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GLI Finance(GLIF) Fundamentals

The Investor Betting Big on Alternative Finance

2015 Fourth Interim Dividend

Proposed fundraising and notice of Extraordinary General Meeting

Confirmation of permanent CEO, Strategic Review and NAV Update

Completion of GLIAF share sale

New Credit Facility

The Board of Directors is pleased to confirm, as announced on 16 February 2016, that it has repaid the existing £30m Sancus loan facility and has entered into a new loan for £14.86m with a term of 1 year at a reduced interest rate of 8.75% (previously 11%). It is the intention of the Directors to refinance this new loan prior to maturity.

GLI Investee Recommended for Designation for the Bank Referral Scheme

The Board of Directors has welcomed the announcement that Funding Options, an investee of GLI, has been recommended by the British Business Bank to go forward for designation by HM Treasury for the Bank Referral Scheme.

Announced within HM Treasury Budget 2016, businesses that are rejected for finance by high-street banks will be able to access new options, with the Budget announcing that Funding Options will be designated as one of only three finance platforms to help match borrowers and alternative lenders.

2016 First Interim Dividend

Further investment in Platform Black

The board of GLI Finance announces that on 10 March 2016, the Company subscribed for 5,000,000 new preference shares at par in its 84% owned subsidiary, Platform Black Limited, for an aggregate subscription price of £5,000,000. To date £4,000,000 preference shares have been issued. The preference shares carry a 9% coupon payable quarterly and are non-voting with a five-year maturity.

Platform Black, an online business finance marketplace for UK SMEs, plans to use the additional funds from its parent company to strengthen its balance sheet and position the business for further growth.

Proposed acquisition of interests & notice of EGM

Completion of Share Sale

The Company is pleased to announce that, following the receipt of regulatory approval, the sale by the Company of 50% of its stake in Amberton Asset Management Limited (formerly GLI Asset Management Limited) completed yesterday. The sale to Golf Investments Limited, a subsidiary of the Somerston Group, was previously outlined in the Company's announcement dated 21 December 2015.

GLI and Somerston look forward to creating a successful partnership, which will seek to develop the Amberton brand and assist the growth of GLI Alternative Finance plc, a closed end fund in which the Company and Somerston hold interests of 47.99% and 27.96% of the issued share capital respectively.

Link copied.. GLI Finance set for rapid payback from corporate moves

Platform Black

The Board announces that, on 29 July 2016, Sancus BMS Group Limited ("Sancus BMS", a wholly owned subsidiary of the Company) acquired a further 24,888 ordinary shares, representing 10.72% of the issued ordinary share capital of Platform Black Limited ("Platform Black"), taking its holding to 94.65% at a £3.5m valuation. The ordinary shares were acquired from certain original minority ordinary shareholders in Platform Black.

Immediately following this transaction, Sancus BMS entered into an agreement with a consortium of high net worth private investors ("Minority Investor Group") whereby the Minority Investor Group will:

· Buy 23,209 ordinary shares representing 10% of Platform Black's issued ordinary capital for consideration of £350,000 settled in cash, taking the Sancus BMS holding back to 84.65%.

· Buy 200,000 Platform Black Preference shares (out of 4.1 million in issue) for consideration of £200,000 settled in cash.

· Provide lending capacity to Platform Black of up to £50m to expand the funder base operating through the platform.

· Have the option, on or before 29 July 2021, to acquire for cash a further 20% of Platform Black's ordinary share capital from Sancus BMS at a £5m valuation.

· Have the right to appoint three Non-Executive Directors to the board of Platform Black.

Following the above transactions, Sancus BMS remains interested in 84.65% of Platform Black's issued ordinary share capital. Platform Black will have an expanded funder base and be better positioned to maximise its potential from being rebranded to Sancus Finance with effect from 1 January 2017.

Platform Black recorded turnover and a post-tax loss of £0.4m and £1.6 respectively in the year ended 30 June 2015. Platform Black's net liabilities at 30 June 2015 were £0.5m. Platform Black became a subsidiary of Sancus BMS on 30 June 2016.

Completion of asset disposals


The Board of GLI announces that, on 30th September 2016, the Company conducted a series of transactions with The SME Loan Fund ("SMEF"). The transactions will see GLI dispose a number of assets to SMEF including existing holdings in the loan note of a pharmaceutical company, a solar energy construction loan and stakes in two BMS Finance structures. As part of the deal, GLI will acquire from SMEF $800,000 of Senior Preferred Stock in the share capital of The Credit Junction. The net effect of the transactions is a cash transfer to GLI Finance of £1,553,745.13, which will be used for general corporate purposes. This is in accordance with GLI's stated strategy of lending "to" the platforms and not "through" the platforms and this transaction assists in removing the few remaining loans that we have on our balance sheet lent "through" the platforms.

Publication of Net Asset Value

Somerston Group Limited Below 25% to above 25% at direct level.

Golf Investments Limited Below 15% to above 15% at direct level.

4th Interim Dividend declaration

Trading Update

GLI Finance Limited, a leading investor in the alternative finance sector, is pleased to provide an update on its trading for the financial year ended 31 December 2016, ahead of the announcement of its audited annual results to be published on 27 March 2017.

Financial information quoted below is subject to the completion of the 2016 audit.

Completion of the Strategic Review

The strategic review that commenced at the beginning of 2016 has been completed, delivering the following outcomes:

· we have simplified the business into two business units, namely Sancus BMS and FinTech Ventures;
· Sancus BMS has brought together the alternative lenders operated by the Group, being Sancus, BMS Finance and Sancus Finance;
· we have completed our review of the goodwill arising on the acquisition of operating subsidiaries and of the valuations of platform investments;
· funding at a Group level has been improved with the repayment of the maturing syndicated loan today. This repayment reduced the Group debt balance to £32.0m with a weighted average cost of 6.0% (7.6% in 2016). The Group's next debt maturity is not until 5 December 2019 when the Group's zero dividend preference shares mature; and
· conflicts of interests have significantly reduced.

Group Structure

In our half year report we introduced our "3 Pillar" structure. Since the half year, with the sale of the Group's shares in The SME Loan Fund plc ("SMEF") and the changed role of Amberton Asset Management Limited ("AAM") (both announced on 8 March 2017), we consider that a structure of 2 pillars or business units is a more efficient way of managing the Group and is more readily understood by investors.

From a Group perspective, AAM's primary focus has become the raising of funding for Sancus BMS's lending operations, through securitization vehicles. AAM is therefore included in Pillar 1.

In summary:

Pillar 1, Sancus BMS is a profitable cash generative business with the potential to earn a high return on equity.

Pillar 2, FinTech Ventures, comprises the Group's portfolio of investments in innovative FinTech lending platforms (now numbering 12) from which the Group expects future capital profits on sale. These investments also include Funding Knight, a subsidiary since mid-year, the results of which are therefore consolidated.

Sale of Investment in SMEF

At year end, the Group's investment in SMEF of 25.3m shares (comprising 47.99%% of the fund) was valued at £23.6m at a mid-price of 93.5p. On 8 March 2017, the Group announced that it had sold this investment for £22.7m and that the proceeds were used to repay the Syndicated Loan (£14.9m) (due 15 March 2017), to purchase £5.3m of performing loans from SMEF which no longer fit their revised investment strategy and to invest the remaining balance in Sancus BMS.

This will further simplify the Pillar 1 balance sheet, and provide an overall improvement in annualised profit.

Group results for the year ended 31 December 2016

The key features of our financial results for the year have been:

· continued growth in the profitability of Sancus BMS;
· the consolidation of the operating losses, for the first time, of Sancus Finance (formerly Platform Black) and Funding Knight;
· in the second half of the year, negative fair value adjustments to the goodwill of two subsidiaries, Sancus Finance and Platform Black (of £4.1m) and an insignificant net fair value adjustment to FinTech Ventures' platforms; and
· achieving the £1m recurring expense savings target.

Performance of Sancus BMS

The pre-tax profit target for 2016 of approximately £2.5m as stated in our RNS dated 30 June 2016 was exceeded, excluding the consolidated loss of Sancus Finance.

Combined loan book growth for the year was a creditable 33%, reaching £151m for the first time. We continue to attract institutional and high net worth co-funders who support loan origination through our syndicated process. A key part of the Sancus BMS strategy is to continue expanding our quality co-funder client base, as this is an important factor underpinning loan book growth.

Platform Black was rebranded Sancus Finance in January 2017 and is trading in line with management's expectations, albeit the company, as it continues its development, lost approximately £1.5m in 2016. The business has been put through a strategic overhaul and is now positioned to break even on a monthly basis by the end of 2017.

Performance of FinTech Ventures

In the first half of 2016, the number of platforms in the Pillar 2 portfolio was reduced and write downs of £7.5m were recognised. In the second half relatively small valuation adjustments were made amounting to £1m, which, after a gain on foreign currency translation, resulted in a small net unrealised gain. These figures remain subject to the completion of our annual audit process.

It has been pleasing to note the additional third party funding which a number of platforms have been able to attract this year. This demonstrates growing confidence in their business models and has contributed to increases in their loan books. Two platforms have now reached break-even point. The aggregate loan books of the platforms grew by 94% to reach £141m. Platform management teams remain positive about the future.

Funding Knight is also in the process of a strategic review to position it for future profitability. An operating loss of approximately £0.5m has been recognised in the period since Funding Knight became a subsidiary.

Group costs

As noted above, our recurring cost savings target of approximately £1m was achieved in 2016, bringing the expected annual costs of running the GLI parent company to approximately £1.5m.

Non-recurring costs of £1.9m (including legal, professional and other project related costs) were expended as part of executing the restructure of the Group.

Confirmation of the new Dividend Policy

The Group will be paying its next interim dividend of 0.625p for the fourth quarter of 2016 on 21 April 2017.

The Board announced the Group's new dividend policy in its strategic update in August 2016. This recognises the need to balance dividend payments in the short term with the opportunities to grow the business for shareholders in the longer term. As such the Group's policy is to make dividend payments which are consistent with prudent capital and liquidity management, covered by cash earnings or realised profits on the sale of investments. Any dividend will be affordable.

GLI is committed to a providing a stable progressive platform for future growth.

In future, dividend payments will be made half yearly, September (interim dividend) and March (final dividend), with a weighting in payment of approximately one third/two thirds.

Conflicts of Interests

Potential conflicts of interest have been reduced in the second half as follows:

· the purchase of 14% of the shares in Sancus IOM Holdings Limited from directors of Sancus BMS Group, announced on 6 February 2017; and
· the sale of the Group's investment in SMEF (see above) has reduced any perceived conflict between SMEF, GLI and AAM (in which GLI is a 50% shareholder) as sub-advisor of this fund.

Outlook for 2017

The critically important strategic changes we undertook in 2016 are behind us. We have created a solid platform from which we can grow financial performance.

Sancus BMS expects loan demand to continue to be strong on attractive terms. An expanding and loyal institutional and high net worth co-funder base, together with a series of asset backed notes to be arranged by AAM during the year, will contribute to the funding of this growth.

We expect the majority of platforms within FinTech Ventures to accelerate their growth trajectories in 2017 and look forward to seeing significant developments this year.

Investment in second securitised loan note SPV



GLI announces that Sancus BMS Group Limited ("Sancus"), a wholly owned subsidiary of GLI, has subscribed for £3 million of redeemable preference shares in a newly established special purpose vehicle (the "SPV"), which was satisfied by the transfer of cash to the SPV.

The SPV has simultaneously raised a further £11.45 million through the issue of senior notes to external investors, closing its fund raising on 31 March 2017. The senior notes were admitted to the Official List of The International Stock Exchange (formerly the Channel Islands Securities Exchange) on 13 April 2017.The funds in the SPV will be used to make loans which will be arranged by Sancus and its subsidiaries.

Over the two year life of the SPV, Sancus's return is expected to be materially comparable to that which it currently earns on its lending business.

The SPV's loan portfolio will be managed by Amberton Asset Management Limited.



Commenting on the investment, Andy Whelan, the Chief Executive of GLI and Sancus said:



The establishment of this series of loan note SPVs is an important part of our funding strategy to expand the lending operations of Sancus. We were pleased to see the continuing interest from the market to participate in this second SPV, and through this mechanism, in the loans arranged by Sancus.

The Board of GLI are pleased to announce the signing of a new funding facility with Honeycomb Investment Trust plc ("HIT"). The funding line has a term of 3 years and comprises a £50 million accordion and revolving credit facility, of which £20 million will be drawn and deployed immediately. The facility will be used to expand further the activities of Sancus, the Company's property backed lending business.

Andy Whelan, CEO of GLI said:

"I am delighted that HIT have provided a substantial funding line to the Company. This will facilitate further expansion of our successful property-backed lending facilities through the Sancus Group of companies. Establishing such a facility has been one of our key stated objectives and is additional testament to the strength of the Sancus offering and our rigorous credit management. "

Howard Garland, Partner of Pollen Street Capital, the investment manager of Honeycomb Investment Trust plc said


What surprises me most about this is Pollen are commercial astute (recently bought Shawbrook). Apparently they target a 10% return. I'm surprised with regard to the size of the loan.

I don't understand GLI and it's web of interconnected transactions so staying clear.

Final Results for the Year Ended 31 December 2017

HIGHLIGHTS

Group Highlights

· Improvement in operating profit to £0.1m from a loss of £2.8m in 2016 reflecting strong revenue growth in Sancus BMS, reduced interest costs and operational cost savings.

· Group revenue of £11.6m decreased by 3% from £12.0m in 2016.

· Adjusting for the sale of the SQN Secured Income Fund shares ("SSIF")*, revenue increased 18%.

· Stabilisation of the FinTech Ventures portfolio following the write downs in the first six months.

· Group NAV is £74.8m (2016: £90.7m).

· Sale of the Group's equity holding in SSIF for £22.7m and subsequent repayment of the Group's syndicated loan of £11.9m.

· In accordance with the Group's stated policy of paying dividends out of net cash generation, no dividend will be declared for the period. The Group remains committed to reconvene dividends as soon as practicable.

Sancus BMS Highlights

· Revenue growth of 11.4% excluding SSIF dividends.

· Net operating profit up 26% to £1.6m following revenue growth and a reduction in debt costs.

· 26% growth in managed loan book to £218m with a default rate of under 0.5% reflecting strong underwriting controls.

· A special purpose lending vehicle established post year end with a £50m lending capacity, backed by a £45m credit facility with Honeycomb Investment Trust plc ("HIT").

· Improved performance by Sancus Finance and Sancus Funding** ("Sancus UK") with operating loss reduced by £0.8m to £1.5m with targeted break-even by the end of 2018. Sancus Funding now fully FCA authorised.

FinTech Ventures Highlights

· FinTech Ventures portfolio stabilised in the second half of the year following the £12.6m write down taken in the first half and a £1.7m foreign exchange loss for the year.

· The carrying value of FinTech Ventures portfolio reduced to £29.6m from £36.1m at 31 December 2016.

· NAV for FinTech Ventures portfolio 10.0 pence (31 December 2016:13.3 pence).

· Portfolio companies moving toward break-even with the majority forecast to achieve break-even during 2018.

· Further investment made of £1.5m in five platform companies primarily in the form of convertible loan notes during the year.

· Several of the platforms are expected to successfully raise further equity during 2018 to fund future growth.

Andy Whelan, CEO commented:

"The year saw a lot of change as I continued the work I started on my appointment in December 2015. Two years into my role I can see real progress.

Sancus BMS is the key operating unit within the Group and is starting to deliver on its potential. The businesses that comprise Sancus BMS are good businesses, well run, with the ability to deliver healthy returns. We are delighted to have secured the credit facility from HIT which was announced in January 2018 which will help drive further growth.

We have taken some tough decisions on the FinTech Ventures portfolio and made substantial write-downs in the first half of the year. I am delighted that no further net write-down was required at the end of the year. With most of the restructuring that is required now complete we will seek to maximise the value of the portfolio going forward"

*On the 27 April 2017 The SME Loan Fund ("SMEF") was renamed to the SQN Secured Income Fund ("SSIF").

** Funding Knight changed its name to Sancus Funding on 16 January 2018.

Interim results for the six months to 30 June 2018

HIGHLIGHTS



Group Highlights

· Group revenue increased by 26% to £7.2m (June 2017: £5.7m).

· Significant improvement in net operating profit to £1.1m (2017: loss of £0.5m) driven by strong revenue growth and continuing cost discipline.

· FinTech Ventures portfolio valued at £23.9m, (Dec 2017: £29.6m) following revaluation.

· Group Net Asset Value ("NAV") is £64.1m (Dec 2017: £74.8m).

· In accordance with the Group's stated policy of paying dividends out of net cash generation, no dividend will be declared for the period. The Group remains committed to recommence dividends as soon as practical.

· Post period end, £7m of cash received from the sale of BMS Irish assets which can be deployed within the Group and be used to acquire more ZDPs.

Sancus BMS Highlights

· Strong performance by the Sancus businesses.

· Revenue growth of 42%, excluding The SQN Secured Income Fund ("SSIF") dividends.

· Net operating profit up 193% to £1.9m (June 2017: £0.7m).

· 12% growth in managed loan book to £246m with actual loss rate of under 0.5% reflecting strong underwriting controls.

· The special purpose lending vehicle established in January 2018 with a £50m lending capacity, backed by a £45m credit facility with Honeycomb Investment Trust plc ("HIT") is proving a success. £22.9m had been drawn as at 30 June 2018.

· Improved performance by Sancus Finance and Sancus Funding (together to be referred to as "Sancus UK") with operating loss reduced by £0.3m to £0.5m. Sancus Finance performance was behind forecasts for the first half of the year but targeted break-even by the end of 2018. The regulated business will commence property backed lending before the end of the year.

· With Sancus Finance having performed below target for the period and being integrated with Sancus Funding into one Sancus UK business, goodwill of £2.1m relating to Sancus Finance has been written off.

FinTech Ventures Highlights

· The carrying value of FinTech Ventures portfolio is £23.9m (£29.6m at 31 December 2017).

· NAV per share for FinTech Ventures portfolio 8.6 pence (31 December 2017:10.0 pence).

· The write down in the period of £8.3m includes a £4.1m write down in one of our prioritised platforms. The platform is close to finalising a significant investment from third parties which will result in a painful dilution of our holding. Whilst clearly disappointing to take a large write down, this new investment will help to ensure and accelerate the long-term prospects of the platform.

· 29% increase in loan origination across the portfolio companies compared to prior year.

· Three platforms have successfully raised new equity from third parties during the period. Several of the others are looking to raise equity over the next twelve months and we have conservatively approached the valuation of those platforms with this in mind.

· Further investment of £2.2m made in four platform companies during the period, primarily in the form of convertible loan notes.

Andy Whelan, Chief Executive Officer commented:

"The Group has seen good progress during the first half of 2018, improving revenue, successfully securing a new funding line and reducing costs across the business.
We are pleased that Sancus BMS, the key operating unit within the Group, has delivered some strong results during the six-month period. The lending businesses that comprise Sancus BMS are strong, well managed, and have the ability to deliver a very attractive return on capital. We were delighted to have secured the £45m credit facility from HIT announced in January 2018 and this has helped us significantly grow the loan book. The new management team in the UK is making excellent progress in integrating the businesses, and delivering synergies. Whilst Sancus Finance's loan book has grown materially since last year, it has fallen short of where we had hoped it would be at this time.

We are very disappointed to have had to take a further material write down on the FinTech Ventures portfolio. Whilst FinTech as a sector continues to grow strongly, increased competition is making it increasingly difficult for smaller players, particularly those that are loss making, to raise further equity. Given the plethora of investment opportunities, investors are often able to negotiate favourable terms. With competing demands for our capital, we often haven't been able to follow our money, and this has resulted in situations where we have been significantly diluted. Several of our platforms are looking to raise equity over the next twelve months, and given our conservative approach to valuations, we believe there is upside potential if these raises are successful."

This announcement contains inside information for the purposes of EU Regulation 596/2014.