20 Sep 2021 17:28
Rothschild & Co Continuation Finance CI Limited
Half-yearly Report for the six-month period ended 30 June 2021
Interim Management Report
Summary of Important Events
Rothschild & Co Continuation Finance CI Limited (the "Company") is a wholly-owned subsidiary of Rothschild & Co Continuation Limited ("R&CoCL"). 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 2021, £125,000,000 perpetual subordinated guaranteed notes were in issue by the Company.
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 fellow subsidiary undertaking, N.M. Rothschild & Sons Limited ("NMR").
COVID-19 has created significant disruption to the global markets and economies. Management has performed an assessment to determine whether there are any material uncertainties arising due to the pandemic that could cast significant doubt on the ability of the Company to continue as a going concern.
The Company's principal risk is credit exposure to other group companies, as the notes issued by the Company have been on-lent to R&CoCL and NMR. R&CoCL has also guaranteed, on a subordinated basis, the notes issued. The Company's ability to meet its obligations in respect of notes issued by it is therefore reliant on NMR and R&CoCL to make payments to the Company. Both R&CoCL and NMR are exposed to the aforementioned market disruption but, nevertheless, have sufficient liquidity to continue to operate for the next 12 months even in the scenario where revenue is significantly reduced. Management has considered the going concern basis of preparation as outlined in note 1 to the financial statements.
The Company's processes are undertaken by another group undertaking. As a result of events the activities of this group undertaking continued in the period to be largely conducted remotely with all employees supported by enhanced existing technology and IT infrastructure. All critical systems continue to operate effectively and there has been minimal disruption in activity. The Company continues to carefully monitor and mitigate the risk on an ongoing basis in order to minimise exposure.
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
Paul O'Leary
Director
20 September 2021
Condensed Interim Statement of Comprehensive Income
For the six months ended 30 June 2021
|
| 6 months to | 6 months to | ||
|
| 30 June2021 | 30 June2020 | ||
| Note | £ | £ | ||
Interest income |
| 5,557,577 | 5,619,328 | ||
Interest expense |
| (5,547,945) | (5,609,589) | ||
Operating profit |
| 9,632 | 9,739 | ||
Revaluation of loans | 4 | (2,512,500) | (5,872,750) | ||
Revaluations of debt securities | 9 | 2,512,500 | 5,872,750 | ||
Administrative expenses |
| (650) | (650) | ||
Profit before tax |
| 8,982 | 9,089 | ||
Income tax expense | 3 | (1,707) | (4,227) | ||
Profit for the financial period |
| 7,275 | 4,862 | ||
Other comprehensive income |
| - | - | ||
Total comprehensive income for the financial period |
| 7,275 | 4,862 | ||
Condensed Interim Statement of Changes in Equity
For the six months ended 30 June 2021
|
Share Capital | Retained Earnings |
Total |
| £ | £ | £ |
At 1 January 2021 | 100,000 | 173,441 | 273,441 |
Total comprehensive income for the period | - | 7,275 | 7,275 |
At 30 June 2021 | 100,000 | 180,716 | 280,716 |
At 1 January 2020 | 100,000 | 160,604 | 260,604 |
Total comprehensive income for the period | - | 4,862 | 4,862 |
At 30 June 2020 | 100,000 | 165,466 | 265,466 |
Condensed Interim Balance Sheet
At 30 June 2021
|
| At 30 June | At 31 December | ||
|
| 2021 | 2021 | 2020 | 2020 |
| Note | £ | £ | £ | £ |
Non-current assets |
|
|
|
|
|
Loans to group undertakings | 4 |
| 146,450,000 |
| 148,962,500 |
Current assets |
|
|
|
|
|
Other financial assets | 5 | 4,168,183 |
| 6,527,066 |
|
Cash and cash equivalents | 6 | 177,547 |
| 3,511,737 |
|
|
| 4,345,730 |
| 10,038,803 |
|
Current liabilities |
|
|
|
|
|
Current tax payable |
| (5,304) |
| (3,598) |
|
Deferred tax | 7 | (23,750) |
| (23,750) |
|
Other financial liabilities | 8 | (4,160,960) |
| (9,863,014) |
|
Net current assets |
|
| 155,716 |
| 148,441 |
Total assets less current liabilities |
|
|
146,605,716 |
|
149,110,941 |
Non-current liabilities |
|
|
|
|
|
Subordinated guaranteed notes | 9 |
| (146,325,000) |
| (148,837,500) |
Net assets |
|
| 280,716 |
| 273,441 |
Shareholders' equity |
|
|
|
|
|
Share capital | 11 |
| 100,000 |
| 100,000 |
Retained earnings |
|
| 180,716 |
| 173,441 |
Total shareholders' equity |
|
| 280,716 |
| 273,441 |
Condensed Interim Cash Flow Statement
For the six months ended 30 June 2021
|
| 6 months to | 6 months to |
|
| 30 June 2021 | 30 June 2020 |
| Note | £ | £ |
Cash flow from operating activities |
|
|
|
Profit for the financial period |
| 7,275 | 4,862 |
Income tax expenses |
| 1,707 | 4,227 |
Operating profit before changes in working capital and provisions |
|
|
9,089 |
Fair value movements of loans |
| 2,512,500 | 5,872,500 |
Fair value movements of debt securities |
| (2,512,500) | (5,872,500) |
Net decrease in other financial assets |
| 2,358,883 | 2,278,607 |
Net decrease in other financial liabilities |
| (5,702,055) | (5,640,411) |
Cash utilised from operations |
| (3,334,190) | (3,352,715) |
Net cash used in operating activities |
| (3,334,190) | (3,352,715) |
Net decrease in cash and cash equivalents |
| (3,334,190) | (3,352,715) |
Cash and cash equivalents at beginning of period |
| 3,511,737 | 3,514,978 |
Cash and cash equivalents at end of period | 6 | 177,547 | 162,263 |
Interest paid and received during the period were as follows:
6 months to | 6 months to | |
30 June 2021 | 30 June 2020 | |
£ | £ | |
Interest paid | 11,250,000 | 11,250,000 |
Interest received | 7,916,460 | 7,897,935 |
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 2021
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 year ended 31 December 2020, 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 year ended 31 December 2020.
Going Concern
Management has performed an assessment to determine whether there are any material uncertainties that could cast significant doubt on the ability of the Company to continue as a going concern, including the impact of COVID-19. No significant issues have been noted. In reaching this conclusion, management considered:
- | The financial impact of the uncertainty on the Company's balance sheet; |
- | The Company's liquidity position based on current and projected cash resources. The liquidity position has been assessed taking into account the forecast liquidity of NMR and R&CoCL and their ability to continue to pay the interest on the intercompany loan provided by the Company; and |
- | The operational resilience with respect to the impact of the pandemic on existing IT and infrastructure |
Based on the above assessment of the Company's financial position, the Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future (for a period of at least twelve months after the date that the financial statements are signed). Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
2. Directors' Emoluments
None of the Directors received any remuneration in respect of their services to the Company during the period (2020: £nil).
3. Taxation
| 6 months to | 6 months to |
| 30 June 2021 | 30 June 2020 |
| £ | £ |
Current tax | 1,707 | 1,727 |
Deferred tax | - | 2,500 |
Tax charged for the period | 1,707 | 4,227 |
The current tax charge can be explained as follows:
| 6 months to | 6 months to |
| 30 June 2021 | 30 June 2020 |
| £ | £ |
Profit before tax | 8,982 | 9,089 |
United Kingdom corporation tax at 19% | 1,707 | 1,727 |
Tax charged for the period | 1,707 | 1,727 |
4. Loans to Group Undertakings
At 30 June | At 31 December | |
2021 | 2020 | |
£ | £ | |
At beginning of period | 148,962,500 | 153,375,000 |
Fair value movements | (2,512,500) | (4,412,500) |
At end of period | 146,450,000 | 148,962,500 |
Due | ||
In 5 years or more | 146,450,000 | 148,962,500 |
IFRS 9 requires the £125,000,000 loans to be carried at fair value which as at 30 June 2021 was £146,450,000 (at 31 December 2020: £148,962,500). On an amortised cost basis, the value of the loan at 30 June 2021 would be £125,000,000 (at 31 December 2020: £125,000,000). The fair values are based on the market value of the external debt securities (level 2).
The interest rate charged on the subordinated perpetual loans to group undertakings is 9 1/64 per cent.
5. Other Financial Assets
| At 30 June | At 31 December |
| 2021 | 2020 |
| £ | £ |
Amounts owed by parent undertaking | 2,500,910 | 3,952,055 |
Amounts owed by fellow subsidiary undertaking | 1,667,273 | 2,575,011 |
| 4,168,183 | 6,527,066 |
6. Cash and Cash Equivalents
At 30 June 2021 the Company held cash of £177,547 (31 December 2020: £3,511,737) at a fellow subsidiary undertaking.
7. Deferred Income Taxes
At 30 June | At 31 December | |
2021 | 2020 | |
£ | £ | |
At beginning of period | (23,750) | (21,250) |
Recognised in income: Effect of change in deferred tax rate |
- |
(2,500) |
At end of period | (23,750) | (23,750) |
Deferred tax assets less liabilities are attributable to the following items:
At 30 June 2021 | At 31 December 2020 | ||
£ | £ | ||
Fair value of intra group loans | (4,075,500) | (4,552,875) | |
Fair value of debt securities in issue | 4,051,750 | 4,529,125 | |
(23,750) | (23,750) | ||
Both the intra-group loans and debt securities in issue are taxed on an amortised cost basis of accounting and accordingly taxable/deductible temporary differences arise following the adoption of IFRS 9.
8. Other Financial Liabilities
| At 30 June | At 31 December |
| 2021 | 2020 |
| £ | £ |
Interest payable | 4,160,960 | 9,863,014 |
Interest is payable on the subordinated guaranteed notes at 9 per cent.
9. Subordinated Guaranteed Notes
At 30 June | At 31 December | |
2021 | 2020 | |
£ | £ | |
At beginning of period | 148,837,500 | 153,250,000 |
Fair value movements | (2,512,500) | (4,412,500) |
At end of period | 146,325,000 | 148,837,500 |
Due | ||
In 5 years or more | 146,325,000 | 148,837,500 |
Given the IFRS 9 requirement to fair value the related loans, the Company has elected to fair value the subordinated guaranteed notes, which as at 30 June 2021 was £146,325,000 (at 31 December 2020: £148,837,500). On an amortised cost basis, the value of the subordinated guaranteed notes at 30 June 2021 would be £125,000,000 (at 31 December 2020: £125,000,000). 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.
At 30 June 2021
| 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 | ||
At 30 June 2020
| 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 |
| 2021 | 2020 |
| £ | £ |
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 recognised in respect of related parties at the period end were as follows:
At 30 June 2021 | At 31 December 2020 | |
£ | £ | |
Subordinated perpetual loan to parent undertaking - fair value | 58,580,000 | 59,585,000 |
Subordinated perpetual loan to fellow subsidiary undertaking - fair value | 87,870,000 | 89,377,500 |
Amounts owed by parent undertaking | 2,500,910 | 3,952,055 |
Amounts owed by fellow subsidiary undertaking | 1,667,273 | 2,575,011 |
Cash at fellow subsidiary undertaking | 177,547 | 3,511,737 |
Amounts recognised in the statement of comprehensive income in respect of related party transactions were as follows:
6 months to 30 June 2021 | 6 months to 30 June2020 | |
£ | £ | |
Interest receivable from parent undertaking | 3,334,546 | 3,371,597 |
Interest receivable from fellow subsidiary undertaking | 2,223,031 | 2,247,731 |
There were no loans made to Directors during the period (6 months to 30 June 2021: none) and no balances outstanding at the period end (at 31 December 2020: £nil). There were no employees of the Company during the period (6 months to 30 June 2020: 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 & Co 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 Rothschild & Co Continuation Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithins Lane, London EC4N 8AL.
The Company's registered office is located at St Julian's Court, St Peter Port, Guernsey, GY1 3BP.