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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.

Liberum Capital Buy 8.50 16.30 17.20 Upgrades