Notes to the Company Financial Statement

 

For the year ended 31 March 2016

 

ACCOUNTING POLICIES

Palace Capital plc is a company incorporated in England & Wales under the Companies Act. The address of the registered office is given on the contents page and the nature of the Group’s operations and its principal activities are set out in the strategic report. The financial statements of the Company have been prepared in accordance with FRS 102 the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.

These financial statements are the first financial statements prepared under FRS 102 and information on the impact of first-time adoption of FRS 102 is given in note 10. 

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Company’s management to exercise judgement in applying the Company’s accounting policies (as detailed below).

DIVIDENDS REVENUE

Revenue is recognised when the Company’s right to receive payment is established, which is generally when shareholders approve the dividend.

VALUATION OF INVESTMENTS

Investments in subsidiaries are measured at cost less accumulated impairment. Where merger relief is applicable, the cost of the investment in a subsidiary undertaking is measured at the nominal value of the shares issued together with the fair value of any additional consideration paid. 

Investments in unlisted company shares, which have been classified as fixed asset investments as the Group intends to hold them on a continuing basis, are held at cost less provision for any impairment.

CURRENT TAXATION

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted, by the balance sheet date.

DEFERRED TAXATION

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

The government announced in the Summer 2015 budget the reduction in the corporation tax rate from the current 20% main rate in the tax year 2016 to 19% with effect from 1st April 2017 and to 17% from 1st April 2020.

Parent company disclosure exemptions

In preparing the separate financial statements of the parent company, advantage has been taken of the following disclosure exemptions available in FRS 102:

  • No cash flow statement has been presented for the parent company;
  • Disclosures in respect of the parent company’s financial instruments have not been presented as equivalent disclosures have been provided in respect of the Group as a whole;
  • Disclosures in respect of the parent company’s share-based payment arrangements have not been presented as equivalent disclosures have been provided in respect of the Group as a whole; and
  • No disclosure has been given for the aggregate remuneration of the key management personnel of the parent company as their remuneration is included in the totals for the Group as a whole.

JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Investments and loans to subsidiary undertakings (see note 3)

The most critical estimates, assumptions and judgements relate to the determination of carrying value of unlisted investments in the Company’s subsidiary undertakings and the carrying value of the loans that the Company has made to them. The nature, facts and circumstance of the investment or loan are taken into account on assessing whether there are any indications of impairment.

1. PROFIT FOR THE FINANCIAL PERIOD

The company has taken advantage of section 408 of the Companies Act 2006 and consequently a profit and loss account for the company alone has not been presented.

The company’s profit after tax for the year was £21,845,313 (2015: £2,403,685).

The company’s profit for the financial year has been arrived at after charging auditor’s remuneration payable to BDO LLP for audit services to the company of £42,500 (2015: £27,500). Fees payable to the auditor for the audit of subsidiary undertakings amounted to £15,000 (2015: £10,000) and for other services amounted to £128,000 (2015: £50,000).

2. TAXATION

 

 3. INVESTMENTS

 

 

Loans to Subsidiaries

A loan amounting to £2,860,164 remains outstanding at 31 March 2016 (2015: £999,998) from Palace Capital (Leeds) Limited. Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on 8 May 2019.

A loan amounting to £2,950,000 remains outstanding at 31 March 2016 (2015: £nil) from Palace Capital (Northampton) Limited. Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on 14 June 2020.

A loan amounting to £13,539,432 remains outstanding at 31 March 2016 (2015: £nil) from Palace Capital (Developments)Limited. Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on 31 March 2018.

A loan amounting to £13,808,464 remains outstanding at 31 March 2016 (2015: £nil) from Palace Capital (Properties) Limited.Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on 11 March 2021.

A loan amounting to £2,491,765 remains outstanding at 31 March 2016 (2015: £nil) from Palace Capital (Halifax) Limited.Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on 31 July 2017.

Investment in Subsidiaries

Year ending 31 March 2016

On 17 June 2015 the Company acquired 100% of the share capital of O&H Northampton Limited for a cash consideration of £1.Following the acquisition the subsidiary changed its name to Palace Capital (Northampton) Limited.

On 17 August 2015 the Company acquired 100% of the share capital of Dering Properties (Sutton) Limited for a cash consideration of £902,619. Following the acquisition the subsidiary changed its name to Palace Capital (Sutton) Limited. On 26 January 2016 the subsidiary changed its name to Palace Capital (Properties) Limited. 

On 11 March 2016 the Company acquired 100% of the share capital of Gregory Projects (Halifax) Limited for a cash consideration of £1. Following the acquisition the subsidiary changed its name to Palace Capital (Halifax) Limited. Costs associated with this acquisition amounting to £401,491 were capitalised.

On 31 March 2016 the Company purchased an additional 3,000,000 ordinary £1 shares at par in Palace Capital (Leeds) Limited in order to refinance the subsidiary.

On 31 March 2016 the Company purchased an additional 4,000,000 ordinary £1 shares at par in Palace Capital (Northampton) Limited in order to refinance the subsidiary.

On 31 March 2016 the Company purchased an additional 4,000,000 ordinary £1 shares at par in Palace Capital (Properties) Limited in order to refinance the subsidiary.

On 31 March 2016 the Company purchased an additional 6,500,000 ordinary £1 shares at par in Palace Capital (Halifax) Limited in order to refinance the subsidiary.

On 31 March 2016 the Company purchased an additional 5,000,000 ordinary £1 shares at par in Palace Capital (Developments) Limited in order to refinance the subsidiary.

Year ending 31 March 2015

On 26 August 2014 the Company acquired 100% of the share capital of Property Investment Holdings Limited for a consideration of £3,613,828. The consideration was satisfied by issuing 1,103,459 ordinary 10p shares in the company at a fair value price of £3.275 per share.

On 31 March 2015 the Company purchased an additional 10,000,000 ordinary £1 shares at par in Property Investment Holdings Limited in order to refinance the subsidiary.

The company owns more than 20% of the following undertakings, all of which are incorporated in the United Kingdom unless shown otherwise:

The Company’s share of the net assets of HBP Services Limited at 31 December 2014 amount to £362 (2013: £308) and its profit for the year ended 31 December 2014 amounted to £54 (2013: loss £13).

 4. PROPERTY, PLANT AND EQUIPMENT

 5. TRADE AND OTHER RECEIVABLES

 

A loan amounting to £10,754 remains outstanding at 31 March 2016 (2015: 2,502,094) from Property Investment Holdings limited. Interest on this loan is charged at a fixed rate of 5% per year and the loan is repayable on demand.

A loan amounting to £4,112,766 remains outstanding at 31 March 2016 (2015: £20,488,377) from Signal Property Investment LLP. Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on demand.

A loan amounting to £70,000 remains outstanding at 31 March 2016 (2015: £150,000) from Hockenhull Investments Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £6,183,515 remains outstanding at 31 March 2016 (2015: £4,000,000) from Quintain (Signal) Member A Limited. No interest is charged on this loan. This loan is repayable on demand.

 

 6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

 7. SHARE CAPITAL

The details of the Company’s share capital are provided in note 21 of the notes to the consolidated financial statements.

 8. LEASES

Operating lease payments in respect of rents on leasehold properties occupied by the Company are payable as follows:

9. POST BALANCE SHEET EVENT

There have been no post balance sheet events that would require disclosure or adjustment to these financial statements.

 

10. FIRST TIME ADOPTION OF FRS 102 IN THE COMPANY FINANCIAL STATEMENTS