s.172 Statements

s.172 Statements

The Companies (Miscellaneous Reporting) Regulations 2018 require a number of NEC Group entities to publish a statement explaining how the Directors have given due regard for the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 while performing their duty to promote the success of the Company for the benefit of its members as a whole ("s.172 statement").

Below are the s.172 statements for the Group's entities captured by these Regulations:

The National Exhibition Centre Limited s.172 Statement 2020

Statement by the Directors on performance of their statutory duties in accordance with s172(1) Companies Act 2006

The Board of Directors of National Exhibition Centre Limited have acted in a way that they consider to be most likely to promote the success of the company for the benefit of its members and the wider Group headed by LHTCA Midco Limited as a whole in the decisions taken during the year ended 31 March 2020. A summary is set out as follows:

(i) The likely consequences of any decision in the long term

The Master Plan sets out our strategy for the NEC campus over the next 15 years. This important strategic document guides our internal decision-making and how we work with our many partners and stakeholders to balance sometimes competing priorities and find mutually acceptable ways forward.

(ii) The interests of employees

Our employees are fundamental to the delivery of our day-to-day operations and the delivery of our Master Plan. The health and safety of our employees is our number one priority, supported by both our dedicated Health and Safety team and a series of regular health & safety meetings covering all areas of the company's operations. Both the Board and the company's senior management receive regular reporting on health & safety matters. Employee development is also a key factor and we have launched a number of additional training and management development initiatives to support our employees through their development.

(iii) The need to foster the company's business relationships with suppliers, customers and others

We know that a great customer experience is not only about our facilities but also how our staff and the staff of our partners operate every day to consistently deliver a great service. During the period, we have continued to invest in our people through customer focused training and reward and recognition for great customer service through our Stars program.

A primary focus continues to be the visitors’ experience. To this end we have continued to invest in our facilities, including external facelift, catering offers and wayfinding and digital signage. We work closely with our business partners across the region, including Resorts World, Birmingham Airport, Birmingham International Railway Station, major corporates, the Chambers of Commerce, government agencies and Solihull and Birmingham local authorities to understand their plans and make sure that both visitor demand and visitor experiences can be managed for the mutual benefit of all.

We provide a diverse and balanced choice of facilities and services across our venues with something for all customer groups.

Our procurement strategy seeks to segment our supply chain by criticality and level of expenditure so that procurement activities can be focused on delivering best practice supply chain solutions which represent value for money, are innovative and have an emphasis on sustainability and health and safety and deliver outcomes which meet our requirements. Through the delivery of effective procurement, there is also a commitment to creating partnerships with our suppliers.

We maintain strong relationships with our debt providers which involves the provision of regular business updates. These strong relationships have resulted in our debt providers being in a position to provide us with additional financing when the impact of COVID-19 took effect. This is set out in more detail on pages 11-12 (See NEC1).

(iv) The impact of the company's operations on the community and the environment

We take our community responsibilities seriously and work closely with key stakeholders, government agencies and local authorities on a wide range of projects and initiatives including Master Plan, High Speed Two programme (HS2) and broader related infrastructure matters. We also take our environmental responsibilities very seriously across all areas such as carbon reduction, water and waste. Managing waste is a key priority and we have implemented an on-site recycling centre that reduces the level and cost of waste going to landfill sites.

We are striving continually to become much more carbon efficient and we continue to invest in our infrastructure and systems to drive down our carbon footprint.

(v) The desirability of the company maintaining a reputation for high standards of business conduct

The company is a key contributor of economic generation in the West Midlands Region and has a high profile and generates significant public interest. This makes it particularly important that the standards of business conduct are maintained at a high standard. This is achieved through a suite of company policies which are regularly reviewed.

(vi) The need to act fairly between members of the Group.

The relationship between the company and its members is primarily guided by a Shareholder Agreement.

LHTCA Midco Limited s.172 Statement 2020

Statement by the Directors on performance of their statutory duties in accordance with s172(1) Companies Act 2006

The Board of Directors of LHTCA Midco Limited have acted in a way that they consider to be most likely to promote the success of the Group for the benefit of its members as a whole in the decisions taken during the period ended 31 March 2020. A summary is set out as follows:

(i) The likely consequences of any decision in the long term

The NEC Master Plan sets out our strategy for the NEC campus over the next 15 years. This important strategic document guides our internal decision-making and how we work with our many partners and stakeholders to balance sometimes competing priorities and find mutually acceptable ways forward.

(ii) The interests of the Group's employees

Our employees are fundamental to the delivery of our day-to-day operations and the delivery of our Master Plan. The health and safety of our employees is our number one priority, supported by both our dedicated Health and Safety team and a series of regular health & safety meetings covering all areas of the Group’s operations. Both the Board and the Group’s senior management receive regular reporting on health & safety matters. Employee development is also a key factor and we have launched a number of additional training and management development initiatives to support our employees through their development.

(iii) The need to foster the Group's business relationships with suppliers, customers and others

We know that a great customer experience is not only about our facilities but also how our staff and the staff of our partners operate every day to consistently deliver a great service. During the period, we have continued to invest in our people through customer focused training and reward and recognition for great customer service through our Stars program.

A primary focus continues to be the visitors’ experience. To this end we have continued to invest in our facilities, including external facelift, catering offers and wayfinding and digital signage. We work closely with our business partners across the region, including Resorts World, Birmingham Airport, Birmingham International Railway Station, major corporates, the Chambers of Commerce, government agencies and Solihull and Birmingham local authorities to understand their plans and make sure that both visitor demand and visitor experiences can be managed for the mutual benefit of all.

We provide a diverse and balanced choice of facilities and services across our venues with something for all customer groups.

Our procurement strategy seeks to segment our supply chain by criticality and level of expenditure so that procurement activities can be focused on delivering best practice supply chain solutions which represent value for money, are innovative and have an emphasis on sustainability and health and safety and deliver outcomes which meet our requirements. Through the delivery of effective procurement, there is also a commitment to creating partnerships with our suppliers.

We maintain strong relationships with our debt providers which involves the provision of regular business updates. These strong relationships have resulted in our debt providers being in a position to provide us with additional financing when the impact of COVID-19 took effect. This is set out in more detail on page 14 (See LM1).

(iv) The impact of the Group's operations on the community and the environment

We take our community responsibilities seriously and work closely with key stakeholders, government agencies and local authorities on a wide range of projects and initiatives including Master Plan, High Speed Two programme (HS2) and broader related infrastructure related matters. We also take our environmental responsibilities very seriously across all areas such as carbon reduction, water and waste. Managing waste is a key priority and we have implemented an on-site recycling centre that reduces the level and cost of waste going to landfill sites.

We are striving continually to become much more carbon efficient and continue to invest in our infrastructure and systems to drive down our carbon footprint.

(v) The desirability of the Group maintaining a reputation for high standards of business conduct

The Group is a key contributor of economic generation in the West Midlands Region and has a high profile and generates significant public interest. This makes it particularly important that the standards of business conduct are maintained at a high standard. This is achieved through a suite of Group policies which are regularly reviewed.

(vi) The need to act fairly between members of the Group

The relationship between the Group and its members is primarily guided by a Shareholder Agreement and the limited number of members also enables each group to be represented on the Board of Directors.

Additional Reference Information

NEC1 – Pages 11-12 of The National Exhibition Centre Ltd Financial Statements – Directors’ Report

Going concern

The company is the core trading entity within the Group headed by LHTCA Midco Limited (“the Group”). The funding for the company and Group is managed centrally and the directors believe that it is therefore appropriate to review the prospects for the company based upon the financial position of the Group as a whole.

The Group has been significantly impacted by COVID-19 and its various trading sites have been closed for business since March 2020 and they remain closed at the date of these Financial Statements. As a direct result of COVID-19, the Group have placed greater focus than usual on its cash position. During this period, the Group has significantly reduced its levels of both operating and capital expenditure, which has resulted in a significant reduction in the Group’s level of cash utilisation. A contributing factor to the achieved reduction in operating expenditure, has been the support provided by both the Government’s Coronavirus Job Retention Scheme and the sector specific assistance provided by way of the Business Rates Relief Scheme.

At the Statement of Financial Position date of 31 March 2020, the Group had a cash balance of £56.1m. Since the Statement of Financial Position date, the Group has received an injection of an additional £50.0m of equity and has also drawn down a further £30.0m from its revolving credit facility, the details of which are set out in note 33 of the LHTCA Midco Limited Financial Statements (See LM2). As a result of this additional liquidity, the Group’s cash balance at 31 August 2020 had increased to £121.7m.

The directors have reviewed the prospects for the Group to 31 December 2021, this being a period of more than 12 months from the date that these Financial Statements were signed. This review has been undertaken bearing in mind the impact that COVID-19 is having on both the economy generally and on the industry sector in which the Group operates. The Government has recently removed the Group’s industry sector “Restart” date, which was previously announced as being 1 October 2020. A revised “Restart” date has not yet been announced. As such, the Group has assessed its going concern position utilising a modelling assumption, which the directors believe to be a severe, but plausible downside case scenario, this being that the Group does not hold any live events or make any ticket sales in respect of future events, for the 12-month period to 31 December 2021. In addition, it has also been assumed that following the recently announced extension to the termination of the Government’s Coronavirus Job Retention Scheme on 31 March 2021 and the expiry of the Business Rates Relief Scheme in April 2021, no further support schemes have been included within the Group’s modelling.

Applying these assumptions, together with a number of other assumptions in respect of both the Group’s current and future rates of both operating and capital expenditure, it has been determined that the Group has sufficient cash to continue to operate over the period from the date of signing these Financial Statements to 31 December 2021.

Given the nature of the above assumption of minimal turnover for the next 12 months, there is limited downside risk to this modelling assumption. The principal risk to the above assumptions would be the Group’s failure to deliver on the assumption of the proposed reduction in its workforce. The Group is currently in a consultation process with its employees in respect of this proposed workforce reduction. If the Group failed to deliver on the proposed workforce reduction, this would reduce the Group’s cash position at 31 December 2021 by between £5m and £10m.

Having assessed the financial position of the company and considered the wider Group using the evidence available to them, the directors have a reasonable expectation that the company has adequate resources to continue to operate over the 12-month period from the date these Financial Statements were signed. They have therefore concluded that it is appropriate to prepare these Financial Statements on a going concern basis.

LM1 – Page 14 of the LHTCA Midco Ltd Financial Statements – Directors’ Report

Going Concern

The company is the ultimate UK Group holding company for the Group, that owns the market-leading live events business, the NEC Group, that trades through the National Exhibition Centre Limited. The funding for the Group is managed centrally and the directors believe that it is therefore appropriate to review the prospects for the company based upon the financial position of the Group as a whole.

The Group has been significantly impacted by COVID-19 and its various trading sites have been closed for business since March 2020 and they remain closed at the date of these financial statements. As a direct result of COVID-19, the Group have placed greater focus than usual on its cash position. During this period, the Group has significantly reduced its levels of both operating and capital expenditure, which has resulted in a significant reduction in the Group’s level of cash utilisation. A contributing factor to the achieved reduction in operating expenditure, has been the support provided by both the Government’s Coronavirus Job Retention Scheme and the sector specific assistance provided by way of the Business Rates Relief Scheme.

At the balance sheet date of 31 March 2020, the Group had a cash balance of £56.1m. Since the balance sheet date, the Group has received an injection of an additional £50.0m of equity and has also drawn down a further £30.0m from its revolving credit facility, the details of which are set out in note 33 (See LM2). As a result of this additional liquidity, the Group’s cash balance at 31 August 2020 had increased to £121.7m.

The directors have reviewed the prospects for the Group to 31 October 2021, this being a period of more than 12 months from the date that these financial statements were signed. This review has been undertaken bearing in mind the impact that COVID-19 is having on both the economy generally and on the industry sector in which the Group operates. The Government has recently removed the Group’s industry sector “Restart” date, which was previously announced as being 1 October 2020. A revised “Restart” date has not yet been announced. As such, the Group has assessed its going concern position utilising a modelling assumption, which the directors believe to be a severe, but plausible downside case scenario, this being that the Group does not hold any live events or make any ticket sales in respect of future events, for the 12-month period to 31 October 2021. In addition, it has also been assumed that following the termination of the Government’s Coronavirus Job Retention Scheme on 31 October 2020 and the expiry of the Business Rates Relief Scheme in April 2021, no further support schemes have been included within the Group’s modelling.

Applying these assumptions, together with a number of other assumptions in respect of both the Group’s current and future rates of both operating and capital expenditure, it has been determined that the Group has sufficient cash to continue to operate over the period from the date of signing these accounts to 31 October 2021.

Given the nature of the above assumption of minimal revenue for the next 12 months, there is limited downside risk to this modelling assumption. The principal risk to the above assumptions would be the Group’s failure to deliver on the assumption of a reduction in its workforce following the termination of the Government’s Coronavirus Job Retention Scheme. If the Group failed to deliver this workforce reduction, this would reduce the Group’s cash position at 31 October 2021 by between £5m and £10m. The Group has recently commenced this workforce reduction programme and as such it believes that the risk to the non-delivery of this assumption is minimal.

Having assessed the financial position of the company and considered the wider Group using the evidence available to them, the directors have a reasonable expectation that the company has adequate resources to continue to operate over the 12-month period from the date these financial statements were signed. They have therefore concluded that it is appropriate to prepare these financial statements on a going concern basis.

LM2 – Note 33 of the LHTCA Midco Ltd Financial Statements

33. Post balance sheet events

Subsequent to the balance sheet date, as explained in the going concern disclosure note 1.3 (See LM3), several measures have been taken to support the Group and company through the adverse impact of COVID-19 including:

• Agreeing and then drawing a further £30.0m revolving credit facility on 10 July 2020 via the Government’s Coronavirus Large Business Interruption Loan Scheme;
• Agreeing a 12 month payment holiday on 50% of the senior loan facility interest, thereby deferring a coupon of c.£13m;
• Securing a £50.0m equity injection from the ultimate parent company LHTCA Topco Limited on 26 June 2020. These funds were passed on to LHTCA Bidco Limited as an equity investment; and
• The Group has announced a restructuring exercise which will involve a consultation process with employees. This is likely to result in a number of job losses.

LM3 – Notes to the LHTCA Midco Ltd Financial Statements – Going Concern Disclosure Note 1.3

1.3 Going concern

The company is the ultimate UK Group holding company for the Group, that owns the market-leading live events business, the NEC Group, that trades through the National Exhibition Centre Limited. The funding for the Group is managed centrally and the directors believe that it is therefore appropriate to review the prospects for the company based upon the financial position of the Group as a whole.

The Group has been significantly impacted by COVID-19 and its various trading sites have been closed for business since March 2020 and they remain closed at the date of these financial statements. As a direct result of COVID-19, the Group have placed greater focus than usual on its cash position. During this period, the Group has significantly reduced its levels of both operating and capital expenditure, which has resulted in a significant reduction in the Group’s level of cash utilisation. A contributing factor to the achieved reduction in operating expenditure, has been the support provided by both the Government’s Coronavirus Job Retention Scheme and the sector specific assistance provided by way of the Business Rates Relief Scheme.

At the balance sheet date of 31 March 2020, the Group had a cash balance of £56.1m. Since the balance sheet date, the Group has received an injection of an additional £50.0m of equity and has also drawn down a further £30.0m from its revolving credit facility, the details of which are set out in note 33 (See LM2). As a result of this additional liquidity, the Group’s cash balance at 31 August 2020 had increased to £121.7m.

The directors have reviewed the prospects for the Group to 31 October 2021, this being a period of more than 12 months from the date that these financial statements were signed. This review has been undertaken bearing in mind the impact that COVID-19 is having on both the economy generally and on the industry sector in which the Group operates. The Government has recently removed the Group’s industry sector “Restart” date, which was previously announced as being 1 October 2020. A revised “Restart” date has not yet been announced. As such, the Group has assessed its going concern position utilising a modelling assumption, which the directors believe to be a severe, but plausible downside case scenario, this being that the Group does not hold any live events or make any ticket sales in respect of future events, for the 12-month period to 31 October 2021. In addition, it has also been assumed that following the termination of the Government’s Coronavirus Job Retention Scheme on 31 October 2020 and the expiry of the Business Rates Relief Scheme in April 2021, no further support schemes have been included within the Group’s modelling.

Applying these assumptions, together with a number of other assumptions in respect of both the Group’s current and future rates of both operating and capital expenditure, it has been determined that the Group has sufficient cash to continue to operate over the period from the date of signing these accounts to 31 October 2021.

Given the nature of the above assumption of minimal revenue for the next 12 months, there is limited downside risk to this modelling assumption. The principal risk to the above assumptions would be the Group’s failure to deliver on the assumption of a reduction in its workforce following the termination of the Government’s Coronavirus Job Retention Scheme. If the Group failed to deliver this workforce reduction, this would reduce the Group’s cash position at 31 October 2021 by between £5m and £10m. The Group has recently commenced this workforce reduction programme and as such it believes that the risk to the non-delivery of this assumption is minimal.

Having assessed the financial position of the company and considered the wider Group using the evidence available to them, the directors have a reasonable expectation that the company has adequate resources to continue to operate over the 12-month period from the date these financial statements were signed. They have therefore concluded that it is appropriate to prepare these financial statements on a going concern basis.