TIDML
RNS Number : 9601M
Sancus Lending Group Limited
27 September 2021
27 September 2021
Sancus Lending Group Limited
(formerly, GLI Finance Limited)
(the "Company")
Interim Results the six month period ended 30 June 2021
Rory Mepham, Interim Chief Executive Officer of Sancus Lending
Group Limited, commented:
" I am delighted to have assumed the position of Interim CEO
from the 1 July 2021. The last eighteen months have been highly
dynamic and it is our expectation that the outlook will continue to
provide both opportunities and challenges. Reduced willingness of
traditional lenders to participate in the residential development
and bridge lending space has offered Sancus the opportunity to
increase the speed of our growth in the target expansion markets of
Ireland and the UK, and continue to grow the Offshore markets,
whilst at the same time various Covid related factors have
continued to delay our exit from a number of historical loan
positions. As we navigate our path through the expected recovery,
we remain confident that the business is in a strong position from
which to grow."
Highlights
-- Change of name from GLI Finance Limited to Sancus Lending
Group Limited announced on 11 May 2021 reflecting the Group's
continued focus on property lending in residential development and
bridge financing;
-- Change in personnel in the period following the resignation
of Andy Whelan, Rory Mepham was appointed as Interim CEO on 1 July
2021 and Dan Walker as Deputy CEO effective on 2 June 2021. Steve
Smith was appointed as Non-Executive Chairman on 31 August 2021,
with the previous Chairman, Patrick Firth stepping down after
sixteen years with the Group;
-- The successful fundraise at the end of 2020 and a positive
shift in the real estate market presents the Group with a
favourable outlook and an opportunity to focus on growth in the
coming period;
-- Our geographic focus remains unchanged with Offshore being
our largest market and the business in the UK and Ireland continues
to expand. The pipeline for these key growth markets is strong with
revenue growth in the UK up five-fold in comparison to last
June;
-- Group revenue for the half year was GBP5.0m (H1 2020:
GBP5.5m) with lower exit fees in the period which can vary year on
year. However, transaction fees are up from GBP0.6m last year to
GBP1.7m in 2021 reflecting an increase in loan activity;
-- Group operating loss for the half year was GBP4.1m (H1 2020:
loss GBP0.5m) with GBP3.0m relating to an increase in expected
credit losses under IFRS9; and
-- A strong start to 2021 with new loan facilities written at
GBP53m for the first half of 2021 against GBP50m for the full year
2020.
The information contained within this Announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No.596/2014 as amended by The
Market Abuse (Amendment) (EU Exit) Regulations 2019. By the
publication of this Announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
Enquires:
Sancus Lending Group Limited via Instinctif Partners
Rory Mepham, Interim CEO
Nominated Adviser and Broker
Liberum Capital Limited +44 (0)203 100 2000
Chris Clarke
Edward Thomas
Public Relations Adviser
Instinctif Partners
George Peele +44 (0) 7517 539 427
Tim Linacre +44 (0) 7949 939 237
CHAIRMAN'S STATEMENT
Positioning the business for the future
I was delighted to join the Group earlier in the year and,
having taken on the role of Chairman on 31 August 2021, I am
looking forward to the challenge ahead.
A number of key events took place prior to my appointment and
the successful fundraise at the end of last year was the first step
in what the Group believes will be a structured programme of change
and repositioning for growth. Our target markets continue to
provide good opportunities and reduced appetite amongst traditional
balance sheet lenders may add to our capacity to write favourable
new business.
It has been a busy first half of the year, during this time the
Group was rebranded as Sancus Lending Group Limited (from GLI
Finance Limited) on 11 May 2021. This change reflects the Group's
continued focus on lending to residential property development and
bridge financing.
There have been a number of changes to our senior executive team
which are outlined more fully below.
As part of a wider review of the business, we have carried out a
detailed impairment review and have made additional IFRS9
provisions of GBP3.0m. The provisions are largely against interest
due and not loan principal, as the Group has been impacted by the
late repayment of certain loans (due to Covid delays). As we are
required under the accounting rules to book revenue due from
interest and it follows that we have applied commensurate expected
credit loss provisions.
Finally, after a five-year tenure our auditor, Deloitte LLP is
standing down to be replaced by Moore Stephens following a tender
process carried out in the period.
Our People
There have been a number of personnel changes in the last six
months, following the resignation of Andy Whelan, Rory Mepham was
appointed as Interim CEO on 1 July 2021 and Dan Walker as Deputy
CEO on 2 June 2021. Rory has extensive experience in corporate
finance, capital raising, debt finance, asset and fund management
and property development. Prior to his appointment as Interim CEO
Rory was responsible for funding and origination for the Group,
having joined in January 2021. Dan has assumed the role of Deputy
CEO and continues to act as the Managing Director of Sancus UK,
having joined the Group in January 2018.
On 31 August 2021, Patrick Firth stepped down after sixteen
years with the Group and we would like to thank Patrick for his
invaluable contribution during this time.
Dividend and Shareholders
In line with our dividend policy, it is not proposed to declare
a dividend for this period.
While our operational focus, Offshore, UK and Ireland, remains
largely unchanged, we expect the Sancus offices in Ireland and the
UK, to drive free cash flow in the coming periods and to return the
Group to profitability. We fully intend to recommence the dividend
programme but only at such time as the Company is in a position to
make such payments.
On behalf of the Board, I would like to thank shareholders for
their continuing support and patience. We certainly do not
underestimate the scale and challenge ahead, but with the
continuing support of shareholders and other stakeholders we
believe that we have the strategy, the systems and the personnel to
put the business onto a much firmer footing. I look forward to
reporting positive developments in the coming period.
Steve Smith
Chairman
INTERIM CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Having joined Sancus at the beginning of 2021, I am delighted to
have been offered the opportunity to assume the position of Interim
CEO from 1 July 2021. The Company has ambitious growth objectives
which will rely upon a combination of growing our loans under
management together with improving our margins. In order to deliver
these plans the Company is reviewing its capital requirements and
considering its options in terms of potential sources of
funding.
During the first half of 2021 we have completed a number of
re-organisational initiatives which now enables the business to
focus on its strategy to be a leading alternative lender in the
residential lending space. The initiatives undertaken include the
rebranding of the Company and reorganisation of staff into teams
aligned with our business priorities: Origination, Funding, Lending
and Finance & Operations. Our geographic focus remains
unchanged, and we will continue to invest in growing our business
across the jurisdictions in which we are active (UK, Ireland, and
the Offshore markets of Channel Islands & Gibraltar). It is our
belief that the UK and Irish markets offer us the greatest growth
opportunities and consequently we foresee a significant scaling up
of our businesses there. We are looking to simplify the Group over
the course of 2021 and will be reporting a new simplified Group
basis at the end of the year when we will set out the Group's
strategy in further detail and set key performance metrics that we
will report on going forward.
We are looking at our options for the FinTech Ventures portfolio
and we will communicate any developments to shareholders as
appropriate. It has certainly been a difficult, challenging and
hugely disappointing journey over the years with the FinTech
Ventures portfolio. Many of the platforms have reached key points
in their development and the market for raising equity and debt
financing is challenging, which has had a material impact on
valuations in the past.
Business Priorities
The essence of the Sancus business involves matching sources of
capital to appropriate risk/return lending opportunities. In order
to continue to grow, the business therefore needs to (1) continue
to focus on the Origination of suitable lending opportunities for
its existing sources of capital; (2) work with current secured
Funders and to identify complementary sources of capital seeking
differing risk/return criteria; (3) continue to increase our
Lending book and maintain a high quality loan management process;
and (4) ensure Finance and Operations is fully equipped to support
the growth of the business.
1. Origination
We have seen a strong start to 2021 with new loan facilities
written at GBP53m for the first half of 2021 against GBP50m for the
full year 2020 and loan deployments of GBP46m for the first half of
the year compared to GBP69m for the full year 2020. Arrangement
fees and commitments fees are received on the full loan facility
written and therefore we believe loan facilities written is a more
meaningful metric when tracking growth. We continue to see
significant demand for development finance and are increasing our
presence in the bridging market with a couple of key hires.
2. Funding
We are confident that as new loan opportunities arise, the loan
book will increase as Co-Funders are attracted to the risk adjusted
returns, especially when compared to the all-time low alternative
yielding assets such as cash or bonds. The business has recently
recruited two senior team members to focus on both managing
relations with our existing funding sources and identify additional
complementary sources of funding. A longer-term objective remains
to identify capital sources domestic to the market in which the
lending opportunity has been identified and this is an ongoing
initiative in Ireland for example. Growing and diversifying pools
of lending capital is critical for our growth. Our funding sources
include institutional, corporate and high net worth individuals
which are in excess of 200. We also continue to target the
Co-Funder base and nurture relationships. The Honeycomb Investment
Trust plc ("HIT") funding line, noted below, is designed to be
complementary to our Co-Funder base and work alongside it to
complete on larger sized loans which have a greater revenue impact
on the Group.
Our existing committed sources of funding include Sancus Loan
Notes ("SLNs") and a credit facility provided by HIT.
The SLNs comprise a series of Special Purpose Vehicles ("SPVs")
designed to act like securitisation vehicles, enabling Co-Funders
to participate in a diversified loan portfolio rather than
individual loans. On 10 May 2021 SLN7 was launched with GBP16.6m
assets managed by Amberton Limited, following the repayment of SLN5
and SLN6. SLN7 matures on 10 May 2024 and has a coupon of 7% p.a.
(payable quarterly), with Sancus providing a 10% first loss
guarantee.
As announced on 4 December 2020 the HIT credit facility was
increased to GBP75m from GBP45m and the term was extended to 28
January 2025. At 30 June 2021 the total drawn was GBP47.5m (31
December 2020: GBP45.0m).
The availability and cost of funding is key to achieving our
growth ambitions and we are reviewing the capital position of the
business with a view to ensuring it's best placed to grow funding
capacity on improved terms.
3. Lending
The senior management team have carried out an extensive review
of the current loan book, particularly in the context of Covid and
the impact this has had on the wider real estate market and
individual borrowers. Where concerns have been identified the loans
have been placed on a recoveries watchlist allowing a more detailed
recovery strategy to be prepared and worked through. The senior
management team believe that initial progress is being made on the
various recoveries strategies but note that working these through
to realisation will take time to ensure the best result for all
stakeholders. The Group has also refreshed its credit process and
we expect to build out this team further as we execute on our
growth strategy.
The Sancus asset backed lending loan book decreased by 7% since
the end of 2020 from GBP171m to GBP160m as we saw some large loans
repay in the period which does not reflect the increase in
activities, we are seeing with new facilities written. We have a
strong pipeline and expect the loan book to increase by the end of
the year. Within the loan book, the Offshore loan book makes up the
majority of this at the moment at GBP132m (Dec 2020: GBP147m) with
the UK loan book GBP18m (Dec 2020: GBP15m) and Irish loan book at
GBP10m (Dec 2020: GBP9m).
4. Finance and Operations
Effective compliance and corporate governance remains a priority
for the Board. This is critical to ensuring that only
well-considered risks are taken, and expected returns emerge as
planned.
A key milestone at the end of last year was the successful new
equity raise as well as restructuring our debt (Bonds and ZDPs) and
increasing and extending the term of our facility with HIT. This
transaction had the full support of our largest shareholder
Somerston Group who participated in both the equity raise and new
bond issue.
The development of our digital trading platform (Loan Management
System "LMS") continues with increased online functionality for Co-
Funders across the Group allowing them to participate online in
asset backed lending opportunities. During the course of 2021 we
have been making further improvements to the platform to ensure it
is well set to support our growth plans.
As highlighted above, we have made a number of recent hires
across the business, in particular to bolster our Funding and
Origination capabilities in the markets in which we are active. At
the end of June 2021, the Group headcount stood at 29 (31 December
2020: 25) and as we build out our presence across the UK and
Ireland, we expect this to increase over time.
Summary of Financial Performance
Group revenue for the first half of 2021 was GBP5.0m against
GBP5.5m last year and an operating loss of GBP4.1m (June 2020: loss
of GBP0.5m). As disclosed in Note 4 of the accounts, transaction
fees were GBP1.7m in the first half of 2021, in comparison to
GBP0.6m last year, which highlights the increase in activity of
loans written as noted above. Exit fees which were GBP0.9m last
year have reduced this year to GBP0.3m. Due to the nature of these
fees, they can vary significantly year on year.
Note 3 Segmental Reporting sets out the results by Offshore, UK
and Ireland. We have seen Offshore revenue decrease by 11% in the
period, largely due to some large exit fees which were received in
2020. The UK for the first time has reported an operating profit of
GBP0.1m against a loss of GBP0.5m last year with revenue growth up
five-fold in comparison to last June. Ireland results are
relatively flat (revenue up 6%) against last year however loan
closures have been slow in the first half of the year due to
continued lockdowns in that region, so we expect results to pick up
in the second half of the year.
The movement in expected credit losses (IFRS 9) of GBP3.0m in
the period (June 2020: GBP0.2m) predominantly relates to interest
debtor balances where we have seen loan repayments taking longer to
complete over the last eighteen months due to market conditions and
this has impacted the expected recoverability of the interest due.
The underlying loans however have not seen a material
deterioration.
The loss for the period was GBP4.2m (30 June 2020: loss of
GBP6.5m)
The Group's net assets have reduced in the period from GBP29.5m
at 31 December 2020 to GBP25.2m as a result of the operating loss
in the period which includes an increase in the expected credit
loss provision of GBP3.0m.
The Board has carried out a full impairment review of the
carrying amount of goodwill and the resultant value-in-use
calculation indicated that no impairment of goodwill was required
in either Sancus Jersey or Sancus Gibraltar. The g oodwill value
therefore remains at GBP22.9m.
Group cash remains healthy. Within the GBP16.2m of cash and cash
equivalents balance at 30 June 2021, GBP3.8m relates to Group
operational cash with GBP12.4m within Sancus Loans Limited. Post
period end one of the development sites within Sancus Properties
Limited was sold for GBP0.7m cash, leaving just one block of flats
which is being developed and due to complete around the end of this
year.
On balance sheet loans (excluding those loans in Sancus Loans
Limited) were GBP11.4m before IFRS9 provisions at 30 June 2021
compared to GBP11.8m at 31 December 2020. During the period GBP1.8m
was received following the sale of the BMS fund, leaving GBP1.9m on
the balance sheet by way of a convertible loan note in one entity.
Following this sale, Sancus BMS Holdings Limited was liquidated on
13 September 2021. Sancus Loans Limited has loans of GBP40.6m at 30
June 2021 (31 December 2021: GBP45.0m).
The Group's liabilities consist of the Bond of GBP12.5m which
has a quarterly coupon of 7% p.a. and matures on 31 December 2025;
and ZDPs of GBP10.1m with a coupon of 8% and payable on 5 December
2022. As the Group considers what capital mix will best support its
growth ambitions, it may seek to acquire ZDPs in the market during
the course of the year and explore other options for reducing
balance sheet leverage. The HIT credit facility was increased to
GBP75m from GBP45m on 4 December 2020 and at 30 June 2021 was
GBP40.6m (31 December 2020: GBP45.0m).
Outlook
The wider market offers a positive outlook for an alternative
lender such as Sancus, particularly in the development lending
space where traditional banks remain inactive. Whilst we have
recently seen some increased competition from alternative lenders,
the residential property supply/demand dynamic in all of our target
markets remains favourable meaning that there is sufficient scale
of opportunity for the business to achieve its growth objectives.
With reasonable prospects for economic growth in the remainder of
the year and thereafter, it is expected that there will continue to
be favourable underlying market fundamentals for the foreseeable
future.
Finally, I want to thank all shareholders for their support
during this period of change. We are excited about the
opportunities that lie ahead of us and look forward to delivering
profitability in due course. In the short time I have been in my
new position, I have done my best to meet as many stakeholders as
possible and look forward to continuing that during the second half
of the year.
Rory Mepham
Interim Chief Executive Officer
RISKS, UNCERTAINTIES AND RESPONSIBILITY STATEMENT
Risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the group's performance over the
remainder of the financial year. These include, but are not limited
to, Capital and liquidity risk, Regulatory and compliance risk,
Market risk, Credit risk with respect to the loan book (primarily
bridging loans and, increasingly, development loans), Operational
risk and the execution of Sancus strategy. These risks remain
unchanged from December 2020 and are not expected to change in the
6 months to the end of the financial year. Further details on these
risks and uncertainties can be found in the December 2020 Annual
Report.
Responsibility statement
The Directors confirm that to the best of their knowledge:
-- The Interim Report has been prepared in accordance with the
AIM rules of the London Stock Exchange;
-- This financial information has been prepared in accordance
with IAS 34 as adopted by the UK;
-- The interim results include a fair review of the important
events during the first half of the financial year and their impact
on the financial information as required by DTR 4.2.7R; and
-- The interim results include a fair review of the disclosure
of related party transactions as required by DTR 4.2.8R.
INDEPENT REVIEW REPORT ON INTERIM FINANCIAL INFORMATION
Conclusion
We have been engaged by Sancus Lending Group Limited (the
"Company") to review the condensed set of Consolidated Financial
Statements in the Interim Report for the six months ended 30 June
2021 which comprises the Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Statement of
Financial Position, the Condensed Consolidated Statement of Changes
in Shareholders' Equity, the Condensed Consolidated Statement of
Cash Flows and related Notes 1 to 19 . We have read the other
information contained in the Interim Report and considered whether
it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of Consolidated Financial
Statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2021 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the UK and the AIM Rules of the London Stock
Exchange.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (the "ISRE") issued by the Auditing Practices Board for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As disclosed in Note 2 of the annual financial statements of the
Company are prepared in accordance with IFRS as adopted by the UK.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the UK.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with the ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of Directors
The Interim Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the Interim Report in accordance with the AIM Rules of
the London Stock Exchange.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Our responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
consolidated financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Moore Stephens Audit and Assurance (Guernsey) Limited
Level 2 Park Place
Park Street
St Peter Port
Guernsey, GY1 3HZ
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Notes Period ended Period ended
30 June 2021 30 June 2020
(unaudited) (unaudited)
GBP'000 GBP'000
Revenue 4 5,002 5,498
Cost of sales 5 (3,386) (3,011)
Gross profit 1,616 2,487
Operating expenses 6 (2,671) (2,824)
Changes in expected credit losses 17 (3,028) (161)
------------ ------------
Operating loss (4,083) (498)
FinTech Ventures fair value movement 17 8 (4,238)
Other net losses (95) (1,712)
Loss for the period before tax (4,170) (6,448)
Income tax expense (58) (67)
------------ ------------
Loss for the period after tax (4,228) (6,515)
Items that may be reclassified subsequently
to profit and loss
Foreign exchange arising on consolidation 9 (26)
------------ ------------
Other comprehensive income/(loss) for
the period after tax 9 (26)
------------ ------------
Total comprehensive loss for the period (4,219) (6,541)
============ ============
Basic loss per Ordinary Share 7 (0.88)p (2.14)p
------------ ------------
Diluted loss per Ordinary Share (0.81)p (2.14)p
------------ ------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
30 June 2021
31 December
(unaudited) 2020 (audited)
ASSETS Notes GBP'000 GBP'000
Non-current assets
Fixed assets 8 638 774
Goodwill 9 22,894 22,894
Other intangible assets 10 97 168
Sancus loans and loan equivalents 17 18,683 3,863
FinTech Ventures investments 17 500 -
Investments in joint ventures and associates 766 866
Other investments 50 -
------------ ---------------
Total non-current assets 43,628 28,565
------------ ---------------
Current assets
Other assets 12 1,067 1,015
Sancus loans and loan equivalents 17 29,600 49,369
Trade and other receivables 11 6,984 8,204
Cash and cash equivalents 16,246 15,786
Total current assets 53,897 74,374
------------ ---------------
Total assets 97,525 102,939
============ ===============
EQUITY
Share premium 13 116,218 116,218
Treasury shares 13 (1,172) (1,099)
Other reserves (89,844) (85,625)
------------ ---------------
Total Equity 25,202 29,494
------------ ---------------
LIABILITIES
Non-current liabilities
Borrowings 69,705 69,450
Other liabilities 357 469
Total non-current liabilities 14 70,062 69,919
------------ ---------------
Current liabilities
Trade and other payables 14 1,235 1,638
Tax liabilities 14 106 118
Provisions 14 733 1,542
Other liabilities 14 187 228
------------ ---------------
Total current liabilities 2,261 3,526
------------ ---------------
Total liabilities 72,323 73,445
------------ ---------------
Total equity and liabilities 97,525 102,939
============ ===============
The accompanying Notes form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY (Unaudited)
Share Treasury Warrants Foreign Retained Total
Shares Outstanding Exchange Earnings/
Reserve
Premium (Losses) Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2020 (audited) 116,218 -1,099 847 -1 -86,471 29,494
Acquired on sale of BMS
Finance AB - -73 - - - -73
Fair value of warrants - - 616 - -616 -
------------------------------------
Transactions with owners - -73 616 - -616 -73
------------------------------------ --------- --------- ------------- ---------- ----------- --------
Total comprehensive profit/(loss)
for the period - - - 9 -4,228 -4,219
------------------------------------ --------- --------- ------------- ---------- ----------- --------
Balance at 30 June 2021
(unaudited) 116,218 -1,172 1,463 8 -91,315 25,202
------------------------------------ --------- --------- ------------- ---------- ----------- --------
Balance at 31 December
2019 (audited) 112,557 -1,099 - 22 -71,107 40,373
------------------------------------
Transactions with owners - - - - - -
----------------------------------- --------- --------- ------------- ---------- ----------- --------
Total comprehensive loss
for the period - - - -26 -6,515 -6,541
------------------------------------ --------- --------- ------------- ---------- ----------- --------
Balance at 30 June 2020
(unaudited) 112,557 -1,099 - -4 -77,622 33,832
------------------------------------ --------- --------- ------------- ---------- ----------- --------
The accompanying Notes form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Period ended Period ended
30 June 2021 30 June 2020
(unaudited) (unaudited)
Notes GBP'000 GBP'000
Cash outflow from operations, excluding
loan movements 15 (2,654) (2,797)
(Increase) / Decrease in Sancus loans (2,298) 3,168
Decrease in loans through platforms - 10
Decrease in loans to UK and Irish
SARLS 1,796 113
Decrease in loans through the HIT
facility 4,518 5,084
Investment in Sancus Loan notes (50) -
------------ ------------
Net cash inflow from operating activities 1,312 5,578
------------ ------------
Cash inflows / (outflows) from investing
activities
Investment in IOM Preference Shares (16) -
Net Repayments / (Investments) in
FinTech Ventures (492) (49)
Divestment in joint ventures 9 -
Expenditure on SPL Properties 12 (52) (147)
Sale of SPL Properties 51 1,598
Expenditure on fixed assets and intangibles (4) (8)
------------ ------------
Net cash (outflow) / inflow from investing
activities (504) 1,394
------------ ------------
Cash inflows / (outflows) from financing
activities
Draw down / (Repayment) of HIT facility 15 2,496 (3,499)
Capital element of lease payments 15 (97) (128)
Repayment of ZDPs 15 (2,756) (3,942)
------------ ------------
Net cash outflow from financing activities (357) (7,569)
------------ ------------
Effects of Exchange 9 (26)
------------ ------------
Net increase / (decrease) in cash
and cash equivalents 460 (623)
Cash and cash equivalents at beginning
of period 15,786 7,244
Cash and cash equivalents at end of
period 16,246 6,621
============ ============
GBP12.4m of the GBP16.2m cash held at 30 June 2021 is for the
exclusive use of Sancus Loans Limited (June 2020: GBP3.9m of the
GBP6.6m)
The accompanying Notes form an integral part of these financial
statements.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Sancus Lending Group Limited (the "Company"), (formerly known as
GLI Finance Limited), and together with its subsidiaries, ("the
Group") was incorporated, and domiciled in Guernsey, Channel
Islands, as a company limited by shares and with limited liability,
on 9 June 2005 in accordance with The Companies (Guernsey) Law,
1994 (since superseded by The Companies (Guernsey) Law, 2008).
Until 25 March 2015, the Company was an Authorised Closed-ended
Investment Scheme and was subject to the Authorised Closed-ended
Investment Scheme Rules 2008 issued by the Guernsey Financial
Services Commission ("GFSC"). On 25 March 2015, the Company was
registered with the GFSC as a Non-Regulated Financial Services
Business, at which point the Company's authorised fund status was
revoked. The Company's Ordinary Shares were admitted to trading on
the AIM market of the London Stock Exchange on 5 August 2005 and
its issued zero dividend preference shares were listed and traded
on the Standard listing Segment of the main market of the London
Stock Exchange with effect from 5 October 2015.
The Company does not have a fixed life and the Articles do not
contain any trigger events for a voluntary liquidation of the
Company. The Company is an operating company for the purpose of the
AIM rules. The Executive Team is responsible for the management of
the Company.
As at 30 June 2021, the Group comprises the Company and its
subsidiaries. During 2021 as part of the Group's rebranding the
Company and a number of its subsidiaries have been renamed:
Previous name New name Date of name change
Sancus BMS Group Limited Sancus Group Holdings Limited 17 March 2021
------------------------------ --------------------
Sancus BMS (Ireland) Limited Sancus Lending (Ireland) 29 March 2021
Limited
------------------------------ --------------------
GLI Finance Limited Sancus Lending Group Limited 11 May 2021
------------------------------ --------------------
Sancus (Guernsey) Limited Sancus Lending (Guernsey) 12 July 2021
Limited
------------------------------ --------------------
Sancus Funding Limited Sancus Lending (UK) Limited 13 July 2021
------------------------------ --------------------
Sancus Finance Limited Sancus Holdings (UK) Limited 13 July 2021
------------------------------ --------------------
The Company has taken advantage of the exemption conferred by
the Companies (Guernsey) Law, 2008, Section 244, not to prepare
company only financial statements which is consistent with the 2020
Annual Report.
2. ACCOUNTING POLICIES
(a) Basis of preparation
These condensed consolidated financial statements ("financial
statements") have been prepared in accordance with International
Financial Reporting Standard (IAS) 34 'Interim Financial
Reporting', as adopted by the United Kingdom and all applicable
requirements of Guernsey Company Law. They do not include all the
information and disclosures required in annual financial statements
and should be read in conjunction with the Company's annual audited
financial statements for the year ended 31 December 2020, which
have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as endorsed by the European Union.
The Group does not operate in an industry where significant or
cyclical variations, as a result of seasonal activity, are
experienced during any particular financial period.
(b) Principal accounting policies
The same accounting policies and methods of computation are
followed in these financial statements as in the last annual
financial statements for the year ended 31 December 2020.
(c) Going Concern
The Board has assessed the Group's financial position as at 30
June 2021 and the factors that may impact its performance in the
forthcoming year. After considering the maturity profile of the
debt structure of the Group and projected cash flows, the Directors
are of the opinion that it is appropriate to prepare these
financial statements on a going concern basis.
(d) Critical accounting estimates and judgements in applying accounting policies
The critical accounting estimates and judgements are as outlined
in the financial statements for the year ended 31 December
2020.
3. SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the
manner in which the Executive Team reports to the Board, which is
regarded to be the Chief Operating Decision Maker (CODM) as defined
under IFRS 8. The main focus of the Group is Sancus. Bearing this
in mind the Executive team have identified 4 segments based on
operations and geography.
Finance costs and Head Office costs are not allocated to
segments as such costs are driven by central teams who provide,
amongst other services, finance, treasury, secretarial and other
administrative functions based on need. The Group's borrowings are
not allocated to segments as these are managed by the Central team.
Segment assets and liabilities are measured in the same way as in
these financial statements and are allocated to segments based on
the operations of the segment and the physical location of those
assets and liabilities.
The four segments based on geography, whose operations are
identical (within reason), are listed below. Note that Sancus Loans
Limited, although based in the UK, is reported separately as a
stand-alone entity to the Board and as such is considered to be a
segment in its own right.
1. Offshore
Contains the operations of Sancus (Jersey) Limited, Sancus
Lending (Guernsey) Limited, Sancus (Gibraltar) Limited, Sancus
Properties Limited and Sancus Group Holdings Limited.
2. United Kingdom (UK)
Contains the operations of Sancus Lending (UK) Limited and
Sancus Holdings (UK) Limited.
3. Ireland
Contains the operations of Sancus Lending (Ireland) Limited.
4. Sancus Loans Limited
Contains the operations of Sancus Loans Limited.
Reconciliation to Consolidated Financial
Statements
Six months to FinTech
30 June Sancus Ventures
2021 Loans Sancus SLL Fair Consolidated
Limited Debt Total Head Debt Value Financial
Offshore UK Ireland (SLL) Costs Sancus Office Costs & Forex Other Statements
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,883 1,018 230 (239) - 2,892 - 2,033 - 77 5,002
--------- -------- -------- -------- -------- -------- -------- -------- --------- -------- -------------
Operating
Profit/(loss)
* 685 136 (8) (248) - 565 (693) - - 73 (55)
Credit Losses (2,270) - - (746) - (3,016) - - - (12) (3,028)
Debt Costs - - - - (1,000) (1,000) - - - - (1,000)
Other
Gains/(losses) 96 2 (26) 1 - 73 - - (4) (49) 20
Loss on JVs and
associates - - - - - - - - - (107) (107)
Taxation (58) - - - - (58) - - - - (58)
Profit After
Tax (1,547) 138 (34) (993) (1,000) (3,436) (693) - (4) (95) (4,228)
========= ======== ======== ======== ======== ======== ======== ======== ========= ======== =============
Six months to 30
June
2020
Revenue 2,160 196 216 444 - 3,016 - 1,836 - 646 5,498
------ ------ ---- ----- -------- -------- ------ ------ -------- ------ --------
Operating
Profit/(loss)
* 979 (470) (7) 437 - 939 (539) - - 337 737
Credit Losses (163) 2 - - - (161) - - - - (161)
Debt Costs - - - - (1,074) (1,074) - - - - (1,074)
Other Gains/(losses) (946) - 2 (27) - (971) - - (4,174) (50) (5,195)
Loss on JVs and
associates - - - - - - - - - (755) (755)
Taxation (67) - - - - (67) - - - - (67)
Profit After Tax (197) (468) (5) 410 (1,074) (1,334) (539) - (4,174) (468) (6,515)
====== ====== ==== ===== ======== ======== ====== ====== ======== ====== ========
* Operating Profit/(loss) before credit losses and debt
costs
Sancus Loans Limited is consolidated into the Group's results as
it is 100% owned by Sancus Group. However, the reality is that
Sancus Loans Limited is a Co-Funder the same as any other
Co-Funder. As a result the Board reviews the economic performance
of Sancus Loans Limited in the same way as any other Co-Funder,
with revenue being stated net of debt costs. Operating expenses
include recharges from UK to Offshore GBP238,000, Offshore to
Ireland GBP37,000 and Head Office to Offshore GBP36,000. "Other"
includes FinTech (excluding fair value and forex) and Sancus BMS
Holdings operations.
Reconciliation to Financial Statements
At 30 June 2021 Sancus
Loans Inter Consolidated
Limited Total Head Investment Fintech Company Financial
Offshore UK Ireland (SLL) Sancus Office in IOM Portfolio Other Balances Statements
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total Assets 49,613 10,314 372 57,250 117,549 43,931 766 500 374 (65,595) 97,525
--------- --------- -------- --------- ---------- --------- ----------- ---------- -------- --------- -------------
Total Liabilities (42,847) (11,187) (587) (58,246) (112,867) (24,177) - - (874) 65,595 (72,323)
--------- --------- -------- --------- ---------- --------- ----------- ---------- -------- --------- -------------
Net
Assets/(liabilities) 6,766 (873) (215) (996) 4,682 19,754 766 500 (500) - 25,202
========= ========= ======== ========= ========== ========= =========== ========== ======== ========= =============
At 31 December
2020
Total Assets 44,486 7,203 488 54,131 106,308 47,137 866 - 4,177 (55,549) 102,939
--------- -------- ------ --------- ---------- ----------- ---- ------ --------- ---------
Total Liabilities (38,720) (8,214) (679) (53,255) (100,868) (27,774) - - (352) 55,549 (73,445)
--------- -------- ------ --------- ---------- ----------- ---- ------ --------- ---------
Net
Assets/(liabilities) 5,766 (1,011) (191) 876 5,440 19,363 866 - 3,825 - 29,494
========= ======== ====== ========= ========== =========== ==== ====== ========= =========
Head Office liabilities include borrowings GBP22.6m (December
2020: GBP24.9m). Other FinTech assets and liabilities, and Sancus
BMS Holdings Limited assets and liabilities are included within
"Other"
4. REVENUE
30 June 2021 30 June 2020
(unaudited) (unaudited)
GBP'000 GBP'000
Co-Funder fees 777 890
Earn out (exit) fees 270 926
Advisory fees - 230
Transaction fees 1,662 563
Total revenue from contracts with customers 2,709 2,609
------------- -------------
Interest on loans 117 556
HIT interest income 1,794 2,280
Other income 382 53
------------- -------------
Total Revenue 5,002 5,498
============= =============
5. COST OF SALES
30 June 2021 30 June 2020
(unaudited) (unaudited)
GBP'000 GBP'000
Interest costs 1,016 1,104
HIT interest costs 2,033 1,836
Other cost of sales 337 71
------------- -------------
Total cost of sales 3,386 3,011
============= =============
6. OPERATING EXPENSES
30 June 2021 30 June 2020
(unaudited) (unaudited)
GBP'000 GBP'000
Administration and secretarial fees 67 25
Amortisation and depreciation 195 216
Audit fees 84 111
Corporate Insurance 27 42
Directors Remuneration 69 64
Employment costs 1,719 1,647
Investor relations expenses 37 36
Legal and professional fees 123 114
Marketing expenses 20 19
NOMAD fees 38 38
Other office and administration costs 247 348
Pension costs 28 141
Registrar fees 15 15
Sundry 2 8
------------ ------------
Total operating expenses 2,671 2,824
============ ============
7. LOSS PER ORDINARY SHARE
Consolidated loss per Ordinary Share has been calculated by
dividing the consolidated loss attributable to Ordinary
Shareholders in the period by the weighted average number of
Ordinary Shares outstanding (excluding treasury shares) during the
period.
Note 13 describes the warrants in issue. Taking these warrants
into account the weighted average number of Ordinary Shares used in
calculating the diluted loss per share was 524,011,652. There was
no dilutive effect in the prior year.
30 June 2021 30 June 2020
(unaudited) (unaudited)
Number of shares in issue 489,843,477 312,065,699
Weighted average number of shares outstanding 478,294,522 304,139,700
Loss attributable to Ordinary Shareholders
in the period GBP4,228,000 GBP6,515,000
Basic Loss per Ordinary Share (0.88)p (2.14)p
Diluted Loss per Ordinary Share (0.81)p (2.14)p
8. FIXED ASSETS
Right of use Property & Total
assets Equipment
Cost GBP'000 GBP'000 GBP'000
At 31 December 2020 1,267 462 1,729
Additions in the period - 4 4
Lease adjustment (16) - (16)
Disposals - (15) (15)
Expired lease (132) - (132)
------------- ----------- --------
At 30 June 2021 1,119 451 1,570
============= =========== ========
Accumulated depreciation GBP'000 GBP'000 GBP'000
At 31 December 2020 628 327 955
Charge in the period 98 26 124
Disposals - (15) (15)
Expired lease (132) - (132)
-------- -------- --------
At 30 June 2021 594 338 932
======== ======== ========
Net book value 30 June 2021 525 113 638
======== ======== ========
Net book value 31 December 2020 639 135 774
======== ======== ========
9. GOODWILL
Goodwill at 30 June 2021 and 31 December
2020 comprises:
GBP'000
Sancus Jersey 14,255
Sancus Gibraltar 8,639
--------
Total 22,894
========
Impairment tests
The carrying amount of goodwill arising on the acquisition of
certain subsidiaries is assessed by the Board for impairment on an
annual basis or sooner if there has been any indication of
impairment. The annual review is due on 30 June each year. As a
result the Board has assessed the Goodwill for impairment on 30
June 2021.
The value in use of Sancus Jersey and Sancus Gibraltar was based
on an internal Discounted Cash Flow ("DCF") value-in-use analysis
using cash flow forecasts for the years 2021/22 to 2025/26. The
starting point for each of the cash flows was the revised forecast
for 2021 produced by Sancus Jersey and Gibraltar management.
Management's revenue forecasts applied a compound annual growth
rate (CAGR) to revenue of 16.1% and 19.6% for Jersey and Gibraltar
respectively. A cost of equity discount rate of 11.5% was employed
in the valuation model for Sancus Jersey and 12.0% for Sancus
Gibraltar. The resultant valuation indicated that no impairment of
goodwill was required in either Sancus Jersey or Sancus Gibraltar,
with significant headroom.
Goodwill valuation sensitivities
When the discounted cash flow valuation methodology is utilised
as the primary goodwill impairment test, the variables which
influence the results most significantly are the discount rates
applied to the future cash flows and the revenue forecasts. The
table below shows the impact on the Consolidated Statement of
Comprehensive Income of stress testing the period end goodwill
valuation with a decrease in revenues of 10% and an increase in
cost of equity discount rate of 3%. These potential changes in key
assumptions fall within historic variations experienced by the
business (taking other factors into account) and are therefore
deemed reasonable. The current model reveals that a sustained
decrease in revenue of circa 20% for Jersey and circa 28% for
Gibraltar or a sustained increase of circa 11% in the cost of
Equity discount rate for Jersey and circa 14% for Gibraltar would
remove the headroom.
Sensitivity Applied Reduction in headroom implied by sensitivity
Sancus Sancus
Jersey Gibraltar Total
GBP'000 GBP'000 GBP'000
10% decrease in revenue
per annum 5,650 3,063 8,713
3% increase in cost of
Equity discount rate 4,040 2,679 6,719
Neither a 10 % decrease in revenue nor a 3% increase in the cost
of Equity discount rate implies a reduction of Goodwill in Jersey
or Gibraltar.
10. OTHER INTANGIBLE ASSETS
GBP'000
Cost
At 30 June 2021 and 31 December 2020 1,584
==========
Amortisation
At 31 December 2020 1,416
Charge for the period 71
----------
At 30 June 2021 1,487
==========
Net book value at 30 June 2021 97
==========
Net book value at 31 December 2020 168
==========
Intangible assets comprise capitalised contractors' costs and
costs related to core systems development. No impairment provision
has been recorded. The amortisation charge has been recorded within
Operating Expenses.
11. TRADE AND OTHER RECEIVABLES
31 December
30 June 2021 2020
(unaudited) (audited)
Current GBP'000 GBP'000
Loan fees, interest and similar receivable 5,734 7,438
Receivable from associated companies 2 49
Derivative contracts (Note 17) 504 94
Other trade receivables and prepaid expenses 744 623
6,984 8,204
============ ===========
12. OTHER ASSETS
Development
properties
Cost GBP'000
At 31 December 2019 3,336
Additions 236
Disposals (1,665)
Write down (892)
At 31 December 2020 1,015
Additions 52
At 30 June 2021 1,067
============
Other assets are developments which were previously held as
security against certain loans which have defaulted. These assets
are held at the lower of cost and net realisable value. The
remaining GBP1.1m comprises of one development property which is
held at cost plus the net realisable value of a development
plot.
13 . SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE
Sancus Lending Group Limited has the power under its articles of
association to issue an unlimited number of Ordinary Shares of nil
par value.
No Ordinary Shares were issued in the period to 30 June 2021
(Period to 30 June 2020: Nil).
Share Capital
Number of Ordinary Shares - nil par value
-----------
At 30 June 2021 (unaudited) and 31 December 2020 (audited) 489,843,477
-----------
Share Premium
Ordinary Shares - nil par value GBP'000
-------
At 30 June 2021 (unaudited) and 31 December 2020 (audited) 116,218
-------
Ordinary shareholders have the right to attend and vote at
Annual General Meetings and the right to any dividends or other
distributions which the company may make in relation to that class
of share.
Treasury Shares
31 December
30 June 2021 2020
(unaudited) (audited)
Number of Number of
shares shares
Balance at start of the period/year 7,925,999 7,925,999
Sancus Lending Group shares acquired on the
sale of BMS Finance AB 3,926,677 -
Balance at end of period/year 11,852,676 7,925,999
============ ===========
31 December
30 June 2021 2020
(unaudited) (audited)
GBP'000 GBP'000
Balance at start of the period/year 1,099 1,099
Sancus Lending Group shares acquired on the
sale of BMS Finance AB 73 -
Balance at end of period/year 1,172 1,099
============ ===========
Warrants in Issue
On 22 December 2020, in connection with the issue of new bonds,
the Company issued 153,994,543 Warrants to subscribe in cash for
new Ordinary Shares at a subscription price of 2.25 pence per
Ordinary Share. The Warrants will be exercisable on at least 30
days notice in the period to 31 December 2025. As at 30 June 2021
and up to the date of signing these condensed interim financial
statements none of these warrants have been exercised. The warrants
are classified as equity instruments because a fixed amount of cash
is exchangeable for a fixed amount of equity, there being no other
features which could justify a financial liability classification.
The fair value of the Warrants at 30 June 2021 is GBP1,463,000 (31
December 2020: GBP847,000).
14. LIABILITIES
31 December
30 June 2021 2020
Non-current liabilities (unaudited) (audited)
GBP'000 GBP'000
Corporate bond (1) 12,461 12,473
HIT facility (2) 47,130 44,553
ZDP shares (3) 10,114 12,424
Lease Creditor 357 469
------------ -----------
Total non-current liabilities 70,062 69,919
============ ===========
Current liabilities 30 June 2021 31 December
(unaudited) 2020 (audited)
GBP'000 GBP'000
Accounts payable 262 436
Accruals and other payables 973 1,202
Taxation 106 118
Deferred income - 40
Provision for financial guarantees 733 1,542
Lease creditor 187 188
Total current liabilities 2,261 3,526
============ ===============
Movement on provision for financial guarantees
GBP'000
At 31 December 2019 -
Profit and loss charge in the year 1,542
-------
At 31 December 2020 1,542
Profit and loss credit in the period (809)
At 30 June 2021 733
=======
Provisions for financial guarantees were recognised in the year
to 31 December 2020 in relation to ECLs on off-balance sheet loans
and debtors where the company has provided a guarantee (see Note
18). The fair value is determined using the exact same methodology
as that used in determining ECLs (Note 17).
(1) Corporate Bond
On 22 December 2020 Sancus Lending Group issued GBP12,575,000
corporate bonds of which GBP3,875,000 were rolled from the existing
GBP10m bonds (the remaining GBP6,125,000 being repaid) and
GBP8,700,000 issued for cash. Over the term of the bonds GBP15m may
be issued. The bond maturity date is 31 December 2025 and they bear
interest at 7% (2020: 7%).
(2) HIT Facility
On 29 January 2018, Sancus Funding Limited signed a new funding
facility with Honeycomb Investment Trust plc (HIT). The funding
line had a term of 3 years and comprised of a GBP45m accordion and
revolving credit facility. On 3 December 2020 the term of the
facility was extended to 28 January 2024. On the same date the
facility was increased to GBP75m. The facility bears interest at
7.25%. The HIT facility has portfolio performance covenants
including that actual loss rates are not to exceed 4% in any twelve
month period and underperforming loans are not to exceed 10% of the
portfolio. Sancus Group has an obligation to maintain a 10% first
loss position on the HIT facility. Sancus Lending Group has also
provided HIT with a guarantee, capped at GBP2m that will continue
to ensure the orderly wind down of the loan book, in the event of
the insolvency of Sancus Group, given its position as facility and
security agent.
(3) ZDP shares
The ZDP shares have a maturity date of 5 December 2022 with a
final capital entitlement of GBP1.6464 per ZDP share, and bear
interest at an average rate of 8.0% (2020: 8.0%).
Refer to the Company's Memorandum and Articles of Incorporation
for full detail of the rights attached to the ZDP shares. This
document can be accessed via the Company's website www.sancus.com
.
In accordance with article 7.5.5 of the Company's Memorandum and
Articles of Incorporation, the Company may not incur more than
GBP30m of long term debt without the prior approval from the ZDP
shareholders. The Memorandum and Articles also specify that two
debt cover tests must be met in relation to the ZDPs. At 30 June
2021 the Company was in compliance with these covenants as Cover
Test A was 3.08 (minimum of 1.7) and Cover Test B was 5.40 (minimum
of 3.25).
At the period end senior debt borrowing capacity amounted to
GBP17.4m. The HIT facility does not impact on this capacity as this
is non-recourse to the Company.
In addition to a tender offer in March 2021, whereby the company
acquired and subsequently cancelled 1,690,034 ZDP shares, a further
226,718 shares have been acquired during the period. As a result,
the number of ZDP shares in issue at 30 June 2021 was 19,101,384
(31 December 2020: 20,791,418) of which 12,235,748 (31 December
2020: 12,009,030) with an aggregate value of GBP18,085,888 (31
December 2020: GBP17,051,409) are held by the company.
15. NOTES TO THE CASH FLOW STATEMENT
30 June 2021 30 June 2020
Cash outflow from operations (excluding
loan movements) (unaudited) (unaudited)
GBP'000 GBP'000
Loss for the period (4,228) (6,515)
Adjustments for:
Net (gain) / loss on FinTech Ventures (8) 4,238
Other net losses / (gains) 88 (121)
Adjustment in carrying value of Sancus
IOM Holdings Limited 116 755
Accrued interest on ZDPs 468 554
Impairment of financial assets 3,028 253
(Gain) / loss on SPL assets (51) 983
Gain on purchase of ZDPs (34) (44)
Amortisation / depreciation of fixed
assets 195 216
Amortisation of debt issue costs 105 96
Changes in working capital:
Trade and other receivables (1,793) (3,272)
Trade and other payables (540) 60
Cash outflow from operations, excluding
loan movements (2,654) (2,797)
============ ========================
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be classified
in the Group's consolidated cash flow statement as cash flows from
financing activities.
Amortisation
of debt
Loan swap issue
1 January Financing Non-cash costs Other 30 June
2021 cash flows(1) Non-cash Non-cash 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ZDP Shares 12,424 (2,756) - 12 434(3) 10,114
Corporate Bond 12,473 - - 12 (24)(3) 12,461
HIT Facility 44,553 2,496 - 81 - 47,130
Lease Liability 657 (97) - - (16)(4) 544
---------- --------------- ------------ ------------- ---------- --------
Total liabilities from
financing activities 70,107 (357) - 105 394 70,249
========== =============== ============ ============= ========== ========
Amortisation
of debt
Loan swap issue
1 January Financing Non-cash costs Other 30 June
2020 cash flows(1) Non-cash Non-cash 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ZDP Shares 16,825 (3,942) (829)(2) 40 510(3) 12,604
Corporate Bond 10,000 - - - - 10,000
HIT Facility 44,191 (3,499) - 56 - 40,748
Lease Liability 890 (128) - - (6)(4) 756
---------- --------------- ------------ ------------- ---------- --------
Total liabilities from
financing activities 71,906 (7,569) (829) 96 504 64,108
---------- --------------- ------------ ------------- ---------- --------
(1) These amounts can be found under financing cash flows in the
cash flow statement.
(2) A loan to the value of GBP829,000 which sat within Sancus
loans and loan equivalents was swapped for 621,586 ZDP shares.
(3) Interest accruals.
(4) Lease variation.
16. RELATED PARTY TRANSACTIONS
Transactions with the Directors/Executive Team
Non-executive Directors
As at 30 June 2021, the non-executive Directors' annualised
fees, excluding all reasonable expenses incurred in the course of
their duties which were reimbursed by the Company, were as detailed
in the table below:
30 June 2021 30 June 2020
GBP GBP
Patrick Firth (Chairman) 50,000 50,000
Stephen Smith (appointed 11 May 2021) 35,000 -
John Whittle 42,500 42,500
Nick Wakefield 35,000 35,000
On 11 May 2021 Mr Smith was appointed as a non-executive
Director to the Board. Mr Smith's directorships were listed in the
RNS issued on 11 May 2021.
Golf Investments Limited ("Golf"), of which Mr Wakefield is a
Director, holds 50,815,167 ordinary shares in the Company. Golf is
part of the Somerston Group of companies which collectively holds
200,349,684 ordinary shares in the Company, representing 40.9 per
cent of the current issued share capital. From time to time, the
Somerston Group may participate as a Co-Funder in Sancus loans.
Other than this and the Directors' fees and expenses in relation to
Mr Wakefield's appointment as a Director the Group has not recorded
any transactions with either Golf or Somerston for the period ended
30 June 2021 (30 June 2020: none).
Total Directors' fees charged to the Company for the period
ended 30 June 2021 were GBP68,640 (30 June 2020: GBP63,750).
Executive Team
For the period ended 30 June 2021, the Executive Team members'
remuneration from the Company, excluding all reasonable expenses
incurred in the course of their duties which were reimbursed by the
Company, were as detailed in the table below:
30 June 2021 30 June 2020
GBP'000 GBP'000
Aggregate remuneration in respect of qualifying
service - fixed salary 303 343
Aggregate amounts contributed to Money Purchase
pension schemes 8 47
Aggregate bonus paid 125 -
All amounts have been charged to Operating Expenses.
Directors' and Persons Discharging Managerial R esponsibilities
("PDMR") shareholdings in the Company
As at 30 June 2021, the Directors had the following beneficial
interests in the Ordinary Shares of the Company:
30 June 2021 31 December 2020
No. of Ordinary % of total No. of Ordinary % of total
Shares Held issued Ordinary Shares Held issued Ordinary
Shares Shares
Patrick Firth (Chairman) 367,966 0.08 367,966 0.08
John Whittle 138,052 0.03 138,052 0.03
Andrew Whelan 9,553,734 1.95 9,553,734 1.95
Emma Stubbs 1,380,940 0.28 1,380,940 0.28
Dan Walker 911,300 0.19 911,300 0.19
In the six month period to June 2021 and the year to December
2020, none of the above received any amounts relating to their
shareholding.
Transactions with connected entities
The following significant transactions with connected entities
took place during the current period:
30 June 2021 30 June 2020
Balance Interest Balance Interest
GBP'000 accrued GBP'000 accrued
in the period in
the period
GBP'000 GBP'000
Loans (and corresponding interest
receivable) to entities in
which Sancus Lending Group
has a significant stake - - 1,853 82
30 June 31 December
Receivable from related parties 2021 2020
GBP'000 GBP'000
Sancus (IOM) Limited 2 36
Sancus (IOM) Holdings Limited - 2
Amberton Asset Management 1 11
Cost recharges
30 June 30 June
2021 2020
Amberton Asset Management 18 20
Sancus (IOM) Limited - 62
-------- ------------
There is no ultimate controlling party of the Company.
All platform loans and preference shares bear interest at a
commercial rate.
17. FINANCIAL INSTRUMENTS - Fair values and risk management
Sancus loans and loan equivalents
30 June 2021 31 December
(unaudited) 2020 (audited)
Non-current GBP'000 GBP'000
Sancus loans 1,005 442
Sancus Loans Limited loans 17,678 3,421
------------- ----------------
Total Non-current Sancus loans and loan equivalents 18,683 3,863
------------- ----------------
Current
Sancus loans 7,281 7,873
Loan equivalents 31 117
Sancus Loans Limited loans 22,288 41,379
------------- ----------------
Total Current Sancus loans and loan equivalents 29,600 49,369
------------- ----------------
Total Sancus loans and loan equivalents 48,283 53,232
============= ================
Fair Value Estimation
The financial assets and liabilities measured at fair value in
the Consolidated Statement of Financial Position are grouped into
the fair value hierarchy as follows:
30 June 2021 31 December 2020
(audited)
(unaudited)
Level Level Level Level
2 3 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Fintech Ventures investments - 500 - -
Derivative contracts 504 - 94 -
Total assets / liabilities at fair
value 504 500 94 -
======== ======== ========= ========
The classification and valuation methodology remains as noted in
the 2020 Annual Report.
All of the FinTech Ventures investments are categorised as Level
3 in the fair value hierarchy. In the past the Directors have
estimated the fair value of financial instruments using discounted
cash flow methodology, comparable market transactions, recent
capital raises and other transactional data including the
performance of the respective businesses. Having considered the
terms, rights and characteristics of the equity and loan stock held
by the Group in the FinTech Ventures investments, as well as the
challenges that have faced the platforms during the pandemic, the
Board's estimate of liquidation value of these assets is GBP0.5m at
30 June 2021 (31 December 2020: GBPNil) following GBP0.5m deployed
into an existing investment in March 2021. Changes in the
performance of these businesses and access to future returns via
its current holdings could affect the amounts ultimately realised
on the disposal of these investments, which may be greater or less
than GBP0.5m. There have been no transfers between levels in the
period (2020: None).
Assets at Amortised Cost
30 June 2021 31 December
2020
(unaudited) (audited)
GBP'000 GBP'000
Sancus loans and loan equivalents 48,283 53,232
Trade and other receivables 5,736 7,487
Cash and cash equivalents 16,246 15,786
------------- ------------
Total assets at amortised cost 70,265 76,505
============= ============
Liabilities at Amortised Cost
30 June 2021 31 December
2020
(unaudited) (audited)
GBP'000 GBP'000
ZDP shares 10,114 12,424
Corporate Bond 12,461 12,473
HIT facility 47,130 44,553
Trade and other payables 1,885 2,453
Provision in respect of guarantees 733 1,542
------------- ------------
Total liabilities at amortised cost 72,323 73,445
============= ============
Refer to Note 14 for further information on liabilities.
FinTech Ventures Investments Total Portfolio
30 June 2021 GBP
At 31 December 2020 -
Net new investments / loan repaid 492
Realised gain recognised in profit and loss 8
At 30 June 2021 500
================
Total Portfolio
31 December 2020 GBP
At 31 December 2019 6,299
Net ne investments / (divestments) (277)
Unrealised losses recognised in profit and loss (5,996)
Foreign exchange loss (26)
At 31 December 2020 -
================
Credit Risk
Credit risk is defined as the risk that a borrower/debtor may
fail to make required repayments within the contracted timescale.
The group invests in senior debt, senior subordinated debt, junior
subordinated debt and secured loans. Credit risk is taken in direct
lending to third party borrowers, investing in loan funds, lending
to associated platforms and loans arranged by associated platforms.
The group mitigates credit risk by only entering into agreements
related to loan instruments in which there is sufficient security
held against the loans or where the operating strength of the
investee companies is considered sufficient to support the loan
amounts outstanding.
Credit risk is determined on initial recognition of each loan
and re-assessed at each balance sheet date. It is categorized into
Stage 1, Stage 2 and Stage 3 with Stage 1 being to recognise 12
month Expected Credit Losses (ECL), Stage 2 being to recognise
Lifetime ECL not credit impaired and Stage 3 being to recognise
Lifetime ECL credit impaired.
Foreign Exchange Risk - Derivative instruments
The Treasury Committee Team monitors the Group's currency
position on a regular basis, and the Board of Directors reviews it
on a quarterly basis. Loans denominated in Euros which are taken
out through the HIT facility are hedged. Forward contracts to sell
Euros at loan maturity dates are entered into when loans are drawn
in Euros. At 30 June 2021 the following forward foreign exchange
contracts were open:
June 2021
Counterparty Settlement Buy Currency Buy Amount Sell currency Sell amount Unrealised
date GBP'000 EUR'000 loss GBP'000
July 2021
EWealthGlobal to September
Group Limited 2022 GBP 9,680 Euro 10,806 406
December 2021
Liberum to February
Wealth Limited 2022 GBP 2,626 Euro 2,928 98
Unrealised loss on forward foreign contracts 504
==============
December 2020
Counterparty Settlement Buy Currency Buy Amount Sell currency Sell amount Unrealised
date GBP'000 EUR'000 gain GBP'000
January 2021
EWealthGlobal to February
Group Limited 2022 GBP 4,121 Euro 4,641 (50)
February 2020
Liberum to November
Wealth Limited 2020 GBP 8,062 Euro 8,854 144
Unrealised gain on forward foreign contracts 94
==============
No hedging has been taken out against investments in the FinTech
Ventures platforms (2020: GBPNil).
Provision for ECL
Provision for ECL is made using the credit risk, the probability
of default (PD) and the probability of loss given default (PL) all
of which are underpinned by the Loan to Value (LTV), historical
position, forward looking considerations and on occasion,
subsequent events and the subjective judgement of the Board.
Preliminary calculations for ECL are performed on a loan by loan
basis using the simple formula: Outstanding Loan Value x PD x PL
and are then amended as necessary according to the more subjective
measures as noted above.
A probability of default is assigned to each loan. This
probability of default is arrived at by reference to historical
data and the ongoing status of each loan which is reviewed on a
regular basis. The probability of loss is arrived at with reference
to the LTV and consideration of cash that can be redeemed on
recovery.
Movement of provision for ECL
Trade Debtors
Loans GBP'000 Guarantees Total
GBP'000 GBP'000 GBP'000
Loss allowance at 31 December
2019 2,868 311 - 3,179
Charge for the year 2020 1,238 1,885 1,542 4,665
Utilised in the year 2020 93 (6) - 87
---------- -------------- ------------- ----------
Loss allowance at 31 December
2020 4,199 2,190 1,542 7,931
Charge/(credit) for the period
to June 2021 437 3,400 (809) 3,028
Utilised in the period to June
2021 (878) - - (878)
---------- -------------- ------------- ----------
Loss allowance at 30 June 2021 3,758 5,590 733 10,081
========== ============== ============= ==========
18. GUARANTEES
The Group undertakes a number of Guarantees and first loss
positions which are not deemed to be contingent liabilities under
IAS37 as there is no present obligation for these guarantees and it
is considered unlikely that these liabilities will crystallise.
HIT Facility
Sancus Group has a 10% first loss position as part of the HIT
facility. Sancus Group has also provided HIT with a guarantee,
capped at GBP2m that it will continue to ensure the orderly wind
down of the HIT related loan book, in the event of the insolvency
of Sancus Group Holdings Limited, given its position as facility
and security agent.
Sancus Loan Notes
SLN7 launched on 10 May 2021 with GBP16.6m assets, and at the
end of August 2021 had increased to GBP17.3m. Sancus Group Holdings
Limited has a 10% first loss position on this loan note . No other
Loan notes are currently in existence.
Commitments
As at 30 June 2021 the Group has unfunded commitments of
GBP43.0m (31 December 2020: GBP28.4m). These unfunded commitments
primarily represent the undrawn portion of development finance
facilities. Drawdowns are conditional on satisfaction of specified
conditions precedent, including that the borrower is not in breach
of its representations or covenants under the loan or security
documents. The figure quoted is the maximum exposure assuming that
all such conditions for drawdown are met. Directors expect the
majority of these commitments to be filled by Co-Funders.
19. SUBSEQUENT EVENTS
Sale of asset in Sancus Properties Limited
On 26 August 2021, the sale of a development site held by Sancus
Properties Limited completed for GBP0.7m.
Liquidation of Amberton Asset Management Limited
The Guernsey registered Company, Amberton Asset Management
Limited was liquidated on 2 September 2021. Amberton Limited, which
is a Jersey registered entity, was incorporated in January 2021 and
has been established as a joint venture to manage the loan note
programme going forward.
Liquidation of Sancus BMS Holdings Limited
On 13 September 2021, Sancus BMS Holdings Limited dissolved
following the sale of the BMS Fund during the period.
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END
IR EZLFLFKLXBBE
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