ASSEMBLE_FUNDCO_2_LIMITED - Accounts

The directors present their annual report and financial statements for the year ended 30 September 2021.

The principal activity of the company continued to be that of property development and management.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

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). 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;

•     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.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

We have audited the financial statements of Assemble Fundco 2 Limited (the 'company') for the year ended 30 September 2021 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 30 September 2021 and of its profit for the year 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.

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 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.

Conclusions relating to going concern

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.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in 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 material misstatements in the directors' report.

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 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 prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the directors' report and take advantage of the small companies exemption from the requirement to prepare a strategic report.

As explained more fully in the directors' responsibilities statement, 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.

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 is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

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 and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection; 

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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.

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

Assemble Fundco 2 Limited is a private company limited by shares incorporated in England and Wales. The registered office is 128 Buckingham Palace Road, London, United Kingdom, SW1W 9SA.

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 the revaluation of financial assets and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

Disclosure exemptions

Exemption has been taken from preparing cash flow statement on the grounds that the company is considered to be small under the provisions of the Companies Act 2006.

The company is a Special Purpose Vehicle for a development under the Local Improvement Finance Trust and accordingly losses are anticipated during the early years of the contracts.true

The company has long term funding in place and has a detailed financial model on which its future operations are based. The directors have considered the company’s projected income and cash flows in the short and medium term and the ongoing impact of the COVID 19 virus on the future viability of the company.

The company’s operating cash inflows are largely dependent on unitary charge receipts from NHS Property Services and the directors expect these amounts to be received even in severe but plausible downside scenarios.

The directors have assessed the viability of its main sub-contractors and reviewed the contingency plans of the sub-contractors and are satisfied in their ability to provide the services in line with the contract without significant additional costs to the company, even in downside scenarios, due to the underlying contractual terms. To date, there has been no adverse impact on the services provided by the company or its sub-contractors arising from COVID 19. However, in the unlikely event of a subcontractor failure, the company has its own business continuity plans to ensure that service provision will continue.

The directors consider that these projections, together with the available loan finance, as a PFI contractor continuing to deliver public services in response to the current COVID 19 emergency will enable the company to have sufficient funds to enable the company to continue to provide these services and meet their liabilities as they fall due. The company therefore continues to adopt the going concern basis.

Public to private concession arrangements

A substantial portion of the company's assets are used within the framework of concession contracts granted by public sector customers ('grantors'). Under these contracts, the company constructs primary care centres that are leased to the NHS on a 25 year lease.

To be classified as a Service Concession Arrangement under section 34 of FRS 102, a contract must satisfy the following two criteria:

•     the grantor controls or regulates what services the operator must provide using the infrastructure, 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 terms of the arrangement.

Pursuant to section 34 of FRS 102, such infrastructure is not recognised as assets of the operator as property, plant and equipment but as financial assets ( 'financial asset model').

Financial asset model

The financial asset model applies when the operator has an unconditional right to receive cash or other financial asset from the grantor.

In the case of concession services the operator has an unconditional right if the grantor contractually guarantees the payment of:

•     amounts specified or determined in the contract or

•     the shortfall, if any, between amounts received from users of the public service and amounts specified or determined in the contract.

Financial assets resulting from the application of section 34 of FRS 102 are recorded in the balance sheet under the heading financial assets and measured at amortised cost.

Pursuant to section 23 of FRS 102, revenue associated with this financial model comprises of service remuneration which relates to the lifecycle maintenance and facilities income and ad hoc property related services income.

The financial asset is stated at amortised cost using the effective rate of interest. The effective rate of interest method is a method of calculating the amortised costs of a financial asset and of allocating interest expense over the relevant period. The effective interest rate is the rate which exactly discounts estimated future cash payments through the expected life of the financial asset.

At each reporting period end date, the company reviews the carrying amounts of its financial 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.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

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

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 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, 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 tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account 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 liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing 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 profit and loss account, 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.

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 concession arrangements undertaken by the company, are considered to fall within the scope of section 34 of FRS 102 'Service Concession Arrangements'. The judgement has been based on a consideration of the nature and terms of the agreements and contracts.

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.

The calculation of the amortised costs of the financial asset requires an estimate of the residual value of the property at the end of the lease term. This estimate has been based on the residual value allocated to the contract in the financial models, taking into account the unitary payments, facilities management fees, lifecycle costs and inflation.

The average monthly number of persons employed by the company during the year was:

A potential deferred tax asset of £1,721,000 (2020: £1,489,000) has not been recognised due to uncertainty over the timing of the reversal which will be based on future trading profits.

The bank loan totalling £28,251,732 (2020: £28,930,637) is secured by Mortgage Debenture and Deed of Assignment, both dated 28 March 2013, a fixed and floating charge over all the companies assets.

The land and buildings of the operator were derecognised under section 34 of FRS 102 and recognised as a financial asset, the above security continues to remain in place.

The bank loan is also secured by a Deed of Charge over shares, dated 28 March 2013 held in the parent company Assemble Holdco 2 Limited.

The loan is split between a development loan and a long term mortgage. The development loan is repaid on an interest only basis for 25 years with repayment of the capital sum 25 years from the date of completion of the development, expected to be in 2040. The long term mortgage is to be repaid on a six monthly basis, over the 25 year term, following the completion of the development.

The loan bears interest at a rate of 4.87% accrued on a monthly basis.

Other creditors relate to subordinated debts, due to the immediate parent company, Assemble Holdco 2 Limited. The subordinated debts, bear interest at a rate of 12.5% per annum and the loan is repaid on a six monthly basis.

Called up share capital - this represents the nominal value of shares that have been issued.

During the year the company entered into the following transactions with related parties:

Assemble Community Partnership Limited

During the year, the company was charged £151,738 (2020: £148,900) as Lift company contributions and £75,547 (2020: £nil) in respect of lifecycle costs by Assemble Community Partnership Limited, the parent company of Assemble Holdco 2 Limited. At the balance sheet date, the company owed £21,524 (2020: £12,559) to Assemble Community Partnership Limited.

Assemble Holdco 2 Limited

During the year, the company paid interest of £355,192 (2020: £363,494) on subordinated loans to Assemble Holdco 2 Limited. At the balance sheet date, loans of £2,790,901 (2020: £2,857,967) were outstanding, repayable in instalments. At the balance sheet date, the company was owed £1 (2020: £1) by Assemble Holdco 2 Limited, in respect of unpaid share capital.

Guildhouse UK Limited

During the year, the company was charged £15,369 (2020: £15,081) for Lift company contributions by Guildhouse UK Limited, a company in which Mr D J Hudson is a director and ultimate controlling party. At the balance sheet date, the company owed £1,547 (2020: £1,526) to Guildhouse UK Limited.

Community Health Partnerships Limited

During the year, the company received financial asset interest of £1,683,882 (2020: £1,710,961) and facilities management fees of £2,417,002 (2020: £2,224,924), income in respect of consumables recharges of £47,262 (2020: £49,159) and income in respect of additional works of £27,176 (2020: £38,274) from Community Health Partnerships Limited, a shareholder in Assemble Community Partnership Limited. At the balance sheet date, the company was owed £15,790 (2020: £65,896) from Community Health Partnerships Limited.

At the balance sheet date, the company had a deferred income balance of £22,147 (2020: £22,015).

Accuro FM Ltd

During the year, the company incurred facilities management fees of £1,123,737 (2020: £1,055,828), £41,982 (2020: £48,974) in respect of consumables recharges, £112,496 (2020: £177,228) in respect of repairs and maintenance from Accuro FM Ltd. Accuro FM Ltd is a wholly owned subsidiary of Accuro Group Holdings Limited, a company in which Mr B J Jenkins and Mr A J Fowles are also directors. At the balance sheet date, the company owed £123,504 (2020: £135,623) to Accuro FM Ltd.

Assemble Fundco 1 Limited

At the balance sheet date, the company was owed £153,000 (2020 £80,000) by Assemble Fundco 1 Limited, a fellow subsidiary company.

The company is a wholly owned subsidiary of Assemble Holdco 2 Limited, a company registered in England and Wales.

The results of the company are included in the consolidated financial statements of Guildhouse Holdings Limited. Assemble Community Partnership Limited, the parent company of Assemble Holdco 2 Limited, is a subsidiary of Guildhouse UK (PPP) Limited, which is a wholly owned subsidiary of Guildhouse UK Limited, which is a wholly owned subsidiary of Guildhouse Holdings Limited. The consolidated financial statements are available from Companies House, Crown Way, Cardiff, CF14 3UZ.