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Annual Report 2022

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ANNUAL REPORT & ACCOUNTS 2022 2022 Annual Report and Accounts | 3 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCompany Information For the year ended 31 December 2022 Directors Steve Baldwin (Chair) 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) Company Secretary Ocorian Secretaries (Jersey) Limited Registered Office 26 New Street St Helier Jersey JE2 3RA Business Address 120 Regent Street London W1B 5FE Registered Number 125245 Auditor Crowe U.K. LLP 55 Ludgate Hill London EC4M 7JW Nominated Advisor and Broker Liberum Capital Limited 25 Ropemaker Street London EC2Y 9LY Advisors 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 Contents Strategic Report 2022 Highlights Company Overview Chair’s Statement CEO’s Review Oxygen review Satago review Playstack review Vertus review CFO’s Review Corporate Governance Board of Directors Corporate Governance Statement Audit Committee Report Nomination Committee Report Remuneration Committee Report Report of the Directors Compliance and Risk Report ESG and Sustainability Report Financial Statements Report of the Independent Auditor Consolidated Statement of Comprehensive Income Company Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Consolidated Financial Statements 2 3 4 6 8 10 12 14 16 20 22 25 26 28 30 32 35 38 43 44 45 46 47 49 50 51 52 2022 Annual Report and Accounts | 1 2022 Highlights REVENUE £16.1m REVENUE GROWTH 23% REVENUE FROM RECURRING SOFTWARE AND LICENSING FEES 84% OVERSUBSCRIBED EQUITY RAISE £10m DIRECT EQUITY INVESTMENT IN SATAGO BY LLOYDS BANKING GROUP £5m (£25m post money valuation) 2 | 2 | Company Overview Investing in cutting edge finance and technology: creating long-term value and significant shareholder returns Since 2017, TruFin has identified and nurtured innovative UK fintech companies, giving them the resources to deliver world- class products and services while targeting meaningful long- term value for our businesses, customers and shareholders. With offices in London and Birmingham, Europe and the USA, our companies Oxygen Finance Limited (“Oxygen”), Satago Finance Solutions Limited (“Satago”) and Vertus Capital Limited (“Vertus”) provide technology and niche lending solutions to thousands of UK and European businesses. We also own the gaming company, Playstack Limited (“Playstack”). TruFin invests at the early stage of a company’s lifecycle, guiding it towards sustainable growth, profitability and, ultimately, an exit. Visit our website www.trufin.com 2022 Annual Report and Accounts | 3 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT Chair’s Statement Steve Baldwin, Chair “As I look back over a turbulent few years, I am once again struck by the remarkable resilience of TruFin and its subsidiaries while facing a global pandemic and ongoing macroeconomic uncertainty.” 4 | I have great pleasure in presenting this year’s Annual Report and Accounts. It has been another year of very positive developments for the Group’s businesses despite the unfavourable macroeconomic headwinds that have once again dominated the last 12 months. After more than a decade of monetary accommodation and historically low interest rates, there has been a sea change in the economic and financial climate. The economic legacy of Covid-19 has been high inflation, as recovering demand coincided with disrupted supply chains – exacerbated by rapid commodity price rises due to the war in Ukraine. In response, central banks have pushed up interest rates and withdrawn or reversed quantitative easing. Although the market environment is unlikely to get easier anytime soon, I am proud to say that the Group is continuing on its growth trajectory and I am certain that the commitment and determination of our employees will enable the Group to skilfully navigate this more unpredictable environment, just as 2021 and 2022 saw TruFin prosper. As anticipated in my statement last year, 2022 has been a year of considerable growth for three out of four of our subsidiaries, alongside landmark contracts and consolidation across the Group. We head into 2023 set for further progress across multiple fronts. The foundations for the Group’s success were laid in previous years, with the Group’s value-creating shareholder restructure following the sale of Arrowgrass’ stake, a successful pivot towards recurring software sales and licensing fees and a sustained relentless focus on exemplary client service. These accomplishments paved the way for an ambitious set of goals in 2022, which I am happy to report have in the main been met, and allowed us to set ever more challenging goals for 2023 and beyond. Chief among TruFin’s aims for the year was to see Satago selected by Lloyds Bank plc (“Lloyds Bank” or the “Bank”) as vendor of choice to support its delivery of invoice financing – this was achieved by early March. The same month saw the Group fulfil a second key goal: strengthening its balance sheet with an oversubscribed placing. These achievements sit alongside organic growth and development across our businesses, positioning us for a profitable future and increased value creation for shareholders. As I look back over a turbulent few years, I am once again struck by the remarkable resilience of TruFin and its subsidiaries while facing a global pandemic and ongoing macroeconomic uncertainty. The Group itself saw revenues increase by 23% last year, evidencing solid fundamentals underpinned by robust cost controls and significant strategic progression. The close of 2022 saw perhaps the clearest demonstration yet of the value of – and shareholder belief in – our proposition. In late December, TruFin’s Board rejected a £26m indicative offer for Oxygen, judging that it undervalued the business and its prospects. It is immensely satisfying to see the hard work, vision and execution of the Group recognised in this way and I have no doubt that we will see further similar demonstrations in 2023 and beyond. As ever, I look forward to updating shareholders on our continued progress throughout the year and my thanks go to all our employees and shareholders, new and old, for their continued support. Steve Baldwin Chair 14 March 2023 Highlights for 2022 include: Satago signing landmark contracts with Lloyds Bank, to help deliver invoice financing, and Sage, the leading small and mid-sized business software provider, to embed Satago services in certain products in the UK and Ireland Oxygen delivering another year of profitable growth and making its first dividend payment (of £0.25m) to the Group Playstack acquisition and successful integration of Magic Fuel Games Inc (“Magic Fuel”), a remote games development studio based in San Francisco, USA Vertus recording its second full year of profitability whilst growing its loan book to £21.4m and increasing its revenues by 61% to £2.2m TruFin raising £10m via an oversubscribed placing and open offer to existing and new shareholders 2022 Annual Report and Accounts | 5 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT CEO’s Review James van den Bergh, Chief Executive Officer “The Group remains focused on delivering growth, profitability and value crystallisation.” 6 | As our Chair has highlighted, 2022 was a year of important structural development for TruFin. Despite the macroeconomic headwinds and challenging inflationary pressures, our subsidiaries grew their customer bases significantly, strengthened their partnerships and have positioned themselves for an exciting 2023 and beyond. At our inaugural Capital Markets Day in October, we laid out our medium-term vision for growth and sustainable profitability. With a medium-term revenue target of £80-100m coupled with attractive EBITDA margins, we are confident we will deliver significant value to our shareholders. It is also important to highlight that a key Group objective is to create a stable environment for our subsidiaries, never more so than amid a global liquidity crisis and ongoing interest rate uncertainty. The success of our £10m placing and open offer in April 2022 supported by 17 institutional shareholders, emphasises TruFin’s strong institutional shareholder backing. This ensures that our subsidiaries are enviably well-placed to consolidate their market leading positions in the years ahead. 2022 Group performance Another Group strategic objective is to reorientate income so that the majority comes from predictable and repeatable sources. In 2022, 84% of Group revenues came from recurring software and licensing fees with our capital light model positioning us to generate the high EBITDA margins and return on equity that other software-as-a- service (“SaaS”) businesses enjoy. Overall Group revenues increased by 23% in 2022. Within this, Satago enjoyed revenue growth of more than 350% as a result of income generated from contract wins with Lloyds Bank and Sage. Vertus and Oxygen also grew strongly – 61% and 28% respectively – continuing to follow their profitable growth trajectory. Playstack meanwhile consolidated its position during the year; revenues declined 11% due to the previously announced delay of a key console game release. The rescheduled game launch is not expected to require TruFin to provide any further support to Playstack. The Group ended the year with a cash balance of £10.3m (including cash of £5.6m in Satago and £0.8m in Vertus which are not 100% owned). Current trading and prospects TruFin has meaningful targets for 2023 and Group revenues for January 2023 were not less than £0.98m (unaudited), a 26% increase over the same period in 2022. The Group remains focused on delivering growth, profitability and value crystallisation and is excited by the significant opportunities that lie ahead. Outlook During 2022 the Group successfully completed several key transactions, positioning ourselves to weather the global macroeconomic storms. In this environment, global liquidity has dried up and other market participants are now acting more rationally. As others are forced to scrutinise their business models more carefully, TruFin will continue to plough its own course. We have steered two of our four businesses towards profitability, with a third anticipated to do the same during 2023. The Board’s rejection of an unsolicited offer for Oxygen is a sign of TruFin’s strength. As others realise the embedded value and barriers to entry within our businesses we expect to see further interest and at the appropriate time we expect to be rewarding our shareholders with value-creating transactions. We have intentionally invested in building lasting relationships with our partners and we are beginning to see the fruits of these investments. We work closely with local councils, FTSE 100 companies and global technology platforms – delivering software, services and products to help meet their strategic requirements. The investments we have made are paying off and will generate significant shareholder returns in the future. My annual ’thank you’ to our shareholders is made on behalf of the Board, our employees, partners and all stakeholders for their support and faith during these turbulent times. I would also like to take the opportunity to welcome Anders Wilhelmsen as a non-executive director. His presence and expertise have proved invaluable additions to the Board since his appointment in February 2022. As always, there is a lot to do and a pile of wood to chop in 2023, but we are brimming with confidence and look forward to the opportunities that lie ahead. James van den Bergh Chief Executive Officer 14 March 2023 2022 Annual Report and Accounts | 7 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT Oxygen review “2022 has been another year of great achievement, with revenue exceeding £5m for the first time. This improved performance, coupled with strong financial management, enabled Oxygen to return funds to TruFin for the first time.” Ben Jackson, CEO REVENUE GROWTH 28% EBITDA GROWTH TO £1.1M 62% INCREASE IN COMMITTED SPENDING TO £1.1bn 25% Increase NEW SIGNED SPEND HIT A RECORD OF £330M 24% Increase 8 |8 | 2022 performance Current trading and prospects Indications from initial trading in 2023 are strong with double digit growth for recurring revenue streams continuing. Continued economic volatility makes Oxygen’s products increasingly attractive; early payment solutions are increasing relevant to our clients and their suppliers. Similarly, business development opportunities identified by our SaaS offer are increasingly in demand from clients seeking public sector insight. Interest from new early payment clients is strong, with several contracts expected to be signed in Q1 2023. Equally major new client features added to SaaS products in the second half of 2022 are rated by existing clients and have generated strong market interest. “Client tenure, a measure of customer loyalty and Oxygen’s success in renewing contracts, reached 6.6 years.” Oxygen delivered revenues of £5.3m, up 28% (2021: £4.1m), with the increase driven by strong performance across all principal revenue streams. This helped to increase EBITDA profits by 62% to £1.1m (2021: £0.7m). Strong trading and working capital controls enabled Oxygen to generate positive free cashflow – with no Group funding required – and subsequently pay TruFin a maiden dividend of £0.25m. New business continued to progress well; combined trade-spending by Oxygen’s early payment clients increased by £0.3bn, totalling a record £24bn. Oxygen’s SaaS product portfolio also expanded, with new products creating incremental revenue. Over 27% of Oxygen’s local authority Early Payment Programme clients also committed to at least one Oxygen SaaS subscription. The average Early Payment Programme client tenure, a measure of customer loyalty and Oxygen’s success in renewing contracts, reached 6.6 years at the end of 2022 (2021: 5.8 years), adding to Oxygen’s recurring revenue streams. Early Payment Programme clients committed £1.1bn in spending to more than 4,000 suppliers during 2022 (2021: £878m). New spend added during the year hit a record £330m (2021: £267m), 24% higher than the prior year. Oxygen’s position as a financial technology company delivering social value strengthened significantly. Throughout 2022 more than 8,000 small businesses within Oxygen clients’ local communities received over £0.5bn in early payments – at no cost to the client. And together with EY, Oxygen continued to develop its Carbon Reporting tool which helps councils understand the carbon footprint of their supply chains. 2022 Annual Report and Accounts | 9 REVENUE GROWTH EBITDA GROWTH TO £1.1M INCREASE IN COMMITTED SPENDING TO NEW SIGNED SPEND HIT A RECORD OF CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT STRATEGIC REPORT Satago review “2022 has proven to be an exciting year for Satago – we have pivoted from being a specialist invoice finance lender to a leading digitised working capital solution for lenders.” Sinead McHale, CEO REVENUE GROWTH +350% WON CONTRACT WITH LLOYDS BANK TO DELIVER THE FIRST UNIFIED DIGITISED INVOICE FINANCE SOLUTION TO THE UK LENDING MARKET LLOYDS BANK MADE A STRATEGIC INVESTMENT IN SATAGO OF £5M SIGNED AGREEMENT WITH SAGE TO FACILITATE SATAGO’S SUBSCRIPTION SOLUTION BEING OFFERED DIRECTLY TO THEIR SAGE 50 CUSTOMER BASE AS PART OF THESE SUBSCRIPTION PACKAGES 10 | 10 | REVENUE GROWTH 2022 performance Current trading and prospects Following conclusion of a commercial pilot and competitive process, Satago was selected by Lloyds Bank (the “Bank”) to deliver a new digitised invoice financing platform for its UK customers. Additionally, the Bank made a strategic investment of £5m in Satago at a post-money valuation of £25m. Satago hit numerous delivery milestones for the Lloyds Bank contract throughout the year, culminating in completing the trial phase of its fully digitised end-to-end invoice finance solution for the Bank in early 2023. The Bank is now testing the digitised proposition ahead of customer onboarding, expected in due course. In June Satago signed a Letter of Intent with Sage Group (“Sage”) and Lloyds, introducing a significant partner to work alongside Satago and the Bank. These major contract wins coupled with a continued pivot towards Lending-As-A-Service (“LaaS”) saw revenues increase by over 350% to £2.2m (2021: £0.5m). Early 2023 has been dominated by continued work with existing and prospective LaaS clients and Embedded Finance partnerships. This has culminated in the delivery of the trial phase of Satago’s fully digitised end-to-end invoice finance solution with Lloyds Bank. Meaningful progress with the Embedded Finance offering has resulted in a deepening of the relationship with Sage and a signed statement of work to embed Satago’s invoice finance service into Sage 50, which launched in Q1 2023. Satago also extended the agreement to provide Satago to certain Sage 50 users as part of a subscription package offering to the Irish market. Further extending Satago’s core offerings of credit control and risk insights to help SMEs better manage their debtor book. Satago has a growing pipeline of LaaS and Embedded Finance customers in the UK and Europe. Demand for Satago’s own loan book offering increased during the first two months of 2023. “Satago hit numerous delivery milestones for the Lloyds Bank contract throughout the year, culminating in completing the trial phase of its fully digitised end-to- end invoice finance solution for the Bank in early 2023.” >4M Automated credit control messages sent <2 minutes Median time to connect Accounting Software Provider IFM First digitised lending solution for Tier 1 bank >£150m Lending to date 2022 Annual Report and Accounts | 11 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT Playstack review “2023 will be an exciting year for Playstack, with multiple games coming to market across all platforms and a focus on building profitability.” Harvey Elliott, CEO ACQUISITION OF MAGIC FUEL, A GAMES DEVELOPER BASED IN SAN FRANCISCO $3M FOLLOWING THE ACQUISITION OF MAGIC FUEL IN 2022, PLAYSTACK HAS DELIVERED ON ALL MILESTONES FOR ITS GLOBAL TECHNOLOGY PARTNER TITLES ANALYSED BY MAGNITUDE IN 2022 4,000+ 12 | 12 | 2022 performance Current trading and prospects Alongside the acquisition of Magic Fuel Games Inc (“Magic Fuel”), and the concurrent signing of a contract with a global technology platform, Playstack announced a delay to a key console game title which stunted the company’s annual growth. Despite the delay, Playstack’s existing games portfolio once again contributed more than 50% of games revenue in 2022, through strong catalogue management and platform partnerships. Given the success of ‘Magnitude’, a proprietary sourcing technology, in supporting the discovery of new games, the Board has focused resources on further developing this tool which is now surfacing over 80% of all new game titles. Playstack launched two new titles during 2022: The Case of the Golden Idol and The Entropy Centre. Both games have received significant critical acclaim, with The Case of the Golden Idol earning a BAFTA Nomination for best Debut Game, and also being shortlisted for the prestigious Seumas McNally Grand Prize at the annual Independent Game Festival Awards in San Francisco. In 2023 Playstack is focusing on game ecosystems and will publish two new games with an extended life well beyond their launch. This strategy aims to extend revenue predictability and establish new, longer-lasting partnerships with platform holders. Playstack is well-placed to expand its game portfolio in 2023 and beyond. Playstack’s console portfolio will be further extended in 2023, with expansions to existing games and two new titles set for release, plus an increasingly strong pipeline of titles for 2024 and beyond. The mobile portfolio centres on six key titles for 2023, including the ongoing delivery of the technology contract by Magic Fuel. Back-book games remain a key component of future revenue modelling, with an increased focus on higher quality, longer-duration titles. 2023 is expected to be a transformative year for the business, with expectations of profitability on a full-year basis with revenue derived from a diverse range of games. “I am immensely proud of The Case of the Golden Idol earning a BAFTA Nomination for best Debut Game, as well as being shortlisted for the prestigious Seumas McNally Grand Prize at the annual Independent Game Festival Awards.” 2022 Annual Report and Accounts | 13 2022 Annual Report and Accounts | 13 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT Vertus review “2022 was our best year since inception for revenue growth, new facilities and profitability, with all key metrics improving substantially. ” Matt Marais, CEO REVENUE GROWTH 61% LOAN BOOK GROWTH 38% DEFAULTS OR IMPAIRMENTS ZERO NEW LOAN FACILITIES 81% 14 | 14 | 2022 performance Current trading and prospects New loan facilities closed during 2022 increased by 81% to £15.2m (2021: £8.4m), resulting in interest income increasing by 61% to £2.2m (2021: £1.4m). Active facilities increased from 21 to 31 inclusive of two early settlements. Overall loan book increased by 38% to £21.4m (2021: £15.6m). No defaults or impairments were recorded across the book for the sixth consecutive year. Increased market demand for IFAs and ongoing consolidation ensures the value of security over IFAs remains strong. Ongoing consolidation in the IFA market is fuelling demand for funding, positioning Vertus well for further growth, as the only specialist capital provider to the IFA sector. Furthermore, IFAs continue to experience new-client enquiries and organic growth, improving their top-line performance. We expect the change in strategy to lend whole-of-market to continue to benefit demand for capital in the coming year. Offsetting the secular consolidation trends, the impact of higher interest rates and increased competition in the broader market environment has spilled over from 2022 into 2023, challenging loan book growth. Early settlements remain a risk to overall loan book growth, driven by higher cost of capital, customers being sold to consolidators and alternative lenders and banks entering the market to fund larger deals. However, our focus remains on the smaller end of the deal market and, although loan book growth may slow, we still foresee steady demand to fund acquisitions and MBOs in this space. Lead times for closing facilities improved during the last quarter, indicating a possible improvement in FCA processing times. This will assist in reducing deal cycles and improving closing rates in the pipeline. “Ongoing consolidation in the IFA market is fuelling demand for funding, positioning Vertus well for further growth.” 2022 Annual Report and Accounts | 15 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT CFO’s Review James Hussey, Chief Financial Officer “We are pleased to report strong financial results driven by revenue growth in three out of our four subsidiaries. The overall 23% growth in revenue resulted in a smaller improvement in loss before tax (5%) as we continue to invest in our teams and infrastructure for the Group’s future growth opportunities.” 16 | 2022 £’000 2021 £’000 YoY Change Gross revenue Net revenue Net revenue % Loss before tax Loss after tax 16,119 13,115 11,044 6,901 69% 53% (8,020) (8,422) (6,806) (7,436) Earnings per share (p) (7.3) (8.7) Cash 10,273 7,608 23% 60% 16% 5% 8% 16% 35% Gross revenue £’000 2022 2021 Net revenue £’000 2022 2021 Net revenue % 2022 2021 Loss before tax £’000 2022 (8,020) 2021 (8,422) Loss after tax £’000 2022 (6,806) 2021 (7,436) Earnings per share (p) 2022 (7.3) 2021 (8.7) Cash £’000 2022 2021 16,119 13,115 11,044 6,901 69% 53% 10,273 7,608 Revenue 2022 £’000 % of rev 2021 £’000 % of rev Interest income 2,619 16% 1,681 Fee income 7,183 Publishing income 6,317 Gross revenue 16,119 45% 39% 4,330 7,104 13,115 13% 33% 54% EBITDA EBITDA Loss before tax Depreciation and amortisation EBITDA 2022 £’000 2021 £’000 YoY Change (8,020) (8,422) 5% (2,485) (5,535) (1,667) (6,755) -49% 18% Net revenue increased from 53% to 69% year on year. This was driven by Playstack’s IP ownership strategy. 1,681 4,330 Revenue 2022 vs 2021 Interest income 2022 2021 Fee income 2022 2021 Publishing income 2022 2021 Revenue 2022 by category 2,619 7,183 6,317 7,104 Interest Income Fee Income Publishing Income EBITDA improved by 18% to a loss of £5.5m (2021: loss of £6.8m). Depreciation and amortisation includes the amortisation of Client Contract Assets, which are accounted for in fee expenses in the Statement of Comprehensive Income. Loss before tax Loss before tax improved by 5% to a loss of £8.0m (2021: loss of £8.4m). The 60% net revenue rise was partially offset by increased spending in staff costs as we continue to invest in our employees, increasing by £1.3m to £12.6m (2021: £11.3m). Other operating expenses increased by £1.5m to £4.8m (2021: £3.3m) and depreciation and amortisation (excluding Client Contract Assets amortisation) increased by £0.8m to £1.6m (2021: £0.8m). Earnings per share (“EPS”) Basic EPS is calculated by dividing the net loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Weighted average number of ordinary shares has been adjusted to reflect the share issue that took place in April 2022 (see Financial Statements Note 15). Management has been granted 5,451,578 share options in TruFin plc (see Financial Statements 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. Weighted average number of ordinary shares (#) Loss for the year attributable to the owners of TruFin plc (£’000) EPS (p) 2022 2021 90,485,862 80,822,204 (6,637) (7.3) (7,071) (8.7) 2022 Annual Report and Accounts | 17 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTSTRATEGIC REPORT CFO’s Review continued Cashflow Cash used in operating activities in the year was £12.7m. This was primarily made up of: • Cash outflows from Loans and Advances of £8.0m • Loss for the year adjusted for non-cash items of £4.6m Cash used in investing activities was primarily additions to intangible and fixed assets of £3.3m, and £1.2m for the first payment for the acquisition of Magic Fuel Games Inc by Playstack. Cash generated from financing activities in the year was £19.9m. This was made up of: • • £9.5m share issue in April 2022 (net of fees) Lloyds Banking Group making a £5m investment into Satago • Net borrowings of £5.4m 18 | CORPORATE GOVERNANCE 2022 Annual Report and Accounts | 19 CORPORATE GOVERNANCE Board of Directors Steve Baldwin Independent Non-Executive Chair Penny Judd 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 of 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 of corporate finance at JPMorgan Cazenove for 10 years and was a vice president of corporate finance at UBS from 1995 to 1998. He is a qualified Chartered Accountant. 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. 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 pursuing 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 for hedge and other multi-asset funds. Paul is currently risk director at Crestbridge and chair of the risk committee at Abrdn. Prior to this, Paul was a member of the manager’s investment committee at Brevan Howard, from 2008 to 2015. His ongoing non-executive roles include directorships 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. 20 | Anders Wilhelmsen Non-Executive Director James van den Bergh Executive Director Anders is an investment professional and the nominated non- executive representative of TruFin’s major shareholder, Watrium. Anders currently serves on several boards within 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. James is the Chief Executive Officer of TruFin. James spun TruFin out of Arrowgrass Capital Partners in 2018, where he led the alternative finance team and private business. He began his career at Merrill Lynch before transitioning into investment management in 2003. James is a CFA Charterholder. 2022 Annual Report and Accounts | 21 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE Corporate Governance Statement 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. On admission to AIM, the Board decided to adhere to the Quoted Companies Alliance’s (“QCA”) Corporate Governance Code for small and mid-size quoted companies (the “QCA Code”). The Board considers this to be appropriate to the nature and size of the Company and its subsidiaries. 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 adheres to these principles can be found on our website www.TruFin.com. The Board TruFin is managed and governed by suitably qualified and authorised personnel, under the governance of an experienced and diverse Board of Directors. TruFin’s Board is established with senior practitioners from the fintech industry and has shareholder representation. The Directors act within the powers granted by TruFin’s Articles of Association and are cognisant of their overarching duty to promote the Group’s success and to drive long term shareholder value. The experienced Directors challenge the work of the executives, using care, skill and diligence and exercising their independent judgment. Board balance and independence The Board currently consists of three independent non- executive directors, one non-executive director and one executive director. The Board is chaired by an independent non-executive director. The Board maintains a mix of independent and non-independent directors in the interests of balance and good governance. The Board considers its non-executive directors remain sufficiently independent and of such calibre and number that their views may be expected to be of sufficient weight that no individual or small group can dominate the Board’s decision-making process. The Board considers that its current composition and structure is appropriate to maintain effective oversight of the Group’s activities. The Board will continue to review its structure on at least an annual basis in order to maintain an appropriate corporate governance environment and independent oversight. 22 | Role of the Board It is the responsibility of the Board, through the senior management, to ensure that TruFin maintains a suitable and sustainable business model, overseeing that an appropriate balance is achieved between promoting suitable long-term growth and delivering short term objectives. The Board is responsible for setting the strategy and maintaining the decision-making framework in which it is implemented, ensuring that the necessary resources are in place to monitor performance and set values and standards in governance matters. The Strategic Report on pages 2–18 further outlines the Board’s approach. The Board is also responsible for the success of TruFin within a framework of controls which enables risk to be assessed and managed. The Compliance and Risk Report on page 32 further details TruFin’s approach to risk. The Chair is responsible for the leadership of the Board and for facilitating the effective contribution of and engagement of all Board members. The Chair has the responsibility for ensuring the Board discharges its responsibilities and implements the Board’s decisions. The role of the non-executive directors is to constructively challenge and help the Board with effective leadership in relation to the Group’s strategy, performance, risk and people management while ensuring a high standard of financial control and corporate governance. One of the independent Non-Executive Directors, Penny Judd, has been selected as the senior independent director. The Board is fully satisfied that the senior independent director demonstrates complete independence and robustness of character in this role. The senior independent director is available to meet shareholders if they have concerns that cannot be resolved through discussion with the Chair or for matters where such contact would be inappropriate. The CEO manages the day to day operations of the Group and reports to the Board on the performance of the Group and progress on the strategic objectives. Implementation of the Group’s strategies and day-to-day business is delegated to the CEO and executive management. The Board has also charged TruFin’s executive management to ensure that all policies and procedures in relation to the governance of the Group are fully integrated into its operations. To ensure effective and independent stewardship, TruFin has expressly set out the matters which are reserved for the Board’s approval. Delegation of authority limits for the Board of Directors and TruFin’s executive management are also documented in an approved framework. Board effectiveness Board meetings Five Board meetings are scheduled each year and additional Board meetings are called as needed, if specific matters need to be considered. In 2022, in addition to the scheduled Board and Committee meetings, Directors attended a number of ad-hoc Board meetings to consider additional matters, which were predominantly related to the fundraise in April 2022. Prior to each Board meeting, the Board and its Committees receive relevant and timely information that will be addressed at each meeting, together with a formal meeting agenda. The primary focus at Board meetings is a review of the Group’s performance and associated matters, and the Chair seeks to encourage open debate between the Directors. Senior executives below Board level attend Board meetings as appropriate, and at each meeting, a subsidiary CEO is invited to present their business update. The Directors are expected to be present at all meetings scheduled during the year, either in person or via video conference. The table that follows sets out the number of formal Board and Committee meetings held during the year ended 31 December 2022 and the number of meetings attended by each Director. The effectiveness of the Board is the responsibility of the Independent Non-Executive Chair and board performance is reviewed on an annual basis. In line with the QCA Code, an external performance review of the Board was conducted in 2020. Nurole was appointed to administer a digital board evaluation in Q1 2022 and the findings were presented to the Nomination Committee and Board. For further details, please see the report of the Nomination Committee on pages 26–27. The result of these evaluations determined that the composition and size of the Board and its Committees is considered appropriate and its operation by Board members is effective. The Board therefore believes that its members possess the relevant qualifications and skills, as well as the balance of personal qualities, necessary to effectively oversee and execute the Group’s strategy. Board committees The Board has delegated specific responsibilities to the Audit Committee, the Remuneration Committee and the Nomination Committee. Every year the Board reviews its composition and the composition of its Committees. The Board and the Nomination Committee oversee this process. In view of the size of the Board and the nature of the Company, all independent non-executive directors are members of each Committee. Each Committee has adopted Terms of Reference, clearly defining the Committee’s roles and responsibilities that the members of each committee must observe in the performance of their duties. These terms of reference are subject to review on an annual basis and copies are available for inspection on the Company’s website www.trufin.com. The individual reports for the Board Committees can be found on pages 25–29. Board and committee attendance record Board Meetings attended 13 / 13 13 / 13 11 / 13 10 / 13 7 / 10 James van den Bergh Steve Baldwin Penny Judd Paul Dentskevich Anders Wilhelmsen* *Anders Wilhelmsen joined the Board on 16 February 2022 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 2022 Annual Report and Accounts | 23 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE Corporate Governance Statement continued Board culture Shareholder engagement The Board recognises the importance of a strong and coherent corporate culture particularly as the Group grows. As such, the Board seeks to establish and maintain a corporate culture characterised by fairness in its treatment of employees and stakeholders, whose efforts are collectively directed towards delivering returns to shareholders in line with the Company’s purpose and objectives. The Board believes that corporate governance and a good culture start at the top of any company and that the Directors and senior management, together, drive the values, behaviours and attitudes that support the Group’s strategy. The Board and senior management will address any concerns that may arise relating to the Group’s cultural environment and are prepared to take appropriate action against unethical behaviour, violation of company policies, or misconduct. TruFin takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships. It is the Group’s policy to conduct all of its business in an honest and ethical manner. TruFin, along with its subsidiaries, all operate an Anti-Bribery & Corruption Policy and adopt appropriately robust governance procedures to ensure compliance. The Board has overall responsibility for ensuring this policy complies with its legal and ethical obligations and that all those under its control comply with it. TruFin also operates a whistleblower policy for its employees. The Board believes that fulfilling TruFin’s strategy depends significantly on the support of its shareholders. The Board strives to ensure that shareholders are kept up to date on the Group’s operations, with clear and transparent information being provided on a regular basis. The Board maintains an active dialogue with shareholders and all material information is released through notification via a Regulatory News Service. TruFin also engages with its shareholders through a subscription news service and the Investors section on its website. The Investors section has all publicly available information including the latest news, investor presentations, financial results, annual reports, governance materials, and AGM notifications. The CEO is available to meet with TruFin shareholders individually throughout the year or through investor roadshows following the publication of TruFin’s financial results. Additionally, the CEO’s of the subsidiaries are also available to meet with TruFin shareholders if requested. Any shareholder feedback is shared with the Directors at the Company’s Board meetings. TruFin concluded a successful £10m capital raise in April 2022. As part of the fundraise, meetings were scheduled with existing and prospective institutional shareholders to which the CEO provided an update on the Group’s purpose for raising capital and business plan. Shareholders are welcome to attend the Company’s Annual General Meeting (“AGM”) and any other general meetings of the Company which are convened throughout the year. The Board understands the importance of the AGM in allowing shareholders to have open and direct dialogue with the Board and management of the Company. If shareholders are not able to attend the AGM, they are encouraged to contact the Directors directly with questions prior to the meeting. All questions received from shareholders at TruFin’s 2022 AGM were responded to personally. The appointment of Anders Wilhelmsen, as non-executive director in February 2022, has facilitated direct shareholder representation to the Board. Anders is the representative from TruFin’s largest shareholder, Watrium AS (“Watrium”), who was appointed, pursuant to a Relationship Agreement between Watrium and TruFin. Anders’ appointment has brought the voice of shareholders into board discussions which has been valuable in making strategic decisions for the Group. 2023 Annual General Meeting The Company anticipates holding its Annual General Meeting in June 2023. The Notice of AGM and Form of Proxy will be posted to shareholders in due course and a copy will be available at www.trufin.com. The location of the AGM will be held in London, the exact location to be confirmed. 24 | Audit Committee Report Penny Judd Chair of the Audit Committee On behalf of the Board, I am pleased to present TruFin plc’s Audit Committee Report for the year ended 31 December 2022. The Audit Committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems, and overseeing the relationship with the external auditors (including advising on their appointment, agreeing the scope of the audit and reviewing the audit findings). 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 and 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. The Committee also ensures that they are satisfied with the external auditors’ independence in relation to any other non-audit work undertaken by them and also reviews their performance. 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 Penny Judd Chair of the Audit Committee 2022 Annual Report and Accounts | 25 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE Nomination Committee Report Steve Baldwin Chair of the Nomination Committee 26 | I am pleased to present my report as Chair of the Nomination Committee (the “Committee”) for the year ended 31 December 2022. The Committee’s approach aligns to the Quoted Companies Alliance Corporate Governance Code (“QCA Code”) and operates under terms of reference. These terms of reference are reviewed annually, approved by the Committee and Board, and are made available on TruFin’s website. The Committee meets at least once a year, and otherwise as required.  The Committee’s objective is to assist the Board in discharging its responsibilities relating to the composition and performance of the Board and also ensuring effective succession planning for the senior management of TruFin and its subsidiaries (collectively the “Group”). The Committee consists of three independent non-executive directors: • • • Steve Baldwin (Chair) Penny Judd Paul Dentskevich Although only members of the Committee have the right to attend meetings, other individuals, such as the non- executive and executive directors, may also be invited to attend all or part of any meeting. Role of the Committee The key responsibilities of the Committee include: • • • • Regularly reviewing the structure, size, and composition (including the skills, knowledge, experience and diversity) of the Board and all Board committees and making recommendations to the Board with regard to any changes Giving full consideration to the succession planning of Directors and other senior executives of the Group Regularly reviewing the leadership needs of TruFin, both executive and non-executive, with a view to ensuring the continued ability for TruFin to compete effectively in its marketplace Identifying and nominating candidates to fill Board and committee vacancies as and when they arise, taking into account relevant experience and Diversity, and making recommendations to the Board on such matters • Evaluating the Board’s performance on an annual basis Appointment of NED Looking ahead We feel it is important to continually assess the composition of the Board and senior management team to ensure that TruFin has the right skills and experience to develop in line with its strategic ambitions and commitment to create a diverse and inclusive workplace. The Committee members agreed that no changes to the Board composition were needed at the present time. Steve Baldwin Chair of the Nomination Committee TruFin announced changes to its Board composition on 16 February 2022 with the appointment of Anders Wilhelmsen. Anders joined as a representative non-executive director of TruFin’s largest shareholder, Watrium AS (“Watrium”), pursuant to a relationship agreement which was entered into between TruFin and Watrium. As a long-standing and very supportive shareholder, Watrium have significant experience and knowledge of the Group’s businesses. Anders has brought considerable expertise in designing and implementing growth strategies which will continue to greatly benefit the Group going forward. Board effectiveness review Under the QCA Code’s corporate governance requirements, we are to consider an external performance review of the Board every few years. In 2022, TruFin appointed Nurole to administer a digital board evaluation. The findings were presented to the Committee and Board in February 2022. The evaluation required each of the Directors to submit responses to an online review reflecting their individual performance, the performance of the Board as a whole, and the main areas under consideration by the Board and its Committees. Responses were collated and analysed, and benchmarked against boards of a similar standing. Individual feedback reports were produced for each director and an anonymised summary report was produced for the Committee and Board to discuss. The evaluation highlighted the depth and breadth of expertise and experience across the Board and the positive way in which its members engage with and challenge Company management. The evaluation also identified a number of areas for improvement, which were addressed during the year. Amongst other things, these have been the improvement of Board material administration, with all directors now having access to a centralised online Board Portal, and the Company’s heightened focus on environmental and social risk throughout the Group, via the revision and implementation of its ESG Policy. These evaluations concluded that the performance of the Board, its Committees, the Chair and each of the Directors is, and continues to be effective. All Directors demonstrated commitment to their roles and contributed effectively throughout the year. 2022 Annual Report and Accounts | 27 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTMembers of the Committee • • • Paul Dentskevich (Chair) Penny Judd Steve Baldwin Role of the Committee The Committee develops and determines remuneration packages for Executives of the Company in line with the Company’s prevailing Remuneration Policy. It ensures that remuneration decisions compensate executive directors and other employees fairly and responsibly. The key responsibilities of the Committee include: • • • • • • Developing, maintaining, and recommending to the Board, remuneration packages for Executives to support the delivery of business objectives in the short, medium and long-term, to deliver sustainable growth in shareholder value Aligning the interests of the Executives with the interests of long-term shareholders Applying performance criteria to encourage Executives to operate within the risk parameters set by the Board Rewarding the right behaviours, values, and culture to support the delivery of TruFin’s business objectives Ensuring that TruFin can recruit and retain high quality Executives through fair and attractive, but not excessive, packages Ensuring that members of the Committee commit sufficient time to the role and develop the necessary skills and knowledge. CORPORATE GOVERNANCE Remuneration Committee Report Paul Dentskevich Chair of the Remuneration Committee I am pleased to present my report as Chair of the Remuneration Committee (the “Committee”). This report covers the key remuneration themes and considerations of the Committee for the year ended 31 December 2022. It sets out the remuneration policy for the executive directors of TruFin and other members of the senior management team as deemed appropriate by the Board (collectively “Executives”). TruFin’s remuneration objective is to attract, retain and motivate Executives of the quality required to run the Company successfully, having regard to the interests of TruFin shareholders and other stakeholders. The philosophy of the Committee is to achieve remuneration structures that are transparent, fair, and consistent with its corporate governance and regulatory obligations. TruFin’s approach to remuneration aligns to the Quoted Companies Alliance Corporate Governance Code. All of TruFin’s independent non-executive directors are members of the Committee and the representative director of TruFin’s largest shareholder may also attend meetings of the Committee as an observer. The Committee operates under terms of reference, which are reviewed annually and approved by the Committee and Board, and are made available on TruFin’s website. The Committee meets at least twice a year, and as necessary beyond that. 28 | Directors’ remuneration Executive Salary1 £’000 Bonus2 £’000 Pension3 Benefits4 2022 Total 2021 Total £’000 £’000 £’000 £’000 James van den Bergh 256 220 Non-executive Steve Baldwin Penny Judd Paul Dentskevich Anders Wilhelmsen 100 70 60 – – – – – 5 – – – – 4 – – – – 485 465 100 70 60 – 100 70 50 – 1 Full base salary during the relevant financial year 3 The value of the Company’s contribution to the individual’s pension scheme 2 Cash value of the bonus in respect of the year ended 31 December 2022 4 Benefits consist of private healthcare Share based payments Looking ahead Details of share based payments and awards in issue are disclosed in Note 6 to the Financial Statements. Annual salary reviews TruFin reviews the basic salary of all employees on an annual basis, taking cost-of-living and inflation rates into account. Where appropriate, the Committee will also benchmark salary reviews against the market. Generally, employees who have significant changes to their role or are paid outside of market benchmarks, will receive adjustments to their basic salary. Executive remuneration benchmark During the year, the Committee appointed Pearl Meyer to review market norms for comparable companies, both in size and sector, to provide suitable context regarding the Chief Executive Officer’s incentive compensation and advise on competitive benchmarking of executive remuneration. Pearl Meyer’s analysis determined that the Chief Executive Officer’s total remuneration falls within the market benchmark. As a committee, we will continue to monitor the effectiveness of our current approach to remuneration, whist staying consistent to our corporate governance and regulatory values. Our objective to attract, motivate, and retain talented employees will remain a top priority across the Group to help deliver excellent outcomes for our shareholders. Paul Dentskevich Chair of the Remuneration Committee 2022 Annual Report and Accounts | 29 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE Report of the Directors The Directors present their report with the financial statements of the Company and the Group for the year ended 31 December 2022. 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 2022 (2021: £nil). The Directors’ current view is that the earnings of the 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. 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) 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 intend for it to 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 2022: % of issued share capital Number of Shares Watrium AS 21,653,323 22.99% Gresham House Asset Management 9,485,237 10.07% Premier Miton Investors 8,941,380 9.49% Lombard Odier Investment Managers 7,107,986 7.55% JO Hambro Capital Management 5,575,753 5.92% Credit Suisse Private Banking 4,066,974 4.32% GPIM M&G Investments 3,799,535 4.03% 3,268,102 3.47% The Directors’ interests in the shares of TruFin plc, all of which were beneficial interests, at 31 December 2022 are as follows: AXA Framlington Investment Managers 3,157,205 3.35% Jupiter Asset Management 3,064,031 3.25% Number of Shares 2022 2021 J van den Bergh 165,982 165,982 P Dentskevich P Judd Shares jointly held by the trustee of the Company’s employee benefit trust (the “EBT”) and J van den Bergh 45,000 24,723 - 24,723 - 395,558 During the year 395,558 shares that were jointly held by the EBT and James van den Bergh vested. 395,558 shares became fully owned by the EBT. James van den Bergh holds a nil cost option in respect of 1,566,255 shares. Events after the Reporting Date Since the year end, Satago has agreed to extend its agreement with Sage. Initially, Satago services were offered to UK based Sage 50 packages only, but this extension is to now include certain packages in Ireland. Additionally, Satago signed a statement of work to embed Satago’s invoice finance service into Sage 50 and the solution was launched during Q1 2023. 30 | Statement of Directors’ responsibility Statement of Going Concern 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 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. 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. 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 Chair 14 March 2023 2022 Annual Report and Accounts | 31 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT Risk reporting At every Board meeting, the Chief Executive Officer reports to the Board on the existing risks and any new areas of material risk that have been identified to the Group. Anything that requires escalation from a subsidiary level is augmented by TruFin’s executive management who take on the responsibility to report to the TruFin Board. Having this layered approach ensures that risk management is embraced throughout the subsidiaries and enables the Group to effectively prioritise and manage risk within our target levels. Risk Register The Company operates a Risk Register which documents risks that may prevent the Company from meeting its corporate and strategic objectives. It records all risks including strategic, operational, conflicts, compliance, financial and reporting, and market risks. All risks are assessed against likelihood and severity. Risks are reviewed at operational and strategic level to ensure that they are in line with TruFin’s risk appetite. Controls are put in place to mitigate against the identified potential impact, and documented risk owners are put in place. Any change in risk will trigger a review of the controls and mitigating actions to ensure they are still relevant and suitable. Risks are measured in respect of how they will impact the business. Along with the Company’s risk policies, the Risk Register is reviewed on an annual basis and any updates are reported to the Board and the Audit Committee. Principal risks and uncertainties 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. CORPORATE GOVERNANCE Compliance and Risk Report Culture is a key component of effective risk management. At TruFin, we encourage, promote, and continuously seek to demonstrate a culture of good governance throughout our business. We have an inclusive, open environment, where transparency, accountability and responsibility is at the core of our organisation. The Board and executive management are committed to creating an effective risk culture across the Company. We believe that the Group’s general risk appetite is moderate and balanced, allowing the appropriate potential for growth and scalability, whilst ensuring regulatory compliance. We have adopted the Quoted Companies Alliance’s Corporate Governance Code for small and mid-size quoted companies to ensure the highest standards of corporate governance and all our operations are audited on an annual basis. Risk management We manage risk, 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. We make complex judgements, including decisions about the level and types of risk that we are willing to accept in order to achieve our business objectives, and the maximum level of risk the Group can assume before breaching constraints determined by liquidity and regulatory needs. The Board of Directors has the overall responsibility for identifying and determining the nature and extent of the significant risks it is willing to take in order to allow for the execution and delivery of TruFin’s strategic objectives and for ensuring that risks are managed effectively. When identifying, assessing and managing risks, the Board is assisted by the Audit Committee. The Audit Committee reviews internal financial controls and the Company’s risk management systems by overseeing risk procedures, including the review and approval of key risk policies and processes. Day-to-day risks are monitored and managed by TruFin’s executive management. As well as external reviews and audits from the Company’s statutory auditors, TruFin has internal checks, and guidelines in place. The Company maintains a framework of the key risks, with policies and processes devised to monitor, manage and mitigate them where possible. At subsidiary level, the responsibility for the establishment and maintenance of adequate day-to-day management of key risks, and formalised risk procedures, rests with the individual boards and their management teams. Additionally, due to Satago and Vertus being lending businesses, they each have their own risk committees in place. Systems and processes throughout the Group are continually reviewed, updated, and effectively communicated to all personnel to ensure that resources, governance, and infrastructure, remains appropriate. 32 | The key risks identified and which the Board has reasonable expectation are appropriately mitigated: Risk Potential Impact Mitigation Strategic Risk Credit Risk Funding Risk Operational 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. The risk of default, potential write-off, financial loss arising from a borrower or counterparty failing to meet its financial obligations. The Group adopts prescribed lending policies and adheres to strict credit and underwriting criteria specifically tailored to each business area. 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. Vertus and Satago have secured external funding, both debt and equity, with which they can continue to grow their businesses. The risk of financial loss and/or reputational damage resulting from inadequate or failed internal processes, people and systems (third party or internal) or from external events. The exposure to operational risk has increased from the previous year as the businesses have grown. 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. Supplier policies are in place to ensure regular review of third parties and the associated costs and key dependencies. Currency Risk The Group is located in the UK, USA and Europe, and trades in GBP, USD, PLN, SEK, and EUR. The Group receives revenues in both GBP and USD, which acts as a natural hedge to costs incurred in USD. There is an FX risk to the Group based on external market conditions which may lead to a realised or unrealised FX loss. Cyber Risk The Group is dependent of the security, integrity and operational performance of the systems and products it offers as well as the platform partners it works with. A security breach or major systems failure could significantly impact the business and its ability to execute on its plans and compromise sensitive data. This would also result in adverse reputational consequences for the Group. The Group operates bank accounts in all Group currencies to hedge against currency risk exposure. The finance function monitor rolling cashflow forecasts to indicate the Group’s currency needs and plan accordingly. Hedging will be considered as an appropriate solution when the scale of European operations becomes significant. The Group has invested in its IT team and infrastructure, implementing additional cyber security processes and policies and continues to regularly review its IT and security provisions to ensure they are industry- leading and in line with best practice. It has put in place business continuity and disaster recovery procedures with scheduled regular testing such that should an event occur, the disruption to the Group can be managed and impact minimised as far as possible. 2022 Annual Report and Accounts | 33 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE Compliance and Risk Report continued Risk Potential Impact Mitigation Inflation and Interest Rate Risk Staff Shortage Risk In recent times global economies have seen increasing levels of inflation and interest rates. There is a risk that this could have a material adverse effect on the Group’s future financial performance and levels of profitability. The Group monitors operational costs and interest rates to ensure competitive rates are obtained, and, where appropriate, customer pricing will be used to mitigate adverse movements and manage financial performance. Key to the Group achieving its short and mid-term objectives is increased investment in headcount and the recruitment of skilled individuals. In some areas identifying such skilled individuals has been challenging and potentially could negatively impact the achievement of the Group’s targets. The Group is focused on ensuring its remuneration packages and employee policies remain competitive with market rates and practices to ensure vacancies are filled with high calibre, skilled individuals. Looking ahead The Directors of TruFin 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. We will continue to monitor the impacts and associated risks arising from the regulatory landscape and global changes with a particular focus on consideration of emerging risks. There will continue to be a focus on strengthening the risk and control environment, including ESG risks. In addition, focus will remain on ensuring a strong dialogue between the compliance function and executive management, the operations of the Group, and the Board of Directors. 34 | Environmental Social and Governance (“ESG”) and Sustainability Report We believe that high standards of ESG and sustainability within both the Company and its subsidiaries make good business sense and have the potential to protect and enhance shareholder returns. Consequently, best practice is encouraged throughout the Group and TruFin’s investment process ensures that ESG and sustainability issues are taken into account from the outset. TruFin has identified the key areas for consideration, across the three ESG categories, which best align with its values and are most relevant for companies operating in the fintech industry. The key environmental consideration as identified by TruFin is the potential impact of business operations on the global issue of climate change. Social factors include the risks and opportunities associated with diversity, data security and privacy, and the impact the Group has on its employees, customers, and community. Governance considerations include anti-bribery and corruption, board structure and independence, and compliance. Environmental responsibility As an investment company, with limited internal resource, the Company has little impact on the environment. However, 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. 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 aim to provide an inclusive, progressive and sustainable environment where our employees thrive. 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. It is becoming increasingly clear that people care about the ethical use of their data, demanding accountability and transparency from the businesses they interact with. As such, we believe our robust internal data protection and security policies ensure regulatory compliance, providing assurance that our data handling is ethical and strengthens our governance. We believe it is critical for boards of directors to benefit from diverse perspectives and as such, the Company aims to have a balance of relevant skills, experience and background amongst the Directors on the Board. Further, we believe that all Board appointments should be made on merit and with due regard to the benefits of diversity. As well as the subsidiary boards, we also encourage diversity in the management teams of the subsidiaries and the promotion of the benefits of diversity throughout Group. 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. Governance is a priority throughout the Group. We have implemented a Group Governance Policy within each of the subsidiaries which we believe 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. The Group Governance Policy requires constant engagement between the executive management of TruFin and its subsidiaries, and expects ESG and sustainability issues to be a key consideration for such communication. Within each subsidiary, there are members of TruFin’s executive management team with a board seat, or with board observer status. We are committed to carrying out business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent bribery and corruption. In carrying out its activities, TruFin aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues. 2022 Annual Report and Accounts | 35 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE Environmental Social and Governance (“ESG”) and Sustainability Report continued ESG and sustainability in action Developments continue to be seen in ESG and sustainability practices across the subsidiaries, both in their business models and operating procedures. However, it should be noted that the Group comprises of early stage companies and quantitative data is not readily available. Below we highlight some examples. Oxygen Vertus Oxygen exists to help businesses thrive and deliver a wider benefit by funding public services within the local community. Oxygen uses its technology platform to promote social and environmentally efficient procurement in the public sector supply chain. Its solutions help public sector clients identify potential spend and carbon emission efficiencies in their supply chain, and give suppliers the tools to find new business opportunities and understand how customers will perceive their carbon impact. Satago Satago facilitates the best in class invoice finance solutions through advanced technology and innovative use of data to helping SMEs in the community. Satago’s solutions solve problems by removing traditional challenges experienced by lenders and SMEs. Satago believes that all SME’s should have access to financing capabilities to help them reach success. Vertus supports independently minded business owners by making it possible for them to sell their businesses by providing independent capital, enabling internal deals and third-party acquisitions of all shapes and sizes. Its unique approach focusses on simple, fair deals, that put client continuity first, meaning that borrowers can do right by the clients and staff of the target firm. By doing this, Vertus preserves the quality of the service provided to consumers, for the benefit of all. Playstack Headquartered in London, Playstack is a leading games publisher with a diverse team of people working all over the world. During the year, Playstack chose to support and fundraise for Special Effect. Special Effect is a charity providing specialist support for the physically disabled through the innovative use of technology. Special Effect’s mission is to maximise fun and quality of life by helping people control video games to their best of their abilities, and much more. Special Effect will remain Playstack’s chosen charity for 2023. Looking ahead We are pleased with the progress we have made in evolving our ESG and sustainability agenda this year, however we know there is much more we can do. This as a long-term journey and something that is core to our business model as a Group. Getting it right for our employees, customers, communities, environment, and shareholders, is the cornerstone of our efforts. We believe that having a focus on ESG and sustainability builds greater resilience into our business model and there will continue to be a focus on strengthening the risk and control environment, including those relating to ESG. In 2023, TruFin will remain committed to: • • • • Incorporating ESG and sustainability considerations into its operating practices; Providing ESG training and support to employees so that they may perform their work in accordance with its philosophy; Actively engaging with the subsidiaries to encourage regular reporting and ongoing improvement of key ESG areas; and Annual reporting on ESG and sustainability via our Annual Report and Accounts. 36 | FINANCIAL STATEMENTS 2022 Annual Report and Accounts | 37 2022 Annual Report and Accounts | 37 CORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTReport of the Independent Auditor to the Shareholders of TruFin plc For the year ended 31 December 2022 Opinion We have audited the financial statements of TruFin plc (the “parent company”) and its subsidiaries (the “group”) for the year ended 31 December 2022, 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 2022; 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 2022 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; 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 month of the 2023 budget to the actual results; Examining within the working capital forecasts the key inputs within the model and corroborating them through discussions with management; and Reviewing for accuracy the disclosures in relation to this matter in the financial statements. 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 group or 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. 38 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Report of the Independent Auditor to the Shareholders of Trufin plc continued For the year ended 31 December 2022 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 £650,000 (2021: £500,000) and £350,000 (2021: £165,000) respectively. In determining this, we considered a range of benchmarks with specific focus on approximately based on 1% of Total Assets (2021: 1% of Total Assets). Entity materiality was based on a benchmark of up to 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 £390,000 for the group and £210,000 for the company. 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 £33,000 (2021: £25,000). 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 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. 2022 Annual Report and Accounts | 39 Report of the Independent Auditor to the Shareholders of Trufin plc continued For the year ended 31 December 2022 This is not a complete list of all risks identified by our audit. Revenue Recognition (Note 3) Key audit matter The Group derives its revenue from interest, fee and publishing income. During the year ended 31 December 2022, the Group recorded total gross revenue of £16,119k (2021: £13,115k). Interest income is earned on loans and advances to customers by Vertus and Satago and accounts for 16% of total revenue. Fee income is earned on payment services and subscription fees provided by Oxygen and Satago which accounts for approximately 45% of total revenue. Publishing income is earned by the companies in the Playstack group and accounts for approximately 39% 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. How the scope of our audit addressed the key audit matter • 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. Carrying value of goodwill and other intangible assets (Note 10) Key audit matter How the scope of our audit addressed the 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. • We reviewed and challenged the assessment made by management in establishing the cash generating units. • 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 and revenue. 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. 40 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Report of the Independent Auditor to the Shareholders of Trufin plc continued For the year ended 31 December 2022 Carrying value of the loan book (Note 18) 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. How the scope of our audit addressed the key audit matter • We selected a sample of agreements entered into to confirm our understanding of the principal terms and obligations. • 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 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 31 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. 2022 Annual Report and Accounts | 41 Report of the Independent Auditor to the Shareholders of Trufin plc continued For the year ended 31 December 2022 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 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 14 March 2023 42 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income For the year ended 31 December 2022 Interest income Fee income Publishing income Gross revenue Interest, fee and publishing expenses Net revenue Staff costs Other operating expenses Depreciation & amortisation Net impairment 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 3 3 3 3 5 7 2, 9 Notes 22 2022 £’000 2,619 7,183 6,317 16,119 (5,075) 11,044 (12,609) (4,810) (1,596) (50) 1 (8,020) 1,214 (6,806) 2021 £’000 1,681 4,330 7,104 13,115 (6,214) 6,901 (11,285) (3,257) (794) 10 3 (8,422) 986 (7,436) (65) (65) (39) (39) (6,871) (7,475) (6,637) (169) (6,806) (6,704) (167) (6,871) 2022 pence (7.3) (7,071) (365) (7,436) (7,112) (363) (7,475) 2021 pence (8.7) 2022 Annual Report and Accounts | 43 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Company Statement of Comprehensive Income For the year ended 31 December 2022 Revenue Staff costs Other operating expenses Depreciation & amortisation Loss before tax Taxation Loss and total comprehensive income for the year Notes 3 5 9 2022 £’000 2,293 (1,673) (660) (2) (42) – (42) 2021 £’000 2,126 (1,911) (624) – (409) – (409) 44 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Consolidated Statement of Financial Position As at 31 December 2022 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 Notes 2022 £’000 2021 £’000 10 11 9 13 13 14 14 15 19 16 16 17 24,411 345 250 15,016 40,022 10,273 9,145 4 2,149 3,899 25,470 65,492 85,706 (24,884) (63) (26,531) 34,228 5,876 40,104 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 16,764 16,764 11,351 11,351 1,783 6,841 8,624 25,388 65,492 1,634 5,292 6,926 18,277 50,728 The notes on pages 52 to 92 are an integral part of these financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 14 March 2023. They were signed on its behalf by: James van den Bergh Chief Executive Officer 2022 Annual Report and Accounts | 45 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Company Statement of Financial Position As at 31 December 2022 Notes 2022 £’000 2021 £’000 Assets Non-current assets Property, plant and equipment 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 11 12 14 15 17 4 30,189 54,835 85,028 2,260 138 2,398 87,426 85,706 (6,042) 6,828 86,492 – 30,189 46,919 77,108 786 144 930 78,038 73,548 (5,504) 8,966 77,010 934 934 934 1,028 1,028 1,028 87,426 78,038 The notes on pages 52 to 92 are an integral part of these financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 14 March 2023. They were signed on its behalf by: James van den Bergh Chief Executive Officer 46 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Balance at 1 January 2022 Loss for the year Other comprehensive income for the year Total comprehensive loss for the year Issuance of shares Issuance of shares by subsidiary Share capital £’000 73,548 – – – 12,158 – Retained earnings £’000 (17,731) (6,637) – (6,637) (496) (20) Foreign exchange reserve £’000 4 – (67) (67) – – Other reserves £’000 (24,393) – – – (2,138) – Total £’000 31,428 (6,637) (67) (6,704) 9,524 (20) Balance at 31 December 2022 85,706 (24,884) (63) (26,531) 34,228 Balance at 1 January 2021 73,548 (10,730) 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 – – – – – – – – (7,071) – (7,071) 70 4 – – (4) 45 – (41) (41) – – – – – (24,395) 38,468 – – – – – – 2 – (7,071) (41) (7,112) 70 4 – 2 (4) Balance at 31 December 2021 73,548 (17,731) 4 (24,393) 31,428 The notes on pages 52 to 92 are an integral part of these financial statements. Non- controlling interest £’000 1,023 (169) 2 (167) – 5,020 5,876 1,268 (365) 2 Total equity £’000 32,451 (6,806) (65) (6,871) 9,524 5,000 40,104 39,736 (7,436) (39) (363) (7,475) – (4) 19 – 103 1,023 70 – 19 2 99 32,451 2022 Annual Report and Accounts | 47 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity continued For the year ended 31 December 2022 Share capital Share capital represents the nominal value of equity share capital issued. Retained earnings The retained earnings reserve represents cumulative net gains and losses. Foreign exchange reserve The foreign exchange reserve represents exchange differences which arise on consolidation from the translation of the financial statements of foreign subsidiaries. Other reserves Other reserves consist of the merger reserve, the share revaluation reserve and shares issued at a discount. The merger reserve arose as a result of combining businesses that are under common control. As at 31 December 2022 it was a debit balance of £33,358,000 (2021: £33,358,000). The share revaluation reserve arose from the share cancellation that took place in February 2018. As at 31 December 2022 its balance was £8,966,000 (2021: £8,966,000). Shares issued at a discount arose from the share issuance that took place in April 2022. As at 31 December 2022 its balance was £2,138,000 (2021: £nil). See Note 15 for further information. Non-Controlling Interest The non-controlling interest relates to the minority interest held in Bandana Media Limited, Playstack OY, Vertus Capital Limited, Vertus SPV1 Limited, Satago Financial Solutions Limited, Satago SPV1 Limited, Satago SPV2 Limited, Altlending Limited and Satago z.o.o. 48 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Company Statement of Changes in Equity For the year ended 31 December 2022 Share capital £’000 Retained earnings Other reserves £’000 £’000 Total equity £’000 Balance at 1 January 2022 Total comprehensive loss for the year Issuance of shares Balance at 31 December 2022 Balance at 1 January 2021 Total comprehensive loss for the year Share based payment Balance at 31 December 2021 73,548 (5,504) 8,966 77,010 – 12,158 85,706 (42) (496) (6,042) – (2,138) 6,828 (42) 9,524 86,492 73,548 (5,165) 8,966 77,349 – – (409) 70 – – (409) 70 73,548 (5,504) 8,966 77,010 The notes on pages 52 to 92 are an integral part of these financial statements. 2022 Annual Report and Accounts | 49 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Consolidated Statement of Cash Flows For the year ended 31 December 2022 Notes 2022 £’000 2021 £’000 Cash flows from operating activities Loss before tax (8,020) (8,422) Adjustments for Depreciation of property, plant and equipment Amortisation of intangible assets Share based payments Finance costs 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 in trade and other receivables Increase/(Decrease) in trade and other payables Net payables on acquisition of subsidiary Tax credit received/(paid) Interest and finance costs paid 108 2,377 – 974 (1) – – (4,562) (8,029) (34) 60 (67) 96 1,571 70 659 (3) 2 2 (6,025) (1,472) (720) (1,735) – (8,070) (3,927) 668 (777) (2) (716) Net cash used in operating activities (12,741) (10,670) Cash flows from investing activities: Additions to intangible assets Additions to property, plant and equipment Acquisition of subsidiaries Cash on acquisition of subsidiary (3,159) (113) (1,217) 19 (1,779) (24) – – Net cash used in investing activities (4,470) (1,803) Cash flows from financing activities: Issue of ordinary share capital Issue of ordinary share capital of subsidiary Net borrowings 16 Lease payments 9,524 5,000 5,370 (28) Net cash generated from financing activities 19,866 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign exchange rate changes 2,655 7,608 10 Cash and cash equivalents at end of the year 10,273 – 148 2,353 (99) 2,402 (10,071) 17,728 (49) 7,608 All cash and cash equivalents are cash at bank. The notes on pages 52 to 92 are an integral part of these financial statements 50 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Company Statement of Cash Flows For the year ended 31 December 2022 Cash flows from operating activities Loss before income tax Adjustments for: Depreciation of property, plant and equipment Interest income Share based payments Working capital adjustments Decrease in trade and other receivables Decrease in trade and other payables Net cash generated used in operating activities Cash flows from investing activities Intragroup loans cash (advanced)/received Additions to property, plant and equipment Net cash generated (used in)/from investing activities Cash flows from financing activities Issue of ordinary share capital Net cash generated from financing 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 52 to 92 are an integral part of these financial statements. 2022 £’000 2021 £’000 (42) (409) 2 – (2,166) (2,008) – 70 (2,206) (2,347) 6 (94) (88) 513 (114) 399 (2,294) (1,948) (5,750) (6) (5,756) 9,524 9,524 1,474 786 2,260 2,156 – 2,156 – – 208 578 786 2022 Annual Report and Accounts | 51 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements For the year ended 31 December 2022 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. Accounting policies 1. General information The TruFin Group (the “Group”) is the consolidation of TruFin plc and the companies set out in the “Basis of consolidation” on pages 53-54. The principal activities of the Group are the provision of niche lending, early payment services and game publishing. The financial statements are presented in Pounds Sterling, which is the currency of the primary economic environment in which the Group operates. Amounts are rounded to the nearest thousand. Basis of accounting The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”). Prior to 29 November 2017 and before the incorporation of TruFin plc and TruFin Holdings, the entities named above were under common control and therefore, have been accounted for as a common control transaction – that is a business combination in which all the combining entities or businesses are ultimately controlled by the same company both before and after the combination. IFRS 3 provides no specific guidance on accounting for entities under common control and therefore other relevant standards have been considered. These standards refer to pooling of assets and merger accounting and this is the methodology that has been used to consolidate the Group. After 29 December 2017, post the reorganisation, the entities constitute a legal group and accordingly the consolidated financial statements have been prepared by applying relevant principles underlying the consolidation procedures of IFRS. Basis of preparation The results of the Group companies have been included in the consolidated statement of comprehensive income. Where necessary, adjustments have been made to the underlying financial information of the companies to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The consolidated financial statements contained in this document consolidates the statements of total comprehensive income, statements of financial position, cash flow statements, statements of changes in equity and related notes for each of the companies listed in the “Basis of consolidation” on pages 53-54, 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. 52 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Basis of consolidation The consolidated financial statements include all of the companies controlled by the Group, which are as follows: Entities Country of incorporation Registered address Nature of the business % voting rights and shares held TruFin Holdings Limited (“THL”) Jersey Satago Financial Solutions Limited (“Satago”) (together with Satago SPV 1, Satago SPV 2 and Satago Poland) (“Satago Group”) Satago SPV 1 Limited (“Satago SPV 1”) Satago SPV 2 Limited (“Satago SPV 2”) UK UK UK 26 New Street, St Helier, Jersey JE2 3RA 120 Regent Street, London, United Kingdom, W1B 5FE 120 Regent Street, London, United Kingdom, W1B 5FE 120 Regent Street, London, United Kingdom, W1B 5FE Holding Company 100% of ordinary shares Provision of short term finance 72% of ordinary shares* Provision of short term finance 72% of ordinary shares* Provision of short term finance 72% of ordinary shares* Satago z.o.o (Satago Poland) Poland 32-023 Krakow ul. Sw. Krzyza 19/6 Poland Provision of short term finance 72% of ordinary shares* Oxygen Finance Group Limited (“OFGL”) (together with OFL and OFAI) (“Oxygen”) UK Oxygen Finance Limited (“OFL”) UK Oxygen Finance Americas, Inc (“OFAI”) USA 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”)*** UK UK UK Bandana Media Limited (“Bandana”)*** UK PlayIgnite Ltd (“PlayIgnite”)*** UK 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 120 Regent Street, London, United Kingdom, W1B 5FE 120 Regent Street, London, United Kingdom, W1B 5FE 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 Holding Company 88% of ordinary shares** Provision of early payment services 88% of ordinary shares** Provision of early payment services 88% of ordinary shares** Provision of technology services 100% of ordinary shares Provision of short term finance 100% of ordinary shares* Provision of short term finance 54% of ordinary shares Provision of short term finance 54% of ordinary shares Publishing of computer games 100% of ordinary shares Publishing of computer games 72% of ordinary shares Business and domestic software developer 100% of ordinary shares 2022 Annual Report and Accounts | 53 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Entities Country of incorporation Registered address Nature of the business % voting rights and shares held 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 Magic Fuel Inc (“Magic Fuel”) USA 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 5424 Sunol Blvd Ste 10 PMB 1021, Pleasanton, CA 94566-7705 Publishing activities in the field of computer games Publishing activities in the field of computer games Developing, publishing and selling electronic games 100% of ordinary shares 75% of ordinary shares 100% of ordinary shares Publishing of computer games 100% of ordinary shares Business and domestic software developer 100% of ordinary shares Game developer 100% of ordinary shares * See Note 19 for the Group’s effective economic ownership of the Satago Group. ** Nominal ownership of these companies is 87.5% due to the Oxygen Management Incentive Plan (“Oxygen MIP”). Effective economic ownership is 100% based on their Statements of Financial Position at the Reporting Date. *** The Playstack Group includes 4 associate companies incorporated in the UK which have been accounted for using the equity method. These are: • A 49% interest in PlayFinder Games Ltd • A 49% interest in Snackbox Games Ltd • A 42% interest in Military Games International Ltd (application to strike off made on 23 January 2023) • A 27% interest in Storm Chaser Games Limited (“Storm Chaser Games”) On 22 March 2022, Porge Ltd, a company 100% owned by OFGL was dissolved. Principal accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been applied consistently to all the financial periods presented. The consolidated financial statements have been prepared in accordance with European Union Endorsed International Financial Reporting Standards (IFRSs) and the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) interpretations. These statements have been prepared on a going concern basis and under the historical cost convention except for the treatment of certain financial instruments. Going concern The Group’s forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Group should be able to operate in the foreseeable future. As a consequence, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors have adopted the going concern basis in preparing these financial statements. Revenue recognition Net revenue Interest income and expense Interest income and expense for all financial instruments except for those classified as held for trading or measured or designated as at Fair Value Through Profit and Loss (“FVTPL”) are recognised in “Net revenue” as “Interest income” and “Interest, fee and publishing expenses” in the profit or loss account using the effective interest method. 54 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 The Effective Interest Rate (“EIR”) is the rate that exactly discounts estimated future cash flows of the financial instrument through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. The future cash flows are estimated taking into account all the contractual terms of the instrument. The calculation of the EIR includes all fees and points paid or received between parties to the contract that are incremental and directly attributable to the specific lending arrangement, transaction costs and all other premiums or discounts. The interest income/expense is calculated by applying the EIR to the gross carrying amount of non-credit impaired financial assets (that is, to the amortised cost of the financial asset before adjusting for any expected credit loss allowance), or to the amortised cost of financial liabilities. For credit-impaired financial assets, as defined in the financial instruments accounting policy, the interest income is calculated by applying the EIR to the amortised cost of the credit-impaired financial assets, that is, to the gross carrying amount less the allowance for Expected Credit Losses (“ECLs”). Fee income Fee income for the Group is earned from payments services fees provided by Oxygen and subscription fees from Oxygen and Satago. Payment services provided by Oxygen comprises the following elements: Early Payment Programme Services (“EPPS”) contracts Oxygen’s EPPS generate rebates (i.e. discounts on invoice value) for its clients by facilitating the early payment of supplier invoices. Oxygen’s single performance obligation is to make its intellectual property and software platform available to its clients for the duration of their contracts. Oxygen bills its clients monthly for a contractually agreed share of supplier rebates generated by their respective Early Payment Programmes during the previous month. This revenue is recognised in the month the rebates are generated. Implementation fees Oxygen Implementation fees Implementation fees are charged to some clients in establishing a client’s technological access to the EPPS and in otherwise readying a client to benefit from the Services. Establishing access to the company’s intellectual property and software platform does not amount to a distinct service as the client cannot benefit from the initial access except by the company continuing to provide access for the contract period. Where an implementation fee is charged, it is therefore a component of the aggregate transaction price of the EPPS. Accordingly, such revenue is initially deferred and then recognised in the statement of comprehensive income over the life of the related EPPS. Satago Implementation fees Implementation fees are in line with contractual agreements and relate to Lending as a Service projects. Consultancy fees Oxygen provides stand-alone advisory services to clients. Revenue is accrued as the underlying services are provided to the client. Subscription fees Insight services subscription fees The Insight Services offered by OFL provide focussed public sector procurement data and analytics on a subscription basis. Clients cover both the private sector, enabling them to improve and develop their engagement with the public sector, and public sector organisations, enabling them to make more informed procurement decisions. Subscriptions are typically received in advance and recognised over the length of the contract as access to the database is provided. Satago subscription fees These are monthly fees for access to Satago’s platform. Subscriptions are received in advance and recognised during the month the subscription relates to. 2022 Annual Report and Accounts | 55 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 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. Publishing income Publishing income for the Group is earned by companies in the Playstack Group and comprises the following elements. Publishing income is recognised at the fair value of consideration received or receivable for goods and services provided and is shown net of VAT and any other sales taxes. The fair value takes into account any trade or volume discounts and commission retained. In App Purchases (IAP) revenue IAP revenue is earned on the sale of mobile games and features within those games. It is recognised when the game or feature is sold. Advertising revenue Advertising revenue is earnings from featuring third party advertising within mobile games. It is recognised when these advertisements are featured within the games. Console revenue Console revenue is earned on the sale of video games for consoles. It is recognised when the game is sold. Brand revenue Brand revenue is when a mobile game player signs up to an advertised brand in a mobile game. Revenue is recognised when the brand has confirmed acquisition of the customer. Publishing expenses Publishing expenses are directly attributable costs, associated with the Playstack Group’s publishing income. These costs are included at their invoiced value and are net of VAT and any other sales tax. Foreign currencies The results and financial position of each Group company are expressed in Pounds Sterling, which is the functional currency of the UK based members of the Group and the presentation currency for the consolidated financial statements. Transactions in foreign currencies are translated to the Group companies’ functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in the consolidated statement of comprehensive income. In preparing the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at the exchange rate at the reporting date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, are recognised in other comprehensive income and are accumulated in the Foreign exchange reserve equity section. Property, plant and equipment All property, plant and equipment is stated at historical cost (or deemed historical cost) less accumulated depreciation and less any identified impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. 56 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight line basis at the following annual rates: Leasehold improvements – 5 years Fixtures and fittings – 3 years Computer equipment – 3 -5 years Useful economic lives and estimated residual values are reviewed annually and adjusted as appropriate. Intangible assets Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Group and the cost of the asset can be reliably measured. Intangible assets with finite lives are stated at acquisition or development cost less accumulated amortisation and less any identified impairment. The amortisation period and method is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate and are treated as changes in accounting estimates. Computer software Computer software which has been purchased by the Group from third party vendors is measured at initial cost less accumulated amortisation and less accumulated impairments. Computer software also comprises internally developed platforms and the costs directly associated with the production of these identifiable and unique software products controlled by the Group. They are probable of producing future economic benefits. They primarily include employee costs and directly attributable overheads. Internally generated intangible assets are only recognised by the Group when the recognition criteria have been met in accordance with IAS 38: Intangible Assets as follows: • • • • • expenditure can be reliably measured; the product or process is technically and commercially feasible; future economic benefits are likely to be received; intention and ability to complete the development; and view to either use or sell the asset in the future. The Group will only recognise an internally-generated asset should it meet all the above criteria. In the event of a development not meeting the criteria it will be recognised within the statement of profit or loss in the period incurred. Capitalised costs include all directly attributable costs to the development of the asset. Internally generated assets are measured at capitalised cost less accumulated amortisation less accumulated impairment losses. The internally generated asset is amortised at the point the asset is available for use or sale. The asset is amortised on a straight-line basis over the useful economic life with the remaining useful economic life and residual value being assessed annually. Any subsequent expenditure on the internally generated asset is only capitalised if the cost increases the future economic benefits of the related asset. Otherwise all additional expenditure should be recognised through the statement of profit or loss in the period it occurs. Contract assets Contract assets comprise the directly attributable costs incurred at the beginning of an Early Payment Scheme Service contract to revise a client’s existing payment systems and provide access to the Group’s software and other intellectual property. These implementation (or “set up”) costs are comprised primarily of employee costs. Amortisation is charged to the statement of comprehensive income over the estimated useful lives of intangible assets from the date they are available for use, on a straight-line basis. The amortisation basis adopted for each class of intangible asset reflects the Group’s consumption of the economic benefit from that asset. 2022 Annual Report and Accounts | 57 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Estimated useful lives The estimated useful lives of finite intangible assets are as follows: Computer software – 3 -5 years Contract assets – Life of underlying contract (typically 5 years) Goodwill Goodwill arising on acquisition represents the excess cost of a business combination over the fair values of the Group’s share of the identifiable assets and liabilities at the date of the acquisition. When part of the consideration transferred by the Group is deferred or contingent, this is valued at its acquisition date fair value, and is included in the consideration transferred in a business combination. Changes in the deferred or contingent consideration, which occur in the measurement period, are adjusted retrospectively, with corresponding adjustments to goodwill. Goodwill is not amortised but is reviewed at least annually for impairment. For the purpose of impairment testing, goodwill is allocated to each Cash Generating Unit (“CGU”). Each CGU is consistent with the Group’s primary reporting segment. Any impairment is recognised immediately through the income statement and is not subsequently reversed. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit or loss on disposal. Financial instruments Initial recognition Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are respectively added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition of financial assets and financial liabilities at FVTPL are recognised immediately in profit or loss. Financial assets Classification and reclassification of financial assets Recognised financial assets within the scope of IFRS 9 are required to be classified as subsequently measured at amortised cost, FVTOCI or FVTPL on the basis of both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are reclassified if and only if, the business model under which they are held is changed. There has been no such change in the allocation of assets to business models in the periods under review. Loans and advances Loans and advances are held within a business model whose objective is to hold those financial assets in order to collect contractual cash flows. The contractual terms of the loan agreements give rise on specified dates to cash flows that are solely payments of principal and interest or fees on the principal amount outstanding. After initial measurement, loans and advances to customers are subsequently measured at amortised cost using the Effective Interest Rate method (EIR) less impairment. Amortised cost is calculated by taking into account any fees or costs that are an integral part of the EIR. The EIR amortisation is included in interest and similar income in the statement of comprehensive income. The losses arising from impairment are recognised in the statement of comprehensive income and disclosed with any other similar losses within the line item “Net impairment losses on financial assets”. Where cash flows are significantly different from the original expectations used to determine EIR, but where this difference does not arise from a modification of the terms of the financial instrument, the Group revises its estimates of receipts and adjusts the gross carrying amount of the financial asset to reflect actual and revised estimated contractual cash flows. The Group recalculates the gross carrying amount of the financial asset as the present value of the estimated future contractual cash flows discounted at the financial instrument’s original EIR. The adjustment is recognised in statement of comprehensive income as income or expense. 58 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Trade and other receivables Trade receivables do not contain any significant financing component and accordingly are recognised initially at transaction price, and subsequently measured at cost less expected credit losses. Investments in subsidiaries Investments in subsidiaries are accounted for at cost less impairment in the Company’s financial statements. Cash and cash equivalents Cash and cash equivalents comprise cash balances and demand deposits and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Impairment The Group (and Company) recognises loss allowances for Expected Credit Losses (“ECLs”) on the following financial instruments that are not measured at FVTPL: • • • • Loans and advances; Other receivables; Trade receivables; and Intercompany receivables ECLs are measured through loss allowances calculated on the following bases: ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Group under the contract and the cash flows that the Group expects to receive arising from the weighting of future economic scenarios, discounted at the asset’s EIR within the current performing book. The Group measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar credit risk characteristics. The loss allowance is measured as the present value of the difference between the contractual cash flows and cash flows that the Group expects to receive using the asset’s original EIR, regardless of whether it is measured on an individual basis or a collective basis. A financial asset that gives rise to credit risk, is referred to (and analysed in the notes to this financial information) as being in “Stage 1” provided that since initial recognition (or since the previous reporting date) there has not been a significant increase in credit risk, nor has it has become credit impaired. For a Stage 1 asset, the loss allowance is the “12-month ECL”, that is, the ECL that results from those default events on the financial instrument that are possible within 12 months from the reporting date. A financial asset that gives rise to credit risk is referred to (and analysed in the notes to this financial information) as being in “Stage 2” if since initial recognition there has been a significant increase in credit risk but it is not credit impaired. For a Stage 2 asset, the loss allowance is the “lifetime ECL”, that is, the ECL that results from all possible default events over the life of the financial instrument. A financial asset that gives rise to credit risk is referred to (and analysed in the notes to this financial information) as being in “Stage 3” if since initial recognition it has become credit impaired. For a Stage 3 asset, the loss allowance is the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original EIR. Further, the recognition of interest income is calculated on the carrying amount net of impairment rather than the gross carrying amount as for stage 1 and stage 2 assets. If circumstances change sufficiently at subsequent reporting dates, an asset is referred to by its newly appropriate Stage and is re-analysed in the notes to the financial information. Where an asset is expected to mature in 12 months or less, the “12 month ECL” and the “lifetime ECL” have the same effective meaning and accordingly for such assets the calculated loss allowance will be the same whether such an asset is at Stage 1 or Stage 2. However, the Group monitors significant increase in credit risk for all assets so that it can accurately disclose Stage 1 and Stage 2 assets at each reporting date. Lifetime ECLs are recognised for all trade receivables using the simplified approach. 2022 Annual Report and Accounts | 59 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Significant increase in credit risk – policies and procedures for identifying Stage 2 assets The Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition in order to determine whether credit risk has increased significantly. See Note 18 for further details about how the Group assesses increases in significant credit risk. Definition of a default Critical to the determination of significant increases in credit risk (and to the determination of ECLs) is the definition of default. Default is a component of the Probability of Default (“PD”), changes in which lead to the identification of a significant increase in credit risk and PD is then a factor in the measurement of ECLs. The Group’s definition of default for this purpose is: • • • • a counterparty defaults on a payment due under a loan agreement and that payment is more than 90 days overdue, or within the core invoice finance proposition, where one or more individual finance repayments are beyond 90 days overdue, management judgement is applied in considering default status of the client. the collateral that secures, all or in part, the loan agreement has been sold or is otherwise not available for sale and the proceeds have not been paid to the lending company; or a counterparty commits an event of default under the terms and conditions of the loan agreement which leads the lending company to believe that the borrower’s ability to meet its credit obligations to the lending company is in doubt. The definition of default is similarly critical in the determination of whether an asset is credit-impaired (as explained below). Credit-impaired financial assets – policies and procedures for identifying Stage 3 assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. IFRS 9 states that evidence of credit-impairment includes observable data about the following events: • • • Significant financial difficulty of the borrower; A breach of contract such as a default (as defined above) or past due event, or The Group, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession that the Group would not otherwise consider. The Group assesses whether debt instruments that are financial assets measured at amortised cost or at FVTOCI are credit-impaired at each reporting date. When assessing whether there is evidence of credit- impairment, the Group takes into account both qualitative and quantitative indicators relating to both the borrower and to the asset. The information assessed depends on the borrower and the type of the asset. It may not be possible to identify a single discrete event – instead, the combined effect of several events may have caused financial assets to become credit-impaired. See Note 18 for further details about how the Group identifies credit-impaired assets. Presentation of allowance for ECL in the statement of financial position Loss allowances for ECL are presented in the statement of financial position as follows: • • • For financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; For loan commitments: as a provision; and For debt instruments measured at FVTOCI: no loss allowance is recognised in the statement of financial position as the carrying amount is at fair value. However, the loss allowance is included as part of the revaluation amount in the investment revaluation reserve. Modification of financial assets A modification of a financial asset occurs when the contractual terms governing a financial asset are renegotiated without the original contract being replaced and derecognised and: The gross carrying amount of the asset is recalculated and a modification gain or loss is recognised in profit or loss; Any fees charged are added to the asset and amortised over the new expected life of the asset; and The asset is individually assessed to determine whether there has been a significant increase in credit risk. • • • 60 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the asset have expired. The Group also derecognises the assets if it has both transferred the asset and the transfer qualifies for derecognition. A transfer only qualifies for derecognition if either • • The Group has transferred substantially all the risks and rewards of the asset; or The Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. Write offs Loans and advances are written off when the Group has no reasonable expectation of recovering the financial asset (either in its entirety or a portion of it). This is the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. A write-off constitutes a derecognition event. The Group may apply enforcement activities to financial assets written off. Recoveries resulting from the Group’s enforcement activities will result in impairment gains. Financial liabilities Financial liabilities and equity Debt and equity instruments that are issued are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group or a non-derivative contract that will or may be settled in a variable number of the Group’s own equity instruments, or a derivative contract over own equity that will or may be settled other than by the exchange of a fixed amount of cash (or another financial asset) for a fixed number of the Group’s own equity instruments. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised as at the proceeds received, net of direct issue costs. Distributions on equity instruments are recognised directly in equity. Financial liabilities Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Financial liabilities at Fair Value through Profit or Loss Financial liabilities at FVTPL may include financial liabilities held for trading. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. During the period under review the Group has held no financial liabilities for trading, nor designated any financial liabilities upon initial recognition as at fair value through profit or loss. Other financial liabilities Interest bearing borrowings are measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in “Interest and fee expenses” in the profit and loss account. Derecognition of financial liabilities The Group derecognises financial liabilities when and only when, the Group’s obligations are discharged, cancelled or they expire. 2022 Annual Report and Accounts | 61 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Impairment of non-financial assets The carrying amounts of the entity’s non-financial assets, other than goodwill and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the CGU). Contract assets are reviewed for impairment based on the performance of the underlying contract. Goodwill is tested annually for impairment in accordance with IFRS. The goodwill acquired in a business combination, for the purpose of impairment testing is allocated to CGU that are expected to benefit from the synergies of the combination. For the purpose of goodwill impairment testing, if goodwill cannot be allocated to individual CGUs or groups of CGUs on a non-arbitrary basis, the impairment of goodwill is determined using the recoverable amount of the acquired entity in its entirety, or if the acquired entity has been integrated then the entire group of entities into which it has been integrated. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of other assets in the unit (or group of units) on a pro rata basis. An impairment loss is reversed if and only if the reasons for the impairment have ceased to apply. An impairment loss recognised for goodwill is not reversed. Impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Current and deferred income tax Income tax on the result for the period comprises current and deferred income tax. Income tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous periods. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Employee benefits – pension costs A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have a legal or constructive obligation to pay further amounts. Contributions to defined contribution schemes are charged to the statement of comprehensive income as they become payable in accordance with the rules of the scheme. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position. 62 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Merger reserve Prior to 29 December 2017, the entities within the Group were held by Arrowgrass Master Fund Limited. On 29 December 2017, these entities were acquired by TruFin plc via TruFin Holdings Limited. The consideration provided to Arrowgrass for the companies acquired was in exchange for shares of TruFin plc based on the fair value of the underlying companies. Upon consolidation of the Group, the difference between the book value of the entities and the amount of the consideration paid was accounted through a merger reserve, in accordance with relevant accounting standards relating to businesses under common control. Investments in associates Associates are entities in which the Group has between 20% and 50% of the voting rights, or is otherwise able to exercise significant influence, but which it does not control or jointly control. Investments in associates are accounted for under the equity method and are initially recognised at costs, including goodwill. Subsequent changes in the carrying value reflect the post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of its associates profits or losses is recognised in the consolidated income statement. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group is obliged to make further payments to, or on behalf of the associate. Segmental reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) and whose operating results are regularly reviewed by the Board of Directors in order to make decisions about resources to be allocated to that component and assess its performance and for which discrete financial information is available. For the purposes of the financial statements, the Directors consider the Group’s operations to be made up of four operating segments: the provision of short term finance, payment services, publishing and other operations. The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole. Further details are provided in Note 4. Share based payments Where the Group engages in share-based payment transactions in respect of services received from certain of its employees, these are accounted for as equity-settled share-based payments in accordance with IFRS 2 ‘Share-based payments’. The equity is in the form of ordinary shares. The grant date fair value of a share-based payment transaction is recognised as an employee expense, with a corresponding increase in equity over the period that the employees become unconditionally entitled to the awards. In the absence of market prices, the fair value of the equity at the date of the grant is estimated using an appropriate valuation technique. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related services and non-market vesting conditions are expected to be met such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with market performance conditions the grant date fair value of the award is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Refer to Note 6 for the amounts disclosed. Leases At the inception of a contract, the Group assesses if the contract contains a lease. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Reassessment is only required when the terms and conditions of the contract are changed. Right-of-use assets The Group recognises a right-of-use asset and lease liability at the date which the underlying asset is available for use. Right-of-use assets are measured at cost which comprises the initial measurement of lease liabilities adjusted for any lease payments made at or before the commencement date and lease incentives received. Any initial direct costs that would not have been incurred if the lease had not been obtained are added to the carrying amount of the right-of-use assets. 2022 Annual Report and Accounts | 63 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 These right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Right-of-use assets (except for those which meet the definition of an investment property) are presented within “Property, plant and equipment”. Right of use assets which meet the definition of property, plant and equipment are presented with and accounted for in accordance the this policy. Lease liabilities The initial measurement of a lease liability is measured at the present value of the lease payments discounted using the interest rate implicit in the lease, if the rate can be readily determined. If that rate cannot be readily determined, the borrower shall use its incremental borrowing rate. Lease liabilities are measured at amortised cost using the effective interest method. Lease liabilities shall be remeasured when: • • • There is a change in future lease payments arising from changes in an index or rate; There is a change in the Group’s assessment of whether it will exercise an extension option; or There is a modification in the scope or the consideration of the lease that was not part of the original term. Lease liabilities are remeasured with a corresponding adjustment to the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Short term and low value leases The Group has elected to not recognise right-of-use assets and lease liabilities for short-term leases that have lease terms of 12 months or less and leases of low value leases. Lease payments relating to these leases are expensed to profit or loss on a straight-line basis over the lease term. Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. These grants are deducted from the expense that the grant is related to. Critical accounting judgements and key sources of estimation uncertainty 2. 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 64 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 under that contract and accordingly the Group considers that these costs meet the applicable criteria for recognition as contract assets. The amount capitalised is disclosed in Note 10. • • Deferred tax asset: There is inherent uncertainty in forecasting beyond the immediate future and significant judgement is required to estimate whether future taxable profits are probable in order to utilise the carried forward tax losses. Companies in the Group have carried forward losses which will be utilised against future taxable profits. However, a deferred tax asset has not been recognised for these companies, except for Vertus Capital Limited as there is uncertainty surrounding the timing of when these losses will be used. Refer to Note 9 for more information on the deferred tax asset. The accounts of the trustee (the “EBT Trustee”) of the Company’s Employee Benefit Trust (“EBT”) have not been consolidated as it is the Directors’ opinion that the Company does not have control over the EBT. The EBT is a discretionary trust, which means that the EBT Trustee has discretion how to act, provided that the action taken by the EBT Trustee is considered by the EBT Trustee to be in the interest of one of more EBT beneficiaries (being employees and former employees (and certain of their relatives) of the Company and its subsidiaries. Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Expected credit losses • Where an asset has a maturity of 12 months or less, the “12 month ECL” and the “lifetime ECL” have the same effective meaning and accordingly for such assets the calculated loss allowance will be the same whether such an asset is at stage 1 or stage 2. • • • The Probability of Default (“PD”) is an estimate of the likelihood of default over a given time horizon and is a key input to the ECL calculation. The Group primarily uses credit scores from credit reference agencies to calculate the PD for loans and advances. The score is a 12-month predictor of credit failure and, in the absence of internally generated loss history, the Group believes that it provides the best proxy for the credit quality of the loan portfolio. Exposure At Default (“EAD”) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities and accrued interest from missed payments. Loss Given Default (“LGD”) is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, in particular taking into account wholesale collateral values and certain buy back options. Note 18 presents the carrying amounts of the Expected Credit Losses in further detail. Impairment of Intangibles The Group is required to test, whether intangible and tangible assets have suffered any impairment based on the recoverable amount of its CGUs, when there are indicators for impairment. Determining whether an impairment has occurred requires an estimation of the value in use of the CGU to which these assets are allocated. Key sources of estimation uncertainty in the value in use calculation include the estimation of future cash flows of the CGU affected by expected changes in underlying revenues and direct costs, and administration costs through the forecast period, the long-term growth rates and a suitable discount rate to apply to the aforementioned cash flows in order to calculate the net present value. Further information regarding the assumptions used in the calculations have been provided in Note 10. Measurement of fair values of level 3 instruments In estimating the fair value of a financial asset or liability, the Group uses market observable data to the extent that it is available. Where such level 1 inputs are not available, the Group uses valuation models to estimate the fair value of its financial instruments. 2022 Annual Report and Accounts | 65 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 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 Company Intercompany interest income Intercompany fee income Other interest income Gross revenue 2022 £’000 2,619 2,619 3,335 597 1,644 1,607 7,183 342 453 5,521 1 6,317 16,119 2022 £’000 2,166 118 9 2021 £’000 1,681 1,681 2,536 436 70 1,288 4,330 428 378 6,285 13 7,104 13,115 2021 £’000 2,008 118 – 2,293 2,126 Segmental reporting 4. The results of the Group are broken down into segments based on the products and services from which it derives its revenue: Short term finance Provision of distribution finance products and invoice discounting. For results during the reporting period, this corresponds to the results of Satago, Vertus and AltLending. Payment services Provision of Early Payment Programme Services. For results during the reporting period, this corresponds to the results of Oxygen. Publishing Publishing of video games. For results during the reporting period, this corresponds to the results of the Playstack Group. Other Revenue and costs arising from investment activities. For results during the reporting period, this corresponds to the results of TSL, THL and TruFin plc. 66 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 The results of each segment, prepared using accounting policies consistent with those of the Group as a whole, are as follows: Short term Payment finance services Publishing Year ended 31 December 2022 £’000 £’000 £’000 Gross revenue 4,469 5,311 6,330 Cost of sales (1,153) (889) (3,033) Net revenue 3,316 4,422 3,297 Adjusted loss before tax* (3,879) (220) (1,569) Loss before tax (3,879) (220) (1,569) Taxation 218 395 601 Other £’000 9 – 9 (2,352) (2,352) – Total £’000 16,119 (5,075) 11,044 (8,020) (8,020) 1,214 (Loss)/profit for the year (3,661) 175 (968) (2,352) (6,806) Total assets 34,200 8,258 20,407 Total liabilities (19,747) (1,792) (2,911) Net assets 14,453 6,466 17,496 * adjusted loss before tax excludes share-based payment expense Short term Payment finance services Publishing Year ended 31 December 2021 £’000 £’000 £’000 Gross revenue 1,878 4,133 7,104 Cost of sales (832) (873) (4,509) Net revenue 1,046 3,260 2,595 Adjusted loss before tax* (3,877) (548) (1,439) Loss before tax (3,877) (548) (1,439) Taxation 367 175 444 2,627 (938) 1,689 Other £’000 – – – (2,488) (2,558) – Loss for the year (3,510) (373) (995) (2,558) Total assets 24,607 8,331 16,774 Total liabilities (13,341) (1,747) (2,184) Net assets 11,266 6,584 14,590 1,016 (1,005) 11 65,492 (25,388) 40,104 Total £’000 13,115 (6,214) 6,901 (8,352) (8,422) 986 (7,436) 50,728 (18,277) 32,451 * adjusted loss before tax excludes share-based payment expense The majority of the Group’s activities (98% of revenues) are within the UK, with 2% earned in USA and 0% in Europe. 5. Staff costs Analysis of staff costs: Group Company 2022 2021 £’000 £’000 Wages and salaries 10,365 9,011 Consulting costs 379 395 Social security costs 1,411 1,409 Pension costs arising on defined contribution schemes 454 428 Share based payment – 70 Government grants – (28) 12,609 11,285 2022 £’000 1,384 – 251 38 – – 1,673 2021 £’000 1,440 19 355 27 70 – 1,911 Consulting costs are recognised within staff costs where the work performed would otherwise have been performed by employees. Consulting costs arising from the performance of other services are included within other operating expenses. 2022 Annual Report and Accounts | 67 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Average monthly number of persons (including Executive Directors) employed: Management Finance Sales & marketing Operations Technology Directors’ emoluments 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: Pension Salary Bonus and Benefits £’000 £’000 £’000 Executive Directors: J v d Bergh 256 220 9 256 220 9 Non-executive Directors: S Baldwin 100 – – P Judd 70 – – P Dentskevich 60 – – Anders Wilhelmsen – – – 230 – – 2022 Number 2021 Number 17 10 30 78 43 178 16 7 23 36 54 136 2022 Number 2021 Number – – 2022 Total £’000 485 485 100 70 60 – 230 2021 Total £’000 465 465 100 70 50 – 220 Key management The Directors consider that key management personnel include the Executive Director of TruFin plc. This individual has the authority and responsibility for planning, directing and controlling the activities of the Group. Employee share-based payment transactions 6. 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 68 | £’000 2022 2021 £’000 – – – – – 59 11 – – 70 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Performance Share Plan and Joint Share Ownership Plan Founder Award (“Found Award”) The final 25% of Founder Awards held by James van den Bergh vested on 22 February 2022 when the share price was £0.81. As a result, 395,558 shares subject to the Join Share Ownership Plan became fully owned by EBT and James’ nil cost option under the Performance Share Plan vested in respect of the same number of shares. Performance Share Plan Market Value Award (“PSP Market Value Award”) On 21 February 2018, options to acquire 4,868,420 shares were granted to the senior management team. The vesting of this award is based on market-based performance conditions. The vesting of these awards is subject to the holder remaining an employee of the Company and the Company’s share price achieving five distinct milestones - vesting at 20% each milestone. The exercise price of the awards at the time of grant was £1.90 per share. A Monte Carlo simulation was used to determine the fair value of these options. The model used an expected volatility of 10% and a risk free rate of 1.3%. In order to reflect the impact of the demerger, the PSP Market Value Award was split into two: • • Part of the award remained as an option in respect of TruFin shares (“TruFin Market Value Award”) Part of the award became an award in respect of DFC shares (“DFC market Value Award”) The TruFin Market Value Award is on the same terms as the original PSP Market Value Award except that: • • • The exercise price was adjusted to £0.85, and the share price milestones were adjusted to reflect the demerger The exercise price was further adjusted to £0.80 and the share price milestones were further adjusted, to reflect the return of value to shareholders in June 2019 The exercise price was further adjusted to £0.71, and the share price milestones were further adjusted to reflect the return of value to shareholders in December 2019 The modification has not resulted in a change in the valuation of the award and this continues to be recognised over the remainder of the original vesting period. Performance Share Plan 2018 Award (“PSP 2018 Award”) The unvested performance conditions of this award had not been met at the end of the vesting period. Performance Share Plan 2019 Award (“PSP 2019 Award”) The performance conditions of this award had not been met at the end of the vesting period. Details of share based awards during the year: JSOP Founder Award* Type of instrument granted Shares (#) PSP Founder Award* Options (#) PSP Market Value Options (#) Outstanding at 1 January 2022 395,558 Granted during the year – Vested during the year (395,558) Exercised during the year – 1,566,255 – – – 4,868,420 – – – Outstanding at 31 December 2022 – 1,566,255 4,868,420 Exercisable at 31 December 2022 1,566,255 – * The JSOP Founder Awards and PSP Founder Awards will together deliver, in aggregate, a maximum of 3,407,895 TruFin shares. 2022 Annual Report and Accounts | 69 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Type of instrument granted Outstanding at 1 January 2022 Granted during the year Vested during the year Exercised during the year Cancelled during the year Outstanding at 31 December 2022 Exercisable at 31 December 2022 No options expired during the year. PSP 2018 Options (#) PSP 2019 Options (#) 263,158 – – – – 320,000 – – – – 263,158 320,000 – – The weighted average remaining contractual life for the share options outstanding as at 31 December 2022 was 5.21 years (2021: 6.21 years). 7. Net impairment loss on financial assets At 1 January Charge for impairment loss Amounts written off in the year Amounts recovered in the year At 31 December 2022 £’000 2021 £’000 4 50 – – 54 10 (10) 8 (4) 4 At 31 December 2022, the Group had an impairment balance of £54,000 which was allocated against loans and advances. At 31 December 2021, all of the impairment balance was allocated against loans and advances. The net impairment charge on financial assets during the year ended 31 December 2022 all related to loans and advances. The net impairment charge on financial assets during the year ended 31 December 2021 all related to loans and advances. Loss before income tax 8. 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 70 | 2022 £’000 108 2,377 12,609 2022 £’000 82 98 180 14 14 2021 £’000 96 1,571 11,285 2021 £’000 45 84 129 13 13 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Taxation 9. Analysis of tax charge recognised in the period Current tax credit Deferred tax charge/(credit) Total tax credit 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% (2021: 19%) 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 Total tax charge Company Loss before tax Loss before tax multiplied by the standard rate of corporation tax in the UK of 19% (2021: 19%) Tax effect of: Expenses not deductible Other short term timing differences Brought forward losses utilised Deferred tax not recognised Total tax charge 2022 £’000 (1,267) 53 (1,214) 2022 £’000 (8,020) (1,524) 15 253 (318) 1 (1,274) 1,633 (1,214) 2022 £’000 (42) (8) 24 (1) (15) – – 2021 £’000 (726) (260) (986) 2021 £’000 (8,422) (1,600) (223) 395 (187) (5) (733) 1,367 (986) 2021 £’000 (409) (78) 32 – – 46 – In the Finance Bill 2022, the UK government announced that legislation would be proposed to increase the main rate of corporation tax to 25% from 1 April 2023, and this was substantively enacted on 24 May 2022. The deferred tax assets and liabilities at 31 December 2022 have been based on the rates substantively enacted at the reporting date. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. Deferred tax asset Group Balance at start of the year (Charge)/credit to the statement of comprehensive income Balance at end of the year Comprised of: Losses Total deferred tax asset 2022 £’000 2021 £’000 303 (53) 250 250 250 43 260 303 303 303 2022 Annual Report and Accounts | 71 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 A deferred tax asset from losses in Vertus Capital Limited has been recognised, and has been used in the year against profits in Vertus Capital SPV 1 during the year. Unutilised tax losses in the remainder of the Group as at the reporting date were £83,102,000 (2021: £77,124,000). Intangible assets 10. Software Separately licenses and identifiable Client similar intangible contracts assets Assets Group £’000 £’000 £’000 Cost At 1 January 2022 5,490 2,579 1,642 Additions 905 2,254 – On Acquisition – 3 1,595 Disposals – (75) – Exchange differences 4 12 – Goodwill £’000 Total £’000 15,746 – 823 – – 25,457 3,159 2,421 (75) 16 At 31 December 2022 6,399 4,773 3,237 16,569 30,978 Amortisation At 1 January 2022 (1,607) (1,181) (1,070) Charge (889) (977) (511) Disposals – 75 – Exchange differences – 1 – At 31 December 2022 (2,496) (2,082) (1,581) Accumulated impairment losses At 1 January 2022 (408) – – At 31 December 2022 (408) – – Net book value At 31 December 2022 3,495 2,691 1,656 At 31 December 2021 3,475 1,398 572 – – – – – – – 16,569 15,746 (3,858) (2,377) 75 1 (6,159) (408) (408) 24,411 21,191 72 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Software Separately licenses and identifiable Client similar intangible contracts assets Assets Group £’000 £’000 £’000 Cost At 1 January 2021 4,689 1,834 1,642 Additions 1,056 757 – Disposals (256) – – Exchange differences 1 (12) – Goodwill £’000 Total £’000 15,796 (50) – – 23,961 1,763 (256) (11) At 31 December 2021 5,490 2,579 1,642 15,746 25,457 Amortisation At 1 January 2021 (956) (814) (742) Charge (873) (370) (328) Disposals 222 – – Exchange differences 3 At 31 December 2021 (1,607) (1,181) (1,070) Accumulated impairment losses At 1 January 2021 (408) – – At 31 December 2021 (408) – – Net book value At 31 December 2021 3,475 1,398 572 At 31 December 2020 3,325 1,020 900 – – – – – – 15,746 15,796 (2,512) (1,571) 222 3 (3,858) (408) (408) 21,191 21,041 The Company had no intangibles assets at the year end. Client contracts comprise the directly attributable costs incurred at the beginning of an Early Payment Scheme Service contract to revise a client’s existing payment systems and provide access to the Group’s software and other intellectual property. These implementation costs are comprised primarily of employee costs. The useful economic life for each individual asset is deemed to be the term of the underlying Client Contract (generally 5 years) which has been deemed appropriate and for impairment review purposes, projected cash flows have been discounted over this period. The amortisation charge is recognised in fee expenses within the statement of comprehensive income, as these costs are incurred directly through activities which generate fee income. The Group performed an impairment review at 31 December 2022 and there was no impairment in relation to underperforming contracts. Software, licenses and similar assets comprises separately acquired software, as well as costs directly attributable to internally developed platforms across the Group. These directly attributable costs are associated with the production of identifiable and unique software products controlled by the Group and are probable of producing future economic benefits. They primarily include employee costs and directly attributable overheads. A useful economic life of 3 to 5 years has been deemed appropriate and for impairment review purposes projected cash flows have been discounted over this period. The amortisation charge is recognised in depreciation and amortisation on non-financial assets within the statement of comprehensive income. The Group performed an impairment review at 31 December 2022 and concluded no impairment was required. The ‘Software, licenses and similar assets’ net book value balance related to internally generated intangible assets at 31 December 2022 was £2,691,000 (2021: £1,398,000 ). This consists of cost of £4,773,000 (2021: £2,579,000) and accumulated amortisation of £2,082,000 (2021: £1,181,000 ). During the year there were additions of £2,254,000 (2021: £757,000) and amortisation of £977,000 (2021: £370,000). 2022 Annual Report and Accounts | 73 FINANCIAL STATEMENTS FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Goodwill and “Separately identifiable intangible assets” arise from acquisitions made by the Group. Porge (now Insight Services within OFL) Porge was acquired by OFGL in August 2018 and goodwill of £2,759,000 that arose from this acquisition was included within the payments services segment of the Group. Following the acquisition, separately identifiable intangible assets of £1,387,000 primarily relating to the value of the contracts in the business at acquisition were recognised. These are being amortised over 5 years resulting in an amortisation charge of £277,000 (2021: £277,000) during the year. Net Book value of these assets at 31 December 2022 was £162,000 (2021: £439,000). Goodwill related to this transaction excluding these assets at 31 December 2022 was £1,372,000 (2021: £1,372,000). On 31 August 2020, OFL purchased the Trade and Assets of Porge. The purchase price was set at the Net book value of the assets acquired at the time of the transaction. Vertus In July 2019, the Group converted into ordinary shares its existing convertible loan with Vertus Capital in full satisfaction and discharge of the loan. This, together with a further cash payment, gave the Group 51% ownership of Vertus Capital and Vertus SPV 1. Goodwill of £1,714,000 arose from this transaction and has been included within the short term finance segment of the business. Separately identifiable intangible assets of £255,000 primarily related to the value of existing third party relationships on acquisition have been identified. These are being amortised over 5 years and the amortisation charge for the year was £51,000 (2021: £51,000). Net Book value of these assets at 31 December 2022 was £81,000 (2021: £132,000). Goodwill related to this transaction excluding these assets at 31 December 2022 was £1,408,000 (2021: £1,408,000). Playstack In September 2019, the Group converted into ordinary shares its existing convertible loans with Playstack Ltd in full satisfaction and discharge of the loans. This gave the Group ownership of Playstack Ltd and the other companies within the Playstack Group. Goodwill of £12,965,000 arose from this transaction and has been included within the publishing segment of the business. Magic Fuel On 6 June 2022, the Group acquired a 100% equity interest in Magic Fuel Inc (“Magic Fuel”). Goodwill of £2,417,000 arose from this transaction and was included within the publishing segment of the business. Following the acquisition , separately identifiable intangible assets of £1,595,000 relating to the Intellectual Property of the Games in development by Magic Fuel were recognised. These are being amortised over 5 years resulting in an amortisation charge of £181,000 during the year. Further details of the acquisition have been included in Note 20. Goodwill related to this transaction excluding these assets at 31 December 2022 was £823,000 (2021: £nil). Impairment testing of intangibles An impairment review of goodwill was carried out at the year end. The insight services segment of OFL was valued using the discounted cash flow methodology. Its net earnings were forecasted to 2027, a discount rate of 10% was used and terminal growth rate of 2%. This valuation was greater than the amount of CGU and therefore the goodwill is not deemed to be impaired. Vertus was valued using the discounted cash flow methodology. The net earnings of Vertus were forecasted to 2027, a discount rate of 15% was used and terminal growth rate of 3%. The valuation of Vertus was greater than the amount of goodwill and therefore the goodwill is not deemed to be impaired. Playstack was valued using the discounted cash flow methodology. The net earnings of Playstack were forecasted to 2027, a discount rate of 20% was used and terminal growth rate of 3%. Revenue growth was a key assumption and was based on Playstack’s pipeline of games over the forecast period. This factors in a number of key projects with platforms and streaming partners. In some instances, revenue projections have been based on amounts outlined in agreed contracts in place with customers, whilst others have been based on progressive discussions with customers and historic sales for games of a similar nature. The valuation of Playstack was greater than the amount of goodwill and therefore the goodwill is not deemed to be impaired. 74 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Magic Fuel was valued using the discounted cash flow methodology. It’s net earnings along with revenues earned in the rest of the group related to this acquisition were forecasted to 2027, a discount rate of 20% was used and a terminal growth rate of 3%. The valuation of this CGU was greater than the value of goodwill and so was deemed not be impaired. The impairment review of Playstack is most sensitive to a change in the planned revenue growth. A 48% reduction in this growth rate could give rise to an impairment charge. No other reasonable change in the other assumptions set out in this note would result currently in an impairment charge. 11. Property, plant and equipment Group Cost At 1 January 2022 Additions Disposals At 31 December 2022 Depreciation At 1 January 2022 Charge Disposals At 31 December 2022 Net book value At 31 December 2022 At 31 December 2021 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 53 86 – 139 (44) (16) – (60) 79 9 78 27 (9) 96 (44) (26) 9 (62) 34 34 429 276 (429) 276 (407) (66) 429 (44) 232 22 560 389 (438) 511 (495) (108) 438 (166) 345 65 Fixtures & fittings £’000 Computer equipment £’000 Right-of-Use Asset £’000 Total £’000 52 2 – (1) 53 (36) (8) – (44) 9 16 60 22 (4) – 78 (26) (20) 2 (44) 34 34 429 – – – 429 (339) (68) – (407) 22 90 541 24 (4) (1) 560 (401) (96) 2 (495) 65 140 2022 Annual Report and Accounts | 75 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Computer equipment £’000 Right-of-use asset £’000 Total £’000 3 6 – 9 (3) (2) (5) 4 – 167 – (167) – (167) – 167 – – – 170 6 (167) 9 (170) (2) 167 (5) 4 – Computer equipment £’000 Right-of-use asset £’000 Total £’000 3 – 3 (3) – (3) – – 167 – 167 (167) – (167) – – 170 – 170 (170) – (170) – – £’000 30,189 30,189 Company Cost At 1 January 2022 Additions Disposals At 31 December 2022 Depreciation At 1 January 2022 Charge Disposals At 31 December 2022 Net book value At 31 December 2022 At 31 December 2021 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 The Right of use assets in the Group and Company relates to leases for office buildings. 12. Company Investment in subsidiaries Balance at 1 January 2022 and 31 December 2022 Balance at 1 January 2021 and 31 December 2021 76 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 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 14. Trade and other receivables Trade and other receivables Prepayments Accrued Income VAT Other debtors Amounts due from Group Undertakings 2022 £’000 24,215 (54) 2021 £’000 16,137 (4) 24,161 16,133 2022 £’000 23,875 129 77 41 39 2021 £’000 16,062 32 10 28 1 24,161 16,133 Group Company 2022 £’000 2,149 455 890 – 2,554 – 2021 £’000 2,585 467 385 – 1,988 – 6,048 5,425 2022 £’000 2021 £’000 – 44 – 11 – 83 138 – 52 – 33 5 54 144 Trade receivables above are stated net of a loss allowance of £nil (2021: £nil). All receivables are due within one year. The aging of trade receivables is analysed as follows: Not yet due Past due: 0–30 days Past due: 31–60 days Past due: 61–90 days Past due: more than 91 days Group Company 2022 £’000 1,960 117 6 9 57 2,149 2021 £’000 2,182 96 88 13 206 2,585 2022 £’000 2021 £’000 – – – – – – – – – – – – 2022 Annual Report and Accounts | 77 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 15. Share capital Group and Company 94,182,943 shares at £0.91 per share Share Capital £’000 Total £’000 85,706 85,706 On 12 April 2022, the Company issued 13,360,739 ordinary shares through a Placing and an Open Offer. These were issued at £0.75 per share, raising gross proceeds of £10,021,000. This was a discount to par value of £2,138,000, which has been included in Other Reserves in the Statement of Changes of Equity. All ordinary shares carry equal entitlements to any distributions by the Company. No dividends were proposed by the Directors for the year ended 31 December 2022. 16. Borrowings Group Loans due within one year Loans due in over one year Movements in borrowings during the year The below table identifies the movements in borrowings during the year. 2022 £’000 1,783 16,764 18,547 Group Balance at 1 January 2022 Funding drawdown Interest expense Fee amortisation Repayments Interest paid Exchange differences Balance at 31 December 2022 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 78 | 2021 £’000 1,634 11,351 12,985 £’000 12,985 8,707 852 110 (3,337) (777) 7 18,547 £’000 10,711 5,725 528 (211) 141 (3,371) (506) (13) (19) 12,985 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 The primary borrowings of the Group are comprised of the following: • • • A 24-month revolving facility agreement with a 12-month term-out period, maturing in September 2024. Interest is payable monthly with the principal balance rolled over monthly, subject to ongoing compliance with the agreement. This facility is secured by a debenture over all assets of Vertus Capital. Unsecured interest bearing facility due in 2028, with interest payable quarterly. A revolving credit facility under which notice is given by either the lender (3 months) or borrower (6 months). The facility is secured by a fixed and floating charge over Satago SPV1 and interest is payable monthly. The Company had no borrowings during the period or at year end. 17. Trade and other payables Trade payables Accruals Other payables Corporation tax Other taxation and social security VAT Group Company 2022 £’000 529 3,867 1,636 – 603 206 2021 £’000 380 3,949 103 9 706 145 6,841 5,292 2022 £’000 28 622 – – 284 – 934 2021 £’000 5 670 – – 353 – 1,028 Financial instruments 18. 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. 2022 Annual Report and Accounts | 79 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Analysis of financial instruments by valuation model There are no financial assets or liabilities included in the statement of financial position at fair value. 31 December 2022 Financial assets and financial liabilities included in the statement of financial position that are not measured at fair value: Carrying amount £’000 Fair value £’000 Level 1 £’000 Level 2 £’000 Level 3 £’000 24,161 2,149 3,444 10,273 24,161 2,149 3,444 10,273 40,027 40,027 18,547 6,392 18,547 6,392 24,939 24,939 – – – 10,273 10,273 – – – – – – – – – – – 24,161 2,149 3,444 – 29,754 18,547 6,392 24,939 Carrying amount £’000 Fair value £’000 Level 1 £’000 Level 2 £’000 Level 3 £’000 16,133 2,585 2,373 7,608 16,133 2,585 2,373 7,608 28,699 28,699 12,985 4,672 17,657 12,985 4,672 17,657 – – – 7,608 7,608 – – – – – – – – – – – 16,133 2,585 2,373 – 21,091 12,985 4,672 17,657 Group Financial assets not measured at fair value Loans and advances Trade receivables Other receivables Cash and cash equivalents Financial liabilities not measured at fair value Borrowings Trade, other payables and accruals 31 December 2021 Group Financial assets not measured at fair value Loans and advances Trade receivables Other receivables Cash and cash equivalents Financial liabilities not measured at fair value Borrowings Trade, other payables and accruals 80 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 31 December 2022 Company Financial assets not measured at fair value Carrying amount £’000 Fair value £’000 Level 1 £’000 Level 2 £’000 Level 3 £’000 Amounts owed by group undertakings 54,835 54,835 Other receivables Cash and cash equivalents Financial liabilities not measured at fair value Trade, other payables and accruals 31 December 2021 Company Financial assets not measured at fair value Amounts owed by group undertakings Other receivables Cash and cash equivalents Financial liabilities not measured at fair value Trade, other payables and accruals 94 2,260 57,189 934 934 94 2,260 57,189 934 934 – – 2,260 2,260 – – – – – – – – 54,835 94 – 54,929 934 934 Carrying amount £’000 Fair value £’000 Level 1 £’000 Level 2 £’000 Level 3 £’000 46,919 46,919 92 786 92 786 47,797 47,797 1,028 1,028 1,028 1,028 – – 786 786 – – – – – – – – 46,919 92 – 47,011 1,028 1,028 Fair values for level 3 assets and liabilities were calculated using a discounted cash flow model and the Directors consider that the carrying amounts of financial assets and liabilities recorded at amortised cost in the financial statements approximate to their fair values. Loans and advances Due to the short-term nature of loans and advances and/or expected credit losses recognised, their carrying value is considered to be approximately equal to their fair value. Trade and other receivables, borrowings, trade and other payables, and accruals These represent short term receivables and payables and as such their carrying value is considered to be equal to their fair value. Financial risk management The Group’s activities and the existence of the above financial instruments expose it to a variety of financial risks. The Board of Directors has overall responsibility for the determination of the Group’s risk management objectives and policies. The overall objective of the Board of Directors is to set policies that seek to reduce ongoing risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. The Group is exposed to the following financial risks: • • Credit risk Liquidity risk • Market risk • Interest rate risk Further details regarding these policies are set out below. 2022 Annual Report and Accounts | 81 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Credit risk Credit risk is the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to the Group. One of the Group’s main income generating activities is lending to customers and therefore credit risk is a principal risk. Credit risk mainly arises from loans and advances. The Group considers all elements of credit risk exposure such as counterparty default risk, geographical risk and sector risk for risk management purposes. Credit risk management The credit committees within the wider Group are responsible for managing the credit risk by: • • • • • • • Ensuring that it has appropriate credit risk practices, including an effective system of internal control; Identifying, assessing and measuring credit risks across the Group from an individual instrument to a portfolio level; Creating credit policies to protect the Group against the identified risks including the requirements to obtain collateral from borrowers, to perform robust ongoing credit assessment of borrowers and to continually monitor exposures against internal risk limits; Limiting concentrations of exposure by type of asset, counterparty, industry, credit rating, geographical location; Establishing a robust control framework regarding the authorisation structure for the approval and renewal of credit facilities; Developing and maintaining the risk grading to categorise exposures according to the degree of risk of default. Risk grades are subject to regular reviews; and Developing and maintaining the processes for measuring Expected Credit Loss (ECL) including monitoring of credit risk, incorporation of forward-looking information and the method used to measure ECL. Significant increase in credit risk The Group continuously monitors all assets subject to Expected Credit Loss as to whether there has been a significant increase in credit risk since initial recognition, either through a significant increase in Probability of Default (“PD”) or in Loss Given Default (“LGD”). The following is based on the procedures adopted by the Group: Granting of credit The Business Development Team prepare a Risk Summary which sets out the rationale and the pricing for the proposed loan facility and confirms that it meets the Group’s product risk and pricing policies. The Application will include the proposed counterparty’s latest financial information and any other relevant information but as a minimum: • • • • • • • • Details of the limit requirement e.g. product, amount, tenor, repayment plan etc.; Facility purpose or reason for increase; Counterparty details, background, management, financials and ratios (actuals and forecast); Key risks and mitigants for the application; Conditions, covenants & information (and monitoring proposals) and security (including comments on valuation); Pricing; Confirmation that the proposed exposure falls within risk appetite; and Clear indication where the application falls outside of risk appetite. The Credit Risk Department will analyse the financial information, obtain reports from credit reference agencies, allocate a risk rating and make a decision on the application. The process may require further dialogue with the Business Development Team to ascertain additional information or clarification. Each mandate holder and Committee is authorised to approve loans up to agreed financial limits provided that the risk rating of the counterparty is within agreed parameters. If the financial limit requested is higher than the credit authority of the first reviewer of the loan facility request, the application is sent to the next credit authority level with a recommendation. The Executive Risk Committee reviews all applications that are outside the credit approval mandate of the mandate holder due to the financial limit requested or if the risk rating is outside of policy but there is a rationale and/or mitigation for considering the loan on an exceptional basis. 82 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Applications where the counterparty has a high risk rating are sent to the Executive Risk Committee for a decision based on a positive recommendation from the Credit Risk department. Where a limited company has such a risk rating, the Executive Risk Committee will consider the following mitigants: • • • • Existing counterparty which has met all obligations in time and in accordance with loan agreements, Counterparty known to Group personnel who can confirm positive experience, Additional security, either tangible or personal guarantees where there is verifiable evidence of personal net worth, A commercial rationale for approving the application, although this mitigant will generally be in addition to at least one of the other mitigants. Identifying significant increases in credit risk The Group measures a change in a counterparty’s credit risk mainly on payment, on updated from credit reference agencies and adverse changes with a counterparty’s debtors. The Group views a significant increase in credit risk as: • • • • • • A two-notch reduction in the Group’s counterparty’s risk rating since origination, as notified through the credit rating agency; A counterparty defaults on a payment due under a loan agreement; Late contractual payments which although cured, re-occur on a regular basis; Evidence of a reduction in a counterparty’s working capital facilities which has had an adverse effect on its liquidity; or Evidence of actual or attempted sales out of trust or of double financing of assets funded by the Group. Deterioration in the underlying business (held as part of the security package) indicated through significant loss of revenue and higher than average client attrition. An increase in significant credit risk is identified when any of the above events happen after the date of initial recognition. Default Identifying loans and advances in default and credit impaired The Group’s definition of default for this purpose is: • • • A counterparty defaults on a payment due under a loan agreement and that payment is overdue on its terms, or The collateral that secures, all or in part, the loan agreement has been sold or is otherwise not available for sale and the proceeds have not been paid to the lending company, or A counterparty commits an event of default under the terms and conditions of the loan agreement which leads the lending company to believe that the borrower’s ability to meet its credit obligations to the lending company is in doubt. Exposure at default Exposure at default (“EAD”) is the expected loan balance at the point of default and, for the purpose of calculating the Expected Credit Losses (“ECL”), management have assumed this to be the balance at the reporting date. Expected Credit Losses The ECL on an individual loan is based on the credit losses expected to arise over the life of the loan, being defined as the difference between all the contractual cash flows that are due to the Group and the cash flows that it actually expects to receive. This difference is then discounted at the original effective interest rate on the loan to reflect the disposal period of underlying collateral. Regardless of the loan status stage, the aggregated ECL is the value that the Group expects to lose on its current loan book having assessed each loan individually. To calculate the ECL on a loan, the Group considers: 1. 2. Counterparty PD; and LGD on the asset whereby: ECL = EAD x PD x LGD 2022 Annual Report and Accounts | 83 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Maximum exposure to credit risk 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 Group Company 2022 £’000 10,273 24,161 – 2021 £’000 7,608 16,133 2022 £’000 2,260 – 2021 £’000 786 – – 54,835 46,919 5,593 4,958 138 144 40,027 28,699 57,233 47,849 Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 800 271 500 701 – 2,272 2 83 192 142 – 419 – – 21,943 15,718 – – – – – – – – – – – – – – – – 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. 84 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 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. 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 2022 Transfer to stage 1 Transfer to stage 2 Transfer to stage 3 Net Loans originated As at 31 December 2022 Stage 1 £’000 11,035 10,615 1,041 22,691 (26) 22,665 Stage 1 £’000 16,136 (43) (957) – 8,079 22,691 Stage 2 £’000 Stage 3 £’000 – – 1,481 1,481 – 1,481 – – 43 43 (28) 15 Stage 2 £’000 Stage 3 £’000 – – 957 – 524 1,481 – 43 – – – 43 2022 Total £’000 11,035 10,615 2,565 2021 Total £’000 5,274 10,863 – 24,215 16,137 (54) (4) 24,161 16,133 Total £’000 16,136 – – – 8,079 24,215 Trade receivables Status at reporting date The Group has assessed the trade and other receivables in accordance with IFRS 9 and determined that, at the balance sheet date, the lifetime ECL is £nil (2021: £nil). The contractual amount outstanding on financial assets that were written off during the reporting period and are still subject to enforcement activity is £nil at 31 December 2022 (2021: £nil). Liquidity risk Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations as they fall due or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows which is inherent in all banking operations and can be affected by a range of Group specific and market-wide events. Liquidity risk management Group Finance performs treasury management for the Group, with responsibility for the treasury for each business entity being delegated to the individual subsidiaries. However, in line with the wider Group governance structure, Group Finance performs an important oversight role in the wider treasury considerations of the Group. The primary mechanism for maintaining this oversight is a formal requirement that subsidiaries’ Finance teams notify all material Treasury matters to Group Finance. The main Group responsibilities are to maintain banking relationships, manage and maximise the efficiency of the Group’s working capital and long-term funding and ensure ongoing compliance with banking arrangements. The Group currently does not have any offsetting arrangements. Liquidity stress testing The Group regularly conducts liquidity stress tests, based on a range of different scenarios to ensure it can meet all of its liabilities as they fall due. 2022 Annual Report and Accounts | 85 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Maturity analysis for financial assets and financial liabilities The following maturity analysis is based on expected gross cash flows. As at 31 December 2022 Financial Assets Cash and cash equivalents Trade and other receivables Loans and advances Financial Liabilities Trade payables, other payables and accruals Borrowings 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 10,273 5,593 24,161 40,027 6,392 18,547 24,939 10,273 2,660 2,785 15,718 1,053 128 1,181 – 778 1,020 1,798 3,127 12 3,139 – 1,717 3,616 5,333 2,009 79 2,008 – 438 15,954 16,392 234 12,628 12,862 – – 1,249 1,249 – 5,700 5,700 Market risk Market risk is the risk that movements in market factors, such as foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices will reduce the TruFin Group’s income or the value of its portfolios. Market risk management The TruFin Group’s management objective is to manage and control market risk exposures in order to optimise return on risk while ensuring solvency. The core market risk management activities are: • • • The identification of all key market risk and their drivers, The independent measurement and evaluation of key market risks and their drivers, The use of results and estimates as the basis for the TruFin Group’s risk/return-oriented management, and • Monitoring risks and reporting on them. Interest rate risk management The TruFin Group is exposed to the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of the change in market interest rates. Interest rate risk Interest rates on loans and advances are charged at competitive rates given current market condition. Should rates fluctuate, this will be reviewed and pricing will be adjusted accordingly. Vertus’s has interest income that is variable in relation to the Bank of England base rate, and interest expense variable to both LIBOR and the Bank of England base rate. 86 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 19. Non-controlling interests The summarised financial information below represents financial information for each subsidiary that has non-controlling interest that are material to the Group. The amounts disclosed for each subsidiary are before intragroup eliminations. The Group’s ownership share Vertus Capital and Vertus SPV1 at the reporting date was 54% (2021: 54%). Statement of Financial Position Vertus Capital Vertus SPV1 Current assets Non-current assets Current liabilities Equity attributable to owners of the Company Non-controlling interests Income Statement Revenue Expenses Profit after tax Profit after tax attributable to owners of the Company Profit after tax attributable to the non-controlling interests 2022 £’000 5,559 69 (373) 2,828 2,426 2021 £’000 5,005 5 94 2,747 2,357 2022 £’000 21,718 – 2021 £’000 15,740 – (21,725) (15,746) (3) (3) (3) (3) Vertus Capital Vertus SPV1 2022 £’000 743 (593) 150 81 69 2021 £’000 522 (343) 86 46 40 2022 £’000 2,214 (2,214) – – – 2021 £’000 1,380 (1,193) 187 100 87 Cash Flow Statement Vertus Capital Vertus SPV1 Net cash used in operating activities Net cash generated from investing activities Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents 2022 £’000 (385) 302 – (83) 2021 £’000 (520) 224 488 192 2022 £’000 (5,296) – 5,425 129 2021 £’000 (2,922) – 2,839 (83) Non-controlling interest Vertus Capital Vertus SPV1 Balance at 1 January Share of profit for the year Change in NCI due to share issuance in the year Balance at 31 December 2022 £’000 2,357 69 – 2021 £’000 2,220 40 97 2,426 2,357 2022 £’000 2021 £’000 (3) – – (3) (95) 87 5 (3) 2022 Annual Report and Accounts | 87 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 The Group had a 72% (2021: 72%) ownership share of Bandana during the year. Statement of Financial Position Current assets Current liabilities Equity attributable to owners of the Company Non-controlling interests Income Statement Revenue Expenses Loss after tax Loss after tax attributable to owners of the Company Loss after tax attributable to the non-controlling interests Cash Flow Statement Net cash from operating activities Net increase in cash and cash equivalents Non-controlling interest Balance at 1 January Share of loss for the year Balance at 31 December Bandana 2022 £’000 1 (5,465) (3,955) (1,510) 2021 £’000 45 (5,258) (3,773) (1,440) Bandana 2022 £’000 2021 £’000 – (251) (251) (182) (69) 2022 £’000 – – 2022 £’000 (1,440) (69) – (981) (981) (710) (271) 2021 £’000 – – 2021 £’000 (1,169) (271) Bandana Bandana (1,509) (1,440) The Group’s effective ownership share of Satago Financial Solutions Limited (“Satago”) at the reporting date is based on the net assets of the Satago Group at the reporting date, and the ownership waterfall following Lloyds Banking Group’s £5m investment in Satago in April 2022. Statement of Financial Position Satago Current assets Non-current assets Current liabilities Equity attributable to owners of the Company Non-controlling interests 88 | 2022 £’000 10,397 617 (927) 5,061 5,026 2021 £’000 1,748 631 (291) 1,985 103 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 Income Statement Revenue Expenses Loss after tax Loss after tax attributable to owners of the Company Loss after tax attributable to the non-controlling interests Cash Flow Statement Net cash used in operating activities Net cash (used in)/generated from investing activities Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Non-controlling interest Balance at 1 January Share of loss for the year Arising from change in non-controlling interest Equity Raise Balance at 31 December Satago Satago Satago 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 2022 £’000 1,860 (3,926) (2,001) 1,910 (91) 2022 £’000 (3,035) (2,498) 7,360 1,827 2022 £’000 103 (91) 14 5,000 5,026 2022 Annual Report and Accounts | 89 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 20. Acquisition of Subsidiaries Magic Fuel On 6 June 2022, the Group acquired a 100% equity interest in Magic Fuel Inc (“Magic Fuel”). Magic Fuel’s financial year end date is 31 December 2022. Its results have been consolidated from the date of acquisition to 31 December 2022, in line with the Group’s financial year end. The profit for the period from acquisition consolidated in the Group’s accounts was £678,000. Had the acquisition taken place on 1 January 2022, the loss from Magic Fuel consolidated in the Group would have been £114,000. This amount includes transactions with other Group companies during the year. Details of the consideration paid, the assets acquired and liabilities assumed, the non-controlling interest recognised and the effects on the cash flows of the Group, at the acquisition, are as follows: Net liabilities at acquisition TruFin share of net liabilities Goodwill arising on acquisition Total consideration Less: fair value of identifiable net liabilities acquired Separately identifiable intangible assets Goodwill net of separately identifiable intangible assets Consideration satisfied by: Deferred consideration Cash £’000 (47) (47) 2,371 (47) 2,417 1,595 822 1,196 1,175 In accordance with IFRS 3, we have recognised and measured the separately identifiable intangible assets acquired as part of the transaction. These have been valued at £1,595,000. Leases 21. 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 2022 Lease recognised in year Interest Payments Balance at 31 December 2022 Group Lease liability recognised at 1 January 2021 Interest Payments Balance at 31 December 2021 90 | £’000 25 276 12 (28) 285 £’000 120 3 (99) 25 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 22. Earnings per share Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. The calculation of the basis and adjusted earnings per share is based on the following data: Number of shares (#) At year end Weighted average Earnings attributable to ordinary shareholders Loss after tax attributable to the owners of TruFin plc 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 2022 2021 94,182,943 80,822,204 90,485,862 80,822,204 £’000 (6,637) (6,637) – (6,637) £’000 (7,071) (7,071) 70 (7,001) Pence Pence (7.3) (7.3) (8.7) (8.7) * All Earnings per share figures are undiluted and diluted. Adjusted1 EPS excludes share-based payment expense and loss from discontinued operations from loss after tax Management has been granted 5,451,578 share options in TruFin plc (see Note 6 for details). These could potentially dilute basic EPS in the future, but were not included in the calculation of diluted EPS as they are antidilutive for the years presented as the Group is loss making. 2022 Annual Report and Accounts | 91 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued For the year ended 31 December 2022 23. Related party disclosures Transactions with Directors Transactions with Directors, or entities in which a Director or recent Director is also a Director or partner: Consultancy services provided by an ex-Director Key management personnel disclosures are provided in Notes 5 and 6. 2022 £’000 – 2021 £’000 21 During the year, Playstack made loans to Storm Chaser UG, a company based in Germany. Storm Chaser UG is 100% owned by Storm Chaser Games – an associate company of Playstack (See Note 1). The balance of the loans (including interest) at the reporting date was £525,000 (2021: £148,000). 24. Events after the Reporting Date Since the year end, Satago has agreed to extend its agreement with Sage. Initially, Satago services were offered to UK based Sage 50 packages only, but this extension is to now include certain packages in Ireland. Additionally, Satago signed a statement of work to embed Satago’s invoice finance service into Sage 50 and the solution was launched during Q1 2023. 92 | Designed by Sterling Studio sterlingfp.com TruFin plc www.TruFin.com 1 | 

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