Company registration number NI072130 (Northern Ireland)
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
COMPANY INFORMATION
Directors
M Templeton
RM Baxter
(Appointed 31 December 2022)
Secretary
Resolis Limited
Company number
NI072130
Registered office
C/O Tughans Llp
The Ewart
3 Bedford Square
Belfast
Northern Ireland
BT2 7EP
Auditor
Deloitte (NI) Limited
27-45 Great Victoria Street
Lincoln Building
Belfast
BT2 7SL
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
CONTENTS
Page
Directors' report
1 - 4
Independent auditor's report
5 - 8
Income statement
9
Statement of comprehensive income
10
Statement of financial position
11
Statement of changes in equity
12
Notes to the financial statements
13 - 29
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activities
The principal activities of the Company comprise the design, construction and operation of an acute hospital facility in Enniskillen. The Company's operations are managed under the supervision of its shareholders and funders. They are largely determined by the detailed terms and the key performance indicators in the PFI contract with the South Western Health and Social Care Trust (the Trust). They were also determined by the subcontracts with FCC Elliott Healthcare Limited who supplied the construction services and Mitie (Facilities Management) Limited, who supply the facilities maintenance services throughout the life of the concession.
Results and dividends
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend (2022: £Nil).
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
LW McKenna
(Resigned 31 December 2022)
M Templeton
RM Thompson
(Resigned 1 April 2022)
J S Gordon
(Appointed 1 April 2022 and resigned 29 January 2024)
RM Baxter
(Appointed 31 December 2022)
Directors' insurance
The company maintains insurance policies on behalf of all the directors against liability arising from negligence, breach of duty and breach of trust in relation to the company.
Supplier payment policy
The company's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code (copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).
The company's current policy concerning the payment of trade creditors is to:
settle the terms of payment with suppliers when agreeing the terms of each transaction;
ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
pay in accordance with the company's contractual and other legal obligations.
Financial instruments
Commercial risk
The Company manages commercial risk through ongoing monitoring of activities and taking appropriate corrective action to resolve any issues arising. The project is subject to a performance management system maintained by the Trust and this is reflected in the arrangements the Company has entered into with its subcontractors.
Liquidity risk
The Company adopts a prudent approach to liquidity management by maintaining sufficient cash and liquid resources to meet its obligations. Due to the nature of the project, cash flows are reasonably predictable and so this is not a significant risk area.
Interest rate risk
Exposure to interest rate risk was hedged at the inception of the project by swapping the majority of variable rate debt into fixed rate through the use of interest rate swaps.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Inflation risk
Exposure to inflation risk (which impacts unitary payments received from the Trust) was hedged at the inception of the project by entering into a fixed rate RPI swap to restrict exposure to future RPI fluctuations.
Credit risk
The Company receives the bulk of its revenue from a NHS Trust covered by a Deed of Safeguard between itself and the Department of Health (formerly The Department of Health, Social Services and Public Safety) and therefore is not exposed to significant credit risk. Cash investments and interest rate swap arrangements are with institutions of a suitable credit quality.
Future developments
The Trust has entered into the Project Agreement with the Company to develop facilities on the site and secure the provision of the services in order to improve the quality and efficiency of the services provided by the Trust. The Enniskillen Hospital Project is scheduled to last for a period of 33 years beginning with the design and construction phase which commenced in May 2009 completed in May 2012 and was followed by the operation phase that began in June 2012 with completion at the end of 2042.
The success of the Company is measured first and foremost in terms of cash flow and adherence to the agreed financial model. The project as a whole is expected to have a positive Net Present Value.
The directors view overall performance as satisfactory and expect to continue to meet financial targets.
The Company is a Special Purpose Vehicle created solely to deliver this project. Therefore, the principal activities as detailed above are low risk as trading relationships with the Company's customer, funders and sub-contractors are determined by the terms of their respective detailed PFI contracts. For this reason, the directors believe that further key performance indicators are not necessary or appropriate for an understanding of the performance or position of the business.
Whilst competitive forces do not exist within the Company's market, its main exposure is to financial risks.
The directors are not aware, at the date of this report, of any likely changes in the Company's activities in the next year.
Auditor
The auditor, Deloitte (NI) Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 “Reduced Disclosure Framework". Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
Each of the persons who is a director at the date of approval of the annual report confirms that so far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company's auditor is unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
Going concern
The Directors have reviewed the Company's projected profits and cash flows by reference to a financial model covering accounting periods up to 2042. The Company has considerable financial resources together with long-term contracts with the South Western Health and Social Care Trust. As a consequence, the directors believe that the Company is well placed to manage its business risks successfully. Further detail can be found in the accounting policies going concern note.
Subsequent to the year end there have been a number of issues in respect of service failure points accrued under the payment mechanism provisions in the Company's agreement with the South Western Health and Social Care Trust which breach certain thresholds within the Company's lending agreements. The Trust and the Directors are working towards agreements to reduce the risk to the Company and the lenders have confirmed that there is no intention to terminate the loan agreements.
The directors have specifically considered the matters above in respect of the Events of Default under the terms of the Common Term Agreement. The directors are working on finding a resolution to the Events of Default under the Common Term Agreement. Any waiver of the Events of Default or variation to the terms of the Common Terms Agreement are subject to approval by the lenders. The directors confirm that they do not intend to liquidate the company or cease trading as they consider they have realistic alternatives to doing so. The company is in a net liabilities position due to the inclusion of the hedge reserve on the statement of financial position and this will unwind completely over the term of the hedge.
The Directors consider that despite the Events of Default attached to the existing financing the Company can maintain sufficient liquidity over the next 12 months, and that it is accordingly appropriate to adopt a going concern basis for the preparation of these financial statements. The directors acknowledge that the non waiver of the Events of Default indicates the existence of a material uncertainty, which may cast significant doubt on the company's ability to continue as a going concern.
The directors have reviewed the balance sheet position at 31 December 2022 and following the year end together with the company's forecasts and projections, taking account of reasonably possible changes in trading performance and believe that it will not impact on the ability of the company to continue trading for at least 12 months from the date of signing the annual report and financial statements and have therefore prepared the financial statements on a going concern basis.
Events since the end of the year
Information relating to events since the end of the year is given in the notes to the financial statements.
Small companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.
On behalf of the board
M Templeton
Director
7 May 2024
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
- 5 -
Opinion
In our opinion the financial statements of NIHG South West Health Partnership Limited (the ‘company’):
give a true and fair view of the state of the company’s affairs as at 31 December 2022 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
the income statement;
the statement of comprehensive income;
the statement of financial position;
the statement of changes in equity; and
the related notes 1 to 20, including a summary of significant accounting policies set out in note 1.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 “Reduced Disclosure Framework” (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 are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which indicates that an event of default has been triggered under the Common Terms Agreement to the company’s loans related to the thresholds for service failure points incurred by the facilities management contractor post year end. As stated in note 1, these events or conditions, along with other matters as set forth in note 1 to the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the 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.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
- 6 -
Other information
The other information comprises the information included in the directors’ report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the directors’ report. 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.
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.
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.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
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.
We considered the nature of the company’s industry and its control environment, and reviewed the company’s documentation of their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management about their own identification and assessment of the risks of irregularities.
We obtained an understanding of the legal and regulatory framework that the company operates in, and identified the key laws and regulations that:
had a direct effect on the determination of material amounts and disclosures in the financial statements. These included UK Companies Act and tax legislation; and
do not have a direct effect on the financial statements but compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty. These included the Health and Safety Act (1974)
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
- 7 -
We discussed among the audit engagement team regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements.
As a result of performing the above, we identified the greatest potential for fraud in the following areas, and our specific procedures performed to address it are described below:
The risk is that revenue is not appropriately recognised in accordance with IFRS 9 and IFRIC 12, particularly the split of revenue between capital, interest and service elements. This relates to the accuracy and classification assertions. The procedures performed were to test the revenue recognised during the construction phase and capitalised in the financial asset to ensure that it represents valid project costs. A recalculation of the finance income using the IRR calculated by the financial model was completed and monthly unitary payment invoices were traced to bank. The split of unitary payments between capital, interest and service elements was also tested in order to ensure that it was appropriate.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
enquiring of management concerning actual and potential litigation and claims, and instances of non-compliance with laws and regulations; and
reading minutes of meetings of those charged with governance.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors’ report has 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 any material misstatements in the directors’ report.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion:
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
the company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to take advantage of the small companies’ exemptions in preparing the directors’ report and from the requirement to prepare a strategic report.
We have nothing to report in respect of these matters.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
- 8 -
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.
Gareth Martin (Senior statutory auditor)
For and on behalf of Deloitte NI Limited
Statutory Auditor
Belfast
Date: 8 May 2024
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
Notes
£'000
£'000
Revenue
3
5,857
5,853
Cost of sales
(3,740)
(2,911)
Gross profit
2,117
2,942
Administrative expenses
(1,847)
(780)
Operating profit
4
270
2,162
Finance income
6
10,518
10,776
Finance costs
7
(13,609)
(13,068)
Loss before taxation
(2,821)
(130)
Income tax income/(expense)
8
25
(675)
Loss for the year
17
(2,796)
(805)
The income statement has been prepared on the basis that all operations are continuing operations.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 10 -
2022
2021
£'000
£'000
Loss for the year
(2,796)
(805)
Other comprehensive income:
Items that may be reclassified to profit or loss
Cash flow hedges:
Hedging gain/(loss) arising in the year
32,308
(6,083)
Tax relating to items that may be reclassified
(8,077)
7,950
Other comprehensive income for the year, net of income tax
24,231
1,867
Total comprehensive income for the year
21,435
1,062
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 2022
- 11 -
2022
2021
Notes
£'000
£'000
Non-current assets
Trade and other receivables
10
143,077
150,262
Deferred tax
14
13,536
21,589
156,613
171,851
Current assets
Trade and other receivables
10
5,891
2,671
Cash and cash equivalents
22,448
26,739
28,339
29,410
Current liabilities
Trade and other payables
13
27,414
28,350
Borrowings
11
4,255
4,499
31,669
32,849
Net current liabilities
(3,330)
(3,439)
Non-current liabilities
Borrowings
11
142,547
146,802
Financial instruments
13
54,144
86,453
196,691
233,255
Net liabilities
(43,408)
(64,843)
Equity
Called up share capital
15
1
1
Hedging reserve
16
(40,608)
(64,839)
Retained earnings
17
(2,801)
(5)
Total equity
(43,408)
(64,843)
The financial statements were approved by the board of directors and authorised for issue on 7 May 2024 and are signed on its behalf by:
M Templeton
Director
Company registration number NI072130 (Northern Ireland)
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
Share capital
Hedging reserve
Retained earnings
Total
£'000
£'000
£'000
£'000
Balance at 1 January 2021
1
(66,706)
800
(65,905)
Year ended 31 December 2021:
Loss for the year
-
-
(805)
(805)
Other comprehensive income:
Profit on hedging instruments
-
1,867
-
1,867
Total comprehensive income for the year
-
1,867
(805)
1,062
Balance at 31 December 2021
1
(64,839)
(5)
(64,843)
Year ended 31 December 2022:
Loss for the year
-
-
(2,796)
(2,796)
Other comprehensive income:
Profit on hedging instruments
-
24,231
-
24,231
Total comprehensive income for the year
-
24,231
(2,796)
21,435
Balance at 31 December 2022
1
(40,608)
(2,801)
(43,408)
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
1
Accounting policies
Company information
NIHG South West Health Partnership Limited is a wholly owned subsidiary of NIHG Limited which in turn is owned by three stakeholders: PFI 2005 Limited, Ashover Project Investments Limited and Coral Project Investments (Assetco) Limited. NIHG South West Health Partnership Limited financed, built, and is now operating a 300-bed hospital in Enniskillen. Funding was provided by the European Investment Bank, Barclays Bank, Bank of Ireland, and Norddeutsche Landesbank Girozentrale. The project is the region's first acute hospital funded through the PFI, with construction completed in May 2012.
The Company is incorporated in the United Kingdom under the Companies Act 2006 and registered in Northern Ireland. The address of the registered office is given within Company Information. The nature of the company's operations and its principal activities are set out in the director's report on pages 1 to 3.
PFI 2005 Limited, Coral Project Investments (Assetco) Limited and Ashover Project Investments Limited are each owned by a fund which is managed by Dalmore Capital Limited. However, as no individual entity owns more than 25% of any of those funds, the directors do not consider any particular entity to be the ultimate controlling party.
1.1
Basis of preparation
The financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the FRC. Accordingly, in the year ended 31 December 2022 the Company has undergone transition from reporting under UK adopted international accounting standards to FRS 101 as issued by the FRC. These financial statements are prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. The implementation date was 1 January 2021 and the transition has not resulted in any adjustments to the loss for the year or total comprehensive income for the year ended 31 December 2021 or net liabilities as at 1 January 2021 or 31 December 2021.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £'000.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
The principal accounting policies and measurement bases used by the Company in preparing its financial statements were as follows:
As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS:
inclusion of an explicit and unreserved statement of compliance with IFRS;
presentation of a statement of cash flows and related notes;
disclosure of the objectives, policies and processes for managing capital;
disclosure of the categories of financial instrument and the nature and extent of risks arising on these financial instruments;
the effect of financial instruments on the statement of comprehensive income;
comparative period reconciliations for the number of shares outstanding and the carrying amounts of property, plant and equipment, intangible assets, investment property and biological assets;
a reconciliation of the number and weighted average exercise prices of share options, how the fair value of share-based payments was determined and their effect on profit or loss and the financial position;
comparative narrative information;
for financial instruments, investment property and biological assets measured at fair value and within the scope of IFRS 13, the valuation techniques and inputs used to measure fair value, the effect of fair value measurements with significant unobservable inputs on the result for the period and the impact of credit risk on the fair value; and
Where required, equivalent disclosures are given in the group accounts of NIHG Limited. The group accounts of NIHG Limited are available to the public and can be obtained as disclosed within note 20.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
1.2
Going concern
The Company currently has £1true46,802,000 (2021: £151,301,000) of total debt. The Company's forecasts and projections, taking account of reasonably possible changes in trading performance, show that it should be able to operate within the level of its current facilities for at least the next twelve months from the date of these Financial Statements.
The Company's revenues have largely been in line with expectations, with very few deductions applied for non-availability of the assets. Any such deductions are generally passed down to the subcontractors so there is usually no direct financial consequence to the company. Sustained non-availability can lead to contract termination however the Company has not reached such termination trigger points.
The Company's forecasts and projections, taking in to account these factors and reasonably possible changes in trading performance, show that it should be able to operate within the level of its current facilities.
The Company has considerable financial resources together with long-term contracts with the South Western Health and Social Care Trust. As a consequence, the directors believe that the Company is well placed to manage its business risks successfully.
During the year ended December 2022 and since this date there have been a number of issues in respect of service failure points accrued under the payment mechanism provisions in the Company's agreement with the South Western Health and Social Care Trust which breach certain thresholds within the Company's lending agreements. The Trust and the directors are working towards agreements to reduce the risk to the Company and the lenders have confirmed that there is no intention to terminate the loan agreements.
The directors have specifically considered the matters above in respect of the Events of Default under the terms of the Common Term Agreement. The directors are working on finding a resolution to the Events of Default under the Common Term Agreement. Any waiver of the Events of Default or variation to the terms of the Common Terms Agreement are subject to approval by the lenders. The directors confirm that they do not intend to liquidate the company or cease trading as they consider they have realistic alternatives to doing so. The company is in a net liability position due to the inclusion of the hedge reserve on the statement of financial position and this will unwind completely over the term of the hedge.
The directors consider that despite the Events of Default attached to the existing financing the Company can maintain sufficient liquidity over the next 12 months, and that it is accordingly appropriate to adopt a going concern basis for the preparation of these financial statements. The directors acknowledge that the non waiver of the Events of Default indicates the existence of a material uncertainty, which may cast significant doubt on the company's ability to continue as a going concern.
After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for at least the next twelve months from the date of signing of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the annual report and Financial Statements.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
1.3
Adoption of new and revised standards
Amendments to IFRSs and the new Interpretation that are mandatorily effective for the current year.
The Company has adopted the following standards, amendments and interpretations which have not had a significant impact on the Company's results:
Amendments to IAS 16 Property, Plant and Equipment — Proceeds before Intended Use
Annual Improvements to IFRS Standards 2018–2020 (May 2020) Annual Improvements to IFRS Standards 2018–2020 (May 2020)
Amendments to IFRS 3 (May 2020) Reference to the Conceptual Framework
Amendments to IAS 37 (May 2020) Onerous Contracts - Cost of Fulfilling a Contract
There is no impact to the company's results with the adoption of the new standards.
1.4
Revenue
PFI projects are accounted for as set out below. The Company has interpreted the provisions of IFRS 15 and IFRIC 12 in determining the appropriate treatment of the principal assets of, and income streams from, PFI and similar contracts. Where it can be demonstrated that the residual interest in the project is not held by the company and where there is a contractual right to receive cash or other financial assets in return for financing, building, and operating the project, the asset created and / or provided under the contract is classified as and accounted for as a financial asset, otherwise it is accounted for as property, plant and equipment. As a consequence, revenues are recognised as follows:
Financial asset projects:
Construction phase - Revenue is recognised based on the certified value of work completed in the period; and Availability phase - Income is allocated between revenue and interest receivable using a constant operating margin on service costs and taking account of the project specific financial income.
Additional third party revenues arising are recognised in accordance with the contractual terms as services are performed.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
Major maintenance
For financial asset accounted projects, the cost of major maintenance is recorded in cost of sales and an appropriate amount of revenue that would otherwise have been available to amortise the financial asset is transferred to revenue. This has the effect of increasing the financial asset by the cost of major maintenance.
PFI bid costs are capitalised only at such time as the company is virtually certain that it will recover the costs. Virtual certainty is generally achieved when an agreement is in place demonstrating that costs are fully recoverable even in the event of cancellation of the project. From the point of virtual certainty, bid costs are capitalised in the balance sheet as a PFI financial asset prior to achieving financial close.
Deferred income is released to the income statement in respect of projects using financial asset accounting, over the period of construction during which the financial asset is established.
Revenue and expenses are recognised on an accrual basis, i.e. when the actual flow of the related goods and services occurs, regardless of when the resulting monetary or financial flow arises. Revenue is measured at the fair value of the consideration received, net of discounts and taxes.
Revenue from sales is recognised when the control of the goods sold has been transferred to the buyer, and the Company neither continues to manage the goods nor retains effective control over them.
Revenue from the rendering of services is recognised by reference to the stage of completion of the transaction at the end of the reporting period, provided the outcome of the transaction can be estimated reliably.
Interest income from financial assets is recognised using the effective interest method and dividend income is recognised when the shareholder's right to receive payment has been established. Interest and dividends from financial assets accrued after the date of acquisition are recognised as income.
1.5
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair value.
1.6
Financial assets
Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.
At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.
Financial assets held at amortised cost
Financial instruments are classified as financial assets measured at amortised cost where the objective is to hold these assets in order to collect contractual cash flows, and the contractual cash flows are solely payments of principal and interest. They arise principally from the provision of goods and services to customers (eg trade receivables). They are initially recognised at fair value plus transaction costs directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment where necessary.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 18 -
Impairment of financial assets
The Company recognises a loss allowance for expected credit losses (ECL) on investments in debt instruments that are measured at amortised cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Company always recognises lifetime ECL for trade receivables, contract assets and lease receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets' gross carrying amount at the reporting date; for financial guarantee contracts, the exposure includes the amount drawn down as at the reporting date, together with any additional amounts expected to be drawn down in the future by default date determined based on historical trend, the Company's understanding of the specific future financing needs of the debtors, and other relevant forward-looking information.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate. For a lease receivable, the cash flows used for determining the expected credit losses is consistent with the cash flows used in measuring the lease receivable in accordance with IFRS 16 Leases.
The Company recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognised in other comprehensive income and accumulated in the investment revaluation reserve, and does not reduce the carrying amount of the financial asset in the statement of financial position.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
1.7
Financial liabilities
The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
Other financial liabilities
Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 19 -
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
1.8
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.9
Hedge accounting
The Company designates its derivatives as hedging instruments in respect of interest rate risk in fair value hedges, cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements:
there is an economic relationship between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Company actually hedges and the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Company adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
1.10
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'other gains and losses' line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect other comprehensive income. Furthermore, if the Company expects that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.
The Company discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge reserve is reclassified immediately to profit or loss.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 20 -
1.11
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.12
Fair value estimation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The fair values of derivatives as at the balance sheet date are obtained from the banks or financial institutions with which the derivatives have been transacted. Where these are not available the fair value of the derivative is calculated as the present value of the estimated future cash flows. In these calculations the market forward six month LIBOR curve for an interest rate swap or the forward RPI inflation curve for an inflation swap as at the balance sheet date are used. All amounts are discounted using the zero coupon yield curve as at the balance sheet date.
1.13
Related party transactions
The Company performs all its transactions with related parties on an arm's length basis.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 21 -
1.14
Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they are incurred.
2
Critical accounting estimates and judgements
In the application of the Company's accounting policies, which are described above, 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 period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
There are no critical judgements that the directors have made in the process of applying the Company's accounting policies or that have a significant effect on the amounts recognised in financial statements.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Fair value of derivative financial instruments
The company carries its derivative financial instruments in its statement of financial position at fair value. No market prices are available for these instruments and consequently the fair values are derived using financial models developed by a third party that is independent of the company but use observable market data in respect of interest rates as an input to valuing those derivative financial instruments. Analysis of derivative financial instruments can be found within the group accounts of NIHG Limited.
3
Revenue
2022
2021
£'000
£'000
Revenue from contracts with customers
Revenue from PFI contracts
5,857
5,853
The company operates exclusively within the United Kingdom.
4
Operating profit
2022
2021
Operating profit for the year is stated after charging:
£'000
£'000
Fees payable to the company's auditor for the audit of the company's financial statements
37
42
Tax compliance services
4
4
All audit fees for the Group are borne by the Company. The Group comprises this Company and its parent, NIHG Limited.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
5
Employees and directors
2022
2021
£'000
£'000
Recharges in respect of non-executive directors' services
173
159
The company had no employees during the year (2021: Nil). The directors have no contract of services with the company.
6
Finance income
2022
2021
£'000
£'000
Finance income
Finance income PFI receivable
10,518
10,776
7
Finance costs
2022
2021
£'000
£'000
Interest on bank loans
8,004
8,242
Interest on loan notes
5,605
4,826
Total interest expense
13,609
13,068
8
Income tax expense
2022
2021
£'000
£'000
Current tax
UK corporation tax on profits for the current period
224
Deferred tax
Origination and reversal of temporary differences
(25)
451
Total tax charge/(credit)
(25)
675
Corporation tax will remain at 19% until March 2023. From 1 April 2023, the main rate will increase to 25% for business profits made by the company over £250,000. A small profit rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate. The company has assessed the impact of this change and consider that the full rate of 25% will apply.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
8
Income tax expense
(Continued)
- 23 -
The charge for the year can be reconciled to the loss per the income statement as follows:
2022
2021
£'000
£'000
Loss before taxation
(2,821)
(130)
Expected tax credit based on a corporation tax rate of 19.00% (2021: 19.00%)
(536)
(25)
Tax relating to loan relationships
536
249
Adjustments in respect of prior years
(25)
451
Total tax charge
(25)
675
9
Credit risk
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the company's maximum exposure to credit risk. At the year end, there were no expected credit losses to the end of the concession (2021: £nil).
The company does not hold any collateral or other credit enhancements to cover this credit risk.
10
Trade and other receivables
Current
Non-current
2022
2021
2022
2021
£'000
£'000
£'000
£'000
Trade receivables
614
698
-
-
Finance debtor
4,803
1,235
143,077
150,262
Other receivables
425
335
-
-
Prepayments
49
403
-
-
5,891
2,671
143,077
150,262
The average credit period taken on sales of goods and services is 32 days (2021: 32 days). No interest is charged on the receivables.
Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the reporting date but against which the Company has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and are still considered recoverable.
Ageing of trade receivables not impaired but before allowance for doubtful debts:
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
10
Trade and other receivables
(Continued)
- 24 -
2022
2021
£'000
£'000
0-30 days
5
9
31-60 days
28
9
61-90 days
2
-
91+ days
787
743
822
761
Movement in the period for doubtful debts
2022
2021
£'000
£'000
Balance at the beginning of the period
253
253
Impairment losses recognised
(45)
-
208
253
Ageing of impaired trade receivables:
2022
2021
£'000
£'000
31-60 days
-
-
61-90 days
-
-
91+ days
208
253
208
253
The directors consider that the carrying amount of the trade and other receivables is approximately equal to their fair value.
11
Borrowings
Current
Non-current
2022
2021
2022
2021
£'000
£'000
£'000
£'000
Borrowings held at amortised cost:
Bank loans
4,255
4,499
123,496
127,751
Loans from parent undertaking
-
-
19,051
19,051
4,255
4,499
142,547
146,802
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
11
Borrowings
(Continued)
- 25 -
1 year or less
1-2 years
2-5 years
5+ years
Total
£'000
£'000
£'000
£'000
£'000
At 31 December 2021
Bank loan
4,499
4,255
10,934
112,562
132,250
Loan notes
-
-
-
19,051
19,051
4,499
4,255
10,934
131,613
151,301
At 31 December 2022
Bank loan
4,255
3,718
9,290
110,488
127,751
Loan notes
-
-
-
19,051
19,051
4,255
3,718
9,290
129,539
146,802
Amount
Carrying
Amount
Carrying
Utilised
Value
Utilised
Value
Facility
2022
2022
2021
2021
£'000
£'000
£'000
£'000
£'000
Loan notes
29,036
19,051
19,051
19,051
19,051
Bank loans
247,230
127,751
127,751
132,250
132,250
276,266
108,700
108,700
151,301
151,301
Analysed:
Current
4,255
Non-current
142,547
146,802
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
11
Borrowings
(Continued)
- 26 -
The first bank loan is from European Investment Bank and was agreed on 19 May 2009. It was drawn down during the Construction Phase between May 2009 and May 2012. It is repayable in unequal quarterly instalments having commenced on 31 May 2012 and ending on 31 March 2039. The Company hedges the loan for interest rate risk via an interest rate swap exchanging the variable rate interest for fixed rate interest. The outstanding balance is adjusted for the fair value movement in the hedged risk, being movements in the 6 months' LIBOR rate.
Interest on the bank loan is charged at 1.4% above LIBOR
The second bank loan is from the senior lenders and was agreed on 19 May 2009. It was drawn down during the Construction Phase between May 2009 and May 2012. It commenced on 31 May 2012, ending on 31 March 2039.
Interest on the bank loan is charged at 2.20% above LIBOR.
The unsecured loan notes represent amounts borrowed under the loan note agreements with the shareholders. The loan notes bear interest at a rate of 12.019% per annum. Unpaid interest bears interest at a rate of 14.019% per annum.
The weighted average interest rates paid during the year were as follows:
2022
2021
%
%
Bank loans
6.19
6.19
Unsecured loan notes
13.78
13.84
12
Financial instruments
Derivatives that are designated and effective as hedging instruments carried at fair value.
At the balance sheet date, the interest rate profile of the company's interest-bearing financial instruments was:
2022
2021
£'000
£'000
Interest rate swap
6,188
46,043
Inflation rate swap
47,956
40,410
54,144
86,453
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 27 -
13
Trade and other payables
Current
Non-current
2022
2021
2022
2021
£'000
£'000
£'000
£'000
Trade payables
479
589
Accruals
26,172
26,976
Corporation tax
149
224
Social security and other taxation
614
561
Interest rate swap liability
-
-
6,188
46,043
RPI swap liability
47,956
40,410
27,414
28,350
54,144
86,453
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 52 days (2021: 32 days). For most suppliers no interest is charged on the trade payables for the first 60 days from the date of the invoice. Thereafter, interest is charged on the outstanding balances at various interest rates. The company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
The directors consider that the carrying amount of trade payables approximates to their fair value.
14
Deferred tax
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
Tax losses
Effective derivative hedges
Total
£'000
£'000
£'000
Asset at 1 January 2021
427
13,663
14,090
Deferred tax movements in prior year
Charge/(credit) to profit or loss
(451)
-
(451)
Charge/(credit) to other comprehensive income
-
7,950
7,950
Balance at 1 January 2022
(24)
21,613
21,589
Deferred tax movements in current year
Charge/(credit) to profit or loss
24
-
24
Charge/(credit) to other comprehensive income
-
(8,077)
(8,077)
Balance at 31 December 2022
-
13,536
13,536
Movement in effective derivative hedges is shown as tax relating to items that may be reclassified within statement of comprehensive income.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 28 -
15
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£'000
£'000
Allotted, issued and fully paid
Ordinary shares of £1 each
1,000
1,000
1,000
1,000
16
Hedging reserve
2022
2021
£'000
£'000
At the beginning of the year
(64,839)
(66,706)
Gains on cash flow hedges
24,231
1,867
At the end of the year
(40,608)
(64,839)
17
Retained earnings
Retained earnings represents the cumulative profit and loss net of distributions to owners.
18
Events after the reporting date
During the year ended December 2022 and since this date there have been a number of issues in respect of service failure points accrued under the payment mechanism provisions in the Group's agreement with the South Western Health and Social Care Trust which breach certain thresholds within the Group's lending agreements. The Trust and the Directors are working towards agreements to reduce the risk to the Group and the lenders have confirmed that there is no intention to terminate the loan agreements.
19
Related party transactions
Directors' transactions
There were no transactions with any of the company's directors. A payment was made for the services of the non- executive directors to their employers. The charge in the year was £173k (2021: £163k).
2022
2021
Loans from related parties
£'000
£'000
Loans from NIHG Limited
19,051
19,051
Amounts repayable to NIHG Limited of £18,981k (2021: £19,051k) carry interest of 12.019% (2021: 12.019%) per annum charged on the outstanding loan balances (see note 14). Interest of £21,384k (2021: £22,793k) in respect of the loan notes was accrued at the year end. Unpaid interest bears interest at a rate to date of 14.019% per annum.
NIHG SOUTH WEST HEALTH PARTNERSHIP LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 29 -
20
Controlling party
The Company's parent is NIHG Limited. NIHG Limited is incorporated in the United Kingdom and registered in Northern Ireland and copies of its financial statements, which are those of the smallest and largest group for which group financial statements are drawn up and of which the reporting entity is a member, are available from its registered office at Marlborough House, 30 Victoria Street, Belfast, BT1 3GG.
The Company deems its investors in its parent company to be related parties in accordance with IAS 24 Related Party Disclosures as they exercise joint control over the Company through the parent company. Transactions between the company and its related parties are disclosed below.
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