E X C H A N G E P L C
Annual Report & Accounts 2018
Contents
OVERVIEW
2018 Highlights
The Aquis Story
Chairman’s Statement
Chief Executive’s Report
Strategic Report
Audit, Risk and Compliance Committee Report
Nomination and Remuneration Committee Report
Directors’ Report
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2
7
9
11
14
15
20
FINANCIAL STATEMENTS
Independent Auditor’s Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
OTHER INFORMATION
Company Information
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33
IBC
2018: A Transformational Year
5 Years
IN NOVEMBER 2018 AQUIS
EXCHANGE CELEBRATED THE
FIFTH ANNIVERSARY OF THE
LAUNCH OF ITS MTF
IPO
IN JUNE 2018 AQUIS EXCHANGE
WAS LISTED ON AIM
4%
MARKET SHARE REACHED
THE 4% MARK DURING 2018*
Expansion
IN LATE 2018 AQUIS EXCHANGE’S
EUROPE OFFICE OPENED IN PARIS
7th
CURRENTLY, AQUIS EXCHANGE
IS THE 7TH LARGEST EUROPEAN
STOCK EXCHANGE GROUP BY
VALUE TRADED
Alasdair Haynes,
Chief Executive Officer
The last 12 months have been transformational for Aquis
Exchange. We have progressed from being "another challenger
exchange" to being one of Europe's top ten stock exchange groups
and the trading technology supplier to businesses across many
asset classes and geographies. On the way, we have completed a
very successful IPO, achieved record market share and expanded
our presence into continental Europe.
Aquis Exchange is a revolutionary business and our vision is
to improve the efficiency of the investment industry though
transparency and innovation. Our aim is to become the leading
technology-driven exchange services group and, I believe, we are
now well on the way.
* Of continuous trading across 14 markets
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ANNUAL REPORT & ACCOUNTS 2018 A new type of stock exchange
Aquis Exchange was conceived in 2012 as a challenger stock exchange for Europe by Alasdair Haynes.
It was created as a pan-European cash equities platform, conforming to the most stringent regulatory
requirements, and the state-of-the-art technology was all built in-house. Regulatory approval was obtained
in approximately a year and trading began in November 2013.
Aquis’ key feature is its unique subscription pricing model. The
world is moving towards subscription payments in all sorts of
industries, but before Aquis, it was absent in financial services.
Aquis offers Members various usage bands – each appropriate
for different levels of trading. It is a simple, transparent and fair
way of charging.
It aligns the cost to Aquis of supplying its matching service to
Members and ensures that the user knows in advance what
monthly fees will be payable. Users of the top tier subscription
are entitled to unlimited usage (subject to policy), which
makes their marginal cost zero.
The world is moving to subscriptions
Low Toxicity
Aquis Exchange is the only stock exchange in the world
that has adopted subscription pricing and offers its top tier
Members unlimited usage. However, buying products and
services via subscription is far from new. One of the first
instances of subscription pricing was in publishing –
from the 1800s people have been buying magazines
through subscriptions.
One sector in which subscriptions are ubiquitous is
mobile phones. In fact, there are more mobile
phones today in the world than there are people: 8.2
billion phones versus 7.7 billion people. The
subscription model in the telecoms industry has
transformed behaviour too. Phones are used much
more now and the social media phenomenon would
not have been possible without fixed subscriptions.
In the entertainment industry subscriptions have
been revolutionary. In 1980, it would have cost
upwards of $30 million to buy all the songs that are
currently available on Spotify for just $10 a month.
Companies such as Netflix and Sky are beginning to
impact not only the consumption of film and its
quantity, but also now on how it is made. Many
blockbusters are now made exclusively for streaming
and Hollywood, the incumbent, is worried.
The ultimate case study of the transformational
impact of subscriptions is Amazon and it’s Prime
service. There are some 100m US households
subscribing to Amazon Prime and they spend
more frequently and twice as much as non-Prime
Amazon users.
One of Aquis Exchange’s key benefits is its low toxicity
liquidity pool. This is due to a move in early 2016 by Aquis
Exchange to prevent non-client proprietary firms from trading
aggressively on its platform. As a result of this measure, toxicity
and signalling risk are lower on Aquis than on other trading
venue in Europe. According to independent studies, trades on
Aquis Exchange are less likely to lead to price movement than
on other lit markets.
Aquis frequently has the
best price on its own,
the deepest liquidity, the
lowest cost of trading and
the fastest technology,
making it an essential
venue for brokers’ best
execution requirements.
— LiquidMetrix
In 2015, Aquis Exchange harnessed its technology resources,
together with its expertise of creating and running an
exchange to launch Aquis Technologies. This business supplies
trading technology, primarily matching engines and surveillance
systems, to third parties such as other exchanges, brokers and
banks across any asset class or geography.
2
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Aquis Exchange at a glance
The Company
Two Identities
PLC
Operator of MTFs and
related services
Exchange
Technologies
Exchange technology
developer and services
Multiple Products
MTF
(UK & France)
Data Services
Multiple Products
AME
AMS
AMG
Services
– Surveillance
– Operations
2018 has been a transformational year for Aquis Exchange that has seen the Company reach new market share highs, conduct a
very successful IPO and launch its first Continental European office, in Paris.
Timeline
2018
June
Initial Public Offering
November
Market share tops 4%
2016
Market increased
from 12 to 14
2013
November
FCA approval and
exchange launched
2014
Markets increased
from 4 to 12
2012
Aquis Founded
2017
Market share 1.9%
2015
Technologies
division launched
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ANNUAL REPORT & ACCOUNTS 2018 AQUIS EXCHANGE PLC
Aquis Exchange in Numbers
Stocks from
14
Countries
1600+
Stocks Traded
• Austria
• Belgium
• Denmark
• Finland
• France
• Germany
• Italy
• Netherlands
• Norway
• Portugal
• Spain
• Sweden
• Switzerland
• UK
The Aquis matching engine.
The Aquis Matching engine is ultra-low latency.
It has a round trip speed of 17 µs or shorter for
99.99% of all messages, on a single port. It is also
high capacity, with an average message rate of
70,000 per second, based on 2 million orders
sent in under 30 seconds. The AMS is very
robust; with minimal degradation and jitter, it
delivers high levels of availability, consistency
and resilience.
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ANNUAL REPORT & ACCOUNTS 2018
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 27+
Exchange Members
12+
Technologies Clients
Infrastructure
Bonds
Futures
Oil Derivatives
Multilateral
Trading
Facility
Tokenisation
Exchange
Options
Systematic
Internaliser
Reinsurance
Dark Pool
T E C H N O L O G I E S
Our technology clients span many sectors
AQUIS EXCHANGE VALUE TRADED & MARKET SHARE
Value traded (€ Billions)
Market share (% continuous trading)
40
35
30
25
20
15
10
5
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4.5
4
3.5
3
2.5
2
1.5
1
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0
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2018
ANNUAL REPORT & ACCOUNTS 2018
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ANNUAL REPORT & ACCOUNTS 2018 AQUIS EXCHANGE PLC
What our shareholders have to say
INVESTOR VIDEOS — To watch the
full content of some of our investors
discussing their investments in Aquis,
please log on to www.aquis.eu
Gervais
Williams
—
SENIOR EXECUTIVE DIRECTOR
MITON GROUP
In a recent interview, Gervais said that Aquis Exchange is a platform on which “many investors might
find that they get the liquidity that they need to transact, even in an unsettled world” and that its
great advantage is its scalable solution.
Andy
Brough
—
HEAD OF PAN-EUROPEAN
SMALL COMPANIES
SCHRODERS
In Andy’s view, Aquis Exchange is interesting in relation to current key topics such as disruption in
the financial markets and the growing value of data. Andy said in a recent interview “when we look
at companies now if you’re not disrupting then you’re probably being disrupted. The pace of change
is accelerating.”
Mark
Barnett
—
HEAD OF UK EQUITIES
INVESCO
Mark sees Aquis as a disruptor in a well-established industry. In a recent interview Mark said that
Aquis’ positioning “offers uncorrelated returns which I find very attractive.”
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AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Chairman’s Statement
Total Revenue
£4.0m +100%
2017: £2.0m
EBITDA
(£2.7m)
a 16% decrease of losses
2017: (£3.2m)
Successful IPO
June 2018
2018 was a significant milestone for Aquis with its successful initial
public offering (IPO) on the Alternative Investment Market of the
LSE (AIM) market in June.
The new funds have positioned the firm for its next stage of development and provided
a secure platform for future growth. We are only at the start of our journey as a listed
company but we can already see that the flotation has positively raised the profile of
the company.
Aquis continued to transform the European equity trading landscape during the year. As we
celebrated 5 years since the launch of the exchange, we saw average market share increase
to 3.8% (4Q18) from 1.9% (4Q17) of all European equity trading thanks to a record number
of messages being routed to the platform by current and new clients. Meanwhile, interest in
Aquis’ world-class exchange trading and surveillance technology is growing.
EMPLOYEES
As Aquis grows and develops the business against a backdrop of increasing regulation for
financial market infrastructures and their participants, we need to invest in attracting high
quality, experienced and responsible individuals who can support the company’s evolution
and promote its cultural values.
Aquis is driven by a visionary founder-led management team of dynamic and committed
individuals. On behalf of the Board and all shareholders, I would like to thank them for all
CONTINUED ›
7
ANNUAL REPORT & ACCOUNTS 2018 of their hard work during the year and their contribution to the
company’s successful listing and continued growth.
BOARD
The structure of the Board changed significantly during the year.
The IPO created an opportunity for directors who had previously
held seats related to their initial shareholdings to step down
and for the Board to consider the mix of skills required for the
future development of the business and its responsibilities as a
listed company.
Four directors, Sean Melnick, Donall McCann, Izabela Olszewska
and Jaroslaw Grzywinski, resigned at IPO and we thank them for
their contribution in helping Aquis to establish a firm foothold as
a European trading venue and reach the point of listing. Richard
Bennett and Mark Spanbroek remained on the Board and Richard
became Senior Independent Director and Chair of the newly
formed Nominations and Remuneration Committee. In March, we
welcomed Mark Goodliffe as a member of the Board and Chairman
of the Audit and Risk Committee. Mark is the UK Chief Financial
Officer of Rea Holdings plc and an independent Non-Executive
Director and Chairman of the Audit Committee of CME Trade
Repository Limited.
We also initiated a search for a non-executive director with
technology expertise, particularly with knowledge of developing
and licensing technology. The search culminated at the end of 2018
ready for Glenn Collinson to be appointed at the start of the 2019.
Glenn’s background as an engineer and his years of developing and
marketing technology products will be invaluable to the business,
as will his experience of serving on the boards of both listed and
private companies
GOVERNANCE
The Board aspires to high standards of corporate governance.
It has adopted the key principles of the UK Corporate Governance
Code. As a UK regulated entity all Aquis Board members and senior
managers must also be approved by the Financial Conduct Authority
(FCA) under the Approved Persons Regime. All Board members
are aware of their additional responsibilities under both UK and
European regulation and guidelines with regards to the oversight
of financial market infrastructures. This is facilitated by an annual
training program.
There remains enormous
potential for our exchange
model to disrupt further
incumbent trading models
and win more market share
across Europe.
OUTLOOK
We continue to be committed to improving the quality of execution
in a transparent environment for the benefit of the end investor.
There remains enormous potential for our exchange model to
disrupt further incumbent trading models and win more market
share across Europe. We hope to do this by exceeding the needs
and demands of the end investors and intermediaries.
The funds raised at the IPO will also be used in part to help us grow
our technology business by attracting larger, more mature clients as
well as strengthening the overall Aquis brand.
The Board will continue to be focused on ensuring the business
delivers on its strategy, managing risks and developing an appropriate
framework for growth.
Brexit introduces uncertainty as well as some additional costs and
risks (principally regulatory) but change may also bring opportunities.
It is estimated that Brexit will increase costs by approximately 5%.
The business is well prepared with regulatory approvals and an
established presence in France, which should allow uninterrupted
service regardless of the form that Brexit takes.
The Board will also prepare for the end of the FCA’s Approved
persons regime, which will be replaced by The Senior Managers and
Certification Regime (SM&CR). This will increase the accountability
of the senior managers and the Board and ensure that individuals
have clearly prescribed responsibilities.
Nicola Beattie,
Non-Executive Chairman
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AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Chief Executive’s Report
Chief Executive Officer (CEO) REPORT
2018 was a transformational year for Aquis. The Company entered
2018 as a private company with approximately 2% market share of
pan-European equities continuous trading and exited the year as a
public listed Company, having successfully listed on the AIM market
of the London Stock Exchange on 14 June 2018, with close to 4%
market share. Revenue has doubled in comparison to the prior year,
reaching £4.0 million, and the exchange has grown both its number
of trading members and the average value of monthly subscriptions.
This success has been based on our commitment to provide our
customers with a comprehensive lit equity trading platform with
significant liquidity and the lowest levels of toxicity in Europe. The
quality of our technology enables us to provide a high-quality
user experience with excellent customer service. These key
characteristics, combined with greater brand awareness, has led to
strong market share growth.
Aquis Exchange PLC is regulated in the UK by the FCA but with
increasing uncertainty over the outcome of Brexit the Company
decided to establish a European subsidiary and in January 2019
successfully applied for regulatory approval to operate a Multilateral
Trading Facility (MTF) in France through this subsidiary.
OPERATIONAL REVIEW
Aquis continues to develop its complementary business activities;
a pan-European equity lit market, a multi-asset class technology
licensing service to an international client base and a market data
offering. The Company continued to grow the principal business
activities during the year and this is expected to continue. A
summary of progress in each activity is outlined below.
Aquis Exchange
The Company currently offers clients the ability to trade in excess of
1,600 stocks and ETFs across 14 European markets.
The Markets in Financial Instruments Directive (MiFID II) took
effect from the beginning of 2018. This regulation did have some
immediate impact but a lot of the ramifications of MiFID II are still
yet to transpire. We anticipate 2019 will be another year of change,
with the implications of Brexit and further regulatory reviews. We
are a strong supporter of the regulatory principles such as greater
transparency for markets, that have been introduced and are
committed to complying with market regulation. We believe we are
well placed to benefit from additional regulation given our robust
and agile business model, our lean cost structure and our technology
leadership.
Aquis operates in a dynamic global industry where we will continue
to see both new challenges and opportunities ahead. The Company
continues to perform strongly in an evolving macroeconomic,
regulatory and political environment, including Brexit. With the UK
set to leave the EU in March of this year, Aquis has a responsibility
to ensure the orderly functioning of our markets and we believe has
taken all necessary steps to ensure it can continue to serve its clients
wherever they are located.
During the period, Aquis grew its number of trading members from
24 to 27. In addition, a number of members increased their trading
volumes resulting in increased monthly subscriptions.
Independent studies have verified that Aquis Exchange has materially
lower toxicity than its competitors which lowers the implicit costs of
trading for the end investor. This is a significant positive differentiating
factor and underpins the growth potential.
Since the successful IPO Aquis has increased its investment in
personnel, infrastructure, sales and marketing to help promote future
growth of the business.
Aquis Technologies
In addition to the exchange business, Aquis licences its leading
exchange related technology to a variety of international financial
services clients across different asset classes.
The Company’s flexible business structure and in-house technology
capabilities enable it to react rapidly and efficiently to diverse market
trends and our partnership approach with our customers continues
to enable us to understand their needs against a changing regulatory
and market backdrop and to develop our products and services to
help our clients with the challenges they face.
Aquis Market Data
Aquis Exchange has provided market data free of charge to trading
members and data vendors since the trading venue was launched in
November 2013. From 1 July 2018, the Company began charging
market data vendors £2,000 per month for data from Aquis’
exchange and it now has 12 paying Members. Market data is a
significant revenue generator for the national exchanges and we
believe this revenue stream will become increasingly meaningful over
time.
RESEARCH AND DEVELOPMENT
The Company 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. We believe this gives us a significant competitive
advantage on functionality, price and ability to deliver. The structure
contributes to expedited product development and it provides
the Company with the ability to react quickly to dynamic market
conditions. All developments are expensed as incurred and we will
continue to work on further developments which are expected to
enhance customer growth.
OUTLOOK
In summary, our strategic goal remains to become the leading
exchange services group through delivering best in class exchange
trading opportunities underpinned by our commitment to first class
client services. Our highly capable and experienced management
team remains focused on the opportunities ahead particularly
delivering our short and medium term market share, client and
financial growth targets.
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ANNUAL REPORT & ACCOUNTS 2018
Chief Executive’s Report continued
We enter 2019 confident we can continue to develop both our
exchange and technology businesses to achieve our strategic goal.
We will continue to invest to maintain and enhance our market
position through innovation and development and promote the
Aquis transparent low toxicity market place which will enable our
customers to get better performance and results. In addition, we
believe this approach will deliver strong shareholder returns over the
next few years.
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AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
Strategic Report
Overview of the business
Aquis Exchange is a founder-led, pan-European Multilateral Trading
Facility (‘‘MTF’’) operator and exchange and regulatory technology
developer and service provider. The Company is regulated by the
UK Financial Conduct Authority.
The Company was founded in 2012 with the vision 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 Company’s main focus is to:
• Capitalise on regulatory and technical shifts in market
infrastructure by providing an exchange which offers deeper
liquidity and transparent, 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; and
•
License its proven technology platform to third parties that
require trading or market surveillance technology.
Aquis’ trading platform is a cash equities trading venue with a unique
subscription-based pricing model based on electronic messaging
traffic. The principal competitors to the trading business are the
national exchanges and other pan-European MTFs / Recognised
Investment Exchanges (RIEs) which charge customers on a per
transaction model. Since the Company commenced trading it has
consistently increased its market share which has grown to reach an
average of approximately 3.8% of the overall pan-European market
of continuous trading during 4Q18.
The client base of the trading platform consists principally of
investment banks and brokers acting on behalf of institutions such
as pension funds and asset managers. The Company’s members
are able to trade European securities on 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.
Aquis’ matching engine and surveillance technology is already
established through its daily use as the system that drives Aquis’
trading platform. It has been developed for multi-asset class trading
and is attracting customers wishing to licence the technology as
the trading engine for a broad range of instruments. Its principal
customers are new equity exchanges where the market is opening
up to competition as well as crypto currency exchanges, 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.
Review of the business
The Company continued to grow the principal business activities
during the year and this is expected to continue. The key
performance indicators of the exchange business: market share,
numbers of members and revenue all increased during the year. The
significant available liquidity, approximately 15% of overall
pan-European equity liquidity, was maintained and should underpin
the future anticipated member and market share growth. As
investment managers conform to the new best execution obligations
placed on them by MiFID II, their trading strategies should
increasingly direct intermediaries to take advantage of the available
liquidity at Aquis. The available liquidity provides the Company with
a strong base to attract a wider membership from across Europe and
to facilitate increased trading volumes.
During the year the market experienced high market volatility on a
number of occasions, which the high-performance technology system
managed without incident. Further enhancements have been made
to the core technology during the year which has been important
not only to the continuing success of Aquis Exchange’s daily
exchange activities but also enables the Company to offer state of
art technology solutions and market surveillance capabilities to other
market participants. International interest across a number of asset
classes in the Company’s ability to provide outsourced technology
solutions for other market participants has increased materially during
the year and additional resource has been recruited to support this
expansion.
A key factor that contributed to the development of the business
activities was the strength, experience and commitment of our staff.
Staff turnover remains below market norms.
Financial Review
The adjusted loss for the year before exceptional items and tax
decreased to £2,683,042 compared to £3,276,770 in the previous
year; this is mainly attributable to increased exchange revenue
as members’ subscriptions have risen as a result of increased
trading levels and new revenue from technology licensing offset by
additional costs as the Company continues to invest in personnel
and technological resources. In June 2018 the Company listed on the
AIM market of the London Stock Exchange. The costs incurred for
Listing have been included as exceptional costs.
The adjusted loss reflects the effect of adopting IFRS 15 accounting
for licensing contracts and IFRS 9 impairment provisions on trade
receivables. The application of these standards has resulted in a
impairment release (credit) during the year of £424,194.
The Company’s cash and cash equivalents as at 31 December 2018
were £11.6 million.
Future development of the business
Aquis has invested heavily in the business differentiators, technology
platform, brand and market reputation and personnel resources and
is committed to continue this investment to ensure it maintains its
reputation for innovative, effective quality delivery. The Company has
established a strong position with its clients and the wider investment
community which should support the growth of the business in the
medium term. In addition, Aquis Technology has achieved a very
strong reputation in the market, and this will also support growth
across assets classes and internationally.
In reaching an average of approximately 3.8% of the pan-European
market of equity continuous trading in 4Q18 Aquis has established
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ANNUAL REPORT & ACCOUNTS 2018
Strategic Report continued
itself as a viable alternative to other European exchanges. The quality
of the exchange offering (in particular the depth of liquidity and low
toxicity) which is attractive to both investment banks and brokers
but also to the institutional investor community offers Aquis the
opportunity to continue to grow market share.
In addition the 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 supports future
business growth.
Principal risks and uncertainties
The principal risks and uncertainties of the Company are detailed
in the Directors Report. The risks include the reliance of the
Company on key personnel as well as client and liquidity provision
concentration risk, the risk of technology failure and regulatory
approval and associated regulatory capital requirements and the
potential adverse effects of an exit from the EU.
The Company has comprehensive back up and contingency plans in
place that are tested regularly. The Company initially concentrated
on the large investment banks, brokers and liquidity providers and is
now broadening its client base to reduce client concentration.
The Company has received regulatory approval from the AMF for
a subsidiary to operate an MTF in France, which will enable it to
continue to operate the exchange and licensing activities across the
EU27. There remains a great deal of uncertainty about how
pan-European trading will evolve once Brexit has occurred; however,
the Company has positioned itself to be able to provide equity
trading facilities across Europe to all its clients.
Directors’ duties
The Company has recruited Directors that it considers have the
knowledge, skill and experience expected of a director in that role
including specialist financial, accounting and legal knowledge.
Directors have continued to act, throughout the year, in the way
which they consider, in good faith, would be most likely to promote
the success of the Company for the benefit of all its stakeholders.
The Directors recognise that they must avoid any situation where
they have or can have an interest that directly or indirectly conflicts
with or may conflict with the Company’s interests. Directors are
required to confirm at every Board meeting, if applicable, the nature
and extent of any interest they may have in any transaction or
arrangement to which the Company is or may be a party.
In addition, the Directors have exercised independent judgement
throughout the year and can confirm that they have not accepted
any benefit (e.g. gifts or inducements) from third parties arising
from their position as a director which were intended to induce the
director to act in a certain way.
Stakeholder management
The Board’s direction of the Company is based on ensuring
that decisions are made after taking account of all the principal
stakeholders which have been identified by the Board. The Company
is still relatively young and in creating and building the business
activities it has already been crucial that the Company works closely
with investors, clients, suppliers, regulators, employees and other
affected parties. The success to date and future success of the
Company is dependent on the support of all key stakeholders. Senior
management provide any stakeholder feedback to the Board at each
Board meeting and the Board is developing a more formal plan for
on-going stakeholder engagement.
Personnel management, training and company culture
The Company has a relatively small resource base and therefore has
concentrated on recruiting personnel with a high degree of specialist
skills. The Company provides on-going training and support to
ensure that personnel retain and enhance their technical skills.
The Company has created a positive inclusive culture. The core
Company values are trust, excellence, integrity, collaboration and
transparency undertaken in a pro-active manner with emphasis on
collective responsibility. Team meetings and company briefings are
held on a regular basis to ensure all personnel are informed of the
Company’s performance and key strategic objectives and goals.
The Company is committed to provide training and development
opportunities for its employees and is supportive of community and
charity initiatives. The Company’s business activities do not have a
material effect on the environment.
Company investments, productivity and capital management
The Company has continued to invest it its technology offering
throughout the year. This has included creation of new order types,
enhancements to the surveillance system, technical developments
to prepare for any required Brexit changes and adaptations and
enhancements to the auction system to enable the move into
different asset classes. In addition, the Company has made further
investment in personnel resources and increased its marketing
budget as it continues to develop capability and brand awareness.
The Directors consider that the investments in personnel have had
a beneficial effect on the employee’s productivity which in turn
has increased client numbers, the range of clients and revenue.
The Directors recognise the importance of continuing to enhance
productivity and the commitment to future investment both
technically and in terms of resource training and development
should ensure this continues to progress in a positive direction. The
Company is in the process of establishing both short- and long-
term incentive plans based on performance for all employees which
are set out in more detail in the Nomination and Remuneration
Committee Report and which the Directors’ believe aligns the
employee’s interests with the long-term strategic goals and success of
the Company.
The Company’s activities are not capital intensive. The Company
is required to maintain sufficient capital to meet its regulatory
obligations. These are calculated and updated annually with reference
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AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
This assessment has concentrated in particular on the exchange
market differentiating factors, the quality and resiliency of the
Company’s technology, the brand position / market position and
reputation and the quality and experience of its key personnel
resources.
In the event that there was a fundamental change in the Company’s
prospects as a result of a principal risk materialising the Company
could instigate a cost reduction exercise; however due to the diverse
business lines and low toxicity and cost model the Directors consider
it unlikely that this remedial action would be necessary.
This Strategic Report was approved by the Board of Directors on
19 March 2019 and is signed on its behalf by:
Alasdair Haynes
Chief Executive Officer (CEO) Chief Financial Officer (CFO)
Jonathan Clelland
to the FCA capital requirements – the ICAAP calculation. At
31 December 2018 the ICAAP requirement amounted to £1.8m.
Capital resources in excess of the ICAAP requirement are deployed
to expand and enhance the key business activities; however, these
activities are not particularly capital intensive and therefore the Board
are confident that the existing capital base is sufficient to cover the
existing and future planned activities of the Company.
Viability Statement
The Directors’ have undertaken a detailed review of the Company’s
prospects taking account of the Company’s current position and
principal underlying business risks and its prospects for the period
2019 - 2021. The Director’s consider this to be an appropriate
period taking into account the target business and revenue growth
and the objective to reach breakeven and attain profitability during
this period.
As a result of the Company’s Listing on the AIM market the
equity capital of the Company was increased with the objective of
having sufficient resources for the Company to reach profitability
and to expand its business. As noted previously in the Company
Investments, productivity and capital management section of this
report the Company is in a strong capital position.
On the basis of the Company’s progress during 2018 where the
business has met and in certain areas exceeded its goals and taking
account of its ability to execute successfully its principal strategic
objectives and operating goals the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of their
assessment.
13
ANNUAL REPORT & ACCOUNTS 2018
Audit, Risk & Compliance Committee Report
• Quarterly risk assessment assessing all internal and external
business risks
• Quarterly compliance review
The external auditors did not raise issues during the audit of the
31.12.17 financial statements that required the attention of the
ARCC during 2018. The ARCC reviewed and were satisfied that the
31.12.17 audit was conducted efficiently and effectively. Following
admission to trading on AIM in June 2018 the ARCC decided to
replace Hazlems Fenton the external auditor and appoint a new
external auditor. Four firms were invited to tender and at the end
of the process PwC was appointed in August 2018. The intention
is to review the appointment in 3 years and if the ARCC deems
appropriate put the audit to tender. The PwC audit partner is
Mr. Mike Wallace. PwC does not provide non-audit services to the
Company.
The Company appointed Grant Thornton as its internal auditor in
2013. The ARCC will reassess this appointment during 2019. The
ARCC reviews all internal audit reports in detail and meets Grant
Thornton annually to assess the quality and effectiveness of the
internal audit process and management responses to the internal
audit recommendations.
The Aquis Exchange PLC Audit, Risk and Compliance Committee
(ARCC) is chaired by Mark Goodliffe. Mark joined the Board and the
ARCC in March 2018 and was appointed Chairman in June 2018.
Previously Richard Bennett was Chairman of the ARCC and resigned
as member in December 2018. The other member of the committee
is Mark Spanbroek. As the composition of the Committees
transitioned to comply with the UK Corporate Governance Code
Niki Beattie resigned from the ARCC in March 2018.
There were 4 committee meetings during 2018. Attendance is
summarised as follows:
Director
Niki Beattie
Richard Bennett
Mark Spanbroek
Mark Goodliffe
ARCC meeting
attendance
1
4
4
4
Mark Goodliffe is a qualified chartered accountant (ICAEW), Richard
Bennett is qualified to practise as a solicitor in England and Wales,
Niki Beattie resigned from the ARCC in March 2018.
The Company considers that the ARCC members’ qualifications
and experience enable it to comply with the audit committee
composition requirements.
The role and responsibilities of the ARCC
The ARCC was created in 2013. Terms of Reference (ToR) of the
ARCC were updated in June as part of the admission process to
the AIM market listing. The Board of Directors undertakes an annual
evaluation which includes an assessment of the ARCC performance.
The principal areas that the ARCC focuses on are:
• Review of the financial statements including interaction with the
external auditors
•
Interaction with the internal auditors including planning over
a 3 year period the internal audit schedule and annual audit
reviews
14
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
Nomination and Remuneration Committee Report
The Board recognises that Aquis operates within a competitive environment and that Company performance depends on the individual
contributions of the Directors and employees. It believes in rewarding financial performance and long-term vision and innovation that will help
grow the Company.
NOMINATION AND REMUNERATION COMMITTEE
The Company created a Nomination and Remuneration Committee (the Committee) on 4th December 2017 in anticipation of the Listing
which is responsible, inter alia, for assessing the skills of the Directors, succession planning for the Board and Executive Committee, identifying
and selecting candidates as required as well as assessing and reviewing the remuneration packages of the Directors and other members of the
Executive Committee and approving the remuneration packages for all other employees. It makes proposals for the granting of share options
and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time. All Committee
decisions on these matters are recommended to the Board. The remuneration and terms and conditions of appointment of the Non-
executive Directors of the Company are set by the Board.
The Committee is chaired by the Senior Independent Director Richard Bennett. The other member of the Committee is Niki Beattie. Glenn
Collinson joined the Committee at the start of 2019. The Executive Directors and other senior personnel may be invited to attend meetings
when appropriate to provide advice. However, no director is present or takes part in discussions concerning their remuneration.
There were 7 committee meetings during 2018. Richard Bennett and Niki Beattie attended all the meetings.
The Company has adopted the UK Corporate Governance Code in full except the elements of the Code that relate to Remuneration, which
it intends to adopt for the financial year 2020 onwards. The current remuneration framework is under review post the IPO. The plan is to
transition to a new remuneration framework in 2020 that is more suited to Aquis’ next stage of growth as a listed Company.
For the reasons outlined above the Company does not intend to move a resolution at the Annual General Meeting to approve the
Remuneration Policy. The Remuneration Policy has been reviewed by the Committee with input from senior management and approved by
the Board.
DIRECTORS’ AND EMPLOYEES’ REMUNERATION
The Aquis Remuneration Policy is to motivate employees appropriately in the context of the Company’s objectives and culture and to ensure
it is aligned with shareholder interests. The policy encourages compliance with the requirements and standards of the regulatory system, whilst
taking care to avoid encouraging behaviours which may lead to conflicts of interest and potentially damage the best interests of its members/
clients. It is not the intention to bring employees into conflict with the regulatory regime through inappropriate remuneration policies.
The Board recognises that Aquis operates within a competitive environment and that Company performance depends on the individual
contributions of the Directors and employees. It believes in rewarding financial performance and long-term vision and innovation that will help
grow the Company.
NOMINATIONS
During 2018 there were a number of Board and Committee changes in particular in the lead up to the Listing. The Board had identified the
need to strengthen its experience by the recruitment of an additional director with professional accounting qualification who would act as the
chairman of the Audit, Risk and Compliance Committee (ARCC).
The Board is committed to Equality and Diversity throughout the Company and seeks to attract and retain a diverse and talented workforce
through the recruitment and selection processes. The role was advertised on a specialist NED website, targeting female Directors, as well as
on the Aquis website. Short listed candidates were interviewed by the Committee and senior management. After the interview process Mark
Goodliffe was proposed by the Committee to the Board and was duly elected as a Non-Executive Director and Chairman of the ARCC on
20th March 2018.
On 14th May the Board announced the resignations of Donall McCann and Sean Melnick and on the 8th June the resignations of Jaroslaw
Grzywinski and Izabela Olszewska as Non-Executive Directors.
With the growth in technology sales the Board identified a need to further increase the experience of the Board by recruiting an additional
director with experience in software development, sales and marketing and an understanding of financial markets and fin tech culture. The
Company does not have a Human Resources department and decided to broaden its search by using an HR Consultant to identify suitable
candidates aligned to its policies on equality and diversity who were then interviewed by the Committee and senior management. Glenn
Collinson was proposed by the Committee to the Board and was duly elected to the Board as a Non-Executive Director on 7th January
2019. He has joined the N&RC.
15
ANNUAL REPORT & ACCOUNTS 2018
Nomination and Remuneration Committee Report continued
With the changes made during the year, the Committee believe
that the current composition of the Board and its Committees
is appropriate to meet the Company’s business, regulatory and
governance objectives; however it will continue to keep the position
under regular review when the range of skills and capabilities at
Board level are assessed for their relevance to the execution of the
Company’s strategy. A Board strategy session was held in June 2018
and the wide range of business experience on the Board contributed
to the breadth of discussion.
The Committee supports the ongoing development of the Board
and the Executive team to ensure that the Company retain and
recruit the best talent for its needs and supports the Board. During
the year the Committee considered the likely business needs of the
Company and its existing executive management capability and the
independence, effectiveness and commitment of each of the Non-
Executive Directors. It was satisfied with the contributions and time
commitment of all the Non-Executive Directors during the year.
This year all the Directors will stand for re-election at the Annual
General Meeting with the support of the Board.
The Company undertakes an internal annual Board evaluation.
In 2018 the evaluation required each Director to complete an
anonymous online questionnaire that focused on matters such as
the Board’s performance and collective judgement, the performance
of each of its Committees, the Board’s focus on strategy, innovation
and risk, the relationship between the Non-Executive and Executive
Directors and the performance of the Chairman. The survey included
open questions that encouraged Directors to provide comments
or enabled them to raise any concerns. The output of this survey
was collated and provided to the Board for discussion. The Senior
Independent Director also undertook a review of the Chairman’s
performance with the other Non-Executive Directors. The overall
results were positive with areas for improvement identified and there
were no specific material concerns raised by any of the Directors
to the Chairman or Senior Independent Director, or anonymously
through the online survey.
DIRECTORS’ REMUNERATION
The remuneration of the Executive Directors is designed to attract,
motivate and retain directors of the calibre necessary to effectively
execute the strategic objectives of the Company and to enhance
shareholder return. The remuneration packages are designed to
reflect the success of the Company’s performance while maintaining
a balance between short and long term performance and reward.
The principal strategic objectives of the Company are to enhance
shareholder value through establishing a stable profitable business
based on growing the equity exchange and technology licensing
activities.
The Committee has established the Executive Directors’
remuneration packages after giving due consideration to the
Company’s strategic objectives, business model, competitive
environment and current circumstances as the Company transitions
from private to listed Company and the markets in which it operates.
In 2018, the remuneration model transitioned from a salary and cash
bonus only to also include an EMI options scheme. The Company
16
will be considering its remuneration model in 2019 and will consult
with stakeholders.
The Committee has exercised discretion on the Executive Directors’
remuneration awards, including consideration of the execution of the
strategic plan, annual performance review and the effect of corporate
performance on environmental, social and governance issues.
Aquis maintains a strong commitment to Corporate Social
Responsibility Equality, Diversity and Human Rights. As prescribed by
law, the Company commit that no existing or potential employee will
receive less favourable treatment due to their race, creed, nationality,
colour, ethnic origin, sexual orientation, gender, gender reassignment,
marital status, membership of a trade union, disability, or any other
criteria. The Committee has ensured that the incentive structure for
the Executive Directors does not raise any environmental, social or
governance risk and can confirm no issues of this nature occurred
during the year.
When the Company listed the Admission document set out in detail
the proposed remuneration packages and performance awards
for Executive Directors. No further shareholder consultation was
undertaken during the year.
The Committee determines the appropriate remuneration package
when appointing an Executive or Non-executive Director with
reference to the short term and long term objectives of the
Company.
An Executive Director’s remuneration package has been made up of:
•
Base salary and benefits: at a level to attract, motivate and retain
Directors of the calibre necessary to enhance the strategic
growth of the Company
• Discretionary cash bonus: not to exceed 100% of base salary
and
• Discretionary share awards/options: to align with long term
Company growth and Executive Directors’ and shareholders’
objectives
The award of a discretionary cash bonus is dependent on the
Company and individual performances measured against agreed KPIs.
At the outset of the year, the Board approved KPIs for the Executive
Directors. KPIs were aligned to overall financial targets and to non-
financial targets such as market share and business sustainability. At
the end of the year, the Board assessed financial performance of the
Company and adjusted the pool accordingly. The Board assessed the
Company’s performance against non-financial targets and used this
to adjust individual Executive awards accordingly. Key Management
personnel received a cash bonus in January, after the Company’s full
year results were finalised.
The Non-Executive Director’s remuneration package consists solely
of annual fees. The Non-Executive Directors may not participate
in any pension or share scheme, operated by the Company or be
entitled to any bonus. Each of them is entitled to be reimbursed for
reasonable expenses properly incurred arising from the performance
of their duties as a director of the Company.
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
The Executive Directors’ total remuneration has increased in 2018
(compared to 2017) reflecting the award of discretionary and
performance based reward. The reward has been determined with
reference to the Company and Executive Directors’ agreed financial
and non-financial KPIs and their performance measured against these
targets.
The remuneration of the Directors in the following tables represent
the remuneration paid to the Directors in 2018 and 2017.
2018 (Audited)
Director
Niki Beattie
Alasdair Haynes
Jonathan Clelland
Richard Bennett
Mark Spanbroek
Mark Goodliffe (1)
Note 1: Mark Goodliffe joined the Board in March 2018.
2017 (Audited)
Director
Niki Beattie
Alasdair Haynes
Jonathan Clelland
Richard Bennett
Mark Spanbroek
Currently the Executive Directors do not serve as non-executive
directors at other companies.
The Executive Directors’ remuneration packages include private
health cover (individual and family), permanent health cover and life
assurance cover. The Executive Directors are entitled to join the
pension scheme but have decided to opt-out of auto-enrolment.
In addition to public holidays the Executive Directors are entitled to
25 working days of paid holiday in each complete holiday year.
All Director’s service contracts are available for inspection at the
principal office address.
Employees’ remuneration packages are determined with reference to
market benchmarking surveys. The Company undertakes an annual
review of all employees’ remuneration packages.
In addition to the remuneration packages awarded to the Directors
and employees the Company operates a share-based incentive plan
and a defined contribution pension scheme.
Salary /
Fees
£50,000
£225,000
£225,000
£40,000
£36,250
£32,615
Performance
bonus max
potential
-
£95,750
£95,750
-
-
-
Performance
bonus actual
Taxable
benefits
Total
-
£68,730
£68,730
-
-
-
-
£50,000
£27,263
£27,603
-
-
-
£320,993
£321,333
£40,000
£36,250
£32,615
Salary /
Fees
Performance
bonus max
potential
Performance
bonus
actual
Taxable
benefits
Total
£50,000
£225,000
£225,000
£40,000
£40,000
-
-
-
-
-
-
-
-
-
-
-
£50,000
£6,940
£6,210
-
-
£231,940
£231,210
£40,000
£40,000
EMI Share Option Plan
The EMI Plan is a discretionary share plan, under which the Board
may grant options over Ordinary Shares, to incentivise and retain
eligible employees.
Administration
The EMI Plan is administered in accordance with its rules. The Board,
which acts through the Committee, approves option grants and
determines applicable performance conditions.
Eligibility
The Board may grant EMI options to eligible employees and non-EMI
options to any employee of the group and to such other persons as
may be nominated for option grants. In the case of tax approved EMI
options, full-time working requirements must be met which means
that the employee must be required to work 25 hours a week or,
if less, 75% of the employee’s working time. Employees who have
a material interest in the Company cannot be granted EMI options.
A material interest is either beneficial ownership of, or the ability to
control directly or indirectly, more than 30% of the ordinary share
capital of the Company.
EMPLOYEE SHARE PLANS
The Company operates an Enterprise Management Incentive Share
Option Plan (“EMI Share Option Plan’’) the main features of which
are set out below.
Options may be granted within 42 days immediately following the
end of a Closed Period (which has the same meaning as in the
Market Abuse Regulation (596/2014)) and, if the Board decides
exceptional circumstances justify it, within any other period.
17
ANNUAL REPORT & ACCOUNTS 2018
Nomination and Remuneration Committee Report continued
No consideration will be payable for the grant of options.
Exercise price
The exercise price of options will be the closing price of an Ordinary
Share on the Business Day before the date of grant (and which
cannot be less than the nominal value of an Ordinary Share).
Exercise and lapse of options
(i) Vesting
Options will vest in tranches of one third on the first, second and
third anniversary of the date of grant. The Board may waive or vary
conditions after the option has been granted, provided any varied
condition is considered to be an improvement, no more difficult
to satisfy than the original condition and, unless the variation was
approved in advance by the Company in general meeting, not
materially easier to satisfy.
The last date for exercise of an option will be the tenth anniversary
of its grant. Each option is personal to the option holder and
any transfer of, or the creation of any charge, pledge or other
encumbrance over, the option will cause it to lapse.
(ii) Cessation of employment
In the case of death, an option holder’s personal representative may
exercise his/her options within twelve months of the date of death.
If an option holder ceases to be an employee before the normal
vesting date by reason of injury, ill health, disability, redundancy, the
employing Company no longer forming part of the same group as
the Company or the sale/transfer of the option holder’s employing
Company or business outside of the group, options are exercisable,
during the 60 days from the earlier of the normal vesting date and
the date of cessation.
If an option holder ceases to be an employee before the normal
vesting date for any other reason, any outstanding options will lapse
unless the Board permits the exercise of the options according to
a pro rata time formula during the 60 days from the cessation of
employment.
If an option holder ceases to be an employee on or after the normal
vesting date for any reason other than summary dismissal, the
options may be exercised in the 60 day period following cessation of
employment, and the Board must decide whether the options of an
employee who has been summarily dismissed can be exercised in the
same 60 day period.
(iii) Corporate events
In the event of a takeover, scheme of arrangement or other change
of control of the Company, the exercise of options will be at the
Board’s discretion.
In the event of the voluntary winding up of the Company, the
options are exercisable according to a pro rata time formula at any
time before the resolution for the voluntary winding up is passed.
provision allowing for a roll-over of options provided that, in the case
of EMI options, such new options continue to meet EMI qualifying
conditions.
Rights attaching to Ordinary Shares
Ordinary Shares issued on the exercise of an option will rank pari
passu with the Ordinary Shares then in issue (except in respect
of entitlements arising prior to the date of the allotment). The
Company will apply to the London Stock Exchange for the newly
issued Ordinary Shares to be admitted to trading on AIM.
Limits
The employee share plans will operate over Ordinary Shares that
will be newly issued. The rules of the EMI Option Scheme provide
that, in any 10 year rolling period, not more than 10 per cent of
the Company’s issued ordinary share capital may be issued under
the EMI Option Scheme and under any other employee share plan
adopted by the Company.
Over and above this 10 per cent, 10 year limit, the Company
has not adopted a binding limit for each recipient for issues
under discretionary employee share plans, but the Remuneration
Committee will take relevant investor guidance (amongst other
factors) into account when making awards under such plans.
Awards which are relinquished or lapse will be disregarded for the
purposes of these limits.
Variation of capital
In the event of any variation of share capital by way of capitalisation
(other than a scrip dividend), rights issue, consolidation, sub-division
or reduction of share capital or other variation, the number and
description of shares comprised in subsisting options and the
exercise price may be adjusted by the Board in such manner that
the Board deems to be fair and reasonable in their opinion and with
effect from such date as the Board may determine to be appropriate.
Benefits not pensionable
The benefits received under the EMI Option Scheme are not
pensionable.
Amendments
The Board may make amendments to the rules of the EMI Plan
provided the amendment does not:
(a) apply to options granted before the amendment was made; or
(b) materially adversely affect the interests of option holders, except
where the option holder consents to the amendment.
Further, while the Company’s shares are traded on AIM, no deletion,
amendment or addition to the advantage of option holders may be
made except with the prior approval of the Company in a general
meeting if the deletion, amendment or addition is in relation to:
(i)
the definition of Employee;
(ii) the EMI Option Scheme’s grant limits; or
If the options are not exercised within an appropriate period,
generally 60 days after the relevant event, they will lapse. There is a
(iii) the adjustment of options following a variation of share capital.
18
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
Termination
No options may be granted under the EMI Option Scheme after the
tenth anniversary of its adoption.
In approving the EMI Plan on 7 June 2018 the Board authorised the
issue of options over 5% of the then issued share capital over a two
year period from the Listing, comprising 1,357,478 options. The
Board awarded options over 564,124 ordinary shares with a value
of £1,517,500 in total to all qualifying employees conditional on the
Listing including options to the Executive Directors as part of the
scheme as follows:
Director
Alasdair Haynes
Jonathan Clelland
Number of
options
120,817
120,817
Exercise
price
Vesting dates
£2.69
June 2019 – June 2021
£2.69
June 2019 – June 2021
The options vest in 3 equal tranches and the options are exercisable
for ten years from the vesting date. There are no performance
criteria attached to the vesting or the exercise.
Directors’ shareholding and share interests
The following table summarises the shareholding and share interests
of the Directors at 31 December 2018.
Director
Executive
Alasdair Haynes
Jonathan Clelland
Non-Executive
Mark Spanbroek
Shares
Options
Total
1,551,551
120,817
1,672,368
576,000
120,817
696,817
319,128
319,128
RETIREMENT BENEFIT SCHEMES
Pension obligations
The Company has defined contribution plans. A defined contribution
plan is a pension plan under which the Company pays fixed
contributions into a separate entity. The Company 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 Company 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.
The Executive Directors’ contracts are subject to 6 months’ notice
period.
The unexpired Non-Executive directors service contract terms are
as follows:
Director
Niki Beattie
Richard Bennett
Mark Spanbroek
Mark Goodliffe
Glenn Collinson (1)
Term
June 2019
June 2020
June 2020
June 2021
June 2022
Defined contribution schemes
The Company operates a defined contribution pension scheme for
all qualifying employees. The assets of the scheme are held separately
from those of the Company in an independently administered fund.
Note 1: Glenn Collinson joined the Board on 7th January 2019
The ratio of the salary of the Chief Executive to the average
employee remuneration (excluding Non-executive Directors) was
3.2:1.
The total costs charged to income in respect of defined contribution
plans in 2018 are £207,751 (2017 – £95,690).
Directors’ service contracts terms
The Company contract term policy is to establish Executive
Directors’ notice period in line with market norms and non-executive
directors’ contract terms of 3 years duration.
19
ANNUAL REPORT & ACCOUNTS 2018
Directors’ Report
Board of Directors
Executive Directors
Alasdair Haynes CEO
Appointed to the Board March 2012
Jonathan Clelland CFO
Appointed to the Board October 2012
In addition, Non-executive Directors who served on the Board
during 2018 were:
Jaroslaw Grzywinski resigned 8th June 2018
Donall McCann resigned 14th May 2018
Sean Melnick resigned 14th May 2018
Izabela Olszewska resigned 8th June 2018
Board Committees
The Aquis Board has established two committees the Audit, Risk
and Compliance Committee (ARCC) and the Nominations and
Remuneration Committee (N&RC).
The ARCC is chaired by Mark Goodliffe since June 2018. Previously
it was chaired by Richard Bennett who resigned from the ARCC in
December 2018. Mark Spanbroek, Alasdair Haynes and Jonathan
Clelland are also members. Mark Goodliffe and Mark Spanbroek
have considerable accounting experience, and both have previous
Audit Committee experience which includes financial reporting and
internal control reviews.
The ARCC is responsible for reviewing a wide range of matters,
including reviewing the annual financial statements, internal audit
reports, compliance submissions, MLRO reports, risk assessments
and ICAAP assessments. Minutes of ARCC meetings are tabled at
subsequent Board meetings and a summary review of the ARCC’s
activities is presented to the Board by the chair of the ARCC on a
quarterly basis.
The management team is responsible for ensuring the “right tone
at the top” and that the ethical and compliance commitments
of management and employees are understood and adhered to
throughout the Company. The ARCC supports and provides
guidance on this area. This is achieved through adherence to
the Company’s core values, annual compliance training and a
whistleblowing policy.
The ARCC meets at least 4 times per year. The ARCC advises
the Board on the appointment of external auditors and on their
remuneration for the audit work, and discusses the nature, scope and
results of the audit with the external auditors.
20
Non-Executive Directors
Niki Beattie Chairman
Appointed to the Board January 2013
Richard Bennett Senior Independent
Appointed to the Board March 2014
Mark Spanbroek
Appointed to the Board March 2013
Mark Goodliffe
Appointed to the Board March 2018
Glenn Collinson
Appointed to the Board January 2019
The ARCC has established a comprehensive assessment of the
internal and external risks which could adversely affect the Company.
The risks include all issues identified through the internal audit
assessments. These risks are reviewed quarterly by the ARCC.
The N&RC is chaired by the Senior Independent Director Richard
Bennett. The other member of the N&RC is Niki Beattie. In January
2019 Glenn Collinson joined the Board and the N&RC.
The N&RC is responsible for assessing the skills of the Board as a
whole, succession planning for the Board and Executive Committee,
identifying and selecting candidates as required.
The N&RC supports the ongoing development of the Board and the
Executive team to ensure that the Company retain and recruit the
best talent for its needs and supports the Board in its work to secure
the long-term health of the Company and its strategy for success in a
fast-changing world.
The N&RC is also responsible, inter alia, for assessing, reviewing
and recommending to the Board the remuneration packages of all
Directors and other members of the Executive Committee and
approving the remuneration packages for all other employees.
The remuneration of the Executive Directors is designed to attract,
motivate and retain directors of the calibre necessary to effectively
execute the strategic objectives of the Company and to enhance
shareholder return. The remuneration packages are designed to
reflect the success of the Company’s performance while maintaining
a balance between short- and long-term performance and reward.
The principal strategic objectives of the Company are to enhance
shareholder value through establishing a stable profitable business
based on growing the equity exchange and technology licensing
activities.
In addition to the two Board committees Aquis has created an
Executive Committee and a Management Committee to help
facilitate day-to-day administration management.
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
Governance summary
Directors’ Board and committee attendance during 2018 is summarised below:
Director
Niki Beattie
Alasdair Haynes
Jonathan Clelland
Richard Bennett
Mark Spanbroek
Mark Goodliffe
Dividend
The Directors do not recommend the payment of a dividend.
Audit information disclosure
So far as the Directors are aware, there is no relevant audit
information of which the auditors are unaware and the Directors
have taken all reasonable steps to ascertain any relevant audit
information and ensure the auditors are aware of such information.
Pension obligations
The Directors can confirm that at 31st December 2018 there
were no qualifying third party indemnity provisions nor qualifying
pension scheme indemnity provisions, for the benefit of Directors
of the Company or directors of associated companies and that such
provisions were not in force during the financial year.
Political contributions
The Directors can confirm that no political contributions were made
during the year.
Risk management policies and objectives
The Company’s financial instruments comprise cash and liquid
resources including trade receivables arising directly from its
operations. The main financial risks arising from these financial
instruments are credit, liquidity, foreign currency and interest rate
risk. The Company actively monitors the balances and risks but has
not formulated any hedging policies as the Director’s do not consider
the exposure to be material. The Company does not use any
financial derivatives.
Post balance sheet events
The Directors can confirm that there were no significant post-
balance sheet events.
Future developments
The Company has made significant progress in both its exchange and
technology licensing activities during 2018 and is well positioned to
continue this growth during 2019 and thereafter.
Third party analysis shows that Aquis Exchange is consistently
offering at the best price deeper liquidity than many other competing
platforms. The potential for new customers continues to increase
as the trading opportunities on the Aquis Exchange become more
Board
7/7
7/7
7/7
7/7
7/7
6/6
ARCC
1/1
4/4
4/4
4/4
N&RC
7/7
7/7
widely recognised as does the opportunity for increased trading
volumes. Firms who are focussed on best execution have already
increased their activities on Aquis Exchange and it is anticipated that
others will follow during 2019.
Licensing activities continue to grow across a range of asset classes
in particular as the Company’s brand and reputation strengthens and
regulatory changes generate new requirements for investment banks,
brokers and trading companies. In addition, the continued growth in
the Company’s exchange activities helps promote the quality of the
technology and assist in generating technology licensing opportunities
internationally and across different asset classes through Aquis
Technology.
Research and development
The Company is committed to continue to invest in research
and development to enhance the quality, efficiency, effectiveness
and breadth of its technology. The Company has made significant
progress through the course of the year in enhancing the core
matching engine and introduction of new order types. In addition, the
Company through Aquis Technology has delivered / been mandated
to deliver technology solutions to clients across a number of different
asset classes. This progress reflects the quality and market reputation
of the Company’s technology which is underpinned by the significant
investment in research and development.
Subsidiary companies / Associates / Branches outside of the UK
The Company has established a subsidiary Company in France –
Aquis Exchange Europe SAS. This subsidiary Company received
regulatory approval to operate as an MTF from the Autorité des
Marchés Financiers (AMF) in January 2019. It is the intention that this
subsidiary Company will drive the European growth aspirations of
the Company.
Aquis does not have any other associate companies or branches
outside of the UK.
Share purchases
The Directors can confirm that no acquisitions of Aquis shares were
made by them during the course of the year.
21
ANNUAL REPORT & ACCOUNTS 2018
Directors’ Report continued
Share Capital Structure
AQUIS SHAREHOLDER RETURN 2018
Aquis Exchange PLC listed on the AIM market of the London Stock
Exchange on 14th June 2018. The Company has 27,417,711 ordinary
shares of 10p each in issue.
The shareholders with a significant holding > 3.0% in Aquis at 31st
December 2018 were as follows:
Mr R Ricci
XTX Markets
Miton Asset Management
Invesco Perpetual Asset Management
Mr A Haynes
Banca Akros
Kendall Capital Markets
Canaccord Genuity Wealth Management
Rathbone Investment Management
Mr A Mendelowitz
Mr G Roveda
Schroder Investment Management
7.9%
6.9%
6.2%
6.0%
5.7%
5.1%
5.0%
3.9%
3.6%
3.3%
3.0%
3.0%
At 31st December 2018 there were no securities carrying special
rights and no restrictions on voting rights. At 31st December 2018
4,265,733 shares representing 15.7% of the total issued share capital
were restricted and not in public hands.
The Company operates an Employee Share Incentive Plan (SIP).
The voting rights of the shares held in the SIP trust are managed and
controlled by the SIP trustee.
The Board of Directors has the authority to appoint and remove
a Director. Directors’ appointments are subject to shareholder
approval annually.
There are no significant agreements that would alter or terminate
on a change of control of the Company and no agreements with
directors or employees for compensation for loss of office or
employment that occurs because of a successful takeover of the
Company.
Shareholder return
Since the IPO on 14th June to 31st December 2018 Aquis
shareholders’ return amounts to 114% compared to the AIM market
of the London Stock Exchange which reported a decreased return
for the same period of (23)%.
22
300
250
200
150
100
50
0
14/06/2018
30/06/2018
30/09/2018
31/12/2018
Aquis Share Price (rebased)
AIM Index (rebased)
Source: Factset
Professional development programs
The Company supports the continued development of the Directors.
This is achieved through attendance at in-house presentations.
Corporate Governance
The Company has adopted the UK Corporate Governance code
(UKCG) in full except the elements of the Code that relate to
Remuneration which in intends to adopt for financial year 2020
onwards.
The confirmation of the UKCG adopted by the Company is available
on the Company’s website www.aquis.eu
Carbon Dioxide Emissions
The Company is a financial services exchange with a small number
of personnel and associated office space. The directors have decided
not to include an estimate of the carbon dioxide emissions as they
believe this to be immaterial.
Principal risks and uncertainties
The Company undertook an extensive review of the principal risks
and uncertainties as part of the AIM listing process which were
detailed in the Admission document. The Directors have updated
these risk assessments reflecting the progress the business has made
and other general market, regulatory, economic and political events
during the subsequent 6 months since listing and these assessments
are detailed below:
• The Company is at an early stage of its life cycle and is
dependent on growing customer numbers, trading volumes and
market share.
• To the extent that global, European or UK economic conditions
weaken, the Company’s trading volumes and other businesses
may be negatively affected.
•
If the UK exits from the EU this could impact the regulatory
framework applicable to the Company’s business, or the market
and economic conditions in which it operates. The Company
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
has established contingency plans including obtaining regulatory
approval to operate in the EU to mitigate the risks arising from
Brexit and, the anticipated loss of EU passporting rights.
The financial statements are subject to external audit before being
reviewed and approved by the Board prior to shareholder approval.
Half yearly reports are subject to review by the external auditors.
• The Company operates in highly regulated markets and is
required to maintain sufficient regulatory capital and comply
with all legal and regulatory requirements to necessary to
operate the Company’s business.
Aquis prepares monthly management accounts that are presented
to the Board. These consist of monthly P/L compared with Budget,
Balance Sheet, variance commentary and forecast regulatory capital
surplus and cash flow for the rest of the calendar year.
• The Company’s future development and prospects depend on
its capacity to attract and retain key personnel.
• The Company’s networks and those of its third-party service
providers may be vulnerable to security risks, cyber-attack or
other leakage of sensitive data although the Company takes
precautions to protect data in accordance with applicable laws.
• The Company is exposed to credit risk from third parties,
including customers, clearing agents and counterparties.
• Changes in tax law may result in an increase in the overall tax
burden of the Company and its customers which could have a
material adverse effect on the Company’s business.
• The Company is reliant on copyright, trade secret protection,
database rights and confidentiality and licence agreements
with its employees, clients and others to protect its intellectual
property rights and has taken steps consistent with industry
practice to reduce these risks.
• The Company is subject to a number of laws relating to
privacy and data protection, including the UK’s Data Protection
Act 1988 and the Privacy and Electronic Communications
(EC Directive) Regulations 2003 and the EU General Data
Protection Regulation (GDPR) and has established controls to
protect the confidentiality and integrity of customer information.
• The Company’s Member revenue concentration is relatively high
but reducing as member numbers increase.
Financial reporting process – internal control and risk
management systems
The Company has established review processes, internal controls
and risk management systems in relation to the financial reporting
process.
Aquis has recruited a Board of directors with the relevant financial
and other complementary skills to exercise oversight over reporting
of, and assessment and use of, the Company’s financial information
and to provide robust challenge to management. The principal
committee which oversees this area is the ARCC.
The principal business activities of Aquis have low risk levels, there
are no transaction risks and credit risk is low given that the clients are
large financially secure financial institutions who are invoiced monthly;
however in order to ensure that Aquis reviews and manages the
business risks effectively management maintain a risk register which
addresses all the identified business risks and is reviewed and
assessed by the ARCC on a quarterly basis.
All new exchange members, software licences and expenditure
are authorised by the CFO. New clients are subject to Know Your
Clients (KYC) and Anti-Money Laundering (AML) checks by the
Aquis compliance department. All software licenses are reviewed
and approved by the CFO who also authorises all client invoices.
Aquis utilises an external provider for the internal audit function. The
ARCC approve the departments / functions that are audited. All
key operational departments / functions are audited within a 3 year
period.
Any issues raised by the external audit team will be communicated
to, considered by and logged by the ARCC. The external and
internal audit team are granted access to ARCC and Board
papers and any issues identified by the external audit team will be
communicated to the internal auditors by the CFO.
Aquis has established clear disaster recovery plans which are
tested regularly. The plans focus on the exchange functionality and
Aquis ability to ensure trading activities can continue under any
circumstances and providing support as required for technology
clients. Initiation of the disaster recovery plan is authorised by either
the CEO or the CFO. The crisis management plans include the ability
to manage activities from home and / or the requirement to take on
new premises (temporarily or if necessary, permanently) and include
the ability to access all systems including Aquis’ financial systems.
Access to IT networks, equipment, storage media and program
documentation is restricted to authorised individuals. All Aquis
information is stored in secure dedicated Data Centres. Access to
the data centres is restricted. All information is password controlled
and the IT infrastructure department monitor system usage.
Access to IT systems, programs, master data, transaction data and
parameters and to processing in web-based or web-enabled financial
systems is restricted and password controlled.
Aquis has clearly defined whistleblowing policies which are set out
in the Staff Handbook which is distributed to all employees when
they join the Company. The whistleblowing policies are also included
in the compliance training program which all employees undertake
annually. These policies include escalation of problems and concerns
to senior management and the monitoring of how these are
addressed. The policies provide clear guidance on reporting concerns
including if required to the Chairman. Alternatively, employees can
report concerns directly to the FCA.
Diversity policy
The Company has adopted a formal diversity policy. This policy
reinforces the commitment to providing equality and fairness to all
23
ANNUAL REPORT & ACCOUNTS 2018
Directors’ Report continued
the Company’s employees and not providing less favourable facilities
or treatment on the grounds of age, disability, gender reassignment,
marriage and civil partnership, pregnancy and maternity, race, ethnic
origin, colour, nationality, national origin, religion or belief, or sex and
sexual orientation. The Company is opposed to all forms of unlawful
and unfair discrimination and is committed to recruit, develop and
promote candidates based purely on the merits of the individual.
Statement of Directors’ responsibilities
The Directors are required by the Companies Act 2006 to prepare
financial statements for each financial year that give a true and fair
view of the state of affairs of the Company as at the end of the
financial year, and of the profit or loss of the Company for the
financial year. Under that law, the Directors are required to prepare
the Company financial statements in accordance with International
Financial Reporting Standards (‘IFRS’) as adopted by the European
Union (‘EU’) and have elected to prepare the Company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 101 ‘Reduced Disclosure
Framework’ (UK Accounting Standards and applicable law). In
preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
state whether IFRSs as adopted by the EU and applicable UK
Accounting Standards have been followed, subject to any
material departures disclosed and explained in the Company
financial statements;
present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and
prepare the financial statements on the going concern basis,
unless it is inappropriate to presume that the Company will
continue in business.
•
•
•
•
24
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company, and which enable them to
ensure that the financial statements and the Directors’ remuneration
report comply with the Companies Act 2006 and with regard to
the Company financial statements, Article 4 of the IAS Regulation.
They also have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group
and the Company, and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of
the Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s and the Company’s performance, business model and
priorities.
Each of the Directors, whose names and functions are set out on
page 20 confirm that, to the best of their knowledge:
•
•
the financial statements, which have been prepared in
accordance with the relevant financial reporting framework, give
a true and fair view of the assets, liabilities, financial position and
profit or loss of the Group and the undertakings included in the
consolidation taken as a whole; and
the Strategic report contained within this document includes a
fair review of the development and performance of the business
and the position of the Group and the undertakings included in
the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that the Company faces.
The statement of the Directors’ Responsibilities was approved by the
Board of Directors on 19 March 2019 and is signed on its behalf by:
Alasdair Haynes
CEO
Jonathan Clelland
CFO
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018
Independent Auditor’s Report
To the Members of Aquis Exchange PLC
Report on the audit of the financial statements
Opinion
In our opinion, Aquis Exchange PLC’s financial statements:
•
•
•
give a true and fair view of the state of the company’s affairs as
at 31 December 2018 and of its loss and cash flows for the year
then ended;
have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union; and
have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the Annual
Report and Financial Statements (the “Annual Report”), which
comprise: the statement of financial position as at 31 December
2018; the statement of comprehensive income for the year then
ended 31 December 2018, the statement of cash flows for the year
then ended 31 December 2018, the statement of changes in equity
for the year then ended 31 December 2018; the accounting policies;
and the notes to the financial statements.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as
applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our audit approach
Overview
• Overall materiality: £170,000, based on
5% of average loss before tax over 3
years.
Materiality
Audit Scope
• The scope of our audit and the nature,
timing and extent of audit procedures
performed were determined by our risk
assessment and other qualitative factors.
Key Audit
Matters
• Timing of revenue recognition in relation
to Licence fees.
• Valuation of the expected credit loss for
trade receivables.
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective
judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that
are inherently uncertain. As in all of our audits we also addressed the
risk of management override of internal controls, including evaluating
whether there was evidence of bias by the directors that represented
a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) identified by the auditors, including those which had the
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Timing of revenue recognition in relation to Licence fees
As explained in note 2 to the financial statements, IFRS 15 was
adopted by the company on 1 January 2018. Under this standard,
revenue from contracts with customers relating to licence fees is
recognised once the relevant contractual terms relating to each
performance obligation have been achieved, and other recognition
criteria have been met. This can be either over time or point in time
which impacts the recognition timing of the revenue.
We gained an understanding of management’s process for
identifying revenue and appropriately recognising it under the
requirements of IFRS 15, including identification of performance
obligations and the apportionment of revenue to each obligation.
We reviewed a sample of contracts to determine whether fees
were recognised in accordance with contractual terms under IFRS
15 and that license fees were appropriately recognised as “point in
time”.
25
ANNUAL REPORT & ACCOUNTS 2018
Independent Auditor’s Report continued
To the Members of Aquis Exchange PLC
We focused on this area as this new standard may be applied
incorrectly and certain judgement is required and this creates a risk of
licence fees not being recognised in an appropriate period.
Valuation of the expected credit loss take for trade receivables
As set out in note 2 to the financial statements, the company has
adopted IFRS 9 from 1 January 2018. In adopting IFRS 9, the company
is required to provide for the expected credit loss (“ECL”) of all trade
receivables.
The material inputs to these calculations include probability of default
(“PD”) and loss given default (“LGD”). These inputs are subjective
and for the trade receivables generated from the up-front recognition
of licence fees, there is the risk that inappropriate or incorrect inputs
could lead to a material misstatement in the ECL. Hence this was a
focus of our audit.
We reperformed the calculation performed by management to
recognise revenue in the correct period for all contracts.
In addition, we tested a sample of the cash flows in the underlying
contracts to bank statements to confirm that the contracts had
economic substance.
No material misstatement was identified as a result of this work and
we consider that our procedures are appropriate to mitigate the
risk of misstatement and have concluded that revenue is correctly
recorded in the correct period.
We gained an understanding of management’s process for
calculating the ECL for their trade receivables including identification
of PD and ECL.
We agreed with management’s conclusions that the ECL should be
calculated over the lifetime of the trade receivable.
We challenged management’s assumptions by understanding the
underlying counterparties, their history and regulatory status, and the
expectation leading to the calculation of both PD and LGD.
We stressed both inputs to reasonably possible alternatives for
each material contract and noted that the calculated change in ECL
would be immaterial in the context of our overall materiality.
We recreated the model used by management and confirmed that
it was accurate.
We reviewed the disclosure of the accounting estimate and agreed
that it was appropriate.
No material misstatement was identified as a result of this work and
we concluded that the appropriate assumptions were used and the
impairment of trade receivables is reasonable.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which it operates.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£170,000.
How we determined it
5% of average loss before tax over 3 years.
Rationale for benchmark applied
We believe that profit/loss before tax is the primary measure used by the shareholders in assessing
the performance of the entity, and is a generally accepted auditing benchmark. Given the nature of
the entity, its historical losses, and its future plans to head towards profitability, an average profit/loss
over three years is considered the most appropriate measure, to remove volatility year on year.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £8,500 as well as
misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
26
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Independent Auditor’s Report continued
To the Members of Aquis Exchange PLC
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
•
•
the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the company’s ability to continue to adopt the
going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are
authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the company’s
ability to continue as a going concern. For example, the terms on
which the United Kingdom may withdraw from the European Union,
which is currently due to occur on 29 March 2019, are not clear,
and it is difficult to evaluate all of the potential implications on the
company’s trade, customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify
an apparent material inconsistency or material misstatement, we
are required to perform procedures to conclude whether there is
a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, ISAs (UK) require us also to
report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic Report and Directors’
Report for the year ended 31 December 2018 is consistent with
the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we did not identify
any material misstatements in the Strategic Report and Directors’
Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement
set out on page 24, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only
for the company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
27
ANNUAL REPORT & ACCOUNTS 2018 Independent Auditor’s Report continued
To the Members of Aquis Exchange PLC
Other required reporting
Companies Act 2006 exception reporting
Other voluntary reporting
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• we have not received all the information and explanations we
require for our audit; or
The company voluntarily prepares a Directors’ Remuneration Report
in accordance with the provisions of the Companies Act 2006.
The directors requested that we audit the part of the Directors’
Remuneration Report specified by the Companies Act 2006 to be
audited as if the company were a quoted company.
adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with the
Companies Act 2006.
Mike Wallace (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
March 2019
•
•
•
certain disclosures of directors’ remuneration specified by law
are not made; or
the financial statements are not in agreement with the
accounting records and returns.
• We have no exceptions to report arising from this responsibility.
28
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Statement of Comprehensive Income
For the year ended 31 December 2018
Revenue
Expenses
Gross loss
Impairment credit
Adjusted loss
Exceptional items
Operating loss
Investment revenues
Loss before taxation
Income tax credit
Loss and total comprehensive income for the year
Earnings per share (pence)
Basic
Ordinary shares
A shares
B shares
Diluted
Ordinary shares
A shares A shares
B shares B shares
The income statement has been prepared on the basis that all operations are continuing operations.
There was no other comprehensive income or deficit in the year or the preceding financial year.
Notes
2018
£
2017
£
3,981,910
2,014,590
(7,089,146)
(5,291,360)
(3,107,236)
(3,276,770)
424,194
-
(2,683,042)
(3,276,770)
(1,011,853)
-
(3,694,895)
(3,276,770)
30,139
9,961
(3,664,756)
(3,266,809)
247,389
222,215
(3,417,367)
(3,044,594)
5
5
6
8
11
12
25
13
(21)
-
-
(20)
-
-
-
(515)
(161)
-
(515)
(161)
29
ANNUAL REPORT & ACCOUNTS 2018 Statements of Financial Position
As at 31 December 2018
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Other receivables
Current assets
Trade and other receivables
Current tax recoverable
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Net current assets
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Other reserves
Retained earnings
Total equity
2018
£
2017
(Restated)
£
Notes
14
15
16
18
637,539
541,933
9,020
841,288
2,029,780
18
1,822,690
-
11,609,901
13,432,591
15,462,371
20
892,364
12,540,227
892,364
14,570,007
664,018
282,492
-
276,534
1,223,044
1,453,922
222,215
3,985,541
5,661,678
6,884,722
275,911
5,385,767
275,911
6,608,811
22
23
24
25
2,714,996
17
10,839,981
23,517,321
92,446
-
922,584
(16,908,527)
14,570,007
6,608,811
The notes to the accounts on pages 33 to 48 form an integral part of these financial statements. The financial statements were approved by
the board of directors and authorised for issue on 19 March 2019 and are signed on its behalf by:
J Clelland
Director
A Haynes
Director
Company Registration No. 07909192
30
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Statement of Changes in Equity
For the year ended 31 December 2018
AS RESTATED FOR THE PERIOD ENDED 31 DECEMBER 2017:
Balance at 1 January 2017
Loss and total comprehensive income for the year
Balance at 31 December 2017
YEAR ENDED 31 DECEMBER 2017:
Effect of change in accounting policy
Balance at 31 December 2017
YEAR ENDED 31 DECEMBER 2018:
Loss and total comprehensive income for the year
Issue of share capital
Elimination of Share Premium account
Recognition of share option reserve
Balance at 31 December 2018
Notes
Share
capital
£
17
-
17
-
17
-
Share
premium
account
£
23,517,321
-
23,517,321
-
23,517,321
-
22
22
446,097
10,840,020
2,268,882
(23,517,360)
Other
reserves
£
-
-
-
-
-
-
-
-
Retained
earnings
£
Total
£
(15,407,444)
8,109,894
(3,044,594)
(3,044,594)
(18,452,038)
5,065,300
1,543,511
1,543,511
(16,908,527)
6,608,811
(3,417,367)
(3,417,367)
-
11,286,117
21,248,478
-
-
-
2,714,996
10,839,981
92,446
92,446
-
92,446
922,584
14,570,007
31
ANNUAL REPORT & ACCOUNTS 2018 Statement of Cash Flows
For the year ended 31 December 2018
Cash flows from operating activities
Cash absorbed by operations
Tax refunded/(paid)
Net cash outflow from operating activities
Investing activities
Increase in intangible assets
Purchase of property, plant and equipment
Investment in subsidiaries
Interest received
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Net cash generated from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
31
2018
£
£
(4,021,908)
469,604
(3,552,304)
2017
(Restated)
£
£
(3,003,077)
-
(3,003,077)
(422,522)
(421,934)
(9,020)
30,139
(440,461)
(300,740)
-
9,961
(823,337)
(731,240)
12,000,001
-
12,000,001
7,624,360
3,985,541
11,609,901
-
(3,734,317)
7,719,858
3,985,541
32
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements
For the year ended 31 December 2018
1. ACCOUNTING POLICIES
Company information
The company is a public limited company which is incorporated and domiciled in England and Wales. Its registered office is located at
Palladium House, 1-4 Argyll Street, London, W1F 7LD.
1.1 Accounting convention
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations
issued by the IFRS Interpretations Committee (IFRS IC) as adopted for use in the European Union and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on the historical cost basis.
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.
The comparative balance sheet, cash flows and certain note disclosures have been restated owing to the change in accounting policy and
application. This is further explained within note 25.
1.2 Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources
to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in
preparing the financial statements.
Whilst the company has made a loss in the year, there are substantial cash reserves, and a positive balance sheet, due to high levels of
investment within the company.
Additionally, the directors are confident that the company will begin to generate profits in the coming years. There has been a growth in
revenue of 100% between the current year and comparative year. Additional revenue growth is projected for 2019, with profits forecast
for future years.
1.3 Revenue
Turnover represents amounts receivable for subscription fees and fees receivable for the licensing of software net of value added tax.
All revenue is generated by contracts with customers and is therefore recognised in accordance with IFRS 15, which the Company has
applied for the first time this year.
Revenue for exchange subscription services is recognised in the accounting year in which the services are rendered, by reference to the
ongoing contractual obligation to provide subscription-based services.
Revenue from licensing contracts is assessed for each contract and split into two 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” license under
IFRS 15 and are therefore recognised at a point in time when control of the license passes to the customer.
1.4 Intangible assets other than goodwill
Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any
impairment losses.
Internally developed intangible assets 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 Company has the ability to use or sell the intangible asset
33
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
•
•
•
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
the Company 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.
Intangible assets have been recognised in the financial statements as the Company has concluded that it has been able to reliably measure
the expenditure attributable to the intangible asset during its development.
Amortisation is recognised so as to write off the cost or valuation of the assets less their residual values of their useful lives on the
following basis: The development of trading platforms has been amortised straight line over 3 years.
1.5 Property, plant and equipment
All property, plant and equipment is 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 company 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
Computer equipment
5 years straight line
3 years straight line
1.6 Non-current investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less
any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or
reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as
to obtain benefits from its activities.
1.7 Impairment of tangible and intangible assets
At each reporting end date, the company reviews the carrying amounts of its tangible 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 company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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.
1.8 Fair value measurement
The carrying amounts of financial assets and liabilities with a maturity of less than one year (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.
34
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 1.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand and cash at bank.
1.10 Financial assets
Financial assets are recognised in the company’s statement of financial position when the company becomes party to the contractual
provisions of the instrument.
Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is
determined at the time of recognition.
Financial assets are initially measured at fair value plus transaction costs.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets. The company’s loans and receivables comprise ‘trade and other receivables’, and ‘cash and cash
equivalents’ in the statement of financial position.
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.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when the company transfers
the financial asset and substantially all the risks and rewards of ownership to another entity.
IFRS 9
The Company has adopted IFRS 9 with effect from 1 January 2018. In applying this standard the Company has considered the impact of
the application of an expected credit loss model when calculating impairment losses on its trade and other receivables (both current and
non-current) , In applying IFRS 9 the Company 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.
1.11 Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
Other financial liabilities
The company does not have any financial liabilities “at fair value through profit or loss”.
The company has the following as non-derivative financial liabilities; ‘trade and other payables’ and ‘accrued expenses’.
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.
35
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or upon expiry.
1.12 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.
1.13 Taxation
The tax expense/(credit) represents the sum of the tax currently payable/(repayable) and deferred tax.
Current tax
The current income tax charge 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.
1.14 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 company is demonstrably committed to terminate the
employment of an employee or to provide termination benefits.
1.15 Retirement benefits
Pension obligations
The company has defined contribution plans. A defined contribution plan is a pension plan under which the company pays fixed
contributions into a separate entity. The company 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 company 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.
1.16 Share-based payments
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
36
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 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
not 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.
1.17 Leases
Leases are accounted for in accordance with IAS 17 and IFRIC 4. The company currently only has operating leases which are accounted
for as follows:
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the
statement of comprehensive income in equal amounts over the period of the lease.
1.18 Foreign exchange
Functional and presentation currency
Items included in the financial statements of the company are measured using the currency of the primary economic environment in
which the entity operates (‘the functional currency’) . The financial statements are presented in UK Pound Sterling (£) , which is the
company’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 generally recognised in profit or loss.
All foreign exchange gains and losses recognised in the income statement are presented net within ‘administrative expenses’.
1.19 Research and development
Expenditure on research and development is capitalised in the year in which it is incurred. This represents wages costs of various
personnel involved in developing the exchange platform and surveillance system. This asset is subsequently amortised as explained in
note 1.4.
2
ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN ACCOUNTING POLICIES
The following IFRS interpretations became effective during the financial year beginning on 1 January 2018.
•
•
IFRS 9, ‘Financial instruments’, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 includes revised guidance on the ‘classification and measurement’ of financial instruments, including a new
expected loss model for calculating ‘impairment’ on financial assets and a new general hedge accounting requirements. It also carries
guidance on recognition and de-recognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018 with early adoption permitted. The Company has adopted IFRS 9 with effect from 1 January
2018. In applying this standard the Company has considered the impact of the application of an expected credit loss model when
calculating impairment losses on its trade and other receivables (both current and non-current) , In applying IFRS 9 the Company
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. The Company does consider that these estimates will result in increased impairment and has
reflected this in the Financial Statements.
IFRS 15, ‘Revenue from Contracts with Customers’, IFRS 15 Revenue has replaced IAS 18 Revenue and IAS 11 Construction
Contracts. It applies to all contracts with customers except leases, financial instruments and insurance contracts. IFRS 15 establishes
the principles that an entity shall apply to report useful information to users of financial statements about their nature, amount, timing
and uncertainty of revenue and cash flows arising from a contract with a customer. The new revenue standard supersedes all current
revenue recognition requirements under IFRS. The Company has adopted a modified retrospective application for annual periods
beginning on or after 1 January 2018. This standard was adopted on its mandatorily effective date, and the standard has been applied
on a cumulative basis, recognising the cumulative effect, if any, of initially applying the standard as an adjustment to the opening
balance of retained earnings. The company will continue to assess individual customer contracts for separate performance obligations
37
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
to allocate the correct transaction price where necessary and therefore has assessed the impact of the new revenue standard to be
immaterial.
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:
•
IFRS 16, ‘Leases’, addresses the measurement, classification and recognition of leases. The complete version of IFRS16 was issued in
January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance
leases is removed. The standard is effective for accounting periods beginning on or after 1 January 2019. Early adoption is permitted.
Adoption of IFRS 16 will result in the Company recognising right of use assets and lease liabilities for all contracts that are, or contain,
a lease. For leases currently classified as operating leases, under current accounting requirements the Company does not recognise
related assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual
financial statements the total commitment.
At 31 December 2018 operating lease commitments amounted to £768,150. Further work will be carried out in the course of 2019 to
determine the right-of-use assets and lease liabilities to be recognised on 1 January 2019, during which the Company’s lease profile is likely
to change. Instead of recognising an operating expense for its operating lease payments, the Company will instead recognise interest on
its lease liabilities and amortisation on its right of use assets.
3
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the company’s accounting policies, 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.
Critical judgements
Useful lives of property, plant and equipment
The cost of property, plant and equipment is depreciated over its estimated useful economic life. Management estimates the useful
economic lives of this property, plant and equipment and intangible assets to be 3 years and 5 years respectively. Changes in the expected
level of usage and technological developments could impact on the useful economic lives and the residual values of these assets; therefore,
future depreciation charges could be revised. The carrying amount of the company’s property, plant and equipment and intangible assets
in the statement of financial position is disclosed in note 12 of the financial statements.
Capitalisation of internally generated intangible assets
Internally generated Intangible assets have been capitalised because in management’s judgement the criteria for capitalisation under
IAS 38 has been met. These assets are amortised straight line over a 3 year period.
Critical accounting estimates
Expected Credit Loss of trade receivables: An impairment for the expected credit loss of trade receivables is required under IFRS9.
This impairment is an accounting estimate which is calculated based on the Directors’ best estimates of the probability of default and
subsequent loss given default. The total provision and the credit for the year are disclosed in note 5 of the financial statements. In arriving
at these estimates the Company has assessed the range of possible outcomes within the next financial year in respect of the carrying
values of the assets and liabilities affected and believes it has arrived at a prudent and accurate assessment.
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.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities
are outlined above.
4
CORPORATE INFORMATION
Aquis Exchange PLC (“the company”) is licensed to operate a multilateral trading facility (MTF) enabling members to trade across
fourteen European markets and to provide exchange software under licence.
38
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 5.1 REVENUE
An analysis of the company’s revenue is as follows:
Revenue analysed by class of business
Subscription Fees
Licence Fees
Data Vendor Fees
2018
£
2017
£
3,100,839
1,706,000
737,530
143,541
308,590
-
3,981,910
2,014,590
Subscription fees and data vendor fees are all recognised at point in time as they reflect variable revenue determined on a monthly basis.
Licence fees have been calculated in accordance with IFRS 15. The Company has decided to apply the standard retrospectively by
recognising the cumulative effect of initially applying the standard at the date of initial application in retained earnings using the simplified
transition method with no restatement of comparatives.
The revenue from licensing contracts with customers has been categorised reflecting the nature, amount, customer categorisation,
contract duration and uncertainty of revenue and cash flows.
Category 1 clients are companies in an early stage of business development and Category 2 clients are companies which have been
operating successfully for a minimum of 3 years.
IFRS 15 Licensing
Performance obligation 1 (contract life) : project fees and maintenance
Performance obligation 2 (point in time) : licensing
Other short-term licensing income
5.2 IMPAIRMENT CREDIT
Impairment credit
2018
Category 1
£
2018
Category 2
£
155,850
323,100
-
478,950
2018
£
424,194
40,310
182,280
26,499
249,089
2017
£
-
The impairment credit reflects the IFRS 9 provision release for technology licensing contracts. This release is based on management
estimates of the collectability of contracts over their useful life and is re-assessed annually.
During potential contract assessment and negotiation Aquis assess the potential credit risk of a prospective client prior to committing to
the contract. Aquis credit risk management processes are applied to all trade receivables and are calculated using a lifetime ECL method.
The ECL has been calculated with reference to estimations based on a probability of default (PD) and a loss given default (LGD) analysed
for each individual contract taking into account the nature, amount, customer categorisation, contract duration and uncertainty of
revenue and cash flows.
There were no changes to the estimation methodology over the year.
The credit recognised during the year is the movement between the opening (restated) provision and the closing estimated provision.
There is no impact on transition as there would be no trade receivables generated and therefore no impairment under the previous
standards.
39
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
6
EXCEPTIONAL ITEMS
Exceptional costs
Exceptional costs relate to the costs incurred for the IPO
7 OPERATING SEGMENTS
The company only has one operating segment.
8 OPERATING LOSS
Operating loss for the year is stated after charging/(crediting) :
Exchange losses/(gains)
Fees payable to the company’s auditor for the audit of the company’s financial statements
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share-based payments (see below)
2018
£
(1,011,853)
2017
£
-
2018
£
2017
£
3
(61)
52,500
162,493
449,001
92,446
15,000
83,706
406,515
-
On the 14th June 2018 the company issued 564,124 share options to eligible employees as part of an approved Employee Share Option
Scheme. In accordance with IFRS 2 the Company has estimated the value of these 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.
There is one approved EMI scheme. Options vest in 3 equal tranches, one, two and three years after grant. The options expire after
10 years.
No options vested or were exercised, expired or forfeited during the period.
The options exercise price is £2.69 per share. The weighted average remaining contractual life of options outstanding at the end of the
reporting period amounted to 2 years 5.5 months.
The valuation method used to estimate the fair value of the awards was the US binomial method with an average expiry duration of
5 years, volatility of 24 and risk free interest rate of 1.1067%.
9
EMPLOYEES
The average monthly number of persons (including directors) employed by the company during the year was:
Management
Operations
Business Development
Marketing
IT and Finance
Compliance and Surveillance
40
2018
Number
2017
Number
4
4
3
1
17
3
32
4
4
3
1
16
3
31
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
10
DIRECTORS’ REMUNERATION
Remuneration for qualifying services
Remuneration disclosed above include the following amounts paid to the highest paid director:
Remuneration for qualifying services
11
INVESTMENT INCOME
Interest income
Bank deposits
12 INCOME TAX EXPENSE
Current tax
Adjustments in respect of prior periods
The charge for the year can be reconciled to the loss per the income statement as follows:
Loss before taxation
Expected tax credit based on a corporation tax rate of 19.00%
Effect of expenses not deductible in determining taxable profit
Unutilised tax losses carried forward
Permanent capital allowances in excess of depreciation
Depreciation on assets not qualifying for tax allowances
Research and development tax credit
Taxation credit for the year
2018
£
2017
£
3,184,145
2,208,402
525,376
207,751
323,021
95,690
3,917,272
2,627,113
2018
£
2017
£
840,789
593,150
341,132
231,940
2018
£
2017
£
30,139
9,961
2018
£
2017
£
(247,389)
(222,215)
2018
£
2017
£
(3,664,756)
(3,266,809)
(696,304)
(628,861)
188,180
537,478
8,225
663,238
(29,355)
(58,716)
-
16,114
(247,389)
(222,215)
(247,389)
(222,215)
The company has estimated losses of £18,180,329 (2017: £16,132,673) available for carry forward against future trading profits.
41
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
13 EARNINGS PER SHARE
Number of shares
2018
£
2017
£
Weighted average number of ordinary shares for basic earnings per share
16,433,338
1,670,701
Earnings
Loss for the period from continued operations
EARNINGS PER SHARE (PENCE)
Basic and diluted earnings per share
Basic earnings per ordinary share
Basic earnings per A share
Basic earnings per B share
Diluted earnings per ordinary share
Diluted earnings per A share
Diluted earnings per B share
14
INTANGIBLE ASSETS
Cost
At 1 January 2017
Additions
At 31 December 2017
Additions – internally generated
At 31 December 2018
Amortisation and impairment
Charge for the year
At 31 December 2017
Charge for the year
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017
42
(3,417,367)
(3,044,594)
2018
2017
(21)
-
-
(20)
-
-
-
(515)
(161)
-
(515)
(161)
Developed
Trading
Platforms
£
630,072
440,461
1,070,533
422,522
1,493,055
406,515
406,515
449,001
855,516
637,539
664,018
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 15 PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Accumulated depreciation and impairment
At 1 January 2017
Charge for the year
At 31 December 2017
Charge for the year
At 31 December 2018
Carrying amount
At 31 December 2018
At 31 December 2017
16
INVESTMENTS
Investments in subsidiaries
Fixtures,
fittings and
equipment
£
Computer
equipment
£
Total
£
-
1,115,752
1,115,752
233,669
67,071
300,740
233,669
1,182,823
1,416,492
12,794
409,140
421,934
246,463
1,591,963
1,838,426
-
1,050,294
1,050,294
28,801
28,801
48,801
77,602
54,905
83,706
1,105,199
1,134,000
113,692
162,493
1,218,891
1,296,493
168,861
204,868
373,072
77,624
541,933
282,492
Current
2018
£
-
2017
£
-
Non-current
2018
£
9,020
2017
£
-
The company has not designated any financial assets that are not classified as held for trading as financial assets at fair value through profit
or loss.
Fair value of financial assets carried at amortised cost
Except as detailed below the directors believe that the carrying amounts of financial assets carried at amortised cost in the financial
statements approximate to their fair values.
17 SUBSIDIARIES
Details of the company’s subsidiaries at 31 December 2018 are as follows:
Name of undertaking
Country of incorporation
Ownership interest (%)
Voting power held (%)
Nature of business
Aquis Exchange Europe SAS
France
100.00
100.00
European Equities Exchange
The registered office of Aquis Exchange Europe SAS is 231 rue saint honore, 75001 Paris, France.
43
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
18
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
19 TRADE RECEIVABLES – CREDIT RISK
Fair value of trade receivables
Current
2018
£
2017
£
Non-current
2018
£
1,518,654
1,204,757
7,953
1,208
296,083
247,957
564,754
276,534
-
2017
£
-
276,534
-
1,822,690
1,453,922
841,288
276,534
The trade receivables are stated net of any credit impairment provision as set out previously in Note 5 in accordance with IFRS 9.
Trade receivables (gross)
Credit impairment
Trade receivables net of impairments
20 TRADE AND OTHER PAYABLES
Trade payables
Accruals
Social security and other taxation
Other payables
2018
£
2017
£
2,779,242
2,324,785
(695,834)
(1,120,028)
2,083,408
1,204,757
Current
2018
£
153,144
681,010
10,494
47,716
2017
£
26,926
248,463
522
-
892,364
275,911
The directors consider that the carrying amount of trade payables approximates to their fair value.
21 RETIREMENT BENEFIT SCHEMES
Defined contribution schemes
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately
from those of the company in an independently administered fund.
The total costs charged to income in respect of defined contribution plans are £207,751 (2017 - £95,690) .
44
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 22 SHARE CAPITAL
Ordinary share capital
Issued and fully paid
27,149,966 Ordinary shares of 10p each
100,001 Ordinary A shares of 0.001p each
1,570,700 Ordinary B shares of 0.001p each
2018
£
2017
£
2,714,996
-
-
2,714,996
-
1
16
17
During the year, the company issued 220,015 Ordinary A shares of 0.001p each, and 226,884,029,284 Ordinary B shares of 0.001p each.
The shares were issued at nominal value.
During the year, a variation of rights was passed to reclass all Ordinary A and B shares as one individual class of Ordinary shares, and to
change their designation to 10p Ordinary shares.
During the year, and following the variation of share designation, an additional 4,460,967 Ordinary shares were issued with nominal value
10p per share, and with a premium of £2.59 per Ordinary share.
23 SHARE PREMIUM ACCOUNT
At beginning of year
Issue of new shares
Share capital reduction
At end of year
24 OTHER RESERVES
Reserves relating to share-based payments
2018
£
2017
£
23,517,321
23,517,321
10,840,020
(23,517,360)
-
-
10,839,981
23,517,321
2018
£
92,446
2017
£
-
The reserves relating to share-based payments reflects the estimated value of the approved Employee Share Option Scheme estimated
using a US binomial option valuation model.
45
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
25 RETAINED EARNINGS
At the beginning of the year
Elimination of Share Premium
Loss for the year
At the end of the year
2018
£
2017
£
(16,908,527)
(13,863,933)
21,248,478
-
(3,417,367)
(3,044,594)
922,584
(16,908,527)
Retained earnings at 31 December 2017 have been restated to reflect applying IAS 38 – accounting for intangibles and adopting IFRS 15 –
accounting for revenue from software licences net of credit provisions IFRS 9. The impact on the reserves is summarised below.
Retained earnings at 1 January 2018
IAS 38
IFRS 15 (net of IFRS 9)
Adjusted retained earnings at 1 January 2018
26 OPERATING LEASE COMMITMENTS
Lessee
2017
£
(18,452,039)
664,019
879,493
(16,908,527)
The company leases an office suite under a non-cancellable operating lease agreement.
Amounts recognised in profit or loss as an expense during the period in respect of operating lease arrangements are as follows:
Minimum lease payments under operating leases
2018
£
2017
£
187,968
206,864
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Within one year
Between two and five years
27 CAPITAL COMMITMENTS
There was no capital expenditure contracted for at the end of the reporting year that had not been provided for.
2018
£
230,445
537,705
768,150
2017
£
230,445
691,335
921,780
46
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 28
CAPITAL RISK MANAGEMENT
The company’s objectives when managing capital are:
•
to safeguard the company’s ability to continue as a going concern so that it can provide returns for shareholders and benefits for
other stakeholders; and
•
to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain a strong capital structure, the company may issue new shares, return capital to shareholders or sell assets to ensure
capital adequacy requirements are met.
The company adopts the following policies and procedures in order to manage its capital requirements:
•
•
regular monitoring of its current and expected levels of liquidity to ensure that it has sufficient funds for working capital
requirements; and
regular monitoring of the Return on Assets (ROA) , maintaining a balance between the higher returns that might be possible with
higher levels of borrowings and the advantages and security afforded by a sound capital position.
The ROA is the amount of net loss returned as a percentage of total assets.
Loss for the year
Total assets
Return on Assets
2018
£
2017
£
(3,417,367)
(3,044,594)
15,462,371
6,884,722
(22%)
(44%)
Externally imposed capital requirements to which the company is subject to have been assessed and complied with in the year.
29 RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the directors, who are key management personnel, is set out below in aggregate for each of the categories specified
in IAS 24 Related Party Disclosures.
Short-term employee benefits
30
CONTROLLING PARTY
In the opinion of the directors, there is no single overall controlling party.
2018
£
681,924
681,924
2017
£
463,150
463,150
47
ANNUAL REPORT & ACCOUNTS 2018 Note to the Financial Statements continued
For the year ended 31 December 2018
31
CASH GENERATED FROM OPERATIONS
Loss for the year after tax
Adjustments for:
Taxation credited
Investment income
Amortisation and impairment of intangible assets
Depreciation and impairment of property, plant and equipment
Equity settled share based payment expense
Other gains / losses on transition of accounting standards
Movements in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Cash absorbed by operations
2018
£
2017
(Restated)
£
(3,417,367)
(3,044,594)
(247,389)
(222,215)
(30,139)
(9,961)
449,001
162,493
92,446
406,515
83,706
-
(713,884)
913,439
(933,522)
(1,222,759)
616,453
92,792
(4,021,908)
(3,003,077)
48
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2018 AUDITOR
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
NOMINATED ADVISER & BROKER
Liberum Capital Limited
25 Ropemaker Street
London EC2Y 9LY
PR ADVISER
Alma PR
71-73 Carter Lane
London EC4V 5EQ
DIRECTORS
N Beattie
R Bennett
J Clelland
G Collinson
(Appointed 7 January 2019)
A Haynes
M Spanbroek
M Goodliffe
(Appointed 21 March 2018)
COMPANY NUMBER
07909192
REGISTERED OFFICE
Palladium House
1-4 Argyll Street
London W1F 7LD
BUSINESS ADDRESS
3rd Floor
77 Cornhill
London EC3V 3QQ
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