TIDM68WN
RNS Number : 3915L
Rothschild & Co Continuation Fin
29 April 2020
Rothschild & Co Continuation Finance PLC
Report of the Directors and Financial Statements
for the year ended 31 December 2019
Strategic Report
Business Model and Strategic Objectives
Rothschild & Co Continuation Finance PLC ("the Company") is
a wholly-owned subsidiary of N M Rothschild & Sons Limited
("NMR") and was incorporated on 30 August 2000 to operate as a
finance vehicle for the benefit of NMR and its subsidiaries.
The principal activity of the Company is the raising of finance
for the purpose of lending it to NMR and other companies in the
Rothschild & Co Group ("the Group"). The only current debt
securities in issue are the perpetual subordinated notes guaranteed
by NMR.
Business Update and Key Performance Indicators
As mentioned above, the Company operates as a finance vehicle
which issues debt and lends it onto other Rothschild & Co Group
companies on substantially the same terms. The only debt currently
in issue is perpetual subordinated notes. Given the nature of this
debt and the related loans to its parent undertaking, the Directors
consider that accrual accounting best reflects the purpose of the
Company as a pass through financing vehicle and to match the
EUR150m loan asset and debt securities in issue. On this basis, the
loan asset and debt securities would be matched on the balance
sheet at GBP128m to reflect the real asset and liability position
of the Company. However, as mentioned in the 2018 Strategic Report,
IFRS 9 has required the Company to report the loan asset, and the
Company has elected to report the debt securities in issue, at fair
value of cGBP105m. Small differences in the valuation of the asset
and liability has resulted in a small accounting loss being
reported for the year although the Company has increased its cash
balances and remains well capitalised.
Principal 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 the parent undertaking, NMR.
Since the start of January 2020, COVID-19 has created
significant disruption to the global markets and economies.
Management has concluded that the impact of COVID-19 is a
non-adjusting post balance sheet event in respect of the financial
statements for the year ended 31 December 2019. 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 NMR, as the
notes issued by the Company have been guaranteed by, and funds have
been on-lent to NMR. The Company is therefore reliant on the
ability of NMR to meet its obligations under these lending
arrangements. NMR is exposed to the aforementioned market
disruption but, nevertheless, has 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 recent events the activities of this
group undertaking are now being conducted remotely with all
employees supported by enhanced existing technology and IT
infrastructure. The business has accordingly invoked the relevant
sections of Business Continuity plans. These plans have now been
operational for a period of time and all critical systems continue
to operate effectively and they have encountered minimal disruption
in activity. The Company continues to carefully monitor and
mitigate the risk on an ongoing basis in order to minimise
exposure.
Strategic Report
The Company's market risk exposure is limited to interest rate
and currency exchange rate movements. Exposure to interest rate
movements on the perpetual subordinated note issues has been passed
to NMR, as the issue proceeds have been lent onwards to NMR at a
fixed margin of one basis point 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 as the
funds on-lent have the same maturity dates as the notes issued.
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.
S172 statement
The Board has a duty under s172 of the Companies Act 2006 to
promote the success of the Company for the benefit of its members
as a whole, and in doing so have regard (amongst other matters)
to:
a) the likely consequences of any decision in the long term,
b) the interests of the Company's employees,
c) the need to foster the Company's business relationships with
suppliers, customers and others,
d) the impact of the Company's operations on the community and the environment,
e) the desirability of the Company maintaining a reputation for
high standards of business conduct, and
f) the need to act fairly as between members of the Company.
During the year the Board has considered its duties under s172
and how it fulfils its obligations thereof. Given that the Company
has no staff and limited suppliers, the key stakeholders are
thought to be shareholders, regulators and tax authorities:
Shareholders
The Board is appointed by the shareholders to oversee, govern
and make decisions on their behalf and so is directly responsible
for protecting and managing their interests in the Company. It does
this by setting the strategies, policies and corporate governance
structures described earlier. As part of the wider R&Co Group,
some of these responsibilities are managed at a group level and
described in greater detail in the R&Co financial statements
that are available on
www.rothschildandco.com/en/investor-relations/.
Regulators and tax authorities
The Company insists on the highest standards of professionalism
and integrity from those that act on its behalf who are expected to
refrain from any conduct or behaviours that could be perceived
unfavourably. This extends to dealing honestly and openly with
regulators and tax authorities and in compliance with all the
relevant laws and regulations in place.
By Order of the Board
Peter Barbour
New Court, St Swithin's Lane, London EC4N 8AL
28 April 2020
Report of the Directors
The Directors present their Directors' report and the financial
statements for the year ended 31 December 2019.
Dividends
During the year, the Company did not pay any dividends (2018:
GBPnil).
Directors
The Directors who held office during the year were as
follows:
Peter Barbour
Christopher Coleman
Mark Crump
Directors' Indemnity
The Company has provided qualifying third-party indemnities for
the benefit of its Directors. These were provided during the year
and remain in force at the date of this report.
Auditor
In accordance with Section 489 of the Companies Act 2006, a
resolution for the re-appointment of KPMG LLP as auditor of the
Company is to be proposed at the forthcoming Annual General
Meeting.
Audit Information
The Directors who held office at the date of approval of this
Report of the Directors confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company's auditors are unaware, and each Director has taken all the
steps that he or she ought to have taken as a Director to make
himself or herself aware of any relevant audit information and to
establish that the Company's auditors are aware of that
information.
Directors' Responsibilities Statement
The Directors are responsible for preparing the Strategic
Report, 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 they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that year.
In preparing these financial statements, the Directors are
required to:
-- Select suitable accounting policies and then apply them
consistently;
-- Make judgements and estimates that are reasonable, relevant
and reliable;
-- State whether they have been prepared in accordance with
IFRS as adopted by the EU;
-- Assess the Group and parent company's ability to continue
as a going concern, disclosing as applicable, matters
related to going concern; and
-- Use the going concern basis of accounting unless they
either intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the
Annual Financial Report
We confirm to the best of our knowledge:
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- The Strategic Report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
By Order of the Board
Peter Barbour
New Court, St. Swithin's Lane, London EC4N 8AL
28 April 2020
Independent Auditor's Report to the Members of Rothschild &
Co Continuation Finance PLC
1. Our opinion is unmodified
We have audited the financial statements of Rothschild & Co
Continuation Finance PLC ("the Company") for the year ended 31
December 2019 which comprise the statement of comprehensive income,
balance sheet, statement of changes in equity, cash flow statement
and the related notes, including the accounting policies in note
1.
In our opinion the financial statements:
-- Give a true and fair view of the state of the Company's
affairs as at 31 December 2019 and of the Company's
loss for the year then ended;
-- Have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European
Union; and
-- Have been prepared in accordance with the requirements
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to
those charged with governance.
We were engaged as auditor by the Directors in 2001. The period
of total uninterrupted engagement is the 18 years ended 31 December
2019. We have fulfilled our ethical responsibilities under, and we
remain independent of the Company in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
Overvi ew
=====================================================================================
Materi al ity: GBP1.05 m (31 December
financial statements as a whole 2018:GBP0.99m )
1% (31 December 2018:
1%) of
Total Assets
=================================== ================================================
Ri sks of material misstatement vs December 2018
=================================== ================================================ ===============================
Recurring risks
Valuation of loans The loan to the parent
to parent undertaking undertaking and debt
and Debt securities securities in issue
in issue are classified at fair
value upon adoption
of IFRS 9 on 1 January
2018. A risk in relation
to the fair value of
loans and debt securities
in issue has been identified
in the current year
due to the associated
estimation uncertainty
of the valuations.
================================= ================================================ =================================
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matters in arriving at our audit opinion above,
together with our key audit procedures to address those matters,
and, as required for public interest entities, our results from
those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for
the purpose of, our audit of the financial statements as a whole,
and in forming our opinion thereon, and consequently are incidental
to that opinion, and we do not provide a separate opinion on these
matters.
The risk Our response
=========================== =========================== ============================================================
Going Concern - Going Concern - Our procedures included:
Disclosure Quality Disclosure * Our Covid-19 knowledge: We considered the directors '
quality assessment of Covid-19 related sources of risk for
Refer to Director The financial statements the Company ' s business and financial resources
' s report and accounting explain how the Board compared with our own understanding of the risks. We
policy has formed a judgment considered the directors ' plans to take action to
that it is appropriate mitigate the risks.
to adopt the going
concern basis of
preparation * Sensitivity analysis: We considered sensitivities
for the Company. over the level of available financial resources
That judgment is based indicated by the Company ' s financial forecasts,
on an evaluation of taking account of reasonably possible (but not
the inherent risks unrealistic) adverse effects that could arise from
to the Company's these risks individually and collectively.
business
model and how those
risks might affect * Assessing transparency: We assessed the completeness
the Company ' s and accuracy of the matters covered in the going
financial concern disclosure, including those in the strategic
resources or ability report, by comparing the overall picture against our
to continue operations understanding of the risks.
over a period of at
least a year from
the date of approval Our results:
of the financial * We found the going concern disclosure without any
statements. material uncertainty to be acceptable (2018:
The risk most likely acceptable).
to adversely affect
the Company ' s
available
financial resources
over this period is
the impact of Covid-19.
The risk for our audit
was whether or not
the risk of Covid-19
is such that it amounted
to a material
uncertainty
that may have cast
significant doubt
about the ability
to continue as a going
concern. Had this
been such, then that
fact would have been
required to have been
disclosed.
=========================== =========================== ============================================================
The risk Our response
=========================== =========================== ============================================================
Valuation of Loans Low Risk, high value: Our procedures included:
to parent undertaking The amount of the * Test of details: We involved our valuation
and debt securities intercompany loan specialists to independently determine the fair value
in issue receivable represents of the loan to the parent undertaking and the debt
Loan to parent undertaking 99% (December 2018: securities in issue at 31 December 2019.
(GBP104.6 million; 99%) of the Company
31 December 2018: ' s total assets.
GBP99.2 million) The terms of the loan * We assessed whether the Company ' s disclosures in
Debt securities to parent are similar relation to fair value were in compliance with the
in issue (GBP104.4 to the debt securities relevant standards.
million; 31 December in issue. The fair
2018: GBP98.9 million) value of debt securities
in issue is based Our results:
Refer to Note 6 on available quotes * We found the valuation of loans to parent undertaking
and Note 11 (financial from brokers and third and debt securities in issue, and the relevant
disclosure) party transactions disclosures to be acceptable. (December 2018:
where available. As Corrected audit misstatement identified.)
a result, valuation
is not at a high risk
of material misstatement
or subject to
significant
judgement.
However, due to its
materiality in the
context of the financial
statements, valuation
of loan to parent
undertaking and debt
securities in issue
is considered to be
an area that has the
greatest effect on
our audit.
=========================== =========================== ============================================================
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Company as a whole was set at GBP1.05m (31
December 2018: GBP0.99m) determined with reference to a benchmark
of total assets (of which it represents 1% (31 December 2018: 1%).
The threshold for reporting misstatements to those charged with
governance was GBP0.05m (31 December 2018: GBP0.05m).
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the
Directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Company will
continue in operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on the work described in our response to
that key audit matter, we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period
of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects.
5. We have nothing to report on the other information in the financial statements
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic Report and Directors' Report
Based solely on our work on the other information:
-- We have not identified material misstatements in the
Strategic Report and the Directors' Report;
-- In our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
-- In our opinion those reports have been prepared in
accordance with the Companies Act 2006
6. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
-- 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
-- The Company financial statements are not in agreement
with the accounting records and returns; or
-- Certain disclosures of Directors' remuneration specified
by law are not made; or
-- We have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statements set out on page 4,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; 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 they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
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 other irregularities (see
below), or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC's website at: www.frc.org.uk/auditorsresponsibilities
Irregularities - ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the annual
accounts from our general commercial and sector experience, through
discussion with the directors (as required by auditing standards),
and from inspection of the Group's regulatory correspondence and
discussed with the directors the policies and procedures regarding
compliance with laws and regulations. We communicated identified
laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit. The potential
effect of these laws and regulations on the financial statements
varies considerably.
Firstly, the Company is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation, and taxation legislation and we
assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement
items.
Whilst the company is subject to many other laws and
regulations, we did not identify any others where the consequences
of non-compliance alone could have a material effect on amounts or
disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations (irregularities) is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it. In addition, as with any audit, there remained a
higher risk of non-detection of irregularities, as these may
involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be
expected to detect non-compliance with all laws and
regulations.
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
Pamela McIntyre (senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
28 April 2020
Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
Note GBP GBP
------------------------------------------- ----- ------------ -------------
Interest income 767,887 1,560,498
------------------------------------------- ----- ------------ -------------
Interest expense (756,228) (1,548,915)
------------------------------------------- ----- ------------ -------------
Operating profit 11,659 11,583
------------------------------------------- ----- ------------ -------------
Revaluation of loan to parent undertaking 6 5,431,046 (20,287,162)
------------------------------------------- ----- ------------ -------------
Revaluation of debt securities in
issue 11 (5,440,409) 20,288,548
------------------------------------------- ----- ------------ -------------
Foreign exchange translation profits (2,471) 1,325
------------------------------------------- ----- ------------ -------------
Loss before tax (175) 14,294
------------------------------------------- ----- ------------ -------------
Taxation 5 (153) (2,688)
------------------------------------------- ----- ------------ -------------
Loss for the financial year (328) 11,606
------------------------------------------- ----- ------------ -------------
Other comprehensive income - -
------------------------------------------- ----- ------------ -------------
Total comprehensive income for the
financial year (328) 11,606
------------------------------------------- ----- ------------ -------------
All amounts are in respect of continuing activities.
Balance Sheet
At 31 December 2019
2019 2019 2018 2018
Note GBP GBP GBP GBP
----------------------------------------- --------- -------------- ---------- -------------
Non-current assets
Loan to parent undertaking 6 104,620,334 99,189,288
------------------------------------- --- --------- -------------- ---------- -------------
Current assets
------------------------------------- --- --------- -------------- ---------- -------------
Cash and cash equivalents 8 230,368 392,172
------------------------------------- --- --------- -------------- ---------- -------------
Other financial assets 7 49,713 252,361
------------------------------------- --- --------- -------------- ---------- -------------
280,081 644,533
------------------------------------- --- --------- -------------- ---------- -------------
Current liabilities
Overdrafts 8 - (168,639)
------------------------------------- --- --------- -------------- ---------- -------------
Current tax liability 5 (1,746) (2,452)
------------------------------------- --- --------- -------------- ---------- -------------
Deferred tax liability 9 (32,598) (34,190)
------------------------------------- --- --------- -------------- ---------- -------------
Other financial liabilities 10 (47,725) (250,275)
------------------------------------- --- --------- -------------- ---------- -------------
Net current assets 198,012 188,977
------------------------------------- --- --------- -------------- ---------- -------------
Total assets less current liabilities 104,818,346 99,378,265
----------------------------------------------------- -------------- ---------- -------------
Non-current liabilities
Debt securities in
issue 11 (104,428,584) (98,988,175)
------------------------------------- --- --------- -------------- ---------- -------------
Net assets 389,762 390,090
------------------------------------- --- --------- -------------- ---------- -------------
Shareholders' equity
Share capital 13 100,000 100,000
------------------------------------- --- --------- -------------- ---------- -------------
Retained earnings 289,762 290,090
------------------------------------- --- --------- -------------- ---------- -------------
Total shareholders'
equity 389,762 390,090
------------------------------------- --- --------- -------------- ---------- -------------
Approved by the Board of Directors and signed on its behalf on
28 April 2020 by:
Peter Barbour
Director
Statement of Changes in Equity
For the year ended 31 December 2019
Share Retained Total
Capital Earnings Equity
GBP GBP GBP
-------------------------------- --------- ---------- --------
At 31 December 2018 100,000 290,090 390,090
-------------------------------- --------- ---------- --------
Total comprehensive income for
the financial year - (328) (328)
-------------------------------- --------- ---------- --------
At 31 December 2019 100,000 289,762 389,762
-------------------------------- --------- ---------- --------
At 31 December 2017 100,000 112,711 212,711
-------------------------------- --------- ---------- --------
Transition to IFRS 9 - 165,773 165,773
-------------------------------- --------- ---------- --------
Restated Balance at 1 January
2018 100,000 278,484 378,484
-------------------------------- --------- ---------- --------
Total comprehensive income for
the financial year - 11,606 11,606
-------------------------------- --------- ---------- --------
At 31 December 2018 100,000 290,090 390,090
-------------------------------- --------- ---------- --------
Cash Flow Statement
For the year ended 31 December 2019
2019 2018
Note GBP GBP
----------------------------------------- ----- ------------ -------------
Cash flow from operating activities
Net(loss)/ profit for the financial
year (328) 11,606
----------------------------------------- ----- ------------ -------------
Tax charge 153 2,688
----------------------------------------- ----- ------------ -------------
Operating profit before changes in
working capital and provisions (175) 14,294
----------------------------------------- ----- ------------ -------------
Fair value movements of loans (5,431,046) 20,287,162
----------------------------------------- ----- ------------ -------------
Fair value movements of debt securities 5,440,409 (20,288,548)
----------------------------------------- ----- ------------ -------------
Cash from operations 9,188 12,908
----------------------------------------- ----- ------------ -------------
Taxation paid (2,451) (4,931)
----------------------------------------- ----- ------------ -------------
Net cash from operating activities 6,737 7,977
----------------------------------------- ----- ------------ -------------
Cash from financing activities
Net decrease/(increase) in interest
receivable 202,648 (48,936)
----------------------------------------- ----- ------------ -------------
Net (decrease)/increase in interest
payable (202,550) 48,884
----------------------------------------- ----- ------------ -------------
Net cash flow from financing activities 98 (52)
----------------------------------------- ----- ------------ -------------
Net (decrease)/increase in cash and
cash equivalents 6,835 7,925
----------------------------------------- ----- ------------ -------------
Cash and cash equivalents at beginning
of year 223,533 215,608
----------------------------------------- ----- ------------ -------------
Cash and cash equivalents at end
of year 8 230,368 223,533
----------------------------------------- ----- ------------ -------------
Interest receipts and payments during the year were as
follows:
2019 2018
GBP GBP
------------------------------------------- -------- ----------
Interest received from parent undertaking 970,535 1,511,562
-------------------------------------------- -------- ----------
Interest paid to note holders 958,778 1,500,031
-------------------------------------------- -------- ----------
Notes to the Financial Statements
(forming part of the Financial Statements)
For the year ended 31 December 2019
1. Accounting Policies
Rothschild & Co Continuation Finance PLC ("the Company") is
a public limited company incorporated in England and Wales. The
principal accounting policies which have been consistently adopted
in the presentation of the financial statements are as follows:
a. Basis of preparation
The financial statements are prepared and approved by the
Directors in accordance with International Financial Reporting
Standards ("IFRS") and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations, endorsed by
the European Union ("EU") and with those requirements of the
Companies Act 2006 applicable to companies reporting under
IFRS.
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 its ability
to continue to pay the interest on the intercompany loan provided
by the Company. Considerations included a stressed scenario where
NMR's revenue could be reduced by more than 50% as compared to the
prior year; 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.
The financial statements are presented in sterling, unless
otherwise stated.
Standards affecting the financial statements
There were no new standards or amendments to standards that have
been applied in the financial statements for the year ended 31
December 2019.
Future accounting policies
A number of new standards, amendments to standards and
interpretations are effective for accounting periods ending after
31 December 2019 and therefore have not been applied in preparing
these financial statements. The Company has reviewed these new
standards to determine their effects on the Company's financial
reporting, and none are expected to have a material impact on the
Company's financial statements.
b. Interest receivable and payable
Interest income and expense represents interest arising out of
lending and borrowing activities. Interest income and expense is
recognised in the income statement using the effective interest
rate method.
c. Foreign currencies
Transactions in foreign currencies are accounted for at the
exchange rates prevailing at the time of the transaction. Gains and
losses resulting from the settlement of such transactions, and from
the translation at period end exchange rates of monetary items that
are denominated in foreign currencies, are recognised in the
statement of comprehensive income.
d. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise balances with other group companies that are
readily convertible to cash and are subject to an insignificant
risk of changes in value.
e. Taxation
Tax payable on profits is recognised in the statement of
comprehensive income.
Deferred tax is provided in full, using the balance sheet
liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts.
Deferred tax is determined using tax rates and laws that are
expected to apply when a deferred tax asset is realised, or when a
deferred tax liability is settled.
f. Capital management
The Company is not subject to any externally imposed capital
requirements.
g. Financial assets and liabilities
Financial assets and liabilities are recognised on trade date
and derecognised on either trade date, if applicable, or on
maturity or repayment.
i. Loans and advances
Loans and advances are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market and are initially recorded at fair value with any subsequent
movement in fair value being recognised in the income
statement.
ii. Financial liabilities
Debt securities in issue are recorded at fair value with any
changes in fair value recognised in the income statement. All other
financial liabilities are recognised at amortised cost.
h. Accounting judgements and estimates
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise judgement in applying the
accounting policies.
Valuation of financial assets and liabilities
Fair value is the price that would be received on selling an
asset or paid to transfer a liability in an orderly transaction
between market participants. For financial instruments carried at
fair value, market prices or rates are used to determine fair value
where an active market exists (such as a recognised exchange), as
this is the best evidence of the fair value of a financial
instrument. Where no active market price or rate is available, fair
values are estimated using inputs based on market conditions at the
balance sheet date.
i. Deferred tax
The recoverability of deferred tax assets is based on
management's assessment of the availability of future taxable
profits against which the deferred tax assets will be utilised.
2. Financial Risk Management
The Company follows the financial risk management policies of
the parent undertaking, N M Rothschild & Sons Limited. The key
risks arising from the Company's activities involving financial
instruments, which are monitored at the group level, are as
follows:
Credit risk - the risk of loss arising from client or
counterparty default is not considered a significant risk to the
Company as all asset balances are with other group companies as
detailed in note 14 Related Party Transactions.
Market risk - exposure to changes in market variables such as
interest rates, currency exchange rates, equity and debt prices is
not considered significant as the terms of financial assets
substantially match those of financial liabilities.
Liquidity risk - the risk that the Company is unable to meet its
obligations as they fall due or that it is unable to fund its
commitments is not considered significant as the risk has been
transferred to NMR. As the funds on-lent to NMR have the same
maturity dates as the notes issued, the Company's ability to meet
its obligations in respect of notes issued by it is affected by
NMR's ability to make payments to the Company.
3. Audit Fee
The amount receivable by the auditors and their associates in
respect of the audit of these financial statements is GBP7,500
(2018: GBP5,000). The audit fee is paid on a group basis by N M
Rothschild & Sons Limited.
4. Directors' Emoluments
None of the Directors received any remuneration in respect of
their services to the Company during the year (2018: GBPnil).
5. Taxation
2019 2018
GBP GBP
-------------- -------- ------
Current tax 1,745 2,452
-------------- -------- ------
Deferred tax (1,592) 236
-------------- -------- ------
Total tax 153 2,688
-------------- -------- ------
The tax charge can be explained as follows:
2019 2018
GBP GBP
--------------------------------------- ------ -------
(Loss)/profit before tax (175) 14,294
--------------------------------------- ------ -------
United Kingdom corporation tax charge
at 19% (33) 2,716
--------------------------------------- ------ -------
Impact on deferred tax of corporation
rate change 187 (28)
--------------------------------------- ------ -------
Prior year adjustments (1) -
--------------------------------------- ------ -------
Total tax 153 2,688
--------------------------------------- ------ -------
6. Non-Current Assets: Loan to Parent Undertaking
2019 2018
GBP GBP
--------------------------------------- ------------ -------------
At beginning of period 99,189,288 133,151,064
--------------------------------------- ------------ -------------
Revaluation due to transition to IFRS
9 - (13,674,614)
--------------------------------------- ------------ -------------
99,189,288 119,476,450
--------------------------------------- ------------ -------------
Fair value movements 5,431,046 (20,287,162)
--------------------------------------- ------------ -------------
At end of period 104,620,334 99,189,288
--------------------------------------- ------------ -------------
Due
In 5 years or more 104,620,334 99,189,288
--------------------------------------- ------------ -------------
IFRS 9 requires the EUR150,000,000 loan to be carried at fair
value which as at 31 December 2019 was GBP104,620,334 (2018:
GBP99,189,288). On an amortised cost basis, the value of the loan
at 31 December 2019 would be GBP127,833,646 (2018: GBP134,075,815).
The fair values are based on the market value of the external debt
securities (level 2).
The interest rate charged on the EUR150 million loan is
EUR-TEC10-CNO plus 36 basis points, capped at 9.01 per cent, fixed
on 05 February, 05 May, 05 August and 05 November each year. The
effective interest rate on the above loan at 31 December 2019 was
0.25% (2018: 1.13%).
7. Current Assets: Other Financial Assets
2019 2018
GBP GBP
------------------------------------- ------- ----------
Amounts owed by parent undertaking:
Interest receivable 49,713 252,361
------------------------------------- ------- ----------
8. Cash and Cash Equivalents
At the year end the Company held cash of GBP230,368 (2018:
GBP223,533) at the parent undertaking. Of this balance, GBP213,288
was held in a sterling account (2018: overdraft of GBP168,639). The
equivalent of GBP17,080 (2018: GBP392,172) was held in a euro
account. The effective interest rate at 31 December 2019 was 0.0%
(2018: 0.0%).
9. Deferred Income Taxes
2019 2018
GBP GBP
------------------------- --------- ---------
At beginning of period (34,190) -
------------------------- --------- ---------
Transition to IFRS 9 - (33,954)
========================= ========= =========
(34,190) (33,954)
========================= ========= =========
Recognised in income
Income statement credit 1,592 (236)
------------------------- --------- ---------
At end of period (32,598) (34,190)
------------------------- --------- ---------
Deferred tax assets less liabilities are attributable to the
following items:
2019 2018
GBP GBP
---------------------------------------- ------------ ------------
Fair value of intra group loans 3,946,263 5,930,710
---------------------------------------- ------------ ------------
Fair value of debt securities in issue (3,978,861) (5,964,900)
---------------------------------------- ------------ ------------
(32,598) (34,190)
---------------------------------------- ------------ ------------
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. Deferred tax is provided using rates that have
been substantively enacted at the balance sheet date and that are
expected to apply when the temporary difference is realised. The
current UK corporation tax rate is 19 per cent although a reduction
in the rate to 17 per cent from April 2020 had been substantively
enacted at the balance sheet date and is reflected in the carrying
value of deferred tax.
In the 11 March 2020 Budget, it was announced that the UK tax
rate will remain at the current 19% and not reduce to 17% from 1
April 2020. This will have a consequential effect on the Company's
future tax charge. If this rate change had been substantively
enacted at the current balance sheet date the deferred tax
liability would have increased by GBP3,835.
10. Current Liabilities: Other Financial Liabilities
2019 2018
GBP GBP
------------------ ------- --------
Interest payable 47,725 250,275
------------------ ------- --------
11. Non-Current Liabilities: Debt Securities in Issue
2019 2018
GBP GBP
--------------------------------------- -------------- -------------
At beginning of period 98,988,175 133,151,064
--------------------------------------- -------------- -------------
Revaluation due to transition to IFRS
9 - (13,874,341)
--------------------------------------- -------------- -------------
98,988,175 119,276,723
--------------------------------------- -------------- -------------
Fair value movements 5,440,409 (20,288,548)
--------------------------------------- -------------- -------------
At end of period 104,428,584 98,988,175
--------------------------------------- -------------- -------------
Repayable
In 5 years or more 104,428,584 98,988,175
--------------------------------------- -------------- -------------
Given the IFRS 9 requirement to fair value the related loans,
the Company has elected to fair value the debt securities in issue,
which as at 31 December 2019 was GBP104,428,584 (2018:
GBP98,988,175). On an amortised cost basis, the value of the debt
securities in issue at 31 December 2019 would be GBP127,833,646
(2018: 134,075,815). The fair value was derived from the quoted
market price at the balance sheet date (level 1).
The interest rate payable on the EUR150 million Perpetual
Subordinated Notes is EUR-TEC10-CNO plus 35 basis points, capped at
9 per cent, fixed on 05 February, 05 May, 05 August and 05 November
each year. From and including the interest payment date falling in
August 2016 and every interest payment date thereafter, the Company
may redeem all (but not some only) of the Perpetual Subordinated
Notes at their principal amount.
The effective interest rate on the above notes at 31 December
2019 was 0.24% (2018: 1.12%).
12. Maturity of Financial Liabilities
The following table shows contractual cash flows payable by the
Company on the perpetual subordinated notes, analysed by remaining
contractual maturity at the balance sheet date. Interest cashflows
on perpetual subordinated notes are estimated and shown up to five
years only, with the principal balance being shown in the perpetual
column.
3 months
or less 1 year 5 years
but not or less or less
payable but over but over
Demand on demand 3 months 1 year Perpetual Total
2019 GBP GBP GBP GBP GBP GBP
----------------------- ------ --------- --------- --------- ----------- -----------
Perpetual subordinated
notes - 76,700 230,101 1,227,203 127,833,646 129,367,650
----------------------- ------ --------- --------- --------- ----------- -----------
3 months
or less 1 year 5 years
but not or less or less
payable but over but over
Demand on demand 3 months 1 year Perpetual Total
2018 GBP GBP GBP GBP GBP GBP
----------------------- ------ --------- --------- --------- ----------- -----------
Perpetual subordinated
notes - 375,415 1,126,237 6,006,597 134,075,815 141,584,064
----------------------- ------ --------- --------- --------- ----------- -----------
13. Share Capital
2019 2018
GBP GBP
------------------------------------------- ---------- ----------
Authorised, allotted, called up and fully
paid
100,000 Ordinary shares of GBP1 each 100,000 100,000
------------------------------------------- ---------- ----------
14. 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, subsidiaries and fellow subsidiaries.
Amounts receivable from related parties at the year-end were as
follows:
2019 2018
GBP GBP
------------------------------------------------- ------------ -----------
Cash and cash equivalents at parent undertaking 230,368 223,533
------------------------------------------------- ------------ -----------
Accrued interest receivable from parent
undertaking 49,713 252,361
------------------------------------------------- ------------ -----------
Loans to parent undertaking - at fair
value 104,620,334 99,189,288
------------------------------------------------- ------------ -----------
Amounts recognised in the statement of comprehensive income in
respect of related party transactions were as follows:
2019 2018
GBP GBP
----------------------------------------- -------- ----------
Interest income from parent undertaking 767,887 1,560,498
----------------------------------------- -------- ----------
There were no loans made to Directors during the year (2018:
none) and no balances outstanding at the year-end (2018: GBPnil).
The Directors did not receive any remuneration in respect of their
services to the Company. There were no employees of the Company
during the year (2018: none).
15. Parent Undertaking, 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, and whose registered office is at 23bis,
Avenue de Messine, 75008 Paris. 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 Rothschild & Co website at
www.rothschildandco.com.
The Company's immediate parent company is N M Rothschild &
Sons 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 New Court, St
Swithin's Lane, London EC4N 8AL.
16. Post Balance Sheet Event
In early 2020, the existence of a new coronavirus (COVID-19) was
confirmed and since this time COVID-19 has spread across China and
to a significant number of other countries. COVID-19 has caused
disruption to businesses and economic activity which has been
reflected in recent fluctuations in global stock markets. The
Company considers the emergence and spread of COVID-19 to be a
non-adjusting post balance sheet event. Given the inherent
uncertainties, it is not practicable at this time to determine the
impact of COVID-19 on the Company or to provide a quantitative
estimate of its impact.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR ILMFTMTATBAM
(END) Dow Jones Newswires
April 29, 2020 13:11 ET (17:11 GMT)
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