TIDM87FW
RNS Number : 7091A
Knightstone Capital PLC
30 September 2015
KNIGHTSTONE CAPITAL PLC
Financial Statements
Year ended 31 March 2015
Directors, Advisers and
Bankers 1
Strategic Report 2
Report of the Directors 4
Independent Auditor's Report
to the Members 6
Profit and Loss Account 8
Balance Sheet 9
Notes to the Financial
Statements 10
Directors
The directors who have served during the year are:
Graham Watts (Director and Chair from 11 September 2014)
Duncan Brown
Nick Horne
Richard Taylor
Stewart Wright (Director and Chair to 11 September 2014)
Secretary
Charlotte Ferris
Auditor
Mazars LLP
45 Church Street
Birmingham
B3 2RT
Bankers
Barclays Bank Plc
The Bank of New York Mellon
Registered Office
Knightstone Housing
Weston Gateway Business Park
Weston-super-Mare
BS24 7JP
The Directors present their reports and audited financial
statements for Knightstone Capital PLC ("the Company") for the year
ended 31 March 2015. The Company is a member of the Knightstone
Housing Group.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
Knightstone Capital Plc was incorporated in September 2013 and
issued its first bond on the London Stock Exchange on 2 October
2013. The bond was a GBP100m 35 year fixed rate bond priced at a
credit spread of 140 basis points above the benchmark gilt rate. It
has an extended deferral of drawdown. The initial GBP1m was drawn
at the date of issue and a further GBP49m will be received in
November 2017 with Knightstone Capital PLC retaining GBP50m of the
bonds to sell to investors in the future. There is an annual coupon
of 5.058% from issue until 30 November 2017 and 5.576% thereafter.
The bond was issued at par.
The profit and loss account shows a result of Nil for the year
(2014: Nil). This is in line with the Company's role as a special
purpose lending vehicle which does not seek to generate significant
financial returns.
Knightstone Capital Plc benefits from the Group's Treasury
service with policies and procedures approved by the Boards of
Knightstone Housing Group Limited and Knightstone Housing
Association Limited. These cover funding, interest rate exposures,
cash management and the investment of surplus cash.
PRINCIPAL RISKS AND UNCERTANTIES
Knightstone Capital Plc on-lends all of its proceeds from
capital market transactions to its parent company, Knightstone
Housing Association Limited. Where capital markets funding has been
on-lent, the underlying assets of the issuance belong to
Knightstone Housing Association Limited.
As Knightstone Capital Plc is not obliged to provide incremental
funding to other Group asset owning subsidiaries, Knightstone
Capital Plc is not at risk if it cannot obtain further funding for
the Knightstone Housing Group. All of Knightstone Capital Plc's
costs relating to providing funding services are met by Knightstone
Housing Association Limited.
FINANCIAL PERFORMANCE
The Company is a special purpose lending vehicle and does not
seek to generate significant financial returns. The Company makes
neither a profit nor a loss in line with its role as a special
purpose lending vehicle. The Company therefore does not have
financial key performance indicators.
FINANCIAL RISK MANAGEMENT
Risk Management Objectives and Policies
Knightstone Housing Group's finance function is responsible for
treasury management activities and control of associated risks. Its
activities are governed by the Treasury Management Policy, approved
by the Board of the Group's parent company, Knightstone Housing
Group Limited, which is ultimately responsible for treasury issues
in all of Knightstone Housing Group's legal entities, which include
the Company. The Group finance function does not operate as a
profit centre.
The Company has in place a risk management programme that seeks
to limit the adverse effects on the financial performance of the
Company by monitoring levels of debt finance and related finance
costs.
Interest Rate Risk/Hedging
The Company currently borrows funds on a fixed rate basis from
the capital markets and will, in future, on-lend these funds to its
immediate parent company, Knightstone Housing Association Limited
on the same fixed rate basis. As such, the Company does not bear
any exposure to interest rate risk. The Company does not undertake
any hedging activities and it does not have any derivatives.
Liquidity Risk
The Company mitigates its liquidity risk in relation to
principal repayments and coupon payments by lending proceeds of
capital market issues on the same repayment terms to the finance
instrument issued.
Credit Risk
All of the Company's capital markets financing proceeds are
available to be on-lent to Knightstone Housing Association Limited,
which represents the only credit risk to the Company. This credit
risk is mitigated through a number of factors, including the
housing asset security which stands behind the loan, the overall
Homes and Communities Agency assessment of the Group's financial
viability and the contractual protection of the loan agreement
between the Company and Knightstone Housing Association Limited.
The Company is not obliged to source further funding from the
capital markets for on-lending to Knightstone Housing Association
Limited.
The Strategic Report was approved on 16 July 2015 and signed on
its behalf by
Richard Taylor
Director
The directors present their report and audited financial
statements for Knightstone Capital Plc for the year ended 31 March
2015. Knightstone Capital Plc is a member of Knightstone Housing
Group.
OVERVIEW AND PRINCIPAL ACTIVITY
Knightstone Capital Plc is a wholly owned subsidiary of
Knightstone Housing Association Limited which is an asset owning
company within the Knightstone Housing Group (the "Group"). The
objective of Knightstone Capital Plc is to source funding on behalf
of Knightstone Housing Association Limited directly from the
capital markets and on-lend the proceeds to Knightstone Housing
Association Limited.
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Strategic
Report, the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law 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).
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;
-- 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
have a general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
DIRECTORS
The directors who served during the period as shown on page 1
were
Duncan Brown
Nick Horne
Richard Taylor
Graham Watts (Director and Chair from 11 September 2014)
Stewart Wright (Director and Chair to 11 September 2014)
DIRECTORS' INDEMITY
The Company's Articles of Association provide, subject to the
provisions of the UK legislation, an indemnity for directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company.
Appropriate directors' and officers' liability insurance cover
is in place in respect of all of the Company's directors.
MATTERS INCLUDED WITHIN THE STRATEGIC REPORT
In accordance with section 414c (11) future developments,
financial risk management and consideration of exposure to risk are
included within the strategic report.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
Each of the directors at the date of approval of this report has
confirmed that:
-- So far as the director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
-- The director has taken all the steps that he ought to have
taken as a director to make himself aware of any information needed
by the Company's auditor in connection with preparing their report
and to establish that the Company's auditor is aware of that
information.
Auditor
Mazars LLP is auditor to the Company and all other companies in
the Knightstone Housing Group including the Company's immediate
parent, Knightstone Housing Association Limited.
The Report of the Directors' was approved on 16 July 2015 and
signed on its behalf by
Richard Taylor
Director
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We have audited the financial statements of Knightstone Capital
Plc for the year ended 31 March 2015 which comprise the Profit and
Loss Account, the Balance Sheet and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting
Practice).
Respective responsibilities of the directors and auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 4, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors. 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.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council's website at www.
frc.org.uk/auditscopeukprivate.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 March 2015 and of its result for the period then
ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on the other matters prescribed by the Companies Act
2006
In our opinion the information given in the Strategic Report and
Report of the Directors for the financial period for which the
financial statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the 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.
Stephen Eames (Senior Statutory Auditor)
For and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
45 Church Street
Birmingham
West Midlands
B3 2RT
Date:
Notes 2015 2014
GBP GBP
Turnover 19,802 -
------------ ------------
Administrative costs (8,100) -
------------ ------------
Operating costs (8,100) -
------------ ------------
Operating profit / (loss) 2 11,702 -
Interest receivable and similar
income 5 50,580 25,151
Interest payable and similar
charges 6 (50,580) (25,151)
------------ ------------
Profit / (Loss) before taxation 11,702 -
Tax on profit / (loss) on 7 - -
ordinary activities
------------ ------------
Profit / (Loss) for the period 11,702 -
The results included in the profit and loss account relate
wholly to continuing activities.
There are no recognised gains and losses other than those
reported above, accordingly no statement of total recognised gains
and losses has been prepared.
Notes 2015 2014
GBP GBP
Current Assets
Debtors due within one year 8 62,651 122,500
Short term investment 9 - 1,000,000
Cash at bank 12,500 12,500
---------- ----------
75,151 1,135,000
Creditors: Amounts falling due
within one year 10 (25,151) (85,000)
---------- ----------
Net current assets 50,000 1,050,000
Debtors: Amounts falling due
after more than one year 8 1,000,000 -
Creditors: Amounts falling due
after more than one year 11 (1,000,000) (1,000,000)
---------- ----------
Net assets 50,000 50,000
Share capital and reserves
Called up share capital 12 50,000 50,000
Profit and loss account 13 - -
---------- ----------
50,000 50,000
These financial statements were approved by the Board of
directors on 15 July 2015 and signed on its behalf by:
Graham Watts Charlotte Ferris
Chair Secretary
1 ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
the Companies Act 2006 and applicable accounting standards. At the
date of these financial statements the directors have carried out a
detailed and comprehensive review of the business and its future
prospects. In the opinion of the directors, the Company is expected
to be able to continue trading within the current arrangements and
consequently the financial statements are presented on the going
concern basis.
A summary of all material accounting policies, which have been
consistently applied, are set out below:
(a) Basis of preparation
The financial statements have been prepared under the historical
cost convention. The Company has adopted FRS 26 Financial
Instruments Measurement and FRS 29 Financial Instruments
Disclosures.
(b) Cash flow statement
Under FRS 1 Financial Reporting Standard No 1 (Revised), the
Company is exempt from the requirement to prepare a cash flow
statement on the grounds that it is a wholly owned subsidiary
undertaking and its cash flows appear in a consolidated cash flow
statement in the publically available financial statements of the
ultimate parent undertaking, Knightstone Housing Group Limited.
(c) Financial assets
Financial assets are defined as cash or any asset that is a
contractual right to receive cash or another financial asset from
another entity, or a contractual right to exchange financial
instruments with another entity under conditions that are
potentially favourable, or an equity instrument of another entity.
The only category of financial asset held by the Company is loans
and receivables.
Loans and receivables are assets with fixed or determinable
payments that are not quoted on an active market, other than those
that are categorised as financial assets at fair value through
profit or loss. These are initially recognised at fair value plus
transaction costs. At each balance sheet date they are subsequently
measured at amortised cost, with interest income recognised in
profit or loss using the effective interest method. Examples of
loans and receivables include amounts on-lent to Group
entities.
(d) Financial liabilities
Financial liabilities are defined as any liability that is a
contractual obligation to deliver cash or another financial asset
to another entity, or to exchange financial instruments with
another entity under conditions that are potentially unfavourable.
Financial liabilities held by the Company include issued debt.
Interest charges are recognised in profit or loss using the
effective interest method. The only category of financial liability
held by the Company is those measured at amortised cost using the
effective interest method.
In the case of issued debt due in more than one year, the fair
value of financial liabilities is estimated by discounting the
future contractual cash flows at the current market interest rate
available to the Company for similar financial instruments.
(e) Segmental Information
The Company has one class of business from which it derives its
income, being to provide funding to its immediate parent company,
Knightstone Housing Association Limited. All interest income,
expenditure and net assets are derived from UK operation.
(f) Taxation
The charge for taxation is based on the profit for the year and
takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting
purposes.
(g) Bond issue costs
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The Company has a contractual agreement in place with
Knightstone Housing Association Limited to meet any costs
associated with issuing bonds. Issue costs are therefore not
recognised as a deduction to the carrying amount of the debt
financial instruments where they are not incurred by the
Company.
2 OPERATING PROFIT
During the year, the Company recharged interest paid on loans to
Knightstone Housing Association Limited to whom the proceeds of the
capital markets issue have been on-lent. Consequently during the
period the Company made neither a profit nor a loss.
Audit fees for the Company are paid for by the ultimate parent
company, Knightstone Housing Group Limited and disclosed within its
consolidated accounts. The proportion of the audit fee attributable
to the Company is GBP5k (2014 GBP5k). Non audit fees amounted to
Nil (2014 GBP50k exc. VAT). The 2014 fees related to the non-audit
work that is typically required with a bond issue including giving
comfort to potential investors as to the Group's post-audited
financial position.
3 EMPLOYEES
The Company does not have any employees. All employees acting on
behalf of the Company are employed by Knightstone Housing Group
Limited or Knightstone Housing Association Limited, whose costs are
disclosed in those financial statements.
4 BOARD OF DIRECTORS' REMUNERATION
The directors of Knightstone Capital Plc are employed and
remunerated by Knightstone Housing Group Limited. Full accounting
disclosures on directors' remuneration are therefore included
within the Group accounts
2015 2014
GBP GBP
5 INTEREST RECEIVABLE
AND SIMILAR INCOME
Interest receivable from
Group undertakings 50,580 25,151
---------- ----------
50,580 25,151
2015 2014
GBP GBP
6 INTEREST PAYABLE AND
SIMILAR CHARGES
Interest payable to bond
holders 50,580 25,151
---------- ----------
50,580 25,151
2015 2014
GBP GBP
7 TAXATION
Tax charge for the year - -
During the current year
and previous year there
was no taxable profit
2015 2014
GBP GBP
8 DEBTORS
Amounts falling due within
one year
Amounts due from Group
undertakings 25,151 85,000
Unpaid share capital (note
11) 37,500 37,500
---------- ----------
62,651 122,500
Amounts falling due after
more than one year
Amounts due from Group 1,000,000 -
undertakings
---------- ----------
1,000,000 -
Repayment of the on lent funds is at a fixed amount in line with
the terms of the agreement. The relevant FRS 29 disclosures have
been disclosed within the Strategic Report and the Report of the
Directors on pages 2 and 4 respectively.
As the terms of the on-lending agreement underlying the
intra-group debtor mirror those of the Company's bond liability
shown under Creditors (note 11), the fair value of the GBP1 million
debtor is estimated as GBP1.4 million. The basis of the estimation
is shown in note 11.
2015 2014
GBP GBP
9 SHORT TERM INVESTMENT
Interest bearing short term
bank deposits (available
on charging security for
the loan) - 1,000,000
---------- ----------
- 1,000,000
2015 2014
GBP GBP
10 CREDITORS: amounts falling
due within one year
Deferred income - 59,849
Interest to bond holders 25,151 25,151
---------- ----------
25,151 85,000
During the previous period ended 31 March 2014, Knightstone
Capital plc charged a management fee of GBP85,000 to Knightstone
Housing Association Limited. The fee was to recognise management
costs associated with the operation of the bond and interest costs
incurred by Knightstone Capital plc until the bond proceeds were
on-lent to Knightstone Housing Association Limited. As the proceeds
were on-lent in January 2015, Nil (2014: GBP59,849) fee has been
deferred into 2016.
2015 2014
GBP GBP
11 CREDITORS: amounts falling
due after more than one
year
Issue 2/10/13-5.058% (step
up) Secured Bonds (semi-annual
coupon) 1,000,000 1,000,000
---------- ----------
1,000,000 1,000,000
On 2 October 2013, Knightstone Capital Plc issued a GBP100
million 35 year fixed rate bond with an annual coupon of 5.058%
from issue until 30 November 2017 and 5.576% thereafter. Of the
total issue, GBP50 million has been retained on behalf of the
issuer and no interest is due on the retained element of the issue.
GBP50 million is therefore repayable on 1 October 2048. The initial
GBP1m was drawn at the date of issue and a further GBP49m will be
received in November 2017 with
Knightstone Capital plc retaining GBP50m of the bonds to sell to
investors in the future. The bond was issued at par.
Knightstone Capital Plc can on-lend all of its proceeds from
capital market transactions to its immediate parent, Knightstone
Housing Association Limited. The underlying assets of this issuance
therefore belong to Knightstone Housing Association Limited which
are held through a security trust arrangement with the Prudential
Trustee Company Limited.
The drawn elements of the bond will be secured by fixed charges
over property security of Knightstone Housing Association Limited
at their Market Value as defined by VS 3.2 of the RICS Valuation -
Professional Standards 2012.
No collateral has been called in the period.
All of Knightstone Capital Plc's costs relating to providing
funding services were met by Knightstone Housing Association
Limited.
The Company currently borrows funds on a fixed rate basis from
the capital markets and will in future on-lend these funds to its
immediate parent company, Knightstone Housing Association Limited
on the same fixed rate basis. As such, the Company does not bear
any exposure to interest rate risk. All of the Company's capital
markets financing proceeds will be available to be on-lent to
Knightstone Housing Association Limited, which represents the only
credit risk to the Company. This credit risk is mitigated through a
number of factors, including the housing asset security which
stands behind the loan, the overall HCA assessment of the Group's
financial viability and the contractual protection of the loan
agreement between the Company and Knightstone Housing Association
Limited. No further qualitative disclosures about credit, liquidity
and market risks are applicable.
The market value of the financial instrument as at 31 March 2015
is estimated as GBP1.4 million. The debt has not been traded in the
period between issue and at the year end its market value has been
calculated against the price of a reference gilt (UKT 3.62% 2045)
at 31 March 2015 plus a 130bps credit spread, which is appropriate
to Knightstone.
2015 2014
GBP GBP
12 ORDINARY SHARE CAPITAL
Issued share capital
Ordinary shares of GBP1
each 50,000 50,000
Knightstone Housing Association Limited is the registered holder
of 50,000 shares of GBP1 of which GBP12,500 has been paid. The
shares were issued on incorporation of the Company on 16 September
2013. Knightstone Housing Association Limited acquired its 50,000
ordinary shares on 16 September 2013 and paid GBP12,500. The
remaining unpaid share capital (GBP37,500) is shown within debtors
(note 7).
13 MOVEMENT IN SHAREHOLDERS FUNDS
Share
capital Reserves Total
GBP GBP GBP
At 1 April 2014 50,000 - 50,000
Profit for the financial
year - 11,702 11,702
Gift Aid donation made
to Knightstone Housing
Association Limited (11,702) (11,702)
-------------- -------------- --------------
As at 31 March 2015 50,000 - 50,000
14 ULTIMATE PARENT UNDERTAKING
The immediate parent company is Knightstone Housing Association
Limited, a charitable housing association and a registered society
under the Co-operative and Community Benefit Societies Act 2014
with registration number 21080R and registered with the Regulator
pursuant to sections 111 and 112 of the Housing and Regeneration
Act 2008 (Registration No. L0291).
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