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REG - Aquis Exchange PLC - Final Results and Board Appointments

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RNS Number : 3152G  Aquis Exchange PLC  29 March 2022

29 March 2022

Aquis Exchange PLC

("Aquis", the "Company" or the "Group")

 

Final results for the year ended 31 December 2021

and

Board appointments

 

Pre-tax profit growth in excess of five times vs the prior year

 

Aquis Exchange PLC (AQX.L), the exchange services group, is pleased to
announce its audited results for the year ended 31 December 2021.

 

Highlights:

 ·             Revenue up 42% to £16.2 million (FY20: £11.4 million)
 ·             Pre-tax profit up 540% to £3.2 million (FY20: £0.5 million)
 ·             Profit after tax up 330% to £4.3 million (FY20: £1.0 million)
 ·             Basic EPS up 300% to 16p (FY20: 4p)
 ·             Cash and cash equivalents at 31 December 2021 of £14.0 million (31 December
               2020: £12.3 million)
 ·             Membership of Aquis Exchange (AQX) grew to 39 (FY20: 33) and there was a 24%
               increase in the average monthly usage, in terms of chargeable orders (4Q 2021
               vs 4Q 2020)
 ·             Market share of all pan-European trading at 5.2% in 4Q21 (4.7% 4Q20)
               reflecting a number of factors including significant market volatility, an
               industry-wide move to dark trading venues and client trading strategies
 ·             Overall share of available liquidity of 24%, the highest of any European MTF
 ·             Aquis Stock Exchange (AQSE) completed first year under new rule book, with a
               record 24 admissions completed during 2021

 

Post-period highlights:

 ·             Encouraging start to current trading, with the Company's trading in line with
               expectations, notwithstanding continued macroeconomic uncertainty and high
               levels of market volatility
 ·             Agreed transferral of the business activities of UBS MTF, the non-displayed
               matching pool of UBS AG, to Aquis, as announced on 16 March 2022
 ·             Fields Wicker-Miurin OBE and Dr. Ruth Wandhöfer appointed as independent
               Non-Executive Directors of the Company, and Richard Fisher appointed to the
               board and acting as Chief Financial Officer following the AGM
 ·             Completed the dual listing of the Company's shares on the Aquis Stock Exchange
               Growth Market today, a tangible demonstration of belief in the market

 

Alasdair Haynes, Chief Executive Officer of Aquis, commented:

 

"I am delighted to be reporting such strong financial results today, with
revenue up 42% and profit before tax increased in excess of five times from
what we recorded in FY20. It is clear we have now transformed into a business
with dependable revenues, generating significant profits, and with a very
robust financial position. We have shown we are able to not only withstand
periods of intense volatility and uncertainty, but to continue growing and
investing throughout them. This gives us great confidence going forward.

 

Operationally, it has been an incredibly busy and fruitful year for the Group
across all divisions, as we delivered the first year of Aquis Stock Exchange
under its innovative new rulebook, harmonised data revenues across the
business and made further progress against our 'cloud native exchange' plans
in our Technologies business. This momentum has continued post-period end,
with our dual listing on Aquis Stock Exchange, a reflection of our confidence
in AQSE as a home for growth businesses. Most recently, in a milestone for the
Group, we announced we would be assuming the business activities of UBS' dark
pool. This development will be accretive for our business, expand our offering
and provide access into a new part/segment of the market.

 

Looking forward, heightened volatility and uncertainty stemming from the wider
geo-political environment is set to continue, but nonetheless, we remain
focused on the execution of our growth strategy and delivering increased value
for our stakeholders. Trading so far has been in line with market expectations
and we approach the remainder of the year with a positive outlook."

 

An overview of the results from Alasdair Haynes, CEO, is available to view on
this link:

https://bit.ly/3DjKdo3 (https://bit.ly/3DjKdo3)

 

The Group will be hosting webinars for analysts and retail investors today at
09.30 and 14.30 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
 Jonathan Clelland, CFO and COO                              Tel: +44 (0)20 3597 6329

 Belinda Keheyan, Head of Marketing

 VSA Capital Limited (AQSE Corporate Adviser)                Tel: +44(0)20 3005 5000
 Andrew Raca
 Pascal Wiese

 Liberum Capital Limited (Nominated Adviser and Broker)      Tel: +44 (0)20 3100 2000
 Clayton Bush
 Chris Clarke
 Edward Thomas

 Kane Collings

 Canaccord Genuity Limited (Joint Broker)                    Tel: +44 (0) 20 7523 8000

 Bobbie Hilliam

 Patrick Dolaghan

 Alma PR (Financial PR Adviser)                              Tel: +44 (0)20 3405 0209
 Susie Hudson                                                aquis@almapr.co.uk

 Kieran Breheny
 Matthew Young

 

 

Notes to editors:

 

About Aquis Exchange PLC

 

Aquis Exchange PLC is an exchange services group, which operates pan-European
cash equities trading businesses (Aquis Exchange), growth and regulated
primary markets (Aquis Stock Exchange/AQSE) and develops/licenses exchange
software to third parties (Aquis Technologies).

 

Aquis Exchange is authorised and regulated by the UK Financial Conduct
Authority and France's Autorité des Marchés Financiers to operate
Multilateral Trading Facility businesses in the UK/Switzerland and in EU27
respectively. Aquis operates lit order books 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. According to
independent studies, trades on Aquis are less likely to lead to price movement
than on other lit markets. 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.

 

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 Technologies is the software and technology division of Aquis Exchange
PLC. It creates and licenses cutting-edge, cost-effective matching engine and
trade surveillance technology for banks, brokers, investment firms and
exchanges.

 

Aquis Exchange PLC (AQX.L) is listed on the Alternative Investment Market of
the LSE (AIM) market. For more information, please go to www.aquis.eu
(http://www.aquis.eu)

 

 
 

 

Chair's Statement

 

Overview

This is my first official communication since being appointed Chair of Aquis
Exchange PLC (AQX) with effect from 1st January 2022 and it is with great
pleasure that I am able to report that the Group delivered significant
increases in revenue and net profit before tax reflecting strong performances
from each of the Group's 3 business activities. These results were
particularly noteworthy given the continued COVID-19 challenges and the
requirement to handle the impact of the UK's exit from the EU.

Overall Group net revenue increased by 42% from £11.4m to £16.2m and net
profit before tax by in excess of 500% from £0.5m to £3.2m driven primarily
by the pan-European secondary market trading activities and material increases
in data revenues.

During 2021 we were able to recommence trading in Swiss shares, increase our
overall pan-European secondary trading market share and manage the transition
of a significant part of the secondary exchange trading business from the UK
to France. Our aim is to further develop our presence in Europe and enhance
client relationships within the EU 27 markets and this includes transferring
Jonathan Clelland, Group CFO & COO to Paris where he has taken on the
additional responsibility of CEO of Aquis Exchange Europe (AQEU).

We also significantly increased data revenue following the harmonisation of
our offering and made material progress in our Technologies division whilst
innovative changes to Aquis Stock Exchange (AQSE) increased liquidity and
narrowed spreads which helped drive growth in new issues.

In addition, we continued to invest in all areas of our activities including
the recruitment of David Stevens who has joined as Chief Revenue Officer (CRO)
and Richard Fisher as Director of Finance (DoF), who subject to satisfactory
completion of the regulatory due diligence and other processes currently under
way, which are required under AIM Rules, and approval at the AGM in April
2022, will step up to take over the CFO responsibilities currently held by
Jonathan Clelland.

We retained our flexible partial remote working environment demonstrating how
important robust business continuity plans and effective working practices
supported by a positive culture throughout the organisation is during a
rapidly changing and challenging period.

We have also continued with the AQSE integration, the strengthening of the
Paris office and continued to invest in our technology division making further
significant progress with the target of creating exchange grade cloud
platforms.

Board and Governance

The Aquis Exchange PLC Board ("the Board") continued to evolve in line with
the Group's expansion and subsequent corporate governance requirements during
the year. Niki Beattie retired as Chair on 31st December 2021 having served in
that role for 9 years and I was appointed Chair in her place. I would like to
formally thank and recognise Niki for all her hard work in helping Aquis to
successfully reach this stage of its growth and evolution. Succession plans
have also been established to cover other non-executive board members as they
come towards the end of their nine-year tenure.

The Group consists of 3 regulated entities: AQX, AQEU and AQSE, which holds a
UK Recognised Investment Exchange Licence (RIE), that allows it to offer
primary listings as well as secondary markets trading. All three entities
require appropriate independent Board governance.

Aquis complies with the FCA's Senior Management and Certification Regime
(SM&CR), which ensures that the identified individuals; namely the Chair,
CEO, CFO and Head of Regulation have clearly prescribed assigned governance
responsibilities.

We are pleased to announce that Fields Wicker-Miurin and Ruth Wandhofer will
join the Board of Aquis as independent non-executive directors, subject to
satisfactory completion of the regulatory due diligence and other processes
currently under way, which are required by the AIM Rules, and approval at the
next AGM. 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 and 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. It is our intention, as part of our
succession planning process, that Fields will take over the Senior Independent
Director role from Richard Bennett.

Ruth has considerable financial services experience. Following a senior
Executive career at Citi Bank she has served on a number of Boards as an
Independent Non- Executive Director including the London Stock Exchange from
2018 to 2020 and currently Gresham Technologies Plc and Permanent TSB Plc in
Ireland. At Aquis, Ruth will also sit on the ARCC and Aquis Europe subsidiary
Board.

Danny Lopez joined the Board of AQSE as an independent Director during the
year. Danny is the CEO of Glasswall Solutions, an award-winning cybersecurity
firm that delivers unique protection against sophisticated cyber threats in
files and documents through its ground-breaking technology. Danny is also an
independent non-executive director of Innovate Finance, an independent
industry body that champions the global FinTech community in the UK.

Culture, Stakeholder Engagement and Section 172 Duties

The Board continued its engagement with key stakeholders, particularly
focusing on employees and shareholders. 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 very positive. In addition, the Chair and
various members of the Board continued with a program to meet with key
shareholders when possible either in person or remotely.

The Board discharged its Section 172 (1) duties in a number of ways, details
of which are set out in the Annual Report and include significant time
focusing on strategy for the Group, considering employees well-being during
another very challenging year and undertaking training in particular in the
area of risk assessment in order to improve the Board's effectiveness and
maintain high standards of conduct.

Environment, Social and Corporate Responsibility

The Board is focussed on the Company's responsibility to both individually
grow and operate on a sustainable basis and more importantly the wider role
that we play 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 difference.

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 are committed to
educating and collaborating with these issuers about the expectations and
benefits of creating and adhering to ESG policies.

We have already made progress with 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.

Our focus for the year ahead

All of the Aquis business lines are set for further profitable growth and we
continue to invest for future growth.

We recently announced the initiative to assume the business activities of UBS
MTF, the non-displayed matching pool, which we anticipate will be finalised in
April 2022. This initiative represents a significant extension of the equities
trading services Aquis offers its clients and will complement its existing
suite of lit liquidity pools and range of order types. The pan-European
secondary market trading activities remains the core of the Aquis Group and
this initiative offers us the opportunity to expand our client offering. This
decision recognises that in recent years there has been a change in the
market's attitude towards, and increase in, the use of non-displayed liquidity
pools.

Our Board will undergo further planned changes as the longer serving
Non-Executive Directors retire from the Board, but with our on-going
commitment to succession planning, we are confident of being able to maintain
stability and 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

 

The Aquis Group delivered material progress across all its business activities
during 2021 building on the maiden profit of 2020 against a backdrop of
continued challenging economic uncertainty.

 

The Group dealt comfortably with the requirement to continue to run the
exchange platforms remotely during the periods of lockdown. It also managed to
grow market share of the pan-European equities market, achieving 5.2% market
share of all trading including auctions during 4Q21, compared to 4.7% during
4Q20.

 

Very strong growth from higher trading levels within Aquis Exchange was
supplemented by growth in the technology and data divisions, together with the
successful integration of AQSE following the acquisition in 2020. Our growth
continues to be driven by the compelling nature of our subscription model and
the strength of our industry-leading exchange software platform. We offer a
faster and more reliable trading venue to all market participants compared to
other international trading venues; the benefits of which are clearly now
flowing through into improved financial results.

 

This resulted in the Group reporting a 42% growth in revenue to £16.2m (net
of provisions) and a pre-tax profit of £3.2m in 2021, compared to a profit of
£0.5m in 2020. This increase demonstrates the significant progress made
during the last 12 months and provides the Group with the profitable platform
to continue to invest and grow its principal business activities.

 

The Ukrainian conflict has resulted in extremely volatile market conditions
and there is no certainty as to when this conflict will be resolved; however,
at this stage, I do not believe this will have a material adverse effect on
the Group. In addition, there remains some macro-economic uncertainty given
the continued presence of COVID-19 and the lack of certainty of the full
impact of Brexit; however, I believe that our strong team and technology
platform should enable us to overcome these and future challenges.

 

Aquis Exchange

 

Over the period, the secondary market multilateral trading facility ("MTF")
platforms operated by the Group in London and Paris delivered growth despite
challenging economic and regulatory conditions. In March 2019, the Company had
established a French subsidiary with full regulatory approval to operate an
MTF covering the European Union, AQEU. The transition from London to Paris
took place seamlessly in January 2021 with an uninterrupted service to all our
clients.

The number of trading members grew from 33 to 39 and a number of members
increased their activity levels, leading exchange revenue to increase by 26%
to £9.8m.

Aquis Exchange's market share of all pan-European trading including auctions
and dark pools strengthened to 6.0% 2Q21 before partially reversing to 5.2%
4Q21. This is compared to a market share of 4.7% 4Q20 and 1.8% at the time of
the IPO in June 2018. The second half decrease reflected the more volatile
trading conditions during 2H21 which resulted in an industry wide move from
lit to dark pools of liquidity. However, overall volumes executed on the Aquis
platforms during 2H21 were approximately the same as 1H21 and we are confident
our lower toxicity and 24% liquidity will ultimately underpin long-term market
growth. Our proposed acquisition of the UBS MTF activities will also add
immediate market share, providing us with access to dark pool trading. Our
Market at Close ("MaC") order type, launched in August 2019, made a material
contribution to trading volumes on the platform and we anticipate it will grow
further during 2022. 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 Exchange offered clients the ability to trade in excess of 1,700 stocks
and ETFs across 15 European Markets as at the end of December 2021. From the
4th February 2021 we were able to restart offering trading in the Swiss market
following the UK / Swiss agreement at the beginning of 2021. Overall, the
available liquidity, equal to approximately 24% of total pan-European equity
liquidity should underpin future market share growth.

 

Brexit and COVID-19 continued to present challenges during the period, and it
is very encouraging that we have delivered such strong growth despite these
issues and further demonstrates the highly competitive nature of our exchange
business. This performance during a very challenging period is reflective of
the significant efforts by all the Aquis employees during long periods of
remote working.

 

Aquis Technologies

 

In addition to the exchange business, Aquis licenses its leading exchange
related technology to a variety of international financial services clients
across different asset classes. Revenue from technology licensing in 2021 grew
to £3.4m (net of provisions), reflecting the increasing interest in our
high-calibre, in-house technology; however, revenue recognition remains lumpy
and the timing of this accounting recognition difficult to predict.

 

Aquis Technologies continues to develop its technology platforms to support
growth across different asset classes internationally and during the year made
further progress in the plan to create a cloud native exchange.

 

Aquis Market Data

 

Data revenues increased 159% in 2021 to reach £2.3m as the Group implemented
a harmonised data structure. Data is seen as a key pillar of the Aquis
strategic plan, and we expect that it will continue to make a material
contribution to the Group.

 

As demonstrated by the increased revenue, data is becoming a key contributor
to the Group results; however, it may increase further in importance in the
long-term if a consolidated tape for Europe is implemented. Introducing a
consolidated tape for Equities in Europe should improve the quality and
pricing of market data and lead to a fairer distribution of data fees across
the various European trading venues. The Group is continually monitoring
European Commission plans and market demand to introduce such a tape and is
well placed to understand and grow the Group data activity as this market in
Europe develops.

 

Aquis Stock Exchange (AQSE)

 

Following the acquisition of AQSE in March 2020 we successfully completed the
technology migration, concluded a consultation period with industry
participants in order to assess opportunities to enhance the market
functionality and launched an innovative market making scheme, which has
significantly enhanced liquidity and narrowed spreads of stocks. These
innovations have supported the growth of AQSE including additional market
makers, corporate advisers, brokers and 24 new issuers during the year an
increase of approximately 30% compared to the number of companies at 31
December 2020. We have a strong pipeline of new companies and dual listed
Aquis Exchange PLC with effect from 29 March 2022.

 

The acquisition of AQSE has provided us with the ability to operate a
Recognised Investment Exchange (RIE) giving our business the same status as
the large national exchanges in Europe and providing further resilience in the
face of possible regulatory headwinds.

 

Underpinned by the Group's proven technology and a track record of
transparency and innovation, we have already made material progress in
building AQSE into a competitive and disruptive 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 2021 and will do so in
2022 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 effectiveness and reliability of our technology was
demonstrated through our initial response to COVID-19 and the requirement to
maintain a flexible semi-remote working environment and the transition of
trading activities following Brexit both of which were achieved seamlessly.
The quality of our technology underpins our Group strategy and is also one of
the principal reasons 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' nimble 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 2021 we continued to invest in personnel resources across a number of
departments including the key hires of a Chief Revenue Officer (CRO) and
Director of Finance (DoF) both of whom have joined the Executive Committee.

To deliver against our current planned or future initiatives we will where
needed continue to further strengthen our team in particular in support of the
sales and technology activities.

Outlook

Post year-end we announced the initiative to take over the UBS MTF dark pool
activities which we anticipate will be finalised in April 2022. This is a very
exciting initiative offering us the opportunity to expand our overall pan-
European equities market offering and feedback from the clients has been very
positive.

There remains some macro-economic uncertainty given the continued presence of
COVID-19 and the lack of certainty of the full impact of Brexit; however, I
believe  that our strong team and technology platform should enable us to
overcome these and future challenges. Our technology systems have dealt
efficiently with significantly higher messaging volumes caused by increased
volatility, and we continue to have an effective remote operating capability
in place. 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 ready 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 2022 trading continues in line with current 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 FY22.

We continue to invest in our business to ensure that we maintain our ability
to grow. This investment should support the aim of broadening and improving
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 and 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
transformation of 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 an exchange services group ("the Group")
which operates three principal divisions: Aquis Exchange, Aquis Technologies
and Aquis Stock Exchange.

·      Aquis Exchange, 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 provides exchange and regulatory technology to
third parties.

·      Aquis Stock Exchange Limited ("AQSE") 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").

Following the UK exit from the EU 99% of all EU continuous trading moved from
the exchange business in London (AQXE) to AQEU on 4th January 2021. This move
was handled seamlessly.

The Group has made significant progress in the development of its activities
since the IPO in June 2018 and is well positioned to realise its primary
objective which is to become the leading technology driven exchange services
group and also to help drive 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 Exchange 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 trading or market surveillance technology; and

·      Positively address the current market issues of spread and
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 and a 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.

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.

Since Aquis commenced trading it has increased its market share of EU
secondary markets trading, which has grown to reach an average of 5.2% of the
overall pan-European market of all trading including auctions and dark pools
during 4Q21, an increase of 11% compared to the 4Q20 average of 4.7%. This
business is well positioned to benefit from regulatory changes, which support
transparent, low toxicity growth on "lit" markets as well as fairness and
non-discriminatory behaviours. The regulatory trends and institutional support
for greater transparency in European equities trading also support 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
in 2020 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.

The Board has established for the senior Executives clear financial and
non-financial KPIs for the Group. For 2021 these were revenue, earnings before
interest, taxation, depreciation and amortisation (EBITDA) , quality of
technology, planning, sustainability and compliance with regulations and
corporate governance. The Group has established financial and non-financial
KPIs to allow clear performance measurement against the most important targets
set by the Board. Financial KPIs represent 70% and non-financial 30%. The
financial KPIs are based on target revenue and net profit before tax. The
non-financial KPIs address strategy, resources, information and communication.
Further details are given in the Remuneration Report.

 

 

 

Financial Review

 

It has been a year of very strong revenue growth during 2021. The breakdown of
the principal revenue activities is as follows:

 

                                                    Group
                                        2021        2020        YoY Growth

                                        £           £           %
 Revenue analysed by class of business
 Subscription fees                      9,766,046   7,738,284   26.2
 Licence fees                           4,404,606   2,319,700   89.9
 Issuer fees                            692,743     524,402     32.1
 Data vendor fees                       2,319,360   894,867     159.2
                                        17,182,755  11,477,253  49.7

 

The Group generated EBITDA for the year of £4.3m compared to £1.5m in the
previous year. The continued growth in profits during 2021 is primarily
attributable to increased exchange revenue 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 (impairment provision on the trade receivables
arising from contract assets). This year the application of IFRS 9 has
resulted in an impairment provision during the year of £972k (2020: £109k).

The profit before taxation for the 2021 financial year of £3.2m compares very
favourably with the profit before taxation in 2020 of £0.5m. Profit after tax
increased more than 300% to £4.3m and EPS (fully diluted) more than 400% to
15p 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. In December 2021 Aquis signed a lease agreement for a new office and will
move into this in Q2 2022, with the existing property lease maturing in May
2022. The lease liabilities arising are amortised over the life of the leases,
attracting a finance expense charge amounting to £26k for 2021, whereas the
right of use assets are depreciated on a straight-line basis over the life of
the lease, attracting a depreciation charge of £149k for 2021. These costs
are in line with the 2020 results.

 

The Group's cash and cash equivalents as at 31 December 2021 were £14.0m
(2020: £12.3m) maintaining the Group's strong cash conversion rate.

 

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 the
move into different asset classes. In addition, the Group has made further
investment in personnel resources 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 2021 the Company ICARA requirement amounted to £3.9m (2020: £3.2m).
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 Report of the Nomination & Remuneration Committee 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 Acquisition

Following the acquisition of AQSE in March 2020, the Group has invested
significant expense and resource into 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.

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 continued challenges posed by the COVID-19 pandemic
and the Group's handling of Brexit.

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 pro-actively 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 during the last quarter of 2021 to introduce the new Chair and to
ensure that their views and opinions are clearly understood. 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. In addition,
during the year Glenn Collinson took over 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. The Group first implemented the
employee engagement survey in 2019 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.

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 as 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.

 

Board Effectiveness and High Standards of Business Conduct

The Board remains committed to high standards of corporate and regulatory
governance. During the year we 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.
All Board members took part in focused risk management training in the year.

The Board has also undertaken succession planning both for the Executive and
the Board. Niki Beattie reached her nine-year tenure as a director on 31st
December 2021 when she ceased to be independent and stepped down as the Chair
and as a Non-Executive Director. She was succeeded by Glenn Collinson. Two
other NEDs are also coming towards the end of their nine-year tenure during
the next 12-18 months when they will cease to be independent. 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.

During 2021, the Group recruited a new Chief Revenue Officer (CRO) and a new
Director of Finance (DoF). Management plan to recruit additional employees, in
particular in the technology area in the UK and France during 2022.

COVID-19 and The Interests of Employees

COVID-19 continued to present significant challenges for every firm including
Aquis during 2021. The Board monitored the day-to-day operations, the business
continuity plans and the employees' well-being carefully throughout the year.
This continued as the various lockdowns unfolded and included considering work
from home issues as well as the office environment for the periods between
lockdowns.

 

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);

·      Pro-activity (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 2021 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 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. It
was also pleasing to see that through focused effort with external recruiters
a more diverse selection of candidates made it through to the shortlists, at
all levels of seniority 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 has established a target to
increase the overall female NED ratio. During 2021 the Board assessed the
profiles and skill sets of the current Board Directors, including potential
retirees during the next 3 years in order to help the Company meet its 3-year
aspirational diversity targets.

The employee targets are set out below:

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:

·      reduce the average seniority pay-gap by 12% from 37% to 25%.

·      meet the Hampton Alexander Review target of at least 30% of board
members being female

·      have a gender pay (seniority) gap no worse than the UK Financial
Services industry average

 

The flexible working policies which we implemented in 2020 have proved very
successful. During the last quarter of 2021 we saw an increased desire for a
partial return to work from a large % of our employees which we have supported
whilst adhering to government recommended health guidelines.

 

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 on average employees continued to work remotely for material
periods due to the COVID-19 pandemic which contributed to reduced carbon
emissions associated with employees commuting to the office and the Group
remains committed to continuing to operate a flexible remote working structure
which will continue to have an incidental beneficial effect on carbon
emissions. In addition, the building electricity provider for the current
Aquis office obtains energy from 100% renewable electricity and carbon neutral
gas. Good progress has been made in the year with regard to the 2 data centres
used by Aquis, and we are pleased to note that both are now 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 massive,
costly and unfriendly 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 to comply, so far as practicable, with the Code.

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 e.g. supporting the NHS and Help for Heroes throughout the year
and employees have shown their desire to make a difference.

Knowledge Transfer Project

Aquis is proud to have started the partnership process with the University of
Derby as part of a two-thirds government funded Knowledge Transfer Project
("KTP") that will involve industry-led research and development on Artificial
Intelligence for trading platform surveillance alerts that will promote 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 2022 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

·      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  The effects of Ukraine, COVID-19 and Brexit on the global, European and UK  Aquis derives revenues from both fee and contractual annuity-based streams,
                     economic conditions and the speed of recovery may negatively affect the     which is less impacted by cyclical market driven trends.
                     Group's trading volumes resulting in lower revenues or increased costs.

                                                                                                 The recent horrific events in Ukraine have caused immeasurable suffering and
                                                                                                 harm but are not expected to have a material adverse effect on the economic
                                                                                                 landscape nor on the Group's trading volumes.

                                                                                                 Whilst COVID-19 had a material negative effect on the economic landscape for
                                                                                                 many countries; the UK and European economies have made substantial recoveries
                                                                                                 during the last 18 months and overall total market volumes have remained
                                                                                                 strong

                                                                                                 Since Brexit pan-European trading has shifted almost 100% to the Group's MTF
                                                                                                 subsidiary in France, AQEU, that has full regulatory approval from the ACPR to
                                                                                                 allow the Group to continue to operate as an MTF.

 

 

 

 

 Risk              Risk Description                                                                Mitigation
 Legal/Regulation  The Group operates highly regulated entities, including two MTFs and an RIE     Senior management consistently monitor regulatory developments including the
                   and is required to maintain sufficient regulatory capital and comply with all   MifiD review and Wholesale Markets Review, which are discussed and actioned at
                   legal and regulatory requirements necessary to operate the Group's business.    Audit Risk and Compliance Committee (ARCC) meetings and engage regularly and
                   All three group entities hold regulatory licences and must hold their own       directly with regulators including where appropriate formal responses to
                   capital.                                                                        consultation documents.

                   There is the risk that current regulation or future changes could have an       The Board reviews a quarterly dashboard that incorporates the Group's
                   adverse                                                                         behaviour and statistics in relation to regulatory obligations. The Board also

                                                                               places considerable importance on having competent staff and advisors to help
                   effect on the Group. Possible impacts may be (but are not limited to):          manage legal and regulatory risk.

                   •    Sustained downturn in revenues could put the regulatory capital at         The Board considers regulators as key stakeholders and endeavours to maintain
                   risk;                                                                           positive working relationships with the regulators for each group entity.

                   •    One of the group entities could be subject to a fine or a lawsuit          Each member of the Group currently has sufficient excess regulatory capital to
                   which may draw on the entities' finances                                        deal with any potential changes in regulation.

                   •    Change in regulation may increase costs for the Group or require           Changes in regulation are usually accompanied by a period of consultation that
                   unanticipated investments                                                       allows market participants to provide feedback before changes are made and a

                                                                               further period to prepare for change once changes in regulation are
                   •    Inability to meet regulatory requirements could result in a licence        determined.
                   being withdrawn and prevent the Group entity from operating its core business

                                                                               The Group consistently reviews the risks associated with possible changes in
                   In addition, changes in tax law may result in an increase in the overall tax    tax legislation.
                   burden of the Group which could have a materially adverse effect on the
                   Group's business.

 

 

 

 

 Risk                                       Risk Description                                                                Mitigation
 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.

                                            New technologies such as distributed ledger technology are emerging but have    Following the change in the tick size regime for SIs in June 2021 their
                                            yet to gain ground in trading, clearing custodian services and settlement of    competitive advantage was removed, and their market share gains have
                                            equities.                                                                       decreased.

                                                                                                                            As a disruptive firm, Aquis remains vigilant about changing technologies and
                                                                                                                            how it might embrace them to further its business model.
 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 Intellectual Property could mean that competitors gain        prioritised accordingly, and resources are closely and consistently monitored
             access to Aquis' technology 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 Intellectual Property (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.

 

 

 

 

 

 Risk      Risk Description                                                                 Mitigation
 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 2021 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

           It is possible that governments or regulators could impose extraordinary         to mitigate against potential resource shortages.
           measures such as closures of the market for a prolonged period.

                                                                                The Group has demonstrated and is confident that it can operate the exchanges
           Remote working practices across the industry may slow overall technology         remotely for a prolonged period.
           programs 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's clients and liquidity providers have also demonstrated that they
           Aquis entities in the anticipated timelines or slower adoption of new products

           developed by Aquis.                                                              can remotely manage their activities successfully. Key suppliers have also
                                                                                            successfully adopted disaster recovery procedures.

                                                                                            Equity markets were at times during 2021 very volatile, experiencing
                                                                                            significantly higher than normal volumes. During these periods the Company did
                                                                                            not experience any significant issues or delays and the system has proven that
                                                                                            it has more than sufficient capacity to operate the market.

                                                                                            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.

 

 

 

 

 Risk                                    Risk Description                                                                 Mitigation
 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 and a new employee
                                         possible attacks which seek to hold Aquis to ransom, unintended movements of     cyber- training program was developed to address this issue.
                                         the 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 N&RC 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, 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.

 

 

 

 

 

 

 Risk                  Risk Description                                                                 Mitigation
 Client concentration  The nature of equity financial markets is that the majority of volumes are       The Company initially concentrated on connecting to large investment banks,
                       undertaken by a small pool of market                                             brokers and is now broadening its client base to reduce client concentration

                                                                                but recognises that volumes from smaller participants are not likely in
                       participants. This risk has been increased as some of the smaller market         aggregate to be as large.
                       participants have decided to route via larger banks that maintain direct

                       exchange memberships.                                                            The Company can offset some of the risk of industry concentration through the

                                                                                quality of the MTF exchange offering.
                       The Group revenue is therefore dependent on a concentrated number of customers

                       and significant change to one customer's flow could negatively impact            The Company seeks to maintain positive relationships with all current and
                       revenues.                                                                        future members of its MTF exchange and to be vigilant for change at any
                                                                                                        client.

                                                                                                        The Group has diversified its business activities to include technology sales,
                                                                                                        data and market gateways and entering the primary exchange business following
                                                                                                        the acquisition of AQSE.

 

 Risk                                       Risk Description                                                                 Mitigation
 Liquidity provision concentration - Aquis  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 are working to maintain a close relationship with all
                                            trading venues, the ability to attract                                           market makers to ensure that there continues to be positive synergies for all

                                                                                parties. Aquis
                                            significant liquidity to the venue is critical. The barriers to entry are even

                                            higher for new trading venues, which must build liquidity from scratch and       is also actively seeking to continue to grow membership and diversify its
                                            differentiate themselves to attract and retain it.                               liquidity providers.

                                            Market makers themselves have differing business models and trading              As Aquis' market share increases further, more natural liquidity should be
                                            strategies; as a result, they may be attracted to different types of venues      attracted thus diluting the concentration risk away from a small number of
                                            depending on the value proposition.                                              liquidity providers to a broader set of investor flows.

                                            Aquis has a highly differentiated business model compared to the incumbent       Externally, the market share growth that Aquis has achieved to date is a
                                            platforms, both dramatically reducing the cost of trading and also not           strong indication of the benefits to its members and liquidity providers and
                                            permitting aggressive trading by market makers. This has been a driver of        makes it likely that natural liquidity will continue to grow, making the Aquis
                                            Aquis' success to date.                                                          marketplace deeper and more attractive for all counterparties.

                                            The number of market makers that have trading models currently aligned with      Additional liquidity providers are likely to follow over time as they should
                                            Aquis' business philosophy is even more concentrated than on the main markets.   be
                                            Therefore, Aquis has always relied heavily on a small number of key market

                                            makers to support liquidity and a wider group to supplement it. These market     incentivised to adapt or create new models that capitalise on Aquis' value
                                            makers have not always been the same organisations and have changed over time.   proposition and interaction with a wider set of trading flows.

                                            Nonetheless, it is a risk that if a key market maker decides to change its       The number of liquidity providers in European equity markets is still
                                            business model or philosophy it would cause a short-term disruption in the       relatively small today, reflecting the continued need to invest in technology
                                            total liquidity provided and could impact Aquis' ability to differentiate        and regulatory oversight. However, as the effects of MiFID II, particularly
                                            itself through the prevention on non- aggressive trading flow.                   with its mandate for best execution, continue to reduce competition in
                                                                                                                             liquidity provision, the Group's low toxicity model and innovative offerings
                                                                                                                             will continue to counter this risk

 

 

 Risk                                      Risk Description                                                                Mitigation
 Liquidity Provision Concentration - AQSE  A relatively small, but growing, population of market makers support AQSE with  The AQSE Market Maker warrant scheme should ensure this risk is effectively
                                           similar risks to those identified above with regard to potential short-term     countered on that Exchange.
                                           impact if one were to change its 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 when 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 actively
manages the balance sheet and risks without the use of any financial
derivatives.

The Group has materially increased its profits during 2021 demonstrating that
it has been able to manage the 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 2022 - 2026. These include
considering the impact during 2021 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 2021 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 28 March 2022
and is signed on its behalf by:

Alasdair Haynes

CEO

Jonathan Clelland

CFO

 

Consolidated and Company Statement of Comprehensive Income

For the year ended 31 December 2021

 

 

 

                                                                                              Group                      Company
                                                                    Notes                     2021          2020         2021         2020

                                                                                              £             £            £            £

 Profit and loss
 Revenue                                                            11                        17,182,755    11,477,253   9,454,737    9,860,328
 Impairment charge                                                  12                        (972,161)     (100,174)    (972,161)    (97,760)
 Operating expenses                                                 13                        (11,930,400)  (9,855,927)  (4,038,026)  (7,443,194)
 Earnings before interest, taxation, depreciation and amortisation                            4,280,194     1,521,152    4,444,550    2,319,374
 Interest income                                                    15                        444           14,632       444          14,632
 Depreciation and amortisation                                      13                        (1,032,240)   (1,030,290)  (1,026,980)  (1,030,290)
 Finance expense                                                    13                        (35,010)      (41,835)     (35,010)     (41,835)
 Finance income                                                     13                        8,835         6,736        8,835        6,736
 Profit before taxation                                                                       3,222,223     470,395      3,391,839    1,268,616
 Income tax credit                                                  18                        -             307,616      -            307,616
 Deferred tax                                                       17                        1,088,543     203,717      1,088,543    203,717
 Profit for the year                                                                          4,310,766     981,728      4,480,382    1,779,951

 Other comprehensive income

                                                                                              76,899        (531)        -            -
 Foreign exchange differences on translation of foreign operations  32
 Other comprehensive income/(loss) for the year                                               76,899        (531)        -            -
 Total comprehensive income for the year                                                      4,387,665     981,197      4,480,382    1,779,951

 Earnings per share (pence)
 Basic
 Ordinary shares                                                    19                        16            4            16           7
 Diluted
 Ordinary shares                                                    19                        15            3            16           6

 

 

 

 

 

 

 

 

 

 

 

Consolidated and Company Statement of Financial Position

As at 31 December 2021

 

                                                                        Group                    Company

                                                            Notes       2021         2020        2021        2020

                                                                        £            £           £           £

 Assets
 Non-current assets
 Goodwill                                                   16,20       83,481       83,481      -           -
 Intangible assets                                          16          753,714      916,256     753,714     916,256
 Property, plant and equipment                              21          4,146,333    1,578,554   3,563,758   1,578,554
 Investment in subsidiaries                                 22          -            -           6,884,202   6,484,202
 Investment in trust                                        23          -            -           1,856,964   486,127
 Deferred tax asset                                         17          1,292,260    203,717     1,292,260   203,717
 Trade and other receivables                                24          2,744,656    839,630     2,731,174   839,630
                                                                        9,020,444    3,621,638   17,082,072  10,508,486
 Current assets
 Trade and other receivables                                24          3,768,947    2,924,067   4,372,554   2,943,368
 Cash and cash equivalents                                  25          14,046,399   12,268,418  7,094,964   6,179,566
 Total assets                                                           26,835,790   18,814,123  28,549,589  19,631,420

 Liabilities

                                                                        3,783,587    2,810,710   3,196,516   2,292,106
 Current liabilities
 Trade and other payables and short term lease liabilities  6, 26
 Net current assets                                                     14,031,759   12,381,775  8,271,002   6,830,828

 Non-current liabilities

                                                                        3,422,744    995,081     2,915,920   995,081
 Lease liabilities                                          27
                                                                        3,422,744    995,081     2,915,920   995,081
 Total liabilities                                                      7,206,331    3,805,791   6,112,436   3,287,187
 Net total assets                                                       19,629,460   15,008,332  22,437,153  16,344,234

 Equity
 Called up share capital                                    28          2,750,545    2,716,970   2,750,545   2,716,970
 Share premium account                                      29          11,771,462   10,892,135  11,771,462  10,892,135
 Other reserves                                             30          1,118,314    760,543     1,448,430   748,525
 Treasury shares                                            31          (1,526,835)  (489,625)   -           -
 Retained earnings                                                      5,438,167    1,127,401   6,466,716   1,986,604
 Foreign currency translation reserve                       32          77,807       908         -           -
 Total equity                                                           19,629,460   15,008,332  22,437,153  16,344,234

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2021

 

 

 

                                                                                                                                                                           Foreign Currency Translation Reserve

                                                                                    Share Capital   Share premium   Other reserves   Retained earnings   Treasury Shares

 Group                                                              Notes                                                                                                                                        Total
 Balance at 1 January 2020                                                          2,714,956       10,839,981      377,766          145,673             (327,809)         1,439                                 13,752,006
 Profit for the year                                                                                                                 981,728                                                                     981,728
 Foreign exchange differences on translation of foreign operations  32                                                                                                     (531)                                 (531)
 Issue of new shares                                                28,29           2,014           52,154                                                                                                       54,168
 Movement in share-based payment reserve                            30                                              382,777                                                                                      382,777
 Movement in Treasury Shares                                        31                                                                                   (161,816)                                               (161,816)
 Balance at 31 December 2020                                                        2,716,970       10,892,135      760,543          1,127,401           (489,625)         908                                   15,008,332
 Balance at 1 January 2021                                                          2,716,970       10,892,135      760,543          1,127,401           (489,625)         908                                   15,008,332
 Profit for the year                                                                -               -               -                4,310,766                             -                                     4,310,766
 Foreign exchange differences on translation of foreign operations  32              -               -               -                -                   -                 76,899                                76,899
 Issue of new shares                                                28,29           33,575          879,327         -                -                   -                 -                                     912,902
 Movement in share-based payment reserve                            30              -               -               357,771          -                   -                 -                                     357,771
 Movement in Treasury Shares                                        31              -               -               -                -                   (1,037,210)                                             (1,037,210)
 Balance at 31 December 2021                                                        2,750,545       11,771,462      1,118,314        5,438,167           (1,526,835)       77,807                                19,629,460

 

 

Company Statement of Changes in Equity

For the year ended 31 December 2021

 

                                                          Share Capital  Share premium  Other reserves  Retained earnings

 Company                                  Notes                                                                            Total
 Balance at 1 January 2020                                2,714,956      10,839,981     368,367         206,383            14,129,687
 Profit for the year                                      -              -              -               1,779,951          1,779,951
 Issue of new shares                      28,29           2,014          52,154         -               -                  54,168
 Movement in share-based payment reserve  30              -              -              380,158         -                  380,158
 Balance at 31 December 2020                              2,716,970      10,892,135     748,525         1,986,334          16,343,964
 Balance at 1 January 2021                                2,716,970      10,892,135     748,525         1,986,334          16,343,964
 Profit for the year                                      -              -              -               4,480,382          4,480,382
 Issue of new shares                      28,29           33,575         879,327        -               -                  912,902
 Movement in share-based payment reserve  30              -              -              699,905         -                  699,904
 Balance at 31 December 2021                              2,750,545      11,771,462     1,448,430       6,466,716          22,437,153

 

Consolidated and Company Statement of Cash Flows

For the year ended 31 December 2021

 

 

                                                                                             Group                     Company
                                                               Notes                         2021         2020         2021         2020

                                                                                             £            £            £            £

 

 

 
 
 Cash flows from operating activities
 Cash generated by operations                                  33                            3,157,517    2,129,563    2,748,346    2,228,339
 Tax refunded                                                  18                            —            307,616      —            307,616
 Finance expense on lease liabilities                          27                            (26,175)     (35,099)     (26,175)     (35,099)
 Net cash outflow from operating activities                                                  3,131,342    2,402,080    2,722,171    2,500,856

 Investing activities
 Recognition of software development costs                     20                            (350,893)    (642,695)    (350,893)    (642,695)
 Purchase of property, plant and equipment                     21                            (319,519)    (115,351)    (314,384)    (115,351)
 Investment in subsidiaries                                                                  —            (259,400)    —            —
 Capital injection into AQSE and Aquis Europe                  22                            —            —            (400,000)    (4,046,436)
 Interest received                                             13                            444          14,632       444          14,632
 Net cash used in investing activities                                                       (669,968)    (1,002,815)  (1,064,833)  (4,789,851)

 Financing activities
 Issue of new shares                                           28,29                         912,902      54,168       912,902      54,168
 Purchase of treasury shares                                   31                            (1,100,000)  —            (1,100,000)  —
 Principal portion of lease liability                          2,23                          (573,194)    (195,346)    (554,842)    (195,346)
 Net cash generated from/(used in) financing activities                                      (760,292)    (141,178)    (741,940)    (141,178)
 Net increase/(decrease) in cash and cash equivalents                                        1,701,082    1,258,088    915,398      (2,430,173)
 Cash and cash equivalents at the beginning of the year        25                            12,268,418   11,010,861   6,179,566    8,609,739
 Effect of exchange rate changes on cash and cash equivalents  32                            76,899       (531)        —            —
 Cash and cash equivalents at the end of the year              25                            14,046,399   12,268,418   7,094,964    6,179,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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:

Following the end of the Brexit transition arrangements, from 1 January 2022
Aquis Europe SAS, a 100% owned subsidiary of the Group earns that element of
exchange revenue relating to EU27 stocks, with Aquis Exchange Plc (the
Company) now recording only that element of exchange revenue relating to UK
and Swiss stocks. 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 Palladium
House, 1-4 Argyll Street, London, W1F 7LD.

 

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.

The "requirements of the Companies Act 2006" here means accounts being
prepared in accordance with "international accounting standards" as defined in
section 474(1) of that Act.

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 2021 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
2022, with profits forecasted for future years.

Coronavirus has continued to impact the global economy in 2021 and caused a
significant amount of uncertainty. Whilst this has not hindered the business
in a discernible way to date, which is evidenced by the revenue growth and
profit generated during the year, there remains a risk that there may be a
longer-term impact on revenues and/or costs and therefore the Directors
continue to closely monitoring how the situation develops and are ready to
address any negative impact on the business if necessary.

The end of 2020 marked the end of the transition period following the UK's
departure from the EU, and a trade agreement was reached at the end of the
year, which did not address financial services. While the agreement ended
years of uncertainty regarding a no-deal Brexit, there are significant costs
for the UK's financial services industry, and it

is anticipated there will be a long-lasting effect on the UK economy. With its
European subsidiary and a well-planned and executed transition of EU
securities trading, the Group has been well-positioned to respond quickly to
the changes in legislation. However, it remains difficult to predict the
overall impact of Brexit on the future trading landscape for both the
financial services industry and the wider UK economy.

The Ukrainian 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 of at least 12 months from
the date of approval of these financial statements.

 

Consolidation

Group

The consolidated financial statements comprise the financial statements of the
Company and its subsidiary companies with all inter-company balances and
transactions eliminated.

Investments in subsidiary companies' shares, loans and other contributions are
recognised at cost. These are reviewed for impairment when events indicate
that the carrying amount may not be recoverable and are accounted for in the
Company's financial statements at cost less accumulated impairment losses.

The results of Aquis Stock Exchange Limited and Aquis Exchange Europe SAS have
been consolidated in the Group financial statements for the year ended 31
December 2021.

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 Company 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 or RSP, 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, net of value added tax. 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 in the
accounting year in which the services are rendered, by reference to the
ongoing contractual obligation to provide the services.

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. 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. Both application and
admission fees are recognised monthly over the expected life of a company's
admission. An

estimation is required to determine the length of time the securities will
remain listed on the exchange, the details of which are set out below. Annual
issuer fees relate to fees paid by issuers to maintain a listing on the
exchange and are discussed below, while further issue fees relate to fees in
respect of further issues by listed companies are recognised at the point in
time they occur.

Annual issuer and data fees are paid by the customers in advance and are
initially recognised as deferred revenue, then released over time as the
performance obligation is fulfilled.

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 £4,657 decrease /£5,821 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 4.

 

Business Combination

Aquis Exchange PLC (the acquirer) purchased 100% of the shares of NEX Exchange
Limited (which subsequently changed its name to Aquis Stock Exchange Limited
(AQSE)) on 11 March 2020 (the acquisition date). Business combinations are
recorded using the acquisition method. Identifiable assets acquired and
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. Acquisition-related costs are expensed as
incurred. The excess of the consideration transferred over the fair value of
the net identifiable assets is recorded as goodwill.

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 20 provides further detail on the impairment
assessment for goodwill as at 31 December 2021.

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

All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Financial assets are initially measured at
fair value plus transaction costs and are subsequently measured in their
entirety at either amortised cost or fair value, depending on the
classification of the financial assets.

Classification of financial assets

Debt instruments that meet the following conditions are measured subsequently
at amortised cost:

The financial asset is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows; and

The contractual terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal
amount outstanding.

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. If not, 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 27.

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 2021 the Group did not hold any Financial liabilities beyond Trade and
other payables, Accrued Expenses 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. It is recognised
as a credit to the profit and loss in the year it is received.

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 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 inventories or non-current assets.

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 are 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. This accounting treatment was
initially adopted in 2020.

Restricted shares

Restricted shares are 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.

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
'Property, Plant and Equipment' 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 (attributed to non-controlling interests as
appropriate).

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.    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 2021.

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 IFRS 9, IAS 39 and IFRS 17  Interest rate benchmark reform
 Amendments to IFRS 3                      Definition of a business
 Amendments to IAS 1 and IAS 8             Definition of material
 Amendment to IAS 12                       Income taxes
 Amendment to IAS 16                       Property, plant and equipment
 Amendment to IAS 37                       Provisions, contingent liabilities and contingent assets
 Amendment to IAS 41                       Agriculture
 IFRS 1                                    First time adoption of IFRS

 

4.    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 at the time
of invoice as Aquis becomes unconditionally entitled to payment.

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 1-4. 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 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 of £1,292k 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. The impact of flexing the discount rates used by +2%/-2% for
exchange and data revenue and by +5%/-5% for new licencing contracts would be
+£272,100/-

£272,100, so that the deferred tax asset would be £1,604,493 in an upside
scenario with lower probability discount rates or £1,060,274 in a downside
scenario with higher probability discount rates.

Share-based payments

The US binomial model and Black Scholes model are used to estimate the value
of the EMI options and the restricted shares. 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. No EMI options were granted during the year but management
notes that a 5% decrease/increase in expected volatility leads to a
+£41,732/-£42,347 variance in the 2021 expense. Similarly, for a 1 year
increase/decrease in the expected life of the options, this would lead to a
+£16,592/-£18,603 variance. Note 14 provides further disclosure on the
amounts recognised in these financial statements.

 

5.    CORPORATE INFORMATION

Aquis Exchange PLC (the 'Group') is licensed to operate a multilateral trading
facility (MTF) enabling members to trade across fifteen European markets and
to provide exchange software under licence.

 

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:                                                                          shareholders and benefits for other stakeholders.

 Increases in the capital requirements of its regulated companies, or           The Group maintains a level of capital that is well in excess of regulatory

                                                                              requirements. Maintaining a strong capital structure is a key priority for the
 A scarcity of equity (driven by its own performance or financial market        Group. If there was an erosion of capital for any reason the Group may issue
 conditions) either separately or in combination are the principal risks to     new shares or sell assets to ensure capital adequacy requirements are met
 managing its capital.                                                          (referenced in table below).

                                                                                The Group continuously monitors its level of capital in order to ensure it
                                                                                remains compliant with regulatory capital requirements. Aquis reviews capital
                                                                                resources and requirements on a monthly basis. 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.

                                                                                The Group supports both Aquis Europe and AQSE in maintaining capital adequacy,
                                                                                and holds sufficient capital to be able to inject capital into the businesses
                                                                                as and when required.

 

The Return on Assets (ROA) is the amount of net profit/(loss) returned as a
percentage of total assets.

 

ROA

 

                                 2021        2020

 Group                           £           £
 Profit for the year             4,310,766   981,728
 Total assets as at 31 December  26,875,790  18,814,123
 Return on assets (%)            16%         5%

 

There was no capital expenditure contracted for at the end of the reporting
year that had not been provided for.

 

 

 

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 has also considered the impact of the Coronavirus pandemic on credit
                                                                              risk by incorporating an assessment of how COVID-19 has affected the risk
                                                                              profile of each client, modifying risk ratings where necessary.

                                                                              Aquis' credit risk management processes are applied to all trade receivables
                                                                              and are calculated using a lifetime ECL method, as detailed in Note 12.

 

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 (2020:

                                                                               £12.4 million), with the majority of the debtor's book (excluding contract
                                                                               assets as set out in Note 24) being short term in nature. The Group is also
                                                                               funded entirely by equity, with no external debt funding obligations to be
                                                                               met.

 

The Group is not materially exposed to market risk including interest rate or
foreign exchange risk.

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 discounted cash flows of
financial liabilities based on the earliest date on which the Group or Company
can be required to pay. There is no exposure to interest rate changes since
the Group and Company have no external debt obligations, and the interest rate
on the lease liability is the rate implicit in the lease and as such is not
subject to change over the term of the lease.

 

 

 Group                     1 Year     2-5 years  5+ years   Total
 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
 31 December 2020
 Trade and other payables  2,616,097  -          -          2,616,097
 Lease Liabilities         194,613    714,704    280,377    1,189,694
                           2,810,710  714,704    280,377    3,805,791

 

 

 Company                   1 Year     2-5 years  5+ years   Total
 31 December 2021
 Trade and other payables  3,045,535  -          -          3,045,535
 Lease Liabilities         150,981    1,376,301  1,539,620  3,066,902
                           3,196,516  1,376,301  1,539,620  6,112,437
 31 December 2020
 Trade and other payables  2,097,493  -          -          2,097,493
 Lease Liabilities         194,613    714,704    280,377    1,189,694
                           2,292,106  714,704    280,377    3,287,187

 

 

 

The tables below 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                     1 Year     2-5 years  5+ years   Total
 31 December 2021
 Trade and other payables  3,575,350  -          -          3,575,350
 Lease Liabilities         326,024    1,927,289  1,945,800  4,199,113
                           3,901,374  1,927,289  1,945,800  7,774,463
 31 December 2020
 Trade and other payables  2,616,097  -          -          2,616,097
 Lease Liabilities         230,445    921,780    345,668    1,497,893
                           2,846,542  921,780    345,668    4,113,990

 

 Company                   1 Year     2-5 years  5+ years   Total
 31 December 2021
 Trade and other payables  3,045,535  -          -          3,045,535
 Lease Liabilities         254,264    1,640,250  1,676,700  3,571,212
                           3,299,799  1,640,250  1,676,700  6,616,747
 31 December 2020
 Trade and other payables  2,616,097  -          -          2,616,097
 Lease Liabilities         230,445    921,780    345,668    1,497,893
                           2,846,542  921,780    345,668    4,113,990

 

Both the Group and the Company have no derivative financial liabilities.

 

 Risk Description                                                                 Risk management approach
 The Group operates in the UK and Europe, with Sterling as its principal          In order to mitigate the impact of unfavourable currency exchange rate
 currency of operation. The Group companies invoice revenues and incur the        movements on consolidated earnings and net assets, Aquis Exchange Europe SAS
 majority expenses in GBP. A relatively small percentage of the overall Group's   maintains the majority of its net assets (primarily comprising of regulatory
 expenses are incurred in Euros in relation to the French subsidiary. As a        cash) in a Sterling denominated bank account so as to minimise fluctuations in
 result, foreign exchange risk arises mainly from the translation of the          the GBP/EUR exchange rate on a consolidated basis.
 Group's foreign currency earnings, assets and liabilities into its reporting
 currency, Sterling.

 An immaterial amount of cash held by Aquis Exchange Europe SAS is held in a
 euro denominated bank account, with the remaining cash held in a Sterling
 denominated bank account, hedging the Group against foreign exchange
 fluctuations in cash and cash equivalents. Since the net asset value of the
 Aquis Exchange Europe SAS

 is predominately comprised of cash, there is negligible exposure to the Group
 of foreign exchange rate fluctuations.

 

 

 

 

7.    OPERATING SEGMENTS

The Aquis Group can be split into 3 operating segments, each offering multiple
products and services and benefiting from Group synergies. The specific focus
of these activities are:

1.    Aquis Exchange - operator of MTF and related services. The Group
operates two MTFs: Aquis Exchange (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.

The Group has no discontinued 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, EBITDA and profit before
taxation. When monitoring the performance of each operating segment
individually, management examines the discrete financial information available
which will normally include revenue and EBITDA for each division. In line with
IFRS 8 the operating segments are reported separately as follows:

 

                                                                     Aquis Technologies

 2021                                 AQXE & AQEU       AQSE                             Total
 Revenue                              10,897,483        1,880,666    4,404,606           17,182,755
 Impairment Charge                    -                 -            (972,161)           (972,161)
 Costs                                (8,817,828)       (2,103,103)  (1,009,469)         (11,930,400)
 Operating Profit/ (Loss)             2,079,655         (222,437)    2,422,976           4,280,194
 Depn, amortisation and net interest  (1,057,971)       -            -                   (1,057,971)
 Profit/ (Loss) before taxation       1,021,684         (222,437)    2,422,976           3,222,223

 

                                                                     Aquis Technologies

 2020                                 AQXE & AQEU       AQSE                             Total
 Revenue                              7,936,036         1,221,517    2,319,700           11,477,253
 Impairment Charge                    (97,760)          (2,414)      -                   (100,174)
 Costs                                (6,687,237)       (1,754,950)  (1,413,740)         (9,855,927)
 Gross Profit/ (Loss)                 1,151,039         (535,847)    905,960             1,521,152
 Depn, amortisation and net interest  (1,050,757)       -            -                   (1,050,757)
 Profit before taxation               100,282           (535,847)    905,960             470,395

 

The tables above represent the segment-level information that is monitored by
the Chief Operating Decision Makers, which are the Chief Executive Officer and
the Chief Financial Officer. All non-current assets are held centrally by
Aquis Exchange PLC, apart from the lease liability for the Paris office. The
geographical analysis of the non-current assets is as follows; UK: £6,565k,
France: £583k and South Africa: £1,912k, Total: £9,060k. Gross revenue from
2 customers amounted to £3,785k (2020: £117k) arising from licence 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 Executive Directors) employed
by the Group during the year was:

 

                              2021     2020

 Group                        Number   Number
 Management                   2        2
 IT                           19       20
 Compliance and Surveillance  10       8
 Operations                   9        6
 Business Development         8        6
 Finance                      4        3
 Marketing                    2        1
                              54       46

 

The monthly average number of persons (including Executive Directors) employed
by the Company during the year was:

 

                              2021     2020

 Company                      Number   Number
 Management                   2        2
 IT                           18       19
 Compliance and Surveillance  4        4
 Operations                   8        5
 Business Development         5        4
 Finance                      3        2
 Marketing                    2        1
                              42       37

 

Their aggregate remuneration was comprised of:

 

                        2021       2020

 Group                  £          £
 Salaries and wages     6,129,802  4,573,007
 Social security costs  815,822    718,885
 Other pension costs    183,941    138,891
 Share based payments   571,834    392,897
 Employee benefits      165,617    148,992
                        7,867,016  5,972,673

 

                        2021       2020

 Company                £          £
 Salaries and wages     4,605,033  3,535,759
 Social security costs  560,051    519,061
 Other pension costs    145,884    112,907
 Share based payments   576,609    363,164
 Employee benefits      165,357    148,633
                        6,052,934  4,679,524

 

 

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 (see
page 30).

 

 

 11.  REVENUE

 An analysis of the Group's and Company's revenue is as follows:
                                                                   Group        Company
                                                                   2021   2020  2021     2020

                                                                   £      £     £        £

 

 Revenue analysed by class of business
 Exchange fees                          9,766,046   7,738,284   3,476,206  7,111,000
 Licence fees                           4,404,606   2,319,700   4,404,606  2,319,700
 Data vendor fees                       2,319,360   894,867     1,573,925  429,628
 Issuer fees                            692,743     524,402     -          -
                                        17,182,755  11,477,253  9,454,737  9,860,328

 

Revenues from customers by operating segment and class of business is as
follows:

 

 

 

                                                              Group                   Company
                                                              2021        2020        2021       2020

                                                              £           £           £          £

 Revenue analysed by operating segment and class of business
 AQXE & AQEU
 Exchange fees                                                9,323,559   7,506,408   3,476,206  7,111,000
 Data vendor fees                                             1,573,925   429,628     1,573,925  429,628
 AQSE
 Exchange fees                                                442,487     231,876     -          -
 Data vendor fees                                             745,435     465,239     -          -
 Issuer fees                                                  692,743     524,403     -          -
 Aquis Technologies
 Licence fees                                                 4,404,606   2,319,700   4,404,606  2,319,700
                                                              17,182,755  11,477,253  9,454,737  9,860,328

 

Revenues from customers attributable to the United Kingdom, Europe and the
rest of the world is as follows:

 

                                                       Group                  Company
                                           2021        2020        2021       2020

                                           £           £           £          £
 Revenue analysed by region
 United Kingdom                            12,048,156  8,780,442   5,764,371  7,629,888
 Europe                                    1,598,511   1,989,508   621,987    1,733,587
 Rest of the world (Africa/Americas/Asia)  3,536,088   707,303     3,068,380  498,853
                                           17,182,755  11,477,253  9,454,738  9,860,328

 

Exchange 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 exchange 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 and
services.

The Group determines the transaction price based primarily on the relative
standalone prices. In the case of exchange, 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 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:

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 6 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.

The revenue from licensing contracts with customers has been categorised
reflecting the nature, amount, customer categorisation (see also Note 12),
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.

The Company determines the transaction price of the licensing contract based
primarily on the competitive landscape. 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 on the basis of the relative
standalone selling price.

 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:

 

                          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

 

                               2020
 Group     £          £        £        £      £
 Category  1          2        3        4      Total
 PO1       50,000     -        -        -      50,000
 PO2       1,201,755  -        451,440  -      1,653,195
 PO3       27,006     111,883  11,577   5,160  155,626
           1,278,761  111,883  463,017  5,160  1,858,821

Customer risk category definitions: 1 - High, 2 - Moderately High, 3 -
Moderately Low and 4 - Low

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. These fees total £530k, (2020: £461k).

The resultant contract assets at year end are disclosed as per Note 24. In
aggregate the total revenue that reflects future performance obligations and
has yet to be recognised is £1,190k.

 

Issuer fees:

Issuer fees are accounted for under IFRS 15 and are recognised over time. They
can be separated into the following categories:

Application and admission fees: These are charged upfront to prospective
companies wishing to be admitted to AQSE. They are recognised monthly over the
expected life of a company's admission. Deferred Revenue is shown as per Note
26.

Annual fees: These are fees paid annually by companies listed on AQSE. They
are charged in advance and are recognised over the year.

Further issue fees: These are charged to companies already listed on AQSE
wishing to issue further securities. In this case revenue is recognised at the
point in time of the further issue.

 

12.  IMPAIRMENT

IFRS 9 provisioning is applied to technology licensing contract assets and to
other trade receivables based on management estimates of the collectability of
contracts over their useful life, and which are re-assessed at each renewal.
The Group applies a 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.

The Group has two types of financial assets that are subject to the expected
credit loss model:

Contract assets relating to technology licensing contracts (Company and Group)

Trade receivables relating to services provided by AQSE (Group)

The Group have concluded that the trade receivables and contract assets have
different risk characteristics and therefore the expected credit loss 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 while 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.

 

 

 

                                                  Group               Company
                                                  2021       2020     2021       2020

                                                  £          £        £          £

 Balance of impairment provisions at 1 Jan 2021   526,271    410,841  508,601    410,841
 Trade receivable ECL Provision at 11 March 2020  -          15,256   -          -
 ECL write off                                    -          (9,236)  -          (9,236)
 Expected credit loss /(reversal)                 972,161    109,410  972,161    106,998
 Balance of impairment provision                  1,498,432  526,271  1,480,762  508,601

 

 

 

 

 

 

                                  2021       2020     2021                            2020

                                  £          £        £          £

 Contract Asset ECL provision     1,480,762  508,601  1,480,762  508,601
 Trade receivable ECL provision   17,183     17.670   -          -
 Other provisions                 487        -        -          -
 Balance of impairment provision  1,498,432  526,271  1,480,762  508,601

 

 

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 0-49% is applied to each client based on the assigned risk
category. The model includes lifetime PD applied to each year of the contract,
based on the assumption that the PD will reduce over time.

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 49% 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 PD assigned 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
49%.

The loss given default 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 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.

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.

Although the full risk assessment is completed only at the start of the
contract and at each renewal date, Aquis regularly assesses whether
macro-economic factors could have a bearing on the success of the client and
the recoverability of the outstanding debt.

The £1,480,762 expected credit loss provision for the year (2020: £508,601)
has been calculated with reference to estimations based on the probability of
default and a loss given default as described above, and has been analysed for
each individual contract taking into account the nature, amount, customer
categorisation, contract duration and uncertainty of revenue and cash flows.

As at 31 December 2021, the average contract duration for the portfolio of
technology contracts is 2.7 years. The contracts are short-to-medium term in
length and the ECL model incorporates the impact of a significant change in
macroeconomic circumstances on the expected PD over the life of the contracts.
The macroeconomic variables are based on 3-year average forecast rates for
2022-2024, 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                                            -3%         1.6%        5%
 UK unemployment                                   7%          4.2%        2%
 UK CPI Inflation                                  1.2%        2.5%        5.0%

 

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
probability of default 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:

 

 

 Group and Company At 31 December 2021  Downside   Baseline   Upside

                                        £          £          £
 Impairment provision                   1,682,547  1,480,762  1,281,452
 Impact on PD                           5%         0%         -5%
 Probability weighting                  25%        50%        25%

 

 

Expected credit loss of Aquis Stock Exchange trade receivables

In line with IFRS 9 guidance, the Group has applied a simplified "Expected
Credit Loss" (ECL) model on AQSE trade receivables. 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. Loss allowances for
financial assets measured at amortised cost are 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 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 90
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 AQSE 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
analysis of credit losses experienced since the acquisition 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 due to a number of older debts being identified and written
off on acquisition.

Trade receivables have payment terms of 30 days from the date of billing. For
debts older than 90 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 £29,240 of trade receivables were written off relating to debts
from companies that had ceased membership with AQSE. The contractual rights to
cash flows from the financial assets were deemed to have expired.

The total loss allowance 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 AQSE trade receivables as at 31 December 2021 was £17,183
(2020: £17,670) which was comprised as follows:

 

 

                     0       1-29    30-59   60-89  90-124  125 - 149  150-179  Over 180

 Days past Due       days    days    days    days   days    days       days     days      Total
 Expected loss rate  0.5%    1%      3%      5%     10%     25%        50%      100%      N/A
 Trade receivables   83,947  19,650  11,405  5,200  3,200   -          1,200    15,044    139,646
 ECL Provision       420     197     342     260    320     -          600      15,044    17,183

 

 

13.  OPERATING EXPENSES

EBITDA is stated after charging:

 

 

 

                                                                                 Group                  Company
 Operating Expenses                                                              2021        2020       2021                      2020

                                                                                 £           £          £            £

 Fees payable to the Company's auditor for the audit of the company's financial  222,000     225,559    167,000      126,431
 statements
 Fees payable to the Company's auditor for the Client Asset audit                7,500       6,300      7,500        6,300
 Share-based payments                                                            571,834     392,897    576,609      363,164
 Exchange loss/(gains)                                                           -           5,958      -            6,144
 Employee costs                                                                  7,295,182   5,579,775  5,476,325    4,316,360
 Operating costs (Net of intercompany recharge)                                  3,833,884   3,645,438  (2,189,408)  2,624,795
                                                                                 11,930,400  9,855,927  4,038,026    7,443,194

 

Other operating 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
                                                   2021   2020  2021     2020

 Depreciation, amortisation and finance costs      £      £     £        £

 

 Depreciation of property, plant and equipment  518,806    550,620    513,546    550,620
 Amortisation of intangible assets              513,434    479,670    513,434    479,670
                                                1,032,240  1,030,290  1,026,980  1,030,290
 Net finance expense (Note 27)                  26,175     35,099     26,175     35,099
                                                1,058,415  1,065,389  1,053,155  1,065,389

 

 Total expenses were as follows:
                                  Group        Company
                                  2021   2020  2021     2020

                                  £      £     £        £

 

 Total expenses  12,988,815  10,921,316  5,091,181  8,508,583

 

 

 

 

14.  SHARE-BASED PAYMENTS

 

     Group        Company
     2021   2020  2021     2020

     £      £     £        £

 

 EMI options granted                                   160,052  227,084  152,577  205,601
 Restricted share awards                               314,222  55,317   314,222  55,317
 Company Share Ownership Plan awards                   19,045   -        19,045   -
 Shares purchased under employee Share Incentive Plan  78,515   110,496  90,765   102,243
                                                       571,834  392,897  576,609  363,164

 

Employee Share Incentive Plan

The share incentive plan 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. 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. The fair value of the
matching 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.

 

                                                                    2021      2020
 Employee Share incentive plan

                                                                    139,543   104,656
 Number of shares issued under the plan to participating employees

 

EMI Share Options

There is one approved EMI scheme, which was initiated in June 2018 when the
first 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.

Of the total number of options granted, 335,753 were exercised, none expired
and 24,526 were forfeited during the year.

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.

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

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 is
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

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 is estimated to be 5 years.

 

 

                                             2021              2021             2020              2020
 Details of the EMI scheme are as follows:   Number of Shares  Average          Number of Shares  Average Exercise Price (£)

                                                               Exercise Price

                                                               (£)
 Outstanding at the beginning of the period  1,297,421         3.15             560,407           2.69
 Granted during the period                   -                 -                776,250           3.47
 Forfeited during the period                 (24,526)          3.07             (19,099)          3.34
 Exercised during the period                 (335,753)         2.70             (20,137)          2.69
 Expired during the period                   -                 -                -                 -
 Outstanding at the end of the period        937,143           3.31             1,297,421         3.15
 Exercisable at the end of the period        453,643           3.11             186,802           2.69

 

 

CSOP

 

The Group has implemented a CSOP employee option scheme in 2021. Initial
grants amounting to 100,000 options at a grant price of £6.58 were made in
April 2021. Options vest three years after grant and expire after 10 years.

 

Details of the CSOP scheme are as follows:

 

                                                          Number of shares  Average Exercise Price (£)
 ·      Outstanding at the beginning of the period        0                 -
 ·      Granted during the period                         100,000           6.85
 ·      Forfeited during the period                       (4,195)           6.85
 ·      Exercised during the period                       0                 -
 ·      Expired during the period                         0                 -
 ·      Outstanding at the end of the period              95,805            6.85
 ·      Exercisable at the end of the period              0                 -

 

 

RSP

 

The Group implemented a RSP senior executive option scheme in 2020. Total
grants made in April 2021 amounted to 88,320 options at a grant price of
£6.85. Options vest three years after grant, with an additional held period
of a further 2 years and expire after 10 years.

 

Details of the RSP scheme are as follows:

 

                                                          2021              2021                         2020              2020
                                                          Number of shares  Average Exercise Price (£)   Number of shares  Average Exercise Price (£)
 ·      Outstanding at the beginning of the period        140,448           3.64                         -                 -
 ·      Granted during the period                         88320             6.85                         140,448           3.64
 ·      Forfeited during the period                       -                 -                            -                 -
 ·      Exercised during the period                       -                 -                            -                 -
 ·      Expired during the period                         -                 -                            -                 -
 ·      Outstanding at the end of the period              228,768           4.88                         140,448           3.64
 ·      Exercisable at the end of the period              -                 -                            -                 -

 

 

15.  INTEREST INCOME

 

 

                  Group         Company
 Interest Income  2021  2020    2021  2020

                  £     £       £     £

 Bank Deposits    444   14,632  444   14,632

 

 

16.  BUSINESS COMBINATION

Business acquisition

On 11 March 2020 Aquis Exchange PLC acquired 100% of the issued share capital
of NEX Exchange Limited, a UK based Recognised Investment Exchange. It has
since been rebranded as Aquis Stock Exchange (AQSE). The acquisition has
broadened the Group's service offering, including the ability to offer
companies wishing to go public a primary listing on its growth market. It
complemented the existing exchange services of the Group and has enabled the
Group to expand its strategic offering.

Details of the purchase consideration is as follows:

 

 

 Purchase consideration:  £
 Cash paid                2,877,118

The assets and liabilities recognised as a result of the acquisition are as follows:

 

 Current assets:
 Cash                               2,617,718
 Trade and other receivables        653,390
 Current liabilities:
 Trade and other payables           (477,471)
 Add: Goodwill                      83,481
 Net assets arising on acquisition  2,877,118

 

The assets acquired and liabilities assumed have been recognised at their fair
values measured at the acquisition date. There were no intangible assets
identified at the acquisition date.

There were no acquisitions in the year ending 31 December 2021.

 

 

17.  DEFERRED TAX ASSET

 

A deferred tax asset of £1,292,260 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.

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 deferred tax balance comprises temporary differences attributable to:

 

                           2021        2020

 Group and Company         £           £
 Deferred tax

                           1,292,260   203,717
 Tax losses
 Total deferred tax asset  1,292,260   203,717

Movement in deferred tax balance:

 

                                                2021       2020

 Group and Company                              £          £
 Movements

                                                203,717    -
 At 1 January
 Origination and reversal of timing difference  1,024,211  203,717
 Rate change                                    64,332     -
 At 31 December                                 1,292,260  203,717

 

The Group has combined losses of £48,125,182 (2020: £51,941,924) 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
totalling

£47,944,397 generated in the UK by Aquis Exchange PLC and Aquis Stock
Exchange Limited and losses totalling

£130,785 generated in France by Aquis Exchange Europe SAS.

The Company has estimated losses of £13,099,278 (2020: £17,043,108)
available for carry forward against future trading profits.

 

18.  INCOME TAX

 

 

 

                     Group            Company
 Current tax         2021  2020       2021  2020

                     £     £          £     £

 R&D tax credit      -     (307,616)  -     (307,616)

 

 

The credit for 2020 can be reconciled to the loss per the income statement as
follows:

 

 

 

                                                                  Group                 Company
                                                                  2021       2020       2021       2020

                                                                  £          £          £          £

 Profit for the year before taxation                              3,222,223  470,395    3,391,839  1,268,618
 Expected tax charge based on a corporation tax rate of 19.00%    612,222    89,375     644,449    241,037
 Effect of expenses not deductible in determining taxable profit  10,407     55,246     10,294     51,165
 Unutilised tax losses carried forward                            41,917     70,204     -          -
 Losses utilised against taxable profits                          (735,805)  -          (732,782)  (77,377)
 Deferred tax not recognised                                      71,259     -          78,038     -
 Permanent capital allowances in excess of depreciation           -          34,109     -          34,109
 Depreciation on assets not qualifying for tax allowances         -          846        -          846
 Additional R&D allowance for qualifying expenditure              -          (247,000)  -          (247,000)
 Non-trade loan relationship credits                              -          (2,780)    -          (2,780)
 Research and development tax credit                              -          (307,616)  -          (307,616)
 Taxation credit for the year                                     -          (307,616)  -          (307,616)

 

 

19.  EARNINGS PER SHARE

 

 

 

 

 

                                                                            Group                   Company
                                                                            2021        2020        2021        2020
 Number of Shares
 Weighted average number of ordinary shares for basic earnings per share    27,339,947  27,164,230  27,339,947  27,164,230
 Weighted average number of ordinary shares for diluted earnings per share  28,456,875  28,281,234  28,456,875  28,281,234

 Earnings

                                                                            4,310,766   981,728     4,480,382   1,779,951
 Profit for the year from continued operations

 Basic and diluted earnings per share (pence)

                                                                            16          4           16          7
 Basic earnings per ordinary share
 Diluted earnings per ordinary share                                        15          3           16          6

 

 

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).

 

20.  INTANGIBLE ASSETS

 

                                            Group Developed                                          Total Intangible

                                            trading platforms                                        Assets Excl Goodwill

                                                                Other Intangibles   Group Goodwill
 Cost
 As at 01/01/2020                           2,055,326           -                   -                2,055,326
 Additions- internally generated            642,695             -                   83,481           642,695
 As at 31/12/2020                           2,698,021           -                   83,481           2,698,021
 Additions- internally generated/ acquired  313,463             37,430              -                350,893
 As at 31/12/2021                           3,011,484           37,430              83,481           3,048,915

 Accumulated amortisation and impairment
 As at 01/01/2020                           1,302,096           -                   -                1,302,096
 Charge for the year                        479,670             -                   -                479,670
 As at 31/12/2020                           1,781,766           -                   -                1,781,766
 Charge for the year                        505,514             7,920               -                513,434
 As at 31/12/2021                           2,287,280           7,920               -                2,295,200

 Carrying amount
 As at 31/12/2021                           724,204             29,510              83,481           753,714
 As at 31/12/2020                           916,256             -                   83,481           916,256

 

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 2024, using an estimated terminal growth rate of 2%, and a pre-tax
discount factor of 7.75%.

No impairment loss has been recognised during the year, as management believes
the value in use of Aquis Stock Exchange is significantly higher than the
carrying value and is unlikely to be materially impaired.

 

 

21.  PROPERTY, PLANT AND EQUIPMENT

 

                      Fixtures, fittings  Computer    Total Right of

 Group                and equipment       Equipment   Use Asset       Total
 Cost
 As at 31/12/2019     249,497             2,098,270   1,444,159       3,791,927
 Additions            2,328               113,024     -               115,351
 As at 31/12/2020     251,825             2,211,295   1,444,159       3,907,278
 Additions            72,636              246,885     3,758,437       4,077,958
 Disposals            -                   (68,926)    (963,837)       (1,032,764)
 As at 31/12/2021     324,461             2,389,254   4,238,759       6,952,474

 Accumulated depreciation and impairment
 As at 31/12/2019     127,572             1,477,366   173,166         1,778,104
 Charge for the year  50,492              326,962     173,166         550,620
 As at 31/12/2020     178,064             1,804,328   346,332         2,328,724
 Charge for the year  51,938              312,092     154,748         518,779
 Disposals            -                   (41,362)    -               (41,362)
 As at 31/12/2021     230,002             2,075,058   501,080         2,806,141

 Carrying amount
 As at 31/12/2021     94,458              314,196     3,737,679       4,146,333
 As at 31/12/2020     73,761              406,966     1,097,827       1,578,553

 

 

 

 

 

                      Fixtures, fittings and equipment  Computer Equipment  Total

 Company                                                                    Right of    Total

                                                                            Use Asset
 Cost
 As at 31/12/2019     249,497                           2,098,270           1,444,159   3,791,927
 Additions            2,328                             113,024             -           115,351
 As at 31/12/2020     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)   (1,032,764)
 As at 31/12/2021     319,325                           2,389,253           3,656,087   6,364,664

 Accumulated depreciation and impairment
 As at 31/12/2019     127,572                           1,477,366           173,166     1,778,104
 Charge for the year  50,492                            326,962             173,166     550,620
 As at 31/12/2020     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 31/12/2021     230,029                           2,075,058           495,820     2,800,907

 Carrying amount
 As at 31/12/2021     89,296                            314,195             3,160,267   3,563,758
 As at 31/12/2020     73,761                            406,966             1,097,827   1,578,554

 

22.  INVESTMENT IN SUBSIDIARIES

 

                             2021       2020

 Company                     £          £
 Investment in subsidiaries  6,884,202  6,484,202

 

Details of the Company's subsidiaries at 31 December 2021 are set out in the
following table. The investments are measured using the equity method in Aquis
Exchange PLC's standalone accounts.

 

 

                            Country of incorporation  Ownership interest (%)  Voting power  Name of business                Carrying amount 2021  Carrying amount

 Name of undertaking                                                          held (%)                                                            2020
 Aquis Stock Exchange       UK                        100                     100           Recognised Investment Exchange  3,677,118             3,277,118
 Aquis Exchange Europe SAS  France                    100                     100           European Equities Exchange      3,207,084             3,207,084

 

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
77 Cornhill, London EC3V 3QQ, UK.

During the year Aquis Exchange PLC made capital contributions to Aquis Stock
Exchange of £400,000.

Both investments were assessed for impairment at year end. Although Aquis
Stock Exchange was loss-making in 2021, this performance was in line with
expectations and is expected to reach profitability in 2022. Therefore, in
line with IAS 36 guidance, no impairment provision has been recognised in
Aquis Exchange PLC's financial statements. The following table summarises the
movement in the carrying amounts of the subsidiaries during the year:

 

                       Aquis Stock Exchange  Aquis Exchange Europe SAS
 Carrying amount 2020  3,277,118             3,207,084
 Capital injection     400,000               -
 Carrying amount 2021  3,677,118             3,207,084

 

23.  INVESTMENT IN TRUSTS

The following table shows the total amount the Company has invested in the two
Trusts in respect of the Share Incentive Plan and also the Restricted Share
Plan as at the reporting date:

 

                       2021       2020

 Company               £          £
 Investment in Trusts  1,856,964  486,127

 

24.  TRADE RECEIVABLES, CONTRACT ASSETS AND OTHER RECEIVABLES

 

 

                                     Current               Non-current         Total
 Group                               2021       2020       2021       2020     2021       2020

                                     £          £          £          £        £          £

 Trade receivables                   1,884,329  1,500,524  -          -        1,884,329  1,500,524
 Technology licence contract assets  1,112,576  1,132,029  2,415,824  617,805  3,528,400  1,749,834
 Other receivables                   339,353    11,911     328,832    221,825  668,185    233,736
 Prepayments                         432,689    279,603    -          -        432,689    279,603
                                     3,768,947  2,924,067  2,744,656  839,630  6,513,603  3,763,697

 

 

 

 

                                     Current               Non-current         Total
 Company                             2021       2020       2021       2020     2021       2020

                                     £          £          £          £        £          £

 Trade receivables                   1,747,286  1,384,467  -          -        1,747,286  1,384,467
 Technology licence contract assets  1,112,576  1,132,029  2,415,824  617,805  3,528,400  1,749,834
 Other receivables                   313,225    6,941      315,350    221,825  628,575    228,766
 Intercompany receivables            804,406    177,266    -          -        804,406    177,266
 Prepayments                         395,061    242,665    -          -        395,061    242,665
                                     4,372,554  2,943,368  2,731,174  839,630  7,103,728  3,782,998

 

 

The following details the trade receivables and contract assets 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                    2021         2020       2021         2020

                                      £            £          £            £

 Gross trade receivables              1,930,498    1,540,230  1,747,286    1,406,505
 Gross contract assets                5,009,162    2,236,397  5,009,162    2,236,397
 Expected credit loss provision       (1,526,931)  (526,271)  (1,480,762)  (508,601)
 Trade receivables net of provisions  5,412,729    3,250,357  5,275,686    3,134,300

 

 25.  CASH AND CASH EQUIVALENTS
 Group                                  Company
 2021                             2020  2021     2020
 £                                £     £        £

 

 Cash at bank  14,046,399  12,268,418  7,094,964  6,179,566

 

 

Cash and cash equivalents are held with authorised counterparties of a high
credit standing, in secured investments. 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, hedging the Group against foreign exchange
fluctuations in cash and cash equivalents of the subsidiary

 

26.  TRADE AND OTHER PAYABLES AND SHORT TERM LEASE LIABILITIES

 

 

                                     Group                 Company
 Current                             2021       2020       2021       2020

                                     £          £          £          £

 Trade payables                      170,934    263,398    162,989    251,136
 Accruals                            1,811,168  1,524,793  1,564,785  1,301,073
 Deferred Revenue                    882,525    431,792    270,900    43,127
 Social security and other taxation  506,638    426,745    494,107    242,588
 Intercompany payables               -          -          552,754    454,182
 Other payables                      204,085    163,982    -          -
 Short term lease liabilities        208,237    -          150,981    -
                                     3,783,587  2,810,710  3,196,516  2,292,106

 

27.  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 2021 as
follows:

 

                                      Property

                                      £
 Carrying amount at 1 January 2020    1,270,993
 Depreciation for the year            (173,166)
 Carrying amount at 31 December 2020  1,097,827
 Additions                            3,758,437
 Disposals                            (963,837)
 Depreciation for the year            (154,748)
 Carrying amount at 31 December 2021  3,737,679

 

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 2021 as follows:

 

                                                    Rent deposit

                                                    asset

                                                    £
 Carrying amount at 1 January 2020                  222,029
 Finance income on rent deposit asset for the year  6,736
 Carrying amount at 31 December 2020                228,765
 Additions                                          374,442
 Finance income on rent deposit asset for the year  8,835
 Carrying amount at 31 December 2021                612,042
 Of which are:
 Current                                            283,212
 Non-current                                        328,830
                                                    612,042

 

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 2021
as follows:

                                                  Lease liability

                                                  £
 Carrying amount at 1 January 2020                1,378,304
 Finance expense on lease liability for the year  41,835
 Lease payments made during the year              (230,445)
 Carrying amount at 31 December 2020              1,189,694
 Additions                                        3,563,025
 Reduction in assumed lease liability             (926,303)
 Finance expense on lease liability for the year  35,010
 Lease payments made during the year              (230,445)
 Carrying amount at 31 December 2021              3,630,981
 Of which are:
 Current                                          208,237
 Non-current                                      3,422,744
                                                  3,630,981

 

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

 

                                         31-Dec-21  31-Dec-20

                                         £          £
 Finance expense on lease liability      35,010     41,835
 Finance income on rent deposit asset    (8,835)    (6,736)
 Net finance expense relating to leases  26,175     35,099

 

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

 

                                              31-Dec-21  31-Dec-20

                                              £          £
 Depreciation expense on right-of-use assets  (149,488)  (173,166)
 Finance expense on lease liability           (35,010)   (41,835)
 Finance income on rent deposit asset         8,835      6,736
 Short term lease expense                     (37,568)   (25,726)
 Net impact of leases on profit or loss       (213,231)  (233,991)

 

The property leases (of which there are three) in which the Group is the
lessee do not contain variable lease payment terms.

 

28.  SHARE CAPITAL

 

                                         2021       2020

 Group and Company                       £          £
 Ordinary share capital
 Issued and fully paid
 27,169,700 Ordinary shares of 10p each  2,716,970  2,714,956
 Issue of 335,750 new shares             33,575     2,014
                                         2,750,545  2,716,970

 

 

29.  SHARE PREMIUM ACCOUNT

 

                               2021        2020

 Group and Company             £           £
 At the beginning of the year  10,892,135  10,839,981
 Issue of new shares           879,327     52,153
 At the end of the year        11,771,462  10,892,135

 

 

30.  OTHER RESERVES

 

 

 

                                            Group               Company
                                            2021       2020     2021       2020

                                            £          £        £          £

 Reserves relating to share-based payments  1,118,314  760,543  1,448,430  748,525

 

 

The reserves relating to share-based payments reflects the cost recognised to
date for the fair value of the approved Employee Share Plans estimated using
the US binomial and Black Scholes option valuation models.

 

31.  TREASURY SHARES

 

                                  2021       2020

 Group                            £          £
 At the beginning of the year     489,625    318,410
 Purchase of additional shares    1,211,907  199,459
 Shares vested or sold by trusts  (177,975)  (40,262)
 Cash held by trusts              3,278      12,018
 At the end of the year/period    1,526,835  489,625

 

As at 31 December 2021 139,543 shares were held in the SIP Trust, and a
further 150,000 shares held in the RSP/EMI Trust.

 

32.  FOREIGN CURRENCY TRANSLATION RESERVE

In 2019 the Group established a Multilateral Trading Facility (MTF) in France
through its subsidiary, Aquis Exchange Europe SAS. The translation of the
European subsidiary' assets into Sterling, the functional currency of the
Group, results in foreign exchange differences that have been recognised in
Other Comprehensive Income and accumulated in a separate component of equity
as illustrated below.

 

                                                                               2021    2020

 Group                                                                         £       £
 At the beginning of the year                                                  908     1,439
 Foreign exchange differences on translation of foreign operations recognised  76,899  (531)
 in OCI
 At the end of the year                                                        77,807  908

 

33.  CASH GENERATED BY OPERATIONS

 

                                                               2021         2020

 Group                                                         £            £
 Profit for the year after tax                                 4,310,766    981,728
 Adjustments for:
 Taxation credited                                             -            (307,616)
 Deferred tax                                                  (1,088,543)  (203,717)
 Interest income                                               (444)        (14,632)
 Amortisation and impairment of intangible assets              505,514      479,670
 Depreciation and impairment of property, plant and equipment  518,779      550,620
 Equity settled share based payment expense                    571,834      392,897
 Other gains/losses                                            324,876      39,814
 Movement in working capital:
 Increase in trade and other receivables                       (2,749,906)  (1,100,337)
 Increase in trade and other payables                          764,641      1,311,136
 Cash generated/ (absorbed) by operations                      3,157,517    2,129,563

 

 

 

 

 

                                                               2021         2020

 Company                                                       £            £
 Profit for the year after tax                                 4,480,382    1,779,951
 Adjustments for:
 Tax credit                                                    -            (307,616)
 Deferred tax                                                  (1,088,543)  (203,717)
 Interest income                                               (444)        (14,632)
 Amortisation and impairment of intangible assets              513,434      479,670
 Depreciation and impairment of property, plant and equipment  513,545      550,620
 Equity settled share based payment expense                    576,609      363,164
 Other gains/losses                                            320,664      (114,892)
 Movement in working capital:
 Increase in trade and other receivables                       (3,320,730)  (1,128,488)
 Increase in trade and other payables                          753,428      824,278
 Cash generated/ (absorbed) by operations                      2,748,346    2,228,339

 

34.  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.

 

                                         2021       2020

 Group                                   £          £
 Salaries and other short term benefits  797,788    761,709
 Share-based payments                    528,070    69,268
 Total                                   1,325,858  830,977

 

 

 

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 through a
Management fee and service charge, which for 2021 represented a net recharge
of £4,965k to Aquis Europe SAS and a net recharge of £494k to Aquis Stock
Exchange Limited. The net cash payments in the year and balances outstanding
at the year end were;

 

 

 

                           2021                           2021                                       2021

                           £000s Receipts and Payments    £000s Amounts owed from related parties    £000s Amounts owed to related parties

 Group and Company
 Aquis Stock Exchange Ltd  (82)                           390                                        -
 Aquis Europe SAS          193                            414                                        553
 Total                     111                            804                                        553

 

 

 

 

                           2020                           2020                                       2020

                           £000s Receipts and Payments    £000s Amounts owed from related parties    £000s Amounts owed to related parties

 Group and Company
 Aquis Stock Exchange Ltd  485                            177                                        -
 Aquis Europe SAS          -                              -                                          54
 Total                     485                            177                                        54

 

 

35.  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
2021.

 

36.  EVENTS OCCURING AFTER THE REPORTING PERIOD

The Ukrainian conflict has resulted in extremely volatile market conditions
and there is no certainty as to when this conflict will be resolved; however,
at this stage, the Directors do not believe this could have a material adverse
effect on the Group and consider this to be a non-adjusting post balance sheet
event at 31.12.21.

The COVID-19 pandemic has continued to cause considerable health and economic
uncertainty and significant market volatility and volumes. Notwithstanding the
significant adverse effect this has had and may continue to have on the
economy and whilst it is possible that this pandemic may result in further
adverse effects on the Group at this stage the Directors do not believe that
they will be material.

In March 2022 Aquis announced the intention, subject to contract, to assume
the business activities of UBS MTF, the non-displayed matching pool of UBS AG.

Aquis announced during March 2022 of the intention to dual-list on Aquis Stock
Exchange Limited whilst remaining listed on the AIM market of the London Stock
Exchange.

 

 

 

 

 

 

 

 

 

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