|
Registered number: 09425230
WEST ONE SECURED LOANS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
WEST ONE SECURED LOANS LIMITED
COMPANY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PricewaterhouseCoopers LLP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEST ONE SECURED LOANS LIMITED
CONTENTS
|
|
|
|
|
|
|
|
|
Independent auditors' report
|
|
Statement of comprehensive income
|
|
Statement of financial position
|
|
Statement of changes in equity
|
|
Notes to the financial statements
|
|
|
|
WEST ONE SECURED LOANS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their Strategic Report on the company for the year ended 31 December 2022.
Business review and future developments
|
The Company operates in the specialist term mortgage sector providing buy-to-let and second charge mortgages. The Company experienced growth in both its buy-to-let and second charge loan books and in December 2022 the Company also launched a new Residential product.
The majority of loans originated by the Company were sold during the reporting period to special purpose funding vehicles: WOSL SPV 1 Limited and WOSL SPV IV Limited. This sits alongside a public securitisation, Elstree Funding No.1 PLC and in January 2022 the Company completed its second public securitisation, Elstree Funding No.2 PLC. Although, the loans are beneficially owned by the special purpose funding vehicle, the Company retains both legal title and administers the loans. The Company also remains exposed to the risk and rewards of the underlying mortgage assets. Consequently, these mortgage assets are recognised in the Company’s Statement of Financial Position.
The company's strategy is to be a leading lender in long term specialist mortgages.
The strategy is delivered by:
∙service expertise with a focus on meeting customer requirements;
∙building strong relationships with both existing and new introducers;
∙providing good value products in segments that offer a sustainable risk-reward return;
∙designing products to provide solution to professional property investors and developers across the property development lifecycle;
∙using insight afforded by its existing distribution to develop innovative solutions to new segments;
∙stringent focus on credit risk, both through careful underwriting of individual cases and the use of portfolio and individual product risk limits;
∙investment in infrastructure to achieve a scalable and compliant operating platform; and
∙recruitment, development and retention of high-quality staff.
Financial key performance indicators
|
The Company made profit totalling £6,151,978 during the year ended 31 December 2022 (2021: £3,266,354) as turnover increased significantly from £28,002,499 in 2021 to £43,702,793 in the current year.
Lending origination also increased significantly totalling £349m for the year (2021: £295m).
Total Shareholders' funds were £35,066,633 at 31 December 2022 (2021: £28,914,655).
The Company and Eclipse Topco Limited Group (“Enra”) continues to evolve its governance and committee structures to support the business through its continued growth in order to ensure that principal risks are appropriately over seen. Management committees are not formal sub-committees of the Enra Board, although reports on their activities are given to the Board by Executive Directors.
Board committees include a Remuneration & Appointment Committee and an Audit & Risk Committee:
|
|
WEST ONE SECURED LOANS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
Remuneration & Appointment Committee
|
The Remuneration & Appointment Committee is Chaired by the Chairman of the Enra Group. Its members are directors of the ultimate parent company, Mr R Monahan, Mr A Sharma, Mr P Prebensen, in addition to Mr D Waters as a director of the Company. It considers on behalf of the Board, Executive Director and Senior Executive remuneration, including the design of performance related remuneration. No person is present when his or her remuneration is being discussed.
The Committee also oversees the process for appointments to the Board and ensures that plans are in place for orderly succession to both the Board and Senior Management positions. The Committee meets at least annually and more frequently if required.
The Audit and Risk Committee is responsible for discharging governance responsibilities in respect of audit, risk and internal control.
The Committee is chaired by a Non-executive director of Enra. Its members during the year until 2 September 2022 were Mr A Clegg, Mr T Lightowler, Mr D Stewart, Mr M Taylor, Ms E Gestetner and Mr D Waters. Following the acquisition by Elliott in September, Mr A Clegg, Mr T Lightowler, Mr D Stewart, Mr M Taylor stepped down and were replaced by Mr A Sharma, Mr R Monahan and Mr M Preston. After the year end Mr M Preston was appointed as Chairman of the Committee. The principle roles and responsibilities of the Committee include:
∙monitoring the integrity of Enra’s financial statements and providing advice on whether the Annual Report, taken as a whole, is fair, balanced and understandable.
∙reviewing Enra’s internal financial controls and risk management systems.
∙monitoring the effectiveness of second line assurance procedures, as undertaken by relevant subsidiary boards.
∙reviewing and monitoring the External Auditor’s independence and objectivity, assessing the effectiveness of the external audit and approving the appointment of the Auditors.
The management committees in operation through the year included:
Asset & Liability Committee (ALCO)
Product Governance Committees
Credit Committee
Servicing Committee
The Asset & Liability Committee is tasked with managing the Enra Group's liquidity risk, interest rate risk and product pricing, paying close regard to the quality and quantity of our funding options, compliance with funding covenants, and stress- testing the balance sheet across a variety of credit risk and market risk scenarios.
Product Governance Committees are responsible for the governance of product design within the lending subsidiaries, taking account of target market, distribution strategy, pricing (subject to ALCO’s approval) and treating customers fairly. Each product has a separate committee to ensure that Enra remains focuses on the individual product design in order to meet our objective of maintaining first class service to our intermediaries and customers and providing products that meet our customers’ requirements.
The Credit Committee oversees the firm’s appetite for credit risk, and the controls over that risk. In particular, the Credit Committee is concerned with setting the lending policies for each product, overseeing the devolution of credit mandates to underwriting personnel, reviewing the credit performance of the existing portfolio, and, where mandates require, taking credit decisions on individual cases.
|
|
WEST ONE SECURED LOANS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
The purpose of the Servicing Committee is to oversee the customer servicing, loan management, collection and recoveries processes on the firm’s outstanding loan balances to ensure that all servicing activities are conducted with the necessary skill, care, and attention to deliver good customer outcomes and to manage the risks and commercial requirements of the business.
Principal risks and uncertainties
|
As a provider of financial services, Enra actively manages risk as a core part of its day-to-day activities. The Directors have put in place procedures to document the Board’s risk appetite and to monitor and manage each of these risks in line with this appetite. The firm has implemented a standardized risk management framework overseen by the Board, focusing on the headline risks broken down into more detailed sub-risks, and associated controls. The firm’s headline risks are:
∙Credit risk
∙Liquidity & interest rate
∙Operational risk (including information security, cybercrime and business continuity risk)
∙Compliance risk (including regulatory, conduct, financial crime and data protection risk)
Credit risk continues to be a core part of Board oversight. Enra has maintained a conservative risk profile through 2022.
On a day-to-day basis, credit risk is overseen by the Enra Head of Credit Risk. The Head of Credit Risk is responsible for reviewing and recommending the Responsible Lending suite of documents across the different lending divisions, including the Responsible Lending Policy (including lending criteria) to the board. Given the volatility in the UK economy, particular consideration has been given the changing credit risk to new loans.
As a precautionary measure, reduced maximum loan-to-value ratios have been recommended to the board to safeguard against a possible softening of the housing market. Responsibility for reviewing and updating West One’s Affordability Model also sits with the Head of Credit Risk with recommendations made to the board at least annually along with the review. Given the rising inflationary environment, an appropriate increase was applied to the existing Affordability Model. Similarly, a regular and ongoing review of West One’s stress testing policy has seen several increases recommended to the board for approval and implementation.
The Head of Credit Risk is also responsible for reviewing concentration limits, including group exposure limits to individuals across all product lines. Mandate approval limits are set and deployed (following board approval) with all individual mandate holders being subject to a quarterly sample audit to ensure loans are approved in adherence to lending policy. The Head of Credit Risk is also a member of the Servicing Committee and in addition to carrying out investigative reviews of accounts in arrears, any findings are considered for future iterations of the lending criteria.
Liquidity and interest rate risk is managed on a day-to-day basis by the Director of Funding Solutions - an experienced treasury professional reporting to the Chief Financial Officer. Funding and liquidity risk forms part of Board discussions and is overseen by the Asset & Liability Committee. The Asset & Liability Committee also has responsibility for managing Enra Groups interest rate risk. Interest rate risk arises on fixed rate lending where the financing is variable rate and the Asset & Liability Committee seek to eliminate the impact of interest rate volatility through a hedging strategy.
The majority of Enra’s funding is subject to conditions controlling the type and quality of lending undertaken, including loan to value ratios and credit metrics, and procedures are in place to monitor compliance with these requirements.
Operational risk is relevant to all aspects of Enra’s business. Losses arising from fraud, unauthorised activities, error, omission, inefficiency, system failure or from external events fall within the definition of operational risk. Both information security risk and cyber security risk are also managed and controlled within the broad definition
|
|
WEST ONE SECURED LOANS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
of operational risk as part of Enra’s overall risk management framework. The framework seeks to manage and control operational risks in a cost- effective manner within the Board’s targeted risk appetite. The Chief Operating Officer has board level responsibility for managing operational risk.
The security of customer data and operational resilience remain areas of regulatory attention and public concern. Enra reviews regularly its controls framework to protect its own, and customers’, data. This includes staff training, controlled tests of existing perimeter security measures, physical security controls, and the ongoing maintenance of its technical infrastructure against these increasing risks. Enra has a resilient technical architecture which uses modern cloud-computing technologies and industry-best-practice approaches to data replication, synchronization and back-ups. Enra also maintains a detailed business continuity plan, including provisions for crisis management procedures in the event a business interruption event occurs. The business continuity plan is tested at least annually, with the 2022 test successfully passed with no ongoing risks noted.
The Board seeks to maintain a strong compliance culture and monitors the regulatory environment carefully to ensure that regulatory requirements are met in a timely and comprehensive manner.
During 2022 the Financial Conduct Authority continued its focus on culture and conduct matters, highlighting, amongst other things, the importance of diversity and inclusion and fair outcomes for vulnerable customers. Enra has considered its operations and put in place measures to safeguard against areas of possible conduct risk, including sales processes and incentives, product suitability, product governance and employee activities. More specifically, Enra updated its vulnerability policy, training modules and relevant systems and processes, thus providing staff with the expertise to take a proactive approach to identifying and supporting its vulnerable customers. Enra maintains a code of conduct applicable to all its firms, directors and employees, which requires them to conform to the applicable laws, rules and regulations that govern Enra. Enra imposes specific responsibilities on its leaders and managers to commit to maintain a strong culture of compliance for its staff and customers.
The Compliance function establishes, implements and maintains a risk-based Compliance Programme that is designed to ensure compliance with applicable laws, rules, regulations and company policies. The Compliance Programme seeks to mitigate the risk of regulatory censure, fines, financial loss or damage to the reputation of Enra arising from Enra or its directors and employees not adhering to applicable laws, rules and regulations, and internal policies. Amongst other areas, the Programme addresses financial crime, conduct and regulatory risk evaluation, management and oversight process.
The Programme aims to implement and maintain systems and processes that:
∙Know the laws, rules and regulations that the Company and its subsidiaries must adhere to in order to understand conduct and regulatory risks imposed on the Company
∙Prevent conduct, regulatory, financial crime and data protection risks from materialising
∙Detect conduct regulatory, financial crime and data protection risks that materialise at the earliest possible stage
∙Respond quickly and remediate materialised risks which have lead to issues or breaches
∙Assess the root causes of compliance issues and breaches to prevent their reoccurrence.
The compliance programme includes the following elements:
∙Rules mapping
∙Conduct and regulatory, financial crime and data protection risk assessments
∙Annual compliance plan
∙Compliance policies
∙Regulatory horizon scanning
∙Annual compliance training plan
∙Projects and Advisory function
∙Business support function
∙Issues and breaches framework
∙Compliance monitoring plan function
|
|
WEST ONE SECURED LOANS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
Enra has a Head of Compliance (HoC) to lead and manage its Compliance Programme, and to ensure resources are made available as necessary to carry out the Programme effectively. The HoC is responsible for the leadership, oversight and operation of the Compliance Programme and the Board is satisfied they have the knowledge, experience, independence, authority, time and resource to do so. All compliance staff shall have the knowledge and experience to carry out their role effectively and the ability and drive to keep abreast of regulatory changes. The HoC is also the Money Laundering Reporting Officer (MLRO), responsible for ensuring that, when appropriate, the information or other matters leading to knowledge or suspicion, or reasonable grounds for knowledge or suspicion of money laundering is properly disclosed to the relevant authority. The MLRO has the knowledge, experience, independence, authority, time and resource to carry out this role effectively.
All employees undergo regular training to ensure that they are able to identify and appropriately manage compliance and operational risks within the business.
The Board has taken steps to encourage employees to raise any concerns that they may have and maintains a whistleblowing policy where employees can escalate concerns to non-executive chair.
Market position and outlook
|
It is anticipated that the company’s growth will continue to accelerate as it expands its origination channels. The Board is committed to ensuring that the quality of the portfolio is maintained at all times with robust risk management and diversity in asset origination.
Growth in the business is supported by continuing investment in our people, systems and infrastructure.
The Directors have undertaken a Going Concern assessment, including a review of principal and emerging risks, including ongoing risks in relation to both Covid-19, the conflict in Eastern Europe, and potential economic consequences from a higher interest rates and inflation. The Directors are satisfied that the Company have adequate resources to continue to operate as a going concern for a period in excess of 12 months from the date of this report and have prepared the financial statements on that basis.
In assessing whether the Going Concern basis is appropriate, the Directors have considered the information contained in the financial statements, the latest business plan, profit forecasts and liquidity projections. These forecasts have been subject to sensitivity tests. The stress scenarios included severe but plausible downside scenarios to satisfy the Directors that there is no realistic scenario under which the business would be unable to meet its liabilities as they fall due over the coming year. The Company has maintained an active dialogue with its lenders who continue to be supportive.
This report was approved by the board and signed on its behalf.
|
|
WEST ONE SECURED LOANS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their report and the audited financial statements for the year ended 31 December 2022.
The principal activity of the Company is the provision of second charge, buy-to-let and residential mortgages to customers who are resident in the UK.
The company is a private company limited by shares and is incorporated and domiciled in England, UK. The address of its registered office is Third Floor, The Edward Hyde Building, 38 Clarendon Road, Watford, Hertfordshire, WD17 1JW.
The profit for the year, after taxation, amounted to £6,151,978 (2021: £3,266,354).
No dividends were paid during the year or the prior year.
The directors who served during the year were:
|
|
|
|
Mr D Stewart (resigned 2 September 2022)
|
|
|
Directors' responsibilities statement
|
The directors are responsible for preparing the Strategic report, the Directors' report and the audited financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare audited financial statements for each financial year. Under that law the directors have elected to prepare the audited financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the directors must not approve the audited financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these audited financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make judgments 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;
∙prepare the audited financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the audited financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
|
|
WEST ONE SECURED LOANS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
Matters covered in the Strategic report
|
The Board is responsible for identifying principal risks and for proposing suitable mitigating strategies. This has been addressed in the Strategic Report, along with a full review of the position and performance of the company for the year. The future development aspirations of the company have also been disclosed in the Strategic Report.
Disclosure of information to auditors
|
Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
∙the director has 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's auditors are aware of that information.
The independent auditors, PricewaterhouseCoopers 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.
|
|
WEST ONE SECURED LOANS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WEST ONE SECURED LOANS LIMITED
Report on the audit of the financial statements
Opinion
In our opinion, West One Secured Loans Limited's financial statements:
∙give a true and fair view of the state of the company’s affairs as at 31 December 2022 and of its profit for the year then ended;
∙have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: the statement of financial position as at 31 December 2022; the statement of comprehensive income and the statement of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Conclusions relating to going concern
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 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.
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.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
|
|
WEST ONE SECURED LOANS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WEST ONE SECURED LOANS LIMITED
In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. 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 based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' report for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors' report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they 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 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 either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ 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 auditors’ 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.
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. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to UK corporation tax and companies act reporting regulations, and we considered the extent to which non-compliance might have a material effect on the financial statements. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to inappropriate journal entries and management bias in accounting estimates.
|
|
WEST ONE SECURED LOANS LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WEST ONE SECURED LOANS LIMITED
Audit procedures performed by the engagement team included:
∙Discussions with management and directors, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;
∙Evaluation of management's controls designed to prevent and detect irregularities;
∙Challenging assumptions and judgments made by management in their significant accounting estimates, in particular in relation to provisions for doubtful debts;
∙Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and
∙Designing audit procedures to incorporate unpredictability around the nature, timing and extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
∙we have not obtained all the information and explanations we require for our audit; or
∙adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
∙certain disclosures of directors’ remuneration specified by law are not made; or
∙the financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Andrew Latham (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
Date: 25 April 2023
|
|
WEST ONE SECURED LOANS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional administrative expenses
|
|
|
|
|
|
|
|
|
Interest payable and similar expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial year
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
The notes on pages 14 to 24 form part of these financial statements.
|
All results derive from continuing operations.
|
|
|
WEST ONE SECURED LOANS LIMITED
REGISTERED NUMBER: 09425230
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders' funds
|
|
|
|
|
|
|
|
|
|
|
|
|
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 24 form part of these financial statements.
|
|
WEST ONE SECURED LOANS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income for the year
|
|
|
|
|
Profit for the financial year
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 14 to 24 form part of these financial statements.
|
|
|
|
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive expense for the year
|
|
|
|
|
Profit for the financial year
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 14 to 24 form part of these financial statements.
|
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1.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 101 'Reduced Disclosure Framework' and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 2).
The following principal accounting policies have been applied:
|
|
|
Financial Reporting Standard 101 - reduced disclosure exemptions
|
The Company has taken advantage of the following disclosure exemptions under FRS 101:
∙the requirements of paragraphs 45(b) and 46-52 of IFRS 2 Share-based payment
∙the requirements of IFRS 7 Financial Instruments: Disclosures
∙the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement
∙the requirements of the second sentence of paragraph 110 and paragraphs 113(a), 114, 115, 118, 119(a) to (c), 120 to 127 and 129 of IFRS 15 Revenue from Contracts with Customers
∙the requirements of paragraph 52, the second sentence of paragraph 89, and paragraphs 90, 91 and 93 of IFRS 16 Leases. The requirements of paragraph 58 of IFRS 16, provided that the disclosure of details in indebtedness relating to amounts payable after 5 years required by company law is presented separately for lease liabilities and other liabilities, and in total
∙the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of:
- paragraph 79(a)(iv) of IAS 1;
- paragraph 73(e) of IAS 16 Property, Plant and Equipment;
- paragraph 118(e) of IAS 38 Intangible Assets;
∙the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements
∙the requirements of IAS 7 Statement of Cash Flows
∙the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
∙the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures
∙the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
∙the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1.Accounting policies (continued)
|
|
|
Impact of new international reporting standards, amendments and interpretations
|
There are no amendments to accounting standards, or IFRIC interpretations that are effective for the year ended 31 December 2022 that have a material impact on the company’s financial statements.
Revenue consists of interest receivable, arrangement and associated fees and other income. Interest receivable is recognised over the expected life of the loan, in line with the effective interest rate. Arrangement fee and associated fee income is incorporated into the total value of the loan and recognised on the origination of the loan. Other income relates to early redemption charges which are received and recognised on the redemption of loans.
Cost of sales represents interest paid, and other expenses directly attributable to the placement of second mortgages. Where broker fees are collected on behalf of and paid on to brokers, these are treated as 'pass through' and netted off in the profit and loss. Expenses are recognised on the drawdown of the loans by the client and as such are generally matched to revenues. Where direct costs cannot be matched to revenues they are amortised over the estimated life of the loan. Interest payable on funding is recognised using the effective Interest rate method.
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.
All borrowing costs are recognised in the Statement of Comprehensive Income in the year in which they are incurred.
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1.Accounting policies (continued)
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 operates and generates 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; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
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.
Exceptional items are disclosed separately in the financial statements, where it is necessary to do so to provide further understanding of the financial performance of the Company. They are items that are material, either because of their size or their nature, or that are non-recurring, and are presented within the line items to which they best relate.
The company recognises financial instruments when it becomes a party to the contractual arrangements of the instrument. Financial instruments are de-recognised when they are discharged or when the contractual terms expire. The company’s accounting policies in respect of financial instruments transactions are explained below:
(i) Classification
The company classifies its financial assets in the following measurement categories:
∙those to be measured subsequently at fair value (through OCI), and
∙those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in OCI.
For investments in equity instruments that are not held for trading, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1.Accounting policies (continued)
|
|
|
Financial instruments (continued)
|
The company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Recognition and derecognition
Purchases and sales of financial assets are recognised on settlement-date, the date on which the company agrees to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
(iv) Impairment
The company assesses on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been an identifiable increase in credit risk.
The methodology involves a 3-step process regarding how we recognise expected credit losses. On the initiation of all loans the probability of a potential loss is assessed based on a risk score conducted on loan origination, where a high-risk score implies a higher probability of loss. This drives an element of provisioning at the inception of loans. Where credit risk is viewed as having increased significantly since initial recognition lifetime expected losses are recognised along with interest revenue calculated on the gross amount of the asset. Where there is objective evidence of impairment at the reporting date, impairment losses and interest revenue calculated on the impaired amount of the asset.
Debtors are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the time value of money is material, debtors are carried at amortised cost.
Gross loans and advances are recognised and carried at the lower of their original loan balance and recoverable amount.
Provisions are made in accordance with IFRS 9 guidelines. On origination the company assesses the required provision based on probabilities of a 12-month loss based using factors such as LTV & time loan has been in place. Loans are considered for Stage 2 impairment upon a demonstrable worsening of credit risk such as events of arrears. Loans are considered for Stage 3 impairment when they are more than 365 days in arrears/overdue or the company becomes aware of any specific event such that the expected loss merits consideration.
|
|
|
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.
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1.Accounting policies (continued)
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, unless the effect of discounting is considered to be immaterial.
|
|
|
Impairment of financial and non-financial assets
|
The company assesses at the end of each reporting period whether there is objective evidence that a financial or non-financial asset or group of assets is impaired. A financial or non-financial asset or a group of assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial or non-financial asset or group of assets that can be reliably estimated.
|
|
Judgments in applying accounting policies and key sources of estimation uncertainty
|
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are addressed below:
(a) Doubtful debt provisions - Provisions for doubtful debts are based on the directors’ prudent expectations of customers’ likelihood of default and the loss in the event the customer defaults. As explained in note 1.11 the provisions are calculated based upon a model that considers higher LTV loans as a greater risk mitigated by the length of time since origination as a reducing risk.
(b) Effective interest rates – In order to determine the EIR applicable to an asset, an estimate must be made of the expected life of the assets and hence the cash flows relating to them. The accuracy of the EIR would therefore be affected by any differences between actual borrower behaviour and that predicted.
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
An analysis of turnover by class of business is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest receivable on loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All turnover was generated from continuing operations arising within the United Kingdom and no revenue was derived from exchanges of goods, in the current and preceding year.
|
|
|
Exceptional administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate transactional fees
|
|
|
|
|
|
|
|
The operating profit is stated after charging:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inter-group overhead recharges
|
|
|
|
|
Defined contribution pension cost
|
|
|
|
|
|
|
|
|
|
Fees payable to the Company's auditors
|
|
|
|
|
Fees payable to the Company's auditor in respect of:
|
|
|
|
|
Audit-related assurance services
|
|
|
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second charge, buy-to-let and residential lending
|
|
|
|
|
|
|
|
There was no directors’ remuneration paid during the year or preceding year.
The directors were paid for their services on a group basis by an intermediary parent company Enra Specialist Finance Limited in the year and the preceding year.
|
|
|
Interest payable and similar expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loan interest payable
|
|
|
|
|
|
|
|
|
|
Current tax on profits for the year
|
|
|
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
10.Tax on profit (continued)
|
|
Factors affecting tax charge for the year
|
|
|
The tax assessed for the year is lower than (2021 -lower than) the standard rate of corporation tax in the UK of 19% (2021 -19%). The differences are explained below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax multiplied by standard rate of corporation tax in the UK of 19% (2021 -19%)
|
|
|
|
|
|
|
|
|
|
Expenses not deductible for tax purposes
|
|
|
|
|
|
|
|
|
|
Total tax charge for the year
|
|
|
|
|
Factors that may affect future tax charges
|
The UK corporation tax rate was 19% throughout the year.
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25%. This rate was substantively enacted on 24 May 2021 and the calculation of UK deferred tax balances reflect the new 25% tax rate where the balances are expected to unwind after 1 April 2023 and at 19% where the balance will unwind before 1 April 2023.
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
|
|
|
|
|
The provisions for bad debts were provided under the following stages:
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Creditors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed to group undertakings
|
|
|
|
|
|
|
|
|
|
Accruals and deferred income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors: amounts falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed loan from Special Purpose Vehicle
|
|
|
|
|
Amounts owed to group undertakings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The deemed loan represents mortgage receivables sold by the Company to WOSL SPV 1 Limited, WOSL SPV IV Limited, Elstree Funding No.1 PLC and Elstree Funding No.2 PLC, net of subordinated loans made by the Company to the SPVs. It represents net proceeds received from the SPVs from the sale of second charge, buy-to-let and residential mortgage receivables.
|
|
|
|
Allotted, called up and fully paid
|
|
|
|
|
|
|
|
|
|
|
|
8,002,000 (2021: 8,002,000) Ordinary shares of £1.00 each
|
|
|
|
|
WEST ONE SECURED LOANS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Related party transactions
|
The company has taken the exemption from disclosing related party transactions, as disclosed in note 1.2. As at 31 December 2022 the company had the following balances outstanding with its related parties:
|
|
|
|
|
|
|
Relationship to the Company
|
|
|
|
Eclipse Financing Limited
|
Intermediary parent company
|
|
|
|
Aria Finance Limited (formerly known as Enterprise Finance Limited)
|
|
|
|
|
|
|
|
|
|
Enra Specialist Finance Limited
|
Intermediary parent company
|
|
|
|
|
Intermediary parent company
|
|
|
|
West One Development Finance Limited
|
|
|
|
|
|
Post balance sheet events
|
The Directors have evaluated subsequent events from the date of the financial statements through to the date the financial statements were signed.
In March 2023 the Company completed its third public securitisation, Elstree Funding No.3 PLC, securitising a portfolio of £322m of mortgage loan originated by the Company.
The immediate parent company is West One Secured Holdings Limited.
The smallest group to consolidate these financial statements is Eclipse Midco Limited.
The largest group to consolidate these financial statements is Eclipse Topco Limited. Copies of the Eclipse Topco Limited and Eclipse Midco Limited consolidated financial statements can be obtained from the Company Secretary at the registered office, Third Floor, The Edward Hyde Building, 38 Clarendon Road, Watford, Hertfordshire, WD17 1JW.
The immediate parent undertaking of Eclipse Topco Limited is Eclipse Investors Limited, a company incorporated in the Cayman Islands. The directors consider the ultimate controlling parties to be Elliott Associates L.P. and Elliott International L.P.
|
|
|
