22.03.22

Proposed Placing and Open Offer


 

22 March 2022

TruFin plc
(“TruFin” or the "Company")

Placing and Open Offer to raise up to approximately £10 million

The Company today announces it is proposing to raise up to approximately £10 million, before expenses, by way of a Placing to raise £8.0 million (the “Placing”) and an Open Offer to raise up to approximately £2.0 million (the “Open Offer”, together with the Placing, the "Share Issue") at a price of 75 pence per share (the “Issue Price”).

The Placing is being conducted through an accelerated bookbuild process (the "Bookbuild"), which will be launched immediately following this Announcement.

Liberum Capital Limited (“Liberum”) is acting as sole bookrunner in relation to the Placing.

Placing and Open Offer Highlights

  • Proposed Placing of £8.0 million (before expenses) to certain existing shareholders and other institutional investors at the Issue Price.
  • Open Offer of up to approximately £2.0 million (before expenses) to Qualifying Shareholders at the Issue Price.
  • Issue Price of 75 pence per New Ordinary Share represents a discount of 9.09 per cent. to the closing mid-market price of the Company's existing ordinary shares on 22 March 2022, the latest practicable date prior to this Announcement.
  • The net proceeds of the Placing and Open Offer will be used to provide working capital, invest in growth opportunities and fund Satago and Playstack to profitability.
  • Major shareholder, Watrium AS, has agreed to support the Placing with a cornerstone investment.
  • Upon completion of the Placing and the Open Offer, the 13,360,739 New Ordinary Shares would represent approximately 14.2 per cent. of the Enlarged Share Capital (assuming the Open Offer is subscribed in full).
  • The timing for the close of the Bookbuild and allocation of the Placing Shares shall be at the discretion of Liberum, in consultation with the Company. The Placing is not underwritten.
  • The final number of Placing Shares will be agreed by Liberum and the Company at the close of the Bookbuild, and the result will be announced as soon as practicable thereafter.
  • The Appendix to this Announcement (which forms part of this Announcement) contains the detailed terms and conditions of the Placing.
  • Completion of the Placing and Open Offer will be conditional upon, inter alia, the approval by Shareholders of the resolutions to be proposed at a general meeting of the Company expected to be convened and held on 11 April 2022 and Admission occurring.
  • The Company expects to publish a circular (the "Circular") in connection with the Placing and Open Offer following the successful closure of the Bookbuild, in order to convene the General Meeting. Full details of the Open Offer will also be included in the Circular.

Introduction

The Company is proposing to undertake the Placing to raise up to £8.0 million (before expenses) through the issue of up to 10,666,666 Placing Shares in aggregate at the Issue Price.

In addition, in order to provide Qualifying Shareholders with the opportunity to participate in the Share Issue, the Company is providing all Qualifying Shareholders with the opportunity to subscribe for an aggregate of up to 2,694,073 Open Offer Shares in the Open Offer at the Issue Price, to raise up to approximately £2.0 million (before expenses), on the basis of 1 Open Offer Share for every 30 Existing Ordinary Shares held on the Record Date. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.

The Placing and the Open Offer, and the issue of the New Ordinary Shares are conditional upon, inter alia, the approval by the Shareholders of the Resolutions to be proposed at the General Meeting of the Company. The Resolutions must be passed by Shareholders at the General Meeting in order for the Share Issue to proceed.

Trading Update

Satago

Satago has been working closely with Lloyds Bank ("Lloyds") on a partnership to deliver Satago’s technology solution to Lloyds and Lloyds’ SME customers. A commercial pilot of Satago’s technology was launched on 11 December 2020. On 9 March 2022, TruFin announced the conclusion of the commercial pilot and a competitive tender process, and that Lloyds had confirmed its intention to enter into a commercial agreement to license Satago's software platform for its Single Invoice Finance and whole of book Invoice Factoring customers. Satago and Lloyds are working towards finalising this commercial agreement in the coming months. TruFin also announced on 9 March 2022 that Lloyds Banking Group had completed an investment of £5 million of new equity capital into Satago, at a pre-money valuation of £20 million.

The Board of TruFin views this as a landmark transaction, with Satago securing one of the largest banks in the UK as a strategic, commercial and financial partner. This partnership validates Satago’s technology, personnel and strategy toward addressing the invoice finance market with its LaaS (lending as a service) solution.

Having secured Lloyds as a partner, Satago is in conversations with several blue-chip organisations across the UK and Europe to offer all or part of its technology solution suite.

The significant progress with Lloyds accelerates and grows Satago’s opportunity set and Satago is expected to remain loss making in the short term. Satago will continue to convert its pipeline, fund technology development and recruit key employees and the Board is excited by its growth trajectory and its potential for significant value creation.  

Oxygen

Oxygen recorded its first year of positive EBITDA for the year ended 31 December 2021 and also recorded its first cash flow positive month in December 2021. During the year, Oxygen signed 28 new clients (taking the total to 120 as at 31 December 2022) and processed its millionth rebate. Client retention stood at 98 per cent. – two clients were lost, both in the data insights division, but it is a testament to the strength of Oxygen’s product that one of those clients later re-subscribed for Oxygen’s data insights product in early 2022.

Oxygen expects to deliver revenue growth in excess of 20 per cent. per annum over the coming years, which, given the operational gearing in the business, is expected to translate to increasing profits. Approximately 90 per cent. of revenue over the next four years is expected to be contributed by existing clients. Oxygen is fully funded for this organic growth, requiring no further financial support from TruFin.

Vertus

Vertus had a strong 2021, recording its first year of profit, writing £8.4 million of facilities and making a £2 million advance, its largest to date. Its existing book remains resilient – it is yet to experience a default – and its pipeline is strong. Vertus’ loan book stood at £18.0 million as at 28 February 2022, with £2.8 million of facilities written in 2022 year-to-date, and it currently has a pipeline of £24.4 million. Vertus has a medium-term loan book target of £50 million and it will be investing in technology-enabled lending solutions during 2022 to satisfy the growing pipeline.

Playstack

Within games publishing, Playstack continues to expand the impact of the Mortal Shell IP, whilst also having secured publishing rights for three new games to be released within the next 12 months, each with the expectation of high user appeal and strong marketability. Playstack is also working to expand its internal games development capability through recruitment or acquisition such that it can increase its core games portfolio and increase reach in all key markets.

The beta launch of the brand technology platform 'Interact' occurred in late November 2021 and is now in the test phase with several external developers who have access to over 500,000 users. Interact has been developed to allow tailored bespoke campaigns, programmatic advertising and full sponsorship solutions across a suite of games on mobile - with a flexible tool for precise audience reach and targeting. Interact is forecast by management to be revenue generating within 2022, but is expected to remain loss making in the medium term.

Unaudited Financial Information & Cash Position

The Group expects to publish its audited results for the year ended 31 December 2021 (FY21) in April 2022. The Group reports unaudited financial results for FY21 as follows:

  • Revenue - £13.1 million (2020: £14.8 million), driven by reduced revenue at Satago as they focussed on the Lloyds partnership and lower revenue at Playstack following a particularly strong performance in 2020 resulting from the release of Mortal Shell
  • Loss before tax - £8.2 million (2020: £8.9 million), as a result of cost reductions at head office and at Playstack
  • Cash - £7.6 million (includes cash of £4.7 million in Satago and £0.7 million in Vertus which cannot be accessed at a Group level) (2020: £17.7 million)
  • Net assets - £32.3 million, of which £16.3 million represents goodwill (2020: £39.7 million)

The Group recorded revenue of more than £1.6 million for the calendar year to 28 February 2022, which represents revenue growth of 9 per cent. over the equivalent period in 2021 and growth of 35 per cent. in February 2022 compared to February 2021.

During 2021, TruFin loaned Satago £3 million to provide working capital as Satago continued its commercial pilot with Lloyds. This loan was originally due to be repaid to TruFin, but as announced on 9 March 2022, as part of the investment by Lloyds Banking Group, TruFin agreed to vary the terms of the loan. The loan is now convertible into equity capital in Satago at the same valuation as the investment made by Lloyds Banking Group at TruFin’s election for six months from the date of the variation or, if a further funding round takes place after such six month period, automatically at the valuation implied by the funding round. As a result, these funds are no longer available to TruFin.

The Group’s unrestricted cash position as at 28 February 2022 was £2.8 million. Following the announcement of Lloyds' intention to enter into a commercial agreement with Satago, the Group will accelerate its investment in this substantial opportunity.  Without the funds to be raised under the Share Issue, the Directors forecast that the Group has sufficient working capital to maintain its current business plan until August 2022.

Reasons for the Share Issue and Use of Proceeds

With two of the Group’s subsidiaries reaching breakeven, and Satago securing a partner in Lloyds, 2021 and 2022 to date have been transformational for the Group. The Board continues to see significant value across each of the portfolio companies and, in order to fund Satago and Playstack to profitability, and to provide working capital, the Company is proposing to raise gross proceeds of up to approximately £10.0 million through a placing of £8.0 million and an open offer of up to approximately a further £2.0 million.

The Company intends to use the net proceeds as follows:

  • £2 million intended to be invested in Satago, which together with the £5 million invested by Lloyds Banking Group and the £3 million already invested by TruFin, will be used to fund technology development and recruit key employees, which is expected to fund Satago to profitability
  • £4 million for growth opportunities in Playstack and to fund it to profitability
  • £1.5–3.5 million for Group working capital (replacing TruFin’s loan, provided to Satago converting into Satago equity)

Following completion of the Placing and the Open Offer, the Group is expected to have sufficient working capital and cash headroom to execute on its ambitious growth strategy through to a position of being cash generative.

Full RNS can be found here.

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