Trufin (LSE:TRU) — Final Results

0:01 Good afternoon, and welcome to the TRUFIN PLC final results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit the following poll, and I would

0:31 now like to hand you over to CEO, j James Vanderberg. Good afternoon to you, sir. Good afternoon, Alex. Thanks very much, and thank you everyone for joining today. I have with me today James Hossey, who's the CFO of TRUFIN PLC. So thank you all for joining. As Alex said, what we're gonna do is we're gonna run you through our results presentation, and then we're gonna leave plenty of time for questions at the end. So you can submit your questions throughout the presentation, and then we'll go through them at the end. We'll leave plenty of time for that. So to remind everyone, TRUFIN is a holding company. We've got three businesses, Oxygen, Subtargo, and PLC.

1:18 We're gonna give plenty of detail on these businesses later on in the presentation. But for now, Oxygen is The UK's number one provider of early payment programs and other procurement software to the public sector. It's based in Birmingham, and its CEO is Vicky Sloan. Then there's Certargo. Certargo provides invoice financing solutions and credit controls tools to SMEs in The UK, and its CEO is Sinead McHale. And then PlayStack PlayStack is an award winning games publisher based in London, US, and its CEO is Harvey Elliott. We own a majority TRUFIN PLC that is owns a majority stake position in each of those three businesses. So before we go into detail on businesses, what I'm gonna do is give you a very it's a high level top down view of the group's performance in 2024.

2:15 So it's obviously a beautiful graph, and sure we'll all agree. So as you may may remember from last this time last year, we said that we knew 2024 would be a a really good year, and we obviously didn't know quite how good it would be, and it turned out to be spectacular. And a lot of the revenue was driven by PlayStack, but it was very much assisted by Oxygen yet again as it has done in a year after year. So what this growth has allowed us to do is just to not just turn profitable, but we turn profitable a full year ahead of market expectations

2:53 as you can see here. So two hundred twenty twenty four was the inflection point for the group. We improved the EBITDA by 11,800,000. We went into profitability not just going into profitability. We went into profitability convincingly, it's a massive, massive milestone for the group. I can't tell you how important it is for us because we gave commitments to shareholders that we wouldn't need any more external capital to reach profitability, and so it's a real pleasure to be able to say we've achieved that. But this is the past. What about the future? I'd 2025 has started, you know, exceptionally well. We the first two months of the year, so that's January and February this year, we've grown a 104 more than a 145% year on year.

3:41 So I would I've I've got to give the caveat that this that Ballotro and ABO and Batter, two of the big drivers of the revenue growth last year, they launched on the February 20 and the May 2. And so so the comps later on this year do get harder. So so don't do what my my son did yesterday, which is say, daddy, daddy, 14.8 times six is about £90,000,000 because that that would be, you know, I've got a temper that sort of enthusiasm. But, obviously, it's been a it's been a great start to the year. So we're all thrilled. And now on that note, I'm gonna hand over to James who's gonna just go through the 2024 numbers in a little more detail, and then we're gonna go into the subsidiaries.

4:28 Thank you, James. So obviously, '24 was a fantastic year for the group. Revenues were recorded at £55,000,000 up from £18,100,000 in the prior year. As James said, a huge contributor to that revenue number is PlayStack recording revenues of over £44,000,000 as compared to £8,000,000 in the prior year. Oxygen, very predictable growth, 25% in the year, going from 6.2 to 7.7, very predictable and increasingly profitable. So target was the only negative from a revenue perspective, the loss of its tier one bank contracts in July impacting their full year revenue performance and revenues went back from £3,800,000 to £2,500,000 The result of that revenue, 55,000,000, is a net revenue figure of just under 25,000,000.

5:31 The margin dropping in the year due to the sales mix, obviously, a a higher proportion of revenues related to games attracting costs and developer royalties. But that that net revenue number increased by 11,500,000 over the prior year, and that fed through to an increase in the adjusted EBITDA number of 11.1. And and the point being there is there hasn't been significant increase in operational costs, staff costs to be able to support that revenue growth. The increase in in the revenue line the net revenue line is pretty much fed through to the adjusted EBITDA line. Staff costs, once you strip out share based payments increased by £200,000 in the year and there was an increase in the impairment charge. Other than that, it all fed through to an adjusted EBITDA increase of 11,100,000 to £7,600,000 positive as compared to £3,500,000 last year.

6:33 All metrics on the P and L, profitable profit before tax even allowing for the share based payments was positive. And indeed, the tax number, we have a tax credit in the year as we're now recognizing an increased deferred tax asset relating to the anticipated performance going forward of of Oxygen and Playster. So very positive p and l. And actually, in addition to the deferred tax asset, there are £70,000,000 of tax losses in the group to utilize going forward and offset against future profits. Cash, final point to point final point to bring out for 2024. Total cash just under £15,000,000 £14,900,000 and unrestricted cash 13,600,000 So cash in a very healthy position.

7:24 2024 fantastic. What does 2025 look like? Well, we've had a great start to the year. As James said, revenues are up in the first first two months. Revenue is just under £15,000,000 and growth year on year of 145%. Play stack increased over last year very significantly. That's a 196% up, and oxygen continues to be very predictable in its growth on the top line. Great. Thanks. Thanks, James. So Oxygen. So just to remind you, Oxygen provides county councils across The UK with early payment software and other related software products related to procurement. It's got around 60, just over 62 of the councils in The UK signed up.

8:16 Average contract duration is five years a very, very, very high retention rates of those councils. So, yeah, phenomenal backdrop for what is a phenomenal business. So if you look at the graph, you'll see the EBITDA progression this year has been excellent, and we very much expect this to continue. I mean, to James' point earlier, about £70,000,000 of tax losses. We we acquired this business in 2016 when they had had £40,000,000 invested into it already. At the time, it was losing £750,000 a month, so you can imagine where this business has come from and where it's heading. So it's yeah. It's been an exceptional turnaround story. And headline, we talked about operation leverage. What what do we mean by that?

9:05 In simple terms, how much of every GBP 1 of revenue falls through to the bottom line? So in our case, last year, we grew revenues by GBP 1,500,000 and that resulted in a GBP 1,000,000 increase in EBITDA. So that's roughly a 66% operating margin. So what that means in real terms is that every one pound of revenue we generate, oxygen increases EBITDA by 66p. So the leverage we talk about is results of that is the the leverage comes from the fact that revenue increased by 25%, but the bottom line increased by 88%. So that's the leverage when we talk about operating leverage. So and it's important to say that that operating leverage is going to increase over time.

9:51 So six to 6% is very often not the ceiling. But operating leverage is useless without revenue growth. So and that is why this graph is so important. So this shows you our visibility over the next four years. So if you and what this graph shows says is that we know where the next where the 85% of the next four years revenue is gonna come from. I mean, it's gonna come from existing clients we've already won. So to put it out another way, if we didn't win another client ever again, 85% of our early payment revenues is already baked in from existing clients we've already won, which is obviously a phenomenal position to be in. And just a little stat on the right side, you know, we are servicing as of the end of last year, we're servicing well over 24,000.

10:44 So we're we're accelerating early payment into the bank accounts of over 24,000 small suppliers and large suppliers, but predominantly small suppliers up and down in The UK. So it's a a phenomenal value add and social good we do for this country, especially difficult times like this. So it's something that's that's a stat we're really proud of. And as of February, at the end of February, that number is now 27,000. So although nothing happens fast in this in this in in the in this space, you know, it's it yeah. Hopefully, that demonstrates that some of the sort of little early indicators to give you a taste of of the future. So it's all very well us having 85% of the future revenue spoken for. What about the 15% that we haven't yet won?

11:32 So in the pipeline, we have over 100 other clients that we're speaking to, early payment clients. So we we have won historically in the past about six councils a year, and we very much expect that trend to continue. So you can see why we're so confident on around our revenues for the for the for the coming years. And then you you couple that with the operating leverage, and you can see why this is such an attractive business for treating shadows to own today. This this graph also shows you the various the new clients we've won last year, some of the renewals of clients we had, and some of them on the other side of our business. We've got Insight Solutions, which is a data side of our business, so we want many new clients on that side of business. So when we talk about 62 early payment clients, we don't talk about the data side. We've got, you know, many many many hundreds of more clients, but that's on the data side of the business.

12:32 So just talking about Target. I think we're just just gonna open up with we're we're gonna talk about the elephant in the room, which is Lloyd's. So we're very cautious about we've always been there, and we will continue to be very cautious what we say about Lloyd's. But there are two things I would personally like to say. It's been a complete the news last year was a complete complete body body blow to us, not just us at but to SCHNAID and her entire team. So they they did a phenomenal job building a phenomenal product, and it was a complete shock to us all. And the second thing I would like to say, and I I I won't please don't ask any questions around Lloyd's because I we won't be answering them. The the second thing I would say is that Lloyd's remained a shareholder of Target, and we have a very, very good working relationship with the equities team at Lloyd's.

13:23 And so, you know, we we I think that's important to say. And, again, we won't be going into any more details about it, but we do have a very good relationship, and they remain a shareholder of Osertigo. So what are we doing now? Well, after the news that Lloyd's decided to terminate their contract, we had two options. One was to bury our head in the sands in the sand and and sort cross our fingers and and very much to hope that another big contract will land. And the other option was to accept the new paradigm and grasp Nettle, and that's what Sinead has

13:54 done with her team. So we're controlling what we control, and and we're rebuilding. And what that really means is we're focusing on winning where we are today. So Certago has some incredible partners, we're very lucky to work with them. So we're focusing on maximizing our relationships and the value we can generate with those partners. As you can see today, we announced or yesterday, we announced a three year a three year contract with our largest software reseller. We have Sotaga also won a contract with Distribution Finance Capital. And, yes, they also announced that we went live with a new embedded finance product for a port a tier one Portuguese bank. So the Lloyd's yes. It was extremely disappointing, but we've reset the business not just in terms of our expectations for the business, but in terms of also the headcount. We've we've radically had to reshape the business in terms of costs, which we've done, and we took those costs in 2024.

14:55 So we came to this into 2025 fresh without any of those unfortunate costs that we've had to endure in 2024. And we we have a very clear set of plans, which we're planning on executing this year and next. As you can see, cash generation is very much our focus and we expect that we expect the targets to be cash generative by June 2026.

15:20 So PlayStack. So last year, we said 2024 would be the year of PlayStack, and and it very much was. Ballotro Ballotro has sold over sold over 5,000,000 units, which is an unbelievable success. And as of today, it's well over 6,000,000 units. I mean, it's a bit like one of those annoying kids at sports day that wins all the medals. It it scooped the game of the year awards medal, the BAFTA medals, the indie medals, the golden joystick awards medals. I mean, it was just an extraordinary year for Ballantra, and we're super proud to be involved with such an incredible developer as LocalFund. And our team has done an incredible job to really let this game shine and to bring it to as many as many players as possible. And that is continuing this year and will go on for many, many years.

16:17 But, interestingly, though it was such success, it did take the shine off the incredible success of Abiotic Factor. So this is another indie game that we launched last year. It's another smash hit, sold over a million years, which is an absolutely enormous number for any indie game. So, you know, it wasn't just Valatro that sold, you know, phenomenally well. You know, we also launched the team launched Aviatry Factor and Rise of the Golden Idol, which is one of the part of our sequel, case of the golden idol, the golden idol sequel. And that was another hit. We we paid our investment on day one for that. So we had three launches last year, all phenomenally successful. So, yes, it was very much the year for for for Balladry. But like the headmaster at Sports Day, I also wanna give praise throughout the throughout the yeah. It was it was a it was a phenomenal year. And I think what is lovely is this year, in March, we also place that one publisher of the year at the UK awards, which is the industry awards in The UK. So that was lovely recognition for them and their team.

17:28 So I think what gets this what gets this industry into into issues and has done in the past is our poster enormous success and there tends to be a lack of discipline and that's absolutely not happening here. So we are very much focused on the data. So I know I've talked about these slides these graphs in the past, so I'll just go through them quickly again. So what these graphs show is the purple dot shows our external investments. That's the investment we make in a game, an external investment we make in a game, which they're called developer advances, before we launch a game. So we make an investment, and then we look to recoup that investment post launch. The green line on each of these graphs shows you the revenue that is generated from that game. We get first recoup on the games before and then our investment

18:22 has been paid, and then the the the revenue after that split between us and the developer. So as you can see, when the when the green line crosses the purple dot, that actually makes means that we're making money on on our investment. So you can see in the in the box below, we show some stats. So hit ratio, I think to clarify, because there was a little bit of confusion last time, a hit ratio is not a game that is a hit. This comes from my hedge fund background. A hit ratio is how many if you have it's like a slugging ratio in the American term. If if if you take a swing at something, are you have you hit it? And so in our in our world, if you make an investment of a £100, have you made a 100 plus pounds?

19:07 Have you made a £101 plus? If you have, that's considered a hit, as in we've hit our investment amount. And so you can see in over 90% of the games that we've launched, we've made our investment back. Our hit ratio is over 90%. And to be accurate on that, we've launched 12 games so far since inception. So we have that's that's without cherry picking. These are console games since launch. Launched 12 games, and 11 of them have returned their invested capital. And on a weighted average basis, which is the fairest way to to calculate our return on invested capital, we have made well in excess of 300% and well in excess of 200% IRR on our on our gains. And then those are extremely conservative numbers. Now one interesting stat is we now know that Excel breaks at 1256% IRR. So if if you if you try and calculate the return higher than that, then Excel blows up, which is causing some problems with a couple of the gains and a couple of our investments. So it's been a it's it's the so far, it's been a it's been a data driven approach to PlayStack has paid off.

20:19 This year, we've got seven more games launching, and you can see that on the right hand side of the graph, starting with Little Problems, Darkwater, Dawn Vale, and then we get yeah. I didn't mention. Avios Patch last year launched and sold a million units and still only beat it. It's going to its full launch in June this year, which is which is that makes it even more of a phenomenal achievement. And then we've got an unbeatable one move away and and one game that's yet to be announced. So there's an extremely exciting pipeline of of games coming up. I think one other thing to say, and and I this is not to make get people too excited, but just to to to give people a taste of of what we've achieved and maybe where what what what the future is.

21:07 So far, if you look at all the games that we've launched so far, we've spent 2.5 just over £2,500,000 in developer bots. These are the the advances that I mentioned earlier, where we give external developers advances, and we go to that game, return that capital, and then we split the the revenues in the future. So so far, with £2,500,000 of developer advances, we've created a business in PlayStat which is over £40,000,000 of revenue and 11,000,000 EBITDA. By the end of last year, so at the start of this year, we had over we have over £7,000,000 of developer advances out in the world, that your money, which is yet to generate a return. Those so those advances are the games these seven games that are launching this year and the games launching in '26 and '27.

21:59 So I'm not saying that you should multiply, you know, that that that 44,000,000 can create is generated by 2,500,000. Therefore, you could you should multiply that by, you know, seven three times to get to where we're gonna be, but it gives you a feel for, you know, some of the the potential for this business. And and the the next by the end of this year, we are budgeting all generated from internal cash flows. We're budgeting that we will have over £10,000,000 of external development in game in in games by the end of this year. And by the end of twenty six, it'll be over £16,000,000. So to James' point earlier about having a very, very healthy cash balance, you know, everything we've done, we haven't restricted the growth of these businesses. Yes. And we we are focused on cash generation, but we also we appreciate that the data is so good. If you trust the data, then you have to be making the sorts of investments we are in this business.

22:57 And, again, just to reiterate, to before anyone says, you know, gosh, you're you're gonna need your fundraise to do all that. No. This is all from internally generated cash. So I think just to just to summarize and to reiterate, we've said it all before. We at a group level, we delivered on our commitments to shareholders. We had didn't come and ask for more more money to get to cash for a breakeven, and that's been that's really been an important focus for James and myself. We've got cash on our balance sheet. It's a very healthy cash balance, and that's a growing balance.

23:42 And as a business, we're profitable and cash generative. Oxygen is in incredible shape. It's a business any any any firm would want to own with this type of profile. It's got so Targo is taking the medicine. It's bouncing back post the big reset, and it's focused on cash generation. And and PlayStack is remaining disciplined. We're trusting the data, and we're looking forward to another exceptional year. So, you know, the the company is in rude health. And before taking any questions, I just do wanna say thank you to all the people who've helped us get to this point. So the CEOs, Vicky, Shanay, and Harvey, and their teams. We've got over a 170 people of exceptionally talented individuals who helped us get to this point, and you, the shareholders, who have backed us and trusted us. So thank you very much indeed.

24:34 I hope you're happy with our progress. And with that, I I'm gonna ask, I think, Alex to move over to the questions. That's great, James. Thank you both for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. James, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you. Great. Thank you, Alex. So I probably just wanna lean in because both both of us are straining. So question from Bobby.

25:25 Bobby's got a few questions. So top one, at the end of December, the cash it was 15,000,000. What is it now? We haven't said, probably, but I think, yeah, we've alluded to the fact that it's a it's a a growing cash balance. So I think we should do that. It's still the question. Next, Bobby. We've got seven games in development. Which is the one that you have the highest hopes for, and when is it due for release? So if you look at there's very lots of public data on wishlist, etcetera. So we won't say, well, we we feel is our, you know, the game that it's most likely we think it's most likely to perform because attempting fake. But if you look at the wish list, the wish list suggests unbeatable which is launching after after the summer and Dark Water is launching next month.

26:17 They are looking at the they have got some tips in terms of Excel data. They Excel data suggest those are the games they're most likely to deliver. Balladro, gosh. Bobby, stealing. Oh my word. I'm gonna have to delete some of Bobby's question. Bobby, Balladro, is there a new release? We won't we won't be talking about that. We'll be talking about any any new releases for voucher, etcetera. We'll be talking about the place that we'll be talking about and making sure that, you know, we get the full marketing benefit of that. So sorry. We won't be answering that, will we? If you've achieved 15,000,000 in the first two months of the year, it's a full year figure of £45,000,000 realistic. It seems very low despite the comments versus 24.

27:09 So I think Bobby's referencing the £45,000,000 from the analyst number, and so he is forecasting analyst forecasting that we made £45,000,000 of revenue this year, and we've done 15 in the first Third. Yeah. So we've done a third of revenue in the first two months. So, yeah, I'll go to a very that's, you know, I think everyone will do the math. That that does seem like a very fair a fair point that, you know, that, you know, there's there's definitely scope for for us doing better than that this year. Yeah. So Bob, you also asked says, oxygen appears to have an interesting growth trajectory.

27:55 What is your five year view in terms of the sales and profit expectations? So you mentioned that the first two months of the year, Oxy grew in excess of 20%, and last year, it grew 25% top line. So I think that that would be fair if you probably can use to extrapolate that out. I think that would be a fair way to look at it. And then, you know, I talked to you about the operating margin and how that's rising as well so you can then, you know, figure out what their sales and profit expectations are because obviously that's not something we'd probably have to say. So Jack Jack talks about the same question about the first two months of the year were were excellent, and how does that place us for the rest of the year.

28:42 And then and then goes on to ask, is is there any reason to ask if Ballotro or might fall very quickly? So there's no reason to to expect them to fall any quicker than this than this normal for any game. And and, you know, it's very pleasing to see actually they are outperforming the normal decay curve for games. So no no you know, direct answer to question. There's no reason for it to. What are your views from Bruce, what are your views on value realizations and recycling of your portfolio? So we've constantly talked about making sure that we are looking to realize value for shelters.

29:28 We've historically if you look back at TRUFIN's history, we had started with six businesses, and now we've got three businesses. We've never bought another business. We've we've had some bolt ons for the existing visitors, but never bought a separate business. So I think if the you know, that's a we give you a feel for where we expect the future to go, but it's never good to be put in timelines, etcetera, and those sorts of things. Then it gives buyers potential buyers, so unfair advantage. So I don't know if that helps you on that. I think, Bruce, I think that's sort of that's that's where we've got to in terms of the map. We're prepared to say And then Jack asks he says, I was shocked. As as were we, Jack. Shocked at the at the fact the price fell yesterday on the update.

30:23 Lots of companies now do share buybacks when they have excess cash. Now cash is consistently growing quickly. Why not take advantage of such a price? Do you want to do new deals? So it's a great question. As we said in the in as I said in my statement, John Ford has discussed at length and, you know, what to do with the excess capital we have. One shareholder during this roadshow said, don't be in any wild hurry to do anything. Just breathe. It's lovely that you're you're in a position where you've actually got excess cash, but we do things we do move quickly as well as a team. So I I I appreciate that, the the suggestion of that, but we have we we are all over at Jack. We're thinking about it hard, and so thank you for prompting that, you know, something I know that many shareholders have also focused on.

31:19 And do we want to do new deals? We we absolutely do want to do new deals as we did by buying bid sets for oxygen and magic fuel, the place that, etcetera. But so, yes, we are always on the lookout for bolt on acquisitions for the existing businesses. I hope that answers your question. I think that's the end of the question. I know I just kinda little shout out to I know Henry Kennan, our former CEO and chairman, is listening to this call. So, Henry, I'm I'm surprised you haven't answered asked a question, but hello from us. So that seems to be the end of the questions. So, Alex, can I hand back over to you? That's great. Fantastic. Thank you both for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform.

32:14 But James, before we direct investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments? Yeah. So I I'm just gonna reiterate what we said earlier. We're we're we're thrilled that we're able to deliver on our commitments and our promises to shareholders that we wouldn't need more capital to to reach profitability. We've got a very healthy bank balance, growing bank balance, but we're profitable. We're growing fast as you can see in the last two months of year. So we are we are in the best position TRUFIN has ever been by a country mile. So thank you again. Thank you all for your support, and Bobby says thank you. So thank you, Bobby, for your questions, your multiple questions.

32:59 And, yeah, and I just wanna say thank you. Thank you, Alex, for hosting this meeting. Our pleasure. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of TRUFIN PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you.