TIDM80UC
RNS Number : 8022H
Connect M77/GSO PLC
31 July 2023
Please refer to the attached PDF document to view the full
announcement:
http://www.rns-pdf.londonstockexchange.com/rns/8022H_1-2023-7-31.pdf
Registration number: 04698798
Connect M77/GSO PLC
Annual Report and Financial Statements
for the Year Ended 31 March 2023
Connect M77/GSO PLC
Contents
1 to
Strategic Report 4
5 to
Directors' Report 6
Statement of Directors' Responsibilities 7
8 to
Independent Auditor's Report 13
Profit and Loss Account 14
Balance Sheet 15
Statement of Changes in Equity 16
17 to
Notes to the Financial Statements 28
Connect M77/GSO PLC
Strategic Report for the Year Ended 31 March 2023
The Directors present their strategic report for the year ended
31 March 2023.
Principal activity
The Company is incorporated in Great Britain, registered in
England and Wales and domiciled in the United Kingdom.
On 7 May 2003 Connect M77/GSO plc signed a contract with East
Renfrewshire Council (the "Client") (on behalf of the Scottish
Government for the M77 and South Lanarkshire Council and East
Renfrewshire Council for the Glasgow Southern Orbital (GSO)) to
design, build, finance and operate the M77 from Fenwick to
Malletsheugh and the GSO from Malletsheugh to Philipshill, East
Kilbride and sections of the A726 and to maintain these roads under
a licence over a 32 year period as well as modify certain sections
of the A77 (the "Concession Agreement"). In accordance with the
Concession Agreement the Company is responsible for operating the
roads together with carrying out all of the routine and major life
cycle maintenance for the life of the concession.
The new road sections were opened to the public in April 2005
and the final completion certificate was issued in September
2005.
There have been no changes to the Company's activities in the
year under review and none are currently contemplated.
Review of business
The results for the year are set out on page 14. The profit for
the year before taxation was GBP1,357k (2022: GBP683k) and the net
liabilities position as at 31 March 2023 was GBP27,734k (2022:
GBP28,856k) for the Company.
The Directors expect the Company to continue its operations for
the foreseeable future and the Directors are not aware, at the date
of this report, of any major changes in the Company's activities in
the next year.
Key performance indicators
As part of the stewardship of the project the Directors
regularly consider Board reports related to the performance of the
Company and the information and Key Performance Indicators
("KPI's") contained therein. These include, amongst other things,
variance against budget in the financial statements and forward
cash flow forecasting and other qualitative and quantitative
indicators of performance that, as a whole, provide the basis for
the management of the Company.
The Company has set specific business objectives, which are
monitored using a number of KPI's. The relevant KPI's for this
report are detailed below.
2023 2022
GBP 000 GBP 000
Turnover 3,238 3,258
Profit after taxation 1,122 24
Net liabilities (27,734) (28,856)
======== ========
Connect M77/GSO PLC
Strategic Report for the Year Ended 31 March 2023
(continued)
Key performance indicators (continued)
The Company has a net liability position at the year end of
GBP27,734k (2022: GBP28,856k). This is primarily due to rolled up
subordinated debt interest charges due to the shareholders as the
Company has not been permitted to make any subordinated interest
payments for an extended period. In order to manage the compounding
impact of the subordinated debt interest roll up the shareholders
have waived their rights to receive interest for the year to 31
March 2023.
Despite the Company showing net liabilities, the Company's
projections, taking account of reasonably possible counterparty
performance, show that the Company expects to be able to continue
to operate for the foreseeable future. Accordingly, the Directors
continue to adopt the going concern basis in preparing the annual
report and financial statements.
Principal risks and uncertainties
The Company recognises that effective risk management is
fundamental to achieving its business objectives in order to meet
its commitments in fulfilling the Private Finance Initiative
("PFI") contract and in delivering a safe and efficient service.
Risk management contributes to the success of the business by
identifying opportunities and anticipating risks in order to
improve business performance and fulfil our contractual
obligations.
Credit and cash flow risk
The relevant financial risks to the Company are credit and cash
flow risks, which arise from its Client. The credit and cash flow
risks are not considered significant as the client is a government
organisation.
Interest rate risk
The financial risk management objective of the Company is to
ensure that financial risks are mitigated by the use of financial
instruments where they cannot be addressed by means of contractual
provisions. There are no derivatives, risk is mitigated through a
fixed rate loan instrument. Financial instruments are not used for
speculative purposes.
Liquidity risk
The Company's liquidity risk is principally managed through
financing the Company by means of long-term borrowings, with an
amortisation profile that matches the expected availability of
funds from the Company's operating activities. In addition, the
Company maintains reserve bank accounts to provide short-term
liquidity against future debt service and other expenditure
requirements.
Contractual relationships
The Company operates within a contractual relationship with its
Client. A significant impairment of this relationship could have a
direct and detrimental effect on the Company's results and could
ultimately result in termination of the concession.
To manage this risk the Company has regular meetings with the
Client including discussions on performance, project progress,
future plans and customer requirements.
The Directors do not believe that the Company is exposed to any
significant Financial Risk. The Company's principal activity as
detailed above is low risk as all relationships with the customer,
funders and sub-contractors within the Company in which it sits are
determined by the terms of the respective contracts.
Economic Uncertainty
The Directors have considered the consequences to the Company of
the current economic conditions, including the high rate of
inflation, increasing energy costs and the impact of the war in
Ukraine. As at the date of signing this report, this has not had a
significant impact on the Company, and it is not currently
anticipated that this will have a significant impact in the future.
This is primarily due to the contractual nature of most of the
Company's cash flows, including those which cover financing, which
ensures that any inflationary changes to expenditure will be
largely offset by equivalent changes to the Company's revenue.
Connect M77/GSO PLC
Strategic Report for the Year Ended 31 March 2023
(continued)
Section 172 Companies Act 2006 Statement
The Directors have a duty to promote the success of the Company
for the benefit of the shareholders as a whole and to describe how
this duty has been performed with regard to those matters set out
in Section 172 of the Companies Act 2006 ("Section 172").
The Directors have identified the Company's main stakeholders as
the following:
-- The Company's shareholders, bondholders and credit providers
Principal considerations of the board are to ensure that
the Company is meeting shareholder, credit provider and bondholder
expectations regarding its ability to meet its financing obligations.
These are discussed at all project board meetings, which are
held regularly throughout the year. The board regularly discusses
the obligations under the financing contracts, and how to
ensure these are fulfilled. In addition, regular meetings
are held with the funders, and attended by Directors, to keep
them updated on matters as required.
Throughout the year the board has given due consideration during
its discussions and decision-making of the matters set out in
Section 172 and below is a description of how the Directors have
had regard to these matters when performing their duties:
a) the likely consequences of any decision in the long term
The communication and reporting provided ensure that the
board is fully informed and able to make appropriate decisions.
b) the interests of the Company's employees,
The Company has no employees. The Company does, however,
pay due regard to the interests and safety of those who perform
services on its behalf.
c) the need to foster the Company's business relationships with
suppliers, customers and others
The Company has regular meetings with the Client, including
discussions on performance, project processes, future plans
and customer requirements. The Company ensures that regular
communication is maintained between the parties to ensure
that all obligations are met.
d) the impact of the Company's operations on the community and
the environment
The Company is committed to minimising environmental disruption
from its activities.
e) the desirability of the Company maintaining a reputation
for high standards of business conduct
The Company is committed in its day to day activities and
dealings with all parties to uphold the highest standard of
business conduct and integrity.
f) the need to act fairly as between members of the Company
The members of the Company are represented at board meetings
by their appointed directors. Conflicts on matters to be discussed
are identified at each meeting of the board. Directors representing
a member with a conflict of interest may therefore be excluded
from any discussion or vote in regard to it.
The Directors are cognisant of their duty under Section 172 in
their deliberation as a board on all matters. Decisions made by the
board consider the interest of all the Company's key stakeholders
and reflect the board's belief that the long-term sustainable
success of the Company is linked directly to its key
stakeholders.
Connect M77/GSO PLC
Strategic Report for the Year Ended 31 March 2023
(continued)
Future developments
The Directors expect the general level of activity to remain
stable in the forthcoming year. There have been no other changes to
the Company's activities in the year under review and no others are
currently contemplated.
Approved by the Board on
........................................ and signed on its behalf
by:
.........................................
M P Mageean
Director
Connect M77/GSO PLC
Directors' Report for the Year Ended 31 March 2023
The Directors present their annual report together with the
audited financial statements for the year ended 31 March 2023.
The following information has been disclosed in the Strategic
Report:
-- Principal activities and business review
-- Key performance indicators
-- Principal risks and uncertainties
-- Indication of likely future developments in the business
Going concern
The Directors do not expect any significant change to the
Company's activities to occur in the following financial year.
After making enquiries, as further elaborated in Note 1 of the
financial statements, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the financial
statements.
Results and dividends
The audited financial statements for the year ended 31 March
2023 are set out on pages 14 to 28. The profit for the year after
tax was GBP1,122k (2022: GBP24k).
The Directors declared and paid dividends of GBPNil (2022:
GBPNil). The Directors expect the Company to continue its
operations for the foreseeable future.
Directors of the Company
The directors who held office during the year were as
follows:
M J Edwards
M P Mageean
A M Mughal
Disclosure of information to the auditors
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
Auditor is unaware; and each Director has taken all steps that they
ought to have taken to make himself/herself aware of any relevant
audit information and to establish that the Company's Auditor is
aware of that information.
Connect M77/GSO PLC
Directors' Report for the Year Ended 31 March 2023
(continued)
Auditor
Pursuant to Section 487 of the Companies Act 2006, the auditor
will be deemed to be reappointed and KPMG LLP will therefore
continue in office.
Approved by the Board on
........................................ and signed on its behalf
by:
.........................................
M P Mageean
Director
Registered office
Q14 Quorum Business Park
Benton Lane
Newcastle Upon Tyne
NE12 8BU
Connect M77/GSO PLC
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual 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 they have
elected to prepare the financial statements in accordance with UK
Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice), including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss for that period. In preparing these financial statements, the
Directors are required to:
-- select suitable accounting policies and apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or
have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, and Directors' Report
that complies with that law and those regulations.
Connect M77/GSO PLC
Independent Auditor's Report to the Members of Connect M77/GSO
PLC
1. Our opinion is unmodified
We have audited the financial statements of Connect M77/GSO PLC
(the 'Company') for the year ended 31 March 2023, which comprise
the Profit and Loss Account, balance Sheet, Statement of Changes in
Equity, and related notes, including the accounting policies in
note 1.
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's affairs
as at 31 March 2023 and of its profit for the year then ended;
-- have been properly prepared in accordance with UK accounting
standards, including FRS 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland; and
-- have been prepared in accordance with the requirements of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were first appointed as auditor by the directors on 17
October 2016. The period of total uninterrupted engagement is for
the 7 financial years ended 31 March 2023. We have fulfilled our
ethical responsibilities under, and we remain independent of the
Company in accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were
provided.
2. Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key
audit matters (unchanged from 2020), in decreasing order of
audit significance, in arriving at our audit opinion above,
together with our key audit procedures to address those matters
and, as required for public interest entities, our results from
those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for
the purpose of, our audit of the financial statements as a whole,
and in forming our opinion thereon, and consequently are incidental
to that opinion, and we do not provide a separate opinion on these
matters. In arriving at our audit opinion above, the key audit
matters, in decreasing order of audit significance, were as
follows:
Connect M77/GSO PLC
Independent Auditor's Report to the Members of Connect M77/GSO
PLC (continued)
Going concern
Risk vs 2022:
Refer to page 18 (accounting policy).
The risk
Disclosure quality
The financial statements explain how the Board has formed a
judgement that it is appropriate to adopt the going concern basis
of preparation for the Company.
The judgement is based on an evaluation of the inherent risks to
the Company's business model and how those risks might affect the
Company's financial resources or ability to continue operations
over a period of at least 12 months from the date of the financial
statements.
The risks most likely to adversely affect the Company's
available financial resources over this period is the impact of
economic uncertainty on the contract performance, subcontractor
failure and compliance with borrowing covenants.
Our response
We performed the tests below rather than seeking to rely on any
of the Company's controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.
Our procedures included:
-- Our sector experience : We critically assessed the directors'
going concern assessment, including the reasonableness of
the key assumptions used in cash flow forecasts and the level
of downside sensitivities applied using our knowledge of the
industry and current economy.
-- Evaluating directors' intent: We evaluated the achievability
of the actions the Directors consider they would take to improve
the position should the risks materialise.
-- Assessing transparency : We assessed the accuracy and completeness
of the matters covered in the going concern disclosure.
Our results
We found the going concern disclosure without any material
uncertainty to be acceptable (2022 result acceptable).
We continue to perform procedures over Service revenue
recognition. However, the revenue is deemed simple by nature being
a fixed mark up by way of an agreement with a single customer, we
have not assessed this as one of the most significant risks in our
current year audit and, therefore, it is not separately identified
in our report this year.
Connect M77/GSO PLC
Independent Auditor's Report to the Members of Connect M77/GSO
PLC (continued)
3. Our application of materiality and an overview of the scope
of our audit
Materiality for the financial statements as a whole was set at
GBP1,300,000 (2022: GBP1,368,500) determined with reference to a
benchmark of total assets, of which it represents 1% (2022:
1%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 75% (2022: 75%) of
materiality for the financial statements as a whole, which equates
to GBP975,000 (2022: GBP1,026,300). We applied this percentage in
our determination of performance materiality because we did not
identify any factors indicated an elevated level of risk.
We agreed to report to the Board of Directors any corrected or
uncorrected identified misstatements exceeding GBP65,000 (2022:
GBP68,400), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
set out above and was performed remotely.
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
Our conclusions based on this work:
-- we consider that the Directors' use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate;
-- we have not identified, and concur with the Directors' assessment
that there is not, a material uncertainty related to events
or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as
a going concern for the going concern period.
-- we found the going concern disclosure in note 1 to be acceptable.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
5 Fraud and breaches of laws and regulations - ability to
detect
To identify risks of material misstatement due to fraud (fraud
risks) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud.
Our risk assessment procedures included:
-- Enquiring of directors and management as to the Company's
high-level policies and procedures to prevent and detect fraud,
and the Company's channel for whistleblowing, as well as whether
they have knowledge of any actual, suspected or alleged fraud;
-- Reading Board meeting minutes; and
-- Using analytic procedures to identify unusual or unexpected
relationships.
Connect M77/GSO PLC
Independent Auditor's Report to the Members of Connect M77/GSO
PLC (continued)
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the
audit.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
the risk that management may be in a position to make inappropriate
accounting entries. On this audit we do not believe there is a
fraud risk related to revenue recognition because revenue is a
fixed mark up by way of an agreement with a single customer.
We did not identify any additional fraud risks.
We performed procedures including:
-- Identifying journal entries to test based on criteria and
comparing the identified entries to supporting documentation.
These included but not limited to entries posted to unsual
account combinations/seldom used accounts and post-closing
entries; and
-- Assessing significant accounting estimates for bias.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience and
through discussion with the directors and other management (as
required by auditing standards) and discussed with the directors
and other management the policies and procedures regarding
compliance with laws and regulations.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
The Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation) and taxation
legislation and we assessed the extent of compliance with these
laws and regulations as part of our procedures on the related
financial statement items.
Secondly, the Company is subject to many other laws and
regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely
to have such an effect: health and safety. Auditing standards limit
the required audit procedures to identify non-compliance with these
laws and regulations to enquiry of the directors and inspection of
regulatory and legal correspondence, if any. Therefore if a breach
of operational regulations is not disclosed to use or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the Financial Statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the Financial Statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Connect M77/GSO PLC
Independent Auditor's Report to the Members of Connect M77/GSO
PLC (continued)
6. We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic Report and Directors' Report
Based solely on our work on the other information:
-- we have not identified material misstatements in the strategic
report and the directors' report;
-- in our opinion the information given in those reports for
the financial year is consistent with the financial statements;
and
-- in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
7. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
-- the financial statements are not in agreement with the accounting
records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 7,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
Connect M77/GSO PLC
Independent Auditor's Report to the Members of Connect M77/GSO
PLC (continued)
9. The purpose of our audit work and to whom we owe our
responsibilities
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.
......................................
Dan Gibson (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
110 Quayside
Newcastle Upon Tyne
United Kingdom
NE1 3DX
Date:.............................
Connect M77/GSO PLC
Profit and Loss Account for the Year Ended 31 March 2023
2023 2022
Note GBP 000 GBP 000
Turnover 6 3,238 3,258
Cost of sales (2,804) (2,738)
-------- --------
Gross profit 434 520
Administrative expenses (184) (345)
-------- --------
Operating profit 250 175
Interest receivable and similar income 7 8,876 8,882
Interest payable and similar expenses 8 (7,769) (8,374)
-------- --------
Profit before tax 1,357 683
Taxation 9 (235) (659)
-------- --------
Profit for the financial year 1,122 24
======== ========
The above results were derived from continuing operations.
The Company has no recognised gains or losses for the year other
than the results above. Accordingly no statement of comprehensive
income is presented.
Connect M77/GSO PLC
(Registration number: 04698798)
Balance Sheet as at 31 March 2023
2023 2022
Note GBP 000 GBP 000
Non current assets
Financial asset 12 104,829 109,074
Current assets
Debtors 13 213 193
Financial assets 12 4,179 4,686
Cash at bank and in hand 11 21,131 21,425
--------- ---------
25,523 26,304
Creditors : Amounts falling due within
one year 14 (7,452) (8,801)
--------- ---------
Net current assets 18,071 17,503
--------- ---------
Total assets less current liabilities 122,900 126,577
Creditors : Amounts falling due after
more than one year 14 (148,727) (153,430)
Deferred tax liabilities 10 (1,907) (2,003)
--------- ---------
Net liabilities (27,734) (28,856)
========= =========
Capital and reserves
Called up share capital 17 50 50
Profit and loss account (27,784) (28,906)
--------- ---------
Total equity (27,734) (28,856)
========= =========
Approved and authorised by the Board on
........................................ and signed on its behalf
by:
.........................................
M P Mageean
Director
Connect M77/GSO PLC
Statement of Changes in Equity for the Year Ended 31 March
2023
Called up Profit and
share capital loss account Total
GBP 000 GBP 000 GBP 000
At 1 April 2021 50 (28,930) (28,880)
Total comprehensive income - 24 24
-------------- ------------- --------
At 31 March 2022 50 (28,906) (28,856)
============== ============= ========
Called up Profit and
share capital loss account Total
GBP 000 GBP 000 GBP 000
At 1 April 2022 50 (28,906) (28,856)
Total comprehensive income - 1,122 1,122
-------------- ------------- --------
At 31 March 2023 50 (27,784) (27,734)
============== ============= ========
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023
Accounting policies
1
Connect M77/GSO PLC (the "Company") is a company limited by
shares and incorporated, domiciled and registered in England and
Wales in the UK. The registered number is 04698798 and the
registered address is Q14 Quorum Business Park, Benton Lane,
Newcastle Upon Tyne, NE12 8BU.
A summary of the principal accounting policies of the Company,
all of which have been applied consistently throughout the current
and preceding year, is set out below.
Basis of preparation
These financial statements were prepared in accordance with
Financial Reporting Standard 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland ("FRS 102") and the
Companies Act 2006. The presentation currency of these financial
statements is sterling. All amounts in the financial statements
have been rounded to the nearest GBP1,000, unless otherwise
stated.
The Company's immediate parent undertaking, Connect M77/GSO
Holdings Limited, includes the Company in its consolidated
financial statements. The consolidated financial statements of
Connect M77/GSO Holdings Limited are available to the public and
may be obtained from the address in note 19.
In these financial statements, the Company is considered to be a
qualifying entity (for the purposes of this FRS) and has applied
the exemptions available under FRS 102 in respect of the following
disclosures:
-- Cash Flow Statement and related notes; and
-- Key Management Personnel compensation.
As the consolidated financial statements of Connect M77/GSO
Holdings Limited include the equivalent disclosures, the Company
has also taken the exemptions under FRS 102 available in respect of
the following disclosures:
-- Certain disclosures required by FRS 102.26 Share Based Payments;
and
-- Certain disclosures required by FRS 102.11 Basic Financial
Instruments and FRS 102.12 Other Financial Instrument Issues
in respect of financial instruments not falling within the
fair value accounting rules of Paragraph 36(4) of Schedule
1 of the Companies Act 2006.
Judgements made by the Directors, in the application of these
accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed in note 2.
Measurement convention
The financial statements are prepared on the historical cost
basis, except that financial instruments classified as fair value
through profit or loss are stated at their fair value.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Accounting policies (continued)
1
Going concern
The Company's business activities, together with the factors
likely to affect its future development and position, are set out
in the Strategic Report and Directors' Report.
The financial statements have been prepared on a going concern
basis which the Directors consider to be appropriate for the
following reasons.
The Directors have prepared cash flow forecasts for the period
to September 2024 which indicate that, taking account of severe but
plausible downside scenarios, the Company will have sufficient
funds to meet its liabilities as they fall due for a period of at
least 12 months from the date of approval of the financial
statements. Those forecasts are dependent on the underlying
customer continuing to meet its obligations under the Project
Agreement which are underwritten by The Cabinet Ministers.
The Company operating cash inflows are largely dependent on
unitary charge receipts receivable from East Renfrewshire Council .
The Directors have no reason to believe these amounts will not
continue to be received but, even in a severe but plausible
downside scenario where there are delays in the receipt of the
unitary charge receipts, the Company could continue to meet its
liabilities as they fall due through its available cash
balances.
The Directors believe the Company has sufficient funding in
place and expect the Company to be in compliance with its debt
covenants even in severe but plausible downside scenarios.
Consequently, the Directors are confident that the Company will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
Turnover
In the operational phase, revenue is recognised by allocating a
proportion of total unitary income receivable over the life of the
project to service costs by means of a deemed constant rate of
return on these costs. Revenue is recognised by applying a 5%
mark-up on the operational costs, representing the fair value of
operational services.
Finance costs
Finance costs in relation to the fixed rate senior secured bonds
and the secured loan stock are recognised using the effective
interest rate method under FRS 102 whereby expected interest over
the life of the project is spread and recognised in each
period.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Accounting policies (continued)
1
Tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in profit or loss, except that a change
attributable to an item of income or expense recognised as other
comprehensive income is also recognised directly in other
comprehensive income.
Current tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. The tax currently
payable is based on taxable profit
for the year. Taxable profit differs from net profit 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 or recoverable 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 liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the balance
sheet date.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Accounting policies (continued)
1
Financial instruments
Classification
Trade and other debtors are recognised initially at transaction
price less attributable transaction costs. Trade and other
creditors are recognised initially at transaction price plus
attributable transaction costs. Subsequent to initial recognition
they are measured at amortised cost using the effective interest
method, reduced by allowances for estimated irrecoverable amounts
and expected credit losses in the case of trade debtors.
Interest-bearing borrowings are recognised initially at the
present value of future payments discounted at a market rate of
interest. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised cost using the effective
interest method, less any impairment losses.
Term loans are initially stated at the amount of the net
proceeds after deduction of related issue costs. The carrying
amount is increased by the finance cost in respect of the
accounting period and reduced by payments made in the period.
Secured subordinated debt is initially stated at the amount of
the net proceeds after deduction of related issue costs. The
carrying amount is increased by the finance cost in respect of the
accounting period and reduced by payments made in that period.
Investments realisable within one year held by the Company
represent amounts held on deposit with a financial institution
which are not available for withdrawal without penalty in under 24
hours. Investments realisable within one year are stated at
amortised cost with the interest receivable being recognised at a
constant rate over the life of the investment.
Cash and cash equivalents comprise cash balances and call
deposits.
Impairment
A financial asset not carried at fair value through profit or
loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset's original effective interest rate. For
financial instruments measured at cost less impairment an
impairment is calculated as the difference between its carrying
amount and the best estimate of the amount that the Company would
receive for the asset if it were to be sold at the reporting date.
Interest on the impaired asset continues to be recognised through
the unwinding of the discount. Impairment losses are recognised in
profit or loss. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is
reversed through profit or loss.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Critical accounting estimates and judgements
2
Judgements
In the application of the Company's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised where the revision
affects only that period, or in the period of the revision and
future periods where the revision affects both current and future
periods.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are as follows.
Service concession arrangement
The Company accounts for the project as a service concession
arrangement. The Directors have used their judgement in selecting
the appropriate accounting basis for the concession. The Directors
use their judgement in selecting the appropriate financial asset
rate to be applied in order to allocate the income received between
revenue, and capital repayment of and interest income on the
financial asset; and also the service margin currently 5% that is
used to recognise service revenue. The Directors have also used
their judgement in assessing the appropriateness of the future
maintenance costs that are included in the Company's forecasts. The
Directors will continue to monitor the condition of the assets and
undertake a regular review of maintenance spend.
Auditors' remuneration
3
The audit fee for the Company amounted to GBP50k (2022:
GBP43k).
Directors' remuneration
4
The Directors received no salary, fees, or other benefits in the
performance of their duties in respect of the Company in the
current or preceeding year.
Staff costs
5
All staff costs are borne by Balfour Beatty Investments Limited,
which seconds its employees to the Company and charges related
service costs. The Company had no employees during the current or
prior year.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Analysis of turnover
6
Turnover by origin and destination from the Company's principal
activity
2023 2022
GBP 000 GBP 000
UK 3,238 3,258
========== ==========
Interest receivable and similar income
7
2023 2022
GBP 000 GBP 000
Interest income on financial assets 8,508 8,880
Interest on bank accounts and deposits 368 2
---------- ----------
8,876 8,882
========== ==========
Interest payable and other expenses
8
2023 2022
GBP 000 GBP 000
Secured bond interest 6,469 6,681
Secured loan stock interest 1,300 1,693
---------- ----------
7,769 8,374
========== ==========
Taxation
9
Tax charged/(credited) in the income statement
2023 2022
GBP 000 GBP 000
Current taxation
UK corporation tax 331 177
UK corporation tax adjustment to prior
periods - 48
-------- --------
331 225
-------- --------
Deferred taxation
Arising from origination and reversal of
timing differences (73) (47)
Arising from changes in tax rates and laws (23) 481
-------- --------
Total deferred taxation (96) 434
-------- --------
Tax expense in the income statement 235 659
======== ========
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Taxation (continued)
9
The tax on profit before tax for the year is lower than the
standard rate of corporation tax in the UK (2022 - higher than the
standard rate of corporation tax in the UK) of 19% (2022 -
19%).
The differences are reconciled below:
2023 2022
GBP 000 GBP 000
Profit before tax 1,357 683
======== ========
Corporation tax at standard rate 258 130
Deferred tax (credit)/expense relating
to changes in tax rates or laws (23) 481
Increase in current tax from adjustment
for prior periods - 48
-------- --------
Total tax charge 235 659
======== ========
The Company earns its results primarily in the UK, therefore the
tax rate used for tax on profit on ordinary activities is the
current UK corporation tax rate of 19% (2022: 19%).
Deferred tax is measured at a tax rate of 25% in line with rates
enacted by the Finance Act 2021 which was enacted on 24 May 2021, a
rate change arises in the tax reconciliation due to this being
calculated at 19%.
Deferred tax liability
10
2023 2022
GBP 000 GBP 000
At 1 April (2,003) (1,569)
(Charged)/credited to the income statement 96 (434)
---------- ----------
At 31 March (1,907) (2,003)
========== ==========
The deferred tax liability is a timing difference relating to
capitalised interest for which a deduction was previously
recognised. The timing difference is being released in line with
the release of the capitalised interest element held within the
financial asset.
Cash and cash equivalents
11
2023 2022
GBP 000 GBP 000
Cash at bank 21,131 21,425
========== ==========
Cash at bank and in hand includes GBP18,184k (2022: GBP17,849k)
restricted from use in the business, being held in the Company's
reserve accounts under the terms of its senior loan facility.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Financial asset
12
2023 2022
GBP 000 GBP 000
Balance brought forward 113,760 116,854
Service income received in the year (17,122) (15,527)
Operating revenues 3,106 3,076
Lifecycle replacement costs 756 477
Notional interest 8,508 8,880
---------- ----------
Balance carried forward 109,008 113,760
========== ==========
Financial asset comprising:
2023 2022
GBP 000 GBP 000
Amounts falling due within one year 4,179 4,686
Amounts falling due after more than one
year 104,829 109,074
---------- ----------
109,008 113,760
========== ==========
Debtors
13
2023 2022
GBP 000 GBP 000
Prepayments and accrued income 213 193
---------- ----------
213 193
========== ==========
Creditors
14
2023 2022
GBP 000 GBP 000
Due within one year
Fixed rate senior secured bonds 6,184 5,766
Accruals and deferred income 1,122 2,720
VAT payable 76 220
Corporate tax liability 70 95
---------- ----------
7,452 8,801
========== ==========
Due after one year
Fixed rate senior secured bonds 100,916 106,920
Secured loan stock 14,865 14,865
Secured loan stock interest 32,946 31,645
---------- ----------
148,727 153,430
========== ==========
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Creditors (continued)
14
Fixed rate guaranteed senior secured bonds due 2034 of
GBP152,429k were issued on 7 May 2003. The bonds have been
unconditionally and irrevocably guaranteed by Syncora Guarantee
(UK) Limited (formerly XL Capital Assurance (UK) Limited) for
payment of principal and interest.
Interest on the bonds is payable semi-annually in arrears on 31
March and 30 September in each year at a fixed rate of 5.404% per
annum commencing on 30 September 2003.
Unless previously redeemed or purchased and cancelled, the bonds
will mature on 31 March 2034 and are subject to redemption in part
from, and including, 30 September 2006 in accordance with the
amortisation schedule set out in the bonds offering circular.
The secured loan stock bears interest at 12.1% per annum and
accrues from the date of final completion, with the final
instalment due in 2035, or as the Company elects, but subject to
certain restrictions in the collateral deed. The secured loan stock
issued by the Company is held by the Company's immediate parent
company. The Company's immediate parent company has waived its
right to receive interest within 12 months for the years ended 31
March 2022 and 31 March 2023.
All borrowings contain either a fixed or varying security
interest over the assets of the Company, as defined by an
intercreditor agreement. The bonds have certain covenants
attached.
Fixed rate guaranteed senior secured bonds are stated net of
unamortised issue costs of GBP1,352k (2022: GBP1,532k). The Company
incurred total issue costs of GBP4,403k in respect of the fixed
rate bonds. These costs, together with the interest expense, are
allocated to the profit and loss account over the term of the
bonds. Interest is calculated using the effective interest rate
method.
The Company has committed borrowing facilities available of
GBP167,294k which have been fully drawn as at 31 March 2023 (2022:
GBP167,294k).
Loans and borrowings
15
Loans not wholly repayable within five years:
2023 2022
GBP 000 GBP 000
Fixed rate guaranteed senior secured bonds 108,452 114,218
Secured loan stock 14,865 14,865
-------- --------
123,317 129,083
======== ========
Analysis of maturity of debt:
2023 2022
GBP 000 GBP 000
Within one year or on demand 6,184 5,766
Between one and two years 6,856 6,184
Between two and five years 23,939 22,206
After five years 86,338 94,927
-------- --------
123,317 129,083
======== ========
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Financial instruments
16
Capital risk management
The Company manages its capital to ensure its ability to
continue as a going concern, to meet the requirements of its
collateral deed and to maintain an optimal capital structure to
reduce the cost of capital. The capital structure of the Company
comprises equity attributable to equity holders consisting of
ordinary share capital and profit and loss account and cash and
cash equivalents and borrowings. The Company has complied with
capital requirements imposed by the collateral deed throughout the
year. There have been no changes in the Company's management of
capital from previous years.
The principal risks and uncertainties faced are highlighted in
the strategic report on page 2.
The Company has the following financial instruments:
2023 2022
GBP 000 GBP 000
Due on demand or within one year 12,147 12,055
Due within one to two years 12,462 12,147
Due within two to five years 38,294 37,824
Due after more than five years 126,298 138,170
---------- ----------
189,201 200,196
========== ==========
Share capital
17
Allotted, called up and fully paid shares
2023 2022
No. GBP No. GBP
Ordinary shares of
GBP1 each 50,000 50,000 50,000 50,000
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
The Company's other reserves are as follows:
-- The profit and loss reserve represents cumulative profits
or losses, net of dividends paid.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Related party transactions
18
Transactions during the year
2023
GBP 000
Balfour Beatty Civil Engineering - operation and
maintenance 3,286
Balfour Beatty Investments - staff secondment charges 339
--------
3,625
========
2022
GBP 000
Balfour Beatty Civil Engineering - operation and
maintenance 2,913
Balfour Beatty Investments - staff secondment charges 246
--------
3,159
========
Outstanding balances at the end of the year
2023
GBP 000
Balfour Beatty Civil Engineering - operation and
maintenance 246
Balfour Beatty Investments - staff secondment charges 27
----------
273
==========
2022
GBP 000
Balfour Beatty Civil Engineering - operation and
maintenance 229
Balfour Beatty Investments - staff secondment charges 1,524
----------
1,753
==========
Parent and ultimate parent undertaking
19
The company's immediate parent is Connect M77/GSO Holdings
Limited, incorporated in the United Kingdom and registered in
England and Wales.
The ultimate parent is Balfour Beatty plc and BIIF LP (acting by
its manager, 3i BIFM Investments Ltd), incorporated in the United
Kingdom and registered in England and Wales.
The largest and smallest group in which the results of Connect
M77/GSO plc are consolidated is Connect M77/GSO Holdings Limited,
copies of whose financial statements are available from Q14 Quorum
Buisness Park, Benton Lane, Newcastle Upon Tyne, NE12 8BU.
Connect M77/GSO PLC
Notes to the Financial Statements for the Year Ended 31 March
2023 (continued)
Subsequent events
20
As at the date of the approval of these accounts, there were no
material post balance sheet events arising after the reporting
date.
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END
FR SDLFMFEDSEDW
(END) Dow Jones Newswires
July 31, 2023 12:45 ET (16:45 GMT)
Connect 5.404% (LSE:80UC)
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Connect 5.404% (LSE:80UC)
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