(The following article is an example of executive interviews by Alliance News journalists. Our IN DEPTH reporting is available only on Alliance News professional services.)
12 Feb 2021, 17:28:29 GMT
(Alliance News) – TruFin PLC dramatically broadened its ownership earlier this month as its dominant shareholder sold stock, but the fintech firm with an interesting sideline in video game publishing is not rushing to sell one of its crown jewels.
The AIM-listed financial technology firm has found itself the beneficiary of a hit role playing video game, launched last August on the PlayStation 4, Xbox One and PC. In ‘Mortal Shell’, players are invited to “possess…the anima of defeated warriors”.
“Inhabit these mortal shell and open your understanding to their unique masteries of combat,” the game offers against dark images of sharp swords and spiky maces.
It is a long way from banking, invoice lending and the other financial offerings of TruFin, but Chief Executive Officer James van den Bergh explained that ‘Mortal Shell’ emerged from the deep approach that the company’s takes in each of its financial services verticals.
TruFin bought a majority stake in Playstack Ltd in 2019 for its games industry expertise, in order to develop a business of providing loans to video game developers. In a form of invoice lending, Playstack provided loans to mobile game developers to tide them over until they start receiving revenue-sharing payments from app stores, such as those of Apple Inc and Alphabet Inc’s Google.
Playstack now acts an originator and broker for such loans, rather than providing the capital itself, but in the meantime its publishing side has continued to launch games, scoring a hit with ‘Mortal Shell’, developed by Cold Symmetry.
Last month, TruFin said revenue doubled in 2020 to GBP14.6 million from GBP7.3 million, “significantly” ahead of market expectations and “predominantly” driven by Playstack. Adjusted pretax loss is expected to be no wider than GBP8.4 million, narrowed from GBP9.3 million in 2019.
“We went into it to do lending,” Van den Bergh said in an interview with Alliance News on Friday, “but the other side is the digital publishing side, which is very, very attractive to investors. It has done extremely well and we think will continue to do extremely well, so I think we have been fortuitous in picking Playstack.”
By being a games publisher itself, Playstack managers “know everything there is to know about the gaming space,” Van den Bergh said. “If someone asked you if you want to get into the mobile game lending, I would say ‘watch out’…because it is an absolute minefield unless you know exactly what you are doing, and the Playstack guys, because of their pedigree, they know exactly what they are doing.”
The CEO said TruFin bought Playstack “to completely own the vertical” of mobile game lending. “We’ve been very fortunate that they’ve had great publishing success as well, and obviously the margin of that is much higher and the growth of that is much bigger.”
In addition to Playstack, TruFin consists of three other financial services verticals.
Satago Financial Solutions Ltd is an invoice lender that also offers its platform to banks as a lending-as-service solution. Currently using the Satago technology in a commercial pilot is Lloyds Banking Group PLC. Success in the trial would lead to a five-year agreement.
Oxygen Finance Group Ltd provides early payment systems to clients in the public and private sector. Vertus Capital Ltd offers business loans to help owners of independent financial advice firms in the UK to sell their businesses to like-minded peers.
Van den Bergh said TruFin is an operating holding company, not a fintech investor, but each of its four verticals operate as a stand-alone business, ready to be sold or spun off at a moment’s notice.
It did this with business lender Distribution Finance Capital Holdings PLC, which demerged from Trufin and debuted on AIM in May 2019. DF Capital lends to manufacturing businesses to support their supply chains.
The CEO likened TruFin, whose own AIM listing was in February 2018, to Melrose Industries PLC in the fintech space. The FTSE 100 firm famously operates a ‘buy, improve and sell’ model, most recently applying this to UK aerospace and engineering firm GKN.
The success of Playstack, combined with its quirky mix of financial services and games publishing, makes it the most likely next candidate for TruFin to spin off, Van den Bergh agreed, though he is in no hurry.
“It is incredibly attractive to investors at this time,” he said. “The mobile games businesses, the console businesses are trading at unbelievable [revenue] multiples. Obviously, as a stand-alone entity, it would be a very attractive business. It’s got a full team. We could sell it tomorrow, and it wouldn’t in any way be disrupted.”
“If we were to spin one off, it would be Playstack,” he said, adding: “But we’re not selling it tomorrow.”
The attractive options for the future ownership of Playstack beckon even as TruFin’s own share register has been considerably broadened.
Founding shareholder Arrowgrass Master Fund Ltd earlier this month reduced its holding in TruFin PLC to 19.99% from 73.87%. The sale, run by Liberum Capital Ltd, was the largest block trade in the UK since 2017, according to TruFin, effectively re-IPOing the company.
The disposal made room for a new group of institutional investors. These are led by Oslo-based family office Watrium AS, which doubled its stake to just under 21% from just over 10%.
Gresham House Asset Management Ltd has taken a 7.9% stake, Lombard Odier Asset Management (Europe) Ltd 5.9%, and JO Hambro Capital Management Ltd 5.5%.
Van den Bergh himself has an about 2% stake.
He said that because Arrowgrass, for which he had worked until 2017, had announced plans to close down by the end of 2021, this created an overhang for TruFin shares.
“They have been a great shareholder in at times difficult circumstances,” Van den Bergh said, “but an overhang of that size is hard to handle.”
TruFin shares closed up 3.7% at 70.00 pence on Friday in London, triple its price of 18.00p on July 1 last year.
He said that Arrowgrass agreed, as the Trufin share price improved in the second half of 2020, that “the company was being held back by the overhang” and would consider reducing its stake.
“It is harder to do business when publicly you have a forced seller on your shareholder register,” Van den Bergh said.
The change in ownership, however, “doesn’t change the strategy”, the CEO continued. “We believe that if you are very dominant in a vertical, in a niche, you will do well,” he said, while using partnerships with larger companies to leverage that expertise.
“We are an unusual combination of a growth company that is fully funded,” he said.
By Tom Waite; thomaslwaite@alliancenews.com
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