s.172 Statements
s.172 Statements
The Companies (Miscellaneous Reporting) Regulations 2018 require a number of NEC Group entities to publish a statement explaining how the Directors have given due regard for the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 while performing their duty to promote the success of the Company for the benefit of its members as a whole ("s.172 statement").
Below are the s.172 statements for the Group's entities captured by these Regulations.
The National Exhibition Centre Limited s.172 Statement 2023
Statement by the Directors on performance of their statutory duties in accordance with s172(1) Companies Act 2006
The Board of Directors of the company have acted in a way that they consider to be most likely to promote the success of the company for the benefit of its members and the wider Group headed by LHTCA Midco Limited, during the year ended 31 March 2023. A summary is set out as follows:
(i) The likely consequences of any decision in the long term
The Masterplan sets out our strategy for the NEC campus over the next 15 years. This important strategic document guides our internal decision-making and how we work with our many partners and stakeholders to balance sometimes competing priorities and find mutually acceptable ways forward.
(ii) The interests of employees
Our employees are fundamental to the delivery of our day-to-day operations and the delivery of our Masterplan.
The wellbeing and health and safety of our employees is our number one priority, along with training required to support employees to perform their duties. This is more important than ever as the business builds-back post COVID-19 to ensure that our workforce is able to fully meet business demand and sustain the high levels of quality we strive to deliver to our customers.
We have supported our employees through engaging in regular communications and providing wellbeing support through both our HR and dedicated Health and Safety team. Both the Board and the company’s senior management receive regular reporting on health & safety matters.
(iii) The need to foster the company's business relationships with suppliers, customers and others
We know that a great customer experience is not only about our facilities but also how our staff and the staff of our partners operate every day to consistently deliver a great service. As the business recovers from COVID-19 we will continue to invest in our people through customer focused training together with reward and recognition for great customer service through our Stars program.
A primary focus is connecting with our visitors. To this end we will continue to leverage the investment in our facilities, including the catering offers and wayfinding and digital signage. We work closely with our business partners across the region, including Resorts World, Birmingham Airport, Birmingham International Railway Station, major corporates, the Chambers of Commerce, government agencies, HS2, National Highways Agency and Solihull and Birmingham local authorities to understand their plans and to make sure that both visitor demand and visitor experiences can be managed for the mutual benefit of all.
We provide a diverse and balanced choice of facilities and services across our venues with something for all customer groups.
Our procurement strategy seeks to segment our supply chain by criticality and level of expenditure so that procurement activities can be focused on delivering best practice supply chain solutions which represent value for money, are innovative and have an emphasis on sustainability and health and safety and deliver outcomes which meet our requirements. Through the delivery of effective procurement, there is also a commitment to creating partnerships with our suppliers.
We continue to maintain strong relationships with our debt providers which involves the provision of regular business updates. These strong relationships have been critical in securing the refinancing of the Group's debt facilities which completed in June 2023. Further information is contained in the Post Balance Sheet Events note 26 (See NEC1).
(iv) The impact of the company's operations on the community and the environment
We take our community responsibilities seriously and work closely with key stakeholders, government agencies and local authorities on a wide range of projects and initiatives including Masterplan, High Speed Two program (HS2) and broader related infrastructure matters. We also take our environmental responsibilities very seriously across all areas such as carbon reduction, water and waste. Managing waste is a key priority and we have implemented an on-site recycling centre that reduces the level and cost of waste going to landfill sites. We are striving continually to become much more carbon efficient and we continue to invest in our infrastructure and systems to drive down our carbon footprint.
(v) The desirability of the company maintaining a reputation for high standards of business conduct
The company is a key contributor of economic generation in the West Midlands Region and it has a high profile and generates significant public interest. This makes it particularly important that the standards of business conduct are maintained at a high standard. This is achieved through a suite of company policies which are regularly reviewed.
(vi) The need to act fairly between members of the company
The relationship between the company and its members is primarily guided by an Investment Agreement and the limited number of members also enables each group to be represented on the Board of Directors.
LHTCA Midco Limited s.172 Statement 2023
Statement by the Directors on performance of their statutory duties in accordance with s172(1) Companies Act 2006
The Board of Directors of LHTCA Midco Limited have acted in a way that they consider to be most likely to promote the success of the Group for the benefit of its members as a whole in the decisions taken during this year ended 31 March 2023. A summary is set out as follows:
(i) The likely consequences of any decision in the long term
The NEC Masterplan sets out our strategy for the NEC campus over the next 15 years. This important strategic document guides our internal decision-making and how we work with our many partners and stakeholders to balance what can sometimes be competing priorities and find mutually acceptable ways forward.
(ii) The interests of the Group's employees
Our employees are fundamental to the delivery of our day-to-day operations and the delivery of our Masterplan.
The wellbeing and health and safety of our employees is our number one priority, along with training required to support employees to perform their duties. This is more important than ever as the business builds-back post COVID-19 to ensure that our workforce is able to fully meet business demand and sustain the high levels of quality service we strive to deliver to our customers.
We have supported our employees through engaging in regular communications and provide wellbeing support through both our HR and dedicated Health and Safety team. Both the Board and the Group’s senior management receive regular reporting on wellbeing and health & safety matters.
(iii) The need to foster the Group's business relationships with suppliers, customers and others
We know that a great customer experience is not only about our facilities but also how our staff and the staff of our partners operate every day to consistently deliver a great service. As the business recovers from COVID-19 we will continue to invest in our people through customer focused training together with reward and recognition for great customer service through our Stars program.
A primary focus is connecting with our visitors. To this end we will continue to leverage the investment in our facilities, including the catering offers and wayfinding and digital signage. We work closely with our business partners across the region, including Resorts World, Birmingham Airport, Birmingham International Railway Station, major corporates, the Chambers of Commerce, government agencies, HS2, National Highways Agency and Solihull and Birmingham local authorities to understand their plans and to make sure that both visitor demand and visitor experiences can be managed for the mutual benefit of all.
We provide a diverse and balanced choice of facilities and services across our venues with something for all customer groups.
Our procurement strategy seeks to segment our supply chain by criticality and level of expenditure so that procurement activities can be focused on delivering best practice supply chain solutions which represent value for money, are innovative and have an emphasis on sustainability and health and safety and deliver outcomes which meet our requirements. Through the delivery of effective procurement, there is also a commitment to creating partnerships with our suppliers.
We continue to maintain strong relationships with our debt providers which involves the provision of regular business updates. These strong relationships have been critical in securing the refinancing of the Group’s debt facilities which completed in June 2023. Further information is contained in the Post Year End Events note 34 (See LM1).
(iv) The impact of the Group's operations on the community and the environment
We take our community responsibilities seriously and work closely with key stakeholders, government agencies and local authorities on a wide range of projects and initiatives including Masterplan, High Speed Two programme (HS2) and broader related infrastructure matters. We also take our environmental responsibilities very seriously across all areas such as carbon reduction, water and waste. Managing waste is a key priority and we have implemented an on-site recycling centre that reduces the level and cost of waste going to landfill sites. We are striving continually to become much more carbon efficient and continue to invest in our infrastructure and systems to drive down our carbon footprint.
(v) The desirability of the Group maintaining a reputation for high standards of business conduct
The Group is a key contributor of economic generation in the West Midlands Region and it has a high profile and generates significant public interest. This makes it particularly important that the standards of business conduct are maintained at a high standard. This is achieved through a suite of Group policies which are regularly reviewed.
(vi) The need to act fairly between members of the Group.
The relationship between the Group and its members is primarily guided by a Shareholder Agreement and the limited number of members also enables each group to be represented on the Board of Directors.
ADDITIONAL REFERENCE INFORMATION
NEC1 – Extract of Note 26 of The National Exhibition Centre Ltd Financial Statements
26. Post balance sheet events
Subsequent to the balance sheet date, as explained in the going concern disclosure note 2.4 (See NEC2), several measures focused around refinancing the Group’s existing Senior Facility Loan have been taken to support the Group and company through the post COVID-19 recovery period and the cost of living crisis. This included securing a £100.0m equity injection from the existing shareholders. This injection was made through a new Jersey incorporated entity, LHTCA New Holdco Limited, which used the £100.0m to acquire the 100% interest in LHTCA Topco Limited on 22 June 2023, and from this date became the new ultimate parent to the Group and company. £30.0m of this funding was then provided to the company for working capital through an inter-company loan.
NEC2 – Note 2.4 of The National Exhibition Centre Ltd Financial Statements
2.4 Going concern
The company is the core trading entity within the Group headed by LHTCA Midco Limited (“the Group”). The funding for the company and Group is managed centrally and the directors believe that it is therefore appropriate to review the prospects for the company based upon the financial position of the Group as a whole.
On 31 March 2023, the group of companies to which the company belongs had external Senior Loan Facilities that totalled £490.0m which were due to mature in January 2024 and were secured against the various assets of the Group. In addition there was an undrawn Revolving Credit Facility of £70.0m.
In addition to the above external Senior Loan Facilities, the Group had strong liquidity, with a cash balance of £43.7m (2022: £99.7m) as at the balance sheet date. The reduction in cash during the year was driven by the Group repaying £60m of Revolving Credit Facilities including £30m drawn using the governments Coronavirus Large Business Interruption Loan Scheme (CLBILS) that matured in June 2023, which it drew down during the COVID-19 pandemic as a precautionary measure.
The Group operates in the exhibition, events and hospitality sectors, which was one of the most adversely impacted by COVID-19. During the pandemic the Group’s various trading sites were closed for business from March 2020 and they remained closed until September 2021 when the final lockdown restrictions were lifted. As a direct result of COVID-19, the Group’s cash reserves have been eroded mainly due to servicing its borrowing costs, whilst its customers and the industry sectors in which they operate have also been adversely impacted, resulting in a reduced level of EBITDAE which is not expected to recover to pre-COVID-19 levels until 2025. The challenges this creates for the Group in its recovery post COVID-19, have been exacerbated by the current cost of living crisis and the increases in interest rates, which are significantly increasing the Group’s debt servicing costs.
The Group maintains a strong relationship with both its shareholders and its lenders. With their continued support, on 22 June 2023 the Group completed a refinancing of its capital and external Senior Loan Facilities which included:
• Securing a £100.0m equity injection from its existing shareholders;
• Repaying £70.0m of the current £490.0m of external Senior Loan Facilities;
• Amending and extending, effective from 30 June 2023, the remaining external Senior Loan Facilities of £420.0m. This was then split in to two tranches, a £350.0m Tranche A with interest terms the same as the existing facility with a margin of 435 basis points and a £70.0m Tranche B converted to a PIK arrangement with an increased margin of 800 basis points with interest payments deferred for a period of 3 years; and
• Reducing the Revolving Credit Facilities from £70.0m to £30.0m.
This has a resulted in an immediate working capital cash injection of £30.0m and will protect the Group's cash position by further reducing or deferring borrowing costs by c.£14.0m p.a.
The directors have prepared a detailed financial forecast for a period of at least 12 months from the date of signing these financial statements which indicates, together with the benefits from the refinancing exercise above, that the Group will retain a positive cash balance throughout the period. Following the lifting of COVID-19 restrictions and the subsequent recommencement of trading in September 2021, the Group has achieved positive trading results.
Using this financial forecast as the baseline, the directors have modelled downside scenarios including a shortfall in EBITDAE delivery and further increases in interest rates which are more than covered by the cash resources available, with further protection available through reducing the level of capital investment in the forecast.
Having assessed the financial position of the company and considered the wider Group using the evidence available to them, the directors have confidence that the company has adequate resources to continue to operate for a period of at least 12 months from the date these Financial Statements were signed. They have therefore concluded that it is appropriate to prepare these Financial Statements on a going concern basis.
LM1 – Extract of Note 34 of the LHTCA Midco Ltd Financial Statements
34. Post year end events
Subsequent to the balance sheet date, as explained in the going concern disclosure note 1.3 (See LM2), several measures focused around refinancing the Group’s existing Senior Facility Loan have been taken to support the Group and company through the post COVID-19 recovery period and the cost of living crisis including:
• Securing a £100.0m equity injection from the existing shareholders. This injection was made through a new Jersey incorporated entity, LHTCA New Holdco Limited, which used the £100.0m to acquire the 100% interest in LHTCA Topco Limited on 22 June 2023, and from this date became the new ultimate parent to the Group and company;
• Passing these funds down to LHTCA Bidco Limited through an equity investment, who in turn used £70.0m to prepay part of the existing Senior Facility Loan (see below), and provided the remaining £30.0m to NECL for working capital through an inter-company loan;
• Completing the refinancing of the £490.0m Senior Facility Loan effective from 30 June 2023 which involved prepaying £70.0m to reduce the total facility to £420.0m. This was then split in to two tranches, a £350.0m Tranche A with interest terms the same as the existing facility with a margin of 435 basis points and a £70.0m Tranche B converted to a PIK arrangement with an increased margin of 800 basis points. This will be accounted for as an extinguishment of the existing Facility with unamortised transaction costs of £5.7m at 31 March 2023 being expensed, and a new Facility Loan recognised, in the financial statements for the year ending 31 March 2024;
• Reducing the Revolving Credit Facilities from £70.0m to £30.0m; and
• Purchasing an Interest Cap with a 5.0% SONIA interest strike rate for 75% of the Tranche A Facility.
LM2 – Note 1.3 of the LHTCA Midco Ltd Financial Statements
1.3 Going concern
The company is the ultimate UK holding company for the Group, which owns the market-leading live events business, the NEC Group, that trades through NECL. The funding for the Group is managed centrally, and the directors believe that it is therefore appropriate to review the prospects for the company based upon the financial position of the Group as a whole.
On 31 March 2023, the group of companies to which the company belongs had external Senior Loan Facilities that totalled £490.0m which were due to mature in January 2024 and were secured against the various assets of the Group. In addition there was an undrawn Revolving Credit Facility of £70.0m.
In addition to the above external Senior Loan Facilities, the Group had strong liquidity, with a cash balance of £43.7m (2022: £99.7m) as at the balance sheet date. The reduction in cash during the year was driven by the Group repaying £60m of Revolving Credit Facilities including £30m drawn using the governments Coronavirus Large Business Interruption Loan Scheme (CLBILS) that matured in June 2023, which it drew down during the COVID-19 pandemic as a precautionary measure.
The Group operates in the exhibition, events and hospitality sectors, which was one of the most adversely impacted by COVID-19. During the pandemic the Group’s various trading sites were closed for business from March 2020 and they remained closed until September 2021 when the final lock-down restrictions were lifted. As a direct result of COVID-19, the Group’s cash reserves have been eroded mainly due to servicing its borrowing costs, whilst our customers and the industry sectors in which they operate have also been adversely impacted, resulting in a reduced level of EBITDA which is not expected to recover to pre-COVID-19 levels until 2025. The challenges this creates for the Group in its recovery post COVID-19, have been exacerbated by the current cost of living crisis and the increases in interest rates, which are significantly increasing the Group’s debt servicing costs.
The Group maintains a strong relationship with both its shareholders and its lenders. With their continued support, on 22 June 2023 the Group completed a refinancing of its capital and external Senior Loan Facilities which included:
• Securing a £100.0m equity injection from its existing shareholders;
• Repaying £70.0m of the current £490.0m of external Senior Loan Facilities;
• Amending and extending, effective from 30 June 2023, the remaining external Senior Loan Facilities of £420.0m. This was then split in to two tranches, a £350.0m Tranche A with interest terms the same as the existing facility with a margin of 435 basis points and a £70.0m Tranche B converted to a PIK arrangement with an increased margin of 800 basis points with interest payments deferred for a period of 3 years; and
• Reduced the Revolving Credit Facilities from £70.0m to £30.0m.
This has a resulted in an immediate working capital cash injection of £30.0m and will protect the Groups cash position by further reducing or deferring borrowing costs by c.£14.0m p.a.
The directors have prepared a detailed financial forecast for a period of at least 12 months from the date of signing these financial statements which indicates, together with the benefits from the refinancing exercise above, that the Group will retain a positive cash balance throughout the period. Following the lifting of COVID-19 restrictions and the subsequent recommencement of trading in September 2021, the Group has achieved positive trading results.
Using this financial forecast as the baseline, the directors have modelled downside scenarios including a shortfall in EBITDA delivery and further increases in interest rates which are more than covered by the cash resources available, with further protection available through reducing the level of capital investment in the forecast.
Having assessed the financial position of the company and considered the wider Group using the evidence available to them, the directors have confidence that the company has adequate resources to continue to operate for a period of at least 12 months from the date these Financial Statements were signed.