GLI Finance (AIM: GLIF) announces its audited final results for the year ended 31 December 2018.
Year ended | Year ended | |
31 December 2018 | 31 December 2017 | |
£’000 | £’000 | |
Total revenue | 13,221 | 11,634 |
Operating profit before credit losses | 745 | 101 |
Operating (loss) / profit | (2,265) | 101 |
Loss before tax | (23,164) | (15,184) |
Basic and diluted Loss Per Share | (7.57p) | (5.01p) |
HIGHLIGHTS
Group Highlights
- Group Revenue for the year was up 14% at £13.2m (2017: £11.6m) with operating profit before credit losses at £0.75m (2017: £0.1m) and operating losses for the year at £2.3m (2017: profit £0.1m) after the inclusion of IFRS 9 provisions which became effective on 1 January 2018.
- The Group is focused on the repayment of the Zero Dividend Preference shares (“ZDPs”) due on 5 December 2019 and it commenced a buyback of these during the year with 1.5m ZDPs being acquired during 2018 and a further 1.6m ZDPs acquired post year-end. Post year-end the Group is seeking authority from shareholders to acquire up to a further 14.99% of ZDPs issued.
- The funding of the ZDPs throughout 2019 and the repayment of the principal due on maturity is expected to come from existing cash and cash from the realisation of on balance sheet loans as they mature.
- Further simplification of the Group following the closure of supply chain finance and focus on asset backed lending.
Strategic Review
- Our business strategy is focused on maximising returns for shareholders. We recognise that this has not been entirely positive over recent years as we have faced inherited challenges on the FinTech Ventures portfolio, however whilst we have made improvements on the cost side, we recognise that more needs to be done to improve profitability and the Group is focussed on achieving this.
- Key financial metrics* for Sancus BMS which management are focussing on and which we will report on going forward, are:
– Return on tangible assets (“ROTA”);
– Cost income ratio; and
– Loan Deployment. - Focus is on lowering debt (with the repayment of the ZDPs in December 2019) and reducing our on-balance sheet loan exposure which in turn will increase ROTA.
- In accordance with the Group’s stated policy of paying dividends out of net cash generation, no dividend will be declared for the period, but we will look to reinstate these when we are in a positive cashflow position.
Sancus BMS Highlights
- Revenue growth of 28% by the main operating unit, Sancus BMS, to £13.3m from £10.3m in the prior year.
- Sancus BMS operating profit before credit losses was up 82% to £2.8m (2017: £1.6m).
- Total cumulative loans advanced across Sancus BMS now at £1bn (prior year £797m) with actual loss rate of under 1% 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 providing a useful funding source. £22.9m had been drawn as at 31 December 2018.
- Announced discontinuation of the supply chain finance product line in February 2019, with focus in the UK on asset backed lending in Sancus Funding, our FCA regulated entity.
- Successful launch of Sancus Ireland during the year providing euro loan options for our client base.
FinTech Ventures Highlights
- The carrying value of FinTech Ventures portfolio at 31 December 2018 was £13.8m (2017: £29.6m).
- NAV per share for FinTech Ventures at 31 December 2018 was 5.1 pence (2017:10.0 pence).
- The write down in the year of £19.6m is across 8 platforms, as a result of market challenges in securing additional growth capital. It is clearly disappointing to take a further large write down and we continue to review our options to achieve the greatest potential return from the portfolio.
- 55% increase in loan origination across the portfolio companies compared to prior year.
- Four platforms have successfully raised new equity from third parties during the year. However, in some cases, we experienced greater dilution of our holding than expected. Several of the other platforms are looking to raise equity over the next twelve months and we have conservatively approached the valuation of those platforms with these difficult market conditions in mind.
- On a selective basis, GLI invested £2.6m across five of the platforms during the year, primarily in the form of convertible loan notes, to support their growth and protect our position as much as possible.
Note: *Performance measurement calculations are included in Note 27.
Andy Whelan, Chief Executive Officer commented:
“The Group has seen mixed progress during 2018, with improving revenue, successfully securing a new funding line and reducing costs across the business balanced against poor developments in the FinTech Ventures portfolio.
We are pleased that Sancus BMS, the key operating unit within the Group, has delivered some positive results during the year. 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.
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 the material write-downs incurred, we believe there is upside potential if these raises are successful.”
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