TIDMGLIF
RNS Number : 2118Z
GLI Finance Limited
13 March 2017
GLI Finance Limited
(the "Group" or "GLI")
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 GBP32.0m 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 GBP23.6m at a
mid-price of 93.5p. On 8 March 2017, the Group announced that it
had sold this investment for GBP22.7m and that the proceeds were
used to repay the Syndicated Loan (GBP14.9m) (due 15 March 2017),
to purchase GBP5.3m 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 GBP4.1m) and an insignificant net fair value
adjustment to FinTech Ventures' platforms; and
-- achieving the GBP1m recurring expense savings target.
Performance of Sancus BMS
The pre-tax profit target for 2016 of approximately GBP2.5m 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 GBP151m 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
GBP1.5m 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 GBP7.5m were recognised.
In the second half relatively small valuation adjustments were made
amounting to GBP1m, 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 GBP141m. 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 GBP0.5m has been recognised in the period since
Funding Knight became a subsidiary.
Group costs
As noted above, our recurring cost savings target of
approximately GBP1m was achieved in 2016, bringing the expected
annual costs of running the GLI parent company to approximately
GBP1.5m.
Non-recurring costs of GBP1.9m (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.
Enquiries
GLI Finance Limited
Andy Whelan
+44 (0)1534 708900
Liberum Capital (Nominated Adviser and Broker)
Steve Pearce
Chris Clarke
Jonathan Wilkes-Green
+44 (0) 207 100 2000
Instinctif Partners (PR Advisor)
Tim Linacre/Nick Woods
+44 (0)207 457 2020
About GLI Finance
GLI Finance (www.glifinance.com) is a specialist provider of
finance to small and medium sized enterprises. Its ordinary shares
are quoted on the AIM and its issued zero dividend preference
shares are listed and traded on the main market of the London Stock
Exchange (tickers GLIF and GLIS (Ord) and GLIZ (2019 ZDP)). Loans
are provided to SMEs through a variety of finance platforms in
which GLI has an equity stake.
The platforms in which GLI Finance is invested vary by
geography, industry, size of lending and by type of lending. They
include UK and US SME Lending, Offshore Lending, UK and European
Invoice Discounting, Supply Chain Finance, Global Trade Finance and
UK Property-Backed Lending.
This information is provided by RNS
The company news service from the London Stock Exchange
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