Company registration number 07661187 (England and Wales)
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
COMPANY INFORMATION
Directors
D A Leedham
J L Barnes
S McGhee
(Appointed 15 May 2023)
JS Gordon
(Appointed 30 June 2023)
Secretary
Resolis Limited
Company number
07661187
Registered office
1 Park Row
Leeds
United Kingdom
LS1 5AB
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
CONTENTS
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditors' report
4 - 7
Profit and loss account
8
Balance sheet
9
Statement of changes in equity
10
Notes to the financial statements
11 - 19
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Principal activities
The principal activity of the Company during the year was to operate as a special purpose vehicle involved in the construction and operation of the three schools in Hull under the Building Schools for the Future programme. The contract is in year 10 of its term, which expires in 2038.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
PK Johnstone
(Resigned 30 June 2023)
D A Leedham
J L Barnes
R W Christie
(Resigned 15 May 2023)
S McGhee
(Appointed 15 May 2023)
JS Gordon
(Appointed 30 June 2023)
Performance review
The result for the financial year, after taxation, amounted to £160,000 (2022: £134,000). The profit for the financial year will be transferred to reserves.
The directors are satisfied with the overall performance of the Company and do not foresee any significant change in the Company's activities in the coming financial year.
Key performance indicators
The performance of the Company 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. The Company has been performing well and has been compliant with the covenants laid out in the Group loan agreement.
Going concern
The Company prepares cash flow forecasts covering the expected life of the asset and so including the 12 month period from the date the financial statements are signed. In drawing up these forecasts, the directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period. Based on these forecasts the directors have a reasonable expectation that the Company has adequate resources to continue in in operational existence for the foreseeable future.
In light of this, the directors continue to adopt the going concern basis of accounting in preparing the Company's annual financial statements.
Dividends
The directors do not recommend the payment of a dividend.
Financial risk management
Due to the nature of the Company's business, the financial risks the directors consider relevant to this Company are interest rate, cashflow and liquidity risk. The credit risk is not considered significant as the client is a quasi-governmental organisation.
Interest rate risk
The financial risk management objectives of the Company are to ensure that financial risks are mitigated by the use of financial instruments. The Company uses fixed rate interest loans to reduce its exposure to interest rate movements.
Cash Flow and Liquidity risk
Many of the cash flow risks are addressed by means of contractual provisions. The Company's liquidity risk is principally managed through financing the Company by means of long term borrowings.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
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.
Auditor
Pursuant to Section 487 of the Companies Act 2006, the auditors will be deemed to be reappointed and Johnston Carmichael LLP will therefore continue in office.
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 Company’s auditor 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 Company’s auditor is aware of that information.
Small companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption within Part 15 of the Companies Act 2006.
On behalf of the board
S McGhee
Director
7 July 2024
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the 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 financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
- 4 -
Opinion
We have audited the financial statements of Hull Esteem Consortium Projectco2 Limited (‘the company’) for the year ended 31 December 2023, which comprise the Profit and Loss Account, Balance sheet, Statement of Changes in Equity, 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:
Give a true and fair view of the state of the company’s affairs as at 31 December 2023 and of its profit for the year then ended;
Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
Have been prepared in accordance with the requirements of the Companies Act 2006.
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 responsibilities for the audit of the financial statements section of our report. We are independent of the 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 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.
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.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
- 5 -
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
The information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its 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:
Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
The financial statements are not in agreement with the accounting records and returns; or
Certain disclosures of Directors’ remuneration specified by law are not made; or
We have not received all the information and explanations we require for our audit
The Directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies’ exemptions in preparing the Directors’ Report and from the requirement to prepare a Strategic Report.
Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement set out on page 3, 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 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 company or to cease operations, or have no realistic alternative but to do so.
Auditor 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 for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which 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.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
- 6 -
We obtained an understanding of the legal and regulatory frameworks that are applicable to company and the sector in which it operates, 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 company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the 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. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. 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:
Recalculating the unitary charge received by taking the base charge per the project agreement and uplifting for RPI;
Agreeing a sample of months’ income receipts to invoice and bank statements;
Performing an assessment on the service margins used in the year and agreeing margins used to the active financial models;
Reconciling the finance income and amortisation to the finance debtor reconciliation to ensure allocation methodology is in line with contractual terms and relevant accounting standards;
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the Company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
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.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
- 7 -
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
9 July 2024
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£'000
£'000
Turnover
3
5,705
6,704
Cost of sales
(4,945)
(5,911)
Gross profit
760
793
Administrative expenses
(442)
(419)
Operating profit
4
318
374
Other interest receivable and similar income
6
3,331
3,376
Interest payable and similar expenses
7
(3,437)
(3,571)
Profit before taxation
212
179
Tax on profit
8
(52)
(45)
Profit for the financial year
160
134
The profit and loss has been prepared on the basis that all operations are continuing operations.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£'000
£'000
£'000
£'000
Current assets
Debtors falling due after more than one year
9
52,029
54,586
Debtors: amounts falling due within one year
9
2,715
2,782
Cash at bank and in hand
5,745
5,169
60,489
62,537
Creditors: amounts falling due within one year
10
(11,296)
(10,907)
Net current assets
49,193
51,630
Creditors: amounts falling due after more than one year
11
(49,445)
(52,042)
Provisions for liabilities
-
-
Net liabilities
(252)
(412)
Capital and reserves
Called up share capital
13
1
1
Profit and loss reserves
14
(253)
(413)
Total equity
(252)
(412)
These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 7 July 2024 and are signed on its behalf by:
S McGhee
Director
Company Registration No. 07661187
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Profit and loss reserves
Total
£'000
£'000
£'000
Balance at 1 January 2022
1
(547)
(546)
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
134
134
Balance at 31 December 2022
1
(413)
(412)
Year ended 31 December 2023:
Profit and total comprehensive income for the year
-
160
160
Balance at 31 December 2023
1
(253)
(252)
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
1
Accounting policies
Company information
Hull Esteem Consortium Projectco2 Limited is a private company limited by shares incorporated in England and Wales. The registered office is 1 Park Row, Leeds, United Kingdom, LS1 5AB.
The principal activity of the Company during the year was to operate as a special purpose vehicle involved in the construction and operation of the three schools in Hull under the Building Schools for the Future programme. The contract is in year 10 of its term, which expires in 2038.
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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A have been applied, other than where additional disclosure is required to show a true and fair view.
The presentational currency of the financial statements is pounds sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £'000.
The financial statements have been prepared on the going concern basis under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
The Company prepares cash flow forecasts covering the expected life of the asset and so including the 12 month period from the date the financial statements are signed. In drawing up these forecasts, the directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period. Based on these forecasts the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company is in a net liability position due to trade losses carried forward. These losses are forecast to unwind against the future profits of the Company. In light of this, the directors continue to adopt the going concern basis of accounting in preparing the Company's annual financial statements.true
1.3
The entity satisfies the criteria of being a qualifying entity as defined in FRS 102. Its financial statements are consolidated into the financial statements of Hull Esteem Consortium PSP Limited which can obtained from 1 Park Row, Leeds, United Kingdom, LS1 5AB. As such, advantage has been taken of the following disclosure exemptions available under paragraph 1.12 of FRS 102:
a) No cash flow statement has been presented for the Company.
b) The disclosures required by Sections 11 and 12 of FRS 102 (Basic Financial Instruments and Other
Financial Instruments Issues respectively) in respect of financial instruments not falling within the
fair value accounting rules of Paragraph 36(4) of Schedule 1.
The Company has taken advantage of the exemption in section 33 of FRS 102 'Related Party Disclosures', that allows it not to disclose transactions with wholly owned members of a group.
1.4
Revenue recognition
Turnover represents the services' share of the management services income received by the Company for the provision of a PFI (Private Finance Initiative) asset to the customer. This income is received over the life of the concession period. Management service income is allocated 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.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 12 -
1.5
Finance debtor
The Company has taken the transition exemption in FRS 102 Section 35.10(i) that allows the Company to continue the service concession arrangement accounting policies from previous UK GAAP. The Company 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 Company on the design and construction of the assets have been treated as a finance debtor within these financial statements.
1.6
Borrowings
Borrowings are recognised at amortised cost using the effective interest rate method. Under the effective interest rate method, any transaction fees, costs, discounts and premiums directly related to the borrowings are recognised in the profit and loss account over the life of the borrowings. Borrowings with maturities greater than twelve months after the reporting date are classified as non-current liabilities.
1.7
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 six months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
Cash at bank includes £2,660,000 (2022: £2,570,000) restricted from use in the business, being held in the Company's reserve accounts under the terms of its Senior Loan facility.
1.8
Financial instruments
A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument.
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 subsequently measured at amortised cost. Other financial instruments are subsequently measured at fair value, with any changes recognised in the profit and loss account, with the exception of hedging instruments in a designated hedging relationship.
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 profit and loss account immediately.
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 profit and loss account 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.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -
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 Profit and loss account. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. 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.
1.9
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 Company’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 when the Company has 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.
1.10
Provisions
Provisions are recognised when the entity has an obligation at the reporting date as a result of a past event, it is probable that the entity will be required to transfer economic benefits in settlement and the amount of the obligation can be estimated reliably. Provisions are recognised as a liability in the balance sheet and the amount of the provision as an expense. Provisions are initially measured at the best estimate of the amount required to settle the obligation at the reporting date and subsequently reviewed at each reporting date and adjusted to reflect the current best estimate of the amount that would be required to settle the obligation. Any adjustments to the amounts previously recognised are recognised in profit or loss unless the provision was originally recognised as part of the cost of an asset.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
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.
Significant judgments
The judgments (apart from those involving estimations) that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are as follows.
Market rate of interest
The directors have reviewed the interest rates applied to the unsecured subordinated loan stock and consider these to be at a market rate.
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. The key assumptions and other sources of estimation uncertainty are as follows.
Impairment of assets
The carrying value of those assets recorded in the Company's balance sheet, at amortised cost, could be materially reduced where circumstances exist which might indicate that an asset has been impaired and an impairment review is performed. Impairment reviews consider the fair value and/or value in use of the potentially impaired asset or assets and compares that with the carrying value of the asset or assets in the balance sheet. Any reduction in value arising from such a review would be recorded in the profit and loss account. Impairment reviews involve the significant use of assumptions. Consideration has to be given as to the price that could be obtained for the asset or assets, or in relation to a consideration of value in use, estimates of the future cash flows that could be generated by the potentially impaired asset or assets, together with a consideration of an appropriate discount rate to apply to those cash flows.
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 closely monitored throughout the duration of the project.
3
Turnover and other revenue
2023
2022
£'000
£'000
Turnover arises from:
Rendering of services
5,705
6,704
The whole of the turnover is attributable to the principal activity of the Company wholly undertaken in the United Kingdom.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
4
Operating profit
2023
2022
Operating profit for the year is stated after charging:
£'000
£'000
Fees payable for the audit of the annual report and financial statements
31
31
Included in the above fee is £6,000 (2022: £5,000) in relation to taxation advisory services fees payable to the Company's auditor. Also included in the fee above is £11,000 (2022: £11,000) for the audit and £1,000 (2022: £1,000) for tax advisory services in respect of the immediate parent entity Hull Esteem Consortium Holdco2 Limited and its related parties, Hull Esteem Consortium Debtco2 Limited and Hull Esteem Consortium PSP Limited.
5
Employees
The average monthly number of persons employed by the Company during the year was nil (2022: nil). The directors, who are key management personnel, did not receive any remuneration from the Company during the year (2022: £nil).
6
Interest receivable and similar income
2023
2022
£'000
£'000
Interest income
Interest on bank deposits
90
Interest from loans to other related parties
3,241
3,376
Total income
3,331
3,376
7
Interest payable and similar expenses
2023
2022
£'000
£'000
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
2,669
2,804
Interest due on loans from group undertakings
730
728
Other interest payable and similar expenses
38
39
3,437
3,571
8
Taxation
2023
2022
£'000
£'000
Current tax
UK corporation tax on profits for the current period
24
Deferred tax
Origination and reversal of timing differences
28
45
Total tax charge
52
46
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Taxation
(Continued)
- 16 -
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£'000
£'000
Profit before taxation
212
179
Expected tax charge based on the standard rate of corporation tax in the UK of 23.52% (2022: 19%)
50
34
Tax effect of utilisation of tax losses not previously recognised
(26)
(34)
Deferred tax adjustments timing differences
28
45
Taxation charge for the year
52
45
A change in the UK Corporation tax rate to 25% took effect from 1 April 2023. This change has had a consequential effect on the Company's tax charge with the standard rate of tax in the current year reflective of a marginal tax rate of 23.5% arising from the Company's period straddling the 19% and 25% tax rates.
Deferred tax has been calculated at 25%.
9
Debtors
2023
2022
Amounts falling due within one year:
£'000
£'000
Trade debtors
28
-
Prepayments and accrued income
131
160
Finance debtor
2,557
2,415
Amounts owed by other related parties
-
180
2,716
2,755
Deferred tax asset
(1)
27
2,715
2,782
2023
2022
Amounts falling due after more than one year:
£'000
£'000
Finance debtor
52,029
54,586
Total debtors
54,744
57,368
Amounts owed by Group undertakings are trading balances that are unsecured, non-interest bearing and repayable upon demand.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
10
Creditors: amounts falling due within one year
2023
2022
£'000
£'000
Bank loans
2,611
2,587
Accruals and deferred income
2,569
1,828
Trade creditors
1
315
Amounts owed to group undertakings
239
246
Corporation tax
24
Other taxation and social security
331
276
Amounts owed to other related parties
258
Other creditors
5,521
5,397
11,296
10,907
Included within accruals and deferred income are amounts recognised in respect of future payments due on lifecycle underspends of £1,900,000 (2022: £1,623,000), the timings of which are uncertain. Amounts due to group undertakings includes interest of £181,000 (2022: £180,000) accrued on loan notes issued as well as capital repayments of loan notes issued of £58,000 (2022: £39,000). The remaining balances are trading balances, are non-interest bearing and are repayable upon demand.
11
Creditors: amounts falling due after more than one year
2023
2022
£'000
£'000
Bank loans and overdrafts
43,492
46,037
Amounts owed to group undertakings
5,953
6,005
49,445
52,042
Included within creditors: amounts falling due after more than one year is an amount of £38,987,000 (2022: £42,099,000) in respect of liabilities payable or repayable by instalments which fall due for payment after more than five years from the reporting date.
Senior debt relates to a facility provided by Aviva Public Private Finance, secured by a fixed and floating charge over the assets of the Company. The total of the loan outstanding as at 31 December 2023 was £46,386,000 (2022: £48,939,000). The facility is repayable quarterly in March, June, September and December on an agreed profile, with the final repayment falling due on 31 December 2036. Interest is also payable quarterly and is charged at a fixed rate of 5.56% per annum.
The Company issued £6,998,730 of unsecured loan stock on 8 January 2013. The loan stock is subscribed for by Hull Esteem Consortium Debtco2 Limited and Hull Esteem Consortium Holdco2 Limited. Interest is charged on the loan notes at 11.66% and is payable semi-annually in March and September. The loan notes are repayable in instalments, also semi-annually in March and September, with final repayment due in March 2038.
Issue costs of £282,000 (2022: £315,000) have been set off against total senior debt, and £157,000 (2022: £163,000) in respect of the loan stock.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
12
Deferred taxation
The deferred tax included in the balance sheet is as follows:
Liabilities
Assets
2023
2022
Balances:
£'000
£'000
Short term timing differences
(1)
27
2023
Movements in the year:
£'000
Opening balance
(27)
Charge to profit or loss
28
Closing balance
1
The deferred tax asset set out above relates to short term timing differences that will unwind by 31 December 2024.
13
Called up share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£'000
£'000
Issued and fully paid
Ordinary shares of £1 each
1,250
1,250
1
1
There is a single class of ordinary share. There are no restrictions on the distribution of dividends and the repayment of capital.
14
Profit and loss reserves
Profit and loss reserves records retained earnings and accumulated losses.
HULL ESTEEM CONSORTIUM PROJECTCO2 LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
15
Related party transactions
The directors consider the material transactions undertaken by the Company during the year with the related parties with as follows:
2023
2022
2023
2022
Transaction
Transaction
Debtor /
Debtor /
amount
amount
(creditor)
(creditor)
£'000
£'000
£'000
£'000
Hull Esteem Consortium LEP
9.8% parent of Hull Esteem Consortium Holdco2 Ltd
Provision of goods and services
(123)
(108)
52
-
Pass through costs
-
(1,770)
-
-
Hull City Council
10% shareholder in Hull Esteem Consortium LEP Ltd
Receipt of goods and services
11,485
12,102
28
180
Pass through costs
(228)
(258)
(228)
(258)
16
Controlling party
The immediate parent undertaking is Hull Esteem Consortium Holdco2 Limited. The ultimate parent company is Hull Esteem Consortium PSP Limited. It is the parent undertaking of the largest and smallest group to consolidate financial statements. Copies of Hull Esteem Consortium PSP Limited consolidated financial statements can be obtained from the Company Secretary at 1 Park Row, Leeds, United Kingdom, LS1 5AB. Hull Esteem Consortium PSP Limited is a jointly owned company with no ultimate controlling party. No one company has overriding control of Hull Esteem Consortium PSP Limited.
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