The directors present their Strategic Report on Innovate East Lothian Limited ("the Company") for the year ended 31 December 2024.
As the Company is in the full operational phase it faces operational risks and actively monitors financial performance against loan covenants. During the year the Company was fully compliant with the contract terms and incurred no penalty points. From a financial perspective the Company has been performing in line with expectations. Losses incurred during the year are largely due to significant capital spend. The Company is forecasting compliance with the covenants laid out in the loan agreement. The directors expect the performance of the Company to be in line with the forecasting model.
Future developments
The directors intend for the business to continue to operate in line with the contractual terms and do not expect any strategic changes.
The performance of the Company from a cash perspective is assessed six monthly by the testing of the covenants of the senior debt provider. The key indicator being the debt service cover ratio. The Company has been performing well and has been compliant with the covenants laid out in the loan agreement.
These financial statements have been prepared on the going concern basis for the reasons set out in the Accounting Policies.
The directors recognise that it is important to disclose their view of the impact of climate change on the Company. The Company's key operational contracts are long-term and with a small number of known counterparties. In most cases, the cashflows from these contracts can be predicted with reasonable certainty for at least the medium-term. Having considered the Company's operations, its contracted rights and obligations and forecast cash flows, there is not expected to be a significant impact upon the Company's operational or financial performance arising from climate change.
This report was approved by the board of directors on 26 June 2025 and signed on behalf of the board by:
The directors present their annual report and the audited financial statements of Innovate East Lothian Limited ("the Company") for the year ended 31 December 2024.
The results for the year are set out on page 8.
The loss for the financial year, after taxation, amounted to £1,546,033 (2023: loss of £122,930).
The directors are satisfied with the overall performance of the Company and do not foresee any significant change in the Company's activities in the coming financial year.
Ordinary dividends were paid amounting to £nil (2023: £nil). The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of approval of the financial statements were as follows:
Many of the cash flow risks are addressed by means of contractual provisions. The Company's liquidity risk is principally managed through the Company by means of long term borrowings.
The financial risk management objectives of the Company are to ensure that financial risks are mitigated by the use of financial instruments. The Company uses interest rate swaps to reduce its exposure to interest rate movements. Financial instruments are not used for speculative purposes.
The independent auditors, PricewaterhouseCoopers LLP, are deemed to be reappointed under section 487(2) of the Companies Act 2006.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law).
Under company law, 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;
state whether applicable United Kingdom Accounting Standards, comprising FRS102 have been followed, subject to any material departures disclosed and explained in the financial statements;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
They are responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also 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.
The financial statements were approved and signed by the director and authorised for issue on 26 June 2025
Carl Dix
Director
Basis for opinion
Conclusions relating to going concern
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
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 the Directors' report for the year ended 31 December 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.
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 identified that the principal risks of non-compliance with laws and regulations related to Companies Act 2006 and UK tax legislation, and we considered 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 inappropriate journal entries and the risk of management bias in accounting estimates. Audit procedures performed by the engagement team included:
Enquiries of management around known or suspected instances of non-compliance with laws and regulations, claims and litigation, and instances of fraud;
Understanding of management's controls designed to prevent and detect irregularities;
Review of board minutes;
Challenging management on assumptions and judgements made in their significant accounting estimates, in particular in relation to the fair value of derivative financial instruments;
Testing journal entries to assess whether any appeared unusual, in particular any affecting revenue and distributable reserves;
Reviewing financial statement disclosures and testing to supporting documentation, where appropriate, to assess compliance with applicable laws and regulations.
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.
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.
All of the activities of the company are from continuing operations.
The notes on pages 12 to 24 form part of these financial statements.
The notes on pages 12 to 24 form part of these financial statements.
Innovate East Lothian Limited ("the Company") is a private company limited by shares incorporated in the United Kingdom and is registered in Scotland. The registered office is located at 2nd Floor, Drum Suite, Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2EN.
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 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’: Not to disclose transactions with wholly owned members of a group.
The financial statements of the company are consolidated in the financial statements of BIIF Holdco Limited. These consolidated financial statements are available from its registered office, 8th Floor, 6 Kean Street, London, WC2B 4AS.
The financial statements are prepared on a going concern basis notwithstanding net liabilities of £13,106,623 (2023: £12,383,747) which the directors believe to be appropriate for reasons set out below.
The directors acknowledge that the Company is in net liabilities, however this is a result of the intercompany balance with Elbon Holdings (1) Limited and Innovate East Lothian (Holdings) Limited as well as a result of the interest rate swaps, which are out of the money, being included on the Statement of Financial Position. The intercompany balance is not due until 28 February 2035, although the directors of Innovate East Lothian (Holdings) Limited and Innovate East Lothian Limited may make repayments at their discretion. Additionally, it is not the Company's intention to close interest rate swaps before their maturity date on 15 September 2033, therefore there's no impact on the Company's ability to meet its liabilities as they fall due.
The Company prepares cash flow forecasts covering the expected life of the asset and so including the 12 month period from the date the financial statements are signed. In drawing up these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period. Based on these forecasts the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.
In light of this, the Directors continue to adopt the going concern basis of accounting in preparing the Company's annual financial statements.
The performance of the Company from a cash perspective is assessed on a six monthly basis by the testing of the covenants of the senior debt provider, the key indicator being the debt service cover ratio. The Company has been performing well and has been compliant with the covenants laid out in the loan agreement.
Basic financial assets, which include debtors , cash and bank balances, are initially measured at transaction price including transaction costs and debtors 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 instruments are subsequently measured at fair value, with any changes recognised in the Statement of Comprehensive Income, with the exception of hedging instruments in a designated hedging relationship.
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 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 at each reporting date. The fair values of the derivatives have been calculated by discounting the fixed cash flows at forecasted forward interest rates over the term of the financial instrument. 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.
The Company has entered into an arrangement with third parties that is designed to hedge future cash flows arising on variable rate interest loan arrangements, with the net effect of exchanging the cash flows arising under those arrangements for a stream of fixed interest cash flows ("interest rate swaps").
To qualify for hedge accounting, documentation is prepared specifying the hedging strategy, the component transactions and methodology used for effectiveness measurement. Changes in the carrying value of financial instruments that are designated and effective as hedges of future cash flows ("cash flow hedges") are recognised directly in a hedging reserve in equity and any ineffective portion is recognised immediately in the Statement of Comprehensive Income. Amounts deferred in equity in respect of cash flow hedges are subsequently recognised in the Statement of Comprehensive Income in the same period in which the hedged item affects net profit or loss or the hedging relationship is terminated and the underlying position being hedged has been extinguished.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:
Fair values for derivative contracts are based on mark-to-market valuations provided by the contract counterparty. Whilst these can be tested for reasonableness, the exact valuation methodology and forecast assumptions for future interest rates or inflation rates are specific to the counterparty.
The whole of the turnover is attributable to the principal activity of the Company wholly undertaken in the United Kingdom.
The average number of persons employed by the Company during the financial year amounted to nil (2023: nil). The directors are not employed by the Company and receive remuneration from another company for their services as directors of this entity and a number of fellow subsidiaries. It is not possible to make an accurate apportionment of their remuneration in respect of each of the subsidiaries.
Included in the fee above is £2,770 (2023: £2,660) for the audit of the immediate parent entity Innovate East Lothian (Holdings) Limited.
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:
In 2021 an increase in the corporation tax rate to 25% with effect from 1 April 2023 was substantively enacted. The 23.52% rate used above in the prior year reflected 9 months of this new rate and 3 months of the previous rate of 19%.
Interest was capitalised until the practical completion date and amounted to £3,161,755 (2023: £3,161,755).
Other debtors includes pass-through costs of £8,500 (2023: £815,333) as well as accrued bank interest of £38,495 (2023: 79,381) which was included within Prepayments and accrued income in the prior year.
Amounts owed to Group undertakings relate to accrued interest of £6,326,115 (2023: £5,297,928) on the subordinated loan notes detailed in note 13 (b) and (c) as well as Group relief of £3,611 (2023: £478,816). Accrued interest owed to Group undertakings was in the prior year included within Other borrowings in Creditors: amounts falling due within one year.
Other creditors relates to accrued interest due to related parties on the subordinated loan notes detailed in note 13 (b) and (c).
The bank loan is secured by a floating charge over all the assets, rights and undertakings of the Company. The loan is repayable under an instalment scheme whereby small repayments are made in the first few years of the loan, the final repayment is due on 31 March 2034. The full amount of the loan drawdown at 31 December 2024 is £24,726,032 (2023: £26,038,103). Issue costs of £228,311 (2023: £287,276) have been set off against the total loan. The loan bears interest at SONIA plus 0.7% however the Company has an interest rate swap arrangement receiving SONIA and paying interest fixed at 5.15% for the full amount of the loan drawn, hence fixing the total interest payable on the bank loan to 5.85%.
Loans from Group undertakings and Loans from related parties:
(a) On 19 March 2004 the Company issued a £4,100,000 loan stock instrument. The loan bears a Coupon of 13.50% per annum and payment of capital falls due in the year 2035. The sum was advanced under a subordinated loan agreement and is therefore unsecured, and would rank alongside ordinary creditors in the event of a winding up. The directors of the borrowing entity may make repayments at their discretion. On the 22nd November 2010 the directors formally agreed to to surrender the right to interest and as a result the instrument is now non-interest bearing. Under FRS 102, at the time the loan became non-interest bearing it met the definition of a financing arrangement and was measured at its fair value. At the year end the loan was held at amortised cost of £1,119,514 (2023: £986,189). As the loan is with the shareholders the difference has been accounted for as a capital contribution.
(b) On 1 March 2004 the Company issued a £1,500,000 subordinated loan note issued at a price of 20 pence for each £1 in nominal value of loan stock held. The loan bears a Coupon of 12.75% per annum and payment of capital falls due in the year 2035. The Coupon on the principal amount accrues daily and is payable on 30 September and 31 March each year. The sums were advanced under a subordinated loan agreement, are unsecured and rank alongside ordinary creditors but above the loan stock detailed above in the event of a winding up. The directors of the borrowing entity may make repayments at their discretion. £924,603 (2023: £892,857) is included in Loans from Group undertakings with £184,920 (2023: £178,571) being included in Loans from related parties. Accrued interest due to Group undertakings of £6,022,634 (2023: £5,174,954) is included in Amounts owed to Group undertakings within Creditors: amounts falling due withing one year. Accrued interest due to related parties of £1,206,941 (2023: £1,037,123) is included in Other creditors within Creditors: amounts falling due withing one year.
(c) On 21 December 2005 the Company issued a £1,600,000 subordinated loan note. The loan bears a Coupon of 12% per annum and payment of capital falls due in the year 2035. The Coupon on the principal amount accrues daily and is payable on 30 September and 31 March each year. The sums were advanced under a subordinated loan agreement, are unsecured and rank alongside ordinary creditors but above the loan stock detailed above in the event of a winding up. The directors of the borrowing entity may make repayments at their discretion. £1,333,333 is included in Loans from Group undertakings with £266,667 being included in Loans from related parties. Accrued interest of £303,481 (2023: £122,974) is included in Amounts owed to Group undertakings within Creditors: amounts falling due withing one year. Accrued interest due to related parties of £60,696 (2023: £24,595) is included in Other creditors within Creditors: amounts falling due withing one year
Loans from Group undertakings includes loan balance due to group companies, which was in the prior year included in Other loans.
Loans from related parties in the prior year included accrued interest due to Group undertakings and related parties, which is now included in Amounts owed to Group undertakings and in Other creditors within Creditors: amounts falling due within one year.
Loans from related parties were in the prior year included within Other creditors in Creditors: amounts falling due after more than one year.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The net deferred tax liability expected to reverse in 2025 is £145,797 (2024: £130,403). This primarily relates to the reversal of timing differences on capital allowances offset by expected utilisation of tax losses and short term timing difference.
The interest rate swaps are measured at fair value, which is determined using valuation techniques that utilise observable inputs. The key assumptions used in valuing the derivatives are the forward interest rate curves for SONIA.
There is a single class of ordinary share. There are no restrictions on the distribution of dividends and repayment of capital.
The following disclosures are with entities in the group that are not wholly owned:
At the year end the Company owed £8,584,052 (2023: £7,524,118) of loan funding to Elbon Holdings (1) Limited, which owns 90% of the shares in the parent Company Innovate East Lothian (Holdings) Limited. During the year interest of £nil (2023: £208,411) was paid.
During the year the Company paid Infrastructure Managers Limited, a fellow group company, for the provision of management services.
At the year end the Company owed £1,719,224 (2023: £1,506,956) of loan to FES Limited which owns 10% of the shares in the parent Company Innovate East Lothian (Holdings) Limited. During the year interest of £nil (2023: £41,692) was paid.
During the year the Company paid FES FM Limited £8,714,416 (2023: £6,205,344) for the provision of facilities management and lifecycle services. FES FM Limited was a fellow group company until 29th November 2024.