Attached files

file filename
8-K - 8-K - Acadia Healthcare Company, Inc.d106450d8k.htm
EX-23.1 - EX-23.1 - Acadia Healthcare Company, Inc.d106450dex231.htm
EX-99.2 - EX-99.2 - Acadia Healthcare Company, Inc.d106450dex992.htm
EX-99.1 - EX-99.1 - Acadia Healthcare Company, Inc.d106450dex991.htm

Exhibit 99.3

PRIORY GROUP NO. 1 Limited

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

For the nine months ended 30 September 2015


Priory Group No. 1 Limited

Table of contents

 

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

     2   

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME (UNAUDITED)

     3   

CONSOLIDATED BALANCE SHEET (UNAUDITED)

     4   

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

     5   

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

     6   

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UNAUDITED)

     7   

 

1


Priory Group No. 1 Limited

Consolidated income statement (unaudited)

For the nine months 30 September 2015

 

£’000

   Note    9 months
ended 30

September
2015
    9 months
ended 30
September
2014
 

Revenue

   3      424,530        385,325   

Operating costs (including exceptional items of £6.2m (2014: £1.6m)

        (377,267     (330,766
     

 

 

   

 

 

 

Operating profit

   3      47,263        54,559   

Finance costs

        (60,970     (71,346

Finance income

        168        196   
     

 

 

   

 

 

 

Loss before tax

        (13,539     (16,591

Tax

   5      194        14,344   
     

 

 

   

 

 

 

Loss for the period

        (13,345     (2,247
     

 

 

   

 

 

 

 

2


Priory Group No. 1 Limited

Consolidated statement of total comprehensive income (unaudited)

For the nine months 30 September 2015

 

£’000

   9 months
ended 30

September
2015
    9 months
ended 30
September
2014
 

Loss for the financial year

     (13,345     (2,247

Other comprehensive income

     —          —     
  

 

 

   

 

 

 

Total comprehensive income for the year attributable to owners

     (13,345     (2,247
  

 

 

   

 

 

 

 

3


Priory Group No. 1 Limited

Consolidated balance sheet (unaudited)

As at 30 September 2015

 

£’000

   Note    As at 30
September

2015
    As at 30
September
2014
    As at 31
December
2014
 

Non-current assets

         

Intangible assets

   6      218,276        210,813        215,452   

Property, plant and equipment

   7      1,090,643        1,079,238        1,088,360   
     

 

 

   

 

 

   

 

 

 
        1,308,919        1,290,051        1,303,812   

Current assets

         

Inventories

        64        50        49   

Trade and other receivables

        43,099        32,310        38,005   

Cash

        16,282        42,960        22,644   
     

 

 

   

 

 

   

 

 

 
        59,445        75,320        60,698   

Assets held for resale

   8      10,524        229,245        10,808   
     

 

 

   

 

 

   

 

 

 
        69,969        304,565        71,506   
     

 

 

   

 

 

   

 

 

 

Total assets

        1,378,888        1,594,616        1,375,318   
     

 

 

   

 

 

   

 

 

 

Current liabilities

         

Trade and other payables

        (74,455     (75,225     (83,927

Borrowings

   9      (7,323     (9,100     (17,886

Provisions for liabilities and charges

        (4,296     (4,122     (4,760
     

 

 

   

 

 

   

 

 

 
        (86,074     (88,447     (106,573

Net current (liabilities)/assets

        (16,105     216,118        (35,067

Non-current liabilities

         

Borrowings

   9      (900,675     (1,086,123     (865,563

Deferred tax

   5      (147,590     (153,914     (147,108

Provisions for liabilities and charges

        (23,805     (21,429     (21,986
     

 

 

   

 

 

   

 

 

 
        (1,072,070     (1,261,466     (1,034,657
     

 

 

   

 

 

   

 

 

 

Net assets

        220,744        244,703        234,088   
     

 

 

   

 

 

   

 

 

 

Equity attributable to the owners of the parent

         

Share capital

        261,186        261,184        261,185   

Share premium account

        11,437        11,437        11,437   

Accumulated losses

        (51,879     (27,918     (38,534
     

 

 

   

 

 

   

 

 

 

Total equity

        220,744        244,703        234,088   
     

 

 

   

 

 

   

 

 

 

 

4


Priory Group No. 1 Limited

Consolidated cash flow statement (unaudited)

For the nine months ended 30 September 2015

 

£’000

   9 months
ended 30

September
2015
    9 months
ended 30
September
2014
 

Operating activities

    

Operating profit

     47,263        54,559   

Profit on disposal of property, plant and equipment

     1,625        (6,849

Depreciation of property, plant and equipment

     33,380        33,329   

Amortisation of intangible assets

     4,507        4,653   

Decrease in inventories

     —          2   

Increase in trade and other receivables

     (5,176     (1,802

Decrease in trade and other payables

     (10,056     (6,971

(Decrease)/increase in provisions

     (637     3,253   

Charge for future minimum rent increases

     1,924        2,138   
  

 

 

   

 

 

 
     72,830        82,312   

Taxation

     (167     (364
  

 

 

   

 

 

 

Net cash inflow from operating activities

     72,663        81,948   

Investing activities

    

Interest received

     168        196   

Purchase of subsidiary undertakings, net of cash acquired

     (7,861     (6,161

Purchases of property, plant and equipment

     (34,216     (33,995

Proceeds from sale of property, plant and equipment

     1,079        19,484   
  

 

 

   

 

 

 

Net cash used in investing activities

     (40,830     (20,476

Financing activities

    

Proceeds from borrowings

     19,000        6,250   

Repayment of borrowings

     (11,054     (5,500

Repayment of obligations under finance leases

     (1,284     (1,617

Interest paid and associated fees

     (44,857     (62,059
  

 

 

   

 

 

 

Net cash used in financing activities

     (38,195     (62,926

Net decrease in cash

     (6,362     (1,454

Cash at the beginning of the period

     22,644        44,414   
  

 

 

   

 

 

 

Cash at the end of the period

     16,282        42,960   
  

 

 

   

 

 

 

 

5


Priory Group No. 1 Limited

Consolidated statement of changes in equity (unaudited)

For the nine months ended 30 September 2015

Nine months ended 30 September 2015

 

£’000

   Share capital      Share premium
account
     Accumulated
losses
    Total equity  

At 1 January 2015

     261,185         11,437         (38,534     234,088   

Loss for the period

     —           —           (13,345     (13,345

Transactions with owners:

          

Issue of share capital

     1         —           —          1   
  

 

 

    

 

 

    

 

 

   

 

 

 

At 30 September 2015

     261,186         11,437         (51,879     220,744   
  

 

 

    

 

 

    

 

 

   

 

 

 

Nine months ended 30 September 2014

 

£’000

   Share capital      Share premium
account
     Accumulated
losses
    Total equity  

At 1 January 2014

     261,184         11,437         (25,671     246,950   

Loss for the period

     —           —           (2,247     (2,247
  

 

 

    

 

 

    

 

 

   

 

 

 

At 30 September 2014

     261,184         11,437         (27,918     244,703   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

6


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information

(unaudited)

 

1. Basis of preparation and accounting policies

This consolidated interim financial information presents the financial records for the nine month period ended 30 September 2015 of Priory Group No 1 Limited (“the Company”) and its subsidiaries (together “the Group”).

The condensed consolidated interim financial information for the nine month period ended 30 September 2015 has been prepared in accordance with IAS 34, ‘Interim financial reporting’, and should be read in conjunction with the annual financial statements for the years ended 31 December 2014 and 31 December 2013 which have been prepared in accordance with IFRSs as issued by the IASB.

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with IFRSs have been condensed or omitted.

In the opinion of management, the condensed consolidated interim financial information contains all adjustments that are necessary to state fairly the Company’s financial position as at 30 September 2015, and comprehensive income/(loss) and cash flows for the nine months ended 30 September 2014 and 30 September 2015.

This interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The annual report and financial statements of Priory Group No. 1 Limited for the year ended 31 December 2014 were approved by the board on 30 March 2015. The financial statements contained an unqualified audit report and did not include an emphasis of matter paragraph or any statement under 498 of the Companies Act 2006.

This consolidated interim financial information was approved for issue on 4 January 2016.

Except as described below, the accounting policies adopted in this interim financial information are consistent with those adopted in the 2014 financial statements of Priory Group No. 1 Limited. The accounting policies are detailed in the 2014 financial statements of Priory Group No. 1 Limited.

The following standards and revisions to existing standards have been published and are mandatory for periods beginning on or after 1 January 2015:

 

    

Effective for periods

commencing on or after

Annual improvements 2011-13

   1 July 2014

Amendment to IAS 19 (revised 2011): ‘Employee benefits’ regarding defined benefit plans

   1 July 2014

Amendment to IFRS 11: ‘Joint arrangements’ on acquisition of an interest in a joint operation

   1 January 2016

Amendment to IAS 16: ‘Property plant and equipment and IAS 38: ‘Intangible assets’ on depreciation and amortisation

   1 January 2016

Amendment to IAS 16: ‘Property plant and equipment’ and IAS 41: ‘Agriculture’ regarding bearer plants

   1 January 2016

IFRS 14: ‘Regulatory deferral accounts’

   1 January 2016

Amendments to IAS 27: ‘Separate financial statements’ on the equity method

   1 January 2016

Amendments to IFRS 10: ‘Consolidated financial statements’ and IAS 28: ‘Investments in associates and joint ventures’

   1 January 2016

Annual improvements 2014

   1 January 2016

IFRS 15: ‘Revenue from contracts with customers’

   1 January 2017

IFRS 9: ‘Financial instruments’

   1 January 2018

Amendments to IFRS 9: ‘Financial instruments’ regarding general hedge accounting

   1 January 2018

The above standards, amendments and interpretations have not impacted on the results or net assets of the Group.

The preparation of interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2014.

The Group’s activities expose it to a variety of financial risks: market risk (including price risk), credit risk and liquidity risk. This condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements; it should be read in conjunction with the Group’s annual financial statements as at 31 December 2014. There have been no material changes in risk management practices since the year end.

 

2. Non-GAAP measures

The Group assesses its operational performance using a number of financial measures, some of which are “non-GAAP measures” as they are not measures recognised in accordance with IFRS. These measures include Earnings before Interest, Tax, Depreciation, Amortisation, Rent and exceptional items (“Adjusted EBITDAR”); Earnings before Interest, Tax, Depreciation, Amortisation, future minimum rental increases and exceptional items (“Adjusted EBITDA before future minimum rental increases”); and Earnings before Interest, Tax, Depreciation, Amortisation and exceptional items (“Adjusted EBITDA”).

Management believe presenting the Group’s results in this way provides users of the financial statements with additional useful information on the underlying performance of the business, and is consistent with how business performance is monitored internally.

 

7


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information (unaudited)

 

3. Segmental information

The Group is organised into the following operating segments:

 

  The Healthcare segment focuses on the treatment of patients with a variety of psychiatric conditions which are treated in both open and secure environments. This segment also provides neuro-rehabilitation services.

 

  The Education and Children’s Services segment provides day and residential schooling, care and assessment for children with emotional and behavioural difficulties or autistic spectrum disorders.

 

  The Older People Services segment provides long term, short term and respite nursing care for older people who are physically frail or suffering with dementia related disorders.

 

  The Adult Care segment focuses on the care of service users with a variety of learning difficulties, mental health illnesses and adult autistic spectrum disorders. This segment includes care homes and supported living environments.

The Group also has a central office, which carries out administrative and management activities. All of the Group’s revenue arises in the United Kingdom (UK). There are no sales between segments and all revenue arises from external customers.

Segment revenues and results

This note includes segmental performance for the nine month period ended 30 September 2015. The accounting policies of the reportable segments are the same as the Priory Group’s accounting policies. The measure of segment profit is adjusted earnings before interest, tax, depreciation, amortisation, rent and exceptional items (Adjusted EBITDAR). Adjusted EBITDAR is reported to the Group’s Chief Operating decision maker for the purposes of resource allocation and assessment of segment performance.

Central costs include the Group’s centralised functions such as finance and accounting centres, IT, sales and marketing, human resources, payroll and other costs not directly related to the hospitals, schools and homes included in the reportable segments.

The following is an analysis of the Group’s revenue and results by reportable segment:

Nine months ended 30 September 2015

 

£’000

   Healthcare     Education     Older
People
Services
    Adult Care     Central     Total  

Revenue

     200,922        81,829        56,763        85,016        —          424,530   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAR

     61,166        21,974        11,117        27,046        (8,426     112,877   

Rental amounts currently payable

     (9,976     (3,003     (5,891     (755     —          (19,625
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA before future minimum rental increases

     51,190        18,971        5,226        26,291        (8,426     93,252   

Future minimum rental increases

               (1,924
            

 

 

 

Adjusted EBITDA

               91,328   

Depreciation

               (33,380

Amortisation

               (4,507

Exceptional items

               (6,177
            

 

 

 

Operating profit

               47,264   
            

 

 

 

Nine months ended 30 September 2014

 

£’000

   Healthcare     Education     Older
People
Services
    Adult Care     Central     Total  

Revenue

     192,295        65,883        52,251        74,896        —          385,325   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAR

     60,776        19,389        9,033        24,248        (8,194     105,252   

Rental amounts currently payable

     (153     (2,508     (5,747     (561     —          (8,969
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA before future minimum rental increases

     60,623        16,881        3,286        23,687        (8,194     96,283   

Future minimum rental increases

               (2,138
            

 

 

 

Adjusted EBITDA

               94,145   

Depreciation

               (33,329

Amortisation

               (4,653

Exceptional items

               (1,604
            

 

 

 

Operating profit

               54,559   
            

 

 

 

The directors consider that there have been no material changes in segment assets and liabilities from amounts previously disclosed in the annual financial statements.

 

8


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information (unaudited)

 

4. Exceptional items

Items that are both material and non-recurring and whose significance is sufficient to warrant separate disclosure and identification within the consolidated financial information are referred to as exceptional items. Items that may give rise to classification as exceptional include, but are not limited to, significant and material restructuring and reorganisation programmes, re-financing and acquisition costs, asset impairments and profits or losses on the disposal of assets.

 

£’000

   9 months
ended 30

September
2015
     9 months
ended 30
September
2014
 

Transaction related costs

     1,504         2,795   

Reorganisation and rationalisation costs

     2,248         4,756   

Legal and professional costs

     800         902   

Loss/(profit) on disposal of fixed assets

     1,625         (6,849
  

 

 

    

 

 

 
     6,177         1,604   
  

 

 

    

 

 

 

Transaction related costs include expenses arising from the strategic review of the Older People Services division in 2015, and costs in respect of an aborted acquisition in 2014.

 

5. Tax

Income tax credit is recognised based on management’s estimate of the weighted average annual income tax rate expected for the full financial year.

The following are the major deferred tax liabilities/(assets) recognised by the Group and movements thereon during the periods presented:

 

£’000

   Accelerated
tax
depreciation
    Short term
timing
differences
    Intangible
assets
    Property,
plant and
equipment
    Total  

At 1 January 2015

     (6,964     (18,303     6,970        165,405        147,108   

Charge/(credit) to income statement

     398        3,556        (795     (3,353     (194

Arising on business combinations

     —          (117     253        540        676   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At 30 September 2015

     (6,566     (14,864     6,428        162,592        147,590   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

£’000

   Accelerated
tax
depreciation
    Short term
timing
differences
    Intangible
assets
    Property,
plant and
equipment
    Total  

At 1 January 2014

     (9,382     (27,004     7,765        195,658        167,037   

(Credit)/charge to income statement

     (3,644     5,826        (1,064     (15,462     (14,344

Arising on business combinations

     —          —          422        799        1,221   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At 30 September 2014

     (13,026     (21,178     7,123        180,995        153,914   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information (unaudited)

 

6. Intangible assets

 

£’000

   Goodwill      Brand      Customer
contracts
     Total  

Cost

           

At 1 January 2015

     180,606         22,220         38,177         241,003   

Arising on business combinations

     6,065         1,266         —           7,331   
  

 

 

    

 

 

    

 

 

    

 

 

 

At 30 September 2015

     186,671         23,486         38,177         248,334   
  

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortisation

           

At 1 January 2015

     —           2,824         22,727         25,551   

Amortisation charge

     —           559         3,948         4,507   
  

 

 

    

 

 

    

 

 

    

 

 

 

At 30 September 2015

     —           3,383         26,675         30,058   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net book value

           

At 30 September 2015

     186,671         20,103         11,502         218,276   
  

 

 

    

 

 

    

 

 

    

 

 

 

At 31 December 2014

     180,606         19,396         15,450         215,452   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7. Property, plant and equipment

 

£’000

   Land and
buildings
    Assets in the
course of
construction
    Fixtures and
fittings
    Motor
vehicles
    Total  

Cost

          

At 1 January 2015

     1,013,535        5,937        155,444        5,894        1,180,810   

Arising on business combinations

     2,800        —          65        —          2,865   

Additions

     1,351        7,086        25,925        1,065        35,427   

Disposals

     (3,210     (13     (234     (952     (4,409

Transfers between classifications

     1,250        (4,675     3,425        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At 30 September 2015

     1,015,726        8,335        184,625        6,007        1,214,693   

Accumulated depreciation

          

At 1 January 2015

     40,316        —          50,083        2,051        92,450   

Charge for the year

     14,728        —          17,144        1,508        33,380   

Disposals

     (712     —          (140     (928     (1,780
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At 30 September 2015

     54,332        —          67,087        2,631        124,050   

Net book value

          

At 30 September 2015

     961,394        8,335        117,538        3,376        1,090,643   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At 31 December 2014

     973,219        5,937        105,361        3,843        1,088,360   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

8. Assets held for sale

Assets held for resale of £10.5m comprises £9.5m relating to a portfolio of supported living properties. A further £1.0m relates to two properties that have been closed, are being actively marketed, and are expected to be disposed of within twelve months of the balance sheet date.

 

10


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information (unaudited)

 

9. Borrowings

 

£’000

   As at
30 September
2015
     As at 30
September
2014
     As at
31 December
2014
 

Borrowings due less than one year

        

Finance lease liabilities

     1,529         1,609         1,585   

Accrued interest – Bank loans

     479         49         255   

Accrued interest – Senior secured notes

     3,382         5,507         10,196   

Accrued interest – Senior unsecured notes

     1,933         1,935         5,850   
  

 

 

    

 

 

    

 

 

 

Total borrowings due less than one year

     7,323         9,100         17,886   

Unsecured borrowings due greater than one year

        

Senior unsecured notes

     175,000         175,000         175,000   

Unamortised issue costs

     (2,788      (3,477      (3,315

Loan notes (including accrued interest)

     304,251         271,653         279,295   
  

 

 

    

 

 

    

 

 

 
     476,463         443,176         450,980   

Secured borrowings due greater than one year

        

Bank loans

     40,250         18,250         31,250   

Senior secured notes

     386,300         631,000         386,300   

Unamortised issue costs

     (3,740      (8,375      (4,808

Finance lease liabilities

     1,402         2,072         1,841   
  

 

 

    

 

 

    

 

 

 
     424,212         642,947         414,583   

Total borrowings due greater than one year

     900,675         1,086,123         865,563   
  

 

 

    

 

 

    

 

 

 

Total borrowings

     907,998         1,095,223         883,449   
  

 

 

    

 

 

    

 

 

 

All of the Group’s borrowings are denominated in Sterling.

Senior secured notes and senior unsecured notes

The Group issued £600.0m of high yield bonds on 3 February 2011, comprising £425.0m senior secured notes with a fixed rate of 7.0% and £175.0m senior unsecured notes with a fixed rate of 8.875%, with maturity dates of 15 February 2018 and 15 February 2019 respectively. The senior secured notes are secured by fixed and floating charges over substantially all of the Group’s property and assets.

The Group issued additional senior secured notes on 14 April 2011 of £206.0m with a fixed rate of 7.0% due 15 February 2018. A premium on issue of £2.0m was received which is included within unamortised issue costs and will be amortised to the income statement over the term of the notes. The high yield bonds are listed on the Luxembourg stock exchange.

On 17 November 2014 the Group redeemed £244.7m of its 7% senior secured notes due 2018. In accordance with the terms of the notes, the redemption price was 105.25% of the principal amount of the notes. Including accrued interest of £4.4m, the total amount paid to redeem the notes was £261.9m.

Loan notes

The Group issued unsecured loan notes on 4 March 2011 of £130.0m with a fixed rate of 12% and a maturity date of 4 March 2060. Additional loan notes were issued on 14 April 2011 of £51.5m with a fixed rate of 12% and a maturity date of 18 July 2057.

Accrued interest of £8.4m in relation to the £51.5m loan notes was capitalised on 31 December 2014 by the issue of PIK notes on the same terms as the original loan notes.

Accrued interest of £21.9m and £19.6m in relation to the £130.0m loan notes was capitalised on 3 March 2015 and 3 March 2014, respectively, by the issue of PIK notes on the same terms as the original loan notes.

Bank loans

The £40.3m drawn down on the RCF is secured with an interest rate of libor plus 4% and is due for repayment February 2017. The security ranks above the senior secured loan notes and consists of fixed and floating charges over substantially all of the Group’s property and assets.

 

11


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information (unaudited)

 

10. Business combinations

On 17 September 2015 the Group acquired a 100% interest in Life Works Community Limited for total cash consideration of £7.8m. The company operates a 22 bed facility in South East England which specialized in providing inpatient therapy for individuals with drug, alcohol and other addictions, eating disorders and depression.

 

£’000

      

Cash consideration

     7,803   

Fair value of net assets acquired

     (1,960
  

 

 

 

Goodwill

     5,843   
  

 

 

 

The fair values of the net assets acquired are as follows:

 

£’000

   Fair value  

Intangible assets

     1,265   

Property, plant and equipment

     2,865   

Inventories

     15   

Trade and other receivables

     71   

Cash

     163   

Deferred tax

     (793

Bank loan

     (1,054

Trade and other payables

     (572
  

 

 

 

Net assets

     (1,960
  

 

 

 

The Group settled the outstanding bank loan in full immediately upon acquisition.

The deferred tax liability arises chiefly on the difference between the fair value of the intangible assets and properties acquired and the tax base of these assets.

Intangible assets recognised relate to the Life Works brand and are subsequently amortised on a straight line basis over 20 years. Goodwill recognised on acquisition is attributable to the synergies expected to be achieved through integration of the business with the rest of the Group, together with the skills and talent of the assembled workforce. None of the goodwill is expected to be deductible for corporation tax purposes.

From the date of acquisition to 30 September 2015, the contribution of the business to the Group results was as follows:

 

£’000

      

Revenue

     145   

Adjusted EBITDA before future minimum rental increases

     62   
  

 

 

 

If acquired on 1 January 2015, the business would have contributed approximately £2.1m revenue and £0.7m Adjusted EBITDA before future minimum rental increases to the Group results for the nine months ended 30 September 2015.

Acquisition costs (primarily legal and professional fees) of £0.1m were incurred in connection with the Life Works Community business combination, and were charged to the income statement in the nine months ended 30 September 2015.

 

11. Fair values

The fair value of the Group’s high yield bonds can be observed directly from market prices as the bonds are listed on the Luxembourg Stock Exchange. As at 30 September 2015, the high yield bonds (including accrued interest), had a fair value of £586,295,000 compared with a book value of £566,615,000 (31 December 2014: fair value of £601,156,000 compared with book value of £577,346,000).

In the opinion of the directors, the fair value of the Group’s fixed rate loan notes are not considered to be significantly different to the book value, therefore book value is considered to be a reasonable proxy.

In respect of all financial instruments other than high yield bonds and fixed rate loan notes, fair value is considered to be consistent with book value.

The Group has no financial instruments that are measured at fair value.

 

12


Priory Group No. 1 Limited

Notes to the condensed consolidated interim financial information (unaudited)

 

12. Related party transactions

Priory Group No. 1 Limited is the largest and smallest group undertaking to consolidate these financial statements. Priory Group No. 1 Limited is beneficially owned by funds managed by Advent International Corporation which is considered by the directors to be the ultimate controlling party of the Company.

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

13. Post balance sheet events

On 22 December 2015 the Group acquired a 100% interest in the share capital of Progress Care (Holdings) Limited group (“Progress Care”) for total cash consideration of £10.8m, funded by way of existing cash reserves. The Progress Care group operates ten facilities for children and adults with specialist care requirements in the North West of England through two wholly owned trading subsidiaries, Progress Care and Education Limited and Progress Adult Services Limited. The directors are currently assessing the fair values of the assets and liabilities acquired in the Progress Care business combination.

 

13