Rothschild & Co

Interim / Quarterly Report • Sep 20, 2021

National Storage Mechanism | Additional information

RNS Number : 3678M

Rothschild & Co Continuation Fin

20 September 2021

Rothschild & Co Continuation Finance PLC

Half-yearly Report for the six-month period ended 30 June 2021

Interim Management Report

Summary of Important Events

Rothschild & Co Continuation Finance PLC (the "Company") is a wholly-owned subsidiary of N M Rothschild & Sons Limited ("NMR") and was incorporated on 30 August 2000 to operate as a finance vehicle for the benefit of NMR and its subsidiaries. 

The principal activity of the Company is the raising of finance for the purpose of lending it to NMR and other companies in NMR's group (the "Group").  The Company raises finance by the issue of perpetual subordinated notes guaranteed by NMR. 

Risks and Uncertainties

The principal risks of the Company are credit risk, liquidity risk, market risk and operational risk.  The Company follows the risk management policies of the parent undertaking, NMR.

COVID-19 has created significant disruption to the global markets and economies. Management has performed an assessment to determine whether there are any material uncertainties arising due to the pandemic that could cast significant doubt on the ability of the Company to continue as a going concern.

The Company's principal risk is credit exposure to NMR, as the notes issued by the Company have been guaranteed by, and funds have been on-lent to NMR. The Company is therefore reliant on the ability of NMR to meet its obligations under these lending arrangements. NMR is exposed to the aforementioned market disruption but, nevertheless, has sufficient liquidity to continue to operate for the next 12 months even in the scenario where revenue is significantly reduced. Management has considered the going concern basis of preparation as outlined in note 1 to the financial statements.

The Company's processes are undertaken by another group undertaking. As a result of events the activities of this group undertaking continued in the period to be largely conducted remotely with all employees supported by enhanced existing technology and IT infrastructure. All critical systems continue to operate effectively and there has been minimal disruption in activity. The Company continues to carefully monitor and mitigate the risk on an ongoing basis in order to minimise exposure

This half-yearly financial report has not been audited or reviewed by the Company's auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. 

Responsibilities Statement

The Directors confirm that to the best of their knowledge:

-	The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; and
-	The interim management report includes a fair review of (i) the important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and (ii) the principal risks and uncertainties for the remaining six months of the financial year.

By Order of the Board

Paul O'Leary

Director

20 September 2021

Condensed Interim Statement of Comprehensive Income

For the six months ended 30 June 2021

		6 months to	6 months to
		30 June 2021	30 June 2020
	Note	£	£
Interest income		132,962	159,671
Interest expense		(127,114)	(153,090)
Operating profit		5,848	6,581
Revaluation of loans	4	3,275,554	(10,473,820)
Revaluation of debt securities	9	(3,284,759)	10,486,546
Foreign exchange translation (losses)/gains		(1,703)	1,502
(Loss)/profit before tax		(5,060)	20,809
Taxation	3	2,710	(10,207)
(Loss)/profit for the financial period		(2,350)	10,602
Other comprehensive income		-	-
Total comprehensive (loss)/income for the financial period		(2,350)	10,602

Condensed Interim Statement of Changes in Equity

For the six months ended 30 June 2021

	Share Capital	Retained Earnings	Total
	£	£	£
At 1 January 2021	100,000	206,384	306,384
Total comprehensive loss for the period	-	(2,350)	(2,350)
At 30 June 2021	100,000	204,034	304,034
At 1 January 2020	100,000	289,762	389,762
Total comprehensive income for the period	-	10,602	10,602
At 30 June 2020	100,000	300,364	300,364

Condensed Interim Balance Sheet

At 30 June 2021

		At 30 June		At 31 December
		2021	2021	2020	2020
	Note	£	£	£	£
Non-current assets
Loan to parent undertaking	4		114,248,685		110,973,131
Current assets
Other financial assets	5	92,697		2,023
Cash and cash equivalents	6	249,987		245,750
		342,684		247,773
Current liabilities
Current tax liability		(4,309)		(5,270)
Deferred tax liability	7	(36,693)		(38,442)
Other financial liabilities	8	(90,766)		-
Net current assets			210,916		204,061
Total assets			114,459,601		111,177,192
Non-current liabilities
Debt securities in issue	9		(114,055,567)		(110,770,808)
Net assets			404,034		406,384
Shareholders' equity
Share capital	11		100,000		100,000
Retained earnings			304,034		306,384
Total shareholders' equity			404,034		406,384

Condensed Interim Cash Flow Statement

For the six months ended 30 June 2021

		6 months to	6 months to
		30 June 2021	30 June 2020
	Note	£	£
Cash flow from operating activities
Net (loss)/profit for the financial period		(2,350)	10,602
Taxation		(2,710)	10,207
Operating (loss)/profit before changes in working capital and provisions		(5,060)	20,809
Cash from operations		(5,060)	20,809
Net cash from operating activities		(5,060)	20,809
Net (increase)/decrease in loans and interest receivable		(3,366,228)	10,455,677
Net increase/(decrease) in debt securities in issue and interest payable		3,375,525	(10,468,536)
Net cash flow from financing activities		9,297	(12,859)
Net increase in cash and cash equivalents		4,237	7,950
Cash and cash equivalents at beginning of period		245,750	230,368
Cash and cash equivalents at end of period	6	249,987	238,318

Interest receipts and payments during the period were as follows:

	6 months to	6 months to
	30 June 2021	30 June 2020
	£	£
Interest received from parent undertaking	42,288	141,528
Interest paid to note holders	36,348	135,080

The notes to the condensed interim financial statements form an integral part of the condensed interim financial statements

Notes to the Condensed Interim Financial Statements

(forming part of the Condensed Interim Financial Statements)

For the six months ended 30 June 2021

1.   Basis of Preparation

The condensed interim financial statements are prepared and approved by the Directors in accordance with IAS 34 Interim Financial Reporting.  The condensed interim financial statements are prepared under the historical cost accounting rules and should be read in conjunction with the annual financial statements for the year ended 31 December 2020, which have been prepared in accordance with International Financial Reporting Standards. 

The accounting policies and methods of valuation are identical to those applied in the financial statements for the year ended 31 December 2020.

Going Concern

Management has performed an assessment to determine whether there are any material uncertainties that could cast significant doubt on the ability of the Company to continue as a going concern, including the impact of COVID-19. No significant issues have been noted. In reaching this conclusion, management considered:

-	The financial impact of the uncertainty on the Company's balance sheet;
-	The Company's liquidity position based on current and projected cash resources. The liquidity position has been assessed taking into account the forecast liquidity of NMR and its ability to continue to pay the interest on the intercompany loan provided by the Company; and
-	The operational resilience with respect to the impact of the pandemic on existing IT and infrastructure.

Based on the above assessment of the Company's financial position, the Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future (for a period of at least twelve months after the date that the financial statements are signed). Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2.   Directors' Emoluments

None of the directors received any remuneration in respect of their services to the Company during the period (2020: £nil). 

3.   Taxation

	6 months to 30 June 2021	6 months to 30 June 2020
	£	£
Current tax	(961)	3,954
Deferred tax	(1,749)	6,253
Total tax	(2,710)	10,207

The tax charge can be explained as follows:

	6 months to	6 months to
	30 June 2021	30 June 2020
	£	£
Profit before tax	(5,060)	20,809
United Kingdom corporation tax at 19%	(961)	3,954
Fair value movements not subject to tax	-	-
Deferred tax income statement charge	(1,749)	2,418
Effect of change in deferred tax rate	-	3,835
Tax charged for the period	(2,710)	10,207

4.   Non-Current Assets: Loan to Parent Undertaking

	At 30 June	At 31 December
	2021	2020
	£	£
At beginning of period	110,973,131	104,620,334
Fair value movements	3,275,554	6,352,797
At end of period	114,248,685	110,973,131
Due
In 5 years or more	114,248,685	110,973,131

IFRS 9 requires the €150,000,000 loan to be carried at fair value which as at 30 June 2021 was £114,248,685 (at 31 December 2020: £110,973,131).  On an amortised cost basis, the value of the loan at 30 June 2021 would be £128,745,419 (at 31 December 2020: £134,882,343).  The fair values are based on the market value of the external debt securities (level 2). 

The interest rate charged on the €150 million loan is EUR-TEC10-CNO plus 36 basis points, capped at 9.01 per cent, fixed on 05 February, 05 May, 05 August and 05 November each year. 

The interest rate on the above loan at 30 June 2021 was 0.48% (31 December 2020: 0.01%). 

5.   Current Assets: Other Financial Assets

	At 30 June	At 31 December
	2021	2020
	£	£
Interest receivable	92,697	2,023

6.   Cash and Cash Equivalents

At 30 June 2021 the Company held cash of £249,987 (31 December 2020: £245,750) at the parent undertaking. Of this balance, £211,543 (31 December 2020: overdraft of £211,543) was held in a sterling account.  The equivalent of £38,444 (31 December 2020: £34,207) was held in a euro account. 

7.   Deferred Income Taxes

	At 30 June	At 31 December
	2021	2020
	£	£
At beginning of period	(38,442)	(32,598)
Recognised in income: Income statement charge	1,749	(2,009)
Effect of change in deferred tax rate	-	(3,835)
At end of period	(36,693)	(38,442)

Deferred tax assets less liabilities are attributable to the following items:

	At 30 June 2021	At 31 December 2020
	£	£
Fair value of intra group loans	2,754,379	4,542,758
Fair value of debt securities in issue	(2,791,072)	(4,581,200)
	(36,693)	(38,442)

Both the intra-group loans and debt securities in issue are taxed on an amortised cost basis of accounting and accordingly taxable/deductible temporary differences arise following the adoption of IFRS 9.

8.   Current Liabilities: Other Financial Liabilities

	At 30 June	At 31 December
	2021	2020
	£	£
Interest payable	(90,766)	-

9.   Non-Current Liabilities: Debt Securities in Issue

	At 30 June	At 31 December
	2021	2020
	£	£
At beginning of period	110,770,808	104,428,584
Fair value movements	3,284,759	6,342,224
At end of period	114,055,567	110,770,808
Due
In 5 years or more	114,055,567	110,770,808

Given the IFRS 9 requirement to fair value the related loans, the Company has elected to fair value the debt securities in issue, which as at 30 June 2021 was £114,055,567 (at 31 December 2020: £110,770,808).  On an amortised cost basis, the value of the debt securities in issue at 30 June 2021 would be £128,745,419 (at 31 December 2020: £134,882,243). The fair value was derived from the quoted market price at the balance sheet date (level 1). 

The interest rate payable on the €150 million Perpetual Subordinated Notes is EUR-TEC10-CNO plus 35 basis points, capped at 9 per cent, fixed on 05 February, 05 May, 05 August and 05 November each year.  From and including the interest payment date falling in August 2016 and every interest payment date thereafter, the Company may redeem all (i.e. not in part) of the Perpetual Subordinated Notes at their principal amount. 

The interest rate on the above notes at 30 June 2021 was 0.47% (31 December 2020: 0%).

10. Maturity of Financial Liabilities

The following table shows contractual cash flows payable by the Company on the perpetual subordinated notes, analysed by remaining contractual maturity at the balance sheet date.  Interest cash flows on perpetual subordinated notes are shown up to five years only, with the principal balance being shown in the perpetual column.

At 30 June 2021

		3 months
		or less	1 year	5 years
		but not	or less	or less
		payable on	but over	but over
	Demand	demand	3 months	1 year	Perpetual	Total
	£	£	£	£	£	£
Perpetual subordinated notes	-	151,276	453,828	2,420,414	128,745,419	131,770,937

At 31 December 2020

		3 months
		or less	1 year	5 years
		but not	or less	or less
		payable on	but over	but over
	Demand	demand	3 months	1 year	Perpetual	Total
	£	£	£	£	£	£
Perpetual subordinated notes	-	-	-	-	134,882,383	134,882,383

11.   Share Capital

	At 30 June	At 31 December
	2021	2020
	£	£
Authorised, allotted, called up and fully paid
100,000 Ordinary shares of £1 each	100,000	100,000

12.   Related Party Transactions

Parties are considered to be related if one party controls, is controlled by or has the ability to exercise significant influence over the other party.  This includes key management personnel, the parent company, subsidiaries and fellow subsidiaries. 

Amounts receivable from related parties at the period end were as follows:

	At 30 June	At 31 December
	2021	2020
	£	£
Cash and cash equivalents at parent undertaking	249,987	245,750
Accrued interest receivable from parent undertaking	92,697	2,023
Loans to parent undertaking	114,248,685	110,973,131

Amounts recognised in the condensed statement of comprehensive income in respect of related party transactions were as follows:

	6 months to	6 months to
	30 June 2021	30 June 2020
	£	£
Interest income from parent undertaking	132,962	159,671

There were no loans made to Directors during the period (6 months to 30 June 2020: none) and no balances outstanding at the period end (at 31 December 2020: £nil).  There were no employees of the Company during the period (6 months to 30 June 2020: none).

13.     Parent Undertaking and Ultimate Holding Company and Registered Office

The largest group in which the results of the Company are consolidated is that headed by Rothschild & Co Concordia SAS, incorporated in France, and whose registered office is at 23bis, Avenue de Messine, 75008 Paris.  The smallest group in which they are consolidated is that headed by Rothschild & Co SCA, a French public limited partnership whose registered office is also at 23bis, Avenue de Messine, 75008 Paris.  The accounts are available on the Rothschild & Co website at www.rothschildandco.com.

The Company's immediate parent company is N M Rothschild and Sons Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithins Lane, London EC7N 8AL. 

The Company's registered office is located at New Court, St Swithin's Lane, London EC4N 8AL. 

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