Company registration number SC312130 (Scotland)
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
COMPANY INFORMATION
Directors
J McDonagh
(Appointed 1 March 2023)
PR Hepburn
(Appointed 16 January 2023)
JS Gordon
(Appointed 1 March 2023)
Secretary
Resolis Limited
Company number
SC312130
Registered office
Exchange Tower
11th Floor
19 Canning Street
Edinburgh
Scotland
EH3 8EG
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
CONTENTS
Page
Directors' report
1
Directors' responsibilities statement
2
Independent auditors' report
3 - 6
Statement of comprehensive income
7
Balance sheet
8
Statement of changes in equity
9
Notes to the financial statements
10 - 19
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2023
- 1 -
The directors present their report and the audited Annual Report and Financial Statements of Elgin Health (Clackmannanshire) Limited ("the Company") for the year ended 31 March 2023.
Principal activities
The principal activities of the Company are finance, operation and maintenance of Clackmannanshire Community Health Services Centre, through an agreement with Forth Valley NHS Trust. Previous activities carried out by the Company include provision of design and construction services for this Community Health Services Centre. The agreement was entered into under the Governments Private Finance Initiative Scheme, the contract runs until 2037.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
PK Johnstone
(Resigned 9 February 2023)
GM Steven
(Resigned 28 September 2022)
J McDonagh
(Appointed 1 March 2023)
PR Hepburn
(Appointed 16 January 2023)
JS Gordon
(Appointed 1 March 2023)
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
The auditor, Johnston Carmichael LLP, is deemed to have been re-appointed in accordance with section 487 of the Companies Act 2006.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
Small companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
On behalf of the board
PR Hepburn
Director
29 August 2023
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 MARCH 2023
- 2 -
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 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;
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 to 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.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
- 3 -
Opinion
We have audited the financial statements of Elgin Health (Clackmannanshire) Limited (the 'company') for the year ended 31 March 2023 which comprise the statement of comprehensive income, balance sheet, statement of changes in equity 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:
Give a true and fair view of the state of the company's affairs as at 31 March 2023 and of its profit for the year then ended;
Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
Have been prepared in accordance with the requirements of the Companies Act 2006.
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 Auditors' 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.
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.
The other information comprises the information included in the annual report other than the financial statements and our auditors' 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
The information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The directors' report has been prepared in accordance with applicable legal requirements.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
- 4 -
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:
A
T
Cdirectors' remuneration specified by law are not made; or
W
The directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the directors' report and from the requirement to prepare a Strategic Report.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out on page 2, 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.
Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
- 5 -
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 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 relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. 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:
Recalculating the unitary charge received by taking the base charge per the project agreement and uplifting for RPI;
Agreeing a sample of months' income receipts to invoice and bank statements;
Performing an assessment on the service margins used in the year and agreeing margins used to the active financial models;
Reconciling the finance income and amortisation to the finance debtor reconciliation to ensure allocation methodology is in line with contractual terms and relevant accounting standards;
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the company's compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
INDEPENDENT AUDITORS' REPORT (CONTINUED)
TO THE MEMBERS OF ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
- 6 -
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 auditors' 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.
Fiona Munro (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
30 August 2023
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2023
- 7 -
2023
2022
Notes
£
£
Turnover
2,467,138
1,652,876
Cost of sales
(1,238,379)
(829,949)
Gross profit
1,228,759
822,927
Administrative expenses
(184,417)
(159,625)
Operating profit
1,044,342
663,302
Interest receivable and similar income
5
1,001,082
1,034,403
Interest payable and similar expenses
6
(1,366,823)
(1,404,232)
Profit before taxation
678,601
293,473
Tax on profit
(129,570)
(53,105)
Profit for the financial year
549,031
240,368
Other comprehensive income
Cash flow hedges gain arising in the year
2,303,308
2,255,713
Total comprehensive income for the year
2,852,339
2,496,081
The profit and loss account has been prepared on the basis that all operations are continuing operations.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
BALANCE SHEET
AS AT
31 MARCH 2023
31 March 2023
- 8 -
2023
2022
Notes
£
£
£
£
Current assets
Debtors falling due after more than one year
7
14,630,349
15,367,608
Debtors - deferred tax
577,909
1,349,367
Debtors falling due within one year
7
5,643,555
4,797,366
Cash at bank and in hand
2,846,910
2,644,372
23,698,723
24,158,713
Creditors: amounts falling due within one year
9
(3,500,453)
(2,871,324)
Net current assets
20,198,270
21,287,389
Creditors: amounts falling due after more than one year
10
(20,355,471)
(24,154,414)
Net liabilities
(157,201)
(2,867,025)
Capital and reserves
Called up share capital
11
202,000
202,000
Hedging reserve
(1,711,594)
(4,014,902)
Profit and loss reserves
1,352,393
945,877
Total equity
(157,201)
(2,867,025)
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 29 August 2023 and are signed on its behalf by:
PR Hepburn
Director
Company Registration No. SC312130
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
- 9 -
Share capital
Hedging reserve
Profit and loss reserves
Total
£
£
£
£
Balance at 1 April 2021
202,000
(6,270,615)
778,046
(5,290,569)
Year ended 31 March 2022:
Profit for the year
-
-
240,368
240,368
Other comprehensive income:
Cash flow hedges gains
-
2,255,713
-
2,255,713
Total comprehensive income for the year
-
2,255,713
240,368
2,496,081
Dividends
-
-
(72,537)
(72,537)
Balance at 31 March 2022
202,000
(4,014,902)
945,877
(2,867,025)
Year ended 31 March 2023:
Profit for the year
-
-
549,031
549,031
Other comprehensive income:
Cash flow hedges gains
-
2,303,308
-
2,303,308
Total comprehensive income for the year
-
2,303,308
549,031
2,852,339
Dividends
-
-
(142,515)
(142,515)
Balance at 31 March 2023
202,000
(1,711,594)
1,352,393
(157,201)
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2023
- 10 -
1
Accounting policies
Company information
Elgin Health (Clackmannanshire) Limited is a private company limited by shares incorporated in Scotland. The registered office is Exchange Tower, 11th Floor, 19 Canning Street, Edinburgh, Scotland, EH3 8EG.
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.
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 financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
The company prepares a detailed financial model semi-annually which forecasts cashflows, financialtrue results and the financial position of the company through to the end of the concession. In preparing these financial models, the directors include assumptions based upon expected future economic conditions, including forecast inflation and interest rates, and include costs profiled on known and expected expenditure. The company's operating cash flows are largely dependent upon unitary charge receipts from Forth Valley NHS Trust and the directors expect these amounts to be recovered even under the most severe economic conditions.
Based on these forecasts, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the remainder of the concession and continue to meet debt covenants and debt repayments as they fall due. In light of this, the directors continue to adopt the going concern basis of accounting in preparing the company's annual financial statements.
1.3
The Company has taken the transition exemption in FRS 102 Section 35.10(i) that allows the Company to continue the service concession arrangement accounting policies from previous UK GAAP.
The Company is accounting for the concession asset based on the ability to substantially transfer all the risks and rewards of ownership to the customer, with this arrangement the costs incurred by the Company on the design and construction of the assets have been treated as a finance debtor within these financial statements.
1.4
Revenue recognition
Turnover represents the services' share of the management services income received by the Company for the provision of a PFI (Private Finance Initiative) asset to the customer. This income is received over the life of the concession period. Management service income is allocated between turnover, finance debtor interest and reimbursement of finance debtor so as to generate a constant rate of return in respect of the finance debtor over the life of the contract.
1.5
Lifecycle
The Company is responsible for the lifecycle costs associated with its principal activity, however risk here is mitigated by passing on lifecycle risk to a third party facilities management company. Lifecycle costs are accounted for on an accrual basis as disclosed in the indicative lifecycle works program or lifecycle tracker as used by all parties through the operating phase of the concession period, with any underspend included within accruals and creditors due less than one year.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 11 -
1.6
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of six months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
The company is obligated to keep cash reserves as at the balance sheet date and 30th September in respect of requirements in the company’s funding agreements. This restricted cash balance, which is shown within the “cash at bank and in hand” balance amounts to £2,266,508 (2022: £2,006,709) as at the balance sheet date.
1.7
Financial instruments
The Company has elected to apply the provisions of Section 11 "Basic Financial Instruments" and Section 12 "Other Financial Instrument Issues" of FRS102, in full, to all of its financial instruments.
A financial asset or a financial liability is recognised only when the entity becomes a party to the contractual provisions of the instrument.
Basic financial instruments are initially recognised at the transaction price and subsequently at amortised cost, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Debt instruments are initially recognised at the present value of cash payable to the lender and are subsequently measured at amortised cost using the effective interest rate method, less impairment. The effective interest rate method is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument. The effective interest rate amortisation is included in interest payable and similar charges in the Statement of Comprehensive Income.
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 that are measured at cost or amortised cost are reviewed for objective evidence of impairment at the end of each reporting date. If there is objective evidence of impairment, an impairment loss is recognised in the Statement of Comprehensive Income immediately.
For all equity instruments regardless of significance, and other financial assets that are individually significant, these are assessed individually for impairment. Other financial assets are either assessed individually or grouped on the basis of similar credit risk characteristics.
Any reversals of impairment are recognised in the Statement of Comprehensive Income immediately, to the extent that the reversal does not result in a carrying amount of the financial asset that exceeds what the carrying amount would have been had the impairment not previously been recognised. 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 entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the Statement of Financial Position. Finance costs and gains or losses relating to financial liabilities are included in the Statement of Comprehensive Income. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 12 -
1.8
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.
1.9
Hedge accounting
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.
The Company has elected to early adopt the FRS 102 Interest Rate Benchmark Reform Amendment.
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.
For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Any gain or loss previously recognised in other comprehensive income is reclassified to profit or loss when the hedge relationship ends. This occurs when the hedging instrument expires or no longer meets the hedging criteria, the forecast transaction is no longer highly probable, the hedged debt instrument is derecognised, or the hedging instrument is terminated.
1.10
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
1
Accounting policies
(Continued)
- 13 -
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 14 -
2
Judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the amounts reported. These estimates and judgments are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Significant judgments
The judgments (apart from those involving estimations) that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are as follows:
i) Hedge accounting and consideration of the fair value of derivative financial instruments
The Company uses derivative financial instruments to hedge certain economic exposures in relation to movements in interest rates as compared with the position that was expected at the date the underlying transaction being hedged was entered into. The Company fair values its derivative financial instruments and records the fair value of those instruments on its Balance Sheet. No market prices are available for these instruments and consequently the fair values are determined by calculating the present value of the estimated future cashflows based on observable yield curves. There is also a judgment on whether an economic hedge relationship exists in order to achieve hedge accounting. Appropriate documentation has been prepared detailing the economic relationship between the hedging instrument and the underlying loan being hedged.
ii) Deferred taxation
Deferred tax is recognised on all timing differences at the reporting date except for certain exceptions. Judgment is required in the case of the recognition of deferred taxation assets, the Directors have to form an opinion as to whether it is probable that the deferred taxation asset recognised is recoverable against future taxable profits arising. This exercise of judgment requires the Directors to consider forecast information over a long time horizon having regard to the risks that the forecasts may not be achieved and then form a reasonable opinion as to the recoverability of the deferred taxation asset.
Key sources of estimation uncertainty
Accounting estimates and assumptions are made concerning the future and, by their nature, will rarely equal the related actual outcome. The key assumptions and other sources of estimation uncertainty are as follows:
i) Impairment of assets
The carrying value of those assets recorded in the Company's Balance Sheet, at amortised cost, could be materially reduced where circumstances exist which might indicate that an asset has been impaired and an impairment review is performed. Impairment reviews consider the fair value and/or value in use of the potentially impaired asset or assets and compare that with the carrying value of the asset or assets in the Balance Sheet. Any reduction in value arising from such a review would be recorded in the Statement of Comprehensive Income. Impairment reviews involve the significant use of assumptions. Consideration has to be given as to the price that could be obtained for the asset or assets, or in relation to a consideration of value in use, estimates of the future cash flows that could be generated by the potentially impaired asset or assets, together with a consideration of an appropriate discount rate to apply to those cash flows.
ii) Accounting for service concession arrangements
Accounting for the service concession contract and finance debtors requires estimation of service margins, finance debtor interest rates and associated amortisation profile which is based on forecast results of the contract. These were forecast initially within the operating model at financial close and are closely monitored throughout the duration of the project.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 15 -
3
Auditors' remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
13,015
10,430
Included in the fee above is £3,800 (2022: £3,450) for taxation compliance services. Also included in the fee above is £1,000 (2022: £1,000) for the audit of the immediate parent entity Elgin Health (Clackmannanshire) Holdings Limited and was not recharged. Auditor's remuneration is payable to Johnston Carmichael LLP.
4
Employees
The average number of persons employed by the Company during the financial year amounted to nil (2022: nil). The directors, who are also key management personnel, do not have contracts of services with the Company. Amounts payable to third parties for their services amounted to £16,295 (2022: £15,064).
5
Interest receivable and similar income
2023
2022
£
£
Interest receivable on finance debtor
995,454
1,034,026
Interest on cash and cash equivalents
5,628
377
Total income
1,001,082
1,034,403
6
Interest payable and similar expenses
2023
2022
£
£
Interest on bank overdrafts and loans
1,121,612
1,156,894
Interest payable to group undertakings
239,132
240,619
Other interest
6,079
6,719
1,366,823
1,404,232
7
Debtors
2023
2022
Amounts falling due within one year:
£
£
Corporation tax recoverable
2,047
Finance Debtor - due within 1 year
672,324
576,433
Other debtors
4,962,296
4,210,742
Prepayments and accrued income
8,935
8,144
5,643,555
4,797,366
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
7
Debtors
(Continued)
- 16 -
2023
2022
Amounts falling due after more than one year:
£
£
Finance Debtor - due after more than 1 year
14,630,349
15,367,608
Deferred tax asset
577,909
1,349,367
15,208,258
16,716,975
Total debtors
20,851,813
21,514,341
Other debtors of £4,962,296 (2022: £4,208,295) relates to the unitary charge control account, of which £3,772,055 (2022: £3,189,681) is forecast to be received within the next 12 months via Unitary Charge receipts with amounts received being offset by service concession accounting adjustments.
The finance debtor represents payments due from NHS Forth Valley in respect of the Project Agreement. These payments are received over the remaining life of the agreement.
2023
2022
£
£
At beginning of year
15,944,041
16,528,585
Amortisation
(641,368)
(584,544)
At end of year
15,302,673
15,944,041
8
Financial instruments
2023
2022
£
£
Carrying amount of financial liabilities
Measured at fair value through profit or loss
- Derivative financial instruments
2,282,125
5,353,203
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
8
Financial instruments
(Continued)
- 17 -
Hedge accounting
Derivatives are financial instruments that derive their value from the price of an underlying item, such as interest rates or other indices. The Company's use of derivative financial instruments is described below.
Interest rate swaps
The Company has entered into an interest rate swap with third parties for the same notional amount as the Company's variable rate borrowings with banks which has the commercial effect of swapping the variable rate interest coupon on those loans for a fixed rate coupon. The bank loans and related interest rate swaps amortise at the same rate over the life of the loan/swap arrangements. The interest rate swaps were entered into with a base rate of 5.59%, on 31 December 2008 and expire on 30 September 2036.
The directors believe that the hedging relationship between the interest rate swaps and related variable rate bank loans is highly effective and as a consequence have concluded that these derivatives meet the definition of a cash flow hedge and have formally designated them as such.
The Company's derivative financial instruments are carried at fair value. The net carrying value of the derivative financial instruments at 31 March 2023 amounted to net liabilities of £2,282,125 (2022: £5,353,203). All of the movements during the year in the fair value, net of deferred tax, of these derivative financial instruments have been recorded in the cash flow hedge reserve amounting to a credit of £2,303,308 (2022: £2,255,713).
9
Creditors: amounts falling due within one year
2023
2022
£
£
Bank loans
736,309
634,396
Other borrowings
50,052
50,038
Trade creditors
108,276
102,042
Corporation tax
63,088
Other taxation and social security
121,344
118,312
Other creditors
32,747
Accruals and deferred income
2,388,637
1,966,536
3,500,453
2,871,324
Other borrowings consist of accrued subordinated debt interest of £50,052 (2022: £50,038) due to related parties.
Other creditors consist of group relief of £32,747 (2022: £nil).
Included within accruals and deferred income are amounts recognised in respect of future payments due on lifecycle underspend of £2,346,002 (2022: £1,847,518), the timing of which is uncertain.
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 18 -
10
Creditors: amounts falling due after more than one year
2023
2022
£
£
Bank loans and overdrafts
16,356,804
17,084,669
Other borrowings
1,716,542
1,716,542
Derivative financial instruments
2,282,125
5,353,203
20,355,471
24,154,414
The senior debt due to Co-operative Bank is secured by a bond and floating charge over the assets and undertakings of the Company and by a guarantee supported by a bond and floating charge over the assets and undertakings of the Company's parent company. The loan bears interest of 5.59% per annum under a swap agreement entered into by the Company. The swap rate is fixed for the duration of the loan. The term 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 September 2036. Senior debt is stated net of issue costs of £60,764 (2022: £66,842).
Subordinated debt provided by Elgin Health (Clackmannanshire) Holdings Limited bears interest at 14% per annum and is repayable in 2037.
Amounts included above which fall due after five years are as follows:
Payable by instalments
14,547,305
15,457,042
11
Called up share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
202,000
202,000
202,000
202,000
There is a single class of ordinary share. There are no restrictions on the distribution of dividends and the repayment of capital.
12
Reserves
Hedging reserve - this reserve records fair value movements on cash flow hedging instruments.
Retained earnings - this reserve records retained earnings and accumulated losses
ELGIN HEALTH (CLACKMANNANSHIRE) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2023
- 19 -
13
Related party transactions
The Company is wholly owned by Elgin Health (Clackmannanshire) Holdings Limited and has taken advantage of the exemption in section 33 of FRS 102 'Related Party Disclosures', that allows it not to disclose transactions with wholly owned members of a group.
14
Parent company
The immediate parent undertaking is Elgin Health (Clackmannanshire) Holdings Limited, a company incorporated in Scotland, with registered office same as the Company.
The accounts of Elgin Health (Clackmannanshire) Holdings Limited can be obtained from Exchange Tower, 11th Floor, 19 Canning Street, Edinburgh, EH3 8EG.
At the year end Elgin Health (Clackmannanshire) Holdings Limited is owned 100% by Elgin Infrastructure Limited, which is jointly owned between Cobalt Project Investments Limited and Ednaston Project Investments Limited. There is no ultimate controlling party.
No group financial statements include the results of the Company.
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