Company registration number 06504240 (England and Wales)
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
CONTENTS
Page
Directors' report
1 - 2
Directors' responsibilities statement
3
Independent auditor's report
4 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 22
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
COMPANY INFORMATION
Directors
KA Cunningham
PR Hepburn
Secretary
Resolis Limited
Company number
06504240
Registered office
1 Park Row
Leeds
United Kingdom
LS1 5AB
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 1 -

The Directors present their annual report and financial statements for the year ended 30 September 2024.

Principal activities

The Company's principal activity is undertaking a Private Finance Initiative (PFI) concession contract with Leeds City Council to design, build, finance and operate a secondary school in Leeds. The school has been in the operational phase throughout the current and preceding year.

 

Going concern

The going concern disclosure for the Company can be found in note 1.2 of the financial statements.

Results and dividends

The results of the Company are as set out in the statement of comprehensive income on page 8.

The Directors declared and paid a dividend in 2024 of £Nil (2023: £200,000). Dividends proposed post year end total £Nil (2023: £Nil).

Directors

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

KA Cunningham
PR Hepburn

The Directors holding office at 30 September 2024 did not hold any beneficial interest in the issued share capital of the Company at 1 October 2023 or 30 September 2024.

Qualifying third party indemnity provisions

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

Auditor

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

Statement of disclosure to auditor

Each of the persons who is a director at the date of approval of this report confirms that:

 

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Small companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 2 -
On behalf of the board
KA Cunningham
Director
25 March 2025
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 3 -

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and 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.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
- 4 -
Opinion

We have audited the financial statements of Environments for Learning Leeds PFI Two Limited (the 'Company’) for the year ended 30 September 2024 which comprise the Statement of Comprehensive Income, the Balance Sheet, the 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 Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor 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.

Material uncertainty relating to going concern.

We draw attention to note 1.2 in the financial statements which indicates that there have been Events of Default (EoDs) under the combined Construction and Facilities Management Agreement and Loan Facilities Agreement. The company does not have a Parent Company Guarantee (“PCG”) due to the liquidation of Interserve Group Limited. As a consequence of this, the combined Construction and Facilities Management is terminable which in turn triggers a technical default in the Loan Facilities Agreement meaning the lender can recall the senior loan on demand.

 

As stated within note 1.2, these events or conditions, along with other matters as set forth in note 1.2, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

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.

 

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.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
- 5 -

Opinions on other matters prescribed by the Companies Act 2006

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

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 Directors’ Report.

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

Responsibilities of directors

As explained more fully in the Directors’ responsibilities statement set out on page 3, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor responsibilities for the audit of the financial statements

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

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

 

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

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
- 6 -

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

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

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

We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns and board meeting minutes.

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

 

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

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
- 7 -

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

Use of our report

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

Grant Roger (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
25 March 2025
Chartered Accountants
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 8 -
2024
2023
Notes
£'000
£'000
Turnover
3
1,936
1,777
Cost of sales
(1,226)
(1,196)
Gross profit
710
581
Administrative expenses
(179)
(184)
Operating profit
4
531
397
Other interest receivable and similar income
3
1,329
1,304
Interest payable to group undertakings
(180)
(314)
Other interest payable and similar expenses
(1,225)
(1,180)
Profit before taxation
455
207
Tax on profit
(114)
(45)
Profit for the financial year
341
162
Other comprehensive income
Cash flow hedges loss arising in the year
(730)
(137)
Tax relating to other comprehensive income
182
34
Total comprehensive income for the year
(207)
59
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
BALANCE SHEET
AS AT
30 SEPTEMBER 2024
30 September 2024
- 9 -
2024
2023
Notes
£'000
£'000
£'000
£'000
Current assets
Debtors: amounts falling due within one year
6
2,613
2,259
Debtors: amounts falling due after one year
6
16,786
18,449
Cash at bank and in hand
2,847
2,394
22,246
23,102
Creditors: amounts falling due within one year
7
(20,455)
(21,663)
Net current assets
1,791
1,439
Creditors: amounts falling due after more than one year
8
(2,049)
(1,490)
Net liabilities
(258)
(51)
Capital and reserves
Called up share capital
9
3
3
Hedging reserve
10
(761)
(213)
Profit and loss reserves
500
159
Total equity
(258)
(51)

The notes on pages 12 to 22 form part of the financial statements.

 

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the board of directors and authorised for issue on 25 March 2025 and are signed on its behalf by:
KA Cunningham
Director
Company Registration No. 06504240
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 10 -
Share capital
Hedging reserve
Profit and loss reserves
Total
Notes
£'000
£'000
£'000
£'000
Balance at 1 October 2022
3
(110)
197
90
Year ended 30 September 2023:
Profit
-
-
162
162
Other comprehensive income:
Cash flow hedges gains
-
(137)
-
(137)
Tax relating to other comprehensive income
-
34
-
0
34
Total comprehensive income
-
(103)
162
59
Dividends
-
-
(200)
(200)
Balance at 30 September 2023
3
(213)
159
(51)
Year ended 30 September 2024:
Profit
-
-
341
341
Other comprehensive income:
Cash flow hedges gains
-
(730)
-
(730)
Tax relating to other comprehensive income
-
182
-
0
182
Total comprehensive income
-
(548)
341
(207)
Balance at 30 September 2024
3
(761)
500
(258)
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 11 -
2024
2023
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
13
1,774
2,448
Interest received from financial debtor
1,143
1,244
Tax paid
(45)
(94)
Net cash inflow from operating activities
2,872
3,598
Cash flows from investing activities
Interest received
74
59
Net cash generated from investing activities
74
59
Cash flows from financing activities
Interest paid
(1,106)
(1,411)
Dividends paid
-
(200)
Repayment of subordinated debt
-
(1,035)
Repayment of secured senior debt
(1,387)
(1,367)
Net cash used in financing activities
(2,493)
(4,013)
Net increase/(decrease) in cash and cash equivalents
453
(356)
Cash and cash equivalents at beginning of year
2,394
2,750
Cash and cash equivalents at end of year
2,847
2,394
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 12 -
1
Accounting policies
Company information

Environments for Learning Leeds PFI Two Limited is a private company, limited by shares, registered and incorporated in England and Wales. The Company's registered number and registered office address can be found on the Company Information page.

 

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.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

 

Measurement convention

The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments.

1.2
Going concern

These financial statements are prepared on the going concern basis. The Directors have a reasonable expectation that the Company will continue in operational existence for the foreseeable future. However, the Directors are aware of certain matters which may impact the performance of the Company in future.true

 

The Directors have reviewed detailed model forecasts, which forecast financial performance through to project completion in September 2034, incorporating relevant terms of the Project Agreements, subcontracts and Credit Agreements and reasonable, prudent economic assumptions. These forecasts are updated semi-annually and predict that the Company will be profitable and will have sufficient cashflow to meet its liabilities as they fall due through to the end of their concession.

 

Design and build projects have business models that are reviewed annually and updated to include relevant ongoing works. These are conducted on a breakeven or "cost plus margin" basis and the companies are expected to break even or be profitable to the end of their life.

 

The Company has positive net current assets but negative net liabilities. This is due to events of defaults ("EoDs") occurring subsequent to the yearend resulting in senior debt facility being classified as current.

 

With effect from 5 October 2023, the Company does not have an effective Parent Company Guarantee in place due to the liquidation of Interserve Group Limited (“IGL”). This has led to technical default in the Loan Facilities Agreement which means that the lender could recall the senior debt from the Company on demand.

 

At the date of signing the financial statements no proceedings had commenced to recall the senior debt earlier than repayment by instalments. The Directors acknowledge that there are significant risks surrounding the EoD which could impact the Company’s ability to continue as a going concern and the future financial performance of the Company. However, appropriate actions are being taken to mitigate these risks and the directors consider the likelihood of the default resulting in the Company no longer being able to continue is remote.

 

The Directors confirm that there are no plans that would change the future operations of the Company. Consequently, the Directors have prepared the financial statements on a going concern basis however they acknowledge the EoD gives rise to a material uncertainty which may cause significant doubt about the Company’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
1
Accounting policies
(Continued)
- 13 -

Event of default

The Company has failed to have an effective Parent Company Guarantee (“PCG”) in place as a result of the liquidation of Interserve Group Limited which has led to the combined Construction and Facilities Management (“FM”) Contract becoming terminable as well as triggering technical defaults in the Loan Facilities Agreement.

 

An EoD was triggered when Interserve PLC went into administration on 15 March 2019 as it was parent company guarantor for Interserve (Facilities Management) Ltd and Interserve Construction Limited. Waivers were signed in 2020 accepting the PCG of Interserve Group Limited meaning the Company was no longer in default.

 

On 5 October 2023 Interserve Group Limited ("IGL") appointed liquidators under a Creditors Voluntary Liquidation. IGL is a Major Project Party as it provides a PCG for Tilbury Douglas Construction Limited ("TDCL") in relation to the combined Construction and FM Contract between the Company and TDCL. Therefore, as a result of IGL's liquidation, the combined Construction and FM Contracts have become terminable. This insolvency event has also triggered a technical default in the Loan Facility Agreement of the Company. This has been known for some time and the Company has been working with ICG, TDCL, Mitie FM and the Lender to find a resolution. The FM services are being carried out by Mitie via a contract with the Company contractor (TDCL), and a PCG is being sought from them.

 

The Company issued a Reservations of Rights letter to IGL and a notice of this was issued to the lenders and Authority (Leeds City Council) in October 2023 in respect of the technical default. The Directors believe this is highly unlikely to cause going concern issues but technically whilst the EoD subsists, there is a risk that the Authority and lenders could exercise their rights to terminate the respective contracts.

 

From 5 October 2023 to the date of signing there has been no formal waiver put in place from the lender relating to the events of default. From Directors and management discussions there is no evidence the Authority intends to cancel the concession agreement. Directors and management also note that there is no evidence that the lender intends to recall the debt earlier than the repayment terms that would otherwise prevail without an event of default. However, under the Loan Facilities Agreement it is within the lender's control to recall the outstanding loan balance. The Company’s cash position and future cash flow forecasts evidence that it would not be possible for the Company to meet its liabilities if the debt were recalled for repayment in full rather than instalments. Despite this course of action being available to the lender, the Directors consider the possibility to be so remote that they deem the application of the going concern basis of preparation of the financial statements to be appropriate.

1.3

Finance asset receivable

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

the Authority, Leeds City Council.

 

During the period of construction, costs incurred as a direct consequence of financing, designing and

constructing the facilities, 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:

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
1
Accounting policies
(Continued)
- 14 -
1.4
Cash and cash equivalents

Cash Investments are stated at cost excluding any accrued interest and with no provision for impairment in value.

 

Restricted cash

The Company is obligated to keep separate cash reserves in respect of requirements in the Company's funding agreements. This restricted cash balance, which is shown on the balance sheet within the "cash at bank and in hand" balance, amounts to £855,000 at the year end (2023: £477,000).

1.5
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 statement of financial position when the Company becomes party to the contractual provisions of the instrument.

 

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

Basic financial assets

Basic financial assets, which include trade and other receivables and cash and bank balances are initially measured at transaction price including transaction costs and are subsequently carried at amortised costs 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 market rate interest.

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 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 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 to net carrying amount on initial recognition.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. The impairment loss is recognised in profit or loss.

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 its liabilities.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
1
Accounting policies
(Continued)
- 15 -
Basic financial liabilities

Basic financial liabilities, including trade and other payables, 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 receipts discounted at a market rate interest.

 

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

 

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

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.

1.6
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.

1.7
Hedge accounting

Where a derivative financial instrument is designated as a hedge of the variability in the 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.

Cash flow hedges

The effective portion of the 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 and 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, exercised or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at the 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.

1.8
Taxation

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

Current tax

Current tax, including UK corporation tax, is provided at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted by the statement of financial position date.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
1
Accounting policies
(Continued)
- 16 -
Deferred tax

Deferred tax is provided in full on timing differences which result in an obligation at the statement of financial position date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items or income and expenditure in taxation computations in periods different from those in which they are included in the financial statements.

 

Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

 

Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income.

1.9

Lifecycle

Under the terms of the PFI contract, the company has a programme of expenditure for the maintenance of and replacement of non-moveable assets in the facilities. The company recognises such expenses as incurred, with any committed expenditure at the balance sheet dates being appropriately accrued for with the associated expense recognised through the Statement of Comprehensive Income.

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 17 -
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.

 

Key sources of estimation uncertainty

 

 

Critical judgements in applying the Company's accounting policies

 

Accounting for service concessions and PFI contracts

The Company was established to provide services under certain private finance agreements with Leeds City 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 Concession 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 October 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 financial asset. The financial asset 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.

 

ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
2
Judgements and key sources of estimation uncertainty
(Continued)
- 18 -

Derivative financial instruments

Financial Instruments

The Company holds derivative financial instruments which have the effect of fixing the interest rate payable on bank borrowings. Amounts payable or receivable in respect of interest rate derivatives are recognised as adjustments to interest over the period of the contract. See Hedge Accounting below for how the derivative is accounted for.

 

Hedge accounting

Where a derivative financial instrument is designated as a hedge of the variability in the 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 derivative portion of the hedge is recognised immediately in statement of comprehensive income.

 

Applicability of hedge accounting

The application of hedge accounting has remained unaffected. The remaining repayments are anticipated to be made as per the original repayment schedule in the bank and swap agreements.

3
Turnover and other revenue

The turnover and profit before taxation are attributable to the one principal activity of the Company.

 

2024
2023
£'000
£'000
Turnover analysed by class of business
Turnover from operations
1,728
1,491
Pass through income
208
286
1,936
1,777
2024
2023
£'000
£'000
Other revenue
Interest income
1,329
1,304

Turnover, which is stated net of value added tax, represents amounts invoiced for services provided, and is recognised each year as the applicable portions of the amounts receivable relating to finance and operating costs calculated on a consistent basis (see accounting policies).

 

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

4
Operating profit
2024
2023
The operating profit is stated after charging:
£'000
£'000
Fees payable to the company's auditor for the audit of the company's and parent company's financial statements
21
20
Taxation advisory services for the company and the parent company
5
4
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 19 -
5
Employees and directors

 

The Company had no employees (2023: nil) during the year.

 

Emoluments paid to third parties for Directors' services to the Company were £Nil (2023: £Nil).

6
Debtors
2024
2023
Amounts falling due within one year:
£'000
£'000
Trade debtors
518
131
Corporation tax recoverable
-
0
33
Finance asset receivable
1,823
1,785
Prepayments and accrued income
260
188
Interest rate swap asset
-
122
2,601
2,259
Deferred tax asset
12
-
0
2,613
2,259
2024
2023
Amounts falling due after more than one year:
£'000
£'000
Finance asset receivable
16,545
18,347
Deferred tax asset
241
102
16,786
18,449
Total debtors
19,399
20,708
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 20 -
7
Creditors: amounts falling due within one year
2024
2023
£'000
£'000
Bank loans
19,130
20,509
Trade creditors
507
559
Corporation tax
37
-
0
Other taxation and social security
150
181
Subordinated loan
56
56
Interest rate swap liability
50
-
Other creditors
23
13
Deferred tax liability
-
31
Accruals and deferred income
502
314
20,455
21,663

The secured senior loan represents amounts borrowed under a facility agreement with Sumitomo Mitsui Banking Corporation Europe Limited. The loan bears interest at a margin over SONIA of 0.5% during operations and is repayable in instalments between 2010 and 2034. The loan is secured by fixed and floating charges over the undertaking, property, assets and rights of the Company, and has certain covenants attached.

 

The subordinated loan payable bears interest at a fixed rate of 13% and is repayable in instalments between 2010 and 2034.

 

In order to hedge against interest variations on the loan, the Company has entered into an interest rate swap agreement with a bank whereby at biannual intervals sums are exchanged reflecting the difference between floating and fixed interest rates, calculated on a predetermined notional principal amount.

 

Due to the Events of Default as discussed in accounting policy note 1.2, and since no waivers have been received from the lender at the signing date, the senior loan is classified as due within one year in the balance sheet.

8
Creditors: amounts falling due after more than one year
2024
2023
£'000
£'000
Subordinated loan
1,084
1,083
Interest rate swap liability
965
407
2,049
1,490

The swap liability and related deferred tax asset have been classified between current and non-current for this financial year.

Creditors which fall due after five years are as follows:
2024
2023
£'000
£'000
Payable by instalments
810
864
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 21 -
9
Called up share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£'000
£'000
Issued and fully paid
Ordinary Shares of £1 each
3,000
3,000
3
3

On incorporation 3,000 shares were issued at £1 each. They carry no right to fixed income.

10
Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedge instruments related to hedged transactions that have not yet occurred.

11
Related party disclosures

The Company has taken advantage of exemption, under the small companies regime, not to disclose related party transactions that have been concluded under normal market conditions.

12
Controlling parties

The Company is wholly owned by Environments for Learning Leeds Holdco Two Limited, a company which is registered in England and having the same registered office as the Company. In the opinion of the Directors, there is no ultimate controlling party.

 

The smallest and largest group in which the Company’s results are consolidated is Environments for Learning Limited, a company registered in England. Copies of the consolidated accounts are available from Companies House.

13
Cash generated from operations
2024
2023
£'000
£'000
Profit before taxation
456
207
Adjustments for:
Finance costs
1,406
1,494
Finance income
(1,329)
(1,304)
Movements in working capital:
Decrease in debtors
1,306
2,024
(Decrease)/increase in creditors
(65)
27
Cash generated from operations
1,774
2,448
ENVIRONMENTS FOR LEARNING LEEDS PFI TWO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2024
- 22 -
14
Analysis of changes in net funds
1 October 2023
Cash flows
Non-cash changes
30 September 2024
£'000
£'000
£'000
£'000
Cash at bank and in hand
2,394
453
-
2,847
Debts falling due within 1 year
(20,566)
1,387
(6)
(19,185)
Debts falling due after 1 year
(1,083)
-
(1)
(1,084)
(19,255)
1,840
(7)
(17,422)
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