According to its latest results, the group reported £6.4m of operating losses relating to credit losses under IFRS9, and there was growth in operating expenses from £5.6m in 2020 to £6.2m in 2021, which reflected investment in sales and credit teams.
The loan book at year-end stood at £142m, which is down from £171m in 2020, which is due to offshore loan repayments and knock-on effect of Covid-19 on loan closures. There were £3m worth of impairments due to a review of its loan book last year.
The loan book comprises £96m in offshore markets, £29m in the UK and £17m in Ireland.
New facilities in UK and Ireland rose to £69m, a 76 per cent increase on 2021.
The group said it had seen an improvement in the quality of its loan book as the worst effects of the pandemic had reduced, but it had made £3.4m provision for the second half of the year which “draws a line under recent losses”.
Origination, loan management, funding and finance and operations
The lender said the four key pillars for its success were origination, loan management, funding and finance and operations.
On the origination side, it increased total business development heads from 8.5 to 15 over the past 15 months, and in the UK specifically it had risen from two to eight in the same period.
The report said new loan facilities written during the year had come to £80m, which is up from £50m in 2020.
Loan deployments are expected to grow from £69m at the end of 2020 to £76m in 2022, with strong growth expected in UK and Ireland, as well as its offshore business.
It added that it would put “greater emphasis on diversifying and growing [its] origination channels” to more brokers and introducers as well as using a wider range of marketing tools. It added that it had established a working group to evaluate how technology could support origination growth.
The group said its loan management priorities include maintaining high quality credit processes, standardising the loan execution process and putting more emphasis on managing loans once initial drawdown has been made as well as taking a “proactive approach” to delinquent or defaulted loans. It added it would make more investments in recruiting its loan management team.
Sancus said it wanted to grow the funding capacity of the business and work with a “diversified mix of funders”. Currently its four sources of funding are co-funders which make up the largest channel, its loan note program, institutional funders and proprietary capital.
During 2021, the loan book funded by institutional funding increased by 22 per cent with most of the UK and Irish loan book coming from this avenue.
It said it wanted to grow this channel as well as its loan notes.
On the finance and operations side, it said its own proprietary loan management systems would be further developed this year and there would be continued focus on improving corporate governance, compliance and risk.
Outlook and plan for future
Rory Mepham (pictured), chief executive of Sancus Lending, said since his appointment in June last year he had prioritised the turnaround of the group’s financial performance.
He added that 2021 was a “transitional period” for the company as it “rebranded, strengthened the management team, invested in technology and expanded [its] presence in the UK and Ireland”.
He said: “Our plan is to return the group to profitability by growing the group’s 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 UK and Ireland together with rebuilding its loan book in the offshore markets of Jersey, Guernsey and Gibraltar.”
The report added that investment in assembling its team, having the right structure, implementing effective institutional management systems and technology would continue.
Mepham said: “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.”
Mepham added: “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.”
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