21 Sep 2018 15:54
21 September 2018
Rothschilds Continuation Finance (C.I.) Limited
Half-yearly Report for the six-month period ended 30 June 2018
Interim Management Report
Summary of Important Events
Rothschilds Continuation Finance (C.I.) Limited (the Company) is a wholly-owned subsidiary of Rothschilds Continuation Limited. The principal activity of the Company is the raising of finance for the purpose of lending it to companies who are members of the Rothschild Concordia SAS group. In the period ended 30 June 2018, £125,000,000 perpetual subordinated guaranteed notes were in issue by the Company.
As reported last year, the Company decided to change its financial year from 31 March to 31 December. The period being reported on for this Interim Management Report is the six months to June 2018. The comparatives are for the six months to 30 September 2017.
Risks and Uncertainties
The principal risks of the Company are credit risk, liquidity risk, market risk and operational risk. The Company follows the risk management policies of a fellow Group company, N M Rothschild & Sons Limited.
The Company's market risk exposure is limited to interest rate risk. Exposure to interest rate movements on the perpetual subordinated note issues has been passed to a fellow subsidiary N M Rothschild & Sons Limited (NMR) and parent undertaking Rothschilds Continuation Limited (RCL), as the issue proceeds have been on-lent to NMR and RCL at a fixed margin of 1/64 per cent above the rate being paid. Currency risk is not considered significant as all material foreign currency balances and cash flows are matched.
Liquidity risk has similarly been transferred to NMR and RCL as the funds on-lent have the same maturity dates as the notes issued.
The Company's principal credit risk is with NMR and RCL. Since notes issued by the Company have been guaranteed by RCL, and funds have been on-lent to NMR and RCL, the Company's ability to meet its obligations in respect of notes issued by it is affected by NMR's and RCL's ability to make payments to the Company.
Operational risk arising from inadequate or failed internal processes, people and systems or from external events is managed by maintaining a strong framework of internal controls.
This half-yearly financial report has not been audited or reviewed by the Company's auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
- | The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; and |
- | The interim management report includes a fair review of (i) the important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and (ii) the principal risks and uncertainties for the remaining six months of the financial year.
|
By Order of the Board
Peter Barbour
Director
Condensed Interim Statement of Comprehensive Income
For the six months ended 30 June 2018
|
| 6 months to | 6 months to | |
|
| 30 June 2018 | 30 September 2017 | |
| Note | £ | £ | |
Interest income |
| 5,557,577 | 5,650,203 | |
Interest expense |
| (5,547,945) | (5,640,411) | |
Administrative expenses |
| (651) | - | |
Profit before tax | 3 | 8,981 | 9,792 | |
Income tax expense | 4 | (1,706) | (1,861) | |
Profit for the financial period |
| 7,275 | 7,931 | |
Other comprehensive income |
| - | - | |
Total comprehensive income for the financial period |
| 7,275 | 7,931 | |
Condensed Interim Statement of Changes in Equity
For the six months ended 30 June 2018
|
Share Capital | Retained Earnings |
Total |
| £ | £ | £ |
At 1 January 2018 | 100,000 | 26,268 | 126,268 |
Total comprehensive income for the period | - | 7,275 | 7,275 |
At 30 June 2018 | 100,000 | 33,543 | 133,543 |
At 1 April 2017 | 100,000 | 164,348 | 264,348 |
Total comprehensive income for the period | - | 7,931 | 7,931 |
Dividends paid | - | (150,000) | (150,000) |
At 30 September 2017 | 100,000 | 22,279 | 122,279 |
Condensed Interim Balance Sheet
At 30 June 2018
|
| At 30 June | At 31 December | ||
|
| 2018 | 2018 | 2017 | 2017 |
| Note | £ | £ | £ | £ |
Non-current assets |
|
|
|
|
|
Loans to group undertakings | 5 |
| 125,000,000 |
| 125,000,000 |
Current assets |
|
|
|
|
|
Debtors | 6 | 4,137,307 |
| 6,496,192 |
|
Cash and cash equivalents | 7 | 130,875 |
| 3,465,064 |
|
|
| 4,268,182 |
| 9,961,256 |
|
Current liabilities |
|
|
|
|
|
Current tax payable |
| (4,502) |
| (2,796) |
|
Other financial liabilities | 8 | (4,130,137) |
| (9,832,192) |
|
Net current assets |
|
| 133,543 |
| 126,268 |
Total assets less current liabilities |
|
|
125,133,543 |
|
125,126,268 |
Non-current liabilities |
|
|
|
|
|
Subordinated guaranteed notes | 9 |
| (125,000,000) |
| (125,000,000) |
Net assets |
|
| 133,543 |
| 126,268 |
Shareholders' equity |
|
|
|
|
|
Share capital | 11 |
| 100,000 |
| 100,000 |
Retained earnings |
|
| 33,543 |
| 26,268 |
Total shareholders' equity |
|
| 133,543 |
| 126,268 |
Condensed Interim Cash Flow Statement
For the six months ended 30 June 2018
|
| 6 months to | 6 months to |
|
| 30 June 2018 | 30 September 2017 |
| Note | £ | £ |
Cash flow from operating activities |
|
|
|
Profit for the financial period |
| 7,275 | 7,931 |
Income tax expenses |
| 1,706 | 1,861 |
Operating profit before changes in working capital and provisions |
|
8,981 |
9,792 |
Net decrease/(increase) in debtors |
| 2,358,885 | (2,297,132) |
Net (decrease)/increase in other financial liabilities |
|
(5,702,055) |
5,640,411 |
Cash (utilised)/generated from operations |
| (3,334,189) | 3,353,071 |
Net cash (used in)/from operating activities |
| (3,334,189) | 3,353,071 |
Dividends paid |
| - | (150,000) |
Net cash flow (used in) financing activities |
| - | (150,000) |
Net (decrease)/increase in cash and cash equivalents |
|
(3,334,189) |
3,203,071 |
Cash and cash equivalents at beginning of period |
| 3,465,064 | 265,660 |
Cash and cash equivalents at end of period | 7 | 130,875 | 3,468,731 |
Interest paid and received during the period were as follows:
6 months to | 6 months to | |
30 June 2018 | 30 September 2017 | |
£ | £ | |
Interest paid | 11,250,000 | - |
Interested received | 7,916,462 | 3,353,071 |
The notes to the condensed interim financial statements form an integral part of the condensed interim financial statements.
Notes to the Condensed Interim Financial Statements
(forming part of the Condensed Interim Financial Statements)
For the six months ended 30 June 2018
1. Basis of preparation
The condensed interim financial statements are prepared and approved by the Directors in accordance with IAS 34 Interim Financial Reporting. The condensed interim financial statements are prepared under the historical cost accounting rules and should be read in conjunction with the annual financial statements for the 9 months ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards.
The accounting policies and methods of valuation are identical to those applied in the financial statements for the 9 months ended 31 December 2017.
2. Directors' Emoluments
None of the Directors received any remuneration in respect of their services to the Company during the period (2017: £nil).
3. Profit before Tax
| 6 months to | 6 months to |
| 30 June 2018 | 30 September 2017 |
| £ | £ |
Is stated after |
|
|
i. Income |
|
|
Income from loans to group undertakings |
|
|
Parent undertaking | 3,334,546 | 2,260,081 |
Fellow subsidiary undertaking | 2,223,031 | 3,390,122 |
| 5,557,577 | 5,650,203 |
ii. Charges |
|
|
Interest payable on subordinated guaranteed notes | 5,547,945 | 5,640,411 |
4. Taxation
| 6 months to | 6 months to |
| 30 June 2018 | 30 September 2017 |
| £ | £ |
Profit before tax | 8,981 | 9,792 |
United Kingdom corporation tax at 19% | 1,706 | 1,861 |
5. Loans to Group undertakings
| Subordinated |
| Perpetual Loans |
| to Group Undertakings |
| £ |
At the beginning and end of the period | 125,000,000 |
The interest rate charged on the subordinated perpetual loans to group undertakings is 9 1/64 per cent. The fair value of the loans was £156,375,000 as at 30 June 2018 (31 December 2017: £160,125,000). The above loans were valued from quoted market prices of a similar instrument (level 2).
6. Debtors
| At 30 June | At 31 December |
| 2018 | 2017 |
| £ | £ |
Amounts owed by parent undertaking | 2,482,384 | 2,556,486 |
Amounts owed by fellow subsidiary undertaking | 1,654,923 | 3,939,706 |
| 4,137,307 | 6,496,192 |
7. Cash and Cash Equivalents
At 30 June 2018 the Company had a loan, repayable on demand of £130,875 (31 December 2017: £3,465,064) to a fellow subsidiary undertaking.
8. Other Financial Liabilities
| At 30 June | At 31 December |
| 2018 | 2017 |
| £ | £ |
Interest payable | 4,130,137 | 9,832,192 |
Interest is payable on the subordinated guaranteed notes at 9 per cent.
9. Subordinated Guaranteed Notes
| At 30 June | At 31 December |
| 2018 | 2017 |
| £ | £ |
£125,000,000 9% Perpetual |
|
|
Subordinated Guaranteed Notes | 125,000,000 | 125,000,000 |
The fair value of the subordinated guaranteed notes was £156,250,000 as at 30 June 2018 (31 December 2017: £160,000,000). The fair value was derived from the quoted market price at the balance sheet date (level 1).
10. Maturity of Financial Liabilities
The following table shows contractual cash flows payable by the Company on the subordinated guaranteed notes, analysed by remaining contractual maturity at the balance sheet date. Interest cash flows on the loan notes are shown up to five years only, with the principal balance being shown in the > 5yr column.
| Demand | Demand - 3m | 3m - 1yr | 1yr - 5yr | >5 yr | Total | ||
| £ | £ | £ | £ | £ | £ | ||
Loan notes in issue | - | - | 11,250,000 | 45,000,000 | 125,000,000 | 181,250,000 | ||
11. Share Capital
| At 30 June | At 31 December |
| 2018 | 2017 |
| £ | £ |
Authorised |
|
|
Ordinary shares of £1 each | 100,000 | 100,000 |
Allotted, called up and fully paid |
|
|
Ordinary shares of £1 each | 100,000 | 100,000 |
12. Related Party Transactions
Parties are considered to be related if one party controls, is controlled by or has the ability to exercise significant influence over the other party. This includes key management personnel, the parent company and fellow subsidiaries.
Amounts receivable from related parties at the period end were as follows:
At 30 June 2018 | At 31 December 2017 | |
£ | £ | |
Subordinated perpetual loan to parent undertaking | 50,000,000 | 50,000,000 |
Subordinated perpetual loan to fellow subsidiary undertaking | 75,000,000 | 75,000,000 |
Amounts owed by parent undertaking | 2,482,384 | 2,556,486 |
Amounts owed by fellow subsidiary undertaking | 1,654,923 | 3,939,706 |
Cash at fellow subsidiary undertaking | 130,875 | 3,465,064 |
Amounts recognised in the statement of comprehensive income in respect of related party transactions were as follows:
6 months to 30 June 2018 | 6 months to 30 September 2017 | |
£ | £ | |
Interest receivable from parent undertaking | 3,334,546 | 2,260,081 |
Interest receivable from fellow subsidiary undertaking | 2,223,031 | 3,390,122 |
Amounts recognised directly in equity in respect of related party transactions were as follows:
6 months to 30 June 2018 | 6 months to 30 September 2017 | |
£ | £ | |
Dividend payable to parent undertaking | - | 150,000 |
There were no loans made to Directors during the period (6 months to 30 September 2017: none) and no balances outstanding at the period end (6 months to 30 September 2017: £nil). There were no employees of the Company during the period (6 months to 30 September 2017: none).
13. Parent Undertaking and Ultimate Holding Company and Registered Office
The largest group in which the results of the Company are consolidated is that headed by Rothschild Concordia SAS, incorporated in France. The smallest group in which they are consolidated is that headed by Rothschild & Co SCA, a French public limited partnership, whose registered office is also at 23bis, Avenue de Messine, 75008 Paris. The accounts are available on the Rothschild & Co website at www.rothschildandco.com.
The Company's immediate parent company is Rothschilds Continuation Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithin's Lane, London EC4N 8AL.
The Company's registered office is located at St Julian's Court, St Peter Port, Guernsey, GY1 3BP.