Rothschild & Co

Interim / Quarterly Report • Sep 4, 2023

National Storage Mechanism | Additional information

RNS Number : 3371L

Rothschild & Co Continuation Fin

04 September 2023

Rothschild & Co Continuation Finance PLC

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

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 and market 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

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		2,053,754	693,444
Interest expense		(2,042,487)	(687,002)
Operating profit		11,267	6,442
Revaluation of loans	4	(3,476,570)	(24,717,418)
Revaluation of debt securities	9	3,470,275	24,722,319
Foreign exchange translation (losses)/gains		(7,337)	1,277
(Loss)/profit before tax		(2,365)	12,620
Taxation	3	(4,084)	(3,329)
(Loss)/profit for the financial period		(6,449)	9,291
Other comprehensive income		-	-
Total comprehensive (loss)/income for the financial period		(6,449)	9,291

Condensed Interim Statement of Changes in Equity

For the six months ended 30 June 2023

	Share Capital	Retained Earnings	Total shareholders' equity
	£	£	£
At 1 January 2023	100,000	324,190	424,190
Total comprehensive loss for the period	-	(6,449)	(6,449)
At 30 June 2023	100,000	317,741	417,741
At 1 January 2022	100,000	304,687	404,687
Total comprehensive income for the period	-	9,291	9,291
At 30 June 2022	100,000	313,978	413,978

Condensed Interim Balance Sheet

At 30 June 2023

		At 30 June		At 31 December
		2023	2023	2022	2022
	Note	£	£	£	£
Non-current assets
Loan to parent undertaking	4		89,372,338		92,848,908
Current assets
Other financial assets	5	625,905		622,569
Cash and cash equivalents	6	269,013		265,057
		894,918		887,626
Current liabilities
Current tax liability		(3,970)		(4,490)
Deferred tax liability	7	(42,519)		(37,915)
Other financial liabilities	8	(623,934)		(620,572)
Net current assets			224,495		224,649
Total assets less current liabilities			89,596,833		93,073,557
Non-current liabilities
Debt securities in issue	9		(89,179,092)		(92,649,367)
Net assets			417,741		424,190
Shareholders' equity
Share capital	11		100,000		100,000
Retained earnings			317,741		324,190
Total shareholders' equity			417,741		424,190

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
Net (loss)/profit for the financial period		(6,449)	9,291
Taxation		4,084	3,329
Net cash (outflow)/inflow from operating activities		(2,365)	12,620
Cash flow from financing activities Net decrease in loans and interest receivable		3,473,234	24,431,389
Net decrease in debt securities in issue and interest payable		(3,466,913)	(24,436,447)
Net cash inflow/(outflow) from financing activities		6,321	(5,058)
Net increase in cash and cash equivalents		3,956	7,562
Cash and cash equivalents at beginning of half-year		265,057	250,897
Cash and cash equivalents at end of half-year	6	269,013	258,459

Interest receipts and payments during the period were as follows:

	6 months to	6 months to
	30 June 2023	30 June 2022
	£	£
Interest received from parent undertaking	2,050,418	407,416
Interest paid to note holders	2,039,125	401,130

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 its 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 (2022: £nil). 

3.   Taxation

	6 months to 30 June 2023	6 months to 30 June 2022
	£	£
Current tax	520	(2,398)
Deferred tax	(4,604)	(931)
Total tax	(4,084)	(3,329)

The tax charge can be explained as follows:

	6 months to	6 months to
	30 June 2023	30 June 2022
	£	£
(Loss)/profit before tax	(2,365)	12,620
United Kingdom corporation tax credit/(charge) at effective rate 22% (2022: 19%)	520	(2,398)
Deferred tax income statement charge	(4,604)	(931)
Tax charged for the period	(4,084)	(3,329)

4.   Non-Current Assets: Loan to Parent Undertaking

	At 30 June	At 31 December
	2023	2022
	£	£
At beginning of period	92,848,908	114,548,269
Fair value movements	(3,476,570)	(21,699,361)
At end of period	89,372,338	92,848,908
Due
In 5 years or more	89,372,338	92,848,908

IFRS 9 requires the €150,000,000 loan to be carried at fair value which as at 30 June 2023 was £89,372,338 (at 31 December 2022: £92,848,908). On an amortised cost basis, the value of the loan at 30 June 2023 would be £128,830,562 (at 31 December 2022: £133,027,075). 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% fixed on 05 February, 05 May, 05 August and 05 November each year. The interest rate on the above loan at 30 June 2023 was 3.18% (31 December 2022: 3.12%).

5.   Current Assets: Other Financial Assets

	At 30 June	At 31 December
	2023	2022
	£	£
Interest receivable	625,905	622,569

6.   Cash and Cash Equivalents

At 30 June 2023 the Company held cash of £269,013 (31 December 2022: £265,057) at the parent undertaking.

7.   Deferred Income Taxes

	At 30 June	At 31 December
	2023	2022
	£	£
At beginning of period	(37,915)	(35,869)
Recognised in income: Income statement charge	(4,604)	(2,046)
At end of period	(42,519)	(37,915)

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	8,680,807	7,633,851
Fair value of debt securities in issue	(8,723,326)	(7,671,766)
	(42,519)	(37,915)

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
	2023	2022
	£	£
Interest payable	623,934	620,572

9.   Non-Current Liabilities: Debt Securities in Issue

	At 30 June	At 31 December
	2023	2022
	£	£
At beginning of period	92,649,367	114,359,489
Fair value movements	(3,470,275)	(21,710,122)
At end of period	89,179,092	92,649,367
Due
In 5 years or more	89,179,092	92,649,367

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 2023 was £89,179,092 (at 31 December 2022: £92,649,367). On an amortised cost basis, the value of the debt securities in issue at 30 June 2023 would be £128,830,562 (at 31 December 2022: £133,027,075). 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).

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 2023 was 3.17% (31 December 2022: 3.11%).

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 2023

		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	-	1,020,982	3,062,947	16,335,715	128,830,562	149,250,206

At 31 December 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	-	1,034,286	3,102,857	16,548,568	133,027,075	153,712,786

11.   Share Capital

	At 30 June	At 31 December
	2023	2022
	£	£
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
	2023	2022
	£	£
Cash and cash equivalents at parent undertaking	269,013	265,057
Accrued interest receivable from parent undertaking	625,905	622,569
Loans to parent undertaking	89,372,338	92,848,908

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 2023	30 June 2022
	£	£
Interest income from parent undertaking	2,053,754	693,444

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, 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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