CODA_(OPERATIONS)_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.

CODA (Operations) Limited is a private company limited by shares incorporated in Northern Ireland. The registered office is Airport Road, Eglinton, BT47 3GY.

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. The principal accounting policies adopted are set out below.

On 11th March 2020, the World Health Organisation declared a global pandemic as a result of the outbreak and spread of the COVID-19 virus. The spread of the virus led to the UK Government to enter a period of lockdown on 23rd March 2020, placing restrictions on non-essential activities. This has had a significant impact on CODA’s operating result for 2020/21 and will continue into 2021/22.

The balance sheet of the company at 31 March 2021 shows net liabilities of £1,650,674. This includes a net defined benefit pension liability of £2.682m in relation to employees transferred from Derry City Council.

The company is reliant on the continued support of Derry City and Strabane District Council (DCSDC) to meet its day to day working and fixed capital requirements. DCSDC currently provides annual funding of £2.145m to the company and this commitment is reviewed by DCSDC as part of its annual budget process. Despite the impact of COVID-19 on the financial position of DCSDC, the Council remains committed to the provision of operational funding for 2021/22 and 2022/23, and a business case has also been submitted to Government in relation to sharing the overall operational funding requirement moving forward.

A Public Service Obligation (PSO) route from City of Derry Airport to London has been in operation since 2017 which is crucial to the sustainability of the airport. Following a tender exercise, a contract was awarded to Loganair who operate the route to London Stansted Airport. This route is fully funded by the Department for Transport and the NI Executive until 31st March 2023.

DCSDC has received significant additional financial support in relation to the company during the year from both the Northern Ireland Government and the UK Government recognising that City of Derry Airport is a key infrastructural regional asset. Funding in the amount of £2.056m has been secured in order to mitigate the impact on its business from COVID-19.

Based on the above, the directors are satisfied that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements are prepared on a going concern basis. The financial statements do not include any adjustments that would result from a withdrawal of the support outlined.

Turnover is derived principally from aviation, commercial and fuel income. It is represented net of VAT and discounts. Turnover is recognised when a right to consideration is obtained from the performance of contractual obligations.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

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

The company applies a de-minimis level of £3,000 to all fixed assets (on an individual asset basis), meaning only assets over £3,000 are capitalised.

Tangible fixed assets are stated at cost net of depreciation and any provision for impairment. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

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).

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. 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.

Stocks are stated at the lower of cost and estimated selling price less costs to sell.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand 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 and preference shares that are classified as debt, 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.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

The company operates a defined contribution scheme and a defined benefit scheme for the benefit of its employees.

Defined contribution scheme

Employees are automatically enrolled in this scheme once mandatory registration criteria are met. Employees who meet these criteria have the option of opting out of the scheme. The company's contributions to the scheme are set at either 2% or 6% based on the level of contributions made by the employee. Contributions payable are charged to the profit and loss account in the year they are payable.

Defined benefit scheme

For employees transferred from Derry City Council, the company contributes to the multi employer Northern Ireland Local Government Officers' Superannuation Committee (NILGOSC) scheme, which is a defined benefit scheme. The cost of providing benefits under the scheme is based on actuarial valuations carried out at each balance sheet date, and is determined using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligations).

The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.

Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.

The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

Licence to Occupy

Airport land and buildings are the subject of a licence to occupy between Derry City and Strabane District Council and CODA (Operations) Ltd. The licence to occupy permits CODA (Operations) Ltd to occupy the airport for the business of the operation and management of the airport.

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 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 company has recognised a defined benefit pension scheme liability in the balance sheet, the value of which has been prepared by an independent qualified actuary. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty.

The average monthly number of persons (including directors) employed by the company during the year was:

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The company contributes to the multi employer Northern Ireland Local Government Officers' Superannuation Committee (NILGOSC) scheme for qualifying employees. The scheme is part of the Local Government Pension Scheme (Northern Ireland) (the "LGPS").

The LGPS is a funded defined benefit plan with benefits earned up to 31 March 2015 being linked to final salary. Benefits after 31 March 2015 are based on Career Average Revalued Earnings Scheme.

The funded nature of the LGPS requires participating employers and its employees to pay contributions into the NILGOSC fund, calculated at a level intended to balance the pension liabilities with investment assets.

The actuarial valuation of plan assets and the present value of the defined benefit obligation is based on the results of the Actuarial Valuation of the Local Government Pension Scheme (Northern Ireland) as at 31 March 2019. The prior year accounts reported the LGPS costs based on the valuation carried out as at 31 March 2016, allowing for the different bases and average ages from the underlying data. Therefore this may give rise to an actuarial gain (or loss) on assets and liabilities arising from the valuation update.

The actuarial report has been prepared to include an estimated allowance for potential additional liabilities arising from the McCloud judgement and GMP Indexation and Equalisation. The additional liability is shown as a Past Service Cost over the accounting period based on an effective date of 31 March 2019.

The mortality assumptions at the accounting date are based on the recent actual mortality experience of members within the Fund based on analysis carried out as part of the 2019 Actuarial Valuation, and allow for expected future mortality improvements. Sample life expectancies at age 65 in normal health resulting from these mortality assumptions are shown below.

Amounts recognised in the profit and loss account

Amounts taken to other comprehensive income

The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:

Movements in the present value of defined benefit obligations

The defined benefit obligations arise from plans which are wholly or partly funded.

Movements in the fair value of plan assets

The actual return on plan assets was £2,139,000 (2020 - £294,000).

Fair value of plan assets at the reporting period end

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.

Emphasis of matter

We draw attention to note 1.2 of the financial statements, which describes the company's operation of a Public Service Obligation route to London which is crucial to the sustainability of the airport, and the reliance on the funding of this service by the Department for Transport and the Department for the Economy. This note also describes the company's reliance on the continued financial support of Derry City and Strabane District Council for the provision of annual funding in respect of day to day operations. Our opinion is not modified in this respect.

The company has not entered into any material transactions that have not been concluded under normal market conditions requiring disclosure in accordance with FRS 102 Section 1A, paragraph 1AC.35.

The parent of CODA (Operations) Limited is Derry City and Strabane District Council (DCSDC) which owns 100% of the issued share capital. Additionally, six of the nine directors currently serving on the Board were nominated or appointed by the DCSDC. The company issued 3,567,295 shares to DCSDC during the period in respect of funding provided by DCSDC to enable the company to meet its capital and revenue costs.

There is a licence to occupy agreement in place between the company and DCSDC, details of which are provided at note 1.12.

During the period, as part of its ongoing operations, the company purchased services from DCSDC in the amount of £23,218 (2020: £19,919). Amounts owed by the company to DCSDC in respect of these transactions at the reporting date and included in creditors total £5,054 (2020: £17,888).

At the year end, the company was owed an amount of £64,818 (2020: £85,472) in respect of costs incurred purchasing infrastructural assets which are rebillable to DCSDC. This amount is included in trade debtors.

The financial statements of CODA (Operations) Limited are consolidated in the group accounts of Derry City and Strabane District Council. The registered office of Derry City and Strabane District Council is 98 Strand Road, Derry~Londonderry, BT48 7NN.

In common with many businesses of its size and nature, the company use its auditor to prepare and submit returns to the tax authorities and assist with the compilation of the financial statements.