TIDMFFX
RNS Number : 7029L
FAIRFX Group PLC
23 April 2018
23 April 2018
FairFX Group plc
("FairFX" or "the Group" or "the Company")
Final results for the year ended 31 December 2017
FairFX, the e-banking and international payments group, is
pleased to announce its audited full year results for the year
ended 31 December 2017.
Financial highlights:
-- Group turnover(1) in excess of GBP1.1 billion (2016: GBP0.8 billion), an increase of 41%
-- Group revenue of GBP15.5 million (2016: GBP10.2 million), an
increase of 52% (33% on a like for like basis)
-- Gross profit of GBP11.9 million, up 60% (39.1% on a like for like basis)
-- Adjusted EBITDA(2) of GBP1.0 million (2016: loss GBP1.5 million)
-- Adjusted PBT(3) of GBP0.9 million (2016: loss GBP1.6 million)
-- First full year of profitability
(1) Turnover is measured by gross value of currency transactions
sold of GBP936.6 million plus gross value of deposits into bank
accounts of GBP184.9 million for a total of GBP1,121.5 million
(2) Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation charges, acquisition-related expenses, share-based payments and foreign exchange gains and losses
(3) Adjusted PBT is profit before tax, acquisition-related
expenses, amortisation of acquisition intangibles, share-based
payments and exchange rate gains or losses
Operational highlights:
-- Milestone year of development with substantial growth in
scale and diversification of operations
-- 73,237 new customers added to the business bringing the total to 728,985
-- Acquisition of Q Money Limited in January provided Group with
e-money licence to diversify business
-- Oversubscribed fund-raise of GBP26 million (net of expenses)
to acquire digital banking provider, CardOne Banking.
-- Full MasterCard Membership granted, providing path to simplify supply chain
Q1 2018 highlights:
-- Group turnover up 125.9% to GBP439.5 million (31.6% on a like for like basis)
-- Group revenue up 85.3% to GBP4.8 million (18.7% on a like for like basis)
-- Acquisition of International Payments Business, City Forex, for GBP6 million
-- Commencement of self-issuance of MasterCard branded cards
-- Agreement with Alternative Business Funding to provide FairFX
business customers access to lending
Commenting on the results and outlook, Ian Strafford-Taylor,
Chief Executive Officer, said:
"2017 has been a ground-breaking year for the Group in terms of
growth and expansion of operations. The Group has reported its
maiden full year profit as a public company and completed over GBP1
billion of transaction volume for the first time. The strategic
acquisitions of Q Money Limited and CardOne Banking have been key
to evolving the business and enabling FairFX to move further into
the digital banking sector. 2018 will see the Group continue to
develop new products, with a particular focus on the SME banking
space, and cross sell its existing services.
"The Group has enjoyed a good start to 2018 to date and has also
completed the acquisition of the international payment business and
supply chain partner, City Forex, which fits with our strategy to
both scale the business and increase control over the supply chain
to improve margins. In addition, the Group has a pipeline of
development for 2018 to further boost revenue and operational
efficiency and consequently, the Board is confident that the
outlook for the full year remains in line with market
expectations."
For further information, please contact:
FairFX Group plc
Ian Strafford-Taylor, CEO +44 (0) 20 7778 9308
Cenkos Securities plc
Max Hartley/Callum Davidson +44 (0) 20 7397 8900
Nick Searle
Yellow Jersey PR
Charles Goodwin +44 (0) 7747 788 221
Katie Bairsto +44 (0) 7946 424 651
About FairFX
FairFX is a leading challenger brand in banking and payments
that disintermediates the incumbent banks with a superior user
experience and low-cost operating model. Our business enables
personal and business customers to make easy, low-cost
multi-currency payments in a broad range of currencies and across a
range of products all via one integrated system. The FairFX
platform facilitates payments either direct to Bank Accounts or at
32 million merchants and over 1 million ATM's in a broad range of
countries globally via Mobile apps, the Internet, SMS, wire
transfer and MasterCard/VISA debit cards.
FairFX provides banking and payment services to both personal
and business customers through four channels: Currency Cards,
Physical Currency, International Payments and Bank Accounts. The
Currency Card and Physical Currency offerings facilitate multiple
overseas payments at points of sale and ATM's whereas the
International Payments channel supports wire transfer foreign
exchange transactions direct to Bank Accounts. For Corporates,
FairFX has a market-leading business-expenses solution based around
its corporate prepaid platform and card. This service can yield
significant savings on a Corporate's expenses and procurement
through better controls and improved transparency, and streamline
the downstream administrative processes, thus saving costs. Through
the acquisition of CardOne Banking in August 2017, FairFX now has
the capability to offer retail and business bank accounts with all
the functionality you would expect from a bank, namely faster
payments, BACs, direct debits, international payments and a debit
card.
Chairman's statement
2017 was a transformational year for FairFX and marked a
step-change in delivering on the Group's strategy, with a major
acquisition having been completed, over GBP1 billion of turnover
generated and achieving profitability for the first time since its
admission to AIM. As a Group, Turnover is measured by the gross
value of currency transactions sold (as reported in the statutory
income statement) plus the gross value of customer funds deposited
into banking services bank accounts.. Having acquired Q Money
Limited in January, which brought with it an e-money licence,
FairFX has set a course to evolve its currency payments platform
and develop its capabilities as a digital banking services
provider, with an emphasis on the SME sector. The acquisition of
CardOne Banking, in August 2017, has enabled the Group to
fast-track its digital banking plans and the successful integration
has seen CardOne Banking's digital banking technology incorporated
into the Group with planned synergies already being realised.
In order to finance the acquisition of CardOne Banking and
provide additional growth capital for the enlarged group, we
completed a placing and open offer to raise net proceeds of GBP26
million (after costs directly attributable to the share issuance).
This was the Group's largest fundraise to date and the high level
of investor demand received is a major endorsement of FairFX's
success, its growth ambitions and the strength of the management
team. We are pleased with the support of both new and existing
shareholders during this process and we look forward to a long and
successful relationship with them.
The Group's core businesses have continued to perform well, with
Currency Card and International Payments turnover up 17.9% and
19.5% respectively. The Group has also made further investment in
its technology and platform functionality to improve user
experience and facilitate repeat business and cross-selling.
Significant enhancements were made in the year to both Corporate
and Retail offerings across all platforms, namely web,
mobile-responsive web-usage and app. Further development of user
experience will remain a key theme for 2018 as we extract more
efficiency from our functionally-rich platform.
As the business continues to scale and data protection issues
increase in importance to the market and regulators, the Board
believes that it is vital to continue to proactively insource more
of its supply chain, thereby removing intermediaries, increasing
the quality of services offered, optimising risk, and enabling
greater control of processes and, in turn, improving gross margins.
Our recent acquisition of City Forex in early 2018 demonstrates
just one manifestation of this strategy, with City Forex being a
partner to FairFX since 2007 and providing the Group's Travel
Currency service. While it is immediately earnings enhancing, the
acquisition also increases economies of scale and adds product
innovation through City Forex's proprietary platform, which also
adds functionality to the existing FairFX platform. The acquisition
also brings an opportunity to cross-sell FairFX's products to City
Forex's customers, particularly FairFX's Corporate Expenses Card
and Platform.
The Group's continual focus on improving its offering and user
experience has been integral to its success to date. As a
challenger brand in a rapidly evolving sector, FairFX recognises
the importance of delivering a service which fits with the changing
needs of consumers and businesses in order to stay ahead of the
competition and retain its customers. As such the Directors believe
the Group is in a strong position to execute its ongoing strategy
to grow its customer base, broaden its customer offering and
further establish itself in the digital banking sector.
John Pearson
Non-executive Chairman
22 April 2018
Chief Executive's statement
I am pleased to report on the Group's significant achievements
during its financial year ended 31 December 2017 ("FY 2017"). We
had another successful year with strong turnover and revenue growth
coupled with a move into full year profitability for the first time
since the admission of the Group to AIM. The results demonstrate
how the stated strategy of the Group, namely adding scale and
efficiency coupled with product innovation focused on SME digital
banking, are bearing fruit. The focus of the Group's activity in
the year and the significant achievements made all fit within these
two key themes.
FairFX Group completed the acquisitions of two businesses during
the year; Q-Money and CardOne Banking. Q-Money, acquired in
January, was the first step towards adding a digital banking
capability to the Group and brought with it an existing e-money
licence, as well as significant expertise in payments and banking.
The Group then completed the acquisition of CardOne Banking in
August, which transformed the digital-banking services the Group
could offer. Accordingly, the Group's 2017 results reflect both the
performance of the core FairFX business lines, which performed
strongly, plus the additional activity of Banking.
Group turnover rose 40.5% to in excess of GBP1.1 billion (2016:
GBP0.8 billion), generating an adjusted EBITDA of GBP1.0 million
(2016: loss GBP1.5 million). Within the total turnover,
like-for-like (excluding acquired business activity post
acquisition) turnover from core foreign exchange services was
GBP936.6 million, up 17.3% (2016: GBP798.3 million). Banking
turnover, generated from the CardOne Banking acquisition,
contributed GBP184.9 million representing trading for the period
since the acquisition completed in August 2017.
Within the non-banking turnover of GBP936.6 million, growth was
evenly spread across our products with Prepaid Currency Cards and
Travel Cash up 14.5% to GBP402.9 million (2016: GBP351.8 million)
and International Payments, comprising Dealing and FairPay, up
19.5% to GBP533.7 million (2016: GBP446.5 million)
Within Prepaid Currency Cards and Travel Cash, the Corporate
Expenses Platform, which enables businesses to better control their
expenses and procurement, continued its strong year-on-year growth
trend, up 60.6% on the previous year to GBP130.3 million. On the
Retail consumer side, the prepaid card showed modest growth, rising
2.2% to GBP224.9 million whilst Travel Cash fell by 5.8% to GBP47.7
million. The performance on cards within Retail is encouraging when
measured against the high level of competition in this space and we
will be launching additional features in 2018 which should further
boost growth. The performance in Travel Cash was partly due to
reducing the amount we were prepared to pay to acquire a customer
to fit within our policy, implemented in 2017, to cap cost per
acquisition (CPA) for all of our products at less than or equal to
the year 1 value of a customer. The acquisition of City Forex, in
early 2018, will ensure that we can look at improving our margins
in the cash space to drive growth.
The Group's push into the corporate market can be demonstrated
by the growth of corporate turnover as % of total turnover. For FY
2017, corporate turnover was 52.3% (2016: 45.5%) of total turnover,
an increase of 15.1%.
Revenue for the year rose 51.7% to GBP15.5 million (2016:
GBP10.2 million) with revenue margin improving to 1.38% (2016:
1.28%), demonstrating that the Company can deliver sustainable top
line growth whilst more than maintaining margins. Within the total
revenue number, like-for-like revenue from core foreign exchange
services was up 33% at GBP13.6 million (2016: GBP10.2 million) with
growth driven by International Payments up 35.3% to GBP5.1 million
and Currency Cards up 33.4% to GBP8.1 million. Revenue from Banking
was GBP1.9 million representing the result post the acquisition of
CardOne Banking in late August.
Gross profit for FY 2017 was GBP11.9 million (2016: GBP7.5
million), up 59.8% on 2016. Within the total gross profit,
like-for-like gross profit from core foreign exchange services was
up 39% at GBP10.4 million (2016: GBP7.5 million). Gross profit from
Banking was GBP1.5 million representing the result post the
acquisition of CardOne Banking in late August. Group gross profit
is stated after the deduction of direct costs which rose by 29.3%
to GBP3.5 million (2016: GBP2.7 million). As direct costs increased
proportionately less than revenues, gross profit margin improved to
77.2% (2016: 73.5%) showing that the focus on costs in the year is
bearing fruit and this trend is expected to continue into 2018.
Group overheads increased to GBP11.4 million during FY 2017, an
increase of 28.4%. Excluding GBP1.5 million of overheads incurred
post-acquisition by CardOne Banking and Q-Money, overheads on a
like-for-like basis grew by 11.1% as the Group continues to invest
for growth, most notably in adding talent into design, product
management and development.
As illustrated in the table below, adjusted EBITDA (earnings
before interest, tax, depreciation and amortisation charges,
acquisition-related expenses, share-based payments and foreign
exchange gains and losses) was GBP1.0 million (2016: GBP1.5 million
loss). This significant improvement is a result of the top line
growth whilst maintaining revenue margins and controlling direct
costs and overheads. The Company is therefore optimally geared to
take further advantage of top line growth by enjoying the economies
of scale on payment processing that comes with higher transaction
volume without significant increase in overheads.
Adjusted PBT (profit before tax, acquisition-related expenses,
amortisation of acquisition intangibles, share-based payments and
exchange rate gain or losses) for the Group was GBP0.9 million
(2016: loss GBP1.6 million). Unadjusted PBT for 2017 was GBP0.2
million (2016: loss GBP1.4 million), an improvement of 116% and
again illustrates the huge strides the Group has made over the
year.
The Group tax charge for the year was a credit of GBP217,687,
comprising a GBP27,179 current tax credit for group tax relief and
a deferred tax credit of GBP190,508 on share based payments.
Profit after tax was GBP0.4 million (2016: GBP1.4 million) after
adjusting for the current and deferred tax credits in 2017.
Adjusted EBITDA/PBT Calculation 2017 2016
GBP GBP
Statutory Net Profit /
(Loss) 447,136 (1,440,190)
Amortisation of acquisition 220,325 -
intangibles
Other amortisation charges 792 -
Depreciation costs 51,727 53,423
Tax Credit (217,687) -
------------- ------------
EBITDA 502,293 (1,386,767)
Acquisition-related costs 269,769 -
Share-based payments 112,961 1,001
Foreign exchange loss /
(gain) 68,186 (119,507)
Adjusted EBITDA 953,208 (1,505,273)
------------- ------------
Other amortisation charges (792) -
Depreciation costs (51,727) (53,423)
------------- ------------
Adjusted PBT 900,690 (1,558,696)
------------- ------------
The net cash position of the Group at 31(st) December 2017 was
GBP52.0 million, comprising GBP34.1 million of client funds and
GBP17.8 million of available cash. Accordingly, the Group has
sufficient cash resources to continue implementing its growth
strategy.
People
A key component for the success of the Group is to attract and
retain talented people and this will continue to be a focus going
forward. During the period, Ben Wynn was appointed as Chief Product
and Marketing Officer, bringing with him over 18 years' experience
of building, promoting and scaling advanced products across mobile,
digital and marketing landscapes. Ben's appointment augments the
already experienced Executive Committee of FairFX and he is driving
positive change throughout the organisation.
The acquisition of CardOne Banking in August of 2017 brought two
major benefits to the Group in terms of people. Firstly, we
acquired excellent new talent, from its Chief Executive Officer,
Adam Rigler, his senior management team and the wider workforce.
Both Adam and the CardOne Banking Chief Technology Officer, Andrew
Phillips, are now part of the Group's Executive Committee.
Secondly, the acquisition allows the Group to widen its catchment
area for recruitment as CardOne Banking is based in Chester and we
are increasingly adding headcount where we can find the relevant
talent, irrespective of the location between London and
Chester.
The net impact on Group average headcount from organic growth
and the CardOne Banking acquisition was an increase from 66 to 101.
The headcount total at the end of the year was 153, which comprised
of 77 within FairFX and 76 within CardOne Banking.
There were no changes to the Board of Directors in 2017. The
Board remains committed to the success of the Group and continues
to value high standards of corporate governance. During the year,
Bob Head, Non-Executive Director, was elected Chair of the Audit
and Remuneration Committees. Bob brings an immense wealth of
experience in corporate governance from his previous roles which
will help the Board further elevate the Group's corporate
governance approach.
Strategy
As stated in our trading update released earlier this year, the
strategic focus for the Group lies in two key areas. Firstly, to
continue to achieve business efficiencies through a combination of
increasing scale, selective internalisation of the supply chain and
improved customer experience of our products. An example of this is
our recent acquisition of City Forex which significantly increases
the Group's scale - see Quarter 1 update below for details.
Secondly, to continue to roll out innovative new products with an
emphasis on banking services for businesses, thereby building on
the technology platform of CardOne Banking, which we acquired in
August 2017.
The business efficiency strategy has multiple strands to it:
- gaining full membership status of Mastercard in December 2017
meant that the Group can now issue its own cards and has
selectively started to do so in 2018 as part of an overall card
issuance strategy;
- increasing turnover of the Group means we can obtain better commercial terms from partners;
- selectively insourcing processes, reducing costs and improving
speed of deploying new products; and
- investing in improving user experience across our platforms
and products making it easier to become a customer and to
transact.
The innovation strategy is focused on the provision of digital
banking services for the business consumer and thereby brings
together the complementary strengths of FairFX and CardOne Banking.
The first key step in this journey is the Fair Everywhere
multi-currency bank account product, which is soon to launch in
2018. Fair Everywhere is targeted on the business sector and more
specifically, SMEs, offering current accounts in multiple
currencies. A pipeline of further innovations in this space is
planned for 2018 and beyond.
Finally, the Board will continue to evaluate accretive
acquisition opportunities, as appropriate, in line with the Group's
strategy and in order to further strengthen the Group.
Quarter 1 update
The results for the first quarter 2018 are encouraging and
support our expectations for the full year. Turnover for the first
3 months of 2018 (including CardOne Banking and City Forex) grew
strongly and is up 125.9% on the prior year at GBP439.5 million
(2017: GBP194.6 million). This growth has been driven by
International Payments which is up 98.5% at GBP212.9 million (2017:
GBP107.2 million) and Prepaid Currency Card turnover which
increased 11.2% to GBP82.6 million (2017: GBP74.3 million),
including corporate card volumes up 25.9% over prior year to
GBP34.0 million (2016: GBP27.0 million). On a like-for-like basis,
turnover from core foreign exchange services was up 31.6% to
GBP256.1 million (2017: GBP194.6 million).
Revenue (including CardOne Banking and City Forex) also grew
strongly in the first quarter of 2018 with an 85.3% increase to
GBP4.8 million (2017: GBP2.6 million). On a like-for-like basis,
revenue from core foreign exchange services increased 18.7% to
GBP3.1 million (2017: GBP2.6 million). Total customer numbers
continue to expand rapidly with 26,909 new customers added in the
first quarter, bringing the total to 755,894.
Also during the period, the Group acquired City Forex for GBP6
million in cash, completing the transaction in February. City Forex
has a substantial international payments and travel currency
business that is serviced through an innovative proprietary system
that processes both the Travel Currency and International Payments
businesses with a high degree of automation. The system will be
combined with FairFX's existing platform to yield further
efficiencies for the Group as well as increased capacity for
growth. The opportunities for revenue enhancement for the Group
from cross-selling FairFX products to City Forex customers are
considerable, particularly for the FairFX Corporate Expense
Platform. In addition, FairFX will utilise its existing
infrastructure and marketing methodology to engage with the City
Forex customer base.
Outlook
Based on the Q1 2018 performance, partnered with planned
enhancements to further boost revenues and operational efficiency,
myself and the Board remain confident that trading for the full
year remains in line with market expectations. We look forward to
delivering further growth and increased profitability in the coming
year and continuing to build shareholder value.
Ian Strafford - Taylor
Chief Executive Officer
22 April 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31
DECEMBER 2017
2017 2016
Note GBP GBP
Gross value of currency transactions
sold 3.4 936,593,130 798,300,641
Gross value of currency transactions
purchased 3.4 (923,028,865) (788,105,667)
Revenue on currency transactions 13,564,265 10,194,974
Banking revenue 1,896,470 -
-------------- --------------
Revenue 4 15,460,735 10,194,974
Direct costs (3,525,676) (2,725,788)
-------------- --------------
Gross profit 11,935,059 7,469,186
Administrative expenses (excluding
acquisition expenses) (11,435,841) (8,909,376)
Acquisition expenses (269,769) -
-------------- --------------
Profit / (loss) before tax 5 229,449 (1,440,190)
Tax credit 8 217,687 -
-------------- --------------
Profit / (loss) and total comprehensive
income for the year 447,136 (1,440,190)
============== ==============
Profit / (loss) per share
Basic 9 0.37 (1.49p)
Diluted 9 0.36 (1.49p)
============== ==============
All income and expenses arise from continuing operations. There
are no differences between the profit for the year and total
comprehensive income for the year, hence no Statement of Other
Comprehensive Income is presented.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
2017
Group Company
2017 2016 2017 2016
Note GBP GBP GBP GBP
ASSETS
Non-current assets
Property, plant and
equipment 10 137,580 75,258 - -
Intangible assets and
goodwill 11 17,649,128 - - -
Deferred tax asset 8 511,912 - - -
Investments 12 - - 29,455,134 11,243,460
------------- ------------- ------------ -----------
18,298,620 75,258 29,455,134 11,243,460
------------- ------------- ------------ -----------
Current assets
Inventories 13 199,747 229,905 - -
Trade and other receivables 14 3,779,768 3,001,402 13,212,504 -
Derivative financial
assets 18 303,775 223,884 - -
Cash and cash equivalents 15 51,950,729 8,523,985 - -
------------- ------------- ------------ -----------
56,234,019 11,979,176 13,212,504 -
------------- ------------- ------------ -----------
TOTAL ASSETS 74,532,639 12,054,434 42,667,638 11,243,460
============= ============= ============ ===========
EQUITY AND LIABILITIES
Equity attributable
to equity holders
Share capital 16 1,553,682 1,031,160 1,553,682 1,031,160
Share premium 35,858,770 10,174,273 35,858,770 10,174,273
Share based payment
reserve 1,144,832 668,422 781,383 668,422
Merger reserve 8,395,521 5,416,083 2,979,438 -
Contingent consideration
reserve 543,172 - 543,172 -
Retained deficit (12,450,546) (12,897,682) (1,123,092) (883,933)
------------- ------------- ------------ -----------
35,045,431 4,392,256 40,593,353 10,989,922
------------- ------------- ------------ -----------
Non-current liabilities
Deferred tax liability 8 673,661 - - -
------------- ------------- ------------ -----------
673,661 - - -
------------- ------------- ------------ -----------
Current liabilities
Trade and other payables 17 38,550,504 7,514,221 2,074,285 253,538
Deferred tax liability 8 117,838 - - -
Derivative financial
liabilities 18 145,205 147,957 - -
------------- ------------- ------------ -----------
38,813,547 7,662,178 2,074,285 253,538
------------- ------------- ------------ -----------
TOTAL EQUITY AND LIABILITIES 74,532,639 12,054,434 42,667,638 11,243,460
============= ============= ============ ===========
The financial statements were approved and authorised for issue
by the Board on 22 April 2018 and were signed on its behalf by:
I A I Strafford-Taylor
Director
Company Registration number: 08922461
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31
DECEMBER 2017
Group Share Share Share Retained Merger Contingent Total
capital premium based deficit reserve consideration
payment reserve
GBP GBP GBP GBP GBP GBP GBP
At 1 January
2016 768,660 5,313,780 667,421 (11,457,492) 5,416,083 - 708,452
Loss for
the year - - - (1,440,190) - - (1,440,190)
Shares issued
in year 262,500 4,860,493 - - - - 5,122,993
Share based
payment
charge (note
20) - - 1,001 - - - 1,001
---------- ----------- ---------- ------------- ---------- -------------- ------------
At 31 December
2016 1,031,160 10,174,273 668,422 (12,897,682) 5,416,083 - 4,392,256
Profit for
the year - - - 447,136 - - 447,136
Shares issued
in year 522,522 25,684,497 - - 2,979,438 - 29,186,457
Share based
payment
charge (note
20) - - 476,410 - - - 476,410
Equity based
acquisition
consideration - - - - - 543,172 543,172
---------- ----------- ---------- ------------- ---------- -------------- ------------
At 31 December
2017 1,553,682 35,858,770 1,144,832 (12,450,546) 8,395,521 543,172 35,045,431
========== =========== ========== ============= ========== ============== ============
Company Share Share Share Retained Merger Contingent Total
capital premium based deficit reserve consideration
payment reserve
GBP GBP GBP GBP GBP GBP GBP
At 1 January
2016 768,660 5,313,780 667,421 (883,933) - - 5,865,928
Loss for - - - - - - -
the year
Shares issued
in period 262,500 4,860,493 - - - - 5,122,993
Share based
payment
charge (note
20) - - 1,001 - - - 1,001
---------- ----------- ---------- ------------- ---------- -------------- ------------
At 31 December
2016 1,031,160 10,174,273 668,422 (883,933) - - 10,989,922
Loss for
the year - - - (239,159) - - (239,159)
Shares issued
in period 522,522 25,684,497 - - 2,979,438 - 29,186,457
Share based
payment
charge (note
20) - - 112,961 - - - 112,961
Equity based
acquisition
consideration - - - - - 543,172 543,172
--------------
At 31 December
2017 1,553,682 35,858,770 781,383 (1,123,092) 2,979,438 543,172 40,593,353
========== =========== ========== ============= ========== ============== ============
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 directly attributable costs.
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.
Contingent consideration Arising on equity based contingent consideration
reserve on acquisition of subsidiaries.
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.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER
2017
Group Note 2017 2016
GBP GBP
Profit / (loss) for the year 447,136 (1,440,190)
Cash flows from operating activities
Adjustments for:
Depreciation 51,727 53,423
Amortisation 221,117 -
Share based payment charge 112,961 1,001
(Increase) in trade and other receivables (697,755) (1,036,399)
(Increase) in derivative financial
assets (79,891) (108,173)
(Increase) in deferred tax asset (511,912) -
Increase in trade and other payables 31,254,467 3,050,296
Increase in deferred tax liabilities 791,499 -
(Decrease) in derivative financial
liabilities (2,752) (551,284)
(Increase) / decrease in inventories 38,031 (134,811)
------------- ------------
Net cash inflow / (outflow) from
operating activities 31,624,628 (166,137)
Cash flows from investing activities
Acquisition of property, plant
and equipment (83,266) (47,927)
Acquisition of intangibles (193,757) -
Acquisition of subsidiary, net (12,827,261) -
of cash acquired
Investment in subsidiary undertaking (1,255,748) -
------------- ------------
Net cash used in investing activities (14,360,032) (47,927)
Cash flows from financing activities
Proceeds from issuance of ordinary
shares 27,703,789 5,250,000
Costs directly attributable to
share issuance (1,541,641) (127,007)
------------- ------------
Net cash from financing activities 26,162,148 5,122,993
Net increase in cash and cash equivalents 43,426,744 4,908,929
Cash and cash equivalents at the
beginning of the year 8,523,985 3,615,056
------------- ------------
Cash and cash equivalents at end
of the year 15 51,950,729 8,523,985
============= ============
COMPANY STATEMENT OF CASH FLOWS FOR THE YEARED 31 DECEMBER
2017
Company
Note 2017 2016
GBP GBP
Loss for the period (239,159) -
Cash flows from operating activities
Adjustments for:
Share based payment charge 112,961 1,001
Decrease / (increase) in trade and
other receivables (13,212,504) 4,624,571
Increase in trade and other payables 2,615,276 234,038
------------- ------------
Net cash inflow / (outflow) from operating
activities (10,723,426) 4,859,610
Cash flows from investing activities
Acquisition of subsidiary, net of cash (12,827,261) -
acquired
Investment in subsidiary undertaking (2,611,461) (9,982,603)
------------- ------------
Net cash used in investing activities (15,438,722) (9,982,603)
Cash flows from financing activities
Proceeds from issuance of ordinary
shares 27,703,789 5,250,000
Costs directly attributable to share
issuance (1,541,641) (127,007)
------------- ------------
Net cash from financing activities 26,162,148 5,122,993
Net increase / (decrease) in cash and
cash equivalents - -
------------- ------------
Cash and cash equivalents at end of
the period - -
============= ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31
DECEMBER 2017
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.
These consolidated financial statements comprise the Company and
its subsidiaries (together referred to as the 'Group'). The Group
is primarily involved in providing foreign currency and banking
services via technology platforms offered on the internet.
The Company and Group's consolidated financial statements for
the year ended 31 December 2017 were authorised for issue on 22
April 2018 and the Company and Group's 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 2017.
Adoption of new and revised accounting standards and
interpretations:
* IAS 12 Recognition of Deferred Tax Assets for
Unrealised Losses (Amendments)
* IAS 7 Disclosure Initiative
The adoption of the new applicable standards has 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 Company or have no material effect on
the financial statements of the Group and Company.
A. IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue,
IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty
Programmes. It affects the timing of recognition of revenue items,
but not generally the overall amount recognised. The standard will
come into force with effect from the Group's financial statements
for the year ending 31 December 2018.
A preliminary review exercise has taken place and the Group has
concluded that the introduction of the new standard will not have a
material impact on its results or financial position.
B. IFRS 9 Financial Instruments
IFRS 9 Financial Instruments sets out requirements for
recognising and measuring financial assets, financial liabilities
and some contracts to buy or sell non-financial items. This
standard replaces IAS 39 Financial Instruments: Recognition and
Measurement. The standard will come into force with effect from the
Group's financial statements for the year ending 31 December
2018.
(i) Classification - Financial assets
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics. IFRS 9
contains three principal classification categories for financial
assets: measured at amortised cost, at fair value through other
comprehensive income (FVOCI), or at fair value through profit or
loss. The changes from the classification under IAS 39 are not
expected to be significant for the Group.
(ii) Impairment - Financial assets
IFRS 9 replaces the 'incurred loss' model in IAS 39 with a
forward-looking 'expected credit loss' (ECL) model. This will
require considerable judgement about how changes in economic
factors affect ECLs, which will be determined on a
probability-weighted basis.
The new impairment model will apply to financial assets measured
at amortised cost or FVOCI, except for investments in equity
instruments, and to contract assets. Under IFRS 9, loss allowances
will be measured on either of the following bases:
-- 12-month ECLs: these are ECLs that result from possible
default events within the 12 months after the reporting date;
and
-- lifetime ECLs: these are ECLs that result from all possible
default events over the expected life of a financial
instrument.
Lifetime ECL measurement applies if the credit risk of a
financial asset at the reporting date has increased significantly
since initial recognition and 12-month ECL measurement applies if
it has not.
An entity may determine that a financial asset's credit risk has
not increased significantly if the asset has low credit risk at the
reporting date. However, lifetime ECL measurement always applies
for trade receivables and contract assets without a significant
financing component.
Overall, the introduction of IFRS 9 is likely to result in
companies carrying a larger provision balance and recognising
losses earlier. However, the profit and loss effect is broadly one
of timing, with the same amount of provision per case ultimately
charged to profit.
The Group is in the process of assessing the impact of the new
standard and does not believe that its financial assets are at risk
of material impairment losses in the scope of the IFRS 9 impairment
model.
(iii) Classification - Financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification of financial liabilities.
However, under IAS 39 all fair value changes of liabilities
designated as at FVTPL are recognised in profit or loss, whereas
under IFRS 9 these fair value changes are generally presented as
follows:
-- the amount of change in the fair value that is attributable
to changes in the credit risk of the liability is presented in OCI;
and
-- the remaining amount of change in the fair value is presented in profit or loss.
The changes from the classification under IAS 39 are not
expected to be significant for the Group.
C. IFRS 16 Leases
IFRS 16 replaces existing leases guidance, including IAS 17
Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating
the Substance of Transactions Involving the Legal Form of a
Lease.
The standard is effective for annual periods beginning on or
after 1 January 2019. Early adoption is permitted for entities that
apply IFRS 15 at or before the date of initial application of IFRS
16.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. There
are recognition exemptions for short-term leases and leases of
low-value items. Lessor accounting remains similar to the current
standard - i.e. lessors continue to classify leases as finance or
operating leases.
The Group has not yet completed its assessment of the potential
impact on its consolidated financial statements. The actual impact
of applying IFRS 16 on the financial statements in the period of
initial application will depend on future economic conditions,
including the Group's borrowing rate at 1 January 2019, the
composition of the Group's lease portfolio at that date, the
Group's latest assessment of whether it will exercise any lease
renewal options and the extent to which the Group chooses to use
practical expedients and recognition exemptions.
So far, the most significant impact identified is that the Group
will recognise new assets and liabilities for its operating leases
on office buildings. In addition, the nature of expenses related to
those leases will now change as IFRS 16 replaces the straight-line
operating lease expense with a depreciation charge for right-of-use
assets and interest expense on lease liabilities.
D. Other standards
Effective
Dates *
IFRS 2 Classification and Measurement of Share-based 01 January
Payment Transactions (Amendments) 2018
IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 01 January
4 Insurance Contracts 2018
IAS 40 Transfers of Investment Property 01 January
2018
IFRIC 22 Foreign Currency Transactions and Advance 01 January
Consideration 2018
IFRIC 23 Uncertainty over Income Tax Treatments 01 January
2019
IFRS 9 Prepayment Features with Negative Compensation 01 January
2019
IAS 28 Long-term Interests in Associates and Joint 01 January
Ventures 2019
IFRS 17 Insurance Contracts 01 January
2021
* The effective dates stated above are those given in the
original IASB/IFRIC standards and interpretations. As the Group and
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 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 Company 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 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 and Group's presentational currency.
IFRS requires management to make certain accounting estimates
and to exercise judgement in the process of applying the Company
and Group's accounting policies. These estimates are based on the
Directors' best knowledge and past experience and are explained
further in note 3.25.
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.
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.
Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group. The
consideration transferred in the acquisition is generally measured
at fair value, as are the identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment. Any gain on
a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to
the issue of debt or equity securities.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the
date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not re-measured and settlement
is accounted for within equity. Otherwise, other contingent
consideration is re-measured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights. The acquisition date is the date on which control is
transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are
eliminated.
On publishing the 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
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 presentational
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 into the presentational currency at the exchange 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 Gross value of currency transactions sold and purchased
The gross value of currency transactions sold and purchased
represent the gross value of currency transactions undertaken with
customers by the Group, where the net is reported as Revenue. These
values are a non-GAAP measure and therefore disclosed as additional
information in the consolidated statement of comprehensive
income.
3.5 Income recognition
(i) Deliverable FX trades (international payments)
Revenue is recognised when a binding contract is entered into by
a client and the margin is fixed and determined. The revenue,
represented by the margin, is the difference between the rate
offered to clients and the rate the Group receives from its
liquidity providers.
(ii) Currency cards
There are two distinct revenue streams, FX card load orders and
transaction-based charges. Revenue on FX card load orders onto
non-GBP currency cards is recognised when a binding order is
entered into by a customer, the margin is fixed and determined and
the foreign currency has been loaded onto their currency card. The
revenue, represented by the margin, is the difference between the
rate offered to clients and the rate the Group receives from its
liquidity providers. The transaction-based charges are recognised
at the time the transaction is entered into by the customer and
deducted from the customer's account.
(iii) Banking operations
There are two distinct revenue streams, account residency
charges and transaction-based charges. The account residency charge
is due monthly and the revenue is recognised when the monthly
service has been provided and it is probable that payment will be
received. The transaction-based charges are recognised at the time
the transaction is entered into by the customer and deducted from
the customer's account.
For currency cards, international payments (fairpay and dealing)
and banking segments, the Group is acting as principal and as such,
customer cash is shown on the balance sheet, with a corresponding
liability to the customer. For the remaining segments, the Group is
acting in the capacity as an agent of a third party, and as such,
customer cash is not recognised on the face of the balance sheet.
Any cash held on behalf of customers is segregated from operational
cash and safeguarded in accordance with our regulatory
obligation.
3.6 Interest expense recognition
Interest expense is recognised as interest accrues, using the
effective interest method, on the net carrying amount of the
financial liability.
3.7 Pension Costs
The Group operates a defined contribution pension scheme and
outsources the administration of the pension scheme to a third
party. The Group contributes to the pension scheme in line with
Auto-enrolment obligations as defined in the Pensions Act 2008 and
passes on the employer and employee contributions to the pension
scheme administrator on a monthly basis. The employer contributions
are recognised as they occur through the payroll.
3.8 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
recognised 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.
3.9 Research and development
Research costs are expensed as incurred. Expenditure on IT
software and development is recognised as an intangible asset when
the Group 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.
3.10 Treatment of Research and Development Tax Credits
Research and development tax credits are treated as a government
grant as defined under IAS20 - Accounting for Government Grants and
Disclosure of Government Assistance. The tax credit claim is based
on research and development activity carried on by staff and so any
claim received is netted against administration expenses. The tax
credit is recognised on receipt of funds from the Government.
3.11 Taxation
The tax expense comprises current and deferred tax.
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 different 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 Intangible assets and goodwill
(i) Recognition and measurement
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses.
Development expenditure is capitalised only if the expenditure
can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable and
the Group intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it is
recognised in profit or loss as incurred. Subsequent to initial
recognition, development expenditure is measured at cost less
accumulated amortisation and any accumulated impairment losses.
Expenditure on research activities is recognised in profit or loss
as incurred.
Other intangible assets, including customer relationships,
patents and trademarks that are acquired by the Group and have
finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as
incurred.
(ii) Amortisation
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally
recognised in profit or loss. Goodwill is not amortised.
The estimated useful lives for current and comparative periods
are as follows:
Customer relationships 6 years
Brands 5 years
Trademarks, licences, patented and non-patented technology 3-10 years
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
3.14 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.
Any gain or loss on disposal of an item of property, plant and
equipment is recognised in profit or loss.
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 33-50%
Fixtures and fittings 20%
Leasehold improvements 10%
3.15 Investments in subsidiaries
Investment in subsidiary undertakings are stated at cost less
impairment in value.
3.16 Inventories
Inventories comprise of stock of prepaid currency cards not yet
distributed to customers. Inventories are valued at the lower of
cost and net realisable value. Cost is based on the first-in
first-out principle and includes expenditure incurred in acquiring
the inventories, production or conversion costs and other costs in
bringing them to their existing location and condition. There are
no currency amounts loaded on stock of prepaid currency cards.
3.17 Trade and other receivables
Trade receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
Trade receivables include monies receivable from customers
executing deliverable FX trades. 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 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.
3.18 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.
3.19 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.
3.20 Cash and cash equivalents
These include cash in hand and deposits held at call with banks.
Any cash held on behalf of customers is segregated from operational
cash and safeguarded in accordance with our regulatory
obligations.
3.21 Trade and other payables
These arise principally from monies held on behalf of customers
from banking operations and deliverable FX trades to be settled in
accordance with instructions from customers.
These are initially recognised at fair value and then carried at
amortised cost using the effective interest method.
3.22 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.
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.
3.23 Leases
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.
3.24 Impairment
Non-derivative financial assets
Financial assets not classified as at FVTPL, including an
interest in an equity-accounted investee, are assessed at each
reporting date to determine whether there is objective evidence of
impairment.
Objective evidence that financial assets are impaired
includes:
-- default or delinquency by a debtor;
-- restructuring of an amount due to the Group on terms that the
Group would not consider otherwise;
-- indications that a debtor or issuer will enter bankruptcy;
-- adverse changes in the payment status of borrowers or issuers;
-- the disappearance of an active market for a security because of financial difficulties; or
-- observable data indicating that there is a measurable
decrease in the expected cash flows from a Group of financial
assets.
Financial assets at amortised cost
The Group considers evidence of impairment for these assets at
both an individual asset and a collective level. All individually
significant assets are individually assessed for impairment. Those
found not to be impaired are then collectively assessed for any
impairment that has been incurred but not yet individually
identified. Assets that are not individually significant are
collectively assessed for impairment. Collective assessment is
carried out by grouping together assets with similar risk
characteristics.
In assessing collective impairment, the Group uses historical
information on the timing of recoveries and the amount of loss
incurred, and makes an adjustment if current economic and credit
conditions are such that the actual losses are likely to be greater
or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an
asset's carrying amount and the present value of the estimated
future cash flows discounted at the asset's original effective
interest rate. Losses are recognised in profit or loss and
reflected in an allowance account. When the Group considers that
there are no realistic prospects of recovery of the asset, the
relevant amounts are written off. If the amount of impairment loss
subsequently decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, then the
previously recognised impairment loss is reversed through profit or
loss.
Non-financial assets
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets (other than inventories and deferred
tax assets) to determine whether there is any indication of
impairment. If any such indication exists, then the asset's
recoverable amount is estimated. Goodwill is tested annually for
impairment.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or CGUs. Goodwill arising from a business combination
is allocated to CGUs or groups of CGUs that are expected to benefit
from the synergies of the combination. The recoverable amount of an
asset or CGU is the greater of its value in use and its fair value
less costs to sell. Value in use is based on the estimated future
cash flows, discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU. The
Group's CGU's for impairment testing are defined in note 11.
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount. Impairment losses are
recognised in profit or loss. They are allocated first to reduce
the carrying amount of any goodwill allocated to the CGU, and then
to reduce the carrying amounts of the other assets in the CGU on a
pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
3.25 Judgements and estimates
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 accounting estimates and assumptions
regarding the future that may have a risk of giving rise to a
material adjustment to the carrying values of assets and
liabilities within the next financial year. The judgements,
assumptions and estimates 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. The critical estimate is the
term of the share option to vest.
(ii) Measurement of fair values
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).
Measurement of fair values of derivative financial assets and
liabilities
The Group's accounting policies and disclosures require
measurement of fair values with regard to derivative financial
assets and liabilities. The fair value of forward exchange
contracts is determined using quoted forward exchange rates at the
reporting date.
Measurement of contingent consideration
Contingent consideration is measured at fair value using
probability weighted cash flows. The valuation model considers the
present value of the expected future payments. The expected payment
is determined by considering the possible scenarios, the amount to
be paid under each scenario and the probability of each
scenario.
The Directors also made the following judgments in the treatment
of contingent consideration:
-- That the contingent consideration in connection with
acquisitions is not linked with the continuing employment of the
employee shareholders of the acquirers and therefore not treated as
remuneration.
-- That the conditions for contingent consideration are not
linked and hence the contingent consideration is accounted for
within equity at completion and is not re-measured thereafter.
Measurement of fair values of subsidiaries acquired:
The valuation techniques used for measuring the fair value of
material assets acquired were as follows:
(a) E-money licence - Q-Money acquisition
The e-money licence was valued using the current cost to
recreate approach. This approach values an intangible asset at the
cost that would be incurred in re-creating the asset - either
though restoration (creating an identical asset) or replacement
(creating a similar asset).
The valuation method used an estimate of the cost of staff
members' time to prepare, submit and manage an authorisation
process, specialist regulatory consultancy costs, the cost of
external contractors and a minimum initial capital required by
Electronic Money Regulations 2011. The estimate was based on
management's experience.
(b) Banking platform and Brand names - Spectrum acquisition
The banking platform and brand names were valued using the
relief from royalty approach. The relief-from-royalty method
considers the discounted estimated royalty payments that are
expected to be avoided as a result of the patents or trademarks
being owned.
A royalty rate of 6.00% was used for the purpose of the
valuation of the banking platform. The discount factor applied in
the valuation of banking platform was 12.25%, comprising of the
weighted average cost of capital (WACC). The most sensitive factor
was the royalty rate used.
A royalty rate of 1.00% was used for the purpose of the
valuation of the brand names. The discount factor applied was
12.75% being the (WACC) together with a margin of 0.50%. The most
sensitive factor was the royalty rate used.
(c) Customer Relationships - Spectrum acquisition
Customer relationships were valued using a multi-period excess
earnings approach. The multi-period excess earnings method
considers the present value of net cash flows expected to be
generated by the customer relationships, by excluding any cash
flows related to contributory assets.
The life of the customer relationships was established through
estimated attrition rates. The attrition rates used in the
valuation of customer relationships were as follows:
-- Corporate customers 33%
-- Retail customers 31%
The contributory assets charges were calculated on the basis of
an aggregated rate of all contributory assets as an average
percentage of revenue over the financial projection period covering
the years ending 31 December 2017 to 2024.
The discount factor applied in the customer relationships
valuation was 13.25%, being the weighted average cost of capital
(WACC) together with a margin of 1.00%.
(d) Impairment of goodwill
The assumptions used in the impairment test for goodwill are
disclosed in note 11.
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, Banking and Central (which includes travel cash,
overheads and corporate costs). The revenue is wholly derived from
within the UK.
The banking segment was added in the current year to manage the
activity of the Q Money Limited (QML) and Spectrum Financial Group
Limited (SFG) businesses acquired in 2017.
The Group has changed its allocation of revenue between the
Central and Currency Cards segments in the year ended 31 December
2017 to more accurately reflect the segment to which the revenue
relates. For consistency, the prior year comparative balances have
been restated below. This restatement did not result in any impact
on the total prior year revenue or loss.
2017 Currency International Banking Central Total
Cards Payments
Group FairPay Dealing
GBP GBP GBP GBP GBP GBP
Segment revenue 8,124,165 786,828 4,321,612 1,896,470 331,660 15,460,735
Direct costs - - - (347,886) (3,177,790) (3,525,676)
Administrative
expenses - - - (1,346,062) (10,089,779) (11,435,841)
Acquisition costs - - - - (269,769) (269,769)
---------- -------- ----------- ------------ ------------- -------------
Profit / (loss)
before tax 8,124,165 786,828 4,321,612 202,522 (13,205,678) 229,449
========== ======== =========== ============ ============= =============
Total assets - - - - 74,532,639 74,532,639
Total liabilities - - - - (39,487,208) (39,487,208)
---------- -------- ----------- ------------ ------------- -------------
Total net assets - - - - 35,045,431 35,045,431
========== ======== =========== ============ ============= =============
2016 Currency International Banking Central Total
Cards Payments
Group FairPay Dealing
GBP GBP GBP GBP GBP GBP
Segment revenue 6,089,477 773,823 3,002,024 - 329,650 10,194,974
Direct costs - - - - (2,725,788) (2,725,788)
Administrative
expenses - - - - (8,909,376) (8,909,376)
Profit / (loss)
before tax 6,089,477 773,823 3,002,024 - (11,305,514) (1,440,190)
========== ======== =========== ======== ============= ============
Total assets - - - - 12,054,434 12,054,434
Total liabilities - - - - (7,662,178) (7,662,178)
---------- -------- ----------- -------- ------------- ------------
Total net assets - - - - 4,392,256 4,392,256
========== ======== =========== ======== ============= ============
5. Profit / (loss) before tax - Group
Profit / (loss) before tax is stated after 2017 2016
charging the following:-
GBP GBP
Operating lease - property 392,377 271,487
Depreciation of plant and equipment and fixtures
and fittings 51,727 53,423
Amortisation of intangibles 221,117 -
Net foreign currency differences 68,186 (119,507)
Research and development costs 1,265,388 902,643
Research and development tax credit (301,032) (220,020)
=========== ===========
Amounts charged by the Group's auditor are
as follows:-
2017 2016
GBP GBP
Audit fees:-
Fees payable for the audit of the annual report
and financial statements 70,000 40,000
Fees payable for the audit of subsidiaries 40,000 40,000
----------- -----------
Total audit fees 110,000 80,000
----------- -----------
Other services:-
Taxation services - -
Corporate finance services - -
Other assurance services - -
----------- -----------
Total non-audit fees - -
----------- -----------
Total Fees 110,000 80,000
=========== ===========
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:-
2017 2016
Headcount Headcount
Administrative staff 101 66
========== ==========
Employee costs
2017 2016
GBP GBP
Wages and salaries 5,354,654 3,587,934
Social security costs 567,279 417,660
Pension costs 23,028 10,008
---------- ----------
5,944,961 4,015,602
========== ==========
Further information regarding share options is given in note
20.
7. Directors' remuneration
2017 2016
GBP GBP
Emoluments 642,973 571,871
======== ========
The total amount payable to the highest paid director in respect
of emoluments was GBP482,586 (2016: GBP433,742)
The total amount payable to all Directors in the consolidated
Group was GBP1,302,782 (2016: GBP682,057).
There were pension payments of GBP773 (2016: GBP402) in the
year. Further information regarding share options is given in note
20.
8. Taxation
Group 2017 2016
GBP GBP
Current tax (credit) (27,179) -
---------- -----
Release of DTL acquired on business (42,046) -
combinations
Recognition of previously unrecognised (148,462) -
deductible temporary differences
---------- -----
Deferred tax (credit) (190,508) -
---------- -----
Total tax (credit) (217,687) -
========== =====
Factors affecting tax charge for the period
The charge for the year can be reconciled to the profit / (loss)
per the consolidated statement of comprehensive income as
follows:
2017 2016
GBP GBP
Profit / (loss) before taxation: Continuing
operations 229,449 (1,440,190)
========== ============
Taxation at the UK corporation rate tax of
19.25% (2016: 20%) 44,169 (288,038)
Capital allowances in arrears / (advance)
of depreciation - 672
Share based payments - 200
Net impact of R&D tax credit claim (188,376) 66,344
Expenses not deductible for tax purposes 47,986 8,447
Tax losses for which no deferred tax asset
utilised 6,211 212,375
Effect of tax at marginal rate (959) -
Deferred tax on equity settled share based (126,718) -
payments
---------- ------------
Total tax credit for the year (217,687) -
========== ============
Movement in deferred tax balances
Group Net Acquired Recognised Recognised Balance Deferred Deferred
balance in business to equity to profit at 31 tax tax
at 1 combination or loss December asset liability
January
2017 GBP GBP GBP GBP GBP GBP GBP
Intangibles - (833,545) - 42,046 (791,499) - (791,499)
Equity
settled
share
based
payments - - 363,450 148,462 511,912 511,912 -
----------- ------------- ----------- ----------- ---------- --------- -----------
Deferred
tax assets
(liabilities) - (833,545) 363,450 190,508 (279,587) 511,912 (791,499)
=========== ============= =========== =========== ========== ========= ===========
Group Net Acquired Recognised Recognised Balance Deferred Deferred
balance in business to equity to profit at 31 tax tax liability
at 1 combination or loss December asset
January
2016 GBP GBP GBP GBP GBP GBP GBP
Deferred - - - - - - -
tax assets
(liabilities)
========= ============= =========== =========== ========== ========= ===============
Group 2017 2016
GBP GBP
Non-current deferred tax asset 511,912 -
======== =====
Current deferred tax liability (117,838) -
Non-current deferred tax liability (673,661) -
----------
Total deferred tax liability (791,499) -
==========
Based on the valuation of acquisition intangibles and enacted UK
corporation tax rates, the Group has acquired deferred tax
liabilities of GBP833,545 in relation to its acquisition of
Spectrum Financial Group Limited and Q Money Limited (note 12). The
deferred tax will be released to the income statement as the
underlying intangible assets are amortised or otherwise recognised
via impairment in profit or loss. The deferred tax liability
released to the income statement in the year was GBP42,046. Future
changes in the standard rate of corporation tax have been reflected
in the carrying value of the deferred tax liability.
During the year, the Group recognised a GBP511,912 deferred tax
asset in relation to unexercised share options. Of this amount
GBP148,463 was recognised in the current year's tax expense and
GBP363,449 was recognised to equity.
The Group has estimated losses of GBP9,271,636 (2016:
GBP9,126,793) available for carry forward against future trading
profits. 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. The Group has an unrecognised
deferred tax asset of GBP1,761,611 (2016: GBP1,825,359) 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.
During the year ended 31 December 2015, the Government announced
provisions further reducing the rate of corporation tax to 19.0%
with effect from 1 April 2017 and to 18.0% from 1 April 2020 which
were substantially enacted during the year. The tax rate applying
from 1 April 2020 was further reduced to 17% during the year.
Therefore the standard rate of corporation tax applicable to the
Group for the year ended 31 December 2017 was 19.25%. The rate in
the years ending 31 December 2018 and 31 December 2019 are expected
to be 19.0%, the rate in the year ending 31 December 2020 is
expected to be 17.5% and the rate in subsequent years is expected
to be 17.0%.
9. Profit / loss per share
Basic profit / loss per share
The calculation of basic profit or loss per share has been based
on the profit or loss attributable to ordinary shareholders and
weighted average number of ordinary shares outstanding. The profit
after tax attributable to ordinary shareholders is GBP447,136
(2016: GBP1,440,190 loss) and the weighted average number of shares
in issue for the period is 121,876,571 (2016: 96,732,842).
Diluted profit / loss per share
The calculation of diluted earnings per share has been based on
the profit or 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 profit after tax attributable to ordinary shareholders
is GBP447,136 (2016: GBP1,440,190 loss) and the weighted average
number of shares is 124,855,331 (2016: 96,732,842).
10. Property, plant and equipment
Group Plant and Fixtures Leasehold Total
machinery and fittings improvements
GBP GBP GBP GBP
Cost
At 1 January 2017 282,034 16,721 39,651 338,406
Additions 77,105 6,161 - 83,266
Acquisitions through
business combinations 27,021 3,762 - 30,783
----------- -------------- -------------- --------
At 31 December 2017 386,160 26,644 39,651 452,455
----------- -------------- -------------- --------
Depreciation
At 1 January 2017 239,867 11,457 11,824 263,148
Charge for the year 45,039 2,723 3,965 51,727
----------- -------------- -------------- --------
At 31 December 2017 284,906 14,180 15,789 314,875
----------- -------------- -------------- --------
Net book value
At 31 December 2017 101,254 12,464 23,862 137,580
=========== ============== ============== ========
At 31 December 2016 42,167 5,264 27,827 75,258
=========== ============== ============== ========
11. Intangible assets and goodwill
Group Trademarks,
licences,
patented Under
and non-patented Customer construc-
Goodwill technology relationships Brands tion Total
GBP GBP GBP GBP GBP GBP
Cost
At 1 January - - - - - -
2017
Additions - 50,000 - - 143,757 193,757
Acquisitions
through business
combinations 12,962,509 2,626,979 1,794,000 293,000 - 17,676,488
----------- ------------------ --------------- -------- ------------ -----------
At 31 December
2017 12,962,509 2,676,979 1,794,000 293,000 143,757 17,870,245
----------- ------------------ --------------- -------- ------------ -----------
Amortisation
At 1 January - - - - - -
2017
Charge for the
year - 101,917 99,667 19,533 - 221,117
----------- ------------------ --------------- -------- ------------ -----------
At 31 December
2017 - 101,917 99,667 19,533 - 221,117
----------- ------------------ --------------- -------- ------------ -----------
Net book value
At 31 December
2017 12,962,508 2,575,062 1,694,333 273,467 143,757 17,649,128
=========== ================== =============== ======== ============ ===========
At 31 December - - - - - -
2016
=========== ================== =============== ======== ============ ===========
The intangibles under construction balance consists of costs
incurred on software development projects that were not completed
before the end of the reporting period.
Goodwill
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs) that are expected
to benefit from that business combination.
Goodwill was acquired as part of the Q Money Limited (QML) and
Spectrum Financial Group Limited (SFG) acquisitions in 2017.
Following the respective acquisitions, the businesses of QML and
SFG have operated as a single business. Accordingly, they have been
treated as a single "banking CGU" for the purpose of impairment
testing. This represent the lowest level at which goodwill is
monitored for internal management purposes. The Group tests
goodwill annually for impairment or more frequently if there are
indications that goodwill might be impaired.
The recoverable amount of the banking CGU is determined as the
higher of fair value less cost of disposal and value in use. The
key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and expected changes to
collections and direct costs during the forecast period.
Management estimates discount rates using pre-tax rate that
reflects the current market assessment of the time value of money
and the specific risks associated with the asset for which the
future cash flow estimates have not been adjusted. The rate used to
discount the forecast cash flows for the banking CGU's are based
upon the CGU's weighted average cost of capital ("WACC") of
15.64%.
The Group prepared cash flow forecasts derived from the most
recent detailed financial budgets approved by management for the
next six years. For the purpose of the value in use calculation the
management forecasts were extrapolated into perpetuity using a
growth rate of 2.2%, representing the expected long-run rate of
inflation in the UK. The forecasts assume growth rates in
acquisitions which in turn drive the forecast collections and cost
figures. The Group used budgets for the next six years (rather than
five) as they believe the expected long-run rate of inflation in
the UK does not reflect the expected growth rate.
The Group has conducted a sensitivity analysis on the impairment
test of the CGU's carrying value. Based on the value in use a
reduction of revenue each year of 25.6% would result in an
impairment at 31 December 2017. An increase in the WACC to greater
than 20% would result in an impairment at 31 December 2017. Based
on the sensitivity analyses, the Group has determined that there
are no reasonably possible changes to the key assumptions which
would result in the carrying value of the CGU exceeding its
carrying value at 31 December 2017.
12. Investments
Company - Shares in subsidiary undertakings 2017 2016
GBP GBP
Cost 11,243,460 1,260,857
Additions 18,211,674 9,982,603
----------- -----------
At 31 December 29,455,134 11,243,460
----------- -----------
Provisions for diminution in value
At 31 December - -
----------- -----------
Net Book Value
At 31 December 29,455,134 11,243,460
=========== ===========
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 Dormant
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
Fair Foreign Exchange Ireland Ordinary 100 Dormant
Ireland Limited *
Q Money Limited England and Wales Ordinary 100 Trading
Q Technology Limited* England and Wales Ordinary 100 Dormant
Q Money One Limited* England and Wales Ordinary 100 Trading
Spectrum Financial Group England and Wales Ordinary 100 Trading
Limited
Spectrum Card Services England and Wales Ordinary 100 Trading
Limited*
Spectrum Payment Services England and Wales Ordinary 100 Trading
Limited*
Red 88 Limited Co* England and Wales Ordinary 100 Dormant
* Share capital held indirectly
The registered office address of all subsidiary undertakings is
3rd Floor Thames House, Vintners' Place, 68 Upper Thames Street,
London, EC4V 3BJ, England.
Acquisition of subsidiaries
See accounting policy in note 3.2.
(i) Q Money Limited ("Q Money Group")
On 19 January 2017, the Group acquired the entire ordinary share
capital of Q Money Limited. Q Money Limited has two wholly owned
subsidiaries (Q Money One Limited and Q Technology Limited).
Acquiring the Q Money Group and its E-money licence allows the
Group to launch a card via a MasterCard Prepaid Issuing Licence and
to enhance the Group's payment infrastructure through direct
membership of other payment networks. Q Money gained a Mastercard
Issuing Licence in December 2017 and so, where appropriate, Group
prepaid card programmes will be bought in-house to deliver
significant cost savings.
The initial consideration payable for the acquisition was
GBP425,000, satisfied by GBP110,000 payable from existing cash and
by the issue of 724,136 new ordinary shares of 1p each in the
Company (the "Initial Consideration Shares") at an issue price of
43.5p. Further contingent consideration of up to GBP825,000 is
subject to the achievement of certain performance milestones, and
will be satisfied by the issue of new ordinary shares of 1p each in
the Company at an issue price of 43.5p (fixed market share price at
acquisition date). Should the share price increase, actual
consideration paid would increase.
In order to ensure that the contingent consideration was
measured at fair value, adjustments in relation to probability
factors and time value of money were made as appropriate. The
contingent consideration performance milestones are split into
three tranches. The probability used to fair value trance one and
two of GBP250,000 each was 50% in 12 months, 20% in 18 months and
30% not payable at all. The probability used to fair value tranche
three of GBP325,000 was 50% in 30 months, 20% in 36 months and 30%
not payable at all. The fair value of all the tranches was
determined by discounting the consideration by an after tax cost of
debt of 3.62%. The fair value of contingent consideration
recognised was GBP543,172, which was made up of GBP168,036 for both
tranche one and two and GBP207,100 for tranche three.
For the period post acquisition to 31 December 2017, Q Money
Group incurred a loss after tax of GBP20,522. This loss includes a
GBP11,109 charge for intercompany loan interest payable to the
parent Company, which eliminates on Group consolidation. If the
acquisition occurred on the 1 January 2017, the loss after tax
contributed to the Group would have been GBP18,975.
The acquisition date fair value of consideration transferred was
calculated as follows:
GBP
Cash 110,000
Share consideration 314,999
Contingent consideration 543,172
--------
Total consideration transferred 968,171
========
The recognised amounts of assets acquired and liabilities
assumed at the date of acquisition were as follows:
GBP
E-money licence 233,000
Cash 335
Trade and other receivables 350,000
Trade and other payables (354,079)
Deferred tax liabilities (41,105)
----------
Total identifiable new assets acquired 188,151
==========
The valuation techniques used for measuring the fair value of
the E-money licence are covered in note 3.25(ii)(a). Based on the
valuation of the E-money licence and enacted UK corporation tax
rates a deferred tax liability of GBP41,105 was recognised as a
result of the identified intangible asset.
Goodwill arising from the acquisition has been recognised as
follows.
GBP
Consideration transferred 968,171
Fair value of identifiable net assets 188,151
--------
Goodwill 780,020
========
Goodwill comprises the value of expected synergies arising from
the acquisition and additional value attributed by the acquirer in
relation to the future expected cash flows, which is not separately
recognised. None of the goodwill recognised is expected to be
deductible for income tax purposes.
(ii) Spectrum Financial Group Limited ("CardOne Banking")
On 25 August 2017, the Group acquired the entire ordinary share
capital of Spectrum Financial Group Limited. Spectrum Financial
Group Limited has three wholly owned subsidiaries (Spectrum Card
Services Limited, Spectrum Payment Services Limited and Red 88
Limited).
Acquiring CardOne Banking provided the Group with access to key
components of digital banking technology and payment infrastructure
connectivity allowing the Group to fast track its push into
offering digital banking services to the small to medium sized
enterprise market. In addition, with the acquisition, the Group
will be able to achieve greater scale and turnover, buyer-specific
synergies and cross selling opportunities.
The initial consideration payable for the Acquisition was
GBP15,000,000, satisfied by GBP12,817,501 payable in cash (raised
during the 24 August 2017 share issue) and by the issue of
3,762,930 new ordinary shares of 1p each in the Company (the
"Initial Consideration Shares") at an issue price of 58p (fixed
market share price at start of the share capital raise), equating
to GBP2,182,499. As per the Companies Act 2006, section 612, for
any shares issued as part of an acquisition merger relief is
obtained with the difference between the market price of the shares
and the nominal value of the shares taken to a merger reserve. The
market price for the Group's shares on the date of acquisition was
72p resulting in the Group recording additional share consideration
of GBP526,810. Further consideration after working capital
adjustments of GBP1,602,730 was paid in cash on the 10 November
2017 using the acquired cash available in CardOne Banking.
For the period post acquisition to 31 December 2017, CardOne
Banking contributed revenue of GBP1,896,470 and profit after tax of
GBP250,223 to the Group's results. If the acquisition occurred on
the 1 January 2017 revenue of GBP5,415,114 and profit after tax of
GBP725,872 would have been contributed to the Group's results.
The acquisition date fair value of consideration transferred was
calculated as follows:
GBP
Cash 12,817,501
Share consideration 2,709,310
Further cash consideration 1,602,730
-----------
Total consideration transferred 17,129,541
===========
The recognised values of assets acquired and liabilities assumed
at the date of acquisition were as follows:
GBP
Intangibles 4,480,979
Property, plant and equipment 30,783
Inventories 7,873
Trade and other receivables 80,610
Cash 1,702,635
Trade and other payables (563,388)
Deferred tax liability (792,440)
----------
Total identifiable new assets acquired 4,947,052
==========
The valuation techniques used for measuring the fair value of
the intangibles are covered in note 3.25(ii). Based on the
valuation of the intangibles and enacted UK corporation tax rates a
deferred tax liability of GBP792,440 was recognised as a result of
the identified intangible asset.
Goodwill arising from the acquisition has been recognised as
follows.
GBP
Consideration transferred 17,129,540
Fair value of identifiable net assets 4,947,052
-----------
Goodwill 12,182,489
===========
Goodwill comprises the value of expected synergies arising from
the acquisition and additional value attributed by the acquirer in
relation to the future expected cash flows, which is not separately
recognised. None of the goodwill recognised is expected to be
deductible for income tax purposes.
13. Inventories
Group 2017 2016
GBP GBP
Finished goods 199,747 229,905
======== ========
The Group's inventories comprise stock of cards.
14. Trade and other receivables
Group Company
2017 2016 2017 2016
GBP GBP GBP GBP
Trade receivables 2,419,594 1,922,977 - -
Amounts due from Group undertakings - - 13,212,504 -
Other receivables 515,063 768,285 - -
Prepayments and accrued income 845,111 310,140 - -
---------- ---------- ----------- -----
3,779,768 3,001,402 13,212,504 -
========== ========== =========== =====
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.
15. Cash and cash equivalents
Group 2017 2016
GBP GBP
Cash at bank 51,950,729 8,523,985
=========== ==========
Included in cash and cash equivalents at 31 December 2017 was
GBP34,147,666 of customer funds (2016: GBP5,022,092).
16. Share capital
2017 2016
Group and Company
GBP GBP
Authorised, issued and fully
paid up capital
155,368,259 ordinary shares
of GBP0.01 each 1,553,682 1,031,160
========== ==========
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 Costs
No Shares per of shares of shares of share Merger
Date of Issue Issued share issued issued issue Reserve Share Premium
19(th) January 724,136 GBP0.435 GBP314,999 GBP7,241 - GBP307,758 -
2017
24(th) August 47,765,154 GBP0.580 GBP27,703,789 GBP477,652 GBP1,541,641 - GBP25,684,497
2017
24(th) August 3,762,930 GBP0.720 GBP2,709,310 GBP37,629 - GBP2,671,680 -
2017
----------- -------------- ----------- ------------- ------------- --------------
Total 52,252,220 GBP30,728,098 GBP522,522 GBP1,541,641 GBP2,979,438 GBP25,684,497
=========== ============== =========== ============= ============= ==============
All of the shares issued on the 19th January 2017 were issued as
consideration for Q Money Limited (note 12(i)). Of the shares
issued on 24th August 2017, 3,762,930 shares were issued as
consideration for Spectrum Financial Group Limited (note 12(ii)).
The remainder of shares were issues in cash.
As per the Companies Act 2006, section 612, for any shares
issued as part of an acquisition merger relief is obtained with the
difference between the market price of the shares and the nominal
value of the shares taken to a merger reserve. The market price for
the Group's shares on the date of acquisition was 72p resulting in
the Group recording additional share consideration of GBP526,810.
This amount was recognised in the movements in merger reserves in
equity.
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.
17. Trade and other payables
Group Company
2017 2016 2017 2016
GBP GBP GBP GBP
Trade payables 36,988,512 6,803,255 - -
Amounts owing to Group undertakings - - 2,074,285 234,038
Taxation and social security 383,446 130,368 - -
Accruals and deferred income 1,178,546 580,598 - 19,500
----------- ---------- ------------ --------
38,550,504 7,514,221 2,074,285 253,538
=========== ========== ============ ========
Group Company
2017 2016 2017 2016
GBP GBP GBP GBP
Current 38,550,504 7,514,221 2,074,285 253,538
=========== ========== ========== ========
18. Derivative financial assets and financial liabilities
18.1 Derivative financial assets
Fair Value Notional Fair Notional
Principal Value Principal
Group 2017 2017 2016 2016
GBP GBP GBP GBP
Foreign exchange forward
contracts 303,775 21,530,930 223,884 10,238,079
----------- ----------- -------- -----------
Total financial instruments
at fair value 303,775 21,530,930 223,884 10,238,079
=========== =========== ======== ===========
18.2 Derivative financial liabilities
Financial liabilities at fair value through profit or loss
Fair Value Notional Fair Value Notional
Principal Principal
Group 2017 2017 2016 2016
GBP GBP GBP GBP
Foreign exchange forward
contracts 145,205 21,366,917 147,957 10,169,959
----------- ----------- ----------- -----------
Total financial instruments
at fair value 145,205 21,366,917 147,957 10,169,959
=========== =========== =========== ===========
19. Financial instruments
The Group's financial instruments comprise cash, foreign
exchange forward contracts 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. The Group does not deal in any
financial instrument contracts for its own benefit. 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:
Group 2017 2016
GBP GBP
Financial instruments held at amortised
cost
Cash and cash equivalents 51,950,729 8,523,985
Trade and other payables (38,550,504) (7,514,221)
Trade and other receivables 3,779,768 3,001,402
============= ============
2017 2016
GBP GBP
Financial instruments held at fair value
through profit or loss
Derivative financial assets - Forward
foreign exchange contracts 303,775 223,884
Derivative financial liabilities - Forward
foreign exchange contracts (145,205) (147,957)
============= ============
Trade and other payables generally have a maturity of less than
one month.
Forward foreign exchange contracts fall into level 2 of the fair
value hierarchy as set out in note 3.25(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 2017.
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:
2017 Current Between Between Over Individually Total
and not 1 and 3 and 1 year impaired
impaired 3 months 12 months
Group GBP GBP GBP GBP GBP GBP
Trade and other
receivables 3,779,768 - - - - 3,779,768
Derivative financial
assets 123,055 56,692 124,028 - - 303,775
---------- ---------- ----------- -------- ------------- ----------
2016 Current Between Between Over Individually Total
and not 1 and 3 and 1 year impaired
impaired 3 months 12 months
Group GBP GBP GBP GBP GBP GBP
Trade and other
receivables 3,001,402 - - - - 3,001,402
Derivative financial
assets 223,884 - - - - 223,884
---------- ---------- ----------- -------- ------------- ----------
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.
The table below analyses the Group's gross undiscounted
financial liabilities by their contractual maturity date.
2017 On demand Between Between Over Total
and within 1 and 3 and 1 year
1 month 3 months 12 months
GBP GBP GBP GBP GBP
Trade and other
payables 38,550,504 - - - 38,550,504
Derivative financial
liabilities 76,330 22,178 46,697 - 145,205
------------- ---------- ----------- -------- -------------
2016 On demand Between Between Over
and within 1 and 3 and 1 year
1 month 3 months 12 months Total
GBP GBP GBP GBP GBP
Trade and other
payables 7,514,221 - - - 7,514,221
Derivative financial
liabilities 18,959 57,292 71,706 - 147,957
------------- ---------- ----------- -------- -------------
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.. The Group has no of
borrowings so 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 liabilities. The largest
currency liabilities are created on entering into forward foreign
currency transactions.
As at 31 December 2017, the Group is not sensitive to movements
in the strength of Sterling as no material foreign currency
balances are held (2016: GBPnil).
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 2017 Loans and Other financial Total
Receivables liabilities
GBP GBP GBP
Financial assets not measured
at fair value
Cash and cash equivalents 51,950,729 - 51,950,729
Trade and other receivables 3,779,768 - 3,779,768
55,730,497 - 55,730,497
------------- ---------------- -----------
Financial liabilities not
measured at fair value
Trade and other payables - 38,550,504 38,550,504
------------- ---------------- -----------
- 38,550,504 38,550,504
------------- ---------------- -----------
31 December 2016 Loans and Other Financial Total
Receivables Liabilities
GBP GBP GBP
Financial assets not measured
at fair value
Cash and cash equivalents 8,523,985 - 8,523,985
Trade and other receivables 3,001,402 - 3,001,402
11,525,387 - 11,525,387
------------- ---------------- -----------
Financial liabilities not
measured at fair value
Trade and other payables - 7,514,221 7,514,221
- 7,514,221 7,514,221
------------- ---------------- -----------
All financial instruments are classified as level 3 financial
instruments in the fair value hierarchy, with the exception of
Derivative financial assets and liabilities 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.
FairFX PLC, a wholly owned subsidiary, is subject to the
following externally imposed capital requirements:
- 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.
Other than below, since its incorporation, the parent Company
has complied with these requirements.
On 24th June 2016, FairFX notified the FCA pursuant to its duty
under Regulation 32(1)(a)(i) of the Payment Services Regulations
2009 ("PSRs") that it had been in breach of the FCA's capital
requirements under Regulation 18(1) of the PSRs for the period from
August 2014 to 23rd June 2016. The breach arose as the net proceeds
from share issues by FairFX Group plc were used to make intra-group
loans to FairFX Plc. FairFX Plc became aware in June 2016 that its
understanding that capital held by FairFX Group plc could properly
be included in its calculation of "own funds" for those purposes,
was open to question. Viewed on a consolidated basis (as FairFX Plc
then believed it was entitled to do), there would have been ample
capital within the Group to meet FairFX Plc's capital requirements.
FairFX Plc and FairFX Group plc have taken prompt steps to
capitalise inter-company loans from FairFX Group plc to FairFX Plc
in the amount of GBP9,982,603, with effect from 23rd June 2016 to
remedy the breach and as a result has substantial surplus capital
above the FCA's capital requirement.
20. 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 2017, there were a number of
share based payment transactions within the Group.
These movements are disclosed within the tables below:
At Granted Exercised Lapsed during At
1 January during year during year year 31 December
2017 2017
Date Exercise Number Number Number Number Number
Granted price
(GBP)
22/07/2014 0.07 200,000 - - - 200,000
22/07/2014 0.22 447,750 - - - 447,750
22/07/2014 0.36 4,113,939 - - (50,000) 4,063,939
22/07/2014 0.58 120,000 - - - 120,000
22/07/2014 1.16 120,000 - - - 120,000
22/07/2014 1.74 120,000 - - - 120,000
28/09/2016 0.30 461,111 - - - 461,111
28/09/2016 0.30 461,111 - - - 461,111
28/09/2016 0.30 461,111 - - - 461,111
01/12/2016 0.27 100,000 - - - 100,000
01/12/2016 0.27 100,000 - - - 100,000
01/12/2016 0.27 100,000 - - - 100,000
18/01/2017 0.44 - 16,667 - - 16,667
18/01/2017 0.44 - 16,667 - - 16,667
18/01/2017 0.44 - 16,667 - - 16,667
Total number
of options 6,805,022 50,001 0 (50,000) 6,805,023
=========== ============= ============= ============== =============
The above share options issued in FairFX Plc have been granted
to both Directors and employees of the Group. At 31 December 2017,
there were unexercised share options amounting to 4.38% (2016:
6.60%) of the Company's total issued shares. Of the above options
5,150,222 (2016: 5,150,222) have been granted to Directors of the
Company, with an additional 1,504,800 (2016: 904,800) having been
granted to an individual who is director of a wholly owned
subsidiary within the Group.
The fair values of share options are calculated using a
Black-Scholes model. The fair value of a share award is based on
the share price at the date of the grant. Details of the inputs
made into that model are disclosed in the table below.
At
1 January Granted
2017 during year
Weighted average share
price (GBP) 0.39 0.62
Weighted average exercise
price (GBP) variable variable a
Expected volatility 36.4% 38.6% b
Expected option life
in years 5.3 9.1
Risk-free
rate 0.10% 0.10%
Expected dividends none none
Fair value of the options
granted (GBP) variable 0.20 c
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. No shares were exercised in
the year ending 31 December 2017.
b. Expected volatility has been determined on the share price
from date of admission up to 31 December in the year the options
were granted.
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)
22/07/2014 0.07 0.28
22/07/2014 0.22 0.20
22/07/2014 0.36 0.12
22/07/2014 0.58 -
22/07/2014 1.16 -
22/07/2014 1.74 -
28/09/2016 0.30 0.13
01/12/2016 0.27 0.11
18/01/2017 0.44 0.20
The total fair value of the options is GBP781,383 (2016:
GBP668,422). The charge expensed to the statement of comprehensive
income is GBP112,961 (2016: GBP1,001). During the year the Group
recognised a GBP511,912 deferred tax asset in relation to
unexercised share options. Of this amount GBP148,463 was recognised
in the current year's tax expense and GBP363,449 was recognised to
equity.
21. Financial commitments
As at 31 December 2017 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
2017 2016
GBP GBP
Not later than one year 341,597 290,760
Later than one year and not later than
five years 1,312,297 1,414,768
---------- ----------
1,653,894 1,705,528
========== ==========
The Group signed a lease on its London office premises on 13th
November 2016 at an annual rental of GBP290,760 (value added tax
(VAT) inclusive). The lease runs until 12th November 2022.
The Group's lease on its Chester office premises expires on 17th
April 2018. The Group is in the closing stages of negotiating a new
lease agreement to include a larger area of the existing premises.
The lease is expected to take effect from 18 April 2018 at an
annual VAT inclusive rental of GBP64,068 increasing to GBP76,882 in
the second year and GBP89,695 in the third year. The lease is
expected to run until 17 April 2021.
22. Related party transactions
Key management personnel
Key management who are responsible for controlling and directing
the activities of the Group comprise the executive Directors, the
Non-Executive Directors and senior management.
The key management compensation is as follows:-
2017 2016
GBP GBP
Salaries, fees and other short-term employee
benefits 1,177,629 902,939
========== ========
A former Q Money Limited and a former Spectrum Financial Group
Limited shareholder joined the key management personnel when those
businesses were respectively acquired.
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 2017.
23. Ultimate controlling party
Since 25 August 2017 no party has held a controlling interest in
FairFX Group Plc and as such the Directors consider FairFX Group
Plc to be the ultimate controlling party.
24. Post balance sheet events
On 20th February 2018, the Group acquired the entire ordinary
share capital of City Forex Limited. The initial consideration
payable for the acquisition was GBP5,250,000, paid from existing
cash. Further consideration of up to GBP750,000, payable from
existing cash may be payable on 31 October 2018 subject to any
completion accounts adjustment being applied and any claims under
the warranties and indemnities.
The initial accounting for the business combination is
incomplete and as such the Group has not disclosed the fair value
of consideration transferred, the fair value of assets acquired and
liabilities assumed or the goodwill arising from the acquisition.
The valuation techniques used for measuring the fair value of
material assets acquired are yet to be determined.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEUESEFASEIL
(END) Dow Jones Newswires
April 23, 2018 02:00 ET (06:00 GMT)
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