Trufin Plc Regulatory News (TRU)

11 September 2019

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO.596/2014.

TruFin plc("TruFin" or the "Company" or together with its subsidiaries the "TruFin Group")

INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2019, MANAGEMENT CHANGE OF ROLES, ACQUISITION OF PLAYSTACK LIMITED ("PLAYSTACK") AND WRITTEN RESOLUTIONS

The Company announces:

·; unaudited interim results for the six months ended 30 June 2019;

·; a change in roles of Executive Chairman and Chief Executive Officer, Henry Kenner and Deputy Chief Executive Officer, James van den Bergh;

·; the acquisition of a majority stake in PlayStack; and

·; the circulation of certain written resolutions to its shareholders (the "Written Resolutions").

Financial Highlights

·; Combined gross revenues at Oxygen Finance Group Limited (together with its subsidiaries, Oxygen Finance Limited, Oxygen Finance Americas, Inc. and Porge Limited) ("Oxygen") and Satago Financial Solutions Limited ("Satago") were £3.1m for the six months ended 30 June 2019 (six months ended 30 June 2018: £1.7m), representing growth of 88%.

·; Gross revenues at Oxygen were £1.7m for the six months ended 30 June 2019 (six months ended 30 June 2018: £1.2m), representing growth of 42%.

·; Oxygen's clients' total procurement spend reached £20.8bn as at 30 June 2019 (as at 30 June 2018: £15.7bn), representing year-on-year growth of 32%.

·; Satago's gross interest income increased to £1.3m for the six months ended 30 June 2019 (six months ended 30 June 2018: £0.4m), representing year-on-year growth in excess of 200%.

·; Volumes in Satago's core invoice financing business increased by 124% for the six months ended 30 June 2019 compared to the six months ended 30 June 2018.

·; TruFin Group's loss before tax from continuing operations was £3.7m for the six months ended 30 June 2019 (six months ended 30 June 2018: £5.2m).

·; Distribution Capital Finance Limited ("DFC") was successfully demerged from the TruFin Group in May 2019, which has had a material impact on the scale and operations of the overall TruFin Group.

·; The investment in Zopa Group Limited ("Zopa") was sold in May 2019 for £44.5m, which was a 22% increase from its valuation at the time of the TruFin Group's IPO in February 2018.

Trading Update and Further Developments

·; The Company has previously announced on 29 July 2019 a restructuring in order to reduce Head Office costs and this continues today with Henry Kenner, the Executive Chairman and Chief Executive Officer, changing role to become Non-Executive Chairman and James van den Bergh, the current Deputy Chief Executive Officer, becoming Chief Executive Officer.

·; In spite of the significant restructuring that has occurred in the last few months the Board is confident of a successful remainder to the year. The integration of the acquisitions of 51% of Vertus Capital Limited ("Vertus") and PlayStack will be a key focus for management in the coming months and also for the Investor Day later in the year where we will expand on the prospects for all our businesses.

·; The TruFin Group announced in July that it had acquired 51% of Vertus and today we are pleased to further announce that Vertus has concluded a secured debt facility for an initial £15m with a UK high street Bank. This will enable Vertus to continue its expansion and service its large and growing pipeline.

·; Further, the TruFin Group is today pleased to announce the conversion into ordinary shares of its outstanding £3.5 million convertible loans in PlayStack, a mobile games publisher and financier, in full satisfaction and discharge of the loans, together with a further equity investment of £1.5m in PlayStack, in order to obtain a majority controlling stake. The conversion and further investment will complete later today. Growing on our existing lending relationship, this investment represents an opportunity for the TruFin Group to solidify its niche financing business in this fast-growing global sector.

The Company is circulating written resolutions to shareholders of the Company this morning proposing to:

(i) grant an increased authority for the buyback of shares,

(ii) approve an increase in the Company's authorised share capital and amendments to the Company's articles of association to remove provisions relating to the B ordinary shares and non-voting preference shares that are no longer required and as such these shares have either been cancelled or redeemed; and

(iii) approve an updated remuneration policy which the Company is proposing to reflect recent changes in the senior management and structure of the Company

Henry Kenner, Chairman and Chief Executive Officer commented:

"This has been another busy period of activity for the TruFin Group resulting in a material reorganisation of the TruFin Group in terms of the nature and scale of its operations. Following the successful demerger and IPO of DFC and the sale of our stake in Zopa, the management has been focused on:

·; re-scaling the business appropriately through an assertive reduction in Head Office costs with many functions being outsourced to other entities within the TruFin Group;

·; increasing investment in its existing businesses to successfully secure their development path; and

·; conversion of the TruFin Group's remaining convertible debt positions in line with its consistent strategy of building a stable of niche lenders. To that end, the TruFin Group has recently announced the acquisition of Vertus and today that of PlayStack.

Finally, I have today announced a change in my role as Chief Executive Officer and Executive Chairman to becoming that of Non-Executive Chairman. In making this step I will be handing the day-to-day executive reins to the talented current Deputy Chief Executive Officer, James van den Bergh, with whom I have worked for several years. This planned handover further reduces Head Office costs, whilst enabling the TruFin Group to implement the next stage in TruFin's life cycle. The Board is delighted that James has accepted this exciting and challenging role and looks forward to continue working with him to ensure TruFin achieves its wider strategic goals."

First half review

Alongside the transactions that have occurred, the remaining and new subsidiaries within the TruFin Group have performed well in the first six months of 2019 and we remain confident for the remainder of 2019. We look forward to the Investor Day later this year where we will highlight the significant value and opportunity set within each business.

In more detail:

Oxygen

Oxygen is a niche technology and professional services platform enabling the public and private sector to make early payments to their suppliers.

Oxygen's gross revenues were £1.7m for the six months ended 30 June 2019 compared to £1.2m for the six months ended 30 June 2018, representing growth of 42%.

The Early Payment client base has increased from 33 as at 30 June 2018 to 45 as at 30 June 2019. As a result of these client wins, total procurement spend of Early Payment clients increased to £20.8bn as at 30 June 2019 from £15.7bn as at 30 June 2018. Oxygen also maintained its 100% renewal record across Early Payment clients in local government with all contracts up for renewal in the period being renewed for five years.

Oxygen continues to see strong growth and traction in the UK local government market with the mature pipeline converting well. However, as previously highlighted, the core means of monetisation, namely that of on-boarding suppliers remains a consistent challenge, but measures taken last year are expected to start reaping benefits in the coming months and years.

Oxygen's net loss of £0.9m for the six months ended 30 June 2019 compared to a net loss of £1.3m for the six months ended 30 June 2018 represents an improvement of over 30%.

Porge Limited, acquired in 2018, is performing in-line with our expectations and the integration with Oxygen has gone smoothly. There has been a high level of existing customer licence renewals and indications from the increased sales effort is that the pipeline of new customers is looking materially positive.

Satago

Satago offers its customers a technically advanced invoice finance system via its online platform, which is designed to help businesses manage their cashflow.

At the start of 2019 the management of TruFin focused its resources on supporting the fast-growing balance sheet of DFC, resulting in a temporarily reduced capital allocation to Satago. Notwithstanding this, volumes in Satago's core invoice financing business increased by 124% for the six months ended 30 June 2019 compared to the same period in 2018. 

Satago expects this momentum to continue into the second half of the year as it continues to see increasing interest from its direct origination efforts together with new demand resulting from several strategic partnerships. These strategic partnerships include a number of joint initiatives expected to launch over the next 12 months which are designed to bring Satago's technology and product offerings to other large corporates and their customer bases.

To further support these strategic partnerships, and in response to demand from its own established client base, Satago is introducing a wider product offering during the final quarter of 2019 which is focused on providing efficient and ethical finance facilities to SMEs. This includes whole book and selective debtor facilities which empower these traditional factoring facility types with Satago's best-in-class technology. Satago is also introducing its own revolving credit facility product bringing a new form of flexible working capital to the market.

Satago continues to invest in its leading-edge technology with the recent opening of a Polish office. This will ensure that it remains an innovative leader within the SME finance sector and is able to support its growth and increasing market presence.

To support the anticipated demand for these new products, Satago has been seeking to secure its initial external funding capacity in addition to its own internal facilities. With negotiations at advanced stages with several credit funds and other financial institutions, it is anticipated that Satago will make an announcement as to a successful conclusion in the near future.

Customer satisfaction levels remain high and Satago continues to win numerous industry awards for its compelling customer-focused product offering. The "Best Alternative Finance Provider" at the British Bank Awards being a recent example.

As previously disclosed, share incentive arrangements for the senior management of Satago are being implemented so as to ensure that management is fully aligned with existing shareholders through the issue of Satago shares.

Vertus

Vertus provides succession finance for the IFA space through its exclusive agreement with IntegraFin plc. This is a truly scalable niche lending space and we are very excited by the opportunity to help Vertus grow in this space.

As previously announced the TruFin Group acquired 51% of Vertus in July this year through the conversion of its existing £3.65 million convertible loan and today the TruFin Group is pleased to announce that Vertus has concluded a secured debt facility of £15m with a UK high street bank which will allow it to service its large and growing pipeline. 

Vertus made a loss before tax in the year to 30 June 2019 of £0.2m (unaudited), and the TruFin Group expects Vertus to turn profitable in 2020.

PlayStack

PlayStack provides publishing and financing services to the mobile game and console sector and, as previously outlined to shareholders, is the TruFin Group's entry point into the highly attractive growth market of mobile game lending.

The TruFin Group is pleased to announce that it is converting its outstanding £3.5m convertible loans into PlayStack ordinary shares in full satisfaction and discharge of the loan, together with a further equity investment of £1.5m in PlayStack in order to obtain a controlling majority stake. This transaction will result in a holding of circa 99% in PlayStack, which may be diluted to between 75% and 99% subject to the level of take-up of pre-emptive rights by certain existing shareholders which will be known within 20 business days of this announcement. The conversion and further investment will complete automatically later this morning.

PlayStack made a loss in the year to 30 December 2018 of £5.2m and had net assets of (negative) £6.5m.

We look forward to giving shareholders more details about the opportunity set for PlayStack and PlayIgnite Limited, its funding business, during the Investor Day.

Written resolutions

The Company is today circulating written resolutions to shareholders of the Company this morning proposing, to:

(i) grant an increased authority for the buyback of shares to 13,789,997 ordinary shares (representing 15% of the Company's current issued share capital),

(ii) approve an increase in the Company's authorised share capital and amendments to the Company's articles of association; and

(iii) approve an updated remuneration policy to reflect the recent changes in the senior management and structure of the TruFin Group.

The Company has received an irrevocable undertaking to vote in favour of the resolutions from its major shareholder the Arrowgrass Master Fund Ltd. holding, in total, 68,377,819 ordinary shares in the Company, representing, in aggregate, 74.38% of the Company's issued ordinary share capital. Given the size of this shareholding, upon Arrowgrass complying with its irrevocable undertaking the ordinary resolution approving the updated remuneration policy will be passed, whilst the remaining special resolutions must be signed by members of the Company holding at least three-quarters of the total voting rights in the Company in order to be passed.

In the opinion of the Directors, each of the resolutions proposed is in the best interests of the Company and shareholders as a whole. Accordingly, the Directors unanimously recommend that shareholders vote in favour of the resolutions.

A copy of the Written Resolutions will be made available on the Company's website www.TruFin.com

Restructure of Management Incentive Plan

In connection with Henry Kenner becoming Non-Executive Chairman and James van den Bergh becoming Chief Executive Officer, certain amendments to the terms of the Company's Management Incentive Plan have been approved by the Company's Remuneration Committee and the Board. The key amendments to the terms of the Management Incentive Plan can be summarised as follows:

Henry Kenner

·; It is intended that Henry's PSP Founder Award and JSOP Founder Award (as such terms are referred to in the Company's Admission Document) shall vest in full on cessation of his role as Chief Executive Officer, the result of which is that Henry will be able to exercise his PSP Founder Award in respect of 1,369,244 ordinary shares in the Company and a corresponding number of shares will become solely owned by the trustee of the TruFin plc Employee Benefit Trust;

·; It is intended that Henry will surrender his PSP Market Value Award and his PSP Awards (as such terms are referred to in the Company's Admission Document) in respect of an aggregate of 2,559,210 ordinary shares in the Company for nil consideration;

·; The Company will not grant Henry any further awards under the Company's share plans; and

·; Henry will receive a fixed annual fee of: (i) £100,000 for his new role as Non-Executive Chairman of the Company; (ii) £15,000 for his role as director of Satago Financial Solutions Limited; and (iii) £15,000 for his role as director of Oxygen Finance Group Limited.

James van den Bergh

·; It is intended that James will receive a grant of: (i) Options (PSP Market Value Awards) over a total of 3,164,763 ordinary shares in the Company, with a strike price of £0.803 per share; and (ii) PSP Awards over a total of 320,000 ordinary shares in the Company, with performance targets set by the Remuneration Committee; and

·; James' current service agreement with the Company will be amended such that whilst his salary and annual bonus arrangements remain unchanged, his employment is fixed for two years during which six months' notice is required from James to terminate. Following the fixed two year period, a six month notice period will be required from both James and the Company to terminate his employment.

For further information, please contact:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No.596/2014. By the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of the Company is Annie Styler.

About TruFin plc:

TruFin plc is the holding company for an operating group of companies that are niche lenders and early payment providers. TruFin Group combines the benefits of both the traditional relationship banking model and developments in the fintech sector. 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

INDEPENDENT REVIEW REPORT TO TRUFIN PLC

We have been engaged by the company to review the condensed set of financial statements in the half‐yearly financial report for the six months ended 30 June 2019 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 22. We have read the other information contained in the half‐yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half‐yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half‐yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the TruFin Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half‐yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half‐yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half‐yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

Crowe U.K. LLP

Statutory Auditor

London, United Kingdom

10 September 2019

UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

EARNINGS PER SHARE

UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

The financial statements were approved by the Board of Directors on 10 September 2019 and were signed on its behalf by:

Chairman and Chief Executive Officer

UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY

UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIALSTATEMENTS

1. Accounting policies

Basis of preparation

The annual financial statements of TruFin plc are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union.

The condensed set of financial statements included in this Interim Financial Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34'). This condensed set of Financial Statements has, with exception of the adoption of IFRS 16 Accounting for Leases, been prepared by applying the accounting policies and presentation that were applied in the preparation of the TruFin Group's published Financial Statements for the year ended 31 December 2018.

The condensed set of financial statements included in this Interim Financial Report for the six months ended 30 June 2019 should be read in conjunction with the annual audited financial statements of TruFin plc for the year ended 31 December 2018.

Following the demerger of DFC from the Group, the comparatives of the condensed interim statement of comprehensive income and relevant supporting notes have been re-presented, disclosing separately results for continuing and discontinued operations.

Going concern

The Directors are satisfied that the TruFin Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of the report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Group information

The TruFin Group ("the Group") is the consolidation of TruFin plc, TruFin Holdings Limited ("THL"), Oxygen Finance Group Limited ("OFGL"), Oxygen Finance Limited ("OFL"), Oxygen Finance Americas Inc.("OFAI"), Porge Limited ("Porge"), TruFin Software Limited ("TSL"), Satago Financial Solutions Limited ("SFSL"), Satago Financial Solutions z.o.o., Distribution Finance Capital Limited ("DFC") (which Demerged from the Group in May 2019) and AltLending (UK) Limited.

Additionally, the Company held:

• a 50% interest in a joint venture - Clear Funding Limited ("Clear Funding"), which was struck off on 30 April 2019.

• a 40% interest in an associate, PlayIgnite Ltd, which is not material to the Group.

• a minority interest investment in Zopa Group Limited, which was sold in May 2019.

The principal activities of the Group are the provision of niche lending and early payment services.

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.

Significant accounting policies and use of estimates and judgements

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting judgements and key sources of estimation uncertainty. It also requires the exercise of judgement in applying the TruFin Group's accounting policies. There have been no material revisions to the nature and the assumptions used in estimating amounts reported in the annual audited financial statements of TruFin plc for the year ended 31 December 2018.

The accounting policies, presentation and methods of computation in the audited financial statements have been followed in the condensed set of financial statements. Any new or amended policies are included below.

IFRS 16 - Leases

IFRS 16 became effective for accounting periods beginning on or after 1 January 2019 and has superseded IAS 17 Leases.

IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting and has been replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others.

2. General information

TruFin plc is a public limited company incorporated in Jersey. The shares of the Company are listed on the Alternative Investment Market. The address of the registered office is 26 New Street, St Helier, Jersey, JE2 3RA.

A copy of this Interim Financial Report including Condensed Financial Statements for the period ended 30 June 2019 is available at the Company's registered office and on the Company's investor relations website (www.trufin.com).

3. Interest and fee income

*Early Payment Programme Services

The above figures are from continuing activities with comparatives restated accordingly based on information drawn from prior period financial statements.

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:

Provision of distribution finance products and invoice discounting. For results during the reporting period, this corresponds to the results of DFC, SFSL and AltLending.

Provision of Early Payment Programme Services. For results during the reporting period, this corresponds to the results of OFGL, OFL, OFAI and Porge.

Revenue and costs arising from investment activities and peer-to-peer lending. For results during the reporting period, this corresponds to the results of TruFin Software Limited, TruFin Holdings Limited, the Group's investment in Zopa and TruFin plc.

The results of each segment, prepared using accounting policies consistent with those of the Group as a whole, are as follows:

*adjusted operating loss excludes share-based payment expense

The figures in this note are from continuing activities with comparatives restated accordingly based on information drawn from prior period financial statements.

5. Staff costs

Analysis of staff costs:

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:

Key management

The Directors consider that key management personnel include the Executive Directors of TruFin plc and the Chief Operating Officer. These individuals have the authority and responsibility for planning, directing and controlling the activities of the Group.

The figures in this note are from continuing activities with comparatives restated accordingly based on information drawn from prior period financial statements.

6. Employee share-based payment transactions

The employment share-based payment charge comprises:

Performance Share Plan and Joint Share Ownership Plan Founder Award ("PSP and JSOP")

In 2018, 3,407,895 shares were granted to selected members of senior management of which the share price at date of grant was £1.90 per share. The award was structured as a Performance Share Plan and a Joint Share Ownership Plan. The Performance Share Plan was structured as a nil cost option with no performance conditions attached, although the individuals are subject to continued employment until February 2021. The Joint Share Ownership Plan allowed the employee to participate in the growth in value over and above the grant price of £1.90. The shares vest 25% on each anniversary of the grant date.

Following the demerger, there was a modification to the award. The £1.90 price above which the employee was able to participate in value growth was adjusted proportionally by reference to the respective share prices of DFC and TruFin to £0.85. This modification has not resulted in a change in the valuation of the award and this continues to be recognised over the remainder of the original vesting period.

As part of the demerger all TruFin shareholders received one DFC listed share for each TruFin share held. As the option holders were entitled to TruFin shares, they were given one DFC share for each option held. The effect of this gave rise to an Employers National Insurance liability of £419,000, which was paid in July 2019.

Performance Share Plan Market Value Award ("PSP Market Value")

In 2018, 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 shares on vesting 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 Awards was split into two:

• Part of the award remained as an option in respect of TruFin shares ("TruFin Market Value Awards")

• Part of the award is in respect of DFC listed shares

The TruFin Market Value Awards is on the same terms as the original PSP Market Value Awards except that:

• The exercise price has been adjusted to £0.85 to reflect the demerger

• Following the return of value to shareholders in June 2019, the exercise price was further adjusted to £0.80.

The DFC Market Value award took the form of a restricted share award of 2% of the DFC Listed Shares under which the award holder will receive nil cost DFC listed shares. These transfer restrictions and clawback fall away over time (i.e. 33.33% per year over three years). The first 33% will become freely transferable and cease to be subject to clawback on 21 February 2020 and each subsequent tranche on the following two anniversaries. The effect of this award gave rise to an Employer's national insurance liability on TruFin plc of £265,000 which was paid in July 2019.

Performance Share Plan 2018 Award ("PSP 2018")

In 2018, 1,000,001 shares were granted to the senior management team. The PSP 2018 award was structured as a nil cost option. The vesting of this award was subject to the holder being in continued employment until February 2021 and the Company achieving certain financial metrics over a three‐year period.

In order to reflect the impact of the demerger and as the performance condition relating to the business of DFC will be achieved in full due to the demerger, the PSP 2018 award was adjusted as follows:

·; the awards part vested and were satisfied by way of a cash payment calculated by reference to 50% of the shares subject to the award and a price of 190p per share. The cash payment will be made at the time of the annual bonus cycle in February 2020.

·; the awards have continued in respect of 100% of the TruFin shares, but the performance condition will relate solely to the business of Oxygen.

Due to the part vesting as a result of the demerger, a charge of £950,000 and £131,000 Employers National Insurance has been accrued for.

Performance Share Plan 2019 Award ("PSP 2019")

The PSP 2019 award was structured as a nil cost option. The vesting of this award was subject to the holder being in continued employment until February 2022 and the Company achieving certain financial metrics over a three‐year period.

In order to reflect the impact of the demerger and a new performance condition related to the granting of a bank licence to DFC, the PSP 2019 award was adjusted as follows:

·; if the new performance condition related to DFC is met, the award will be satisfied by way of a cash payment calculated by reference to 50% of the award. The cash payment will be made at the time of the annual bonus cycle in February 2020.

·; the awards have continued in respect of 50% of the TruFin shares, but the performance condition will relate to the businesses of Satago and Oxygen.

A charge of £972,000 and £134,000 Employers National Insurance has been provided for as a contingent liability for the DFC related performance condition of the PSP 2019. While the granting of a licence is at the discretion of the regulator, the Board is of the view that the performance condition will be met.

The charges incurred as a result of the demerger and subsequent modifications of the awards have been included within discontinued operations in Note 9.

A breakdown of these charges is shown below.

Employees are responsible for settling their own tax obligations related to these awards as and when they arise. The Company will pay any Employers NI that becomes due on these awards.

7. Provision for commitments and other liabilities

Management have recognised a provision of £194,000 (31 December 2018: £299,000) in relation to uncertain tax positions prior to 31 December 2016. Although advice has been taken, the legislation is complex and could result in different interpretations. The amount recognised is the best estimate of the consideration required to settle the present obligation at the balance sheet date. £105,000 of the provision had been recognised by DFC and as such following the demerger, the provision is no longer part of the Group.

A provision of £750,000 had been made in 2018 for the deferred consideration payable for the acquisition of Porge by Oxygen. The deferred consideration was paid in the second quarter of 2019 as Porge met certain revenue targets.

A provision of £1,106,000 has been included for the cash settled portion of the PSP 2019 award (as shown in Note 6).

8. Loss before income tax

Loss before income tax is stated after charging:

9. Discontinued operations

On 8 May 2019, DFC was demerged from the group. Its results for the period from the start of the year to the date of demerger have been included within this note.

Also included within this note are; the costs to the Group associated with the demerger and the fair value uplift in the value of DFC prior to its demerger from the Group.

10. Taxation

Analysis of tax (charge)/credit recognised in the period

Deferred tax asset

The deferred tax asset is in respect of Oxygen's historical tax losses and it is considered probable that future taxable profits of Oxygen and the wider Group will be able to be relieved against these losses. Although the Board remain satisfied that Oxygen is still able to deliver its expected growth and profitability, the Directors have undertaken an impairment review and reassessed the period over which losses may be utilised. Based on this reassessment an impairment of £1,789,000 has been recorded. Although impaired, the losses do remain available to carry forward and may regain value in future periods.

11. Intangible assets