TIDMBC84
RNS Number : 6210M
Trafford Centre Finance Ld
30 April 2018
THE TRAFFORD CENTRE FINANCE LIMITED
LEI: 213800J9WWQVUK5FE223
Regulated Information Classification: Annual Financial
and audit reports
30 April 2018
ANNUAL FINANCIAL REPORT
In compliance with Disclosure and Transparency Rule
4.1, the Trafford Centre Finance Limited (the "Company")
announces the publication of its Annual Financial
Report for the year ended 31 December 2017. Pursuant
to Listing Rule 9.6.1, a copy of this document has
been submitted to the National Storage Mechanism
and will shortly be available for inspection at
morningstar.co.uk/uk/NSM
The Annual Report will also shortly be available
for download at intugroup.co.uk
In accordance with Disclosure and Transparency Rule
6.3.5, the following information is extracted from
the company's Annual Report and in unedited full
text.
DIRECTORS' REPORT
FOR THE YEARED 31 DECEMBER 2017
The directors present their report and the audited
financial statements of the company for the year
ended 31 December 2017.
The company is incorporated and registered in the
Cayman Islands (company number 91678). The company's
registered office is 89 Nexus Way, Camana Bay, Grand
Cayman, Cayman Islands KY1-9007.
PRINCIPAL ACTIVITY
The principal activity of the company is the provision
of financing to The Trafford Centre Limited, which
owns intu Trafford Centre. This is funded by the
issue of loan notes.
The company's results and financial position for
the year ended 31 December 2017 are set out in full
in the income statement, the balance sheet, the
statement of changes in equity, the statement of
cash flows and the notes to the financial statements.
The company receives interest on the provision of
financing to The Trafford Centre Limited at rates
equal to those paid on its external debt plus additional
interest of 0.01% per annum on the average principal
loan amount outstanding. Any financing related fees
incurred by the company are also charged on to The
Trafford Centre Limited.
The company's financial risk management objectives
and policies are set out in note 10 as is the company's
exposure to price and liquidity risk.
The company recorded a profit before taxation of
GBP50,000 compared with a profit of GBP20,000 for
the previous year. Net assets at 31 December 2017
were GBP1,018,000, an increase of GBP163,000 from
the 31 December 2016 figure of GBP855,000, driven
by a capital injection from the parent company of
GBP113,000 (2016 GBPnil).
Given the straightforward nature of the business,
the company's directors are of the opinion that
analysis using KPIs is not necessary for an understanding
of the development, performance or position of the
business. The directors expect that the present
level of activity will continue for the foreseeable
future.
CAPITAL MANAGEMENT
The directors consider the capital of the company
to be the ordinary share capital of GBP2 (2016 GBP2).
Management of this capital is performed at a group
level.
GOING CONCERN
The directors have assessed the risk that the company
is not a going concern and concluded that the going
concern assumption is appropriate and prepared the
annual report and financial statements on that basis.
Further information regarding the adoption of the
going concern can be found in note 1 to the financial
statements.
DIRECTORS
The directors who held office during the year and
until the date of this report are given below:
Raulin Amy
David Fischel
Matthew Roberts
KEY RISKS AND UNCERTAINTIES
As the company's principal activity is to provide
financing to The Trafford Centre Limited, the company's
key risks and uncertainties are those faced by The
Trafford Centre Limited to the extent that they
impact The Trafford Centre Limited's ability to
meet its obligations to the company including those
related to the terms of the company's borrowings
which are secured on the assets of The Trafford
Centre Limited. The key risks and uncertainties
facing The Trafford Centre Limited and the company
are set out below:
Risk & Impact Mitigation Change 2017 commentary
-------------- ---------------------------------------------------------------- ------ ------------------------------
----------------------------------
Property
------------------------------------------------------------------------------------------------------------------------
----------------------------------
Macro-economic Likelihood of macro-economic
Weakness * Prime asset = weakness continues
in the to be a risk with political
macro-economic uncertainty in the
environment * Covenant headroom monitored and stress-tested UK and Brexit arrangements
could undermine not yet detailed, which
rental income has increased investor
levels and * Make representation on key policies, for example caution
property business rates * Valuation increase cont
inues to support LTV headroom
values, reducing
return on
investment * Large-scale marketing events to attract footfall * Tenant administrations
at relatively low levels
and covenant
headroom
* Leveraging the strength of the intu brand to attract
and retain aspirational retailers
---------------- -------------------------------------------------------------- ------ ------------------------------
----------------------------------
Retail = Likelihood and severity
environment * Active management of tenant mix of potential impact
Failure was closely monitored
to react in 2017 with intu's
to changes * Regular monitoring of tenant strength and diversity strategy continuing
in the retail to deliver strong footfa
ll
environment numbers and occupancy
could undermine * 'Tell intu' customer feedback programme helps * Continued digital
investment to improve relevance as
intu Trafford identify changes in customer preferences shopping habits ch
ange
Centre's
ability to
attract * Work closely with retailers * Occupancy remains
strong
customers
and tenants
* Digital strategy that embraces technology and digital
customer engagement. This enables intu to engage in
and support multichannel retailing, and to take the
opportunities offered by ecommerce
---------------- -------------------------------------------------------------- ------ ------------------------------
----------------------------------
Risk & Impact Mitigation Change 2017 commentary
-------------- ------------------------------------------------------------- ------ ---------------------
-------------------------------------------
Operations
------------------------------------------------------------------------------------------------------------
-------------------------------------------
Health and Likelihood of po
tential
safety * Strong business process and procedures, including = impact has not c
hanged
Accidents compliance with OHSAS 18001, supported by regular significantly du
ring
or system training and exercises 2017 however sev
erity
failure leading impacted by new
enforcement
to financial structure
and/or * Annual audits of operational standards carried out * Maintenanc
e of OHSAS 18001 certification,
reputational internally and by external consultants demonstrat
ing consistent health and safety management
loss process an
d procedures across the portfolio
* Culture of visitor, staff and contractor safety
* Work conti
nuing towards achieving ISO 9001, 14001,
and 55001
accreditation
* Crisis management and business continuity plans in
place and tested
* Award of t
he Golden Status from the Royal Society for
the Preven
tion of Accidents
* Retailer liaison and briefings
* Full revie
w undertaken of fire strategy and building
* Appropriate levels of insurance specificat
ions post-Grenfell has provided appropriate
assurance
* Staff succession-planning and development in place to
ensure continued delivery of world class service
* Health and safety managers or coordinators in all
centres
---------------- ----------------------------------------------------------- ------ ---------------------
-------------------------------------------
Cyber-security + Likelihood has increa
sed
Loss of * Data and cyber security strategies with increased relia
nce
data and on operational and
information third party systems
or failure * Regular testing programme and cyber scenario exercise and data, and with
of key systems and benchmarking the number of recent
resulting high profile hacks.
in financial Severity of potentia
l
and/or * Appropriate levels of insurance impact has reduced
reputational by significant devel
opment
loss of tools and control
s.
* Crisis management and business continuity plans in We have experienced
place and tested attempted cybersecur
ity
hacks which have not
resulted in any data
* Data committee loss or major operat
ional
impacts. We continue
to prioritise the cy
bersecurity
* Monitoring of regulatory environment and best programme of works
practice * Ongoing intu-w
ide cyber security project with focus
on proactive m
onitoring of technical infrastructure
to mitigate cy
ber threats
External benchmarkin
g
of cybersecurity lan
dscape
---------------- ----------------------------------------------------------- ------ ---------------------
-------------------------------------------
Risk & Mitigation Change 2017 commentary
Impact
---------- ---------------------------------------------------------------- ------ ----------------------------------
-------------------------
Terrorism Overall likelihood
Terrorist * strong business process and procedures, supported by = and severity of potential
incident regular training and exercises, designed to adapt and impact unchanged. In
at intu respond to changes in risk levels May 2017 we enacted
Trafford our operational plan
Centre or for the period of increased
another * extraordinary pre-planned operational responses to threat level. The threat
major changes in national threat level level was subsequently
shopping reduced to the prior
centre threat level
resulting * annual audits of operational standards carried out * there have been five terrori
st related incidents in
in loss of internally and by external agencies the UK in 2017
consumer
confidence
with * culture of visitor, staff and contractor safety * national threat level remain
s at Severe
consequent
impact on
lettings * crisis management and business continuity plans in * major scenario exercise held
with involvement of
and rental place and tested with involvement of multiple external agencies
growth external agencies
* operating procedures in plac
e for the introduction of
* retailer liaison and briefings further security measures if
required
* appropriate levels of insurance
* strong relationships and frequent liaison with police,
NaCTSO and other agencies
* NaCTSO approved to train staff in counter-terrorism
awareness programme
internal head
of security appointed
---------- ---------------------------------------------------------------- ------ ----------------------------------
-------------------------
STATEMENT OF DIRECTORS' RESPONSIBILTIES
The directors are responsible for preparing the company
financial statements in accordance with International
Financial Reporting Standards ("IFRSs") as adopted
by the European Union for to assist the directors
to discharge their obligations under section 4 of
the Disclosure and Transparency rules (the 'DTR')
issued by the United Kingdom's Financial Conduct
Authority and to enable the company to comply with
its obligations under various agreements known as
'The Trafford Centre Securitisation Agreements'.
The directors must not approve the financial statements
unless they are satisfied that the financial statements
give a true and fair view of the state of affairs
of the company and of the profit or loss of the company
for that period. In preparing the financial statements,
the directors are responsible for:
* selecting suitable accounting policies and then
applying them consistently;
* stating whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements;
* making judgements and accounting estimates that are
reasonable and prudent; and
* preparing the financial statements on the going
concern basis unless it is inappropriate to presume
that the company will continue in business.
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.
The directors are also responsible for safeguarding
the assets of the company and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities.
STATEMENT OF DISCLOSURE TO AUDITORS
So far as each person who was a director at the date
of approving this report is aware, there is no relevant
audit information of which the company's auditor
is unaware. Additionally, the directors individually
have taken all the necessary steps that they ought
to have taken as directors in order to make themselves
aware of all relevant audit information and to establish
that the company's auditor is aware of that information.
On behalf of the Board
David Fischel
Director
26 April 2018
INDEPENT AUDITORS' REPORT TO THE DIRECTORS OF
THE TRAFFORD CENTRE FINANCE LIMITED
Opinion
In our opinion, The Trafford Centre Finance Limited's
financial statements:
* give a true and fair view of the state of the
company's affairs as at 31 December 2017 and of its
profit and cash flows for the year then ended; and
* have been properly prepared in accordance with IFRSs
as adopted by the European Union.
We have audited the financial statements, included
within the Report and Financial Statements (the
"Annual Report"), which comprise: the balance sheet
as at 31 December 2017; the income statement, the
statement of cash flows and the statement of changes
in equity for the year then ended; and the notes
to the financial statements, which include a description
of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable
law. Our responsibilities under ISAs (UK) are further
described in the Auditors' responsibilities for
the audit of the financial statements section of
our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the company in accordance
with the ethical requirements that are relevant
to our audit of the financial statements in the
UK, which includes the FRC's Ethical Standard, as
applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities
in accordance with these requirements.
Our audit approach
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement
in the financial statements. In particular, we looked
at where the directors made subjective judgements,
for example in respect of significant accounting
estimates that involved making assumptions and considering
future events that are inherently uncertain.
We gained an understanding of the legal and regulatory
framework applicable to the company and the industry
in which it operates, and considered the risk of
acts by the company which were contrary to applicable
laws and regulations, including fraud. We designed
audit procedures to respond to the risk, recognising
that the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional
misrepresentations, or through collusion. We focused
on laws and regulations that could give rise to
a material misstatement in the company's financial
statements, including, but not limited to, the Disclosure
and Transparency rules. Our tests included, but
were not limited to, review of financial statement
disclosures to underlying supporting documentation
and enquires of management. There are inherent limitations
in the audit procedures described above and the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in
the financial statements, the less likely we would
become aware of it.
We did not identify any key audit matters relating
to irregularities, including fraud. As in all of
our audits we also addressed the risk of management
override of internal controls, including testing
journals and evaluating whether there was evidence
of bias by the directors that represented a risk
of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the
auditors' professional judgement, were of most significance
in the audit of the financial statements of the
current period and include the most significant
assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors,
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. These matters, and any comments we make on
the results of our procedures thereon, were addressed
in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these
matters. This is not a complete list of all risks
identified by our audit.
Key audit matter How our audit addressed the key audit
matter
------------------------------------------- -------------------------------------------
Recoverability of amounts owed by The We have considered the key risks and
Trafford Centre Limited uncertainties faced by The Trafford Centre
The principal activity of the company is Limited. We
the provision of financing to The Trafford have performed audit procedures over the
Centre financial statements of The Trafford Centre
Limited. Its borrowings are secured on the Limited
assets of The Trafford Centre (being intu and concluded that these give a true and
Trafford fair view of the company's affairs in our
Centre shopping centre). Amounts owed by audit opinion
The Trafford Centre Limited represent back dated 26 April 2018. As part of our audit
to back procedures, we have considered whether the
arrangements between the companies, with going
the same terms as The Trafford Centre concern assumption and the company's net
Limited's external assets are supportable.
debt. The Trafford Centre Finance Limited
is therefore wholly reliant on The Trafford
Centre
Limited's ability to meet its obligations
to it, in order to be able to meet the
terms of
its own borrowing arrangements. The
recoverability of amounts owed by The
Trafford Centre
Limited is therefore a key audit matter.
------------------------------------------- -------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that
we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into
account the structure of the company, the accounting
processes and controls, and the industry in which
it operates.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative
considerations, helped us to determine the scope
of our audit and the nature, timing and extent of
our audit procedures on the individual financial
statement line items and disclosures and in evaluating
the effect of misstatements, both individually and
in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole
as follows:
Overall materiality GBP8,719,172 (2016: GBP8,901,450).
------------------------------- -------------------------------------------------------
How we determined it 1% of total assets.
------------------------------- -------------------------------------------------------
Rationale for benchmark applied The principal activity of the company is the provision
of financing to The Trafford Centre
Limited. External debt and the company's ability to
meet it's obligations relating to this
financing are therefore the primary focus for users of
the financial statements. The company
has entered into back to back financing arrangements
with The Trafford Centre Limited, which
owns intu Trafford Centre (the asset on which The
Trafford Centre Finance Limited's debt is
secured). As such total assets approximate to total
liabilities and are considered to be an
appropriate benchmark on which to calculate
materiality..
------------------------------- -------------------------------------------------------
We agreed with the Audit Committee that we would
report to them misstatements identified during our
audit above GBP87,191 (2016: GBP89,014) as well
as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following
matters in relation to which ISAs (UK) require us
to report to you when:
* the directors' use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
* the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the company's
ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months
from the date when the financial statements are
authorised for issue.
However, because not all future events or conditions
can be predicted, this statement is not a guarantee
as to the company's ability to continue as a going
concern.
Reporting on other information
The other information comprises all of the information
in the Annual Report other than the financial statements
and our auditors' report thereon. The directors
are responsible for the other information. Our opinion
on the financial statements does not cover the other
information and, accordingly, we do not express
an audit opinion or any form of assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information
and, in doing so, consider whether the other information
is materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify
an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude
whether there is a material misstatement of the
financial statements or a material misstatement
of the other information. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report based
on these responsibilities.
Responsibilities for the financial statements and
the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
Responsibilities set out on page 4, the directors
are responsible for the preparation of the financial
statements in accordance with the applicable framework
and for being satisfied that they give a true and
fair view. The directors are also 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.
In preparing the financial statements, the directors
are responsible for 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 the directors
either intend to liquidate the company or to cease
operations, or have no realistic alternative but
to do so.
Auditor's responsibilities for the audit of the
financial statements
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 error, and to issue an auditors' report
that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud
or error and are considered material if, individually
or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for
the audit of the financial statements is located
on the FRC's website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors' report.
Use of this report
This report, including the opinion, has been prepared
for and only for the company's directors as a body
for to assist the directors to discharge their obligations
under section 4 of the Disclosure and Transparency
rules (the 'DTR') issued by the United Kingdom's
Financial Conduct Authority and to enable the company
to comply with its obligations under various agreements
known as 'The Trafford Centre Securitisation Agreements'
in accordance with our engagement letter dated 14
December 2017 and for no other purpose. We do not,
in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to
whom this report is shown or into whose hands it
may come, including without limitation under any
contractual obligations of the company, save where
expressly agreed by our prior consent in writing.
Ranjan Sriskandan (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 April 2018
INCOME STATEMENT
FOR THE YEARED 31 DECEMBER
2017
2017 2016
Notes GBP000 GBP000
Administrative expenses (31) (29)
Operating loss 3 (31) (29)
Finance costs 4 (48,559) (48,694)
Finance income 48,640 48,743
Change in fair value
of derivative financial
instruments 4 - -
Profit before taxation 50 20
Taxation 5 - -
Profit for the year 50 20
Other than the items in the income statement above,
there are no other items of comprehensive income
and accordingly, a separate statement of comprehensive
income has not been prepared.
BALANCE SHEET
AS AT 31 DECEMBER 2017
2017 2016
Notes GBP000 GBP000
Non-current assets
Derivative financial
instruments 7 103,256 108,396
Trade and other receivables 6 733,551 755,936
836,807 864,332
Current assets
Trade and other receivables 6 33,032 23,833
Derivative financial
instruments 7 1,611 1,594
Cash and cash equivalents 467 386
35,110 25,813
Total assets 871,917 890,145
Current liabilities
Trade and other payables 8 (10,238) (9,357)
Borrowings 9 (22,243) (14,007)
Derivative financial
instruments 7 (1,611) (1,594)
(34,092) (24,958)
Non-current liabilities
Borrowings 9 (733,551) (755,936)
Derivative financial
instruments 7 (103,256) (108,396)
(836,807) (864,332)
Total liabilities (870,899) (889,290)
Net assets 1,018 855
Equity
Share capital 11 - -
Other reserves 113 -
Retained earnings 905 855
Total equity 1,018 855
The notes on pages 12 to 24 form part of these
financial statements
The financial statements were approved by the Board
of directors and authorised for issue on 26 April
2018 and were signed on its behalf by:
David Fischel
Director
Matthew Roberts
Director
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER
2017
Share Other Retained Total
capital reserves earnings
Notes GBP000 GBP000 GBP000 GBP000
Balance at 1 January
2016 - - 835 835
Profit for the year - - 20 20
Total comprehensive income
for the year - - 20 20
Balance at 31 December
2016 - - 855 855
Balance at 1 January
2017 - - 855 855
Profit for the year - - 50 50
Total comprehensive income
for the year - - 50 50
Capital injection from
parent - 113 - 113
Balance at 31 December
2017 - 113 905 1,018
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER
2017
2017 2016
Notes GBP000 GBP000
Cash flows from operating
activities
Cash (used in)/generated
from operations 12 (1,715) 1,722
Interest paid (47,731) (48,025)
Interest received 49,414 46,383
Net cash (outflow)/inflow
from operating activities (32) 80
Investing activities
Amounts received from
group undertaking 15,069 14,129
Net cash generated
from investing activities 15,069 14,129
Financing activities
Borrowings repaid (15,069) (14,129)
Capital injection
from parent 113 -
Net cash used in financing
activities (14,956) (14,129)
Net increase in cash
and cash equivalents 81 80
Cash and cash equivalents
at beginning of year 386 306
Cash and cash equivalents
at end of year 467 386
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
1 Principal accounting policies
Purpose of financial statements
The financial statements have been prepared to
assist the directors to discharge their obligations
under section 4 of the Disclosure and Transparency
rules (the 'DTR') issued by the United Kingdom's
Financial Conduct Authority and to enable to company
to comply with its obligations under various agreements
relating to the issue, management, and amortisation
of bond issues of various notes issued in February
2000, June 2005, January 2006 and March 2014 where
collectively such agreements are known as "The
Trafford Centre Securitisation Agreements". They
have not been prepared for the purpose of compliance
with the requirements of the Companies Act 2006
and are therefore not statutory financial statements.
Basis of preparation
The financial statements have been prepared in
accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the European
Union and interpretations issued by the International
Financial Reporting Standards Interpretations
Committee.
The financial statements have been prepared under
the historical cost convention as modified by
the revaluation of certain financial assets and
liabilities. A summary of the accounting policies
is set out below.
In assessing whether the going concern basis of
preparation is appropriate to adopt, the directors
considered a number of factors including financial
projections of the company and the level of financial
support that may be made available to the company
by its ultimate parent, intu properties plc. In
addition investment property held by The Trafford
Centre Limited, a fellow subsidiary of intu properties
plc, acts as security for the financial instruments
held in The Trafford Centre Finance Limited. The
ability of the company to meet its obligations
of these financial instruments is dependent upon
the performance of The Trafford Centre Limited
and its ability to meet its obligations to the
company. In concluding that the going concern
basis is appropriate the directors have considered
the net rental income forecasts of The Trafford
Centre Limited. Based on this review the directors
have concluded that there is a reasonable expectation
that the company will have sufficient resources
to continue in operational existence for the foreseeable
future and therefore the prepare the financial
statements on a going concern basis.
A number of standards and amendments to standards
have been issued but are not yet effective for
the current year. The most significant of these
are set out below:
* IFRS 9 Financial Instruments (effective from 1
January 2018) - The standard applies to
classification and measurement of financial assets
and financial liabilities, impairment provisioning
and hedge accounting. The intu properties plc group
have completed their impact assessment of the
standard in which the main area of impact has been
identified as impairment provisioning in respect of
trade receivables. The impairment provisioning
approach has been refined in accordance with the new
accounting standard to reflect the expected
collection of trade receivables; however, no material
quantitative differences have been identified from
the impairment provisioning in accordance with the
previous accounting standard.
Estimates and assumptions
The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make judgements and use
estimates that affect the reported amounts of
assets and liabilities at the date of the financial
statements and the reported amounts of income
and expenses during the reporting period. Although
these judgements and estimates are based on management's
best knowledge of the amount, event or actions,
actual results ultimately may differ from those
estimates.
Interest income and expense
Interest income and expense is accrued on a time
basis, by reference to the principal outstanding
and the effective interest rate.
Borrowings
Borrowings are recognised initially at their net
proceeds on issue and subsequently carried at
amortised cost. Any transaction costs and premiums
or discounts are recognised over the contractual
life using the effective interest rate method.
In the event of early repayment, all unamortised
transaction costs are recognised immediately in
the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand,
deposits with banks, whether restricted or unrestricted
and other short-term liquid investments with original
maturities of three months or less.
Trade receivables
Trade receivables are recognised initially at
fair value and subsequently measured at amortised
cost.
The directors exercise judgement as to the collectability
of the trade receivables and determine if it is
appropriate to impair these assets. Factors such
as days past due, credit status of the counterparty
and historical evidence of collection are considered.
Loans and receivables
The amounts owed by the group undertakings is
on terms in line with that under which the company
borrows. The amounts owed by group undertakings
qualifies as a financial asset under IAS39 and
as such was initially recorded at fair value plus
transaction costs. Under IAS39, the subsequent
measurement of loans and receivables is at amortised
cost using the effective interest method, with
interest being recognised in the income statement.
Trade payables
Trade payables are recognised initially at fair
value and subsequently measured at amortised cost.
Derivatives
The company uses derivative financial instruments
to manage exposure to interest rate risk. They
are initially recognised on the trade date at
fair value and subsequently re-measured at fair
value. In assessing fair value the company uses
its judgement to select suitable valuation techniques
and make assumptions which are mainly based on
market conditions existing at the balance sheet
date. The fair value of interest rate swaps is
calculated by discounting estimated future cash
flows based on the terms and maturity of each
contract and using market interest rates for similar
instruments at the measurement date. These values
are tested for reasonableness based upon broker
or counterparty quotes.
Amounts paid under derivative financial instruments
(currently for the company this relates to interest
rate swaps), both on obligations as they fall
due and on early settlement are recognised in
the income statement as finance costs. Fair value
movements on revaluation of derivative financial
instruments are shown in the income statement
through changes in fair value of financial instruments.
The company does not currently apply hedge accounting
to its interest rate swaps.
Taxation
Current tax
Current tax is the amount payable on the taxable
income for the year and any adjustment in respect
of prior years. It is calculated using rates that
have been enacted or substantively enacted by
the balance sheet date.
Deferred tax
Deferred tax is provided using the balance sheet
liability method in respect of temporary differences
between the carrying amounts of assets and liabilities
in the balance sheet and their tax bases.
Temporary differences are not provided on the
initial recognition of assets or liabilities that
affect neither accounting nor taxable profit,
and differences relating to investments in subsidiaries
to the extent that they will not reverse in the
foreseeable future.
Deferred tax is determined using tax rates that
have been enacted or substantively enacted by
the balance sheet date and are expected to apply
when the related deferred tax asset is realised
or the deferred tax liability is settled.
Deferred tax assets are recognised only to the
extent that management believe 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
only when they relate to taxes levied by the same
authority and the group intends to settle them
on a net basis.
Tax is included in the income statement except
when it related to items recognised directly in
other comprehensive income or equity, in which
case the related tax is also recognised directly
in other comprehensive income or equity.
Current/non-current classification
Current assets include assets held primarily for
trading purposes, cash and cash equivalents, and
assets expected to be realised in, or intended
for sale or consumption in, the course of the
company's operating cycle. All other assets are
classified as non-current assets.
Current liabilities include liabilities held primarily
for trading purposes, liabilities expected to
be settled in the course of the company's operating
cycle and those liabilities due within one year
from the reporting date. All other liabilities
are classified as non-current liabilities.
Share capital
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new
ordinary shares are shown in equity as a deduction,
net of tax, from the proceeds.
2 Operating segments
Management have not identified separate operating
segments and rely on information presented in
the primary statements for decision making purposes.
3 Operating loss
The operating loss for the year ended 31 December
2017 of GBP31,000 (2016 operating loss of GBP29,000)
did not include any fees in respect of auditors'
remuneration of GBP4,917 (2016 GBP4,774) in respect
of the audit of the financial statements, which
was settled on behalf of the company by its ultimate
parent company intu properties plc and has not
been recharged. Non-audit service of GBP4,456
for a half year review were provided during the
year (2016 GBP4,326).
The directors did not receive or waive any emoluments
(2016 GBPnil) in respect of their services to
the company.
There were no employees during the year (2016
none).
4 Net finance income
2017 2016
GBP000 GBP000
Finance income
On amounts due from group undertaking 48,640 48,743
Finance costs
On borrowings (48,557) (48,664)
Other interest (2) (30)
(48,559) (48,694)
Change in fair value of financial
instruments
On external derivative financial
instruments (5,139) (20,338)
On derivative financial instruments
with The Trafford Centre Limited 5,139 20,338
- -
5 Taxation
The company is subject to UK corporation tax
on its profits. The tax expense for the year
is lower than (2016 lower than) the standard
rate of corporation tax in the UK. The differences
are explained below:
2017 2016
GBP000 GBP000
Profit before tax 50 20
Profit before tax multiplied by
the standard rate of tax in the
UK of 19.25% (2016 20.00%) 10 4
Group relief (without payment) (10) (4)
Tax expense - -
Deferred
tax
The company has tax losses arising in the UK
of GBP2,583,000 (2016 GBP2,602,000) that are
available for offset against future taxable
profits. No deferred tax asset is recognised
in respect of these losses due to uncertainty
over the level of taxable profits against which
these losses can be used in future periods.
6 Trade and other receivables
Current Non-current
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
Amounts owed by group
undertaking 23,179 14,927 744,363 767,684
Less: finance costs (936) (920) (10,812) (11,748)
Net loan amount 22,243 14,007 733,551 755,936
Accrued income and other
amounts due from group
undertaking 10,402 9,381 - -
Prepayments 387 445 - -
33,032 23,833 733,551 755,936
The amounts owed by group undertaking relate to
an intercompany loan with The Trafford Centre Limited
where the company's borrowings with external parties
are passed to The Trafford Centre Limited. The
amounts owed are unsecured and the repayment profile
matches the maturity profile of the company's borrowings
as The Trafford Centre Limited is required to provide
funds to the company in order for it to meet its
external funds obligations. The recoverability
of these balances has been reviewed and as a result
no allowance for doubtful debts is considered to
be required. There have been no impairments on
receivables or amounts written off in the year.
Interest is due on the intercompany loans at rates
equal to those paid on the external debt plus additional
interest of 0.01% per annum on the average principal
loan amount outstanding. Interest is also due to
cover any fees and costs incurred by the company.
7 Derivative financial instruments
All derivative financial instrument liabilities
relate to interest rate swaps with an external
counterparty which are classified as held for
trading. All derivative financial instrument assets
relate to interest rate swap arrangements with
The Trafford Centre Limited under the same terms
as the interest rate swaps with the counterparty.
8 Trade and other payables
2017 2016
GBP000 GBP000
Amounts owed to group undertakings 1,690 797
Accruals 8,403 8,560
Other payables 145 -
10,238 9,357
Amounts owed to group undertakings are unsecured
and repayable on demand. No interest is charged
on these amounts.
9 Borrowings
Interest Final Carrying Fair Carrying Fair
rate maturity value value value value
2017 2017 2016 2016
GBP000 GBP000 GBP000 GBP000
Current secured notes
Class:
A2 6.50% 2023 11,619 14,667 10,911 13,615
B 7.03% 2029 4,450 5,213 4,016 4,701
D2 8.28% 2022 7,110 8,174 - -
Debt falling due within
one year 23,179 28,054 14,927 18,316
Less: finance costs (936) - (920) -
Net loan amount 22,243 28,054 14,007 18,316
Non-current secured notes
Class:
A2 6.50% 2033 286,538 393,114 298,158 406,396
A3 Floating 2035 188,500 172,809 188,500 158,321
A4 2.88% 2019 20,000 20,404 20,000 20,800
B 7.03% 2029 67,381 85,892 71,972 92,325
B2 Floating 2035 20,000 18,250 20,000 17,571
B3 4.25% 2024 20,000 21,698 20,000 21,815
D1(N) Floating 2035 29,054 21,075 29,054 28,952
D2 8.28% 2022 42,890 49,480 50,000 60,646
D3 4.75% 2024 70,000 76,910 70,000 76,809
Debt falling due after
one year 744,363 859,632 767,684 883,635
Less: finance costs (10,812) - (11,748) -
Net loan amount 733,551 859,632 755,936 883,635
Total net borrowings 755,794 887,686 769,943 901,951
2017 2016
GBP000 GBP000
Repayable within one year 23,179 14,927
Repayable in more than one year but
not more than two years 46,525 23,179
Repayable in more than two years
but not more than five years 92,061 106,235
Repayable in more than five years 605,077 638,270
766,842 782,611
The secured notes have the benefit of a floating
charge over all of the assets and undertakings
of the company and in addition are secured against
The Trafford Centre Securitisation Agreements
together with the benefit of a fixed legal charge
over the land and buildings comprising The Trafford
Centre granted by The Trafford Centre Limited,
a fellow subsidiary undertaking of Intu Trafford
Centre Group (UK) Limited and owner of intu Trafford
Centre.
Interest on the Class A3, Class B2 and Class D1(N)
secured notes whose rates are based on LIBOR plus
an applicable margin has been hedged under interest
rate swap contracts totalling GBP237,554,000 (2016
GBP230,045,000) with rates of 4.20%, 4.34% and
4.66% and an interest rate cap of GBPnil (2016
GBP7,509,000) with a capped rate of 6.66% plus
an applicable margin on each bond. The fair value
of these interest rate swaps at 2017 was a liability
of GBP104,867,000 (2016 GBP109,990,000).
10 Financial risk management
The company is exposed to a variety of risks arising
from the company's operations being principally
market risk (including interest rate risk and
market price risk) and liquidity risk.
The majority of the company's financial risk management
is carried out by intu properties plc's treasury
department and the group's policies for managing
each of these risks as they apply to the company
and the principal effects of these policies on
the results for the year are summarised below.
Further details of intu properties plc's financial
risk management are disclosed in the group's publicly
available financial statements.
Market risk
Interest rate risk
Interest rate risk comprises of both cash flow
and fair value risks. Cash flow interest rate
risk is the risk that the future cash flows of
a financial instrument will fluctuate due to changes
in market interest rates. Fair value interest
rate risk is the risk that the fair value of financial
instruments will fluctuate as a result of changes
in market interest rates.
The company's interest rate risk arises from borrowings
issued at variable rates that expose the company
to cash flow interest rate risk, whereas borrowings
issued at fixed interest rates expose the company
to fair value interest rate risk.
Bank debt is typically issued at floating rates
linked to LIBOR. Bond debt and other capital market
debt are generally issued at fixed rates.
It is the intu properties plc group's policy,
and often a requirement of the group's lenders,
to eliminate substantially all short and medium-term
exposure to interest rate fluctuations in order
to establish certainty over medium-term cash flows
by using floating to fixed interest rate swaps.
Such swaps have the economic effect of converting
borrowings from floating to fixed rates. As a
consequence, the company is exposed to market
price risk in respect of the fair value of its
fixed rate interest rate swaps.
As a consequence, the company is exposed to market
price risk in respect of the fair value of its
fixed interest rate swaps.
The table below shows the effect of interest rate
swaps on the borrowings profile of the company:
Fixed Floating Fixed Floating
2017 2017 2016 2016
GBP000 GBP000 GBP000 GBP000
Borrowings 529,987 237,555 545,056 237,555
Interest rate swap impact 237,555 (237,555) 237,555 (237,555)
Net borrowings profile 767,542 - 782,611 -
Interest rate protection on
floating debt 100% 100%
The weighted average rate of interest rates contracted
through interest rate swaps is 4.4 per cent (2016
4.4 per cent).
The approximate impact of a 50 basis point increase
in the level of interest rates would be to reduce
the liability by GBP22,628,000 (2016 GBP24,231,000)
in the fair value of derivatives. The approximate
impact of a 50 basis point decrease in the level
of interest rates would be to increase the liability
by GBP22,628,000 (2016 GBP24,231,000) in the fair
value of derivatives. In practice, a parallel
shift in the yield curve is highly unlikely. However,
the above sensitivity analysis is a reasonable
illustration of the possible effect from the changes
in slope and shifts in the yield curve that may
occur. Due to offsetting loans and derivative
contracts with The Trafford Centre Limited the
impact of interest rate movements on the company
is minimal as the cash flows from the assets and
liabilities will be symmetrical.
Liquidity risk
Liquidity risk is managed to ensure that the company
is able to meet future payment obligations when
financial liabilities fall due. Liquidity analysis
is conducted to ensure that sufficient headroom
is available to meet the operational requirements
and committed investments. The group treasury
policy aims to meet this objective through maintaining
adequate cash, marketable securities and committed
facilities to meet these requirements. The group's
policy is to seek to optimise its exposure to
liquidity risk by balancing its exposure to interest
rate risk and to refinancing risk. In effect the
group seeks to borrow for as long as possible
at the lowest acceptable cost.
The tables below set out the maturity analysis
of the company's financial liabilities based on
the undiscounted contractual obligations to make
payments of interest and to repay principal. Where
interest payment obligations are based on a floating
rate the rates used are those implied by the par
yield curve.
Within 1-2 years 3-5 years Over 5 Total
1 year years
or on
demand
GBP000 GBP000 GBP000 GBP000 GBP000
At 31 December 2017
Borrowings
(including
interest) (59,359) (81,191) (185,089) (780,054) (1,105,693)
Amounts owed
to group
undertakings (1,835) - - - (1,835)
Derivative
payments (10,486) (10,486) (31,544) (124,178) (176,694)
Derivative
receipts 1,319 1,888 8,048 43,156 54,411
(70,361) (89,789) (208,585) (861,076) (1,229,811)
At 31 December
2016
Borrowings
(including
interest) (52,083) (59,246) (204,313) (845,955) (1,161,597)
Amounts owed
to group
undertakings (797) - - - (797)
Derivative
payments (10,350) (10,486) (31,515) (134,693) (187,044)
Derivative
receipts 952 1,207 6,399 50,626 59,184
(62,278) (68,525) (229,429) (930,022) (1,290,254)
Classification of financial assets and liabilities
The tables below set out the company's accounting
classification of each class of financial assets
and liabilities, and their fair values at 31 December
2017 and 31 December 2016.
The fair values of quoted borrowings are based
on the asking price.
The fair values of derivative financial instruments
are determined from observable market prices or
estimated using appropriate yield curves at 31
December each year by discounting the future contractual
cash flows to the net present values.
Carrying Gain/(loss)
value Fair value to income statement
2017 GBP000 GBP000 GBP000
Derivative financial
instrument assets 104,867 104,867 5,139
Total held for trading
assets 104,867 104,867 5,139
Trade and other receivables 766,196 898,088 -
Cash and cash equivalents 467 467 -
Total cash and receivables 766,663 898,555 -
Derivative financial
instrument liabilities (104,867) (104,867) (5,139)
Total held for trading
liabilities (104,867) (104,867) (5,139)
Trade and other payables (1,835) (1,835) -
Borrowings (755,794) (887,686) -
Total loans and payables (757,629) (889,521) -
Carrying Gain/(loss)
value Fair value to income statement
2016 GBP000 GBP000 GBP000
Derivative financial
instrument assets 109,990 109,990 20,338
Total held for trading
assets 109,990 109,990 20,338
Trade and other receivables 779,324 911,332 -
Cash and cash equivalents 386 386 -
Total cash and receivables 779,710 911,718 -
Derivative financial
instrument liabilities (109,990) (109,990) (20,338)
Total held for trading
liabilities (109,990) (109,990) (20,338)
Trade and other payables (797) (797) -
Borrowings (769,943) (901,951) -
Total loans and payables (770,740) (902,748) -
The only financial assets and liabilities of the
company recognised at fair value are derivative
financial instruments. These are all held at fair
value through profit or loss and are categorised
as level 2 in the fair value hierarchy as explained
below.
Fair value hierarchy
Level 1: valuation based on quoted market prices
traded in active markets.
Level 2: valuation techniques are used, maximising
the use of observable market data, either directly
from market prices or derived from market prices.
Level 3: where one or more inputs to valuation
are not based on observable market data. Valuations
at this level are more subjective and therefore
more closely managed, including sensitivity analysis
of inputs to valuation models. Such testing has
not indicated that any material difference would
arise due to a change in input variables.
Transfers into and out of the fair value hierarchy
levels are recognised on the date of the event
or change in circumstance that caused the transfer.
There were no transfers in or out for the above
financial assets and liabilities during the year.
Valuation techniques for level 2 hierarchy financial
assets and liabilities are presented in the accounting
policies.
There were no gains or losses arising on financial
assets or liabilities recognised direct to equity
(2016 GBPnil).
11 Share capital 2017 2016
GBP GBP
Issued, called up and fully paid
2 (2016 2) Ordinary shares of GBP1
each 2 2
12 Cash generated from operations
2017 2016
GBP000 GBP000
Profit before tax 50 20
Adjustments for:
Finance costs 48,559 48,694
Finance income (48,640) (48,743)
Movements in working capital:
(Increase)/decrease in trade and
other receivables (2,656) 1,004
Increase in trade and other
payables 972 747
Cash (absorbed by)/generated from
operations (1,715) 1,722
13 Related party transactions
During the year the company entered into the following
transactions with other group companies:
2017 2016
Nature of transaction GBP000 GBP000
The Trafford Centre
Limited* Interest receivable 48,640 48,743
The Trafford Centre
Holdings Limited* Capital injection 113 -
Significant balances outstanding between the
company and other group companies are shown below:
Amounts owed
by
2017 2016
GBP000 GBP000
The Trafford Centre Limited 766,196 779,324
Amounts owed
to
2017 2016
GBP000 GBP000
Intu Trafford Centre Group (UK)
Limited* - 797
Liberty International Group Treasury
Limited* 1,690 -
*The company's registered office is 40 Broadway,
London, England and Wales, United Kingdom, SW1H
0BT.
14 Ultimate parent company
The ultimate parent company is intu properties
plc, a company incorporated and registered in
England and Wales, copies of whose financial statements
may be obtained from the Company Secretary, 40
Broadway, London, SW1H 0BT. The immediate parent
company is The Trafford Centre Holdings Limited,
a company incorporated and registered in England
and Wales, copies of whose financial statements
may be obtained as above. The registered office
of The Trafford Centre Holdings Limited is 40
Broadway, London, England and Wales, United Kingdom,
SW1H 0BT.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR WGUBWCUPRGCU
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April 30, 2018 10:45 ET (14:45 GMT)
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