The directors present the strategic report for the year ended 30 June 2023.
In April 2022 Propiteer Capital increased the £50M secured limited recourse bond issuance programme to £500M, listed on the Vienna Stock Exchange allowing the issue of further Bond Series and Tranches due to the success of the original bond listings.
Stock Exchanges
Propiteer Capital PLC's bond programme is 'listed' on leading pan-European authorised stock exchanges including the Weiner Börse Vienna, and Frankfurt Exchange. These being authorised stock exchanges proves the level of due diligence passed in order to list on these exchanges.
Vienna MTF
Application has been made to the Vienna Stock Exchange for an additional Programme listing on the Weiner Börse main market. The Main Market is an "EU regulated and recognised market" (as defined in article 1 item 13 of the directive 93/22/EEC), and means that the market enjoys full status as an accredited official market.
The Issuer's business
Propiteer Capital PLC, help deliver attractive investment returns through listed bonds in conjunction with our developing partner, Propiteer Limited. They source, build, and manage a range of our property projects, which we then finance using a combination of bank and investor funding.
The portfolio of completed and ongoing projects stretches across strategic nationwide locations that are recession-resilient and well set to enjoy future economic growth and regeneration. Funds are used for exclusive, unique developments across the UK and Ireland, all of which are cherry-picked based on their profitability and demand, ensuring suitable returns opportunities.
Propiteer Capital PLC are helping with the supply of essential housing around the country, helping to close the gap in supply and demand for residential properties as well as upgrading and modernising up-and-coming, profitable towns.
The investment objective in respect of each tranche of Bonds issued is to be achieved through the use of the proceeds by the Issuer. The Issuer will use the proceeds of each tranche of Bonds issued to procure Borrower Loans with principal and interest payments made from Borrowers under the Borrower Loans intended to generate sufficient funds to enable the Issuer to satisfy its payment obligations under each relevant series and tranche of Bonds issued. Propiteer Capital PLCs customer base is entirely qualified investors who meet the High Net Worth or Sophisticated Investor criteria as defined by the FCA.
Issuer's Credit risk
The Issuer has no material assets with the exception of the requirements of the Collateral Manager under the Collateral Management Agreement and the Borrower Loans procured and any security granted as part of that. Payments made in respect of each tranche of Bonds will come entirely from payments in relation to the Borrower Loans.
As net proceeds from Bonds are being used to procure Borrower Loans, there is credit risk inherent in these procurement activities. As such any adverse changes in credit quality and Borrower Loan recoverability could affect the Issuer's ability to make sufficient payments to satisfy its own payment obligations to the Bondholders.
A downturn in business condition or the general economy in the UK may adversely affect all aspects of the Issuer's business. The Borrower assets which will be subject to the Borrower Security will mainly be located in the UK and as such the geographical concentration of credit risk is mainly centred on the UK making the Issuer sensitive to adverse changes in the UK economy, which could impact on the value of the security taken as part of Borrower Security. Such decreases in value of security could have an impact on the Issuer's ability to make payments to the Issuer's bondholders.
Changes and mismatches in interest rates may adversely impact on the Issuer's revenue and/or profits. A substantial fall in the general cost of lending in the UK may adversely impact the availability of Borrower Loans and thus the Issuer's ability to make payments to the Issuer's bondholders. This is because the coupon payments to bondholders are reliant on there being a sufficient pool of Borrower Loans in the market which there may not be.
Employer of Staff
The Issuer has several seconded staff members who work in an administrative capacity, in addition to the directors. Staff and directors alike now work with a hybrid approach working from home with and in the office and face to face board meetings have resumed.
The Issuer's management constantly monitors opportunities to bring in new investment and issue Borrower Loans.
Propiteer Capital PLC are strategic partners of Hilton UK and Marriott International. Propiteer recently bid for the development of a new hotel project in Plymouth, during the tender process the head of Hilton UK made a presentation directly to the Plymouth council in support of Propiteers bid and was also supported by documentation by Peterborough City Council which went through a highly detailed due diligence process with Propiteer as the project in Peterborough involves public funds. This unique relationship provides a competitive edge when sourcing and bidding for new hotel opportunities.
The directors are of the view that economic consequences of issues such as the post pandemic and recession with interest rate uncertainty will create opportunities which the Issuer will be well placed to take advantage of. The directors will continue the same investment policies which have been successful since its listing with the intention of continuing to increase the Issuer's assets in the future.
Business Environment and Future Outlook
The Company's priority is to build a sustainable and growing business, and this takes precedence over short term profit maximisation. Their focus is to build long-term, trusted relationships with investors by understanding that each investor is different and meeting their needs. They continue to build their community and industry impact by adding value through their services and increasing their exposure to the wider market. This can be seen with Propiteer being seen as a strategic partner of both Hilton UK and Marriott International, two global hotel brands.
The company's KPI targets include money's raised through its bond programme, Interest receipts and payables and responsible investment to ensure stakeholder growth.
The directors acknowledge their duty under S.172 of the Companies Act 2006 and consider that they have, both individually and together, acted in the way that, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.
In doing so, they have had regard (amongst other matters) to;
the likely consequences of any decision in the longterm
the impact of the Company's operations on the community and environment. The Company operates honestly and transparently. We consider the impact on the environment on our day to day operations and how we can minimise this,
the desirability of the Company maintaining a reputation for high standards of business conduct. Our intention is to behave in responsible manner, operating within the high standard of business conduct and good governance.
the need to act fairly as between members of the company. Our intention is to behave responsibly towards our shareholders and stakeholders and treat them fairly and equally so that they may benefit from successful delivery of our strategic objectives.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2023.
The results for the year are set out on page 9.
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:
TC Group were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
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:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and 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.
We have audited the financial statements of Propiteer Capital Plc (the 'company') for the year ended 30 June 2023 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the 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).
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 strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Extent to which the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and its management.
Our approach was as follows:
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations;
We considered the legal and regulatory frameworks directly applicable to the financial statements reporting framework (FRS 102 and the Companies Act 2006) and the relevant tax compliance regulations in the UK, and the relevant waste regulations in the UK (including the Waste (England and Wales) Regulations 2011;
We considered the nature of the industry, the control environment and business performance, including the key drivers for management's remuneration;
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit;
We considered the procedures and controls that the company has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and controls.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included: testing manual journals; reviewing the financial statement disclosures and testing to supporting documentation; performing analytical procedures; and enquiring of management, and were designed to provide reasonable assurance that the financial statements were free from fraud or error.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/Our-Work/Audit/Audit-and-assurance/Standards-and-guidance-for-auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor's report.
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Propiteer Capital Plc is a private company limited by shares incorporated in England and Wales. The registered office is Olivers Barn, Maldon Road, Witham, Essex, United Kingdom, CM8 3HY.
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 company recognises revenue from the following major sources:
The nature, timing of satisfaction of performance obligations and significant payment terms of the company's major sources of revenue are as follows:
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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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, 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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, 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 hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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.
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 average monthly number of persons (including directors) employed by the company during the year was:
The actual 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:
The debentures comprise bonds issued by the company. The bonds are unsecured and carry a fixed rate of return.
Subsequent to the year end the company's the debenture holders holding a total of £58,560,557 of bonds converted their bonds into Preference Share Capital. The terms of the Preference shares were such that they would qualify as equity.