REG - Supply @ME Capital - Year-end business update

Supply@Me CapitalAnnouncement

20/01/2023 07:00

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RNS Number : 3289N  Supply @ME Capital PLC   20 January 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU, WHICH IS PART OF UNITED KINGDOM DOMESTIC LAW PURSUANT
TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK
MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS
DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

20 January 2023

Supply@ME Capital plc

(the "Company" or "SYME", and together with its subsidiaries, the "Group")

Year-end business update

SYME, the fintech business which provides an innovative fintech platform (the
"Platform") for use by manufacturing and trading companies to access Inventory
Monetisation© ("IM") solutions enabling their businesses to generate
cashflow, is pleased to provide an update on its recent business activities.

Key highlights:

·    Growth in the pipeline of client companies with warehoused goods
inventories suitable for monetisation 1  was valued at £343.5m as at 31
December 2022. This compares to £329.8m as at 23 September 2022.

 

·    Progress has been made towards securing traditional funding routes in
both European (including Italy) and UK markets.

 

·    New Italian legislation - pegno non possessorio (the "PNP
Regulation") - which SYME anticipates will be promulgated shortly, is expected
to provide greater opportunities for Italian banks to adopt the Platform for
use under white-label agreements and further enhance the security available to
the Inventory Funders in traditional IM transactions.

 

·    TradeFlow Capital Management Pte. Limited ("TradeFlow") experienced
growth in assets under management ("AUM") in the year ended 31 December 2022
of approximately 35%, relative to the year ended 31 December 2021,
representing a continued and growing endorsement of its Investment Advisory
strategy.

 

Warehoused goods monetisation

Overview

Origination of client companies in SYME's core regions of Europe (including
Italy) and the UK have continued to grow, with the warehoused goods
monetisation pipeline standing at £343.5m as at 31 December 2022. This
compares to £329.8m as at 23 September 2022.

SYME's focus remains on maintaining, growing and converting the pipeline,
whilst attracting new Inventory Funders, starting from smaller ticket IM
transactions, to build a track-record, and then moving to larger ticket IM
transactions. With the inaugural IM completed and others in process of being
arranged, the foundations of positive track-record are being laid by SYME with
the expectation that it would become progressively easier to attract new
Inventory Funders to IM transactions. The appetite of Inventory Funders has
also driven the SYME origination team to assess potential IM amounts over
GBP/EUR/USD 10m and, subject to the appropriate structure and funding being in
place, there are a number of larger ticket opportunities that could be
converted during 2023.

The market need for inventory solutions with a proven technology platform and
infrastructure from day one is continuing to drive significant opportunities
for SYME's client company origination and for self-funding opportunities with
global and local banks, the latter of which are not included in the above
referenced pipeline figures.

The onboarding of new client companies to the Platform will generate
additional due diligence fees and, once the client companies have signed IM
binding agreements, origination fees.

SYME has continued to work diligently to build quality portfolios of client
companies to attract additional Inventory Funders. Leveraging the first IM
transaction made in 2022, SYME, as the provider of the Platform and inventory
servicer, is now working on the following funding routes:

·    Inventory Funders via the Global Inventory Fund ("GIF")

In addition to the existing Cayman-based structure serviced by APEX Group 2 ,
advised by TradeFlow, SYME is evaluating the option of sponsoring the creation
of a European structure together with a market-leading fund service provider
and to build, progressively, a multi-asset management model where the Group
can also cooperate with further European and UK authorised asset managers.

·    Special situations / deals

SYME also recognises the importance of allowing initial traditional Inventory
Funders to build up a bespoke funding structure on top of the stock companies
(trading companies which deliver the IM transactions by using the Platform).
This route can be built through dedicated securitisation issuances or similar
direct investing structures, which are still being considered.

·    Direct partnerships with banks

Global and local banks have expressed an interest in using the Platform to
directly serve their clients. SYME has developed two alternative approaches
for such banks, including the "self-funding" model (where a bank will be able
to use the Platform, including the legal and accounting framework provided by
SYME, to fund companies that are already clients of such bank) or the
"white-label" model (where a bank will only use the technology components of
the Platform to fund directly such bank's existing clients).

·    Token route

As per the RNS of 21 December 2022, the Company aims to involve multiple
liquidity providers to deploy new IM transactions (including crypto asset
managers and direct investors through liquidity pools partnerships) in line
with the goals of Phase Two of the Strategic Agreement with VeChain
Foundation 3  ("VeChain"). In this regard, SYME is compiling, from its global
pipeline, a portfolio of potential client companies with up to approximately
US$50m of inventory to be monetised across such portfolio. This reflects the
residual commitment of US$8.5m budgeted by VeChain and, the objective to raise
additional capital from the VeChain community and other crypto/digital assets
investors.

 

SYME also expects to commence a new onboarding process with Centrifuge 4 ,
and, accordingly, the opportunity to explore potential funding of IM
transactions through DeFi (decentralised finance). The Company will provide a
further update to the market as and when the Centrifuge onboarding is
finalised.

Europe (including Italy)

The Group's origination team works with a select panel of originators and
local business introducers who continue to make introductions to high quality
businesses. As the awareness of IM grows, following the first IM transaction,
SYME is also seeing 'larger ticket' opportunities.

The Group has built a strong pipeline in Italy and other European
jurisdictions to facilitate further IMs with VeChain in "Phase Two" and other
traditional Inventory Funders. SYME is also seeing more opportunities for
self-funding with local banks across Europe and their client companies.

For example, SYME is currently working with:

·    an Italian bank and a Big 4 accountancy firm to secure an IM
transaction with an IM value of up to €10m, which involves an existing
client of the relevant Italian bank; and

·    a consortium of European investors for a securitisation issuance to
fund an IM transaction with an IM value of up to €5m, which will involve at
least one Italian and one UK client company.

Furthermore, the Company believes the new PNP Regulation, which is expected to
be published shortly in the Official Journal of the Italian Republic, will
provide opportunities to commence its white-label business model. The PNP
Regulation will, for the first time in Italy, introduce the concept of
"security interest" (a concept widely adopted across Europe and the UK) into
Italian law, and allow entrepreneurs to access the financing of their
inventory more easily, without having to sell, transform or otherwise dispose
of their business assets.

Moreover, the "non-possessory pledge" introduced by the Decree-law n. 59/2016,
later converted into law, and regulated more specifically by Decree no.
114/2021 of the Italian Ministry of Economy and Finance, will soon be
accessible to Italian businesses following the latest provision taken by the
Italian Revenue Agency (Agenzia delle Entrate) with which the digital register
for the registration and keeping of pledges becomes operational. As a result
of that register, all the operations relating to such pledges will be capable
of being carried out swiftly and electronically (including, but not limited
to, registration, consultation by anyone, modification, renewal and
cancellation).

For banks and investors, the PNP Regulation will facilitate the effective
exercise of the rights of secured creditors, aligning the effectiveness of the
enforceability of the movable pledge with the best practices already adopted
in other countries.

Market operators consider the PNP Regulation to be a significant development
for the Italian industrial and manufacturing sector. It is expected to help
companies to attract investments aimed at divesting and/or financing their own
inventory.

For SYME, it is expected that the PNP Regulation will create further
opportunity for traditional Inventory Funders to invest in IM transactions in
light of the proposed improvements to the legal enforceability of guarantees
over the inventory, through the arrangement of self-funding and/or white-label
agreements, which leverage the Platform.

The Company will provide further updates to the market as and when the PNP
Regulation is promulgated.

Finally, with reference to other projects previously announced by the Company:

·    SACE: the Company has worked closely with SACE 5  to study a bespoke
guarantee covering the hypothetical risk that the Italian Stock Company would
be unable to repay the loans (or notes) provided by the Inventory Funders. The
most recent feedback that SYME has received from SACE is that in order to
continue with the bespoke guarantee, there is a need for an update to the
local legal framework regarding state aid, which is already part of the
Italian government's legislative agenda. Such an amendment would allow SACE to
guarantee domestic transactions - such as the IM transactions - which are
currently not part of the SACE's core products, which are focused on export or
international business.

·    Captive & Fintech bank initiatives: over the last two years, due
to the turbulent economic outlook (post-COVID-19 and impacted by the energy
crisis) the Company had delayed the decision to invest directly into an
authorised and licensed banking business. This decision was validated by the
evolution of banking regulation which contains further limits and constraints
to the lending activity of banks. As such, with reference to the following
potential initiatives:

o  Captive bank: the Company has been advised by its key shareholder the
AvantGarde Group S.p.A. ("TAG"), that the initiative is still active.
Specifically, TAG, together with its partners, is evaluating an investment
into a wider European license which would not focus solely on the Italian
jurisdiction. This initiative is still in progress and SYME will provide
further updates via RNS as and when it is appropriate for it to do so; and

o  Fintech bank: as per the RNS on 29 June 2021 where the Company updated its
captive funding strategy to include the possibility of a direct investment
into a fintech bank owned by an Italian banking group, the commercial
sensitivities and legal complexities meant that the Company was not always
able to update investors regarding such initiatives. The term sheet between
the parties has expired, and, in light of the economic environment described
above, the Company is continuing to assess the benefits for its business and
shareholders and remains in discussion with the Italian banking group
regarding a new potential agreement, whilst continuing to evaluate similar
opportunities which the market can offer.

 

United Kingdom

Origination in the UK has continued to grow, with client companies sourced
through SYME's strong relationships held with a wide eco-system of introducers
which have also enabled the growth in the European portfolio of client
companies. There are several large ticket opportunities to monetise subject to
the appropriate structure and funding being in place and as the Company
continues to build its track-record, this will unlock further client company
opportunities.

Additionally, as stated above, SYME is working with a consortium of European
investors for a securitisation issuance to fund an IM transaction with an
inventory monetisation value of up to €5m, which involves a first UK client
company and at least one Italian client company.

For both UK and Italian markets, the Company is continuing to work with
StormHarbour Securities LP to originate potential Inventory Funders.

Middle East and North Africa (MENA)

Business opportunities in the UK and Europe continue to be SYME's core focus,
but progress is also being made for future IM transactions in the MENA region,
particularly in the United Arab Emirates, supported by a select panel of local
partners and brokers.

More specifically, leveraging the partnership agreement signed in 2022 by
TradeFlow and Cargoes Finance (by DP World), SYME started to work directly
with DP World to structure an IM transaction.

As previously announced, the Company remains in discussions with a bank
operating in Saudi Arabia regarding the white-label tender, though that has
been delayed for operational reasons due to the bank's business priorities.

Finally, with the objective of prioritising the traditional funding routes and
optimising its capability plan, the Company temporarily placed the Shariah
project on hold, waiting for the optimal time-to-market.

United States

In 2023, the Company intends to conclude the project started with a Big 4
consultancy firm aimed at conducting a dedicated assessment regarding the
application of the IM framework under the US GAAP.

In parallel, leveraging the partnership with Anthony Brown, consulting company
Epicirean Brands and The Trade Advisory, SYME continues to engage with
specific potential Inventory Funders and white-label partners on how best to
structure the first IM transaction in US.

As previously stated, while SYME sees a number of opportunities in the US, the
Company's current priority is to concentrate, for now, on its core markets.

In-transit monetisation

TradeFlow has continued to focus on the following key areas of activity during
the year ended 31 December 2022:

·    fund management;

·    digital fund support implementation and strategic developments in
technology/fund management; and

·    alliances with logistic partners who share our digitalisation vision.

In respect of the fund management business, TradeFlow's relationship with the
International Chamber of Commerce ("ICC") continues to progress and
it anticipates launching an ICC endorsed fund to support small-medium-sized
enterprise trade in 2023. The existing TradeFlow funds covering in-transit
cargo transactions are on track to make targeted returns for its
investors.

TradeFlow's partnership with the Singapore Institute of Technology continues
to progress with its Research project contract to develop an artificial
intelligence system for enhanced predictive analytics around logistics and
shipping, which is on track to yield results in 2023.

Alessandro Zamboni, CEO of SYME, said:

"Today's update evidences the continued and significant progress being made by
the Group. The next key milestones on SYME's horizon are traditional
funding-backed IMs in Italy and the UK. These transactions will serve a
dual-purpose: to build our track-record for Inventory Funders; and to support
corporates in sectors where we see growth opportunities and the potential to
scale to larger inventories."

"We further expect the PNP Regulation in Italy to open additional routes to
market for our white-label offering, which will further validate our
ready-to-go Platform and strengthen SYME's position as a partner of choice for
global and local banks interested in funding inventory-backed transactions."

"It's great to see an increased appetite by the investors on real asset class
related to inventories. TradeFlow's relationship with ICC is a concrete
example. It reflects the size of the target addressable market which continues
to show a huge funding gap suffered by mid-caps and SMEs, which we are
targeting with unique IM market proposition."

 

For the purposes of UK MAR, the person responsible for arranging release of
this announcement on behalf of SYME is Alessandro Zamboni, CEO.

Contact information

Alessandro Zamboni, CEO, Supply@ME Capital
plc, investors@supplymecapital.com (about%3Ablank)

MHP Group, SupplyME@mhpgroup.com (about%3Ablank)

Notes

SYME and its operating subsidiaries provide its Platform for use by
manufacturing and trading companies to access inventory trade solutions
enabling their businesses to generate cashflow, via a non-credit approach and
without incurring debt.  This is achieved by their existing eligible
inventory being added to the Platform and then monetised via purchase by third
party Inventory Funders.  The inventory to be monetised can include
warehoused goods waiting to be sold to end-customers or goods that are part of
a typical import/export transaction. SYME announced in August 2021 the launch
of a global Inventory Monetisation programme which will be focused on both
inventory in transit monetisation and warehoused goods monetisation. This
programme will be focused on creditworthy companies and not those in distress
or otherwise seeking to monetise illiquid inventories.

 1  The warehoused goods monetisation pipeline key performance indicator
("KPI") represents the current (British Pound Sterling ("GBP") equivalent)
potential value of warehoused goods, rather than pipeline revenue expected to
be earned by the Group. As such, this provides a good indicator of the level
of customer interest and demand for the Group's current and future warehoused
goods monetisation services. The warehoused goods monetisation pipeline KPI is
an unaudited figure.

 2  https://www.apexgroup.com/

 3  https://www.vechain.org/

 4  https://centrifuge.io/

 5  https://www.sace.it/en

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