Interim Report 2024

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. The person responsible for making this announcement on behalf of the Company is Rory Mepham.

Sancus Lending Group Limited

("Sancus", the "Company" or "Group")

Interim Results for the six month period ended 30 June 2024

17 September 2024

HIGHLIGHTS

Rory Mepham, Chief Executive Officer of Sancus Lending Group Limited, commented:

In the first half of 2024 (H1 2024) the Group has achieved revenues of £7.5m versus £5.4m in H1 2023 despite the headwinds caused by the higher interest rate in our three core markets of the UK, Ireland and Channel Islands which continue to impact housing sales and borrower confidence. The 39% increase in revenue reflects our success in driving increased fee income. Our Assets Under Management increased to £209m versus £202m as at 31 December 2023 and we continue to strive to move from loss to profitability.

Financial Highlights

• New loan facilities written in H1 2024 of £51m (H1 2023: £57m).
• Group revenue H1 2024 of £7.5m (H1 2023: £5.4m).
• A reduction in IFRS 9 provisions in H1 2024 of £0.5m (H1 2023: increase of £0.8m).
• Reduction in Group Borrowing Costs to £1.2m (H1 2023: £1.7m) and a gain on repurchase of ZDPs of c.
  £1.1m (H1 2023: £nil).
• Group operating loss H1 2024 of £1.5m (H1 2023: loss £3.3m).
• Net loss after tax H1 2024 of £0.6m (H1 2023: loss £3.3m).

Strategic and Operating Highlights

• Joint venture with Hawk Lending Limited launched. The joint venture business has now started writing new business.
• Geographic focus remains unchanged, with three core markets UK, Ireland and Offshore. UK represents 36% of the current loan book, Channel Islands 45% and Ireland 19%.
• Continued progress in diversifying our sources of funding and improving funding costs. The £25m Morton Family facility is now live.
• The Group remains focused on maintaining credit discipline.

CHAIRMAN'S STATEMENT

Introduction

The Company has continued to make strategic progress against the current backdrop of economic uncertainty. Whilst the Group reported a loss of £(0.6)m for H1 2024, the loss is materially improved from the loss of £(3.3)m in H1 2023 and has also been helped by the exceptional gain of c. £1.1m on the ZDP shares. The Company remained disciplined in the volume of new loans written in H1 2024 and enters H2 2024 cautiously optimistic about its new business opportunities. The joint venture we announced with Hawk Lending Limited in December 2023 became operational in H1 2024 and the business has now started writing new business. The management team is taking all necessary steps to ensure it becomes a profitable contributor to the Group.

Our People

As detailed in the 2023 Annual Report, Keith Lawrence was appointed as our new Group Chief Financial Officer in March 2024, succeeding Tracy Clarke who had acted as Interim Chief Financial Officer since March 2023. Tracy has now resumed her role as a non-executive director of the Group.

Capital

In April 2024 Somerston, the Group's largest shareholder, subscribed for £5m of preference shares in Sancus Loans Limited, one of our core subsidiaries. Also in April, the Group repurchased 1.4m of its ZDP shares at a cost of £1.5m, resulting in an accounting gain of c. £1.1m.

Dividend and Shareholders

It is the Board's intention to reinvest surplus resources for growth. As such, the Group does not intend to declare a dividend for the period. The dividend policy will be revisited at the appropriate time, should the profitability and cash flow profile support the reinstatement of a dividend.

On behalf of the Board, I would like to thank shareholders for their continuing support and patience and for the efforts of the management and employees.

As I noted in the Chairman's statement in the 2023 annual report, we remain cautious about the continuing challenges ahead. I firmly believe that we have the right strategy, systems and personnel to put the business onto a stronger footing and return to profitability and I look forward to reporting more positive developments in the coming period.

Steve Smith

Chairman

16 September 2024

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

In the first half of 2024 we continued to navigate the negative impacts of a sustained period of higher interest rates on the housing market. Against this backdrop, we remain focused on the steps required to ensure we become a profitable property private credit business in our core markets of the UK, Ireland and Channel Islands.

Revenues in H1 2024 were £7.5m versus £5.4m in H1 2023. This reflects modest growth in our loan book and also increased fee income in the UK in particular.

Loan book origination in H1 2024 was £51m versus £57m written in H1 2023, partly due to continued low market confidence in all of our core markets. As at 30 June 2024 we had Assets Under Management ("AUM") of £209m versus £202m as at 31 December 2023. As we enter the second half of 2024 we are optimistic that market conditions will improve, especially in the UK, allowing us to increase our loan volumes whilst retaining our underwriting discipline.

Our Strategy

We provide an update below against the strategic pillars set out in our 2023 Annual Report:

Focusing on revenue growth

• The Revenue rose 39% to £7.5m compared to £5.4m in H1 2023. This increase reflects fee income growth, especially in the UK and also modest growth in our AUM.

Achieving operating and cost efficiency

• Our reported operating expenses were £2.8m in H1 2024 versus £3.3m in H1 2023. We remain committed to achieving further expense savings and operating efficiency.

Becoming a capital efficient business

• The amount of own capital within loans continues to be maintained at a low level, which at 30 June 2024 represented 0.4% of the total loan book, in comparison to 4.5% at 30 June 2023.
• We continue to make progress in diversifying our sources of fundings. As at 30 June 2024 our Loan Note programme funding was £28m, modestly higher than the balance as at 31 December 2023 of £27m. The £25m Morton Family facility we agreed as part of our joint venture with Hawk Lending Limited is now live and we expect to use this facility during H2 2024. Both the Loan Note programme and the Morton Family facility have interest rates lower than our institutional funding line.
• As at 30 June 2024 £87.75m of our loans were financed by an institutional line arranged by Pollen Street Capital (31 December 2023: £77.75m).

Our AUM, pro-forma for our joint venture with Hawk Lending, increased 3% from £202m as at 31 December 2023 to £209m as at 30 June 2024.

Financial Summary

We have reported an operating loss of £1.5m for H1 2024 versus an operating loss of £3.8m in H1 2023. The loss before tax in H1 2024 was £0.6m versus £3.3m in H1 2023. In addition to the revenue growth outlined above, this reflects:

• Operating expenses being £2.8m in H1 2024 versus £3.3m in H1 2023, reflecting both our continued focus on achieving operating efficiency and the transfer of certain costs, including staff costs, to the joint venture with Hawk Lending and which is reported as a "Share of net loss of joint venture."
• Group borrowing costs of £1.2m in H1 2024 versus £1.7m in H1 2023 following our purchase of 1.4m ZDPs in April 2024. This purchase of ZDPs also resulted in an accounting gain of £1.1m (recorded within "Other net gains").
• £0.5m reduction in expected credit losses (versus a £0.8m charge in H1 2023). Our H1 2023 and full year 2023 results were materially impacted by our need to recognise expected credit losses against historic loans.
• Our share of the loss from our joint venture with Hawk Lending was £262k (H1 2023: £nil), due to the delay between the launch of the joint venture and the start of writing new business. The joint venture is now fully operational and we are focussed on ensuring it becomes a profit contributor to the Group.

ESG

At Sancus, we are committed to taking Environmental, Social and Governance ("ESG") factors seriously. We recognise our responsibility to incorporate sustainability throughout the operations of our business, to be custodians of the environment and to practise good stewardship of our stakeholders' interests.

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Alongside the publication of our 2023 Results we published our second Environmental, Social, and Governance report, marking the start of our journey towards greater transparency and sustainability. The report highlights our progress and achievements in the areas of environmental protection, social responsibility and governance, as well as the challenges and opportunities that we face.

Outlook

We continue to believe there are grounds for optimism and that with our strategic focus and progress the long-term profitable growth potential for our business is clear. Whilst the operating environment was somewhat uncertain for much of H1 2024 we are cautiously optimistic as we enter H2 2024.

Rory Mepham

Chief Executive Officer

16 September 2024

RISKS, UNCERTAINTIES AND RESPONSIBILITY STATEMENT

Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year. These include, but are not limited to, Capital and liquidity risk, Regulatory and compliance risk, Market risk, Credit risk with respect to the loan book (primarily bridging loans and, increasingly, development loans), Operational risk and the execution of Sancus strategy. These risks remain unchanged from the year ended 31 December 2023 and were not expected to change in the 6 months to the end of the 2024 financial year. Further details on these risks and uncertainties can be found in the 2023 Annual Report.

Responsibility statement

The Directors confirm that to the best of their knowledge:

• The Interim Report has been prepared in accordance with the AIM rules of the London Stock Exchange;
• This financial information has been prepared in accordance with IAS 34 as adopted by the UK;
• The interim results include a fair review of the important events during the first half of the financial year and their impact on the financial information as required by DTR 4.2.7R; and
• The interim results include a fair review of the disclosure of related party transactions as required by DTR 4.2.8R.

Approved and signed on behalf of the Board of Directors 16 September 2024

INDEPENDENT REVIEW REPORT ON INTERIM FINANCIAL INFORMATION

Conclusion

We have been engaged by Sancus Lending Group Limited (the 'Company') to review the condensed set of consolidated financial statements in the Interim Report for the six months ended 30 June 2024 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in shareholders' equity, the condensed consolidated statement of cash flows and related Notes 1 to 20.

We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Consolidated Financial Statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2024 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the UK and the AIM Rules of the London Stock Exchange.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2 of the interim condensed consolidated financial statements, the financial statements of the Company are prepared in accordance with IFRSs as adopted by the UK. The condensed set of financial statements included in this half- yearly financial report has been prepared in accordance with the International Accounting Standard 34, "Interim Financial Reporting", as adopted by the UK.

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of directors

The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the AIM Rules of the London Stock Exchange.

In preparing the half-yearly financial report, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Moore Kingston Smith LLP

9 Appold Street,

London,

EC2A 2AP

16 September 2024

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

The accompanying Notes in the "Notes to the Financial Statements" section form an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

The financial statements were approved by the Board of Directors on 16 September 2024 and were signed on its behalf by:

Director: John Whittle

The accompanying Notes in the "Notes to the Financial Statements" section form an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

The accompanying Notes in the "Notes to the Financial Statements" section form an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

£3.5m of the £6.0m cash held at 30 June 2024 is for the exclusive use of Sancus Loans Limited (30 June 2023: £2.2m of the £4.3m).

The accompanying Notes in the "Notes to the Financial Statements" section form an integral part of these financial statements.

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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Sancus Lending Group Limited (the "Company"), together with its subsidiaries, (the "Group") was incorporated, and domiciled in Guernsey, Channel Islands, as a company limited by shares and with limited liability, on 9 June 2005 in accordance with The Companies (Guernsey) Law, 1994 (since superseded by The Companies (Guernsey) Law, 2008). Until 25 March 2015, the Company was an Authorised Closed-ended Investment Scheme and was subject to the Authorised Closed-ended Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission ("GFSC"). On 25 March 2015, the Company was registered with the GFSC as a Non-Regulated Financial Services Business ("NRFSB"), at which point the Company's authorised fund status was revoked. The Company's Ordinary Shares were admitted to trading on the AIM market of the London Stock Exchange on 5 August 2005 and its issued zero dividend preference shares were listed and traded on the Standard listing Segment of the main market of the London Stock Exchange with effect from 5 October 2015. The Company changed where its business is managed and controlled, from Guernsey to Jersey, effective 1 April 2023. The Board agreed that the Company should revoke its NRFSB status, which was completed on 23 June 2023.

The Company does not have a fixed life and the Company's Memorandum and Articles of Incorporation (the "Articles") do not contain any trigger events for a voluntary liquidation of the Company. The Company is an operating company for the purpose of the AIM rules. The Executive Team is responsible for the management of the Company.

The Company has taken advantage of the exemption conferred by the Companies (Guernsey) Law, 2008, Section 244, not to prepare company only financial statements which is consistent with the 2023 Annual Report.

2. ACCOUNTING POLICIES

1. Basis of preparation

These condensed consolidated financial statements ("financial statements") have been prepared in accordance with International Financial Reporting Standard (IAS) 34 'Interim Financial Reporting', as adopted by the United Kingdom and all applicable requirements of Guernsey Company Law. They do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the Company's annual audited financial statements for the year ended 31 December 2023, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the United Kingdom.

The Group does not operate in an industry where significant or cyclical variations, as a result of seasonal activity, are experienced during any particular financial period.

These financial statements were authorised for issue by the Company Directors on 16 September 2024.

1. Principal accounting policies

The same accounting policies and methods of computation are followed in these financial statements as in the last annual financial statements for the year ended 31 December 2023.

1. Going concern

The Directors have considered the going concern basis in the preparation of the financial statements as supported by the Director's assessment of the Company's and Group's ability to pay its liabilities as they fall due and have assessed the current position and the principal risks facing the business with a view to assessing the prospects of the Company. The Directors have prepared a cash flow forecast for the period to 30 September 2025 which shows that the Company and the Group will have sufficient cash resources to meet their ongoing liabilities as they fall due for at least twelve months from the date of approval of these financial statements. Following the extension of the ZDPs at the end of 2022, for a further 5 years to 5 December 2027 and with the Bonds maturity date not until 31 December 2025, the Company does not have any debt liabilities that fall due within the next 12 months.  Based on this, along with the issuance of preference shares by a subsidiary of the Group in April 2024, the Directors are of the opinion that the Company and Group has adequate financial resources to continue in operation and meet its liabilities as they fall due for the foreseeable future.

It is however expected, whereby equity is required to facilitate an increase in drawdown from institutional funding lines that the Company will require growth capital to fund the continued growth of the loan book. The Company's largest shareholder, Somerston, has indicated their willingness to support the Company's growth plans. The Company will be looking at options available to raise additional growth capital over the course of the year, which may include a form of equity raise or sale by the Company of ZDP shares held in treasury.

The Directors therefore believe it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

1. Critical accounting estimates and judgements in applying accounting policies