GLI Finance Limited

("the Group" or "GLI")

Unaudited Interim Results for the Six month period ended 30 June 2017

 

 

Group Operational and Financial Highlights

 

Operational

·      Continued simplification of the Group structure into two business units, Sancus BMS and FinTech Ventures:

o  Sancus BMS comprises the Group's property backed and SME lending business.

o  FinTech Ventures comprises the Group's investments in eleven SME focused lending platforms.

·      This structure provides clarity, and enables the management team to focus on growing Sancus BMS and maximise the value of the FinTech Venture investments.

 

Financial

·      Proforma* Group revenue grown 11% to £5.6m (2016: £5.1m). On a statutory basis Group revenue was 4% down.

·      Proforma Group net operating loss reduced by 83% to £0.5m (2016: £2.9m loss) reflecting reduced interest costs and achieved administrative savings. On a statutory basis Group net operating loss was £0.5m (2016: £1.7m loss).

·      Further write downs in FinTech Ventures investments of £12.6m following detailed review, plus a £1m FX movement.

·      Sale of the Group's equity holding in the SQN Secured Income Fund ("SSIF")** for £22.7m and repayment of the Syndicated loan of £11.9m.

·      In line with the Group's stated policy of paying dividends out of net cash generation, no dividend will be declared for the period.

 

Sancus BMS              

·      Funding Knight obtained full FCA authorisation after the end of the period and has been transferred into Sancus BMS.

·      Strong performance of managed loan book with growth of 46% over the last twelve months to £184.0m, with default rate at less than 0.5%.

·      Sancus BMS proforma revenue up 10% from June 2016 with the expansion into the UK and Irish markets to drive further growth.

·      Fall in statutory operating profits due to changes in the reporting structure from prior period which included the earnings from SSIF and the BMS Sarls which are no longer consolidated**.

·      Management focus on growing the Sancus BMS business.

 

FinTech Ventures               

·      Thorough review of investments leading to write downs of £12.6m.

·      FinTech Ventures investment reduced to £28.9m from £36.1m at December 2016 due to write downs in two platforms and concerns over the collectability of some platform loans.

·      NAV per share for FinTech Ventures 10.04p (December 2016:13.38p).

·      Of the 11 platforms in FinTech Ventures, five are expected to reach break-even on a monthly basis by end of 2017.

·      Management focus on maximising value for shareholders and monitoring the progress being made by platforms in meeting their strategic objectives.

 

 

Andy Whelan, CEO said

 

The first six months of this year have seen a continuation of the work I started on my appointment in December 2015. The business has been greatly simplified, tough decisions made, and we consider the investments in our FinTech portfolio now offer potential for capital gain from the values at which they are currently being held. With most of the restructuring now complete the management team's focus is on executing the plan to grow Sancus BMS, and to maximise the value of the FinTech Investments.

 

In line with the Group's dividend policy we will not be declaring a dividend for this period. The Board are aware of the importance of paying a sustainable and growing dividend and look forward to being in a position to resume the payment of dividends when the Group's cash-generation permits.

  

I am confident in the prospects for the Sancus BMS businesses - these are good businesses, well run, with strong potential. Our recent expansion of the product offering in Ireland and the UK will lead to further growth. Additional funding lines will further enhance growth. The write down in the FinTech Ventures portfolio relates to two loans where collectability is considered a potential issue and the investment in two underperforming platforms. In all cases, we believe we have taken a prudent view. The investments in the platforms which form the FinTech Ventures portfolio are being actively managed to maximise value for shareholders.

 

As always, I am grateful to my colleagues for their support and hard work through what has been a turbulent 18 months, and to shareholders for their patience. The business is increasingly fit for growth and I look forward to the future with ever increasing confidence.

 

*June 2016 proforma is included to provide a like for like comparison. This proforma excludes net earnings of £1.1m from entities which are no longer consolidated in the June 2017 figures (SSIF, BMS Sarl, Raiseworks and Finpoint) but includes net losses of £0.1m from Sancus Gibraltar and Funding Knight combined which were not previously consolidated in 30 June 2016.

 

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

For further information:

 

GLI Finance Limited	+44 (0)1534 708900
Andy Whelan
Nominated Adviser and Broker
Liberum Capital Limited	+44 (0)207 100 2000
Steve Pearce
Chris Clarke
Jonathan Wilkes-Green
Public Relations Adviser
Instinctif Partners	+44 (0)207 457 2020
Tim Linacre
Ambrose Fullalove

 

Inside information

 

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation.

 

 

CHAIRMAN'S STATEMENT

For the period ended 30 June 2017

 

Overview

 

I am pleased to present the results of GLI Finance Limited ("GLI" or the "Group") for the six-months ended 30 June 2017.

 

As our CEO sets out in his review, the structure of the Group has been simplified and now has two business units being Sancus BMS, a business focused on property-backed lending and other lending to SMEs, and FinTech Ventures, a portfolio of minority investments in lending platforms. Each have their own distinct opportunities and challenges.

 

Sancus BMS Group continues to deliver strong growth, particularly in loan advances.  Revenue and profitability have also increased but margins are lower due to the impact of the launch of the Sancus Loan Notes ("SLNs") and the increased costs primarily from the expansion in the UK and Ireland.  We expect margins to improve in the second half and beyond. The carrying value of the FinTech Ventures portfolio has unfortunately been adversely impacted by some material write downs on some of the legacy loans and investments.

 

Outlook

 

We expect the economies in which we operate to remain supportive of our businesses for the foreseeable future.  The alternative finance sector continues to develop rapidly and we believe we are well positioned to benefit from this trend across both parts of our business.

 

Sancus BMS Group continues to grow and we have a solid profitable business with a strong pipeline and some exciting growth plans. With regard to the FinTech Ventures portfolio, several of our platforms are performing strongly and we remain confident of achieving a good return on our investment as transactions materialise in due course. Across the eleven platforms we are invested in, five of them are expected to reach break-even on a month to month basis by the end of 2017. 

 

Shareholders

 

I would like to express my appreciation to all our shareholders who have kept confidence with the Group through what has been a difficult period, particularly in light of the significant decline in the share price. We believe that the share price is trading well below the value inherent within the business and we look forward to the share price reflecting this in future.  In line with the new dividend policy, it is not proposed to declare a dividend for the first six months of 2017.

 

 

 

Patrick Firth

Chairman

Date: 25 September 2017

 

 

CHIEF EXECUTIVE OFFICER'S REVIEW

For the period ended 30 June 2017

 

Overview

The strategic review conducted last year and subsequent restructuring of the Group into two business units - Sancus BMS and FinTech Ventures - has put GLI Finance into a strong position to benefit from the continued growth of the alternative finance sector. 

The core units within Sancus BMS continue to grow strongly with loan advances increasing 46% year on year.  On a like for like basis, year on year revenue within the Sancus BMS Group has increased by 10%. The percentage revenue growth is not proportional to the loan advances due to the introduction of the SLNs, the irregular nature of loan earn outs and the BMS administration fee being fixed. 

The SLNs comprise a planned series of Special Purpose Vehicles ("SPVs") designed as securitisation vehicles to help offset capital constraints and enable additional co-funder participation in loan opportunities, whilst being attractive to new clients that wanted to invest in an independently managed (by Amberton Asset Management) listed product rather than via direct participation.  The initial SLNs included direct Sancus BMS investment and create a lag on the revenue being earned by Sancus on this capital.  The return from the SLNs is therefore expected to increase in the second half and future SPVs are not expected to require the same level of capital outlay. Sancus BMS earn outs are loan specific and whilst expected to increase overall, higher earn out fees were obtained in the first six months of 2016, compared to 2017.

Our strong underwriting criteria and procedures continue to deliver very impressive default rates with losses being maintained at less than 0.5% across the Sancus BMS portfolio. Funding Knight transferred into Sancus BMS from FinTech Ventures during the period as it is 100% owned by the Group.  With the full FCA authorisation having been obtained in July 2017, Funding Knight and Sancus Finance are increasingly being managed as one business and we are making good progress on the repositioning of Sancus Finance and Funding Knight.  Management remain very focused on the performance of these entities and expect the changes already implemented to deliver improved results over the coming period. 

 

The majority of the platforms within our FinTech Ventures portfolio continue to grow strongly and their aggregate loan book has increased year on year by an impressive 84%. Five out of the eleven platforms are expected to reach break-even on a month to month basis by the end of 2017 and several have secured further institutional funding.  We continue to improve the level of monitoring and influence over the platforms in which we hold investments in order to protect our interests and ensure we are well positioned for the expected upside in due course. During the first half of the year we have had to take a write down of £0.8m on one of our legacy loans and provide £2.8m against a platform loan. This has primarily arisen as a result of concerns regarding the recoverability of these loans. In addition we have made two equity write downs. One of our platforms is in the process of looking to raise further equity capital. Based on the latest position regarding this equity raise, we believe it is prudent to reduce our holding value of this investment by £6.1m. The second equity write down of £2.5m relates to a platform which is currently performing below the forecasts previously used to value the business.

 

The movement in FX rates since 31 December 2016 has resulted in a £1.0m reduction in the fair value of our investments, primarily arising from the devaluation of USD versus GBP.  Further investments, in the form of convertible loan notes, have been made into Open Energy Group and UK Bond Network during the period, to continue to support their growth plans.

 

Long-term strategy and business objectives

 

As highlighted in the table overleaf, we have made excellent progress in delivering against the objectives we agreed as a Board towards the end of last year. 

 

Sancus BMS continues to grow strongly and I'm delighted that our strong underwriting criteria continues to deliver exceptionally low loss rates.  The coordination across the executive and senior management team, complemented with strong new business development expertise is delivering a healthy flow and pipeline of lending opportunities. Our good reputation in the markets in which we operate is also enabling us to lower our cost of funding, through the extension of our successful loan note program and we are confident of securing more institutional funding, beyond our traditional co-funder network, in the near future. 

 

The write down in certain fair values within the FinTech Ventures portfolio during the last six months has been very disappointing for all concerned. We continue to enhance the level of monitoring and governance of our FinTech companies and several exciting opportunities are emerging within the portfolio which I look forward to updating you on in due course. 

 

2017 Objectives and Progress

 

Goals	Strategy	Objectives for 2017	Progress
Geographic expansion	We continue to consider the opportunities for growth afforded by other jurisdictions	Expand the Sancus secured loan product to the UK and Ireland and review future opportunities such as the Cayman Islands.   Ireland is considered to be an attractive market that is under-served by traditional lenders. We plan to expand through BMS and Sancus secured property-backed loans.	We are in the process of launching secured lending in UK.  Launch of secured lending in Ireland expected in 2018.
Profitably expand the funding base	Funding for the balance sheets and loan funds is critical to growth. We seek funding from institutional, corporate and high net worth individuals. We apply funding to businesses where returns for risk are optimised.	Sancus plans to launch further SLNs.   BMS Finance is targeting an expansion of its two funds.   Relationships with existing funders will be nurtured.   Long term financing line for Sancus BMS is being explored.	First 2 SLNs fully deployed.    SLN3 has been designed and book building has commenced - improved terms in SLN3 given loan note concept has been proven as demonstrated by investor appetite.   BMS is planning to extend both its UK and Irish funds in H2 2017.   Co-funder base has grown to over 110 relationships with £118.0m deployed.    Several positive discussions ongoing with interested lending parties.
One FinTech brand, solutions orientated client proposition, online, direct and intermediary-led origination	Sancus BMS will operate under the "Sancus" brand as one integrated business, maximising its reach in the market and providing multi product solutions to its funders and borrowers.	Optimise the operation of the "Sancus.com" website, including all entities' products, with enhanced borrower and funder online experience and functionality. Implement common "solution-based" sales message across origination teams. Build team work to ensure cross-selling opportunities are maximised.   Additional resources to be applied to loan origination.	Website enhanced to improve presentation of our full package of lending solutions.   Proprietary loan management solution rolled out across most of the Group.   Recruited Sales Director and team to accelerate business development activity.    Regular sales meetings held to facilitate cross selling.
Ensure all operating entities are profitable	'Work hard on it, give it an opportunity, if it doesn't work, restructure it, sell it or close it. Don't procrastinate.'	Ensure Sancus Finance is profitable on a monthly basis by December 2017. Product enhancements, improved sales capabilities and a better online presence are planned.	Sancus Finance and Funding Knight are increasingly being managed as one business.  Good progress is being made, and we have invested in business development resources to drive revenue.
Quality risk management and compliance to capture value	Safeguarding the balance sheet and our reputation with funders is critical. Regular reviews of policy effectiveness, adjustments to controls, transparent reporting and a culture in which open challenge is encouraged are core to the strategy.	Credit processes and procedures will continue to be monitored and improved as required.	Credit process has been further enhanced during H1 2017 by linking operational procedures to the Loan Management System.
Continue to beat our 2% loan default target	Ensure continued quality of staff, adapt policies and procedures as required, monitor loan books and take early action on any problems, govern with Credit Committees.	Credit processes and procedures will continue to be monitored and improved as required.	Credit process has been enhanced during H1 2017. Loss rates maintained at less than 0.5% with strong focus across the Group.    No losses incurred within the Sancus (Offshore) secured lending business.
Support and guide the development of key platforms	Provide direct financial support at critical times, introducing potential investors/funders and advice through active participation as a board member	The Group is unlikely to make any significant additional platform investments, but may provide short term or limited financial support at key moments. Board participation and ongoing review of strategies and financial performance will continue.	Increased monitoring and governance of FinTech Ventures. Decision taken to prudently write down holding value of two portfolio equity investments and make provisions against two loans acquired as part of SSIF transaction. GLI have introduced other investors who have invested directly into several of the platforms.
Realise value at optimal times	The Group is not a long-term holder of this portfolio, and will seek to realise value at optimal times in the growth of each platform, or opportunistically if capital can be profitably redeployed.	No sales are planned for this year, but the Group will consider serious offers if they are forthcoming.	Several interesting debt and equity raises under consideration.    One of the unprofitable platforms is conducting an equity raise, where we expect to be diluted and we have prudently written down the fair value.
Value capital allocation and liquidity management	The Group will continue to review where capital is best deployed, and how it can be raised most cost-effectively.	The announced sale on 8 March 2017 of our holding in SSIF will improve the liquidity position, and surplus capital will be reinvested in higher yielding lending activities. Strict liquidity controls will continue to be applied.	Bi-weekly Treasury meetings chaired by CEO to agree on investments/divestments.    Ongoing positive discussions with potential interested lending parties.
Stakeholder communication	The nature of the Group's business will continue to develop, and it will continue to be a priority to ensure investors fully appreciate the potential value the Group offers.	Ongoing stakeholder roadshows, communications and disclosures will be undertaken	Comprehensive stakeholder communication programme alongside interim results.

 

 

 

Financial Results for the six months ended 30 June 2017 (Table 1)

 

£'000	Statutory SOCI		Proforma adjustments		Proforma*
	Group Results	Group Results Restated**	Sancus Gibraltar & Funding Knight*	No longer consolidated*	Group Results
	30 June 2017	30 June 2016	30 June 2016	30 June 2016	30 June 2016
Sancus BMS Interest on loans and Fee and other income	4,777	5,106	924	(1,683)	4,347
FinTech Ventures interest on loans and Fee and other income	532	63	-	-	63
SSIF dividends	303	664	-	-	664
Revenue	5,612	5,833	924	(1,683)	5,074
Interest costs	(1,204)	(2,058)	-	-	(2,058)
Gross profit/(loss)	4,408	3,775	924	(1,683)	3,016
Operating expenses	(4,876)	(5,442)	(1,031)	537	(5,936)
Net operating loss	(468)	(1,667)	(107)	(1,146)	(2,920)
Fair Value adjustments and other net losses including FX	(14,635)	(7,071)	-	-	(7,071)
Tax	(56)	-	-	-	-
Loss for the period	(15,159)	(8,738)	(107)	(1,146)	(9,991)

 

* June 2016 proforma is included to provide a like for like comparison. This proforma excludes net earnings of £1.1m from entities which are no longer consolidated in the June 2017 figures (SSIF, BMS Sarl, Raiseworks and Finpoint) but includes net losses of £0.1m from Sancus Gibraltar and Funding Knight combined which were not previously consolidated in 30 June 2016.

**30 June 2016 results restated for the change in accounting policy to adopt the Venture Capital exemption in IAS28 whereby FinTech Ventures is accounted for on a fair value basis as consistent with the 2016 Annual Accounts (see Note 2b for further detail)

 

Revenue

 

Total revenue for the period increased by 11% to £5.6m (2016 £5.1m) on a proforma basis. On a statutory basis revenue was down 4% from £5.8m at 30 June 2016 to £5.6m at 30 June 2017, primarily due to structural changes within the Group. Excluding the SSIF dividends which in future we will no longer receive following the sale of this asset in March 2017 (refer Note 15), revenue from interest on loans and fee and other income was up 20% on a proforma basis compared to 30 June 2016.

Revenue consists of interest income, fee and other income and dividend income, with a further breakdown provided in the Condensed Consolidated Statement of Comprehensive Income.

The dividend income received in the period of £0.3m (30 June 2016 £0.7m) related purely to dividends from our holding in SSIF which was sold in March 2017.

The principal driver of revenue growth has been fee income from arrangement and commitment fees arising from the increase in loan origination. However, the increase in fees has been somewhat offset by a reduction in interest income as on balance sheet funds have not grown due to capital constraints and we will see a lag on interest earned on the SLNs.

The combined revenue of Funding Knight and Sancus Finance increased by 69% compared to the six months ended 30 June 2016.

Revenues from interest income from loans and preference shares held in FinTech Ventures increased in the period as additional loans and accrued interest were acquired as part of the sale of our shares in SSIF.

Interest Costs

 

Interest costs have decreased in the period from £2.1m to £1.2m as the Syndicated loan of £11.9m was repaid in March 2017. Following the repayment of the Syndicated loan, the weighted average interest cost for the period ended 30 June 2017 has reduced to 5.9% (from 7.5% at 31 December 2016). At the period end, interest bearing debt comprised:

 

·      £10m 5-year Bond (7%) matures 30 June 2021, interest paid half yearly; and

·      £20.7m 2019 ZDPS (5.5%) income entitlement and principal due on expiry 5 December 2019.

 

To measure business unit performance, finance costs are allocated to Sancus BMS to recognise its use of the Group's debt facilities in its lending activities. FinTech Ventures is treated as being funded by equity. This allocation best matches the risk profile of each business unit with its capital structure, as well as recognising that interest costs are effectively serviced by interest income from Sancus BMS.

 

Operating Expenses

 

Total costs for the first half of 2017 were £4.9m compared to £5.9m on a comparable proforma basis (refer Table 1) including Sancus Gibraltar and Funding Knight.

 

Savings of £1.0m in Head Office Costs have been achieved in the period mainly on administration fees, legal, travel and marketing. However Sancus BMS's operating expenses have increased due to the investment in more business development resources and the expansion of its operations.

 

FinTech Venture's operating expenses reduced to £1.0m at 30 June 2017 from £1.6m at 30 June 2016.

 

Fair Value adjustments and other net losses including FX (Table 2)

 

In total the fair value adjustments and other net losses for the period produced a loss of £14.6m. The breakdown is shown in the table below.

£'000	30 June 2017
FinTech Ventures loan provision	(2,790)
FinTech Ventures loan write down	(806)
FinTech Ventures equity fair value write down	(8,630)
FinTech Ventures other	(332)
Total FinTech Ventures before FX Loss	(12,558)
FinTech Ventures FX Loss	(992)
Total FinTech Ventures	(13,550)
Amberton NAV movement	(381)
Sancus BMS FX Gain	169
Sancus BMS other gains	80
Total Sancus BMS	(132)
SSIF realised loss on sale	(953)
Total Losses on financial assets at FVTPL	(14,635)

 

The loan provision and loan write down are related to legacy GLI loans which were previously held within the SSIF portfolio.  As part of the sale of GLI's stake in SSIF, these were transferred back to GLI. 

 

The equity write down relates to one of the platforms which is in the process of looking to raise further equity capital. Whilst the process is still underway, based on the current expressions of interest, management believe it is prudent to reduce our holding value of this investment by £6.1m. The second equity write down of £2.5m relates to one of the platforms whereby they are performing behind forecasts.

 

Dividend Policy

 

In line with the Group's announced dividend policy whereby dividends are only paid out of net cash generated in the period there will be no dividend declared for the period. A dividend of 0.625 pence per share was paid in April 2017 in relation to quarter four 2016.

 

Financial Position (Table 3)

 

£'000	30 June 2017 (unaudited)	31 December 2016 (audited)
Sancus BMS on Balance Sheet Loan and loan equivalents	44.2	38.8
Shares in SSIF	-	23.8
Goodwill	25.0	25.0
FinTech Ventures' Loan and loan equivalents	1.1	4.0
FinTech Ventures' Investment Portfolio	28.9	36.1
Group Cash, trade receivables and other assets	16.0	14.4
Total assets	115.2	142.1
Group debt	(40.8)	(51.2)
Group net assets	74.4	90.9

 

The Group's Net assets have decreased in the period by £16.5m to £74.4m, largely from the fair value adjustments noted in Table 2.

 

On balance sheet loan and loan equivalents have increased in the period from £38.8m to £44.2m, with an increase in the BMS Funds and SLNs being the primary driver for the increase.

 

Group cash, trade receivables and other assets of £16.0m consist of £6.7m cash, £6.4m trade and other receivables with the remaining £2.9m relating to fixed assets (£0.6m), investment in Amberton Asset Management (£0.1m) and other investments at fair value (£2.2m). Trade receivables includes £2.7m in respect of the sale of GLI's 5% holding in the BMS UK Sarl which occurred on 31 May 2017 and cash received post period end. Other investments include £1.6m for the 23% holding in Sancus Isle of Man plus the equity holdings in the UK and Irish BMS Funds. The Group's cash position has decreased by £3.0m as cash has been redeployed into on balance sheet loans and loan equivalents.

 

Shares held in SSIF were sold in the period, raising £22.7m in cash which was partly used to repay the Syndicated loan.

 

The £2.9m decrease in the FinTech Ventures loans and loan equivalents to £1.1m (31 December 2016: £4.0m) is due to the repayment of certain loans and the write down and provision against the loans acquired from the sale of SSIF.

 

Goodwill has remained at £25.0m in the period and a breakdown is provided in Note 7.

 

FinTech Ventures portfolio is now at £28.9m. This relates to equity, preference shares and working capital loans.  The movement in the period includes a £8.6m write down on fair value adjustments and a £1.0m FX loss on the USD exposure of the portfolio with the remaining movement being the net additions and repayments in the period.

 

The Group's debt position has reduced to £40.8m in the period following the repayment of the Syndicated loan with the Group gearing ratio now at 35% (31 December 2016: 36%).

 

Cashflow

 

Cash flows used in operating activities for the six months to 30 June 2017 reduced to £1.0m compared to £13.0m in the period to 30 June 2016 due to an increase in trading profits and a reduction in debt servicing costs.  The movement in cash outflow from operating activities in the period increased as cash of £7.8m was deployed by the Group into Sancus BMS loans whereas the same period in 2016 saw a reduction of £4.3m.  During the period we sold our holding in SSIF, raising £22.7m resulting in net cash inflow from investing activities of £19.1m (30 June 2016: £12.7m). Cash used in financing activities in the period was £13.2m (30 June 2016: £9.0m) including the repayment of the Syndicated loan (£11.9m) and the payment of the Q4 2016 GLI dividend (£1.3m).

 

Post Balance Sheet Events

 

FCA Funding Knight Authorisation

On the 14 July 2017, it was announced that Funding Knight, the specialist peer to peer/marketplace lender has been granted full authorisation from the Financial Conduct Authority (FCA). Funding Knight has been operating under interim permissions since 2014, when the FCA commenced the process of regulating the peer-to-peer industry. This is an important milestone for the business and demonstrates its commitment to maintaining the expected standards of regulatory compliance designed to protect both funders and clients.

 

Related Party Transactions

 

Related party transactions are disclosed in Note 14 to the condensed set of financial statements. There have been no material changes in the related party transactions described in the last annual report.

 

Governance, Risk Management and Operations

 

Effective governance processes both at platform and holding company level continue to be a priority for the Board. This is critical to ensuring that only well-considered risks are taken, and expected returns emerge as planned. At Group level we have implemented projects to take a more strategic approach to the assessment, reporting and management of investment risk.

 

Operationally a number of technology projects were completed in the first half of the year, in particular to provide Sancus BMS Group with a proprietary loan management system and enhanced online functionality.

 

Outlook

 

I believe that we are well placed now to continue to grow Sancus BMS. With a lot of the hard work and progress having been made over the last 18 months we are well positioned to leverage off our expertise and see benefits from the increased synergies. Within FinTech Ventures we have made the hard decisions of writing down the fair value where we have some concerns. There are positive discussions underway with a number of the platforms but we will need to be patient and will only look to record these potential gains when transactions materialise. I would like to thank our shareholders for their continued support and patience.

 

 

 

Andrew Whelan

Chief Executive Officer

25 September 2017

 

 

INDEPENDENT REVIEW REPORT TO GLI FINANCE LIMITED

 

We have been engaged by the Company to review the condensed set of Consolidated Financial Statements in the Interim Report for the six months ended 30 June 2017 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 17. 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.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK & Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

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.

 

As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of Financial Statements included in this Interim Report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the Interim Report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK & Ireland) 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 inquiries, 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.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the Interim Report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

 

 

 

Deloitte LLP

Statutory Auditor

Guernsey, Channel Islands

25 September 2017

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the period ended 30 June 2017

 

	Notes	Period ended	Period ended
		30 June 2017 (unaudited)   £'000	30 June 2016 (unaudited) Restated* £'000
Interest on loans		2,135	3,230
SSIF dividends		303	664
Fee and other income	4	3,174	1,939
Total revenue		5,612	5,833
Interest costs		(1,204)	(2,058)
Gross profit		4,408	3,775
Operating expenses
Administration and secretarial fees		170	301
Legal and professional fees		506	1,445
Other expenses	5	4,200	3,696
Total operating expenses		4,876	5,442
Net operating loss		(468)	(1,667)
Losses on financial assets at fair value through profit and loss
SSIF loss on disposal / fair value adjustment		(953)	(2,590)
Net loss on de-recognition of SSIF as a subsidiary		-	(1,208)
Fintech Ventures fair value adjustment		(13,111)	(2,642)
Other net losses		(571)	(631)
Losses on financial assets at fair value through profit and loss		(14,635)	(7,071)
Loss before tax		(15,103)	(8,738)
Income tax expense		(56)	-
Loss for the period after tax		(15,159)	(8,738)
Other comprehensive income
Items that may subsequently be reclassified to profit or loss:
Foreign exchange on consolidation		-	169
Total comprehensive loss for the period		(15,159)	(8,569)
Operating (loss)/profit attributable to:
Equity holders of the Company		(15,024)	(9,142)
Non-controlling interest		(135)	404
		(15,159)	(8,738)
Total comprehensive (loss)/income attributable to:
Equity holders of the Company		(15,024)	(8,973)
Non-controlling interest		(135)	404
		(15,159)	(8,569)
Basic and Diluted Loss per Ordinary Share	6	(4.83)p	(3.97)p

 

 

* Comparatives have been restated for the adoption of the Venture Capital exemption in IAS28 which was first adopted in the Annual Results 2016 which allowed FinTech Ventures investments to be fair valued as opposed to equity accounted. Further details are included in Note 2b.

 

The accompanying Notes 1 to 17 form an integral part of these financial statements.

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

As at 30 June 2017

 

		30 June 2017 (unaudited)	31 December 2016 (audited)
ASSETS	Notes	£'000	£'000
Non-current assets
Property and equipment		634	618
Goodwill	7	25,033	25,033
Sancus BMS loans	15	25,128	19,216
Investment in Sancus Loan Notes	15	10,642	7,500
Total Sancus BMS loans and loan equivalents		35,770	26,716
FinTech Investments	15	28,922	36,104
Other investments	15	2,172	874
Joint Venture in Amberton Asset Management		147	527
Total Non-current assets		92,678	89,872
Current assets
Investment in SSIF	15	-	23,781
Loans through platforms	15	1,055	4,034
Sancus BMS loans		3,063	3,900
Loan equivalents		5,317	8,205
Total Sancus BMS loans and loan equivalents	15	8,380	12,105
Trade and other receivables	8	6,393	2,712
Cash and cash equivalents		6,657	9,616
Total Current assets		22,485	52,248
Total assets		115,163	142,120
EQUITY
Share premium	9	112,557	111,942
Treasury shares	9	(1,630)	(1,734)
Distributable reserve	9	-	34,803
Retained earnings		(36,206)	(54,268)
Capital and reserves attributable to equity holders of the Group		74,721	90,743
Non-controlling interest		(361)	125
Total equity		74,360	90,868
LIABILITIES
ZDP shares	15	24,072	23,436
Corporate bond	15	9,585	8,500
Non-current liabilities	10	33,657	31,936
Current liabilities
Syndicated loan	15	-	11,920
Trade and other payables	15	7,146	7,396
Total current liabilities	10	7,146	19,316
Total liabilities		40,803	51,252
Total equity and liabilities		115,163	142,120

 

 

The financial statements were approved by the Board of Directors on 25 September 2017 and were signed on its behalf by:

 

 

 

Director: Patrick Firth

Director: John Whittle

 

 

The accompanying Notes 1 to 17 form an integral part of these financial statements.

 

 

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

For the period ended 30 June 2017

 

	Share Capital	Share Premium	Treasury Shares	Distributable **Reserve	Foreign  Exchange Reserve	Retained **Earnings/ (Losses)	Capital and reserves attributable to equity holders of the Company	Non-controlling Interest	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2016 (audited)	-	111,942	(1,734)	34,803	--	(54,268)	90,743	125	90,868
Net proceeds from Ordinary Shares issued (Note 9)	-	615	-	-	--	-	615	-	615
Transferred to management (Note 9)	-	-	104	-	--	-	104	-	104
Transfer of distributable reserves to retained earnings (Note 9)	-	-	-	(34,803)	--	34,803	-	-	-
Acquisition of non-controlling interest in Sancus Finance	-	-	-	-	--	-	-	(351)	(351)
Dividends paid*	-	-	-	-	--	(1,717)	(1,717)	-	(1,717)
Transactions with owners	-	615	104	(34,803)	--	33,086	(998)	(351)	(1,349)
Total comprehensive income/(loss) for the period	-	-	-	-	--	(15,024)	(15,024)	(135)	(15,159)
Balance at 30 June 2017 (unaudited)	-	112,557	(1,630)	-	--	(36,206)	74,721	(361)	74,360

 

Balance at 31 December 2015 (audited)	-	87,405	-	34,803	(163)	(40,412)	81,633	13,792	95,425
Net proceeds from Ordinary Shares issued (Note 9)	-	15,108	-	-	-	-	15,108	-	15,108
Dividends paid	-	-	-	-	-	(2,876)	(2,876)	-	(2,876)
Acquired through Group restructure		1,900	(1,900)			-	-		-
Acquisition of non-controlling interest in Sancus Finance	-	-	-	-	-	416	416	(416)	-
Acquisition of NCI without change in control in SBHL	-	-	-	-	-	(4,096)	(4,096)	(1,745)	(5,841)
Disposal of non-controlling interest	-	-	-	-	-	103	103	(12,694)	(12,591)
Transactions with owners	-	17,008	(1,900)	-	-	(6,453)	8,655	(14,855)	(6,200)
Profit /(loss) for the period	-	-	-	-	-	(9,142)	(9,142)	404	(8,738)
Foreign exchange on consolidation	-	-	-	-	168	-	168	-	168
Total comprehensive income/(loss) for the period	-	-	-	-	168	(9,142)	(8,974)	404	(8,570)
Balance at 30 June 2016 restated (unaudited)	-	104,413	(1,900)	34,803	5	(56,007)	81,314	(659)	80,655

* During the period ended 30 June 2017, the Company made one dividend payments, totalling 0.625 pence per Ordinary Share in relation to Q4 2016.

 

** Distributable Reserves have been combined with retained earnings (losses) in the year to simplify the presentation of reserves (Note 9)

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the period ended 30 June 2017

 

		Period ended	Period ended
		30 June 2017 (unaudited)	30 June 2016 (unaudited)
	Notes	£'000	£'000
Cash flows used in operating activities	11	(985)	(12,988)
(Increase)/decrease on Sancus BMS loans		(7,857)	4,274
Net cash movement of BMS Sarl prior to consolidation		-	(1,903)
Net Cash flows used in operating activities		(8,842)	(10,617)
Cash flows from/(used in) investing activities
Net cash on disposal of subsidiaries		-	14,061
Net cash acquired on acquisition of subsidiaries		-	4,477
Acquisition of non-controlling interest and connected entities		(713)	(1,725)
Purchase of investments in FinTech Ventures		(5,531)	(4,120)
Decrease/(increase) on loans through platforms		2,848	(158)
Sale of investments in FinTech Ventures		-	138
Sale of SSIF investment		22,675	-
Property equipment acquired		(158)	-
Net cash inflow from investing activities		19,121	12,673
Cash flows used in financing activities
Loan drawn down		-	711
Repayment of syndicated loan		(11,920)	(6,980)
Dividends paid		(1,318)	(2,712)
Net cash used in financing activities		(13,238)	(8,981)
Net decrease in cash and cash equivalents		(2,959)	(6,925)
Cash and cash equivalents at beginning of period		9,616	17,415
Effect of foreign exchange rate changes during the period		-	168
Cash and cash equivalents at end of period		6,657	10,658

 

The accompanying Notes 1 to 17 form an integral part of these financial statements.

 

 

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

For the period ended 30 June 2017

 

1.      GENERAL INFORMATION

 

GLI Finance Limited (the "Company"), and 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, 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 does not have a fixed life and 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.

 

As at 30 June 2017, the Group comprises the Company and its subsidiaries (please refer to Note 12 for full details of the Company's subsidiaries).

 

Given the changes made as a result of the strategic review, 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 2016 Annual Report.

 

 

2.      ACCOUNTING POLICIES

 

(a)           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 European Union 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 2016, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union.

 

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 2016.

 

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 25 September 2017.

 

(b)           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 2016. However, of particular note is that in the prior year the Group elected to apply the exemption available under IAS 28 Investments in Associates and Joint Ventures which states that when an investment in an associate is held by, or is held indirectly through, an entity that is a venture capital organisation, the entity may elect to measure investments in those associates at fair value through profit or loss in accordance with IAS 39 Financial Instruments. Please refer to the 2016 Annual Accounts for further information.

 

The new accounting policy under IAS 28 has been applied retrospectively to 30 June 2016 in order to comply with IAS 8 Accounting policies, changes in accounting estimates and errors.

 

Impact on Consolidated Statement of Comprehensive Income	30 June 2016 (unaudited)
	£'000
Reversal of share in net losses on associates	-
Unrealised losses on associates	295
Net decrease in total comprehensive loss for the period	295

 

(c)         Going Concern

 

The Board has assessed the Group's financial position as at 30 June 2017 and the factors that may impact its performance in the forthcoming year. After considering the maturity profile of the debt structure of the Group and projected cash flows, the Directors are of the opinion that it is appropriate to prepare these financial statements on a going concern basis.

 

(d)           Critical accounting estimates and judgements in applying accounting policies

 

The critical accounting estimates and judgements are as outlined in the Annual Report 2016.

 

 

3.      SEGMENTAL REPORTING

 

Operating segments are reported in a manner consistent with the manner in which the Executive Team reports to the Board, which is regarded to be the Chief Operating Decision Maker (CODM) as defined under IFRS 8. The Executive Team is responsible for allocating resources and assessing performance of the Group, as well as making strategic investment decisions, subject to the oversight of the Board of Directors. The Executive Team is responsible for the entire Group and considers it to have two operating segments. There has been one minor change in the period which has been to move Funding Knight from FinTech Ventures to Sancus BMS as this now has an established business model and work has begun to integrate into the Sancus BMS Group.

 

The segments are as follows:

 

Sancus BMS

·      Platforms with an established business model (now including Funding Knight, a wholly owned subsidiary)

·      Amberton - fundraising for Sancus BMS

·      Investments in the BMS loan funds

 

FinTech Ventures

·      Eleven platform investments

 

Group Treasury

·      Group Treasury - Primarily includes cash balances and related expenses to manage the Group's listed holding company

·      SSIF (sold in March 2017, however will be included in prior year comparatives)

 

The accounting policies of each segment are the same as the accounting policies of the Group, therefore no differences arise between the segment report and the Group statements.

 

£'000	Sancus BMS	FinTech Ventures	Group Treasury	30 June 2017	Sancus  BMS	FinTech Ventures	Group Treasury	30 June 2016*
Revenue
Interest on loans	1,604	531	-	2,135	3,221	9	0	3,230
SSIF dividends	303	-	-	303	664	-	-	664
Fee and other income	3,173	1	-	3,174	1,885	54	0	1,939
Total revenue	5,080	532	-	5,612	5,770	63	0	5,833
Interest costs	(1,204)	-	-	(1,204)	(2,058)	0	0	(2,058)
Gross profit	3,876	532	-	4,408	3,712	63	0	3,775
Total operating expenses	(3,220)	(1,019)	(637)	(4,876)	(2,233)	(1,574)	(1,635)	(5,442)
Net operating profit/(loss)	656	(487)	(637)	(468)	1,479	(1,511)	(1,635)	(1,667)
Losses on financial assets at fair value through profit and loss
SSIF loss on disposal / fair value adjustment	-	-	(953)	(953)	-	-	(2,590)	(2,590)
Net loss on / de-recognition of SSIF as a subsidiary	-	-	-	-	-	-	(1,208)	(1,208)
FinTech Ventures fair value adjustment	-	(13,111)	-	(13,111)	-	(2,642)	-	(2,642)
Other net gains / (losses)	(132)	(439)	-	(571)	(2,192)	1,561	-	(631)
Losses on financial assets at fair value through profit or loss	(132)	(13,550)	(953)	(14,635)	(2,192)	(1,081)	(3,798)	(7,071)
Profit/(loss) before tax	524	(14,037)	(1,590)	(15,103)	(713)	(2,592)	(5,433)	(8,738)
Income tax expense	(56)	-	-	(56)	-	-	-	-
Profit/(loss) for the period after tax	468	(14,037)	(1,590)	(15,159)	(713)	(2,592)	(5,433)	(8,738)
Other comprehensive income
Items that may subsequently be reclassified to profit or loss:
Foreign exchange on consolidation	-	-	-	-	169	-	-	169
Total comprehensive income/(loss) for the year	468	(14,037)	(1,590)	(15,159)	(544)	(2,592)	(5,433)	(8,569)
Operating (loss)/profit attributable to:
Equity holders of the Company	603	(14,037)	(1,590)	(15,024)	(1,117)	(2,592)	(5,433)	(9,142)
Non-controlling interest	(135)	-	-	(135)	404	-	-	404
	468	(14,037)	(1,590)	(15,159)	(713)	(2,592)	(5,433)	(8,738)
Total comprehensive (loss)/income attributable to:
Equity holders of the Company	603	(14,037)	(1,590)	(15,024)	(948)	(2,592)	(5,433)	(8,973)
Non-controlling interest	(135)	-	-	(135)	404	-	-	404
	468	(14,037)	(1,590)	(15,159)	(544)	(2,592)	(5,433)	(8,569)

 

*A proforma table (Table 1) has been included to provide a like for like comparison against the prior period. This proforma excludes earnings from entities which are no longer consolidated in the June 2017 figures (SSIF, BMS Sarl, Raiseworks and Finpoint) but includes Sancus Gibraltar and Funding Knight which were not previously consolidated in 30 June 2016.

£'000	Sancus BMS*	FinTech Ventures	Group Treasury	30 June  2017	Sancus BMS	FinTech Ventures*	Group Treasury	31 December 2016
ASSETS
Non-current assets
Property and equipment	627	-	7	634	602	5	11	618
Goodwill	25,033	-	-	25,033	25,033	-	-	25,033
Sancus BMS Loans	25,128	-	-	25,128	19,216			19,216
Investment in Sancus Loan Notes	10,642	-	-	10,642	7,500	-	-	7,500
Total Sancus BMS loans and loan equivalents	35,770	-	-	35,770	26,716	-	-	26,716
FinTech Ventures Investments	-	28,922	-	28,922	-	36,104	-	36,104
Other Investments	2,172	-	-	2,172	874	-	-	874
Joint Venture in Amberton Asset Management	147	-	-	147	527	-	-	527
Total Non-current assets	63,749	28,922	7	92,678	53,752	36,109	11	89,872
Current assets
Investment in SSIF	-	-	-	-	23,781	-	-	23,781
Loans through platforms	92	963	-	1,055	-	4,034	-	4,034
Sancus BMS Loans	3,063	-	-	3,063	3,900	-	-	3,900
Loan equivalents	5,317	-	-	5,317	8,205	-	-	8,205
Total Sancus BMS loans and loan equivalents	8,380	-	-	8,380	12,105	-	-	12,105
Trade and other receivables	4,948	1,445	-	6,393	1,854	748	110	2,712
Cash and cash equivalents	2,640	-	4,017	6,657	5,619	480	3,517	9,616
Total Current assets	16,060	2,408	4,017	22,485	43,359	5,262	3,627	52,248
Total assets	79,809	31,330	4,024	115,163	97,111	41,371	3,638	142,120
EQUITY
Share premium	-	-	112,557	112,557	-	-	111,942	111,942
Treasury shares	-	-	(1,630)	(1,630)	-	-	(1,734)	(1,734)
Distributable reserve	-	-	-	-	-	-	34,803	34,803
Retained earnings allocation to segments	-	-	(74,967)	(74,967)	-	-	(88,186)	(88,186)
Retained earnings	41,206	31,305	(33,750)	38,761	46,933	41,253	(54,268)	33,918
Capital and reserves attributable to equity holders of the Group	41,206	31,305	2,210	74,721	46,933	41,253	2,557	90,743
Non-controlling interest	(361)	-	-	(361)	125	-	-	125
Total equity	40,845	31,305	2,210	74,360	47,058	41,253	2,557	90,868
LIABILITIES
Non-current liabilities
ZDP shares	24,072	-	-	24,072	23,436	-	-	23,436
Corporate bond	9,585	-	-	9,585	8,500	-	-	8,500
	33,657	-	-	33,657	31,936	-	-	31,936
Current liabilities
Syndicated loan	-	-	-	-	11,920	-	-	11,920
Trade and other payables	5,307	25	1,814	7,146	6,197	118	1,081	7,396
	5,307	25	1,814	7,146	18,117	118	1,081	19,316
Total liabilities	38,964	25	1,814	40,803	50,053	118	1,081	51,252
Total equity and liabilities	79,809	31,330	4,024	115,163	97,111	41,371	3,638	142,120
*The net assets of Funding Knight at 31 December 2016 (£0.5m) were included in FinTech Ventures. At 30 June 2017 Funding Knights' net assets of £0.2m are now reported within Sancus BMS.

 

 

4.     FEE AND OTHER INCOME

 

	30 June 2017 (unaudited)	30 June 2016 (unaudited)
	£'000	£'000
Co-Funder fees	449	244
Earn out (exit) fees	864	661
Management fees	728	320
Transaction fees	1,133	700
Sundry income	-	14
	3,174	1,939

 

 

5.      OTHER EXPENSES

 

	30 June 2017 (unaudited)	30 June 2016 (unaudited)
Other expenses:	£'000	£'000
Audit fees	23	63
Amortisation and depreciation	142	44
Corporate Insurance	40	47
Directors Remuneration	70	109
Employment costs	2,864	2,104
Independent valuation fees	54	28
Investor relations expenses	60	-
Marketing expenses	87	365
NOMAD fees	58	38
Other office and administration costs	508	475
Pension costs	100	44
Registrar fees	27	56
Sundry	167	323
	4,200	3,696

 

 

6.              LOSS PER ORDINARY SHARE

 

Consolidated loss per Ordinary Share has been calculated by dividing the consolidated operating loss attributable to Ordinary Shareholders of £15,024,074 (30 June 2016 restated: loss of £9,141,771) by the weighted average number of Ordinary Shares outstanding during the period of 311,143,170 (30 June 2016: 230,065,329). There was no dilutive effect for potential Ordinary Shares during the current or prior periods.

 

Note 9 describes the warrants in issue which are currently out of the money, and therefore have not been considered to have a dilutive effect on the calculation of Loss per Ordinary Share.

 

 

	30 June 2017 (unaudited)	30 June 2016 (unaudited)
No. of shares	312,065,699	284,762,819
Weighted average no. of shares in issue throughout the year	311,143,170	230,065,329
Loss per share	(4.83)p	(3.97)p

 

 

7.             GOODWILL

 

	30 June 2017	31 December 2016
	£'000	£'000
Brought forward	25,033	14,255
Additions:
- Acquisition of Sancus Finance	-	5,547
- Acquisition of Funding Knight	-	738
- Acquisition of Sancus Gibraltar	-	8,639
Impairment:
- Sancus Finance	-	(3,408)
- Funding Knight	-	(738)
Carried forward	25,033	25,033

 

Goodwill comprises:
Sancus Jersey	14,255	14,255
Sancus Gibraltar	8,639	8,639
Sancus Finance	2,139	2,139
	25,033	25,033

 

Impairment tests

The carrying amount of the goodwill arising on the acquisition of certain subsidiaries is assessed by the Board for impairment on an annual basis, in relation to the fair value of such subsidiaries.

 

The recoverable amount of Sancus Jersey, Sancus Finance and Funding Knight were assessed by the Board as described in the 2016 Annual Report. In the last six months there has been no indication of a material difference of underlying assumptions.

 

At 31 December 2016 the recoverable amount of Sancus Gibraltar was taken as being the purchase price paid by the Group and no impairment of goodwill was considered necessary given that the company had only recently been acquired and that it continued to be profitable. A full impairment review has therefore been carried out as part of the interim review and the sensitivities are noted below. The resultant valuation indicated that no impairment of goodwill was required.

 

Goodwill valuation sensitivities

When the discounted cash flow valuation methodology is utilised as the primary goodwill impairment test, the variables which influence the results most significantly are the discount rates applied to the future cash flows and the revenue forecasts.

 

The table below shows the impact on the Consolidated Statement of Comprehensive Income of stress testing the period end goodwill valuation as follows: 

 

Decrease in revenues by 10%

Increase in discount rates by 3% (discount rates in valuation model ranges between 13.25%-15.25%)

 

	Impairment implied by sensitivity
Sensitivity applied	Sancus Gibraltar 30 June 2017
	£'000
10% pa decrease in revenue	-
3% increase in discount rates	(387)

 

 

8.             TRADE AND OTHER RECEIVABLES

 

	30 June 2017 (unaudited)	31 December 2016 (audited)
Current	£'000	£'000
Dividend income receivable	-	371
Loan assignment receivable	97	121
Loan interest receivable	1,767	940
Preference share dividends receivable	603	415
Other trade receivables and prepaid expenses	1,233	865
Cash receivable from sale of BMS UK Sarl	2,693	-
	6,393	2,712

 

During the period, value dated 31 May 2017, GLI sold its 5% holding in the BMS UK Sarl for a total consideration of £2.7m for principal and accrued interest. Cash was received on the 4 July 2017 and this was redeployed into Sancus BMS as part of the Sancus Loan Note 2 participation.

 

 

9.             SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE

 

GLI Finance Limited has the power under its articles of association to issue an unlimited number of Ordinary Shares of no par value.

 

During the current period and prior year the Company issued the following additional Ordinary Shares:

 

	2017 (unaudited)
Date	No of shares issued	Share Premium £	Reason for issue
21 April 2017	2,767,586	615,239	2016 fourth quarter scrip dividend
	2,767,586	615,239

 

 

	2016 (audited)
Date	No of shares issued	Share Premium £	Reason for issue
20 January 2016	51,020	18,750	Bonus entitlement
22 March 2016	237,230	79,709	2015 fourth quarter scrip dividend
13 June 2016	270,015	84,650	2016 first quarter scrip dividend
30 June 2016	43,408,360	13,500,000	Acquisition of Sancus Gibraltar
30 June 2016	11,093,247	3,450,000	Increased stake in GLIF BMS Holdings Limited
15 August 2016	23,020,560	7,036,374	Placing with Somerston Group
16 September 2016	295,943	83,974	2016 second quarter scrip dividend
02 December 2016	686,784	213,591	BIS Management Seller share portion
15 December 2016	317,590	69,552	2016 third quarter scrip dividend
	79,380,749	24,536,600

 

 

Share Capital	30 June 2017 (unaudited)	31 December 2016 (audited)
Ordinary Shares - nil par value	Shares in issue	Shares in issue
Balance at start of period/year	309,298,113	229,917,364
Issued during the period/year	2,767,586	79,380,749
Balance at end of the period/year	312,065,699	309,298,113

 

Share Premium	30 June 2017 (unaudited)	31 December 2016 (audited)
Ordinary Shares - nil par value	£'000	£'000
Balance at start of period/year	111,942	87,405
Issued during the period/year	615	24,537
Balance at end of the period/year	112,557	111,942

 

Treasury Shares

 

As at 30 June 2017 a total of 8,632,619 Ordinary Shares, with an aggregate value of £1,629,952 were held by a Subsidiary, Sancus BMS Group Limited and eliminated on consolidation. These shares were part consideration for this company's minority shareholding in Sancus Gibraltar purchased by the Group in June 2016.

 

	30 June 2017 (unaudited)	31 December 2016 (audited)
	£'000	£'000
Balance at start of the period/year	1,734	-
Acquired through Group restructure in June 2016	-	1,900
GLI shares transferred by SBMGL to key members of management	(104)	(166)
Balance at end of period/year	1,630	1,734

 

Warrants in Issue

 

On 25 February 2016, Shareholders approved special resolutions authorising the issue of warrants to Golf Investments Limited which confer the warrant holder the right to subscribe for up to 32,000,000 new Ordinary Shares in the capital of the Company at the following subscription prices:

 

10,000,000 Ordinary Shares at 40 pence per Ordinary Share;

10,000,000 Ordinary Shares at 45 pence per Ordinary Share;

12,000,000 Ordinary Shares at 55 pence per Ordinary Share.

 

On 16 September 2016, Shareholders approved a special resolution authorising the issue of warrants to Golf Investments Limited which confer the warrant holder the right to subscribe for up to 10,000,000 shares at 37 pence per Ordinary Share, exercisable up to 9 August 2020.

 

As at 30 June 2017, the above warrants were in issue but not yet exercised. On issue of these warrants, no provision has been made for a fair value adjustment, as following the Board's assessment of the fair value it was not deemed to be materially different to the current carrying value of £Nil.

 

Distributable Reserve

 

As at 30 June 2017, the Distributable Reserve stood at £Nil, following a transfer of this balance to retained earnings in the period. (31 December 2016, the Distributable Reserve stood at £34,802,740).

 

Whilst UK Legislation only permits companies to pay dividends out of profits for distribution (i.e. realised profits), under the Companies (Guernsey) Law 2008, this operates on a solvency model and therefore does not have any impact on dividend distribution.

 

10.   LIABILITIES

 

 

	30 June 2017 (unaudited)	31 December 2016 (audited)
Non-current liabilities	£'000	£'000
ZDP shares (1)	24,072	23,436
Corporate bond (2)	9,585	8,500
	33,657	31,936

 

	30 June 2017 (unaudited)	31 December 2016 (audited)
Current liabilities	£'000	£'000
Syndicated Loan (3)	-	11,920
Accounts payable	2,765	2,582
Accruals and other payables	1,625	1,624
Dividend payable	-	215
Deferred income	205	-
Other staff costs	151	375
Payable to related party*	2,400	2,400
Preference shares	-	200
	7,146	19,316

 

	30 June 2017 (unaudited)	31 December 2016 (audited)
	£'000	£'000
Total liabilities	40,803	51,252

 

	30 June 2017 (unaudited)	30 June 2016 (unaudited)
Interest costs on debt facilities	£'000	£'000
ZDP Shares (1)	636	636
Syndicated Loan (3)	225	1,398
Corporate bond (2)	314	-
	1,175	2,034

 

*Relates to the amount owing by Sancus BMS Group Limited to Sancus IOM Holdings Limited for its subscription for preference shares, which is due by mutual agreement between these companies, and does not bear interest. Refer to Note 14.

 

(1)           ZDP shares

The ZDP Shares have a maturity date of 5 December 2019 with a final capital entitlement of £1.30696 per ZDP Share.

 

Refer to the Company's Memorandum and Articles of Incorporation for full detail of the rights attached to the ZDP Shares. This document can be accessed via the Company's website www.glifinance.com.

 

During the period, the interest costs accrued on the ZDPs amounted to £0.6m (30 June 2016: £0.6m), at an average interest rate of 5.5% (30 June 2016: 5.5%).

 

In accordance with article 7.5.5 of the Company's Memorandum and Articles of Incorporation, the Company may not incur more than £30.0m of long term debt without the prior approval from the ZDP shareholders. The Memorandum and Articles also specify that two debt cover tests must be met in relation to the ZDPs.

 

At 30 June 2017 the Company was in compliance with these covenants as Cover Test A was 3.31 (minimum of 1.7) and Cover Test B was 4.17 (minimum of 3.25).

 

At the period end senior debt borrowing capacity amounted to £20m after the repayment of the Syndicated Loan (see Note 10.3). 

 

(2)           Corporate Bond

 

On 30 June 2016 GLI Finance issued £10m corporate bonds as part of the acquisition of Sancus Gibraltar. As at 30 June 2017 Sancus BMS Group Limited holds £0.4m of these (31 December 2016 £1.5m), leaving a balance on consolidation of £9.6m (31 December 2016 £8.5m). The bond maturity date is 30 June 2021 and they bear interest at 7%.

 

During the period the interest costs to the Group on the bonds amounted £0.3m (30 June 2016: £Nil).

 

(3)           Syndicated Loan Facility

 

On 15 March 2017, the Syndicated Loan Facility of £14.9m was repaid. £11.9m was repaid to external parties and £3.0m was paid to Sancus BMS Group Limited to settle their participation in the loan.

 

 

11.          CASH GENERATED FROM OPERATIONS

 

	30 June 2017 (unaudited)	30 June 2016 (unaudited)
	£'000	£'000
Loss for the period	(15,159)	(8,738)
Adjustments for:
Net losses on FinTech Ventures	13,111	2,642
Net losses on fair value of SSIF	953	2,590
Net loss on associate of SSIF	-	1,208
Other net losses	571	631
Non-cash capitalisation of loan interest payable	-	9
Non-cash item on finance costs on ZDPs	636	636
Amortisation/depreciation of fixed assets	142	21
Other non-cash	-	20
Changes in working capital:
Trade and other receivables	(989)	(2,192)
Trade and other payables	(250)	(9,815)
Cash outflow from operations	(985)	(12,988)

 

 

12.          CONSOLIDATED SUBSIDIARIES

 

The Directors consider the following entities as wholly and partly owned subsidiaries of the Group and their results and financial positions are included within its consolidated results.

 

Subsidiary entity	Date of incorporation	Country of incorporation	Nature of holding	Percentage holding
Sancus BMS Group Limited (formerly Sancus Group Limited) ("SBMS")	27 December 2013	Guernsey	Directly held - Equity Shares	100%
Sancus BMS Holdings Limited ("SBHL") (formerly GLIF BMS Holdings Limited ("GBHL"))	5 November 2012	United Kingdom	Indirectly held - Equity Shares	100%
BMS Finance AB Limited ("BMS Finance AB")	24 November 2006	United Kingdom	Indirectly held - Equity Shares	100%
GLI Finance (UK) Limited	21 October 2014	United Kingdom	Directly held - Equity Shares	100%
Sancus (Jersey) Limited (formerly Sancus Limited)	1 July 2013	Jersey	Indirectly held - Equity Shares	100%
Sancus (Guernsey) Limited	18 June 2014	Guernsey	Indirectly held - Equity Shares	100%
Sancus (Gibraltar) Limited	10 March 2015	Gibraltar	Indirectly held - Equity Shares	100%
Funding Knight Limited	17 February 2011	United Kingdom	Directly held - Equity Shares	100%
Sancus Finance Limited (formerly Platform Black)	7 January 2011	United Kingdom	Indirectly held - Equity Shares	98.2%
FinTech Ventures Limited	9 December 2015	Guernsey	Directly held - Equity Shares	100%

 

 

13.          FINTECH VENTURES AND OTHER INVESTMENTS

 

The Directors consider the following entities as associated undertakings of the Group as at 30 June 2017.

 

 

Name of Investment:	Nature of holding	Country of incorporation	Percentage holding	Measurement
FinTech Ventures:
LiftForward Inc.	Directly held - Equity	United States of America	18.40%	Fair Value
Finexkap	Directly held - Equity	France	29.80%	Fair Value
Ovamba Solutions Inc.	Directly held - Equity	United States of America	20.48%	Fair Value
The Credit Junction Holdings	Directly held - Equity	United States of America	22.26%	Fair Value
Funding Options Limited	Directly held - Equity and Preference Shares	United Kingdom	28.90%	Fair Value
TradeRiver Finance Limited	Directly held - Equity and Preference Shares	Guernsey	46.7%	Fair Value
TradeRiver USA Inc	Directly held - Equity and Preference Shares	United States of America	30.25%	Fair Value
Open Energy Group Inc	Directly held - Equity	United States of America	23.1%	Fair Value
MytripleA	Directly held - Equity	United Kingdom	15.00%	Fair Value
UK Bond Network Limited	Directly held - Equity	United Kingdom	19.24%	Fair Value
Finpoint Limited	Directly held - Equity	United Kingdom	21.12%	Fair Value
Other Investments:
BMS Finance (Ireland) Sarl	Directly held - Equity	Luxembourg	30.25%	Fair Value
BMS Finance (UK) Sarl	Directly held - Equity	Luxembourg	25.25%	Fair Value

 

No significant restrictions exist on the ability of these associates to transfer funds to the Group in the form of cash dividends, or to repay loans or advances made by the Group.

 

 

14.          RELATED PARTY TRANSACTIONS

 

Transaction with the Directors/Executive Team

 

Non-executive Directors

 

As at 30 June 2017, the non-executive Directors' annualised fees, excluding all reasonable expenses incurred in the course of their duties which were reimbursed by the Company, were as detailed in the table below:

 

	30 June 2017		31 December 2016
	£		£
Patrick Firth (Chairman)	50,000		50,000
Frederick Forni (1)	-		37,500
James Carthew (1)	-		40,000
John Whittle	42,500		40,000

 

(1)           Resigned on 23 September 2016

 

There was no increase in the Directors' base fees during the period ended 30 June 2017, but Mr Whittle received an additional £2,500 as Chairman of the Audit Committee. Total Directors' fees charged to the Company for the period ended 30 June 2017 were £45,628 (30 June 2016: £86,380) with £Nil (31 December 2016: £Nil) remaining unpaid at the period end.

 

Executive Team

 

For the period ended 30 June 2017, the Executive Team members' annual remuneration from the Company, excluding all reasonable expenses incurred in the course of their duties which were reimbursed by the Company, were as detailed in the table below:

 

	30 June 2017			31 December 2016
	Fixed Salary	Executive Bonus Scheme		Fixed Salary	Executive Bonus Scheme
	£	£		£	£
Andrew Whelan	240,000	-		240,000	-
Russell Harte (1)	150,000	-		150,000	-
Emma Stubbs (2)	150,000	-		120,000	-
Marc Krombach (3)	-	-		130,000	-
Louise Beaumont (4)	-	-		85,000	-

 

(1)           Annual salary of £150,000. Mr Harte ceased employment on 1 July 2017.

(2)           Annual salary of £150,000 increased from £120,000 with effect from 1 January 2017.

(3)    Annual salary of £130,000. Mr Krombach ceased employment on 29 April 2016.

(4)    Annual salary of £85,000. Ms Beaumont ceased employment on 27 September 2016.

 

At the Company's annual general meeting ("AGM") held on 10 May 2017 Shareholders approved terms for a revised long-term incentive scheme, pursuant to which members of the Executive Team will be entitled to receive options to subscribe for new Ordinary Shares in the capital of the Company ("Share Options") at strike prices of 25p, 30p and 35p and will vest on the first, second and third anniversaries of the respective grant (the "New Scheme"). The New Scheme took effect from the date of the AGM and replaces the previous Executive Bonus Scheme. As at the period-end no Share Options were in issue.

 

Directors' and Persons Discharging Managerial Responsibilities ("PDMR") shareholdings in the Company

 

As at 30 June 2017, the Directors had the following beneficial interests in the Ordinary Shares of the Company