enra

Specialist Finance

 

 

For the year ended 31 December 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Registered number: 13692985

Contents

 

4.3 Directors’ Report

 

The directors present their report and the audited consolidated financial statements of the Group for the year ended 31 December 2025.

 

Principal activities

 

The Company is a private company limited by shares and is incorporated and domiciled in England, UK. The address of its registered office is C/O Enra Specialist Finance, The Edward Hyde Building, 38 Clarendon Road, Watford, Hertfordshire, WD17 1JW.

 

The directors of the Company who were in office during the year and up to the date of signing the financial statements were:

 

•

Ms E Gestetner

•

Mr D Waters

 

For the year 31 December 2025

4.3 Directors' Report (continued)

 

Going Concern

The Directors have undertaken a Going Concern assessment, including a review of geopolitical uncertainty and continued stresses that customers are facing from higher interest rates and inflation. The Directors have considered the information contained in the financial statements, the latest business plan, profit forecasts and liquidity projections. These forecasts have been subject to sensitivity tests. The stress scenarios included severe but plausible downside scenarios to satisfy the Directors that the business will be able to meet its liabilities as they fall due over the coming year. Further details of this assessment are set out in Note 2.3 to the financial statements.

 

As a result, the Directors are satisfied that the Group and the Company have adequate resources to continue to operate as a going concern for a period of at least 12 months from the date of this report and have prepared the financial statements on that basis.

 

Statement of Directors’ Responsibilities in Respect of the Financial Statements

 

For the year 31 December 2025

4.3 Directors’ Report (continued)

 

Directors’ confirmations

 

Matters Covered in the Strategic Report

 

Directors’ indemnities

 

Post balance sheet events

The Directors have evaluated subsequent events from the date of the financial statements through to the date the financial statements were signed.

 

In April 2026, the Group completed its eighth public securitization, Elstree 2026-1 MIX PLC, securitising a portfolio of first and second charge mortgage loans originated by West One Secured Loans Limited, a wholly owned subsidiary of the Group. In April the Group also called the Elstree Funding No. 3 PLC securitization.

 

Independent Auditors

The independent auditors, PricewaterhouseCoopers LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

 

Approval of directors’ report

This report and the accompanying financial statements were approved by the board and signed on its behalf.

 

 

For the year 31 December 2025

5. Audit report and financial statements

 

For the year 31 December 2025

5.1 Independent auditors' report to the members of Eclipse Midco Limited

 

 

Opinion

 

We have audited the financial statements, included within the Annual Report, which comprise:

 

•

the Consolidated Statement of Financial Position as at 31 December 2025;

•

the Company Statement of Financial Position as at 31 December 2025;

•

the Consolidated Statement of Comprehensive Income for the year then ended;

•

the Consolidated Statement of Changes in Equity for the year then ended;

•

the Company Statement of Changes in Equity for the year then ended;

•

the Consolidated Statement of Cash Flows for the year then ended; and

•

the notes to the financial statements, comprising material accounting policy information and other explanatory information.

 

Basis for opinion

 

Conclusions relating to going concern

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and the 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.

 

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

 

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and the parent company's ability to continue as a going concern.

 

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

 

For the year 31 December 2025

5.1 Independent auditors' report to the members of Eclipse Midco Limited (continued)

 

Reporting on other information

 

Strategic report and the Directors' Report

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 year ended 31 December 2025 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.

 

In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and the Directors' Report.

 

Responsibilities for the financial statements and the audit

 

Use of this report

 

Companies Act 2006 exception reporting

 

Christopher Dalton (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

 

For the year 31 December 2025

5.2 Consolidated Statement of Comprehensive Income

 

 

All results derive from continuing operations.

For the year 31 December 2025

5.3 Consolidated Statement of Financial Position

 

 

The notes on pages 60 to 105 form an integral part of these financial statements.

 

The financial statements on pages 54 to 111 were approved and authorised for issue by the board and were signed on its behalf:

 

 

Company Registration No. 13692985

For the year 31 December 2025

5.4 Company Statement of Financial Position

 

 

 

The notes on pages 60 to 105 form an integral part of these financial statements.

 

The financial statements on pages 54 to 111 were approved and authorised for issue by the board and were signed on its behalf:

 

 

Company Registration No. 13692985

For the year 31 December 2025

5.5 Consolidated Statement of Changes in Equity

 

 

 

For the year 31 December 2025

5.6 Company Statement of Changes in Equity

 

 

 

For the year 31 December 2025

5.7 Consolidated Statement of Cash Flows

 

 

For the year 31 December 2025

5.8 Notes to the Financial Statements

 

1.

Company information

The Company’s principal place of business and its registered office is C/O Enra Specialist Finance, The Edward Hyde Building, 38 Clarendon Road, Watford, Herts, WD17 1JW.

 

The principal activity of the Company is that of a holding company. The Group’s trading operations are undertaken via its wholly owned subsidiary, Enra Specialist Finance Limited, and its subsidiaries (“Enra Specialist Finance” or “Enra” or “Enra Group”). The principal activities of the Enra Group are the distribution and provision of specialist finance services.

 

2.

Summary of material accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below.

 

2.1.

Basis of preparation

The financial statements have been prepared under the historical cost basis except for certain financial assets and liabilities (including derivative instruments), which have been measured at fair value. The accounting policies have been applied consistently.

 

The Group consolidated financial statements have been prepared on a going concern basis in accordance with UK- adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

 

 

The Company has taken advantage of the following disclosure exemptions under FRS 101:

 

the requirements of IFRS 

Financial Instruments: Disclosures

the requirements of the second sentence of paragraph 110 and paragraphs 113(a), 114, 115, 118, 119(a) to (c), 120 to 127 and 129 of IFRS 15 Revenue from Contracts with Customers

the requirements of paragraph 52, the second sentence of paragraph 89, and paragraphs 90, 91 and 93 of IFRS 16 Leases. The requirements of paragraph 58 of IFRS 16, provide that the disclosure of details in indebtedness relating to amounts payable after 5 years required by company law is presented separately for lease liabilities and other liabilities, and in total.

the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of:

paragraph 79(a)(iv) of IAS 1.

paragraph 73(e) of IAS 16 Property, Plant and Equipment.

paragraph 118(e) of IAS 38 Intangible Assets.

the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements

the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.

the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.2.

Basis of consolidation

 

2.3.

Going concern

 

2.4.

Interest income and expense

Interest income and expense are recognised for all financial instruments measured at amortised cost using the effective interest method. The effective interest rate (EIR) is the rate that, at the inception of the instrument, discounts its estimated future cash payments or receipts to the net carrying amount of the financial instrument.

 

The Group applies an EIR approach, under which the fixed-rate and reversionary-rate elements of each loan are identified and accounted for separately. Where loans contain an initial fixed-rate period followed by a contractual reversionary rate, the Group determines the EIR for each component based on its own distinct pattern of expected cash flows. The fixed-rate element and the reversionary element therefore each have separate EIR calculations, reflecting differences in contractual terms, interest recognition profiles and expected behavioural repayment characteristics.

 

When calculating the effective interest rate, the group considers all contractual terms of the financial instrument but does not consider future credit losses except for assets which are credit-impaired on origination. For assets purchased or originated credit impaired a credit-adjusted effective interest rate is calculated using estimated future cash flows including expected credit losses. The calculation includes all fees, transaction costs, and other premiums or discounts that relate to the origination of the instrument.

 

Interest on impaired financial assets is recognised at the original effective interest rate applied to the carrying amount as reduced by an allowance for impairment.

 

2.5.

Fees and commission income and expense

Fees and commission that are an integral part of the effective interest rate of a financial instrument, such as procuration fees paid to introducers, are recognised as an adjustment to the contractual interest rate and recorded in interest income or expense.

 

Fees and commissions that are not an integral part of the effective interest rate of a financial instrument are recognised as revenue in accordance with the principles of IFRS 15. These amounts are recognised when the Group satisfies its performance obligations by transferring the related services to the customer, in an amount that reflects the consideration to which the Group expects to be entitled. These items primarily consist of fees earned by the broking division, application fees, purchase fees, management and servicing fees.

 

Management and servicing fees are earned monthly from our portfolio of off-balance sheet loans under management by the Group. Management fees are based upon pre-agreed percentages of the interest income earned on the underlying loans, on a loan-by- loan basis and servicing fees are based on a pre-agreed percentage of loans under management.

 

2.6.

Finance costs

Finance costs represent interest and other funding costs at the Group level, not related to customer lending, along with the interest cost on lease liabilities.

 

Loan note interest is recognised using the effective interest method, in accordance with the terms of the loan (see Note 23).

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.7.

Taxation

Tax on the profit or loss for the period comprises current and deferred tax. Current and deferred tax items are recognised in the income statement except tax on items that are recognised in other comprehensive income shall be recognised in other comprehensive income, and tax on items that are recognised directly in equity shall be recognised in equity.

 

Current tax is the expected tax payable on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated income statement because it excludes certain items of income and expense that are taxable or deductible in other years and 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 date.

 

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of the assets and liabilities in the financial statements and the corresponding amounts used for taxation purposes and is accounted for using the balance sheet liability method. Deferred tax assets and liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

 

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date.

 

2.8.

Property and equipment

Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid, and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

 

Depreciation is provided on all property, plant, and equipment, other than land, over its expected useful life as follows:

 

 

The carrying values of property and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

 

2.9.

Intangible assets

Intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment allowances. The estimated useful life of at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

 

Expenditure relating to computer software incurred in respect of individual projects is capitalised only if all the following conditions are met:

 

the intangible asset is technically feasibly;

an intangible asset is created that can be separately identified;

the Group is deemed to have control over the intangible asset;

it is probable that the intangible asset created will generate future economic benefits; and

the development cost of the intangible asset can be measured reliably.

 

This type of expenditure is amortised on a straight-line basis over the expected useful life of the asset of 3 years.

 

Where the above conditions for recognition are not met, development expenditure is recognised as an expense in the period in which it is incurred.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.9

Intangible assets (continued)

Customer relationships are comprised of broker and customer relationships recognised on acquisition of the Galene Topco Limited group and amortized on a straight-line basis over seven years.

 

All intangible assets are reviewed for indications of impairment at least annually. If impairment is indicated, the asset’s recoverable amount (being the greater of fair value less cost to sell and value in use) is estimated. Value in use is calculated by discounting the future cash flows generated from the continuing use of the asset. If the carrying value of the asset is more than the recoverable amount, an impairment charge is recognised in the income statement.

 

2.10.

Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed.

 

After initial recognition, goodwill is measured at cost less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or groups of cash- generating units) that is expected to benefit from the synergies of the combination.

 

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent years. On disposal of the relevant cash- generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

2.11.

Investments in subsidiaries

 

2.12.

Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a non-financial asset or group of assets is impaired. A non-financial asset or group of assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss’ event) and that loss event (or events) has an impact on the estimated future cash flows of the financial or non-financial asset or group of assets that can be reliably estimated.

 

The recoverable amount, being the higher of fair value less cost to sell, or dispose of, and value in use, is determined for any assets for which an indication of impairment is identified or for assets where annual impairment testing is required. If the recoverable amount of an asset is less than its carrying value, the asset is considered impaired and the carrying value of the asset is reduced to its recoverable amount.

 

In assessing the value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflets current market assessments of the time value of money and the risks specific to the asset. In determining fair value less cost to sell, an appropriate valuation model is used.

 

Impairment losses are recognized as an expense in the consolidated statement of comprehensive income in the year in which they are identified. An impairment loss recognised in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Impairment losses relating to goodwill are not reversed in future periods.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.13.

Financial instruments

2.13.1.

Financial assets

The Group’s financial assets are initially recognized initially at fair value plus any directly attributable transaction costs.

 

The Group classifies its financial assets based on the business model and contractual cash flow characteristics of the financial assets. Under IFRS 9, the Group classifies financial assets into one of the following categories:

 

Amortised cost - the assets are held within a business model whose objective is to hold the assets in order to collect contractual cash flows, and where the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

Fair value through other comprehensive income (FVOCI) - assets held in a business model in which the assets are realized either by collecting the contractual cash flows or by the sale of the assets and where the contractual terms of the financial assets give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.

 

The Group’s financial assets, except derivatives, are classified as measured at amortised cost, being the gross carrying amount less expected impairment allowance, using the effective interest rate method

 

The Group’s business model for its financial assets is to hold them to collect contractual cash flows, with sales of mortgage loans and advances to customers only made internally to consolidated special purpose entities for the purpose of recognised the issuance of loans. The loans’ cash flows are consistent with a basic lending arrangement, the related interest only including consideration for the time value of money, credit and other basic lending risks, and a profit margin consistent with such an arrangement. Cash and cash equivalents also meet these conditions and accordingly management has classified all the Group’s financial assets (except for derivatives) as measured at amortised cost.

 

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset have expired or where substantially all the risks and rewards of ownership have been transferred.

 

The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. The Group then assesses whether the new terms are substantially different from the original ones. If the terms of an asset are substantially different, it is recognised and a new asset recognised at its fair value using its new effective interest rate. If the terms are not substantially different, the Group recalculates the gross carrying amount using the original effective interest rate and recognises a modification gain or loss in the income statement. Such modifications typically arise from forbearance because of financial difficulties of the borrower, and any gain or loss is included in impairment losses. A modified loan’s credit risk is assessed to see if it remains higher than on initial recognition for the purposes of calculating expected credit losses.

 

Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less.

 

Where cash is not freely available for the Group to use for its general purpose it is disclosed as restricted cash, this includes cash held in reserve accounts for the securitisation vehicles.

 

The Group recognises loss allowances for expected credit losses (ECLs) on loans and advances to customers and any exposures arising from loan commitments. ECLs are an unbiased and probability-weighted estimate of the present value of credit losses discounted over the expected life of an instrument at its original effective interest rate (EIR). Credit losses for financial assets are the difference between the contractual cash flows and the discounted cash flows expected to be received.

 

The Group considers whether financial assets are credit impaired at each reporting date. A financial asset is credit impaired when one or more events that have a detrimental impact on its estimated future cash flows have occurred.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.13.

Financial instruments (continued)

 

2.13.1.

Financial assets (continued)

Evidence of credit impairment includes:

 

Significant financial difficulty of the borrower

Breach of contract such as default, or becoming past due

The granting of concessions to the borrower that the Group would not otherwise consider

It becoming probable that the borrower will enter bankruptcy or other financial reorganization.

 

For financial instruments on which credit risk has not increased significantly since initial recognition, the Group measures loss allowances at an amount equal to the 12-month ECL, being the portion of lifetime ECL of those default events expected to arise within 12 months of the reporting date, weighted by probability of that event occurring. For all other financial instruments loss allowances are measured at an amount equal to the full lifetime ECL, being the lifetime ECL arising from all default events that may occur over the life of the instrument, probability weighted. The latter category of instruments includes those that have objective evidence of impairment at the reporting date.

 

Besides instruments that become credit impaired on entering default, lifetime ECLs are also used for any that are credit impaired on origination. If, due to the financial difficulties of the borrower, the terms of a financial asset are renegotiated or modified, or the asset is replaced with a new one, then an assessment is made of whether the asset should be derecognized. A loan to a borrower granted such concessions due to forbearance is evaluated to determine whether it is credit impaired or to have experienced a significant increase in credit risk. If this is the case a loss allowance will be recognised equivalent to the full lifetime ECL. If there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment, the loss allowance on the new asset will be based on a 12-month ECL.

 

Interest income is recognised at the effective rate on the gross carrying amount of a financial asset, before allowance for impairment, except for those assets which are credit impaired, for which interest income is recognised on the carrying amount net of the allowance for impairment.

 

Loans are written off when the Group expects no further recovery, and the amount of the loss has been determined. The Group may continue to apply enforcement activities for loans written off and any subsequent recoveries are recognised as impairment gains in the income statement. Loss allowances for ECL are presented in the statement of financial position as a deduction from the gross carrying amount of financial assets measured at amortised cost and as a provision in the case of loan commitments.

 

The ECL calculation is a product of an individual loan’s probability of default (PD), and loss given default (LGD) and exposure at default (EAD).

 

While loans and advances to customers are considered a single asset class for disclosure and classification purposes, the Group applies distinct ECL methodologies to its Bridging, Development Finance and Term and Commercial loan portfolios to reflect the differing behavioural characteristics, repayment profiles, and risk drivers associated with each product type. These tailored approaches ensure that ECL calculations appropriately capture the specific credit risk features inherent in each segment of the portfolio.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.13.

Financial instruments (continued)

 

2.13.1.

Financial assets (continued)

The ECL model applies four macroeconomic scenarios, baseline, upside, downside and severe downside, each reflecting different potential economic environments, and each assigned a probability weight. The economic scenarios and probability weights are reviewed internally to ensure that they are plausible and consistent with economic outlooks used for other purposes.

 

For the PD component, the Group converts its through-the-cycle (TTC) PDs to point-in-time (PiT) PDs by applying a forward-looking adjustment derived from a macroeconomic regression model that links historic default behaviour to key economic variables, including GDP, unemployment and the Bank of England base rate. The model produces a scenario-specific forward-looking adjustment that is applied to the TTC PD, which directly responds to the changing economic conditions of the scenarios. For the LGD component, the same macroeconomic scenarios are used to forecast regional house price indices (HPI), which are applied to project collateral values at the expected point of sale.

 

The PD and LGD outputs for each scenario are then combined with EAD estimates, and the resulting ECLs are probability-weighted across all scenarios to produce an unbiased and forward-looking estimate of credit losses. This approach ensures that the ECL calculation appropriately reflects both current economic conditions and the potential impact of future macroeconomic changes.

 

POCI financial assets are assets that are credit-impaired on initial recognition. For POCI assets, lifetime ECL are incorporated into the calculation of the effective interest rate on initial recognition. Consequently, POCI assets do not carry an impairment allowance on initial recognition. The amount recognised as a loss allowance after initial recognition is equal to the changes in lifetime ECL since initial recognition of the asset.

 

2.13.2.

Financial liabilities

The Group’s financial liabilities, which largely consist of borrowings, are all classified as measured at amortised cost, recognised initially at fair value, less any directly attributable transaction costs.

 

Financial liabilities are recognized when their contractual obligations are discharged, cancelled, or have expired. An exchange of financial liabilities with substantially different terms or a substantial modification to the terms of an existing financial liability is treated as an extinguishment of the original liability and the recognition of a new one. All gains or losses on non-substantial modifications, calculated as a change in the net present value of future cash flows using the original effective interest rate, are recognised immediately in the income statement.

 

2.14.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of a liability reflects its non-performance risk.

 

When available, the Group measures the fair value of an instrument using the quoted price in an active market for the instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an on-going basis.

 

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all the factors that market participants would consider in pricing a transaction. The Group classifies disclosed fair values according to a hierarchy that reflects the significance of observable market inputs.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.15.

Derivative financial instruments and hedging accounting

 

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

2.

Summary of material accounting policies (continued)

2.16.

Leased assets

 

2.17.

Foreign currency translation

The Group’s financial statements are presented in GBP, which is also the Group’s functional currency. All transactions, except for a small number of supplier invoices, occur in GBP.

 

2.18.

Dividend distribution

Dividend distributions to the Group’s shareholders are recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Group’s shareholders. No dividends were paid or approved during the period.

 

2.19.

Exceptional items

Exceptional items are disclosed separately in the financial statements, where it is necessary to do so to provide further understanding of the financial performance of the Group. They are items that are material, either because of their size or their nature, or that are non-recurring.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

3.

Critical accounting estimates and judgments

 

(a)

 

3.2

Critical judgments

Consolidation of structured entities - The Group makes investments in associated public and private securitisation entities by retaining 5% of the total notes issued by a public securitisation entity and a subordinated loan for a private securitisation entity, in addition to retaining the rights to residual income from mortgage loans held in the securitisation entities. The Group is exposed to a variable return from these securitisation entities. The Group holds the legal title to the mortgages held in the securitisation entities and makes management decisions on their behalf including setting of variable mortgage interest rates and the mortgage collections strategy. The power of the Group over the management and / or return of the structured entities has resulted in the structured entities being consolidated into the Group. There are no material unconsolidated structured entities.

 

4.

Changes in accounting policy

Standards and amendments to standards applicable to the Group that became effective during the year are listed below:

 

Amendments to IAS 21 - Lack of Exchangeability.

 

The amendment listed above did not have any material impact on these financial statements.

 

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2025 reporting periods and have not been early adopted by the Company, these are listed below:

 

Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Instruments (effective for annual periods beginning on or after 1 January 2026)

IFRS 19 Subsidiaries without Public Accountability: Disclosures (effective for annual periods beginning on or after 1 January 2027)

IFRS 18 Presentation and Disclosure in Financial Statements (effective for annual periods beginning on or after 1 January 2027)

Amendments to IAS 21 - Translation to a Hyperinflationary Presentation Currency (effective for annual periods beginning on or after 1 January 2027)

 

None of these are expected to have a material impact on these financial statements in the current or future reporting periods and on foreseeable future transactions.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

5.

Interest income

 

 

6.

Interest expense (excluding finance costs)

 

 

7.

Operating profit

 

 

8.

Auditors’ remuneration

 

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

9.

Exceptional expense

 

 

Exceptional corporate transaction fees in 2024 relate to group reconstruction costs of taking out old holding companies no longer required by the overall group. The exceptional release of amortised set-up facilities fees in 2024 related to a funding facility terminated early.

 

10.

Staff costs

 

 

 

Staff costs are included within administration expenses.

 

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

11.

Directors’ remuneration

 

 

 

12.

Finance costs

 

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

13.

Taxation

 

 

Reconciliation of the total tax credit

The tax credit in the income statement for the year is higher than the standard rate of corporation tax in the UK of 25% (2024: 25%).

 

The differences are reconciled below:

 

 

14.

Company profit for the financial year

 

As permitted by section 408 Companies Act 2006, the holding company’s statement of comprehensive income has not been included in these financial statements. The profit for the financial year is made up as follows:

 

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

15.

Cash and cash equivalents

 

 

 

16.

Derivative financial assets and liabilities

 

The Group applies hedge accounting for its strategy of cash flow hedging the interest-rate risk on floating-rate liabilities.

 

Cash flow hedging

Cash flow hedges of interest rate risk relate to hedges of exposures to variability in future interest payments due to the movement in SONIA benchmark interest rates. This variability in cash flows is hedged using interest rate swaps, which convert variable cash flows into fixed. For these cash flow hedge relationships, the hedged items are variable interest rate cash flows arising from floating rate financial liabilities with interest rates linked to SONIA. The variability in cash flows due to movements in the SONIA benchmark interest rate is hedged; this risk component is identified using the Groups risk management process and encompasses the majority of cash flow variability risk.

 

The Group establishes the existence of an economic relationship between the hedged item and the hedging instrument when the hedged exposure closely aligns with the receive floating leg of designated interest rate swaps. This alignment is determined by closely matching the notional amounts in each time bucket, ensuring the reference benchmark interest rate and payment frequency are identical. The notional amounts of the interest rate swaps are designated against a proportion of floating-rate notes that fund the fixed-rate mortgages, and these amounts decrease over time in accordance with the anticipated repayment of the mortgages.

 

The effectiveness of this strategy is assessed by comparing the changes in fair value of the interest-rate derivatives with changes in the fair value of the hedged floating-rate notes using the hypothetical-derivative method.

 

The Group establishes the hedging ratio by matching the notional amount of the derivative with the corresponding floating-rate notes, resulting in a hedge ratio of 1:1. The Group’s policy is to maintain a hedge ratio within 90-110% across all term products and durations.

 

These liabilities fund portfolios of mortgage assets, some of which pay fixed rates of interest, and to address the resultant risk of mismatches in the cash flows, the Group may enter into interest-rate swaps. The notional amounts of these derivatives are designated against a proportion of floating-rate debt funding fixed-rate mortgages and decline over time in line with the expected repayment of the mortgages.

 

The effectiveness of this strategy is assessed by comparing the changes in fair value of the interest-rate derivatives with changes in the fair value of the hedged floating-rate notes and uses the hypothetical-derivative method.

 

The main sources of ineffectiveness in the cash flow hedges of interest rate risk are:

 

The securitisation process can lead to a break in hedge accounting and re-designation of an off-market swaps

•

The inclusion of transaction costs or off-market interest rates in the fixed-rate leg

•

The counterparty credit risk impacting the fair value movements of the hedging instruments, but not the hedged item.

 

Differences in the expected maturity of the hedged item and the hedging instrument.

 

For the year 31 December 2025

5.8 Notes to the Financial Statements (continued)

 

16.

Derivative financial assets and liabilities (continued)

 

The following table analyses derivatives held for risk-management purposes by type of instrument: