Final Results

RNS Number : 2420S

Baydonhill PLC

07 September 2010

 



7 September 2010

Baydonhill plc

("Baydonhill" or "the Company")

Final results for the year ended 31 March 2010

HIGHLIGHTS

·      Achievement of breakeven at EBITDA level in every month since September 2009 to period end

·      Turnover (value of foreign exchange transactions) for the year up 54 per cent to £709 million (2009: £460 million)

·      Gross profit (foreign exchange commission earned) up 38 per cent to £3.6 million (2009: £2.6 million)

·      Net loss before tax reduced by 47 per cent to £739,000 (2009: loss £1.4 million)

·      Profit after tax of £681,000 following recognition of £1.4 million tax credit

·      First quarter of 2011 fiscal year ahead of budget with strong performance from both retail and corporate sectors 

Sir Eric Peacock, Chairman of Baydonhill, commented:

"Strong growth in the Company's corporate business continues to drive the business forward and has enabled us to reach and sustain breakeven at EBITDA level on a monthly basis.

 

"Despite continuing uncertainty in the economy, the Board is very encouraged by the Company's performance to date and expects the positive trends in revenue growth and profitability to continue this financial year." 

 

 

Contacts:

Baydonhill plc
Sir Eric Peacock, Chairman Wayne Mitchell, Chief Executive	Tel: [phone]
Merchant Securities Limited
Bidhi Bhoma	Tel: [phone]

Chairman's and Chief Executive Officer's Statement

Introduction

The year under review represents an important turning point for the Company. Whilst revenue growth remained strong, the Company also implemented steps to restructure its costs to accelerate the achievement of breakeven for earnings before interest, tax, depreciation and amortisation ("EBITDA") on a monthly basis. The revenue growth alongside the cost restructuring resulted in the Company achieving breakeven at EBITDA level in September 2009. This was achieved for each subsequent month for the remainder of the financial year.

Revenues from the Corporate Sector have shown very strong growth during the year and the Company has continued to focus on platform developments and service enhancements for this area.  The Retail Sector continued to be impacted by the difficult economic climate although improvements were seen in the second half of the year.

Financial Review

The loss before tax for the financial year was £739,000, compared to a loss of £1.4 million in 2009.  However, the Company reported a profit after tax for the financial year of £681,000 (2009: loss £1.4 million) due to a tax credit of £1.4 million, recognised in the financial year under review.

As a result of the Company's improved performance, the Directors have decided that it is now appropriate to recognise the deferred asset arising from trading losses incurred in previous years.  In order to recognise the deferred tax asset arising from prior period trading losses, the Directors must be satisfied that it is more probable that future taxable profit will be available against which the unused tax losses can be utilised.  The Company prepared a five year profit forecast with underlying assumptions in line with those experienced in the year ended 31 March 2010.  The forecast indicated that the losses would be utilised in full by March 2013, and the Directors therefore decided it would be appropriate to recognise the deferred tax in full. 

Gross turnover (representing the gross value of foreign exchange currency transactions undertaken) for the Company for the year under review was £709 million, an increase of 54 per cent from the previous year's figure of £460 million.  Gross profit (representing foreign exchange commissions earned net of payments to affiliates and bank charges) increased by 38 per cent to £3.6 million from £2.6 million in the previous year.

In 2010, a charge of £1,048 (2009: £Nil) was made in respect of IFRS2 (share based payments) relating to the options issued in October 2009 which vested in January 2010. All share options issued in previous years were fully vested at 31 March 2008.

The impact on the income statement of adopting IFRS is a credit of £69,000 (2009: loss £52,000) in the year under review.

Total equity at 31 March 2010 amounted to £0.5 million compared to a deficit of £1.7 million at 31 March 2009. This is due to the issue of new shares during the year, which included Ekwienox Fx Limited ("Ekwienox Fx"), the Company's largest shareholder, exercising a convertible loan and the recognition of deferred tax in respect of trading losses incurred in previous years.

Sector Review

Revenues from the Corporate sector have shown strong even growth throughout the year under review. Gross turnover was £604 million compared to £314 million in the prior year. Following the success in this sector the sales team was expanded in February 2010.

The Retail sector has experienced another challenging year, with turnover dropping from £146 million in 2009 to £105 million in 2010.  This was due to a combination of the recession, Sterling weakness against the Euro and other principal currencies, and lack of credit all negatively impacting overseas property purchases, the sector showed signs of recovery in the second half of the year. 

Fundraising

During the period Ekwienox Fx exercised 23,090,073 warrants, representing all the warrants in respect of ordinary shares that Ekwienox Fx held at 31 March 2009.

During the period under review, new incentive arrangements were introduced whereby the ultimate parent company, Ekwienox Limited ("Ekwienox"), agreed to make available loans to certain Directors and employees of the Company, to allow these persons to subscribe for new ordinary shares in the Company ("Subscription Shares"). The loans taken up amounted, in aggregate, to approximately £350,000 and were used to subscribe for 5,599,968 new ordinary shares at 6.25p per share ("Subscription Price"), being a 56 per cent. premium to the closing mid-market price of the Company's shares on 21 October 2009. The loans are repayable on or before 30 November 2012.

On 31 March 2010, Ekwienox Fx converted an existing £700,000 loan facility granted by Ekwienox Fx in August 2007 into new ordinary shares ("Ordinary Shares") in the capital of the Company.  Under the terms of the loan agreement, the loan was convertible into new Ordinary Shares at 6p per share at any time up to the repayment date, 30 April 2010. Since the loan was made, no principal amounts were repaid.

On the same date, the Company granted to Ekwienox Fx 300,000 warrants to subscribe for new ordinary shares at 12p per share at any time up to 31 March 2013.

In February 2010, Ekwienox Fx agreed to reschedule the repayment of the £476,000 convertible loan until 30 September 2011.  Also in February 2010, Wallich and Matthes Holding BV, a company controlled by Ekwienox agreed to reschedule the repayment of a loan totalling £600,000 which will now be repaid over twenty four months commencing September 2010.

The rescheduling of the convertible loan of £476,000 has resulted in a re-assessment of the fair value of the loan at 31 March 2010 which has in a credit to the income statement of £41,000 in respect of the fair value gain.

People

There has been no change to the composition of the Board in the period under review. 

The Company's employees have responded magnificently to the challenges that they have encountered throughout the year and the Board would like to thank them for their continuing dedication and support.

Outlook

The Directors expect that during 2011 there will be continued significant growth from the Corporate Sector and plans further increases in the sales team.  The Directors believe that the current financial year will continue to show signs of recovery in the Retail Sector. The Company has decided to increase marketing expenditure to help capitalise on the recovery in this area and plans to recruit additional staff as and when the opportunity arises.

The Company has made significant progress in preparing for compliance with the European Union Payment Services Directive.  The Directive provides for greater transparency in the regulatory environment of non-bank payment businesses across the European Union.  The Company, which benefits from interim grandfathering provisions, is in the process of applying for the appropriate license from the Financial Services Authority ("FSA").

The first quarter of the 2011 fiscal year has exceeded budget with a strong performance from both the retail and corporate sectors. The Directors are very encouraged and expect that the positive trends in revenue growth and profitability will continue.

Sir Eric Peacock KCMG                                              

Chairman                                                                     

Wayne Mitchell

Chief Executive

INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2010

	Notes	2010	2009
		£	£
Continuing activities
Turnover	1	709,023,274	460,436,851
Cost of sales		(705,407,937)	(457,794,594)
Gross profit		3,615,337	2,642,257
Administrative expenses		(4,206,883)	(3,954,516)
Operating loss	3	(591,546)	(1,312,259)
Finance costs	4	(213,204)	(214,009)
Finance income	4	65,435	99,310
Loss before taxation		(739,315)	(1,426,958)
Taxation	5	1,420,200	-
Profit / (loss) for the financial year		680,885	(1,426,958)
Earnings per share
Basic	6	1.95p	(5.85p)
Diluted	6	1.28p	(5.85p)

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2010

	2010	2009
	£	£
Profit / (loss) for the year	680,885	(1,426,958)
Other comprehensive income for the year, net of tax	-	-
Total comprehensive income / (loss) for the year	680,885	(1,426,958)

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2010

	Notes	2010	2009
		£	£
Non-current assets
Plant and equipment		24,720	28,374
Intangible assets	7	658,085	700,198
Investments in subsidiaries		10	10
Deferred tax	12	1,420,200	-
Total non-current assets		2,103,015	728,582
Current assets
Trade and other receivables	9	83,823,792	40,867,872
Derivative financial assets - forward contracts	17	1,390,708	792,947
Cash and cash equivalents	8	5,544,679	2,710,550
Total current assets		90,759,179	44,371,369
Current liabilities
Trade and other payables	10	(90,695,587)	(42,778,505)
Derivative financial liabilities - forward contracts	17	(330,853)	(1,794,698)
Total current liabilities		(91,026,440)	(44,573,203)
Net current liabilities		(267,261)	(201,834)
Total assets less current liabilities		1,835,754	526,748
Non-current liabilities
Borrowings	11	(1,371,094)	(2,201,824)
Net assets		464,660	(1,675,076)
Equity
Share capital	13	492,555	243,841
Share premium	13	4,246,427	3,005,551
Retained earnings		(4,300,423)	(4,982,356)
Equity component of convertible loans		26,101	57,888
		464,660	(1,675,076)

STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 MARCH 2010

	Share Capital	Share Premium	Equity component of convertible loan notes	Retained Earnings	Total Equity
	£	£	£	£	£
Balance at 1 April 2009	243,841	3,005,551	57,888	(4,982,356)	(1,675,076)
Total comprehensive income for the year	-	-	-	680,885	680,885
Share based payments	-	-	-	1,048	1,048
Conversion of loan note	5,298	26,489	(31,787)	-	-
Issue of equity share capital	243,416	1,214,387	-	-	1,457,803
Balance at 31 March 2010	492,555	4,246,427	26,101	(4,300,423)	464,660

	Share Capital	Share Premium	Equity component of convertible loan notes	Retained Earnings	Total Equity
	£	£	£	£	£
Balance at 1 April 2008	243,841	3,005,551	52,438	(3,555,398)	(253,568)
Total comprehensive income for the year	-	-	-	(1,426,958)	(1,426,958)
Equity element of convertible loans	-	-	5,450	-	5,450
Balance at 31 March 2009	243,841	3,005,551	57,888	(4,982,356)	(1,675,076)

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2010

	Notes	2010	2009
		£	£
Net cash generated from/(used in) operating activities	14	2,325,316	(1,625,059)
Investing activities
Interest received		13,966	99,310
Purchases of intangible assets		(148,893)	(312,425)
Purchases of plant and equipment		(27,197)	(14,749)
Net cash (used in) investing activities		(162,124)	(227,864)
Financing activities
(Decrease) in borrowings		(180,767)	-
Increase in borrowings		139,425	750,000
Issue of shares		789,591	-
Interest paid		(77,312)	(79,008)
Net cash generated from financing activities		670,937	670,992
Net increase/(decrease) in cash and cash equivalents		2,834,129	(1,181,931)
Cash and cash equivalents at beginning of period		2,710,550	3,892,481
Cash and cash equivalents at end of period	8	5,544,679	2,710,550

NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 MARCH 2010

1          Accounting policies

The financial information set out in this announcement does not comprise the Company's statutory accounts for the years ended 31 March 2010 or 31 March 2009.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 March 2010 or 31 March 2009. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 or Section 237 (2) or Section 237 (3) of the Companies Act 1985 respectively and did not include references to any matters to which the auditor drew attention by way of emphasis.

The statutory accounts for the year ended 31 March 2009, which were prepared under UK GAAP, have been delivered to the Registrar of Companies, whereas those for the year ended 31 March 2010 will be delivered in due course.

The principal accounting policies are summarised below.  They have all been applied consistently throughout the period covered by this financial information.

Basis of preparation

The financial information has been prepared in accordance with IFRS as adopted by the European Union applied in accordance with the provisions of the Companies Act 2006.  In previous years the financial information has been prepared under UK GAAP. The comparative information has been restated in accordance with IFRS.  The impact on the financial information of the move from UK GAAP to IFRS is detailed in note 18.  The date of transition to IFRS was 1 April 2008 ("transition date").

The financial information has been prepared under the historical cost convention as modified by the revaluation of financial instruments.

The Company has taken advantage of section 405 of the Companies Act 2006 and not prepared consolidated financial information incorporating the investments referred to in note 12 of the statutory accounts for the year ended 31 March 2010, as the Directors' consider that their inclusion is not material for the purpose of giving a true and fair view.  The financial information therefore presents information about the Company only.

Going concern

Whilst the Company reported an operating loss for the year to March 2010, as noted in the Chairman's and Chief Executive's Statement revenue growth alongside the cost restructuring resulted in the Company achieving breakeven at EBITDA level for every month since September 2009, continuing into the new financial year.  The Directors have reviewed the cash flow for the period to September 2011 and consider that the Company will have adequate resources to meet its liabilities as they fall due for a period of at least twelve months from the date of approval of this financial information and indicate that no additional funding is required.  Accordingly, they consider it appropriate to continue to prepare the financial information on a going concern basis and hence the financial information does not include any adjustments that would result if the going concern assumption was no longer appropriate.

New standards and interpretations

A number of new standards and amendments to existing standards and interpretations have been issued, some of which are mandatory for the financial year beginning 1 April 2009, with the remaining becoming effective in future periods. 

The following accounting standards and amendments to standards have been issued by the IASB but are not effective for the year ended 31 March 2010 and have not been applied in preparing these financial information.

·              IFRS 9 - "Financial instruments". IFRS 9 has not yet been endorsed by the European Union.  As it currently stands, the new standard replaces the classification and measurement models for financial assets in IAS 39 with two classification categories: amortised cost and fair value.  The appropriate classification is driven by the Company's business model for managing the financial assets and the contractual characteristics of those assets.  The Company's decision as to how it wishes to reclassify such instruments will determine the impact of the new standard.

Other new or revised standards and interpretations issued but not yet effective include those listed below, but none of them are expected to have a significant impact on the financial information of the Company:

·              Embedded directives: amendments to IFRIC 9 and IAS 39;

·              IAS 24: related party transactions;

·              IAS 32: amendments relating to classification of rights issues;

·              IFRIC 17: distribution of non-cash assets to owners;

·              IFRIC 18: transfers of assets from customers;

·              IFRIC 19: extinguishing financial liabilities with equity instruments; and

·              Improvements to IFRS 2008 and 2009.

Taxation         

The tax expense represents the sum of the tax currently payable and any deferred tax.

The tax currently payable is based on the taxable profit for the year.  Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the year end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the correspondence tax bases used in the computation of taxable profit, and is accounted for using the liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit not the accounting profit.

The carrying amount of deferred tax assets is reviewed at each year end date and amended to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.  Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Revenue recognition

Turnover represents:

·              The gross value of foreign exchange currency transactions undertaken by the Company's foreign currency business.  Purchases of currency relating to such transactions are treated as cost of sales.  Turnover is recognised after receiving the client's authorisation.  Where the Company enters into contracts with its clients, it also entered into matched contracts with its bankers; and

·              Commissions earned from arranging property finance.  Such revenue is recognised when the client has entered into irrevocable arrangements with the loan provider or underwriter.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker as required by IFRS 8 "Operating Segments".  The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

Segment expenses are expenses that are directly attributable to a segment together with the relevant portion of other expenses that can reasonably be allocated to the segment.  Foreign exchange gains or losses, investment income, interest payable and tax are not allocated by segment.

Segment assets and liabilities include items that are directly attributable to a segment plus an allocation on a reasonable basis of shared items.  Corporate assets and liabilities are not included in business segments and are thus unallocated.  At 31 March 2010 and 2009, all assets and liabilities were unallocated.

Share based payments

The cost of share-based compensation arrangements, whereby employees and Directors receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the income statement.

The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant.  The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non market-based vesting conditions to reflect the conditions prevailing at the year end date. 

Fair value is measured by the use of a Black-Scholes pricing model taking into account the terms upon which the options were granted and spread over the period during which the employees become unconditionally entitled to the options.  The charge made in respect of the share based payments is matched by an equal adjustment to the profit and loss reserve, thereby having no impact on the Company's closing reserves or equity.

Plant and equipment

Plant and equipment are stated at historical cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, on the following bases:

                        Office equipment                        -           33 per cent.

                        Leasehold improvements            -           over the life of the lease

Intangible assets

Intangible assets are stated at historical cost less accumulated amortisation and impairment losses.

Amortisation is charged to the Income Statement on a straight line basis over the estimated useful lives of the intangible assets.  The useful lives are as follows:

                        On-line system              -           5 years

Investments in subsidiaries

Investments in subsidiaries are stated at cost less any provision for impairment.

Financial instruments

Financial assets and financial liabilities are recognised on the statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Trade and other receivables are measured at initial recognition at fair value which is the original invoiced amount less provision for impairment.  Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the amount is impaired.  The trade receivables arising from forward contracts are restated at the spot rate, plus forward points at the year end.

Cash and cash equivalents comprise cash held by the Company and short-term bank deposits with an original maturity of three months or less.

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Financial liabilities and equity instruments issued by the Company are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.  An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.  Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Interest bearing loans are initially recorded at fair value, which is ordinarily equal to the proceeds received net of direct issue costs.  Finance costs are accounted for on an accruals basis in the income statement using the effective interest method.

Derivative financial instruments

Derivative financial instruments are recognised on the Company's balance sheet when the Company becomes a party to the contractual provisions of the instrument.  The instrument is derecognised from the balance sheet when the contractual rights or obligations arising from that instrument expire or are extinguished.

Derivative financial instruments are recognised at fair value.  The gain or loss on re-measurement to fair value is recognised immediately in the income statement.

Convertible loan notes

In accordance with IAS 39 Financial Instruments: Recognition and Measurement, the future payments of convertible loans, including all future interest payments, are discounted at an equivalent market value rate and included within creditors at initial recognition. 

The difference between this and the proceeds received is regarded as the equity element of the convertible loans and is shown within reserves as equity component of convertible loans.  Subsequent to initial recognition, the liability component of the convertible loans, is measured at amortised costs using the effective interest method.  The equity component of the convertible loans is not re-measured subsequent to initial recognition except on expiry, rescheduling of repayment date or conversion.

Interest is calculated at a constant rate of return.

Foreign currency

Transactions denominated in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions.  At each year end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the year end date.  Exchange gains and losses which arise from normal trading activities are included in the income statement as incurred.

Operating leases

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.  Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the term of the lease.

Pension costs

Contributions to defined contribution schemes are charged to the income statement as they become payable in accordance with the rules of the scheme.  Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position.

2          CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATE UNCERTAINTY

The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the year end date and the reported amounts of revenues and expenses during the reporting period.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting judgements:

Share based payments

In determining the fair value of equity settled share based payments and the related charge to the income statement, the Company makes assumptions about future events and market conditions, in particular, judgement must be made as to the likely number of shares that will vest, and the fair value of each award granted.  The fair value is determined using a valuation model which is dependent on further estimates, including the Company's future dividend policy, employee turnover, the timing with which options will be exercised and the future volatility in the price of the Company's shares.

Such assumptions are based on publicly available information.  Different assumptions about these factors to those made by the Company could materially affect the reported value of share based payments.

Key sources of estimation uncertainty:

Credit risk

The trade receivables balances predominantly represent amounts not yet due under forward contracts.  There is a possibility, that, if a forward contract fails to deliver, the market loss may exceed the deposit held from the customer.  The mark to market position outstanding forward contracts is monitored regularly and for the majority of customers there is an option to make a margin call.  In respect of all other trade receivables, a full line by line review of trade receivables is carried out regularly. 

Whilst every attempt is made to ensure that the bad debt provision is as accurate as possible, there remains a risk that the provisions do not match the level of debts which ultimately prove to be uncollectible.

Deferred tax asset

Deferred tax has been recognised in full in the year to 31 March 2010 as the Company achieved monthly breakeven at EBITDA level every month from September 2009.  As noted in previous reports the nature of the corporate sales model lends itself to a high level of first year costs associated with winning new business.  The year to 31 March 2008 was the first full year of sales activity and as anticipated by the Board the ratio of costs to revenue has fallen significantly in the year to 31 March 2010, and ongoing profitability is anticipated.  The forecasts suggest sufficient taxable profits to utilise the outstanding tax losses within five years.  The tax rates substantively enacted in the 2010 emergency budget have been adopted in computing the deferred tax asset.  It is possible that the tax corporate rates are reduced or profits fail to materialise.  The position will be reviewed six monthly.

Impairment of intangibles

The intangibles represent the cost of the online trading system.  There is no off the shelf software against which the net book value of the software can be compared.  However, the reasonableness of the value can be assessed by the present value of the gross profits generated from customers who trade online rather than via a dealer.

3          OPERATING LOSS

	2010	2009
Operating loss for the period is stated after charging:	£	£
Depreciation of plant and equipment	30,851	51,225
Amortisation of intangible assets	191,006	137,404
Staff costs	2,609,285	2,550,882
Operating lease rentals	237,776	142,500

4          FINANCE COSTS AND FINANCE INCOME

	2010	2009
	£	£
Bank loans and overdrafts	16,019	4,412
Extended payment terms from group companies in respect of on-line system	60,853	25,423
Interest due on loans from Group undertakings	134,856	153,401
Unwinding of net present value of convertible loans	1,476	30,773
Finance costs	213,204	214,009

Interest receivable and similar income	13,966	99,310
Fair value gain on convertible loan	51,469	-
	65,435	99,310

5          TAXATION

	Note	2010	2009
		£	£
Current tax		-	-
Deferred tax	11	1,420,200	-
		1,420,200	-

Tax has been calculated using an estimated annual effective tax rate of Nil per cent. (2009: Nil per cent.) on profit before tax.

The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the loss before tax is as follows:

	2010	2009
	£	£
Loss before taxation	(739,315)	(1,426,958)

	2010	2009
	£	£
Tax on loss on ordinary activities at standard UK corporation tax rate of 28 per cent. (2009: 28 per cent.)	(207,008)	(399,548)
Effects of:
Expenses not deductible for tax purposes	5,596	28,444
Depreciation in excess of capital allowances	-	52,816
Fair value adjustment on derivative financial instruments	(19,242)	14,436
Losses arising in the year not recognised for deferred tax	-	303,852
Prior year trading losses / short term timing differences	(1,199,546)	-
Total tax expense for the year	(1,420,200)	-

6          EARNINGS PER SHARE

Both basic profit per share and diluted profit per share are based on a profit after tax of £681,000 and £690,000 respectively (2009: loss £1.4 million).  The basic profit per share has been calculated on a weighted average of 34,863,807 (2009: 24,384,015) ordinary shares in issue.  Diluted profit per share is calculated on a weighted average of 54,012,448 ordinary shares (2009: 24,384,015).  The convertible debt is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect.  For the share options and warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's share) based on the monetary value of the subscription rights attached to outstanding share options.  The number of shares calculated is compared with the number of shares that would have been issued assuming the exercise of the share options.  In 2009 the diluted loss and diluted loss per share were calculated on the same basis as basic loss and loss per share because the effect of the potential ordinary shares (share options, convertible loans and warrants) reduces the net loss per share and is therefore anti-dilutive.

7          INTANGIBLE ASSETS

				On-line System
				£
Cost
At 1 April 2008				566,786
Additions				312,425
At 1 April 2009				879,211
Additions				148,893
At 31 March 2010				1,028,104
Depreciation
At 1 April 2008				41,609
Charge for the year				137,404
At 1 April 2009				179,013
Charge for the year				191,006
At 31 March 2010				370,019
Net book amount
At 31 March 2009				700,198
At 31 March 2010				658,085

8          CASH AND CASH EQUIVALENTS

	2010	2009
	£	£
Cash at bank	4,626,930	2,141,309
Short term bank deposits (held in Sterling)	242,749	119,241
Secured funding (held in Sterling)	675,000	450,000
	5,544,679	2,710,550

Cash at bank and in hand are analysed by currency as follows:

	2010	2009
	£	£
Sterling balances	1,160,618	887,710
Euro balances	1,581,439	(179,017)
US Dollar balances	679,040	400,246
Other currencies	1,205,833	1,032,370
	4,626,930	2,141,309

The Directors consider that the carrying amount of these assets approximates to their fair value.  The credit risk on liquid funds is limited because the counter-party is a bank with a high credit rating.

9          TRADE AND OTHER RECEIVABLES

	2010	2009
	£	£
Trade receivables	83,950,547	40,821,106
Less: provision for impairment	(273,088)	(112,797)
Trade receivables - net	83,677,459	40,708,309
Prepayments and accrued income	146,333	159,563
	83,823,792	40,867,872

Trade receivables and forward contracts constitute the only financial assets within the category "Loans and Receivables" as defined by IAS 39.

Trade receivables and forward contracts are non-interest bearing and are generally not yet due or less than 30 days past due. 

Of the trade receivables and forward contracts balance at the end of the year, £13 million (2009: £8.9 million) is due from the Company's largest counterparty.  There is one (2009: three) other counterparty where the balance of trade receivables represents more than 5 per cent. of the total balance of trade receivables.

A provision for impairment of trade receivables is established when there is no objective evidence that the Company will be able to collect all amounts due according to the original terms.  The Company considers factors such as default or delinquency in payment, significant financial difficulties of the debtor and the probability that the debtor will enter bankruptcy in deciding whether the trade receivable is impaired.

As at 31 March 2010 trade receivables of £83,677,459 (2009: £40,708,309) were not yet due or pas due but not impaired.  The ageing analysis of these trade receivables is as follows:

	2010	2009
	£	£
Not yet due	77,878,969	35,892,910
Up to 3 months past due	5,798,490	4,815,399
	83,677,459	40,708,309

The movement in the bad debt provision can be analysed as follows:

	2010	2009
	£	£
Opening position	112,797	38,286
Amount charged to the income statement	188,937	74,511
Amount written off as uncollectible	(24,644)	-
Closing position	277,090	112,797

There are no impaired trade receivables not yet due.  Trade receivables up to three months past due includes £277,090 (2009: £112,791) of impaired trade receivables.

10         TRADE AND OTHER PAYABLES

	2010	2009
	£	£
Amounts owed to group undertakings	754,105	389,206
Trade payables	88,928,660	41,493,138
Trade payables in respect of expenses	167,512	161,774
Other tax and social security	214,934	99,251
Accruals and deferred income	517,592	510,732
Other creditors	112,784	124,404
	90,695,587	42,778,505

Trade payables in respect of expenses comprise amounts outstanding for administrative and other ongoing costs.  The average credit period taken for trade purchases is 38 days (2009: 42).  No interest is charged on the outstanding balance.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

11         BORROWINGS

	2010	2009
	£	£
Loans - Amounts owed to group undertakings	1,371,094	2,201,824

All the borrowings are stated at amortised cost using the effective interest method.

The amount due to ASPone Limited on deferred terms of £385,960 (2009: £425,824) attracts interest at 10 per cent. and is repayable as to £15,000 a month.  There is no material difference between amortised cost and their fair value.

The amount due under the convertible loan note from Ekwienox Fx of £435,134 (2009: £1,176,000 million) attracts interest at a rate of 3.75 per cent. over LIBOR and is due for repayment on 30 September 2011.  Under this agreement Ekwienox Fx has the right to convert the loan into 1p ordinary shares at a price of 5.75p per share at any time prior to the repayment date.  There is not material difference between amortised costs and their fair value.

The amount due to Wallich & Matthes Holding BV of £550,000 (2009: £600,000) is repayable by instalments between 30 September 2010 and 30 September 2012 and attracts interest at a rate of 12 per cent.  There is no material difference between the amortised costs and their value.

12         DEFERRED TAX

	2010	2009
	£	£
At 1 April 2009	-	-
Credited to the income statement	1,420,200	-
At 31 March 2010	1,420,200	-

	Tax Losses	Short term timing differences	Accelerated capital allowances	Fair value loss / (gains )	Potential deferred tax not recognised	Total recognised
	£	£	£	£	£	£
At 1 April 2009	1,121,730	31,583	143,251	14,436	(1,311,000)	-
For the year	(74,026)	6,729	190,933	(19,242)	1,315,806	1,420,200
At 31 March 2010	1,047,704	38,312	334,184	(4,806)	(4,806)	1,420,200

Recognition of deferred tax

As a result of the change in the Company's performance referred to above, the Directors have decided that it is now appropriate to recognise the deferred asset arising principally from trading losses incurred in previous years.  In order to recognise the deferred tax asset arising from prior period trading losses, the Directors must be satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.  The Company prepared a five year profit forecast with underlying assumptions in line with those experienced in the year ended 31 March 2010.  The forecast indicated that the losses would be utilised in full by March 2013, and the Directors therefore decided it would be appropriate to recognise the deferred tax in full.  This has resulted in a tax credit of £1.4 million in the year under review.

Other factors affecting future tax

As at 31 March 2010, trading losses of approximately £4.5 million (2009: £4.0 million) are available to carry forward against future profits of the same trade.  These tax losses will reduce the corporation tax charge in future years until they have been utilised. 

13         SHARE CAPITAL AND SHARE PREMIUM

	2010	2009
	£	£
Authorised
75,000,000 ordinary shares of 1p each	750,000	750,000
		Share capital	Share premium
Allotted, called up and fully paid ordinary shares of 1p each	No.	£	£
At 31 March 2009	24,384,015	243,841	3,005,551
Exercise of options - April 2009 (5.75p)	1,739,130	17,391	82,609
Exercise of options - May 2009 (5.75p)	3,500,000	35,000	166,250
Exercise of options - July 2009 (5.75p and 6.00p)	2,309,070	23,091	111,711
Issue of Shares - October 2009 (6.25p)	5,656,608	56,566	296,972
Conversion of Loan Note March 2010 (6.00p)	11,666,667	116,666	583,334
At 31 March 2010	49,255,490	492,555	4,246,427

The company has one class of ordinary shares which carry no right to fixed income.

At the end of the year the Company had granted the following warrants in respect of Ordinary shares:

	Number of Warrants Granted	Exercise Price	Exercise Date
Ekwienox Fx Limited	300,000	12p	31 March 2013

14         NET CASH GENERATED FROM/(USED IN) OPERATING ACTIVITIES

	2010	2009
	£	£
Operating loss	(591,546)	(1,312,259)
Depreciation charge	30,851	51,225
Amortisation charge	191,006	137,404
Increase in receivables	(43,553,681)	(22,459,460)
Increase in payables	46,248,686	21,958,031
Cash generated from/(used in) operations	2,325,316	(1,625,059)
Tax paid	-	-
	2,325,316	(1,625,059)

15         RELATED PARTY TRANSACTIONS

Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Company.  In the opinion of the Board, the Company's key management are the Directors of Baydonhill plc.  Information regarding their compensation is given below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

	2010	2009
	£	£
Salaries and other short-term employee benefits	256,882	339,495
Share based payments	393	-
	257,275	339,495

During the year the Company entered into contracts to purchase foreign exchange on an arms length basis on behalf of the following related parties.  The total value of the transactions during the year were:

	2010	2009
Sail Croatia Limited, a company controlled by Mr A Hughes	£Nil	£420,239
Hidden Croatia Limited, a company controlled by Mr A Hughes	£934,762	£1,251,111
Ekwienox Limited, the ultimate parent Company	£3,751,313	£611,932
Sarah Collis, a director of the Company	£454	£Nil
Arthur Hughes, the ultimate controlling party	£3,350,610	£8,100,610
Charles McLeod, a director of the Company	£145,095	£107,736

During the year the Company incurred the following costs from related parties that have been expensed to the income statement:

	2010	2009
Ekwienox Limited, in respect of executive, non-executive fees and insurance recharges	£83,194	£48,400
ASPone Limited, a Company controlled by Ekwienox Limited, in respect of the development of an online trading system and associated hosting, maintenance and consultancy charges	£385,707	£871,346
Ekwienox Fx Limited, interest payable on convertible loan notes	£62,856	£102,332
Wallich & Matthes Holding BV interest on loan note	£72,000	£30,260
Tauristic Marketing Limited, a Company controlled by Mr McLeod	£67,249	£17,749

At the end of the year the following amounts were owed from related parties:

	2010	2009
Arthur Hughes	£ Nil	£24,975
Charles McLeod	£ Nil	£10,911

At the end of the year the following amounts were owed to related parties:

Ekwienox Limited	£81,847	£20,000
ASPone Limited	£814,018	£717,589
Charles McLeod	£14,492	£Nil
Ekwienox Fx Limited	£614,187	£1,250,296
Wallich & Matthes Holding BV	£702,259	£630,260

16         SHARE BASED PAYMENTS

The Company issued 800,000 unapproved share options in October 2009 and at the end of the year the Company had, under a previously approved Enterprise Management Incentive Plan, granted options in April 2004 and February 2005.

All options are settled by the issue of shares.  The principal terms and conditions of the options outstanding at the year end are as follows:

Date of grant	Entitled employees	Number of options	Exercise price	Vesting period from grant	Exercise period
October 2009	Employees and certain Directors	800,000	5.75p	3 months	Jan 2010 - Dec 2014
April 2004	Employees and certain Directors	40,000	60.00p	3 years	Apr 2007 - Apr 2014
February 2005	Director	50,000	55.00p	3 years	Feb 2008 - Feb 2015
July 2005	Former Director	600,000	28.00p	0 years	Jul 2005 - Jul 2010

	2010		2009
	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
Outstanding at the beginning of the year	690,000	32.00p	878,333	33.00p
Forfeited during the year	(2,000)	60.00p	(188,333)	36.00p
Issued during the year	800,000	5.75p	-	-
Outstanding at the year end	1,488,000	18.00p	690,000	32.00p
Exercisable at the end of the year	1,488,000	18.00p	690,000	32.00p

The options outstanding at 31 March 2010 had exercises prices ranging from 5.75p to 60.00p (2009: 28.00p to 60.00p) and the weighted average remaining contractual life was three years (2009: two years).

The fair value of the options and shares granted have been measured using the Black Scholes valuation model.  In arriving at the fair value, each option grant has been valued separately, with the exception of certain options which were issued simultaneously on identical terms which have been aggregated.  Volatility has been estimated by reference to the historical volatility in the Company's share price over a period of six months prior to each grant date.

The following table lists the main assumptions used in the model for the options granted in the year to 31 March 2010:

Volatility (%)	10.06%
Risk-free interest rate (%)	2.50%
Expected life of options (years)	4.25
Expected life of share-based payments (years)	0.50
Weighted average share price - options (price)	5.75p
Weighted average share price - share based payments (pence)	13.00p
Expected dividends	None

The charge recognised for share based payments in respect of options issued and vested during the year was £1,048 (2009: £Nil).

17         FINANCIAL INSTRUMENTS

The Company's financial instruments comprise derivatives relating to forward contracts, cash and cash equivalents, borrowings and items such as trade payables and trade receivables which arise directly from its operations.  The main purpose of this financial information is to provide finance for the Company's operations.

The Company's operations expose it to a variety of financial risks including credit risk, liquidity risk, interest rate risk, equity price risk and foreign currency exchange rate risk.  Given the size of the Company, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board.  The policies set by the board of Directors are implemented by the Company's finance department.

Financial assets and liabilities by category

The carrying values of financial assets and liabilities, which are principally denominated in Sterling, Euros or US Dollars, were as follows:

	Loans & receivables £	Assets at fair value through profit and loss £	Non financial assets £	Total £
Assets 2010
Plant and equipment	-	-	24,720	24,720
Intangible assets	-	-	658,085	658,085
Investments in subsidiaries	-	-	10	10
Deferred tax	-	-	1,420,200	1,420,200
Trade and other receivables	83,677,459	-	146,333	83,823,792
Derivative financial assets	-	1,390,708	-	1,390,708
Cash and cash equivalents	5,544,679	-	-	5,544,679
	89,222,138	1,390,708	2,249,348	92,862,194

	Loans & receivables £	Assets at fair value through profit and loss £	Non financial assets £	Total £
Assets 2009
Plant and equipment	-	-	28,374	28,374
Intangible assets	-	-	700,198	700,198
Investments in subsidiaries	-	-	10	10
Deferred tax	-	-	-	-
Trade and other receivables	40,708,309	-	159,563	40,867,872
Derivative financial assets	-	792,947	-	792,947
Cash and cash equivalents	2,710,550	-	-	2,710,550
	43,418,859	792,947	888,145	45,099,951

Carrying values do not differ materially from their fair value at both 31 March 2010 and 31 March 2009.

	Amortised cost £	Liabilities at fair value through profit and loss £	Non financial assets £	Total £
Liabilities 2010
Non-current borrowings	1,371,094	-	-	1,371,094
Other payables	870,051	-	142,771	1,012,822
Derivative financial liabilities	-	330,853	-	330,853
Trade and other payables	88,928,660	-	-	88,928,660
Amounts due to group companies	754,105	-	-	754,105
	91,923,710	330,853	142,771	92,397,534

Liabilities 2009
Non-current borrowings	2,201,824	-	-	2,201,824
Other payables	708,401	-	187,760	896,161
Derivative financial liabilities	-	1,794,698	-	1,794,698
Trade and other payables	41,493,138	-	-	41,493,138
Amounts due to group companies	389,206	-	-	389,206
	44,792,569	1,794,698	187,760	46,775,027

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

· Level 1:	quoted (unadjusted) prices in active markets for identical assets or liabilities;
· Level 2:	other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
· Level 3:	techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.  Unlisted equity investments are included in Level 3. The fair value of the embedded derivative is determined using the present value of the stemated future cash flows based on financial forecasts.

As at 31 March 2010, the only financial instruments measured at fair value were derivative financial instruments and these are classified as Level 1.

Credit risk

The Company's credit risk is primarily attributable to its forward contracts.  The Company has implemented policies that require appropriate credit checks on potential customers before sales are made and a credit approval process where the client is seeking either payment by Direct Debit or a deposit waiver on forward contracts.  The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the Board.

The carrying amount of financial assets represents the maximum credit exposure.  The maximum exposure to credit risk at the reporting date was:

	2010	2009
	£	£
Trade receivables at fair value	83,708,193	40,708,309
Derivative financial assets	1,390,708	792,947
Cash and cash equivalents	5,213,324	2,710,550
	90,312,225	44,211,806

Interest rate risk

The Company has both interest bearing assets and interest bearing liabilities.  Interest bearing assets comprise only cash and cash equivalents which earn interest at a variable rate.  Interest bearing liabilities are primarily the loans from group undertakings, two of these attract interest at fixed rates and the other a variable interest rate.

Details of the terms of the Company's borrowings are disclosed in note 11.

Interest rate sensitivity

At 31 March 2010, if interest rates at that date had been 10 basis points higher with all other variables held constant, the loss before tax would have been £12,000 lower (2009: £12,000 lower).

At 31 March 2010, if interest rates at that date had been 10 basis points lower with all other variables held constant, the loss before tax would have been £12,000 higher (2009: £12,000 higher).

Liquidity risk

The Company's policy is to manage its capital requirements and liquidity through a combination of retained earnings, the issue of equity and borrowings from Group undertakings.  The Company monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due.

The table below shows the contractual maturity analysis of the undiscounted residual contractual cashflows of the Company's liabilities:

	Less than 1 year	1 to 2 years	2 to 5 years	Total
	£	£	£	£
2010
Amounts due to group companies	754,105	-	-	754,105
Borrowings	-	956,000	455,960	1,411,960
Trade and other payables	89,798,711	-	-	89,798,711
Derivative financial liabilities	329,362	1,491	-	330,853
	90,882,178	957,491	455,960	92,295,629
2009
Amounts due to group companies	209,206	-	-	209,206
Borrowings	180,000	1,956,000	268,483	2,404,483
Trade and other payables	42,201,539	-	-	42,201,539
Derivative financial liabilities	1,777,637	17,061	-	1,794,698
	44,368,382	1,973,061	268,483	46,609,926

Foreign currency exchange rate risk

The Company is exposed to foreign currency exchange rate risk in connection with revenue generated during the year in currencies other than Sterling.  There is no exposure on the balances owing to and from customers under both spot and forward contracts as these have been mitigated by spot and forward contracts with a bank.

The principle currencies other than Sterling in which revenue is generated are the Euro and the US Dollar.  A 10 per cent. strengthening of these currencies against Sterling over the course of the year would have increased gross profits by £70,000 (2009: £86,000) and £170,000 (2009: £49,000) respectively assuming that all other variables remain constant.

The most significant Sterling principal amounts of forward foreign currency purchase contracts and contracted forward rates were as follows:

	2010	2009
US Dollar	18,953,495	15,264,479
Contracted rates	1.48 - 1.65	1.50 - 1.84
US Dollar sales	6,383,424	2,422,045
Contracted rates	1.49 - 1.65	1.38 - 1.54
Euro purchases	15,689,989	5,105,304
Contracted rates	1.09 - 1.45	1.15 - 1.25
Euro sales	7,131,198	5,595,990
Contracted rates	1.07 - 1.18	1.06 - 1.24
Japanese Yen purchases	1,452,828	956,520
Contracted rates	135 - 155	123 - 139

18         TRANSITION TO IFRS

The Company reported under UK GAAP in its previously published financial statements for the year ended 31 March 2009.  The analysis below shows a reconciliation of net assets and comprehensive income as reported under UK GAAP as at 31 March 2009 to the revised net assets and profits under IFRS as reported in this financial information.  In addition, there is a reconciliation of net assets under UK GAAP to IFRS at the transition date for this company, being 1 April 2008.

		At 31 March 2009	At 31 March 2008
	Note	£	£
Equity reconciliation
Equity as reported under UK GAAP		(1,623,520)	(253,568)
Increase in fair value of forward contracts (debits)	A	950,194	-
Increase in fair value of forward contracts (credits)	A	(1,001,750)	-
Equity as reported under IFRS		(1,675,076)	(253,568)
Total comprehensive income reconciliation
Loss as reported under UK GAAP		(1,375,402)
Income statement effect of increases in the fair value of forward contracts	A	(51,556)
Total comprehensive income as reported under IFRS		(1,426,958)

Cash flow statement

The Company's consolidated cash flow statements are presented in accordance with IAS 7.  The statements present substantially the same information as that required under UK GAAP, with the following principle exceptions:

1.         Under UK GAAP, cashflows are presented under nine standard headings, whereas IFRS requires the classification of cash flows resulting from operating, investing and financing activities; and

2.         The cash flows reported under IAS 7 relate to movements in cash and cash equivalents, which include cash and short term liquid investments.  Under UK GAAP, cash comprises cash in hand and deposits repayable on demand.

		At 31 March 2009	At 31 March 2008
	Note	£	£
Cash flow reconciliation
Decrease in cash in the year under UK GAAP		(1,062,731)	(213,944)
Management of liquid resources	C	(119,200)	-
Net decrease in cash and cash equivalents as reported under IFRS		(1,181,931)	(213,944)

Notes to the reconciliation

A     These amounts relate to the restatement of forward contracts outstanding at the respective reporting dates to their fair value at that date in accordance with IAS 39.

B     There has also been a reclassification from tangible fixed assets to intangible fixed assets of £700,198 (2008: £525,177) in relation to the development of the online system in accordance with IAS 38.  This reclassification had no effect on equity or on total comprehensive income; and

C     This represents the short term deposits held with a financial institution in accordance with IAS 7.

19         PARENT COMPANIES AND CONTROLLING PARTIES

The immediate parent Company and controlling party is Ekwienox Fx.  Ekwienox Limited is the ultimate parent Company of Baydonhill plc and is the largest and smallest Company which prepares group accounts including Baydonhill plc.  These are available from their registered office, 160 Brompton Road, London, SW3 1HW.  Ekwienox Limited is under the control of Mr A. Hughes.

20         DIVIDENDS

The directors have not recommended the payment of a dividend.

21         AVAILABILITY OF REPORT AND ACCOUNTS

Copies of the Report and Accounts are expected to be posted to shareholders on 7 September 2010.  Hard copies will be available from the Company's registered office at 160 Brompton Road, Knightsbridge, London SW3 1HW and will be available from the Company's website www.baydonhill.com.

 

END

 

 

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