TIDM60VT
RNS Number : 5345L
Paragon Treasury PLC
03 October 2016
Paragon Treasury plc
Report and Financial Statements
For the year ended 31 March 2016
Company Number: 09288564
Paragon Treasury plc
Report and financial statements
for the year ended 31 March 2016
Contents
Page:
Strategic report 1
Report of the directors 3
Independent auditor's report 5
Statement of comprehensive income 7
Statement of financial position 8
Statement of change in equity 9
Notes forming part of the financial
statements 10
Directors
Dilip Kavi
Marion Hall
Secretary and registered office
Marion Hall, Case House, 85-89 High Street, Walton-on-Thames,
Surrey KT12 1DZ
Company number
09288564
Auditor
BDO LLP, 2 City Place, Beehive Ring Road, Gatwick, West Sussex
RH6 0PA
Bankers
Natwest, 38 Strand, London WC2H 5JB
Solicitors
Devonshires, 30 Finsbury Circus, London EC2M 7DT
Paragon Treasury Plc
Strategic report
for the year ended 31 March 2016
The directors present their Strategic Report, Report of the
Directors and the audited financial statements for Paragon Treasury
plc (PTP) for the year ended 31 March 2016.
Principal activities and review of business
The Statement of comprehensive income shows a profit of GBPnil
for the period. This is in line with PTP's role as a special
purpose lending vehicle not seeking to generate financial
returns.
On 21 January 2015 PTP issued a GBP250m bond and GBP25m was
retained on the same day for future issuance. The future issuance
must take place before 21 January 2020. The bond issue has a coupon
rate of 3.625% and was raised to help the group fund the
development of new homes, and to refinance existing loans. At issue
the yield was 3.626% and there was a GBP40,500 discount to be
amortised over the life of the bond. PTP therefore received
GBP224,959,500 which was on-lent to Elmbridge Housing Trust (EHT)
and Richmond upon Thames Churches Housing Trust (RuTCHT), two
subsidiaries of Paragon Community Housing Group Limited (PCHG).
On 31 October 2015 RuTCHT transferred its engagements into EHT,
along with PCHG. At the same time EHT was renamed Paragon Community
Housing Limited (Paragon).
No new activity was undertaken in the year.
Effects of material estimates and judgements upon
performance
There have been no material estimates made in the preparation of
these financial statements.
Qualifying third party indemnity provisions
The company has no qualifying third party indemnity provisions
in place for the directors of Paragon Community Housing
Limited.
Going concern
The Directors have considered the current and future activities
of PTP and have confirmed their view that PTP continues to be a
going concern.
Principal risks and uncertainties
As PTP on-lends to Paragon, the main risk facing PTP is that
this company will be unable to make its interest or principal
payments when they fall due. This is mitigated through a secured
loan agreement, backed by social housing assets owned by Paragon.
These assets are subject to regulation by the Homes and Communities
Agency (HCA) and therefore offer a level of protection in terms of
regulatory scrutiny. If there are any payments not made to PTP, it
has the right to enforce the security under the loan.
A contribution to the assessment of the scale of risk is Moody's
Investor Services credit rating of A2 (stable) for Paragon which
was reconfirmed in December 2015. However, the 'Brexit' vote has
meant that, along with the rest of the sector, Paragon's outlook
has now been downgraded by Moody's from stable to negative.
Assessment of the effectiveness of internal control
The directors have overall responsibility for maintaining a
sound system of internal control and for reviewing its
effectiveness. The directors recognise that such a system can
provide only reasonable and not absolute assurance against material
misstatements or loss.
The system of internal control is designed to manage risk and
fraud and to provide reasonable assurance that key business
objectives and expected outcomes will be achieved. It also exists
to give reasonable assurance about the preparation and reliability
of financial and operational information and the safeguarding of
the company's assets and interests.
Paragon Treasury Plc
Strategic report
for the year ended 31 March 2016
In meeting their responsibilities, the directors have adopted a
risk-based approach to internal controls which is embedded within
the normal management and governance arrangements and it is a
continuous process.
The internal controls are implemented consistently across the
Paragon group of entities and further detail is provided in the
consolidated accounts of Paragon.
Risk management objectives and policies
Paragon's treasury function is responsible for the management of
the funds and control of the associated risks. Its activities are
governed by the Paragon Board and the Investment Committee and they
are responsible for overseeing treasury strategy and risk
management for all the Paragon entities including PTP.
Interest rate risk/hedging
PTP borrows funds on a fixed rate basis from the capital markets
and then on-lends these to Paragon at the same fixed rate. As such
PTP does not bear any interest rate risk, apart from the underlying
credit risk with Paragon which is discussed above. PTP does not
undertake any hedging activities and it does not have any
derivatives.
Approval
This strategic report was approved by order of the Board on 15
September 2016.
Dilip Kavi
Director
Paragon Treasury Plc
Report of the directors
for the year ended 31 March 2016
The directors present their report together with the audited
financial statements for the year to 31 March 2016.
Overview and principal activities
PTP was incorporated on 30 October 2014. PTP is a wholly owned
subsidiary of Paragon. PTP is a special purpose funding vehicle,
used to secure funding for Paragon. PTP obtains finance directly
from capital markets and on-lends this to Paragon. All associated
expenses are borne by the underlying borrower.
Financial Instruments
PTP has no financial instruments other than those related to the
bond. The directors consider that PTP has a low level of risk
exposure to interest rate risk and credit risk.
Results and dividends
The Statement of comprehensive income is on page 7 and shows the
result for the year.
The directors do not recommend the payment of a dividend.
Future developments
The Directors do not anticipate any changes in the Company's
principal activity.
Employees
PTP does not employ any staff.
Political and charitable contributions
The Company made no political or charitable donations, not did
it incur any political expenditure during the period.
Directors and their interests
The Directors of the Company who held office during the period
are as follows:
Dilip Kavi
Marion Hall
None of the Directors who held office during the year had any
interest in the shares of the Company.
Paragon Treasury Plc
Report of the directors
for the year ended 31 March 2016 (continued)
Directors' responsibilities
The directors are responsible for preparing the directors'
report, strategic report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under company law
the directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the company and of the statement of comprehensive income
of the company for that period.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed subject to any material departures disclosed and explained
in the financial statements;
-- prepare 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 and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
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.
Auditors
All of the current directors have taken all the steps that they
ought to have taken to make themselves aware of any information
needed by the company's auditors for the purposes of their audit
and to establish that the auditors are aware of that information.
The directors are not aware of any relevant audit information of
which the auditors are unaware.
BDO LLP have expressed their willingness to continue in office
and a resolution to re-appoint them will be proposed at the annual
general meeting.
By order of the Board
Dilip Kavi
Director
15 September 2016
Paragon Treasury plc
Independent auditor's report
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF PARAGON TREASURY
PLC
We have audited the financial statements of Paragon Treasury Plc
for the year ended 31 March 2016 which comprise the statement of
comprehensive income, the statement of financial position, the
statement of change in equity, and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice), including
Financial Reporting Standard 102, the financial reporting standard
applicable to the UK and the Republic of Ireland.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the association and the association's members as
a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of the board and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council's (FRC's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the FRC's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 March 2016 and of its result for the year then
ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the strategic report and
the directors' report for the financial year for which the
financial statements are prepared is consistent with the financial
statements.
Paragon Treasury plc
Independent auditor's report
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF PARAGON TREASURY
PLC
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Elizabeth Kulczycki, Senior Statutory Auditor
BDO LLP, statutory auditor
Gatwick, West Sussex
United Kingdom
Date
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Paragon Treasury plc
Statement of comprehensive income
for the year ended 31 March 2016
Note 3 month
Year ended period ended
31 March 2016 31 March 2015
GBP GBP
Revenue 4 8,302,588 1,556,908
Operating expenses (42,761) (12)
Interest payable and other finance costs 5 (8,259,827) (1,556,896)
-------------- --------------
Operating profit - -
Taxation 6 - -
Profit on ordinary activities for the financial year - -
============== ==============
All amounts relate to continuing activities.
The notes on pages 10 to 14 form part of these financial
statements.
Paragon Treasury plc
Statement of financial position
at 31 March 2016
Company number 09288564 Note 2016 2015
GBP GBP
Current assets
Debtors: receivable after more than one year 7 222,509,807 222,428,575
Debtors: receivable within one year 7 1,564,328 1,541,878
Cash at bank and in hand 12,384 12,488
224,086,519 223,982,941
Creditors: amounts falling due within one year 8 (1,564,212) (1,541,866)
Total assets less current liabilities 222,522,307 222,441,075
Creditors: amounts falling due after more than one year 8 (222,509,807) (222,428,575)
12,500 12,500
Capital and reserves
Called up share capital 9 12,500 12,500
Total shareholders' funds 12,500 12,500
============== ==============
The financial statements were approved by the Board of Directors
and authorised for issue on 15 September 2016.
Dilip Kavi Marion Hall
Director Secretary
The notes on pages 10 to 14 form part of these financial
statements.
Paragon Treasury plc
Statement of change in equity
for the year ended 31 March 2016
3 month
Year ended period ended
31 March 2016 31 March 2015
GBP GBP
At 1(st) April 12,500 -
Contributions by and distributions to shareholders
GBP1 ordinary shares issued and paid - 12,500
Comprehensive income for the period
Profit for the period - -
At 31(st) March 12,500 12,500
The notes on pages 10 to 14 form part of these financial
statements.
Paragon Treasury plc
Notes forming part of the financial statements
for the year ended 31 March 2016
1 Accounting policies
The financial statements have been prepared in accordance with
the applicable accounting standards and under the historical cost
accounting rules.
The following principal accounting policies have been
applied:
Going concern
On the basis of their assessment of the Company's financial
position and resources, the Company's directors have a reasonable
expectation that the Company will be able to continue in
operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in the
preparation of the annual financial statements.
Disclosure exemptions adopted
As a qualifying entity as defined in FRS 102, the directors are
taking advantage of the reduced disclosure framework and have not
presented a statement of cash flows.
Financial instruments
The company has applied the requirements of sections 11 and 12
of FRS 102. In accordance with the FRS, Financial Instruments are
classified as basic. The Bond is initially recorded at transaction
price and on subsequent measurement is carried on the statement of
financial position at amortised cost using the effective interest
method. The Bond discount is amortised over the life of the
instrument.
Effective interest rate method
The effective interest rate method is a method of calculating
the amortised cost of a financial asset or liability and allocating
interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash flows through the expected life of the financial asset or
liability or, where appropriate, a shorter period to the net
carrying amount on initial recognition.
Taxation
The charge for taxation is based on the profit or loss for the
financial year. The current tax charge is based on the taxable
profit for the year. Taxable profit differs from net profit as
reported in the statement of comprehensive income because it
excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable
or deductible. The company's liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the year end date.
Key sources of estimation uncertainty
There is no estimation uncertainty. The on-lent funding to
Paragon is under a secured loan agreement, backed by housing assets
owned by Paragon.
Revenue
The revenue shown in the statement of comprehensive income
represents interest receivable on the loan to Paragon, plus amounts
invoiced to cover the administrative expenses incurred during the
period. Also included is any amortisation on bond issue costs due
from Paragon. Interest receivable is recognised on an accruals
basis. All revenue comes from group entities.
Paragon Treasury plc
Notes forming part of the financial statements
for the year ended 31 March 2016
2 Statement of comprehensive income
During the period the company incurred interest on the borrowings it holds. The borrowings
are then lent to Paragon and interest charged. Consequently, the net finance costs of PTP,
made neither a gain nor a loss.
3 Directors' emoluments
The directors are employed by Paragon. They do not receive remuneration for their duties as
directors of the Company. Any employment costs are retained by Paragon and disclosed in the
financial statements of the group as appropriate.
The Company has no directly employed personnel.
4 Interest receivable and similar income 2016 2015
GBP GBP
Interest due from other group entities 8,178,596 1,541,866
Release of issue costs payable by other group entities 79,724 15,030
Release of bond discount payable by other group entities 1,507 -
8,259,827 1,556,896
------------- ------------
5 Interest payable and other finance costs 2016 2015
GBP GBP
Bond interest payable 8,178,596 1,541,866
Amortisation on bond issue costs 79,724 15,030
Release of bond discount payable by other entities 1,507 -
8,259,827 1,556,896
------------- ------------
6 Taxation on ordinary activities 2016 2015
GBP GBP
Current tax
UK Corporation tax - -
Profit on ordinary activities before taxation - -
------------- ------------
Paragon Treasury plc
Notes forming part of the financial statements
for the year ended 31 March 2016
7 Debtors
2016 2015
GBP GBP
Amounts receivable after more than one year
Long term 32 year loan to other entities 225,000,000 225,000,000
Less: Bond Discount (38,992) (40,500)
Less: issue costs (2,451,201) (2,530,925)
222,509,807 222,428,575
----------------- -----------------
Amounts receivable in less than one year
Amounts due from other group entities 1,564,328 1,541,878
----------------- -----------------
Included in amounts receivable after more than one year, is a 32 year loan facility made to
Paragon, the parent of PTP. The loan, which has a coupon rate of 3.625% will be repaid by
2047 and will be paid in equal instalments over the last 5 years of the bond, from 2042 to
2047. The loan is secured via security trustee on the assets of Paragon. The bond discount
(GBP40,500) and issue costs (GBP2,545,955) are amortised on a straight line basis over the
life of the bond.
8 Creditors Restated
2016 2015
GBP GBP
Amounts falling due in less than one year
Interest payable to 2047 Bond investors 1,564,212 1,541,866
----------------- -----------------
Amounts falling due after more than one year
32 year Fixed Rate Bond 225,000,000 225,000,000
Less: Bond Discount (38,992) (40,500)
Less: issue costs (2,451,201) (2,530,925)
222,509,807 222,428,575
----------------- -----------------
Bonds are repayable, as follows:
In five years or more 225,000,000 225,000,000
----------------- -----------------
The set up costs, bond discount and issue costs are borne by Paragon over the 32 year term.
The Bond matures in 2047 with interest charged at a fixed coupon of 3.625%, amortising in
the last 5 years. Issue costs will amortise over the life of the bond.
Risk management objectives and policies
Paragon's treasury function is responsible for the management of the funds and control of
the associated risks. Its activities are governed by the Paragon Board and Investment Committee
and the function is responsible for all the treasury issues in Paragon and all of its legal
entities.
Paragon Treasury plc
Notes forming part of the financial statements
for the year ended 31 March 2016
8 Creditors (continued)
Interest rate risk
The Company has no exposure to interest rate risk as all amounts owed to external 2047 Bond
investors are at a fixed rate of interest as is the interest receivable amount due from Paragon
on amounts lent under the Bond Loan Agreement.
There are no other interest bearing assets or liabilities.
Credit risks and uncertainties
PTP is dependent on receipt of funds from Paragon in order to meet its contractual obligations
under the Bond Loan Agreement in relation to the 2047 Bond. The credit risk is that Paragon,
as the sole counterparty, fails to reimburse PTP. The Directors consider the credit risk to
be very low owing to the fact that Paragon is a financially strong business, with a strong
asset base, that consistently generates a surplus, supported by a regulator with strong oversight
and which has an investor grade credit rating of A2 (stable).
The maximum credit risk currently faced by the Company is GBP225,000,000 (2015: GBP225,000,000)
being the issued amount of funds raised from external investors by the 2047 Bond issuance,
and on-lent to Paragon.
9 Share capital 2016 2015
GBP GBP
Allotted and issued
50,000 ordinary shares of GBP1 each 50,000 50,000
Issued share capital paid up
50,000 Ordinary shares of GBP1, part paid 25 pence 12,500 12,500
Upon incorporation PTP had issued 50,000 ordinary shares of GBP1 each of which GBP12,500 was
paid up to provide working capital to establish the business.
All shares rank pari passu in all regards.
10 Financial Institution disclosures
PTP on-lends to Paragon, the main risk facing PTP is that this company will be unable to make
its interest or principal payments when they fall due. This is mitigated through a secured
loan agreement, backed by social housing assets owned by Paragon. These assets are subject
to regulation by the HCA and therefore offer a level of protection in terms of regulatory
scrutiny. The value of secured assets is GBP293m. If there are any payments not made to PTP,
it has the right to enforce the security under the loan.
11 Related party transactions
All intra-group transactions have taken place in the normal course of business. There are
no other related party transactions requiring disclosure.
Paragon Treasury plc
Notes forming part of the financial statements
for the year ended 31 March 2016
------------------------------------------------------------------------------------------------------------------
12 Group structure
PTP is a wholly owned subsidiary undertaking of Paragon Community Housing Limited. The results
of PTP have therefore been consolidated within the parent accounts, which are available on
request from:
The Secretary
Paragon Community Housing Limited
Case House
85-89 High Street
Walton-on-Thames
Surrey KT12 1DZ
13 Legal status
PTP is incorporated under the Companies Act 2006.
14 Ultimate parent undertaking
Paragon Community Housing Limited is the ultimate parent
undertaking and controlling entity of Paragon Treasury PLC by a
100% shareholding.
Please click on the link below to view the Statutory Accounts
for Paragon Community Housing Limited.
http://www.rns-pdf.londonstockexchange.com/rns/5345L_-2016-10-3.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
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