Registered number:
06525088
FERNLAKES LIMITED
GROUP ANNUAL REPORTS AND FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
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FERNLAKES LIMITED
COMPANY INFORMATION
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FERNLAKES LIMITED
CONTENTS
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Independent Auditor's Report
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Consolidated Profit and Loss Account
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Consolidated Balance Sheet
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Consolidated Statement of Changes in Equity
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Company Statement of Changes in Equity
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Consolidated Statement of Cash Flows
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Notes to the Financial Statements
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Appendix - Subsidiary and Associated Undertakings
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FERNLAKES LIMITED
GROUP STRATEGIC REPORT
FOR THE PERIOD ENDED 29 DECEMBER 2020
The Group Strategic Report has been prepared for Fernlakes Limited (the "Company") and the Fernlakes Limited group of companies (the "Group") for the period from 31 December 2019 to 29 December 2020 (the "period").
Principal activity and review of the business
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The principal activities of the Group include managing its remaining trading and investment activities and using its net assets to provide lending facilities to the media, real estate and infrastructure sectors. The subsidiaries of the Group are listed in the Appendix to the financial statements. The Group generated a loss after tax of £6,115k (2019: loss after tax of £15,628k). The loss for the period is mainly attributable to declining revenue partly offset by a decrease in costs. The tax tribunal case is ongoing (see note 9) for further details.
All employees of the Group were transferred to a related entity in April 2020. The directors are not aware of any other significant changes in the Group's activities in the next year. Despite the loss for the current financial period, the Group has net assets of £2,986k (2019: £9,101k) which continues to be used to fund the principal activities of the Group.
Principal risks and uncertainties
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The Group actively manages risks and uncertainties facing its business by undertaking regular strategic reviews. The principal risks identified are those relating to the national and global economy, Brexit and changes to the tax and regulatory environment governing investment business. Damage to reputation and competitive pressure are also continuing risks for the Group. These principal risks can be stratified into the following categories:
Business Risk
Business risk is the failure of the business to execute its business strategy and therefore being unsuccessful in achieving projected returns. This includes changes to tax legislation or financial regulation. Please refer to note 9 for further details.
External Risks
These include risks affecting the economic, political, regulatory and legal environment in which the Group operates. Changes in legislation will therefore have a significant impact on the Group, thus appropriate resources are deployed to perform detailed assessments of current legislation, as well as understand and predict the sentiment of the future political and regulatory environment.
Operational Risk
Operational risk relates to the efficacy of the Group's systems, controls and processes. The Group's risk management committee is responsible for overseeing the design and operational effectiveness of our systems and controls, and are monitored on a regular basis. Any significant risks or issues identified are immediately assessed, resolved and debriefed to ensure any possible future related risks are mitigated to the utmost.
The results for the Group for the period are set out on page 12.
The directors do not propose to pay a final dividend to the 'A' shareholder (2019: £nil).
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FERNLAKES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 29 DECEMBER 2020
Financial instruments and risk management
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The Group's activities expose it to a number of financial risks including liquidity risk, interest rate risk and credit risk.
(a) Liquidity risk
The Group manages its liquidity assets in order to maximise returns, whilst ensuring the Group has sufficient liquid resources to meet the operating needs of the business as well as the regulatory capital requirements as laid down by the Financial Conduct Authority.
(b) Interest rate risk
The Group is exposed to interest rate risk on its lending and deposit balances. The Group negotiates a fixed margin of interest payable on borrowings and seeks to maximise its margin on interest receivable, subject to the requirements of liquidity risk noted above.
(c) Credit risk
The Group's principal financial assets are cash, trade debtors and loans receivable, to which the Group’s credit risk is primarily attributable. The Group regularly reviews its treasury management strategy based upon all available information. Where loans are provided in the normal course of business, credit reviews are undertaken where possible.
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FERNLAKES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 29 DECEMBER 2020
Statement in compliance with section 172(1) of Companies Act 2006
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The directors of the Group are acutely aware of the requirement for them to act in the way they consider, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole. In considering this duty the directors consider the following stakeholders:
Shareholders
The shares of the Company are 100% owned by Patrick McKenna. Patrick McKenna is also a director of the Company.
Employees
On average, the Group employed 147 people during the period ending 29 December 2020. Employees are a key stakeholder as they are the principal asset which generates revenue for the business. Employees are involved in the operational management of the Group, with direct access to senior management including the CEO. The Group provides regulatory training as required for a financial services firm within the Group and promotes further learning by subsidising study fees. There is also a formal annual goal setting and assessment process, ensuring that staff members remain competent and continue to develop. All employees of the Group were transferred to a related party from Freeshire Limited, a subsidiary of the Group in April 2020.
Customers
Customers of the Group mainly consist of investors into the funds that the Group operates, being private individuals, their financial advisors, and other intermediaries. The Group also has a small number of corporate customers. The Group is focused on providing quality discretionary management services to its entire customer base. Treating customers fairly is ingrained in the organisation. Engagement with customers is mainly through the investment portal and the client services team.
Suppliers
Relationships with suppliers is maintained though regular contact and interaction. The Group does not follow any specific code or standard on payment of creditors. The Group agrees the payment terms as part of the commercial arrangement negotiated with counterparties. Payments are made on these terms provided the counterparty meets its obligations.
HMRC
The relationship with HMRC is maintained through a dedicated tax team.
Community and the environment
The Group has a minimal direct impact on the environment as it is currently only managing its existing investments and is currently not involved in any new investment activity. However, the Group remains committed to having a positive impact on the sectors and communities it operates in.
Other stakeholders
The directors also consider the FCA a stakeholder as the regulator of Goldwoodshire Limited, a subsidiary in the Group.
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FERNLAKES LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 29 DECEMBER 2020
Key decisions made in the period
All employees of the Group were transferred to a related party from Freeshire Limited, a subsidiary of the Group in April 2020. The wider Group went through a restructuring process in June 2020. Prior to and during the restructure, all affected stakeholders were consulted via regular updates from and meetings with senior management. The main aim of the restructuring process was to maximise profitability of the wider Group and preserve regulatory capital in a related party as required by the FCA.
The Group intends to continue providing investment and advisory services to the media and entertainment and real estate industries.
Approved by the board of directors
and signed on its behalf by:
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FERNLAKES LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 29 DECEMBER 2020
The directors present their report and the financial statements for the period ended 29 December 2020.
Directors' responsibilities statement
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The directors are responsible for preparing the Group annual reports and
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year
. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
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select suitable accounting policies for the Group's financial statements and then apply them consistently;
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make judgements and accounting estimates that are reasonable and prudent;
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state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in Directors' Reports may differ from legislation in other jurisdictions.
The directors who served during the period and subsequently were as follows:
Directors' remuneration is disclosed in note 6 to the financial statements.
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FERNLAKES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 29 DECEMBER 2020
The Company’s business activities including the impact of the decisions of the First-tier Tax Tribunal, the Upper Tribunal and Court of Appeal, together with Partner Payment Notices (as further explained in note 9), the civil claims (refer to note 24), Brexit and the COVID19 world pandemic have been reviewed by the directors.
Having assessed these risks, its financial position, and results and cash flow forecasts, the directors intend to continue operating its business and have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The going concern basis of accounting is appropriate however there are material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue to adopt the going concern basis of accounting in the future.
Further details regarding the adoption of the going concern basis can be found in note 1.2.
The Group does not follow a specific code or standard on payment of creditors. The Group agrees the payment terms as part of the commercial arrangement negotiated with suppliers. Payments are made on these terms provided the supplier meets its obligations.
During the period the Group made charitable donations of £Nil (2019: £80,668).
Provision of insurance to directors
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All directors were covered by directors' and officers' liability insurance throughout the period under review and this will continue to remain in force.
Each of the persons who is a director at the date of approval of this report confirms that so far as the director is aware there is no relevant audit information of which the Company’s auditor is unaware and the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
The auditor, BDO LLP, will be proposed for reappointment in accordance with section 487(2) of the Companies Act 2006.
Other disclosures
Other disclosures relating to future developments, dividends and financial risk management have been disclosed in the Group Strategic Report.
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FERNLAKES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 29 DECEMBER 2020
This report was approved by the board of directors and signed on its behalf by:
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FERNLAKES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FERNLAKES LIMITED
Opinion on the financial statement
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In our opinion:
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the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at 29 December 2020 and of the Group’s loss for the period then ended;
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the financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
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the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Fernlakes Limited
(the ‘Company’) and its subsidiaries (the ‘Group’) for the period ended 29 December 2020
which comprise Consolidated Profit and Loss Account, the Consolidated and the Company Balance Sheets, the Consolidated and the Company Statements of Changes in Equity, the Consolidated Statement of Cash Flows, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s 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 are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Material uncertainty relating to going concern
We draw attention to note 1.2 to the financial statements, which highlights that ability of the Company and the Group to continue as a going concern is dependent on the final outcome of the Tax Tribunal and the civil litigation claims made against the Group. As stated in note 1.2, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s and Groups’ ability to continue as a going concern. Our opinion is not modified in respect of this matter
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In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in preparation of the financial statements is appropriate. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Emphasis of matter - tax liability
We draw your attention to notes 2 and 9 in the financial statements which highlights the uncertain outcome of the Tax Tribunal and key sources of estimation uncertainties that the directors have made in the process of determining the tax liability as at 29 December 2020. Our opinion is not modified in respect of this matter.
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FERNLAKES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FERNLAKES LIMITED
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual reports other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit:
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the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
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the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
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adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
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the financial statements are not in agreement with the accounting records and returns; or
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certain disclosures of directors’ remuneration specified by law are not made; or
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we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
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FERNLAKES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FERNLAKES LIMITED
Auditor’s 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 auditor’s 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Extent to which the audit was capable of detecting irregularities, including frau
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We obtained an understanding of the legal and regulatory framework applicable to the entity. We determined that the most significant which are directly relevant to specific assertions in the financial statements are those related to the reporting framework (FRS 102) and the Companies act 2006;
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We enquired of management to identify how the entity is complying with those legal and regulatory frameworks and whether there were any known instances of non-compliance, or any actual, suspected or alleged fraud. We corroborated our enquiries through review of board minutes;
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We assessed the risk of susceptibility of the entity’s financial statements to material misstatement, including how fraud might occur;
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assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and considering whether there were any significant transactions that were unusual or outside the normal course of business;
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We considered the entity’s control environment that has been established to prevent, detect and deter fraud;
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In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments in the general ledger and evaluated the business rationale of any significant transactions that were unusual or outside the normal course of business;
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We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and discussed how and where these might occur and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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FERNLAKES LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF FERNLAKES LIMITED
Use of our report
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.
Peter Smith
(Senior Statutory Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
London
UK
Date:
23 February 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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FERNLAKES LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 29 DECEMBER 2020
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Fair value movement of financial assets and liabilities through profit and loss
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Interest receivable and similar income
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Interest payable and similar expenses
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Tax credit / (charge) on loss
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Loss for the financial period
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Loss for the period attributable to:
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There were no recognised gains and losses for 2020 or 2019 other than those included in the consolidated profit and loss account.
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The notes on pages 18 to 52 form part of these financial statements.
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FERNLAKES LIMITED
REGISTERED NUMBER:
06525088
CONSOLIDATED BALANCE SHEET
AS AT
29 DECEMBER 2020
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Provisions for liabilities
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The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 18 to 52 form part of these financial statements.
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FERNLAKES LIMITED
REGISTERED NUMBER:
06525088
COMPANY BALANCE SHEET
AS AT
29 DECEMBER 2020
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Net assets excluding pension asset
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Profit and loss account brought forward
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Profit and loss account carried forward
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The Company's loss for the financial period amounted to £6,115k (2019: loss of £15,628k).
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 18 to 52 form part of these financial statements.
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FERNLAKES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
29 DECEMBER 2020
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Equity attributable to owners of parent Company
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Comprehensive income for the period
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The notes on pages 18 to 52 form part of these financial statements.
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FERNLAKES LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED
29 DECEMBER 2020
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The notes on pages 18 to 52 form part of these financial statements.
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FERNLAKES LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 29 DECEMBER 2020
Cash flows from operating activities
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Loss for the financial period
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Amortisation of intangible assets (note 11)
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Depreciation of tangible assets (note 12)
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Fair value adjustment of investments (note 10)
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Net cash generated from operating activities
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Cash flows from investing activities
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Disposal/returns of financial investments (note 10)
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Payments to acquire tangible assets (notes 12)
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Net cash from investing activities
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Cash flows from financing activities
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Net cash used in financing activities
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Net increase in cash and cash equivalents
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Cash and cash equivalents at beginning of period
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Cash and cash equivalents at the end of period
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Cash and cash equivalents at the end of period comprise:
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The notes on pages 18 to 52 form part of these financial statements.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies
The principal accounting policies are summarised below. They have been applied consistently throughout the current and prior period.
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General information and basis of accounting
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
Fernlakes Limited is a company incorporated in England and Wales under the Companies Act. Its place of business and registered office address is 15 Golden Square, London, W1F 9JG. The nature of the Group and Company's operations and principal operating activity are set out in the Group Strategic Report on pages 1 to 4.
The functional currency of the Group and Company is considered to be pound sterling which is the currency of the primary economic environment in which the Group operates. Foreign currency transactions are included in accordance with the policies set out below.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 2).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Profit and Loss Account in these financial statements.
The Company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it in respect of its separate financial statements, which are presented alongside the consolidated financial statements. Exemptions have been taken, by the Company, in relation to financial instruments and presentation of a cash flow statement.
Accounting period
The Group has taken advantage of section 390(3)(b) of the Companies Act 2006 in preparing these financial statements to these financial statements to 29 December 2020 which is within seven days of the Company’s 22 December 2020 accounting reference period end.
The following principal accounting policies have been applied:
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Group Strategic Report. The Group Strategic Report on pages 1 to 4 describes the Group's objectives, policies, its financial risk management objectives and its exposure to various risks.
The Group’s and the Company's business activities including the impact of the of the decisions of the First-tier Tax Tribunal, the Upper Tribunal and Court of Appeal, Partner Payment Notices (as further explained in note 9) and the civil claims (refer to note 24), as well as Brexit and the impact of the COVID19 world pandemic have been reviewed by the directors.
In addition to the risks identified in the Group Strategic Report, the impact of the Tax Tribunal, PPNs and the civil claims, the directors have considered the impact of Brexit and the COVID19 world pandemic on the Group's business. The Group is wholly based in the UK and is not taking on any new business, and the main source of any revenue in the future is unaffected as it is attributable to transactions that completed in the past and is not dependent on broader economic activity that may be negatively affected by these circumstances. The directors acknowledge that there has been a general slowdown across all economic sectors in the UK during 2020, however, there has been no material business interruption for any of the Group's individual trading subsidiaries to date. The directors do not believe that the remaining assets across the Group will be impaired, the Group no longer has any direct employees, and the cost base of the Group should not be affected in any way by the circumstances. Therefore, the directors have concluded that the impact of Brexit and the pandemic on the business is insignificant.
The directors of the Group have prepared cash flow forecasts for 12 months following approval of these financial statements assuming a range of operational transactions. Having assessed the risks facing the business as set out in the Group Strategic Report, the Directors' Report, its financial position and profit and cashflow forecasts, the directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and have therefore concluded that it is appropriate to prepare these financial statements on a going concern basis. If some or all of its subsidiaries were not a going concern, or if the ultimate outcome of the Tax Tribunal were in the favour of HMRC’s claim or there was to be an adverse outcome in respect of civil claims, adjustments might be required to the consolidated financial statements. This indicates that a material uncertainty exists that may cast significant doubt on the Company's and Group’s ability to continue as a going concern. The financial statements do not include any adjustments should the going concern basis of preparation be inappropriate.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
The financial statements represent the consolidated accounts of the Company and of each of its subsidiary undertakings. The results of subsidiary undertakings are included from the date on which control passes to the Group, and similarly excluded after the date on which the Group no longer controls the subsidiary. Subsidiaries are accounted for under the acquisition method unless otherwise noted.
The Profit and Loss Account of the Company is not included in the financial statements as permitted by section 408 of the Companies Act 2006. The Company's loss for the financial period amounted to £6,115k (2019: loss of £15,628k).
Certain dormant subsidiaries of the Company have taken advantage of the Companies Act 2006 s480A exemption from audit of accounts. These subsidiaries are exempt from the requirement for an audit of the accounts by virtue of this section and are disclosed as dormant in the Appendix.
Turnover represents amounts receivable for services net of Value Added Tax and is derived from the Group's principal activity. Turnover from the supply of services represents the value of services provided under contracts to the extent that there is a right to consideration and is recorded at the value of the consideration.
Where the amount of turnover is contingent on future events, this is only recognised where the amount of revenue can be measured reliably and it is probable that the economic benefits will be received. When this cannot be estimated reliably, revenue is only recognised to the extent of the expenses recognised that are recoverable, with an additional element of revenue recognised based on stage of completion once the uncertain events no longer exist.
Services provided to the client which at the balance sheet date have not been billed have been recognised as revenue and are included in debtors as accrued income. Where payments are received from customers in advance of services provided, the amounts are recorded as deferred income and included as part of creditors due within one year.
Cost of sales represents direct costs attributable to turnover, recorded on an accruals basis.
Rentals payable under operating leases are charged against income on a straight-line basis over the lease term.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
Current tax, including United Kingdom corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable tax profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets and liabilities are not discounted.
The pension costs charged in the financial statements represent the defined contributions payable by the Group during the period on an accruals basis.
Transactions denominated in foreign currencies are translated into pound sterling at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange ruling at the balance sheet date. Exchange differences are taken to the Profit and Loss Account.
All borrowing costs are recognised in the Consolidated Profit and Loss Account in the year in which they are incurred.
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Intangible assets - website development costs
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Website development costs are recorded at cost less accumulated amortisation. Website development costs are amortised to the Consolidated Profit and Loss Account over a 3 year period, being their estimated useful lives.
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Intangible assets - acquired rights
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Where the rights to future film receipts are acquired from ordinary members in film partnerships, an intangible asset arises representing the value of payments owing to those members. The intangible asset is amortised to the Profit and Loss Account on a systematic basis to match against the income generated by the acquisition.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
Tangible fixed assets are stated at cost, net of depreciation and any provision for impairment.
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life:
Short leasehold land and buildings In equal instalments over the remaining period of the lease
Fixtures, fittings and equipment 10% - 33% of cost
Other investments and loans
Where fair value cannot be reliably measured, other investments are stated at cost less any provision for permanent diminution in value. Refer to note 1.17 for policies on impairment of certain investments.
Loans are held at amortised cost using the effective interest rate method, except those that are classified as non basic as defined in FRS102 Section 12 and are therefore accounted for at fair value through profit or loss.
Trade loans entered into are recorded at the full extent of their legal liability at the date that the loan agreement was signed, less any repayments to date.
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accruals basis in the Profit and Loss Account using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
The Group enters into basic and non basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method, except those that are designated at fair value to avoid an accounting mismatch. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Consolidated Profit and Loss Account.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Group would receive for the asset if it were to be sold at the balance sheet date.
Financial liabilities that do not have fixed repayment terms are classified as non basic financial instruments and are therefore held at fair value through profit or loss. Where their value is dependent on the value of a corresponding financial asset, the financial asset is also classified at fair value to avoid an accounting mismatch.
Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or income as appropriate. The Company does not currently apply hedge accounting for interest rate and foreign exchange derivatives.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
Financial liabilities and equity are classified according to the substance of the financial instrument's contractual obligations, rather than the financial instrument's legal form.
Financial liabilities that are non basic are initially classified as financial liabilities at fair value through profit or loss.
The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.
Subsequently, the measurement of financial liabilities depends on their classification under FRS102.
Basic financial liabilities are measured at amortised cost, and non basic financial liabilities are valued at fair value through profit or loss.
Interest bearing loans and borrowings
Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at the fair value of consideration received less directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance revenue and finance cost.
Derecognition of financial liabilities
A liability is derecognised when the contract that gives rise to it is settled, sold, cancelled or expired.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such as an exchange or modification, this is treated as a derecognition of the original liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss.
In accordance with FRS 102 Section 20 Leases, the amount due from the lessee under finance leases is recorded in the Balance Sheet as a debtor at the amount of the net investment in the lease, less provision for any items such as bad and doubtful rentals receivable.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
1.
Accounting policies (continued)
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
The merger reserve was created due to a reorganisation of the Group in a previous period. The Group reorganisation was accounted for using merger accounting principles in order to meet the overriding requirement under section 611 of the Companies Act 2006 for financial statements to present a true and fair view.
Grants relating to revenue shall be recognised in income on a systematic basis over the periods in which the entity recognises the related costs for which the grant is intended to compensate.
During the period the Group received assistance under the Coronavirus Job Retention Scheme (CJRS scheme), totalling £65k.
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Other operating income/(expense)
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Other operating income/(expense) include charges for investments and other assets impaired during the period. Other operating income includes, inter alia, the gain on sale of investments , and grant income related to the Coronavirus Job Retention Scheme (CJRS scheme). The payments made to furloughed employees as part of the expense is reflected in administrative expenses.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In the application of the Group's and Company's accounting policies, which are described in note 1, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.
Critical accounting judgements in applying the accounting policies
The following are the critical judgements that the directors have made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Aside from that noted below, there are no other key sources of estimation uncertainty in the Group.
Fair value of investments and non-basic financial instruments
The most critical estimates and assumptions for investments relate to the determination of carrying value of unlisted investments at fair value through profit and loss. In determining this amount, the Group applies the overriding concept that fair value is the amount for which an asset can be exchanged between knowledgeable willing parties in an arm’s length transaction. The nature, facts and circumstances of the investment drives the valuation methodology.
Furthermore, the Group holds financial assets and financial liabilities in the form of non basic debt instruments where the repayment obligation of the loans are restricted to the film receipts collected by some underlying partnerships (the “S&L partnerships”) when they entered into sale and leaseback transactions, and are therefore valued at fair value through profit and loss in accordance with FRS 102 section 12. The Group also holds financial assets in the form of equity investments into some of the S&L partnerships which have been financed by the above-mentioned debt instruments. These equity investments are valued by the Group at fair value in accordance with FRS 102 section 12.
Because there is evidence that the value of the film assets (and therefore of the related loans) has fallen due to the commercial performance of the underlying films being lower than anticipated, management have subsequently remeasured the assets and the related loan liabilities. When performing their fair value assessment of the equity investments and fair value of the debt instruments, management have taken into account the performance to date of the underlying film assets and the future cash flows expected to arise based on each film lease schedule.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
Impairment
Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss as described below.
Non-financial assets
An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.
Where indicators exist for a decrease in impairment loss, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no Impairment been recognised.
Financial assets
For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the financial asset's original effective interest rate.
For financial assets carried at cost less impairment, the impairment loss is the difference between the asset's carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at the reporting date.
Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised.
Tax liability
In estimating the potential tax liability relating to the First-tier Tax Tribunal, the Upper Tribunal and Court of Appeal decisions (refer to note 9), the directors continue to consider that the liability calculated in accordance with the First-tier Tax Tribunal decision provides the most likely outcome to the litigation. The following key elements as set out in the Tribunal decision were taken into account in calculating the partnerships’ revised profits or losses: treatment of the operator and executive producer fees, deductibility of contracted film cost, recognition of film income and calculation of the film net realisable values. These reduce the income and expenditure recognised by the partnerships which reduces the losses available to be utilised by the Group. In calculating the tax liabilities of the Group relief has been claimed under the corporate intangibles fixed asset tax regime for film expenditure incurred by the partnerships.
The total turnover of the Group for the period has been predominantly derived from its principal activity (refer to page 1).
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
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The operating loss is stated after charging/ (crediting):
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Fair value adjustment of fixed asset investments (see note 10)
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Revaluation of non basic financial instruments
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Amortisation of intangible asset (see note 11)
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Depreciation of tangible fixed assets (see note 12)
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Operating lease rentals - land and buildings
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Fees payable to the Company's auditor for the audit of the Company's
annual financial statements
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Fees payable to the Group's auditor for the audit of the Group's
subsidiaries pursuant to legislation
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Fees payable to the Company's auditor for other assurance services
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* Other operating income relates to the profit on disposal of some Infrastructure assets totalling £611k recognised in the current period (2019: £nil)
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
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Staff costs were as follows:
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Cost of defined contribution scheme
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There are no staff employed directly by the Company. The average monthly number of employees (including directors) in the Group up to 30 April 2020 was as follows:
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The highest paid director of the Group received remuneration of £85k (2019: £341k).
See also directors' current accounts in note 22.
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Interest receivable and similar income
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Other interest receivable
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
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Interest payable and similar expenses
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Group relief withdrawn and film production losses denied
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Adjustments in respect of prior years
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Deferred tax credit for the period
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Deferred tax adjustment in respect of prior years (credit)/charge
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Total current tax (credit)/charge
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
9.
Taxation (continued)
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Factors affecting tax (credit)/charge for the period
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The tax assessed for the year is higher than (2019: higher than ) the standard rate of corporation tax in the UK of 19% (2019: 19%). The differences are explained below:
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Loss on ordinary activities before tax
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Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2019 - 19%)
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Adjustments resulting from investment in film partnerships
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Adjustments in respect of investment in associated LLPs
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Expenses not deductible for tax purposes
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Transfer pricing adjustment
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Other short-term timing differences
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Income of consolidated partnerships taxable on members
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Share of profit from associated company
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Adjustments in respect of prior years
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Group relief withdrawn and film production losses denied
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Unrecognised tax losses carried forward
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Timing differences in relation to capital allowances
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Total tax (credit)/charge for the period
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Factors that may affect future tax charges
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A potential deferred tax asset of £2.2m (2019: £3.3m) in respect of tax losses carried forward has not been recognised due to uncertainty over the availability of taxable profits in future chargeable accounting periods.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
In prior accounting periods the Group has received the benefit of tax losses associated with the Group’s investment in a number of film and game production partnerships related to the Group. The partnerships have challenged the basis on which the closure notices have been calculated, resulting in a hearing before the First-tier Tax Tribunal ("the Tribunal"). The initial decision of the Tribunal was delivered on 2 August 2016 and a second decision which clarified the findings of the first decision was delivered in May 2017 and an amended decision was received on 16 November 2017. The effect of the decisions is to reduce both the losses available to Group entities that invested in the film and game production partnerships and their share of taxable income from the partnerships. The partnerships received permission to appeal in full on 7 of the 8 grounds requested from the Tribunal and on all aspects of the 8th ground the Upper Tribunal was asked to consider. The appeal hearing before the Upper Tribunal was heard in March and April 2019.
On 26 July 2019 the film and game production partnerships received the decision of the Upper Tribunal on their appeals against the decision of the First-tier Tax Tribunal. The Upper Tribunal concluded that the partnerships were not trading and did not have a view to profit. The finding that the partnerships were not trading is sufficient to dispose of the entirety of the partnerships’ appeals. However, mindful that the decision may itself be appealed, the Upper Tribunal went on to briefly consider the remaining questions, where it often corrected the First-tier Tax Tribunal’s approach but generally supported the First-tier Tax Tribunal’s overall conclusions. An application for permission to appeal the Upper Tribunal’s decision was submitted in November 2019 and was refused by the Upper Tribunal. An application was therefore made for permission to appeal to the Court of Appeal in December 2019 and authority was granted by the Court of Appeal in February 2020 to appeal the findings on trading and view to profit. The appeal hearing before the Court of Appeal was heard in March 2021. See Events after the balance sheet date (note 25) for the impact of the Court of Appeal decision which was received on 4 August 2021.
If the film and game production partnerships are successful in their appeal on the view to profit decision of the Upper Tribunal the quantum of tax relief for expenditure by the partnerships and taxable income attributable to the corporate members of the partnerships should be consistent with that expected to follow the First-tier Tax Tribunal decision.
The quantum of both tax losses available to the Group and income taxable on Group entities arising from the Group’s investment in these partnerships will remain uncertain until the tax cases are finally resolved. For the period ended 29 December 2020, the directors have estimated an additional tax liability for the Group of £nil (2019: £64k, 2018: £535k, 2017: £1,826k, 2016: £37,292k) together with a liability for late paid interest of £827k (2019: £890k, 2018: £2,206k, 2017: £1,724k, 2016: £17,977k). The directors' estimate of the additional tax and interest liability continues to be calculated on the basis of the decision of the First-tier Tax Tribunal as the directors consider that this decision provides the most likely outcome to the litigation. If, at the end of the appeals process, all contested areas of the Tribunal decision are found in favour of HMRC, a total tax liability of c.£26.8m, plus interest on late paid tax, would arise for the Group, subject to agreeing the basis of the calculation of the liability with HMRC. As at 29 December 2020, payments totalling £13.8m (tax) and £6.1m (interest) had been made with regard to these amounts, as described further below.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
During November 2016, a number of companies, all subsidiaries of Fernlakes Limited, as corporate members of film production partnerships received PPNs, which are demands for payments on account in respect of a tax liability in dispute, from HMRC. These corporate member companies (together the “Members”) submitted written representations to HMRC within the authorised 90 day period. As a result of these representations, the PPNs were not due and payable until 30 days after the date on which HMRC responded to the representations. On 10 November 2017 HMRC issued amended PPNs to some Members and as a consequence of the determination, on 13 December 2017, the Group notified HMRC of an intended claim for judicial review of the decision to uphold the PPNs and filed its claim with the court on 5 January 2018. At the date of signing these financial statements the claim for judicial review has not been heard. HMRC have agreed to postpone collection of part of the PPN liability. The postponed amounts fall under two tranches; the first tranche HMRC agreed to postpone pending the hearing of the judicial review, the second tranche is currently postponed pending an internal HMRC review. The first tranche of PPN liability no longer falls within the Group due to the deconsolidation of some former Group entities. If the second tranche becomes payable the subsidiaries will have a liability to make tax payments of a further £18.9m to HMRC which will also attract interest charges.
If HMRC also issues determinations in respect of the representations submitted by other Members, an additional payment of £10m will be due to HMRC in respect of group relief being withdrawn which will trigger further liabilities for interest on late paid tax.
Subject to the final court decision; the payments on account of tax of £13.8m may be repaid so are shown as debtors (note 13) with the gross amount of total taxes provided included in creditors (note 15). When determining the best estimate of the ultimate cash outflows, the directors have considered the effect of the notices received but believe that the best estimate of ultimate cash outflows should still be based on the decision delivered by the First-tier Tax Tribunal as this represents the most likely outcome to the litigation.
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Fair value adjustment through profit and loss
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Refer to the Appendix to the financial statements for a listing of subsidiary undertakings.
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
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Significant investments
During the period the Group had interests in the following significant investments:
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Net assets / (liabilities) at latest financial year end
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Profit / (loss) at latest financial year end
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Ingenious Fuller Partnership LLP
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Management do not consider any of these to be subsidiaries, associates or joint ventures, as defined in FRS102, as the Group has no control or significant influence over the operating and financial policies.
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
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|
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|
|
|
|
|
|
|
|
|
|
Charge for the period on owned assets
|
|
|
|
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|
|
|
|
|
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|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
11.
Intangible assets (continued)
|
Development costs
Costs related to the development of a new website and internal client relationship management (CRM) system have been capitalised in accordance with the requirements of FRS 102.
Acquired rights
On 5 April 2008 Langreave Limited (previously known as Ingenious Film Partners Limited) acquired the right to receive future film receipts above an agreed level from the ordinary members of the Ingenious Film Partners LLP. On 22 November 2010, IFP1 Corporate Partner Limited became entitled to a portion of these film receipts, as detailed in the members' agreement.
On 5 April 2008 Cradgrove Limited (previously known as Ingenious Film Partners 2 Limited) acquired the right to receive future film receipts above an agreed level from the ordinary members of the Ingenious Film Partners 2 LLP. On 22 November 2010, IFP2 Corporate Partner Limited became entitled to a portion of these film receipts, as detailed in the members' agreement.
During the financial period, IFP1 Corporate Partner Limited and IFP2 Corporate Partner Limited were entitled to film receipts totalling £4,292k (2019: £3,784k), of which £1,438k is payable to the ordinary members (2019: £1,311k). The amount payable to the ordinary members is capitalised as an intangible asset and amortised as a charge to the Profit and Loss Account to offset the income that the asset has generated.
The above amortisation charge of £1,438k (2019: £1,311k) is included within administrative expenses in the Consolidated Profit and Loss Account.
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
|
Short-term leasehold property
|
Fixtures, fittings and equipment
|
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Charge for the period on owned assets
|
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|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
Due after more than one year
|
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Amounts owed by Group undertakings
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Prepayments and accrued income
|
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Directors' current account
|
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|
Trade loans (due after more than one year) are represented mainly by amounts lent to Ingenious Real Estate Enterprises 4 Limited and Ingenious AG JV LLP joint venture.
Trade loans are shown net of provisions of £50,947k.
Other debtors mainly represent the amounts receivable from the Ingenious Capital Management Holdings Limited group of companies, and amounts owed from the subsidiaries that were put into voluntary administration/liquidation in the prior period.
|
|
Cash and cash equivalents
|
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|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
Creditors: Amounts falling due within one year
|
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Directors' current account
|
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Accruals and deferred income
|
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|
Please refer to Financial instruments and risk management in the Strategic Report for further details on the impact of liquidity, interest rate and credit risk to the Group.
|
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Measured at undiscounted amount receivable
|
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|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
|
|
|
|
Measured at undiscounted amount payable
|
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Other creditors (due within one year)
|
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|
|
Measured at amortised cost
|
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Charged to profit or loss
|
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|
Deferred Tax
Deferred tax assets and liabilities are offset only where the Company has a legally enforceable right to do so and where the assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity or another entity within the Group.
Interest provision
Interest provision relates to interest on the estimated tax liability (refer to notes 2 and 9).
Other provisions
Other provisions relate to loans made by other Group entities, where the Company has guaranteed to repay these loans in the event of default.
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
Allotted, called up and fully paid
|
|
|
|
Class 'A' shares of 10p each
|
|
|
|
Class 'B' shares of 5p each
|
|
|
|
Class 'C' shares of 5p each
|
|
|
|
Class 'D' shares of 5p each
|
|
|
|
Class 'E' shares of 5p each
|
|
|
|
Class 'F' shares of 5p each
|
|
|
|
Class 'G' shares of 5p each
|
|
|
|
Class 'H' shares of 5p each
|
|
|
|
Class 'I' shares of 5p each
|
|
|
|
Class 'J' shares of 5p each
|
|
|
|
Class 'K' shares of 5p each
|
|
|
|
Class 'L' shares of 0.125p each
|
|
|
|
Class 'M' shares of 0.125p each
|
|
|
|
Class 'N' shares of 0.125p each
|
|
|
|
Class 'O' shares of 0.125p each
|
|
|
|
Class 'P' shares of 0.125p each
|
|
|
|
Class 'Q' shares of 0.125p each
|
|
|
|
Class 'R' shares of 0.125p each
|
|
|
|
Class 'S' shares of 0.125p each
|
|
|
|
Class 'T' shares of 0.125p each
|
|
|
|
Class 'U' shares of 0.125p each
|
|
|
|
Class 'V' shares of 0.125p each
|
|
|
|
Class 'W' shares of 0.125p each
|
|
|
|
Class 'X' shares of 0.125p each
|
|
|
|
Class 'Y' shares of 0.125p each
|
|
|
|
Class 'Z' shares of 0.125p each
|
|
|
|
|
|
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
|
Called up share capital (continued)
|
'A' shares hold all voting rights and entitlements to distributions of retained profit.
Shares of 5p each of classes 'B' through 'K' acquired by employees are held in trust by Gildales Limited (previously known as Ingenious Nominees Limited) and/or Barry Nominees Limited on behalf of the named employees.
Shares of 0.125p each of classes 'L' through 'Z' acquired by employees are held in trust by Gildales Limited and/or Barry Nominees Limited on behalf of named employees. The shares do not carry voting rights or entitlements to dividends, but entitle the owner to a share of the proceeds on sale or public listing of the Company. Finance costs relating to the scheme are borne by Freeshire Limited. Employees can be made to surrender their shares if they cease to be employees of the Group.
|
See note 1.21 for further information on the merger reserve.
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
|
|
|
Financial commitments are as follows:
|
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|
Contracted for but not provided for
|
|
|
|
- operating leases entered into
|
|
|
|
- potential amounts owed to legacy investors
|
|
|
|
|
|
|
|
Potential amounts owed to legacy investors represents the total repayment of limited recourse loans that could be redrawn if certain conditions are met. The Company estimates that it's maximum settlement value is £9,598k (2019: £9,783k) as at the financial reporting date.
Minimum future lease payments under non-cancelable operating leases are as follows:
|
|
|
|
|
|
Between one and five years
|
|
|
|
|
|
|
|
|
|
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
Related party transactions
|
|
The Company has taken advantage of the exemptions conferred by FRS 102 Section 33 Related Party Disclosures to not disclose intercompany transactions between 100% subsidiaries. During the period the Group conducted significant transactions with the following related parties outside of the Group:
|
|
|
Fee income derived from entities listed below
29 December
|
Fee income derived from entities listed below
30 December
|
Amounts due from/(to) entities listed below
29 December
|
Amounts due from/(to) entities listed below
30 December
|
|
|
|
|
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|
|
Ingenious AG JV Member Limited
|
|
|
|
|
|
|
Ingenious Capital Management Limited
|
|
|
|
|
|
|
Ingenious Capital Management Holdings Limited
|
|
|
|
|
|
|
Ingenious Capital Management Services Limited
|
|
|
|
|
|
|
Ingenious Fuller Partnership LLP
|
|
|
|
|
|
|
Ingenious IQB Member Limited
|
|
|
|
|
|
|
Ingenious Real Estate Enterprises 4 Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group had various trivial balances with entities listed in note 10.
The following significant relationships existed between the related parties during all or part of the period:
Subnote:
1 - Common director(s).
2 - Common shareholder(s)/ultimate shareholder.
3 - Operator/promoter/administrator/advisor/manager/agent is Goldwoodshire Limited.
4 - Common director(s) of designated member.
5 - Operator/promoter/administrator/advisor/manager/agent is Ingenious Capital Management Limited.
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
Directors' current accounts
|
|
Directors serving during the period had the following loan balances outstanding at the period end as stated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors' current accounts
|
|
|
|
Amount owed (to) / by the Group
|
|
|
During the period ended 29 December 2020 the ultimate controlling party of the Group and the Company was P A McKenna. The Company is the only parent undertaking for which consolidated financial statements are prepared.
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
Civil litigation claims
During the year ended 30 June 2016, the Company and some of its subsidiaries received claims from two law firms - Stewarts Law LLP and Peters and Peters LLP, filed on behalf of a minority of investors (the “Claimants”) in what are referred to as the Inside Track partnerships, the Ingenious Film Partnerships and Ingenious Games LLP (the “Production Partnerships”) and some film sale and leaseback partnerships, all operated or managed by the Group and its related entities. The claimants are seeking compensation via a number of legal remedies from various parties, many of whom are unconnected to the Group and its related entities, involved in the Production Partnerships and sale and leaseback partnerships including from the Company or its subsidiaries. The basis for the claims related to the film sale and leaseback partnerships has not been articulated in sufficient detail. The sale and leaseback claims are currently stayed, and any party can lift the stay on one month’s notice. Following legal consultation based on the information which has been provided in respect of the nature and basis of the claims so far and consideration of the current circumstances, the directors of the Company believe the claims are without merit and therefore no provision has been made in the financial statements. Currently, there are no reasonable grounds for calculating the potential liability in the unexpected event that the claims do succeed.
Additionally, during the period ended 31 December 2018, the Company was informed of claims from Mishcon de Reya, filed on behalf of a minority of investors in Inside Track 1 LLP, Inside Track 2 LLP, Inside Track 3 LLP, Ingenious Film Partners LLP and Ingenious Film Partners 2 LLP, all operated by the Group and its related entities. These investors are seeking compensation via a number of legal remedies from various parties involved in these partnerships, including from the Company or its subsidiaries. Following legal consultation based on the information which has been provided in respect of the nature and basis of the potential claims so far and consideration of the current circumstances, the directors of the Company believe the potential claims are without merit and therefore no provision has been made in the financial statements. Currently, there are no reasonable grounds for calculating the potential liability in the unexpected event that any claims do succeed.
A trial for the claims related to the Production Partnerships is scheduled for 26 April 2022.
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
Events after the balance sheet date
|
On 4 August 2021 the film and game production partnerships received the decision of the Court of Appeal. The Court of Appeal reversed the decision of the Upper Tribunal and restored the decision of the First-tier Tribunal that the film partnerships were trading with a view to profit. Ingenious Games was found to be in business. The effect of restoring the First-tier Tribunal decision is to reduce both the losses available to Group entities that invested in the film production partnerships and their share of taxable income from the partnerships. On receipt of the draft decision HMRC submitted an application to the Court of Appeal to appeal its decision, which was declined on 4 August 2021. In the absence of an HMRC application to appeal to the Supreme Court, the decision of the Court of Appeal on 4th August 2021 represents the final outcome of the tax case (subject to any out of time applications). The impact on the financial statements for the Company of the Court of Appeal decision has not been agreed with HMRC but is expected to be consistent with the directors' estimate of the additional tax and interest liability calculated on the basis of the decision of the First-tier Tax Tribunal.
In December 2021, the directors of Granleaf Square Limited, a subsidiary of the Group, agreed to put the company into administration. The administrator was formally appointed on 20 January 2022.
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
|
|
|
Subsidiary holdings
During the period, the Group had the following direct and indirect subsidiaries which were all incorporated and registered in England and Wales (unless otherwise indicated):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amber Film Partner 1 Limited
|
|
|
|
Amber Film Partner 2 Limited
|
|
|
|
Angel Cake Television Limited
|
|
|
|
Aries Film Partner 1 Limited
|
|
|
|
Aries Film Partner 2 Limited
|
|
|
|
|
|
|
|
Bergkamp Productions Limited
|
|
|
|
Big Screen Productions 10 Limited *
|
|
|
|
Big Screen Productions 11 Limited *
|
|
|
|
Big Screen Productions 12 Limited *
|
|
|
|
Big Screen Productions 13 Limited *
|
|
|
|
Big Screen Productions 14 IM Limited *
|
|
|
|
Big Screen Productions 15 IM Limited *
|
|
|
|
Big Screen Productions 16 IM Limited *
|
|
|
|
Big Screen Productions 17 IM Limited *
|
|
|
|
Big Screen Productions 18 IM Limited *
|
|
|
|
Big Screen Productions 19 IM Limited *
|
|
|
|
Big Screen Productions 20 IM Limited *
|
|
|
|
Big Screen Productions 21 IM Limited *
|
|
|
|
Big Screen Productions 22 IM Limited *
|
|
|
|
Big Screen Productions 23 IM Limited *
|
|
|
|
Big Screen Productions 24 IM Limited *
|
|
|
|
Big Screen Productions 3 Limited *
|
|
|
|
Big Screen Productions 4 Limited *
|
|
|
|
Big Screen Productions 5 Limited *
|
|
|
|
Big Screen Productions 7 Limited *
|
|
|
|
Big Screen Productions 8 Limited *
|
|
|
|
Big Screen Productions 9 Limited *
|
|
|
|
Blue Budgie Films Limited
|
|
|
|
Blue Budgie (Serenity) Limited
|
|
|
|
Bronze Film Partner 1 Limited
|
|
|
|
Bronze Film Partner 2 Limited
|
|
|
|
Bullock Street Waste Energy Limited *
|
|
|
|
|
|
|
|
Cairo Film Partner 1 Limited
|
|
|
|
Cairo Film Partner 2 Limited
|
|
|
|
|
|
|
|
Chrome Film Partner 1 Limited
|
|
|
|
Chrome Film Partner 2 Limited
|
|
|
|
Copper Film Partner 1 Limited
|
|
|
|
Copper Film Partner 2 Limited
|
|
|
|
Corinth Film Partner 1 Limited
|
|
|
|
Corinth Film Partner 2 Limited
|
|
|
|
|
|
|
|
|
|
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
(continued)
|
Dayday Films (CM) Limited *
|
|
|
|
Daylily Investments Limited *
|
|
|
|
Dekatria Productions Limited
|
|
|
|
|
|
|
|
Delphi Film Partner 1 Limited
|
|
|
|
Delphi Film Partner 2 Limited
|
|
|
|
Diamond Film Partner 1 Limited
|
|
|
|
Diamond Film Partner 2 Limited
|
|
|
|
Dog With A Bone Productions Limited
|
|
|
|
Double Guess Productions Limited
|
|
|
|
Ebony Film Partner 1 Limited
|
|
|
|
Ebony Film Partner 2 Limited
|
|
|
|
Electra Film Partner 1 Limited
|
|
|
|
Electra Film Partner 2 Limited
|
|
|
|
|
|
|
|
Erewash Productions Limited
|
|
|
|
Evandine Productions Limited
|
|
|
|
|
|
|
|
|
|
|
|
Fleet Film Partners 1 Limited
|
|
|
|
Fleet Film Partners 2 Limited
|
|
|
|
Gallipoli Film Partner 1 Limited
|
|
|
|
Gallipoli Film Partner 2 Limited
|
|
|
|
Gemini Film Partner 1 Limited
|
|
|
|
Gemini Film Partner 2 Limited
|
|
|
|
Gemstone Film Partner 1 Limited
|
|
|
|
Gemstone Film Partner 2 Limited
|
|
|
|
|
|
|
|
|
|
|
|
Ingenious (Jersey) Film Sales Limited
|
|
|
|
Golden Square Services 1 Limited
|
|
|
|
|
|
|
|
Golden Square Services 2 Limited
|
|
|
|
|
|
|
|
|
|
|
|
Granleaf Square Limited **
|
|
|
|
|
|
|
|
Makalu Productions Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hat and Coat Productions Limited
|
|
|
|
Hotwells Productions Limited
|
|
|
|
IFP1 Corporate Partner Limited
|
|
|
|
IFP2 Corporate Partner Limited
|
|
|
|
Inkie Productions IM Limited *
|
|
|
|
Isabella's Basil Productions Limited
|
|
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
(continued)
|
Ivory Film Partner 1 Limited
|
|
|
|
Ivory Film Partner 2 Limited
|
|
|
|
Jade Film Partner 1 Limited
|
|
|
|
Jade Film Partner 2 Limited
|
|
|
|
Jasper Film Partner 1 Limited
|
|
|
|
Jasper Film Partner 2 Limited
|
|
|
|
Jewel Film Partner 1 Limited
|
|
|
|
Jewel Film Partner 2 Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo Film Partner 1 Limited
|
|
|
|
Leo Film Partner 2 Limited
|
|
|
|
Libra Film Partner 1 Limited
|
|
|
|
Libra Film Partner 2 Limited
|
|
|
|
Little Blair Productions IM Limited *
|
|
|
|
Lobsand Productions Limited
|
|
|
|
Lodestone Film Partner 1 Limited
|
|
|
|
Lodestone Film Partner 2 Limited
|
|
|
|
Lowsun Productions Limited
|
|
|
|
Luxor Film Partner 1 Limited
|
|
|
|
Luxor Film Partner 2 Limited
|
|
|
|
Makalu Productions Limited
|
|
|
|
Malachite Film Partner 1 Limited
|
|
|
|
Malachite Film Partner 2 Limited
|
|
|
|
Mars Film Partner 1 Limited
|
|
|
|
Mars Film Partner 2 Limited
|
|
|
|
|
|
|
|
Mercury Film Productions Limited
|
|
|
|
Milan Film Partner 1 Limited
|
|
|
|
Milan Film Partner 2 Limited
|
|
|
|
Millbank Broadcasting Partner 1 Limited
|
|
|
|
Millbank Broadcasting Partner 2 Limited
|
|
|
|
Momhil Productions Limited
|
|
|
|
Moot Point Productions Limited
|
|
|
|
|
|
|
|
Neptune Film Partner 1 Limited
|
|
|
|
Neptune Film Partner 2 Limited
|
|
|
|
Onyx Film Partner 1 Limited
|
|
|
|
Onyx Film Partner 2 Limited
|
|
|
|
Opal Film Partners 1 Limited
|
|
|
|
Opal Film Partners 2 Limited
|
|
|
|
Pangorda Investor Limited *
|
|
|
|
Pearl Film Partner 1 Limited
|
|
|
|
Pearl Film Partner 2 Limited
|
|
|
|
FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
(continued)
|
Petra Film Partner 1 Limited
|
|
|
|
Petra Film Partner 2 Limited
|
|
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|
Phoenix Film Partners Limited *
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Quartz Film Partner 1 Limited
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Quartz Film Partner 2 Limited
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Reel Film Partner 1 Limited
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Reel Film Partner 2 Limited
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Rome Film Partner 1 Limited
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Rome Film Partner 2 Limited
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Sapphire Film Partner 1 Limited
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Sapphire Film Partner 2 Limited
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Saturn Film Partner 1 Limited
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Saturn Film Partner 2 Limited
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Sirius Film Partner 1 Limited
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Sirius Film Partner 2 Limited
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Skagos Productions Limited
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Skull Distribution Limited
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Sleeping Otters Productions Limited
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Solar Film Partners IM Limited *
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Sparrowfall Films Limited
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Starlight Film Partners Limited *
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Taurus Film Partner 1 Limited
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Taurus Film Partner 2 Limited
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Temple Film Partner 1 Limited
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Temple Film Partner 2 Limited
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Thebes Film Partner 1 Limited
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Thebes Film Partner 2 Limited
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Topaz Film Partner 1 Limited
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Topaz Film Partner 2 Limited
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Trafalgar Film Partner 1 Limited
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Trafalgar Film Partner 2 Limited
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Turin Film Partner 1 Limited
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Turin Film Partner 2 Limited
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Venus Film Partner 1 Limited
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Venus Film Partner 2 Limited
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Verona Film Partner 1 Limited
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Verona Film Partner 2 Limited
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Vienna Film Partner 1 Limited
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Vienna Film Partner 2 Limited
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Virgo Film Partner 1 Limited
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Virgo Film Partner 2 Limited
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Waterloo Film Partner 1 Limited
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FERNLAKES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 29 DECEMBER 2020
(continued)
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Waterloo Film Partner 2 Limited
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Zinc Film Partner 1 Limited
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Zinc Film Partner 2 Limited
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* = In Liquidation
** = In Administration
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