ANNUAL REPORT AND ACCOUNTS For the year ended 31 December 2021 CONTENTS Company Information 2 Chairman’s Statement 3 CEO’s Review 5 9 Group Strategic Report 12 Report of the Directors 17 Audit Committee Report 18 ESG Responsibility Statement 19 Report of the Independent Auditor 25 Consolidated Statement of Comprehensive Income 26 Company Statement of Comprehensive Income 27 Consolidated Statement of Financial Position 29 Company Statement of Financial Position 30 Consolidated Statement of Changes in Equity 31 Company Statement of Changes in Equity 32 Consolidated Statement of Cash Flows 33 Company Statement of Cash Flows 34 Notes to the Consolidated Financial Statements ANNUAL REPORT AND ACCOUNTS 2021 1 COMPANY INFORMATION For the year ended 31 December 2021 Directors Steve Baldwin (Chairman) James van den Bergh (Chief Executive Officer) Penny Judd (Non-Executive Director) Paul Dentskevich (Non-Executive Director) Anders Wilhelmsen (Non-Executive Director) (appointed 16 February 2022) Stephen Greene (Non-Executive Director) (resigned 31 October 2021) Company Secretary Ocorian Secretaries (Jersey) Limited Registered Office Business Address 26 New Street St Helier Jersey JE2 3RA 48 Warwick Street London W1B 5AW Registered Number 125245 Auditor Nominated Advisor and Broker Advisors Crowe U.K. LLP 55 Ludgate Hill London EC4M 7JW Liberum Capital Limited 25 Ropemaker Street London EC2Y 9LY Travers Smith LLP (Solicitors – UK law) 10 Snow Hill London EC1A 2AL Ogier (Solicitors – Jersey law) 44 Esplanade St Helier Jersey JE4 9WG Equiniti (Jersey) Limited (Registrar) 26 New Street St Helier Jersey JE2 3RA ANNUAL REPORT AND ACCOUNTS 2021 2 CHAIRMAN’S STATEMENT For the year ended 31 December 2021 When I wrote my Chairman’s Statement last year, we had just experienced a very difficult 12 months. The pandemic was still causing significant disruption and the outlook was still highly unpredictable for companies around the world. The Group’s various businesses responded amazingly well to unprecedented challenge, and I am incredibly proud of our employees who navigated new working environments and continued to drive the businesses forward. I wrote last year that the Group was emerging from the pandemic relatively unscathed and even better placed to prosper. I am delighted to say that this has indeed been the case and we have made great strides forward in 2021. Though the pandemic’s impact appears to be waning, we now face other challenges, such as rising inflation resulting in increased interest rates and, no doubt, further difficulties caused by the conflict in Ukraine. Despite such challenges, TruFin is in great shape and I expect to be able to report considerable growth in all our businesses through 2022. The Group had three main objectives during 2021. Firstly, the restructuring of the shareholder base to allow the Group to fully capitalise on the inherent value it had already created, whilst ensuring it remains a stable Group for employees, strategic partners and other stakeholders. This successfully happened via two oversubscribed sell-downs of our largest shareholder’s position – resulting in TruFin gaining many new, high quality institutional shareholders. Secondly, the Group sought to continue the transition from a lending Group to one focused on recurring software sales and licencing fees. It is therefore very pleasing to report that during 2021 the Group generated more than 87% of its revenue from these sources. Finally, the Group strived continuously to provide exemplary service to its customers and give our 136 employees the opportunity to continue the important work they do. As a result of their efforts, TruFin is better positioned now than it has ever been. This is no more evident than in the recent signing of a letter of intent by Lloyds Bank plc (“Lloyds Bank” or the “Bank”) and £5m equity investment by Lloyds Banking Group (“LBG”) in Satago Financial Solutions Limited (“Satago”) which was only possible thanks to the collaborative and stellar work carried out by all parties during 2021. Highlights throughout 2021 include: • Oxygen Finance Limited (“Oxygen”) recording its first full year EBITDA profit • Satago extending its trial with Lloyds Bank and developing further integration with the Bank’s infrastructure • Playstack Limited’s (“Playstack”) beta launch of Interact, their new brand offering which introduces real world brands into the gaming space • Vertus Capital Limited (“Vertus”) recording its first year of profit whilst writing £8.4m of new facilities and experiencing zero credit losses, yet again demonstrating the efficacy of its underwriting What is particularly pleasing is how significantly de-risked the Group now is - both tactically and strategically - as a result of the work carried out during the last 12 months. The decision for Oxygen to demonstrate the operational leverage in the business, whilst maintaining its leading market position, has resulted in its first full year of EBITDA profit during 2021. With 2022 expected to deliver the first year of cash generation, this will end the need for financial support from TruFin. Satago’s focus on its Lending-as-a-Service (“LaaS”) launch and delivering on its strategic partnership with Lloyds Bank has resulted in the Bank selecting it to provide invoice factoring solutions to the Bank’s customers. Alongside this recent landmark announcement, it was also very pleasing to report that LBG made a strategic investment of £5m in Satago. Playstack’s successful launch of their first major title has resulted in the console portfolio being extended by three new titles for release in 2022, with a strong pipeline of further titles for 2023 and beyond. The existing back catalogue in mobile and console, combined with these secured releases and Interact’s launch, ensures a balanced mix of revenue streams going forward for this exciting gaming technology business. As ever with Vertus, it has been pleasing to witness such a robust credit performance and a first full year of profitability. ANNUAL REPORT AND ACCOUNTS 2021 3 CHAIRMAN’S STATEMENT (CONTINUED) For the year ended 31 December 2021 TruFin’s share price has risen by more than 400% since mid-2020. This rise, I believe, is a result of the wholesale restructuring in the shareholder register plus the excellent work done at subsidiary level. This work, evidenced by demonstrable milestones, now ensures that the Group’s subsidiaries are moving from the ‘venture’ stage to greater maturity. This reduces Group volatility whilst increasing the inherent value of the subsidiaries and the Group’s ability to realise this value. 2022 meanwhile has started with two incredibly positive developments: Satago’s selection as the platform of choice by Lloyds Bank and an oversubscribed £10m Placing and Open Offer. The fundraise, together with the additional £5m invested in Satago by LBG, positions the Group to accelerate growth and capitalise on all the work undertaken to date. I look forward to updating the market on our continued progress over the course of the year and, as ever, I would like to thank all our employees and shareholders, new and old, for their continued support. Steve Baldwin Chairman 28 April 2022 ANNUAL REPORT AND ACCOUNTS 2021 4 CEO’S REVIEW For the year ended 31 December 2021 As our Chairman highlighted, 2021 was a pivotal year for TruFin. With our largest shareholder selling down their 73.82% position (to 15 institutional investors in two oversubscribed transactions) the Group was effectively re-IPOd. One of the key objectives for the Group is to create a stable environment for our subsidiaries. As such it cannot be underestimated how positively the news of our updated shareholder structure was received by both employees and customers, alongside our partners, suppliers and other stakeholders. In addition, the Group continued to transition its revenue base away from lending income towards recurring licence fee and software revenues. Alongside these important strategic goals, the subsidiaries grew their customer bases, strengthened their partnerships and positioned themselves for an exciting 2022 and beyond. 2021 Group Performance When I became CEO in 2019, the Group’s revenue was dominated by lending income, with just 36% of revenues attributed to recurring software and licencing fees. One of the Group’s strategic objectives was to reorientate income so that the majority came from these more predictable sources. With 87% of 2021 revenues coming from such fees we can say that this transition has occurred successfully. Our new capital light model positions us perfectly to generate the high EBITDA margins and return on equity that other successful software-as-a-service (“SaaS”) businesses enjoy. The shift to recurring software and licencing fees has resulted in the Group consolidating the significant revenue growth we experienced in 2020; 2021 saw a modest 12% decline in revenues to £13.1m, driven by lending earnings falling by 35%. With the split between the various revenue streams now at a sustainable level, we can look forward to the Group returning to meaningful growth in 2022 and beyond. The Group ended the year with a cash balance of £7.6m (including cash of £4.7m in Satago and £0.7 million in Vertus which cannot be accessed at a Group level) and, following the £10m fundraising post period end, is fully funded to achieve profitability. Oxygen • Revenue growth in the year and strong cost management resulted in positive EBITDA generation for each quarter of 2021, ensuring Oxygen delivered its first full year of EBITDA profit (£0.5m) • Oxygen is now fully funded through to profitability and cash generation and therefore no longer requires financial support from the Group • New business continued to progress well with five new Early Payment Programme clients and 23 new Insight Solutions clients. Oxygen lost two Insight clients in the period (one of which returned during the final quarter 2021) and as a result Oxygen had 120 unique clients at year end • Average Early Payment Programme client tenure, as at end of 2021, was 6.2 years. The average length of contract terms and loyalty of the customer base amplifies the value of the recurring revenue stream built up within Oxygen • Suppliers joined Oxygen’s Early Payment Programmes at a record rate, with a 43% increase in suppliers onboarded versus the same period in 2020 • Oxygen processed its 1,000,000th rebate in 2021 • Oxygen successfully positioned itself as a financial technology company delivering social value. As a result, 2021 saw dramatic growth in its FreePay Programme, which allows small and micro suppliers to benefit from early payment without charge, and the development of a Carbon Reporting tool to provide local authorities insight into their Scope 3 emissions ANNUAL REPORT AND ACCOUNTS 2021 5 CEO’S REVIEW (CONTINUED) For the year ended 31 December 2021 Satago • 2021 was the first full year of the LaaS proposition with a focus on developing the offering for Lloyds Bank, culminating in the March 2022 announcement. The work carried out with both Lloyds Bank and other potential partners provides the foundation for significant future growth • Satago expanded its product range, with whole book funding launched during 2021 • Government backed loans and Covid restrictions reduced demand for Satago’s financing products • New financing product providing funding against HMRC R&D tax credit submissions • £5m revolving credit agreement signed in March 2020 continues to run well and the agreement remains in force Playstack • Good progress during this transitional year, delivering financial targets and setting the foundations for growth in 2022 and 2023 • Back-book games portfolio contributed more than 50% of games revenue in 2021, with strong catalogue management and platform partnerships • Ongoing investment in Interact, the brand technology platform, throughout 2021 ensuring a successful beta launch in November 2021 and public launch in February 2022 Vertus • New facilities closed during 2021 increased by 70% to £8.4m (2020: £4.9m), resulting in interest income increasing by 33% to £1.3m (2020: £1.0m) • Active facilities increased from 15 to 21 (inclusive of two early settlements) • Zero missed payments, defaults, or impairments across the book for the fifth consecutive year • Renewal of creditor agreements for a further 36 months, on improved terms Current trading and prospects After a transitional 2021 in which the Group reorientated towards recurring software and licencing fee income, we expect significant growth during 2022. Group revenues in the first quarter of 2022 are expected to be more than £2.5m (unaudited), flat versus revenues during the same period in 2021. Following the recent oversubscribed Placing and Open Offer, the Group is focused on delivering considerable growth, profitability and value crystallisation. Oxygen • Current trading in line with budget expectations for both Early Payment Programmes and Insight Solutions, with both delivering cumulative revenue growth for the first quarter of 2022 of over 25%, compared to the same period in 2021 • Record monthly recurring revenues in March 2022 • Strong pipeline for both Early Payment Programmes and Insight Solutions clients with new product development allowing for the release of the proprietary ‘Carbon footprint Insights Solution’. This new product is generating significant interest and demonstrates Oxygen’s ability to provide further product ranges to their loyal customer base • Record supplier on-boarding of £102m in the first quarter of 2022, representing an increase of 34% over ANNUAL REPORT AND ACCOUNTS 2021 6 CEO’S REVIEW (CONTINUED) For the year ended 31 December 2021 the same period in 2021 and a 120% increase over the fourth quarter of 2021. The supplier spend in Oxygen’s Early Payment Programmes is expected to reach £1bn during 2022 • Unique client count exceeded 125 Satago • The first quarter of 2022 was dominated by continued work with Lloyds Bank, culminating in confirmation of their intention to enter into a commercial agreement with Satago • A £5m equity investment by LBG into Satago ahead of the signing of the commercial agreement with Lloyds Bank • Meaningful progress with a growing pipeline of LaaS customers in Europe and the UK interested in all or part of its technology suite • Increased activity and demand for Satago’s own loan book offering Playstack • Console portfolio extended by three new titles for release during 2022, with a strong pipeline of titles for 2023 and beyond • Interact brand technology publicly announced in February 2022, with significant interest from numerous developers and brands • Increased mix of revenue sources for 2022 and beyond, providing a more balanced mix across the company portfolio and allowing the business expected to target profitability during 2023 Vertus • Ongoing consolidation in the IFA market is fuelling demand for funding, positioning Vertus well for further growth • Lead times for closing facilities increased due to challenges around FCA change of control processing times. We believe these delays are temporary • New referral agreements and online campaigns are driving increased applications. The first quarter of 2022 saw £2.8m of new facilities closed and a further £8.4m of new facilities approved and submitted for legal drafting • Zero missed payments, defaults or impairments Outlook In 2021 we remained focused on our technological advantages. This allowed us to expand our product offerings to new and existing customers, the benefits of which we will see in 2022 and beyond. Similarly, we expect our investments in building lasting relationships with Lloyds Bank and our other partners to bear fruit in the coming years. With each subsidiary delivering on their strategic objectives and having executed on an oversubscribed Placing and Open Offer, the Group is now well positioned to focus on continued growth, moving towards profitability and value creation. It is with pride that I have seen first-hand how our Board has acted to protect all shareholders over the last 24 months. We have received unwavering support from new and existing shareholders who have given us the time to develop the foundations for continued growth. Crucially, we have also been trusted by our employees and partners who have remained loyal despite our competitors attempting to capitalise on our temporary instability. ANNUAL REPORT AND ACCOUNTS 2021 7 CEO’S REVIEW (CONTINUED) For the year ended 31 December 2021 So, alongside the habitual ‘thank you’ to our shareholders I would like to thank all stakeholders for their support and encouragement. We have hit the ground running in 2022 and we look forward to updating investors on TruFin’s progress throughout the year. James van den Bergh Chief Executive Officer 28 April 2022 ANNUAL REPORT AND ACCOUNTS 2021 8 GROUP STRATEGIC REPORT For the year ended 31 December 2021 Goals and Objectives TruFin’s overarching strategy is to generate significant value by remaining focused on poorly served niches and partnering with others. We work with an increasing number of partners which have dominant positions in their markets, allowing us to scale over time without significant marketing costs. It is through existing and new partnerships that the Group expects to grow and meaningfully increase shareholder value. Our strategic objective remains the realisation of value from each of our assets at the appropriate time. Specifically, the Directors have the following short term strategic objectives for each business: Oxygen • Expand the Early Payment Solutions client portfolio to beyond 70 clients • Build out partnerships and launch proprietary products for new and existing clients • Achieve first full year of positive free cash flow, ensuring no further financial support is required from TruFin Satago • Finalise commercial terms with Lloyds and begin serving Lloyds Bank customers by the end of 2022 • Expand the client base utilising the Satago platform and lending offerings in order to support the UK’s small and medium sized enterprises • Sign up further strategic partnerships for the LaaS products • Ensure Satago’s platform can provide the full range of invoice finance products by the end of 2022 (single invoice, factoring and discounting) Playstack • Continue to maximise the console catalogue performance through diligent management and analysis • Build on a successful launch of Interact with developers and brands, expanding the feature-set to exceed customer expectation • Continue to invest in the games portfolio, data technology and gaming insights in order to build sustainable and scalable revenues across the mobile portfolio • Secure key console and mobile titles for 2023 and beyond Vertus • Remain the UK’s go-to provider of independent capital solutions for IFA acquisition and succession planning. We believe this alone can enable significant growth in facilities of 40% per annum over the next three years • Explore additional capital products to offer well-positioned regional IFA firms seeking market consolidation through acquisition • Continue to collaborate closely with IntegraFin plc in order to build our reputation as a niche capital provider in the UK IFA market Principal risks and uncertainties The Directors of TruFin plc confirm that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. ANNUAL REPORT AND ACCOUNTS 2021 9 GROUP STRATEGIC REPORT (CONTINUED) For the year ended 31 December 2021 Principal risks are a risk or combination of risks that, given the Group’s current position, could seriously affect the performance, future prospects or reputation of the Group. These risks could potentially threaten the businesses, performance, solvency or liquidity, or prevent the delivery of the strategic objectives. The Board has overall responsibility for ensuring that risk is appropriately managed across the Group. As well as external reviews and audits from the Group’s statutory auditors, the Group has internal checks and policies. Initial responsibility rests with the management team of each business for identifying and managing risks arising in their business areas. This is augmented by the Group’s central compliance and finance function with responsibility for reporting to the Board. The key risks identified and which the Board has reasonable expectation are appropriately mitigated are: • Strategic risk - Strategic and business risk is the risk which can affect the Group’s ability to achieve its corporate and strategic objectives. The risk on the performance of the Group arising from its strategic decisions, change in the business conditions, improper implementation of decisions or lack of responsiveness to industry changes. It is particularly important as the Group continues its growth strategy. The Group will not put its core strategic and business objectives at a level of risk which is beyond its financial resources and operational capabilities. The Group will monitor and continually review this risk • Credit risk - The risk of default, potential write-off, financial loss arising from a borrower or counterparty failing to meet its financial obligations. This is mitigated by the Group adopting prescribed lending policies and adhering to strict credit and underwriting criteria specifically tailored to each business area. The loans issued are in most cases collateralised to a large extent and therefore the risk of loss is mitigated to the extent the Directors deem appropriate in accordance with the relevant risk policies • Funding risk - The risk of the Group not being able to meet its current and future financial obligations over time, specifically that funding is not available to meet the Group’s growth targets. Both Vertus and Satago have secured external funding with which they can continue to grow their loan books. PlayIgnite is acting as a ‘broker’ for an external debt provider and is looking to increase the pool of capital available for funding • Operational risk - the risk of financial loss and/or reputational damage resulting from inadequate or failed internal processes, people and systems or from external events. The exposure to operational risk has increased from the previous year as the businesses have grown. Mitigating factors are: the Group reviews its operational infrastructure to ensure that it is secure and fit for purpose, the Group maintains a strong internal control environment and the Group has also factored in the strengthening of processes and systems • Covid-19 – The Covid-19 pandemic and related lockdowns has impacted companies, employees, suppliers and customers across the world. Operationally the Group fully adapted to remote working in 2021, with minimal disruption to business. The Group will continue to monitor the impacts on its customers and partners and will work alongside them to navigate any short, medium and long-term challenges that may arise • Risk to delayed Contract Signings – Satago and Lloyds Bank are in discussions to enter into a commercial agreement to license Satago’s software platform and these conversations are progressing as planned. The risk is that a commercial agreement is not finalised which would result in lower forecast financial performance in the near term. The Group will continue to monitor this matter and support Satago in finalising an agreement Strict adherence to managing risk The Group manages such risks, among other things, with robust systems and processes, guidelines and policies which are forward-looking, clearly articulated, documented and communicated throughout the businesses and which enable the accurate identification and control of potentially problematic transactions and events. Due to Satago and Vertus being lending businesses, they each have their own risk committees and formal risk ANNUAL REPORT AND ACCOUNTS 2021 10 GROUP STRATEGIC REPORT (CONTINUED) For the year ended 31 December 2021 procedures in place that aim to manage risk effectively. The systems and processes, guidelines and policies are continually reviewed and updated and effectively communicated to all personnel to ensure that resources, governance and infrastructure are appropriate for the increasing size and complexity of the business. The Group manages the risks by making complex judgements, including decisions (based on assumptions about economic factors) about the level and types of risk that it is willing to accept in order to achieve its business objectives, the maximum level of risk the Group can assume before breaching constraints determined by liquidity needs and its regulatory. Significant events post reporting date In February 2022 the Company was pleased to announce the appointment of Anders Wilhelmsen as a Non- Executive Director. Mr Wilhelmsen is appointed as a representative of Watrium AS (“Watrium”) which is a long-standing and very supportive shareholder. The Company has already benefited from Mr Wilhelmsen’s appointment and looks forward to working with him to achieve its stated strategic objectives. We are delighted that Satago’s platform was selected by Lloyds Bank as the platform of choice to support the provision of invoice factoring solutions to the Bank’s customers. In addition, LBG made a strategic investment of £5m in Satago. These landmark commercial and strategic partnerships are pivotal to the future success of Satago, and we look forward to updating shareholders on its progress, and further partnerships. Finally, I would like to thank shareholders for their substantial support for the recent Placing and Open Offer. Both transactions were over-subscribed and resulted in the Company raising £10m via the issue of 13,360,739 New Ordinary Shares at 75 pence per Share. TruFin has never been better positioned. With two businesses already achieving sustainable profitability and a fully funded business plan, we look to the future with confidence. James van den Bergh Chief Executive Officer 28 April 2022 ANNUAL REPORT AND ACCOUNTS 2021 11 REPORT OF THE DIRECTORS For the year ended 31 December 2021 The Directors present their report with the financial statements of the Company and the Group for the year ended 31 December 2021. Principal activity The principal activities of the Group in the year under review were those of providing niche lending, early payment services and video games publishing. Dividends The Directors have confirmed that no dividends have been declared for the year to 31 December 2021 (2020: £nil). The Directors’ current view is that the earnings of Group will first be reinvested in the businesses to fund the Group’s growth strategy and any surplus cash, if not reinvested in the foreseeable future, will be returned to shareholders. Events since the end of the year On 12 April 2022 the Company successfully completed a Placing and Open offer resulting in 13,360,739 new ordinary shares being issued in the Company at £0.75 per share, raising gross proceed of c.£10m. Following issue of the new shares, the total number of voting rights in the Company is 94,182,943. Since the year end Lloyds Banking Group (“LBG”) has completed an investment of £5m of new equity capital in Satago, at a pre-money valuation of £20m. 937,501 newly created B ordinary shares, with a par value of £0.001 per share, were allotted for £5m cash from LBG, representing 20% of the fully diluted share capital. On 9 March 2022 TruFin agreed to vary the terms of an existing £3 million loan to Satago so that it is convertible into equity capital in Satago at the same valuation as the LBG investment or, if a further funding round takes place, the valuation implied by the funding round. Assuming conversion based on the £20 million valuation (and assuming LBG does not subscribe for its pro rata entitlement to shares), TruFin would hold approximately 68% of Satago (on a fully diluted basis). In addition on 9 March 2022 LBG confirmed its intention to enter into a commercial agreement to licence Satago’s software platform for its Single Invoice Finance and whole of book Invoice Factoring customers. Satago and LBG have signed a letter of intent. Directors The Directors who held office during the year and up to the date of the Directors’ report were as follows: Steve Baldwin James van den Bergh Penny Judd Paul Dentskevich Anders Wilhelmsen (appointed 16 February 2022) Stephen Greene (resigned 31 October 2021) ANNUAL REPORT AND ACCOUNTS 2021 12 REPORT OF THE DIRECTORS (CONTINUED) For the year ended 31 December 2021 The Directors’ interests in the shares of TruFin plc, all of which were beneficial interests, at 31 December 2021 are as follows: Number of Shares J van den Bergh P Judd Shares jointly held by the trustee of the Company’s employee benefit trust (the “EBT”) and J van den Bergh 2021 165,982 24,723 2020 165,982 24,723 395,558 791,118 During the year 395,560 shares that were jointly held by the EBT and James van den Bergh vested. 395,560 shares became fully owned by the EBT. James van den Bergh holds a nil cost option in respect of 1,186,679 shares. Directors insurance and indemnities Throughout the year the Company has maintained Directors and Officers liability insurance for the benefit of the Company, the Directors and its officers. The Directors consider the level of cover appropriate for the business and will remain in place for the foreseeable future. Significant shareholders The following parties held greater than 3% of the issued share capital of TruFin plc as at 31 December 2021: Watrium AS Gresham House Asset Management Lombard Odier Investment Managers Premier Miton Investors JO Hambro Capital Management Jupiter Asset Management AXA Framlington Investment Managers Credit Suisse Private Banking GPIM M&G Investments CRUX Asset Management Statement of Directors’ responsibility Number of shares 16,986,657 8,320,628 5,547,343 5,415,051 4,982,620 4,755,188 3,740,096 3,502,781 3,409,057 2,727,273 2,430,692 % of issued share capital 21.02% 10.29% 6.86% 6.70% 6.16% 5.88% 4.63% 4.33% 4.22% 3.37% 3.01% The Directors are required by the Companies (Jersey) Law 1991, to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the company for that period. The directors have elected to prepare the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In preparing these financial statements, the Directors are required to: • Select suitable accounting policies and then apply them consistently, • Make judgements and estimates that are reasonable and prudent, • State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements, and ANNUAL REPORT AND ACCOUNTS 2021 13 REPORT OF THE DIRECTORS (CONTINUED) For the year ended 31 December 2021 • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company’s transactions. These records must disclose with reasonable accuracy at any time the financial position of the Company and enable the Directors to ensure that any financial statements prepared comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and, hence, for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations. Statement of Going Concern The directors have completed a final assessment of the Group’s financial resources, including forecasts. Based on this review, the directors believe that the Group is well placed to manage its business risks successfully within the expected economic outlook. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Financial Statements. Corporate Governance and Internal Controls The Directors acknowledge the importance of high standards of corporate governance and how the Board and its committees operate. The corporate governance framework which TruFin operates, including Board leadership and effectiveness, board remuneration, and internal control is based upon practices which the board believes are proportional to the size, risks, complexity and operations of the business and is reflective of the Group’s values. The Board has decided to adhere to the Quoted Companies Alliance’s Corporate Governance Code (“QCA Code”) for small and mid-size quoted companies (revised in April 2018 to meet the new requirements of AIM Rule 26). The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA itself has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. The Board has considered how it applies each principle and the extent to which the Board judges these to be appropriate in the circumstances. Details of how TruFin adhere to these principles can be found on our website www.TruFin.com. In line with the QCA Code, the Board and Committees conducted a formal performance evaluation process during the year. The process was carried out by way of tailored questionnaires completed by each member of the Board and Committees. With respect to the Board, the question covered a variety of topics, including the composition of the Board, the quality and timeliness of information provided to the Board, succession planning and shareholder engagement. In general, the responses found the Board comprises an appropriate balance of skills and experience and that it is operating effectively. The Board comprises one Executive Director and four Non-Executive Directors, three of which are independent. Brief biographies of the Directors are set out below: James van den Bergh – Chief Executive Officer James possesses over 16 years of investment banking and capital markets experience. James led the alternative finance team at Arrowgrass Capital Partners since its inception in 2013 to its transfer to TruFin. James began his career at Merrill Lynch before transitioning into investment management in 2003. James was formerly a partner at SAC Capital Advisors, Walter Capital Management LLP and Ivaldi Capital LLP. James is a Chartered Financial Analyst (CFA) Charterholder. ANNUAL REPORT AND ACCOUNTS 2021 14 REPORT OF THE DIRECTORS (CONTINUED) For the year ended 31 December 2021 Steve Baldwin – Chairman (appointed Chairman 26 June 2020, previously Senior Independent Non- Executive Director) Steve has an extensive corporate finance background and is currently a Non-Executive Director at The Edinburgh Investment Trust plc, Plus500 Limited and Wings Holdings Limited. He is also a Trustee at Howard de Walden Estate Limited. Steve was the Head of European Equity Capital Markets and Corporate Broking at Macquarie Capital until February 2015. Prior to this, Steve was a Director at JPMorgan Cazenove for ten years and was a Vice President of Corporate Finance at UBS from 1995 to 1998. Steve qualified as a Chartered Accountant. Penny Judd – Independent Non-Executive Director Penny has over 30 years of experience in Compliance, Regulation, Corporate Finance and Audit and is currently a Non-Executive Director, Senior Independent Director and Chair of the Audit Committee of AIM listed Alpha Financial Management Consulting plc. She is also a Non-Executive Director and Chair of the Audit Committee of AIM listed Team17 plc and LendInvest plc. Penny started her career at KPMG qualifying as a chartered accountant and specialising in Audit and Corporate Finance before joining the London Stock Exchange where she was Head of Equity Markets at the UKLA. She then moved to Cazenove & Co as a corporate financier and was a consultant at the London Investment Banking Association before moving into a career in Compliance. Penny was a Managing Director and EMEA Head of Compliance firstly for UBS Limited and then Nomura International Plc before moving into her current portfolio career. Paul Dentskevich – Independent Non-Executive Director Paul has over 30 years of financial services experience, specialising in risk management, investment management and corporate governance of hedge and other multi-asset funds. Paul is currently Risk Director at Crestbridge and Chairman of the Risk Committee at Standard Life Aberdeen. Having previously been at Brevan Howard, 2008 to 2015, Paul was a member of the Manager’s Investment Committee. Paul is currently a Director at Signal Credit GP Limited, Signal Alpha II CP Limited and CloverTree Opportunities Fund Limited. Paul has a PhD in Economics from Imperial College London. Anders Wilhelmsen – Non-Executive Director Anders is an investment professional and the nominated non-executive representative of the Company’s major shareholder, Watrium. Anders currently serves on several boards on the Watrium portfolio, including Private equity firm, HitecVision and health-tech company, Sensio. He holds an MA Honours in Financial Economics from the University of St Andrews, and an MBA from INSEAD. Our Committees The Board has established the Audit Committee, the Remuneration Committee and the Nomination Committee each with written terms of reference and agreed schedules of work. (a) Audit Committee The Audit Committee is chaired by Penny Judd. Its other members are Steve Baldwin and Paul Dentskevich The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported on. It receives and reviews reports from the Company’s management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee meets at least twice a year and has unrestricted access to the Company’s auditors. A copy of the Audit Committee Terms of Reference can be found on our website. ANNUAL REPORT AND ACCOUNTS 2021 15 REPORT OF THE DIRECTORS (CONTINUED) For the year ended 31 December 2021 (b) Remuneration Committee The Remuneration Committee is chaired by Paul Dentskevich. Its other members are Penny Judd and Steve Baldwin. The Remuneration Committee reviews the performance of the Company’s Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The Remuneration Committee also makes recommendations to the Board on proposals for the granting of options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time by the Company. The remuneration and terms and conditions of appointment of the Non-Executive Directors is set by the Board. The Remuneration Committee meets formally at least once a year and otherwise as required. A copy of the Remuneration Committee Terms of Reference can be found on our website. (c) Nomination Committee The Nomination Committee is chaired by Steve Baldwin. Its other members are Penny Judd and Paul Dentskevich. The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of the Board, performance of Board members, induction of new Directors, appointment of committee members and succession planning for senior management of the Company. The Nomination Committee is responsible for evaluating the balance of skills, knowledge, diversity and experience of the Board, the size, structure and composition of the Board, retirements and appointments of additional and replacement directors and makes appropriate recommendations to the Board on such matters including succession planning. The Nomination Committee prepares a description of the role and capabilities required for a particular appointment. The Nomination Committee meets formally at least once a year and otherwise as required. A copy of the Nomination Committee Terms of Reference can be found on our website. Given the small number of meetings held by the Nomination and Remuneration Committees, neither have produced a separate report, however the Company intends to review this requirement on an annual basis Board and Committee attendance record James van den Bergh Steve Baldwin Penny Judd Paul Dentskevich Stephen Greene Board Meetings attended 5 / 5 5 / 5 5 / 5 5 / 5 4 / 5 Committee Membership Nomination Committee Audit Committee Remuneration Committee 1 / 1 1 / 1 1 / 1 2 / 2 2 / 2 2 / 2 4 / 4 4 / 4 4 / 4 Statement as to disclosure of information to auditors So far as the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware and each Director has taken all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. ON BEHALF OF THE BOARD Steve Baldwin Chairman 28 April 2022 ANNUAL REPORT AND ACCOUNTS 2021 16 AUDIT COMMITTEE REPORT For the year ended 31 December 2021 Members of the Committee • Penny Judd (Chair) • Steve Baldwin • Paul Dentskevich Role of the Committee The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported on. It receives reviews reports from the Company’s management and auditors related to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee meets at least twice a year and has unrestricted access to the Company’s auditors. A copy of the Audit Committee Terms of Reference can be found on our website. External Audit The Audit Committee approves the appointment and remuneration of the Group’s external auditors. They also ensure that they are satisfied with the external auditors’ independence in relation to any other non-audit work undertaken by them. Internal Audit The Committee has considered the need for an internal audit function during the year and continues to be of the view that, given the size and nature of the Group’s operations and finance team, there is no current requirement to establish a separate internal audit function. Significant issues considered in relation to the financial statements The Audit Committee assesses whether suitable accounting policies have been adopted and whether appropriate estimates and judgements have been made by management. The Committee also reviews accounting papers prepared by management, and reviews reports by the external auditors. The specific areas reviewed by the Committee in respect of the year were: • appropriateness of the calculation and valuation of Goodwill recognised in the Group financial statements • appropriateness of going concern assumptions ANNUAL REPORT AND ACCOUNTS 2021 17 ESG Responsibility Statement For the year ended 31 December 2021 Environmental Responsibility We believe protecting the environment is a global mission and we have our own part to play in helping the UK reduce greenhouse gas emissions to net zero by 2050. Our offices operate energy saving practices, our employees recycle waste, and we discourage excessive printing of documents and will continue to remove unnecessary paper wherever we can. We will be also considering the impact of climate change on our Group model as well as our own environmental footprint and consider how we can incorporate climate change criteria into the Group businesses. We want to support valuable businesses that share the same commitment and passion to sustainability as we do, and plan to focus on how the Group approaches environmental concerns and its carbon footprint. Social Responsibility Our aim is to embrace diversity and be truly representative of all sections of society. We believe the foundations are in place for the Group to uphold a diverse and inclusive environment where employees feel they can fulfil their career ambitions regardless of their gender, sexual orientation, ethnicity, disability, or social upbringing. We believe it is critical for boards of directors to benefit from diverse perspectives, and so we aim to achieve this on the boards throughout the Group. We strive to uphold working environments free of bullying, harassment, victimisation and unlawful discrimination, where individual differences and contributions from all employees are recognised and valued. We our proud to work with companies within the Group that hold similar values to us, that understand the importance of a Living Wage, respect the Modern Slavery Act, and think about their communities. Governance Responsibility We acknowledge the importance of high standards of corporate governance and intend to comply with the principles set out in the QCA Corporate Governance Code for Small and Mid-Size quoted companies 2018. This sets out a standard of minimum best practice for small and mid-size quoted companies, particularly Alternative Investment Market (“AIM”) companies. A statement regarding how we comply with the QCA code can be found on the TruFin website. We aim to make governance a priority throughout the Group and have implemented a Group Governance Policy within each of the subsidiaries. We believe this policy provides the Group with sufficient autonomy to be as successful as possible, whilst ensuring we have adequate information about, and appropriate control over, the significant activities and decisions of our subsidiaries, ensuring that good governance is achieved. ANNUAL REPORT AND ACCOUNTS 2021 18 REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF TRUFIN PLC For the year ended 31 December 2021 Opinion We have audited the financial statements of TruFin plc (the “parent company”) and its subsidiaries (the “group”) for the year ended 31 December 2021, which comprise: • the group consolidated and parent company statements of comprehensive income for the year then ended; • the group consolidated and parent company statements of financial position as at 31 December 2021; • the group and parent company statements of changes in equity for the year then ended; • the group and parent company statements of cash flows for the year then ended; and • the notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company's affairs as at 31 December 2021 and of the group and parent company’s loss for the year then ended; • the group and parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and • the financial statements have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the parent company’s and group’s ability to continue to adopt the going concern basis of accounting included: • Obtaining and reviewing the Board’s assessment of going concern, which included considerations arising from the COVID-19 pandemic and general economic conditions; • Challenging budgets used by management in their going concern assessment by assessing the historical accuracy of the management’s budgeting process by comparing the prior year budgets with actual figures and by comparing the first trimester of the 2022 budget to the actual trimester 2022 results; • Examining within the working capital forecasts the key inputs within the model and corroborating them through discussions with management, including the impact of the post year end fundraising; and • Reviewing for accuracy the disclosures in relation to this matter in the financial statements. ANNUAL REPORT AND ACCOUNTS 2021 19 REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF TRUFIN PLC (CONTINUED) For the year ended 31 December 2021 Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Overview of our audit approach Materiality In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified. Based on our professional judgement, we determined overall materiality for the Group and Company financial statements as a whole to be £500,000 (2020: £305,000) and £165,000 (2020: £180,000) respectively. In determining this, we considered a range of benchmarks with specific focus on approximately based on 1% of Total Assets (2020: 0.5% of Total Assets). We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment. The performance materiality that was set was £300,000. Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the Board of Directors to report to it all identified errors in excess of £25,000 (2020: £15,000). Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds. Overview of the scope of our audit The group consists of TruFin plc itself, TruFin Holdings Ltd (the holding entity) and the subsidiaries as disclosed in Note 1. In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team. The primary audit engagement team audited all the UK trading entities within the group, except for the Oxygen business which was audited by a separate Crowe UK team. For the Oxygen business, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole. The primary team led by the Senior Statutory Auditor was ultimately responsible for the scope and direction of the audit process. The primary team interacted regularly with the component team where appropriate during various stages of the audit, reviewed working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group level, such as performing analytical procedures on non significant entities to the Group, gave us appropriate evidence for our opinion on the Group financial statements. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the ANNUAL REPORT AND ACCOUNTS 2021 20 REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF TRUFIN PLC (CONTINUED) For the year ended 31 December 2021 greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion. This is not a complete list of all risks identified by our audit. Revenue Recognition Key audit matter How the scope of our audit addressed the key audit matter The Group derives its revenue from interest, fee and publishing income. During the year ended 31 December 2021, the Group recorded total gross revenue of £13,115k (FY20: £14,832k). Interest income is earned on loans and advances to customers by Vertus and Satago and accounts for 13% of total revenue. Fee income is earned on payment services and subscription fees provided by Oxygen and Satago which accounts for approximately 33% of total revenue. Publishing income is earned by the companies in the Playstack group and accounts for approximately 54% of total revenue. Revenue is recognised in accordance with the accounting policy set out in the financial statements. We focus on the risk of material misstatement in the recognition of revenue, as a result of both fraud and error, because revenue is material and is an important determinant of the Group’s profitability, which has a consequent impact on its share price performance. • For each company in the Group, we confirmed our understanding of its business model and the services and products it delivers to its customers; • Based on that understanding, we considered the performance obligations identified when “control” passes to the customer and, consequently, when revenue is earned; • We selected a sample of contracts to confirm our understanding of the principal terms and obligations; • We confirmed our understanding of the key systems used to capture and record that income and evaluate any key controls; • Where the Group utilises third party platforms we evaluated those platforms and the safeguards management have in place to corroborate the output from those platforms; • We performed an overall analytical review and corroborated the reasons for any large and unusual variances; • For a selection of transactions, we confirmed that the recognition criteria in relation to the income earned in the period has been met and vouched to cash receipt; • We reviewed and tested the basis for accrued and deferred income; • We reviewed aged receivables profile and credit notes issued post year end; and • Where relevant, we reviewed and tested revenue cut off procedures. ANNUAL REPORT AND ACCOUNTS 2021 21 REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF TRUFIN PLC (CONTINUED) For the year ended 31 December 2021 Carrying value of goodwill and other intangible assets Key audit matter The Group’s intangible assets comprises of goodwill, separately identifiable intangible assets, client contracts, software licenses and project costs When assessing the carrying value of goodwill and intangible assets, management make judgements regarding the appropriate cash generating unit, strategy, future trading and profitability and the assumptions underlying these. We considered the risk that goodwill and/or other intangible assets were impaired. How the scope of our audit addressed the key audit matter • We evaluated, in comparison to the requirements set out in IAS 36, management’s assessment (using discounted cash flow models) as to whether goodwill and/or other intangible assets were impaired. • We challenged, reviewed and considered by reference to external evidence, management’s impairment and fair value models as appropriate and their key estimates, including the discount rate. We reviewed the appropriateness and consistency of the process for making such estimates. • We reviewed the accuracy of the disclosures included in the financial statements. Carrying value of the loan book Key audit matter How the scope of our audit addressed the key audit matter There is a risk the loan book is not appropriately carried at the expected recoverable amount which includes the expected credit loss required under IFRS 9. We also considered the ageing analysis to ensure that an appropriate approach has been taken to dealing with any loans which are deemed past due either in terms of capital or interest. Due to the estimation needed in assessing the carrying value of the loan book, this is considered a key audit matter. • We selected a sample of agreements entered understanding of the principal terms and obligations. into to confirm our • We examined the ageing analysis to ensure that an appropriate approach has been taken to dealing with any loans which are deemed past due either in terms of capital or interest. • We challenged management in relation to the assumptions applied in the ECL model by holding discussions with the management and challenging the inputs applied in the Loss Given Default assumption used in the ECL model. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion. Other information The directors are responsible for the other information contained within the annual report. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance ANNUAL REPORT AND ACCOUNTS 2021 22 REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF TRUFIN PLC (CONTINUED) For the year ended 31 December 2021 conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Matters on which we are required to report by exception We have nothing to report to you in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: • proper accounting records have not been kept by the parent company, or proper returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • we have not received all the information and explanations we require for our audit. Responsibilities of the directors for the financial statements As explained more fully in the directors’ responsibilities statement set out on page 13 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the legal and regulatory frameworks within which the parent company operates, focusing on those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The laws and regulations we considered in this context were the Companies (Jersey) Law 1991 and income tax rules. As part of our audit planning process we assessed the different areas of the financial statements, including disclosures, for the risk of material misstatement. This included considering the risk of fraud where direct ANNUAL REPORT AND ACCOUNTS 2021 23 REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF TRUFIN PLC (CONTINUED) For the year ended 31 December 2021 enquiries were made of management and those charged with governance concerning both whether they had any knowledge of actual or suspected fraud and their assessment of the susceptibility of fraud. We considered the risk was greater in areas involve significant management estimate or judgement. Based on this assessment we designed audit procedures to focus on the key areas of estimate or judgement, this included specific testing of journal transactions, both at the year end and throughout the year. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). The potential effects of inherent limitations are particularly significant in the case of misstatement resulting from fraud because fraud may involve sophisticated and carefully organized schemes designed to conceal it, including deliberate failure to record transactions, collusion or intentional misrepresentations being made to us. A further description of our responsibilities for the audit of the financial statements is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the parent company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the parent company's members those matters we are required to state to them in an auditor's 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 parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed. Leo Malkin (Senior Statutory Auditor) for and on behalf of Crowe U.K. LLP Statutory Auditor London 28 April 2022 ANNUAL REPORT AND ACCOUNTS 2021 24 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2021 Interest income Fee income Publishing income Interest, fee and publishing expenses Net revenue Staff costs Other operating expenses Depreciation & amortisation Net impairment reversal on financial assets Share of profit from associates Loss before tax Taxation Loss for the year Other comprehensive income Items that may be reclassified subsequently to profit and loss Exchange differences on translating foreign operations Other comprehensive income for the year, net of tax Total comprehensive loss for the year Loss for the year attributable to: Owners of TruFin plc Non-controlling interests Total comprehensive loss for the year attributable to: Owners of TruFin plc Non-controlling interests Earnings per Share Basic and Diluted EPS Notes 21 Notes 3 3 3 5 7 2021 £’000 1,681 4,330 7,104 (6,214) 6,901 (11,285) (3,257) (794) 10 3 2020 £’000 2,578 3,846 8,408 (6,512) 8,320 (11,532) (4,927) (799) 11 – (8,422) (8,927) 2, 9 986 (7,436) (2,476) (11,403) (39) (39) (7,475) (7,071) (365) (7,436) (7,112) (363) (7,475) 2021 pence (8.7) 85 85 (11,318) (10,971) (432) (11,403) (10,886) (432) (11,318) 2020 pence (13.6) ANNUAL REPORT AND ACCOUNTS 2021 25 COMPANY STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2021 Revenue Staff costs Other operating expenses Depreciation & amortisation Loss before tax Taxation Loss and total comprehensive income for the year Notes 2021 £’000 2020 £’000 3 5 9 2,126 2,192 (1,911) (624) – (409) – (409) (1,920) (975) (1) (704) – (704) ANNUAL REPORT AND ACCOUNTS 2021 26 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2021 Notes 2021 £’000 Assets Non-current assets Intangible assets Property, plant and equipment Deferred tax asset Loans and advances Total non-current assets Current assets Cash and cash equivalents Loans and advances Interest in associate Trade receivables Other receivables Total current assets Total assets Equity and liabilities Equity Issued share capital Retained earnings Foreign exchange reserve Other reserves Equity attributable to owners of the company Non-controlling interest Total equity Liabilities Non-current liabilities Borrowings Total non-current liabilities Current liabilities Borrowings Trade and other payables Total current liabilities Total liabilities Total equity and liabilities 10 11 9 13 13 14 14 15 19 16 16 17 21,191 65 303 11,575 33,134 7,608 4,558 3 2,585 2,840 17,594 50,728 73,548 (17,731) 4 (24,393) 31,428 1,023 32,451 11,351 11,351 1,634 5,292 6,926 18,277 50,728 2020 £’000 21,041 140 43 9,301 30,525 17,728 5,359 – 1,992 1,962 27,041 57,566 73,548 (10,730) 45 (24,395) 38,468 1,268 39,736 8,507 8,507 2,204 7,119 9,323 17,830 57,566 ANNUAL REPORT AND ACCOUNTS 2021 27 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) As at 31 December 2021 The notes on pages 34 to 79 are an integral part of these financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 28 April 2022. They were signed on its behalf by: James van den Bergh Chief Executive Officer ANNUAL REPORT AND ACCOUNTS 2021 28 COMPANY STATEMENT OF FINANCIAL POSITION As at 31 December 2021 Assets Non-current assets Investments in subsidiaries Amounts owed by group undertakings Total non-current assets Current assets Cash and cash equivalents Trade and other receivables Total current assets Total assets Equity and liabilities Equity Issued share capital Retained earnings Other reserves Total equity Liabilities Current liabilities Trade and other payables Total current liabilities Total liabilities Total equity and liabilities Notes 2021 £’000 2020 £’000 12 14 15 17 30,189 46,919 77,108 786 144 930 78,038 73,548 (5,504) 8,966 77,010 1,028 1,028 1,028 78,038 30,189 47,066 77,255 578 658 1,236 78,491 73,548 (5,165) 8,966 77,349 1,142 1,142 1,142 78,491 The notes on pages 34 to 79 are an integral part of these financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 28 April 2022. They were signed on its behalf by: James van den Bergh Chief Executive Officer ANNUAL REPORT AND ACCOUNTS 2021 29 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2021 Share capital £’000 73,548 – Retained earnings £’000 (10,730) (7,071) Foreign exchange reserve £’000 45 – Other reserves £’000 (24,395) – Balance at 1 January 2021 Loss for the year Other comprehensive income for the year Total comprehensive loss for the year Share based payment Adjustment arising from change in non-controlling interest Issuance of subsidiary shares to employees Intragroup transfer of subsidiary Issuance of shares by subsidiary Balance at 31 December 2021 73,548 – – – – – – – – (7,071) 70 4 – – (4) (17,731) (41) (41) – – – – – 4 Non- controlling interest £’000 1,268 (365) Total equity £’000 39,736 (7,436) 2 (39) Total £’000 38,468 (7,071) (41) (7,112) (363) (7,475) 70 4 – – (4) 19 – 103 70 – 19 2 99 1,023 32,451 – – – – – 2 – (24,393) 2 (4) 31,428 Balance at 1 January 2020 Loss for the year Other comprehensive income for the year Total comprehensive loss for the year Share based payment Issuance of subsidiary shares to employees Adjustment arising from change in non-controlling interest Balance at 31 December 2020 73,548 – (63) (10,971) (40) – (24,395) – 49,050 (10,971) 1,293 (432) 50,343 (11,403) – – – – – – (10,971) 545 (322) 81 85 85 – – – – – – – – 85 – 85 (10,886) (432) (11,318) 545 (322) 81 – 488 (81) 545 166 – 73,548 (10,730) 45 (24,395) 38,468 1,268 39,736 The notes on pages 35 to 84 are an integral part of these financial statements Share capital Share capital represents the nominal value of equity share capital issued. Retained earnings The retained earnings reserve represents cumulative net gains and losses. Foreign exchange reserve The foreign exchange reserve represents exchange differences which arise on consolidation from the translation of the financial statements of foreign subsidiaries. Other reserves Other reserves consist of the merger reserve and the share revaluation reserve. The merger reserve arose as a result of combining businesses that are under common control. As at 31 December 2021 it was a debit balance of £33,358,000 (2020: £33,360,000) The share revaluation reserve arose from the share cancellation that took place in February 2018. As at 31 December 2021 its balance was £8,966,000 (2020: £8,966,000). Non-Controlling Interest The non-controlling interest relates to the minority interest held in Bandana Media Limited, Playstack OY, Vertus Capital Limited, Vertus SPV1 Limited, Satago Financial Solutions Limited, Satago SPV1 Limited, Satago SPV2 Limited, Altlending Limited and Satago z.o.o. ANNUAL REPORT AND ACCOUNTS 2021 30 COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2021 Balance at 1 January 2021 Total comprehensive loss for the year Share based payment Balance at 31 December 2021 Balance at 1 January 2020 Total comprehensive loss for the year Share based payment Balance at 31 December 2020 Share capital £’000 73,548 – – 73,548 73,548 – – 73,548 Retained earnings £’000 (5,165) (409) 70 (5,504) (5,006) (704) 545 (5,165) Other reserves £’000 Total equity £’000 8,966 – – 8,966 8,966 – – 8,966 77,349 (409) 70 77,010 77,508 (704) 545 77,349 The notes on pages 34 to 79 are an integral part of these financial statements. ANNUAL REPORT AND ACCOUNTS 2021 31 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2021 Cash flows from operating activities Loss before tax Adjustments for Depreciation of property, plant and equipment Amortisation of intangible assets Share based payments Decrease in provision Finance costs Impairment of intangible assets Share of profit from associate Loss on disposal of Fixed Assets Loss on intragroup transfer of subsidiary Working capital adjustments Movement in Loans and advances (Increase)/decrease in trade and other receivables (Decrease)/increase in trade and other payables Tax paid Interest and finance costs paid Net cash (used in)/from operating activities Cash flows from investing activities: Additions to intangible assets Additions to property, plant and equipment Net cash used in investing activities Cash flows from financing activities: Issue of ordinary share capital of subsidiary New borrowings Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign exchange rate changes Cash and cash equivalents at end of the year 2021 £’000 2020 £’000 (8,422) (8,927) 96 1,571 70 – 656 – (3) 2 2 128 1,209 545 (700) 412 222 – – – (6,028) (7,111) (1,472) (720) (1,831) (4,023) (2) (716) (10,769) (1,779) (24) (1,803) 148 2,353 2,501 (10,071) 17,728 (49) 7,608 13,045 30 2,384 15,459 (17) (276) 8,055 (1,905) (31) (1,936) 166 4,382 4,548 10,667 6,971 90 17,728 16 All cash and cash equivalents are cash at bank. The notes on pages 34 to 79 are an integral part of these financial statements ANNUAL REPORT AND ACCOUNTS 2021 32 COMPANY STATEMENT OF CASH FLOWS For the year ended 31 December 2021 Cash flows from operating activities Loss before income tax Adjustments for: Depreciation of property, plant and equipment Interest income Share based payments Decrease in provision Working capital adjustments Decrease/(increase) in trade and other receivables Decrease in trade and other payables 2021 £’000 2020 £’000 (409) (704) – (2,008) 70 – (2,347) 513 (114) 399 1 (2,073) 545 (700) (2,931) (369) (304) (673) Net cash generated used in operating activities (1,948) (3,604) Cash flows from investing activities Cash received on intragroup loans Net cash generated from investing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year All cash and cash equivalents are cash at bank. The notes on pages 34 to 79 are an integral part of these financial statements. 2,156 2,156 208 578 786 3,998 3,998 394 184 578 ANNUAL REPORT AND ACCOUNTS 2021 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 Statutory information TruFin plc is a Company registered in Jersey and incorporated under Companies (Jersey) Law 1991. The Company’s ordinary shares were listed on the Alternative Investment Market of the London Stock Exchange on 21 February 2018. The address of the registered office is 26 New Street, St Helier, Jersey, JE2 3RA. 1. Accounting policies General information The TruFin Group (the “Group”) is the consolidation of TruFin plc and the companies set out in the “Basis of consolidation” (below). The principal activities of the Group are the provision of niche lending, early payment services and mobile game publishing. The financial statements are presented in Pounds Sterling, which is the currency of the primary economic environment in which the Group operates. Amounts are rounded to the nearest thousand. Basis of accounting The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”). Prior to 29 November 2017 and before the incorporation of TruFin plc and TruFin Holdings, the entities named above were under common control and therefore, have been accounted for as a common control transaction – that is a business combination in which all the combining entities or businesses are ultimately controlled by the same company both before and after the combination. IFRS 3 provides no specific guidance on accounting for entities under common control and therefore other relevant standards have been considered. These standards refer to pooling of assets and merger accounting and this is the methodology that has been used to consolidate the Group. After 29 December 2017, post the reorganisation, the entities constitute a legal group and accordingly the consolidated financial statements have been prepared by applying relevant principles underlying the consolidation procedures of IFRS. Basis of preparation The results of the Group companies have been included in the consolidated statement of comprehensive income. Where necessary, adjustments have been made to the underlying financial information of the companies to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The consolidated financial statements contained in this document consolidates the statements of total comprehensive income, statements of financial position, cash flow statements, statements of changes in equity and related notes for each of the companies listed in the “Basis of consolidation” below, which have been prepared in accordance with IFRS. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Basis of consolidation The consolidated financial statements include all of the companies controlled by the Group, which are as follows: ANNUAL REPORT AND ACCOUNTS 2021 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Entities TruFin Holdings Limited (“THL”) Country of incorporation Jersey Satago Financial Solutions Limited (“Satago”) Satago SPV 1 Limited (“Satago SPV 1”) UK UK Satago SPV 2 Limited (“Satago SPV 2”) UK Satago z.o.o (Satago Poland) Poland Oxygen Finance Group Limited (“OFGL”) (together with OFL and OFAI) (“Oxygen”) UK Oxygen Finance Limited (“OFL”) UK Oxygen Finance Americas, Inc (“OFAI”) USA Porge Ltd (“Porge”) *** UK TruFin Software Limited (“TSL”) UK AltLending UK Limited (“AltLending”) UK Vertus Capital Limited (“Vertus Capital”) (together with Vertus SPV 1 Limited) (“Vertus”) Vertus Capital SPV 1 Limited (“Vertus SPV 1”) Playstack Limited (“Playstack”)**** Bandana Media Limited (“Bandana”)**** PlayIgnite Ltd (“PlayIgnite”)**** UK UK UK UK UK Playstack z.o.o (“PS Poland”) **** Poland Playstack OY (“PS Finland”)**** Finland Playstack AB (“PS Sweden”)**** Sweden Playstack Inc (“Playstack USA”)**** USA PlayIgnite Inc (“PlayIgnite USA”)**** USA Registered address 26 New Street, St Helier, Jersey JE2 3RA 48 Warwick Street, London, United Kingdom, W1B 5AW 48 Warwick Street, London, United Kingdom, W1B 5AW 48 Warwick Street, London, United Kingdom, W1B 5AW 32-023 Krakow ul. Sw. Krzyza 19/6 Poland 1st Floor Enterprise House, 115 Edmund Street, Birmingham, United Kingdom, B3 2HJ 1st Floor Enterprise House, 115 Edmund Street, Birmingham, United Kingdom, B3 2HJ Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801, USA Cathedral Place, 42-44 Waterloo Street, Birmingham, United Kingdom, B2 5QB 48 Warwick Street, London, United Kingdom, W1B 5AW 48 Warwick Street, London, United Kingdom, W1B 5AW Building 1 Chalfont Park, Gerrards Cross, United Kingdom, SL9 0BG Building 1 Chalfont Park, Gerrards Cross, United Kingdom, SL9 0BG 56a Poland Street, London United Kingdom, W1F 7NN 56a Poland Street, London United Kingdom, W1F 7NN 56a Poland Street, London United Kingdom, W1F 7NN Kamienna 21, 31-403 Krakow, Poland Mikonkatu 17 B, 00100 Helsinki, Finland Solbergavägen 17, 17998 Färentuna, Sweden Gust Delaware, 16192 Coastal Hwy, Lewes, DE 19958 Cogency Global Inc, 850 New Burton Road, Suite 201, Dover DE 19904 Nature of the business Holding Company Provision of short term finance Provision of short term finance Provision of short term finance Provision of short term finance Holding Company % voting rights and shares held 100% of ordinary shares 85.1% of ordinary shares* 85.1% of ordinary shares* 85.1% of ordinary shares* 85.1% of ordinary shares* 88.4% of ordinary shares** Provision of early payment services Provision of early payment services 88.4% of ordinary shares** 88.4% of ordinary shares** Provision of market research information. 84.4% of ordinary shares** Provision of technology services Provision of short term finance Provision of short term finance 100% of ordinary shares 100% of ordinary shares* 54% of ordinary shares Provision of short term finance 54% of ordinary shares Publishing of computer games Publishing of computer games Business and domestic software developer Publishing activities in the field of computer games Publishing activities in the field of computer games Developing, publishing and selling electronic games Publishing of computer games Business and domestic software developer 100% of ordinary shares 72% of ordinary shares 100% of ordinary shares 100% of ordinary shares 75% of ordinary shares 100% of ordinary shares – (80% until 8 October 2020) 100% of ordinary shares 100% of ordinary shares ANNUAL REPORT AND ACCOUNTS 2021 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 * Following the grant of the Satago Management Incentive Plan (“Satago MIP”), the effective economic ownership of these companies is 94.1% based on their Statements of Financial Position at the Reporting Date. ** Nominal ownership of these companies is 88.4% due to the Oxygen Management Incentive Plan (“Oxygen MIP”). Effective economic ownership is 100% based on their Statements of Financial Position at the Reporting Date. *** On 22 March 2022, Porge was dissolved. **** The Playstack Group includes 4 associate companies incorporated in the UK which have been accounted for using the equity method. These are: • A 49% interest in PlayFinder Games Ltd • A 49% interest in Snackbox Games Ltd • A 42% interest in Military Games International Ltd • A 27% interest in Storm Chaser Games Limited (“Storm Chaser Games”) Principal accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been applied consistently to all the financial periods presented. The consolidated financial statements have been prepared in accordance with European Union Endorsed International Financial Reporting Standards (IFRSs) and the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) interpretations. These statements have been prepared on a going concern basis and under the historical cost convention except for the treatment of certain financial instruments. Going concern The Group’s forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Group should be able to operate in the foreseeable future. As a consequence, and following the fundraise post year end of c.£10m, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors have adopted the going concern basis in preparing these financial statements. This assessment takes into consideration the potential uncertainties arising from Covid-19 mentioned earlier in the report. Revenue recognition Net revenue Interest income and expense Interest income and expense for all financial instruments except for those classified as held for trading or measured or designated as at Fair Value Through Profit and Loss (“FVTPL”) are recognised in “Net revenue” as “Interest income” and “Interest, fee and publishing expenses” in the profit or loss account using the effective interest method. The Effective Interest Rate (“EIR”) is the rate that exactly discounts estimated future cash flows of the financial instrument through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. The future cash flows are estimated taking into account all the contractual terms of the instrument. The calculation of the EIR includes all fees and points paid or received between parties to the contract that are incremental and directly attributable to the specific lending arrangement, transaction costs and all other premiums or discounts. The interest income/expense is calculated by applying the EIR to the gross carrying amount of non-credit ANNUAL REPORT AND ACCOUNTS 2021 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 impaired financial assets (that is, to the amortised cost of the financial asset before adjusting for any expected credit loss allowance), or to the amortised cost of financial liabilities. For credit-impaired financial assets, as defined in the financial instruments accounting policy, the interest income is calculated by applying the EIR to the amortised cost of the credit-impaired financial assets, that is, to the gross carrying amount less the allowance for Expected Credit Losses (“ECLs”). Fee income Fee income for the Group is earned from payments services fees provided by Oxygen and subscription fees from Porge and Satago. Payment services provided by Oxygen comprises the following elements: Early Payment Programme Services (“EPPS”) contracts Oxygen’s EPPS generate rebates (i.e. discounts on invoice value) for its clients by facilitating the early payment of supplier invoices. Oxygen’s single performance obligation is to make its intellectual property and software platform available to its clients for the duration of their contracts. Oxygen bills its clients monthly for a contractually agreed share of supplier rebates generated by their respective Early Payment Programmes during the previous month. This revenue is recognised in the month the rebates are generated. Implementation fees Oxygen Implementation fees Implementation fees are charged to some clients in establishing a client’s technological access to the EPPS and in otherwise readying a client to benefit from the Services. Establishing access to the company’s intellectual property and software platform does not amount to a distinct service as the client cannot benefit from the initial access except by the company continuing to provide access for the contract period. Where an implementation fee is charged, it is therefore a component of the aggregate transaction price of the EPPS. Accordingly, such revenue is initially deferred and then recognised in the statement of comprehensive income over the life of the related EPPS. Satago Implementation fees Implementation fees have also been recognised by Satago in full on the signing of new contracts with partners. Consultancy fees Oxygen provides stand-alone advisory services to clients. Revenue is accrued as the underlying services are provided to the client. Subscription fees Insight services subscription fees The Insight Services offered by OFL (previously within Porge) provide focussed public sector procurement data and analytics on a subscription basis. Clients cover both the Private sector, enabling them to improve and develop their engagement with the public sector, and Public sector organisations, enabling them to make more informed procurement decisions. Subscriptions are typically received in advance and recognised over the length of the contract as access to the database is provided. Satago subscription fees These are monthly fees for access to Satago’s platform. Subscriptions are received in advance and recognised during the month the subscription relates to. ANNUAL REPORT AND ACCOUNTS 2021 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Fee expenses Fee expenses are directly attributable costs, associated with the Oxygen’s EPPS. The expenses include amortisation arising from capitalised contract costs incurred directly through activities which generate fee income. Amortisation arising from other intangible assets is recognised in depreciation and amortisation of non-financial assets before operating profit/loss. Publishing income Publishing income for the Group is earned by companies in the Playstack Group and comprises the following elements. Publishing income is recognised at the fair value of consideration received or receivable for goods and services provided and is shown net of VAT and any other sales taxes. The fair value takes into account any trade or volume discounts and commission retained. In App Purchases (IAP) revenue IAP revenue is earned on the sale of mobile games and features within those games. It is recognised when the game or feature is sold. Advertising revenue Advertising revenue is earnings from featuring third party advertising within mobile games. It is recognised when these advertisements are featured within the games. Console revenue Console revenue is earned on the sale of video games for consoles. It is recognised when the game is sold. Brand revenue Brand revenue is when a mobile game player signs up to an advertised brand in a mobile game. Revenue is recognised when the brand has confirmed acquisition of the customer. Publishing expenses Publishing expenses are directly attributable costs, associated with the Playstack Group’s publishing income. These costs are included at their invoiced value and are net of VAT and any other sales tax. Operating profit/loss Operating profit/loss is net interest and fee income less staff costs, depreciation and amortisation, impairment loss on financial assets and other operating expenses. Foreign currencies The results and financial position of each group company are expressed in Pounds Sterling, which is the functional currency of the UK based members of the Group and the presentation currency for the consolidated financial statements. Transactions in foreign currencies are translated to the Group companies’ functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in the consolidated statement of comprehensive income. In preparing the consolidated financial statements, the assets and liabilities of the group’s foreign operations are translated at the exchange rate at the reporting date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, are recognised in other comprehensive income and are accumulated in the Foreign exchange reserve equity section. ANNUAL REPORT AND ACCOUNTS 2021 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Property, plant and equipment All property, plant and equipment is stated at historical cost (or deemed historical cost) less accumulated depreciation and less any identified impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight line basis at the following annual rates: Leasehold improvements Fixtures and fittings Computer equipment – – – 5 years 3 years 3 -5 years Useful economic lives and estimated residual values are reviewed annually and adjusted as appropriate. Intangible assets Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Group and the cost of the asset can be reliably measured. Intangible assets with finite lives are stated at acquisition or development cost less accumulated amortisation and less any identified impairment. The amortisation period and method is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate and are treated as changes in accounting estimates. Computer software Computer software which has been purchased by the Group from third party vendors is measured at initial cost less accumulated amortisation and less accumulated impairments. Computer software also comprises internally developed platforms and the costs directly associated with the production of these identifiable and unique software products controlled by the Group. They are probable of producing future economic benefits. They primarily include employee costs and directly attributable overheads. Internally generated intangible assets are only recognised by the Group when the recognition criteria have been met in accordance with IAS 38: Intangible Assets as follows: • expenditure can be reliably measured; • the product or process is technically and commercially feasible; • future economic benefits are likely to be received; • intention and ability to complete the development; and • view to either use or sell the asset in the future. The Group will only recognise an internally-generated asset should it meet all the above criteria. In the event of a development not meeting the criteria it will be recognised within the statement of profit or loss in the period incurred. Capitalised costs include all directly attributable costs to the development of the asset. Internally generated assets are measured at capitalised cost less accumulated amortisation less accumulated impairment losses. The internally generated asset is amortised at the point the asset is available for use or sale. The asset is amortised on a straight-line basis over the useful economic life with the remaining useful economic life and residual value being assessed annually. Any subsequent expenditure on the internally generated asset is only capitalised if the cost increases the ANNUAL REPORT AND ACCOUNTS 2021 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 future economic benefits of the related asset. Otherwise all additional expenditure should be recognised through the statement of profit or loss in the period it occurs. Contract assets Contract assets comprise the directly attributable costs incurred at the beginning of an Early Payment Scheme Service contract to revise a client’s existing payment systems and provide access to the Group’s software and other intellectual property. These implementation (or “set up”) costs are comprised primarily of employee costs. Amortisation is charged to the statement of comprehensive income over the estimated useful lives of intangible assets from the date they are available for use, on a straight-line basis. The amortisation basis adopted for each class of intangible asset reflects the Group’s consumption of the economic benefit from that asset. Estimated useful lives The estimated useful lives of finite intangible assets are as follows: Computer software Contract assets – – Goodwill 3 -5 years Life of underlying contract (typically 5 years) Goodwill arising on acquisition represents the excess cost of a business combination over the fair values of the Group’s share of the identifiable assets and liabilities at the date of the acquisition. When part of the consideration transferred by the Group is deferred or contingent, this is valued at its acquisition date fair value, and is included in the consideration transferred in a business combination. Changes in the deferred or contingent consideration, which occur in the measurement period, are adjusted retrospectively, with corresponding adjustments to goodwill. Goodwill is not amortised but is reviewed at least annually for impairment. For the purpose of impairment testing, goodwill is allocated to each Cash Generating Unit (“CGU”). Each CGU is consistent with the Group’s primary reporting segment. Any impairment is recognised immediately through the income statement and is not subsequently reversed. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit or loss on disposal. Assets classified as held for sale Whilst assessing whether any assets should be classified as held for sale, the management of the Group ensure that the status of the asset satisfies all of the following criteria as set out within IFRS 5: • the carrying amount of the asset will be recovered principally through a sale transaction rather than through continuing use; • the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets; • its sale must be highly probable and within one year from the date of classification; • management must be committed to a plan to sell the asset; and • the asset is being actively marketed for sale at a sales price reasonable in relation to its fair value. In the event an asset satisfies the criteria, prior to reclassification the asset should be valued in accordance with IFRS accounting standards applicable to the asset in question. At initial recognition the asset is measured at the lower of carrying amount and fair value less costs to sell. Any unrealised gains or losses are recognised in the profit and loss account. ANNUAL REPORT AND ACCOUNTS 2021 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Financial instruments Initial recognition Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are respectively added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition of financial assets and financial liabilities at FVTPL are recognised immediately in profit or loss. Financial assets Classification and reclassification of financial assets Recognised financial assets within the scope of IFRS 9 are required to be classified as subsequently measured at amortised cost, FVTOCI or FVTPL on the basis of both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are reclassified if and only if, the business model under which they are held is changed. There has been no such change in the allocation of assets to business models in the periods under review. Loans and advances Loans and advances are held within a business model whose objective is to hold those financial assets in order to collect contractual cash flows. The contractual terms of the loan agreements give rise on specified dates to cash flows that are solely payments of principal and interest or fees on the principal amount outstanding. After initial measurement, loans and advance to customers are subsequently measured at amortised cost using the Effective Interest Rate method (EIR) less impairment. Amortised cost is calculated by taking into account any fees or costs that are an integral part of the EIR. The EIR amortisation is included in interest and similar income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income and disclosed with any other similar losses within the line item “Net impairment losses on financial assets”. Where cash flows are significantly different from the original expectations used to determine EIR, but where this difference does not arise from a modification of the terms of the financial instrument, the Group revises its estimates of receipts and adjusts the gross carrying amount of the financial asset to reflect actual and revised estimated contractual cash flows. The Group recalculates the gross carrying amount of the financial asset as the present value of the estimated future contractual cash flows discounted at the financial instrument’s original EIR. The adjustment is recognised in statement of comprehensive income as income or expense. Trade and other receivables Trade receivables do not contain any significant financing component and accordingly are recognised initially at transaction price, and subsequently measured at cost less expected credit losses. Investments in equity shares Prior to its disposal the Group’s investment in the equity shares of Zopa was not held for trading. The Group made an irrevocable election to classify and subsequently measure the investment at FVTOCI. Movements in the fair value of the investment were recognised in the statement of other comprehensive income and were not reclassified to profit on loss on derecognition. Investments in subsidiaries Investments in subsidiaries are accounted for at cost less impairment in the Company’s financial statements. ANNUAL REPORT AND ACCOUNTS 2021 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Cash and cash equivalents Cash and cash equivalents comprise cash balances and demand deposits and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Impairment The Group (and Company) recognises loss allowances for Expected Credit Losses (“ECLs”) on the following financial instruments that are not measured at FVTPL: • Loans and advances; • Other receivables; • Trade receivables; and • Intercompany receivables ECLs are measured through loss allowances calculated on the following bases: ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Group under the contract and the cash flows that the Group expects to receive arising from the weighting of future economic scenarios, discounted at the asset’s EIR within the current performing book. The Group measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar credit risk characteristics. The loss allowance is measured as the present value of the difference between the contractual cash flows and cash flows that the Group expects to receive using the asset’s original EIR, regardless of whether it is measured on an individual basis or a collective basis. A financial asset that gives rise to credit risk, is referred to (and analysed in the notes to this financial information) as being in “Stage 1” provided that since initial recognition (or since the previous reporting date) there has not been a significant increase in credit risk, nor has it has become credit impaired. For a Stage 1 asset, the loss allowance is the “12-month ECL”, that is, the ECL that results from those default events on the financial instrument that are possible within 12 months from the reporting date. A financial asset that gives rise to credit risk is referred to (and analysed in the notes to this financial information) as being in “Stage 2” if since initial recognition there has been a significant increase in credit risk but it is not credit impaired. For a Stage 2 asset, the loss allowance is the “lifetime ECL”, that is, the ECL that results from all possible default events over the life of the financial instrument. A financial asset that gives rise to credit risk is referred to (and analysed in the notes to this financial information) as being in “Stage 3” if since initial recognition it has become credit impaired. For a Stage 3 asset, the loss allowance is the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original EIR. Further, the recognition of interest income is calculated on the carrying amount net of impairment rather than the gross carrying amount as for stage 1 and stage 2 assets. If circumstances change sufficiently at subsequent reporting dates, an asset is referred to by its newly appropriate Stage and is re-analysed in the notes to the financial information. Where an asset is expected to mature in 12 months or less, the “12 month ECL” and the “lifetime ECL” have the same effective meaning and accordingly for such assets the calculated loss allowance will be the same whether such an asset is at Stage 1 or Stage 2. However, the Group monitors significant increase in credit risk for all assets so that it can accurately disclose Stage 1 and Stage 2 assets at each reporting date. Lifetime ECLs are recognised for all trade receivables using the simplified approach. ANNUAL REPORT AND ACCOUNTS 2021 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Significant increase in credit risk – policies and procedures for identifying Stage 2 assets The Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition in order to determine whether credit risk has increased significantly. See note 18 for further details about how the Group assesses increases in significant credit risk. Definition of a default Critical to the determination of significant increases in credit risk (and to the determination of ECLs) is the definition of default. Default is a component of the Probability of Default (“PD”), changes in which lead to the identification of a significant increase in credit risk and PD is then a factor in the measurement of ECLs. The Group’s definition of default for this purpose is: • a counterparty defaults on a payment due under a loan agreement and that payment is more than 90 days overdue, or • within the core invoice finance proposition, where one or more individual finance repayments are beyond 90 days overdue, management judgement is applied in considering default status of the client. • the collateral that secures, all or in part, the loan agreement has been sold or is otherwise not available for sale and the proceeds have not been paid to the lending company; or • a counterparty commits an event of default under the terms and conditions of the loan agreement which leads the lending company to believe that the borrower’s ability to meet its credit obligations to the lending company is in doubt. The definition of default is similarly critical in the determination of whether an asset is credit-impaired (as explained below). Credit-impaired financial assets – policies and procedures for identifying Stage 3 assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. IFRS 9 states that evidence of credit-impairment includes observable data about the following events: • Significant financial difficulty of the borrower; • A breach of contract such as a default (as defined above) or past due event, or • The Group, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession that the Group would not otherwise consider. The Group assesses whether debt instruments that are financial assets measured at amortised cost or at FVTOCI are credit-impaired at each reporting date. When assessing whether there is evidence of credit- impairment, the Group takes into account both qualitative and quantitative indicators relating to both the borrower and to the asset. The information assessed depends on the borrower and the type of the asset. It may not be possible to identify a single discrete event – instead, the combined effect of several events may have caused financial assets to become credit-impaired. See note 18 for further details about how the Group identifies credit-impaired assets. Presentation of allowance for ECL in the statement of financial position Loss allowances for ECL are presented in the statement of financial position as follows: • For financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; ANNUAL REPORT AND ACCOUNTS 2021 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 • For loan commitments: as a provision; and • For debt instruments measured at FVTOCI: no loss allowance is recognised in the statement of financial position as the carrying amount is at fair value. However, the loss allowance is included as part of the revaluation amount in the investment revaluation reserve. Modification of financial assets A modification of a financial asset occurs when the contractual terms governing a financial asset are renegotiated without the original contract being replaced and derecognised and: • The gross carrying amount of the asset is recalculated and a modification gain or loss is recognised in profit or loss; • Any fees charged are added to the asset and amortised over the new expected life of the asset; and • The asset is individually assessed to determine whether there has been a significant increase in credit risk. Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the asset have expired. The Group also derecognises the assets if it has both transferred the asset and the transfer qualifies for derecognition. A transfer only qualifies for derecognition if either • The Group has transferred substantially all the risks and rewards of the asset; or • The Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. Write offs Loans and advances are written off when the Group has no reasonable expectation of recovering the financial asset (either in its entirety or a portion of it). This is the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. A write-off constitutes a derecognition event. The Group may apply enforcement activities to financial assets written off. Recoveries resulting from the Group’s enforcement activities will result in impairment gains. Debt securities Debt securities are financial assets that are not held for trading and are intended to be held within a business model to collect contractual cash flows or sell. These are initially measured at fair value plus transaction costs that are directly attributable to the financial asset. Subsequently changes in the fair value are recognised in other comprehensive income except for interest calculated at the asset’s EIR, foreign exchange and impairment gains and losses. Financial liabilities Financial liabilities and equity Debt and equity instruments that are issued are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group or a non-derivative contract that will or may be settled in a variable number of the Group’s own equity instruments, or a derivative contract over own equity that will or may be settled other than by the exchange of a fixed amount of cash (or another financial asset) for a fixed number of the Group’s own equity instruments. ANNUAL REPORT AND ACCOUNTS 2021 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised as at the proceeds received, net of direct issue costs. Distributions on equity instruments are recognised directly in equity. Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Financial liabilities at Fair Value through Profit or Loss Financial liabilities at FVTPL may include financial liabilities held for trading. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. During the period under review the Group has held no financial liabilities for trading, nor designated any financial liabilities upon initial recognition as at fair value through profit or loss. Other financial liabilities Interest bearing borrowings are measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in “Interest and fee expenses” in the profit and loss account. Derecognition of financial liabilities The Group derecognises financial liabilities when and only when, the Group’s obligations are discharged, cancelled or they expire. Impairment of non-financial assets The carrying amounts of the entity’s non-financial assets, other than goodwill and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the Cash-Generating Unit or “CGU”). Contract assets are reviewed for impairment based on the performance of the underlying contract. Goodwill is tested annually for impairment in accordance with IFRS. The goodwill acquired in a business combination, for the purpose of impairment testing is allocated to CGU that are expected to benefit from the synergies of the combination. For the purpose of goodwill impairment testing, if goodwill cannot be allocated to individual CGUs or groups of CGUs on a non-arbitrary basis, the impairment of goodwill is determined using the recoverable amount of the acquired entity in its entirety, or if the acquired entity has been integrated then the entire group of entities into which it has been integrated. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of other assets in the unit (or group of units) on a pro rata basis. An impairment loss is reversed if and only if the reasons for the impairment have ceased to apply. An impairment loss recognised for goodwill is not reversed. ANNUAL REPORT AND ACCOUNTS 2021 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Current and deferred income tax Income tax on the result for the period comprises current and deferred income tax. Income tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous periods. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Employee benefits – pension costs A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have a legal or constructive obligation to pay further amounts. Contributions to defined contribution schemes are charged to the statement of comprehensive income as they become payable in accordance with the rules of the scheme. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position. Provisions for commitments and other liabilities Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (discounted at the Group’s weighted average cost of capital when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset only if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Merger reserve Prior to 29 December 2017, the entities within the Group were held by Arrowgrass Master Fund Limited. On 29 December 2017, these entities were acquired by TruFin plc via TruFin Holdings Limited. The consideration provided to Arrowgrass for the companies acquired was in exchange for shares of TruFin plc based on the fair value of the underlying companies. Upon consolidation of the group, the difference between the book value of the entities and the amount of the consideration paid was accounted through a merger reserve, in accordance with relevant accounting standards relating to businesses under common control. ANNUAL REPORT AND ACCOUNTS 2021 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Investments in associates Associates are entities in which the Group has between 20% and 50% of the voting rights, or is otherwise able to exercise significant influence, but which it does not control or jointly control. Investments in associates are accounted for under the equity method and are initially recognised at costs, including goodwill. Subsequent changes in the carrying value reflect the post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of its associates profits or losses is recognised in the consolidated income statement. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group is obliged to make further payments to, or on behalf of the associate. Segmental reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) and whose operating results are regularly reviewed by the Board of Directors in order to make decisions about resources to be allocated to that component and assess its performance and for which discrete financial information is available. For the purposes of the financial statements, the Directors consider the Group’s operations to be made up of four operating segments: the provision of short term finance, payment services, publishing and other operations. The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole. Further details are provided in note 4. Share based payments Where the Group engages in share-based payment transactions in respect of services received from certain of its employees, these are accounted for as equity-settled share-based payments in accordance with IFRS 2 ‘Share-based payments’. The equity is in the form of ordinary shares. The grant date fair value of a share-based payment transaction is recognised as an employee expense, with a corresponding increase in equity over the period that the employees become unconditionally entitled to the awards. In the absence of market prices, the fair value of the equity at the date of the grant is estimated using an appropriate valuation technique The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related services and non-market vesting conditions are expected to be met such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with market performance conditions the grant date fair value of the award is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Refer to note 6 for the amounts disclosed. Leases Leases are accounted for under IFRS 16. IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. A model where a right-of-use asset and a corresponding liability are recognised for all leases by lessees (i.e. all on balance sheet) except for short term leases and leases of low value assets. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. ANNUAL REPORT AND ACCOUNTS 2021 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Government grants Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions attaching to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. These grants are deducted from the expense that the grant is related to. 2. Critical accounting judgements and key sources of estimation uncertainty The preparation of financial information in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apart from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in financial statements. Critical accounting judgements • Early Payment Programme Services set up costs: the Group capitalises the direct costs of implementing Early Payment Programme Services contracts for clients. These costs are essential to the satisfaction of the Group’s performance obligation under that contract and accordingly the Group considers that these costs meet the applicable criteria for recognition as contract assets. The amount capitalised is disclosed in note 10. • Deferred tax asset: There is inherent uncertainty in forecasting beyond the immediate future and significant judgement is required to estimate whether future taxable profits are probable in order to utilise the carried forward tax losses. Companies in the Group have carried forward losses which will be utilised against future taxable profits. However, a deferred tax asset has not been recognised for these companies, except for Vertus Capital Limited as there is uncertainty surrounding the timing of when these losses will be used. Refer to note 9 for more information on the deferred tax asset. • The accounts of the trustee (the “EBT Trustee”) of the Company’s Employee Benefit Trust (“EBT”) have not been consolidated as it is the Directors’ opinion that the Company does not have control over the EBT. The EBT is a discretionary trust, which means that the EBT Trustee has discretion how to act, provided that the action taken by the EBT Trustee is considered by the EBT Trustee to be in the interest of one of more EBT beneficiaries (being employees and former employees (and certain of their relatives) of the Company and its subsidiaries. Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Expected credit losses • Where an asset has a maturity of 12 months or less, the “12 month ECL” and the “lifetime ECL” have the same effective meaning and accordingly for such assets the calculated loss allowance will be the same ANNUAL REPORT AND ACCOUNTS 2021 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 whether such an asset is at stage 1 or stage 2. • The Probability of Default (“PD”) is an estimate of the likelihood of default over a given time horizon and is a key input to the ECL calculation. The Group primarily uses credit scores from credit reference agencies to calculate the PD for loans and advances. The score is a 12-month predictor of credit failure and, in the absence of internally generated loss history, the Group believes that it provides the best proxy for the credit quality of the loan portfolio. • Exposure At Default (“EAD”) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities and accrued interest from missed payments. • Loss Given Default (“LGD”) is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, in particular taking into account wholesale collateral values and certain buy back options. Measurement of fair values of level 3 instruments In estimating the fair value of a financial asset or liability, the Group uses market observable data to the extent that it is available. Where such level 1 inputs are not available, the Group uses valuation models to estimate the fair value of its financial instruments. ANNUAL REPORT AND ACCOUNTS 2021 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 3. Gross revenue Group Revenue Interest income Total interest income EPPS contracts Consultancy fees Implementation fees* Subscription fees Total fee income IAP revenue Advertising revenue Console revenue Brand revenue Total publishing income Gross revenue 2021 £’000 1,681 1,681 2,536 436 70 1,288 4,330 428 378 6,285 13 7,104 2020 £’000 2,578 2,578 2,243 288 301 1,014 3,846 410 410 7,500 88 8,408 13,115 14,832 *In 2020, Implementation fees also included fees recognised by Satago in full on the signing of new contracts with partners. Company Intercompany interest income Intercompany fee income Other interest income Gross revenue 4. Segmental reporting 2021 £’000 2,008 118 – 2,126 2020 £’000 2,073 118 1 2,192 The results of the Group are broken down into segments based on the products and services from which it derives its revenue: Short term finance Provision of distribution finance products and invoice discounting. For results during the reporting period, this corresponds to the results of Satago, Vertus and AltLending. Payment services Provision of Early Payment Programme Services. For results during the reporting period, this corresponds to the results of Oxygen. ANNUAL REPORT AND ACCOUNTS 2021 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Publishing Publishing of video games. For results during the reporting period, this corresponds to the results of the Playstack Group. Other Revenue and costs arising from investment activities. For results during the reporting period, this corresponds to the results of TSL, THL and TruFin plc. The results of each segment, prepared using accounting policies consistent with those of the Group as a whole, are as follows: Year ended 31 December 2021 Gross revenue Cost of sales Net revenue Adjusted loss before tax* Loss before tax Taxation Loss for the year Total assets Total liabilities Net assets Short term finance £’000 1,878 (832) 1,046 Payment services £’000 4,133 (873) 3,260 (3,877) (3,877) 367 (3,510) 24,607 (13,341) 11,266 (548) (548) 175 (373) 8,331 (1,747) 6,584 Publishing £’000 7,104 (4,509) 2,595 (1,439) (1,439) 444 Other £’000 – – – (2,488) (2,558) – (995) (2,558) 16,774 (2,184) 14,590 1,016 (1,005) 11 *adjusted loss before tax excludes share-based payment expense Year ended 31 December 2020 Gross revenue Cost of sales Net revenue Adjusted loss before tax* Loss before tax Taxation Loss for the year Total assets Total liabilities Net assets Short term finance £’000 2,020 (730) 1,290 (3,318) (3,318) 42 Payment services £’000 3,490 (760) 2,730 (1,111) (1,111) (2,504) Publishing £’000 8,408 (5,022) 3,386 (2,458) (2,458) (14) Other £’000 914 – 914 (1,495) (2,040) – (3,276) (3,615) (2,472) (2,040) (11,403) 22,798 (11,276) 11,522 7,430 (1,858) 5,572 17,765 (3,559) 14,206 9,573 (1,137) 8,436 57,566 (17,830) 39,736 ANNUAL REPORT AND ACCOUNTS 2021 51 Total £’000 13,115 (6,214) 6,901 (8,352) (8,422) 986 (7,436) 50,728 (18,277) 32,451 Total £’000 14,832 (6,512) 8,320 (8,382) (8,927) 2,476 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 5. Staff costs Analysis of staff costs: Wages and salaries Consulting costs Social security costs Pension costs arising on defined contribution schemes Share based payment Government grants Group Company 2021 £’000 9,011 395 1,409 428 70 (28) 2020 £’000 9,311 313 1,019 442 545 (98) 2021 £’000 1,440 19 355 27 70 – 2020 £’000 1,327 – 22 26 545 – 11,285 11,532 1,911 1,920 Consulting costs are recognised within staff costs where the work performed would otherwise have been performed by employees. Consulting costs arising from the performance of other services are included within other operating expenses. Average monthly number of persons (including Executive Directors) employed: Management Finance Sales & marketing Operations Technology Directors’ emoluments 2021 Number 2020 Number 16 7 23 36 54 136 17 8 33 37 54 149 The number of directors who received share options during the year was as follows: Long term incentive schemes There were no directors who exercised share options during the year. The directors’ aggregate emoluments in respect of qualifying services were: 2021 Number – 2020 Number – Executive Directors: J v d Bergh S H Kenner* Salary Bonus Pension and Benefits £’000 £’000 £’000 256 – 256 200 – 200 9 – 9 2021 Total £’000 465 – 465 2020 Total £’000 735 97 832 * S H Kenner left the Group in June 2020 ANNUAL REPORT AND ACCOUNTS 2021 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Salary Bonus Pension and Benefits 2021 Total 2020 Total £’000 £’000 £’000 £’000 £’000 100 70 50 220 – – – – – – – – 100 70 50 220 85 65 50 200 Non-executive Directors: S Baldwin P Judd P Dentskevich Key management The Directors consider that key management personnel include the Executive Director of TruFin plc. This individual has the authority and responsibility for planning, directing and controlling the activities of the Group. 6. Employee share-based payment transactions The employment share-based payment charge comprises: Performance Share Plan and Joint Share Ownership Plan Founder Award Performance Share Plan Market Value Award Performance Share Plan 2019 Award Performance Share Plan 2018 Award Total 2021 £’000 59 11 – – 70 2020 £’000 465 80 – – 545 Performance Share Plan and Joint Share Ownership Plan Founder Award (“Founder Award”) On 21 February 2018, 3,407,895 shares were granted to selected founder members of senior management of which the share price at date of grant was £1.90 per share. The awards are structured as a Performance Share Plan and a Joint Share Ownership Plan. The Performance Share Plan is structured as a nil cost option with no performance conditions attached. The awards were also granted subject to continued employment until February 2021. The Joint Share Ownership Plan allows the employee to participate in the growth in value over and above the grant price of £1.90. The shares vest 25% on each anniversary of the grant date. The first 25% of shares (851,973 shares) vested on 21 February 2019 when the share price was £1.98. As a result, 817,550 shares subject to the Joint Share Ownership Plan became fully owned by the trustee of the Company’s employee benefit trust (the “EBT”) and 34,423 became fully owned by senior management. At the time of Distribution Finance Capital Ltd’s (“DFC”) demerger from the Group, there was a modification to the Founder Award. The £1.90 price above which the employee was able to participate in value growth under the Joint Share Ownership Plan was adjusted proportionally by reference to the respective share prices of DFC and TruFin to £0.85. This modification has not resulted in a change in the valuation of the award and this continues to be recognised over the remainder of the original vesting period. As part of the demerger, holders of Founder Awards also received an award in respect of DFC shares which gave rise to an Employers National Insurance liability of £419,000, which was paid in July 2019. On 11 September 2019, in connection with his change of role, the unvested Founder Awards in respect of 1,369,244 shares held by Henry Kenner fully vested, the result of which was that all of the relevant shares ceased to be subject to the Joint Share Ownership Plan and instead become fully owned by the EBT. In addition, 1,369,244 shares subject to the Performance Share Plan ceased to be subject to continued employment condition. ANNUAL REPORT AND ACCOUNTS 2021 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 The second 25% of Founder Awards held by James van den Bergh vested on 21 February 2020 when the share price was £0.26. As a result, 395,560 shares subject to the Join Share Ownership Plan became fully owned by EBT and James’ nil cost option under the Performance Share Plan vested in respect of the same number of shares. On 27 November 2020, Henry Kenner exercised his nil cost option under the Performance Share Plan which resulted in 1,807,217 shares being transferred from the EBT to Henry Kenner on 22 December 2020. This gave rise to an Employer’s National Insurance liability of £82,000 which was paid in January 2021. The third 25% of Founder Awards held by James van den Bergh vested on 21 February 2021 when the share price was £0.68. As a result, 395,560 shares subject to the Join Share Ownership Plan became fully owned by EBT and James’ nil cost option under the Performance Share Plan vested in respect of the same number of shares. Performance Share Plan Market Value Award (“PSP Market Value Award”) On 21 February 2018, options to acquire 4,868,420 shares were granted to the senior management team. The vesting of this award is based on market-based performance conditions. The vesting of these awards is subject to the holder remaining an employee of the Company and the Company’s share price achieving five distinct milestones - vesting at 20% each milestone. The exercise price of the awards at the time of grant was £1.90 per share. A Monte Carlo simulation was used to determine the fair value of these options. The model used an expected volatility of 10% and a risk free rate of 1.3%. In order to reflect the impact of the demerger, the PSP Market Value Award was split into two: • Part of the award remained as an option in respect of TruFin shares (“TruFin Market Value Award”) • Part of the award became an award in respect of DFC shares (“DFC market Value Award”) The TruFin Market Value Award is on the same terms as the original PSP Market Value Award except that: • The exercise price was adjusted to £0.85, and the share price milestones were adjusted to reflect the demerger • The exercise price was further adjusted to £0.80 and the share price milestones were further adjusted, to reflect the return of value to shareholders in June 2019 • The exercise price was further adjusted to £0.71, and the share price milestones were further adjusted to reflect the return of value to shareholders in December 2019 The modification has not resulted in a change in the valuation of the award and this continues to be recognised over the remainder of the original vesting period. The grant of the DFC Market Value Award gave rise to an Employer’s national insurance liability for the Company of £265,000 which was paid in July 2019. Performance Share Plan 2018 Award (“PSP 2018 Award”) On 21 February 2018, options to acquire 1,000,001 shares were granted to the senior management team. The PSP 2018 Award is structured as a nil cost option. The vesting of this award is subject to the holder being in continued employment until February 2021 and the subsidiary companies achieving certain financial metrics over a three-year period. In order to reflect the impact of the demerger, and as the performance condition relating to the business of DFC was deemed to be achieved in full due to the demerger, the PSP 2018 Award was adjusted as follows: • the award part vested and was satisfied by way of a cash payment calculated by reference to 50% of the shares subject to the award and a price of £1.90 per share. The cash payments were made in September 2019; and ANNUAL REPORT AND ACCOUNTS 2021 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 • the awards have otherwise continued in respect of 100% of the TruFin shares, but the performance condition now relates solely to the business of Oxygen In 2019, PSP 2018 Awards in respect of 736,843 shares lapsed following members of senior management leaving the Group and changing roles. The fair value of the unvested part of the award as at 31 December 2021 was deemed to be nil as it is highly improbable that the vesting conditions will be met. Performance Share Plan 2019 Award (“PSP 2019 Award”) On 11 September 2019 an option to acquire 320,000 shares was granted to James van den Bergh. The PSP 2019 Award is structured as a nil cost option. The vesting of this award is subject to the holder being in continued employment until September 2022 and subsidiary companies achieving certain financial metrics over a three-year period. The fair value of the award as at 31 December 2021 was deemed to be nil as it is highly improbable that the vesting conditions will be met. Details of share based awards during the year: Type of instrument granted Outstanding at 1 January 2021 Granted during the year Vested during the year Exercised during the year JSOP Founder Award* Shares (#) PSP Founder Award* Options (#) PSP Market Value Options (#) 791,118 1,566,255 4,868,420 – (395,560) – – – – – – – Outstanding at 31 December 2021 359,558 1,566,255 4,868,420 Exercisable at 31 December 2021 1,170,697 – *The JSOP Founder Awards and PSP Founder Awards will together deliver, in aggregate, a maximum of 3,407,895 TruFin shares. Type of instrument granted Outstanding at 1 January 2021 Granted during the year Vested during the year Exercised during the year Cancelled during the year PSP 2018 Options (#) PSP 2019 Options (#) 263,158 320,000 – – – – – – – – Outstanding at 31 December 2021 263,158 320,000 Exercisable at 31 December 2021 – – No options expired during the year. The weighted average remaining contractual life for the share options outstanding as at 31 December 2021 was 6.21 years (2020: 7.21 years). ANNUAL REPORT AND ACCOUNTS 2021 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 7. Net impairment loss on financial assets At 1 January Charge for impairment loss Amounts written off in the year Amounts recovered in the year At 31 December 2021 £’000 10 (10) 8 (4) 4 2020 £’000 123 (11) (102) – 10 At 31 December 2021, the Group had an impairment balance of £4,000 which was allocated against loans and advances. At 31 December 2020, all of the impairment balance was allocated against loans and advances. The net impairment charge on financial assets during the year ended 31 December 2021 all related to loans and advances. The net impairment charge on financial assets during the year ended 31 December 2020 all related to loans and advances. 8. Loss before income tax Loss before income tax is stated after charging: Depreciation of property, plant and equipment Amortisation of intangible assets Staff costs including share based payments charge Fees payable to the Group’s auditor (Crowe U.K. LLP) Fees payable for the audit of the company’s annual accounts Fees payable for the audit of the company’s subsidiaries Total audit fees Non audit services Other assurance services Total non-audit fees 9. Taxation Analysis of tax charge recognised in the period Current tax (credit)/charge Deferred tax (credit)/charge Total tax (credit)/charge 2021 £’000 96 1,571 11,285 2021 £’000 45 84 129 2020 £’000 128 1,209 11,532 2020 £’000 44 83 127 13 13 12 12 2021 £’000 (726) (260) (986) 2020 £’000 16 2,460 2,476 ANNUAL REPORT AND ACCOUNTS 2021 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Reconciliation of loss before tax to total tax credit recognised Group Loss before tax Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%) 2021 £’000 (8,422) 2020 £’000 (8,927) (1,600) (1,696) Tax effect of: Expenses not deductible Depreciation in excess of capital allowances Capital allowances Other short term timing differences R&D tax credit Deferred tax not recognised Effect of different tax rates of subsidiaries operating in other jurisdictions Total tax charge Company Loss before tax Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%) Tax effect of: Expenses not deductible Other short term timing differences Deferred tax not recognised Total tax charge (223) 395 (187) (5) (733) 1,367 – (986) 2021 £’000 (409) (78) 32 – 46 – 161 132 (57) (129) – 4,064 1 2,476 2020 £’000 (704) (134) 169 (133) 98 – The UK Government enacted changes to the UK tax rate in 2020, resulting in the rate remaining at 19% (instead of the previously intended reduction from 19% to 17% from 1 April 2020). In the Finance Bill 2021, the UK chancellor announced that legislation would be proposed to increase the main rate of corporation tax to 25% from 1 April 2023, and this was substantively enacted on 24 May 2021. The deferred tax assets and liabilities at 31 December 2021 have been based on the rates substantively enacted at the reporting date. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. ANNUAL REPORT AND ACCOUNTS 2021 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Deferred tax asset Group Balance at start of the year Credit/(charge) to the statement of comprehensive income Balance at end of the year Comprised of: Losses Total deferred tax asset 2021 £’000 43 260 303 303 303 2020 £’000 2,503 (2,460) 43 43 43 A deferred tax asset from losses in Vertus Capital Limited was recognised, to be used against profits in Vertus Capital SPV 1, which became profitable in the prior year. Unutilised tax losses in the remainder of the Group as at the reporting date were £77,124,000 (2020:£69,496,000) 10. Intangible assets Client contracts £’000 Software licenses and similar assets £’000 Separately identifiable intangible Assets £’000 4,689 1,056 (256) 1 5,490 (956) (873) 222 – 1,834 757 – (12) 2,579 (814) (370) – 3 1,642 – – – 1,642 (742) (328) – – (1,607) (1,181) (1,070) (408) (408) 3,475 3,325 – – 1,398 1,020 – – 572 900 Goodwill £’000 15,796 (50) – – 15,746 – – – – – – – Total £’000 23,961 1,763 (256) (11) 25,457 (2,512) (1,571) 222 3 (3,858) (408) (408) 15,746 15,796 21,191 21,041 Group Cost At 1 January 2021 Additions Disposals Exchange differences At 31 December 2021 Amortisation At 1 January 2021 Charge Disposals Exchange differences At 31 December 2021 Accumulated impairment losses At 1 January 2021 At 31 December 2021 Net book value At 31 December 2021 At 31 December 2020 ANNUAL REPORT AND ACCOUNTS 2021 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Client contracts £’000 Software licenses and similar assets £’000 Separately identifiable intangible Assets £’000 3,574 1,180 (61) (4) 4,689 (479) (538) 61 (956) (186) (222) (408) 1,109 725 – – 1,834 (471) (343) – (814) – – – 1,642 – – – 1,642 (414) (328) – (742) – – – Goodwill £’000 15,796 – – – 15,796 – – – – – – – Total £’000 22,121 1,905 (61) (4) 23,961 (1,364) (1,209) 61 (2,512) (186) (222) (408) 3,325 2,909 1,020 638 900 1,228 15,796 15,796 21,041 20,571 Group Cost At 1 January 2020 Additions Disposals Exchange differences At 31 December 2020 Amortisation At 1 January 2020 Charge Disposals At 31 December 2020 Accumulated impairment losses At 1 January 2020 Charge At 31 December 2020 Net book value At 31 December 2020 At 31 December 2019 The Company had no intangibles assets at the year end. Client contracts comprise the directly attributable costs incurred at the beginning of an Early Payment Scheme Service contract to revise a client’s existing payment systems and provide access to the Group’s software and other intellectual property. These implementation (or “set up”) costs are comprised primarily of employee costs. The useful economic life for each individual asset is deemed to be the term of the underlying Client Contract (generally 5 years) which has been deemed appropriate and for impairment review purposes, projected cash flows have been discounted over this period. The amortisation charge is recognised in fee expenses within the statement of comprehensive income, as these costs are incurred directly through activities which generate fee income. The Group performed an impairment review at 31 December 2021 and there was no impairment in relation to underperforming contracts. Software, licenses and similar assets comprises separately acquired software, as well as costs directly attributable to internally developed platforms across the Group. These directly attributable costs are associated with the production of identifiable and unique software products controlled by the Group and are probable of producing future economic benefits. They primarily include employee costs and directly attributable overheads. A useful economic life of 3 to 5 years has been deemed appropriate and for impairment review purposes ANNUAL REPORT AND ACCOUNTS 2021 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 projected cash flows have been discounted over this period. The amortisation charge is recognised in depreciation and amortisation on non-financial assets within the statement of comprehensive income. The Group performed an impairment review at 31 December 2021 and concluded no impairment was required. The ‘Software, licenses and similar assets’ net book value balance related to internally generated intangible assets at 31 December 2021 was £1,398,000 (2020: £1,020,000). This consists of cost of £2,579,000 (2020: £1,834,000) and accumulated amortisation of £1,181,000 (2020: £814,000). During the year there were additions of £757,000 (2020: £725,000) and amortisation of £370,000 (2020: £343,000). Goodwill and “Separately identifiable intangible assets” arise from acquisitions made by the Group. Porge (now Insight Services within OFL) Porge was acquired by OFGL in August 2018 and goodwill of £2,759,000 that arose from this acquisition was included within the payments services segment of the Group. Following the acquisition, separately identifiable intangible assets of £1,387,000 primarily relating to the value of the contracts in the business at acquisition were recognised. These are being amortised over 5 years resulting in an amortisation charge of £277,000 (2020: £277,000) during the year. Net Book value of these assets at 31 December 2021 was £439,000 (2020: £717,000). Goodwill related to this transaction excluding these assets at 31 December 2021 was £1,372,000 (2020: £1,372,000). On 31 August 2020, OFL purchased the Trade and Assets of Porge. The purchase price was set at the Net book value of the assets acquired at the time of the transaction. Vertus In July 2019, the Group converted into ordinary shares its existing convertible loan with Vertus Capital in full satisfaction and discharge of the loan. This, together with a further cash payment, gave the Group 51% ownership of Vertus Capital and Vertus SPV 1. Goodwill of £1,714,000 arose from this transaction and has been included within the short term finance segment of the business. Separately identifiable intangible assets of £255,000 primarily related to the value of existing third party relationships on acquisition have been identified. These are being amortised over 5 years and the amortisation charge for the year was £51,000 (2020: £51,000). Net Book value of these assets at 31 December 2021 was £132,000 (2020: £183,000). During the year, the Group increased its ownership of Vertus Capital from 51% to 53.8%. ,This resulted in a £50,000 adjusted to Goodwill related to Vertus (excluding the assets mentioned above). Goodwill related to Vertus excluding these assets at 31 December 2021 was £1,409,000 (2020: £1,459,000) Playstack In September 2019, the Group converted into ordinary shares its existing convertible loans with Playstack Ltd in full satisfaction and discharge of the loans. This gave the Group ownership of Playstack Ltd and the other companies within the Playstack Group. Goodwill of £12,965,000 arose from this transaction and has been included within the publishing segment of the business. Impairment testing of intangibles An impairment review of goodwill was carried out at the year end. The insight services segment of OFL was valued using the discounted cash flow methodology. Its net earnings were forecasted to 2025, a discount rate of 12% was used and terminal growth rate of 2%. This valuation was greater than the amount of CGU and therefore the goodwill is not deemed to be impaired. ANNUAL REPORT AND ACCOUNTS 2021 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Vertus was valued using the discounted cash flow methodology. The net earnings of Vertus were forecasted to 2030, a discount rate of 12% was used and terminal growth rate of 3%. The valuation of Vertus was greater than the amount of goodwill and therefore the goodwill is not deemed to be impaired. Playstack was valued using the discounted cash flow methodology. The net earnings of Playstack were forecasted to 2030, a discount rate of 20% was used and terminal growth rate of 3%. The valuation of Playstack was greater than the amount of goodwill and therefore the goodwill is not deemed to be impaired. 11. Property, plant and equipment Group Cost At 1 January 2021 Additions Disposals Exchange differences At 31 December 2021 Depreciation At 1 January 2021 Charge Disposals At 31 December 2021 Net book value At 31 December 2021 At 31 December 2020 Fixtures & fittings £’000 Computer equipment £’000 Right-of-Use Asset £’000 Total £’000 52 2 – (1) 53 (36) (8) – (44) 60 22 (4) – 78 (26) (20) 2 (44) 9 16 34 34 429 – – 429 (339) (68) – (407) 22 90 541 24 (4) (1) 560 (401) (96) 2 (495) 65 140 ANNUAL REPORT AND ACCOUNTS 2021 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Group Cost At 1 January 2020 Additions Disposals At 31 December 2020 Depreciation At 1 January 2020 Charge Disposals At 31 December 2020 Net book value At 31 December 2020 At 31 December 2019 Company Cost At 1 January 2021 Additions At 31 December 2021 Depreciation At 1 January 2021 Charge At 31 December 2021 Net book value At 31 December 2021 At 31 December 2020 Leasehold improvements £’000 Fixtures & fittings £’000 Computer equipment £’000 Right-of-Use Asset £’000 Total £’000 44 – (44) – (36) (8) 44 – 247 7 (202) 52 (219) (19) 202 (36) 36 24 – 60 (9) (17) – (26) – 8 16 28 34 27 429 – – 429 (255) (84) – (339) 90 174 Computer equipment £’000 Right-of- use asset £’000 3 – 3 (3) – (3) – – 167 – 167 (167) – (167) – – 756 31 (246) 541 (519) (128) 246 (401) 140 237 Total £’000 170 – 170 (170) – (170) – – ANNUAL REPORT AND ACCOUNTS 2021 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Company Cost At 1 January 2020 Additions At 31 December 2020 Depreciation At 1 January 2020 Charge At 31 December 2020 Net book value At 31 December 2020 At 31 December 2019 Computer equipment £’000 Right-of- use asset £’000 3 – 3 (2) (1) (3) – 1 167 – 167 (167) – (167) – – The Right of use assets in the Group and Company relates to leases for office buildings. 12. Investment in subsidiaries Company Balance at 1 January 2021 and 31 December 2021 Balance at 1 January 2020 and 31 December 2020 13. Loans and advances Group Total loans and advances Less: loss allowance The aging of loans and advances are analysed as follows: Neither past due nor impaired Past due: 0–30 days Past due: 31–60 days Past due: 61–90 days Past due: more than 91 days 2021 £’000 16,137 (4) 16,133 2021 £’000 16,062 32 10 28 1 Total £’000 170 – 170 (169) (1) (170) – 1 £’000 30,189 30,189 2020 £’000 14,670 (10) 14,660 2020 £’000 14,401 254 2 – 3 The Company had no loans and advances at the year end (2020: £nil). 16,133 14,660 ANNUAL REPORT AND ACCOUNTS 2021 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 14. Trade and other receivables Trade and other receivables Prepayments Accrued Income VAT Other debtors Amounts due from Group Undertakings Group Company 2021 £’000 2,585 467 385 – 1,988 – 2020 £’000 1,992 421 263 – 1,278 – 2021 £’000 – 52 – 33 5 54 5,425 3,954 144 2020 £’000 – 39 – 15 7 597 658 Trade receivables above are stated net of a loss allowance of £nil (2020: £nil). All receivables are due within one year. The aging of trade receivables is analysed as follows: Group Company 2021 £’000 2,182 96 88 13 206 2,585 2020 £’000 1,411 121 92 50 318 1,992 2021 £’000 – – – – – – 2020 £’000 – – – – – – Not yet due Past due: 0–30 days Past due: 31–60 days Past due: 61–90 days Past due: more than 91 days 15. Share capital Group and Company 80,822,204 shares at £0.91 per share Share Capital £’000 73,548 Total £’000 73,548 All ordinary shares carry equal entitlements to any distributions by the company. No dividends were proposed by the Directors for the year ended 31 December 2021. 16. Borrowings Group Loans due within one year Loans due in over one year 2021 £’000 1,634 11,351 12,985 2020 £’000 2,204 8,507 10,711 ANNUAL REPORT AND ACCOUNTS 2021 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Movements in borrowings during the year The below table identifies the movements in borrowings during the year. Group Balance at 1 January 2021 Funding drawdown Interest expense Origination fees paid Fee amortisation Repayments Interest paid Loan written off Exchange differences Balance at 31 December 2021 Group Balance at 1 January 2020 Funding drawdown Interest expense Origination fees paid Fee amortisation Repayments Interest paid Balance at 31 December 2020 £’000 10,711 5,725 528 (211) 141 (3,371) (506) (13) (19) 12,985 £’000 6,194 5,840 279 (2) 133 (1,458) (275) 10,711 The primary borrowings of the Group are comprised of the following: • A 24-month revolving facility agreement with a 12-month term-out period, maturing in September 2024. This facility incepted in September 2019 and was renewed in November 2021. Interest is payable monthly with the principal balance rolled over monthly, subject to ongoing compliance with the agreement. This facility is secured by a debenture over all assets of Vertus Capital. • Unsecured interest bearing facility due in 2028, with interest payable quarterly. This facility was renewed during the current year with the maturity date extended from 2026 to 2028. • A revolving credit facility under which notice is given by either the lender (3 months) or borrower (6 months). The facility is secured by a fixed and floating charge over Satago SPV1 and interest is payable monthly. The Company had no borrowings during the period or at year end. ANNUAL REPORT AND ACCOUNTS 2021 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 17. Trade and other payables Group Company 2021 £’000 380 3,949 103 9 706 145 5,292 2020 £’000 1,553 4,179 247 1 960 179 7,119 2021 £’000 5 670 – – 353 – 1,028 2020 £’000 32 569 2 – 539 – 1,142 Trade payables Accruals Other payables Corporation tax Other taxation and social security VAT 18. Financial instruments The Directors have performed an assessment of the risks affecting the Group through its use of financial instruments and believe the principal risks to be: capital risk; credit risk, and market risk including interest rate risk. This note describes the Group’s objectives, policies and processes for managing the material risks and the methods used to measure them. The significant accounting policies regarding financial instruments are disclosed in note 1. Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while providing an adequate return to shareholders. The capital structure of the Group consists of borrowings disclosed in note 16 and equity of the Group (comprising issued capital, reserves, retained earnings and non-controlling interests as disclosed in note 15 and note 19). The Group is not subject to any externally imposed capital requirements. Principal financial instruments The principal financial instruments to which the Group is party and from which financial instrument risk arises, are as follows: • Loans and advances, primarily credit risk and liquidity risk; • Trade receivables, primarily credit risk and liquidity risk; • Investments, primarily fair value or market price risk; • Cash and cash equivalents, which can be a source of credit risk but are primarily liquid assets available to further business objectives or to settle liabilities as necessary; • Trade and other payables; and • Borrowings which are used as sources of funds and to manage liquidity risk. Analysis of financial instruments by valuation model There are no financial assets or liabilities included in the statement of financial position at fair value. ANNUAL REPORT AND ACCOUNTS 2021 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 31 December 2021 Financial assets and financial liabilities included in the statement of financial position that are not measured at fair value: Group Carrying amount £’000 Financial assets not measured at fair value Loans and advances 16,133 Trade receivables Other receivables Cash and cash equivalents 2,585 2,373 7,608 Fair value £’000 16,133 2,585 2,373 7,608 28,699 28,699 Financial liabilities not measured at fair value Borrowings Trade, other payables and accruals 12,985 4,672 12,985 4,672 17,657 17,657 31 December 2020 Group Carrying amount £’000 Financial assets not measured at fair value Loans and advances 14,660 Trade receivables Other receivables Cash and cash equivalents 1,992 1,541 17,728 35,921 Financial liabilities not measured at fair value Borrowings Trade, other payables and accruals 10,711 6,578 17,289 Fair value £’000 14,660 1,992 1,541 17,728 35,921 10,711 6,578 17,289 Level 1 £’000 Level 2 £’000 Level 3 £’000 – – – 7,608 7,608 – – – – – – – – – – – 16,133 2,585 2,373 – 21,091 12,985 4,672 17,657 Level 1 £’000 Level 2 £’000 Level 3 £’000 – – – 17,728 17,728 – – – – – – – – – – – 14,660 1,992 1,541 – 18,193 10,711 6,578 17,289 ANNUAL REPORT AND ACCOUNTS 2021 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 31 December 2021 Company Carrying amount £’000 Fair value £’000 Level 1 £’000 Level 2 £’000 Level 3 £’000 Financial assets not measured at fair value Amounts owed by group undertakings Other receivables Cash and cash equivalents 46,919 46,919 92 786 92 786 47,797 47,797 Financial liabilities not measured at fair value Trade, other payables and accruals 1,028 31 December 2020 Company 1,028 Carrying amount £’000 1,028 1,028 Fair value £’000 Financial assets not measured at fair value Amounts owed by group undertakings Other receivables Cash and cash equivalents 47,066 47,066 619 578 619 578 48,263 48,263 Financial liabilities not measured at fair value Trade, other payables and accruals 1,142 1,142 1,142 1,142 – – 786 786 – – – – – – – – 46,919 92 – 47,011 1,028 1,028 Level 1 £’000 Level 2 £’000 Level 3 £’000 – – 578 578 – – – – – – – – 47,066 619 – 47,685 1,142 1,142 Fair values for level 3 assets and liabilities were calculated using a discounted cash flow model and the Directors consider that the carrying amounts of financial assets and liabilities recorded at amortised cost in the financial statements approximate to their fair values. Loans and advances Due to the short-term nature of loans and advances and/or expected credit losses recognised, their carrying value is considered to be approximately equal to their fair value. ANNUAL REPORT AND ACCOUNTS 2021 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Trade and other receivables, borrowings, trade and other payables, and accruals These represent short term receivables and payables and as such their carrying value is considered to be equal to their fair value. Financial risk management The Group’s activities and the existence of the above financial instruments expose it to a variety of financial risks. The Board of Directors has overall responsibility for the determination of the Group’s risk management objectives and policies. The overall objective of the Board of Directors is to set policies that seek to reduce ongoing risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. The Group is exposed to the following financial risks: • Credit risk • Liquidity risk • Market risk • Interest rate risk Further details regarding these policies are set out below. Credit risk Credit risk is the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to the Group. One of the Group’s main income generating activities is lending to customers and therefore credit risk is a principal risk. Credit risk mainly arises from loans and advances. The Group considers all elements of credit risk exposure such as counterparty default risk, geographical risk and sector risk for risk management purposes. Credit risk management The credit committees within the wider Group are responsible for managing the credit risk by: • Ensuring that it has appropriate credit risk practices, including an effective system of internal control; • Identifying, assessing and measuring credit risks across the Group from an individual instrument to a portfolio level; • Creating credit policies to protect the Group against the identified risks including the requirements to obtain collateral from borrowers, to perform robust ongoing credit assessment of borrowers and to continually monitor exposures against internal risk limits; • Limiting concentrations of exposure by type of asset, counterparty, industry, credit rating, geographical location; • Establishing a robust control framework regarding the authorisation structure for the approval and renewal of credit facilities; • Developing and maintaining the risk grading to categorise exposures according to the degree of risk of default. Risk grades are subject to regular reviews; and • Developing and maintaining the processes for measuring Expected Credit Loss (ECL) including monitoring of credit risk, incorporation of forward-looking information and the method used to measure ECL. Significant increase in credit risk The Group continuously monitors all assets subject to Expected Credit Loss as to whether there has been a ANNUAL REPORT AND ACCOUNTS 2021 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 significant increase in credit risk since initial recognition, either through a significant increase in Probability of Default (“PD”) or in Loss Given Default (“LGD”). The following is based on the procedures adopted by the Group: Granting of credit The Business Development Team prepare a Risk Summary which sets out the rationale and the pricing for the proposed loan facility and confirms that it meets the Group’s product risk and pricing policies. The Application will include the proposed counterparty’s latest financial information and any other relevant information but as a minimum: • Details of the limit requirement e.g. product, amount, tenor, repayment plan etc.; • Facility purpose or reason for increase; • Counterparty details, background, management, financials and ratios (actuals and forecast); • Key risks and mitigants for the application; • Conditions, covenants & information (and monitoring proposals) and security (including comments on valuation); • Pricing; • Confirmation that the proposed exposure falls within risk appetite; and • Clear indication where the application falls outside of risk appetite. The Credit Risk Department will analyse the financial information, obtain reports from credit reference agencies, allocate a risk rating and make a decision on the application. The process may require further dialogue with the Business Development Team to ascertain additional information or clarification. Each mandate holder and Committee is authorised to approve loans up to agreed financial limits provided that the risk rating of the counterparty is within agreed parameters. If the financial limit requested is higher than the credit authority of the first reviewer of the loan facility request, the application is sent to the next credit authority level with a recommendation. The Executive Risk Committee reviews all applications that are outside the credit approval mandate of the mandate holder due to the financial limit requested or if the risk rating is outside of policy but there is a rationale and/or mitigation for considering the loan on an exceptional basis. Applications where the counterparty has a high risk rating are sent to the Executive Risk Committee for a decision based on a positive recommendation from the Credit Risk department. Where a limited company has such a risk rating, the Executive Risk Committee will consider the following mitigants: • Existing counterparty which has met all obligations in time and in accordance with loan agreements, • Counterparty known to Group personnel who can confirm positive experience, • Additional security, either tangible or personal guarantees where there is verifiable evidence of personal net worth, • A commercial rationale for approving the application, although this mitigant will generally be in addition to at least one of the other mitigants. Identifying significant increases in credit risk The Group measures a change in a counterparty’s credit risk mainly on payment, on updated from credit reference agencies and adverse changes with a counterparty’s debtors. The Group views a significant increase in credit risk as: • A two-notch reduction in the Group’s counterparty’s risk rating since origination, as notified ANNUAL REPORT AND ACCOUNTS 2021 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 through the credit rating agency; • A counterparty defaults on a payment due under a loan agreement; • Late contractual payments which although cured, re-occur on a regular basis; • Evidence of a reduction in a counterparty’s working capital facilities which has had an adverse effect on its liquidity; or • Evidence of actual or attempted sales out of trust or of double financing of assets funded by the Group. • Deterioration in the underlying business (held as part of the security package) indicated through significant loss of revenue and higher than average client attrition. An increase in significant credit risk is identified when any of the above events happen after the date of initial recognition. Default Identifying loans and advances in default and credit impaired The Group’s definition of default for this purpose is: • A counterparty defaults on a payment due under a loan agreement and that payment is overdue on its terms, or • The collateral that secures, all or in part, the loan agreement has been sold or is otherwise not available for sale and the proceeds have not been paid to the lending company, or • A counterparty commits an event of default under the terms and conditions of the loan agreement which leads the lending company to believe that the borrower’s ability to meet its credit obligations to the lending company is in doubt. Exposure at default Exposure at default (“EAD”) is the expected loan balance at the point of default and, for the purpose of calculating the Expected Credit Losses (“ECL”), management have assumed this to be the balance at the reporting date. Expected Credit Losses The ECL on an individual loan is based on the credit losses expected to arise over the life of the loan, being defined as the difference between all the contractual cash flows that are due to the Group and the cash flows that it actually expects to receive. This difference is then discounted at the original effective interest rate on the loan to reflect the disposal period of underlying collateral. Regardless of the loan status stage, the aggregated ECL is the value that the Group expects to lose on its current loan book having assessed each loan individually. To calculate the ECL on a loan, the Group considers: 1. Counterparty PD; and 2. LGD on the asset whereby: ECL = EAD x PD x LGD ANNUAL REPORT AND ACCOUNTS 2021 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Maximum exposure to credit risk Group Company 2021 £’000 7,608 16,133 – 4,958 28,699 Group 2021 £’000 2 83 192 142 – 419 2020 £’000 17,728 14,660 – 3,532 35,920 2020 £’000 – 75 163 2,185 – 2,423 – 15,718 – 12,247 2021 £’000 786 – 46,919 144 47,849 2020 £’000 578 – 47,066 658 48,302 Company 2021 £’000 2020 £’000 – – – – – – – – – – – – – – – – Cash and cash equivalents Loans and advances Amounts owed by group undertakings Trade and other receivables Maximum exposure to credit risk Loans and advances: Collateral held as security Fully collateralised Loan-to-value* ratio: Less than 50% 50% to 70% 71% to 80% 81% to 90% 91% to 100% Partially collateralised Collateral value relating to loans over 100% loan-to-value Unsecured lending * Calculated using wholesale collateral values Concentration of credit risk The Group maintains policies and procedures to manage concentrations of credit at the counterparty level and industry level to achieve a diversified loan portfolio. ANNUAL REPORT AND ACCOUNTS 2021 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Credit quality An analysis of the Group’s credit risk exposure for loan and advances per class of financial asset, internal rating and “stage” is provided in the following tables. A description of the meanings of stages 1, 2 and 3 is given in the accounting policies set out in note 1. 2020 Total £’000 6,360 6,675 1,635 14,670 (10) 14,660 Stage 1 £’000 Stage 2 £’000 Stage 3 £’000 5,274 10,863 – 16,137 (4) 16,133 Stage 1 £’000 14,665 5 – – 1,467 16,137 – – – – – – Stage 2 £’000 – – – – – – – – – – – – Stage 3 £’000 5 (5) – – – – 2021 Total £’000 5,274 10,863 – 16,137 (4) 16,133 Total £’000 14,669 – – – 1,468 16,137 Risk rating Above average (risk rating 1-2) Average (risk rating 3-5) Below average (risk rating 6+) Gross carrying amount Loss allowance Carrying amount Gross Carrying Amount As at 1 January 2021 Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Net Loans originated As at 31 December 2021 Trade receivables Status at reporting date The Group has assessed the trade and other receivables in accordance with IFRS 9 and determined that, at the balance sheet date, the lifetime ECL is £nil (2020: £nil). The contractual amount outstanding on financial assets that were written off during the reporting period and are still subject to enforcement activity is £nil at 31 December 2021 (2020: £nil). Liquidity risk Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations as they fall due or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows which is inherent in all banking operations and can be affected by a range of Group specific and market-wide events. Liquidity risk management Group Finance performs treasury management for the Group, with responsibility for the treasury for each business entity being delegated to the individual subsidiaries. However, in line with the wider Group governance structure, Group Finance performs an important oversight role in the wider treasury considerations of the Group. The primary mechanism for maintaining this oversight is a formal requirement that subsidiaries’ Finance teams notify all material Treasury matters to Group Finance. The main Group responsibilities are to maintain banking relationships, manage and maximise the efficiency of ANNUAL REPORT AND ACCOUNTS 2021 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 the Group’s working capital and long-term funding and ensure ongoing compliance with banking arrangements. The Group currently does not have any offsetting arrangements. Liquidity stress testing The Group regularly conducts liquidity stress tests, based on a range of different scenarios to ensure it can meet all of its liabilities as they fall due. Maturity analysis for financial assets and financial liabilities The following maturity analysis is based on expected gross cash flows. Carrying Amount £’000 Less than 1 month £’000 1-3 months £’000 3 months to 1 year £’000 1-5 years £’000 >5 years £’000 7,608 7,608 – – – 4,958 16,133 28,699 2,717 740 11,065 4,672 12,985 17,657 1,203 48 1,251 690 660 1,350 2,414 – 2,414 392 3,158 3,550 1,159 11,197 12,356 – – 378 378 1,055 1,602 2,657 – 7,835 7,835 – 3,500 3,500 As at 31 December 2021 Financial Assets Cash and cash equivalents Trade and other receivables Loans and advances Financial Liabilities Trade payables, other payables and accruals Borrowings Market risk Market risk is the risk that movements in market factors, such as foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices will reduce the TruFin Group’s income or the value of its portfolios. Market risk management The TruFin Group’s management objective is to manage and control market risk exposures in order to optimise return on risk while ensuring solvency. The core market risk management activities are: • The identification of all key market risk and their drivers, • The independent measurement and evaluation of key market risks and their drivers, • The use of results and estimates as the basis for the TruFin Group’s risk/return-oriented management, and • Monitoring risks and reporting on them. Interest rate risk management The TruFin Group is exposed to the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of the change in market interest rates. Interest rate risk Interest rates on loans and advances are charged at competitive rates given current market condition. Should rates fluctuate, this will be reviewed and pricing will be adjusted accordingly. ANNUAL REPORT AND ACCOUNTS 2021 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Vertus’s has interest income that is variable in relation to the Bank of England base rate, and interest expense variable to both LIBOR and the Bank of England base rate. 19. Non-controlling interests The summarised financial information below represents financial information for each subsidiary that has non-controlling interest that are material to the Group. The amounts disclosed for each subsidiary are before intragroup eliminations. The Group’s ownership share Vertus Capital and Vertus SPV1 at the reporting date was 53.8% (2020: 51.0%). Statement of Financial Position Vertus Capital Vertus SPV1 Current assets Non-current assets Current liabilities Equity attributable to owners of the Company Non-controlling interests 2021 £’000 5,005 5 94 2,747 2,357 2020 £’000 4,670 5 (144) 2,311 2,220 2021 £’000 15,740 – (15,746) (3) (3) Income Statement Vertus Capital Vertus SPV1 Revenue Expenses Profit/(loss) after tax Profit/(loss) after tax attributable to owners of the Company Profit/(loss) after tax attributable to the non-controlling interests 2021 £’000 522 (436) 86 46 40 2020 £’000 469 (623) (154) (79) (75) 2021 £’000 1,380 (1,193) 187 100 87 Cash Flow Statement Vertus Capital Vertus SPV1 Net cash used in operating activities Net cash used in investing activities Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents 2021 £’000 (520) 224 488 192 2020 £’000 (390) 331 – (59) 2021 £’000 (2,922) – 2,839 (83) 2020 £’000 12,538 – (12,731) (98) (95) 2020 £’000 1,018 (940) 78 40 38 2020 £’000 (2,035) – 2,043 8 ANNUAL REPORT AND ACCOUNTS 2021 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 Vertus Capital Vertus SPV1 Balance at 1 January Share of loss for the year Change in NCI due to share issuance in the year Balance at 31 December 2021 £’000 2,220 40 97 2,357 2020 £’000 2,295 – (75) 2,220 The Group had a 72% ownership share of Bandana Media Ltd during the year. Bandana Media Ltd Current assets Current liabilities Equity attributable to owners of the Company Non-controlling interests Bandana Media Ltd Revenue Expenses Loss after tax Loss after tax attributable to owners of the Company Loss after tax attributable to the non-controlling interests Bandana Media Ltd Net cash used in operating activities Net decrease in cash and cash equivalents Bandana Media Ltd Balance at 1 January Share of loss for the year Balance at 31 December 2021 £’000 (95) 87 5 (3) 2021 £’000 45 (5,258) (3,773) (1,440) 2021 £’000 – (981) (981) (710) (271) 2021 £’000 – – 2021 £’000 (1,169) (271) (1,440) 2020 £’000 (134) – 39 (95) 2020 £’000 61 (4,293) (3,063) (1,169) 2020 £’000 – (824) (824) (596) (228) 2020 £’000 1 1 2020 £’000 (941) (228) (1,169) ANNUAL REPORT AND ACCOUNTS 2021 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 The Group had a 94.1% effective economic ownership share of Satago Financial Solutions Limited at the reporting date (2020: 93.7%). Satago Financial Solutions Ltd Current assets Non-current assets Current liabilities Equity attributable to owners of the Company Non-controlling interests Satago Financial Solutions Ltd Revenue Expenses Loss after tax Loss after tax attributable to owners of the Company Loss after tax attributable to the non-controlling interests Satago Financial Solutions Ltd Net cash used in operating activities Net cash used in investing activities Net cash used in financing activities Net decrease in cash and cash equivalents Satago Financial Solutions Ltd Balance at 1 January NCI on grant of Satago MIP Share of loss for the year Arising from change in non-controlling interest Balance at 31 December 2021 £’000 1,748 631 (291) 1,985 103 2021 £’000 198 (3,284) (3,086) (2,905) (181) 2021 £’000 (3,965) 189 2,731 (1,044) 2021 £’000 294 – (181) (10) 103 2020 £’000 5,256 631 (713) 4,880 294 2020 £’000 591 (3,508) (2,916) (2,787) (129) 2020 £’000 (751) (305) – (1,056) 2020 £’000 – 496 (129) (73) 294 ANNUAL REPORT AND ACCOUNTS 2021 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 20. Leases The carrying amounts of the right-of-use assets recognised and the movements during the period are shown in note 11. The lease liability and movement during the period were: Group Lease liability recognised at 1 January 2021 Interest Payments Balance at 31 December 2021 21. Earnings per share £’000 120 3 (99) 25 Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. The calculation of the basis and adjusted earnings per share is based on the following data: Number of shares (#) At year end Weighted average 2021 2020 80,822,204 80,822,204 80,822,204 80,822,204 Earnings attributable to ordinary shareholders Loss after tax attributable to the owners of TruFin plc £’000 (7,071) £’000 (10,971) Adjusted earnings attributable to ordinary shareholders Loss after tax attributable to the owners of TruFin plc Adjusted for share-based payment Adjusted loss after tax attributable to the owners of TruFin plc Earnings per share* Basic and Diluted Adjusted1 (7,071) 70 (7,001) Pence (8.7) (8.7) (10,971) 545 (10,426) Pence (13.6) (12.9) * All Earnings per share figures are undiluted and diluted. Adjusted1 EPS excludes share-based payment expense and loss from discontinued operations from loss after tax Management has been granted 5,451,578 share options in TruFin plc (see note 6 for details). These could potentially dilute basic EPS in the future, but were not included in the calculation of diluted EPS as they are antidilutive for the years presented as the Group is loss making. ANNUAL REPORT AND ACCOUNTS 2021 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2021 22. Related party disclosures Transactions with Directors Transactions with Directors, or entities in which a Director or recent Director is also a Director or partner: Payment to an ex-Director Consultancy services provided by an ex-Director Other related parties 2021 £’000 – 21 – 2020 £’000 359 29 2 Key management personnel disclosures are provided in note 5 and 6. During the year, the company made loans to Storm Chaser UG, a company based in Germany. Storm Chaser UG is 100% owned by Storm Chaser Games – an associate company of Playstack (See note 1). The balance of the loans (including interest) at the reporting date was £148,000 (prior period: £Nil). 23. Post balance sheet events On 12 April 2022 the Company successfully completed a Placing and Open offer resulting in 13,360,739 new ordinary shares being issued in the Company at £0.75 per share, raising gross proceed of c.£10m. Following issue of the new shares, the total number of voting rights in the Company is 94,182,943. Since the year end Lloyds Banking Group (“LBG”) has completed an investment of £5m of new equity capital in Satago, at a pre-money valuation of £20m. 937,501 newly created B ordinary shares, with a par value of £0.001 per share, were allotted for £5m cash from LBG, representing 20% of the fully diluted share capital. On 9 March 2022 TruFin agreed to vary the terms of an existing £3 million loan to Satago so that it is convertible into equity capital in Satago at the same valuation as the LBG investment or, if a further funding round takes place, the valuation implied by the funding round. Assuming conversion based on the £20 million valuation (and assuming LBG does not subscribe for its pro rata entitlement to shares), TruFin would hold approximately 68% of Satago (on a fully diluted basis). In addition on 9 March 2022 LBG confirmed its intention to enter into a commercial agreement to licence Satago’s software platform for its Single Invoice Finance and whole of book Invoice Factoring customers. Satago and LBG have signed a letter of intent. ANNUAL REPORT AND ACCOUNTS 2021 79 TruFin plc www.TruFin.com