SHARES in GLI Finance skidded 28 per cent lower in morning trading, after the alternative finance firm reported a “disappointing” half-year loss.
The Aim-listed firm posted a £6.1m overall loss in the six months to 30 June 2019, although this was a year-on-year improvement from a £9.3m loss in the first half of 2018.
Net assets dropped to £44m from £50.2m last year and group revenue was £100,000 lower at £7.1m.
The Aim-listed company said the overall result was impacted by a £5.2m writedown in its Fintech Ventures portfolio, which invests in fintech lending platforms.
“It is disappointing to again be reporting further write downs in the Fintech Ventures portfolio,” said GLI chief executive Andrew Whelan.
“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.”
Whelan said that greater competition in the sector “is making it increasingly difficult for smaller players, particularly those that are loss making, to raise further equity”.
“The write down in the period relates primarily to three of our platforms,” he added. “One of the platforms has disappointingly ceased trading in September 2019 following an enforcement by their debt provider. Another of the platforms is finding it difficult to secure the additional equity capital they require. The third platform where we have suffered a write down has secured further equity capital during the first half of 2019, but the providers of the new equity have negotiated a favourable liquidation preference which has impacted our value.”
GLI previously reported a £19.6m writedown across its Fintech Ventures arm in its last annual results. Then in May, it warned that a platform held within its Fintech Ventures portfolio was at risk of becoming insolvent and said it had written off the value of this investment to zero.
GLI’s other division – its lending business Sancus BMS – posted a drop in operating profit to £300,000, from £1.4m in the first half of last year.
However, GLI attributed this to “one-off large exit fees” and the establishment of its UK and Irish businesses last year, “where the revenue stream is not yet up to its full potential”. Results were also impacted by a £1.2m provision relating to the new accounting rules IFRS 9.
Over the past six months, Sancus’ offshore loanbook has increased by 12 per cent from £168m to £188m. However, the sale of its Irish loanbook meant that the entire division’s loanbook decreased by eight per cent to £225m.
“While the headline financial results for the first six months remain disappointing, they mask some crucial developments in asset efficiency and cost controls that have led to a significant improvement in return on tangible assets in our core business,” GLI said.
“Impressive loan growth in asset-backed secured lending in our offshore jurisdictions, together with the establishment of offices in our future growth markets in the UK and Ireland are where operations have barely begun, lay the foundations for improved financial results in the years ahead.”
Chairman Patrick Firth said there would be no dividend for investors until the company’s cash flow situation had improved.
He added that he believes the share price – which has fallen around 70 per cent this year to date – “is trading well below the inherent value of the business” and said the team looks forward to seeing it recover in due course on the back of strong growth from the Sancus BMS division.
The company pledged earlier this year to revise the way it paid executive bonuses after more than 10 per cent of shareholders raised opposition. GLI had revealed in its 2018 annual report that bosses were paid £784,250 in bonuses last year.
Shares were trading 28 per cent lower at 2.41p as of 11.34am GMT.