Nucleus Cash Flow Finance2 Limited
Annual Report and Financial Statements
For the year ended 31 March 2024
Company Registration No. 10999923 (England and Wales)
Nucleus Cash Flow Finance2 Limited
Company Information
Directors
M Goldman
C Shah
S Willmett
Secretary
G May
Company number
10999923
Registered office
Mezzanine Floor
St Albans House
57-59 Haymarket
London
SW1Y 4QX
Auditor
Moore Kingston Smith LLP
6th Floor
9 Appold Street
London
EC2A 2AP
Nucleus Cash Flow Finance2 Limited
Contents
Page
Directors' report
1 - 2
Independent auditor's report
3 - 6
Profit and loss account
7
Balance sheet
8
Notes to the financial statements
9 - 15
Nucleus Cash Flow Finance2 Limited
Directors' Report
For the year ended 31 March 2024
Page 1

The directors present their annual report and financial statements for the year ended 31 March 2024.

Principal activities

The principal activity of the company continued to be that of the provision of alternative business financing via two methods. The first is as a SPV within the Nucleus Group, where loans are originated from the company and retained for the life of the loan. The second is operating within a special purpose entity arrangement with Atom Finance Ltd, where loans are originated from the company and sold to the SPE.

 

The Company originates both Nucleus Business Loans (NBL) and Nucleus Revenue Based Loans (RBL) under a £25,000,000 uni-tranch debt facility.

The Company then has further debt facilities with Pollen Street Capital in Nucleus Cash Flow Finance3 Limited and a securitisation, where Natwest are the Senior Debt Provider, in an orphan SPV Atom Finance Limited.

Both the Atom and PSC facilities purchase qualifying Nucleus Business loans originated by NCFF2 on an ongoing basis. Non-qualifying NBL and RBL loans remain within NCFF2 portfolio.

NCFF2 will continue to originate loans for both the PSC and Natwest facility until maximum limits are reached, £50m in the PSC facility and c.£260m in the securitisation SPV.

NCFF2 also holds first loss pieces (equity or Junior Loan notes) in both the NCFF3 and the Atom entity.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

M Goldman
C Shah
S Willmett
Auditor

The auditor, Moore Kingston Smith LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Nucleus Cash Flow Finance2 Limited
Directors' Report (Continued)
For the year ended 31 March 2024
Page 2
Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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:

 

 

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.

Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

Small companies exemption

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

On behalf of the board
S Willmett
Director
30 September 2024
Nucleus Cash Flow Finance2 Limited
Independent Auditor's Report
To the Members of Nucleus Cash Flow Finance2 Limited
Page 3
Opinion

We have audited the financial statements of Nucleus Cash Flow Finance2 Limited (the 'company') for the year ended 31 March 2024 which comprise the Profit and Loss Account, the Balance Sheet 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

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.

Nucleus Cash Flow Finance2 Limited
Independent Auditor's Report (Continued)
To the Members of Nucleus Cash Flow Finance2 Limited
Page 4

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

Matters on which we are required to report by exception

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 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:

 

Responsibilities of directors

As explained more fully in the Directors' Responsibilities Statement, 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.

Nucleus Cash Flow Finance2 Limited
Independent Auditor's Report (Continued)
To the Members of Nucleus Cash Flow Finance2 Limited
Page 5
Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

 

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

 

Nucleus Cash Flow Finance2 Limited
Independent Auditor's Report (Continued)
To the Members of Nucleus Cash Flow Finance2 Limited
Page 6

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.

Our approach was as follows:

 

 

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

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.

Ryan Day
Senior Statutory Auditor
for and on behalf of Moore Kingston Smith LLP
30 September 2024
Chartered Accountants
Statutory Auditor
6th Floor
9 Appold Street
London
EC2A 2AP
Nucleus Cash Flow Finance2 Limited
Profit and Loss Account
For the year ended 31 March 2024
Page 7
2024
2023
£
£
Turnover
4,829,270
565,080
Cost of sales
(2,193,061)
(33,862)
Gross profit
2,636,209
531,218
Administrative expenses
(920,607)
(331,876)
Other operating income
406,027
-
0
Operating profit
2,121,629
199,342
Interest payable and similar expenses
(2,400,295)
(357,146)
Loss before taxation
(278,666)
(157,804)
Tax on loss
-
0
-
0
Loss for the financial year
(278,666)
(157,804)
Nucleus Cash Flow Finance2 Limited
Balance Sheet
As at 31 March 2024
Page 8
2024
2023
Notes
£
£
£
£
Fixed assets
Investments
4
3,801,000
1,000
Current assets
Debtors
6
59,158,136
11,207,785
Cash at bank and in hand
206,961
298,713
59,365,097
11,506,498
Creditors: amounts falling due within one year
7
(1,476,960)
(287,295)
Net current assets
57,888,137
11,219,203
Total assets less current liabilities
61,689,137
11,220,203
Creditors: amounts falling due after more than one year
8
(62,110,600)
(11,363,000)
Net liabilities
(421,463)
(142,797)
Capital and reserves
Called up share capital
9
1,000
1,000
Profit and loss reserves
(422,463)
(143,797)
Total equity
(421,463)
(142,797)

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the board of directors and authorised for issue on 30 September 2024 and are signed on its behalf by:
S Willmett
Director
Company Registration No. 10999923
Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements
For the year ended 31 March 2024
Page 9
1
Accounting policies
Company information

Nucleus Cash Flow Finance2 Limited is a private company limited by shares domiciled and incorporated in England and Wales. The registered office is Mezzanine Floor, St Albans House, 57-59 Haymarket, London, United Kingdom, SW1Y 4QX.

1.1
Accounting convention

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 as applicable to companies subject to the small companies regime.

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.

1.2
Exemptions for qualifying entities under FRS 102

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

 

 

The financial statements of the company are consolidated in the financial statements of Nucleus Commercial Holdings Limited. These consolidated financial statements are available from its registered office, Mezzanine Floor, St Albans House, 57-59 Haymarket, London, SW1Y 4QX.

1.3
Going concern

The directors have reviewed the current financial position, cash flow and financial forecasts and believe the company can meet its obligations as they arise and will continue to trade for the foreseeable future. true

 

Nucleus Commercial Holdings Limited has agreed in writing to provide sufficient financial support to the company to enable it to continue to trade and to meet its liabilities as they fall due, for a period of at least one year from the date of signature of the audit report for the year ended 31 March 2024. On this basis, the director considers that the going concern basis is appropriate for these financial statements.

 

There are no material uncertainties that would cast significant doubt over the ability of the entity to continue to meet its obligations as they fall due and to continue trading for the foreseeable future. As such the accounts have been prepared on a going concern basis.

Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements (Continued)
For the year ended 31 March 2024
1
Accounting policies
(Continued)
Page 10
1.4
Turnover

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT.

 

Interest receivable is recognised on a monthly basis. Take on fees are accrued at the point of the start of the contract with the customer. Commitment fees relate to preliminary work carried out to establish the risk profile of the client which are then recharged and are accrued as invoiced.

 

Where take on fees have been accrued on day one and that loan is then sold to the special purpose entity, the performance obligations have been satisfied and the fees are then brought up front and recognised in full on the date of the loan sale.

 

Other operating income represents management charge income receivable from a group company.

1.5
Fixed asset investments

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The company considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.

Entities in which the company has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.

1.6
Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term liquid investments with original maturities of three months or less.

Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements (Continued)
For the year ended 31 March 2024
1
Accounting policies
(Continued)
Page 11
1.7
Financial instruments

Basic financial instruments are measured at cost. The company has no other financial instruments or basic financial instruments measured at fair value.

 

Deemed Loan

 

The directors of the company have concluded that the sale of loan assets to Atom Finance Ltd failed the derecognition criteria of FRS 102 and therefore, the company has not derecognised the SME loans. The company has recognised a limited recourse loan liability (a "Deemed Loan") at a company level from Atom Finance Ltd, which is secured on, and only has recourse to, the cash flows arising from the loans as a result of the residual interest held in Atom Finance Ltd.

 

The derecognition criteria of IAS 39 was failed and the company has not transferred all the risks and rewards of ownerships as it has retained the variability of returns by way of exposure via a Junior Note included in Other Debtors and rights to receive Deferred Consideration payments dependant on performance of the loans.

 

The Deemed Loan is initially recognised at the amount corresponding to the consideration received by the Company for the pool of loan assets, less any issue costs paid. The Deemed Loan has subsequently been adjusted for principal receipts from the underlying mortgage loans which have been retained by Atom Finance Ltd and which represent repayments of the Deemed Loan.

 

On the sale of the loans, the company sell the legal title and the entitlement to all future interest income. For this reason, the company have not recognised the interest income charged by Atom Finance Ltd to its SME borrowers on the loans sold by the company.

 

On Group consolidation, the Deemed Loan is eliminated given that the loan assets related to the special purpose entity are part of the Nucleus Commercial Holdings Limited group, as noted in the Subsidiaries note.

1.8
Equity instruments

Equity instruments issued by the company 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 company.

Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements (Continued)
For the year ended 31 March 2024
Page 12
2
Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Key sources of estimation uncertainty
Bad debt provision

The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current valuation of the assets that the company has security on, the ageing profile of debtors and historical experience. See note 6 for the net carrying amount of the debtors which includes an associated impairment provision of £680,943 (2023: £69,299) within trade debtors.

 

A specific provision is recognised in respect of loans where an assessment has been made that recovery of the principal is doubtful.

3
Employees

There were no persons employed by the company during the current or prior year.

4
Fixed asset investments
2024
2023
£
£
Investments
3,801,000
1,000
Movements in fixed asset investments
Shares in subsidiaries
£
Cost or valuation
At 1 April 2023
1,000
Additions
3,800,000
At 31 March 2024
3,801,000
Carrying amount
At 31 March 2024
3,801,000
At 31 March 2023
1,000
Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements (Continued)
For the year ended 31 March 2024
Page 13
5
Subsidiaries

Details of the company's subsidiaries at 31 March 2024 are as follows:

Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Nucleus Cash Flow Finance3 Limited
England and Wales
Ordinary
100.00

The company also has effective control over Atom Finance Ltd, a special purpose entity incorporated in England and Wales. Control is achieved when the company has rights to the variable returns and is exposed to the related risks as a result of its involvement with the structured entities.

 

The registered office is 10th Floor 5 Churchill Place, London, London, United Kingdom, E14 5HU.

 

 

6
Debtors
2024
2023
Amounts falling due within one year:
£
£
Trade debtors
42,853,913
11,207,785
Amounts owed by group undertakings
380,470
-
0
Other debtors
15,923,753
-
0
59,158,136
11,207,785

Included within trade debtors is a balance of £32,776,421 (2023: £8,208,881) due in more than one year, gross of the bad debt provision.

 

Included within other debtors is a balance of £15,525,000 (2023: £nil) due in more than one year.

 

Included within trade debtors are SME loans with a carrying value of £39,610,600 (2023: £nil) at the year end, which relate to loans where the legal title has been sold to Atom Finance Ltd, a special purpose entity controlled by the company, in the year. The loans remain on the company balance sheet as the derecognition criteria has not been met.

 

 

7
Creditors: amounts falling due within one year
2024
2023
£
£
Trade creditors
68,147
23,007
Amounts owed to group undertakings
1,000,000
14,122
Other creditors
408,813
250,166
1,476,960
287,295
Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements (Continued)
For the year ended 31 March 2024
Page 14
8
Creditors: amounts falling due after more than one year
2024
2023
£
£
Other creditors
62,110,600
11,363,000
Other creditors due after more than one year of £22,500,000 (2023: £11,363,000) are secured by a fixed and floating charge over the company's assets in their entirety.

Other creditors includes £39,610,600 (2023: £Nil) relating to a deemed loan with Atom Finance Ltd, a special purpose entity controlled by the company.
9
Called up share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
1,000
1,000
1,000
1,000
10
Related party transactions

The company has taken advantage of the exemption available in accordance with FRS 102 section 33 'Related Party Disclosures' not to disclose transactions entered into between two or more members of a group, as the company is a wholly owned subsidiary undertaking of the group with which it is party to the transactions.

 

During the year the company received income of £936,869 (2023: £nil) in respect of take-on fees from Atom Finance Ltd, a company controlled by the Nucleus Commercial Holdings Limited group. At the balance sheet date an amount of £nil (2023: £nil) was due from Atom Finance Ltd in respect of these take-on fees.

 

During the year the company received issued loan notes totalling £15,525,000 (2023: £nil) to Atom Finance Ltd. At the balance sheet date an amount of £15,525,000 (2023: £nil) was due from Atom Finance Ltd in respect of these loan notes.

 

A further related party year end balance relates to the carrying value of the loans sold from the originator (Nucleus Cash Flow Finance2 Limited) to the special purpose entity (Atom Finance Ltd) at year end, which have not been derecognised from the originators balance sheet given the sale does not meet the derecognition criteria.

 

At year end, there is a deemed loan balance of £39,610,600 (2023: £nil) with Atom Finance Ltd.

 

The transactions during the year relate to the balances of the loans sold from the originator to the SPV on each loan sale date.

Nucleus Cash Flow Finance2 Limited
Notes to the Financial Statements (Continued)
For the year ended 31 March 2024
Page 15
11
Control

The parent company of Nucleus Cash Flow Finance2 Limited is Nucleus Commercial Holdings Limited, a company incorporated in England and Wales who prepare consolidated accounts for the group. Copies of the consolidated accounts are available from Mezzanine Floor, St Albans House, 57-59 Haymarket, London, England, SW1Y 4QX.

 

The ultimate parent undertaking is Nucleus Holdings Limited, a company incorporated in Isle of Man.

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