Year-end business update

RNS Number : 3289N

Supply @ME Capital PLC

20 January 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU, WHICH IS PART OF UNITED KINGDOM DOMESTIC LAW PURSUANT TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

20 January 2023

Supply@ME Capital plc

(the " Company " or " SYME ", and together with its subsidiaries, the "Group")

Year-end business update

SYME, the fintech business which provides an innovative fintech platform (the "Platform") for use by manufacturing and trading companies to access Inventory Monetisation© ("IM") solutions enabling their businesses to generate cashflow, is pleased to provide an update on its recent business activities.

Key highlights:

· Growth in the pipeline of client companies with warehoused goods inventories suitable for monetisation [1] was valued at £343.5m as at 31 December 2022. This compares to £329.8m as at 23 September 2022.

· Progress has been made towards securing traditional funding routes in both European (including Italy) and UK markets.

· New Italian legislation - pegno non possessorio (the "PNP Regulation") - which SYME anticipates will be promulgated shortly, is expected to provide greater opportunities for Italian banks to adopt the Platform for use under white-label agreements and further enhance the security available to the Inventory Funders in traditional IM transactions.

· TradeFlow Capital Management Pte. Limited ("TradeFlow") experienced growth in assets under management ("AUM") in the year ended 31 December 2022 of approximately 35%, relative to the year ended 31 December 2021, representing a continued and growing endorsement of its Investment Advisory strategy. 

Warehoused goods monetisation

Overview

Origination of client companies in SYME's core regions of Europe (including Italy) and the UK have continued to grow, with the warehoused goods monetisation pipeline standing at £343.5m as at 31 December 2022. This compares to £329.8m as at 23 September 2022.

SYME's focus remains on maintaining, growing and converting the pipeline, whilst attracting new Inventory Funders, starting from smaller ticket IM transactions, to build a track-record, and then moving to larger ticket IM transactions. With the inaugural IM completed and others in process of being arranged, the foundations of positive track-record are being laid by SYME with the expectation that it would become progressively easier to attract new Inventory Funders to IM transactions. The appetite of Inventory Funders has also driven the SYME origination team to assess potential IM amounts over GBP/EUR/USD 10m and, subject to the appropriate structure and funding being in place, there are a number of larger ticket opportunities that could be converted during 2023.

The market need for inventory solutions with a proven technology platform and infrastructure from day one is continuing to drive significant opportunities for SYME's client company origination and for self-funding opportunities with global and local banks, the latter of which are not included in the above referenced pipeline figures.

The onboarding of new client companies to the Platform will generate additional due diligence fees and, once the client companies have signed IM binding agreements, origination fees.

SYME has continued to work diligently to build quality portfolios of client companies to attract additional Inventory Funders. Leveraging the first IM transaction made in 2022, SYME, as the provider of the Platform and inventory servicer, is now working on the following funding routes:

· Inventory Funders via the Global Inventory Fund ("GIF")

In addition to the existing Cayman-based structure serviced by APEX Group[2], advised by TradeFlow, SYME is evaluating the option of sponsoring the creation of a European structure together with a market-leading fund service provider and to build, progressively, a multi-asset management model where the Group can also cooperate with further European and UK authorised asset managers.

· Special situations / deals

SYME also recognises the importance of allowing initial traditional Inventory Funders to build up a bespoke funding structure on top of the stock companies (trading companies which deliver the IM transactions by using the Platform). This route can be built through dedicated securitisation issuances or similar direct investing structures, which are still being considered.

· Direct partnerships with banks

Global and local banks have expressed an interest in using the Platform to directly serve their clients. SYME has developed two alternative approaches for such banks, including the "self-funding" model (where a bank will be able to use the Platform, including the legal and accounting framework provided by SYME, to fund companies that are already clients of such bank) or the "white-label" model (where a bank will only use the technology components of the Platform to fund directly such bank's existing clients).

· Token route

As per the RNS of 21 December 2022, the Company aims to involve multiple liquidity providers to deploy new IM transactions (including crypto asset managers and direct investors through liquidity pools partnerships) in line with the goals of Phase Two of the Strategic Agreement with VeChain Foundation[3] ("VeChain"). In this regard, SYME is compiling, from its global pipeline, a portfolio of potential client companies with up to approximately US$50m of inventory to be monetised across such portfolio. This reflects the residual commitment of US$8.5m budgeted by VeChain and, the objective to raise additional capital from the VeChain community and other crypto/digital assets investors.

SYME also expects to commence a new onboarding process with Centrifuge[4], and, accordingly, the opportunity to explore potential funding of IM transactions through DeFi (decentralised finance). The Company will provide a further update to the market as and when the Centrifuge onboarding is finalised.

Europe (including Italy)

The Group's origination team works with a select panel of originators and local business introducers who continue to make introductions to high quality businesses. As the awareness of IM grows, following the first IM transaction, SYME is also seeing 'larger ticket' opportunities.

The Group has built a strong pipeline in Italy and other European jurisdictions to facilitate further IMs with VeChain in "Phase Two" and other traditional Inventory Funders. SYME is also seeing more opportunities for self-funding with local banks across Europe and their client companies.

For example, SYME is currently working with:

· an Italian bank and a Big 4 accountancy firm to secure an IM transaction with an IM value of up to €10m, which involves an existing client of the relevant Italian bank; and

· a consortium of European investors for a securitisation issuance to fund an IM transaction with an IM value of up to €5m, which will involve at least one Italian and one UK client company.

Furthermore, the Company believes the new PNP Regulation, which is expected to be published shortly in the Official Journal of the Italian Republic, will provide opportunities to commence its white-label business model. The PNP Regulation will, for the first time in Italy, introduce the concept of "security interest" (a concept widely adopted across Europe and the UK) into Italian law, and allow entrepreneurs to access the financing of their inventory more easily, without having to sell, transform or otherwise dispose of their business assets.

Moreover, the "non-possessory pledge" introduced by the Decree-law n. 59/2016, later converted into law, and regulated more specifically by Decree no. 114/2021 of the Italian Ministry of Economy and Finance, will soon be accessible to Italian businesses following the latest provision taken by the Italian Revenue Agency (Agenzia delle Entrate) with which the digital register for the registration and keeping of pledges becomes operational. As a result of that register, all the operations relating to such pledges will be capable of being carried out swiftly and electronically (including, but not limited to, registration, consultation by anyone, modification, renewal and cancellation).

For banks and investors, the PNP Regulation will facilitate the effective exercise of the rights of secured creditors, aligning the effectiveness of the enforceability of the movable pledge with the best practices already adopted in other countries.

Market operators consider the PNP Regulation to be a significant development for the Italian industrial and manufacturing sector. It is expected to help companies to attract investments aimed at divesting and/or financing their own inventory.

For SYME, it is expected that the PNP Regulation will create further opportunity for traditional Inventory Funders to invest in IM transactions in light of the proposed improvements to the legal enforceability of guarantees over the inventory, through the arrangement of self-funding and/or white-label agreements, which leverage the Platform.

The Company will provide further updates to the market as and when the PNP Regulation is promulgated.

Finally, with reference to other projects previously announced by the Company:

· SACE: the Company has worked closely with SACE[5] to study a bespoke guarantee covering the hypothetical risk that the Italian Stock Company would be unable to repay the loans (or notes) provided by the Inventory Funders. The most recent feedback that SYME has received from SACE is that in order to continue with the bespoke guarantee, there is a need for an update to the local legal framework regarding state aid, which is already part of the Italian government's legislative agenda. Such an amendment would allow SACE to guarantee domestic transactions - such as the IM transactions - which are currently not part of the SACE's core products, which are focused on export or international business.

· Captive & Fintech bank initiatives: over the last two years, due to the turbulent economic outlook (post-COVID-19 and impacted by the energy crisis) the Company had delayed the decision to invest directly into an authorised and licensed banking business. This decision was validated by the evolution of banking regulation which contains further limits and constraints to the lending activity of banks. As such, with reference to the following potential initiatives:

o  Captive bank: the Company has been advised by its key shareholder the AvantGarde Group S.p.A. ("TAG"), that the initiative is still active. Specifically, TAG, together with its partners, is evaluating an investment into a wider European license which would not focus solely on the Italian jurisdiction. This initiative is still in progress and SYME will provide further updates via RNS as and when it is appropriate for it to do so; and

o  Fintech bank: as per the RNS on 29 June 2021 where the Company updated its captive funding strategy to include the possibility of a direct investment into a fintech bank owned by an Italian banking group, the commercial sensitivities and legal complexities meant that the Company was not always able to update investors regarding such initiatives. The term sheet between the parties has expired, and, in light of the economic environment described above, the Company is continuing to assess the benefits for its business and shareholders and remains in discussion with the Italian banking group regarding a new potential agreement, whilst continuing to evaluate similar opportunities which the market can offer.

United Kingdom

Origination in the UK has continued to grow, with client companies sourced through SYME's strong relationships held with a wide eco-system of introducers which have also enabled the growth in the European portfolio of client companies. There are several large ticket opportunities to monetise subject to the appropriate structure and funding being in place and as the Company continues to build its track-record, this will unlock further client company opportunities.

Additionally, as stated above, SYME is working with a consortium of European investors for a securitisation issuance to fund an IM transaction with an inventory monetisation value of up to €5m, which involves a first UK client company and at least one Italian client company.

For both UK and Italian markets, the Company is continuing to work with StormHarbour Securities LP to originate potential Inventory Funders.

Middle East and North Africa (MENA)

Business opportunities in the UK and Europe continue to be SYME's core focus, but progress is also being made for future IM transactions in the MENA region, particularly in the United Arab Emirates, supported by a select panel of local partners and brokers.

More specifically, leveraging the partnership agreement signed in 2022 by TradeFlow and Cargoes Finance (by DP World), SYME started to work directly with DP World to structure an IM transaction.

As previously announced, the Company remains in discussions with a bank operating in Saudi Arabia regarding the white-label tender, though that has been delayed for operational reasons due to the bank's business priorities.

Finally, with the objective of prioritising the traditional funding routes and optimising its capability plan, the Company temporarily placed the Shariah project on hold, waiting for the optimal time-to-market.

United States

In 2023, the Company intends to conclude the project started with a Big 4 consultancy firm aimed at conducting a dedicated assessment regarding the application of the IM framework under the US GAAP.

In parallel, leveraging the partnership with Anthony Brown, consulting company Epicirean Brands and The Trade Advisory, SYME continues to engage with specific potential Inventory Funders and white-label partners on how best to structure the first IM transaction in US.

As previously stated, while SYME sees a number of opportunities in the US, the Company's current priority is to concentrate, for now, on its core markets.

In-transit monetisation

TradeFlow has continued to focus on the following key areas of activity during the year ended 31 December 2022:

· fund management;

· digital fund support implementation and strategic developments in technology/fund management; and

· alliances with logistic partners who share our digitalisation vision.

In respect of the fund management business, TradeFlow's relationship with the International Chamber of Commerce ("ICC") continues to progress and it anticipates launching an ICC endorsed fund to support small-medium-sized enterprise trade in 2023. The existing TradeFlow funds covering in-transit cargo transactions are on track to make targeted returns for its investors. 

TradeFlow's partnership with the Singapore Institute of Technology continues to progress with its Research project contract to develop an artificial intelligence system for enhanced predictive analytics around logistics and shipping, which is on track to yield results in 2023.

Alessandro Zamboni, CEO of SYME, said:

"Today's update evidences the continued and significant progress being made by the Group. The next key milestones on SYME's horizon are traditional funding-backed IMs in Italy and the UK. These transactions will serve a dual-purpose: to build our track-record for Inventory Funders; and to support corporates in sectors where we see growth opportunities and the potential to scale to larger inventories."

"We further expect the PNP Regulation in Italy to open additional routes to market for our white-label offering, which will further validate our ready-to-go Platform and strengthen SYME's position as a partner of choice for global and local banks interested in funding inventory-backed transactions."

"It's great to see an increased appetite by the investors on real asset class related to inventories. TradeFlow's relationship with ICC is a concrete example. It reflects the size of the target addressable market which continues to show a huge funding gap suffered by mid-caps and SMEs, which we are targeting with unique IM market proposition."

For the purposes of UK MAR, the person responsible for arranging release of this announcement on behalf of SYME is Alessandro Zamboni, CEO.

Contact information

Alessandro Zamboni, CEO, Supply@ME Capital plc,   [e-mail]

MHP Group, [e-mail]

Notes

SYME and its operating subsidiaries provide its Platform for use by manufacturing and trading companies to access inventory trade solutions enabling their businesses to generate cashflow, via a non-credit approach and without incurring debt.  This is achieved by their existing eligible inventory being added to the Platform and then monetised via purchase by third party Inventory Funders.  The inventory to be monetised can include warehoused goods waiting to be sold to end-customers or goods that are part of a typical import/export transaction. SYME announced in August 2021 the launch of a global Inventory Monetisation programme which will be focused on both inventory in transit monetisation and warehoused goods monetisation. This programme will be focused on creditworthy companies and not those in distress or otherwise seeking to monetise illiquid inventories.

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[1] The warehoused goods monetisation pipeline key performance indicator ("KPI") represents the current (British Pound Sterling ("GBP") equivalent) potential value of warehoused goods, rather than pipeline revenue expected to be earned by the Group. As such, this provides a good indicator of the level of customer interest and demand for the Group's current and future warehoused goods monetisation services. The warehoused goods monetisation pipeline KPI is an unaudited figure.

[2] https://www.apexgroup.com/

[3] https://www.vechain.org/

[4] https://centrifuge.io/

[5] https://www.sace.it/en

 

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