The directors present the strategic report for the year ended 30 June 2024.
Ark Estates Cody Park Limited owns the Cody Park site, which had 48.78 MW (2023: 48.78 MW) of built capacity as of 30 June 2024, split across 5 buildings. In addition, 800kW (2023: 800kW) of further capacity is under construction.
On 19 March 2024 the company applied for the listing of an unlimited number of unsecured loan notes due 2038 on The International Stock Exchange ("TISE") and issued unsecured loan notes to a related undertaking in settlement of the amount owed to it at that date (see Note 12).
Financial indicators
The Board of Directors are therefore pleased to report the following financial results:
| 2024 (£) | 2023 (£) | Change (£) | % Change |
Property income | 40,396,227 | 35,232,131 | 5,164,096 | +14.66% |
Operating profit | 31,668,980 | 25,639,612 | 6,029,368 | +23.52% |
Interest payable | (37,369,423) | (36,186,755) | (1,182,668) | +3.27% |
(Loss)/Profit for year | (19,494,901) | 7,691,649 | (27,186,550) | -353.46% |
Investment property | 741,900,000 | 755,845,000 | (13,945,000) | -1.84% |
Total equity | 197,205,622 | 167,576,122 | 29,629,500 | +17.68% |
Non-financial indicators
Alongside the financial performance, the key performance indicators of the Company include;
MW capacity (built, contracted and available)
contract term
build costs
delivering in accordance with build programmes
maintaining operational excellence
stakeholder (customer and suppler) satisfaction scores
In addition, the group will continue to build out new facilities on its existing sites, and through its related undertakings at additional sites in and around London – Union Park, Longcross Park and Alliance Park – to meet the growing demand for colocation and cloud data centres.
The business plan of Ark is built around a long-term strategy and significant progress has been made during the year to 30 June 2024. During the current reporting period the group has secured new long-term contracts with customers from both public and private sectors across multiple industries including UK Government, Financial Services, Telecommunications, Cloud Providers and IT. The sales pipeline remains strong and further growth is expected through Ark’s existing customers, framework agreements and new customers. The Board of Directors believe that the Company’s position within the marketplace remains strong, and we look forward to further expansion in 2025.
Principal risks faced by the Company are identified and monitored through a regular process that is reviewed by Ark's Senior Leadership Team and presented to the Board of Directors. Principal risks include, but are not limited to;
Operational risks from a power or cooling outage or a security breach. The Company places a primary focus on preventative measures and controls to address these risks through its design and construction of the facilities and operation of robust accredited processes and regular maintenance programmes. Additionally, the Company undertakes regular exercises, involving our customers and supply chain, across multiple scenarios to test the application and robustness of its procedures.
Performance in an increasingly competitive marketplace is continually monitored. The Company engages proactively with its customers, both existing and prospective, to understand their requirements and has continuously progressed innovation in data centre design and construction to meet those needs and drive efficiencies.
Uncertainty of current economic conditions may impact supply and/or development arrangements, although this is largely mitigated by entering into fixed priced contracts for the construction of the data centres and ensuring critical supplies are available when needed.
The Company manages these risks on an ongoing basis, and the Board of Directors believe that the Company’s offering within the marketplace remains strong, and that it is well positioned to continue its growth.
No events have occurred since the balance sheet date which significantly affect the Company.
On behalf of the board
The directors present their annual report and audited financial statements for the year ended 30 June 2024.
The results for the year are set out on page 11.
The results for the year and the financial position at the year end were considered satisfactory by the directors.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend (2023: nil).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with the company's articles, a resolution proposing that PricewaterhouseCoopers CI LLP be reappointed as auditor of the company will be put at a General Meeting.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
Basis for opinion
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As a result of the company issuing loan notes on The International Stock Exchange (“TISE”), key audit matters have been included for the first time this year.
This is not a complete list of all risks identified by our audit.
Key audit matter | How our audit addressed the key audit matter |
Valuation of Investment Property as at 30 June 2024 |
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Please refer to note 1.5 and 9 to the financial statements. The company owns both standing and development investment property which are carried at fair value through profit or loss. The valuation of investment property is inherently subjective due to, among other factors, the individual nature of the investment property, its location, stage of development and expected future rental income. The valuation of the company’s investment property was carried out by an independent professional valuer ("management’s expert") who performed their work in accordance with the latest version of the RICS Valuation – Global Professional Standards (known as the “Red Book”) current as at the valuation date. In determining the investment property's valuation for standing investment property, management’s expert has considered property specific current information such as tenancy agreements and rental income earned from the property.
Assumptions are then applied in relation to capitalisation rates, current market rent and growth, based on available market data, and recent transactions to arrive at a range of valuation outcomes, from which they derive a point estimate. In determining the valuation of the investment property under development, management’s expert takes into account property specific current information such as planning permission, the stage of development and committed costs to complete the development. Assumptions are then applied in relation to capitalisation rates, current market rent and growth (based on available market data and transactions), variable costs of the development, developer’s profit on cost and purchaser’s costs at the Gross Development Value (GDV) / Net Development Value (NDV) and residual land value levels to arrive at a range of valuation outcomes, from which they derive a point estimate. The directors have scrutinised and then adopted management’s expert values for the investment property for financial reporting purposes. | Understood and evaluated the controls and appropriateness of accounting policy in place in respect of investment property valuations and management’s engagement with management’s expert and the scope of their work; Obtained and read management’s expert report on the valuation of the company’s investment property as at the year end; Assessed management expert’s qualification, expertise and independence; Confirmed that management’s expert report was prepared in accordance with professional valuation standards and suitable for use in determining the fair value of investment properties as at 30 June 2024;
Engaged our auditors expert to support our critique and challenge of the work performed and assumptions used by management’s expert. In particular, the valuation assumptions used by management's expert were compared to recent comparable market activity and industry indices and significant movements in the valuation were challenged; and Assessed the appropriateness of disclosures made within the company’s financial statements. Based on the audit work detailed above we have nothing to report to those charged with governance. |
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which it operates.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined the principal risks were related to posting of inappropriate journal entries to increase revenue, and management bias in accounting estimates and judgemental areas of the financial statements such as valuation of investment property. We engaged our own internal auditor's expert to review the valuation of investment property as at 30 June 2024. Our findings are documented in the Key Audit Matter "Valuation of investment property".
The audit was led, directed and controlled by PricewaterhouseCoopers CI LLP and all audit work for material items within the financial statements was performed in Jersey and the United Kingdom.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the company’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the company’s financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall company materiality | £7.5 million (2023: £22.8 million). |
How we determined it | 1% of Total Assets (2023: 3% of Total Assets) |
Rationale for benchmark applied | We believe total assets to be the appropriate basis for determining materiality since this is a key consideration for members of the company when assessing financial performance. It is also a generally accepted measure used for companies in this industry. |
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2023: 75%) of overall materiality, amounting to £5.6 million (2023: £17.1 million) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £750k (2023: £2.3 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included:
Discussing and critically examining management's assessment of the company's ability to continue as a going concern. This included evaluating the nature of the company’s operations, the assumptions made, and the time frame covered by the assessment;
Inquiring about any events or conditions beyond the assessment period that might significantly undermine the company’s ability to continue as a going concern;
Assessing the company’s ability to meet its commitments by issuing unsecured loan notes on TISE or calling on shareholder support when funding is required; and
Reviewing the cash flow forecasts prepared by the directors which include relevant downside sensitivities.
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.
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.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information.
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 based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic report and Directors' report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' report for the year ended 30 June 2024 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors' report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they 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.
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
Based on our understanding of the company and industry, we considered the principal risks of non-compliance with laws and regulations, including those that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, and the extent to which non-compliance might have a material effect on the financial statements. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue and the potential for management bias in accounting estimates and key judgements impacting the financial statements such as valuation of investment property. Audit procedures performed by the engagement team included:
enquiring with the management of the company and the directors as to any actual or suspected instances of fraud or non-compliance with laws and regulations;
checking the minutes of meetings of the board of directors for matters relevant to the audit;
testing the disclosures made in the financial statements, as well as in the Directors' report, for compliance with the requirements of the Companies Act 2006;
procedures relating to the valuation of investment property described in the related Key Audit Matter;
performing audit procedures to incorporate unpredictability around the nature, timing and extent of our testing;
identifying and testing journal entries considered to be of higher fraud risk; and
evaluating the business rationale for any significant or unusual transactions identified as being outside the normal course of business.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, 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 deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
The notes on pages 14 to 21 form part of these financial statements.
The notes on pages 14 to 21 form part of these financial statements.
The notes on pages 14 to 21 form part of these financial statements.
Ark Estates Cody Park Limited is a private company limited by shares incorporated in England and Wales. The registered office is Spring Park, Westwells Road, Hawthorn, Corsham, Wiltshire, SN13 9GB.
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 £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Ark Estates Holdings Limited. These consolidated financial statements are available from Companies House.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
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, including creditors, listed loan notes 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. Listed loan notes represent unsecured, unsubordinated fixed rate funding loan notes issued by the company to fund the principal activities. These are initially recognised at amounts drawn and subsequently measured at amounts drawn plus interest less payments made.
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.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
Finance costs
Finance costs of financial liabilities are recognised in the profit or loss account over the term of such instruments at a constant rate on the carrying amount.
Finance costs which are directly attributable to the construction of tangible fixed assets are capitalised as part of the cost of those assets. The commencement of capitalisation begins when both finance costs and expenditures for the assets are being incurred and activities that are necessary to prepare the asset for use are in progress. Capitalisation ceases when substantially all the activities that are necessary to prepare the asset for use are complete.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. Judgements, estimates and assumptions have been made in relation to the valuation of the company's investment property (see note 9). The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
There were no employees during the year (2023: none).
No directors' remuneration was paid in either the current year or prior year. The directors are remunerated by other group undertakings for which no allocations are made to the company. Please refer to Note 19 for related party transactions.
The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Investment property represents data centres at Cody Park. The value reported includes both completed data centres, as well as new buildings under construction. The investment property has been revalued as at 30 June 2024 at fair value by the directors with reference to market-based evidence and expected future cash flows derived from the assets. An independent professional valuation of the completed data centres was carried out by a RICS qualified valuer as at 30 June 2024 and this was taken into consideration in the directors' assessment of the fair value. The valuation methodology used to establish the value of the investment property includes a number of assumptions. These include, but are not limited to: occupancy rates, contracted and uncontracted income forecasts, operational costs, capital replacement costs, planning permission, the stage of development, committed costs to complete the development, discount rates and exit yields.
At the year end the total finance costs within investment property was £21,344,921 (2023: £21,344,921).
Amounts owed by group undertakings are unsecured, have no fixed date of repayment and are repayable on demand.
Amounts owed to parent undertaking are unsecured, have no fixed date of repayment and are repayable on demand. Interest is payable at 4.5% (2023: 4.5%) per annum (see Note 6).
Amounts owed to fellow group undertakings are unsecured, have no fixed date of repayment and are repayable on demand.
Amounts owed to related undertakings are owed to subsidiaries of Ark Capital Partners I LP Inc., the ultimate parent of Ark Estates Cody Park Limited. The amount owed at 30 June 2023 was repayable on 17 March 2027 and was accruing interest payable of 8.4% per annum. On 31 December 2023 49,124,401 ordinary shares of £1 each were issued at par in exchange for a decrease in amounts owed to related undertakings (see note 14). On 19 March 2024 the amount owed to related undertakings was converted into unsecured loan notes due 31 December 2038 listed on TISE. Interest is payable on the loan notes at a fixed rate of 8.4% per annum and is converted into unsecured loan notes on a quarterly basis. During the year £8,261,976 (2023: £Nil) of interest was capitalised.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
No deferred tax has been recognised at either 30 June 2024 or 30 June 2023 in relation to carried forward losses or capital allowances. This is due to the uncertainty and judgement associated with both the estimation of the financial value, as well as uncertainty around the timing of when such assets would be utilised.
On 31 December 2023 49,124,401 ordinary shares of £1 each were issued at par in exchange for a decrease in amounts owed to related undertakings (see note 12).
The assets of the Company have been pledged as security against a bank loan held by Ark Estates Holdings Limited, which is the Company's immediate parent company, also controlled by Ark Capital Partners I LP Inc. For full details of the bank loan, please refer to the financial statements of Ark Estates Holdings Limited available at Companies House.
At the reporting end date the company had contracted with tenants for the following minimum lease payments:
Amounts contracted for but not provided in the financial statements:
There have been no post balance sheet events requiring disclosure in the notes to the financial statements.
During the year property management fees of £Nil (2023: £100,000) were charged by Revcap Advisors Limited. The director A J Pettit is also a director of Revcap Advisors Limited.