|
MSP Capital Ltd
Registered number: 01543169
Annual Report
For the year ended 31 December 2021
|
|
MSP CAPITAL LTD
COMPANY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chartered Accountants & Statutory Auditor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSP CAPITAL LTD
CONTENTS
|
|
|
|
|
|
|
|
|
Independent Auditor's Report
|
|
Consolidated Statement of Comprehensive Income
|
|
Consolidated Statement of Financial Position
|
|
Company Statement of Financial Position
|
|
Consolidated Statement of Changes in Equity
|
|
Company Statement of Changes in Equity
|
|
Notes to the Financial Statements
|
|
|
|
MSP CAPITAL LTD
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
Principal activity
MSP Capital Limited’s principal activity is the provision of specialist finance to property owners in England and Wales.
All finances provided are secured via legal charges and the maximum tenure of any loan agreement is 36 months. The loan finance is generally used to fund acquisitions of investment properties and residential developments. The borrower profile is typically a medium sized but experienced developer.
MSP Capital’s strategic objective is to be well known and respected in the marketplace among current and future clients, competitors, lenders, and employees. MSP aims to empower people to build property, offering its borrowers a wealth of experience from over 40 years of lending.
The Group has plans to increase the number of personnel it employs in order to underpin its growth plan. During the year, the average number of employees increased from 19 to 26.
In addition to its growth objectives, MSP are aiming to become carbon neutral in 2022 and will be engaging with specialists to assess its carbon emissions as a business. After quantifying its carbon footprint, MSP will identify emissions reduction opportunities and seek to neutralise remaining emissions through a variety of initiatives.
During the period under review, the Group acquired another subsidiary, MSP Capital Four Limited, increasing the number of companies in the Group to a total of 7. The acquisition was driven by the desire to increase the available funding for development products, as well to bolster the Group’s capital structure.
In the six months following the acquisition of MSP Capital Four, its loan book grew to £31m demonstrating the strong market appetite for MSPs development product offering. At Group level, the total loan book grew by over £84m (41%) from £207m to £291m.
Despite the COVID-19 pandemic introducing market uncertainty in 2021, activity levels recovered rapidly with the average house price in the UK increasing by 11% in the year, partly aided by the stamp duty holiday. Additionally, the dual impact of COVID-19 and Brexit related supply chain issues meant that supply of housing was constrained which also contributed to price rises.
The United Kingdom has well documented shortage of affordable homes and MSP will continue to service property investors who provide homes within this sector. As such, MSP’s growth forecasts are in line with this general theme.
The Directors are satisfied with the performance of the Group during the year. Further information on the primary KPIs of the business is provided below.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group are liquidity risk, credit risk, interest rate risk, compliance and regulatory risk and operational risk.
The Group uses various financial instruments, loans, cash and a variety of items such as trade creditors that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations. The main risks arising from the Group's financial instruments are liquidity risk, credit risk and interest rate risk.
- 1 -
|
|
MSP CAPITAL LTD
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The Directors review and agree policies for managing each of these risks and they are summarised below:
Liquidity risk
Liquidity risk arises when the Group is potentially unable to meet its contracted obligations and this risk is mitigated by daily internal controls to monitor the Group's treasury function. All long-term commitments are matched with similar long-term funding lines.
Credit risk
The primary risk within the Group is the potential financial loss arising from borrowers not repaying their loans within agreed contracted terms or the net realisations from the security underpinning a loan being insufficient to recover the full loan. The Group mitigates this risk by regularly reviewing the underwriting policy in the context of current market conditions and the risk appetite of the board. In addition, internal covenants relating to concentration risk, geographic location and project type are monitored frequently.
Interest rate risk
MSP Capital provides finance at a fixed interest rate whilst funding lines are negotiated at lower, variable rates. The Directors regularly review interest rate risk and ensure adequate measures are in place to manage this risk. These measures include ensuring that the average borrower loan term is approximately 17 months and thus any exposure, if any, will be limited.
Compliance and reputational risk
During the year the Group appointed a Head of Financial Crime Compliance and has taken multiple steps to further safeguard the group from compliance risks. These steps included enhancing the existing 'Know Your Client' procedures and undertaking a thematic review of current internal controls.
The Group takes independent advice on the regulatory framework and the Directors are satisfied that none of the business activities fall into regulated areas. Nevertheless, the Directors are cognisant of the broader sector in which the business operates and manage the business accordingly.
Operational risk
The Group is impacted by general business in the wider economy. MSP Capital Group works solely in the United Kingdom and all security is based in the United Kingdom; therefore, the Group is primarily affected by domestic business and economic conditions.
The Group has a thorough risk management process along with a strong performance record through market corrections historically. Management undertake sensitivity analysis on shocks in the market and how they could impact the Group.
The Directors consider the business has a robust business model of pricing loans in the event of a downturn, by using risk managed loan-to-value ratios against robust security.
- 2 -
|
|
MSP CAPITAL LTD
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
COVID-19
Whilst the global pandemic continues, the UK Government has now publicised its ‘Living with Covid’ strategy with the remaining domestic legal restrictions lifted in early 2022.
In line with this a comprehensive action plan remains in place enabling the Group to respond to any possible business interruptions, as and when they arise.
The firm’s operational response to the pandemic has been highly successful. IT infrastructure and security continued to be upgraded, enabling the team to work remotely where necessary.
Several risk assessments have also been undertaken to enable a safe return to the office with Covid-secure measures in place, tailored to meet the evolving Government guidance.
The many adaptations to the overall ecosystem of MSP operations represent a gain in resilience and contingency capabilities enabling the business to deal with a range of possible scenarios.
The ongoing impact of the pandemic or other global events on the UK property market and wider economy cannot be reliably estimated due to its unprecedented nature. Management continues to be keenly aware of upcoming changes, and the Group is poised to react to these as appropriate.
Financial key performance indicators
The KPIs are an important indicator to monitor the performance of the business. The Directors’ Report and monitor KPIs on a monthly basis. Whilst management continue to track a range of financial and non-financial measures, it is these KPIs that the business uses to gauge progress.
These KPIs illustrate that revenue and profitability are directly related to the loan book, which fluctuates over time. The below KPIs are a comparison of the year to 31 December 2021 with the year to 31 December 2020.
The gross loan book grew by 41% (6% in the year to December 2020). In the prior year, originations were paused for three months whilst repayments continued curbing book growth.
Revenue for the 12 months was £37.47m (compared to £28.78m in the year to December 2020). Profit before tax was £16.6m (compared to £11.7m for the year to December 2020).
This report was approved by the board and signed on its behalf.
- 3 -
|
|
MSP CAPITAL LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2021.
Directors' responsibilities statement
|
The Directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation, amounted to £13,455,777 (2020: profit of £9,629,134).
The Directors do not recommend the payment of a dividend (2020: £nil).
The Directors who served during the year and to the date of this report were:
The Group will continue to provide the finance and manage its continued growth by investing in all stakeholders. The Group's growth is only restricted by its existing capital structure and key potential developments for the forthcoming year is to continue to explore additional funding lines to complement the current capital structure.
- 4 -
|
|
MSP CAPITAL LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
Matters covered in the Group Strategic Report
|
The mandatory disclosures in relation to the financial instrument risks of the Group are considered by the directors to be of strategic importance. These have therefore been included in the Strategic Report.
Disclosure of information to auditor
|
Each of the persons who are Directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the Directors are aware, there is no relevant audit information of which the Company and the Group's auditor is unaware, and
∙the Directors have taken all the steps that ought to have been taken as a Director in order to be aware of any relevant audit information and to establish that the Company and the Group's auditor is aware of that information.
Post balance sheet events
|
There have been no significant events affecting the Group since the year end.
The auditor, Mazars LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
- 5 -
|
|
MSP CAPITAL LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MSP CAPITAL LTD
Opinion
We have audited the financial statements of MSP Capital Ltd (the ‘Company’) and its subsidiaries ('the Group') for the year ended 31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statement of Financial Positions, the Consolidated and Company Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
∙give a true and fair view of the state of the Group's and Company’s affairs as at 31 December 2021 and of the Group's profit for the year then ended;
∙have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
- 6 -
|
|
MSP CAPITAL LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MSP CAPITAL LTD
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
∙the 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.
- 7 -
|
|
MSP CAPITAL LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MSP CAPITAL LTD
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities Statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors intend either to liquidate the Group or Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Based on our understanding of the Group and Company and their industry, we considered that non-compliance with the following laws and regulations might have a material effect on the financial statements: FCA regulation, employment regulation, health and safety regulation, anti-money laundering regulation, non-compliance with implementation of government support schemes relating to COVID-19.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:
∙Inquiring of management and, where appropriate, those charged with governance, as to whether the Group and Company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations;
∙Inspecting correspondence, if any, with relevant licensing or regulatory authorities;
∙Communicating identified laws and regulations to the engagement team and remaining alert to any indications of non-compliance throughout our audit; and
∙Considering the risk of acts by the Group and Company which were contrary to applicable laws and regulations, including fraud.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as tax legislation, pension legislation and the Companies Act 2006.
- 8 -
|
|
MSP CAPITAL LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MSP CAPITAL LTD
In addition, we evaluated the directors’ and management’s incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to revenue recognition (which we pinpointed to the cut-off and completeness assertion), and significant one-off or unusual transactions.
Our audit procedures in relation to fraud included but were not limited to:
∙Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
∙Gaining an understanding of the internal controls established to mitigate risks related to fraud;
∙Discussing amongst the engagement team the risks of fraud; and
∙Addressing the risks of fraud through management override of controls by performing journal entry testing.
There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of the audit report
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.
Stephen Mills (Senior statutory auditor)
for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
5th Floor, Merck House
Seldown Lane
Poole
Dorset
BH15 1TW
5 May 2022
- 9 -
|
|
MSP CAPITAL LTD
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest receivable and similar income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial year
|
|
|
|
The Consolidated Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.
|
There was no other comprehensive income for the year ended 31 December 2021 (2020: £nil).
|
The notes on pages 17 to 37 form part of these financial statements.
|
- 10 -
|
|
MSP CAPITAL LTD
REGISTERED NUMBER: 01543169
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debtors: amounts falling due after more than one year
|
|
|
|
|
|
Debtors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
Creditors: amounts falling due after more than one year
|
|
|
|
|
|
Provisions for liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 11 -
|
|
MSP CAPITAL LTD
REGISTERED NUMBER: 01543169
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital redemption reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 17 to 37 form part of these financial statements.
- 12 -
|
|
MSP CAPITAL LTD
REGISTERED NUMBER: 01543169
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debtors: amounts falling due after more than one year
|
|
|
|
|
|
Debtors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due after more than one year
|
|
|
|
|
|
Provisions for liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 13 -
|
|
MSP CAPITAL LTD
REGISTERED NUMBER: 01543169
COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital redemption reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The profit after tax of the Company for the year was £4,183,619 (2020: £1,525,548).
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 17 to 37 form part of these financial statements.
- 14 -
|
|
MSP CAPITAL LTD
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
Capital redemption reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 17 to 37 form part of these financial statements.
|
- 15 -
|
|
MSP CAPITAL LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
Capital redemption reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 17 to 37 form part of these financial statements.
|
- 16 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
MSP Capital Ltd (01543169) is a private company limited by shares incorporated in England and Wales. The address of its registered office is Strata House, 12-14 Castle Street, Poole, England, BH15 1BQ.
The Group's principal activity is the granting of credit.
2.Accounting policies
|
|
|
Basis of preparation of financial statements
|
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 3).
The financial statements have been prepared in Pound Sterling as this is the currency of the primary economic environment in which the Group operates and is rounded to the nearest pound.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The following principal accounting policies have been applied:
|
|
|
Financial reporting standard 102 - reduced disclosure exemptions
|
The Company has taken advantage of the following disclosure exemption in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows.
This information is included in the consolidated financial statements of MSP Capital Holdings Limited as at 31 December 2020 and these financial statements may be obtained from Strata House, 12-14 Castle Street, Poole, United Kingdom, BH15 1BQ.
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained.
- 17 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
The Directors have made an assessment in preparing the financial statements as to whether the Company and Group is a going concern. After reviewing the Company and Group's forecasts and projections, the directors have a reasonable expectation that the Company has adequate resources to continue in operation existence for the foreseeable future. The Company therefore adopts the going concern basis in preparing its financial statements.
Interest income is recognised in the Statement of Comprehensive Income for all interest-bearing financial instruments, using the effective interest method, except for those classified at fair value through profit or loss. The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocating the interest income over the expected life of the financial instrument. The effective interest rate is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.
The effective interest rate is calculated on initial recognition of the financial asset or liability by estimating the future cash flows after considering all the contractual terms of the instrument but not future credit losses. The calculation includes all amounts expected to be paid or received by the Company including expected early redemption fees and related penalties and premiums and discounts that are an integral part of the overall return. Direct incremental transaction costs related to the acquisition, issue or disposal of a financial instrument are also taken into account in the calculation. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
In accordance with section 11 of FRS102, loans issued which are receivable within one year are accounted for on a straight line basis.
Arrangement fees are recognised in full at the commencement of the loan, in line with the costs associated with the initial loan setup.
Fees and commissions which are not an integral part of the effective interest rate are generally recognised when the service has been provided.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
The costs of borrowing are spread over the life of the related facility.
- 18 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
The Group adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the Group. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.
The estimated useful lives range as follows:
|
|
|
|
|
|
|
Straight line over the life of the lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Consolidated Statement of Comprehensive Income.
|
|
|
Operating leases: the Group as lessee
|
Rentals paid under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term.
Investments in subsidiaries are measured at cost less accumulated impairment.
- 19 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
|
|
|
Cash and cash equivalents
|
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
- 20 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
The Group only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Consolidated Statement of Comprehensive Income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Group would receive for the asset if it were to be sold at the reporting date.
Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
- 21 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Defined contribution pension plan
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the Group in independently administered funds.
Bank interest receivable is recognised in the Consolidated Statement of Comprehensive Income using the effective interest method.
|
|
|
Current and deferred taxation
|
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company and the Group operate and generate income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the reporting date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits;
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
∙Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the Group can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
- 22 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
Judgements in applying accounting policies and key sources of estimation uncertainty
|
The Group’s significant accounting policies are stated in note 2. Not all of these significant policies require the management to make difficult, subjective or complex judgements or estimates. The following is intended to provide an understanding of the policies the management considers critical because of their complexity, judgement and estimation involved in their application and their impact on these financial statements.
Judgements and estimates are reviewed on an ongoing basis and actual results may differ from these estimates. The areas involving a higher degree of judgements or complexity or areas where assumptions and estimates are significant to the financial statements are as follows:
3.1 Critical judgements in applying the Group’s accounting policies
The Directors do not consider there to be any critical judgements in applying the Group's accounting policies.
3.2 Key sources of estimation uncertainty
i) Provision for doubtful debts: All loans issued are based on recent independent valuations which are then assessed and reviewed by an experienced in-house chartered surveyor. When underwriting a loan, the directors stay within the Group Loan to Value parameters to manage the risk of the loan. The Directors form an assessment for the provision of doubtful debts taking into account this security over the loans.
ii) Exit fee recognition: Exit fees are accrued evenly over the life of the loan, up to the loan expiry date. Long loans have variable exit fee rates depending upon the future date of repayment. Based upon historical data, MSP considers the rate applicable at the loan expiry date the most appropriate rate to use.
|
|
|
|
|
An analysis of turnover by class of business is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All turnover arose within the United Kingdom.
|
- 23 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
|
The operating profit is stated after charging:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of tangible assets
|
|
|
|
|
Provision for reversal of interest and fees
|
|
|
|
|
Defined contribution pension cost
|
|
|
|
|
Other operating lease rentals
|
|
|
|
|
Fees payable to the Group's auditor for the audit of the Group's annual financial statements
|
|
|
|
|
The fee above relates to the Group audit as a whole and is borne by MSP Capital Ltd.
The non-audit service fees are disclosed in the financial statements for the largest group for which consolidated financial statements are drawn up, MSP Capital Holdings Limited.
|
|
|
|
|
|
Staff costs, including Directors' remuneration, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of defined contribution scheme
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average monthly number of employees, including the Directors, during the year was as follows:
|
- 24 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
The highest paid Director received remuneration of £434,700 (2020: £413,472).
|
|
|
The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to £nil (2020: £nil).
The Key Management Personnel are considered to be limited to the Directors of the Company.
|
|
|
|
|
|
|
|
Current tax on profits for the year
|
|
|
|
|
Adjustments in respect of prior periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of timing differences
|
|
|
|
|
Adjustments in respect of prior periods
|
|
|
|
|
Effect of tax rate change on opening balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation on profit on ordinary activities
|
|
|
- 25 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
9.Taxation (continued)
|
|
Factors affecting tax charge for the year
|
|
|
The tax assessed for the year is higher than (2020: lower than) the standard rate of corporation tax in the UK of19% (2020: 19%). The differences are explained below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before tax
|
|
|
|
|
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2020: 19%)
|
|
|
|
|
|
|
|
|
|
Expenses not deductible for tax purposes
|
|
|
|
|
Capital allowances for year in excess of depreciation
|
|
|
|
|
Adjustments to tax charge in respect of prior periods
|
|
|
|
|
Adjustments to tax charge in respect of prior periods - deferred tax
|
|
|
|
|
Remeasurement of deferred tax for changes in tax rates
|
|
|
|
|
Group relief surrendered/(claimed)
|
|
|
|
|
Total tax charge for the year
|
|
|
|
|
Factors that may affect future tax charges
|
The UK Government announced in the 2021 budget that from 1 April 2023, the rate of corporation tax in the United Kingdom will increase from 19% to 25%. Companies with profits of £50,000 or less will continue to be taxed at 19%, which is a new small profits rate. Where taxable profits are between £50,000 and £250,000, the higher 25% rate will apply but with a marginal relief applying as profits increase.
- 26 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 27 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 28 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
Investments in subsidiary companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following were subsidiary undertakings of the Company:
|
|
|
|
|
|
|
|
|
|
|
Strata House, 12-14 Castle Street, Poole
|
|
|
|
|
|
|
Strata House, 12-14 Castle Street, Poole
|
|
|
|
|
|
MSP Capital Three Limited
|
Strata House, 12-14 Castle Street, Poole
|
|
|
|
|
|
|
Strata House, 12-14 Castle Street, Poole
|
|
|
|
|
|
During the year MSP Capital Four Limited was acquired as subsidiary with a net book value of £1.
|
- 29 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
Due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by group undertakings
|
|
|
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade debtors are stated after a provision for impairment against unpaid interest and fees of £1,434,657 (2020: £2,174,712).
Amounts owed by subsidiaries are unsecured, payable on demand and interest is charged at market rate.
Amounts owed by parent entities are unsecured, payable on demand and interest free.
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 30 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
Creditors: Amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other taxation and social security
|
|
|
|
|
|
|
Accruals and deferred income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: Amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts falling due 1-2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts falling due 2-5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The other loans are secured by way of fixed and floating charges which are secured over the property that the MSP Capital Ltd Group have received as security in relation to loans made to their customers.
|
- 31 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
Financial assets measured at fair value through profit or loss
|
|
|
|
|
|
|
Financial assets that are debt instruments measured at amortised cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortised cost
|
|
|
|
|
|
|
Financial assets measured at fair value through profit and loss comprises cash and cash equivalents.
Financial assets measured at amortised cost comprise trade and other debtors.
Financial liabilities measured at amortised cost comprise other creditors, bank and other loans and accruals and deferred income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged to profit or loss
|
|
|
|
|
- 32 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
19.Deferred taxation (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged to profit or loss
|
|
|
|
|
|
|
The deferred taxation balance is made up as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term timing differences
|
|
|
|
|
|
|
|
Allotted, called up and fully paid
|
|
|
|
|
|
|
|
|
|
|
|
185 (2020: 185) Ordinary shares of £1.00 each
|
|
|
|
|
The Company has one class of ordinary shares; each share carries one voting right per share but no right to fixed income.
|
Share premium account
Includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.
Capital redemption reserve
Capital redemption reserve was created on purchase of own shares by the Company.
Profit and loss account
Includes all current and prior period retained profits and losses, less dividends paid.
- 33 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Statement of Comprehensive Income has been restated for the reclassification of loan facility fees from administrative expenses to cost of sales.
The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £26,979 (2020: £21,931). There were no contributions outstanding to the fund at the reporting date.
|
|
Commitments under operating leases
|
|
|
At 31 December 2021 the Group and the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included within the commitments above are leases for vehicles in the name of MSP Capital Ltd, totalling £25,101 (2020: £31,117). These costs are recharged to the employees who use the vehicles. Therefore the net impact within the Consolidated Statement of Comprehensive Income in relation to these commitments is £nil.
|
- 34 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
Related party transactions
|
|
|
The Group owes the following amounts to related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arpac Trading Ltd (D Capra)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mildren Holdings Ltd (D Capra, M Higgins and P Miracca)
|
|
|
|
|
|
|
Still Waters Capital Ltd (M Higgins)
|
|
|
|
|
|
|
Blue Flag Developments Ltd (P Miracca)
|
|
|
|
|
|
|
Larchcroft Investments Ltd (P Miracca)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharepoole Ltd (D Capra, M Higgins and P Miracca)
|
|
|
|
|
|
|
Southern Property Development Limited (D Capra, M Higgins and P Miracca)
|
|
|
|
|
|
|
The following amounts are owed to the Group from related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above individuals and entities are deemed related due to being owners of the Group, Directors of the Group, or being entities over which those Directors have significant influence.
The Group has taken advantage of the exemption under FRS 102 Section 33 from disclosing transactions with members of the group.
|
|
|
Post balance sheet events
|
There have been no significant events affecting the Group since the year end.
- 35 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Company is a wholly owned subsidiary of MSP Capital Finance Limited. The largest group of undertakings for which consolidated accounts are drawn up is headed by MSP Capital Holdings Limited, a company registered in the United Kingdom with a registered office address of Strata House, 12-14 Castle Street, Poole, England, BH15 1BQ. The financial statements of this company are available from the Registrar, Companies House. MSP Capital Ltd is the smallest group of companies for which consolidated accounts are drawn up.
The ultimate controlling party is considered to be Mr. John Van Deventer.
|
|
Risk management and monitoring
|
Risk is inherent in all aspects of the Group’s business and effective risk management is a core objective for the Group.
The principal financial risks that the Group manages are listed below and explained further in the following sections:
∙Credit risk
∙Market risk – interest rate
∙Liquidity risk
Credit risk
This is the risk that counterparties will be unable or unwilling to meet their obligations to the Group as they fall due and the credit risk of lending is a factor of two components:
i) The probability of default by the customer on contractual obligations
ii) The exposure at default by the customer on contractual obligations
The Board seeks to mitigate credit risk by:
∙Focusing on market segments where it has specific expertise;
∙Limiting the absolute size of exposures, and their loan to value percentage;
∙Maintaining detailed lending policies;
∙Thorough rigorous underwriting process;
∙Actively monitoring the performance, collections and recoveries of loans.
Maximum credit risk exposure at 31 December 2021 is £379,381,614 (2020: £263,092,487) which includes future capital commitments of £89,400,283 (2020: £57,837,874).
Loans are regularly reviewed to determine if a provision is necessary. A provision against unpaid interest and fees of £1,434,657 (2020: £2,174,712) is included within trade debtors. Due to the weighted average loan to values being 63% (2020: 61%) a further provision is not required. The Company deems its security coverage to be adequate and therefore the credit quality of loans is considered good.
- 36 -
|
|
MSP CAPITAL LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
Risk management and monitoring (continued)
|
Interest rate risk
Those Group companies which are impacted by LIBOR have fully transitioned to SONIA prior to the year end.
Interest rate risk arises from the relationship between interest rate changes due to a spike in SONIA and the timing of repricing new loan at revised interest rates.
Management monitor interest rate risks monthly by performing a sensitivity analysis on changes in SONIA. The potential impact of a rise or fall in market interest rates by 1% should have a +/- impact of £1,915,169 (2020: £767,000) for the results for the period.
Included within creditors are other loans totalling £250,627,287 (2020: £176,356,970) which are interest bearing at various market rates of interest.
Liquidity Risk
Liquidity risk represents the risk of being unable to pay contracted commitments as they fall due, arising from the mismatch in cash flows generated from current and expected assets. The Group’s policy is to maintain a liquidity buffer in case of a stress event, as well as maintaining sufficient liquidity resources to meet current and future commitments.
- 37 -
|
