REG - Rothschild & Co - Half-year Report
13/09/2022 17:30
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RNS Number : 3251Z Rothschild & Co Continuation Fin 13 September 2022
Rothschild & Co Continuation Finance PLC
Half-yearly Report for the six-month period ended 30 June 2022
Interim Management Report
Summary of Important Events
Rothschild & Co Continuation Finance PLC (the "Company") is a wholly-owned
subsidiary of N.M. Rothschild & Sons Limited ("NMR") and was incorporated
on 30 August 2000 to operate as a finance vehicle for the benefit of NMR and
its subsidiaries.
The principal activity of the Company is the raising of finance for the
purpose of lending it to NMR and other companies in NMR's group (the "Group").
The Company raises finance by the issue of perpetual subordinated notes
guaranteed by NMR.
Risks and Uncertainties
The principal risks of the Company are credit risk, liquidity risk, market
risk and operational risk. The Company follows the risk management policies of
the parent undertaking, NMR.
The Company's principal risk is credit exposure to NMR, as the notes issued by
the Company have been guaranteed by, and funds have been on-lent to NMR. The
Company is therefore reliant on the ability of NMR to meet its obligations
under these lending arrangements. NMR is exposed to current market and
geopolitical headwinds but, nevertheless, has sufficient liquidity to continue
to operate for the next 12 months even in the scenario where revenue is
significantly reduced. Management has considered the going concern basis of
preparation as outlined in note 1 to the financial statements.
This half-yearly financial report has not been audited or reviewed by the
Company's auditors pursuant to the Auditing Practices Board guidance on Review
of Interim Financial Information.
Responsibilities Statement
The Directors confirm that to the best of their knowledge:
- The condensed set of financial statements has been prepared in accordance with
IAS 34 Interim Financial Reporting; and
- The interim management report includes a fair review of (i) the important
events that have occurred during the first six months of the financial year,
and their impact on the condensed set of financial statements, and (ii) the
principal risks and uncertainties for the remaining six months of the
financial year.
By Order of the Board
Paul O'Leary
Director
13 September 2022
Condensed Interim Statement of Comprehensive Income
For the six months ended 30 June 2022
6 months to 6 months to
30 June 30 June
2022
2021
Note £ £
Interest income 693,444 132,962
Interest expense (687,002) (127,114)
Operating profit 6,442 5,848
Revaluation of loans 4 (24,717,418) 3,275,554
Revaluation of debt securities 9 24,722,319 (3,284,759)
Foreign exchange translation gains/(losses) 1,277 (1,703)
Profit/(loss) before tax 12,620 (5,060)
Taxation 3 (3,329) 2,710
Profit/(loss) for the financial period 9,291 (2,350)
Other comprehensive income - -
Total comprehensive income/(loss) for the financial period 9,291 (2,350)
Condensed Interim Statement of Changes in Equity
For the six months ended 30 June 2022
Retained Earnings
Share Capital Total
£ £ £
At 1 January 2022 100,000 304,687 404,687
Total comprehensive loss for the period - 9,291 9,291
At 30 June 2022 100,000 313,978 413,978
At 1 January 2021 100,000 206,384 306,384
Total comprehensive income for the period - (2,350) (2,350)
At 30 June 2021 100,000 204,034 304,034
Condensed Interim Balance Sheet
At 30 June 2022
At 30 June At 31 December
2022 2022 2021 2021
Note £ £ £ £
Non-current assets
Loan to parent undertaking 4 89,830,851 114,548,269
Current assets
Other financial assets 5 382,306 96,278
Cash and cash equivalents 6 258,459 250,897
640,765 347,175
Current liabilities
Current tax liability (3,406) (1,009)
Deferred tax liability 7 (36,800) (35,869)
Other financial liabilities 8 (380,262) (94,390)
Net current assets 220,297 215,907
Total assets less current liabilities 90,051,148 114,764,176
Non-current liabilities
Debt securities in issue 9 (89,637,170) (114,359,489)
Net assets 413,978 404,687
Shareholders' equity
Share capital 11 100,000 100,000
Retained earnings 313,978 304,687
Total shareholders' equity 413,978 404,687
Condensed Interim Cash Flow Statement
For the six months ended 30 June 2022
6 months to 6 months to
30 June 30 June
2022
2021
Note £ £
Cash flow from operating activities
Net profit/(loss) for the financial period 9,291 (2,350)
Taxation 3,329 (2,710)
Net cash inflow/(outflow) from operating activities 12,620 (5,060)
Cash flow from financing activities
Net decrease/(increase) in loans and interest receivable 24,431,389 (3,366,228)
Net (decrease)/increase in debt securities in issue and interest payable
(24,436,447) 3,375,525
Net cash (outflow)/inflow from financing activities (5,058) 9,297
Net increase in cash and cash equivalents 7,562 4,237
Cash and cash equivalents at beginning of half-year 250,897 245,750
Cash and cash equivalents at end of half-year 6 258,459 249,987
Interest receipts and payments during the period were as follows:
6 months to 6 months to
30 June 2022 30 June 2021
£ £
Interest received from parent undertaking 407,416 42,288
Interest paid to note holders 401,130 36,348
The notes to the condensed interim financial statements form an integral part
of the condensed interim financial statements.
Notes to the Condensed Interim Financial Statements
(forming part of the Condensed Interim Financial Statements)
For the six months ended 30 June 2022
1. Basis of Preparation
The condensed interim financial statements are prepared and approved by the
Directors in accordance with IAS 34 Interim Financial Reporting. The
condensed interim financial statements are prepared under the historical cost
accounting rules and should be read in conjunction with the annual financial
statements for the year ended 31 December 2021, which have been prepared in
accordance with International Financial Reporting Standards.
The accounting policies and methods of valuation are identical to those
applied in the financial statements for the year ended 31 December 2021.
Going Concern
Management has performed an assessment to determine whether there are any
material uncertainties that could cast significant doubt on the ability of the
Company to continue as a going concern. No significant issues have been noted.
In reaching this conclusion, management considered:
- The financial impact of the uncertainty on the Company's balance sheet;
- The Company's liquidity position based on current and projected cash
resources. The liquidity position has been assessed taking into account the
forecast liquidity of NMR and its ability to continue to pay the interest on
the intercompany loan provided by the Company; and
- The operational resilience with respect to the impact of the pandemic on
existing IT and infrastructure.
Based on the above assessment of the Company's financial position, the
Directors have concluded that the Company has adequate resources to continue
in operational existence for the foreseeable future (for a period of at least
twelve months after the date that the financial statements are signed).
Accordingly, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
Financial Risk Management
The Company follows the financial risk management policies of the parent
undertaking, N M Rothschild & Sons Limited. The key risks arising from
the Company's activities involving financial instruments, which are monitored
at the group level, are as follows:
- Credit risk - the risk of loss arising from client or counterparty default is
not considered a significant risk to the Company as all asset balances are
with other group companies as detailed in note 14 Related Party
Transactions.
- Market risk - exposure to changes in market variables such as interest rates,
currency exchange rates, equity and debt prices is not considered significant
as the terms of financial assets substantially match those of financial
liabilities.
- Liquidity risk - the risk that the Company is unable to meet its obligations
as they fall due or that it is unable to fund its commitments is not
considered significant as the risk has been transferred to NMR. As the funds
on-lent to NMR have the same maturity dates as the notes issued, the Company's
ability to meet its obligations in respect of notes issued by it is affected
by NMR's ability to make payments to the Company.
2. Directors' Emoluments
None of the directors received any remuneration in respect of their services
to the Company during the period (2021: £nil).
3. Taxation
6 months to 6 months to
30 June 2022
30 June 2021
£ £
Current tax (2,398) 961
Deferred tax (931) 1,749
Total tax (3,329) 2,710
The tax charge can be explained as follows:
6 months to 6 months to
30 June 2022 30 June 2021
£ £
Profit/(loss) before tax 12,620 (5,060)
United Kingdom corporation tax at 19% (2,398) 961
Deferred tax income statement (charge)/credit (931) 1,749
Tax charged for the period (3,329) 2,710
4. Non-Current Assets: Loan to Parent Undertaking
At 30 June At 31 December
2022 2021
£ £
At beginning of period 114,548,269 110,973,131
Fair value movements (24,717,418) 3,575,138
At end of period 89,830,851 114,548,269
Due
In 5 years or more 89,830,851 114,548,269
IFRS 9 requires the €150,000,000 loan to be carried at fair value which as
at 30 June 2022 was £89,930,851 (at 31 December 2021: £114,548,269). On an
amortised cost basis, the value of the loan at 30 June 2022 would be
£129,121,116 (at 31 December 2021: £125,853,708). The fair values are based
on the market value of the external debt securities (level 2).
The interest rate charged on the €150 million loan is EUR-TEC10-CNO plus 36
basis points, capped at 9.01 per cent, fixed on 05 February, 05 May, 05 August
and 05 November each year.
The interest rate on the above loan at 30 June 2022 was 1.87% (31 December
2021: 0.51%).
5. Current Assets: Other Financial Assets
At 30 June At 31 December
2022 2021
£ £
Interest receivable 382,306 96,278
6. Cash and Cash Equivalents
At 30 June 2022 the Company held cash of £258,459 (31 December 2021:
£250,897) at the parent undertaking. Of this balance, £208,282 (31 December
2021: £208,282) was held in a sterling account. The equivalent of £50,177
(31 December 2021: £42,615) was held in a euro account.
7. Deferred Income Taxes
At 30 June At 31 December
2022 2021
£ £
At beginning of period (35,869) (38,442)
Recognised in income:
Income statement (charge)/credit (931) 2,573
At end of period (36,800) (35,869)
Deferred tax assets less liabilities are attributable to the following items:
At 30 June 2022 At 31 December 2021
£ £
Fair value of intra group loans 7,465,150 2,148,033
Fair value of debt securities in issue (7,501,950) (2,183,902)
(36,800) (35,869)
Both the intra-group loans and debt securities in issue are taxed on an
amortised cost basis of accounting and accordingly taxable/deductible
temporary differences arise following the adoption of IFRS 9.
8. Current Liabilities: Other Financial Liabilities
At 30 June At 31 December
2022 2021
£ £
Interest payable 380,262 94,390
9. Non-Current Liabilities: Debt Securities in Issue
At 30 June At 31 December
2022 2021
£ £
At beginning of period 114,359,489 110,770,808
Fair value movements (24,722,319) 3,588,681
At end of period 89,637,170 114,359,489
Due
In 5 years or more 89,637,170 114,359,489
Given the IFRS 9 requirement to fair value the related loans, the Company has
elected to fair value the debt securities in issue, which as at 30 June 2022
was £89,637,170 (at 31 December 2021: £114,359,489). On an amortised cost
basis, the value of the debt securities in issue at 30 June 2022 would be
£129,121,116 (at 31 December 2021: £125,853,708). The fair value was derived
from the quoted market price at the balance sheet date (level 1).
The interest rate payable on the €150 million Perpetual Subordinated Notes
is EUR-TEC10-CNO plus 35 basis points, capped at 9 per cent, fixed on 05
February, 05 May, 05 August and 05 November each year. From and including
the interest payment date falling in August 2016 and every interest payment
date thereafter, the Company may redeem all (i.e. not in part) of the
Perpetual Subordinated Notes at their principal amount.
The interest rate on the above notes at 30 June 2022 was 1.86% (31 December
2021: 0.50%).
10. Maturity of Financial Liabilities
The following table shows contractual cash flows payable by the Company on the
perpetual subordinated notes classified by remaining contractual maturity at
the balance sheet date. Interest cash flows on perpetual subordinated notes
are shown up to five years only, with the principal balance being shown in the
perpetual column.
At 30 June 2022
3 months
or less 1 year 5 years
but not or less or less
payable on but over but over
Demand demand 3 months 1 year Perpetual Total
£ £ £ £ £ £
Perpetual subordinated notes
- 603,641 1,810,924 9,658,259 129,121,116 141,193,940
At 31 December 2021
3 months
or less 1 year 5 years
but not or less or less
payable on but over but over
Demand demand 3 months 1 year Perpetual Total
£ £ £ £ £ £
Perpetual subordinated notes
- 157,317 471,951 2,517,074 125,853,708 129,000,050
11. Share Capital
At 30 June At 31 December
2022 2021
£ £
Authorised, allotted, called up and fully paid
100,000 Ordinary shares of £1 each 100,000 100,000
12. Related Party Transactions
Parties are considered to be related if one party controls, is controlled by
or has the ability to exercise significant influence over the other party.
This includes key management personnel, the parent company, subsidiaries and
fellow subsidiaries.
Amounts receivable from related parties at the period end were as follows:
At 30 June At 31 December
2022 2021
£ £
Cash and cash equivalents at parent undertaking 258,459 250,897
Accrued interest receivable from parent undertaking 382,306 96,278
Loans to parent undertaking 89,830,851 114,548,269
Amounts recognised in the condensed statement of comprehensive income in
respect of related party transactions were as follows:
6 months to 6 months to
30 June 2022 30 June 2021
£ £
Interest income from parent undertaking 693,444 132,962
There were no loans made to Directors during the period (6 months to 30 June
2021: none) and no balances outstanding at the period end (at 31 December
2021: £nil). There were no employees of the Company during the period (6
months to 30 June 2021: none).
13. Parent Undertaking and Ultimate Holding Company and Registered
Office
The largest group in which the results of the Company are consolidated is that
headed by Rothschild & Co Concordia SAS, incorporated in France, and whose
registered office is at 23bis, Avenue de Messine, 75008 Paris. The smallest
group in which they are consolidated is that headed by Rothschild & Co
SCA, a French public limited partnership whose registered office is also at
23bis, Avenue de Messine, 75008 Paris. The accounts are available on the
Rothschild & Co website at www.rothschildandco.com.
The Company's immediate parent company is N M Rothschild and Sons Limited,
incorporated in England and Wales and whose registered office is at New Court,
St Swithins Lane, London, EC7N 8AL.
The Company's registered office is located at New Court, St Swithin's Lane,
London, EC4N 8AL.
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