Gli Finance Share Discussion Threads

[kenny] 01/6/2017 00:23

The Sancus BMS businesses produced a return on gross assets of 2.12% (page 24 of the annual report) - so that is hardly anything to write home about - and it is unclear if that was before or after an expense ratio stated as being 48.5% (presumably 48.5% of gross income from loans).

You cite "decent increases" in the size of co-lender loan books. The operating profits for Sancus BMS increased from £2.6m to £3.537m in 2016 (page 25). Those profits are small figures in the context of the overall group and it's market capitalisation. Therefore, they are very unlikely to be the saviour of the group. They would have to increase revenue "over 25%" for quite a few years just to achieve break even as a group.

Markets being what they are, the company may not have the luxury to keep trading at a loss indefinitely on the promise that one day it will become profitable and/or one of their investee companies will hit the jackpot. Besides which, if the big banks are finding it hard to make money at current interest rate margins, what chance GLIF? Unlike GLIF, the big banks do not have expensive loans they have to service; they mainly rely on customer deposits which they pay very little interest upon.

Since I started having a close look at GLIF, having not been a holder here for about 3 years, I have come to the conclusion that I would not invest unless the share price was at or about 5p. Above 5p per share, it is just a big gamble that someone who has more money than sense comes alone with a bid at, say, 10p per share. I would need that large of a margin of safety because there would still be a fair probability of a total wipeout.

I know the above valuations may seem absurdly low to someone who looks at the share price graph. However, what I have found out is that the destruction of capital has been more or less total - even to the extent that I am not at all certain that there is anything to invest in here - at any price! I am quite shocked that a company that previously had a great business investing in CLO loans has destroyed more or less all value by selling that portfolio and gambling the whole lot in P2P start-ups. The previous management also issued shares and loan capital to raise yet more money to invest in P2P start-ups!

Turning the valuation question on it's head - what is a company that is likely to be loss making for many year's to come and with dubious assets worth? I believe it is only worth hope value because unless there is a take over or windup, a shareholder receives nothing for the foreseeable future. Further, "foreseeable future" may become infinite if the company keeps going just to pay the directors salaries while gradually consuming its assets in annual operating losses and asset write downs.

The above is not intended as investment advice - no doubt the share price will have many bounces over the next few months and years, but I think with both a) the balance sheet not yet reflecting a true write down in the value of assets/investments and, b) operating losses (never mind investment losses) continuing for the foreseeable future (or at least until base rate exceeds 5%, which may not be in our lifetime), the overall long term trajectory in the share price will be down.

As always, I think the question is - what are you getting if you invest here? I certainly cannot find anything that is either sustainable or of substance compared to the current market capitalisation but I remain open to being convinced otherwise?

[the monkster] 31/5/2017 22:01

I'm out sold today. Total disaster.

[the monkster] 31/5/2017 22:01

I'm out sold today. Total disaster.

[james188] 31/5/2017 18:11

Yes, I know that the company made an operating loss of just over £2.9m last year and I agree that the limited cost savings achieved are at the edges. The 2016 figures are ugly in the extreme, but it was a year when the company was restructured and the sins of 2015 were addressed.

I think that the turn around (if it is to be achieved) depends on how quickly the Sancus BMS loan book can be increased and more particularly how that translates through to increased revenue, particularly from structuring fees and funds under management, because I am not expecting the level of group capital deployed to increase much. Save for the unlikely circumstance of a realisation of funds from the sale of FTV interests this year, there will obviously be a net holding cost for the FTV part of the business.

The tables at page 26 of the AR show decent increases in the size of the co-lender loan books for both the Sancus and BMS Finance divisions (a total of £111m for H2 2016, up from £82.4m for H2 2015)and we are also told that the SancusBMS loan book (group capital) totalled £38.8m at the end of 2016. The default rate on those loans is also very low. The 2 recent securitisations have been expressly aimed at expanding the lending operations of Sancus and that has generated over £21m of third party funds. I understand that most of that cash has already been deployed, but we should get a better feel for what has happened later this year.

If you strip out what the company terms non-sustainable earnings from the Sancus BMS figures, you get an average annual increase in revenues of over 25% over the last two financial years - page 25 of the AR. People will form their own views as to what the outcome will be this year.

[kenny] 30/5/2017 23:08

Even before writing off bad investments and losses on loans, the company is operating at a loss as per the 2016 figures below:

Profit before expenses £8.1m
Operating Expenses £11m
Loss on operations (£2.9m)
(See page 60 of the 2016 annual accounts)

How can this be turned around when the company is also losing its asset base through write downs of past bad investment decisions? Raising yet more expensive debt just accelerates the demise of this company. A cost saving drive to reduce expenses by £1m per annum is not going to resolve the situation.

The most recent transaction was to sell a loan investment at a discount, in effect, realising yet more losses; because there was no other way to finance a loan redemption in March 2017. To me, that clearly is desperation because, over past years, they have issued ordinary shares and loan notes by the millions and ended up with a portfolio of loss making investments that cannot support the loans let alone the share capital.

No good burying one’s head in the sand and talking in platitudes - it is an analysis of facts and figures that reveals the company’s future.

[james188] 30/5/2017 19:42

Interesting post, Kenny and it might play out that way, but I sincerely hope not - and I speak as a very bruised continuing shareholder who continues to evaluate the position and the steps that the current management are taking very closely.

As I have said in previous posts, I regard the possibility of a lowball takeout offer from Somerston as a very significant risk. Against that, there are still quite a few material intsti holders (I am guessing that most of the PIs have bailed out), so my thinking is that they are unlikely to bail out at a heavy loss unless they think that the company is continuing on a downwards trajectory.

It is clear that the company did a number of quite dreadful deals in the second half of 2015 in particular (very poorly reported to shareholders at the time, which is a real bugbear for me) and there has been a clear out since then - for very good reason. We now have what I regard as a special situation, where the Sancus BMS arm is doing pretty well and expanding, but having to support the cash drag from the FinTech platforms, which are not cash generating. The market is effectively valuing the FinTech part of the business as zero to negative. As a lender base case, that is probably right, but there is obvious potential equity upside in a number of the platforms.

If you think that management are (now)doing the right things, this is an interesting play. Forget the dividend for now, because there are better uses for the cash. Actually, the company should have cut the dividend sooner, in my view. Not least of the issues is that it takes a lot of time and effort to understand what is going on. I can quite see why lots of investors duck, but I am not one of them - and I would usually ditch any share with this sort of recent performance. We'll see.

[kenny] 30/5/2017 16:06

I have not been a shareholder in GLIF for a little over 3 years and while it is sad to see investor’s lose money, I am surprised that there are still individual investor’s holding on. Losses that are continuing from trading and past investments mean there is unlikely to be another dividend paid anytime soon. The expense base also seems too high for a viable business to emerge.

I think the end game has already been written – in common with what has occurred in many similar situations I have seen - where there is one controlling holder. The share price will continue to steadily deteriorate over the next few years and eventually the controlling shareholder will step in with an offer.

I have no idea when that will happen or what the buyout price will be but, based upon figures I ran today, I am guessing that it will be at a single digit price e.g. 9p or lower. At that time, with the share price having reached a level below the buyout price and traded below that buyout price for some time; then holders will be glad to be put out of their misery.

Of course, I could be proved wrong but the odds are heavily stacked against holders at the current share price.

Note that I have no position in GLIF and have never shorted any share.

[my retirement fund] 26/5/2017 07:55

Im not a holder but lurke. I always imagined they would be bust by now. I see thats not yet happened.

[garycook] 26/5/2017 05:41

I take it some fellow GLIF unhappy investor,s.I thought all GLIF investors had sold out,and I was the only one left !!!

[my retirement fund] 25/5/2017 23:33

Yea what would you like ? Down down, deeper and down, or Down and out?

[the monkster] 25/5/2017 21:30

could someone please change the name of this thread !!!

[garycook] 25/5/2017 16:23

John Whittle Non-Ex Director buys 27,750 shares at 17.38.Nice to see,if only a small amount, a director buying at hopefully the bottom for the GLIF share price It just needs the rest of the Director,s to put their hand in their pockets and buy,to show condfident in the company.

[garycook] 13/5/2017 12:16

Let,s hope so.He needs to turn GLIF around.With the share price at a all time low,I hope he creates plenty of growth.

[bluemango] 13/5/2017 09:45

Interesting appointment of new COO.





Sounds a bright guy.

[james188] 22/4/2017 07:47

I think of GLIF as a hybrid VCT - and facing a number of similar challenges. In particular, how do you balance the need to provide further cash to early stage companies which will take time to produce returns with the desire to provide consistent dividend payments to shareholders, in addition to servicing all ongoing operational costs and expenses? Not easy.

Unless something quite unexpected happens this calendar year (i.e. a profitable disposal) the Fintech Ventures part of the business will continue to be a cash drag, although the scale of investment by GLIF has been pared back. The Sancus BMS business is growing, but it is not currently throwing off enough cash to support an ongoing dividend after all other mouths have been fed. It also needs to turn around the Sancus Finance part of the business, which is loss making and not expected to reach break even until 2018.

There is a lot more detail about all this in the AR and also in the recent Liberum note, for those who can access it. If you take the Liberum projections, they anticipate no further dividend payment this year and dividends resuming in 2018 as the Sancus BMS loan book increases and Sancus Finance and Funding Knight cease to be a cash drag.

[garycook] 22/4/2017 05:46

Confirmation of the new Dividend Policy

The Group will be paying its next interim dividend of 0.625p for the fourth quarter of 2016 on 21 April 2017.

The Board announced the Group's new dividend policy in its strategic update in August 2016. This recognises the need to balance dividend payments in the short term with the opportunities to grow the business for shareholders in the longer term. As such the Group's policy is to make dividend payments which are consistent with prudent capital and liquidity management, covered by cash earnings or realised profits on the sale of investments. Any dividend will be affordable. GLI is committed to a providing a stable progressive platform for future growth.

In future, dividend payments will be made half yearly, September (interim dividend) and March (final dividend), with a weighting in payment of approximately one third/two thirds.So by this statement dated 13/03/2017 there should be another dividend in September,if it is covered by cash earning,s/or realised profit,s ?

[james188] 21/4/2017 20:08

I am expecting it to be the only divi that will be paid during this calendar year. The next 12 months are critical for the company and will show whether the fundamental (and in my view necessary)restructuring has paid off.

[neilyb675] 21/4/2017 19:54

divi arrived in account, pending re-investment

[james188] 31/3/2017 07:10

You can make a case that more clipped bullet points at the start would have made for an easier read, but you only have to get to page 3 of the AR to read that the group had an operating loss before exceptionals of £1 million for the year. That is compared to the 2015 figure (on a restated basis) and there is a helpful cross-reference to page 21 (Financial review) that explains how those figures are arrived at. You don't have to get as far as the Financial Statements/notes to work out what is going on. I am not suggesting that the AR is a particularly easy read, but nor do I think that the hard facts have been buried.

[timanglin] 30/3/2017 22:08

I have nothing against very long reports following a 1 page summary of key issues, which is the norm. When very long reports are done, without a summary of key numbers, the effect is sometimes, the opposite of transparency, most private investors are not company analysts. If it helps the first things I look for are sequential revenue, sequential ebitda(helpful), sequential cash in the bank. My take home message, after wading through pages and pages of words(not numbers), fwiw, is that GLIF is a company managing assets that has operating costs of greater than the net asset revenues? Please correct me if I am wrong.dyor, imho.

[james188] 30/3/2017 18:51

In my view quite correctly, a number of investors in GLIF have been pushing for further disclosure in relation to what is a complex business that is undergoing significant restructuring. The company has also recognised the need to do that to restore confidence after the material problems in 2015 that have since surfaced and have had to be addressed, with painful consequences for shareholders.

I would not want the company to reverse that trend. Ditto the information provided by the Liberum note published this week, although that has clearly knocked the share price. Transparency is essential.

[timanglin] 30/3/2017 18:32

Well if you spend over 75 percent of your gross revenue on operating costs then you get a ?40 page report. Dyor.

[spectoacc] 27/3/2017 07:30

Suspect the fact GLIF's Consolidated Financial Statements have just come out in 40 parts says a lot!

[james188] 14/3/2017 08:40

PB now Sancus Finance Limited.

[future financier] 14/3/2017 08:11

Can somebody remind me - what is Platform Black now called - it does not appear to exist as a separate entity on the internet!