Rothschild & Co

Interim / Quarterly Report • Sep 13, 2022

National Storage Mechanism | Additional information

RNS Number : 3251Z

Rothschild & Co Continuation Fin

13 September 2022

Rothschild & Co Continuation Finance PLC

Half-yearly Report for the six-month period ended 30 June 2022

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.  

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 current market and geopolitical headwinds 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.

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

13 September 2022

Condensed Interim Statement of Comprehensive Income

For the six months ended 30 June 2022

		6 months to	6 months to
		30 June 2022	30 June 2021
	Note	£	£
Interest income		693,444	132,962
Interest expense		(687,002)	(127,114)
Operating profit		6,442	5,848
Revaluation of loans	4	(24,717,418)	3,275,554
Revaluation of debt securities	9	24,722,319	(3,284,759)
Foreign exchange translation gains/(losses)		1,277	(1,703)
Profit/(loss) before tax		12,620	(5,060)
Taxation	3	(3,329)	2,710
Profit/(loss) for the financial period		9,291	(2,350)
Other comprehensive income		-	-
Total comprehensive income/(loss) for the financial period		9,291	(2,350)

Condensed Interim Statement of Changes in Equity

For the six months ended 30 June 2022

	Share Capital	Retained Earnings	Total
	£	£	£
At 1 January 2022	100,000	304,687	404,687
Total comprehensive loss for the period	-	9,291	9,291
At 30 June 2022	100,000	313,978	413,978
At 1 January 2021	100,000	206,384	306,384
Total comprehensive income for the period	-	(2,350)	(2,350)
At 30 June 2021	100,000	204,034	304,034

Condensed Interim Balance Sheet

At 30 June 2022

		At 30 June		At 31 December
		2022	2022	2021	2021
	Note	£	£	£	£
Non-current assets
Loan to parent undertaking	4		89,830,851		114,548,269
Current assets
Other financial assets	5	382,306		96,278
Cash and cash equivalents	6	258,459		250,897
		640,765		347,175
Current liabilities
Current tax liability		(3,406)		(1,009)
Deferred tax liability	7	(36,800)		(35,869)
Other financial liabilities	8	(380,262)		(94,390)
Net current assets			220,297		215,907
Total assets less current liabilities			90,051,148		114,764,176
Non-current liabilities
Debt securities in issue	9		(89,637,170)		(114,359,489)
Net assets			413,978		404,687
Shareholders' equity
Share capital	11		100,000		100,000
Retained earnings			313,978		304,687
Total shareholders' equity			413,978		404,687

Condensed Interim Cash Flow Statement

For the six months ended 30 June 2022

		6 months to	6 months to
		30 June 2022	30 June 2021
	Note	£	£
Cash flow from operating activities
Net profit/(loss) for the financial period		9,291	(2,350)
Taxation		3,329	(2,710)
Net cash inflow/(outflow) from operating activities		12,620	(5,060)
Cash flow from financing activities Net decrease/(increase) in loans and interest receivable		24,431,389	(3,366,228)
Net (decrease)/increase in debt securities in issue and interest payable		(24,436,447)	3,375,525
Net cash (outflow)/inflow from financing activities		(5,058)	9,297
Net increase in cash and cash equivalents		7,562	4,237
Cash and cash equivalents at beginning of half-year		250,897	245,750
Cash and cash equivalents at end of half-year	6	258,459	249,987

Interest receipts and payments during the period were as follows:

	6 months to	6 months to
	30 June 2022	30 June 2021
	£	£
Interest received from parent undertaking	407,416	42,288
Interest paid to note holders	401,130	36,348

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 2022

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 2021, 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 2021.

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. 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.

Financial Risk Management

The Company follows the financial risk management policies of the parent undertaking, N M Rothschild & Sons Limited.  The key risks arising from the Company's activities involving financial instruments, which are monitored at the group level, are as follows:

-	Credit risk - the risk of loss arising from client or counterparty default is not considered a significant risk to the Company as all asset balances are with other group companies as detailed in note 14 Related Party Transactions.
-	Market risk - exposure to changes in market variables such as interest rates, currency exchange rates, equity and debt prices is not considered significant as the terms of financial assets substantially match those of financial liabilities.
-	Liquidity risk - the risk that the Company is unable to meet its obligations as they fall due or that it is unable to fund its commitments is not considered significant as the risk has been transferred to NMR.  As the funds on-lent to NMR have the same maturity dates as the notes issued, the Company's ability to meet its obligations in respect of notes issued by it is affected by NMR's ability to make payments to the Company.

2.   Directors' Emoluments

None of the directors received any remuneration in respect of their services to the Company during the period (2021: £nil). 

3.   Taxation

	6 months to 30 June 2022	6 months to 30 June 2021
	£	£
Current tax	(2,398)	961
Deferred tax	(931)	1,749
Total tax	(3,329)	2,710

The tax charge can be explained as follows:

	6 months to	6 months to
	30 June 2022	30 June 2021
	£	£
Profit/(loss) before tax	12,620	(5,060)
United Kingdom corporation tax at 19%	(2,398)	961
Deferred tax income statement (charge)/credit	(931)	1,749
Tax charged for the period	(3,329)	2,710

4.   Non-Current Assets: Loan to Parent Undertaking

	At 30 June	At 31 December
	2022	2021
	£	£
At beginning of period	114,548,269	110,973,131
Fair value movements	(24,717,418)	3,575,138
At end of period	89,830,851	114,548,269
Due
In 5 years or more	89,830,851	114,548,269

IFRS 9 requires the €150,000,000 loan to be carried at fair value which as at 30 June 2022 was £89,930,851 (at 31 December 2021: £114,548,269). On an amortised cost basis, the value of the loan at 30 June 2022 would be £129,121,116 (at 31 December 2021: £125,853,708). 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 2022 was 1.87% (31 December 2021: 0.51%). 

5.   Current Assets: Other Financial Assets

	At 30 June	At 31 December
	2022	2021
	£	£
Interest receivable	382,306	96,278

6.   Cash and Cash Equivalents

At 30 June 2022 the Company held cash of £258,459 (31 December 2021: £250,897) at the parent undertaking. Of this balance, £208,282 (31 December 2021: £208,282) was held in a sterling account. The equivalent of £50,177 (31 December 2021: £42,615) was held in a euro account. 

7.   Deferred Income Taxes

	At 30 June	At 31 December
	2022	2021
	£	£
At beginning of period	(35,869)	(38,442)
Recognised in income: Income statement (charge)/credit	(931)	2,573
At end of period	(36,800)	(35,869)

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

	At 30 June 2022	At 31 December 2021
	£	£
Fair value of intra group loans	7,465,150	2,148,033
Fair value of debt securities in issue	(7,501,950)	(2,183,902)
	(36,800)	(35,869)

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
	2022	2021
	£	£
Interest payable	380,262	94,390

9.   Non-Current Liabilities: Debt Securities in Issue

	At 30 June	At 31 December
	2022	2021
	£	£
At beginning of period	114,359,489	110,770,808
Fair value movements	(24,722,319)	3,588,681
At end of period	89,637,170	114,359,489
Due
In 5 years or more	89,637,170	114,359,489

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 2022 was £89,637,170 (at 31 December 2021: £114,359,489). On an amortised cost basis, the value of the debt securities in issue at 30 June 2022 would be £129,121,116 (at 31 December 2021: £125,853,708). 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 2022 was 1.86% (31 December 2021: 0.50%).

10. Maturity of Financial Liabilities

The following table shows contractual cash flows payable by the Company on the perpetual subordinated notes classified 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 2022

		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	-	603,641	1,810,924	9,658,259	129,121,116	141,193,940

At 31 December 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	-	157,317	471,951	2,517,074	125,853,708	129,000,050

11.   Share Capital

	At 30 June	At 31 December
	2022	2021
	£	£
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
	2022	2021
	£	£
Cash and cash equivalents at parent undertaking	258,459	250,897
Accrued interest receivable from parent undertaking	382,306	96,278
Loans to parent undertaking	89,830,851	114,548,269

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 2022	30 June 2021
	£	£
Interest income from parent undertaking	693,444	132,962

There were no loans made to Directors during the period (6 months to 30 June 2021: none) and no balances outstanding at the period end (at 31 December 2021: £nil).  There were no employees of the Company during the period (6 months to 30 June 2021: 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. 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR BKNBDPBKDPCD