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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