Publication of Annual Report and Consolidated Financial Statements
for the Year Ended 31 December 2020
Supply@ME Capital plc, the innovative fintech platform which provides Inventory Monetisation© services to manufacturing and trading companies, is pleased to announce the publication of its Annual Report and Consolidated Financial Statements for the year ended 31 December 2020.
A separate announcement providing details of the 2020 Annual General Meeting will be made shortly.
Following publication of this Annual Report and Consolidated Financial Statements, and before the issue of the 2021 interim financial statements, the Company will issue a Half-Year Trading Update to 30 June 2021 which will include trading information from the TradeFlow business.
Notes
Supply@ME enables businesses to generate cashflow, without incurring debt, by monetising their existing stock. Before a business has found an end-customer for its inventory, the Supply@ME platform enables them to sell (“monetise”) their stock and receive cash immediately to boost their working capital. The Supply@ME service enables strong companies to improve their working capital cycle. SYME does not monetise inventory for companies in financial difficulty or with inventory that they are struggling to sell.
Contacts
Alessandro Zamboni, CEO, Supply@ME Capital plc, [email protected]
Registration number: 03936915
Supply@ME Capital plc
Annual Report and Consolidated Financial Statements
for the Year Ended 31 December 2020
Chief Executive’s Review and Chairman’s Statement
We are pleased to report to you on the Group’s activities in the year to 31 December 2020, and subsequent developments to date.
These financial statements represent the Group’s first period of trading on the Main Market of the Stock Exchange since the acquisition of Supply@ME S.r.l..
Business overview
Global landscape: a huge addressable target market
Inventory monetisation facilities can play a key role in addressing the financing needs of the broadly defined global supply chain market. According to “The 2020 McKinsey Global Payments Report”, insights into that market reveal:
· $17 trillion, as potential market for supply-chain finance.
· ~80% of eligible assets that do not benefit from better working capital financing. The remaining one-fifth of assets are often inefficiently financed.
· $14 trillion, managed directly (not financed).
· $ 2.5 trillion, currently addressed by seller-side finance solutions. In this regard, inventory financing represented, in the past year, 10% of the Seller-side financial solutions, while the receivables financing segment (including factoring, invoice discounting and receivables finance in all its forms), remains the largest segment with an estimated 65% market share.
· $ 0.5 trillion, addressed through buyer-led solutions.
· $1.5 trillion as the global gap in trade finance. In this regard, the overall trade finance market can be roughly differentiated into three segments, each with unique product dynamics:
o Documentary business, which includes traditional off-balance-sheet trade finance instruments, such as letters of credit, international guarantees, and banks’ payment obligations. These instruments are typically used to cover the two corporate parties against potential transaction risks (e.g., an exporter protecting against country-related risks of its importer’s domestic market);
o Seller-side finance, including two main financial instruments: factoring and invoice finance. These instruments address the financing needs of corporate sellers by advancing liquidity related to commercial transactions;
o Buyer-side finance, which is typically aimed at large buyers and their suppliers. It covers the financing needs of suppliers originated by large buyers, like reverse factoring, where suppliers can access third-party financing for buyer-approved invoices, as well as dynamic discounting, where buyers pay suppliers early in exchange for discounts on the invoice. This has traditionally been a smaller and more fragmented market (roughly $500 billion of turnover financed), but is now growing at double-digit rates, driven by increasing interest and new offerings by players.
Seeing the wider opportunities related to the untapped supply chain finance market, the Company wants to play a key role in this space, gaining traction from its inventory monetisation services to provide a unique non-credit approach and covering both “in-transit” and warehoused goods.
Delivering a unique alternative facility for SMEs and Large Corporates – and a new asset class for investors
Supply@ME delivers an innovative platform (“Platform”) for inventory monetisation that enables a wide range of manufacturing and trading customers to improve their working capital position by releasing capital from their inventory stock. The Platform matches the working capital needs of its customers, with capital invested through the Platform by its inventory investors (“Inventory Funders”).
Investors in Supply@ME shares gain exposure to the fee income generated by the Platform from inventory monetisation. Inventory Funders subscribe financial instruments that are secured by inventory portfolios.
The highlight event for Supply@ME Capital Plc (LON:SYME – the Company or SYME) in the year to 31 December 2020 was the successful acquisition, via a reverse takeover, of Supply@ME S.r.l. together with a successful Placing and Main Market Listing on the London Stock Exchange on 23 March 2020. These were both key milestones that will enable the Group to develop and fulfil its ambition to become a leading platform for inventory monetisation (Supply@ME Capital plc changed its name from Abal Group plc on 30 March 2020).
The Company’s purpose is to be the leading fintech inventory monetisation business enabling companies to optimise their working capital cycle through the release of capital from their inventory, in a time and price efficient way.
Its immediate strategy of creating a highly scalable global business is built on three key objectives:
· delivering a unique facility, via a digitised route, attracting and on-boarding its customers (“Client Companies”),
· developing a cutting-edge technology Platform that efficiently manages the Inventory Monetisation process, and
· implementing a repeatable, multi-channel funding strategy to diversify and scale-up its Inventory Funder investor base, allowing the asset management industry to diversify its portfolio by virtue of a real new asset class.
Building the fundamentals: milestones 2020 achieved towards the key objectives
2020 saw the groundwork laid for a number of business initiatives which have either been implemented or are close to fruition. The Company also strengthened its board and senior management team with the appointment of a Chief Financial Officer and several highly experienced individuals to key positions.
Looking at the business plan’s strategic pillars, apart from the delay in delivering the first inventory monetisation in 2020, most of the other work streams planned are on-track or completed. Specifically:
· Client Company sourcing partnerships have been established in Italy, the UK, MENA and the US with 14 partners to deliver an ongoing stream of monetisation demand to the Platform;
· the technology Platform has been further developed and is now operational and ready to implement the first monetisation transaction
· the Company has in place a multi-channel global funding strategy:
o Middle East: Shariah structure approval
o Italy: strategic agreement with the institutional asset manager Quadrivio Group (and its Industry 4.0 fund) who are working on a European bank acquisition. In parallel, establishing a Self-Funding model in order to allow other banks to promote the inventory monetisation service to their customer base
o Italy and UK: progress with the Italian and UK securitisation program managed by Storm Harbour
o USA: partnership with The Trade Advisory aimed at delivering the inventory monetisation service gaining traction from Mr Anthony Brown’s ecosystem (Funders, Client companies, warehouse service providers etc.).
Finally, talks began in 2020 with Tradeflow Capital Management Pte Ltd (“TradeFlow”), a Singaporean complementary inventory “in-transit” fintech business . In the first half of 2021, those initial discussions developed into a concrete acquisition transaction of their business, which was announced on 26 May 2021.
This acquisition will enable SYME’s customers to monetise an additional step of the inventory lifecycle (inventory in-transit) through its Platform as well as provide access to TradeFlow’s’ existing Inventory Funders. It will also potentially establish a base for inventory monetisation activity in the Singapore region covering the “East and Far-East”: the final target geography of the SYME global Platform.
Financial overview
In summary, from a financial viewpoint, the Group has transformed successfully from a cash shell listed on AIM, to a Group admitted to the Official List as a Main Market company, standard segment, trading on the London Stock Exchange.
In the period to 31 December 2020 the Company raised £2,234,000 gross (2019: £Nil), £1,615,000 net from the issue of new ordinary shares by way of a Placing.
Consolidated results
Revenues in the period* were £1,147,000 (2019: £4,000). The loss before tax and the exceptional cost of listing (£1,376,000) described below was £2,819,000 (2019: loss £687,000).
Total loss for the year was £2,962,000 (2019: loss £551,000) and loss per share 0.01 pence (2019: 0.00)
At the year end, net liabilities were £452,000 (2019: net liabilities £557,000) and cash balances were £552,000 (2019: £143,000).
*Included within accruals and deferred income is £1,131,000 (2019: £634,000) relating to payments in advance made by client companies for due diligence to pre-qualify them for access to the inventory monetisation scheme. Under Italian GAAP, these amounts are recognised in revenue in the year. Under IFRS, these amounts will be recognised in future periods.
Further details are to be found in the financial review section of the Strategic Report.
Change of accounting date / temporary suspension and subsequent re-instatement of trading
The Company’s shares were temporarily suspended from trading on 21 January 2021 due to a technical breach of DTR rule 2.0 (reporting timetable). This happened because SYME had, in accordance with company law (and following a precedent set by Aston Martin), proactively taken the decision to change its accounting reporting date to 31 December to match that of its current subsidiaries and likely future subsidiaries in the middle east and USA. Countries have different standard reference accounting dates but it had become clear that the typical reporting period across the Group’s target business geographies was the calendar year.
Therefore, on 19 January 2021, the Company changed its Accounting Reference Date from 30 September to 31 December.
This change required the Company to produce two sets of historic accounts:
– Audited accounts for the nine months to 31 December 2019, which were published on 28 January 2021
– Unaudited Interim accounts for the six months to 30 June 2020, published on 29 January 2021
Although this created additional work in the short-term, it had the immediate benefit of allowing us to produce 2020 accounts completely segregated from the Abal business and it also became clear that in the longer term, aligning all of the reporting dates to the calendar year would significantly streamline the financial reporting consolidation process.
Despite being compliant with company law timetables for reporting when accounting reference dates are changed, the Company was advised that it had triggered a technical stock exchange reporting timeline breach and the Company therefore requested the temporary suspension of its shares on 21 January 2021. The subsequent restoration process was managed directly with the FCA during February and trading in the Company’s shares resumed on 9 March 2021.
Treatment of the Reverse Takeover (RTO)
Accounting for the RTO presented a very complex accounting challenge, and a detailed analysis is to be found in Note 3 to the Group’s consolidated financial statements. Nevertheless, after a great deal of input by technical teams, there was an underlying principle to represent: Supply@ME S.r.l. – the Italian operating company – reversed into the shell of Abal Group plc (which became Supply Me Capital plc) in order to get a public company listing. It was this action which needed to be costed; and that cost needed to pass through the Income Statement. All other movements that had to be accounted for went directly through specific balance sheet reserves.
Therefore Supply@ME S.r.l. became the “deemed acquirer” of Abal Group plc. The logic that was applied to the calculation of the deemed cost of listing was relatively straightforward, once this distinction was made: the cost was effectively that of buying a controlling interest in the shares of Abal Group plc at the time of the transaction, adjusted by the working capital. It was made up of the following components:
