Sancus BMS Group. The Future for Alternative Finance Andrew Whelan. May 2017

Transcription

1 Sancus BMS Group The Future for Alternative Finance Andrew Whelan May 2017

2 GLI Finance Investment Portfolio of SME Lending Platforms 2 11/05/2017

3 Bank lending to firms has collapsed over the last few years 10 billion Fall in lending to UK firms Now finally stabilising Source : Funding Options 3 11/05/2017

4 Online Technology and Disintermediation Auctions Airlines Travel Real Estate Accommodation Bank Lending Future Disintermediation reduction in the use of intermediaries between producers and consumers Structural and permanent change bank lending is next /05/2017 4

5 Alternative Finance - Taxonomy Alternative Finance Model Marketplace /P2P Consumer Lending Balance Sheet Consumer Lending Marketplace/P2P Business Lending Balance Sheet Business Lending Marketplace/P2P Real Estate Lending Real Estate Crowdfunding Invoice Trading/Supply Chain Finance Equity-based Crowdfunding Definition Individuals or institutional funders provide a loan to a consumer borrower. The platform entity provides a loan directly to a consumer borrower. Individuals or institutional funders provide a loan to a business borrower. The platform entity provides a loan directly to a business borrower. Individuals or institutional funders provide a loan secured against a property to a consumer or business borrower. Individuals or institutional funders provide equity or subordinated-debt financing for real estate. Individuals or institutional funders purchase invoices or receivable notes from a business (at a discount). Individuals or institutional funders purchase equity issued by a company. Source : University of Cambridge Judge Business School 5 11/05/2017

6 Traditional Banking versus P2P Traditional Banks Borrower Sancus BMS Group Cost Inefficiencies High Margins Restrictive Lending Margin & Costs Lower Rates Costs Better Returns and Margins Borrower Margin & Costs Costs and Margins Lender Government Endorsed Attractive Rates Convenient Depositor Lenders and Borrowers share the margin that banks traditionally captured 6 11/05/2017

7 Alternative finance growth worldwide Source : University of Cambridge Judge Business School / KPMG FinTech (US$ billion cumulative) 7 11/05/2017

8 Alternative Finance Maturity by country (as at 2015) Adoption of alternative finance by country, adjusted for volume per capita. The maturity of each market shows USA ahead, followed by China and the UK Source : University of Cambridge Judge Business School / KPMG FinTech 8 11/05/2017

9 billion Total Quarterly P2P Cumulative Lending (UK estimate) Total amount lent to individuals/firms at the end of each period Total Cumulative Lending Cumulative Business Lending Cumulative Consumer Lending 1 0 Q Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Source : University of Cambridge Judge Business School 9 11/05/2017

10 BBB and ISIF where do they come in? The British Business Bank 100% Government owned business development bank; Making finance markets work better for smaller businesses ; Aimed at start ups, high growth and viable but underfunded businesses; Working with over 90 trusted partners; Value of loans drawn 2016, 207m (2,015 loans). Ireland Strategic Investment Fund Managed and controlled by the National Treasury Management Agency; Policy of commercial investment to support economic activity and employment in Ireland; Strategy to co-invest with trusted partners; Strong connections with both the public and private sectors across multiple industries; Currently 8 billion available to deploy /05/2017

11 Evolution of the P2P Marketplace, moving to I2P and hybrid models. Retail Capital Consumer Debt Institutional Capital Real Estate Debt Balance Sheet Capital UK SME Loans SME Debt Lenders Online Peer-to-Peer Marketplaces Borrowers 11 11/05/2017

12 Poised for Institutional Capital as at June 2013 $2,500,000,000 $2,000,000,000 $1,500,000,000 Lending Club Prosper.com 2016 Prosper.com US$10bn $1,000,000,000 $500,000,000 Lending Club SEC Registration Prosper SEC Registrati on $- Jun-07Oct-07Feb-08Jun-08Oct-08Feb-09Jun-09Oct-09Feb-10Jun-10Oct-10Feb-11Jun-11Oct-11Feb-12Jun-12Oct-12Feb-13Jun Lending Club US$18bn HNW HNW Retail Retail Retail Family US P2P loan origination growth of 6% to 8%+ monthly Credit 12 11/05/2017

13 The Good, The Bad and The Ugly Our back yard Not too far away Across the pond A strong global economy, but uncertainty lies ahead /05/2017

14 What about Brexit? Political and economic uncertainty What we have seen so far weakened against $ and ; Some real estate has declined in value; UK downgraded by several credit agencies; Disruption in the ability of UK banks to access funding. What could happen Slow growth in UK; Imported goods more expensive; UK may create its own path in regulation of domestic financial services; Significant uncertainty. What does it mean for Alternative Finance? Banks still retreating from financing SMEs, more opportunities for borrowers; Short term funding opportunities more attractively priced; Lack of investment opportunities elsewhere makes alternative finance more attractive for funders /05/2017

15 Brexit Corporate sentiment in the market What is the impact of Brexit on your plans for obtaining funding from alternative providers? Puts plans on hold Limits opportunities Creates opportunities No impact Don't know % Source Allen & Overy, Alternative Finance : A European Profile 15 11/05/2017

16 Brexit Investor sentiment in the market What is the impact of Brexit on your plans for providing alternative funding to large, medium and small businesses? Creates opportunities Limits opportunities to fund businesses in UK I will look outside Europe No impact Don't know % Source Allen & Overy, Alternative Finance : A European Profile 16 11/05/2017

17 Sancus Group Overview 578m Cumulative Loan Book 162m Invoice Discounting Supply Chain Financing 274m Asset Backed Loans 142m Business Loans 30m Proprietary Capital 3m* 2016 Profits British Business Bank Investments Ltd is an investor in BMS Finance (UK) SARL 152m Live Loan Book Ireland Strategic Investment Fund is an investor in BMS Finance (Ireland) SARL *Excluding Sancus Finance (estimate) Data source: Sancus Group as at 31/12/ /05/2017

18 Our Funding Solutions Short Term/Ongoing (1 to 3 months) Medium Term (3 24 months) Long term (24 60 months) Invoice Discounting Supply Chain Finance Asset Backed Loans Property Bridge Property Development Intellectual Property Mergers & Acquisitions Cash Flow Mezzanine 18 11/05/2017

19 Corporate Structure A profitable niche lending business operating different funding solutions in multiple jurisdictions. Sancus BMS Group Jersey Sancus (Jersey) Ltd Company No Guernsey Sancus (Guernsey) Ltd Company No Gibraltar Sancus (Gibraltar) Ltd Company No UK Sancus Finance Ltd Company No BMS Finance (UK) SARL Company No Ireland BMS Finance (Ireland) SARL Company No Isle of Man* Sancus (IOM) Ltd Company No V Total staff 39 * Affiliate 19 11/05/2017

20 Use of Proprietary Capital Critical differentiating factor: Allows us to underwrite loans; Allows us to change shape of credit risk for Co-Funders; Ensures we can Co-Fund in every deal to control process; Ensures we share risk with Co-Funders and have skin in the game ; Provides us with the ability to subordinate to Co-Funders to reduce their risk; Highlights our confidence in our credit process. Sancus BMS is wholly owned by GLI Finance a trading business listed on AIM 20 11/05/2017

21 Benefits for Borrowers Certainty - commitment if borrowers meet clearly defined approval process criteria; Reliability - speed & efficiency of service; Simplicity - terms can be customised to suit individual borrower requirements; Transparency - on both costs and reporting; Trust - in a relationship business you know who you are dealing with; Flexibility - ability to repay early if circumstances change; Opportunity - access to capital in more complex situations than traditional lenders can cope with /05/2017

22 Benefits for Co-Funders Diversification via a low correlation to traditional asset classes with returns in excess of those from bonds and cash; Control Funders can choose the type of opportunity they wish to allocate to; Simplicity secured participation in a hassle free way with transparent reporting; Trust in a relationship business you know who you are dealing with; Flexibility ability to repay monies if circumstances change and interest paid monthly if required; Impact assisting the real economy, making a real difference in your local jurisdiction /05/2017

23 Borrower Characteristics What we look for in our borrowers, the six C s: Character strong moral fibre; Capital holistic approach to understanding a borrower s total net-wealth; Collateral what is our security; Cover a sensible Loan-to-Value (LTV); Capacity ability to repay and clear repayment strategy; Conditions economic scenarios to understanding impact /05/2017

24 Conclusion Straightforward to deal with; Speed and certainty of execution; Pragmatic application of common sense; Highly experienced credit team in multiple jurisdictions; Ability to review complex scenarios /05/2017

25 Appendices 1. Case Studies 2. Contact Details 25 11/05/2017

26 Case Study Asset Backed Loan Type/Location: Trust/Isle of Man & Edinburgh; Purpose of loan: bridging loan; Loan value 7.2m; Funding: Sancus 450k with 6.75m spread between 14 Co- Funders; Borrower s Interest Rate: 18%; Co-Funder s Interest Rate: 14%; Interest Serviced: Rolled up; Term: 6 months; Security value: 43.1m; Security: first charge on properties, security interest agreement on companies, two debentures, & guaranteed by Trustees and Ultimate Beneficial Owner (UBO) of Trust; Repayment strategy: refinanced from traditional lender; Completion: August 2015; Fees: Commitment fee 0.50% & Arrangement fee 1.50%; All legal fees paid by borrower /05/2017

27 Case Study Supply Chain Finance Engineering business in South of England with turnover of 120m; Needed to source working capital to support new projects in continental Europe and the UK; Sancus provided 2m of working capital through 90 day supply chain finance programme; Extended days payable outstanding by 45 days; There was zero cost to our client who was able to gain a 3.5% increase in gross margin; Sancus paid approved supplier invoices within 3 days of delivery to our client, allowing the client to negotiate 8% early settlement discounts; 27 11/05/2017

28 Case Study Invoice Finance Industrial coatings business based in North of England with annual turnover of 7m; Client had won 2 large contracts creating a need for an additional 750k working capital; Incumbent bank declined to support; Traditional invoice finance solutions required control over the whole sales ledger and restricted the amount of funding available; Fees based on all turnover meant that traditional invoice line was too expensive; Restricted funding from traditional invoice finance meant that company would not have sufficient funds to carry out new contracts; Sancus Finance provided a 750k invoice finance line for the 2 new customers only; Company generated in excess of 10% contract values and they have now been invited to tender for additional contracts, ensuring the company s continued growth /05/2017

29 Case Study Business loan Simulity Labs Limited is a software company based in Bangor, Wales specialising in embedded communications and related server applications, serving over 45 mobile network operators; Their pioneering esims and Over The Air platform enable their customers to embrace the Internet of Things with no compromise on quality, security or privacy; Simulity was growing impressively (>50% CAGR) but was constrained by the working capital required to deliver the additional demand from their customer base; Sancus provided a 1.5m loan, amortising over 3 years which unlocked delivery of the trapped extra revenue and enabled Simulity to continue on its growth trajectory; A further tranche of 500k has been provided to assist in the development of the new euicc suite of products (embedded SIM), repayment of which has been structured over the remaining term of the original loan; Since Sancus s involvement, the business has increased revenues by 100% /05/2017

30 Contact Details Richard Whitehouse Sales Director, Sancus Finance e richard.whitehouse@sancus.com t +44 (0) Stephen O Brien Managing Director, Sancus Gibraltar e stephen.o brien@sancus.com t Stephen House Business Development Manager, Sancus Jersey e stephen.house@sancus.com t Callum Scott Regional Director, South Sancus Finance e callum.scott@sancus.com t +44 (0) Lino Brydges Business Development Manager, Sancus Gibraltar e lino.brydges@sancus.com t Stuart Hamilton Business Development Manager, Sancus Jersey e stuart.hamilton@sancus.com t Michael Hennessy Managing Director, Sancus IOM e michael.hennessy@sancus.com t +44 (0) Rachael Bajard Business Development Manager, Sancus IOM e rachael.bajard@sancus.com t +44 (0) Simon Brown Managing Director, Sancus Guernsey e simon.brown@sancus.com t +44 (0) Peter Hudson Director, Property Finance Sancus Finance e peter.hudson@sancus.com t +44 (0) Shane Lanigan Managing Director, BMS Finance UK & Ireland e shane.lanigan@bms-finance.com t +44 (0) (UK) t +353 (0) (Ireland) 30 11/05/2017

31 Legal Disclaimer (page 1 of 2) Important Information and Disclaimer This Presentation (this "Document") relates to Sancus BMS Group Limited (the "Company") and its subsidiaries (the "Group") and has been delivered to you (a "recipient") for information only. This Document does not constitute an offer or invitation to subscribe for shares or other securities issued by the Group, is not capable of acceptance by any recipient and shall not form the basis of any contract or other arrangement between any member of the Group (or any other person) and any recipient (in any jurisdiction). Without prejudice to the generality of the foregoing, the issue of this Document shall not be deemed to be any form of commitment on the part of the Company or the Group (or any other person) to proceed with any investment. The information in this Document, which does not purport to be comprehensive, has been provided by the Company and has not been independently verified. Whilst this Document has been prepared in good faith, no representation, warranty or undertaking, express or implied, is or will be made, and no responsibility or liability is or will be accepted by the Company or by any of its officers, employees, agents or advisers, in relation to the accuracy or completeness of this Document, the information contained in this Document or any other written or oral information made available to any interested party or its advisers in connection with this Document, and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation, warranty or undertaking is given as to the achievement or reasonableness of any future projections, management estimates, prospects or returns contained in this Document or in such other written or oral information. Each recipient acknowledges and agrees by accepting this Document that no person has, nor is held out as having, any authority to give any statement, warranty, representation, or undertaking on behalf of the Company. The foregoing provisions of this paragraph shall not limit the liability of any person in respect of fraud or otherwise as prohibited by applicable laws. The Company gives no undertaking to provide any recipient with access to any additional information or to update this Document or any additional information, or to correct any inaccuracies in it which may become apparent. Any recipient of this Document should note that this Document does not constitute an offer to the public to subscribe for securities in any member of the Group and has not therefore been approved by any regulatory authority anywhere in the world. Sancus (Guernsey) Limited is a non-regulated financial services business under the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 as amended by the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 (Amendment) Ordinance, This law has no effect on the conduct of business of Sancus (Guernsey) Limited except for the requirement to carry out certain measures in connection with anti-money laundering and combating the financing of terrorism measures in accordance with the guidance issued by the Guernsey Financial Services Commission from time to time. Sancus (Guernsey) Limited is also registered with the Guernsey Data Protection Commissioner under the Data Protection (Bailiwick of Guernsey) Law /05/2017

32 Legal Disclaimer (page 2 of 2) Important Information and Disclaimer Sancus (Jersey) Limited is registered with the Jersey Financial Services Commission under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 to carry out the business of providing lending services, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting). As a result of this registration Sancus (Jersey) Limited is required to comply with certain procedures to prevent and detect money laundering in accordance with the guidance issued by the Jersey Financial Services Commission from time to time. Sancus (Jersey) Limited is also registered with the Jersey Data Protection Commissioner under the Data Protection (Jersey) Law Sancus Finance Limited and Sancus BMS Group Limited are not regulated by the United Kingdom Financial Conduct Authority or by the Central Bank of Ireland. Sancus (IOM) Limited holds a money lending licence issued by the Isle of Man Office of Fair Trading under the Moneylenders Act 1991, which regulates private lending in the Isle of Man. Sancus (IOM) Limited is also registered with the Isle of Man Information Commissioner under the Isle of Man Data Protection Act Sancus (Gibraltar) Limited holds a Moneylender's Licence issued by the Gibraltar Financial Services Commission under the Financial Services (Moneylending) Act 1917, which, together with the Moneylending Rules 1917 regulates private lending in Gibraltar. Sancus (Gibraltar) Limited is also registered with the Gibraltar Data Protection Commissioner under the Gibraltar Data Protection Act /05/2017