Annual Report • Dec 31, 2014
Annual Report
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Page
| Directors' report | |
|---|---|
| Statement of directors' responsibilities | |
| Independent auditor's report | 5 |
| Income statement | 6 |
| Statement of comprehensive income | 6 |
| Balance sheet | |
| Statement of changes in shareholders' equity | 8 |
| Statement of cash flows | 8 |
| Statement of accounting policies | 9 |
| Financial and capital risk management | 13 |
| Notes to the financial statements | 16 |
1
Provident Investments plc (the 'company') is a subsidiary of Provident Financial plc which, to nyther limit subsidiaries, forms the Provident Financial group (the 'group'). Provident Financial plc is a public limited company, listed on the London Stock Exchange.
r memal activity of Provident Investments plc is to provide finance and loans to Provident Financial plc and its subsidiary companies.
The income statement for the year is set out on page 6. The loss for the year of £48,000 (2013: £21,000 profit) has been deducted from (2013: added to) reserves.
Revenue and operating costs have decreased by 63% and 62% respectively in the year due to the maturity of the 2004 private placement loan notes and swaps in August 2014.
The directors expect that the business will continue in existence for the foreseeable future and the company will h he able to meet its liabilities as they fall due. Accordingly, the financial statements of the company have been prepared on a going concern basis.
Exemption from propaning a circus. Act 2006, the company has taken advantage of the exemption for small companies from preparing a strategic report.
The directors do not recommend the payment of a dividend in respect of the year ended 31 December 2014 (2013: Enil).
Directors of the company during the year ended 31 December 2014, all of whom were directors for the whole year then ended and up to the date of this report, were:
K J Mullen (Chairman) A C Fisher
E G Versluys
r micipal histor and antoo and wide risk management framework of Provident Financial planet of and r no oompany parkespece in framework together with the group's principal risks and uncertainties are set out in the annual report of Provident Financial plc.
The financial and capital risk management policies of the company are set out on pages 13 to 15.
Rey performance matouche (inance to fund the group. For this reason, the company's directors The company solery operialso to provide infance indicators for the statutory company is not necessary or appropriate for an understanding of the development, performance or position of the company.
The development, performance and position of the group as a whole, including the company, is set out in the annual report of Provident Financial plc.
The company does not have any employees.
In accordance with section 418 of the Companies Act 2006, each person who is a director at the date of this report confirmed that:
Addite LLP, the auditor for the company, was appointed in 2012 and a resolution proposing their reappointment will be proposed at the forthcoming annual general meeting of the group.
BY ORDER OF THE BOARD
Fredering
E G Versluys Director Bradford 11 March 2015
The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting anocore nate elobidate to propare the inune of the directors must not approve the Countained (if res) as daspled by are satisfied that they give a true and fair view of the state of affairs on the imancial classified and of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that the directors:
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain The directors and disclose with reasonable accuracy at any time the financial of the the company and enable the financial statements comply with the Companies Act 2006. They oundary and one them to easets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
BY ORDER OF THE BOARD
Chaple
E G Versluys Director Bradford 11 March 2015
We have audited the financial statements of Provident Investments plc for the year ended 31 December 2014 which comprise the income statement of comprehensive income, the balance sheet, the statement of changes in shareholders' equity, the statement of cash flows, the statement of accounting policies, the financial and capital risk management report and the related notes 1 to 15. The financial reporting the minute that been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Ocope of the adult of the minuted excenter.
An audit involves obtaining evidence about the amounts and disclosures sufficient to give reasonable assurance that the financial statements are from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based wn, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the financial statements:
In our opinion the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on while we are is respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
S. Curchecati Stewart Cumberbatch ACA (Senior Statutory Auditor) For and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Birmingham, United Kingdom 11 March 2015
| 2014 | 2013 | ||
|---|---|---|---|
| For the year ended 31 December | Note | £'000 | £'000 |
| Revenue | 2.085 | 5,694 | |
| Operating costs | 2 | (2,138) | (5,662) |
| Administrative costs | (8) | (8) | |
| (Loss)/profit before taxation | 3 | (59) | 24 |
| Tax credit/(charge) | 11 | (3) | |
| (Loss)/profit for the year attributable to the equity shareholders | (48) | 21 |
All of the above operations relate to continuing operations.
| 2014 | 2013 | ||
|---|---|---|---|
| For the year ended 31 December | Note | £'000 | £'000 |
| (Loss)/profit for the year attributable to the equity shareholders | (48) | 21 | |
| Other comprehensive income: | |||
| - cash flow hedges | ర్ | (133) | (216) |
| - tax on other comprehensive income | 28 | 50 | |
| - impact of change of UK tax rate | (2) | ||
| Other comprehensive loss for the year | (107) | (161) | |
| Total comprehensive loss for the year | (155) | 140) |
| 2014 | 2013 | ||
|---|---|---|---|
| As at 31 December | Note | £'000 | £'000 |
| ASSETS | |||
| Non-current assets | |||
| Deferred tax asset | 8 | 13 | |
| Current assets | |||
| Financial assets: | |||
| - derivative financial instruments | ర్ | 5,354 | |
| - cash and cash equivalents | 9 | ||
| - trade and other receivables | 358 | 76,090 | |
| Current tax asset | 1 | ||
| 360 | 81,445 | ||
| Total assets | 373 | 81,445 | |
| LIABILITIES | |||
| Current liabilities | |||
| Financial liabilities: | |||
| - bank and other borrowings | 10 | (43,431) | |
| - trade and other payables | 11 | (g) | (37,469) . (2) |
| Current tax liabilities | |||
| (9) | (80,902) | ||
| Non-current liabilities | 8 | (24) | |
| Deferred tax liabilities | (80,926) | ||
| Total liabilities | (9) 364 |
519 | |
| NET ASSETS | |||
| SHAREHOLDERS' EQUITY | 12 | 50 | 50 |
| Share capital | 107 | ||
| Hedging reserve | 314 | 362 | |
| Retained earnings | 364 | 519 | |
| TOTAL SHAREHOLDERS' EQUITY |
The financial statements on pages 6 to 25 were approved by the board of directors on 11 March 2015 and signed on its behalf by:
7
Arian
A C Fisher Director
KJ Mullen Director
| Share capital |
Hedging reserve |
Retained earnings |
Total | ||
|---|---|---|---|---|---|
| Note | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2013 | 50 | 268 | 341 | 659 | |
| Profit for the year | 21 | 21 | |||
| Other comprehensive income: | |||||
| - cash flow hedges | 6 | (216) | (216) | ||
| - tax on other comprehensive income | 4 | 50 | 50 | ||
| - impact of change in UK tax rate | 4 | 5 | 5 | ||
| Other comprehensive income for the year | (161) | (161) | |||
| Total comprehensive income for the year | (161) | 21 | (140) | ||
| At 31 December 2013 | 50 | 107 | 362 | 519 | |
| At 1 January 2014 | રે જેવ | 107 | 362 | 519 | |
| Loss for the year | (48) | (48) | |||
| Other comprehensive income: | |||||
| - cash flow hedges | 6 | (133) | (133) | ||
| - tax on other comprehensive income | 4 | 28 | 28 | ||
| - impact of change in UK tax rate | 4 | (2) | (2 | ||
| Other comprehensive income for the year | 1 | (107) | (107) | ||
| Total comprehensive income for the year | (107) | (48) | 155) | ||
| At 31 December 2014 | 50 | 314 | 364 |
| 2014 | 2013 | ||
|---|---|---|---|
| For the year ended 31 December | Note | £'000 | £'000 |
| (Loss)/profit after taxation | (48) | 21 | |
| Adjusted for: | |||
| - interest received | 1,141 | 5,115 | |
| - interest paid | (3,306) | (6,857) | |
| - tax (credit)/charge | (11) | ||
| Changes in operating assets and liabilities: | |||
| - derivative financial instruments | ર્દિક | (રે | |
| - trade and other receivables | 74,589 | 93,400 | |
| - trade and other payables | 34,154) | (43,050) | |
| Net cash generated from operating activities | 38,276 | 48,627 | |
| Cash flow from financing activities | |||
| Repayment of borrowings | (38,276) | (48,639) | |
| Net cash used in financing activities | (38,276) | (48,639) | |
| (12) | |||
| Net decrease in cash and cash equivalents | 13 | ||
| Cash and cash equivalents at beginning of year | |||
| Cash and cash equivalents at end of year | |||
| Cash and cash equivalents at end of year comprise: | |||
| Cash at bank and in hand | 9 | ||
| Total cash and cash equivalents |
The company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is No.1 Godwin Street, Bradford, BD1 2SU.
The principal activity of the company is to provide finance and loans to Provident Financial plc and its subsidiary companies.
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union (EU), International Financial Reporting Interpretations (. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFRS.
The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of derivative financial instruments to fair value. In preparing the financial statements, the directors are required to use certain critical accounting estimates and are required to exercise judgement in the application of the company's accounting policies.
The company's accounting policies are chosen by the directors to ensure that the financial statements present a true and fair view. All of the company's accounting policies are consistent with the requirements of IFRS, interpretations issued by the IFRIC and UK company law.
The company's principal accounting policies under IFRS, which have been consistently applied to all the years presented unless otherwise stated, are set out below.
(a) New and amended standards adopted by the company:
'Offsetting financial assets and financial liabilities (amendments to IAS 32)' clarifies the requirements for offsetting financial instruments. The amendments address in current practice when applying the offsetting criteria in IAS 32 'Financial instruments: Presentation'. The amendments clarify the meaning of 'currently has a legally enforceable right of set-off and that some gross settlement systems may be or considered equivalent to a net settlement. There was no material impact on the company.
'Novation of derivatives and continuation of hedge accounting (amendments to IAS 39)' are narrow-scope rovation of defrain of a recounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. There was no material impact on the company.
There are no other IFRS or IFRIC interpretations that are effective for the financial year beginning on or after 1 January 2014 that would be expected to have had a material impact on the company.
(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2014 and not early adopted:
IFRS 9, 'Financial instruments', addresses the classification measurement and recognition of financial of n res of mancial liabilities. The final version of the standard was issued in July 2014. The standard assets and imandal habilities and measurement of financial assets and liabilities and introduces the phinaniy impacts the dacement of the impairment of financial assets so it is no longer oxposed for a credit event to have occurred before a credit loss is recognised. The company is in the nocess of assessing the impact of standard and will adopt the standard in line with the mandatory effective date of 1 January 2018, subject to endorsement by the EU.
There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the company.
Revenue comprises interest income on derivative financial interest income earned from the parent company on intercompany loans.
Operating costs principally comprise the interest on bank and other borrowings and is recognised on an effective interest rate basis. Operating costs also include amounts payable on those derivative financial instruments held for hedging purposes which do not qualify for hedge accounting under IAS 39.
Transactions that are not denominated in the company's functional currency are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the exchange rate ruling at the balance sheet date. Differences arising on translation are charged or credited to the statement of comprehensive income.
Cash and cash equivalents comprise cash at bank and in hand.
Borrowings are recognised initially at fair value, being their issue proceeds net of any transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds net of transaction costs and the redemption value is recognised in the income statement over the expected life of the borrowings using the effective interest rate.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Denvanve manolal instruments, principally cross-currency swaps with an interest rate fixing element, to manage the interest rate and foreign exchange rate risk arising from the company's underlying business operations. No transactions of a speculative nature are undertaken.
All derivative financial instruments are assessed against the hedge accounting criteria set on ha has man All defive lindine moriality are accountine includinative financial instruments that met the heat 1 manufal instrants of IAS 39 are accordingly designated as either: hedges of the fair fair fair fair fair fair a fr recognised assets, liabilities or firm commitments (fair value hedges of highly probable forecast transactions (cash flow hedges).
The relationship between hedging instruments and hedged items is documented at the inception baring The Telationship betwoon new ment objectives and strategy for undertaking various hedging transactions. The assessment of whether the derive financial instruments that are used in helging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items is documented, both at the hedge inception and on an ongoing basis.
Derivative financial instruments are initially recognised at their fair value on the aderivative contract is Denvalive infancial instranced at each reporting date to their fair value. Where denvalive financial instruments do not qualify for hedge accounting, movements in their fair value are recognised imanolar instruments do not qualify for nedge accounting criteria have been met, the resulting imin or loss on the derivative financial instrument is recognised as follows:
Cash now neuges.
The effective portion of changes in the fair value of derivative financial instruments that are lease polstimated The ellective portion of the fair var var var var var varian equity. The gain or loss relating to the ineffective portion is recognised initialy in the income statement as part of operating costs. the mencedive portion to roognised in the income statement when the income or expense on the hedged item is recognised in the income statement.
Hedge accounting for both fair value and cash flow hedges is discontinued when:
When a cash flow hedging instrument expires or is sold, or when a cash flow hedge no longer meets the witeria for hedge accounting, any cumulative gain or loss existing in equity at that time is these chiend for neage acounting, any cannalians is no longer expected to occur, the cumulative gain or loss income statement. When a foresuit is immediately transferred to the income statement.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in notes The fall values of validae don't manusi in shareholder's equity are shown in the statement of changes in a pop of Movenients on the nedging fooor of a hedging derivative financial instrument is classified as a nonsharenologi sequily. The fair value of a maturity of the hedged item is more than 12 more in the cance sheet date and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months from the balance sheet date.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
The tax charge represents the sum of current and deferred tax. Current tax is calculated based on taxable r rrofit for the year using the enacted or substantially enacted by the balance sheet date. profit of the your with before taxation as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax is the tax expected to be payable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the the bulance and and and and oxported as is also provided on temporary differences, except when the timing of the reversal of the temporary difference is controlled by the company and it is probable that the temporary difference will not reverse in the future.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where is an intention to settle the balances on a net basis.
Provident Investments plc (the company) is a wholly-owned subsidiary of Provident Financial plc which, together with its subsidiaries, forms the Provident Financial group (the group).
The overall group internal control and risk management framework is the responsibility of the group board with certain responsibilities in respect of internal control and risk management being delegated to various sub-committees who report directly to the board. An overview of the group's risk management framework can be found in the annual report of Provident Financial plc.
The group operates with a centralised treasury function and therefore the funding requirements of the company are met wholly or partially via funding from Provident Financial plc or one of its subsidiaries. In addition, the allocation of capital is managed on a group basis by the centralised treasury function. Accordingly, it is inappropriate to consider the management of liquidity risk, interest rate risk, market risk and capital risk on a stand-alone company basis.
The company's activities expose it to a variety of financial risks, which can be categorised as credit risk, Higuidity risk, interest rate risk and foreign exchange rate risks are monitored and managed through a centralised treasury function on a group basis. The objective of the group's risk management framework is to identify and assess the risks facing the group and to minimise the potential adverse effects of these risks on the group's financial performance.
Financial and capital risk management is overseen by the group treasury committee and further detail on the group's risk management framework is described in the group annual report.
Credit risk is the risk that the company will suffer loss in the event of a default by a bank counterparty. A default occurs when the bank fails to honour repayments as they fall due.
The company's maximum exposure to credit risk on bank counterparties as at 31 December 2014 was £1,000 (2013: £6.7m).
Counterparty credit risk arises as a result of cash deposits placed with banks and the use of derivative financial instruments with banks and other financial institutions which are used to hedge interest rate risk and foreign exchange rate risk. Counterparty credit risk is managed by the group's treasury committee and and lorelyn bronange dounterparty policy which ensures that the group's cash deposits and derivative financial instruments are only made with high quality counterparties with the level of permitted exposure to a counterparty firmly linked to the strength of its credit rating. This is linked to the group's onpoure to a councipally the group's regulatory reporting requirements on large exposures to the Prudential Regulation Authority (PRA).
Liquidity risk is the risk that the company will have insufficient liquid resources available to meet its financial obligations as they fall due.
Liquidity risk is managed by the group's centralised treasury department through daily monitoring of expected cash flows in accordance with a board approved group funding and liquidity policy. This process is ononitored regularly by the group treasury committee. The group treasury committee ensures that all group companies have sufficient liquid resources to meet obligations as they fall due.
The group's funding and liquidity policy is designed to ensure that the group is able to continue to fund the growth of the business. The group therefore maintains committed borrowing facilities and access to retail deposit funding through it's subsidiary, Vanquis Bank Limited, to meet forecast borrowing requirements, including contractual maturities for at least the following 12 months. As at 31 December 2014, the group's committed borrowing facilities had a weighted average maturity of 3.1 years (2013: 3.2 years) and the headroom on these committed facilities amounted to £111.5m (2013: £235.2m).
The group is less exposed than other mainstream lenders to liquidity risk as the loans issued by the home credit business, the group's largest business, are of short-term duration (typically around one year) whereas the group's borrowings extend over a number of years.
A maturity analysis of the undiscounted contractual cash flows of the company's bank and other borrowings, including derivative financial instruments, is shown below.
| 2011 | ||||
|---|---|---|---|---|
| Financial liabilities | <1 vear £'000 |
1-2 years £'000 |
2-5 years £'000 |
Total £'000 |
| Trade and other payables | ਉ | S | ||
| Total | ರಿ | 9) |
| Financial assets | <1 vear £'000 |
1-2 years £'000 |
2-5 years £'000 |
Total £'000 |
|---|---|---|---|---|
| Trade and other receivables | 358 | 358 | ||
| Total | 358 | 358 |
| 2013 | ||||
|---|---|---|---|---|
| Financial liabilities | <1 year £'000 |
1-2 years £'000 |
2-5 years £'000 |
Total £'000 |
| Private placement loan notes | 39.007 | 39.007 | ||
| Trade and other payables | 37.469 | 37.469 | ||
| Total | 76.476 | 76.476 |
| Financial assets | <1 vear £'000 |
1-2 years £'000 |
2-5 years £'000 |
Total £'000 |
|---|---|---|---|---|
| Derivative financial instruments - settled gross | 6,186 | 6.186 | ||
| Trade and other receivables | 76.090 | 76.090 | ||
| Total | 82.276 | 82.276 |
Interest rate risk is the risk of a change in external interest rates which leads to an increase in the company's cost of borrowing.
The group's exposure to movements in interest rates is managed by the group treasury committee and is governed by a board approved interest rate hedging policy which forms part of the group's treasury policies.
The group seeks to limit the net exposure to changes in sterling interest rates. This is achieved through a combination of issuing fixed-rate debt and by the use of derivative financial instruments such as crosscurrency swaps with an interest fixing element.
A 2% movement in the interest rate applied to borrowings during 2014 and 2013 would not have had a material impact on the group's profit before taxation or equity as the group's interest rate risk was substantially hedged.
Foreign exchange rate risk is the risk of a change in foreign currency exchange rates leading to a reduction in profits or equity.
The group's exposure to movements in foreign exchange rates is monitored monthly by the group treasury committee and is governed by a board-approved foreign exchange rate risk management policy which forms part of the group's treasury policies.
The company's exposures to foreign exchange rate risk arise solely from the issuance of US dollar private placement loan notes, which were fully hedged into sterling through the use of cross-currency swaps. All US dollar private placement loan notes were settled in August 2014.
As at 31 December 2014, a 2% movement in the sterling to US dollar exchange rate would have led to a £nil (2013: £nil) movement in external borrowings with an opposite movement of £nil (2013: £nil) in the hedging reserve within equity. Due to the hedging arrangements in place, there would have been no impact on reported profits in 2014 (2013: £nil).
Market risk is the risk of loss due to adverse market movements caused by active trading positions taken in interest rates, foreign exchange markets, bonds and equities. The company's and group's policies do not increet for the group to undertake position taking or trading books of this type and the group do not do so.
Capital risk is managed by the group's centralised treasury department. The group manages capital risk by focussing on capital effective risk management. This aims to maintain sufficient, but not rocasing on expensive, optimise the debt to equity structure of the company and support any dividend payments to the parent. This takes into account the requirements of a variety of different stakeholders including shareholders, policyholders, regulators and rating agencies. A more detailed explanation of the management of capital risk can be found in the annual report of Provident Financial plc.
2
3
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Interest income from parent undertaking | 573 | 1,959 |
| Amounts receivable on cross currency swaps | 1,577 | 3,730 |
| Net fair value (loss)/gain on cross currency swaps | (65) | 5 |
| Total revenue | 2,085 | 5,694 |
| Operating costs | 2014 | 2013 |
| £'000 | £'000 | |
| Interest payable on private placement loan notes | 1,577 | 3,729 |
| Amounts payable on cross currency swaps | 561 | 1,933 |
| Total operating costs | 2,138 | 5,662 |
| Loss/profit before taxation | ||
| 2014 | 2013 | |
| £'000 | £'000 | |
| Auditor's remuneration: | ||
| Fees payable to the company's auditor for the audit of the financial statements |
ರಿ | 6 |
There were no non-audit fees paid by the company in the year (2013: £nil).
The company has no employees. The emoluments of the directors are paid by the ulimate parent company. The company has no omployous. The company (2013: no recharge to the directors of the directors of the r Tovion't financial pic, which manes in to resident is not possible to make an accurate apportionment of their services in relation to the company.
Retirement benefits accrue to one director (2013: one director) under a defined benefit scheme and two directors (2013: two directors) under a money purchase scheme.
Three directors (2013: three directors) exercised share options/awards over shares of the company's ultimate parent company, Provident Financial plc, in the year.
| 2014 | 2013 | |
|---|---|---|
| Tax charge in the income statement | £'000 | £'000 |
| Current tax | ||
| - current year | (17) | |
| Deferred tax (note 8) | 12 · | 15 |
| Impact of change in UK tax rate (note 8) | ||
| Total tax credit/(charge) |
The standard rate of UK corporation tax reduced from 23% to 21% with effect from 1 April 2014 and will further reduce rate to 20% from 1 April 2015.
As the changes to the UK statutory corporation tax rate were enacted in the 2013 Finance Act, deferred tax balances at 31 December 2013 were re-measured at 20% on the basis that the temporary differences on which the deferred tax balances were calculated were expected to reverse after 1 April 2015. In 2014, the movements in the deferred tax balances have been measured at the average statutory corporation tax rate for the year of 21.50% (2013: 23.25%). The deferred tax balances at 31 December 2014 have been remeasured at 20% as the temporary differences on which deferred tax has been calculated are expected to reverse after 1 April 2015. A tax charge of £1,000 in 2014 (2013; £1,000) represents the income statement adjustment as a result of this change. An additional deferred tax charge of £2,000 in 2014 (2013: credit of £5,000) has been taken directly to other comprehensive income, reflecting the impact of the change in UK corporation tax rate on items reflected directly in other comprehensive income.
| 2014 | 2013 | |
|---|---|---|
| Tax credit on items taken directly to other comprehensive income | £'000 | £'000 |
| Current tax credit on cash flow hedges | 28 | 50 |
| Impact of change in UK tax rate | 2) | |
| Total tax credit on items taken directly to other comprehensive income | 26 | 55 |
The rate of tax credited/(charged) on the (loss)/profit before taxation for the year is lower than (2013: lower than) the average standard rate of corporation tax in the UK of 21.50% (2013: 23.25%). This can be reconciled as follows:
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| (Loss)/profit before taxation | (59) | 24 |
| (Loss)/profit before taxation multiplied by the average standard rate of | ||
| corporation tax in the UK of 21.50% (2013: 23.25%) | 13 | (ଚ) |
| - impact of change in UK tax rate | ||
| - adjustment in respect of prior years | ||
| Total tax credit/(charge) | (3) |
The following table sets out the carrying value of the company's financial assets and liabilities in accordance with the categories of financial instruments set out in IAS 39. Assets and liabilities outside the scope of IAS 39 are shown within non-financial assets/liabilities:
| 2014 | |||||
|---|---|---|---|---|---|
| Loans and receivables £'000 |
Amortised cost £'000 |
Hedging derivatives £'000 |
Non- financial assets/ liabilities £'000 |
Total £'000 |
|
| Assets | |||||
| Cash and cash equivalents | 1 | ||||
| Trade and other receivables | 358 | 358 | |||
| Current tax assets | |||||
| Deferred tax assets | 13 | 13 | |||
| Total assets | 359 | 14 | 373 | ||
| Liabilities | |||||
| Trade and other payables | (છ) | (9) | |||
| Total liabilities | (9) | (છ) |
| Loans and receivables £'000 |
Amortised cost £'000 |
Hedging derivatives £'000 |
Non- financial assets/ liabilities £'000 |
Total £'000 |
|
|---|---|---|---|---|---|
| Assets | |||||
| Cash and cash equivalents | |||||
| Derivative financial instruments | 5,354 | 5,354 | |||
| Trade and other receivables | 76.090 | 76.090 | |||
| Total assets | 76,091 | 5,354 | 81.445 | ||
| Liabilities | |||||
| Bank and other borrowings | (43,431) | (43,431) | |||
| Trade and other payables | (37,469) | (37,469) | |||
| Current tax liabilities | (2) | (2) | |||
| Deferred tax liabilities | (24) | (24) | |||
| Total liabilities | (80,900) | (26) | (80,926) |
Under IFRS 7, 'Financial instruments: Disclosures', all derivative financial instruments are classed as Level Onder in No 7, Tinanola moranoner Blocks and the fair value is therefore determined through discounting z, as they are not traded in an active market in the financial assets and liabilities are classed as Level 1 and their fair value is equal to their carrying value.
The company uses derivative financial instruments to hedge the interest rate risk and foreign exchange rate risk on its borrowings. The company does not enter into speculative transactions or positions.
The contractual/notional amounts and the fair values of derivative financial instruments are set out below:
| 2014 | 2013 | |||||
|---|---|---|---|---|---|---|
| Contractual/ notional amount |
Assets | Liabilities | Contractual/ notional amount |
Assets | Liabilities | |
| £'000 | £'000 . | £'000 | £'000 | £'000 | £'000 | |
| Cross-currency swaps | 36,275 | 5,354 | ||||
| Total | 36,275 | 5,354 | ||||
| Analysed as: - due within one year - due in more than one year |
5,354 | |||||
| Total | 5,354 |
The fair value of derivative financial instruments was calculated by discounting contractual future cash flows using relevant market interest rate yield curves and foreign exchange rates prevailing at the balance sheet date.
The movement in the hedging reserve within equity as a result of the changes in the fair value of derivative financial instruments can be summarised as follows:
| 2014 | 2013 | |
|---|---|---|
| Hedging reserve movements | £'000 | £'000 |
| 2003 cross-currency swaps | (32) | |
| 2004 cross-currency swaps | 133 | 248 |
| Net charge to the hedging reserve | 133 | 216 |
Under IFRS 7, 'Financial instruments: Disclosures', all derivative financial instruments are classed as Level Onate in No 1, Thanolar methe market and the fair value is therefore determined through discounting future cash flows, using appropriate observable rates.
(b) (Onarge)/orcuit to the income statement in the year in respect of the movement in the fair value of derivative financial instruments is as follows:
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Net fair value (loss)/gain_on 2004 cross-currency swaps | (65) | |
| Net (charge)/credit to the income statement | 65 |
The company used cross-currency swaps in order to manage the interest rate and foreign exchange rate risk arising on the company's US private placement loan notes issued in 2003 and 2004.
The company put in place cross-currency swaps to swap the principal and fixed rate interest of the 2003 US dollar private placement loan notes into fixed rate sterling liabilities. The maturity dates of the cross-currency swaps matched the underlying loan notes. These swaps were designated as cash flow hedges and were deemed effective under IAS 39 until maturity.
The cross-currency swaps used to hedge the 2003 US dollar private placement loan notes matured in 2013.
The movement in the fair value of the swaps can be analysed as follows:
| 2014 | 2013 | |
|---|---|---|
| 2003 private placement loan notes | £'000 | £'000 |
| Liability at 1 January | (1,880) | |
| Exchange rate movements | 1.848 | |
| Charged to the hedging reserve | 32 | |
| Liability at 31 December |
The exchange rate movements reflected the translation of the 2003 US dollar private placement loan notes at the year-end exchange rate compared with the contracted rate. A corresponding entry was made to borrowings.
The amount charged to the hedging reserve reflected the difference between the movement in fair value of the cross-currency swaps and the exchange rate movements described above.
The company put in place cross-currency swaps to swap the principal and fixed rate interest of the US dollar private placement loan notes issued in 2004 into floating rate sterling interest liabilities. The maturity dates of the cross-currency swaps matched the underlying loan notes.
The cross-currency swaps used to hedge the 2004 US dollar private placement loan notes matured in 2014.
The swaps comprised both cash flow hedges and fair value hedges. The cash flow hedge portion of the swaps were designated as cash flow hedges and were effective under IAS 39 until maturity.
The fair value hedge portion of the swaps were designated and were effective under IAS 39 as fair value hedges until the date of maturity. As a result, fair value movements in the swaps were charged to the income statement with a corresponding entry made to the underlying loan notes within borrowings for the effective portion of the swaps, leaving a net credit within the income statement reflecting the net fair value loss (2013: gain) on the fair value hedge up the date of maturity.
During the year to 31 December 2014 the swaps had a range of interest rates from LIBOR + 1.61% to LIBOR + 1.63% (2013: LIBOR + 1.61% to LIBOR + 1.63%) and at 31 December 2014 had a weighted average period to maturity of nil years (2013: 0.6 years).
The movement in the fair value of the swaps can be analysed as follows:
| 2014 | 2013 | |
|---|---|---|
| 2004 private placement loan notes | £'000 | £'000 |
| Asset at 1 January | 5.354 | 8.072 |
| Exchange rate movements | (5,156) | (2,475) |
| Net fair value (loss)/gain (charged)/credited to the income statement | (65) | |
| Charged to the hedging reserve | (133) | (248) |
| Asset at 31 December | 5.354 |
The exchange rate movement of £5,156,000 credit (2013: £2,475,000 credit) reflects the difference between the translation of the 2004 US dollar private placement loan notes up to the date of maturity (2013: during the year) compared with the contracted rate. At 31 December 2013 the difference between the translation of the 2004 US dollar private placement loan notes at the year-end compared with the contracted rate amounted to a debit of £5,156,000.Corresponding entries were made within borrowings.
The amount charged to the hedging reserve reflects the difference between the movement in fair value of the cross-currency swaps and the exchange rate movements described above.
As at 31 December 2014 there are no amounts due for repayment in more than one year (2013: £nil). As at 31 December 2014 there were no amounts past due and there was no impairment provision held against amounts owed by parent undertakings due for repayment in less than one year (2013: £nil). The amounts owed by parent undertaking were unsecured, due for repayment in less than one year and accrue interest at rates linked to LIBOR.
| Total | 358 | 76.090 |
|---|---|---|
| Prepayments and accrued income | 1.008 | |
| Amounts owed by swap counterparties | 36,275 | |
| Amounts owed by parent undertaking | 358 | 38.807 |
| Current assets | £'000 | £'000 |
| 2014 | 2013 |
There are no amounts past due in respect of trade and other receivables due in less than one year (2013: £nil).
Amounts owed by the parent undertaking are unsecured, repayable on demand and generally accrue interest at rates linked to LIBOR.
Amounts owed by swap counterparties comprise the contracted notional amount receivable under the cross-currency swaps which are gross settled. Corresponding entries are made within trade and other payables.
The maximum exposure to credit risk of trade and other receivables in 2014 and 2013 is the carrying value of each class of receivable set out above. There is no collateral held in respect of trade and other receivables (2013: £nil).
9
Deferred tax is calculated in full on temporary differences under the balance sheet liability method. As a result of the changes in corporation tax rates in 2013, deferred tax balances at 31 December 2013 were remeasured at 20% on the basis that the temporary on which the deferred tax was calculated were expected to reverse after 1 April 2015. In 2014, movements in the deferred tax balances have been measured at the average statutory corporation tax rate for the year of 21.50% (2013. 23.25%). The deferred tax balances at 31 December 2014 have then been re-measured at 20% as the temporary differences on which deferred tax has been calculated are expected to reverse after 1 April 2015. A tax charge in 2014 of £1,000 (2013. £1,000) represents the income statement adjustment to deferred tax as a result of this change. An additional deferred tax charge of £2,000 in (2013: credit of £5,000) has been taken directly to other comprehensive income, reflecting the impact of the change in corporation tax rates on items reflected directly in other comprehensive income.
The movement in the deferred tax liability during the year can be analysed as follows:
| 2014 | 2013 | |
|---|---|---|
| Asset/(liability) | £'000 | £'000 |
| At 1 January | (24) | (93) |
| Credit to the income statement (note 4) | 12 | 15 |
| Credit on other comprehensive income prior to change in UK tax rate | ||
| (note 4) | 28 | 50 |
| Impact of change in UK tax rate: | ||
| - charge to the income statement (note 4) | (1) | (1) |
| - (charge)/credit to other comprehensive income | (2) | |
| At 31 December | 13 | 24 |
| Cash and cash equivalents | 2014 | 2012 |
| ALAAA | 0000 | |
|---|---|---|
| Cash at bank and in hand | ||
All amounts above are denoted in sterling.
Cash and cash equivalents are non-interest bearing (2013: non-interest bearing).
Borrowing facilities during the years to 31 December 2014 and 31 December 2013 comprised Ioan notes privately placed with US institutions (see note 10(d)).
There are no borrowings outstanding at 31 December 2014. At 31 December 2013 the borrowings were repayable within one year and were shown within current liabilities.
As at 31 December 2014, the weighted average period to maturity of committed facilities was nil years (2013: 0.6 years).
Before taking account of the various interest rate swaps and cross-currency swap arrangements entered into by the company, the company has no interest rate risk. The foreign exchange rate exposure on borrowings was as follows:
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Sterling | 2,000 | |
| US dollar | 41.431 | |
| Total | 43.431 |
As detailed in note 6, the company has entered into various cross-currency swap arrangements to hedge the foreign exchange rate exposures on borrowings. After taking account of aforementioned cross-currency swaps, the company has no foreign exchange rate exposures to borrowings denominated in US dollars (2013: £nil).
Cross-currency swaps were put in place to swap the proceeds and liabilities for principal and interest under the US dollar denominated loan notes into sterling.
On 24 April 2003, the company issued loan notes as follows:
On 12 August 2004, the company issued loan notes as follows:
(iii) £2m of 7.01% loan notes matured and repaid on 12 August 2014.
There were no undrawn committed borrowing facilities at 31 December 2014 (2013: no undrawn committed facilities).
Before taking account of the various cross-currency swap arrangements entered into by the company, the weighted average interest rate and the weighted average period to maturity of the company's fixed rate borrowings was as follows:
| 2014 | 2013 | ||||
|---|---|---|---|---|---|
| Weighted average interest rate 0/0 |
Weighted average period to maturity versits |
Weighted average interest rate 1/0 |
Weighted average period to maturity vears |
||
| Sterling | 7.01 | 0.61 | |||
| US dollar | 6.39 | 0.61 |
(3) . an values of the company's bank and other borrowings are compared to the book values as follows:
| 2014 | 2013 | |||
|---|---|---|---|---|
| Book value | Fair value Book value | Fair value | ||
| £'000 | £'000 | £'000 | £'000 | |
| US dollar private placement loan notes | 41.431 | 41,952 | ||
| Sterling private placement loan notes | 2.000 | 2.133 | ||
| Total | 43.431 | 44.085 |
The fair value of the sterling private placement loan notes and the US dollar private placement loan notes was calculated by discounting the expected future cash flows at the relevant market interest rate yeld curves prevailing at the balance sheet date.
| 2014 | 2013 | |
|---|---|---|
| Current liabilities | £'000 | £'000 |
| Amounts owed to swap counterparties | 36.275 | |
| Amounts owed to fellow subsidiary undertakings | ട് | 21 |
| 1.167 | ||
| 6 | 0 | |
| 9 | 37.469 | |
| Accrued interest payable Other payables Total |
The amounts owed to fellow subsidiary undertakings are unsecured, due for repayment in less than one year and generally accrue interest at rates linked to LIBOR.
Amounts owed to swap counterparites relate to the contracted notional amount payable under the crosscurrency swaps which are gross settled. Corresponding entries are made within trade and other receivables.
| Issued and fully paid | ||
|---|---|---|
| Ordinary shares of £1 each | - £'000 | |
| - number ('000) | ou |
There are no shares issued and not fully paid at the end of the year (2013: no shares).
Details of the transactions between the company and its parent and fellow subsidiary undertaings, which Details of the transactions betwoolf the vehipary and halances, along with any balances outstanding at 31 December 2014 are set out below:
| Interest credit | Outstanding balance | |||
|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | |
| £'000 | £'000 | £'000 | £'000 | |
| Interest income from parent undertaking | 12 | 26 | ||
| Outstanding receivable from parent undertaking | 358 | 38,807 | ||
| Outstanding amounts payable to fellow subsidiary undertakings |
3) | (21) |
Oontingent nabilitioo
The company is a guarantor in respect of borrowing facilities of the firsd and fleating rate herrowings in The Company is a guaranter in Toppor of \$31 December 2014, the fixed and floating rate borrowings in maximall of these guarantees amounted to £906.5m (2013: £800.8m). No loss is expected to arise.
Parent undertaking and controlling party is Provident Financial plc, which is the increaseds and she The Inimediate and altinate paront and railable in the can be and finat company's consolidated smallest and largest group to consolution the Company Secretary, Provident Financial plc, No.1 Godwin Street, Bradford, BD1 2SU.
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