Bupa_Case

Bupa Care Homes (CFG) plc (Registered number 1969735) Directors’ report and financial statements for the year ended 31 December 2012 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Contents Page Directors’ report Statement of directors’ responsibilities in respect of the directors’ report and financial statements Independent auditor’s report to the members of Bupa Care Homes (CFG) plc Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of cash flows Consolidated statement of changes in equity Accounting policies Notes to the financial statements Company profit and loss account Company balance sheet Company cash flow statement Company accounting policies Notes to the Company financial statements 1  10  11  12  13  14  15  16  17  25  50  51  52  53  54  Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report The directors present their annual report and the audited financial statements of Bupa Care Homes (CFG) plc (the “Company”) for the year ended 31 December 2012. 1. Principal activities The consolidated financial statements for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the “Group”). The principal activities of the Group are the owning and operating of nursing and residential homes for the elderly in the United Kingdom. 2. Business review Results The surplus for the year, after taxation, amounted to £21,697,000 (2011: £38,983,000). The Group has net assets of £333,070,000 (2011: £318,972,000) and generated £49,808,000 (2011: £73,454,000) of cash from operating activities. The directors have performed an impairment review of freehold land and buildings at 31 December 2012. This review has resulted in an impairment of £16,200,000 against the value of the certain freehold land and buildings. Dividends The directors do not recommend the payment of a final dividend in respect of the year ended 31 December 2012 (2011: £nil). A preference dividend at the rate of 3.25% (2011: 6.25%) per annum amounting to £2,598,000 (2011: £4,375,000) was paid on 27 August 2012. The preference accrued in 2012 amounted to £2,083,000. A preference dividend at the rate of 3.25% per annum will be paid on 27 August 2013. Key Performance Indicators The Group together with fellow subsidiary undertakings of the ultimate parent company, the British United Provident Association Limited (Bupa), with similar activities, form Bupa Care Homes. Bupa Care Homes is a leading care homes operator in the UK providing nursing and residential care to more than 18,000 residents in over 300 care homes in the UK over 70% of whom are funded wholly or in part by local authorities and primary care trusts (PCTs). The Group operates 226 of these homes. Despite the challenging economy the Group has delivered satisfactory results in the year. In this environment, the Group focused on managing occupancy and costs to maintain profitability. The board monitors progress on the overall strategy and the individual strategic elements by reference to the key performance indicators below. 1 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 2. Business review (continued) Key Performance Indicators (continued) 2012 Revenue (£’000) Continuing 481,613 Discontinued Total 481,613 Operating surplus before exceptional items (£’000) Continuing 38,364 Discontinued Total 38,364 Occupancy percentage (%) Continuing 87.3 Discontinued Total Available beds Continuing Discontinued 87.3 15,775 - 2011 479,062 53,891 532,953 Analysis Continuing revenue has increased due to the annual fee increase for each resident. 43,807 10,395 54,202 87.6 90.6 87.9 15,852 1,633 Operating surplus has decreased primarily due to an increase in payroll and utility costs. Occupancy is stable despite public authority funding restrictions and a slowdown in self-funded admissions. The reduction in beds relates to the closure of 3 care homes and the temporary closure of underutilised capacity in large homes targeted at the publicly funded market. This will result in both improved resident experience and operational efficiencies. Total 15,775 17,485 Definitions and method of calculation Occupancy percentage is defined as the average occupied beds divided by average available beds for the year. Available beds are the average number of beds available for occupation during the year. Development Bupa Care Homes has continued to lead the field in aged care, working with government and organisations to help shape agenda and long term policies. Occupancy was stable at 87.3% but the business saw a small decline in profit due to inflationary cost pressures which were compounded by below-inflation fee increases from local authorities and PCTs, who pay for over 70 percent of Bupa’s residents. The business maintained its investment in extending, refurbishing and opening new homes. During 2012, Bupa commissioned independent research on what constitutes the fair cost of care. The most recent report, Bridging the Gap, found the gap between the cost of providing care and what providers received from local authorities was almost £900m per annum. A hoped-for solution from the government to fix the chronic underfunding of social care was unfortunately not forthcoming in the government’s White Paper and Draft Bill, announced in July. In response to the Dilnot Review of 2011, in February 2013 the government announced a cap on the amount any individual has to pay for their care of £75,000. While the cap may help a small minority of people, the government has failed to acknowledge that the fees paid by local authorities to pay for the care of people unable to pay themselves, are already inadequate. Bupa Care Homes cemented its reputation as a leader in dementia care when, in November, it made a commitment to opening the first dementia teaching care home, a move that prompted the Prime Minister to praise Bupa as one of the most forward thinking care providers. 2 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 2. Business review (continued) Future outlook Bupa Care Homes continues to perform well despite increasing pressure on public sector budgets and funding for aged care coming under review by the government. Throughout the year, Bupa Care Homes demonstrated its commitment to investing in the training and development of its staff. Bupa Care Homes was also the first large care home operator to be awarded the Investors in People Gold award for its demonstrably continued high commitment in developing its people. We continue to deliver a strong overall resident satisfaction score with 77% of our residents rating Bupa’s services as very good or excellent, rising to 95% for quality of care. Principal risks and uncertainties The Company and its strategy are subject to a number of risks and uncertainties. Management consider that the key risks and uncertainties arise as a result of challenges to occupancy and fee levels of publicly funded residents as a result of public sector spending constraints and pressure on private funded placements due to current economic conditions. In addition it is anticipated that there will be increasing legislation and regulation and increases in staff costs driven by employment legislation. Further information relating to the Company, as applicable to the Bupa Group as a whole, is provided within the discussion of business risks and uncertainties section of the Group’s annual report and accounts, which does not form part of this report. Risk Management Framework The Bupa Risk Management Framework is approved by the board and outlines Bupa’s approach to risk management. At the heart of the framework is the requirement to identify and quantify periodically the key risks they face and to assess the effectiveness of control strategies to mitigate them to an acceptable level. Risks are measured in terms of significance to the business and its stakeholders in the context of Bupa’s strategy, its operations and the Board’s risk appetite. A top-down, annual assessment of our key risks was performed by the Chief Risk Officer in January 2012. This was supplemented by quarterly, “bottomup” risk assessments across the whole portfolio to produce reports which are shared with relevant management committees and the quarterly Bupa Risk Committee. The principal role of the Committee is to assist the Board in its leadership and oversight of risk across the Group. This includes understanding and, where appropriate, optimising the current risk exposures and the future risk strategy, overall risk appetite and tolerances, the risk management framework including risk policies, process and controls, and the promotion of a risk awareness culture throughout the Group. 2012 Key Developments We continually seek improvements to the Risk Management Framework and outputs generated by it to ensure it remains relevant. Activities in 2012 focused on: 1. Creating a Bupa Risk Committee during 2012, Bupa split the Audit, Risk and Compliance Committee into two Board sub-committees, namely the Audit Committee and the Risk Committee. This took effect from June 2012. 2. Refreshing the Risk Management Framework Changes made to the framework during the year included:  Implementing revised assessment scales to take account of the size of each of our Business Units;  Reviewing the “detailed risk category model” to ensure continuing relevance and consistency across Bupa; and  Aligning with other governance improvements made, including linking with the Bupa Governance Policy suite and capital assessments. 3 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 2. Business review (continued) Principle risks and uncertainties (continued) 3. A new global Risk Portal Bupa has a network of Risk Managers around the world who drive improvements in risk culture and assessment within the Business Units. In 2012, Bupa implemented a global Risk Portal. This application facilitates quicker reporting of risks and includes enhanced analytic tools. It further allows close monitoring of key risks and the actions to mitigate them. During the year, the Corporate Centre Risk team reviewed the effectiveness of Bupa’s risk management arrangements via a maturity assessment and provided the results to the Bupa Risk Committee for recommended actions. 4. Annual review of our risk appetite Bupa’s risk appetite is defined by the Board in a set of risk appetite statements. These statements are reviewed annually with regular reporting to the Risk Committee of performance against each individual statement. The key elements of our risk appetite show a keen focus on our financial strength, risk exposures and the provision of high quality service to our customers:    Economic Capital: Bupa maintains a prudent capital buffer such that the Group has a high degree of confidence that it has sufficient capital to meet its liabilities in extreme scenarios. Funding and Liquidity: the Board requires that at all times sufficient facilities are available to fund the operations of the Group and to meet obligations as they fall due. Operational Activities: the Board requires business units to put in place appropriate processes, systems and trained staff to prevent customer detriment, reputational damage, regulatory and legal scrutiny or financial consequences due to operational activities. We have in place detailed qualitative statements and preferences to support these statements, which are supported by a suite of governance policies and guidance. As our business both funds and commissions healthcare, the inherent risks we manage as a business vary considerably. The key risks faced by Bupa, along with mitigating actions, have been mapped against the Group’s 6 Level 1 Risk categories namely, Strategic Risk, Financial Risk, Insurance Commercial Risk, Non-Insurance Commercial Risk, Operational Risk and Clinical Risk. Strategic Risk Business Environment Description Many governments are reviewing policies on healthcare provision and the role of the private sector, which may impact Bupa in a number of geographies and sectors. Mitigating activity The geographic spread of Bupa’s operations reduces the organisation’s exposure to significant changes in government healthcare policy within any one country. Bupa actively monitors the changing political environment across all areas of operation and, where possible, seeks to engage with relevant government officials. Economic Market Conditions Description Challenging economic conditions, particularly in Europe, increase the risk faced by Bupa. Rising inflation, prolonged periods of low interest rates, credit rating reductions for investment counterparties and reduced GDP can impact Bupa businesses and investment strategies. Mitigating activity Bupa seeks to minimise the impact of external economic events through the diversified nature of its operations. Bupa’s governance structures and policies seek to protect the business from excessive exposure to specific external risks while seeking to achieve growth targets. Management teams are responsible for considering the potential impact of macroeconomic events in terms of impacts on their business plans including the use of stress testing to consider potential consequences of specific events. 4 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 2. Business review (continued) Principle risks and uncertainties (continued) Expansion Description Rapid growth into new markets and expansion in existing markets exposes Bupa to new potential financial, regulatory and reputational risks. Mitigating activity All major acquisitions and strategy decisions are approved by the Board. The decisions are supported by thorough due diligence and consideration of the impact on Bupa’s operations in line with the Bupa Mergers and Acquisition policy. Bupa seeks to integrate acquisitions into existing management and governance structures within the first 100 days to enable appropriate oversight and control. Financial Risk Capital & Solvency Description Against the backdrop of changing regulations, there is a risk that Bupa could be required to hold more capital or hold too much which could otherwise be used to fund growth. Mitigating activity The Bupa Group and the individual insurance legal entities seek to maintain a prudent buffer over and above the regulatory capital requirement. This amount is regularly reviewed in light of regulatory changes, economic conditions and the effect of ongoing business activities. Investment Description Bupa Group had financial investments and cash equivalents totalling £2.68bn. Failure to manage financial assets effectively could result in a financial loss and reduction in Group Solvency. Bupa holds a small return-seeking portfolio which is exposed to market volatility. Mitigating activity Most of the investments are centrally managed by the Group’s Treasury department in London under the supervision of the Treasury and Investment Committee, chaired by the Chief Financial Officer. Most of the investments are held in cash; exposure to individual counterparties is restricted. The widespread downgrading of financial institutions has required Bupa to accept deposits being held with institutions whose two credit ratings are below AA-/Aa3 by the major credit rating agencies. The Treasury and Investment Committee addresses these breaches on a case-by-case basis in order to maintain a balanced portfolio. The return seeking asset portfolio is managed within a risk budget framework using Value at Risk methodology. Funding Description Bupa needs to maintain good access to a variety of funding sources to ensure that short-term and long-term liquidity is maintained to support current operations and future growth. Mitigating activity Bupa commits to maintaining an appropriate level of undrawn headroom through an £800m committed bank facility which was successfully refinanced in 2012. In addition, Bupa has access to a variety of debt capital markets including the senior and hybrid bond markets. Bupa is committed to maintaining an appropriate investment grade rating and monitors key financial ratios, such as gearing and interest cover. 5 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 2. Business review (continued) Principle risks and uncertainties (continued) Commercial Pricing and utilisation Description A significant proportion of revenues for Bupa’s Care Homes businesses come from local government. Expenditure cuts increase pressure on Bupa’s ability to achieve desired utilisation rates and pricing targets. Mitigating activity In order to limit its exposure to lower occupancy rates and fees Bupa is targeting the private market to achieve a higher conversion rate and increased fees per bed. Operational Regulatory Description Changes in financial, clinical and health and safety regulations in any of the countries where Bupa has customers can affect the way it carries out business, increase costs or reduce revenues. Mitigating activity Bupa operates to high regulatory standards and maintains an awareness of and, where possible, seeks to anticipate regulatory change. Bupa’s principal financial regulator is the UK’s Financial Services Authority, with which Bupa senior managers and directors maintain a close working relationship. They also seek to maintain strong relationships with all local regulators. Change management Description Bupa has an ongoing development programme to drive improvement in the products and services. Should these changes be managed ineffectively, the risk of failure to deliver the intended benefits may be increased. Mitigating activity Bupa mitigates the risk inherent in change by having stringent change management procedures. Major project expenditure on new developments is approved by the board following a rigorous assessment of plans. Professional programme management resources are used and the internal audit function reviews the impact of major changes on Bupa’s operational controls. Progress on key projects is reviewed by the Risk Committee. Information technology Description Bupa’s services are underpinned by IT systems and infrastructure. System failures may impact products and services or risk information security breaches. Lack of integration of systems across the Group could also impact operations and profits. Mitigating activity Bupa has a number of dedicated IT teams who are responsible for the development, maintenance and monitoring of IT services. Bupa has a dedicated information technology risk management function which monitors and manages specific risks across the information technology estate, reporting to both senior management and Group Risk on a routine basis. Bupa is continually undertaking work to integrate systems and in 2012 it delivered a “Cloud” based platform on which to host applications globally. Business Continuity Description The geographic diversification of Bupa’s operations significantly increases its exposure to business disruption, natural disasters and other catastrophic events. 6 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 2. Business review (continued) Principle risks and uncertainties (continued) Mitigating activity Each Bupa Business Unit has detailed Business Continuity Plans overseen by the Group Business Continuity Management (BCM) Committee. These plans include response plans for specific incidents such as pandemics or significant events and are tested on a regular basis. Business continuity issues are reported to the Risk Committee which is responsible for ensuring appropriate controls are in place to mitigate potential risks. As a result of the governance structures and controls in place, Bupa was not significantly impacted by any business disruption event during 2012. Clinical Clinical Governance Description Bupa is dedicated to evidence-based best practice and high patient safety and clinical standards. Failure to fulfil these obligations could have significant financial, regulatory and reputational impact. Mitigating activity All key business units have a Medical Director responsible for ensuring clinical quality and governance within the business. They are professionally accountable to the Group Medical Director (GMD) for clinical governance; the GMD has been nominated as the senior manager, independent from the businesses, who takes overall responsibility on behalf of Group, for the oversight of systems and controls relating to clinical governance. The Board has a Medical Advisory Panel (MAP) chaired by Professor Sir John Tooke, which advises it on medical issues and considers external perspectives from a number of leading clinicians and health professionals to help inform and develop Bupa’s approach. 3. Conversion to International Financial Reporting Standards The consolidated accounts have been prepared under International Financial Reporting Standards as adopted by the European Union (IFRS). The Company is not required to report under IFRS and therefore the Company’s financial statements are prepared in accordance with applicable UK Generally Accepted Accounting Principles (UK GAAP). The Company financial statements are presented on pages 49 to 60. 4. Directors The directors who served during the year and subsequently were as follows: N R Taylor M Ellerby N T Beazley M A Merchant G Pueyo Roberts R T Bowden O H D Thomas S P Reiter A M Peeler S M Los A J Cannon resigned resigned resigned appointed appointed appointed appointed appointed 15 October 2012 1 October 2012 10 December 2012 1 December 2012 15 October 2012 15 October 2012 1 December 2012 4 February 2013 resigned resigned 15 March 2013 28 March 2013 7 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 5. Employees Details of the number of persons employed and gross remuneration are contained in note 5 to the financial statements. Every effort is made by the directors and management to inform, consult and encourage the full involvement of staff on matters concerning them as employees and affecting the Group’s performance. The Group continues to pursue its stated policy of giving every consideration to the employment of disabled persons. Employees who are registered disabled persons are, to the greatest possible extent, treated on the same basis as all other employees and given every opportunity to develop their full working potential within the Group, through training, career development and promotion. The Group is committed to providing equal opportunities to employees. The employment of disabled persons is included in this commitment and the recruitment, training, career development and promotion of disabled persons is based on the aptitudes and abilities of the individual. Where employees have become disabled whilst in the service of the Group, every effort is made to rehabilitate them in their former occupation or some suitable alternative and if necessary, appropriate training would be provided. The Group continues to regard communication with its employees as a key aspect of its policies. Information is given to employees about employment matters and about the financial and economic factors affecting the Group’s performance through management channels, in-house magazines and by way of attendance at internal seminars and training programmes. Employees are encouraged to discuss operational and strategic issues with their line management and to make suggestions aimed at improving performance. 6. Companies (Audit, Investigations and Community Enterprise) Act 2004 As at the date of this report, indemnities are in force under which the Company has agreed to indemnify the directors, to the extent permitted by law and the Company's Articles of Association, in respect of all losses arising out of, or in connection with, the execution of their powers, duties and responsibilities, as directors of the Company or any of its subsidiaries. 7. Political and charitable contributions The Group made no political or charitable donations or incurred any political expenditure during the year (2011: £nil) 8. Supplier payment policy The Group's policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, to ensure that suppliers are made aware of their terms of payment and abide by the terms of payment. Trade creditors of the Company at 31 December 2012 were equivalent to 25 (2011: 26) days purchases, based on the average daily amount invoiced by suppliers during the year. 9. Disclosure of information to auditor The directors who held office at the date of approval of this directors’ report confirm that:   so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. 10. Corporate governance The Company was a wholly owned subsidiary of Bupa during the year. A statement on Bupa corporate governance policies and the report of the remuneration committee are included in Bupa’s annual report and accounts. 8 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Directors’ report (continued) 11. Auditor In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG Audit Plc as auditor of the Company is to be proposed at the forthcoming Annual General Meeting. Registered Office: Bridge House Outwood Lane Horsforth Leeds LS18 4UP 16 April 2013 A J Cannon Director 9 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Statement of directors’ responsibilities in respect of the directors’ report and financial statements The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law, they have elected to prepare the Group financial statements in accordance with IFRS and applicable law and have elected to prepare the Company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). 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 Group and parent Company and of their surplus or deficit for that period. In preparing each of the Group and parent Company financial statements, the directors are required to:     select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; for the Group financial statements, state whether they have been prepared in accordance with IFRS; for the parent Company financial statements state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and parent 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 have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors’ responsibility statement We confirm to the best of our knowledge: 1. the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and surplus or deficit of the Company and the undertakings included in the consolidation taken as a whole; and the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face. 2. A J Cannon Director 16 April 2013 10 Independent auditor’s report to the members of Bupa Care Homes (CFG) plc We have audited the financial statements of Bupa Care Homes (CFG) plc for the year ended 31 December 2012 set out on pages 12 to 59. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). 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 Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the statement of directors' responsibilities in respect of the directors’ report and financial statements set out on page 10, 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 Auditing Practices Board'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 Financial Reporting Council'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 Group's and of the parent Company's affairs as at 31 December 2012 and of the Group's and the parent Company’s profit for the year then ended;  the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;  the parent Company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice;  the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and as regards the Group financial statements, Article 4 of the IAS Regulation. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion:  adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or  the parent Company 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. Under the Listing Rules we are required to review:  the directors' statement, set out on page 10, in relation to going concern Lindsey Crossland Senior Statutory Auditor for and on behalf of KPMG Audit plc Statutory Auditor Chartered Accountants 1 The Embankment Neville Street, Leeds West Yorkshire, LS1 4DW 16 April 2013 11 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Consolidated income statement Note Continuing operations Revenue Operating expenses Operating surplus 2 4 481,613 (443,249) 38,364 479,062 (435,255) 43,807 2012 £’000 2011 £’000 Financial income Financial expenses Surplus on ordinary activities before taxation expense Taxation expense Surplus for the financial year from continuing operations Discontinued operations Surplus for the financial year from discontinued operations Surplus for the financial year attributable to equity holders of the parent Company 7 8 7,868 (15,045) 31,187 5,625 (11,811) 37,621 (11,520) 26,101 9 (9,490) 21,697 11 - 12,882 21,697 38,983 There were no material differences between reported surpluses and deficits and historical surpluses and deficits on ordinary activities before and after taxation. The accounting policies and notes on pages 17 to 47 form part of these financial statements. 12 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Consolidated statement of comprehensive income Note Surplus for the financial year Other comprehensive income/(expense): Unrealised (loss) on impairment and revaluation of properties Actuarial (loss) on pension schemes Taxation credit on income and expenses recognised directly in other comprehensive income 20 (13,623) (131) (13,732) (352) 2012 £’000 21,697 2011 £’000 38,983 21 6,155 8,803 Other comprehensive (expense) for the financial year, net of taxation Total comprehensive income for the financial year attributable to equity holders of the parent Company (7,599) (5,281) 14,098 33,702 The accounting policies and notes on pages 17 to 47 form part of these financial statements. 13 Bupa Care Homes (CFG) plc Financial statements Consolidated balance sheet as at 31 December 2012 Note Non-current assets Intangible assets Property, plant and equipment Deferred taxation assets Other receivables 12 13 21 15 2012 £’000 2,166 488,239 844 245,637 736,886 Current assets Inventories Trade and other receivables Cash and cash equivalents 2011 £’000 1,218 498,289 455 122,542 622,504 16 17 18 771 87,529 6,783 95,083 421 270,302 7,575 278,298 900,802 Total assets Non-current liabilities 11.8% debenture stock Amounts owed to Bupa Group undertakings Post employment benefits liability Deferred taxation liabilities Provisions for liabilities and charges Preference shares 831,969 19 30 20 21 22 23 (50,000) (284,841) (1,109) (19,838) (355,788) (50,000) (280,607) (1,085) (26,674) (68) (68,293) (426,727) Current liabilities Provision for liabilities and charges Current taxation liabilities Trade and other payables 22 25 (1,157) (6,347) (135,607) (143,111) (14) (6,347) (148,742) (155,103) (581,830) 318,972 Total liabilities Net assets Equity Share capital Share premium Merger reserve Capital redemption reserve Revaluation reserve Income and expenditure reserve (498,899) 333,070 26 40,553 114,141 16,963 2,110 181,712 (22,409) 40,553 114,141 16,963 2,110 189,137 (43,932) 318,972 333,070 Total equity attributable to the holders of the parent Company These financial statements were approved by the board of directors and were signed on its behalf by: A J Cannon Director 16 April 2013 Registered number: 1969735 The accounting policies and notes on pages 17 to 47 form part of these financial statements. 14 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Consolidated statement of cash flows Note 2012 £’000 49,808 2011 £’000 73,454 Net cash generated from operating activities Cash flows from investing activities Purchase of separately acquired intangible assets Purchase of property, plant and equipment Disposal of subsidiary undertakings Proceeds from disposal of available for sale investments Proceeds from disposal of property, plant and equipment Interest received Net cash generated from used in) /( investing activities Cash flows from financing activities Net loans from (to)/from Group undertakings Dividends paid Net cash used in financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 27 (1,393) (29,668) (1,300) 19 (32,342) (791) (26,944) 118,516 23,155 40 113,976 (18,258) (18,258) (792) 1,714 27 922 67,645 (260,000) (192,355) (4,925) 6,639 1,714 The accounting policies and notes on pages 17 to 47 form part of these financial statements. 15 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Consolidated statement of changes in equity 31 December 2012 Share capital £’000 40,553 40,553 Share premium account £’000 114,141 114,141 Merger reserve £’000 16,963 16,963 Capital redemption reserve fund £’000 2,110 2,110 Revaluation reserve £’000 189,137 (13,623) 6,198 (7,425) (7,425) 181,712 Income and expenditure reserve £’000 (43,932) 21,697 (131) (43) (174) 21,523 (22,409) Total equity £’000 318,972 21,697 (13,623) (131) 6,155 (7,599) 14,098 333,070 Note At 1 January 2012 Surplus for the financial year Other comprehensive income/(expense) Unrealised loss on impairment of properties Actuarial loss on pension scheme Taxation charge on income and expense recognised directly in other comprehensive income Other comprehensive income for the year, net of taxation Total comprehensive (expenses)/income for the year Dividend paid At 31 December 2012 31 December 2011 20 9 Note Share capital £’000 40,553 40,553 Share premium account £’000 114,141 114,141 Merger reserve £’000 16,963 16,963 Capital redemption reserve fund £’000 2,110 2,110 Revaluation reserve £’000 232,625 (13,732) (38,587) 8,831 (43,488) (43,488) 189,137 Income and expenditure reserve £’000 138,878 38,983 38,587 (352) (28) 38,207 77,190 (260,000) (43,932) Total equity £’000 545,270 38,983 (13,732) (352) 8,803 (5,281) 33,702 (260,000) 318,972 At 1 January 2011 Surplus for the financial year Other comprehensive income/(expense) Unrealised loss on impairment of properties Realised gains on disposal of subsidiaries Actuarial loss on pension scheme Taxation charge on income and expense recognised directly in other comprehensive income Other comprehensive income for the year, net of taxation Total comprehensive (expenses)/income for the year Dividend paid At 31 December 2011 20 9 The accounting policies and notes on pages 17 to 47 form part of these financial statements. 16 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year. General Information Bupa Care Homes (CFG) plc (the “Company”), the parent company of the Group, is a company incorporated in England and Wales. The consolidated financial statements for the year ended 31 December 2012 comprise the Company and its subsidiary companies (together referred to as the “Group”). The Group’s consolidated financial statements are prepared under International Financial Reporting Standards (IFRS’s) as adopted by the EU. The appropriate provisions of the Companies Act 2006 applicable to companies reporting under IFRS’s have also been complied with. The financial statements were approved by the directors on the 16 April 2013. The Directors have reviewed and approved the Group’s accounting policies, which have been applied consistently to all the years presented, unless otherwise stated. For the purposes of consolidation, the accounting policies of subsidiary companies have been aligned with those of the Parent Company. Statement of compliance The consolidated financial statements have been prepared in accordance with IFRS and approved by the directors. The Company is not required to report under IFRS and therefore the Company’s financial statements are prepared in accordance with applicable UK Generally Accepted Accounting Principles. Basis of preparation The financial statements are prepared on a going concern basis, and under the historical cost convention, as modified by the revaluation of property and financial investments available for sale. Going concern Management has conducted a detailed assessment on the Group’s going concern status based on its current position and forecast results. They have concluded that the Group has adequate resources to operate for the foreseeable future. In making this assessment, management have considered the discussions with the relationship banks as well as forecasts which take account of reasonably possible changes in trading performance. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements. The Group meets its day to day working capital requirements through an intercompany financial arrangement with the Bupa Group. The Bupa Group maintains significant cash balances to meet its day to day working capital requirements. The Bupa Group’s £800million committed bank facility, which was renegotiated in October 2012 and matures on October 2017, was undrawn at 31 December 2012 with the exception of £6.4million of outstanding letters of credit for general business purposes. New financial reporting requirements All newly effective financial reporting standards applicable to the Group for the first time for the year ended 31 December 2012 have been reviewed and it has been concluded that they have no material impact on the financial statements of the Group. Financial reporting standards applicable to the Group for future financial periods The following financial reporting standards have been issued but not yet endorsed by the European Union and are not effective for the year ended 31 December 2012 and have not been early adopted by the Group. The Group has reviewed the effect of all other amendments to IFRS and interpretations effective for accounting periods beginning on or after 1 January 2013 and does not expect them to have a significant impact on the financial statements of the Group. 17 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Financial reporting standards applicable to the Group for future financial periods International Accounting Standard 19 Employee Benefits (Amendment) (IAS 19) The amendment does not change the total return on defined benefit plan assets, but it does change the split between what is recognised in the income statement and what is recognised in other comprehensive income by changing the way the interest expense is calculated in the income statement. A number of new disclosures are also required. The amendment becomes effective for annual periods beginning on or after 1 January 2013. Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination, are expensed as incurred. Subsidiary companies Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences to the date that control ceases. Investments in subsidiary companies are carried at cost less impairment in the Company’s accounts. Dividends received from subsidiaries are recognised in the income statement when the right to receive the dividend is established. Transactions between Group companies are on commercial terms. Intra Group balances and any gains, losses, income and expenses arising from intra Group transactions are eliminated in preparing the consolidated financial statements. Non-controlling interests in the net assets of subsidiaries are identified separately from the Group’s equity. Non-controlling interests consist of the amount of those interests at the date of the original acquisition and the non-controlling shareholder’s share of changes in equity since this date. Revenue Revenue represents income receivable from health and care provision services rendered and goods supplied. Revenue is stated net of value added taxation and other sales taxes, rebates and discounts and after eliminating sales within the Group. Revenue is recognised in the accounting period in which the Group obtains the right to consideration in exchange for its performance. 18 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Financial income and expenses Financial expenses include interest payable on borrowings, calculated using the effective interest method. Financial income comprises interest receivable, realised gains and losses on investments and dividend income on equity investments. Interest income and expenses are recognised in the income statement as they accrue. Taxation The reduction to 23% (effective from 1 April 2013) was enacted on 3 July 2012. The company’s deferred tax balances have been provided for at 23% (25% at 31 December 2011), being the rate that was substantively enacted at 31 December 2012. Income taxation on the surplus or deficit for the year comprises current and deferred taxation. Income taxation is recognised in the income statement except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised directly in other comprehensive income. Current taxation is the expected taxation payable on the taxable surplus for the year, using taxation rates enacted or substantively enacted at the balance sheet date, and any adjustments to taxation payable in respect of previous years. Deferred taxation is recognised in full using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not recognised: goodwill not deductible for taxation purposes and the initial recognition of an asset or liability in a transaction that is not a business combination and which, at the time of the transaction, affects, neither the accounting profit nor taxable profit or loss. The amount of deferred taxation recognised is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using taxation rates enacted or substantively enacted at the balance sheet date. Deferred taxation is recognised on temporary differences arising on investments in subsidiary companies, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred taxation assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and when the Group can settle its current taxation assets and liabilities on a net basis. Segmental reporting The Group determines and presents its reportable segments based on information that internally is provided to the directors who together fulfil the function of the Group’s chief operating decision makers. A reportable segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including inter segment transactions. The reportable segments reflect the Group’s main operating divisions. The divisional structure is defined by the different products and services provided by each division and the geographic areas in which they operate. Discrete financial information is available for these segments and is reviewed regularly by the Group’s chief operating decision makers to monitor the results of the business, assess performance and make decisions about the allocation of resources. 19 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Segmental reporting (continued) Segment results that are reported to the Group’s chief operating decision makers include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated results comprise mainly income and expenses which cannot be specifically allocated to the reportable segments. Non-current assets acquired by the reportable segments, as reported to the Group’s chief operating decision makers, is the total cost of additions to intangible assets, property, plant and equipment and investment property, but excludes assets acquired through business combinations and other intangible assets arising on business combinations. These reportable segments reflect the management structure used by management to monitor the results of the business to assess performance and make decisions about the allocation of resources. Segmental performance is assessed based on surplus (including share of post taxation results of equity accounted investments) before amortisation of intangible assets arising on business combinations, other charges and income, financial income and expenses, taxation expense and non-controlling equity interests. Financial income and expenses and taxation expense are reported and monitored on a Group basis and are not attributed to individual segments. The accounting policies of the reportable segments are the same as those for the Group as a whole. Any transactions between reportable segments are on commercial terms. Geographical information is also presented. Segment revenues are based on the geographical source of revenues and segment non-current assets are based on the geographical location of the assets. Current/non-current classification Assets and liabilities are classified as current if they are expected to be realised within twelve months from the balance sheet date, the primary purpose of the asset or liability is to be traded or, for loans and receivables, where they have a maturity of less than twelve months from the balance sheet date. All other assets and liabilities are classified as non-current. Intangible assets Goodwill Goodwill represents the excess of the cost of a business combination over the fair value of the Group’s share of identifiable assets, liabilities and contingent liabilities of the acquired subsidiary company or associated company at the date of business combination. The carrying value of goodwill may be adjusted up to 12 months from the date of acquisition, as the allocation of the purchase price to identifiable intangible assets is finalised within that period. Goodwill arising on business combinations is capitalised and presented as part of intangible assets in the consolidated balance sheet. Goodwill is stated at cost less accumulated impairment losses. Impairment reviews are performed annually or more frequently if there is an indication that the carrying value may be impaired. Impairment reviews are performed at the level of the relevant cash generating unit (CGU). A CGU is the smallest identifiable group of assets generating cash inflows and outflows measured for goodwill. Where the fair value of the net assets acquired is greater than the consideration paid, the excess is recognised immediately in the income statement. Goodwill arising on business combinations before the date of transition to IFRS and capitalised in the balance sheet has, at the date of transition, been retained at the amount recorded previously under UK GAAP, subject to impairment testing. Goodwill previously written off to reserves under UK GAAP (on business combinations prior to 31 December 1997) remains eliminated against reserves and is not included in calculating any subsequent profit or loss on disposal. 20 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Intangible assets (continued) Other intangible assets Intangible assets, other than goodwill, that are acquired as part of a business combination are capitalised at fair value. Intangible assets acquired separately are stated at cost less accumulated amortisation and impairment. Amortisation is charged to the income statement on a straight line basis as follows: Computer software 3 to 7 years Intangible assets that are subject to amortisation are reviewed for impairment if circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the income statement to reduce the carrying amount to the recoverable amount. Freehold and Leasehold Properties Freehold and Leasehold properties comprise care homes and offices. These properties are shown at fair value, based on periodic, but at least triennial, valuations performed by external independent valuers, less subsequent depreciation and impairment losses. The valuations are performed with sufficient regularity to ensure that the carrying value does not differ significantly from fair value at the balance sheet date. Directors’ impairment reviews are performed in interim years where impairment indicators exist. Revaluations Fair value for care homes is considered to be existing use value. Valuations of office buildings are on a market value basis. Borrowing costs relating to the acquisition or construction of qualifying assets are capitalised as part of the cost of that asset. The revaluation of properties was carried out independently by Knight Frank, Chartered Surveyors. The revaluations were effective as of 31 December in the year in which they were undertaken. Care homes are valued with regard to their trading potential based on value in use techniques, the principle assumptions are; quantifying a fair, maintainable level of trade and profitability; levels of competition; and assumed ability to renew existing licences consents, certificates or permits. Gains and losses on revaluation are recognised in the revaluation reserve, except where an asset is revalued below historical cost, in which case the deficit is recognised in the income statement. Where a revaluation reverses deficits taken to the income statement in prior years, then it is credited to the income statement. Equipment Equipment (including leasehold improvements) is stated at historic cost less subsequent depreciation and impairment losses. Depreciation Freehold land and assets under construction, included within freehold or leasehold properties as appropriate, are not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straight line method to allocate cost or revalued amount less residual values over estimated useful lives, as follows: Freehold buildings Leasehold buildings Fixtures, fittings and equipment 50 years shorter of useful life and terms of the lease 3 to 50 years Impairment Impairment reviews are undertaken where there are indications that the carrying value may not be recoverable. An impairment loss on assets carried at cost is recognised in other income and charges to reduce the carrying value to the recoverable amount. 21 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Leased assets Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets obtained under finance leases are capitalised within property, plant and equipment at fair value at acquisition or, if lower, at the present value of the minimum lease payments and depreciated over the shorter of their useful economic life and the lease term. On initial recognition, the leased asset is measured at the amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Obligations relating to finance leases, net of finance charges in respect of future periods, are included within other interest bearing liabilities. The interest element of the obligation is allocated over the lease term to reflect a constant rate of interest on the outstanding obligation. Leasehold land, where no option to obtain title exists, is treated as an operating lease. Assets classified as being under operating lease are not capitalised and therefore not recognised within the balance sheet. Payments made under operating leases are recognised as prepayments within trade and other receivables and are recognised in the income statement on a straight line basis over the term of the lease within other operating charges. Financial investments All financial investments are initially recognised at fair value, which includes transaction costs for financial investments not classified as at fair value through profit or loss. Financial investments are derecognised when the rights to receive cash flows from the financial investments have expired or where the Group has transferred substantially all risks and rewards of ownership. The Group has classified its financial investments into the following categories: available for sale and loans and receivables. Management determines the classification at initial recognition. Available for sale Available for sale financial investments are those intended to be held for an undisclosed period of time which may be sold in response to liquidity needs or changes in interest rates, exchange rates or equity prices. Available for sale financial investments are carried at fair value, with the exception of investments in equity instruments where fair value cannot be reliably determined, which are carried at cost. Fair values are determined in the same manner as for investments at fair value through profit or loss. Changes in fair value are recognised in other comprehensive income whilst an investment is held, and are subsequently transferred to the income statement upon sale or derecognition of the investment. Loans and receivables Loans and receivables are non-derivative financial investments with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a borrower or customer with no intention of trading the receivable. Loans are recognised when cash is advanced to the borrowers. Loans and receivables are carried at amortised cost calculated using the effective interest method, less impairment losses. 22 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Trade and other receivables Trade and other receivables are carried at amortised cost less impairment losses. Impairment of financial assets Financial assets comprise financial investments and trade and other receivables. If they are not already held at fair value, financial assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial asset is considered impaired if objective evidence indicates that one or more events that have occurred since the initial recognition of the asset have had a negative impact on the estimated future cash flows of that asset. An impairment loss in respect of a financial investment measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the effective interest rate at the date the investment was made. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. Non-current assets classified as held for sale and discontinued operations Non-current assets or disposal groups are classified as held for sale where their carrying amount will be recovered principally through a sale transaction rather than continuing use, where sale is highly probable and where the asset or disposal group is available for immediate sale in its present condition. Non-current assets and disposal groups held for sale are recognised at the lower of carrying amount and fair value less costs to sell. Impairment losses are recognised in the income statement. A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations or is a subsidiary company acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal, abandonment or when the operation meets the criteria to be classified as held for sale, if earlier. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average method, and includes costs incurred in acquiring the inventories and in bringing them to their current location and condition. Cash and cash equivalents Cash and cash equivalents comprise cash balances, call deposits and other highly liquid investments (including money market funds) with original maturities of three months or less and which are subject to an insignificant risk of change in value. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Provisions for liabilities and charges A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation that can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-taxation rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Trade and other payables Trade and other payables, excluding derivative liabilities, are carried at amortised cost. Employee post employment benefits The Group operates defined contribution and defined benefit pension schemes. 23 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Accounting policies (continued) Defined contribution pension schemes The defined contribution schemes provide benefits based on the accumulated contributions made by Bupa and the employees. The Group pays fixed contributions into the fund on behalf of the employees and these contributions are recognised as an expense in the income statement as incurred. The risks and rewards of the defined contribution schemes are assumed by the members of the schemes. Defined benefit pension schemes The defined benefit schemes provide benefits based on final pensionable salary. The Group’s net obligation in respect of defined benefit pension schemes is calculated separately for each scheme and represents the present value of the defined benefit obligation less, for funded schemes, the fair value of the scheme assets. The discount rate used is the yield at the balance sheet date on high quality corporate bonds denominated in the currency in which the benefits will be paid. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of any future refunds from the scheme, or reductions in future contributions to the scheme, plus the total of any unrecognised past service cost. The charge to the income statement for defined benefit schemes represents the following: current service cost calculated on a projected unit credit method, the expected return on scheme assets, less the interest cost on scheme liabilities, and gains and losses on curtailments. All actuarial gains and losses are recognised in full in the statement of comprehensive income in the period in which they occur. Interest bearing liabilities Interest bearing liabilities are recognised initially at proceeds receivable less attributable transaction costs. Subsequent to initial recognition they are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. The amortised cost of borrowings with a corresponding fair value hedge is amended for the fair value of the risk being hedged. Accounting estimates and judgements The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in applying the Group’s accounting policies. The estimates and assumptions are based on historical experience and other related variables, updated to reflect current trading performance. The estimates and assumptions are reviewed on an ongoing basis and are considered to be prudent and appropriate but actual results may differ from these estimates. Judgements made by management in applying the Group’s accounting policies that have a significant effect on the financial statements, and estimates with a significant risk of material adjustment in subsequent periods, are described below:  Pension assumptions: Note 20 details the estimation techniques involved in calculating the Group’s net pension asset or liability.  Property valuations: The Group’s properties are valued with regard to their trading potential. Valuations are performed by independent, external valuers who incorporate assumptions. The principal assumptions relate to: quantifying a fair, maintainable level of trade and profitability; levels of competition; and assumed ability to renew existing licences, consents, certificates or permits.  Income taxes: The Group is subject to income taxes in the United Kingdom. There are many transactions and calculations for which the ultimate taxation determination is uncertain during the ordinary course of business. Where the final taxation outcome is different from the amount that was initially recorded, the difference is recognised in the period in which such determination is made. The areas of judgement made in the process of applying the Group’s accounting policies to categorise how transactions are displayed and that have the most significant effect on the amounts recognised in the financial statements are:  determining whether a substantial transfer of risks and rewards has occurred in relation to leased assets; and  determining the necessary taxation provision where the effect of taxation laws and regulations is unclear. 24 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements 1. Immediate and ultimate parent company The immediate parent undertaking of the Company is Grupo Bupa Sanitas S.L., a company incorporated in Spain. The ultimate parent undertaking of the Company, and the largest group into which these financial statements are consolidated, is The British United Provident Association Limited, a company incorporated in England and Wales. The smallest group into which these financial statements are consolidated is that headed by Bupa Finance plc, a company incorporated in England and Wales. Copies of the accounts of both companies can be obtained from The Registrar of Companies, Cardiff, CF14 3UZ. 2. Revenue An analysis of the Group revenue is as follows: Continuing 2011 2012 £’000 £’000 Health care 481,613 479,062 Discontinued 2011 2012 £’000 £’000 53,891 Total 2011 2012 £’000 £’000 481,613 532,953 3. Segmental Information For management purposes, the Group is currently organised into two operating divisions – health care and property development. The principal activities are as follows:   Health care – ownership and operation of nursing and residential homes for the elderly. Property development – construction of purpose built care homes for other Group undertakings. Segment information about these businesses is presented below: 2012 Health care Continuing £’000 481,613 Property development £’000 - Total £’000 481,613 Revenue External sales Segment result Operating surplus Financial income Financial expenses Surplus before taxation expense Taxation expense Surplus after taxation 38,364 7,868 (15,045) 31,187 (9,490) 21,697 - 38,364 7,868 (15,045) 31,187 - - (9,490) 21,697 25 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 3. Segmental Information (continued) Other information 2012 Health care £’000 30,363 22,246 2,577 Property development £’000 Total £’000 30,363 22,246 2,577 Assets acquired Depreciation and amortisation Impairment losses recognised in income Assets and liabilities Segment assets Segment liabilities 2011 Continuing £’000 Revenue External sales Segment result Operating surplus 479,062 Health care discontinued £’000 53,891 830,746 (497,141) 1,223 (1,758) Property development £’000 - 831,969 (498,899) Sub total £’000 532,953 Total £’000 532,953 43,807 10,395 54,202 - 54,202 Financial income Financial expenses Surplus before taxation expense Taxation expense Profit on disposal of businesses Surplus after taxation 5,625 (12,024) - 5,625 (12,024) - 5,625 (12,024) 47,803 (14,105) 5,285 38,983 From continuing operations From discontinued operations 26,101 12,882 38,983 26 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 3. Segmental Information (continued) Other information 2011 Health care £’000 30,312 25,759 3,468 Property development £’000 Total £’000 30,312 25,759 3,468 Assets acquired Depreciation and amortisation Impairment losses recognised in income Assets and liabilities Segment assets Segment liabilities Geographical segments The Group’s operations are located in the United Kingdom. 898,244 (581,724) 2,558 (106) 900,802 (581,830) 4. Operating expenses Continuing 2011 2012 £’000 £’000 Discontinued 2011 2012 £’000 £’000 28,613 2,541 1,972 57 3,219 900 6,194 43,496 Total 2011 2012 £’000 £’000 281,993 29,911 17,121 518 43,790 21,821 2,577 3,877 445 41,196 443,249 308,371 29,640 19,473 656 45,121 25,336 3,468 3,218 423 43,045 478,751 Staff costs Property cost Catering costs Operating lease rentals - Plant and equipment - Land and buildings Depreciation charge Impairment losses and reversal of past impairment losses Inventories consumed Amortisation of other intangible assets Other operating expenses (including auditor’s remuneration) Before exceptional items 281,993 29,911 17,121 518 43,790 21,821 2,577 3,877 445 41,196 443,249 279,758 27,099 17,501 599 45,121 22,117 2,568 3,218 423 36,851 435,255 27 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 5. Staff costs and Directors' remuneration (i) Staff costs The average number of persons employed by the Group during the year (including directors), analysed by category, was as follows: Continuing Discontinued Total 2011 2011 2011 2012 2012 2012 Health care Property development 16,316 15 16,331 Their aggregate remuneration comprised: Continuing 2011 2012 £’000 £’000 Wages and salaries Social security costs Other pension costs 261,562 18,098 2,333 281,993 (ii) Directors’ remuneration Emoluments 2012 £’000 Directors’ emoluments Compensation for loss of office 1,287 901 2,188 2011 £’000 1,044 1,044 257,322 20,156 2,280 279,758 Discontinued 2011 2012 £’000 £’000 26,625 1,932 56 28,613 Total 2011 2012 £’000 £’000 261,562 18,098 2,333 281,993 283,947 22,088 2,336 308,371 15,746 15 15,761 1,720 1,720 16,316 15 16,331 17,466 15 17,481 Company contributions paid to money purchase schemes Long Term Incentive Plan 2012 £’000 Amounts payable Pensions 2012 Members of money purchase pension schemes Members of defined benefit pension schemes Certain directors are remunerated by other group companies. 3 529 2011 £’000 635 2011 2 28 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 5. Staff costs and Directors' remuneration (continued) (ii) Directors’ remuneration (continued) Amounts in respect of highest paid director 2012 £’000 Emoluments Directors’ emoluments Compensation for loss of office 2011 £’000 687 901 1,588 400 1,988 816 816 480 1,296 152 Amounts receivable under long term incentive schemes Company contributions to money purchase pension schemes Accrued pension at year end The highest paid director is a member of The Bupa Pension Scheme. 185 6. Auditor’s remuneration The analysis of auditor’s remuneration is as follows: 2012 £’000 Fees for the audit of the Company’s annual accounts Fees for the audit of the Company’s subsidiary undertakings 9 177 186 2011 £’000 8 174 182 Fees for the audit of the Company and subsidiary undertakings represent the amount receivable by the Group’s auditor. The amount may not be borne by the Group. Fees paid to the Group’s auditor KPMG Audit plc, and its associates for services other than the statutory audit of the Group are not disclosed in these accounts since the consolidated accounts of Bupa, the ultimate parent undertaking, disclose non-audit fees on a consolidated basis. 7. Financial income 2012 £’000 2011 £’000 40 5,585 5,625 Bank deposits Loans to Group undertakings 19 7,849 7,868 29 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 8. Financial expenses Continuing 2011 2012 £’000 £’000 Bank loans and overdrafts Debenture stock Loans from Group undertakings Preference dividend 105 5,900 6,957 2,083 15,045 117 5,900 1,598 4,196 11,811 Discontinued 2011 2012 £’000 £’000 213 213 Total 2011 2012 £’000 £’000 105 5,900 6,957 2,083 15,045 117 5,900 1,811 4,196 12,024 9. Taxation expense (i) Recognised in the income statement Continuing 2011 2012 £’000 £’000 Current taxation expense UK taxation on income for the year Adjustments in respect of prior periods Total current taxation Deferred taxation (income)/expense Origination and reversal of temporary differences Adjustments in respect of prior periods Total deferred taxation Taxation expense (ii) Reconciliation of effective taxation rate 2012 £’000 Continuing operations Discontinued operations Surplus before taxation expense Taxation at the domestic UK corporation taxation rate of 24.5% (2011: 26.5%) Effects of: Changes in taxation rate Non taxable items Adjustments to taxation in respect of prior periods Deferred taxation on short-term and other timing differences Adjustments in respect of deferred taxation of prior periods Taxation expense on continuing activities at the effective rate of 30.4% (2011: 26.6%) 31,187 31,187 7,641 2011 £’000 37,621 15,467 53,088 14,064 10,825 (265) 10,560 14,271 (512) 13,759 Discontinued 2011 2012 £’000 £’000 3,467 21 3,488 Total 2011 2012 £’000 £’000 10,825 (265) 10,560 17,738 (491) 17,247 (724) (346) (1,070) 9,490 (1,308) (931) (2,239) 11,520 - - (882) (21) (903) 2,585 (724) (346) (1,070) 9,490 (2,190) (952) (3,142) 14,105 (18) 3,474 (265) (996) (346) (51) 1,114 (491) 421 (952) 9,490 14,105 30 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 9. Taxation expense (continued) (iii) Current and deferred taxation recognised directly in other comprehensive income 2012 £’000 Deferred taxation (credit)/charge in respect of: Unrealised loss on revaluation of properties (6,198) Actuarial gain on pension schemes 43 Taxation credit reported in other comprehensive income (6,155) 2011 £’000 (8,831) 28 (8,803) (iv) Factors that may affect future tax charges The Budget statement in March 2013 announced that the UK corporation tax rate will reduce to 20% by 2015. The reduction to 23% (effective from 1 April 2013) was enacted on 3 July 2012. The company’s deferred tax balances have been provided for at 23% (25% at 31 December 2011), being the rate that was substantively enacted at 31 December 2012. The effect of the reduction in the UK corporation rate to 20% would create an additional reduction in the deferred tax balance of £2,480,000. This has not been reflected in the figures above as it was not substantively enacted at the balance sheet date. 10. Dividends 2012 £’000 Equity – ordinary Interim dividend of £nil per 25p ordinary share (2011: £1.60) No final dividend is proposed for the year. 2011 £’000 260,000 11. Discontinued activities The results of the discontinued activities and gain on disposal which relate to the sale of Bupa Care Homes (AKW) Limited and Bupa Care Homes (Carrick) Limited to Bupa Care Homes (ANS) Limited have been included in the income statement as follows: 1 January 2011 to 7 December 2011 2012 £’000 £’000 Revenue 53,891 Operating expenses Operating surplus Financial expenses Surplus on ordinary activities before taxation expense Attributable tax expense Gain on disposal of discontinued business Attributable tax expense on profit on disposal of discontinued business Surplus for the financial year (43,496) 10,395 (213) 10,182 (2,585) 5,285 12,882 31 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 12. Intangible assets Goodwill £’000 Cost At 1 January 2012 Additions Disposal At 31 December 2012 Amortisation and impairment losses At 1 January 2012 Amortisation for the year Disposal At 31 December 2012 Net book value At 31 December 2012 At 1 January 2012 10,854 10,854 Software £’000 2,690 1,393 (105) 3,978 Total £’000 13,544 1,393 (105) 14,832 10,854 10,854 1,472 445 (105) 1,812 12,326 445 (105) 12,666 - 2,166 1,218 2,166 1,218 Goodwill £’000 Cost At 1 January 2011 Additions Disposal At 31 December 2011 Amortisation and impairment losses At 1 January 2011 Amortisation for the year Disposal At 31 December 2011 Net book value At 31 December 2011 At 1 January 2011 18,223 (7,369) 10,854 Software £’000 1,899 791 2,690 Total £’000 20,122 791 (7,369) 13,544 10,899 (45) 10,854 1,049 423 1,472 11,948 423 (45) 12,326 7,324 1,218 850 1,218 8,174 32 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 13. Property, plant and equipment Land and buildings £’000 Cost or valuation At 1 January 2012 Additions Disposals At 31 December 2012 Depreciation At 1 January 2012 Charge for the year Impairment loss Disposals At 31 December 2012 Net book value At 31 December 2012 At 1 January 2012 Leased assets included above: Net book value At 31 December 2012 At 1 January 2012 434,679 6,240 (668) 440,251 Fixtures, fittings and equipment £’000 220,669 22,730 (44,874) 198,525 Total £’000 655,348 28,970 (45,542) 638,776 24,425 6,147 16,200 (8) 46,764 132,634 15,674 (44,535) 103,773 157,059 21,821 16,200 (44,543) 150,537 393,487 410,254 94,752 88,035 488,239 498,289 61,507 66,450 - 61,507 66,450 The Group’s freehold land and buildings were independently valued by Knight Frank, Chartered Surveyors in accordance with Appraisal and Valuation Manual issued by the Royal Institute of Chartered Surveyors. The valuations were effective from 31 December 2010. The principal assumptions inherent in such valuations are described in the accounting policies. These valuations were incorporated into the balance sheet as of 31 December 2010. The directors have performed an impairment review of freehold land and buildings as at 31 December 2012. This review has resulted in an impairment of £16,200,000 against the value of certain freehold land and buildings. 33 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 13. Property, plant and equipment (continued) Land and buildings £’000 Cost or valuation At 1 January 2011 Additions Impairment loss Disposals At 31 December 2011 Depreciation At 1 January 2011 Charge for the year Impairment loss Disposals At 31 December 2011 Net book value At 31 December 2011 At 1 January 2011 Leased assets included above: Net book value At 31 December 2011 At 1 January 2011 Analysis of cost or valuation of land and buildings: 2012 £’000 411,604 16,983 (18,240) (660) (16,200) 393,487 2011 £’000 563,839 10,743 (12,093) (135,535) (16,700) 410,254 573,121 1,461 (722) (139,181) 434,679 Fixtures, fittings and equipment £’000 254,013 28,060 (61,404) 220,669 Total £’000 827,134 29,521 (722) (200,585) 655,348 3,325 8,768 15,978 (3,646) 24,425 166,987 16,568 500 (51,421) 132,634 170,312 25,336 16,478 (55,067) 157,059 410,254 569,796 88,035 87,026 498,289 656,822 66,450 67,808 - 66,450 67,808 At open market value At cost Aggregate depreciation thereon Disposal Impairment If land and buildings had not been revalued they would have been included at the following amounts: 2012 £’000 Historical cost of revalued assets 296,600 Disposal (95,362) Depreciation based on historical cost (70,469) Historical cost net book value 130,769 2011 £’000 290,360 (94,694) (66,444) 129,222 34 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 14. Investments Subsidiary companies A list of the significant investments, including the name, country of incorporation and proportion of ownership interest is given in note 37 to the Company’s financial statements. 15. Other non-current receivables Other non-current receivables comprise: 2012 £’000 Amounts owed by Group undertakings The amounts owed by Group undertakings include the following loans: Date issued December 2011 December 2011 December 2011 Repayment date December 2021 December 2021 November 2021 Interest rate Six months LIBOR plus 120 basis points Six months LIBOR plus 120 basis points Twelve months LIBOR plus 120 basis points 245,637 2011 £’000 122,542 ANS 2003 Limited Bupa Care Homes (ANS) Limited Bupa Investments Limited 16. Inventories 2012 £’000 Finished goods 771 2011 £’000 421 17. Trade and other receivables Trade and other receivables due within one year comprise: 2012 £’000 Trade receivables net of impairment losses Amounts owed by Group undertakings Other receivables Prepayments and accrued income 34,490 31,571 4,252 17,216 87,529 2011 £’000 31,910 221,890 250 16,252 270,302 The average credit period taken on sales of goods and services provided is 19 days (2011: 19 days). No interest is charged on receivables. An allowance has been made for estimated irrecoverable amounts from the sale of goods and services rendered amounting to £2,744,000 (2011: £2,595,000). This allowance has been determined by reference to past default experience. The directors consider that the amount of trade and other receivables approximates their fair value. Prepayments and accrued income includes payments to Bupa Group undertakings for future services. 35 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 17. Trade and other receivables (continued) The ageing of trade receivables is as follows: 2012 £’000 Neither past due nor impaired 0-30 days 30-60 days 60-90 days 90-120 days Above 120 days 25,005 7,524 1,990 1,073 507 1,135 37,234 The movement in the allowance for doubtful debts is as follows: 2012 £’000 At 1 January 2012 Impairment losses recognised Bad debt provision (released)/charged in year At 31 December 2012 2,595 149 2,744 2011 £’000 3,244 36 (685) 2,595 2011 £’000 23,314 7,142 1,611 808 440 1,190 34,505 Credit risk The Group’s principal financial assets are bank balances, cash and trade and other receivables, which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessment of the current economic climate. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Group has no significant concentration of credit risk, with exposure spread over a large number of counter parties and customers. 18. Cash and cash equivalents Bank balances and cash comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. 19. 11.8% Debenture stock 2012 £’000 11.8% debenture stock 50,000 2011 £’000 50,000 The 11.8% debenture stock is repayable at par in 2014. The stock is secured by a fixed charge over certain of the Group’s assets, on a first floating charge over the businesses attached thereto and a general floating charge over the remainder of the assets of the Company and Bupa Care Homes (CFHCare) Limited. The assets pledged as security include £72,203,000 (2011: £80,281,000) of property, plant and equipment. The fair value of the 11.8% debenture stock at 31 December 2012 was £58,259,000 (2011: £62,807,000). 36 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 20. Post employment benefit liability The assets and liabilities in respect of defined benefit pension schemes are as follows: 2012 £’000 Present value of funded obligations Fair value of scheme assets Net recognised liabilities (15,746) 14,637 (1,109) 2011 £’000 (14,642) 13,557 (1,085) The Group operates several funded defined benefit and defined contribution pension schemes for the benefit of employees and directors. The defined benefit schemes provide benefits based on final pensionable salary. Contributions by Group companies to such schemes are made in accordance with the recommendations of independent scheme actuaries of the individual schemes. Complete disclosure of each separate pension scheme’s details is not practicable within this report. The key factors relating to the Group’s funded pension arrangements are discussed below. The Bupa Pension Scheme The Bupa Pension Scheme is the principal defined benefit pension scheme which provides benefits based on final pensionable salary, with charges made to the profit and loss account of The Bupa United Provident Association Limited (‘Bupa’) comprising the current service cost calculated on the projected unit method, interest cost on plan liabilities, less the expected return on plan assets, and gains and losses on curtailments. The Bupa Pension Scheme was closed to new entrants from 1 October 2002. Under this scheme, contributions by employees and the Bupa Group are administered by trustees in funds independent of the Group. The scheme is funded to cover future pension liabilities allowing for future earnings and pension increases. An independent actuary performs triennial valuations together with periodic interim reviews. Both triennial and interim valuations use the attained age method, recognising the closure of the scheme to new entrants. The most recent triennial valuation as at 1 July 2011 was finalised during the year ended 31 December 2012. The Bupa Pension Scheme was valued as at 31 December 2012 under the requirements of International Accounting Standard No 19: Employee Benefits (IAS 19) as the Group prepares its consolidated financial statements under International Financial Reporting Standards. This valuation showed a surplus before deferred tax of £104.5m (2011: £67.8m) with assets of £1,180.7m (2011: £1,076.8m) and liabilities of £1,076.2m (2011: £1,009.0m), which would not be materially different from a valuation performed under the requirements of FRS 17. It is not possible to identify the Company’s share of this deficit on a consistent and reliable basis, therefore, as permitted by FRS 17, the pension contributions paid by the Company relating to this scheme are charged to the profit and loss account of the Company. Details of the latest valuations of the scheme and main assumptions are included in the annual report and accounts of the ultimate holding company, ‘Bupa’. As recommended by the scheme’s independent actuary, employer contributions were paid at the rate of 31.9% of pensionable salaries for the period to 30 June 2012 and at the rate of 34.3% for the period 1 July 2012 to 31 December 2012. Included in the employer contributions is 7.0% which represents the employer pension contributions paid as part of the Group's salary sacrifice arrangement, PeopleChoice Pensions. There is a corresponding reduction in wages and salaries as a result. The full disclosure requirements under IAS 19 are disclosed in the Annual Report and Accounts of Bupa. 37 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 20. Post employment benefit liability (continued) The Care First Bedfordshire Limited Defined Benefit Scheme The Group operates a defined benefit pension scheme, Care First Bedfordshire Limited Defined Benefit Scheme, for certain employees who transferred from Bedfordshire County Council and who were previously members of the relevant Local Government Superannuation Scheme (LGSS). The scheme has been established to provide benefits identical to those offered by the LGSS. Under this scheme, contributions by employees and the Company are administered by JLT Benefits Solutions Limited who are also responsible for investments management and the provision of actuarial advice. The scheme was established on 4 November 1996 and eligible staff joined the scheme with effect from the 14 July 1998. The scheme is funded to cover future pension liabilities, allowing for future earnings and pension increases. On the basis of a detailed valuation undertaken every three years and a periodic interim review, an independent actuary recommends the rates of contribution. A full actuarial valuation was carried out at 1 July 2009 and updated to 31 December 2012 by a qualified actuary independent of the scheme’s sponsoring employer. An employer contribution rate of 25.7% of pensionable pay for staff members and 26.7% of pensionable pay for non staff members currently applies. Member contributions are payable in addition at the rate of 6% of pensionable salaries for staff members and 5% of pensionable salaries for non-staff members. The Powys County Council Pension Fund The Group participates in a Local Government Pension Scheme, a defined benefit scheme based on final pensionable salary. The latest independent actuarial valuation of the Powys County Council Pension Fund took place on 31 March 2010. (i) Actuarial assumptions The Care First Bedfordshire Limited Defined Benefit Scheme The principal actuarial assumptions (expressed as weighted averages) used when valuing the scheme obligations and assets at the year end are as follows: Principal financial assumptions (% per annum) 2012 Inflation rate (CPI) Inflation rate (RPI) Rate of increase in salaries Rate of increase to pensions in payment Discount rate for scheme obligations Rate of revaluation of deferred pensions of CPI or 5% if less 2.30 3.00 3.50 3.00 4.50 2.30 2011 2.40 3.10 3.60 3.10 4.70 2.40 The mortality assumptions adopted at 31 December 2012 imply the following life expectancies: Male retiring at age 65 in 2012 Female retiring at age 65 in 2012 Male retiring at age 65 in 2032 Female retiring at age 65 in 2032 Expected long term rates of return The long-term expected rate of return on cash is determined by reference to UK Government Gilt Yields balance sheet dates. The long-term expected return on corporate bonds is determined by reference to Iboxx AA rated long-dated corporate bond yield at the balance sheet date. The long-term expected rate of return on equities is based on the rate of return on bonds with an allowance for out-performance. 22.6 25.1 24.5 26.9 38 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 20. Post employment benefit liability (continued) (i) Actuarial assumptions (continued) The Powys County Council Pension Fund The principal assumptions used by the independent qualified actuaries in updating the latest valuation of the Fund were: Principal financial assumptions (% per annum) 2012 Discount rate RPI Inflation CPI Inflation Rate of increase to pensions in payment Rate of increase to deferred pensions Rate of general increase in salaries 4.5 3.0 2.3 2.3 2.3 4.5 2011 4.7 3.1 2.4 2.4 2.4 4.6 The mortality assumptions adopted at 31 December 2012 imply the following life expectancies: Male retiring at age 65 in 2012 Female retiring at age 65 in 2012 Male retiring at age 65 in 2032 Female retiring at age 65 in 2032 21.6 23.8 23.4 25.7 At 31 December 2011 and 2012 each member assumed to exchange 35% of the maximum amount permitted of their pre 1 April 2010 pension entitlements, for additional lump sum. Each member assumed to exchange 70% of the maximum amount permitted of their post 31 March 2010 pension entitlements, for additional lump sum. (ii) Present value of schemes’ obligations – combined for the Powys and Bedfordshire schemes The movement in the present value of the schemes’ obligation is: 2012 £’000 At 1 January Current service cost Interest on obligations Contributions by employees Actuarial gains Changes in assumptions underlying the present value of scheme liabilities Benefits paid At 31 December 14,642 373 688 86 321 (364) 15,746 2011 £’000 13,629 378 737 99 (520) 687 (368) 14,642 39 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 20. Post employment benefit liability (continued) (iii) Fair value of schemes’ assets The movement in the fair value of the funded schemes’ assets is: 2012 £’000 At 1 January Expected return on scheme assets Actuarial gains and losses Contributions by employer Contributions by employees Benefits paid At 31 December 13,557 757 190 411 86 (364) 14,637 2011 £’000 12,757 798 (185) 456 99 (368) 13,557 The analysis of the schemes’ assets and the expected return at the balance sheet date was as follows: The Care First Bedfordshire Limited Defined Benefit Scheme Expected return 2011 2012 % % Equity Corporate Bonds Cash and short dated securities 6.60 4.70 3.00 5.60 The Powys County Council Pension Fund Expected return 2011 2012 % % Equity Property Government bonds Corporate bonds Cash Other 6.8 6.8 3.3 4.5 3.0 6.8 5.9 6.6 6.6 3.1 4.7 3.0 6.6 5.50 Fair value of assets 2011 2012 £’000 £’000 2,531 340 724 629 128 378 4,730 2,167 314 854 475 196 354 4,360 7.70 5.40 4.20 6.16 Fair value of assets 2011 2012 £’000 £’000 1,787 8,120 9,907 1,553 7,644 9,197 The scheme employs a building block approach in determining the rate of return on Fund assets. Historical markets are studied and assets with higher volatility are assumed to generate higher returns consistent with widely accepted capital market principles. The assumed rate of return on each asset class is set out within this note. The overall expected rate of return on assets is then derived by aggregating the expected return for each asset class over the actual asset allocation for the Fund at 31 December 2012. 40 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 20. Post employment benefit liability (continued) (iv) Amount recognised in the consolidated income statement The amounts charged/(credited) to operating expenses for the year are: 2012 £’000 Current service cost Interest on pension scheme liabilities Expected return on pension scheme assets 373 688 (757) 304 (v) Amount recognised directly in other comprehensive income The amounts charged/(credited) to other comprehensive income are: 2012 £’000 Actual return less expected return on pension assets Experience gains and losses arising on the scheme liabilities Changes in assumptions underlying the present value of scheme liabilities (190) 321 131 2011 £’000 185 (520) 687 352 2011 £’000 378 737 (798) 317 The cumulative amounts of actuarial loss recognised directly in other comprehensive income are £2,376,000 (2011: £2,245,000). (vi) History of experience gains and losses 2012 £’000 (15,746) 14,637 (1,109) 2011 £’000 (14,642) 13,557 (1,085) 2010 £’000 (13,629) 12,757 (872) 2009 £’000 (13,175) 11,528 (1,647) 2008 £’000 (9,484) 8,857 (627) Present value of schemes obligations Fair value of schemes assets Net deficit Experience gains and losses arising on: Scheme obligations Scheme assets Changes in assumptions Total amounts recognised directly in equity (190) 321 - 185 (520) 687 (80) (270) (50) (136) (698) - (518) 2,095 - 131 352 (400) 2,003 282 41 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 21. Deferred taxation assets and liabilities Recognised deferred taxation assets and liabilities Deferred taxation assets and liabilities are attributable to the following: Assets Liabilities 2011 2011 2012 2012 £’000 £’000 £’000 £’000 Accelerated capital allowances Post employment benefit liability Revaluation of properties to fair value Other Net deferred taxation (assets)/ liabilities (255) (589) (271) (184) 6,906 12,932 7,163 19,511 - Net 2012 £’000 6,906 (255) 12,932 (589) 2011 £’000 7,163 (271) 19,511 (184) (844) (455) 19,838 26,674 18,994 26,219 Deferred taxation assets relating to the carry forward of employee benefits, other provisions, unused taxation losses and other deferred taxation assets are recognised to the extent that it is probable that future taxable surpluses will be available against which the deferred taxation assets can be utilised. The deferred tax relating to revaluation of properties has reduced by £1,600,000 (2011: £3,300,000) in the year due to the change in tax rate. Unrecognised deferred taxation assets As at 31 December 2012 the Group had deductible temporary differences relating to capital losses of £12,961,000 (2011: £13,392,000) for which no deferred taxation asset was recognised due to uncertainty of those temporary differences. Movement in net deferred taxation liabilities At 1 January 2012 £’000 Accelerated capital allowances Post employment benefit liability Revaluation of properties to fair value Other 7,163 (271) 19,511 (184) 26,219 Recognised in income statement £’000 (257) (27) (381) (405) (1,070) Recognised in other comprehensive income £’000 43 (6,198) (6,155) At 31 December 2012 £’000 6,906 (255) 12,932 (589) 18,994 At 1 January 2011 £’000 Accelerated capital allowances Post employment benefit liability Revaluation of properties to fair value Other 9,905 (235) 45,135 (457) 54,348 Recognised in income statement £’000 (1,662) (64) (1,689) 273 (3,142) Recognised in other comprehensive income £’000 28 (8,831) (8,803) Disposal of subsidiary companies 2011 £’000 (1,080) (15,104) (16,184) At 31 December 2011 £’000 7,163 (271) 19,511 (184) 26,219 42 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 22. Provisions for liabilities and charges 2012 £’000 Reorganisation 2012 £’000 Onerous lease 82 (28) 54 54 54 2012 £’000 Total 2011 £’000 At 1 January Provided in the year Utilised in year At 31 December Non-current Current 1,200 (97) 1,103 1,103 1,103 82 1,200 (125) 1,157 1,157 1,157 107 (25) 82 68 14 82 The onerous lease is a non-cancellable lease for a property in Woking, Surrey. The Group has provided for lease obligations, net of sub lease receivables. The future net outflows are uncertain and are affected by the Group’s ability to sublet property. The reorganisation provision relates to costs incurred following the restructuring announced in 2012. 23. Preference shares The non-equity preference shares represent the entire cumulative redeemable preference shares in Bupa Care Homes (CFHCare) Limited. Bupa Care Homes (CFHCare) Limited is a subsidiary of Bupa Care Homes (CFG) plc. Bupa Care Homes (CFHCare) Limited issued the cumulative redeemable preference shares at par value on 24 February 1998, carrying an initial dividend rate of 5.25% increasing to a maximum rate of 6.25%. On 15 November 2011 the coupon rate was reduced from 6.25% to 3.25%. On a return of capital on a winding-up or otherwise, the holders of the preference shares shall be entitled, in priority to any payment to the holders of any other class of shares, to the repayment of a sum equal to the nominal paid up capital. The holders of the preference shares shall have the right to receive notice of and attend, but not to speak or vote at, a General Meeting of Bupa Care Homes (CFHCare) Limited. On 19 December 2012, the redeemable preference shares were sold by Centro Internacional De Medicina Avanzada SL , a fellow Bupa company to Bupa Care Homes Group Limited, a subsidiary of Bupa Care Homes (CFG) plc, a company within the Group. As Bupa Care Homes Group Limited and Bupa Care Homes (CFHCare) Limited are both members of the Group no balance is shown in the consolidated accounts in respect of the preference shares creditor nor the associated debtor. The fair value of the shares at 31 December 2012 was £66,634,000 (2011: £68,293,000). 24. Risk management The principal risks inherent in the Group’s financing activities are: Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Liquidity risk Liquidity risk is the risk that the Group will not have available funds to meet its liabilities when they fall due. These risks are managed by the ultimate parent company Bupa. These are disclosed in the accounts of Bupa Finance plc, an intermediate parent company. 43 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 25. Trade and other payables Trade and other payables due within one year comprise: 2012 £’000 Trade payables Amounts owed to Group undertakings Other taxation and social security Deferred income Other payables Accruals Non equity dividend 11,457 39,667 5,701 18,233 2,651 57,898 135,607 2011 £’000 10,702 51,424 5,666 18,003 2,960 58,655 1,332 148,742 Trade payables comprise amounts outstanding for trade purchases. The average credit period taken for trade purchases is 25 (2011: 26) days. There is no material difference between the carrying amount of trade payables and their fair value. 26. Share Capital 2012 £’000 Allotted, called up and fully paid 162,213,958 ordinary shares of 25p each 40,553 2011 £’000 40,553 27. Notes to the consolidated cash flow statement 2012 £’000 Surplus before taxation expense Adjustments for: Depreciation of property, plant and equipment Impairment losses Gain on disposal of discontinued activities Loss on disposal of property, plant and equipment Amortisation of other intangible assets Financial income Financial expenses Movement in onerous lease provision Movement in restructuring provision Movement in post employment benefits liability Operating cash flows before movement in working capital Decrease/(Increase) in working capital: Inventories Trade receivables Other receivables Prepayments and accrued income Trade payables Other taxation and social security Accruals Deferred income Other payables Cash generated from operations 31,187 21,821 2,577 2,318 445 (7,868) 15,045 (29) 1,103 (106) 66,493 2011 £’000 53,088 25,336 3,468 (5,285) 423 (5,624) 12,024 (24) (139) 83,267 (350) (2,580) (4,002) (963) 755 34 (79) 229 (309) 59,228 40 (621) 114 306 1,804 (499) (2,607) 2,012 29 83,845 44 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 27. Notes to the consolidated cash flow statement (continued) Interest paid Net cash from operating activities (9,420) 49,808 (10,391) 73,454 Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts: 2011 2012 £’000 £’000 Cash on hand and balances with bank Restricted access deposits 6,783 (5,861) 922 7,575 (5,861) 1,714 Cash and cash equivalents comprise cash at bank and other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. A charge is held over cash of £5.9million (2011: £5.9million) as security over future operating rental payments due to Bupa LeaseCo (Guernsey) Limited. 28. Commitments Capital commitments As at 31 December 2012, the Group had capital commitments as set out below. 2012 £’000 Land and buildings Operating leases The total value of future non-cancellable operating lease rentals is payable as follows: 2012 £’000 Less than one year Between one and five years More than five years 42,956 171,784 776,710 991,450 2011 £’000 43,198 172,362 782,687 998,247 5,680 2011 £’000 6,600 The Group leases a number of properties under operating leases. The leases typically run for a period of 25 to 35 years, with an option to renew the lease after that date. Lease payments are reviewed regularly in accordance with the terms and conditions of the individual lease agreements. None of these leases include contingent rentals. 29. Contingent liabilities The Group has given a guarantee and other undertakings, as part of the Group banking agreements, in respect of the overdraft of certain other Group undertakings. Under a group arrangement the Group is jointly and severally liable for Value Added Taxation due by certain other group companies. The Group has disposed of leasehold interests in a number of close care properties in which it continues to hold a reversionary interest. In so doing, it granted the right to certain purchasers to require the Group to repurchase properties at any time in the future for a price equal to 90% of the purchase price paid for the properties 45 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 29. Contingent liabilities (continued) concerned. These are not considered to be financing transactions, and no asset or liability is included on the balance sheet. The outstanding repurchase commitments granted by the Group in this respect amounted to £366,000 (2011: £366,000). The obligations of the Group under operating leases which have been granted to the Group by Bupa LeaseCo (Guernsey) Limited have been guaranteed by its parent and cross guaranteed by a number of its fellow subsidiaries. At 31 December 2012, the Company was party to a £800million revolving credit facility. The Group has joint and several liability for all obligations under the agreement. The Group has given a guarantee in respect of a £350million bond issue by Bupa Finance plc. 30. Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its fellow Group undertakings are disclosed below. Trading transactions During the year, the Group entered into the following transactions with related parties who are fellow members of the Bupa Group: Sales of goods and services and rental income Sales of goods and services and rental income are as follows: 2012 £’000 Fellow Bupa Group undertakings Purchases of goods and services and rental charges Purchases of goods and services and rental charges are as follows: 2012 £’000 Bupa Fellow Bupa Group undertakings 1,228 40,582 41,810 Interest received Interest received is as follows: 2012 £’000 Fellow Bupa Group undertakings Interest paid Interest paid is as follows: 2012 £’000 Fellow Bupa Group undertakings 6,957 2011 £’000 1,811 7,849 2011 £’000 5,585 2011 £’000 14,458 41,836 56,294 11,764 2011 £’000 9,113 46 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the financial statements (continued) 30. Related party transactions (continued) Non-current other receivables Non-current other receivables comprise: 2012 £’000 Fellow Bupa Group undertakings Current accounts receivable Current accounts receivable comprise: 2012 £’000 Fellow Bupa Group undertakings Non-current accounts payable Non-current accounts payable comprise: 2012 £’000 Fellow Bupa Group undertakings Current accounts payable Current accounts payable comprise: 2012 £’000 Fellow Bupa Group undertakings 21,201 2011 £’000 51,424 284,841 2011 £’000 280,607 31,571 2011 £’000 221,890 245,697 2011 £’000 122,542 Sales and purchases of goods and services with related parties were made at market price discounted to reflect the quantity of goods purchased and the relationships between parties. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. 47 Bupa Care Homes (CFG) plc (Registered No. 1969735) Company financial statements for the year ended 31 December 2012 48 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Contents Page Company profit and loss account Company balance sheet Company cash flow statement Company accounting policies Notes to the Company financial statements 50 51  52  53  54  49 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Company profit and loss account Note Amounts written off investments Profit on disposal of fixed assets Income from shares in Group undertakings Other interest receivable and similar income Interest payable and similar charges Profit on ordinary activities before taxation Taxation on profit on ordinary activities Profit for the year There were no recognised gains and losses other than the profit for the financial year. There were no material differences between reported profit and loss and historical profit and loss on ordinary activities before and after taxation. 35 32 33 34 37 2012 £’000 8,220 (6,827) 1,393 (341) 1,052 2011 £’000 (51,500) 58,349 324,376 11,676 (11,022) 331,879 (173) 331,706 The accounting policies and notes on pages 53 to 59 form part of these financial statements. 50 Bupa Care Homes (CFG) plc Financial statements Company balance sheet as at 31 December 2012 Note Fixed assets Investments Current assets Debtors Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Net assets 40 37 2012 £’000 56,243 2011 £’000 56,243 38 39 287,084 (628) 286,456 342,699 (121,502) 221,197 287,569 (3,092) 284,477 340,720 (120,575) 220,145 Shareholders’ funds Called up share capital Share premium account Capital redemption reserve Profit and loss account Shareholders’ funds 41 42 42 42 43 40,553 114,141 2,110 64,393 221,197 40,553 114,141 2,110 63,341 220,145 These financial statements were approved by the board of directors and were signed on its behalf by: A J Cannon Director 16 April 2013 Registered number: 1969735 The accounting policies and notes on pages 53 to 59 form part of these financial statements. 51 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Company cash flow statement 2012 £’000 Returns on investment and servicing of finance Acquisitions and disposal Equity dividend paid Cash flow before financing Financing Movement in cash 44 44 45 36 (5,900) (5,900) 5,900 2011 £’000 261,900 141,671 (260,000) 143,571 (143,571) - The accounting policies and notes on pages 53 to 59 form part of these financial statements. 52 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Company accounting policies The principal accounting policies are summarised below. They have been applied consistently throughout the year. (a) Basis of preparation The financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain fixed assets, and in accordance with applicable UK accounting standards. (b) Going concern The Company meets its day to day working capital requirements through an intercompany financing arrangement. The forecast and projections of the Bupa Group indicate that it will continue to trade profitably. After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements. (c) Related party transactions As the Company is a wholly owned subsidiary of Bupa, the Company has taken advantage of the exemption contained in Financial Reporting Standard 8: Related Party Disclosures (FRS 8) and has therefore not disclosed transactions or balances with entities which form part of the group. (d) Taxation including deferred taxation The charge for taxation is based on the result for the year and takes into account deferred taxation. Deferred tax is provided in full on all timing differences that have originated, but not reversed, at the balance sheet date which result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exception:  Deferred tax assets are recognised only to the extent that it is considered more likely than not that there will be suitable taxable profits from which the underlying timing differences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on current tax rates and laws. Trading losses surrendered to other Group subsidiary undertakings are made on a full payment basis. (e) Investments Investments held as fixed assets are stated at cost less provision for any permanent diminution in value. 53 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the Company financial statements 31. Staff costs and directors’ remuneration None of the directors receive any emoluments in relation to their services to the Company. The emoluments of the directors in relation to their services to the Group are disclosed in note 5. Some directors emoluments are borne by other group companies. The Company has no other employee costs during the year. 32. Income from shares in Group undertakings 2012 £’000 Ordinary dividends from Greenacre Residential Retirement Homes Limited Bupa Care Homes Group Limited Surgichem Limited Bupa Care Homes (AKW) Limited Bupa Care Homes (Carrick) Limited Takare Special Projects Limited Court Cavendish Group Limited Downing Harnham Croft Nursing Homes Limited 2011 £’000 - 52 260,000 1,800 5,000 1,000 20 54,811 1,693 324,376 33. Other interest receivable and similar income 2012 £’000 Group undertakings 8,220 2011 £’000 11,676 34. Interest payable and similar charges 2012 £’000 Banks loans and overdrafts Group undertaking 5,900 927 6,827 2011 £’000 5,900 5,122 11,022 54 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the Company financial statements (continued) 35. Tax on profit on ordinary activities (i) Analysis of tax charge in the year 2012 £’000 Current tax UK corporation tax on profit for the year Total tax on profit on ordinary activities 341 341 2011 £’000 173 173 (ii) Factors affecting the tax charge The differences between the total current tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows: 2010 2012 £’000 £’000 Profit on ordinary activities before taxation Tax on profit on ordinary activities at standard UK corporation tax rate of 24.5% (2011: 26.5%) Effects of: Non taxable items Total current tax charge for year 341 1,393 331,879 341 87,948 - (87,775) 173 36. Dividends 2012 £’000 Equity – ordinary Interim paid £nil per ordinary share (2011:£1.60) No final dividend was declared and paid (2011: £nil). 2011 £’000 260,000 55 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the Company financial statements (continued) 37. Investments Shares in subsidiary undertaking £’000 Cost At 1 January 2012 and at 31 December 2012 Provisions for impairment At 1 January 2012 and at 31 December 2012 Net book value At 1 January 2012 and at 31 December 2012 76,909 Loans to subsidiary undertaking £’000 52,000 Other investments £’000 - Total £’000 128,909 72,666 - - 72,666 4,243 52,000 - 56,243 The Company has investments in the following subsidiary undertakings. Holding Class of % shares 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary Country of incorporation England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales Bupa Care Homes Group Limited Bupa Care Homes (CFHCare) Limited* Bupa Care Homes (CFCHomes) Limited* Bupa Care Homes (Partnerships) Limited* Bupa Care Homes (Bedfordshire) Limited Bupa Care Homes (GL) Limited* Bupa Care Homes (BNH) Limited* Bupa Care Homes (Developments) Limited Surgichem Limited Principal activity Holding company of care homes operators Owner and operator of care homes Owner and operator of care homes Owner and operator of care homes Owner and operator of care homes Owner and operator of care homes Owner and operator of care homes Developer of care homes Manufacturer and distributor of monitored drug dosage systems * Investment held by subsidiary undertaking 56 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the Company financial statements (continued) 37. Investments (continued) In addition to the companies listed above, the Company either directly or indirectly owns a number of nontrading subsidiary companies. Dissolved during the year Bupa Care Homes (CCG) Limited In liquidation Greenacre Group Limited Takare Special Projects Limited Subsidiary undertakings are included at cost less provisions. 38. Debtors 2012 £’000 Amounts falling due after one year: Amounts owed by Group undertakings 287,084 2011 £’000 287,569 39. Creditors – amounts falling due within one year 2012 £’000 Amounts owed to Group undertakings 628 2011 £’000 3,092 57 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the Company financial statements (continued) 40. Creditors – amounts falling after more than one year 2012 £’000 11.8% debenture stock Amounts owed to Group undertakings 50,000 71,502 121,502 Loans are repayable as follows: In two to three years 2011 £’000 50,000 70,575 120,575 50,000 50,000 The 11.8% debenture stock is repayable at par in 2014. The stock is secured by a fixed charge over certain of the Group’s assets and a first floating charge over the business attached thereto and a general floating charge over the remainder of the assets of the Company and Bupa Care Homes (CFHCare) Limited. The amount due to Group undertakings due after more than one year relates to a loan from Bupa Blackbird Investments Limited, repayable on 25 November 2030 and bearing interest at a rate of six months LIBOR plus 100 basis points. On 23 February 2011 the loan was novated to Bupa Malta Investments No. 1 Limited and Bupa Malta Investments No. 2 Limited. On 9 November 2011 the loans were assigned to Bupa Treasury Investments Limited Partnership. 41. Called up share capital 2012 £’000 Allotted, called up and fully paid 162,213,958 ordinary shares of 25 pence each 40,553 2011 £’000 40,553 42. Reserves Share premium account £’000 At 1 January 2012 Profit for the year At 31 December 2012 114,141 114,141 Capital redemption reserve fund £’000 2,110 2,110 Profit and loss account £’000 63,341 1,052 64,393 43. Reconciliation of movements in shareholders’ funds 2012 £’000 Profit for the year Dividends paid 1,052 2011 £’000 331,706 (260,000) Net addition to shareholders' funds Opening shareholders' funds Closing shareholders' funds 1,052 220,145 221,197 71,706 148,439 220,145 58 Bupa Care Homes (CFG) plc Financial statements Year ended 31 December 2012 Notes to the Company financial statements (continued) 44. Analysis of cash flow 2012 £’000 Returns on investments and servicing of finance Interest paid Dividends received 2011 £’000 (5,900) (5,900) (5,900) 267,800 261,900 Financing Borrowing from/(to) fellow group undertakings 5,900 (143,571) Cash comprises cash at bank and other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 45. Cash from acquisitions and disposal 2012 £’000 Bupa Care Homes (AKW) Limited Bupa Care Homes Carrick Limited ANS 2003 Limited Sale of subsidiary undertakings 2011 £’000 87,298 31,218 23,155 141,671 59