t
| Date | 4 Apr 2025 |
| Time | 16:40:12 |
| Category | Results |
| ID | 7774D |
Registered Number: 15702711
For the period from 3 May 2024 to 31 December 2024
|
Company Information |
3 |
|
Strategic Report |
4 |
|
Directors' Report |
8 |
|
Statement of Directors' Responsibilities |
10 |
|
Independent auditor's report to the Members of Darrowby No. 6 plc |
11 |
|
Statement of Comprehensive Income |
17 |
|
Statement of Financial Position |
18 |
|
Statement of Changes in Equity |
19 |
|
Statement of Cash flows |
20 |
|
Notes to the Financial Statements |
21 |
Company Information
CSC Directors (No.1) Limited CSC Directors (No.2) Limited Helena Whitaker
Anthony Chapman
CSC Corporate Services (UK) Limited
Registered Office 5 Churchill Place 10th Floor
London E14 5HU
Ernst & Young LLP 12 Wellington Place Leeds
LS1 1AP
15702711
The Directors present the strategic report for Darrowby No. 6 plc (the "Company") for the period from 3 May 2024 (date of incorporation) to 31 December 2024.
The Company was incorporated in the United Kingdom and registered in England and Wales on 3 May 2024 as a public limited company under the Companies Act 2006 (the "Act").
The Company is a special purpose vehicle whose principal activity is to issue mortgage-backed floating rate notes (the "Notes"). The proceeds from such issuance are used to acquire a portfolio of mortgage loans originated by Skipton Building Society (the "Society", "Originator" and "Seller"). The loans are secured by first charges over residential properties in England, Wales and Scotland.
On 15 October 2024, the Company issued £777,780,000 of floating rate notes (£700,000,000 Class A and
£77,780,000 Class B notes) with a final maturity date of September 2071 and established a General Reserve Fund. All notes issued by the Company are listed on the London Stock Exchange.
The activities of the Company are conducted primarily by reference to a series of securitisation transaction documents (the "Transaction Documents").
In accordance with IFRS 10 "Consolidated Financial Statements", the principal activities of the Company are controlled by the Society and it is exposed to variability of returns, meaning the results of the Company are fully consolidated into the Skipton Building Society Group (the "Group") accounts.
The legal ownership of the mortgage loans acquired by the Company from the Seller failed the IFRS 9 derecognition criteria in the Seller's financial statements, and therefore these receivables remain on the Statement of Financial Position of the Seller. The receivables are classified as a deemed loan to the originator on the Statement of Financial Position of the Company (as detailed in note 7 to the Financial Statements).
The capital value of the mortgages underlying the deemed loan have decreased since the Notes were issued, primarily due to mortgage repayments received and repurchase of loans by the Seller. The mortgage loan balance is expected to decrease in future accounting periods, the rate of decrease is dependent on future redemptions. Payments received from the mortgage loans are used to repay principal and interest on the notes. During the period, £11.3m of Class A notes have been repaid.
The Directors are satisfied that the Company will continue to meet its obligations on the Notes and do not foresee any changes in the Company's activities.
As a special purpose vehicle the governance structure of the Company is such that the key policies have been predetermined at the time of issuance. The Directors have had regards to the matters set out in section 172(1) of the Companies Act 2006 as follows:
· with reference to subsection (a) concerning the likely consequences of any decision in the long term: the Transaction Documents have been formulated to achieve the Company's purpose and business objectives, safeguard the assets and promote the success of the Company with a long term view and as disclosed in Note 1f in accordance with relevant securitisation legislation the Company is only permitted to retain minimal profit.
· the matters set out in subsections (b)-(f) have limited or no relevance to the Company and therefore they are not strategically important.
In accordance with s. 426B Companies Act 2006 a copy of this statement is available at https://connect.cscgfm.com/issuer/2624309
The Directors have responsibility for the overall system of internal control and for reviewing its effectiveness. When the transaction was entered into, a derivative instrument was taken out with the Society, to manage the associated risk of fixed rate income versus floating rate expense. The effectiveness of the risk management is monitored on an ongoing basis. More detail regarding the management of these risks is given in note 13 to the Financial Statements and further discussion in the context of the Group as a whole is provided in the Skipton Building Society Group Accounts which do not form part of these Financial Statements.
The Company's operations are financed primarily by means of the Notes. The Company issued such financial instruments to finance the acquisition of its portfolio of mortgage loans. The Company uses derivative financial instruments (an interest rate swap) to economically hedge against the possible variance between the fixed rates of interest payable on the loans in the portfolio and the floating rates of interest payable on the Notes.
The Company is exposed to climate change risks relating to the deemed loan assets. The Society, the originator of the mortgage loans, has continued to embed the management of climate risk across the business during 2024. The responsibilities for the management of climate risks are defined within the Climate Change Risk Management Framework. The framework is integrated within the wider governance processes and the three lines of defence approach to risk management. Further details are provided within the Skipton Building Society Group Accounts. While changes in climate have the potential to increase the frequency and severity of physical risks which could lead to an increasing number of properties subject to flooding and or subsidence, the directors consider these risks to be immaterial due to diversity in the mortgage portfolio; no adjustments have been made to the financial statements in respect of this.
The principal risks faced by the Company are listed below. These risks are managed within the framework established for the Group.
:
· Credit risk;
· Liquidity risk;
· Interest rate risk;
· Operational risk; and
· External environment risk
Credit risk
Credit risk reflects the risk that borrowers or other transaction parties do not meet their obligations as and when they fall due.
The Company is exposed through the deemed loan to the risk of default in payment by borrowers and the failure by the Seller acting as administrator on behalf of the Company, to realise or recover sufficient funds under the arrears and default procedures in respect of the loan and related security in order to discharge all amounts due and owing by the relevant borrowers under the loans, which may adversely affect payments on the Notes. This risk is to some extent mitigated by the requirement of loans to meet certain eligibility criteria to ensure they are of good quality when allocated to the portfolio. The risk to noteholders is further mitigated by certain credit enhancement features which include the subordination of junior ranking notes and the General Reserve Fund.
Liquidity risk
This is the risk the Company has insufficient funds to meet its financial obligations when they fall due.
This risk is mitigated by the Company being obliged to only make repayments of interest and principal in respect of the Notes to the extent that sufficient funds are available to the Company.
Interest rate risk
Interest rate risk arises from the mismatch of fixed and variable rates of interest received on the mortgage loans and the floating interest rate payable on the Notes. The Company's debt securities are all SONIA linked.
To manage interest rate risk the Company has entered into an interest rate swap with the Society where the Company receives a floating rate of interest aligned with the rate of interest payable on the Notes and the Company pays a rate based on the mortgage pool.
Operational risk
Operational risk is the risk of loss from failed processes, systems, people or from external events. In order to meet its obligations to the Noteholders, the Company has entered into contracts with a number of third parties who have agreed to provide operational support to the Company in accordance with the Transaction Documents.
CSC Capital Markets UK Limited has been appointed to provide corporate services in accordance with a Corporate Service Agreement. Other third parties who have agreed to provide services with respect to the Notes include the paying agents and transaction account provider. The Society acts as administrator, cash manager and interest rate swap provider and is sufficiently rated to fulfil these roles. Operational risk is further managed as part of the Society's overall risk management framework.
External Environmental risk
The Company operates within the UK and is exposed through the deemed loan to the risk of default in payment by UK borrowers. If the cost of living pressures within the UK continue to worsen this could adversely impact the ability of borrowers to repay their mortgage.
The UK growth outlook remains dampened, with economies across the globe still facing significant uncertainties and continued geopolitical tensions. Despite inflation returning to more normal levels and wage growth helping to soften cost of living pressures, there remains significant strain on some household finances. An increase in the household energy price cap in January and rising council tax and water bills will impact disposable incomes.
The impact from these risks are not believed to materially affect the Company.
The operating profits of the Company are pre-determined under the terms of the Transaction Documents being £1,200 before tax. There are additional accounting adjustments relating to the fair value of the derivative which brings the results to an accounting profit of £6.0m this period. The results for the period are shown in the Statement of Comprehensive Income on page 17.
The Company's KPIs are published in the monthly investor report (available via the European DataWarehouse website https://authenticate.eurodw.co.uk/) and include various metrics and analysis of the characteristic of the mortgage loans including the weighted average yield on the loans, levels of arrears, losses and possessions, payment rates etc.
 |
|
 |
The Directors present their Directors' Report and Financial Statements of Darrowby No. 6 plc (the "Company") for the period from 3 May 2024 (date of incorporation) to 31 December 2024.
The Company was established as a special purpose vehicle to issue mortgage backed floating rate notes (the "Notes") and to use the proceeds of issuance to acquire a portfolio of mortgage loans originated by Skipton Building Society. The loans are secured by first charges over residential properties in England, Wales and Scotland. The activities of the Company are conducted primarily by reference to a series of securitisation transaction documents (the "Transaction Documents"). Further information is disclosed in the Strategic Report.
No dividend was paid during the period. The Directors do not recommend the payment of a final dividend.
The Directors who held office during the period and up to the signing of these financial statements are as follows:
CSC Directors (No.1) Limited CSC Directors (No.2) Limited Helena Whitaker
Anthony Chapman
CSC Directors (No.1) Limited, CSC Directors (No.2) Limited and Helena Whitaker are also Directors of the legal parent company Darrowby 6 Holdings Limited.
Anthony Chapman is the Group Treasurer of Skipton Building Society and receives no remuneration from the Company. The remaining directors are appointed in their capacity as a corporate administration service, and are not directly remunerated by the Company, instead a fee for their service is paid to the corporate services provider.
None of the Directors have any beneficial interest in the share capital of the Company. None of the Directors had any interest in any material contract or arrangement with the Company during or at the end of the period.
CSC Corporate Services (UK) Limited has served as the Company Secretary since inception.
Qualifying third party indemnity provisions for the benefit of the Directors were in force during the period and remain in force as at the date of approval of the Financial Statements.
As described in the Section 172(1) statement in the Strategic Report, the Directors have been charged with governance in accordance with the Transaction Documents describing the structure and operation of the transaction. The governance structure of the Company is such that the key policies have been predetermined at the time of issuance and the operational roles have been assigned to third parties with their roles strictly governed by the Transaction Documents.
The Transaction Documents provide for procedures that have been designed for safeguarding assets against unauthorised use or disposition; for maintaining proper accounting records; and for the reliability and usefulness of financial information used within the business or for publication. Such procedures are designed to manage rather than eliminate the risk of failure to achieve business objectives whilst enabling them to comply with the regulatory obligations.
 |
The Directors are responsible for preparing the Strategic Report, the Directors' Report and the Financial Statements in accordance with applicable United Kingdom 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 UK adopted international accounting standards.
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 of the profit or loss of the Company for that period.
In preparing these Financial Statements the Directors are required to:
• select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in UK adopted IAS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the company's financial position and financial performance;
• in respect of the Financial Statements, state whether UK adopted IAS 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 appropriate to presume that the company will not continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They 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.
Under applicable United Kingdom law and regulations, the Directors are also responsible for preparing a Strategic Report and Directors' Report that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.
We have audited the financial statements of Darrowby No.6 Plc (the 'Company') for the period ended 31 December 2024 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash flows and the related notes 1 to 18, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
In our opinion, the financial statements:
· give a true and fair view of the Company's affairs as at 31 December 2024 and of its profit for the period then ended;
· have been properly prepared in accordance with UK adopted international accounting standards; and
· have been prepared in accordance with the requirements of the Companies Act 2006.
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 as applied to listed public interest entities, 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.
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. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included
· We obtained the Directors' going concern assessment, including cash flow forecasts for the going concern period of 12 months from when the financial statements are authorised for issue;
· We assessed the suitability of the assessment to conclude as to whether it supports the preparation of the accounts on a going concern basis. This included our own evaluation of the Company's liquidity and funding position, as well as consideration of the future prospects of the entity. We considered the nature of the entity as a bankruptcy-remote special purpose vehicle.
· We evaluated the Directors' stress testing to assess scenarios and circumstances that may challenge the going concern assumption. We considered alternate downside scenarios to evaluate whether they could plausibly change the conclusions of the going concern assessment;
· We reviewed key meeting minutes of Board committees;
· We read the Directors' draft disclosures related to going concern and compared to the supporting evidence noted above to identify any significant inconsistencies. We evaluated the reasonableness of these disclosures and their compliance with reference to applicable accounting standards.
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 12 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. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company's ability to continue as a going concern.
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Key audit matters |
· Recoverability of the deemed loan |
|
Materiality |
· Overall materiality of £3.9m which represents 0.5% of total assets. |
An overview of the scope of our audit
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the Company and effectiveness of controls, the potential impact of climate change and changes in the business environment when assessing the level of work to be performed.
Stakeholders are increasingly interested in how climate change will impact Skipton Building Society Group which consolidates the Company. The Company has determined that the most significant future impacts from climate change on its operations will be in connection to the impact of expected credit losses on the deemed loan. All of these disclosures form part of the "Other information," rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on "Other information".
In planning and performing our audit we assessed the potential impacts of climate change on the Company's business and any consequential material impact on its financial statements.
As explained in Note 13 to the financial statements, the degree of uncertainty in respect of climate change means that this cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the requirements of UK adopted international accounting standards.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management's assessment of the impact of climate risk, physical and transition, the impact of the Skipton Building Society Group's climate commitments, the effects of material climate risks on significant judgements and estimates and whether these have been appropriately reflected in the valuation of assets or liabilities where required by UK adopted international accounting standards. As part of this evaluation, we performed our own risk assessment supported by our climate change internal specialists to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key audit matter.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
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Risk |
Our response to the risk |
Key observations communicated to those charged with governance |
|
Recoverability of the deemed loan (31 December 2024: £760.7m)
Refer to Note 7 of the financial statements.
The Company is a special purpose vehicle within a securitisation structure. It exists to hold a beneficial interest in a portfolio of mortgage loans secured by first charge over residential properties within the UK from the Skipton Building Society (the originator), the funds for which were generated through the issuance of floating rate notes.
Within the financial statements of the originator, the transfer fails the derecognition criteria of IFRS 9 and the Company has recognised a deemed loan on its Statement of Financial Position at amortised cost.
As repayment of the deemed loan is required before the Company's debt can be serviced, we consider the estimate of expected credit losses (ECL) associated with the recoverability of the deemed loan to be a key audit matter. |
We walked through the process and relevant controls by which the Directors assessed expected credit losses for the deemed loan in order to understand the assessment performed.
We independently evaluated this assessment, which involved the following procedures:
· We examined the deemed loan for any indicators of potential future losses. This involved looking through to the securitised mortgage loan pool from which deemed loan repayments flow and assessed whether shortfalls in mortgage recoveries are expected, as well as an assessment of the probable impact of other risk factors.
· We considered the performance of the deemed loan, by obtaining evidence of the interest income recognised by the Company that was realised from the mortgages underpinning the deemed loan.
· We assessed the appropriateness of provisions for expected credit losses recognised by the Company and assessed the sufficiency and completeness of disclosures of the risk to the deemed loan. |
We highlighted to those charged with governance the following matters:
· No material differences were identified between the Directors' ECL calculation and the total ECL relating to the underlying mortgages within the pool.
· We were satisfied that the deemed loan has been appropriately categorised as a financial asset, is performing, and has been recognised in Stage 1. |
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Company to be £3.9 million which is 0.5% of total assets. We consider that noteholders are primarily focused on the value of the loan assets that are utilised by the entity to discharge its liabilities, therefore we determine total assets to be an appropriate basis for materiality.
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company's overall control environment, our judgement was that performance materiality was 50% of our planning materiality, namely
£2.0m. We have set performance materiality at this percentage because this is the first accounting period of a newly incorporated entity. We determined this percentage to be appropriate for an initial audit of a public interest entity.
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.2m, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
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 this report, we do not express any form of assurance conclusion thereon.
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 the other information, we are required to report that fact.
We have nothing to report in this regard.
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 period for which the financial statements are prepared is consistent with the financial statements; and
· the strategic report and Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or 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
As explained more fully in the Directors' responsibilities statement set out on page 10, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, 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 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.
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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. 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. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and management.
· We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are the Companies Act 2006 and UK adopted international accounting standards.
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|
|
|
2024 |
|
|
Note |
£000 |
|
Interest receivable and similar income |
2 |
9,276 |
|
Interest payable and similar charges |
3 |
(8,917) |
|
Net interest income |
|
359 |
|
Net fair value gains |
13 |
6,047 |
|
Operating expenses |
4 |
(360) |
|
Impairment losses on liquid assets |
8 |
(15) |
|
Profit before tax for the period |
|
6,031 |
|
Taxation |
5 |
0 |
|
Net profit |
|
6,031 |
|
Other comprehensive income |
|
- |
|
Total Comprehensive Income |
|
6,031 |
The profit for the period as shown above is derived from continuing operations. There is no other comprehensive income for the period.
The notes on pages 21 to 36 form part of these Financial Statements.
 |
|
|
Share |
Retained |
|
|
|
Capital |
Earnings |
Total |
|
Period ended 31 December 2024 |
£000 |
£000 |
£000 |
|
As at inception |
- |
- |
- |
|
Share Capital issued |
13 |
- |
13 |
|
Profit for the period |
- |
6,031 |
6,031 |
|
At 31 December 2024 |
13 |
6,031 |
6,044 |
The notes on pages 21 to 36 form part of these Financial Statements.
|
for the period ended 31 December 2024 |
|
2024 |
|
|
Note |
£000 |
|
Cash flows from operating activities: |
|
|
|
Profit before tax |
|
6,031 |
|
Adjustments for : |
|
|
|
Interest payable on loans from Skipton Building Society |
3 |
141 |
|
Debt securities interest payable |
3 |
8,710 |
|
Swap interest (receivable)/payable |
2 |
(116) |
|
Bank interest receivable |
2 |
(235) |
|
Amortisation of issue costs |
3 |
66 |
|
Movement in fair value gains and losses |
13 |
(6,047) |
|
Impairment loss allowance on bank deposits |
8 |
15 |
|
Cash flows from operating profit before changes in operating assets and liabilities |
|
8,565 |
|
Change in prepayments and accruals |
12 |
67 |
|
Interest paid on subordinated loan |
3 |
(122) |
|
Increase in amounts due to Skipton Building Society |
12 |
680 |
|
Net cash from operating activities |
|
9,190 |
|
Cash flows from investing activities |
|
|
|
Bank interest received |
2 |
235 |
|
Swap interest received/(paid) |
|
1,727 |
|
Deemed Loan at inception |
|
(777,922) |
|
Repayment of Deemed Loan |
|
17,271 |
|
Net cash flows from investing activities |
|
(758,689) |
|
Cash flows from financing activities |
|
|
|
Share Capital paid in period |
9 |
13 |
|
Debt Securities in issue |
9 |
777,780 |
|
Repayment of Debt Securities |
9 |
(11,309) |
|
Debt securities interest paid |
9 |
(7,412) |
|
Subordinated Loan from Skipton Building Society |
9 |
12,592 |
|
Repayment of Subordinated Loan |
9 |
(1,274) |
|
Issue costs paid |
9 |
(1,268) |
|
Net cash flows from financing activities |
|
769,122 |
|
Net increase in cash and cash equivalents |
|
19,623 |
|
Cash and cash equivalents at inception |
8 |
0 |
|
Change in impairment loss allowance on cash |
8 |
(15) |
|
Cash and cash equivalents at 31 December |
8 |
19,608 |
The notes on pages 21 to 36 form part of these Financial Statements.
The Company is a public limited company incorporated in the United Kingdom under the Companies Act 2006 and registered in England and Wales.
The profit is derived from the Company's single continuing activity. The Company operates in one business segment and all business is conducted in the UK. The Company's principal activity is issuing residential mortgage backed securities.
The Financial Statements for the period ended 31 December 2024 have been prepared in accordance with UK adopted international accounting standards.
The principal accounting policies set out below have been applied in respect of the financial period ended 31 December 2024.
The Company adopted during the period the following new accounting standards and amendments to existing accounting standards, none of which had a material impact on these Financial Statements:
· Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
· Non-current liabilities with covenants (Amendments to IAS 1);
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16); and
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).
A number of new and amended accounting standards and interpretations will be effective for future reporting periods, none of which have been early adopted by the Company in preparing these financial statements. These new and amended standards and interpretations, details of which are set out below, are not expected to have a material impact on the Company's Financial Statements:
· Lack of exchangeability (Amendments to IAS 21);
· Amendments to classification and measurement of financial instruments (Amendments to IFRS 9 and IFRS 7);
· IFRS 18 Presentation and Disclosure in Financial Statements; and
· IFRS 19 Subsidiaries without Public Accountability: Disclosures.
The Financial Statements have been prepared in accordance with 'UK adopted international accounting standards' and in line with the requirements of the Companies Act 2006.
The Financial Statements have been prepared on an historical cost basis, except for financial instruments which are stated at their fair value through profit and loss.
The Financial Statements are presented in sterling which is the Company's functional and presentational currency and rounded to the nearest thousand except where otherwise indicated. There are no material transactions denominated in foreign currencies.
The earliest optional redemption date of the notes is September 2029. Given this date is more than 12 months from the balance sheet date, the Directors are satisfied that the Company continues to operate and will have adequate resources to continue to meet its obligations as they fall due for a period of at least 12 months and it is therefore appropriate to adopt the going concern basis in preparing the financial statements.
Notes to the Financial Statements (continued)
d) Critical accounting estimates and judgements
The preparation of the Financial Statements requires the exercise of judgement in both the application of accounting policies which are set out in the sections below and in the selection of assumptions used in calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates. The most significantly affected components of the Financial Statements and associated critical judgements are as follows:
Valuation of derivatives - The fair value of the interest rate swap is determined by using a discounted cash flow analysis model that is consistent with commonly used market techniques. The cash flows are based on the expected run off of the balance of the mortgages underlying the deemed loan.
All inputs into valuation models adopted by the entity, including the sterling zero coupon yield curve used as the discount rate on the interest rate swap are obtained from observable market data except for the prepayment rates on the underlying mortgages which are unobservable. Sensitivity to a change in the prepayment rate of the underlying mortgages is assessed in note 13.
The Company's financial instruments comprise a deemed loan to the Seller, floating rate issued debt securities, cash and liquid resources, derivatives, borrowings and various receivables and payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Seller. These financial instruments are classified in accordance with the principles of IFRS 9 as described below.
In accordance with IFRS 9, where a transfer of a financial asset does not qualify for derecognition, the transferee does not recognise the transferred asset as its asset. The transferee derecognises the cash or other consideration paid and recognises a receivable from the transferor. In relation to the mortgage portfolios transferred to the Company, derecognition is considered to be inappropriate for the Originator's own Financial Statements as the Originator has retained significant risks and rewards of ownership of that financial asset. The Company's Financial Statements are therefore prepared on the basis that the acquisitions of beneficial interests in mortgage portfolios are recognised as a collateralised loan to the Originator.
The deemed loan is held at amortised cost in line with IFRS 9. Interest receivable on the deemed loan is recognised on an effective interest rate basis.
The requirement to pay deferred consideration is viewed as a contractual obligation and deferred consideration is therefore accounted for separately as a liability held at amortised cost. Deferred consideration payable depends on the extent to which the surplus income generated by the underlying mortgage portfolio to which the Company has a beneficial interest, exceeds the administration costs of the mortgage portfolio, and is deducted from interest income, since the Company does not recognise income to which it is not beneficially entitled.
The Company holds a transaction bank account with Citibank, N.A., London Branch. This account is held in the Company's name and meets the definition of cash but the use of the funds is restricted by a detailed priority of payments set out in the Transaction Documents. As the cash can only be used to meet certain specific liabilities detailed in the priority of payments and is not available to be used with discretion, it is viewed as restricted cash and is included in Cash and Cash equivalents. The General Reserve fund is included in the reported cash balance.
The Society is also Account Bank provider to the Company; there were no balances held with the Society as at 31 December 2024.
Notes to the Financial Statements (continued)
For the purposes of the Statement of Cash Flows, cash comprises cash in hand and loans and advances to and from credit institutions repayable on demand, including amounts held by a corporate service provider. The corporate service provider holds £12,501 in respect of issued shares in the Company. The Statement of Cash Flows has been prepared using the indirect method.
The Company uses derivative financial instruments to manage its exposure to interest rate risk arising from investment activities. The Company does not hold or issue derivative financial instruments for trading purposes.
Interest rate risk associated with the loan to originator is managed by means of an interest rate swap that the Company has entered into with the Society; the Company pays a rate of interest based on the mortgage loans and receives SONIA.
Interest payable on the interest rate swap used to economically hedge the deemed loan to originator is recognised within Interest Receivable and Similar Income to represent the substance of the transaction as a whole. This treatment is in line with Group policy.
IFRS 9 requires all derivative financial instruments to be recognised initially at fair value in the Statement of Financial Position. Subsequent to initial recognition, derivatives are re-measured to fair value. Where the value of the derivative is positive, it is carried as a derivative asset and where negative, as a derivative liability. The gain or loss on re-measurement of fair value is recognised immediately in the Statement of Comprehensive Income. The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swap at the reporting date taking into account current interest rates and the current creditworthiness of the swap counterparties. The credit risk on the derivatives has been assessed to be immaterial as on downgrade of the swap counterparty, the Company would receive cash collateral.
These comprise floating rate notes and are recognised initially at fair value. Fair value includes the issue proceeds (the fair value of consideration received) net of issue costs incurred. Subsequent to initial recognition interest bearing borrowings are stated at amortised cost with any difference between cost and redemptions value being recognised in the statement of comprehensive income over the period of the borrowings on an effective interest basis.
The carrying amounts of the Company's assets are reviewed at each year end to determine whether there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The carrying amount of the asset is reduced through a provision account and the amount of the loss is recognised in the Statement of Comprehensive Income.
Impairment loss allowances are recognised for 'expected credit losses' (ECLs) on all financial assets held at amortised cost as per the requirements of IFRS 9. ECLs are measured as the difference between contractual cash flows and expected cash flows, discounted at the asset's effective interest rate.
The allowance for ECLs is based on an assessment of the probability of default (PD), exposure at default (EAD) and loss given default (LGD) for each future period and for each individual exposure in the underlying mortgage portfolio. ECLs are measured by multiplying together the PD, EAD and LGD, and are discounted using the loan's original effective interest rate. The estimation of ECLs is unbiased and probability weighted, considering all reasonable and supportable information, including historical experience, forward looking economic assumptions and a range of possible outcomes to produce the final loss allowance.
Financial assets that are subject to the impairment requirements of IFRS 9 are described according to their ECL 'stage' as follows:
Notes to the Financial Statements (continued)
· 'Stage 1' - Assets for which a 12-month ECL is recognised;
· 'Stage 2' - Assets for which a lifetime ECL is recognised but which are not credit-impaired;
· 'Stage 3' - Assets for which a lifetime ECL is recognised and which are credit-impaired.
ECLs are classed as 'Stage 1' for financial assets that have not had a significant increase in credit risk since the date of initial recognition. 'Stage 2' ECLs are lifetime ECLs that are recognised where there has been a significant increase in credit risk of the financial instrument and 'stage 3' ECLs are lifetime ECLs that are recognised where the financial instrument is considered to be credit impaired.
The assets held by the Company that are subject to impairment are cash and the deemed loan to originator. The Company measures impairment loss allowances on cash and the deemed loan as 12- month ECLs.
The Company defines a financial instrument as in default, when the borrower is more than 90 days past due on their contractual payments, or going through bankruptcy, IVA, forbearance arrangement or expired contracts.
For UK corporation tax purposes, the Company is a securitisation company under the 'Taxation of Securitisation Companies Regulations 2006' (SI 2006/3296). Therefore, the Company is not required to pay corporation tax on its accounting profit or loss. Instead, the Company is required to pay tax on its retained profits as specified in the documentation governing the transaction. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the date of the Statement of Financial Position.
The Directors are satisfied that this Company meets the definition of a 'securitisation company' as defined by both the Finance Act 2005 and the subsequent secondary legislation and that no incremental unfunded tax liabilities will arise.
All differences between the company's accounting profits and taxable net cash flows are treated as permanent differences and, as no timing differences with future tax consequences arise, no deferred tax is required to be recognised.
Details of related party transactions are disclosed in note 17 and have been applied in accordance with the provisions of IAS 24 "Related Party Disclosures".
Notes to the Financial Statements (continued)
2. INTEREST RECEIVABLE AND SIMILAR INCOME
|
|
2024 |
|
|
£000 |
|
Income recognised under EIR from loan to originator |
9,581 |
|
Deferred consideration payable |
(656) |
|
Bank deposit interest |
235 |
|
Swap interest offsetting loan to originator income |
116 |
|
|
9,276 |
3. INTEREST PAYABLE AND SIMILAR CHARGES
|
|
2024 |
|
|
£000 |
|
Interest on debt securities in issue |
8,710 |
|
Interest payable to Skipton Building Society |
141 |
|
Amortisation of issue costs |
66 |
|
|
8,917 |
4. OPERATING EXPENSES
|
|
2024 |
|
|
£000 |
|
Servicer fees and other expenses |
360 |
|
|
360 |
Audit fees of £69,600 will be paid to the Company's auditors Ernst & Young LLP. The cost of these fees will be borne by the Society.
Notes to the Financial Statements (continued)
|
|
2024 |
|
|
£000 |
|
UK corporation tax on profit for the period |
0 |
|
Total taxation charge per the Statement of Comprehensive Income |
0 |
The rate of corporation tax, assessed for the period is at the standard rate of corporation tax in the UK of 19.00%. The operating profits of the Company are pre-determined under the terms of the Transaction Documents being £100 before tax each month. The amount of tax recorded in the period is £57. The tax reconciliation is shown below.
|
|
2024 |
|
|
£000 |
|
Profit before taxation |
6,031 |
|
UK corporation tax charge/(credit) at 19.00% |
1,146 |
|
Non-taxable FV & impairment allowance adjustment at 19.00% |
(1,146) |
|
Total taxation charge per the Statement of Comprehensive Income |
0 |
The Company is taxed under the permanent regime of taxation of securitisation companies as laid down by Statutory Instrument 2006/3296. As a result, the Company will be subject to tax on its retained profits as determined in the Transaction Documents. The Company has therefore adjusted its expectation of the timing differences which will reverse on the fair value of derivatives. Accordingly, its estimate of the taxable timing differences is now nil.
There were no deferred tax movements in the period.
There were no employees during the period and none of the Directors received emoluments in respect of their services to the Company. A corporate service fee is paid to CSC Capital Markets UK Limited in connection with its supply of corporate management services including the provision of Directors (see note 17). The total amount paid in the period, including other disbursements and VAT, was £9,381 of which £1,321 was paid in respect of Darrowby 6 Holdings Limited.
Income on the deemed loan, arising on the underlying mortgages, reflects fixed, variable and tracker rates.
|
|
2024 |
|
|
£000 |
|
At inception |
777,922 |
|
Decrease in period |
(17,271) |
|
At 31 December |
760,651 |
Notes to the Financial Statements (continued)
As outlined in note 1e (i) the deemed loan is held at amortised cost and is reviewed for impairment at each reporting date.
Any impairment on the underlying mortgage portfolio does not itself result in impairment of the Deemed Loan to Originator. This is due to the fact that any mortgages losses on the underlying mortgage portfolio are deducted from deferred consideration payable to the Originator; the mortgages losses on the underlying mortgage portfolio would have to be greater than the excess revenue recognised from the underlying mortgage portfolio. The possibility of this occurring has been assessed to be remote, therefore the impairment provision recognised as a 12 month 'Stage 1' ECL has been deemed to be immaterial and is therefore not recognised within these accounts.
|
|
2024 |
|
|
£000 |
|
Bank deposits |
19,610 |
|
Balance held by corporate services provider |
13 |
|
Impairment allowance |
(15) |
|
|
19,608 |
The bank deposits are held with the provider of the transaction account, Citibank, N.A., London Branch. Withdrawals from the account are restricted by the detailed priority of payments set out in the Transaction Documents. The Company receives a variable interest rate of SONIA less a margin. The interest received during 2024 was £235k.
The Society is also Account Bank provider to the Company; there were no balances held with the Society as at 31 December 2024.
As outlined in note 1e) (vi), the Company's accounting policy for cash is to always recognise ECLs measured as the difference between contractual cash flows and expected cash flows, discounted at the asset's effective interest rate. The Company measures impairment loss allowances on cash as 12-month ECLs, as they are determined to have low credit risk at the reporting date. The Company considers a treasury asset to have low credit risk when its credit rating is equivalent to the globally understood definition of 'investment grade'.
The table below provides information on movements in the loss allowance for cash during the period.
|
|
2024 |
|
|
Stage 1 |
|
|
£000 |
|
Loss allowance at incorporation |
0 |
|
Increases due to origination, acquisition and additions |
15 |
|
Loss allowance at 31 December |
15 |
Notes to the Financial Statements (continued)
The table below shows the movement during the period of the Company's financing activity liabilities:
|
Debt Securities in Issue |
Subordinated loan |
Share capital |
Retained earnings |
|
|
Period ended 31 December 2024 |
|
|
|
|
|
At incorporation |
0 |
0 |
0 |
0 |
|
Issuance/proceeds |
777,780 |
12,592 |
- |
- |
|
Issued Share Capital |
- |
- |
13 |
- |
|
Issue Costs paid |
(1,268) |
- |
- |
- |
|
Repayments |
(11,309) |
(1,274) |
- |
- |
|
Total changes from financing cash flow |
765,203 |
11,318 |
13 |
0 |
|
Interest expense |
8,710 |
141 |
0 |
0 |
|
Interest paid |
(7,412) |
(122) |
0 |
0 |
|
Amortisation of issue costs |
66 |
0 |
0 |
0 |
|
Net profit after tax |
0 |
0 |
0 |
6,031 |
|
Total liability & equity related changes |
1,364 |
19 |
0 |
6,031 |
|
|
|
|
|
|
|
At 31 December 2024 |
766,567 |
11,337 |
13 |
6,031 |
|
|
2024 |
|
|
£000 |
|
Subordinated loan from Skipton Building Society |
11,318 |
|
Accrued interest on Subordinated loan |
19 |
|
|
11,337 |
The interest bearing loan and borrowings comprise a subordinated loan from the Seller. Interest and principal is repaid on the loan in accordance with the revenue priority of payments specified in the Transaction Documents dependent on the amount of available revenue receipts. The subordinated loan bears interest at a rate equal to daily compounded SONIA plus a margin.
Notes to the Financial Statements (continued)
Debt securities in issue comprise floating rate Notes issued on 15 October 2024. The final maturity date is 20 September 2071; the step-up/call option date is in September 2029.
|
|
2024 |
|
|
£000 |
|
Due within one year |
|
|
Class A Mortgage Backed Floating Rate Notes due 2071 |
1,178 |
|
Class B Mortgage Backed Floating Rate Notes due 2071 |
120 |
|
|
1,298 |
|
Due in more than one year |
|
|
Class A Mortgage Backed Floating Rate Notes due 2071 |
688,691 |
|
Class B Mortgage Backed Floating Rate Notes due 2071 |
77,780 |
|
|
766,471 |
|
Unamortised Issue Costs |
(1,202) |
|
Total Debt Securities in issue |
766,567 |
Amounts shown above as 'Due within one year' reflect the accrued interest on the Notes.
|
|
2024 |
|
|
£000 |
|
Accruals |
67 |
|
Due to Skipton Building Society |
680 |
|
|
747 |
Amounts due to the Society comprise deferred consideration of £656k, fees and insurance relating to mortgage loans of £15k and interest arrears of £10k. Accruals include amounts payable to the Society in respect of cash management and administration fees totalling £54k.
Notes to the Financial Statements (continued)
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability of another entity. The Company's financial instruments consist primarily of the deemed loan due from Group undertakings, amounts due to Group undertakings, loan notes issued, derivatives and cash.
Notes to the Financial Statements (continued)
13. FINANCIAL INSTRUMENTS (continued)
Numerical financial instrument disclosures for derivatives, measured at fair value, are set out below.
|
|
Notional principal amount |
Fair Value Assets |
Fair Value Liabilities |
|
|
2024 |
2024 |
2024 |
|
|
£000 |
£000 |
£000 |
|
Interest Rate swap |
712,522 |
4,436 |
- |
|
|
712,522 |
4,436 |
- |
Accrued interest on derivatives of £1,610k payable is included in the above.
|
|
Fair Value through P&L |
|
|
2024 |
|
|
£000 |
|
Interest Rate Swap |
6,047 |
|
|
6,047 |
The fair value gains and losses relating to the Interest Rate Swap derivative are all unrealised and are shown in the Statement of Comprehensive Income in the 'Net fair value gains' line.
The following table summarises the fair value measurement basis used for assets and liabilities held on the Balance Sheet at fair value:
|
|
2024 |
|
|
Level 3 |
|
|
£000 |
|
Assets |
|
|
Interest Rate Swap |
6,047 |
|
At 31 December |
6,047 |
The Company measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurement:
Level 1: unadjusted quoted prices available in active markets for identical instruments.
Level 2: significant inputs (other than quoted prices included within Level 1) are based on observable market data either directly (i.e. price) or indirectly (i.e. derived from prices).
Level 3: significant inputs are based on unobservable market data.
13. FINANCIAL INSTRUMENTS (continued)
The inputs used are SONIA swap rates which are used to forecast the cash flows and estimated redemption rates on the securitised mortgage pool. After consideration of the inputs used in arriving at fair values, it has been determined that level 3 appropriately reflects the basis of these fair values given the usage of estimated redemption rates which are considered unobservable inputs.
The sensitivity of both the level 3 fair values to a 1% movement in redemption rates is £1.6m for the interest rate swap. These alternatives would have no overall impact on the Company's result due to the offsetting nature of the deemed loan and the derivatives.
The tables below summarise the carrying values and fair values of those financial assets and liabilities not presented within the Statement of Financial Position at fair value.
|
|
Carrying Value |
Fair Value |
|
|
2024 |
2024 |
|
|
£000 |
£000 |
|
Cash (note 1) |
19,608 |
19,608 |
|
Deemed Loan (note 2) |
760,651 |
754,724 |
|
Interest Bearing Loans & Borrowings (note 3) |
11,337 |
11,337 |
|
Other Payables (note 4) |
(747) |
(747) |
|
|
790,849 |
784,922 |
|
Debt Securities in Issue |
|
|
|
Class A (note 5) |
(688,691) |
(689,046) |
|
Class B (note 6) |
(77,780) |
(70,141) |
|
Floating rate notes interest payable (note 7) |
(1,298) |
(1,298) |
|
Unamortised issue costs |
1,202 |
0 |
|
|
(766,567) |
(760,485) |
Notes
1. The Cash FV represents a Level 1 Fair Value measure.
2. The Deemed Loan FV represents a Level 3 Fair Value measure.
3. The Interest Bearing Loans & Borrowings represents a Level 1 Fair Value measure.
4. The Other Payables FV represents a Level 1 Fair Value measure.
5. The Class A Notes FV represents a Level 1 Fair Value measure.
6. The Class B Notes FV represents a Level 3 Fair Value measure.
7. The Interest Payable FV represents a Level 1 Fair Value measure.
The carrying values of derivatives have been determined using a discounted cash flow model, consistent with commonly used market valuation techniques. Further detail is provided below.
The fair values of the Class A Debt Securities in Issue presented in the table above have been determined using market prices and are therefore considered to be level 1 fair values. Market prices are not readily available for Class B Debt Securities in Issue and the fair values have been based on a price calculated using a Bloomberg cashflow model. Market prices are not readily available for Interest Bearing Loan and Borrowings, however their amortised cost carrying values have been determined to be a close approximation of their fair values. Cash, Prepayments and accrued income and Other Payables are also carried at amortised cost, which is considered to be a reasonable approximation of their fair value. The Deemed loan is valued by the Discounted Cash Flow method, the expected cash flows arising from the loan are discounted using observed benchmark rates in the UK mortgage market.
Notes to the Financial Statements (continued)
Liquidity risk
Within cash, there is an amortising General Reserve Fund of £10.3m (initially £10.5m) held by the Company, for use in the event that the Company is not able to meet its financial commitments on a temporary basis. This General Reserve Fund has not been drawn upon during the period to 31 December 2024.
The following table is an analysis of the undiscounted gross contractual cash flows payable on the Company's financial assets and liabilities.
|
Payable within three months |
Payable between three months & one year |
Payable between one & five years |
Total |
|
|
At 31 December 2024 |
£000 |
£000 |
£000 |
£000 |
|
Interest Bearing Loans and Borrowings |
(2,029) |
(5,929) |
(3,824) |
(11,782) |
|
Derivative Financial Instruments |
(1,603) |
(2,391) |
990 |
(3,004) |
|
Debt Securities in Issue |
40,384 |
109,545 |
729,246 |
879,175 |
|
|
36,752 |
101,225 |
726,412 |
864,389 |
The cash flows in the above table are estimates, up to the step-up date, as the actual flows are dependent on the repayment profile of the underlying mortgages and future interest rate trends. The estimates are based on Directors' view of the future Constant Prepayment Rates and future interest rates. Payments are made in accordance with the priority of payments set out in the Transaction Documents. Deferred Consideration payments are only made to the Society to the extent that there are sufficient Available Revenue Receipts and hence Other Payables are not shown in the table above. The option to call the notes on the step-up date is at the complete discretion of the Society.
The overall liquidity risk is effectively mitigated as a result of the structure of the repayment of capital being required only in line with the principal repayment of the underlying mortgage loans.
Market risk is the risk that the value of, or income arising from, the Company's assets and liabilities changes as a result of changes in market prices, the principal element being interest rate risk (including the use of derivatives).
Interest rate risk is managed by the Group and is monitored by the independent Asset & Liability Management team. The Company is protected from fixed interest rate risk by the provision of interest rate derivatives. The Company is exposed to basis risk between the Bank Base Rate (BBR) and the Society's administered rate mortgage products, but this is not material.
Interest on the floating rate liabilities is determined and payable quarterly in arrears at the following rates above daily compounded SONIA:
|
Notes |
Margin |
|
Class A |
0.50% |
|
Class B |
0.00% |
The accrued interest on the Notes is shown in note 10 within the amount payable in less than one year. As the profit of the Company is pre-determined under the terms of the Transaction Documents alongside the hedging in place, the Company is not sensitive to interest rates overall.
The Company is exposed to credit risk on cash, the deemed loan and derivative financial instruments. The table below represents a worst case scenario of credit risk exposure to the Company at 31 December 2024, without taking into account any collateral held or other credit enhancements attached. The exposures set out below are based on gross carrying amounts excluding the fair value adjustment and the impairment loss allowance (see note 8).
|
|
|
2024 |
|
Category |
Class |
£000 |
|
Cash and cash equivalents |
Bank Deposits |
19,623 |
|
Loans and receivables |
Deemed Loan |
760,651 |
|
Derivative financial instruments |
Interest Rate Swap |
4,436
|
|
|
|
784,710 |
Other than the impairment loss allowance in respect of cash, no impairment has been recognised in respect of any financial asset.
The future impact of climate-related risks on the Company's credit risk exposure is currently unknown, the Company will continue to monitor developments in future periods.
The risk on the deemed loan is mitigated by the size and quality of the securitised loans and advances to customers. An arrears analysis of the underlying mortgage portfolio is shown in the table below:
|
|
2024 |
|
|
|
£000 |
% |
|
Not in arrears |
760,559 |
100.0% |
|
Less than 3 months past due |
92 |
0.0% |
|
More than three months past due |
0 |
0.0% |
|
In possession |
0 |
0.0% |
|
|
760,651 |
100.0% |
The table below shows the indexed loan to value percentage of the mortgage portfolio. At 31 December the weighted average indexed LTV of the mortgage loans was 64.8%.
|
|
2024 |
|
Indexed LTV Range (%) |
% (of value) |
|
0% - 40% |
14.4% |
|
40.01% - 50% |
10.3% |
|
50.01% - 60% |
11.9% |
|
60.01% - 70% |
14.1% |
|
70.01% - 75% |
8.4% |
|
75.01% - 80% |
10.3% |
|
80.01% - 85% |
15.0% |
|
85.01% - 90% |
14.0% |
|
90.01% - 95% |
1.6% |
|
Over 95% |
0.0% |
|
Total |
100.0% |
The table below shows the geographic distribution of the mortgage portfolio and demonstrates a wide spread of assets across the UK.
|
|
2024 |
|
Regional Distribution |
% (of value) |
|
East Anglia |
3.8% |
|
East Midlands |
8.7% |
|
Greater London |
13.4% |
|
North |
3.3% |
|
North West |
10.5% |
|
Scotland |
8.5% |
|
South East |
21.5% |
|
South West |
10.0% |
|
Wales |
2.8% |
|
West Midlands |
8.9% |
|
Yorkshire & Humberside |
8.6% |
|
Total |
100.0% |
|
|
2024 |
2024 |
|
Allotted, issued and fully paid |
Shares |
£ |
|
Ordinary shares of £1 each, fully paid |
1 |
1 |
|
Ordinary shares of £1 each, partially paid |
49,999 |
12,500 |
|
|
50,000 |
12,501 |
During the period the Company issued 50,000 ordinary shares of £1 each of which 49,999 were part paid to £0.25 and one was fully paid. The share capital is wholly owned by Darrowby 6 Holdings Limited.
Notes to the Financial Statements (continued)
The Company's capital comprises share capital and retained earnings. The Company is not subject to externally imposed capital requirements other than the minimum share capital required by the Companies Act 2006, with which it complies.
The Company's immediate parent company is Darrowby 6 Holdings Limited, a company registered in England and Wales (registered number 15701813). The entire beneficial interest in the share capital of Darrowby 6 Holdings Limited is held by its legal parent company CSC Corporate Services (UK) Limited on a discretionary trust basis under a share trust deed. CSC Corporate Services (UK) Limited is a wholly owned subsidiary of CSC Capital Markets UK Limited.
Activities of the Issuer are carried out in line with the Transaction Documents. The Society is exposed to variable returns from the Issuer and has the ability to affect those returns in line with the Transaction Documents and therefore this passes the test of control under IFRS 10. Skipton Building Society is the ultimate parent company, consequently the Company's results are fully consolidated into the Society Group Accounts. Copies of the Society's consolidated financial statements are available from its registered offices at:
The Secretary
Skipton Building Society The Bailey
Skipton
North Yorkshire BD23 1DN
Notes to the Financial Statements (continued)
The Company is a special purpose vehicle established in accordance with the Transaction Documents. Three of the Company's four Directors are provided by CSC Capital Markets UK Limited (two corporate Directors and one individual) and, the fourth Director is an employee of the Society (the controlling party under IFRS). The Company pays a corporate services fee to CSC Capital Markets UK Limited in connection with its supply of corporate management services including the provision of Directors. The total amount paid in the period, including other disbursements and VAT, was £9,381 of which £1,321 was paid in respect of Darrowby 6 Holdings Limited.
The Company pays cash management and mortgage loan servicing fees to the Society in connection with its provision of services defined under the transaction documents. Other related party transactions include an interest rate swap and a subordinated loan from the Society.
The Society holds 100% of the Class B notes and 28.6% of the Class A notes. The total interest payable on these notes in 2024 was £3,059k.
Balances between the Company and the Society are shown below:
|
|
2024 |
|
|
£000 |
|
Interest receivable and similar income |
|
|
Interest on deemed loan |
8,925 |
|
Swap Interest |
116 |
|
Interest Payable |
|
|
Interest on subordinated loan |
141 |
|
Interest on Notes |
3,059 |
|
Expenses |
|
|
Administration and Cash Manager Fees |
348 |
|
Assets |
|
|
Deemed loan |
760,651 |
|
Derivative financial instruments |
4,436 |
|
Liabilities |
|
|
Class A Notes (accrued interest included) |
197,106 |
|
Class B Notes (accrued interest included) |
77,900 |
|
Subordinated loan (accrued interest included) |
11,337 |
|
Other Payables |
680 |
|
Admin & Cash Manager Fees |
53 |
All related party transactions were made on terms equivalent to arm's length transactions.
There are no post balance sheet events to report.