Company registration number SC308017 (Scotland)
DISCOVERY EDUCATION (HOLDINGS) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
DISCOVERY EDUCATION (HOLDINGS) LIMITED
COMPANY INFORMATION
Directors
RJ Emmott
S McGhee
(Appointed 15 May 2023)
JS Gordon
(Appointed 30 June 2023)
Secretary
Resolis Limited
Company number
SC308017
Registered office
Exchange Tower
11th Floor
19 Canning Street
Edinburgh
Scotland
EH3 8EG
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
DISCOVERY EDUCATION (HOLDINGS) LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 8
Group statement of comprehensive income
9
Group balance sheet
10
Company balance sheet
11
Group statement of changes in equity
12
Company statement of changes in equity
13
Group statement of cash flows
14
Notes to the financial statements
15 - 26
DISCOVERY EDUCATION (HOLDINGS) LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 1 -

The directors present the strategic report for Discovery Education (Holdings) Limited ("the Company") and its subsidiaries (collectively "the Group") for the year ended 31 March 2023.

Principal activities

 

The principal activity of the Group during the year was the provision and operation of six primary schools and two secondary schools in Dundee under the Government's Private Finance Initiative Scheme.

Review of the business

 

On 27 February 2007 Discovery Education plc, a wholly owned subsidiary of the Group, entered into a contract with Dundee City Council to design, construct, finance and operate six primary schools and two secondary schools in Dundee under the Government's Private Finance Initiative Scheme. Construction of the final two schools was completed in April 2009.

 

At 31 March 2023, the Group had retained losses of £4,658,142 (2022: £96,589 retained earnings). In the current year the Group made a loss of £4,754,731 (2022: Loss of £87,694) primarily as a result of higher RPI inflation increasing both the valuation of the index-linked bond and related interest payments.

 

The Group uses Key Performance Indicators to provide analysis of the development, performance and position of the Group.

 

There were service deductions of £7,287 (2022: £21,354) during the year. These were passed on in full to the facilities management provider.

Principal risks and uncertainties

 

The Group has exposures to a variety of financial risks which are managed with the purpose of minimising any potential adverse effect on the Group's performance. The board has established risk management policies for managing each of these risks and they are summarised below:

 

Interest rate risk and Inflation risk

The Group mitigated its interest rate risk at the inception of the project by ensuring that the majority of its debt is at a fixed rate or a fixed rate uplifted by RPI increases. The Group's exposure to interest and inflationary fluctuations will continue to be monitored. The Group's project revenue and most of its costs were linked to inflation at the inception of the project.

 

Contract Performance risk

The Group's contract performance risk is mostly mitigated as facilities management services and lifecycle risk has been subcontracted to a third party provider.

 

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group adopts a prudent approach to liquidity management by maintaining sufficient cash and liquid resources to meet its obligations. The nature of the project is such that cash flows are reasonably predictable. Surplus cash is placed on deposit with institutions of a suitable credit quality.

 

Credit risk

Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers. The Group receives its revenue from Dundee City Council. The directors monitor amounts due carefully and do not consider there to be a significant credit risk. The Group does not undertake financial instrument transactions which are speculative or unrelated to the Group's trading activities. Board approval is required for the use of any new financial instruments.

 

DISCOVERY EDUCATION (HOLDINGS) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 2 -
Key performance indicators

 

The performance of the Group from a cash perspective is assessed six monthly by the testing of the covenants of the senior debt provider. The key indicator being the debt service cover ratio, which is the ratio of the Group's net cash inflows available for debt service relative to actual debt service payments. At the year end this ratio was 1.13 (2022: 1.13). The Group has been performing well and has been compliant with the covenants laid out in the group loan agreement.

 

Financial Instruments

 

The Group's principal financial instruments comprise index-linked bonds, which are listed on the London Stock Exchange main market, subordinated debt, cash at bank and short term deposits in Guaranteed Investment Contracts. The main purpose of these financial instruments is to ensure, via the terms of the various financial instruments, that the profile of the debt service costs is tailored to match expected revenues arising from the concession contract.

 

The Group has issued £86,800,000 of 1.948% Guaranteed Secured Index-Linked Bonds. The bonds are repayable in instalments from 2010 until the final repayment in 2037.

On behalf of the board

S McGhee
Director
29 August 2023
DISCOVERY EDUCATION (HOLDINGS) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 3 -

The directors present their report and the audited report and consolidated financial statements of Discovery Education (Holdings) Limited for the year ended 31 March 2023.

Results and dividends

The loss for the year, after taxation, amounted to £4,754,731 (2022: Loss of £87,694) and the group had net liabilities as at 31 March 2023 of £4,184,142 (2022: £570,589 net assets). A review of the Company performance is set out in the Strategic Report.

The directors do not recommend the payment of a dividend.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

RJ Emmott
PK Johnstone
(Resigned 30 June 2023)
R W Christie
(Resigned 15 May 2023)
S McGhee
(Appointed 15 May 2023)
JS Gordon
(Appointed 30 June 2023)
Qualifying third party indemnity provisions

The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date.

Financial instruments

 

Details of the financial instruments are noted in the Strategic Report.

Future developments

 

No significant changes are expected to the Group's activities, as set out in the Strategic Report, in the foreseeable future.

Auditor

A resolution to reappoint Johnston Carmichael LLP as auditor will be proposed at the Annual General Meeting.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

On behalf of the board
S McGhee
Director
29 August 2023
DISCOVERY EDUCATION (HOLDINGS) LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 MARCH 2023
- 4 -

The directors are responsible for preparing the Strategic Report, Directors' Report and the Annual Report and consolidated financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare the Annual Report and consolidated financial statements for each financial year. Under that law the directors have elected to prepare the Annual Report and consolidated financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the Annual Report and consolidated financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these consolidated financial statements, the directors are required to:

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF DISCOVERY EDUCATION (HOLDINGS) LIMITED
- 5 -
Opinion

We have audited the financial statements of Discovery Education (Holdings) Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

DISCOVERY EDUCATION (HOLDINGS) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DISCOVERY EDUCATION (HOLDINGS) LIMITED
- 6 -
Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DISCOVERY EDUCATION (HOLDINGS) LIMITED
- 7 -

Extent the audit was considered capable of detecting irregularities, including fraud

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:

 

We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.

 

All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and parent company and the sector in which they operate, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:

 

 

We gained an understanding of how the Group and parent company are complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of any relevant correspondence with regulatory bodies and board meeting minutes.

 

We assessed the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:

 

 

In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:

 

DISCOVERY EDUCATION (HOLDINGS) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DISCOVERY EDUCATION (HOLDINGS) LIMITED
- 8 -

Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Allison Dalton (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
29 August 2023
Chartered Accountants
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
DISCOVERY EDUCATION (HOLDINGS) LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
- 9 -
2023
2022
Notes
£
£
Turnover
3
8,896,188
7,489,536
Cost of sales
(5,090,357)
(4,472,850)
Gross profit
3,805,831
3,016,686
Administrative expenses
(721,974)
(722,829)
Operating profit
3,083,857
2,293,857
Interest receivable and similar income
6
3,334,654
3,324,743
Interest payable and similar expenses
7
(12,758,153)
(5,726,864)
Loss before taxation
(6,339,642)
(108,264)
Tax on loss
8
1,584,911
20,570
Loss for the financial year
19
(4,754,731)
(87,694)
Loss for the financial year is all attributable to the owners of the parent company.
DISCOVERY EDUCATION (HOLDINGS) LIMITED
GROUP BALANCE SHEET
AS AT
31 MARCH 2023
31 March 2023
- 10 -
2023
2022
Notes
£
£
£
£
Current assets
Debtors falling due after more than one year
11
63,927,474
65,424,095
Debtors falling due within one year
11
25,592,964
18,191,687
Cash at bank and in hand
10,083,255
15,147,585
99,603,693
98,763,367
Creditors: amounts falling due within one year
12
(16,002,383)
(13,666,495)
Net current assets
83,601,310
85,096,872
Creditors: amounts falling due after more than one year
13
(87,785,452)
(84,526,283)
Net (liabilities)/assets
(4,184,142)
570,589
Capital and reserves
Called up share capital
16
474,000
474,000
Profit and loss reserves
19
(4,658,142)
96,589
Total equity
(4,184,142)
570,589
The financial statements were approved by the board of directors and authorised for issue on 29 August 2023 and are signed on its behalf by:
29 August 2023
S McGhee
Director
Company registration number SC308017 (Scotland)
DISCOVERY EDUCATION (HOLDINGS) LIMITED
COMPANY BALANCE SHEET
AS AT 31 MARCH 2023
31 March 2023
- 11 -
2023
2022
Notes
£
£
£
£
Fixed assets
Investments
9
474,000
474,000
Current assets
Debtors falling due after more than one year
11
4,095,348
4,664,243
Debtors falling due within one year
11
904,000
685,059
4,999,348
5,349,302
Creditors: amounts falling due within one year
12
(904,000)
(685,059)
Net current assets
4,095,348
4,664,243
Total assets less current liabilities
4,569,348
5,138,243
Creditors: amounts falling due after more than one year
13
(4,095,348)
(4,664,243)
Net assets
474,000
474,000
Capital and reserves
Called up share capital
16
474,000
474,000

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £0 (2022 - £0 profit).

The financial statements were approved by the board of directors and authorised for issue on 29 August 2023 and are signed on its behalf by:
29 August 2023
S McGhee
Director
Company registration number SC308017 (Scotland)
DISCOVERY EDUCATION (HOLDINGS) LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
- 12 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 April 2021
474,000
184,283
658,283
Year ended 31 March 2022:
Loss and total comprehensive income
-
(87,694)
(87,694)
Balance at 31 March 2022
474,000
96,589
570,589
Year ended 31 March 2023:
Loss and total comprehensive income
-
(4,754,731)
(4,754,731)
Balance at 31 March 2023
474,000
(4,658,142)
(4,184,142)
DISCOVERY EDUCATION (HOLDINGS) LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
- 13 -
Share capital
£
Balance at 1 April 2021
474,000
Year ended 31 March 2022:
Profit and total comprehensive income
-
Balance at 31 March 2022
474,000
Year ended 31 March 2023:
Profit and total comprehensive income
-
Balance at 31 March 2023
474,000
DISCOVERY EDUCATION (HOLDINGS) LIMITED
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
- 14 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash (absorbed by)/generated from operations
22
(299,543)
4,723,405
Interest paid
(2,353,132)
(2,426,571)
Income taxes paid
-
0
(56,066)
Net cash (outflow)/inflow from operating activities
(2,652,675)
2,240,768
Investing activities
Interest received
3,334,654
3,324,743
Net cash generated from investing activities
3,334,654
3,324,743
Financing activities
Repayment of borrowings
(349,953)
69,953
Repayment of bank loans
(5,396,356)
(4,553,528)
Net cash used in financing activities
(5,746,309)
(4,483,575)
Net (decrease)/increase in cash and cash equivalents
(5,064,330)
1,081,936
Cash and cash equivalents at beginning of year
15,147,585
14,065,649
Cash and cash equivalents at end of year
10,083,255
15,147,585
DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
- 15 -
1
Accounting policies
Company information

Discovery Education (Holdings) Limited is a private company limited by shares and is incorporated and domiciled in Scotland. The address of its registered office is Exchange Tower, 11th Floor, 19 Canning Street, Edinburgh, Scotland, EH3 8EG.

 

The principal activity of the Group during the year was the provision and operation of six primary schools and two secondary schools in Dundee under the Government's Private Finance Initiative Scheme.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the group. Monetary amounts in these financial statements are rounded to the nearest £.

These financial statements are prepared on a going concern basis, under the historical cost convention.

 

The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed further in the accounting policies.

 

The accounting policies stated below have been consistently applied to the years presented, unless otherwise stated.

The parent company satisfies the criteria of being a qualifying entity as defined in FRS 102. As such, advantage has been taken of the following reduced disclosures available under FRS 102:

 

1.2
Basis of consolidation

The consolidated financial statements include the Company and all its subsidiary undertakings. Where subsidiary undertakings are acquired during the period their results are included in the consolidated financial statements from the date of acquisition up to the date of the financial period end.

 

The Parent Company has applied the exemption contained in section 408 of the Companies Act 2006 and has not included its individual Statement of Comprehensive Income.

1.3
Going concern

The group prepares a detailed financial model semi-annually which forecasts cashflows, financial results and the financial position of the project company through to the end of the concession. In preparing these financial models, the directors include assumptions based upon expected future economic conditions, including forecast inflation and interest rates, and include costs profiled on known and expected expenditure. The group's operating cash flows are largely dependent upon unitary charge receipts from Dundee City Council and the directors expect these amounts to be recovered even under the most severe economic conditions.

 

Based on these forecasts, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the remainder of the concession and continue to meet debt covenants and debt repayments as they fall due. In light of this, the directors continue to adopt the going concern basis of accounting in preparing the group's annual financial statements.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 16 -
1.4
Turnover

Turnover represents the services' share of the management services income received by the Group for the provision of a PFI asset to the customer. Income is received and recognised over the life of the concession period. Management service income is allocated net of VAT between turnover, finance debtor interest and reimbursement of finance debtor so as to generate a constant rate of return in respect of the finance debtor over the life of the contract.

1.5
Fixed asset investments

Fixed asset investments are initially recorded at cost, and subsequently stated at cost less any accumulated impairment losses.

1.6
Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

 

The group is obligated to keep cash reserves as at the balance sheet date and 30th September in respect of requirements in the funding agreements, some of which has been placed in fixed term deposit accounts. This restricted cash balance, which is shown on the group balance sheet within "cash at bank and in hand" and "Other financial assets" within "Debtors falling due within one year" balances, amounts to £13,796,430 (2022: £13,243,937) as at the balance sheet date.

1.7
Financial instruments

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

Basic financial instruments are initially recognised at the transaction price and subsequently at amortised cost, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

 

Debt instruments are initially recognised at the present value of cash payable to the lender and are subsequently measured at amortised cost using the effective interest rate method. Where a bond contains cash flows that are inflation linked, the effective interest rate at initial recognition is determined as the rate that sets the estimated future cash flows to be paid on the bond, based on the expected level of the inflation index over the expected term of the bond to equal the fair value of the bond. Where in subsequent periods there is a change in inflation expectations, the changes are reflected by adjusting both the expected future cash flows on the debt and the effective interest rate. Therefore no adjustment to the carrying amount of the debt and no gain or loss is recognised. The effective interest rate amortisation is included in interest payable and similar charges in the Statement of Comprehensive Income. Fees paid on establishment of the bond have been capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

 

Other financial instruments are subsequently measured at fair value, with any changes recognised in the Statement of Comprehensive Income.

 

Financial assets that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in the Statement of Comprehensive Income immediately.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 17 -

For all equity instruments regardless of significance, and other financial assets that are individually significant, these are assessed individually for impairment. Other financial assets are either assessed individually or grouped on the basis of similar credit risk characteristics.

 

Any reversals of impairment are recognised in the Statement of Comprehensive Income immediately, to the extent that the reversal does not result in a carrying amount of the financial asset that exceeds what the carrying amount would have been had the impairment not previously been recognised. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.

 

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the Balance Sheet. Finance costs and gains or losses relating to financial liabilities are included in the Statement of Comprehensive Income. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.

 

Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.

1.8
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

1.9

Finance debtor

The Group has taken the transition exemption in FRS 102 Section 35.10(i) that allows the Group to continue the service concession arrangement accounting policies from previous UK GAAP.

 

The Group is accounting for the concession asset based on the ability to substantially transfer all the risks and rewards of ownership to the customer, with this arrangement the costs incurred by the Group on the design and construction of the assets have been treated as a finance debtor within these financial statements.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 18 -
1.10

Lifecycle

The Group is responsible for the lifecycle costs associated with its principal activity, however risk here is mitigated by passing on lifecycle risk to a third party facilities management company. Lifecycle costs are accounted for on an accrual basis as disclosed in the indicative lifecycle works program or lifecycle tracker as used by all parties through the operating phase of the concession period, with any underspend included within accruals and creditors due less than one year.

2
Judgements and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported. These estimates and judgments are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Key sources of estimation uncertainty

 

Accounting estimates and assumptions are made concerning the future and, by their nature, will rarely equal the related actual outcome. Actual results may therefore subsequently differ from these estimates. The key assumptions and other sources of estimation uncertainty are as follows:

 

i) Accounting for service concession arrangements

 

Accounting for the service concession contract and finance debtors requires estimation of service margins, finance debtor interest rates and associated amortisation profile which is based on forecast results of the contract. These were forecast initially within the operating model at financial close and are updated on a six monthly basis throughout the duration of the project.

3
Turnover
2023
2022
£
£
Turnover analysed by class of business
Service Fee
8,806,519
7,406,644
Other income
89,669
82,892
8,896,188
7,489,536

The whole of the turnover is attributable to the principal activity of the group wholly undertaken in the United Kingdom.

4
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company's subsidiaries
16,740
14,670

Included in the fee above are costs borne for the audit of the parent Company entity Discovery Education (Holdings) Limited. Auditor's remuneration is payable to Johnston Carmichael LLP.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 19 -
5

Particulars of Employees and Directors

The directors did not receive any remuneration directly from the Group during the year (2022: £nil). There were no employees in the financial year other than the directors (2022: nil).

 

Elgin Infrastructure Limited, one of the shareholders received fees of £14,189 (2022: £13,117) from the Group during the year in respect of Director services.

 

Crimson Project Investments Ltd, one of the shareholders received fees of £14,189 (2022: £13,117) from the Group during the year in respect of Director services

6
Interest receivable and similar income
2023
2022
£
£
Interest income
Other interest income
3,334,654
3,324,743
7
Interest payable and similar expenses
2023
2022
£
£
Interest payable to group undertakings
575,467
720,951
Other interest on financial liabilities
41,983
41,983
Index-linked movement on bond
10,363,039
3,258,310
Interest payable on index-linked bond
1,777,664
1,705,620
Total finance costs
12,758,153
5,726,864
8
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
-
0
(20,570)
Deferred tax
Origination and reversal of timing differences
(1,584,911)
-
0
Total tax credit
(1,584,911)
(20,570)
DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
8
Taxation
(Continued)
- 20 -

The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

2023
2022
£
£
Loss before taxation
(6,339,642)
(108,264)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2022: 19.00%)
(1,204,532)
(20,570)
Effect of change in applicable future corporation tax rate
(380,379)
-
0
Taxation credit
(1,584,911)
(20,570)

Subsequent to the year end, on 1 April 2023 the Corporation Tax rate in the United Kingdom changed from 19% to 25%. As disclosed in the Deferred Tax note, losses incurred in the current year are expected to reverse within 63 months of the year end when the higher 25% rate is effective.

9
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Investments in subsidiaries
10
-
0
-
0
474,000
474,000
Movements in fixed asset investments
Company
Shares in subsidiaries
£
Cost
At 1 April 2022 and 31 March 2023
474,000
Carrying amount
At 31 March 2023
474,000
At 31 March 2022
474,000
10
Subsidiaries

The Company owns 100% of the share capital of Discovery Education (Nominee) Limited and 99.9% of Discovery Education plc. The remaining share capital of Discovery Education plc is owned by Discovery Education (Nominee) Limited and, as such, Discovery Education plc is wholly owned by the Group.

 

 

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 21 -
11
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£
£
£
£
Other financial assets
5,790,000
-
0
-
0
-
0
Corporation tax recoverable
20,589
20,589
-
0
-
0
Amounts owed by group undertakings
-
-
904,000
685,059
Finance Debtor
3,081,533
2,942,078
-
0
-
0
Prepayments and accrued income
16,700,842
15,229,020
-
0
-
0
25,592,964
18,191,687
904,000
685,059
Amounts falling due after more than one year:
Amounts owed by group undertakings
-
-
4,095,348
4,664,243
Finance Debtor
62,342,563
65,424,095
-
0
-
0
62,342,563
65,424,095
4,095,348
4,664,243
Deferred tax asset (note 15)
1,584,911
-
0
-
0
-
0
63,927,474
65,424,095
4,095,348
4,664,243
Total debtors
89,520,438
83,615,782
4,999,348
5,349,302

Other financial assets include amounts held within deposit accounts with a maturity of greater than three months but less than eight months from the initial deposit date.

Included in prepayments and accrued income is £16,474,801 (2022: £15,098,051) relates to the unitary charge control account, of which £15,378,421 (2022: £13,657,567) is forecast to be received within the next 12 months via Unitary Charge receipts with amounts received being offset by service concession accounting adjustments.

The finance debtor represents payments due from Dundee City Council in respect of the Project Agreement. These payments are received over the remaining life of the agreement. There were no receivables past due (and no allowance for impairment of receivables) at the reporting date.

 

The movement in the finance debtor reconciles as £68,366,174 at beginning of year (2022: £71,175,109); £2,942,079 amortisation (2022: £2,808,935); and £65,424,095 at the end of the year (2022: £68,366,174).

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 22 -
12
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Index-linked bond
14
6,359,521
5,178,919
-
0
-
0
Other borrowings
14
904,000
685,059
904,000
685,059
Trade creditors
735,353
319,773
-
0
-
0
Other taxation and social security
462,495
435,879
-
-
Accruals and deferred income
7,541,014
7,046,865
-
0
-
0
16,002,383
13,666,495
904,000
685,059

Included within accruals and deferred income are amounts recognised in respect of future payments due on lifecycle underspends of £7,407,831 (2022: £6,743,514), the timings of which are uncertain.

13
Creditors: amounts falling due after more than one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Index-linked bond
14
83,690,104
79,862,040
-
0
-
0
Other borrowings
14
4,095,348
4,664,243
4,095,348
4,664,243
87,785,452
84,526,283
4,095,348
4,664,243

The Index-Linked Senior Guaranteed Secured Bonds, which are listed on the London Stock Exchange main market, have a nominal value of £86,800,000 and mature on 31 March 2037. Capital repayments are such that they pay down a percentage of each bond note in issue rather than the individual bond notes in their entirety and at the year end £34,377,000 of the nominal value of the bonds issued had been repaid. The bonds are the subject of and have the benefit of a bond trust deed dated 27 February 2007 between the Group, Ambac Assurance UK Limited and Prudential Trustee Company Limited in its capacity as bond trustee. The bonds are index-linked, assume a base RPI index of 198.5 and attract interest at 1.948% per annum. Repayment of the bond including indexation is half yearly and commenced on 31 March 2010. The bonds are held at amortised cost.

 

Prudential Trustee Company Limited has a floating charge over all the assets of the Group for all present or future, actual or contingent obligations.

 

Other borrowings relates to subordinated debt due to group undertakings. The subordinated debt is unsecured and attracts an effective interest at 14% per annum payable half yearly. The debt will be fully repaid by 31 March 2038. The subordinated debt is held at amortised cost.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 23 -
14
Loans and overdrafts
Group
Company
2023
2022
2023
2022
£
£
£
£
Amounts falling due within one year or on demand:
Index-linked bond
6,401,504
5,220,902
-
0
-
0
Loan issue costs
(41,983)
(41,983)
-
0
-
0
Loans from group undertakings
904,000
685,059
904,000
685,059
7,263,521
5,863,978
904,000
685,059
Amounts falling due between one and two years:
Index-linked bond
7,203,227
5,588,148
-
0
-
0
Loan issue costs
(41,983)
(41,983)
-
0
-
0
Loans from group undertakings
-
578,985
-
578,985
7,161,244
6,125,150
-
578,985
Amounts falling due between two and five years:
Index-linked bond
23,354,191
18,270,391
-
0
-
0
Loan issue costs
(125,949)
(125,949)
-
0
-
0
23,228,242
18,144,442
-
-
Amounts falling due after more than five years:
Repayable by instalments
Index-linked bond
53,678,449
56,591,247
-
0
-
0
Loan issue costs
(377,831)
(419,814)
-
0
-
0
Loans from group undertakings
4,095,348
4,085,258
4,095,348
4,085,258
57,395,966
60,256,691
4,095,348
4,085,258
The total cash repayable on the loan is as follows:
Index-linked bond
90,637,371
85,670,688
-
0
-
0
Loans from group undertakings
4,999,348
5,349,302
-
0
-
0
95,636,719
91,019,990
-
-
Payable within one year
7,305,504
5,905,961
904,000
685,059
Payable after one year
88,331,215
85,114,029
4,095,348
4,664,243
DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 24 -
15
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

Assets
Assets
2023
2022
Group
£
£
Tax losses
1,584,911
-
Group
Company
2023
2023
Movements in the year:
£
£
Asset at 1 April 2022
-
-
Credit to profit or loss
(1,584,911)
-
Asset at 31 March 2023
(1,584,911)
-

The deferred tax asset set out above is expected to reverse within 5-6 years and relates to the utilisation of tax losses against future expected profits of the same period.

16
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary A shares of £1 each
466,500
466,500
466,500
466,500
Ordinary B shares of £1 each
7,500
7,500
7,500
7,500
474,000
474,000
474,000
474,000

A Shares are voting shares. There are no restrictions on the distribution of dividends and the repayment of capital.

 

B Shares are non voting shares. They are not entitled to any distributions and any return of capital is restricted to the par value of each B Share.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 25 -
17
Related Party Transactions

Group

 

The directors consider the material transactions undertaken by the Group during the year with related parties were as follows:

 

Discovery Education (Holdings) Limited is owned 49.25% by Elgin Infrastructure Limited. The Group paid £14,189 (2022: £13,117) to Elgin Infrastructure Limited for the provision of directors. £nil (2022: £nil) remained outstanding at the year end.

 

During the year interest of £287,734 (2022: £360,476) was payable from the Group to Elgin Infrastructure Limited. Interest of £nil (2022: £174,977) was due to Elgin Infrastructure Limited at the year end. £nil (2022: £140,000) relating to subordinated debt principal was paid to Elgin Infrastructure Limited. Subordinated debt due to Elgin Infrastructure Limited at the year end was £2,499,674 (2022: £2,674,651).

 

Discovery Education (Holdings) Limited is owned 49.25% by Crimson Project Investments Limited. The Group paid £14,189 (2022: £13,117) to Crimson Project Investments Limited for the provision of directors. £nil (2022: £13,117) remained outstanding at the year end.

 

During the year interest of £287,734 (2022: £360,476) was payable from the Group to Crimson Project Investments Limited. Interest of £nil (2022: £174,977) was due to Crimson Project Investments Limited at the year end. £nil (2022: £140,000) relating to subordinated debt principal was paid to Crimson Project Investments Limited. Subordinated debt due to Crimson Project Investments Limited at the year end was £2,499,674 (2022: £2,674,651).

18
Controlling Party

At the year end Discovery Education (Holdings) Limited is owned 49.25% by Elgin Infrastructure Limited, which is a joint venture between Cobalt Project Investments Limited and Ednaston Project Investments Limited, and 49.25% by Crimson Projects Investments Limited and 1.5% by Dundee City Council. As no one company has overriding control, it is deemed that there is no ultimate controlling party.

 

The accounts of Discovery Education (Holdings) Limited can be obtained from Exchange Tower, 11th Floor, 19 Canning Street, Edinburgh, EH3 8EG.

19
Reserves

Profit and Loss Reserves - This reserve records accumulated profits and losses.

DISCOVERY EDUCATION (HOLDINGS) LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 26 -
22
Cash (absorbed by)/generated from group operations
2023
2022
£
£
Loss for the year after tax
(4,754,731)
(87,694)
Adjustments for:
Taxation credited
(1,584,911)
(20,570)
Finance costs
12,758,153
5,726,864
Interest income
(3,334,654)
(3,324,743)
Movements in working capital:
(Increase)/decrease in debtors
(4,319,745)
1,789,542
Increase in creditors
936,345
640,006
Cash (absorbed by)/generated from operations
(299,543)
4,723,405
23
Analysis of changes in net debt - group
1 April 2022
Cash flows
Market value movements
31 March 2023
£
£
£
£
Cash at bank and in hand
15,147,585
(5,064,330)
-
10,083,255
Borrowings excluding overdrafts
(90,390,261)
5,662,345
(10,321,057)
(95,048,973)
(75,242,676)
598,015
(10,321,057)
(84,965,718)
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