Trufin Plc Regulatory News (TRU)

29 September 2021

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

INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2021 (UNAUDITED)

• Combined gross revenue for the Group increased 18% to £4.9m (H1 2020: £4.2m). H1 2020 benefited from interest income from Distribution Finance Capital Ltd ("DFC"). Excluding this income, H1 2021 gross revenue rose by 28% over H1 2020

• Gross revenue at Playstack Ltd ("Playstack") increased 79% to £2.2m (H1 2020: £1.2m)

• Gross revenue at Oxygen Finance Group Limited (together with its subsidiaries, Oxygen Finance Limited, Oxygen Finance Americas Inc. and Porge Limited) ("Oxygen") increased by 6% to £1.8m (H1 2020: £1.7m)

• Gross interest income and fee income at Satago Financial Solutions Limited's ("Satago") core invoice financing division was £0.3m (H1 2020: £0.4m) as Satago focused on Lending-as-a-Service ("LaaS") solutions with Lloyds Bank plc ("Lloyds Bank" or the "Bank") and other potential strategic partners

• Gross interest income and fee income at Vertus Capital Limited ("Vertus") increased 26% to £0.6m (H1 2020: £0.5m)

• TruFin Group's loss before tax improved to £5.2m (H1 2020: £5.5m)

Post period end developments and outlook

• Playstack signed two further contracts with global technology platforms during September 2021, underpinning the company's confidence in its gaming IP and go-to-market strategy. Playstack's new brand offering introducing real world brands into the gaming space, is expected to launch in Q4 2021.

• Oxygen's Q3 2021 revenue is expected to be 20% ahead of the same period in 2020. Having maintained consecutive positive quarterly EBITDA throughout 2021, Oxygen will post its first cash flow positive month during 2021.

• Alongside positive momentum with its existing trial partner, Lloyds Bank, Satago is in discussions with several other potentially significant partners.

• After a £0.5m capital injection into Vertus by TruFin and another existing shareholder, Vertus has successfully renegotiated the terms of its collaboration with IntegraFin Holdings plc ("IntegraFin") and renewed terms of finance with the high street bank it partners with. These multi-year renewals are expected to position Vertus for meaningful growth in profitability in the coming years.

James van den Bergh, Chief Executive Officer commented:

"Notwithstanding the challenges posed by the pandemic, I am pleased with the Group's progress. TruFin invests at the early stage of a company's life cycle, guiding the company towards sustainable growth, profitability and ultimately an exit. As such, it is pleasing to report that during 2021 both Oxygen and Vertus will record their first cash generative months. This underscores the Group's strategy and supports the Board's decision not to divest either of these subsidiaries earlier in the year.

Alongside Satago's trial with Lloyds Bank, which continues apace, management continue to work on further potentially significant strategic partnerships.

Given the progress made at every level of the Group we believe there remains significant scope for value creation in the near and medium term and I look forward to updating shareholders on our continued progress before year end.

With a significantly reconstituted institutional shareholder base and meaningful progress across all the subsidiaries, we can look to the future with confidence."

For further information, please contact:

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

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.

Chief Executive's Statement

The subsidiaries within the TruFin Group have been resilient in the first six months of 2021 and the board remains confident regarding prospects for the remainder of 2021.

As at 31 August 2021, the following assets were not less than:

• £9.0m of cash or cash equivalents

• £0.6m of assets within the Satago Group's loan book

• £2.3m share of net assets in Vertus Capital Limited

The TruFin Group has no more than £3.5m in near-term liabilities.

Playstack

Playstack is a gaming technology business providing publishing and financing services to the mobile game and console sector. Playstack, as previously announced, was the Group's entry point into the highly attractive growth market of mobile game lending and is a niche player in the gaming ecosystem.

Playstack experienced significant growth during 2020, driven by the successful launch of its console game Mortal Shell. During September 2021, Playstack signed two further deals with global technology partners, underpinning its confidence for full year 2021.

In addition, Playstack continues to develop its own innovative technology that increases the revenue generating potential of its game portfolio. The official launch of this technology has been delayed, due to the lack of in-person events and brands initially retrenching their marketing spend, focusing instead on existing channels; we now expect to launch the platform by the year end.

Oxygen

Through progressive payment practices, big data and expertise, Oxygen allows public sector and private organisations to trade more effectively. Payments become frictionless and data becomes information, driving growth and efficiency, resulting in better social and economic outcomes.

During the first half of 2021, Oxygen's gross revenues increased by 6%, although we do not believe this fully reflects the progress made during the period. As Covid-19 compensation payments rolled off late in 2020, Oxygen was exposed to a short term lull in demand as some clients took longer to return to normal. Oxygen has always believed that strong long-term relationships trump short term gains and has worked constructively with its clients to ensure the early payment programmes were rapidly re-activated and returned to pre-pandemic levels.

Oxygen has maintained its quarterly EBITDA profitability record since Q4 2020 and will record its first cash flow positive month during 2021. Given the long-term contracts and the period taken for contracts to produce meaningful revenues, we expect Oxygen to continue to increase its profitability in the coming years benefiting from operational gearing. The board believes that Oxygen is becoming an increasingly attractive asset uniquely positioned within its sector.

Oxygen's clients' total procurement spend increased to £22.5bn as at 30 June 2021 (30 June 2020: £21.6bn), whilst the transacted spend eligible for discounts to be applied on the Oxygen platform rose to £315m, an increase of 24% over the prior year. This equates to an addition of approximately £25m each month to client programmes, significantly outperforming previous years. Total suppliers onboarded rose by 130 during the first half of 2021 increasing to 3,252 as at 30 June 2021. With an ever-growing client base this trend is expected to continue and is the direct driver of revenue from Early Payment Programmes.

Oxygen's FreePay product continues to gather momentum, providing councils with the ability to pay local, small and micro suppliers early without charge. Over 2,000 suppliers now benefit from this unique working capital benefit. FreePay is viewed by management and clients alike as crucial support to the local economies within the UK and contributes directly to the social value agendas of Oxygen's clients.

The appetite for solutions continues to grow, despite the impact of delayed decisions due to the Covid-19 pandemic and local elections, as evidenced by new client wins for Oxygen in the first half of 2021. As at the end of June 2021, Oxygen had 52 early payment clients (and 108 unique clients versus 92 at the same stage in 2020) and has maintained its 100% renewal record for early payment clients. The pipeline of new prospects continues to remain strong.

Oxygen dominates its niche market and despite the distraction Oxygen endured during the sales process in the first half of 2021, it has achieved monthly profitability ahead of schedule.

Satago

Satago offers its customers a technically advanced invoice finance and cashflow management system via its online software platform. As reported during 2020, its core lending has been impacted by the Covid-19 pandemic, through both the decreased trading activities of its client base and disruption in the lending market caused by the Government backed lending schemes.

As a result of these measures, coupled with Satago's strategy of focusing on the LaaS solutions, revenues from its invoice finance offering declined in the first half.

Satago's trial with Lloyds Bank, announced in December 2020, was extended during June 2021 and we will update shareholders before the year end as to the conclusion of the trial. As part of the partnership, Satago is developing further integrations with the Bank's infrastructure, driving additional reach throughout the Bank's regional sales network.

As the demand for LaaS solutions grows, Satago will continue to lend from its own balance sheet. However, discussions with strategic partners have highlighted significant appetite from these organisations to lend from their own balance sheets. As a result, going forward, Satago will operate a hybrid model of both 'own balance sheet financing' and 'partner balance sheet financing' in line with its new focus on LaaS solutions and an embedded finance model.

As previously outlined, Satago is in discussions with a number of other potential strategic partners which could, if successful, result in additional growth for the business.

Vertus

Vertus provides succession finance for the IFA space through its collaboration with IntegraFin. This is a scalable niche lending space as more Financial Planners are expected to retire in the coming years, leading to further consolidation in the advice market. Vertus ensures that planning firms can remain independent and offer their clients quality and bespoke advice throughout a succession process.

The loan book has performed exceptionally well throughout 2020 and 2021, with no credit losses since inception (August 2016). We anticipate Vertus' loan book growth will remain strong into year end and the renegotiation of Vertus' collaboration with IntegraFin and its financing agreement with a high street bank will solidify Vertus' position in the market and improve future profitability.

We expect that Vertus will be profitable on a monthly basis during 2021 and that with the successful conclusion of a £0.5m capital increase, in which TruFin participated, the capital base for Vertus is now in place to enable further growth and profitability. Vertus is now targeting a loan book of £22m by the end of Q1 2022 (from £12m as at 31 December 2020) and has a three-year loan book target of £50m.

Covid-19 pandemic impact update

In relation to the Covid-19 pandemic, the safety of our employees was, and is, of paramount importance. The Company ensured it gave continuous support to employees around flexible working, wellbeing issues and other concerns and all the subsidiaries are now looking at how best to work on an ongoing basis.

It is important to note the impact the Covid-19 pandemic has had on the Group, specifically:

• Vertus has seen their deal cycle extend due to slower regulatory processing times (specifically FCA approvals for change of control).

• Similar to 2020, Satago's subscription software sales flattened during the first half of 2021. However, due to a strong pipeline and distribution deals with large partners, management is confident of future growth.

• Oxygen's predominantly public sector client base absorbed much of the frontline challenges associated with the Covid-19 pandemic and, whilst spending associated with social care increased, other planned spend, such as construction, was reduced.

• Clients gave priority to supporting their local communities by accelerating payments to their own supply chains in line with government guidance. Some of Oxygen's clients temporarily suspended discounts for a period, with Oxygen compensated for this change. Transacted spend eligible for discounts has now recovered to pre-Covid-19 pandemic levels.

• The pandemic has impacted the growth of Playstack's brand division as clients retrenched their marketing spend and focused it on existing channels. However, Playstack is excited by the opportunity and looks forward to showcasing the technology to shareholders in due course, with a formal launch expected by year end.

TruFin has maintained an excellent dialogue with Arrowgrass Master Fund Limited since they sold 53.83% of the Company in February 2021 and the Board continue to focus on maximising value for all shareholders.

The Board looks to the future with confidence and will keep shareholders updated on the Company's progress.

UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

The financial statements were approved by the Board of Directors on 28 September 2021 and were signed on its behalf by:

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 FINANCIAL STATEMENTS

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 United Kingdom.

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 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 2020.

The condensed set of financial statements included in this Interim Financial Report for the six months ended 30 June 2021 should be read in conjunction with the annual audited financial statements of TruFin plc for the year ended 31 December 2020, which were delivered to the Jersey Financial Services Commission. The audit report for these accounts was unqualified and did not draw attention to any matters by way of emphasis.

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,

• Oxygen Finance Group Limited, Oxygen Finance Limited, Oxygen Finance Americas Inc. and Porge Ltd (the activities of which were hived up into Oxygen Finance Limited in 2020), together the ("Oxygen Group"),

• TruFin Software Limited,

• Satago Financial Solutions Limited, Satago SPV 1 Limited, Satago SPV 2 Limited, Satago Financial Solutions z.o.o, together ("Satago"),

• AltLending (UK) Ltd,

• Vertus Capital Limited and Vertus SPV 1 Limited, together ("Vertus"), and

• Playstack Limited, Bandana Media Ltd, Playignite Ltd, Playstack z.o.o, Playstack OY, Foxglove Studios AB, Playtest Ltd (dissolved 24 March 2020), Playstack Inc and Playignite Inc, together the ("Playstack Group").

Additionally, the Playstack Group also includes four 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, and

• A 26% interest in Stormchaser Games Ltd.

The principal activities of the Group are the provision of niche lending, early payment services and mobile game publishing.

The financial statements are presented in Pounds Sterling, which is the currency of the primary economic environment in which the Group operates. Amounts are rounded to the nearest thousand.

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 2020.

The accounting policies, presentation and methods of computation in the audited financial statements have been followed in the condensed set of financial statements.

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 2021 is available at the Company's registered office and on the Company's investor relations website (www.trufin.com).

3. Gross revenue

*Early Payment Programme Services

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 invoice discounting and succession financing for the IFA space. 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 the Oxygen Group.

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 TruFin Software Limited, TruFin Holdings Limited 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

*adjusted operating loss excludes share-based payment expense

*adjusted operating loss excludes share-based payment expense

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:

Directors' emoluments

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")

On 21 February 2018, 3,407,895 shares were granted to selected founder members of senior management of which the share price at date of grant was £1.90 per share. The awards are structured as a Performance Share Plan and a Joint Share Ownership Plan. The Performance Share Plan is structured as a nil cost option with no performance conditions attached. The awards were also granted subject to continued employment until February 2021. The Joint Share Ownership Plan allows the employee to participate in the growth in value over and above the grant price of £1.90. The shares vest 25% on each anniversary of the grant date.

The first 25% of shares (851,973 shares) vested on 21 February 2019 when the share price was £1.98. As a result 817,550 shares subject to the Joint Share Ownership Plan became fully owned by the trustee of the Company's employee benefit trust (the "EBT") and 34,423 became fully owned by senior management.

At the time of Distribution Finance Capital Ltd's ("DFC's") demerger from the Group, there was a modification to the Founder Award. The £1.90 price above which the employee was able to participate in value growth under the Joint Share Ownership Plan was adjusted proportionally by reference to the respective share prices of DFC and TruFin to £0.85. This modification has not resulted in a change in the valuation of the award and this continues to be recognised over the remainder of the original vesting period.

As part of the demerger, holders of Founder Awards also received an award in respect of DFC shares which gave rise to an employer's National Insurance liability of £419,000, which was paid in July 2019.

On 11 September 2019, in connection with his change of role, the unvested Founder Awards in respect of 1,369,244 shares held by Henry Kenner fully vested, the result of which was that all of the relevant shares ceased to be subject to the Joint Share Ownership Plan and instead become fully owned by the EBT. In addition, 1,369,244 shares subject to the Performance Share Plan ceased to be subject to continued employment condition.

The second 25% of Founder Awards held by James van den Bergh vested on 21 February 2020 when the share price was £0.26. As a result, 395,560 shares subject to the Joint Share Ownership Plan became fully owned by the EBT and James' nil cost option under the Performance Share Plan vested in respect of the same number of shares.

On 27 November 2020, Henry Kenner exercised his nil cost option under the Performance Share Plan which resulted in 1,807,217 shares being transferred from the EBT to Henry Kenner on 22 December 2020. This gave rise to an Employer's National Insurance liability of £82,000 which was paid in January 2021.

The third 25% of Founder Awards held by James van den Bergh vested on 21 February 2021 when the share price was £0.78. As a result, 395,560 shares subject to the Joint Share Ownership Plan became fully owned by the 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")

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 plc shares ("TruFin Market Value Award")

• Part of the award became an award in respect of DFC shares ("DFC market Value Award")

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

• The exercise price was adjusted to £0.85, and the share price milestones were adjusted to reflect the demerger

• The exercise price was further adjusted to £0.80, and the share price milestones were further adjusted, to reflect the return of value to shareholders in June 2019

• The exercise price was further adjusted to £0.71, and the share price milestones were further adjusted to reflect the return of value to shareholders in December 2019

The modification has not resulted in a change in the valuation of the award and this continues to be recognised over the remainder of the original vesting period.

The grant of the DFC Market Value Award gave rise to an employer's National Insurance liability for the Company of £265,000 which was paid in July 2019.

Performance Share Plan 2018 Award ("PSP 2018")

On 21 February 2018, options to acquire 1,000,001 shares were granted to the senior management team. The PSP 2018 Award is structured as a nil cost option. The vesting of this award is subject to the holder being in continued employment until February 2021 and the subsidiary companies achieving certain financial metrics over a three‐year period.

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

• the award part vested and was satisfied by way of a cash payment calculated by reference to 50% of the shares subject to the award and a price of £1.90 per share. The cash payments were made in September 2019; and

• the awards have otherwise continued in respect of 100% of the TruFin plc shares, but the performance condition now relates solely to the business of the Oxygen Group.

In 2019, PSP 2018 Awards in respect of 736,843 shares lapsed following members of senior management leaving the Group and changing roles.

The remaining performance condition of this award has not been met and as such no charge has been recognised (2020: £nil).

Performance Share Plan 2019 Award ("PSP 2019")

On 11 September 2019 an option to acquire 320,000 shares was granted to James van den Bergh. The PSP 2019 Award is structured as a nil cost option. The vesting of this award is subject to the holder being in continued employment until September 2022 and subsidiary companies achieving certain financial metrics over a three‐year period. It is highly improbable that the vesting conditions will be met and as such there has been no charge in the period (2020: £nil).

7. Issuance of subsidiary shares to employees

On 6 May 2021, 32,500 unallocated B ordinary shares in Oxygen Finance Group Limited ("OFGL") were allocated to key Oxygen staff as part of its Management Incentive Plan ("Oxygen MIP"). To date 115,000 B ordinary shares have been issued to Oxygen staff, which is 11.6% of the issued and fully authorised share capital of OFGL.

On 9 March 2020, Satago Financial Solutions Limited ("SFSL") implemented its Management Incentive Plan ("Satago MIP"). Under the Satago MIP key Satago managers were given the opportunity to acquire new created ordinary shares in the capital of SFSL. 20% (750,000 ordinary shares) of the fully diluted share capital has been made available under the Satago MIP, and, to date, 590,625 ordinary shares have been issued to Satago managers.

8. Loss before income tax

Loss before income tax is stated after charging:

9. Taxation

Analysis of tax charge recognised in the period/year

Deferred tax asset

A deferred tax asset was recognised in the prior year in respect of Vertus Capital SPV 1 Limited, as it became profitable.

In the prior year, the deferred tax asset in respect of Oxygen was derecognised.

10. Intangible assets

Client contracts comprise the directly attributable costs incurred at the beginning of an Early Payment Scheme Service contract to revise a client's existing payment systems and provide access to the Group's software and other intellectual property. These implementation (or "set up") costs are comprised primarily of employee costs.

The useful economic life for each individual asset is deemed to be the term of the underlying Client contract (generally 5 years) which has been deemed appropriate and for impairment review purposes, projected cash flows have been discounted over this period.

The amortisation charge is recognised in fee expenses within the statement of comprehensive income, as these costs are incurred directly through activities which generate fee income.

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.

Goodwill and "Separately identifiable intangible assets" arise from acquisitions made by the Group.

11. Property, plant and equipment