TIDMTRU TIDMTRU
RNS Number : 6108A
TruFin PLC
13 September 2018
13 September 2018
TruFin plc
("TruFin" or the "Company" or together with its subsidiaries
"TruFin Group")
INTERIM FINANCIAL REPORT FOR THE SIX MONTHSED 30 JUNE 2018
Financial Highlights
-- Combined gross revenues were GBP3.6m for the six months ended
30 June 2018 (six months ended 30 June 2017: GBP1.5m) representing
growth of 142%
-- Combined loans and advances to customers were GBP74m as at 30
June 2018 representing growth in excess of 125% in the first half
of 2018 and growth in excess of 500% over the last twelve
months
-- Oxygen's clients' total procurement spend reached GBP15.7bn
as at 30 June 2018 (31 December 2017: GBP11.3bn)
-- Adjusted Loss Before Tax and Exceptional Items and share
based payment expense was GBP7.1m (six months ended 30 June 2017
loss: GBP4.0m)
-- Consolidated net assets as at 30 June 2018 of GBP159m (31 December 2017: GBP91m)
-- The investment in Zopa was revalued upwards by GBP8.0m to
GBP44.5m following a recent funding round to support capital
investment required to build a next generation bank.
6m to 6m to 6m to
30 June 31 December 30 June
2018 2017 2017
Financials and KPI's (Unaudited) GBP'000 GBP'000 GBP'000
Gross Revenue 3,593 2,291 1,483
Adjusted Loss:
Loss before tax (8,323) (5,650) (4,352)
Add: exceptional items - - 330
Add: share-based payment
charge 1,191 - -
Adjusted Loss (7,132) (5,650) (4,022)
-------------------- --------------------- ---------------------
Gain on investment in Zopa 8,000 2,578 22
Net Assets (GBP 000's) 158,743 91,396* 43,332
Loan Book at period end
(GBP000's) 73,899 32,709* 11,410
Total volume of Loans written
(GBP'000) 107,015 47,374 15,280
DFC: Number of dealers on
to programme (#) 371 246 80
Oxygen: Clients' Total annual
procurement spend under
contract (GBPbn) 15.7 11.3 7.4
Average Headcount for the
TruFin Group (#) 115 69 61
*Audited figures
Trading Update
-- As at 31 August 2018 the combined loans and advances were
GBP89m representing growth in excess of 170% since 31 December
2017. We expect growth to continue into the year end targeting
combined loans and advances of GBP120m
-- DFC's growth remains strong with a growing pipeline. With
such robust demand and prior to obtaining a banking licence, it is
unsurprising that capital is the limiting factor to writing more
business and we are actively addressing this issue
-- DFC's application for a UK banking licence was submitted to
the PRA/FCA on 28 June 2018. We are in active dialogue with the
regulators and will continue to keep investors updated as
appropriate
-- Oxygen continues to win and implement new business mandates.
New streamlined processes to improve client implementation and
supplier onboarding were introduced in the period and are proving
effective, although the full benefits have yet to be monetised
-- Satago is pursuing several new corporate partnerships as it
becomes a meaningful competitor in its core financing business
whilst also experiencing strong growth in its other niche lending
activities
-- Zopa's UK banking licence application continues in line with its schedule.
Post Balance Sheet Update
-- Oxygen recently acquired Porge Ltd, a provider of
evidence-based public sector market insight services and research
products. This strategically enhances Oxygen's product
offering.
Henry Kenner, Chairman and Chief Executive Officer
commented:
"This has been a pleasing first half for the TruFin Group with
activity levels post IPO continuing apace.
We continue to invest in the businesses and confidence levels
are such that we have accelerated some of these investments whether
in people, systems or a small bolt-on acquisition. This accelerated
investment and associated cost lays down the foundations for
achieving our long-term goals.
Clearly the banking licence applications are a focus. Whilst the
applications have been submitted we await the outcomes and will
update investors in due course.
In conclusion, the TruFin Group remains robust and exciting. The
businesses are rapidly being recognised as quality providers of
niche finance and early payment provision and this is having
tangible effects in the scale and depth of opportunities being
presented to us. Whilst we are engaging with these, we remain
focused on our current core product offerings. As such the Board
and Executive Management are working effectively to ensure that an
appropriate balance is achieved between investment in strategic
long-term objectives and medium-term financial rewards."
For further information, please contact:
TruFin plc
Henry Kenner, Chief Executive Officer 0203 743 1340
James van den Bergh, Deputy Chief Executive
Officer
Raxita Kapashi, Chief Financial Officer
Macquarie Capital (Europe) Limited (NOMAD and
broker)
Alex Reynolds
Nicholas Harland 0203 037 2000
Blue Pool Communications (PR)
Nicholas Lord 07501 271 083
About TruFin plc:
TruFin plc is the holding company for an operating group of
companies that are niche lenders and early payment providers. The
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. More information
is available on the Company website www.TruFin.com.
FIRST HALF REVIEW
First half review
The TruFin Group has performed well in the first six months of
2018 and we remain optimistic for the remainder of 2018. Businesses
in detail:
DFC
DFC's loan book growth continues and ended the first half 111%
higher than at the start of the year.
The number of manufacturers and dealers signed up has been
strong and there is a growing pipeline. Additionally, as DFC
becomes more widely recognised the lending opportunities are
increasing in terms of frequency, size and quality.
Portfolio diversification has been accelerated as lending to the
industrial and agricultural sectors has been increased and the
technology sector is now being actively explored.
Pricing levels have largely remained resilient over the period.
That said, customer behaviour coupled with the larger financing
programmes (with generally higher quality corporates) have meant
that revenues in the first half of 2018, whilst increasing in
excess of 98% over the second half of 2017, have not mirrored
like-for-like the growth in the loan book.
Credit quality as mentioned remains high with zero actual losses
and an impairment provision in accordance with IFRS9 at 0.2%.
We continue to build out the core business with accelerated
investment being allocated to the roll-out of the personnel,
systems and processes commensurate with being a bank.
The management team have been heavily focused on submitting the
banking licence application and the application was submitted on 28
June 2018. Whilst we await the outcome, the exact timing of any
decision is in the hands of the regulators.
Satago
Satago's core invoice financing book has grown by over 140% in
the first half, albeit from a low base, and we expect this momentum
to continue. With customer satisfaction levels remaining high,
Satago is seeing increasing interest from direct origination and
also from several large organisations seeking partnerships.
Financing opportunities are already being sourced from one key
partner and we expect to expand these relationships into the year
end.
Actual default levels remain low, whilst IFRS9 has meant an
impairment provision of 1.6%.
Within its niche lending business, the initial Vertus funding
transaction was completed and the team is busy originating new
transactions. Meanwhile in the mobile games vertical, PlayStack
continues to launch its library of new games and whilst some of
these have been marginally delayed, the remainder of the year has
an extremely full launch programme.
Satago's leading edge technology continues to be the recipient
of material and increased investment as the company looks to not
only strengthen its existing service, but expand its wider product
offering. As a result, it is anticipated that a number of new
products will be launched over the next twelve months.
Oxygen
Oxygen's new client mandates have been on plan in the six months
ended 30 June 2018.
This coupled with the total number of clients going live having
doubled in the last 12 months and with client implementations at
record levels the momentum is with the company.
However, revenues in the period have remained broadly flat
compared to the comparable period in 2017. This has been caused by
a combination of the residual impact of the company's migration to
the new billing methodology introduced last year and a backlog in
supplier onboarding. To address these issues Oxygen's management
has been focusing on introducing new streamlined processes to
optimise delivery of the monetary rewards for its clients and
itself. This has resulted in some immediate operational changes,
but the full benefits will not be seen until future periods.
On the strategic front the focus is on offering more products to
Oxygen's clients. In August 2018 the company acquired Porge Ltd
which provides evidence-based public sector market insight services
and research products to the UK corporate and government sectors.
This business fits in strategically with its offering to existing
clients by providing a wider and deeper service in terms of
supplier data analytics as well as broadening Oxygen's client base.
Additionally, the company is considering other partnership
arrangements which will offer benefits to its clients whilst
enhancing Oxygen's revenue opportunities.
INDEPENT 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 2018 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 2018 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.
Deloitte LLP
Statutory Auditor
London, United Kingdom
12 September 2018
UNAUDITED CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
Interest and similar
income 2,377 204 1,136
Interest and similar
expenses (805) (18) (68)
------------- --------------
Net interest income 1,572 186 1,068
Fee income 3 1,216 1,279 2,638
Fee expenses (18) (31) (53)
Net fee income 1,198 1,248 2,585
------------- ------------- --------------
Revenue 2,770 1,434 3,653
------------- ------------- --------------
Staff costs 5 (7,771) (3,601) (8,188)
Other operating expenses (3,109) (1,239) (4,251)
Depreciation & amortisation (106) (14) (146)
Operating loss before
share of loss from joint
venture (8,216) (3,420) (8,932)
Share of loss of joint
venture accounted for
using the equity method - (582) (582)
Operating loss (8,216) (4,002) (9,514)
Net impairment loss on
financial assets (107) (20) (158)
Exceptional expenses 8 - (330) (330)
Loss before tax (8,323) (4,352) (10,002)
------------- ------------- --------------
Taxation 10 179 242 867
Loss after tax (8,144) (4,110) (9,135)
------------- ------------- --------------
Other comprehensive income
Exchange differences
on translating foreign
operations (213) 57 (357)
Gains on investments 8,000 22 2,600
Other comprehensive income
for the period, net of
tax 7,787 79 2,243
Total comprehensive loss
for the period (357) (4,031) (6,892)
------------- ------------- --------------
Loss after tax attributable
to:
Owners of TruFin plc (7,903) (3,783) (8,103)
Non-controlling interests (241) (327) (1,032)
------------- ------------- --------------
(8,144) (4,110) (9,135)
------------- ------------- --------------
Total comprehensive loss
for the period attributable
to:
Owners of TruFin plc (116) (3,704) (5,860)
Non-controlling interests (241) (327) (1,032)
------------- ------------- --------------
(357) (4,031) (6,892)
------------- ------------- --------------
EARNINGS PER SHARE
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
Notes (Unaudited) (Unaudited) (Unaudited)
pence pence pence
Basic and Diluted EPS 20 (8.1) NA (6.5)
Adjusted EPS 20 (6.9) NA (6.5)
The number of shares in issue as at 30 June 2018 was 97m (31
December 2017: 124m).
UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
As at
30 June
As at 31
December
2018 2017
(Unaudited) (Audited)
Notes GBP'000 GBP'000
Assets
Non-current, non-financial assets
Intangible assets 11 1,864 649
Property, plant and equipment 211 131
Deferred tax asset 10 5,368 5,189
------------- -----------
Total non-current, non-financial
assets 7,443 5,969
------------- -----------
Financial assets
Cash and cash equivalents 62,158 26,049
Loan and advances 13 73,899 32,709
Other investments 12 44,500 36,500
Total financial assets 180,557 95,258
------------- -----------
Other current assets
Trade and other receivables 14 413 487
Other receivables 14 2,845 1,821
------------- -----------
Total other current assets 3,258 2,308
------------- -----------
Total assets 191,258 103,535
------------- -----------
Equity and liabilities
Equity
Issued share capital 15 185,000 123,966
Retained earnings 21,531 (4,962)
Foreign exchange reserve (609) (396)
Non-controlling interest 3,437 (293)
Other reserves (50,616) (26,919)
Total equity 158,743 91,396
------------- -----------
Liabilities
Current liabilities
Borrowings 16 23,638 9,035
Trade and other payables 17 8,480 2,805
Provision for commitments and other
liabilities 7 397 299
------------- -----------
Total current liabilities 32,515 12,139
------------- -----------
Total liabilities 32,515 12,139
------------- -----------
Total equity and liabilities 191,258 103,535
------------- -----------
These financial statements were approved by the Board of
Directors on 12 September 2018.
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Foreign
Share Share Retained exchange Other Non-controlling Total
capital premium Earnings reserve reserves Total interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2017 2,202 31,249 541 (39) - 33,953 547 34,500
Loss for the
period - - (3,783) - - (3,783) (327) (4,110)
Gains on
FVTOCI
investments - - 22 - - 22 - 22
Exchange
differences
on
translating
foreign
operations - - - 57 - 57 - 57
Balance at 30
June 2017
(Unaudited) 2,202 31,249 (3,220) 18 - 30,249 220 30,469
--------- --------- ---------- --------------- ---------- --------- ---------------- ---------
Balance at 1
July 2017 2,202 31,249 (3,220) 18 - 30,249 220 30,469
Loss for the
period - - (4,320) - - (4,320) (705) (5,025)
Gains on
FVTOCI
investments - - 2,578 - - 2,578 - 2,578
Exchange
differences
on
translating
foreign
operations - - - (414) - (414) - (414)
Capital
contribution
in relation
to the issue
of preference
shares - - - - - - 192 192
New issue of
shares 123,966 - - - - 123,966 - 123,966
Arising on
consolidation (2,202) (31,249) - - (26,919) (60,370) - (60,370)
Balance at 31
December 2017
(Audited) 123,966 - (4,962) (396) (26,919) 91,689 (293) 91,396
--------- --------- ---------- --------------- ---------- --------- ---------------- ---------
Balance at 1
January 2018 123,966 - (4,962) (396) (26,919) 91,689 (293) 91,396
Loss for the
period - - (7,903) - - (7,903) (241) (8,144)
Gains on
FVTOCI
investments - - 8,000 - - 8,000 - 8,000
Exchange
differences
on
translating
foreign
operations - - - (213) - (213) - (213)
New issue of
shares 61,034 - (3,658) - 8,966 66,342 - 66,342
Share based
payment - - 1,191 - - 1,191 - 1,191
Reduction of
Capital - - 28,752 - (28,752) - 1,819 1,819
NCI Share
Premium - - - - - - 1,482 1,482
Arising on
consolidation - - 111 - (3,911) (3,800) 670 (3,130)
Balance at 30
June 2018
(Unaudited) 185,000 - 21,531 (609) (50,616) 155,306 3,437 158,743
--------- --------- ---------- --------------- ---------- --------- ---------------- ---------
UNAUDITED CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT
6 months
6 months ended Year ended
ended 30 30 June 31 December
June 2018 2017 2017
(Unaudited) (Unaudited) (Audited)
Cash flows from operating activities GBP'000 GBP'000 GBP'000
Loss before income tax (8,323) (4,352) (10,002)
Adjustments for
Depreciation of property, plant
and equipment 41 14 43
Amortisation of intangible fixed
assets 83 30 156
Share based payment expense 1,191 - -
Finance Costs - 18 27
Increase in provisions 98 - -
Foreign exchange translation (42) 58 -
Share in joint venture - 582 582
------------- ------------- -------------
(6,952) (3,650) (9,194)
Working capital adjustments
Loans to customers (106,908) (11,978) (62,512)
Loans repaid by customers 65,718 3,478 30,673
Increase in trade and other receivables (950) (2,152) (1,214)
Increase in trade and other payables 5,675 2,356 1,979
(36,465) (8,296) (31,074)
Net cash used in operating activities (43,417) (11,946) (40,268)
------------- ------------- -------------
Cash flows from investing activities:
Additions to intangible assets (1,298) (656) (805)
Additions to property, plant and
equipment (121) (32) (107)
------------- ------------- -------------
Net cash used in from investing
activities (1,419) (688) (912)
Cash flows from financing activities:
Issue of ordinary share capital 70,000 - 2,000
Issue of preference share capital - 3,500 3,500
Share issue costs (3,658) - -
Net borrowings from Group Undertakings - 16,000 46,000
New borrowings 14,603 - 9,000
Net interest received - - 38
------------- -------------
Net cash generated from financing
activities 80,945 19,500 60,538
------------- ------------- -------------
Net increase in cash and cash
equivalents 36,109 6,866 19,358
Cash and cash equivalents at beginning
of the period 26,049 6,690 6,690
Effect of exchange rate fluctuations
on cash held - - 1
------------- ------------- -------------
Cash and cash equivalents at end
of the period 62,158 13,556 26,049
------------- ------------- -------------
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 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 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 2017.
The condensed set of financial statements included in this
Interim Financial Report for the six months ended 30 June 2018
should be read in conjunction with the annual audited financial
statements of TruFin plc for the year ended 31 December 2017.
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 this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed financial statements.
Group structure
The consolidated financial statements include all of the
companies controlled by the TruFin Group which are as follows:
-- Satago Financial Solutions Limited ("SFSL")
-- Distribution Finance Capital Ltd ("DFC")
-- Oxygen Finance Group Limited (together with OFL and OFAI) ("Oxygen")
-- Oxygen Finance Limited ("OFL")
-- Oxygen Finance Americas, Inc ("OFAI")
-- TruFin Software Limited ("TSL")
-- TruFin Holdings Limited ("THL")
-- AltLending UK ("AltLending")
The consolidated financial information also includes three
further investments:
-- 50% interest in a joint venture, Clear Funding Limited
("Clear Funding"), which is accounted for using the equity
method;
-- 40% interest in PlayIgnite Ltd ("PlayIgnite"), which is
accounted for using the equity method; and
-- 14.9% in Zopa Group Limited ("Zopa")
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 2017.
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.
Share based payments
Where the TruFin 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 Payment'. 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.
Financial assets at Fair Value
Financial assets held by the TruFin Group are measured at Fair
Value Through Profit and Loss as they fail the contractual cash
flow characteristics test required by IFRS 9 for classification
under amortised cost. Movements in the fair value of these assets
are recognised in the Statement of Comprehensive Income.
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 2018 is available
at the Company's registered office and on the Company's investor
relations website (www.trufin.com).
3. Fee income
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Revenue from:
Early Payment Programme
Services 1,060 1,028 2,153
Assessment fees 145 194 219
Consultancy fees 11 57 78
Facility fees - - 188
Total revenue 1,216 1,279 2,638
------------- ------------- --------------
4. Segmental reporting
The results of the TruFin 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 DFC, SFSL and AltLending.
Payment services:
Provision of Early Payment Programme Services. For results
during the reporting period, this corresponds to the results of
Oxygen.
Other:
Revenue and costs arising from investment activities and
peer-to-peer lending. For results during the reporting period, this
corresponds to the results of TSL, THL, the TruFin Group's
investment in Zopa and joint venture in Clear Funding, and TruFin
plc.
The results of each segment, prepared using accounting policies
consistent with those of the TruFin Group as a whole, are as
follows:
Period ended 30 June 2018 Short term Payment
(Unaudited) finance services Other Total
GBP'000 GBP'000 GBP'000 GBP'000
External revenue 2,340 1,210 43 3,593
Expenses (805) (18) - (823)
---------
Total revenue 1,535 1,192 43 2,770
----------- ---------- -------- ---------
Operating loss (3,740) (1,433) (3,043) (8,216)
Loss before tax (3,847) (1,433) (3,043) (8,323)
Taxation - 179 - 179
---------
Loss for the year (3,847) (1,254) (3,043) (8,144)
----------- ---------- -------- ---------
Total assets 129,337 2,360 59,561 191,258
Total liabilities (29,632) (1,544) (1,339) (32,515)
Net assets 99,705 816 58,222 158,743
----------- ---------- -------- ---------
Period ended 30 June 2017 Short term Payment
(Unaudited) finance services Other Total
GBP'000 GBP'000 GBP'000 GBP'000
External revenue 203 1,275 5 1,483
Expenses (18) (31) - (49)
----------- ---------- -------- ---------
Total revenue 185 1,244 5 1,434
----------- ---------- -------- ---------
Operating loss (1,254) (1,314) (1,434) (4,002)
Loss before tax (1,274) (1,644) (1,434) (4,352)
Taxation (3) 245 - 242
Loss for the year (1,277) (1,399) (1,434) (4,110)
----------- ---------- -------- ---------
Total assets 23,672 7,551 34,146 65,369
Total liabilities (20,996) (1,041) - (22,037)
Net assets 2,676 6,510 34,146 43,332
----------- ---------- -------- ---------
5. Staff costs
Analysis of staff costs
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Wages and salaries 5,028 2,561 6,111
Consulting costs 769 710 1,262
Social security costs 667 286 710
Pension costs arising on defined
contribution schemes 116 44 105
Share based-payment 1,191 - -
7,771 3,601 8,188
------------- ------------- --------------
Consulting costs are recognised within personnel costs where the
work performed would otherwise have been performed by employees.
Consulting costs arising from the performance of other services is
included within other operating expenses.
Average monthly number of persons (including Executive
Directors) employed
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
(Unaudited) (Unaudited) (Audited)
Number Number Number
Management 14 4 10
Finance 8 4 4
Sales & marketing 22 11 12
Operations 57 36 35
Technology 14 6 8
--------------
115 61 69
------------- ------------- --------------
Key management compensation
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Combined remuneration 587 - -
Pension contributions 5 - -
The Directors consider that key management personnel are those
persons who are the Executive Committee of TruFin plc. These
individuals have the authority and responsibility for planning,
directing and controlling the activities of the TruFin Group.
6. Employee share-based payment transactions
The employee share-based payment charge comprises:
6 Months 6 Months Year ended
ended
ended 30 June 31 December
2017 2017 (Audited)
30 June 2018 (Unaudited)
(Unaudited)
GBP'000 GBP'000 GBP'000
Performance Share Plan and
Joint Share Ownership Plan 1,106 - -
Founder Award
Performance Share Plan Market
Value Award 85 - -
Performance Share Plan - 2018 - - -
Award
--------------- ------------- -----------------
Total 1,191 - -
--------------- ------------- -----------------
All employee share-based awards are deemed to be equity-settled
schemes.
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
members of senior management of which the Share price at date of
grant was GBP1.90 per share. The award is 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, although the individuals are
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 GBP1.90.
Performance Share Plan Market Value Award ("PSP Market
Value")
On 21 February 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 is GBP1.90
per share.
Performance Share Plan 2018 Award ("PSP 2018")
On 21 February 2018, 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 Company achieving
certain financial metrics over a three-year period.
7. Provision for commitments and other liabilities
As at 31 December 2017 management has recognised a provision 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.
The movement in provision during the year relates to a lease
provision for DFC's remaining property costs outstanding on the
Sutton office following the relocation of staff to Manchester and
London. The provision will be released over the course of the
remainder of the lease which expires February 2019.
GBP'000
At 1 January 2018 (Audited) 299
Additional provision during the year 98
At 30 June 2018 (Unaudited) 397
--------
8. Exceptional expenses
Loss before income tax is stated after charging the following
material items:
6 months
6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Oxygen IT platform transition - 330 330
- 330 330
-------------------- ------------- --------------
Oxygen's legacy business strategy had also been based around a
technology platform operated by a third-party provider on Oxygen's
behalf. Oxygen incurred material costs to transfer the platform to
a cloud based environment under its own control and in terminating
certain legacy contracts.
9. Loss before income tax
Loss before income tax is stated after charging:
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Depreciation of property,
plant and equipment 41 14 43
Amortisation of intangible
assets 83 30 156
Staff costs 7,771 3,601 8,188
Operating lease rentals 231 194 258
Audit fees payable to the
Group's auditor 60 - 107
Non-audit fees payable to
the Group's auditor 59 - 894
------------- ------------- --------------
10. Taxation
Analysis of tax credit recognised in the period
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Current tax credit - 3 -
Deferred tax credit (179) (245) (867)
------------- ------------- --------------
Total tax credit (179) (242) (867)
------------- ------------- --------------
Deferred Tax Asset
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Balance at start of the period 5,189 4,322 4,322
Credit to the statement of
comprehensive income 179 245 867
------------- ------------- --------------
Balance at the end of the
year 5,368 4,567 5,189
------------- ------------- --------------
11. Other intangible assets
Software,
Client licenses
Contracts and similar Total
assets
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2018 305 500 805
Additions 823 475 1,298
At 30 June 2018 1,128 975 2,103
----------- ------------- --------
Amortisation
At 1 January 2018 (52) (104) (156)
Charge for the period (18) (65) (83)
At 30 June 2018 (70) (169) (239)
----------- ------------- --------
Net book value
At 30 June 2018 (Unaudited) 1,058 806 1,864
At 31 December 2017 (Audited) 253 396 649
Cost
At 1 January 2017 - - -
Additions 155 500 655
At 30 June 2017 155 500 655
Additions 150 - 150
----- ------ ------
At 31 December 2017 305 500 805
----- ------ ------
Amortisation
At 1 January 2017 - - -
Charge for the period (30) - (30)
At 30 June 2017 (30) - (30)
Charge for the period (22) (104) (126)
----- ------ ------
At 31 December 2017 (52) (104) (156)
----- ------ ------
Net book value
At 31 December 2017 (Audited) 253 396 649
At 30 June 2017 (Unaudited) 125 500 625
At 31 December 2016 (Audited) - - -
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 TruFin 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.
Software, licenses and similar assets comprises internally
developed platforms and systems, as well as external licenses.
Costs that are directly associated with the production of
identifiable and unique software products controlled by the TruFin
Group and are probable of producing future economic benefits, are
recognised as intangible assets. Direct costs of software
development include employee costs and directly attributable
overheads.
A useful economic life of 3-5 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.
12. Other investments
Level 3 valuation
GBP'000
Fair value at 31 December 2017 36,500
Gain on revaluation at 30 June 2018 8,000
Fair value at 30 June 2018 (Unaudited) 44,500
------------------
Level 3 valuation
GBP'000
Fair value at 31 December 2016 33,900
Gain on revaluation at 31 December 2017 2,600
Fair value at 31 December 2017 (Audited) 36,500
------------------
At 31 December 2017, the TruFin Group had an economic interest
in Zopa Group Limited (the ultimate owner of the UK-based Zopa
peer-to-peer lending business). During the first half of 2017, Zopa
underwent a corporate restructuring. Prior to this, the ultimate
owner of the Zopa business was Zopa Holdings Inc, a Delaware (USA)
company. The below table represents the economic ownership both on
an undiluted basis and a fully diluted basis (i.e. assuming that
all holders of options, warrants and preferred shares were to have
exercised their subscription and conversion rights).
Zopa Ownership:
30 June
2018
31 December
(Unaudited) 2017 (Audited)
Undiluted 14.9% 17.7%
Fully diluted 13.1% 15.7%
A level 3 valuation is one that relies on unobservable inputs to
the valuation process.
The shares are not quoted in any market. TruFin values it
investment in Zopa using the most recent funding round. Zopa has
had a series of funding rounds and the latest funding round
therefore represents the most recent price of the transaction and
is the best estimate for its market value. TruFin values the
investment on a monthly basis. At the half year end and the year
end an independent valuation is carried out by an independent
valuation service provider.
13. Loans and advances
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Total loans and advances 74,092 32,835
Less: loss allowance (193) (126)
73,899 32,709
------------- ------------
Total loans and advances are made up of;
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Loans and advances to customers 66,942 32,835
Financial assets at Fair Value 7,150 -
74,092 32,835
------------- ------------
Past due receivables relating to loans and advances are analysed
as follows:
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Neither past due nor impaired 72,653 32,402
Past due: 0-30 days 761 254
Past due: 31-60 days 26 16
Past due 61-90 days 6 1
Past due: More than 91 days 0 32
Impaired 453 4
73,899 32,709
------------- ------------
14. Trade and other receivables
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Trade and receivables 413 487
Prepayments 1,177 1,062
Accrued income 461 354
VAT 248 29
Other debtors 959 376
3,258 2,308
------------- ------------
Trade receivables above are stated net of a loss allowance of
GBPNil (Dec 2017: GBPNil). All receivables are due within one
year.
Unimpaired, past due trade receivables are analysed as
follows:
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Not yet due 280 328
Past due: 0-30 days 21 10
Past due: 31-60 days 43 8
Past due: 61-90 days 16 -
Past due: More than 91 days 53 141
413 487
------------- ------------
15. Share capital
Share Capital Total
GBP'000 GBP'000
97,368,421 shares at GBP1.90 each 185,000 185,000
At 31 December 2017, 123,965,702 shares were issued and fully
paid. 1 share was issued and unpaid.
In February 2018, these were consolidated to form 57,118,419
ordinary shares and on 21 February 2018, the shares of TruFin plc
were listed on the Alternative Investment Market of the London
Stock Exchange. The company raised GBP70 million from the IPO,
issuing 36,842,106 shares at a price of 190p share.
All ordinary shares carry equal entitlements to any
distributions by the company. No dividends were proposed by the
Directors for the period ended 30 June 2018.
16. Borrowings
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Loans due within one year 44 35
Loans due in over a year 23,594 9,000
23,638 9,035
------------- ------------
On 12 December 2017, DFC entered into a two year senior debt
facility with a leading bank which is secured on a floating pool of
underlying assets. Interest is payable at 3 month LIBOR + 4%.
17. Trade and other payables
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Trade payables 4,716 212
Accruals 2,940 1,430
Other payables 426 652
Other taxation and social security 398 511
8,480 2,805
------------- ------------
18. Financial instruments
The Directors have performed an assessment of the risks
affecting the TruFin Group through its use of financial instruments
and believe the principal risks to be: capital risk; credit risk;
market risk and interest rate risk.
This note describes the TruFin 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 TruFin Group manages its capital to ensure that entities in
the TruFin Group will be able to continue as a going concern while
providing an adequate return to shareholders.
The capital structure of the TruFin Group consists of net debt
(borrowings disclosed in note 16) and equity of the TruFin Group
(comprising issued capital, reserves, retained earnings and
non-controlling interests).
The TruFin Group is not subject to any externally imposed
capital requirements.
Principal financial instruments
The principal financial instruments to which the TruFin Group is
party and from which financial instrument risk arises, are as
follows:
-- Loans and advances to customers, 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
Financial assets included in the balance sheet at fair
value:
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Investments (level 3) 44,500 36,500
Financial assets at fair value (level
3) 7,150 -
A level 3 valuation is one that relies on unobservable inputs to
the valuation process.
The Zopa valuation is calculated by reference to the price of
previous transactions involving the issuance of shares in Zopa and
warrants over shares in Zopa and any other relevant information
such as future funding rounds.
The Zopa valuation as at 30 June 2018 is based on the most
recent funding round concluded by Zopa.
Financial assets at fair value have been valued by reference to
the performance and financial position of the underlying companies,
their credit quality and prevailing market conditions.
There are no financial liabilities included in the balance sheet
at fair value.
30 June 2018
Financial assets and financial liabilities included in the
balance sheet that are not measured at fair value:
Carrying Fair
amount value Level Level Level
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets not
measured at fair value
(Unaudited)
Loans and advances
to customers 66,749 66,749 - - 66,749
Trade receivables 413 413 - - 413
Other receivables 2,845 2,845 - - 2,845
Cash and cash equivalents 62,158 62,158 62,158 - -
132,165 132,165 62,158 - 70,007
--------- -------- -------- -------- --------
Financial liabilities
not measured at fair
value (Unaudited)
Other borrowings 23,638 23,638 - - 23,638
Other liabilities 8,480 8,480 - - 8,480
32,118 32,118 - - 32,118
--------- -------- -------- -------- --------
31 December 2017
Carrying Fair Level Level Level
amount value 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets not
measured at fair value
(Audited)
Loans and advances
to customers 32,709 32,709 - - 32,709
Trade receivables 487 487 - - 487
Other receivables 1,821 1,821 - - 1,821
Cash and cash equivalents 26,049 26,049 26,049 - -
61,066 61,066 26,049 - 35,017
--------- -------- -------- -------- --------
Financial liabilities
not measured at fair
value (Audited)
Other borrowings 9,035 9,035 - - 9,035
Other liabilities 2,805 2,805 - 27 2,778
11,840 11,840 - 27 11,813
--------- -------- -------- -------- --------
Fair values for level 3 assets 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 to customers
Due to the short-term nature of loans and advances to customers,
their carrying value is considered to be approximately equal to
their fair value. These items are short term in nature such that
the impact of the choice of discount rate would not make a material
difference to the calculations.
Trade and other receivables, other borrowings and other
liabilities
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 TruFin 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 TruFin 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 TruFin Group's competitiveness and
flexibility.
The TruFin Group is exposed to the following financial
risks:
-- Credit risk;
-- Liquidity risk;
-- Market risk; and
-- 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 TruFin Group. One of the TruFin 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 to customers. The TruFin 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 TruFin Group is
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
TruFin Group from an individual instrument to a portfolio
level;
-- Creating credit policies to protect the TruFin 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 TruFin 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 TruFin
Group:
Granting of credit
The Business Development Team prepare a Credit Application which
sets out the rationale and the pricing for the proposed loan
facility and confirms that it meets the TruFin 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 TruFin Group personnel who can confirm positive experience;
-- Additional security, either tangible or personal guarantees
where there is verifiable evidence of personal net worth; and
-- 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 short tenor of the current loan facilities reduces the
possible adverse effect of changes in economic conditions and/or
the credit risk profile of the counterparty.
The TruFin Group nonetheless measures a change in a
counterparty's credit risk mainly on payment and end of contract
repayment behaviour and the collateral audit process. Although
regular and interim reviews may highlight other changes in a
counterparty's risk profile, such as the security asset no longer
being under the control of the borrower. The TruFin Group views a
significant increase in credit risk as:
-- A two-notch reduction in the TruFin Group's counterparty's
risk rating, 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;
-- Counterparty confirmation that it has sold TruFin Group
assets but delays in processing payments;
-- Evidence of a reduction in a counterparty's working capital
facilities which has had an adverse effect on its liquidity;
and
-- Evidence of actual or attempted sales out of trust or of
double financing of assets funded by the TruFin Group.
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 to customers in default and
credit impaired
The TruFin 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;
-- 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 short tenor of the loans extended by the TruFin Group means
that significant economic events are unlikely to influence
counterparties' ability to meet their obligations to the TruFin
Group.
At 30 June 2018 a very small amount of assets are considered
credit impaired and no forbearance had been granted.
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 TruFin 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 such
assets underlying the original contract.
Regardless of the loan status stage, the aggregated ECL is the
value that the TruFin Group expects to lose on its current loan
book having assessed each loan individually.
To calculate the ECL on a loan, the TruFin Group considers:
1. Counterparty PD; and
2. LGD on the asset
whereby: ECL = EAD x PD x LGD
Forward looking information
In its ECL models, the TruFin Group applies the following
sensitivity analysis of forward-looking economic inputs:
-- GDP growth
-- Central Bank base rates expressed as LIBOR
-- Retail Price Index ("RPI")
However, in making its assessment of the impact of these key
forward looking economic assumptions, the TruFin Group has placed
reliance on the short-dated nature of its loans which do not extend
beyond 12 months. Given the current loan book has an average tenor
of less than 4 months the forward looking economic inputs above do
not affect the ECL significantly.
Maximum exposure to credit risk
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Cash and cash equivalents 62,158 26,049
Loans and advances 73,899 32,709
Trade and other receivables 3,258 2,308
Maximum exposure to credit risk 139,315 61,066
------------- ------------
Loans and advances to customers:
Collateral held as security
30 June 31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Fully collateralised
Loan-to-value* ratio:
Less than 50% - 6
50% to 70% 353 5
71% to 80% 6 3,893
81% to 90% 900 5,161
91% to 100% 65,553 23,311
66,812 32,376
------------- ------------
Partially collateralised
Collateral value relating to loans
over 100% loan-to-value - -
Unsecured lending 130 459
------------- ------------
* Calculated using wholesale collateral values
The majority of the TruFin Group's lending activities are
asset-backed and the TruFin Group expects that the majority of its
exposure is secured by the collateral value of the asset that has
been funded under the loan agreement. The TruFin Group has title to
the collateral which is funded under loan agreements. The
collateral has low depreciation and is not subject to rapid
technological changes or redundancy. There has been no change in
the TruFin Group's assessment of collateral and its underlying
value in the reporting period.
The assets are generally in the counterparty's possession, but
this is controlled and managed by the asset audit process. The
audit process checks on an agreed periodic basis that the asset is
in the counterparty's possession and has not been sold out of trust
or is otherwise not in the counterparty's control. The frequency of
the audits is determined by the risk rating assessed at the time
that the borrowing facility is first approved.
Additional security may also be taken to further secure the
counterparty's obligations and further mitigate risk. Further to
this, in many cases the TruFin Group is often granted by the
counterparty, an option to sell-back the underlying collateral.
Based on the TruFin Group's current principal products, the
counterparty repays its obligation under a loan agreement with the
TruFin Group at or before the point that it sells the asset. If the
asset is not sold and the loan agreement reaches maturity, the
counterparty is required to pay the amount due under the loan
agreement plus any other amounts due. In the event that the
counterparty does not pay on the due date, the TruFin Group's
customer management process will maintain frequent contact with the
counterparty to establish the reason for the delay and agree a
timescale for payment. Senior Management will review actions on a
regular basis to ensure that the TruFin Group's position is not
being prejudiced by delays.
In the event that the TruFin Group determines that payment will
not be made voluntarily, it will enforce the terms of its loan
agreement and recover the asset, instituting legal proceedings for
delivery, if necessary. If there is a shortfall between the net
sales proceeds from the sale of the asset and the counterparty's
obligations under the loan agreement, the shortfall is payable by
the counterparty on demand.
Concentration of credit risk
The TruFin Group maintains policies and procedures to manage
concentrations of credit at the counterparty level and industry
level to achieve a diversified loan portfolio. As at 30 June 2018,
the largest counterparty exposure was 7% of the total loan
portfolio and the largest industry sector exposure was 34% of the
total loan portfolio.
Credit quality
An analysis of the TruFin 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.
30 June 31 December
2017
2018 (Audited)
(Unaudited)
Risk rating Stage Stage Stage Total Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Above Average
(Risk rating
1-2) 30,849 283 - 31,132 14,305
Average (Risk
rating 3-5) 21,680 80 - 21,760 16,207
Below Average
(Risk rating
6+) 13,248 777 25 14,050 2,323
Gross carrying
amount 65,777 1,140 25 66,942 32,835
Loss allowance (158) (17) (18) (193) (126)
Carrying amount 65,619 1,123 7 66,749 32,709
-------- -------- -------- ------------- ------------
Gross Carrying Amount Stage Stage Stage Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
As at 31 December 2017
(Audited) 32,835 - - 32,835
Transfer to stage 2 (538) 538 - -
Transfer to stage 3 (13) - 13 -
Net loans originated 33,493 602 12 34,107
As at 30 June 2018 (Unaudited) 65,777 1,140 25 66,942
-------- -------- -------- --------
Trade receivables
30 June 31 December
2018 2017
(Unaudited) (Audited)
Status at balance sheet date GBP'000 GBP'000
Not past due, nor impaired 280 328
Past due but not impaired 133 159
Total gross carrying amount 413 487
loss allowance - -
Carrying amount 413 487
------------- ------------
Net trade receivables 413 487
------------- ------------
The TruFin Group has determined that all trade receivables are
Stage 1. They all relate to amounts outstanding from public sector
bodies in the UK and US. As such there is no expectation of
material future credit losses relating to these financial
assets.
The contractual amount outstanding on financial assets that were
written off during the reporting period and are still subject to
enforcement activity is GBPNil at 30 June 2018 (31 December 2017:
GBPNil).
Liquidity risk
Liquidity risk is the risk that the TruFin 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
The TruFin Group delegates liquidity risk management to its
subsidiary, DFC, which has in place a policy and control framework
for managing liquidity risk. DFC's Asset and Liability Management
Committee (ALCO) is responsible for managing the liquidity risk via
a combination of policy formation, review and governance, analysis,
stress testing, limit setting and monitoring. The ALCO meets on a
monthly basis to review the liquidity position and risks. Daily
liquidity reports are produced and reviewed by the management team
to track liquidity and pipeline.
DFC is in the process of applying for a Bank Licence. One of the
key requirements is to a have a comprehensive liquidity management
process & documentation which is submitted to the Prudential
Regulation Authority (PRA) for approval. These documents have been
approved by DFC's Board of Directors and submitted to the PRA.
Group Finance performs treasury management for the TruFin 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 TruFin Group. The primary mechanism for maintaining this
oversight is a formal requirement that the 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 TruFin
Group's working capital and long term funding and ensure ongoing
compliance with banking arrangements. The TruFin Group currently
does not have any offsetting arrangements.
Liquidity stress testing
DFC has assessed its liquidity adequacy and viability for the
first 12 months of operations, based on its 5 year business plan
projections. Under this analysis, DFC is confident that it will be
able to meet all of its liabilities as they fall due, even in a
stress scenario.
A range of liquidity stress scenarios has been conducted (as
detailed in the capital and liquidity requirements), which
demonstrates that DFC's liquidity profile at the end of this 12
month period will be sufficient to withstand a severe stress at
this time.
Maturity analysis for financial assets and financial
liabilities
The following maturity analysis is based on expected gross cash
flows.
As at 30 June 2018:
Carrying < than 1 - 3 3 months 1 -
amount 1 month months to 1 year 5 years
Financial assets (Unaudited)
Cash and cash equivalents 62,158 62,158 - - -
Trade receivables 413 362 51 - -
Loans and advances
to customers 73,899 17,174 21,284 26,326 9,159
Investment securities 44,500 - - - 44,500
180,970 79,694 21,335 26,326 53,659
Financial liabilities
(Unaudited)
Trade and similar
payables 8,480 8,480 - - -
Borrowings 23,638 104 205 917 24,156
32,118 8,584 205 917 24,156
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
The TruFin Group's borrowings are at 3m LIBOR plus a margin. The
borrowing that is currently in place is a short term measure until
DFC is granted its banking licence and hence there is little cash
flow interest rate risk. Conversely there is little interest rate
price risk because market interest rates are currently low.
19. Leasing commitments
At the year-end date the TruFin Group has lease agreements in
respect of properties and equipment for which the payments extend
over a number of years. The future minimum lease payments under
non-cancellable leases are as follows:
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Due in less than one year 312 391
Due between one and five years 627 450
Total future lease payments committed 939 841
20. Earnings per share
The calculation of the basic and adjusted earnings per share is
based on the following data:
6 months
ended Year ended
30 June 31 December
2018 2017
(Unaudited) (Audited)
Number of shares
Basic and Diluted 97,368,421 123,765,703
Earnings attributable to ordinary shareholders GBP'000 GBP'000
Loss after tax attributable to the owners
of TruFin plc (7,903) (8,103)
Adjusted earnings attributable to ordinary
shareholders
Loss after tax attributable to the owners
of TruFin plc (7,903) (8,103)
Adjusted for
Share Based Payment 1,191 -
Adjusted loss after tax attributable
to the owners of TruFin plc (6,712) (8,103)
Earnings per share (Unaudited) Pence Pence
Basic and Diluted (8.1) (6.5)
Adjusted (6.9) (6.5)
Adjusted(2) 1.3 (4.4)
Adjusted(2) EPS includes the unrealised gain on revaluation of
the TruFin Group's investment in Zopa - GBP8.0m for the 6 months
ended 30 June 2018 (GBP2.6m for the year ended 31 December
2017).
21. Related party disclosures
Transactions with Directors
Transactions with Directors, or entities in which a Director is
also a Director or partner:
30 June
31 December
2018 2017
(Unaudited) (Audited)
GBP'000 GBP'000
Loans provided to a director 140 -
Consultancy services provided by a director - 13
Key management personnel disclosures are provided in note 5.
Loans were issued to Henry Kenner (GBP74,878) and James van den
Bergh (GBP64,894) on 21 February 2018 relating to the tax and
national insurance payable on the JSOP founder awards in the month
that these were granted. These loans are outstanding at the period
end.
22. Post balance sheet events
On 3 August 2018, Oxygen Finance Group Limited, acquired 100% of
Porge Limited ("Porge"). Porge provides an evidence based public
sector market insight service and research product. The
consideration comprises GBP2m in cash paid on completion and an
earn out of a maximum of GBP0.75m in cash, payable in 2019, subject
to meeting certain performance conditions.
An assessment of the goodwill arising from this acquisition is
being carried out and will be completed as part of the preparation
of the consolidated accounts for the year ended 31 December
2018.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BLGDCLXBBGID
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September 13, 2018 02:00 ET (06:00 GMT)
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