Interim results for the six months to 30 June 2018

RNS Number : 6331B

GLI Finance Limited

24 September 2018

GLI Finance Limited

("the Group" or "GLI")

Interim Report and

Unaudited Condensed Consolidated Financial Statements

For the six-month period ended 30 June 2018

HIGHLIGHTS

Group Highlights

· Group revenue increased by 26% to £7.2m (June 2017: £5.7m).

· Significant improvement in net operating profit to £1.1m (2017: loss of £0.5m) driven by strong revenue growth and continuing cost discipline.

· FinTech Ventures portfolio valued at £23.9m, (Dec 2017: £29.6m) following revaluation.

· Group Net Asset Value ("NAV") is £64.1m (Dec 2017: £74.8m).

· In accordance with the Group's stated policy of paying dividends out of net cash generation, no dividend will be declared for the period. The Group remains committed to recommence dividends as soon as practical.

· Post period end, £7m of cash received from the sale of BMS Irish assets which can be deployed within the Group and be used to acquire more ZDPs.

Sancus BMS Highlights

· Strong performance by the Sancus businesses.

· Revenue growth of 42%, excluding The SQN Secured Income Fund ("SSIF") dividends.

· Net operating profit up 193% to £1.9m (June 2017: £0.7m).

· 12% growth in managed loan book to £246m with actual loss rate of under 0.5% reflecting strong underwriting controls.

· The special purpose lending vehicle established in January 2018 with a £50m lending capacity, backed by a £45m credit facility with Honeycomb Investment Trust plc ("HIT") is proving a success. £22.9m had been drawn as at 30 June 2018.

· Improved performance by Sancus Finance and Sancus Funding (together to be referred to as "Sancus UK") with operating loss reduced by £0.3m to £0.5m. Sancus Finance performance was behind forecasts for the first half of the year but targeted break-even by the end of 2018. The regulated business will commence property backed lending before the end of the year.

· With Sancus Finance having performed below target for the period and being integrated with Sancus Funding into one Sancus UK business, goodwill of £2.1m relating to Sancus Finance has been written off.

FinTech Ventures Highlights

· The carrying value of FinTech Ventures portfolio is £23.9m (£29.6m at 31 December 2017).

· NAV per share for FinTech Ventures portfolio 8.6 pence (31 December 2017:10.0 pence).

· The write down in the period of £8.3m includes a £4.1m write down in one of our prioritised platforms. The platform is close to finalising a significant investment from third parties which will result in a painful dilution of our holding. Whilst clearly disappointing to take a large write down, this new investment will help to ensure and accelerate the long-term prospects of the platform.

· 29% increase in loan origination across the portfolio companies compared to prior year.

· Three platforms have successfully raised new equity from third parties during the period. Several of the others are looking to raise equity over the next twelve months and we have conservatively approached the valuation of those platforms with this in mind.

· Further investment of £2.2m made in four platform companies during the period, primarily in the form of convertible loan notes.

Andy Whelan, Chief Executive Officer commented:

"The Group has seen good progress during the first half of 2018, improving revenue, successfully securing a new funding line and reducing costs across the business.

We are pleased that Sancus BMS, the key operating unit within the Group, has delivered some strong results during the six-month period. The lending businesses that comprise Sancus BMS are strong, well managed, and have the ability to deliver a very attractive return on capital. We were delighted to have secured the £45m credit facility from HIT announced in January 2018 and this has helped us significantly grow the loan book. The new management team in the UK is making excellent progress in integrating the businesses, and delivering synergies. Whilst Sancus Finance's loan book has grown materially since last year, it has fallen short of where we had hoped it would be at this time.

We are very disappointed to have had to take a further material write down on the FinTech Ventures portfolio. Whilst FinTech as a sector continues to grow strongly, increased competition is making it increasingly difficult for smaller players, particularly those that are loss making, to raise further equity. Given the plethora of investment opportunities, investors are often able to negotiate favourable terms. With competing demands for our capital, we often haven't been able to follow our money, and this has resulted in situations where we have been significantly diluted. Several of our platforms are looking to raise equity over the next twelve months, and given our conservative approach to valuations, we believe there is upside potential if these raises are successful."

This announcement contains inside information for the purposes of EU Regulation 596/2014.

For further information:

GLI Finance	+44 (0)1534 708900
Andy Whelan

Nominated Adviser and Broker
Liberum Capital Limited	+44 (0)203 100 2000
Steve Pearce
Chris Clarke
Trystan Cullen

Public Relations Adviser
Instinctif Partners	+44 (0)207 457 2020
Tim Linacre
Ambrose Fullalove

CHAIRMAN'S STATEMENT

Positioning the business for the future

Our focus remains on maximising the earning potential of our two distinct business units:

Sancus BMS comprises the Group's property backed and SME lending businesses. FinTech Ventures represents the Group's investments in 11 SME focussed lending platforms.

Sancus BMS continues to deliver strong growth and we are confident this growth will continue, as we increase our market share and launch into new markets such as Ireland.

The launch of a special purpose lending vehicle with a £50m lending capacity, backed by a £45m facility with HIT in January of 2018 was an important step in the expansion plans for Sancus BMS. The granting of the line is an endorsement of the thorough credit processes used within Sancus BMS and as evidenced by the revenue growth rate seen in the first half of the year, this is proving a success. We continue to explore other funding lines and working capital focused facilities, particularly for the UK Sancus businesses and I am delighted to report that we have signed up a new material institutional co-funder in July 2018 for Sancus Finance.

During the first half of 2018, we have unfortunately had to take further write downs on some of our FinTech Ventures platforms. Whilst the majority of them continue to make progress, many need to secure further equity financing to fund future growth. Where platforms have not yet achieved breakeven, and have secured fresh capital the new equity investors have been able to secure favourable terms, resulting in a material dilution of our holding.

Overview

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

Sancus BMS Group continues to grow, and we have a solid, profitable business with a strong pipeline and some exciting growth plans. The funding facility helps to support this growth, but we are also continuing to secure a steady flow of new co-funders due to the attractive risk adjusted returns which are available on our lending opportunities. We have hired our first two employees for our new Sancus asset backed lending business in Ireland, and we expect to start lending in this new market in October. The work to restructure our UK operations is making very good progress and we will be launching our proprietary asset backed lending platform into the UK in Q4 2018. Despite the write downs within the FinTech Ventures portfolio, we remain confident that the majority of them will succeed in their respective marketplace and deliver a good return on investment in due course.

Dividend and Shareholders

In line with our dividend policy, it is not proposed to declare a dividend for this period, but we are committed to reinstating one as soon as feasible. I am grateful to all our shareholders who have kept confidence with the Group through what has been a challenging period as reflected in the depressed share price. We believe that the share price is trading well below the inherent value of the business and we look forward to seeing it recover in due course on the back of the strong growth delivered by the Executive Team within Sancus BMS.

Patrick Firth

Chairman

Date: 21 September 2018

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

We have had a busy first half of the year focusing on our strategy to deliver strong growth within Sancus BMS, whilst simplifying the business, and stabilising the FinTech Ventures portfolio. Sancus has had a very positive first six months of the year.

The strong growth within Sancus BMS delivered a 42% increase in revenue compared to the same period in 2017, excluding the SSIF dividends. The new debt facility from HIT helped contribute to this growth, and even without this, revenue still grew by 28%. We continue to manage costs carefully and a further 9% reduction in operating costs has been achieved in the first 6 months of 2018 compared to the same period in 2017.

I'm delighted to report an operating profit of £1.1m during the first 6 months, which demonstrates the strong progress that we have made across the business during the year and is a significant improvement compared to the operating loss of £0.5m for the first 6 months of 2017. We continue to grow our market share and as the Sancus brand is becoming increasingly well known, we are receiving a healthy flow of new lending opportunities and have a strong pipeline of new co-funders.

It is a disappointment therefore to be reporting further write downs in the FinTech Ventures portfolio. As we have previously outlined, we are largely a passenger on this journey and due to capital constraints, we have not been able to follow our money into these platforms. Whilst FinTech as a sector continues to grow strongly, the increased competition is making it increasingly difficult for smaller players, particularly those that are loss making, to raise further equity. Investors are much more discerning about potential valuations and are seeking key unique service propositions as to why a particular platform will succeed. For several of our platforms, it is taking longer for them to achieve breakeven than previously envisaged and they are currently seeking to raise further equity to fund further growth and to see them through to sustained profitability. Competing demands for our capital means that the platforms have often had to secure new third-party investors. Given the plethora of investment opportunities, these investors are often able to negotiate favourable terms and frustratingly, we often haven't been able to follow our money. In some cases, this has resulted in us being significantly diluted, particularly where the Executive Management teams have needed to be issued with further equity to ensure they are appropriately incentivised. With several of our platforms looking to raise equity over the next twelve months, we have factored this scenario, and potential dilution, into our current carrying values.

IFRS9 has been adopted for the first time this period and we have made a £1.9m provision across the Sancus BMS Group loan book. This new standard requires an estimation of expected losses rather than losses as a result of incurred events. The provision made represents 2.3% of the Sancus BMS loan book where our own capital is at risk.

The restructuring of the Sancus UK operations remains a key priority for the business. We continue to integrate the businesses, have received regulatory approval for Sancus Funding to commence asset backed lending activity, and will be rolling out our proprietary asset backed transactional lending platform in Q4 2018. Following our impairment review at the half year, we have taken the decision to write off the £2.1m of goodwill relating to Sancus Finance. Whilst the performance of this business continues to improve it has fallen behind the forecasts on which the goodwill was based, and given the restructuring, it will not be managed as a separate cash generating unit going forward, rather it will be combined with Sancus Funding. We continue to deliver cost savings as these UK businesses become increasingly integrated and we expect the combined Sancus UK business to be profitable by the year end.

On 3 July 2018, we announced that we had sold the loan assets held within the BMS Irish Fund at par and in September 2018 this has realised approximately £7m in cash. Some of this cash is being used to purchase some GLI ZDPs which we believe will deliver a strong return on investment given the ZDPs have been trading at a price significantly below their true accrued capital entitlement. The remaining cash will be redeployed for general investment purposes including the launch of Sancus BMS' property backed lending business in Ireland which is expected to start lending activities in October 2018.

I am pleased with the continued progress we have made on the execution of the strategy. I expect the strong Sancus BMS Group growth rates to continue in the second half of the year as we are in the driving seat of this business with a healthy pipeline. The FinTech Ventures portfolio has been a disappointment and very frustrating that the good results seen in Sancus BMS Group are over-shadowed by these write downs which are largely out of our control. However, we will continue to work hard on this portfolio and explore exits where we can realise value for shareholders.

I have provided below further detail on the operational and financial performance of the Group looking at Sancus BMS and FinTech Ventures separately.

Sancus BMS

Sancus BMS continues to show strong growth with the total loan book advances increasing 12% from the end of 2017 to £246m. The growth rate has reduced from the increase we saw in 2017 of 26%, partly due to the BMS Finance loan book which is capped at £60m (UK Fund) and EUR30m (Irish Fund) and the historical Sancus Funding (Funding Knight) loan book which is in run off. We expect this to pick up again with the new initiatives and management team in place. The growth rates in the offshore entities, however, have been very pleasing. Sancus Jersey is up 20% on December 2017, Guernsey up 198%, where we have been seeing excellent results from a new team in place, and 15% up in Gibraltar.

I am delighted by the 42% increase in revenue within the Sancus BMS Group and this is testament to the hard work of the senior management team to build our profile in the markets in which we operate and secure a strong pipeline of new lending opportunities whilst also deepening our base of co-funders. The HIT facility has also strengthened our ability to fund larger loan opportunities and helped contribute to the 42% year on year increase in revenue excluding SSIF dividends. On a like for like basis, without the additional HIT revenue, revenue has increased by 28%.

The Sancus Loan Notes ("SLNs") comprise a planned series of Special Purpose Vehicles ("SPVs") designed to act like securitisation vehicles to help offset capital constraints and enable additional co-funder participation in loan opportunities. These are attractive to new clients that want to participate in a pooled vehicle, delivered across a number of loans, rather than via direct participation in individual loans. SLN4 had a successful launch in July 2018, and the initial £5.9m invested has now grown to £7.4m, with a maximum capacity of £15m. We are beginning our planning for a larger loan note launch towards the end of 2018. As part of the structure of the loan notes, Sancus BMS provides first loss positions. For SLN2 this exposure is capped at £3m, and in SLN3 and SLN4 it is 20% of the total capital in each of these Loan Notes. Further details are outlined in Note 16 to these accounts.

As noted above, with the introduction of IFRS9 in January 2018 we have made a provision of £1.9m following the methodology as set out in Note 14, which is on an expected credit loss model. This equates to 2.3% of the loan assets where Sancus BMS has an economic interest and is exposed to any loss which might be incurred. Our actual loss rate to date still remains low across the Sancus BMS portfolio at less than 0.5% reflecting our strong underwriting criteria and procedures. As highlighted by the IFRS9 provision, there is always the risk of further defaults and potential losses as lending is clearly not risk free, however the expected risk adjusted return is considered very attractive.

Sancus Funding changed its name from Funding Knight at the beginning of 2018. With the full FCA authorisation having been obtained by Sancus Funding in 2017, Sancus Funding and Sancus Finance (which combined we will refer to as Sancus UK) are increasingly being managed as one business and we are making good progress on the repositioning of Sancus UK. A new Managing Director, Dan Walker, joined at the beginning of 2018 and has been focussed on improving the revenue, whilst reducing the cost base. He has started to make good progress on this and headcount in these entities has been reduced further since December 2017. The plan is to also integrate BMS Finance into this UK Group to achieve further synergies. In the first half of the year, operating expenses have reduced by £0.3m on prior year, although the full impact will not be reflected until next year. Total Sancus UK revenue has remained flat. However, in July 2018 a new institutional co-funder for Sancus Finance was brought on board and this, together with the strengthening of the sales team in Q3 2018, should help deliver improved margins and profitability. Whilst the results of the first six months are disappointing, management believe the business has strong potential and that it will be break-even on a monthly basis by the end of 2018.

The Group continues to invest in its technology. Following the successful launch of the Group's proprietary Loan Management System (LMS) in 2017, an online reporting platform for offshore co-funders has been rolled out in 2018. This platform has been well received by co-funders as it provides real time access to all of their account information and any new co-funding opportunities, including statements, details of loans in which they have participated, and all supporting documentation. A fully online, transactional platform, covering all Sancus UK's lending solutions will be launched in the UK before the end of 2018.

FinTech Ventures

The majority of the platforms within our FinTech Ventures portfolio continue to grow strongly and the loan origination has increased 29% compared to the same period last year. As noted above, I am very disappointed to have to report a further £8.3m write down across the FinTech Ventures portfolio. Approximately half of the write down we are taking relates to one platform which has undergone a major capital reorganisation during 2018. $15m of new equity was successfully raised during the period along with a major refinancing of the debt facility. A further material equity raise is close to being finalised for this platform. Whilst the platform has some excellent technology, and some exciting potential partnerships, it has not yet reached profitability. In addition to the new money from third party investors, management's equity holding has also been increased to ensure they remain appropriately incentivised to drive the business going forward. With this new capital injection, the platform is now set to deliver on its growth potential, but we have incurred a material dilution of our holding. As a result, we have factored this potential scenario into our valuation approach for those other platforms which remain loss making, and this has caused the further write downs.

During the period, further investments, with an aggregate value of £2.2m and largely in the form of convertible loan notes, have been made into The Credit Junction, UK Bond Network and The Open Energy Group, to continue to support their growth plans. The movement in foreign currency rates since 31 December 2017 has resulted in a £0.4m increase in the fair value of our investments, primarily arising from the 2% appreciation of USD versus GBP.

We continue to improve the level of monitoring and influence over the platforms in which we hold investments in order to protect our interests.

Long-term strategy and business objectives

As highlighted in the Strategic Plan table below, we continue to make good progress in delivering against the objectives we agreed as a Board towards the end of 2016.

Sancus BMS continues to grow and I am delighted that our robust underwriting criteria continue to deliver very low loss rates. The coordination across the executive and senior management team, complemented with strong new business development expertise, is delivering a healthy flow and pipeline of lending opportunities. Our solid reputation in the markets in which we operate is also enabling us to lower our cost of funding, through the extension of our successful loan note program and the credit facility from HIT.

I am disappointed that the FinTech Ventures portfolio has seen a further write down in the period, but we continue to work hard on this portfolio and to continue to enhance the level of monitoring and governance of our FinTech Ventures companies and have strong relationships with the platforms we are involved with.

Strategic Goals	How we will achieve these goals	Targets for 2018	Progress
Growing Sancus BMS
Geographic expansion	We continue to consider the opportunities for growth afforded by other jurisdictions such as Cayman Islands.	Launch of secured lending in Ireland expected in H2 2018.	We have made 2 new senior appointments for the Irish office who joined on 1 August 2018 and we expect to commence lending operations in October 2018.
Profitably expand the funding base	Funding for the balance sheets and loan funds is critical to growth. We seek funding from institutional, corporate and high net worth individuals. We apply funding to businesses where returns for risk are optimised.	Continue to launch further loan notes with or through Amberton Asset Management or similar structured vehicles to expand co-funder base. We will continue to target the co-funder base and nurture relationships. The new funding line is designed to be complementary with our co-funder base and work alongside it to fulfil larger sized loans. We will continue to explore long term financing lines and work alongside our syndicated lending approach. Continue to seek appropriate expansion opportunities for BMS Finance with appropriate institutional funding.	The HIT facility was signed in February 2018 providing long term funding of up to £45m. SLN4 was launched in July 2018 at £5.9m and is now at £7.4m with a maximum cap of £15m. Plans are in place to launch SLN5 before the end of 2018. A material institutional co-funder for Sancus Finance was signed in July 2018. The Offshore Co-funder base (excluding loan notes and HIT) has grown 43% from 119 at 31 December 2017 to 170 at end of June 2018.
Develop joined up business under the Sancus brand, with multiple routes to market and one platform	Sancus BMS will operate under the "Sancus" brand as one integrated business, maximising its reach in the market and providing multi product solutions to its funders and borrowers.	Interactive website went live in the first quarter of 2018 improving customer experience. Continue enhancements on the proprietary loan management system and full roll out of the online functionality for co-funders. Joined up approach across the Sancus BMS Group with bi-weekly activity calls and Quarterly Sales meetings attended by representatives from each entity.	Feedback from the new website has been very positive. The loan management system and online reporting platform for co-funders which is now live across the Offshore regions will also be rolled out in the UK in the second half of the year. "Joined up" approach continues and works well, including leveraging off experience and "know how" to launch the Irish property backed business. Continuing integration of Sancus BMS UK operations, with a UK Managing Director appointed.

Strategic Goals	How we will achieve these goals	Targets for 2018	Progress
Growing Sancus BMS (Continued)
Ensure all operating entities are profitable	Continue to work hard to increase revenues whilst managing costs closely with careful selection of investment opportunities.	Continue to monitor performance. New Sancus UK MD appointed to lead business. Current plans are for these entities to become profitable by the end of the year, however performance will be closely monitored, and action will be taken if results are not seen. Priority is to secure a working capital funding line in these businesses which is a key focus of management. This will enable us to bring costs down, margins up and become more competitive.	Continued integration of Sancus BMS UK operations, which has delivered a number of efficiencies and cost savings, including a reduction in headcount. With a new material institutional co-funder signed up for Sancus Finance in July 2018 and a new Senior Sales Executive hired, the focus is to increase loan origination to achieve profitability.
Quality risk management and compliance to capture value	Safeguarding the balance sheet and our reputation with funders is critical. Regular reviews of policy effectiveness, adjustments to controls, transparent reporting and a culture in which open challenge is encouraged are core to the strategy.	Credit processes and procedures will continue to be monitored and improved as required.	Actual loss rates maintained at less than 0.5% with strong underwriting focus across the Group. £1.9m IFRS9 provision has been booked representing 2.3% of the loan assets where Sancus BMS has an economic interest and is exposed to any loss which might be incurred.
Continue to beat our 2% loan default target	Ensure continued quality of staff, adapt policies and procedures as required, monitor loan books and take early action on any problems, govern through Credit Committees.	Credit processes and procedures will continue to be monitored and improved as required.	Actual loss rates maintained at less than 0.5% with strong underwriting focus across the Group. £1.9m IFRS9 provision has been booked representing 2.3% of the loan assets where Sancus BMS has an economic interest and is exposed to any loss which might be incurred.
Realise value from FinTech Ventures' Investments
Support and guide the development of key platforms	Provide direct financial support at critical times, introducing potential investors/funders and advice through active participation as a board member.	Continue to assist platforms with the development of their strategy and particularly with regard to corporate finance and any capital restructurings. Increased monitoring and governance of FinTech Ventures. Continue to introduce other investors to support the ongoing growth of the platforms where appropriate.	Assistance continues with strategy, corporate finance and capital restructuring. 3 platforms successfully raised new equity during H1 2018 and several other platforms are looking to raise equity over the next 12 months. Monitoring and governance of FinTech Ventures continues. Our network of contacts has invested over £5m equity in the FinTech Ventures platforms during H1 2018 and supported with debt financing.

Strategic Goals

How we will achieve these goals

Targets for 2018

Progress

Managing the Group for value

Realise value at optimal times

The Group is not a long-term holder of its FinTech Ventures portfolio and will seek to realise value at optimal times in the growth of each platform, or opportunistically if capital can be profitably redeployed.

Continue to assist platforms with the development of their strategy and particularly with regard to corporate finance and any capital restructurings, taking opportunities to realise value where appropriate.

Assistance continues with strategy, corporate finance and capital restructuring. 3 platforms successfully raised new equity during H1 2018 and several other platforms are looking to raise equity over the next 12 months.

Value capital allocation and liquidity management

The Group will continue to review where capital is best deployed, and how it can be raised most cost-effectively.

Ongoing positive discussions with potential interested lending parties.

Strict liquidity controls will continue to be applied.

Seek out opportunities to improve the capital structure and achieve lower cost of funding. Average Group debt cost is 6% excluding HIT.

Discussions with potential lending parties continues.

Strict liquidity controls continue.

We continue to look to acquire our ZDPs in order to reduce our liability and earn a decent return on our capital given the ZDPs have been trading below their accrued capital entitlement. To date we have acquired £0.4m ZDPs and have shareholder approval to buy up to 14.99% of the issued shares.

We continue to consider our options around the repayment of the 2019 ZDPs as noted in the 'outlook' section below.

Stakeholder communication

The nature of the Group's business will continue to develop, and it will continue to be a priority to ensure investors fully appreciate the potential value the Group offers.

Continued improvement in stakeholder communication programme.

Financial Results for the six months ended 30 June 2018 (Table 1)

	30 June 2018 £'000	30 June 2017 £'000	Movement %	Movement £'000
Sancus BMS interest on loans and fee and other income	6,919	4,880	42%	2,039
FinTech Ventures interest on loans and fee and other income	260	532	(51%)	(272)
SSIF dividends	-	303	(100%)	(303)
Revenue	7,179	5,715	26%	1,464
Interest costs	(985)	(1,204)	18%	219
HIT interest costs	(574)	-	N/A	(574)
Other cost of sales	(110)	(156)	29%	46
Total Cost of Sales	(1,669)	(1,360)	(23%)	(309)
Gross profit	5,510	4,355	27%	1,155
Operating expenses	(4,370)	(4,823)	9%	453
Net operating profit/(loss)	1,140	(468)	344%	1,608
SSIF loss on disposal	-	(953)	100%	953
FinTech Ventures fair value movement	(8,251)	(12,226)	33%	3,975
FinTech Ventures foreign exchange gain/(loss)	429	(885)	148%	1,314
Other net gains/(losses)	247	(571)	143%	818
Impairment of financial assets (IFRS9)	(518)	-	N/A	(518)
Goodwill impairment	(2,139)	-	N/A	(2,139)
Tax	(162)	(56)	(189%)	(106)
Loss for the period	(9,254)	(15,159)	39%	5,905

Revenue

Total revenue for the period increased by 26% to £7.2m (30 June 2017: £5.7m) primarily due to higher fee income across the Sancus entities and the Sancus Loans Ltd interest income of £0.6m (30 June 2017: £Nil). Following the sale of our SSIF position in March 2017, dividends are no longer received, and adjusting for this, revenue has increased 33% year on year.

Revenues from interest income on loans and preference shares held in FinTech Ventures decreased in the period due to the write-off of Senior Preferred Shares in one of the platforms due to provisioning within their loan portfolio.

Total Cost of Sales

Interest and other direct costs have increased in the period from £1.4m to £1.7m. The increase is due to the £0.6m interest on the HIT facility which has funded the majority of the £24.9m HIT loans as at 30 June 2018 (30 June 2017: £Nil). This has been somewhat offset by the £11.9m syndicated loan having been repaid in March 2017. At the period end, interest bearing debt comprised:

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

o £20.8m 2019 ZDPs (5.5%) income entitlement and principal due on expiry 5 December 2019 (£27.2m); and

o £22.9m HIT facility (7.25%) (total facility £45m of which £22.9m drawn as at 30 June 2018), interest paid monthly.

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

Operating Expenses

Across the Group, £0.4m of cost savings were achieved in the period with operating expenses for the first 6 months falling from £4.8m to £4.4m. Savings relate predominantly to Staffing, Legal & Professional costs and Other Administrative costs within the Group Head Office function and FinTech Ventures.

Sancus BMS's operating expenses as shown in Note 3, have increased marginally in the 6 months to June 2018 to £3.3m compared to £3.2m in the same period in 2017. This is as a result of investment into business development resources and the expansion of its operations, although this has been offset to a certain extent by further cost savings in Sancus Finance and Sancus Funding.

FinTech Ventures Fair Value and FX movements

During the period, FinTech Ventures fair value movement suffered a write down of £8.3m, but benefitted from a £0.4m FX gain on our USD and Euro denominated investments exposure. As noted in more detail above, £4.1m of the fair value write down within the portfolio was caused by our position in one particular platform being significantly diluted by a new equity raise whereby we were unable to follow our money. The valuation of our remaining platforms has been conservatively adjusted to reflect this potential risk.

Impairment of financial assets (IFRS9)

Following the introduction of IFRS 9 for reporting periods on or after 1 January 2018, we have made a £1.9m provision, as detailed in Note 14. This has resulted in a £0.5m charge to profit and loss in the current period, with £1.4m allocated to the prior year. As per Note 15, we have elected to apply the exemption in IFRS9 relating to transition for classification, measurement and impairment, and accordingly we have not restated comparative periods.

The provision equates to 2.3% of the loan assets where Sancus BMS has direct participation or is exposed to any first loss via the Sancus Loan Notes, as detailed in Note 16.

Goodwill impairment

The £2.1m goodwill impairment in the period relates to the full write down of the Sancus Finance goodwill as noted above.

Financial Position (Table 2)

£'000	30 June 2018 (unaudited)	31 December 2017 (audited)
Sancus BMS on Balance Sheet Loans and loan equivalents	37,549	46,326
Sancus Loans Limited loans	24,882	-
Goodwill	22,894	25,033
FinTech Ventures' Loan and loan equivalents	832	839
FinTech Ventures' Investment Portfolio	23,936	29,598
Group Cash, trade receivables and other assets	15,208	10,656
Total Assets	125,301	112,452
ZDPs and Bond payable	(35,347)	(34,714)
HIT Debt	(22,629)	-
Other Liabilities	(3,189)	(2,935)
Total Liabilities	(61,165)	(37,649)
Group net assets	64,136	74,803

The Group's net assets have decreased in the 6 months to June 2018 by £10.7m to £64.1m. The reduction in Sancus BMS on Balance Sheet Loans and loan equivalents is due to the repayment of Sancus Loan Note 1. As part of this transaction, £5m of group capital was reinvested in Sancus Loans Limited, which is backed by the HIT credit facility. In addition, the fair value of the Fintech Ventures' portfolio is £5.7m lower than at December 2017 as noted above. The goodwill has reduced by £2.1m due to the impairment of the goodwill previously held relating to Sancus Finance. These have been offset by an increase in Cash of £2.1m, and an increase in trade debtors £2.1m (predominantly relating to interest and fees receivable on loans and preference shares). Liabilities have increased predominantly as a result of the HIT facility and accrued interest on the ZDPs.

Goodwill has fallen to £22.9m (31 December 2017: £25.0m). A full impairment review of the goodwill relating to Sancus Finance has been carried out at the period end. Although the results of Sancus Finance are showing significant improvement over the equivalent prior period, they remain behind the forecasts. We are increasingly integrating the UK operations and therefore have decided to write off the £2.1m of goodwill relating specifically to Sancus Finance. A breakdown of the remaining goodwill balances is provided in Note 7.

The Group's liabilities have increased by £23.5m to £61.2m in the period following the drawdown of the HIT facility of £22.9m. The Group gearing ratio is now at 49% (31 December 2017: 33%).

Sancus BMS on Balance Sheet Loans and loan equivalents (Table 3)

On balance sheet loan and loan equivalents have increased in the year from £46.3m to £62.4m primarily due to the launch of Sancus Loans Limited, backed by the HIT credit facility. This increase is partially offset by the repayment of Sancus Loan Note 1. Other on Balance sheet loans have increased by £1m, £0.4m and £0.4m at Sancus Jersey, Sancus Gibraltar and Sancus Guernsey respectively.

£'000	30 June 2018	31 December 2017
Jersey	5,818	4,808
Gibraltar	6,331	5,896
Guernsey	1,106	718
BMS - Investment in the funds and other loans	21,695	22,045
Sancus UK	438	1,002
Sancus Loan Notes	3,079	10,907
IOM preference shares	950	950
Sancus Loans Limited loans	24,882	-
IFRS9 Provision	(1,868)	-
Total Sancus BMS on Balance Sheet Loans and loan equivalents	62,431	46,326

HIT Funding Facility

A special purpose loan vehicle called Sancus Loans Limited, which is non-recourse to GLI, has been established during the first six months of 2018 with a £50m funding capacity. This has been backed by a £45m credit facility from HIT, with a term of 3 years. Although non-recourse to GLI the SPV is 100% owned by the Group and is therefore consolidated. As a result, both the Sancus Loans Limited loans and HIT facility appear on the consolidated balance sheet.

Cashflow

Cash used in operating activities, excluding loan movements, for the period to 30 June 2018 reduced to £0.2m compared to £1m in the same period in 2017. The major operating cash flows during the period included £0.9m invested in BMS Finance Loans (2017: £4.7m), £24.9m invested in Sancus Loans Limited loans (2017: £Nil) and £8m was received from the repayment of Sancus Loan Note 1 (2017: £3.1m paid out to participate in Sancus Loan Notes). In respect of investing activities £2.2m was invested in FinTech Ventures primarily in the form of convertible loan notes (2017: £5.5m). In respect of financing activities £22.9m was received from the drawdown of the HIT facility (2017: £11.9m payment to repay the syndicated loan).

Dividend Policy

The Group dividend policy recognises the need to balance dividend payments in the short term with the opportunities to grow the business for shareholders in the longer term. As such the Group's policy is to make dividend payments which are consistent with prudent capital and liquidity management, covered by cash earnings and realised profits on the sale of investments. In line with this dividend policy, no dividend is being declared for this period.

Related Party Transactions

Related party transactions are disclosed in Note 13. There have been no material changes in the related party transactions described in the last annual report.

Governance, Risk Management and Operations

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

The development of the digital trading platform continues with increased on-line functionality for co-funders. During the second half of 2018 this will be rolled out to Sancus UK clients, allowing them to participate online in asset backed lending opportunities in addition to working capital funding.

Outlook

The Group has gone through a period of sustained change over the past two years. We are now in a solid position with the potential for strong risk-adjusted performance for the Group. However, I fully appreciate that we have two businesses; Sancus BMS and the FinTech Ventures portfolio which might not ordinarily be grouped together. Therefore, I will continue to consider how we can maximise their value in the future.

Since the period end we have announced that we have sold our 30.3% holding in the loan assets of BMS Finance (Ireland) SARL at par (this completed on 14 September 2018) and we received a cash consideration of approximately £7m. This included £275,000 payable to BMS Finance AB Limited which will cease to be investment advisor to BMS Ireland upon completion of the transaction. The net proceeds of this transaction will be redeployed for general investment purposes including the launch of Sancus BMS' property backed lending business in Ireland which is expected to start lending activities in October 2018. We believe that this business should generate a higher return on capital compared to the historical BMS Finance SME lending business.

We will also continue to look to acquire our own ZDPs, as announced in the last few months. We have acquired £0.4m to date and have shareholder approval to acquire up to 14.99% of the issued ZDP shares. As well as reducing the liability on maturity of the ZDPs in December 2019, these purchases deliver a good return on capital given the ZDPs have been trading below their accrued capital entitlement. We remain focused on our liability to repay the ZDPs which mature in December 2019 and a number of options are being considered. Whilst no decision has been made yet, options being considered include rolling them or refinancing with a more traditional institutional debt. We also could repay them from the proceeds of assets, such as investments in Fintech Ventures or maturities within the loan book. We will provide an update to shareholders in due course.

Andrew Whelan

Chief Executive Officer

21 September 2018

RISKS, UNCERTAINTIES AND RESPONSIBILITY STATEMENT

Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the group's performance over the remainder of the financial year. These include, but are not limited to, Capital and liquidity risk, Regulatory and compliance risk, Market risk, Credit risk, Operational risk - execution of Sancus BMS strategy and Investment risk - platform valuation. These risks remain unchanged from December 2017 and are not expected to change in the 6 months to the end of the financial year. Further details on these risks and uncertainties can be found in the December 2017 Annual Report.

Responsibility statement

The directors confirm that to the best of their knowledge:

§ The Interim Report has been prepared in accordance with the AIM rules of the London Stock Exchange;

§ This financial information has been prepared in accordance with IAS 34 as adopted by the EU;

§ The interim results include a fair review of the important events during the first half of the financial year and their impact on the financial information as required by DTR 4.2.7R; and

§ The interim results include a fair review of the disclosure of related party transactions as required by DTR 4.2.8R.

Approved and signed on behalf of the Board of Directors

21 September 2018

INDEPENDENT REVIEW REPORT TO GLI FINANCE LIMITED

We have been engaged by the Company to review the condensed set of Consolidated Financial Statements in the Interim Report for the six months ended 30 June 2018 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Shareholders' Equity, the Condensed Consolidated Statement of Cash Flows and related Notes 1 to 17. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Consolidated Financial Statements.

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

Directors' responsibilities

The Interim Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules of the London Stock Exchange.

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

Our responsibility

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

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK & Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the Interim Report for the six months ended 30 June 2018 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

Guernsey, Channel Islands

21 September 2018

For the period ended 30 June 2018

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

	Notes	Period ended	Period ended
		30 June 2018 (unaudited) £'000	30 June 2017 (unaudited)* £'000

Interest on loans		2,044	2,135
Fee and other income	4	4,486	3,277
SSIF dividends		-	303
Interest on Sancus Loans Limited		649	-
Total revenue		7,179	5,715

Interest costs		(985)	(1,204)
HIT interest costs		(574)	-
Other cost of sales		(110)	(156)
Total cost of sales		(1,669)	(1,360)

Gross profit		5,510	4,355

Operating expenses	5	(4,370)	(4,823)

Net operating profit/(loss)		1,140	(468)

SSIF loss on disposal		-	(953)
FinTech Ventures fair value movement	14	(8,251)	(12,226)
FinTech Ventures foreign exchange gain/(loss)	14	429	(885)
Other net gains/(losses)		247	(571)
Impairment of financial assets held at amortised cost	14	(518)	-
Impairment of goodwill	7	(2,139)	-

Loss before tax		(9,092)	(15,103)

Income tax expense		(162)	(56)

Loss for the period after tax		(9,254)	(15,159)

Total comprehensive loss for the period		(9,254)	(15,159)

Loss for the period after tax attributable to:
Equity holders of the Company		(9,254)	(15,024)
Non-controlling interest		-	(135)
		(9,254)	(15,159)
Total comprehensive loss attributable to:
Equity holders of the Company		(9,254)	(15,024)
Non-controlling interest		-	(135)
		(9,254)	(15,159)

Basic and Diluted loss per Ordinary Share	6	(3.03)p	(4.98)p

* Other cost of sales has been netted off Fee and other income and Other expenses in the prior year.

As at 30 June 2018

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

		30 June 2018 (unaudited)	31 December 2017 (audited)
ASSETS	Notes	£'000	£'000
Non-current assets
Property and equipment		40	63
Goodwill	7	22,894	25,033
Other intangible assets	8	536	530

Sancus BMS loans and loan equivalents	14	30,566	27,238
FinTech Ventures investments	14	23,936	29,598
Other investments	14	558	542
Investments in joint ventures and associates		2,631	2,266
Total Non-current assets		81,161	85,270
Current assets
Loans through platforms	14	891	908

Sancus BMS loans and loan equivalents	14	31,865	19,088
Trade and other receivables	9	6,317	4,170
Cash and cash equivalents		5,067	3,016

Total current assets		44,140	27,182

Total assets		125,301	112,452

EQUITY
Share premium	10	112,557	112,557
Treasury shares	10	(1,162)	(1,162)
Retained earnings		(47,259)	(36,588)
Capital and reserves attributable to equity holders of the Group		64,136	74,807

Non-controlling interest		-	(4)

Total equity		64,136	74,803

LIABILITIES
Non-current liabilities	11	57,976	34,714

Current liabilities
Trade and other payables	11	3,189	2,935

Total current liabilities		3,189	2,935

Total liabilities		61,165	37,649

Total equity and liabilities		125,301	112,452

The financial statements were approved by the Board of Directors on 21 September 2018 and were signed on its behalf by:

Director: Patrick Firth

Director: John Whittle

For the period ended 30 June 2018

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

	Note	Share Capital	Share Premium	Treasury Shares	Distributable **Reserve	Retained **Earnings/ (Losses)	Capital and reserves attributable to equity holders of the Company	Non-controlling Interest	Total Equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2017 (audited)		-	112,557	(1,162)	-	(36,588)	74,807	(4)	74,803
Adjustment on adoption of IFRS 9	15	-	-	-	-	(1,350)	(1,350)	-	(1,350)
Restated balance at 1 January 2018		-	112,557	(1,162)	-	(37,938)	73,457	(4)	73,453
Acquisition of non-controlling interest in Sancus Finance		-	-	-	-	(67)	(67)	4	(62)
Transactions with owners		-	-	-	-	(67)	(67)	4	(63)
Total comprehensive loss for the period		-	-	-	-	(9,254)	(9,254)	-	(9,254)
Balance at 30 June 2018 (unaudited)		-	112,557	(1,162)	-	(47,259)	64,136	-	64,136

Balance at 31 December 2016 (audited)		-	111,942	(1,734)	34,803	(54,268)	90,743	125	90,868
Net proceeds from Ordinary Shares issued	10	-	615	-	-	-	615	-	615
Transferred to management		-	-	104	-	-	104	-	104
Transfer of distributable reserves to retained earnings		-	-	-	(34,803)	34,803	-	-	-
Acquisition of non-controlling interest in Sancus Finance		-	-	-	-	-	-	(351)	(351)
Dividends paid*		-	-	-	-	(1,717)	(1,717)	-	(1,717)
Transactions with owners		-	615	104	(34,803)	33,086	(998)	(351)	(1,349)
Total comprehensive loss for the period		-	-	-	-	(15,024)	(15,024)	(135)	(15,159)
Balance at 30 June 2017 (unaudited)		-	112,557	(1,630)	-	(36,206)	74,721	(361)	74,360

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

** Distributable Reserves were combined with retained earnings (losses) in 2017 to simplify the presentation of reserves.

For the period ended 30 June 2018

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

		Period ended	Period ended
		30 June 2018 (unaudited)	30 June 2017 (unaudited)
	Notes	£'000	£'000
Cash outflow from operations, excluding loan movements	12	(192)	(985)
Increase on Sancus BMS loans		(936)	(4,715)
Decrease on loans through platforms		8	2,848
Increase on loans through the HIT facility		(24,882)	-
Repayment/(Investment) in Sancus Loan notes		8,015	(3,142)
Net cash outflow from operating activities		(17,987)	(5,994)
Cash inflows/(outflows) from investing activities
Acquisition of non-controlling interest and connected entities		(63)	(713)
Investments in FinTech Ventures		(2,160)	(5,531)
Investment in joint venture		(200)	-
Sale of SSIF investment		-	22,675
Expenditure on fixed assets and intangibles		(131)	(158)
Net cash (outflow)/inflow from investing activities		(2,554)	16,273

Cash inflows/(outflows) from financing activities
Draw down of HIT facility		22,592	-
Repayment of syndicated loan		-	(11,920)
Dividends paid		-	(1,318)
Net cash inflow/(outflow) from financing activities		22,592	(13,238)

Net increase/(decrease) in cash and cash equivalents		2,051	(2,959)

Cash and cash equivalents at beginning of period		3,016	9,616

Cash and cash equivalents at end of period		5,067	6,657

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

1. GENERAL INFORMATION

GLI Finance Limited (the "Company"), and together with its subsidiaries, ("the Group") was incorporated, and domiciled in Guernsey, Channel Islands, as a company limited by shares and with limited liability, on 9 June 2005 in accordance with The Companies (Guernsey) Law, 1994 (since superseded by The Companies (Guernsey) Law, 2008). Until 25 March 2015, the Company was an Authorised Closed-ended Investment Scheme and was subject to the Authorised Closed-ended Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission ("GFSC"). On 25 March 2015, the Company was registered with the GFSC as a Non-Regulated Financial Services Business, at which point the Company's authorised fund status was revoked. The Company's Ordinary Shares were admitted to trading on the AIM market of the London Stock Exchange on 5 August 2005 and its issued zero dividend preference shares were listed and traded on the Standard listing Segment of the main market of the London Stock Exchange with effect from 5 October 2015.

The Company does not have a fixed life and the Articles do not contain any trigger events for a voluntary liquidation of the Company.

The Company is an operating company for the purpose of the AIM rules. The Executive Team is responsible for the management of the Company.

As at 30 June 2018, the Group comprises the Company and its subsidiaries.

Given the changes made as a result of the strategic review, the Company has taken advantage of the exemption conferred by the Companies (Guernsey) Law, 2008, Section 244, not to prepare company only financial statements which is consistent with the 2017 Annual Report.

2. ACCOUNTING POLICIES

(a) Basis of preparation

These condensed consolidated financial statements ("financial statements") have been prepared in accordance with International Financial Reporting Standard (IAS) 34 'Interim Financial Reporting', as adopted by the European Union and all applicable requirements of Guernsey Company Law. They do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the Company's annual audited financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union.

The Group does not operate in an industry where significant or cyclical variations, as a result of seasonal activity, are experienced during any particular financial period.

These financial statements were authorised for issue by the Company Directors on 21 September 2018.

(b) Principal accounting policies

The same accounting policies and methods of computation are followed in these financial statements as in the last annual financial statements for the year ended 31 December 2017 except for changes in accounting policy brought about by the adoption of new accounting standards. These changes are detailed in note 15.

The Board has assessed the Group's financial position as at 30 June 2018 and the factors that may impact its performance in the forthcoming year. After considering the maturity profile of the debt structure of the Group and projected cash flows, the Directors are of the opinion that it is appropriate to prepare these financial statements on a going concern basis.

In assessing the prospects of the Group, the Directors in particular are focussed on the repayment of the ZDPs due in December 2019. Although they are not due within the next 12 months and a final decision has not yet been made, as noted in the CEO report a number of options are being considered. These include rolling them or refinancing with a more traditional institutional debt. They could also be repaid from the proceeds of assets, such as investments in Fintech Ventures or maturities within the loan book.

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

The critical accounting estimates and judgements are as outlined in the financial statements for the year ended 31 December 2017 except for the credit risk on financial assets and other items which now come under the scope of IFRS 9.

Credit risk and determining when a significant increase in credit risk has occurred are critical accounting judgements and are assessed at each reporting period end. It is used to calculate estimated credit losses (ECLs). Key areas of estimation and uncertainty are the probabilities of default (PD) and the probabilities of loss given default (PL) which are also used in the calculation of ECL. Further details on Credit Risk, ECLs, PD and PL can be found within notes 14 and 15. No additional critical accounting judgements or estimates have been required on the adoption of IFRS 15.

3. SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with the manner in which the Executive Team reports to the Board, which is regarded to be the Chief Operating Decision Maker (CODM) as defined under IFRS 8. The Executive Team is responsible for allocating resources and assessing performance of the Group, as well as making strategic investment decisions, subject to the oversight of the Board of Directors. The Executive Team is responsible for the entire Group and considers it to have two operating segments as well as group treasury.

The segments are as follows:

Sancus BMS

- Platforms with an established business model

- Amberton - fundraising for Sancus BMS

- Investments in the BMS loan funds

- HIT facility

FinTech Ventures

- Eleven platform investments

Group Treasury

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

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


£'000	Sancus BMS	FinTech Ventures	Group Treasury	30 June 2018	Sancus BMS	FinTech Ventures	Group Treasury	30 June 2017
Revenue
Interest on loans	1,784	260	-	2,044	1,604	531	-	2,135
Fees and other income	4,486	-	-	4,486	3,276	1		3,277
SSIF dividends	-	-	-	-	303	-	-	303
Interest on Sancus Loans Limited	649	-	-	649	-	-	-	-
Total revenue	6,919	260	-	7,179	5,183	532	-	5,715

Interest costs	(985)	-	-	(985)	(1,204)	-	-	(1,204)
HIT interest costs	(574)	-	-	(574)	-	-	-	-
Other costs of sales	(110)	-	-	(110)	(156)	-	-	(156)
Total cost of sales	(1,669)	-	-	(1,669)	(1,360)	-	-	(1,360)

Gross profit	5,250	260	-	5,510	3,823	532	-	4,355

Operating expenses	(3,327)	(637)	(406)	(4,370)	(3,167)	(1,019)	(637)	(4,823)

Net operating profit/(loss)	1,923	(377)	(406)	1,140	656	(487)	(637)	(468)

SSIF loss on disposal	-	-	-	-	-	-	(953)	(953)
FinTech Ventures fair value movement	-	(8,251)	-	(8,251)	-	(12,226)	-	(12,226)
FinTech Ventures foreign exchange gain/(loss)	-	429		429	-	(885)	-	(885)
Other net gains / (losses)	227	20	-	247	(132)	(439)	-	(571)
Impairment of financial assets held at amortised cost	(518)	-	-	(518)	-	-	-	-
Impairment of goodwill	(2,139)	-	-	(2,139)	-	-	-	-

(Loss)/profit before tax	(507)	(8,179)	(406)	(9,092)	524	(14,037)	(1,590)	(15,103)

Income tax expense	(162)	-	-	(162)	(56)	-	-	(56)

(Loss)/profit for the period after tax	(669)	(8,179)	(406)	(9,254)	468	(14,037)	(1,590)	(15,159)


Total comprehensive(loss)/income for the period	(669)	(8,179)	(406)	(9,254)	468	(14,037)	(1,590)	(15,159)

(Loss)/profit for the period after tax attributable to:
Equity holders of the Company	(669)	(8,179)	(406)	(9,254)	603	(14,037)	(1,590)	(15,024)
Non-controlling interest	-	-	-	-	(135)	-	-	(135)
	(669)	(8,179)	(406)	(9,254)	468	(14,037)	(1,590)	(15,159)
Total comprehensive (loss)/income attributable to:
Equity holders of the Company	(669)	(8,179)	(406)	(9,254)	603	(14,037)	(1,590)	(15,024)
Non-controlling interest	-	-	-	-	(135)	-	-	(135)
	(669)	(8,179)	(406)	(9,254)	468	(14,037)	(1,590)	(15,159)

£'000	Sancus BMS*	FinTech Ventures*	Group Treasury	30 June 2018	Sancus BMS	FinTech Ventures	Group Treasury	31 December 2017
ASSETS
Non-current assets
Property and equipment	40	-	-	40	60	-	3	63
Goodwill	22,894	-	-	22,894	25,033	-	-	25,033
Other intangible assets	536	-	-	536	530	-	-	530

Sancus BMS loans and loan equivalents	30,566	-	-	30,566	27,238	-	-	27,238

FinTech Ventures investments	-	23,936	-	23,936	-	29,598	-	29,598
Other investments	558	-	-	558	542	-	-	542
Investments in joint ventures and associates	2,631	-	-	2.631	2,266	-	-	2,266

Total Non-current assets	57,225	23,936	-	81,161	55,669	29,598	3	85,270

Current assets
Loans through platforms	59	832	-	891	69	839	-	908

Sancus BMS loans and loan equivalents	31,865	-	-	31,865	19,088	-	-	19,088

Trade and other receivables	4,769	1,548	-	6,317	2,796	616	758	4,170
Cash and cash equivalents	3,419	-	1,648	5,067	926	-	2,090	3,016

Total current assets	40,112	2,380	1,648	44,140	22,879	1,455	2,848	27,182

Total assets	97,337	26,316	1,648	125,301	78,548	31,053	2,851	112,452


LIABILITIES

Non-current liabilities	(57,976)	-	-	(57,976)	(34,714)	-	-	(34,714)

Current liabilities
Trade and other payables	(2,415)	(6)	(768)	(3,189)	(2,324)	(2)	(609)	(2,935)

Total current liabilities	(2,415)	(6)	(768)	(3,189)	(2,324)	(2)	(609)	(2,935)

Total liabilities	(60,391)	(6)	(768)	(61,165)	(37,038)	(2)	(609)	(37,649)

Net Assets	36,946	26,310	880	64,136	41,510	31,051	2,242	74,803

Sancus BMS is treated as being funded by the debt facilities whilst FinTech Ventures is treated as being funded by equity. This allocation best matches the risk profile of each business unit with its capital structure, as well as recognising that interest costs are effectively serviced by interest and fee income from Sancus BMS.

4. FEE AND OTHER INCOME

	30 June 2018 (unaudited)	30 June 2017 (unaudited)
	£'000	£'000
Administration fees	862	449
Earn out (exit) fees	874	864
Management fees	648	728
Transaction fees	2,102	1,236
	4,486	3,277

5. OPERATING EXPENSES

	30 June 2018 (unaudited)	30 June 2017 (unaudited)
	£'000	£'000

Administration and secretarial fees	94	170
Amortisation and depreciation	148	142
Audit fees	119	23
Corporate Insurance	10	40
Directors Remuneration	46	70
Employment costs	2,979	2,864
Independent valuation fees	5	54
Investor relations expenses	40	60
Legal and professional fees	158	506
Marketing expenses	48	87
NOMAD fees	56	58
Other office and administration costs	527	508
Pension costs	113	100
Registrar fees	21	27
Sundry	6	114
	4,370	4,823

6. LOSS PER ORDINARY SHARE

Consolidated loss per Ordinary Share has been calculated by dividing the consolidated total comprehensive loss attributable to Ordinary Shareholders of £9,254,000 (30 June 2017: loss of £15,024,000) by the weighted average number of Ordinary Shares outstanding (excluding treasury shares) during the period of 305,911,597 (30 June 2017: 301,466,733). There was no dilutive effect for potential Ordinary Shares during the current or prior periods.

Note 10 describes the warrants in issue which are currently out of the money, and therefore have not been considered to have a dilutive effect on the calculation of Profit/(Loss) per Ordinary Share.

	30 June 2018 (unaudited)	30 June 2017 (unaudited)
Number of shares in issue	312,065,699	312,065,699
Weighted average number of shares outstanding (excluding treasury shares)	305,911,597	301,466,733
Loss per share	(3.03)p	(4.98)p

7. GOODWILL

		£'000

At 31 December 2017		25,033
Impairment of Sancus Finance Goodwill		(2,139)
At 30 June 2018		22,894

Goodwill comprises:

	30 June 2018	31 December 2017
	£'000	£'000

Sancus Jersey	14,255	14,255
Sancus Gibraltar	8,639	8,639
Sancus Finance	-	2,139
Total	22,894	25,033

Impairment tests

The carrying amount of goodwill arising on the acquisition of certain subsidiaries is assessed by the Board for impairment on an annual basis or sooner if there has been any indication of impairment. At 30 June 2018 the recoverable amount of Sancus Finance was assessed by the Board using DCF methodology as described in the 2017 Annual Report. As a result of this assessment it was deemed appropriate to write down the Sancus Finance goodwill. The UK operations are increasingly being integrated and managed as a combined division which will enable further synergies to be achieved.

8. INTANGIBLE ASSETS

Cost	30 June 2018 £'000	31 December 2017 £'000

At beginning of period/year	1,312	1,050
Additions in the period/year	126	262
At end of period/year	1,438	1,312

Amortisation

At beginning of period/year	782	530
Charge for the period/year	120	252
At end of period/year	902	782

Net book value at end of period/year	536	530

Intangible assets comprise capitalised contractors' costs and costs related to core systems development. No impairment provision has been recorded. The amortisation charge has been recorded within Operating Expenses.

9. TRADE AND OTHER RECEIVABLES

	30 June 2018 (unaudited)	31 December 2017 (audited)
Current	£'000	£'000
Dividend income receivable	68	68
Loan fees and similar receivable	1,596	930
Loan interest receivable	2,894	1,973
Receivable from related parties	59	42
Preference share dividends receivable	618	607
Other trade receivables and prepaid expenses	1,082	550
	6,317	4,170

10. SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE

GLI Finance Limited has the power under its articles of association to issue an unlimited number of Ordinary Shares of nil par value.

No Ordinary Shares were issued in the period to 30 June 2018, but in the prior year the company issued the following additional Ordinary Shares relating to the 2016 fourth quarter scrip dividend.

	2017 (unaudited)
Date	No of shares issued	Share Premium £
21 April 2017	2,767,586	615,239

Total	2,767,586	615,239

Share Capital	30 June 2018 (unaudited)	31 December 2017 (audited)
Ordinary Shares - nil par value	Shares in issue	Shares in issue
Balance at start of period/year	312,065,699	309,298,113
Issued during the period/year	-	2,767,586
Balance at end of the period/year	312,065,699	312,065,699

Share Premium	30 June 2018 (unaudited)	31 December 2017 (audited)
Ordinary Shares - nil par value	£'000	£'000
Balance at start of period/year	112,557	111,942
Issued during the period/year	-	615
Balance at end of the period/year	112,557	112,557

Treasury Shares

As at 30 June 2018 and 31 December 2017 a total of 6,154,102 Ordinary Shares, with an aggregate value of £1,161,975 were held by a Subsidiary, Sancus BMS Group Limited and eliminated on consolidation. These shares mainly arose as part consideration for this company's minority shareholding in Sancus Gibraltar purchased by the Group in June 2016.

	30 June 2018 (unaudited)		31 December 2017 (audited)
	£'000		£'000
Balance at start of the period/year		1,162	1,734
GLI shares transferred by SBMGL to key members of management		-	(572)
Balance at end of period/year		1,162	1,162

Warrants in Issue

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

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

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

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

These warrants expire on 25 February 2020.

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

As at 30 June 2018, the above warrants were in issue but not yet exercised. On issue of these warrants, no provision has been made for a fair value adjustment, as following the Board's assessment of the fair value it was not deemed to be materially different to the current carrying value of £Nil.

11. LIABILITIES

Non-current liabilities	30 June 2018 (unaudited)	31 December 2017 (audited)
	£'000	£'000
ZDP shares (1)	25,347	24,714
Corporate bond (2)	10,000	10,000
HIT facility (3)	22,629	-
	57,976	34,714

Current liabilities	30 June 2018 (unaudited)	31 December 2017 (audited)
	£'000	£'000
Accounts payable	125	319
Accruals and other payables	1,580	1,266
Deferred income	150	166
Other staff costs	384	234
Payable to related party*	950	950
	3,189	2,935
Interest costs on debt facilities	30 June 2018 (unaudited)	30 June 2017 (unaudited)
	£'000	£'000
ZDP shares (1)	632	636
Corporate bond (2)	347	314
HIT facility (3)	574	-
Syndicated loan	-	225
	1,553	1,175

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

(1) ZDP shares

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

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

The ZDP shares bear interest at an average rate of 5.5% (30 June 2017: 5.5%).

In accordance with article 7.5.5 of the Company's Memorandum and Articles of Incorporation, the Company may not incur more than £30m of long term debt without the prior approval from the ZDP shareholders. The Memorandum and Articles also specify that two debt cover tests must be met in relation to the ZDPs.

At 30 June 2018 the Company was in compliance with these covenants as Cover Test A was 2.98 (minimum of 1.7) and Cover Test B was 3.71 (minimum of 3.25).

At the period end senior debt borrowing capacity amounted to £20m. The HIT facility does not impact on this capacity as this is non-recourse to GLI.

(2) Corporate Bond

On 30 June 2016, GLI Finance issued £10m corporate bonds as part of the acquisition of Sancus Gibraltar. The bond maturity date is 30 June 2021 and they bear interest at 7% (2017: 7%).

(3) HIT Facility

On 29 January 2018, GLI Finance signed a new funding facility with Honeycomb Investment Trust plc (HIT). The funding line has a term of 3 years and comprises a £45m accordion and revolving credit facility. The facility bears interest at 7.25%.

The HIT facility has portfolio performance covenants including that actual loss rates are not to exceed 4% in any twelve month period and underperforming loans are not to exceed 10% of the portfolio.

Sancus BMS Group has a £5m first loss position on the HIT facility. GLI has also provided HIT with a guarantee, capped at £2m that will continue to ensure the orderly wind down of the loan book, in the event of the insolvency of Sancus BMS Group, given its position as facility and security agent.

12. CASH GENERATED FROM OPERATIONS

	30 June 2018 (unaudited)	30 June 2017 (unaudited)
	£'000	£'000

Loss for the period	(9,254)	(15,159)
Adjustments for:
Net losses on FinTech Ventures	7,802	13,111
Net loss on sale of SSIF	-	953
Other net (gains)/losses	(316)	571
Non-cash item on finance costs on ZDPs	633	636
Impairment of financial assets	518	-
Impairment of goodwill	2,139	-
Amortisation/depreciation of fixed assets	148	142
Amortisation of debt issue costs	37	-
Changes in working capital:
Trade and other receivables	(2,126)	(989)
Trade and other payables	227	(250)
Cash outflow from operations, excluding loan movements	(192)	(985)

13. RELATED PARTY TRANSACTIONS

Transaction with the Directors/Executive Team

Non-executive Directors

As at 30 June 2018, 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 2018	30 June 2017
	£	£

Patrick Firth (Chairman)	50,000	50,000
John Whittle	42,500	42,500

There was no increase in the Directors' base fees during the period ended 30 June 2018. Total Directors' fees charged to the Company for the period ended 30 June 2018 were £46,250 (30 June 2017: £45,628).

Executive Team

For the period ended 30 June 2018, the Executive Team members' 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 2018	30 June 2017
	£'000	£'000

Aggregate remuneration in respect of qualifying service - fixed salary	353	295
Aggregate amounts contributed to Money Purchase pension schemes	46	44
Aggregate bonus paid (cash)	125	60

On the 2 January 2018 Mr Walker joined the Executive Team as UK Managing Director.

During the period, £125,000 in total was paid to Mr Le Cornu and Mr Walker relating to a sign-on bonus.

All amounts have been charged to Operating Expenses.

At the Company's annual general meeting ("AGM") held on 10 May 2017 Shareholders approved terms for a revised long-term incentive scheme, pursuant to which members of the Executive Team will be entitled to receive options to subscribe for new Ordinary Shares in the capital of the Company ("Share Options") at strike prices of 25p, 30p and 35p and will vest on the first, second and third anniversaries of the respective grant (the "New Scheme"). The New Scheme took effect from the date of the AGM and replaces the previous Executive Bonus Scheme.

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

As at 30 June 2018, the Directors had the following beneficial interests in the Ordinary Shares of the Company:

	30 June 2018		31 December 2017
	No. of Ordinary Shares Held	% of total issued Ordinary Shares	No. of Ordinary Shares Held	% of total issued Ordinary Shares

Patrick Firth (Chairman)	278,669	0.09	278,669	0.09
John Whittle	104,550	0.03	104,550	0.03
Andrew Whelan	8,051,912	2.58	8,051,912	2.58
Emma Stubbs	1,005,485	0.32	1,005,485	0.32
Aaron Le Cornu	1,405,790	0.45	455,790	0.15

During the period none of the above received any amounts relating to their shareholding (30 June 2017: Mr Firth £1,694, Mr Whittle £Nil, Mr Whelan £43,506, Mrs Stubbs £2,022 and Mr Le Cornu £Nil) by way of dividends on their Ordinary Share holdings in the Company. As at 30 June 2018 there were no unexercised share options for Ordinary Shares of the Company (31 December 2017 and 30 June 2017: Nil Ordinary Shares).

During the period Mr Whelan received £20,567 in relation to the coupon on his holding of £592,500 GLI Bonds (30 June 2017: £20,567).

Mr Le Cornu purchased 950,000 shares during the period at the open market value.

Transactions with connected entities

The following significant transactions with connected entities took place during the current period:

	30 June 2018		30 June 2017
	Balance £'000	Interest accrued in the period	Balance £'000	Interest accrued in the period
		£'000		£'000

Loans (and corresponding interest receivable) to entities in which GLI Group has a significant stake	5,217	252	3,260	507

Preference shares (and corresponding interest receivable) in entities which GLI Group has a significant stake	1,943	77	4,512	277

(Payable)/receivable to/from related parties			30 June 2018	31 December 2017
			£'000	£'000
Intercompany with Sancus (IOM) Holdings Limited			3	2
Intercompany with Sancus (IOM) Limited			41	24
Intercompany with Sancus (IOM) Limited			(950)	(950)
Receivable from Amberton Asset Management			15	16

30 June 2018

£'000

30 June

2017

£'000

Office and staff costs recharges

Amberton Asset Management

There is no ultimate controlling party of the Company.

All platform loans and preference shares bear interest at a commercial rate.

14. FINANCIAL INSTRUMENTS - Fair values and risk management

Sancus BMS loans and loan equivalents

	30 June 2018 (unaudited)	31 December 2017 (audited)
Non-current	£'000	£'000

Sancus BMS loans	20,837	24,238
Investment in Sancus Loan Notes	-	3,000
Sancus Loans Limited loans	9,729	-
Total Non-current Sancus BMS loans and loan equivalents	30,566	27,238

Current

Sancus BMS loans	11,453	8,560
Investment in Sancus Loan Notes	3,079	7,907
Loan equivalents	2,180	2,621
Sancus Loans Limited loans	15,153	-
Total Current Sancus BMS loans and loan equivalents	31,865	19,088

Total Sancus BMS loans and loan equivalents	62,431	46,326

Fair Value Estimation

The financial assets and liabilities measured at fair value in the Consolidated Statement of Financial Position are grouped into the fair value hierarchy as follows:

	30 June 2018 (unaudited)	31 December 2017 (audited)

	Level 3	Level 3
	£	£
FinTech Ventures investments	23,936	29,598
Investments in Sancus Loan Notes	3,079	10,907
Other investments at fair value	558	542
Total assets as fair value	27,573	41,047

The classification and valuation methodology remains as noted in the 2017 Annual Report. In relation to the Level 3 valuation methodology for the FinTech Ventures investments the Board assesses the fair value based on either the value at the last capital transaction or valuation techniques, performed internally or by an independent third-party expert. Factors considered in these valuation analyses included discounted cashflows, comparable company and comparable transaction analysis. Key inputs used in the discounted cashflows include costs of equity, illiquidity discount rates, revenue and costs growth rates, interest margins, bad debt expense and tax rates. These are consistent with the inputs described in the 2017 Annual Report and adjusted where necessary. 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 value determination.

FinTech Ventures' Investments	Equity	Loans	Total
30 June 2018	£	£	£
Opening fair value	26,470	3,128	29,598
New investments/loans advanced	200	1,960	2,160
Unrealised gains/(losses) recognised in profit and loss	(8,251)	-	(8,251)
Foreign exchange gain	300	129	429
Closing fair value	18,719	5,217	23,936

	Equity	Loans	Total
31 December 2017	£	£	£
Opening fair value	34,699	1,405	36,104
New investments/loans advanced	1,455	5,494	6,949
Reclassification of loan	-	418	418
Disposals/loan repayments	-	(414)	(414)
Unrealised gains/(losses) recognised in profit and loss	(8,322)	(3,597)	(11,919)
Foreign exchange loss	(1,362)	(178)	(1,540)
Closing fair value	26,470	3,128	29,598

Level 3 investment valuation techniques used and key inputs

The following table gives information about how the fair values of financial assets categorised as level 3 in the fair value hierarchy are determined by the Company:

Valuation technique and key inputs	Fair Value £'000	Fair Value £'000	Reason for any changes in valuation techniques from prior years	Significant unobservable inputs	Relationship of unobservable inputs to fair value
	At 30 June 2018	At 31 December 2017
Market comparable transaction based on recent fundraising activity, adjusted for any relevant risk	11,981	15,346	Equity raises completing H1 2018	None	None
Fair value based on cost and adjusted for FX movement and any new investment (WC loan, convertible note etc)	2,123	2,833	None	None	None

Valuation technique and key inputs	Fair Value £'000	Fair Value £'000	Reason for any changes in valuation techniques from prior years	Significant unobservable inputs	Relationship of unobservable inputs to fair value
	At 30 June 2018	At 31 December 2017
Discounted cash flow forecasts	10,390	11,961	There has been no change in valuation techniques. Recent market comparable transaction data became available (see above).	Cash flows are discounted by a range of 18.1-26.1% for cost of equity and 15-17.5% for illiquidity of the investment. Significant internal sensitivities are also applied to the forecasts, creating high and low cases used in the weighted average output	A smaller adjustment for these factors would increase the fair value - see sensitivity analysis noted below
Investment in redeemable preference shares of the loan notes is valued at fair value	3,079	10,907	None	Fair value which closely approximates the net asset value of the Loan Note Special purpose vehicles	None
Total Level 3 at Fair Value	27,573	41,047

Sensitivities of key inputs

When discounted cash flow ("DCF") valuation methodology is utilised, the variables which influence the resultant valuations most significantly are the discount rates applied to the future cash flows, the revenue forecasts and the illiquidity discounts. The table below shows the impact of stressing year end valuations by the sensitivities which the Board believe to be reasonably foreseeable.

	Effect on consolidated statement of comprehensive income
	30 June 2018
	£'000

10% per annum increase in revenue	5,063
10% per annum decrease in revenue	(5,063)
3% increase in discount rate	(633)
3% decrease in discount rate	601
5% increase in illiquidity discount	(123)
5% decrease in illiquidity discount	123

The DCF methodology has been used on different investments and a different number of investments this period compared to the prior period. As a result, no prior period comparative has been given as it would not provide a meaningful comparison.

Assets at Amortised Cost

	30 June 2018	31 December 2017
	(unaudited)	(audited)
	£'000	£'000
Sancus BMS loans and loan equivalents	34,470	35,419
Sancus Loans Limited loans	24,882	-
Loans through platforms	891	908
Trade and other receivables	6,317	4,170
Cash and cash equivalents	5,067	3,016
Total assets at amortised cost	71,627	43,513

Liabilities at Amortised Cost

	30 June 2018	31 December 2017
	(unaudited)	(audited)
	£'000	£'000
ZDP shares	25,347	24,714
Corporate Bond	10,000	10,000
HIT facility	22,629	-
Trade and other payables	3,189	2,935
Total liabilities at amortised cost	61,165	37,649

Refer to Note 11 for further information on liabilities.

Credit Risk

Credit risk is defined as the risk that a borrower/debtor may fail to make required repayments within the contracted timescale. The group invests in senior debt, senior subordinated debt, junior subordinated debt and secured loans. Credit risk is taken in direct lending to third party borrowers, investing in loan funds, lending to associated platforms and loans arranged by associated platforms. The group mitigates credit risk by only entering into agreements related to loan instruments in which there is sufficient security held against the loans or where the operating strength of the investee companies is considered sufficient to support the loan amounts outstanding.

Credit risk is determined on initial recognition of each loan and re-assessed at each balance sheet date. It is categorized into stage 1, Stage 2 and Stage 3 with Stage 1 being to recognise 12 month Expected Credit Losses (ECL), Stage 2 being to recognise Lifetime ECL not credit impaired and Stage 3 being to recognise Lifetime ECL credit impaired.

Provision for ECL

Provision for ECL is made using the credit risk, the probability of default (PD) and the probability of loss given default (PL) all of which are underpinned by the Loan to Value (LTV), historical position, forward looking considerations and on occasion, subsequent events and the subjective judgement of the Board. Preliminary calculations for ECL are performed on a loan by loan basis using the simple formula: Outstanding Loan Value x PD x PL and are then amended as necessary according to the more subjective measures as noted above.

A probability of default is assigned to each loan. This probability of default is arrived at by reference to historical data and the ongoing status of each loan which is reviewed on a regular basis. The probability of loss is deemed to be nil where LTV is equal to or less than 100%, as it is assumed that the asset can be sold and full recovery made.

The following table provides information on amounts reserved for ECL on loans and loan equivalents as at 30 June 2018 based on the model adopted by management.

	Low Risk	Medium Risk	High Risk	Total

Typical Loan to Value	0% to 50%	50% to 65%	65% to 100%
Probability of default	1%	2%	Loan by Loan
Probability of loss given default	0%	0%	Loan by Loan

ECL (£'000)	-	-	1,868	1,868

Movement of provision for ECL in the period

	£'000
At 1 January 2018	1,350
Charged through profit and loss in the period	518
At 30 June 2018	1,868

15. CHANGES IN ACCOUNTING POLICY

IFRS 9 'Financial Instruments'

IFRS 9 'Financial Instruments' addresses the classification, measurement and derecognition of financial assets and liabilities. It replaces the multiple classification and measurement models in IAS 39 and is effective for reporting periods beginning on or after 1 January 2018. As such the Group has adopted IFRS 9 for the first time in this set of Interim Financial Statements.

Key requirements of IFRS 9

Classification and measurement of debt assets will be driven by the entity's business model for managing the financial assets and the contractual cash flow characteristics of those financial assets.

There are three principal classification categories for financial assets that are debt instruments: (i) amortised cost, (ii) fair value through other comprehensive income and (iii) fair value through profit and loss. Equity investments in scope of IFRS 9 are measured at fair value with gains and losses recognised in profit and loss unless an irrevocable election is made to recognise gains or losses in other comprehensive income.

IFRS 9 also introduces a new expected credit loss impairment model, as opposed to the incurred credit loss model currently implemented under IAS 39. This requires entities to account for expected credit losses at initial recognition and changes to expected credit losses at each reporting date to reflect changes in credit risk since initial recognition.

Finally, under IFRS 9 greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. Enhanced disclosure requirements about an entities risk management activities have also been introduced.

Impact of IFRS 9 - Classification and measurement

Sancus BMS loans, HIT loans, BMS fund investments, loan equivalents and loans through platforms are held solely for the collection of contractual cash flows, being interest, fees and payment of principal. These assets continue to be held at amortised cost on adoption of IFRS 9, and hence there is no change in classification or measurement of these assets.

FinTech Ventures investments relate to equity, preference shares and some working capital loans. Whilst some of these investments do attract interest the assets are held primarily to assist the development of the entities involved. These investments continue to be held at fair value with charges recognised in profit and loss on adoption of IFRS 9, and hence there is no change in classification or measurement of these assets.

Trade payables, financial liabilities and trade receivables are held solely for the collection and payment of contractual cash flows, being payments of principal and interest where applicable. These assets continue to be held at amortised cost on adoption of IFRS 9, and hence there is no change in classification or measurement of these assets and liabilities.

Impact of IFRS 9 - Impairment

Sancus BMS loans and loan equivalents have been assessed for credit risk based on information available at initial recognition, predominantly (but not solely) using Loan to Value (LTV). For each category of Credit risk loans have been categorized into Stage 1, Stage 2 and Stage 3 with Stage 1 being to recognise 12 month Expected Credit Losses (ECL), Stage 2 being to recognise Lifetime ECL not credit impaired and Stage 3 being to recognise Lifetime ECL credit impaired. The judgement used for a significant increase in credit risk includes for example moving up through the LTV brackets and 30 days past due.

A loan is considered to be in default when there is a failure to meet the legal obligation of the loan agreement. This would include provisions against loans that are considered by management as unlikely to pay their obligations in full without realisation of collateral. Provision for ECL has been calculated using the credit risk, the probability of default and the probability of loss given default, all underpinned by the LTV, historical position, forward looking considerations and on occasion subsequent events, and the subjective judgement of the Board. For first time adoption Credit risk and provision for ECL has been assessed at 30 June 2018 and 31 December 2017. Going forward credit risk and provision for ECL will be assessed at initial recognition and re-assessed at each reporting period-end. Given the nature of the loans (in most cases short term bridging loans), ECL assumes the life of the loan is consistent with contractual terms.

With respect to the loans to the UK SARL and Ireland SARL there is no direct exposure to individual loans. As a result these two loans have been assessed for credit risk based upon the Net Asset Value (NAV) of the SARLs, and their ability to repay the loans. Should the NAV of the SARLs fall materially then the loans will have been deemed to have fallen into Stage 2, with a further significant drop in NAV pushing the loans into Stage 3. Provision for ECL has been made according to the credit risk and the deemed ability of the SARL to repay the loan. Credit risk and ECL has been assessed at 30 June 2018 and 31 December 2017 and going forward will be re-assessed at each reporting period-end.

For trade and other receivables, the Group has applied the simplified approach to recognise lifetime expected credit losses.

The Group has elected to apply the exemption in IFRS 9 relating to transition for classification and measurement and impairment, and accordingly has not restated comparative periods. As a consequence:

§ Any adjustments to carrying amounts of financial assets and liabilities are recognised at the beginning of the current reporting period, with the difference recorded in opening retained earnings;

§ Provisions for impairment have not been restated in the comparative period;

§ Financial assets are not restated in the balance sheet for the comparative period, and hence a third balance sheet as at December 2016 is not presented.

Had prior year balances been restated Sancus BMS loans and loan equivalents would have been £1,350,000 lower than stated in the 2017 annual financial statements as follows:

	£'000
Sancus BMS loans and loan equivalents as at 31 December 2017 under IAS 39	46,216
Amounts restated through retained earnings on adoption of IFRS 9	(1,350)
Restated Sancus BMS loans and loan equivalents as at 31 December 2017 under IFRS 9	44,976

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 'Revenue from Contracts with Customers' specifies how and when to recognise revenue as well as requiring entities to provide users of financial statements with more favourable, relevant disclosures. The standard provides a single, principles based five step model to be applied to all contracts with customers. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, and hence has been adopted for the first time in this set of Interim financial statements. There has been no impact on timing of recognition or gross up for principal/agents considerations on the adoption of IFRS 15.

16. GUARANTEES

The Group undertakes a number of Guarantees and first loss positions which are not deemed to be contingent liabilities under IAS37 as there is no present obligation for these guarantees and it is considered unlikely that these liabilities will crystallise.

HIT Facility

Sancus BMS Group has invested £5m of its own capital in Sancus Loans Limited which sits in a £5m first loss position as part of the HIT facility. GLI has also provided HIT with a guarantee, capped at £2m that it will continue to ensure the orderly wind down of the HIT related loan book, in the event of the insolvency of Sancus BMS Group, given its position as facility and security agent.

Sancus Loan Notes

Sancus BMS typically provides first loss positions as part of the Loan Note structures. Sancus BMS has invested £3m of its own capital in SLN2 which sits in a £3m first loss position. For SLN3 and SLN4, Sancus BMS has no capital invested but has a 20% first loss position. As all the loans within the SLNs are asset backed with loan to values typically below 65%, the probability of these first loss positions being called upon is considered low, but the positions have been included within the calculations for IFRS9 provisioning.

Sancus Finance

Sancus Finance provides a 10% first loss position on certain working capital transactions and its obligations are supported by a Group Guarantee of up to £2m.

For IFRS9 purposes in calculating our capital at risk provision ratio of 2.3%, we have included the Sancus on balance sheet loans (£43m), plus the full amount of those loans which include the first loss risk position we have with HIT (£20m) and the Loan Notes (£18m).

17. POST PERIOD END EVENTS

Sale of BMS Irish Loan Assets

On the 3 July 2018 it was announced that the Company had sold its 30.3% interest in the assets held in the BMS Finance (Ireland) SARL at par to BPC Ireland Lending Designated Activity Company ("BPC"), a fund managed by Beach Point Capital (Ireland) DAC ("BPCI"). Following the sale of the loan assets BMS Ireland will be wound up with cash distributed to investors. This completed on 14 September 2019 and a cash consideration of approximately £7.0 million was received, which included £275,000 payable to BMS Finance AB Limited ("BMS AB"), which will cease to be the investment adviser to BMS Ireland upon completion of the Transaction. The net proceeds of the Transaction will be redeployed for general investment purposes including the launch of Sancus BMS' property backed lending business in Ireland which commenced activities in August 2018. The Company believes that this business should generate a higher return on capital compared to the historic SME lending business.

Acquisition of Group ZDPs

During July and August 2018, the Company has acquired 427,790 ZDPs at an average price of £1.09. These shares are held by the Company as treasury shares. As well as reducing the liability on maturity of the ZDPs in December 2019, these purchases deliver a good return on capital given the ZDPs have been trading below their accrued capital entitlement.

Incorporation of Sancus Developments Limited

Subsequent to 30 June 2018 the Group, via a newly incorporated subsidiary Sancus Developments Limited, has entered into a Development Framework Agreement regarding security previously held by a former borrower. In addition, a further portfolio of real estate assets previously held by the borrower have been purchased by the company. The intention is to realise these assets via orderly transactions; the timing of which will be determined so as to best preserve shareholder capital. This includes potential development of assets under a development framework agreement entered into with the previous borrower. In accordance with IFRS9, a provision for impairment has been recorded on the Group's overall exposure to this portfolio given the uncertainties over the timing of such realisations and ultimate value.

FFICERS AND PROFESSIONAL ADVISERS

Directors

Non-executive:	Patrick Anthony Seymour Firth (Chairman)
	John Richard Whittle

Executive:	Andrew Noel Whelan
	Emma Stubbs

The Address of the Directors is the Company's registered office

Executive Team:

Chief Executive Officer:	Andrew Whelan
Chief Financial Officer	Emma Stubbs
Chief Operating Officer	Aaron Le Cornu
UK Managing Director:	Dan Walker (joined 2 January 2018)

Registered office:	1^st Floor
	10 Lefebvre Street
	St Peter Port
	Guernsey, GY1 2PE
	Channel Islands

Nominated Adviser and Broker:	Liberum Capital Limited
	Ropemaker Place
	25 Ropemaker Street
	London, EC2Y 9LY
	United Kingdom

Administrator and Company Secretary:	Praxis Fund Services Limited
	Sarnia House
	Le Truchot
	St Peter Port
	Guernsey, GY1 1GR
	Channel Islands

Legal Advisers in the Channel Islands	Carey Olsen
	P.O. Box 98
	Carey House
	Les Banques
	St Peter Port
	Guernsey, GY1 4BZ
	Channel Islands

Legal Advisers in the UK	Stephenson Harwood
	1 Finsbury Circus
	London, EC2M 7SH
	United Kingdom

Legal Advisers in the US:	Pepper Hamilton LLP
	3000 Two Logan Square
	Eighteenth and Arch Streets
	Philadelphia, PA 19103-2799

Bankers:	Barclays International
	1^st Floor, 39041 Broad Street
	St Helier
	Jersey, JE4 8NE

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR EAENDALXPEAF

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Sancus Lending Group Limited NPV (LEND)

Friday, 17th May 2024

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Interim results for the six months to 30 June 2018

GLI Finance Limited

Total

Equity

£'000

£'000

£'000

£'000

112,557

(1,162)

-

(36,588)

-

-

-

(1,350)

112,557

(1,162)

-

(37,938)

-

-

-

(67)

-

-

-

(67)

-

-

-

(9,254)

112,557

(1,162)

-

(47,259)

111,942

(1,734)

34,803

(54,268)

615

-

-

-

-

104

-

-

-

-

(34,803)

34,803

-

-

-

-

-

-

-

(1,717)

615

104

(34,803)

33,086

-

-

-

(15,024)

112,557

(1,630)

-

(36,206)

Sancus BMS

- Platforms with an established business model

- Amberton - fundraising for Sancus BMS

FinTech Ventures

- Eleven platform investments

£'000

£'000

862