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For Immediate Release

30 September 2021

Zaim Credit Systems Plc

("Zaim" or the "Group")

Unaudited financial results for six months ended 30 June 2021

Transformational Results Following First Year of Online Business Model

Zaim Credit Systems plc (the 'Group' or 'Zaim'), the Russian focused fintech group, is pleased to announce its unaudited financial results for the six month period ended 30 June 2021. A copy of the full interim results are available on the Company's website, www.zaimcreditsystemsplc.com.

Key H1 2021 Highlights

Growth and Profit Simultaneously Delivered

Successful implementation of highly scalable, low-fixed-cost online-focused strategy, has resulted in:

•             A dramatic increase in the amount of overall loans issued for the H1 2021 period by 2.78 times to £11.45m (total for both on-line and off-line) (H1 2020: £4.12m);

•             Outstanding growth of amount of loans issued online by 13.6 times to £9.88m with online business now comprising 86% of overall loans issued;

•           Net H1 profit of £229,000 vs. net loss of £1,335,000 in H1 2020 (profit recovery of c.£1,564m);

•            Growing Cash Balance of £1,167,000 as at 30 June 2021 (an increase of £526,000 vs. 31 December 2020)

•            Staff costs decreased significantly by 25% to £724,000 vs. 1H 2020

•             Operating expenses reduced by 10% to £948,000 vs. 1H 2020

Zaim's transition to a digital business has delivered a growth in H1 2021 amounts lent equal to a multiple of 2.78 times volume seen in the same period of the previous year. At the same time the overall operational costs have been significantly reduced. This has led to an improvement in profit in excess of £1.5 million compared to the prior period and management expects further improvements in cash flow from operating activities in H2 2021.

 Zaim CEO, Siro Cicconi commented:

"I am very pleased to report another period of strong and profitable growth. In the first half of 2021 Zaim continued to execute its strategy to transition to an online lending model. This strategy resulted in a significant increase in access to our products without the need to visit our stores and at the same time decreasing our fixed costs base. Following one year of the launch of the new business model, we have proved that the path to digitalisation was the correct one and through further plans to increase our digital service and new business offerings we are now poised to generate substantial value for our shareholders.

In the first half of 2021 our team continued to develop our services by introducing new payment methods (Apple Pay/Google Pay), launching a campaign manager to manage advertising communications, further improving user interface. At the same time, our initiatives, launched in the second half of 2020 such as target advertisement, search engine optimization, launch of online business on a 24/7 schedule, continued to bear fruits.

As a result, the amount of loans issued in the first half of 2021 grew by 2.78 times vs. the first half of 2020 on the back of an impressive growth of loans issued online by 13.6 times. In the first half of 2021 86% of loans were issued online vs. only 17% in the first half of 2020.

An increase in the amount of loans issued was partially offset by a decrease in the average duration of the loan by 42% as online loans have fewer duration than offline loans, however, interest income in the first half of 2021 grew by a healthy 55% vs. the first half of 2020.

At the same time, staff costs have decreased by 25% and operating expenses have decreased by 10% due to the online expansion all resulting in a Net profit for H1 2021 of £229k a c£1.5million improvement on the losses declared in the same period of 2020. Zaim's four consecutive quarters of rapid year-on-year and quarter-on-quarter growth demonstrate the strength of our business model. Our management is focused on maximising the growth and gaining as much market share as possible.

We have recently launched our branded mobile application (Zaim Mobile App) that became a new sales channel for our company along with online and offline sales channels. The App allows existing customers to get loans faster and easier, increasing loyalty of the clients by improving their customer experience. We expect it to become a significant growth driver for our business given the rapid growth of the online customer base.

The successful launch of the Zaim Mobile App is an important milestone in the path of increasing the Fintech content in our business model. It creates the opportunity to widen the knowledge we have of our clients, understand their needs, attitudes and source information and data that will drive Zaim in the creation of next generation services.

Our low-fixed-costs highly scalable business model had laid solid foundation for further growth of our business and I would like to thank all of our employees, customers, consultants and the management team for their hard work and dedication."

Financial highlights

1 Operating margin is calculated as net operating cash flow (net cash received for the period (including collecting claims) less loans provided including insurances) divided by total loans provided including insurances
2 Adjusted EBIT is calculated by taking loss for the year adding back accrued interest, non-cash share-based payment charges, costs related to the IPO and one-off restructuring costs which are non-recurring.

Contact:

Zaim Credit Systems Group

Unaudited Interim Condensed Financial Statements in accordance with International Financial Reporting Standards

30 June 2021

Zaim Сredit Systems Group

Interim Condensed Consolidated Statement of profit or loss and Other Comprehensive Income for the six months ended 30 June

30 September 2021

Zaim Сredit Systems Group        

Interim Condensed Consolidated Statement of financial position as at

30 September 2021

Interim Condensed Statement of changes in shareholders' equity (Unaudited)  for the six months ended 30 June 2021  (unaudited)

Interim Condensed Statement of changes in shareholders' equity (Unaudited)  for the six months ended 30 June 2020 (unaudited)

Interim Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June

Notes to the Financial information

1.     Activities of the Group. General information

The principal activity of Zaim Credit Systems plc ("the Company") and its subsidiary Zaim-Express, LLC (together "the Group") is issuance of microloans to individuals (retail customers). The Company was incorporated as Agana Holdings Plc and registered in England and Wales on 15 June 2018 as a public limited company with company registration number 11418575 and LEI, 213800Z4MI9KSZA2VW72 and on 22 July 2019 the Company changed its name to Zaim Credit Systems Plc.

On 18 September 2019 the Company acquired the entire issued share capital of Zaim-Express LLC. The Company is now the holding company of a Russian based financial services company Zaim-Express LLC (Subsidiary), so main function of the Company is to provide holding company services and undertake management of the listed activities on the stock exchange. These business combination in 2019 was stated in consolidated financial statements as reverse acquisitions under IFRS 3.

The organizational structure of Group:

The Subsidiary's principle activity is issuance of microloans online via web-site and the mobile application and through the network of its branches in Moscow and the Moscow Region. The Subsidiary was entered in the state register of microfinance organisations on 29 August 2011, registration number 2110177000440. The Subsidiary's assets and liabilities are located in the Russian Federation. The average number of Subsidiary's employees is as follows:

The average number of parent Company's employees (directors) is as follows:

As at 30 June 2021, the man participant of the Company is Zaim Holdings SA (with share of votes 73,23%). The ultimate controlling party of the Group is an individual - Mr. Siro Donato Cicconi.

Subsidiary has 26 stores as at 30 June 2021 (31 December, 2020: 30 stores), from which it conducts business throughout the Russian Federation.  During first half of the year 2020 there was reduction of stores due to reduced business activity because of Covid-19 pandemic (as a measure to prevent unprofitable business) and also because of intentions of the management to develop the new business-model - which supposes substantial share of online-loans. The additional costs due to the dismissal of employees (because of Covid-19 pandemic) and forced collecting activity (which aimed to collect bad debts in the portfolio as of December 31, 2019) were stated separately (like non-periodic or one-time operational costs) in Group Consolidated Statement of profit or loss. During first half year 2021 management continued to monitor the profitability of stores, and there is no significant reduction in its number.

The Group's perspective is the continued development of online strategy and focus on collecting activities.

According to the estimates of the Central Bank of Russia, the microfinance market in Russia began to recover in the first half of 2021 year. There is a slowdown in the number of players that leaving the market compared to the second half of 2020 (including those due to their non-compliance with the new requirements for the minimum level of equity (capital). More than half of MFOs demonstrated portfolio growth in the first half of 2021. One of the reasons the implementation of deferred demand amid recovery in economic activity. Also, there is a decrease in the share of overdue debt (NPL90 +). Experts of the National Rating Agency (NRA) believe that the tightening of requirements for borrowers and a decrease in loans allowed the sector to avoid the growth of overdue debt and even demonstrate its decline.

2.  Basis of preparation

The condensed consolidated interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standard 34 Interim Financial Reporting. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2020, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The condensed consolidated interim financial statements set out above do not constitute statutory accounts within the meaning of the Companies Act 2006. They have been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union. Statutory financial statements for the year ended 31 December 2020 were approved by the Board of Directors on 29 April 2021 and delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified.

The condensed consolidated interim financial statements of the Company have not been audited or reviewed by the Company's auditor, Shipley's LLP.

Going concern

This financial information reflects Group's management's current assessment of the impact of the Russian business environment on the operations and the financial position of Group. The future economic direction of the Russian Federation is largely dependent upon the effectiveness of measures undertaken by the Russian Federation Government and other factors, including regulatory and political developments which are beyond Group's control. Group's management cannot predict what impact these factors can have on Group's financial position in future. This financial information was prepared on a going concern assumption.

The above factors in conjunction with continuing economic and political changes taking place in the Russian Federation indicate that a material uncertainty exists that may cast significant doubt on Group's ability to continue as a going concern. This ability depends on future events, including achieving the level of the loans to customers portfolio sufficient to incur costs and earn profits and the ability and willingness of Group's sole participant to continue with financial assistance to Group.

The Financial Statements have been prepared on a going concern basis. In 2020, the Group changed its business model to one of remote lending via the Internet, which resulted in a significant decrease in fixed lease and staff costs and a decrease in the share of lending costs within total expenses. The Group continues to optimise the network operation, including removal of loss-making outlets and enhancement of the Internet channel to attract customers. The Group is actively collecting overdue debts, inter alia, through legal action.

The Directors consider that the Group has sufficient funds to undertake its operating activities for a period of at least the next 12 months including any additional expenditure required in relation to any adverse impacts from the Covid-19 Pandemic. The Group has cash reserves which are considered sufficient by the Directors to fund the Group's desired strategy of increasing the loan book both online and in the store. 

Risks and uncertainties

The Director continuously assesses and monitors the key risks of the business. The key risks that could affect Group's medium-term performance and the factors that mitigate those risks have not substantially changed from those set out in Group's 2019 Financial Information. The key financial risks are liquidity risk, interest rate risk.

The economy of the Russian Federation continues to display certain characteristics of an emerging market. These characteristics include, in particular, inconvertibility of the national currency in most countries outside of Russia and relatively high inflation rates. The current Russian tax, currency and customs legislation is subject to varying interpretations and frequent changes. The country's economy depends on movements of oil and gas prices.

The future economic development of the Russian Federation is largely dependent upon the effectiveness of economic measures, financial mechanisms and monetary policies adopted by the Government, together with tax, regulatory, and political developments.

Critical accounting estimates

The preparation of condensed consolidated interim financial information requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in note 3 of Group's 2020 Financial Information. The nature and amounts of such estimates have not changed significantly during the interim period.

Currency 

The GBP was chosen as the presentation currency of the consolidated financial information, as the shareholders of Group use information prepared in GBP to make decisions and evaluate the financial results of Group.

For the purpose of presenting the consolidated financial information, the financial results and balance sheet items of Subsidiary are translated into the presentation currency of Group in accordance with the requirements of International Accounting Standard IAS 21 "Effect of Changes in Foreign Exchange Rates" as follows:

(a) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Gains and losses on purchase and sale of foreign currency are determined as a difference between the selling price and the carrying amount at the date of the transaction.

(b) Group companies

 The results and financial position of all the Group's entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

   1. assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

   2. each component of profit or loss is translated at average exchange rates during the accounting period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

   3.  all resulting exchange differences are recognised in other comprehensive income

3.  Significant accounting policies

The condensed consolidated interim financial information have been prepared under the historical cost convention as modified by the revaluation of certain of the subsidiaries' assets and liabilities to fair value for consolidation purposes.

The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated interim financial information as were applied in the preparation of Group's Financial Information for the year ended 31 December 2020 (see Note 3).

4. Loans to customers

Below is analysis of movements in the ECL allowance during 1H2021  (by type of loans specified in the first table of the Note), GBP:

Below is analysis of movements in the ECL allowance during 1H2020 (by type of loans specified in the first table of the Note), GBP:

The ECL allowance for loans and advances to customers recognised during the period is impacted by various factors. The table below describes the main changes:

·           transfers between Stages 1 and 2 and Stage 3 due to significant increase (or decrease) in credit exposure or impairment during the period and subsequent increase (or decrease) in the estimated ECL level: for 12 months or over the entire period;

·           accrual of additional allowances for new financial instruments recognised during the period, as well as reduction in allowance as a result of derecognition of financial instruments during the period;

·           impact on ECL estimation due to changes in model assumptions, including changes in probability of default, EAD and LGD during the period resulting from regular updating of the model inputs.

Following is the credit quality analysis of loans to customers as at 30 June 2021:

Following is the credit quality analysis of loans to customers as at 31 December 2020:

The ECL allowance for loans to customers recognized during the period is impacted by different factors.  Information on the assessment of expected credit losses is disclosed in Note 3 of Group's Financial Statements for the year 2020.

The Group uses the following approach to measurement of expected credit losses:

·      portfolio-based measurement: internal ratings are assigned individually, but the same credit risk parameters (e.g. PD, LGD) are applied to similar credit risk ratings and homogeneous credit portfolio segments in the process of ELC estimation.

This approach provides for aggregation of the portfolio into homogeneous segments on the basis of specific information on borrowers, such as delinquent loans, historic data on prior period losses and forward-looking macroeconomic information.

The amounts of loans recognised as "past due" represent the entire balance of such loans rather than the overdue amounts of individual payments.

5.  Lease

The Group has agreements for lease of premises.

The Group did not apply a simplified approach to recognise lease modifications allowed due to the COVID-19 pandemic.

During the 2020 there was a significant decrease in the number of concluded lease agreements due to reduced business activity because of Covid-19 pandemic (as a measure to prevent unprofitable business) and also because of intentions of the management to develop the new business-model - which supposes substantial share of online-loans.  In 1 half year 2020 there was no significant reduction of stores, although some of it were closed as the result of monitoring for unprofitableness.

The carrying amount of right-of- use assets and its movements during the period are presented below:

The carrying amounts of lease liabilities and their movements during the period are set out below:

Group

6.  Interest income and interest expense

7. Other operating income / loss

8. Operating expenses

Periodic Operating expenses

9. Restructuring costs (for the six months, ended 30 June, 2020)

There were additional staff costs during IH 2020 due to the dismissal of employees (because of Covid-19 pandemic and also the intentions of management to develop the new business-model - which supposes substantial share of online-loans).  Besides this, the additional costs on personal were caused by the hiring of additional staff with fixed-term contracts, which were engaged in organizing the collection of the bad debt portfolio as of 31 December 2019, based on court decisions. These additional costs were stated separately in Consolidated Statement of profit or loss and Other Comprehensive Income

There were also additional non-periodic operational costs during IH 2020 due to the forced collecting activity (which aimed to collect bad debts in the portfolio as of December 31, 2019) - State Duty and Postal Services, which were stated separately in Group Consolidated Statement of profit or loss and Other Comprehensive Income. The main results of this collection work were reflected in the second half of the year 2020.

Non-Periodic (One-time) Operating expenses

10.  Charter and Additional Capital

During 1 half year 2021, Group has completed an equity fundraise of £1,000,000 (gross) through the issue of 25,000,000 ordinary shares at a price of 4.0 pence per ordinary share.

The Fundraise has been undertaken by way of a placing of new ordinary shares of £0.01 par value in the share capital of the Group. The Fundraise is to provide additional capital for expansion of the loan portfolio and the development of new products.

Below is a reconciliation of the movement in the legal parent Company share capital during 1 H 2021

        Additional capital (share premium) of the legal parent

        Group                                                                                                                                                        Amount, £

11. Related party transactions

Transactions with parent company 

Interest income                                                                                                                               -                    7                

Interest expense                                                                                                                          -                       45