Final Results, Annual Report & AGM Notice
Certain information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as applied in the United Kingdom. Upon publication of this Announcement, this information is now considered to be in the public domain.
8 May 2024
Cornerstone FS plc
(Trading as Finseta)
("Finseta" or the "Company" or the "Group")
Final Results
Notice of AGM and Publication of Annual Report
Cornerstone FS plc (AIM: CSFS) (trading as Finseta), a foreign exchange and payments solutions company offering multi-currency accounts to businesses and individuals through its proprietary technology platform, is pleased to announce its audited final results for the year ended 31 December 2023. In addition, the Company gives notices of its annual general meeting ("AGM") and the publication of its annual report and accounts.
Financial Highlights
· Revenue increased 100% to £9.6m (2022: £4.8m)
· Gross margin improved to 63.4% (2022: 60.9%)
· Adjusted1 EBITDA of £1.7m (2022: £0.9m loss)
· Profit before tax of £1.3m (2022: £5.8m loss)
· Basic earnings per share of 3.77p (2022: 17.26p loss)
· Cash generated from operations of £2.0m (2022: £1.0m cash used in operations)
· Strong balance sheet with cash and cash equivalents at 31 December 2023 of £2.3m (31 December 2022: £0.7m)
Strategic & Operational Highlights
· Growth in active customers2 to 906 (2022: 803) and average transaction value increased by 33%
· Proportion of revenue accounted for by direct clients increased to 95% (2022: 78%) reflecting the strategic decision taken in the year to rationalise the majority of the historic white label business
· New counterparty partnerships established to broaden the number of currencies and countries where the Group can transact - now able pay out to over 150 countries in 58 currencies
· Launched Finseta Solutions as a new offering focused on servicing clients with complex requirements, with strong progress made to date
· Received regulatory approval, post year end, to provide payment services in Canada
· Signed agreement with Mastercard, post year end, to launch corporate card scheme
· Selected Finseta3 as new company name to reflect differentiated offer and as part of strategic growth plan
James Hickman, CEO of Finseta, said:
"This has been an excellent year for our business, resulting in 100% revenue growth and our maiden full year of profitability and positive cashflow. This has been driven by the expansion of our sales team, which achieved an increase in client numbers as well as average transaction value. At the same time, we advanced key strategic initiatives that will be drivers of our future growth in the near term. We continued to expand our global payments network, and are now able to pay out to over 150 countries in 58 currencies, and we were thrilled to receive, post year end, regulatory approval to operate a payments business in Canada. Since the year-end, we also signed an agreement with Mastercard to launch a commercial card scheme, which will enable us to offer an additional payment method to corporate clients. In reflection of this progress, we were delighted to select 'Finseta' as our new company name to better align our brand identity with our mission, values and the comprehensive range of services we provide.
"Looking ahead, the strong trading momentum that was experienced during 2023 has been sustained into the current year and we are on track to report significant growth for full year 2024, in line with the Board's expectations. With the excellent progress made during the year and to date in executing on our strategic priorities, we have strengthened our operations and established the foundations to deliver long-term, sustainable growth. As a result, the Board continues to look to the future with great confidence."
Notes
1 Excluding share-based compensation, transaction costs, depreciation & amortisation charges, profit from the disposal of a subsidiary, other operating income related to interest on client balances and non-cash based accounting adjustments in respect of the Group's corporate premises
2 Defined as customers who traded through Finseta during the 12-month periods to 31 December 2023 and 2022 respectively
3 As announced on 20 March 2024, the Company intends to change its name to Finseta plc and has been operating as Finseta since 18 April 2024 in anticipation of the name change. As at the date of the signing of the financial statements, the Company's name change had not become effective. The Company expects that the change of name will take place shortly and will make a further announcement when the Company's name change takes effect
Enquiries
|
Finseta James Hickman, Chief Executive Officer Judy Happe, Chief Financial Officer
|
+44 (0)203 971 4865
|
|
Shore Capital (Nominated Adviser and Broker) Daniel Bush / Tom Knibbs (Corporate Advisory) Guy Wiehahn (Corporate Broking)
|
+44 (0)207 408 4090 |
|
Gracechurch Group (Financial PR) Harry Chathli / Claire Norbury |
+44 (0)204 582 3500 |
About Finseta
Finseta is a foreign exchange and payments company offering multi-currency accounts and payment solutions to businesses and individuals. Headquartered in the City of London, Finseta combines a proprietary technology platform with a high level of personalised service to support clients with payments in over 150 countries in 58 currencies. With a track record of over 12 years, Finseta has the expertise, experience and expanding global partner network to be able to execute complex cross-border payments. It is fully regulated by the Financial Conduct Authority as an Electronic Money Institution through its wholly-owned subsidiary company Finseta Payment Solutions Limited. www.finseta.com
Investor Presentation
James Hickman, CEO, and Judy Happe, CFO, will provide a live presentation via Investor Meet Company at 10.00am BST today. The presentation is open to all existing and potential shareholders. Investors can sign up to Investor Meet Company for free and add to meet Finseta via:
https://www.investormeetcompany.com/cornerstone-fs-plc/register-investor
Operational Review
The year to 31 December 2023 was an excellent period for Finseta. The Group delivered record revenue, achieved key milestones with its maiden year of positive EBITDA, profit before tax and positive cashflow, and made substantial strategic and operational progress. The focus has been on driving direct sales and fully commercialising the platform, while carefully managing the cost base. This was actioned through enhancing the Group's products and services, extending its offer and expanding its client base. Key initiatives were advanced that strengthen the foundations of the business and its ability to deliver sustained growth, in particular, the work undertaken to launch a corporate card scheme with Mastercard and to receive regulatory approval in Canada. The Group also continued to realise the value of its non-core assets, with the completion of the sale of Avila House and entering an agreement to sell Capital Currencies.
Performance
The Group delivered substantial growth in revenue, which doubled to £9.6m (2022: £4.8m), driven by year-on-year increases in active customers and average transaction value. Active customers, calculated as clients who traded during the 12 months ended 31 December 2023, increased to 906 compared with 803 for the 12 months to 31 December 2022 as the Group continued to expand its sales team and payment capabilities. Average transaction value increased by 33% year-on-year driven by an increased focus on providing an exceptional level of service to its business and high net worth individual ("HNWI") clients.
There was a significant increase in revenue generated by clients that the Group serves directly. The proportion of total revenue that was accounted for by direct clients was 95%, being £9.2m (2022: £3.8m), compared with 78% in 2022. Revenue generated through white label partners was £497k (2022: £1.1m), which reflects the Group's strategic decision to manage down almost all of its historic white label business - only maintaining a small number of accounts that meet appropriate profitability thresholds.
By client type, there was an increase in revenue generated by both private clients (primarily HNWIs) and corporate accounts. Particularly strong growth was seen from private clients, with the proportion of total revenue accounted for by private clients increasing to 64% (2022: 53%) with corporate accounts contributing 34% (2022: 47%). For the majority of private client revenue, whilst the underlying transaction is with an individual, the relationship is via a corporate that provides services to the individual. In addition, the Group generated £200k in revenue (2022: £nil), accounting for 2% of total revenue, through licencing its software to the acquirers of Avila House.
Strategy execution
The Group's growth strategy is founded on the three pillars of product, geography and people - and Finseta executed on all three during 2023. This contributed to growth during the year, but also established drivers for growth in the years to come.
Product
A core element of Finseta's strategy is to establish a global payments network that will enable clients to be able to pay in from, and pay out to, any jurisdiction (subject to regulatory restrictions) in any currency and via any payment method. While it is still relatively early days, important steps have been taken in advancing this strategy during the year.
Currencies & countries
The Group continued to expand its global payments network by establishing new counterparty partnerships. This enables the Group to broaden the number of currencies and countries where it can transact, as well as expanding the business sectors it can serve. The Group can now pay out to over 150 countries in 58 currencies compared with over 70 countries and 49 currencies this time last year.
Payment method
The Group made significant progress during the year towards expanding its payment method offering, which culminated in the signing of a long-term agreement in January 2024 with Mastercard to launch a corporate card scheme. The Group expects to launch the scheme during Q3 of the current year, when it will be able to issue commercial cards co-branded and supported by Mastercard for its corporate customers. This additional payment rail will provide clients with greater choice and flexibility in managing their business expenses.
Service
A key differentiator of the Group's offer is the high level of personalised service provided to clients. Through this, along with the experience of Finseta's team and the strength of its compliance capabilities, the Group is able to build solutions tailored to meet clients' needs, even when those needs are complex. In 2023, the Group took this a step further by establishing a new offering, Finseta Solutions, that is specifically focused on providing solutions to clients that are harder to service, due to, for example, the sector in which they operate. This gives the Group access to a further cohort of potential clients and is a higher value service offering while also supporting its goal of enabling clients to transact how, when and where they need. Finseta Solutions has made great progress to date, and is continuing to grow.
One of the Group's core values is that it always puts clients first and, as part of that, it is committed to continuously improving the service it provides. During the year, this included making enhancements to the user interface and user experience of the Finseta platform. The Group also continued its development work to increase automation in transactional processes to increase the speed of payments and worked on enhancements to the onboarding process, which will further improve clients' experience.
Actions such as these meant that the Group was well prepared for the introduction of the Financial Conduct Authority's Consumer Duty regulation in July 2023. Prior to that, the Group undertook an in-depth review of its operations to ensure that it was fully compliant with the new regulation, which sets higher and clearer standards for consumer protection across financial services.
To be able to support clients with more of their business needs, during the year the Group formed strategic partnerships with specialised and alternative lenders to offer a range of funding solutions. In particular, Finseta launched a lending platform in partnership with Swoop Finance, which enables the Group to seamlessly refer clients to a lending partner that it has pre-vetted to ensure that they can meet the clients' requirements. This service increases the Group's value to clients while also providing commission on referrals. It also enhances its competitive offer to potential clients who want to utilise the Group's FX services (rather than those of their traditional bank), but who are hesitant to move away from their traditional bank where they require their lending facilities.
Geography
A core pillar of the Group's strategy is geography - that is, expanding its capabilities to enable clients to transact to and from anywhere in the world (subject to regulatory restrictions). As noted, through establishing further counterparty relationships during the year, the Group can now pay out to over 150 countries. The Group also intends to expand its own geographical footprint and regulatory capabilities to deliver sustained growth for the years to come. A significant milestone was achieved in this regard with the Group undergoing the authorisation process in Canada, with the receipt of a Money Services Business ("MSB") licence from the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") post year-end. This allows the Group to operate a payments company in Canada and provide payments services to Canadian businesses and individuals.
Having previously received enquiries in Canada for its services through its existing network, the establishment of a regulated business will enable the Group to fully pursue such opportunities and leverage local payment rails and lower transaction costs. The Group is now in the process of opening a full-service office in Canada, which will allow it to provide customers with the high-touch service-led approach that is core to the Finseta offer.
People
A fundamental contribution to the Group's growth during the year was the enhancing of its sales team. The Group restructured its UK sales team and appointed a seasoned UK Sales Director. To strengthen its offer and drive its future growth, the Group invested in key personnel to establish its Finseta Solutions offer, as well appointing an experienced Head of Compliance and Money Laundering Reporting Officer and a Card Programme Manager. As a high-touch, service-led business, the strength of Finseta's people is crucial. While its business is highly scalable thanks to its platform, as the Group continues to grow, it will look to expand its headcount further.
In addition, with the Group's client acquisition being predominantly introducer-led, it is very much a people business. The Group continues to expand and deepen its network of introducers, which also drives diversification in payment flows meaning it is not overly reliant on particular currencies. It also lends itself to the Group's Finseta Solutions offer as it is able to address the varied requirements of clients won through different introducers.
Brand identity
In recognition of the substantial strategic progress that the Group has made and the development of its business - with a fundamentally expanded offer, capabilities and geographic footprint - the Group decided to adopt a new name. The Group wanted a name that better aligned its brand identity with its mission, values and the comprehensive range of services it provides. In particular, the Group needed a unique name that reflected its differentiated offer. Accordingly, the Group underwent a renaming process that culminated in the adoption of 'Finseta', and the Group began operating under the new name in April 2024. The Company will update the market when the change name change is effected by Companies House and the Company's ordinary shares will commence trading on AIM under the new company name and the new TIDM of 'FIN'.
Realising value
This year the Group continued to realise value from its non-core assets. The sale of Avila House, for which it entered the agreement in December 2022, completed during the year and an agreement was entered to sell Capital Currencies, which is expected to complete in the current year. Both of these non-core subsidiaries held licences that were more limited than that of Finseta Payment Solutions, which is an authorised electronic money institution, and, therefore, surplus to the Group's requirements. Accordingly, the Group generated value through their disposal to non-competing entities, which, in the case of Avila House, included licencing revenue as well as the acquisition consideration.
Financial Review
Revenue for the 12 months to 31 December 2023 increased by 100% to £9.6m compared with £4.8m for the previous year. This growth reflects the strategic and operational changes that were implemented during the second half of 2022 and in the current year that are focused on driving direct sales and fully commercialising the platform.
Gross margin improved to 63.4% (2022: 60.9%), which reflects a lower proportion of revenue derived from white label partners following the Group's strategic decision to manage down almost all of its historic white label business. The Group also benefited from a change in commission arrangements agreed with Robert O'Brien, General Manager APAC and Middle East, in the first half of the year, as announced on 8 March 2023.
The improvement in gross margin combined with the increased revenue resulted in a substantial growth in gross profit to £6.1m (2022: £2.9m).
Operating expenses were reduced to £5.1m in 2023 compared with £8.6m for the previous year. This primarily reflects movements of:
• £4.0m reduction in share-based (non-cash) compensation to £0.3m (2022: £4.3m), which predominantly relates to a variation to the terms of the incentivisation agreement with Mr. O'Brien and the Asia team, which was agreed in H2 2022;
• £0.2m profit recognised from the disposal of Avila House (2022: £nil);
• £0.5m increase in other administrative expenses to £4.4m (2022: £3.8m); and
• £0.2m increase in depreciation and amortisation to £0.6m (2022: £0.4m).
The Group maintained tight control over operating costs and the increase in other administrative expenses primarily relates to additional sales team hires and increased performance-related bonuses commensurate with the Group's performance. Amortisation was higher due the cumulative impact of internally developed software additions that have been capitalised since 2020 with an amortisation period of three years, combined with the amortisation of a right-of-use asset related to the Group's move to new corporate premises in Q4 2023 (with the previous premises being operating leases that did not attract amortisation).
On an adjusted basis, to exclude share-based compensation, profit from the disposal of a subsidiary, depreciation & amortisation charges and after the add-back of the rental cost of the Group's corporate premises, operating expenses were £4.4m compared with £3.8m for 2022. This reflects the increase in other administrative expenses as described above. However, adjusted operating expenses as a proportion of revenue significantly improved to 46% for 2023 compared with 79% for 2022.
Thanks to the strong operating performance, there was a substantial improvement in adjusted EBITDA to £1.7m compared with a loss of £0.9m for 2022.
The Group generated other operating income of £0.4m (2022: £0.03m) based on interest on client cash balances (see note 3 to the financial statements).
As a result of the increased gross profit and other operating income and reduced operating expenses, profit from operations was £1.4m compared with a loss from operations of £5.6m for 2022.
Net finance costs were £69k (2022: £164k). This primarily reflects a £165k year-on-year change in the unwinding of discount charges - being a £56k credit in 2023 compared with a £108k cost in 2022 - owing to the remeasurement of the deferred consideration payable in respect of the acquisition of Capital Currencies in 2022.
As a result of the increased profit from operations and reduced finance costs, profit before tax grew substantially to £1.3m in 2023 compared with a loss before tax of £5.8m for 2022.
A tax credit of £843k was recognised in 2023 (2022: £175k), principally reflecting the recognition of a £818k deferred tax asset relating to tax losses, following the Group's transition to profitability during 2023 and therefore visibility in consumption of the carried-forward tax losses as at 31 December 2023 of £3.3m (31 December 2022 carried forward tax losses were £5.0m, with no associated deferred tax asset recognised).
Basic earnings per share were 3.77 pence (2022: loss of 17.26 pence per share), which was achieved despite an increase in the weighted average number of ordinary shares in issue to 56,613,145 (2022: 32,506,335). On a fully diluted basis, earnings per share were 3.76 pence (2022: loss of 17.26 pence).
The Group was cashflow positive for 2023 compared with there being a cash outflow for the previous year. Cash generated from operations was £2.0m (2022: £1.0m used in operations) based on the improved trading performance. Cash used in investment activities was £0.2m (2022: £1.0m used in investment activities), reflecting purchases of intangible assets, property, plant and equipment, principally associated with the continued investment in developing its proprietary platform, partly offset by the proceeds from the disposal of Avila House. Cash used in financing activities was £0.1m compared with £2.2m generated from financing activities in 2022, with the difference primarily reflecting a fundraising undertaken in 2022.
As a result, as of 31 December 2023, cash and cash equivalents had significantly increased to £2.3m (31 December 2022: £682k).
Outlook
The strong trading momentum that was experienced during 2023 has been sustained into the current year, which reflects the continued increase in the number of active clients and expansion of the Group's introducer network. This is being driven, in particular, by the investment that the Group is making into its UK sales team. Consequently, the Group is on track to report significant growth for full year 2024, in line with the Board's expectations.
Looking further ahead, with the excellent progress that the Group made during the year and to date in executing on its strategic priorities, the Group has strengthened its operations and established the foundations to deliver long-term, sustainable growth. As a result, the Board continues to look to the future with great confidence.
Notice of AGM and Publication of Annual Report
The Company gives notice that its AGM will be held at 11.00am BST on 20 June 2024 at the office of Gracechurch Group, 48 Gracechurch Street, London, EC3V 0EJ.
The Notice of AGM, along with the Company's annual report and accounts for the year ended 31 December 2023 (together, the "Documents"), have been published on the Company's website at: https://investors.cornerstonefs.com/. The Documents, along with a form of proxy, will be posted to those shareholders who have elected to receive physical copies over the coming week.
Group Statement of Comprehensive Income
For the year ended 31 December 2023
|
|
|
2023 |
2022
|
|
|
|
Notes |
£ |
£ |
|
|
|
|
|
|
|
|
REVENUE |
1 |
9,649,233 |
4,821,996 |
|
|
Cost of sales |
|
(3,533,897) |
(1,885,503) |
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
6,115,336 |
2,936,493 |
|
|
|
|
|
|
|
|
ADMINISTRATIVE EXPENSES |
2 |
|
|
|
|
Share-based compensation |
19 |
(333,061) |
(4,284,039) |
|
|
Further adjustments to adjusted EBITDA (see below) |
|
(357,348) |
(500,529) |
|
|
Other administrative expenses |
|
(4,415,113) |
(3,805,812) |
|
|
|
|
|
|
|
|
TOTAL ADMINISTRATIVE EXPENSES |
|
(5,105,522) |
(8,590,380) |
|
|
|
|
|
|
|
|
Other operating income |
|
350,143 |
30,647 |
|
|
|
|
|
|
|
|
Adjusted EBITDA/(EBITDA loss) |
|
1,700,223 |
(869,319) |
|
|
Stated after the add back of: |
|
|
|
|
|
- other operating income (interest earned on client funds) |
3 |
(350,143) |
(30,647) |
|
|
- share-based compensation |
19 |
333,061 |
4,284,039 |
|
|
- transaction costs |
|
4,500 |
99,365 |
|
|
- profit on disposal of subsidiary |
2 |
(207,480) |
- |
|
|
- amortisation of intangible assets |
|
533,649 |
386,542 |
|
|
- IAS 17 rent reversal |
|
(61,613) |
- |
|
|
- depreciation of property, plant and equipment |
|
88,292 |
14,622 |
|
|
|
|
|
|
|
|
PROFIT/(LOSS) from operations |
|
1,359,957 |
(5,623,240) |
|
|
|
|
|
|
|
|
Finance and other income |
4 |
21,363 |
18 |
|
|
Finance costs |
4 |
(90,635) |
(163,975) |
|
|
|
|
________ |
________ |
|
|
PROFIT/(LOSS) BEFORE TAX |
|
1,290,685 |
(5,787,197) |
|
|
|
|
|
|
|
|
Income tax |
7 |
843,168 |
175,365 |
|
|
|
|
________ |
________ |
|
|
PROFIT/(LOSS) FOR THE YEAR |
|
2,133,853 |
(5,611,832) |
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE PROFIT/(LOSS) FOR THE YEAR |
2,133,853 |
(5,611,832) |
||
|
|
|
|
|
|
|
Profit/(loss) per ordinary share - basic (pence) |
8 |
3.77 |
(17.26) |
|
|
Profit/(loss) per ordinary share - diluted (pence) |
8 |
3.76 |
(17.26) |
|
|
|
|
_______ |
_______ |
|
All amounts are derived from continuing operations.
The notes to the financial statements form an integral part of these financial statements.
Group and Company Statement of Financial Position
|
|
|
Group |
Group |
Company |
Company |
|
|
|
31 December 2023 |
31 December 2022 |
31 December 2023 |
31 December 2022 |
|
|
Notes |
£ |
£ |
£ |
£ |
|
assets |
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
Intangible assets |
9 |
1,514,519 |
2,315,637 |
692,022 |
611,507 |
|
Tangible assets |
11 |
34,356 |
39,677 |
- |
- |
|
Investments |
13 |
- |
- |
7,351,660 |
8,017,622 |
|
Right-of-use assets |
10 |
796,498 |
- |
- |
- |
|
Deferred tax |
12 |
697,864 |
- |
607,568 |
- |
|
|
|
__________ |
__________ |
__________ |
___ _______ |
|
|
|
3,043,237 |
2,355,314 |
8,651,250 |
8,629,129 |
|
CURRENT ASSETS |
|
|
|
|
|
|
Trade and other receivables |
14 |
1,359,641 |
1,339,110 |
902,919 |
700,720 |
|
Cash and cash equivalents |
|
2,343,417 |
682,346 |
14,553 |
495,627 |
|
|
|
__________ |
__________ |
__________ |
___ _______ |
|
|
|
3,703,058 |
2,021,456 |
917,472 |
1,196,347 |
|
|
|
__________ |
__________ |
__________ |
___ _______ |
|
total assets |
|
6,746,295 |
4,376,770 |
9,568,722 |
9,825,476 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
equity and liabilities |
|
|
|
|
|
|
equity |
|
|
|
|
|
|
Share capital |
19 |
574,171 |
480,362 |
574,171 |
480,362 |
|
Share premium |
|
6,191,748 |
5,496,829 |
6,191,748 |
5,496,829 |
|
Share-based payment reserve |
|
780,389 |
1,489,765 |
780,389 |
1,489,765 |
|
Deferred consideration reserve |
|
- |
950,920 |
- |
950,920 |
|
Merger relief reserve |
|
5,557,645 |
5,557,645 |
5,557,645 |
5,557,645 |
|
Reverse acquisition reserve |
|
(3,140,631) |
(3,140,631) |
- |
- |
|
Retained earnings |
|
(8,307,787) |
(10,924,791) |
(8,967,643) |
(8,365,764) |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
TOTAL EQUITY |
|
1,655,535 |
(89,901) |
4,136,310 |
5,609,757 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
LIABILITIES |
|
|
|
|
|
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
Loan notes |
15 |
2,000,000 |
2,172,578 |
2,000,000 |
2,172,578 |
|
Deferred tax |
12 |
- |
99,816 |
- |
- |
|
Obligations under leases |
17 |
543,555 |
- |
- |
- |
|
Deferred consideration |
18 |
111,323 |
- |
111,323 |
- |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
|
|
2,654,878 |
2,272,394 |
2,111,323 |
2,172,578 |
|
CURRENT LIABILITIES |
|
|
|
|
|
|
Trade and other payables |
16 |
1,882,771 |
1,969,277 |
3,031,335 |
1,818,141 |
|
Loan notes |
15 |
172,578 |
225,000 |
172,578 |
225,000 |
|
Obligations under leases |
17 |
263,357 |
- |
- |
- |
|
Deferred consideration |
18 |
117,176 |
- |
117,176 |
- |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
|
|
2,435,882 |
2,194,277 |
3,321,089 |
2,043,141 |
|
|
|
__________ |
__________ |
__________ |
__________ |
|
TOTAL EQUITY AND LIABILITIES |
|
6,746,295 |
4,376,770 |
9,568,722 |
9,825,476 |
|
|
|
_______ |
_______ |
_______ |
_______ |
As at 31 December 2023
A separate profit and loss account for the parent company is omitted from the Group's financial statements by virtue of section 408 of the Companies Act 2006. The Company loss for the year ended 31 December 2023 was £1,085,030 (year ended 31 December 2022: loss of £5,973,633). The financial statements were approved by the Board of Directors and authorised for issue on 7 May 2024 and are signed on its behalf by:
James Hickman
Chief Executive Officer
The notes to the financial statements form an integral part of these financial statements.
Group Statement of Changes in Equity
For the year ended 31 December 2023
|
|
Share capital |
Share premium |
Share-based payment reserve |
Deferred consideration reserve |
Merger relief reserve |
Reverse acquisition reserve |
Retained earnings |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2022 |
202,776 |
3,074,355 |
2,392,710 |
- |
5,557,645 |
(3,140,631) |
(7,828,230) |
258,625 |
|
|
|
|
|
|
|
|
|
|
|
Issue of shares |
210,423 |
1,905,234 |
- |
- |
- |
- |
- |
2,115,657 |
|
Costs of raising equity |
- |
(87,310) |
- |
- |
- |
- |
- |
(87,310) |
|
Share-based payments (note 19) |
- |
- |
4,284,039 |
- |
- |
- |
- |
4,284,039 |
|
Settlement of equity-based incentives |
67,163 |
604,550 |
(5,186,984) |
- |
- |
- |
2,515,271 |
(2,000,000) |
|
Deferred equity-based consideration |
- |
- |
- |
950,920 |
- |
- |
- |
950,920 |
|
Loss and total comprehensive income for the year |
- |
- |
- |
- |
- |
- |
(5,611,832) |
(5,611,832) |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Balance at 31 December 2022 |
480,362 |
5,496,829 |
1,489,765 |
950,920 |
5,557,645 |
(3,140,631) |
(10,924,791) |
(89,901) |
|
|
|
|
|
|
|
|
|
|
|
Issue of shares |
35,299 |
194,143 |
- |
- |
- |
- |
- |
229,442 |
|
Share-based payments (note 19) |
- |
- |
333,061 |
- |
- |
- |
- |
333,061 |
|
Settlement of equity-based incentives |
58,510 |
500,776 |
(1,042,437) |
- |
- |
- |
483,151 |
- |
|
Remeasurement of deferred consideration on acquisition |
- |
- |
- |
(810,102) |
- |
- |
- |
(810,102) |
|
Unwind of discount factor |
- |
- |
- |
87,681 |
- |
- |
- |
87,681 |
|
Transfer to deferred consideration liability |
|
|
|
(228,499) |
- |
- |
- |
(228,499) |
|
Profit and total comprehensive income for the year |
- |
- |
- |
- |
- |
- |
2,133,853 |
2,133,853 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Balance at 31 December 2023 |
574,171 |
6,191,748 |
780,389 |
- |
5,557,645 |
(3,140,631) |
(8,307,787) |
1,655,535 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
The notes to the financial statements form an integral part of these financial statements.
Company Statement of Changes in Equity
|
|
Share capital |
Share premium |
Share-based payment reserve |
Deferred consideration reserve |
Merger relief reserve |
Retained earnings |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2022 |
202,776 |
3,074,355 |
2,392,710 |
- |
5,557,645 |
(4,907,402) |
6,320,084 |
|
|
|
|
|
|
|
|
|
|
Issue of shares |
210,423 |
1,905,234 |
- |
- |
- |
- |
2,115,657 |
|
Costs of raising equity |
- |
(87,310) |
- |
- |
- |
- |
(87,310) |
|
Share-based payments (note 19) |
- |
- |
4,284,039 |
- |
- |
- |
4,284,039 |
|
Settlement of equity-based incentives |
67,163 |
604,550 |
(5,186,984) |
- |
- |
2,515,271 |
(2,000,000) |
|
Deferred equity-based consideration |
- |
- |
- |
950,920 |
- |
- |
950,920 |
|
Loss and total comprehensive income for the year |
- |
- |
- |
- |
- |
(5,973,633) |
(5,973,633) |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Balance at 31 December 2022 |
480,362 |
5,496,829 |
1,489,765 |
950,920 |
5,557,645 |
(8,365,764) |
5,609,757 |
|
|
|
|
|
|
|
|
|
|
Issue of shares |
35,299 |
194,143 |
- |
- |
- |
- |
229,442 |
|
Share-based payments (note 19) |
- |
- |
333,061 |
- |
- |
- |
333,061 |
|
Settlement of equity-based incentives |
58,510 |
500,776 |
(1,042,437) |
- |
- |
483,151 |
- |
|
Remeasurement of deferred consideration on acquisition |
- |
- |
- |
(810,102) |
- |
- |
(810,102) |
|
Unwind of discount factor |
- |
- |
- |
87,681 |
- |
- |
87,681 |
|
Transfer to deferred consideration liability |
- |
- |
- |
(228,499) |
- |
- |
(228,499) |
|
Loss and total comprehensive loss for the year |
- |
- |
- |
- |
- |
(1,085,030) |
(1,085,030) |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Balance at 31 December 2023 |
574,171 |
6,191,748 |
780,389 |
- |
5,557,645 |
(8,967,643) |
4,136,310 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
For the year ended 31 December 2023
The notes to the financial statements form an integral part of these financial statements.
Group and Company Cash Flow Statement
For the year ended 31 December 2023
|
|
|
Group |
Group |
Company |
Company |
|
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
|
£ |
£ |
£ |
£ |
|
|
Notes |
|
|
|
|
|
Profit/(loss) before tax |
|
1,290,685 |
(5,787,197) |
(2,067,319) |
(6,131,818) |
|
Adjustments to reconcile profit before tax to cash generated from operating activities: |
|
|
|
|
|
|
Other operating income |
|
(27,167) |
- |
- |
- |
|
Finance income |
4 |
(21,363) |
(18) |
- |
- |
|
Finance costs |
4 |
90,635 |
163,975 |
73,847 |
162,757 |
|
Equity-settled share-based payment |
|
- |
32,595 |
- |
32,595 |
|
Share-based compensation |
19 |
333,061 |
4,284,039 |
333,061 |
4,284,039 |
|
Depreciation and amortization |
2 |
621,941 |
401,164 |
410,499 |
296,133 |
|
Profit on disposal of subsidiary |
|
(207,480) |
- |
- |
- |
|
Write-off of property, plant and equipment |
|
519 |
- |
- |
- |
|
Decrease/(increase) in accrued income, trade and other receivables |
14 |
67,344 |
(845,866) |
177,935 |
(451,724) |
|
(Decrease)/increase in trade and other payables |
16 |
(194,021) |
757,250 |
1,121,397 |
896,573 |
|
|
|
_______ |
_______ |
_________ |
_________ |
|
Cash generated from/(used in) operations |
|
1,954,154 |
(994,058) |
49,420 |
(911,445) |
|
|
|
|
|
|
|
|
Income tax received |
7 |
- |
158,188 |
- |
158,188 |
|
|
|
_______ |
_______ |
_________ |
_________ |
|
Cash generated from/(used in) operating activities |
|
1,954,154 |
(835,870) |
49,420 |
(753,257) |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Acquisition of property, plant and equipment |
11 |
- |
(17,198) |
- |
- |
|
Purchases of property, plant and equipment |
|
(11,081) |
- |
- |
- |
|
Acquisition of intangible assets |
9 |
- |
(422,713) |
- |
(422,713) |
|
Internally generated software development |
|
(491,013) |
- |
(491,013) |
- |
|
Acquisition of subsidiary, net of cash acquired |
|
- |
(552,128) |
- |
- |
|
Investment in Group companies |
13 |
- |
- |
- |
(631,335) |
|
Proceeds from disposal of subsidiary |
|
300,000 |
- |
- |
- |
|
|
|
_______ |
_______ |
_________ |
_________ |
|
Cash used in investment activities |
|
(202,094) |
(992,039) |
(491,013) |
(1,054,048) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Shares issued (net of costs) |
19 |
- |
1,992,694 |
- |
1,992,694 |
|
Loans received |
|
- |
225,000 |
- |
225,000 |
|
Interest and similar income |
4 |
10,587 |
18 |
- |
- |
|
Interest and similar charges |
4 |
(39,963) |
(55,559) |
(39,481) |
(54,341) |
|
Lease payments |
|
(61,613) |
- |
- |
- |
|
|
|
_______ |
_______ |
__________ |
__________ |
|
Cash (used in)/generated from financing activities |
|
(90,989) |
2,162,153 |
(39,481) |
2,163,353 |
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and cash equivalents |
|
1,661,071 |
334,244 |
(481,074) |
356,048 |
|
|
|
|
|
|
|
|
Opening cash and cash equivalents |
|
682,346 |
348,102 |
495,627 |
139,579 |
|
|
|
_______ |
_______ |
________ |
________ |
|
Closing cash and cash equivalents |
|
2,343,417 |
682,346 |
14,553 |
495,627 |
|
|
|
===================== |
===================== |
===================== |
===================== |
The notes to the financial statements form an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2023
BAsis of preparation
Cornerstone FS plc (trading as Finseta) is a public limited company, incorporated and domiciled in England. The Company was admitted to AIM, London Stock Exchange's market for small and medium size growth companies, on 6 April 2021. The registered office of the Company is 14-18 Copthall Avenue, London, EC2R 7DJ. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the "Group"). The main activities of the Group are set out in the Strategic Report of the Company's annual report for the year ended 31 December 2023 (the "2023 Annual Report").
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the United Kingdom ("IFRS") for the years ended 31 December 2022 and 31 December 2023, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared in sterling, which is the Group's presentation currency and the functional currency of each Group entity. They have been prepared using the historical cost convention except for the measurement of certain financial instruments.
The parent company accounts have also been prepared in accordance with IFRS (as adopted by the United Kingdom) and using the historical cost convention. The accounting policies set out below have been applied consistently to the parent company where applicable.
Monetary amounts in these financial statements are rounded to the nearest pound.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. These estimates and assumptions are based upon management's knowledge and experience of the amounts, events or actions. Actual results may differ from such estimates.
The critical accounting estimates are considered to relate to the following:
Fair values of assets acquired in business combinations: The Group recognises the fair value of customer relationships acquired through business combinations reflecting discounted future cash flows from the acquired customers and incorporating an estimated rate of attrition of the customer base.
Deferred consideration: Total compensation for acquisitions includes an element of deferred consideration payable, subject to the revenue performance post-acquisition. Management use historical information and management forecasts to estimate a liability, using the discounted cashflow methodology, to derive a fair value of the deferred consideration payable.
Intangible assets: The Group recognises intangible assets in respect of software development costs. This recognition requires the use of estimates, judgements and assumptions in determining whether the carrying value of such assets is impaired at each year end.
Investments in subsidiary undertakings (Company financial statements only): The Company's statement of financial position includes investments stated at cost in its subsidiary undertakings. The continuing recognition at cost requires judgements and estimates including an assessment of whether the carrying value of such investments is impaired at each year end.
NEW AND REVISED STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET ADOPTED
At the date of authorisation of these financial statements, the Company has not yet adopted the following amendments to Standards and Interpretations that have been issued:
· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies; and
· Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates.
The Directors do not expect any material impact as a result of adopting the amendments listed above in the financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. Entities are accounted for as subsidiary undertakings when the Group is exposed to or has rights to variable returns through its involvement with the entity and it has the ability to affect those returns through its power over the entity.
All subsidiary undertakings have an accounting reference date ended 31 December.
BUSINESS COMBINATIONS
The Group financial statements recognise business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, other contingent consideration is re-measured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
GOING CONCERN
During the year ended 31 December 2023, the Group made an adjusted EBITDA profit (excluding non-cash share-based compensation, depreciation & amortisation costs, non-recurring transaction costs, profit on the disposal of Avila House, operating income related to interest on client balances and IFRS 16 accounting adjustments) of £1,700,223 (2022: loss of £869,319). At 31 December 2023, the Group balance sheet showed a net asset position of £1,655,535 (2022: net liability of £89,901), including a negative profit and loss reserve of £8,307,787 (2022: £10,924,791), and a cash balance of £2,343,417 (2022: £682,346).
The Directors have prepared cash flow forecasts covering a period to 31 December 2026. The Directors have derived forecast assumptions that are their best estimate of the future development of the Group's business taking into account projected increase in revenues, continued investment in the development of the software platform and organic sales and marketing efforts.
The Directors have prepared various scenario planning forecasts alongside their best-estimate forecast assumptions, including a scenario in which sales growth falls below management expectations and various cash mitigation measures are implemented, which all indicate sufficient cash resources to continue to finance the Group's working capital requirements over the forecast period.
For these reasons, the Directors continue to adopt the going concern basis of accounting in preparing the Group's financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
revenue
The Group applies IFRS 15 Revenue from Contracts with Customers for the recognition of revenue. IFRS 15 established a comprehensive framework for determining whether, how much and when revenue is recognised. It affects the timing and recognition of revenue items, but not generally the overall amount recognised.
The performance obligations of the Group's revenue streams are satisfied on the transaction date or by the provision of the service for the period described in the contract. Revenue is not recognised where there is evidence to suggest that customers do not have the ability or intention to pay. The Group does not have any contracts with customers where the performance obligations have not been fully satisfied.
The Group derives revenue from the provision of foreign exchange and payment services. When a contract with a client is entered into, it immediately enters into a separate matched contract with its institutional counterparty.
Spot and forward revenue is recognised when a binding contract is entered into by a client and the rate is fixed and determined. Revenue represents the difference between the rate offered to clients and the rate received from its institutional counterparties.
INVESTMENTS
Investments in subsidiary undertakings are accounted for at cost less impairment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the Group statement of financial position when the Group has become a party to the contractual provisions of the instrument.
Derivative financial instruments
Derivative financial assets and liabilities are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in the income statement. The Group's derivative financial assets and liabilities at fair value through profit or loss comprise solely of forward foreign exchange contracts.
Trade, loan and other receivables
Trade and loan receivables are initially measured at their transaction price. Trade and loan receivables are held to collect the contractual cash flows which are solely payments of principal and interest. Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate method. The Directors have considered the impact of discounting trade and loan receivables whose settlement may be deferred for lengthy periods and concluded that the impact would not be material.
An impairment loss is recognised for the expected credit losses on trade and loan receivables when there is an increased probability that the counterparty will be unable to settle an instrument's contractual cash flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying amount of the receivable and are recognised in profit or loss.
Trade payables
Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into. An instrument will be classified as a financial liability when there is a contractual obligation to deliver cash or another financial asset to another enterprise.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdraft that is integral to the Group's cash management.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill on acquisition of subsidiaries is separately disclosed in note 9.
Goodwill is not amortised; it is recognised as an asset, allocated to cash generating units for the purpose of impairment testing and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
other INTANGIBLE aSSETS
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.
Amortisation is charged on a straight-line basis through the profit or loss within administrative expenses. The rates applicable, which represent the Directors' best estimate of the useful economic life, are as follows:
Customer relationships - 5 years
Internally developed software - 3 years
Software costs - 3 years
Other intangible assets - 3 years
Trademarks are recognised as intangible assets and are expected to generate future economic benefits in perpetuity. Trademarks are not amortised. They are allocated to a cash generating unit and tested for impairment annually.
property, plant and equipment
All property, plant and equipment is initially recorded at cost and is subsequently measured at cost less accumulated depreciation and any recognised impairment loss.
Depreciation, which is charged through the profit or loss within administrative expenses, is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life, as follows:
Computer equipment - 25% straight line
Leasehold improvements - in line with the term of the underlying leased asset
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
LEASES
The Group as lessee
The Group assesses whether a contract is, or contains, a lease at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (determined to be those with an initial discounted total obligation of less than £5,000). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If that rate cannot be readily determined, the Group uses its incremental borrowing rate.
The incremental borrowing rate depends on the term, currency and start date of the lease and is determined based on a series of inputs including: the risk-free rate based on government bond rates; a country-specific risk adjustment; a credit risk adjustment based on bond yields; and an entity-specific adjustment when the risk profile of the entity that enters into the lease is different to that of the Group and the lease does not benefit from a guarantee from the Group.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable
· Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date
· The amount expected to be payable by the lessee under residual value guarantees
· The exercise price of purchase options, if the lessee is reasonably certain to exercise the options
· Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
· The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate
· The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used)
· A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated balance sheet.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the "Impairment of property, plant and equipment and intangible assets excluding goodwill" policy.
Variable rents that do not depend on an index or rate are not included in the measurement the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line "Administrative expenses" in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
Rent free concessions granted during the COVID-19 pandemic have been credited to the income statement in the year they were granted, with a resulting reduction in the lease obligation.
The Group as lessor
The Group enters into lease agreements as a lessor for some of its property included within its right-of-use assets.
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease as two separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Group regularly reviews the estimated unguaranteed residual value and applies the impairment requirements of IFRS 9, recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except for credit-impaired financial assets for which interest income is calculated with reference to their amortised cost (i.e. after a deduction of the loss allowance).
When a contract includes both lease and non-lease components, the Group applies IFRS 15 to allocate the consideration under the contract to each component.
PROVISIONS
Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated.
SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in share premium as a deduction from the proceeds.
SHARE-BASED COMPENSATION
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period. Where equity instruments are granted to persons other than employees, the income statement is charged with fair value of goods and services received.
Cancelled or settled options are accounted for as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
The proceeds received net of any attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
Fair value is measured by use of the Black-Scholes pricing model which is considered by management to be the most appropriate method of valuation.
employee benefits
The Group operates a defined contribution pension scheme. The pension costs charged in the financial statements represent the contribution payable by the Group during the year.
The costs of short-term employee benefits are recognised as a liability and an expense in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
TAXATION
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax relating to items recognised directly in equity or other comprehensive income is recognised in equity and not in the consolidated statement of comprehensive income.
Deferred income tax is provided on all temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Deferred tax assets have been recognised in respect of the Group's tax losses carried forward.
Research and Development tax credits are recognised as receivables when they have been submitted to HMRC. The amount recognised is based on the expected value of the credit.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
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.
The Group makes estimates and assumptions concerning the future. The resulting accounting judgements will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
IMPAIRMENT
At each accounting reference date, the Group reviews the carrying amounts of its intangibles, property, plant & equipment and investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried in at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
DEFERRED CONSIDERATION
Total compensation for acquisitions includes an element of deferred consideration payable, subject to the revenue performance post-acquisition. Management use historical information and management forecasts to estimate a liability, using the discounted cashflow methodology, to derive a fair value of the deferred consideration payable.
SHARE-BASED COMPENSATION
The fair value of share-based awards is measured using the Black-Scholes model which inherently makes use of significant estimates and assumptions concerning the future applied by the Directors. Such estimates and judgements include the expected life of the options and the number of employees that will achieve the vesting conditions. Further details of the share option scheme are given in note 19.
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the alternative performance measure of adjusted EBITDA. This measure is not defined under IFRS, nor is it a measure of financial performance under IFRS.
This measure is sometimes used by investors to evaluate a company's operational performance with a long-term view towards adding shareholder value. This measure should not be considered an alternative, but instead supplementary, to profit/(loss) from operations and any other measure of performance derived in accordance with IFRS.
Alternative performance measures do not have generally accepted principles for governing calculations and may vary from company to company. As such, the adjusted EBITDA quoted within the Group statement of comprehensive income should not be used as a basis for comparison of the Group's performance with other companies.
ADJUSTED EBITDA
The Group uses adjusted EBITDA, defined as profit/(loss) from operations, adding back share-based compensation, transaction costs associated with the Group's acquisitions, depreciation & amortisation charge, profit on the disposal of Avila House, operating income related to interest on client balances and IFRS 16 accounting transactions.
1 revenue and SEGMENTAL REPORTING
All of the Group's revenue arises from its activities within the UK (although a proportion of revenue is derived from customers incorporated or residing outside of the UK). Management considers there to be only one operating segment within the business based on the way the business is organised and the way results are reported internally.
Revenue is as follows:
|
|
Group |
Group |
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
|
|
|
|
|
_______ |
_______ |
|
Total revenue |
9,649,233 |
4,821,996 |
|
|
_______ |
_______ |
2 PROFIT/(LOSS) FROM OPERATIONS
|
|
Group |
Group |
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
|
|
|
|
Profit/(loss) from operations is stated after charging/(crediting): |
|
|
|
Share-based compensation |
333,061 |
4,284,039 |
|
Transaction costs |
4,500 |
99,365 |
|
Expensed software development costs |
58,792 |
86,941 |
|
Depreciation of property, plant and equipment |
15,883 |
14,622 |
|
Depreciation of right-of-use assets |
72,409 |
- |
|
Amortisation of intangible assets |
533,649 |
386,541 |
|
Profit on disposal of subsidiary |
(207,480) |
- |
|
Short-term (2018 IAS 17 operating) lease rentals |
- |
252,308 |
|
|
_______ |
_______ |
Amounts payable to the Group's auditor in respect of both audit and non-audit services:
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
Audit Services |
|
|
|
- Statutory audit |
41,000 |
40,000 |
|
Other Services |
|
|
|
The auditing of accounts of associates of the Company pursuant to legislation: |
|
|
|
- Audit of subsidiaries and its associates |
45,000 |
49,450 |
|
|
------------------------- |
------------------------- |
|
|
86,000 |
89,450 |
|
|
========================= |
========================= |
3 OTHER OPERATING INCOME
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
Interest receivable from client cash balances |
350,143 |
30,647 |
|
|
------------------------- |
------------------------ |
Other operating income represents interest generated from client cash balances. The recent changes to the interest rate environment have meant that these accounts can be interest bearing, whilst maintaining the safeguarding requirements. Under the terms of the Group's Electronic Money Licence, the Group is not able to pass any of the interest earned back to the clients.
Whilst the increased interest stream is a positive boost for the Group and a natural by-product of its increasingly diversified product offering, the Group is mindful that aspects of its dynamics are driven by macroeconomics beyond its control. The Group has therefore chosen to recognise interest income on client balances as 'other operating income', and not revenue on the face of the statement of comprehensive income. For the same reason, interest income has been excluded from the presentation of adjusted EBITDA.
In 2022, interest on client cash balances was included in interest receivable. The comparatives figures have been amended for comparison purposes.
Interest earned on the Group's own cash is recognised within 'finance and other income' in the consolidated statement of comprehensive income.
4 INTEREST AND SIMILAR ITEMS
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
|
|
|
|
Total finance and other income |
|
|
|
Bank interest receivable |
21,363 |
18 |
|
|
========================= |
========================= |
|
|
|
|
|
Total finance costs |
|
|
|
(Release)/unwinding of discount |
(56,459) |
108,416 |
|
Loan note interest |
130,306 |
53,500 |
|
Other interest payable and charges |
483 |
2,059 |
|
Interest on lease liabilities (note 17) |
16,305 |
- |
|
|
------------------------- |
------------------------- |
|
|
90,635 |
163,975 |
|
|
========================= |
========================= |
5 EMPLOYEES
The average monthly numbers of employees in the Group (including the Directors) during the year was made up as follows (the Company has no employees other than the Directors):
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
Number |
Number |
|
|
|
|
|
Directors |
6 |
7 |
|
Employees |
28 |
27 |
|
|
_______ |
_______ |
|
|
34 |
34 |
|
|
_______ |
_______ |
|
|
|
|
|
Employment costs |
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
|
|
|
|
Wages and salaries |
2,349,642 |
1,977,588 |
|
Social security costs |
206,636 |
251,010 |
|
Pension costs |
71,408 |
49,200 |
|
Share-based compensation |
219,068 |
4,155,094 |
|
|
_______ |
_______ |
|
|
2,846,754 |
6,432,892 |
|
|
_______ |
_______ |
remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate. Further information about the remuneration of the individual directors is provided in the Directors' Remuneration Report of the 2023 Annual Report.
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
|
£ |
£ |
|
|
|
|
|
|
|
Salaries and fees |
559,310 |
794,712 |
|
|
Bonus |
175,981 |
43,044 |
|
|
Share-based compensation charge/(credit) |
152,495 |
(125,443) |
|
|
Social security costs |
103,472 |
123,024 |
|
|
|
_______ |
_______ |
|
|
|
991,258 |
835,337 |
|
|
|
_______ |
_______ |
|
|
|
Number |
Number |
|
|
Number of Directors to whom retirement benefits are accruing under a defined contribution scheme |
3 |
3 |
|
|
|
|
_______ |
_______ |
|
|
|
|
||
|
|
|
|
||
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
|
|
£ |
£ |
|
|
|
|
The remuneration in respect of the highest paid Director was: |
|
|
|
|
|
|
|
|
|
|
|
Salaries and fees |
170,360 |
140,000 |
|
|
|
Bonus |
119,981 |
31,360 |
|
|
|
Share-based compensation charge |
103,629 |
30,173 |
|
|
|
Pension and other benefits |
12,379 |
7,046 |
|
|
|
|
_______ |
_______ |
|
|
|
|
406,349 |
208,579 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
During the year, no (2022: nil) Directors exercised any (2022: nil) share options.
6 Pension costs
The Group operates a defined contribution pension scheme. The scheme and its assets are held by independent managers. The pension charge represents contributions due from the Group and amounted to £71,408 (2022: £49,200). At 31 December 2023 contributions of £20,130 remained outstanding and are included within other payables (2022: £59,054).
7 taxation
The tax on the loss on ordinary activities for the period was as follows:
|
|
Group |
Group |
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
|
_______ |
_______ |
|
Current Tax: |
|
|
|
Current tax credit |
(45,489) |
(158,188) |
|
Deferred tax credit |
(797,679) |
(17,177) |
|
|
_______ |
_______ |
|
Income tax credit |
(843,168) |
(175,365) |
|
|
_______ |
_______ |
|
|
|
|
|
|
Group |
Group |
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
Profit/(loss) before taxation |
1,290,685 |
(5,787,197) |
|
|
_______ |
_______ |
|
Profit/(loss) multiplied by main rate of corporation tax in the UK of 23.52% (2022: 19%) |
303,569 |
(1,099,567) |
|
Effects of: |
|
|
|
Surrender of tax losses for research & development tax credit refund |
(45,489) |
(158,188) |
|
Expenses not deductible for tax purposes |
65,575 |
29,261 |
|
Income not taxable |
(122,176) |
- |
|
Share-based payments |
78,335 |
814,037 |
|
Tax rate changes |
(17,550) |
- |
|
Other adjustments in period |
(2,520) |
48,648 |
|
Unutilised tax losses |
- |
190,444 |
|
Utilisation of tax losses |
(377,472) |
- |
|
Recognition of deferred tax asset in respect of tax losses |
(725,440) |
- |
|
|
_______ |
_______ |
|
Income tax credit |
(843,168) |
(175,365) |
|
|
_______ |
_______ |
As at 31 December 2023, the Group had tax losses carried forward of £3,272,638 (31 December 2022: £5,013,429).
The Group has recognised a deferred tax asset of £697,864 in respect of the Group's tax losses. They are expected to be utilised within the year ending 31 December 2024 and 31 December 2025.
The standard rate of corporation tax increased from 19% to 25%, with effect from 1 April 2023. The blended rate of corporation tax applicable for the year ended 31 December 2023 was therefore 23.52% (2022: 19%).
8 earnings PER SHARE
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
£ |
£ |
|
Statutory profit/(loss) |
2,133,853 |
(5,611,832) |
|
|
|
|
|
Weighted average number of shares used in basic EPS |
56,613,145 |
32,506,335 |
|
Effect of dilutive share options |
161,510 |
- |
|
Weighted average number of shares used in diluted EPS |
56,774,655 |
32,506,335 |
|
|
|
|
|
Earnings/(loss) per share (pence) |
|
|
|
|
|
|
|
Statutory total earnings/(loss) per share |
|
|
|
Basic |
3.77 |
(17.26) |
|
Diluted |
3.76 |
(17.26) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the prior year, the loss incurred by the Group means that the effect of any outstanding warrants and options would be considered anti-dilutive and is ignored for the purposes of the loss per share calculation.
9 GROUP INTANGIBLE ASSETS
|
|
Goodwill |
Customer relationships |
Internally developed software |
Software costs |
Trademarks |
Other |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
COST |
|
|
|
|
|
|
|
|
At 1 January 2023 |
1,086,262 |
615,756 |
1,070,198 |
15,611 |
- |
92,520 |
2,880,347 |
|
Additions |
- |
- |
444,899 |
- |
46,114 |
- |
491,013 |
|
Measurement period adjustment |
(665,962) |
- |
- |
- |
- |
- |
(665,962) |
|
Disposal |
- |
- |
- |
- |
- |
(92,520) |
(92,520) |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
At 31 December 2023 |
420,300 |
615,756 |
1,515,097 |
15,611 |
46,114 |
- |
2,612,878 |
|
|
|
|
|
|
|
|
|
|
AMORTISATION |
|
|
|
|
|
|
|
|
At 1 January 2023 |
- |
90,408 |
458,691 |
15,611 |
- |
- |
564,710 |
|
Charge for the period |
- |
123,151 |
410,498 |
- |
- |
- |
533,649 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
At 31 December 2023 |
- |
213,559 |
869,189 |
15,611 |
- |
- |
1,098,359 |
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
|
|
|
|
|
|
At 31 December 2023 |
420,300 |
402,197 |
645,908 |
- |
46,114 |
- |
1,514,519 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
At 31 December 2022 |
1,086,262 |
525,348 |
611,507 |
- |
- |
92,520 |
2,315,637 |
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
Other intangible assets comprise regulatory licences that are held at cost and are not amortised.
On 18 March 2023, the Group agreed a variation of the deferred consideration payments for its 2022 acquisition of Capital Currencies Ltd. A measurement period adjustment of £665,962 has been recognised by the Group as a reduction in goodwill with a corresponding reduction in contingent deferred consideration, which is due to be settled in cash.
The estimated deferred consideration of £228,499 has been included in liabilities (see note 18).
Company INTANGIBLE ASSETS
|
|
Internally developed software |
Trademarks |
Total |
|
|
£ |
£ |
£ |
|
COST |
|
|
|
|
At 1 January 2023 |
1,070,198 |
- |
1,070,198 |
|
Additions |
444,899 |
46,114 |
491,013 |
|
|
|
|
|
|
At 31 December 2023 |
1,515,097 |
46,114 |
1,561,211 |
|
|
|
|
|
|
AMORTISATION |
|
|
|
|
At 1 January 2023 |
458,691 |
- |
458,691 |
|
Charge for the period |
410,498 |
- |
410,498 |
|
|
_______ |
_______ |
_______ |
|
At 31 December 2023 |
869,189 |
- |
869,189 |
|
|
|
|
|
|
NET BOOK VALUE |
|
|
|
|
At 31 December 2023 |
645,908 |
46,114 |
692,022 |
|
|
|
|
|
|
At 31 December 2022 |
611,507 |
- |
611,507 |
|
|
_______ |
_______ |
_______ |
10 RIGHT-OF-USE ASSETS
|
Leasehold Property |
2023 |
|
|
£ |
|
COST |
|
|
At 1 January 2023 |
- |
|
Additions |
868,907 |
|
|
_______ |
|
At 31 December 2023 |
868,907 |
|
|
|
|
AMORTISATION |
|
|
At 1 January 2023 |
- |
|
Charge for the period |
72,409 |
|
|
_______ |
|
At 31 December 2023 |
72,409 |
|
|
|
|
NET BOOK VALUE |
|
|
At 31 December 2023 |
796,498 |
|
|
_______ |
|
|
|
|
|
|
11 GROUP property, plant and equipment
|
|
Computer equipment |
Leasehold improvements |
Total |
|
|
£ |
£ |
£ |
|
COST |
|
|
|
|
At 1 January 2023 |
51,220 |
14,583 |
65,803 |
|
Additions |
11,081 |
- |
11,081 |
|
Disposals |
(976) |
- |
(976) |
|
|
_______ |
_______ |
_______ |
|
At 31 December 2023 |
61,325 |
14,583 |
75,908 |
|
|
|
|
|
|
AMORTISATION |
|
|
|
|
At 1 January 2023 |
19,779 |
6,347 |
26,126 |
|
Charge for the period |
12,340 |
3,543 |
15,883 |
|
Disposal |
(457) |
- |
(457) |
|
|
_______ |
_______ |
_______ |
|
At 31 December 2023 |
31,662 |
9,890 |
41,552 |
|
|
|
|
|
|
NET BOOK VALUE |
|
|
|
|
At 31 December 2023 |
29,663 |
4,693 |
34,356 |
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
At 31 December 2022 |
31,441 |
8,236 |
39,677 |
|
|
_______ |
_______ |
_______ |
12 deferred tax
The Group recognised the following movements in deferred tax:
|
|
Acquired intangibles |
Fixed asset and other temporary differences |
Tax losses |
Total |
|
|
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
At 1 January 2022 |
- |
- |
- |
- |
|
Charge in the year |
(99,816) |
- |
- |
(99,816) |
|
Liability at 31 December 2022 |
(99,816) |
- |
- |
(99,816) |
|
(Charge)/credit in the year |
(733) |
(19,748) |
818,161 |
797,680 |
|
(Liability)/asset at 31 December 2023 |
(100,549) |
(19,748) |
818,161 |
697,864 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
Current |
302,609 |
|
|
|
|
Non-current |
395,255 |
|
|
|
|
|
|
The Company recognised the following movements in deferred tax:
|
|
Fixed asset and other temporary differences |
Tax losses |
Total |
|
|
£ |
£ |
£ |
|
|
|
|
|
|
At 1 January 2022 and 31 December 2022 |
- |
- |
- |
|
(Charge)/credit in the year |
(17,516) |
625,084 |
607,568 |
|
(Liability)/asset at 31 December 2023 |
(17,516) |
625,084 |
607,568 |
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
Current |
- |
|
|
|
Non-current |
607,568 |
|
|
|
|
|
13 investments
|
|
Investments in Subsidiaries £ |
|
|
Cost or Valuation At 1 January 2023 Remeasurement of deferred consideration
|
8,017,622 (665,962)
|
|
|
|
7,351,660 |
|
|
|
|
|
|
Net Book Value At 31 December 2023 |
7,351,660
|
|
|
At 31 December 2022 |
8,017,622 |
|
During the year ended 31 December 2023, the Company remeasured the deferred consideration payable in respect of its 2022 acquisition of Capital Currencies Ltd. The remeasurement followed a variation to the original terms as follows:
· The first tranche of the earn-out consideration is now assessable on revenue performance for the year ending 31 January 2024 and the second tranche is assessable on revenue performance for the year ending 31 January 2025 - both representing an extension of one year.
· The Company now has the option, at its discretion, to satisfy one or both of the earn-out payments in cash as opposed to one half of the first tranche being payable in ordinary shares and the other half in convertible loan notes and the second tranche to be payable in ordinary shares. Accordingly, the Company has recognised the estimated deferred consideration as a liability payable in cash.
Shares in subsidiary and associate undertakings are stated at cost. As at 31 December 2023, the Company owned the following principal subsidiaries, which are included in the consolidated accounts:
|
Subsidiary |
Principal Activity |
Country of Incorporation |
|
Percentage of Ownership |
|
Finseta Payment Solutions Limited* |
Foreign Exchange |
Northern Ireland |
14-18 Copthall Avenue, London, England, EC2R 7DJ |
100 per cent. |
|
Cornerstone - Middle East FZCO |
Consultancy |
United Arab Emirates |
Dubai Silicon Oasis, DDP, Building A2, Dubai, United Arab Emirates |
100 per cent. |
|
Capital Currencies Limited |
Authorised Payment Institution |
England and Wales |
14-18 Copthall Avenue, London, England, EC2R 7DJ |
100 per cent. |
|
Pangea FX Limited |
Foreign Exchange White Label |
England and |
14-18 Copthall Avenue, London, England, EC2R 7DJ |
100 per cent. |
|
Finseta Payments Corp |
Foreign Exchange |
Canada |
5577 153A street, Suite 207, Surrey BC, V3S 5K7, Canada |
100 per cent. |
* During the year, the subsidiary was named Cornerstone Payment Solutions Ltd. The change of name to Finseta Payment Solutions Limited became effective 24 April 2024.
On 20 September 2023, the Company entered into a sale and purchase agreement to sell Capital Currencies Ltd, which is subject to the approval of the FCA. As at the year end, the only asset held in Capital Currencies Ltd is an API licence with a £nil net book value (2022: £nil).
On 12 December 2023, the Group incorporated a new Canadian entity, Finseta Payments Corp.
Finseta Payment Solutions Limited disposed of its 100% shareholding in Avila House Ltd on 26 April 2023.
14 current trade and other receivables
|
|
Group 31 December 2023 |
Group 31 December 2022 |
Company 31 December 2023 |
Company 31 December 2022 |
|
|
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
Trade receivables |
347,491 |
221,669 |
- |
- |
|
Prepayments and accrued income |
152,281 |
131,010 |
19,142 |
39,465 |
|
Derivative financial assets at fair value |
340,241 |
635,473 |
- |
- |
|
Other receivables |
147,536 |
53,062 |
53,264 |
- |
|
Amounts due from Group undertakings |
- |
- |
458,421 |
363,359 |
|
Taxes and social security |
372,092 |
297,896 |
372,092 |
297,896 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
1,359,641 |
1,339,110 |
902,919 |
700,720 |
|
|
_______ |
_______ |
_______ |
_______ |
For the year ended 31 December 2023, £nil was recorded as a bad debt expense (31 December 2022: £nil).
15 loan notes
|
|
Group |
Group |
Company |
Company |
|
|
31 December 2023 |
31 December 2022 |
31 December 2023 |
31 December 2022 |
|
|
£ |
£ |
£ |
£ |
|
CURRENT |
|
|
|
|
|
Convertible loan notes |
- |
225,000 |
- |
225,000 |
|
Loan notes |
172,578 |
- |
172,578 |
- |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
NON-CURRENT |
|
|
|
|
|
Loan notes |
2,000,000 |
2,172,578 |
2,000,000 |
2,172,578 |
|
|
_______ |
_______ |
_______ |
_______ |
On 3 February 2023, the current convertible loan note of £225,000, issued pursuant to the Company's fundraising on 5 August 2022, was converted to 3,461,538 ordinary shares at a price of £0.065 for Mr. Horrocks to take his shareholding in the Company above 10%.
The non-convertible loan notes comprise £2,000,000 issued to Robert O'Brien (repayable on 31 July 2026) and £172,578 of deferred consideration in relation to the acquisition of Pangea FX Limited (repayable on 31 August 2024). Both loan notes have a 6% coupon rate payable quarterly in arrears. The Pangea FX Limited loan note is payable contingent upon achieving future revenue targets over a period of two years from the acquisition date. Based on current and forecast performance of Pangea FX, it has been assumed that the loan note will be paid in full.
16 current trade and other payables
|
|
Group |
Group |
Company |
Company |
|
|
31 December 2023 |
31 December 2022 |
31 December 2023 |
31 December 2022 |
|
|
£ |
£ |
£ |
£ |
|
Trade payables |
248,493 |
362,035 |
87,339 |
162,128 |
|
Derivative financial liabilities at fair value |
279,097 |
563,676 |
- |
- |
|
Other tax and social security |
480,612 |
515,750 |
2,298 |
50,640 |
|
Other payables and accruals |
874,569 |
527,816 |
298,720 |
179,818 |
|
Amount due to Group undertakings |
- |
- |
2,642,978 |
1,425,555 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
1,882,771 |
1,969,277 |
3,031,335 |
1,818,141 |
|
|
_______ |
_______ |
_______ |
_______ |
17 lEASE LIABILITIES
|
|
Group |
Group |
|
Leasehold Property |
31 December 2023 |
31 December 2022 |
|
|
£ |
£ |
|
At 1 January 2023 |
- |
- |
|
Additions |
868,907 |
- |
|
Finance costs |
16,305 |
- |
|
Payments |
(61,613) |
- |
|
Lease accruals |
(16,687) |
- |
|
|
_______ |
_______ |
|
At 31 December 2023 |
806,912 |
- |
|
|
_______ |
_______ |
|
|
|
|
|
Current |
263,357 |
- |
|
Non-Current |
543,555 |
- |
|
|
|
|
|
Incremental borrowing rate |
7.97% |
- |
Maturity analysis
|
|
Group |
Group |
|
Contractual undiscounted cash flows |
31 December 2023 |
31 December 2022 |
|
|
£ |
£ |
|
Less than one year |
316,332 |
- |
|
One to five years |
583,053 |
- |
|
More than five years |
- |
- |
|
|
_______ |
_______ |
|
Total undiscounted lease liabilities at 31 December 2023 |
899,385 |
- |
|
|
_______ |
_______ |
18 deferred consideration
|
|
Group |
|
Contractual undiscounted cash flows |
31 December 2023 |
|
|
£ |
|
At 1 January 2023 |
- |
|
Transferred from deferred consideration reserve |
228,499 |
|
At 31 December 2023 |
_______ |
|
|
228,499 |
|
|
_______ |
|
Current |
117,176 |
|
Non-current |
111,323 |
|
|
_______ |
19 Share capital AND Reserves
|
Allotted, called up and fully paid |
|
|
|
|
Ordinary shares |
Share capital |
|
|
No. |
£ |
|
Ordinary shares of £0.01 each as at 1 January 2023 |
48,036,199 |
480,362 |
|
Issue of new shares of £0.01 |
9,380,902 |
93,809 |
|
|
_______ |
_______ |
|
Ordinary shares of £0.01 each at 31 December 2023 |
57,417,101 |
574,171 |
|
|
_______ |
_______ |
|
|
|
|
At 31 December 2023 share subscriptions of £nil remained unpaid (31 December 2022: £nil).
The following changes in the share capital of the Company have taken place in year ended 31 December 2023:
· On 13 January 2023, 806,182 ordinary shares were issued at a price of £0.06501 settling the share-based remuneration for former non-executive board members and the company secretary in respect of the year ended 31 December 2021
· On 3 February 2023, 5,113,182 ordinary shares were issued at a price of £0.100 being the final equity settlement with Robert O'Brien related to his share-based incentivisation agreement and following receipt of approval from the FCA for Mr. O'Brien to take his shareholding in the Company above 10%
· On 3 February 2023, 3,461,538 ordinary shares were issued at a price of £0.065 upon conversion of a loan note held by Mark Horrocks and following receipt of approval from the FCA for Mr. Horrocks to take his shareholding in the Company above 10%
All ordinary shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of shareholders.
The following describes the nature and purpose of each reserve within owner's equity:
Share capital: Amount subscribed for shares at nominal value.
Share premium: Amount subscribed for share capital in excess of nominal value, less costs of share issue.
Share-based payment reserve: The share-based payment reserve comprises the cumulative expense representing the extent to which the vesting period of warrants and share options has passed and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest.
Deferred consideration reserve: Reflects equity-based contingent consideration on the acquisition of subsidiaries.
Merger relief reserve: Effect on equity of the consideration shares issued over their nominal value.
Reverse acquisition reserve: Effect on equity of the reverse acquisition of Finseta Payment Solutions Limited.
Retained losses: Cumulative realised profits less cumulative realised losses and distributions made, attributable to the equity shareholders of the Company.
Options
The Company operates an Enterprise Management Incentive ("EMI") Scheme equity-settled share-based remuneration scheme for employees.
Under the scheme the options are exercisable at any time. The options are also exercisable in the event of a change of control. If the option holder's employment within the Group is terminated, other than for gross misconduct, any options vested may be exercised within 90 days of such termination (12 months in the case of the option holder's death), otherwise the options lapse five years after the date of grant. The options also lapse, inter alia, if the option holder is adjudged bankrupt or proposes a voluntary arrangement or other scheme in relation to his/her debts.
|
|
31 December 2023 |
31 December 2022 |
||
|
|
Number |
Weighted average exercise price |
Number |
Weighted average exercise price |
|
|
|
£ |
|
£ |
|
|
|
|
|
|
|
Outstanding at the beginning of the year |
1,706,331 |
0.24 |
1,599,480 |
0.50 |
|
Granted during the year |
3,919,180 |
0.13 |
1,893,454 |
0.23 |
|
Forfeited/waived during the year |
(767,775) |
(0.40) |
(1,786,603) |
(0.46) |
|
|
_______ |
_______ |
_______ |
_______ |
|
Total outstanding |
4,857,736 |
0.13 |
1,706,331 |
0.24 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
Total exercisable |
1,357,674 |
0.11 |
184,535 |
0.50 |
|
|
_______ |
_______ |
_______ |
_______ |
The Black-Scholes model was used for calculating the cost of options. The model inputs for each of the options issued were:
|
GRANT DATE |
8 March 2022 |
8 March 2022 |
8 March 2022 |
1 September 2022 |
13 January 2023 |
13 January 2023 |
16 November 2023 |
16 November 2023 |
|
|
|
|
|
|
|
|
|
|
|
Exercise price (pence) |
36.2 |
61.0 |
26.5 |
10.0 |
10.0 |
20.0 |
12.0 |
10.0 |
|
Share price at grant date (pence) |
16.5 |
16.5 |
16.5 |
9.0 |
8.0 |
8.0 |
12.0 |
12.0 |
|
|
|
|
|
|
|
|
|
|
|
Risk free rate |
2.1% |
2.1% |
2.1% |
2.7% |
2.7% |
2.7% |
4.2% |
4.2% |
|
Expected volatility |
90.1% |
90.1% |
90.1% |
129.5% |
129.5% |
129.5% |
119.8% |
119.8% |
|
Contractual life (years) |
5 |
5 |
5 |
5 |
5 |
5 |
5 |
5 |
The expected volatility reflects the assumption that historical volatility of comparable quoted companies is indicative of future trends, which may not necessarily be the actual outcome.
The weighted average contractual life of the options is five years (2022: five years).
No options were exercised during the year (2022: nil).
The Group's share-based compensation charge for the year ended 31 December 2023 of £333,061 (2022: £4,284.039) consists of £113,993 in relation to warrants granted in the Company (2022: £128,943), £219,065 in respect of options granted in the Company (2022: charge of £222,577), £nil in respect of equity-settled share-based payments related to the non-executive Board member's service agreements (2022: £36,836) and £nil of other share-based compensation (2022: £4,340,837).
No warrants were granted in the year (2022: none).
20 Related party transactions
Details of key management compensation are included in note 5. Key management are considered to be the Directors of the Group.
Transactions with subsidiaries
During the year, the Company and Finseta Payment Solutions Limited entered into various transactions with each other including software development charges, licences fees and working capital support. The net balance of transactions between the companies are held on an interest-free inter-Group loan, which has no terms for repayment. At the year end, the Company owed £2,620,559 (2022: £1,404,408) to Finseta Payment Solutions Limited.
During the year, the Company also provided working capital support to Cornerstone - Middle East FZCO and Capital Currencies Ltd. The net balance of transactions between the companies are held on an interest-free intra-Group loan, which has no terms for repayment. At the year end, Cornerstone - Middle East FZCO owed the Company £92,319 (2022: £60,500) and Capital Currencies Ltd owed the Company £35,899 (2022: £43,242).
Other related parties
On 3 February 2023 the Company issued shares to Robert O'Brien, General Manager APAC and Middle East and largest shareholder in the Company, as disclosed in notes 15 and 19. On 8 March 2023 the Company and Mr. O'Brien's agreed to extend the repayment date of his non-convertible interest-bearing loan note in the sum of £2,000,000, as disclosed in note 15, by one year to 31 July 2026. On the same date Mr. O'Brien agreed to vary and extend certain elements of his compensation package, decreasing his commission share on certain established revenue streams and increasing his share of the profitability of the Dubai office.
The transaction with Mark Horrocks, a significant shareholder in the Company, is disclosed in notes 15 and 19.
As at 31 December 2023, an amount of £8,750 was due from Terry Everson, a former director of Finseta Payment Solutions Limited and a shareholder in the Company (31 December 2022: £8,750).
21 FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
|
|
Group |
Group |
Company |
Company |
|
|
31 December 2023 |
31 December 2022 |
31 December 2023 |
31 December 2022 |
|
|
£ |
£ |
£ |
£ |
|
DERIVATIVE FINANCIAL ASSETS |
|
|
|
|
|
Foreign currency forward contracts with customers |
253,663 |
504,106 |
- |
- |
|
Foreign currency forward contracts with institutional counterparty |
86,578 |
131,367 |
- |
- |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
340,241 |
635,473 |
- |
- |
|
|
|
|
|
|
|
Cash and cash equivalents |
2,343,417 |
682,346 |
14,553 |
495,627 |
|
Trade receivables |
347,491 |
221,669 |
- |
- |
|
Other receivables |
254,328 |
184,072 |
485,338 |
402,824 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
3,285,477 |
1,723,560 |
499,891 |
898,451 |
|
|
_______ |
_______ |
_______ |
_______ |
FINANCIAL LIABILITIES
|
|
Group |
Group |
Company |
Company |
|
|
31 December 2023 |
31 December 2022 |
31 December 2023 |
31 December 2022 |
|
|
£ |
£ |
£ |
£ |
|
DERIVATIVE FINANCIAL LIABILITIES |
|
|
|
|
|
Foreign currency forward contracts with customers |
61,367 |
165,156 |
- |
- |
|
Foreign currency forward contracts with institutional counterparty |
217,730 |
398,520 |
- |
- |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
279,097 |
563,676 |
- |
- |
|
Trade payables |
248,493 |
362,035 |
87,339 |
162,128 |
|
Other payables |
874,569 |
527,816 |
2,941,698 |
1,605,373 |
|
Loan notes |
2,172,578 |
2,397,578 |
2,172,578 |
2,397,578 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
3,574,737 |
3,851,105 |
5,201,615 |
4,165,079 |
|
|
_______ |
_______ |
_______ |
_______ |
All financial assets and liabilities have contractual maturity of less than one year with the exception of loan notes of £2,172,578 (2022: £2,172,578).
Derivative financial assets and liabilities
Derivative financial assets not designated as hedging instruments
|
|
31 December 2023 |
31 December 2022 |
||
|
|
Fair Value |
Notional Principal |
Fair Value |
Notional Principal |
|
|
£ |
£ |
£ |
£ |
|
Foreign currency forward contracts with customers |
253,663 |
8,546,025 |
504,106 |
9,042,956 |
|
Foreign currency forward contracts with institutional counterparty |
86,578 |
3,799,202 |
131,367 |
3,377,597 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
340,241 |
12,345,227 |
635,473 |
12,420,553 |
|
|
_______ |
_______ |
_______ |
_______ |
Derivative financial liabilities not designated as hedging instruments
|
|
31 December 2023 |
31 December 2022 |
||
|
|
Fair Value |
Notional Principal |
Fair Value |
Notional Principal |
|
|
£ |
£ |
£ |
£ |
|
Foreign currency forward contracts with customers |
61,367 |
2,928,816 |
165,156 |
3,337,362 |
|
Foreign currency forward contracts with institutional counterparty |
217,730 |
7,912,698 |
398,520 |
8,715,534 |
|
|
_______ |
_______ |
_______ |
_______ |
|
|
279,097 |
10,841,514 |
563,676 |
12,052,896 |
|
|
_______ |
_______ |
_______ |
_______ |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Foreign currency forward contracts are measured at fair value on a recurring basis.
There are three levels of fair value hierarchy:
· Level 1 - the fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.
· Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
· Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
Foreign currency forward contracts with customers generally require immediate settlement on the maturity date of the individual contract and fall into level 2 of the fair value hierarchy above. Level 2 comprises those financial instruments which can be valued using inputs other than quoted prices that are observable for the asset or liability either directly (i.e. prices) or indirectly (i.e. derived from prices). The fair value of forward foreign exchange contracts is measured using observable forward exchange rates for contracts with a similar maturity at the reporting date.
The net loss on financial assets at fair value through profit or loss for year ended 31 December 2023 was £58,116 (2022: net gain of £3,300).
Financial instruments - risk management
Financial assets primarily comprise trade and other receivables, cash and cash equivalents and derivative financial assets. Financial liabilities comprise trade and other payables, shareholder loans and derivative financial liabilities. The main risks arising from financial instruments are market risk (including foreign currency risk and interest rate risk), liquidity risk, credit risk and counterparty risk.
Market risk
Market risk for the Group comprises foreign exchange risk and interest rate risk. The Group operates as a riskless matched principal broker for deliverable non-speculative spot and forward foreign currency transactions, with each trade with its clients matched with an identical trade with an institutional counterparty. Therefore, foreign exchange risk is mitigated through the matching of foreign currency assets and liabilities between clients and institutional counterparties which move in parity.
The Group's cash balances are primarily held in Pound Sterling and the Group does not hold significant cash balances in foreign currencies.
Interest rate risk affects the Group to the extent that it implicitly impacts the price of foreign currency forward contracts. However, this risk is mitigated in the same way as foreign currency risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group has extensive controls to ensure that it has sufficient cash or working capital to meet its cash requirements to mitigate this risk.
As per the 'Going Concern' section above, the Directors have prepared a cash flow forecast taking into account a projected increase in revenues and continued investment in the development of the Group's platform and organic sales & marketing efforts and the inherent risks and uncertainties facing the Group's business to assess the Group's working capital requirements. The Board reviews cash flow projections on a regular basis and has authority controls in place so as not to commit to material expenditure without being satisfied that sufficient funding is available to the Group.
The Group also has systems in place to monitor the margin requirements of its clients and its margin requirement with the institutional counterparty for the back-to-back foreign currency forward contract on a real-time basis and request any necessary top up payment from the clients. The Group also has the right to close any position if no margin is given.
Credit risk
Credit risk is the risk that clients do not meet their contractual obligations in respect of the currency spot and forward contracts, which leads to a financial loss. All customers are subject to credit verification checks. Approximately 90% of the Group's trades are spot currency contracts, which are required to be settled within two working days. For forward currency contracts, as noted above, clients are required to provide margin that mitigates credit exposure. Trade limits are applied to all clients. The Group has systems to monitor trade limits and collateral requirements on a real-time basis. The Group does not have any significant concentration of exposures within its client base.
Counterparty risk
Each trade between a client and the Group is matched with an identified trade with Velocity Trade International ("Velocity"), which is a global foreign exchange liquidity and trade provider that provides pricing, execution and settlement services for the Group.
The Group also has brokerage accounts with alternative institutional counterparties and could transact with them instead if Velocity is unable to provide liquidity.
Management of settled and open trades are conducted via Currency Cloud, the GV (formerly Google Ventures) backed global payments and FX platform, and Banking Circle. Client funds are safeguarded with Banking Circle in line with the Group's requirements under the Electronic Money Regulations 2011 for additional protection and to reduce counterparty risk.
22 CAPITAL MANAGEMENT
The capital structure of the business consists of cash and cash equivalents, debt and equity. Equity comprises share capital, share premium and retained losses and is equal to the amount shown as 'Equity' in the balance sheet. The Group's current objectives when maintaining capital are to:
· safeguard the Group's ability to operate as a going concern so that it can continue to pursue its growth plans;
· provide a reasonable expectation of future returns to shareholders; and
· maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of underlying assets.
The Company is subject to the following externally imposed capital requirements:
· as a public limited company, the Company is required to have a minimum issued share capital of £50,000.
Finseta Payment Solutions Limited, a wholly-owned subsidiary of the Company, is subject to the following capital requirement under the Electronic Money Regulations 2011:
· 2% of the average outstanding e-money issued by the Electronic Money Institution (based on a 6-month rolling average), or the initial capital requirement of €350,000, whichever is the higher.
Capital Currencies Ltd, a wholly-owned subsidiary of the Company, is subject to the following capital requirement under the Payment Service Regulations 2017:
· either 10% of fixed overheads for the preceding year or the initial capital requirement of €20,000, whichever is the higher.
Finseta Payment Solutions Limited and Capital Currencies Ltd complied with the above requirements for all periods during the year ended 31 December 2023.
23 EVENTS AFTER THE REPORTING DATE
On 22 February 2024, the Company granted 470,000 options to staff members over ordinary shares of 1 penny each in the capital of the Company. All options are intended to qualify as Enterprise Management Incentive options pursuant to the Income Tax (Earnings and Pensions) Act 2003.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
Latest directors dealings
- 1 hour ago Urban Logistics Reit
- 2 hours ago Ocado Group
- 2 hours ago AJ Bell
- 2 hours ago Foresight Enterprise VCT
- 2 hours ago Mitie Group