Half-year Report

13 September 2018

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

INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018

Financial Highlights

· Combined gross revenues were £3.6m for the six months ended 30 June 2018 (six months ended 30 June 2017: £1.5m) representing growth of 142%

· Combined loans and advances to customers were £74m as at 30 June 2018 representing growth in excess of 125% in the first half of 2018 and growth in excess of 500% over the last twelve months

· Oxygen's clients' total procurement spend reached £15.7bn as at 30 June 2018 (31 December 2017: £11.3bn)

· Adjusted Loss Before Tax and Exceptional Items and share based payment expense was £7.1m (six months ended 30 June 2017 loss: £4.0m)

· Consolidated net assets as at 30 June 2018 of £159m (31 December 2017: £91m)

· The investment in Zopa was revalued upwards by £8.0m to £44.5m following a recent funding round to support capital investment required to build a next generation bank.

Trading Update

· As at 31 August 2018 the combined loans and advances were £89m representing growth in excess of 170% since 31 December 2017. We expect growth to continue into the year end targeting combined loans and advances of £120m

· DFC's growth remains strong with a growing pipeline. With such robust demand and prior to obtaining a banking licence, it is unsurprising that capital is the limiting factor to writing more business and we are actively addressing this issue

· DFC's application for a UK banking licence was submitted to the PRA/FCA on 28 June 2018. We are in active dialogue with the regulators and will continue to keep investors updated as appropriate

· Oxygen continues to win and implement new business mandates. New streamlined processes to improve client implementation and supplier onboarding were introduced in the period and are proving effective, although the full benefits have yet to be monetised

· Satago is pursuing several new corporate partnerships as it becomes a meaningful competitor in its core financing business whilst also experiencing strong growth in its other niche lending activities

· Zopa's UK banking licence application continues in line with its schedule.

Post Balance Sheet Update

· Oxygen recently acquired Porge Ltd, a provider of evidence-based public sector market insight services and research products. This strategically enhances Oxygen's product offering.

Henry Kenner, Chairman and Chief Executive Officer commented:

"This has been a pleasing first half for the TruFin Group with activity levels post IPO continuing apace.

We continue to invest in the businesses and confidence levels are such that we have accelerated some of these investments whether in people, systems or a small bolt-on acquisition. This accelerated investment and associated cost lays down the foundations for achieving our long-term goals.

Clearly the banking licence applications are a focus. Whilst the applications have been submitted we await the outcomes and will update investors in due course.

In conclusion, the TruFin Group remains robust and exciting. The businesses are rapidly being recognised as quality providers of niche finance and early payment provision and this is having tangible effects in the scale and depth of opportunities being presented to us. Whilst we are engaging with these, we remain focused on our current core product offerings. As such the Board and Executive Management are working effectively to ensure that an appropriate balance is achieved between investment in strategic long-term objectives and medium-term financial rewards."

For further information, please contact:

About TruFin plc:

TruFin plc is the holding company for an operating group of companies that are niche lenders and early payment providers. The TruFin Group combines the benefits of both the traditional relationship banking model and developments in the fintech sector. The Company was admitted to AIM in February 2018. More information is available on the Company website www.TruFin.com.

FIRST HALF REVIEW

First half review

The TruFin Group has performed well in the first six months of 2018 and we remain optimistic for the remainder of 2018. Businesses in detail:

DFC

DFC's loan book growth continues and ended the first half 111% higher than at the start of the year.

The number of manufacturers and dealers signed up has been strong and there is a growing pipeline. Additionally, as DFC becomes more widely recognised the lending opportunities are increasing in terms of frequency, size and quality.

Portfolio diversification has been accelerated as lending to the industrial and agricultural sectors has been increased and the technology sector is now being actively explored.

Pricing levels have largely remained resilient over the period. That said, customer behaviour coupled with the larger financing programmes (with generally higher quality corporates) have meant that revenues in the first half of 2018, whilst increasing in excess of 98% over the second half of 2017, have not mirrored like-for-like the growth in the loan book.

Credit quality as mentioned remains high with zero actual losses and an impairment provision in accordance with IFRS9 at 0.2%.

We continue to build out the core business with accelerated investment being allocated to the roll-out of the personnel, systems and processes commensurate with being a bank.

The management team have been heavily focused on submitting the banking licence application and the application was submitted on 28 June 2018. Whilst we await the outcome, the exact timing of any decision is in the hands of the regulators.

Satago

Satago's core invoice financing book has grown by over 140% in the first half, albeit from a low base, and we expect this momentum to continue. With customer satisfaction levels remaining high, Satago is seeing increasing interest from direct origination and also from several large organisations seeking partnerships. Financing opportunities are already being sourced from one key partner and we expect to expand these relationships into the year end.

Actual default levels remain low, whilst IFRS9 has meant an impairment provision of 1.6%.

Within its niche lending business, the initial Vertus funding transaction was completed and the team is busy originating new transactions. Meanwhile in the mobile games vertical, PlayStack continues to launch its library of new games and whilst some of these have been marginally delayed, the remainder of the year has an extremely full launch programme.

Satago's leading edge technology continues to be the recipient of material and increased investment as the company looks to not only strengthen its existing service, but expand its wider product offering. As a result, it is anticipated that a number of new products will be launched over the next twelve months.

Oxygen

Oxygen's new client mandates have been on plan in the six months ended 30 June 2018.

This coupled with the total number of clients going live having doubled in the last 12 months and with client implementations at record levels the momentum is with the company.

However, revenues in the period have remained broadly flat compared to the comparable period in 2017. This has been caused by a combination of the residual impact of the company's migration to the new billing methodology introduced last year and a backlog in supplier onboarding. To address these issues Oxygen's management has been focusing on introducing new streamlined processes to optimise delivery of the monetary rewards for its clients and itself. This has resulted in some immediate operational changes, but the full benefits will not be seen until future periods.

On the strategic front the focus is on offering more products to Oxygen's clients. In August 2018 the company acquired Porge Ltd which provides evidence-based public sector market insight services and research products to the UK corporate and government sectors. This business fits in strategically with its offering to existing clients by providing a wider and deeper service in terms of supplier data analytics as well as broadening Oxygen's client base. Additionally, the company is considering other partnership arrangements which will offer benefits to its clients whilst enhancing Oxygen's revenue opportunities.

INDEPENDENT REVIEW REPORT TO TRUFIN PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 22. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

Deloitte LLP

Statutory Auditor

London, United Kingdom

12 September 2018

UNAUDITED CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT

EARNINGS PER SHARE

The number of shares in issue as at 30 June 2018 was 97m (31 December 2017: 124m).

UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEET

These financial statements were approved by the Board of Directors on 12 September 2018.

UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

UNAUDITED CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting policies

Basis of preparation

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

The condensed set of financial statements included in this Interim Financial Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34'). This condensed set of Financial Statements has been prepared by applying the accounting policies and presentation that were applied in the preparation of the TruFin Group's published Financial Statements for the year ended 31 December 2017.

The condensed set of financial statements included in this Interim Financial Report for the six months ended 30 June 2018 should be read in conjunction with the annual audited financial statements of TruFin plc for the year ended 31 December 2017.

Going concern

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

Group structure

The consolidated financial statements include all of the companies controlled by the TruFin Group which are as follows:

· Satago Financial Solutions Limited ("SFSL")

· Distribution Finance Capital Ltd ("DFC")

· Oxygen Finance Group Limited (together with OFL and OFAI) ("Oxygen")

· Oxygen Finance Limited ("OFL")

· Oxygen Finance Americas, Inc ("OFAI")

· TruFin Software Limited ("TSL")

· TruFin Holdings Limited ("THL")

· AltLending UK ("AltLending")

The consolidated financial information also includes three further investments:

· 50% interest in a joint venture, Clear Funding Limited ("Clear Funding"), which is accounted for using the equity method;

· 40% interest in PlayIgnite Ltd ("PlayIgnite"), which is accounted for using the equity method; and

· 14.9% in Zopa Group Limited ("Zopa")

Significant accounting policies and use of estimates and judgements

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting judgements and key sources of estimation uncertainty. It also requires the exercise of judgement in applying the TruFin Group's accounting policies. There have been no material revisions to the nature and the assumptions used in estimating amounts reported in the annual audited financial statements of TruFin plc for the year ended 31 December 2017.

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

Share based payments

Where the TruFin Group engages in share-based payment transactions in respect of services received from certain of its employees, these are accounted for as equity-settled share-based payments in accordance with IFRS 2 'Share-based Payment'. The equity is in the form of ordinary shares.

The grant date fair value of a share-based payment transaction is recognised as an employee expense, with a corresponding increase in equity over the period that the employees become unconditionally entitled to the awards. In the absence of market prices, the fair value of the equity at the date of the grant is estimated using an appropriate valuation technique.

The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related services and non-market vesting conditions are expected to be met such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with market performance conditions the grant date fair value of the award is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Financial assets at Fair Value

Financial assets held by the TruFin Group are measured at Fair Value Through Profit and Loss as they fail the contractual cash flow characteristics test required by IFRS 9 for classification under amortised cost. Movements in the fair value of these assets are recognised in the Statement of Comprehensive Income.

2. General information

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

A copy of this Interim Financial Report including Condensed Financial Statements for the period ended 30 June 2018 is available at the Company's registered office and on the Company's investor relations website (www.trufin.com).

3. Fee income

4. Segmental reporting

The results of the TruFin Group are broken down into segments based on the products and services from which it derives its revenue:

Short term finance:

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

Payment services:

Provision of Early Payment Programme Services. For results during the reporting period, this corresponds to the results of Oxygen.

Other:

Revenue and costs arising from investment activities and peer-to-peer lending. For results during the reporting period, this corresponds to the results of TSL, THL, the TruFin Group's investment in Zopa and joint venture in Clear Funding, and TruFin plc.

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

5. Staff costs

Analysis of staff costs

Consulting costs are recognised within personnel costs where the work performed would otherwise have been performed by employees. Consulting costs arising from the performance of other services is included within other operating expenses.

Average monthly number of persons (including Executive Directors) employed 

Key management compensation

The Directors consider that key management personnel are those persons who are the Executive Committee of TruFin plc. These individuals have the authority and responsibility for planning, directing and controlling the activities of the TruFin Group.

6. Employee share-based payment transactions

The employee share-based payment charge comprises: 

All employee share-based awards are deemed to be equity-settled schemes.

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

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

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

On 21 February 2018, 4,868,420 shares were granted to the senior management team. The vesting of this award is based on market-based performance conditions. The vesting of these awards is subject to the holder remaining an employee of the Company and the Company's share price achieving five distinct milestones vesting at 20% each milestone. The exercise price of the shares on vesting is £1.90 per share.

Performance Share Plan 2018 Award ("PSP 2018")

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

7. Provision for commitments and other liabilities

As at 31 December 2017 management has recognised a provision in relation to uncertain tax positions prior to 31 December 2016. Although advice has been taken, the legislation is complex and could result in different interpretations. The amount recognised is the best estimate of the consideration required to settle the present obligation at the balance sheet date.

The movement in provision during the year relates to a lease provision for DFC's remaining property costs outstanding on the Sutton office following the relocation of staff to Manchester and London. The provision will be released over the course of the remainder of the lease which expires February 2019.

8. Exceptional expenses

Loss before income tax is stated after charging the following material items:

Oxygen's legacy business strategy had also been based around a technology platform operated by a third-party provider on Oxygen's behalf. Oxygen incurred material costs to transfer the platform to a cloud based environment under its own control and in terminating certain legacy contracts.

9. Loss before income tax

Loss before income tax is stated after charging:

10. Taxation

Analysis of tax credit recognised in the period 

Deferred Tax Asset

11. Other intangible assets

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

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

The amortisation charge is recognised in fee expenses within the statement of comprehensive income.

Software, licenses and similar assets comprises internally developed platforms and systems, as well as external licenses. Costs that are directly associated with the production of identifiable and unique software products controlled by the TruFin Group and are probable of producing future economic benefits, are recognised as intangible assets. Direct costs of software development include employee costs and directly attributable overheads.

A useful economic life of 3-5 years has been deemed appropriate and for impairment review purposes, projected cash flows have been discounted over this period.

The amortisation charge is recognised in depreciation and amortisation on non-financial assets within the statement of comprehensive income.

12. Other investments

At 31 December 2017, the TruFin Group had an economic interest in Zopa Group Limited (the ultimate owner of the UK-based Zopa peer-to-peer lending business). During the first half of 2017, Zopa underwent a corporate restructuring. Prior to this, the ultimate owner of the Zopa business was Zopa Holdings Inc, a Delaware (USA) company. The below table represents the economic ownership both on an undiluted basis and a fully diluted basis (i.e. assuming that all holders of options, warrants and preferred shares were to have exercised their subscription and conversion rights).

Zopa Ownership:

A level 3 valuation is one that relies on unobservable inputs to the valuation process.

The shares are not quoted in any market. TruFin values it investment in Zopa using the most recent funding round. Zopa has had a series of funding rounds and the latest funding round therefore represents the most recent price of the transaction and is the best estimate for its market value. TruFin values the investment on a monthly basis. At the half year end and the year end an independent valuation is carried out by an independent valuation service provider.

13. Loans and advances

Total loans and advances are made up of;

Past due receivables relating to loans and advances are analysed as follows:

14. Trade and other receivables

Trade receivables above are stated net of a loss allowance of £Nil (Dec 2017: £Nil). All receivables are due within one year.

Unimpaired, past due trade receivables are analysed as follows:

15. Share capital

At 31 December 2017, 123,965,702 shares were issued and fully paid. 1 share was issued and unpaid.

In February 2018, these were consolidated to form 57,118,419 ordinary shares and on 21 February 2018, the shares of TruFin plc were listed on the Alternative Investment Market of the London Stock Exchange. The company raised £70 million from the IPO, issuing 36,842,106 shares at a price of 190p share.

All ordinary shares carry equal entitlements to any distributions by the company. No dividends were proposed by the Directors for the period ended 30 June 2018.

16. Borrowings

On 12 December 2017, DFC entered into a two year senior debt facility with a leading bank which is secured on a floating pool of underlying assets. Interest is payable at 3 month LIBOR + 4%.

17. Trade and other payables

18. Financial instruments

The Directors have performed an assessment of the risks affecting the TruFin Group through its use of financial instruments and believe the principal risks to be: capital risk; credit risk; market risk and interest rate risk.

This note describes the TruFin Group's objectives, policies and processes for managing the material risks and the methods used to measure them. The significant accounting policies regarding financial instruments are disclosed in note 1.

Capital risk management

The TruFin Group manages its capital to ensure that entities in the TruFin Group will be able to continue as a going concern while providing an adequate return to shareholders.

The capital structure of the TruFin Group consists of net debt (borrowings disclosed in note 16) and equity of the TruFin Group (comprising issued capital, reserves, retained earnings and non-controlling interests).

The TruFin Group is not subject to any externally imposed capital requirements.

Principal financial instruments

The principal financial instruments to which the TruFin Group is party and from which financial instrument risk arises, are as follows:

· Loans and advances to customers, primarily credit risk and liquidity risk;

· Trade receivables, primarily credit risk and liquidity risk;

· Investments, primarily fair value or market price risk;

· Cash and cash equivalents, which can be a source of credit risk but are primarily liquid assets available to further business objectives or to settle liabilities as necessary;

· Trade and other payables; and

· Borrowings which are used as sources of funds and to manage liquidity risk.

Analysis of financial instruments by valuation model

Financial assets included in the balance sheet at fair value:

A level 3 valuation is one that relies on unobservable inputs to the valuation process.

The Zopa valuation is calculated by reference to the price of previous transactions involving the issuance of shares in Zopa and warrants over shares in Zopa and any other relevant information such as future funding rounds.

The Zopa valuation as at 30 June 2018 is based on the most recent funding round concluded by Zopa.

Financial assets at fair value have been valued by reference to the performance and financial position of the underlying companies, their credit quality and prevailing market conditions.

There are no financial liabilities included in the balance sheet at fair value.

30 June 2018

Financial assets and financial liabilities included in the balance sheet that are not measured at fair value:

31 December 2017

Fair values for level 3 assets were calculated using a discounted cash flow model and the Directors consider that the carrying amounts of financial assets and liabilities recorded at amortised cost in the financial statements approximate to their fair values.

Loans and advances to customers

Due to the short-term nature of loans and advances to customers, their carrying value is considered to be approximately equal to their fair value. These items are short term in nature such that the impact of the choice of discount rate would not make a material difference to the calculations.

Trade and other receivables, other borrowings and other liabilities

These represent short-term receivables and payables and as such their carrying value is considered to be equal to their fair value.

Financial risk management

The TruFin Group's activities and the existence of the above financial instruments expose it to a variety of financial risks.

The Board of Directors has overall responsibility for the determination of the TruFin Group's risk management objectives and policies. The overall objective of the Board of Directors is to set policies that seek to reduce ongoing risk as far as possible without unduly affecting the TruFin Group's competitiveness and flexibility.

The TruFin Group is exposed to the following financial risks:

· Credit risk;

· Liquidity risk;

· Market risk; and

· Interest rate risk.

Further details regarding these policies are set out below.

Credit risk

Credit risk is the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to the TruFin Group. One of the TruFin Group's main income generating activities is lending to customers and therefore credit risk is a principal risk. Credit risk mainly arises from loans and advances to customers. The TruFin Group considers all elements of credit risk exposure such as counterparty default risk, geographical risk and sector risk for risk management purposes.

Credit risk management

The credit committees within the wider TruFin Group is responsible for managing the credit risk by: