REG - TruFin PLC TruFin PLC - Final Results for the year ended 31 December 2022
15/03/2023 07:00
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RNS Number : 9831S TruFin PLC 15 March 2023
15 March 2023
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 2022
Full year results highlight direction of travel
TruFin is pleased to announce its audited results for the 12 months ended 31
December 2022. 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 grew 23% to £16.1m (2021: £13.1m) driven by
significant revenue growth from three out of four subsidiaries
· Recurring software and licensing fees represented 84% of revenue
(2021: 87%)
· Gross profit margin grew to 69% (2021: 53%)
· Loss Before Tax ("LBT") was £8.0m (2021: £8.4m)
· Cash and cash equivalents at year end totalled £10.3m (£3.9m
unrestricted)
Company Highlights
· Oxygen Finance Limited ("Oxygen") EBITDA increased 62% to £1.1m
(2021: £0.7m)
· Satago Financial Solutions Limited ("Satago") grew revenues by
more than 350% to £2.2m (2021: £0.5m) after its platform was chosen to
support invoice factoring solutions for Lloyds Bank plc ("Lloyds Bank" or the
"Bank") customers
· Playstack Limited ("Playstack") acquired Magic Fuel Games Inc.
("Magic Fuel") and signed a concurrent technology contract with a global
technology platform
· Vertus Capital Limited ("Vertus") grew its loan book by 38% and
revenues by 61% to £2.2m (2021: £1.4m)
Current Trading and Prospects
· Group revenues in January 2023 were not less than £0.98m
(unaudited), growing 26% compared to January 2022
· Oxygen Q1 revenues to date have experienced double digit growth when
compared to the same period in 2022
· Satago delivered the trial phase to Lloyds Bank for a digitised
end-to-end invoice finance solution
· Playstack has secured more than 5 games for release throughout 2023
· Vertus's pipeline remains strong. Despite early loan settlements
dragging on loan book growth, revenues in January 2023 were up 83% versus
January 2022
James van den Bergh, TruFin CEO, said:
"2022 was a significant year for the Group. Satago secured a landmark contract
and £5m equity investment from Lloyds, and soon after signed an embedded
finance and package deal with Sage. To win such headline contracts in just 12
months is testament to the quality of the offering Sinead McHale and her team
have built and gives shareholders a taste of what the future holds.
Oxygen, managed by Ben Jackson, yet again grew its client base, revenues and
EBITDA. Oxygen's key internal initiatives include helping clients to purchase
multiple products; it is thus very pleasing to note that more clients than
ever chose to purchase two or more products during 2023. We expect this trend
to continue. At the point of value crystallisation, given its significant and
growing embedded revenue base, we felt justified in rejecting the unsolicited
bid for Oxygen in December 2022.
Meanwhile, 2023 is an important year for Playstack. Company CEO Harvey Elliot
has secured an eye-catching and enviable line up of games and is looking to
demonstrate the embedded value he has created in recent years.
As always, Vertus is benefitting from the IFA market trend for consolidation
and continues to be skilfully managed by Matt Marais.
We are excited by the future and the opportunities that lie ahead and look
forward to another year of significant progress."
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
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)
.
Chair's Statement
I have great pleasure in presenting this year's Annual Report and Accounts. It
has been another year of very positive developments for the Group's businesses
despite the unfavourable macro-economic headwinds that have once again
dominated the last 12 months.
After more than a decade of monetary accommodation and historically low
interest rates, there has been a sea change in the economic and financial
climate. The economic legacy of Covid-19 has been high inflation, as
recovering demand coincided with disrupted supply chains - exacerbated by
rapid commodity price rises due to the war in Ukraine. In response, central
banks have pushed up interest rates and withdrawn or reversed quantitative
easing.
Although the market environment is unlikely to get easier anytime soon, I am
proud to say that the Group is continuing on its growth trajectory and I am
certain that the commitment and determination of our employees will enable the
Group to skilfully navigate this more unpredictable environment, just as 2021
and 2022 saw TruFin prosper.
As anticipated in my statement last year, 2022 has been a year of considerable
growth for three out of four of our subsidiaries, alongside landmark contracts
and consolidation across the Group. We head into 2023 set for further progress
across multiple fronts.
The foundations for the Group's success were laid in previous years, with the
Group's value-creating shareholder restructure following the sale of
Arrowgrass' stake, a successful pivot towards recurring software sales and
licensing fees and a sustained relentless focus on exemplary client service.
These accomplishments paved the way for an ambitious set of goals in 2022,
which I am happy to report have in the main been met, and allowed us to set
ever more challenging goals for 2023 and beyond.
Chief among TruFin's aims for the year was to see Satago selected by Lloyds
Bank plc ("Lloyds Bank" or the "Bank") as vendor of choice to support its
delivery of invoice financing - this was achieved by early March. The same
month saw the Group fulfil a second key goal: strengthening its balance sheet
with an oversubscribed placing. These achievements sit alongside organic
growth and development across our businesses, positioning us for a profitable
future and increased value creation for shareholders.
Highlights for 2022 include:
· Satago signing landmark contracts with Lloyds Bank, to help deliver
invoice financing, and Sage, the leading small and mid-sized business software
provider, to embed Satago services in certain products in the UK and Ireland
· Oxygen delivering another year of profitable growth and making its
first dividend payment (of £0.25m) to the Group
· Playstack acquisition and successful integration of Magic Fuel Games
Inc ("Magic Fuel"), a remote games development studio based in San
Francisco, USA
· Vertus recording its second full year of profitability whilst growing
its loan book to £21.4m and increasing its revenues by 60% to £2.2m.
· TruFin raising £10m via an oversubscribed placing and open offer to
existing and new shareholders
As I look back over a turbulent few years, I am once again struck by the
remarkable resilience of TruFin and its subsidiaries while facing a global
pandemic and ongoing macro-economic uncertainty. The Group itself saw revenues
increase by more than 23% last year, evidencing solid fundamentals underpinned
by robust cost controls and significant strategic progression.
The close of 2022 saw perhaps the clearest demonstration yet of the value of -
and shareholder belief in - our proposition. In late December, TruFin's Board
rejected a £26m indicative offer for Oxygen, judging that it undervalued the
business and its prospects. It is immensely satisfying to see the hard work,
vision and execution of the Group recognised in this way and I have no doubt
that we will see further similar demonstrations in 2023 and beyond.
As ever, I look forward to updating shareholders on our continued progress
throughout the year and my thanks go to all our employees and shareholders,
new and old, for their continued support.
Steve Baldwin
Chair
CEO's Review
As our Chair has highlighted, 2022 was a year of important structural
development for TruFin.
Despite the macroeconomic headwinds and challenging inflationary pressures,
our subsidiaries grew their customer bases significantly, strengthened their
partnerships and have positioned themselves for an exciting 2023 and beyond.
At our inaugural Capital Markets Day in October, we laid out our medium-term
vision for growth and sustainable profitability. With a medium-term revenue
target of £80-100m coupled with attractive EBITDA margins, we are confident
we will deliver significant value to our shareholders.
It is also important to highlight that a key Group objective is to create a
stable environment for our subsidiaries, never more so than amid a global
liquidity crisis and ongoing interest rate uncertainty. The success of our
£10m placing and open offer in April 2022, supported by 17 institutional
shareholders, emphasises TruFin's strong institutional shareholder backing.
This ensures that our subsidiaries are enviably well-placed to consolidate
their market leading positions in the years ahead.
2022 Group performance
Another Group strategic objective is to reorientate income so that the
majority comes from predictable and repeatable sources. In 2022, 84% of Group
revenues came from fee and recurring software and licencing fees with our
capital light model positioning us to generate the high EBITDA margins and
return on equity that other software-as-a-service ("SaaS") businesses enjoy.
Overall Group revenues increased by 23% in 2022. Within this, Satago enjoyed
revenue growth of more than 350% as a result of income generated from contract
wins with Lloyds Bank and Sage. Vertus and Oxygen also grew strongly - 61% and
28% respectively - continuing to follow their profitable growth trajectory.
Playstack meanwhile consolidated its position during the year; revenues
declined 11% due to the previously announced delay of a key console game
release. The rescheduled game launch is not expected to impact the financial
support that Playstack requires from TruFin.
The Group ended the year with a cash balance of £10.3m (including cash of
£5.6m in Satago and £0.8m in Vertus which are not 100% owned).
Current trading and prospects
TruFin has meaningful targets for 2023 and Group revenues for January 2023
were not less than £0.98m (unaudited), a 26% increase over the same period in
2022.
The Group remains focused on delivering growth, profitability and value
crystallisation and is excited by the significant opportunities that lie
ahead.
Outlook
During 2022 the Group successfully completed several key transactions,
positioning ourselves to weather the global macroeconomic storms. In this
environment, global liquidity has dried up and other market participants are
now acting more rationally. As others are forced to scrutinise their business
models more carefully, TruFin will continue to plough its own course. We have
steered two of our four businesses towards profitability, with a third
anticipated to do the same during 2023.
The Board's rejection of an unsolicited offer for Oxygen is a sign of TruFin's
strength. As others realise the embedded value and barriers to entry within
our businesses we expect to see further interest and at the appropriate time
expect to be rewarding our shareholders with value-creating transactions.
We have intentionally invested in building lasting relationships with our
partners and we are beginning to see the fruits of these investments. We work
closely with local councils, FTSE100 companies and global technology platforms
- delivering software, services and products to help meet their strategic
requirements. The investments we have made are paying off and will generate
significant shareholder returns in the future.
My annual 'thank you' to our shareholders is made on behalf of the Board, our
employees, partners and all stakeholders for their support and faith during
these turbulent times. I would also like to take the opportunity to welcome
Anders Wilhelmsen as a non-executive director. His presence and expertise
have proved invaluable additions to the Board since his appointment in
February 2022.
As always, there is a lot to do and a pile of wood to chop in 2023, but we are
brimming with confidence and look forward to the opportunities that lie
ahead.
James van den Bergh
Chief Executive Officer
OXYGEN REVIEW
2022 performance
Oxygen delivered revenues of £5.3m, up 28% (2021: £4.1m), with the increase
driven by strong performance across all principal revenue streams. This helped
increase EBITDA profits by 62% to £1.1m (2021: £0.7m).
Strong trading and working capital controls enabled Oxygen to generate
positive free cashflow - with no Group funding required - and subsequently pay
TruFin a maiden dividend of £0.25m.
New business continued to progress well; combined trade-spending by Oxygen's
early payment clients increased by £0.3bn, totalling a record £24bn.
Oxygen's SaaS product portfolio also expanded, with new products creating
incremental revenue. Over 27% of Oxygen's local authority Early Payment
Programme clients also committed to at least one Oxygen SaaS subscription.
The average Early Payment Programme client tenure, a measure of customer
loyalty and Oxygen's success in renewing contracts, reached 6.6 years at the
end of 2022 (2021: 5.8 years), adding to Oxygen's recurring revenue streams.
Early Payment Programme clients committed £1.1bn in spending to more than
4,000 suppliers during 2022 (2021: £878m). New spend added during the year
hit a record £330m (2021: £267m), 24% higher than the prior year.
Oxygen's position as a financial technology company delivering social value
strengthened significantly. Throughout 2022 more than 8,000 small businesses
within Oxygen clients' local communities received over £0.5bn in early
payments - at no cost to the client. And together with EY, Oxygen continued
to develop its Carbon Reporting tool which helps councils understand the
carbon footprint of their supply chains.
Current trading and prospects
Indications from initial trading in 2023 are strong with double digit growth
for recurring revenue streams continuing.
Continued economic volatility makes Oxygen's products increasingly attractive;
early payment solutions are increasing relevant to our clients and their
suppliers. Similarly, business development opportunities identified by our
SaaS offer are increasingly in demand from clients seeking public sector
insight.
Interest from new early payment clients is strong, with several contracts
expected to be signed in Q1 2023. Equally major new client features added to
SaaS products in the second half of 2022 are rated by existing clients and
have generated strong market interest.
SATAGO REVIEW
2022 performance
Following conclusion of a commercial pilot and competitive process, Satago was
selected by Lloyds Bank (the "Bank") to deliver a new digitised invoice
financing platform for its UK customers..
Additionally, the Bank made a strategic investment of £5m in Satago at a
post-money valuation of £25m.
Satago hit numerous delivery milestones for the Lloyds Bank contract
throughout the year, culminating in completing the trial phase of its fully
digitised end-to-end invoice finance solution for the Bank in early 2023. The
Bank is now testing the digitised proposition ahead of customer onboarding,
expected in due course.
In June Satago signed a Letter of Intent with Sage Group ("Sage") and Lloyds,
introducing a significant partner to work alongside Satago and the Bank.
These major contract wins coupled with a continued pivot towards
Lending-As-A-Service ("LaaS") saw revenues increase by over 350% to £2.2m
(2021 :£0.5m).
Current trading and prospects
Early 2023 has been dominated by continued work with existing and prospective
LaaS clients and Embedded Finance partnerships. This has culminated in the
delivery of the trial phase of Satago's fully digitised end-to-end invoice
finance solution with Lloyds Bank.
Meaningful progress with the Embedded Finance offering has resulted in a
deepening of the relationship with Sage and a signed statement of work to
embed Satago's invoice finance service into Sage 50, which launched in Q1
2023. Satago also extended the agreement to provide Satago to certain Sage 50
users as part of a subscription package offering to the Irish market. Further
extending Satago's core offerings of credit control and risk insights to help
SMEs better manage their debtor book.
Satago has a growing pipeline of LaaS and Embedded Finance customers in the
UK and Europe.
Demand for Satago's own loan book offering increased during the first two
months of 2023.
PLAYSTACK REVIEW
2022 performance
Alongside the acquisition of Magic Fuel Games Inc ("Magic Fuel"), and the
concurrent signing of a contract with a global technology platform, Playstack
announced a delay to a key console game title which stunted the company's
annual growth.
Despite the delay, Playstack's existing games portfolio once again contributed
more than 50% of games revenue in 2022, through strong catalogue management
and platform partnerships.
Given the success of 'Magnitude', a proprietary sourcing technology, in
supporting the discovery of new games, the Board has focused resources on
further developing this tool, which is now surfacing over 80% of all new game
titles.
Playstack launched two new titles during 2022: The Case of the Golden Idol and
The Entropy Centre. Both games have received significant critical acclaim,
with The Case of the Golden Idol earning a BAFTA Nomination for best Debut
Game, and also being shortlisted for the prestigious Seumas McNally Grand
Prize at the annual Independent Game Festival Awards in San Francisco.
In 2023 Playstack is focusing on game ecosystems and will publish two new
games with an extended life well beyond their launch. This strategy aims to
extend revenue predictability and establish new, longer-lasting partnerships
with platform holders.
Playstack is well-placed to expand its game portfolio in 2023 and beyond.
Current trading and prospects
Playstack's console portfolio will be further extended in 2023, with
expansions to existing games and two new titles set for release, plus an
increasingly strong pipeline of titles for 2024 and beyond.
The mobile portfolio centres on six key titles for 2023, including the ongoing
delivery of the technology contract by Magic Fuel.
Back-book games remain a key component of future revenue modelling, with an
increased focus on higher quality, longer-duration titles.
2023 is expected to be a transformative year for the business, with
expectations of profitability on a full-year basis with revenue derived from a
diverse range of games.
VERTUS REVIEW
2022 performance
New loan facilities closed during 2022 increased by 81% to £15.2m (2021:
£8.4m), resulting in interest income increasing by 61% to £2.2m (2021:
£1.4m).
Active facilities increased from 21 to 31 inclusive of two early settlements.
Overall loan book increased by 38% to £21.4m (2021: £15.6m).
No defaults or impairments were recorded across the book for the sixth
consecutive year. Increased market demand for IFAs and ongoing consolidation
ensures the value of security over IFAs remains strong.
Current trading and prospects
Ongoing consolidation in the IFA market is fuelling demand for funding,
positioning Vertus well for further growth, as the only specialist capital
provider to the IFA sector. Furthermore, IFAs continue to experience
new-client enquiries and organic growth, improving their top-line performance.
We expect the change in strategy to lend whole-of-market to continue to
benefit demand for capital in the coming year.
Offsetting the secular consolidation trends, the impact of higher interest
rates and increased competition in the broader market environment, has spilled
over from 2022 into 2023, challenging loan book growth.
Early settlements remain a risk to overall loan book growth, driven by higher
cost of capital, customers being sold to consolidators and alternative lenders
and banks entering the market to fund larger deals. However, our focus remains
on the smaller end of the deal market and, although loan book growth may slow,
we still foresee steady demand to fund acquisitions and MBOs in this space.
Lead times for closing facilities improved during the last quarter, indicating
a possible improvement in FCA processing times. This will assist in reducing
deal cycles and improving closing rates in the pipeline.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes 2022 2021
£'000 £'000
Interest income 3 2,619 1,681
Fee income 3 7,183 4,330
Publishing income 3 6,317 7,104
Gross revenue 16,119 13,115
Interest, fee and publishing expenses (5,075) (6,214)
Net revenue 11,044 6,901
5 (12,609) (11,285)
Staff costs
Other operating expenses (4,810) (3,257)
Depreciation & amortisation (1,596) (794)
Net impairment on financial assets 7 (50) 10
Share of profit from associates 1 3
Loss before tax (8,020) (8,422)
2, 9 1,214 986
Taxation
Loss for the year (6,806) (7,436)
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
Exchange differences on translating foreign operations (65) (39)
Other comprehensive income for the year, net of tax (65) (39)
Total comprehensive loss for the year (6,871) (7,475)
Loss for the year attributable to:
Owners of TruFin plc (6,637) (7,071)
Non-controlling interests (169) (365)
(6,806) (7,436)
Total comprehensive loss for the year attributable to:
Owners of TruFin plc (6,704) (7,112)
Non-controlling interests (167) (363)
(6,871) (7,475)
Earnings per Share
Notes 2022 2021
pence pence
Basic and Diluted EPS 22 (7.3) (8.7)
COMPANY STATEMENT OF COMPREHENSIVE INCOME
Notes 2022 2021
£'000 £'000
Revenue 3 2,293 2,126
5 (1,673) (1,911)
Staff costs
Other operating expenses (660) (624)
Depreciation & amortisation (2) -
Loss before tax (42) (409)
9 - -
Taxation
Loss and total comprehensive income for the year (42) (409)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes 2022 2021
£'000 £'000
Assets
Non-current assets
Intangible assets 10 24,411 21,191
Property, plant and equipment 11 345 65
Deferred tax asset 9 250 303
Loans and advances 13 15,016 11,575
Total non-current assets 40,022 33,134
Current assets
Cash and cash equivalents 10,273 7,608
Loans and advances 13 9,145 4,558
Interest in associate 4 3
Trade receivables 14 2,149 2,585
Other receivables 14 3,899 2,840
Total current assets 25,470 17,594
Total assets 65,492 50,728
Equity and liabilities
Equity
Issued share capital 15 85,706 73,548
Retained earnings (24,884) (17,731)
Foreign exchange reserve (63) 4
Other reserves (26,531) (24,393)
Equity attributable to owners of the company 34,228 31,428
Non-controlling interest 19 5,876 1,023
Total equity 40,104 32,451
Liabilities
Non-current liabilities
Borrowings 16 16,764 11,351
Total non-current liabilities 16,764 11,351
Current liabilities
Borrowings 16 1,783 1,634
Trade and other payables 17 6,841 5,292
Total current liabilities 8,624 6,926
Total liabilities 25,388 18,277
Total equity and liabilities 65,492 50,728
COMPANY STATEMENT OF FINANCIAL POSITION
Notes 2022 2021
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 11 4 -
Investments in subsidiaries 12 30,189 30,189
Amounts owed by group undertakings 54,835 46,919
Total non-current assets 85,028 77,108
Current assets
Cash and cash equivalents 2,260 786
Trade and other receivables 14 138 144
Total current assets 2,398 930
Total assets 87,426 78,038
Equity and liabilities
Equity
Issued share capital 15 85,706 73,548
Retained earnings (6,042) (5,504)
Other reserves 6,828 8,966
Total equity 86,492 77,010
Liabilities
Current liabilities
Trade and other payables 17 934 1,028
Total current liabilities 934 1,028
Total liabilities 934 1,028
Total equity and liabilities 87,426 78,038
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 2022 73,548 (17,731) 4 (24,393) 31,428 1,023 32,451
Loss for the year - (6,637) - - (6,637) (169) (6,806)
Other comprehensive income for the year - - (67) - (67) 2 (65)
Total comprehensive loss for the year - (6,637) (67) - (6,704) (167) (6,871)
Issuance of shares 12,158 (496) - (2,138) 9,524 - 9,524
Issuance of shares by subsidiary - (20) - - (20) 5,020 5,000
Balance at 31 December 2022 85,706 (24,884) (63) (26,531) 34,228 5,876 40,104
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
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, the share revaluation reserve
and shares issued at a discount.
The merger reserve arose as a result of combining businesses that are under
common control. As at 31 December 2022 it was a debit balance of £33,358,000
(2021: £33,358,000 )
The share revaluation reserve arose from the share cancellation that took
place in February 2018. As at 31 December 2022 its balance was £8,966,000
(2021: £8,966,000).
Shares issued at a discount arose from the share issuance that took place in
April 2022. As at 31 December 2022 its balance was £2,138,000 (2021: £nil).
See Note 15 for further information.
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 2022 73,548 (5,504) 8,966 77,010
Total comprehensive loss for the year - (42) - (42)
Issuance of shares 12,158 (496) (2,138) 9,524
Balance at 31 December 2022 85,706 (6,042) 6,828 86,492
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
CONSOLIDATED STATEMENT OF CASH FLOWS
2022 2021
£'000 £'000
Cash flows from operating activities
Loss before tax (8,020) (8,422)
Adjustments for
Depreciation of property, plant and equipment 108 96
Amortisation of intangible assets 2,377 1,571
Share based payments - 70
Finance costs 974 659
Share of profit from associate (1) (3)
Loss on disposal of Fixed Assets - 2
Loss on intragroup transfer of subsidiary - 2
(4,562) (6,025)
Working capital adjustments
Movement in Loans and advances (8,029) (1,472)
Increase in trade and other receivables (34) (720)
Increase/(Decrease) in trade and other payables 60 (1,735)
Net payables on acquisition of subsidiary (67) -
(8,070) (3,927)
Tax credit received/(paid) 668 (2)
Interest and finance costs paid (777) (716)
Net cash used in operating activities (12,741) (10,670)
Cash flows from investing activities:
Additions to intangible assets (3,159) (1,779)
Additions to property, plant and equipment (113) (24)
Acquisition of subsidiaries (1,217) -
Cash on acquisition of subsidiary 19 -
Net cash used in investing activities (4,470) (1,803)
Cash flows from financing activities:
Issue of ordinary share capital 9,524 -
Issue of ordinary share capital of subsidiary 5,000 148
Net borrowings 16 5,370 2,353
Lease payments (28) (99)
Net cash generated from financing activities 19,866 2,402
Net increase/(decrease) in cash and cash equivalents 2,655 (10,071)
Cash and cash equivalents at beginning of the year 7,608 17,728
Effect of foreign exchange rate changes 10 (49)
Cash and cash equivalents at end of the year 10,273 7,608
COMPANY STATEMENT OF CASH FLOWS
2022 2021
£'000 £'000
Cash flows from operating activities
Loss before income tax (42) (409)
Adjustments for:
Depreciation of property, plant and equipment 2 -
Interest income (2,166) (2,008)
Share based payments - 70
(2,206) (2,347)
Working capital adjustments
Decrease in trade and other receivables 6 513
Decrease in trade and other payables (94) (114)
(88) 399
Net cash generated used in operating activities (2,294) (1,948)
Cash flows from investing activities
Intragroup loans cash (advanced)/received (5,750) 2,156
Additions to property, plant and equipment (6) -
Net cash generated (used in)/from investing activities (5,756) 2,156
Cash flows from financing activities
Issue of ordinary share capital 9,524 -
Net cash generated from financing activities 9,524 -
Net increase in cash and cash equivalents 1,474 208
Cash and cash equivalents at beginning of the year 786 578
Cash and cash equivalents at end of the year 2,260 786
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".
The principal activities of the Group are the provision of niche lending,
early payment services and 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") (together with Satago SPV 1, UK 120 Regent Street, London, United Kingdom, W1B 5FE Provision of short term finance 72% of ordinary shares*
Satago SPV 2 and Satago Poland) ("Satago Group")
Satago SPV 1 Limited ("Satago SPV 1") UK 120 Regent Street, London, United Kingdom, W1B 5FE Provision of short term finance 72% of ordinary shares*
Satago SPV 2 Limited ("Satago SPV 2") UK 120 Regent Street, London, United Kingdom, W1B 5FE Provision of short term finance 72% of ordinary shares*
Satago z.o.o (Satago Poland) Poland 32-023 Krakow ul. Sw. Krzyza 19/6 Poland Provision of short term finance 72% of ordinary shares*
Oxygen Finance Group Limited ("OFGL") (together with OFL and OFAI) ("Oxygen") UK 1(st) Floor Enterprise House, Holding Company 88% 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% 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% of ordinary shares**
New Castle, Delaware 19801, USA
TruFin Software Limited ("TSL") UK 120 Regent Street, London, United Kingdom, W1B 5FE Provision of technology services 100% of ordinary shares
AltLending UK Limited ("AltLending") UK 120 Regent Street, London, United Kingdom, W1B 5FE 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
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
Magic Fuel Inc ("Magic Fuel") USA 5424 Sunol Blvd Ste 10 PMB 1021, Pleasanton, CA 94566-7705 Game developer 100% of ordinary shares
*See Note 19 for the Group's effective economic ownership of the Satago Group.
** Nominal ownership of these companies is 87.5% 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.
*** 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 (application to
strike off made on 23 January 2023)
· A 27% interest in Storm Chaser Games Limited ("Storm Chaser Games")
On 22 March 2022, Porge Ltd, a company 100% owned by OFGL was dissolved.
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, 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.
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 Oxygen 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 are in line with contractual agreements and relate to
Lending as a Service projects.
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 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.
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.
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.
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 advances 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 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.
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 CGU 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 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.
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
At the inception of a contract, the Group assesses if the contract contains a
lease. A contract contains a lease if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for
consideration. Reassessment is only required when the terms and conditions of
the contract are changed.
Right-of-use assets
The Group recognises a right-of-use asset and lease liability at the date
which the underlying asset is available for use. Right-of-use assets are
measured at cost which comprises the initial measurement of lease liabilities
adjusted for any lease payments made at or before the commencement date and
lease incentives received. Any initial direct costs that would not have been
incurred if the lease had not been obtained are added to the carrying amount
of the right-of-use assets.
These right-of-use assets are subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term.
Right-of-use assets (except for those which meet the definition of an
investment property) are presented within "Property, plant and equipment".
Right of use assets which meet the definition of property, plant and equipment
are presented with and accounted for in accordance the this policy.
Lease liabilities
The initial measurement of a lease liability is measured at the present value
of the lease payments discounted using the interest rate implicit in the
lease, if the rate can be readily determined. If that rate cannot be readily
determined, the borrower shall use its incremental borrowing rate.
Lease liabilities are measured at amortised cost using the effective interest
method. Lease liabilities shall be remeasured when:
· There is a change in future lease payments arising from changes in an
index or rate;
· There is a change in the Group's assessment of whether it will
exercise an extension option; or
· There is a modification in the scope or the consideration of the
lease that was not part of the original term.
Lease liabilities are remeasured with a corresponding adjustment to the
right-of-use asset, or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
Short term and low value leases
The Group has elected to not recognise right-of-use assets and lease
liabilities for short-term leases that have lease terms of 12 months or less
and leases of low value leases. Lease payments relating to these leases are
expensed to profit or loss on a straight-line basis over the lease term.
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.
Note 18 presents the carrying amounts of the Expected Credit Losses in further
detail.
Impairment of Intangibles
The Group is required to test, whether intangible and tangible assets have
suffered any impairment based on the recoverable amount of its CGUs, when
there are indicators for impairment. Determining whether an impairment has
occurred requires an estimation of the value in use of the CGU to which these
assets are allocated. Key sources of estimation uncertainty in the value in
use calculation include the estimation of future cash flows of the CGU
affected by expected changes in underlying revenues and direct costs, and
administration costs through the forecast period, the long-term growth rates
and a suitable discount rate to apply to the aforementioned cash flows in
order to calculate the net present value. Further information regarding the
assumptions used in the calculations have been provided in Note 10.
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 2022 2021
£'000 £'000
Revenue
Interest income 2,619 1,681
Total interest income 2,619 1,681
EPPS contracts 3,335 2,536
Consultancy fees 597 436
Implementation fees 1,644 70
Subscription fees 1,607 1,288
Total fee income 7,183 4,330
IAP revenue 342 428
Advertising revenue 453 378
Console revenue 5,521 6,285
Brand revenue 1 13
Total publishing income 6,317 7,104
Gross revenue 16,119 13,115
Company 2022 2021
£'000 £'000
Intercompany interest income 2,166 2,008
Intercompany fee income 118 118
Other interest income 9 -
Gross revenue 2,293 2,126
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 2022 finance £'000 Publishing Other Total
£'000 £'000 £'000 £'000
Gross revenue 4,469 5,311 6,330 9 16,119
Cost of sales (1,153) (889) (3,033) - (5,075)
Net revenue 3,316 4,422 3,297 9 11,044
Adjusted loss before tax* (3,879) (220) (1,569) (2,352) (8,020)
Loss before tax (3,879) (220) (1,569) (2,352) (8,020)
Taxation 218 395 601 - 1,214
(Loss)/profit for the year (3,661) 175 (968) (2,352) (6,806)
Total assets 34,200 8,258 20,407 2,627 65,492
Total liabilities (19,747) (1,792) (2,911) (938) (25,388)
Net assets 14,453 6,466 17,496 1,689 40,104
*adjusted loss before tax excludes share-based payment expense
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
The majority of the Group's activities (98% of revenues) are within the UK,
with 2% earned in USA and 0% in Europe.
5. Staff costs
Analysis of staff costs:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Wages and salaries 10,365 9,011 1,384 1,440
Consulting costs 379 395 - 19
Social security costs 1,411 1,409 251 355
Pension costs arising on defined contribution schemes 454 428 38 27
Share based payment - 70 - 70
Government grants - (28) - -
12,609 11,285 1,673 1,911
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:
2022 2021
Number Number
Management 17 16
Finance 10 7
Sales & marketing 30 23
Operations 78 36
Technology 43 54
178 136
Directors' emoluments
The number of directors who received share options during the year was as
follows:
2022 2021
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 2022 2021
and Benefits Total Total
£'000 £'000 £'000 £'000 £'000
Executive Directors:
J v d Bergh 256 220 9 485 465
256 220 9 485 465
Salary Bonus Pension 2022 2021
and Benefits Total Total
£'000 £'000 £'000 £'000 £'000
Non-executive
Directors:
S Baldwin 100 - - 100 100
P Judd 70 - - 70 70
P Dentskevich 60 - - 60 50
A Wilhelmsen - - - - -
230 - - 230 220
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:
2022 2021
£'000 £'000
Performance Share Plan and Joint Share Ownership Plan Founder Award - 59
Performance Share Plan Market Value Award - 11
Performance Share Plan 2019 Award - -
Performance Share Plan 2018 Award - -
Total - 70
Performance Share Plan and Joint Share Ownership Plan Founder Award ("Found Award")
The final 25% of Founder Awards held by James van den Bergh vested on 22
February 2022 when the share price was £0.81. As a result, 395,558 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.
Performance Share Plan 2018 Award ("PSP 2018 Award")
The unvested performance conditions of this award had not been met at the end
of the vesting period.
Performance Share Plan 2019 Award ("PSP 2019 Award")
The performance conditions of this award had not been met at the end of the
vesting period .
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 2022 395,558 1,566,255 4,868,420
Granted during the year - - -
Vested during the year (395,558) - -
Exercised during the year - - -
Outstanding at 31 December 2022 - 1,566,255 4,868,420
Exercisable at 31 December 2022 1,566,255 -
*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 2022 263,158 320,000
Granted during the year - -
Vested during the year - -
Exercised during the year - -
Cancelled during the year - -
Outstanding at 31 December 2022 263,158 320,000
Exercisable at 31 December 2022 - -
No options expired during the year.
The weighted average remaining contractual life for the share options
outstanding as at 31 December 2022 was 5.21 years (2021: 6.21 years).
7. Net impairment loss on financial assets
2022 2021
£'000 £'000
At 1 January 4 10
Charge for impairment loss 50 (10)
Amounts written off in the year - 8
Amounts recovered in the year - (4)
At 31 December 54 4
At 31 December 2022, the Group had an impairment balance of £54,000 which was
allocated against loans and advances. At 31 December 2021, all of the
impairment balance was allocated against loans and advances.
The net impairment charge on financial assets during the year ended 31
December 2022 all related to loans and advances.
The net impairment charge on financial assets during the year ended 31
December 2021 all related to loans and advances.
8. Loss before income tax
Loss before income tax is stated after charging:
2022 2021
£'000 £'000
Depreciation of property, plant and equipment 108 96
Amortisation of intangible assets 2,377 1,571
Staff costs including share based payments charge 12,609 11,285
2022 2021
Fees payable to the Group's auditor (Crowe U.K. LLP) £'000 £'000
Fees payable for the audit of the company's annual accounts 82 45
Fees payable for the audit of the company's subsidiaries 98 84
Total audit fees 180 129
Non audit services
Other assurance services 14 13
Total non-audit fees 14 13
9. Taxation
Analysis of tax charge recognised in the period
2022 2021
£'000 £'000
Current tax credit (1,267) (726)
Deferred tax charge/(credit) 53 (260)
Total tax credit (1,214) (986)
Reconciliation of loss before tax to total tax credit recognised
Group 2022 2021
£'000 £'000
Loss before tax (8,020) (8,422)
Loss before tax multiplied by the standard rate of corporation tax in the UK (1,524) (1,600)
of 19% (2021: 19%)
Tax effect of:
Expenses not deductible 15 (223)
Depreciation in excess of capital allowances 253 395
Capital allowances (318) (187)
Other short term timing differences 1 (5)
R&D tax credit (1,274) (733)
Deferred tax not recognised 1,633 1,367
Total tax charge (1,214) (986)
Company 2022 2021
£'000 £'000
Loss before tax (42) (409)
Loss before tax multiplied by the standard rate of corporation tax in the UK (8) (78)
of 19% (2021: 19%)
Tax effect of:
Expenses not deductible 24 32
Brought forward losses utilised (15) -
Other short term timing differences (1) -
Deferred tax not recognised - 46
Total tax charge - -
In the Finance Bill 2022, the UK government 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 2022.
The deferred tax assets and liabilities at 31 December 2022 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
2022 2021
Group £'000 £'000
Balance at start of the year 303 43
(Charge)/credit to the statement of comprehensive income (53) 260
Balance at end of the year 250 303
Comprised of:
Losses 250 303
Total deferred tax asset 250 303
A deferred tax asset from losses in Vertus Capital Limited has been
recognised, and has been used in the year against profits in Vertus Capital
SPV 1 during the year. Unutilised tax losses in the remainder of the Group as
at the reporting date were £83,102,000 (2021:£77,124,000).
10. Intangible assets
Separately identifiable intangible Assets
Software licenses and similar assets
Client contracts
Goodwill Total
Group £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 5,490 2,579 1,642 15,746 25,457
Additions 905 2,254 - - 3,159
On Acquisition - 3 1,595 823 2,421
Disposals - (75) - - (75)
Exchange differences 4 12 - - 16
At 31 December 2022 6,399 4,773 3,237 16,569 30,978
Amortisation (1,607) (1,181) (1,070) - (3,858)
At 1 January 2022
Charge (889) (977) (511) - (2,377)
Disposals - 75 - - 75
Exchange differences - 1 - - 1
At 31 December 2022 (2,496) (2,082) (1,581) - (6,159)
Accumulated impairment losses (408) - - - (408)
At 1 January 2022
At 31 December 2022 (408) - - - (408)
Net book value
At 31 December 2022 3,495 2,691 1,656 16,569 24,411
At 31 December 2021 3,475 1,398 572 15,746 21,191
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
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 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 2022 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 2022 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 2022 was £2,691,000
(2021: £1,398,000 ). This consists of cost of £4,773,000 (2021: £2,579,000)
and accumulated amortisation of £2,082,000 (2021: £1,181,000 ). During the
year there were additions of £2,254,000 (2021: £757,000 ) and amortisation
of £977,000 (2021: £370,000 ).
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 (2021: £277,000)
during the year. Net Book value of these assets at 31 December 2022 was
£162,000 (2021: £439,000). Goodwill related to this transaction excluding
these assets at 31 December 2022 was £1,372,000 (2021: £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
(2021: £51,000). Net Book value of these assets at 31 December 2022 was
£81,000 (2021: £132,000). Goodwill related to this transaction excluding
these assets at 31 December 2022 was £1,408,000 (2021: £1,408,000).
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.
Magic Fuel
On 6 June 2022, the Group acquired a 100% equity interest in Magic Fuel Inc
("Magic Fuel"). Goodwill of £2,417,000 arose from this transaction and was
included within the publishing segment of the business. Following the
acquisition , separately identifiable intangible assets of £1,595,000
relating to the Intellectual Property of the Games in development by Magic
Fuel were recognised. These are being amortised over 5 years resulting in an
amortisation charge of £181,000 during the year. Further details of the
acquisition have been included in Note 20. Goodwill related to this
transaction excluding these assets at 31 December 2022 was £823,000 (2021:
£nil).
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 2027, a discount rate of 10%
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 2027, a discount rate of 15% 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 2027, a discount rate of 20% was used
and terminal growth rate of 3%. Revenue growth was a key assumption and was
based on Playstack's pipeline of games over the forecast period. This factors
in a number of key projects with platforms and streaming partners. In some
instances, revenue projections have been based on amounts outlined in agreed
contracts in place with customers, whilst others have been based on
progressive discussions with customers and historic sales for games of a
similar nature. The valuation of Playstack was greater than the amount of
goodwill and therefore the goodwill is not deemed to be impaired.
Magic Fuel was valued using the discounted cash flow methodology. It's net
earnings along with revenues earned in the rest of the group related to this
acquisition were forecasted to 2027, a discount rate of 20% was used and a
terminal growth rate of 3%. The valuation of this CGU was greater than the
value of goodwill and so was deemed not be impaired.
The impairment review of Playstack is most sensitive to a change in the
planned revenue growth. A 47% reduction in this growth rate could give rise to
an impairment charge.
No other reasonable change in the other assumptions set out in this note would
result currently in an impairment charge.
11. Property, plant and equipment
Fixtures & Computer equipment Right-of-Use Asset
fittings Total
Group £'000 £'000 £'000 £'000
Cost 53 78 429 560
At 1 January 2022
Additions 86 27 276 389
Disposals - (9) (429) (438)
At 31 December 2022 139 96 276 511
(44) (44) (407) (495)
Depreciation
At 1 January 2022
Charge (16) (26) (66) (108)
Disposals - 9 429 438
At 31 December 2022 (60) (62) (44) (166)
Net book value
At 31 December 2022 79 34 232 345
At 31 December 2021 9 34 22 65
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
Computer equipment Right-of-use asset
Total
Company £'000 £'000 £'000
Cost 3 167 170
At 1 January 2022
Additions 6 - 6
Disposals - (167) (167)
At 31 December 2022 9 - 9
(3)
Depreciation
At 1 January 2022 (167) (170)
Charge (2) - (2)
Disposals 167 167
At 31 December 2022 (5) - (5)
Net book value
At 31 December 2022 4 - 4
At 31 December 2021 - - -
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 - - -
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 2022 and 31 December 2022 30,189
Balance at 1 January 2021 and 31 December 2021 30,189
13. Loans and advances
2022 2021
Group £'000 £'000
Total loans and advances 24,215 16,137
Less: loss allowance (54) (4)
24,161 16,133
The aging of loans and advances are analysed as follows:
2022 2021
£'000 £'000
Neither past due nor impaired 23,875 16,062
Past due: 0-30 days 129 32
Past due: 31-60 days 77 10
Past due: 61-90 days 41 28
Past due: more than 91 days 39 1
24,161 16,133
14. Trade and other receivables
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade and other receivables 2,149 2,585 - -
Prepayments 455 467 44 52
Accrued Income 890 385 - -
VAT - - 11 33
Other debtors 2,554 1,988 - 5
Amounts due from Group Undertakings - - 83 54
6,048 5,425 138 144
Trade receivables above are stated net of a loss allowance of £nil (2021:
£nil). All receivables are due within one year.
The aging of trade receivables is analysed as follows:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Not yet due 1,960 2,182 - -
Past due: 0-30 days 117 96 - -
Past due: 31-60 days 6 88 - -
Past due: 61-90 days 9 13 - -
Past due: more than 91 days 57 206 - -
2,149 2,585 - -
15. Share capital
Group and Company
Share Capital Total
£'000 £'000
80,822,204 shares at £0.91 per share 85,706 85,706
On 12 April 2022, the Company issued 13,360,739 ordinary shares through a
Placing and an Open Offer. These were issued at £0.75 per share, raising
gross proceeds of £10,021,000. This was a discount to par value of
£2,138,000, which has been included in Other Reserves in the Statement of
Changes of Equity.
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 2022.
16. Borrowings
2022 2021
Group £'000 £'000
Loans due within one year 1,783 1,634
Loans due in over one year 16,764 11,351
18,547 12,985
Movements in borrowings during the year
The below table identifies the movements in borrowings during the year.
Group £'000
Balance at 1 January 2022 12,985
Funding drawdown 8,707
Interest expense 852
Fee amortisation 110
Repayments (3,337)
Interest paid (777)
Exchange differences 7
Balance at 31 December 2022 18,547
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
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. 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.
· 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
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade payables 529 380 28 5
Accruals 3,867 3,949 622 670
Other payables 1,636 103 - -
Corporation tax - 9 - -
Other taxation and social security 603 706 284 353
VAT 206 145 - -
6,841 5,292 934 1,028
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 2022
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 24,161 24,161 - - 24,161
Trade receivables 2,149 2,149 - - 2,149
Other receivables 3,444 3,444 - - 3,444
Cash and cash equivalents 10,273 10,273 10,273 - -
40,027 40,027 10,273 - 29,754
Financial liabilities not measured at fair value
Borrowings 18,547 18,547 - - 18,547
Trade, other payables and accruals 6,392 6,392 - - 6,392
24,939 24,939 - - 24,939
31 December 2021
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 2022
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 54,835 54,835 - - 54,835
Other receivables 94 94 - - 94
Cash and cash equivalents 2,260 2,260 2,260 - -
57,189 57,189 2,260 - 54,929
Financial liabilities not measured at fair value
Trade, other payables and accruals 934 934 - - 934
934 934 - - 934
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
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
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash and cash equivalents 10,273 7,608 2,260 786
Loans and advances 24,161 16,133 - -
Amounts owed by group undertakings - - 54,835 46,919
Trade and other receivables 5,593 4,958 138 144
Maximum exposure to credit risk 40,027 28,699 57,233 47,849
Loans and advances:
Collateral held as security
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Fully collateralised
Loan-to-value* ratio:
Less than 50% 800 2 - -
50% to 70% 271 83 - -
71% to 80% 500 192 - -
81% to 90% 701 142 - -
91% to 100% - - - -
2,272 419 - -
Partially collateralised
Collateral value relating to loans over 100% loan-to-value - - - -
Unsecured lending 21,943 15,718 - -
* 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.
2022 2021
Risk rating Stage 1 Stage 2 Stage 3 Total Total
£'000 £'000 £'000 £'000 £'000
Above average (risk rating 1-2) 11,035 - - 11,035 5,274
Average (risk rating 3-5) 10,615 - - 10,615 10,863
Below average (risk rating 6+) 1,041 1,481 43 2,565 -
Gross carrying amount 22,691 1,481 43 24,215 16,137
Loss allowance (26) - (28) (54) (4)
Carrying amount 22,665 1,481 15 24,161 16,133
Gross Carrying Amount
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2022 16,136 - - 16,136
Transfer to stage 1 (43) - 43 -
Transfer to stage 2 (957) 957 - -
Transfer to stage 3 - - - -
Net Loans originated 8,079 524 - 8,079
As at 31 December 2022 22,691 1,481 43 24,215
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
(2021: £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 2022 (2021: £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 2022 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 10,273 10,273 - - - -
Trade and other receivables 5,593 2,660 778 1,717 438 -
Loans and advances 24,161 2,785 1,020 3,616 15,954 1,249
40,027 15,718 1,798 5,333 16,392 1,249
Financial Liabilities
Trade payables, other payables and accruals 6,392 1,053 3,127 2,009 234 -
Borrowings 18,547 128 12 79 12,628 5,700
24,939 1,181 3,139 2,008 12,862 5,700
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 54% (2021: 54%).
Statement of Financial Position Vertus Capital Vertus SPV1
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Current assets 5,559 5,005 21,718 15,740
Non-current assets 69 5 - -
Current liabilities (373) 94 (21,725) (15,746)
Equity attributable to owners of the Company 2,828 2,747 (3) (3)
Non-controlling interests 2,426 2,357 (3) (3)
Income Statement Vertus Capital Vertus SPV1
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Revenue 743 522 2,214 1,380
Expenses (593) (343) (2,214) (1,193)
Profit after tax 150 86 - 187
Profit after tax attributable to owners of the Company 81 46 - 100
Profit after tax attributable to the non-controlling interests 69 40 - 87
Cash Flow Statement Vertus Capital Vertus SPV1
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Net cash used in operating activities (385) (520) (5,296) (2,922)
Net cash generated from investing activities 302 224 - -
Net cash generated from financing activities - 488 5,425 2,839
Net (decrease)/increase in cash and cash equivalents (83) 192 129 (83)
Non-controlling interest Vertus Capital Vertus SPV1
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Balance at 1 January 2,357 2,220 (3) (95)
Share of profit for the year 69 40 - 87
Change in NCI due to share issuance in the year - 97 - 5
Balance at 31 December 2,426 2,357 (3) (3)
The Group had a 72% ownership share of Bandana during the year.
Statement of Financial Position Bandana
2022 2021
£'000 £'000
Current assets 1 45
Current liabilities (5,465) (5,258)
Equity attributable to owners of the Company (3,955) (3,773)
Non-controlling interests (1,510) (1,440)
Income Statement Bandana
2022 2021
£'000 £'000
Revenue - -
Expenses (251) (981)
Loss after tax (251) (981)
Loss after tax attributable to owners of the Company (182) (710)
Loss after tax attributable to the non-controlling interests (69) (271)
Cash Flow Statement Bandana
2022 2021
£'000 £'000
Net cash from operating activities - -
Net increase in cash and cash equivalents - -
Non-controlling interest Bandana
2022 2021
£'000 £'000
Balance at 1 January (1,440) (1,169)
Share of loss for the year (69) (271)
Balance at 31 December (1,509) (1,440)
The Group's effective ownership share of Satago Financial Solutions Limited
("Satago") at the reporting date is based on the net assets of the Satago
Group at the reporting date, and the ownership waterfall following Lloyds
Banking Group's £5m investment in Satago in April 2022.
Statement of Financial Position Satago
2022 2021
£'000 £'000
Current assets 10,397 1,748
Non-current assets 617 631
Current liabilities (927) (291)
Equity attributable to owners of the Company 5,061 1,985
Non-controlling interests 5,026 103
Income Statement Satago
2022 2021
£'000 £'000
Revenue 1,860 198
Expenses (3,926) (3,284)
Loss after tax (2,001) (3,086)
Loss after tax attributable to owners of the Company 1,910 (2,905)
Loss after tax attributable to the non-controlling interests (91) (181)
Cash Flow Statement Satago
2022 2021
£'000 £'000
Net cash used in operating activities (3,035) (3,965)
Net cash (used in)/generated from investing activities (2,498) 189
Net cash generated from financing activities 7,360 2,731
Net increase/(decrease) in cash and cash equivalents 1,827 (1,044)
Non-controlling interest Satago
2022 2021
£'000 £'000
Balance at 1 January 103 294
Share of loss for the year (91) (181)
Arising from change in non-controlling interest 14 (10)
Equity Raise 5,000 -
Balance at 31 December 5,026 103
20. Acquisition of Subsidiaries
Magic Fuel
On 6 June 2022, the Group acquired a 100% equity interest in Magic Fuel Inc
("Magic Fuel").
Magic Fuel's financial year end date is 31 December 2022. Its results have
been consolidated from the date of acquisition to 31 December 2022, in line
with the Group's financial year end. The profit for the period from
acquisition consolidated in the Group's accounts was £678,000. Had the
acquisition taken place on 1 January 2022, the loss from Magic Fuel
consolidated in the Group would have been £114,000. This amount includes
transactions with other Group companies during the year.
Details of the consideration paid, the assets acquired and liabilities
assumed, the non-controlling interest recognised and the effects on the cash
flows of the Group, at the acquisition, are as follows:
£'000
Net liabilities at acquisition (47)
TruFin share of net liabilities (47)
Goodwill arising on acquisition
Total consideration 2,371
Less: fair value of identifiable net liabilities acquired (47)
2,417
Separately identifiable intangible assets 1,595
Goodwill net of separately identifiable intangible assets 822
Consideration satisfied by:
Deferred consideration 1,196
Cash 1,175
In accordance with IFRS 3, we have recognised and measured the separately
identifiable intangible assets acquired as part of the transaction. These have
been valued at £1,595,000.
21. 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 2022 25
Lease recognised in year 276
Interest 12
Payments (28)
Balance at 31 December 2022 285
Group
£'000
Lease liability recognised at 1 January 2021 120
Interest 3
Payments (99)
Balance at 31 December 2021 25
22. 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:
2022 2021
Number of shares (#)
At year end 94,182,943 80,822,204
Weighted average 90,485,862 80,822,204
Earnings attributable to ordinary shareholders £'000 £'000
Loss after tax attributable to the owners of TruFin plc (6,637) (7,071)
Adjusted earnings attributable to ordinary shareholders
Loss after tax attributable to the owners of TruFin plc (6,637) (7,071)
Adjusted for share-based payment - 70
Adjusted loss after tax attributable to the owners of TruFin plc (6,637) (7,001)
Earnings per share* Pence Pence
Basic and Diluted (7.3) (8.7)
Adjusted(1) (7.3) (8.7)
* All Earnings per share figures are undiluted and diluted.
Adjusted1 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.
23. Related party disclosures
Transactions with Directors
Transactions with Directors, or entities in which a Director or recent
Director is also a Director or partner:
2022 2021
£'000 £'000
Consultancy services provided by an ex-Director - 21
Key management personnel disclosures are provided in Notes 5 and 6.
During the year, Playstack 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 £525,000 (2021: £148,000).
24. Events after the Reporting Period
Since the year end, Satago has agreed to extend its agreement with Sage.
Initially, Satago services were offered to UK based Sage 50 packages only, but
this extension is to now include certain packages in Ireland.
Additionally, Satago signed a statement of work to embed Satago's invoice
finance service into Sage 50 and the solution was launched during Q1 2023.
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