TIDMBC84
RNS Number : 6293X
Trafford Centre Finance Ld
30 April 2019
LEI: 213800J9WWQVUK5FE223
THE TRAFFORD CENTRE FINANCE LIMITED
Regulated Information Classification: Annual Financial and audit
reports
ANNUAL FINANCIAL REPORT
In compliance with the Disclosure and Transparency Rules, The
Trafford Centre Finance Limited (the "Company") announces the
publication of its Annual Financial Report for the year ended 31
December 2018. 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 the Disclosure and Transparency Rules, the
following information is extracted from the Company's Annual Report
and in unedited full text.
DIRECTORS' REPORT
FOR THE YEARED 31 DECEMBER 2018
The directors present their report and the audited financial statements
of the company for the year ended 31 December 2018.
The company is incorporated and registered in the Cayman Islands
(company number 91678). The company's registered office is 190 Elgin
Avenue, George Town, Grand Cayman, Cayman Islands KY1-9005.
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 2018 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 GBP12,000 compared
with a profit of GBP50,000 for the previous year. Net assets at
31 December 2018 were GBP1,030,000, an increase of GBP12,000 from
the 31 December 2017 figure of GBP1,018,000.
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 (2017 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 2018 commentary
Property
Macro-economic + Likelihood and impact of
Weakness in * Prime asset macroeconomic weakness continues
the to be a risk with continued
macro-economic political uncertainty in
environment * Covenant headroom monitored and stress-tested the UK and Brexit arrangements
could undermine not yet detailed, which has
rental income increased investor caution
levels and * Make representation on key policies, for example resulting in a reduction
property business rates in property values and lower
values, reducing transaction volumes in the
return on year
investment * Marketing events to attract footfall
and covenant * Valuation continues to support LTV headroom
headroom
* Use our respected brand to attract and retain
aspirational retailers * Tenant administrations at relatively low levels
* Review and update of Brexit risk review
--------------------------------------------------------------- ------ -----------------------------------------------------------------
Retail + Due to continued macroeconomic
environment * Active management of tenant mix uncertainty, the likelihood
Failure to react and impact of changes to
to changes in the retail environment resulting
the retail * Regular monitoring of tenant strength and diversity in potential tenant failures
environment continues to increase. intu
could undermine monitored this closely in
intu Trafford * 'Tell intu' customer feedback programme helps 2018 with intu's strategy
Centre's ability identify changes in customer preferences continuing to deliver solid
to attract footfall numbers and occupancy
customers
and tenants * Work closely with retailers * Increased level of administrations and retailer CVAs
* Digital strategy that embraces technology and digital * Continuing digital investment to improve relevance as
customer engagement. This enables intu to engage in shopping habits change
and support multichannel retailing, and to take the
opportunities offered by ecommerce
* Occupancy remains strong at 98 per cent
* Contingency plans for potential future vacant units
* Footfall growth continues to beat the benchmark
--------------------------------------------------------------- ------ -----------------------------------------------------------------
Risk & Impact Mitigation Change 2018 commentary
Operations
Health and = Likelihood of potential impact
safety * Strong business process and procedures, including has not changed significantly
Accidents or compliance with OHSAS 18001, supported by regular during 2018
system failure training and exercises * Retained OHSAS 18001, demonstrating consistent health
leading to and safety management process and procedures
financial
and/or * Annual audits of operational standards carried out
reputational internally and by external consultants * Gold award from RoSPA
loss
* Crisis management and business continuity plans in * Full review undertaken of each centre's fire strategy
place and tested and building specifications post-Grenfell and
Liverpool Echo Arena has provided appropriate
assurance
* Culture of visitor, staff and contractor safety
* Retailer liaison and briefings
* Appropriate levels of insurance
* Staff succession-planning and development in place to
ensure continued delivery of world class service
* Health and safety managers or coordinators in centre
* Implementation of new risk mitigators such as acid
attack response kits in centre
----------------------------------------------------------------- ------ ----------------------------------------------------------------
Cyber-security = Likelihood continues to rely
Loss of data * Data and cyber security strategies on operational and third
and information party systems and data. Severity
or failure of of potential impact managed
key systems * Regular testing programme and cyber scenario exercise through continued development
resulting in and benchmarking of tools and controls. Hacking
financial and/or attempts have not resulted
reputational in data loss or major operational
loss * Appropriate levels of insurance impacts
* Ongoing intu-wide cyber security project with
* Crisis management and business continuity plans in investment in tools, consultancy and staff to
place and tested mitigate impact of threats from evolving
cybersecurity andscape
* Data committee and data protection officer in place
* Implemented updated GDPR policies and procedures
* Internal and external assessment of GDPR compliance
* Monitoring of regulatory environment and best
practice
* Cybersecurity assessment performed by external
consultancy and full action plan in place
* Managing of supply chain and service providers who
hold intu data
----------------------------------------------------------------- ------ ----------------------------------------------------------------
Risk & Mitigation Change 2018 commentary
Impact
Terrorism = Overall likelihood and severity
Terrorist * Strong business processes and procedures, supported of potential impact unchanged.
incident by regular training and exercises, designed to adapt The NaCTSO and the intelligence
at intu and respond to changes in risk levels community continue to be as
Trafford busy as ever in protecting
Centre or the UK from terror attacks
another * Trained security staff who are alert and vigilant and 2018 has seen a continuation
major of terror attacks in mainland
shopping Europe. The intu Group Head
centre * Extraordinary pre-planned operational responses to of Security is a member of
resulting changes in national threat level the Crowded Places Information
in loss of Exchange. This group meets
consumer quarterly and ensures that
confidence * Annual audits of operational standards carried out intu is abreast of all the
with internally and by external agencies current threats and work undertaken
consequent by the Counter Terrorism Policing
impact teams in the UK
on * Culture of visitor and staff safety
lettings * National threat level remains at Severe
and rental
growth * Crisis management and business continuity plans in
place and tested with involvement of multiple * Major scenario exercise held at intu Trafford Centre
external agencies with involvement of multiple external agencies
* Retailer liaison and briefings * Operating procedures in place for the introduction of
further security measures if required
* Appropriate levels of insurance
* Strong relationships and frequent liaison with police,
NaCTSO, CPNI and other agencies
* NaCTSO approved to train staff in counter-terrorism
awareness programme
---------------------------------------------------------------- ------ -----------------------------------------------------------------
Change in level of
risk
+ increased
= remained the same
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.
INDEPENT AUDITORS
As previously announced by intu properties plc group, it is proposed
that Deloitte LLP will succeed PricewaterhouseCoopers LLP as the
auditor of the group including subsidiaries for the financial year
commencing 1 January 2019.
On behalf of the Board
David Fischel
Director
24 April 2019
INDEPENT AUDITORS' REPORT TO THE MEMBERS 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 2018 and of its
profit and cash flows for the year then ended; and
* have been properly prepared in accordance with
International Financial Reporting Standards (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 2018; the income statement and statement
of comprehensive income, 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. As in all our audits we also addressed the risk of management
override of controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material misstatement
due to fraud.
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 25 April 2019. 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 8,385,790 (2017: 8,719,172).
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 838,579 (2017: 871,917) as well
as misstatements below that amount that, in our view, warranted reporting
for qualitative reasons.
Conclusions relating to going concern
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.
We have nothing to report in respect of the above matters.
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. For example, the terms on which the United Kingdom
may withdraw from the European Union are not clear, and it is difficult
to evaluate all of the potential implications on the company's trade,
customers, suppliers and the wider economy.
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 8 April 2019 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.
Partner responsible for the audit
The engagement partner on the audit resulting in this independent
auditors' report is Mark Pugh.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 April 2019
INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Notes GBP000 GBP000
Administrative expenses (33) (31)
Operating loss 3 (33) (31)
Finance costs 4 (46,001) (48,559)
Finance income 46,046 48,640
Change in fair value of derivative
financial instruments 4 - -
Profit before taxation 12 50
Taxation 5 - -
Profit for the year 12 50
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 2018
2018 2017
Notes GBP000 GBP000
Non-current assets
Derivative financial instruments 6 94,412 103,256
Trade and other receivables 7 688,012 733,551
782,424 836,807
Current assets
Trade and other receivables 7 54,129 33,032
Derivative financial instruments 6 1,481 1,611
Cash and cash equivalents 545 467
56,155 35,110
Total assets 838,579 871,917
Current liabilities
Trade and other payables 8 (7,992) (10,238)
Borrowings 9 (45,652) (22,243)
Derivative financial instruments 6 (1,481) (1,611)
(55,125) (34,092)
Non-current liabilities
Borrowings 9 (688,012) (733,551)
Derivative financial instruments 6 (94,412) (103,256)
(782,424) (836,807)
Total liabilities (837,549) (870,899)
Net assets 1,030 1,018
Equity
Share capital 11 - -
Other reserves 113 113
Retained earnings 917 905
Total equity 1,030 1,018
The notes on pages 14 to 26 form part of these financial statements
The financial statements were approved by the Board of directors
and authorised for issue on 24 April 2019 and were signed on its
behalf by:
David Fischel
Director
Matthew Roberts
Director
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2018
Share capital Other reserves Retained Total equity
earnings
Notes GBP000 GBP000 GBP000 GBP000
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
Balance at 1 January 2018 - 113 905 1,018
Profit for the year - - 12 12
Total comprehensive income for
the year - - 12 12
Balance at 31 December 2018 - 113 917 1,030
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Notes GBP000 GBP000
Cash flows from operating activities
Cash generated from/(used
in) operations 12 8 (1,715)
Interest paid (45,361) (47,731)
Interest received 45,431 49,414
Net cash inflow/(outflow)
from operating activities 78 (32)
Investing activities
Amounts owed by group undertaking
received 23,179 15,069
Net cash generated from
investing activities 23,179 15,069
Financing activities
Borrowings repaid (23,179) (15,069)
Capital injection from parent - 113
Net cash used in financing
activities (23,179) (14,956)
Net increase in cash and
cash equivalents 78 81
Cash and cash equivalents
at beginning of year 467 386
Cash and cash equivalents
at end of year 545 467
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
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.
This is the company's first set of annual financial statements
where IFRS 9 Financial Instruments has been applied. This standard
applies to classification and measurement of financial assets
and financial liabilities, impairment provisioning and hedge accounting.
The adoption of this standard has not had a material impact on
the financial statements.
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.
When applying a loss allowance, the Directors exercise judgement
as to the collectibility of 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.
As trade receivables are financial assets within the scope of
IFRS 9 Financial Instruments, the company applies the expected
credit loss model.
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 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 2018 of GBP33,000
(2017 operating loss of GBP31,000) includes fees in respect of
auditors' remuneration of GBP5,163 (2017 GBP4,917) in respect
of the audit of the financial statements. Non-audit services of
GBP4,634 for a half year review were provided during the year
(2017 GBP4,456).
The directors did not receive or waive any emoluments (2017 GBPnil)
in respect of their services to the company.
There were no employees during the year (2017 none).
4 Net finance income
2018 2017
GBP000 GBP000
Finance income
On amounts due from group undertaking 46,046 48,640
Finance costs
On borrowings (45,986) (48,557)
Other interest (15) (2)
(46,001) (48,559)
Change in fair value of financial instruments
On external derivative financial instruments 8,844 (5,139)
On derivative financial instruments with The
Trafford Centre Limited (8,844) 5,139
- -
5 Taxation
The company is subject to UK corporation tax on its profits.
The tax expense for the year is lower than (2017 lower than)
the standard rate of corporation tax in the UK. The differences
are explained below:
2018 2017
GBP000 GBP000
Profit before tax 12 50
Profit before tax multiplied by the standard
rate of tax in the UK of 19% (2017 19.25%) 2 10
Utilisation of tax losses not previously recognised (1) -
Group relief (without payment) (1) (10)
Tax expense - -
Deferred
tax
The company has tax losses arising in the UK of GBP2,557,000
(2017 GBP2,583,000) 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 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.
7 Trade and other receivables
Current Non-current
2018 2017 2018 2017
GBP000 GBP000 GBP000 GBP000
Amounts owed by group undertaking 46,525 23,179 697,838 744,363
Less: finance costs (873) (936) (9,826) (10,812)
Net loan amount 45,652 22,243 688,012 733,551
Accrued income and other amounts
due from group undertaking 8,094 10,402 - -
Prepayments 373 387 - -
VAT recoverable 10 - - -
54,129 33,032 688,012 733,551
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.
8 Trade and other payables
2018 2017
GBP000 GBP000
Amounts owed to group undertakings 6 1,690
Accruals 7,986 8,403
Other payables - 145
7,992 10,238
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
2018 2018 2017 2017
GBP000 GBP000 GBP000 GBP000
Current secured notes
Class:
A2 6.50% 2023 12,376 15,232 11,619 14,667
A4 2.88% 2019 20,000 20,075 - -
B 7.03% 2029 4,764 5,435 4,450 5,213
D2 8.28% 2022 9,385 10,440 7,110 8,174
Debt falling due within one
year 46,525 51,182 23,179 28,054
Less: finance costs (873) - (936) -
Net loan amount 45,652 51,182 22,243 28,054
Non-current secured notes
Class:
A2 6.50% 2033 274,163 364,669 286,538 393,114
A3 Floating 2035 188,500 163,695 188,500 172,809
A4 2.88% 2019 - - 20,000 20,404
B 7.03% 2029 62,617 77,015 67,381 85,892
B2 Floating 2035 20,000 17,475 20,000 18,250
B3 4.25% 2024 20,000 21,343 20,000 21,698
D1(N) Floating 2035 29,054 20,690 29,054 21,075
D2 8.28% 2022 33,504 37,190 42,890 49,480
D3 4.75% 2024 70,000 75,523 70,000 76,910
Debt falling due after one
year 697,838 777,600 744,363 859,632
Less: finance costs (9,826) - (10,812) -
Net loan amount 688,012 777,600 733,551 859,632
Total borrowings 733,664 828,782 755,794 887,686
2018 2017
GBP000 GBP000
Repayable within one year 46,525 23,179
Repayable in more than one year but not more
than two years 28,693 46,525
Repayable in more than two years but not more
than five years 87,163 92,061
Repayable in more than five years 581,982 605,077
744,363 766,842
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
(2017 GBP237,554,000) with rates of 4.20%, 4.34% and 4.66%. The
fair value of these interest rate swaps at 2018 was a liability
of GBP95,893,000 (2017 GBP104,867,000).
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.
The table below shows the effect of interest rate swaps on the
borrowings profile of the company:
Fixed Floating Fixed Floating
2018 2018 2017 2017
GBP000 GBP000 GBP000 GBP000
Borrowings 506,809 237,554 529,987 237,555
Interest rate swap impact 237,554 (237,554) 237,555 (237,555)
Net borrowings profile 744,363 - 767,542 -
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 (2017 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 GBP20,882,000
(2017 GBP22,628,000) 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 GBP20,882,000 (2017 GBP22,628,000)
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 hat 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 1-2 years 3-5 years Over 5 years Total
year or
on demand
GBP000 GBP000 GBP000 GBP000 GBP000
At 31 December 2018
Borrowings (including
interest) (81,534) (61,859) (175,134) (728,692) (1,047,219)
Amounts owed to group
undertakings (6) - - - (6)
Derivative payments (10,486) (10,515) (31,575) (113,633) (166,209)
Derivative receipts 2,231 2,645 9,439 39,661 53,976
(89,795) (69,729) (197,270) (802,664) (1,159,458)
At 31 December
2017
Borrowings (including
interest) (59,359) (81,191) (185,089) (780,054) (1,105,693)
Amounts owed to group
undertakings (1,690) - - - (1,690)
Derivative payments (10,486) (10,486) (31,544) (124,178) (176,694)
Derivative receipts 1,319 1,888 8,048 43,156 54,411
Other financial
liabilities (145) - - - (145)
(70,361) (89,789) (208,585) (861,076) (1,229,811)
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 2018 and 31 December 2017.
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) to income
value Fair value statement
2018 GBP000 GBP000 GBP000
Derivative financial instrument
assets 95,893 95,893 (8,844)
Total held for trading assets 95,893 95,893 (8,844)
Trade and other receivables 741,758 836,876 -
Cash and cash equivalents 545 545 -
Total cash and receivables 742,303 837,421 -
Derivative financial instrument
liabilities (95,893) (95,893) 8,844
Total held for trading liabilities (95,893) (95,893) 8,844
Trade and other payables (6) (6) -
Borrowings (733,664) (828,782) -
Total loans and payables (733,670) (828,788) -
Carrying Gain/(loss) to income
value Fair value 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) -
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
* valuation based on quoted market prices traded in
active markets.
* valuation techniques are used, maximising the use of
observable market data, either directly from market
prices or derived from market prices.
* 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 (2017 GBPnil).
11 Share capital 2018 2017
GBP GBP
Issued, called up and fully paid
2 (2017 2) Ordinary shares of GBP1 each 2 2
12 Cash generated from/(used in) operations
2018 2017
GBP000 GBP000
Profit before tax 12 50
Adjustments for:
Finance costs 46,001 48,559
Finance income (46,046) (48,640)
Movements in working capital:
Decrease/(increase) in trade and other receivables 1,877 (2,656)
(Decrease)/increase in trade and other
payables (1,836) 972
Cash generated from/(used in) operations 8 (1,715)
13 Related party transactions
During the year the company entered into the following transactions
with other group companies:
2018 2017
Nature of transaction GBP000 GBP000
The Trafford Centre Limited* Interest receivable 46,046 48,640
The Trafford Centre Holdings
Limited* Capital injection - 113
Significant balances outstanding between the company and other
group companies are shown below:
Amounts owed by
2018 2017
GBP000 GBP000
The Trafford Centre Limited 739,524 766,196
Amounts owed to
2018 2017
GBP000 GBP000
Liberty International Group Treasury Limited* - 1,690
Intu Trafford Centre Group (UK) Limited* 6 -
*The company's registered office is 40 Broadway, London, 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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EASLEDDANEFF
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