Company registration number 04261262 (England and Wales)
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 29 FEBRUARY 2024
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
COMPANY INFORMATION
Directors
JS Gordon
CT Solley
KA Cunningham
(Appointed 10 January 2024)
N Covington
(Appointed 19 January 2024)
Secretary
Resolis Limited
Company number
04261262
Registered office
1 Park Row
Leeds
United Kingdom
LS1 5AB
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 8
Profit and loss account
9
Statement of comprehensive income
10
Balance sheet
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 25
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 1 -

The directors present the strategic report for the year ended 29 February 2024.

 

These financial statements have been prepared under FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".

 

Principal activities

Pyramid Schools (Southampton) Limited ("the company") was formed to enter into a Private Finance Initiative ("PFI") concession contract with the Southampton City Council ("the Council") to design, build, finance and operate schools. The contract was signed on 15 March 2005, construction commenced immediately, and full services started 7 January 2007. The contract will run until 31 December 2034. There have not been any changes in the company's activities in the year under review and the directors are not aware, at the date of this report, of any likely changes in activity for the foreseeable future.

 

The company was incorporated in Great Britain, registered in England and Wales and is domiciled in the United Kingdom.

 

In the year the company made a profit of £1,317,000 (2023: profit £504,000).

 

The company's operations are managed under the supervision of its shareholders and funders and are largely determined by the detailed terms of the key performance indicators in the PFI contract with the Council. Mitie FM Limited, formerly Interserve (facilities Management) Ltd, provides Fabric Replacement services and is the FM service provider throughout the life of the concession. For this reason, the company's directors believe that no other key performance indicators apart from profit are necessary or appropriate for an understanding of the performance or position of the business.

 

The PFI contract with the Council and subcontracts with Mitie FM Limited follow a set formula for the life of the contract and this enables the company to have a high degree of certainty over its net income and major expenses until 31 December 2034. Furthermore, the company has a Credit Agreement with its lender which fixes the level of borrowing and repayments due until the loan is fully repaid in 2029.

 

The directors do not anticipate a change in the company's activity for the foreseeable future.

 

The directors, in preparing this strategic report, have complied with s414C of the Companies Act 2006.

Principal risks and uncertainties

The company's principal activity as detailed above is considered low risk as its trading relationships with its customer, funders, and contracts with Mitie FM Limited are determined by the terms of their respective detailed PFI contracts. Its main exposure is to financial risks as detailed in the following section.

 

One of the risks of the company is that services may not be able to continue due to the financial failure of one of the company's subcontractors. The financial stability of the facilities management and management service companies is being monitored. The directors have reviewed the benchmarking information on the facilities management contract fee and are comfortable that this is a market rate which would enable replacement of the contractor for a similar fee.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 2 -
Financial risk management

The company has exposures to a variety of financial risks which are managed with the purpose of minimising any potential adverse effect on the company's performance.

 

The board has policies for managing each of these risks and they are summarised below:

 

Interest rate risk

The company hedged its interest rate risk at the inception of the project by swapping its variable rate debt into fixed rate by the use of an interest rate swap. Interest is recognised on the accruals basis at the appropriate date.

 

Inflation risk

The company hedged its inflation risk at the inception of the project by entering into RPI linked contracts for services provided to the Local Authority and for services received for facilities management.

 

Liquidity risk

The company adopts a prudent approach to liquidity management by maintaining sufficient cash and liquid resources to meet its obligations. Due to the nature of the project, cash flows are reasonably predictable and so this is not a major risk area for the company.

 

Credit risk

The company receives the bulk of its revenue from the Council and therefore is not exposed to significant credit risk. Cash investments and interest rate swap arrangements are with institutions of a suitable credit quality.

 

Ownership

In the directors' opinion there is no controlling party. At the balance sheet date the ultimate parent companies who jointly control the company are PPP Equity PIP LP (acting by its General Partner Dalmore Capital 6 GP Limited and its manager Dalmore Capital Limited), and Aberdeen Infrastructure Partners LP Inc acting by its manager Aberdeen Asset Managers Limited.

Going concern

The directors have prepared a detailed model forecast to project completion incorporating the relevant terms of the PFI contract, subcontracts and Credit Agreement and reasonably prudent economic assumptions. This forecast and associated business model, which is updated regularly, predicts that the company will remain profitable and will have sufficient cash resources to operate within the terms of the PFI contract, Subcontract and Credit agreement. Therefore, the directors, having considered the financial position of the company and its expected future cash flows, for at least 12 months from the date of signing the accounts, and have prepared the financial statements on a going concern basis. The directors confirm that they do not intend to liquidate the company or cease trading as they consider they have realistic alternatives to doing so.

 

The directors confirm the completeness of the information provided regarding events and conditions relating to going concern at the date of approval of the financial statements, including plans for future actions.

On behalf of the board

N Covington
Director
30 August 2024
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 3 -

The directors present their annual report and financial statements for the year ended 29 February 2024.

Results and dividends

The results for the year are shown in the Statement of Comprehensive Income on page 11. Ordinary dividends were paid amounting to £286,000 (2023: £-). Following the year end a dividend of £613,000 was paid on 6 March 2024.

Directors

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

JS Gordon
PK Johnstone
(Resigned 30 June 2023)
MT Smith
(Resigned 19 January 2024)
CT Solley
J McDonagh
(Appointed 30 June 2023 and resigned 10 January 2024)
KA Cunningham
(Appointed 10 January 2024)
N Covington
(Appointed 19 January 2024)

JS Gordon resigned on 30 June 2023 and was reappointed on 30 June 2023. He continues to hold office at the date of signature of the financial statements.

Post reporting date events

Dividends were paid following the reporting date. This has been disclosed in the Directors' Report under the results and dividends heading.

Auditor

Pursuant to section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and Johnston Carmichael LLP will therefore continue in office.

Strategic report

The information that fulfils the Companies Act requirements of the business review is included in the strategic report. This includes a review of the development of the business of the group during the year, of its position at the end of the year and of the likely future developments in its business.

 

Information related to the going concern assumptions is included in the strategic report and note 1.2 to these financial statements. Details of the principal risk and uncertainties are included in the strategic report.

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.

 

On behalf of the board
N Covington
Director
30 August 2024
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 4 -

The directors are responsible for preparing the annual 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 of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

 

 

 

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 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.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
- 5 -
Opinion

We have audited the financial statements of Pyramid Schools (Southampton) Limited (the 'company') for the year ended 29 February 2024 which comprise the profit and loss account, statement of comprehensive income, balance sheet, statement of changes in equity, 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 FRS 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 29 February 2024 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.

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 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.

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:

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
- 6 -
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 and 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.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 4, 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.

Auditors' 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 auditors' 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.

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.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
- 7 -

We obtained an understanding of the legal and regulatory frameworks that are applicable to company and the sector in which it operates, focusing on 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. 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:

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 are to become aware of it.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
- 8 -

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.

Matthew Kaye
Senior Statutory Auditor
For and on behalf of Johnston Carmichael LLP
30 August 2024
Chartered Accountants
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 9 -
2024
2023
Notes
£'000
£'000
Turnover
3
5,898
4,774
Cost of sales
(4,188)
(4,055)
Gross profit
1,710
719
Administrative expenses
(272)
(234)
Operating profit
1,438
485
Interest receivable and similar income
6
1,826
1,747
Interest payable and similar expenses
7
(1,569)
(1,669)
Profit before taxation
1,695
563
Tax on profit
8
(378)
(59)
Profit for the financial year
1,317
504

The profit and loss account has been prepared on the basis that all operations are continuing operations.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 10 -
2024
2023
£'000
£'000
Profit for the year
1,317
504
Other comprehensive income
Fair value movement on derivatives
178
2,192
Deferred tax relating to other comprehensive income
(45)
(548)
Other comprehensive income for the year
133
1,644
Total comprehensive income for the year
1,450
2,148
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
BALANCE SHEET
AS AT
29 FEBRUARY 2024
29 February 2024
- 11 -
29 February 2024
28 February 2023
Notes
£'000
£'000
£'000
£'000
Current assets
Debtors falling due after more than one year
10
22,088
24,252
Debtors falling due within one year
10
3,586
2,778
Cash at bank and in hand
6,576
6,097
32,250
33,127
Creditors: amounts falling due within one year
11
(6,034)
(5,466)
Net current assets
26,216
27,661
Creditors: amounts falling due after more than one year
12
(16,691)
(18,904)
Provisions for liabilities
Deferred tax liability
13
4,141
4,537
(4,141)
(4,537)
Net assets
5,384
4,220
Capital and reserves
Called up share capital
14
6
6
Hedging reserve
15
(297)
(430)
Profit and loss reserves
16
5,675
4,644
Total equity
5,384
4,220
The financial statements were approved by the board of directors and authorised for issue on 30 August 2024 and are signed on its behalf by:
N Covington
Director
Company registration number 04261262 (England and Wales)
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 12 -
Share capital
Hedging reserve
Profit and loss reserves
Total
Notes
£'000
£'000
£'000
£'000
Balance at 1 March 2022
6
(2,074)
4,140
2,072
Year ended 28 February 2023:
Profit for the year
-
-
504
504
Other comprehensive income:
Cash flow hedges gains
-
2,192
-
2,192
Tax relating to other comprehensive income
-
(548)
-
0
(548)
Total comprehensive income for the year
-
1,644
504
2,148
Balance at 28 February 2023
6
(430)
4,644
4,220
Year ended 29 February 2024:
Profit for the year
-
-
1,317
1,317
Other comprehensive income:
Cash flow hedges gains
-
178
-
178
Tax relating to other comprehensive income
-
(45)
-
0
(45)
Total comprehensive income for the year
-
133
1,317
1,450
Dividends
9
-
-
(286)
(286)
Balance at 29 February 2024
6
(297)
5,675
5,384
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 13 -
2024
2023
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
19
3,177
2,736
Interest received
1,826
1,747
Income taxes paid
(323)
(651)
Net cash inflow from operating activities
4,680
3,832
Financing activities
Repayment of borrowings
(38)
(563)
Repayment of bank loans
(2,360)
(1,696)
Repayment of derivatives
(1)
-
0
Interest paid
(1,516)
(1,093)
Dividends paid
(286)
-
0
Net cash used in financing activities
(4,201)
(3,352)
Net increase in cash and cash equivalents
479
480
Cash and cash equivalents at beginning of year
6,097
5,617
Cash and cash equivalents at end of year
6,576
6,097
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 14 -
1
Accounting policies
Company information

Pyramid Schools (Southampton) 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.

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 company. Monetary amounts in these financial statements are rounded to the nearest £'000.

The financial statements have been prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities. The principal accounting policies adopted are set out below.

1.2
Going concern

The directors have prepared a detailed model forecast to project completion incorporating the relevant terms of the PFI contract, subcontracts and Credit Agreement and reasonably prudent economic assumptions. This forecast and associated business model, which is updated regularly, predicts that the truecompany will remain profitable and will have sufficient cash resources to operate within the terms of the PFI contract, Subcontract and Credit Agreement. Therefore, the directors, having considered the financial position of the company and its expected future cash flows for at least 12 months from the date of signing the financial statements, and have prepared the financial statements on a going concern basis. The directors confirm that they do not intend to liquidate the company or cease trading as they consider they have realistic alternatives to doing so. At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.3

Accounting for PFI contracts

In prior years the company took advantage of exemptions made available under section 35 10 (i) of FRS 102, and as such there has been no substantial change to the treatment of the financial asset receivable due to the adoption of the standard.

 

Under the terms of the contract, substantially all the risks and rewards of ownership of the property remain with the Council.

 

During the period of construction, costs incurred as a direct consequence of financing, designing and constructing the schools, including finance costs, are capitalised and shown as work in progress. On completion of the construction, credit is taken for the deemed sale, which is recorded within turnover. The construction expenditure and associated costs are reallocated to cost of sales. Amounts receivable are classified as a financial asset receivable (PFI debtor).

 

Revenues received from the customer are apportioned between:

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
1
Accounting policies
(Continued)
- 15 -
1.4
Service concession

The company has been established to provide services under certain private finance agreements with the Council. Under the terms of these Agreements, the Council (as grantor) controls the services to be provided by the company over the contract term. Based on the contractual arrangements, the company has classified the project as a service concession arrangement, and has accounted for the principal assets, of and income streams from, the project in accordance with FRS 102, Section 34.12 Service Arrangements.

 

The company has chosen to adopt the transitional arrangements available within FRS 102, Section 35.10 (i) and as such the service concession arrangement has continued to be accounted for using the same accounting policies being applied at the date of transition to FRS 102 (1 March 2014). The nature of the asset has therefore not changed.

Under the terms of the arrangement, the company has the right to receive a baseline contractual payment stream for the provision of the services from or at the direction of the grantor (the Council), and as such the asset is accounted for as a finance debtor. The finance debtor has initially been recognised at the fair value of the consideration received, based on the fair value of the construction (or upgrade) services, plus any directly attributable transaction costs, provided in line with FRS 102.

 

Revenue is recognised from the supply of services, which represents the timing of services provided under contracts to the extent that there is a right to consideration and is recorded at the fair value of the consideration received or receivable. Revenue is stated net of value added tax.

1.5
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with maturities of three months or less, and bank overdrafts.

 

Under the credit agreement the company is required to hold amounts in reserve accounts, the reserve accounts are to be funded to a level determined in the credit agreement at 29 February and 31 August. At 29 February 2024 £5,838,000 and (2023: £5,320,000) was held in such accounts.

1.6
Financial instruments

The company 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 company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset, with 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 assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
1
Accounting policies
(Continued)
- 16 -

Loans and receivables

Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest rate method, less any impairment.

 

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of the interest would be immaterial. The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument it bet carrying amount on initial recognition.

Other financial liabilities

Derivatives, including interest rate swaps, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless they are included in a hedging arrangement.

Classification of financial liabilities

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 company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans and loans from fellow group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

 

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

1.7
Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

1.8
Hedge accounting

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the fair value of the derivative financial instrument is recognised directly in the statement of comprehensive income as other comprehensive income or expense. Any ineffective portion of the hedge is recognised immediately in profit or loss.

 

Where hedge accounting recognises a liability then an associated deferred tax asset is also recognised.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
1
Accounting policies
(Continued)
- 17 -

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods in which the hedged item affects profit or loss or when the hedging relationship ends.

 

Hedge accounting is discontinued when the entity revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time is reclassified to profit or loss when the hedged item is recognised in profit or loss. When a forecast transaction is no longer expected to occur, any gain or loss that was recognised in other comprehensive income is reclassified immediately to profit or loss.

1.9
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. Tax is recognised in the Profit and Loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

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.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 18 -
2
Judgements and key sources of estimation uncertainty

The preparation of the financial statements in conformity with FRS 102 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based upon historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making judgements about carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods.

Critical judgements
Hedge accounting

The company’s borrowings are linked to SONlA and the company has entered into interest rate swaps to restrict its exposure to future interest rate fluctuations.

 

In assessing whether the company is entitled to apply cash flow hedge accounting, the directors must apply judgment in considering whether there is appropriate matching between the hedged item (the loan balance) and the hedging instrument (the interest rate swap). The directors must prepare documentation to demonstrate this consideration.

 

In the director’s judgment, the company has met the criteria for cash flow hedge accounting, accordingly the company has therefore recognised fair value movements on derivatives in effective hedging relationships through other comprehensive income as well as deferred taxation thereon.

Key sources of estimation uncertainty
Accounting for service concessions and PFI contracts

The company was established to provide services under certain private finance agreements with the Council. Under the terms of these Agreements, the Council (as grantor) controls the services to be provided by the company over the contract term. Based on the contractual arrangements the company has classified the project as a service concession arrangement, and has accounted for the principal assets, of and income streams from, the project in accordance with FRS 102, Section 34.12 Service Arrangements.

 

Accounting for the service concession contract and finance debtor requires estimation of finance debtor interest rates and the associated amortisation profile, which is based on projected trading results for the remainder of the contract term.

Derivative Financial Instruments

Derivative financial instruments are carried at fair value, which required estimation of various factors including future interest rates and credit risk.

 

Fair values for derivative contracts are based on mark-to-market valuations provided by the contract counterparty. Whilst these can be tested for reasonableness, the exact valuation methodology and forecast assumptions for future interest rates or inflation rates are specific to the counterparty.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 19 -
3
Turnover and other revenue
2024
2023
£'000
£'000
Turnover analysed by class of business
Turnover from operations
3,658
3,317
Turnover from pass-throughs
2,240
1,457
5,898
4,774
2024
2023
£'000
£'000
Finance income
Interest income (note 6)
1,826
1,747

Turnover is attributable to one geographical market, the United Kingdom.

4
Auditor's remuneration
2024
2023
Fees payable to the company's auditor and associates:
£'000
£'000
For audit services
Audit of the financial statements of the company and subsidiary borne by the subsidiary
29
19
For other services
Taxation compliance services
6
5
5
Employees

The average monthly number of persons (including directors) employed by the company during the year was: nil (2023: nil).

6
Interest receivable and similar income
2024
2023
£'000
£'000
Interest income
Interest on bank deposits
339
122
Interest receivable on finance debtor
1,487
1,625
Total income
1,826
1,747
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 20 -
7
Interest payable and similar expenses
2024
2023
£'000
£'000
Interest on financial liabilities measured at amortised cost:
Senior debt interest
984
567
Subordinated loan stock
532
518
1,516
1,085
Other finance costs:
Interest payable on derivative financial instruments
38
563
Other finance costs
15
13
Other interest
-
0
8
1,569
1,669
8
Taxation
2024
2023
£'000
£'000
Current tax
UK corporation tax on profits for the current period
779
340
Adjustments in respect of prior periods
(6)
-
0
Total current tax
773
340
Deferred tax
Deferred taxation
(395)
(281)
Total tax charge
378
59

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:

2024
2023
£'000
£'000
Profit before taxation
1,695
563
Expected tax charge based on the standard rate of corporation tax in the UK of 24.49% (2023: 19.00%)
415
107
Tax effect of expenses that are not deductible in determining taxable profit
466
321
Tax effect of income not taxable in determining taxable profit
(87)
(68)
Adjustments in respect of prior years
-
0
(188)
Under/(over) provided in prior years
(6)
180
Deferred tax timing differences
(402)
(226)
Deferred tax change in rate
(8)
(67)
Taxation charge for the year
378
59
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
8
Taxation
(Continued)
- 21 -

In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

2024
2023
£'000
£'000
Reclassifications from equity to profit or loss:
Relating to cash flow hedges
45
548

Corporation tax remained at 19% until March 2023. From 1 April 2023 the main rate increased to 25% for business profits made by the company over £250,000. A small profit rate (SPR) was introduced for companies with profits of £50,000 or less so that they continue to pay corporation tax at 19%. Companies with profits between £50,000 and £250,000 pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate. The company has assessed the impact of this change and consider the full rate of 25% applies.

 

There is a deferred tax asset relating to the interest rate derivative, calculated at 25%, which will unwind over the term of the hedging arrangement. All movements in the deferred tax asset have been recognised in other comprehensive income.

9
Dividends
2024
2023
£'000
£'000
Dividend paid on ordinary shares
286
-
0
10
Debtors
2024
2023
Amounts falling due within one year:
£'000
£'000
Trade debtors
1,088
713
Corporation tax recoverable
-
0
40
Finance debtor
2,136
1,901
Prepayments and accrued income
357
101
3,581
2,755
Deferred tax asset (note 13)
5
23
3,586
2,778
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
10
Debtors
(Continued)
- 22 -
2024
2023
Amounts falling due after more than one year:
£'000
£'000
Finance debtor
21,994
24,131
Deferred tax asset (note 13)
94
121
22,088
24,252
Total debtors
25,674
27,030

The finance debtor is amortised over the length of concession. Interest is charged at 6% (2023: 6%) and is calculated on the carrying value quarterly.

11
Creditors: amounts falling due within one year
2024
2023
£'000
£'000
Bank loans
2,069
2,327
Trade creditors
630
101
Corporation tax
411
-
0
Other taxation and social security
245
293
Derivative financial instruments
23
91
Other creditors
100
100
Accruals and deferred income
2,556
2,554
6,034
5,466

Included with accruals and deferred income is £1,688,000 (2023: £1,987,000) which relates to lifecycle underspend. The timing of the unwinding of this accrual is uncertain.

12
Creditors: amounts falling due after more than one year
2024
2023
£'000
£'000
Bank loans and overdrafts
12,303
14,405
Subordinated debt
4,016
4,016
Derivative financial instruments
372
483
16,691
18,904
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
12
Creditors: amounts falling due after more than one year
(Continued)
- 23 -

The senior secured loan and standby loan represents amounts borrowed under two facilities agreements with Bank of Scotland. The loans bear interest at a margin over SONIA of 0.9000% and are payable in instalments between 2004 and 2029.

 

In order to hedge against interest variations on the loans, the company has entered into two interest rate swaps agreements whereby at six monthly intervals sums are exchanged reflecting the difference between floating and fixed interest rates, calculated on a predetermined notional principal amount. Details of the interest rate swap is included within note 15.

 

Interest on the subordinated loan stock balance is paid at 6.54% compounded per semi-annum, principal is repayable upon expiry of the contract or earlier at the company's discretion.

Amounts included above which fall due after five years are as follows:
Payable by instalments
1,502
4,511
Payable other than by instalments
4,016
4,016
5,518
8,527
13
Deferred taxation

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

Liabilities
Liabilities
Assets
Assets
2024
2023
2024
2023
Balances:
£'000
£'000
£'000
£'000
Accelerated capital allowances
(99)
(113)
-
-
Deferred receipts under contract
4,240
4,650
-
-
Derivative financial instruments
-
-
99
144
4,141
4,537
99
144
2024
Movements in the year:
£'000
Liability at 1 March 2023
4,393
Credit to profit or loss
(396)
Charge to other comprehensive income
45
Liability at 29 February 2024
4,042
PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 24 -
14
Share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£'000
£'000
Issued and fully paid
Ordinary shares of £1 each
6,000
6,000
6
6
15
Hedging reserve
2024
2023
£'000
£'000
At the beginning of the year
(430)
(2,074)
Fair value movement on interest swap liability
178
2,192
Deferred tax movement on interest swap liability
(45)
(548)
At the end of the year
(297)
(430)

On 14 November and 22 February 2006, the group entered into two fixed interest rate swaps, one for 28 years and the other for 24 years, arrangements to hedge its exposure to the effect of interest rate fluctuations. The interest rate swap contracts are designated as a hedge of variable interest rate risk of the company’s floating rate borrowings. The hedged cash flows are expected to occur and to affect profit or loss over the period to maturity of the swap. One swap was effected on a notional amount of £39.9m at a fixed rate of 5.41% payable bi-annually between November 2001 and August 2029 and the other on a notional amount of £0.7m at a fixed rate of 4.51% payable bi-annually between February 2007 and August 2029.

 

The fair value of the interest rate swap liability in the current and prior years has been determined by Bank of Scotland PLC who have used relevant market data to determine their valuations .

16
Profit and loss reserves
2024
2023
£'000
£'000
At the beginning of the year
4,644
4,140
Profit for the year
1,317
504
Dividends declared and paid in the year
(286)
-
At the end of the year
5,675
4,644
17
Related party transactions

The company received directors services from PPP Equity PIP LP of £8,000 (2023: £8,000).

 

The company received directors services from Aberdeen Infrastructure Partners LP of £8,000 (2023: £8,000).

 

The company has taken advantage of Section 33 of FRS 102 and has not disclosed transactions with wholly owned entities within the group. The group comprises the company and its parent Pyramid Schools (Southampton) Holdings Limited.

PYRAMID SCHOOLS (SOUTHAMPTON) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 29 FEBRUARY 2024
- 25 -
18
Ultimate controlling party

The company is incorporated and domiciled in Great Britain. The immediate controlling party is Pyramid Schools (Southampton) Holdings Limited which is the smallest and largest entity to consolidate these financial statements. Copies of the financial statements of Pyramid Schools (Southampton) Holdings Limited are available from Companies House, Crown Way, Maindy, Cardiff, CF14 3UZ. The registered office is 1 Park Row, Leeds, United Kingdom, LS1 5AB.

 

At the balance sheet date, the immediate parent companies are Browning PFI Holdings Limited (previously known as Interserve PFI Holdings Limited) and Aberdeen Infrastructure (No.3) Limited which each holds 50% of the share capital of the Company. The registered offices of these companies are 1 Park Row, Leeds, England, LS1 5AB and 280 Bishopsgate, London, EC2M 4RB, respectively. In the opinion of the directors no company is a controlling party. At the balance sheet date, the ultimate parent companies who jointly control the company are PPP Equity PIP LP (acting by its General Partner, Dalmore Capital 6 GP Limited and its Manager, Dalmore Capital Limited) and Aberdeen Infrastructure Partners LP Inc. (acting by its General Partner, Aberdeen Infrastructure Finance GP Ltd and its manager, abrdn Investments Ltd).

19
Cash generated from operations
2024
2023
£'000
£'000
Profit for the year after tax
1,317
504
Adjustments for:
Taxation charged
378
59
Finance costs
1,569
1,669
Investment income
(1,826)
(1,747)
Decrease in provisions
(15)
(13)
Movements in working capital:
Decrease in debtors
1,271
1,767
Increase in creditors
483
497
Cash generated from operations
3,177
2,736
20
Analysis of changes in net debt
1 March 2023
Cash flows
29 February 2024
£'000
£'000
£'000
Cash at bank and in hand
6,097
479
6,576
Borrowings
(20,748)
2,360
(18,388)
(14,651)
2,839
(11,812)
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