Rothschild & Co

Interim / Quarterly Report • Sep 4, 2023

National Storage Mechanism | Additional information

RNS Number : 3373L

Rothschild & Co Contin Fin CI Ltd

04 September 2023

Rothschild & Co Continuation Finance CI Limited

Half-yearly Report for the six-month period ended 30 June 2023

Interim Management Report

Summary of Important Events

Rothschild & Co Continuation Finance CI Limited (the "Company") is a wholly-owned subsidiary of Rothschild & Co Continuation Limited ("R&CoCL"). The principal activity of the Company is the raising of finance for the purpose of lending it to companies who are members of the Rothschild Concordia SAS group. In the period ended 30 June 2023, £125,000,000 perpetual subordinated guaranteed notes were in issue by the Company. 

Risks and Uncertainties

The principal risks of the Company are credit risk, liquidity risk and market risk.  The Company follows the risk management policies of fellow subsidiary undertaking, N. M. Rothschild & Sons Limited ("NMR"). 

The Company's principal risk is credit exposure to other group companies, as the notes issued by the Company have been on-lent to R&CoCL and NMR. R&CoCL has guaranteed, on a subordinated basis, the notes issued. The Company's ability to meet its obligations in respect of notes issued by it is therefore reliant on NMR and R&CoCL to make payments to the Company. Both R&CoCL and NMR are exposed to current market and geopolitical headwinds but, nevertheless, have 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. 

Responsibility 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

Peter Barbour

Director

04/09/2023

Condensed Interim Statement of Comprehensive Income

For the six months ended 30 June 2023

		6 months to		6 months to
		30 June 2023		30 June 2022
	Note	£		£
Interest income			5,588,452	5,588,452
Interest expense			(5,578,767)	(5,578,767)
Operating profit			9,685	9,685
Revaluation of loans	4		(1,395,000)	(8,238,750)
Revaluations of debt securities	9		1,395,000	8,238,750
Administrative expenses			(650)	(650)
Profit before tax			9,035	9,035
Income tax expense	3		(1,988)	(1,717)
Profit for the financial period			7,047	7,318
Other comprehensive income			-	-
Total comprehensive income for the financial period			7,047	7,318

Condensed Interim Statement of Changes in Equity

For the six months ended 30 June 2023

	Share Capital	Retained Earnings	Total
	£	£	£
At 1 January 2023	100,000	203,986	303,986
Total comprehensive income for the period	-	7,047	7,047
At 30 June 2023	100,000	211,033	311,033
At 1 January 2022	100,000	188,692	288,692
Total comprehensive income for the period	-	7,318	7,318
At 30 June 2022	100,000	196,010	296,010

Condensed Interim Balance Sheet

At 30 June 2023

		At 30 June		At 31 December
		2023	2023	2022	2022
	Note	£	£	£	£
Non-current assets
Loans to group undertakings	4		127,807,500		129,202,500
Current assets
Other financial assets	5	4,168,182		6,496,190
Cash and cash equivalents	6	208,135		3,542,325
		4,376,317		10,038,515
Current liabilities
Current tax payable		(5,575)		(3,587)
Deferred tax	7	(23,750)		(23,750)
Other financial liabilities	8	(4,160,959)		(9,832,192)
Net current assets			186,033		178,986
Total assets less current liabilities			127,993,533		129,381,486
Non-current liabilities
Subordinated guaranteed notes	9		(127,682,500)		(129,077,500)
Net assets			311,033		303,986
Shareholders' equity
Share capital	11		100,000		100,000
Retained earnings			211,033		203,986
Total shareholders' equity			311,033		303,986

Condensed Interim Cash Flow Statement

For the six months ended 30 June 2023

		6 months to	6 months to
		30 June 2023	30 June 2022
	Note	£	£
Cash flow from operating activities
Profit for the financial period		7,047	7,318
Income tax expenses		1,988	1,717
Net cash inflow from operating activities		9,035	9,035
Cash flow from financing activities Fair value movements of loans		(1,395,000)	(8,238,750)
Fair value movements of debt securities		1,395,000	8,238,750
Net decrease in other financial assets		2,328,008	2,328,008
Net decrease in other financial liabilities		(5,671,233)	(5,671,233)
Net cash outflow from financing activities		(3,343,225)	(3,343,225)
Net decrease in cash and cash equivalents		(3,334,190)	(3,334,190)
Cash and cash equivalents at beginning of the half-year		3,542,325	3,527,021
Cash and cash equivalents at end of the half-year	6	208,135	192,831

Interest paid and received during the period were as follows:

	6 months to	6 months to
	30 June 2023	30 June 2022
	£	£
Interest paid	11,250,000	11,250,000
Interest received	7,916,460	7,916,460

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 2023

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 2022, 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 2022.

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 R&CoCL and their ability to continue to pay the interest on the intercompany loan provided by the Company.

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, NMR.  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 12 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 (2020: £nil). 

3.  Taxation

	6 months to	6 months to
	30 June 2023	30 June 2022
	£	£
Current tax	(1,988)	(1,717)
Tax charged for the period	(1,988)	(1,717)

The current tax charge can be explained as follows:

	6 months to	6 months to
	30 June 2023	30 June 2022
	£	£
Profit before tax	9,035	9,035
United Kingdom corporation tax charge at effective rate 22% (2022: 19%)	(1,988)	(1,717)
Tax charged for the period	(1,988)	(1,717)

4.  Non-Current Assets: Loans to Group Undertakings

	At 30 June	At 31 December
	2023	2022
	£	£
At beginning of period	129,202,500	145,628,750
Fair value movements	(1,395,000)	(16,426,250)
At end of period	127,807,500	129,202,500
Due In 5 years or more	127,807,500	129,202,500

IFRS 9 requires the £125,000,000 loans to be carried at fair value which as at 30 June 2023 was £127,807,500 (at 31 December 2022: £129,202,500).  On an amortised cost basis, the value of the loan at 30 June 2023 would be £125,000,000 (at 31 December 2022: £125,000,000). The fair values are based on the market value of the external debt securities (level 2). 

The interest rate charged on the subordinated perpetual loans to group undertakings is 9 1/64 percent.

5.  Other Financial Assets

	At 30 June	At 31 December
	2023	2022
	£	£
Amounts owed by parent undertaking	2,500,910	3,939,705
Amounts owed by fellow subsidiary undertaking	1,667,272	2,556,485
	4,168,182	6,496,190

6.  Cash and Cash Equivalents

At 30 June 2023 the Company held cash of £208,135 (31 December 2022: £3,542,325) at a fellow subsidiary undertaking.

7.  Deferred Income Taxes

	At 30 June	At 31 December
	2023	2022
	£	£
At beginning of period	(23,750)	(23,750)
At end of period	(23,750)	(23,750)

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

	At 30 June 2023		At 31 December 2022
		£	£
Fair value of intra-group loans		(533,425)	(798,475)
Fair value of debt securities in issue		509,675	774,725
		(23,750)	(23,750)

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.   Other Financial Liabilities

	At 30 June	At 31 December
	2023	2022
	£	£
Interest payable	4,160,959	9,832,192

Interest is payable on the subordinated guaranteed notes at 9 percent. 

9.  Subordinated Guaranteed Notes

	At 30 June	At 31 December
	2023	2022
	£	£
At beginning of period	129,077,500	145,503,750
Fair value movements	(1,395,000)	(16,426,250)
At end of period	127,682,500	129,077,500
Due In 5 years or more	127,682,500	129,077,500

Given the IFRS 9 requirement to fair value the related loans, the Company has elected to fair value the subordinated guaranteed notes, which as at 30 June 2023 was £127,682,500 (at 31 December 2022: £129,077,500).  On an amortised cost basis, the value of the subordinated guaranteed notes at 30 June 2023 would be £125,000,000 (at 31 December 2022: £125,000,000). Consistent with the prior period, the fair value was derived from quoted market prices at the balance sheet date. In accordance with IFRS 13 and due to a

reduction in the frequency and volume of transactions observed in the immediate run up to the period

end, the fair value is considered to be level 2 as at 30 June 2023 (2022: level 1).

10.            Maturity of Financial Liabilities

The following table shows contractual cash flows payable by the Company on the subordinated guaranteed notes classified by remaining contractual maturity at the balance sheet date.  Interest cash flows on the loan notes are shown up to five years only, with the principal balance being shown in the >5 yr column.

At 30 June 2023

	Demand		Demand - 3mth		3mth - 1yr	1yr - 5yr	>5 yr	Total
		£	£		£	£	£	£
Loan notes in issue		-	-	11,250,000		45,000,000	125,000,000	181,250,000

At 30 June 2022

	Demand		Demand - 3mth		3mth - 1yr	1yr - 5yr	>5 yr	Total
		£	£		£	£	£	£
Loan notes in issue		-	-	11,250,000		45,000,000	125,000,000	181,250,000

11. Share Capital

	At 30 June	At 31 December
	2023	2022
	£	£
Allotted, called up and fully paid
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 and fellow subsidiaries. 

Amounts recognised in respect of related parties at the period end were as follows:

	At 30 June 2023	At 31 December 2022
	£	£
Subordinated perpetual loan to parent undertaking - fair value	51,123,000	51,681,000
Subordinated perpetual loan to fellow subsidiary undertaking - fair value	76,684,500	77,521,500
Amounts owed by parent undertaking	2,500,910	3,939,705
Amounts owed by fellow subsidiary undertaking	1,667,272	2,556,485
Cash at fellow subsidiary undertaking	208,135	3,542,325

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

	6 months to 30 June 2023	6 months to 30 June 2022
	£	£
Interest receivable from parent undertaking	3,353,071	3,353,071
Interest receivable from fellow subsidiary undertaking	2,235,381	2,235,381

There were no loans made to Directors during the period (6 months to 30 June 2022: none) and no balances outstanding at the period end (at 31 December 2022: £nil).  There were no employees of the Company during the period (6 months to 30 June 2022: 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. 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 Rothschild & Co Continuation Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithins Lane, London, EC4N 8AL.

The Company's registered office is located at St Julian's Court, St Peter Port, Guernsey, GY1 3BP.

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