REG - Aquis Exchange PLC - Final Results
30/03/2023 07:00
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RNS Number : 6998U Aquis Exchange PLC 30 March 2023
30 March 2023
Aquis Exchange PLC
("Aquis", the "Company" or the "Group")
Final results for the year ended 31 December 2022
24% increase in net revenue marks continuation along growth trajectory
Aquis Exchange PLC (AQX.L), the creator and facilitator of next-generation
financial markets, is pleased to announce its audited results for the year
ended 31 December 2022.
Financial highlights:
· Net revenue up 24% to £20.1m (FY21: £16.2m)
· Profit before tax up 27% to £4.5m (FY21: £3.6m)
· Underlying profit* up 41% to £4.7m (FY21: £3.3m)
· Basic EPS of 17p (FY21: 17p)
· Cash and cash equivalents at 31 December £14.2m (31 December 2021: £14.0m),
with no debt held
Business highlights:
· Launch of Aquis Matching Pool (AMP) further diversified the Aquis Markets
offering into dark pools, offsetting a decrease in lit volumes across the
market
· Membership of Aquis Markets grew to 41 (FY21: 38)
· Increasing levels of interest in Aquis Technologies' pioneering exchange
technology, with the offering expanding to include a 24/7 Matching Engine. In
2022, Aquis Technologies extended one contract and secured two new contracts,
bringing the total to seven
· Despite adverse market conditions, Aquis Stock Exchange delivered an
impressive 22 new IPOs in 2022: the most of any growth company exchange in the
UK
Post-period highlights:
· Encouraging start to current trading, with the Company's trading in line with
expectations, notwithstanding continued macroeconomic uncertainty
· Successfully completed a Company rebrand in Q1 23, updated to reflect the
diversification across three business units and four revenue streams
*Underlying profit refers to profit before tax plus other comprehensive
income. This measure has been calculated in order to make appropriate
comparison with FY21, taking into account an adjustment made for FX arising on
consolidation since the publication of FY21's ARA.
Alasdair Haynes, Chief Executive Officer of Aquis, commented:
"I am very pleased to be reporting another year of significant growth for
Aquis, with net revenue up 24% and underlying profit increased by 41% from
FY21. The Group profited from significant growth in the technologies division,
along with strong performances in pan-European secondary market trading, the
primary market activities of Aquis Stock Exchange and data revenue.
From the fledgling pan-European secondary market equities trading platform
that we launched a decade ago, it is edifying to see Aquis transform into a
profitable and growing Group that creates and facilitates next-generation
financial markets. In 2022, we saw milestones reached in each division with
the launch and growth of the Aquis Matching Pool (AMP); significant interest
in Aquis Technologies' pioneering exchange technology and particularly its
cloud-native and 24/7 functionality, and an impressive 22 new listings on the
Aquis Stock Exchange - the most of any growth exchange in the UK.
Amidst changing market dynamics in the UK and abroad, there are significant
opportunities for Aquis across all divisions, and we are looking forward to
continuing our growth strategy. Trading so far has been in line with market
expectations."
An overview of the results from Alasdair Haynes, CEO, is available to view on
this link: https://bit.ly/3lRH3DG (https://bit.ly/3lRH3DG)
The Group will be hosting webinars for analysts and retail investors today at
09.30 and 16.00 respectively.
If you would like to register for the analyst webinar, please
contact aquis@almapr.co.uk (mailto:aquis@almapr.co.uk) . Investors who would
like to attend the retail investor webinar can sign up to Investor Meet
Company for free and add themselves to the meeting
via https://www.investormeetcompany.com/aquis-exchange-plc/register-investor
(https://www.investormeetcompany.com/aquis-exchange-plc/register-investor) .
Investors who have already registered will be automatically invited.
Enquiries:
Aquis Exchange PLC Tel: +44 (0) 20 3597 6321
Alasdair Haynes, CEO
Richard Fisher, CFO
Adele Gilbert, Head of Marketing
VSA Capital Limited (AQSE Corporate Adviser) Tel: +44(0)20 3005 5000
Andrew Raca
Liberum Capital Limited (Nominated Adviser and Joint Broker) Tel: +44 (0) 20 3100 2000
Chris Clarke
Clayton Bush
Edward Thomas
Kane Collings
Canaccord Genuity Limited (Joint Broker) Tel: +44 (0) 20 7523 8000
Emma Gabriel
Patrick Dolaghan
Alma PR (Financial PR Adviser) Tel: +44 (0)20 3405 0209
Josh Royston aquis@almapr.co.uk
Kieran Breheny
Pippa Crabtree
Notes to editors:
About Aquis Exchange PLC
Aquis Exchange PLC ("Aquis") is a creator and facilitator of next-generation
financial markets, through the provision of accessible, simple and efficient
stock exchanges, trading venues and technology.
Aquis consists of three divisions: Aquis Markets, a subscription-based
exchange offering pan-European cash equities trading; Aquis Technologies,
which develops and licenses next-generation exchange technology globally; and
Aquis Stock Exchange, a growth and regulated primary exchange delivering
capital to companies via the listing and trading of shares.
Aquis Markets operates lit and dark order books, covering 16 European markets.
For its lit books, Aquis uses a subscription pricing model which works by
charging users according to the message traffic they generate, rather than a
percentage of the value of each stock that they trade and does not allow
aggressive non-client proprietary trading, which has resulted in lower market
impact and signalling risk on Aquis than other trading venues in Europe.
Aquis Technologies is the software and technology division of Aquis. It
focuses on building better markets via the creation and licensing of
cutting-edge, cost-effective exchange infrastructure technology and services,
including matching engine and trade surveillance solutions.
Aquis Stock Exchange (AQSE) is a stock market providing primary and secondary
markets for equity and debt products. It is authorised as a Recognised
Investment Exchange, which allows it to operate a regulated listings venue.
The AQSE Growth Market is divided into two segments 'Access' and 'Apex', with
different levels of admission criteria. The Access market focuses on earlier
stage growth companies, while Apex is the intended market for larger, more
established businesses.
Aquis is authorised and regulated by the UK Financial Conduct Authority and
France's Autorité de contrôle prudentiel et de résolution and Autorité
des Marchés Financiers to operate Multilateral Trading Facility businesses in
the UK & Switzerland markets and in EU27 markets respectively. Aquis
Exchange PLC is quoted on the Aquis Stock Exchange and on the Alternative
Investment Market of the LSE (AIM) market. For more information, please go
to www.aquis.eu (http://www.aquis.eu/) .
Chairman's statement
Overview
I have now completed my first year as Chair of Aquis Exchange PLC (AQXE) and
it is with great pleasure that I am able to report that the Group continues to
make significant progress underpinned by strong performances from each of the
Group's three business activities. These results were particularly noteworthy
given the macro-economic challenges resulting primarily from the war in
Ukraine, residual adverse effects from COVID-19 and the requirement to handle
the impact of the UK's exit from the EU.
During 2022 net revenue increased by 24% to £20.1m and profit before tax by
27% to £4.5m. There were significant increases in technology licensing
revenue, whilst AQSE generated a profit ahead of schedule. Pan-European
secondary market trading was strengthened through the launch of AMP, our new
dark pool activity. We continued to develop our presence in Europe and enhance
client relationships within the EU 27 markets.
We have also continued to invest in our technology making further significant
progress through the development of 24/7 capability and exchange grade cloud
platforms.
Board and Governance
We further strengthened the Aquis Exchange PLC Board ("the Board") during 2022
through the appointment of Fields Wicker-Miurin as Senior Independent Director
and Chair of the Nominations & Remuneration Committee and Ruth Wandhöfer
as independent non-executive director and member of the Audit & Risk
Committee and the Aquis Europe subsidiary Board. Richard Fisher joined the
Board as CFO at the AGM in April 2022.
Fields has a distinguished career with over 40 years' experience as an
executive in financial services, a social entrepreneur focused on leadership,
and a non-executive director and committee chair of the boards of both global
companies and government departments. From 1994-7 she led the transformation
of the London Stock Exchange (LSE) and the London equity markets while CFO and
Strategy Director, and from 2006-7 she was the only non-US member of the
NASDAQ Technical Advisory Council. Fields was one of only 6 experts (and the
only British one) advising the EU Parliament on financial services
harmonisation in the lead-up to the Prospectus Directive.
She currently serves as a non-executive director, member and chair of key
committees of the main boards of BNP Paribas (the Eurozone's largest bank) and
Scor (the world's 4th largest reinsurance company) and is Deputy Chair of the
Royal College of Art & Design.
Ruth has considerable financial services experience. Following a senior
executive career at Citibank, she has served on a number of Boards as an
Independent Non-Executive Director including the London Stock Exchange from
2018 to 2020 and is currently serving on the board of Gresham Technologies PLC
and Permanent TSB PLC in Ireland.
Prior to joining Aquis as Director of Finance in April 2021, Richard was the
Director of Finance at Redwood Bank and prior to that held a number of senior
roles within RBS. Richard qualified as an accountant (ICAEW) with PwC.
Richard Bennett retired from the Board with effect from 31st December 2022 and
Mark Spanbroek will retire on 27th April 2023. Richard served for nine years
and Mark for ten years. On behalf of the whole Company I would like to thank
them both for their service to Aquis.
Culture, Stakeholder Engagement and Section 172 Duties
The Board continued its engagement with key stakeholders, particularly
focusing on employees and shareholders. We hosted a very successful Capital
Markets Day in November and Fields Wicker-Miurin and myself consulted with
shareholders in advance of the renewal of our Directors' Remuneration Policy
at the 2023 AGM.
During the year I assumed responsibility as the appointed representative of
the Board to liaise with employees. We also undertook our third annual
employee engagement survey and once again overall feedback was positive.
Environment, Social and Corporate Responsibility
The Board is focussed on the Company's responsibility to continue to grow and
operate on a sustainable basis whilst playing the role as an exchange operator
in bringing issuers and investors together to create a sustainable ecosystem
where capital flows and investment can occur. This offers us an opportunity to
make a difference not only through our own actions but also by creating an
environment for other companies and investors to make a wider contribution.
From the outset, Aquis has been committed to improving the efficiency of
markets through transparency and innovation. In addition, we aim to stimulate
growth in the economy by listening to the needs of issuers and creating a
supportive, fair and low-cost environment for capital raisers to list
instruments, particularly for innovative young companies.
We continue to make progress on our ESG plans through integrating diversity
objectives into our business plans and reducing our environmental impact,
details of which are set out in the Strategic Report.
We remain committed to further improving our gender balance, making progress
towards meeting the Hampton Alexander guidelines on female representation on
the Board (3 out of 9 after the 2023 AGM), and further improving the gender
pay gap measure of female seniority in the company to 24% on base salary and
29% on base salary plus annual bonus. Our target remains to be better than the
average in UK financial services on these measures.
Our focus for the year ahead
We are confident that we have the resources and technology to support further
profitable growth across all our business activities and we will continue to
invest for future growth. We have strengthened the Board and it is now scaled
appropriately to meet the opportunities ahead. However, we will continue to
monitor closely the skills and experience of the Board Directors to ensure
that we are able to continue to focus on ensuring the business delivers on its
strategy across all the aspects of the business.
Glenn Collinson
Chair
Chief Executive's Report
Overview
During 2022 Aquis celebrated its 10th anniversary. It has already been an
amazing journey from building a fledgling pan-European secondary market
equities trading platform into a profitable Group covering primary and
secondary trading and technology licensing activities. I am confident that the
next decade will be equally, if not more, successful than the first.
There were some major economic headwinds during the year, yet the Group dealt
comfortably with these adverse conditions, despite the significant negative
effects they caused across the financial services industry.
The Group profited from significant growth in the technologies division along
with strong performances in pan-European secondary market trading, the primary
market activities of AQSE and data revenue. This growth demonstrates the
resilience of the diversified business model that Aquis has created. It also
managed to maintain market share of the pan-European equities secondary market
trading in excess of 5% whilst diversifying its product offering through the
launch of the Aquis Matching Pool (AMP).
This overall performance resulted in the Group reporting a 24% growth in net
revenue to £20.1m (net of provisions) and a profit before tax of £4.5m in
2022 compared to a profit before tax of £3.6m in 2021. On an underlying basis
including FX movements reported through other comprehensive income this
equates to a 41% increase in underlying profit from £3.3m to £4.7m. This
increase demonstrates the continued progress made during the last 12 months
and provides the Group with the profitable platform to continue to invest and
further strengthen the synergies across its principal business activities.
Reflecting the increasing diversification across three business units and four
revenue streams, we have successfully completed a rebrand post-period, in Q1
2023. The Group now consists of Aquis Markets (formerly the Aquis Exchange
business), Aquis Technologies, and Aquis Stock Exchange.
It is difficult to predict if market conditions will become more stable in
2023, following a difficult 2022; however, I do believe that our strong team
and technology platform should enable us to overcome these and any future
challenges.
Aquis Markets
Over the period, the secondary market multilateral trading facility ("MTF")
platforms operated by the Group in London and Paris continued to grow despite
challenging economic and regulatory conditions. The number of trading members
grew from 38 to 41 and a number of members increased their activity levels,
leading Aquis Markets revenue to increase by 15% to £12.4m.
The market share of all pan-European trading including auctions and dark pools
was maintained through the year with the launch of AMP, the Aquis dark pool
offering offsetting a decrease in Lit volumes. We are confident that with new
innovative order types planned to be introduced in 2023, our lower toxicity
and high available liquidity will ultimately underpin long-term market growth.
Our Market at Close ("MaC") order type, made a material contribution to
trading volumes on the platform and we anticipate it will grow further during
2023. As the MaC allows members to enter orders for matching on the Aquis
platform at the closing price of the primary market, we now operate across a
larger cross-section of all available trading.
Aquis Markets offered clients the ability to trade in excess of 2,000 stocks
and ETFs across 16 European Markets as at the end of December 2022. Overall,
the available liquidity, equal to approximately 23% of total pan-European
equity liquidity should underpin future market share growth.
Aquis Technologies
During 2022 Aquis made significant progress in its technology division. This
activity, where Aquis licenses its leading exchange related technology to a
variety of international financial services clients across different asset
classes, has a strong pipeline and offers material future growth
opportunities. Net revenue from technology licensing in 2022 grew 51% to
£5.2m, reflecting the increasing interest in our high-calibre, in-house
technology.
In 2022, Aquis Technologies extended one contract and secured two new
contracts, bringing the total to seven.
Aquis Technologies continues to develop its technology platforms to support
growth across different asset classes internationally, delivered the first
exchange grade 24/7 platform and made further progress in the plan to create a
cloud native exchange.
Aquis Market Data
Data revenues increased 29% in 2022 to reach £3.0m as the Group continued to
benefit from the implementation of a harmonised data structure. Data is a key
pillar of the Aquis strategic plan, and we expect that it will continue to
make a significant contribution to the Group.
In addition to the contribution data brings to the Group results, it may
increase further in importance in the long-term if consolidated tapes for the
UK and Europe are implemented. Introducing consolidated tapes for Equities
should improve the quality and pricing of market data and lead to a fairer
distribution of data fees across the various European trading venues. Progress
was made during the year in the UK and in Europe where the European Council
has recently agreed a mandate to negotiate with the European Parliament on
reforms that include the establishment of a consolidated tape.
Aquis Stock Exchange (AQSE)
AQSE had a very successful 2022, moving to profitability ahead of schedule.
The exchange attracted a further 22 IPOs during the year: the most of any
growth company exchange in the UK. The business also made good progress in
integrating with the main retail investor platforms thereby ensuring access to
its broad range of companies and continuing to attract additional market
makers, corporate advisers and brokers.
Underpinned by the Group's proven, disruptive technology and a track record of
transparency and innovation, we have already made material progress in
building AQSE into a competitive primary marketplace, particularly as MiFID II
and the FCA Wholesale Markets Review continues to put the traditional business
model of national exchanges under pressure.
I believe that we have a unique opportunity to build a pan-European,
technology-driven, listing exchange for growth companies, overcoming several
issues faced by small and mid-cap market participants today.
Further Investment in Research and Development (R&D)
The Group continued to invest in R&D throughout 2022 and will continue
this investment during 2023 in order to maintain and enhance the quality of
its technology and its ability to be able to deliver new products and platform
enhancements to its clients.
Our proven trading platform has been developed in-house and is based on
proprietary technology, which does not rely on third party software suppliers.
The quality and flexibility of our technology was demonstrated through the
launch
of AMP, the creation of the first ever exchange grade 24/7 market and
underpins our Group strategy. It is the principal reason for the growth in our
technology licensing business.
I believe this structure and continued investment in R&D gives us a
significant competitive advantage on functionality, price and ability to
deliver. Aquis' technology organisation ensures expeditious product
development and, together with Aquis' further investment, will allow the Group
to react quickly to dynamic market conditions. We intend to continue to work
on further developments which will foster future growth.
Resources
During 2022 we continued to invest in personnel resources across a number of
departments with headcount across
the London and Paris offices increasing by 16% and we will continue to further
strengthen our team in particular in support of the sales and technology
activities.
Outlook
In November 2022 we held our first Capital Markets Day (CMD) which enabled us
to present some of the exciting initiatives that we will pursue over the next
few years and how we believe we can remain at the forefront of exchange
technological invention.
Following the successful launch of AMP we will continue to develop this
activity and anticipate further product development in this area during 2023.
There remains some macro-economic uncertainty; however, I believe that our
strong team and technology platform should enable us to overcome this and any
future challenges. Our technology systems have dealt efficiently with
significantly higher messaging volumes caused by increased volatility.
Although it is difficult to forecast, with any degree of certainty, the effect
of these events on the broader Group for the time being, I remain confident in
our unique proposition and our readiness to achieve the next level of
operational, financial and strategic success.
There has been an encouraging start to the current financial year and so far
in 2023 trading continues in line with market expectations.
We are already delivering on our vision of a transformation of primary markets
for small and mid-cap stocks through Aquis Stock Exchange where we have a
pipeline of 50-60 companies looking to IPO and expect the growth of the
Exchange to continue at pace throughout 2023.
We continue to invest in our business to ensure that we maintain our ability
to grow. This investment will support the broadening of our market position
through innovation and excellence. We will continue to promote the Aquis
values of transparency, fairness and simplicity, enabling our end customers to
get better performance and results.
Our principal aim in the future remains to deliver robust and sustainable
returns for the benefit of shareholders and all our other stakeholders in the
medium and long term. Our highly capable and experienced management team
remains focused on serving our clients as we grasp the opportunities ahead
and, in particular, on delivering our shared goals and our vision for
transforming primary markets for small and mid-cap stocks.
Alasdair Haynes
Chief Executive Officer
Strategic Report
Overview of the business
Aquis Exchange PLC ("Aquis" or "the Company"), is the principal operating
company and the holding company of the Aquis exchange activities ("the Group")
which operates three principal divisions: Aquis Markets, Aquis Technologies
and Aquis Stock Exchange.
· Aquis Markets, a pan-European Multi-Lateral Trading Facility (MTF) operator
that provides secondary market trading in pan-European stocks that are listed
on other exchanges.
· Aquis Technologies which provides exchange and regulatory technology to third
parties.
· Aquis Stock Exchange Limited ("AQSE") which is a Recognised Investment
Exchange ("RIE"). It runs a primary market for small and medium size issuers
and secondary market trading in those stocks.
The Company also has a French subsidiary, Aquis Exchange Europe SAS, ("AQEU"),
an MTF established to enable European clients to continue to trade EU stocks,
which provides secondary market trading in EU 27 stocks listed on other
exchanges.
The Company and AQSE are regulated by the UK Financial Conduct Authority
("FCA"), while AQEU is regulated by the Autorité de Contrôle Prudentiel et
de Resolution ("ACPR") and the Autorité des Marchés Financiers ("AMF").
The Group has made significant progress in the development of its activities
since the IPO in June 2018 and is well positioned to be recognised as one of
the leading technology-led, international exchanges driving improved
transparency and fairness in the securities trading market through the
introduction and enhancement of competition and innovation. With these guiding
principles the Group's main focus is to:
· Capitalise on regulatory and technical shifts in market infrastructure by
providing an exchange which offers deeper liquidity and transparency, higher
quality execution for intermediaries and investors;
· Continue to increase the number of members of Aquis Markets and associated
trading volumes by providing a robust and innovative platform that responds to
their needs;
· License its proven technology platform to third parties that require
cutting-edge trading or market surveillance technology; and
· Positively address the current market issues of large spread and low liquidity
in small and mid-cap trading through AQSE's RIE status
The trading platform for all Group entities is run on the same trading
technology and all entities apply a unique subscription-based pricing model
based on electronic messaging traffic for the lit market. This means that the
dealing price prior to the trade is transparent to the whole market. This is
in contrast to pricing on dark and grey markets, where price discovery is only
available to the market post-trade. For AMP (the Aquis dark pool market)
clients are charged a percentage of the value of each transaction.
AQXE and AQEU MTFs apply a non-aggressive trading model, which means that
certain types of trading behaviour are not allowed, and it encourages more
passive trades to rest in its order book. This creates greater depth of
liquidity and less potential for information leakage or "toxicity" in the
market. Independent studies have verified that Aquis' non-aggressive trading
model has materially lower toxicity than its competitors, which reduces
adverse price movements thereby lowering the implicit costs of trading for the
end investor. This is a significant positive differentiating factor.
AQSE is focused on creating a primary market for growth company issuers and a
secondary market for the trading of their stocks.
Clients and Competitive Landscape
The client base of all three entities consists, principally, of investment
banks and brokers acting on behalf of institutions such as pension funds,
asset managers and retail brokers to execute their orders and, in the case of
AQSE, it includes the issuers who wish to raise capital on the platform.
The principal competitors to Aquis' business are the incumbent national
exchanges and other pan-European trading venues. In secondary markets they
charge customers on a per transaction model to allow fully aggressive trading.
During 2022 Aquis has consolidated its market position commanding 5.2% market
share (Q4 average) of all EU secondary markets trading underpinned by a more
diversified product offering following the launch of AMP. This business is
well positioned to benefit from further product development and any future
regulatory changes. The institutional support for greater transparency in
European equities trading also supports future business growth.
Aquis' matching engine and surveillance technology has been operating
successfully for a number of years. It has been developed for multi-asset
class trading and is attracting customers wishing to license the technology as
the trading engine for a broad range of instruments. The Company's principal
technology customers are new equity trading venues where the market is opening
up to competition as well as exchanges specialising in digital assets, MTF
operators across asset classes and market participants requiring real time
market surveillance. Aquis delivered a proof of concept for cloud-based
exchange technology in partnership with AWS and the Singapore Stock Exchange
and continues to see significant interest in this space. Competitors of the
licensing business are other matching engine providers and surveillance
software providers.
We are a strong supporter of the regulatory principles such as best execution
and greater transparency for markets that have been introduced and we are
committed to complying with market regulation. We believe that we are well
placed to manage any regulatory divergence between the UK and EU given our
robust and agile business model, our lean cost structure and our technology
leadership.
As a growth company the Key Performance Indicators (KPIs) for the Group are
principally (i) the continued growth in revenue (See the Table below showing
Group Revenue) and also (ii) the continued growth in Profit Before Tax (PBT).
In building out these KPIs significant focus is made to the key drivers of
revenue and profitability which include for example the market share of pan
European secondary market trading. The delivery against these principal KPIs
are fundamental to the success of the Group.
In support of these KPIs the Board has established for the senior Executives
clear financial and non-financial objectives for the Group. For 2022 these
were revenue, profit before taxation, market share of pan-European secondary
market trading, quality of technology, planning, sustainability and compliance
with regulations and corporate governance, allowing clear performance
measurement against the most important targets set by the Board. Financial
objectives represent 70% and non-financial 30%. The financial KPIs are based
on target net revenue and profit before tax. The non- financial KPIs address
strategy, resources, information and communication. Further details are given
in the FY22 Annual Report.
Financial Review
It has been a year of very strong revenue growth during 2022. The breakdown of
the principal revenue activities is as follows:
Group
2022 2021 YoY Growth
£ £ %
Revenue analysed by class of business
Subscription fees 10,869,442 9,766,046 11
Licence fees 5,034,579 4,404,606 14
Issuer fees 1,022,520 692,743 48
Data vendor fees 3,002,986 2,319,360 29
19,929,527 17,182,755 16
The Group generated a profit before taxation for the year of £4.5m compared
to £3.6m in the previous year. The continued growth in profits during 2022 is
primarily attributable to increased exchange revenue through the launch of AMP
and as members' subscriptions have risen as a result of increased trading
levels, as well as increased revenue from data, technology licensing and
issuer fees.
The trade receivables resulting from revenue from licensing technology
contracts attract an IFRS 9 (Expected Credit Loss on the trade receivables
arising from contract assets). This year the application of IFRS 9 has
resulted in a net impairment provision release during the year of £133k
(2021: charge (£972k)).
Profit before tax increased 27% to £4.5m and EPS (fully diluted) remained at
16p per share. The profit before taxation is after applying amortisation
charges to internally generated intangible assets, as well as depreciation and
finance charges, which reflect the accounting treatment of leases under IFRS
16.
The Group generated an income tax credit of £157k which was driven by an
increase of £301k in deferred tax assets, offset by an overseas corporation
tax charge of £144k.
In May 2022 Aquis relocated its London office. The lease liabilities arising
are amortised over the life of the leases, attracting a net finance expense
charge amounting to £53k for 2022, whereas the right of use assets are
depreciated on a straight-line basis over the life of the lease, attracting a
depreciation charge of £397k for 2022.
The Group's cash and cash equivalents as at 31 December 2022 were £14.2m
(2021: £14.0m) maintaining the Group's strong cash conversion rate which
allowed the continued investments as set out below. Over the year the Group
deployed £1.95m of cash to purchase treasury shares used to service the
various employee share schemes.
Group investments, productivity and capital management
The Group has continued to invest in its technology offering, including the
creation and enhancement of new order types, enhancements to the surveillance
system and auction systems and further technical development to enable
licencees to enter different asset classes. In addition, the Group has made
further investment in personnel as it continues to develop capability and
brand awareness.
The Group is required to maintain sufficient capital to meet the regulatory
obligations for all entities. These are calculated and updated annually. At 31
December 2022 the Company ICARA requirement amounted to £4.7m (2021 £3.9m).
The individual entities of the Group meet the respective FCA and ACPR capital
adequacy requirements with plenty of headroom for further investment in
business operations.
The Board considers that its investments have contributed to the Group's
ability to gain new clients, broaden its customer base and increase revenue.
The Group recognises the importance of continuing to enhance productivity, and
the commitment to future investment, both technically and in terms of resource
training and development. The Group has established both short- and long-term
incentive plans based on performance for all employees, which are set out in
more detail in the FY22 Annual Report and aligns the employees' interests with
the long-term strategic objectives of the Group.
In deciding its investment plans, Group management receive a detailed analysis
of the exchange and client technical opportunities and related time
requirements on a quarterly basis and then determine the personnel and other
resources that it wishes to allocate to these opportunities. This information
also includes an estimate of the deployment cost.
Future development of the business
In order to support its long-term vision and in order to strategically
position for continued growth, Aquis
has invested significantly in its business differentiators, R&D in the
technology platform, brand and personnel resources. The Group is cognisant of
the importance of such investments to maintain innovation and strong quality
delivery.
AQSE
During 2022, the Group has invested significant time and resource into AQSE
re-building the market presence and brand and has started to realise some of
the anticipated synergies across the Group's exchange memberships, data
offering and use of technology.
Compliance with Section 172 (1) of the Companies Act 2006
Section 172 of the Companies Act 2006 requires a Director of a company to act
in the way he or she considers, in good faith, would most likely promote the
success of the company for the benefit of its members as a whole. As such,
Section 172 requires a Director to have regard, amongst other matters, to the:
· Likely consequences of any decisions in the long-term
· Interests of the Company's employees
· Need to foster the Company's business relationships with suppliers, customers
and others
· Impact of the Company's operations on the community and environment
· Desirability of the company maintaining a reputation for high standards of
business conduct
· Need to act fairly between members of the company
We set out below some examples of how the Directors have had regard to the
matters set out in Section 172(1) when discharging their Section 172 duty and
the effect of that on certain of the decisions taken by them.
Stakeholder Management
The Group complies with the requirements prescribed by S172 of the Companies
Act to disclose how the Company promotes its success for the benefit of all
stakeholders.
The Board is acutely aware that the Group's long-term success and sustainable
value creation is critically reliant on maintaining good relations with all
stakeholders and ensuring that decisions are made after taking account of the
principal stakeholders' interests. Specific stakeholder considerations
undertaken by the Board this year included, but were not limited to, the
Group's handling of the fallout from the war in Ukraine.
In arriving at these decisions, the Board has assessed the likely consequences
of any decision in the long term, the interests of the Group's employees, the
need to foster the Group's business relationships with suppliers, customers
and others, the impact of the Group's operations on the broader community, the
desirability of the Group maintaining a reputation for high standards of
business conduct, and the need to act fairly between shareholders of the
Company.
Details on how Aquis and its Board engage with its principal stakeholders, are
given below.
Clients
Management proactively gathers regular feedback from clients, both positive
and negative, in order to understand their ever-evolving needs, identify any
improvements that would result in better client outcomes or satisfaction and
to foster good client relations. This is regularly fed to the Board at
meetings or on an ad hoc basis, if required.
Shareholders
Executive Management meet with the key shareholders at appropriate times
during the year and provide feedback to the Board.
Additionally, the Chair and other Non-Executive Directors continued, where
possible, to engage with a subset of key shareholders through one-on-one
meetings. The latest round took place in January 2023. Shareholders have been
extremely appreciative of these meetings and feedback is provided to the Board
in both written and verbal updates.
Employees
The Group promotes a positive and inclusive culture. Team meetings and Group
briefings are held on a regular basis to ensure all personnel are informed of
the Group's performance and key strategic objectives and goals. Throughout the
year Glenn Collinson has held the responsibility as the Board's nominated
representative for employee engagement and facilitated meetings with employees
so as to ensure that their voices are heard through an independent ear from
the Board.
This was complemented by the annual employee engagement survey, which allowed
employees to provide feedback in confidence. This the 4th consecutive year
that the Group has run the employee engagement survey and results have been
consistently positive. The Executive develops an action plan to address the
key areas highlighted with particular emphasis on our core values and on
investing further in employee training and career development.
Suppliers
The Group has identified key suppliers that include suppliers of office
hardware and consumables, as well as suppliers such as liquidity providers and
advisers such as auditors, brokers, recruitment agents, legal advisers and PR
consultants. The Group seeks the independent and experienced view of its key
advisers on various matters as and when required. Sometimes this is directly
with the Board, or the Board will ensure that the Executive reports on advice
provided to the Group when needed.
Regulators
The Group takes an open and co-operative approach with its regulators and
positively embraces the FCA's 11 principles of business. The Group submits
regular returns to the FCA, the ACPR and the AMF, and employees whose roles
encompass compliance activities are encouraged to attend regular external
presentations and workshops arranged by the regulators on topical issues, and
also receive regular professional update training. All new and existing
employees and advisers are made aware of the FCA, ACPR and AMF's principles of
business, and undergo training required by finance professionals working at an
equities exchange group. The Group arranges regular compliance assessments to
provide assurance that the Group is meeting the requirements of the regulator.
During the year the Board undertook training, which covered reminders of
Directors' duties in the UK and Europe with regards to the regulation and
oversight of financial market infrastructures.
Board Effectiveness and High Standards of Business Conduct
The Board remains committed to high standards of corporate and regulatory
governance. During the year the Board undertook training, which covered
reminders of directors' duties under UK law, under the UK Corporate Governance
Code and also under UK and European regulation with regards to the oversight
of financial market infrastructures. Additionally, it explored how to improve
the Group's cyber security risk management frameworks and became more informed
about the policy-making environment for financial markets in Europe.
Consequences of Long-Term Decisions
Considerable time was spent focusing on the Group's strategy and challenging
management to think about the longer-term impact of decisions, how those
decisions were in line with the Group's values, the long-term sustainability
of the Company and its subsidiaries and the desire to maintain its reputation.
The Board has also made further progress in its succession planning both for
the Executive and the Board. Glenn Collinson was appointed Chair with effect
from 1st January 2022. The Board appointed two new NEDs, Fields
Wicker-Miurin and Ruth Wandhöfer in anticipation of the scheduled retirement
of Richard Bennett on
31st December 2022 and Mark Spanbroek on 29th April 2023. In addition the
Board promoted Richard Fisher to the Board in March 2022 as CFO. The Board
operates a skills matrix to map the requirements of the organisation against
the current skills and composition of the Group Board and the skills and
composition gaps that will be created as the Group evolves and directors move
off the Board. This matrix is updated at least annually and was used
effectively in the search for the latest additions to the Boards of both Aquis
and AQSE.
Management plan to recruit additional employees, in particular in the
technology area in the UK and France during 2023.
COVID-19 and The Interests of Employees
The impact of COVID-19 decreased dramatically during 2022; however the Board
continued to monitor the day-to-day operations, the business continuity plans
and the employees' well-being carefully throughout the
year. This included work from home issues and the office environment.
The Board has also ensured engagement with employees through the engagement
survey and the nomination of a Board representative to meet with employees
when possible.
Our ESG journey
Our Purpose
In its role as a disruptor, Aquis' aim has always been to improve financial
markets by maintaining the utmost transparency and least market toxicity for
the benefit of the end investor. In this way it reduces both the explicit and
implicit costs of trading that are borne by investors.
In addition, the Group is also focused on stimulating growth in the economy by
listening to the needs of issuers and creating a supportive, fair and low-cost
environment for capital raisers to list instruments, particularly for
innovative growth companies while ensuring an appropriate balance of investor
protection. Aquis also recognises the pivotal role it has to play in educating
those issuers about ESG and how they can set and achieve goals and
facilitating their disclosures to investors.
Our Culture, Diversity and Employee Well-being
The Group is committed to ethical business conduct and expects the highest
standards of integrity to be followed by the Directors and all employees. The
Aquis Group culture is underpinned by the following core values:
· Trust (integrity, competence and deliver what and when we say we will);
· Proactivity (discipline and initiative);
· Openness (transparency);
· Excellence (through creativity and innovation);
· Collaboration (through positive, collegiate and free thinking); and
· Respect.
Despite a further increase in employee numbers in 2022 the Group has a
relatively small resource base, and therefore has concentrated on recruiting
personnel with a high degree of specialist skills. The Group provides on-
going training and support with the aim of ensuring that personnel retain and
enhance their technical skills and that employees feel that there is
opportunity to develop within the Group. The Group also operates a flexible
working policy to ensure it takes account of individual employee requirements.
The Group has a Diversity and Inclusion Policy that emphasises Aquis' desire
to create a supportive and inclusive culture amongst the whole workforce. We
believe it is in the best interests of the Company and the wider community to
promote diversity and eliminate discrimination in the workplace. Our aim is to
ensure that all employees and job applicants are given equal opportunity and
that our organisation is representative of all sections of society. Each
employee will be respected and valued and able to give their best as a result.
The policy reinforces our commitment to providing equality and fairness to all
in our employment and not providing less favourable facilities or treatment on
the grounds of age, disability, gender reassignment, marriage and civil
partnership, pregnancy and maternity, race, ethnic origin, colour,
nationality, national origin, religion or belief, or sex and sexual
orientation.
We are opposed to all forms of unlawful and unfair discrimination. All
employees, management, agency, casual workers, and independent contractors no
matter whether they are part-time, full-time, or temporary, will be treated
fairly and with respect. When Aquis selects candidates for employment,
promotion, training, or any other benefit, it will be on the basis of their
aptitude and ability. All employees will be given help and encouragement to
develop their full potential and utilise their unique talents. Therefore, the
skills and resources of our organisation will be fully utilised, and we will
maximise the efficiency of our whole workforce. Aquis' commitments are:
· To create an environment in which individual differences and the contributions
of all team members are recognised and valued.
· To create a working environment that promotes dignity and respect for every
employee.
· To not tolerate any form of intimidation, bullying, or harassment, and to
discipline those that breach this policy.
· To make training, development, and progression opportunities available to all
staff.
· To promote equality in the workplace, which Aquis believes is good management
practice and makes sound business sense.
· To encourage anyone who feels they have been subject to discrimination to
raise their concerns so we can apply corrective measures.
· To encourage employees to treat everyone with dignity and respect.
· To regularly review all our employment practices and procedures so that
fairness is maintained at all times.
Aquis has implemented an equality, diversity and inclusion policy which has
been communicated to all employees emphasising that they are obligated to
comply with all its requirements and promote fairness in the workplace. The
policy is also be drawn to the attention of agents, stakeholders, customers
and job applicants. It is therefore very pleasing to report that gender and
non-gender diversity strengthened further during the course of the year and we
believe our diversity and inclusion policies will have a positive impact on
the successful execution of the Group strategy.
This year the Group has established aspirational 3-year diversity targets for
the Board and for the employees. These targets have been established to
underpin the importance the Board places on this issue and to provide clear
guidance and focus on these aspirations. The Board had established a target to
increase the overall female NED ratio and this was achieved during the year.
The employee targets are set out below.
These are to:
1. improve all diversity ratios
2. increase the management team diversity ratios
3. decrease the female / male seniority gender pay gap
4. include more comprehensive employee statistical analysis in the annual report
5. create a targeted diversity inclusive supplementary development program for
employees who we believe have the potential to be promoted to Exco in the next
5 years
6. implement a more comprehensive mentoring system
In addition, the Group has established targets over the next three years (i.e.
to 2025) where the aspirations are to:
· in 2022 the gender (seniority) pay gap was 24% on base salary and 29% on base
salary plus annual bonus, an improvement over the 2021 gap of 36% (base
salary) and 41% (base salary plus annual bonus)
· meet the Hampton Alexander Review target of at least 33% of board members
being female
· have a gender pay (seniority) gap no worse than the UK Financial Services
industry average
The Group runs an annual anonymous employee survey and arranges regular
meetings with the Board nominated employee representative. In addition,
employees have regular one-to-one sessions with their immediate line manager
and annual reviews where development plans are discussed to ensure
individuals' objectives are aligned to the business strategy and to improve
levels of employee engagement.
The Group has a commitment towards preventing slavery and human trafficking
throughout our supply agreements: the Group complies with the Modern Slavery
Act 2015 (MSA) and adopts a zero-tolerance approach towards slavery and human
trafficking and expects all those in our supply chain (and contractors) to
comply with the MSA.
Consumption and The Environment
The Directors endeavour to promote the consumption of resources in a manner
that fosters the long-term sustainability of the business and the environment
in which it operates and are conscious of the requirement to monitor these
activities.
Although the Group has a small number of personnel and associated office
space, it recognises that it contributes directly to carbon emissions through
its consumption of energy, waste and water, through staff travel and,
indirectly, through its consumption of supplies and equipment including office
hardware.
During the year the Group continued to promote the target of reduced carbon
emissions associated with employees commuting to the office. In addition, the
building electricity provider for the current Aquis office obtains energy from
100% renewable electricity and carbon neutral gas and the two data centres
used by Aquis are both powered by 100% renewable energy.
We have also continued progress on the target to deliver a cloud native
exchange. While most major financial exchanges operate using physical data
centres, the infrastructure required to run a trading environment is not
beneficial to the environment because of the fact that servers must always be
"on" and significant duplicative processing occurs. If trading firms could
leverage all the benefits of running a cloud-based solution, the cost
optimisation, scalability and resiliency would make a positive contribution to
reducing the impact on the environment.
Governance
When Aquis listed in 2018, it voluntarily chose to follow the highest
standards of corporate governance when it committed to adhering to the UK
Corporate Governance Code and the Directors have implemented appropriate
measures which have allowed Aquis to comply with all provisions of the Code
during the accounting period and up to the date of this report.
Aquis and AQSE are directly authorised and regulated by the FCA and AQEU is
regulated by the ACPR and the
AMF. The Group fully complies with the relevant rules and guidelines in all
respects and monitors that compliance throughout the year.
The Group's objective is to establish an open and cooperative relationship
with all regulators, and it positively embraces the FCA's 11 principles of
business. The Group submits regular returns to the FCA, and employees whose
roles encompass compliance activities are encouraged to attend regular
external presentations and workshops arranged by the FCA on topical issues,
and also receive regular professional update training. All new and existing
employees and advisers are made aware of the FCA's principles of business, and
undergo training required by finance professionals working at an equities
exchange group. The Group arranges regular compliance assessments to provide
assurance that the Group is meeting the requirements of the regulator.
The wider community
Aquis has been involved in a number of charitable and community enhancing
initiatives in the year. In 2022, Aquis partnered with Ravens Wood School in
Bromley to spearhead an 'Investment Club' scheme with A-Level Economics and
Business students. Aimed at increasing financial literacy and accessibility,
students received tailored talks and presentations from members of Aquis staff
on aspects of the financial services industry, public markets and career
advice. Students then created their own mock-up AQSE universe portfolios with
an imaginary starting value of £50,000 using an app developed by Aquis fed
with real price data. Aquis intends to continue with and expand this programme
in future. Aquis also participated in the London Youth Rowing Race the Thames
project and employees have shown their desire to make a difference.
Knowledge Transfer Project
Aquis has made significant progress with the University of Derby partnership:
a two-thirds government funded
Knowledge Transfer Project ("KTP") that involves industry- led research and
development on Artificial Intelligence for trading platform surveillance
alerts to develop an efficient and accurate market abuse monitoring system.
Current surveillance systems are deterministic, handcrafted, generate a high
percentage of false positive alerts and run a high risk of human fatigue
and/or boredom. Consequently, market abuse events may often be missed when
analysing a large number of false positives. As part of our mission to improve
transparency in financial markets, this partnership will publish research
papers on machine learning techniques that will mitigate human error in
detecting fraudulent trading practices that harm the integrity of, and trust
in, financial systems that are critical for the modern economy.
As part of our mandate to strive for innovation, we are excited for what the
future holds for machine learning and artificial intelligence in the trading
industry and are encouraged by the widespread support for this project.
Next Steps in Our ESG Journey
During the strategic planning process, we assessed a number of potential ESG
initiatives Our short-term goal is to complete the assessment of the
sustainability risk factors of the Group's day-to-day activities and translate
them into a meaningful Group-wide ESG strategy that can be woven into our main
strategic goals.
In addition, during 2023 we aim to:
· Develop a formal ESG policy
· Set formal short, medium and longer term non- financial goals on material ESG
topics that are directly relevant to our business
· Introduce a first round of formal initiatives to reduce ESG impact and manage
ESG risk
· Complete a carbon footprint assessment for the Group that has been
commissioned and begun in January 2023.
· Undertake an initial assessment of potential broader ESG initiatives that may
have a positive impact on the wider community through the Group's role as a
primary exchange
Principal risks and uncertainties
The identification and management of risk is an integral part of the execution
of Aquis' strategic vision and operations. The below provides an overview of
the principal risks facing the Group:
STRATEGIC RISKS
Risk Risk Description Mitigation
Economic landscape In March 2023 there were signs of stress in the banking sector with the Aquis derives revenues from both fee and contractual annuity-based streams,
default of which is less impacted by cyclical market driven trends.
Silicon Valley Bank and acquisition of Credit Suisse by UBS. There is a risk The war in Ukraine continues to cause immeasurable suffering and harm but it
the credit worthiness of historically financially robust institutions is not expected to have a material adverse effect on the Group's trading
comprising the customer base of AQXE might increase the credit risk of the volumes.
parent company. Equally, a second order exposure is possible for other
customers who maintain deposits with insolvent banks. Whilst COVID-19 had a material negative effect on the economic landscape for
many countries; the impact on the UK and European economies decreased
The Economic landscape was adversely affected during 2022 by Ukraine materially during 2022 and it is anticipated that it will
(particularly in respect to heightened cyber risk) and to a lesser effect the
residual impacts of COVID-19 and Brexit. The speed of have less impact on total market volumes in the future.
recovery may negatively affect the Group's trading volumes resulting in lower Pan-European trading is now executed almost 100% by the Group's MTF subsidiary
revenues or increased costs. in France, AQEU, that has full regulatory approval from the ACPR to allow the
Group to continue to operate as an MTF and it is anticipated that this will
remain the case for the foreseeable future.
The Directors have reviewed where possible our customer base to ensure these
entities are not directly exposed to insolvent credit institutions.
Additionally,
swift regulatory intervention by the Federal Deposit Insurance Corporation
secured depositors with SVB and the acquisition of UBS subsequent to a Swiss
Central Bank liquidity backstop both ensure limited fallout from these events.
Legal/Regulation The Group operates highly regulated entities, including three MTFs and an RIE Senior management consistently monitor regulatory developments including the
and is required to maintain sufficient regulatory capital and comply with MiFID review and Wholesale Markets Review, which are discussed and actioned at
Audit Risk and Compliance Committee (ARCC) meetings and engage regularly and
relevant legal and regulatory requirements necessary to operate the Group's directly with regulators including where appropriate formal responses to
business. All three Group entities must hold regulatory licences and consultation documents.
independent capital minimum.
The Board reviews a quarterly dashboard that incorporates the Group's
There is the risk that current regulation or future changes could have an behaviour and statistics in relation to regulatory obligations. The Board also
adverse effect on the Group. Possible impacts may be (but are not limited to): places considerable importance on having competent staff and advisors to help
manage legal and regulatory risk.
Sustained downturn in revenues could put regulatory capital at risk,
The Board considers regulators as key stakeholders and endeavours to maintain
One of the Group entities could be subject to a fine or a lawsuit which may positive working relationships with the regulators for each group entity.
draw on the entities' finances,
Each member of the Group currently has sufficient excess regulatory capital to
Change in regulation may increase costs for the Group or require unanticipated deal with any unanticipated changes in regulation.
investments, and
Changes in regulation are usually accompanied by a period of consultation that
Inability to meet regulatory requirements could result in a licence being allows market participants to provide feedback before changes are made and a
withdrawn and prevent the Group entity from operating its core business. further period to prepare for change once changes in regulation are
determined.
In addition, changes in tax law may result in an increase in the overall tax
burden of the Group which could have a materially adverse effect on cash The Group consistently reviews the risks associated with possible changes in
reserves. tax legislation.
Competition The Group operates in a highly competitive global industry. Aquis' competitive differentiation is underpinned by its subscription-based
model and lack of aggressive trading. This is hard for incumbent exchanges to
The principal competitors to the trading business are the national exchanges, replicate without significantly impacting their own revenue models which have
other pan-European MTFs / Recognised Investment Exchanges (RIEs) which always been based on a per transaction basis and on charging significant data
currently charge customers on a per fees to participants who trade aggressively.
transaction model and accept both passive and aggressive market makers. These Whilst the effects of competitor behaviour can never be fully mitigated, the
exchanges have significant market share and could move to copy Aquis' Company has consistently increased its secondary market trading market share
subscription fee model and/or differentiate between passive and aggressive since it was formed. Senior management initiatives
trading.
to reduce this risk include: consistent monitoring of competitor activity and,
Other competitors to the exchange business are ad hoc OTC trading and maintaining close customer relationships so as to understand their evolving
Systematic Internalisers ("SIs") which operate off-exchange models and make needs, and the acquisition of a primary listing business thereby gaining RIE
money through spreads. status.
Additionally, the emergence of new asset classes might reduce the Group's Following the change in the tick size regime for SIs in June 2021 their
competitiveness. competitive advantage was removed, and their market share gains have
decreased.
New asset classes are emerging but have yet to make a real impact on equities
trading, clearing custodian services and settlement of equities; however,
Aquis will continue to closely monitor new market developments.
Intellectual property and data protection The Group is reliant on copyright, trade secret protection, database rights The Group has taken steps that are consistent with industry practice to reduce
and confidentiality and licence agreements with its employees, clients and these risks by establishing controls to protect the confidentiality and
others to protect its intellectual property rights. integrity
The Group is subject to a number of laws relating to privacy and data of customer information, and these controls are consistently reviewed for
protection, including the UK's Data Protection Act 1988 and the Privacy and their effectiveness at quarterly ARCC meetings.
Electronic Communications (EC Directive) Regulations 2003 and the EU General
Data Protection Regulation (GDPR).
OPERATIONAL RISKS
Risk Risk Description Mitigation
Technology The operation of the Group is critically reliant on the smooth and efficient A defining feature of the Aquis business model is its high calibre, in-house
functioning of technology. technology. The technology was built and is maintained by highly skilled
employees. Aquis actively seeks to retain the employees through flexible
Technological failures would negatively affect clients and the Group's ability attractive working practices and remuneration policies and to continually
to deliver on performance obligations. It could also result in regulatory enhance the technology to meet client requirements.
scrutiny or fines or requirements for further investment.
The Group's key infrastructure, development and operational activities are
Failure to protect the Aquis Technology could mean that competitors get access prioritised accordingly, and resources are closely and consistently monitored
to Aquis' Intellectual Property (IP) or make Aquis susceptible to external and reviewed with the aim to ensure smooth functioning of technology at all
infiltration. times.
These risks could adversely affect the firm's financial and competitive Aquis technology is securely maintained to protect it from unauthorised access
situation. with full back up and version control if remediation is required.
Aquis has system control features that are regularly tested to protect data
and IP.
The Group maintains a Disaster Recovery plan that encompasses input from all
departments and is continuously monitored and reviewed by appropriately
experienced individuals.
The comprehensive back up and contingency plans in place are tested regularly.
The Board reviews a quarterly dashboard that incorporates technology
performance statistics and operational resilience.
COVID-19 There remains a risk that the COVID-19 pandemic could still negatively impact The Group continued to successfully operate a partial remote working plan
personnel being able to operate the exchanges. throughout 2022 and this remains in place, with all staff demonstrating
adaptive and flexible behaviours The processes that the Group has adopted are
There are also risks to clients, liquidity providers, suppliers, markets and in accordance with UK and French government guidelines. This plan mitigated
the economy in general. against and will continue
Remote working practices across the industry may slow new proposals or to mitigate against potential resource shortages.
development at client and supplier organisations which may have a longer- term
impact on Aquis. This could manifest in new members not joining any of the The Group has demonstrated and is confident that it can operate the exchanges
Aquis entities in the anticipated timelines or slower adoption of new products remotely for a prolonged period.
developed by Aquis.
The Group's clients and liquidity providers have also demonstrated that they
can remotely manage their activities successfully. Key suppliers have also
successfully adopted disaster recovery procedures.
Aquis is not overly reliant on new members to achieve its growth plans. The
main source of anticipated growth in trading is from the increase in volumes
of current customers.
Cyber security The Group's networks and those of its third-party service providers may be The Board reviews a quarterly dashboard that incorporates cyber technology
vulnerable to security risks, cyber-attack or other leakage of sensitive data. monitoring.
Potential outcomes of such an attack might include outages of the market, Regular penetration tests are undertaken by a third party with the results
attacks which seek to hold Aquis to ransom, unintended movements of the reviewed by the ARCC and Board and all employees undertake cyber-training.
company finances or generally create reputational and financial risk.
Internal exercises to alert employees to the possibility of phishing emails
are held regularly.
The MTF has "kill" switches in place which are intended to restrict clients if
rogue behaviour is evidenced.
The Group takes precautions to protect data in accordance with applicable
laws. Extensive risk management protocols are adopted in the IT control
framework so as to prevent, detect and respond proactively to cyber security
attacks.
The comprehensive back up and contingency plans in place are tested regularly.
Key management personnel and employees The Group has a relatively low headcount and hence is exposed to key person The Group has established emergency staffing plans for Senior Executives.
risk.
The NRC reviews immediate and medium- term succession plans and the ARCC
The Group's future development and prospects depend on its capacity to attract assesses key person risk.
and retain key personnel.
Aquis employs a number of strategies to ensure the Group is able to attract
and retain a high calibre of talent. The Group employs a rigorous recruitment
process and offers competitive salaries and benefits and employee share option
schemes, whilst promoting a culture of diversity, high performance and
inclusion from the top.
The Group continues to demonstrate its ability to recruit high-quality
individuals and is clearly viewed as a dynamic and attractive employer.
Client concentration The nature of equity financial markets is that the majority of pan-European The Group continues to broaden its client base to reduce client concentration
secondary market trading volumes are undertaken by a small pool of market but recognises that volumes from smaller participants are not likely in
aggregate to be as large.
participants. This risk has been increased as some of the smaller market
participants have decided to route via larger banks that maintain direct The Group has offset some of the risk of industry concentration through the
exchange memberships. quality of the MTF exchange offering and the strengthening of the product
offering.
The Group revenue is therefore dependent on a concentrated number of customers
and significant change to a customer's flow could negatively impact revenues. The Group seeks to maintain positive relationships with all current and future
members of its MTF exchange and to be vigilant for change at any client.
The Group has diversified its business activities to include primary markets,
technology sales, data and market gateways.
Liquidity provision concentration - Aquis Markets In most trading venues globally, there is considerable symbiosis between the This risk is mitigated internally through a number of actions including those
venue and the liquidity providers on which the venues rely to make continuous set out below, and externally through the likely evolution of the structure of
prices and enhance liquidity. the European equity market.
In Europe, where there is significant competition between a limited number of Internally, management maintain a close relationship with its market makers to
trading venues, the ability to attract significant liquidity to the venue is ensure that there continues to be positive synergies for all parties. Aquis is
critical. The barriers to entry are even higher for new trading venues, which also actively seeking to continue to grow membership and diversify its
must build liquidity from scratch and differentiate themselves to attract and liquidity providers.
retain it.
As Aquis' market share increases further, more natural liquidity should be
Market makers themselves have differing business models and trading attracted thus diluting the concentration risk away from a small number of
strategies; as a result, they may be attracted to different types of venues liquidity providers to a broader set of investor flows.
depending on the value proposition.
Externally, the market share growth that Aquis has achieved to date is a
Aquis has a highly differentiated business model for its pan-European strong indication of the benefits to its members and liquidity providers and
secondary market trading activities compared to the incumbent platforms, both makes it likely that natural liquidity will continue to grow, making the Aquis
dramatically reducing the cost of trading and also not permitting aggressive marketplace deeper and more attractive for all counterparties.
trading by market makers. This has been a driver of Aquis' success to date.
Additional liquidity providers are likely to follow over time as they should
The number of market makers that have trading models currently aligned with be
Aquis' business philosophy is even more concentrated than on the main markets.
Therefore, Aquis has always relied heavily on a small number of key market incentivised to adapt or create new models that capitalise on Aquis' value
makers to support liquidity and a wider group to supplement it. These market proposition and interaction with a wider set of trading flows.
makers have not always been the same organisations and have changed over time.
The number of liquidity providers in European equity markets is still
Nonetheless, it is a risk that if a key market maker decides to change its relatively small today, reflecting the continued need to invest in technology
business model or philosophy it would cause a short-term disruption in the and regulatory oversight. However, the Group's low toxicity model and
total liquidity provided and could impact Aquis' ability to differentiate innovative offerings will continue to counter this risk.
itself through the prevention on non- aggressive trading flow.
Liquidity Provision Concentration - AQSE A relatively small population of market makers support AQSE with similar risks The number of market makers active on AQSE has and is anticipated to increase
to those identified above with regard to potential short-term impact if one or as the number of companies and reputation of the exchange continues to
improve.
more market makers were to change their business model or approach.
Supplier risk The Group is exposed to the failure of a key supplier. Examples include loss Aquis has back up plans in place for key suppliers and has agreed procedures
of data supplied to Aquis which is an important input into the trading and thresholds in place for managing this if necessary.
platform.
This may impact the ability to undertake market surveillance.
FINANCIAL RISKS
The Group's current assets comprise cash and liquid resources including trade
receivables arising directly from its operations. The main financial risks are
capital, credit, liquidity and foreign currency risks. The Group has approved
FX hedging policies in place and as at 31 December 2022 actively managed the
balance sheet and risks without the use of any financial derivatives.
Previously all revenues were GBP denominated but at the end of 2022 the Group
entered into the first contract denominated in a foreign currency. To manage
the FX risk going forward the Group entered into forward FX trades and will
continue to do so in the future where any further contracts are non-GBP
denominated.
The Group has continued to increase its profits during 2022 demonstrating that
it has been able to manage strategic and operational risks; however, future
results could be negatively impacted if any of the risks outlined above were
to occur. Financial risk management disclosures have been made in Note 6 of
the Group Financial Statements accompanying this report.
Viability statement
The Directors have undertaken a detailed review of the Group's prospects,
taking account of the Group's current position and principal underlying
business risks and its prospects for the period January 2023 - December 2027.
These include considering the impact during 2022 and potential future impact
due to Ukraine, COVID-19 and Brexit. The Directors consider this to be an
appropriate period considering the target business and revenue growth, and the
objective to maintain and enhance profitability during this period.
The Group maintains a strong equity capital position which has been
strengthened during 2022 as profitability has been enhanced. This result
complemented by the Group achieving and in certain areas exceeding its goals
and taking account of its ability to execute successfully its principal
strategic objectives and operating goals during continued challenging
circumstances, the Directors have a reasonable expectation that the Group will
be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment.
This assessment has concentrated in particular on the key differentiating
factors that the Group has established, the quality and resiliency of the
Group's technology, the brand and market position, and the reputation and
quality of the experience of its key personnel resources.
This Strategic Report was approved by the Board of Directors on 29 March 2023
and is signed on its behalf by Alasdair Haynes, CEO, and Richard Fisher, CFO.
Consolidated and Company Statements of Comprehensive Income
For the year ended 31 December 2022
Group Company
Notes 2022 2021 2022 2021
Restated
Restated
£
£
£
£
Profit and loss
Revenue 11 19,929,527 17,182,755 10,342,525 9,243,427
Impairment credit / (charge) on contract assets 12 133,484 (972,161) 133,484 (972,161)
Impairment (charge) on trade and other receivables 12 (12,784) (28,499) - -
Operating expenses 13 (14,239,918) (11,560,000) (5,616,089) (4,038,025)
Earnings before interest, taxation, depreciation 5,810,309 4,622,095 4,859,920 4,233,241
and amortisation
Depreciation and amortisation 13 (1,259,492) (1,032,240) (1,187,569) (1,026,980)
Net finance expense 13, 25 (53,130) (26,175) (36,948) (26,175)
Finance income 13 28,722 444 2,416 444
Profit before taxation 4,526,409 3,564,124 3,637,819 3,180,530
Income tax credit 15, 16 157,203 1,088,543 163,925 1,088,543
Profit for the year 4,683,612 4,652,667 3,801,744 4,269,073
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on translation of foreign operations 181,370 (231,412) - -
Other comprehensive income for the year 181,370 (231,412) - -
Total comprehensive income for the year 4,864,982 4,421,255 3,801,744 4,269,073
Earnings per share (pence)
Basic
Ordinary shares 17 17 17 14 16
Diluted
Ordinary shares 17 16 16 13 16
Consolidated Statement of Financial Position
As at 31 December 2022
Notes 2022 2021 2020
Restated
£ Restated
£
£
Assets
Non-current assets
Goodwill 18 83,481 83,481 83,481
Intangible assets 18 1,032,224 753,714 916,256
Property, plant, and equipment 19 4,155,215 4,146,333 1,578,554
Deferred tax asset 15 1,593,931 1,292,260 203,717
Trade and other receivables 22 5,352,110 2,744,656 839,630
12,216,961 9,020,444 3,621,638
Current assets
Trade and other receivables 22 4,135,426 3,768,946 2,890,477
Cash and cash equivalents 23 14,170,965 14,046,399 12,268,418
Total assets 30,523,352 26,835,789 18,780,533
Liabilities
Current liabilities
Trade and other payables 24 4,268,735 3,783,585 2,810,710
Net current assets 14,037,656 14,031,760 12,348,185
Non-current liabilities
Lease liabilities 25 2,874,877 3,422,744 995,081
2,874,877 3,422,744 995,081
Total liabilities 7,143,612 7,206,329 3,805,791
Net total assets 23,379,740 19,629,460 14,974,742
Equity
Called up share capital 26 2,750,945 2,750,545 2,716,970
Share premium account 30 11,785,045 11,771,462 10,892,135
Other reserves 31 1,813,119 1,118,314 760,543
Treasury shares 27 (3,350,325) (1,526,835) (489,625)
Retained earnings 10,316,831 5,633,219 980,552
Foreign currency translation reserve 64,125 (117,245) 114,167
Total equity 23,379,740 19,629,460 14,974,742
Company Statement of Financial Position
As at 31 December 2022
Notes 2022 2021
£ Restated
£
Assets
Non-current assets
Intangible assets 18 1,032,224 753,714
Property, plant, and equipment 19 3,628,081 3,563,758
Investment in subsidiaries 20 6,884,202 6,884,203
Investment in trust 21 3,350,325 1,856,964
Deferred tax asset 15 1,456,184 1,292,260
Trade and other receivables 22 5,329,674 2,731,174
21,680,690 17,082,073
Current assets
Trade and other receivables 22 10,571,256 4,372,553
Cash and cash equivalents 23 5,595,827 7,094,964
Total assets 37,847,773 28,549,590
Liabilities
Current liabilities
Trade and other payables 24 8,992,201 3,407,826
Net current assets 7,174,882 8,059,691
Non-current liabilities
Lease liabilities 25 2,449,312 2,915,920
2,449,312 2,915,920
Total liabilities 11,441,513 6,323,746
Net total assets 26,406,260 22,225,844
Equity
Called up share capital 26 2,750,945 2,750,545
Share premium account 30 11,785,045 11,771,462
Other reserves 31 1,813,119 1,448,430
Retained earnings 10,057,151 6,255,407
Total equity 26,406,260 22,225,844
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Group Notes Share Share Premium Share Based Payment Reserve Retained Earnings Treasury Shares Foreign Currency Translation Reserve Total
Capital
Balance at 1 January 2021 as previously stated 2,716,970 10,892,135 760,543 1,127,401 (489,625) 908 15,008,332
Prior year adjustment - - - (146,849) - 113,259 (33,590)
Balance at 1 January 2021 as restated 2,716,970 10,892,135 760,543 980,552 (489,625) 114,167 14,974,742
Profit for the year (restated) - - - 4,652,667 - - 4,652,667
Foreign exchange differences on translation of foreign operations (restated)
- - - - - (231,412) (231,412)
Issue of new shares 26,30 33,575 879,327 - - - - 912,902
Movement in share based payment reserve 31 - - 357,771 - - - 357,771
Movement in Treasury Shares 27 - - - - (1,037,210) - (1,037,210)
Balance at 31 December 2021 2,750,545 11,771,462 1,118,314 5,633,219 (1,526,835) (117,245) 19,629,460
Balance at 1 January 2022 2,750,545 11,771,462 1,118,314 5,633,219 (1,526,835) (117,245) 19,629,460
Profit for the year - - - 4,683,612 - - 4,683,612
Foreign exchange differences on translation of foreign operations - - - - - 181,370 181,370
Issue of new shares 26,30 400 13,583 - - - - 13,983
Movement in share based payment reserve 31 - - 694,805 - - - 694,805
Movement in Treasury Shares 27 - - - - (1,823,490) - (1,823,490)
Balance at 31 December 2022 2,750,945 11,785,045 1,813,119 10,316,831 (3,350,325) 64,125 23,379,740
Company Statement of Changes in Equity
For the year ended 31 December 2022
Company Notes Share Share Share Based Payment Reserve Retained Earnings Total
Capital
Premium
Balance at 1 January 2021 2,716,970 10,892,135 748,525 1,986,334 16,343,964
Profit for the year (restated) - - - 4,269,073 4,269,073
Issue of new shares 26,30 33,575 879,327 - - 912,902
Movement in share based payment reserve 31 - - - 699,905
699,905
Balance at 31 December 2021 2,750,545 11,771,462 1,448,430 6,255,407 22,225,844
as restated
Balance at 1 January 2022 2,750,545 11,771,462 1,448,430 6,255,407 22,225,844
Profit for the year - - - 3,801,744 3,801,744
Issue of new shares 26,30 400 13,583 - - 13,983
Movement in share based payment reserve 31 - - 364,689 364,689
-
Balance at 31 December 2022 2,750,945 11,785,045 1,813,119 10,057,151 26,406,260
Consolidated and Company Statements of Cash Flows
For the year ended 31 December 2022
Group Company
Notes 2022 2021 2022 2021
£
£
£ £
Cash flows from operating activities
Cash generated/ (absorbed) by operations 28 3,961,654 3,157,518 2,164,898 2,748,347
Net finance expense on lease liabilities 53,130 (26,175) 36,948 (26,175)
Net cash outflow from operating activities 4,014,784 3,131,343 2,201,846 2,722,172
Investing activities
Recognition of intangible assets 18 (777,465) (350,893) (777,465) (350,893)
Purchase of property, plant and equipment 19 (769,419) (319,520) (752,938) (314,385)
Capital injection into AQSE 20 - - - (400,000)
Interest received 13 34,653 444 2,416 444
Loan to Investment in Trust - - (1,955,720) (1,100,000)
Net cash used in investing activities (1,512,231) (669,969) (3,483,707) (2,164,834)
Financing activities
Issue of new shares 13,983 912,902 13,983 912,902
Principal portion of lease liability 6,25 (300,994) (573,194) (231,259) (554,842)
Loan to employee benefit trusts 27 (1,955,720) (1,100,000) - -
Net cash used in financing activities (2,242,731) (760,292) (217,276) (358,060)
Net increase/(decrease) in cash and cash equivalents 259,822 1,701,082 (1,499,137) 915,398
Cash and cash equivalents at the beginning of the year 23 14,046,399 12,268,418 7,094,964 6,179,566
Effect of exchange rate changes on cash and cash equivalents (135,256) 76,899 - -
Cash and cash equivalents at the end of the year 23 14,170,965 14,046,399 5,595,827 7,094,964
Notes to the Financial Statements
1 SIGNIFICANT CHANGES IN THE REPORTING PERIOD
The following events and transactions had an impact on the financial position
and performance of the Group and/or Company during the period:
Data revenues earned are now apportioned between Aquis Exchange PLC where the
underlying trade activity has arisen in the UK and within Aquis Exchange SAS
where that revenue has been derived within the EU27 countries. There is no
impact at a Group level.
2 BASIS OF PREPARATION AND ACCOUNTING POLICIES
Company information
Aquis Exchange PLC is a public limited company which is incorporated and
domiciled in the United Kingdom. Its registered office is located at 63 Queen
Victoria Street, London, EC4N 4UA. The Company Number is 07909192.
Accounting convention
The Group's consolidated and the Company's financial statements are prepared
in accordance with UK-adopted international accounting standards and the
Companies Act 2006 requirements.
The financial statements have been prepared on the historical cost basis.
The Group does not hold any financial instruments at fair value through profit
or loss.
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
Going concern
At the time of approving the financial statements, the Directors have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and thus continue to adopt
the going concern basis of accounting in preparing the financial statements.
The Group has made an increased profit in 2022 against prior year and has
substantial cash reserves and a strong balance sheet, due to high levels of
investment within the Group. There has been a growth in revenue between the
current year and comparative years. Additional revenue growth is projected for
2023, with profits forecasted for future years.
The Russia-Ukraine conflict has resulted in extremely volatile market and
there is no certainty as to when this conflict will be resolved, however at
this stage, the Directors do not believe that this could have a material
adverse effect on the group.
Taking the above into account in light of the Group's current position and
principal risks as discussed in the Strategic Report section of this annual
report, the Directors have assessed the prospects of the Group for the
foreseeable future and there is no material uncertainty as to the Group's
ability to continue to adopt the going concern basis of accounting in
preparing the financial statements over a period from the date of approval of
these financial statements to 31 March 2024.
Consolidation
In preparing these financial statements, the group has applied the
consolidation principles in IFRS 10, Consolidated Financial Statements. This
requires the Group to consolidate subsidiary entities it controls. Control is
determined based on the ability to direct the activities of the entity that
significantly affect its returns.
The Group assesses control on a continuing basis and includes entities it
controls as of the end of the reporting period. The financial statements of
the consolidated entities are prepared using consistent accounting policies
and are presented as if they were a single economic entity. Intercompany
transactions, balances, and unrealized gains and losses on transactions
between consolidated entities are eliminated in full.
The Group consolidated financial statements also include treasury shares and
cash held by two separate trusts ("the Trusts") that administers the Company's
employee share incentive plan and also hold shares purchased by the Group in
preparation for future settlement of employee share awards made to date. The
Trusts have been consolidated based on the IFRS 10 criteria for control over
the Trust being met:
· The Trusts were established to (i) facilitate the acquisition and
holding of shares under the Aquis Exchange PLC Share Incentive Plan and (ii)
facilitate the acquisition and holding of shares under the Aquis Exchange PLC
Restricted Share Plan.
· The activities of the Trusts are limited by the agreements in
place; and
· The Trusts do not have any assets outside of the partnership
share money received and the shares purchased. The use of any shares or cash
that remain in the Trust funds once the trustee no longer holds any shares
relating to the SIP,RSP or PPO, is directed by the company. The Trust itself
has no rights to any dividends.
Accounting Policies
Revenue
Revenue comprises amounts derived from the provision of services which fall
within the Company's ordinary activities. It represents amounts receivable for
subscription fees, the licensing of software, the provision of data to
third-party vendors, and fees relating to listings on the Aquis Stock Exchange
(AQSE), all of which are net of value added tax. Revenue is recognised once
the performance obligations for each activity have been satisfied.
All the revenue streams are generated by contracts with customers and revenue
is therefore recognised in accordance with IFRS 15.
Revenue from exchange subscription-based services is recognised over time when
the services are rendered.
Revenue from licensing contracts is assessed for each contract and split into
three performance obligations:
· Project fees and maintenance fees which are recognised over time
as the obligations are met; and
· Licensing for which fees are considered a "right to use" licence
under IFRS 15 and are therefore recognised at a point in time when control of
the licence passes to the customer.
Revenue from the provision of data to third-party vendors is comprised of the
annual fees paid by the redistributors, member firms and multi-media firms for
access to real time and/or end of day data, and is recognised over time. An
additional monthly fee is received based on the number of users the vendors
provide the data to each month, variable based on usage for the prior month,
is charged in arrears and is recognised in the month it is incurred.
Revenue from AQSE issuer fees is comprised of initial application and
admission fees, annual fees, and further issue fees, these are all recognised
over time under IFRS 15 except further issue fees which are recognised at a
point in time.
Application and admission fees are charged upfront to prospective companies
admitted to AQSE markets. These are recognised monthly over the average
expected life of company admission periods (see further details about this
estimate in the following section).
Annual fees are paid upfront annually by companies with securities listed on
AQSE and are recognised over the year.
Further issue fees are incurred by existing issuers who have already
contributed an application and admission fee, and are recognised at a point in
time on the date the new security is available for trade on AQSE.
Estimated listing period for Aquis Stock Exchange securities
In recognising application and admission fees, the Company determines the
expected length of time each new security will be listed on AQSE. The estimate
is based on historical analysis of listing durations in respect of the
companies listed on AQSE. The length of time a security remains listed
incorporates significant uncertainty as it is based on factors outside the
control of the Company and which are inherently difficult to predict.
Based on the available information and incorporating management's predictions,
it is currently estimated that an average security will remain listed for a
period of 9 years. Application and admission fees are recognised monthly over
this period.
It is estimated that a one year increase/ decrease in the deferral period
would cause a £6k decrease /£7k increase in annual revenue released
respectively. The estimated listing periods will be reassessed at each
reporting date to ensure they reflect the best estimates of the Group.
Intangible assets other than goodwill
Internally developed intangible assets arising from the capitalisation of
Research and Development expenditures are recognised in the financial
statements when all of the following criteria are met:
· The technical feasibility of completing the intangible asset so
that it will be available for use or sale is established;
· There is an intention to complete the intangible asset and use or
sell it;
· The Group has the ability to use or sell the intangible asset;
· The existence of a market for the output of the intangible asset
or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset can be demonstrated;
· Adequate technical, financial and other resources are available
to complete the development and to use or sell the intangible asset; and
· The Group has the ability to measure reliably the expenditure
attributable to the intangible asset during its development.
Where the above criteria are not met, costs incurred in research and
development are recognised in the Statement of Comprehensive Income as
incurred.
Amortisation is recognised in order to write off the cost or valuation of the
assets, less their residual values over their useful lives. The development of
trading platforms has been amortised over 3 years on a straight-line basis
reflecting management's estimate of the useful life of the technology, the
rationale of which is discussed in Note 5.
Business Combination
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration
transferred, which is measured at fair value. Acquisition-related costs are
expensed as incurred and recognised as non-underlying transaction costs in the
income statement.
Goodwill
In March 2020 the acquisition of AQSE gave rise to goodwill in the
consolidated financial statements. Goodwill is initially measured at cost,
being the excess of the aggregate of the consideration transferred over the
net identifiable assets acquired and liabilities assumed. Goodwill is assessed
for impairment annually. Note 18 provides further detail on the impairment
assessment for goodwill as at 31 December 2022.
Goodwill is initially measured at cost being the amount by which the aggregate
of the consideration transferred that exceeds the net identifiable assets
acquired and liabilities assumed. The Group assess for impairment of goodwill
on an annual basis with any impairment charge recognised in the statement of
comprehensive income.
Property, plant and equipment (excluding right-of-use assets)
All property, plant and equipment are stated at historical cost less
depreciation or impairment. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent expenditure is included in the asset's carrying amount or is
recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. All other repair and
maintenance costs are charged to the income statement during the financial
period in which they are incurred.
Depreciation is recognised so as to write off the cost or valuation of assets,
less their residual values, over their useful lives on the following basis:
· Fixtures, fittings and equipment: 5 years straight line.
· Computer equipment: 3 years straight line.
Impairment of tangible and intangible assets
At each reporting end date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as
a revaluation decrease.
Cash and cash equivalents
Cash and cash equivalents include cash at bank.
Financial assets
Trade and other receivables
Trade receivables are amounts due from customers for services performed in the
ordinary course of business. Other receivables are defined as amounts due that
are outside the ordinary course of business. If collection is expected in one
year or less (or in the normal operating cycle of the business if longer) they
are classified as current assets. Otherwise they are presented as non-current
assets.
Contract assets
Contract assets are recognised for licensing fees recognised at inception of a
licensing contract but not yet billed under IFRS 15. Contract assets are
initially measured at fair value and subsequently measured at amortised cost
and are stated net of any expected credit loss provision (ECL) recognised in
accordance with IFRS 9, as detailed in Note 12. Contract assets are presented
on the Statement of Financial Position as trade receivables. The right to
consideration becomes unconditional once the customer has been billed.
Rent deposit asset
Under IFRS 16 a rent deposit is accounted for as a financial asset if:
· The collateral provided to the lessor is not a payment relating
to the right to use the underlying assets and hence is not a lease payment as
defined;
· The difference between the nominal amount and fair value of the
rent deposit at the commencement date represents an additional lease payment
which is prepaid and is included in initial carrying amount of the Right of
Use (RoU) asset; and
· The prepaid RoU portion is subsequently measured in terms of IFRS
16 i.e. is depreciated over the term of the lease.
Further disclosures are provided in Note 25.
Impairment of financial assets
The Group has considered the impact of the application of an expected credit
loss model when calculating impairment losses on current and non-current
contract assets and other financial assets at amortised cost (presented within
trade and other receivables). In applying IFRS 9 the Group must consider the
probability of a default occurring over the contractual life of its trade
receivables and contract asset balances on initial recognition of those
assets. Note 12 details the Group's credit risk assessment procedures.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using
the effective interest method. The effective interest method is a method of
calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments (including all fees
and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial liability, or (where appropriate) a shorter
period, to the amortised cost of a financial liability. In 2022 the Group did
not hold any Financial liabilities beyond Trade and other payables and the
lease liabilities recognised under IFRS 16 as described in the "Leases"
sub-section below.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities. Trade and other payables are
not interest bearing and are initially recognised at fair value.
Equity instruments
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new ordinary shares or options are charged
against the share premium account.
Earnings per share
The earnings per share (EPS) calculations are based on basic earnings per
ordinary share as well as diluted earnings per ordinary share. The basic EPS
is calculated by dividing the profit after tax of the Group by the weighted
average number of ordinary shares that were in issue during the year. The
diluted EPS takes into account the dilution effects which would arise on
conversion of all outstanding share options and share awards under the
Employee Share Incentive Plan.
Taxation
The tax expense/(credit) represents the sum of the tax currently
payable/(repayable) and deferred tax.
An R&D tax credit is claimed annually from HMRC based on the employee
costs involved in developing Aquis' systems and technology.
Current tax
The current income tax charge/ (credit) is calculated on the basis of the tax
laws enacted or substantively enacted at the balance sheet date in the country
where the company operates and generates taxable income. Management
periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred tax
Deferred income tax is recognised, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realised, or the deferred income tax liability is
settled.
Deferred income tax assets are recognised only to the extent that it is
probable that future measurable taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax assets and liabilities (note 15) are offset when there is
a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate
to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to
settle the balances on a net basis.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an
expense, unless those costs are required to be recognised as part of the cost
of group developed trading platforms.
The cost of any unused holiday entitlement is recognised in the period in
which the employee's services are received.
Termination benefits are recognised as an expense when the Group is
demonstrably committed to terminate the employment of an employee or to
provide termination benefits, as set out within IAS 19.
Retirement benefits
Pension obligations
The Group has no further payment obligations once the contributions have been
paid. The contributions are recognised as an employee benefit expense when
they are due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available.
Share-based payments
EMI Options
Equity-settled share-based payments were measured at fair value at the date of
grant by reference to the fair value of the equity instruments granted using
the US Options Binomial model. The fair value determined at the grant date is
expensed on a straight-line basis over the vesting period, based on the
estimate of shares that will eventually vest. A corresponding adjustment is
made to equity.
When the terms and conditions of equity-settled share-based payments at the
time they were granted are subsequently modified, the fair value of the
share-based payment under the original terms and conditions and under the
modified terms and conditions are both determined at the date of the
modification. Any excess of the modified fair value over the original fair
value is recognised over the remaining vesting period in addition to the grant
date fair value of the original
share-based payment. The share-based payment expense is adjusted if the
modified fair value is less than the original fair value. Cancellations or
settlements (including those resulting from employee redundancies) are treated
as an acceleration of vesting and the amount that would have been recognised
over the remaining vesting period is recognised immediately.
Employee share incentive plan
Shares purchased under the share incentive plan are recognised as share-based
payments under IFRS 2. Partnership shares are purchased by employees and
matching shares are those purchased by Aquis at a ratio of 2:1. The shares are
held in a trust ("the Trust"), with matching shares required to be held for
three years before being transferred to the employee. The fair value of both
the partnership and matching shares are recognised in the share-based payment
reserve.
Partnership shares vest immediately while matching shares will vest over the
three-year holding period. The market value of shares when they are purchased
is assumed to approximate the fair value of the shares.
The cash transferred to the Trust is recognised as an investment in the
Company's accounts. In line with IFRS 10 guidance, the Trust is consolidated
in the Group accounts with the fair value of the shares held in the trust
recognised as a debit entry within equity.
Restricted share plan
The Restricted share plan is share based and will vest three years after the
grant date subject to continued employment. Similar to share-based payments
they are measured at fair value determined at the grant date using the Black
Scholes model. The fair value is expensed on a straight-line basis over the
vesting period, with the corresponding adjustment being made to reserves.
Company Share Option Plan
The company share option plan is a share based scheme awarded to staff and has
a vesting period of three years subject to continued employment. Similar to
share-based payments they are measured at fair value determined at the grant
date using the Black Scholes model. The fair value is expensed on a
straight-line basis over the vesting period, with the corresponding adjustment
being made to reserves.
Premium Priced Options Plan
The PPO scheme is option based and they will vest three years after the grant
date subject to continued employment. Similar to share-based payments they are
measured at fair value determined at the grant date using the Black Scholes
model. The fair value is expensed on a straight-line basis over the vesting
period, with the corresponding adjustment being made to reserves.
Leases
The Group assesses whether a contract is or contains a lease at inception of
the contract. The Group recognises a right of use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and
personal computers, small items of office furniture and telephones). For these
leases, the Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic benefits from the
leased assets are consumed.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. Lease payments included in the measurement of the
lease liability comprise:
· Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
· Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· The amount expected to be payable by the lessee under residual
value guarantees;
· The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
· Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated
statement of financial position and is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the
lease payments made. The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset) whenever:
· The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of exercise of
a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
· The lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments
using an unchanged discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is
used).
· A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of
the modification.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses. The right-of-use assets are included in property, plant and equipment
in the consolidated statement of financial position and are depreciated over
the term of the lease. The Group applies IAS 36 to determine whether a
right-of-use asset is impaired and accounts for any identified impairment loss
as described in the 'Impairment of tangible and intangible assets' policy.
Variable rents that do not depend on an index or rate are not included in the
measurement the lease liability and the right-of-use asset.
Foreign exchange
Functional and presentation currency
Items included in the financial statements of the Group are measured using the
currency of the primary economic environment in which the entity operates
('the functional currency'). The financial statements are presented in UK
Pound Sterling (£), which is the Group's functional and presentation
currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation of monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are recognised in profit or
loss.
All foreign exchange gains and losses recognised in the income statement are
presented net within 'operating expenses'. For the purpose of presenting
consolidated financial statements, the assets and liabilities of the Group's
foreign operations are translated at exchange rates prevailing on the
reporting date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are recognised in
other comprehensive income and accumulated in a foreign exchange translation
reserve.
On the disposal of a foreign operation (i.e. a disposal of the Group's entire
interest in a foreign operation, or a disposal involving loss of control over
a subsidiary that includes a foreign operation or a partial disposal of an
interest in a joint arrangement or an associate that includes a foreign
operation of which the retained interest becomes a financial asset), all of
the exchange differences accumulated in a foreign exchange translation reserve
in respect of that operation attributable to the owners of the Group are
reclassified to profit or loss.
3 Restatement of Prior Year Comparatives
i) AQEU has been consolidated as a EUR functional currency subsidiary.
In 2022 it was noted that certain consolidation adjustments since
incorporation should be treated differently and this has led to a life to date
adjustment of £195k between Foreign Currency Translation Reserve (FCTR) and
Retained Earnings, with the 2021 comparative for expenses reduced by a
corresponding amount from £11,902k to £11,560k and a resultant increase in
Group PBT for 2021 of £342k to £3,564k. The restatement does not impact net
cash flows generated by the group.
ii) In 2020 Aquis Exchange Europe (AQEU) was established as a 100% owned
subsidiary of Aquis Exchange PLC to allow the trading of EU stocks post the
Brexit transition period. In 2021 AQEU reflected Exchange Fees of £5,857k
that arose through the trading of the underlying EU27 stocks. In 2022 in
agreement with the local French regulator it has been decided to reflect that
element of data revenue which is derived from EU stocks within the results for
AQEU. In 2022 this reflects £760k. Consequently, the 2021 Company
comparatives have been adjusted by £211k to reflect that element of data
revenue that is now reported within AQEU. The restatement does not impact the
Company's net operating cash flows in note 28.
Group 2021 Adjustment Restated
£
£
£
i) Other Operating costs (Income Statement) (11,901,901) 341,901 (11,560,000)
i) Foreign Exchange differences on translation of foreign operations 76,899 (308,311) (231,412)
(Other Comprehensive Income)
i) Retained Earnings brought forward (Equity) 1,127,401 (146,849) 980,552
i) Translation reserve brought forward (Equity) 908 113,259 114,167
i) Basic EPS (pence) 16 1 17
i) Diluted EPS (pence) 15 1 16
Company 2021 Adjustment Restated
£
£
£
ii) Data Vendor Revenues 1,573,925 (211,310) 1,362,615
ii) Intercompany Payable 552,754 211,310 764,064
4 ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN ACCOUNTING
POLICIES
New IFRS Standards that are effective for the current year
There were no new standards effective during the year ended 31 December 2022.
Three standards have been amended and are effective as of 2022 as set out
below. These have not impacted the current year financial statements.
Amendments to IFRS 3 Definition of a business
Amendment to IAS 16 Property, plant and equipment
Amendment to IAS 37 Provisions, contingent liabilities and contingent assets
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the following
Standards and Interpretations, which have not yet been applied in these
financial statements, were in issue. The Directors do not expect that the
adoption of the Standards listed below will have any impact on the financial
statements of the Group in future periods:
IFRS 17 Insurance Contracts
Amendments to IAS 1 and IAS 8 Definition of material
Amendment to IAS 12 Income taxes
There have been no changes to any accounting policies in the year.
5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In applying the Group's accounting policies, which are described in Note 2,
the Directors are required to make judgements, estimates and assumptions about
the carrying amount of assets and liabilities that are not readily apparent
from other sources. Management has shown these matters as judgements where
they relate to a significant policy and the judgement has a material impact on
the reported balance. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Critical judgements
The following are the critical judgements, apart from those involving
estimations (which are presented separately below), that the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in financial statements.
Judgements in relation to performance obligations
In making their judgement, the Directors considered the detailed criteria for
the recognition of revenue set out in IFRS 15, and in particular, whether
revenue is recognised at a point in time or over time. Following an assessment
of the technology licensing contract portfolio, and the obligations that Aquis
has under each contract, the Directors are satisfied that obligations
contained therein be split into the following performance obligations, and
that the revenue from each licensing contract should be assessed individually.
The identified performance obligations and the timing of revenue recognition
on delivering the licence contracts as follows:
· Implementation/ project fees: these are upfront, non-refundable
fees that a customer pays in order to obtain the user agreement. Even if the
user acceptance certificate is never issued, the implementation fee cannot be
reclaimed and so the revenue is guaranteed and can be recognised from the time
of invoice as Aquis becomes unconditionally entitled to payment but in
practice recognition will often be deferred until the work is completed.
· Licensing fees: The customer is liable to pay the monthly
licensing fee from the date of signing the user acceptance agreement (contract
inception date). At this point in time Aquis has fulfilled its promise to
deliver the licence (i.e. the system has been deployed in the client's
production environment) and this performance obligation is fulfilled.
Management uses judgement when assessing the recoverability of the licencing
fees, and recognises them only when their collection is assumed to be highly
probable. This assessment takes into consideration the current status of the
client's business, including whether the exchange system is active with
products/ securities added and members trading on it. The licensing fees are
recognised at a point in time, which occurs after the contract is signed and
once Aquis is satisfied that receiving the licencing fees is highly probable.
· Maintenance fees: fees to maintain the system are recognised over
the course of the licensing contract as Aquis fulfils its performance
obligation to maintain the system. Management have estimated a fixed annual
amount per contract, which reflects the time spent supporting the client's
platform and upgrading the software in accordance with the contractual terms.
Changes in identification of performance obligations could impact the timing
of revenue recognition for licensing contract assets and is thus a critical
accounting judgement.
Capitalisation of internally generated intangible assets resulting from
Research and Development
Internally generated intangible assets are capitalised when, in management's
judgement, the criteria for capitalisation under IAS 38 (listed in Note 2)
have been met. The direct costs incurred in the research and development of
Aquis' exchange platform and associated technology and systems are
capitalised. Management reviews the time spent by the development team in
developing and maintaining the systems used internally by Aquis when
determining the amount to be capitalised within each period.
Critical accounting estimates
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting date that may have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below.
Estimating the useful life of intangible assets
The expected useful life of an intangible asset is estimated to be 3 years. In
making this judgement management have taken into account product upgrade
cycles, the pace of change of regulation as well as benchmarking against other
companies with internal systems and technology research and development.
Expected credit loss of contract assets
An impairment for the expected credit loss of contract assets that arise as a
result of applying IFRS 15 to licensing revenue is required under IFRS 9. This
impairment is an accounting estimate which is calculated based on the
Directors' best estimates of the probability of default and loss given
default. The quantification of the assumptions and stresses for the year are
disclosed in Note 12 of the financial statements.
In arriving at these estimates, the Directors have assessed the range of
possible outcomes using reasonable and supportable forward-looking
information, which is based on assumptions for the future movement of
different economic drivers and how these drivers will affect each other.
Aquis' assessment of the credit risk associated with a licensing customer is
conducted at inception of the contract (but before the user agreement is
signed) and includes factors that are specific to the customer, general
economic conditions and an assessment of both the current as well as the
forecast direction of these conditions.
The credit risk assessment is conducted by means of a take-on assessment which
comprises of a series of relevant criteria for a licensing contract that are
scored according to the specific circumstances of the customer, with scores
for each parameter typically ranging from 1-5. The assessment evaluates the
following:
· Level of funding;
· Regulatory approvals;
· Market, industry and business model;
· Macro-economic forecasts;
· Corporate governance/ Group management;
· Whether the client is revenue generating;
· Level of client profitability;
· Contract length and the associated range of economic scenarios
therein;
· Payment history; and
· External credit ratings.
The above assessment will determine the customer category upon inception of
the contract, and the inputs to the expected credit loss model is determined
thereon.
The credit risk assessment and associated inputs to the expected credit loss
model (probability of default and loss given default) are critical assessments
that could impact both the provision for expected credit losses as well as the
movement in the provision reflected in the income statement.
Deferred tax asset
Deferred tax assets (note 15) are recognised to the extent that their
utilisation is probable. The utilisation of deferred tax assets will depend on
whether it is possible to generate sufficient taxable income in the respective
tax type and jurisdiction. A total net deferred tax asset is recognised in the
current period, since profitability is expected to continue for at least the
next 3 years. The deferred tax asset is calculated based on expected
profitability over this period as Aquis is a high growth company and there is
considerable uncertainty in estimating financial performance beyond this
length of time.
Various factors are used to assess the probability of the future utilisation
of deferred tax assets, including, operational plans and loss-carry forward
periods. To reflect the uncertainty in the accuracy of business forecasts, the
model uses modest growth rates and applies a probability weighting to each
type of revenue.
Share-based payments
The US binomial model and Black Scholes model are used to estimate the value
of the EMI, CSOP, RSP and PPO options. The resulting values are recognised
straight-line over the vesting period as an expense, with the corresponding
amounts recognised as equity in the balance sheet. The model requires the
following inputs: grant date, exercise price, expiry, expected life of
options, expected volatility, and the risk-free interest rate. The expected
life and expected volatility require the use of estimates. Volatility is
estimated based on the historical average for the available data up to the
grant date, while the expected life of the options is based on management's
judgement of when the options will be exercised, which is assumed to be an
average of 5 years
6 FINANCIAL RISK MANAGEMENT
The Group seeks to protect its financial performance and the value of its
business from exposure to adverse changes in capital commitments, as well as
credit, liquidity and foreign exchange risks.
The Group's financial risk management approach is not speculative. The Group's
Audit, Risk and Compliance Committee provides assurance that the governance
and operational controls are effective to manage risks within the
Board-approved risk appetite, supporting a robust Group risk management
framework.
The Group's objectives when managing these risks are detailed below.
Capital risk management and capital commitments
Risk description Risk management approach
There is a risk that Group entities may not maintain sufficient capital to The Group's objectives when managing capital are to safeguard the Group's
meet their obligations. The Group comprises regulated entities. It considers ability to continue as a going concern so that it can provide returns for
that increases in the capital requirements of its regulated companies, or a shareholders and benefits for other stakeholders.
scarcity of equity (driven by its own performance or financial market
conditions) either separately or in combination are the principal risks to The Group has mitigated the level of risk significantly by ensuring that, as
managing its capital. set out within the risk description, each entity in the Group maintains a
level of capital that is well in excess of regulatory requirements.
AQXE has a total capital regulatory requirement of £4.7m as at 31 December Maintaining a strong capital structure is a key priority for the Group. If
2022, with available capital of £22.4m, reflecting a surplus of £17.7m / there was an erosion of capital for any reason the Group may issue new shares
478%. The total regulatory requirement is set as the total capital ratio plus or sell assets to ensure capital adequacy requirements continue to be met. The
Pillar 2 add on. directors have assessed the impact of a 10% fall in the Group's available
capital and concluded the impact not to be material.
Within the AQSE subsidiary the capital regulatory minima is set by the FCA
through the Financial Resource Requirement (FRR) which is currently set at The Group supports both Aquis Europe and AQSE in maintaining capital adequacy,
£2.4m. Financial resources available (representing net assets) were £2.8m at and holds sufficient capital to be able to inject capital into the businesses
31 December 2022, reflecting a £0.4m headroom above regulatory minima. as and when required, and has historically done so within AQSE after the
Company had been acquired to enable its capital to be sufficient as the
company was brought up to the current profitable trading levels evidenced from
2022.
The Group continuously monitors its level of capital in order to ensure it
remains compliant with regulatory capital requirements and performs monthly
and quarterly reporting on capital balances and associated headroom. Proposed
investment requirements, capital expenditure and potentially increasing
capital resources through equity or debt issuance are assessed annually as
part of the budgeting process, as well as on an ad-hoc basis as required.
Credit risk
Risk description Risk management approach
The Group's credit risk relates to its customers being unable to meet their The Directors make a judgement on the credit quality of the Group's customers
obligations to the Group either in part or in full. based upon the customers' financial position, the recurring nature of billing
and collection arrangements and, historically, a low incidence of default.
Aquis' assessment of the credit risk associated with a licensing customer is
conducted at inception of the contract (but before the user agreement is
signed) and includes factors that are specific to the customer, general
economic conditions and an assessment of both the current as well as the
forecast direction of these conditions. Based on this assessment, the
prospective customer is assigned to a customer category with an appropriate
risk rating.
Aquis' credit risk management processes are applied to all trade receivables
and are calculated using a lifetime ECL method, as detailed in Note 12. The
Directors have stress tested the current approach to managing this risk and
believe it to be appropriate. If 10% of trade receivables outstanding from 31
December 2022 were to default, the hypothetical impairment charge would be
immaterial.
Liquidity Risk
Risk Description Risk management approach
The Group's operations are exposed to liquidity risk to the extent that they The Group maintains sufficient liquid resources to meet its financial
are unable to meet their daily payment obligations. obligations as and when they become due in the ordinary course of business.
Management monitors forecasts of the Group's cash flow quarterly through an
assessment of cash resources that are in excess of regulatory capital
requirements. The Group is solvent with net current assets in excess of £14.0
million (2021: £14.0 million), with the majority of the debtor's book being
short term in nature. The Group is also funded entirely by equity, with no
external debt funding obligations to be met. The Directors have stress tested
the current approach to managing this risk and believe it to be appropriate.
If group net assets were to fall by 10% there would still be a significant
surplus to meet the Group's liabilities as they fall due.
Interest Rate Risk
Risk description Risk management approach
The Group is not materially exposed to market risk including interest rate Bank deposits are primarily placed over night or as interest rates have risen
(see below for FX risk) the Group has started to prudently place some funds on deposit for up to 3
months. The Directors have stress tested the current approach to managing this
There is no negative exposure to interest rate changes since the Group and risk and believe it to be appropriate. The only adverse impact would be if
Company have no external debt obligations, and the interest rate on the lease interest rates were to fall and reduce interest income on bank deposits. As at
liability is the rate implicit in the lease and as such is not subject to 31 December 2022 total interest income on deposits was immaterial.
change over the term of the lease.
FX Risk
Risk description Risk management approach
The Group operates in the UK and Europe, with Sterling as its principal Foreign exchange risk has previously arisen on foreign currency denominated
currency of operation. The Group companies invoice revenues and incur the costs within Aquis Exchange PLC or through the translation of GBP denominated
majority of expenses in GBP. A relatively small percentage of the overall balances within Aquis Exchange SAS. At the end of 2022 Aquis entered into a
Group's expenses are incurred in Euros in relation to the French subsidiary. USD denominated technology contract and hence opened a USD account which holds
As a result, foreign exchange risk arises mainly from the translation of the a low level of USD at the year end (£0.2m). The contract will deliver USD
Group's foreign currency earnings, assets and liabilities into its reporting cash flows in the future from 2023 and so in January 2023 Aquis entered into
currency, Sterling. an FX forward arrangement to lock in the future GBP benefit of this contract.
As at the year end at 31 December 2022 there were no FX derivatives in place.
An immaterial amount of cash held by Aquis Exchange Europe SAS is held in a The Directors performed stress testing on the cost base of the group in
euro denominated bank account and an immaterial amount of USD held by Aquis non-functional currencies and concluded that an adverse movement of 10% versus
Exchange PLC, with the remaining cash held in Sterling denominated bank GBP would not render a material impact.
accounts.
The following tables detail the Group and Company's remaining contractual
maturity for its non-derivative financial liabilities with agreed repayment
periods. The tables have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the Group or Company
can be required to pay.
Group
31 December 2022 1 Year 2-5 years 5+ years Total
Trade and other payables 3,754,935 - - 3,754,935
Lease Liabilities 522,800 1,580,900 1,293,977 3.397,677
4,268,735 1,580,900 1,293,977 7,143,612
31 December 2021
Trade and other payables 3,575,350 - - 3,575,350
Lease Liabilities 208,236 1,623,226 1,799,519 3,630,981
3,783,586 1,623,226 1,799,519 7,206,331
Company
31 December 2022 1 Year 2-5 years 5+ years Total
Trade and other payables 8,992,201 - - 8,992,201
Lease Liabilities 437,400 1,239,300 1,210,012 2,886,712
9,429,601 1,239,300 1,210,012 11,441,513
31 December 2021 (Restated)
Trade and other payables 3,256,845 - - 3,256,845
Lease Liabilities 150,981 1,376,301 1,539,620 3,066,902
3,407,826 1,376,301 1,539,620 6,323,747
Both the Group and the Company have no derivative financial liabilities as at
31 December 2022.
7 OPERATING SEGMENTS
The Aquis Group can be split into 3 operating segments, each offering multiple
products and services and benefitting from Group synergies. The specific focus
of these activities are:
1) Aquis Markets - operator of MTF and related services. The Group
operates two MTFs: Aquis Markets (AQXE), which is UK regulated and Aquis
Exchange Europe (AQEU), which is French regulated. Another revenue stream for
this division is the provision of data services to third party vendors;
2) Aquis Stock Exchange (AQSE) - primary listings and trading business.
Within this division is AQSE Main Market, AQSE Growth Market, AQSE Trading and
the provision of data services;
3) Aquis Technologies - developer of exchange technology and services. The
product offering includes Aquis Matching Engine, Aquis Market Surveillance,
Aquis Market Gateway and related services including market surveillance and
operations.
Aquis Exchange PLC is the parent company and comprises AQXE and Aquis
Technologies. It owns 100% of its two subsidiaries, AQEU and AQSE. Management
monitors the Group's overall performance regularly using a set of established
Key Performance Indicators including revenue, net profit and EBITDA. When
monitoring the performance of each operating segment individually, management
examines the discrete financial information available which will normally
include revenue and gross profit for each division. Assets and liabilities,
income tax and IFRS 2 charges are not reported internally to Chief Operating
Decision Maker. In line with IFRS 8 the operating segments are reported
separately as follows:
2022 AQXE & AQEU AQSE Aquis Technologies Total
Revenue 12,450,578 2,444,370 5,034,579 19,929,527
Impairment credit on contract assets - - 133,484 133,484
Impairment charge on trade and other receivables - (12,784) - (12,784)
Costs (8,687,263) (2,043,164) (3,509,491) (14,239,918)
EBITDA 3,763,315 388,422 1,658,572 5,810,309
Depn, amortisation and net interest (1,283,900) - - (1,283,900)
Profit Before Tax 2,479,415 388,422 1,658,572 4,526,409
2021 (Restated) AQXE & AQEU AQSE Aquis Technologies Total
Revenue 10,897,483 1,880,666 4,404,606 17,182,755
Impairment charge on contract assets - - (972,648) (972,648)
Impairment charge on trade and other receivables - (28,012) - (28,012)
Costs (8,475,927) (2,074,604) (1,009,469) (11,560,000)
EBITDA 2,421,556 (221,950) 2,422,489 4,622,095
Depn, amortisation and net interest (1,057,971) - - (1,057,971)
Profit Before Tax 1,363,585 (221,950) 2,422,489 3,564,124
The tables above represent the segment-level information that is monitored by
the Chief Operating Decision Makers, which are the Chief Executive Officer,
Chief Operating Officer and the Chief Financial Officer. All non-current
assets are held centrally by Aquis Exchange PLC, other than the lease for the
Paris office assigned to AQEU. The geographical analysis of the non-current
assets is as follows; UK: £1,815k, Singapore: £3,471k and South Africa:
£1,815k, Total: £7,461k. Gross revenue from one customer amounted to
£3,383k (2020: £3,785k) arising from license and maintenance fees. There are
no other customers with revenue greater than 10% of total revenue for the
Group.
8 EMPLOYEES
The monthly average number of persons (including directors) employed by the
Group during the year was:
Group 2022 2021
Number
Number
Management 4 2
IT 20 19
Compliance and Surveillance 11 10
Operations 7 9
Business Development 17 8
Finance / HR / Admin 5 4
Marketing 2 2
66 54
Company 2022 2021
Number
Number
Management 2 2
IT 18 18
Compliance and Surveillance 5 4
Operations 7 8
Business Development 10 5
Finance / HR / Admin 5 3
Marketing 2 2
49 42
Their aggregate remuneration was comprised of:
Group 2022 2021
£
£
Salaries and wages 6,598,427 6,129,802
Social security costs 967,032 815,822
Other pension costs 159,366 183,940
Share based payments 819,872 571,834
Employee benefits 170,102 165,617
8,714,799 7,867,015
Company 2022 2021
£
£
Salaries and wages 4,698,746 4,605,033
Social security costs 680,908 560,051
Other pension costs 116,150 145,884
Share based payments 819,872 576,609
Employee benefits 169,596 165,357
6,485,272 6,052,934
9 RETIREMENT BENEFIT SCHEME
Defined contribution schemes
The Group operates a defined contribution pension scheme for all qualifying
employees. The assets of the scheme are held separately from those of the
Company in an independently administered fund.
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior periods.
10 DIRECTORS REMUNERATION
Detail on Directors remuneration are included within the Directors Report in
the FY22 Annual Report.
Group 2022 2021
£
£
Salaries, fees and bonuses 1,562,555 1,052,077
Taxable benefits 49,250 35,713
Share-based payments 445,250 528,070
Remuneration for qualifying services 2,057,055 1,615,860
Remuneration disclosed above include the following amounts paid to the highest
paid director:
2022 2021
£
£
Salaries, fees and bonuses 366,060 393,777
Taxable benefits 17,500 17,301
Share-based payments 162,500 264,035
Remuneration for qualifying services 546,060 675,113
Company 2022 2021
£
£
Salaries, fees and bonuses 1,437,555 1,052,077
Taxable benefits 49,250 35,713
Share-based payments 445,250 528,070
Remuneration for qualifying services 1,932,055 1,615,860
11 REVENUE
An analysis of the company's revenue is as follows:
Group Company
2022 2021 2022 2021
Restated
£
£
£
£
Revenue analysed by class of business
Exchange fees 10,869,442 9,766,046 3,894,736 3,476,206
Licence fees 5,034,579 4,404,606 4,970,622 4,404,606
Data vendor fees 3,002,986 2,319,360 1,477,167 1,362,615
Issuer fees 1,022,520 692,743 - -
19,929,527 17,182,755 10,342,525 9,243,427
Revenues from customers by class of business is as follows:
Group Company
2022 2021 2022 2021
Restated
£
£
£
£
Revenue analysed by class of business
AQXE & AQEU
Exchange fees 10,244,767 9,323,559 3,894,736 3,476,206
Data vendor fees 2,205,811 1,573,925 1,477,167 1,362,615
AQSE
Exchange fees 624,675 442,487 - -
Data vendor fees 797,175 745,435 - -
Issuer fees 1,022,520 692,743 - -
Aquis Technologies
Licence fees 5,034,579 4,404,606 4,970,622 4,404,606
19,929,527 17,182,755 10,342,525 9,243,427
Revenues from customers attributable to each of the following countries
Group Company
2022 2021 2022 2021
Restated
£
£
£
£
Country
Australia 58,325 35,931 31,403 23,600
British Virgin Islands 8,575 12,473 - -
Canada 22,860 10,220 - -
Cayman Islands 14,717 1,000 - 1,000
China 25,025 - - -
Cyprus 8,075 6,800 - -
Denmark 38,259 - 10,859 -
Finland 13,500 - 8,931 -
France 1,201,936 949,349 528,432 125,915
Germany 182,715 299,801 62,080 74,829
Gibraltar 12,075 - - -
Guernsey 7,977 1,700 - -
Hong Kong 15,300 92,706 10,112 74,300
Ireland 1,422,523 78,611 463,743 72,611
Isle of Man 17,717 - - -
Italy 18,900 - 12,472 -
Jersey 23,371 8,800 - -
Kenya 4,000 - - -
Luxembourg - 15,000 - 15,000
Netherlands 47,789 37,200 31,643 38,556
New Zealand 2,425 - - -
Norway 34,950 34,300 - -
Peru - 1,700 - -
Singapore 3,646,556 - 3,646,556 -
Slovenia - 2,333 - -
South Africa 117,320 2,168,290 109,245 2,161,490
Spain 47,039 - 13,689 -
Sweden 15,300 5,600 10,112 5,600
Switzerland 197,312 159,017 69,666 79,522
United Arab Emirates 17,150 15,300 - -
United Kingdom 11,223,396 11,727,897 4,469,782 5,592,886
United States 1,484,440 1,518,727 863,800 978,118
19,929,527 17,182,755 10,342,525 9,243,427
Subscription fees and data vendor fees:
Subscription fees and some data vendor fees are accounted for under IFRS 15
and are all recognised at point in time as they reflect variable revenue
determined on a monthly basis. In addition to the variable monthly fee some
AQSE data vendors pay an annual fee for access to real time and/or end of day
data, which is recognised over time as the performance obligation of providing
data is fulfilled.
The Group begins to recognise monthly subscription fees, data vendor fees, and
connectivity fees when the customer conformance test is satisfactorily
concluded, and an acceptance certificate is issued. This is then verified by
the customer starting to utilise the platform, which is the point in time that
the Group determines that the customer has obtained control of the goods.
In the case of subscription, connectivity and data fees, invoices are raised
monthly in arrears and there is no obligation for a refund, return or any
other similar obligation. There is no constrained variable consideration in
any customer contracts, and the transaction price is allocated in full at a
single point in time when the customer obtains control of the goods.
Licence fees and contract assets:
Aquis Exchange PLC provides technology services under licence to clients. The
services comprise the provision of an exchange platform and / or a
surveillance system and may also include support services comprising basic
infrastructure support or additional services. The duration of the licences
varies between 1 and 7 years and will consist of an implementation fee, and,
post implementation, a monthly licence fee for the duration of the contract.
The monthly fees also cover system maintenance and system upgrades that
typically occur every 12 - 18 months. The licensing contracts are accounted
for under IFRS 15 and any corresponding contract assets are subject to IFRS 9
provisioning, as disclosed further in Note 12. Contract liabilities arise when
consideration has been provided to Aquis prior to completion of relevant
performance obligations as outlined below. There balances typically arise when
customers pay in advance of implementation. As of the balance sheet date there
are no contract liabilities (2021: nil).
The revenue from licensing contracts with customers has been categorised
reflecting the nature, amount, customer categorisation (see also Note 5),
contract duration and uncertainty of revenue and cash flows. Revenue from
licensing contracts is assessed for each contract and is recognised as and
when each performance obligation is satisfied. A transaction price is
determined by the contractual terms of an agreement. Transaction prices are
allocated to each performance obligation based on the standalone price of the
product or service offered by the Group. The list of performance obligations
included within Aquis' Technology Licence agreements is outlined below.
For licensing contracts, the Company has assessed the expected credit loss of
each client individually. The transaction price is allocated according to the
Group's obligations to the client over the course of licence period. There is
no constrained variable consideration in any customer contracts.
The licensing fees line item also includes connectivity fees for licensing
contract customers that are recognised at a point in time as they reflect
variable revenue determined on a monthly basis, and are underpinned by a
separate agreement.
Contract balances are thus analysed:
Contract Assets (Group and Company) 2022 2021
£
£
As at 1 January 5,009,162 1,749,834
New contracts 3,805,388 3,788,615
Foreign exchange gains 87,784 -
Impairment of contract assets - -
Transfers to trade receivables (1,756,639) (994,482)
Maintenance fees 315,687 465,195
7,461,382 5,009,162
The scope of a Technology License contract was amended during the year which
resulted in cumulative catch-up adjustments of £191,000 (2021: -£147,000)
being recognised in the year despite satisfaction of their performance
obligation in prior periods.
Upon invoicing of revenues the right to consideration becomes unconditional
and thus contract asset balances have been reduced for balances transferred to
trade receivables. The unrecovered amount included in receivables is £462,563
(2021: £177,527).
Performance obligation (PO) Recognition of revenue upon completion
PO1: Implementation fees Implementation/ project fees are upfront, non-refundable fees that a
customer pays in order to obtain the user agreement. Even if the user
acceptance certificate is never issued, the implementation fee cannot be
reclaimed and so the revenue is guaranteed and can be recognised at the time
of invoice as Aquis becomes unconditionally entitled to payment.
PO2: Licencing fees At a point in time upon signing the user acceptance agreement, as the Company
has fulfilled its promise to deliver the licence (i.e. the system has been
deployed in the client's production environment). A corresponding contract
asset (trade receivable) is recognised to reflect the customer's obligation to
pay the monthly licensing fee over the remaining term of the contract.
PO3: Maintenance fees Over the course of the licensing contract, as the performance obligation to
maintain the system is settled and the customer benefits from using the
system.
The aggregate amount of the transaction price per customer category that has
been allocated to the performance obligations for the year is as follows:
2022
Group £ £ £ £ £ £
Category 1 2 3 4 5 Total
PO1 - - 236,842 - - 236,842
PO2 - 191,000 3,382,792 231,596 - 3,805,388
PO3 - 315,687 - - - 315,687
- 506,687 3,619,634 231,596 - 4,357,917
2021
Group £ £ £ £ £
Category 1 2 3 4 Total
PO1 - - - - -
PO2 - 3,788,615 - - 3,788,615
PO3 - 59,943 25,080 - 85,023
- 3,848,558 25,080 - 3,873,638
The amount of revenue to be recognised from unsatisfied performance
obligations with Technology License customers is as follows:
2023 2024 2025 2026-2029 Total
As at 31 December 2022 £ £ £ £ £
Maintenance and other support 429,384 353,197 234,245 691,179 1,708,005
Regulatory services - - - - -
429,384 353,197 234,245 691,179 1,708,005
2022 2023 2024 2025-2027 Total
As at 31 December 2021 £ £ £ £ £
Maintenance and other support 314,582 286,285 228,197 300,424 1,129,488
Regulatory services - - - - -
314,582 286,285 228,197 300,424 1,129,488
Customer risk category definitions: 2022: 1 - High, 2 - Moderately High, 3 -
Moderate, 4 - Moderately Low and 5 - Low. (2021: 1 - High, 2 - Moderately
High, 3 - Moderately Low and 4 - Low)
12 IMPAIRMENT
The Group has two types of financial asset that are subject to potential
impairment, which are contract assets relating to technology licencing
contracts within the Company and also trade receivables arising on services
provided in the AQSE subsidiary.
The Group have concluded that trade receivables and contract assets have
different risk characteristics and therefore the Expected Credit Loss (ECL)
rates for each type of asset are measured separately. Since they comprise a
portfolio of only a small number of clients, contract assets have been
assessed on a client-by-client basis, whilst trade receivables have been
grouped based on shared credit risk characteristics and the days past due.
Further details on both methodologies can be found below.
IFRS 9 provisioning is applied to technology licensing contract assets based
on management estimates of the collectability of contracts over their useful
life, and which are re-assessed at each renewal and also at each year-end.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for trade receivables and
contract assets and therefore the ECL for each contract is assessed on a
lifetime basis rather than at each reporting date. As the simplified approach
is adopted it is not necessary to consider the impact of a significant
increase in credit risk.
Group Company
Reconciliation of opening to closing loss allowances 2022 Contract Trade Receivables Contract Trade Receivables
Assets
£
Assets
£
£
£
Opening Impairment Provision at 1 January 1,480,762 46,169 1,480,762 -
ECL increase during the year - 12,784 - -
Impairment on new contract assets 713,230 - 713,230 -
Impairment reversed over time (846,714) - (846,714) -
Closing Impairment Provision at 31 December 1,347,278 58,953 1,347,278 -
Group Company
Reconciliation of opening to closing loss allowances 2021 Contract Trade Receivables Contract Trade Receivables
Assets
£
Assets
£
£
£
Opening Impairment Provision at 1 January 508,601 17,670 508,601 -
ECL increase during the year 14,895 28,499 14,895 -
Impairment on new contract assets 1,321,449 - 1,321,449 -
Impairment reversed over time (364,183) - (364,183) -
Closing Impairment Provision at 31 December 1,480,762 46,169 1,480,762 -
Technology Licencing Contracts
During contract negotiation Aquis assesses the potential credit risk of a
prospective client prior to committing to the contract. Aquis' assessment of
the credit risk associated with a licensing customer is conducted at inception
of the contract (but before the user agreement is signed) and includes factors
that are specific to the customer, general economic conditions and an
assessment of both the current as well as the forecast direction of these
conditions. Based on this assessment, the prospective customer is assigned to
a customer category with an appropriate risk rating.
A probability of default (PD) occurring during the lifetime of the contract
ranging from 0-50% is applied to each client based on the assigned risk
category. The model has been further enhanced during the year to allow greater
granularity by creation of an additional category, allowing increased
differentiation between contracts. The credit risk of Aquis' technology
clients ranges from those that are in infant start up stages (i.e. riskier) to
those that are highly liquid and solvent conglomerates (little to no risk). As
such, the Directors view the range of PD's for the portfolio to be between 50%
for those with the highest level of risk to 0% for those that are so near to a
zero level of risk that the PD is zero in substance. The Directors are
comfortable that the assigned PD is sufficiently accurate to reflect the
elevated risk associated with each start up when considering the idiosyncratic
circumstances and risk factors of each client. The Directors would not enter
into any contract where the PD is deemed to be any higher than 50%. The
portfolio of technology contracts held by Aquis have PDs that have an
observable relationship with time, i.e. the PD will decrease each year as the
contract progresses. The credit risk of the contracts is directly linked to
the success of the business and its ability to raise capital, which increases
each year the company successfully continues in operation.
The Loss Given Default (LGD) is also quantified on a customer-by-customer
basis and is done through an assessment of the recovery rate the Directors
anticipate will be applied to the customer in the event of liquidation.
Currently the low number of technology clients allows Aquis to assess each
contract individually on the appropriate credit risk category, and this is
determined based on several factors including company specific factors and
also any future macro-economic changes, the sensitivity to these potential
changes and the impact that these may have on the recoverability of the
outstanding debt.
Although the full risk assessment is completed only at the start of the
contract, Aquis regularly assesses whether macro-economic factors could have a
bearing on the success of the client and the recoverability of the outstanding
debt. At renewal a desk top assessment is made as to whether the previous
categorisation remains appropriate.
The Contract Asset Impairment provision as at 31 December 2022 is £1,348k
(2021: £1,481k) and has been calculated with reference to estimations based
on the PD and LGD as described above for each individual contract taking into
account the nature, amount, customer categorisation, contract duration and
uncertainty of revenue and cash flows.
The contracts are short-to-medium term in length and, as at 31 December 2022,
the average contract duration for the portfolio of technology contracts is 3.1
years. (2021: 2.7 years).
In calculating the Impairment provision, the impact of a significant change in
macroeconomic circumstances on the expected PD over the life of the contracts
has been assessed. Management does not believe that there is significant
impact on the assessed PDs for each of the existing contracts from these
variables, with the success of the contractual counterparts more driven
through individual factors already incorporated within the ECL assessment. In
this assessment the macroeconomic variables used are based on 3-year average
forecast rates for 2023-2025, which is an appropriate timescale based on the
average contract duration. The baseline rates are defined using the rates
forecast by the Monetary Policy Committee ("MPC"). The macroeconomic
indicators used in the analysis are as follows:
Macroeconomic Indicators - 3 year average forecast Downside % Baseline % Upside %
UK GDP -4.8% -0.43% 4.0%
UK Unemployment 7.9% 5.7% 3.5%
UK CPI Inflation 5.3% 2.2% -0.5%
In order to quantify the impact of movement in credit losses that occur as a
result of macro-economic developments, the Directors have flexed the PD
associated with each client category in three scenarios: a baseline scenario
(maintaining the status quo, keeping each assessment criteria reflecting
current client circumstances and forecast macroeconomic indicators), a
downside scenario (prolonged recession), and an upside scenario (fast economic
recovery).
The model incorporates all three possible outcomes by attaching a probability
weighting to each scenario. The range of outcomes is detailed in the table
below:
At 31 December 2022 Downside Baseline Upside
£
£
£
Impairment provision 1,628,007 1,347,765 1,066,549
Impact on PD 5% 0% -5%
Probability weighting 25% 50% 25%
Trade Receivables
In line with IFRS 9 guidance, the Group has applied a simplified "Expected
Credit Loss" (ECL) model on trade receivables where a risk of potential
non-payment may arise. In doing so the Group has considered the probability of
a default occurring over the contractual life of the financial asset on
initial recognition of the asset. Such trade receivables largely arise within
the AQSE subsidiary, with those arising in Aquis Exchange PLC predominantly
with institutions where the resultant credit risk is assessed as
non‑material, with no historical evidence of non-payment, hence no ECL
provision is recognised on trade receivables. The trade receivables are
measured at amortised cost and the calculated ECL provision is deducted from
the gross carrying amount of the assets. When a trade receivable is determined
to be uncollectible, it is written off against the provision account for trade
receivables.
The simplified provision matrix is based on historic default rates over the
expected life of the trade receivables and is adjusted where appropriate for
forward-looking estimates. The trade receivables balance is split into 8
separate categories depending on the age of each debt, ranging from 0 days
past due to over 180 days past due. An appropriate estimation of the
probability of default is applied to each category of debt, based on both
historical default rates and expectations for the future.
The key assumptions in calculating the ECL for trade receivables are that the
probability of default increases with the age of the debt and that the debts
are homogenous, i.e. the credit risk assessment is based on age rather than by
individual client. The expected loss rates are based on historical credit
losses experienced and adjusted to reflect current and forward-looking
information. AQSE trade receivables have been assessed to have a higher risk
of impairment than the rest of the Group's trade receivables.
Trade receivables have payment terms of 30 days from the date of billing. For
debts older than 180 days, debts are assessed on a case-by-case basis and are
written off if there is no reasonable expectation of recovery. During the year
a total of £12,784 (2021: £28,499) of trade receivables were written off
relating to debts from companies that had ceased membership with AQSE and the
contractual rights to cash flows from the financial assets were deemed to have
expired.
The total loss allowance is calculated by applying the expected loss rate to
the trade receivables balance in each age bucket. The total portion of the ECL
balance relating to trade receivables as at 31 December 2022 was £58,953
(31 December 2021: £46,169) which was comprised as follows:
Group - 2022
Days past Due 0 1-29 30-59 60-89 90-124 days 125 - 149 days 150-179 days Over 180 days Total
days
days
days
days
Expected loss rate 0.5% 1% 3% 5% 10% 25% 50% 100%
Trade receivables 106,305 33,200 6,800 2,200 4,500 - 15,780 78,845 247,630
Expected loss 532 332 204 110 450 - 7,890 78,845 88,363
Specific provisions charged / (released) - - - - - - - (29,410) (29,410)
Total Expected Credit Losses 532 332 204 110 450 - 7,890 49,435 58,953
Group - 2021
Days past Due 0 1-29 30-59 60-89 90-124 days 125 - 149 days 150-179 days Over 180 days Total
days
days
days
days
Expected loss rate 0.5% 1% w3% 5% 10% 25% 50% 100%
Trade receivables 88,947 17,650 14,405 4,200 14,200 700 - 43,310 183,413
Expected loss 445 177 432 210 1,420 175 - 14,811 17,670
Specific provisions charged / (released) - - - - - - 28,499 28,499
Total Expected Credit Losses 445 177 432 210 1,420 175 - 43,310 46,169
13 OPERATING EXPENSES
Earnings before interest, taxation, depreciation and amortisation is stated
after charging:
Group Company
Administrative Expenses 2022 2021 2022 2021
Restated
£
£
£
£
Fees payable to the company's auditor for the audit of the company's financial 241,250 222,000 190,000 167,000
statements
Fees payable to the company's auditor for the Client Asset audit 10,000 7,500 10,000 7,500
Share-based payments 819,872 571,834 819,872 576,609
Exchange loss/(gains) 116,415 (341,877) (50,269) -
Employee costs 7,894,927 7,295,181 5,665,400 5,476,324
Operating costs (net of intercompany recharge) 5,157,454 3,805,362 (1,018,914) (2,189,408)
14,239,918 11,560,000 5,616,089 4,038,025
Other administrative expenses comprise marketing fees, data centre and other
service fees incurred in the ordinary course of business.
Profit before taxation is stated after charging:
Group Company
Depreciation, amortisation and finance costs 2022 2021 2022 2021
£
£
£
£
Depreciation of property, plant and equipment 760,537 518,805 688,615 513,545
Amortisation of intangible assets 498,955 513,435 498,955 513,435
1,259,492 1,032,240 1,187,569 1,026,980
Net finance expense on lease liabilities and rent deposit asset (Note 25) 53,130 26,175 36,948 26,175
Interest on deposited funds (28,722) (444) (2,416) (444)
1,283,900 1,057,971 1,222,101 1,052,711
Total company expenses were as follows:
Group Company
Total expenses 2022 2021 2022 2021
£
£
£
£
Expenses 15,523,818 12,617,971 6,838,190 5,090,736
14 SHARE-BASED PAYMENTS
Aquis Exchange PLC has five different share schemes which have been set up
since incorporation of which one, being the EMI scheme, is now closed to new
entrants. A new scheme, being the Premium Priced Option scheme was introduced
in 2022.
Aquis Exchange PLC has established two Trusts (see Note 21) to which it has
provided funding to allow the purchase of shares for future settlement of the
share awards noted below.
The Fair Value of any awards made in the year is calculated and recognised
through the P&L over the appropriate period as set out in the detail on
each scheme below. The total costs recognised through the P&L in the Group
in 2022 was £819,872 (2021: £571,834).
Group Company
2022 2021 2022 2021
£
£
£
£
EMI Option Scheme 58,430 160,052 58,430 152,577
Restricted Share Plan (RSP) scheme 485,860 314,222 485,860 314,222
Company Share Ownership Plan (CSOP) scheme 43,039 19,045 43,039 19,045
Premium Priced Option (PPO) scheme 69,000 - 69,000 -
Share Incentive Plan (SIP) scheme 163,543 78,515 163,543 90,765
819,872 571,834 819,872 576,609
The aggregate level of share options and shares awarded which existed at the
year end is 2,207,649 shares (2021: 1,401,259 shares).
Group Company
2022 2021 2022 2021
£
£
£
£
EMI Option Scheme 904,849 937,143 904,849 937,143
Restricted Share Plan (RSP) scheme 346,624 228,768 331,292 228,768
Company Share Ownership Plan (CSOP) scheme 163,090 95,805 145,504 95,805
Premium Priced Option (PPO) scheme 606,931 - 606,931 -
Share Incentive Plan (SIP) scheme 186,155 139,543 186,155 139,543
2,207,649 1,401,259 2,174,731 1,401,259
EMI Share Options
There is one approved EMI scheme, which was initiated in June 2018 when the
first 564,124 options were granted. In April 2020 the second allotment
(approved in and deferred from November 2019 because Aquis was in a close
period) was made with a total of 740,250 options being granted. Options vest
in 3 equal tranches, one, two and three years after grant. The options expire
after 10 years.
In accordance with IFRS 2, the Group has estimated the fair value of options
using a US binomial option valuation model and spread the estimated value
against the profit and loss account over the life of the vesting period.
Of the total number of options granted, 3,999 (2021: 335,753) were exercised,
none (2021: Nil) expired and 28,295 (2021: 24,526) were forfeited during 2022.
The exercise price for the options granted on 14 June 2018 is £2.69 per share
to be settled in cash at the date of exercise. The weighted average remaining
contractual life of options outstanding at the end of the reporting period
amounted to Nil months (2021: 5.5 months).
The US binomial model with an average expiry duration of 5 years, volatility
of 24 and risk-free interest rate of 1.1067% was used to calculate the fair
value of the options granted on 14 June 2018. All options are exercisable at a
price of £2.69 and the weighted average expected life of the options was
estimated to be 5 years.
The exercise price for the options granted on 16 April 2020 is £3.47 per
share to be settled in cash at the date of exercise.
The weighted average remaining contractual life of options outstanding at the
end of the reporting period amounted to 1 year and 3.5 months (2021: 2 years
3.5 months).
The US binomial model using an average expiry duration of 5 years, volatility
of 20 and risk-free interest rate of 0.16% was used to calculate the fair
value of the options granted on 16 April 2020. All options are exercisable at
a price of £3.47 and the weighted average remaining expected life of the
options was estimated to be 5 years.
Details of the EMI scheme are as follows:
2022 2021
Number of Shares Average Number of Shares Average
Exercise
Exercise
Price (£)
Price (£)
• Outstanding at the beginning of the period 937,143 3.31 1,297,421 3.15
• Granted during the period - N/A - N/A
• Forfeited during the period (28,295) 3.22 (24,526) 3.07
• Exercised during the period (3,999) 3.50 (335,753) 2.70
• Expired during the period - - - N/A
• Outstanding at the end of the period 904,849 3.43 937,143 3.31
• Exercisable at the end of the period 670,766 3.24 453,643 3.11
Restricted Share Plan
The Group implemented a Restricted Share Plan (RSP) senior executive option
scheme in 2020. Total grants were made in April 2022 of 107,527 at a grant
price of £4.90 (April 2021: 88,320 options at a grant price of £6.85). A
further grant was made in September 2022 of 10,449 at a grant price of £3.83
(September 2021: Nil).
Options vest three years after grant, with an additional hold period of a
further 2 years and expire after 10 years.
The Black-Scholes model with an average expiry duration of 3 years, volatility
of 21% and risk-free interest rate of 1.669% was used to calculate the fair
value of the options granted in April 2022.
The Black-Scholes model with an average expiry duration of 3 years, volatility
of 21% and risk-free interest rate of 1.891% was used to calculate the fair
value of the options granted in September 2022. The weighted average remaining
contractual life of options outstanding at the end of the reporting period
amounted to 8 years and 7 months (2021: 8 years and 0 months).
Details of the RSP scheme are as follows:
2022 2021
Number of Shares Average Exercise Price (£) Number of Shares Average Exercise Price (£)
• Outstanding at the beginning of the period 228,768 4.88 140,448 3.64
• Granted during the period 117,856 4.86 88,320 6.85
• Forfeited during the period - N/A - N/A
• Exercised during the period - N/A - N/A
• Expired during the period - - - N/A
• Outstanding at the end of the period 346,624 4.81 228,768 4.88
• Exercisable at the end of the period - - - -
Company Share Ownership Plan
The Group implemented a Company Share Ownership Plan (CSOP) employee option
scheme in 2021. Grants in April 2022 were made amounting to 78,045 options at
a grant price of £4.90 (April 2021: 100,000 options at a grant price of
£6.85).
Options vest three years after grant and expire after 10 years.
The Black-Scholes model with an average expiry duration of 5 years, volatility
of 21 and risk-free interest rate of 1.669% was used to calculate the fair
value of the options granted in April 2022. The weighted average remaining
contractual life of options outstanding at the end of the reporting period
amounted to 9 years and 1 months (2021: 8 years and 8 months).
Details of the CSOP scheme are as follows:
2022 2021
Number of Shares Average Exercise Price (£) Number of Shares Average Exercise Price (£)
• Outstanding at the beginning of the period 95,805 6.85 - -
• Granted during the period 78,045 4.90 100,000 6.85
• Forfeited during the period (10,760) 6.39 (4,195) 6.85
• Exercised during the period - N/A - N/A
• Expired during the period - N/A - N/A
• Outstanding at the end of the period 163,090 5.95 95,805 6.85
• Exercisable at the end of the period - - - -
Premium Priced Option Plan
The Group implemented a Premium Priced Option (PPO) option scheme in 2022
primarily focussed on Senior Executives. Grants in June 2022 were made
amounting to 684,811 options at a grant price of £3.88 (2021: No PPO options
were granted).
Options vest 3 years after grant and expire after 7 years.
The Black-Scholes model with an average expiry duration of 5 years, volatility
of 22.5% and risk-free interest rate of 1.5% was used to calculate the fair
value of the options granted in June 2022. The weighted average remaining
contractual life of options outstanding at the end of the reporting period
amounted to 6 years and 6 months (2021: N/A).
Details of the PPO scheme are as follows:
2022 2021
Number of Shares Average Exercise Price (£) Number of Shares Average Exercise Price (£)
• Outstanding at the beginning of the period - - - -
• Granted during the period 684,811 4.79 - -
• Forfeited during the period (77,880) 4.79 - -
• Exercised during the period - - - -
• Expired during the period - - - -
• Outstanding at the end of the period 606,931 4.79 - -
• Exercisable at the end of the period - - - -
Share Incentive Plan
The employee Share Incentive Plan (SIP) is administered by Equiniti ("the
Trust"). The Trust purchases shares in Aquis on the open market on behalf of
employees that have elected to take part. Employees are limited to a maximum
annual contribution of £1,800. The scheme allows employees to become
shareholders in the Company in a tax efficient manner, with the Company
purchasing two matching shares for every partnership purchased by the
employee. The terms of the matching shares include that they must be held by
the Trust for three years before they can be transferred or sold, and the
employee must remain employed with the Company throughout this period. Free
shares are also awarded to staff on an annual basis where performance criteria
are met, with the Company purchasing up to a further 2 shares for each
partnership share purchased.
The fair value of the matching and free shares purchased by the company are
expensed over the three year vesting period. Management assumes that the cost
of the shares is a close approximation of the fair value of the shares as the
market price tends to be reflective of the discounted value of research
analysts' medium-term projections.
Details of the SIP scheme are as follows:
2022 2021
Number of Shares
Number of Shares
• Shares held at the beginning of the period 139,543 104,656
• Partnership shares purchased in the period 12,478 8,611
• Matching shares purchased during the period 24,956 17,222
• Free shares purchased during the period 22,465 16,327
• Exercised during the period (9,241) (6,483)
• Forfeited during the period (4,046) (790)
• Shares held at the end of the period 186,155 139,543
15 DEFERRED TAX ASSET
A net deferred tax asset of £1,593,931 (2021: £1,292,260) at the Group and
£1,456,184 (2021: £1,292,260 at the Company) relating to unused tax losses
has been recognised in the current period. The losses are considered able to
offset against the Company's taxable profits expected to arise in the next
three accounting periods. This comprises a gross Deferred Tax Asset of
£1,716,748 (2021: £1,323,459) at the Group and £1,578,001 (2021:
£1,323,459 at the Company) offset by a Deferred Tax Liability of £122,817
(2021: £31,199) at the group and Company arising in the Company on the timing
difference on accounting depreciation versus tax written down value charge.
The assessment of future taxable profits involves a significant degree of
estimation, which management have based on the latest budget for the Company
approved by the Board which reflects the improvement trading performance
largely due to the continued expansion of the business as discussed in the
Strategic Report. The preparation of the budget involves a rigorous review
process by the Board, whereby each revenue stream and cost is scrutinised and
challenged in detail so that the final version is considered to be an accurate
and plausible representation of what is likely to be achieved in the period.
In calculating the deferred tax asset, management have applied a conservative
approach by using probability adjusted revenues, applying lower probabilities
to budgeted revenue from more uncertain sources such as large technology
licencing contracts, with the effect of reducing estimated profits over the
3-year period from the original forecasts. The analysis predicts profitability
is still achievable even when revenues are reduced to reflect this adjustment.
The net deferred tax balance comprises temporary differences attributable to:
Group 2022 2021
£
£
Tax losses 1,716,748 1,323,459
Fixed asset timing differences (122,817) (31,199)
Total deferred tax asset 1,593,931 1,292,260
Company 2022 2021
£
£
Tax losses 1,579,001 1,323,459
Fixed asset timing differences (122,817) (31,199)
Total deferred tax asset 1,456,184 1,292,260
Movement in deferred tax balance:
Group 2022 2021
£
£
At 1 January 1,292,260 203,717
Origination and reversal of timing differences 229,267 1,024,212
Effects of changes in tax rates 72,404 64,331
At 31 December 1,593,931 1,292,260
Company 2022 2021
£
£
At 1 January 1,292,260 203,717
Origination and reversal of timing differences 124,581 1,024,212
Effects of changes in tax rates 39,343 64,331
At 31 December 1,456,184 1,292,260
The Group has combined losses of £46,116,352 (2021: £49,555,213) available
for carry forward and to be used against future trading profits of the same
trade in which they were generated. This is comprised of trading losses
generated in the UK by Aquis Exchange PLC and Aquis Stock Exchange Limited.
There are no losses carried forward in France within Aquis Exchange Europe
SAS.
The Company has estimated losses of £11,747,647 (2021: £14,801,969)
available for carry forward against future trading profits.
16 INCOME TAX
The credit for the year can be reconciled to the loss per the income statement
as follows:
Group Company
2022 2021 2022 2021
Restated
Restated
Current tax
£
£
£
£
UK Corporation tax charge - - - -
Overseas tax charges on foreign operations 144,469 - - -
Total tax charge 144,469 - - -
Deferred tax £ £ £ £
Origination and reversal of timing differences (229,267) (1,024,212) (124,581) (1,024,212)
Effect of changes in tax rates (72,405) (64,331) (39,344) (64,331)
Total deferred tax credit (301,672) (1,088,543) (163,925) (1,088,543)
The credit for the year can be reconciled to the loss per the income statement
as follows:
Group Company
2022 2021 2022 2021
Restated
Restated
£
£
£
£
Profit for the year before taxation 4,526,409 3,564,124 3,637,819 3,180,530
Expected tax charge based on a corporation tax rate of 19% 860,018 677,184 691,186 604,301
Expected tax charge based at effective overseas rates of 25% 177,647 - - -
Fixed asset differences (40,330) (12,963) (40,330) (12,963)
Expenses not deductible for tax purposes 109,502 100,424 109,104 98,891
Additional deduction for R&D expenditure - (267,184) - (267,184)
Other differences (89,428) (1) 16 -
Remeasurement of deferred tax for changes in tax rates (72,405) (64,331) (39,344) (64,331)
Movement in deferred tax not recognised (1,069,029) (1,413,895) (884,557) (1,447,257)
Movement in deferred tax not recognised at overseas rates (33,178) (107,777) - -
Tax credit for the period (157,203) (1,088,543) (163,925) (1,088,543)
17 EARNINGS PER SHARE
Group Company
2022 2021 2022 2021
Restated
Restated
Number of Shares
Weighted average number of ordinary shares for basic earnings per share 27,508,166 27,339,947 27,508,166 27,339,947
Weighted average number of ordinary shares for diluted earnings per share 28,425,419 28,456,875 28,425,419 28,456,875
Earnings
Profit for the year from continued operations 4,683,612 4,652,667 3,801,744 4,269,073
Basic and diluted earnings per share (pence)
Basic earnings per ordinary share 17 17 14 16
Diluted earnings per ordinary share 16 16 13 16
Basic earnings per share is in respect of all activities of the Group and
diluted earnings per share takes into account the dilution effects which would
arise on conversion or vesting of all outstanding share options and share
awards under the Employee Share Incentive Plan (SIP).
The basic EPS when adjusted for outstanding EMI options of 937,143 (2021:
1,297,421) and adjusted for forfeited options in the year of 28,295 (2021:
24,526) gives a weighted average of 28,425,419 (2021: 28,456,875).
18 INTANGIBLE ASSETS
Group and Company Group Other Intangibles Total Group
Developed
Intangible
Goodwill
trading platforms
Assets
Cost
As at 1 January 2021 2,698,021 - 2,698,021 83,481
Additions- internally generated/ acquired 313,463 37,430 350,893 -
As at 31 December 2021 3,011,484 37,430 3,048,914 83,481
Additions- internally generated/ acquired 605,599 171,866 777,465 -
As at 31 December 2022 3,617,083 209,296 3,826,379 83,481
Accumulated amortisation and impairment
As at 1 January 2021 1,781,765 - 1,781,765 -
Charge for the year 505,515 7,920 513,435 -
As at 31 December 2021 2,287,280 7,920 2,295,200 -
Charge for the year 484,915 14,040 498,955 -
As at 31 December 2022 2,772,195 21,960 2,794,155 -
Carrying amount
As at 31 December 2022 844,888 187,336 1,032,224 83,481
As at 31 December 2021 724,204 29,510 753,714 83,481
All intangible assets within the Group are held by the Company.
Goodwill
On 11 March 2020 the Group acquired NEX Exchange Limited which resulted in
recognition of goodwill of £83,481. The cash generating unit associated with
the goodwill is determined to be the assets associated with the investment in
AQSE.
The goodwill arising on consolidation represents the growth potential of the
primary listings exchange and the synergies with the rest of the business.
AQSE has no intangible assets.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to a cash
generating unit, being the net assets related to Aquis Stock Exchange.
The recoverable amounts of the cash generating unit has been determined based
on a value-in-use calculation using discounted cash flow forecasts based on
business plans prepared by management for a three-year period ending 31
December 2025. The two key estimates used in this model were an estimated
terminal growth rate of 2%, and a pre-tax discount factor of 12%.
The results of the testing indicated the projected value of Aquis Stock
Exchange to exceed its carrying value. As a result no impairment loss has been
recognised in the current year.
19 PROPERTY, PLANT AND EQUIPMENT
Group Fixtures, fittings and equipment Computer equipment Right of use asset Total
Cost
As at 1 January 2021 251,540 2,211,295 1,469,474 3.932.309
Additions 72,636 246,885 3,758,437 4,077,958
Disposals - (68,926) (963,837) (1,032,763)
Foreign Currency Translation Differences 285 - (25,315) (25,030)
As at 31 December 2021 324,461 2,389,254 4,238,759 6,952,474
Additions 167,440 601,979 - 769,419
As at 31 December 2022 491,901 2,991,233 4,238,759 7,721,893
Accumulated depreciation and impairment
As at 1 January 2021 178,036 1,804,328 346,038 2,328,402
Charge for the year 51,938 312,092 154,775 518,805
Disposals - (41,362) - (41,362)
Foreign Currency Translation Differences 29 - 267 296
As at 31 December 2021 230,003 2,075,058 501,080 2,806,141
Charge for the year 65,263 298,052 397,222 760,537
As at 31 December 2022 295,266 2,373,110 898,302 3,566,678
Carrying amount
As at 31 December 2022 196,635 618,123 3,340,457 4,155,215
As at 31 December 2021 94,458 314,196 3,737,679 4,146,333
Company Fixtures, fittings and equipment Computer Equipment Right of Use Asset Total
Cost
As at 1 January 2021 251,825 2,211,294 1,444,159 3,907,278
Additions 67,500 246,885 3,175,765 3,490,150
Disposal - (68,926) (963,837) (1,032,763)
As at 31 December 2021 319,325 2,389,253 3,656,087 6,364,665
Additions 157,805 595,133 - 752,938
As at 31 December 2022 477,130 2,984,386 3,656,087 7,117,603
Accumulated depreciation and impairment
As at 1 January 2021 178,064 1,804,328 346,332 2,328,724
Charge for the year 51,965 312,092 149,488 513,545
Disposal - (41,362) - (41,362)
As at 31 December 2021 230,029 2,075,058 495,820 2,800,907
Charge for the year 62,746 296,005 329,864 688,615
As at 31 December 2022 292,775 2,371,063 825,684 3,489,522
Carrying amount
As at 31 December 2022 184,355 613,323 2,830,403 3,628,081
As at 31 December 2021 89,296 314,195 3,160,267 3,563,758
20 INVESTMENT IN SUBSIDIARIES
Company 2022 2021
£
£
Investment in subsidiaries 6,884,202 6,884,202
Details of the Company's subsidiaries at 31 December 2022 are set out in the
following table. The investments are measured using the equity method in Aquis
Exchange PLC's standalone accounts.
Name of undertaking Country of incorporation Ownership interest (%) Voting power held (%) Nature of business Carrying amount Carrying amount
31-Dec-22
31-Dec-21
Aquis Stock Exchange UK 100 100 Recognised Investment Exchange 3,677,118 3,677,118
Aquis Exchange Europe SAS France 100 100 European Equities Exchange 3,207,084 3,207,084
6,884,202 6,884,202
The registered office of Aquis Exchange Europe SAS is 231 rue Saint Honoré,
75001 Paris, France. The registered office of Aquis Stock Exchange Limited is
63 Queen Victoria Street, EC4N 4UA,UK.
Both investments were assessed for impairment at year end and no indicators of
impairment were noted, with both Aquis Stock Exchange and Aquis Exchange
Europe SAS profitable in 2022. Therefore, in line with IAS 36 guidance, no
impairment provision has been recognised in Aquis Exchange PLC's financial
statements.
There has been no change in the year of the carrying value of any subsidiary
(2021: £400k increase in Aquis Stock Exchange following a capital injection
in the year) as set out in the table below;
Company 2022 2021
£
£
Carrying amount at 1 January 6,884,202 6,484,202
Capital injection in the year - 400,000
Carrying amount at 31 December 6,884,202 6,884,202
21 INVESTMENT IN TRUSTS
The table below shows the total amount the Company has invested in the two
Trusts in respect of the share based payments arising under (i) the Employee
Share Incentive Plan and (ii) the Restricted Share Plan, Company Share
Ownership Plan and Premium Price Options plan as at the reporting date.
Investments into the Trusts are primarily comprised of cash contributions made
to acquire Company shares. Deductions from the Trusts represent vested shares
withdrawn.
Company 2022 2021
£
£
Investment in Trusts 3,350,325 1,856,964
22 TRADE AND OTHER RECEIVABLES
Current Non-current Total
Group 2022 2021 2022 2021 2022 2021
£
£
£
£
£
£
Trade receivables 2,317,384 1,884,329 - - 2,317,384 1,884,329
Technology licence contract assets 1,104,221 1,112,576 5,009,883 2,415,824 6,114,104 3,528,400
Other receivables 77,635 339,353 342,227 328,832 419,862 668,185
Prepayments 636,186 432,688 - - 636,186 432,688
4,135,426 3,768,946 5,352,110 2,744,656 9,487,536 6,513,602
Current Non-current Total
Company 2022 2021 2022 2021 2022 2021
£
£
£
£
£
£
Trade receivables 2,053,560 1,747,286 - - 2,053,560 1,747,286
Technology licence contract assets 1,104,221 1,112,576 5,009,883 2,415,824 6,114,104 3,528,400
Other receivables 330,957 313,224 319,791 315,350 650,748 628,574
Intercompany receivables 6,485,690 804,406 - - 6,485,690 804,406
Prepayments 596,828 395,061 - - 596,828 395,061
10,571,256 4,372,553 5,329,674 2,731,174 15,900,930 7,103,727
The following details the trade receivables that are stated net of any credit
impairment provision, as set out previously in Note 12 in accordance with
IFRS 9.
Group Company
Trade receivables 2022 2021 2022 2021
£
£
£
£
Gross trade receivables 2,376,337 1,930,011 2,053,560 1,747,286
Expected credit loss provision on trade receivables (58,953) (45,682) - -
Gross contract assets 7,461,382 5,009,162 7,461,382 5,009,162
Expected credit loss provision on contract assets (1,347,278) (1,480,762) (1,347,278) (1,480,762)
Trade receivables net of provisions 8,431,488 5,412,729 8,167,664 5,275,686
23 CASH AND CASH EQUIVALENTS
Group Company
2022 2021 2022 2021
£
£
£
£
Cash at bank 14,170,965 14,046,399 5,595,827 7,094,964
Cash and cash equivalents comprise over night and short term deposits of less
than 3 month and are held with authorised counterparties of a high credit
standing. Management does not expect any losses from non-performance by the
counterparties holding cash and cash equivalents, and there are no material
differences between their book and fair values.
Cash held by Aquis Exchange Europe SAS is predominantly held in a Sterling
denominated bank account.
24 TRADE AND OTHER PAYABLES
Group Company
Current 2022 2021 2022 2021
Restated
£
£
£
£
Trade payables 510,384 170,934 510,068 162,989
Accruals 1,508,760 1,811,168 1,287,138 1,564,785
Deferred revenue 1,358,479 882,525 251,250 270,900
Social security and other taxation 220,593 506,638 220,593 494,107
Overseas corporation tax payable 144,469 - - -
Intercompany payables - - 6,285,752 764,064
Other payables 3,250 204,083 - -
Short term lease liabilities 522,800 208,237 437,400 150,981
4,268,735 3,783,585 8,992,201 3,407,826
25 LEASES
Right of Use Assets
The right-of use asset was measured at the amount equal to the lease
liability, plus prepaid lease payments (being the unamortised portion of the
rent deposit asset). The right of use asset is depreciated over the term of
the lease and was accounted for during the year ended 31 December 2022 as
follows:
Group Company
Property
Property
£
£
Carrying amount at 1 January 2021 1,097,827 1,097,827
Additions 3,758,437 3,175,765
Disposals (963,837) (963,837)
Depreciation for the year (154,748) (149,488)
Carrying amount at 31 December 2021 3,737,679 3,160,267
Depreciation for the year (397,222) (329,864)
Carrying amount at 31 December 2022 3,340,457 2,830,403
Rent deposit asset
The rent deposit asset (excluding the prepaid right of use portion which has
been included in the calculation of the right of use asset above) is a
financial asset measured at amortised cost and was accounted for during the
year ended 31 December 2022 as follows:
Group Company
Rent Deposit Asset
Rent Deposit Asset
£
£
Carrying amount at 1 January 2021 228,765 228,765
Additions 374,442 361,932
Finance income on rent deposit asset 8,835 7,444
Carrying amount at 31 December 2021 612,042 598,141
Recovery of rent deposit (269,956) (282,315)
Finance income on rent deposit asset 14,561 14,121
Carrying amount at 31 December 2022 356,647 329,947
Of which are:
Current 10,667 10,156
Non-current 345,980 319,791
356,647 329,947
The non-current and current portions of the rent deposit asset are both
included in 'Other Receivables' (Trade and Other Receivables) on the Statement
of Financial Position.
Lease liability
The lease liability is calculated as the net present value of the fixed
payments (including in-substance fixed payments), less any lease incentives
receivable (e.g. any rent-free periods). The lease payments are discounted
using the interest rate implicit in the lease. The lease liability is measured
at amortised cost and was accounted for during the year ended 31 December
2022 as follows:
Group Company
Lease Liability
Lease Liability
£
£
Carrying amount at 1 January 2021 1,189,694 1,127,268
Additions 3,563,025 3,062,762
Reduction in assumed lease liability (926,304) (926,303)
Finance expense on lease liability 35,010 33,619
Lease payments made (230,445) (230,444)
Carrying amount at 31 December 2021 3,630,980 3,066,902
Finance expense on lease liability 67,691 51,069
Lease payments made (300,994) (231,259)
Carrying amount at 31 December 2022 3,397,677 2,886,712
Of which are:
Current 522,800 437,400
Non-current 2,874,877 2,449,312
3,397,677 2,886,712
The non-current and current portions of the lease liability are included in
'Lease liability' and 'Other Payables' (Trade and Other Payables) on the
Statement of Financial Position respectively.
Net finance expense on leases
Group Company
2022 2021 2022 2021
£
£
£
£
Finance expense on lease liability 67,691 35,010 51,069 33,619
Finance income on rent deposit asset (14,561) (8,835) (14,121) (7,444)
Net finance expense relating to leases 53,130 26,175 36,948 26,175
The finance income and finance expense arising from the Groups leasing
activities as a lessee have been shown net where applicable as is permitted by
IAS 32 where criteria for offsetting have been met.
Amounts recognised in profit and loss
Group Company
2022 2021 2022 2021
£
£
£
£
Depreciation expense on right-of-use assets (397,222) (149,488) (329,863) (149,488)
Finance expense on lease liability (67,691) (35,010) (51,069) (33,619)
Finance income on rent deposit asset 14,561 8,835 14,121 7,444
Short term lease expense (35,816) (37,568) - -
Net impact of leases on profit for the year (486,168) (213,231) (366,811) (175,663)
The property leases (of which there are two) in which the Group is the lessee
do not contain variable lease payment terms.
26 SHARE CAPITAL
Group 2022 2021
£
£
Ordinary share capital
Issued and fully paid
27,505,450 (2021: 27,169,700) Ordinary shares of 10p each 2,750,545 2,716,970
Issue of 3,998 (2021: 335,750) New shares of 10p each 400 33,575
27,509,448 (2021: 27,505,450) Ordinary Shares of 10p each 2,750,945 2,750,545
27 TREASURY SHARES
Group 2022 2021
£
£
At the beginning of the year 1,526,835 489,625
Purchase of additional shares 1,952,325 1,211,907
Shares vested or sold by trusts (132,230) (177,975)
Change in level of surplus cash held by trusts 3,395 3,278
At the end of the year 3,350,325 1,526,835
Treasury shares are held by the Employee Benefit Trusts. Further disclosures
about the value of shares acquired by the EBT can be read in note 21. The
Investment in Trust has been consolidated within the Group's results as the
parent company (Aquis Exchange PLC) can substantially direct the investment
activities of the Trusts, thus the Trusts' assets have been consolidated as
Treasury Shares.
In the year to 31 December 2022 481,301 shares with a nominal value of
£48,130 were bought at a total cost of £1,952,325 and held in Treasury (2021
- 184,887 shares with a nominal value of £18,489 were bought at a total cost
of £1,211,907 and held in Treasury).
As at 31 December 2022, 186,155 shares (2021: 139,651) were held in the
Employee Share Incentive Plan Trust, and a further 584,797 shares (2021:
150,000) held in the Trust relating to Restricted Share Plan, Company Share
Ownership Plan and Premium Priced Option Plan.
At 31 December 2022 £36,610, (2021: £33,215) of surplus cash was held within
the Trust, which had yet to be used to purchase Treasury shares, but remained
under the control of the Trust.
Group 2022 2021
£
£
Treasury Shares held 3,313,715 1,493,620
Cash held in Employee Trusts 36,610 33,215
At the end of the year 3,350,325 1,526,835
28 CASH GENERATED BY OPERATIONS
Group 2022 2021
Restated
£
£
Profit after tax 4,683,612 4,652,667
Adjustments for:
Corporation tax (157,203) (1,088,543)
Foreign exchange (gains)/losses 116,415 (341,877)
Interest Income (28,722) (444)
Amortisation and impairment of intangible assets 498,955 513,435
Depreciation and impairment of property, plant and equipment 760,537 518,805
Equity settled share based payment expense 819,872 571,834
Other (gains)/losses 58,031 316,906
Movement in working capital:
Increase in trade and other receivables (1,593,925) (2,749,906)
Increase/(decrease) in trade and other payables (1,195,918) 764,641
Cash generated by operations 3,961,654 3,157,518
Company 2022 2021
Restated
£
£
Profit after tax 3,801,744 4,269,073
Adjustments for:
Deferred tax (163,925) (1,088,543)
Foreign exchange (gains) (50,269) -
Interest Income (2,416) (444)
Amortisation and impairment of intangible assets 498,955 513,435
Depreciation and impairment of property, plant and equipment 688,615 513,545
Equity settled share based payment expense 819,872 576,609
Other (gains)/losses 57,447 320,664
Movement in working capital:
Increase in trade and other receivables (8,783,081) (3,320,730)
Increase in trade and other payables 5,297,956 964,738
Cash generated by operations 2,164,898 2,748,347
29 RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the directors, who are key management personnel, is set
out below in aggregate for each of the categories specified in IAS 24 Related
Party Disclosures.
Group 2022 2021
£
£
Salaries and other short term benefits 1,068,562 797,788
Value of share options granted 445,250 528,070
Total 1,513,812 1,325,858
During the year the Group has entered into, in the ordinary course of
business, with other related parties. All transactions between Aquis Exchange
Plc and its subsidiaries are eliminated on consolidation. There are no related
party balances outstanding at group level. Costs incurred by the Company on
behalf of its subsidiary companies are recharged to these Companies though a
Management fee and service charge, which for 2021 represented a net recharge
of £5,528k
(2021: £4,965k) to Aquis Europe SAS and a net recharge of £450k (2021:
£494k) to Aquis Stock Exchange Limited. The net cash payments in the year and
balances outstanding at the year end were;
2022 Receipts and Amounts owed Amounts owed
Company
(payments)
from related
to related
£000s
parties
parties
£000s
£000s
Aquis Stock Exchange Ltd 600 533 -
Aquis Europe SAS (1,389) 5,953 (6,286)
Total (789) 6,486 (6,286)
2021 Receipts and (payments) Amounts owed from related parties Amounts owed to related
Company
£000s
£000s
parties
£000s
Aquis Stock Exchange Ltd (82) 390 -
Aquis Europe SAS 193 414 553
Total 111 804 553
30 SHARE PREMIUM ACCOUNT
Group 2022 2021
£
£
At the beginning of the year 11,771,462 10,892,135
Issue of new shares 13,583 879,327
At the end of the year 11,785,045 11,771,462
31 OTHER RESERVES
Group Company
2022 2021 2022 2021
£
£
£
£
Reserves relating to share-based payments 1,813,119 1,118,314 1,813,119 1,448,430
The reserves relating to share-based payments reflects the estimated fair
value of the approved Employee Share Option Scheme estimated using the US
binomial and Black Scholes option valuation models.
32 CONTROLLING PARTY
In the opinion of the Directors, there is no single overall controlling party.
No individual shareholder had a shareholding of 10% or above as at 31 December
2022.
33 EVENTS OCCURING AFTER THE REPORTING PERIOD
On 10 March 2023 Silicon Valley Bank (SVB) had its assets assumed by the
Federal Deposit Insurance Corporation (FDIC) as it became unable to fulfil
consumer withdrawals and SVB (UK) was bought by HSBC. Whilst this led to
widespread unrest in financial markets, which was further compounded by the
announcement that Credit Suisse had secured a SFr 50bn liquidity backstop from
the Swiss central bank on 16 March 2023 and then subsequently been acquired by
UBS on 19 March 2023, these events have not currently impacted the trading
performance of the Group.
At this stage, the Directors do not believe this would have a material adverse
effect on the Group and consider this to be a non-adjusting post balance sheet
event.
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