ELC_(BARROW)_LIMITED - Accounts

The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true

These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.

ELC (Barrow) Limited is a private company limited by shares incorporated in England and Wales. The registered office is Richard House, 9 Winckley Square, Preston, PR1 3HP and its place of business is Duke Street, Barrow-in-Furness, Cumbria, LA14 2LB.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

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 £.

The financial statements have been prepared under the historical cost convention, modified to include certain financial assets at fair value. The principal accounting policies adopted are set out below.

These financial statements are prepared on the going concern basis.  Construction of the health care centre finished completion during the end of 2019. During the build phase, construction costs were incurred, with little or no corresponding income which resulted in a net liability position on the balance sheet.  The original completion date was delayed, and as a result the company was in receipt of liquidated and ascertained damages from the contractor which enabled the company to meet its financial obligations as they have fallen due. 

The directors have given consideration to the additional economic uncertainty relating to the Covid-19 pandemic when making their going concern assessment. They have concluded that the company is protected from any material uncertainty regarding future cashflow, on the basis that the company has a covenant with the Secretary of State which guarantees tenancy payments. Correspondence has been received from the tenant regarding the unprecedented challenges posed by the pandemic, with confirmation having been provided that they will comply with the mandate that government bodies must continue to pay suppliers for contractual services during this period.

The directors have reviewed the future liquidity requirements and have considered the cash flow forecasts of the company. The company produces long-term financial forecasts which show the company is able to operate and meet its financial obligations as they fall due for at least the twelve month period following approval of the accounts.

Having regard to the above and after making other enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

Turnover is recognised at the fair value of the consideration received or receivable for construction and property management services provided in the normal course of business, and is shown net of VAT.

Turnover comprises of the following items:

•     Remuneration for property management services which is recognised at cost plus an estimated mark up, in line with when the related services are provided.

•     Re-charges of utility costs, reception charges, management charges and other operating costs on which an estimated mark up is applied, recognised in line with when the associated costs are incurred.

•     Profit uplift applied to construction costs, which is recognised in the period in which the associated construction costs are incurred.

Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Freehold land is not depreciated.

At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks and other short-term liquid investments with original maturities of three months or less.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors, assets held under service concession arrangements and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The company holds a financial asset which falls under the scope of being a service concession arrangement, whereby the company has contracted with a public sector customer (the ‘grantor’). Under this concession contract, the company (the ‘operator’) is constructing a health centre which is being leased to the grantor under a 25 year lease.

To fall within the scope of section 34 of FRS 102, Service Concession Arrangements, a contract must satisfy the following two criteria:

•     The grantor controls or regulates what services the operator must provide using the infrastructure assets, to whom, and at what price; and

•     The grantor controls, through ownership, beneficial entitlement or otherwise, any significant residual interest in the infrastructure at the end of the term of the agreement.

Pursuant to section 34 of FRS 102, such infrastructure is not recognised within property, plant and equipment because the arrangement does not convey the right to control the use of the public service assets to the operator. Instead the infrastructure is held within financial assets, under the financial asset model.

The financial asset model applies when the operator has an unconditional contractual right to receive a specified or determinable amount of cash from the grantor in return for constructing the infrastructure assets and then operating and maintaining the assets for a specified period of time. The operator initially recognises the financial asset at fair value for the consideration received or receivable, based on the fair value of the construction services provided. Thereafter, it accounts for the financial asset in accordance with Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The service concession arrangement undertaken by the company is considered to fall within the scope of section 34 of FRS102, as described in the accounting policies. This judgement has been based upon consideration of the nature and terms of the lease agreement, with the directors concluding the following conditions apply:

• The grantor controls or regulates what services the operator must provide using the infrastructure assets, to whom, and at what price; and

• The grantor controls, through ownership, beneficial entitlement or otherwise, any significant residual interest in the infrastructure at the end of the term of the agreement.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

There are a number of significant estimates made in respect of the financial asset:

RPI index – The finance asset is calculated assuming a predicted level of RPI increases for future receipts and expenditure. The RPI estimate has been benchmarked against historical data available from the Office of National Statistics, however future projections carry a degree of uncertainty given the nature of RPI.

Future lifecyle maintenance (LCM) costs – Under the lease there is an obligation to maintain and repair the building to a defined standard over the lease term. The finance asset is calculated using an estimate of the cost of future repairs, capital expenditure and maintenance to meet these obligations. The anticipated costs have been profiled to fall due over the lease term to recognise some costs will not be required annually and contain assumptions for capital and operational costs. There is an overall trend of costs increasing as the lease progresses.

The terms of the Senior Debt include an interest rate linked to inflation . An effective interest charge is recognised in the Profit and Loss Account, rather than actual interest paid. The effective interest rate is based on estimated future cash flows, including the interest rate linked to inflation. The inflation estimate has been benchmarked against historical data available from the Office of National Statistics, however future projections carry a degree of uncertainty given its nature.

The company had no employees during the current or prior period.

The bank loan is secured over the freehold land, containing a fixed charge and a floating charge over all the property and the undertakings of the company.

The bank loan is secured over the freehold land, containing a fixed charge and a floating charge over all the property and the undertakings of the company.

As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:

The auditor's report was unqualified.

A cross company guarantee is in place in favour of Aviva between the company and ELC (Barrow) Holdco Limited. At the balance sheet date, borrowings payable by these companies to Aviva amounted to £13,026,111 (2019: £13,254,063).

The adjustment relates to the service cost incurred in the year ended 31 March 2019, re-charged at a 5% uplift.

The adjustment relates to the effective interest charge recognised on the financial asset in the year ended 31 March 2019.

The company has taken advantage of the exemption permitted under Section 33 'Related Party Disclosures' paragraph 33.1A from disclosing transactions with wholly owned group companies.

Barbentas Development LLP, incorporated in England and Wales, is the ultimate parent of ELC (Barrow) Limited.