TIDMAQX
RNS Number : 0871U
Aquis Exchange PLC
31 March 2021
31 March 2021
Aquis Exchange PLC
("Aquis", the "Company" or the "Group")
Final results for the year ended 31 December 2020
Strong growth across the Group delivers maiden full year
profit
Aquis Exchange PLC (AQX.L), the exchange services group, is
pleased to announce its audited results for the year ended 31
December 2020.
Highlights:
-- Revenue increased 67% to GBP11.5m (2019: GBP6.9m)
-- EBITDA of GBP1.5m (2019: GBP0.0m)
-- Maiden full year pre-tax profit of GBP0.5m achieved (2019:
GBP0.9m loss)
-- Cash and cash equivalents at 31 December 2020 of GBP12.3m
(31 December 2019: GBP11.0m)
-- Membership of Aquis Exchange grew to 33 in 2020 (2019:30)
and there was a 50% increase in the average monthly usage,
in terms of chargeable orders (4Q 2019 vs 4Q 2020)
-- Market share of pan-European continuous trading increased
to 4.7% during 4Q2020 (4Q2019: 4.2%)
-- Business and management has shown great resilience in
the face of COVID-19 and Brexit headwinds
-- Aquis Technologies was chosen to deliver a world-leading
proof of concept project, undertaken in collaboration
with Singapore Exchange (SGX) and Amazon Web Services
(AWS), to create a cloud native exchange
-- Completed the acquisition of NEX Exchange (now "Aquis
Stock Exchange" or "AQSE"), marking entry into Primary
Listings and made strong progress with its transformation
Post period highlights
-- Seamlessly moved trading of the majority of Aquis Exchange, AQX, trading instruments into
our French entity, creating a significant presence in the European Union outside of the UK
-- As at 31 March 2021, membership of Aquis Exchange had grown to 39, and market share to 5.0%
-- Completed the listing of the first business onto Aquis Stock Exchange using a Growth Prospectus
(Samarkand Group plc), allowing individual investor participation; its fundraise was heavily
oversubscribed and with significant institutional support shown
-- Since December 2020 the AQSE Market Maker scheme has helped reduce spreads by 64%, with the
value traded having increased 700% on the Apex segment of the AQSE growth market
Alasdair Haynes, Chief Executive Officer of Aquis,
commented:
"For any founder it is a very proud day when you are able to
announce your company's first full year profit. The fact that Aquis
has delivered this against the backdrop of COVID-19 and Brexit is
even more remarkable and demonstrates the ongoing value of our
offering.
We have again achieved growth in all our KPIs, and delivered
financial progress across all the Group's divisions, as our
management team determinedly executes on strategy. Operationally we
have achieved much this year, including the milestone acquisition
of what is now Aquis Stock Exchange, our listing venue, and a
world-leading proof of concept project in the technologies
division. We strive to stay at the forefront of innovation in our
industry and can see the reward this brings.
Momentum has carried into current trading, with strong
performances across the Group and particularly notable progress in
AQSE, which is now truly fit for purpose for modern-minded SMEs
looking to float. We have a clear vision, excellent team and an
exceptional drive to succeed. So, whilst the road ahead remains
uncertain at a macro-economic level, we have confidence we have an
exciting year in front of us."
An overview of the results from Alasdair Haynes, CEO, is
available to view on this link: https://bit.ly/3deeat2
The Group will be hosting webinars for analysts and retail
investors today at 09:30 and 13:00, respectively.
If you would like to register for the analyst webinar, please
contact aquis@almapr.co.uk . Investors who would like to attend the
retail investor webinar can sign up to Investor Meet Company for
free and add themselves to the meeting via
https://www.investormeetcompany.com/aquis-exchange-plc/register-investor
. Investors who have already registered will be automatically
invited.
Enquiries:
Aquis Exchange PLC Tel: +44 (0)20 3597
6321
Alasdair Haynes, CEO
Jonathan Clelland, CFO and COO
Belinda Keheyan, Head of Marketing Tel: +44 (0)776 807
8110
Liberum Capital Limited (Nominated Adviser Tel: +44 (0)20 3100
and Broker) 2000
Clayton Bush
Chris Clarke
Edward Thomas
Kane Collings
Canaccord Genuity Limited (Joint Broker) Tel: +44 (0)20 7523
Emma Gabriel (Corporate Broking) 8000
Jeremy Grime (Specialist Sales)
Alma PR (Financial PR Adviser) Tel: +44 (0)20 3405
0205
Susie Hudson aquis@almapr.co.uk
Caroline Forde
Kieran Breheny
Faye Calow
Notes to editors:
Aquis Exchange PLC is an exchange services group, which operates
pan-European cash equities trading businesses (Aquis Exchange),
growth and regulated primary markets (Aquis Stock Exchange/AQSE)
and develops/licenses exchange software to third parties (Aquis
Technologies).
Aquis Exchange is authorised and regulated by the UK Financial
Conduct Authority and France's Autorité des Marchés Financiers to
operate Multilateral Trading Facility businesses in the UK and in
EU27 respectively. Aquis operates a lit order book and does not
allow aggressive non-client proprietary trading, which has resulted
in lower toxicity and signalling risk on Aquis than other trading
venues in Europe. According to independent studies, trades on Aquis
are less likely to lead to price movement than on other lit
markets. Aquis uses a subscription pricing model which works by
charging users according to the message traffic they generate,
rather than a percentage of the value of each stock that they
trade.
Aquis Stock Exchange (AQSE) is a stock market providing primary
and secondary markets for equity and debt products. It is
authorised as a Recognised Investment Exchange, which allows it to
operate a regulated listings venue. The AQSE Growth Market is
divided into two segments 'Access' and 'Apex', with different
levels of admission criteria. The Access market focuses on earlier
stage growth companies, while Apex is the intended market for
larger, more established businesses.
Aquis Technologies is the software and technology division of
Aquis Exchange PLC. It creates and licenses cutting-edge,
cost-effective matching engine and trade surveillance technology
for banks, brokers, investment firms and exchanges.
Aquis Exchange PLC (AQX.L) is listed on the Alternative
Investment Market of the LSE (AIM) market. For more information,
please go to www.aquis.eu
Chair's Statement
Overview
2020 was a remarkable year of transition and collaboration for
Aquis as we successfully navigated through the most difficult of
circumstances during a global pandemic to post our first year of
annual profits.
Achieving profitability was one of many notable firsts. The
transition of the business towards a more mature state was also
evidenced through the hiring of our first Chief Technology Officer,
the building of our first cloud native exchange, and the successful
completion of the NEX Exchange Limited deal (now Aquis Stock
Exchange Limited, AQSE) along with its subsequent integration into
the business. We have also seen a significant uptick in gender
diversity and, at year-end, we seamlessly moved trading of the
majority of Aquis Exchange's EU stocks into our French entity,
creating a significant presence in the European Union outside of
the UK.
Although unexpected, the entire business successfully moved to a
completely remote working environment in unprecedented
circumstances. This shows that the business continuity plans were
robust and effective and that the Company's previously embedded
attitude to flexible working gave it an immediate advantage in what
was a very smooth transition.
Against such an extraordinary backdrop, collaboration was
critical. Aquis staff jointly and successfully navigated the
rapidly changing work environment supporting our clients and each
other during very difficult times. The Board congratulates all the
staff on their handling of the situation and recognises the changes
and sacrifices that people have had to make to their work and home
lives in order to keep the business operating.
It is also very pleasing that the integration of AQSE and the
switch to Aquis systems was completed successfully. The acquisition
was completed one day before lockdown meaning staff had little
chance to integrate in a physical location. Yet it is clear,
through engaging with the staff both remotely and in person when
possible, how well the teams have got to know each other and have
been working together.
Board and Governance
The Board continued to evolve in line with the Group's expansion
and subsequent corporate governance requirements during the year.
The Aquis Group's parent company, Aquis Exchange PLC, now has two
subsidiaries both of which are also financially regulated
companies: the French entity, Aquis Exchange Europe SAS, AQEU, that
was established in case of a no deal Brexit and AQSE, which holds a
UK Recognised Investment Exchange Licence, RIE, that allows it to
offer primary listings as well as secondary markets trading. These
two entities both require appropriate independent Board governance
at the subsidiary level.
This year we also transitioned to the FCA's Senior Management
and Certification Regime (SM&CR), which has increased the
accountability of the Executive and the Chair and ensures that
individuals have clearly prescribed responsibilities which are now
assigned to them.
The Board continued its succession planning. Three non-executive
board members, including the Chair, are coming towards the end of
their nine-year tenure over the next one to two years.
We welcomed Deirdre Somers to the Board of Aquis Exchange PLC in
the last quarter of the year as an independent non-executive
director. Deirdre has 23 years of stock exchange and trading venue
experience across both primary and secondary markets and,
therefore, a deep knowledge of EU market structure and regulation.
She was the Chief Executive Officer of the Irish Stock Exchange
from 2007 to 2018, leading its transformation from a relatively
small domestic equity exchange to a highly profitable Plc with
global specialisms.
Lesley Gregory joined the Board of AQSE as an independent
non-executive director during the year. Lesley has experience as
the CEO, and now as the chairperson, of leading international law
firm, Memery Crystal. She has significant experience in advising
private growth companies as well as other organisations.
Culture, Stakeholder Engagement and Section 172 Duties
The Board continued its engagement with key stakeholders,
particularly focusing on employees and shareholders. I continued as
the appointed representative of the Board to liaise with employees
and engaged informally with small groups of staff remotely during
lockdown and in person, when permitted. We also undertook our
second annual employee engagement survey and overall feedback
continued to be positive.
Following on from our initial shareholder engagement meetings in
2019, the Chair and various members of the Board have continued
with a program to meet with key shareholders when possible either
in person or remotely. A cross-section of Board members were
encouraged to participate in different meetings.
The Board discharged its Section 172 (1) duties in a number of
ways, details of which are set out in the Annual Report and include
considering employees well-being during a very difficult year,
undertaking considerable training and our first independent board
evaluation to maintain high standards of conduct and improve the
Board's effectiveness. We also spent significant time focusing on
strategy and succession planning for the Board and the
Executive.
Environment, Social and Corporate Responsibility
The Board recognises the Company's broader responsibility to
grow sustainably. As an exchange operator, we realise that we have
an important role in the economy by bringing issuers and investors
together. We, therefore, have an opportunity to make a difference
not only through our own actions but also by creating an
environment for other companies and investors to make a
difference.
From the outset Aquis has been committed to improving markets by
maintaining the utmost transparency and least market toxicity for
the benefit of the end investor. With the acquisition of AQSE in
2020, we can further stimulate growth in the economy by listening
to the needs of issuers and creating a supportive, fair and
low-cost environment for capital raisers to list instruments,
particularly for innovative young companies. We are committed to
educating and collaborating with these issuers about the
expectations and benefits of creating and adhering to ESG
policies.
We realise that our whole approach to ESG is part of a longer
journey, which is only just beginning. To date our focus has been
on ad hoc steps such as integrating diversity objectives into our
business plans and cultural thinking or encouraging voluntary
initiatives that consider the environment and the impact of our
consumption. These are set out in more detail in the Strategic
Report in the Annual Report. We have seen meaningful results in
these focus areas but we now need to embed a full ESG plan into our
strategy.
Our focus for the year ahead
The UK's transition away from the European Union and the
COVID-19 pandemic continue to bring uncertainty but, based on our
experience in 2020, we expect to continue with uninterrupted
service supported by our flexible remote working structure.
A significant part of the secondary exchange trading business is
now being run out of France and the aim is to continue to further
develop the office there and to build relationships both within the
EU 27 markets as well as within the UK. We also intend to
capitalise on the success of the cloud project and our growing
reputation for building world-class exchange technology.
Our Board will undergo further planned changes as the longer
serving Non-Executive Directors retire from the Board but we aim to
maintain stability and corporate memory through our on-going
commitment to succession planning.
The Board will continue to be focused on ensuring the business
delivers on its strategy across all the aspects of the business,
managing risks, building sustainability and developing an
appropriate framework for growth.
Niki Beattie, Chair
Chief Executive's Report
The year of 2020 was a landmark year for Aquis as the Group
achieved its first net profit, made substantial progress across its
various business activities and successfully completed and
integrated its first acquisition, all during one of the most
difficult environments that I, and probably most others, have ever
experienced.
The Group dealt comfortably with the volatile market conditions
during March and April and running the exchange platforms remotely
during the lockdown. It also managed to grow market share of the
pan-European equities market, achieving 4.7% market share of all
trading including auctions during 4Q20, compared to 4.2% during
4Q19. In addition, the Group reported a 67% growth in revenue to
GBP11.5 million. Alongside this progress, we achieved a key
milestone for the business when we completed the strategic
acquisition of AQSE.
Very strong growth from higher trading levels in the equities
trading division was supplemented by growth in the technology and
data divisions, together with the acquisition of AQSE. Our success
continues to be driven by the compelling nature of our subscription
model and the strength of our industry-leading exchange software
platform. We offer a faster and more reliable trading venue than
many international trading venues to all market participants; the
benefits are clearly now flowing through into improved financial
results. The pre-tax profit of GBP0.5m in 2020, compared to a loss
of GBP0.9m in 2019, is a significant step forward and provides the
platform to grow the main secondary market exchange and technology
licensing business streams and primary exchange business through
AQSE so as to increase revenue across the Group.
Aquis Exchange
Over the period, the secondary market multilateral trading
facility ("MTF") platforms operated by the Group delivered growth
despite challenging economic and regulatory conditions. The number
of trading members grew from 30 to 33 and a number of members
increased their activity levels, leading exchange revenue to
increase 46% to GBP7.7m.
Market share of all pan-European trading including auctions and
dark pools has risen from 4.2% to 4.7% over the last 12 months and
from 1.8% at the time of the IPO in June 2018. Our Market at Close
("MaC") order type, launched in August 2019, made a positive
contribution to trading volumes on the platform and we anticipate
will grow further during 2021. As the MaC allows members to enter
orders for matching on the Aquis platform at the closing price of
the primary market, we now operate across a larger cross-section of
all available trading.
Aquis Exchange offered clients the ability to trade in excess of
1,500 stocks and ETFs across 14 European Markets as at the end of
December 2020. We were not able to offer trading in the Swiss
market during 2020. However, following the UK / Swiss agreement at
the beginning of 2021, we were able to start trading Swiss stocks
again on the 4(th) February 2021. The available liquidity,
approximately 23% of total pan-European equity liquidity, increased
by 3% from 20% in 2019 and should underpin future market share
growth.
In March 2019, the Company established a French subsidiary with
full regulatory approval to operate an MTF covering the European
Union, AQEU. Despite the uncertain political situation in the UK
throughout 2020, the Group completed its Brexit plans on schedule
and is now able to maintain uninterrupted service.
Brexit and COVID-19 were major headwinds during the period and
it is very encouraging that we have delivered such strong growth
despite these issues and further demonstrates the highly
competitive nature of our exchange business. This performance
during a very challenging period is reflective of the significant
efforts by all the Aquis employees during long periods of remote
working.
Aquis Technologies
In addition to the exchange business, Aquis licenses its leading
exchange related technology to a variety of international financial
services clients across different asset classes. Revenue from
technology licensing in 2020 grew to GBP2.3 million, reflecting the
increasing interest in our high-calibre, in-house technology.
Aquis Technologies continues to develop its technology platforms
to support growth across different asset classes internationally.
One of the highlights of the year was the successful proof of
concept project, undertaken in collaboration with Singapore
Exchange (SGX) and Amazon Web Services (AWS) to create a cloud
native exchange.
Aquis Market Data
Data revenues increased 165% in 2020 to reach GBP0.9m buoyed by
the inclusion of AQSE data revenues. Data is seen as a key pillar
of the Aquis strategic plan and we expect that it will contribute
to the revenue streams of all 3 Aquis divisions over time.
One such aspect is the possibility of a consolidated tape for
Europe. Introducing a consolidated tape in Europe should improve
the quality and pricing of market data and lead to a fairer
distribution of data fees across the various European exchanges.
The Group is continually monitoring European Commission plans and
market demand to introduce such a tape and is well placed to
understand and grow the Group's data activity as this market in
Europe develops.
Primary Markets: Aquis Stock Exchange (AQSE)
In March 2020, we completed the acquisition of 100% of the share
capital of NEX Exchange Limited from CME Group Inc. for the nominal
amount of GBP1 plus the current working capital held by NEX
Exchange Limited, the majority of which comprised regulatory cash
and which amounted to GBP2.88m at the transaction date.
The acquired company, rebranded as Aquis Stock Exchange Limited
(AQSE), had at 31st December 2020, 87 companies quoted on its two
markets, with a total market capitalisation of approximately
GBP1.8bn. It works with 49 registered brokers and 8 market makers.
Following the acquisition, we successfully concluded a consultation
period with industry participants in order to assess opportunities
to enhance the market functionality. This has led to us launching
an innovative market making scheme, which we believe will
significantly enhance liquidity and narrow spreads of stocks. For
the 9 1/2 months ended 31st December 2020, AQSE delivered revenues
of GBP1.2 million and a loss before tax of GBP0.5 million.
The acquisition has provided us with the ability to operate a
Recognised Investment Exchange (RIE) giving our business the same
status as the large national exchanges in Europe and providing
further resilience in the face of possible regulatory
headwinds.
Underpinned by the Group's proven technology and a track record
of transparency and innovation, I am confident that we have the
ability to build AQSE into a competitive and disruptive primary
marketplace, particularly as MiFID II continues to put the
traditional business model of national exchanges under pressure. I
believe that we have a unique opportunity to build a pan-European,
technology-driven, listing exchange for growth companies,
overcoming several issues faced by small and mid-cap market
participants today.
Further Investment in Research and Development (R&D)
The Group continues to invest in R&D in order to maintain
and enhance the quality of its technology and its ability to be
able to deliver new products and platform enhancements to its
clients. Our proven trading platform has been developed in-house
and is based on proprietary technology, which does not rely on
third party software suppliers. The effectiveness and reliability
of our technology was a major factor in dealing with COVID-19 and
the requirement to adopt remote working which was achieved
seamlessly. The quality of our technology underpins our Group
strategy and is also one of the principal reasons for the growth in
our technology licensing business.
I believe this structure and continued investment in R&D
gives us a significant competitive advantage on functionality,
price and ability to deliver. Aquis' nimble technology organisation
ensures expeditious product development and, together with Aquis'
further investment into its sales organisation, will allow the
Group to react quickly to dynamic market conditions. We intend to
continue to work on further developments which will foster future
growth.
Resources
We have also invested in personnel resources across a number of
departments in particular the sales and technology activities and
strengthened the Executive Committee.
Outlook
There remains significant macro-economic uncertainty given the
continued presence of COVID-19 and the lack of certainty of the
full impact of Brexit; however, I believe that our strong team and
technology platform should enable us to overcome these and future
challenges. Our technology systems dealt efficiently with the
higher messaging volumes caused by increased volatility in trading
earlier in the year and we have an effective remote operating
capability in place. Although the longer-term economic impact is
harder to predict, such that it is difficult to forecast the effect
on the broader Group for the time being, I remain confident in our
unique proposition and that we are ready to achieve the next level
of operational, financial and strategic success.
We continue to invest in our business to ensure that we maintain
our ability to grow. This investment should support the aim of
broadening and improving our market position through innovation and
excellence. We will continue to promote the Aquis values of
transparency, fairness and simplicity, enabling our end customers
to get better performance and results.
In addition to tackling the issues of small and mid-cap trading
through the AQSE initiatives, our aim in the future will be to
deliver robust and sustainable returns for the benefit of
shareholders and all our other stakeholders in the medium and long
term. Despite the unprecedented situation which we, together with
the whole world, continue to face, our highly capable and
experienced management team remains focused on serving our clients
as we grasp the opportunities ahead and, in particular, on
delivering our shared goals, and our vision for transformation of
primary markets for small and mid-cap stocks.
Alasdair Haynes
Chief Executive
Strategic Report
Overview of the business
Aquis Exchange Plc ("Aquis" or "the Company" or "the Group"), is
a pan-European Multi-Lateral Trading Facility ("MTF") operator that
provides secondary market trading in Pan European stocks that are
listed on other exchanges. It also provides exchange and regulatory
technology to third parties. On 11 March 2020, it acquired NEX
Exchange Limited ("NEX Exchange"), a Recognised Investment Exchange
("RIE") which has been rebranded Aquis Stock Exchange Limited
("AQSE") and which runs as a subsidiary providing primary markets
for small and medium size issuers and secondary market trading in
those stocks. The Company also has a French subsidiary, Aquis
Exchange Europe SAS, AQEU, an MTF established to enable European
clients to continue to trade EU stocks, which provides secondary
market trading in EU 27 stocks listed on other exchanges.
The Company is regulated by the UK Financial Conduct Authority
with two subsidiaries: a French subsidiary, AQEU, an investment
firm incorporated in France, that received regulatory approval to
operate as an MTF from the Autorité de Contrôle Prudentiel et de
Resolution ("ACPR"), effective in March 2019 and AQSE, a UK
regulated Recognised Investment Exchange.
Following the UK's exit from the EU, 99% of all EU continuous
trading moved from the exchange business in London (AQXE) to AQEU
on 4(th) January 2021. This move was handled seamlessly.
The Group's objective is to become the leading technology driven
exchange services group and to introduce competition and innovation
to the securities trading market. With these guiding principles the
Group's main focus is to:
-- Capitalise on regulatory and technical shifts in market
infrastructure by providing an exchange which offers deeper
liquidity and transparency, and higher quality execution for
intermediaries and investors;
-- Continue to increase the number of members and associated
trading volumes by providing a robust and innovative platform that
responds to their needs;
-- License its proven technology platform to third parties that
require trading or market surveillance technology; and
-- Positively address the current market issues of spread and
liquidity in small and mid-cap trading through AQSE's RIE
status
The trading platform for all Group entities is run on the same
trading technology and all entities apply a unique
subscription-based pricing model based on electronic messaging
traffic and a lit market. This means that the dealing price prior
to the trade is transparent to the whole market. This is in
contrast to pricing on dark and grey markets, where price discovery
is only available to the market post-trade.
AQXE and AQEU MTFs apply a non-aggressive trading model, which
means that certain types of trading behaviour are not allowed, and
it encourages more passive trades to rest in its order book. This
creates greater depth of liquidity and less potential for
information leakage or "toxicity" in the market. Independent
studies have verified that Aquis' non-aggressive trading model has
materially lower toxicity than its competitors, which reduces
adverse price movements thereby lowering the implicit costs of
trading for the end investor. This is a significant positive
differentiating factor and underpins our continued growth
potential.
AQSE is focused on creating a primary market for growth company
issuers and a secondary market for the trading of their stocks.
The client base of all three entities consists, principally, of
investment banks and brokers acting on behalf of institutions such
as pension funds, asset managers and retail brokers to execute
their orders and, in the case of AQSE, it includes the issuers who
wish to raise capital on the platform.
The principal competitors to Aquis businesses are the national
exchanges and other pan-European trading venues. In secondary
markets they charge customers on a per transaction model and allow
fully aggressive trading.
Since Aquis commenced trading it has consistently increased its
market share of EU secondary markets trading, which has grown to
reach an average of 4.7% of the overall pan-European market of all
trading including auctions and dark pools during 4Q20. This
business is well positioned to benefit from regulatory changes,
which support transparent, low toxicity growth on "lit" markets.
The regulatory trends and institutional support for greater
transparency in European equities trading also support future
business growth.
Aquis' matching engine and surveillance technology has been
operating successfully for a number of years. It has been developed
for multi-asset class trading and is attracting customers wishing
to license the technology as the trading engine for a broad range
of instruments. The Company's principal technology customers are
new equity exchanges where the market is opening up to competition
as well as exchanges specialising in digital assets, MTF operators
across asset classes and market participants requiring real time
market surveillance. Competitors of the licensing business are
other matching engine providers and surveillance software
providers.
We are a strong supporter of the regulatory principles such as
greater transparency for markets that have been introduced and we
are committed to complying with market regulation. We believe that
we are well placed to benefit from the anticipated additional
regulation given our robust and agile business model, our lean cost
structure and our technology leadership.
The Board has established clear financial and non-financial KPIs
for the senior executives in relation to the performance of the
Group. For 2020 these were revenue, operating profit, market share
of the exchange platform, quality of technology and its
sustainability and compliance with regulations and corporate
governance. Further details are given in the Remuneration
Report.
Financial Review
It has been a year of very strong revenue growth during 2020. A
breakdown is as follows:
Group
------------------------------------
2020 2019 YoY Growth
GBP GBP %
------------------------------ ----------- ---------- -----------
Revenue analysed by class of
business
Subscription fees 7,738,284 5,285,000 46%
Licence fees 2,319,700 1,269,362 83%
Issuer fees 524,402 0 N/A
Data vendor fees 894,867 337,632 165%
11,477,253 6,891,994 67%
------------------------------ ----------- ---------- -----------
The Group generated an operating profit (profit before interest,
taxation, depreciation and amortisation) for the year of GBP1.52m
compared to a GBP0.01m operating loss in the previous year. The
move from an operating loss to profit for the 2020 financial year
is primarily attributable to increased exchange revenue as members'
subscriptions have risen as a result of increased trading levels,
as well as increased revenue from new technology licensing
contracts that were signed, delivered and/or renewed during the
year.
The trade receivables resulting from revenue from licensing
technology contracts attract an IFRS 9 (impairment provision on the
trade receivables arising from contract assets). This year the
application of IFRS 9 has resulted in an impairment provision
during the year of GBP100k (2019: GBP284k reversal).
The profit before taxation for the 2020 financial year of
GBP0.5m compares very favourably with the loss before tax in 2019
of GBP0.9 million. The profit before taxation is after applying
amortisation charges to internally generated intangible assets, as
well as depreciation and finance charges, which reflect the
accounting treatment of leases under IFRS 16. The lease liability
is amortised over the life of the lease, attracting a finance
expense charge amounting to GBP35k for 2020, whereas the right of
use asset is depreciated on a straight-line basis over the life of
the lease, attracting a depreciation charge of GBP173k for 2020.
These costs are in line with the 2019 results.
The Group's cash and cash equivalents as at 31 December 2020
were GBP12.3 million (2019: GBP11.0 million) with a cash conversion
rate of in excess of 100%. Total assets grew 14% to GBP18.8m while
total equity grew 9% to GBP15m.
Group
-------------------------------------
2020 2019 YoY Growth
GBP GBP %
--------------------------------- ----------- ----------- -----------
Group balance sheet at 31.12.20
Cash 12,268,418 11,010,861 11%
Total assets 18,814,123 16,441,274 14%
Total equity 15,008,332 13,752,006 9%
---------------------------------- ----------- ----------- -----------
Group investments, productivity and capital management
The Group hired its first Chief Technology Officer during the
year and has continued to invest in its technology offering. This
has included the creation and enhancement of new order types,
enhancements to the surveillance system and auction systems, as
well as technological development to enable the move into different
asset classes and a proof of concept project to develop a cloud
native exchange. In addition, the Group has made further investment
in personnel resources as it continues to develop capability and
brand awareness.
The Group is required to maintain sufficient capital to meet the
regulatory obligations for all entities. These are calculated and
updated annually. At 31 December 2020 the Company ICAAP requirement
amounted to GBP3.2m (2019: GBP2.6m). The individual entities of the
Group meet the respective FCA and ACPR capital adequacy
requirements with plenty of headroom for further investment in
business operations.
Regulatory capital requirements to which each entity within
Group is subject to have been assessed and complied with in the
year. An assessment of the excess of regulatory capital for each
individual entity is as follows:
Aquis Exchange PLC Aquis Exchange Aquis Stock Exchange
Europe SAS Ltd
2020 2019 2020 2019 2020 2019
GBP GBP EUR EUR GBP GBP
----------------------- ----------- ----------- ---------- ---------- -------------- -------
Total equity 16,344,234 14,129,957 3,841,776 2,881,470 2,657,790 -
Regulatory
capital requirements 3,204,216 2,623,363 730,000 730,000 2,446,000 -
Excess 13,140,018 11,506,594 3,111,776 2,151,470 211,790 -
----------------------- ----------- ----------- ---------- ---------- -------------- -------
The Board considers that its investments have contributed to the
Group's ability to gain new clients, broaden its customer base and
increase revenue. The Group recognises the importance of continuing
to enhance productivity, and the commitment to future investment,
both technically and in terms of resource training and development.
The Group has established both short and long-term incentive plans
based on performance for all employees, which are set out in more
detail in the Report of the Nomination & Remuneration Committee
and align the employees' interests with the long-term strategic
objectives of the Group.
In deciding its investment plans, Group management receive a
detailed analysis of the exchange and client technical
opportunities and related time requirements on a quarterly basis,
and then determine the personnel and other resources that it wishes
to allocate to these opportunities. This information also includes
an estimate of the deployment cost.
Future development of the business
In order to support its long-term vision and in order to
strategically position for continued growth, Aquis has invested
significantly in its business differentiators, the technology
platform, brand and personnel resources which includes a 50%
increase in R&D technology investment in 2020. The Group is
cognisant of the importance of such investments to maintain
innovation and strong quality delivery.
GROUP FINANCIAL STATEMENTS
Consolidated and Company Statements of Comprehensive Income
For the year ended 31 December Company
2020 Group
-------------------------------- -----------------------------------------------
2019 2020 2019
2020 Restated Restated
Notes GBP GBP GBP GBP
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Income Statement
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Revenue 12 11,477,253 6,891,994 9,860,328 6,627,994
Impairment (charge)/credit 13,23 (100,174) 284,993 (97,760) 284,993
Administrative expenses 14 (9,855,927) (7,171,216) (7,443,194) (6,840,840)
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Operating profit/(loss) 1,521,152 5,771 2,319,374 72,147
Investment income 16 14,632 41,699 14,632 36,303
Depreciation and
amortisation 14 (1,030,290) (928,191) (1,030,290) (928,191)
Finance expense 28 (41,835) (47,653) (41,835) (47,653)
Finance income 28 6,736 6,538 6,736 6,538
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Profit before taxation 470,395 (921,836) 1,268,618 (860,856)
Income tax
credit/(expense) 19 307,616 265,254 307,616 265,254
Deferred tax 18 203,717 - 203,717 -
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Profit/(loss) for the
year 981,728 (656,582) 1,779,951 (595,602)
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Other comprehensive income
----------------------------------- -------------- ---------------- --------------------------------- ------------
Foreign exchange
differences
on translation of foreign
operations, net of tax 33 (531) 1,439 - -
--------------------------- ------ -------------- ---------------- --------------------------------- ------------
Other comprehensive loss for
the year (531) 1,439 - -
----------------------------------- -------------- ---------------- --------------------------------- ------------
Total comprehensive income/(loss)
for the year 981,197 (655,143) 1,779,951 (595,602)
----------------------------------- -------------- ---------------- --------------------------------- ------------
Earnings per share (pence)
Basic
----------------------------------- -------------- ---------------- --------------------------------- ------------
Ordinary shares
20 4 (3) 7 (3)
Diluted
----------------------------------- -------------- ---------------- --------------------------------- ------------
Ordinary shares
20 3 (3) 6 (3)
----------------------------------- -------------- ---------------- --------------------------------- ------------
The Statement of Comprehensive Income has been prepared on the
basis that all operations are continuing operations.
Consolidated and Company Statements of Financial Position
As at 31 December 2020 Group Company
----------------------------------------- -------------------------------
2019 2019
2020 Restated 2020 Restated
Notes GBP GBP GBP GBP
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Assets
Non-current assets
Goodwill 17,21 83,481 - - -
Intangible assets 916,256 753,230 916,256 753,230
Property, plant and equipment 20 1,578,554 2,013,823 1,578,554 2,013,823
Investment in subsidiaries 21 - - 6,484,202 2,437,766
Investment in trust 24 - 486,127 318,410
Deferred tax asset 16 203,717 - 203,717 -
Trade and other receivables 22,25 839,630 966,922 839,630 966,922
------------------------------- ------ ------------------ --------------------- -------------- ---------------
3,621,638 3,733,975 10,508,486 6,490,151
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Current assets
Trade and other receivables 22,25 2,924,067 1,696,438 2,943,368 1,687,587
Cash and cash equivalents 26 12,268,418 11,010,861 6,179,566 8,609,739
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Total assets 18,814,123 16,441,274 19,631,420 16,787,477
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Liabilities
Current liabilities
Trade and other payables 27,28 2,810,710 1,499,574 2,292,106 1,467,826
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Net current assets 12,381,775 11,207,725 6,830,828 8,829,500
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Non-current liabilities
Lease liabilities 28 995,081 1,189,694 995,081 1,189,694
------------------------------- ------ ------------------ --------------------- -------------- ---------------
995,081 1,189,694 995,081 1,189,694
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Total liabilities 3,805,791 2,689,268 3,287,187 2,657,520
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Net total assets 15,008,332 13,752,006 16,344,234 14,129,957
------------------------------- ------ ------------------ --------------------- -------------- ---------------
Equity
Called up share capital 29 2,716,970 2,714,956 2,716,970 2,714,956
Share premium account 30 10,892,135 10,839,981 10,892,135 10,839,981
Other reserves 31 760,543 377,766 748,525 368,367
Treasury shares 32 (489,625) (327,809) - -
Retained earnings 1,127,401 145,673 1,986,604 206,653
Foreign currency translation
reserve 33 908 1,439 - -
Total equity 15,008,332 13,752,006 16,344,234 14,129,957
------------------------------- ------ ------------------ --------------------- -------------- ---------------
The notes to the financial statements form an integral part of
these financial statements. The financial statements were approved
by the Board of Directors and authorised for issue on 30 March 2021
and are signed on its behalf by:
Alasdair Haynes Jonathan Clelland
CEO CFO
AQUIS EXCHANGE PLC COMPANY REGISTRATION NUMBER: 07909192
Consolidated Statement of Changes in Equity
For the year
ended 31
December
2020
Group Notes Share Share Other Retained Treasury Foreign Total
Capital premium reserves earnings shares Currency
Translation
Reserve
GBP GBP GBP GBP GBP GBP
GBP
Balance at 1
January
2019 2,714,956 10,839,981 92,446 802,255 - 14,449,638
Restated
loss
for the
year - - - (656,582) - - (656,582)
Foreign
exchange
differences
on
translation
of foreign
operations 33 - - - - - 1,439 1,439
Restated
movement
in
share-based
payment
reserve 31 - - 285,319 - - - 285,319
Restated
movement
in treasury
shares 32 (327,809) (327,809)
Restated at
31 December
2019 2,714,956 10,839,981 377,766 145,673 (327,809) 1,439 13,752,006
Balance at 1
January
2020 2,714,956 10,839,981 377,766 145,673 (327,809) 1,439 13,752,006
Profit for
the
year - - - 981,728 - 981,728
Foreign
exchange
differences
on
translation
of foreign
operations 33 - - - - (531) (531)
Issue of new
shares 2,014 52,154 - - - 54,168
Movement in
share-based
payment
reserve 31 - - 382,777 - - 382,777
------------- ------ ------------------ --------------------- --------------- ---------------- ---------- -------------------- -------------
Recognition
of treasury
shares (161,816) (161,816)
------------- ------ ------------------ --------------------- --------------- ---------------- ---------- -------------------- -------------
Balance at
31
December
2020 2,716,970 10,892,135 760,543 1,127,401 (489,625) - 908 15,008,332
------------- ------ ------------------ --------------------- --------------- ---------------- ---------- -------------------- -------------
Company Statement of Changes in Equity
For the year
ended
31 December
2020
Company Notes Share Capital Share premium Other Retained Total
GBP reserves earnings
GBP GBP GBP GBP
Balance at 1
January
2019 2,714,956 10,839,981 92,446 802,255 14,449,638
Restated
loss
for the
year - - - (595,602) (595,602)
Restated
movement
in share
option
reserve 31 - - 275,921 - 275,921
Restated
balance
at 31
December
2019 2,714,956 10,839,981 368,367 206,653 14,129,957
Balance at 1
January
2020 2,714,956 10,839,981 368,367 206,653 14,129,957
Profit for
the
year - - - 1,779,951 1,779,951
Issue of new
shares 2,014 52,154 - - 52,154
Movement in
share
option
reserve 31 - - 380,158 - 380,158
------------- ------ ------------------ ---------------------- ------------------- ---------------- ------------
Balance at
31
December
2020 2,716,970 10,892,135 748,525 1,986,604 16,344,234
------------- ------ ------------------ ---------------------- ------------------- ---------------- ------------
Consolidated and Company Statements of Cash Flows
For the year ended Group Company
31 December 2020
--------------------------------- ----------------------------------------
2020 2019 2020 2019
Notes GBP GBP GBP GBP
---------------------- ------ ------------ ------------------- ------------------- -------------------
Cash flows from
operating
activities
Cash generated by
operations 34 2,129,563 385,606 2,228,339 438,105
Tax refunded 19 307,616 265,254 307,616 265,254
Finance expense on
lease liabilities 28 (35,099) (47,653) (35,099) (47,653)
Net cash inflow from
operating activities 2,402,080 603,207 2,500,856 655,706
----------------------- ------ ------------ ------------------- ------------------- -------------------
Investing activities
Payment of software
development costs 21 (642,695) (562,271) (642,695) (562,271)
Purchase of property,
plant and equipment 22 (115,351) (509,342) (115,351) (509,342)
Investment in
subsidiaries 23 (259,400) - (2,437,766)
Capital injection - - (4,046,436) -
into AQSE and Aquis
Europe
Interest received 16 14,632 41,699 14,632 36,303
Net cash used in
investing
activities (1,002,815) (1,029,914) (4,789,851) (3,473,076)
----------------------- ------ ------------ ------------------- ------------------- -------------------
Financing activities
Issue of new shares 29,30 54,168 - 54,168 -
Principal portion
of lease liability 28 (195,346) (182,792) (195,346) (182,792)
Net cash generated
from/ (used in)
financing
activities (141,178) (182,792) (141,178) (182,792)
----------------------- ------ ------------ ------------------- ------------------- -------------------
Net
increase/(decrease)
in cash and cash
equivalents 1,258,088 (609,499) (2,430,173) (3,000,162)
Cash and cash
equivalents
at the beginning of
the year 26 11,010,861 11,618,921 8,609,739 11,609,901
Effect of exchange
rate changes on cash
and cash equivalents 33 (531) 1,439 - -
Cash and cash
equivalents
at the end of the
year 26 12,268,418 11,010,861 6,179,566 8,609,739
----------------------- ------ ------------ ------------------- ------------------- -------------------
Notes to the Financial Statements
1 Significant changes in the reporting period
The following events and transactions had an impact on the
financial position and performance of the Group and/or Company
during the period:
-- The acquisition of NEX Exchange Limited (which has changed
its name to Aquis Stock Exchange Limited) in March 2020 which
resulted in an increase in the Group's current assets and current
liabilities, the details of which are disclosed in Note 15.
2 Basis of preparation and accounting policies
Company information
Aquis Exchange PLC is a public limited company which is
incorporated and domiciled in the United Kingdom. Its registered
office is located at Palladium House, 1-4 Argyll Street, London,
W1F 7LD.
Accounting convention
The Group's consolidated and the Company's financial statements
are prepared in accordance with International Financial Reporting
Standards ("IFRS") and interpretations issued by the IFRS
Interpretations Committee (IFRS IC) as adopted for use in the
European Union and in conformity with the requirements of the
Companies Act 2006.
The "requirements of the Companies Act 2006" here means accounts
being prepared in accordance with "international accounting
standards" as defined in section 474(1) of that Act, as it applied
immediately before Implementation Period completion day (end of
transition period, including where the company also makes use of
standards which have been adopted for use within the United Kingdom
in accordance with regulation 1(5) of the International Accounting
Standards and European Public Limited Liability Company (Amendment
etc.) (EU Exit) Regulations 2019.
The financial statements have been prepared on the historical
cost basis.
The Group does not hold any financial instruments at fair value
through profit or loss.
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
Going concern
At the time of approving the financial statements, the Directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future and
thus continue to adopt the going concern basis of accounting in
preparing the financial statements.
The Group has made a profit for the first time since its
inception this year and has substantial cash reserves and a strong
balance sheet, due to high levels of investment within the Group.
There has been a growth in revenue between the current year and
comparative years. Additional revenue growth is projected for 2021,
with profits forecasted for future years.
The Coronavirus impact has adversely impacted the global economy
in 2020 and caused a significant amount of uncertainty. Whilst this
has not hindered the business in a discernible way to date, which
is evidenced by the revenue growth and profit generated during the
year, there is a risk that there may be a longer-term impact on
revenues and/or costs and therefore the Directors are closely
monitoring how the situation develops and are ready to address any
negative impact on the business if necessary.
The end of 2020 marked the end of the transition period
following the UK's departure from the EU, and a trade agreement was
reached at the end of the year, which did not address financial
services While the agreement ended years of uncertainty regarding a
no-deal Brexit, there are significant costs for the UK's financial
services industry, and it is anticipated there will be a
long-lasting effect on the UK economy. With its European subsidiary
and a well-planned and executed transition of EU securities
trading, the Group has been well-positioned to respond quickly to
the changes in legislation. However, it remains difficult to
predict the overall impact of Brexit on the future trading
landscape for both the financial services industry and the wider UK
economy.
Taking the above into account in light of the Group's current
position and principal risks as discussed in the Strategic Report
section of this annual report, the Directors have assessed the
prospects of the Group for the foreseeable future and there is no
material uncertainty as to the Group's ability to continue to adopt
the going concern basis of accounting in preparing the financial
statements over a period of at least 12 months from the date of
approval of these financial statements.
Consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiary companies with all
inter-company balances and transactions eliminated. The attribution
to non-controlling interests has not been presented since all
subsidiaries are 100% held.
There were no discontinued operations in any of the periods
presented.
Investments in subsidiary companies' shares, loans and other
contributions are recognised at cost. These are reviewed for
impairment when events indicate that the carrying amount may not be
recoverable and are accounted for in the Company's financial
statements at cost less accumulated impairment losses.
The results of Aquis Stock Exchange Limited and Aquis Exchange
Europe SAS have been consolidated in the Group financial statements
for the year ended 31 December 2020.
The consolidated financial statements also include treasury
shares and cash held by the trust ("the Trust") that administers
the Company's employee share incentive plan. The Trust has been
consolidated based on the IFRS 10 criteria for control over the
Trust being met:
-- The Trust was established to facilitate the acquisition and
holding of shares under the Aquis Exchange PLC Share Incentive
Plan;
-- The activities of the Trust are limited by the agreement in place; and
-- The Trust does not have any assets outside of the partnership
share money received and the shares purchased. The use of any
shares or cash that remain in the Trust fund once the trustee no
longer holds any shares relating to the SIP, is directed by the
company. The Trust itself has no rights to any dividends.
Accounting policies
Revenue
Revenue comprises amounts derived from the provision of services
which fall within the Company's ordinary activities, net of value
added tax. It represents amounts receivable for subscription fees,
the licensing of software, the provision of data to third-party
vendors, and fees relating to listings on the Aquis Stock Exchange
(AQSE), all of which are net of value added tax. Revenue is
recognised once the performance obligations for each activity have
been satisfied.
All the revenue streams are generated by contracts with
customers and revenue is therefore recognised in accordance with
IFRS 15.
Revenue from exchange subscription-based services is recognised
in the accounting year in which the services are rendered, by
reference to the ongoing contractual obligation to provide the
services.
Revenue from licensing contracts is assessed for each contract
and split into three performance obligations:
-- Project fees and maintenance fees which are recognised over
time as the obligations are met; and
-- Licensing fees which are considered a "right to use" licence
under IFRS 15 and are therefore recognised at a point in time when
control of the licence passes to the customer.
Revenue from the provision of data to third-party vendors is
comprised of the annual fees paid by the redistributors, member
firms and multi-media firms for access to real time and/or end of
day data. An additional monthly fee is received based on the number
of users the vendors provide the data to each month, variable based
on usage for the prior month, is charged in arrears and is
recognised in the month it is incurred.
Revenue from AQSE issuer fees is comprised of initial
application and admission fees, annual fees, and further issue
fees. Both application and admission fees are recognised monthly
over the expected life of a company's admission. An estimation is
required to determine the length of time the securities will remain
listed on the exchange, the details of which are discussed in Note
5. Annual issuer fees relate to fees paid by issuers to maintain a
listing on the exchange and are discussed below, while further
issue fees relate to fees in respect of further issues by listed
companies are recognised at the point in time they occur.
Annual issuer and data fees are paid by the customers in advance
and are initially recognised as deferred revenue, then released
over time as the performance obligation is fulfilled.
Estimated listing period for Aquis Stock Exchange securities
In recognising application and admission fees, the Company
determines the expected length of time each new
security will be listed on AQSE. The estimate is based on
historical analysis of listing durations in
respect of the companies listed on AQSE. The length of time a
security remains listed incorporates significant
uncertainty as it is based on factors outside the control of the
Company and which are inherently difficult to
predict.
Based on the available information and incorporating
management's predictions, it is currently estimated that an average
security will remain listed for a period of 9 years. Application
and admission fees are recognised monthly over this period. It is
estimated that a one year increase/decrease in the deferral period
would cause a GBP3,649 decrease /GBP2,919 increase in annual
revenue released respectively. The estimated listing periods will
be reassessed at each reporting date to ensure they reflect the
best estimates of the Group.
Intangible assets other than goodwill
Internally developed intangible assets arising from the
capitalisation of Research and Development expenditures are
recognised in the financial statements when all of the following
criteria are met:
-- The technical feasibility of completing the intangible asset
so that it will be available for use or sale is established;
-- There is an intention to complete the intangible asset and use or sell it;
-- The Group has the ability to use or sell the intangible asset;
-- The existence of a market for the output of the intangible
asset or the intangible asset itself or, if it is to be used
internally, the usefulness of the intangible asset can be
demonstrated;
-- Adequate technical, financial and other resources are
available to complete the development and to use or sell the
intangible asset; and
-- The Group has the ability to measure reliably the expenditure
attributable to the intangible asset during its development.
Where the above criteria are not met, costs incurred in research
and development are recognised in the Statement of Comprehensive
Income as incurred.
Amortisation is recognised in order to write off the cost or
valuation of the assets, less their residual values over their
useful lives. The development of trading platforms has been
amortised over 3 years on a straight-line basis reflecting
management's estimate of the useful life of the technology, the
rationale of which is discussed in Note 5.
Business Combination
Aquis Exchange PLC (the acquirer) purchased 100% of the shares
of NEX Exchange Limited (which subsequently changed its name to
Aquis Stock Exchange Limited (AQSE)) on 11 March 2020 (the
acquisition date). Business combinations are recorded using the
acquisition method. Identifiable assets acquired and liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date. Acquisition-related costs are
expensed as incurred. The excess of the consideration transferred
over the fair value of the net identifiable assets is recorded as
goodwill.
Goodwill
In March 2020 the acquisition of AQSE gave rise to goodwill in
the consolidated financial statements. Goodwill is initially
measured at cost, being the excess of the aggregate of the
consideration transferred over the net identifiable assets acquired
and liabilities assumed. Goodwill is assessed for impairment
annually. Note 21 provides further detail on the impairment
assessment for goodwill as at 31 December 2020.
Property, plant and equipment
All property, plant and equipment are stated at historical cost
less depreciation or impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the
items.
Subsequent expenditure is included in the asset's carrying
amount or is recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be
measured reliably. All other repair and maintenance costs are
charged to the income statement during the financial period in
which they are incurred.
Depreciation is recognised so as to write off the cost or
valuation of assets, less their residual values, over their useful
lives on the following basis:
-- Fixtures, fittings and equipment: 5 years straight line.
-- Computer equipment: 3 years straight line.
Impairment of tangible and intangible assets
At each reporting end date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Cash and cash equivalents
Cash and cash equivalents include cash at bank.
Financial assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Financial assets
are initially measured at fair value plus transaction costs and are
subsequently measured in their entirety at either amortised cost or
fair value, depending on the classification of the financial
assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured
subsequently at amortised cost:
-- The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured
subsequently at fair value through other comprehensive income:
-- The financial asset is held within a business model whose
objective is achieved by both collecting contractual cash flows and
selling the financial assets; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently
at fair value through profit or loss (FVTPL). In 2020, the Group
did not hold any Financial Assets measured at FVTPL.
Trade and other receivables
Trade receivables are amounts due from customers for services
performed in the ordinary course of business. Other receivables are
defined as amounts due that are outside the ordinary course of
business. If collection is expected in one year or less (or in the
normal operating cycle of the business if longer), they are
classified as current assets. If not, they are presented as
non-current assets.
Contract assets
Contract assets are recognised for licensing fees recognised at
inception of a licensing contract but not yet billed under IFRS 15.
Contract assets are initially measured at fair value and
subsequently measured at amortised cost and are stated net of any
expected credit loss provision (ECL) recognised in accordance with
IFRS 9, as detailed in Note 13. Contract assets are presented on
the Statement of Financial Position as trade receivables. The right
to consideration becomes unconditional once the customer has been
billed.
Rent deposit asset
Under IFRS 16, a rent deposit is accounted for as a financial
asset if:
-- The collateral provided to the lessor is not a payment
relating to the right to use the underlying assets and hence is not
a lease payment as defined;
-- The difference between the nominal amount and fair value of
the rent deposit at the commencement date represents an additional
lease payment which is prepaid and is included in initial carrying
amount of the Right of Use (ROU) asset; and
-- The prepaid ROU portion is subsequently measured in terms of
IFRS 16 i.e. is depreciated over the term of the lease.
Further disclosures are provided in Note 28.
Impairment of financial assets
The Group has considered the impact of the application of an
expected credit loss model when calculating impairment losses on
current and non-current contract assets and other financial assets
at amortised cost (presented within trade and other receivables).
In applying IFRS 9 the Group must consider the probability of a
default occurring over the contractual life of its trade
receivables and contract asset balances on initial recognition of
those assets. Note 13 details the Group's credit risk assessment
procedures.
Financial liabilities
All financial liabilities are measured subsequently at amortised
cost using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees and
points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where
appropriate) a shorter period, to the amortised cost of a financial
liability.
In 2020 the Group did not hold any Financial liabilities beyond
Trade and other payables, Accrued Expenses and the lease
liabilities recognised under IFRS 16 as described in the "Leases"
sub-section below.
Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade and other payables are
not interest bearing and are initially recognised at fair
value.
Accrued expenses
Accrued expenses are recognised at fair value and are recognised
in the accounting period in which those transactions, events, or
circumstances occur.
Fair value measurement
The carrying amounts of financial assets and liabilities
(including trade and other receivables, cash and cash equivalents,
trade and other payables) are assumed to approximate their fair
values because of the short period to maturity and credit risk,
except for technology licensing contract assets, which comprise
both current and non-current balances and are stated net of any
expected credit loss provision in accordance with IFRS 9 as
detailed in Notes 13 and 23.
Equity instruments
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are charged against the share premium account.
Earnings per share
The earnings per share (EPS) calculations are based on basic
earnings per ordinary share as well as diluted earnings per
ordinary share. The basic EPS is calculated by dividing the profit
after tax of the Group by the weighted average number of ordinary
shares that were in issue during the year. The diluted EPS takes
into account the dilution effects which would arise on conversion
of all outstanding share options and share awards under the
Employee Share Incentive Plan.
Taxation
The tax expense/(credit) represents the sum of the tax currently
payable/(repayable) and deferred tax.
An R&D tax credit is claimed annually from HMRC based on the
employee costs involved in developing Aquis' systems and
technology. It is recognised as a credit to the profit and loss in
the year it is received.
Current tax
The current income tax charge/ (credit) is calculated on the
basis of the tax laws enacted or substantively enacted at the
balance sheet date in the country where the company operates and
generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related
deferred income tax asset is realised, or the deferred income tax
liability is settled.
Deferred income tax assets are recognised only to the extent
that it is probable that future measurable taxable profit will be
available against which the temporary differences can be
utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Employee benefits
The costs of short-term employee benefits are recognised as a
liability and an expense, unless those costs are required to be
recognised as part of the cost of inventories or non-current
assets.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
Termination benefits are recognised immediately as an expense
when the Group is demonstrably committed to terminate the
employment of an employee or to provide termination benefits.
Retirement benefits
Pension obligations
The Group has defined contribution plans. A defined contribution
plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or
constructive obligations to pay further contributions if the fund
does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods.
The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as
an employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
Share-based payments
EMI Options
Equity-settled share-based payments are measured at fair value
at the date of grant by reference to the fair value of the equity
instruments granted using the US Options Binomial model. The fair
value determined at the grant date is expensed on a straight-line
basis over the vesting period, based on the estimate of shares that
will eventually vest. A corresponding adjustment is made to
equity.
When the terms and conditions of equity-settled share-based
payments at the time they were granted are subsequently modified,
the fair value of the share-based payment under the original terms
and conditions and under the modified terms and conditions are both
determined at the date of the modification. Any excess of the
modified fair value over the original fair value is recognised over
the remaining vesting period in addition to the grant date fair
value of the original share-based payment. The share-based payment
expense is adjusted if the modified fair value is less than the
original fair value.
Cancellations or settlements (including those resulting from
employee redundancies) are treated as an acceleration of vesting
and the amount that would have been recognised over the remaining
vesting period is recognised immediately.
Employee Share Incentive Plan
Shares purchased under the share incentive plan are recognised
as share-based payments under IFRS 2. Partnership shares are
purchased by employees and matching shares are those purchased by
Aquis at a ratio of 2:1. The shares are held in a trust ("the
Trust"), with matching shares required to be held for three years
before being transferred to the employee. The fair value of both
the partnership and matching shares are recognised in the
share-based payment reserve. Partnership shares vest immediately
while matching shares will vest over the three-year holding period.
The market value of shares when they are purchased is assumed to
approximate the fair value of the shares.
In line with IFRS 10 guidance the cash transferred to the Trust
is recognised as an investment in the Company's accounts. The Trust
is consolidated in the Group accounts with the fair value of the
shares held in the trust recognised as a debit entry within
equity.
This accounting treatment was adopted in 2020 and was applied
retrospectively in the form of a prior year restatement. Notes 3
and 37 provide further detail on the accounting amendment relating
to prior year.
Restricted shares
Restricted shares are share based and will vest three years
after the grant date subject to continued employment. Similar to
share-based payments they are measured at fair value determined at
the grant date using the US Options Binomial model. The fair value
is expensed on a straight-line basis over the vesting period, with
the corresponding adjustment being made to reserves.
Leases
The Group assesses whether a contract is or contains a lease at
inception of the contract. The Group recognises a right of use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For
these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. Lease payments
included in the measurement of the lease liability comprise:
-- Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
-- Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- The amount expected to be payable by the lessee under residual value guarantees;
-- The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
-- Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the
consolidated statement of financial position and is subsequently
measured by increasing the carrying amount to reflect interest on
the lease liability (using the effective interest method) and by
reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding
adjustment to the related right-of-use asset) whenever:
-- The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a
revised discount rate.
-- The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the
revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
-- A lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a revised
discount rate at the effective date of the modification.
The Group did not make any such adjustments during the periods
presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any
initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses. The right-of-use
assets are presented as a separate line in the consolidated
statement of financial position and are depreciated over the term
of the lease. The Group applies IAS 36 to determine whether a
right-of-use asset is impaired and accounts for any identified
impairment loss as described in the 'Property, Plant and Equipment'
policy. Variable rents that do not depend on an index or rate are
not included in the measurement the lease liability and the
right-of-use asset.
Foreign exchange
Functional and presentation currency
Items included in the financial statements of the Group are
measured using the currency of the primary economic environment in
which the entity operates ('the functional currency'). The
financial statements are presented in UK Pound Sterling (GBP),
which is the Group's functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
at year end exchange rates are recognised in profit or loss.
All foreign exchange gains and losses recognised in the income
statement are presented net within 'administrative expenses'.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the reporting date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in a
foreign exchange translation reserve (attributed to non-controlling
interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign
operation or a partial disposal of an interest in a joint
arrangement or an associate that includes a foreign operation of
which the retained interest becomes a financial asset), all of the
exchange differences accumulated in a foreign exchange translation
reserve in respect of that operation attributable to the owners of
the Group are reclassified to profit or loss.
3 Restatement of comparatives
Employee Share Incentive Plan
In 2018 a share incentive plan ("SIP") for employees was
created. The scheme allows employees to purchase shares in Aquis
from their gross salary ("partnership shares"), with Aquis matching
the number of shares purchased by the employee at a ratio of 2:1
("matching shares"). The scheme is administered by a trust "the
Trust" to purchase shares on behalf of employees. Matching shares
must be held in the trust for three years before they can be sold
or transferred.
The SIP was previously accounted for as an expense, with amounts
recognised to the profit and loss account as and when payments were
transferred to the trust. However, this has been corrected to be
accounted for as share-based payments under IFRS 2. This has been
applied retrospectively in line with IAS 8, restating the opening
balances. Under the revised treatment, the fair value of the shares
purchased are recognised as an expense over the vesting period,
with a share-based payment reserve being created in the balance
sheet. The partnership shares are assumed to vest immediately while
the matching shares are assumed to vest over three years. The
amount paid or payable to the trust is recognised as an investment
in trust in the Company accounts. Management assumes that the cost
of the shares is a close approximation of the fair value of the
shares as the market price tends to be reflective of the discounted
value of research analysts' medium-term projections.
Additionally, as the Company fulfils the definition of control
over the trust under the IFRS 10, the shares purchased by the trust
and residual cash is consolidated in the Group accounts.
Accordingly in the Group accounts, treasury shares are recognised
in equity and they offset against the share-based payment reserves
over 3 years.
The restatement comprises a GBP148k reduction in the expense
recognised during 2018 and 2019, and recognition of a share-based
payment reserve amounting to GBP157k. The investment in trust in
the Company's accounts amounted to GBP318k and the fair value of
the treasury shares recognised in the Group's accounts amounted to
GBP318k in 2019. Note 37 provides further detail on the prior year
adjustments made in respect of the share incentive plan.
Expected credit loss model
The ECL model was adjusted to correct the ECL provision
recognised in 2019. Note 37 provides further detail on the
adjustment.
4 Adoption of new and revised standards and changes in
accounting policies
New IFRS Standards that are effective for the current year
There were no new standards effective during the year ended 31
December 2020.
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not yet been
applied in these financial statements, were in issue and adopted by
the EU. The Directors do not expect that the adoption of the
Standards listed below will have any impact on the financial
statements of the Group in future periods:
IFRS 17 Insurance Contracts
Amendments to IFRS 9, IAS Interest rate benchmark reform
39 and IFRS 17
--------------------------------
Amendments to IFRS 3 Definition of a business
--------------------------------
Amendments to IAS 1 and IAS Definition of material
8
--------------------------------
Conceptual Framework Amendments to References to the
Conceptual Framework in IFRS
Standards
--------------------------------
5 Critical accounting estimates and judgements
In applying the Group's accounting policies, which are described
in Note 2, the Directors are required to make judgements, estimates
and assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements
The following are the critical judgements, apart from those
involving estimations (which are presented separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in financial statements.
Judgements in relation to performance obligations
In making their judgement, the Directors considered the detailed
criteria for the recognition of revenue set out in IFRS 15, and in
particular, whether revenue is recognised at a point in time or
over time. Following an assessment of the technology licensing
contract portfolio, and the obligations that Aquis has under each
contract, the Directors are satisfied that obligations contained
therein be split into the following performance obligations, and
that the revenue from each licensing contract should be assessed
individually. The identified performance obligations and the timing
of revenue recognition on delivering the licence contracts as
follows:
-- Implementation/ project fees: these are upfront,
non-refundable fees that a customer pays in order to obtain the
user agreement. Even if the user acceptance certificate is never
issued, the implementation fee cannot be reclaimed and so the
revenue is guaranteed and can be recognised at the time of invoice
as Aquis becomes unconditionally entitled to payment.
-- Licensing fees: The customer is liable to pay the monthly
licensing fee from the date of signing the user acceptance
agreement (contract inception date). At this point in time Aquis
has fulfilled its promise to deliver the licence (i.e. the system
has been deployed in the client's production environment) and this
performance obligation is fulfilled. Management uses judgement when
assessing the recoverability of the licencing fees, and recognises
them only when their collection is assumed to be highly probable.
This assessment takes into consideration the current status of the
client's business, including whether the exchange system is active
with products/securities added and members trading on it. The
licensing fees are recognised at a point in time, which occurs
after the contract is signed and once Aquis is satisfied that
receiving the licencing fees is highly probable.
-- Maintenance fees: fees to maintain the system are recognised
over the course of the licensing contract as Aquis fulfils its
performance obligation to maintain the system. In management's
judgement maintenance fees comprise between 3-5% per annum of the
overall value of the contract reflecting time spent supporting the
client's platform and upgrading the software in accordance with the
contractual terms.
Changes in identification of performance obligations could
impact the timing of revenue recognition for licensing contract
assets and is thus a critical accounting judgement.
Critical accounting estimates
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting date that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Capitalisation of internally generated intangible assets
resulting from Research and Development
Internally generated Intangible assets are capitalised when, in
management's judgement, the criteria for capitalisation under IAS
38 (listed in Note 2) have been met. The direct costs incurred in
the research and development of Aquis' exchange platform and
associated technology and systems are capitalised.
Management reviews the time spent by the development team in
developing and maintaining the systems used internally by Aquis
when determining the amount to be capitalised within each
period.
Estimating the useful life of intangible assets
The expected useful life of an intangible asset is estimated to
be 3 years. In making this judgement management have taken into
account product upgrade cycles, the pace of change of regulation as
well as benchmarking against other companies with internal systems
and technology research and development.
Expected credit loss of contract assets
An impairment for the expected credit loss of contract assets
that arise as a result of applying IFRS 15 to licensing revenue is
required under IFRS 9. This impairment is an accounting estimate
which is calculated based on the Directors' best estimates of the
probability of default and loss given default. The quantification
of the assumptions and stresses for the year are disclosed in Note
13 of the financial statements.
In arriving at these estimates, the Directors have assessed the
range of possible outcomes using reasonable and supportable
forward-looking information, which is based on assumptions for the
future movement of different economic drivers and how these drivers
will affect each other.
Aquis' assessment of the credit risk associated with a licensing
customer is conducted at inception of the contract (but before the
user agreement is signed) and includes factors that are specific to
the customer, general economic conditions and an assessment of both
the current as well as the forecast direction of these
conditions.
The credit risk assessment is conducted by means of a take-on
assessment which comprises of a series of relevant criteria for a
licensing contract that are scored according to the specific
circumstances of the customer, with scores for each parameter
typically ranging from 1-4. The assessment evaluates the
following:
-- Level of funding;
-- Regulatory approvals;
-- Market, industry and business model;
-- Macro-economic forecasts;
-- Corporate governance/ Group management;
-- Whether the client is revenue generating;
-- Level of client profitability;
-- Contract length and the associated range of economic scenarios therein;
-- Payment history; and
-- External credit ratings.
The above assessment will determine the customer category upon
inception of the contract, and the inputs to the expected credit
loss model is determined thereon.
The credit risk assessment and associated inputs to the expected
credit loss model (probability of default and loss given default)
are critical assessments that could impact both the provision for
expected credit losses as well as the movement in the provision
reflected in the income statement.
Deferred tax asset
Deferred tax assets are recognised to the extent that their
utilisation is probable. The utilisation of deferred tax assets
will depend on whether it is possible to generate sufficient
taxable income in the respective tax type and jurisdiction. A
deferred tax asset of GBP203,717 is recognised in the current
period, since profitability is expected to continue for at least
the next 3 years. The deferred tax asset is calculated based on
expected profitability over this period as Aquis is a high growth
company and there is considerable uncertainty in estimating
financial performance beyond this length of time.
Various factors are used to assess the probability of the future
utilisation of deferred tax assets, including, operational plans
and loss-carry forward periods. To reflect the uncertainty in the
accuracy of business forecasts, the model uses modest growth rates
and discount rates on each type of revenue based on probabilities.
The impact of flexing the discount rates used by +2%/-2% for
exchange and data revenue and by +5%/-5% for new licencing
contracts would be +GBP147,604/-GBP171,169, so that the deferred
tax asset would be GBP351,321 in an upside scenario with lower
probability discount rates or GBP32,548 in a downside scenario with
higher probability discount rates.
Share-based payments
The US binomial model is used to estimate the value of the EMI
options and the restricted shares. The resulting values are
recognised straight-line over the vesting period as an expense,
with the corresponding amounts recognised as equity in the balance
sheet. The model requires the following inputs: grant date,
exercise price, expiry, expected life of options, expected
volatility, and the risk-free interest rate. The expected life and
expected volatility require the use of estimates. Volatility is
estimated based on the historical average for the available data up
to the grant date, while the expected life of the options is based
on management's judgement of when the options will be exercised,
which is assumed to be an average of 5 years. For the EMI options
granted during the year, a 5% decrease/increase in expected
volatility leads to a +GBP41,732/-GBP42,347 variance in the 2020
expense. Similarly, for a 1 year increase/decrease in the expected
life of the options, this would lead to a +GBP16,592/-GBP18,603
variance. Note 15 provides further disclosure on the amounts
recognised in these financial statements.
6 Corporate information
Aquis Exchange PLC (the 'Group') is licensed to operate a
multilateral trading facility (MTF) enabling members to trade
across fourteen European markets and to provide exchange software
under licence.
7 Financial risk management
The Group seeks to protect its financial performance and the
value of its business from exposure to adverse changes in capital
commitments, as well as credit, liquidity and foreign exchange
risks.
The Group's financial risk management approach is not
speculative. The Group's Audit, Risk and Compliance Committee
provides assurance that the governance and operational controls are
effective to manage risks within the Board-approved risk appetite,
supporting a robust Group risk management framework.
The Group's objectives when managing these risks are detailed
below.
Capital risk management and capital commitments
Risk Description Risk management approach
There is a risk that Group The Group's objectives when managing
entities may not maintain sufficient capital are to safeguard the Group's
capital to meet their obligations. ability to continue as a going concern
The Group comprises regulated so that it can provide returns for shareholders
entities. It considers that: and benefits for other stakeholders.
- Increases in the capital
requirements of its regulated The Group maintains a level of capital
companies, or that is well in excess of regulatory
requirements. Maintaining a strong capital
-A scarcity of equity (driven structure is a key priority for the Group.
by its own performance or financial If there was an erosion of capital for
market conditions) any reason the Group may issue new shares,
either separately or in combination return capital to shareholders or sell
are the principal risks to assets to ensure capital adequacy requirements
managing its capital. are met (referenced in table below).
The Group continuously monitors its
level of capital in order to ensure it
remains compliant with regulatory capital
requirements. Aquis reviews capital resources
and requirements on a monthly basis.
Proposed investment requirements, capital
expenditure and potentially increasing
capital resources through equity or debt
issuance are assessed annually as part
of the budgeting process, as well as
on an ad-hoc basis as required.
The Group supports both Aquis Europe
and AQSE in maintaining capital adequacy,
and holds sufficient capital to be able
to inject capital into the businesses
as and when required.
-------------------------------------------------
The ROA is the amount of net profit/(loss) returned as a
percentage of total assets.
Group 2020 2019
Restated
GBP GBP
-------------------------------- ----------- -----------
Profit/(loss) for the year 981,728 656,582
Total assets as at 31 December 18,814,123 16,441,274
Return on assets (%) 5% -4%
-------------------------------- ----------- -----------
There was no capital expenditure contracted for at the end of
the reporting year that had not been provided for.
Credit risk
Risk Description Risk management approach
The Group's credit risk relates The Directors make a judgement on the
to its customers being unable credit quality of the Group's customers
to meet their obligations based upon the customers' financial
to the Group either in part position, the recurring nature of billing
or in full. and collection arrangements and, historically,
a low incidence of default.
Aquis' assessment of the credit risk
associated with a licensing customer
is conducted at inception of the contract
(but before the user agreement is signed)
and includes factors that are specific
to the customer, general economic conditions
and an assessment of both the current
as well as the forecast direction of
these conditions. Based on this assessment,
the prospective customer is assigned
to a customer category with an appropriate
risk rating.
Aquis has also considered the impact
of the Coronavirus pandemic on credit
risk by incorporating an assessment
of how COVID-19 has affected the risk
profile of each client, modifying risk
ratings where necessary.
Aquis' credit risk management processes
are applied to all trade receivables
and are calculated using a lifetime
ECL method, as detailed in Note 13.
------------------------------------------------
Liquidity risk
Risk Description Risk management approach
The Group's operations are The Group maintains sufficient liquid
exposed to liquidity resources to meet its financial obligations
risk to the extent that they as and when they become due in the
are unable to meet ordinary course of business. Management
their daily payment obligations. monitors forecasts of the Group's cash
flow quarterly through an assessment
of cash resources that are in excess
of regulatory capital requirements.
The Group is solvent with net current
assets in excess of GBP12.1 million
(2019: GBP11.2 million), with the majority
of the debtor's book being short term
in nature. The Group is also funded
entirely by equity, with no external
debt funding obligations to be met.
---------------------------------------------
The Group is not materially exposed to market risk including
interest rate or foreign exchange risk.
The following tables detail the Group and Company's remaining
contractual maturity for its non-derivative financial liabilities
with agreed repayment periods. The tables have been drawn up based
on the undiscounted cash flows of financial liabilities based on
the earliest date on which the Group or Company can be required to
pay. There is no exposure to interest rate changes since the group
and company have no external debt obligations, and the interest
rate on the lease liability is the rate implicit in the lease and
as such is not subject to change over the term of the lease.
Group 1 Year 2-5 years 5+ years Total
31 December 2020 GBP GBP GBP GBP
-------------------------- ------------------ ------------------- ---------------- ------------
Trade and other payables 2,616,097 - - 2,616,097
Lease Liabilities 194,613 714,704 280,377 1,189,694
2,810,710 714,704 280,377 3,805,791
-------------------------- ------------------ ------------------- ---------------- ------------
31 December 2019
-------------------------- ------------------ ------------------- ---------------- ------------
Trade and other payables 1,499,574 - - 1,499,574
Lease Liabilities 188,610 692,685 497,037 1,378,304
1,688,184 692,685 497,037 2,877,878
-------------------------- ------------------ ------------------- ---------------- ------------
Company 1 Year 2-5 years 5+ years Total
31 December 2020 GBP GBP GBP GBP
-------------------------- -------------------- ------------------- ---------------- ------------
Trade and other payables 2,097,493 - - 2,097,493
Lease Liabilities 194,613 714,704 280,377 1,189,694
2,292,106 714,704 280,377 3,287,187
-------------------------- -------------------- ------------------- ---------------- ------------
31 December 2019
-------------------------- -------------------- ------------------- ---------------- ------------
Trade and other payables 1,467,826 - - 1,467,827
Lease Liabilities 188,610 692,658 497,037 1,378,304
1,656,436 692,658 497,037 2,846,130
-------------------------- -------------------- ------------------- ---------------- ------------
Both the Group and the Company have no derivative financial
liabilities.
Foreign exchange
Risk Description Risk management approach
The Group operates in the In order to mitigate the impact of
UK and Europe, with Sterling unfavourable currency exchange rate
as its principal currency movements on consolidated earnings
of operation. The Group companies and net assets, Aquis Exchange Europe
invoice revenues and incur SAS maintains the majority of its net
the majority expenses in GBP. assets (primarily comprising of regulatory
A relatively small percentage cash) in a Sterling denominated bank
of the overall Group's expenses account so as to minimise fluctuations
are incurred in Euros in relation in the GBP/EUR exchange rate on a consolidated
to the French subsidiary. basis.
As a result, foreign exchange
risk arises mainly from the
translation of the Group's
foreign currency earnings,
assets and liabilities into
its reporting currency, Sterling.
An immaterial amount of cash
held by Aquis Exchange Europe
SAS is held in a euro denominated
bank account, with the remaining
cash held in a Sterling denominated
bank account, hedging the
Group against foreign exchange
fluctuations in cash and cash
equivalents. Since the net
asset value of the Aquis Exchange
Europe SAS is predominately
comprised of cash, there is
negligible exposure to the
Group of foreign exchange
rate fluctuations.
------------------------------------------------
8 Operating segments
The Aquis Group can be split into 3 operating segments, each
offering multiple products and services and benefitting from Group
synergies. The specific focus of these activities are:
1) Aquis Exchange - operator of MTF and related services. The
Group operates two MTFs: Aquis Exchange (AQXE), which is UK
regulated and Aquis Exchange Europe (AQEU), which is French
regulated. Another revenue stream for this division is the
provision of data services to third party vendors;
2) Aquis Stock Exchange (AQSE) - primary listings and trading
business. Within this division is AQSE Main Market, AQSE Growth
Market, AQSE Trading and the provision of data services;
3) Aquis Technologies - developer of exchange technology and
services. The product offering includes Aquis Matching Engine,
Aquis Market Surveillance, Aquis Market Gateway and related
services including market surveillance and operations.
Aquis Exchange PLC is the parent company and comprises AQXE and
Aquis Technologies. It owns 100% of its two subsidiaries, AQEU and
AQSE. Management monitors the Group's overall performance regularly
using a set of established Key Performance Indicators including
revenue, net profit and EBITDA. When monitoring the performance of
each operating segment individually, management examines the
discrete financial information available which will normally
include revenue and gross profit for each division. In line with
IFRS 8 the operating segments are reported separately as
follows:
2020 AQXE & AQEU AQSE Aquis Technologies Total
Revenue 7,936,036 1,221,517 2,319,700 11,477,253
------------ ------------ ------------------- ------------
Impairment charge (97,760) (2,414) - -
------------ ------------ ------------------- ------------
Operating costs (6,687,237) (1,754,950) (1,413,740) (9,855,927)
------------ ------------ ------------------- ------------
Gross profit / (loss) 1,151,039 (535,847) 905,960 1,521,152
------------ ------------ ------------------- ------------
Depreciation, amortisation and
net interest (1,050,757) - - (1,050,757)
------------ ------------ ------------------- ------------
Profit / (loss) before tax from
continuing operations 100,282 (535,847) 905,960 470,395
------------ ------------ ------------------- ------------
In the current year, due to the expansion of the technology
licencing business and the acquisition of Aquis Stock Exchange,
Management has decided it is appropriate to assess business
performance based on the three operating segments identified above.
In previous years, Management monitored the performance of both the
exchange business and the technology licencing business under one
operating segment. For comparative purposes the 2019 financial
performance of the exchange and licencing businesses has been
restated under separate operating segments in the following
table:
2019 AQXE & AQEU AQSE Aquis Technologies Total
Revenue 5,622,632 - 1,269,362 6,891,994
------------ ----- ------------------- ----------
Impairment credit 284,993 - - -
------------ ----- ------------------- ----------
Operating costs (5,998,794) - (1,172,422) 7,171,216
------------ ----- ------------------- ----------
Gross loss (91,169) - 96,940 5,771
------------ ----- ------------------- ----------
Depreciation, amortisation
and net interest (927,607) - - (927,607)
------------ ----- ------------------- ----------
Loss before tax from continuing
operations (1,018,776) - 96,940 921,836
------------ ----- ------------------- ----------
The tables above represent the segment-level information that is
monitored by the Chief Operating Decision Makers, which are the
Chief Executive Officer and the Chief Financial Officer. All
non-current assets are held centrally by Aquis Exchange PLC. There
were no non-current assets located outside the UK as at 31 December
2020.
9 Employees
The monthly average number of persons (including Executive
Directors) employed by the Group during the year was:
Group 2020 2019
Number Number
----------------------------- ------- -------
Management 2 2
IT 20 18
Compliance and Surveillance 8 4
Operations 6 5
Business Development 6 5
Finance 3 2
Marketing 1 1
46 37
----------------------------- ------- -------
The average number of persons (including Executive Directors)
employed by the Company during the year was:
Company 2020 2019
Number Number
----------------------------- ------- -------
Management 2 2
IT 19 17
Compliance and Surveillance 4 4
Operations 5 4
Business Development 4 4
Finance 2 2
Marketing 1 1
37 34
----------------------------- ------- -------
Their aggregate remuneration was comprised of:
2019
Group 2020 Restated
GBP GBP
----------------------- ---------- ----------
Wages and salaries 4,573,007 3,390,768
Social security costs 718,885 436,448
Other pension costs 138,891 274,154
Share-based payments 392,897 210,403
Employee benefits 148,992 -
5,972,673 4,311,773
----------------------- ---------- ----------
2019
Company 2020 Restated
GBP GBP
----------------------- ------------ ----------
Wages and salaries 3,535,759 3,192,131
Social security costs 519,061 365,363
Other pension costs 112,907 274,154
Share-based payments 363,164 210,403
Employee benefits 148,633 -
4,679,524 4,042,051
----------------------- ------------ ----------
10 Retirement benefit scheme
Defined contribution schemes
The Group operates a defined contribution pension scheme for all
qualifying employees. The assets of the scheme are held separately
from those of the Group in an independently administered fund.
The total costs charged to income in respect of defined
contribution scheme are GBP112,907 (2019: GBP274,154).
11 Directors' remuneration
Group 2020 2019
GBP GBP
------------------------------------------ ----------- --------
Salaries, fees and bonuses 1,082,020 791,300
Taxable benefits 13,253 15,895
Share-based payments 69,268 175,588
------------------------------------------- ----------- --------
Remuneration for qualifying services 1,164,541 982,783
Remuneration disclosed above includes the following amounts
paid to the highest paid director:
------------------------------------------------------------------
2020 2019
GBP GBP
------------------------------------------- ----------- --------
Salary and bonus 385,896 293,150
Taxable benefits 5,664 7,693
Share-based payments 34,634 59,445
------------------------------------------- ----------- --------
Remuneration for qualifying services 426,194 360,288
Company 2020 2019
GBP GBP
-------------------------------------- ---------- --------
Salaries, fees and bonuses 998,917 791,300
Taxable benefits 13,253 15,895
Share-based payments 69,268 175,588
--------------------------------------- ---------- --------
Remuneration for qualifying services 1,081,438 982,783
12 Revenue
An analysis of the Group's revenue is as follows:
Group Company
-------------------------------- -------------------------------
2020 2019 2020 2019
GBP GBP GBP GBP
--------------------------- -------------------- ---------- ------------------- ----------
Revenue analysed by class
of business
Subscription fees 7,738,284 5,285,000 7,111,000 5,021,000
Technology licensing
fees 2,319,700 1,269,362 2,319,700 1,269,362
Data vendor fees 894,867 337,632 429,628 337,632
Issuer fees 524,402 - - -
11,477,253 6,891,994 9,860,328 6,627,994
--------------------------- -------------------- ---------- ------------------- ----------
Revenues from customers attributable to the United Kingdom and
the rest of the world is as follows:
Group Company
----------------------- ----------------------
2020 2019 2020 2019
GBP GBP GBP GBP
---------------------------- ----------- ---------- ---------- ----------
Revenue analysed by region
United Kingdom 8,780,442 5,200,390 7,767,475 5,200,390
Rest of World 2,696,811 1,691,604 2,092,853 1,427,604
11,477,253 6,891,994 9,860,328 6,627,994
---------------------------- ----------- ---------- ---------- ----------
Subscription fees and data vendor fees:
Subscription fees and some data vendor fees are accounted for
under IFRS 15 and are all recognised at point in time as they
reflect variable revenue determined on a monthly basis.
In addition to the variable monthly fee some AQSE data vendors
pay an annual fee for access to real time and/or end of day data,
which is recognised over time as the performance obligation of
providing data is fulfilled.
The Group begins to recognise monthly subscription fees, data
vendor fees, and connectivity fees when the customer conformance
test is satisfactorily concluded, and an acceptance certificate is
issued. This is then verified by the customer starting to utilise
the platform, which is the point in time that the Group determines
that the customer has obtained control of the goods.
The Group determines the transaction price based primarily on
the competitive landscape. In the case of subscription,
connectivity and data fees, invoices are raised monthly in arrears
and there is no obligation for a refund, return or any other
similar obligation. There is no constrained variable consideration
in any customer contracts, and the transaction price is allocated
in full at a single point in time when the customer obtains control
of the goods.
Licence fees:
Aquis Exchange PLC provides technology services under licence to
clients. The services comprise the provision of an exchange
platform and / or a surveillance system and may also include
support services comprising basic infrastructure support or
additional services (including with the Software as a Service
("SaaS") model, for example with some surveillance clients). The
duration of the licences varies between 1 and 5 years and will
consist of an implementation fee, and, post implementation, a
monthly licence fee for the duration of the contract. The monthly
fees also cover system maintenance and system upgrades that
typically occur every 12 - 18 months. The licensing contracts are
accounted for under IFRS 15 and any corresponding contract assets
are subject to IFRS 9 provisioning, as disclosed further in Note
13.
The revenue from licensing contracts with customers has been
categorised reflecting the nature, amount, customer categorisation
(see also Note 13), contract duration and uncertainty of revenue
and cash flows. Revenue from licensing contracts is assessed for
each contract and is recognised as and when each performance
obligation is satisfied.
The Company determines the transaction price of the licensing
contract based primarily on the competitive landscape. For
licensing contracts, the Company has assessed the expected credit
loss of each client individually. The transaction price is
allocated according to the Group's obligations to the client over
the course of licence period. There is no constrained variable
consideration in any customer contracts.
The licensing fees line item also includes connectivity fees for
licensing contract customers that are recognised at a point in time
as they reflect variable revenue determined on a monthly basis, and
are underpinned by a separate agreement.
Performance obligation Recognition of revenue upon completion
(PO)
PO1: Implementation Implementation/ project fees are upfront,
fees non-refundable fees that a customer pays
in order to obtain the user agreement.
Even if the user acceptance certificate
is never issued, the implementation fee
cannot be reclaimed and so the revenue
is guaranteed and can be recognised at
the time of invoice as Aquis becomes unconditionally
entitled to payment.
------------------------------------------------------
PO2: Licensing fees At a point in time upon signing the user
acceptance agreement, as the Company has
fulfilled its promise to deliver the licence
(i.e. the system has been deployed in the
client's production environment). A corresponding
contract asset (trade receivable) is recognised
to reflect the customer's obligation to
pay the monthly licensing fee over the
remaining term of the contract.
------------------------------------------------------
PO3: Maintenance fees Over the course of the licensing contract,
as the performance obligation to maintain
the system is settled and the customer
benefits from using the system.
------------------------------------------------------
The aggregate amount of the transaction price per customer
category that has been allocated to the performance obligations for
the year is as follows:
Group 2020 2019
GBP GBP GBP GBP GBP GBP GBP GBP
Category 1 2 3 4 1 2 3 4
----------- --------------------- --------------------- ---------------------- ------------------- -------- --------------------- -------- --------
PO1 50,000 - - - 135,000 - - 50,000
PO2 1,201,754 - 451,440 - 171,000 - 203,707 247,608
PO3 27,006 111,883 11,577 5,160 740 128,995 18,287 4,453
1,278,760 111,883 463,017 5,160 306,740 128,995 221,994 302,133
---------- --------------------- --------------------- ---------------------- ------------------- -------- --------------------- -------- --------
Customer risk category definitions: 1 - High, 2 - Moderately
High, 3 - Moderately Low and 4 - Low.
Issuer fees:
Issuer fees are accounted for under IFRS 15 and are recognised
over time. They can be separated into the following categories:
Application and admission fees: These are charged upfront to
prospective companies wishing to be admitted to AQSE. They are
recognised monthly over the expected life of a company's
admission.
Annual fees: These are fees paid annually by companies listed on
AQSE. They are charged in advance and are recognised over the
year.
Further issue fees: These are charged to companies already
listed on AQSE wishing to issue further securities. In this case
revenue is recognised at the point in time of the further
issue.
13 Impairment
IFRS 9 provisioning is applied to technology licensing contract
assets and to other trade receivables based on management estimates
of the collectability of contracts over their useful life, and
which are re-assessed at each renewal. The Group applies a
simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for trade receivables and
contract assets and therefore the ECL for each contract is assessed
on a lifetime basis rather than at each reporting date. As the
simplified approach is adopted it is not necessary to consider the
impact of a significant increase in credit risk.
The Group has two types of financial assets that are subject to
the expected credit loss model:
-- Contract assets relating to technology licensing contracts; and
-- Trade receivables relating to services provided by AQSE.
The Group have concluded that the trade receivables and contract
assets have different risk characteristics and therefore the
expected credit loss rates for each type of asset are measured
separately. Since they comprise a portfolio of only a small number
of clients, contract assets have been assessed on a
client-by-client basis while trade receivables have been grouped
based on shared credit risk characteristics and the days past due.
Further details on both methodologies can be found below.
The movement in the provision balance was affected by the
recognition of an ECL on AQSE trade receivables, the release of the
ECL on existing contracts, the recognition of an ECL against new
contracts, and the reversal of a provision against a technology
licencing contract that was terminated during the year. The
movements in the provision balance are shown in the table below.
The balance outstanding at the reporting date represents the
exposure at default (EAD).
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
---------------------------------- -------- ---------- ---------- ----------
Balance of impairment provisions
at 1 Jan 2020 410,841 695,834 410,841 695,834
AQSE ECL Provision at 11 March 15,256 - - -
ECL write off(1) (9,236) - (9,236) -
Impairment charge/(credit) 109,410 (284,993) 106,998 (284,993)
Balance of impairment provisions
at the end of the year 526,271 410,841 508,601 410,841
----------------------------------- -------- ---------- ---------- ----------
(1) The ECL write off relates to a reversal of the ECL provision
following the early termination of a licencing contract during the
year. This resulted in a corresponding write off of trade
receivables amounting to GBP104k.
Technology licensing contract assets
During contract negotiation Aquis assesses the potential credit
risk of a prospective client prior to committing to the contract.
Aquis' assessment of the credit risk associated with a licensing
customer is conducted at inception of the contract (but before the
user agreement is signed) and includes factors that are specific to
the customer, general economic conditions and an assessment of both
the current as well as the forecast direction of these conditions.
Based on this assessment, the prospective customer is assigned to a
customer category with an appropriate risk rating. A probability of
default occurring during the lifetime of the contract (PD) ranging
from 0-50% is applied to each client based on the assigned risk
category. The model has been enhanced during the year with a
lifetime PD applied to each year of the contract, based on the
assumption that the PD will reduce over time.
The credit risk of Aquis' technology clients ranges from those
that are in infant start up stages (i.e. riskier) to those that are
highly liquid and solvent conglomerates (little to no risk). As
such, the Directors view the range of PD's for the portfolio to be
between 50% for those with the highest level of risk to 0% for
those that are so near to a zero level of risk that the PD is zero
in substance. The Directors are comfortable that 50% is
sufficiently accurate to reflect the elevated risk associated with
each start up when considering the idiosyncratic circumstances and
risk factors of each client. The Directors would not enter into any
contract where the PD is deemed to be any higher than 50%.
The loss given default is also quantified on a
customer-by-customer basis and is done through an assessment of the
recovery rate the Directors anticipate will be applied to the
customer in the event of liquidation. Currently the low number of
technology clients allows Aquis to assess each contract
individually on the appropriate credit risk category, and this is
determined based on several factors including any future
macro-economic changes, the sensitivity to these potential changes
and the impact that these may have on the recoverability of the
outstanding debt.
The portfolio of technology contracts held by Aquis have PDs
that have an observable relationship with time, i.e. the PD will
decrease each year as the contract progresses. The credit risk of
the contracts is directly linked to the success of the business and
its ability to raise capital, which increases each year the company
successfully continues in operation.
Although the full risk assessment is completed only at the start
of the contract and at each renewal date, Aquis regularly assess es
whether macro-economic factors could have a bearing on the success
of the client and the recoverability of the outstanding debt.
The GBP508,601 expected credit loss provision for the year
(2019: GBP410,841) has been calculated with reference to
estimations based on the probability of default and a loss given
default as described above, and has been analysed for each
individual contract taking into account the nature, amount,
customer categorisation, contract duration and uncertainty of
revenue and cash flows.
As at 31 December 2020, the average contract duration for the
portfolio of technology contracts is 2.7 years. The contracts are
short-to-medium term in length and the ECL model incorporates the
impact of a significant change in macroeconomic circumstances on
the expected PD over the life of the contracts. The macroeconomic
variables are based on 3-year average forecast rates for 2021-2023,
which is an appropriate timescale based on the average contract
duration. The baseline rates are defined using the rates forecast
by the Monetary Policy Committee ("MPC"). The macroeconomic
indicators used in the analysis are as follows:
Macroeconomic Indicators Downside Baseline Upside
3 year forecast average
2021-2023 % % %
-------------------------- --------- --------- -------
UK GDP 0.2% 5.2% 7.2%
UK unemployment 7.3% 5.3% 4.3%
UK CPI Inflation 0.1% 2.1% 2.6%
-------------------------- --------- --------- -------
In order to quantify the impact of movement in credit losses
that occur as a result of macro-economic developments, the
Directors have flexed the probability of default associated with
each client category in three scenarios: a baseline scenario
(maintaining the status quo, keeping each assessment criteria
reflecting current client circumstances and forecast macroeconomic
indicators), a downside scenario (prolonged recession), and an
upside scenario (fast economic recovery). The model incorporates
all three possible outcomes by attaching a probability weighting to
each scenario. The range of outcomes is detailed in the table
below:
Company Downside Baseline Upside
At 31 December 2020 GBP GBP GBP
----------------------- ----------------------------- --------------------------- --------
Impairment provision 523,727 476,115 452,310
Impact on PD +10% - -5%
Probability weighting 35% 50% 15%
----------------------- ----------------------------- --------------------------- --------
The ageing debtor profile for the technology licensing contract
assets was as follows:
2020 2019
Contract assets GBP GBP
-------------------- ---------- ----------
Current 2,141,397 1,814,090
More than 30 days
past due 25,000 10,000
More than 60 days
past due 25,000 10,000
More than 90 days
past due 45,000 10,000
More than 180 days
past due - -
-------------------- ---------- ----------
Total 2,236,397 1,844,090
-------------------- ---------- ----------
A total of GBP104,272 was written off during the year relating
to debts where there was no reasonable expectation of recovery.
Expected credit loss of Aquis Stock Exchange trade
receivables
In line with IFRS 9 guidance, the Group has applied a simplified
"Expected Credit Loss" (ECL) model on
AQSE trade receivables. In doing so the Group has considered the
probability of a default occurring over the contractual life of the
financial asset on initial recognition of the asset. Loss
allowances for financial assets measured at amortised cost are
deducted from the gross carrying amount of the assets. When a trade
receivable is determined to be uncollectible, it is written off
against the provision account for trade receivables.
The simplified provision matrix is based on historic default
rates over the expected life of the trade receivables and is
adjusted for forward-looking estimates. The trade receivables
balance is split into 5 separate categories depending on the age of
each debt, ranging from 0 days past due to over 90 days past due.
An appropriate estimation of the probability of default is applied
to each category of debt, based on both historical default rates
and expectations for the future, including the implementation of
Group credit control policies to AQSE debts that existed at the
acquisition date.
The key assumptions in calculating the ECL for AQSE trade
receivables are that the probability of default increases with the
age of the debt and that the debts are homogenous, i.e. the credit
risk assessment is based on age rather than by individual client.
The expected loss rates are based on historical analysis of credit
losses experienced within the 9.5 months since the acquisition and
adjusted to reflect current and forward-looking information
including the implementation of more stringent credit control
policies since acquisition. AQSE trade receivables have been
assessed to have a higher risk of impairment than the rest of the
Group's trade receivables due to a number of older debts being
identified and written off on acquisition.
Trade receivables have payment terms of 30 days from the date of
billing. For debts older than 90 days, debts are assessed on a
case-by-case basis and are written off if there is no reasonable
expectation of recovery. During the year a total of GBP29,240 of
trade receivables were written off relating to debts from companies
that had ceased membership with AQSE. The contractual rights to
cash flows from the financial assets were deemed to have
expired.
The total loss allowance calculated by applying the expected
loss rate to the trade receivables balance in each age bucket. The
total portion of the ECL balance relating to AQSE trade receivables
as at 31 December 2020 was GBP17,670 which was comprised as
follows:
Days past due 0 days 1-29 days 30-59 60-89 90-124 125 - 150-179 Over 180
days days days 149 days days days
------------------- ------- ---------- ------- ------ ------- ---------- -------- ---------
Expected loss
rate 1% 1% 3% 5% 10% 25% 50% 75%
Trade receivables
(GBP) 57,715 43,640 18,745 2,770 17,910 - - 19,270
------------------- ------- ---------- ------- ------ ------- ---------- -------- ---------
Provision (GBP) 289 436 562 139 1,791 - - 14,453
14 Administrative expenses
Operating loss is stated after charging:
Group Company
---------------------- ----------------------
2020 2019 2020 2019
Restated Restated
Administrative expenses GBP GBP GBP GBP
--------------------------- ---------- ---------- ---------- ----------
Fees payable to the
Group's auditors for
the audit of the Group's
financial statements 225,559 79,991 126,431 50,950
Fees payable to the
Group's auditor for
the Client Asset audit 6,300 6,300 6,300 6,300
Share-based payments
(Note 15) 392,897 210,403 363,164 210,403
Exchange loss/(gains) 5,958 (7,483) 6,144 (7,483)
Employee costs 5,579,775 4,101,370 4,316,360 3,831,648
Other administrative
expenses 3,645,438 2,780,635 2,624,795 2,749,022
9,855,927 7,171,216 7,443,194 6,840,840
--------------------------- ---------- ---------- ---------- ----------
Other administrative expenses comprise marketing fees, data
centre and other service fees incurred in the ordinary course of
business.
Profit before taxation is stated after charging:
Group Company
-------------------- --------------------
2020 2019 2020 2019
Depreciation, amortisation and finance GBP GBP GBP GBP
costs
---------------------------------------- ---------- -------- ---------- --------
Depreciation of property, plant
and equipment 550,620 481,611 550,620 481,611
Amortisation of intangible assets 479,670 446,580 479,670 446,580
----------------------------------------- -------- --------
1,030,290 928,191 1,030,290 928,191
41,115 41,115
Net finance expense (Note 28) 35,099 - 35,099 -
1,065,389 969,306 1,065,389 969,306
---------------------------------------- ---------- -------- ---------- --------
Total expenses were as follows:
Group Company
----------------------- ----------------------
2020 2019 2020 2019
Total expenses GBP GBP GBP GBP
---------------- ----------- ---------- ---------- ----------
Expenses 10,921,316 8,140,522 8,508,583 7,810,146
----------------- ----------- ---------- ---------- ----------
15 Share-based payments
The table below shows the total expenses arising from
share-based payment transactions recognised during the period as
part of employee expenses:
Group Company
-------- ---------- --------------------
2020 2019 2020 2019
Restated Restated
-------- ---------- -------- ----------
EMI options granted 227,084 120,245 205,601 120,245
Restricted share awards 55,317 - 55,317 -
Shares purchased under
Employee Share Incentive
Plan 110,496 90,158 102,243 90,158
--------------------------- -------- ---------- -------- ----------
392,897 210,403 363,164 210,403
--------------------------- -------- ---------- -------- ----------
Employee Share Incentive Plan
The share incentive plan is administered by Equiniti ("the
Trust"). The Trust purchases shares in Aquis on the open market on
behalf of employees that have elected to take part. The scheme
allows employees to become shareholders in the Company in a tax
efficient manner, with the Company purchasing two matching shares
for every partnership purchased by the employee. The terms of the
matching shares include that they must be held by the Trust for
three years before they can be transferred or sold, and the
employee must remain employed with the Company throughout this
period. The fair value of the matching shares purchased by the
company are expensed over the three year vesting period. Management
assumes that the cost of the shares is a close approximation of the
fair value of the shares as the market price tends to be reflective
of the discounted value of research analysts' medium-term
projections.
During the year a total of 50,127 shares were awarded, 6,729
vested and 2,218 were forfeited, with a fair value of GBP124,510,
GBP30,281 and GBP9,981 respectively. The following table shows the
number of shares held in the Trust at the reporting date:
2020 2019
---------- ---------
Employee Share incentive plan
Number of shares issued under the plan
to participating employees 104,656 63,476
----------------------------------------- ---------- ---------
EMI Share Options
There is one approved EMI scheme, which was initiated in June
2018 when the first options were granted. In April 2020 the second
allotment approved in and deferred from November 2019 because Aquis
was in a close period was made with a total of 740,250 options
being granted. Options vest in 3 equal tranches, one, two and three
years after grant. The options expire after 10 years.
Of the total number of options granted, 20,137 were exercised,
none expired and 11,098 were forfeited during the year.
In accordance with IFRS 2, the Group has estimated the fair
value of options using a US binomial option valuation model and
spread the estimated value against the profit and loss account over
the life of the vesting period.
The exercise price for the options granted on 14 June 2018 is
GBP2.69 per share to be settled in cash at the date of exercise.
The weighted average remaining contractual life of options
outstanding at the end of the reporting period amounted to 5.5
months.
The US binomial model with an average expiry duration of 5
years, volatility of 24 and risk-free interest rate of 1.1067% was
used to calculate the fair value of the options granted on 14 June
2018. All options are exercisable at a price of GBP2.69 and the
weighted average expected life of the options is estimated to be 5
years.
The exercise price for the options granted on 16 April 2020 is
GBP3.47 per share to be settled in cash at the date of exercise.
The weighted average remaining contractual life of options
outstanding at the end of the reporting period amounted to 2 years
3.5 months.
The US binomial model using an average expiry duration of 5
years, volatility of 20 and risk-free interest rate of 0.16% was
used to calculate the fair value of the options granted on 16 April
2020. All options are exercisable at a price of GBP3.47 and the
weighted average remaining expected life of the options is
estimated to be 5 years.
Details of the EMI scheme are as follows:
-- Outstanding at the beginning of the period 560,406
-- Granted during the period 740,250
-- Forfeited during the period (11,098)
-- Exercised during the period (20,137)
-- Expired during the period -
-- Outstanding at the end of the period 1,269,421
-- Exercisable at the end of the period 351,918
16 Investment income
Group Company
---------------- ----------------
2020 2019 2020 2019
Interest income GBP GBP GBP GBP
----------------- ------- ------- ------- -------
Bank deposits 14,632 41,699 14,632 36,303
------------------ ------- ------- ------- -------
17 Business Combination
On 11 March 2020 Aquis Exchange PLC acquired 100% of the issued
share capital of NEX Exchange Limited, a UK based Recognised
Investment Exchange. It has since been rebranded as Aquis Stock
Exchange (AQSE). The acquisition has broadened the Group's service
offering, including the ability to offer companies wishing to go
public a primary listing on its growth market. It complements the
existing exchange services of the Group and has enabled the Group
to expand its strategic offering. Further details can be found in
the Strategic Report.
Details of the purchase consideration is as follows:
Purchase consideration GBP
------------------------ ---------------
Cash paid 2,877,118
------------------------ ---------------
The assets and liabilities recognised as a result of the
acquisition are as follows:
Group GBP
----------------------------- ----------
Current assets:
Cash 2,617,718
Trade and other receivables 653,390
Current liabilities:
Trade and other payables (477,471)
Add: Goodwill 83,481
Net assets arising on acquisition 2,877,118
----------------------------------- ----------
The assets acquired and liabilities assumed have been recognised
at their fair values measured at the acquisition date. There were
no intangible assets identified at the acquisition date.
In the year ended 31 March 2020, AQSE delivered revenues of
GBP1.6m and a loss before tax of GBP1.6m. The Group has brought the
year end of AQSE to 31 December in line with other Aquis Group
companies. The consolidated results to 31 December 2020 include the
9.5 months results for AQSE from 11 March to 31 December 2020.
The acquired business contributed revenues of GBP1.2m and a loss
before tax of GBP0.5m to the Group for the period of 9.5 months
from 11 March to 31 December 2020.
There were no acquisitions in the year ending 31 December
2019.
18 Deferred tax asset
A deferred tax asset of GBP203,717 relating to unused tax losses
has been recognised in the current period. The losses are
considered to be able to offset against the Company's taxable
profits expected to arise in the next three accounting periods. The
assessment of future taxable profits involves a significant degree
of estimation, which management have based on the latest budget for
the Company approved by the Board which reflects the improved
trading performance largely due to the continued expansion of the
business as discussed in the Strategic Report. The preparation of
the budget involves a rigorous review process by the Board, whereby
each revenue stream and cost is scrutinised and challenged in
detail so that the final version is considered to be an accurate
and plausible representation of what is likely to be achieved in
the period.
In calculating the deferred tax asset, management have applied a
conservative approach by using probability-adjusted revenues,
applying lower probabilities to budgeted revenue from more
uncertain sources such as large technology licensing contracts,
with the effect of reducing estimated profits over the 3-year
period from the original forecasts. The analysis predicts
profitability is still achievable even when revenues are reduced to
reflect this adjustment. The model uses modest growth rates and is
sensitive to the discount rate used in each year. The impact of
flexing the discount rates used upwards or downwards within a
reasonable range would be +GBP147,604/-GBP171,169, so that the
deferred tax asset would be GBP351,321 in an upside scenario with
lower probability discount rates or GBP32,548 in a downside
scenario with higher probability discount rates.
A deferred tax balance of GBP9,642,727 based on the remaining
unused losses of the Group has not been recognised. The losses can
be carried forward indefinitely and have no expiry date. Of this
balance, GBP3,011,951 relates to the unrecognised deferred tax
balance of the Company.
There was no deferred tax asset recognised in 2019.
The deferred tax balance comprises temporary differences
attributable to:
Group and Company
----------------------------------------
2020 2019
Deferred tax GBP GBP
------------------- -------------------- ------------------
Tax losses 203,717 -
------------------- -------------------- ------------------
Total deferred
tax asset 203,717 -
------------------- -------------------- ------------------
Movement in deferred tax balance:
Group and Company
Movements GBP
-------------------------------------- --------
At 1 January 2020 -
(Charged)/credited to profit or loss 203,717
-------------------------------------- --------
At 31 December 2020 203,717
-------------------------------------- --------
The Group has combined losses of GBP51,941,924 (2019:
GBP18,386,969) available for carry forward and to be used against
future trading profits of the same trade in which they were
generated. This is comprised of trading losses totalling
GBP51,511,244 generated in the UK by Aquis Exchange PLC and Aquis
Stock Exchange Limited and losses totalling GBP430,681 generated in
France by Aquis Exchange Europe SAS.
The Company has estimated losses of GBP17,043,108 (2019:
GBP18,386,969) available for carry forward against future trading
profits.
19 Income tax credit
Group Company
---------------------- ----------------------
2019 2019
2020 Restated 2020 Restated
Current tax GBP GBP GBP GBP
---------------- ---------- ---------- ---------- ----------
R&D tax credit (307,616) (265,254) (307,616) (265,254)
----------------- ---------- ---------- ---------- ----------
The credit for the year can be reconciled to the profit/(loss)
per the income statement as follows:
Group Company
2019 2019
2020 Restated 2020 Restated
GBP GBP GBP GBP
----------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) for the year
before taxation 470,395 (921,836) 1,268,618 (860,856)
------------------------------------ ---------- ---------- ---------- ----------
Expected tax charge/(credit)
based on a corporation
tax rate of 19.00% 89,375 (175,149) 241,037 (163,563)
Effect of expenses not deductible
in determining taxable profit 55,247 33,784 51,165 72,596
Unutilised tax losses carried
forward 70,204 195,301 - 144,903
Losses utilised against
taxable profits - - (77,377) -
Permanent capital allowances
in excess of depreciation 34,109 (52,765) 34,109 (52,765)
Depreciation on assets
not qualifying for tax
allowances 846 (1,171) 846 (1,171)
Additional R&D allowance
for qualifying expenditure (247,000) - (247,000) -
Non-trade loan relationship
credits (2,780) - (2,780) -
Research and development
tax credit (307,616) (265,254) (307,616) (265,254)
Taxation credit for the
year (307,616) (265,254) (307,616) (265,254)
------------------------------------ ---------- ---------- ---------- ----------
20 Earnings per share
Group Company
------------------------ ------------------------
2020 2019 2020 2019
-------------------------------------- ----------- ----------- ----------- -----------
Number of Shares
Weighted average number of ordinary
shares for basic earnings per share 27,164,230 27,149,559 27,164,230 27,149,559
Weighted average number of ordinary
shares for diluted earnings per
share 28,281,234 27,713,683 28,281,234 27,713,683
Earnings
Profit/(Loss) for the year from
continued operations 981,728 (671,327) 1,779,951 (610,347)
Basic and diluted earnings per
share (pence)
Basic earnings/(loss) per ordinary
share 4 (3) 7 (3)
Diluted earnings/(loss) per ordinary
share 3 (3) 6 (3)
-------------------------------------- ----------- ----------- ----------- -----------
Basic earnings per share is in respect of all activities of the
Group and diluted earnings per share takes into account the
dilution effects which would arise on conversion or vesting of all
outstanding share options and share awards.
21 Intangible assets
Group Group Company
Developed Goodwill Developed
trading platforms trading platforms
--------------------------------- ------------------- --------- -------------------
Cost
As at 01/01/2019 1,493,055 - 1,493,055
Additions- internally generated 562,271 - 562,271
As at 31/12/2019 2,055,326 - 2,055,326
Additions- internally generated 642,695 83,481 642,695
As at 31/12/2020 2,698,022 83,481 2,698,022
--------------------------------- ------------------- --------- -------------------
Accumulated amortisation and
impairment
As at 01/01/2019 855,516 - 855,516
Charge for the year 446,580 - 446,580
As at 31/12/2019 1,302,096 - 1,302,096
Charge for the year 479,670 - 479,670
As at 31/12/20120 1,781,766 - 1,781,766
--------------------------------- ------------------- --------- -------------------
Carrying amount
As at 31/12/2020 916,256 83,481 916,256
As at 31/12/2019 753,230 - 753,230
--------------------------------- ------------------- --------- -------------------
Goodwill
On 11 March 2020 the Group acquired NEX Exchange Limited which
resulted in recognition of goodwill of GBP83,481. The cash
generating unit associated with the goodwill is determined to be
the assets associated with the investment in AQSE.
The goodwill arising on consolidation represents the growth
potential of the primary listings exchange and the synergies with
the rest of the business. AQSE has no intangible assets.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to a
cash generating unit, being the net assets related to Aquis Stock
Exchange.
The recoverable amounts of the cash generating unit has been
determined based on a value-in-use calculation using discounted
cash flow forecasts based on business plans prepared by management
for a five-year period ending 31 December 2025, using an estimated
terminal growth rate of 2%.
No impairment loss has been recognised during the year, as
management believes the value in use of Aquis Stock Exchange is
significantly higher than the carrying value and is unlikely to be
materially impaired.
22 Property, plant and equipment
Group Fixtures, Computer Non-current Total
fittings Equipment Right of
and equipment Use Asset
GBP GBP GBP
GBP
------------------------------ --------------- ----------- ------------ ----------
Cost
As at 01/01/2019 246,463 1,591,963 - 1,838,426
Additions 3,034 506,308 - 509,342
Recognition of IFRS 16 Right
of Use Asset - - 1,444,159 1,444,159
As at 31/12/2019 249,497 2,098,270 1,444,159 3,791,927
Additions 2,328 113,024 - 115,351
As at 31/12/2020 251,825 2,211,294 1,444,159 3,907,278
------------------------------ --------------- ----------- ------------ ----------
Accumulated depreciation and
impairment
As at 01/01/2019 77,602 1,218,891 - 1,296,493
Charge for the year 49,970 258,475 173,166 481,611
As at 31/12/2019 127,572 1,477,366 173,166 1,778,104
Charge for the year 50,492 326,962 173,166 550,620
As at 31/12/2020 178,064 1,804,328 346,332 2,328,724
------------------------------ --------------- ----------- ------------ ----------
Carrying amount
As at 31/12/2020 73,761 406,966 1,097,827 1,578,554
------------------------------ --------------- ----------- ------------ ----------
As at 31/12/2019 121,925 620,905 1,270,993 2,013,823
------------------------------ --------------- ----------- ------------ ----------
Company Fixtures, Computer Non-current Total
fittings Equipment Right of
and equipment Use Asset
GBP GBP GBP
GBP
-------------------------------- --------------- ----------- ------------ ----------
Cost
As at 31/12/2018 246,463 1,591,963 - 1,838,426
Additions 3,034 506,308 - 509,342
Recognition of IFRS 16 Right
of Use Asset - - 1,444,159 1,444,159
As at 31/12/2019 249,497 2,098,270 1,444,159 3,791,927
Additions 2,328 113,024 - 115,351
As at 31/12/2020 251,825 2,211,294 1,444,159 3,907,278
-------------------------------- --------------- ----------- ------------ ----------
Accumulated depreciation and
impairment
As at 01/01/2019 77,602 1,218,891 - 1,296,493
Charge for the year 49,970 258,475 173,166 481,611
As at 31/12/2019 127,572 1,477,366 173,166 1,778,104
Charge for the year 50,492 326,962 173,166 550,620
As at 31/12/2020 178,064 1,804,328 346,332 2,328,724
-------------------------------- --------------- ----------- ------------ ----------
Carrying amount
As at 31/12/2020 73,761 406,966 1,097,827 1,578,554
-------------------------------- --------------- ----------- ------------ ----------
As at 31/12/2019 121,925 620,905 1,270,993 2,013,823
-------------------------------- --------------- ----------- ------------ ----------
23 Investment in subsidiaries
2020 2019
Company GBP GBP
---------------------------- ---------- ----------
Investment in subsidiaries 6,484,202 2,437,766
----------------------------- ---------- ----------
Details of the Company's subsidiaries at 31 December 2020 are
set out in the following table. The investments are measured using
the equity method in Aquis Exchange PLC's standalone accounts.
Carrying Carrying
amount amount
(GBP)
2020 (GBP)
Voting 2019
Ownership power
Name of Country interest held
undertaking of incorporation (%) (%) Name of business
Aquis Stock Recognised
Exchange Investment
Limited UK 100 100 Exchange 3,277,118 -
------------------- ---------- ------- ------------------ ---------- ----------
Aquis Exchange European Equities
Europe SAS France 100 100 Exchange 3,207,084 2,437,766
------------------- ---------- ------- ------------------ ---------- ----------
The registered office of Aquis Exchange Europe SAS is 231 rue
Saint Honoré, 75001 Paris, France. The registered office of Aquis
Stock Exchange Limited is 77 Cornhill, London EC3V 3QQ, UK.
During the year Aquis Exchange PLC made capital contributions to
Aquis Europe of GBP769,318 and GBP400,000 to Aquis Stock
Exchange.
Both investments were assessed for impairment at year end.
Although both investments were loss-making in 2020, this
performance was in line with expectations. Aquis Europe is expected
to reach profitability in 2021 and AQSE in 2022. Therefore, in line
with IAS 36 guidance, no impairment provision has been recognised
in Aquis Exchange PLC's financial statements. The following table
summarises the movement in the carrying amounts of the subsidiaries
during the year:
Aquis Stock Exchange Aquis Exchange Europe
Limited SAS
GBP GBP
Carrying amount 2019 - 2,437,766
--------------------- ----------------------
Investment in subsidiary 2,877,118 -
--------------------- ----------------------
Capital injection 400,000 769,318
--------------------- ----------------------
Carrying amount 2020 3,277,118 3,207,084
--------------------- ----------------------
24 Investment in Trust
The following table shows the total amount the Company has
invested in the Trust in respect of the Share Incentive Plan as at
the reporting date:
2019
2020 Restated
Company GBP GBP
--------------------- -------- ----------
Investment in Trust 486,127 318,410
---------------------- -------- ----------
25 Trade and other receivables
Current Non-current Total
---------------------- -------------------- ----------------------
2019 2019 2019
Group 2020 Restated 2020 Restated 2020 Restated
GBP GBP GBP GBP GBP GBP
-------------------- ---------- ---------- -------- ---------- ---------- ----------
Trade receivables 1,500,524 1,523,494 - 751,629 1,500,524 2,275,123
Technology licence
contract assets 1,132,029 - 617,805 - 1,749,834 -
Other receivables 11,911 6,736 221,825 215,293 233,736 222,029
Prepayments 279,603 166,208 - - 279,603 166,208
2,924,067 1,696,438 839,630 966,922 3,763,697 2,663,360
-------------------- ---------- ---------- -------- ---------- ---------- ----------
Current Non-current Total
---------------------- -------------------- ----------------------
2019 2019 2019
Company 2020 Restated 2020 Restated 2020 Restated
GBP GBP GBP GBP GBP GBP
-------------------------- ---------- ---------- -------- ---------- ---------- ----------
Trade receivables 1,384,467 1,514,439 - 751,629 1,384,467 2,266,068
Technology licence
contract assets 1,132,029 - 617,805 - 1,749,834 -
Other receivables 6,941 6,941 221,825 215,293 228,766 222,234
Intercompany receivables 177,266 - - - 177,266 -
Prepayments 242,665 166,208 - - 242,665 166,208
2,943,368 1,687,587 839,630 966,922 3,782,998 2,654,509
-------------------------- ---------- ---------- -------- ---------- ---------- ----------
The following details the trade receivables that are stated net
of any credit impairment provision, as set out previously in Note
13 in accordance with IFRS 9.
Group Company
---------------------- ----------------------
2019 2019
Trade receivables 2020 Restated 2020 Restated
GBP GBP GBP GBP
------------------------------------- ---------- ---------- ---------- ----------
Gross trade receivables 1,540,230 2,685,964 1,406,505 2,676,909
Gross contract assets 2,236,397 - 2,236,397 -
Impairment (526,271) (410,841) (508,601) (410,841)
Trade receivables net of provisions 3,250,357 2,275,123 3,134,300 2,266,068
------------------------------------- ---------- ---------- ---------- ----------
26 Cash and cash equivalents
Group Company
------------------------ ----------------------
2020 2019 2020 2019
GBP GBP GBP GBP
-------------- ----------- ----------- ---------- ----------
Cash at bank 12,268,418 11,010,861 6,179,566 8,609,739
--------------- ----------- ----------- ---------- ----------
Cash and cash equivalents are held with authorised
counterparties of a high credit standing, in secured investments.
Management does not expect any losses from non-performance by the
counterparties holding cash and cash equivalents, and there are no
material differences between their book and fair values.
Cash held by Aquis Exchange Europe SAS is predominantly held in
a Sterling denominated bank account, hedging the Group against
foreign exchange fluctuations in cash and cash equivalents of the
subsidiary.
27 Trade and other payables
Group Company
---------------------------- -------------------------------------
2020 2019 2020 2019
Current GBP GBP GBP GBP
--------------------------- ---------- ---------------- ------------------- ----------------
Trade payables 263,398 130,396 251,136 215,031
Accruals 1,524,793 1,053,313 1,301,073 1,034,636
Deferred Revenue 431,792 - 43,127 -
Social security and other
taxation 426,745 173,540 242,588 173,540
Intercompany payables - - 454,182
Other payables 163,982 142,325 - 44,619
2,810,710 1,499,574 2,292,106 1,467,826
--------------------------- ---------- ---------------- ------------------- ----------------
28 Leases
The impact on the Group's assets and liabilities, and the
related effects on profit and loss, of the Group's leasing
activities (the Group as a lessee) are detailed below.
Right of Use Assets
The right-of use asset was measured at the amount equal to the
lease liability, plus prepaid lease payments (being the unamortised
portion of the rent deposit asset). The right of use assets is
depreciated over the term of the lease and was accounted for during
the year ended 31 December 2020 as follows:
Property
GBP
------------------------------------- ----------
Carrying amount at 1 January 2019 1,444,159
Depreciation for the year (173,166)
Carrying amount at 31 December 2019 1,270,993
Depreciation for the year (173,166)
Carrying amount at 31 December 2020 1,097,827
------------------------------------- ----------
Of which are:
Current 173,166
Non-current 924,661
1,097,827
------------------------------------- ----------
The non-current and current portions of the right of use asset
are included in 'Property, Plant and Equipment' and Trade and Other
Receivables on the Statement of Financial Position
respectively.
Rent deposit asset
The rent deposit asset (excluding the prepaid right of use
portion which has been included in the calculation of the right of
use asset above) is a financial asset measured at amortised cost
and was accounted for during the year ended 31 December 2020 as
follows:
Rent deposit asset
GBP
------------------------------------------ -------------------
Carrying amount at 1 January 2019 215,491
Finance income on rent deposit asset for
the year 6,538
Carrying amount at 31 December 2019 222,029
Finance income on rent deposit asset for
the year 6,736
Carrying amount at 31 December 2020 228,765
------------------------------------------ -------------------
Of which are:
Current 6,941
Non-current 215,293
222,234
------------------------------------------ -------------------
The non-current and current portions of the rent deposit asset
are both included in Trade and Other Receivables on the Statement
of Financial Position.
Lease liability
The lease liability is calculated as the net present value of
the fixed payments (including in-substance fixed payments), less
any lease incentives receivable (e.g. any rent-free periods). The
lease payments are discounted using the interest rate implicit in
the lease. The lease liability is measured at amortised cost and
was accounted for during the year ended 31 December 2020 as
follows:
Lease liability
GBP
-------------------------------------------- ----------------
Carrying amount at 1 January 2019 1,561,096
Finance expense on lease liability for the
year 47,653
Lease payments made during the year (230,445)
Carrying amount at 31 December 2019 1,378,304
Finance expense on lease liability for the
year 41,835
Lease payments made during the year (230,445)
Carrying amount at 31 December 2019 1,189,694
-------------------------------------------- ----------------
Of which are:
Current 194,613
Non-current 995,081
1,189,694
-------------------------------------------- ----------------
The non-current and current portions of the lease liability are
included in 'Lease liability' and Trade and Other Payables on the
Statement of Financial Position respectively.
Net finance expense on leases
2020 2019
GBP GBP
------------------------------------ -------- --------
Finance expense on lease liability 41,835 47,653
Finance income on rent deposit
asset (6,736) (6,538)
Net finance expense relating to
leases 35,099 41,115
------------------------------------ -------- --------
The finance income and finance expense arising from the Group's
leasing activities as a lessee have been shown net where applicable
as is permitted by IAS 32 where criteria for offsetting have been
met.
Amounts recognised in profit and loss
2020 2019
GBP GBP
-------------------------------------- ---------- ----------
Depreciation expense on right-of-use
assets (173,166) (173,166)
Finance expense on lease liability (41,835) (47,653)
Finance income on rent deposit
asset 6,736 6,736
Net impact of leases on profit
or loss (208,265) (214,083)
-------------------------------------- ---------- ----------
The property lease (of which there is only one) in which the
Group is the lessee does not contain variable lease payment
terms.
The total cash outflow for leases amounts to GBP230,445 (2019:
GBP230,445).
29 Called up Share Capital
2020 2019
Group GBP GBP
----------------------------------- ---------- ----------
Ordinary share capital
Issued and fully paid
27,169,696 Ordinary shares of 10p
each (2019: 27,149,559) 2,714,956 2,714,956
Issue of 20,137 new shares 2,014 -
2,716,970 2,714,956
----------------------------------- ---------- ----------
30 Share premium account
Group 2020 2019
GBP GBP
------------------------------ ----------- -----------
At the beginning of the year 10,839,981 10,839,981
Issue of 20,137 new shares 52,154 -
At the end of the year 10,892,135 10,839,981
------------------------------ ----------- -----------
31 Other reserves
Group Company
-------------------- --------------------
2019 2019
2020 Restated 2020 Restated
GBP GBP GBP GBP
---------------------------------- -------- ---------- -------- ----------
Reserves relating to share-based
payments 760,543 368,366 748,525 368,367
----------------------------------- -------- ---------- -------- ----------
32 Treasury shares
2019
Group 2020 Restated
GBP GBP
------------------------------- --------- ----------
At the beginning of the year 318,410 121,851
Purchase of additional shares 199,459 196,558
Shares sold by the Trust (40,262) -
Cash held by Trust 12,018 9,399
At the end of the year 489,625 327,809
------------------------------- --------- ----------
33 Foreign currency translation reserve
In 2019 the Group established a Multilateral Trading Facility
(MTF) in France through its subsidiary, Aquis Exchange Europe SAS.
The translation of the European subsidiary' assets into Sterling,
the functional currency of the Group, results in foreign exchange
differences that have been recognised in Other Comprehensive Income
and accumulated in a separate component of equity as illustrated
below.
Group 2020 2019
GBP GBP
-------------------------------------------------------- ------------- ----------------
At the beginning of the year 1,439 -
Foreign exchange differences on translation of foreign
operations recognised in OCI (531) 1,439
At the end of the year/period 908 1,439
-------------------------------------------------------- ------------- ----------------
34 Cash generated by operations
2020 2019
Restated
Group GBP GBP
---------------------------------------------------- ------------ ----------
Profit/(Loss) for the year after tax 981,728 (656,582)
---------------------------------------------------- ------------ ----------
Adjustments for:
Taxation credited (307,616) (265,254)
Deferred tax (203,717) -
Investment income (14,632) (41,699)
Amortisation and impairment of intangible
assets 479,670 446,580
Depreciation and impairment of property,
plant and equipment 550,620 481,611
Equity settled share-based payment expense 392,897 210,403
Other gains/(losses) 39,815 (156,586)
Prior year adjustments - (205,142)
Gains/(losses) on transition of accounting
standards - (120,369)
Movement in working capital:
(Increase)/decrease in trade and other receivables (1,100,337) 85,434
Increase/(decrease) in trade and other payables 1,311,136 607,210
Cash generated/ (absorbed) by operations 2,129,564 385,606
---------------------------------------------------- ------------ ----------
2020 2019
Restated
Company GBP GBP
---------------------------------------------------- ------------ ----------
Profit / (Loss) for the year after tax 1,779,951 (595,602)
---------------------------------------------------- ------------ ----------
Adjustments for:
Taxation credited (307,616) (265,254)
Deferred tax (203,717) -
Investment income (14,632) (36,303)
Amortisation and impairment of intangible
assets 479,670 446,580
Depreciation and impairment of property,
plant and equipment 550,620 481,611
Equity settled share-based payment expense 363,164 210,403
Other gains/losses (114,892) (147,566)
Prior year adjustments - (205,142)
Gains/ losses on transition of accounting
standards - (120,369)
Movement in working capital:
(Increase)/decrease in trade and other receivables (1,128,488) 94,284
Increase/(decrease) in trade and other payables 824,278 575,463
Cash generated/(absorbed) by operations 2,228,339 438,105
---------------------------------------------------- ------------ ----------
35 Related party transactions
Remuneration of key management personnel
The remuneration of the Directors of the Company, who are key
management personnel, is set out below in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures. Key
management compensation relates to the Executive Directors who have
authority for planning, directing and controlling the Group.
2020 2019
Group GBP GBP
---------------------------------------- -------- --------
Salaries and other short-term benefits 761,709 602,195
Share-based payments 69,268 175,589
----------------------------------------- -------- --------
830,977 777,784
---------------------------------------- -------- --------
Inter-company transactions with subsidiary undertakings
The Company has intercompany balances with its subsidiary
undertakings. Details as at 31 December 2020 are shown in the table
below:
Amount (owed to)/due
from as at:
Counterparty 2020 2019 Term
Aquis Exchange Europe
SAS (53,720) (84,634) Repayable on demand
Aquis Stock Exchange (223,195) - Repayable on demand
Limited
----------------------- ------------ --------- --------------------
At year end, a balance of GBP400,000 was payable to AQSE in
respect of additional capital to be injected into the entity.
During the year, the Company recharged operating costs to its
subsidiaries on a proportionate basis.
36 Controlling party
In the opinion of the Directors, there is no single overall
controlling party. No individual shareholder had a shareholding of
10% or above as at 31 December 2020.
37 Restatement of comparatives
The prior year adjustments are as follows:
1) Accounting for expenses arising from the share incentive plan
as share-based payments under IFRS 2 and recognition of the
investment in Trust in Company accounts and consolidation of the
Trust in Group accounts under IFRS 10;
2) The ECL model was updated resulting in a net decrease in the ECL provision of GBP42k.
The following table summarises the impact of the adjustments on
the associated accounts in 2019:
2019 (as per prior 2019
year financial restated
statements) Adjustment balance
Group GBP GBP GBP
------------- -------------------------------------------------------------------------------------------------------------- ---------------------------------------- ----------
Treasury
shares - 327,809 327,809
Share-based
payment
expense 120,245 90,158 210,403
Share-based
payment
reserve 212,691 165,075 377,766
Employee
costs 4,474,507 (373,137) 4,101,370
Other
expenses 2,660,390 120,245 2,780,635
Impairment
Credit
(SOCI) 242,585 42,408 284,993
ECL
Provision
(SOFP) 453,249 - (42,408) 410,841
------------- -------------------------------------------------------------------------------------------------------------- ---------------------------------------- ----------
2019 (as per prior 2019
year financial restated
statements) Adjustment balance
Company GBP GBP GBP
------------- -------------------------------------------------------------------------------------------------------------- ---------------------------------------- ----------
Investment
in Trust - 318,410 318,410
Share-based
payment
expense 120,245 90,158 210,403
Share-based
payment
reserve 212,691 155,676 368,367
Employee
costs 4,204,785 (373,137) 3,831,648
Other
expenses 2,628,777 120,245 2,749,022
Impairment
Credit
(SOCI) 242,585 42,408 284,993
ECL
Provision
(SOFP) 453,249 - (42,408) 410,841
------------- -------------------------------------------------------------------------------------------------------------- ---------------------------------------- ----------
38 Events occurring after the reporting period
AQSE Market Maker Warrant Scheme
From 1 January 2021 a new market maker warrant incentive scheme
will commence, the purpose of which is to improve the liquidity and
functioning of the AQSE Apex market. The scheme will involve
issuing warrants to eligible market makers over a 3-year period,
giving them the option to purchase up to 19.9% of the shares in
AQSE. Market makers will become eligible for the scheme if they
meet a defined set of performance criteria, and the number of
warrants to be issued to each market maker will be determined by
AQSE.
The warrants will be accounted for in accordance with IFRS 15,
with a debit to revenue and corresponding credit to equity being
recognised in each year of the scheme based on the fair value of
the warrants and the expectation of the number of awards likely to
vest at the end of that year. The first charge will be recognised
in 2021.
Proposed Corporation Tax Increase
On 3 March 2021 the Chancellor announced that the UK corporation
tax rate would increase to 25% from April 2023. This does not have
a material impact on the financial position of the Group as at 31
December 2020.
The Directors can confirm that there were no other significant
post-balance sheet events.
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END
FR UASVRAWUOORR
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