CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
In the first half of 2024 we
continued to navigate the negative impacts of a sustained period of
higher interest rates on the housing market. Against this backdrop,
we remain focused on the steps required to ensure we become a
profitable property private credit business in our core markets of
the UK, Ireland and Channel Islands.
Revenues in H1 2024 were £7.5m
versus £5.4m in H1 2023. This reflects modest growth in our loan
book and also increased fee income in the UK in
particular.
Loan book origination in H1 2024
was £51m versus £57m written in H1 2023, partly due to continued
low market confidence in all of our core markets. As at 30
June 2024 we had Assets Under Management ("AUM") of £209m versus
£202m as at 31 December 2023. As we enter the second half of 2024
we are optimistic that market conditions will improve, especially
in the UK, allowing us to increase our loan volumes whilst
retaining our underwriting discipline.
Our
Strategy
We provide an update below against
the strategic pillars set out in our 2023 Annual Report:
Focusing on revenue growth
|
•
|
The Revenue rose 39% to £7.5m compared to £5.4m in H1 2023. This
increase reflects fee income growth, especially in the UK and also
modest growth in our AUM.
|
Achieving operating and cost efficiency
|
•
|
Our reported operating expenses
were £2.8m in H1 2024 versus £3.3m in H1 2023. We remain committed
to achieving further expense savings and operating
efficiency.
|
Becoming a capital efficient business
|
•
|
The amount of own capital within
loans continues to be maintained at a low level, which at 30 June
2024 represented 0.4% of the total loan book, in comparison to 4.5%
at 30 June 2023.
|
|
•
|
We continue to make progress in
diversifying our sources of fundings. As at 30 June 2024 our Loan
Note programme funding was £28m, modestly higher than the balance
as at 31 December 2023 of £27m. The £25m Morton Family facility we
agreed as part of our joint venture with Hawk Lending Limited is
now live and we expect to use this facility during H2 2024.
Both the Loan Note programme and the Morton Family facility have
interest rates lower than our institutional funding
line.
|
|
•
|
As at 30 June 2024 £87.75m of our
loans were financed by an institutional line arranged by Pollen
Street Capital (31 December 2023: £77.75m).
|
Our AUM, pro-forma for our joint
venture with Hawk Lending, increased 3% from £202m as at 31
December 2023 to £209m as at 30 June 2024.
Financial
Summary
We have reported an operating loss
of £1.5m for H1 2024 versus an operating loss of £3.8m in H1 2023.
The loss before tax in H1 2024 was £0.6m versus £3.3m in H1 2023.
In addition to the revenue growth outlined above, this
reflects:
|
•
|
Operating expenses being £2.8m in
H1 2024 versus £3.3m in H1 2023, reflecting both our continued
focus on achieving operating efficiency and the transfer of certain
costs, including staff costs, to the joint venture with Hawk
Lending and which is reported as a "Share of net loss of joint
venture."
|
|
•
|
Group borrowing costs of £1.2m in
H1 2024 versus £1.7m in H1 2023 following our purchase of 1.4m ZDPs
in April 2024. This purchase of ZDPs also resulted in an accounting
gain of £1.1m (recorded within "Other net gains").
|
|
•
|
£0.5m reduction in expected credit
losses (versus a £0.8m charge in H1 2023). Our H1 2023 and full
year 2023 results were materially impacted by our need to recognise
expected credit losses against historic loans.
|
|
•
|
Our share of the loss from our
joint venture with Hawk Lending was £262k (H1 2023: £nil), due to
the delay between the launch of the joint venture and the start of
writing new business. The joint venture is now fully
operational and we are focussed on ensuring it becomes a profit
contributor to the Group.
|
ESG
At Sancus, we are committed to
taking Environmental, Social and Governance ("ESG") factors
seriously. We recognise our responsibility to incorporate
sustainability throughout the operations of our business, to be
custodians of the environment and to practise good stewardship of
our stakeholders' interests.
Alongside the publication of our
2023 Results we published our second Environmental, Social, and
Governance report, marking the start of our journey towards greater
transparency and sustainability. The report highlights our progress
and achievements in the areas of environmental protection, social
responsibility and governance, as well as the challenges and
opportunities that we face.
Outlook
We continue to believe there are
grounds for optimism and that with our strategic focus and progress
the long-term profitable growth potential for our business is
clear. Whilst the operating environment was somewhat uncertain for
much of H1 2024 we are cautiously optimistic as we enter H2
2024.
Rory Mepham
Chief Executive Officer
16 September 2024
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 the
year ended 31 December 2023 and were not expected to change in the
6 months to the end of the 2024 financial year. Further details on
these risks and uncertainties can be found in the 2023 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.
|
Approved and signed on behalf of
the Board of Directors
16 September 2024
INDEPENDENT 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 2024 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 20.
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 2024 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" 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
interim condensed consolidated financial statements, the financial
statements of the Company are prepared in accordance with IFRSs as
adopted by the UK. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with the 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 this 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.
Auditor's 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
statements 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 Kingston Smith LLP
9 Appold Street,
London,
EC2A 2AP
16 September 2024
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
|
|
Notes
|
Period
ended
|
Period
ended
|
|
|
|
30 June
2024
(unaudited)
£'000
|
30 June
2023
(unaudited)
£'000
|
|
|
|
|
|
|
Revenue
|
4
|
7,499
|
5,407
|
|
Cost of sales
|
5
|
(5,445)
|
(3,441)
|
|
Gross profit
|
|
2,054
|
1,966
|
|
Operating expenses
|
6
|
(2,846)
|
(3,318)
|
|
Group borrowing costs
|
7
|
(1,182)
|
(1,664)
|
|
Changes in expected credit
losses
|
19
|
466
|
(799)
|
|
Operating loss
|
|
(1,508)
|
(3,815)
|
|
FinTech Ventures fair value
movement
|
19
|
-
|
362
|
|
Other net gains
|
16
|
1,158
|
37
|
|
Loss on disposal of other
assets
|
|
-
|
(202)
|
|
Profit on disposal of other
assets
|
14
|
-
|
303
|
|
Share of net loss of joint ventures
accounted for using the equity method
|
10
|
(262)
|
-
|
|
Loss for the period before tax
|
|
(612)
|
(3,315)
|
|
Income tax expense
|
|
(35)
|
2
|
|
Loss for the period after tax
|
|
(647)
|
(3,313)
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit and
loss
|
|
|
|
|
Foreign exchange arising on
consolidation
|
|
(30)
|
(20)
|
|
Other comprehensive loss for the period after
tax
|
|
(30)
|
(20)
|
|
Total comprehensive loss for the period
|
|
(677)
|
(3,333)
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per Ordinary Share
|
8
|
(0.12)p
|
(0.57)p
|
|
Diluted loss per Ordinary Share
|
8
|
(0.12)p
|
(0.57)p
|
The accompanying Notes in the
"Notes to the Financial Statements"
section form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
|
|
|
30 June
2024
(unaudited)
|
31 December 2023
(audited)
|
|
ASSETS
|
Notes
|
£'000
|
£'000
|
|
Non-current assets
|
|
|
|
|
Property, plant and
equipment
|
9
|
200
|
294
|
|
Goodwill
|
11
|
-
|
-
|
|
Other intangible assets
|
12
|
-
|
-
|
|
Sancus loans and loan
equivalents
|
19
|
11,946
|
10,148
|
|
FinTech Ventures
investments
|
19
|
-
|
-
|
|
Investments in equity-accounted
joint ventures and associates
|
10
|
14,370
|
14,255
|
|
Other investments
|
|
50
|
50
|
|
Total non-current assets
|
|
26,566
|
24,747
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Other assets
|
14
|
-
|
-
|
|
Sancus loans and loan
equivalents
|
19
|
75,556
|
68,617
|
|
Trade and other
receivables
|
13
|
10,816
|
8,058
|
|
Cash and cash equivalents
|
|
5,995
|
4,990
|
|
Total current assets
|
|
92,367
|
81,665
|
|
|
|
|
|
|
Total assets
|
|
118,933
|
106,412
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
Share premium
|
15
|
118,340
|
118,340
|
|
Treasury shares
|
15
|
(1,172)
|
(1,172)
|
|
Other reserves
|
|
(119,821)
|
(119,144)
|
|
Total Equity
|
|
(2,653)
|
(1,976)
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
|
119,228
|
106,086
|
|
Other liabilities
|
|
84
|
130
|
|
Total non-current liabilities
|
16
|
119,312
|
106,216
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
1,046
|
925
|
|
Hedging contracts
|
|
118
|
231
|
|
Tax liabilities
|
|
110
|
76
|
|
Lease liabilities
|
|
90
|
152
|
|
Provisions
|
|
11
|
18
|
|
Interest payable
|
|
899
|
770
|
|
Total current liabilities
|
16
|
2,274
|
2,172
|
|
|
|
|
|
|
Total liabilities
|
|
121,586
|
108,388
|
|
|
|
|
|
|
Total equity and liabilities
|
|
118,933
|
106,412
|
The financial statements were
approved by the Board of Directors on 16 September 2024 and were
signed on its behalf by:
Director: John Whittle
The accompanying Notes in the
"Notes to the Financial Statements"
section form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY (Unaudited)
|
|
|
|
Share
Premium
|
Treasury
Shares
|
Warrants
Outstanding
|
Foreign Exchange
Reserve
|
Retained
Earnings/
(Losses)
|
207BTotal
208BEquity
|
|
|
|
|
0B£'000
|
1B£'000
|
2B£'000
|
3B£'000
|
4B£'000
|
£'000
|
|
Balance at 31 December 2023 (audited)
|
|
118,340
|
(1,172)
|
-
|
15
|
(119,159)
|
(1,976)
|
|
Transactions with owners
|
|
|
5B-
|
6B-
|
7B-
|
8B-
|
9B-
|
-
|
|
Total comprehensive loss for the
period
|
|
10B-
|
11B-
|
12B-
|
13B(30)
|
14B(647)
|
(677)
|
|
Balance at 30 June 2024 (unaudited)
|
|
|
15B118,340
|
16B(1,172)
|
17B-
|
19B
(15)
|
19B(119,806)
|
(2,653)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2022 (audited)
|
|
118,340
|
(1,172)
|
-
|
31
|
(110,025)
|
7,174
|
|
Transactions with owners
|
|
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total comprehensive loss for the
period
|
|
-
|
-
|
-
|
(20)
|
(3,313)
|
(3,333)
|
|
Balance at 30 June 2023 (unaudited)
|
|
|
118,340
|
(1,172)
|
-
|
11
|
(113,338)
|
3,841
|
The accompanying Notes in the
"Notes to the Financial Statements"
section form an integral part of these
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
Period
ended
|
Period
ended
|
|
|
|
30 June
2024
(unaudited)
|
30 June
2023
(unaudited)
|
|
|
Notes
|
£'000
|
£'000
|
|
Cash outflow from operations, excluding loan
movements
|
17
|
(3,175)
|
(4,374)
|
|
Decrease / (Increase) in Sancus
loans
|
|
126
|
(211)
|
|
Increase in loans through the
Pollen facility
|
|
(8,862)
|
(9,237)
|
|
Net
cash outflow from operating activities
|
|
(11,911)
|
(13,822)
|
|
Cash (outflow) / inflow from investing
activities
|
|
|
|
|
Net investments in FinTech
Ventures
|
|
-
|
125
|
|
Investment in joint
ventures
|
10
|
(427)
|
(50)
|
|
Sale of Sancus Properties
Limited
|
|
-
|
1,008
|
|
Expenditure on fixed assets and
intangibles
|
|
(18)
|
(5)
|
|
Net
cash (outflow) / inflow from investing activities
|
|
(445)
|
1,078
|
|
|
|
|
|
|
Cash inflows from financing activities
|
|
|
|
|
Drawdown of Pollen
facility
|
17
|
10,000
|
10,000
|
|
Issue of preference
shares
|
17
|
5,000
|
-
|
|
Capital element of lease
payments
|
17
|
(108)
|
(109)
|
|
Debt issue costs
|
|
-
|
32
|
|
(Purchase) / Sale of ZDPs
|
17
|
(1,501)
|
3,000
|
|
Net
cash inflow from financing activities
|
|
13,391
|
12,923
|
|
|
|
|
|
|
Effects of Foreign
Exchange
|
|
(30)
|
(20)
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
1,005
|
159
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of period
|
|
4,990
|
4,134
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
5,995
|
4,293
|
£3.5m of the £6.0m cash held at 30
June 2024 is for the exclusive use of Sancus Loans Limited (30 June
2023: £2.2m of the £4.3m).
The accompanying Notes
in the "Notes to the
Financial Statements" section form an
integral part of these financial statements.
NOTES TO THE CONDENSED INTERIM FINANCIAL
STATEMENTS
1. GENERAL
INFORMATION
Sancus Lending Group Limited (the
"Company"), 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 ("NRFSB"), 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 changed where
its business is managed and controlled, from Guernsey to Jersey,
effective 1 April 2023. The Board agreed that the Company should
revoke its NRFSB status, which was completed on 23 June
2023.
The Company does not have a fixed
life and the Company's Memorandum and Articles of Incorporation
(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.
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 2023 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 2023, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the United Kingdom.
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.
These financial statements were
authorised for issue by the Company Directors on 16 September
2024.
(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 2023.
(c) Going
concern
The Directors have considered the
going concern basis in the preparation of the financial statements
as supported by the Director's assessment of the Company's and
Group's ability to pay its liabilities as they fall due and have
assessed the current position and the principal risks facing the
business with a view to assessing the prospects of the Company. The
Directors have prepared a cash flow forecast for the period to 30
September 2025 which shows that the Company and the Group will have
sufficient cash resources to meet their ongoing liabilities as they
fall due for at least twelve months from the date of approval of
these financial statements. Following the extension of the ZDPs at
the end of 2022, for a further 5 years to 5 December 2027 and with
the Bonds maturity date not until 31 December 2025, the Company
does not have any debt liabilities that fall due within the next 12
months. Based on this, along with the issuance of preference
shares by a subsidiary of the Group in April 2024, the Directors
are of the opinion that the Company and Group has adequate
financial resources to continue in operation and meet its
liabilities as they fall due for the foreseeable future.
It is however expected, whereby
equity is required to facilitate an increase in drawdown from
institutional funding lines that the Company will require growth
capital to fund the continued growth of the loan book. The
Company's largest shareholder, Somerston, has indicated their
willingness to support the Company's growth plans. The Company will
be looking at options available to raise additional growth capital
over the course of the year, which may include a form of equity
raise or sale by the Company of ZDP shares held in
treasury.
The Directors therefore believe it
is appropriate to continue to adopt the going concern basis in
preparing the financial statements.
(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 2023.
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
Lending (Jersey) Limited, Sancus Lending (Guernsey) Limited, Sancus
Properties Limited, Sancus Group Holdings Limited and the
JV.
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 30 June 2024
|
Offshore
|
UK
|
Ireland
|
Sancus Loans Limited
(SLL)
|
Sancus Debt
Costs
|
Total
Sancus
|
|
Head
Office
|
SLL Debt
Costs
|
FinTech Ventures Fair Value
& Forex
|
Other
|
|
Consolidated Financial
Statements
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
350
|
2,056
|
719
|
(720)
|
-
|
2,405
|
|
-
|
5,094
|
-
|
-
|
|
7,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit/(loss)
*
|
(66)
|
252
|
261
|
(741)
|
-
|
(294)
|
|
(493)
|
-
|
-
|
(5)
|
|
(792)
|
|
Credit Losses
|
395
|
24
|
-
|
47
|
-
|
466
|
|
-
|
-
|
-
|
-
|
|
466
|
|
Debt Costs
|
-
|
-
|
-
|
-
|
(1,182)
|
(1,182)
|
|
-
|
-
|
-
|
-
|
|
(1,182)
|
|
Other Gains/(losses)
|
(44)
|
-
|
18
|
103
|
-
|
77
|
|
1,131
|
-
|
-
|
-
|
|
1,208
|
|
Loss on JVs and
associates
|
(262)
|
-
|
-
|
-
|
-
|
(262)
|
|
-
|
-
|
-
|
(50)
|
|
(312)
|
|
Taxation
|
-
|
-
|
(35)
|
-
|
-
|
(35)
|
|
-
|
-
|
-
|
-
|
|
(35)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) After Tax
|
23
|
276
|
244
|
(591)
|
(1,182)
|
(1,230)
|
|
638
|
-
|
-
|
(55)
|
|
(647)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months to 30 June 2023
|
Offshore
|
UK
|
Ireland
|
Sancus Loans Limited
(SLL)
|
Sancus Debt
Costs
|
Total
Sancus
|
|
Head
Office
|
SLL Debt
Costs
|
FinTech Ventures Fair
Value
&
Forex
|
Other
|
|
Consolidated Financial
Statements
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
|
Revenue
|
721
|
1,131
|
886
|
(603)
|
-
|
2,135
|
|
-
|
3,272
|
-
|
-
|
|
5,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit/(loss)
*
|
(228)
|
(160)
|
320
|
(625)
|
-
|
(693)
|
|
(662)
|
-
|
-
|
(9)
|
|
(1,364)
|
|
Credit Losses
|
(122)
|
(29)
|
-
|
(648)
|
-
|
(799)
|
|
-
|
-
|
-
|
-
|
|
(799)
|
|
Debt Costs
|
-
|
-
|
-
|
-
|
(1,652)
|
(1,652)
|
|
-
|
-
|
-
|
-
|
|
(1,652)
|
|
Other Gains/(losses)
|
101
|
-
|
8
|
84
|
-
|
193
|
|
-
|
-
|
362
|
(5)
|
|
550
|
|
Loss on JVs and
associates
|
-
|
-
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
(50)
|
|
(50)
|
|
Taxation
|
2
|
-
|
-
|
-
|
-
|
2
|
|
-
|
-
|
-
|
-
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit After Tax
|
(247)
|
(189)
|
328
|
(1,189)
|
(1,652)
|
(2,949)
|
|
(662)
|
-
|
362
|
(64)
|
|
(3,313)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Operating Profit/(loss) before
credit losses and debt costs
Sancus Loans Limited is
consolidated into the Group's results as it is a 100% owned
subsidiary of the Group. Sancus Loans Limited is considered 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 £nil (2023: £244,000), Offshore to Ireland £37,000 (2023:
£37,000), Head Office to Offshore £62,500 (2023: £68,000) and UK to
Head Office £nil (2023: £96,000). "Other" includes FinTech
(excluding fair value and forex).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2024
|
Offshore
|
UK
|
Ireland
|
Sancus Loans Limited
(SLL)
|
Total
Sancus
|
|
Head
Office
|
Fintech
Portfolio
|
Other
|
Inter Company
Balances
|
|
Consolidated Financial
Statements
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
45,065
|
16,108
|
2,083
|
98,117
|
161,373
|
|
42,616
|
-
|
5
|
(85,061)
|
|
118,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
(53,157)
|
(16,999)
|
(474)
|
(108,719)
|
(179,349)
|
|
(27,293)
|
-
|
(5)
|
85,061
|
|
(121,586)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets/ (liabilities)
|
(8,092)
|
(891)
|
1,609
|
(10,602)
|
(17,976)
|
|
15,323
|
-
|
-
|
-
|
|
(2,653)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
32,329
|
17,298
|
1,668
|
86,822
|
138,117
|
|
59,306
|
-
|
9
|
(91,020)
|
|
106,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
(54,670)
|
(18,494)
|
(273)
|
(96,832)
|
(170,269)
|
|
(29,130)
|
-
|
(9)
|
91,020
|
|
(108,388)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets/(liabilities)
|
(22,341)
|
(1,196)
|
1,395
|
(10,010)
|
(32,152)
|
|
30,176
|
-
|
-
|
-
|
|
(1,976)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Head Office liabilities include
borrowings £26.9m (December 2023: £28.9m). Other FinTech assets and
liabilities are included within "Other."
4. REVENUE
|
|
30 June
2024
(unaudited)
|
30 June
2023
(unaudited)
|
|
|
45B£'000
|
46B£'000
|
|
Co-Funder fees
|
47B1,577
|
47B1,228
|
|
Earn out (exit) fees
|
49B350
|
49B394
|
|
Transaction fees
|
51B1,129
|
51B1,024
|
|
Total revenue from contracts with
customers
|
53B3,056
|
53B2,646
|
|
|
|
|
|
Interest on loans
|
55B26
|
55B86
|
|
Sancus Loans Limited interest
income
|
57B4,375
|
57B2,669
|
|
Other income
|
59B42
|
59B6
|
|
Total Revenue
|
61B7,499
|
61B5,407
|
5. COST OF SALES
|
|
30 June
2024
(unaudited)
|
30 June
2023
(unaudited)
|
|
|
63B£'000
|
64B£'000
|
|
Sancus Loans Limited interest
cost
|
67B5,105
|
67B3,272
|
|
Other cost of sales
|
69B340
|
69B169
|
|
Total cost of sales
|
71B5,445
|
71B3,441
|
6. OPERATING
EXPENSES
|
|
30 June
2024
(unaudited)
|
30 June
2023
(unaudited)
|
|
|
73B£'000
|
74B£'000
|
|
|
|
|
|
Administration and secretarial
fees
|
75B61
|
75B47
|
|
Amortisation and
depreciation
|
77B112
|
77B118
|
|
Audit fees
|
79B184
|
79B63
|
|
Corporate Insurance
|
54
|
81B4
|
|
Directors Remuneration
|
83B88
|
83B55
|
|
Employment costs
|
85B1,662
|
85B2,157
|
|
Investor relations
expenses
|
87B30
|
87B30
|
|
Legal and professional
fees
|
89B93
|
89B185
|
|
Marketing expenses
|
91B2
|
91B55
|
|
NOMAD fees
|
93B70
|
93B38
|
|
Other office and administration
costs
|
95B431
|
95B502
|
|
Pension costs
|
97B40
|
97B46
|
|
Registrar fees
|
99B15
|
99B15
|
|
Sundry
|
101B4
|
101B3
|
|
Total operating expenses
|
103B2,846
|
103B3,318
|
7.
GROUP BORROWING COSTS
Group borrowing costs reflect the
interest cost of the Corporate bond and ZDPs (see note
16).
|
|
115B30 June
2024
(unaudited)
£'000
|
116B30 June
2023
(unaudited)
£,000
|
|
Group Borrowing Costs
|
127B1,182
|
128B1,664
|
8.
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 15 describes the warrants in
issue which are currently out of the money, and therefore are not
considered to have a dilutive effect on the calculation of Loss per
Ordinary Share.
|
|
30 June
2024
(unaudited)
|
30 June
2023
(unaudited)
|
|
|
|
|
|
Number of shares in issue
|
105B584,138,346
|
105B584,138,346
|
|
Weighted average number of shares
outstanding
|
107B584,138,346
|
107B584,138,346
|
|
Loss attributable to Ordinary
Shareholders in the period
|
109B£677,000
|
109B£3,333,000
|
|
Basic Loss per Ordinary
Share
|
111B(0.12)p
|
111B(0.57)p
|
|
Diluted Loss per Ordinary
Share
|
113B(0.12)p
|
113B(0.57)p
|
|
|
|
|
9.
PROPERTY,
PLANT AND EQUIPMENT
|
|
Right of use
assets
|
Property &
Equipment
|
Total
|
|
Cost
|
£'000
|
£'000
|
£'000
|
|
At 31 December 2023
|
1,365
|
419
|
1,784
|
|
Additions in the period
|
-
|
18
|
18
|
|
Disposals in the period
|
-
|
-
|
-
|
|
At 30 June 2024
|
1,365
|
437
|
1,802
|
|
|
|
|
|
|
Accumulated depreciation
|
£'000
|
£'000
|
£'000
|
|
At 31 December 2023
|
1,084
|
406
|
1,490
|
|
Charge in the period
|
106
|
6
|
112
|
|
Disposals in the period
|
-
|
-
|
-
|
|
At 30 June 2024
|
1,190
|
412
|
1,602
|
|
|
|
|
|
|
Net book value 30 June 2024
|
175
|
25
|
200
|
|
|
|
|
|
|
Net book value 31 December
2023
|
281
|
13
|
294
|
10.
INVESTMENTS IN JOINT VENTURES
|
|
115B30 June
2024
(unaudited)
|
116B31 December
2023
(audited)
|
|
|
117B£'000
|
118B£'000
|
|
At beginning of year
|
119B14,255
|
120B-
|
|
Additions - joint venture
|
121B427
|
122B100
|
|
Additions - goodwill
|
123B-
|
124B14,255
|
|
Impairment of joint
venture
|
125B(50)
|
126B(100)
|
|
Share of net loss of joint ventures
accounted for using the equity method
|
125B(262)
|
126B-
|
|
|
127B14,370
|
128B14,255
|
The Group has a 50% share in
Amberton Limited. Additions in the period include £50,000 of
investment in Amberton Limited and which was subsequently written
down to a carrying value of £Nil. 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.
On 5 December 2023, the Group
entered into a Joint Venture ("JV") agreement with Hawk Family
Office Limited for a new bridge and development lending business in
the Channel Islands. Sancus Lending (Jersey) Limited ("SLJL")
entered into a Business and Asset Purchase Agreement ("BAPA") with
Hawk Lending Limited (the previous lending business of Hawk Family
Office Limited) and Hawkbridge Limited (the new joint venture
lending business) ("Hawkbridge"). Under the terms of the BAPA, SLJL
sold to Hawkbridge Limited its business as a going concern
including goodwill, business information, moveable assets, records
and third party rights. The consideration for the business of SLJL
was the issue of 12 shares in the newly formed JV holding company,
Hawkbridge Limited, giving Sancus Group Holdings Limited a 50%
ownership in the JV. Hawkbridge Limited has two wholly owned
subsidiaries, Hawkbridge Lending Limited and Westmead Debt Services
Limited. The Group has contributed £377,000 of capital into the JV
in order to cover initial costs and operating expenses before the
JV became cash generative.
Under the joint venture
shareholder agreement, all new Channel Islands lending business
will be written through Hawkbridge. Hawkbridge will also provide
administration and other services to SLJL and Hawk Lending
Limited.
Under IFRS 11, this joint
arrangement is classified as a joint venture and has been included
in the consolidated financial statements using the equity
method.
Summarised financial information
in relation to the joint venture is presented below:
|
|
115B30 June
2024
(unaudited)
|
116B31 December
2023
(audited)
|
|
|
117B£'000
|
118B£'000
|
|
Current assets
|
119B381
|
120B-
|
|
Non-current assets
|
121B28,517
|
122B28,510
|
|
Current liabilities
|
123B157
|
124B-
|
|
Non-current liabilities
|
125B-
|
126B-
|
|
|
|
|
|
Included in the above amounts are:
|
|
|
|
Cash and cash equivalents
|
125B255
|
126B-
|
|
Current financial liabilities
(excluding trade payables)
|
125B62
|
126B-
|
|
Non-current financial liabilities
(excluding trade payables)
|
125B-
|
126B-
|
|
|
|
|
|
Net assets (100%)
|
127B28,741
|
128B28,510
|
|
Group share of net assets
(50%)
|
127B14,370
|
128B14,255
|
|
Revenues
|
119B244
|
120B-
|
|
|
|
|
|
Loss and total comprehensive loss
for the period (100%)
|
121(524)
|
122B-
|
|
Group share of total comprehensive
income (50%)
|
123B(262)
|
124B-
|
|
|
|
|
|
Included in the above amounts are:
|
|
|
|
Depreciation and
amortisation
|
125B(50)
|
126B(100)
|
|
Income tax expense
|
125B(50)
|
126B(100)
|
No dividends were received from
the JV during the period ended 30 June 2024.
The JV is a private company;
therefore no quoted market prices are available for its
shares.
The Group has no additional
commitments relating to the JV.
11. GOODWILL
|
|
115B30 June
2024
(unaudited)
|
116B31 December
2023
(audited)
|
|
|
117B£'000
|
118B£'000
|
|
At 31 December 2023
|
119B-
|
120B14,255
|
|
Impairment of goodwill
|
121B-
|
122B-
|
|
Disposal of goodwill
|
123B-
|
124B(14,255)
|
|
|
127B-
|
128B-
|
On 5 December 2023, the Group
entered into a Joint Venture ("JV") agreement with Hawk Family
Office Limited for a new bridge and development lending business in
the Channel Islands. Sancus Lending (Jersey) Limited ("SLJL")
entered into a Business and Asset Purchase Agreement ("BAPA") with
Hawk Lending Limited (the previous lending business of Hawk Family
Office Limited) and Hawkbridge Limited (the new joint venture
lending business) ("Hawkbridge"). Under the terms of the BAPA, SLJL
sold to Hawkbridge Limited its business as a going concern
including goodwill, business information, moveable assets, records
and third party rights. The consideration for the business of SLJL
was the issue of 12 shares in the newly formed JV holding company,
Hawkbridge Limited, giving Sancus Group Holdings Limited a 50%
ownership in the JV. Hawkbridge Limited has two wholly owned
subsidiaries, Hawkbridge Lending Limited and Westmead Debt Services
Limited.
Under the joint venture
shareholder agreement, all new Channel Islands lending business
will be written through Hawkbridge. Hawkbridge will also provide
administration and other services to SLJL and Hawk Lending
Limited.
Following the sale of the business
of SLJL to Hawkbridge Limited on 5 December 2023, the remaining
business is in run off. As detailed in Note 10, the investment in
the joint venture has been recognised separately on the Balance
Sheet and has been accounted for using the equity
method.
12. OTHER
INTANGIBLE ASSETS
|
|
£'000
|
|
Cost
|
|
|
At 30 June 2024 and 31 December
2023
|
1,584
|
|
|
|
|
Amortisation
|
|
|
At 31 December 2023
|
1,584
|
|
Charge for the period
|
-
|
|
At 30 June 2024
|
1,584
|
|
|
|
|
Net book value at 30 June 2024
|
-
|
|
|
|
|
Net book value at 31 December
2023
|
-
|
Other Intangible assets comprise
capitalised contractors' costs and costs related to core systems
development. The assets have been fully amortised.
13. TRADE
AND OTHER RECEIVABLES
|
|
115B30 June
2024
(unaudited)
|
116B31 December
2023
(audited)
|
|
Current
|
117B£'000
|
118B£'000
|
|
Loan fees, interest and similar
receivable
|
119B9,879
|
120B7,235
|
|
Taxation
|
123B-
|
124B5
|
|
Other trade receivables and prepaid
expenses
|
125B937
|
126B818
|
|
|
127B10,816
|
128B8,058
|
14. OTHER
ASSETS
|
|
|
|
Development
properties
|
|
Cost
|
|
|
£'000
|
|
At 31 December 2022
|
|
|
706
|
|
Additions
|
|
|
-
|
|
Disposals
|
|
|
(706)
|
|
At 31 December 2023
|
|
|
-
|
|
Disposals
|
|
|
-
|
|
At 30 June 2024
|
|
|
-
|
Other assets are development
properties previously held as security against certain loans which
have defaulted. Other assets are held at the lower of cost and net
realisable value. All development properties classified as Other
Assets were sold during 2023 with a profit on disposal of £303k
recognised in the Condensed Consolidated Statement of Comprehensive
Income.
15. SHARE
CAPITAL, SHARE PREMIUM & DISTRIBUTABLE
RESERVE
Sancus Lending Group Limited has the
power under the Articles to issue an unlimited number of Ordinary
Shares of nil par value.
No Ordinary Shares were issued in
the period to 30 June 2024 (Period to 30 June 2023:
Nil).
|
Share Capital
|
|
|
Number of Ordinary Shares - nil par value
|
|
|
At 30 June 2024 (unaudited) and 31
December 2023 (audited)
|
129B584,138,346
|
|
Share Premium
|
|
|
Ordinary Shares - nil par value
|
130B£'000
|
|
At 30 June 2024 (unaudited) and 31
December 2023 (audited)
|
131B118,340
|
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
|
|
132B30 June
2024
(unaudited)
Number of
shares
|
133B31 December
2023
(audited)
Number of
shares
|
|
|
|
|
|
Balance at start and end of
period/year
|
134B11,852,676
|
135B11,852,676
|
|
|
136B30 June
2024
(unaudited)
£'000
|
137B31 December
2023
(audited)
£'000
|
|
|
|
|
|
Balance at start end of
period/year
|
138B1,172
|
139B1,172
|
Warrants in Issue
As at 30 June 2024 there were
89,396,438 Warrants in issue to subscribe for new Ordinary Shares
at a subscription price of 2.25 pence per ordinary share. The
Warrants are exercisable on at least 30 days notice within the
period ending 31 December 2025. The Warrants in issue 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 2024 is £Nil (31 December
2023: £Nil).
16. LIABILITIES
|
Non-current liabilities
|
30
June 2024
(unaudited)
|
141B31 December
2023
(audited)
|
|
|
142B£'000
|
143B£'000
|
|
Corporate bond (1)
|
144B14,963
|
145B14,950
|
|
Pollen facility (2)
|
146B87,281
|
147B77,169
|
|
ZDP shares (3)
|
148B11,984
|
149B13,967
|
|
Preference shares (4)
|
148B5,000
|
149B-
|
|
Lease liability
|
B84
|
151B130
|
|
Total non-current liabilities
|
152B119,312
|
153B106,216
|
|
Current liabilities
|
30
June 2024
(unaudited)
|
155B31 December
2023
(audited)
|
|
|
156B£'000
|
157B£'000
|
|
Accounts payable
|
158B319
|
159B126
|
|
Accruals and other
payables
|
727
|
799
|
|
Taxation
|
162B110
|
163B76
|
|
Interest payable
|
166B899
|
167B770
|
|
Derivative contracts (note
19)
|
168B118
|
169B231
|
|
Provisions for financial
guarantees
|
170B11
|
171B18
|
|
Lease liability
|
172B90
|
173B152
|
|
Total current liabilities
|
2,274
|
174B2,172
|
|
Movement on provision for financial
guarantees
|
|
|
|
|
|
175B£'000
|
|
At 31 December 2022
|
|
176B413
|
|
Profit and loss charge in the
year
|
|
177B(395)
|
|
At 31 December 2023
|
|
178B18
|
|
Profit and loss charge in the
period
|
|
179B(7)
|
|
At
30 June 2024
|
|
180B11
|
Provisions for financial
guarantees are recognised in relation to Expected Credit Losses
("ECLs") on off-balance sheet loans and receivables where the
Company has provided a subordinated position or other guarantee
(see Note 19). The fair value is determined using the exact same
methodology as that used in determining ECLs (Note 19).
(1)
Corporate bond
The £15m (31 December 2023: £15m)
Corporate bonds bear interest at 7% (2023: 7%). The bonds have a
maturity date of 31 December 2025.
(2)
Pollen facility (previously HIT Facility)
On 28 January 2018, Sancus signed
a funding facility with Honeycomb Investment Trust plc (HIT), now
Pollen Street PLC ("Pollen"). The funding line initially had a term
of 3 years and comprised of a £45m accordion and revolving credit
facility. On 3 December 2020 this facility was extended to a 6 year
term to end on 28 January 2024 and on 23 November 2022 this was
extended further to 23 November 2026. In addition to the extension
the facility was increased to £75m in December 2020 and to £125m in
November 2022.
The Pollen 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 participates 10%
on every drawdown with a first loss position on the Pollen
facility. Sancus has also provided Pollen with a guarantee, capped
at £4m 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. Refer to Note 20
Guarantees.
(3)
ZDPs
The ZDP Shares have a maturity
date of 5 December 2027, following a 5 year extension of the final
capital repayment approved on 5 December 2022. The final capital
entitlement is £2.5332 per ZDP Share.
Under the Companies (Guernsey)
Law, 2008 shares in the Company can only be redeemed if the Company
can satisfy the solvency test prescribed under that law. 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.
The ZDP shares bore interest at an
average rate of 8% until 5 December 2022. As part of the extension
agreement noted above the interest rate increased to an average of
9% per annum with effect from 5 December 2022, through to the final
repayment date of 5 December 2027. In accordance with article 7.5.5
of the Company's Memorandum and Articles of Incorporation, the
Company may not incur more than £30m of long term debt without
prior approval from the ZDP shareholders. The Memorandum and
Articles (section 7.6) also specify that two debt cover tests must
be met in relation to the ZDPs. At 30 June 2024 the Company was in
compliance with these covenants as Cover Test A was 2.39 (minimum
of 1.7) and the adjusted Cover Test B was 3.70 (minimum of 2.05).
At 30 June 2024 senior debt borrowing capacity amounted to £15m.
The Pollen facility does not impact on this capacity as it is
non-recourse to Sancus.
The Company purchased 1,388,889
Zero Dividend Preference shares of no par value at a price of £1.08
per ZDP share on 29 April 2024. All of the ZDP shares purchased
will be held as treasury shares.
At 30 June 2024 the Company held
11,894,628 ZDP shares in Treasury (31 December 2023: 10,505,739)
with an aggregate value of £22,893,204 (31 December 2023:
£19,291,480).
(4)
Preference Shares
In April 2024, Somerston Fintech
Limited, a subsidiary of Somerston Group, the majority shareholder
of the Company, subscribed for £5,000,000 of preference shares in
Sancus Loans Limited ("Sancus Loans"). The Preference Shares have a
non-cash, cumulative coupon of 15% and a maturity date of 23
November 2026.
17. NOTES TO
THE CASH FLOW STATEMENT
|
Cash outflow from operations (excluding loan
movements)
|
|
181B30 June
2024
(unaudited)
|
182B30 June
2023
(unaudited)
|
|
|
|
183B£'000
|
184B£'000
|
|
|
|
|
|
|
Loss for the period
|
|
185B(647)
|
185B(3,313)
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
Net gain on FinTech
Ventures
|
|
187B-
|
187B(362)
|
|
Other net gains
|
|
189B(769)
|
189B(195)
|
|
Loss on disposal of
subsidiary
|
|
189B-
|
189B202
|
|
Accrued interest on ZDPs
|
|
191B636
|
191B1,106
|
|
Impairment of financial
assets
|
|
193B(466)
|
193B799
|
|
Taxation
|
|
195B4
|
195B45
|
|
Amortisation / depreciation of
property, plant and equipment
|
|
197B112
|
197B118
|
|
Amortisation of debt issue
costs
|
|
199B138
|
199B195
|
|
|
|
|
|
|
Changes in working capital:
|
|
|
|
|
Trade and other
receivables
|
|
201B(2,297)
|
201B(2,133)
|
|
Trade and other payables
|
|
203B114
|
203B(836)
|
|
|
|
|
|
|
Cash outflow from operations,
excluding loan movements
|
|
205B(3,175)
|
205B(4,374)
|
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.
|
|
1 January
2024
|
Financing cash
flows1
|
Amortisation of debt issue
costs
Non-cash
|
Other
Non-cash
|
30 June
2024
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
ZDPs
|
13,967
|
(1,501)
|
13
|
(495)2
|
11,984
|
|
Corporate Bond
|
14,950
|
-
|
13
|
-
|
14,963
|
|
Pollen Facility
|
77,169
|
10,000
|
112
|
-
|
87,281
|
|
Preference Shares
|
-
|
5,000
|
-
|
-
|
5,000
|
|
Lease Liability
|
282
|
(108)
|
-
|
-
|
174
|
|
Total liabilities from financing activities
|
106,368
|
13,391
|
138
|
(495)
|
119,402
|
|
|
1 January
2023
|
Financing cash
flows1
|
Amortisation of debt issue
costs
Non-cash
|
Other
Non-cash
|
30 June
2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
ZDPs
|
9,117
|
3,000
|
12
|
1,1392
|
13,268
|
|
Corporate Bond
|
14,925
|
-
|
12
|
-
|
14,937
|
|
Pollen Facility
|
66,826
|
10,000
|
171
|
-
|
76,997
|
|
Lease Liability
|
364
|
(109)
|
-
|
(99)
|
156
|
|
Total liabilities from financing activities
|
91,232
|
12,891
|
195
|
1,040
|
105,358
|
1 These amounts can be found under financing cash flows in the
cash flow statement.
2 Interest accruals.
18.
RELATED PARTY TRANSACTIONS
Transactions with the Directors/Executive
Team
Non-executive Directors
As at 30 June 2024, 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
2024
|
|
30 June
2023
|
|
|
£
|
|
£
|
|
|
|
|
|
|
Stephen Smith (Chairman)
|
50,000
|
|
50,000
|
|
John Whittle
|
42,500
|
|
42,500
|
|
Tracy Clarke (stepped down as
non-executive director 30 March 2023, reappointed 31 March
2024)
|
35,000
|
|
35,000
|
Tracy Clarke was appointed Interim
Group CFO and joined the Executive Team on 30 March 2023. She
subsequently stepped down on 31 March 2024 and returned to her role
of non-executive Director. Fees paid to her include £32,500 in
respect of her role as Interim CFO.
Total Directors' fees charged to
the Company for the period ended 30 June 2024 were £87,500 (30 June
2023: £55,000).
Executive Team
For the period ended 30 June 2024,
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
2024
|
30 June
2023
|
|
|
£'000
|
£'000
|
|
|
|
|
|
Aggregate remuneration in respect of
qualifying service - fixed salary
|
149
|
284
|
|
Aggregate amounts contributed to
Money Purchase pension schemes
|
6
|
10
|
|
Aggregate bonus paid
|
-
|
-
|
All amounts have been charged to
Operating Expenses.
On 30 March 2023 Carlton
Management Services Limited ("Carlton"), was appointed to manage
and develop the Group's finance function, including new technology
integrations for forecasting, performance and treasury management
under a service agreement. The agreement was terminated on 31 March
2024. The annualised fee for the service was £170,000. Carlton
sub-lease office space in the Group's offices in Jersey, with a sub
lease end date of 31 August 2024, at an annual cost of c.£100,000
p.a.
On 30 March 2023 Carlton entered
into a Director service agreement with Sancus Lending Group Limited
for the provision of Tracy Clarke as Interim Group CFO, with an
annual fee of £130,000. This agreement terminated on 31 March
2024.
Tracy Clarke is Managing Director
of Carlton Management Services Limited.
From time to time, the Somerston
Group may participate as a Co-Funder in Sancus loans, on the same
commercial terms available to other Co-Funders.
In April 2024, Somerston Fintech
Limited, a subsidiary of Somerston Group, the majority shareholder
of the Company, subscribed for £5,000,000 of preference shares in
Sancus Loans Limited ("Sancus Loans"). The Preference Shares have a
non-cash, cumulative coupon of 15% and a maturity date of 23
November 2026.
The Group has not recorded any
other transactions with any Somerston Group companies for the
period ended 30 June 2024 (2023: none).
Directors' and Persons Discharging Managerial
Responsibilities ("PDMR") shareholdings in the
Company
As at 30 June 2024, the Directors
had the following beneficial interests in the Ordinary Shares of
the Company:
|
|
30 June
2024
|
31 December
2023
|
|
|
No. of Ordinary Shares
Held
|
% of total issued Ordinary
Shares
|
No. of Ordinary Shares
Held
|
% of total issued Ordinary
Shares
|
|
|
|
|
|
|
|
John Whittle
|
138,052
|
0.02
|
138,052
|
0.02
|
|
Rory Mepham
|
2,000,000
|
0.34
|
2,000,000
|
0.34
|
|
|
|
|
|
|
In the six month period to 30 June
2024 and the year to 31 December 2023, none of the above received
any amounts relating to their shareholding.
Transactions with connected entities
There were no significant
transactions with connected entities that took place during the
current period.
There is no ultimate controlling
party of the Company.
19.
FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK
MANAGEMENT
Sancus loans and loan
equivalents
|
|
30 June 2024
(unaudited)
|
31 December 2023
(audited)
|
|
Non-current
|
£'000
|
£'000
|
|
|
|
|
|
Sancus loans
|
-
|
-
|
|
Sancus Loans Limited
loans
|
11,946
|
10,148
|
|
Total Non-current Sancus loans and loan
equivalents
|
11,946
|
10,148
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Sancus loans
|
334
|
460
|
|
Sancus Loans Limited
loans
|
75,222
|
68,157
|
|
Total Current Sancus loans and loan
equivalents
|
75,556
|
68,617
|
|
|
|
|
|
Total Sancus loans and loan equivalents
|
87,502
|
78,765
|
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
2024
(unaudited)
|
31 December 2023
(audited)
|
|
|
Level 2
|
Level 3
|
Level 2
|
Level 3
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Fintech Ventures
investments
|
-
|
-
|
-
|
-
|
|
Derivative contracts
|
(118)
|
-
|
(231)
|
-
|
|
Total assets / liabilities at fair
value
|
(118)
|
-
|
(231)
|
-
|
The classification and valuation
methodology remains as noted in the 2023 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, the Board's estimate of liquidation value of
these assets is £Nil at 30 June 2024 (31 December 2023: £Nil).
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 £Nil. There have been no transfers between
levels in the period (2023: None).
Assets at Amortised
Cost
|
|
30 June
2024
|
31 December
2023
|
|
|
(unaudited)
|
(audited)
|
|
|
£'000
|
£'000
|
|
Sancus loans and loan
equivalents
|
87,502
|
78,765
|
|
Trade and other
receivables
|
9,879
|
7,240
|
|
Cash and cash equivalents
|
5,995
|
4,990
|
|
Total assets at amortised cost
|
103,376
|
90,995
|
Liabilities at Amortised
Cost
|
|
30 June
2024
|
31 December
2023
|
|
|
(unaudited)
|
(audited)
|
|
|
£'000
|
£'000
|
|
ZDPs
|
11,984
|
13,967
|
|
Corporate bond
|
14,963
|
14,950
|
|
Pollen facility
|
87,281
|
77,169
|
|
Preference shares
|
5,000
|
-
|
|
Trade and other payables
|
2,229
|
2,053
|
|
Provisions in respect of
guarantees
|
11
|
18
|
|
Total liabilities at amortised cost
|
121,468
|
108,157
|
Refer to Note 16 for further
information on liabilities.
|
FinTech Ventures
Investments
|
Total
Portfolio
|
|
30
June 2024
|
£'000
|
|
At 31 December 2023
|
-
|
|
Net new investments / loan
repaid
|
-
|
|
Realised gain recognised in profit
and loss
|
-
|
|
At 30 June 2024
|
-
|
|
|
Total
Portfolio
|
|
31
December 2023
|
£'000
|
|
At 31 December 2022
|
-
|
|
Net new investments /
(divestments)
|
715
|
|
Realised losses recognised in profit
and loss
|
(715)
|
|
At 31 December 2023
|
-
|
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 ECLs, Stage 2 being to
recognise Lifetime ECLs not credit impaired and Stage 3 being to
recognise Lifetime ECLs 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 Pollen
facility are hedged. Forward contracts to sell Euros at loan
maturity dates are entered into when loans are drawn in Euros. At
30 June 2024 the following forward foreign exchange contracts were
open:
|
June 2024
|
|
|
|
|
|
|
|
|
Counterparty
|
Settlement
date
|
Buy
Currency
|
Buy Amount
£'000
|
Sell
currency
|
Sell amount
€'000
|
Unrealised gain/(loss)
£'000
|
|
|
|
|
|
|
|
|
|
Alpha
|
Jun 2024
to July 2024
|
GBP
|
7,827
|
Euro
|
9,245
|
(11)
|
|
Lumon Risk Management
|
Jun 2023
to July 2023
|
GBP
|
27,428
|
Euro
|
32,460
|
(107)
|
|
|
|
|
|
|
|
|
|
|
(118)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty
|
Settlement
date
|
Buy
Currency
|
Buy Amount
£'000
|
Sell
currency
|
Sell amount
€'000
|
Unrealised loss
£'000
|
|
|
|
|
|
|
|
|
|
Alpha
|
Dec 2023
to Jan 2024
|
GBP
|
7,710
|
Euro
|
9,000
|
(97)
|
|
Lumon Risk Management
|
Dec 2023
to Jan 2024
|
GBP
|
23,851
|
Euro
|
27,640
|
(134)
|
|
|
|
|
|
|
|
|
|
|
(231)
|
|
No hedging has been taken out
against investments in the FinTech Ventures platforms (2023:
£Nil).
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
|
|
Loans
£'000
|
Trade Receivables
£'000
|
Guarantees
£'000
|
Total
£'000
|
|
Loss allowance at 31 December
2022
|
6,835
|
6,493
|
413
|
13,741
|
|
Charge/(credit) for the year
2023
|
4,032
|
1,180
|
(395)
|
4,817
|
|
Utilised in the year
2023
|
(2,383)
|
(1,211)
|
-
|
(3,594)
|
|
Loss allowance at 31 December
2023
|
8,484
|
6,462
|
18
|
14,964
|
|
Credit for the period to June
2024
|
(303)
|
(156)
|
(7)
|
(466)
|
|
Utilised in the period to June
2024
|
(4,319)
|
-
|
-
|
(4,319)
|
|
Loss allowance at 30 June 2024
|
3,862
|
6,306
|
11
|
10,179
|
20.
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.
Pollen Facility
Sancus Group participates 10% on
every loan funded by the Pollen facility, taking a first loss
position. Sancus Group Lending Limited has provided Pollen with a
guarantee capped at £4m following the restructure of the Pollen
facility in November 2022 (previously was capped at £2m) and that
it will continue to ensure the orderly wind down of the Pollen
funded loan book, in the event of the insolvency of Sancus Group,
given its position as facility and security agent. No provision has
been provided in the financial statements (2023: £Nil).
Sancus Loan Notes
Loan Note 7 was launched in May
2021 and was repaid in September 2023.
Loan Note 8 was launched in
January 2022 and currently stands at c.£30.0m. Loan Note 8 matures
on 1 December 2026 and has a coupon of 8% p.a. (payable quarterly),
with Sancus providing a 20% first loss guarantee.
Unfunded Commitments
As at 30 June 2024 the Group has
unfunded commitments of £81.4m (31 December 2023: £72.5m). 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.
OFFICERS AND PROFESSIONAL
ADVISERS
|
|
|
|
Directors
|
|
|
Non-executive
|
Stephen Smith
|
|
|
John Richard Whittle
|
|
|
Tracy Clarke (appointed 31 March
2024)
|
|
|
|
|
|
|
|
Executive
|
Rory Mepham
|
|
|
Tracy Clarke (resigned 31 March
2024)
|
|
The address of the Directors is the
company's registered office.
|
|
|
|
|
Executive Team:
|
|
|
Chief Executive Officer
|
Rory Mepham
|
|
Chief Financial Officer
|
Keith Lawrence (appointed 31 March
2024); Tracy Clarke (resigned 31 March 2024)
|
|
Chief Investment Officer
|
James Waghorn
|
|
|
|
|
Registered Office
|
Suite 1, First Floor
|
|
|
Windsor House, Lower
Pollet
|
|
|
St Peter Port
|
|
|
Guernsey, GY1 1WF
|
|
|
Channel Islands
|
|
|
|
|
Nominated Advisor and Broker
|
Panmure Liberum Capital
Limited
|
|
|
Ropemaker Place
|
|
|
25 Ropemaker Street
|
|
|
London, EC2Y 9LY
|
|
|
United Kingdom
|
|
|
|
|
Company Secretary
|
Sanne Fund Services (Guernsey)
Limited
|
|
|
Sarnia House
|
|
|
Le Truchot
|
|
|
St Peter Port
|
|
|
Guernsey, GY1 1GR
|
|
|
Channel Islands
|
|
|
|
|
Legal Advisors, Channel Islands
|
Carey Olsen
|
|
|
PO Box 98
|
|
|
Carey House
|
|
|
Les Banques
|
|
|
St Peter Port
|
|
|
Guernsey, GY1 4BZ
|
|
|
Channel Islands
|
|
|
|
|
Legal Advisors, UK
|
Stephenson Harwood
|
|
|
1 Finsbury Circus
|
|
|
London, EC2M 7SH
|
|
|
United Kingdom
|
|
|
|
|
Legal Advisors, USA
|
Troutman Pepper
|
|
|
3000 Two Logon Square
|
|
|
Eighteenth and Arch
Streets
|
|
|
Philadelphia, PA
19103-2799
|
|
|
United States
|
|
|
|
|
Bankers
|
Barclays International
|
|
|
1st Floor, 39041 Broad
Street
|
|
|
St Helier
|
|
|
Jersey, JE4 8NE
|
|
|
|
|
Auditors
|
Moore Kingston Smith LLP
|
|
|
9 Appold Street
|
|
|
London
|
|
|
EC2A 2AP
|
|
|
|
|
Registrar
|
Link Market Services
Limited
|
|
|
The Registry, 34 Beckenham
Road
|
|
|
Beckenham
|
|
|
Kent, BR3 4TU
|
|
|
United Kingdom
|
|
|
|
|
Public Relations
|
Instinctif Partners
Limited
|
|
|
65 Gresham Street
|
|
|
London, EC2V 7NQ
|
|
|
United Kingdom
|
