TIDMFFX
RNS Number : 2854V
FAIRFX Group PLC
15 April 2016
15 April 2016
FairFX Group plc
("FairFX" or "the Group" or "the Company")
Audited Results for the year ended 31 December 2015
Marketing and technology investment delivering higher customer
conversion rates and card spend
FairFX, the low cost multi-currency payments service, is pleased
to announce its audited full year results for the year ended 31
December 2015.
2015 Financial Highlights:
-- Turnover up 31.9% to GBP626.8 million
-- Revenue up 35.7% to GBP7.4 million
-- Gross profit up 31.8% to GBP5.0 million
-- Money transfer and deliverable FX execution products turnover up 40% to GBP299.2 million
-- Currency card revenue up 37.5% GBP241.0 million
-- Pre-tax loss of GBP3.4 million in line with forecast
-- Marketing spend of GBP3.2 million and Options charge of GBP0.4 million
2015 Operational Highlights:
-- 103,338 new retail customers added to the business, bringing 2015 total to 508,048
-- 75,039 retail card customers added in period, up 56% from FY 2014
-- Delivered new mobile-responsive website increasing conversion
-- Launched new Apps across all platforms
-- Launched 'FairFX Business' with dedicated website to increase Corporate presence
-- Title sponsorship for the Sky Sports F1 programming season
significantly raised brand awareness among key customer
audience
-- Continued strategic investment in technology development to
maintain pace of expansion via new products
Q1 2016 Highlights:
-- Q1 activity in line with full-year forecast
-- Underlying growth of 3% in revenue for the period at GBP145.5
million (Q1 2015: GBP141.7 million after deducting non-recurring
items)
-- Revenue growth of 15% in core business of cards and single pay only
-- Single pay revenue up 10.8% to GBP83.6 million
-- Corporate platform revenue up 55.8% to GBP13.3 million
-- Retail card spending up by 25% on a like-for-like basis versus Q1 2015
-- 16,280 new customers added
-- 11,774 currency cards sold
-- Strong momentum in activity towards end of Quarter, continuing into April
-- Completed GBP5.25 million equity raise (before expenses)
Ian Strafford-Taylor, Chief Executive Officer, stated:
"The Company had a strong 2015 and delivered excellent revenue
improvements by following our strategic focus on the increasing
retail card customers. Maintaining our strategy of investment in
marketing and technology has yielded discernable improvements in
customer conversion rates and increased customer spending. Since
raising significant funds in Q1 2016, the Group is now in a strong
position to push forward with its focus on the corporate card
market, whilst maintaining its level of activity in acquiring new
retail customers.
"Despite a somewhat weaker macro environment during Q1, our
underlying customer base is performing strongly. Spending on retail
cards is up 25% on Q1 2015 with top-ups of existing cards also
showing growth. In addition, overall customer activity has picked
up in recent weeks and we have some exciting deployments of new
technology scheduled before our peak summer season. Accordingly, we
are confident the Group remains in line with market expectations
for the full year."
FairFX Group plc
Ian Strafford-Taylor,
CEO +44 (0) 20 7778 9308
Cenkos Securities plc
Max Hartley/Callum Davidson +44 (0) 20 7397 8900
Yellow Jersey PR
Charles Goodwin
Aidan Stanley +44 (0) 7747 788 221
Chairman's Statement
We are pleased to present the full year results of FairFX GROUP
PLC for the year ended 31 December 2015. This has been another
successful year for the Group following its listing on AIM in 2014.
We have been very pleased with our performance and indeed with the
results we have seen throughout the year.
At the beginning of the year, we clearly stated our strategy of
focusing on the Retail card space and performing a customer
land-grab through the deployment of marketing resources allied to
targeted, consumer-led technical innovation. Our results prove the
success of our approach as the number of new Retail cards sold has
accelerated strongly compared to 2014. At the same time our
conversion percentages have improved across all devices in terms of
digital visitors becoming FairFX customers.
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 Bureaux de Change at airports. We see a significant opportunity
to become a leading category brand and for that reason we have
invested heavily in marketing and building brand awareness. Given
the success of our strategy to date we will continue to invest in
targeted and measured marketing over the next few years to further
accelerate customer acquisition.
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. Our
technological developments are aligned to this strategy to reduce
the friction of moving from one FairFX product to another.
The Group has developed solid foundations over recent years as a
base for future growth and we continue to invest, in a targeted
fashion, in people and systems development. Innovation and delivery
of new system solutions is key to our future success and it is
important we continue to develop new capabilities to retain our
competitive advantage. We therefore invested significantly in
R&D and innovation to enhance all of our products and services
in 2015 as well as introducing "agile" methodology to improve
efficiency of project management and deployment of new technology.
FairFX is highly focused upon the ease of use of its systems and
products and is targeted towards mobile functionality operating
across all platforms and devices. To this end, during 2015, for
Retail customers we significantly improved the
mobile-responsiveness of our website and developed a much improved
mobile App. In the Corporate space, we have invested further in
developing our Corporate card platform and started developing a
mobile app for Corporate card users with the goal of enhancing the
card user experience an improving efficiency. The first phase of
development was released in January 2016 and was very well received
by customers.
After receiving its EEA-wide licence in 2014, the Group has been
working towards being able to offer its products in foreign
locations. The pilot for this is FairFX Ireland, which was
developed in 2015 and soft-launched in 2016 and provides the
template for further roll-outs. In turn this will then reinforce
the P2P credentials of the business.
FairFX also launched an App for the new Apple Watch in 2015 to
adapt to our customers' changing technological needs and we are
exploring geo-location services and mobile wallets to enhance
users' experience of its iOS and Android apps.
The Directors are confident that FairFX is extremely well placed
to continue its expansion with a robust business based on excellent
products and scalability.
John Pearson
Non-executive Chairman
14 April 2016
Chief Executive's Statement
We are very pleased to report that as a result of the funds
raised since our IPO in August 2014, the Group has had successful
and strong year of growth in 2015 with turnover up 31.9% to
GBP626.8 million (2014: GBP475.3 million). We added 103,338 new
Retail customers to the business during 2015, a 19.6% increase on
2014, bringing the total to 508,048 by the year end (2014:
404,710). Within that total, the strategy of focusing on our core
card product was extremely successful with 75,039 new card
customers which represented a 56% increase on prior year of
48,071.
The Group continued its stated growth strategy and increased its
marketing expenditure to GBP3.2 million compared to GBP1.8 million
for 2014. The increase reflects marketing investment in both direct
call-to-action TV advertising combined with sponsorship of the Sky
Sports F1 channel, which raised brand awareness amongst our target
audience by more than 70% (source: YouGov).
We also committed funds to accelerate the development of a
mobile-responsive website to further improve conversion of
customers. To expedite the process and to improve efficiency going
forward, we implemented an "agile" IT project management
methodology in 2015 which has transformed our productivity in
technological deployment providing a strong pipeline of deployments
planned for 2016.
The mobile responsive website went live at the end of May 2015
in line with the TV advert airing in June 2015. The combination of
increased awareness through the Sky F1 sponsorship and the TV
advert, together with our improved website, drove a 41% increase in
website visits and a 50% higher conversion rate online and an 88%
increase when accessing our website via mobile devices.
The launch of an enhanced mobile app in June 2015, followed by
regular updates throughout the year, also helped drive turnover
through the cards as it allows customers to access their card
accounts and top up on the go.
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April 15, 2016 02:00 ET (06:00 GMT)
In September 2015 we launched a sub-brand for corporates called
"FairFX Business" together with a dedicated business section on our
website. These steps increased awareness of the FairFX range of
business solutions as well as providing a forum where both existing
and prospective corporate customers can get more information about
FairFX products. We saw an increase of 35% in business product
enquiries within 6 months, which helped drive a 40% uplift in
turnover on the Corporate card platform in 2015. The site also
opened opportunities to cross-sell existing retail prepaid card
customers onto our business products.
The single-pay products, namely FairPay and deliverable FX
execution (dealing), performed strongly in 2015 posting turnover
growth of 40% to GBP299.2 million (2014: GBP213.7 million). With
the further strengthening of our sales and dealing teams, we expect
to continue our expansion in 2016 and this has been borne out in
the first quarter. Multi-pay turnover, being prepaid cards and
travel cash, also achieved robust growth, increasing by 25% to
GBP327.6 million (2014: GBP261.7 million). However, within the
multi-pay product group the growth was much stronger in the higher
margin prepaid card product versus the travel-cash product. This
shows the success of our stated strategy for the year of focusing
on the prepaid card and demonstrates the effectiveness of the
various marketing and IT initiatives listed above. Within the
multi-pay category, Retail Prepaid card turnover grew by 39% to
GBP200.4 million (2014: GBP143.9 million) and Corporate card
turnover by 40% to GBP40.6 million (2014: GBP29.1 million)
Gross profit for 2015 was GBP5.0 million (2014: GBP3.8 million),
which comprised of margin on currency transactions of GBP7.4
million (2014: GBP5.5 million) less transaction costs of GBP0.4
million (2014: GBP0.3 million) and other direct costs including all
costs associated with fulfilling the prepaid cards of GBP2.0
million (2014: GBP1.4 million).
In line with expectations, the Group made a loss for the year of
GBP3.4 million (2014: loss GBP2.8 million). The Group continued to
make necessary investment in its operations and technology for
future growth and boosted its marketing to increase the customer
base and raise the brand profile. Specifically, the reported loss
was due to an increase in marketing spend to GBP3.2 million (2014:
GBP1.8 million), an increase in headcount cost with average
employee numbers rising to 65 (2014: 53), and the charge for share
options granted to incentivise management and staff of GBP0.4
million (2014: GBP0.3 million).
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 its
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 in
2016.
People
We continued to selectively invest in talent in 2015 with an
average headcount of 65 (2014: 53). However, we feel that the
business has now reached a level where operational gearing will
kick in and large-scale increases in headcount are not needed as
the Group expands.
There have been no changes to the Board of Directors in 2015.
The Board remains committed to the success of the Group, ensuring
it is conducted in accordance with the highest levels of corporate
governance. We look forward to reporting on the Group's continued
growth and development.
Strategy
On the Retail side of the business, FairFX will continue to
focus on growth via the combination of marketing and technological
development and sees further opportunities for rapid expansion in
this marketplace, both in the UK and beyond.
In addition, we are taking our experience in growing the Retail
card business and applying it to our Corporate card platform. At
over GBP30 billion (Source: Concur), the market size for UK
Corporate Expenses is a comparable to the UK travel money market of
GBP35 billion (Source: Mintel) and hence represents a great
opportunity for FairFX. Our Corporate card expense solution is a
unique platform and enables us to use disruptive technology to
compete head-on with the charge-card offerings which currently
predominate. We will use a similar model for growth as for the
retail product but enhanced for the different challenges of
acquiring corporate customers. As this is a growing market space
and we are in a position to offer a unique product solution, we are
extremely excited by the potential for this market and our product
capabilities within it.
Accordingly, in the core UK market for FairFX, 2016 will see a
continuation of the strategy for growth on the Retail side of the
business but with increased priority given to simultaneous
expansion of the corporate sector.
More specifically, growth on the retail side will be pursued
using a two-pronged strategy. First, we intend to continue the
strong trend of acquiring new customers, and second, we intend to
maximise the revenue generation from the existing customer base. We
intend to acquire new customers by continuing targeted marketing
combined with consumer-driven technological development and we have
a range of exciting deployments planned ahead of the peak summer
period. This combination is expected to drive greater traffic to
the site and more efficiently convert that traffic into customers
and transactions. For existing customers, FairFX already benefits
from strong customer loyalty and high levels of reuse and
repurchase. We intend to further increase activity by using
technology to improve mobile usability and functionality and also
make it easier to move from one FairFX product to another. We
expect this will ultimately create a FairFX payment ecosystem.
On the Corporate side, FairFX intends to grow the usage of its
platform by increasing its inside-sales efforts contacting
corporates directly allied to targeted marketing, lead sourcing and
technical innovation. We have a pipeline of development planned for
the Corporate expenses management platform in 2016 including a
full-service App that yields a significant increase in usability,
and therefore aides the sales process.
Quarter 1 2016 Update
The results for the first quarter 2016 are encouraging and
underpin our expectations for the full year. Against this backdrop,
the Group envisages turnover and revenue patterns month-to-month to
be different this year due to certain macro events. Since the start
of 2016, customer trends within the travel industry in the UK have
changed in terms of timing of decisions due to two major factors.
The first is that Pound Sterling has been weaker versus both the
Euro and US Dollar in sharp contrast to the same period in 2015,
when customers were taking advantage of a much stronger Pound to
purchase other currencies. The second is that in recent months
there have been various geopolitical events affecting travel
decisions and causing travellers to review their destination
choices and delay booking until nearer their travel dates. Recent
evidence for this was publicised by Thomas Cook on 22nd March 2016.
It stated that it continued to see a "volatile market environment
with customers shunning potential trouble spots and taking longer
to make up their minds". We see this combination of factors causing
customers to delay loading their cards as they decide on their
holiday destination and hope for a rebound in the value of the
Pound. As a consequence, this year we expect to acquire a greater
proportion of new customers, with the commensurate purchasing of
currency cards, closer to their travel dates.
Despite the changes in timing of customer behaviour, turnover is
broadly in line with last year at GBP145.5 million (2015: GBP152.2
million) and showing 3% growth when two exceptional dealing
transactions in 2015 are removed. Overall net percentage margin is
expected to be higher than 2015 because of a better mix of business
with the out-performance of the card product versus cash. Single
pay turnover, which is not so dependent on travel activity but is
influenced by the strength of Sterling, is up 8.5% at GBP83.6
million (2015: GBP77.0 million). In keeping with the behavioural
effects described, retail multi-pay product turnover is down 27.1%
at GBP48.6 million (2015: GBP66.7 million). However, this masks the
out-performance on the core focus of the Retail card product
compared to the lower-margin cash product, with Retail card
turnover only lagging 2015 by 9.2% for the quarter and gaining
strong momentum in March. In addition, spending on Retail cards by
current customers is up by 25% on a like-for-like basis and top-ups
of existing cards are also up which shows the existing client base
is performing well and emphasises the "stickiness" of the client
base. We take great encouragement from this and believe this
demonstrates that potential new customers are delaying their
decisions for the reasons outlined above and hence we expect
further customer acquisition in the coming months.
For the Corporate card space, our renewed focus on this product
is producing excellent results with card turnover up 56.5% over
prior year to GBP13.3 million (Q1 2015: GBP8.5 million) and with
exciting new functionality and usability improvements planned for
2016 we anticipate this growth to continue.
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April 15, 2016 02:00 ET (06:00 GMT)
In addition, general activity in the last week of March (new
customers, cards sold and turnover) was our strongest so far in
2016 and mirrored levels last seen in the summer of 2015 and this
activity has continued into April. We take this as further evidence
that consumers have been delaying their decisions but are now
choosing to transact as their trips become imminent. Accordingly,
we reiterate that the Company is confident that it remains on
course for its forecast growth in 2016. Customer numbers continue
to expand rapidly with 16,280 new customers added in the first
quarter, bringing the total to 524,328. Within the new retail
customer numbers, the strategic focus on acquiring card customers
rather than those for the lower margin cash product can be seen
given that 11,781 cards were sold in the first quarter, with a
discernable increase in momentum as the quarter progressed. The
current expansion of the business will be further supported by the
planned integrated marketing campaigns across the key holiday
travel periods in 2016. The Group also sees the delaying of travel
decisions playing into the hands of its marketing strategy because
we can target customers more efficiently in concentrated bursts
around our planned marketing campaigns in June and July. The key
focus of our media spend will continue to be on above-the-line
marketing campaigns, including TV advertising, combined with
targeted digital presence and multiple deployments of
consumer-driven new technology. We expect this combination to
improve the performance of the marketing investment in terms of
acquiring new customers, whilst maximising revenues from the
existing client base.
The first quarter of 2016 was also notable for the completion of
a significant fundraising for the Company and a strategic
investment by Crystal Amber Fund Limited ("CA"). Overall, the
company raised GBP5.25 million, with GBP5 million coming from CA,
which meant the Company received GBP5.09 million net of transaction
fees. These funds will be deployed in a controlled fashion by the
Company to accelerate the key initiatives outlined above. Namely,
selected boosting of marketing combined with more rapid deployment
of new technology both for retail and corporate customers. The
Company is also improving its data capabilities and stitching
together better digital analysis with our customer data to better
target new customers and optimize performance with the existing
client base.
Outlook
Based on the performance and further progress made in Q1 2016,
the Group remains in line with market expectations for the full
year. We look forward to delivering further growth in the coming
year and continuing to grow the business for our stakeholders.
Ian Strafford-Taylor
Chief Executive Officer
14 April 2016
FairFX GROUP PLC
consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014
Note GBP GBP
Gross value of currency
transactions sold 4 626,827,807 475,345,811
Gross value of currency
transactions purchased (619,387,847) (469,864,995)
-------------- --------------
Revenue on currency transactions 4 7,439,960 5,480,816
Direct costs (2,412,073) (1,666,109)
-------------- --------------
Gross profit 5,027,887 3,814,707
Administrative expenses (8,423,285) (5,966,697)
AIM Listing expenses - (678,056)
Loss before tax and from
operations 5 (3,395,398) (2,830,046)
Tax expense 8 - -
-------------- --------------
Loss for the year (3,395,398) (2,830,046)
============== ==============
Loss per share
Basic 9 (4.76p) (4.41p)
Diluted 9 (4.76p) (4.41p)
============== ==============
All income and expenses arise from continuing operations. There
are no differences between the loss for the year and total
comprehensive income for the year.
The notes form an integral part of these financial
statements.
FairFX GROUP PLC
consolidated and company Statement of Financial Position
As at 31 December 2015
Group Company
2015 2014 2015 2014
Note GBP GBP GBP GBP
ASSETS
Non-current assets
Property, plant
and equipment 10 80,754 112,759 - -
Investments 11 - - 1,260,857 884,969
-------------- ------------ ---------- ----------
80,754 112,759 1,260,857 884,969
-------------- ------------ ---------- ----------
Current assets
Inventories 12 95,094 161,149 - -
Trade and other
receivables 13 1,965,003 1,637,178 4,624,571 2,943,621
Derivative financial
assets 18 115,711 47,141 - -
Cash and cash
equivalents 14 3,615,056 4,085,137 - -
-------------- ------------ ---------- ----------
5,790,864 5,930,605 4,624,571 2,943,621
-------------- ------------ ---------- ----------
TOTAL ASSETS 5,871,618 6,043,364 5,885,428 3,828,590
============== ============ ========== ==========
EQUITY AND LIABILITIES
Equity attributable
to Equity holders
Share capital 15 768,660 704,758 768,660 704,758
Share premium 5,313,780 3,522,752 5,313,780 3,522,752
Share based payment
reserve 667,421 279,136 667,421 279,136
Merger reserve 5,416,083 5,416,083 - -
Retained deficit (11,457,492) (8,062,094) (883,933) (699,056)
-------------- ------------ ---------- ----------
Total equity 708,452 1,860,635 5,865,928 3,807,590
-------------- ------------ ---------- ----------
Current Liabilities
Borrowings 16 - 334,882 - -
Trade and other
payables 17 4,463,925 3,847,847 19,500 21,000
Derivative financial
liabilities 18 699,241 - - -
-------------- ------------ ---------- ----------
5,163,166 4,182,729 19,500 21,000
-------------- ------------ ---------- ----------
TOTAL EQUITY
AND LIABILITIES 5,871,618 6,043,364 5,885,428 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 2015
Group Share Share Share Retained Merger Total
capital premium based deficit reserve
payment
GBP GBP GBP GBP GBP GBP
At 1 January
2014 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
(Note 20) - - 279,136 - - 279,136
--------- ---------- --------- ------------- ---------- ------------
At 31 December
2014 704,758 3,522,752 279,136 (8,062,094) 5,416,083 1,860,635
Loss for the
year - - - (3,395,398) - (3,395,398)
Shares issued
in year 63,902 1,791,028 - - - 1,854,930
Share based
payment charge
(Note 20) - - 388,285 - - 388,285
At 31 December
2015 768,660 5,313,780 667,421 (11,457,492) 5,416,083 708,452
========= ========== ========= ============= ========== ============
Company Share Share Share Retained Merger Total
capital premium based deficit reserve
payment
GBP GBP GBP GBP GBP GBP
At 1 January - - - - -
2014
Loss for the
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year - - - (699,056) - (699,056)
Shares issued
in period 704,758 3,522,752 - - - 4,227,510
Share based
payment charge
(Note 20) - - 279,136 - - 279,136
At 31 December
2014 704,758 3,522,752 279,136 (699,056) - 3,807,590
Loss for the
period - - - (184,877) - (184,877)
Shares issued
in period 63,902 1,791,028 - - - 1,854,930
Share based
payment charge
(Note 20) - - 388,285 - - 388,285
At 31 December
2015 768,660 5,313,780 667,421 (883,933) - 5,865,928
========= ========== ========= ============= ========== ============
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
shares.
Share based Fair value of share options granted to both
payment directors and employees.
Retained Cumulative profit and losses are attributable
deficit to equity shareholders.
Merger Arising on reverse acquisition from group
reserve reorganisation.
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
FairFX GROUP PLC
consolidated Statement OF CASH FLOWS
For the year ended 31 December 2015
Note 2015 2014
GBP GBP
Loss for the year (3,395,398) (2,830,046)
Cash flows from operating
activities
Adjustments for:
Depreciation 55,165 55,537
Share based payment charge 388,285 279,136
(Increase)/decrease in
trade and other receivables (327,825) 30,191
(Increase) in derivative
financial assets (68,570) (47,141)
(Decrease) in borrowings (334,882) (111,628)
Increase in trade and other
payables 616,078 1,309,045
Increase in derivative 699,241 -
financial liabilities
Decrease/(Increase) in
inventories 66,055 (84,868)
Net cash flow used by operating
activities (2,301,851) (1,399,774)
Cash flows from investing
activities
Acquisition of property,
plant and equipment (23,160) (134,144)
Net cash used in investing
activities (23,160) (134,144)
Cash flows from financing
activities
Proceeds from issuance
of ordinary shares 1,980,971 4,161,104
Costs directly attributable
to share issuance (126,041) (548,337)
Net cash from financing
activities 1,854,930 3,612,767
Net (decrease)/increase
in cash and cash equivalents (470,081) 2,078,849
Cash and cash equivalents
at the beginning of the
year 4,085,137 2,006,288
------------ ------------
Cash and cash equivalents
at end of the year 14 3,615,056 4,085,137
============ ============
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 2015
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 2015 were authorised for issue on 14
April 2016 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 year ended 31
December 2015.
Adoption of new and revised accounting standards and
interpretations:
-- IAS 19 Defined Benefit Plans: Employee Contributions
(Amendment). Clarifies the requirements that relate to how
contributions from employees or third parties that are linked to
service should be attributed to periods of service.
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 *
IFRS 14 Regulatory Deferral Accounts 1 January
2016
IFRS 11 Accounting for acquisitions of 1 January
interests in Joint Operations (Amendment) 2016
IAS 16 Property, Plant and Equipment and 1 January
IAS 38 Intangible Assets (Amendments) 2016
IAS 27 Equity Method in Separate Financial 1 January
Statements (Amendments) 2016
IAS 1 Disclosure Initiative (Amendments) 1 January
2016
IFRS 10 Consolidated Financial Statements, 1 January
IFRS 12 Disclosure of Interests in Other 2016
Entities and IAS 28 Investment In Associates
and Joint Ventures
IFRS 15 Revenue from Contracts with Customers 1 January
2018
IFRS 9 Financial Instruments: Classification 1 January
and Measurement 2018
IFRS 16 Leases 1 January
2019
* The effective dates stated above are those given in the
original IASB/IFRIC standards and interpretations. As the group and
parent company prepares its 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 use 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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
The financial statements have been prepared on a historical cost
basis with the exception of derivative financial instruments which
are measured at fair value through profit or loss.
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' best knowledge and past experience and are
explained further in note 3.21.
The Group has changed its accounting treatment of Derivative
financial assets and liabilities in the year ended 31 December
2015. Derivate financial assets and liabilities are recorded at
fair value through the profit or loss and offset in the Statement
of Financial Position (see notes 3.8 and 3.9). For consistency, the
prior year comparative balances have been restated in the Statement
of Financial Position. This restatement did not result in any
impact on the prior year loss.
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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(th) 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 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 2015 and are disclosed fully in note 15.
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" were 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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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 consolidated 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.
Trade receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. A
provision for the impairment of trade receivables is recognised
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 Derivative financial assets and liabilities
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.
3.9 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net account reported in the statement of financial position if, and
only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net
basis, or to realise the assets and settle the liabilities
simultaneously.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
3.10 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.
3.11 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.
3.12 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.
3.13 Investments in subsidiaries
Investment in subsidiaries undertakings are stated at cost less
impairment in value.
3.14 Income recognition
Revenue is recognised when a binding contract is entered into by
a client and the margin is fixed and determined. The margin is the
difference between the rate offered to clients and the rate the
Company receives from its liquidity providers.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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.
3.15 Research and development
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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.
3.16 Interest expense recognition
Interest expense is recognised as interest accrues, using the
effective interest method, on the net carrying amount of the
financial liability.
3.17 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.
3.18 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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
3.19 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 20.
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.
3.20 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 term.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
3.21 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 20. 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) Measurement of fair values
The Group's accounting policies and disclosures require
measurement of fair values with regard to Derivative 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).
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
4. Revenue and segmental analysis
Segment results are reported to the Board of Directors (being
the chief operating decision maker) to assess both performance and
strategic decisions. The Board of Directors reviews financial
information on revenue the following segments: Currency cards,
FairPay, Dealing and Central (which includes overheads and
corporate costs). The revenue is wholly derived from within the
UK.
2015 Currency FairPay Dealing Central Total
Cards
GBP GBP GBP GBP GBP
Segment revenue 4,446,460 828,044 2,127,682 37,774 7,439,960
Direct costs - - - (2,412,073) (2,412,073)
Administrative
expenses - - - (8,423,285) (8,423,285)
AIM listing - - - - -
expenses
---------- -------- ---------- ------------- ------------
Loss before
tax and from
operations 4,446,460 828,044 2,127,682 (10,797,584) (3,395,398)
========== ======== ========== ============= ============
Total assets - - - 5,871,618 5,871,618
Total liabilities - - - (5,163,166) (5,163,166)
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---- ---- ------------ ------------
Total net assets - - - 708,452 708,452
==== ==== ============ ============
2014 Currency FairPay Dealing Central Total
Cards
GBP GBP GBP GBP GBP
Segment revenue 3,057,454 695,330 1,364,603 363,429 5,480,816
Direct costs - - - (1,666,109) (1,666,109)
Administrative
expenses - - - (5,966,697) (5,966,697)
AIM listing
expenses - - - (678,056) (678,056)
---------- -------- ---------- ------------ ------------
Loss before
tax and from
operations 3,057,454 695,330 1,364,603 (7,947,433) (2,830,046)
========== ======== ========== ============ ============
Total assets - - - 6,043,364 6,043,364
Total liabilities - - - (4,182,729) (4,182,729)
---- ---- ------------ ------------
Total net assets - - - 1,860,635 1,860,635
==== ==== ============ ============
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
5. Loss before tax
Loss before tax is stated after charging the following:-
2015 2014
GBP GBP
Operating lease - property 258,790 135,486
Depreciation of plant and equipment
and fixtures and fittings 55,165 55,537
Net foreign currency differences 151,822 41,490
Research & development costs 714,847 514,976
======== ========
Amounts charged by the group's
auditor are as follows:-
2015 2014
GBP GBP
Audit fees:-
Fees payable for the audit of
the annual report and financial
statements 21,000 21,000
Fees payable for the audit of
subsidiaries 24,000 34,000
-------- --------
Total audit fees 45,000 55,000
-------- --------
Other services:-
Taxation services - 1,000
Corporate finance services - 140,000
Other assurance services - 15,000
-------- --------
Total non-audit fees - 156,000
-------- --------
Total Fees 45,000 211,000
======== ========
The above 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:-
2015 2014
Number Number
Administrative staff 65 53
======= =======
Employee costs
2015 2014
GBP GBP
Wages and salaries 3,101,177 2,349,651
Social security costs 351,254 265,221
---------- ----------
3,452,431 2,614,872
========== ==========
There were no pension payments in respect of either year.
Further information regarding share options is given in note
20.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
7. Directors' remuneration
2015 2014
GBP GBP
Emoluments 366,621 441,040
======== ========
The total amount payable to the highest paid director in respect
of emoluments was GBP227,500 (2014: GBP392,500)
The total amount payable to all Directors in the consolidated
Group was GBP468,288 (2014: GBP532,540). Prior year numbers have
been restated to exclude GBP69,544 of employers national insurance
erroneously included.
There were no pension payments in respect of either year.
Further information regarding share options is given in note
20.
8. Taxation
2015 2014
GBP GBP
Current year tax expenses - -
- -
===== =====
Factors affecting tax charge for the period
The charge for the year can be reconciled to the (loss) per the
consolidated statement of comprehensive income as follows:
2015 2014
GBP GBP
Loss before taxation: Continuing
operations (3,395,398) (2,830,046)
=========== ===========
Taxation at the UK corporation
rate tax of 20% (2014: 21%) (687,568) (594,310)
Capital allowances in arrears /(advance)
of depreciation 6,626 (8,999)
Share based payments 78,628 58,619
Net impact of R&D tax credit claim 92,349 25,489
Expenses not deductible for tax
purposes 9,882 8,700
Tax losses utilised - -
Tax losses for which no deferred
tax asset utilised 500,083 510,501
----------- -----------
Total tax for the year - -
=========== ===========
The group has estimated losses of GBP8,612,311 (2014:
GBP7,315,029) 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
GBP1,722,462 (2014: GBP1,536,156) 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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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. Loss per share
Basic loss per share
The calculation of basic loss per share has been based on the
following loss attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding. The loss after tax
attributable to ordinary shareholders is GBP3,395,398 (2014:
GBP2,830,046 loss) and the weighted average number of shares in
issue for the period is 71,316,169 (2014: 64,128,356).
Diluted loss per share
The calculation of diluted earnings per share has been based on
the loss 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 GBP3,395,168 (2014:
GBP2,830,046 loss) and the weighted average number of shares is
71,316,169 (2014: 64,128,356).
10. Property, plant and equipment
Group Plant Fixtures Leasehold Total
and machinery and fittings improve-ments
GBP GBP GBP GBP
Cost
At 1 January 2015 216,796 11,588 38,935 267,319
Additions 19,400 3,044 716 23,160
--------------- -------------- --------------- --------
At 31 December 2015 236,196 14,632 39,651 290,479
--------------- -------------- --------------- --------
Depreciation
At 1 January 2015 143,045 7,621 3,894 154,560
Charge for the year 49,391 1,809 3,965 55,165
--------------- -------------- --------------- --------
At 31 December 2015 192,436 9,430 7,859 209,725
--------------- -------------- --------------- --------
Net book value
At 31 December 2015 43,760 5,202 31,792 80,754
=============== ============== =============== ========
At 31 December 2014 73,751 3,967 35,041 112,759
=============== ============== =============== ========
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
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For the year ended 31 December 2015
11. Investments
Company - Shares in subsidiary 2015 2014
undertakings
GBP GBP
Cost 884,969 -
Additions 375,888 884,969
---------- --------
At 31 December 2015 1,260,857 884,969
---------- --------
Provisions for diminution in value
At 31 December - -
---------- --------
Net Book Value
At 31 December 1,260,857 884,969
========== ========
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 England and Wales Ordinary 100 Dormant
Limited *
FAIRFX Wholesale England and Wales Ordinary 100 Dormant
Limited *
FAIRFS Limited * England and Wales Ordinary 100 Dormant
FAIR Foreign Exchange Ireland Ordinary 100 Dormant
Ireland Limited *
* Share capital held indirectly
12. Inventories
Group 2015 2014
GBP GBP
Finished goods 95,094 161,149
======= ========
The group's inventories comprise stock of cards.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
13. Trade and other receivables
Group Company
2015 2014 2015 2014
GBP GBP GBP GBP
Trade receivables 1,046,473 1,013,080 - -
Amounts due from
group undertakings - - 4,624,571 2,943,621
Other receivables 811,977 460,492 - -
Prepayments and
accrued income 106,553 163,606 - -
---------- ---------- ---------- ----------
1,965,003 1,637,178 4,624,571 2,943,621
========== ========== ========== ==========
Information about the Group's exposure to credit and market
risks, and impairment losses for trade and other receivables, is
included in Note 19.2.
14. Cash and cash equivalents
Group 2015 2014
GBP GBP
Cash at bank 3,615,056 4,085,137
========== ==========
Included in cash and cash equivalents at 31 December 2015 was
GBP2,877,514 of customer trading funds (2014: GBP2,054,109).
All the cash is held in the name of the trading company FAIRFX
Plc.
15. Share capital
Group and Company 2015 2014
GBP GBP
Authorised, issued and fully paid
up capital
76,866,039 ordinary shares of
GBP0.01 each 768,660 704,758
======== ========
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 issue:
Gross Nominal
Price value Value Costs
Date of No Shares per of shares of shares of share Share
Issue Issued share issued issued issues Premium
13 November 6,390,229 GBP0.31 GBP1,980,971 GBP0.01 GBP126,041 GBP1,791,028
2015
========== ============= =========== =========== =============
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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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.
16. Borrowings
Group 2015 2014
GBP GBP
Shareholder loan - 334,882
------- --------
- 334,882
======= ========
Details of Shareholder loans are included in Note 22 below.
17. Trade and other payables
Group Company
2015 2014 2015 2014
GBP GBP GBP GBP
Trade payables 3,950,139 3,232,827 - -
Taxation and social
security 115,918 88,165 - -
Accruals and deferred
income 397,868 526,855 19,500 21,000
---------- ---------- ------- -------
4,463,925 3,847,847 19,500 21,000
========== ========== ======= =======
Group Company
2015 2014 2015 2014
GBP GBP GBP GBP
Current 4,463,925 3,847,847 19,500 21,000
========== ========== ======= =======
18. Derivative financial assets and financial liabilities
18.1 Derivative financial assets and liabilities
Financial assets at fair value through profit or loss
Notional Notional
Fair Principal Fair Principal
Value Value
2015 2015 2014 2014
GBP GBP GBP GBP
Foreign exchange
forward contracts 115,711 10,882,130 47,141 6,261,923
-------- ----------- -------- -----------
Total financial
instruments at fair
value 115,711 10,882,130 47,141 6,261,923
======== =========== ======== ===========
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
18.2 Derivative financial liabilities
Financial liabilities at fair value through profit or loss
Notional Notional
Fair Principal Fair Principal
Value Value
2015 2015 2014 2014
GBP GBP GBP GBP
Foreign exchange
forward contracts 699,241 11,385,381 - 6,214,782
-------- ----------- -------- -----------
Total financial
instruments at fair
value 699,241 11,385,381 - 6,214,782
======== =========== ======== ===========
19. 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.
19.1 Principal financial instruments
The principal financial instruments of the Group, from which
financial instrument risk arises, are as follows:
2015 2014
GBP GBP
Financial instruments held at
amortised cost
Cash and cash equivalents 3,615,056 4,085,137
Borrowings - (334,882)
Trade and other payables (4,463,925) (3,847,847)
Trade and other receivables 1,965,003 1,637,178
============ ============
2015 2014
GBP GBP
Financial instruments held at
fair value through profit or loss
Derivative financial assets -
Forward foreign exchange contracts 115,711 47,141
Derivative financial liabilities (699,241) -
- Forward foreign exchange contracts
========== =======
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Trade and other payables generally have short time to
maturity.
Forward foreign exchange contracts fall into level 2 of the fair
value hierarchy as set out in note 3.21(ii) since 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).
19.2 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 2015.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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 risks 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.
The ageing of financial assets at the statement of financial
position date is as follows:
2015 Current Less 4 to Over
and than 6 months 6 months Individually
not 3 months overdue overdue impaired Total
impaired overdue
GBP GBP GBP GBP GBP GBP
Trade and
other receivables 1,965,003 - - - - 1,965,003
Derivative
financial
assets 115,711 - - - - 115,711
---------- ---------- ---------- ---------- --------------- ----------
2014 Current Less 4 to Over
and than 6 months 6 months Individually
not 3 months overdue overdue impaired Total
impaired overdue
GBP GBP GBP GBP GBP GBP
Trade and
other receivables 1,637,178 - - - - 1,637,178
Derivative
financial
assets 47,141 - - - - 47,141
---------- ---------- ---------- ---------- --------------- ----------
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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
The table below analyses the Group's gross undiscounted
financial liabilities by their contractual maturity date.
2015 On demand Between Between
and 1 and 3 and Over
within 3 months 12 months 1 year Total
1 month
GBP GBP GBP GBP GBP
Borrowings - - - - -
Trade and other
payables 4,463,925 - - - 4,463,925
Derivative financial
liabilities 230,564 245,436 223,241 - 699,241
---------- ---------- ----------- --------- ----------
2014 On demand Between Between
and 1 and 3 and Over
within 3 months 12 months 1 year Total
1 month
GBP GBP GBP
Borrowings - - - 334,882 334,882
Trade and other
payables 3,847,847 - - - 3,847,847
Derivative financial - - - - -
liabilities
---------- ---------- ----------- --------- ----------
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 2015, the Group is not sensitive to movements
in the strength of Sterling as no material foreign currency
balances are held.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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 2015 Loans Other Total
and financial
receivables liabilities
GBP GBP GBP
Financial assets not
measured at fair value
Cash and cash equivalents 3,615,056 - 3,615,056
Trade and other receivables 1,965,003 - 1,965,003
5,580,059 - 5,580,059
------------- ------------- ------------
Financial liabilities
not measured at fair
value
Borrowings - - -
Trade and other payables - (4,463,925) (4,463,925)
- (4,463,925) (4,463,925)
------------- ------------- ------------
31 December 2014 Loans Other Total
and Financial
receivables Liabilities
GBP GBP GBP
Financial assets not
measured at fair value
Cash and cash equivalents 4,085,137 - 4,085,137
Trade and other receivables 1,637,178 - 1,637,178
5,722,315 - 5,722,315
------------- ------------- ------------
Financial liabilities
not measured at fair
value
Borrowings - (334,882) (334,882)
Trade and other payables - (3,847,847) (3,847,847)
- (4,182,729) (4,182,729)
------------- ------------- ------------
All financial instruments are classified as level 1 financial
instruments in the fair value hierarchy, with the exception of
Derivative financial assets and liabilities 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 EUR20,000, whichever is the higher.
Since its incorporation, the parent company has complied with
these requirements, which are unchanged since the previous year
end.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
20. Share options
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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 2015, there were no share
based payment transactions within the group.
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
Exercise
price Number
(GBP)
Outstanding at 1
January 0.10 142,228
Cancelled during
the year 0.10 (142,228)
Outstanding at 31 0.10 -
December
==========
Historically, the Group granted share options to its director
and employees as well as external third parties. At the start of
2014 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 for 2014. The entirety of these options were cancelled in
2014.
Options issued during year ended 2014 2014
31 December 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 31 December
2015, there were unexercised share options amounting to 7% 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
from 5(th) August 2015 and will lapse on 3 November 2019.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
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 variable a
(GBP)
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 variable c
(GBP)
a. The weighted average exercise price varies dependent 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
price Value
(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, from 28(th) July
2014 to 5(th) August 2015 with GBP388,285 being expensed to the
statement of comprehensive income for the year ended 31 December
2015 (2014: GBP279,136).
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.
21. Financial commitments
As at 31 December 2015 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
2015 2014
GBP GBP
Not later than one year 189,537 218,927
Later than one year and not later
than five years - 189,537
189,537 408,464
======== ========
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.
FairFX GROUP PLC
Notes to the consolidated Financial Statements (cONTINUED)
For the year ended 31 December 2015
22. Related party transactions
Loans from related parties
Included within Current borrowings are amounts of nil (2014:
GBP334,882) due to Pembar Limited. Pembar Limited is a company
incorporated in British Virgin Islands and is the controlling party
of FAIRFX Group Plc. The transaction was concluded at arm's length.
Details of the loan is as follows:
-- The loan from Pembar Limited dated 9 June 2006 carried
interest at a rate of 2% over the Bank of England base rate and was
repayable in full by 9 June 2016. The lender converted his loan
into share capital as part of the share issue on 13(th) November
2015 (see note 15).
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:-
2015 2014
GBP GBP
Salaries, fees and other short
term employee benefits 1,003,120 855,246
========== ========
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 2015.
23. 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.
24. Post balance sheet events
On 29(th) March 2016, the Group completed a placing of
26,250,000 new Ordinary Shares at 20p per share with Crystal Amber
Fund Limited, an AIM listed fund which invests in small and mid-cap
UK equities and other institutional investors which raised GBP5.1
million (net of expenses).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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