ACCOUNTS - Final Accounts preparation
ACCOUNTS - Final Accounts preparation
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Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
COMPANY INFORMATION
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ARDEN PARTNERSHIP (DERBY) LIMITED
CONTENTS
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ARDEN PARTNERSHIP (DERBY) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their report and the financial statements for the year ended 31 December 2020.
Arden Partnership (Derby) Limited is a wholly owned subsidiary of Arden Partnership (Derby) Holdings Limited. The Company’s principal activities during the year were the operation of an Adult High Dependency Unit (HDU), an Older Persons HDU, an Older Adult Dementia HDU, an Older Adult Resource Centre and a Clinical Services Building within the Derby area for Derbyshire Mental Health Services NHS Trust.
The Company completed construction of the new HDUs, the Older Adult Resource Centre and the Clinical Services Building on 5 May 2009 and the units were handed over to Derbyshire Mental Health Services NHS Trust (the Trust).
The directors who served during the year were:
The directors are responsible for preparing 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and 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 for the Company's financial statements 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 to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation, amounted to £491k (2019 - £417k).
A dividend of £691k (2019: £387k) was approved and paid during the year.
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ARDEN PARTNERSHIP (DERBY) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors have reviewed the future liquidity requirements and have considered the cash flow forecasts of the Company as set out in the operational model, which show that the project will continue to operate profitably and be cash generative, operating well within its means. Based on this review, and the future business prospects of the Company, despite the current economic conditions (which include the impact of Covid-19 and Brexit) the directors believe the Company will be able to meet its liabilities as they fall due and as such do not expect to be significantly affected by these events. Further consideration has been included in the risks section of the Directors’ Report. The directors are also mindful of the relationship with the local authority and ensure that this is carefully monitored and maintained. There have been no instances during the year, or since, of non-compliance of the Project Agreement, and the relationship with the local authority remains strong. Having regards to the above and after enquires; 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.
The Company is subject to certain risks during the operational phase of the contract; these risks wherever possible have been mitigated by passing the risk down to sub-contractors or by using interest rate and retail price swap instruments.
Current economic situation The directors recognise that the current economic conditions, which include the impact of COVID-19, will be very challenging. The directors are of the opinion that the business will not be affected because PFI projects have very tight controls over finances and have fixed agreements with the Lenders and the NHS Trust. Liquidity risk During the operational period the Company charges the Trust a monthly Unitary Charge, which is sufficient to meet its trade creditors and other liabilities.
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ARDEN PARTNERSHIP (DERBY) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Credit risk
The Company’s main customer during operations is the Trust with which the Company has a concession agreement. This concession agreement includes clauses whereby should the Company not be paid by the Trust then the Company does not pay the relevant supplier for the services provided if the latter is the cause of the non-payment. The risk to bank borrowings and the availability of credit for this project is not material because there are agreements set up with the lender and all drawdowns are monitored by the directors and are within credit agreement. The Company therefore, does not consider its exposure to credit risk to be material. Interest rate cash flow risk The Company has in place hedging arrangements to eliminate risk from interest rate movements and fluctuations in Retail Price indices. In order to ensure stability of cash flows and hence manage interest rate risk, the Company has a policy of maintaining all of its bank debt at a fixed rate. Supplier risk The main supplier to the SPV is in relation to the Facilities Management contract. The risks associated with this contract are mitigated as it is on a fixed term at a fixed cost per annum, only increasing in line with inflation. Additionally the credit and performance risk of the Facilities Management contract supplier is monitored on a regular basis to ensure that the services are delivered on a continuing timely basis to the appropriate standard. Should service issues develop, the SPV would seek to resolve through contractual provisions and ultimately the SPV has right to terminate the contract by serving notice and consequently putting in place an alternative contract supplier. Brexit Risk Brexit is an ongoing political process which may result in changes in the economic environment. Management have considered the potential implications of Brexit on the Company’s ability to continue as a going concern, the main risk identified being the potential impact on the FM contractor’s position. The company has been provided with a contingency plan by this contractor and consequently the risk is not considered to be significant based on the plan and the latest information published by the government.
The directors have closely monitored the performance of the business during the year together with its technical advisors and the contract has been carried out in line with expectations.
During the coming year the Company will continue with the operation of the new HDUs, the Older Adult Resource Centre and the Clinical Services Building.
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ARDEN PARTNERSHIP (DERBY) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
The auditors, Ryecroft Glenton, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
In preparing this report, the directors have taken advantage of the small companies exemptions provided by section 415A of the Companies Act 2006.
This report was approved by the board on
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ARDEN PARTNERSHIP (DERBY) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARDEN PARTNERSHIP (DERBY) LIMITED
We have audited the financial statements of Arden Partnership (Derby) Limited (the 'Company') for the year ended 31 December 2020, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Auditors' 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 United Kingdom, including the Financial Reporting Council'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.
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.
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ARDEN PARTNERSHIP (DERBY) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARDEN PARTNERSHIP (DERBY) LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the 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.
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ARDEN PARTNERSHIP (DERBY) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARDEN PARTNERSHIP (DERBY) LIMITED (CONTINUED)
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 Auditors' 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.
The 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: Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows: • the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations; • we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the sector; • we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including Companies Act 2006, taxation legislation, data protection, anti-bribery and employment legislation; • we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and • identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: • making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; • considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations. To address the risk of fraud through management bias and override of controls, we: • performed analytical procedures to identify any unusual or unexpected relationships; • tested journal entries to identify unusual transactions.
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ARDEN PARTNERSHIP (DERBY) LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ARDEN PARTNERSHIP (DERBY) LIMITED (CONTINUED)
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
• agreeing financial statement disclosures to underlying supporting documentation; • reading the minutes of meetings of those charged with governance; • enquiring of management as to actual and potential litigation and claims; • reviewing correspondence with HMRC, relevant regulators and the company’s legal advisors. There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
This report is made solely to the Company's members 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 Auditors' 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 for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
32 Portland Terrace
Newcastle upon Tyne
NE2 1QP
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ARDEN PARTNERSHIP (DERBY) LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
REGISTERED NUMBER: 06046104
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 12 to 23 form part of these financial statements.
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ARDEN PARTNERSHIP (DERBY) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Arden Partnership (Derby) Limited (the 'company') is a private company limited by shares and is registered and incorporated in England and Wales (registered number: 06046104). The registered office is Unit G1 Ash Tree Court, Nottingham Business Park, Nottingham, England, NG8 6PY
The company's principal activities and nature of its operations are disclosed in the Director's Report.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
Monetary amounts included in these financial statements are rounded to the nearest £1,000, except
where otherwise stated.
The following principal accounting policies have been applied:
The Company has net liabilities of £11,296k (2019: £10,783k) which includes the fair value of the interest rate swap liability of £16,741k (2019: £15,010k), the fair value RPI swap asset of £2,860k (2019: £1,841k), and cash of £3,284k (2019: £3,154k) as at 31 December 2020.
The directors have reviewed the future liquidity requirements and have considered the cash flow forecasts of the Company as set out in the operational model, which show that the project will continue to operate profitably and be cash generative, operating well within its means. Based on this review, and the future business prospects of the Company, despite the current economic conditions (which include the impact of Covid-19 and Brexit) the directors believe the Company will be able to meet its liabilities as they fall due and as such do not expect to be significantly affected by these events. Further consideration has been included in the risks section of the Directors’ Report. The directors are also mindful of the relationship with the local authority and ensure that this is carefully monitored and maintained. There have been no instances during the year, or since, of non-compliance of the Project Agreement, and the relationship with the local authority remains strong. Having regards to the above and after enquires; 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 measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Income received in respect of the service concession is allocated between revenue and capital repayment of, and interest income on, the PFI financial asset using the effective interest rate method. Service revenue is recognised as a margin on non-pass-through operating and maintenance costs.
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
The tax expense for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates income. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of financial position date, except that: • The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and • Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met. Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
In preparing the financial statements of the Company, advantage has been taken of the following disclosure exemption available in FRS 102, as a result of the Company being a small entity:
• No cash flow statement has been presented for the Company
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
The Company is a special purpose entity that has been established to provide services under certain private finance agreements with Derbyshire Mental Health Services NHS Trust. Under the terms of these Agreements, the Derbyshire Mental Health Services NHS Trust (as grantor) controls the services to be provided by the Company over the contract term.
Based on the contractual arrangements the Company has classified the project as a service concession arrangement, and has accounted for the principal assets of, and income streams from, the project in accordance with FRS 102, Section 34.12 Service Concession Arrangements. The Company has chosen to adopt the transitional arrangements available within FRS 102, Section 35.10(i) and as such the service concession arrangement has continued to be accounted for using the same accounting policies being applied at the date of transition to FRS 102 (1 January 2015). The nature of the asset has therefore not changed; however, there has been a change in the description from Finance Debtor to Financial Asset. Under the terms of the arrangement, the Company has the right to receive a baseline contractual payment stream for the provision of the services from or at the direction of the grantor (the Trust), and as such the asset is accounted for as a financial asset. The financial asset has initially been recognised at the fair value of the consideration receivable, based on the fair value of the construction (or upgrade) services, plus any directly attributable transaction costs, provided in line with FRS 102.
The accumulated costs incurred in respect of bid development, design, construction and finance costs during construction were transferred to finance debtor receivable when the facilities became available and are being recovered over the contract period on an annuity basis. Upon construction completion, occupational availability payments from the Trust are allocated between turnover in relation to the service element of the contract, reimbursement of the finance debtor receivable and finance income on the finance debtor receivable so as to generate a constant rate of return over the contract period. Interest payable and similar charges and administration costs relating to the day to day running of the Company are written off as incurred.
Upfront finance and arrangement costs of procuring senior debt facilities are charged to the Statement of Comprehensive Income on completion of the construction phase over the life of the relevant loans.
Interest incurred during the construction phase is capitalised and amortised over the period of the concession.
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2.Accounting policies (continued)
The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance the substance of the contractual arrangement.
Financial instruments are recognised on the trade date when the Company becomes a party to the contractual provisions of the instrument. Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not a fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments are decrecognised on trade date when the Company is no longer a party to the contractual provisions of the instrument.
Financial liabilities and equity are classified according to the substance of the financial instrument's contractual obligations, rather that the financial instrument's legal form.
The Company has entered into variable to fixed rate interest swaps and RPI swap to manage its exposure to interest rate cash flow risk on its variable rate debt and inflation rate risk respectively. These derivatives are measured at fair value at each reporting date. To the extent the hedge is effective; movements in fair value are recognised in other comprehensive income and presented in a separate cash flow hedge reserve. Any ineffective portions of those movements are recognised in the profit or loss for the period.
The Company uses financial instruments in order to manage risk arising from changes in interest rates and inflation.
Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument. The capitalised fees are then released to the statement of comprehensive income on a straight line basis over the term of the loan.
Provisions are made in respect of lifecycle maintenance to the extent that the Company is obliged to undertake maintenance in future periods.
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders.
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
a. Key sources of estimation uncertainty Financial asset interest rate - The financial asset interest income is based on the WACC of the project and is applied to the carrying value of the financial asset on a quarterly basis. The interest rate used in throughout the project life is 7.40%. Service margin - After the property is constructed, the Company provides property management services. The remuneration for these services is recognised at cost plus an estimated mark up for profit on property management services. b. Critical judgements Concession arrangements - The concession arrangements undertaken by the Company are considered to fall within the scope of section 34 of FRS 102 "Service Concession Arrangements", as described in the turnover note. This judgement has been based on a consideration of the nature and terms of the agreements
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
10.Taxation (continued)
There were no factors that may affect future tax charges.
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Other reserves
associated tax movement.
Profit and loss account
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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ARDEN PARTNERSHIP (DERBY) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
The ultimate and immediate holding company is Arden Partnership (Derby) Holdings Limited, registered address Unit G1 Ash Tree Court, Nottingham Business Park, Nottingham, NG8 6PY, a Company registered in England and Wales. In the opinion of the Directors, there is no ultimate controlling party.
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