Annual Report • Sep 26, 2016
Annual Report
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RNS Number : 7803K
GLI Finance Limited
26 September 2016
26 September 2016
GLI Finance Limited
(the "Company" or "GLI")
Unaudited Interim Results for the six month period ended 30 June 2016
Highlights
· Full business strategic review undertaken incorporating review of cost base, capital structure, detailed assessment of equity and loan investments and valuations;
· The Company losses for the period were GBP6.9m (June 2015 profit of GBP5.3m), impacted by GBP13m write downs in investments in underperforming or liquidated platforms following the strategic review;
· Group organised with Three Pillars to improve operational focus and assist reporting our strategy;
· Pillar One - Sancus BMS Group - on a pro forma* like for like basis, increased consolidated revenues from GBP2.7 million in H1 2015 to GBP4.0 million in H1 2016. The period was notable for the consolidation of the Sancus group and its amalgamation with BMS and Platform Black to establish our speciality lending business. We anticipate that the combined business will provide strong cash flows for the Group;
· Pillar Two - Valuations in our prioritised platforms, The Credit Junction, LiftForward, Funding Options and Finexkap increased by GBP5.5m in aggregate. Investments in underperforming or liquidated platforms were written down by GBP13m. We have been very prudent in reorganising this portfolio and we fully expect to see value of this portfolio build materially in future periods;
· Pillar Three - Amberton Asset Management - remains de minimus and we expect to make progress on this pillar in the next 12-18 months;
· Group - As a consequence of the considerable restructuring in the period together with write-downs in Pillar Two, the Net Loss for the period on the GLI Measurement Basis** was GBP10.3m (H1 2015: Net Profit of GBP0.2m).
· As a consequence of making early write downs and recognising losses in underperforming assets, together with raising capital and reorganising Sancus BMS Group, the Companies' balance sheet is significantly strengthened. Nonetheless, during the period the Company Net Asset Value "NAV" per share decreased from 42.73p to 37.07p;
· Company debt to gross asset ratio is 30% (31 December 2015 33%)
· Company Net Assets have increased in the period from GBP98.2m to GBP105.6m and;
· The Company's weighted average cost of debt decreased from 8.6% (year to 31 December 2015) to 6.8% (period to 30 June 2016).
Post period-end
· Ordinary share placing raised GBP7.1m from Somerston Group in August 2016;
· New wholly owned subsidiary, FinTech Ventures Limited ("FVL"), created to hold, initially, the four Prioritised FinTech platforms thereby enabling independent capital raises to support these investments.
· Name change of GLI Alternative Finance Limited Plc to the SME Loan Fund ("SMEF") on 1 September 2016.
Key
*Pro forma basis as described within the CFO report. pro forma
** GLI Measurement Basis is described within the CFO Report.
Patrick Firth, Chairman said:
"The last six months have marked the beginning of a period of significant transformation for GLI Finance. We continue to restructure the business in order to reduce its complexity, remove potential conflicts of interests and optimise our allocation of capital and resource. We have made good progress in establishing the basis for a strong business that is sustainable over the long-term and well positioned to take advantage of significant market opportunities in order to generate value for our shareholders."
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Please note that the Chief Financial Officer's Review is supplemented by charts in a document (the "Supplementary Document") which can be found at the following location: http://www.rns-pdf.londonstockexchange.com/rns/7803K_-2016-9-26.pdf
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Contacts
Enquiries
GLI Finance Limited
Andy Whelan
+44 (0)1534 708900
Panmure Gordon (Nominated Adviser and Corporate Broker)
Dominic Morley
+44 (0)20 7886 2954
Peter Steel
+44 (0)113 357 1152
Charles Leigh-Pemberton
+44 (0)20 7886 2906
Instinctif Partners (PR Advisor)
Tim Linacre/Jordan Campbell/Karanjit Sahota
+44 (0)207 457 2020
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
GLI Finance Limited
CHAIRMAN'S STATEMENT
For the period ended 30 June 2016
I am pleased to present the results of GLI Finance Limited ("GLI" or the "Group") for the six-months ended 30 June 2016. As a result of the strategic review announced in January, the past six month period has seen a significant transformation in the underlying shape of our business and following the substantial progress made this year. It has not been an easy six months and the strategy we have been focussing on over the past few years has not materialised as we would have hoped and we have had to make significant write offs and raise additional capital to ensure the business could execute its plans in line with the strategic review. The changes we have made have been tough, however what this does mean is that we have addressed the key risk areas within the portfolio and made significant improvements to the structure of the business. I am excited for the Group's future prospects.
Industry Dynamics
Mastery of the iterative process of matching the risk/return requirements of institutional, high net worth and retail funders with borrowers' expectations has emerged as the critical success factor in our fast-evolving industry. Although sophisticated internet websites remain important, experience is showing that these are not necessarily the differentiating factor, but rather the key ingredient is the model each platform employs to attract funders with their risk/return lending propositions, and matching them with borrowers' requirements. In addition, working capital is critical and we expect many platforms will now be needing to raise additional funds, which dependent upon the effectiveness of their models, may prove to be difficult. As a result of this dynamic, there is evidence of divergence in performance of platforms in the market generally, and across our portfolio in particular.
Despite the emerging trend of direct lending becoming an acceptable part of investors' asset allocations, industry fundraising has been more difficult this year as economies in the developed world deal with a range of macro issues. 'Brexit' in the UK may have a beneficial impact on alternative finance, assuming that banks' risk appetites retract further from SME lending. Time will tell. In the USA, corporate events surrounding Lending Club have provided a further reminder of the importance placed by investors on effective, transparent governance. We expect an ongoing focus on this from regulators, the press and investors. Well resourced funders with strong management teams are likely to be able to meet these challenges. We therefore expect to see well governed platforms with solid funding and niche lending strategies growing strongly.
Business Strategy
During the 2014 and 2015 financial years the Group's strategy was to take advantage of the expected long term growth of the alternative FinTech sector by investing in nascent lending businesses that were perceived to be beneficiaries of the disintermediation of lending by banks to SMEs. As a result, the Company's balance sheet was largely transformed from relatively liquid, income producing assets into a private equity portfolio of early-stage 'capital hungry' lending businesses with significant potential.
The transition has been challenging as the substantial change in risk profile of our assets together with a commensurate increase in the cost of capital gave the Company funding requirements at an inopportune time.
In January this year, the Board tasked our new Chief Executive, Andy Whelan, with conducting a strategic review.
Progress on the Strategic Review
At the start of the year, a number of challenging strategic objectives were set which were directed towards stabilising the Group's funding position, its investment portfolio of platforms operations and more clearly articulating corporate strategy.
Substantial and constructive progress has been made in addressing the findings of this review, although, as expected, earnings are not yet reflecting the results of this progress. The strategic review is now largely complete but shareholders should expect more progress and clarification in the next 6 months.
Highlights of this process have been:
1. Investing in our most cash generative businesses and forming the Sancus BMS Group.
2. Identifying investments which are likely to achieve material capital appreciation for our shareholders where we wish to concentrate our resources. We have termed these 'prioritised platforms'.
3. In contrast, we have materially shrunk the balance sheet by recognising losses on investments which are unlikely to succeed.
4. We have secured funding and reduced our cost of debt.
5. We have reorganised the organisation into 'three pillars' which more clearly define our businesses.
6. We have reduced recurring operational costs.
7. We have invested in senior key personnel through the appointment of Russell Harte as COO and Steve Simpson as CTO
There are still some challenges to meet in the next 6 months which we are presently planning for. Amongst them, we need to extend further the duration of some of our funding. We are also looking to optimise the Group's balance sheet yet further. This task is becoming incrementally easier as the balance sheet is materially de-risked through early recognition of losses this year, Sancus BMS Group is increasing its cash generation and certain of the prioritised platforms are likely to turn profitable this year. Moreover, Sancus BMS Group has recently been successful in funding loan origination through special purpose vehicles, largely funded by the British Business Bank and the Irish Strategic Investment Fund and we expect this sort of funding across the Group to accelerate.
GLI Finance Limited
CHAIRMAN'S STATEMENT (continued)
For the period ended 30 June 2016
Business performance
While our focus has been on the strategic review, our underlying businesses have made very notable progress. Loan growth has been substantial at Sancus BMS Group with cash flow 50% higher than at this point last year on a like for like basis. Our prioritised platforms have also seen significant double digit loan growth in the last year, with many securing institutional funding, thereby reaching important inflection points.
Financial Results
Results for the half year reflect the restructuring of the balance sheet flowing from the strategic review. The Sancus BMS Group has performed profitably. Investments in Prioritised platforms (The Credit Junction, Liftforward, Funding Options and Finexkap) have performed well, increasing in value by GBP5.5m. However, it was necessary to take further write downs on platforms which have not been able to meet investment expectations. This has been the primary cause of the decrease in the Company NAV per share from 42.73p at December 2015 to 37.07p at June 2016.
Capital Management and Dividend Policy
The issue in August 2016 of 23m shares at 31p was another important step in reducing the leverage on the Group's balance sheet and to funding our operations appropriately. Sources of future funding continue to be reviewed.
The Company expects to continue to pay quarterly dividends amounting to 2.5p in respect of the current 2016 financial year. As stated in the August strategic update, dividends going forward will be sustainable and covered by the cash earnings of the business. Further guidance for 2017 dividends will be provided at the end of the year.
Governance, Risk Management and Operations
Effective governance processes both at platform and holding company level continue to be a priority for your Board. This is critical to ensuring that only well-considered risks are taken, and expected returns emerge as planned. At Group level, projects are underway to take a more strategic approach to the assessment, reporting and management of investment risk. Within the platforms themselves, the management of credit and information technology risks are a priority, and the GLI team is providing increased oversight of the management of such risks.
Operationally a number of technology projects are underway, in particular to provide Sancus BMS Group with much-enhanced online functionality.
The Board and I wish to thank Andy and his team for their excellent work and diligence in taking the Group forward through a challenging period.
Changes to the Board
I would also like to thank both Fred Forni and James Carthew, two of my fellow long standing Board Directors for their support over the years. James and Fred have resigned from the Board with effect from 23 September 2016. Fred has been on the Board over 10 years and has been one of the longest serving Board members. James has decided to step down due to other business commitments and John Whittle, his alternate, will join the Board. We will continue to review the composition of the Board to represent the focus of the Company as a trading business. Somerston Group have the right to appoint a Board member and will consider doing so during 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 of change. In particular, Somerston Group has become our most significant Shareholder after underwriting the recent issue of 23m shares. As at 13 September 2016 Somerston Group held 23.5% of the Company's Ordinary Shares.
GLI Finance Limited
CHAIRMAN'S STATEMENT (continued)
For the period ended 30 June 2016
Outlook
I am confident that the new management team under Andy has quickly come to grips with the challenges faced by the Group, and is well advanced with the process of returning the Group to a position where it can create Shareholder value. Sancus BMS Group continues to grow and the second half of 2016 will see the Group recognise the full attributable earnings of the recent Sancus BMS Group acquisitions for the first time. We are positive about the Group's investment in the Prioritised platforms and believe there is reduced risk related to the valuations of platforms still under strategic review.
We expect the economies in which we operate to remain supportive of our businesses for the foreseeable future.
Patrick Firth
Non-Executive Chairman
Date: 23 September 2016
GLI Finance Limited
CHIEF EXECUTIVE OFFICER'S REVIEW
For the period ended 30 June 2016
When I was appointed CEO in late December last year, the Group was fragmented in its structure, complex and lacked clarity of purpose. I commenced a tidying operation and to date we have made good progress towards putting the Group on a solid footing for the future. My primary focus has been on creating a strong and sustainable business, which we expect to deliver considerable shareholder value from its profitable niche lending operations, complemented by a stable portfolio of growing FinTech platforms, both supported by an asset management joint venture.
The Groups financial statements for the period have been prepared in accordance with applicable International Financial reporting Standards ('IFRS'). The commentary in my CEO report and the CFO report, however focuses on our 'GLI Measurement' Basis, which as explained fully in the CFO's report, makes certain adjustments to the key line items prepared under IFRS. We have developed this methodology for presentation of the numbers as, we believe, it helps to provide the reader with a comprehensive understanding of our underlying performance and financial position over the period.
A full reconciliation between the key line items presented on a GLI Measurement Basis and their IFRS equivalents is provided in the CFO's report.
Progress on the Short Term Strategic Goals set in March 2016
We have made good progress in executing on the range of initiatives I set in March 2016, as described below.
| Goals | |
| Clarify and restate the Company's strategic objective | We continue to own, operate and invest in a portfolio of lenders to small and medium-sized enterprises (SMEs). Establishing the "Three Pillar" operating model clarifies the investment proposition for current and future investors. |
| Remove the risks of conflicts of interest | GLI no longer actively lends through platforms, removing the conflict with the SME Loan Fund. Amberton Asset Management ("AAM") has its own Board, is regulated by the Guernsey Financial Services Commission and operates independently of GLI. The Sancus BMS Group consolidation has led to alignment of interests with all key persons being GLI shareholders. |
| Initiate measures to strengthen the balance sheet | The Company's weighted average cost of debt was reduced from 8.6% at 31 December 2015 to 6.8%. at 30 June 2016. Inter-company loan structures between GLI and Sancus have been simplified, although there is still more to do. |
| Ensure that positive cash flows are accessible by GLI | A much improved treasury function has been built with bi-weekly CEO-chaired treasury meetings. The Sancus BMS Group is wholly owned and its cash flows are controlled by the Group. |
| Initiate measures to reduce the cost base | The Group Head Office cost saving target of GBP1m is on track to be achieved on a normalised basis, although one off acquisition related professional costs of circa GBP0.7m have been incurred in the first half of the year. Significant savings have been made on marketing, travel and professional fees. |
| Remove unnecessary complexity | The Three pillar strategy has created clarity of future direction of travel for GLI. The creation of the Sancus BMS Group has simplified the operational management of the Group. |
GLI Finance Limited
CHIEF EXECUTIVE OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Progress on the Short Term Strategic Goals set in March 2016 (Continued)
| Goals | |
| Rationalise and invest in the Company's core business pillars and ensure Prioritised platforms are properly financially resourced | Prioritised platforms receive first call on Group funding. The investment portfolio has been rationalised, underperforming investments have been exited and many have been written off. |
| Improve communication to aid stakeholders' understanding of operations | We have undertaken an intensive investor communication program since my appointment. To improve communication with Shareholders and investors, segmental reporting by Pillar has been introduced, using a measurement basis which provides the most relevant presentation of the Group's results. This is the first time we have done this and believe the information that follows will provide the clarity that Shareholders and investors alike are seeking. |
Simplifying the Group's structure - GLI's Three Pillars
By establishing and defining GLI Finance's operations into Three Pillars as described below, we have been able to provide clarity to Shareholders and investors and to focus our valuable resources, financial and human, on the parts of the business that offer the most attractive risk/reward opportunities.
Pillar One is the largest of our Three Pillars with the Sancus BMS Group accounting for 55% of Company gross assets.
Pillar Two is our portfolio of largely minority interests in up and coming FinTech and alternative finance businesses and accounts for 24% of Company gross assets. We break this Pillar out further into two categories:
· Prioritised - platforms with significant validation of their business models via third party institutional funding. A total of four platforms initially make up this category which will be transferred to the newly created FinTech Ventures Limited. These account for 15% of Company gross assets equivalent to 63% of this pillar.
· Other FinTech - platforms remaining under review. These account for 9% of Company gross assets.
Pillar Three, AAM, an asset management business jointly owned with Somerston currently has marginal financial impact on the Group, but Amberton has the potential to become a larger pillar over time. AAM currently has SMEF under its management.
The remaining 21% of the Companies Gross assets is held under the management of Group Head Office, being the holding in SMEF, the BMS managed fund and the remaining loans through SME platforms.
GLI Finance Limited
CHIEF EXECUTIVE OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Figure 1- Please see supplementary document
GLI Finance Limited
CHIEF EXECUTIVE OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Pillar Performance Review:
Pillar One (Sancus BMS Group)
During the half year, GLI's investment in Sancus BMS Group increased following the acquisition of Sancus (Gibraltar) Limited ("Sancus Gibraltar") and the remaining stakes in GLIF BMS Holdings Limited ("GBHL") and increasing our interest in Platform Black. Post period-end, we are also pleased to announce that Platform Black has reached an agreement with a consortium of high net worth private investors to provide a GBP50m funding line as well as acquiring a 10% minority Shareholding in this Company.
The Sancus BMS Group operates in "niche" markets with strong sustainable loan origination underwritten by an experienced credit team. We are leveraging the breadth of the groups expertise by bringing them together under a single unified brand.
Sancus BMS already offers several loan products including asset backed lending, secured finance, shorter term cash flow lending and supply chain finance. With a newly integrated group there will be more opportunity for helping borrowers' funding requirements across the entire business generating cross-selling opportunities and better understanding of our borrowers' business. This will assist our risk management processes further. In addition, the technology behind Platform Black, which has always operated through an online platform, is now being developed for use by other parts of the Sancus BMS Group and will become fully operational throughout the Sancus entities by the end of the year.
In an industry which is typically characterised by single product platforms, I am confident that we are building a business which has unique value propositions. The Sancus BMS Group now operates in five jurisdictions: UK, Ireland, Jersey, Guernsey and Gibraltar, with endorsements from the British Business Bank and the Irish Strategic Investment Fund (ISIF) and which will soon have an online lending platform. These businesses are profitable and focus on specific niche lending opportunities. Importantly they do not try and compete with the traditional banks, but sit alongside and complement their services. We believe this is a strong competitive and operational position to be in. We also have an investment in the Sancus Isle of Man, which is performing in line with expectations.
From June 2015 to June 2016, on a comparable basis, loans under management increased from GBP42.3m to GBP78.1m. The Sancus BMS Group presently funds itself through a combination of three sources: SPV funds in which the British Business Bank and the Irish Strategic Investment fund largely invest; A growing network of High Net Worth and institutional investors we term 'co-lenders' to whom we sell our originated and underwritten loans; and on balance sheet lending funded by group working capital. The balance sheet is extremely lean helping to drive return on equity. On-balance sheet lending has decreased from GBP32.7m to GBP25.5m as our growing pool of co-lenders increased their participation in lending activities. We are seeing strong growth in the number of co-lenders (who comprise private clients, HNWIs, family offices and institutions) who are attracted to alternative opportunities for yield enhancement with moderate risk.
Strong loan origination, diligent risk management, and a lean balance sheet will propel our cash return on assets which we believe should gradually be reflected in a higher valuation being attributed to this part of the business which presently represents 55% of total company assets.
This Pillar (excluding Platform Black) remains on course to generate net profit of GBP2.5m for the 2016 financial year.
Pillar Two (FinTech platforms)
The minority stakes in start-up platforms accumulated by the Group during the 2014 and 2015 FinTech "gold rush" were recognised at the time as being high risk, but with the potential for some of these investments to deliver significant returns. Perhaps what was not recognised at the time was the length of time and the funding it might take for these businesses to mature and become profitable. Therefore, although disappointing, it is perhaps inevitable that some platforms have failed, or are underperforming to the point where write downs have been necessary, whereas others continue to show promise, and consequently positive revaluations have been made. It is expected that the investment risk related to this portfolio will remain an ongoing feature for the foreseeable future. However, this Pillar is where we would expect substantial positive surprise.
We have identified 4 platforms which have become the Group's "Prioritised" platforms, as a result of their innovative business models not only attracting investment from GLI, but also from other institutional investors. These are The Credit Junction, LiftForward, Funding Options and Finexkap. During the period we have increased our equity stakes in the Prioritised platforms from GBP7.7m to GBP10.2m. The continuing positive returns from these investments have resulted in a total investment capital return of GBP13.0m, representing a strong 117.4% return on investment since inception.
A new wholly owned subsidiary, FinTech Ventures Limited (FVL) will be used to hold the Group's investments in the Prioritised platforms. We are currently in the process of transferring these investments into FVL. This will support management focus on these investments, facilitate separate performance reporting and, in time, potentially enable separate funding of future capital required to assist the growth in these platforms. Other platform investments may be transferred into this entity.
In terms of other platforms, the Group's equity investment increased by GBP0.75m. This investment related to the outright purchase of FundingKnight Limited following the liquidation of its holding company. We are currently working with its management team to ensure it has a competitive distribution strategy to complement its quality IT platform.
GLI Finance Limited
CHIEF EXECUTIVE OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Despite management's efforts to minimise the loss in value in eight of the less successful platforms, a prudent approach to valuation was adopted, leading to net write downs of GBP6.9m. During the period two platforms were in the process of closing (Raiseworks which was wholly-owned was closed on 24 August 2016 and CrowdShed in which we hold a 32.5% interest, is in orderly wind down), we reduced our interest in and removed our support from a third and post period end we have sold our interests in Proplend for a nominal consideration. Also during the period, Verus 360 an online SME finance provider, ceased operation, resulting in GBP4.5m write-down. I am working closely with the remaining 5 platforms management and boards and will provide further updates in the year end report on their development.
Pillar Three (Amberton)
At the start of the reporting period, GLI Asset Management Limited was a wholly owned subsidiary of GLI Finance. Q1 saw a 50% stake in GLIAM sold to Somerston and the successful change of name and rebranding to Amberton Asset Management ("AAM"). AAM currently has a marginal financial impact on the Group, however it manages a significant portion of the Group's total assets, GBP22.7m, through its mandate to manage The SME Loan Fund plc ("SMEF" or the "Fund") (previously known as GLI Alternative Finance plc).
Financially, the company is not yet profitable, with assets under management of GBP53.4m, compared to an initial target of GBP100 million. The consolidated loss for the period amounted to GBP149k. AAM is pursuing a number of separate lines of business to broaden revenue streams.
In terms of SMEF, the Board of the Fund decided in August 2016 to change its name from GLI Alternative Finance PLC, also changing its listing codes from GLAF:LN to SMEF:LN. From a performance perspective, the first half of 2016 will be remembered for significant market volatility, particularly within the AltFi sector, enhanced by the decision that the UK electorate took to leave the European Union. Confidence in the investment trust sector was also negatively impacted by news of governance issues at Lending Club in the USA, resulting in share prices for the sector trading at a significant discount to net asset value. SMEF also suffered a share price fall which saw the shares trading at a discount to NAV of 11.4% at its low point. This recovered to a discount to NAV of 8.9% at the end of July. During this time the NAV of the Fund remained stable. The Fund continues to provide a low risk exposure within the sector. It remains unleveraged and we understand this stance is likely to continue for the foreseeable future. An EGM in August this year adjusted the investment restrictions to allow greater flexibility in the allocation of capital.
Group Head Office
We have been focused on improving Group governance, treasury, risk management processes and IT functions, whilst carefully managing Group Head Office costs. At the beginning of July, I was delighted to welcome both Russell Harte and Steve Simpson to the team, as Chief Operating Officer and Head of Group IT respectively. Russell brings a vast range of experience in a number of fields whilst Steve has 22 years of experience in IT, most recently as the architect of the successful Platform Black platform.
During the reorganisation period there were assets which did not fit to any pillar and were retained by head office. These included the Group's investment in SMEF and loans to and through platforms. Many of these loans have been written off during the reporting period making a material negative contribution to group profits. There are minimal loans outstanding other than for working capital purposes to Sancus BMS Group. In future we do not envisage the head office results to impact the group results to the same degree as we have seen in this period.
Income generation within SMEF has been in line with expectations with the dividend of 0.55p being paid monthly, equating to a yield 7.48% as at the end of the reporting period.
Capital and cash flow management
The current weighted average cost of debt is 6.8%, which was achieved during the period through the refinancing of a loan from a syndicate of high net worth individuals via the Sancus platform which reduced interest costs on this from 11% to 8.75% (the "Syndicated Loan").
One of my key objectives over the next 6 months is to optimise the group balance sheet and secure long term funding. By recognising losses early and reducing leverage, together with an increasingly profitable Sancus BMS Group, we have de-risked the business significantly and have a foundation for driving returns. Nonetheless a growing lending business needs capital.
The Board and I have assessed the Company's financial position as at 30 June 2016 and after taking into consideration the maturity profile of our debt structure and the various options we have available to us to meet these commitments, we are of the opinion that it is appropriate to prepare these accounts on a going concern basis. The options being considered by the Board include the possible refinance of the loan. In current market conditions, the rate being provided to investors is attractive and therefore the Board considers this could be one likely option. We are however looking to reduce our current debt, so the Board also notes the potential to "tap" the existing ZDPs and/or GLI Bond or the part sale of our holding in the SMEF shares could also repay the debt.
GLI Finance Limited
CHIEF EXECUTIVE OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Capital and cash flow management (continued)
I am working on a solution to improve the Group's debt to equity profile yet further, and I will provide more information during the course of the year as to how these plans develop.
Summary of financial results
The financial results for the period for the Company and the Group prepared in accordance with IFRS are set out in pages 33 to 41. The Group loss for the period was GBP8.4m (June 2015 loss GBP8k) and on a Company basis was GBP6.9m (June 2015 profit GBP5.3m).Results for the first half have been impacted by the write downs we have made and as touched upon at the start of my report, in order to assist in understanding the underlying performance and financial position of the period, we have developed the GLI Measurement basis. I have commented below on the GLI Measurement results presented in the CFO's report.
From a GLI measurement perspective, the loss of GBP10.3m as shown on page 17 largely reflects the results of the strategic review's impact on platform valuations in Pillar Two, with net write-downs incurred over the period of GBP6.9m and GBP6.0m on loan write offs. Also in the period we have incurred capital movements in relation to de-recognition of associates due to the restructuring of the Group, along with incurring GBP0.7m of legal and professional fees and the loss on the fair value on SMEF which we would deem as non-recurring. Adjusting for these items, on a normalised basis profits for the period are GBP5.2m.
In Pillar One, earnings for the period did not include the results of Sancus Gibraltar or the full BMS Finance profits as they were only fully acquired at the end of the period. EBIT on a consolidated basis was GBP1.4m, but on a pro forma basis, including new acquisitions for the full period, EBIT totalled GBP2.0m. We expect profits for Pillar One to steadily increase from the current year comprehensive profit target of GBP2.5m (excluding Platform Black), as it benefits from synergies, cross selling and continued organic growth. Platform Black is anticipated to move from a loss position (H1 2016 GBP0.7m loss) into profit following the recent commitment of a GBP50m funding line from new investors, and other synergies upon joining Sancus BMS Group.
In Pillar Two we have made write-downs where necessary, reflecting our prudent approach to valuations. Net write downs have totalled GBP6.9m. The companies in the Prioritised list of platforms are well placed to continue the growth in value we have seen this period, during which we have recognised a valuation uplift of GBP5.5m.
Amberton's loss amounted to GBP149k.
Group Head Office's results were negatively impacted by the share price decline in SMEF, resulting in an unrealised loss of GBP 2.6m on this asset. We expect this loss to reverse in time as the market price returns to the Fund's net asset value.
We have stated earlier in the year that following GLI's reclassification on AIM as a trading company rather than an investing company, we will in future focus reporting on earnings rather than on NAV. However we note that the Company's NAV is still important and in the CFO report a breakdown of the movements in the period is provided.
Conclusion
Overall I am pleased with the progress the Group has made so far this year, although it has been a testing time for all. We have moved as quickly as possible and I believe that we have achieved a significant transformation in the past 8 months. We have executed on our plan to focus, simplify and rationalise the Group's operations after its rapid expansion over the previous two years. The Group's attention has now firmly shifted to generating sustainable earnings streams from our profitable, niche SME lenders, alongside the FinTech investment portfolio, where we will continue to actively support our Prioritised platforms. By the "venture" nature of the 20 start-up platforms in which GLI took an interest in recent years, there was always a risk that some would not yield a return - however, now that the "losers" have been written down, we consider that over time, the portfolio will provide a material positive return.
By the end of the year I aim to have finished the strategic review I started in December 2015. I have taken all the necessary hard decisions and write downs and, I truly believe, we will have positioned the business for growth, laid the foundations for maximising returns to Shareholders. I will remain focused on executing our strategy, and, consistent with this, maximising value creating opportunities as they arise.
I would like to thank the Board for welcoming me as the Group CEO and for their support over the period. I would also like to thank my Executive Team and staff who have worked extremely hard to achieve our strategic goals. Finally, I would like to thank James and Fred for their support particularly over the past nine months and wish them well in the future.
Andrew Whelan
Chief Executive Officer
Date: 23 September 2016
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW
For the period ended 30 June 2016
Introduction
As the Group has transformed considerably over the last three years, we have aimed to improve our approach to disclosure with the introduction of reporting by Pillar, providing transparency of performance at this level. To enable this, we make, as referred to in the CEO report and explained in further detail below, certain adjustments to the key line items prepared under IFRS to arrive at the GLI Management Basis for commentary on these numbers. We have developed this methodology for presentation of the numbers in the CEO and CFO reports as, we believe, it helps provide the reader with a comprehensive understanding of our underlying performance and financial position over the period.
The GLI Measurement Basis
GLI has restructured its business into Three Pillars for the following reasons:-
- to more clearly define the components of the Group's business;
- to focus management on the achievement of value creation targets in each Pillar;
- to clarify how value is created in each area of the Group's business, and,
- to improve the measurement and disclosure of value created in each Pillar.
As the Group's transformation has progressed, it has become increasingly obvious that the application of International Financial Reporting Standards (IFRS) to the Group's business does not necessarily provide a clear understanding of performance and financial position. To address this issue, the Group has developed a hybrid approach to presenting its results, referred to as the GLI Measurement Basis, which is explained in the table below.
It should be noted that the GLI Measurement Basis is only applied to disclosures in the CEO's and CFO's reports. The primary statements are presented in accordance with IFRS. Key reconciliations to IFRS disclosures of Consolidated Comprehensive Income are included below.
| Source of Value Creation by Pillar | Adaptation of IFRS in the GLI Measurement Basis |
| The Company The Company's accounting policy is to carry the value of its subsidiaries and platform investments (collectively, the Group) at fair value. Therefore, the Company's net asset value (NAV) is a reasonable measure of the current value of the Group, measured in accounting terms. |
· The Company NAV remains an important measure of the fair value of the Group. |
| Pillar One Established as a profitable group of operating companies, Pillar One creates value through its consolidated earnings. However, its contribution to the value of the Group is also, meaningfully represented by the fair value of its gross assets per the Company balance sheet. |
· Earnings are disclosed on a consolidated basis. · Pillar One Gross Asset Value (GAV) per share, being gross assets at fair value excluding liabilities, as reflected in the Company Accounts, is disclosed as the most appropriate valuation measure of the Pillar. |
| Pillar Two Pillar Two investments are held with the objective of realising capital gains. Fair value gains and losses of Pillar Two "venture capital" assets are reflected in the Company accounts. IFRS requires that fair value gains and losses are reversed out on consolidation, making consolidated information less meaningful in the context of Pillar Two. |
· The Company fair value basis for earnings and financial position best measures Pillar Two performance and valuations and is adopted in the GLI Measurement Basis. · The GAV per share, calculated as per Pillar One, is disclosed as the most appropriate measure of the value Pillar Two contributes to the value of the Group. |
| Pillar Three Amberton Asset Management contributes value through its earnings as an asset manager. |
· Earnings are disclosed on a consolidated basis. · The GAV per share, calculated as per Pillar One, is also disclosed. |
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
The GLI Measurement Basis (continued)
| Source of Value Creation by Pillar | Adaptation of IFRS in the GLI Measurement Basis |
| Group Head Office The corporate centre of the Group manages interest earning assets and interest bearing liabilities (with exposure to credit and market risks) and incurs operating costs. |
· Earnings are disclosed on the consolidated basis, to exclude any operating costs and finance revenues/costs internal to the Group. · The SME Fund is stated at fair value. · NAV per share is disclosed to complete the disclosure of Company NAV on a fair value basis. |
| Pro forma disclosures The components of the Group have changed significantly since 30 June 2015, making comparison of previously disclosed numbers to current period values unhelpful. |
· To provide useful information, "pro forma" comparatives have been disclosed as if the Group structure at 30 June 2016 had existed throughout prior periods. |
Significant events over the half year
Significant events in the first half of the year which have had an impact on the results and capital structure are listed below:
· On 5 February 2016 GLI entered into a Share Sale agreement with Golf Investments (part of the Somerston Group of companies) which included:
· Sale of 15m SMEF shares to Golf Investments;
· The sale of 50% of AAM for GBP0.25m;
· Issuing a warrant instrument to Golf Investments to subscribe in cash for up to 32m new Ordinary Shares on the basis below:
· 10,000,000 Warrants at 40 pence per Ordinary Share;
· 10,000,000 Warrants at 45 pence per Ordinary Share; and
· 12,000,000 Warrants at 55 pence per Ordinary Share.
· On 5 February 2016 GLI increased its' stake in Platform Black from 43.9% to 83.7%.
· On 16 February 2016 we announced our strategic goals, including a target to achieve a saving of GBP1.0m in costs on an annualised basis from closure of non-performing subsidiaries, advisory fees and travel. We are on target to achieve these cost savings.
· On 3 March 2016 the sale of 15 million SMEF shares to Golf Investments was completed for a cash consideration of GBP15m which was used to reduce Company debt. GLI now holds 47.94% and Somerston 27.94% of SMEF's issued share capital.
· On 10 March 2016 GLI subscribed for GBP5.0m Platform Black preference shares at an interest rate of 9%.
· On 15 March 2016, the GBP30m syndicated loan facility which was at an interest rate of 11% was repaid and a new facility put in place for GBP14.86m for one year at 8.75%.
· On 20 April 2016, the dividend for Q1 2016 of 0.625 pence per share was declared, following the announcement on 21 December 2015 that the annual dividend would be halved from 5.0 pence per annum to 2.5 pence per annum.
· On 27 April 2016, it was announced, subject to Shareholder approval, that the Company would no longer be classified as an "Investing Company" under the AIM Rules, reflecting the Board's view that the Company now exhibits the characteristics of a trading company. Shareholders approved the change at GLI's AGM on 19 May 2016 and, as a result, the Company is no longer classified as an Investing Company effective 20 May 2016.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Significant events over the half year (continued)
· On 28 June 2016 it was announced that GLI had acquired Funding Knight Limited and two of its operating subsidiaries for a consideration of GBP0.75m.
· GLI committed to providing Funding Knight Limited with at least GBP1.0m of further capital to finance its ongoing operations.
· Funding Knight Holdings Limited ("FKHL") was put into administration and GLI wrote off its holding in the ordinary share capital of GBP2.48m, GBP1.0m in preference shares and loans and accrued interest of GBP0.82m.
· It was confirmed by the administrator of FKHL that GBP0.45m would be repaid to GLI from FKHL in partial settlement of the loan.
· On 30 June 2016 the 100% acquisition of Sancus Gibraltar and GBHL (the Company owned 15.26% and 62.5% respectively before the deal) completed to create Sancus BMS Group. The transaction was completed by:
· The issue of 43,408,360 new Ordinary Shares and GBP10m bond as consideration for Sancus Gibraltar; and
· 11,093,247 shares issued and GBP1.75m cash in payment for GBHL.
· Post period, on 8 July 2016, the Company announced a change of external auditor from Grant Thornton Limited to Deloitte LLP and the change of registrar from Equiniti Investment Solutions to Capita Registrars.
· On 9 August 2016 an update of dividend policy was announced. The Board has resolved to maintain the policy of paying a dividend of not less than 2.5p per annum on a quarterly basis in respect of the 2016 financial year, but from 2017, dividends will only be paid when fully covered by cash earnings. This ensures that the Company has the resources to make the most of its opportunities to create longer term shareholder value, with the objective of providing for the payment of a progressive dividend.
Company Net Asset Value (at fair value) and the GLI Share Price
Figure 2- Please see supplementary document
The Company NAV per share at the end of June 2016 was 37.07p represented a 13.25% decline since December 2015. The share price at 30 June 2016 was 24.88p representing a 32.9% discount to NAV on a fair value basis.
The Net Asset Value of the Company has been negatively impacted by write-downs in its Pillar Two investments, primarily at 31 December 2015 and 30 June 2016. This is further explained later in this report.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Movement in the Company Net Asset Value (at Fair Value)
Figure 3- Please see supplementary document
Net assets increased in the first half of the year by 7.5% from GBP98.24m to GBP105.64m. The main reason for this was due to the issue of new shares as part of the transaction which closed on the 30 June 2016 and the upwards revaluation of the Company's existing holdings in Sancus Gibraltar and GBHL, based on the acquisition prices of GBP13.5m and GBP13.8m respectively.
Pillar Two Prioritised platforms were revalued on the basis of the most recent transaction prices, in line with our valuation policy.
Pillar Two Other FinTech required write-downs of GBP6.9m in equity and GBP6.0m in loans as platforms either underperformed or were closed. Specifically, two platforms were in the process of closing during the period (CrowdShed and Raiseworks), with interests in one (Proplend) being sold post period end and another in the process or being sold or exited. Pillar Two benefited from a GBP2.7m unrealised foreign exchange gain.
We experienced a loss on the carrying value of our investment in SMEF based on the mid-price of this quoted fund falling to 89.75p at 30 June 2016, however there is a potential for upside with the NAV per share at 30 June 2016 at 101.31p.
Company Net Asset Value by Pillar (at fair value)
As set out in the tables below, at June 2016 Company NAV comprises gross assets of :
· Pillar One GBP87.0 (30.52p per share) being a combination of equity and intercompany loans.
· Pillar Two GBP37.66m (13.22p per share) being the fair value of the FinTech platforms.
· Pillar Three, GBP0.45m (0.16p per share) being the net asset value of AAM.
· Group Head Office
o Holding in SMEF shares of GBP22.74m (7.96p per share)
o Loans through platforms and held in BMS managed funds of GBP8.8m (3.08p per share)
o Net Liabilities of GBP50.99m (-17.86p per share) largely made up of the Zero Dividend Preference Shares ("ZDPs"), Bond and the Syndicated Loan.
In comparison to December 2015, the increase in Pillar One was due to the acquisition and revaluation of Sancus Gibraltar and GBHL. Pillar Two has had a minimal movement overall, due to the net effects of write ups, write downs, acquisitions, disposals and new loans made to prioritised platforms. The value held in the SMEF has decreased following the sale of 15 million shares to Somerston at the beginning of the year and a fair value loss on share price of GBP2.6m. The slight increase in loans made to SME's in the period relates to loans made to the BMS managed funds in the period.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Figure 4- Please see supplementary document
Figure 5- Please see supplementary document
Net Profit/(Loss) by Pillar (GLI Measurement Basis)
Figure 6- Please see supplementary document
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Net Profit/(Loss) Pro forma comparatives by Pillar (GLI Measurement Basis)
| GBP '000 | Pillar One | Pillar Two Prioritised | Pillar Two Other FinTech | Total Pillar Two |
Pillar Three | Group Head Office | Total |
| June 2016 Net Profit/(Loss) | 1,350 | 5,520 | (13,135) | (7,616) | (149) | (3,839) | (10,254) |
| June 2015 Net Profit/(Loss) | 1,061 | 5,529 | (4,295) | 1,234 | (77) | (2,044) | 173 |
Summary
The net loss for the first six months of the year on a GLI Measurement Basis is GBP10.3m and a profit of GBP0.2m on a like for like basis for 2015. This is further explained below.
Pillar One - Sancus BMS Group
We expect to see further profit growth within this Pillar, which will be reflected in the Group's results next period, partly flowing from the inclusion of the full profits of Sancus Gibraltar which only became attributable to the Group after its full acquisition on 30 June 2016. The GBP0.3m pro forma net profit increase from H1 2015 to H1 2016 was largely driven by increased profits at GBHL as a result of growth in the two BMS funds.
Platform Black is currently the sole loss making entity within Pillar One with an operating loss before financing costs of GBP0.7m in the first half of 2016. We expect to see this position improve in the future as the platform scales through the utilisation of its new funding line and benefits from being part of an integrated larger group.
On an annualised basis operating expenses in H1 2016 were largely in line with FY15. Overall, costs have remained under control as the Pillar's revenue continues to grow. However there have been increases related to building the new Irish BMS fund and Sancus Gibraltar, but this has been offset by cost savings at Platform Black.
Pillar Two - Prioritised Platforms
The Pillar comprises Liftforward, The Credit Junction, Finexkap and Funding Options. We value this pillar on a fair value basis, recognising any revaluations as a measure of performance. This half year we have seen an uplift of GBP5.5m as these platforms have continued to grow and raise external funding, validating a higher Company valuation on which the Board makes their fair value assessment.
The performance of this Pillar has remained strong since it was established - the details of its 117% return based on original investment are set out in the Pillar Two Finance Performance section on page 23.
Pillar Two - Other FinTech
In the period, we recorded GBP13m of write-downs across equity and loan investments in Other FinTech companies. During the period we closed two of our platforms, reduced our interest in and removed our support from a third and post period end we have sold our interests in a fourth platform.
Pillar Three - Amberton
On a consolidated basis, Amberton in total is making a small loss of GBP0.15m as its asset management fees are not yet covering its operating expenses. The widening of the loss compared to H1 2015 is due to Amberton not being operational for the full six months in H1 2015.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Group Head Office
Main components included in Group Head Office are:
· Revenue of GBP2.6m is made up of dividends from SMEF and the BMS managed funds and interest from loans through the platforms.
· A fair value loss of GBP2.6m on the SMEF shares.
· Operating costs of GBP2.65m including GBP1.2m legal and professional costs, of which GBP0.7m arose from non-recurring projects associated with the strategic review.
· Finance costs of GBP2.1m from the following interest bearing instruments:
o GBP14.86m loan facility repayable 15 March 2017 (8.75%), interest paid quarterly;
o GBP10m 5-year Bond (7%) matures 30 June 2021, interest paid half yearly;
o GBP20.7m 2019 ZDPS (5.5%) income entitlement and principal due on expiry 5 December 2019.
Group Head Office net loss has increased from GBP2.0m in H1 2015 to GBP3.8m in 2016. This net GBP1.8m increase is primarily due to the GBP2.6m loss on SMEF (as noted above), higher non-recurring transaction costs associated with the corporate actions (listed above) executed as part of the strategic review, offset by capital adjustments.
Normalised Net Profit (GLI Measurement Basis)
A number of exceptional, non-recurring write downs have been necessary this period. Normalised earnings on the GLI Measurement basis are set out below:
| GBP'000 | 6 Months to June 2016 | 6 Months to June 2016 |
| Pre adjustment | Normalised | |
| Pillar One | 1,350 | 1,350 |
| Pillar Two | (7,616) | 5,520 |
| Pillar Three | (149) | (149) |
| Group Head Office | (3,839) | (1,552) |
| Normalised Net (loss)/profit | (10,254) | 5,169 |
The adjustments made in the 'normalised' column in the table above exclude the deduction of Pillar Two fair value adjustments of GBP13.0m as we currently do not foresee significant write downs in the future, although a level of investment risk remains in the portfolio. The uplift in fair value in Pillar Two of GBP5.5m relates to prioritised platforms. The GBP2.6m fair value write down of the holding in SMEF within Group Head Office has also been excluded in the calculation as we expect the share price to normalise back towards NAV over time as well as the reversal of capital movements in relation to de-recognition of associates and removal of non-recurring expenditure on legal and professional fees of GBP0.7m associated with the restructure have been excluded.
Pillar One Pro forma Financial Performance Report (GLI Measurement Basis)
At 30 June 2016, with the exception of Platform Black at 84%, all of the entities in Pillar One were 100% owned by GLI. Pro forma disclosures set out below been prepared on this basis.
Revenue Analysis
Revenue streams include interest income on balance sheet lending, advisory/management fees, arrangement fees, commitment fees, earn-outs and other fees. By their nature, fees vary with transaction volumes, and the irregular timing of earn-outs, so will generally show some volatility.
Figure 7- Please see supplementary document
Figure 8- Please see supplementary document
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Earnings
Figure 9- Please see supplementary document
Pillar One continues to display strong revenue growth with Sancus and GBHL being the main revenue generators in this Pillar at present. On an annualised basis, H1 2016 operating expenses are largely in line with FY15. Overall, costs have remained under control as the Pillar's revenue continues to grow, improving the EBIT margin. Sancus and GBHL are both profitable, with Platform Black looking to benefit from its new GBP50m funding which was committed in July 2016 from external minority investors.
Sancus
Sancus provides secured lending to asset rich, cash constrained borrowers while also providing co-lending opportunities to high value clients. The key margin generator within this business is from the underwriting and participation of syndicated loans. Sancus has loaned in total GBP250m since it became fully operational in January 2015. The average loan is GBP2m, duration is 16 months interest rate is 9% and Loan to Value (LTV) is 34% and activities are focused on offshore jurisdictions. Sancus companies lend their own capital in every loan alongside "co-lenders" who advance the majority of funds on each borrowing. There is no set ratio for the deployment of Sancus capital, although a guideline of 5-10% average participation is in place.
Figure 10- Please see supplementary document
The above pro forma graph shows the performance achieved by Sancus Jersey, Sancus Gibraltar and Sancus Guernsey since 2014. All lending and fees related to transactions with GLI have been eliminated. The results of Sancus IOM have not been included due to the Group only holding 2.1% (now 7%).
The total loan book has increased by 24% from GBP49.5m at the end of June 2015 to GBP61.4m at the end of June 2016. The composition of the loan book has shifted in the period with the decrease in Sancus capital reflecting increased co-lender participation, delivering a profitable higher co-lender participation ratio at the end of H2 2016.
Interest income in absolute terms has seen a decrease from H1 2015 to H1 2016 due to lower on-balance sheet lending, although lending margins have been maintained.
In general terms, the Sancus entities have experienced excellent retention rates amongst co-lenders, as they seek both to recycle and deploy additional capital upon maturity of existing loans and availability of new opportunities. With attractive returns and Sancus' track record of a default lower than 0.5% since inception, we continue to witness strong appetite both from existing and potential new co-lenders.
Transaction fees fluctuate from month to month according to loan activity.
At the end of H1 2016, Sancus entities reported a pipeline of GBP50m+ of potential new loans. This, allied with strong demand for co-lender participation, we believe, provides a strong platform for further revenue growth through H2 2016. Sancus will also seek to create new entities in the future and will explore opportunities in expanding the BMS operation into Ireland and the other offshore jurisdictions.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
BMS Finance
www.bms-finance.com
BMS Finance arranges and manages senior secured lending of up to GBP5 million for UK small and medium sized enterprises (SMEs) and up to EUR5 million to Irish SMEs which are at, or approaching, profitability. Lending is structured through two distinct investment funds, one focused in the UK and one in Ireland and have committed capital of GBP60 million and EUR30 million respectively. Investment is locked in until 2024, enabling BMS to match its lending time horizon with capital availability.
The funding for the funds is provided from BMS Finance's own balance sheet, from GLI, through British Business Bank Investments (BBIL), the National Treasury Management Agency (as controller and manager of the Ireland Strategic Investment Fund (ISIF)) and from SMEF, under matched funding agreements. BMS acts as an advisor to both funds.
The pro forma graph below shows the revenue earned by BMS from (1) a return on its own assets invested in either loans or the funds, and (2) the fees it earns for managing the two funds.
Figure 11- Please see supplementary document
The loan book funded by external capital has increased significantly from June 2014 to June 2016, the main drivers being the growth in the UK fund and the launch of the Irish fund. The decrease in BMS deployed capital from GBP13.8m in December 2015 to GBP10.9m at the end of June 2016 arose following the transfer of legacy loans from BMS's balance sheet into the new funds. This enabled BMS to fund its commitments to the funds whilst also generating sufficient liquidity for the partial repayment of BMS's debt facility with GLI.
Total income shows an upwards trend largely in line with the growth of loans under management. Further growth is anticipated as the deployment of the UK and Irish funds progress.
Default rates continue to remain low at less than 0.5% since GLI's initial investment in 2012.
The BMS team's specialist understanding of SMEs, illustrated through its successful 12-year track record in SME lending, together with its long term committed capital, positions it favourably in a market that continues to offer significant opportunities for growing the lending books whilst generating attractive risk adjusted returns. The corporate fund structures in place remain resilient and effective in light of the recent macro environment and associated uncertainty created by the UK's planned exit from membership of the European Union. BMS's focus remains on prudent deployment of funds, beneficial pricing and resilient structuring ensuring that growth of the loan books is not at the expense of deteriorating borrower credit quality and ultimately lower investor returns.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Platform Black
Platform Black is an innovative online business finance marketplace that connects investors to businesses and institutions who are seeking flexible working capital finance solutions. Since inception, Platform Black has raised finance from a wide-range of mainly UK based funders.
Key developments over the last 12 months have included:
- In 2015, the business repositioned its target market into mid corporate supplier and invoice finance solutions.
- In April 2016, GLI subscribed for GBP5m of new preference shares in Platform Black with the funds being used to repay GLI loan facilities and to position the business for further growth.
- In July 2016, a consortium of private investors took a 10% Shareholding in Platform Black Ltd with options to buy a further 20% in the next five years, replacing six minority Shareholders.
- The new Shareholders committed to lend up to GBP50m through the company, thereby providing an opportunity to fund ambitious growth plans in the SME and education sectors.
- Following the July transactions, Sancus BMS Group Ltd's equity stake in Platform Black Ltd was 84.65% (83.93% as at 30 June 2016).
- Platform Black will change its name to Sancus Finance on 31 December 2016.
Figure 12- Please see supplementary document
As reflected in the performance graph, the business is seeing increasing volumes in its targeted SME finance solutions through its innovative education and supplier finance products. The company's approach has been particularly well received in the university sector where the business provides a working capital solution to fund short term funding needs.
Default rates have remained low despite the volume growth in the business, a reflection of the strong credit focus of the senior management team.
Although transaction volumes have increased in H1 2016, revenue per trade declined slightly at the commencement of the period due to transactions with some exceptionally large university clients bearing a lower transaction fee commensurate with the associated lower risk. Revenues are expected to increase with utilisation of the new funding line.
A healthy pipeline of larger SME transactions is matched by increased interest from funders with appetite for this market sector. They have invested in an enlarged new business team supported by a strong marketing strategy focussed on strategic relationships. In addition, Platform Black is introducing credit insurance onto its loan book. As a consequence, strong growth in revenues is forecast in the next 12 months.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Pillar Two Financial Performance
Figure 13- Please see supplementary document
The Gross Assets (equity and working capital loans) in Priority platforms has increased over the period due to additional investments, a revaluation gain and FX gains (three of these platforms are denominated in EUR or USD).
Other platforms have decreased in value due to significant write-downs partially offset by FX gains. Of the twelve platforms in this category, following the write-downs during the previous two accounting periods, six are now fully written down.
Return on Investment in Pillar Two
As noted earlier, Management assess Pillar Two based on its fair value performance and as such, the ROI is the single most important measure of performance.
Figure 14- Please see supplementary document
The Prioritised platforms have had their business models validated by the involvement of one or more external parties such as investors, platform funders, key partners and regulatory authorities. Although the risk remains that one or more of the platforms might not fulfil their expected potential, management are working closely with these platforms to maximise performance and sustain high ROI rates.
The Other Pillar Two platforms have underperformed. The GBP44.1m of investment made since 2013 is now valued at GBP13m after GBP9.1m of disposals. To address this, the financial performance and outlook of these assets is being intensively reviewed. In the period two platforms (Raiseworks and CrowdShed) have been closed and one sold (Proplend) post period end.
Management expect that H2 2016 and future periods will show less volatility in platform valuation than in H2 2015 and H1 2016. With the strategic review now passing the half-way point, risks have been more clearly identified, measured and valuations adjusted accordingly.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
Pillar Two - Priority FinTech platforms
The Priority FinTech platforms comprise Finexkap, Funding Options, LiftForward and The Credit Junction, with GLI holding 29.8%, 28.9%, 18.4% and 24.4% of the platforms respectively. Further explanation around the activities and performance of each is set out below.
Combined new loans per quarter
Figure 15- Please see supplementary document
Combined loan books
Figure 16- Please see supplementary document
Financial results are considered to be commercially sensitive by associate platforms and as such are not disclosed by individual platform. However, the aggregate loan books and new business volumes have been presented.
The four priority platforms have shown strong new loan origination growing quarter on quarter over the past 10 quarters. The combined new loan volume graph shows a 13% increase from Q1 to Q2 2016 and a 70% increase from H2 2015 to H1 2016.
The aggregate loan exposure has shown growth in H1 2016 of 9% per month on average.
Finexkap
Finexkap offers short-term funding solutions with no volume or timeframe conditions. The service focuses on easy-to-use features - "in just a few clicks" French SMEs can sell their receivables and gain access to working capital financing with competitive advantages compared to traditional factoring services. As of June 2016, Finexkap had originated EUR30m of invoice transactions since inception. Volumes are growing on an exponential basis with year on year growth multiples averaging 2.0 - 2.5x. Demand continues to be strong.
On the funding side, Finexkap is working on two innovative funding partnerships, which if consummated will support future growth at a cheaper financing cost. Partnerships with leading accounting software and e-invoicing platforms which are planned to begin operation in H2 2016 are expected to improve lending demand from higher-credit quality borrowers.
The success of the funding and lending partnerships is key to Finexkap's potential profitability. Based on current projections, profitability is expected to occur late in 2017, or early in 2018.
Funding Options
Funding Options uses proprietary funder/borrower "matchmaking" technology to act as a one-stop-shop for business finance. The company has been recommended as one of three platforms for designation by HM Treasury under the Small Business, Enterprise and Employment Act 2015 Bank Referral Scheme. It is Authorised and Regulated by the Financial Conduct Authority as a Credit Broker, Reference number: 727867.
Funding Options has a well-established panel of over 60 funders, which provide funding for its SME lending.
A significant programme of operational change has been delivered, resulting in substantial improvements to unit economics.
Funding Options continues to deliver strong lending growth and remains on plan to achieve profitability in 2017 as market awareness of online solutions for business finance continues to grow, evidenced by the broadening demographic profile of the typical SME customer. Demand for borrowing and availability of funds via alternative lenders both remain strong.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
LiftForward
LiftForward provides manufacturers and distributors with point-of sale software solutions for their small business customers, allowing manufacturers to sell their goods and services as subscription products. LiftForward also supplies the financing, providing a total end-to-end solution.
LiftForward has experienced significant growth over the course of the year to date, more than tripling origination volume year on year. Total originations are likely to top USD100 million during 2016.
LiftForward recently completed its integration with Microsoft's front and back-end systems, allowing customers to complete transactions on Microsoft's website. This partnership provides Microsoft the ability to offer its hardware as subscription and membership services allowing many companies to implement the latest Microsoft equipment for a monthly fee.
Over the course of the next 12 months LiftForward is working towards integrating its subscription management solution into other major manufacturers and distributors.
The Credit Junction
The Credit Junction ("TCJ") is a data-driven asset based lending platform that combines technology and data intelligence with traditional asset-based metrics to help owners of US and Canadian small and midsized businesses grow their companies with fast, flexible and efficient access to working capital.
TCJ has made significant progress, both in short-term milestones and longer-term objectives, across all areas of the business: credit, customer acquisition and product development. Those developments are the basis on which management is building The Credit Junction to be a long-term profitable, scalable and sustainable business.
The Credit Junction platform was launched in Q2 of 2015 and has seen steady growth since inception. The Company surpassed $50 million in Lines of Credit in Q2 of 2016, is seeing on average $250 million in new applications per quarter and continues to see market demand and acceptance of its products.
Management remains keenly focused on credit, controls and its path towards profitability as it prepares for the next stage of growth in 2016 and beyond.
Pillar Two - Other FinTech platforms
As above, aggregate loan book performance has been presented for the eight "Other" Pillar Two platforms which continue to operate.
Combined new loans per quarter
Figure 17- Please see supplementary document
Combined loan books-current months
Figure 18- Please see supplementary document
Other platform loan origination volume for H1 2016 was broadly in line with H2 2015. However, within this number there is some variation at a platform level. Although most of the contributing platforms have outstripped their H2 2015 performance, two have not. One of these platforms, FundingKnight has undergone significant restructuring in the period and management are working towards a return to a growth path. The other platform with a loan origination contraction in H1 2016 is currently being intensely reviewed by GLI, and the Group's investment has been written down to reflect its performance.
GLI Finance Limited
CHIEF FINANCIAL OFFICER'S REVIEW (continued)
For the period ended 30 June 2016
The fair value of the eight platforms in the 'Other' Category is GBP13.1m (31 December 2016 GBP20.9m). The valuation of GLI's investment in these platforms ranges up to GBP4.8m. The Group considers these eight businesses (Finpoint, Funding Knight, MyTripleA, Open Energy Group, Ovamba, Trade River UK and US, and UK Bond Network) to have interesting operating models which hold potential for growth, but we continue to closely monitor the execution of their individual strategies.
The performance of Pillar Three has been disclosed as part of the GLI Measurement Basis table above.
Emma Stubbs
Chief Financial Officer
Date: 23 September 2016
GLI Finance Limited
RISK REPORT
For the period ended 30 June 2016
Principal Risks inherent in the Group's Three Pillar business model
The taking of risk is inherent in the process of value creation. As the essence of the Group's business model is investing in FinTech platforms, which raise funds to lend, it follows that the principal risks the Group has consciously accepted are investment risk, liquidity risk and credit risk. In turn, exposure to investment risk is driven by the strategic, liquidity, indirect credit and operational risks assumed by investee platforms.
The Group has assumed other risks which, based on current assessment, pose lower levels of uncertainty: strategic, market, operational, regulatory compliance, and consequential reputational risk.
Set out below is an analysis of risks by Pillar and the residual exposures on the holding Company balance sheet. In this discussion reference is made to the following risk definitions employed by the Group:
Risk Definitions
1. Investment Risk - the risk that an investment's actual return will be different to that expected. Investment risk primarily arises from the exposure of the Group's investee entities to the risks summarised below:
· Strategic Funding Risk - the risk that investee platforms are not able to raise sufficient funding to fuel their loan growth until they become operationally self-sustaining.
· Strategic Lending Risk - the risk that markets for the lending products of platforms are not sufficiently large to allow revenue growth, or that the offering/pricing is not competitive;
· Strategic Operating Risk - the risk that the platforms' business models are ineffective across the people/process/IT system dimensions is sub-optimal;
· Operating Finance Risk - the risk that platforms will not be able to finance their operating expenditures until they reach break-even in cash flow terms; and,
· Performance Management Risk - the risk that GLI is not in a position to influence, guide or otherwise adequately direct the performance of investee platforms to protect its investment.
2. Liquidity Risk - the possibility that the Group will be unable to settle obligations timeously.
3. Credit Risk - Direct credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments. Indirect credit risk is defined as the potential impact on the Group of defaults in loans arranged and managed by GLI's subsidiaries and which are funded by clients of that subsidiary. Subsidiaries do not carry direct credit risk in these circumstances, but may be negatively impacted by consequential reputational risk.
4. Strategic Risk - the uncertainties and untapped opportunities embedded in the Group's strategic intent.
5. Market Risk - Market risk is the risk of losses in positions arising from movements in market prices. Market risk includes as sub-definitions: Interest rate risk, including basis risk and foreign exchange risk.
6. Operational risk - the risk of loss arising as a result of inadequate or failed internal processes, people and systems, or from external events (including legal risk).
7. Regulatory Compliance Risk - Regulatory Compliance Risk is defined as the risk of legal or regulatory sanctions, material financial loss as a result of a failure to comply with laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to the Group's activities.
8. Consequential risks - risks that arise as a consequence of the occurrence of a risk event. Two main categories of such risks are:
· Capital Risk
· Reputational Risk
Risks managed at the Group level
Liquidity risk - Cash flow requirements arise from:
· Investment decisions;
· On-balance sheet lending;
· Operational expenditures;
· Contractual liability maturities, and,
· Distributions to Shareholders.
GLI Finance Limited
RISK REPORT (continued)
For the period ended 30 June 2016
All platforms require loan and working capital funding to grow. Therefore, a close relationship exists between the availability of GLI's investment funding and the growth of the valuations of platforms which have not managed to obtain other funding lines.
The Group's liquidity and cash flow management has been enhanced over the half year and is a focus for the CEO and his executive team.
The contractual timing of the maturity of its liabilities, and the liquidity of its assets, are reflected in the table below:
| GROUP | CURRENT | NON-CURRENT | ||
| At 30 June 2016 | Within 6 months | 6 to 12 months | 1 to 5 years | Over 5 years to maturity |
| GBP | GBP | GBP | GBP | |
| Assets | ||||
| Cash and cash equivalents | 10,657,974 | - | - | - |
| Loans | 450,000 | 13,452,430 | 22,467,834 | - |
| Trade and other receivables | 6,170,005 | 2,745,461 | - | - |
| SME Loan Fund Plc | 22,680,510 | - | - | - |
| Total financial assets | 39,958,489 | 16,197,891 | 22,467,834 | - |
| Loans payable | - | 12,441,000 | - | - |
| ZDP Shares payable | - | - | 22,796,533 | - |
| Bond payable | - | - | 8,500,000 | - |
| Trade and other payables* | 8,185,784 | - | - | - |
| Total financial liabilities | 8,185,784 | 12,441,000 | 31,296,533 | - |
| *In accordance with IFRS 7, excludes deferred income |
Fund raising, whether it be debt, equity or through asset sales, either for the Group balance sheet or on behalf of one or other of the platforms, is an ongoing feature of the Group's business, managed by bi-weekly reviews of cash flow forecasts undertaken by a sub-committee of the GLI Executive Committee chaired by the CEO, and overseen by the Board in its quarterly meetings.
Planning is well underway to refinance the Syndicated Loan due on March 2017 (included in the 6 to 12 month category).
GLI Finance Limited
RISK REPORT (continued)
For the period ended 30 June 2016
Market risk
Interest rate and foreign exchange rate risks arise through the normal course of the Group's business, operating as it does across a number of different monetary areas. The Group is also exposed to the quoted price of the SMEF investment.
Although these are relatively insignificant exposures, they are regularly monitored, and the decision not to hedge reviewed from time to time.
Sensitivities to these exposures are set out in the table below.
| Risk | Sensitivity | Impact on consolidated comprehensive income |
| Interest rate | GBP rates +2% GBP rates -2% |
GLI isn't linked to bank rates as all debt and interest bearing assets are at fixed interest rates. |
| Foreign exchange rate | GBP +15% GBP -15% |
GLI carries exposure on its balance sheet to foreign currency movements. If the GBP were to strengthen by 15% it would generate a GBP3.5m loss. However if it was to weaken by 15% a gain of GBP4.8m would be recognised. |
| SMEF share price | Price +15% Price -15% |
GLI has a Shareholding of 25.2m shares in SMEF. A 15% increase or decrease in the price of these shares will cause a GBP3.4m gain or loss respectfully. |
FX Rates
The Company has transactions in a number of currencies. The table below lists out the rates used for the periods ended 30 June 2016, 31 December 2015, 30 June 2015, 31 December 2014 and 30 June 2014:
Rate of exchange vs. GBP1:00
| Currency | 30 June 2016 | 31 December 2015 | 30 June 2015 | 31 December 2014 |
| USD | 1.3311 | 1.4736 | 1.5712 | 1.5577 |
| EUR | 1.1984 | 1.3571 | 1.4103 | 1.2876 |
| DKK | 8.9153 | 10.1191 | 10.5146 | 9.5908 |
Legal and Regulatory compliance
As a Guernsey Investment Company traded on the AIM market, the Company is required to comply with the AIM Rules as well as Guernsey Company law. Other key areas of legislation which exist in all jurisdictions in which the Group operates include Company laws, anti-money laundering regulations, data protection requirements and FATCA.
In conjunction with the Nominated Advisor, the Company Secretary monitors statutory requirements to ensure compliance with AIM Rules. The Group regularly consults leading legal firms for advice on the application of regulation, as well as to ensure the quality of contractual arrangements with counter parties.
In the wholly owned operating businesses, dedicated compliance officers, or executives with compliance experience perform and oversee the compliance of processes with local regulations. They operate within policy frameworks laid down at the GLI and Sancus BMS Group levels. A Compliance Committee has recently been established to ensure the continuous improvement of this framework.
The Group now invests in a number of platforms and whilst no platform is in direct competition with any other, this is a consideration when looking at potential new platforms and one which the Company looks to avoid. The Chief Executive Officer or a member of the Executive Team is on the Board of the majority of the platforms in which the Company invests. There are service agreements in place to confirm that any information acquired as a result of being a Director of each platform remains confidential to that platform. No information is shared with other platforms without the knowledge and consent of the relevant platform.
Consequential Risks
Capital Risk - Group Head Office closely monitors and plans to meet ongoing capital requirements.
Reputational Risk - Governance and the risk framework in operation within GLI is designed to avoid significant risk events, and so protect the Group's reputation. Events with potential reputational impacts are managed by the CEO and closely overseen by the Board.
GLI Finance Limited
RISK REPORT (continued)
For the period ended 30 June 2016
Risks inherent in Pillar One
Liquidity risk
Apart from the funding provided by the Group, Sancus BMS Group, relies on institutional, high net worth and some retail funders to meet requirements from borrowers. Funding is arranged before a loan is approved, and funding and loan repayment terms are structured to avoid any liquidity mismatches arising.
The main impact of liquidity risk is that growth may be constrained. As such, building and maintaining relationships with co-lenders and funders is an ongoing priority for management.
Direct and Indirect Credit Risk
The on balance sheet loan book is generally performing well, and loans under management have only 0.3% outside of original credit terms.
| Direct Credit Risk (GBP '000) | 30 June 2016 |
| Total loans | 25,500 |
| Loans outside of normal repayment terms | - |
| Doubtful recovery | - |
| Provisions | - |
| Written off | - |
| Indirect Credit Risk (GBP '000) | 30 June 2016 |
| Total loans | 80,800 |
| Loans outside of normal repayment terms | 222 |
| Doubtful recovery | 192 |
| Provisions | - |
| Written off | 3 |
Sancus, BMS Finance and Platform Black have developed their credit policies, approval and monitoring processes to be effective for each businesses' different type of lending (property-backed, business cash flow and invoice/supply chain finance respectively.) Limited default experience indicate that the policies and processes are proving effective.
The 0.3% defaults were experienced at Platform Black.
Operational Risk
The operational risks of primary concern in Pillar One are business continuity and IT security risks, particularly where dependence on IT is significant, as in the case of Platform Black.
As the businesses, apart from Platform Black, are relatively simple operationally, reliable business continuity is achieved through offsite hosting and back-up of systems and data by reputable service providers and providing staff with the ability to operate from locations remote to their normal offices.
Platform Black, which is dependent on the 24/7 operation of its website, has robust real time data replication and systems availability. To date this infrastructure has proved to be reliable.
Platform Black also performs periodic penetration testing to ensure security controls built at the time of system implementation remain effective.
Risks inherent in Pillar Two
The Group's objective is to maximise the value of its Pillar Two investments over time. Pillar Two is where the majority of GLI's investment risk has been consolidated.
To limit the exposure to any one platform, an investment limit of 15% of gross assets has been set. The largest exposure to a particular platform that the Group had at period end amounted to 5.47%.
Using the drivers of investment risk as described above, the Group has developed a risk rating for each platform (commercially sensitive and therefore not disclosed). This rating is used to guide the intensity of management attention on platforms and is a key determinant of the decision to continue support for platforms, or not. It is reported to the Board at six monthly Audit and Risk Committee meetings.
GLI Finance Limited
RISK REPORT (continued)
For the period ended 30 June 2016
Risks inherent in Pillar Two (continued)
Liquidity support for platforms receives ongoing attention from management. Understanding the quantum of liquidity required by each platform to allow it to become self-financing from a working capital perspective is a key area receiving management attention.
GLI operates a New Business Committee which considers new/increased investment proposals in platforms. The GLI Executive Committee has also enhanced the process of reviewing platform performance.
Pillar Three
AAM manages its primary risk as an asset manager, namely that of investment underperformance of its fund under management, through the structured due diligence it performs on the platforms which originate loans for the fund. AAM also overview the credit risk on loans before the fund participates therein, and closely monitors the performance of these loans.
Group Head Office
The quoted price of the Group's investment in the SMEF fund is impacted by market sentiment and the underlying credit risks of the loans in the fund. These are risks accepted by the Group, and discussed in performance review meetings with AAM.
The direct credit risk in Group Head Office's portfolio of remaining loans through platforms is analysed as follows:
| Direct Credit Risk (GBP '000) | 30 June 2016 |
| Total loans | 8,723 |
| Loans outside of normal repayment terms | 210 |
| Doubtful recovery | - |
| Provisions | - |
| Written off | - |
Loans continue to perform with minimal late capital or income repayments. Only one loan has fallen outside of the current payment terms but this only accounts for 2.4% of our exposure. The remaining direct exposure is yielding an average interest rate of 11.45% p.a.. GLI are putting in place an agreement with Amberton to manage the remaining loan book on behalf of GLI and maintain close monitoring of our exposure.
Russell Harte
Chief Operating Officer
Date: 23 September 2016
INDEPENDENT REVIEW REPORT TO
GLI Finance Limited
We have been engaged by the company to review the condensed set of consolidated and company financial statements in the interim report for the six months ended 30 June 2016 which comprises the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Shareholders' Equity, the Statement of Cash Flows and related notes 1 to 25 for both the Group and Company. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and 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 financial report is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the Group and Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial 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 financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and 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 Ireland) 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 financial report for the six months ended 30 June 2016 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
Chartered Accountants and Statutory Auditor
Guernsey, Channel Islands
Date: 23 September 2016
GLI Finance Limited
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
For the period ended 30 June 2016
| Notes | Period ended | Period ended | |
| 30 June 2016 (unaudited) |
30 June 2015 (audited)* |
||
| Revenue | GBP | GBP | |
| Interest income | 3,230,362 | 3,516,094 | |
| Dividend revenue | 664,245 | 1,105,216 | |
| Fee income | 1,924,296 | 777,564 | |
| Other income | 6 | 14,110 | 1,864,199 |
| 5,833,013 | 7,263,073 | ||
| Other (losses)/ gains | |||
| (Loss)/gain on financial assets and liabilities at fair value through profit or loss: | |||
| Realised (losses)/gains | 11 (i) | (384,708) | 797,394 |
| Unrealised (losses)/gains | 11 (ii) | (4,712,772) | 702,881 |
| Other net gains/(losses) | 11 (iii) | 1,485,315 | (1,013,099) |
| Net losses on Associates | 10 (ii) | (1,947,054) | (1,155,664) |
| Net losses on Joint Venture | 10 (iii) | (8,797) | - |
| (5,568,016) | (668,488) | ||
| Total income | 264,997 | 6,594,585 | |
| Expenses | |||
| Management fees | 7 | - | (502,235) |
| Administration and secretarial fees | 300,509 | 221,004 | |
| Legal and professional fees | 1,444,659 | 939,073 | |
| Other expenses | 7 | 3,696,498 | 3,844,942 |
| Operating expenses before finance costs | 5,441,666 | 4,502,784 | |
| Net (loss)/profit from operations before finance costs | (5,176,669) | 2,091,801 | |
| Finance costs | 15 | (2,057,811) | (2,100,281) |
| Loss for the period after finance costs | (7,234,480) | (8,480) | |
| Net losses on de-recognition of subsidiaries | (1,207,701) | - | |
| Loss for the period | 8 | (8,442,181) | (8,480) |
| Other comprehensive income | |||
| Items that may subsequently be reclassified to profit or loss: | |||
| Foreign exchange on consolidation | 168,454 | 23,890 | |
| Total other comprehensive income | 168,454 | 23,890 | |
| Total comprehensive (loss)/income for the period | (8,273,727) | 15,410 | |
| Operating (loss)/profit attributable to: | |||
| Equity holders of the Company | (8,846,432) | 393,454 | |
| Non-controlling interest | 404,251 | (401,934) | |
| (8,442,181) | (8,480) | ||
| Total comprehensive (loss)/income attributable to: | |||
| Equity holders of the Company | (8,677,978) | 417,344 | |
| Non-controlling interest | 404,251 | (401,934) | |
| (8,273,727) | 15,410 | ||
| Basic & diluted (loss)/earnings per Ordinary Share | 8 | (3.84)p | 0.20p |
* Comparatives have been reclassified in order to more appropriately reflect the nature of the underlying items.
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED COMPANY STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
For the period ended 30 June 2016
| Period ended | Period ended | ||
| 30 June 2016 (unaudited) |
30 June 2015 (audited)* |
||
| Notes | GBP | GBP | |
| Revenue | |||
| Interest income | 1,422,939 | 2,704,200 | |
| Dividend revenue | 1,020,572 | 1,105,216 | |
| Fee income | 39,750 | - | |
| Other (losses)/income | 6 | (8,364) | 45,267 |
| 2,474,897 | 3,854,683 | ||
| Other (losses)/gains | |||
| (Loss)/gain on financial assets and liabilities at fair value through profit or loss: | |||
| Realised (losses)/gains | 11 (iv) | (5,575,862) | 1,493,532 |
| Unrealised gains | 11 (v) | 1,272,199 | 4,517,430 |
| Other net losses | 11 (vi) | (348,891) | (1,005,034) |
| (4,652,554) | 5,005,928 | ||
| Total (loss)/income | (2,177,657) | 8,860,611 | |
| Expenses | |||
| Management fees | 7 | - | (502,235) |
| Administration and secretarial fees | 184,104 | 186,610 | |
| Legal and professional fees | 1,208,302 | 705,591 | |
| Other expenses | 7 | 1,257,653 | 1,271,666 |
| Operating expenses before finance costs | 2,650,059 | 1,661,632 | |
| Net (loss)/profit from operations before finance costs | (4,827,716) | 7,198,979 | |
| Finance costs | 15 | (2,033,776) | (1,939,580) |
| (Loss)/profit for the period after finance costs | (6,861,492) | 5,259,399 | |
| Total comprehensive (loss)/income for the period | (6,861,492) | 5,259,399 | |
| Basic & diluted (loss)/earnings per Ordinary Share | 8 | (2.98)p | 2.68p |
* Comparatives have been reclassified in order to more appropriately reflect the nature of the underlying items.
All of the (loss)/profit for the current and prior periods is attributable to the equity holders of the parent.
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)
As at 30 June 2016
| 30 June 2016 (unaudited) |
31 December 2015 (audited) |
||
| ASSETS | Notes | GBP | GBP |
| Non-current assets | |||
| Property and equipment | 590,833 | 91,414 | |
| Intangible intellectual property | 1,000,000 | 1,001,594 | |
| Goodwill | 9 | 29,179,236 | 14,254,652 |
| Trade and other receivables | 13 | - | 29,172,634 |
| Financial assets at fair value through profit or loss - Debt | 10 (i) | 22,467,834 | 42,882,777 |
| Financial assets at fair value through profit or loss - Equity | 10 (i) | 3,842,738 | 5,547,538 |
| Associates at equity method accounting | 10 (ii) | 42,625,749 | 19,325,379 |
| Joint Venture at equity method accounting | 10 (iii) | 216,203 | - |
| 99,922,593 | 112,275,988 | ||
| Current assets | |||
| Financial assets held at fair value through profit or loss - Debt | 10 (i) | 13,902,430 | 10,077,220 |
| Trade and other receivables | 13 | 8,915,466 | 17,091,637 |
| Cash and cash equivalents | 14 | 10,657,947 | 17,415,157 |
| 33,475,843 | 44,584,014 | ||
| Total assets | 133,398,436 | 156,860,002 | |
| EQUITY | |||
| Share premium | 16 | 102,513,019 | 87,404,910 |
| Distributable reserve | 16 | 34,802,740 | 34,802,740 |
| Foreign exchange reserve | 5,493 | (162,961) | |
| Retained earnings | (55,711,871) | (40,411,825) | |
| Capital and reserves attributable to equity holders of the Company | 81,609,381 | 81,632,864 | |
| Non-controlling interest | (659,290) | 13,791,640 | |
| Total equity | 80,950,091 | 95,424,504 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Loans payable | 15 | 12,441,000 | 35,527,972 |
| ZDP Shares payable | 15 & 17 | 22,796,533 | 22,160,765 |
| Corporate Bond | 15 | 8,500,000 | - |
| 43,737,533 | 57,688,737 | ||
| Current liabilities | |||
| Trade and other payables | 15 | 8,710,812 | 3,746,761 |
| 8,710,812 | 3,746,761 | ||
| Total liabilities | 52,448,345 | 61,435,498 | |
| Total equity and liabilities | 133,398,436 | 156,860,002 | |
| Net Asset Value per Ordinary Share | 18 | 29.34p | 35.51p |
The financial statements were approved by the Board of Directors on 23 September 2016 and were signed on its behalf by:
| Director: Patrick Firth | Director: John Whittle |
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED COMPANY STATEMENT OF FINANCIAL POSITION (Unaudited)
As at 30 June 2016
| 30 June 2016 (unaudited) |
31 December 2015 (audited) |
||
| Notes | GBP | GBP | |
| ASSETS | |||
| Non-current assets | |||
| Property and equipment | 10,764 | 11,225 | |
| Intangible intellectual property | - | 1,594 | |
| Financial assets held at fair value through profit or loss - Debt | 10 (iv) | 52,493,600 | 54,546,470 |
| Financial assets held at fair value through profit or loss - Equity | 10 (iv) | 1,579,599 | 2,743,983 |
| Subsidiaries held at fair value through profit or loss | 10 (v) | 42,757,824 | 57,258,016 |
| Associates held at fair value through profit or loss | 10 (vi) | 53,687,058 | 30,783,799 |
| Joint Venture held at fair value through profit or loss | 10 (vii) | 250,000 | - |
| 150,778,845 | 145,345,087 | ||
| Current assets | |||
| Financial assets held at fair value through profit or loss - Debt | 10 (iv) | 2,276,844 | 554,603 |
| Trade and other receivables | 13 | 4,304,012 | 3,444,287 |
| Cash and cash equivalents | 14 | 1,509,830 | 7,036,130 |
| 8,090,686 | 11,035,020 | ||
| Total assets | 158,869,531 | 156,380,107 | |
| EQUITY | |||
| Share premium | 16 | 104,538,019 | 87,404,910 |
| Distributable reserve | 16 | 34,802,740 | 34,802,740 |
| Retained earnings | (33,704,985) | (23,967,406) | |
| Total equity | 105,635,774 | 98,240,244 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Loan payable | 15 | 14,860,000 | 28,890,000 |
| ZDP Shares payable | 15 & 17 | 22,796,533 | 22,160,765 |
| Corporate bond | 15 | 10,000,000 | - |
| 47,656,533 | 51,050,765 | ||
| Current liabilities | |||
| Trade and other payables | 15 | 5,577,224 | 7,089,098 |
| 5,577,224 | 7,089,098 | ||
| Total liabilities | 53,233,757 | 58,139,863 | |
| Total equity and liabilities | 158,869,531 | 156,380,107 | |
| Net Asset Value per Ordinary Share | 18 | 37.10p | 42.73p |
The financial statements were approved by the Board of Directors on 23 September 2016 and were signed on its behalf by:
| Director: Patrick Firth | Director: John Whittle |
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the period ended 30 June 2016
| Share Capital | Share Premium | Distributable Reserve | Foreign Exchange Reserve | Retained Earnings/ (Losses) |
Capital and reserves attributable to equity holders of the Company | Non-controlling Interest | ##### Total Equity | ||||||||
| GBP | GBP | GBP | ### GBP | GBP | GBP | GBP | GBP | ||||||||
| Balance at 31 December 2015 (audited) | - | 87,404,910 | 34,802,740 | ### (162,961) | (40,411,825) | 81,632,864 | 13,791,640 | 95,424,504 | |||||||
| Net proceeds from Ordinary Shares issued (note 16) | - | 15,108,109 | - | ### - | - | 15,108,109 | - | 15,108,109 | |||||||
| Dividends paid* | - | - | - | ### - | (2,876,087) | (2,876,087) | - | (2,876,087) | |||||||
| Acquisition of non-controlling interest in Platform Black | - | - | - | ### - | 415,884 | 415,884 | (415,884) | - | |||||||
| Acquisition of NCI without change in control in GBHL | - | - | - | ### - | (4,096,282) | (4,096,282) | (1,745,386) | (5,841,668) | |||||||
| Disposal of non-controlling interest | - | - | - | ### - | 102,871 | 102,871 | (12,693,911) | (12,591,040) | |||||||
| Transactions with owners | - | 15,108,109 | - | ### - | (6,453,614) | 8,654,495 | (14,855,181) | (6,200,686) | |||||||
| (Loss)/profit for the period | - | - | - | ### - | (8,846,432) | (8,846,432) | 404,251 | (8,442,181) | |||||||
| Other comprehensive income: | |||||||||||||||
| Foreign exchange on consolidation | - | - | - | ### 168,454 | - | 168,454 | - | 168,454 | |||||||
| Total comprehensive income/(loss) for the period | - | - | - | ### 168,454 | (8,846,432) | (8,677,978) | 404,251 | (8,273,727) | |||||||
| Balance at 30 June 2016 (unaudited) | - | 102,513,019 | 34,802,740 | ### 5,493 | (55,711,871) | 81,609,381 | (659,290) | 80,950,091 |
* During the period ended 30 June 2016, the Company made two dividend payments, totalling 1.25 pence per Ordinary Share.
GLI Finance Limited
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the period ended 30 June 2016
| Share Capital | Share Premium | Distributable Reserve | Foreign Exchange Reserve | Retained Earnings | Capital and reserves attributable to equity holders of the Company | Non-controlling Interest | ##### Total Equity | ||||||||
| GBP | GBP | GBP | ### GBP | GBP | GBP | GBP | GBP | ||||||||
| Balance at 31 December 2014 (audited) | - | 58,106,797 | 34,802,740 | ### (326,773) | (19,155,408) | 73,427,356 | 1,114,312 | 74,541,668 | |||||||
| Net proceeds from Ordinary Shares issued | - | 23,494,482 | - | ### - | - | 23,494,482 | - | 23,494,482 | |||||||
| Dividends paid** | - | - | - | ### - | (4,441,525) | (4,441,525) | - | (4,441,525) | |||||||
| Transactions with owners | - | 23,494,482 | - | ### - | (4,441,525) | 19,052,957 | - | 19,052,957 | |||||||
| Profit/(loss) for the period | - | - | - | ### - | 393,454 | 393,454 | (401,934) | (8,480) | |||||||
| Other comprehensive income: | |||||||||||||||
| Foreign exchange on consolidation | - | - | - | ### 23,890 | - | 23,890 | - | 23,890 | |||||||
| Total comprehensive income/(loss) for the period | - | - | - | ### 23,890 | 393,454 | 417,344 | (401,934) | 15,410 | |||||||
| Balance at 30 June 2015 (audited) | - | 81,601,279 | 34,802,740 | ### (302,883) | (23,203,479) | 92,897,657 | 712,378 | 93,610,035 |
** During the period ended 30 June 2015, the Company made two dividend payments, totalling 2.50 pence per Ordinary Share.
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the period ended 30 June 2016
| Share Capital | Share Premium | Distributable Reserve | Retained Earnings | ##### Total Equity | |||||
| GBP | GBP | GBP | GBP | GBP | |||||
| Balance at 31 December 2015 (audited) | - | 87,404,910 | 34,802,740 | (23,967,406) | 98,240,244 | ||||
| Net proceeds from Ordinary Shares issued (note 16) | - | 17,133,109 | - | - | 17,133,109 | ||||
| Dividends paid* | - | - | - | (2,876,087) | (2,876,087) | ||||
| Transactions with owners | - | 17,133,109 | - | (2,876,087) | 14,257,022 | ||||
| Loss for the period | - | - | - | (6,861,492) | (6,861,492) | ||||
| Total comprehensive loss for the period | - | - | - | (6,861,492) | (6,861,492) | ||||
| Balance at 30 June 2016 (unaudited) | - | 104,538,019 | 34,802,740 | (33,704,985) | 105,635,774 | ||||
| Balance at 31 December 2014 (audited) | - | 58,106,797 | 34,802,740 | (4,693,851) | 88,215,686 | ||||
| Net proceeds from Ordinary Shares issued (note 16) | - | 23,494,482 | - | - | 23,494,482 | ||||
| Dividends paid** | - | - | - | (4,441,525) | (4,441,525) | ||||
| Transactions with owners | - | 23,494,482 | - | (4,441,525) | 19,052,957 | ||||
| Profit for the period | - | - | - | 5,259,399 | 5,259,399 | ||||
| Total comprehensive income for the period | - | - | - | 5,259,399 | 5,259,399 | ||||
| Balance at 30 June 2015 (audited) | - | 81,601,279 | 34,802,740 | (3,875,977) | 112,528,042 | ||||
*During the period ended 30 June 2016, the Company made two dividend payments, totalling 1.25 pence per Ordinary Share.
**During the period ended 30 June 2015, the Company made two dividend payments, totalling 2.50 pence per Ordinary Share.
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the period ended 30 June 2016
| Period ended | Period ended | ||
| 30 June 2016 (unaudited) |
30 June 2015 (audited) |
||
| Notes | GBP | GBP | |
| Cash flows used in operating activities | |||
| Cash used in operations | 19 | (12,474,055) | (16,048,411) |
| Purchase of investments | (12,574,098) | (38,062,066) | |
| Sale of investments | 976,861 | 24,923,351 | |
| Principal received | 9,883,334 | 13,556,228 | |
| Net cash flow used in operating activities | (14,187,958) | (15,630,898) | |
| Cash flows from investing activities | |||
| Disposal of subsidiaries | 14,060,921 | ||
| Net cash acquired on acquisition of subsidiaries | 4,476,892 | - | |
| Net cash flow from investing activities | 18,537,813 | - | |
| Cash flows (used in)/from financing activities | |||
| Loan drawn down | 711,210 | - | |
| Cash received on loan payables | - | 8,507,308 | |
| Cash repaid on loan payables | (7,550,000) | (4,280,000) | |
| Proceeds of issue of Ordinary Shares | - | 13,613,082 | |
| Acquisition of non-controlling interest | (1,725,000) | - | |
| Dividends paid | (2,711,729) | (4,281,122) | |
| Net cash flow (used in)/ from financing activities | (11,275,519) | 13,559,268 | |
| Net decrease in cash and cash equivalents | (6,925,664) | (2,071,630) | |
| Cash and cash equivalents at beginning of period | 17,415,157 | 13,734,130 | |
| Effect of foreign exchange rate changes during the period | 168,454 | 23,890 | |
| Cash and cash equivalents at end of period | 14 | 10,657,947 | 11,686,390 |
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
CONDENSED COMPANY STATEMENT OF CASH FLOWS (Unaudited)
For the period ended 30 June 2016
| Period ended | Period ended | |||||
| 30 June 2016 (unaudited) |
30 June 2015 (audited) |
|||||
| Notes | GBP | GBP | ||||
| Cash flows used in operating activities | ||||||
| Cash generated from/(used in) operations | 19 | 798,632 | (17,609,687) | |||
| Purchase of investments | (16,236,145) | (19,387,182) | ||||
| Sale of investments | (999,908) | 24,594,489 | ||||
| Principal received | 7,730,718 | 1,523,416 | ||||
| Net cash flow used in operating activities | (8,706,703) | (10,878,964) | ||||
| Cash flows from/(used in) investing activities | ||||||
| Acquisition of subsidiaries | (3,768,986) | (203,412) | ||||
| Disposal of subsidiaries | 16,249,908 | - | ||||
| Net cash flow from/(used in) investing activities | 12,480,922 | (203,412) | ||||
| Cash flows (used in)/from financing activities | ||||||
| Proceeds of issue of Ordinary Shares | - | 13,613,081 | ||||
| Cash received on loan payables | 961,210 | 8,600,000 | ||||
| Cash repaid on loan payables | (7,550,000) | (9,780,000) | ||||
| Dividends paid | (2,711,729) | (4,281,122) | ||||
| Net cash flow (used in)/from financing activities | (9,300,519) | 8,151,959 | ||||
| Net decrease in cash and cash equivalents | (5,526,300) | (2,930,417) | ||||
| Cash and cash equivalents at beginning of the period | 7,036,130 | 5,479,656 | ||||
| Cash and cash equivalents at end of the period | 14 | 1,509,830 | 2,549,239 |
The accompanying notes form an integral part of these financial statements.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the period ended 30 June 2016
1. GENERAL INFORMATION
GLI Finance Limited (the "Company") 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 commenced trading on the standard 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 2016, the Group comprises the Company and its subsidiaries (please refer to note 20 for full details of the Company's subsidiaries).
2. ACCOUNTING POLICIES
(i) Basis of preparation
The consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU"), and all applicable requirements of Guernsey Company Law. The financial statements have been prepared under the historical cost convention, apart from the valuation of investments. The principal accounting policies of the Group and Company have remained unchanged from the previous year, except for the application of new standards which are set out below and a new accounting policy for investment in a Joint Venture. Comparative information in the primary statements is given as at 31 December 2015 and for the period ended 30 June 2015.
The Company does not operate in an industry where significant or cyclical variations, as a result of seasonal activity, are experienced during the financial period.
(ii) Basis of consolidation
Statement of Compliance
These condensed interim financial statements ("financial statements") are for the six month period ended 30 June 2016 and are presented in GBP, which is the functional currency of the Company. They have been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting', as adopted by the EU. 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 2015, which have been prepared in accordance with IFRS as adopted by the EU.
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 2015.
Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's and Group's financial position and performance since the last financial statements as at and for the year ended 31 December 2015.
These financial statements were authorised for issue by the Company's Directors on 23 September 2016.
(iii) New Accounting Standards, interpretations and amendments adopted
There are no new accounting standards, interpretations and amendments that have been adopted in the current period which have had a material impact in these financial statements.
The Board are still assessing the potential impact of standards and interpretations that were in issue at the date of these financial statements but not yet effective.
The Directors believe that the financial statements contain all of the information required to enable Shareholders and potential investors to make an informed appraisal of the investment activities and profits and losses of the Group and Company for the period to which it relates and do not omit any matter or development of significance.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
2. ACCOUNTING POLICIES (continued)
(iv) Investment in Joint Venture
A joint venture is a joint arrangement over which the Group has joint control.
Investment in a joint venture is accounted for by the Group using the equity method.
Any goodwill or fair value adjustment attributable to the Group's share in the joint venture is not recognised separately and is included in the amount recognised as investment.
The carrying amount of the investment in a joint venture is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the joint venture and adjusted where necessary to ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its joint venture are eliminated to the extent of the Group's interest in the entity. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
The Company has designated its investment in a joint venture as fair value through profit or loss since it is managed and its performance is evaluated on a fair value basis, and information about the Group is provided internally on that basis to the entity's key management personnel including the entity's Board of Directors. The Company carries its directly held investment in a joint venture at fair value through profit or loss.
(v) Foreign currency translation
Translation differences on non-monetary items are reported as part of the fair value gain or loss reported in the Consolidated Statement of Comprehensive Income. The rates of exchange at the period/year end are as follows:
| 30 June 2016 | 31 December 2015 | 30 June 2015 |
| GBP1: USD1.3311 | GBP1: USD1.4736 | GBP1: USD1.5712 |
| GBP1: EUR1.1984 | GBP1: EUR1.3571 | GBP1: EUR1.4103 |
| GBP1: DKK8.9153 | GBP1: DKK10.1191 | GBP1: DKK10.5146 |
Differences arising as a result of movements in rates of exchange are dealt with in the Condensed Consolidated and Condensed Company Statements of Comprehensive Income.
(vi) Critical accounting estimates and judgements in applying accounting policies
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results. These financial statements have been prepared on a going concern basis, which the Directors of the Company believe to be appropriate.
Fair values of Unlisted Debt Securities and Unlisted Equity Securities designated as financial assets and liabilities at fair value
The Group invests in financial instruments which are not quoted in active markets and may receive such financial instruments as distributions on certain investments. Fair values are determined by using valuation techniques as detailed on page 46.
Because the Group's portfolio of investments is generally not traded in active markets, fair value determinations are based upon additional information, including internal analysis and projections as well as independent valuation work performed by outside firms, beyond the indicative quotes which are generally also available for portfolio investments. These other analyses rely upon observable data including comparable transactions, interest rates and credit spreads.
Investment Entity
The Company does not meet the definition of an Investment Entity in accordance with IFRS 10 'Consolidated Financial Statements'. Therefore under IFRS 10 the Company, as a parent company, is required to present consolidated financial statements of the Group.
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is measured as the excess of (a) the aggregate of: (i) the consideration transferred measured in accordance with this IFRS, which generally requires acquisition-date fair value; (ii) the amount of any non-controlling interest in the acquiree measured in accordance with this IFRS; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquire; over (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with this IFRS. Goodwill is then carried at cost less accumulated impairment losses. Refer to Note 2 (t) in the Annual Report for a description of impairment testing procedures.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
2. ACCOUNTING POLICIES (continued)
(vi) Critical accounting estimates and judgements in applying accounting policies (continued)
Impairment testing of intangible assets
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management's assessment of respective risk profiles, such as market and asset-specific risks factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.
Going Concern
One of management's continuing challenges is to manage the Group's cash flow whilst having a considerable allocation of capital in SMEF earning 7.48% when paying interest on the Syndicated Loan at 8.75%. The current weighted average cost of debt is 6.8%, which has already been reduced this period from 11% to 8.75% by the refinancing of a loan from a syndicate of high net worth individuals via the Sancus platform. This loan expires in March 2017 and management will be looking to reduce the overall cost of the Company's debt over the medium term.
The Board has assessed the Company's financial position as at 30 June 2016, and the factors that may impact its performance in the forthcoming year, and after taking into consideration the maturity profile of the debt structure of the Group and the various options available to meet these commitments, the Board is of the opinion that it is appropriate to prepare these financial statements on a going concern basis. The options being considered by the Board include the possible refinance of the loan. In current market conditions, the rate being provided to investors is attractive and therefore the Board considers this could be one likely option. We are however looking to reduce our current debt, so the Board also notes that the issue of new ZDPs or the part sale of our holding in the SMEF shares could also repay the debt.
3. SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the reporting of the Executive Team to the Board. The Executive Team is responsible for allocating resources and assessing performance of the portfolio, as well as making strategic investment decisions, subject to the oversight of the Board of Directors. The Executive Team is responsible for the entire portfolio and considers the business to have four operating segments.
A strategic review performed during the period has confirmed the importance of separating the Group's activities into three key pillars alongside the activities performed at Head Office:
b - Other Fintech - platforms at various early stages of scaling and considered to be important, under review or exiting. These platforms are not yet validated by significant external funding.
Pillar 3 -Amberton (Segment 3)
Amberton - management and provision of an alternative finance fund.
Group Head Office
- Head Office - Primarily includes expenses to oversee and support the Group's trading activities.
- SMEF
- BMS (Ireland) Sarl
- BMS Finance (UK) Sarl
- Loans to SME's - exiting over time.
The accounting policies of each segment are the same as the accounting policies of the Group, therefore no reconciliation has been performed.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
3. SEGMENTAL REPORTING (continued)
| 30 June 2016 - Group (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Total assets | 71,489,130 | 25,106,657 | 419,764 | 36,382,885 | 133,398,436 |
| Total liabilities | 3,339,349 | 4,571,025 | - | 44,537,971 | 52,448,345 |
| 30 June 2016 - Company (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Total assets | 86,964,292 | 37,664,252 | 453,561 | 33,787,426 | 158,869,531 |
| Total liabilities | 130,832 | 1,864,792 | - | 51,238,134 | 53,233,758 |
| 31 December 2015 - Group (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Total assets | 51,815,804 | 43,652,880 | 11,646 | 61,379,672 | 156,860,002 |
| Total liabilities | 899,190 | 271,428 | 31,566 | 60,233,314 | 61,435,498 |
| 31 December 2015 - Company (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Total assets | 68,045,214 | 38,916,255 | 578,505 | 48,840,133 | 156,380,107 |
| Total liabilities | 125,733 | 5,995,583 | - | 52,018,547 | 58,139,863 |
| 30 June 2016 - Group (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Segment revenue | 3,020,283 | (185,692) | 159,601 | 2,838,821 | 5,833,013 |
| (Losses)/gains | (38,838) | (7,730,489) | (8,981) | 2,210,292 | (5,568,016) |
| Total operating expenses | (1,856,477) | (477,766) | (299,666) | (2,807,757) | (5,441,666) |
| Finance costs | - | - | - | (2,057,811) | (2,057,811) |
| Net losses on de-recognition of subsidiaries | - | - | - | (1,207,701) | (1,207,701) |
| Net profit/(loss) | 1,124,968 | (8,393,947) | (149,046) | (1,024,156) | (8,442,181) |
| 30 June 2016 - Company (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Segment revenue | 1,125,917 | (132,847) | - | 1,481,827 | 2,474,897 |
| Gains/(losses) | 5,191,506 | (7,482,661) | (150,000) | (2,211,399) | (4,652,554) |
| Total operating expenses | - | - | - | (2,650,059) | (2,650,059) |
| Finance costs | - | - | - | (2,033,776) | (2,033,776) |
| Net profit/(loss) | 6,317,423 | (7,615,508) | (150,000) | (5,413,407) | (6,861,492) |
| 30 June 2015 - Group (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Segment revenue | 3,967,553 | 915,274 | 26 | 2,380,220 | 7,263,073 |
| Losses | (65,407) | (305,351) | - | (297,730) | (668,488) |
| Total operating expenses | (1,385,482) | (1,337,969) | (77,205) | (1,702,128) | (4,502,784) |
| Finance costs | - | - | - | (2,100,281) | (2,100,281) |
| Net profit/(loss) | 2,516,664 | (728,046) | (77,179) | (1,719,919) | (8,480) |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
3. SEGMENTAL REPORTING (continued)
| 30 June 2015 - Company (unaudited) | Pillar 1 | Pillar 2 | Pillar 3 | Other | Total |
| GBP | GBP | GBP | GBP | GBP | |
| Segment revenue | 1,445,886 | 144,230 | - | 2,264,567 | 3,854,683 |
| Gains/(losses) | 5,972,754 | 1,089,300 | (77,179) | (1,978,947) | 5,005,928 |
| Total operating expenses | - | - | - | (1,661,632) | (1,661,632) |
| Finance costs | - | - | - | (1,939,580) | (1,939,580) |
| Net profit/(loss) | 7,418,640 | 1,233,530 | (77,179) | (3,315,592 | 5,259,399 |
| Group (unaudited) | Revenue | Non-current assets | ||
| 30 June 2016 | 30 June 2015 | 30 June 2016 | 31 December 2015 | |
| (unaudited) | (audited) | (unaudited) | (audited) | |
| GBP | GBP | GBP | GBP | |
| United Kingdom | 5,817,982 | 7,259,921 | 30,770,069 | 44,520,294 |
| United States of America | 15,031 | 3,152 | - | - |
| 5,833,013 | 7,263,073 | 30,770,069 | 44,520,294 |
4. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group is exposed to a variety of financial risks: market risk (including price risk, fair value interest rate risk, cash flow interest rate risk and currency risk), credit risk and liquidity risk. The primary objectives of the financial risk management processes are to identify, monitor and report on these exposures. The operational and legal risk management processes are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks. The risk management policies employed by the Group to manage these risks are, in material respects, the same as those in place during the prior year and were disclosed in the last annual audited financial statements for the year ended 31 December 2015.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimation
When available, the Group measures the fair value of an instrument using a quoted price in an active market for that instrument. A market is regarded as "active" if transactions of the asset or liability take place with sufficient frequency and volume to provide pricing information on an on-going basis. The Group measures financial instruments quoted in an active market at bid price.
If there is no quoted price in an active market, the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
The Group recognises transfers between levels of the fair value hierarchy (see below) as at the end of the reporting period during which the change has occurred.
Unquoted equity security investments, at fair value through profit or loss, are appraised in accordance with the International Private Equity and Venture Capital valuation guidelines or any other valuation model and techniques which can provide a reasonable estimate of fair value of the investment involved. These valuations are consistent with the requirements of IFRS.
Factors considered in these valuation analyses include discounted cash flows, comparable company and comparable transaction analysis, and credit spread analysis based upon the independent valuation firm's view of the implied credit rating of the investment and the corresponding required spread in the marketplace. The Board considers all the information presented to it, including indicative bids, internal analysis, and independent valuations, in order to reach, in good faith, their fair value determination.
If in the case of any investment the Directors at any time consider that the above basis of valuation is inappropriate or that the value determined in accordance with the foregoing principles is unfair, they are entitled to substitute what in their opinion, is a fair value.
Where this is the case or where no value is provided by the independent valuers of the underlying investment, then the fair value is estimated with care and in good faith by the Directors in consultation with the Executive Team with a view to establishing the probable realisation value for such shares as at close of business on the relevant valuation day.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Fair value hierarchy (continued)
The fair values of the Group's short-term trade receivables and payables approximate their carrying amounts at the period end date.
Fair value hierarchy
The fair value of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or broker price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques.
For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
§ Level 1 - Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
§ Level 2 - Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
§ Level 3 - Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect difference between the instruments.
The financial assets and liabilities measured at fair value in the Consolidated and Company Statements of Financial Position are grouped into the fair value hierarchy as follows:
| Group | 30 June 2016 (unaudited) | 31 December 2015 (audited) |
||||
| Level 3 & Total | Level 3 & Total | |||||
| Assets | Note | GBP | GBP | |||
| Loans | a | 22,467,834 | 42,882,777 | |||
| Equity securities | b | 3,842,738 | 5,547,538 | |||
| Non-current financial assets | 26,310,572 | 48,430,315 | ||||
| Current asset loans | a | 13,902,430 | 10,077,220 | |||
| Total assets | 40,213,002 | 58,507,535 | ||||
| Net fair value | 40,213,002 | 58,507,535 |
| Company | 30 June 2016 (unaudited) | 31 December 2015 (audited) |
||||
| Level 2 | Level 3 | Total | Level 3 & Total | |||
| Assets | Note | GBP | GBP | GBP | GBP | |
| Loans | a | - | 52,493,600 | 52,493,600 | 54,546,470 | |
| Equity securities | b | - | 1,579,599 | 1,579,599 | 2,743,983 | |
| Non-current other financial assets held at fair value through profit or loss | - | 54,073,199 | 54,073,199 | 57,290,453 | ||
| Subsidiaries held at fair value through profit or loss | b | - | 42,757,824 | 42,757,824 | 57,258,016 | |
| Associates held at fair value through profit or loss | b | 22,680,510 | 31,006,548 | 53,687,058 | 30,783,799 | |
| Joint Venture held at fair value through profit or loss | - | 250,000 | 250,000 | - | ||
| Current asset loans | a | - | 2,276,844 | 2,276,844 | 554,603 | |
| Net fair value | 22,680,510 | 130,364,415 | 153,044,925 | 145,886,871 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The Company's financial assets and liabilities classified in Level 3 are valued using valuation techniques based on significant inputs that are not based on observable market data. The financial assets within this level can be reconciled from beginning to ending balances as follows:
| 30 June 2016 (unaudited) | |
| Company | GBP |
| Opening fair value | 145,886,871 |
| Purchases | 69,399,111 |
| Classification transfer out* | (25,270,763) |
| Sales | (57,937,393) |
| Gains/(losses) recognised in profit and loss: | |
| - realised | (5,575,862) |
| - unrealised | 3,862,451 |
| Closing fair value | 130,364,415 |
* GBP25,276,750 related to a subsidiary that the Company lost control over during the period, resulting in a transfer between Level 3 and Level 2 within the Company. The Fair Value is based on a listed price in an inactive market, therefore should be classified as Level 2.
Measurement of fair value
The methods and valuation techniques used for the purposes of measuring fair value are unchanged compared to the previous reporting year.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
(a) Loans - non current and current asset loans
The loans held by the Group are bilateral agreements and thus there are no external valuation metrics available. The fair value is established by considering the financial data provided by the underlying businesses to the Group. If the loan remains within its covenants, continues to meet all of its obligations and management expect this to continue to be the case, the loans are valued at par. If the borrowers fail to meet their obligations, or management are of the view that it is likely in the future that the borrower may not meet its obligations in the future, an allowance is made against the loan.
(b) Equity securities
The Group has a number of equity investments, which fall into three categories:
1. Investment in a listed und, SMEF;
2. Investments in finance platforms;
3. Investments in equity investments received from loan restructurings; and
4. Other equity investments
The equity securities, except for the listed fund, have significant unobservable inputs, as they trade infrequently and are unlisted. There is a discrete valuation approach to each category of equity investments.
(c) Warrant security
There is one warrant security held within the Group. By nature of the warrant security being issued by a company that is relatively small and relatively early stage and unlisted, it has unobservable inputs and thus there is a high degree of uncertainty as to the equity value of the business and thus whether any value will ever attach to the warrant. For these reasons the warrant held by the Group is valued at zero, unless and until cash has been received by the Group in exchange for the warrant.
Investment in listed Fund (Associate)
At Company Level, the investment in SMEF, a listed fund, is valued at quoted market bid price. At Group level the carrying value of associates is ascertained using the equity method.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Investments in finance platforms (including Subsidiaries and Associates)
At the period end, the Group held investments in nineteen finance platforms: Raiseworks LLC, Finpoint Limited, FundingKnight Holdings Limited, Platform Black Limited, CrowdShed Limited, Proplend Limited, TradeRiver Finance Limited, TradeRiver USA Inc, Sancus BMS Group Limited, European Receivables Exchange A/S, Finexkap, UK Bond Network Group Limited, Liftforward Inc, Ovamba Solutions Inc, Open Energy Group Inc, Funding Options Limited, MytripleA, Funding Options and The Credit Junction Holdings Inc.
At Company Level, the investments in the platforms were initially recognised at fair value, being the acquisition cost of each investment. Subsequently to that, the Board assesses fair value based on independent third-party valuations, the net asset values of the investee companies, the latest available financial information and consideration of any material alterations to the prospects of these investments during the time since the assets were acquired. Any changes in carrying fair value are reflected in the Company Statement of Comprehensive Income.
The Group uses the equity method to account for any investment in a platform which is classified as an investment in an Associate or Joint Venture. As at 30 June 2016, CrowdShed Limited, Finexkap, Proplend Limited, TradeRiver Finance Limited, TradeRiver USA Inc, Liftforward Inc, Ovamba Solutions Inc, Open Energy Group Inc, Funding Options Limited, The Credit Junction Holdings Inc, SMEF, BMS Finance (UK) Sarl and BMS Finance (Ireland) Sarl are classified as Associates and Amberton Asset Management Limited is classified as a Joint Venture.
The remaining investments in platforms, being European Receivables Exchange A/S, MytripleA and UK Bond Network Group Limited, are valued at Group level on the same basis as at Company level described above.
Investments in equity positions received from loan restructurings
As observable prices are not available for these equity securities, the Board uses an independent third-party valuer to provide a valuation analysis of the equities in its determining of the fair value. The valuation expert used the Income Approach - Discounted Cash Flow Method and the Market Approach - Guideline Comparable Method and Comparable Transaction Method to estimate the indicated Total Enterprise Value of each company. The Total Enterprise Value is used to ascertain the fair value of the equity securities. Assumptions used by the independent third-party valuer and adopted by the Directors, include discount rates, growth rates, EBITDA margins and tax rates.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Level 3 fair value measurements
The Group's financial assets and liabilities classified in Level 3 are valued using valuation techniques based on significant inputs that are not based on observable market data. The financial assets within this level can be reconciled from beginning to ending balances as follows:
| 30 June 2016 (unaudited) | Loans* - Other | Equity | Warrants | Total |
| Group | GBP | GBP | GBP | GBP |
| Opening fair value | 52,959,997 | 5,547,538 | - | 58,507,535 |
| Purchases/loans advanced | 10,059,357 | 2,240,000 | - | 12,299,357 |
| Classification transfer in/(out) (see note 10) | (13,167,125) | (1,863,023) | - | (15,030,148) |
| Sales | (9,883,334) | (976,861) | - | (10,860,195) |
| Gains/(losses) recognised in profit and loss: | ||||
| - realised | 9,225 | - | - | 9,225 |
| - unrealised | (3,607,857) | (1,104,915) | - | (4,712,772) |
| Closing fair value | 36,370,263 | 3,842,739 | - | 40,213,002 |
| 31 December 2015 (audited) | Loans* - Other | Equity | Warrants | Total |
| GBP | GBP | GBP | GBP | |
| Opening fair value | 73,673,663 | 7,574,872 | - | 81,248,535 |
| Purchases/loans advanced | 58,757,261 | 3,443,671 | - | 62,200,932 |
| Classification transfer out | (15,507,345) | (808,188) | - | (16,315,533) |
| Sales | (26,370,878) | (5,124,162) | (345,485) | (31,840,525) |
| Capital repayments | (30,941,469) | - | - | (30,941,469) |
| (Losses)/gains recognised in profit and loss: | ||||
| - realised | (1,120,942) | 1,099,161 | 345,485 | 323,704 |
| - unrealised | (5,530,293) | (637,816) | - | (6,168,109) |
| Closing fair value | 52,959,997 | 5,547,538 | - | 58,507,535 |
*As at 30 June 2016, GBP13,902,430 (31 December 2015: GBP10,077,220) of the total loans balance of the Group is due within 12 months and has been classified as current assets in the Condensed Consolidated Statement of Financial position.
Changing inputs to the Level 3 valuations to reasonably possible alternative assumptions would not change significantly amounts recognised in profit or loss, total assets or total liabilities or total equity.
There have been no transfers into or out of Level 3 in the reporting periods under review.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
5. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Level 3 fair value measurements (continued)
As at 30 June 2016, 31 December 2015 and 30 June 2015, the Group had no financial liabilities being carried at fair value. In prior years, the Group's financial liabilities, at fair value, classified in Level 3 used valuation techniques based on significant inputs that are not based on observable market data.
The table below sets out information at the Company level about significant unobservable inputs used as at 30 June 2016 in measuring financial assets categorised as Level 3 in the fair value hierarchy.
| Description | Nature | Fair Value Hierarchy Level | Fair Value GBPm | Valuation Technique | Unobservable Inputs | Sensitivity to changes in significant unobservable inputs |
| Loans | Working Capital Platform Loans | 3 | 48.2 | Par book value, amended for impairment | Judgement on recoverability | Low |
| Platform Accounts | 3 | 6.6 | Par book value, amended for impairment | Judgement on recoverability | Low | |
| Equity securities | Market traded and off market securities | 3 | 75.6 | In order of priority; 1. External Valuation 2. Independent Valuation DCF & Multiples on a case by case basis 3. Internal analysis |
DCF rates, multiples, internal information | Low to High |
| Total Investments | 130.4 |
In valuing the Group's equity positions, priority is given to the market price set in recent transactions and this is supplemented by independent valuations and internal analysis. Due to the relatively early-stage status of the platforms and wider FinTech sector, the supplementary valuation inputs are strongly influenced by subjective factors in addition to numeric indicators such as discounted cash flow analysis and earnings multiples as well as any discount applied for lack of liquidity. Although it is expected that such metrics will increasingly gain weighting in the Group's valuation approach, Management do not yet consider them to be sufficiently useful in isolation when performing analyses such as sensitivity scenarios.
For scenario analysis purposes, it is reasonably possible that the equity portfolio could be subject to a 15% valuation increase or decrease depending on the development of the following factors:
- Portfolio marketability fluctuations due to wider market liquidity and appetite for FinTech;
- Regulatory changes in the sector;
- Competitive environment shift;
- Over/under achievement of key milestones.
Changing inputs to the Level 3 valuations to reasonably possible alternative assumptions would not change significantly amounts recognised in profit or loss, total assets or total liabilities or total equity.
6. OTHER INCOME/(LOSSES)
The table below details other income during the period:
| GROUP | 30 June 2016 (unaudited) |
30 June 2015 (audited) |
| Other income: | ### GBP | ### GBP |
| Bank interest | ### 14,110 | ### 18,248 |
| IP licence fees | ### - | ### 1,345,808 |
| Commission income | ### - | ### 287,492 |
| Sundry income | ### - | ### 212,651 |
| ### 14,110 | ### 1,864,199 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
6. OTHER INCOME/(LOSSES) (continued)
| COMPANY | ### 30 June 2016 (unaudited) |
30 June 2015 (audited) |
| Other (losses)/income: | ### GBP | GBP |
| Bank interest | ### 11,636 | ### 15,177 |
| Director's fee income* | ### (20,000) | ### 30,000 |
| Sundry income | ### - | ### 90 |
| ### (8,364) | ### 45,267 |
*Director's fee income from Finpoint has been waived, therefore all fees due at 31 December 2015 have been written back.
7. EXPENSES
Management fees
Total management fees charged during the period ended 30 June 2016 amounted to GBPNil (30 June 2015: credit of GBP502,235). The prior period write back is as a result of over-accrued management expenses as at 31 December 2014. There will be no further management fees going forward.
Administration and secretarial fees
With effect from 1 June 2016, PraxisIFM Trust Limited is entitled to an annual fee for its services as administrator of GBP145,000 plus disbursements, payable monthly in arrears. The Administrator is entitled to an additional fee of GBP55,000 per annum for the preparation of the annual report and accounts, interim unaudited report and accounts and assisting the auditors during the audit. With regard to company secretarial services, the Administrator is entitled to a fee of GBP67,500 per annum payable monthly in arrears.
Prior to 1 June 2016, PraxisIFM Trust Limited was entitled to an annual fee for its services as administrator of 0.1% of the Net Asset Value of the Company, calculated on the last business day of each quarter and payable quarterly in arrears. The fee was subject to a minimum of GBP55,000 per annum. With regard to company secretarial services, the Administrator was compensated on a time cost basis.
Total Company administration and secretarial fees charged in accordance with this agreement for the period ended 30 June 2016 amounted to GBP184,104 (30 June 2015: GBP186,610). The total amount due and payable by the Company at the period end amounted to GBP85,929 (31 December 2015: GBP90,497).
Other expenses
The table below details other charges of the Group during the period:
| GROUP | 30 June 2016 (unaudited) |
30 June 2015 (audited) |
| Other expenses: | ### GBP | ### GBP |
| Directors' remuneration | ### 108,990 | ### 63,967 |
| Directors' expenses | ### 2,136 | ### 335 |
| Executive team remuneration and other staff costs | ### 2,147,981 | ### 1,485,003 |
| Directors' and officers' insurance | ### 46,796 | ### 33,819 |
| Other office and administration costs | ### 497,482 | ### 595,009 |
| Audit fees | ### 62,964 | ### 49,916 |
| NOMAD fees | ### 37,500 | ### 37,806 |
| Listing fees | ### 4,937 | ### 14,661 |
| Independent valuation fees | ### 27,846 | ### 106,250 |
| Marketing expenses | ### 365,008 | ### 602,892 |
| Registrar fees | ### 40,784 | ### 34,422 |
| Investments expenses | ### 38,960 | ### 244,495 |
| Amortisation | ### 21,374 | ### 58,601 |
| Custodian fees | ### 4,080 | ### - |
| Broker fees | ### 14,835 | ### - |
| Introducer commissions paid | ### 54,618 | ### - |
| Sundry | ### 220,207 | ### 517,766 |
| ### 3,696,498 | ### 3,844,942 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
7. EXPENSES (continued)
The table below details other charges of the Company during the period:
| COMPANY | ### 30 June 2016 (unaudited) |
30 June 2015 (audited) |
| Other expenses: | ### GBP | GBP |
| Directors' remuneration | ### 86,380 | ### 63,967 |
| Directors' expenses | ### 1,203 | ### 335 |
| Executive team remuneration and other staff costs | ### 575,221 | ### 327,444 |
| Consultancy fees | ### 130,376 | ### - |
| Directors' and officers' insurance | ### 36,276 | ### 33,721 |
| Other office and administration costs | ### 65,225 | ### 59,856 |
| Audit fees | ### 46,444 | ### 30,497 |
| NOMAD fees | ### 37,500 | ### 37,806 |
| Listing fees | ### 1,602 | ### 14,661 |
| Independent valuation fees | ### 27,846 | ### 106,250 |
| Marketing expenses | ### 175,552 | ### 451,288 |
| Registrar fees | ### 33,682 | ### 34,422 |
| Investments expenses | ### - | ### 51,100 |
| Sundry | ### 40,346 | ### 60,319 |
| ### 1,257,653 | ### 1,271,666 |
Non-executive Directors' fees, Executive Team's and other staff remuneration
Please refer to note 23 for details of the non-executive Directors' fees, Executive Team's and other staff remuneration.
8. (LOSS)/EARNINGS PER ORDINARY SHARE
Consolidated (loss)/earnings per Ordinary Share has been calculated by dividing the consolidated (loss)/profit attributable to Ordinary Shareholders of GBP(8,846,432) (30 June 2015: profit of GBP393,454) by the weighted average number of Ordinary Shares outstanding during the period of 230,065,329 (30 June 2015: 196,291,439). There was no dilutive effect for potential Ordinary Shares during the current or prior periods, therefore fully diluted consolidated (loss)/earnings per Ordinary Share is calculated in the same way as the undiluted consolidated (loss)/earnings per Ordinary Share described above.
Company (loss)/earnings per Ordinary Share has been calculated by dividing the Company (loss)/profit attributable to Ordinary Shareholders of GBP(6,861,492) (30 June 2015: GBP5,259,399) by the weighted average number of Ordinary Shares outstanding during the period of 230,065,329 (30 June 2015: 196,291,439). There was no dilutive effect for potential Ordinary Shares during the current or prior periods, therefore fully diluted Company (loss)/earnings per Ordinary Share is calculated in the same way as the Company's undiluted (loss)/earnings per Ordinary Share described above.
Basic & Diluted (loss)/earnings per Ordinary Share
| GROUP & COMPANY | |||||
| Date | No. of shares | No. of days | Weighted average no. of shares | ||
| 01/01/2016 | 229,917,364 | 20 | 25,265,644 | ||
| 20/01/2016 | 229,968,384 | 62 | 78,340,878 | ||
| 22/03/2016 | 230,205,614 | 55 | 69,567,631 | ||
| 16/05/2016 | 229,991,197 | 28 | 35,383,261 | ||
| 13/06/2016 | 230,261,212 | 17 | 21,507,915 | ||
| 30/06/2016 | 273,669,572 | - | - | ||
| 30/06/2016 | 284,762,819 | 182 | 230,065,329 |
| GROUP & COMPANY | |||||
| Date | No. of shares | No. of days | Weighted average no. of shares | ||
| 01/01/2015 | 172,960,021 | 76 | 72,624,097 | ||
| 17/03/2015 | 207,460,021 | 3 | 3,438,564 | ||
| 20/03/2015 | 207,590,523 | 10 | 11,469,090 | ||
| 30/03/2015 | 213,777,917 | 60 | 70,865,608 | ||
| 29/05/2015 | 214,289,446 | 21 | 24,862,311 | ||
| 19/06/2015 | 214,431,843 | 11 | 13,031,769 | ||
| 30/06/2015 | 214,431,843 | 181 | 196,291,439 |
There was no dilutive effect for potential Ordinary Shares during the current or prior periods.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
9. GOODWILL
| 30 June 2016 | Acquisition Cost |
| GBP | |
| Brought forward (Sancus (Jersey) Limited) | 14,254,652 |
| Additions: | |
| Acquisition of Platform Black Limited (Note 12 (1)) | 5,547,475 |
| Acquisition of Funding Knight Limited (Note 12 (2)) | 738,122 |
| Acquisition of Sancus (Gibraltar) Limited (Note 12 (3)) | 8,638,987 |
| Carried forward | 29,179,236 |
| 31 December 2015 | Acquisition Cost |
| GBP | |
| Brought forward | 14,500,007 |
| Impairment of Goodwill relating to Raiseworks acquisition | (245,355) |
| Carried forward | 14,254,652 |
Impairment tests for Goodwill assets
The carrying amount for goodwill is assessed for impairment on an annual basis.
As at 30 June 2016, additions to goodwill relate to gaining control of Platform Black, Funding Knight and the acquisition of Sancus (Gibraltar) Limited. For the purpose of annual impairment testing, during the year ended 31 December 2015, the Board assessed the recoverable amount of the Sancus (Jersey) Limited ("Sancus") goodwill with regards to the fair value of Sancus' business at acquisition, as determined by third party experts.
The recoverable amount was determined based on fair value less cost of disposal. The fair value was based on the valuation analysis carried out by third party experts as at 30 June 2015. The valuation experts applied the Discounted Cash Flow ("DCF") method using management's forecast over five years which applied a growth rate of 2.5% and used a discount rate of 11% which is reflective of Sancus' average cost of debt and the average lending rate to borrowers. The cost of disposal was estimated at 10% of the equity value computed using the DCF method.
The estimated recoverable amount is sensitive to the discount rate. A 10% increase/decrease in the discount rate will decrease / increase the fair value by GBP3.3m. However, as the recoverable amount exceeds goodwill by GBP4.3m, no impairment loss will have to be recognised.
Further, the Board have considered Sancus' past and expected future performance. In the Board's opinion, the carrying amount for goodwill is not deemed to be impaired.
10. FINANCIAL ASSETS
| (i) Financial assets at fair value through profit or loss | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| GROUP | ### GBP | ### GBP |
| Opening cost of investments | ### 63,253,678 | ### 80,617,698 |
| Purchases | ### 12,299,358 | ### 62,200,927 |
| Sales | ### (976,861) | ### (6,269,457) |
| In-specie transfer on recognition of business combination* | ### 20,386,038 | ### - |
| Transfer out - classification change to Associate and receivables** | ### (35,416,185) | ### (16,315,533) |
| Realised gain on sale investments | ### 9,225 | ### 332,389 |
| Capital repayments/redemption of loans | ### (9,883,333) | ### (57,312,346) |
| Closing cost of investments | ### 49,671,920 | ### 63,253,678 |
| Closing unrealised loss | ### (9,458,918) | ### (4,746,143) |
| Closing fair value of investments | ### 40,213,002 | ### 58,507,535 |
| Non-current financial assets held at fair value through profit or loss - Debt (1) | ### 22,467,834 | ### 42,882,777 |
| Non-current financial assets held at fair value through profit or loss - Equity (2) | ### 3,842,738 | ### 5,547,538 |
| Current financial assets held at fair value through profit or loss - Debt (1) | ### 13,902,430 | ### 10,077,220 |
| Total financial assets held at fair value through profit or loss | ### 40,213,002 | ### 58,507,535 |
(1) This represents the Group's interest in Loans to SMEs.
(2) This represents the Group's minority interest holdings.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
10. FINANCIAL ASSETS (continued)
| (ii) Associates: | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| GROUP | ### GBP | ### GBP |
| Opening cost of Associates | ### 23,159,397 | ### 31,550,115 |
| Purchases | ### 2,564,740 | ### 12,586,534 |
| Transfer in - classification change from subsidiary* | ### 25,286,883 | ### - |
| Transfer in - classification change from equity investment** | ### - | ### 808,188 |
| Transfer out - classification change to subsidiary | ### (2,604,199) | ### - |
| Sale | ### - | ### (22,359,252) |
| Realised gain | ### - | ### 573,812 |
| Closing cost of Associates | ### 48,406,821 | ### 23,159,397 |
| Cumulative share in losses of associates | ### (5,781,072) | ### (3,834,018) |
| Closing value of Associates at equity method accounting*** | ### 42,625,749 | ### 19,325,379 |
* During the current period, GBP20,386,038 related to Associates which changed classification to Subsidiaries when the Company gained control over these Associates.
** During the current period, GBP33,553,162 related to loans which changed classification to "balances held by Platforms on behalf of the Company". GBP1,863,023 relates to Subsidiaries which changed classification to Associates when the Company lost control over the Subsidiaries. During the prior year, GBP15,507,345 related to a loans which changed classification to "balances held by Platforms on behalf of the Company". GBP808,188 relates to an investment's book cost brought forward that was reclassified from investment to an Associate during the prior period when the Company gained significant influence over this underlying investment.
***Significant Associates included above are: Finexkap, Funding Options Limited, SMEF, TradeRiver Finance Limited, Liftforward Inc, The Credit Junction and TradeRiver USA Inc.
| (iii) Joint Venture: | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| GROUP | ### GBP | ### GBP |
| Opening cost of Joint Venture at equity method accounting | ### - | ### - |
| Purchases | ### 100,000 | ### - |
| Transfer in - classification change from subsidiary | ### 125,000 | ### - |
| Closing cost of Associates at equity method accounting | ### 225,000 | ### - |
| Cumulative share in losses of associates | ### (8,797) | ### - |
| Closing value of Associates at equity method accounting | ### 216,203 | ### - |
| (iv) Financial assets held at fair value through profit or loss: | ### 30 June 2016 (unaudited) |
31 December 2015 (audited) |
| COMPANY | ### GBP | GBP |
| Opening cost of other financial assets at fair value through profit or loss | ### 63,448,437 | ### 35,195,310 |
| Transfer out - classification change (1) | ### (500,000) | ### (1,808,188) |
| Purchases | ### 47,493,561 | ### 31,083,031 |
| Sales | ### (41,558,471) | ### (4,974,162) |
| Realised gain on sales | ### 140,804 | ### (78,571) |
| Capital repayments | ### - | ### (9,113,406) |
| Conversion of preference shares | ### - | ### 20,000,000 |
| Conversion of receivable | ### - | ### 2,816,625 |
| Transfer out - SMEF seed portfolio (2) | ### - | ### (9,672,202) |
| Cost of investments | ### 69,024,331 | ### 63,448,437 |
| Unrealised loss | ### (12,674,288) | ### (5,603,381) |
| Closing fair value of other financial assets at fair value through profit or loss | ### 56,350,043 | ### 57,845,056 |
| Non-current other financial assets at fair value through profit or loss - Debt | ### 52,493,600 | ### 54,546,470 |
| Non-current other financial assets at fair value through profit or loss - Equity | ### 1,579,599 | ### 2,743,983 |
| Current financial assets at fair value through profit or loss - Debt | ### 2,276,844 | ### 554,603 |
| ### 56,350,043 | ### 57,845,056 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
10. FINANCIAL ASSETS (continued)
(1) GBP500,000 related to a loan which changed classification to a "subsidiary". During the prior year, GBP1,000,000 related to a loan which changed classification to "balances held by Platforms on behalf of the Company" (see note 10) and GBP808,188 related to an investment which the Company gained significant influence over, resulting in a transfer in classification between Investments and Associates within the Company.
(2) During the prior year, the Company acquired a Subsidiary of the Company via a non-cash in-specie transfer of assets in exchange for equity ownership in the Subsidiary. This resulted in GBP9,672,202 of other financial assets held at fair value through profit or loss being novated from the Company to the Subsidiary.
| (v) Subsidiaries: | ### 30 June 2016 (unaudited) |
31 December 2015 (audited) |
| COMPANY | GBP | GBP |
| Opening cost of investment in Subsidiaries | 52,533,802 | 18,862,260 |
| Purchases | 19,400,273 | 203,052 |
| Sales | (16,378,922) | - |
| Transfer in - classification change (1) | 500,000 | - |
| Transfer in on business combination acquisition of Associates (3) | 2,604,199 | - |
| Transfer out on business combination disposal of a Subsidiary (4) | (25,501,750) | - |
| Transfer in on business combination acquisition of a Subsidiary (5) | - | 33,468,490 |
| Realised loss on sales | (5,716,666) | - |
| Closing cost of investment in Subsidiaries | 27,440,936 | 52,533,802 |
| Unrealised gain | 15,316,888 | 4,724,214 |
| Closing fair value of investment in Subsidiaries at fair value through profit or loss | 42,757,824 | 57,258,016 |
(3) During the period, the Company gained control over two of its Associates resulting in a transfer in classification to Subsidiaries of the Company.
(4) GBP25,276,750 related to two subsidiaries that the Company lost control over during the period, resulting in a transfer between Subsidiaries and Associates within the Company. GBP225,000 related to a subsidiary that the Company lost control over, resulting in a transfer between Subsidiary and Joint Venture of the Company.
(5) During the prior year, the Company acquired a Subsidiary of the Company via a non-cash in-specie transfer of assets in exchange for equity ownership in the Subsidiary amounting to GBP33,468,490.
| (vi) Associates: | ### 30 June 2016 (unaudited) |
31 December 2015 (audited) |
| COMPANY | GBP | GBP |
| Opening cost of investment in Associates | 23,159,399 | 30,341,276 |
| Purchases | 2,505,276 | 12,270,094 |
| Transfer out on business combination classification change to Subsidiary (3) | (2,604,199) | - |
| Transfer in on business combination acquisition of a Subsidiary (4) | 25,276,750 | - |
| Transfer in - classification change from equity investment (6) | - | 808,188 |
| Sale | - | (20,981,238) |
| Realised gain on sale | - | 721,079 |
| Closing cost of investment in Associates | 48,337,226 | 23,159,399 |
| Unrealised gain | 5,349,832 | 7,624,400 |
| Closing fair value of investment in Associates at fair value through profit or loss | 53,687,058 | 30,783,799 |
(6) During the prior year, the Company gained significant influence over one of its minority stake equity investments resulting in a transfer between Investments and Associates within the Company.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
10. FINANCIAL ASSETS (continued)
| (vii) Joint Venture: | ### 30 June 2016 (unaudited) |
31 December 2015 (audited) |
| COMPANY | GBP | GBP |
| Opening cost of investment in Joint Venture | - | - |
| Transfer in on business combination disposal of a Subsidiary (4) | 225,000 | - |
| Closing cost of investment in Joint Venture | 225,000 | - |
| Unrealised gain | 25,000 | - |
| Closing fair value of investment in Associates at fair value through profit or loss | 250,000 | - |
11. GAINS/(LOSSES) ON FINANCIAL ASSETS
| GROUP | ### 30 June 2016 (unaudited) |
### 30 June 2015 (audited) |
| (i) Realised (losses)/gains | ### GBP | ### GBP |
| Realised gains/(losses) recognised on financial assets: | ||
| Realised gain on investments at fair value through profit or loss | ### 9,225 | ### 223,392 |
| Subsidiary realised loss on sale of business combination | ### (393,933) | ### - |
| Associate realised gain adjustment - due to loss of significant influence | ### - | ### 574,002 |
| ### (384,708) | ### 797,394 |
| GROUP | ### 30 June 2016 (unaudited) | ### 30 June 2015 ### (audited) |
| (ii) Unrealised (loss)/gain on financial assets investments at fair value through profit or loss | ### (4,712,772) | ### 702,881 |
| ### (4,712,772) | ### 702,881 | |
| GROUP | ### 30 June 2016 (unaudited) |
### 30 June 2015 (audited) |
| ### GBP | ### GBP | |
| (iii) Other net (losses)/gains: | ||
| Realised losses on Platform accounts | ### (194,602) | ### - |
| Unrealised gains/(losses) on Platform accounts | ### 810,736 | ### (460,891) |
| Gain on de-recognition of Associate | ### 455,158 | ### - |
| Losses on AFS assets | ### - | ### (7,015) |
| Other net investment losses | ### (442,057) | ### - |
| Foreign exchange losses on derivatives | ### (392,993) | ### - |
| Other foreign exchange gains/(losses) | ### 132,944 | ### (545,193) |
| Other financing gains | ### 1,117,723 | ### - |
| Impairment of intangible fixed assets | ### (1,594) | ### - |
| ### 1,485,315 | ### (1,013,099) |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
11. GAINS/(LOSSES) ON FINANCIAL ASSETS (continued)
| COMPANY | ### 30 June 2016 (unaudited) |
### 30 June 2015 (audited) |
| (iv) Realised (losses)/gains | ### GBP | ### GBP |
| Realised gain/(loss) on other financial assets at fair value through profit or loss | ### 140,804 | ### (105,560) |
| Realised loss on Subsidiary at fair value through profit or loss | ### (5,716,666) | ### - |
| Realised gain on Associate at fair value through profit or loss | ### - | ### 1,599,092 |
| ### (5,575,862) | ### 1,493,532 |
| (v) Unrealised gains | ||
| Unrealised (loss)/gain on other financial assets at fair value through profit or loss | ### (7,070,907) | ### 695,322 |
| Unrealised gain on Subsidiaries at fair value through profit or loss | ### 10,592,674 | ### 374,724 |
| Unrealised (loss)/gain on Associates at fair value through profit or loss | ### (2,274,568) | ### 3,447,384 |
| Unrealised gain on Joint Venture at fair value through profit or loss | ### 25,000 | ### - |
| ### 1,272,199 | ### 4,517,430 | |
| (vi) Other net (losses)/gains: | ||
| Realised losses on Platform accounts | ### (194,602) | ### - |
| Unrealised gains/(losses on Platform accounts) | ### 325,126 | ### (460,891) |
| Other foreign exchange losses | ### (442,057) | ### (544,143) |
| Other net investment losses | ### (35,764) | ### - |
| Impairment of intangible fixed assets | ### (1,594) | ### - |
| ### (348,891) | ### (1,005,034) | |
| Net (loss)/gain on financial assets and liabilities at fair value through profit or loss | ### (4,652,554) | ### 5,005,928 |
12. ACQUISITION OF SUBSIDIARIES
Details of the business combinations that were effected during the period are as follows:
| Subsidiary | Acquisition / Control Established Date | Percentage of issued share capital acquired | Operations of Acquiree |
| Platform Black Limited | 5 February 2016 | 39.75% | Innovative online business finance marketplace that connects investors to businesses and institutions who are seeking flexible working capital finance solutions. |
| Funding Knight Limited | 28 June 2016 | 100% | Provides SME finance through crowd lending from a broad base of investors and finance for property bridging and green energy projects. |
| Sancus (Gibraltar) Limited | 6 June 2016 | 100% | Provides secured lending to asset rich, cash-constrained borrowers and co-lending opportunities to high value clients. |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
12. ACQUISITION OF SUBSIDIARIES (continued)
The amounts recognised in respect of the identifiable assets acquired and liabilities acquired for each business combination effected during the period are as set out in the table below:
| Platform Black Limited | Funding Knight Limited | Sancus (Gibraltar) Limited | |
| Property, plant and equipment | 474,577 | 6,120 | 25,650 |
| Identifiable intangible assets | 270,022 | - | - |
| Investments | - | - | 263,141 |
| Loans advanced | - | - | 22,831,848 |
| Cash | 587,022 | 33,050 | 5,904,820 |
| Other financial assets | 90,273 | 78,647 | 247,637 |
| Borrowings | (1,783,153) | - | (14,322,848) |
| Other financial liabilities | (1,956,676) | (105,939) | (89,233) |
| Total identifiable (liabilities)/assets | (2,317,935) | 11,878 | 14,861,015 |
| Goodwill | 5,547,475 | 738,122 | 8,638,985 |
| Total consideration | 3,229,540 | 750,000 | 23,500,000 |
| Attributable to non-controlling interests | (517,590) | - | - |
| Less: fair value of previously held interest | (1,413,950) | - | - |
| 1,298,000 | 750,000 | 23,500,000 | |
| Satisfied by: | |||
| Cash | 1,298,000 | 750,000 | - |
| Ordinary shares in the Group | - | - | 13,500,000 |
| Bonds issued by the Group | - | - | 10,000,000 |
| 1,298,000 | 750,000 | 23,500,000 | |
| Transactions not part of business combination | - | - | (14,322,848) |
| Total consideration transferred | 1,298,000 | 750,000 | 9,177,152 |
The initial accounting for business combinations effected during the period is incomplete as the fair value of identifiable intangible assets acquired, including platform technology and intellectual property, has not yet been fully assessed. The nature and amount of any measurement period adjustments recognised will be reported in the Group's 2016 Annual Report.
(1) Platform Black Limited
Platform Black Limited was acquired as it offers a complementary service to Sancus and BMS creating positive operational synergies within pillar 1. The goodwill of GBP5,547,475 arising from the acquisition, consists of a strong in house IT solution to manage its business which is being tailored to work across the whole Sancus BMS group.
Consideration was paid in 3 tranches: GBP518,000 was paid on 5 February 2016 and GBP390,000 on 4 May 2016. At 30 June 2016, GBP390,000 was outstanding, which was settled on 5 August 2016.
The measurement basis used for determining non-controlling interests in the above calculation was the deemed fair value based on consideration for interest acquired, with no adjustment made for control premium.
The Group made an effective gain of GBP914,139 on the effective disposal of previous interest held in associate.
Platform Black Limited contributed revenue of GBP204,417 and losses of GBP573,137 to the Group's loss for the period between the date of acquisition and the balance sheet date. If the acquisition of Platform Black Limited had been completed on the first day of the financial period, its contribution to group revenues for the period and net losses for the period would have been GBP236,006 and a loss of GBP730,991 respectively.
(2) Funding Knight Limited
Funding Knight Limited was acquired when its parent company, Funding Knight Holdings Limited, went into administration. We believe this is a fundamentally good business with inherent strategic value, which we were able to acquire at a low entry price. The goodwill of GBP738,122 arising from the acquisition consists of a strong existing staff base with the majority of the infrastructure in place to grow a successful business.
Consideration paid was GBP750,000. An additional GBP1,000,000 for post acquisition recapitalisation of the business was agreed and is not included in the consideration transferred.
Funding Knight Limited contributed revenue of GBPNil and GBPNil to the Group's loss for the period between the date of acquisition and the balance sheet date. If the acquisition of Funding Knight Limited had been completed on the first day of the financial year, its contribution to group revenues for the period and net losses for the period would have been GBP178,139 and a loss of GBP558,245 respectively.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
12. ACQUISITION OF SUBSIDIARIES (continued)
(3) Sancus (Gibraltar) Limited
Sancus (Gibraltar) Limited was acquired as this offered a strong profitable business model and allowed a better organised, more operationally efficient group. It also reduced a keyman risk. The goodwill of GBP8,638,985 arising from the acquisition consists of a strong pipeline and a growing profitable business in a new jurisdiction.
The fair value of the 43,408,360 new Ordinary Shares issued as part of the consideration paid for Sancus (Gibraltar) Limited (GBP13,500,000) was determined on the basis of the prevailing market traded price at the date of acquisition. The fair value of the 10,000,000 Bonds issued represents the aggregate value of GBP1 per issued bond. Refer to note 15 for further details.
Part of the consideration transferred also included the acquisition of an inter-company loan of GBP14,322,848 which was not part of the business combination.
Sancus (Gibraltar) Limited contributed revenue of GBPNil and GBPNil to the Group's profit for the period between the date of acquisition and the balance sheet date. If the acquisition of Sancus (Gibraltar) Limited had been completed on the first day of the financial year, its contribution to group revenues for the period and net losses for the period would have been GBP744,083 and a profit of GBP251,242 respectively.
13. TRADE AND OTHER RECEIVABLES
| ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
|
| GROUP - Non-current | ### GBP | ### GBP |
| Balances held by Platforms on behalf of the Group* | ### - | ### 29,113,674 |
| Loan interest receivable | ### - | ### 58,960 |
| ### - | ### 29,172,634 |
*Balances held by Platforms on behalf of the Group were held by SMEF, which is no longer consolidated due to the Company losing control, resulting in the transfer between Subsidiaries and Associates within the Company.
| ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
|
| GROUP - Current | ### GBP | ### GBP |
| Balances held by Platforms on behalf of the Group** | ### 2,062,837 | ### 12,430,875 |
| Unsettled investment sales*** | ### 800,000 | ### 800,000 |
| Loan assignment receivable | ### 1,500,582 | ### 1,270,687 |
| Accrued bank interest | ### 1,041 | ### 532 |
| Loan interest receivable | ### 1,158,119 | ### 663,042 |
| Dividend income receivable | ### 555,956 | ### 73,693 |
| Preference share dividends receivable | ### 287,342 | ### 1,053,553 |
| Funds held in escrow | ### 1,000,000 | ### - |
| Other trade receivables and prepaid expenses | ### 1,549,589 | ### 799,255 |
| ### 8,915,466 | ### 17,091,637 |
| ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
|
| COMPANY - Current | ### GBP | ### GBP |
| Balances held by Platforms on behalf of the Company** | ### 2,062,837 | ### 1,556,396 |
| Accrued bank interest | ### 1,041 | ### 532 |
| Dividend income receivable | ### 518,544 | ### 200,806 |
| Loan interest receivable | ### 616,132 | ### 617,193 |
| Preference share dividends receivable | ### 287,342 | ### 754,001 |
| Other receivables | ### 733,084 | ### 203,635 |
| Prepaid expenses | ### 85,032 | ### 111,724 |
| ### 4,304,012 | ### 3,444,287 |
**Other loans held through platforms.
***GBP800,000 has been settled post period end.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
14. CASH AND CASH EQUIVALENTS
| ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
|
| GROUP | ### GBP | ### GBP |
| Call account | ### 10,657,947 | ### 15,515,942 |
| Cash held by Platforms on behalf of the Company | ### - | ### 1,899,215 |
| ### 10,657,947 | ### 17,415,157 |
| COMPANY | ||
| Call account | ### 1,509,830 | ### 7,036,130 |
For the purposes of the Consolidated and Company Cash Flow Statements, the above items represent the period/year end cash and cash equivalents balances.
15. TRADE AND OTHER PAYABLES
| GROUP | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| Current liabilities | ### GBP | ### GBP |
| Administration and secretarial fees | ### 99,213 | ### 156,207 |
| Custodian's fees | ### - | ### 6,849 |
| Risk advisory fees | ### - | ### 12,603 |
| Audit fees | ### 76,924 | ### 126,750 |
| Valuation fees | ### 15,000 | ### 84,000 |
| Legal and professional fees | ### 556,074 | ### 973,647 |
| Executive Team's remuneration payable | ### - | ### 375,000 |
| Finance costs | ### 118,235 | ### 996,948 |
| Other staff costs | ### 258,102 | ### 439,093 |
| Deferred income | ### 151,351 | ### 63,997 |
| Loan novation | ### 3,591,918 | ### - |
| Subsidiary closure costs payable | ### 599,992 | ### - |
| Unsettled security investment purchases payable | ### 2,390,000 | ### - |
| Provision of Ordinary Shares held by business combination | ### 373,677 | ### - |
| Other payables | ### 480,326 | ### 511,667 |
| 8,710,812 | ### 3,746,761 |
| GROUP | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| Non-current liabilities | ### GBP | ### GBP |
| Loan payable (1) | ### 12,441,000 | ### 35,527,972 |
| ZDP Shares payable (see note 17) | ### 22,796,533 | ### 22,160,765 |
| Corporate bond (3) | ### 8,500,000 | ### - |
| ### 43,737,533 | ### 57,688,737 |
Total finance costs for the period were GBP2,057,811 (30 June 2015: GBP2,100,281). These finance costs are for interest due to the loan holders, loan facility fees and uplift in ZDP Shares. The fair value of loans outstanding at 30 June 2016 was GBP12,441,000 (31 December 2015: GBP35,527,972).
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
15. TRADE AND OTHER PAYABLES (continued)
| COMPANY | ### 30 June 2016 (unaudited) |
31 December 2015 (audited) |
| Current liabilities | ### GBP | GBP |
| Due to Subsidiary | ### 53,435 | ### 125,734 |
| Due to Associate | ### 3,591,918 | ### - |
| Administration and secretarial fees | ### 85,929 | ### 90,497 |
| Valuation fees | ### 15,000 | ### 84,000 |
| Legal and professional fees | ### 1,203,862 | ### 920,995 |
| Audit fees | ### 55,694 | ### 30,250 |
| Executive Team's remuneration payable (see note 23) | ### - | ### 225,000 |
| Staff costs payable | ### 73,800 | 109,695 |
| Unsettled security investment purchases payable | ### 390,000 | ### 5,452,695 |
| Other payables | ### 107,586 | ### 50,232 |
| ### 5,577,224 | ### 7,089,098 | |
| Non-current liabilities | ||
| Loan payable (1) | ### 14,860,000 | 28,890,000 |
| ZDP Shares payable (see note 17) | ### 22,796,533 | ### 22,160,765 |
| Corporate bond (3) | ### 10,000,000 | ### - |
| ### 47,656,533 | ### 51,050,765 | |
| ### 53,233,757 | ### 58,139,863 |
Total finance costs for the period were GBP2,033,776 (30 June 2015: GBP1,939,580). These finance costs are for interest due to the loan holders, loan facility fees and uplift in ZDP Shares. The fair value of loans outstanding at 30 June 2016 was GBP14,860,000 (31 December 2015: GBP28,890,000).
(1) Sancus Loan Facility with the Company
During the year ended 31 December 2015, the Company had a loan facility to borrow up to GBP30,000,000 ("the Loan Facility") through Sancus (Jersey) Limited, a subsidiary of the Company as at the period/year end. Interest on the Loan Facility, which is secured over the Company's assets, was charged at 11% per annum.
Refinancing of Sancus Loan Facility
On 15 March 2016, the Loan Facility with Sancus was amended and GBP15,000,000 was repaid. The Loan Facility amount is up to GBP14.86m and the interest charged against the Loan Facility was amended to 8.75%. All other significant terms and conditions remained unchanged.
As at 30 June 2016, the total loan payable under the Loan Facility was GBP14,860,000 (31 December 2015: GBP28,890,000). GBP2,419,000 (31 December 2015: GBP7,450,000) of this balance was funded directly by Sancus and this element is eliminated on consolidation in the Group's Consolidated Statement of Financial Position. During the period ended 30 June 2016, the interest expensed in the Group financial statements was GBP886,584 (30 June 2015: GBP854,993) and the interest expensed in the Company financial statements was 1,056,663 (30 June 2015: GBP986,621). The outstanding accrued interest payable on the loan at period end is GBP53,435 (31 December 2015: GBP125,734) in the Company's financial statements and GBP53,435 (31 December 2015: GBP125,734) in the Group's consolidated financial statements. This loan will mature on 15 March 2017.
(2) Loan Facility with BMS Finance (UK) Sarl
During the prior year, BMS Finance (UK) Sarl issued Asset-Linked Notes, each having a par value of GBP1, to a provider of matched funding. The Notes had a term of ten (10) years from the initial closing date of 7 August 2014, subject to two (2) consecutive extensions of one (1) year each. Amounts payable relating to Asset-Linked Notes are subordinated to all other commercial debts of BMS Finance (UK) Sarl. During the current period, the Company lost control of BMS Finance (UK) Sarl, resulting in its reclassification from Subsidiary to Associate.
As at 31 December 2015, GBP14,087,972 had been subscribed to by parties outside the Group. In addition, as at 31 December 2015, GBP14,181,895 had been subscribed to by Group entities and this element was eliminated on consolidation in the Group's Consolidated Statement of Financial Position.
The interest accrued on the Asset-Linked Notes had a fixed interest amount equal to 1% per annum of the Asset-Linked Notes par value, plus, a variable interest amount equal to the adjusted net profits of BMS Finance (UK) Sarl, less a margin of 11.94% per annum of the operating costs borne by BMS Finance (UK) Sarl in relation to the specified assets.
During the period ended 30 June 2016, GBP322,520 (30 June 2015: GBP390,443) interest had been expensed in relation to the Asset-Linked Notes, with GBPNil (31 December 2015: GBP871,215) remaining outstanding as at the period end.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
15. TRADE AND OTHER PAYABLES (continued)
(3) Corporate Bond
On 30 June 2016, the Company issued GBP10,000,000 aggregate corporate bonds as part consideration for the acquisition of Sancus (Gibraltar) Limited's preference shares. Sancus BMS Group Limited holds GBP1,500,000 and this element is eliminated on consolidation in the Group's Consolidated Statement of Financial Position. These corporate bonds must be repaid by 30 June 2021. The interest charged on these corporate bonds is 7%. As at 30 June 2016, GBP8,500,000 was payable by the Group and GBP10,000,000 payable by the Company.
16. SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE
The Company has the power 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:
| 30 June 2016 (unaudited) | |||
| Date | No of shares issued | Share Premium | Reason for issue |
| 20 January 2016 | 51,020 | 18,750 | Re Louise Beaumont 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 Limited |
| 30 June 2016 | 11,093,247 | 3,450,000 | Increased stake in GLIF BMS Holdings Limited |
| 55,059,872 | 17,133,109 |
| 31 December 2015 (audited) | |||
| Date | No of shares issued | Share Premium | Reason for issue |
| 17 March 2015 | 34,500,000 | 19,263,081 | Placing shares |
| 20 March 2015 | 130,502 | 80,689 | 2014 fourth quarter scrip dividend |
| 30 March 2015 | 6,187,394 | 3,774,310 | Part payment for the Company's increased stake in TradeRiver Finance Limited |
| 29 May 2015 | 511,529 | 296,687 | Louise Beaumont in payment for the Company's increased stake in Platform Black Limited |
| 19 June 2015 | 142,397 | 79,714 | 2015 first quarter scrip dividend |
| 15 September 2015 | 128,022 | 73,523 | 2015 second quarter scrip dividend |
| 29 December 2015 | 357,499 | 180,109 | 2015 third quarter scrip dividend |
| 31 December 2015 | 15,000,000 | 5,550,000 | Placing shares |
| 56,957,343 | 29,298,113 |
| GROUP - Share Capital | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| Ordinary Shares - nil par value | ### Shares in issue | ### Shares in issue |
| Balance at start of the period/year | ### 229,917,364 | ### 172,960,021 |
| Issued during the period/year | ### 55,059,872 | ### 56,957,343 |
| Purchase of shares into treasury* | ### (6,852,900) | ### - |
| Balance at end of the period/year | ### 278,124,336 | ### 229,917,364 |
| GROUP - Share Premium | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| GBP | GBP | |
| Balance at start of the period/year | 87,404,910 | 58,106,797 |
| Issued during the period/year | 17,133,109 | 29,298,113 |
| Purchase of shares into treasury* | (2,025,000) | - |
| Balance at end of the period/year | 102,513,019 | 87,404,910 |
| COMPANY - Share Capital | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| Ordinary Shares - nil par value | ### Shares in issue | ### Shares in issue |
| Balance at start of the period/year | ### 229,917,364 | ### 172,960,021 |
| Issued during the period/year | ### 55,059,872 | ### 56,957,343 |
| Purchase of shares into treasury** | ### (214,417) | ### - |
| Balance at end of the period/year | ### 284,762,819 | ### 229,917,364 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
16. SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE (continued)
| COMPANY - Share Premium | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| GBP | GBP | |
| Balance at start of the period/year | 87,404,910 | 58,106,797 |
| Issued during the period/year | 17,133,109 | 29,298,113 |
| Balance at end of the period/year | 104,538,019 | 87,404,910 |
*During the period, a total of 6,638,483 (31 December 2015: Nil) Ordinary Shares, with an aggregate value of GBP2,025,000 (31 December 2015: GBPNil) were eliminated on consolidation as they related to shares held by a Subsidiary, Sancus BMS Group.
**During the period, 214,417 Ordinary Shares were taken into treasury for GBPNil consideration. The shares were issued to the former CEO under the Company's employee share scheme and were subject to clawback provisions in the event that the Company failed to meet specified performance criteria.
Treasury Shares
Where the Company purchases its own Share Capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from Share Premium.
When such shares are subsequently sold or reissued to the market, any consideration received, net of any directly attributable incremental transaction costs, is recognised as an increase in Share Premium. Where the Company cancels treasury shares, no further action is required to the Share Premium account of the Company at the time of cancellation. Shares held in treasury are excluded from calculations when determining NAV per share.
| GROUP | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| Treasury Shares | ### Shares in issue | ### Shares in issue |
| Balance at start of the period/year | ### - | ### - |
| On market purchases | ### 2,025,000 | ### - |
| Balance at end of the period/year | ### 2,025,000 | ### - |
| COMPANY | ### 30 June 2016 (unaudited) |
### 31 December 2015 (audited) |
| Treasury Shares | ### Shares in issue | ### Shares in issue |
| Balance at start of the period/year | ### - | ### - |
| On market purchases | ### 214,417 | ### - |
| Balance at end of the period/year | ### 214,417 | ### - |
Distributable Reserve
On 15 June 2007, Court approval was received to reduce the issued share premium of the Company by an amount of GBP0.95 per Ordinary Share. The reduction was credited as a Distributable Reserve.
As at 30 June 2016 and 31 December 2015, the Distributable Reserve stood at GBP34,802,740.
Issue of Warrants
On 25 February 2016, Shareholders approved special resolutions authorising the issue of warrants to Golf Investments 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; and
- 12,000,000 Ordinary Shares at 55 pence per Ordinary Share.
As at 30 June 2016, 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 managements assessment of the fair value it was not deemed to be materially different to the current carrying value of Nil.
17. ZDP SHARES PAYABLE
At the Extraordinary General Meeting on 12 December 2014, a special resolution to approve the adoption of the New Articles in connection with the creation of the ZDPs, a new class of redeemable zero dividend preference shares in the Company and attached rights was duly passed by Shareholders.
On 27 March 2015, the Company issued 791,418 ZDP shares in part payment for the Company's increased stake in TradeRiver Finance Limited.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
17. ZDP SHARES PAYABLE (continued)
On 16 December 2014, the Company issued 20,000,000 ZDP shares to Sancus Holdings Limited as part consideration for the entire issued Share Capital of Sancus Limited (now Sancus (Jersey) Limited) and Sancus (Guernsey) Limited. The ZDP Shares have a maturity date of 5 December 2019 with a final capital entitlement of GBP1.30696 per ZDP Share.
Please 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.
18. NET ASSET VALUE PER ORDINARY SHARE
GROUP
The Group net asset value per Ordinary Share is calculated by dividing the total consolidated net assets attributable to Ordinary Shareholders at the period/year end of GBP81,609,381 (31 December 2015: 81,623,864) by the Ordinary Shares in issue at the end of the period/year being 278,124,336 (31 December 2015: 229,917,364).
COMPANY
The Company net asset value per Ordinary Share is calculated by dividing the total Company net assets attributable to Ordinary Shareholders at the period/year end of GBP105,635,774 (31 December 2015: GBP98,240,244) by the Ordinary Shares in issue at the end of the period/year being 284,762,819 (31 December 2015: 229,917,364).
During the period, 214,417 Ordinary Shares were transferred to Treasury Shares. These shares were included in the number of Ordinary Shares in issue at the period end for the calculation of the published NAV, resulting in a difference in NAV per share of 0.03p. The published NAV per share was 37.07p and the accounting NAV per share is 37.10p.
19. CASH GENERATED FROM OPERATIONS
| ### 30 June 2016 (unaudited) |
### 30 June 2015 (audited) |
|
| Group: | ### GBP | ### GBP |
| Loss for the period | ### (8,442,181) | ### (8,480) |
| Adjustments for: | ||
| Net losses/(gains) on financial assets and liabilities at fair value through profit or loss | ### 4,703,547 | ### (1,777,467) |
| Net losses on de-recognition of subsidiaries | ### 1,207,701 | ### - |
| Net losses on Associates | ### 1,947,054 | ### 2,317,884 |
| Net losses on Joint Venture | ### 8,797 | ### - |
| Non-cash expenses: | ||
| Non-cash capitalisation of loan interest payable | ### 8,790 | ### - |
| Amortisation/depreciation of non-current assets | ### 21,374 | ### 36,711 |
| Other non-cash | ### 18,750 | ### - |
| Changes in working capital: | ||
| Trade and other receivables | ### (2,132,907) | ### (15,845,419) |
| Trade and other payables | ### (9,814,980) | ### (771,640) |
| Cash outflow from operations | ### (12,474,055) | ### (16,048,411) |
| ### 30 June 2016 (unaudited) |
### 30 June 2015 (audited) |
|
| Company: | ### GBP | ### GBP |
| (Loss)/profit for the period | ### (6,861,492) | ### 5,259,399 |
| Adjustments for: | ||
| Net losses/(gains) on financial assets and liabilities at fair value through profit or loss | ### 4,303,663 | ### (5,132,949) |
| Non-cash interest expense/(income) | ### 679,728 | ### (698,843) |
| Non-cash expenses | ### 20,805 | ### - |
| Changes in working capital: | ||
| Trade and other receivables | ### (1,530,662) | ### (16,888,375) |
| Trade and other payables | ### 4,186,590 | ### (148,919) |
| Cash inflow/(outflow) from operations | ### 798,632 | ### (17,609,687) |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
20. CONSOLIDATED SUBSIDIARY UNDERTAKINGS
The Directors consider the following entities as wholly and partly owned subsidiaries of the Company and their results and financial positions are included within the consolidated results of the Group.
| Subsidiary entity | Date of incorporation |
Country of incorporation |
Nature of holding |
Percentage holding |
| Sancus BMS Group Limited (formerly Sancus Group Limited) | 27 December 2013 | Guernsey | Directly held - Equity Shares |
100% |
| GLIF BMS Holdings Limited (1) | 5 November 2012 | United Kingdom | Directly held - Equity Shares |
100% |
| BMS Finance AB Limited | 24 November 2006 | United Kingdom | Indirectly held - Equity Shares |
100%* |
| Finpoint Limited | 15 January 2014 | United Kingdom | Directly held - Equity Shares |
65% |
| Raiseworks LLC | 5 December 2013 | United States | Directly held - Equity Shares |
100% |
| Sageworks Capital Inc | 4 May 2011 | United States | Indirectly held - Equity Shares |
100%** |
| GLI Investments Holdings Sarl | 13 May 2014 | Luxembourg | Directly 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% |
| NACFB Business Finance Limited | 11 September 2015 | United Kingdom | Directly held - Equity Shares |
100% |
| FinTech Ventures Limited | 9 December 2015 | Guernsey | Directly 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% |
| Platform Black Limited (1) | 7 January 2011 | United Kingdom | Indirectly held - Equity Shares |
83.93% |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
20. CONSOLIDATED SUBSIDIARY UNDERTAKINGS (continued)
| Subsidiaries disposed of/liquidated/lost control of during the current period | ||||
| NVF I Limited | 10 September 2002 | United Kingdom | Indirectly held - Equity Shares |
100%* |
| NVF I LP | 12 January 2003 | Jersey | Indirectly held - Equity Shares |
100%* |
| BMS Equity Limited | 30 May 2007 | Jersey | Indirectly held - Equity Shares |
100%* |
| Amberton Asset Management Limited (formerly GLI Asset Management Limited) (2) | 22 May 2015 | Guernsey | Directly held - Equity Shares |
100% |
| BMS Finance (UK) Sarl (3) | 29 July 2014 | Luxembourg | Directly & Indirectly held - Equity Shares |
40.17%*** |
| The SME Loan Fund plc (formerly GLI Alternative Finance plc) (3) | 13 July 2015 | United Kingdom | Directly and indirectly held - Equity Shares |
76.47% |
| GLI Alternative Finance Guernsey Limited | 20 April 2015 | Guernsey | Directly held - Equity Shares |
100% |
| Subsidiaries disposed of/liquidated during the prior year | ||||
| NVF Tech Limited ("NVF Tech") | 7 December 1995 | United Kingdom | Indirectly held - Equity Shares |
95%* |
| NVF Patents Limited | 8 March 2013 | Incorporated in Jersey, re-domiciled to Guernsey | Indirectly held - Equity Shares |
100%* |
* Subsidiaries within the GBHL Group, percentage holding represents GBHL Group's holding in the underlying subsidiaries.
** Subsidiary of Raiseworks, percentage holding represents Raiseworks' holding in the underlying subsidiary.
*** GLIF directly controlled 24.92% of the issued Share Capital and indirectly controlled 25.25% of the issued Share Capital through GBHL until 1 April 2016 when the Group disposed of 10% of the issued Share Capital, resulting in loss of control.
(1) During the current period, the Company increased its stake in Platform Black Limited resulting in a change in classification of this entity from an Associate to a Subsidiary.
(2) During the current period, the Company decreased its stake in Amberton resulting in a change in classification of this entity from a Subsidiary to a Joint Venture.
(3) During the current period, the Company decreased its stake in BMS Finance (UK) Sarl and SMEF resulting in a change in classification of these entities from Subsidiaries to Associates.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
21. ASSOCIATED UNDERTAKINGS
The Directors consider the following entities as material associated undertakings of the Group and Company as at 30 June 2016.
| Name of Associate: | Nature of holding | Country of incorporation | Percentage holding | Measurement - Group level | Measurement - Company level |
| Proplend Limited | Directly held - Equity | United Kingdom | 22.50% | Equity Method | Fair Value |
| CrowdShed Limited | Directly held - Equity | United Kingdom | 32.51% | Equity Method | Fair Value |
| LiftForward Inc. | Directly held - Equity | United States of America | 18.40% | Equity Method | Fair Value |
| Finexkap | Directly held - Equity | France | 29.80% | Equity Method | Fair Value |
| Ovamba Solutions Inc. | Directly held - Equity | United States of America | 20.48% | Equity Method | Fair Value |
| The Credit Junction Holdings | Directly held - Equity | United States of America | 24.38% | Equity Method | Fair Value |
| Funding Options Limited | Directly held - Equity and Preference Shares | United Kingdom | 28.90% | Equity Method | Fair Value |
| TradeRiver Finance Limited | Directly held - Equity and Preference Shares | Guernsey | 46.39% | Equity Method | Fair Value |
| TradeRiver USA Inc | Directly held - Equity and Preference Shares | United States of America | 30.25% | Equity Method | Fair Value |
| Open Energy Group Inc | Directly held - Equity | United States of America | 21.57% | Equity Method | Fair Value |
| BMS Finance (Ireland) Sarl | Directly held - Equity | Luxembourg | 40.50% | Equity Method | Fair Value |
| BMS Finance (UK) Sarl (2) | Directly held - Equity | Luxembourg | 40.17% | Equity Method | Fair Value |
| The SME Loan Fund plc (formerly GLI Alternative Finance plc) ("SMEF") (2) | Directly held - Equity | United Kingdom | 47.94% | Equity Method | Fair Value |
| Associates gained control of during the current period | |||||
| Name of Associate: | Nature of holding | Country of incorporation | Percentage holding | Measurement - Group level | Measurement - Company level |
| Platform Black Limited (1) | Directly held - Equity and Preference Shares | United Kingdom | 83.93% | Equity Method | Fair Value |
(1) During the current period, the Company increased its stake in Platform Black Limited resulting in a change in classification of this entity from an Associate to a Subsidiary.
(2) During the current period, the Company decreased its stake in BMS Finance (UK) Sarl and SMEF resulting in a change in classification of these entities from Subsidiaries to Associates.
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.
All the Associates held as at 30 June 2016, are considered individually immaterial.
As at 30 June 2016, there was GBPNil (31 December 2015: GBPNil) relating to the Group's share in an Associate's losses that remained unrecognised when applying the equity method.
Please refer to note 24 for unrecognised commitments from the Group at 30 June 2016 and 31 December 2015.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
22. JOINT VENTURE UNDERTAKINGS
The Directors consider the following entity as a joint venture undertaking of the Group and Company as at 30 June 2016.
| Name of Joint Venture: | Nature of holding | Country of incorporation | Percentage holding | Measurement - Group level | Measurement - Company level |
| Amberton Asset Management Limited (formerly GLI Asset Management Limited) | Directly held - Equity Shares | Guernsey | 50% | Equity Method | Fair Value |
23. RELATED PARTY TRANSACTIONS
Transaction with the Directors/Executive Team
Non-executive Directors
As at 30 June 2016, 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 2016 | 31 December 2015 | ||
| GBP | GBP | ||
| Patrick Firth (Chairman) | 50,000 | 50,000 | |
| Frederick Forni | 37,500 | 37,500 | |
| James Carthew | 40,000 | 40,000 | |
| John Whittle (Alternate) (1) | 40,000 | 40,000 |
(1) Appointed 8 December 2015
There was no increase in Directors' fees during the period ended 30 June 2016. Total Directors' fees charged to the Company for the period ended 30 June 2016 were GBP86,380 (30 June 2015: GBP63,967) with GBPNil (31 December 2015: GBPNil) remaining unpaid at the period end.
Executive Team
For the period ended 30 June 2016, 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 2016 | 31 December 2015 | ||||
| Fixed Salary | Executive Bonus Scheme | Fixed Salary | Executive Bonus Scheme | ||
| GBP | GBP | GBP | GBP | ||
| Andrew Whelan (1) | N/A | - | N/A | - | |
| Emma Stubbs (2) | 120,000 | - | 120,000 | - | |
| Marc Krombach (3) | 130,000 | - | 130,000 | - | |
| Louise Beaumont (4) | 75,000 | - | 75,000 | - | |
| Russell Harte (5) | N/A | - | N/A | - | |
| Geoff Miller (6) | - | - | 165,000 | N/A |
(1) Annual salary of GBP240,000 remunerated via Sancus. Annual salary increased from GBP175,000 with effect from 1 May 2016.
(2) Annual salary increase from GBP99,000 to GBP120,000 with effect from 1 September 2015.
(3) Annual salary of GBP130,000.
(4) Remunerated via the Company.
(5) Annual salary of GBP150,000 remunerated via Sancus.
(6) Annual salary GBP165,000. Mr Miller resigned on 19 December 2015.
During the period, the total Executive Bonus Scheme pool charged to the Company's expenses relating to 2016 was GBPNil (31 December 2015: GBPNil), with GBPNil (31 December 2015: GBPNil) remaining outstanding as at 30 June 2016.
As the Executive Bonus Scheme is a non-fixed amount, the total Executive Team remuneration will fluctuate year on year.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
23. RELATED PARTY TRANSACTIONS (continued)
Directors' and Persons Discharging Managerial Responsibilities ("PDMR") shareholdings in the Company
As at 30 June 2016, the Directors had the following beneficial interests in the Ordinary Shares of the Company:
| 30 June 2016 | 31 December 2015 | |||
| No. of Ordinary Shares Held | % of total issued Ordinary Shares | No. of Ordinary Shares Held | % of total issued Ordinary Shares | |
| Patrick Firth (Chairman) | 257,852 | 0.09 | 248,197 | 0.11 |
| Fred Forni | - | - | - | - |
| James Carthew | 300,000 | 0.10 | 300,000 | 0.14 |
| John Whittle (Alternate)* | - | - | - | - |
| Andrew Whelan | 3,800,000 | 1.33 | 3,686,461 | 1.74 |
| Emma Stubbs | 65,033 | 0.02 | 62,598 | 0.03 |
* On 23 September 2016, John Whittle succeeded Mr Carthew as chairman of the Audit Committee and remains a director of the Company.
During the period, Mr Firth, Mr Carthew, Mr Whelan and Mrs Stubbs received total amounts of GBP3,131, GBP3,750, GBP41,394 and GBP790 (31 December 2015: GBP11,729, GBP12,968, GBP92,162, GBP2,995 and GBP120,537) respectively from the Company by way of dividends on their Ordinary Share holdings in the Company.
See Note 25 for details of the Directors' interests in the Ordinary Shares of the Company between the period end and the date of this report.
As at 30 June 2016, there were no unexercised share options for Ordinary Shares of the Company (31 December 2015 and 30 June 2015: nil Ordinary Shares).
Intra-Group Transactions
The following significant intra-group company transactions took place during the current period:
| Entity | Relationship | Nature of Transaction | Balance as at 30 June 2016 |
Amount for the period ended 30 June 2016 |
| GBP | GBP | |||
| Platform loans & corresponding interest | ||||
| Sancus & GBHL | Subsidiaries | Loan payable to Sancus from GBHL | 16,048,493 | - |
| GLIF & GBHL | Subsidiaries | Loan interest payable to GLIF from GBHL | 280,079 | 603,619 |
| GBHL & BMS Finance AB | Subsidiaries | Loan interest receivable by GBHL from BMS Finance AB | - | 193,896 |
| GLIF & BMS Finance (UK) Sarl | Subsidiaries | Loan interest receivable by GLIF from BMS Finance (UK) Sarl | 229,902 | 369,257 |
| GLIF & BMS Finance (Ireland) Sarl | Subsidiaries | Loan receivable by GLIF from BMS Finance (Ireland) Sarl | 28,955 | 28,852 |
| GBHL & BMS Finance (UK) Sarl | Subsidiaries | Loan receivable by GBHL from BMS Finance (UK) Sarl | 8,829,603 | - |
| GBHL & BMS Finance (UK) Sarl | Subsidiaries | Loan interest receivable by GBHL from BMS Finance (UK) Sarl | 48,758 | 552,553 |
| GBHL & BMS Finance (Ireland) Sarl | Subsidiaries | Loan receivable by GBHL from BMS Finance (Ireland) Sarl | 2,296,604 | - |
| GBHL & BMS Finance (Ireland) Sarl | Subsidiaries | Loan interest receivable by GBHL from BMS Finance (Ireland) Sarl | 389,143 | 48,758 |
| GLIF & Proplend | Associates | Loan interest payable to GLIF from Proplend | 4,754 | 29,713 |
| SMEF & Finpoint | Associates & Subsidiaries | Loan interest payable to SMEF from Finpoint | 44,818 | - |
| GLIF & Platform Black | Subsidiaries | Loan interest receivable by GLIF from Platform Black | - | 11,271 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
23. RELATED PARTY TRANSACTIONS (continued)
| Entity | Relationship | Nature of Transaction | Balance as at 30 June 2016 |
Amount for the period ended 30 June 2016 |
| GBP | GBP | |||
| Platform loans & corresponding interest | ||||
| GLIF & Open Energy Group | Associates | Loan interest payable to GLIF from Open Energy Group | 16,128 | 22,017 |
| GLIF & Ovamba Solutions | Associates | Loan payable to GLIF from Ovamba Solutions | 568,901 | - |
| GLIF & Ovamba Solutions | Associates | Loan interest payable to GLIF from Ovamba Solutions | - | 9,383 |
| SMEF & CrowdShed | Associates & Subsidiaries | Loan interest payable to SMEF from CrowdShed | - | 146,885 |
| GLIF & CrowdShed | Associates | Loan payable from GLIF to CrowdShed | 141,495 | - |
| GLIF & CrowdShed | Associates | Loan interest payable to GLIF from CrowdShed | 3,838 | 3,838 |
| GLIF & Finpoint | Subsidiaries | Loan interest payable to GLIF from Finpoint | - | 3,551 |
| GLIF & Finpoint | Subsidiaries | Loan payable to GLIF by Finpoint | 965,000 | 13,322 |
| GLIF & Raiseworks | Subsidiaries | Loan interest payable to GLIF by Raiseworks | 656 | 5,896 |
| GLIF & FundingKnight | Subsidiaries | Loan interest payable to GLIF by FundingKnight | 12,013 | 38,087 |
| GLIF & TradeRiver Finance Limited | Associates | Loan interest payable to GLIF by TradeRiver Finance Limited | 988 | 6,926 |
| Platform preference shares & corresponding interest | ||||
| GLIF & TradeRiver Finance Limited | Associates | Preference shares held by GLIF in TradeRiver Finance Limited | 807,999 | |
| GLIF & TradeRiver Finance Limited | Associates | Preference shares interest due to GLIF by TradeRiver Finance Limited | 164,734 | 28,253 |
| GLIF & TradeRiver USA | Associates | Preference shares held by GLIF in TradeRiver USA | 375,629 | - |
| GLIF & TradeRiver USA | Associates | Preference shares interest due to GLIF by TradeRiver USA | 43,470 | 14,010 |
| GLIF & Platform Black | Subsidiaries | Preference shares held by GLIF in Platform Black | 4,100,000 | - |
| GLIF & Finpoint | Subsidiaries | Preference shares interest due to GLIF by Finpoint | - | 90,959 |
| GLIF & FundingKnight | Subsidiaries | Preference shares held by GLIF in FundingKnight | - | 237,930 |
| GLIF & Funding Options Limited | Associates | Preference shares held by GLIF in Funding Options Limited | 749,882 | - |
| GLIF & Funding Options Limited | Associates | Preference share interest due to GLIF by Funding Options Limited | 79,138 | 33,652 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
23. RELATED PARTY TRANSACTIONS (continued)
| Entity | Relationship | Nature of Transaction | Balance as at 30 June 2016 |
Amount for the period ended 30 June 2016 |
| GBP | GBP | |||
| Platform preference shares & corresponding interest | ||||
| GLIF & Finexkap | Subsidiaries | Preference shares held by GLIF in Platform Black | 125,174 | - |
| GLIF & Platform Black Limited | Subsidiaries | Preference share accrued coupon due to GLIF by Platform Black | - | 135,040 |
| GLIF & Ovamba Solutions | Associates | Preference shares held by GLIF in Ovamba Solutions | - | 7,980 |
| GLIF & LiftForward | Associates | Preference shares held by GLIF in LiftForward | 6,082,188 | - |
| GLIF & The Credit Junction | Associates | Preference shares held by GLIF in The Credit Junction | 6,873,531 | - |
| Other transactions | ||||
| GLIF & Sancus | Subsidiaries | Corporate Bond to GLIF from Sancus Gibraltar | 10,000,000 | - |
| GLIF & Sancus | Subsidiaries | Corporate Bond to Sancus from Sancus Gibraltar | 1,500,000 | - |
| GBHL & BMS Equity Ltd | Subsidiaries | Loan receivable by GBHL from BMS Equity | 422,050 | - |
| GBHL & BMS Finance (UK) Sarl | Subsidiaries | Advisory fees payable to GBHL from BMS Finance (UK) Sarl | - | 450,000 |
| GLIF & Sancus | Subsidiaries | Loan payable to GLIF from Sancus | 14,860,000 | - |
| GLIF & Sancus | Subsidiaries | Loan interest payable to GLIF from Sancus | 53,435 | 1,056,663 |
| Sancus & GLIF | Subsidiaries | Loan payable by GLIF to Sancus | 45,912,845 | - |
| Sancus & GLIF | Subsidiaries | Loan interest payable by GLIF to Sancus | 3,653 | 398,528 |
| Sancus & GLIF | Subsidiaries | Loan charges payable to GLIF from Sancus | - | 201,638 |
| GBHL & SMEF | Subsidiaries | Dividend income from SMEF to GBHL | - | 4,922 |
| Sancus & SMEF | Subsidiaries | Dividend income from SMEF to Sancus | 37,412 | 139,024 |
| SMEF & Amberton | Associates & Joint Venture | Management fees payable to Amberton from SMEF | - | 159,418 |
| GLIF & Sancus | Subsidiaries | Reimbursed expenses from GLIF to Sancus | 23,622 | - |
| GLIF & Sancus | Subsidiaries | Reimbursed expenses from GLIF to Sancus Jersey Limited | 53,774 | - |
| GLIF & Sancus | Subsidiaries | Expenses recharges from charged by GLI to Sancus | 9,891 | 9,280 |
| GLIF & Finpoint | Subsidiaries | Commitment fee payable to GLIF by Finpoint | - | 6,000 |
| GLIF & FundingKnight | Subsidiaries | Commitment fee payable to GLIF by FundingKnight | - | 9,000 |
| GLIF & Funding Options | Subsidiaries | Commitment fee payable to GLIF by Funding Options | - | 15,000 |
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
23. RELATED PARTY TRANSACTIONS (continued)
| Entity | Relationship | Nature of Transaction | Balance as at 30 June 2016 |
Amount for the period ended 30 June 2016 |
| GLIF & FundingKnight | Subsidiaries | Drawdown payable by GLIF to FundingKnight | - | 70,000 |
| GLI & Raiseworks | Subsidiaries | Expenses recharged by GLI to Raiseworks | 713 | 713 |
| GLI & Amberton | Joint Venture | Expenses recharged by GLI to Amberton | 203,561 | 181,702 |
There is no ultimate controlling party of the Company.
24. COMMITMENTS AND CONTINGENCIES
As at 30 June 2016, the Company had the following aggregate unrecognised commitments to loans denominated in Sterling, Euro and US Dollar, due to its Subsidiaries, Associates and other underlying investments:
| Aggregate Loan Currency Commitment | Maturity Date | 30 June 2016 (unaudited) |
31 December 2015 (audited) |
| GBP | GBP | ||
| Sterling | 24 March 2023 | 4,727,742 | 2,903,490 |
| Euro | 3 March 2017 | 2,350,000 | 342,692 |
| US Dollar | 24 March 2023 | 2,206,923 | 976,502 |
| 9,284,665 | 4,222,684 |
As at 30 June 2016, the Group had no unrecognised commitments due.
25. POST YEAR END EVENTS
Directors and PDMR Interests
At the date of these financial statements, the Directors beneficial interests in the Ordinary Shares of the Company were:
| No. of Ordinary Shares Held | % of total issued Ordinary Shares | |
| Patrick Firth (Chairman) | 263,530 | 0.09 |
| Andrew Whelan | 3,800,000 | 1.33 |
| Emma Stubbs | 179,610 | 0.06 |
| John Whittle | - | - |
Dividend
On 21 July 2016, the Directors of the Company declared a dividend of 0.625p per Ordinary Share for the second quarter of 2016. The dividend was payable to Shareholders on the register on the record date of 29 July 2016.
Subsidiary - Name Change
On 9 August 2016, Sancus UK Holdings Limited changed its name to FinTech Ventures Limited.
Underwritten Placing
On 11 August 2016, the Company announced a placing of 23,020,560 new Ordinary Shares in the Company at a price of 31p per Ordinary Share raising gross proceeds of GBP7.1m.
Purchase of Ordinary Shares
On 17 August 2016, the Company announced that Emma Stubbs purchased 113,145 Ordinary Shares in the Company for 26.5p per Ordinary Share.
On 18 August 2016, the Company announced that Louise Beaumont purchased 14,900 Ordinary Shares in the Company for 25.4p per Ordinary Share.
Associate - Name Change
On 1 September 2016, GLI Alternative Finance Plc changed its name to The SME Loan Fund Plc.
Script Dividend Shares - Additional Listing
On 15 September 2016, 295,943 new Ordinary Shares were issued relating to Shareholders who elected to take shares in lieu of cash from the Company's second quarter dividend.
GLI Finance Limited
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
For the period ended 30 June 2016
25. POST YEAR END EVENTS (continued)
Resignation and appointment of Directors
On 23 September 2016, Fred Forni and James Carthew resigned as Director's of the Company with immediate effect. John Whittle will remain as a Director, succeeding Mr Carthew as chairman of the Audit Committee.
There were no other significant post period end events that require disclosure in these condensed interim financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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