The directors present their annual report and financial statements for the year ended 30 June 2024.
The results for the year are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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.
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
We have audited the financial statements of IIC Northampton Limited (the 'company') for the year ended 30 June 2024 which comprise the statement of comprehensive income, the balance sheet 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).
Basis for 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
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our 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 has been prepared in accordance with applicable legal requirements.
Extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to 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:;
Companies Act 2006;
UK Corporation Tax legislation;
VAT legislation; and
UK Generally Accepted Accounting Practice.
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:
Revenue recognition; and
Management override of controls.
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 are to become aware of it.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
All results are in respect of continuing activities.
The notes on pages 11 to 24 form part of these financial statements
IIC Northampton 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 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 £.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
The Company's parent undertaking, IIC Northampton Holding Company Limited includes the Company in its consolidated financial statements. The consolidated financial statements of IIC Northampton Holding Company are prepared in accordance with FRS 102 and are available to the public and may be obtained from the Company Secretary, 1 Park Row, Leeds, England, LS1 5AB. In these financial statements, the Company is considered to be a qualifying entity (for the purposes of FRS102) and has applied the exemptions available under FRS 102 in respect of the following disclosures:
Section 7 'Statement of Cash Flows' - Presentation of a statement of cash flows and related notes and disclosures; and
Section 33 'Related Party Disclosures' - Compensation for key management personnel.
As the consolidated financial statements of IIC Northampton Holding Company Limited include the equivalent disclosures, the Company has also taken the exemptions under FRS 102 available in respect of the following disclosures:
The disclosures required by FRS 102 Section 11 Basic Financial Instruments and FRS 102 Section 12 Other Financial Instrument Issues in respect of financial instruments not falling within the fair value accounting rules of Paragraph 36(4) of Schedule 1.
The shareholder's funds at 30 June 2024 show a deficit of £2,503,151 (2023: £2,750,150). This arises from the FRS102 requirement to show the swap contracts on the balance sheet. The Company has secured bank facility that will enable it to continue trading for the life of the concession period. The Company is not in breach of its covenant terms and does not expect to become so in the foreseeable future.
The directors have reviewed the Company's projected profits and cash flows by reference to a financial model covering accounting periods up to October 2037.
The Company's operating cash inflows are largely dependent on unitary charge receipts receivable from Northampton Healthcare NHS Trust. These have been received as expected to date and the Directors expect these amounts to be received even in severe but plausible downside scenarios.
The Company continues to provide the asset in accordance with the contract and is available to be used. As a result, the Company does not believe there is any likelihood of a material impact to the unitary payment.
The Directors have assessed the viability of its main sub-contractors and reviewed the contingency plans of the sub-contracts and are satisfied in their ability to provide the services in line with the contract without significant additional costs to the Company, even in downside scenarios, due to the underlying contractual terms. To date, there has been no adverse impact on the services provided by the Company has sufficient funding in place and expect the Company to be in compliance with its debt covenants even in severe but plausible downside scenarios.
The directors have reviewed the forecast and believe that the financial position will strengthen in the future and therefore consider that it is appropriate to prepare these financial statements on a going concern basis.
Lifecycle
The Company is responsible for the lifecycle costs associated with its principal activity, however risk here is mitigated by passing on lifecycle risk to a third-party facilities management company. Lifecycle costs are accounted for on an accruals basis in line with indicative lifecycle works program or lifecycle tracker issued by all parties through the operating phase of concession period with any underspend included within accruals and creditors due less than one year.
The Company has elected to apply the provision of Section 11 'Basic Financial Instruments' and Section 12 'Other Financial Instruments' of FRS 102 to all of its financial instruments.
Trade and other debtors/creditors
Trade and other debtors are recognised initially at transaction price less attributable transaction costs. Trade and other creditors are recognised initially at transactions price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade debtors.
If the arrangement constitutes a financing transaction, for example if a payment is deferred beyond normal business terms, then it is measured at the present value of future payments discontinued at a market rate of interest for a similar debt instrument.
Interest-bearing borrowing classified as basic financial instruments
Interest-bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Finance debtor and contractual receivable
Finance debtor and contractual receivables are classified as loans and receivables as defined in FRS 102, which are initially recognised at the fair value of the consideration received or receivable and are then stated at amortised cost.
Derivative financial instruments are not recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see below).
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 derivative financial instrument is recognised directly in other comprehensive income. Any ineffective portion of the hedge is recognised immediately in profit or loss.
For cash flow hedges, where the forecast transactions resulted in the recognition of a non-financial asset or non-financial liability, the hedging gain or loss recognised in other comprehensive income is included in the initial cost or other carrying amount of the asset or liability. Alternatively when the hedged item is recognised in profit or loss the hedging gain or loss is reclassified to profit or loss.
When a hedging instrument expires or is sold, terminated or exercised, or the entity discontinues designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the profit and loss immediately.
Provision for liabilities
A provision is recognised when the group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.
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, bank loans, loans from fellow group companies and preference shares that are classified as debt, 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.
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.
Basis of consolidation
The group has taken advantage of the exemption under section 400 of the Companies Act 2006, from preparing consolidated financial statements on the basis that this is a small group.
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. 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.
The preparation of financial statement 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 results of which form the basis of making judgements. The estimates and underlying assumptions are reviewed on an ongoing basis.
The Company uses derivative financial instruments to hedge certain economic exposures in relation to movements in interest rates and movements in RPI as compared with the position that was expected at the date the underlying transaction being hedged was entered into. The Company fair values its derivative financial instruments and records the fair value of those on its balance sheet. No market prices are available for these instruments and consequently the fair value of those on its balance sheet. No market prices are available for these instruments and consequently the fair value s are derived using financial models developed by shareholders based on counterparty information that is independent of the Company, but use observable market data in respect of RPI and interest rates as in input to valuing those derivative financial instruments. The directors have applied their judgment in assessing the interest rate and RPI swaps to be fully effective and have therefore designated the instruments as a cashflow hedge.
Accounting for the service contracts and finance receivables requires estimation of service margins, finance receivable interest rates and finance receivable amortisation which is based on forecasted results of the PFI contract.
The Company had no employees during the year (2023: nil)
The directors, who are key management personnel, received no emoluments in respect of their services to the Company during the year (2023: £nil). Fees paid to investors in respect of their directors amount to £29,003 (2023: £26,064).
Cash at bank includes the seven current accounts with Lloyds Banking Group plc having a balance of £3,905,900 (2023: £4,287,920). The restricted cash balance is £2,932,058 (2023: £3,422,571). Withdrawals from these bank accounts are restricted to items set out in the Credit Agreement with Dexia Credit Local and the Company must satisfy certain requirements before being permitted to withdraw any amounts from these accounts. Included in the amounts above is £2,800,000 currently held in short term deposits.
Derivative financial instruments
The fair value of interest rate and RPI swaps are based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.
Derivative financial instruments designated as hedges of variable interest rate risk and RPI risk comprise of an interest rate swap and RPI swap respectively.
To hedge the potential movement in the interest cash flows associated with the SONIA rate used for the bank term loan described in note 13, the Company has entered into floating to fixed interest rate swaps with a nominal value equal to the initial borrowings with the same term as the loans and interest payment dates. These result in the Company paying 5.11% per annum and receiving SONIA plus spread.
In addition, the Company has also entered into an RPI-linked swap deal to hedge against potential movements in future revenue cash flows arising from changes in RPI. The nominal value of the deal is below that of the contracted revenues of the Company, but the term and re-pricing dates are identical to those of the contracted revenue. These result in the Company effectively fixing the inflation on a determined portion of the concession period.
Included within accruals and deferred income are amounts recognised in respect of the future payments due on lifecycle underspend of £1,596,327 (2023: £1,814,379).
All these shares rank pari passu to each other.
At the balance sheet date, the Company was a wholly owned subsidiary of Jura Holdings Limited and has taken advantage of the exemption, under the terms of FRS 102, from disclosing related party transactions with entities that are part of the group headed by Jura Holdings Limited.
There were no other related party transactions entered into by the Company during the year.