TIDM37QC
RNS Number : 8054U
Meadowhall Finance PLC
31 July 2020
The Annual Report and Financial Statements for the year ended 31
March 2020, attached below in accordance with DTR 6.3.5, has been
submitted to the Financial Conduct Authority through the National
Storage Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report and Financial Statements are also available
at:
https://www.britishland.com/investors/strategic-partnerships/meadowhall-finance-plc
Meadowhall Finance PLC
Annual Report and Financial Statements
Year ended 31 March 2020
Company number: 05987141
Strategic Report for the Year Ended 31 March 2020
The directors present their Strategic Report for the year ended
31 March 2020.
Business review and principal activities
Meadowhall Finance PLC ("the company") is a wholly owned
subsidiary of Meadowhall Limited Partnership, which itself is
indirectly owned by MSC Property Intermediate Holdings Limited. MSC
Property Intermediate Holdings Limited and its subsidiaries ("the
group") operate as a joint venture between The British Land Company
PLC and NBIM Victoria Partners LP.
The company's principal activity is to provide funding to fellow
subsidiaries within the group.
As shown in the company's Profit and Loss Account on page 10,
the company's profit on ordinary activities before taxation is
GBP3,367 compared to a profit on ordinary activities before
taxation of GBP3,488 in the prior year.
Dividends of GBPnil (2019: GBPnil) were paid in the year.
The Balance Sheet on page 12 shows that the company's financial
position at the year end has, in net liability terms, increased
compared with the prior year. This is mainly due to movements in
the valuation of interest rate swaps reflecting the decrease in
market interest rates since the beginning of the year.
Details of significant events since the balance sheet date, if
any, are contained in note 15.
Key performance indicators
The directors measure how the group is delivering its strategy
through the key performance indicators.
The directors consider the primary measure of performance of the
group to be turnover and net asset value. The performance of the
group, which includes the company, is discussed in the group's
annual report which can be obtained as per the details in note
16.
The expected future developments of the company are determined
by the strategy of the group. There are no future developments
outside of the company's operations planned.
Principal risks and uncertainties
This company is part of a large property investment group. As
such, the fundamental underlying risks for this company are those
of the property group as discussed below.
The group generates returns to shareholders through long-term
investment decisions requiring the evaluation of opportunities
arising in the following areas:
-- demand for space from occupiers against available supply;
-- identification and execution of investment and development
strategies which are value enhancing;
-- availability of financing or refinancing at an acceptable
cost;
-- economic cycles, including their impact on tenant covenant
quality, interest rates, inflation and property values;
-- legislative changes, including planning consents and taxation;
-- engagement of development contractors with strong covenants;
-- key staff changes; and
-- environmental and health and safety policies.
Principal risks and uncertainties (continued)
These opportunities also represent risks, the most significant
being change to the value of the property portfolio. This risk has
high visibility to directors and is considered and managed on a
continuous basis. Directors use their knowledge and experience to
knowingly accept a measured degree of market risk.
The group's preference for prime assets and their secure long
term contracted rental income, primarily with upward only rent
review clauses, presents lower risks than many other property
portfolios.
Credit risk is the risk that one party to a financial instrument
will fail to discharge an obligation and cause the other party to
incur a financial loss. In order to manage this risk, management
regularly monitors all amounts that are owed to the company to
ensure that amounts are paid in full and on time.
Liquidity risk is the risk that the entity will encounter
difficulty in raising funds to meet commitments associated with
financial liabilities. This risk is managed through day to day
monitoring of future cash flow requirements to ensure that the
company has enough resources to repay all future amounts
outstanding.
The company's activities expose it primarily to interest rate
risk. The company uses interest rate swap contracts to hedge these
exposures. The company does not use derivative financial
instruments for speculative purposes.
The company finances its operations through public debt issues.
The company borrows in Sterling at both fixed and floating rates of
interest, using interest rate derivatives to hedge the interest
rate risk on variable rate debt.
The company holds one derivative as at 31 March 2020 (2019: one)
to fix the interest rates on external debt at approximately 4.65%
(2019: 4.65%). The fair value of interest rate derivatives at the
year end is a liability of GBP17.2m (2019: GBP15.5m liability) and
has been accounted for using hedge accounting through the Statement
of Comprehensive Income, with the ineffective portion recognised in
the profit and loss account.
The outbreak of COVID-19 has created a unprecedented degree of
uncertainty over both the severity of the above risks and the
effectiveness of the above mitigating actions. The decline in
economic activity resulting from the pandemic has heightened the
risk of tenants becoming financially distressed. The pandemic has
also reduced the degree of certainty around the valuation of the
properties, and around the availability and pricing of
finance.
Approved by the Board on 31 July 2020 and signed on its behalf
by:
P Case
Director
Directors' Report for the Year Ended 31 March 2020
The directors present their report and the audited financial
statements for the year ended 31 March 2020.
Directors of the company
The directors, who held office during the year, and up to the
date of signing the financial statements, were as follows:
J Patel
H Shah (appointed 29 November 2019)
P Case
R Peel (appointed 10 June 2019)
J Brookes (appointed 29 November 2019)
C A Barber (alternate H Shah) (resigned 29 November 2019)
E Strysse (resigned 10 June 2019)
Directors' responsibilities statement
The directors acknowledge their responsibilities for preparing
the Annual 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 prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 "Reduced Disclosure
Framework", 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 period.
In preparing these financial statements, the directors are required
to:
-- select suitable accounting policies and apply them consistently;
-- state whether applicable United Kingdom Accounting Standards,
comprising FRS 101, have been followed, subject to any material
departures disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable
and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
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.
The directors 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.
The directors of the ultimate parent company are responsible for
the maintenance and integrity of the ultimate parent company's
website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Environment
The company recognises the importance of its environmental
responsibilities, monitors its impact on the environment; and
designs and implements policies to reduce any damage that might be
caused by the company's activities. The company operates in
accordance with best practice policies and initiatives designed to
minimise the company's impact on the environment including safe
disposal of manufacturing waste, recycling and reducing energy
consumption.
Going concern
The Directors have reviewed the company's forecast working
capital and cash flow requirements in light of the COVID-19
pandemic and in addition to making enquiries and examining areas
which could give risk to financial exposure.
At 31 March 2020 the company was in a net liability position of
GBP13,533,446 (2019: GBP12,447,997) mainly due to the result of
market rates being below the fixed rate payable on the company's
interest rate swap. Within the going concern period the company is
required to repay principal amounts of GBP32,763,480 on the secured
bonds and receive GBP32,763,480 on term loan from Meadowhall
Limited Partnership (the borrower). In the instance of shortfall on
repayment of term loan by the borrower due to lower rent received
from tenants, the Company has access to an undrawn Liquidity
Facility of GBP75m which will be available for the scheduled life
of the bonds to 2032 to meet certain shortfalls in debt service of
the Issuer, including bond interest and certain bond amortisation
amounts. The company also has the ability to defer other debt
service amounts in accordance with the securitisation
documents.
As a result of above, Meadowhall Finance PLC expects to have
sufficient resources to meet the debt service requirements of the
company despite the current economic climate. Therefore, the
directors have a reasonable expectation that the company has
adequate resources to continue its operations for at least twelve
months after the signing of these financial statements and as a
result they continue to adopt the going concern basis in preparing
the accounts.
Subsequent Events
Following the Consent Solicitation Process and Notices announced
by Meadowhall Finance PLC on 17 June 2020, the Extraordinary
Resolutions set out in each such Notice was duly held and passed by
the holders of the relevant Classes of the A1, A2 and B Bonds on 9
July 2020. As a result certain covenant provisions in relation to
Meadowhall Limited Partnership (the Borrower) apply are modified
from 9 July 2020 to (and including) the Interest Payment Date
falling in October 2021. GBP5.5m was drawn on the Liquidity
Facility for 13th July.
Disclosure of information to the auditors
Each director has taken steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit
information and to establish that the company's auditors are aware
of that information. The directors confirm that there is no
relevant information that they know of and of which they know the
auditors are unaware.
Reappointment of auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their
willingness to continue in office and a resolution concerning their
re-appointment will be proposed at the next Board Meeting.
Approved by the Board on 31 July 2020 and signed on its behalf
by:
P Case
Director
Independent auditors' report to the members of
Meadowhall Finance PLC
Report on the audit of the financial statements
Opinion
In our opinion, Meadowhall Finance PLC's financial
statements:
-- give a true and fair view of the state of the company's
affairs as at 31 March 2020 and of its profit for the year then
ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 "Reduced
Disclosure Framework", and applicable law); and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Financial Statements (the "Annual Report"), which
comprise: Balance Sheet as at 31 March 2020;the Profit and Loss
Account, the Statement of Comprehensive Income, and the Statement
of Changes in Equity for the year ended ; and the notes to the
financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the those
charged with governance.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC's Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC's Ethical Standard
were
not provided to the company.
We have provided no non-audit services to the company in the
period from 1 April 2019 to 31 March 2020.
Our audit approach
Overview
* Overall materiality: GBP5.9 million (2019: GBP6.2
million), based on 1% of total assets.
* Our 2020 audit was planned and executed having regard
to the fact that the company's operations were
largely unchanged in nature from the previous year.
Additionally, there have been no significant changes
to the accounting standards relevant to the company.
In light of this, our approach to the audit in terms
of scoping and areas of focus was largely unchanged
* COVID-19
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements.
Capability of the audit in detecting irregularities, including
fraud
Based on our understanding of the company and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to the Companies Act 2006 and the Listing
Rules, and we considered the extent to which non- compliance might
have a material effect on the financial statements. We also
considered those laws and regulations that have a direct impact on
the preparation of the financial statements such as the Companies
Act 2006. We evaluated
management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were
related to the Companies Act 2006 and the Listing Rules. Audit
procedures performed by the engagement team included:
-- Discussions with management and internal audit, including
consideration of known or suspected instances of non- compliance
with laws and regulations and fraud, and review of the reports made
by management and internal audit;
-- Understanding of management's internal controls designed to
prevent and detect irregularities, risk-based monitoring of
customer processes;
-- Reviewing relevant meeting minutes.
There are inherent limitations in the audit procedures described
above 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 would become aware of it.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, 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. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. This is not a complete list of all risks identified
by our audit.
Key audit matter How our audit addressed the key audit
matter
------------------------------------------ ---------------------------------------------
COVID-19 We evaluated the company's updated
Refer to page 2 (Strategic Report risk assessment and considered whether
- Principal risks and uncertainties) it addresses the relevant threats
and pages 14 and 21 (Notes to the posed by COVID-19. We also evaluated
financial statements - Note 2 Accounting management's assessment and corroborated
policies and Note 10 Creditors due evidence of the operational impacts,
after more than one year). considering their consistency with
The outbreak of the novel coronavirus other available information and our
(known as COVID 19) in many countries understanding of the business.
is rapidly evolving and the socio- We have assessed the disclosures
economic impact is unprecedented. presented in the Annual Report in
It has been declared as a global relation to COVID-19 by reading the
pandemic and is having a major impact other information, including the
on economies and financial markets. Principal risks and uncertainties
The efficacy of government measures statement set out in the Strategic
will materially influence the length Report, and assessing its consistency
of economic disruption, but it is with the financial statements and
probable there will be a recession the evidence we obtained in our audit.
in the United Kingdom. We obtained evidence of the GBP75m
The company's bonds of GBP584.7m undrawn revolving credit facility
are secured on properties of the and intent and ability of management
company's parent (Meadowhall Limited to draw on the facility.
Partnership) valued at GBP1,154.0m. We obtained third party confirmation
The property valuations of GBP1,154.0m on the valuation of the interest
as at 31 March 2020 against which rate swap and performed procedures
the bonds are secured to ensure the hedge arrangement in
are reported on the basis of "material place has been accounted for appropriately.
valuation uncertainty" as per VPS We considered whether changes to
3 and VPGA 10 of the RICS Red Book working practices brought about by
Global due to the COVID-19 global COVID-19 had had an adverse impact
pandemic. Consequently, less certainty on the effectiveness of management's
- and a higher degree of caution business process and Information
- should be attached to the valuations Technology controls. Our planned
provided than would normally be tests of controls did not identify
the case. any evidence of material deterioration
At 31 March 2020 the company was in the control environment.
in a net liability position of GBP13.5m Our conclusions relating to going
(2019: GBP12.4m) mainly due to the concern and other
result of market swap rates being information are set out in the 'Conclusions
below the fixed rate payable on relating to Going Concern' and 'Reporting
the on other information' sections of
company's interest rate swap. As our report, respectively, below.
disclosed in Note 11, the swap has
been designated as a cash flow hedge
and the effective portion of changes
in fair value of
the designated hedging instrument
is recognised in other comprehensive
income. Amounts previously recognised
in other comprehensive income and
accumulated in equity are
------------------------------------------ ---------------------------------------------
Key audit matter How our audit addressed the key audit matter
----------------- -----------------------------------------------------------------------
reclassified to the profit and loss in the periods in which the hedged
item affects profit or loss or when the hedging relationship ends.
The Directors have prepared an analysis of the impact of COVID-19
on the cash flows and liquidity position of the company for the next
12 months. The company is due to repay
GBP32.8m on the secured bonds within the next 12 months. The Directors'
intend to access the company's undrawn revolving credit facilities
of GBP75.0m to meet its liabilities as they fall due should insufficient
cash be received from the company's borrower (Meadowhall Limited
Partnership, the 'borrower') in the event that the borrower does
not collect sufficient rent from its tenants in the Meadowhall Shopping
Centre.
After considering all of these factors, management have concluded
that preparing the financial statements on a going concern basis
remains appropriate.
No material uncertainty in relation to going concern exists.
------------------------------------------------------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
company, the accounting processes and controls, and the industry in
which it operates.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality GBP5.9 million (2019: GBP6.2 million).
------------------------ --------------------------------------------------------
How we determined 1% of total assets.
it
------------------------ --------------------------------------------------------
Rationale for benchmark We believe that total assets is the primary measure
applied used by shareholders in assessing the performance
of the entity, and is a generally accepted auditing
benchmark.
------------------------ --------------------------------------------------------
We agreed with the those charged with governance that we would
report to them misstatements identified during our audit above
GBP297,000 (2019: 311,000) as well as misstatements below that
amount that, in our view, warranted reporting for qualitative
reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not
appropriate; or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the company's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the
company's
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors' report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express an
audit opinion or, except to the extent otherwise explicitly stated
in this report, any form of assurance thereon.
In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. 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 based on these
responsibilities.
With respect to the Strategic Report and Directors' Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, ISAs (UK) require us also to
report certain opinions and matters as described below.
Strategic Report and Directors' Report
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Strategic Report and
Directors' Report for the year ended 31 March 2020 is consistent
with the financial statements and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and understanding of the company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and
Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Directors' responsibilities
statement set out on page 3, the directors are responsible for the
preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true
and fair view. The directors are also 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.
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 FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company's members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- the financial statements are not in agreement with the
accounting records and returns. We have no exceptions to report
arising from this responsibility.
Appointment
We were appointed by the directors on 15 March 2018 to audit the
financial statements for the year ended 31 March 2020 and
subsequent financial periods. The period of total uninterrupted
engagement is 3 years, covering the years ended 31 March 2020 to 31
March 2020.
Sandra Dowling (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP Chartered
Accountants and Statutory Auditors London
31 July 2020
Profit and Loss Account for the Year Ended 31 March 2020
2020 2019
Note GBP GBP
Interest receivable and similar income 4 30,324,389 31,837,392
Interest payable and similar expenses 5 (30,321,022) (31,833,904)
------------ ------------
Profit on ordinary activities before
taxation 3,367 3,488
Tax on profit on ordinary activities 8 (640) (663)
------------ ------------
Profit for the year 2,727 2,825
============ ============
Turnover and results were derived from continuing operations
within the United Kingdom.
Statement of Comprehensive Income for the Year Ended 31 March
2020
2020 2019
Note GBP GBP
Profit for the year 2,727 2,825
----------- ---------
Items that may be reclassified subsequently
to profit or loss
Loss on cash flow hedges (net) (1,728,037) (198,419)
Tax relating to components of other
comprehensive expense 12 639,861 21,409
----------- ---------
(1,088,176) (177,010)
----------- ---------
Total comprehensive expense for the
year (1,085,449) (174,185)
=========== =========
Balance Sheet as at 31 March 2020
31 March 31 March
2020 2019
*Restated
Note GBP GBP
Current assets
Debtors due within one year 9 39,107,905 35,200,132
Debtors due after more than one year 9 555,187,011 587,310,630
Cash at bank and in hand 41,830 38,423
------------- -------------
594,336,746 622,549,185
Creditors due within one year 10 (38,726,111) (34,826,341)
------------- -------------
Total assets less current liabilities 555,610,635 587,722,844
Creditors due after more than one year 11 (569,144,081) (600,170,841)
------------- -------------
Net liabilities (13,533,446) (12,447,997)
============= =============
Capital and reserves
Called up share capital 13 12,502 12,502
Cash flow hedging reserve (13,052,581) (11,964,405)
Profit and loss account (493,367) (496,094)
------------- -------------
Total shareholders' deficit (13,533,446) (12,447,997)
============= =============
*See note 17 for details regarding the restatement as a result
of the reclassification of the interest rate derivative liability
from current liabilities to non-current liabilities for value in
the prior year of GBP15,494,231.
Approved by the Board on 31 July 2020 and signed on its behalf
by:
P Case
Director
Statement of Changes in Equity for the Year Ended 31 March
2020
Cash flow Profit and
Share capital hedging reserve loss account Total
GBP GBP GBP GBP
Balance at 1 April
2018 12,502 (11,787,395) (498,919) (12,273,812)
Profit for the year - - 2,825 2,825
Loss on cash flow
hedges (net) - (198,419) - (198,419)
Tax relating to components
of other comprehensive
expense - 21,409 - 21,409
------------- ---------------- ------------- ------------
Total comprehensive
expense for the year - (177,010) 2,825 (174,185)
------------- ---------------- ------------- ------------
Balance at 31 March
2019 12,502 (11,964,405) (496,094) (12,447,997)
============= ================ ============= ============
Balance at 1 April
2019 12,502 (11,964,405) (496,094) (12,447,997)
Profit for the year - - 2,727 2,727
Loss on cash flow
hedges (net) - (1,728,037) - (1,728,037)
Tax relating to components
of other comprehensive
expense - 639,861 - 639,861
------ ------------ --------- ------------
Total comprehensive
expense for the year - (1,088,176) 2,727 (1,085,449)
------ ------------ --------- ------------
Balance at 31 March
2020 12,502 (13,052,581) (493,367) (13,533,446)
====== ============ ========= ============
Notes to the Financial Statements for the Year Ended 31 March
2020
1 General information
The company is a public company limited by share capital,
incorporated and domiciled in England, United Kingdom.
The address of its registered office is:
York House
45 Seymour Street
London
W1H 7LX
2 Accounting policies
Summary of significant accounting policies and key accounting
estimates
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
Basis of preparation
These financial statements were prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS
101").
In preparing these financial statements, the company applies the
recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the EU
("Adopted IFRSs"), but makes amendments where necessary in order to
comply with Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken.
The financial statements have been prepared under the historical
cost convention, as modified to include the revaluation of
derivatives. Historical cost is generally based on the fair value
of the consideration given in exchange for the assets.
Summary of disclosure exemptions
The company has taken advantage of the following disclosure
exemptions under FRS 101:
(a) The requirements of IAS 1 to provide a Balance Sheet at
the beginning of the year in the event of a prior year adjustment;
(b) The requirements of IAS 1 to provide a Statement of Cash
flows for the year;
(c) The requirements of IAS 1 to provide a statement of compliance
with IFRS;
(d) The requirements of IAS 1 to disclose information on the
management of capital;
(e) The requirements of paragraphs 30 and 31 of IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors to
disclose new IFRS's that have been issued but are not yet
effective;
(f) The requirements in IAS 24 Related Party Disclosures to
disclose related party transactions entered into between
two or more members of a group, provided that any subsidiary
which is a party to the transaction is wholly owned by such
a member;
(g) The requirements of paragraph 17 of IAS 24 Related Party
Disclosures to disclose key management personnel compensation;
(h) The requirements of IFRS 7 to disclose financial instruments;
and
(i) The requirements of paragraphs 91-99 of IFRS 13 Fair Value
Measurement to disclose information of fair value valuation
techniques and inputs.
2 Accounting policies (continued)
Disclosure exemptions for subsidiaries are permitted where the
relevant disclosure requirements are met in the consolidated
financial statements. Where required, equivalent disclosures are
given in the group financial statements of MSC Property
Intermediate Holdings Limited. The group financial statements of
MSC Property Intermediate Holdings Limited are available to the
public and can be obtained as set out in note 16.
Adoption status of relevant new financial reporting standards
and interpretations
During the year the company adopted the following standards:
IFRS 16 - Leases
The new standard results in lessees bringing almost all
operating leases on balance sheet as the distinction between
operating and finance leases is removed. The accounting for lessors
has not significantly changed. The Company does not hold any
material leases as lessee therefore adoption of IFRS 16 has not had
a material impact on the financial statements of the Company. The
standard was applied using the modified retrospective approach.
Apart from the changes in the standards highlighted above, no
other standards, interpretations and amendments effective for the
first time from 1 April 2019 have had a material effect on the
financial statements.
Going concern
At 31 March 2020 the company was in a net liability position of
GBP13,533,446 (2019: GBP12,447,997) mainly due to the result of
market rates being below the fixed rate payable on the company's
interest rate swap. Within the going concern period the company is
required to repay principal amounts of GBP32,763,480 on the secured
bonds and receive GBP32,763,480 on term loan from Meadowhall
Limited Partnership (the borrower). In the instance of shortfall on
repayment of term loan by the borrower due to lower rent received
from tenants, the Company has access to an undrawn Liquidity
Facility of GBP75m which will be available for the scheduled life
of the bonds to 2032 to meet certain shortfalls in debt service of
the Issuer, including bond interest and certain bond amortisation
amounts. The company also has the ability to defer other debt
service amounts in accordance with the securitisation
documents.
As a result of above, Meadowhall Finance PLC expects to have
sufficient resources to meet the debt service requirements of the
company despite the current economic climate. Therefore, the
directors have a reasonable expectation that the company has
adequate resources to continue its operations for at least twelve
months after the signing of these financial statements and as a
result they continue to adopt the going concern basis in preparing
the accounts.
Interest payable and receivable policy
Interest payable and receivable is recognised as incurred under
the accruals concept. Interest payable includes financing charges
which are spread over the period to redemption, using the effective
interest method. Commitment fees on non-utilised facilities are
also included within interest payable.
Taxation
Current tax
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous years.
Current tax is based on taxable profit for the year and is
calculated using tax rates that have been enacted or substantively
enacted at the balance sheet date. Taxable profit differs from net
profit as reported in the profit and loss account because it
excludes items of income or expense that are not taxable (or tax
deductible).
Deferred tax
Deferred tax is provided on items that may become taxable at a
later date, on the difference between the balance sheet value and
tax base value, on an undiscounted basis. The company recognises
deferred tax assets on derivative revaluations to the extent that
future matching taxable profits are expected to arise.
2 Accounting policies (continued)
Financial assets and liabilities
Trade debtors and creditors are initially recognised at fair
value and subsequently measured at amortised cost and discounted as
appropriate. On initial recognition the Group calculates the
expected credit loss for debtors based on lifetime expected credit
losses under the IFRS 9 simplified approach.
Loans and receivables classified as amortised cost are measured
using the effective interest method, less any impairment. Interest
is recognised by applying the effective interest rate.
Debt instruments are stated at their net proceeds on issue.
Finance charges including premia payable on settlement or
redemption and direct issue costs are spread over the period to
redemption, using the effective interest method. Exceptional
finance charges incurred due to early redemption (including premia)
are recognised in the Consolidated Income Statement when they
occur.
As defined by IFRS 9, cash flow and fair value hedges are
initially recognised at fair value at the date the derivative
contracts are entered into, and subsequently remeasured at fair
value. Changes in the fair value of derivatives that are designated
and qualify as effective cash flow hedges are recognised directly
through other comprehensive income as a movement in the hedging and
translation reserve. Changes in the fair value of derivatives that
are designated and qualify as effective fair value hedges are
recorded in the Consolidated Income Statement, along with any
changes in the fair value of the hedged item that is attributable
to the hedged risk. Any ineffective portion of all derivatives is
recognised in the Consolidated Income Statement. Changes in the
fair value of derivatives that are not in a designated hedging
relationship under IFRS 9 are recorded directly in the Consolidated
Income Statement. These derivatives are carried at fair value on
the balance sheet.
Cash equivalents are limited to instruments with a maturity of
less than three months.
3 Significant accounting judgements and key sources of estimation
uncertainty
Critical accounting judgements and estimation uncertainty
Determining the carrying amount of some assets requires
estimation of the effect of uncertain future events. The major
sources of estimation uncertainty that have a significant risk of
resulting in a material adjustment to the carrying amounts of
assets are noted below.
Hedge accounting
The key source of estimation uncertainty relates to the
valuation of derivatives. The potential for management to make
judgements or estimates relating to those items which would have a
significant impact on the financial statements is considered, by
the nature of the group's business to be limited. The derivatives
have been valued by calculating the net present value of future
cashflows, using appropriate market discount rates, by an
independent treasury advisor.
Trade and other debtors
The company makes an estimate of the recoverable value of trade
and other debtors. When assessing impairment of trade and other
debtors, the Directors consider factors including the current
credit rating of the debtor, the ageing profile of debtors and
historical experience.
4 Interest receivable and similar income
2020 2019
GBP GBP
Interest receivable on amounts owed by
group companies 30,324,389 31,837,392
------------------- -------------------
30,324,389 31,837,392
=================== ===================
5 Interest payable and similar expenses
2020 2019
GBP GBP
Bonds and related facilities 28,573,963 30,018,178
Derivatives 1,747,059 1,815,726
------------------- ------------------
30,321,022 31,833,904
=================== ==================
6 Auditors' remuneration
A notional charge of GBP14,700 (2019 : GBP14,302) is deemed
payable to PricewaterhouseCoopers LLP in respect of the audit of
the financial statements for the year ended 31 March 2020. Actual
amounts payable to PricewaterhouseCoopers LLP are paid at group
level by MSC Property Intermediate Holdings Limited.
No non-audit fees (2019 : GBPnil) were paid to
PricewaterhouseCoopers LLP.
7 Staff costs
No director (2019: nil) received any remuneration for services
to the company in either year. The remuneration of the directors
was borne by another company, for which no apportionment or
recharges were made. The value of this service was negligible.
Average number of employees, excluding directors, of the company
during the year was nil (2019: nil).
8 Taxation
2020 2019
GBP GBP
Current taxation
UK corporation tax 640 663
---- ----
Tax charge in the profit and loss account 640 663
==== ====
2020 2019
GBP GBP
Tax reconciliation
Profit on ordinary activities before taxation 3,367 3,488
----- -----
Tax on profit on ordinary activities at
UK corporation tax rate of 19% (2019: 19%) 640 663
Effects of:
Total tax charge 640 663
===== =====
On 17 March 2020 legislation was substantially enacted
confirming that the tax rate would not be reduced from 1 April 2020
but would remain at 19%. Where relevant this has been reflected in
the deferred tax calculation.
9 Debtors
31 March 31 March
2020 2019
GBP GBP
Debtors due within one year
Amounts due from related parties 12,185 12,998
Loans to related parties 32,763,480 28,454,600
Accrued income 6,332,240 6,732,534
---------- ----------
39,107,905 35,200,132
========== ==========
31 March 31 March
2020 2019
GBP GBP
Debtors due within more than one year
Deferred tax assets - see note 12 3,273,881 2,634,020
Amounts owed by group companies - Long
term loans 551,913,130 584,676,610
----------- -----------
555,187,011 587,310,630
=========== ===========
10 Creditors due within one year
31 March 31 March
2020 2019
*Restated
GBP GBP
Accrued expenses 5,959,348 6,368,285
Amounts due to related parties 1,825 1,825
Social security and other taxes 1,458 1,294
Corporation tax liability - 337
Secured bonds 32,763,480 28,454,600
--------------- --------------
38,726,111 34,826,341
=============== ==============
*See note 17 for details regarding the restatement as a result
of the reclassification of the interest rate derivative liability
from current liabilities to non-current liabilities for value in
the prior year of GBP15,494,231.
11 Creditors due after more than one year
31 March 31 March
2020 2019
*Restated
GBP GBP
Secured bonds due within one to two years 32,643,480 32,763,480
Secured bonds due within two to five years 112,502,960 107,246,920
Secured bonds due after five years 406,766,690 444,666,210
Interest rate derivative liability 17,230,951 15,494,231
------------------- -------------------
569,144,081 600,170,841
=================== ===================
*See note 17 for details regarding the restatement as a result
of the reclassification of the interest rate derivative liability
from current liabilities to non-current liabilities for value in
the prior year of GBP15,494,231.
31 March 31 March
2020 2019
GBP GBP
Borrowings repayment analysis
Repayments due:
Within one year 32,763,480 28,454,600
Within one to two years 32,643,480 32,763,480
Within two to five years 112,502,960 107,246,920
----------- -----------
177,909,920 168,465,000
After five years 406,766,690 444,666,210
----------- -----------
Total borrowings 584,676,610 613,131,210
Fair value of interest rate derivatives 17,230,951 15,494,231
----------- -----------
Net debt 601,907,561 628,625,441
=========== ===========
11 Creditors due after more than one year (continued)
31 March 31 March
2020 2019
GBP GBP
Secured bonds on the assets of the Meadowhall Limited Partnership
Class A1 4.986% Bonds due 2037 420,760,560 442,758,360
Class A2 Floating Rate Bonds due 2037 44,460,000 46,140,000
Class B 4.988% Bonds due 2037 119,456,050 124,232,850
--------------------------- -----------------------
Total borrowings 584,676,610 613,131,210
Fair value of interest rate derivatives 17,230,951 15,494,231
--------------------------- -----------------------
Total secured borrowings 601,907,561 628,625,441
=========================== =======================
The GBP44m (2019: GBP46m) floating rate bonds are fully hedged
by a swap to 2032. At 31 March 2020, taking into account the effect
of derivatives, 100% of the bonds were fixed (2019: 100%) until
expected maturity. The bonds amortise from 2007 to 2032, and are
secured on the properties of group valued at GBP1,154m (2019:
GBP1,700m). The weighted average interest rate of the bonds is
5.00% (2019: 5.00%). The weighted average maturity of the bonds is
8.0 years (2019: 8.6 years). The property valuation of GBP1,154m as
at 31 March 2020 against which the bonds are secured are reported
on the basis of "material valuation uncertainty" as per VPS 3 and
VPGA 10 of the RICS Red Book Global due to the COVID-19 global
pandemic. Consequently, less certainty - and a higher degree of
caution - should be attached to the valuations provided than would
normally be the case.
The secured bonds as detailed in this note are issued by
Meadowhall Finance PLC ('Issuer') and the proceeds are on-lent to
Meadowhall Limited Partnership ('Borrower') under the
Issuer/Borrower Loan Agreement. Under this agreement Meadowhall
Limited Partnership will grant security over its beneficial
interest in Meadowhall Shopping Centre ('Mortgaged Property') and
selected other interests and assets.
At 31 March 2020, the company was financed by GBP584.7m bonds
(2019: GBP613.1m).
Except as detailed below, the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the
financial statements are approximately equal to their fair
values.
31 March 31 March
2020 2019
GBPm GBPm
Bonds fair value 702 738
======== ========
Comparison of fair values and book values and fair value
hierarchy
The table below provides a comparison of fair value and book
value along with the classification per the fair value hierarchy.
The different levels are defined:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
11 Creditors due after more than one year (continued)
Fair value Book value Fair value Book value
31 March 31 March 31 March 31 March
2020 2020 2019 2019
Level GBP m GBP m GBP m GBP m
Secured bonds 2 702 585 738 613
Interest rate derivative
liability 2 17 17 15 15
----------- ----------- ----------- -----------
719 602 753 628
=========== =========== =========== ===========
The fair values of the bonds have been established by obtaining
quoted market prices from brokers. The derivatives have been valued
by calculating the present value of future cash flows, using
appropriate market discount rates, by an independent treasury
advisor.
The Class A1 and B Loan notes expose the entity to fair value
interest rate risk while the Class A2 Loan notes expose the company
to cash flow interest rate risk.
The ineffectiveness recognised in the income statement on cash
flow hedges in the year ended 31 March 2020 was GBPnil (2019:
GBPnil). The table below summarises variable rate debt hedged at 31
March 2020.
31 March 31 March
2020 2019
GBP GBP
Outstanding after one year 42,780,000 44,460,000
Outstanding after two years 41,220,000 42,780,000
Outstanding after five years 39,060,000 39,780,000
Hedge accounting
The company uses interest rate swaps to hedge exposure to the
variability in cash flows on floating rate debt. At 31 March 2020,
the fair value of these derivatives, which have been designated
cash flow hedges under lFRS 9, is a liability of GBP17.2m (2019:
GBP15.5m liability). The valuation movement reflects the decrease
in market interest rates since the beginning of the year.
The derivatives have been valued by calculating the net present
value of future cash flows, using appropriate market discount
rates, by an independent treasury advisor. The effective portion of
changes in fair value of the designated hedging instrument is
recognised in other comprehensive income. The gain or loss relating
to the ineffective portion is recognised immediately in the profit
and loss. Amounts previously recognised in other comprehensive
income and accumulated in equity are reclassified to the profit and
loss in the periods in which the hedged item affects profit or loss
or when the hedging relationship ends.
The Treasury Function
The company finances its operations through public debt issues.
The company borrows in Sterling at both fixed and floating rates of
interest, using interest rate derivatives where appropriate to
generate a suitably prudent mixture of fixed and variable rate
debt.
Risk Management
Capital risk management:
The company finances its operations through public debt issues
to ensure that sufficient competitively priced finance is available
to support the property strategy of the MSC Property Intermediate
Holdings Limited group.
The approach adopted has been to engage in debt financing with
long term maturity dates and as such the bonds issued are due in
2037, but are expected to be repaid in 2032. Including debt
amortisation 69.6% (2019: 72.5%) of the total borrowings are due
for payment after 5 years. There are no immediate debt refinancing
requirements.
11 Creditors due after more than one year (continued)
The company maintains undrawn revolving liquidity facilities
which provide financial liquidity. These facilities are only
available for the requirements of the Meadowhall securitisation. At
31 March 2020 this facility was GBP75.0m (2019: GBP75.0m).
Details of bond covenants are authorised in the bonds Offering
Circular, accessible via:
http://www.britishland.com/investors/strategic-partnerships/meadowhall-finance-plc.aspx
Credit risk:
Credit risk is the risk that one party to a financial instrument
will fail to discharge an obligation and cause the other party to
incur a financial loss. The carrying amount of financial assets
recorded in the financial statements represents the company's
maximum exposure to credit risk without taking account of the value
of any collateral obtained.
Cash and deposits at 31 March 2020 amounted to GBP41,830 (2019:
GBP38,423) and are placed with European Financial institutions with
A- or better credit ratings. At 31 March 2020, prior to taking
account of any offset arrangements, the largest combined credit
exposure to a single counterparty arising from money market
deposits and interest rate swaps was GBPnil (2019: GBPnil). This
represents 0% (2019: 0%) of gross assets.
The company's principal credit risk relates to an intra-group
loan to Meadowhall Limited Partnership. At 31 March 2020 this loan
stood at GBP584.7m (2019: GBP613.1m). The purpose of this loan is
to provide funding to fellow subsidiaries of the MSC Property
Intermediate Holdings Limited group.
At 31 March 2020, the fair value of all interest rate
derivatives which had a positive value was GBPnil (2019:
GBPnil).
In order to manage this risk, management regularly monitors all
amounts that are owed to the company to ensure that amounts are
paid in full and on time.
Liquidity risk:
Liquidity risk is the risk that the entity will encounter
difficulty in raising funds to meet commitments associated with
financial liabilities. This risk is managed through day to day
monitoring of future cash flow requirements to ensure that the
company has enough resources to repay all future amounts
outstanding.
Interest rate risk:
The company's activities expose it primarily to interest rate
risk. The group uses interest rate swap contracts to hedge these
exposures. The group does not use derivative financial instruments
for speculative purposes.
12 Deferred tax asset
2020 2019
GBP GBP
1 April 2,634,020 2,612,611
Credited to hedging and translation reserve 639,861 21,409
--------- ---------
31 March 3,273,881 2,634,020
========= =========
The deferred tax balance arises on the fair value gain or loss
on the revaluation of interest rate derivatives as described in
note 11.
13 Share capital
Allotted, called up and fully paid shares
31 March 31 March
2020 2019
No. GBP No. GBP
Ordinary shares of GBP1
each 2 2 2 2
Ordinary shares part
paid of GBP0.25 each 49,998 12,500 49,998 12,500
50,000 12,502 50,000 12,502
====== ====== ====== ======
14 Contingent liabilities
The company is jointly and severally liable with MSC (Cash
Management) Limited and fellow subsidiaries for all monies falling
due under the group VAT registration.
15 Subsequent events
Following the Consent Solicitation Process and Notices announced
by Meadowhall Finance PLC on 17 June 2020, the Extraordinary
Resolutions set out in each such Notice was duly held and passed by
the holders of the relevant Classes of the A1, A2 and B Bonds on 9
July 2020. As a result certain covenant provisions in relation to
Meadowhall Limited Partnership (the Borrower) apply are modified
from 9 July 2020 to (and including) the Interest Payment Date
falling in October 2021. GBP5.5m was drawn on the Liquidity
Facility for 13th July.
16 Parent and ultimate parent undertaking
The immediate controlling party is Meadowhall Limited
Partnership.
The ultimate holding company is MSC Property Intermediate
Holdings Limited, a joint venture between The British Land Company
PLC and NBIM Victoria Partners LP.
MSC Property Intermediate Holdings Limited is the smallest and
largest group for which group accounts are available and which
include the company. The accounts of MSC Property Intermediate
Holdings Limited are available on request from British Land, York
House, 45 Seymour Street, London, W1H 7LX.
17 Prior year restatement
The prior year Interest rate derivative liability GBP15,494,231
has been reclassified from current to non-current liabilities given
that the hedging relationship is for more than 12 months. The error
has been corrected by restating each of the affected financial
statement line items and notes to the financial statements.
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 KKDBNBBKDDON
(END) Dow Jones Newswires
July 31, 2020 08:41 ET (12:41 GMT)
Meadow.fin A1 (LSE:37QC)
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