TIDMFFX
RNS Number : 9138I
FAIRFX Group PLC
31 March 2015
31st March 2015
FAIRFX Group plc
("FAIRFX" or "the Group" or "the Company")
Results for the year ended 31st December 2014
Continued strong customer and revenue growth
FAIRFX, the FinTech business specialising in low cost,
multi-currency payments, announces its full year results for the
year ended 31st December 2014.
Performance Highlights for 2014
-- 47% increase in revenue to GBP475.3m (2013: GBP322.4m) --
86,397 new customers added to the business, bringing the total to
404,710 (2013: 58,925 new customers) -- 62% revenue growth to
GBP213.7m within money transfer and deliverable FX execution
products; multi-payment products revenue up 38% -- 38% increase in
gross margin to GBP3.8m (2013: GBP2.8m)
Post Period End (to 24(th) March)
-- 90% growth in revenues in first 12 weeks to GBP143.1 million
(2014: GBP75.1 million) -- 66% growth in customer acquisition with
21,515 new customers added, bringing the total to 426,225 (2014:
12,960 new customers) -- Became title sponsor of Sky Sports Formula
1 programming for the 2015 season -- Additional Financial Conduct
Authority permissions added
Commenting on the results and outlook, Chief Executive Officer,
Ian Strafford-Taylor, said:
"FAIRFX has had a strong year in 2014 and since joining AIM, our
customer-focused innovation and agile technology platform have
enabled accelerating growth. Against this backdrop we have enhanced
the management team of the business and improved controls and
compliance. As such the business combines solid foundations with
the pace of a FinTech and is structured for scale.
"We look forward to delivering further growth in the coming year
and continuing to meet the expectations of all of our
stakeholders."
Enquiries:
FAIRFX Group plc +44 (0) 20 7778 9308
Ian Strafford-Taylor, CEO
Square1 Consulting +44 (0) 20 7929 5599
David Bick/Mark Longson
Cenkos Securities plc +44 (0) 20 7397 8925
Max Hartley/Callum Davidson
Chairman and Chief Executive's Statement
Overview
We are pleased to present the first full year results of FAIRFX,
following its admission to trading on AIM in August 2014. The year
ended 31(st) December 2014 has been an important year for the Group
- in addition to our admission to AIM, FAIRFX has delivered record
levels of new customers and revenue. With strong growth in demand
across both our consumer and business audiences in 2014 we are well
placed to grow market share and revenue in the UK and to expand to
additional European markets in the year ahead.
Business Review
The biggest event in 2014 was the successful listing of FAIRFX
on AIM on 5(th) August (Ticker: FFX). The principal purpose of the
listing was to raise funds in order to expand the available budget
for marketing and accelerate market penetration across consumers
and businesses. The initial listing was supplemented by a secondary
fund-raise in December to invest in future growth and hence the
business is primed for significant acceleration in 2015.
The Group had a very successful and strong year of growth in
2014 with a 47.4% increase in revenue to GBP475.3 million (2013:
GBP322.4 million). We added 86,397 new customers to the business
during 2014, a 27.1% increase on 2013, bringing the total to
404,710 by the year end (2013: 318,313). Strategically, the Group
continued on its pursuit of growth and hence marketing expenditure
grew further to GBP1.8 million compared to GBP0.6 million for 2013.
The increase reflected an expansion of TV advertising augmented by
pay-per-click (PPC) and affiliate partnerships. Given the "sticky"
nature of the FAIRFX customers, the benefit of this spend is
expected to accrue over many years, particularly in the multi-pay
FAIRFX products, namely the prepaid currency cards and travel cash
where customers typically re-use and repurchase the products and
services.
Gross margin for 2014 was GBP3.8 million (2013: GBP2.8 million),
which comprised of margin on currency transactions of GBP5.5
million (2013: GBP3.9 million) less hedging and transaction costs
of GBP0.3 million (2013: GBP0.2 million) and other cost of sales,
including all costs associated with fulfilling the prepaid cards of
GBP1.4 million (2013: GBP0.9milion).
The Group made a loss for the year of GBP2.8 million (2013:
profit GBP0.1 million). This loss reflects the Group's focus on
investment to provide a solid foundation for future growth. The
loss included an increase in marketing spend, growth in headcount,
costs of the admission to AIM of GBP0.7m and the charge for share
options granted to incentivise management and staff of GBP0.3
million.
Our growth in 2014 saw all product lines of the business
progressing strongly. The single-pay products, namely FairPay and
Deliverable FX execution, advanced particularly rapidly posting
revenue growth of 61.5% to GBP213.7 million (2013: GBP132.3
million) and further significant expansion is expected in 2015. The
growth in single-pay reflects the success of the strategy of
cross-selling these products to the multi-pay customer base.
Multi-pay revenue, being prepaid cards and travel cash, also saw
strong growth of 37.7% to GBP261.7 million (2013: GBP190.1
million).
Another key area of investment in 2014 has been in headcount. By
the end of 2014 we had 66 FAIRFX employees compared with 41 at the
end of 2013. Early 2015 has seen a bolstering of the management
team with the appointment of a Chief Financial Officer (CFO) and a
Chief Commercial Officer (CCO). The overall headcount growth is
expected to be much less in percentage terms in 2015 as the
automated nature of the FAIRFX business yields economies of scale
and operating leverage. The expansion of headcount combined with
the ending of the lease on the previous premises occupied by FAIRFX
necessitated an office move in May 2014 which we achieved
seamlessly in terms of customer experience.
Strategic Review
FAIRFX, by the nature of its products, has a relatively low
margin on each transaction. Accordingly, our key objective for the
business is to add customers and drive high volume growth in
revenue. The emphasis since 2013 has been on exploiting our digital
early-mover advantage and expanding marketing activity in order to
increase awareness of FAIRFX's value and service among customers of
traditional higher-cost providers such as the Banks, Post Office
and Bureau de Change at airports. With relatively low awareness
levels around prepaid currency cards, there is a significant
opportunity to become a leading category brand.
The Directors intend to increase marketing spend over the next
few years to further accelerate customer acquisition. As a
marketing-led organization our activities are focused on integrated
campaigns targeting travellers and holidaymakers, using traditional
advertising media in combination with digital and mobile
performance marketing. The Directors believe that the market has
currently reached an inflection point and is highly receptive to
FAIRFX's customer-centric products at this moment in time.
Against this backdrop, the investment in people and systems
development also remain vital and ongoing to ensure we have the
capacity to deal with increased activity. The Directors are
confident that the investment in this area in 2014, and indeed in
2015 to date, sees FAIRFX extremely well placed going forward as a
robust business with excellent scalability.
Smart, segmented cross selling opportunities exist throughout
the Group's offerings and are key to FAIRFX's growth strategy. To
date, we have focused on growing numbers of consumers in the
multi-payments space using the currency card and physical travel
money products. The Group is building on existing relationships
with multi-pay customers with the aim of offering them the
convenience of our higher value, single-payment products as well.
Investment by FAIRFX into analysis of the most efficient methods of
cross selling and identification of the customers most receptive to
this is ongoing and the process continues to become more
personalised and sophisticated.
We continued to invest significantly in R&D and innovation
to enhance all of our products and services across 2014. FAIRFX is
highly focused upon the ease of use of its systems and products and
is targeted towards mobile functionality. The FAIRFX App, available
on both iOS and Android, is a good example of this and is
constantly being enhanced.
Trading Post Period End (to 24 March 2015)
Since the year ended 31(st) December 2014, FAIRFX's results to
24(th) March 2015 have continued the strong growth trajectory of
2014 with all product lines expanding rapidly. It should be noted
that this growth has been achieved before the planned expansion of
marketing activity which will come into effect later in the year,
to coincide with the seasonal peak of our business, which will
further boost growth.
Current trading to 24(th) March 2015 shows revenues as a whole
up 90% to GBP143.1 million (GBP75.1 million in the equivalent
period of 2014) with revenue in multi-pay product lines up 66% to
GBP69.5 million (GBP41.8 million in the equivalent period of 2014)
whilst the single pay offering increased by 121% to GBP73.6 million
(GBP33.3 million in the equivalent period of 2014). Customer
numbers are also expanding rapidly with 21,515 retail customers
added so far in 2015 to bring the total to 426,225. This represents
66% growth over the equivalent period in 2014 when 12,960 customers
were added. The current expansion of the business will be further
supported by the planned integrated marketing campaigns across the
key holiday travel periods in 2015. The key focus here will be on
above-the-line marketing campaigns including TV advertising and
sponsorship of the Formula One Channel on Sky Sports.
In addition, we have had considerable success in expanding our
affiliate programme following a good performance in 2014 and have
recently signed agreements with Jet2.com, Hotelplan, Laterooms.com
and Trinity Mirror.
The Board
In November 2014, Jason Drummond stepped down from the role of
Chairman to focus on other business interests and John Pearson was
appointed. We would like to thank Jason for the enormous
contribution he has made to FAIRFX over the years. John Pearson has
considerable experience in the digital, media and broadcast
industries. Most significantly, he was co-founder and CEO of Virgin
Radio for 13 years and Chairman of Shazam Entertainment for 8 years
and this background is extremely relevant to the marketing-led
growth phase that FAIRFX is now undergoing.
In March 2015, Ian Strafford-Taylor was replaced as Company
Secretary for the Group by Clive Atkinson, the Group CFO.
Outlook
The proceeds from the AIM listing and secondary fundraise in
December have provided the Group with funds to accelerate its
growth strategy. This will be achieved principally through
increased customer-centric marketing activity and further agile
development of our technology platform and digital services. We
will also maximize cross-selling opportunities and target
international expansion to increase the Group share of the
multi-currency payments market.
Given the Group has now received its EEA-wide licence, initial
expansion of operations overseas will be focused on Europe with the
intention of launching in Ireland as a first location during 2015.
Expansion to markets further afield will also be considered and in
some markets growth by acquisition is a possibility depending on
appropriate opportunities.
In the core UK market, 2015 will see an extension of the
marketing-led growth strategy that has been proven in both 2014 and
2013. Utilising the proceeds since the AIM listing, the marketing
investment will increase further and therefore we expect 2015 to be
another year of strong expansion of the key indicators of customers
and revenue. FAIRFX is also targeting increased growth in its
corporate client base and will be investing further in its
Corporate Expenses Management products accordingly.
The business benefits from strong customer loyalty and high
levels of reuse and repurchase. We will focus on continually
improving service to the customer base in 2015 by focusing on
further improving mobile usability and functionality. FAIRFX is set
to launch an App for the new Apple Watch to adapt to our customers'
changing needs and we will explore geo-location services and mobile
wallets to enhance users' experience of its iOS and Android apps.
FAIRFX customers will also be able to receive multi-currency
inbound payments through the creation of a payment ecosystem.
The Group has also continued to strengthen and refine its
compliance procedures and as a validation of this we are delighted
to announce that we were granted additional permissions by the FCA
under the Authorised Payment Institution regulations in February
2015. The granting of these permissions allows FAIRFX to offer our
customers improved protection of their funds in comparison with
many of our competitors. The Group will continue to further enhance
compliance processes as we continue the lengthy process of
application for an eMoney licence, which we hope to complete later
in the year.
FAIRFX has had a strong year in 2014 and, since joining AIM, we
have made further steps to enhance growth and become a
marketing-led business with and agile-based technology platform.
Against this backdrop of growth we have enhanced the management
team of the business and improved controls and Compliance and as
such the company is built on very solid foundations and is built
for scale as we look to the future.
We look forward to delivering further growth in the coming year
and continuing to meet the expectations of all of our
stakeholders.
FAIRFX group PLC
consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
2014 2013
Note GBP GBP
Gross value of currency transactions
sold 4 475,345,811 322,384,612
Gross value of currency transactions
purchased (469,864,995) (318,454,399)
-------------- --------------
Margin on currency transactions 4 5,480,816 3,930,213
Direct costs (1,666,109) (1,157,263)
-------------- --------------
Gross margin 3,814,707 2,772,950
Administrative expenses (5,966,697) (2,643,689)
AIM Listing expenses (678,056) -
(Loss)/profit before tax and from
operations 5 (2,830,046) 129,261
Tax expense 8 - -
-------------- --------------
(Loss)/profit for the year (2,830,046) 129,261
============== ==============
(4.26p)
(4.26p)
(Loss)/profit per share
Basic 22 (4.41p) 0.21p
Diluted 22 (4.41p) 0.21p
============== ==============
All amounts relate to continuing activities.
The notes form an integral part of these financial
statements.
FAIRFX group PLC
consolidated and company Statement of Financial Position
As at 31 December 2014
Group Company
2014 2013 2014
Note GBP GBP GBP
ASSETS
Non-current assets
Property, plant and
equipment 9 112,759 34,152 -
Investments 10 - - 884,969
------------- ------------- ----------
112,759 34,152 884,969
------------- ------------- ----------
Current assets
Inventories 11 161,149 76,281 -
Trade and other receivables 12 7,899,101 9,035,474 2,943,621
Cash and cash equivalents 13 4,085,137 2,006,288 -
------------- ------------- ----------
12,145,387 11,118,043 2,943,621
------------- ------------- ----------
TOTAL ASSETS 12,258,146 11,152,195 3,828,590
============= ============= ==========
EQUITY AND LIABILITIES
Equity attributable to Equity
holders
Share capital 14 704,758 614,743 704,758
Share premium 3,522,752 - 3,522,752
Share based payment
reserve 279,136 - 279,136
Merger reserve 5,416,083 5,416,083 -
Retained deficit (8,062,094) (5,232,048) (699,056)
------------- ------------- ----------
Total equity 1,860,635 798,778 3,807,590
------------- ------------- ----------
Current Liabilities
Borrowings 15 334,882 446,510
Trade and other payables 16 10,062,629 9,906,907 21,000
------------- ------------- ----------
10,397,511 10,353,417 21,000
------------- ------------- ----------
TOTAL EQUITY AND LIABILITIES 12,258,146 11,152,195 3,828,590
============= ============= ==========
The notes form an integral part of these financial
statements.
FAIRFX group PLC
consolidated and company Statement of Changes in Equity
For the year ended 31 December 2014
Group Share capital Share Share Retained Merger Total
premium based deficit reserve
payment
GBP GBP GBP GBP GBP GBP
Balance as
at 1 January
2013 614,743 - - (5,361,309) 5,416,083 669,517
Profit for
the year - - - 129,261 - 129,261
Balance as
at 31
December
2013 614,743 - - (5,232,048) 5,416,083 798,778
Loss for
the year - - - (2,830,046) - (2,830,046)
Shares issued
in year 90,015 3,522,752 - - - 3,612,767
Share based
payment
charge - - 279,136 - - 279,136
Balance as
at 31
December
2014 704,758 3,522,752 279,136 (8,062,094) 5,416,083 1,860,635
============== ========== ========= ============== ========== ==============
Company Share capital Share Share Retained Merger Total
premium based deficit reserve
payment
GBP GBP GBP GBP GBP GBP
Loss for
the period - - - (699,056) - (699,056)
Shares issued
in period 704,758 3,522,752 - - - 4,227,510
Share based
payment
charge - - 279,136 - - 279,136
Balance as
at 31
December
2014 704,758 3,522,752 279,136 (699,056) - 3,807,590
============== ========== ========= ============== ==============
The following describes the nature and purpose of each reserve
within owners' equity:
Share capital Amount subscribed for shares at nominal value.
Share premium Amount subscribed for shares in excess of nominal
value less costs directly attributable to the
Initial Public Offer of the company's share.
Share based payment Fair value of share options granted to both
directors and employees.
Retained deficit Cumulative profit and losses are attributable
to equity shareholders.
Merger reserve Arising on reverse acquisition from group reorganisation.
Under the principles of reverse acquisition accounting, the
group is presented as if FAIRFX Group Plc as if it had always owned
the FAIRFX (UK) Limited group. The comparative and current period
consolidated reserves of the group are adjusted to reflect the
statutory share capital and merger reserve of FAIRFX Group Plc as
if it had always existed.
FAIRFX group PLC
consolidated Statement OF CASH FLOWS
For the year ended 31 December 2014
Note 2014 2013
GBP GBP
(Loss)/profit for the year (2,830,046) 129,261
Cash flows from operating activities
Adjustments for:
Depreciation 55,537 23,558
Share based payment charge 279,136 -
Decrease/(increase) in trade and
other receivables 1,136,373 (5,820,644)
Decrease in borrowings (111,628) -
Increase in trade and other payables 155,722 5,361,910
Increase in inventories (84,868) (3,643)
Net cash flow used by operating
activities (1,399,774) (309,558)
Cash flows from investing activities
Acquisition of property, plant
and equipment (134,144) (20,100)
Net cash used in investing activities (134,144) (20,100)
Cash flows from financing activities
Proceeds from issuance of ordinary 4,161,104 -
shares
Costs directly attributable to (548,337) -
share issuance
Net cash from financing activities 3,612,767 -
Net increase/(decrease) in cash
and cash equivalents 2,078,849 (329,658)
Cash and cash equivalents at the
beginning of the year 2,006,288 2,335,946
------------ ------------
Cash and cash equivalents at end
of the year 13 4,085,137 2,006,288
============ ============
The notes form an integral part of these financial
statements.
FAIRFX group PLC
Notes to the consolidated Financial Statements
For the year ended 31 December 2014
1. General information
FAIRFX Group Plc (the "company") is a limited liability company
incorporated and domiciled in England and Wales and whose shares
are quoted on AIM, a market operated by The London Stock Exchange.
The group's principal activity is that of selling of foreign
currency via technology platforms offered on the internet.
The company and group's consolidated financial statements for
the year ended 31 December 2014 were authorised for issue on 26
March 2015 and the consolidated and company statement of financial
position signed by I A I Strafford-Taylor on behalf of the
board.
2. New standards, amendments and interpretations to published standards
The Group applied all applicable IFRS standards and all
applicable interpretations published by the International
Accounting Standards Board (IASB) and its International Financial
Reporting Interpretations Committee (IFRIC) for the period
beginning 1 January 2014.
Adoption of new and revised accounting standards and
interpretations:
-- IFRS 10 Consolidated Financial Statements (Amendment). This
standard builds on existing principles by identifying the concept
of control as the determining factor in whether an entity should be
included within the consolidated financial statements.
-- IFRS 11 Joint Arrangements (Amendment). This standard
provides for a more realistic reflection of joint arrangements by
focusing on the rights and obligations of the arrangement, rather
than its legal form.
-- IFRS 12 Disclosure of Interests in Other Entities
(Amendment). This standard includes the disclosure requirements for
all forms of interests in other entities, including joint
arrangements, associates, special purpose vehicles and other
off-balance sheet vehicles.
-- IAS 32 Financial Instruments (Amendment). Presentation on
assets and liabilities offsetting (Amendment): This standard
provides clarification on offsetting rules.
-- IAS 36 Impairment of Assets (Amendment). These amendments
address disclosure of information about the recoverable amount of
impaired assets.
-- IAS 39 Novation of derivatives and continuation of hedge
accounting (Amendment). These amendments provide an exception to
the requirement for the discontinuation of hedge accounting in IAS
30.
-- IFRIC 21 Levies. Clarifies when to recognise a liability to
pay a government levy that is accounted for in accordance with IFRS
37.
The adoption of the new applicable standards have not had a
significant impact on the financial reporting of the Group.
The following standards and interpretations (and amendments
thereto) have been issued by the IASB and the IFRIC which are not
yet effective and have not been adopted, many of which are either
not relevant to the group and parent company or have no material
effect on the financial statements of the group and parent
company.
Effective
Dates *
IAS 19 Employee Benefits 1 July 2014
IFRS 14 Regulatory Deferral Accounts 1 January
2016
IFRS 11 Accounting for acquisitions of interests in 1 January
Joint Operations (Amendment) 2016
IAS 16 Property, Plant and Equipment and IAS 38 Intangible 1 January
Assets (Amendments) 2016
IFRS 15 Revenue from Contracts with Customers 1 January
2017
IFRS 9 Financial Instruments: Classification and Measurement 1 January
2018
* The effective dates stated above are those given in the
original IASB/IFRIC standards and interpretations. As the group and
parent company prepares it financial statements in accordance with
IFRS as adopted by the European Union (EU), the application of new
standards and interpretations will be subject to their having been
endorsed for used in the EU via the EU Endorsement mechanism. In
the majority of cases this will result in an effective date
consistent with that given in the original standard of
interpretation but the need for endorsement restricts the group and
parent company's discretion to early adopt standards.
3. Basis of presentation and significant accounting policies
The principal accounting policies applied in the preparation of
the group and parent company's financial statements are set out
below. These policies have been consistently applied to all the
years presented, unless otherwise stated.
The financial statements have been prepared on a historical cost
basis.
3.1 Basis of presentation
These financial statements are prepared in accordance with AIM
Regulations, International Financial Reporting Standards,
International Accounting Standards and Interpretations
(collectively IFRSs) issued by the International Accounting
Standards Board (IASB) as adopted by the European Union ("adopted
IFRSs"). The financial statements are presented in sterling, the
company's and group's functional currency.
IFRS requires management to make certain critical accounting
estimates and to exercise judgement in the process of applying the
company's and group's accounting policies. These estimates are
based on the directors' and independent professional's best
knowledge and past experience and are explained further in note
3.20.
In the opinion of the directors, based on the group's budgets
and financial projections, they have satisfied themselves that the
business is a going concern. The board has a reasonable expectation
that the group has adequate resources to continue in operational
existence for the foreseeable future and therefore the accounts are
prepared on a going concern basis.
3.2 Basis of consolidation
On 5 August 2014, FAIRFX Group Plc listed its shares on AIM, a
market operated by The London Stock Exchange. In preparation for
the Initial Public Offering ("IPO") the group was restructured. The
restructure has impacted a number of current year and comparative
primary financial statements and notes. The effect of this
reorganisation was to insert one new company into the group, a new
holding company, FAIRFX Group Plc. The impact of the shares
subscribed from the "IPO" are included within the results for the
year ended 31 December 2014 and are disclosed fully in note 14.
FAIRFX Group Plc acquired the entire share capital of FAIRFX
(UK) Limited (previously named FAIRFX Group Limited) on 22 July
2014 through a share for share exchange. For the consolidated
financial statements of the Group, prepared under IFRS, the
principles of reverse acquisition under IFRS 3 "Business
Combinations" have been applied. The steps to restructure the group
had the effect of FAIRFX Group Plc being inserted above FAIRFX (UK)
Limited. The holders of the share capital of FAIRFX (UK) Limited
were issued fifty shares in FAIRFX Group Plc for one share held in
FAIRFX (UK) Limited.
By applying the principles of reverse acquisition accounting,
the group is presented as if FAIRFX Group Plc had always owned and
controlled the FAIRFX Group Plc had always owned and controlled the
FAIRFX group. Comparatives have also been prepared on this basis.
Accordingly, the assets and liabilities of FAIRFX Group Plc have
been recognised at their historical carrying amounts, the results
for the periods prior to the date the company legally obtained
control have been recognised and the financial information and cash
flows reflect those of the "former" FAIRFX (UK) Limited group. The
comparative and current year consolidated revenue of the group are
adjusted to reflect the statutory share capital, share premium and
merger reserve of FAIRFX Group Plc as if it had always existed.
On publishing the parent company financial statements here,
together with the group financial statements, the company is taking
advantage of exemption in section 408 of the Companies Act 2006 not
to present the individual income statement and related notes of the
parent company which form part of these approved financial
statements.
3.3 Foreign currency
In preparing these financial statements, transactions in
currencies other than the company and group's functional currency
(foreign currencies) are recorded at the rates of exchange
prevailing on the dates of the transaction. At each statement of
financial position date monetary items in foreign currencies are
translated at the rate prevailing at statement of financial
position date.
Exchange differences arising on the settlements of monetary
items and on the retranslation of monetary items are included in
the statement of comprehensive income for the year.
3.4 Inventories
Inventories are valued at the lower of cost and net realisable
value on a first in first out basis. Inventories comprise of stock
of prepay and travel cards not yet distributed to customers.
3.5 Trade and other receivables
Trade and other receivables are recognised initially at fair
value. Subsequent to initial recognition, they are measured at
amortised cost using the effective interest method, less any
provision for impairment losses.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial
reorganisation and default or significant delinquency in payments
are considered indicators that the trade receivable may be
impaired. Impairment on trade receivables is written off to the
statement of comprehensive income when it is recognised as being
impaired.
Other receivables are recognised at fair value.
3.6 Cash and cash equivalents
These include cash in hand and deposits held at call with
banks.
3.7 Trade and other payables
These are initially recognised at fair value and then carried at
amortised cost using the effective interest method. These arise
principally from the receipt of goods and services.
3.8 Provisions
A provision is recognised in the statement of financial position
when the company and group has a present legal or constructive
obligation as a result of a past event, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that
reflects the current market assessment of the time value of money
and, where appropriate, the risks specific to the liability.
3.9 Taxation
The tax expense represents the sum of the tax currently
payable.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the consolidated statement
of financial position date.
3.10 Deferred tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
- temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
- temporary differences related to investments in subsidiaries
to the extent that the group is able to control the timing of the
reversal of the temporary differences and it is probable that they
will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
The measurement of deferred tax reflects the tax consequences
that would follow the manner in which the group expects, at the end
of the reporting period, to recover or settle the carrying amount
of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax authority
on the same taxable entity, or on difference tax entities, but they
intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
3.11 Investments in subsidiaries
Investmentin subsidiaries undertakings are stated at cost less
impairment in value.
3.12 Income recognition
The gross value of currency transactions sold by the group
represents revenue. The gross value of currency transactions
purchased by the group and direct costs represent cost of
sales.
Revenue is recognised when a binding contract is entered into by
a client and the profit is fixed and determined. The profit is the
margin derived between the rate offered to clients and the rate the
Company receives from its liquidity providers. When the group
enters into a contract for forward delivery with a client it also
enters into a separate matched forward contract with its bankers.
As each trade is booked back to back with a liquidity provider the
margin is accounted for once the binding contract is formed.
Where a contract for forward delivery is open as at the year
end, the balance of the contract due from the client at the
maturity date is included in trade receivables and the
corresponding liability with the group's bankers is included in
trade payables.
3.13 Research and development
Research costs are expensed as incurred. Expenditure on IT
software and development is recognised as an intangible asset when
the company can demonstrate: the technical feasibility of
completing the intangible asset so that it will be available for
use or sale, its intention to complete and its ability to use or
sell the asset, how the asset will generate future economic
benefits, the availability of resources to complete the asset and
the ability to measure reliably the expenditure during
development.
Following initial recognition of the development expenditure as
an asset, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins when
development is complete and the asset is available for use. It is
amortised over the period of expected future benefit. During the
period of development, the asset is tested for impairment
annually.
3.14 Interest expense recognition
Interest expense is recognised as interest accrues, using the
effective interest method, on the net carrying amount of the
financial liability.
3.15 Borrowings
Borrowings other than bank overdrafts are recognised initially
at fair value less attributable transaction costs. Subsequent to
initial recognition, borrowings are stated at amortised cost with
any difference between the amount initially recognised and
redemption value being recognised in the consolidated statement of
comprehensive income over the period of the borrowings, using the
effective interest method.
3.16 Property, plant and equipment
Items of property, plant and equipment are stated at cost of
acquisition or production cost less accumulated depreciation and
impairment losses.
Depreciation is charged so as to write off the cost or valuation
of assets over their estimated useful lives, using the straight
line method, on the following basis:
Plant and equipment 33%
Fixtures and fittings 20%
Leasehold improvements 10%
A full year's depreciation is charged in the year of acquisition
and none in the year of disposal.
3.17 Share-based payments
Employees (including directors) of the group receive
remuneration in the form of share-based payment transactions,
whereby employees render services as consideration for equity
instruments (equity-settled transactions). In situations where
equity instruments are issued and some or all of the goods or
services received by the entity as consideration cannot be
specifically identified, they are measured as the difference
between fair value of the share-based payment and the fair value of
any identifiable goods or services received at the grant date. The
cost of equity-settled transactions with employees, is measured by
reference to the fair value at the date on which they are granted.
The fair value is determined using an appropriate pricing model,
further details of which are given in note 18.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ('the vesting date'). The cumulative expense recognised
for equity settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the group's best estimate of the number of equity
instruments that will ultimately vest. The profit or loss charge or
credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance and/or service conditions are satisfied. Where the
terms of an equity-settled award are modified, the minimum expense
recognised is the expense as if the terms had not been modified. An
additional expense is recognised for any modification, which
increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee as measured
at the date of modification. Where an equity settled award is
cancelled, it is treated as if it had vested on the date of
cancellation, and any expense not yet recognised for the award is
recognized immediately. However, if a new award is substituted for
the cancelled award, and designated as a replacement award on the
date that it is granted, the cancelled and new awards are treated
as if they were a modification of the original award, as described
on the previous paragraph.
The dilutive effect of outstanding options is reflected as
additional share dilution on the computation of earnings per
share.
Where the company grants options over its own shares to the
employees of its subsidiaries it recognises, in its individual
financial statements, an increase in the cost of investment in its
subsidiaries equivalent to the equity settled share-based payment
charge recognised.
3.18 Leased assets
Where substantially all of the risks and rewards incidental to
ownership of a leased asset have been transferred to the company
and group (a "finance lease"), the asset is treated as if it had
been purchased outright. The amount initially recognised as an
asset is the lower of the fair value of the leased property and the
present value of the minimum lease payments payable over the term
of the lease. The corresponding lease commitment is shown as a
liability. Lease payments are analysed between capital and
interest. The interest element is charged to the statement of
comprehensive income over the period of the lease and is calculated
so that it represents a constant proportion of the lease liability.
The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the company and group (an
"operating lease"), the total rentals payable under the lease are
charged to the statement of comprehensive income on a straight-line
basis over the lease term. Benefits received and receivable as an
incentive to enter into an operating lease are spread on a straight
line basis over the lease tem.
3.19 Critical judgements and estimations
Judgements
In the process of applying the group's accounting policies,
management makes various judgements which can significantly affect
the amounts recognised in the financial statements. They are also
required to use certain critical accounting estimates and
assumptions regarding the future that may have a significant risk
of giving rise to a material adjustment to the carrying values of
assets and liabilities within the next financial year. The critical
judgements are considered to be the following:
(i) Share based payments
In order to calculate the charge for share-based compensation as
required by IFRS 2, the Group makes estimates principally relating
to the assumptions used in its option-pricing model as set out in
note 18. The accounting estimates and assumptions relating to these
share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period
but may impact expenses and equity.
(ii) Impairment of trade receivables
The assessments undertaken in recognising provisions and
contingencies are made in accordance with IAS 39. A provision for
impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganisation and
default or significant delinquency in payments are considered
indicators that the trade receivable may be impaired.
(iii) Measurement of fair values
A number of the group's accounting policies and disclosures
require measurement of fair values for financial assets and
liabilities. When measuring the fair value of an asset or a
liability, the Group uses observable market data as far as
possible. Fair values are categorised into different levels in a
fair value hierarchy based on the inputs used in the valuation
techniques as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
-- Level 2:inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3:inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
4. Revenue and segmental analysis
The revenue for the group is generated through the provision of
foreign currency services and this is the sole operating segment of
the group. The revenue is wholly derived from within the UK.
5. Operating loss
Operating loss is stated after charging the following:-
2014 2013
GBP GBP
Operating lease - property 135,486 75,436
Depreciation of plant and equipment and
fixtures and fittings 55,537 23,558
Net foreign currency differences 41,490 59,766
Research & development costs 514,976 234,193
======== ========
Amounts charged by the group's auditor are
as follows:-
2014 2013
GBP GBP
Audit fees:-
Fees payable for the audit of the annual
report and financial statements 21,000 13,400
Fees payable for the audit of subsidiaries 34,000 -
-------- --------
Total audit fees 55,000 13,400
-------- --------
Other services:-
Taxation services 1,000 1,000
Corporate finance services 140,000 -
Other assurance services 15,000 -
-------- --------
Total non-audit fees 156,000 1,000
-------- --------
Total Fees 211,000 14,400
======== ========
The 2013 audit fee payable was solely to the Group's previous
auditor, Gerald Edelman. The 2014 audit fee is payable solely to
the Group's current auditor, KPMG LLP. These amounts are shown
exclusive of VAT.
6. Staff costs
Number of employees
The average number of employees (including directors) during the
year was:-
2014 2013
Number Number
Administrative staff 53 36
======= =======
Employee costs
2014 2013
GBP GBP
Wages and salaries 2,349,651 1,359,930
Social security costs 265,221 149,050
---------- ----------
2,614,872 1,508,980
========== ==========
There were no pension payments in respect of either year.
Further information regarding share options is given in note
18.
7. Directors' remuneration
2014 2013
GBP GBP
Emoluments 602,084 251,750
======== ========
The total amount payable to the highest paid director in respect
of emoluments was GBP444,942 (2013: GBP177,500)
There were no pension payments in respect of either year.
Further information regarding shares options is given in note
18.
8. Taxation
2014 2013
GBP GBP
Current year tax expenses - -
- -
===== =====
Factors affecting tax charge for the period
The charge for the year can be reconciled to the (loss)/profit
per the consolidated statement of comprehensive income as
follows:
2014 2013
GBP GBP
(Loss)/profit before taxation: Continuing
operations (2,830,046) 129,261
=========== ========
Taxation at the UK corporation rate tax of
21% (2013: 22%) (594,310) 28,437
Capital allowances in arrears /(advance) of
depreciation (8,999) 365
Share based payments 58,619 -
Net impact of R&D tax credit claim 25,489 -
Expenses not deductible for tax purposes 8,700 5,670
Tax losses utilised - (34,472)
Tax losses for which no deferred tax asset
utilised 510,501 -
----------- --------
Total tax for the year - -
=========== ========
The group has estimated losses of GBP7,315,029 (2013:
GBP5,337,662) available for carry forward against future trading
profits. The company and group have incurred losses in the current
year. Deferred tax assets are recognised for tax losses carried
forward to the extent that the realisation of the related tax
benefit through future taxable profits is considered more likely
than not. The decision to recognise any asset will be taken at such
point recovery is reasonably certain, when the group returns to
profitability. The Group has an unrecognised deferred tax asset of
GBP1,536,156 (2013: GBP1,174,286) in respect of losses that can be
carried forward against future taxable income for the period
between one year and an indefinite period of time.
The Finance Act 2013 was substantively enacted on 2 July 2013.
This reduced the main rate of corporation tax to 21% with effect
from 1 April 2014 and 20% with effect from 1 April 2015.
9. Property, plant and equipment
Group Plant and Fixtures Leasehold Total
machinery and fittings improve-ments
GBP GBP GBP GBP
Cost
At 1 January 2014 124,190 8,985 - 133,175
Additions 92,606 2,603 38,935 134,144
----------- -------------- --------------- --------
At 31 December 2014 216,796 11,588 38,935 267,319
----------- -------------- --------------- --------
Depreciation
At 1 January 2014 92,702 6,321 - 99,023
Charge for the year 50,343 1,300 3,894 55,537
----------- -------------- --------------- --------
At 31 December 2014 143,045 7,621 3,894 154,560
----------- -------------- --------------- --------
Net book value
At 31 December 2014 73,751 3,967 35,041 112,759
=========== ============== =============== ========
At 31 December 2013 31,488 2,664 - 34,152
=========== ============== =============== ========
10. Investments
Company Shares in
subsidiary
undertakings
GBP
Cost
Additions 884,969
--------------
At 31 December 2014 884,969
--------------
Provisions for diminution in value
At 31 December 2014 -
--------------
Net Book Value
At 31 December 2014 884,969
==============
In the opinion of the directors the aggregate value of the
company's investment in subsidiary undertakings is not less than
the amount included in the statement of financial position.
Holdings of more than 20%
The company holds the share capital (both directly and
indirectly) of the following companies:
Shares Held
Country of registration
Subsidiary Undertaking or incorporation Class %
FAIRFX (UK) Limited England and Wales Ordinary 100 Trading
FAIRFX Plc * England and Wales Ordinary 100 Trading
FAIRFX Corporate Limited England and Wales Ordinary 100 Dormant
*
FAIRFX Wholesale Limited England and Wales Ordinary 100 Dormant
*
FAIRFS Limited * England and Wales Ordinary 100 Dormant
* Share capital held indirectly
11. Inventories
Group 2014 2013
GBP GBP
Finished goods 161,149 76,281
======== =======
The group's inventories comprise stock of cards.
12. Trade and other receivables
Group Company
2014 2013 2014
GBP GBP GBP
Trade receivables 7,275,003 8,481,405 -
Amounts due from group
undertakings - - 2,943,621
Other receivables 460,492 348,043 -
Prepayments and accrued
income 163,606 206,026 -
---------- ---------- ----------
7,899,101 9,035,474 2,943,621
========== ========== ==========
Included in trade receivables is GBP6,261,923 (2013:
GBP7,395,829) due from customers of open forward contracts as at
the year end.
Information about the Group's exposure to credit and market
risks, and impairment losses for trade and other receivables, is
included in Note 17.2.
13. Cash and cash equivalents
Group 2014 2013
GBP GBP
Cash at bank 4,085,137 2,006,288
========== ==========
Included in cash and cash equivalents at 31 December 2015 was
GBP2,054,109 of customer trading funds (2013: GBP1,337,738).
All the cash is held in the name of the trading company FAIRFX
Plc.
14. Share capital
Group and Company 2014 2013
GBP GBP
Authorised, issued and fully paid up capital
70,475,810 ordinary shares of GBP0.01 each 704,758 614,743
======== ========
Under the principles of reverse acquisition accounting, the
group is presented as if FAIRFX Group Plc had always owned the
FAIRFX (UK) Limited group. The comparative and current period
consolidated reserves of the group are adjusted to reflect the
statutory share capital and merger reserve of FAIRFX Group Plc as
if it had always existed.
During the year, the company made the following share
issues:
Nominal
Price Gross value Value
No Shares per of shares of shares Costs of
Date of Issue Issued share issued issued share issues Share Premium
5 August 2014 5,726,667 GBP0.45 GBP2,577,000 GBP57,267 GBP446,602 GBP2,073,132
5 August 2014 549,611 GBP0.01 GBP5,496 GBP5,496 - -
26 November 199,800 GBP0.57 GBP113,886 GBP1,998 - GBP111,888
2014
18 December 2,525,382 GBP0.58 GBP1,464,722 GBP25,254 GBP101,736 GBP1,337,732
2014
---------- ------------- ----------- -------------- --------------
Total 9,001,460 GBP4,161,104 GBP90,015 GBP548,338 GBP3,522,752
========== ============= =========== ============== ==============
In accordance with IAS 32 Financial Instruments: Presentation,
costs incurred which are directly applicable to the raising of
finance, are offset against the share premium created upon the
share issue.
The holders of the ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one
vote per share at meetings of the company.
15. Borrowings
Group 2014 2013
GBP GBP
Director's loan - 111,628
Shareholder loan 334,882 334,882
-------- --------
334,882 446,510
======== ========
Details of the Directors and Shareholder loans are included in
Note 20 below.
16. Trade and other payables
Group Company
2014 2013 2014 2013
GBP GBP GBP GBP
Trade payables 9,447,609 9,421,016 - -
Taxation and social
security 88,165 51,358 - -
Accruals and deferred
income 526,855 434,533 21,000 -
----------- ---------- ------- -----
10,062,629 9,906,907 21,000 -
=========== ========== ======= =====
Group Company
2014 2013 2014 2013
GBP GBP GBP GBP
Current 10,062,629 9,906,907 21,000 -
=========== ========== ======= =====
Included in trade payables is GBP6,214,782 (2013: GBP7,368,104)
due to third parties of open forward contracts as at the year
end.
17. Financial instruments
The Group's financial instruments comprise cash and various
items arising directly from its operations. The main purpose of
these financial instruments is to provide working capital for the
Group. In common with other businesses, the group is exposed to the
risk that arises from its use of financial instruments. This note
describes the group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information is found throughout these consolidated
financial statements.
17.1 Principal financial instruments
The principal financial instruments of the group, from which
financial instrument risk arises, are as follows:
2014 2013
GBP GBP
Cash and cash equivalents 4,085,137 2,006,288
Borrowings (334,882) (446,510)
Trade and other payables (10,062,629) (9,906,907)
Trade and other receivables 7,899,101 9,035,474
============= ============
Trade and other payables generally have short time to maturity.
Current borrowings have a maturity date of 9 June 2016.
17.2 Financial risk management objectives and policies
Credit risk
The group trades only with recognised, credit worthy customers.
All customers who wish to trade on credit are subject to credit
verification checks. Customer balances are checked daily to ensure
that the risk of exposure to bad debts is minimised and margined
accordingly. The group's risk is the risk that financial loss
arises from the failure of a customer or counterparty to meet its
obligations under a contract. The group had no significant
concentrations of risk with customers and counterparties at 31
December 2014.
The group's exposure to credit related losses, in the event of
non-performance by customers relates mostly to wholesale business.
The risk on wholesale business is minimal as group polices require
new customers to be reviewed for creditworthiness before standard
payment and delivery terms and conditions are entered into.
Individual credit terms are set and monitored regularly.
The group's cash balances are all held with major banking
institutions. The majority of trade receivables are due from credit
worthy customers and or financial institutions and are
automatically settled within a few days of arising.
The credit risk from other financial contractual relationships,
including other receivables, are not considered material.
Where forward contracts are not fully settled by the maturity
date, appropriate action is agreed with the customer to roll
forward the contract to a future date.
Liquidity risk
Management of liquidity risk is achieved by monitoring budgets
and forecasts and actual cash flows and available cash
balances.
The daily settlement flows in respect of financial asset and
liability, spot and swap contracts require adequate liquidity which
is provided through intra-day settlement facilities.
Further details of the risk management objectives and policies
are disclosed in the Principal risks and uncertainties section of
the Strategic report.
All of the group's financial liabilities have a contractual
maturity date of within one year from the 31 December 2014.
Market risk
Market risk arises from the group's use of foreign currency.
This is detailed below.
Interest rate risk
The group is subject to interest rate risk as its bank balances
are subject to interest at a floating rate. Due to the current low
levels of borrowings, the group is not materially affected by
changes in interest rates.
Foreign currency risk
The group's balance sheet currency exposure is primarily managed
by matching currency assets with currency borrowings. The largest
currency liabilities are created on entering into forward foreign
currency transactions.
As at 31 December 2014, the group is not sensitive to movements
in the strength of Sterling as no material foreign currency
balances are held.
Fair value risk
The following table shows the carrying amount of financial
assets and financial liabilities. It does not include a fair value
as the carrying amount is a reasonable approximation of fair
value.
31 December 2014 Loans Other financial Total
and liabilities
receivables
GBP GBP GBP
Financial assets not measured
at fair value
Cash and cash equivalents 4,085,137 - 4,085,137
Trade and other receivables 1,637,179 - 1,637,179
Other forward exchange contracts 6,261,922 6,261,922
11,984,238 - 11,984,238
------------- ---------------- -------------
Financial liabilities not
measured at fair value
Borrowings - (334,882) (334,882)
Trade and other payables - (3,847,847) (3,847,847)
Other forward exchange contracts (6,214,782) (6,214,782)
- (10,397,511) (10,397,511)
------------- ---------------- -------------
31 December 2013 Loans Other Financial Total
and Liabilities
receivables
GBP GBP GBP
Financial assets not measured
at fair value
Cash and cash equivalents 2,006,288 - 2,006,288
Trade and other receivables 1,639,645 - 1,639,645
Other forward exchange contracts 7,395,829 7,395,829
11,041,762 - 11,041,762
------------- ---------------- -------------
Financial liabilities not
measured at fair value
Borrowings - (446,510) (446,510)
Trade and other payables - (2,538,803) (2,538,803)
Other forward exchange contracts - (7,368,104) (7,368,104)
- (10,353,417) (10,353,417)
------------- ---------------- -------------
All financial instruments are classified as level 1 financial
instruments in the fair value hierarchy, with the exception of
Other forward exchange contracts and Borrowings which are level 2
financial instruments.
Capital management policy and procedures
The group's capital management objectives are:
- to ensure that the group and company will be able to continue as a going concern; and
- to maximise the income and capital return to the company's shareholders.
The parent 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 GBP50,000; and
- as a company regulated by the Payment Service Regulations
2009, the company is required to maintain a capital requirement of
either 10% of fixed overheads for the preceding year or the initial
capital requirement of EUR25,000, whichever is the higher.
Since its incorporation, the parent company has complied with
these requirements, which are unchanged since the previous year
end.
18. Share options
The group issues equity-settled share-based payments to certain
directors and employees. Equity-settled share based payments are
measured at fair value (excluding the effect of non market-based
vesting conditions) at the date of grant. The fair value of options
granted has been calculated with reference to the Black-Scholes
option pricing model. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the group's
estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions.
During the year ended 31 December 2014, there were a number of
share based payment transactions within the group. These included
an agreed cancellation of the share options in existence at the
start of the year and a subsequent granting of new options at
various exercise prices. These movements are disclosed within the
tables below:
Historic options 2014 2014 2013 2013
Exercise Exercise
price (GBP) Number price Number
(GBP)
Outstanding at 1 January 0.10 142,228 0.10 142,228
Cancelled during the year 0.10 (142,228) 0.10 -
Outstanding at 31 December 0.10 - 0.10 142,228
========== ========
Historically, the group granted share options to its director
and employees as well as external third parties. At the start of
the year there were 142,228 unexercised share options. Of these
options 48,681 were granted to two directors of the group. The
directors consider that the fair value of the options was
immaterial and therefore no charge has been made in the statement
of comprehensive income. The entirety of these options were
cancelled during the year.
Options issued during year 2014 2014
Exercise
price Number
(GBP)
Granted during the year 0.07 200,000
Granted during the year 0.22 447,750
Granted during the year 0.36 4,352,828
Granted during the year 0.58 120,000
Granted during the year 1.16 120,000
Granted during the year 1.74 120,000
Outstanding at 31 December 5,360,578
==========
The above share options issued in FairFX Plc have been granted
to both directors and employees of the group. At the year end,
there were unexercised share options amounting to 8% of the
company's total issued shares. Of the above options 4,055,778 have
been granted to directors of the company, with an additional
854,800 having been granted to an individual who is director of a
wholly owned subsidiary within the group. All of the above options
are exercisable one year following the company's Admission to AIM
and will lapse on 3 November 2019.
The directors have valued the share options at date of grant
using the Black Scholes pricing model. Details of the inputs made
into that model are disclosed in the table below
Weighted average share price (GBP) 0.45
Weighted average exercise price (GBP) variable a
Expected volatility 21% b
Expected option life in years 4.5
Risk-free rate 1.09%
Expected dividends none
Fair value of the options granted (GBP) variable c
a. The weighted average exercise price varies dependant upon the
amount stipulated in the individual option deeds. The exercise
price ranges from GBP0.07 - GBP1.74.
b. Expected volatility has been determined on the share price
from date of admission up to 31(st) December 2014.
c. A summary of the fair value of the options granted is
summarised in the table below. If the fair value of the option was
deemed to be nil it is marked accordingly.
Exercise Fair Value
price (GBP) (GBP)
0.07 0.28
0.22 0.20
0.36 0.12
0.58 -
1.16 -
1.74 -
The total fair value of the options is GBP667,420. The charge
incurred has been spread over the vesting period, with GBP279,136
being expensed to the statement of comprehensive income for the
year ended 31 December 2014.
The most significant assumption used when arriving at the
valuation is volatility. A movement of 5% in this assumption would
have an income statement effect of approximately GBP60,000.
19. Financial commitments
As at 31 December 2014 the group had the following annual
commitments under non-cancellable operating leases. The total
future value of the minimum lease payments is as follows:
Land and buildings
2014 2013
GBP GBP
Not later than one year 218,927 27,875
Later than one year and not later than five 189,537 -
years
408,464 27,875
======== =======
The group took an assignment of the lease on its office premises
on 6th May 2014. The lease runs until 12th November 2016 at an
annual rental of GBP148,688 and a service charge of GBP80,132. An
incentive, paid by the assignor on assignment of the lease of
GBP100,000 is amortised over the remaining term of the lease.
20. Related party transactions
Loans from related parties
Included within Current borrowings are amounts of GBP334,882
(2013: GBP334,882) due to Pembar Limited and GBPnil (2013:
GBP111,628) due to Jason Drummond. Pembar Limited is a company
incorporated in British Virgin Islands and is the controlling party
of FAIRFX Group Plc. Jason Drummond was a director of the company
during the year. Each of the transactions was concluded at arm's
length. Details of the loans are as follows:
-- The loan from Pembar Limited dated 9 June 2006 carries
interest at a rate of 2% over the Bank of England base rate and is
repayable in full by 9 June 2016. The Company has undertaken to
repay the loans along with any relevant accrued interest by June
2016. The company may also choose, at its discretion, to repay the
loans in whole or in part at an earlier date. The lender has agreed
to waive the interest payable in respect of all previous years and
the current period ended 31 December 2014.
-- The loan from Jason Drummond dated 9 June 2006 carried
interest at a rate of 2% over Bank of England base rate and was
repayable in full by 9 June 2016. On 21st November, the company
agreed to repay the loan with accrued interest giving a total
repayable of GBP113,886. Jason Drummond agreed to subscribe for
199,800 ordinary shares of 1 penny each in the Company ("Ordinary
Shares") at a price of 57 pence per Ordinary Share.
Key management personnel
Key management who are responsible for controlling and directing
the activities of the group comprises the executive Directors, the
Non-executive Directors and senior management. The key management
compensation is as follows:-
2014 2013
GBP GBP
Salaries, fees and other short term employee
benefits 855,246 404,216
======== ========
There are no other related party transactions which, as a single
transaction or in their entirety, are or may be material to the
Company and have been entered into by the Company or any other
member of the Group during the year ended 31 December 2014.
21. Ultimate controlling party
Pembar Limited holds a significant interest In FAIRFX Group Plc,
albeit short of necessary level to exert control over the entity.
However, there are individuals connected to the directors of Pembar
Limited through familial links who also have shareholdings in
FAIRFX Group Plc. Consequently, it is the opinion of the directors
that Pembar Limited is the company's immediate parent company.
The ultimate controlling party is The General Trust Company SA,
an off-shore trust which wholly owns Pembar Limited.
22. Loss per share
Basic loss per share
The calculation of basic loss per share has been based on the
following loss / (profit) attributable to ordinary shareholders and
weighted average number of ordinary shares outstanding. The loss
after tax attributable to ordinary shareholders is GBP2,830,046
(2013: GBP129,261 profit) and the weighted average number of shares
in issue for the period is 64,128,356 (2013: 61,474,350).
Diluted loss per share
The calculation of diluted earnings per share has been based on
the profit attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding, after adjustment for
the effects of all dilutive potential ordinary shares. The loss
after tax attributable to ordinary shareholders is GBP2,830,046
(2013: GBP129,261 profit) and the weighted average number of shares
is 64,128,356 (2013: 61,474,350).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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