TIDM15GY
RNS Number : 7703Q
Kenrick No.3 PLC
01 March 2021
Kenrick No. 3 Plc
Annual report and financial statements
for the year ended 31 March 2020
Registered number: 11001450
Kenrick No. 3 Plc
Contents Page
Directors and advisors 1
Strategic report 2
Directors' report 4
Statement of Directors' responsibilities in respect of
the strategic report, Directors' report and the financial
statements 5
Independent auditor's report to the members of Kenrick
No. 3 Plc 6
Statement of comprehensive income 10
Statement of changes in equity 10
Statement of financial position 11
Statement of cash flows 12
Notes to the financial statements 13
Kenrick No. 3 Plc
Directors and advisors
Directors
Charles Michael Leahy
MaplesFS UK Corporate
Director No.1 Limited
MaplesFS UK Corporate
Director No.2 Limited
Company secretary
Maples Fiduciary Services
(UK) Limited
Auditor
KPMG LLP
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
Solicitors
Clifford Chance LLP
London
Bankers
Citibank
London
Registered office
11th Floor
200 Aldersgate Street
London
EC1A 4HD
Registered number
11001450
Kenrick No. 3 Plc
Strategic report
The Directors present their strategic report for Kenrick No.
3 Plc (the Company) for the year ended 31 March 2020.
Business model, objectives and future developments
The principal activity of the Company is the holding of secured
residential mortgage portfolios.
On 25 January 2018, the Company acquired a 99% beneficial
interest in a mortgage portfolio secured on residential properties
located in England and Wales. The assets were acquired from
West Bromwich Building Society (the Seller), the originator
of the mortgages. The acquisition of these loans was financed
by the issue of mortgage backed floating rate loan notes (GBP350,000,000
Class A and GBP33,100,000 Class B floating rate notes with
a final maturity date of October 2054). The notes are listed
on the London Stock Exchange.
The securitisation structure has been established as a means
of raising finance for West Bromwich Building Society and
its subsidiaries. Under the terms of the securitisation transaction
the activities of the Company are managed through a series
of agreements whereby the Company retains the rights to a
profit of
GBP1,000 per annum, subject to there being sufficient available
revenue receipts. Deferred consideration is payable to West
Bromwich Building Society to the extent to which surplus income
is generated by the residential mortgage assets to which the
Company holds the beneficial title.
The Company's tax charge is based on the tax regime for securitisation
companies.
The principal asset of the Company is a beneficial interest
in a mortgage portfolio, which is classified as a deemed loan
in the Company's statement of financial position, as described
in note 1. The deemed loan is subject to economic factors
affecting the residential loan market and reviewed annually
for impairment.
The Directors are not, at the date of this report, aware of
any likely major changes in the Company's activities in the
next year.
Results and review of the business
The Company's loss for the year of GBP796,000 (2019 restated:
loss GBP414,000) has been transferred to reserves.
The statement of financial position on page 11 of the financial
statements shows the Company's financial position at the period
end date.
Key performance indicators
The key performance indicators used by management in assessing
the performance of the Company are monitoring of actual cash
flows against planned cash flows within the scheduled waterfall
of payments and the level of arrears in the underlying mortgage
portfolio.
During the period, the Company made all required payments
on the loan notes and paid all normal operating expenses.
At 31 March 2020, there were no loans with arrears of three
months or more in the underlying mortgage portfolio (2019:
nil).
Principal risks and uncertainties
The Company's financial instruments comprise a deemed loan
to West Bromwich Building Society (equivalent to the value
of its investment in the mortgages held in trust), cash and
liquid resources, derivatives and a subordinated loan between
the Company and West Bromwich Building Society. The Company
is a securitisation company and has been structured so as
to avoid, as far as possible, all forms of financial risk.
As explained above, during the period, the Company has made
all required payments on the loan notes and paid all normal
operating expenses.
As with the financial impact on the economy, the longer-term
impact of COVID-19 on the Company is, as yet, unquantifiable
with any degree of confidence. The sheer scale of the government's
various support initiatives for individuals and businesses
is targeted at minimising the adverse impact on the economy.
The Company revisited assumptions used in its ECL calculations
as a result of the pandemic and the introduction of UK government
support schemes that followed.
The outcome of Brexit is not expected to directly impact the
Company's operations, with its activities being entirely UK-based.
However, there are risks that could impact the wider economy
in the transitional period.
It is, and has been throughout the period under review, the
Company's policy that no trading in financial instruments
be undertaken.
The principal risks arising from the Company's financial instruments
are credit risk and interest rate risk. These, and other risks
which may affect the Company's performance, are detailed below
and in note 2 to the financial statements.
Credit risk
Credit risk can be described as the risk of customers or counterparties
being unable to meet their financial obligations to the Company
as they become due.
The ability of the Company to pay loan interest and principal
will depend on the amount and timing of payment of interest
on the mortgage loans and the repayment of principal by the
borrowers. Credit risk arises on the individual loans within
the mortgage loan portfolio which are in turn secured on the
underlying UK residential properties. The performance of these
loans is therefore influenced by the economic background and
the UK residential property market. Under International Financial
Reporting Standards (IFRSs) the beneficial interest in the
mortgage portfolio is classified as a deemed loan in the Company's
statement of financial position.
In terms of administrator/cash management, the Company has
engaged West Bromwich Building Society to monitor repayments
on the mortgage loans in accordance with its credit policies.
West Bromwich Building Society is also responsible for ensuring
residential loans in the Trust loan pool meet the eligibility
criteria at loan and pool level.
As the Company is only required to make repayments of interest
and principal to the extent that repayments are received from
the mortgage administrator in respect of the mortgage loans,
impairment losses on the deemed loan are not borne by the
Company but by the Seller (in terms of impacting the Company's
ability to pay deferred consideration and repay principal
and interest on the subordinated loan provided to the Company
by the Seller).
Interest rate risk
Interest rate risk exists where assets and liabilities have
interest rates set under a different basis or which reset
at different times. The Company minimises its exposure to
interest rate risk by ensuring that the interest rate characteristics
of assets and liabilities are similar. Where this is not possible
the Company uses derivative financial instruments to mitigate
interest rate risk. Interest rate swaps have therefore been
entered into to manage the Company's exposure to interest
rate risk.
Kenrick No. 3 Plc Strategic report (continued) Liquidity
risk
Liquidity risk is the risk that the Company either does not have
sufficient financial resources to enable it to meet its obligations
as they fall due or can secure such resources only at excessive
cost. The Company's policy to mitigate liquidity risk is through
the use of a subordinated loan from West Bromwich Building
Society.
The loan notes are obligations solely of the Company and will
not be the responsibility of, or guaranteed by, any other entity.
In particular, the loan notes will not be obligations or
responsibilities of, or guaranteed by, the Seller or any of its
affiliates. However due to the limited recourse nature of the Notes
the Company is only obliged to make repayments of interest and
principal in respect of the Notes to the extent that repayments are
received from the mortgage administrator in respect of the mortgage
loans. Further details of the loan notes are given in note 12.
Operational risk
Operational risk is the risk of loss and/or the negative impact
on the Company resulting from inadequate or failed internal
processes or systems, inability to attract, retain and motivate
people, or from external events.
The activities of the Company are strictly governed by the
transaction documents and Prospectus which are designed to
facilitate effective and efficient operations whilst managing the
risk of failure to achieve business objectives. The Company does
not have any employees and has entered into contracts with a number
of third parties whose responsibilities are determined by the
transaction agreements.
The Company's operations are managed by West Bromwich Building
Society, which has established a thorough operational risk
framework which involves a Group Operational and Conduct Risk team,
which co-ordinates regular reviews with the function managers and
collates the output for review by executive management, the
Operational, Conduct and Information Risk Group and the Group Risk
Committee.
The Company's operations are also subject to periodic review by
the Internal Audit function of West Bromwich Building Society.
Capital risk management
The Company is not subject to any external capital requirements
except for the minimum requirement under the Companies Act 2006.
The Company has not breached the minimum requirement.
Section 172 Statement
A new requirement for firms is to explain how the directors have
considered the views of stakeholders as part of long-term decision
making, in the form of a Section 172 Statement.
Obligations included within the new statement require directors
to act in the way they consider, in good faith, would be most
likely to promote the success of the organisation and in doing so
have regard to a number of key areas:
- The likely consequences of any decision in the long term;
- How constructive relationships with wider stakeholder groups
are fostered;
- How any community and environmental impacts of our operations
are considered;
- How a reputation for high standards of business conduct is
maintained; and
- The need to act fairly and balance the interests of
stakeholders
The entity's key stakeholders are its parent undertaking and
noteholders, its customers as well as the regulator. The entity
does not have any employees and does not occupy stand-alone
premises thereby minimising the community and environmental
impacts.
A summary of the entity's engagement with its key stakeholders
is presented below. Additionally, the WBBS Group makes use of
feedback from engagement with its wider stakeholder group including
investors, intermediaries and suppliers to ensure it is achieving
high standards of business conduct.
Our Stakeholders How the Board has considered How else we engage to
views within decision making ensure views are considered
Parent and The West Bromwich Building Decisions taken at WBBS
noteholder Society (WBBS) manages its Group level are aligned
undertakings operations on a Group basis to the long term strategic
as discussed in its annual objectives of the Group
report. and factor in the views
of the Group's Employee
A number of Group Committees and Member Councils as
support the Company Board in well as the wider stakeholders
the effective measurement and of the Group as described
management of risk as described below.
in the principal risks and
uncertainties section.
---------------------------------- --------------------------------
Our Customers The Group has a Member Council - Management information
which acts as a formal body supplied to the Group
that helps to inform the Group Board monthly covering
Board's long-term strategic key customer metrics
decision making. - An active programme
Examples include the importance of Members' ViewPoint
of extending the Society's Events providing an opportunity
digital capabilities. for members to ask questions
of Group Executive Directors
and senior management.
---------------------------------- --------------------------------
Our Regulators The West Bromwich Building - Monthly updates provided
Society's Board maintains an on key regulatory items
open and transparent relationship covered within the material
with both the FCA and the PRA. supplied to the Group
Key engagement includes: Board.
- The management of any actions - The Group engages in
raised by regulatory reviews regular dialogue with
at Board level with key updates regulatory supervisors
provided at regular intervals; covering principal risks
and and other matters. Regular
- Attendance of Board members regulatory 'horizon scanning'
both Executive and non-Executive completed by the Group
at key regulatory update meetings Legal and Regulatory
so the Society's position is Team to remain well informed
considered in light of emerging regarding latest updates
developments. and actions required.
---------------------------------- --------------------------------
On behalf of the Board
Charles Leahy
Representing MaplesFS UK Corporate Director No.1 Limited,
Director 17 September 2020
Kenrick No. 3 Plc
Directors' report
The Directors present their annual report and the audited
financial statements of Kenrick No. 3 Plc (the Company) for
the year ended 31 March 2020.
Going concern
After considering the principal risks and uncertainties within
the strategic report, the directors have a reasonable expectation
that the Company will have adequate resources to continue
in operational existence for the foreseeable future. This
is further discussed in note 1.
Share capital
The issued share capital consists of 1 fully paid ordinary
share of GBP1 and 49,999 quarter paid ordinary shares of GBP1
each. The shares are beneficially owned by the Company's parent,
Kenrick No. 3 Holdings Limited.
Directors and Directors' interests
The Directors who held office during the period and subsequently
were as follows:
Charles Michael Leahy
MaplesFS UK Corporate Director No.1 Limited
MaplesFS UK Corporate Director No.2 Limited
None of the Directors has any beneficial interest in the ordinary
share capital of the Company. None of the Directors had any
interest either during or at the end of the period in any
material contract or arrangement with the Company.
Company secretary
Maples Fiduciary Services Limited served as the Company Secretary
during the period.
Dividend
The Directors do not recommend a payment of a dividend (2019:
GBPnil).
Third party indemnity
Qualifying third party indemnity provisions for the benefit
of the Directors were in force during the period under review
and remain in force as at the date of approval of the annual
report and financial statements.
Information included in the strategic report
In accordance with Section 414(c) of the Companies Act 2006
(Strategic Report and Directors Report) Regulations 2013,
the Company has prepared a strategic report that contains
information that would have previously been included in the
Directors' report, which includes the principal activity of
the company and review of the business.
Disclosure of information to the auditor
The Directors who held office at the date of approval of this
Directors' report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is unaware, and each Director has taken all the steps
that they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish that
the Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of section 418(2) of the Companies Act
2006.
Auditor
In accordance with the relevant sections of the Companies
Act 2006, the Company has dispensed with the requirements
to re-appoint the auditor annually. New auditors will be proposed
at the forthcoming annual general meeting of the Company.
Kenrick No. 3 Plc
Directors' report (continued)
Statement of Directors' responsibilities in respect of the
strategic report, Directors' report and the financial statements
The Directors are responsible for preparing the strategic
report, the Directors' report and the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial period. Under that law they have elected
to prepare the financial statements in accordance with International
Financial Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU) 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:
* select suitable accounting policies and then apply
them consistently;
* make judgements and estimates that are reasonable,
relevant and reliable;
* state whether they have been prepared in accordance
with IFRSs as adopted by the EU;
* assess the Company's ability to continue as a going
concern, disclosing, as applicable, matters related
to going concern; and
-- use the going concern basis of accounting unless they
either intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
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 responsible for such internal control
as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility
for taking such steps as are reasonably open to them to safeguard
the assets of the Company and to prevent and detect fraud
and other irregularities.
On behalf of the Board
Charles Leahy
Representing MaplesFS UK Corporate Director No.1 Limited,
Director
17 September 2020
Kenrick No. 3 Plc
Independent auditor's report to the members of Kenrick No.
3 Plc
1 Our opinion is unmodified
We have audited the financial statements of Kenrick No. 3
plc ("the Company") for the year ended 31 March 2020 which
comprise the statement of comprehensive income, statement
of changes in equity, statement of financial position, statement
of cash flows, and the related notes, including the accounting
policies in note 1.
In our opinion the financial statements:
* give a true and fair view of the state of the
Company's affairs as at 31 March 2020 and of its loss
for the year then ended;
* have been properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union; and
* have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities
are described below. We believe that the audit evidence we
have obtained is a sufficient and appropriate basis for our
opinion. Our audit opinion is consistent with our report
to those charged with governance.
We were first appointed as auditor by the directors in 2018.
The period of total uninterrupted engagement is for the two
financial years ended 31 March 2020. We have fulfilled our
ethical responsibilities under, and we remain independent
of the Company in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public
interest entities. No non-audit services prohibited by that
standard were provided.
2 Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks
of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team.
We summarise below the key audit matters, in arriving at
our audit opinion above, together with our key audit procedures
to address those matters and, as required for public interest
entities, our results from those procedures. These matters
were addressed, and our results are based on procedures undertaken,
in the context of, and solely for the purpose of, our audit
of the financial statements as a whole, and in forming our
opinion thereon, and consequently are incidental to that
opinion, and we do not provide a separate opinion on these
matters.
Kenrick No. 3 Plc
Independent auditor's report to the members of Kenrick No. 3 Plc
(continued)
The risk Our response
Going concern
Refer to page 4 (strategic report) and page 13 (basis of
preparation)
Disclosure quality Our procedures included:
The financial statements Tests of detail: We inspected
explain how the directors the securitisation agreement to
have formed a judgement that identify the timings from which
it is appropriate to adopt parties have the power to instruct
the going concern basis of redemption of the loan notes
preparation for the Company's
financial statements. Assessing transparency: We critically
assessed the completeness and accuracy
The nature of the Company of the matters covered in the going
is such that it is governed concern disclosure in the financial
by a securitisation agreement statements using our knowledge
that stipulates the parties of the relevant facts and circumstances
whom have the power to redeem developed during our audit work
the issued loan notes and and by considering the securitisation
proceed to collapse the securitisation structure and agreements.
and the timing of when these
parties can instigate redemption. Our results
There is a risk to the application We found the resulting disclosure
of the going concern assumption of the going concern basis of preparation
where the securitisation to be acceptable (2019: acceptable).
agreement allows for redemption
of the loan notes within
12 months of the date of
this audit report.
As such, clear and full disclosure
of the facts and the directors'
rationale for the use of
the going concern basis of
preparation is a key financial
statement disclosure and
so was the focus of our audit
in this area.
------------------------------------------
Valuation of deemed loan
Deemed loan: GBP283,745k (2019: GBP337,299k)
Refer to pages 14 to 16 (accounting policy) and notes 2
and 9 (financial disclosures)
Subjective estimate Our procedures included:
The Company recognises a Historical comparisons: We critically
deemed loan asset, being assessed certain assumptions used
the beneficial interest in in the model, being LGD and PD,
a mortgage portfolio secured against historical experience.
on residential properties. This included assessing the accuracy
The value of the deemed loan of the model's predicted PDs against
is subject to the performance actual default experience and comparing
of the underlying loan portfolio valuation haircut assumptions used
and to economic factors affecting in estimating LGDs against actual
the residential loan market. historical sales data of the West
Bromwich Building Society, the
The directors consider the originator of the mortgage loans.
valuation of the deemed loan
by assessing the underlying Benchmarking assumptions: We compared
residential mortgage loans assumptions and judgements made
for impairment. by management, for example regarding
significant increase in credit
The directors use models risk criteria and the definition
to determine the level of of default, against comparable
expected credit loss ("ECL") peers to assess their reasonableness.
required to be recognised
on the underlying loans. Tests of details: We critically
Given the subjectivity inherent assessed the collateral valuations
in estimating the recoverability used in the ECL model by comparing
of loan balances on a forward-looking the original valuation to the underlying
basis, the assessment of valuation report for a selection
ECLs becomes highly judgemental. of loan accounts and recalculating
The subjectivity in respect the indexation applied to the original
of these assumptions has valuation in determining a current
increased further at the collateral valuation for those
current year end as a result loan accounts.
of the uncertainties arising
from COVID-19. Our market expertise: Our economics
specialists assessed the forward
In particular, there is subjectivity economic guidance applied by the
in the following key areas: Company in the ECL models to consider
- Significant increase in the reasonableness of assumptions
credit risk ('SICR'): The against market data, our own independent
criteria selected to identify assumptions and peer experience.
a significant increase in This included considering the impact
credit risk is a key area of uncertainties arising from COVID-
of judgement within the Company's 19 in the current economic forecasts.
ECL calculation as these
criteria determine whether Sensitivity analysis: We performed
a 12 month or lifetime provision stress testing on the key assumptions
is recorded. to assess the sensitivity of the
resulting expected credit loss
- Model estimations: Inherently to these.
judgemental modelling is
used to estimate ECLs, particularly Test of details: We critically
in determining Probabilities assessed adjustments made outside
of Default ("PD") and Loss of the Company's models by challenging
Given Default ("LGD"), including the calculation methodology applied
collateral valuations. The and critically assessing the assumptions
PD and LGD assumptions used used in determining the value of
in the models are the key the post-model adjustments recognised.
drivers of the ECL results
and are therefore the most Assessing transparency: We evaluated
significant judgemental aspect the adequacy of the Company's disclosures
of the Company's ECL modelling in note 1 regarding the estimation
approach. uncertainty inherent in arriving
at the expected credit loss amount.
- Economic scenarios: IFRS This included an assessment of
9 requires the Company to the disclosures made in light of
measure ECLs on an unbiased, the increased uncertainty arising
forward-looking basis reflecting from COVID-19.
a range of future economic
conditions. Significant management Our results
judgement is applied in determining
the economic scenarios used We found the resulting estimate
and the probability weightings of the valuation of the deemed
applied to them. loan to be acceptable (2019: acceptable).
- Post-model adjustments:
The overall level of expected
credit losses recognised
is also sensitive to the
application of post-model
adjustments made by management
in respect of COVID-19.
The effect of these matters
is that, as part of our risk
assessment, we determined
that the valuation of the
deemed loan has a high degree
of estimation uncertainty,
with a potential range of
reasonable outcomes greater
than our materiality for
the financial statements
as a whole, and potentially
many times that amount.
------------------------------------------
Kenrick No. 3 Plc
Independent auditor's report to the members of Kenrick No. 3 Plc
(continued)
Complexity of the securitisation structure contractual terms
present a risk to the accounting of interest income, interest
expense, deemed loan and borrowings
Interest income GBP4,589k (2019 GBP6,028k) Interest expense
GBP4,011k (2019: GBP5,228k)
Deemed loan receivable GBP283,745k (2019: GBP337,299k) Debt
securities in issue GBP298,423k (2019: GBP351,347k)
Refer to pages 14 to 18 (accounting policy) and notes 3,
4, 9 and 12 (financial disclosures)
Securitisation structure
Inspection of documents: We compared
The company was set up by the underlying transaction flows
West Bromwich Building Society and accounting against key legal
with the sole purpose being and contractual documents and reports.
to issue asset-backed notes
as part of the securitisation These included:
of a pool of loans.
- The base prospectus and final
The complex structure can terms of the Deemed loan and Debt
lead to a lack of understanding Securities in Issue which govern
of transactions and the contractual the operation of the Company and
terms of the various financial its transaction flows to understand
instruments, hence there the securitisation structure and
is risk that interest income accounting impact of the securitisation
and principal balances receivable transaction.
from loans (referred to as
'Deemed loan receivable'), - All minutes of board of directors'
interest expense and principal meetings for the year to identify
balances of asset backed and investigate any unusual trends
notes payable to investors or incidents that would indicate
(referred to as 'Debt securities a misstatement in the balances
in issue') are not appropriately of the Deemed loan, Debt Securities
accounted and reported. in Issue and associated interest
income and interest expense.
Test of details: We have recalculated
interest income and interest expense
arising from the Deemed loan and
Debt Securities in Issue respectively.
Our results
We found the accounting and reporting
of the Deemed Loan, Debt Securities
in Issue, interest income and interest
expense to be acceptable (2019:
acceptable).
-----------------------------------------
We continue to perform procedures over the impact of
uncertainties due to the UK exiting the European Union on our
audit. However, as time has passed since Article 50 was first
triggered, and the UK has now left the EU, the Company has had more
time to plan for different scenarios of exit and the level of
understanding about how Brexit might impact the Company has
increased. As such, we have not assessed this as one of the most
significant risks in our current year audit and, therefore, it is
not separately identified in our report this year.
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP800k (2019: GBP800k), determined with reference to a benchmark
of total assets, of which it represents 0.27% (2019: 0.23%).
We consider total assets to be the most appropriate benchmark
for materiality as the Company is not set up to make a statutory
profit and accordingly its strategy is not one purely of profit
maximisation. Total assets are deemed to be the benchmark which
users of the financial statements focus their attention on.
We agreed to report to those charged with governance any
corrected or uncorrected identified misstatements exceeding GBP40k,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
4 We have nothing to report on going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over their ability to continue as
a going concern for at least a year from the date of approval of
the financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the
directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Company will
continue in operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on the work described in our response to
that key audit matter, we are required to report to you if we have
anything material to add or draw attention to in relation to the
directors' statement in Note 1 to the financial statements on the
use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Company's
use of that basis for a period of at least twelve months from the
date of approval of the financial statements.
We have nothing to report in this respect.
5 We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Kenrick No. 3 Plc
Independent auditor's report to the members of Kenrick No.
3 Plc (continued)
Strategic report and directors' report
Based solely on our work on the other information:
* we have not identified material misstatements in the
strategic report and the directors' report;
* in our opinion the information given in those reports
for the financial period is consistent with the
financial statements; and
* in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
6 We have nothing to report on the other matters on which
we are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
* adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
* the financial statements are not in agreement with
the accounting records and returns; or
* certain disclosures of directors' remuneration
specified by law are not made; or
-- we have not received all the information and explanations
we require for our audit. We have nothing to report in these
respects.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page
5, the Directors are responsible for: the preparation of
the financial statements including being satisfied that they
give a true and fair view; such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error; 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 they either intend to liquidate the
Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities
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 other irregularities
(see below), or error, and to issue our opinion in an auditor's
report. Reasonable assurance is a high level of assurance,
but does not guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other
irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided
on the FRC's website at www.frc.org.uk/auditorsresponsibilities.
Irregularities - ability to detect
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial
and sector experience and through discussion with the directors
and other management (as required by auditing standards),
and discussed with the directors and other management the
policies and procedures regarding compliance with laws and
regulations. We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
The company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation and taxation legislation and we assessed
the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement
items.
Whilst the company is subject to many other laws and regulations,
we did not identify any others where the consequences of
non-compliance alone could have a material effect on amounts
or disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we
have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed
non- compliance with laws and regulations (irregularities)
is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures
required by auditing standards would identify it. In addition,
as with any audit, there remained a higher risk of non-detection
of irregularities, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override
of internal controls. We are not responsible for preventing
non-compliance and cannot be expected to detect non-compliance
with all laws and regulations.
8 The purpose of our audit work and to whom we owe our responsibilities
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.
Matthew Rowell (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway Birmingham
B4 6GH
21 September 2020
Kenrick No. 3 Plc
Statement of comprehensive
income
for the year ended 31 March
2020
Year ended Period
Notes 31 ended 31
March 2020 March 2019
Restated*
GBP'000 GBP'000
Interest receivable and
similar income 3 4,589 6,028
Interest expense and similar
charges 4 (4,011) (5,228)
------------------- -----------
Net interest receivable 578 800
Net fair value losses on
derivatives (796) (431)
Administrative expenses (578) (779)
------------------- -----------
Loss before tax 5 (796) (410)
Taxation 7 - (4)
------------------- -----------
Loss for the year (796) (414)
The loss for the year was derived wholly from continuing
operations.
There has been no comprehensive income or expense other than
the profit for the year.
*2019 fair value losses on derivatives have been restated
as explained in note 19.
Statement of changes in
equity
for the year ended 31 March
2020
Share capital Retained Total
losses
GBP'000 GBP'000 GBP'000
Balance at 1 April 2019 13 (414) (401)
Loss for the year - (796) (796)
---------------------------- ------------------- -----------
Balance at 31 March 2020 13 (1,210) (1,197)
============================ =================== ===========
Share capital Retained Total
losses
GBP'000 GBP'000 GBP'000
Balance at 6 October 2017 - - -
Issue of share capital 13 - 13
Loss for the period (restated)* - (414) (414)
---------------------------- ------------------- -----------
Balance at 31 March 2019
(restated)* 13 (414) (401)
============================ =================== ===========
The notes on pages 13 to 29 form part of
these financial statements.
*2019 loss for the period and retained earnings
have been restated as explained in note 19.
Kenrick No. 3 Plc
Statement of financial position
at 31 March 2020
Notes 2020 2019
Restated*
GBP'000 GBP'000
Assets
Cash and cash equivalents 8 14,808 13,852
Deemed loan due from Group
undertaking 9 283,745 337,299
Derivative financial instruments 10 - -
Trade and other receivables 11 343 617
------------------ ---------------
Total assets 298,896 351,768
Liabilities
Debt securities in issue 12 298,423 351,347
Derivative financial instruments 10 1,529 658
Trade and other payables 13 141 160
Current tax - 4
------------------ ---------------
Total liabilities 300,093 352,169
Equity
Share capital 15 13 13
Retained losses 16 (1,210) (414)
------------------ ---------------
Total equity attributable
to equity holders of parent (1,197) (401)
------------------ ---------------
Total liabilities and equity 298,896 351,768
The notes on pages 13 to 29
form part of these financial
statements.
*2019 derivative financial instruments and retained earnings
have been restated in note 19. There was no impact on the
brought forward figures for the period ended 31 March 2019
from the restatement detailed in note 19.
These financial statements were approved by the Board of
Directors on 17 September 2020 and were signed on its behalf
by:
Charles Leahy
Representing MaplesFS UK Corporate
Director No.1 Limited, Director
Registered number: 11001450
Kenrick No. 3 Plc
Statement of cash flows
for the period ended 31 March
2020.
Year ended Period
Notes 31 ended 31
March 2020 March 2019
Restated*
GBP'000 GBP'000
Cash flows from operating
activities
Loss before tax (796) (410)
Amortisation of Note issue
costs 334 472
Accrued interest on debt
securities in issue 698 966
Movement in fair value of
derivative financial instruments 871 658
------------------ -----------
Net cash inflow from operating activities
before changes in operating assets and liabilities 1,107 1,686
Repayment of deemed loan
due from Group undertaking 53,554 (337,299)
Movement in trade and other
receivables 274 (617)
Movement in trade and other
payables (19) 160
Tax paid (4) -
------------------ -----------
Net cash outflow from operating
activities 54,912 (336,070)
Cash flows from financing
activities
Issue of share capital - 13
Issue of debt securities - 381,629
Repayment of debt securities
in issue (53,956) (31,720)
------------------ -----------
Net cash flows from financing
activities (53,956) 349,922
Net increase in cash and
cash equivalents 956 13,852
Cash and cash equivalents
at beginning of period 13,852 -
------------------ -----------
Cash and cash equivalents
at end of period 8 14,808 13,852
The notes on pages 13 to
29 form part of these financial
statements.
*2019 loss before tax and derivative financial instruments
have been restated as explained in note 19, which have no
impact on net cash inflow from operating activities.
Kenrick No. 3 Plc
Notes to the financial statements
1 Accounting policies
Kenrick No. 3 Plc (the Company) is a public limited company
incorporated in the United Kingdom and registered in England
and Wales under the Companies Act 2006. The Company's registered
office and principal activities are set out on pages 1 and
2 respectively.
The principal accounting policies applied consistently in
the preparation of these financial statements are set out
below.
Basis of preparation
The financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) and
its interpretations as adopted by the European Union (EU)
and effective at 31 March 2020.
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of derivatives
at fair value through profit or loss.
The financial statements are presented in pounds Sterling
and, except where otherwise indicated, have been rounded to
the nearest thousand.
Going concern
The financial statements have been prepared on the going concern
basis, as defined in 'IAS 1 - Presentation of Financial Statements'.
In order to prepare financial statements on this basis, the
directors must conclude that management does not intend to
liquidate the Company or cease trading, and that the Company
has the ability to continue to trade and will be able to satisfy
its liabilities as they fall due.
As a result of the transaction documents governing the Company's
mortgage backed floating rate note borrowings described in
note 12, the Company will continue to trade in the same way
as it did in the year ended 31 March 2020 until either:
* All of the class A and B notes are repaid from
principal cash flows arising from the Company's
mortgage portfolio;
-- The call option, exercisable for the first time on the
earlier of: 11th January 2023, when the aggregate principal
amount outstanding of the notes is equal to or less than 10%
of the issued notes principal amount, or when there is a change
in tax law which has certain impacts on the Company as specified
in the securitisation prospectus, is exercised; or
* The final repayment date for the notes in October
2054 is reached.
The directors have reviewed the balance sheet performance
of the company and consider that it is unlikely that any of
these events will occur during the next 12 months.
Before this point, repayments of the principal liabilities
of the Company, the mortgage backed floating rate notes described
in note 12, are limited to available principal cash received
on the Company's loan portfolio until the final repayment
date. Therefore, the directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence until this point, satisfying all liabilities as
they fall due.
On that basis, the directors have concluded that it is appropriate
to continue to adopt the going concern basis in the preparation
of these financial statements.
New or amended accounting standards
The following new or amended accounting standards, which are
relevant to the Company, have been adopted during the year
ended 31 March 2020:
* Interest Rate Benchmark Reform (Amendments to IFRS 9,
IAS 39 and IFRS 7)
Future accounting developments
There were no new or amended accounting standards and interpretations
relevant to the Company that have been issued, and not effective
for the period ended
31 March 2020.
Kenrick No. 3 Plc
Notes to the financial statements
1 Accounting policies (continued)
Interest receivable and expense
Interest receivable and expense are recognised in the income
statement for all instruments measured at amortised cost using
the effective interest method. Interest income on defaulted
loans categorised as 'stage 3' under IFRS 9 is recognised
by applying the effective interest rate to the balances net
of provisions for expected credit losses.
Deferred consideration
Under the terms of the securitisation agreements, the Company
retains the rights to a profit of GBP1,000 p.a. subject to
there being sufficient available revenue receipts. Amounts
in excess of this accrue to West Bromwich Building Society
as deferred consideration.
Effective interest rate
The effective interest rate is the method used to calculate
the amortised cost of financial instruments and to recognise
interest receivable or payable over the relevant period. The
effective interest rate is the internal rate of return (IRR)
or the level yield to maturity, i.e. the rate that exactly
discounts estimated future cash flows or receipts through
the expected life of the instrument, or where appropriate,
a shorter period, to the net carrying amount at initial recognition.
Financial instruments
a) Financial assets
Under IFRS 9, financial assets are classified based on the
business model under which they are held and the characteristics
of their contractual cash flows.
Amortised cost
Financial assets are measured at amortised cost if they are
held for the purpose of collecting contractual cash flows
and have contractual terms which give rise on specified dates
to cash flows which are solely payments of principal and interest
(SPPI) on the outstanding amount.
Assets measured at amortised cost are initially recognised
at fair value, being the cash consideration to originate or
purchase the asset including any directly attributable transaction
costs, and measured subsequently using the effective interest
method.
This category includes cash and cash equivalents and the deemed
loan asset.
Deemed loan
The loans and advances to customers legally sold to the Company
fail the derecognition criteria of IFRS 9 (and its predecessor
IAS 39) as West Bromwich Building Society (the Seller) has
retained significant risk and rewards of ownership and therefore
these loans remain on the statement of financial position
of the Seller. IFRS 9 (and its predecessor IAS 39) therefore
requires the Seller to recognise a deemed loan financial liability
on its statement of financial position and the resulting deemed
loan asset is held on the Company's statement of financial
position. This deemed loan initially represents the consideration
paid by the Company in respect of the acquisition and the
beneficial ownership of the securitised loans and advances
to customers and is subsequently adjusted due to repayments
made by the Seller to the Company.
The deemed loan balance is shown net of any deferred consideration,
start up loan and subordinated loan payable to West Bromwich
Building Society. Similarly, interest receivable on the deemed
loan is presented net of deferred consideration, start up
loan and subordinated loan interest payable.
Fair value through profit or loss (FVTPL)
Financial assets which do not meet the classification criteria
to be held at amortised cost are measured at FVTPL.
This category includes derivative assets. The fair values
of derivatives are based on level 2 valuation techniques,
as described in note 2. Changes in the fair value of derivative
assets are presented as net fair value gains/(losses) on derivatives
in the statement of comprehensive income. Interest arising
on derivative financial instruments is recognised within net
interest on an accruals basis.
b) Financial liabilities
In accordance with IFRS 9, all of the Company's financial
liabilities are classified as subsequently measured at amortised
cost except for financial liabilities at fair value through
profit or loss.
Amortised cost
This category includes debt securities in issue.
Liabilities subsequently measured at amortised cost are recognised
initially at fair value, being the issue proceeds, net of
premia, discounts and directly attributable transaction costs
incurred. They are subsequently measured at amortised cost
using the effective interest method.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
1 Accounting policies (continued)
Fair value through profit or loss (FVTPL)
This category includes derivative liabilities. The fair values
of derivatives are based on level 2 valuation techniques,
as described in note 2. Changes in the fair value of derivative
liabilities are presented as net fair value gains/(losses)
on derivatives in the statement of comprehensive income.
Interest arising on derivative financial instruments is recognised
within net interest on an accruals basis.
c) Impairment of financial assets
Impairment of financial assets
Expected credit losses (ECLs) are recognised for all financial
assets carried at amortised cost.
COVID-19 was declared a pandemic and UK government support
measures only came into play towards the end of the Company's
financial year. Nevertheless this required an update of certain
assumptions used in the Company's ECL calculation which included
the Company revisng its macroeconomic scenarios and revisited
the probability weightings assigned to each scenario to reflect
a more pessimistic outlook.
Staging
At each reporting date, financial assets subject to the impairment
requirements of IFRS 9 are categorised into one of three
stages:
Stage 1
On initial recognition, financial assets which are not credit
impaired are categorised as stage 1 and provision is made
for 12-month ECLs, being the losses from default events expected
to occur within the next 12 months. Assets remain in stage
1 until such time as they meet the criteria for another stage
or are derecognised.
Stage 2 (significant increase in credit risk)
Financial assets which are not in default, but have experienced
a significant increase in credit risk since initial recognition,
are categorised as stage 2. The loss allowance recognised
is equivalent to lifetime ECL, being the loss arising from
default events expected to occur over the lifetime of the
financial asset.
Determining whether a significant increase in credit risk
has occurred is a critical aspect of the IFRS 9 methodology
and one which involves judgement, based on a combination
of quantitative and qualitative measures, including the IFRS
9 'backstop' of 30 days past due.
Stage 3 (default)
Defaulted or credit-impaired financial assets are categorised
stage 3, requiring recognition of lifetime ECLs.
Transfers to lower stages (curing)
Financial assets in stages 2 or 3 can transfer back to stages
1 or 2, respectively, once the criteria for significant increase
in credit risk or default cease to be met for a period of
time defined within the ECL methodology for that portfolio,
sometimes known as the 'cure' period. In practice, this means
that a stage 2 or 3 loan which ceases to breach the threshold(s)/criteria
for that stage will remain in the higher stage for a pre-determined
number of months. The use of cure periods gives assurance
that accounts have rehabilitated before re-entering lower
stages and reduces the level of volatility that might otherwise
arise from accounts regularly migrating between stages.
Forward-looking ECL approach
ECL is measured as the present value of the difference between
the cash flows contractually due on a financial asset and
the cash flows expected to be received. In the statement
of financial position, the loss allowance is presented as
a reduction in the carrying value of the financial asset.
The estimate of ECL is unbiased and probability-weighted,
taking into account a range of possible outcomes. In accordance
with IFRS 9, forecasts of future economic conditions are
integral to the ECL calculations. The Company currently models
four forward-looking macroeconomic scenarios: a central forecast
with economic assumptions aligned to the West Bromwich Building
Society Group (the Group) Medium Term Plan (and therefore
assigned the highest probability), together with upside,
downside and stress scenarios. The scenarios have been updated
with due regard to the latest market data available following
the emergence of the COVID-19 pandemic. A more pessimistic
view has been taken when developing the forecasts this year,
combined with reduced
weightings assigned to the central scenario, offset by a
higher weighting assigned to the severe low rate scenario.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
1 Accounting policies (continued)
ECL calculation - deemed loan
The loss allowance held against the deemed loan is determined
based on the IFRS 9 provision requirements for the underlying
mortgage portfolio. The residential impairment model employs
industry-accepted statistical techniques to address the complex
requirements of IFRS 9, with model assumptions and parameters
initially determined by regression analysis of the West Bromwich
Building Society Group's (the Group's) historical default
data. The assumptions are validated using 'out of time' samples,
across a range of economic scenarios, enabling the predictive
capabilities of the models to be confirmed.
The model incorporates quantitative factors for identifying
a significant increase in credit risk by comparing reporting
date lifetime probability of default (PD) with residual origination
lifetime PD. Residual origination PD curves and (relative
and absolute) threshold levels are established via an iterative
process involving statistical analysis of the Group's default
data. In addition, a range of internally monitored potential
impairment indicators have been selected as qualitative criteria
for classifying an individual loan as stage 2. Examples of
qualitative indicators include cancelled direct debit instructions,
certain forbearance measures and evidence of impaired credit
history obtained from external agencies.
Loans in the underlying portfolio are considered to be in
default or credit-impaired if they are in arrears by three
or more months, in litigation, possession or LPA receivership
or meet one of a range of internal 'unlikely to pay' indicators.
Within the residential impairment model, ECL is calculated
by multiplying forward-looking probability of default (PD),
exposure at default (EAD) and loss given default (LGD). The
model outputs monthly ECLs, which are aggregated over the
first 12 months to obtain 12-month ECL and over the life
of the loan to calculate lifetime ECL. The model combines
a number of account-specific variables and forecasts of future
economic conditions within the calculation of PD. Macroeconomic
variable inputs to the model are reviewed quarterly and include
house price index (HPI), interest rates, unemployment and
GDP. The variables were selected based on statistical tests
and other analysis which evidenced their correlation with
credit risk.
As the Company is only required to make repayments of interest
and principal to the extent that repayments are received
from the mortgage administrator in respect of the mortgage
loans, impairment losses on the deemed loan are not borne
by the Company but by the Seller (in terms of impacting the
Company's ability to pay deferred consideration and repay
principal and interest on the subordinated loan provided
to the Company by the Seller).
Where a loan is not recoverable, it is written off against
the related provision for loan impairment once all the necessary
procedures have been completed and the amount of the loss
has been determined.
d) Derecognition of financial assets and liabilities
The Company's policy is to derecognise financial assets when
the contractual right to the cash flows from the financial
asset expires. The Company also derecognises financial assets
that it transfers to another party provided the transfer
of the asset also transfers the right to receive the cash
flows of the financial asset and substantially all the risks
and rewards of ownership.
The Company derecognises financial liabilities only when
the obligation specified in the contract is discharged, cancelled
or has expired.
Cash and cash equivalents
For the purposes of the statement of cash flows, cash comprises
cash and bank balances repayable on demand. Cash equivalents
comprise highly liquid investments that are convertible into
cash with an insignificant risk of changes in value, with
maturities of 90 days or less on acquisition.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
1 Accounting policies
(continued)
Taxation
The Company has elected to be taxed as a securitisation company
under the Taxation of Securitisation Companies Regulations
2006 ("the permanent regime"). Under the permanent regime
the Company will be taxed on an amount which broadly represents
its net cashflows as determined by the transaction documents.
This is different to the basis on which the accounting profit
or loss is reported in these financial statements.
All differences between the Company's accounting profits
or losses and taxable net cashflows are therefore treated
as permanent differences and as no timing difference with
future tax consequences arise, no deferred tax is required
to be recognised.
Critical accounting estimates and judgements in applying
accounting policies
In the process of applying accounting policies, the Company
makes various judgements, estimates and assumptions which
affect the amounts recognised in the financial statements.
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
Significant judgements in applying accounting policies
Impairment
For IFRS 9 impairment, judgement is required to define the
staging criteria, i.e. what constitutes a significant increase
in credit risk (stage 2) and what circumstances give rise
to a default (stage 3). Where assets meet the stage 2 or
3 criteria, lifetime ECL must be recognised.
In accordance with IFRS 9, forecasts of future macroeconomic
conditions are integral to the impairment modelling processes.
The selection of economic variables which are genuine drivers
of credit risk and adequately capture the impact of changes
in the economic outlook involves a degree of judgement.
The staging methodologies and macroeconomic scenario selection
processes for each portfolio are detailed within the financial
assets (impairment) accounting policy above. Model monitoring
and model validation procedures are used to continually evaluate
the appropriateness of the staging criteria and macroeconomic
variable inputs.
Sources of estimation uncertainty
Impairment on loans and advances - forward-looking ECL approach
The estimation of ECLs is inherently uncertain and the IFRS
9 impairment model incorporates a number of assumptions and
estimates, changes in which could materially affect the carrying
amounts of assets and liabilities within the next financial
year. The IFRS 9 requirements to incorporate forward-looking
information within the ECL calculation, including forecasts
of future macroeconomic conditions, necessitate judgement
thereby increasing the potential for volatility in future
periods.
The impairment model incorporates four macroeconomic forecasts
(central, upside, downside and stress), each comprising a
number of economic variables considered to be credit risk
drivers.
Impairment on deemed loan - residential mortgages
The scenarios have been updated with due regard to the latest
market data available following the emergence of the COVID-19
pandemic. A more pessimistic view has been taken when developing
the forecasts this year, combined with reduced weightings
assigned to the central scenario, offset by a higher weighting
assigned to the severe low rate scenario.
The following table indicates the main economic variables
included within the IFRS 9 macroeconomic scenarios at 31
March and the associated probability weightings.
At 31 March
2020
Probability Current scenario (%)
weighting
2020/21 2021/22 2022/23
Central
scenario Bank_Rate 0.1 0.3 0.3
50% HPI (4.0) 4.0 3.4
Unemployment 6.0 4.5 3.7
GDP (5.0) 3.5 3.5
Upside scenario Bank_Rate 0.3 0.8 1.0
5% HPI 2.9 3.8 4.6
Unemployment 4.1 3.6 3.1
GDP (5.0) 6.0 6.0
Downside scenario Bank_Rate 0.1 0.1 0.1
30% HPI (6.0) - 1.0
Unemployment 10.0 6.0 3.7
GDP (15.0) - 6.0
Bank_Rate 0.1 - -
Stress scenario 15% HPI (15.0) (5.0) -
Unemployment 12.0 8.0 6.0
GDP (15.0) (5.0) -
Key assumptions for the residential portfolios are the probability
weightings of the macroeconomic forecasts, which each incorporate
a different outlook for the economic variables shown in the
table above, the forecast of future house price inflation
and the relative threshold used to identify a significant
increase in credit risk. Any increase in provision requirements
would not result in a loss to the Company but an adjustment
to the carrying value of its assets/liabilities.
Under the terms of the securitisation, impairment losses
on the deemed loan are borne by the Seller (in relation to
receipt of deferred consideration and capital and interest
on the subordinated loan).
Limited sensitivities have been performed for the Company,
with the total ECLs equating to GBP12k, from a GBP0.3bn loan
book.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments
A financial instrument is a contract that gives rise to a
financial asset of one entity and a financial liability or
equity of another entity. The Company's activities expose
it to a variety of financial risks including interest rate
risk and liquidity risk.
The activities of the Company are conducted primarily by reference
to a series of securitisation documents (the programme documentation).
The securitisation structure has been set up as a means of
raising finance for West Bromwich Building Society and no
business activities will be undertaken by the Company beyond
those set out in the programme documentation.
The Company's exposure to risk on its financial instruments
and the management of such risk is largely set out at the
inception of the securitisation transaction. The Company's
activities and the role of each party to the transaction are
clearly defined and documented.
Interest rate risk
The Company has a policy of maintaining floating rate liabilities
and matching these with the floating rate assets to mitigate
against interest rate risk.
Interest rate swaps are undertaken as part of the securitisation
to hedge interest rate exposure arising from the underlying
financial instruments. The derivative counterparty is selected
as a highly rated, regulated financial institution to reduce
the risk of default and loss for the Company.
Sensitivity analysis
As previously noted, the Company has been set up in such a
way as to eliminate, as far as possible, any impact on the
Company's cash flows from changes in market conditions. The
Company is subject to a number of contractual agreements including
the use of derivatives to eliminate market risk from interest
rate changes.
At 31 March 2020, if interest rates were 25 basis points higher
or lower with all other variables held constant, the effect
on net interest receivable in the statement of comprehensive
income would not be material.
Liquidity risk
The Company's policy to mitigate liquidity risk is through
the use of a subordinated loan from West Bromwich Building
Society. As the length of the funding is designed to match
the length of the mortgages, there is deemed to be no further
liquidity risk facing the Company.
The mortgage assets are principally funded by mortgage backed
loan notes. The maturity profile of the loan notes is matched
to that of the assets being funded. The loan notes are subject
to mandatory redemption in part on each repayment date in
accordance with the redemption of the assets.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments (continued)
The table below analyses the Company's financial assets and
liabilities across maturity periods that reflect the residual
duration from the period end date to the contractual maturity
date. In the case of the deemed loan, the analysis is based
on the contractual maturity of the underlying mortgage assets.
The actual repayment profiles of financial assets and liabilities
are likely to be significantly different to that shown in
the analysis.
Less than 1 to Over No specific Total
12 months 5 years 5 years maturity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2020
Financial assets
Cash and cash equivalents 14,808 - - - 14,808
Deemed loan due from Group
undertaking - 853 282,904 (12) 283,745
------------ ------------- -------------- ----------------- -------
14,808 853 282,904 (12) 298,553
============ ============= ============== ================= =======
Financial liabilities
Derivative financial instruments - 1,529 - - 1,529
Debt securities in issue 698 853 297,537 (665) 298,423
------------ ------------- -------------- ----------------- -------
698 2,382 297,537 (665) 299,952
============ ============= ============== ================= =======
Less than 1 to Over No specific Total
12 months 5 years 5 years maturity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2019*
Financial assets
Cash and cash equivalents 13,852 - - - 13,852
Deemed loan due from Group
undertaking - 1,016 336,295 (12) 337,299
------------ ------------- -------------- ----------------- -------
13,852 1,016 336,295 (12) 351,151
============ ============= ============== ================= =======
Financial liabilities
Derivative financial instruments - 658 - - 658
Debt securities in issue 966 1,016 350,364 (999) 351,347
------------ ------------- -------------- ----------------- -------
966 1,674 350,364 (999) 352,005
============ ============= ============== ================= =======
*2019 derivative financial instruments have been restated
as explained in note 19.
Gross contractual cash flows
The timing and amount of any payments to be made in respect
of financial liabilities is determined by the waterfall of
payments as laid out in the initial prospectus. In practical
terms, the waterfall of payments only allows for (and expects)
payments to be made to the extent that funds have been generated
from the underlying mortgage assets. If insufficient funds
have been generated to meet the full payments expected, then
these amounts continue to be accrued until such time as funds
are available. The current expected cash flows to be generated
from the underlying mortgage loans are included in the maturity
table above.
Cash and cash equivalents are held with an A+ rated bank.
Credit risk
Credit risk arises on the individual loans within the mortgage
portfolio which are secured on the underlying properties.
Under IFRS the portfolio is reclassified as a deemed loan.
To the extent that the income on the deemed loan does not
provide sufficient funds to recover the Company's investment
in the mortgage portfolio, the Company has no claim on the
assets of West Bromwich Building Society. The Company's maximum
gross exposure to credit loss is therefore equal to the fair
value of its involvement in the portfolio (subject to mitigation
which may result in the elimination of any obligation to
pay deferred consideration to West Bromwich Building Society).
Deemed loan
The deemed loan is a single financial instrument under IFRS
9 and is allocated within IFRS 9 stage 1.
The table below shows an analysis of the deemed loan:
2020 2019
GBP'000 GBP'000
Prime owner occupied residential
mortgages 289,294 343,930
Gross balances 289,294 343,930
Subordinated loan (1,540) (4,486)
Expected credit loss provisions (12) (12)
Deferred consideration (3,997) (2,133)
283,745 337,299
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments (continued)
Credit quality
The West Bromwich Building Society Group assess credit risk
on owner occupied mortgages using behavioural scorecard and
other analysis to determine probabilities of default across
a number of rating grades. The IFRS 9 impairment models make
use of this data, incorporating forecasts of future economic
conditions and account-specific factors to produce forward-looking
probabilities of default by account and allocating loans
to one of three stages (as explained in note 1).
The table below analyses the underlying residential mortgages
(gross exposures) by 12-month probability of default and
IFRS 9 stage at the reporting date.
At 31 March 2020 Stage Stage Stage 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000
Probability of default range
0.00 to < 0.25 263,142 7,926 - 271,068
0.25 to < 0.50 14,490 897 - 15,387
0.50 to < 0.75 - - - -
0.75 to < 1.00 - - - -
1.00 to < 5.00 255 4,388 - 4,643
5.00 to < 10.00 - - - -
10.00 to < 100.00 - 505 - 505
100.00 (default) - - 438 438
Other (2,747) - - (2,747)
------------ ----------------- ------------------ -------------
275,140 13,716 438 289,294
============ ================= ================== =============
At 31 March 2019 Stage Stage Stage 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000
Probability of default range
0.00 to < 0.25 307,648 9,696 - 317,344
0.25 to < 0.50 18,460 2,426 - 20,886
0.50 to < 0.75 - - - -
0.75 to < 1.00 - - - -
1.00 to < 5.00 4,038 4,328 - 8,366
5.00 to < 10.00 - - - -
10.00 to < 100.00 - 175 - 175
100.00 (default) - - 539 539
Other (3,380) - - (3,380)
------------ ----------------- ------------------ -------------
326,766 16,625 539 343,930
============ ================= ================== =============
Included within 'Other' above, is GBP2.7m (2019: GBP3.4m)
representing intercompany balances due to West Bromwich Building
Society.
The table below provides further information on the underlying
residential loan portfolio by payment due status at 31 March
2020:
2020 2019
GBP'000 GBP'000
Not past due 289,083 343,930
Past due 1 to 3 months 211 -
289,294 343,930
Expected credit losses
The table below illustrates the IFRS 9 staging distribution
of the underlying residential mortgages and related expected
credit loss provisions at the period end. Stage 2 loans have
been further analysed to show those which are more than 30
days past due, the IFRS 9 backstop for identifying a significant
increase in credit risk (SICR), and those which meet other
SICR criteria as detailed in note 1.
Gross Expected
At 31 March 2020 exposure credit Provision
loss provision coverage
GBP'000 GBP'000 %
Residential loans at amortised cost
Stage
1 275,140 4 0.00%
Stage
2
> 30 days past due 211 - 0.00%
Other SICR indicators 13,505 6 0.04%
Stage
3 438 2 0.46%
----------------- ------------------ -------------
289,294 12 0.00%
================= ================== =============
Gross Expected
At 31 March 2019 exposure credit Provision
loss provision coverage
GBP'000 GBP'000 %
Residential loans at amortised cost
Stage
1 326,766 4 0.00%
Stage
2
> 30 days past due - - 0.00%
Other SICR indicators 16,625 5 0.03%
Stage
3 539 3 0.56%
----------------- ------------------ -------------
343,930 12 0.00%
================= ================== =============
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments (continued)
The tables below analyse the movement in gross balances and
the related expected credit loss allowances on the underlying
mortgage portfolio for the period ended 31 March:
Stage Stage Stage 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000
Gross balances
At 1 April 2019 326,766 16,625 539 343,930
Transfers due to increased credit risk:
From stage 1 to stage 2 (6,180) 6,180 - -
Transfers due to decreased credit risk:
From stage 2 to stage 1 6,624 (6,624) - -
Net redemptions and repayments (52,070) (2,465) (101) (54,636)
-------------- ------- --------- --------
At 31 March 2020 275,140 13,716 438 289,294
============== ======= ========= ========
Stage Stage Stage 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000
Gross balances
At start of period (6 October - - - -
2017)
Mortgages transferred via securitisation
transaction 384,987 384,987
Transfers due to increased credit risk:
From stage 1 to stage 2 (16,625) 16,625 - -
From stage 1 to stage 3 (539) - 539 -
Net redemptions and repayments (41,057) - - (41,057)
-------------- ------- --------- --------
At 31 March 2019 326,766 16,625 539 343,930
============== ======= ========= ========
Stage Stage Stage 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000
Expected credit loss provision
At 1 April 2019 4 5 3 12
Transfers due to increased credit risk:
From stage 1 to stage 2 - 4 - 4
Transfers due to decreased credit risk:
From stage 2 to stage 1 - (1) - (1)
Remeasurement of expected credit
losses with no stage transfer - (2) (1) (3)
-------------- ------- --------- --------
At 31 March 2020 4 6 2 12
============== ======= ========= ========
Stage Stage Stage 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000
Expected credit loss provision
At start of period (6 October - - - -
2017)
Transfers due to increased credit risk:
From stage 1 to stage 2 - 5 - 5
From stage 1 to stage 3 - - 3 3
Remeasurement of expected credit
losses with no stage transfer 4 - - 4
-------------- ------- --------- --------
At 31 March 2019 4 5 3 12
============== ======= ========= ========
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments (continued)
Geographical analysis
The table below shows the geographic spread of the underlying
residential mortgage portfolio at the year end date:
2020 2019
GBP'000 GBP'000
East Anglia 11,853 13,901
East Midlands 37,637 46,621
Greater London 13,332 17,479
North 16,403 19,677
North West 45,081 52,168
South East 40,558 47,466
South West 27,802 32,980
Wales 14,477 18,218
West Midlands 40,702 47,785
Yorkshire 41,449 47,635
289,294 343,930
Collateral
The table below shows the indexed loan to value distribution
of the underlying residential loan portfolio at the year end
date:
2020 2019
GBP'000 GBP'000
>95% - -
91% - 95% 213 84
86% - 90% 7,283 34,896
76% - 85% 63,690 94,408
51% - 75% 152,963 157,771
<51% 65,145 56,771
289,294 343,930
The following table indicates collateral held against the
underlying residential loan portfolio by IFRS 9 stage at the
year-end date:
2020 2019
GBP'000 GBP'000
Fair value of collateral
held
Stage 1 522,115 567,251
Stage 2 22,951 27,213
Stage 3 655 972
545,721 595,436
The average indexed loan to value is 57.16%, calculated
as a simple average across all loans (2019: 62.48%).
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments (continued)
Classification of financial assets and financial liabilities
The following tables show the classification of the Company's
assets and liabilities:
Amortised Fair value
through
cost profit or Total
loss
GBP'000 GBP'000 GBP'000
At 31 March 2020
Assets
Cash and cash equivalents 14,808 - 14,808
Deemed loan due from Group undertaking 283,745 - 283,745
---------------- ------------ ---------
Total financial assets 298,553 - 298,553
Non-financial assets 343
Total assets 298,896
Ot her financial Fair value
through
liabilities profit or Total
loss
GBP'000 GBP'000 GBP'000
Liabilities
Derivative financial instruments - 1,529 1,529
Debt securities in issue 298,423 - 298,423
---------------- ------------ ---------
Total financial liabilities 298,423 1,529 299,952
Non-financial liabilities 141
---------
Total liabilities 300,093
Amortised Fair value
through
cost profit or Total
loss
Restated* Restated*
GBP'000 GBP'000 GBP'000
At 31 March 2019
Assets
Cash and cash equivalents 13,852 - 13,852
Deemed loan due from Group undertaking 337,299 - 337,299
---------------- ------------ ---------
Total financial assets 351,151 - 351,151
Non-financial assets 617
Total assets 351,768
O ther financial Fair value
through
liabilities profit or Total
loss
Restated* Restated*
GBP'000 GBP'000 GBP'000
Liabilities
Derivative financial instruments - 658 658
Debt securities in issue 351,347 - 351,347
---------------- ------------ ---------
Total financial liabilities 351,347 658 352,005
Non-financial liabilities 164
Total liabilities 352,169
*2019 derivative financial instruments have been restated
as explained in note 19.
Fair values of financial assets and liabilities
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
Company determines fair value by the following three tier
valuation hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Valuation techniques where all inputs are taken
from observable market data, either directly (i.e. as prices)
or indirectly (i.e. derived from prices). Level 3: Valuation
techniques where significant inputs are not based on observable
market data.
Valuation techniques include net present value and discounted
cash flow models, comparison to similar instruments for which
market observable prices exist and other valuation models.
Assumptions and market observable inputs used in valuation
techniques include risk-free and benchmark interest rates,
equity index prices and expected price volatilities. The
objective of valuation techniques is to arrive at a fair
value determination that reflects the price of the financial
instrument at the reporting date that would have been determined
by market participants acting at arm's length. Observable
prices are those that have been seen either from counterparties
or from market pricing sources including Bloomberg. The use
of these depends upon the liquidity of the relevant market.
The carrying value of cash and cash equivalents are assumed
to approximate their fair value.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
2 Financial instruments (continued)
Fair values of financial assets and liabilities held at
amortised cost
The tables below show the fair values of the Company's financial
assets and liabilities held at amortised cost in the statement of
financial position, analysed according to the fair value hierarchy
described previously.
Carrying Fair Fair value Fair value Fair value
value value Level Level 3 Total
Level 2
1
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2020
Financial assets
Deemed loan due from Group
undertaking 283,745 - - 285,503 285,503
Financial liabilities
Debt securities in issue 298,423 257,994 32,242 - 290,236
========== ========= ============ ============ ============
Carrying Fair Fair value Fair value Fair value
value
value Level Level Level 3 Total
1 2
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2019
Financial assets
Deemed loan due from Group
undertaking 337,299 - - 332,880 332,880
Financial liabilities Debt
securities in issue 351,347 315,638 32,891 - 348,529
========== ========= ============ ============ ============
a) Deemed loan
The deemed loan is net of provisions for impairment. The
estimated fair value represents the discounted amount of estimated
future cash flows expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
b) Debt securities in issue
The aggregate fair values are calculated based on quoted market
prices. For those notes where quoted market prices are not
available, a discounted cash flow model is used based on a current
yield curve appropriate for the remaining term to maturity.
Financial assets and financial liabilities held at fair value
through profit or loss
The following table summarises the fair value measurement basis
used for assets and liabilities held on the statement of financial
position at fair value:
Level 2 Total
2020 2020
GBP'000 GBP'000
Financial liabilities
Derivative financial instruments 1,529 1,529
Level 2 Total
2019 2019
Restated* Restated*
GBP'000 GBP'000
Financial liabilities
Derivative financial instruments 658 658
*2019 derivative financial instruments have been restated as
explained in note 19.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
Year ended 31 for the
3 Interest receivable and similar March 2020 period ended
income 31 March
2019
GBP'000 GBP'000
On deemed loan 5,903 7,926
Bank interest 68 57
Net expense on derivative financial
instruments (1,382) (1,955)
4,589 6,028
Included within interest receivable and similar income is
interest accrued on impaired residential mortgage assets of
GBP13,549 (2019: GBP14,261). For the purposes of this disclosure,
impaired mortgage assets are those which have been categorised
as stage 3 under IFRS 9.
4 Interest expense and similar charges
Year ended 31 for the
March 2020 period ended
31 March
2019
GBP'000 GBP'000
On debt securities in issue 3,973 5,193
Other interest payable 38 35
4,011 5,228
5 Profit before tax
Year ended 31 for the
March 2020 period ended
31 March
2019*
GBP'000 GBP'000
Profit before tax is stated after
charging:
Inter-group charges (note 18) 492 662
Fair value losses on financial instruments* (796) (431)
Auditor's remuneration: audit services 1 3 2 0
*2019 fair value losses on financial instruments have been
restated as explained in note 19.
6 Information regarding Directors
and employees
Directors
None of the Directors received any emoluments for their qualifying
services to Kenrick No. 3 Plc during the year ended 31 March
2020 or the preceding period.
Employees
The Company has no employees and
services required are contracted
from third parties.
7 Taxation
The Company's tax charge is based
on the tax regime for securitisation
companies.
Year ended 31 Period ended
March 2020 31
March 2019
GBP'000 GBP'000
Tax charge - 4
The tax charge for the period is reconciled to
the loss before tax in the income statement as
follows:
Loss before tax* (796) (410)
Loss before tax multiplied by the
UK standard rate of tax of 19% (151) (78)
Permanent differences as a result
of securitisation regime 151 82
Tax charge - 4
*2019 loss before tax has been restated
as explained in note 19.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
8 Cash and cash
equivalents
2020 2019
GBP'000 GBP'000
Bank deposits 14,808 13,852
9 Deemed loan to Group undertaking
2020 2019
GBP'000 GBP'000
Repayable in:
1 to 5 years 853 1,016
Over 5 years 288,441 342,914
289,294 343,930
Subordinated
loan (1,540) (4,486)
Impairment provisions (12) (12)
Deferred consideration
(note 14 ) (3,997) (2,133)
283,745 337,299
The deemed loan balance is shown net of the subordinated
loan and deferred consideration due back to West Bromwich
Building Society.
Allowance for losses on deemed loan
2020 2019
GBP'000 GBP'000
At beginning
of period 12 -
Amounts written off net of recoveries - -
Charge for the
year comprising:
Provisions for
loan impairment - 12
Adjustments to provisions resulting - -
from recoveries
Charge for the
year - 12
At end of year 12 12
10 Derivative financial instruments
2020 2019
Restated*
GBP'000 GBP'000
Interest rate
swaps (1,529) (658)
*2019 derivative financial instruments have been restated
as explained in note 19.
11 Trade and other
receivables
2020 2019
GBP'000 GBP'000
Other debtors 34 3 61 7
12 Debt securities
in issue
2020 2019
GBP'000 GBP'000
Due after more
than 1 year:
Class A Notes 265,290 318,280
Class B Notes 33,100 33,100
Unamortised
issue costs (665) (999)
Accrued interest 698 966
298,423 351,347
Interest on the Notes will accrue on a day to day basis
and be payable quarterly in arrears (subject to a longer
first period) at the following rates above the London
Interbank Offer Rate for 3 month sterling deposits (3
month LIBOR).
Amounts outstanding Margin over 3 month
LIBOR
2020 %
GBP'000
Class A 265,290 0.37
Class B 33,100 0.00
Kenrick No. 3 Plc
Notes to the financial statements (continued)
12 Debt securities in issue (continued)
For the purposes of the statement of cash flows, debt securities
in issue are classified as liabilities arising from financing
activities. The following table analyses movements in debt
securities in issue.
2020 2019
GBP'000 GBP'000
At beginning of period 351,347 -
Financing cash flows
Proceeds from issue of debt securities - 383,100
Issue costs - (1,471)
Repayments of debt securities
in issue (53,956) (31,720)
Non-cash flows:
Accrued interest 698 966
Amortisation of issue costs 334 472
At end of period 298,423 351,347
13 Trade and other payables
2020 2019
GBP'000 GBP'000
Other amounts due to related parties 113 132
Other payables 28 28
14 1 16 0
14 Deferred consideration
Deferred consideration payable to West Bromwich Building Society
is dependent on the extent to which surplus income is generated
by the mortgage assets, to which the Company holds the beneficial
title.
Movements in deferred consideration due to West Bromwich Building
Society during the period were as follows:
2020 2019
GBP'000 GBP'000
At beginning of period 2,133 -
Deferred consideration arising
during the period 1,864 2,145
Movement in carrying value adjustment - (12)
At end of period 3,997 2,133
Under the terms of the securitisation agreements, impairment
losses on the deemed loan are borne by the Seller (in relation
to receipt of deferred consideration and capital and interest
on the subordinated loan) and the holders of the mortgage
backed floating rate notes. The carrying value of the deferred
consideration has been decreased to reflect cumulative actual
and expected impairment losses.
The deferred consideration remains a liability of the Company
as the associated contractual obligation has not been extinguished.
The deferred consideration amount is presented net against
the deemed loan. The carrying value adjustment will be reviewed
on a regular basis to reflect the cash flows expected to be
achieved by the underlying assets and adjusted accordingly.
15 Share capital
2020 2019
GBP GBP
Allotted
1 ordinary share of GBP1 each,
fully paid 1 1
49,999 ordinary shares of GBP1
each, 25p paid 12,500 12,500
12,501 12,501
A dividend shall be declared and paid according
to the amounts paid up on the shares.
Capital disclosures
The Company is not subject to any external capital requirements
except for the minimum requirement under the Companies
Act 2006. The Company has not breached the minimum requirement.
Kenrick No. 3 Plc
Notes to the financial statements (continued)
16 Retained earnings
2020 2019
Restated*
GBP'000 GBP'000
At beginning of period (414) -
Loss for the period (796) (414)
At end of period (1,210) (414)
17 Parent undertakings and ultimate
controlling party
The entire ordinary share capital of the Company is owned
by Kenrick No. 3 Holdings Limited, a company registered in
England and Wales. MaplesFS UK Group Services Limited holds
the entire share capital of Kenrick No. 3 Holdings Limited,
on a discretionary trust basis for the benefit of certain
charities. The Company regards West Bromwich Building Society
as its ultimate controlling party. The results of the Company
are consolidated into the results of the West Bromwich Building
Society Group (the Group) under the rules and guidance of
IFRS 10 'Consolidated Financial Statements'. A copy of the
Group financial statements may be obtained from 2 Providence
Place, West Bromwich B70 8AF, the address of the ultimate
controlling party's registered office.
18 Related party transactions
Transactions with West Bromwich
Building Society
Year ended 31 for the
March 2020 period ended
31 March
2019
GBP'000 GBP'000
Interest receivable on deemed loan 5,903 7,926
Interest payable on debt securities
in issue (262) (294)
Administration and cash management
fees (492) (662)
Transactions with Maples Fiduciary
Services (UK) Limited
Year ended 31 for the
March 2020 period ended
31 March
2019
GBP'000 GBP'000
Corporate services and back-up
service facilitator fees 9 1 5
At the period end the following
balances were outstanding with
related parties:
Outstanding balances with West
Bromwich Building Society
2020 2019
GBP'000 GBP'000
Deemed loan asset 283,745 337,299
Debt securities in issue (33,154) (33,167)
Other balances due to Group undertaking (113) (132)
Kenrick No. 3 Plc
Notes to the financial statements (continued)
19 Prior year adjustment
It was identifed during the year that derivative financial
instruments were incorrectly posted in the prior year
due to a transposition error. A prior year restatement
has been made to reverse the derivative financial instrument
asset of GBP658k and recognise a derivative financial
instrument liability of GBP658k. A GBP1,316k charge has
been made to the net fair value losses (previously 'gains')
on derivatives within the Income Statement.
The table below show the effect of the retrospective
restatements on the statements of financial
position.
Statement of financial position
As reported Restated
31-Mar-19 Restatement 31-Mar-19
GBP'000 GBP'000 GBP'000
Assets
Cash and cash equivalents 13,852 - 13,852
Deemed loan due from Group undertaking 337,299 - 337,299
Derivative financial instruments 658 (658) -
Trade and other receivables 617 - 617
Total assets 352,426 (658) 351,768
Liabilities
Debt securities in issue 351,347 - 351,347
Derivative financial instruments - 658 658
Trade and other payables 160 - 160
Current tax 4 - 4
Total liabilities 351,511 658 352,169
Equity
Share capital 13 - 13
Retained earnings/(losses) 902 (1,316) (414)
Total equity attributable to equity
holders of parent 915 (1,316) (401)
Total liabilities and equity 352,426 (658) 351,768
The table below show the effect of the retrospective
restatements on the income statement.
As reported Restated
31-Mar-19 Restatement 31-Mar-19
GBP'000 GBP'000 GBP'000
Interest receivable and similar income 6,028 - 6,028
Interest expense and similar charges (5,228) - (5,228)
Net interest receivable 800 - 800
Net fair value gains on derivatives 885 (1,316) (431)
Administrative expenses (779) - (779)
Profit before tax 906 (1,316) (410)
Taxation (4) - (4)
Profit for the period 902 (1,316) (414)
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March 01, 2021 12:54 ET (17:54 GMT)
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