Final Results, Annual Report & AGM Notice
08/05/2024 07:00
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RNS Number : 5079N Cornerstone FS PLC 08 May 2024
Certain information contained within this Announcement is deemed by the
Company to constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 ("MAR") as applied in the United Kingdom. Upon
publication of this Announcement, this information is now considered to be in
the public domain.
8 May 2024
Cornerstone FS plc
(Trading as Finseta)
("Finseta" or the "Company" or the "Group")
Final Results
Notice of AGM and Publication of Annual Report
Cornerstone FS plc (AIM: CSFS) (trading as Finseta), a foreign exchange and
payments solutions company offering multi-currency accounts to businesses and
individuals through its proprietary technology platform, is pleased to
announce its audited final results for the year ended 31 December 2023. In
addition, the Company gives notices of its annual general meeting ("AGM") and
the publication of its annual report and accounts.
Financial Highlights
· Revenue increased 100% to £9.6m (2022: £4.8m)
· Gross margin improved to 63.4% (2022: 60.9%)
· Adjusted(1) EBITDA of £1.7m (2022: £0.9m loss)
· Profit before tax of £1.3m (2022: £5.8m loss)
· Basic earnings per share of 3.77p (2022: 17.26p loss)
· Cash generated from operations of £2.0m (2022: £1.0m cash used in
operations)
· Strong balance sheet with cash and cash equivalents at 31 December
2023 of £2.3m (31 December 2022: £0.7m)
Strategic & Operational Highlights
· Growth in active customers(2) to 906 (2022: 803) and average
transaction value increased by 33%
· Proportion of revenue accounted for by direct clients increased to
95% (2022: 78%) reflecting the strategic decision taken in the year to
rationalise the majority of the historic white label business
· New counterparty partnerships established to broaden the number of
currencies and countries where the Group can transact - now able pay out to
over 150 countries in 58 currencies
· Launched Finseta Solutions as a new offering focused on servicing
clients with complex requirements, with strong progress made to date
· Received regulatory approval, post year end, to provide payment
services in Canada
· Signed agreement with Mastercard, post year end, to launch corporate
card scheme
· Selected Finseta(3) as new company name to reflect differentiated
offer and as part of strategic growth plan
James Hickman, CEO of Finseta, said:
"This has been an excellent year for our business, resulting in 100% revenue
growth and our maiden full year of profitability and positive cashflow. This
has been driven by the expansion of our sales team, which achieved an increase
in client numbers as well as average transaction value. At the same time, we
advanced key strategic initiatives that will be drivers of our future growth
in the near term. We continued to expand our global payments network, and are
now able to pay out to over 150 countries in 58 currencies, and we were
thrilled to receive, post year end, regulatory approval to operate a payments
business in Canada. Since the year-end, we also signed an agreement with
Mastercard to launch a commercial card scheme, which will enable us to offer
an additional payment method to corporate clients. In reflection of this
progress, we were delighted to select 'Finseta' as our new company name to
better align our brand identity with our mission, values and the comprehensive
range of services we provide.
"Looking ahead, the strong trading momentum that was experienced during 2023
has been sustained into the current year and we are on track to report
significant growth for full year 2024, in line with the Board's expectations.
With the excellent progress made during the year and to date in executing on
our strategic priorities, we have strengthened our operations and established
the foundations to deliver long-term, sustainable growth. As a result, the
Board continues to look to the future with great confidence."
Notes
(1) Excluding share-based compensation, transaction costs, depreciation &
amortisation charges, profit from the disposal of a subsidiary, other
operating income related to interest on client balances and non-cash based
accounting adjustments in respect of the Group's corporate premises
(2) Defined as customers who traded through Finseta during the 12-month
periods to 31 December 2023 and 2022 respectively
(3) As announced on 20 March 2024, the Company intends to change its name to
Finseta plc and has been operating as Finseta since 18 April 2024 in
anticipation of the name change. As at the date of the signing of the
financial statements, the Company's name change had not become effective. The
Company expects that the change of name will take place shortly and will make
a further announcement when the Company's name change takes effect
Enquiries
Finseta +44 (0)203 971 4865
James Hickman, Chief Executive Officer
Judy Happe, Chief Financial Officer
Shore Capital (Nominated Adviser and Broker) +44 (0)207 408 4090
Daniel Bush / Tom Knibbs (Corporate Advisory)
Guy Wiehahn (Corporate Broking)
Gracechurch Group (Financial PR) +44 (0)204 582 3500
Harry Chathli / Claire Norbury
About Finseta
Finseta is a foreign exchange and payments company offering multi-currency
accounts and payment solutions to businesses and individuals. Headquartered in
the City of London, Finseta combines a proprietary technology platform with a
high level of personalised service to support clients with payments in over
150 countries in 58 currencies. With a track record of over 12 years, Finseta
has the expertise, experience and expanding global partner network to be able
to execute complex cross-border payments. It is fully regulated by the
Financial Conduct Authority as an Electronic Money Institution through its
wholly-owned subsidiary company Finseta Payment Solutions
Limited. www.finseta.com
(https://url.avanan.click/v2/___http:/www.finseta.com___.YXAxZTpzaG9yZWNhcDphOm86N2Q4OTk2YzdiYzY2YzZmYmNkZWJkNDlkMTllNjNiM2M6Njo2NWZjOjBhNzg0ZjlmNDA3MDRmMzhhNTgwMmVlYzkxYmU5OWYwMTI4NDIxZDg4MmZlZTY0ZGVjYTVlNDczZTA0Y2JlYzk6cDpU)
Investor Presentation
James Hickman, CEO, and Judy Happe, CFO, will provide a live presentation via
Investor Meet Company at 10.00am BST today. The presentation is open to all
existing and potential shareholders. Investors can sign up to Investor Meet
Company for free and add to meet Finseta via:
https://www.investormeetcompany.com/cornerstone-fs-plc/register-investor
(https://url.avanan.click/v2/___https:/www.investormeetcompany.com/cornerstone-fs-plc/register-investor___.YXAxZTpzaG9yZWNhcDphOm86N2Q4OTk2YzdiYzY2YzZmYmNkZWJkNDlkMTllNjNiM2M6NjpkNWMzOjhhNmNkMWFkZGE4N2IyMjUzNTRmZWQ5Mjk1NTRmMTgwZWJkMzg1Yzk3NmU5YmM3MDFjN2RkNTJiMGY3NmU4YjA6cDpU)
Operational Review
The year to 31 December 2023 was an excellent period for Finseta. The Group
delivered record revenue, achieved key milestones with its maiden year of
positive EBITDA, profit before tax and positive cashflow, and made substantial
strategic and operational progress. The focus has been on driving direct sales
and fully commercialising the platform, while carefully managing the cost
base. This was actioned through enhancing the Group's products and services,
extending its offer and expanding its client base. Key initiatives were
advanced that strengthen the foundations of the business and its ability to
deliver sustained growth, in particular, the work undertaken to launch a
corporate card scheme with Mastercard and to receive regulatory approval in
Canada. The Group also continued to realise the value of its non-core assets,
with the completion of the sale of Avila House and entering an agreement to
sell Capital Currencies.
Performance
The Group delivered substantial growth in revenue, which doubled
to £9.6m (2022: £4.8m), driven by year-on-year increases in active
customers and average transaction value. Active customers, calculated as
clients who traded during the 12 months ended 31 December 2023, increased to
906 compared with 803 for the 12 months to 31 December 2022 as the Group
continued to expand its sales team and payment capabilities. Average
transaction value increased by 33% year-on-year driven by an increased focus
on providing an exceptional level of service to its business and high net
worth individual ("HNWI") clients.
There was a significant increase in revenue generated by clients that the
Group serves directly. The proportion of total revenue that was accounted for
by direct clients was 95%, being £9.2m (2022: £3.8m), compared with 78%
in 2022. Revenue generated through white label partners was £497k
(2022: £1.1m), which reflects the Group's strategic decision to manage down
almost all of its historic white label business - only maintaining a small
number of accounts that meet appropriate profitability thresholds.
By client type, there was an increase in revenue generated by both private
clients (primarily HNWIs) and corporate accounts. Particularly strong growth
was seen from private clients, with the proportion of total revenue accounted
for by private clients increasing to 64% (2022: 53%) with corporate accounts
contributing 34% (2022: 47%). For the majority of private client revenue,
whilst the underlying transaction is with an individual, the relationship is
via a corporate that provides services to the individual. In addition, the
Group generated £200k in revenue (2022: £nil), accounting for 2% of total
revenue, through licencing its software to the acquirers of Avila House.
Strategy execution
The Group's growth strategy is founded on the three pillars of product,
geography and people - and Finseta executed on all three during 2023. This
contributed to growth during the year, but also established drivers for growth
in the years to come.
Product
A core element of Finseta's strategy is to establish a global payments network
that will enable clients to be able to pay in from, and pay out to, any
jurisdiction (subject to regulatory restrictions) in any currency and via any
payment method. While it is still relatively early days, important steps have
been taken in advancing this strategy during the year.
Currencies & countries
The Group continued to expand its global payments network by establishing new
counterparty partnerships. This enables the Group to broaden the number of
currencies and countries where it can transact, as well as expanding the
business sectors it can serve. The Group can now pay out to over 150 countries
in 58 currencies compared with over 70 countries and 49 currencies this time
last year.
Payment method
The Group made significant progress during the year towards expanding its
payment method offering, which culminated in the signing of a long-term
agreement in January 2024 with Mastercard to launch a corporate card scheme.
The Group expects to launch the scheme during Q3 of the current year, when it
will be able to issue commercial cards co-branded and supported by Mastercard
for its corporate customers. This additional payment rail will provide clients
with greater choice and flexibility in managing their business expenses.
Service
A key differentiator of the Group's offer is the high level of personalised
service provided to clients. Through this, along with the experience of
Finseta's team and the strength of its compliance capabilities, the Group is
able to build solutions tailored to meet clients' needs, even when those needs
are complex. In 2023, the Group took this a step further by establishing a new
offering, Finseta Solutions, that is specifically focused on providing
solutions to clients that are harder to service, due to, for example, the
sector in which they operate. This gives the Group access to a further cohort
of potential clients and is a higher value service offering while also
supporting its goal of enabling clients to transact how, when and where they
need. Finseta Solutions has made great progress to date, and is continuing to
grow.
One of the Group's core values is that it always puts clients first and, as
part of that, it is committed to continuously improving the service it
provides. During the year, this included making enhancements to the user
interface and user experience of the Finseta platform. The Group also
continued its development work to increase automation in transactional
processes to increase the speed of payments and worked on enhancements to the
onboarding process, which will further improve clients' experience.
Actions such as these meant that the Group was well prepared for the
introduction of the Financial Conduct Authority's Consumer Duty regulation in
July 2023. Prior to that, the Group undertook an in-depth review of its
operations to ensure that it was fully compliant with the new regulation,
which sets higher and clearer standards for consumer protection across
financial services.
To be able to support clients with more of their business needs, during the
year the Group formed strategic partnerships with specialised and alternative
lenders to offer a range of funding solutions. In particular, Finseta launched
a lending platform in partnership with Swoop Finance, which enables the Group
to seamlessly refer clients to a lending partner that it has pre-vetted to
ensure that they can meet the clients' requirements. This service increases
the Group's value to clients while also providing commission on referrals. It
also enhances its competitive offer to potential clients who want to utilise
the Group's FX services (rather than those of their traditional bank), but who
are hesitant to move away from their traditional bank where they require their
lending facilities.
Geography
A core pillar of the Group's strategy is geography - that is, expanding its
capabilities to enable clients to transact to and from anywhere in the world
(subject to regulatory restrictions). As noted, through establishing further
counterparty relationships during the year, the Group can now pay out to over
150 countries. The Group also intends to expand its own geographical footprint
and regulatory capabilities to deliver sustained growth for the years to come.
A significant milestone was achieved in this regard with the Group undergoing
the authorisation process in Canada, with the receipt of a Money Services
Business ("MSB") licence from the Financial Transactions and Reports Analysis
Centre of Canada ("FINTRAC") post year-end. This allows the Group to operate
a payments company in Canada and provide payments services to Canadian
businesses and individuals.
Having previously received enquiries in Canada for its services through its
existing network, the establishment of a regulated business will enable the
Group to fully pursue such opportunities and leverage local payment rails and
lower transaction costs. The Group is now in the process of opening a
full-service office in Canada, which will allow it to provide customers with
the high-touch service-led approach that is core to the Finseta offer.
People
A fundamental contribution to the Group's growth during the year was the
enhancing of its sales team. The Group restructured its UK sales team and
appointed a seasoned UK Sales Director. To strengthen its offer and drive its
future growth, the Group invested in key personnel to establish its Finseta
Solutions offer, as well appointing an experienced Head of Compliance and
Money Laundering Reporting Officer and a Card Programme Manager. As a
high-touch, service-led business, the strength of Finseta's people is crucial.
While its business is highly scalable thanks to its platform, as the Group
continues to grow, it will look to expand its headcount further.
In addition, with the Group's client acquisition being predominantly
introducer-led, it is very much a people business. The Group continues to
expand and deepen its network of introducers, which also drives
diversification in payment flows meaning it is not overly reliant on
particular currencies. It also lends itself to the Group's Finseta Solutions
offer as it is able to address the varied requirements of clients won through
different introducers.
Brand identity
In recognition of the substantial strategic progress that the Group has made
and the development of its business - with a fundamentally expanded offer,
capabilities and geographic footprint - the Group decided to adopt a new name.
The Group wanted a name that better aligned its brand identity with its
mission, values and the comprehensive range of services it provides. In
particular, the Group needed a unique name that reflected its differentiated
offer. Accordingly, the Group underwent a renaming process that culminated in
the adoption of 'Finseta', and the Group began operating under the new name in
April 2024. The Company will update the market when the change name change is
effected by Companies House and the Company's ordinary shares will commence
trading on AIM under the new company name and the new TIDM of 'FIN'.
Realising value
This year the Group continued to realise value from its non-core assets. The
sale of Avila House, for which it entered the agreement in December 2022,
completed during the year and an agreement was entered to sell Capital
Currencies, which is expected to complete in the current year. Both of these
non-core subsidiaries held licences that were more limited than that of
Finseta Payment Solutions, which is an authorised electronic money
institution, and, therefore, surplus to the Group's requirements. Accordingly,
the Group generated value through their disposal to non-competing entities,
which, in the case of Avila House, included licencing revenue as well as the
acquisition consideration.
Financial Review
Revenue for the 12 months to 31 December 2023 increased by 100% to £9.6m
compared with £4.8m for the previous year. This growth reflects the strategic
and operational changes that were implemented during the second half of 2022
and in the current year that are focused on driving direct sales and fully
commercialising the platform.
Gross margin improved to 63.4% (2022: 60.9%), which reflects a lower
proportion of revenue derived from white label partners following the Group's
strategic decision to manage down almost all of its historic white label
business. The Group also benefited from a change in commission arrangements
agreed with Robert O'Brien, General Manager APAC and Middle East, in the
first half of the year, as announced on 8 March 2023.
The improvement in gross margin combined with the increased revenue resulted
in a substantial growth in gross profit to £6.1m (2022: £2.9m).
Operating expenses were reduced to £5.1m in 2023 compared with £8.6m for the
previous year. This primarily reflects movements of:
• £4.0m reduction in share-based (non-cash) compensation to £0.3m
(2022: £4.3m), which predominantly relates to a variation to the terms of the
incentivisation agreement with Mr. O'Brien and the Asia team, which was agreed
in H2 2022;
• £0.2m profit recognised from the disposal of Avila House (2022:
£nil);
• £0.5m increase in other administrative expenses to £4.4m (2022:
£3.8m); and
• £0.2m increase in depreciation and amortisation to £0.6m (2022:
£0.4m).
The Group maintained tight control over operating costs and the increase in
other administrative expenses primarily relates to additional sales team hires
and increased performance-related bonuses commensurate with the Group's
performance. Amortisation was higher due the cumulative impact of internally
developed software additions that have been capitalised since 2020 with an
amortisation period of three years, combined with the amortisation of a
right-of-use asset related to the Group's move to new corporate premises in Q4
2023 (with the previous premises being operating leases that did not attract
amortisation).
On an adjusted basis, to exclude share-based compensation, profit from the
disposal of a subsidiary, depreciation & amortisation charges and after
the add-back of the rental cost of the Group's corporate premises, operating
expenses were £4.4m compared with £3.8m for 2022. This reflects the increase
in other administrative expenses as described above. However, adjusted
operating expenses as a proportion of revenue significantly improved to 46%
for 2023 compared with 79% for 2022.
Thanks to the strong operating performance, there was a substantial
improvement in adjusted EBITDA to £1.7m compared with a loss of £0.9m for
2022.
The Group generated other operating income of £0.4m (2022: £0.03m) based
on interest on client cash balances (see note 3 to the financial statements).
As a result of the increased gross profit and other operating income and
reduced operating expenses, profit from operations was £1.4m compared with
a loss from operations of £5.6m for 2022.
Net finance costs were £69k (2022: £164k). This primarily reflects a £165k
year-on-year change in the unwinding of discount charges - being a £56k
credit in 2023 compared with a £108k cost in 2022 - owing to the
remeasurement of the deferred consideration payable in respect of the
acquisition of Capital Currencies in 2022.
As a result of the increased profit from operations and reduced finance costs,
profit before tax grew substantially to £1.3m in 2023 compared with a loss
before tax of £5.8m for 2022.
A tax credit of £843k was recognised in 2023 (2022: £175k), principally
reflecting the recognition of a £818k deferred tax asset relating to tax
losses, following the Group's transition to profitability during 2023 and
therefore visibility in consumption of the carried-forward tax losses as at 31
December 2023 of £3.3m (31 December 2022 carried forward tax losses were
£5.0m, with no associated deferred tax asset recognised).
Basic earnings per share were 3.77 pence (2022: loss of 17.26 pence per
share), which was achieved despite an increase in the weighted average number
of ordinary shares in issue to 56,613,145 (2022: 32,506,335). On a fully
diluted basis, earnings per share were 3.76 pence (2022: loss of 17.26 pence).
The Group was cashflow positive for 2023 compared with there being a cash
outflow for the previous year. Cash generated from operations
was £2.0m (2022: £1.0m used in operations) based on the improved trading
performance. Cash used in investment activities
was £0.2m (2022: £1.0m used in investment activities), reflecting
purchases of intangible assets, property, plant and equipment, principally
associated with the continued investment in developing its proprietary
platform, partly offset by the proceeds from the disposal of Avila House. Cash
used in financing activities was £0.1m compared with £2.2m generated from
financing activities in 2022, with the difference primarily reflecting a
fundraising undertaken in 2022.
As a result, as of 31 December 2023, cash and cash equivalents had
significantly increased to £2.3m (31 December 2022: £682k).
Outlook
The strong trading momentum that was experienced during 2023 has been
sustained into the current year, which reflects the continued increase in the
number of active clients and expansion of the Group's introducer network. This
is being driven, in particular, by the investment that the Group is making
into its UK sales team. Consequently, the Group is on track to report
significant growth for full year 2024, in line with the Board's expectations.
Looking further ahead, with the excellent progress that the Group made during
the year and to date in executing on its strategic priorities, the Group has
strengthened its operations and established the foundations to deliver
long-term, sustainable growth. As a result, the Board continues to look to the
future with great confidence.
Notice of AGM and Publication of Annual Report
The Company gives notice that its AGM will be held at 11.00am BST on 20 June
2024 at the office of Gracechurch Group, 48 Gracechurch Street, London, EC3V
0EJ.
The Notice of AGM, along with the Company's annual report and accounts for the
year ended 31 December 2023 (together, the "Documents"), have been published
on the Company's website at: https://investors.cornerstonefs.com/
(https://investors.cornerstonefs.com/) . The Documents, along with a form of
proxy, will be posted to those shareholders who have elected to receive
physical copies over the coming week.
Group Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
Notes £ £
REVENUE 1 9,649,233 4,821,996
Cost of sales (3,533,897) (1,885,503)
GROSS PROFIT 6,115,336 2,936,493
ADMINISTRATIVE EXPENSES 2
Share-based compensation 19 (333,061) (4,284,039)
Further adjustments to adjusted EBITDA (see below) (357,348) (500,529)
Other administrative expenses (4,415,113) (3,805,812)
TOTAL ADMINISTRATIVE EXPENSES (5,105,522) (8,590,380)
Other operating income 350,143 30,647
Adjusted EBITDA/(EBITDA loss) 1,700,223 (869,319)
Stated after the add back of:
- other operating income (interest earned on client funds) 3 (350,143) (30,647)
- share-based compensation 19 333,061 4,284,039
- transaction costs 4,500 99,365
- profit on disposal of subsidiary 2 (207,480) -
- amortisation of intangible assets 533,649 386,542
- IAS 17 rent reversal (61,613) -
- depreciation of property, plant and equipment 88,292 14,622
PROFIT/(LOSS) from operations 1,359,957 (5,623,240)
Finance and other income 4 21,363 18
Finance costs 4 (90,635) (163,975)
________ ________
PROFIT/(LOSS) BEFORE TAX 1,290,685 (5,787,197)
Income tax 7 843,168 175,365
________ ________
PROFIT/(LOSS) FOR THE YEAR 2,133,853 (5,611,832)
TOTAL COMPREHENSIVE PROFIT/(LOSS) FOR THE YEAR 2,133,853 (5,611,832)
Profit/(loss) per ordinary share - basic (pence) 8 3.77 (17.26)
Profit/(loss) per ordinary share - diluted (pence) 8 3.76 (17.26)
_______ _______
All amounts are derived from continuing operations.
The notes to the financial statements form an integral part of these financial
statements.
Group and Company Statement of Financial Position
Group Group Company Company
31 December 2023 31 December 2022 31 December 31 December
2023 2022
Notes £ £ £ £
assets
NON-CURRENT ASSETS
Intangible assets 9 1,514,519 2,315,637 692,022 611,507
Tangible assets 11 34,356 39,677 - -
Investments 13 - - 7,351,660 8,017,622
Right-of-use assets 10 796,498 - - -
Deferred tax 12 697,864 - 607,568 -
__________ __________ __________ ___ _______
3,043,237 2,355,314 8,651,250 8,629,129
CURRENT ASSETS
Trade and other receivables 14 1,359,641 1,339,110 902,919 700,720
Cash and cash equivalents 2,343,417 682,346 14,553 495,627
__________ __________ __________ ___ _______
3,703,058 2,021,456 917,472 1,196,347
__________ __________ __________ ___ _______
total assets 6,746,295 4,376,770 9,568,722 9,825,476
_______ _______ _______ _______
equity and liabilities
equity
Share capital 19 574,171 480,362 574,171 480,362
Share premium 6,191,748 5,496,829 6,191,748 5,496,829
Share-based payment reserve 780,389 1,489,765 780,389 1,489,765
Deferred consideration reserve - 950,920 - 950,920
Merger relief reserve 5,557,645 5,557,645 5,557,645 5,557,645
Reverse acquisition reserve (3,140,631) (3,140,631) - -
Retained earnings (8,307,787) (10,924,791) (8,967,643) (8,365,764)
__________ __________ __________ __________
TOTAL EQUITY 1,655,535 (89,901) 4,136,310 5,609,757
_______ _______ _______ _______
LIABILITIES
NON-CURRENT LIABILITIES
Loan notes 15 2,000,000 2,172,578 2,000,000 2,172,578
Deferred tax 12 - 99,816 - -
Obligations under leases 17 543,555 - - -
Deferred consideration 18 111,323 - 111,323 -
__________ __________ __________ __________
2,654,878 2,272,394 2,111,323 2,172,578
CURRENT LIABILITIES
Trade and other payables 16 1,882,771 1,969,277 3,031,335 1,818,141
Loan notes 15 172,578 225,000 172,578 225,000
Obligations under leases 17 263,357 - - -
Deferred consideration 18 117,176 - 117,176 -
__________ __________ __________ __________
2,435,882 2,194,277 3,321,089 2,043,141
__________ __________ __________ __________
TOTAL EQUITY AND LIABILITIES 6,746,295 4,376,770 9,568,722 9,825,476
_______ _______ _______ _______
As at 31 December 2023
A separate profit and loss account for the parent company is omitted from the
Group's financial statements by virtue of section 408 of the Companies Act
2006. The Company loss for the year ended 31 December 2023 was £1,085,030
(year ended 31 December 2022: loss of £5,973,633). The financial statements
were approved by the Board of Directors and authorised for issue on 7 May 2024
and are signed on its behalf by:
James Hickman
Chief Executive Officer
The notes to the financial statements form an integral part of these financial
statements.
Group Statement of Changes in Equity
For the year ended 31 December 2023
Share capital Share premium Share-based payment reserve Deferred consideration reserve Merger relief reserve Reverse acquisition reserve Retained earnings Total
£ £ £ £ £ £ £ £
Balance at 1 January 2022 202,776 3,074,355 2,392,710 - 5,557,645 (3,140,631) (7,828,230) 258,625
Issue of shares 210,423 1,905,234 - - - - - 2,115,657
Costs of raising equity - (87,310) - - - - - (87,310)
Share-based payments (note 19) - - 4,284,039 - - - - 4,284,039
Settlement of equity-based incentives 67,163 604,550 (5,186,984) - - - 2,515,271 (2,000,000)
Deferred equity-based consideration - - - 950,920 - - - 950,920
Loss and total comprehensive income for the year - - - - - - (5,611,832) (5,611,832)
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 31 December 2022 480,362 5,496,829 1,489,765 950,920 5,557,645 (3,140,631) (10,924,791) (89,901)
Issue of shares 35,299 194,143 - - - - - 229,442
Share-based payments (note 19) - - 333,061 - - - - 333,061
Settlement of equity-based incentives 58,510 500,776 (1,042,437) - - - 483,151 -
Remeasurement of deferred consideration on acquisition - - - (810,102) - - - (810,102)
Unwind of discount factor - - - 87,681 - - - 87,681
Transfer to deferred consideration liability (228,499) - - - (228,499)
Profit and total comprehensive income for the year - - - - - - 2,133,853 2,133,853
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 31 December 2023 574,171 6,191,748 780,389 - 5,557,645 (3,140,631) (8,307,787) 1,655,535
_______ _______ _______ _______ _______ _______ _______ _______
The notes to the financial statements form an integral part of these financial
statements.
Company Statement of Changes in Equity
Share capital Share premium Share-based payment reserve Deferred consideration reserve Merger relief reserve Retained earnings Total
£ £ £ £ £ £ £
Balance at 1 January 2022 202,776 3,074,355 2,392,710 - 5,557,645 (4,907,402) 6,320,084
Issue of shares 210,423 1,905,234 - - - - 2,115,657
Costs of raising equity - (87,310) - - - - (87,310)
Share-based payments (note 19) - - 4,284,039 - - - 4,284,039
Settlement of equity-based incentives 67,163 604,550 (5,186,984) - - 2,515,271 (2,000,000)
Deferred equity-based consideration - - - 950,920 - - 950,920
Loss and total comprehensive income for the year - - - - - (5,973,633) (5,973,633)
_______ _______ _______ _______ _______ _______ _______
Balance at 31 December 2022 480,362 5,496,829 1,489,765 950,920 5,557,645 (8,365,764) 5,609,757
Issue of shares 35,299 194,143 - - - - 229,442
Share-based payments (note 19) - - 333,061 - - - 333,061
Settlement of equity-based incentives 58,510 500,776 (1,042,437) - - 483,151 -
Remeasurement of deferred consideration on acquisition - - - (810,102) - - (810,102)
Unwind of discount factor - - - 87,681 - - 87,681
Transfer to deferred consideration liability - - - (228,499) - - (228,499)
Loss and total comprehensive loss for the year - - - - - (1,085,030) (1,085,030)
_______ _______ _______ _______ _______ _______ _______
Balance at 31 December 2023 574,171 6,191,748 780,389 - 5,557,645 (8,967,643) 4,136,310
_______ _______ _______ _______ _______ _______ _______
For the year ended 31 December 2023
The notes to the financial statements form an integral part of these financial
statements.
Group and Company Cash Flow Statement
For the year ended 31 December 2023
Group Group Company Company
Year ended Year ended Year ended Year ended
31 December 2023 31 December 2022 31 December 2023 31 December
2022
£ £ £ £
Notes
Profit/(loss) before 1,290,685 (5,787,197) (2,067,319) (6,131,818)
tax
Adjustments to reconcile profit before tax to cash generated from operating
activities:
Other operating income (27,167) - - -
Finance income 4 (21,363) (18) - -
Finance costs 4 90,635 163,975 73,847 162,757
Equity-settled share-based payment - 32,595 - 32,595
Share-based compensation 19 333,061 4,284,039 333,061 4,284,039
Depreciation and amortization 2 621,941 401,164 410,499 296,133
Profit on disposal of subsidiary (207,480) - - -
Write-off of property, plant and equipment 519 - - -
Decrease/(increase) in accrued income, trade and other receivables 67,344 (845,866) 177,935 (451,724)
14
(Decrease)/increase in trade and other payables 16 (194,021) 757,250 1,121,397 896,573
_______ _______ _________ _________
Cash generated from/(used in) operations 1,954,154 (994,058) 49,420 (911,445)
Income tax received 7 - 158,188 - 158,188
_______ _______ _________ _________
Cash generated from/(used in) operating activities 1,954,154 (835,870) 49,420 (753,257)
Investing activities
Acquisition of property, plant and equipment 11 - (17,198) - -
Purchases of property, plant and equipment (11,081) - - -
Acquisition of intangible assets 9 - (422,713) - (422,713)
Internally generated software development (491,013) - (491,013) -
Acquisition of subsidiary, net of cash acquired - (552,128) - -
Investment in Group companies 13 - - - (631,335)
Proceeds from disposal of subsidiary 300,000 - - -
_______ _______ _________ _________
Cash used in investment activities (202,094) (992,039) (491,013) (1,054,048)
Financing activities
Shares issued (net of costs) 19 - 1,992,694 - 1,992,694
Loans received - 225,000 - 225,000
Interest and similar income 4 10,587 18 - -
Interest and similar charges 4 (39,963) (55,559) (39,481) (54,341)
Lease payments (61,613) - - -
_______ _______ __________ __________
Cash (used in)/generated from financing activities (90,989) 2,162,153 (39,481) 2,163,353
Increase/(decrease) in cash and cash equivalents 1,661,071 334,244 (481,074) 356,048
Opening cash and cash equivalents 682,346 348,102 495,627 139,579
_______ _______ ________ ________
Closing cash and cash equivalents 2,343,417 682,346 14,553 495,627
===================== ===================== ===================== =====================
The notes to the financial statements form an integral part of these financial
statements.
Notes to the Financial Statements
For the year ended 31 December 2023
BAsis of preparation
Cornerstone FS plc (trading as Finseta) is a public limited company,
incorporated and domiciled in England. The Company was admitted to AIM, London
Stock Exchange's market for small and medium size growth companies, on 6 April
2021. The registered office of the Company is 14-18 Copthall Avenue, London,
EC2R 7DJ. These consolidated financial statements comprise the Company and its
subsidiaries (together referred to as the "Group"). The main activities of the
Group are set out in the Strategic Report of the Company's annual report for
the year ended 31 December 2023 (the "2023 Annual Report").
These financial statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the United Kingdom ("IFRS") for
the years ended 31 December 2022 and 31 December 2023, and with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS. The
financial statements have been prepared in sterling, which is the Group's
presentation currency and the functional currency of each Group entity. They
have been prepared using the historical cost convention except for the
measurement of certain financial instruments.
The parent company accounts have also been prepared in accordance with IFRS
(as adopted by the United Kingdom) and using the historical cost convention.
The accounting policies set out below have been applied consistently to the
parent company where applicable.
Monetary amounts in these financial statements are rounded to the nearest
pound.
The preparation of financial statements in conformity with IFRS requires the
use of estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting year. These estimates
and assumptions are based upon management's knowledge and experience of the
amounts, events or actions. Actual results may differ from such estimates.
The critical accounting estimates are considered to relate to the following:
Fair values of assets acquired in business combinations: The Group recognises
the fair value of customer relationships acquired through business
combinations reflecting discounted future cash flows from the acquired
customers and incorporating an estimated rate of attrition of the customer
base.
Deferred consideration: Total compensation for acquisitions includes an
element of deferred consideration payable, subject to the revenue performance
post-acquisition. Management use historical information and management
forecasts to estimate a liability, using the discounted cashflow methodology,
to derive a fair value of the deferred consideration payable.
Intangible assets: The Group recognises intangible assets in respect of
software development costs. This recognition requires the use of estimates,
judgements and assumptions in determining whether the carrying value of such
assets is impaired at each year end.
Investments in subsidiary undertakings (Company financial statements only):
The Company's statement of financial position includes investments stated at
cost in its subsidiary undertakings. The continuing recognition at cost
requires judgements and estimates including an assessment of whether the
carrying value of such investments is impaired at each year end.
NEW AND REVISED STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET ADOPTED
At the date of authorisation of these financial statements, the Company has
not yet adopted the following amendments to Standards and Interpretations that
have been issued:
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting Policies; and
· Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates.
The Directors do not expect any material impact as a result of adopting the
amendments listed above in the financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiary undertakings. Entities are accounted for as
subsidiary undertakings when the Group is exposed to or has rights to variable
returns through its involvement with the entity and it has the ability to
affect those returns through its power over the entity.
All subsidiary undertakings have an accounting reference date ended 31
December.
BUSINESS COMBINATIONS
The Group financial statements recognise business combinations using the
acquisition method when control is transferred to the Group. The consideration
transferred in the acquisition is generally measured at fair value, as are the
identifiable net assets acquired. Any goodwill that arises is tested annually
for impairment. Any gain on a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except if related to
the issue of debt or equity securities. The consideration transferred does not
include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of
acquisition. If an obligation to pay contingent consideration that meets the
definition of a financial instrument is classified as equity, then it is not
re-measured and settlement is accounted for within equity. Otherwise, other
contingent consideration is re-measured at fair value at each reporting date
and subsequent changes in the fair value of the contingent consideration are
recognised in profit or loss.
GOING CONCERN
During the year ended 31 December 2023, the Group made an adjusted EBITDA
profit (excluding non-cash share-based compensation, depreciation &
amortisation costs, non-recurring transaction costs, profit on the disposal of
Avila House, operating income related to interest on client balances and IFRS
16 accounting adjustments) of £1,700,223 (2022: loss of £869,319). At 31
December 2023, the Group balance sheet showed a net asset position of
£1,655,535 (2022: net liability of £89,901), including a negative profit and
loss reserve of £8,307,787 (2022: £10,924,791), and a cash balance of
£2,343,417 (2022: £682,346).
The Directors have prepared cash flow forecasts covering a period to 31
December 2026. The Directors have derived forecast assumptions that are their
best estimate of the future development of the Group's business taking into
account projected increase in revenues, continued investment in the
development of the software platform and organic sales and marketing efforts.
The Directors have prepared various scenario planning forecasts alongside
their best-estimate forecast assumptions, including a scenario in which sales
growth falls below management expectations and various cash mitigation
measures are implemented, which all indicate sufficient cash resources to
continue to finance the Group's working capital requirements over the forecast
period.
For these reasons, the Directors continue to adopt the going concern basis of
accounting in preparing the Group's financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
revenue
The Group applies IFRS 15 Revenue from Contracts with Customers for the
recognition of revenue. IFRS 15 established a comprehensive framework for
determining whether, how much and when revenue is recognised. It affects the
timing and recognition of revenue items, but not generally the overall amount
recognised.
The performance obligations of the Group's revenue streams are satisfied on
the transaction date or by the provision of the service for the period
described in the contract. Revenue is not recognised where there is evidence
to suggest that customers do not have the ability or intention to pay. The
Group does not have any contracts with customers where the performance
obligations have not been fully satisfied.
The Group derives revenue from the provision of foreign exchange and payment
services. When a contract with a client is entered into, it immediately enters
into a separate matched contract with its institutional counterparty.
Spot and forward revenue is recognised when a binding contract is entered into
by a client and the rate is fixed and determined. Revenue represents the
difference between the rate offered to clients and the rate received from its
institutional counterparties.
INVESTMENTS
Investments in subsidiary undertakings are accounted for at cost less
impairment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the Group
statement of financial position when the Group has become a party to the
contractual provisions of the instrument.
Derivative financial instruments
Derivative financial assets and liabilities are carried as assets when their
fair value is positive and as liabilities when their fair value is negative.
Changes in the fair value of derivatives are included in the income statement.
The Group's derivative financial assets and liabilities at fair value through
profit or loss comprise solely of forward foreign exchange contracts.
Trade, loan and other receivables
Trade and loan receivables are initially measured at their transaction price.
Trade and loan receivables are held to collect the contractual cash flows
which are solely payments of principal and interest. Therefore, these
receivables are subsequently measured at amortised cost using the effective
interest rate method. The Directors have considered the impact of discounting
trade and loan receivables whose settlement may be deferred for lengthy
periods and concluded that the impact would not be material.
An impairment loss is recognised for the expected credit losses on trade and
loan receivables when there is an increased probability that the counterparty
will be unable to settle an instrument's contractual cash flows on the
contractual due dates, a reduction in the amounts expected to be recovered, or
both.
Impairment losses and any subsequent reversals of impairment losses are
adjusted against the carrying amount of the receivable and are recognised in
profit or loss.
Trade payables
Trade payables are initially recognised at fair value and subsequently at
amortised cost using the effective interest method.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual arrangements entered into. An instrument will be classified as a
financial liability when there is a contractual obligation to deliver cash or
another financial asset to another enterprise.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities
of three months or less.
For the purposes of the cash flow statement, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of any outstanding bank
overdraft that is integral to the Group's cash management.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary, associate or jointly controlled entity
at the date of acquisition. Goodwill on acquisition of subsidiaries is
separately disclosed in note 9.
Goodwill is not amortised; it is recognised as an asset, allocated to cash
generating units for the purpose of impairment testing and reviewed for
impairment at least annually. Any impairment is recognised immediately in
profit or loss and is not subsequently reversed.
other INTANGIBLE aSSETS
An intangible asset, which is an identifiable non-monetary asset without
physical substance, is recognised to the extent that it is probable that the
expected future economic benefits attributable to the asset will flow to the
Group and that its cost can be measured reliably. The asset is deemed to be
identifiable when it is separable or when it arises from contractual or other
legal rights.
Amortisation is charged on a straight-line basis through the profit or loss
within administrative expenses. The rates applicable, which represent the
Directors' best estimate of the useful economic life, are as follows:
Customer relationships - 5 years
Internally developed software - 3 years
Software costs
- 3
years
Other intangible assets - 3 years
Trademarks are recognised as intangible assets and are expected to generate
future economic benefits in perpetuity. Trademarks are not amortised. They are
allocated to a cash generating unit and tested for impairment annually.
property, plant and equipment
All property, plant and equipment is initially recorded at cost and is
subsequently measured at cost less accumulated depreciation and any recognised
impairment loss.
Depreciation, which is charged through the profit or loss within
administrative expenses, is provided at rates calculated to write off the cost
less residual value of each asset over its expected useful life, as follows:
Computer equipment
- 25% straight
line
Leasehold improvements - in
line with the term of the underlying leased asset
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
LEASES
The Group as lessee
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 (determined to be those with
an initial discounted total obligation of less than £5,000). 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. If that rate cannot be readily determined, the
Group uses its incremental borrowing rate.
The incremental borrowing rate depends on the term, currency and start date of
the lease and is determined based on a series of inputs including: the
risk-free rate based on government bond rates; a country-specific risk
adjustment; a credit risk adjustment based on bond yields; and an
entity-specific adjustment when the risk profile of the entity that enters
into the lease is different to that of the Group and the lease does not
benefit from a guarantee from the Group.
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
· 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.
The lease liability 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.
Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the
related right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the right-of-use asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated
balance sheet.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired
and accounts for any identified impairment loss as described in the
"Impairment of property, plant and equipment and intangible assets excluding
goodwill" 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. The related
payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included in the line
"Administrative expenses" in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical
expedient. For contracts that contain a lease component and one or more
additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Rent free concessions granted during the COVID-19 pandemic have been credited
to the income statement in the year they were granted, with a resulting
reduction in the lease obligation.
The Group as lessor
The Group enters into lease agreements as a lessor for some of its property
included within its right-of-use assets.
Leases for which the Group is a lessor are classified as finance or operating
leases. Whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and
the sub-lease as two separate contracts. The sub-lease is classified as a
finance or operating lease by reference to the right-of-use asset arising from
the head lease.
Rental income from operating leases is recognised on a straight-line basis
over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount
of the leased asset and recognised on a straight-line basis over the lease
term.
Amounts due from lessees under finance leases are recognised as receivables at
the amount of the Group's net investment in the leases. Finance lease income
is allocated to accounting periods to reflect a constant periodic rate of
return on the Group's net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Group regularly reviews the estimated
unguaranteed residual value and applies the impairment requirements of IFRS 9,
recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount
of the lease receivables, except for credit-impaired financial assets for
which interest income is calculated with reference to their amortised cost
(i.e. after a deduction of the loss allowance).
When a contract includes both lease and non-lease components, the Group
applies IFRS 15 to allocate the consideration under the contract to each
component.
PROVISIONS
Provisions are recognised when the Group has a present obligation as a result
of a past event which it is probable will result in an outflow of economic
benefits that can be reliably estimated.
SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in share premium as a
deduction from the proceeds.
SHARE-BASED COMPENSATION
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to the income statement over the vesting period.
Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period is based
on the number of options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are satisfied. The
cumulative expense is not adjusted for failure to achieve a market vesting
condition.
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to the income statement over the
remaining vesting period. Where equity instruments are granted to persons
other than employees, the income statement is charged with fair value of goods
and services received.
Cancelled or settled options are accounted for as an acceleration of vesting
and the amount that would have been recognised over the remaining vesting
period is recognised immediately.
The proceeds received net of any attributable transaction costs are credited
to share capital (nominal value) and share premium when the options are
exercised.
Fair value is measured by use of the Black-Scholes pricing model which is
considered by management to be the most appropriate method of valuation.
employee benefits
The Group operates a defined contribution pension scheme. The pension costs
charged in the financial statements represent the contribution payable by the
Group during the year.
The costs of short-term employee benefits are recognised as a liability and an
expense in the period the related service is rendered at the undiscounted
amount of the benefits expected to be paid in exchange for that service.
TAXATION
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and
tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date. Current income tax relating to
items recognised directly in equity or other comprehensive income is
recognised in equity and not in the consolidated statement of comprehensive
income.
Deferred income tax is provided on all temporary differences at the reporting
date arising between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred tax assets and
liabilities are offset when the Group has a legally enforceable right to
offset current tax assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority.
Deferred tax assets have been recognised in respect of the Group's tax losses
carried forward.
Research and Development tax credits are recognised as receivables when they
have been submitted to HMRC. The amount recognised is based on the expected
value of the credit.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting judgements will, by definition, seldom equal the related actual
results. The estimates and assumptions that 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.
IMPAIRMENT
At each accounting reference date, the Group reviews the carrying amounts of
its intangibles, property, plant & equipment and investments 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 the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs. An intangible asset with an indefinite useful life
is tested for impairment annually and whenever there is an indication that the
asset may be impaired.
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.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried in at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation increase.
DEFERRED CONSIDERATION
Total compensation for acquisitions includes an element of deferred
consideration payable, subject to the revenue performance post-acquisition.
Management use historical information and management forecasts to estimate a
liability, using the discounted cashflow methodology, to derive a fair value
of the deferred consideration payable.
SHARE-BASED COMPENSATION
The fair value of share-based awards is measured using the Black-Scholes model
which inherently makes use of significant estimates and assumptions concerning
the future applied by the Directors. Such estimates and judgements include the
expected life of the options and the number of employees that will achieve the
vesting conditions. Further details of the share option scheme are given in
note 19.
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the alternative performance measure of adjusted EBITDA. This
measure is not defined under IFRS, nor is it a measure of financial
performance under IFRS.
This measure is sometimes used by investors to evaluate a company's
operational performance with a long-term view towards adding shareholder
value. This measure should not be considered an alternative, but instead
supplementary, to profit/(loss) from operations and any other measure of
performance derived in accordance with IFRS.
Alternative performance measures do not have generally accepted principles for
governing calculations and may vary from company to company. As such, the
adjusted EBITDA quoted within the Group statement of comprehensive income
should not be used as a basis for comparison of the Group's performance with
other companies.
ADJUSTED EBITDA
The Group uses adjusted EBITDA, defined as profit/(loss) from operations,
adding back share-based compensation, transaction costs associated with the
Group's acquisitions, depreciation & amortisation charge, profit on the
disposal of Avila House, operating income related to interest on client
balances and IFRS 16 accounting transactions.
1 revenue and SEGMENTAL REPORTING
All of the Group's revenue arises from its
activities within the UK (although a proportion of revenue is derived from
customers incorporated or residing outside of the UK). Management considers
there to be only one operating segment within the business based on the way
the business is organised and the way results are reported internally.
Revenue is as follows:
Group Group
Year ended 31 December 2023 Year ended 31 December 2022
£ £
_______ _______
Total revenue 9,649,233 4,821,996
_______ _______
2 PROFIT/(LOSS) FROM OPERATIONS
Group Group
Year ended 31 December 2023 Year ended 31 December 2022
£ £
Profit/(loss) from operations is stated after charging/(crediting):
Share-based compensation 333,061 4,284,039
Transaction costs 4,500 99,365
Expensed software development costs 58,792 86,941
Depreciation of property, plant and equipment 15,883 14,622
Depreciation of right-of-use assets 72,409 -
Amortisation of intangible assets 533,649 386,541
Profit on disposal of subsidiary (207,480) -
Short-term (2018 IAS 17 operating) lease rentals - 252,308
_______ _______
Amounts payable to the Group's auditor in respect of both audit and non-audit
services:
Year ended 31 December 2023 Year ended 31 December 2022
£ £
Audit Services
- Statutory audit 41,000 40,000
Other Services
The auditing of accounts of associates of the Company pursuant to legislation:
- Audit of subsidiaries and its associates 45,000 49,450
------------------------- -------------------------
86,000 89,450
========================= =========================
3 OTHER OPERATING INCOME
Year ended 31 Year ended 31 December 2022
December 2023
£ £
Interest receivable from client cash balances 350,143 30,647
------------------------- ------------------------
Other operating income represents interest generated from client cash
balances. The recent changes to the interest rate environment have meant that
these accounts can be interest bearing, whilst maintaining the safeguarding
requirements. Under the terms of the Group's Electronic Money Licence, the
Group is not able to pass any of the interest earned back to the clients.
Whilst the increased interest stream is a positive boost for the Group and a
natural by-product of its increasingly diversified product offering, the Group
is mindful that aspects of its dynamics are driven by macroeconomics beyond
its control. The Group has therefore chosen to recognise interest income on
client balances as 'other operating income', and not revenue on the face of
the statement of comprehensive income. For the same reason, interest income
has been excluded from the presentation of adjusted EBITDA.
In 2022, interest on client cash balances was included in interest receivable.
The comparatives figures have been amended for comparison purposes.
Interest earned on the Group's own cash is recognised within 'finance and
other income' in the consolidated statement of comprehensive income.
4 INTEREST AND SIMILAR ITEMS
Year ended 31 December 2023 Year ended 31 December 2022
£ £
Total finance and other income
Bank interest receivable 21,363 18
========================= =========================
Total finance costs
(Release)/unwinding of discount (56,459) 108,416
Loan note interest 130,306 53,500
Other interest payable and charges 483 2,059
Interest on lease liabilities (note 17) 16,305 -
------------------------- -------------------------
90,635 163,975
========================= =========================
5 EMPLOYEES
The average monthly numbers of employees in the Group (including the
Directors) during the year was made up as follows (the Company has no
employees other than the Directors):
Year ended 31 December 2023 Year ended 31 December 2022
Number Number
Directors 6 7
Employees 28 27
_______ _______
34 34
_______ _______
Employment costs Year ended 31 December 2023 Year ended 31 December 2022
£ £
Wages and salaries 2,349,642 1,977,588
Social security costs 206,636 251,010
Pension costs 71,408 49,200
Share-based compensation 219,068 4,155,094
_______ _______
2,846,754 6,432,892
_______ _______
remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate. Further information about the
remuneration of the individual directors is provided in the Directors'
Remuneration Report of the 2023 Annual Report.
Year ended 31 December 2023 Year ended 31 December 2022
£ £
Salaries and fees 559,310 794,712
Bonus 175,981 43,044
Share-based compensation charge/(credit) 152,495 (125,443)
Social security costs 103,472 123,024
_______ _______
991,258 835,337
_______ _______
Number Number
Number of Directors to whom retirement benefits are accruing under a defined 3 3
contribution scheme
_______ _______
Year ended 31 December 2023 Year ended 31 December 2022
£ £
The remuneration in respect of the highest paid Director was:
Salaries and fees 170,360 140,000
Bonus 119,981 31,360
Share-based compensation charge 103,629 30,173
Pension and other benefits 12,379 7,046
_______ _______
406,349 208,579
_______ _______
During the year, no (2022: nil) Directors exercised any (2022: nil) share
options.
6 Pension costs
The Group operates a defined contribution pension scheme. The scheme and its
assets are held by independent managers. The pension charge represents
contributions due from the Group and amounted to £71,408 (2022: £49,200). At
31 December 2023 contributions of £20,130 remained outstanding and are
included within other payables (2022: £59,054).
7 taxation
The tax on the loss on ordinary activities for the period was as follows:
Group Group
Year ended 31 December 2023 Year ended 31 December 2022
£ £
_______ _______
Current Tax:
Current tax credit (45,489) (158,188)
Deferred tax credit (797,679) (17,177)
_______ _______
Income tax credit (843,168) (175,365)
_______ _______
Group Group
Year ended 31 December 2023 Year ended 31 December 2022
£ £
Profit/(loss) before taxation 1,290,685 (5,787,197)
_______ _______
Profit/(loss) multiplied by main rate of corporation tax in the UK of 23.52% 303,569 (1,099,567)
(2022: 19%)
Effects of:
Surrender of tax losses for research & development tax credit refund (45,489) (158,188)
Expenses not deductible for tax purposes 65,575 29,261
Income not taxable (122,176) -
Share-based payments 78,335 814,037
Tax rate changes (17,550) -
Other adjustments in period (2,520) 48,648
Unutilised tax losses - 190,444
Utilisation of tax losses (377,472) -
Recognition of deferred tax asset in respect of tax losses (725,440) -
_______ _______
Income tax credit (843,168) (175,365)
_______ _______
As at 31 December 2023, the Group had tax losses carried forward of
£3,272,638 (31 December 2022: £5,013,429).
The Group has recognised a deferred tax asset of £697,864 in respect of the
Group's tax losses. They are expected to be utilised within the year ending 31
December 2024 and 31 December 2025.
The standard rate of corporation tax increased from 19% to 25%, with effect
from 1 April 2023. The blended rate of corporation tax applicable for the year
ended 31 December 2023 was therefore 23.52% (2022: 19%).
8 earnings PER SHARE
Year ended 31 December 2023 Year ended 31 December 2022
£ £
Statutory profit/(loss) 2,133,853 (5,611,832)
Weighted average number of shares used in basic EPS 56,613,145 32,506,335
Effect of dilutive share options 161,510 -
Weighted average number of shares used in diluted EPS 56,774,655 32,506,335
Earnings/(loss) per share (pence)
Statutory total earnings/(loss) per share
Basic 3.77 (17.26)
Diluted 3.76 (17.26)
In the prior year, the loss incurred by the Group means that the effect of any
outstanding warrants and options would be considered anti-dilutive and is
ignored for the purposes of the loss per share calculation.
9 GROUP INTANGIBLE ASSETS
Goodwill Customer relationships Internally developed software Software costs Other Total
Trademarks
£ £ £ £ £ £ £
COST
At 1 January 2023 1,086,262 615,756 1,070,198 15,611 - 92,520 2,880,347
Additions - - 444,899 - 46,114 - 491,013
Measurement period adjustment (665,962) - - - - - (665,962)
Disposal - - - - - (92,520) (92,520)
_______ _______ _______ _______ _______ _______ _______
At 31 December 2023 420,300 615,756 1,515,097 15,611 46,114 - 2,612,878
AMORTISATION
At 1 January 2023 - 90,408 458,691 15,611 - - 564,710
Charge for the period - 123,151 410,498 - - - 533,649
_______ _______ _______ _______ _______ _______ _______
At 31 December 2023 - 213,559 869,189 15,611 - - 1,098,359
NET BOOK VALUE
At 31 December 2023 420,300 402,197 645,908 - 46,114 - 1,514,519
_______ _______ _______ _______ _______ _______ _______
At 31 December 2022 1,086,262 525,348 611,507 - - 92,520 2,315,637
_______ _______ _______ _______ _______ _______ _______
Other intangible assets comprise regulatory licences that are held at cost and
are not amortised.
On 18 March 2023, the Group agreed a variation of the deferred consideration
payments for its 2022 acquisition of Capital Currencies Ltd. A measurement
period adjustment of £665,962 has been recognised by the Group as a reduction
in goodwill with a corresponding reduction in contingent deferred
consideration, which is due to be settled in cash.
The estimated deferred consideration of £228,499 has been included in
liabilities (see note 18).
Company INTANGIBLE ASSETS
Internally developed software Total
Trademarks
£ £ £
COST
At 1 January 2023 1,070,198 - 1,070,198
Additions 444,899 46,114 491,013
At 31 December 2023 1,515,097 46,114 1,561,211
AMORTISATION
At 1 January 2023 458,691 - 458,691
Charge for the period 410,498 - 410,498
_______ _______ _______
At 31 December 2023 869,189 - 869,189
NET BOOK VALUE
At 31 December 2023 645,908 46,114 692,022
At 31 December 2022 611,507 - 611,507
_______ _______ _______
10 RIGHT-OF-USE ASSETS
Leasehold Property 2023
£
COST
At 1 January 2023 -
Additions 868,907
_______
At 31 December 2023 868,907
AMORTISATION
At 1 January 2023 -
Charge for the period 72,409
_______
At 31 December 2023 72,409
NET BOOK VALUE
At 31 December 2023 796,498
_______
11 GROUP property, plant and equipment
Computer equipment Leasehold improvements Total
£ £ £
COST
At 1 January 2023 51,220 14,583 65,803
Additions 11,081 - 11,081
Disposals (976) - (976)
_______ _______ _______
At 31 December 2023 61,325 14,583 75,908
AMORTISATION
At 1 January 2023 19,779 6,347 26,126
Charge for the period 12,340 3,543 15,883
Disposal (457) - (457)
_______ _______ _______
At 31 December 2023 31,662 9,890 41,552
NET BOOK VALUE
At 31 December 2023 29,663 4,693 34,356
_______ _______ _______
At 31 December 2022 31,441 8,236 39,677
_______ _______ _______
12 deferred tax
The Group recognised the following movements in deferred tax:
Acquired intangibles Fixed asset and other temporary differences Tax losses
Total
£ £ £
£
At 1 January 2022 - - - -
Charge in the year (99,816) - - (99,816)
Liability at 31 December 2022 (99,816) - - (99,816)
(Charge)/credit in the year (733) (19,748) 818,161 797,680
(Liability)/asset at 31 December 2023 (100,549) (19,748) 818,161 697,864
_______ _______ _______ _______
Current 302,609
Non-current 395,255
The Company recognised the following movements in deferred tax:
Fixed asset and other temporary differences Tax losses
Total
£ £
£
At 1 January 2022 and 31 December 2022 - - -
(Charge)/credit in the year (17,516) 625,084 607,568
(Liability)/asset at 31 December 2023 (17,516) 625,084 607,568
_______ _______ _______
Current -
Non-current 607,568
13 investments
Investments in
Subsidiaries
£
Cost or Valuation
At 1 January 2023 8,017,622
Remeasurement of deferred consideration (665,962)
7,351,660
Net Book Value
At 31 December 2023 7,351,660
At 31 December 2022 8,017,622
During the year ended 31 December 2023, the Company remeasured the deferred
consideration payable in respect of its 2022 acquisition of Capital Currencies
Ltd. The remeasurement followed a variation to the original terms as follows:
· The first tranche of the earn-out consideration is now assessable
on revenue performance for the year ending 31 January 2024 and the second
tranche is assessable on revenue performance for the year ending 31 January
2025 - both representing an extension of one year.
· The Company now has the option, at its discretion, to satisfy one
or both of the earn-out payments in cash as opposed to one half of the first
tranche being payable in ordinary shares and the other half in convertible
loan notes and the second tranche to be payable in ordinary shares.
Accordingly, the Company has recognised the estimated deferred consideration
as a liability payable in cash.
Shares in subsidiary and associate undertakings are stated at cost. As at 31
December 2023, the Company owned the following principal subsidiaries, which
are included in the consolidated accounts:
Subsidiary Principal Activity Country of Incorporation Registered Office Percentage of Ownership
Finseta Payment Solutions Limited* Foreign Exchange Northern Ireland 14-18 Copthall Avenue, London, England, EC2R 7DJ 100 per cent.
and Payment Services
Cornerstone - Middle East FZCO Consultancy United Arab Emirates Dubai Silicon Oasis, DDP, Building A2, Dubai, United Arab Emirates 100 per cent.
Capital Currencies Limited Authorised Payment Institution England and Wales 14-18 Copthall Avenue, London, England, EC2R 7DJ 100 per cent.
Pangea FX Limited Foreign Exchange White Label England and 14-18 Copthall Avenue, London, England, EC2R 7DJ 100 per cent.
Wales
Finseta Payments Corp Foreign Exchange Canada 5577 153A street, Suite 207, Surrey BC, V3S 5K7, Canada 100 per cent.
and Payment Services
* During the year, the subsidiary was named Cornerstone Payment Solutions Ltd.
The change of name to Finseta Payment Solutions Limited became effective 24
April 2024.
On 20 September 2023, the Company entered into a sale and purchase agreement
to sell Capital Currencies Ltd, which is subject to the approval of the FCA.
As at the year end, the only asset held in Capital Currencies Ltd is an API
licence with a £nil net book value (2022: £nil).
On 12 December 2023, the Group incorporated a new Canadian entity, Finseta
Payments Corp.
Finseta Payment Solutions Limited disposed of its 100% shareholding in Avila
House Ltd on 26 April 2023.
14 current trade and other receivables
Group Group Company Company
31 December 2023 31 December 2022 31 December 2023 31 December 2022
£ £ £ £
Trade receivables 347,491 221,669 - -
Prepayments and accrued income 152,281 131,010 19,142 39,465
Derivative financial assets at fair value 340,241 635,473 - -
Other receivables 147,536 53,062 53,264 -
Amounts due from Group undertakings - - 458,421 363,359
Taxes and social security 372,092 297,896 372,092 297,896
_______ _______ _______ _______
1,359,641 1,339,110 902,919 700,720
_______ _______ _______ _______
For the year ended 31 December 2023, £nil was recorded as a bad debt expense
(31 December 2022: £nil).
15 loan
notes
Group Group Company Company
31 December 2023 31 December 2022 31 December 2023 31 December 2022
£ £ £ £
CURRENT
Convertible loan notes - 225,000 - 225,000
Loan notes 172,578 - 172,578 -
_______ _______ _______ _______
NON-CURRENT
Loan notes 2,000,000 2,172,578 2,000,000 2,172,578
_______ _______ _______ _______
On 3 February 2023, the current convertible loan note of £225,000, issued
pursuant to the Company's fundraising on 5 August 2022, was converted to
3,461,538 ordinary shares at a price of £0.065 for Mr. Horrocks to take his
shareholding in the Company above 10%.
The non-convertible loan notes comprise £2,000,000 issued to Robert O'Brien
(repayable on 31 July 2026) and £172,578 of deferred consideration in
relation to the acquisition of Pangea FX Limited (repayable on 31 August
2024). Both loan notes have a 6% coupon rate payable quarterly in arrears. The
Pangea FX Limited loan note is payable contingent upon achieving future
revenue targets over a period of two years from the acquisition date. Based on
current and forecast performance of Pangea FX, it has been assumed that the
loan note will be paid in full.
16 current trade and other payables
Group Group Company Company
31 December 2023 31 December 2022 31 December 2023 31 December 2022
£ £ £ £
248,493 362,035 87,339 162,128
Trade payables
Derivative financial liabilities at fair value 279,097 563,676 - -
Other tax and social security 480,612 515,750 2,298 50,640
Other payables and accruals 874,569 527,816 298,720 179,818
Amount due to Group undertakings - - 2,642,978 1,425,555
_______ _______ _______ _______
1,882,771 1,969,277 3,031,335 1,818,141
_______ _______ _______ _______
17 lEASE LIABILITIES
Group Group
Leasehold Property 31 December 31 December
2023 2022
£ £
At 1 January 2023 - -
Additions 868,907 -
Finance costs 16,305 -
Payments (61,613) -
Lease accruals (16,687) -
_______ _______
At 31 December 2023 806,912 -
_______ _______
Current 263,357 -
Non-Current 543,555 -
Incremental borrowing rate 7.97% -
Maturity analysis
Group Group
Contractual undiscounted cash flows 31 December 31 December
2023 2022
£ £
Less than one year 316,332 -
One to five years 583,053 -
More than five years - -
_______ _______
Total undiscounted lease liabilities at 31 December 2023 899,385 -
_______ _______
18 deferred consideration
Group
Contractual undiscounted cash flows 31 December
2023
£
At 1 January 2023 -
Transferred from deferred consideration reserve 228,499
At 31 December 2023 _______
228,499
_______
Current 117,176
Non-current 111,323
_______
19 Share capital AND Reserves
Allotted, called up and fully paid
Ordinary shares Share capital
No. £
Ordinary shares of £0.01 each as at 1 January 2023 48,036,199 480,362
Issue of new shares of £0.01 9,380,902 93,809
_______ _______
Ordinary shares of £0.01 each at 31 December 2023 57,417,101 574,171
_______ _______
At 31 December 2023 share subscriptions of £nil remained unpaid (31 December
2022: £nil).
The following changes in the share capital of the Company have taken place in
year ended 31 December 2023:
· On 13 January 2023, 806,182 ordinary shares were issued at a
price of £0.06501 settling the share-based remuneration for former
non-executive board members and the company secretary in respect of the year
ended 31 December 2021
· On 3 February 2023, 5,113,182 ordinary shares were issued at a
price of £0.100 being the final equity settlement with Robert O'Brien related
to his share-based incentivisation agreement and following receipt of approval
from the FCA for Mr. O'Brien to take his shareholding in the Company above 10%
· On 3 February 2023, 3,461,538 ordinary shares were issued at a
price of £0.065 upon conversion of a loan note held by Mark Horrocks and
following receipt of approval from the FCA for Mr. Horrocks to take his
shareholding in the Company above 10%
All ordinary shares are equally eligible to receive dividends and the
repayment of capital and represent equal votes at meetings of shareholders.
The following describes the nature and purpose of each reserve within owner's
equity:
Share capital: Amount subscribed for shares at nominal value.
Share premium: Amount subscribed for share capital in excess of nominal value,
less costs of share issue.
Share-based payment reserve: The share-based payment reserve comprises the
cumulative expense representing the extent to which the vesting period of
warrants and share options has passed and management's best estimate of the
achievement or otherwise of non-market conditions and the number of equity
instruments that will ultimately vest.
Deferred consideration reserve: Reflects equity-based contingent consideration
on the acquisition of subsidiaries.
Merger relief reserve: Effect on equity of the consideration shares issued
over their nominal value.
Reverse acquisition reserve: Effect on equity of the reverse acquisition of
Finseta Payment Solutions Limited.
Retained losses: Cumulative realised profits less cumulative realised losses
and distributions made, attributable to the equity shareholders of the
Company.
Options
The Company operates an Enterprise Management Incentive ("EMI") Scheme
equity-settled share-based remuneration scheme for employees.
Under the scheme the options are exercisable at any time. The options are also
exercisable in the event of a change of control. If the option holder's
employment within the Group is terminated, other than for gross misconduct,
any options vested may be exercised within 90 days of such termination (12
months in the case of the option holder's death), otherwise the options lapse
five years after the date of grant. The options also lapse, inter alia, if the
option holder is adjudged bankrupt or proposes a voluntary arrangement or
other scheme in relation to his/her debts.
31 December 2023 31 December 2022
Number Weighted average exercise price Number Weighted average exercise price
£ £
Outstanding at the beginning of the year 1,706,331 0.24 1,599,480 0.50
Granted during the year 3,919,180 0.13 1,893,454 0.23
Forfeited/waived during the year (767,775) (0.40) (1,786,603) (0.46)
_______ _______ _______ _______
Total outstanding 4,857,736 0.13 1,706,331 0.24
_______ _______ _______ _______
Total exercisable 1,357,674 0.11 184,535 0.50
_______ _______ _______ _______
The Black-Scholes model was used for calculating the cost of options. The
model inputs for each of the options issued were:
GRANT DATE 8 March 8 March 8 March 2022 1 September 2022 13 January 2023 13 January 2023 16 November 2023 16 November 2023
2022 2022
Exercise price (pence) 36.2 61.0 26.5 10.0 10.0 20.0 12.0 10.0
Share price at grant date (pence) 16.5 16.5 16.5 9.0 8.0 8.0 12.0 12.0
Risk free rate 2.1% 2.1% 2.1% 2.7% 2.7% 2.7% 4.2% 4.2%
Expected volatility 90.1% 90.1% 90.1% 129.5% 129.5% 129.5% 119.8% 119.8%
Contractual life (years) 5 5 5 5 5 5 5 5
The expected volatility reflects the assumption that historical volatility of
comparable quoted companies is indicative of future trends, which may not
necessarily be the actual outcome.
The weighted average contractual life of the options is five years (2022: five
years).
No options were exercised during the year (2022: nil).
The Group's share-based compensation charge for the year ended 31 December
2023 of £333,061 (2022: £4,284.039) consists of £113,993 in relation to
warrants granted in the Company (2022: £128,943), £219,065 in respect of
options granted in the Company (2022: charge of £222,577), £nil in respect
of equity-settled share-based payments related to the non-executive Board
member's service agreements (2022: £36,836) and £nil of other share-based
compensation (2022: £4,340,837).
No warrants were granted in the year (2022:
none).
20 Related party transactions
Details of key management compensation are included in note 5. Key management
are considered to be the Directors of the Group.
Transactions with subsidiaries
During the year, the Company and Finseta Payment Solutions Limited entered
into various transactions with each other including software development
charges, licences fees and working capital support. The net balance of
transactions between the companies are held on an interest-free inter-Group
loan, which has no terms for repayment. At the year end, the Company owed
£2,620,559 (2022: £1,404,408) to Finseta Payment Solutions Limited.
During the year, the Company also provided working capital support to
Cornerstone - Middle East FZCO and Capital Currencies Ltd. The net balance of
transactions between the companies are held on an interest-free intra-Group
loan, which has no terms for repayment. At the year end, Cornerstone - Middle
East FZCO owed the Company £92,319 (2022: £60,500) and Capital Currencies
Ltd owed the Company £35,899 (2022: £43,242).
Other related parties
On 3 February 2023 the Company issued shares to Robert O'Brien, General
Manager APAC and Middle East and largest shareholder in the Company, as
disclosed in notes 15 and 19. On 8 March 2023 the Company and Mr. O'Brien's
agreed to extend the repayment date of his non-convertible interest-bearing
loan note in the sum of £2,000,000, as disclosed in note 15, by one year to
31 July 2026. On the same date Mr. O'Brien agreed to vary and extend certain
elements of his compensation package, decreasing his commission share on
certain established revenue streams and increasing his share of the
profitability of the Dubai office.
The transaction with Mark Horrocks, a significant shareholder in the Company,
is disclosed in notes 15 and 19.
As at 31 December 2023, an amount of £8,750 was due from Terry Everson, a
former director of Finseta Payment Solutions Limited and a shareholder in the
Company (31 December 2022: £8,750).
21 FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
Group Group Company Company
31 December 2023 31 December 2022 31 December 2023 31 December 2022
£ £ £ £
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts with customers 253,663 504,106 - -
Foreign currency forward contracts with institutional counterparty 86,578 131,367 - -
_______ _______ _______ _______
340,241 635,473 - -
Cash and cash equivalents 2,343,417 682,346 14,553 495,627
Trade receivables 347,491 221,669 - -
Other receivables 254,328 184,072 485,338 402,824
_______ _______ _______ _______
3,285,477 1,723,560 499,891 898,451
_______ _______ _______ _______
FINANCIAL LIABILITIES
Group Group Company Company
31 December 2023 31 December 2022 31 December 2023 31 December 2022
£ £ £ £
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts with customers 61,367 165,156 - -
Foreign currency forward contracts with institutional counterparty 217,730 398,520 - -
_______ _______ _______ _______
279,097 563,676 - -
Trade payables 248,493 362,035 87,339 162,128
Other payables 874,569 527,816 2,941,698 1,605,373
Loan notes 2,172,578 2,397,578 2,172,578 2,397,578
_______ _______ _______ _______
3,574,737 3,851,105 5,201,615 4,165,079
_______ _______ _______ _______
All financial assets and liabilities have contractual maturity of less than
one year with the exception of loan notes of £2,172,578 (2022: £2,172,578).
Derivative financial assets and liabilities
Derivative financial assets not designated as
hedging instruments
31 December 2023 31 December 2022
Fair Value Notional Principal Fair Value Notional Principal
£ £ £ £
Foreign currency forward contracts with customers 253,663 8,546,025 504,106 9,042,956
Foreign currency forward contracts with institutional counterparty 3,799,202 3,377,597
86,578 131,367
_______ _______ _______ _______
340,241 12,345,227 635,473 12,420,553
_______ _______ _______ _______
Derivative financial liabilities not designated
as hedging instruments
31 December 2023 31 December 2022
Fair Value Notional Principal Fair Value Notional Principal
£ £ £ £
Foreign currency forward contracts with customers 61,367 2,928,816 165,156 3,337,362
Foreign currency forward contracts with institutional counterparty 217,730 7,912,698 398,520 8,715,534
_______ _______ _______ _______
279,097 10,841,514 563,676 12,052,896
_______ _______ _______ _______
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. Foreign currency forward contracts are measured at fair
value on a recurring basis.
There are three levels of fair value hierarchy:
· Level 1 - the fair value of financial instruments traded in active
markets is based on quoted market prices at the end of the reporting period.
· Level 2 - valuation techniques for which the lowest level input that
is significant to the fair value measurement is directly or indirectly
observable.
· Level 3 - valuation techniques for which the lowest level input that
is significant to the fair value measurement is unobservable.
Foreign currency forward contracts with customers generally require immediate
settlement on the maturity date of the individual contract and fall into level
2 of the fair value hierarchy above. Level 2 comprises those financial
instruments which can be valued using inputs other than quoted prices that are
observable for the asset or liability either directly (i.e. prices) or
indirectly (i.e. derived from prices). The fair value of forward foreign
exchange contracts is measured using observable forward exchange rates for
contracts with a similar maturity at the reporting date.
The net loss on financial assets at fair value through profit or loss for year
ended 31 December 2023 was £58,116 (2022: net gain of £3,300).
Financial instruments - risk management
Financial assets primarily comprise trade and other receivables, cash and cash
equivalents and derivative financial assets. Financial liabilities comprise
trade and other payables, shareholder loans and derivative financial
liabilities. The main risks arising from financial instruments are market risk
(including foreign currency risk and interest rate risk), liquidity risk,
credit risk and counterparty risk.
Market risk
Market risk for the Group comprises foreign exchange risk and interest rate
risk. The Group operates as a riskless matched principal broker for
deliverable non-speculative spot and forward foreign currency transactions,
with each trade with its clients matched with an identical trade with an
institutional counterparty. Therefore, foreign exchange risk is mitigated
through the matching of foreign currency assets and liabilities between
clients and institutional counterparties which move in parity.
The Group's cash balances are primarily held in Pound Sterling and the Group
does not hold significant cash balances in foreign currencies.
Interest rate risk affects the Group to the extent that it implicitly impacts
the price of foreign currency forward contracts. However, this risk is
mitigated in the same way as foreign currency risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group has extensive controls to
ensure that it has sufficient cash or working capital to meet its cash
requirements to mitigate this risk.
As per the 'Going Concern' section above, the Directors have prepared a cash
flow forecast taking into account a projected increase in revenues and
continued investment in the development of the Group's platform and organic
sales & marketing efforts and the inherent risks and uncertainties facing
the Group's business to assess the Group's working capital requirements. The
Board reviews cash flow projections on a regular basis and has authority
controls in place so as not to commit to material expenditure without being
satisfied that sufficient funding is available to the Group.
The Group also has systems in place to monitor the margin requirements of its
clients and its margin requirement with the institutional counterparty for the
back-to-back foreign currency forward contract on a real-time basis and
request any necessary top up payment from the clients. The Group also has the
right to close any position if no margin is given.
Credit risk
Credit risk is the risk that clients do not meet their contractual obligations
in respect of the currency spot and forward contracts, which leads to a
financial loss. All customers are subject to credit verification checks.
Approximately 90% of the Group's trades are spot currency contracts, which are
required to be settled within two working days. For forward currency
contracts, as noted above, clients are required to provide margin that
mitigates credit exposure. Trade limits are applied to all clients. The Group
has systems to monitor trade limits and collateral requirements on a real-time
basis. The Group does not have any significant concentration of exposures
within its client base.
Counterparty risk
Each trade between a client and the Group is matched with an identified trade
with Velocity Trade International ("Velocity"), which is a global foreign
exchange liquidity and trade provider that provides pricing, execution and
settlement services for the Group.
The Group also has brokerage accounts with alternative institutional
counterparties and could transact with them instead if Velocity is unable to
provide liquidity.
Management of settled and open trades are conducted via Currency Cloud, the GV
(formerly Google Ventures) backed global payments and FX platform, and Banking
Circle. Client funds are safeguarded with Banking Circle in line with the
Group's requirements under the Electronic Money Regulations 2011 for
additional protection and to reduce counterparty risk.
22 CAPITAL MANAGEMENT
The capital structure of the business consists of cash and cash equivalents,
debt and equity. Equity comprises share capital, share premium and retained
losses and is equal to the amount shown as 'Equity' in the balance sheet. The
Group's current objectives when maintaining capital are to:
· safeguard the Group's ability to operate as a going concern so that it
can continue to pursue its growth plans;
· provide a reasonable expectation of future returns to shareholders;
and
· maintain adequate financial flexibility to preserve its ability to
meet financial obligations, both current and long term.
The Group sets the amount of capital it requires in proportion to risk. The
Group manages its capital structure and adjusts it in the light of changes in
economic conditions and the risk characteristics of underlying assets.
The Company is subject to the following externally imposed capital
requirements:
· as a public limited company, the Company is required to have a minimum
issued share capital of £50,000.
Finseta Payment Solutions Limited, a wholly-owned subsidiary of the Company,
is subject to the following capital requirement under the Electronic Money
Regulations 2011:
· 2% of the average outstanding e-money issued by the Electronic Money
Institution (based on a 6-month rolling average), or the initial capital
requirement of €350,000, whichever is the higher.
Capital Currencies Ltd, a wholly-owned subsidiary of the Company, is subject
to the following capital requirement under the Payment Service Regulations
2017:
· either 10% of fixed overheads for the preceding year or the initial
capital requirement of €20,000, whichever is the higher.
Finseta Payment Solutions Limited and Capital Currencies Ltd complied with the
above requirements for all periods during the year ended 31 December 2023.
23 EVENTS AFTER THE REPORTING DATE
On 22 February 2024, the Company granted 470,000 options to staff members over
ordinary shares of 1 penny each in the capital of the Company. All options are
intended to qualify as Enterprise Management Incentive options pursuant to the
Income Tax (Earnings and Pensions) Act 2003.
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