The director presents the strategic report for the year ended 31 December 2023.
The results of the group show an operating profit of £1.3m (2022: £1.8m) for the year and post-tax profit of £1.1m (2022: £1.4m).
The director is pleased with the results for the year. The 2024 loan pipeline is strong and the director envisages continued growth resulting in a rise in group profit.
The director and senior staff members are constantly monitoring the risks to which the group is exposed and regularly meet to consider how best to manage and mitigate any potential threats that have arisen or are expected to arise.
The group summarises the principal risks and uncertainties as follows:
Credit risk
As the group operates in the lending market, credit risk is considered a key risk. All potential loan applications are thoroughly checked and reviewed before being approved. The underwriting and compliance department are responsible for vetting the borrowers.
Once approved the borrowers are subject to a thorough process of ongoing monitoring by the credit control department to ensure all amounts due are received as and when expected.
Interest rate risk
Management monitors the interest rate risk of the group by ensuring the funds provided by third parties are lent to viable borrowers at interest rates that will lead to a strong profit margin whilst enabling the group to cover all associated costs and generate profits.
Liquidity risk
The group ensures that there are always sufficient liquid funds to settle financial obligations as and when they are due. This includes a contingency fund to attend to any unforeseen additional liabilities that may arise.
Operational risk
The group ensures there are controls in place, wherever possible, to mitigate any operational risk which may arise from inadequate or failed internal processes, people or systems. The risk is further mitigated by regular external audit and compliance visits.
Loan Book
The group’s loan book represents the amount its customers have borrowed. An increase in the loan book results in a rise in revenue. The amount borrowed at the end of the year has risen by £196.0m from £252.6m to £448.6m.
Shareholders’ funds
The strong growth in the year has resulted in a £0.3m increase in shareholders’ funds from £4.1m to £4.4m.
Turnover
The turnover of the group is derived from loan interest receivable from the loan book. The group turnover has risen by £23.9m from £24.8m to £48.7m.
Future developments
The short term vision of the director is to increase the group loan book. The group anticipates doing this by widening the range of products on offer and also penetrating the market by offering long term (in excess of 12 month) products.
The group plans to generate additional revenue as a result of increasing the size of the loan book by providing certainty in a turbulent market, ensuring it is in a position to work with the many brokers and borrowers who are seeking finance.
The group continues to grow by identifying and securing institutional funding opportunities which will allow the group to increase its lending activities across all products on offer.
Going concern
The group carries out an ongoing review of its going concern position and is confident that the current level of liquid reserves, together with the funds that are expected to be generated in the coming months, is sufficient for the group to settle all financial obligations as and when they fall due.
On behalf of the board
The director presents his annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £500,000. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The financial instruments of the group are disclosed within the strategic report.
Silver Levene (UK) Limited were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of PSR Equities Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The director is responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the director's 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company 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 director's responsibilities statement, the director is 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 director determines 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 director is responsible for assessing the parent 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 director either intends to liquidate the parent company or to cease operations, or has 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Discussions were held with, and enquiries made of, management and those charged with governance with a view to identifying those laws and regulations that could be expected to have a material impact on the financial statements. During the engagement team briefing, the outcomes of these discussions and enquiries were shared with the team, as well as consideration as to where and how fraud may occur in the entity.
The following laws and regulations were identified as being of significance to the entity:
Those laws and regulations considered to have a direct effect on the financial statements include UK financial reporting standards, Tax legislation, Company law, FCA rules, General Data Protection Regulation and distributable profits legislation.
It is considered that, other than FCA rules, there are no laws and regulations for which non-compliance may be fundamental to the operating aspects of the business.
Audit procedures undertaken in response to the potential risks relating to irregularities (which include fraud and non-compliance with laws and regulations) comprised of: inquiries of management and those charged with governance as to whether the entity complies with such laws and regulations; enquiries with the same concerning any actual or potential litigation or claims; testing the appropriateness of entries in the nominal ledger, including journal entries; reviewing transactions around the end of the reporting period; and the performance of analytical procedures to identify unexpected movements in account balances which may be indicative of fraud.
No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK).
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Other matters which we are required to address
Prior period group financial statements are unaudited. Sufficient adequate audit evidence was obtained to ensure that corresponding figures are free from material misstatements.
The financial statements of the company for the year ended 31 December 2022, were audited by another auditor who expressed an unmodified opinion on those statements on 14 July 2023.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £774,749 (2022 - £1,373,849 profit).
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.
PSR Equities Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The principal place of business is 46 Hertford Street, London W1J 7DP.
The group consists of PSR Equities Limited and all of its subsidiaries.
The company's and group's principal activities and nature of its operations are disclosed in the Director's Report.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company PSR Equities Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Where control of a subsidiary is lost, the gain or loss is recognised in the consolidated income statement. The cumulative amounts of any exchange differences on translation, recognised in equity, are not included in the gain or loss on disposal and are transferred to retained earnings. The gain or loss also includes amounts included in other comprehensive income that are required to be reclassified to profit or loss but excludes those amounts that are not required to be reclassified.
Where control of a subsidiary is achieved in stages, the initial acquisition that gave the group control is accounted for as a business combination. Thereafter where the group increases its controlling interest in the subsidiary the transaction is treated as a transaction between equity holders. Any difference between the fair value of the consideration paid and the carrying amount of the non-controlling interest acquired is recognised directly in equity. No changes are made to the carrying value of assets, liabilities or provisions for contingent liabilities.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Turnover represents interest receivable on loans advanced to customers. Turnover is recognised at the fair value of the consideration received or receivable for services provided and interest receivable in the normal course of business. The turnover of the group is not subject to VAT.
Interest receivable is recognised at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period. The effective interest rate (EIR) is the rate that exactly discounts estimated future cash flows through the expected life, or contractual term if shorter, of the financial asset to the net carrying amount of the financial asset. When calculating the EIR, the group estimates cash flows considering all contractual terms of the financial instruments, but does not include an expectation for future credit losses.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The average monthly number of persons (including directors) employed by the group and company during the year was:
The director did not receive any remuneration in the year.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
During the year, the corporation tax rate increased from 19% to 25%, starting from 1 April 2023, for companies with profits over £250,000. Therefore, the effective tax rate is 23.52%.
Details of the company's subsidiaries at 31 December 2023 are as follows:
* Exemption pursuant to Section 479A of the Companies Act 2006.
During the year, the group transferred its shareholding in London Bridging Limited to a related party as part of a group restructuring.
During the year, the group transferred its shareholding in Horizon Loans Limited (previously Credit Capital Corporation II Limited) to an unconnected party as part of a group restructuring.
The bridge loans receivable are secured.
Company:
In the previous year, an amount of £13,490,000 in amounts owed by group undertakings was included in amounts falling due within one year. A reclassification adjustment has been made in this respect.
Group:
Included in other creditors is an amount of £6,296,860 (2022: £5,963,403) due to the director. It is an interest free loan and is repayable on demand.
Company:
Included in other creditors is an amount of £6,252,635 (2022: £5,798,262) due to the director. It is an interest free loan and is repayable on demand.
Loans payable and other loans are secured by way of fixed and floating charges on all the assets of the group.
Included within loan notes, is a debtor amount of £4,193,836 (2022: creditor of £849,494) in relation to deferred purchase price.
On 4 November 2021, the group issued various classes of loan notes pursuant to the Loan Note Facility Agreement.
Class A Loan Notes are unlisted. Class B and C Loan Notes are listed on the Vienna MTF, a multilateral trading facility operated by Wiener Börse AG.
Class C Notes are held by the company. The company has undertaken that it shall retain, on an ongoing basis, a material net economic interest of not less than 5% in the transaction and such interest will comprise it holding Class C Loan Notes with a Loan Note Principal Amount Outstanding of no less than 5% of the nominal amount of the Mortgage Loan Portfolio held by the company's subsidiary, EarthAve Bridging Limited ("EBL"), from time to time.
The loan notes are limited recourse obligations of EBL. The right of recourse of the lenders under the respective agreements are only in respect of the assets of EBL. If the assets of EBL are insufficient to make all payments which are due to the lenders under the respective agreements, neither the lenders nor any persons acting of their behalf shall be entitled to take any further steps against EBL to recover any further sums and EBL's liability for any sums still unpaid shall be extinguished.
The maturity date of the Loan Notes is 4 November 2025.
Amounts included within loans payable and other loans payable after one year relate to senior lenders, mezzanine lenders, junior lenders and other loans.
Loan terms vary from 1 to 5 years and charge interest of between 7% and 14.5%.
Group:
During the period, total interest receivable from related parties amounted to £3,304,618 (2022: £3,437,630). At the end of the period, included in debtors, amounts totalling £37,762,583 (2022: £34,981,852) were due from related parties.
During the period, total fees and interest payable to related parties amounted to £8,086,882 (2022: £5,179,569). At the end of the period, included in creditors, amounts totalling £95,930,955 (2022: £62,435,859) were due to related parties.
Company:
During the period, total interest receivable from related parties amounted to £3,304,618 (2022: £3,437,630). At the end of the period, included in debtors, amounts totalling £37,762,583 (2022: £34,981,852) were due from related parties.
During the period, total fees and interest payable to related parties amounted to £6,057,641 (2022: £4,180,671). At the end of the period, included in creditors, amounts totalling £94,110,060 (2022: £58,212,660) were due to related parties.
Other than the transactions disclosed above and in note 13 the group and company’s other related party transactions were with wholly owned subsidiaries.
All the related parties are controlled by the director of the company.