Sancus Lending Group Limited
(formerly GLI Finance Limited)
Final Results for the Year Ended 31 December 2021
HIGHLIGHTS
Rory Mepham, Chief Executive Officer of Sancus Lending Group Limited, commented:
"Since my appointment as CEO in June 2021, I have prioritised the turnaround of the Group's financial performance. 2021 was the start of a transitional period for the Company. We have rebranded, strengthened the management team, invested in technology and expanded our presence in the
Our plan is to return the Group to profitability by growing the Groups loans under management while ensuring that our credit and other processes are best in class. We will also broaden our funder base and improve funding terms. The business will continue to focus on expanding the Group's presence in the
We started 2022 with a clear strategy to return the business to profitability, and a management team committed to achieving that."
Strategic and Operational Highlights
· Change of name 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;
· Appointment of Rory Mepham as CEO and Steve Smith as Chairman;
· Significant investment in the sales and credit teams at the end of 2021 and into 2022, to support and drive growth over the coming years;
· Focus on the maintenance of robust institutional grade credit processes, smooth loan execution, active loan management, data integrity and a proactive approach to loans that become stressed or distressed;
· Geographic focus remains unchanged, with the
· Impressive growth of 60% on new facilities written; from
· Loan book at year end
· Positive shift in the residential property market presents the Group with a favourable outlook and an opportunity to focus on the right strategic steps to support growth in coming years.
Financial Headlines
· Group revenue for the year was
· Group loss for the year was
·
· Increase in operating expenses to
Enquires:
|
Sancus Lending Group Limited |
via Instinctif Partners |
|
Rory Mepham, CEO |
|
|
|
|
|
Nominated Adviser and Broker |
|
|
Liberum Capital Limited |
+44 (0)203 100 2000 |
|
Chris Clarke |
|
|
Lauren Kettle |
|
|
|
|
|
Public Relations Adviser |
|
|
Instinctif Partners |
|
|
Tim Linacre |
+44 (0) 7949 939 237 |
CHAIRMAN'S STATEMENT
Introduction
I was delighted to take on the role of Chairman of the Group on 31 August 2021, having joined Sancus in May 2021, and am looking forward to the challenge ahead.
A number of key events took place prior to my appointment. The successful fund raise at the end of 2020 was the first step in what the Board believes will be a structured change programme which will reposition the Group for growth. Our target markets continue to present compelling opportunities and coupled with the reduced appetite amongst traditional balance sheet lenders, we are optimistic this will increase the potential to write high quality new business.
2021 was a busy year. The Group was rebranded as Sancus Lending Group Limited (from GLI Finance Limited) on 11 May 2021, the change reflecting the Group's continued focus on lending for residential property development and bridge financing purposes.
There have also been a number of changes to our senior executive team, with new appointments expected to drive Group development and growth, which are outlined more fully below.
As part of a wider review of the business and the expansion of the credit and recoveries teams, we carried out a detailed review of the Group's loan book in June 2021, resulting in impairments of
Finally, after a five-year tenure our auditor, Deloitte LLP stood down and have been replaced by Moore Stephens following a tender process.
Our People
There were a number of personnel changes during 2021. Following the resignation of Andy Whelan, Rory Mepham assumed the role of Interim CEO on 30 June 2021 and was then confirmed as CEO on 23 November 2021. Rory joined the business in January 2021 with initial responsibility for funding and origination and has extensive experience in corporate finance, capital raising, debt finance, fund management and development. During his transition, Rory was supported by Dan Walker who originally joined the Group in 2018, and was appointed as Deputy CEO in June 2021. Dan subsequently left the Group on 31 January 2022, and we thank him for his contribution. On 8 March 2022 James Waghorn was appointed as Chief Investment Officer and together with Rory and Emma Stubbs, our Chief Financial Officer, completes our Executive Management Team. James has over 14 year's experience in the
On 31 August 2021, Patrick Firth stepped down after sixteen years with the Group and I would like to thank Patrick for his invaluable contribution during this time.
As Rory sets out in more detail in his report, the Group has invested in rebuilding and reinforcing the team and our headcount has increased from 25 at the end of 2021 to 36 as at 30 March 2022. The new resource will largely be focussed on expansion in our growth markets
Dividend and Shareholders
As part of its wider strategic review of the business, the Board has decided to withdraw its previous dividend policy as the business plan requires the reinvestment of surplus resources in order to deliver the planned growth objectives. The Company last declared a dividend in 2016 and thereafter adopted a policy consistent with prudent capital and liquidity management, recognising the need to provide the time and funding necessary for the various platforms in which the Group was invested to reach their potential. This followed the transitioning of the business from an investment company to a trading company, when historically it was earning positive cashflows from CLO investments which enabled the business to pay dividends. The Board's decision to formally withdraw its previous dividend policy is therefore consistent with the approach that has been adopted over recent years, to reinvest surplus resources for growth. As such, the Group does not intend to declare a dividend for the year. The Board intends to revisit this policy at the appropriate time, should the profitability and cash flow profile of the business support the reinstatement of a dividend.
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 all of our stakeholders and in the belief that we have the strategy, the systems and the personnel to put the business onto a firmer footing, I look forward to reporting more positive developments in the coming period.
Steve Smith
Chairman
Outlook
Since my appointment as CEO in June 2021, I have prioritised planning the turnaround of the Group's financial performance. A return to Group profitability relies on successfully growing loans under management whilst widening its range of funders, improving funding terms and adopting institutional grade processes in all areas. The business is focused on expanding the Group's presence in the
The business has written in excess of
The perennial imbalance between supply and demand for housing continues to offer a favourable landscape for the Group's anticipated growth in its target markets. Banks having retrenched from both SME and development financing further provides attractive opportunities for alternative lenders. We continue to track the geopolitical situation closely and note the potential for further supply chain disruption and inflationary risks in the construction sector.
The successful delivery of Sancus's growth objectives will be driven by the four key pillars of the Group's business: Origination, Loan Management, Funding and Finance & Operations.
Origination
Originating sufficient lending volumes across the target jurisdictions and product types will provide the business with the scale and diversification it needs to deliver sustainable profitable growth. Significant investment has been made in recruiting experienced business development team members in each of our markets during 2021, an initiative which will continue in 2022.
In the 15 months to March 2022, we took the total business development heads from 8.5 to 15, with a particular focus on our sales activity in the
Whilst it is possible that further hiring will be required in the future, we consider that this recruitment drive provides the team that can substantially deliver against the Group's required targets. The Board will remain alert to market dynamics and future opportunities as they present themselves and will look to add to the team in line with business requirements.
As part of the risk management process, no members of the credit committee have an origination function. This ensures an appropriate separation between the origination and credit functions.
We have seen growth in new loan facilities written during the year with
Arrangement fees and commitments fees are received on the full value of loan facility written and therefore a key metric in monitoring the performance of our sales team. We continue to see significant demand for development finance and are increasing our presence in the bridging market with a couple of key hires.
We envisage origination growth in the
During the year, we have placed a greater emphasis on diversifying and growing our origination channels to include a wider variety of brokers, other introducers, and a greater range of marketing tools utilised in a targeted fashion. We have also established a working group to explore the extent to which technology may be able to support our growth in origination.
Loan Management
Scaling the business successfully necessitates a focus on the maintenance of robust institutional grade credit processes, smooth loan execution, active loan management, data integrity and a proactive approach to loans that become stressed or distressed.
· Maintaining a high-quality credit process whilst scaling the quantity of new loans is a priority. During 2021 our experienced credit team has been supplemented by new members with a track record in the property sector and qualifications as Chartered Surveyors. We have standardised our approach across all jurisdictions including valuation, legal title, borrower, market due diligence and monitoring surveyor standards.
· Standardisation of the loan execution process has been implemented across the Group, including documentation, conditions precedent, conditions subsequent and closing checklists. We have also implemented a new workflow process to expediate the time between the loan credit approval and loan drawdown and exploring how we can better utilise technology to better manage certain elements. The business is both actively engaging with external suppliers of software packages together with continuing to invest our own loan management system. The required investment in terms of possible subscription charges and additional technology staff has been budgeted in our forecasts.
· Greater emphasis has been placed on actively managing loans once the initial drawdown has been made. This has been particularly important during a time when various market related pressures such as cost inflation, are impacting our borrowers. Active management is helping us to deal with issues before they become problems.
· Where loans unavoidably become delinquent or defaulted Sancus is adopting a proactive approach to minimise the risk of loss. The period of time during which loans become stressed can lead to further strain on loan covenants, so decisive action is often required without compromising on the integrity of decision making.
· Due consideration is always afforded to the interests of all stakeholders in a given loan.
· Further investment has been made in recruiting experienced loan management team members in each of our markets during 2021, and this will continue in 2022.
The Sancus asset backed lending loan book decreased by 17% since the end of 2020 from
Under the leadership of the Senior Management Team, a detailed evaluation of the Group's loan book has been completed. Particular focus has been on reviewing historic loans that are either delinquent or defaulted. As a result of this exercise, the Group is reporting an increase in expected credit loss provisions of
Funding
We continue to focus on growing the funding capacity of the business on improved terms. Additionally, we are seeking to work with a diversified mix of funders, both private and institutional, to match funders with the loans meeting their varied risk and rewards criteria. Currently, the Group continues to be supported by four sources of funding:
· Co-Funders
· Loan Note program
· Institutional funders
· Proprietary Capital
Co Funders remain our largest funding channel, with the majority of the loan book in the
During the year we have continued to launch further loan notes through Amberton Asset Management with the successful launch of Loan Note 7, raising
Sancus has a secured institutional funding line from the Honeycomb Investment Trust ("HIT"), which is managed by Pollen Street Capital and is designed to be complementary to our Co-Funder base and Loan Notes. As announced on 4 December 2020 the HIT credit facility was increased to
Sancus has additionally secured a forward flow bridge funding arrangement with a global private equity backed debt acquisition business and continues to explore additional long term financing lines that could sit alongside our syndicated lending approach.
The availability, cost and flexibility 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 is best placed to grow funding capacity on improved terms. Over the course of 2021 the loan book funded by institutional funding increased by 22% with the majority of the
Own capital has fluctuated around
Finance & Operations
A focus on operational efficiencies within Finance and Operations to be driven by technology wherever possible is underway, linking into the technology strategy noted above. Continued focus and improvement on Corporate Governance, Compliance and Risk via way of policy and procedures to ensure the business is well set for future growth plans.
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.
Sancus has developed, and continues to evolve, its own proprietary loan managements system ("LMS") for the administration of loans. A comprehensive review of the LMS system and our wider Technology strategy has been carried out during the year and further steps will be undertaken in 2022.
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 December 2021, the Group headcount was 35 (31 December 2020: 25) with the largest increase in the Sales and Credit teams and as we build our presence across the
A key milestone at the end of 2020 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. With the ZDP's intended to play a long-term part the Group's finance strategy, given the current maturity date of 5 December 2022, we intend to engage with the ZDP holders in due course in order to seek their support at this critical time in the Group's turnaround and as it embarks on a redefined growth strategy.
Realising value from the legacy FinTech Ventures Investments remains a target for the management team. Monitoring and governance of FinTech Ventures is ongoing and we continue to assist our investee platforms with their strategy. Unfortunately, the profitability of many of these companies have failed to meet expectations within an acceptable timeframe and their ability to raise additional capital without proving concept is severely constrained. It remains a challenging market for many of the FinTech platforms.
Strategic KPIs
The Board have agreed the following KPI's with the senior management team. These have been selected based on their link to the successful delivery of our strategy and the executive management team will be monitored against these throughout the year. The composition of KPI's are further monitored by the Board on a regular basis and upon their successful delivery are designed to create shareholder value.
· Revenue growth.
· Growing loans under management.
· Reducing cost of funding.
· Become a capital efficient business.
· Increasing operating profits - by increasing gross margin and reducing costs.
· Return on Equity.
· Ensuring a risk based approach is taken on all decision making.
Summary of Financial Performance
Our full year 2021 financial results have been overshadowed by the ongoing impact of Covid-19 as we saw a reduction in our loan book and revenue as delays to loan completions impacted the results. This resulted in revenue of
2021 was the start of what we expect will be a transitional period for the Group, where we saw the Group rebrand, a number of changes to senior management and continued expansion of our presence in the
Although headline revenue showed a decrease, Note 3 Segmental Reporting sets out the results by Offshore,
We have seen Offshore revenue decrease by 12% in the year, partly due to some large exit fees which were received in 2020 but also a reduction in administration fees as we saw the loan book in this region decrease over the last few years. The Offshore team has been rebuilt over the course of 2021 and into 2022 following some changes in senior management and they are focussed on building the loan book over the next few years.
Operating costs in the year were
Following a thorough review of the loan book we have seen an increase in the expected credit loss provisions (IFRS 9) of
The Group's net assets have reduced in the year from
Goodwill remains at
Group cash remains healthy. Within the
On balance sheet loans (excluding those loans in Sancus Loans Limited) were
The Group's liabilities consist of the Bond of
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 debts 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.
Liabilities which fall due in the next 12 months include the final capital entitlement of the Company's ZDP shares, which are repayable on 5 December 2022 at
As part of the Group's growth plan the Company is considering its options regarding this liability which may include re-financing, part repayment and/or extension of the ZDPs and an equity raise. This will require consultation with the relevant stakeholders, including ordinary shareholders and ZDP shareholders and regulatory approvals and consents. Accordingly, there can be no certainty that the proposals will proceed.
These factors and assumptions constitute a material uncertainty that may cast significant doubt over the Company's ability to continue as a going concern, such that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors expect that if they are able to action the mitigations in accordance with the plan outlined above, the material uncertainty will be extinguished. The Directors are therefore of the opinion that the Company will have adequate financial resources to continue in operation and meet its liabilities as they fall due for the foreseeable future and continue to adopt the going concern basis in preparing the financial statements.
Outlook
The Group has been through a substantial period of change with a new chief executive and other new members of the senior executive team now in place. This new senior executive team have a clearly defined strategy to return the business to profitability. The road map to achieving this goal has been clearly communicated to the whole team and all members of the Sancus team are clear on the vision for the business together with understanding the role that they have to play in delivering this target. While a great deal of hard work lies ahead, I am certain the team are up to the challenge and are excited about the future.
I want to thank all shareholders for their support during this period of change and over the preceding year. We are enthusiastic about the opportunities that lie ahead of us and look forward to delivering profitability.
Rory Mepham
Chief Executive Officer
The Group aims to carefully manage the risks which are inherent across its business activities in order to deliver an appropriate risk adjusted commercial return. The principal risks which the Group has consciously accepted in the pursuit of value creation are liquidity risk, regulatory and compliance risk, market risk, credit risk, strategic risk, and investment risk. With regard to the FinTech activities, exposure to investment risk is a factor of the strategic, liquidity, credit and operational risks assumed by the platforms in which the Group is invested.
This section on the Group's Principal Risks should be read together with the sections on the Group's Governance Framework, the operation of the Audit and Risk Committee, as well as Note 22 which describes the sensitivity of the Group's financial results to its Financial Risk exposures. These sections explain how these risks are being managed, monitored and governed.
The table below describes the Group's assessment of the principal risks being those which have the potential to have a significant impact on the Group's business model, future performance, solvency or liquidity.
|
Principal Risks |
Internal controls mitigating Risks |
Current Rating of Risks |
|
Group |
|
|
|
1. Capital and liquidity Risk |
|
Medium |
|
Sancus's own funding is sourced primarily from the ZDP shares and the Corporate Bond (as detailed in Note 17).
Expansion of lending and investment activities will be constrained to the extent of retained profits unless further sources of funding are secured. |
Sancus has a Treasury Committee which meets once a month to manage its capital and liquidity position, and forecasts over several years to predict longer term funding requirements.
Management of each of the operating companies balance their lending and funding and proposals to advance lending are typically contingent on sufficient funding having been secured in advance.
The business seeks to maintain a material liquidity buffer at all times. |
Completion of the fundraising and liability management exercise in December 2021 has significantly improved the Group's capital and liquidity position.
Management at Group and subsidiary level are focussed on raising additional on and off balance sheet funding in order to grow lending activities and support funding commitments.
|
|
2. Regulatory and Compliance Risk |
|
Low |
|
As a Financial Services business, compliance with regulation is considered paramount within the Group, particularly with regard to Anti Money Laundering (AML) regulations which are critically important.
The Company has chosen to comply with the provisions of the QCA Corporate Governance Code.
|
All entities have developed and implemented appropriate policies and procedures relating to regulatory compliance and Anti Money Laundering.
The Group Compliance Committee monitors these risks, and forthcoming regulations, with appropriate reporting from the various Heads of Compliance and Money Laundering Reporting Officers. Further reviews of AML compliance are carried out by independent third parties where appropriate.
The Company has an appointed NOMAD, Liberum, with whom it liaises regularly, to ensure compliance with the AIM rules, including the Market Abuse Regulations.
Boards receive quarterly reports from Compliance Officers and where appropriate, Money Laundering Reporting Officers on compliance monitoring plans and any breaches identified. |
The compliance framework as described is considered to be operating effectively.
The Group is mindful of the conflicts in
|
|
3. Market risk |
|
Low |
|
The primary market risks are considered to be interest rate and foreign exchange risk. Given the nature of the business operations, with relatively short term lending and currencies on lending opportunities being matched (or hedged) the exposure is considered to have limited impact on its position as a Going Concern.
Foreign exchange risk primarily arises from the USD and Euro investments in the FinTech portfolio and Euro loans held in the Irish lending book.
|
Exposures to these risks are monitored regularly by the Sancus Treasury Committee and reported to the Board on a quarterly basis.
These risks are identified and assessed at the time of entering into new transactions. |
More information on the sensitivity to these risks is contained in Note 22.
Covid-19 could cause interest rate and foreign exchange fluctuations although the impact of this we believe is likely to be minimal as loans have fixed rates and are short term. Co-Funders might look elsewhere to investment; however, we believe this to be a minimal risk as our lending model enables investors to receive attractive risk adjusted returns on asset backed lending. |
|
4. Credit Risk |
|
Medium |
|
The Group has direct credit exposures through its on balance sheet lending and credit support. Indirect credit risk (potential losses to Co-Funders) could impact further business development.
|
Each operational entity has its own credit policies and procedures which are the subject of at least annual review by operating entity Boards.
The respective Credit Committees take all credit decisions, monitor credit exposures on an ongoing basis and manage recoveries situations. Following Covid-19 tighter lending criteria has been implemented.
|
The IFRS 9 provision increased substantially during the year. However, the credit performance across the Group remains resilient with actual losses incurred being less than 1% of loans advanced.
See Note 22 (5) for further details.
Covid-19 created downside risk through potential delays in loan repayments and reduced recoveries. We believe the risk of this going forward has reduced.
|
|
Sancus |
|
|
|
5. Operational Risk - Execution of the Sancus strategy |
|
Medium |
|
Approximately 80% of Sancus's capital has been deployed into the Sancus Group. There is a risk that the planned growth of these businesses will not be realised primarily as a result of sub optimal levels of loan origination and funding.
|
The Board and Executive Committee of Sancus Group recognise the challenge of building the business to meet the financial targets and actively manage all aspects of the business on an ongoing basis. Plans and budgets are in place and performance against these is monitored regularly by the management team and the Executive Committee.
There continues to be strong demand from both Borrowers and Co-Funders for the lending products offered across the business, and the risk adjusted returns available to Co-Funders.
|
By its nature, this risk remains an on-going area of focus for the Board, particularly with respect to business development in the
The emergence of Covid-19 created downside risk on new loan origination levels although we believe this risk has now reduced.
IT capabilities for Sancus were further enhanced during 2021, providing Co-Funders with online interactive services and creating operational efficiencies. |
|
FinTech Ventures |
|
|
|
6. Investment risk - Platform Valuations |
|
Low |
|
Across the majority of the FinTech portfolio, the growth rates historically have been slower than originally anticipated and the business models have proved more capital intensive.
Many of the FinTech platforms require additional capital to fund their ongoing growth to enable them to reach profitability. There remains a risk that some platforms may not be successful in the longer term, either as a result of lack of loan funding, lack of working capital funding or difficulties in establishing a competitive position in their chosen markets
|
The Group has board seats or board observer rights on most investee company boards and thus is able to participate in the strategic discussions and monitor the progress on each platform.
The Group regularly monitors the progress of each business, with regular review of financial and KPI reporting.
Period end valuations are conducted for all investments in platforms. These are based on a variety of factors including the pricing for any recent relevant capital transactions by the respective platform or using an appropriate valuation methodology such as a discounted cash flow model. The forecasts provided by management of the platforms are often challenged, and where considered appropriate, adjustments are made and sensitivity analysis is included as part of the valuation work. |
As a result of the platforms taking longer to reach profitability, and given that several are seeking additional capital, the Board has valued our holding of the FinTech portfolio at
The valuations are also subject to a number of material estimation uncertainties, refer to Note 22 (4). .
|
|
|
|
|
Our ESG journey at Sancus
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, be custodians of the environment and practice good stewardship of our stakeholders' interests. We are now taking steps to improve our approach to managing these factors.
Q1 2022 has been focused on starting to define our ESG strategy. Having now established an internal ESG focus group we will also draw on external industry experts as required.
It is essential that we understand what ESG factors are most important to our stakeholders, such that we can focus our strategy around improving our approach to these material issues. We are well on our way to completing a materiality assessment and intend to engage with stakeholders in the coming period.
Our approach to ESG will be to breakdown the topics into People, Planet and Prosperity. Starting by ascertaining which factors are material to our business, establish our baseline, set objectives & goals, assess the gap between goals and baseline, establish a roadmap, set KPIs and report on progress.
We are committed to providing an ESG report, focusing on our progress in the 2022 Annual Report.
Introduction
The Board recognises the importance of a strong corporate governance culture.
The composition of the Board is the subject of ongoing review. Somerston Group had the right to nominate a candidate for appointment to the Board and took up this right in 2019 with the appointment of Nick Wakefield. On the 8 March 2022 it was announced that Nick Wakefield has been replaced by Tracy Clarke (bio noted below).
Board of Directors
The Company operates a unitary Board Structure, comprised of both Executive and Non-Executive Directors. Biographical details of the Directors can be found below. The terms of Directors' appointments are available from the Company Secretary.
On joining the Board, any new director will have received an induction through face to face meetings with existing directors, senior management and the Company Secretary.
The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company, its corporate governance responsibilities, and addressing any training or development needs of the directors.
Steve Smith - Independent Non-Executive Director
Mr Smith was formerly an Executive Director and the Chief Investment Officer of The British Land Company plc, the FTSE 100 real estate investment trust, with responsibility for the group's property and investment strategy, standing down in 2013. Prior to this, Mr Smith was Global Head of Asset Management and Transactions at AXA Real Estate Investment Managers, where he was responsible for the asset management of a portfolio of assets valued at more than
John Whittle - Independent Non-Executive Director
Mr Whittle has a background in large third party Fund Administration. He has worked extensively in high tech service industries and has in-depth experience of strategic development and mergers/acquisitions. He has experience of listed company boards as well as the private equity, property and fund of funds sectors. He is currently a director of Starwood European Real Estate Finance Limited and TRIG (both listed on the main market of the London Stock Exchange) and Chenavari Toro Income Fund Limited (admitted to trading on the Specialist Fund Segment of the London Stock Exchange). Mr Whittle, a Chartered Accountant, has also served as Finance Director of Close Fund Services Limited (responsible for internal finance and client financial reporting), Managing Director of Hugh Symons Group PLC and Finance Director and Deputy MD of Talkland International Limited (now Vodafone Retail).
Mr. Whittle was appointed to the Board, the Audit and Risk Committee and the Remuneration and Nomination Committee on 23 September 2016, after having served as an Alternate Director since December 2015. He is resident in
Tracy Clarke - Non-Executive Director
Ms Clarke is a representative of the Somerston group of companies ("Somerston"), the Company's largest shareholder which has the right to nominate one individual for appointment to the Board. Ms Clarke joined Somerston in 2016 and acts as the group's Chief Operating Officer. Ms Clarke is also Managing Director of Carlton Management Services Limited, a licensed Jersey trust company business. Prior to joining Somerston, Ms Clarke worked for Deutsche Bank in Jersey and
Rory Mepham - Executive Director
Rory joined Sancus in January 2021, assuming the role of Interim CEO on 1 July 2021 and was then confirmed as CEO and board member on 23 November 2021. Joining Sancus from The Somerston Group where he managed their European real estate platform which includes business in the hotel, retail, land development, student housing and PRS sectors. Rory has over 20 years experience in the
Emma Stubbs - Executive Director
Emma joined the Group in November 2013 as Chief Financial Officer and was appointed to the Board on 16 September 2014. Emma is also a Board member of Sancus Group Holdings Limited and a number of the subsidiary entities. Emma was appointed as a Non Executive Director on Funding Options Limited on 24 March 2020. Emma is also a Non-Executive Director of Amberton Limited. Emma is a Fellow member of the Association of Chartered Certified Accountants and qualified with Deloitte in 2004. She graduated from the University of the West of
Executive Management Team
Rory Mepham - Chief Executive Officer
See above.
Emma Stubbs - Chief Financial Officer
See above.
Dan Walker - Chief Operating Officer (left Company on 31 January 2022)
James Waghorn - Chief Investment Officer (joined Executive Management Team on 8 March 2022)
James was appointed to the Executive Management Team on 8 March 2022. James has over 14 years experience in the
development focused business with capacity for in excess of 2,350 units within its strategic portfolio. James holds a BSc in Investment and Finance in Property from the University of
The Board is committed to maintaining high standards of corporate governance throughout the Company's operations and to ensuring that all of its practices are conducted transparently, ethically and efficiently. The Board believes that scrutinising all aspects of the Company's business and reflecting, analysing and improving its procedures will minimise the potential for downside risk and will preserve shareholder value. In compliance with the AIM Rules for Companies, published March 2018, the Company has chosen to comply with the provisions of the QCA Corporate Governance Code (the "QCA Code"). The Company is also mindful of the provisions of the Finance Sector Code of Corporate Governance, as amended by the Guernsey Financial Services Commission in November 2021.
The Board believes that applying the principles and reporting against the provisions of the QCA Code accurately reflects the nature, scale and complexity of the business and enables the Board to provide information to shareholders on its activities in accordance with the principles set out in a recognised governance framework. Furthermore, through applying the relevant provisions the Company is better positioned to mitigate downside risk and in doing so, preserve long-term shareholder value. The Company's corporate governance framework has been based on these principles and is designed to deliver the Group's strategy, and the application of such principles to the operation of the Board ensures that its decision-making processes remain focussed on the long-term sustainable success of the Company.
As at 31 December 2021, the Company complied substantially with the relevant provisions of the QCA Code and it is the intention of the Board that the Company will comply with these provisions throughout the year ending 31 December 2022, save with regard to the following:
· The appointment of a Senior Independent Director: Given the size and composition of the Board, the Board does not consider it is necessary to appoint a Senior Independent Director. The Board considers that all the independent Directors have different qualities and areas of expertise on which they may lead where issues arise and to whom concerns can be referred.
· Internal audit function: The Board has considered the need for an internal audit function and is satisfied that the compliance policies, procedures and reporting mechanisms in place throughout the group are sufficient, and that implementing a separate internal audit function would be unnecessary. This requirement is assessed annually by the Audit and Risk Committee.
How we apply the QCA Code
The Company has established specific formally constituted committees and implemented certain policies, to ensure that:
· It is led by an effective Board which is collectively responsible for the long-term sustainable success of the Company and establishes a culture whereby the tone is set from the top which is consistent with the objectives, strategy and business model of the Group;
· the Board and its committees have the appropriate balance of skills, experience, independence, and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively;
· the Board establishes a formal and transparent arrangement for considering how it applies the corporate reporting, risk management, and internal control principles and for maintaining an appropriate relationship with the Company's auditors; and
· there is a dialogue with shareholders based on the mutual understanding and alignment of objectives, conducted primarily through the CEO and the Corporate Broker.
Risk management remains a key area of focus during Board meetings.
Composition and Independence of the Board of Directors
The Board of Directors is responsible for ensuring the affairs of the Company are properly managed through formulating, reviewing and approving the Company's strategy, budgets, and corporate actions and that oversight, scrutiny and challenge is applied to Executives responsible for the day-to-day activities of the Group. The Company seeks to deliver long-term growth for shareholders and maintain a flexible, efficient and effective management framework within an entrepreneurial environment.
It is important that the Board itself contains the right mix of skills and experience in order to deliver the strategy of the Company. As such, the Board is comprised of:
· Two Independent Non-Executive Directors, one of which serves as the Chairman, who is responsible for leadership of the Board and ensuring its effectiveness on all aspects of its role;
· One Non-Executive Director who, whilst sharing the fiduciary and statutory duties of the independent directors, is also an executive director of the Somerston Group, a significant shareholder of the Company, and therefore not considered independent under the QCA Code; and
· Two Executive Directors, who are also members of the Group's Executive Committee and are therefore not considered independent under the QCA Code.
The Board is comprised of individuals holding professional qualifications and experience relevant to the activities of the Company. The time requirement expected from each of the Directors is set out in writing in their respective appointment letters.
Liberum Capital has been appointed as the Company's Corporate Broker and Nominated Adviser under the AIM Rules and advises on compliance with the AIM Rules, corporate communications and acts as financial adviser to corporate actions. Additionally, the Company has appointed a professional Company Secretary who assists the Board of Directors in preparing for and running effective board meetings, including the timely dissemination of appropriate information. The Company Secretary provides guidance to the extent required by the Board on certain aspects of the legal and regulatory environment, within which the Company operates.
The Board believes that long serving Directors should not be prevented from forming part of the Board or from acting as Chairman and no limit has been imposed on the overall length of service of the Directors. Each Director will retire and seek reappointment at every third annual general meeting, with those serving for nine years or more subject to reappointment annually. The Board meets on at least a quarterly basis during the financial year.
The Board has appointed several committees to support it in different areas of the business; each with formal terms of reference, with specific roles as set out below.
The Board undertakes an annual evaluation of its own performance, the performance of its formally constituted committees and that of individual Directors. This includes a formal process of self-appraisal reviewing the balance of skills, experience, independence and diversity present on the Board, and individual director performance, contribution and commitment to the Group to ensure that the Board and its committees continue to operate effectively, or to identify areas where action is required. The remainder of the Board is responsible for evaluating the performance of the Chairman. The Chairman also has responsibility for assessing the individual Board members' training requirements. No significant findings were identified in the 2021 evaluation which required further action.
The Directors remain mindful of the benefits which can flow from increasing the level of diversity represented on the Board including, but not limited to, cultural, gender, experience and background. Such factors will be taken into consideration by the Nomination Committee during any selection process.
Executive Management Team
As at the year end, the Company's Executive Management Team comprised Rory Mepham (Chief Executive Officer), Emma Stubbs (Chief Financial Officer) and Dan Walker (Chief Operating Officer and
The Audit and Risk Committee conducts formal meetings at least twice a year. The Audit and Risk Committee's key duties include:
· monitoring the integrity of the financial statements of the Group, including its annual and half-yearly reports and any other formal announcement relating to its financial performance, reviewing, challenging (where necessary) and reporting to the Board on significant financial reporting issues and judgements which they contain having regard to matters communicated to it by the auditor, and how they were addressed;
· reviewing the Group's internal financial controls and the Group's internal control and risk management systems;
· making recommendations to the Board for it to put to the shareholders for their approval in general meeting in relation to the appointment, re-appointment or removal of the external auditor and to recommend the remuneration and terms of engagement of the external auditor;
· monitoring the external auditor's independence and objectivity and the effectiveness of the audit process, taking into account relevant professional and regulatory requirements;
· in conjunction with executive management, advise the Board on the overall risk appetite, tolerance and strategy of the Group, current risk exposures and future risk strategy; and
· keep under review the Group's overall risk assessment processes that inform the Board's decision making, ensuring both qualitative and quantitative metrics are used.
The Audit and Risk Committee has three members, two of whom are independent, non-executive directors and one of whom is a non-executive director, and at least one member has recent and relevant financial experience. The current members of the Committee are John Whittle as the Chairman, Steve Smith and Tracy Clarke.
The Audit and Risk Committee is supported by a risk management and oversight process employed by the Executive Management Team and receives reports twice a year on key risks and developments during the period, or as otherwise required in the case of a material development.
The terms of reference of the Audit and Risk Committee are available from the Company Secretary.
The purpose of the Remuneration and Nomination Committee is to determine and agree with the Board the framework or broad policy for the remuneration of the Company's Directors, senior executives, and any bonus-related arrangements in place by the Company as well as to consider the structure, size and composition of the Board. The key duties of the Remuneration and Nomination Committee include:
· determining and agreeing with the Board the framework or broad policy for the remuneration of the Company's Chairman, executive and non-executive directors and such other members of the management as it is designated to consider;
· reviewing the ongoing appropriateness and relevance of the remuneration policy;
· reviewing the structure, size and composition of the Board;
· considering the succession planning for Directors and the Executive Management Team;
· reviewing the leadership needs of the organisation; and
· identifying candidates for appointment to the Board.
The Remuneration and Nomination Committee has three members, all of whom are non-executive directors and two are independent. The current members of the committee are John Whittle as the Chairman, Steve Smith and Tracy Clarke.
The terms of reference of the Remuneration and Nomination Committee are available from the Company Secretary.
Meetings and attendance
The Directors meet on a quarterly basis ('Quarterly' meetings per the table below) and at other unscheduled times ('Other' meetings per the table below) when necessary to assess Group operations and the setting and monitoring of strategy and performance.
The table below, details the attendance of the Board at eligible Board and Committee meetings during the year, noting that certain Directors retired or were appointed during the course of the year as set out below the table:
|
|
Board |
|
|
|
|
|
Quarterly |
Other |
Remuneration & Nomination Committee |
Audit and Risk Committee |
|
Total number of meetings held during the year |
4 |
19 |
6 |
4 |
|
Stephen Smith (Chairman)(1) |
3 of 3 |
7 of 7 |
3 of 3 |
3 of 3 |
|
Patrick Firth (2) |
3 of 3 |
16 of 16 |
6 of 6 |
2 of 2 |
|
John Whittle |
4 of 4 |
18 of 19 |
6 of 6 |
4 of 4 |
|
Nicholas |
4 of 4 |
18 of 19 |
6 of 6 |
4 of 4 |
|
Andrew Whelan (3) |
2 of 2 |
12 of 16 |
n/a |
n/a |
|
Emma Stubbs |
4 of 4 |
19 of 19 |
n/a |
n/a |
|
Rory Mepham (4) |
1 of 1 |
1 of 1 |
n/a |
n/a |
(1) Stephen Smith was appointed to the Board on 11 May 2021 and appointed as Chairman of the Board on 1 September 2022.
(2) Patrick Firth resigned as Chairman of the Board on 31 August 2021.
(3) Andrew Whelan resigned from the Board on 30 June 2021.
(4) Rory Mepham was appointed to the Board on 23 November 2021.
Relations with Stakeholders
The Board's advisers and the Executive Management Team maintain regular dialogue with key shareholders, the feedback from which is reported to the Board and the Chairman. Shareholders who wish to communicate with the Board should contact the Company Secretary in the first instance.
The Board also regularly monitors the shareholder profile of the Company. All shareholders have the opportunity to and are encouraged to attend the Company's annual general meeting at which members of the Board are available in person to meet shareholders and answer questions.
Whilst the primary duty of the Directors is owed to the Company as a whole, the Board takes into consideration the interests of all key stakeholder groups as part of its decision-making process and particular consideration is given to the impact of any decision on holders of its securities, the Co-Funders to the underlying loan businesses, and providers of the Group's long-term debt capital. The Board also recognises the crucial roles played by those involved throughout the Group's operations who contribute to delivering strategy, including staff and key service providers, to ensure a continued alignment of interests between their activities and those of the Company.
Terms of Reference of Committees
Committee Terms of Reference are available from the Company Secretary.
The Audit and Risk Committee
The Audit and Risk Committee has a formal terms of reference mandate documenting the duties and responsibilities which it has been delegated by the Board. These are available from the Company Secretary.
The Audit and Risk Committee has been in operation throughout the year under review.
Chairman and Membership
The Audit and Risk Committee comprises of John Whittle as Chairman, Steve Smith and Tracy Clarke. Only Non-Executive Directors serve on the Audit and Risk Committee and members of the Audit and Risk Committee have no links with the Company's external auditor and are independent of the Executive Management Team. The Audit and Risk Committee meets not less than three times a year in
Duties
The Audit and Risk Committee is responsible for monitoring the financial reporting process, including the appropriateness of the Company's accounting policies and the effectiveness of the Company's risk management and internal control systems.
The Committee continues to spend a considerable amount of time reviewing significant risks and areas of judgement. In particular, the Committee conducts detailed reviews and analysis of the valuations prepared by the Executive Management Team of the FinTech Ventures investments, the Subsidiary Goodwill value in use models to assess if any impairment might be required and the Expected Credit Loss model. These valuations are key elements in the Group's financial statements and the Audit and Risk Committee questions these carefully.
External Audit
The Audit and Risk Committee is responsible for overseeing the relationship with the external auditor, including the ongoing assessment of the auditor's independence. The Committee makes recommendations to the Board with regard to the appointment of the external auditor and approves their terms of engagement and fees. The Committee discusses and agrees the nature and scope of the audit as set out in the audit engagement letter, reviews the results of the audit as described in the auditors' management letter and the ongoing independence and objectivity of the external auditor. Following a tender process, Moore Stephens were appointed as the Company's auditor in 2021, taking over from Deloitte who held this position since 2016.
Processes are in place to safeguard the independence of the external auditor, including controls around the use of the external auditor for non-audit services. The external auditor also provides the Audit and Risk Committee with further assurance as to the procedures that it maintains to preserve objectivity and confirmation that it remains independent. All non-audit services are pre-approved by the Audit and Risk Committee.
Effectiveness of External Auditor
The Committee assessed the effectiveness of the external auditor and the external audit process for 2021 through a number of steps, including:
· agreement of their engagement letter and fees;
· review of the external audit plan;
· meetings with the external auditors;
· considering the extent of any non-audit services provided by the external auditors;
· considering the external auditors' fulfilment of the agreed audit plan and variations from it;
· considering the report from the auditor highlighting any major issues that arose during the course of the audit; and
· conducting interviews to obtain feedback from the Executive Management Team to evaluate the performance of the audit team.
For the audit for the year ended 31 December 2021, the Audit and Risk Committee was satisfied that the audit was effective and that there were no factors which had any bearing on the independence or effectiveness of the external auditor.
Financial Reporting
The Audit and Risk Committee reviews, considers and, if thought appropriate, recommends to the Board the approval of the contents of the half yearly report and annual report and audited financial statements together with the external auditor's report thereon. It focuses particularly on compliance with legal requirements, accounting standards and the relevant Listing Rules. The ultimate responsibility for reviewing and approving the half year report and annual report and audited financial statements remains with the Board.
The Audit and Risk Committee provides a forum through which the external auditor reports to the Board and the external auditor is invited to attend Audit and Risk Committee meetings at which annual and half yearly financial statements are considered. After discussions with the Executive Management Team and external auditor, the Audit and Risk Committee determined that the key risks of misstatement of the Group's financial statements relate to the valuation of financial assets at fair value through profit or loss, the valuation and recoverability of goodwill, loan impairments and revenue.
Freely tradeable market prices are not available for the majority of the Group's financial assets, including the carrying value of goodwill arising on consolidation, which are therefore based on a discounted cash flow basis. Goodwill impairment reviews are carried out annually or sooner where an indicative event of impairment has been identified. The next annual review will coincide with the preparation of the 2022 interim accounts, there having been no indicative event of impairment since the last annual review which coincided with the preparation of the 2021 interim accounts. Full details can be found in Note 2 (h), Note 3 and Note 12 to the financial statements.
For the valuations of the FinTech Ventures portfolio, the Executive Management Team provides a detailed valuation report on a quarterly basis. The Executive Management Team has confirmed to the Audit and Risk Committee that the valuation methodology has been applied consistently during the year. The accounting policies are described in detail in Note 2 (f) to the financial statements.
The Audit and Risk Committee has assessed the processes around the expected credit loss provisions recorded in respect of the Group's loan assets and reviewed the IFRS 9 model adopted at year-end which had also gone through the credit committee for approval.
The accounting policies for revenue recognition are described in detail in Note 2 (o) to the financial statements. The Audit and Risk Committee has reviewed the revenue recognition policies of the Group and has determined that they are in accordance with the accounting standards and have been applied consistently.
After due consideration, the Audit and Risk Committee recommends to the Board that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's performance, business model and strategy.
Non-Audit and audit related fees paid to the External Auditors
During 2021 no non-audit fees were paid to Moore Stephens, the external auditors.
During 2021, management continued to enhance its reporting on risk management to the Board and the Audit and Risk Committee, which cover the operation of the Company and its wholly owned subsidiaries. The Audit and Risk Committee has received and considered these reports on three occasions, which has been the basis for its conclusion below.
In addition to the review of risk management reports, and in accordance with the guidance published in the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting by the Financial Reporting Council (the "FRC"), the Audit and Risk Committee has reviewed the Company's internal control procedures and concluded that these are adequate to manage the current risk profile.
A robust, ongoing process of Risk Management and Internal Control
The Board and Executive Management Team are responsible for safeguarding the assets of the Group through establishing effective systems of risk management and internal control. This responsibility is shared by the Directors of subsidiary companies, who are similarly responsible for safeguarding the assets of these companies.
The Board is also responsible for deciding on whether the nature and extent of risks taken within the Group are within its risk appetite. Such risks have been formally defined, setting the basis for the design and implementation of the Group's internal control framework.
On behalf of the Board, the Audit and Risk Committee oversees the Group's risk management and internal control systems. These systems are designed to ensure proper accounting records are maintained and that internal and published financial information is reliable, and that the assets of the Group are safeguarded. Such a system of internal controls can only provide reasonable and not absolute assurance against misstatement or loss.
Critical components of the Group's internal control framework include the documented policies which describe how each risk is to be managed and governed and the governance committees established in terms of such policies, which have mandates describing how they should operate, what reports they should receive and how they should govern the management of principal risks. Such policies have been implemented at Company as well as subsidiary levels.
On a semi-annual basis, the Executive Management Team review the key risks across the Group to ensure they are being managed within the Company's risk appetite. Action plans are drawn up if any risks are considered to be outside of the Company's risk appetite and these are monitored on a regular basis until they return to levels back within the risk appetite.
On a semi-annual basis, the Board and/or Audit and Risk Committee receive reports on risk management, the key risks and the exposures outstanding. Also included in these reports are the results of Executive Management Team's risk and issue identification discussions noted above. These meetings also provide the Directors with the opportunity to consider any other issues which management may not have identified and give direction on any additional risk management actions which might be required.
Described in the table below are the Group's risk definitions and the primary governance bodies, other than the Board and Audit and Risk Committee which either manage or oversee the management of such risks, at Company and/or subsidiary level.
Insurance
The Sancus and subsidiaries insurance programme is subject to annual review each year, with cover generally renewed in April of the following year. A significant amount of Insurance cover is held for Public Indemnity, Directors' and Officers' liability, Cyber, and Crime. Appropriate office and travel insurance is also in place.
During 2021, the Committee did not receive any reports relating to whistleblowing across the Group.
On behalf of the Audit and Risk Committee
John Whittle
Chairman
Audit and Risk Committee
Introduction
An ordinary resolution for the approval of the annual remuneration report will be put to the shareholders at the annual general meeting to be held in 2022.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee comprises of John Whittle as Chairman, Steve Smith and Tracy Clarke. The key duties include, but are not limited to, agreeing a framework for Director remuneration, ensuring management staff are appropriately incentivised to enhance performance, and reviewing the effectiveness of the remuneration policy on an on-going basis. No Director is involved in determining their own remuneration.
Remuneration Policy
In February 2020 the Remuneration Policy was last approved and adopted. The Company is committed to the objective of maximising shareholder return in the longer term. The remuneration policy aims to be competitive, aligned with shareholder interests and relatively simple and transparent. The Board takes into consideration the views of significant shareholders when determining the remuneration of directors.
The objective is to put in place a remuneration package that, as a whole:
· aligns the interests of employees with that of shareholders and the success of the Company;
· is appropriately benchmarked, such that it aids retention and recruitment; and
· meets applicable legal or regulatory requirements, is tax efficient and simple to implement and administer.
The Board is reviewing the Remuneration Policy against these objectives.
The Policy is divided into two parts; the first part in relation to the remuneration of the Non-Executive directors of the Company, and the second part in relation to the remuneration of the Executive Directors of the Company.
Part 1 - Remuneration Policy of Non-Executive Directors
Each Non-Executive Director receives a fixed fee per annum based on their role and responsibility within the Company and the time commitment required. It is not considered appropriate that Non-Executive Directors' remuneration should be performance related and none of the Non-Executive Directors are eligible for pension benefits, share options, long-term incentive schemes or other benefits in respect of their services as Non-Executive directors of the Company. Shares held by the Non-Executive Directors are disclosed in the Annual Report.
Pursuant to Article 30.3 of the Company's Articles of Incorporation (the "Articles") the Board may award additional remuneration to any Director engaged in exceptional work at the request of the Board on a time spent basis to compensate for the additional time spent over their expected time commitment.
The total remuneration of the Non‑Executive Directors has not exceeded the
The Articles provide that Non-Executive Directors retire and offer themselves for re‑election at the first annual general meeting after their appointment and at least every three years thereafter. A Non-Executive Director's appointment may at any time be terminated by and at the discretion of either party upon three months' written notice. A Non-Executive Director's appointment will terminate immediately without notice (or payment in lieu of notice) if such director is not re-appointed at a General Meeting of the Company (if required under the Articles), if such director is removed as a director at a General Meeting of the Company, or if such director resigns or ceases to be a director in accordance with the provisions of the Articles.
The terms and conditions of appointment of each Non-Executive Director are available for inspection at the Company's registered office.
The last independent remuneration review was carried out in July 2014. The Directors intend to put in place a Long-Term Incentive Plan for Senior Management and an external advisor will be engaged to assist with this during the course of 2022 which will also include a remuneration review.
For comparative purposes the table below sets out the Non-Executive Directors' remuneration approved and actually paid for the year to 31 December 2020 as well as proposed for the year ending 31 December 2021 (to be approved at the 2022 AGM). There has been no change to the base fee, other than the fees noted below were reduced by 10% in the third quarter of 2020 as part of the Covid-19 cost saving initiative.
|
Director |
Role |
Base for 2021 |
Additional fees for 2021 |
Total fees for 2021
|
Base for 2020 |
Additional fees for 2020 |
Total fees for 2020
|
|
Patrick Firth* |
Non-Executive Director and Chairman of the Board
|
|
|
|
|
|
|
|
Steve Smith** |
Non-Executive Director and Chairman of the Board
|
|
|
|
- |
- |
- |
|
John Whittle |
Non-Executive Director, Chairman of the Audit and Risk Committee and Chairman of the Remuneration Committee
|
|
|
|
|
|
|
|
Nicholas |
Non-Executive Director |
|
Nil |
|
|
Nil |
|
|
Total |
|
|
|
|
|
|
|
* Pro rata for 2021 as Mr Firth resigned as a Non-Executive Director and Chairman of the Board on 31 August 2021.
** Pro rata for 2021 as Mr Smith was appointed to the Board on 11 May 2021 and succeeded Mr Firth as Board Chairman following his resignation.
*** Pro rata for 2022 as Mr Wakefield was succeeded by Ms Clark on 8 March 2022.
Part 2 - Remuneration Policy of Executive Directors
Base Remuneration
For the year ended 31 December 2021, the Executive Directors' base salary 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:
|
|
31 December 2021 |
31 December 2020 |
|
Andrew Whelan* |
|
|
|
Rory Mepham** |
|
- |
|
Emma Stubbs |
|
|
|
Dan Walker |
|
|
*Mr Whelan resigned on 30 June 2021, and his contract ended on 28 February 2022.
** Mr Mepham was appointed Interim CEO on 30 June 2021 and permanent CEO on 23 November 2022.
In addition to fixed salary payments, in 2021 the Executive Management Team members received pension contributions of
Long Term Incentives
The Board intends to introduce a Long Term Incentive Plan for Senior Management during 2022 and an external advisor will be engaged to assist with this.
Discretionary Executive Bonus
In the year to 31 December 2021 discretionary bonuses in cash of
On behalf of the Remuneration Committee
John Whittle
Remuneration Committee Chairman
The Directors submit their Report together with the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Shareholders' Equity, the Consolidated Statement of Cash Flows and the related Notes for the year ended 31 December 2021, which have been prepared in accordance with International Financial Reporting Standards as adopted by the
Principal Activities
The Company was incorporated and domiciled in
The Company does not have a fixed life and the Articles do not contain any trigger events for a voluntary liquidation of the Company.
Following the approval by Shareholders at the Company AGM on 19 May 2016, the Company changed its status from being an investing company for the purpose of the AIM rules to a trading Company.
The Executive Management Team is responsible for the day-to-day management of the Company.
The Group
As at 31 December 2021, the Group comprises the Company and the entities disclosed in Note 20 to the financial statements.
Directors and Executive Management Team of the Company
A list of the Directors and the Executive Management Team who served the Company during the year and as at 30 March 2022 is set out in this announcement.
Results and Dividends
No Dividends were paid during the year (31 December 2020: Nil).
Substantial Shareholdings
As at 31 December 2021, the Company was aware of the following substantial shareholders who held 3% or more of issued share capital of the Company:
|
|
Number of Ordinary Shares held |
Percentage of total ordinary shares issued held |
|
Somerston Group |
200,349,684
|
40.90% |
|
Philip J Milton & Company plc |
86,793,928
|
17.72% |
|
Investec Wealth and Investment |
16,590,873
|
3.39% |
|
DBH Global Holdings |
15,603,285
|
3.19% |
|
Chelverton Asset Management |
14,700,000
|
3.00% |
Directors' Interests
As at 31 December 2021, the Directors had the following beneficial interests in the Ordinary Shares of the Company:
|
|
31 December 2021 |
31 December 2020 |
||
|
|
No. of Ordinary Shares Held |
No. of Ordinary Shares Held |
No. of Ordinary Shares Held |
% of Ordinary Shares |
|
|
|
|
|
|
|
John Whittle |
138,052 |
138,052 |
138,052 |
0.03 |
|
Nick |
- |
- |
- |
- |
|
Emma Stubbs |
1,380,940 |
1,380,940 |
1,380,940 |
0.28 |
|
Steve Smith (Chairman) |
- |
- |
- |
|
|
Rory Mepham |
- |
- |
- |
- |
Statement of Directors' Responsibilities
The Directors are responsible for preparing the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the
In preparing the financial statements, the Directors are required to:
· Ensure that the financial statements comply with the Memorandum and Articles of Incorporation and IFRSs, as adopted by the
· Select suitable accounting policies and apply them consistently;
· Present information including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· Make judgements and estimates that are reasonable and prudent; and
· Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements have been properly prepared in accordance with The Companies (
The Directors also confirm that the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's performance, business model and strategy.
Internal Controls Review
Taking into account the ongoing work of the Audit and Risk Committee in monitoring the risk management and internal control systems on behalf of the Board the Directors have conducted a robust assessment of the principal risks and uncertainties faced by the Group and is satisfied that each of these has been properly identified and is being effectively managed through the operation of appropriate internal controls and risk management systems, within the constraints of the resources of the Group.
Statement as to Disclosure of Information to Auditor
The Directors who held office at the date of approval of this Directors' Report confirm that:
· There is no relevant audit information of which the Company's auditors is unaware; and
· The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
Auditor
Moore Stephens have indicated their willingness to continue in office and a resolution to re-appoint Moore Stephens will be tabled at the forthcoming AGM.
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 debts 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.
Liabilities which fall due in the next 12 months include the final capital entitlement of the Company's ZDP shares which are repayable on 5 December 2022 at
As part of the Group's growth plan the Company is considering its options regarding this liability which may include re-financing, part repayment and/or extension of the ZDPs and an equity raise. This will require consultation with the relevant stakeholders, including ordinary shareholders and ZDP shareholders and regulatory approvals and consents. Accordingly, there can be no certainty that the proposals will proceed.
These factors and assumptions constitute a material uncertainty that may cast significant doubt over the Company's ability to continue as a going concern, such that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors expect that if they are able to action the mitigations in accordance with the plan outlined above, the material uncertainty will be extinguished. The Directors are therefore of the opinion that the Company will have adequate financial resources to continue in operation and meet its liabilities as they fall due for the foreseeable future and continue to adopt the going concern basis in preparing the financial statements.
Board Succession
The Board notes the resignation of Patrick Firth in August 2021 and the appointment of Steve Smith who succeeded Mr Firth as Chairman of the Board on his resignation. The Directors remain focussed on ensuring the Board is comprised of individuals with the requisite skills, knowledge, experience and diversity to operate effectively and to meet the future leadership needs of the Company. The Board welcomes the appointment of Ms Tracy Clarke who succeeded Mr Nick Wakefield in March 2022 as the Somerston appointed Board representative.
Independent auditor's report to the members of Sancus Lending Group Limited
Opinion
We have audited the financial statements of Sancus Lending Group Limited (the 'company' or the 'parent company and its subsidiaries together as the 'group') for the year ended 31 December 2021 which comprise of the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Cash Flows, the Consolidated Statements of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
In our opinion:
· the financial statements give a true and fair view of the state of the group's affairs as at 31 December 2021 and of the group's loss for the year then ended;
· the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
· the Group's financial statements have been prepared in accordance with the requirements of the Companies (
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (
Material uncertainty related to going concern
We draw attention to Note 2(a) in the financial statements, which sets out that the company's ZDP shares are repayable on 5 December 2022 at
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the Group's consolidated financial statements is appropriate. Our evaluation of the directors' assessment of the entity's ability to continue to adopt the going concern basis of accounting included Review of board and treasury minutes, subsequent year financial forecasts and management's going concern assessment.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this announcement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The key audit matters that we identified in the current year are:
|
Audit Matter |
Procedures |
|
Impairment of Goodwill
As at 31 December 2021, the Group has recorded goodwill of
|
We obtained our understanding of how the discounted cash flow forecasts are modelled as part of the Board's processes to identify and recognise impairment. With regards to valuation, we performed the following procedures: We obtained an understanding of the relevant controls over the impairment assessment process;
We have reviewed and checked the key assumptions to the cash flows including revenue growth rates, discount rates, the potential impacts of Covid-19 and future income and expenditure cash flows, and tested for any inconsistencies with our understanding of the group's business model;
We internally performed stress testing on the key assumptions to determine the impact on the recoverable amount of goodwill and whether this would lead to any impairment;
We checked the critical model assumptions related to the cash flow and growth rate assumptions, which were used in the forecast to model the recovery to pre-Covid-19 levels of loan origination, by assessing trends in external sector reports, evaluating the expected cash flows from the loan pipeline and loans originated post impairment test date;
We agreed inputs to supporting evidence where appropriate;
We reviewed the models prepared by management for consistency with the requirements of IAS 36;
We challenged management's assertion that no further impairment triggers exist at the balance sheet date,
We reviewed the disclosures made per requirements of IAS 36.
Based on our audit work, we concur with management that the goodwill balance was not impaired as at 31 December 2021.
As described in Note 3 to the financial statements, we noted that management have assumed a recovery to pre-Covid-19 levels of loan issuance in 2021 in their forecasts and should this not occur, this could lead to future impairment.
Note 12 to the financial statements describes the underlying sensitivity of the key inputs used. |
|
Impairment and recoverability of loans receivable
As at 31 December 2021. the aggregate value of Sancus loans amounted to
The group has also provided a first loss guarantee as part of the Sancus Loan Note structures and has direct investment into loan SPVs including BMS Finance (
In making this assessment, management makes several significant judgements. These include determining appropriate assumptions for calculating the loss allowance under IFRS9 (including probability of default and loss given default), as well as loan-specific matters including cash flow forecasts and covenant compliance, specifically related to loan to value (LTV) ratio. As a result, errors or deliberate manipulation of these determining factors could result in material misstatement of the financial statements, as such it is
|
We have performed the following procedures: We have obtained an understanding of significant controls over the loan's impairment process;
Performed a walkthrough of relevant controls in the valuation process to confirm they were appropriately designed and implemented;
We have tested, on a sample basis, inputs used in the 'Loans Monitoring Report', including the accuracy of covenant calculations, such as loan to value ratios, collateral values, and other financial and non-financial information;
We have checked the reasonableness of management's significant judgments relating to the categorisation of loans into the various credit stages required under IFRS 9. We have considered this in relevance to management's definition of a significant increase in credit risk ('SICR') and the definition of default
We also checked the reasonableness of management's assumptions related to the recoverable value of any non-performing loans in light of available evidence and the underlying collateral;
We have checked the reasonableness of management's assumptions relating to their capital market expectations, such as Covid-19, including any overlays required to compensate for the change in the market environment not reflected in the ECL model;
We have evaluated the reasonableness of management's judgements and estimates in deriving the probability of default (PD), determining the loss given
We tested the numerical accuracy of the ECL calculation based on the above inputs; and
We evaluated the adequacy of disclosures made in the financial statements in light of the requirements of IFRS 7 and IFRS 9.
We have concluded that the overall carrying value of loans is reasonable.
As described in Note 3 to the financial statements, IFRS 9 requires the application of a probability-weighted unbiased estimate in determining the ECL
there are therefore certain loans where the amounts recovered could be materially different to the
Note 22 to the financial statements describes the underlying sensitivity of the key inputs used |
|
Revenue recognition
The Group's revenue for the year ended 31 December 2021 was
We consider revenue as a presumed fraud risk and have directed our tests towards this risk |
We have performed the following procedures: We have obtained reports from the Loan Management System ("LMS"), related to interest income and tested on sample basis by recalculating interest income and comparing it with the amounts accounted in the general ledger.
We also performed analytical review to test the reasonableness of interest income.
For fee income, we have verified on sample basis, fee from various contracts and tested for accuracy.
We have concluded that the reported revenue is presented fairly. |
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
|
Group Materiality |
|
|
Basis |
2% of net assets |
|
Rationale |
considered as most appropriate based on the significance of the on balance sheet lending and goodwill balances. |
|
|
In determining performance materiality, we considered the following significant judgements:
· Our risk assessment, including our assessment of the Group's overall control environment; and · No past audit experience with the Group. |
We have also adopted a lower level of materiality for revenue balances consistent with the prior year audit. We consider revenue to be a critical performance measure for the group as it is expected
to be a key driver for future distributions from profits now the group has further developed its SME and property backed lending business.
The lower level materiality applied was
Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 60% of group materiality for the 2021 audit (2020: 60%). In determining performance materiality, we considered the following factors:
· Our risk assessment, including our assessment of the group's overall control environment and that we consider it appropriate to rely on controls on a key business process;
· Our past experience of the audit, which has indicated a low number of uncorrected misstatements identified in prior periods; and
· The potential impact of Covid-19 on the application of control procedures which might increase the possibility of having undetected misstatements.
Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the group and its environment, including internal control, and assessing the risks of material misstatement for the parent company and its subsidiaries. Audit work to respond to the risks of material misstatement was performed directly by the group audit team for both the parent entity and its subsidiaries. All subsidiaries in the group were subject to full scope audits.
Audit work performed for the subsidiaries was executed by the group audit team at levels of materiality applicable to each subsidiary, which in all instances was lower than group materiality and ranged between
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters where the Companies (
· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
· the consolidated financial statements are not in agreement with the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are not made; or
· we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group'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 group or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
· We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies (
· We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
· We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
· We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
· Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
As part of an audit in accordance with ISAs (
· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the group's internal control.
· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
· Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the group to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Use of our report
The report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (
Jeff Vincent (Senior Statutory Auditor)
for and on behalf of Moore Stephens Audit and Assurance (
Level 2 Park Place
Park Street
St Peter Port
GY1 3HZ
For the year ended 31 December 2021
|
|
Notes |
2021 £'000 |
2020 £'000 |
|
|
|
|
|
|
Revenue |
5 |
9,022 |
10,861 |
|
|
|
|
|
|
Cost of sales |
6 |
(6,537) |
(6,118) |
|
|
|
|
|
|
Gross profit |
|
2,485 |
4,743 |
|
|
|
|
|
|
Operating expenses |
7 |
(6,231) |
(5,582) |
|
|
|
|
|
|
Operating loss before credit losses |
|
(3,746) |
(839) |
|
|
|
|
|
|
Changes in expected credit losses |
22 |
(6,399) |
(4,665) |
|
Incurred losses on financial assets |
|
(90) |
- |
|
|
|
|
|
|
Operating Loss |
|
(10,235) |
(5,504) |
|
|
|
|
|
|
FinTech Ventures fair value movement |
22 |
434 |
(5,996) |
|
Other net losses |
8 |
(557) |
(3,032) |
|
|
|
|
|
|
Loss for the year before tax |
|
(10,358) |
(14,532) |
|
|
|
|
|
|
Income tax |
18 |
19 |
15 |
|
|
|
|
|
|
Loss for the year after tax |
|
(10,339) |
(14,517) |
|
|
|
|
|
|
|
|||
|
Items that may be reclassified subsequently to profit and loss |
|||
|
Foreign exchange gain/(loss) arising on consolidation |
|
12 |
(23) |
|
Other comprehensive income/(loss) for the year after tax |
|
12 |
(23) |
|
|
|
|
|
|
Total comprehensive loss for the year |
|
(10,327) |
(14,540) |
|
|
|
|
|
|
|
|
|
|
|
Loss for the year after tax attributable to equity holders of the company |
(10,339) |
(14,517) |
|
|
|
|
|
|
|
Total comprehensive loss attributable to equity holders of the company |
(10,327) |
(14,540) |
|
|
|
|
|
|
|
Basic Loss per Ordinary Share |
10 |
(2.16)p |
(4.60)p |
|
Diluted Loss per Ordinary Share |
10 |
(2.09)p |
(4.19)p |
As at 31 December 2021
|
ASSETS |
Notes |
31 December 2021 £'000 |
31 December 2020 £'000 |
|
Non-current assets |
|
|
|
|
Fixed assets |
11 |
660 |
774 |
|
Goodwill |
12 |
22,894 |
22,894 |
|
Other intangible assets |
13 |
53 |
168 |
|
Sancus loans and loan equivalents |
22 |
6,643 |
3,863 |
|
FinTech Ventures investments |
22 |
500 |
- |
|
Other investments |
|
100 |
- |
|
Investments in joint ventures and associates |
9 |
500 |
866 |
|
Total non-current assets |
|
31,350 |
28,565 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Other assets |
14 |
496 |
1,015 |
|
Sancus loans and loan equivalents |
22 |
46,602 |
49,369 |
|
Trade and other receivables |
15 |
6,075 |
8,204 |
|
Cash and cash equivalents |
|
12,436 |
15,786 |
|
Total current assets |
|
65,609 |
74,374 |
|
|
|
|
|
|
Total assets |
|
96,959 |
102,939 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
Share premium |
16 |
116,218 |
116,218 |
|
Treasury shares |
16 |
(1,172) |
(1,099) |
|
Other reserves |
|
(95,952) |
(85,625) |
|
Capital and reserves attributable to equity holders of the Group |
|
19,094 |
29,494 |
|
|
|
|
|
|
Total equity |
|
19,094 |
29,494 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
|
64,677 |
69,450 |
|
Lease liabilities |
|
364 |
469 |
|
Total non-current liabilities |
17 |
65,041 |
69,919 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Borrowings |
|
10,532 |
- |
|
Trade and other payables |
|
1,628 |
1,638 |
|
Tax liabilities |
|
86 |
118 |
|
Provisions |
|
- |
1,542 |
|
Lease liabilities |
|
212 |
188 |
|
Interest payable |
|
366 |
- |
|
Other liabilities |
|
- |
40 |
|
Total current liabilities |
17 |
12,824 |
3,526 |
|
|
|
|
|
|
Total liabilities |
|
77,865 |
73,445 |
|
|
|
|
|
|
Total equity and liabilities |
|
96,959 |
102,939 |
For the year ended 31 December 2021
|
|
Note |
Share Premium |
Treasury Shares |
Warrants Outstanding |
Foreign Exchange Reserve |
Retained Earnings/ (Losses) |
Capital and reserves attributable to equity holders of the Company |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2021 |
|
116,218 |
(1,099) |
847 |
(1) |
(86,471) |
29,494 |
|
Acquired on sale of BMS |
16 |
- |
(73) |
- |
- |
- |
(73) |
|
Movement in fair value of warrants |
16 |
- |
- |
(462) |
- |
462 |
- |
|
Transactions with owners |
|
- |
(73) |
(462) |
- |
462 |
(73) |
|
Total comprehensive income/loss for the year |
|
- |
- |
- |
12 |
(10,339) |
(10,327) |
|
Balance at 31 December 2021 |
|
116,218 |
(1,172) |
385 |
11 |
(96,348) |
19,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2020 |
|
112,557 |
(1,099) |
- |
22 |
(71,107) |
40,373 |
|
Warrants issued during the year |
16 |
- |
- |
847 |
- |
(847) |
- |
|
Equity raised (net of costs) |
16 |
3,661 |
- |
- |
- |
- |
3,661 |
|
Transactions with owners |
|
3,661 |
- |
847 |
- |
(847) |
3,661 |
|
Total comprehensive loss for the year |
|
- |
- |
- |
(23) |
(14,517) |
(14,540) |
|
Balance at 31 December 2020 |
|
116,218 |
(1,099) |
847 |
(1) |
(86,471) |
29,494 |
|
|
|
|
|
|
|
|
|
For the year ended 31 December 2021
|
|
Notes |
31 December 2021 £'000 |
31 December 2020 £'000 |
|
|
|
|
|
|
Cash flow from operations, excluding loan movements |
19 |
(4,121) |
(3,837) |
|
|
|
|
|
|
Increase/(Decrease) in Sancus loans |
|
(1,340) |
5,060 |
|
Decrease in loans through platforms |
|
8 |
18 |
|
(Increase)/Decrease in Sancus Loans Limited loans |
|
(4,564) |
472 |
|
Decrease in loans re: |
|
1,808 |
3,581 |
|
Investment in Sancus Loan Notes |
|
(100) |
- |
|
Net Cash flows (used in) / from operating activities |
|
(8,309) |
5,294 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Net investments in FinTech Ventures |
|
(66) |
277 |
|
Investment in Sancus (IOM) Holdings Limited |
|
(16) |
- |
|
Investment in joint venture |
|
(91) |
(100) |
|
Cash outflow on disposal of BMS Finance AB Limited |
|
- |
(215) |
|
Expenditure on SPL Properties |
|
(157) |
(229) |
|
Sale of SPL Properties |
|
743 |
1,597 |
|
Property, equipment and other intangibles acquired |
|
(14) |
(29) |
|
Net cash inflow from investing activities |
|
399 |
1,301 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Drawdown of HIT facility |
19 |
7,500 |
4,187 |
|
Repayment of HIT facility |
19 |
- |
(3,500) |
|
Capital element of lease payments |
19 |
(193) |
(216) |
|
Proceeds from equity issued |
|
- |
3,681 |
|
Repayment of bonds |
19 |
- |
(6,125) |
|
Issue of bonds |
19 |
- |
8,700 |
|
Debt issue costs |
19 |
(3) |
(314) |
|
Repayment of ZDPs |
19 |
(2,756) |
(4,443) |
|
Net cash generated by financing activities |
|
4,548 |
1,970 |
|
|
|
|
|
|
Effects of foreign exchange |
|
12 |
(23) |
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
(3,350) |
8,542 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
15,786 |
7,244 |
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
12,436 |
15,786 |
1. GENERAL INFORMATION
Sancus Lending Group Limited (formerly GLI Finance Limited), (the "Company"), and together with its subsidiaries, ("the Group") was incorporated, and domiciled in
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 Management Team is responsible for the management of the Company.
As at 31 December 2021, the Group comprises the Company and its subsidiaries (Note 20). 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 ( |
Sancus Lending ( |
29 March 2021 |
|
GLI Finance Limited |
Sancus Lending Group Limited |
11 May 2021 |
|
Sancus ( |
Sancus Lending ( |
12 July 2021 |
|
Sancus Funding Limited |
Sancus Lending ( |
13 July 2021 |
|
Sancus Finance Limited |
Sancus Holdings ( |
13 July 2021 |
|
Sancus (Jersey) Limited |
Sancus Lending (Jersey) Limited |
6 October 2021 |
|
Sancus ( |
Sancus Lending ( |
6 October 2021 |
The Company has taken advantage of the exemption conferred by the Companies (
2. ACCOUNTING POLICIES
(a) Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the
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.
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 debts 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.
Liabilities which fall due in the next 12 months include the final capital entitlement of the Company's ZDP shares which are repayable on 5 December 2022 at £11.3m.
As part of the Group's growth plan the Company is considering its options regarding this liability which may include re-financing, part repayment and/or extension of the ZDPs and an equity raise. This will require consultation with the relevant stakeholders, including ordinary shareholders and ZDP shareholders and regulatory approvals and consents. Accordingly, there can be no certainty that the proposals will proceed.
These factors and assumptions constitute a material uncertainty that may cast significant doubt over the Company's ability to continue as a going concern, such that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors expect that if they are able to action the mitigations in accordance with the plan outlined above, the material uncertainty will be extinguished. The Directors are therefore of the opinion that the Company will have adequate financial resources to continue in operation and meet its liabilities as they fall due for the foreseeable future and continue to adopt the going concern basis in preparing the financial statements.
(b) Basis of consolidation
The financial statements comprise the results of Sancus Lending Group and its subsidiaries for the year ended 31 December 2021. The subsidiaries are all entities where the Company has the power to control the investee, is exposed, or has rights to variable returns and has the ability to use its power to affect these returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year is recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated in full on consolidation.
(c) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held on call with banks and other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
(d) Dividends
Dividend distributions are made at the discretion of the Company. A dividend distribution to shareholders is accounted for as a reduction in retained earnings. A proposed dividend is recognised as a liability in the period in which it has been approved and declared by the Directors.
(e) Expenditure
All expenses are accounted for on an accrual basis. Management fees, administration fees, finance costs and all other expenses (excluding share issue expenses which are offset against share premium) are charged through the Consolidated Statement of Comprehensive Income.
(f) Financial assets and liabilities
Classification, recognition and initial measurement
Classification and measurement of debt assets is driven by the business model for managing the financial assets and the contractual cash flow characteristics of those financial assets. There are three principal classification categories for financial assets that are debt instruments: (i) amortised cost, (ii) fair value through other comprehensive income and (iii) fair value through profit and loss. Equity investments in the scope of IFRS 9 are measured at fair value with gains and losses recognised in profit and loss unless an irrevocable election is made to recognise gains or losses in other comprehensive income.
We are a lending business, which participates in financing to borrowers, Sancus loans, HIT loans, loan equivalents and loans through platforms. As a result all of these loans/loan equivalents are held solely for the collection of contractual cash flows, being interest, fees and payment of principal. These assets are held at amortised cost using the effective interest rate method, adjusted for any credit loss allowance.
FinTech Ventures investments relate to equity, preference shares and some working capital loans. Whilst some of these investments attract interest, the assets are held primarily to assist the development of the entities involved. These investments are held at fair value with charges recognised in profit and loss.
Trade payables, financial liabilities and trade receivables are held solely for the collection and payment of contractual cash flows, being payments of principal and interest where applicable. Trade receivables are held at amortised cost using the effective interest rate method, adjusted for any credit loss allowance. Trade payables and financial liabilities are held at amortised cost with any interest cost calculated in accordance with the effective interest rate.
Financial assets and financial liabilities are initially recognised on the trade date, which is the date on which the Group becomes party to the contractual provisions of the instrument.
Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in the Consolidated Statement of Comprehensive Income. Financial assets and financial liabilities not at fair value through profit or loss are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue.
Subsequent to initial recognition, financial assets are either measured at fair value or amortised cost as noted above. Realised gains and losses arising on the derecognition of financial assets and liabilities are recognised in the period in which they arise. The effect of discounting on trade and other receivables is not considered to be material.
Fair value measurement
"Fair value" is the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Group measures the fair value of an instrument using quoted price in an active market for that instrument. A market is regarded as "active" if transactions of the asset or liability take place with sufficient frequency and volume to provide pricing information on an on-going basis. The Group measures financial instruments quoted in an active market at a mid price.
If there is no quoted price in an active market, the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. Please refer to Note 22.
The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred. If in the case of any investment the Directors at any time consider that the above basis of valuation is inappropriate or that the value determined in accordance with the foregoing principles is unfair, they are entitled to substitute what in their opinion, is a fair value. Gains and losses arising from changes in the fair value of the financial assets and liabilities at fair value through profit or loss are included in the Consolidated Statement of Comprehensive Income in the period in which they arise.
Debt and Equity Instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments are recorded at the proceeds received less any direct costs of issue.
Derecognition
Sales of all financial assets are recognised on trade date - the date on which the Group disposes of the economic benefits of the asset. Financial assets are derecognised when the rights to receive cash flows from the asset have expired or the Group has transferred substantially all risks and rewards of ownership.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in the Consolidated Statement of Comprehensive Income. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Derivative financial instruments
The Group enters into foreign exchange forward contracts in order to manage its exposure to foreign exchange rate movements. Further details can be found in Note 22.
Forward contracts are initially recognised at fair value at the date the contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. Resulting gains/losses are recognised in profit or loss immediately. Forward contracts with positive fair value are recognised as financial assets whereas forward contracts with negative fair value are recognised as financial liabilities. Contracts are presented as non-current assets or liabilities if the remaining maturity of the instrument is more than 12 months and is not expected to be settled within 12 months. Other contracts are presented as current assets.
Expected credit losses
Credit risk is assessed at initial recognition of each financial asset and subsequently re-assessed at each reporting period-end. For each category of Credit risk loans have been 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. When for example LTV exceeds 65% or amounts become 30 days past due judgement will be used to reassess whether Credit risk has increased significantly enough to move the loan from one stage to another. A loan is considered to be in default when there is a failure to meet the legal obligation of the loan agreement. This would include provisions against loans that are considered by management as unlikely to pay their obligations in full without realisation of collateral. Refer to Note 22 for further details.
Sancus loans and loan equivalents are assessed for credit risk based on information available at initial recognition, predominantly (but not solely) using Loan to Value (LTV). For trade and other receivables, the Group has applied the simplified approach to recognise lifetime expected credit losses although loan interest receivable is included in the gross carrying value when determining ECL.
Provision for ECL is calculated using the credit risk, the probability of default and the probability of loss given default, all underpinned by the LTV, historical position, forward looking considerations and on occasion subsequent events, and the subjective judgement of the Board. ECL assumes the life of the loan is consistent with contractual term.
Financial guarantee contracts
Financial guarantee contracts are only recognised as a financial liability when it becomes probable that the guarantee will be called upon in the future. The liability is measured at fair value and subsequently in accordance with the expected credit loss model under IFRS 9. The fair value of financial guarantees is determined based on the present value of the difference in cash flows between contracted payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.
(g) Foreign currency translation
Functional and presentation currency
The financial statements of the Group are presented in the currency of the primary economic environment in which the Company operates (its functional currency). The Directors have considered the primary economic currency of the Company and considered the currency in which finance is raised, distributions made, and ultimately what currency would be returned if the Company was wound up. The Directors have also considered the currency to which the underlying investments are exposed. On balance, the Directors believe Sterling best represents the functional currency of the Company. Therefore, the books and records are maintained in Sterling and for the purpose of the financial statements, the results and financial position of the Group are presented in Sterling, which is also the presentation currency of the Group.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.
All subsidiaries are presented in Sterling, which is the primary currency in which they operate with the exception of Sancus Lending (
Foreign exchange differences arising on consolidation of the Group's foreign operations are taken direct to reserves. The rates of exchange as at the year-end are £1: USD1.3527 (31 December 2020 USD1.3664) and £1: EUR1.1898 (31 December 2020 EUR1.1202)
(h) Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is measured as the excess of (a) the aggregate of: (i) the consideration transferred measured in accordance with IFRS 3, which generally requires acquisition-date fair value; (ii) the amount of any non-controlling interest in the acquiree measured in accordance with IFRS 3; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree; over (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with IFRS 3. Goodwill is carried at cost less accumulated impairment losses. Refer to Note 2 (k) for a description of impairment testing procedures and Note 12 for details on impairment testing.
(i) Interest costs
Interest costs are recognised when economic benefits are due to debt holders. Interest costs are accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the liability's net carrying amount on initial recognition.
(j) Other intangible assets
Intangible assets with finite useful lives are amortised to profit or loss on a straight-line basis over their estimated useful lives. Useful lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently when there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on a prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of intangible assets is assumed to be zero.
Computer software
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:
· it is technically feasible to complete the software product so that it will be available of use;
· management intends to complete the software product and use or sell it;
· there is an ability to use or sell the software product;
· it can be demonstrated how the software product will generate probable future economic benefits;
· adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
· the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and third party contractor costs. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use over their estimated useful lives, which does not exceed four years.
(k) Impairment testing of goodwill, intangible assets and property and equipment
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management's assessment of respective risk profiles, such as market and asset-specific risk factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.
All impairments or subsequent reversals of impairments are recognised in the Consolidated Statement of Comprehensive Income.
(l) Investment in Joint Venture and associates
A joint venture is a joint arrangement over which the Group has joint control. An associate is an entity over which the Group has significant influence but is not a subsidiary.
An investment in a joint venture or associate is accounted for by the Group using the equity method except for certain FinTech Ventures associates as described in Note 3. These are measured at fair value through profit or loss in accordance with policy Note 2 (f).
Any goodwill or fair value adjustment attributable to the Group's share in the joint venture or associate is not recognised separately and is included in the amount recognised as an investment.
The carrying amount of the investment in a joint venture or associate is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the joint venture or associate and adjusted where necessary to ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its joint venture or associate are eliminated to the extent of the Group's interest in the entity. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
(m) Non-Current Liabilities
Loans payable are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, loans payable are stated at amortised cost using the effective interest rate method.
The ZDPs are contractually required to be redeemed on their maturity date and they will be settled in cash, thus, ZDP shares are classified as liabilities (refer to Note 17) in accordance with IAS 32 Financial Instruments: Presentation. After initial recognition, these liabilities are measured at amortised cost, which represents the initial proceeds of the issuance plus the accrued entitlement to the reporting date. Any ZDPs acquired by the group, as noted in Note 17, are held in Treasury and shown as a reduction in carrying value.
(n) Property and equipment
Tangible fixed assets include computer equipment, furniture and fittings stated at cost less accumulated depreciation. Depreciation is provided at rates calculated to write off the cost of tangible property and computer equipment on a straight-line basis over its expected useful economic life as follows:
Furniture and fittings 3 to 5 years
Computer equipment 2 to 4 years
(o) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes where applicable in the Group. Revenue is reduced for estimated rebates and other similar allowances. The Group has five principal sources of revenue and related accounting policies are outlined below:
Interest on loans
Interest income is recognised in accordance with IFRS 9. Interest income is accrued over the contractual life of the loan, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
Dividend income
Dividend income from investments is recognised when the shareholders' rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).
Fee income on syndicated and non-syndicated loans
In accordance with the guidance in IFRS 15 Revenue, the Group distinguishes between fees that are an integral part of the effective interest rate of a financial instrument, fees that are earned as services are provided, and fees that are earned on the execution of a significant act.
i) Commitment and arrangement fees
Commitment and arrangement fees earned for syndicated loans are recognised on origination of the loan as compensation for the service of syndication. This is a reflection of the commercial reality of the operations of the business to arrange and administer loans for other parties i.e. the execution of a significant act and satisfying the Group's performance obligation at the point of arranging the loan.
Consistent with the policy outlined above, commitment and arrangement fees earned on loans originated for the sole benefit of the Group are also recorded in revenue on completion of the service of analysing or originating the loan. Whilst this is not in accordance with the requirements of the effective interest rate method outlined in IFRS 9 Financial Instruments, this is not considered to have a material impact on the financial performance or financial position of the Group.
ii) Exit fees
Where a loan is syndicated and has standard terms the exit fee is recognised as part of the arrangement fee, reflecting the costs of syndication at the start of the loan. Where a loan is syndicated and has milestones or conditions which determine if the fee becomes payable and/or the magnitude of the fee the exit fee is treated as variable consideration in line with IFRS 15 and is only recognised when the relevant milestones/conditions are met. Where loans are not syndicated the exit fee is deemed to be part of the effective interest rate and recognised over the term of the loan.
Fee income earned by peer-to-peer subsidiary platforms
Fee income earned by subsidiaries whose principal business is to operate online lending platforms that arrange financing between Co-Funders and Borrowers includes arrangement fees, trading transaction fees, repayment fees and other lender related fees. Revenue earned from the arrangement of financing is classified as a transaction fee and is recognised immediately upon acceptance of the arrangement by borrowers. Other transaction fees, including revenue from Co-Funders in relation to the sale of their loan participations in platform secondary markets is also recognised immediately.
Loan repayment fees are charged on a straight-line basis over the repayments of the borrower's financing arrangement.
Advisory fees
Advisory fee income is invoiced and recognised on an accruals basis in accordance with the relevant investment advisory agreement.
(p) Share based payments
As explained in the Remuneration Report, the Company provides a discretionary bonus, part of which is satisfied through the issuance of the Company's own shares, to certain senior management. The cost of such bonuses is taken to the Consolidated Statement of Comprehensive Income with a corresponding credit to Shareholders' Equity. The fair value of any share options granted is determined at the grant date and the expense is spread over the vesting period in accordance with IFRS 2.
(q) Taxation
Current tax, including corporation tax in relevant jurisdictions that the Group operates in, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group's taxable profits, and its results as stated in the financial statements, that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.
(r) Treasury shares
Where the Company purchases its own Share Capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from Share Premium.
When such shares are subsequently sold or reissued to the market, any consideration received, net of any directly attributable incremental transaction costs, is recognised as an increase in Share Premium. Where the Company cancels treasury shares, no further action is required to the Share Premium account at the time of cancellation.
(s) Warrants
Warrants are accounted for as either equity or liabilities based upon the characteristics and provisions of each instrument and are recorded at fair value as of the date of issuance. In subsequent periods an amount representing the difference between the warrant exercise price and the prevailing market price of the company's shares is transferred from/to retained earnings to/from warrants outstanding.
(t) Inventories - Development properties
Inventories are stated at the lower of cost and net realisable value. Cost comprises initial outlay and, where applicable, additional costs that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing and selling. Repossessed assets are accounted for under IAS 2: Inventories because the Group will either immediately seek to dispose of those assets which are readily marketable or pursue the original development plans to sell for those that are not readily marketable. Such assets are classed as "Other Assets" within current assets on the balance sheet.
(u) Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or rate (initially measured using the index or rate at the commencement date), the amount expected to be payable by the lessee under residual value guarantees, the exercise price of purchase options (if the lessee is reasonably certain to exercise the options) and payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented within current and non-current liabilities in the consolidated statement of financial position. It is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures this liability (and makes a corresponding adjustment to the related right-of-use asset) whenever the lease term has changed or there is a change in the lease payments used on inception to measure the liability as described above.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in 'Operating expenses' in profit or loss.
(v) Adoption of new and revised Standards
Amendments to IFRSs and IASs that are mandatorily effective for the current year
In the current year, the Group has applied a number of amendments to IFRSs and IASs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2021. These have been listed below. Their adoption has not had any material impact on the disclosures or on the amounts reported in the financial statements.
Amendments to IFRS 4, 7, 9, 16 and IAS 39: Amendments regarding replacement issues in the context of the IBOR reform
IFRSs, IASs and amendments that are in issue but not yet effective
At the date of approval of these Consolidated Financial Statements, the following IFRSs, IASs and amendments, which have not been applied in these Consolidated Financial Statements and are not envisaged to have a material impact on the financial statements when they are applied, were in issue but not yet effective:
§ Amendments to IFRS 1: Amendments resulting from 'Annual Improvements to IFRS Standards 2018-2020'
§ Amendments to IFRS 3: Amendments updating a reference to the Conceptual Framework
§ Amendments to IFRS 4: Amendments regarding the expiry date of the deferral approach
§ Amendments to IFRS 9: Amendments resulting from 'Annual Improvements to IFRS Standards 2018-2020'
§ Amendments to IFRS 16: Amendments to extend the exemption from assessing whether a COVID-19-related rent concession is a lease modification
§ IFRS 17: Insurance Contracts
§ Amendments to IFRS 17: Amendments to address concerns and implementation challenges that were identified after IFRS 17 was published
§ Amendments to IFRS 17: Amendments regarding the initial application of IFRS 17 and IFRS 9
§ Amendments to IAS 1: Amendments regarding the classification of liabilities
§ Amendments to IAS 1: Amendments to defer the effective date of the January 2020 amendments
§ Amendments to IAS 1: Amendments regarding the disclosure of Accounting Policies
§ Amendments to IAS 8: Amendments regarding the definition of accounting estimates
§ Amendments to IAS 12: Amendments regarding deferred tax on leases and decommissioning obligations
§ Amendments to IAS 16: Amendments prohibiting a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use
§ Amendments to IAS 37: Amendments regarding the costs to include when assessing whether a contract is onerous
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES
In the application of the Group's accounting policies, which are described in Note 2, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. There is no change in applying accounting policies for critical accounting estimates and judgments from the prior year. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the group's accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Fair value accounting for FinTech Ventures investments
Some of the Group's FinTech Ventures investments meet the definition of an associate. However, the Group has applied the exemption available under IAS 28.18 which states that when an investment in an associate is held by, or is held indirectly through, an entity that is a venture capital organisation, the entity may elect to measure investments in those associates at fair value through profit or loss in accordance with IAS 39 - Financial Instruments.
The Directors consider that the Group is of a nature similar to a venture capital organisation on the basis that FinTech Ventures investments form part of a portfolio which is monitored and managed without distinguishing between investments that qualify as associate undertakings. Furthermore, the most appropriate point in time for exit from such investments is being actively monitored as part of the Group's investment strategy.
The Group therefore designates those investments in associates which qualify for this exemption as fair value through profit or loss. Refer to Note 22 for fair value techniques used. If the Group had not applied this exemption the investments would be accounted for using the equity method of accounting. This would have the impact of taking a share of each investment's profit or loss for the year and would also affect the carrying value of the investments.
The Directors consider that equity and loan stock share the same investment characteristics and risks and they are therefore treated as a single unit of account for valuation purposes and a single class for disclosure purposes.
Exit fees
The Directors consider that the economic measurement of fee revenues that arise and become due on the completion of a loan (exit fees and warrants) should be accounted for as variable consideration and the exit fee constrained to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. Variable consideration is included based on the expected value or most likely amount, with the estimated transaction price associated with syndication services (being the performance obligation to which these fees are attributable) due on collection of the loan, updated at the end of each reporting period to represent the circumstances present and any changes in circumstances during the reporting period. This includes factors such as timing risk, liquidity risk, quantum uncertainty and conditions precedent in the syndicated finance contract. The Directors consider that this treatment best reflects the commercial operations of the Group as an administrator of loan arrangements.
IFRS 10 Control Judgements
Judgement is sometimes required to determine whether after considering all relevant factors, the Group has control, joint control or significant influence over an entity or arrangement. Other companies may make different judgements regarding the same entity or arrangement. The Directors have assessed whether or not the Group has control over Sancus Loan Note 7 based on whether the Group has the practical ability to direct the relevant activities unilaterally. In making their judgement, the directors considered the rights associated with its investment in preference shares. After assessment, the directors concluded that the Group does not have the ability to affect returns through voting rights (the preference shares do not have voting rights) or other arrangements such as direct management of these entities (the Group does not have control over the investment manager). If the Directors had concluded that the ownership of preference shares was sufficient to give the Group control, these entities would instead have been consolidated with the results of the Group.
IFRS 9 Credit Risk
Credit risk and determining when a significant increase in credit risk has occurred are critical accounting judgements and are assessed at each reporting period end. Credit risk is used to calculate estimated credit losses (ECL). Further details on credit risk can be found in Note 22.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Impairment of goodwill
As detailed in Note 12, the Directors carry out an impairment review annually to assess whether goodwill is impaired. In doing so, the Directors assess the value in use of each cash generating unit through an internal discounted cash flow analysis. The last impairment review was carried out for the June 2021 interim reporting.
Given the nature of the Group's operations, the calculation of value in use is sensitive to the estimation of future cash flows and the discount rates applied, the impact of which is also disclosed in Note 12. Refer Notes 2(h) and 2(k) for accounting policies relating to the valuation and impairment of goodwill.
IFRS 9 ECL
Key areas of estimation and uncertainty are the probabilities of default (PD) and the probabilities of loss given default (PL) which are used along with the credit risk in the calculation of ECL. Further details on ECLs, PD and PL can be found in Note 22. Should the estimates of PD or PL prove to be different from what actually happens in the future, then the recoverability of loans could be higher or lower than the accounts currently suggest, although this should be mitigated by the levels of LTV which are, in the main, less than 70%. Where loans are in default and classified within stage 3, the Directors estimate of the present value of amounts recoverable through enforcement or other repayment plans could be materially different to the actual proceeds received to settle the balances due. In respect of certain loans held by the Group, the range of outcomes is significant and has a material impact on the calculation of ECL.
Fair Value of the FinTech Ventures investments
The Group invests in financial instruments which are not quoted in active markets and measures their fair values as detailed in Note 22.
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 £0.5m at 31 December 2021 (31 December 2020: £Nil) following £0.5m 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 £0.5m. There have been no transfers between levels in the period (2020: None).
4. SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the manner in which the Executive Management 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 Management 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 the 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
1. Offshore
Contains the operations of Sancus Lending (Jersey) Limited, Sancus Lending (
2.
Contains the operations of Sancus Lending (
3.
Contains the operations of Sancus Lending (
4. Sancus Loans Limited
Contains the operations of Sancus Loans Limited.
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Financial Statements |
|||||
|
|
|
|
|
|
|
|
|
|
|||||
|
Year to 31 December 2021
|
Offshore |
|
|
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 |
3,810 |
1,480 |
667 |
(1,149) |
- |
4,808 |
|
- |
4,137 |
- |
77 |
|
9,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit/(loss) * |
1,207 |
(462) |
88 |
(1,170) |
- |
(337) |
|
(1,601) |
- |
- |
67 |
|
(1,871) |
|
Credit Losses |
(3,892) |
- |
- |
(2,579) |
- |
(6,471) |
|
- |
- |
- |
(18) |
|
(6,489) |
|
Debt Costs |
- |
- |
- |
- |
(1,875) |
(1,875) |
|
- |
- |
- |
- |
|
(1,875) |
|
Other Gains/(losses) |
56 |
2 |
(38) |
(100) |
- |
(80) |
|
- |
- |
420 |
10 |
|
350 |
|
Loss on JVs and associates |
- |
- |
- |
- |
- |
- |
|
- |
- |
- |
(473) |
|
(473) |
|
Taxation |
19 |
- |
- |
- |
- |
19 |
|
- |
- |
- |
- |
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit After Tax |
(2,610) |
(460) |
50 |
(3,849) |
(1,875) |
(8,744) |
|
(1,601) |
- |
420 |
(414) |
|
(10,339) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to 31 December 2020
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
4,338 |
638 |
628 |
876 |
- |
6,480 |
|
- |
3,785 |
- |
596 |
|
10,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit/(loss) * |
1,916 |
(672) |
201 |
859 |
- |
2,304 |
|
(890) |
- |
- |
(302) |
|
1,112 |
|
Credit Losses |
(3,923) |
- |
- |
(965) |
- |
(4,888) |
|
- |
- |
- |
223 |
|
(4,665) |
|
Debt Costs |
- |
- |
- |
- |
(1,952) |
(1,952) |
|
- |
- |
- |
- |
|
(1,952) |
|
Other Gains/(losses) |
4 |
- |
- |
- |
- |
4 |
|
- |
- |
(6,022) |
(1,072) |
|
(7,090) |
|
Loss on JVs and associates |
- |
- |
- |
- |
- |
- |
|
- |
- |
- |
(1,937) |
|
(1,937) |
|
Taxation |
15 |
- |
- |
- |
- |
15 |
|
- |
- |
- |
- |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit After Tax |
(1,988) |
(672) |
201 |
(106) |
(1,952) |
(4,517) |
|
(890) |
- |
(6,022) |
(3,088) |
|
(14,517) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
Reconciliation to Financial Statements |
|
||||||||||
|
|
|
|
|
|
|
|
|||||||||||
|
At 31 December 2021
|
Offshore |
|
|
Sancus Loans Limited (SLL) |
Total Sancus |
|
Head Office |
Investment in IOM |
Fintech Portfolio |
Other |
Inter Company Balances |
|
Consolidated Financial Statements |
||||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
£'000 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total Assets |
45,397 |
11,127 |
586 |
60,504 |
117,614 |
|
43,129 |
500 |
500 |
793 |
(65,577) |
|
96,959 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total Liabilities |
(40,503) |
(12,599) |
(714) |
(64,355) |
(118,171) |
|
(23,978) |
- |
- |
(1,293) |
65,577 |
|
(77,865) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Net Assets/(liabilities) |
4,894 |
(1,472) |
(128) |
(3,851) |
(557) |
|
19,151 |
500 |
500 |
(500) |
- |
|
19,094 |
||||
|
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 £23,007,000 (2020: £24,897,000). Other Fintech assets and liabilities, and Sancus Group Holdings assets and liabilities are included within "Other".
5. REVENUE
|
|
2021 £'000 |
2020 £'000 |
|
|
|
|
|
Co-Funder fees |
1,574 |
1,836 |
|
Earn out (exit) fees |
962 |
1,863 |
|
Advisory fees |
- |
399 |
|
Transaction fees |
2,862 |
1,434 |
|
Total revenue from contracts with customers |
5,398 |
5,532 |
|
|
|
|
|
Interest on loans |
168 |
456 |
|
HIT Interest income |
2,989 |
4,660 |
|
Sundry income |
467 |
213 |
|
Total Revenue |
9,022 |
10,861 |
The disaggregation of revenue reflects the different performance obligations in contracts with customers as described in the accounting policy Note 2(o) and the typical timing of payment for those relevant revenue streams.
6. COST OF SALES
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Interest costs |
1,911 |
2,016 |
|
HIT interest costs |
4,137 |
3,785 |
|
Other cost of sales |
489 |
317 |
|
Total cost of sales |
6,537 |
6,118 |
7. OPERATING EXPENSES
|
|
2021 £'000 |
2020 £'000
|
|
Amortisation and depreciation |
356 |
428 |
|
Audit fees |
155 |
231 |
|
Company secretarial |
124 |
78 |
|
Corporate insurance |
96 |
72 |
|
Employment costs |
4,363 |
3,573 |
|
Investor relations expenses |
81 |
67 |
|
Legal & professional |
251 |
222 |
|
Marketing expenses |
93 |
38 |
|
NOMAD fees |
76 |
75 |
|
Other office and administration costs |
514 |
620 |
|
Pension costs |
87 |
145 |
|
Registrar fees |
31 |
23 |
|
Sundry |
4 |
10 |
|
|
6,231 |
5,582 |
8. OTHER NET LOSSES
The £557,000 Other net losses is predominantly made up of losses on Foreign exchange £143,000 and loss on joint ventures and associates of £473,000 offset by the profit on the sale of Sancus Property Limited properties of £59,000. (2020 £3,032,000: predominantly made up of the write down of other assets of £892,000 (Note 14) and loss on joint ventures and associates of £1,937,000 (Note 9).
9. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
|
|
31 December 2021 £'000 |
31 December 2020 £'000 |
|
|
|
|
|
At beginning of year |
866 |
2,703 |
|
Additions |
107 |
100 |
|
Share of profit/(loss) of associate |
161 |
(574) |
|
Share of loss in joint venture |
(91) |
(100) |
|
Write down joint venture/associate |
(543) |
(1,263) |
|
At end of year |
500 |
866 |
The investment in joint venture relates to a 50% share in Amberton Limited (31 December 2020: 50% share in Amberton Asset Management Limited). Both investments were held at £Nil. Amberton Asset Management Limited was liquidated on 13 December 2021. Amberton Limited, which is Jersey a registered entity, was incorporated in January 2021 and has been established as a joint venture to manage the loan note programme going forward (duties previously performed by Amberton Asset Management Limited).
Details of material associates
|
|
Principal Activity |
Place of Incorporation |
Proportion of ownership interest/voting rights held by the group |
|
|
|
|
|
31 December 2021 |
31 December 2020 |
|
|
|
|
|
|
|
Sancus ( |
Holding Company for Sancus (IOM) Limited |
|
29.32% |
29.32% |
The above associate is accounted for using the equity method in these consolidated financial statements as set out in the Group's accounting policies in Note 2.
Summarised financial information in respect of Sancus (
|
|
31 December 2021 |
31 December 2020 |
|
|
|
|
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Non-current assets |
1 |
2 |
|
|
|
Current assets |
5,309 |
4,821 |
|
|
|
Current liabilities |
(49) |
(164) |
|
|
|
Equity attributable to owners of the company |
5,261 |
4,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
173 |
278 |
|
|
|
Profit from continuing operations |
133 |
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the above summarised financial information to the carrying amount of the interest in Sancus ( |
|
|||
|
|
|
|
||
|
|
31 December 2021 |
31 December 2020 |
|
|
|
|
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Net assets of associate |
5,261 |
4,659 |
|
|
|
|
|
|
|
|
|
Proportion of the Group's ownership interest in the associate |
1,543 |
1,366 |
|
|
|
Goodwill arising on acquisition |
763 |
763 |
|
|
|
Write down of carrying value |
(1,806) |
(1,263) |
|
|
|
Carrying amount of the Group's interest in the associate |
500 |
866 |
|
|
|
|
|
|
|
|
10. LOSS PER ORDINARY SHARE
Consolidated loss per Ordinary Share has been calculated by dividing the consolidated loss for the year after tax attributable to Ordinary Shareholders of £10,339,000 (31 December 2020: loss of £14,517,000) by the weighted average number of Ordinary Shares (excluding treasury shares) outstanding during the period of 478,141,413 (31 December 2020: 315,797,259).
Note 16 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 493,540,868 (31 December 2020: 346,046,187).
|
|
31 December 2021 |
31 December 2020 |
|
Number of shares |
489,843,477 |
489,843,477 |
|
Weighted average no. of shares in issue throughout the year |
478,141,413 |
315,797,259 |
|
Basic Loss per share |
(2.16)p |
(4.60)p |
|
Diluted Loss per share |
(2.09)p |
(4.19)p |
11. FIXED ASSETS
|
Cost |
Right-of-use assets £'000 |
Property & Equipment £'000 |
Total
£'000 |
|
At 31 December 2019 |
1,089 |
433 |
1,522 |
|
Additions in the year |
- |
29 |
29 |
|
Leases expired |
(75) |
- |
(75) |
|
Lease variations |
253 |
- |
253 |
|
At 31 December 2020 |
1,267 |
462 |
1,729 |
|
|
|
|
|
|
Additions in the year |
128 |
15 |
143 |
|
Disposals |
- |
(14) |
(14) |
|
Leases expired |
(132) |
- |
(132) |
|
Lease variations |
(16) |
- |
(16) |
|
At 31 December 2021 |
1,247 |
463 |
1,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
Right-of-use assets £'000 |
Property & Equipment £'000 |
Total
£'000 |
|
At 31 December 2019 |
231 |
273 |
504 |
|
Charge in the year |
208 |
54 |
262 |
|
Leases expired |
(75) |
- |
(75) |
|
Lease variations |
264 |
- |
264 |
|
At 31 December 2020 |
628 |
327 |
955 |
|
|
|
|
|
|
Charge for the year |
190 |
51 |
241 |
|
Disposals |
- |
(14) |
(14) |
|
Leases expired |
(132) |
- |
(132) |
|
At 31 December 2021 |
686 |
364 |
1,050 |
|
|
|
|
|
|
Net book value 31 December 2021 |
561 |
99 |
660 |
|
|
|
|
|
|
Net book value 31 December 2020 |
639 |
135 |
774 |
12. GOODWILL
|
|
£'000 |
|
At 31 December 2021 and 31 December 2020 goodwill comprises: |
|
|
Sancus Lending Jersey |
14,255 |
|
Sancus Lending Gibraltar |
8,639 |
|
|
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 Board last assessed the Goodwill for impairment on the preparation of the 2021 interim accounts, with the next assessment due on the preparation of the 2022 interim accounts, assuming that there having been no indicators of impairment in the interim period.
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 Lending Jersey and
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
|
Sensitivity Applied |
|
Reduction in headroom implied by sensitivity |
|
||
|
|
|
Sancus Jersey £'000 |
Sancus £'000 |
Total £'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
13. OTHER INTANGIBLE ASSETS
|
|
|
|
|
Cost |
|
£'000 |
|
|
|
|
|
At 31 December 2021, 31 December 2020 and 31 December 2019 |
|
1,584 |
|
|
|
|
|
Amortisation |
|
£'000 |
|
At 31 December 2019 |
|
1,250 |
|
Charge for the year |
|
166 |
|
At 31 December 2020 |
|
1,416 |
|
Charge for the year |
|
115 |
|
At 31 December 2021 |
|
1,531 |
|
Net book value 31 December 2021 |
|
53 |
|
Net book value 31 December 2020 |
|
168 |
Other Intangible assets comprise capitalised contractors' costs and other costs related to core systems development. No impairment provision has been recorded. The amortisation charge has been recorded in Operating expenses.
14. OTHER ASSETS
|
|
Development properties £'000 |
|
|
|
|
At 31 December 2019 |
3,336 |
|
Additions |
236 |
|
Disposals |
(1,665) |
|
Write downs |
(892) |
|
At 31 December 2020 |
1,015 |
|
Additions |
157 |
|
Disposals |
(676) |
|
At 31 December 2021 |
496 |
Other assets comprise of a number of repossessed properties and developments which were previously held as security against certain loans which have defaulted. The write down in the prior year is that necessary to bring the assets to the lower of cost and net realisable value. The remaining £0.5m comprises of one development property which is held at cost.
15. TRADE AND OTHER RECEIVABLES
|
|
31 December 2021 £'000 |
31 December 2020 £'000 |
|
|
|
|
|
Loan fees, interest and similar receivable |
4,146 |
7,438 |
|
Receivable from associated companies |
10 |
49 |
|
Taxation |
40 |
- |
|
Derivative contracts (Note 22) |
759 |
94 |
|
Other trade receivables and prepaid expenses |
1,120 |
623 |
|
|
6,075 |
8,204 |
Loan fees, interest and similar receivables amounted to £11,201,000 at 31 December 2021 (31 December 2020: £9,628,000) before provisions against receivables of £7,055,000 (31 December 2020: £2,190,000).
16. SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE
Sancus has the power under its articles of association to issue an unlimited number of Ordinary Shares of no par value.
No Ordinary shares were issued during the year. (2020: 177,777,778 Ordinary shares for a consideration of £4,000,000).
|
Share Capital - ordinary shares of nil par value |
|
|
|
|
|
31 December 2021 |
31 December 2020 |
|
|
|
Number of shares |
Number of shares |
|
|
|
|
|
|
|
At beginning of the year |
489,843,477 |
312,065,699 |
|
|
Issued during the year |
- |
177,777,778 |
|
|
At end of the year |
489,843,477 |
489,843,477 |
|
|
Share Premium - Ordinary shares of nil par value |
|
|
|
|
31 December 2021 |
31 December 2020 |
|
|
£'000 |
£'000 |
|
|
|
|
|
At beginning of the year |
116,218 |
112,557 |
|
Issued during the year |
- |
4,000 |
|
Costs of issue |
- |
(339) |
|
At end of the year |
116,218 |
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 2021 Number of shares |
31 December 2020 Number of shares |
|
|
|
|
|
|
At beginning of the year |
|
7,925,999 |
7,925,999 |
|
Sancus shares acquired on sale of BMS Finance AB Limited |
|
3,926,677 |
- |
|
At end of the year |
|
11,852,676 |
7,925,999 |
Treasury Shares (Continued)
|
|
|
31 December 2021 £'000
|
31 December 2020 £'000
|
|
At beginning of the year |
|
1,099 |
1,099 |
|
Sancus shares acquired on sale of BMS Finance AB Limited |
|
73 |
- |
|
At end of the year |
|
1,172 |
1,099 |
Warrants in Issue
On 22 December 2020, in connection with the issue of the 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 31 December 2021 and up to the date of signing these accounts none of these warrants have been exercised. 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 31 December 2021 is £385,000 (31 December 2020: £847,000).
17. LIABILITIES
|
|
31 December 2021 |
31 December 2020 |
|
Non-current liabilities |
£'000 |
£'000 |
|
|
|
|
|
ZDP shares (1) |
- |
12,424 |
|
Corporate Bond (2) |
12,474 |
12,473 |
|
HIT Facility (3) |
52,203 |
44,553 |
|
Lease creditors (Notes 2(u), 2(v) & 24) |
364 |
469 |
|
|
65,041 |
69,919 |
|
|
31 December 2021 |
31 December 2020 |
|
Current liabilities |
£'000 |
£'000 |
|
|
|
|
|
ZDP shares (1) |
10,532 |
- |
|
Accounts payable |
93 |
436 |
|
Payable to associated companies |
16 |
- |
|
Interest payable |
366 |
- |
|
Accruals and other payables |
1,519 |
1,202 |
|
Taxation |
86 |
118 |
|
Deferred income |
- |
40 |
|
Provisions for financial guarantees |
- |
1,542 |
|
Lease creditors (Notes 2(u), 2(v) & 24) |
212 |
188 |
|
|
12,824 |
3,526 |
Provisions for financial guarantees were recognised in the prior year in relation to ECLs on off-balance sheet loans and debtors where the company has provided a subordinated position or other guarantee (Note 25). No such provision was required in the current year. The fair value is determined using the exact same methodology as that used in determining ECLs (Note 2(f) and Note 22). The amount credited to operating profit in the year was £1,542,000 (2020: £1,542,000 charged to operating profit), there being no other movements.
|
|
31 December 2021 |
31 December 2020 |
|
Interest costs on debt facilities |
£'000 |
£'000 |
|
|
|
|
|
ZDP shares (1) |
969 |
1,246 |
|
Corporate Bond (2) |
906 |
706 |
|
HIT Facility (3) |
4,137 |
3,785 |
|
Lease Interest |
36 |
64 |
|
|
6,048 |
5,801 |
(1) ZDP shares
The ZDP Shares have a maturity date of 5 December 2022 with a final capital entitlement of £1.6464 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 bear interest at an average rate of 8% (2020: 8%). 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 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 31 December 2021 the Company was in compliance with these covenants as Cover Test A was 3.07 (minimum of 1.7) and Cover Test B was 5.38 (minimum of 3.25). At 31 December 2021 senior debt borrowing capacity amounted to £17.4m. The HIT facility does not impact on this capacity as it is non-recourse to Sancus.
In addition to a tender offer in April 2021, whereby the company acquired, and subsequently cancelled 1,690,034 ZDP shares, the company purchased a further 226,718 ZDP shares throughout the year. At 31 December 2021 the Company held 12,235,748 shares (31 December 2020: 12,009,030) with an aggregate value of £18,810,266 (31 December 2020: £17,051,409).
(2) Corporate Bond
£6,125,000 of the existing £10m bonds were repaid early on 21 December 2020 (maturity was 30 June 2021). The remaining £3,875,000 were rolled into new bonds which were issued on 22 December 2020. In addition to these a further £8,700,000 new bonds were issued for cash on 22 December 2020 giving a total amount of new bonds issued £12,575,000 (£15m may be issued over the life of the bonds). The bonds bear interest at 7% (2020: 7%). The new bonds have a maturity date of 31 December 2025.
(3) HIT Facility
On 28 January 2018, Sancus signed a funding facility with Honeycomb Investment Trust plc (HIT). 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. In addition to the extension the facility was increased to £75m. 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 a £5.8m first loss position on the HIT facility. Sancus has also provided HIT with a guarantee, capped at £2m 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 25 Commitments and Guarantees.
18. TAXATION
The Company is exempt from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £1,200 (31 December 2020: £1,200) is payable to the States of Guernsey in respect of this exemption.
Reconciliation of tax charge
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Accounting loss before tax |
(10,358) |
(14,532) |
|
|
|
|
|
Gibraltar Corporation Tax at 10% (2020: 10%) |
- |
- |
|
Jersey Corporation Tax at 10% (2020: 10%) |
- |
- |
|
Adjustment in respect of prior years |
(19) |
(15) |
|
Tax (credit)/expense |
(19) |
(15) |
Certain of the Group's subsidiaries have an estimated £16.0m of losses between them available to carry forward to offset against qualifying future trading profits. The Group does not recognise deferred tax assets in respect of losses arising because in the opinion of the directors the quantum and timing of any suitable profits which can utilise these losses is unknown.
19. NOTES TO THE CASH FLOW STATEMENT
Cash generated from operations (excluding loan movements)
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Loss for the year |
(10,339) |
(14,517) |
|
Adjustments for: |
|
|
|
Net losses on FinTech Ventures |
- |
5,936 |
|
Other net losses/(gains) |
9 |
(221) |
|
ZDP finance costs |
874 |
1,039 |
|
Fair Value joint ventures and associates |
473 |
1,937 |
|
Changes in expected credit losses |
6,489 |
4,665 |
|
Amortisation/depreciation of fixed assets |
356 |
428 |
|
Amortisation of debt issue costs |
202 |
201 |
|
SPL Properties |
(59) |
960 |
|
|
|
|
|
Changes in working capital: |
|
|
|
Trade and other receivables |
(1,995) |
(4,303) |
|
Trade and other payables |
(131) |
38 |
|
Cash outflow from operations (excluding loan movements) |
(4,121) |
(3,837) |
Changes in liabilities arising from financing activities
The tables below detail 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 2021 £'000 |
Payments 1 £'000 |
Receipts 1 £'000 |
Debt issue costs 1 £'000 |
Additions Non-cash £'000 |
Amortisation of debt issue costs Non-cash £'000 |
Other Non-cash £'000 |
31 December 2021 £'000 |
|
|
|
|
|
|
|
|
|
|
|
ZDP Shares |
12,424 |
(2,756)1 |
- |
- |
- |
24 |
8403 |
10,532 |
|
Corporate Bond |
12,473 |
(24)5 |
- |
- |
- |
25 |
- |
12,474 |
|
HIT Facility |
44,553 |
- |
7,500 |
(3) |
- |
153 |
- |
52,203 |
|
Lease Liability |
657 |
(193)1 |
- |
- |
128 |
- |
(16)4 |
576 |
|
Total liabilities |
70,107 |
(2,973) |
7,500 |
(3) |
128 |
202 |
824 |
75,785 |
|
|
1 January 2020 £'000 |
Payments 1 £'000 |
Receipts 1 £'000 |
Debt issue costs 1 £'000 |
Additions Non-Cash £'000 |
Amortisation of debt issue costs Non-cash £'000 |
Other Non-cash £'000 |
31 December 2020 £'000 |
|
|
|
|
|
|
|
|
|
|
|
ZDP Shares |
16,825 |
(4,443) |
- |
(44) |
(829)2 |
76 |
8393 |
12,424 |
|
Corporate Bond |
10,000 |
(6,125) |
8,700 |
(111) |
- |
1 |
83 |
12,473 |
|
HIT Facility |
44,191 |
(3,500) |
4,187 |
(159) |
- |
124 |
(290)3 |
44,553 |
|
Lease Liability |
890 |
(216) |
- |
- |
- |
- |
(17)4 |
657 |
|
Total liabilities |
71,906 |
(14,284) |
12,887 |
(314) |
(829) |
201 |
540 |
70,107 |
1These amounts can be found under financing cash flows in the cash flow statement.
2 A loan to the value of £829,000 which sat within Sancus loans and loan equivalents was swapped for 621,586 ZDP shares.
3 Comprises interest accruals and unpaid debt issue costs.
4 Lease variations.
5 Interest within operating cash flows.
20. CONSOLIDATED SUBSIDIARIES
|
The Directors consider the following entities as wholly owned subsidiaries of the Group as at 31 December 2021. Their results and financial positions are included within its consolidated results.
|
|
|
|
|
Sancus Group Holdings Limited and Sancus Holdings (UK) Limited act as holding companies. Sancus Properties Limited engages in property development. Fintech Ventures Limited is an investment company, investing in Fintech companies. The activities of the remaining companies named above relate to the core business of lending.
Sancus BMS Holdings Limited was voluntarily struck off on 13 September 2021 following the sale of the BMS Fund.
21. FINTECH VENTURES AND OTHER INVESTMENTS
The Directors consider the following entities as associated undertakings of the Group as at 31 December 2021.
|
Name of Investment: |
Nature of holding |
Country of incorporation |
Percentage holding |
Measurement |
|
FinTech Ventures: |
|
|
|
|
|
LiftForward Inc |
Indirectly held - Equity |
United States of America |
18.81% |
Fair Value |
|
Finexkap |
Indirectly held - Equity |
France |
10.76% |
Fair Value |
|
Ovamba Solutions Inc |
Indirectly held - Equity |
United States of America |
20.18% |
Fair Value |
|
Funding Options Limited |
Indirectly held - Equity and Preference Shares |
United Kingdom |
22.78% |
Fair Value |
|
Open Energy Group Inc |
Indirectly held - Equity |
United States of America |
22.71% |
Fair Value |
|
Finpoint Limited |
Indirectly held - Equity |
United Kingdom |
12.95% |
Fair Value |
The percentage holdings in the above table are on a fully diluted basis, assuming any warrants and management options all vest.
22. FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT
|
Sancus loans and loan equivalents |
31 December 2021 £'000 |
31 December 2020 £'000 |
|
Non-current |
|
|
|
Sancus loans |
447 |
442 |
|
Sancus Loans Limited loans |
6,196 |
3,421 |
|
Total non-current Sancus loans and loan equivalents |
6,643 |
3,863 |
|
|
|
|
|
Current |
|
|
|
Sancus loans |
4,269 |
7,873 |
|
Loan equivalents |
- |
117 |
|
Sancus Loans Limited loans |
42,333 |
41,379 |
|
Total current Sancus loans and loan equivalents |
46,602 |
49,369 |
|
|
|
|
|
Total Sancus loans and loan equivalents |
53,245 |
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:
|
|
31 December 2021 |
31 December 2020 |
|||
|
|
Level 2 |
Level 3 |
Level 2 |
Level 3 |
|
|
Assets |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
FinTech Ventures investments |
- |
500 |
- |
- |
|
|
Derivative contracts |
759 |
- |
94 |
- |
|
|
Total assets at Fair Value |
759 |
500 |
94 |
- |
|
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 £0.5m at 31 December 2021 (31 December 2020: £Nil) following £0.5m 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 £0.5m. There have been no transfers between levels in the period (2020: None).
|
FinTech Ventures investments |
|
|
|
|
|
|
|
|
|
31 December 2021 |
Equity |
Loans |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Opening fair value |
- |
- |
- |
|
New investments/divestments |
(8) |
74 |
66 |
|
Realised gains recognised in profit and loss |
8 |
426 |
434 |
|
Closing fair value |
- |
500 |
500 |
|
FinTech Ventures investments (continued) |
|
|
|
|
|
|
|
|
|
31 December 2020 |
Equity |
Loans |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Opening fair value |
4,500 |
1,799 |
6,299 |
|
New investments/divestments |
- |
(277) |
(277) |
|
Unrealised losses recognised in profit and loss |
(4,500) |
(1,496) |
(5,996) |
|
Foreign exchange loss |
- |
(26) |
(26) |
|
Closing fair value |
- |
- |
- |
Assets at Amortised Cost
|
|
31 December 2021 |
31 December 2020 |
|
|
£'000 |
£'000 |
|
Sancus loans and loan equivalents |
53,245 |
53,232 |
|
Trade and other receivables |
4,196 |
7,487 |
|
Cash and cash equivalents |
12,436 |
15,786 |
|
Total assets at amortised cost |
69,877 |
76,505 |
Due to the relatively short-term nature of the above assets, their carrying amount is considered to be the same as their fair value.
Liabilities at Amortised Cost
|
|
31 December 2021 |
31 December 2020 |
|
|
£'000 |
£'000 |
|
ZDP Shares |
10,532 |
12,424 |
|
Corporate Bond |
12,474 |
12,473 |
|
HIT Facility |
52,203 |
44,553 |
|
Trade and other payables |
2,656 |
2,453 |
|
Provisions in respect of guarantees |
- |
1,542 |
|
Total liabilities at amortised cost |
77,865 |
73,445 |
Refer to Note 17 for further information on liabilities.
Risk Management
The Group is exposed to financial risk through its investment in a range of financial instruments, ie. in the equity and debt of investee companies and through the use of debt instruments to fund its investment in loans. Such risks are categorised as capital risk, liquidity risk, investment risk, credit risk, and market risk (market price risk, interest rate risk and foreign currency risk).
Comments supplementary to those on risk management in the Corporate Governance section of this announcement are included below.
(1) Capital Risk Management
The Group's capital comprises ordinary shares as well as a number of debt instruments. Its objective when managing this capital is to enable the Group to continue as a going concern in order to provide a consistent appropriate risk-adjusted return to shareholders, and to support the continued development of its investment activities. Details of the Group's equity is disclosed in Note 16 and of its debt in Note 17.
The Group and its subsidiaries (with the exception of Sancus Lending (UK) Limited, which is regulated by the FCA) are not subject to regulatory or industry specific requirements to hold a minimum level of capital, other than the legal requirements for Guernsey incorporated entities. The Group considers the amount and composition of its capital is currently in proportion to its risk profile.
The Group monitors the ratio of debt (loans payable, bonds and ZDP Shares) to other capital which, based upon shareholder approval, is limited to 5 to 1 (or 500%). At year-end this ratio increased to 394% (31 December 2020: 235%) due to the HIT facility. The HIT facility is non-recourse to Sancus. Excluding HIT, the ratio at year-end was 120% (31 December 2020: 84%).
(2) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. At the end of the reporting period the group held cash of £12,436,000. The Group Treasury Committee monitors rolling forecasts of the group's cash position in relation to its obligations as they become due on a monthly basis. In addition, the group's liquidity management involves projecting cash flows and considering the level of liquid assets necessary to meet obligations. Where necessary contingency plans are made to realise assets which are reasonably liquid in the short term.
The following table analyses the Group's financial liabilities into relevant maturity groupings based on the period to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows.
|
Contractual maturities of financial liabilities |
Within 12 months |
Between 1 and 2 years |
Between 2 and 5 years |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
31 December 2021 |
|
|
|
|
|
ZDP shares |
10,532 |
- |
- |
10,532 |
|
Corporate bond |
- |
- |
12,474 |
12,474 |
|
Sancus Loans Limited |
- |
- |
52,203 |
52,203 |
|
Trade and other payables |
2,206 |
212 |
152 |
2,570 |
|
Total liabilities |
12,738 |
212 |
64,829 |
77,779 |
|
|
Within 12 months |
Between 1 and 2 years |
Between 2 and 5 years |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
31 December 2020 |
|
|
|
|
|
ZDP shares |
- |
12,424 |
- |
12,424 |
|
Corporate bond |
- |
- |
12,473 |
12,473 |
|
Sancus Loans Limited |
- |
- |
44,553 |
44,553 |
|
Trade and other payables |
3,408 |
200 |
269 |
3,877 |
|
Total liabilities |
3,408 |
12,624 |
57,295 |
73,327 |
(3) Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates and that mismatches in the interest rates applying to assets and liabilities will impact on the Group's earnings.
The Group's cash balances, debt instruments and loan notes are exposed to interest rate risk.
The Group did not enter into any interest rate risk hedging transactions during the current or prior years.
The table below summarises the Group's exposure to interest rate risk:
|
|
|
Floating rate Financial Instruments |
Fixed Rate Financial Instruments |
Total |
|
31 December 2021 |
£'000 |
£'000 |
£'000 |
|
|
Assets |
|
|
|
|
|
Sancus loans and loan equivalents |
- |
53,245 |
53,245 |
|
|
Cash and cash equivalents |
12,436 |
- |
12,436 |
|
|
Total assets |
12,436 |
53,245 |
65,681 |
|
|
Liabilities |
|
|
|
|
ZDP shares |
- |
10,532 |
10,532 |
|
Corporate Bond |
- |
12,474 |
12,474 |
|
Sancus Loans Limited |
- |
52,203 |
52,203 |
|
Total liabilities |
- |
75,209 |
75,209 |
|
Total interest sensitivity gap |
12,436 |
(21,964) |
(9,528) |
|
31 December 2020 |
£'000 |
£'000 |
£'000 |
||
|
Assets |
|
|
|
||
|
Sancus Loans and loan equivalents |
3,693 |
49,539 |
53,232 |
||
|
Cash and cash equivalents |
15,786 |
- |
15,786 |
||
|
Total assets |
19,479 |
49,539 |
69,018 |
||
|
Liabilities |
|
|
|
|
ZDP shares |
- |
12,424 |
12,424 |
|
Corporate Bond |
- |
12,473 |
12,473 |
|
Sancus Loans Limited |
- |
44,553 |
44,553 |
|
Total liabilities |
- |
69,450 |
69,450 |
|
Total interest sensitivity gap |
19,479 |
(19,911) |
(432) |
Interest rate sensitivities
The Group currently holds £12,436,000 in cash deposits, predominantly in sterling. Whilst interest rates are currently negligible there is a risk that these could go negative. At the current level of cash deposits this could cost the group £124,000 per annum for every 1% decrease in interest rates. The Group does not hold significant amounts in foreign currencies for any period of time.
The Treasury Committee reviews interest rate risk on an ongoing basis, and the exposure is reported quarterly to the Board and/or Audit and Risk Committee.
(4) Investment risk
Investment risk is defined as the risk that an investment's actual return will be different to that expected. Investment risk primarily arises from the Group's exposure to its FinTech Ventures portfolio (see Note 3). This risk in turn is driven by the underlying risks taken by the platforms themselves - their own strategic, liquidity, credit and operational risks.
The Group's framework for the management of this risk includes the following:
· Seats on the Boards of most of the platforms, which allow input into strategy and monitoring of progress;
· pre-emptive rights on participation in capital raises, or the support for capital raises, to protect against dilution;
· regular monitoring of the financial results of platforms;
· bi-annual reviews of the valuations of platforms, which provide an opportunity to test the success of platforms' strategies; and
· quarterly reporting to the Board on these matters.
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
· Level 1 - Inputs that are quoted market prices (unadjusted) in active markets for identical instruments. A market is regarded as "active" if transactions of the asset or liability take place with sufficient frequency and volume to provide pricing information on an on-going basis. The Group measures financial instruments quoted in an active market at a bid price.
· Level 2 - Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
· Level 3 - Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. If in the case of any investment the Directors at any time consider that the above basis of valuation is inappropriate or that the value determined in accordance with the foregoing principles is unfair, they are entitled to substitute what in their opinion, is a fair value. In this case, the fair value is estimated with care and in good faith by the Directors in consultation with the Executive Management Team with a view to establishing the probable realisation value for such shares as at close of business on the relevant valuation day.
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 £0.5m at 31 December 2021 (31 December 2020: £Nil) following £0.5m 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 £0.5m. There have been no transfers between levels in the period (2020: None).
(5) Credit risk
Credit risk is defined as the risk that a borrower/debtor may fail to make required repayments within the contracted time scale. 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. The risk assessment is undertaken by the Executive Management Team at the time of the agreements, and the Executive Management Team continues to evaluate the loan instruments in the context of these agreements. Credit risk is categorised 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.
Credit risk is initially evaluated using the LTV, (LTGDV and LTF where relevant) and the circumstances of the individual borrower. For the majority of loans security takes the form of real estate. There has been no significant change in the quality of this security over the prior year. When determining credit risk macro-economic factors such as GDP, unemployment rates, the impact of Covid19 on real estate and other relevant factors are also taken into account. A loan is considered to be in default when there is a failure to meet the legal obligation of the loan agreement. Having regards to the principles of IFRS 9 this would also include provisions against loans that are considered by management as unlikely to pay their obligations in full without realisation of collateral. Once identified as being in default a re-assessment of the credit risk of that loan will be undertaken using the factors as noted above. A decision will then be made as to whether to credit impair that asset.
In some instances borrowers will request loan modifications, extensions or renegotiation of terms. Any such event will trigger a reassessment of the credit risk of that loan where the reasons for the modification, extension or renegotiation will be carefully assessed and may result in that asset being credit impaired.
The entities in the Sancus Lending Group operate Credit Committees which are responsible for evaluating and deciding upon loan proposals, as well as monitoring the recoverability of loans, and taking action on any doubtful accounts. All lending undertaken by Sancus Lending is secured. The credit committee reports to the Sancus Lending Board on a quarterly basis.
Provision for ECL
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 loss given default is deemed to be nil where LTV is equal to or less than 65%, as it is assumed that the asset can be sold and full recovery made.
Provision for ECL is made using the credit risk, the probability of default (PD) and the 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 (exposure at default) x PD x PL and are then amended as necessary according to the more subjective measures as noted above.
To reflect the time value of money ECL is discounted back to the reporting date using the effective interest rate of the asset (or an approximation thereof) that was determined at initial recognition.
The following tables provide information on amounts reserved for ECL on loans and loan equivalents as at 31 December 2021 and 31 December 2020 based on the model adopted by management. Loans through platforms were added to the table in 2020 (previously disclosed separately and not included in the below analysis).
|
Sancus loans and loan equivalents at 31 December 2021 |
Stage 1 £'000 |
Stage 2 £'000 |
Stage 3 £'000 |
Total £'000 |
|
|
|
|
|
|
|
Closing loans at 31 December 2020 |
41,972 |
4,047 |
7,213 |
53,232 |
|
New Loans |
27,794 |
- |
- |
27,794 |
|
Loans Repaid |
(17,640) |
(4,578) |
(3,273) |
(25,491) |
|
Transfers from Stage 1 to Stage 2 |
(5,739) |
5,739 |
- |
- |
|
Transfers from Stage 1 to Stage 3 |
(16,247) |
- |
16,247 |
- |
|
Transfers from Stage 2 to Stage 3 |
- |
(368) |
368 |
- |
|
Loans written off |
(80) |
- |
- |
(80) |
|
Movement in ECL |
- |
903 |
(3,113) |
(2,210) |
|
Closing loans at 31 December 2021 |
30,060 |
5,743 |
17,442 |
53,245 |
|
|
|
|
|
|
|
Loss allowance at 31 December 2021 |
Stage 1 £'000 |
Stage 2 £'000 |
Stage 3 £'000 |
Total £'000 |
|
|||
|
|
|
|
|
|
||||
|
Closing loss allowance at 31 December 2020 |
- |
903 |
3,296 |
4,199 |
|
|||
|
Transfers from Stage 2 to Stage 3 |
- |
(37) |
37 |
- |
|
|||
|
(Decrease)/Increase in provision |
- |
- |
3,076 |
3,076 |
|
|||
|
Utilisations |
- |
(866) |
- |
(866) |
|
|||
|
Closing loss allowance at 31 December 2021 |
- |
- |
6,409 |
6,409 |
|
|||
For certain loans the range of outcomes for loss given default considered by the Directors is significant and therefore has a material impact on the calculation of ECL.
|
Sancus loans and loan equivalents at 31 December 2020 |
Stage 1 £'000 |
Stage 2 £'000 |
Stage 3 £'000 |
Total £'000 |
|
|
|
|
|
|
|
Closing loans at 31 December 2019 |
54,188 |
8,849 |
1,195 |
64,232 |
|
Add loans through platforms |
31 |
- |
- |
31 |
|
|
54,219 |
8,849 |
1,195 |
64,263 |
|
New Loans |
19,168 |
- |
- |
19,168 |
|
Loans Repaid |
(25,267) |
(3,582) |
(19) |
(28,868) |
|
Transfers from Stage 1 to Stage 2 |
(380) |
380 |
- |
- |
|
Transfers from Stage 1 to Stage 3 |
(5,768) |
- |
5,768 |
- |
|
Transfers from Stage 2 to Stage 3 |
- |
(1,910) |
1,910 |
- |
|
Movement in ECL |
- |
310 |
(1,641) |
(1,331) |
|
Closing loans at 31 December 2020 |
41,972 |
4,047 |
7,213 |
53,232 |
|
Loss allowance at 31 December 2020 |
Stage 1 £'000 |
Stage 2 £'000 |
Stage 3 £'000 |
Total £'000 |
|
|||
|
|
|
|
|
|
||||
|
Closing loss allowance at 31 December 2019 |
- |
1,213 |
1,655 |
2,868 |
|
|||
|
Transfer from Stage 2 to Stage 3 |
- |
(125) |
125 |
- |
|
|||
|
(Decrease)/Increase in provision |
- |
(185) |
1,516 |
1,331 |
|
|||
|
Closing loss allowance at 31 December 2020 |
- |
903 |
3,296 |
4,199 |
|
|||
Reconciliation of Provision for ECLs to charge in the statement of comprehensive income
|
|
Loans |
Trade Debtors |
Guarantees |
Total |
|
|
|
|
|
|
|
Loss allowance at 31 December 2020 |
4,199 |
2,190 |
1,542 |
7,931 |
|
Charge/(credit) for the year 2021 |
3,076 |
4,865 |
(1,542) |
6,399 |
|
Utilisations |
(866) |
- |
- |
(866) |
|
Loss allowance at 31 December 2021 |
6,409 |
7,055 |
- |
13,464 |
For certain loans the range of outcomes for loss given default considered by the Directors is significant and therefore has a material impact on the calculation of ECL.
(6) Market price risk
The Group has no exposure to market price risk of financial assets valued on a Level 1 basis as disclosed earlier in this note.
(7) Foreign exchange risk
Foreign exchange risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Investments made in currencies other than Sterling are currently valued at £Nil and therefore there is no exposure.
The exchange rates used by the Group to translate foreign currency balances are as follows:
|
Currency |
31 December 2021 |
30 June 2021 |
31 December 2020 |
30 June 2020 |
31 December 2019 |
|
EUR |
1.1898 |
1.1663 |
1.1202 |
1.1039 |
1.1815 |
|
USD |
1.3527 |
1.3830 |
1.3664 |
1.2399 |
1.3259 |
The Treasury Committee 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. The following forward foreign exchange contracts were open at the respective dates:
At 31 December 2021
|
Counterparty |
Settlement date |
Buy Currency |
Buy Amount £'000 |
Sell currency |
Sell amount €'000 |
Unrealised gain £'000 |
|
|
|
|
|
|
|
|
|
|
|
EWealthGlobal Group Limited |
February 2022 to May 2023 |
GBP |
14,769 |
Euro |
16,817 |
623 |
|
|
|
|
|
|
|
|
|
|
|
Liberum Wealth Limited |
February 2022 |
GBP |
1,183 |
Euro |
1,299 |
92 |
|
|
|
|
|
|
|
|
|
|
|
Lumon Risk Management |
April 2022 to May 2023 |
GBP |
5,148 |
Euro |
6,046 |
44 |
|
|
Unrealised gain on forward foreign contracts |
759 |
||||||
At 31 December 2020
|
Counterparty |
Settlement date |
Buy Currency |
Buy Amount £'000 |
Sell currency |
Sell amount €'000 |
Unrealised gain £'000 |
|
|
|
|
|
|
|
|
|
EWealthGlobal Group Limited |
January 2021 to February 2022 |
GBP |
4,121 |
Euro |
4,641 |
(50) |
|
|
|
|
|
|
|
|
|
Liberum Wealth Limited |
January 2021 to December 2021 |
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: £Nil).
23. RELATED PARTY TRANSACTIONS
Transactions with the Directors/Executive Management Team
Non-executive Directors
As at 31 December 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:
|
|
31 December 2021 |
|
31 December 2020 |
|
|
£ |
|
£ |
|
|
|
|
|
|
Steven Smith (Chairman - appointed Chairman 31.8.21) |
50,000 |
|
- |
|
Patrick Firth (Chairman - resigned Chairman 31.8.21) |
- |
|
48,750 |
|
John Whittle |
42,500 |
|
41,438 |
|
Nick Wakefield |
35,000 |
|
34,125 |
Golf Investments Limited ('Golf'), a subsidiary of Somerston, of which Mr Wakefield is a Director, 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 Lending loans. Other than this and the directors' fees and expenses in relation to Mr Wakefield's appointment as a director the Group does not transact with either Golf or Somerston.
Total Directors' fees charged to the Company for the year ended 31 December 2021 were £138,279 (31 December 2020: £124,313) with £Nil (31 December 2020: £Nil) remaining unpaid at the year-end.
Executive Management Team
The Executive Management Team consisted of Rory Mepham (appointed 30 June 2021), Andrew Whelan (resigned 30 June 2021), Emma Stubbs, and Dan Walker (resigned 31 January 2022). The Executive Management Team members' remuneration from the Company, excluding all reasonable expenses incurred in the course of their duties which were reimbursed by the Company, was as detailed in the table below:
|
|
2021 |
2020 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Aggregate remuneration in respect of qualifying service - fixed salary |
598 |
646 |
|
|
|
|
|
Aggregate amounts contributed to Money Purchase pension schemes |
24 |
48 |
|
|
|
|
|
Aggregate bonus paid (cash) |
325 |
210 |
|
|
|
|
See remuneration report for further details. All amounts have been charged to Operating Expenses.
Directors' and Persons Discharging Managerial Responsibilities ("PDMR") shareholdings in the Company
The Directors and PDMRs had the following beneficial interests in the Ordinary Shares of the Company:
|
|
31 December 2021 |
31 December 2020 |
||
|
|
No. of Ordinary Shares Held |
% of Ordinary Shares |
No. of Ordinary Shares Held |
% of Ordinary Shares |
|
|
|
|
|
|
|
John Whittle |
138,052 |
0.03 |
138,052 |
0.03 |
|
Andrew Whelan* |
- |
- |
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 |
*Andrew Whelan resigned 30 June 2021.
During the year and prior year no directors received dividends on their Ordinary Share holdings in the Company.
Mr Walker had an outstanding unsecured loan from Sancus Holdings (UK) Limited in the amount of £31,053 at 31 December 2021 and 31 December 2020. This was waived in January 2022. The loan was interest free and repayable on demand.
From time to time members of key management personnel participate as co-funders in loans originated by the Group.
Transactions with connected entities
The following transactions with connected entities took place during the year:
|
|
|
|
|
|
||
|
|
31 December 2021 £'000 |
31 December 2020 £'000 |
|
|||
|
Receivable from/(payable to) related parties |
|
|
|
|||
|
Sancus (IOM) Holdings Limited |
(16) |
2 |
|
|||
|
Sancus (IOM) Limited |
- |
36 |
|
|||
|
Amberton Limited |
10 |
- |
|
|||
|
Amberton Asset Management Limited |
- |
11 |
|
|||
|
|
|
|
|
|||
|
Office and staff costs recharges |
|
|
|
|||
|
|
|
|
|
|||
|
Amberton Asset Management Limited |
18 |
41 |
|
|||
|
Amberton Limited |
9 |
- |
|
|||
|
Sancus (IOM) Limited |
- |
125 |
|
|||
|
|
|
|
|
|||
There is no ultimate controlling party of the Company. All platform loans and preference shares bear interest at a commercial rate.
24. LEASES
The Group as Lessee
Maturity Analysis - contracted undiscounted cash flows
|
|
31 December 2021 £'000
|
31 December 2020 £'000
|
|
Within one year |
247 |
240 |
|
In the second to fifth years inclusive |
413 |
569 |
|
After five years |
- |
- |
|
|
660 |
809 |
All lease commitments relate to office space.
Lease liabilities included in the statement of financial position
|
|
31 December 2021 £'000
|
31 December 2020 £'000
|
|
Current |
212 |
188 |
|
Non-current |
364 |
469 |
|
|
576 |
657 |
Amounts recognised in the statement of comprehensive income
|
|
2021 £'000
|
2020 £'000 |
|
Depreciation expense on right-of-use assets |
190 |
208 |
|
Interest expense on lease liabilities |
36 |
64 |
|
Expense related to short term leases |
78 |
137 |
|
Income received from sub-leasing right-of-use assets |
60 |
- |
25. COMMITMENTS AND GUARANTEES
The Group's commitments and guarantees are described below.
HIT Facility
Sancus Group has invested £9.5m (2020: £6.3m) of its own capital in Sancus Loans Limited which sits in a £5.8m first loss position as part of the HIT facility. Sancus has also provided HIT with a guarantee, capped at £2m 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, given its position as facility and security agent. Nothing has been provided in the accounts for this (2020: £Nil).
Sancus Loan Notes
SLN7 launched on 10 May 2021 with £16.6m assets. As at 31 December 2021 this had £16.3m assets. Sancus Group Holdings Limited has a 10% first loss position on this loan note.
Unfunded Commitments
As at 31 December 2021 the Group has unfunded commitments of £47.3m (31 December 2020: £28.4m). 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.
26. POST YEAR END EVENTS
On 31 January 2022 the Group sold its 29.32% interest in Sancus (Isle of Man) Holdings Limited for a consideration of £500,000.
27. AVAILABILITY OF REPORT AND ACCOUNTS
The Company's annual report and accounts for the year ended 31 December 2021 is available to download from the Company's website at www.sancus.com . A copy of the report and accounts, together with a notice for the Company's 2021 annual general meeting (the "AGM Notice"), is expected to be posted to shareholders who have elected to receive hard copies in April. The AGM Notice will also be available to download from the Company's website in due course.