REG - TruFin PLC TruFin PLC - Final Results For The Year Ended 31 December 2021
29/04/2022 07:00
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RNS Number : 7866J TruFin PLC 29 April 2022
29 April 2022
TruFin plc
("TruFin" or the "Company" or together with its subsidiaries "TruFin Group" or
the "Group")
FINAL RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2021
Full year results highlight the transition to recurring revenue sources
TruFin is pleased to announce its audited results for the 12 months ended 31
December 2021. TruFin's complete annual report and accounts, which set out
these results in full detail with accompanying commentary, are now available
on TruFin's website: www.Trufin.com/investors
(https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.trufin.com%2Finvestors&data=02%7C01%7Cjames.vandenbergh%40TruFin.com%7C6f10ba878ca34db183b408d7f7ee04fc%7C67937f35ec6246869ff319b660f3fd22%7C0%7C1%7C637250473973575045&sdata=Fb9CSvRWbJTpnwg32G0hfDg0SNKLZNCieX68%2Bcxzj8k%3D&reserved=0)
.
Financial Highlights
· Gross revenues were £13.1m for the 12 months ended 31 December 2021,
representing a year-on-year decline of 12%, driven by revenue from the
de-emphasised lending strategy declining 35%
· Loss Before Tax ("LBT") excluding share-based payment charge was
£8.4m
· 87% of 2021 revenue came from predictable recurring software and
licencing fees
Operational Highlights
· Oxygen Finance Limited ("Oxygen") recorded its first full year of
EBITDA profit (£0.5m)
· Satago Financial Solutions Limited ("Satago") extended its
six-month trial with Lloyds Bank plc ("Lloyds Bank" or the "Bank") for their
Lending-as-a-Service ("LaaS") offering
· Playstack Limited ("Playstack") beta-launched its brand technology
platform in November 2021
· Vertus Capital Limited ("Vertus") closed £8.4m of new facilities, an
increase of 70% over the previous 12 months (2020: £4.9m)
Current Trading and Prospects
· Group revenues for Q1 2022 were not less than £2.5m (unaudited),
flat over the same period in 2021
· Oxygen recorded revenue growth for Q1 2022 of over 25%, compared to
the same period in 2021
· Satago is seeing meaningful progress, with a growing pipeline of
potential LaaS customers in Europe and the UK
· Playstack has extended its portfolio by three titles for release
during 2022. It has a strong pipeline of further titles for 2023 and beyond
· Vertus closed £2.8m of new facilities in Q1 2022 and has £8.4m of
new facilities approved and submitted for legal drafting
James van den Bergh, TruFin CEO, said:
"2021 was a transitional year for the TruFin Group. We welcomed 15 new
institutional shareholders, repositioned our business to one which now
receives 87% of its revenue from recurring software and licencing fees and we
have significantly enhanced the Group's prospects by building new and
consolidating existing partnerships.
We saw Group revenue fall as we focused on shifting to these new sources of
predictable revenue, in doing so laying the building blocks for sustainable
growth in 2022 and beyond.
Due to the work carried out during 2021, our significantly diversified
shareholder base and the successfully completed Placing and Open Offer, we
look forward to the current year with optimism and believe we are well
positioned for the future."
Enquiries:
TruFin plc 0203 743 1340
James van den Bergh, Chief Executive Officer
07779 229508
Kam Bansil, Investor Relations
Liberum Capital Limited (Nominated Adviser and Corporate broker) 0203 100 2000
Chris Clarke
Edward Thomas
Lydia Zychowska
About TruFin plc:
TruFin plc is the holding company of an operating group comprising four
growth-focused technology businesses operating in niche markets: early payment
provision, invoice finance, IFA finance and mobile games publishing. The
Company was admitted to AIM in February 2018 and trades under the ticker
symbol: TRU. More information is available on the Company website:
www.TruFin.com
(https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.trufin.com%2F&data=05%7C01%7Cannie.styler%40trufin.com%7Cbaa78452ac0a47f8945108da28fa43e7%7C67937f35ec6246869ff319b660f3fd22%7C0%7C0%7C637867352602970809%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=KlrhCWwTxueK%2BL9vIsnyHiMNFfDmDQOWUnAQeFSgNQc%3D&reserved=0)
.
CHAIRMAN'S STATEMENT
When I wrote my Chairman's Statement last year, we had just experienced a very
difficult 12 months. The pandemic was still causing significant disruption and
the outlook was still highly unpredictable for companies around the world. The
Group's various businesses responded amazingly well to unprecedented
challenge, and I am incredibly proud of our employees who navigated new
working environments and continued to drive the businesses forward.
I wrote last year that the Group was emerging from the pandemic relatively
unscathed and even better placed to prosper. I am delighted to say that this
has indeed been the case and we have made great strides forward in 2021.
Though the pandemic's impact appears to be waning, we now face other
challenges, such as rising inflation resulting in increased interest rates
and, no doubt, further difficulties caused by the conflict in Ukraine. Despite
such challenges, TruFin is in great shape and I expect to be able to report
considerable growth in all our businesses through 2022.
The Group had three main objectives during 2021. Firstly, the restructuring of
the shareholder base to allow the Group to fully capitalise on the inherent
value it had already created, whilst ensuring it remains a stable Group for
employees, strategic partners and other stakeholders. This successfully
happened via two oversubscribed sell-downs of our largest shareholder's
position - resulting in TruFin gaining many new, high quality institutional
shareholders.
Secondly, the Group sought to continue the transition from a lending Group to
one focused on recurring software sales and licencing fees. It is therefore
very pleasing to report that during 2021 the Group generated more than 87% of
its revenue from these sources.
Finally, the Group strived continuously to provide exemplary service to its
customers and give our 136 employees the opportunity to continue the important
work they do. As a result of their efforts, TruFin is better positioned now
than it has ever been. This is no more evident than in the recent signing of a
letter of intent by Lloyds Bank plc ("Lloyds Bank" or the "Bank") and £5m
equity investment by Lloyds Banking Group ("LBG") in Satago Financial
Solutions Limited ("Satago") which was only possible thanks to the
collaborative and stellar work carried out by all parties during 2021.
Highlights throughout 2021 include:
• Oxygen Finance Limited ("Oxygen") recording its first full year EBITDA
profit
• Satago extending its trial with Lloyds Bank and developing further
integration with the Bank's infrastructure
• Playstack Limited's ("Playstack") beta launch of Interact, their new
brand offering which introduces real world brands into the gaming space
• Vertus Capital Limited ("Vertus") recording its first year of profit
whilst writing £8.4m of new facilities and experiencing zero credit losses,
yet again demonstrating the efficacy of its underwriting
What is particularly pleasing is how significantly de-risked the Group now is
- both tactically and strategically - as a result of the work carried out
during the last 12 months.
The decision for Oxygen to demonstrate the operational leverage in the
business, whilst maintaining its leading market position, has resulted in its
first full year of EBITDA profit during 2021. With 2022 expected to deliver
the first year of cash generation, this will end the need for financial
support from TruFin.
Satago's focus on its Lending-as-a-Service ("LaaS") launch and delivering on
its strategic partnership with Lloyds Bank has resulted in the Bank selecting
it to provide invoice factoring solutions to the Bank's customers. Alongside
this recent landmark announcement, it was also very pleasing to report that
LBG made a strategic investment of £5m in Satago.
Playstack's successful launch of their first major title has resulted in the
console portfolio being extended by three new titles for release in 2022, with
a strong pipeline of further titles for 2023 and beyond. The existing back
catalogue in mobile and console, combined with these secured releases and
Interact's launch, ensures a balanced mix of revenue streams going forward for
this exciting gaming technology business.
As ever with Vertus, it has been pleasing to witness such a robust credit
performance and a first full year of profitability.
TruFin's share price has risen by more than 400% since mid-2020. This rise, I
believe, is a result of the wholesale restructuring in the shareholder
register plus the excellent work done at subsidiary level. This work,
evidenced by demonstrable milestones, now ensures that the Group's
subsidiaries are moving from the 'venture' stage to greater maturity. This
reduces Group volatility whilst increasing the inherent value of the
subsidiaries and the Group's ability to realise this value.
2022 meanwhile has started with two incredibly positive developments: Satago's
selection as the platform of choice by Lloyds Bank and an oversubscribed £10m
Placing and Open Offer. The fundraise, together with the additional £5m
invested in Satago by LBG, positions the Group to accelerate growth and
capitalise on all the work undertaken to date.
I look forward to updating the market on our continued progress over the
course of the year and, as ever, I would like to thank all our employees and
shareholders, new and old, for their continued support.
Steve Baldwin
Chairman
CEO'S REVIEW
As our Chairman highlighted, 2021 was a pivotal year for TruFin. With our
largest shareholder selling down their 73.82% position (to 15 institutional
investors in two oversubscribed transactions) the Group was effectively
re-IPOd.
One of the key objectives for the Group is to create a stable environment for
our subsidiaries. As such it cannot be underestimated how positively the news
of our updated shareholder structure was received by both employees and
customers, alongside our partners, suppliers and other stakeholders.
In addition, the Group continued to transition its revenue base away from
lending income towards recurring licence fee and software revenues. Alongside
these important strategic goals, the subsidiaries grew their customer bases,
strengthened their partnerships and positioned themselves for an exciting 2022
and beyond.
2021 Group Performance
When I became CEO in 2019, the Group's revenue was dominated by lending
income, with just 36% of revenues attributed to recurring software and
licencing fees. One of the Group's strategic objectives was to reorientate
income so that the majority came from these more predictable sources. With 87%
of 2021 revenues coming from such fees we can say that this transition has
occurred successfully. Our new capital light model positions us perfectly to
generate the high EBITDA margins and return on equity that other successful
software-as-a-service ("SaaS") businesses enjoy.
The shift to recurring software and licencing fees has resulted in the Group
consolidating the significant revenue growth we experienced in 2020; 2021 saw
a modest 12% decline in revenues to £13.1m, driven by lending earnings
falling by 35%. With the split between the various revenue streams now at a
sustainable level, we can look forward to the Group returning to meaningful
growth in 2022 and beyond.
The Group ended the year with a cash balance of £7.6m (including cash of
£4.7m in Satago and £0.7 million in Vertus which cannot be accessed at a
Group level) and, following the £10m fundraising post period end, is fully
funded to achieve profitability.
Oxygen
• Revenue growth in the year and strong cost management resulted in
positive EBITDA generation for each quarter of 2021, ensuring Oxygen delivered
its first full year of EBITDA profit (£0.5m)
• Oxygen is now fully funded through to profitability and cash generation
and therefore no longer requires financial support from the Group
• New business continued to progress well with five new Early Payment
Programme clients and 23 new Insight Solutions clients. Oxygen lost two
Insight clients in the period (one of which returned during the final quarter
2021) and as a result Oxygen had 120 unique clients at year end
• Average Early Payment Programme client tenure, as at end of 2021, was
6.2 years. The average length of contract terms and loyalty of the customer
base amplifies the value of the recurring revenue stream built up within
Oxygen
• Suppliers joined Oxygen's Early Payment Programmes at a record rate,
with a 43% increase in suppliers onboarded versus the same period in 2020
• Oxygen processed its 1,000,000(th) rebate in 2021
• Oxygen successfully positioned itself as a financial technology company
delivering social value. As a result, 2021 saw dramatic growth in its FreePay
Programme, which allows small and micro suppliers to benefit from early
payment without charge, and the development of a Carbon Reporting tool to
provide local authorities insight into their Scope 3 emissions
Satago
• 2021 was the first full year of the LaaS proposition with a focus on
developing the offering for Lloyds Bank, culminating in the March 2022
announcement. The work carried out with both Lloyds Bank and other potential
partners provides the foundation for significant future growth
• Satago expanded its product range, with whole book funding launched
during 2021
• Government backed loans and Covid restrictions reduced demand for
Satago's financing products
• New financing product providing funding against HMRC R&D tax credit
submissions
• £5m revolving credit agreement signed in March 2020 continues to run
well and the agreement remains in force
Playstack
• Good progress during this transitional year, delivering financial
targets and setting the foundations for growth in 2022 and 2023
• Back-book games portfolio contributed more than 50% of games revenue in
2021, with strong catalogue management and platform partnerships
• Ongoing investment in Interact, the brand technology platform,
throughout 2021 ensuring a successful beta launch in November 2021 and public
launch in February 2022
Vertus
• New facilities closed during 2021 increased by 70% to £8.4m (2020:
£4.9m), resulting in interest income increasing by 33% to £1.3m (2020:
£1.0m)
• Active facilities increased from 15 to 21 (inclusive of two early
settlements)
• Zero missed payments, defaults, or impairments across the book for the
fifth consecutive year
• Renewal of creditor agreements for a further 36 months, on improved
terms
Current trading and prospects
After a transitional 2021 in which the Group reorientated towards recurring
software and licencing fee income, we expect significant growth during 2022.
Group revenues in the first quarter of 2022 are expected to be more than
£2.5m (unaudited), flat versus revenues during the same period in 2021.
Following the recent oversubscribed Placing and Open Offer, the Group is
focused on delivering considerable growth, profitability and value
crystallisation.
Oxygen
• Current trading in line with budget expectations for both Early Payment
Programmes and Insight Solutions, with both delivering cumulative revenue
growth for the first quarter of 2022 of over 25%, compared to the same period
in 2021
• Record monthly recurring revenues in March 2022
• Strong pipeline for both Early Payment Programmes and Insight Solutions
clients with new product development allowing for the release of the
proprietary 'Carbon footprint Insights Solution'. This new product is
generating significant interest and demonstrates Oxygen's ability to provide
further product ranges to their loyal customer base
• Record supplier on-boarding of £102m in the first quarter of 2022,
representing an increase of 34% over the same period in 2021 and a 120%
increase over the fourth quarter of 2021. The supplier spend in Oxygen's Early
Payment Programmes is expected to reach £1bn during 2022
• Unique client count exceeded 125
Satago
• The first quarter of 2022 was dominated by continued work with Lloyds
Bank, culminating in confirmation of their intention to enter into a
commercial agreement with Satago
• A £5m equity investment by LBG into Satago ahead of the signing of the
commercial agreement with Lloyds Bank
• Meaningful progress with a growing pipeline of LaaS customers in Europe
and the UK interested in all or part of its technology suite
• Increased activity and demand for Satago's own loan book offering
Playstack
• Console portfolio extended by three new titles for release during 2022,
with a strong pipeline of titles for 2023 and beyond
• Interact brand technology publicly announced in February 2022, with
significant interest from numerous developers and brands
• Increased mix of revenue sources for 2022 and beyond, providing a more
balanced mix across the company portfolio and allowing the business expected
to target profitability during 2023
Vertus
• Ongoing consolidation in the IFA market is fuelling demand for funding,
positioning Vertus well for further growth
• Lead times for closing facilities increased due to challenges around FCA
change of control processing times. We believe these delays are temporary
• New referral agreements and online campaigns are driving increased
applications. The first quarter of 2022 saw £2.8m of new facilities closed
and a further £8.4m of new facilities approved and submitted for legal
drafting
• Zero missed payments, defaults or impairments
Outlook
In 2021 we remained focused on our technological advantages. This allowed us
to expand our product offerings to new and existing customers, the benefits of
which we will see in 2022 and beyond. Similarly, we expect our investments in
building lasting relationships with Lloyds Bank and our other partners to bear
fruit in the coming years.
With each subsidiary delivering on their strategic objectives and having
executed on an oversubscribed Placing and Open Offer, the Group is now well
positioned to focus on continued growth, moving towards profitability and
value creation.
It is with pride that I have seen first-hand how our Board has acted to
protect all shareholders over the last 24 months. We have received unwavering
support from new and existing shareholders who have given us the time to
develop the foundations for continued growth. Crucially, we have also been
trusted by our employees and partners who have remained loyal despite our
competitors attempting to capitalise on our temporary instability.
So, alongside the habitual 'thank you' to our shareholders I would like to
thank all stakeholders for their support and encouragement.
We have hit the ground running in 2022 and we look forward to updating
investors on TruFin's progress throughout the year.
James van den Bergh
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes 2021 2020
£'000 £'000
Interest income 3 1,681 2,578
Fee income 3 4,330 3,846
Publishing income 3 7,104 8,408
Interest, fee and publishing expenses (6,214) (6,512)
Net revenue 6,901 8,320
5 (11,285) (11,532)
Staff costs
Other operating expenses (3,257) (4,927)
Depreciation & amortisation (794) (799)
Net impairment reversal on financial assets 7 10 11
Share of profit from associates 3 -
Loss before tax (8,422) (8,927)
2, 9 986 (2,476)
Taxation
Loss for the year (7,436) (11,403)
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
Exchange differences on translating foreign operations (39) 85
Other comprehensive income for the year, net of tax (39) 85
Total comprehensive loss for the year (7,475) (11,318)
Loss for the year attributable to:
Owners of TruFin plc (7,071) (10,971)
Non-controlling interests (365) (432)
(7,436) (11,403)
Total comprehensive loss for the year attributable to:
Owners of TruFin plc (7,112) (10,886)
Non-controlling interests (363) (432)
(7,475) (11,318)
COMPANY STATEMENT OF COMPREHENSIVE INCOME
Notes 2021 2020
£'000 £'000
Revenue 3 2,126 2,192
5 (1,911) (1,920)
Staff costs
Other operating expenses (624) (975)
Depreciation & amortisation - (1)
Loss before tax (409) (704)
9 - -
Taxation
Loss and total comprehensive income for the year (409) (704)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes 2021 2020
£'000 £'000
Assets
Non-current assets
Intangible assets 10 21,191 21,041
Property, plant and equipment 11 65 140
Deferred tax asset 9 303 43
Loans and advances 13 11,575 9,301
Total non-current assets 33,134 30,525
Current assets
Cash and cash equivalents 7,608 17,728
Loans and advances 13 4,558 5,359
Interest in associate 3 -
Trade receivables 14 2,585 1,992
Other receivables 14 2,840 1,962
Total current assets 17,594 27,041
Total assets 50,728 57,566
Equity and liabilities
Equity
Issued share capital 15 73,548 73,548
Retained earnings (17,731) (10,730)
Foreign exchange reserve 4 45
Other reserves (24,393) (24,395)
Equity attributable to owners of the company 31,428 38,468
Non-controlling interest 19 1,023 1,268
Total equity 32,451 39,736
Liabilities
Non-current liabilities
Borrowings 16 11,351 8,507
Total non-current liabilities 11,351 8,507
Current liabilities
Borrowings 16 1,634 2,204
Trade and other payables 17 5,292 7,119
Total current liabilities 6,926 9,323
Total liabilities 18,277 17,830
Total equity and liabilities 50,728 57,566
COMPANY STATEMENT OF FINANCIAL POSITION
Notes 2021 2020
£'000 £'000
Assets
Non-current assets
Investments in subsidiaries 12 30,189 30,189
Amounts owed by group undertakings 46,919 47,066
Total non-current assets 77,108 77,255
Current assets
Cash and cash equivalents 786 578
Trade and other receivables 14 144 658
Total current assets 930 1,236
Total assets 78,038 78,491
Equity and liabilities
Equity
Issued share capital 15 73,548 73,548
Retained earnings (5,504) (5,165)
Other reserves 8,966 8,966
Total equity 77,010 77,349
Liabilities
Current liabilities
Trade and other payables 17 1,028 1,142
Total current liabilities 1,028 1,142
Total liabilities 1,028 1,142
Total equity and liabilities 78,038 78,491
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Retained Foreign Other Total Non- Total
capital earnings exchange reserves £'000 controlling equity
£'000 £'000 reserve £'000 interest £'000
£'000 £'000
Balance at 1 January 2021 73,548 (10,730) 45 (24,395) 38,468 1,268 39,736
Loss for the year - (7,071) - - (7,071) (365) (7,436)
Other comprehensive income for the year - - (41) - (41) 2 (39)
Total comprehensive loss for the year - (7,071) (41) - (7,112) (363) (7,475)
Share based payment - 70 - - 70 - 70
Adjustment arising from change in non-controlling interest - 4 - - 4 (4) -
Issuance of subsidiary shares to employees - - - - - 19 19
Intragroup transfer of subsidiary - - - 2 2 - 2
Issuance of shares by subsidiary - (4) - - (4) 103 99
Balance at 31 December 2021 73,548 (17,731) 4 (24,393) 31,428 1,023 32,451
Balance at 1 January 2020 73,548 (63) (40) (24,395) 49,050 1,293 50,343
Loss for the year - (10,971) - - (10,971) (432) (11,403)
Other comprehensive income for the year - - 85 - 85 - 85
Total comprehensive loss for the year - (10,971) 85 - (10,886) (432) (11,318)
Share based payment - 545 - - 545 - 545
Issuance of subsidiary shares to employees - (322) - - (322) 488 166
Adjustment arising from change in non-controlling interest - 81 - - 81 (81) -
Balance at 31 December 2020 73,548 (10,730) 45 (24,395) 38,468 1,268 39,736
Share capital
Share capital represents the nominal value of equity share capital issued.
Retained earnings
The retained earnings reserve represents cumulative net gains and losses.
Foreign exchange reserve
The foreign exchange reserve represents exchange differences which arise on
consolidation from the translation of the financial statements of foreign
subsidiaries.
Other reserves
Other reserves consist of the merger reserve and the share revaluation
reserve.
The merger reserve arose as a result of combining businesses that are under
common control. As at 31 December 2021 it was a debit balance of £33,358,000
(2020: £33,360,000)
The share revaluation reserve arose from the share cancellation that took
place in February 2018. As at 31 December 2021 its balance was £8,966,000
(2020: £8,966,000).
Non-Controlling Interest
The non-controlling interest relates to the minority interest held in Bandana
Media Limited, Playstack OY, Vertus Capital Limited, Vertus SPV1 Limited,
Satago Financial Solutions Limited, Satago SPV1 Limited, Satago SPV2 Limited,
Altlending Limited and Satago z.o.o.
COMPANY STATEMENT OF CHANGES IN EQUITY
Share capital Retained earnings Other reserves Total equity
£'000 £'000 £'000 £'000
Balance at 1 January 2021 73,548 (5,165) 8,966 77,349
Total comprehensive loss for the year - (409) - (409)
Share based payment - 70 - 70
Balance at 31 December 2021 73,548 (5,504) 8,966 77,010
Balance at 1 January 2020 73,548 (5,006) 8,966 77,508
Total comprehensive loss for the year - (704) - (704)
Share based payment - 545 - 545
Balance at 31 December 2020 73,548 (5,165) 8,966 77,349
CONSOLIDATED STATEMENT OF CASH FLOWS
2021 2020
£'000 £'000
Cash flows from operating activities
Loss before tax (8,422) (8,927)
Adjustments for
Depreciation of property, plant and equipment 96 128
Amortisation of intangible assets 1,571 1,209
Share based payments 70 545
Decrease in provision - (700)
Finance costs 656 412
Impairment of intangible assets - 222
Share of profit from associate (3) -
Loss on disposal of Fixed Assets 2 -
Loss on intragroup transfer of subsidiary 2 -
(6,028) (7,111)
Working capital adjustments
Movement in Loans and advances (1,472) 13,045
(Increase)/decrease in trade and other receivables (720) 30
(Decrease)/increase in trade and other payables (1,831) 2,384
(4,023) 15,459
Tax paid (2) (17)
Interest and finance costs paid (716) (276)
Net cash (used in)/from operating activities (10,769) 8,055
Cash flows from investing activities:
Additions to intangible assets (1,779) (1,905)
Additions to property, plant and equipment (24) (31)
Net cash used in investing activities (1,803) (1,936)
Cash flows from financing activities:
Issue of ordinary share capital of subsidiary 148 166
New borrowings 16 2,353 4,382
Net cash generated from financing activities 2,501 4,548
Net (decrease)/increase in cash and cash equivalents (10,071) 10,667
Cash and cash equivalents at beginning of the year 17,728 6,971
Effect of foreign exchange rate changes (49) 90
Cash and cash equivalents at end of the year 7,608 17,728
COMPANY STATEMENT OF CASH FLOWS
2021 2020
£'000 £'000
Cash flows from operating activities
Loss before income tax (409) (704)
Adjustments for:
Depreciation of property, plant and equipment - 1
Interest income (2,008) (2,073)
Share based payments 70 545
Decrease in provision - (700)
(2,347) (2,931)
Working capital adjustments
Decrease/(increase) in trade and other receivables 513 (369)
Decrease in trade and other payables (114) (304)
399 (673)
Net cash generated used in operating activities (1,948) (3,604)
Cash flows from investing activities
Cash received on intragroup loans 2,156 3,998
Net cash generated from investing activities 2,156 3,998
Net increase in cash and cash equivalents 208 394
Cash and cash equivalents at beginning of the year 578 184
Cash and cash equivalents at end of the year 786 578
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Statutory information
TruFin plc is a Company registered in Jersey and incorporated under Companies
(Jersey) Law 1991. The Company's ordinary shares were listed on the
Alternative Investment Market of the London Stock Exchange on 21 February
2018. The address of the registered office is 26 New Street, St Helier,
Jersey, JE2 3RA.
1. Accounting policies
General information
The TruFin Group (the "Group") is the consolidation of TruFin plc and the
companies set out in the "Basis of consolidation" (below).
The principal activities of the Group are the provision of niche lending,
early payment services and mobile game publishing.
The financial statements are presented in Pounds Sterling, which is the
currency of the primary economic environment in which the Group operates.
Amounts are rounded to the nearest thousand.
Basis of accounting
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
("IFRS").
Prior to 29 November 2017 and before the incorporation of TruFin plc and
TruFin Holdings, the entities named above were under common control and
therefore, have been accounted for as a common control transaction - that is a
business combination in which all the combining entities or businesses are
ultimately controlled by the same company both before and after the
combination. IFRS 3 provides no specific guidance on accounting for entities
under common control and therefore other relevant standards have been
considered. These standards refer to pooling of assets and merger accounting
and this is the methodology that has been used to consolidate the Group.
After 29 December 2017, post the reorganisation, the entities constitute a
legal group and accordingly the consolidated financial statements have been
prepared by applying relevant principles underlying the consolidation
procedures of IFRS.
Basis of preparation
The results of the Group companies have been included in the consolidated statement of comprehensive
income. Where necessary, adjustments have been made to the underlying
financial information of the companies to bring the accounting policies used
into line with those used by the Group. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
The consolidated financial statements contained in this document consolidates
the statements of total comprehensive income, statements of financial
position, cash flow statements, statements of changes in equity and related
notes for each of the companies listed in the "Basis of consolidation" below,
which have been prepared in accordance with IFRS.
Non-controlling interests, presented as part of equity, represent the portion
of a subsidiary's profit or loss and net assets that is not held by the Group.
The Group attributes total comprehensive income or loss of subsidiaries
between the owners of the parent and the non-controlling interests based on
their respective ownership interests.
Basis of consolidation
The consolidated financial statements include all of the companies controlled
by the Group, which are as follows:
Country of Nature of the business % voting rights
Entities incorporation Registered address and shares held
TruFin Holdings Limited ("THL") Jersey 26 New Street, St Helier, Jersey JE2 3RA Holding Company 100% of ordinary shares
Satago Financial Solutions Limited ("Satago") UK 48 Warwick Street, London, United Kingdom, W1B 5AW Provision of short term finance 85.1% of ordinary shares*
Satago SPV 1 Limited ("Satago SPV 1") UK 48 Warwick Street, London, United Kingdom, W1B 5AW Provision of short term finance 85.1% of ordinary shares*
Satago SPV 2 Limited ("Satago SPV 2") UK 48 Warwick Street, London, United Kingdom, W1B 5AW Provision of short term finance 85.1% of ordinary shares*
Satago z.o.o (Satago Poland) Poland 32-023 Krakow ul. Sw. Krzyza 19/6 Poland Provision of short term finance 85.1% of ordinary shares*
Oxygen Finance Group Limited ("OFGL") (together with OFL and OFAI) ("Oxygen") UK 1(st) Floor Enterprise House, Holding Company 88.4% of ordinary shares**
115 Edmund Street, Birmingham, United Kingdom, B3 2HJ
Oxygen Finance Limited ("OFL") UK 1(st) Floor Enterprise House, Provision of early payment services 88.4% of ordinary shares**
115 Edmund Street, Birmingham, United Kingdom, B3 2HJ
Oxygen Finance Americas, Inc ("OFAI") USA Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of Provision of early payment services 88.4% of ordinary shares**
New Castle, Delaware 19801, USA
Porge Ltd ("Porge") *** UK Cathedral Place, Provision of market research information. 84.4% of ordinary shares**
42-44 Waterloo Street, Birmingham, United Kingdom, B2 5QB
TruFin Software Limited ("TSL") UK 48 Warwick Street, London, United Kingdom, W1B 5AW Provision of technology services 100% of ordinary shares
AltLending UK Limited ("AltLending") UK 48 Warwick Street, London, United Kingdom, W1B 5AW Provision of short term finance 100% of ordinary shares*
Vertus Capital Limited ("Vertus Capital") (together with Vertus SPV 1 Limited) UK Building 1 Chalfont Park, Gerrards Cross, United Kingdom, SL9 0BG Provision of short term finance 54% of ordinary shares
("Vertus")
Vertus Capital SPV 1 Limited ("Vertus SPV 1") UK Building 1 Chalfont Park, Gerrards Cross, United Kingdom, SL9 0BG Provision of short term finance 54% of ordinary shares
Playstack Limited ("Playstack")**** UK 56a Poland Street, London United Kingdom, W1F 7NN Publishing of computer games 100% of ordinary shares
Bandana Media Limited ("Bandana")**** UK 56a Poland Street, London United Kingdom, W1F 7NN Publishing of computer games 72% of ordinary shares
PlayIgnite Ltd ("PlayIgnite")**** UK 56a Poland Street, London United Kingdom, W1F 7NN Business and domestic software developer 100% of ordinary shares
Playstack z.o.o ("PS Poland") **** Poland Kamienna 21, 31-403 Krakow, Poland Publishing activities in the field of computer games 100% of ordinary shares
Playstack OY ("PS Finland")**** Finland Mikonkatu 17 B, 00100 Helsinki, Finland Publishing activities in the field of computer games 75% of ordinary shares
Playstack AB ("PS Sweden")**** Sweden Solbergavägen 17, 17998 Färentuna, Sweden Developing, publishing and selling electronic games 100% of ordinary shares - (80% until 8 October 2020)
Playstack Inc ("Playstack USA")**** USA Gust Delaware, 16192 Coastal Hwy, Lewes, DE 19958 Publishing of computer games 100% of ordinary shares
PlayIgnite Inc ("PlayIgnite USA")**** USA Cogency Global Inc, 850 New Burton Road, Suite 201, Dover DE 19904 Business and domestic software developer 100% of ordinary shares
* Following the grant of the Satago Management Incentive Plan ("Satago MIP"),
the effective economic ownership of these companies is 94.1% based on their
Statements of Financial Position at the Reporting Date.
** Nominal ownership of these companies is 88.4% due to the Oxygen Management
Incentive Plan ("Oxygen MIP"). Effective economic ownership is 100% based on
their Statements of Financial Position at the Reporting Date.
*** On 22 March 2022, Porge was dissolved.
**** The Playstack Group includes 4 associate companies incorporated in the UK
which have been accounted for using the equity method. These are:
• A 49% interest in PlayFinder Games Ltd
• A 49% interest in Snackbox Games Ltd
• A 42% interest in Military Games International Ltd
• A 27% interest in Storm Chaser Games Limited ("Storm Chaser Games")
Principal accounting policies
The principal accounting policies adopted in the preparation of the financial
statements are set out below. These policies have been applied consistently to
all the financial periods presented.
The consolidated financial statements have been prepared in accordance with
European Union Endorsed International Financial Reporting Standards (IFRSs)
and the IFRS Interpretations Committee (formerly the International Financial
Reporting Interpretations Committee (IFRIC)) interpretations. These statements
have been prepared on a going concern basis and under the historical cost
convention except for the treatment of certain financial instruments.
Going concern
The Group's forecasts and projections, taking into account reasonable possible
changes in trading performance, show that the Group should be able to operate
in the foreseeable future. As a consequence, and following the fundraise post
year end of c.£10m, the Directors have a reasonable expectation that the
Group will have adequate resources to continue in operational existence for
the foreseeable future. Accordingly, the Directors have adopted the going
concern basis in preparing these financial statements. This assessment takes
into consideration the potential uncertainties arising from Covid-19 mentioned
earlier in the report.
Revenue recognition
Net revenue
Interest income and expense
Interest income and expense for all financial instruments except for those
classified as held for trading or measured or designated as at Fair Value
Through Profit and Loss ("FVTPL") are recognised in "Net revenue" as "Interest
income" and "Interest, fee and publishing expenses" in the profit or loss
account using the effective interest method.
The Effective Interest Rate ("EIR") is the rate that exactly discounts
estimated future cash flows of the financial instrument through the expected
life of the financial instrument or, where appropriate, a shorter period, to
the net carrying amount of the financial asset or financial liability. The
future cash flows are estimated taking into account all the contractual terms
of the instrument.
The calculation of the EIR includes all fees and points paid or received
between parties to the contract that are incremental and directly attributable
to the specific lending arrangement, transaction costs and all other premiums
or discounts.
The interest income/expense is calculated by applying the EIR to the gross
carrying amount of non-credit impaired financial assets (that is, to the
amortised cost of the financial asset before adjusting for any expected credit
loss allowance), or to the amortised cost of financial liabilities.
For credit-impaired financial assets, as defined in the financial instruments
accounting policy, the interest income is calculated by applying the EIR to
the amortised cost of the credit-impaired financial assets, that is, to the
gross carrying amount less the allowance for Expected Credit Losses ("ECLs").
Fee income
Fee income for the Group is earned from payments services fees provided by
Oxygen and subscription fees from Porge and Satago.
Payment services provided by Oxygen comprises the following elements:
Early Payment Programme Services ("EPPS") contracts
Oxygen's EPPS generate rebates (i.e. discounts on invoice value) for its
clients by facilitating the early payment of supplier invoices. Oxygen's
single performance obligation is to make its intellectual property and
software platform available to its clients for the duration of their
contracts.
Oxygen bills its clients monthly for a contractually agreed share of supplier
rebates generated by their respective Early Payment Programmes during the
previous month. This revenue is recognised in the month the rebates are
generated.
Implementation fees
Oxygen Implementation fees
Implementation fees are charged to some clients in establishing a client's
technological access to the EPPS and in otherwise readying a client to benefit
from the Services. Establishing access to the company's intellectual property
and software platform does not amount to a distinct service as the client
cannot benefit from the initial access except by the company continuing to
provide access for the contract period. Where an implementation fee is
charged, it is therefore a component of the aggregate transaction price of the
EPPS. Accordingly, such revenue is initially deferred and then recognised in
the statement of comprehensive income over the life of the related EPPS.
Satago Implementation fees
Implementation fees have also been recognised by Satago in full on the signing
of new contracts with partners.
Consultancy fees
Oxygen provides stand-alone advisory services to clients. Revenue is accrued
as the underlying services are provided to the client.
Subscription fees
Insight services subscription fees
The Insight Services offered by OFL (previously within Porge) provide focussed
public sector procurement data and analytics on a subscription basis. Clients
cover both the Private sector, enabling them to improve and develop their
engagement with the public sector, and Public sector organisations, enabling
them to make more informed procurement decisions. Subscriptions are typically
received in advance and recognised over the length of the contract as access
to the database is provided.
Satago subscription fees
These are monthly fees for access to Satago's platform. Subscriptions are
received in advance and recognised during the month the subscription relates
to.
Fee expenses
Fee expenses are directly attributable costs, associated with the Oxygen's
EPPS. The expenses include amortisation arising from capitalised contract
costs incurred directly through activities which generate fee income.
Amortisation arising from other intangible assets is recognised in
depreciation and amortisation of non-financial assets before operating
profit/loss.
Publishing income
Publishing income for the Group is earned by companies in the Playstack Group
and comprises the following elements. Publishing income is recognised at the
fair value of consideration received or receivable for goods and services
provided and is shown net of VAT and any other sales taxes. The fair value
takes into account any trade or volume discounts and commission retained.
In App Purchases (IAP) revenue
IAP revenue is earned on the sale of mobile games and features within those
games. It is recognised when the game or feature is sold.
Advertising revenue
Advertising revenue is earnings from featuring third party advertising within
mobile games. It is recognised when these advertisements are featured within
the games.
Console revenue
Console revenue is earned on the sale of video games for consoles. It is
recognised when the game is sold.
Brand revenue
Brand revenue is when a mobile game player signs up to an advertised brand in
a mobile game. Revenue is recognised when the brand has confirmed acquisition
of the customer.
Publishing expenses
Publishing expenses are directly attributable costs, associated with the
Playstack Group's publishing income. These costs are included at their
invoiced value and are net of VAT and any other sales tax.
Operating profit/loss
Operating profit/loss is net interest and fee income less staff costs,
depreciation and amortisation, impairment loss on financial assets and other
operating expenses.
Foreign currencies
The results and financial position of each group company are expressed in
Pounds Sterling, which is the functional currency of the UK based members of
the Group and the presentation currency for the consolidated financial
statements.
Transactions in foreign currencies are translated to the Group companies'
functional currency at the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
at the reporting date are retranslated to the functional currency at the
foreign exchange rate ruling at that date. Non-monetary assets and liabilities
that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction. Foreign
exchange differences arising on translation are recognised in the consolidated
statement of comprehensive income.
In preparing the consolidated financial statements, the assets and liabilities
of the group's foreign operations are translated at the exchange rate at the
reporting date. Income and expense items are translated at the average
exchange rates for the year. Exchange differences arising, are recognised in
other comprehensive income and are accumulated in the Foreign exchange reserve
equity section.
Property, plant and equipment
All property, plant and equipment is stated at historical cost (or deemed
historical cost) less accumulated depreciation and less any identified
impairment. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for its
intended use.
Depreciation is provided on all property, plant and equipment at rates
calculated to write each asset down to its estimated residual value on a
straight line basis at the following annual rates:
Leasehold improvements - 5 years
Fixtures and fittings - 3 years
Computer equipment - 3 -5 years
Useful economic lives and estimated residual values are reviewed annually and
adjusted as appropriate.
Intangible assets
Identifiable intangible assets are recognised when the Group controls the
asset, it is probable that future economic benefits attributed to the asset
will flow to the Group and the cost of the asset can be reliably measured.
Intangible assets with finite lives are stated at acquisition or development
cost less accumulated amortisation and less any identified impairment. The
amortisation period and method is reviewed at least annually. Changes in the
expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortisation
period or method, as appropriate and are treated as changes in accounting
estimates.
Computer software
Computer software which has been purchased by the Group from third party
vendors is measured at initial cost less accumulated amortisation and less
accumulated impairments.
Computer software also comprises internally developed platforms and the costs
directly associated with the production of these identifiable and unique
software products controlled by the Group. They are probable of producing
future economic benefits. They primarily include employee costs and directly
attributable overheads.
Internally generated intangible assets are only recognised by the Group when
the recognition criteria have been met in accordance with IAS 38: Intangible
Assets as follows:
• expenditure can be reliably measured;
• the product or process is technically and commercially feasible;
• future economic benefits are likely to be received;
• intention and ability to complete the development; and
• view to either use or sell the asset in the future.
The Group will only recognise an internally-generated asset should it meet all
the above criteria. In the event of a development not meeting the criteria it
will be recognised within the statement of profit or loss in the period
incurred.
Capitalised costs include all directly attributable costs to the development
of the asset. Internally generated assets are measured at capitalised cost
less accumulated amortisation less accumulated impairment losses. The
internally generated asset is amortised at the point the asset is available
for use or sale. The asset is amortised on a straight-line basis over the
useful economic life with the remaining useful economic life and residual
value being assessed annually.
Any subsequent expenditure on the internally generated asset is only
capitalised if the cost increases the future economic benefits of the related
asset. Otherwise all additional expenditure should be recognised through the
statement of profit or loss in the period it occurs.
Contract assets
Contract assets comprise the directly attributable costs incurred at the
beginning of an Early Payment Scheme Service contract to revise a client's
existing payment systems and provide access to the Group's software and other
intellectual property. These implementation (or "set up") costs are comprised
primarily of employee costs.
Amortisation is charged to the statement of comprehensive income over the
estimated useful lives of intangible assets from the date they are available
for use, on a straight-line basis. The amortisation basis adopted for each
class of intangible asset reflects the Group's consumption of the economic
benefit from that asset.
Estimated useful lives
The estimated useful lives of finite intangible assets are as follows:
Computer software - 3 -5 years
Contract assets - Life of underlying contract (typically 5 years)
Goodwill
Goodwill arising on acquisition represents the excess cost of a business
combination over the fair values of the Group's share of the identifiable
assets and liabilities at the date of the acquisition. When part of the
consideration transferred by the Group is deferred or contingent, this is
valued at its acquisition date fair value, and is included in the
consideration transferred in a business combination. Changes in the deferred
or contingent consideration, which occur in the measurement period, are
adjusted retrospectively, with corresponding adjustments to goodwill.
Goodwill is not amortised but is reviewed at least annually for impairment.
For the purpose of impairment testing, goodwill is allocated to each Cash
Generating Unit ("CGU"). Each CGU is consistent with the Group's primary
reporting segment. Any impairment is recognised immediately through the income
statement and is not subsequently reversed.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of profit or loss on disposal.
Assets classified as held for sale
Whilst assessing whether any assets should be classified as held for sale, the
management of the Group ensure that the status of the asset satisfies all of
the following criteria as set out within IFRS 5:
• the carrying amount of the asset will be recovered principally through a
sale transaction rather than through continuing use;
• the asset is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets;
• its sale must be highly probable and within one year from the date of
classification;
• management must be committed to a plan to sell the asset; and
• the asset is being actively marketed for sale at a sales price
reasonable in relation to its fair value.
In the event an asset satisfies the criteria, prior to reclassification the
asset should be valued in accordance with IFRS accounting standards applicable
to the asset in question.
At initial recognition the asset is measured at the lower of carrying amount
and fair value less costs to sell. Any unrealised gains or losses are
recognised in the profit and loss account.
Financial instruments
Initial recognition
Financial assets and financial liabilities are recognised in the Group's
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of the financial assets and financial liabilities (other than financial
assets and financial liabilities at FVTPL) are respectively added to or
deducted from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition. Transaction costs that are directly
attributable to the acquisition of financial assets and financial liabilities
at FVTPL are recognised immediately in profit or loss.
Financial assets
Classification and reclassification of financial assets
Recognised financial assets within the scope of IFRS 9 are required to be
classified as subsequently measured at amortised cost, FVTOCI or FVTPL on the
basis of both the Group's business model for managing the financial assets and
the contractual cash flow characteristics of the financial assets.
Financial assets are reclassified if and only if, the business model under
which they are held is changed. There has been no such change in the
allocation of assets to business models in the periods under review.
Loans and advances
Loans and advances are held within a business model whose objective is to hold
those financial assets in order to collect contractual cash flows. The
contractual terms of the loan agreements give rise on specified dates to cash
flows that are solely payments of principal and interest or fees on the
principal amount outstanding.
After initial measurement, loans and advance to customers are subsequently
measured at amortised cost using the Effective Interest Rate method (EIR) less
impairment. Amortised cost is calculated by taking into account any fees or
costs that are an integral part of the EIR. The EIR amortisation is included
in interest and similar income in the statement of comprehensive income. The
losses arising from impairment are recognised in the statement of
comprehensive income and disclosed with any other similar losses within the
line item "Net impairment losses on financial assets".
Where cash flows are significantly different from the original expectations
used to determine EIR, but where this difference does not arise from a
modification of the terms of the financial instrument, the Group revises its
estimates of receipts and adjusts the gross carrying amount of the financial
asset to reflect actual and revised estimated contractual cash flows. The
Group recalculates the gross carrying amount of the financial asset as the
present value of the estimated future contractual cash flows discounted at the
financial instrument's original EIR. The adjustment is recognised in statement
of comprehensive income as income or expense.
Trade and other receivables
Trade receivables do not contain any significant financing component and
accordingly are recognised initially at transaction price, and subsequently
measured at cost less expected credit losses.
Investments in equity shares
Prior to its disposal the Group's investment in the equity shares of Zopa was
not held for trading. The Group made an irrevocable election to classify and
subsequently measure the investment at FVTOCI. Movements in the fair value of
the investment were recognised in the statement of other comprehensive income
and were not reclassified to profit on loss on derecognition.
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost less impairment in the
Company's financial statements.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and demand deposits and short
term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
Impairment
The Group (and Company) recognises loss allowances for Expected Credit Losses
("ECLs") on the following financial instruments that are not measured at
FVTPL:
• Loans and advances;
• Other receivables;
• Trade receivables; and
• Intercompany receivables
ECLs are measured through loss allowances calculated on the following bases:
ECLs are a probability-weighted estimate of the present value of credit
losses. These are measured as the present value of the difference between the
cash flows due to the Group under the contract and the cash flows that the
Group expects to receive arising from the weighting of future economic
scenarios, discounted at the asset's EIR within the current performing book.
The Group measures ECL on an individual basis, or on a collective basis for
portfolios of loans that share similar credit risk characteristics. The loss
allowance is measured as the present value of the difference between the
contractual cash flows and cash flows that the Group expects to receive using
the asset's original EIR, regardless of whether it is measured on an
individual basis or a collective basis.
A financial asset that gives rise to credit risk, is referred to (and analysed
in the notes to this financial information) as being in "Stage 1" provided
that since initial recognition (or since the previous reporting date) there
has not been a significant increase in credit risk, nor has it has become
credit impaired.
For a Stage 1 asset, the loss allowance is the "12-month ECL", that is, the
ECL that results from those default events on the financial instrument that
are possible within 12 months from the reporting date.
A financial asset that gives rise to credit risk is referred to (and analysed
in the notes to this financial information) as being in "Stage 2" if since
initial recognition there has been a significant increase in credit risk but
it is not credit impaired.
For a Stage 2 asset, the loss allowance is the "lifetime ECL", that is, the
ECL that results from all possible default events over the life of the
financial instrument.
A financial asset that gives rise to credit risk is referred to (and analysed
in the notes to this financial information) as being in "Stage 3" if since
initial recognition it has become credit impaired.
For a Stage 3 asset, the loss allowance is the difference between the asset's
gross carrying amount and the present value of estimated future cash flows
discounted at the financial asset's original EIR. Further, the recognition of
interest income is calculated on the carrying amount net of impairment rather
than the gross carrying amount as for stage 1 and stage 2 assets.
If circumstances change sufficiently at subsequent reporting dates, an asset
is referred to by its newly appropriate Stage and is re-analysed in the notes
to the financial information.
Where an asset is expected to mature in 12 months or less, the "12 month ECL"
and the "lifetime ECL" have the same effective meaning and accordingly for
such assets the calculated loss allowance will be the same whether such an
asset is at Stage 1 or Stage 2. However, the Group monitors significant
increase in credit risk for all assets so that it can accurately disclose
Stage 1 and Stage 2 assets at each reporting date.
Lifetime ECLs are recognised for all trade receivables using the simplified
approach.
Significant increase in credit risk - policies and procedures for identifying Stage 2 assets
The Group compares the risk of a default occurring on the financial instrument
as at the reporting date with the risk of a default occurring on the financial
instrument as at the date of initial recognition in order to determine whether
credit risk has increased significantly.
See note 18 for further details about how the Group assesses increases in
significant credit risk.
Definition of a default
Critical to the determination of significant increases in credit risk (and to
the determination of ECLs) is the definition of default. Default is a
component of the Probability of Default ("PD"), changes in which lead to the
identification of a significant increase in credit risk and PD is then a
factor in the measurement of ECLs.
The Group's definition of default for this purpose is:
•
a counterparty defaults on a payment due under a loan agreement and that payment is more than 90 days
overdue, or
•
within the core invoice finance proposition, where one or more individual finance repayments are beyond
90 days overdue, management judgement is applied in considering default status
of the client.
• the collateral that secures, all or in part, the loan agreement has been
sold or is otherwise not available for sale and the proceeds have not been
paid to the lending company; or
• a counterparty commits an event of default under the terms and
conditions of the loan agreement which leads the lending company to believe
that the borrower's ability to meet its credit obligations to the lending
company is in doubt.
The definition of default is similarly critical in the determination of
whether an asset is credit-impaired (as explained below).
Credit-impaired financial assets - policies and procedures for identifying Stage 3 assets
A financial asset is credit-impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset
have occurred. IFRS 9 states that evidence of credit-impairment includes
observable data about the following events:
• Significant financial difficulty of the borrower;
• A breach of contract such as a default (as defined above) or past due
event, or
•
The Group, for economic or contractual reasons relating to the borrower's financial difficulty, having
granted to the borrower a concession that the Group would not
otherwise consider.
The Group assesses whether debt instruments that are financial assets measured
at amortised cost or at FVTOCI are credit-impaired at each reporting date.
When assessing whether there is evidence of credit- impairment, the Group
takes into account both qualitative and quantitative indicators relating to
both the borrower and to the asset. The information assessed depends on the
borrower and the type of the asset. It may not be possible to identify a
single discrete event - instead, the combined effect of several events may
have caused financial assets to become credit-impaired.
See note 18 for further details about how the Group identifies credit-impaired
assets.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for ECL are presented in the statement of financial position
as follows:
• For financial assets measured at amortised cost: as a deduction from the
gross carrying amount of the assets;
• For loan commitments: as a provision; and
• For debt instruments measured at FVTOCI: no loss allowance is recognised
in the statement of financial position as the carrying amount is at fair
value. However, the loss allowance is included as part of the revaluation
amount in the investment revaluation reserve.
Modification of financial assets
A modification of a financial asset occurs when the contractual terms
governing a financial asset are renegotiated without the original contract
being replaced and derecognised and:
• The gross carrying amount of the asset is recalculated and a
modification gain or loss is recognised in profit or loss;
• Any fees charged are added to the asset and amortised over the new
expected life of the asset; and
•
The asset is individually assessed to determine whether there has been a significant increase in credit risk.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised when the rights to
receive cash flows from the asset have expired. The Group also derecognises
the assets if it has both transferred the asset and the transfer qualifies for
derecognition.
A transfer only qualifies for derecognition if either
• The Group has transferred substantially all the risks and rewards of the
asset; or
• The Group has neither transferred nor retained substantially all the
risks and rewards of the asset but has transferred control of the asset.
Write offs
Loans and advances are written off when the Group has no reasonable
expectation of recovering the financial asset (either in its entirety or a
portion of it). This is the case when the Group determines that the borrower
does not have assets or sources of income that could generate sufficient cash
flows to repay the amounts subject to the write-off. A write-off constitutes a
derecognition event. The Group may apply enforcement activities to financial
assets written off. Recoveries resulting from the Group's enforcement
activities will result in impairment gains.
Debt securities
Debt securities are financial assets that are not held for trading and are
intended to be held within a business model to collect contractual cash flows
or sell. These are initially measured at fair value plus transaction costs
that are directly attributable to the financial asset. Subsequently changes in
the fair value are recognised in other comprehensive income except for
interest calculated at the asset's EIR, foreign exchange and impairment gains
and losses.
Financial liabilities
Financial liabilities and equity
Debt and equity instruments that are issued are classified as either financial
liabilities or as equity in accordance with the substance of the contractual
arrangement.
A financial liability is a contractual obligation to deliver cash or another
financial asset or to exchange financial assets or financial liabilities with
another entity under conditions that are potentially unfavourable to the Group
or a non-derivative contract that will or may be settled in a variable number
of the Group's own equity instruments, or a derivative contract over own
equity that will or may be settled other than by the exchange of a fixed
amount of cash (or another financial asset) for a fixed number of the Group's
own equity instruments.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recognised as at the proceeds received, net of direct
issue costs. Distributions on equity instruments are recognised directly in
equity.
Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL
or other financial liabilities.
Financial liabilities at Fair Value through Profit or Loss
Financial liabilities at FVTPL may include financial liabilities held for
trading. Financial liabilities are classified as held for trading if they are
acquired for the purpose of selling in the near term.
During the period under review the Group has held no financial liabilities for
trading, nor designated any financial liabilities upon initial recognition as
at fair value through profit or loss.
Other financial liabilities
Interest bearing borrowings are measured at amortised cost using the effective
interest rate method. Gains and losses are recognised in the income statement
when the liabilities are derecognised as well as through the effective
interest rate method (EIR). Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in "Interest and
fee expenses" in the profit and loss account.
Derecognition of financial liabilities
The Group derecognises financial liabilities when and only when, the Group's
obligations are discharged, cancelled or they expire.
Impairment of non-financial assets
The carrying amounts of the entity's non-financial assets, other than goodwill
and deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists,
then the asset's recoverable amount is estimated. The recoverable amount of an
asset or cash-generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset.
For the purposes of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (the Cash-Generating Unit or
"CGU").
Contract assets are reviewed for impairment based on the performance of the
underlying contract.
Goodwill is tested annually for impairment in accordance with IFRS. The
goodwill acquired in a business combination, for the purpose of impairment
testing is allocated to CGU that are expected to benefit from the synergies of
the combination. For the purpose of goodwill impairment testing, if goodwill
cannot be allocated to individual CGUs or groups of CGUs on a non-arbitrary
basis, the impairment of goodwill is determined using the recoverable amount
of the acquired entity in its entirety, or if the acquired entity has been
integrated then the entire group of entities into which it has been
integrated.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
the statement of comprehensive income. Impairment losses recognised in respect
of CGUs are allocated first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amounts of other assets
in the unit (or group of units) on a pro rata basis.
An impairment loss is reversed if and only if the reasons for the impairment
have ceased to apply. An impairment loss recognised for goodwill is not
reversed.
Impairment losses recognised in prior periods are assessed at each reporting
date for any indication that the loss has decreased or no longer exists. An
impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
Current and deferred income tax
Income tax on the result for the period comprises current and deferred income
tax. Income tax is recognised in the consolidated statement of comprehensive
income except to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income
for the period, using tax rates enacted or substantively enacted at the
reporting date and any adjustment to tax payable in respect of previous
periods.
Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Employee benefits - pension costs
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have a legal or
constructive obligation to pay further amounts. Contributions to defined
contribution schemes are charged to the statement of comprehensive income as
they become payable in accordance with the rules of the scheme. Differences
between contributions payable in the year and contributions actually paid are
shown as either accruals or prepayments in the statement of financial
position.
Provisions for commitments and other liabilities
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows
(discounted at the Group's weighted average cost of capital when the effect of
the time value of money is material).
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable is recognised as an
asset only if it is virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
Merger reserve
Prior to 29 December 2017, the entities within the Group were held by
Arrowgrass Master Fund Limited. On 29 December 2017, these entities were
acquired by TruFin plc via TruFin Holdings Limited. The consideration provided
to Arrowgrass for the companies acquired was in exchange for shares of TruFin
plc based on the fair value of the underlying companies. Upon consolidation of
the group, the difference between the book value of the entities and the
amount of the consideration paid was accounted through a merger reserve, in
accordance with relevant accounting standards relating to businesses under
common control.
Investments in associates
Associates are entities in which the Group has between 20% and 50% of the
voting rights, or is otherwise able to exercise significant influence, but
which it does not control or jointly control. Investments in associates are
accounted for under the equity method and are initially recognised at costs,
including goodwill. Subsequent changes in the carrying value reflect the
post-acquisition changes in the Group's share of net assets of the associate.
The Group's share of its associates profits or losses is recognised in the
consolidated income statement. However, when the Group's share of losses in an
associate equals or exceeds its interest in the associate, the Group does not
recognise further losses, unless the Group is obliged to make further payments
to, or on behalf of the associate.
Segmental reporting
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses (including
revenues and expenses relating to transactions with other components of the
same entity) and whose operating results are regularly reviewed by the Board
of Directors in order to make decisions about resources to be allocated to
that component and assess its performance and for which discrete financial
information is available.
For the purposes of the financial statements, the Directors consider the
Group's operations to be made up of four operating segments: the provision of
short term finance, payment services, publishing and other operations.
The accounting policies of the reportable segments are consistent with the
accounting policies of the Group as a whole.
Further details are provided in note 4.
Share based payments
Where the Group engages in share‐based payment transactions in respect of
services received from certain of its employees, these are accounted for as
equity‐settled share‐based payments in accordance with IFRS 2
'Share‐based payments'. The equity is in the form of ordinary shares.
The grant date fair value of a share‐based payment transaction is recognised
as an employee expense, with a corresponding increase in equity over the
period that the employees become unconditionally entitled to the awards. In
the absence of market prices, the fair value of the equity at the date of the
grant is estimated using an appropriate valuation technique
The amount recognised as an expense is adjusted to reflect the actual number
of awards for which the related services and non‐market vesting conditions
are expected to be met such that the amount ultimately recognised as an
expense is based on the number of awards that do meet the related service and
non‐market performance conditions at the vesting date.
For share‐based payment awards with market performance conditions the grant
date fair value of the award is measured to reflect such conditions and there
is no true‐up for differences between expected and actual outcomes.
Refer to note 6 for the amounts disclosed.
Leases
Leases are accounted for under IFRS 16. IFRS 16 distinguishes leases and
service contracts on the basis of whether an identified asset is controlled by
a customer. A model where a right-of-use asset and a corresponding liability
are recognised for all leases by lessees (i.e. all on balance sheet) except
for short term leases and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured
at cost (subject to certain exceptions) less accumulated depreciation and
impairment losses, adjusted for any remeasurement of the lease liability. The
lease liability is initially measured at the present value of the lease
payments that are not paid at that date. Subsequently, the lease liability is
adjusted for interest and lease payments, as well as the impact of lease
modifications, amongst others.
Government grants
Government grants are not recognised until there is reasonable assurance that
the group will comply with the conditions attaching to them and that the
grants will be received.
Government grants that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate financial support to
the Group with no future related costs are recognised in profit or loss in the
period in which they become receivable. These grants are deducted from the
expense that the grant is related to.
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in accordance with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets and
liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apart
from other sources. The estimates and underlying assumptions are reviewed on
an ongoing basis. Actual results may differ from these estimates.
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately below), that the directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in financial statements.
Critical accounting judgements
• Early Payment Programme Services set up costs: the Group capitalises the
direct costs of implementing Early Payment Programme Services contracts for
clients. These costs are essential to the satisfaction of the Group's
performance obligation under that contract and accordingly the Group considers
that these costs meet the applicable criteria for recognition as
contract assets.
The amount capitalised is disclosed in note 10.
• Deferred tax asset: There is inherent uncertainty in forecasting beyond
the immediate future and significant judgement is required to estimate whether
future taxable profits are probable in order to utilise the carried forward
tax losses. Companies in the Group have carried forward losses which will be
utilised against future taxable profits. However, a deferred tax asset has not
been recognised for these companies, except for Vertus Capital Limited as
there is uncertainty surrounding the timing of when these losses will be used.
Refer to note 9 for more information on the deferred tax asset.
• The accounts of the trustee (the "EBT Trustee") of the Company's
Employee Benefit Trust ("EBT") have not been consolidated as it is the
Directors' opinion that the Company does not have control over the EBT. The
EBT is a discretionary trust, which means that the EBT Trustee has discretion
how to act, provided that the action taken by the EBT Trustee is considered by
the EBT Trustee to be in the interest of one of more EBT beneficiaries (being
employees and former employees (and certain of their relatives) of the Company
and its subsidiaries.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting period that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
Expected credit losses
• Where an asset has a maturity of 12 months or less, the "12 month ECL"
and the "lifetime ECL" have the same effective meaning and accordingly for
such assets the calculated loss allowance will be the same
whether such an asset is at stage 1 or stage 2.
• The Probability of Default ("PD") is an estimate of the likelihood of
default over a given time horizon and is a key input to the ECL calculation.
The Group primarily uses credit scores from credit reference agencies to
calculate the PD for loans and advances. The score is a 12-month predictor of
credit failure and, in the absence of internally generated loss history, the
Group believes that it provides the best proxy for the credit quality of the
loan portfolio.
• Exposure At Default ("EAD") is an estimate of the exposure at a future
default date, taking into account
expected changes in the exposure after the reporting date, including repayments of principal and interest,
whether scheduled by contract or otherwise, expected drawdowns on committed
facilities and accrued interest from missed payments.
•
Loss Given Default ("LGD") is an estimate of the loss arising on default. It is based on the difference between
the contractual cash flows due and those that the lender would expect to receive, in particular taking into
account wholesale collateral values and certain buy back options.
Measurement of fair values of level 3 instruments
In estimating the fair value of a financial asset or liability, the Group uses
market observable data to the extent that it is available. Where such level 1
inputs are not available, the Group uses valuation models to estimate the fair
value of its financial instruments.
3. Gross revenue
Group 2021 2020
£'000 £'000
Revenue
Interest income 1,681 2,578
Total interest income 1,681 2,578
EPPS contracts 2,536 2,243
Consultancy fees 436 288
Implementation fees* 70 301
Subscription fees 1,288 1,014
Total fee income 4,330 3,846
IAP revenue 428 410
Advertising revenue 378 410
Console revenue 6,285 7,500
Brand revenue 13 88
Total publishing income 7,104 8,408
Gross revenue 13,115 14,832
*In 2020, Implementation fees also included fees recognised by Satago in full
on the signing of new contracts with partners.
Company 2021 2020
£'000 £'000
Intercompany interest income 2,008 2,073
Intercompany fee income 118 118
Other interest income - 1
Gross revenue 2,126 2,192
4. Segmental reporting
The results of the Group are broken down into segments based on the products
and services from which it derives its revenue:
Short term finance
Provision of distribution finance products and invoice discounting. For
results during the reporting period, this corresponds to the results of
Satago, Vertus and AltLending.
Payment services
Provision of Early Payment Programme Services. For results during the
reporting period, this corresponds to the results of Oxygen.
Publishing
Publishing of video games. For results during the reporting period, this
corresponds to the results of the Playstack Group.
Other
Revenue and costs arising from investment activities. For results during the
reporting period, this corresponds to the results of TSL, THL and TruFin plc.
The results of each segment, prepared using accounting policies consistent
with those of the Group as a whole, are as follows:
Short term Payment services
Year ended 31 December 2021 finance £'000 Publishing Other Total
£'000 £'000 £'000 £'000
Gross revenue 1,878 4,133 7,104 - 13,115
Cost of sales (832) (873) (4,509) - (6,214)
Net revenue 1,046 3,260 2,595 - 6,901
Adjusted loss before tax* (3,877) (548) (1,439) (2,488) (8,352)
Loss before tax (3,877) (548) (1,439) (2,558) (8,422)
Taxation 367 175 444 - 986
Loss for the year (3,510) (373) (995) (2,558) (7,436)
Total assets 24,607 8,331 16,774 1,016 50,728
Total liabilities (13,341) (1,747) (2,184) (1,005) (18,277)
Net assets 11,266 6,584 14,590 11 32,451
*adjusted loss before tax excludes share-based payment expense
Short term Payment services
Year ended 31 December 2020 finance £'000 Publishing Other Total
£'000 £'000 £'000 £'000
Gross revenue 2,020 3,490 8,408 914 14,832
Cost of sales (730) (760) (5,022) - (6,512)
Net revenue 1,290 2,730 3,386 914 8,320
Adjusted loss before tax* (3,318) (1,111) (2,458) (1,495) (8,382)
Loss before tax (3,318) (1,111) (2,458) (2,040) (8,927)
Taxation 42 (2,504) (14) - 2,476
Loss for the year (3,276) (3,615) (2,472) (2,040) (11,403)
Total assets 22,798 7,430 17,765 9,573 57,566
Total liabilities (11,276) (1,858) (3,559) (1,137) (17,830)
Net assets 11,522 5,572 14,206 8,436 39,736
5. Staff costs
Analysis of staff costs:
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Wages and salaries 9,011 9,311 1,440 1,327
Consulting costs 395 313 19 -
Social security costs 1,409 1,019 355 22
Pension costs arising on defined contribution schemes 428 442 27 26
Share based payment 70 545 70 545
Government grants (28) (98) - -
11,285 11,532 1,911 1,920
Consulting costs are recognised within staff costs where the work performed
would otherwise have been performed by employees. Consulting costs arising
from the performance of other services are included within other operating
expenses.
Average monthly number of persons (including Executive Directors) employed:
2021 2020
Number Number
Management 16 17
Finance 7 8
Sales & marketing 23 33
Operations 36 37
Technology 54 54
136 149
Directors' emoluments
The number of directors who received share options during the year was as
follows:
2021 2020
Number Number
Long term incentive schemes - -
There were no directors who exercised share options during the year.
The directors' aggregate emoluments in respect of qualifying services were:
Salary Bonus Pension 2021 2020
and Benefits Total Total
£'000 £'000 £'000 £'000 £'000
Executive Directors:
J v d Bergh 256 200 9 465 735
S H Kenner* - - - - 97
256 200 9 465 832
* S H Kenner left the Group in June 2020
Salary Bonus Pension 2021 2020
and Benefits Total Total
£'000 £'000 £'000 £'000 £'000
Non-executive
Directors:
S Baldwin 100 - - 100 85
P Judd 70 - - 70 65
P Dentskevich 50 - - 50 50
220 - - 220 200
Key management
The Directors consider that key management personnel include the Executive
Director of TruFin plc. This individual has the authority and responsibility
for planning, directing and controlling the activities of the Group.
6. Employee share-based payment transactions
The employment share-based payment charge comprises:
2021 2020
£'000 £'000
Performance Share Plan and Joint Share Ownership Plan Founder Award 59 465
Performance Share Plan Market Value Award 11 80
Performance Share Plan 2019 Award - -
Performance Share Plan 2018 Award - -
Total 70 545
Performance Share Plan and Joint Share Ownership Plan Founder Award ("Founder Award")
On 21 February 2018, 3,407,895 shares were granted to selected founder members
of senior management of which the share price at date of grant was £1.90 per
share. The awards are structured as a Performance Share Plan and a Joint Share
Ownership Plan. The Performance Share Plan is structured as a nil cost option
with no performance conditions attached. The awards were also granted subject
to continued employment until February 2021. The Joint Share Ownership Plan
allows the employee to participate in the growth in value over and above the
grant price of £1.90. The shares vest 25% on each anniversary of the grant
date.
The first 25% of shares (851,973 shares) vested on 21 February 2019 when the
share price was £1.98. As a result, 817,550 shares subject to the Joint Share
Ownership Plan became fully owned by the trustee of the Company's employee
benefit trust (the "EBT") and 34,423 became fully owned by senior management.
At the time of Distribution Finance Capital Ltd's ("DFC") demerger from the
Group, there was a modification to the Founder Award. The £1.90 price above
which the employee was able to participate in value growth under the Joint
Share Ownership Plan was adjusted proportionally by reference to the
respective share prices of DFC and TruFin to £0.85. This modification has not
resulted in a change in the valuation of the award and this continues to be
recognised over the remainder of the original vesting period.
As part of the demerger, holders of Founder Awards also received an award in
respect of DFC shares which gave rise to an Employers National Insurance
liability of £419,000, which was paid in July 2019.
On 11 September 2019, in connection with his change of role, the unvested
Founder Awards in respect of 1,369,244 shares held by Henry Kenner fully
vested, the result of which was that all of the relevant shares ceased to be
subject to the Joint Share Ownership Plan and instead become fully owned by
the EBT. In addition, 1,369,244 shares subject to the Performance Share Plan
ceased to be subject to continued employment condition.
The second 25% of Founder Awards held by James van den Bergh vested on 21
February 2020 when the share price was £0.26. As a result, 395,560 shares
subject to the Join Share Ownership Plan became fully owned by EBT and James'
nil cost option under the Performance Share Plan vested in respect of the same
number of shares.
On 27 November 2020, Henry Kenner exercised his nil cost option under the
Performance Share Plan which resulted in 1,807,217 shares being transferred
from the EBT to Henry Kenner on 22 December 2020. This gave rise to an
Employer's National Insurance liability of £82,000 which was paid in January
2021.
The third 25% of Founder Awards held by James van den Bergh vested on 21
February 2021 when the share price was £0.68. As a result, 395,560 shares
subject to the Join Share Ownership Plan became fully owned by EBT and James'
nil cost option under the Performance Share Plan vested in respect of the same
number of shares.
Performance Share Plan Market Value Award ("PSP Market Value Award")
On 21 February 2018, options to acquire 4,868,420 shares were granted to the
senior management team. The vesting of this award is based on market‐based
performance conditions. The vesting of these awards is subject to the holder
remaining an employee of the Company and the Company's share price achieving
five distinct milestones - vesting at 20% each milestone. The exercise price
of the awards at the time of grant was £1.90 per share. A Monte Carlo
simulation was used to determine the fair value of these options. The model
used an expected volatility of 10% and a risk free rate of 1.3%.
In order to reflect the impact of the demerger, the PSP Market Value Award was
split into two:
• Part of the award remained as an option in respect of TruFin shares
("TruFin Market Value Award")
• Part of the award became an award in respect of DFC shares ("DFC market
Value Award")
The TruFin Market Value Award is on the same terms as the original PSP Market
Value Award except that:
• The exercise price was adjusted to £0.85, and the share price
milestones were adjusted to reflect the demerger
• The exercise price was further adjusted to £0.80 and the share price
milestones were further adjusted, to reflect the return of value to
shareholders in June 2019
• The exercise price was further adjusted to £0.71, and the share price
milestones were further adjusted to reflect the return of value to
shareholders in December 2019
The modification has not resulted in a change in the valuation of the award
and this continues to be recognised over the remainder of the original vesting
period.
The grant of the DFC Market Value Award gave rise to an Employer's national
insurance liability for the Company of £265,000 which was paid in July 2019.
Performance Share Plan 2018 Award ("PSP 2018 Award")
On 21 February 2018, options to acquire 1,000,001 shares were granted to the
senior management team. The PSP 2018 Award is structured as a nil cost option.
The vesting of this award is subject to the holder being in continued
employment until February 2021 and the subsidiary companies achieving certain
financial metrics over a three‐year period.
In order to reflect the impact of the demerger, and as the performance
condition relating to the business of DFC was deemed to be achieved in full
due to the demerger, the PSP 2018 Award was adjusted as follows:
• the award part vested and was satisfied by way of a cash payment
calculated by reference to 50% of the shares subject to the award and a price
of £1.90 per share. The cash payments were made in September 2019; and
• the awards have otherwise continued in respect of 100% of the TruFin
shares, but the performance condition now relates solely to the business of
Oxygen
In 2019, PSP 2018 Awards in respect of 736,843 shares lapsed following members
of senior management leaving the Group and changing roles.
The fair value of the unvested part of the award as at 31 December 2021 was
deemed to be nil as it is highly improbable that the vesting conditions will
be met.
Performance Share Plan 2019 Award ("PSP 2019 Award")
On 11 September 2019 an option to acquire 320,000 shares was granted to James
van den Bergh. The PSP 2019 Award is structured as a nil cost option. The
vesting of this award is subject to the holder being in continued employment
until September 2022 and subsidiary companies achieving certain financial
metrics over a three‐year period. The fair value of the award as at 31
December 2021 was deemed to be nil as it is highly improbable that the vesting
conditions will be met.
Details of share based awards during the year:
JSOP Founder Award* PSP Founder Award* PSP Market Value
Type of instrument granted Shares (#) Options (#) Options (#)
Outstanding at 1 January 2021 791,118 1,566,255 4,868,420
Granted during the year - - -
Vested during the year (395,560) - -
Exercised during the year - - -
Outstanding at 31 December 2021 359,558 1,566,255 4,868,420
Exercisable at 31 December 2021 1,170,697 -
*The JSOP Founder Awards and PSP Founder Awards will together deliver, in
aggregate, a maximum of 3,407,895 TruFin shares.
PSP 2018 PSP 2019
Type of instrument granted Options (#) Options (#)
Outstanding at 1 January 2021 263,158 320,000
Granted during the year - -
Vested during the year - -
Exercised during the year - -
Cancelled during the year - -
Outstanding at 31 December 2021 263,158 320,000
Exercisable at 31 December 2021 - -
No options expired during the year.
The weighted average remaining contractual life for the share options
outstanding as at 31 December 2021 was 6.21 years (2020: 7.21 years).
7. Net impairment loss on financial assets
2021 2020
£'000 £'000
At 1 January 10 123
Charge for impairment loss (10) (11)
Amounts written off in the year 8 (102)
Amounts recovered in the year (4) -
At 31 December 4 10
At 31 December 2021, the Group had an impairment balance of £4,000 which was
allocated against loans and advances. At 31 December 2020, all of the
impairment balance was allocated against loans and advances.
The net impairment charge on financial assets during the year ended 31
December 2021 all related to loans and advances.
The net impairment charge on financial assets during the year ended 31
December 2020 all related to loans and advances.
8. Loss before income tax
Loss before income tax is stated after charging:
2021 2020
£'000 £'000
Depreciation of property, plant and equipment 96 128
Amortisation of intangible assets 1,571 1,209
Staff costs including share based payments charge 11,285 11,532
Crowe LLP) (2018: Deloitte LLP)
2021 2020
Fees payable to the Group's auditor (Crowe U.K. LLP) £'000 £'000
Fees payable for the audit of the company's annual accounts 45 44
Fees payable for the audit of the company's subsidiaries 84 83
Total audit fees 129 127
Non audit services
Other assurance services 13 12
Total non-audit fees 13 12
9. Taxation
Analysis of tax charge recognised in the period
2021 2020
£'000 £'000
Current tax (credit)/charge (726) 16
Deferred tax (credit)/charge (260) 2,460
Total tax (credit)/charge (986) 2,476
Reconciliation of loss before tax to total tax credit recognised
Group 2021 2020
£'000 £'000
Loss before tax (8,422) (8,927)
Loss before tax multiplied by the standard rate of corporation tax in the UK (1,600) (1,696)
of 19% (2020: 19%)
Tax effect of:
Expenses not deductible (223) 161
Depreciation in excess of capital allowances 395 132
Capital allowances (187) (57)
Other short term timing differences (5) (129)
R&D tax credit (733) -
Deferred tax not recognised 1,367 4,064
Effect of different tax rates of subsidiaries operating in other - 1
jurisdictions
Total tax charge (986) 2,476
Company 2021 2020
£'000 £'000
Loss before tax (409) (704)
Loss before tax multiplied by the standard rate of corporation tax in the UK (78) (134)
of 19% (2020: 19%)
Tax effect of:
Expenses not deductible 32 169
Other short term timing differences - (133)
Deferred tax not recognised 46 98
Total tax charge - -
The UK Government enacted changes to the UK tax rate in 2020, resulting in the
rate remaining at 19% (instead of the previously intended reduction from 19%
to 17% from 1 April 2020). In the Finance Bill 2021, the UK chancellor
announced that legislation would be proposed to increase the main rate of
corporation tax to 25% from 1 April 2023, and this was substantively enacted
on 24 May 2021.
The deferred tax assets and liabilities at 31 December 2021 have been based on
the rates substantively enacted at the reporting date.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
Deferred tax asset
2021 2020
Group £'000 £'000
Balance at start of the year 43 2,503
Credit/(charge) to the statement of comprehensive income 260 (2,460)
Balance at end of the year 303 43
Comprised of:
Losses 303 43
Total deferred tax asset 303 43
A deferred tax asset from losses in Vertus Capital Limited was recognised, to
be used against profits in Vertus Capital SPV 1, which became profitable in
the prior year. Unutilised tax losses in the remainder of the Group as at the
reporting date were £77,124,000 (2020:£69,496,000).
10. Intangible assets
Separately identifiable intangible Assets
Software licenses and similar assets
Client contracts
Goodwill Total
Group £'000 £'000 £'000 £'000 £'000
Cost 4,689 1,834 1,642 15,796 23,961
At 1 January 2021
Additions 1,056 757 - (50) 1,763
Disposals (256) - - - (256)
Exchange differences 1 (12) - - (11)
At 31 December 2021 5,490 2,579 1,642 15,746 25,457
Amortisation (956) (814) (742) - (2,512)
At 1 January 2021
Charge (873) (370) (328) - (1,571)
Disposals 222 - - - 222
Exchange differences - 3 - - 3
At 31 December 2021 (1,607) (1,181) (1,070) - (3,858)
Accumulated impairment losses (408) - - - (408)
At 1 January 2021
At 31 December 2021 (408) - - - (408)
Net book value
At 31 December 2021 3,475 1,398 572 15,746 21,191
At 31 December 2020 3,325 1,020 900 15,796 21,041
Separately identifiable intangible Assets
Software licenses and similar assets
Client contracts
Goodwill Total
Group £'000 £'000 £'000 £'000 £'000
Cost 3,574 1,109 1,642 15,796 22,121
At 1 January 2020
Additions 1,180 725 - - 1,905
Disposals (61) - - - (61)
Exchange differences (4) - - - (4)
At 31 December 2020 4,689 1,834 1,642 15,796 23,961
Amortisation (479) (471) (414) - (1,364)
At 1 January 2020
Charge (538) (343) (328) - (1,209)
Disposals 61 - - - 61
At 31 December 2020 (956) (814) (742) - (2,512)
Accumulated impairment losses (186) - - - (186)
At 1 January 2020
Charge (222) - - - (222)
At 31 December 2020 (408) - - - (408)
Net book value
At 31 December 2020 3,325 1,020 900 15,796 21,041
At 31 December 2019 2,909 638 1,228 15,796 20,571
The Company had no intangibles assets at the year end.
Client contracts comprise the directly attributable costs incurred at the
beginning of an Early Payment Scheme Service contract to revise a client's
existing payment systems and provide access to the Group's software and other
intellectual property. These implementation (or "set up") costs are comprised
primarily of employee costs.
The useful economic life for each individual asset is deemed to be the term of
the underlying Client Contract (generally 5 years) which has been deemed
appropriate and for impairment review purposes, projected cash flows have been
discounted over this period.
The amortisation charge is recognised in fee expenses within the statement of
comprehensive income, as these costs are incurred directly through activities
which generate fee income.
The Group performed an impairment review at 31 December 2021 and there was no
impairment in relation to underperforming contracts.
Software, licenses and similar assets comprises separately acquired software,
as well as costs directly attributable to internally developed platforms
across the Group. These directly attributable costs are associated with the
production of identifiable and unique software products controlled by the
Group and are probable of producing future economic benefits. They primarily
include employee costs and directly attributable overheads.
A useful economic life of 3 to 5 years has been deemed appropriate and for
impairment review purposes projected cash flows have been discounted over this
period.
The amortisation charge is recognised in depreciation and amortisation on
non-financial assets within the statement of comprehensive income.
The Group performed an impairment review at 31 December 2021 and concluded no
impairment was required.
The 'Software, licenses and similar assets' net book value balance related to
internally generated intangible assets at 31 December 2021 was £1,398,000
(2020: £1,020,000). This consists of cost of £2,579,000 (2020: £1,834,000)
and accumulated amortisation of £1,181,000 (2020: £814,000). During the year
there were additions of £757,000 (2020: £725,000) and amortisation of
£370,000 (2020: £343,000).
Goodwill and "Separately identifiable intangible assets" arise from
acquisitions made by the Group.
Porge (now Insight Services within OFL)
Porge was acquired by OFGL in August 2018 and goodwill of £2,759,000 that
arose from this acquisition was included within the payments services segment
of the Group. Following the acquisition, separately identifiable intangible
assets of £1,387,000 primarily relating to the value of the contracts in the
business at acquisition were recognised. These are being amortised over 5
years resulting in an amortisation charge of £277,000 (2020: £277,000)
during the year. Net Book value of these assets at 31 December 2021 was
£439,000 (2020: £717,000). Goodwill related to this transaction excluding
these assets at 31 December 2021 was £1,372,000 (2020: £1,372,000).
On 31 August 2020, OFL purchased the Trade and Assets of Porge. The purchase
price was set at the Net book value of the assets acquired at the time of the
transaction.
Vertus
In July 2019, the Group converted into ordinary shares its existing
convertible loan with Vertus Capital in full satisfaction and discharge of the
loan. This, together with a further cash payment, gave the Group 51% ownership
of Vertus Capital and Vertus SPV 1.
Goodwill of £1,714,000 arose from this transaction and has been included
within the short term finance segment of the business. Separately identifiable
intangible assets of £255,000 primarily related to the value of existing
third party relationships on acquisition have been identified. These are being
amortised over 5 years and the amortisation charge for the year was £51,000
(2020: £51,000). Net Book value of these assets at 31 December 2021 was
£132,000 (2020: £183,000).
During the year, the Group increased its ownership of Vertus Capital from 51%
to 53.8%. ,This resulted in a £50,000 adjusted to Goodwill related to Vertus
(excluding the assets mentioned above). Goodwill related to Vertus excluding
these assets at 31 December 2021 was £1,409,000 (2020: £1,459,000).
Playstack
In September 2019, the Group converted into ordinary shares its existing
convertible loans with Playstack Ltd in full satisfaction and discharge of the
loans. This gave the Group ownership of Playstack Ltd and the other companies
within the Playstack Group.
Goodwill of £12,965,000 arose from this transaction and has been included
within the publishing segment of the business.
Impairment testing of intangibles
An impairment review of goodwill was carried out at the year end.
The insight services segment of OFL was valued using the discounted cash flow
methodology. Its net earnings were forecasted to 2025, a discount rate of 12%
was used and terminal growth rate of 2%. This valuation was greater than the
amount of CGU and therefore the goodwill is not deemed to be impaired.
Vertus was valued using the discounted cash flow methodology. The net earnings
of Vertus were forecasted to 2030, a discount rate of 12% was used and
terminal growth rate of 3%. The valuation of Vertus was greater than the
amount of goodwill and therefore the goodwill is not deemed to be impaired.
Playstack was valued using the discounted cash flow methodology. The net
earnings of Playstack were forecasted to 2030, a discount rate of 20% was used
and terminal growth rate of 3%. The valuation of Playstack was greater than
the amount of goodwill and therefore the goodwill is not deemed to be
impaired.
11. Property, plant and equipment
Fixtures & Computer equipment Right-of-Use Asset
fittings Total
Group £'000 £'000 £'000 £'000
Cost 52
At 1 January 2021 60 429 541
Additions 2 22 - 24
Disposals - (4) - (4)
Exchange differences (1) - (1)
At 31 December 2021 53 78 429 560
Depreciation (36) (26) (339) (401)
At 1 January 2021
Charge (8) (20) (68) (96)
Disposals - 2 - 2
At 31 December 2021 (44) (44) (407) (495)
Net book value
At 31 December 2021 9 34 22 65
At 31 December 2020 16 34 90 140
Leasehold improvements Fixtures & Computer equipment Right-of-Use Asset
fittings Total
Group £'000 £'000 £'000 £'000 £'000
Cost 247
At 1 January 2020 44 36 429 756
Additions - 7 24 - 31
Disposals (44) (202) - - (246)
At 31 December 2020 - 52 60 429 541
Depreciation (36) (219) (9) (255) (519)
At 1 January 2020
Charge (8) (19) (17) (84) (128)
Disposals 44 202 - - 246
At 31 December 2020 - (36) (26) (339) (401)
Net book value
At 31 December 2020 - 16 34 90 140
At 31 December 2019 8 28 27 174 237
Computer equipment Right-of-use asset
Total
Company £'000 £'000 £'000
Cost 3 167 170
At 1 January 2021
Additions - - -
At 31 December 2021 3 167 170
(3)
Depreciation
At 1 January 2021 (167) (170)
Charge - - -
At 31 December 2021 (3) (167) (170)
Net book value
At 31 December 2021 - - -
At 31 December 2020 - - -
Computer equipment Right-of-use asset
Total
Company £'000 £'000 £'000
Cost 3 167 170
At 1 January 2020
Additions - - -
At 31 December 2020 3 167 170
(2)
Depreciation
At 1 January 2020 (167) (169)
Charge (1) - (1)
At 31 December 2020 (3) (167) (170)
Net book value
At 31 December 2020 - - -
At 31 December 2019 1 - 1
The Right of use assets in the Group and Company relates to leases for office
buildings.
12. Investment in subsidiaries
Company £'000
Balance at 1 January 2021 and 31 December 2021 30,189
Balance at 1 January 2020 and 31 December 2020 30,189
13. Loans and advances
2021 2020
Group £'000 £'000
Total loans and advances 16,137 14,670
Less: loss allowance (4) (10)
16,133 14,660
The aging of loans and advances are analysed as follows:
2021 2020
£'000 £'000
Neither past due nor impaired 16,062 14,401
Past due: 0-30 days 32 254
Past due: 31-60 days 10 2
Past due: 61-90 days 28 -
Past due: more than 91 days 1 3
16,133 14,660
The Company had no loans and advances at the year end (2020: £nil).
14. Trade and other receivables
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Trade and other receivables 2,585 1,992 - -
Prepayments 467 421 52 39
Accrued Income 385 263 - -
VAT - - 33 15
Other debtors 1,988 1,278 5 7
Amounts due from Group Undertakings - - 54 597
5,425 3,954 144 658
Trade receivables above are stated net of a loss allowance of £nil (2020:
£nil). All receivables are due within one year.
The aging of trade receivables is analysed as follows:
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Not yet due 2,182 1,411 - -
Past due: 0-30 days 96 121 - -
Past due: 31-60 days 88 92 - -
Past due: 61-90 days 13 50 - -
Past due: more than 91 days 206 318 - -
2,585 1,992 - -
15. Share capital
Group and Company
Share Capital Total
£'000 £'000
80,822,204 shares at £0.91 per share 73,548 73,548
All ordinary shares carry equal entitlements to any distributions by the
company. No dividends were proposed by the Directors for the year ended 31
December 2021.
16. Borrowings
2021 2020
Group £'000 £'000
Loans due within one year 1,634 2,204
Loans due in over one year 11,351 8,507
12,985 10,711
Movements in borrowings during the year
The below table identifies the movements in borrowings during the year.
Group £'000
Balance at 1 January 2021 10,711
Funding drawdown 5,725
Interest expense 528
Origination fees paid (211)
Fee amortisation 141
Repayments (3,371)
Interest paid (506)
Loan written off (13)
Exchange differences (19)
Balance at 31 December 2021 12,985
Group £'000
Balance at 1 January 2020 6,194
Funding drawdown 5,840
Interest expense 279
Origination fees paid (2)
Fee amortisation 133
Repayments (1,458)
Interest paid (275)
Balance at 31 December 2020 10,711
The primary borrowings of the Group are comprised of the following:
• A 24-month revolving facility agreement with a 12-month term-out period,
maturing in September 2024. This facility incepted in September 2019 and was
renewed in November 2021. Interest is payable monthly with the principal
balance rolled over monthly, subject to ongoing compliance with the agreement.
This facility is secured by a debenture over all assets of Vertus Capital.
• Unsecured interest bearing facility due in 2028, with interest payable
quarterly. This facility was renewed during the current year with the maturity
date extended from 2026 to 2028.
• A revolving credit facility under which notice is given by either the
lender (3 months) or borrower (6 months). The facility is secured by a fixed
and floating charge over Satago SPV1 and interest is payable monthly.
The Company had no borrowings during the period or at year end.
17. Trade and other payables
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Trade payables 380 1,553 5 32
Accruals 3,949 4,179 670 569
Other payables 103 247 - 2
Corporation tax 9 1 - -
Other taxation and social security 706 960 353 539
VAT 145 179 - -
5,292 7,119 1,028 1,142
18. Financial instruments
The Directors have performed an assessment of the risks affecting the Group
through its use of financial instruments and believe the principal risks to
be: capital risk; credit risk, and market risk including interest rate risk.
This note describes the Group's objectives, policies and processes for
managing the material risks and the methods used to measure them. The
significant accounting policies regarding financial instruments are disclosed
in note 1.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be
able to continue as going concerns while providing an adequate return to
shareholders.
The capital structure of the Group consists of borrowings disclosed in note 16
and equity of the Group (comprising issued capital, reserves, retained
earnings and non-controlling interests as disclosed in note 15 and note 19).
The Group is not subject to any externally imposed capital requirements.
Principal financial instruments
The principal financial instruments to which the Group is party and from which
financial instrument risk arises, are as follows:
• Loans and advances, primarily credit risk and liquidity risk;
• Trade receivables, primarily credit risk and liquidity risk;
• Investments, primarily fair value or market price risk;
• Cash and cash equivalents, which can be a source of credit risk but are
primarily liquid assets available to further business objectives or to settle
liabilities as necessary;
• Trade and other payables; and
• Borrowings which are used as sources of funds and to manage liquidity
risk.
Analysis of financial instruments by valuation model
There are no financial assets or liabilities included in the statement of
financial position at fair value.
31 December 2021
Financial assets and financial liabilities included in the statement of
financial position that are not measured at fair value:
Carrying amount Fair value
Group £'000 £'000 Level 1 Level 2 Level 3
£'000 £'000 £'000
Financial assets not measured at fair value
Loans and advances 16,133 16,133 - - 16,133
Trade receivables 2,585 2,585 - - 2,585
Other receivables 2,373 2,373 - - 2,373
Cash and cash equivalents 7,608 7,608 7,608 - -
28,699 28,699 7,608 - 21,091
Financial liabilities not measured at fair value
Borrowings 12,985 12,985 - - 12,985
Trade, other payables and accruals 4,672 4,672 - - 4,672
17,657 17,657 - - 17,657
31 December 2020
Carrying amount Fair value
Group £'000 £'000 Level 1 Level 2 Level 3
£'000 £'000 £'000
Financial assets not measured at fair value
Loans and advances 14,660 14,660 - - 14,660
Trade receivables 1,992 1,992 - - 1,992
Other receivables 1,541 1,541 - - 1,541
Cash and cash equivalents 17,728 17,728 17,728 - -
35,921 35,921 17,728 - 18,193
Financial liabilities not measured at fair value
Borrowings 10,711 10,711 - - 10,711
Trade, other payables and accruals 6,578 6,578 - - 6,578
17,289 17,289 - - 17,289
31 December 2021
Carrying amount Fair value
Company £'000 £'000 Level 1 Level 2 Level 3
£'000 £'000 £'000
Financial assets not measured at fair value
Amounts owed by group undertakings 46,919 46,919 - - 46,919
Other receivables 92 92 - - 92
Cash and cash equivalents 786 786 786 - -
47,797 47,797 786 - 47,011
Financial liabilities not measured at fair value
Trade, other payables and accruals 1,028 1,028 - - 1,028
1,028 1,028 - - 1,028
31 December 2020
Carrying amount Fair value
Company £'000 £'000 Level 1 Level 2 Level 3
£'000 £'000 £'000
Financial assets not measured at fair value
Amounts owed by group undertakings 47,066 47,066 - - 47,066
Other receivables 619 619 - - 619
Cash and cash equivalents 578 578 578 - -
48,263 48,263 578 - 47,685
Financial liabilities not measured at fair value
Trade, other payables and accruals 1,142 1,142 - - 1,142
1,142 1,142 - - 1,142
Fair values for level 3 assets and liabilities were calculated using a
discounted cash flow model and the Directors consider that the carrying
amounts of financial assets and liabilities recorded at amortised cost in the
financial statements approximate to their fair values.
Loans and advances
Due to the short-term nature of loans and advances and/or expected credit
losses recognised, their carrying value is considered to be approximately
equal to their fair value.
Trade and other receivables, borrowings, trade and other payables, and
accruals
These represent short term receivables and payables and as such their carrying
value is considered to be equal to their fair value.
Financial risk management
The Group's activities and the existence of the above financial instruments
expose it to a variety of financial risks.
The Board of Directors has overall responsibility for the determination of the
Group's risk management objectives and policies. The overall objective of the
Board of Directors is to set policies that seek to reduce ongoing risk as far
as possible without unduly affecting the Group's competitiveness and
flexibility.
The Group is exposed to the following financial risks:
• Credit risk
• Liquidity risk
• Market risk
• Interest rate risk
Further details regarding these policies are set out below.
Credit risk
Credit risk is the risk that a customer or counterparty will default on its
contractual obligations resulting in financial loss to the Group. One of the
Group's main income generating activities is lending to customers and
therefore credit risk is a principal risk. Credit risk mainly arises from
loans and advances. The Group considers all elements of credit risk exposure
such as counterparty default risk, geographical risk and sector risk for risk
management purposes.
Credit risk management
The credit committees within the wider Group are responsible for managing the
credit risk by:
• Ensuring that it has appropriate credit risk practices, including an
effective system of internal control;
• Identifying, assessing and measuring credit risks across the Group from
an individual instrument to a portfolio level;
• Creating credit policies
to protect the Group against the identified risks including the requirements
to obtain collateral from borrowers, to perform robust ongoing credit
assessment of borrowers and to continually monitor exposures against internal
risk limits;
• Limiting concentrations of exposure by type of asset, counterparty,
industry, credit rating, geographical location;
• Establishing a robust control framework regarding the authorisation
structure for the approval and renewal of credit facilities;
• Developing and maintaining the risk grading to categorise exposures
according to the degree of risk of default. Risk grades are subject to regular
reviews; and
• Developing and maintaining the processes for measuring Expected Credit
Loss (ECL) including monitoring of credit risk, incorporation of
forward-looking information and the method used to measure ECL.
Significant increase in credit risk
The Group continuously monitors all assets subject to Expected Credit Loss as
to whether there has been a significant increase in credit risk since initial
recognition, either through a significant increase in Probability of Default
("PD") or in Loss Given Default ("LGD").
The following is based on the procedures adopted by the Group:
Granting of credit
The Business Development Team prepare a Risk Summary which sets out the
rationale and the pricing for the proposed loan facility and confirms that it
meets the Group's product risk and pricing policies. The Application will
include the proposed counterparty's latest financial information and any other
relevant information but as a minimum:
• Details of the limit requirement e.g. product, amount, tenor, repayment
plan etc.;
• Facility purpose or reason for increase;
• Counterparty details, background, management, financials and ratios
(actuals and forecast);
• Key risks and mitigants for the application;
• Conditions, covenants & information (and monitoring proposals) and
security (including comments on valuation);
• Pricing;
• Confirmation that the proposed exposure falls within risk appetite; and
• Clear indication where the application falls outside of risk appetite.
The Credit Risk Department will analyse the financial information, obtain
reports from credit reference agencies, allocate a risk rating and make a
decision on the application. The process may require further dialogue with the
Business Development Team to ascertain additional information or
clarification.
Each mandate holder and Committee is authorised to approve loans up to agreed
financial limits provided that the risk rating of the counterparty is within
agreed parameters. If the financial limit requested is higher than the credit
authority of the first reviewer of the loan facility request, the application
is sent to the next credit authority level with a recommendation.
The Executive Risk Committee reviews all applications that are outside the
credit approval mandate of the mandate holder due to the financial limit
requested or if the risk rating is outside of policy but there is a rationale
and/or mitigation for considering the loan on an exceptional basis.
Applications where the counterparty has a high-risk rating are sent to the
Executive Risk Committee for a decision based on a positive recommendation
from the Credit Risk department. Where a limited company has such a risk
rating, the Executive Risk Committee will consider the following mitigants:
• Existing counterparty which has met all obligations in time and in
accordance with loan agreements,
• Counterparty known to Group personnel who can confirm positive
experience,
• Additional security, either tangible or personal guarantees where there
is verifiable evidence of personal net worth,
• A commercial rationale for approving the application, although this
mitigant will generally be in addition to at least one of the other mitigants.
Identifying significant increases in credit risk
The Group measures a change in a counterparty's credit risk mainly on payment,
on updated from credit reference agencies and adverse changes with a
counterparty's debtors. The Group views a significant increase in credit risk
as:
•
A two-notch reduction in the Group's counterparty's risk rating since
origination, as notified through the credit rating agency;
• A counterparty defaults on a payment due under a loan agreement;
• Late contractual payments which although cured, re-occur on a
regular basis;
• Evidence of a reduction in a counterparty's working capital
facilities which has had an adverse effect on its liquidity; or
• Evidence of actual or attempted sales out of trust or of double
financing of assets funded by the Group.
• Deterioration in the underlying business (held as part of the
security package) indicated through significant loss of revenue and higher
than average client attrition.
An increase in significant credit risk is identified when any of the above
events happen after the date of initial recognition.
Default
Identifying loans and advances in default and credit impaired
The Group's definition of default for this purpose is:
•
A counterparty defaults on a payment due under a loan agreement and that payment is overdue
on its terms, or
• The collateral that secures, all or in part, the loan agreement
has been sold or is otherwise not available for sale and the proceeds have not
been paid to the lending company, or
• A counterparty commits an event of default under the terms and
conditions of the loan agreement which leads the lending company to believe
that the borrower's ability to meet its credit obligations to the lending
company is in doubt.
Exposure at default
Exposure at default ("EAD") is the expected loan balance at the point of
default and, for the purpose of calculating the Expected Credit Losses
("ECL"), management have assumed this to be the balance at the reporting date.
Expected Credit Losses
The ECL on an individual loan is based on the credit losses expected to arise
over the life of the loan, being defined as the difference between all the
contractual cash flows that are due to the Group and the cash flows that it
actually expects to receive.
This difference is then discounted at the original effective interest rate on
the loan to reflect the disposal period of underlying collateral.
Regardless of the loan status stage, the aggregated ECL is the value that the
Group expects to lose on its current loan book having assessed each loan
individually.
To calculate the ECL on a loan, the Group considers:
1. Counterparty PD; and
2. LGD on the asset
whereby: ECL = EAD x PD x LGD
Maximum exposure to credit risk
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Cash and cash equivalents 7,608 17,728 786 578
Loans and advances 16,133 14,660 - -
Amounts owed by group undertakings - - 46,919 47,066
Trade and other receivables 4,958 3,532 144 658
Maximum exposure to credit risk 28,699 35,920 47,849 48,302
Loans and advances:
Collateral held as security
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Fully collateralised
Loan-to-value* ratio:
Less than 50% 2 - - -
50% to 70% 83 75 - -
71% to 80% 192 163 - -
81% to 90% 142 2,185 - -
91% to 100% - - - -
419 2,423 - -
Partially collateralised
Collateral value relating to loans over 100% loan-to-value - - - -
Unsecured lending 15,718 12,247 - -
* Calculated using wholesale collateral values
Concentration of credit risk
The Group maintains policies and procedures to manage concentrations of credit
at the counterparty level and industry level to achieve a diversified loan
portfolio.
Credit quality
An analysis of the Group's credit risk exposure for loan and advances per
class of financial asset, internal rating and "stage" is provided in the
following tables. A description of the meanings of stages 1, 2 and 3 is given
in the accounting policies set out in note 1.
2021 2020
Risk rating Stage 1 Stage 2 Stage 3 Total Total
£'000 £'000 £'000 £'000 £'000
Above average (risk rating 1-2) 5,274 - - 5,274 6,360
Average (risk rating 3-5) 10,863 - - 10,863 6,675
Below average (risk rating 6+) - - - - 1,635
Gross carrying amount 16,137 - - 16,137 14,670
Loss allowance (4) - - (4) (10)
Carrying amount 16,133 - - 16,133 14,660
Gross Carrying Amount
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2021 14,665 - 5 14,669
Transfer to stage 1 5 - (5) -
Transfer to stage 2 - - - -
Transfer to stage 3 - - - -
Net Loans originated 1,467 - - 1,468
As at 31 December 2021 16,137 - - 16,137
Trade receivables
Status at reporting date
The Group has assessed the trade and other receivables in accordance with IFRS
9 and determined that, at the balance sheet date, the lifetime ECL is £nil
(2020: £nil).
The contractual amount outstanding on financial assets that were written off
during the reporting period and are still subject to enforcement activity is
£nil at 31 December 2021 (2020: £nil).
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial
resources to meet its obligations as they fall due or will have to do so at an
excessive cost. This risk arises from mismatches in the timing of cash flows
which is inherent in all banking operations and can be affected by a range of
Group specific and market-wide events.
Liquidity risk management
Group Finance performs treasury management for the Group, with responsibility
for the treasury for each business entity being delegated to the individual
subsidiaries. However, in line with the wider Group governance structure,
Group Finance performs an important oversight role in the wider treasury
considerations of the Group. The primary mechanism for maintaining this
oversight is a formal requirement that subsidiaries' Finance teams notify all
material Treasury matters to Group Finance.
The main Group responsibilities are to maintain banking relationships, manage
and maximise the efficiency of the Group's working capital and long-term
funding and ensure ongoing compliance with banking arrangements. The Group
currently does not have any offsetting arrangements.
Liquidity stress testing
The Group regularly conducts liquidity stress tests, based on a range of
different scenarios to ensure it can meet all of its liabilities as they fall
due.
Maturity analysis for financial assets and financial liabilities
The following maturity analysis is based on expected gross cash flows.
As at 31 December 2021 Carrying Amount Less than 1 month 1-3 months 3 months to 1 year 1-5 years >5 years
£'000 £'000 £'000 £'000 £'000
£'000
Financial Assets
Cash and cash equivalents 7,608 7,608 - - - -
Trade and other receivables 4,958 2,717 690 392 1,159 -
Loans and advances 16,133 740 660 3,158 11,197 378
28,699 11,065 1,350 3,550 12,356 378
Financial Liabilities
Trade payables, other payables and accruals 4,672 1,203 2,414 1,055 - -
Borrowings 12,985 48 - 1,602 7,835 3,500
17,657 1,251 2,414 2,657 7,835 3,500
Market risk
Market risk is the risk that movements in market factors, such as foreign
exchange rates, interest rates, credit spreads, equity prices and commodity
prices will reduce the TruFin Group's income or the value of its portfolios.
Market risk management
The TruFin Group's management objective is to manage and control market risk
exposures in order to optimise return on risk while ensuring solvency.
The core market risk management activities are:
• The identification of all key market risk and their drivers,
• The independent measurement and evaluation of key market risks and
their drivers,
•
The use of results and estimates as the basis for the TruFin Group's risk/return-oriented management, and
• Monitoring risks and reporting on them.
Interest rate risk management
The TruFin Group is exposed to the risk of loss from fluctuations in the
future cash flows or fair values of financial instruments because of the
change in market interest rates.
Interest rate risk
Interest rates on loans and advances are charged at competitive rates given
current market condition. Should rates fluctuate, this will be reviewed and
pricing will be adjusted accordingly.
Vertus's has interest income that is variable in relation to the Bank of
England base rate, and interest expense variable to both LIBOR and the Bank of
England base rate.
19. Non-controlling interests
The summarised financial information below represents financial information
for each subsidiary that has non-controlling interest that are material to the
Group. The amounts disclosed for each subsidiary are before intragroup
eliminations.
The Group's ownership share Vertus Capital and Vertus SPV1 at the reporting
date was 53.8% (2020: 51.0%).
Statement of Financial Position Vertus Capital Vertus SPV1
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Current assets 5,005 4,670 15,740 12,538
Non-current assets 5 5 - -
Current liabilities 94 (144) (15,746) (12,731)
Equity attributable to owners of the Company 2,747 2,311 (3) (98)
Non-controlling interests 2,357 2,220 (3) (95)
Income Statement Vertus Capital Vertus SPV1
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Revenue 522 469 1,380 1,018
Expenses (436) (623) (1,193) (940)
Profit/(loss) after tax 86 (154) 187 78
Profit/(loss) after tax attributable to owners of the Company 46 (79) 100 40
Profit/(loss) after tax attributable to the non-controlling interests 40 (75) 87 38
Cash Flow Statement Vertus Capital Vertus SPV1
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Net cash used in operating activities (520) (390) (2,922) (2,035)
Net cash used in investing activities 224 331 - -
Net cash generated from financing activities 488 - 2,839 2,043
Net increase/(decrease) in cash and cash equivalents 192 (59) (83) 8
Vertus Capital Vertus SPV1
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Balance at 1 January 2,220 2,295 (95) (134)
Share of loss for the year 40 - 87 -
Change in NCI due to share issuance in the year 97 (75) 5 39
Balance at 31 December 2,357 2,220 (3) (95)
The Group had a 72% ownership share of Bandana Media Ltd during the year.
2021 2020
Bandana Media Ltd £'000 £'000
Current assets 45 61
Current liabilities (5,258) (4,293)
Equity attributable to owners of the Company (3,773) (3,063)
Non-controlling interests (1,440) (1,169)
2021 2020
Bandana Media Ltd £'000 £'000
Revenue - -
Expenses (981) (824)
Loss after tax (981) (824)
Loss after tax attributable to owners of the Company (710) (596)
Loss after tax attributable to the non-controlling interests (271) (228)
2021 2020
Bandana Media Ltd £'000 £'000
Net cash used in operating activities - 1
Net decrease in cash and cash equivalents - 1
2021 2020
Bandana Media Ltd £'000 £'000
Balance at 1 January (1,169) (941)
Share of loss for the year (271) (228)
Balance at 31 December (1,440) (1,169)
The Group had a 94.1% effective economic ownership share of Satago Financial
Solutions Limited at the reporting date (2020: 93.7%).
2021 2020
Satago Financial Solutions Ltd £'000 £'000
Current assets 1,748 5,256
Non-current assets 631 631
Current liabilities (291) (713)
Equity attributable to owners of the Company 1,985 4,880
Non-controlling interests 103 294
2021 2020
Satago Financial Solutions Ltd £'000 £'000
Revenue 198 591
Expenses (3,284) (3,508)
Loss after tax (3,086) (2,916)
Loss after tax attributable to owners of the Company (2,905) (2,787)
Loss after tax attributable to the non-controlling interests (181) (129)
2021 2020
Satago Financial Solutions Ltd £'000 £'000
Net cash used in operating activities (3,965) (751)
Net cash used in investing activities 189 (305)
Net cash used in financing activities 2,731 -
Net decrease in cash and cash equivalents (1,044) (1,056)
2021 2020
Satago Financial Solutions Ltd £'000 £'000
Balance at 1 January 294 -
NCI on grant of Satago MIP - 496
Share of loss for the year (181) (129)
Arising from change in non-controlling interest (10) (73)
Balance at 31 December 103 294
20. Leases
The carrying amounts of the right-of-use assets recognised and the movements
during the period are shown in note 11.
The lease liability and movement during the period were:
Group
£'000
Lease liability recognised at 1 January 2021 120
Interest 3
Payments (99)
Balance at 31 December 2021 25
21. Earnings per share
Earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue during the year.
The calculation of the basis and adjusted earnings per share is based on the
following data:
2021 2020
Number of shares (#)
At year end 80,822,204 80,822,204
Weighted average 80,822,204 80,822,204
Earnings attributable to ordinary shareholders £'000 £'000
Loss after tax attributable to the owners of TruFin plc (7,071) (10,971)
Adjusted earnings attributable to ordinary shareholders
Loss after tax attributable to the owners of TruFin plc (7,071) (10,971)
Adjusted for share-based payment 70 545
Adjusted loss after tax attributable to the owners of TruFin plc (7,001) (10,426)
Earnings per share* Pence Pence
Basic and Diluted (8.7) (13.6)
Adjusted(1) (8.7) (12.9)
* All Earnings per share figures are undiluted and diluted.
Adjusted(1) EPS excludes share-based payment expense and loss from
discontinued operations from loss after tax
Management has been granted 5,451,578 share options in TruFin plc (see note 6
for details). These
could potentially dilute basic EPS in the future, but were not included in the
calculation of diluted EPS as they are antidilutive for the years presented as
the Group is loss making.
22. Related party disclosures
Transactions with Directors
Transactions with Directors, or entities in which a Director or recent
Director is also a Director or partner:
2021 2020
£'000 £'000
Payment to an ex-Director - 359
Consultancy services provided by an ex-Director 21 29
Other related parties - 2
Key management personnel disclosures are provided in note 5 and 6.
During the year, the company made loans to Storm Chaser UG, a company based in
Germany. Storm Chaser UG is 100% owned by Storm Chaser Games - an associate
company of Playstack (See note 1). The balance of the loans (including
interest) at the reporting date was £148,000 (prior period: £Nil).
23. Post balance sheet events
On 12 April 2022 the Company successfully completed a Placing and Open offer
resulting in 13,360,739 new ordinary shares being issued in the Company at
£0.75 per share, raising gross proceed of c.£10m. Following issue of the new
shares, the total number of voting rights in the Company is 94,182,943.
Since the year end Lloyds Banking Group ("LBG") has completed an investment of
£5m of new equity capital in Satago, at a pre-money valuation of £20m.
937,501 newly created B ordinary shares, with a par value of £0.001 per
share, were allotted for £5m cash from LBG, representing 20% of the fully
diluted share capital.
On 9 March 2022 TruFin agreed to vary the terms of an existing £3 million
loan to Satago so that it is convertible into equity capital in Satago at the
same valuation as the LBG investment or, if a further funding round takes
place, the valuation implied by the funding round. Assuming conversion based
on the £20 million valuation (and assuming LBG does not subscribe for its pro
rata entitlement to shares), TruFin would hold approximately 68% of Satago (on
a fully diluted basis).
In addition on 9 March 2022 LBG confirmed its intention to enter into a
commercial agreement to licence Satago's software platform for its Single
Invoice Finance and whole of book Invoice Factoring customers. Satago and LBG
have signed a letter of intent.
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