E X C H A N G E P L C
Annual Report & Accounts 2020
Contents
OVERVIEW
Highlights
Chairman’s Statement
Chief Executive’s Report
Strategic Report
Directors’ Report
Audit, Risk and Compliance Committee Report
Nomination and Remuneration Committee Report
1
6
8
11
26
32
33
FINANCIAL STATEMENTS
Independent Auditors’ Report
Statements of Comprehensive Income
Statements of Financial Position
Statement of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
OTHER INFORMATION
Company Information
51
57
58
59
60
61
61
2020: A year of growth, resilience
and expansion
Profitability reached
Pre tax profit of £0.5m. 2020 was the
first full year of profitability for Aquis
– a significant milestone.
Revenue up 67%
Revenues were £11.5m for the period,
up 67% on 2019.
Exchange business
strong
Despite the COVID-19 and Brexit
headwinds, the Company’s core Aquis
Exchange MTFs saw revenues up 46%
at £7.7m.
AQSE transformation
underway
Acquisition completed in March 2020.
Rule and technology changes made,
spreads down and liquidity boosted.
Cloud project successful
A proof of concept project with
Singapore Exchange and Amazon Web
Services to produce a cloud-based,
world scale exchange was successfully
completed.
Successful transition
to Paris office
January 4th 2021 saw the seamless
transition of virtually all Aquis
Exchange’s trading in non-UK European
shares from London to Paris.
Swiss trading back
February 4th 2021 saw the re-activation
of trading in Swiss stocks after
an 18-month hiatus, following an
equivalence deal between UK and
Switzerland.
ANNUAL REPORT & ACCOUNTS 2020
1
The year 2020 has been a year like no other for Aquis Exchange PLC, the City and
the world. Notwithstanding the headwinds that Brexit and COVID-19 created,
Aquis had much to celebrate in 2020, such as posting its first period of profitability,
the full operational launch of its Paris base and the integration of its newly-acquired
primary listings business Aquis Stock Exchange/AQSE.
The pan-European Aquis Exchange business remained the principal revenue driver
with market volumes and volatility increasing compared to 2019. All the key metrics
improved during the year, despite the extremely challenging environment and the
business is well placed to support its Members through the combination of low
toxicity and significant available liquidity - the key competitive advantages of trading
on Aquis Exchange.
The purchase of AQSE was completed in March and we have since rebranded the
business, undertaken a far-reaching market consultation and have already began to
roll out many of the transformational and innovative plans we have for building this
business into the natural home for growth companies wishing to become publicly-
owned.
During 2020, we also expanded our personnel resources, bringing in more
specialised expertise and investing further in technology. One of the highlights
of the year was the completion of a project we undertook with the Singapore
Exchange and Amazon Web Services to prove the concept that cloud technology
can be deployed for top tier exchange operations, demonstrating the innovative
approach Aquis brings to exchange platforms.
This year, 2021, has begun well, with virtually all our European share trading business
successfully transitioning to our Paris office, the resumption of trading Swiss stocks
in February and a strong pipeline for technology sales and IPOs on AQSE.
Aquis Exchange –
the driver behind
profitability
Aquis Stock Exchange –
creating the home of growth companies
Aquis Technologies –
in World-leading
Cloud Project
In March 2020, as the world succumbed to the grip of the COVID-19 pandemic, your company completed the
successful acquisition of our new primary exchange. The business was renamed Aquis Stock Exchange (AQSE) and so
began a new chapter in the Aquis story.
AQSE is an incredibly exciting business line for Aquis as it gives us the perfect platform to bring our well-known flair for innovation and
desire to improve markets through competition to European IPO market for SMEs. Over the summer of 2020, we undertook a major
consultation process with all our stakeholders. Based on those findings and with characteristic Aquis enthusiasm for positive disruption, we
have set about transforming AQSE in three key ways as set out below.
In one of 2020’s other highlights, Aquis Technologies
(Aquis), together with Singapore Exchange (SGX) and
Amazon Web Services (AWS), worked on a proof
of concept project to demonstrate that complex
exchange architecture and operations can work as
efficiently in the cloud as in physical data centres.
We saw continued strong performance from our core
Aquis Exchange business during 2020, despite working-
from-home restrictions on staff and Members alike.
The pan-European trading business saw revenue rise
46% to £7.7m from £5.3m the previous year. In addition
to the disruption caused by the pandemic, much Brexit
preparation work was undertaken by Aquis Exchange
throughout 2020. This effort was rewarded with a very
smooth transition of business at the start of January
2021, when virtually all of our EU denominated trading
shifted to the Paris office. In a further movement of
liquidity, the resumption of trading in Swiss stocks in
February 2021 saw volumes return to the UK MTF for
the first time since June 2019 .
MARKET SHARE AND VALUE TRADED
Aquis Exchange value traded (EUR)
Market share (incl. auctions)
)
s
n
o
i
l
l
i
B
R
U
E
(
d
e
d
a
r
t
e
u
l
a
V
60
50
40
30
20
10
0
Jan ‘18
M ar ‘18
M ay ‘18
Jul ‘18
Sep ‘18
N ov ‘18
Jan ‘19
M ar ‘19
M ay ‘19
Jul ‘19
Sep ‘19
N ov ‘19
Jan ‘20
M ar ‘20
M ay ‘20
Jul ‘20
Sep ‘20
N ov ‘20
6.0
5.0
4.0
3.0
2.0
1.0
0.0
)
%
(
e
r
a
h
S
t
e
k
r
a
M
THE TRANSFORMATION PROCESS
1
2
3
Increase institutional
& retail investment
• Segmentation into
Apex & Access
• Retail access to IPOs
Raise standards
• Modernise technology
• Enhance regulation
• Improve visability &
branding
Boost liquidity in
trading
• More market makers
• Narrower spreads
AQSE KEY FACTS (as of Dec 2020)
£1.8bn
Value of
securities
5
Companies
valued £100m+
90+
Number of
securities
7
IPOs since
acquisition
16
Sectors
represented
£63m
Average mkt cap
of Apex stocks
5%
Spreads narrowed
to 5% or less
£19m
Average mkt cap
of all AQSE stocks
“While the building of AQSE into a major force in the markets has only
just begun, we feel that we have put in place strong foundations on
which to add more services and functions in the year ahead and to see
our strong pipeline of potential issuers convert into successful IPOs.”
REVENUE
£3.1m
2018
2
SOME OF OUR 2020 NEW ISSUERS
£5.3m
2019
£7.7m
2020
British Honey
Company is a UK
based producer of
spirits, honey and jams.
Incanthera is a specialist
pharmaceutical firm
focused on cancer
treatments.
Vulcan Industries is a group of
companies providing high quality
products and services to the
manufacturing and engineering sectors.
The integration of multicast ensured feasibility as
this functionality is crucial to large global markets.
Aquis was chosen by SGX to take part because of
its demonstrable expertise in delivering consistent
ultra-low latency profiles in physical data centre
environments.
Testing took place over much of 2020 using Aquis’
matching engine, industry standard FIX and Aquis’
own binary trading protocols, as well as market data
run in the cloud by all three parties in their respective
environments. A variability of a mere 4 microseconds
was achieved, which hugely exceeded initial
expectations.
3
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020ANNUAL REPORT & ACCOUNTS 2020
Introducing the Aquis Exchange PLC top team members
THE BOARD OF DIRECTORS
Nicola Beattie
Independent Non-Executive
Chairman
Richard Bennett
Senior Independent
Non-Executive Director
Mark Spanbroek
Independent Non-Executive
Director
Alasdair Haynes
Chief Executive Officer
Jonathan Clelland
Chief Financial Officer &
Chief Operating Officer
Mark Goodliffe
Independent Non-Executive
Director
David Vaillant
Independent Non-Executive
Director
Deirdre Somers
Independent Non-Executive
Director
Subsidiary boards
EXECUTIVE TEAM
AQUIS STOCK EXCHANGE
AQUIS EXCHANGE EUROPE
Michael Berkeley
Independent Non-
Executive Chairman
Alasdair Haynes
CEO
David Vaillant
Independent Non-
Executive Chairman
Graham Dick
CEO
Glenn Collinson
Independent Non-
Executive Director
Mark Goodliffe
Independent Non-
Executive Director
Jonathan Clelland
Executive Director
Glenn Collinson
Independent Non-
Executive Director
Lesley Gregory
Independent Non-Executive Director
Alasdair Haynes
CEO
Jonathan Clelland
CFO, COO
Philip Olm
Company Secretary,
General Counsel AQSE
Graham Dick
CEO, Aquis Exchange Europe
David Attew
Head of Regulatory Affairs
Viet Lee
Chief Technology Officer
Adrian Ip
Head of Technology Sales
COMMITMENT TO DIVERSITY
20-24
25-34
Female
White
AGE
GENDER
Male
RACE
Asian
Black
Mixed
heritage
55-64
45-54
35-44
2020
2019
2020
2019
2020
2019
The data above refers to all Aquis Exchange PLC staff. Board directors are not included.
4
5
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020ANNUAL REPORT & ACCOUNTS 2020 Chairman’s Statement
Total Revenue
£11.5m +67%
2019: £6.9m
£11.5m
£6.9m
2019
2020
£4.0m
2018
Pre Tax Profit
£0.5m
2019: £(0.9m)
2018
2019
£(3.7m)
£(0.9m)
£0.5m
2020
2020 was a remarkable year of transition
and collaboration for Aquis as we successfully
navigated through the most difficult of
circumstances during a global pandemic
to post our first year of annual profits.
Achieving profitability was one of many notable firsts. The
transition of the business towards a more mature state
was also evidenced through the hiring of our first Chief
Technology Officer, the building of our first cloud native
exchange, and the successful completion of the NEX
Exchange Limited deal (now Aquis Stock Exchange Limited,
AQSE) along with its subsequent integration into the business.
We have also seen a significant uptick in gender diversity and,
at year-end, we seamlessly moved trading of the majority of
Aquis Exchange’s EU stocks into our French entity, creating a
significant presence in the European Union outside of the UK.
Although unexpected, the entire business successfully moved
to a completely remote working environment in unprecedented
circumstances. This shows that the business continuity plans
were robust and effective and that the Company’s previously
embedded attitude to flexible working gave it an immediate
advantage in what was a very smooth transition.
Against such an extraordinary backdrop, collaboration was
critical. Aquis staff jointly and successfully navigated the rapidly
changing work environment supporting our clients and each
other during very difficult times. The Board congratulates all
the staff on their handling of the situation and recognises the
changes and sacrifices that people have had to make to their
work and home lives in order to keep the business operating.
It is also very pleasing that the integration of AQSE and the
switch to Aquis systems was completed successfully. The
acquisition was completed one day before lockdown meaning
staff had little chance to integrate in a physical location. Yet it
is clear, through engaging with the staff both remotely and in
person when possible, how well the teams have got to know
each other and have been working together.
Board and Governance
The Board continued to evolve in line with the Group’s
expansion and subsequent corporate governance
requirements during the year. The Aquis Group‘s parent
company, Aquis Exchange PLC now has two subsidiaries
both of which are also financially regulated companies: the
French entity, Aquis Exchange Europe SAS, AQEU, that was
established in case of a no deal Brexit and AQSE, which holds
a UK Recognised Investment Exchange Licence, RIE, that allows
it to offer primary listings as well as secondary markets trading.
6
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 These two entities both require appropriate independent
Board governance at the subsidiary level.
This year we also transitioned to the FCA’s Senior
Management and Certification Regime (SM&CR), which
has increased the accountability of the Executive and the
Chair and ensures that individuals have clearly prescribed
responsibilities which are now assigned to them.
The Board continued its succession planning. Three non-
executive board members, including the Chair, are coming
towards the end of their nine-year tenure over the next one
to two years.
We welcomed Deirdre Somers to the Board of Aquis
Exchange PLC in the last quarter of the year as an
independent non-executive director. Deirdre has 23 years
of stock exchange and trading venue experience across
both primary and secondary markets and, therefore, a deep
knowledge of EU market structure and regulation. She was
the Chief Executive Officer of the Irish Stock Exchange from
2007 to 2018, leading its transformation from a relatively small
domestic equity exchange to a highly profitable Plc with global
specialisms.
Lesley Gregory joined the Board of AQSE as an independent
non-executive director during the year. Lesley has experience
as the CEO, and now as the chairperson, of leading
international law firm, Memery Crystal. She has significant
experience in advising private growth companies as well as
other organisations.
Culture, Stakeholder Engagement
and Section 172 Duties
The Board continued its engagement with key stakeholders,
particularly focusing on employees and shareholders.
I continued as the appointed representative of the Board to liaise
with employees and engaged informally with small groups of staff
remotely during lockdown and in person, when permitted. We
also undertook our second annual employee engagement survey
and overall feedback continued to be positive.
Following on from our initial shareholder engagement meetings
in 2019, the Chair and various members of the Board have
continued with a program to meet with key shareholders when
possible either in person or remotely. A cross-section of Board
members were encouraged to participate in different meetings.
The Board discharged its Section 172 (1) duties in a number
of ways, details of which are set out on page 14 and include
considering employees well-being during a very difficult year,
undertaking considerable training and our first independent
board evaluation to maintain high standards of conduct and
improve the Board’s effectiveness. We also spent significant time
focusing on strategy and succession planning for the Board and
the Executive.
Environment, Social and Corporate Responsibility
The Board recognises the Company’s broader responsibility
to grow sustainably. As an exchange operator, we realise that
we have an important role in the economy by bringing issuers
and investors together. We, therefore, have an opportunity
to make a difference not only through our own actions but
also by creating an environment for other companies and
investors to make a difference.
From the outset Aquis has been committed to improving
markets by maintaining the utmost transparency and least
market toxicity for the benefit of the end investor. With
the acquisition of AQSE in 2020, we can further stimulate
growth in the economy by listening to the needs of issuers
and creating a supportive, fair and low-cost environment for
capital raisers to list instruments, particularly for innovative
young companies. We are committed to educating and
collaborating with these issuers about the expectations and
benefits of creating and adhering to ESG policies.
We realise that our whole approach to ESG is part of a longer
journey, which is only just beginning. To date our focus has
been on ad hoc steps such as integrating diversity objectives
into our business plans and cultural thinking or encouraging
voluntary initiatives that consider the environment and the
impact of our consumption. These are set out in more detail
in the Strategic Report page 15. We have seen meaningful
results in these focus areas but we now need to embed a full
ESG plan into our strategy.
Our focus for the year ahead
The UK’s transition away from the European Union and the
COVID-19 pandemic continue to bring uncertainty but,
based on our experience in 2020, we expect to continue
with uninterrupted service supported by our flexible remote
working structure.
A significant part of the secondary exchange trading business is
now being run out of France and the aim is to continue to further
develop the office there and to build relationships both within
the EU 27 markets as well as within the UK. We also intend to
capitalise on the success of the cloud project and our growing
reputation for building world-class exchange technology.
Our Board will undergo further planned changes as the longer
serving Non-Executive Directors retire from the Board but
we aim to maintain stability and corporate memory through
our on-going commitment to succession planning.
The Board will continue to be focused on ensuring the
business delivers on its strategy across all the aspects of the
business, managing risks, building sustainability and developing
an appropriate framework for growth.
Niki Beattie
Independent Non-Executive Chairman
7
ANNUAL REPORT & ACCOUNTS 2020 Chief Executive’s Report
Very strong growth
from higher
trading levels
in the equities
trading division
were supplemented
by growth in the
technology and
data divisions,
together with the
acquisition of
AQSE.
The year of 2020 was a landmark year for Aquis as the Group
achieved its first net profit, made substantial progress across its
various business activities and successfully completed and integrated
its first acquisition, all during one of the most difficult environments
that I, and probably most others, have ever experienced.
The Group dealt comfortably with the volatile market conditions
during March and April and running the exchange platforms remotely
during the lockdown. It also managed to grow market share of the
pan-European equities market, achieving 4.7% market share of all
trading including auctions during 4Q20, compared to 4.2% during
4Q19. In addition, the Group reported a 67% growth in revenue to
£11.5 million. Alongside this progress, we achieved a key milestone
for the business when we completed the strategic acquisition of
AQSE.
Very strong growth from higher trading levels in the equities trading
division was supplemented by growth in the technology and data
divisions, together with the acquisition of AQSE. Our success
continues to be driven by the compelling nature of our subscription
model and the strength of our industry-leading exchange software
platform. We offer a faster and more reliable trading venue than
many international trading venues to all market participants; the
benefits are clearly now flowing through into improved financial
results. The pre-tax profit of £0.5m in 2020, compared to a loss of
£0.9m in 2019, is a significant step forward and provides the platform
to grow the main secondary market exchange and technology
licensing business streams and primary exchange business through
AQSE so as to increase revenue across the Group.
Aquis Exchange
Over the period, the secondary market multilateral trading facility
(“MTF”) platforms operated by the Group delivered growth despite
challenging economic and regulatory conditions. The number of
trading members grew from 30 to 33 and a number of members
increased their activity levels, leading exchange revenue to increase
46% to £7.7m.
Market share of all pan-European trading including auctions and
dark pools has risen from 4.2% to 4.7% over the last 12 months
and from 1.8% at the time of the IPO in June 2018. Our Market at
Close (“MaC”) order type, launched in August 2019, made a positive
contribution to trading volumes on the platform and we anticipate
will grow further during 2021. As the MaC allows members to enter
orders for matching on the Aquis platform at the closing price of the
primary market, we now operate across a larger cross-section of all
available trading.
Aquis Exchange offered clients the ability to trade in excess of
1,500 stocks and ETFs across 14 European Markets as at the end
of December 2020. We were not able to offer trading in the Swiss
market during 2020. However, following the UK / Swiss agreement
8
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
at the beginning of 2021, we were able to start trading Swiss stocks
again on the 4th February 2021. The available liquidity, approximately
23% of total pan-European equity liquidity, increased by 3% from
20% in 2019 and should underpin future market share growth.
In March 2019, the Company established a French subsidiary with
full regulatory approval to operate an MTF covering the European
Union, AQEU. Despite the uncertain political situation in the UK
throughout 2020, the Group completed its Brexit plans on schedule
and is now able to maintain uninterrupted service.
Brexit and COVID-19 were major headwinds during the period and
it is very encouraging that we have delivered such strong growth
despite these issues and further demonstrates the highly competitive
nature of our exchange business. This performance during a very
challenging period is reflective of the significant efforts by all the
Aquis employees during long periods of remote working.
Aquis Technologies
In addition to the exchange business, Aquis licenses its leading
exchange related technology to a variety of international financial
services clients across different asset classes. Revenue from
technology licensing in 2020 grew to £2.3 million, reflecting the
increasing interest in our high-calibre, in-house technology.
Aquis Technologies continues to develop its technology platforms to
support growth across different asset classes internationally. One of
the highlights of the year was the successful proof of concept project,
undertaken in collaboration with Singapore Exchange (SGX) and
Amazon Web Services (AWS) to create a cloud native exchange.
Aquis Market Data
Data revenues increased 165% in 2020 to reach £0.9m buoyed by
the inclusion of AQSE data revenues. Data is seen as a key pillar of
the Aquis strategic plan and we expect that it will contribute to the
revenue streams of all 3 Aquis divisions over time.
One such aspect is the possibility of a consolidated tape for Europe.
Introducing a consolidated tape in Europe should improve the
quality and pricing of market data and lead to a fairer distribution
of data fees across the various European exchanges. The Group
is continually monitoring European Commission plans and market
demand to introduce such a tape and is well placed to understand
and grow the Group’s data activity as this market in Europe develops.
Primary Markets: Aquis Stock Exchange (AQSE)
In March 2020, we completed the acquisition of 100% of the share
capital of NEX Exchange Limited from CME Group Inc. for the
nominal amount of £1 plus the current working capital held by NEX
Exchange Limited, the majority of which comprised regulatory cash
and which amounted to £2.88m at the transaction date.
The acquired company, rebranded as Aquis Stock Exchange Limited
(AQSE), had at 31st December 2020, 87 companies quoted on
its two markets, with a total market capitalisation of approximately
£1.8bn. It works with 49 registered brokers and 8 market makers.
Following the acquisition, we successfully concluded a consultation
period with industry participants in order to assess opportunities
to enhance the market functionality. This has led to us launching an
innovative market making scheme, which we believe will significantly
enhance liquidity and narrow spreads of stocks. For the 91/2 months
ended 31st December 2020, AQSE delivered revenues of £1.2
million and a loss before tax of £0.5 million.
The acquisition has provided us with the ability to operate a
Recognised Investment Exchange (RIE) giving our business the same
status as the large national exchanges in Europe and providing further
resilience in the face of possible regulatory headwinds.
Underpinned by the Group’s proven technology and a track record
of transparency and innovation, I am confident that we have the
ability to build AQSE into a competitive and disruptive primary
marketplace, particularly as MiFID II continues to put the traditional
business model of national exchanges under pressure. I believe that
we have a unique opportunity to build a pan-European, technology-
driven, listing exchange for growth companies, overcoming several
issues faced by small and mid-cap market participants today.
Further Investment in Research and Development (R&D)
The Group continues to invest in R&D in order to maintain and
enhance the quality of its technology and its ability to be able to
deliver new products and platform enhancements to its clients.
Our proven trading platform has been developed in-house and is
based on proprietary technology, which does not rely on third party
software suppliers. The effectiveness and reliability of our technology
was a major factor in dealing with COVID-19 and the requirement
to adopt remote working which was achieved seamlessly. The quality
of our technology underpins our Group strategy and is also one
of the principal reasons for the growth in our technology licensing
business.
I believe this structure and continued investment in R&D gives us a
significant competitive advantage on functionality, price and ability to
deliver. Aquis’ nimble technology organisation ensures expeditious
product development and, together with Aquis’ further investment
into its sales organisation, will allow the Group to react quickly to
dynamic market conditions. We intend to continue to work on
further developments which will foster future growth.
Resources
We have also invested in personnel resources across a number of
departments in particular the sales and technology activities and
strengthened the Executive Committee.
Outlook
There remains significant macro-economic uncertainty given the
continued presence of COVID-19 and the lack of certainty of the
full impact of Brexit; however, I believe that our strong team and
technology platform should enable us to overcome these and
future challenges. Our technology systems dealt efficiently with the
higher messaging volumes caused by increased volatility in trading
earlier in the year and we have an effective remote operating
capability in place. Although the longer-term economic impact is
harder to predict, such that it is difficult to forecast the effect on the
broader Group for the time being, I remain confident in our unique
9
ANNUAL REPORT & ACCOUNTS 2020 Chief Executive’s Report continued
proposition and that we are ready to achieve the next level of
operational, financial and strategic success.
We continue to invest in our business to ensure that we maintain
our ability to grow. This investment should support the aim of
broadening and improving our market position through innovation
and excellence. We will continue to promote the Aquis values of
transparency, fairness and simplicity, enabling our end customers to
get better performance and results.
In addition to tackling the issues of small and mid-cap trading through
the AQSE initiatives, our aim in the future will be to deliver robust
and sustainable returns for the benefit of shareholders and all our
other stakeholders in the medium and long term. Despite the
unprecedented situation which we, together with the whole world,
continue to face, our highly capable and experienced management
team remains focused on serving our clients as we grasp the
opportunities ahead and, in particular, on delivering our shared goals,
and our vision for transformation of primary markets for small and
mid-cap stocks.
Alasdair Haynes
Chief Executive
10
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Strategic Report
Overview of the business
Aquis Exchange Plc (“Aquis” or “the Company” or “the Group”), is
a pan-European Multi-Lateral Trading Facility, (“MTF”), operator that
provides secondary market trading in Pan European stocks that are
listed on other exchanges. It also provides exchange and regulatory
technology to third parties. On 11 March 2020, it acquired NEX
Exchange Limited (“NEX Exchange”), a Recognised Investment
Exchange (“RIE”) which has been rebranded Aquis Stock Exchange
Limited (“AQSE”) and which runs as a subsidiary providing primary
markets for small and medium size issuers and secondary market
trading in those stocks. The Company also has a French subsidiary,
Aquis Exchange Europe SAS, AQEU, an MTF established to enable
European clients to continue to trade EU stocks, which provides
secondary market trading in EU 27 stocks listed on other exchanges.
The Company is regulated by the UK Financial Conduct Authority
with two subsidiaries: a French subsidiary, AQEU, an investment
firm incorporated in France, that received regulatory approval to
operate as an MTF from the Autorité de Contrôle Prudentiel et
de Resolution (“ACPR”), effective in March 2019 and AQSE, a UK
regulated Recognised Investment Exchange.
Following the UK’s exit from the EU, 99% of all EU continuous
trading moved from the exchange business in London (AQXE) to
AQEU on 4th January 2021. This move was handled seamlessly.
The Group’s objective is to become the leading technology
driven exchange services group and to introduce competition and
innovation to the securities trading market. With these guiding
principles the Group’s main focus is to:
• Capitalise on regulatory and technical shifts in market
infrastructure by providing an exchange which offers deeper
liquidity and transparency, and higher quality execution for
intermediaries and investors;
• Continue to increase the number of members and associated
trading volumes by providing a robust and innovative platform
that responds to their needs;
•
•
License its proven technology platform to third parties that
require trading or market surveillance technology; and
Positively address the current market issues of spread and
liquidity in small and mid-cap trading through AQSE’s RIE status
The trading platform for all Group entities is run on the same trading
technology and all entities apply a unique subscription-based pricing
model based on electronic messaging traffic and a lit market. This
means that the dealing price prior to the trade is transparent to the
whole market. This is in contrast to pricing on dark and grey markets,
where price discovery is only available to the market post-trade.
AQXE and AQEU MTFs apply a non-aggressive trading model,
which means that certain types of trading behaviour are not allowed,
and it encourages more passive trades to rest in its order book. This
creates greater depth of liquidity and less potential for information
leakage or “toxicity” in the market. Independent studies have verified
that Aquis’ non-aggressive trading model has materially lower toxicity
than its competitors, which reduces adverse price movements
thereby lowering the implicit costs of trading for the end investor.
This is a significant positive differentiating factor and underpins our
continued growth potential.
AQSE is focused on creating a primary market for growth company
issuers and a secondary market for the trading of their stocks.
The client base of all three entities consists, principally, of investment
banks and brokers acting on behalf of institutions such as pension
funds, asset managers and retail brokers to execute their orders and,
in the case of AQSE, it includes the issuers who wish to raise capital
on the platform.
The principal competitors to Aquis businesses are the national
exchanges and other pan-European trading venues. In secondary
markets they charge customers on a per transaction model and allow
fully aggressive trading.
Since Aquis commenced trading it has consistently increased its
market share of EU secondary markets trading, which has grown to
reach an average of 4.7% of the overall pan-European market of all
trading including auctions and dark pools during 4Q20. This business
is well positioned to benefit from regulatory changes, which support
transparent, low toxicity growth on “lit” markets. The regulatory
trends and institutional support for greater transparency in European
equities trading also support future business growth.
Aquis’ matching engine and surveillance technology has been
operating successfully for a number of years. It has been developed
for multi-asset class trading and is attracting customers wishing to
license the technology as the trading engine for a broad range of
instruments. The Company’s principal technology customers are new
equity exchanges where the market is opening up to competition as
well as exchanges specialising in digital assets, MTF operators across
asset classes and market participants requiring real time market
surveillance. Competitors of the licensing business are other matching
engine providers and surveillance software providers.
We are a strong supporter of the regulatory principles such as
greater transparency for markets that have been introduced and we
are committed to complying with market regulation. We believe
that we are well placed to benefit from the anticipated additional
regulation given our robust and agile business model, our lean cost
structure and our technology leadership.
The Board has established clear financial and non-financial KPIs for
the senior executives in relation to the performance of the Group.
For 2020 these were revenue, operating profit, market share of the
exchange platform, quality of technology and its sustainability and
compliance with regulations and corporate governance. Further
details are given in the Remuneration Report.
11
ANNUAL REPORT & ACCOUNTS 2020
Strategic Report continued
Financial Review
It has been a year of very strong revenue growth during 2020. A breakdown is as follows:
Revenue analysed by class of business
Subscription fees
Licence fees
Issuer fees
Data vendor fees
Group
2020
£
2019
£
YoY Growth
%
7,738,284
2,319,700
524,402
894,867
5,285,000
1,269,362
0
337,632
11,477,253
6,891,994
46%
83%
N/A
165%
67%
The Group generated an operating profit (profit before interest,
taxation, depreciation and amortisation) for the year of £1.52m
compared to a £0.01m operating loss in the previous year. The
move from an operating loss to profit for the 2020 financial year is
primarily attributable to increased exchange revenue as members’
subscriptions have risen as a result of increased trading levels, as well
as increased revenue from new technology licensing contracts that
were signed, delivered and/or renewed during the year.
The trade receivables resulting from revenue from licensing
technology contracts attract an IFRS 9 (impairment provision on
the trade receivables arising from contract assets). This year the
application of IFRS 9 has resulted in an impairment provision during
the year of £100k (2019: £284k reversal).
The profit before taxation for the 2020 financial year of £0.5m
compares very favourably with the loss before tax in 2019 of
£0.9 million. The profit before taxation is after applying amortisation
charges to internally generated intangible assets, as well as
depreciation and finance charges, which reflect the accounting
treatment of leases under IFRS 16. The lease liability is amortised
over the life of the lease, attracting a finance expense charge
amounting to £35k for 2020, whereas the right of use asset is
depreciated on a straight-line basis over the life of the lease,
attracting a depreciation charge of £173k for 2020. These costs are
in line with the 2019 results.
The Group’s cash and cash equivalents as at 31 December 2020 were £12.3 million (2019: £11.0 million) with a cash conversion rate of in
excess of 100%. Total assets grew 14% to £18.8m while total equity grew 9% to £15m.
Group balance sheet at 31.12.20
Cash
Total assets
Total equity
Group
2020
£
2019
£
YoY Growth
%
12,268,418
11,010,861
18,814,123
16,441,274
15,008,332
13,752,006
11%
14%
9%
Group investments, productivity and capital management
The Group hired its first Chief Technology Officer during the
year and has continued to invest in its technology offering. This
has included the creation and enhancement of new order types,
enhancements to the surveillance system and auction systems, as well
as technological development to enable the move into different asset
classes and a proof of concept project to develop a cloud native
exchange. In addition, the Group has made further investment in
personnel resources as it continues to develop capability and brand
awareness.
The Group is required to maintain sufficient capital to meet the
regulatory obligations for all entities. These are calculated and
updated annually. At 31 December 2020 the Company ICAAP
requirement amounted to £3.2m (2019: £2.6m). The individual
entities of the Group meet the respective FCA and ACPR capital
adequacy requirements with plenty of headroom for further
investment in business operations.
12
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Regulatory capital requirements to which each entity within Group is subject to have been assessed and complied with in the year. An
assessment of the excess of regulatory capital for each individual entity is as follows:
Aquis Exchange PLC
Aquis Exchange Europe SAS
Aquis Stock Exchange Ltd
Total equity
16,344,234
14,129,957
3,841,776
2,881,470
Regulatory capital requirements
3,204,216
2,623,363
730,000
730,000
Excess
13,140,018
11,506,594
3,111,776
2,151,470
2020
£
2019
£
2020
€
2019
€
2020
£
2,657,790
2,446,000
211,790
2019
£
–
–
–
The Board considers that its investments have contributed to the
Group’s ability to gain new clients, broaden its customer base
and increase revenue. The Group recognises the importance of
continuing to enhance productivity, and the commitment to future
investment, both technically and in terms of resource training and
development. The Group has established both short and long-term
incentive plans based on performance for all employees, which
are set out in more detail in the Report of the Nomination &
Remuneration Committee and align the employees’ interests with
the long-term strategic objectives of the Group.
In deciding its investment plans, Group management receive a
detailed analysis of the exchange and client technical opportunities
and related time requirements on a quarterly basis, and then
determine the personnel and other resources that it wishes to
allocate to these opportunities. This information also includes an
estimate of the deployment cost.
The acquisition was concluded on 11th March 2020 with book value
for cash, receivables (net of provisions) and liabilities. The acquisition
did not include any loans, finance leases or any other class of
receivables nor any other liabilities or contingent liabilities.
The acquisition consisted of:
• Cash: £2.6m
• Receivables (net of provisions): £0.7m
• Goodwill generated on acquisition: £0.1m
• Creditors and deferred income: £ (0.5m)
Related acquisition costs (legal and professional fees) were
recognised as an expense in the 2019 Aquis financial statements and
amounted to approximately £0.2m.
Future development of the business
Stakeholder Management
In order to support its long-term vision and in order to strategically
position for continued growth, Aquis has invested significantly
in its business differentiators, the technology platform, brand
and personnel resources which includes a 50% increase in R&D
technology investment in 2020. The Group is cognisant of the
importance of such investments to maintain innovation and strong
quality delivery.
AQSE Acquisition
In March 2020, the Company completed the strategic acquisition
of 100% of the share capital of NEX Exchange Limited, now
AQSE, from CME Group Inc. for a cash consideration of £1, plus
approximately £2.9m based on NEX Exchange’s current working
capital levels at the time of transfer.
Based on the audited financial accounts for the year ended 31 March
2020, AQSE delivered revenues of £1.6m and a loss before tax of
£1.6m. The Group has brought the year end of AQSE in line with
other Aquis Group companies and so the consolidated results to
31 December 2020 include the 9 ½ months results for AQSE from
12th March 2020 to 31st December 2020.
The deal anticipated some synergies across the Group’s exchange
memberships, data offering and use of technology and the Group
has already started to deliver on these, particularly in successfully
transitioning AQSE onto the Aquis technology platform in
September 2020.
The Group complies with the requirements prescribed by S172 of
the Companies Act to disclose how the Company promotes its
success for the benefit of all stakeholders.
The Board is acutely aware that the Group’s long-term success and
sustainable value creation is critically reliant on maintaining good
relations with all stakeholders and ensuring that decisions are made
after taking account of the principal stakeholders’ interests. Specific
stakeholder considerations undertaken by the Board this year
included, but were not limited to, the critical analysis and assessment
of decisions such as the integration of AQSE, Aquis’ handling of
the COVID-19 issue, changes in Director’s remuneration and the
Group’s Brexit strategy.
In arriving at these decisions, the Board has assessed the likely
consequences of any decision in the long term, the interests of
the Group’s employees, the need to foster the Group’s business
relationships with suppliers, customers and others, the impact of the
Group’s operations on the broader community, the desirability of
the Group maintaining a reputation for high standards of business
conduct, and the need to act fairly between shareholders of the
Company.
Details on how Aquis and its Board engage with its principal
stakeholders, are given below.
13
ANNUAL REPORT & ACCOUNTS 2020
Strategic Report continued
Clients
Management pro-actively gathers regular feedback from clients, both
positive and negative, in order to understand their ever-evolving
needs, identify any improvements that would result in better client
outcomes or satisfaction and to foster good client relations. This
is regularly fed to the Board at meetings or on an ad hoc basis, if
required.
Shareholders
Executive Management meet with the key shareholders at
appropriate times during the year and provide feedback to the
Board.
Additionally, following on from the successful shareholder
engagement program in 2019, the Chair and other Non-Executive
Directors continued, where possible, to engage with a subset of key
shareholders through one-on-one meetings during the last quarter of
2020 to ensure that their views and opinions are clearly understood.
Shareholders have been extremely appreciative of these meetings
and feedback is provided to the Board in both written and verbal
updates.
Employees
The Group promotes a positive and inclusive culture. Team
meetings and Group briefings are held on a regular basis to ensure
all personnel are informed of the Group’s performance and key
strategic objectives and goals. In addition, the Chair continued in
her role as the Board’s nominated representative for employee
engagement and facilitated meetings with employees so as to ensure
that their voices are heard through an independent ear for the
Board.
This was complemented by an employee engagement survey, which
allowed employees to provide feedback in confidence. Our first
employee engagement survey took place in 2019 and a further
survey was undertaken in 2020. Overall feedback continued to be
positive. An action plan had been developed to address the key
areas highlighted in the 2019 survey with particular emphasis on
our core values and on improvement of operational efficiencies.
Improvements could be discerned in these areas in the 2020 survey.
A further action plan has been created following this year’s survey
with employee training and career development being the principal
areas of focus.
Suppliers
The Group has identified key suppliers that include suppliers of office
hardware and consumables, as well as suppliers such as liquidity
providers and advisers such as auditors, brokers, legal advisers and
PR consultants. The Group seeks the independent and experienced
view of its key advisers on various matters as and when required.
Sometimes this is directly with the Board or the Board will ensure
that the Executive reports on advice provided to the firm when
needed.
Regulators
The Group takes an open and co-operative approach with its
regulators and positively embraces the FCA’s 11 principles of
business. The Group submits regular returns to the FCA. Employees
whose roles encompass compliance activities are encouraged to
attend regular external presentations and workshops arranged by
the FCA on topical issues, and also receive regular professional
update training. All new and existing employees and advisers are
made aware of the FCA’s principles of business, and undergo training
required by finance professionals working at an equities exchange
group. The Group arranges regular compliance assessments to
provide assurance that the Group is meeting the requirements of the
regulator.
Similarly, AQEU is regulated by the ACPR and the AMF where
the same co-operative compliance principles are applied with
the objective of establishing a strong relationship with the French
regulators.
During the year the Board undertook training, which covered
reminders of directors’ duties in the UK and Europe with regards to
the regulation and oversight of financial market infrastructures.
Compliance with Section 172 (1) of the Companies Act 2006
Section 172 of the Companies Act 2006 requires a Director of a
company to act in the way he or she considers, in good faith, would
most likely promote the success of the company for the benefit of
its members as a whole. As such, Section 172 requires a Director to
have regard, amongst other matters, to the:
•
•
Likely consequences of any decisions in the long-term
Interests of the Company’s employees
• Need to foster the Company’s business relationships with
suppliers, customers and others
•
Impact of the Company’s operations on the community and
environment
• Desirability of the Company maintaining a reputation for high
standards of business conduct
• Need to act fairly as between members of the Company
We set out below some examples of how the Directors have had
regard to the matters set out in Section 172(1) when discharging
their Section 172 duty and the effect of that Section on certain of
the decisions taken by them.
Board Effectiveness and High Standards of Business Conduct
The Board undertook its first external Board evaluation and is
developing a prioritised action plan based on the feedback.
The Board remains committed to high standards of corporate
and regulatory governance. During the year the Board undertook
training, which covered reminders of directors’ duties in the UK and
Europe and their responsibilities for the oversight of financial market
infrastructures. Additionally, it explored how to improve the firm’s
cyber security risk management frameworks and became more
informed about the policy-making environment for financial markets
in Europe.
14
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
A number of specific actions were taken to increase the effectiveness
of internal policies and procedures such as creating a Matters
Reserved for the Board document and enhancing the firm’s
Independence Policy.
Consequences of Long-Term Decisions
Considerable time was spent focusing on the firm’s strategy and
challenging management to think about the longer-term impact of
decisions, how those decisions were in line with the firm’s values, the
long-term sustainability of the Company and the desire to maintain
its reputation.
The Board has also undertaken succession planning both for the
Executive and the Board. Three board members, including the Chair,
are coming towards the end of their nine-year tenure over the next
one to two years. The Board operates a skills matrix to map the
requirements of the Group against the current skills and composition
of the Board and the skills and composition gaps that will be created
as the Company evolves and Directors move off the Board. This is
updated at least annually and was used effectively in our search for
the latest additions to the Boards of both Aquis and AQSE.
During 2020, a new Chief Technology Officer was welcomed into
the firm and a new Director of Finance has been recruited to start
in the second quarter of 2021. Management are also targeting to
increase senior commercial staff in the UK and France during 2021.
COVID-19 and The Interests of Employees
2020 was a hugely challenging year for every firm including Aquis.
The Board communicated regularly during the early part of
the pandemic to monitor both the business continuity and the
employees’ well-being. This continued as the various lockdowns
unfolded and included considering work from home issues as well as
the office environment for the periods between lockdowns.
The Board has also ensured engagement with employees through
the engagement survey and the nomination of a Board representative
to meet with employees when possible.
Our ESG journey
Our Purpose
In its role as a disruptor, Aquis’ aim has always been to improve
financial markets by maintaining the utmost transparency and least
market toxicity for the benefit of the end investor. In this way it
reduces both the explicit and implicit costs of trading that are borne
by investors.
With its recent acquisition of AQSE, it is also now focused on
stimulating growth in the economy by listening to the needs of
issuers and creating a supportive, fair and low-cost environment
for capital raisers to list instruments, particularly for innovative
growth companies while ensuring an appropriate balance of investor
protection. We also recognise the pivotal role we have to play in
educating those issuers about ESG and how they can set and achieve
goals and facilitating their disclosures to investors. The Group is
assessing the viability of introducing a dedicated ESG market segment
to qualifying companies that wish to list on AQSE.
Our Culture, Diversity and Employee Well-being
The Group is committed to ethical business conduct and expects the
highest standards of integrity to be followed by the Directors and all
employees. The Aquis Group culture is underpinned by the following
core values:
• Trust (integrity, competence and deliver what and when we say
we will);
•
Pro-activity (discipline and initiative);
• Openness (transparency);
•
Excellence (through creativity and innovation);
• Collaboration (through positive, collegiate and free thinking);
and
• Respect.
Despite the increase in employee numbers in 2020 the Group has
a relatively small resource base, and therefore has concentrated
on recruiting personnel with a high degree of specialist skills. The
Group provides on-going training and support with the aim of
ensuring that personnel retain and enhance their technical skills and
that employees feel that there is opportunity to develop within the
Group.
The Group has a Diversity and Inclusion Policy that emphasises
Aquis’ desire to create a supportive and inclusive culture amongst
the whole workforce. We believe it is within our best interest to
promote diversity and eliminate discrimination in the workplace. Our
aim is to ensure that all employees and job applicants are given equal
opportunity and that our organisation is representative of all sections
of society. Each employee will be respected and valued and able to
give their best as a result. The policy reinforces our commitment
to providing equality and fairness to all in our employment and not
providing less favourable facilities or treatment on the grounds of
age, disability, gender reassignment, marriage and civil partnership,
pregnancy and maternity, race, ethnic origin, colour, nationality,
national origin, religion or belief, or sex and sexual orientation. We
are opposed to all forms of unlawful and unfair discrimination. All
employees, management, agency, casual workers, and independent
contractors no matter whether they are part-time, full-time, or
temporary, will be treated fairly and with respect. When Aquis
selects candidates for employment, promotion, training, or any
other benefit, it will be on the basis of their aptitude and ability. All
employees will be given help and encouragement to develop their
full potential and utilise their unique talents. Therefore, the skills
and resources of our organisation will be fully utilised, and we will
maximise the efficiency of our whole workforce. Aquis commits:
• To create an environment in which individual differences and
the contributions of all team members are recognised and
valued.
• To create a working environment that promotes dignity and
respect for every employee.
15
ANNUAL REPORT & ACCOUNTS 2020 Strategic Report continued
• To not tolerate any form of intimidation, bullying, or harassment,
and to discipline those that breach this policy.
and the environment in which it operates and are conscious of the
requirement to monitor these activities.
• To make training, development, and progression opportunities
available to all staff.
• To promote equality in the workplace, which Aquis believes is
good management practice and makes sound business sense.
• To encourage anyone who feels they have been subject to
discrimination to raise their concerns so we can apply corrective
measures.
• To encourage employees to treat everyone with dignity and
respect.
• To regularly review all our employment practices and
procedures so that fairness is maintained at all times.
Aquis keeps all employees informed that an equality, diversity
and inclusion policy is in operation and that they are obligated to
comply with its requirements and promote fairness in the workplace.
The policy is also drawn to the attention of agents, stakeholders,
customers and job applicants. It is therefore very pleasing to report
that gender and non-gender diversity strengthened during the course
of the year and we have established targets to improve this further.
It was also pleasing to see that through focused effort with external
recruiters a more diverse selection of candidates made it through
to the shortlists, even for the most senior roles and we believe our
diversity and inclusion policies will have a positive impact on the
successful execution of the Group strategy.
It was also very important to note how our already embedded
attitude to flexible working allowed the Group to migrate seamlessly
to a work from home environment in the face of a global pandemic.
However, we also recognise the enormous challenges and sacrifices
that people have had to make when this became a long-term
situation and are considering how to best strike the right work-life
balance when a more normal working environment is resumed.
The Group aims to competitively remunerate its employees and
to accommodate flexible working requests wherever possible. In
addition to the anonymous employee survey and meetings with the
Chair of the Board, employees have regular one-to-one sessions
with their immediate line manager and annual reviews where
development plans are discussed to ensure individuals’ objectives are
aligned to the business strategy and to improve levels of employee
engagement.
The Group has a commitment towards preventing slavery and
human trafficking throughout our supply agreements: the Group
complies with the Modern Slavery Act 2015 (MSA) and adopts a
zero tolerance approach towards slavery and human trafficking and
expects all those in our supply chain (and contractors) to comply
with the MSA.
Consumption and the Environment
The Directors endeavour to promote the consumption of resources
in a manner that fosters the long-term sustainability of the business
16
Although the Group has a small number of personnel and associated
office space, it recognises that it contributes directly to carbon
emissions through its consumption of energy, waste and water,
through staff travel and, indirectly, through its consumption of
supplies and equipment including office hardware.
During the year employees worked primarily remotely due to the
COVID-19 pandemic which significantly reduced carbon emissions
from employees commuting to the office and the Group remains
committed to continuing to operate a flexible remote working
structure which will continue to have a beneficial effect on carbon
emissions. In addition, when employees are working in the office
the Group pro-actively works towards reducing its carbon footprint
through the following initiatives:
• Motion-activated lights in the main office space and hallways;
• Recycling of obsolete office electronic equipment, batteries,
plastics, cardboard, coffee capsules, paper and tins in the office
space;
• Of the 2 data centres used by Aquis, one is powered by 100%
renewable energy whilst the second is striving to be “greener”.
The operational statistics demonstrate positive and significant
improvements have been made;
• The building electricity provider for the Aquis office switched to
an energy supplier in October 2020 that obtains energy from
100% renewable electricity and carbon neutral gas;
• As a general principle, AQEU Board and Committee meetings
are held remotely when possible
•
Elimination of paper for Board and Committee meetings by
using electronic board books.
We are also very pleased to have achieved a proof of concept
project this year with Singapore Exchange, SGX, and Amazon Web
Services, AWS, to deliver a cloud native exchange. While most
major financial exchanges operate using physical data centres, the
infrastructure required to run a trading environment is massive, costly
and unfriendly to the environment because of the fact that servers
must always be “on” and significant duplicative processing occurs. If
trading firms could leverage all the benefits of running a cloud-based
solution, the cost optimisation, scalability and resiliency would make a
positive contribution to reducing the impact on the environment.
Governance
When Aquis listed in 2018, it voluntarily chose to follow the highest
standards of corporate governance when it committed to adhering
to the UK Corporate Governance Code and the Directors have
implemented appropriate measures to comply with the Code.
Aquis and AQSE are directly authorised and regulated by the FCA
and AQEU is regulated by the ACPR and the AMF. The Group fully
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Next Steps in Our ESG Journey
Our short-term goal is to understand the sustainability risk factors of
our day-day activities and translate them into a meaningful company-
wide ESG strategy that can be woven into our main strategic goals.
In 2021 we aim to:
• Deliver ESG training for the Board
• Develop a formal ESG policy
•
•
Set formal short, medium and longer term non-financial goals on
material ESG topics that are relevant to our business
Introduce a first round of formal initiatives to reduce ESG
impacts and manage ESG risk
complies with the relevant rules and guidelines in all respects and
monitors that compliance throughout the year.
The Group’s objective is to establish an open and cooperative
relationship with all regulators and it positively embraces the FCA’s
11 principles of business. The Group submits regular returns to the
FCA, and employees whose roles encompass compliance activities
are encouraged to attend regular external presentations and
workshops arranged by the FCA on topical issues, and also receive
regular professional update training. All new and existing employees
and advisers are made aware of the FCA’s principles of business,
and undergo training required by finance professionals working at an
equities exchange group. The Group arranges regular compliance
assessments to provide assurance that the Group is meeting the
requirements of the regulator. During the year the Board undertook
training, which covered reminders of directors’ duties under UK law,
under the UK Corporate Governance Code and also under UK and
European regulation with regards to the oversight of financial market
infrastructures.
The wider community
Aquis has been involved in a number of charitable and community
enhancing initiatives e.g. supporting the NHS and Help for Heroes
throughout the year and employees have shown their desire to make
a difference.
Knowledge Transfer Project
Aquis is proud to have begun the partnership process with a UK
University as part of a two-thirds government funded Knowledge
Transfer Project (“KTP”) that will involve industry-led research and
development on artificial intelligence for trading platform surveillance
alerts that will promote an efficient and accurate market abuse
monitoring system.
Current surveillance systems are deterministic, handcrafted, generate
a high percentage of false positive alerts and run a high risk of human
fatigue and/or boredom. Consequently, market abuse events may
often be missed when analysing a large number of false positives.
As part of our mission to improve transparency in financial markets,
this partnership will publish research papers on machine learning
techniques that will mitigate human error in detecting fraudulent
trading practices that harm the integrity of, and trust in, financial
systems that are critical for the modern economy.
Aquis is proud to have regulator and consumer encouragement to
embark on such a project, and as part of our mandate to strive for
innovation, we are excited for what the future holds for machine
learning and artificial intelligence in the trading industry.
17
ANNUAL REPORT & ACCOUNTS 2020 Strategic Report continued
Principal risks and uncertainties
The identification and management of risk is an integral part of the execution of Aquis’ strategic vision and operations. The table below
provides an overview of the principal risks facing the Group:
STRATEGIC RISKS
Risk
Economic landscape
Legal/Regulation
18
Risk Description
Mitigation
The adverse effect of COVID-19 on
the global, European and UK economic
conditions and the speed of recovery may
negatively affect the Group’s trading volumes
resulting in lower revenues or increased
costs. In addition, potential adverse effects
of the UK’s exit from the EU may arise over
the course of 2021 or in the future.
The Group operates highly regulated
entities, including two MTFs and an RIE
and is required to maintain sufficient
regulatory capital and comply with all legal
and regulatory requirements necessary to
operate the Group’s business. All three
group entities hold regulatory licences and
must hold their own capital.
There is the risk that current regulation or
future changes could have an adverse effect
on the Group. Possible impacts may be (but
are not limited to):
•
Sustained downturn in revenues could
put the regulatory capital at risk;
• One of the group entities could be
subject to a fine or a lawsuit which may
draw on the entities’ finances
• Change in regulation may increase costs
for the Group or require unanticipated
investments
•
Inability to meet regulatory
requirements could result in a licence
being withdrawn and prevent the group
entity from operating its core business
In addition, changes in tax law e.g. the 2021
Budget corporation tax change may result in
an increase in the overall tax burden of the
Group which could have a materially adverse
effect on the Group’s business.
Aquis derives revenues from both fee and
contractual annuity-based streams, which
are less impacted by cyclical market driven
trends.
COVID-19 had a material negative effect on
the economic landscape; however, overall
market volumes remained strong having a
positive effect on Aquis revenues.
Since Brexit pan-European trading has
shifted almost 100% to the Group’s MTF
subsidiary in France, AQEU, that has full
regulatory approval from the ACPR to allow
the Group to continue to operate as an
MTF.
Senior management consistently monitor
regulatory developments which are
discussed and actioned at Audit Risk and
Compliance Committee (ARCC) meetings
and engage regularly and directly with
regulators.
The Board reviews a quarterly dashboard
that incorporates the Group’s behaviour and
statistics in relation to regulatory obligations.
The Board also places considerable
importance on having competent staff and
advisors to help manage legal and regulatory
risk.
The Board considers regulators as key
stakeholders in its stakeholder engagement
and endeavours to maintain positive working
relationships with the regulators for each
group entity.
In addition, each member of the Group
currently has sufficient excess regulatory
capital to deal with changes in regulation.
Changes in regulation are usually
accompanied by a period of consultation
that allows market participants to provide
feedback before changes are made and a
further period to prepare for change once
changes in regulation are determined.
The Group consistently reviews the risks
associated with possible changes in tax
legislation.
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Risk
Competition
Intellectual property and data protection
Risk Description
Mitigation
Aquis’ competitive differentiation is
underpinned by its subscription-based model
and lack of aggressive trading. This is hard for
incumbent exchanges to replicate without
significantly impacting their own revenue
models which have always been based on
a per transaction basis and on charging
significant data fees to participants who trade
aggressively.
Whilst the effects of competitor behaviour
can never be fully mitigated, the Company
has consistently increased its secondary
market trading market share since it was
formed. Senior management initiatives
to reduce this risk include: consistent
monitoring of competitor activity and,
maintaining close customer relationships so
as to understand their evolving needs, and
the acquisition of a primary listing business
thereby gaining RIE status.
From June 2020 SIs have been forced to
follow the same tick size regime as other
trading venues which has reduced their
competitive advantage for the time being.
As a disruptive technology firm, Aquis
remains vigilant about changing technologies
and how it might embrace them to further
its business model.
The Group has taken steps that are
consistent with industry practice to reduce
these risks by establishing controls to protect
the confidentiality and integrity of customer
information, and these controls are
consistently reviewed for their effectiveness
at quarterly ARCC meetings.
The Group operates in a highly competitive
and global industry.
The principal competitors to the trading
business are the national exchanges,
other pan-European MTFs / Recognised
Investment Exchanges (RIEs) which currently
charge customers on a per transaction
model and accept both passive and
aggressive market makers. These exchanges
have significant market share and could
move to copy Aquis’ subscription fee model
and/or differentiate between passive and
aggressive trading.
Other competitors to the exchange business
are ad hoc OTC trading and Systematic
Internalisers (“SIs”) which operate off-
exchange models and make money through
spreads.
New technologies such as distributed
ledger technology are emerging but have
yet to gain ground in trading, clearing and
settlement of equities.
The Group 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.
The Group 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).
19
ANNUAL REPORT & ACCOUNTS 2020 Strategic Report continued
Risk Description
Mitigation
The operation of the Group is critically
reliant on the smooth and efficient
functioning of technology.
Technological failures would negatively
affect clients and the Group’s ability to
deliver on performance obligations. It could
also result in regulatory scrutiny or fines or
requirements for further investment.
Failure to protect Intellectual Property could
mean that competitors gain access to Aquis’
technology or make Aquis susceptible to
external infiltration.
These risks could adversely affect the firm’s
financial and competitive situation.
A defining feature of the Aquis business
model is its high calibre, in-house technology.
The technology was built and is maintained
by highly skilled employees. Aquis actively
seeks to retain the employees through
flexible attractive working practices and
remuneration policies and to continually
enhance the technology to meet client
requirements.
The Group’s key infrastructure, development
and operational activities are prioritised
accordingly, and resources are closely and
consistently monitored and reviewed with
the aim to ensure smooth functioning of
technology at all times.
Aquis technology is securely maintained to
protect it from unauthorised access with full
back up and version control if remediation
is required.
Aquis has system control features that
are regularly tested to protect data and
Intellectual Property (IP).
The Group maintains a Disaster Recovery
plan that encompasses input from all
departments and is continuously monitored
and reviewed by appropriately experienced
individuals.
The comprehensive back up and
contingency plans in place are tested
regularly.
The Board reviews a quarterly dashboard
that incorporates technology performance
statistics and operational resilience.
OPERATIONAL RISKS
Risk
Technology
20
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Risk
COVID-19
Risk Description
Mitigation
There remains a risk that the COVID-19
pandemic could negatively impact personnel
being able to operate the exchanges.
The Group established and successfully
implemented a remote working plan.
This mitigated against potential resource
shortages.
There are also risks to clients, liquidity
providers, suppliers, markets and the
economy in general.
It is possible that governments or regulators
could impose extraordinary measures such
as closures of the market for a prolonged
period.
Remote working practices across the
industry may slow overall technology
programs at client and supplier organisations
which may have a longer-term impact on
Aquis. This could manifest in new members
not joining any of the Aquis entities in the
anticipated timelines or slower adoption of
new products developed by Aquis.
The remote working plan operated
successfully during 2020 with all employees
working primarily from home in accordance
with government guidelines. The Group
has demonstrated and is confident that it
can operate the exchanges remotely for a
prolonged period.
The Group’s clients and liquidity providers
have also demonstrated that they can
remotely manage their activities successfully.
Key suppliers have also successfully adopted
disaster recovery procedures.
Equity markets were at times during 2020
extremely volatile, experiencing significantly
higher than normal volumes. Subsequently
markets have become less volatile. During
these periods the Company did not
experience any outages or delays and the
system has proven that it has more than
sufficient capacity to operate the market.
Aquis is not overly reliant on new members
to achieve its growth plans. The main source
of anticipated growth in trading is from the
increase in volumes of current customers.
21
ANNUAL REPORT & ACCOUNTS 2020 Strategic Report continued
Risk
Cyber security
Risk Description
Mitigation
The Group’s networks and those of its third-
party service providers may be vulnerable to
security risks, cyber-attack or other leakage
of sensitive data.
The Board reviews a quarterly dashboard
that incorporates cyber technology
monitoring.
This could cause outages of the market,
create possibilities for attacks which
hold Aquis to ransom, cause unintended
movements of the company finances or
generally create reputational and financial
risk.
Regular penetration tests are undertaken by
a third party and a new employee cyber-
training program was developed to address
this issue.
Internal exercises to alert employees to the
possibility of phishing emails are planned to
be held regularly.
The MTF has “kill” switches in place which
are intended to restrict clients if rogue
behaviour is evidenced.
The Group takes precautions to protect
data in accordance with applicable laws.
Extensive risk management protocols are
adopted in the IT control framework so as
to prevent, detect and respond proactively
to cyber security attacks.
The comprehensive back up and
contingency plans in place are tested
regularly.
Key management personnel and employees
The Group has a relatively low headcount
and hence is exposed to key person risk.
The Group has established emergency
staffing plans.
The Group’s future development and
prospects depend on its capacity to attract
and retain key personnel.
The ARCC assesses key person risk on a
quarterly basis.
Aquis employs a number of strategies to
ensure the Group is able to attract and
retain a high calibre of talent. The Group
employs a rigorous recruitment process
and offers competitive salaries and benefits,
whilst promoting a culture of diversity,
high performance and inclusion from the
top. The Group continues to position itself
as a dynamic and attractive employer for
top talent to Board members and junior
employees alike.
22
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Risk
Client concentration
Risk Description
Mitigation
The nature of equity financial markets is
that the majority of volumes are undertaken
by a small pool of market participants. This
issue has been increased as some of the
smaller market participants have decided to
route via larger banks than maintain direct
exchange memberships.
The Company initially concentrated on
connecting to large investment banks,
brokers and is now broadening its client
base to reduce client concentration but
recognises that volumes from smaller
participants cannot completely offset the
volumes from larger ones.
The Group revenue is therefore dependent
on a concentrated number of customers and
significant change to one customer’s flow
could negatively impact revenues.
The Company can offset some of the risk of
industry concentration through the quality of
the exchange offering.
The Company seeks to maintain positive
relationships with all current and future
members and to be vigilant for change at
any client.
The Group has diversified its business
activities to include technology sales, data
and market gateways and entering the
primary exchange business through the
acquisition of AQSE.
23
ANNUAL REPORT & ACCOUNTS 2020 Strategic Report continued
Risk
Risk Description
Mitigation
In most trading venues globally, there is
considerable symbiosis between the venue
and the liquidity providers on which the
venues rely to make continuous prices and
enhance liquidity.
In Europe, where there is significant
competition between a limited number of
trading venues, the ability to attract good
liquidity to the venue is critical. The barriers
to entry are even higher for new trading
venues, which must build liquidity from
scratch and differentiate themselves to
attract and retain it.
Market makers themselves have differing
business models and trading strategies; as
a result, they may be attracted to different
types of venues depending on the value
proposition.
Aquis has a highly differentiated business
model to the incumbent platforms, both
dramatically reducing the cost of trading
and also not permitting aggressive trading
by market makers. This has been a driver of
Aquis’ success to date.
The number of market makers that have
trading models currently aligned with
Aquis’ business philosophy is even more
concentrated than on the main markets.
Therefore, Aquis has always relied heavily
on a small number of key market makers
to support liquidity and a wider group to
supplement it. These market makers have
not always been the same organisations and
have changed over time.
Nonetheless, it is a risk that if a key market
maker decides to change its business model
or philosophy it would cause a short-term
disruption in the total liquidity provided and
could impact Aquis’ ability to differentiate
itself through the prevention on non-
aggressive trading flow.
This risk is mitigated internally through a
number of actions and externally through
the likely evolution of the structure of the
European equity market.
Internally, management are working to
maintain a close relationship with all market
makers to ensure that there continues to
be positive synergies for all parties. Aquis
is also actively seeking to continue to
grow membership and diversify its liquidity
providers.
As Aquis’ market share increases further,
more natural liquidity should be attracted
thus diluting the concentration risk away
from a small number of liquidity providers to
a broader set of investor flows.
Externally, the market share growth that
Aquis has achieved to date is a strong
indication of the benefits to its members
and liquidity providers and makes it likely
that natural liquidity will continue to grow,
making the Aquis marketplace deeper and
more attractive for all counterparties.
Additional liquidity providers are likely
to follow over time as they should be
incentivised to adapt or create new models
that capitalise on Aquis’ value proposition
and interaction with a wider set of trading
flows.
The number of liquidity providers in
European equity markets is still relatively
small today, reflecting the continued need
to invest in technology and regulatory
oversight. However, as the effects of MiFID
II, particularly with its mandate for best
execution, continue to reduce competition
in liquidity provision the Group’s low toxicity
model and innovative offerings e.g. The
AQSE MM warrant scheme should ensure
this issue is effectively countered.
The Group is exposed to the failure of a
key supplier. Examples include loss of data
supplied to Aquis which is an important
input into the trading platform.
Aquis has back up plans in place for key
suppliers and has agreed procedures and
thresholds in place for managing this when
necessary.
This may impact the ability to undertake
market surveillance.
Liquidity provision concentration
Supplier risk
24
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
FINANCIAL RISKS
The Group’s current assets comprise cash and liquid resources including trade receivables arising directly from its operations. The main
financial risks are capital, credit, liquidity and foreign currency risks. The Group actively manages the balance sheet and risks without the use of
any financial derivatives.
The Group reported its first profit in 2020 demonstrating that it has been able to manage the strategic and operational risks; however future
results could be negatively impacted if any of the risks outlined above were to occur. Financial management risk disclosures have been made
in Note 7 of the Group Financial Statements accompanying this report.
Viability statement
The Directors have undertaken a detailed review of the Group’s prospects, taking account of the Group’s current position and principal
underlying business risks and its prospects for the period 2021 - 2023. These include considering the impact of the significant slowdown in the
global, European and UK economies due to COVID 19 and the possible future negative impact of Brexit. The Directors consider this to be
an appropriate period considering the target business and revenue growth, and the objective to maintain and enhance profitability during this
period.
The Group maintains a strong equity capital position which has been strengthened during 2020 as profitability has been achieved. This result
is complemented by the Group achieving and in certain areas exceeding its strategic goals. In taking account of its profitability and ability to
execute successfully its principal strategic objectives and operating goals during extraordinarily challenging circumstances, the Directors have
a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their
assessment.
This assessment has concentrated in particular on the key differentiating factors that the Group has established, the quality and resiliency of
the Group’s technology, the brand and market position, and the reputation and quality of the experience of its key personnel resources.
This Strategic Report was approved by the Board of Directors on 30 March 2021 and is signed on its behalf by:
Alasdair Haynes
CEO
Jonathan Clelland
CFO
25
ANNUAL REPORT & ACCOUNTS 2020 Directors’ Report
The Directors of Aquis Exchange PLC are delighted to present
their report to shareholders and other stakeholders, together
with the audited consolidated financial statements for the year
ended 31 December 2020 with comparatives for the year ended
31 December 2019.
Board of Directors
The Directors of the Company who were in office during the year and up to the date of signing the financial statements were:
Executive Directors
Non-executive Directors
Alasdair Haynes CEO
Appointed to the Board March 2012
Jonathan Clelland CFO
Appointed to the Board October 2012
Niki Beattie Chair
Appointed to the Board January 2013
Richard Bennett Senior Independent Director
Appointed to the Board March 2014
Mark Spanbroek
Appointed to the Board March 2013
Mark Goodliffe
Appointed to the Board March 2018
David Vaillant
Appointed to the Board June 2020
Deirdre Somers
Appointed to the Board October 2020
Directors’ Appointment, Removal and Duties
The Board of Directors has the authority to appoint and remove
a Director. Directors’ appointments are subject to shareholder
approval annually.
The Company has recruited Directors that it considers have the
knowledge, skills and diversity of 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 Group’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 Group 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 (for example 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.
Board Committees
The Board has established two committees: The Audit, Risk and
Compliance Committee (“ARCC”) and the Nominations and
Remuneration Committee (“N&RC”).
The ARCC has been chaired by Mark Goodliffe since June 2018.
Mark Spanbroek is the other committee member. Mark Goodliffe
and Mark Spanbroek have considerable accounting, risk and
compliance 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, oversight of
the relationship with the external auditors, internal audit reports,
compliance submissions, MLRO reports, risk assessments and ICAAP
assessments. A summary review of the ARCC’s activities is presented
to the Board by the chair of the ARCC on a quarterly basis and
minutes are made available to the Board.
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 Group. The ARCC supports and provides guidance
on this area. This is achieved through adherence to the Group’s core
values, annual compliance training and 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.
The ARCC has established a comprehensive assessment of the
internal and external risks which could adversely affect the Group
and actively assesses the potential impact and mitigating factors, if
applicable. These risks are reviewed quarterly by the ARCC.
The N&RC is chaired by the Senior Independent Director Richard
Bennett. The other members of the N&RC during the year were
Niki Beattie and Glenn Collinson. In March 2020 Glenn Collinson
stepped down from the Board of the Company and membership of
N&RC and was appointed to the Board of AQSE. Glenn Collinson
26
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
was reappointed to N&RC at the June Board meeting. The Executive
Directors and other senior personnel may be invited to attend
meetings when appropriate to provide advice.
The N&RC is responsible, inter alia, for assessing the skills of the
Directors, succession planning for the Board, its Committees 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. It
also approves the high-level 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 for approval.
Minutes of N&RC meetings are made available to the Board and a
summary review of the N&RC’s activities is presented to the Board
by the chair of the N&RC on a quarterly basis.
The remuneration and terms and conditions of appointment of the
Non-Executive Directors of the Company are set by the Board.
The N&RC supports the ongoing development of the Board and the
Executive team to ensure that the Group retains and recruits the
best talent for its needs and supports the Board in its work to secure
the long-term health of the Group and its strategy for success in a
fast-changing world.
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 Group and to enhance
shareholder return. The remuneration packages are designed to
reflect the success of the Group’s performance while maintaining a
balance between short- and long-term performance and reward.
In addition to the two Board committees, Aquis has created
an Executive Committee (Exco) to help facilitate day-to-day
administration management. Exco was expanded during 2020 and
consists of the Chief Executive Officer, Chief Financial Officer,
Chief Executive Officer of AQEU, Head of Group Compliance,
Chief Technical Officer, Head of AQSE Regulation and the Head of
Technology Sales.
Governance Summary
Directors’ Board and committee attendance during 2020 is summarised below:
Director
Niki Beattie
Alasdair Haynes
Jonathan Clelland
Richard Bennett
Mark Spanbroek
Mark Goodliffe
David Vaillant
Deirdre Somers
Results
The Group made an operating profit before interest, depreciation,
amortisation and taxation for the year of £1,521k (2019: operating
loss of £9k).
After taking into account interest, depreciation and amortisation the
Group made a profit before tax of £470k (2019: loss before tax of
£93k).
There were no discontinued operations in the current or previous
year.
N&RC
5/5
5/5
Board
ARCC
6/6
6/6
6/6
6/6
6/6
6/6
5/5
1/1
4/4
4/4
numbers of clients, client pipeline and market share despite an
extremely challenging market environment.
Third party analysis shows that Aquis Exchange is consistently
offering deeper liquidity at the best price than many other competing
platforms. The potential for new customers continues to increase
as the trading opportunities on the Aquis Exchange become
more widely recognised, as does the opportunity for increased
trading volumes. Several firms who are focused on best execution
have already increased their activities on Aquis Exchange and it is
anticipated that others will follow during 2021.
Dividend
The Directors do not recommend the payment of a dividend.
Future developments
The Group has made significant progress in both its exchange and
technology licensing activities during 2020 with growth in revenue,
With a proven business model and potential improvements in the
economic landscape post COVID-19 and Brexit, the Board considers
that it is important to invest to support the long-term success of the
business. The Company intends to further invest in sales resources,
finance and technology in London and Paris during 2021 and
thereafter, to take advantage of the scope for significant long-term
sales and value creation for shareholders.
27
ANNUAL REPORT & ACCOUNTS 2020 Directors’ Report continued
Licensing activities continue to grow across a range of asset classes
as the Group’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
Group’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
Technologies.
The completion of the acquisition of AQSE has helped to support
the long-term vision of Aquis which is to be “The leading technology-
driven exchange services group”, adding primary markets capability
to the growing secondary markets and technology licensing activities
capability with an established issuer base for a cost-effective capital
outlay.
Whilst management had not anticipated this strategic goal to be met
so early on in the life of the Group, it was always the intention of the
Directors to establish RIE status, to enable listings in the medium to
long term and the Directors consider it a great result to have been
achieved at this juncture. The original strategy was to concentrate
on the secondary market and licensing activities, and then in due
course to establish primary market capabilities; however, acquiring
AQSE provided Aquis the opportunity to achieve this goal ahead of
schedule.
The Directors are also conscious of the fact that the acquisition
also offers a hedge against any adverse regulatory developments
which may occur as the impact of Brexit unfolds during 2021
and thereafter, in particular in the event that equivalence status
be provided to RIEs and not to MTFs, which would have had a
materially adverse effect on Aquis pre-acquisition.
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 2020 there were
no qualifying third-party indemnity provisions or qualifying pension
scheme indemnity provisions, for the benefit of Directors of the
Group 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.
Post balance sheet events
The COVID-19 pandemic has caused considerable health and
economic uncertainty and significant market volatility and volumes.
Notwithstanding the significant adverse effect this has had on the
economy the Directors have assessed this remains a non-adjusting
post balance sheet event given that, at the balance sheet date, whilst
28
it is possible that this may have an adverse effect on the Group at
this stage the Directors do not believe it will be material.
Brexit was concluded at the end of 2020. The terms of the exit
agreement did not include the financial services industry and so
equivalence with the EU has ceased. The Group has put measures in
place through the creation of AQEU to ensure that it can continue
to offer trading across the EU.
The Directors can confirm that there were no other significant post-
balance sheet events.
Research and development
The Group is committed to continue to invest in research and
development to enhance the quality, efficiency, effectiveness and
breadth of its technology. The Group has made significant progress
through the course of the year transitioning AQSE onto the Aquis
Exchange technology platform and through enhancing the core
matching engine. In addition, the Group, through Aquis Technologies,
has delivered and/or 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 Group’s technology
which is underpinned by the significant investment in research and
development.
Subsidiary companies / Associates / Branches outside the UK
The Company established a subsidiary company in France: Aquis
Exchange Europe SAS and this subsidiary company received
regulatory approval to operate as an MTF from the Autorité de
Contrôle Prudentiel et de Résolution (ACPR) in March 2019. It is
the intention that this subsidiary company will drive the European
growth aspirations of the Group and positions the Group well to
accommodate the post Brexit outcome. Aquis does not have any
other subsidiaries, associate companies or branches outside the UK.
Share Capital Structure
Aquis Exchange PLC is listed on the AIM market of the London
Stock Exchange. The Company has 27,169,696 ordinary shares
of 10p each in issue (31st December 2019: 27,149,559). The
shareholders with a significant holding (more than 3.0%) in Aquis at
31st December 2020 were as follows:
XTX Markets
Mr G Roveda
Mr R Ricci
Canaccord Genuity Wealth Management
Mr A Haynes
Kendall Capital Markets
Schroder Investment Management
Rathbone Investment Management
J O Hambro
Chelverton Asset Management
9.6%
9.4%
7.9%
5.5%
5.5%
5.0%
4.3%
4.1%
4.1%
3.5%
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
At 31st December 2020 there were no securities carrying special
rights and no restrictions on voting rights. At 31st December 2020,
2,067,551 shares representing 7.6% of the total issued share capital
held by the Directors 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.
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 the loss of office or
employment that occurs because of a successful takeover of the
Company.
Shareholder return
Aquis shareholders’ return for 2020 amounts to 17.0% compared
to the AIM market of the London Stock Exchange which reported a
return for the same period of 19.6%.
Aquis Shareholder Return 14 June 2018 - 31st
December 2020
250.00
200.00
150.00
100.00
50.00
0.00
Aquis share price (rebased)
AIM index (rebased)
Source: London Stock Exchange
Professional development programs
The Company supports the continued development of the Directors.
This is achieved through attendance at in-house presentations. It also
runs technical and management development training programs for
employees.
Corporate Governance
The Board continued to apply the UK Corporate Governance
Code (the ‘‘Code’’) recommendations on stakeholder engagement
during the year. It focused on active interaction with stakeholders,
information on which is set out in further detail in the Strategic
Report.
The Directors have implemented appropriate measures, as stated in
the Strategic Report to comply, so far as practicable, with the Code.
The Group’s Corporate Governance Statement outlining all of
its governance policies and including its commitment to the UK
Corporate Governance Code is available from the Company
Secretary or in the corporate governance section of the Group’s
website at: https://www.aquis.eu/investors/corporate-governance/.
Employees
Details on the Company’s approach to employee engagement and
human rights and diversity is given in the Strategic report on page 16,
and information on the Share Incentive Plan (SIP) can be found in
the N&RC report.
Diversity policy
The Group has adopted a Diversity and Inclusion policy which is set
out in more detail in the Strategic report on page 15.
Environment
The Directors recognise the broader Group’s responsibility to
consume resources in a manner that ensures the long-term
sustainability of the business and the environments in which it
operates in.
Although the Group has a relatively small resource base and
associated office space, the Group recognises that it creates carbon
emissions from energy, waste and water in its offices as well the data
centres, staff travel and indirectly through the supply of our office
hardware. Details of the initiatives that the Group has adopted in its
efforts to reduce the impact of this carbon footprint is included in
the Strategic Report on page 16.
Principal risks and uncertainties and risk management policies and
objectives
The principal risks and uncertainties of the Group, together with
mitigating actions taken, are detailed in the Strategic Report from
page 18.
In addition, the financial risk management disclosures have been
included in Note 7 in the Group Financial Statements accompanying
this report.
Financial reporting process – internal control and risk
management systems
The Group has established review processes, internal controls
and risk management systems in relation to the financial reporting
process.
Aquis has recruited a Board with the relevant financial and other
complementary skills to exercise oversight over the reporting,
assessment and use of the Group’s financial information and to
provide robust challenge to management. The principal committee
which oversees this area is the ARCC.
The credit risk levels associated with Aquis’ exchange members
are considered very low on average 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 which is reviewed and
assessed by the ARCC on a quarterly basis. The majority of the
technology licensing clients are less established businesses and are
therefore monitored on an individual basis.
29
ANNUAL REPORT & ACCOUNTS 2020 Directors’ Report continued
The financial statements are subject to external audit before being
reviewed and approved by the Board prior to shareholder approval.
required to the Chair. Alternatively, employees can report concerns
directly to the FCA.
Aquis prepares monthly management accounts and a quarterly
dashboard which is presented to the Board. The management
accounts consist of actual monthly profits or losses compared with
Budget, Balance Sheet, variance commentary and forecast regulatory
capital surplus and cash flow for the rest of the calendar year. The
quarterly dashboard includes an analysis of operational statistics
and analyses, compliance and regulatory developments, marketing-
initiatives and financial performance reviews and projections.
All new exchange members, software licences and expenditure are
authorised by the Chief Financial Officer (CFO). New exchange
members or clients of Aquis Technologies are subject to Know Your
Clients (KYC) and Anti-Money Laundering (AML) checks by the
Aquis compliance department. All software licences 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 approves the departments and functions that are audited. All
key operational departments and / or 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 a Disaster Recovery crisis team and 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 Group. 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
Statement of Directors’ Responsibilities in respect of the financial
statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the Group and Company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB).
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
•
•
select suitable accounting policies and then apply them
consistently;
state whether applicable IFRSs as issued by the International
Accounting Standards Board (IASB) have been followed, subject
to any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
•
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006.
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.
Directors’ confirmations
The Directors consider that the annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s and
Company’s position and performance, business model and strategy.
30
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
In the case of each Director in office at the date the Directors’
report is approved:
•
•
so far as the Director is aware, there is no relevant audit
information of which the Group’s and Company’s auditors are
unaware; and
they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant
audit information and to establish that the Group’s and
Company’s auditors are aware of that information.
The Directors’ Report was approved by the Board of Directors on
30 March 2021 and is signed on its behalf by:
Alasdair Haynes
CEO
Jonathan Clelland
CFO
31
ANNUAL REPORT & ACCOUNTS 2020 Audit, Risk and Compliance Committee Report
This report is intended to give an overview of the role and activities
of the Audit, Risk and Compliance Committee (“ARCC”) in assisting
the Board to fulfil its oversight responsibilities relating to systems
of internal control and risk management, the independence and
effectiveness of the external auditors and the integrity of the Group’s
financial statements. It details the activities, discussions and decisions
that enabled the ARCC to fulfil its responsibilities effectively during
the financial year ended 31st December 2020.
Composition and meetings
The ARCC members as at 31st December 2020 were Mark
Goodliffe and Mark Spanbroek. The ARCC has been chaired by
Mark Goodliffe, a qualified chartered accountant (ICAEW) and
independent non-executive director, since June 2018. The Group
considers that the ARCC members’ qualifications and experience
enable it to comply with the audit committee composition
requirements.
The Chief Executive Officer, Chief Financial Officer, Group Head
of Compliance, Group Head of Surveillance and Group Financial
Accountant are standing invitees to all ARCC meetings.
The role and responsibilities of the ARCC
The ARCC was created in 2013 and the Terms of Reference
(“ToR”) of the ARCC comply with the AIM market admission
requirements. The Board undertakes an annual evaluation of the ToR
which includes an assessment of the ARCC performance.
The principal role and responsibilities of the ARCC are:
•
•
Financial reporting: review of the financial statements and
oversight of the relationship with the external auditors and the
external audit process;
Internal audit: monitoring and reviewing the effectiveness of the
Group’s internal auditors and internal controls, including planning
over a 3-year period the internal audit schedule and annual audit
reviews;
• Risk assessment: quarterly risk assessment assessing all internal
and external business risks and mitigation thereof; and
• Compliance: quarterly compliance review.
Further details on the functions and responsibilities of the ARCC
and also the N&RC can be found in the Corporate Governance
Statement available from the Company Secretary or in the corporate
governance section of the Group’s website at: https://www.aquis.eu/
investors/corporate-governance/.
2020 Activities
The ARCC maintains a formal agenda which ensures that all matters
for which the Committee is responsible are considered at each
meeting. The agenda for each meeting during 2020 was determined
by the key events of the annual financial reporting cycle, the risks
identified by the Committee and the standing items under the ToR.
The Committee concentrated on maintaining an effective working
relationship with the external auditors, including monitoring their
independence and effectiveness and reviewed the scope of the
external audit and agreed the key areas of focus with the external
auditors. PricewaterhouseCoopers LLP (‘PwC’) were appointed as
external auditors in August 2018 following an audit tender process.
The intention is to review the appointment after 3 years in 2021,
and if the ARCC deems appropriate, the audit will be put to tender
again. PwC does not provide non-audit services to the Group except
for the Client Money and Custody Asset Assurance Report (CASS)
audit. The PwC audit partner for both the current and preceding
audit is Mike Wallace.
In addition to maintaining the relationship with the external auditors,
the ARCC discharged its responsibilities by / through the following:
• The Group appointed Grant Thornton as its internal auditor
in 2013. The ARCC reviews the internal audit reports in
detail and when circumstances allow, meets Grant Thornton
annually to assess the quality and effectiveness of the internal
audit process and management responses to the internal audit
recommendations;
• Reviewed and monitored principal internal and business risks
and associated mitigative management actions on a quarterly
basis. This process includes analysing and assessing emerging
risks as well as monitoring existing previously identified risks;
• Assessed the ICAAP annually;
• Considered operational risks, cybersecurity risks and technology
resilience. This includes an annual review of the effectiveness of
risk management and internal control systems;
• Reviewed and monitored compliance, surveillance and
regulation developments on a quarterly basis; and
• Monitored final preparations for Brexit, which included the
operational setup of Aquis Exchange Europe SAS.
Priorities for the 2021 financial year will include:
• Continued monitoring of key processes such as business
continuity planning and risk assessment, disaster recovery and
cybersecurity monitoring programmes;
• Monitoring the quality and effectiveness of the support services
provided to AQEU and AQSE across all departments;
• Monitoring the progress of any management actions
recommended by PwC within their letter to Those Charged
with Governance;
• Continuing to assess the impact of developments in accounting
standards and the related implementation;
• Continuing to monitor compliance, surveillance and regulatory
developments;
• Continuing to monitor progress on the key projects of the
Group;
• Continuing to monitor the effect of the COVID-19 pandemic
on the Group and its customers, and make appropriate plans;
and
• Continuing to monitor Brexit developments and the implications
of it on the business.
32
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Nomination and Remuneration Committee Report
The Board recognises that Aquis operates within a competitive
environment and that Group performance depends on the individual
contributions to investors of the Directors and employees. It
believes in rewarding financial performance and long-term vision and
innovation that will help grow the Group.
her own self-assessment. The Senior Independent Director
subsequently discussed the observations and the assessments with
the Chair and any additional recommendations are being addressed
as part of the post Board evaluation action plan.
The Board is committed to equality and diversity throughout the
Group and seeks to ensure a diverse and talented workforce is
attracted and retained through appropriate recruitment and selection
processes. The Group has adopted a Diversity and Inclusion policy
which is set out in more detail in the Strategic Report on page 15.
In 2020 the Group has prepared resourcing targets taking account
of industry benchmarks and has made significant progress towards
improving the diversity ratios.
In 2019 the Company instructed FIT Remuneration Consultants
LLP to advise on the remuneration structure and the Directors
Remuneration Policy. Proposals were discussed with key
shareholders and applied as set out in the Directors Remuneration
Report for 2019. The following Directors’ Remuneration Report for
2020 explains that the Board has not made any changes to the 2019
Policy or structure or the manner in which discretionary awards are
calculated and made to Executive Directors so that in summary:
•
•
•
•
the arrangements remain transparent to shareholders and the
workforce;
the structure continues to be simple and the methodology is
easy to understand;
the discretionary annual cash bonus and the share awards to
Executive Directors continue to have underpin provisions as
well as Clawback and Malus provisions as described in more
detail so as to mitigate behavioural risks that could arise from
target based incentive plans; and
the Directors Remuneration Report also explains the range of
possible values of awards to the Executive Directors and how
the discretions were applied in 2020 and how the Directors
Remuneration Policy will be applied in 2021.
The Group uses specialist recruitment agencies for all recruitment
opportunities for the Board and employees. In 2020 the Group
engaged an agency, Sainty Hird and Partners (SHP), in connection
with the recruitment of the additional Non-Executive Directors for
both Aquis and Aquis Stock Exchange. SHP do not have any other
connection to the Group or any individual directors. Roles are also
advertised on the Aquis’ website and the N&RC provides oversight
to ensure that the recruitment process is aligned to Aquis’ policies
on equality and diversity.
The N&RC believes that the current composition of the Board
and its Committees is appropriate to meet the Group’s business,
regulatory and governance objectives; however, it will continue to
keep the composition of the Board under regular review in order
to assess the range of skills and capabilities of the Board for their
relevance to the execution of the Group’s strategy and regulatory
responsibilities.
The N&RC supports the ongoing development of the Board and the
Executive team to ensure that the Group retains and recruits the
best talent for its needs and supports the Board in its work to secure
the long-term health of the Group and its strategy for success in a
fast-changing world. During the year the N&RC considered the likely
business needs of the Group and its existing executive management
capability and took action where appropriate. The Board adopted
a revised Independence Policy and assessed the independence,
effectiveness and commitment of each of the Non-Executive
Directors. It also reviewed the skill sets of the Non-Executive
Directors and, with a view to succession planning for both the Chair
and some Non-Executive Directors, recruited an additional Non-
Executive Director. It was satisfied with the contributions and time
commitment of all the Non-Executive Directors during the year.
At the Annual General Meeting all the Directors will stand for
re-election with the support of the Board.
This year the Group appointed a specialist consulting firm, Board
Excellence, to undertake an external Board evaluation. Board
Excellence do not have any other connection or relationship to
the Group or any individual directors. The evaluation required
each Director to complete an online questionnaire and undertake
individual interviews with the evaluator. The questionnaire and
interviews 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 and the relationship
between the Non-Executive and Executive Directors. The
questionnaire included open questions that encouraged Directors
to provide comments or enabled them to raise any concerns. In
addition, Board Excellence observed the December Board meeting
and meetings of both Board committees. The Board believe that this
evaluation will help with its evolution and succession planning. The
output of the review was provided to the Board for discussion and a
plan is being actioned to follow up on the recommendations.
The external Board evaluation also covered the Chair’s Leadership
and the Chair-CEO relationship and the overall Board dynamics.
It made some observations and recommendations but specifically
stated that the Chair enjoyed strong support from the Non-
Executive Directors. Separately the Senior Independent Director
invited all Directors and Board Committee members to complete a
questionnaire with their own assessment of the Chair’s contribution,
effectiveness, leadership and performance and the Chair completed
33
ANNUAL REPORT & ACCOUNTS 2020
Directors’ Remuneration Report
Annual Statement
Dear Shareholder,
I am pleased to present, on behalf of the Board, the Directors’
Remuneration Report for the year ended 31 December 2020. This
report includes (i) this Annual Statement which summarises the main
decisions taken by the Nomination & Remuneration Committee
(N&RC) during 2020 including the incentive outcomes for 2020, (ii)
the Directors’ Remuneration Policy Report which was introduced last
year and sets out the structure of Directors’ pay packages, and (iii)
the Annual Report on Remuneration which sets out in more detail
the payments and awards made to the Directors during 2020 and
how the Policy will be operated for 2021.
At the 2021 Annual General Meeting there will be a single
remuneration-related resolution presented, being the normal annual
advisory vote on the Directors’ Remuneration Report.
Work of the N&RC during the year
The main activities during the year (full details of which are set out in
the relevant sections of this report) included:
• Assessing the skills of the Non-Executive Directors, reviewing
the succession plan for the Board and senior executive and
identifying and selecting candidates for a new appointment to
the Board. The Board composition is described in the Directors’
Report;
• Determining changes to Executive Directors’ and senior
executives’ base salaries effective from 1 January 2021 in the
context of salary changes across the Group
• Annual cash bonus:
• Assessing performance versus the targets and agreeing
the payouts to the Executive Directors and other senior
executives under the 2020 Executive Cash Bonus Plan;
• Reviewing and agreeing the proposals for the 2021
Executive Cash Bonus Plan for the Executive Directors and
other senior executives;
•
Long term incentives:
• Confirming the terms and making the grant of restricted
share awards to the Executive Directors and other
executives in June 2020 under the Aquis Exchange
Omnibus Share Plan;
• Reviewing and agreeing the restricted share awards to be
granted to Executive Directors and other senior executives
in 2021 under the Aquis Exchange Omnibus Share Plan;
• Reviewing the fees of the Chair and other Non-Executive
Directors
Throughout the year, the N&RC has continued to work to ensure
policy and practices remain consistent with the relevant provisions of
the 2018 UK Corporate Governance Code.
34
Discretion
The Group is satisfied that the Remuneration Policy operated as
intended during 2020 versus the performance of the Group and no
discretion has been applied in respect of remuneration outcomes.
Executive Directors’ Remuneration in 2020 and comparison with
Group Performance
Summary of 2020 performance
The Group has performed very well during 2020, making significant
financial and strategic progress despite the most challenging
economic conditions arising from the Coronavirus pandemic. Aquis
did not have to take advantage of any government assistance and
did not reduce the number of employees as a result of COVID-19.
There has been very good revenue growth and the Group was
profitable for the first time for the year as a whole. Aquis Stock
Exchange was rapidly and successfully integrated into the business
after the acquisition was completed earlier in the year. Immediately
following the end of the year, upon expiry of the Brexit transition
period on 31st December, more than 99% of continuous trading
volume of EU27 equities switched from Aquis Exchange’s platform
in the UK to Aquis Exchange Europe SAS, its regulated subsidiary
in France. This was achieved without any loss of service or other
incident.
Executive Directors’ 2020 annual cash bonus
The Executive Directors’ discretionary annual cash bonus for 2020
was determined by the achievement against a set of performance
targets. The N&RC ensures performance targets, agreed at the
start of the performance period, are sufficiently challenging. In 2020,
for both Executive Directors, 70% of the achievable bonus was
determined against Group Financial Key Performance Indicators
(KPIs) and 30% was determined against strategic, non-financial
objectives.
Against the Group Financial KPIs, the performance was very strong
with the revenue target exceeded and the profit target significantly
exceeded. When combined with performance against the strategic,
non-financial objectives, the Board determined that cash bonuses
of 54.4% of salary should be payable, resulting in a cash bonus of
£135,896 for Alasdair Haynes and £127,742 for Jonathan Clelland.
These bonuses are paid in the April 2021 payroll. Further details of
the measures, targets and bonus outcomes are set out in the Annual
Report on Remuneration.
Executive Directors’ vesting during 2020 of share-based awards under
previous long term incentive plans
Only previous awards that are subject to time-based vesting, with
no performance conditions attached, vested during the year. Full
details on the vesting status of all share plan awards for the Executive
Directors are set out in the Annual Report on Remuneration
Implementation of Policy in 2021
Executive Directors’ base salaries from 1 January 2021
The Board have decided to maintain the Executive Directors
salaries for 2021 at the same level as in 2020. Therefore, Alasdair
Haynes’ base salary will remain unchanged at £250,000 p.a. and
Jonathan Clelland’s base salary will remain at £235,000 p.a. This is in
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
the context of increases provided to the general workforce of on
average around 3%.
Executive Directors’ 2021 Annual Cash Bonus Plan
The N&RC conducted a full review of the Executive Annual Cash
Bonus Plan last year and for 2021 it has decided to make some
changes:
Policy, including with all shareholders who held more than 2% of
the total equity in the Company (not including the Company’s
Board directors). As no substantial changes are proposed to the
Remuneration Policy this year, the consultation process was not
repeated in 2020. It is the N&RC’s firm commitment to continue
a wide engagement with the shareholders on remuneration issues
going forwards.
• The maximum bonus opportunity will continue to be 80% of
salary and half of the maximum will be payable for on-target
performance;
Finally, I would like to thank our shareholders and I hope we can
continue to rely on their support at our Annual General Meeting on
27 April 2021.
Richard Bennett
Nomination and Remuneration Committee Chairman
30 March 2021
•
70% of the bonus will be based on stretching Group Financial
KPIs and 30% on strategic, non-financial objectives. In 2021
66.6% of the Group Financial KPIs (previously 50% in 2020)
will be measured against revenue and 33.3% (previously 50% in
2020) will be measured against Profit Before Tax (as opposed
to Operating Profit);
• As an underpin, a minimum level of profit must be achieved
before any payment can be made against the financial element
of the Annual Cash Bonus Plan. There is no formal underpin
for the strategic, non-financial objectives but the N&RC and
Board will retain discretion to reduce (including to nil) annual
cash bonuses based on non-performance against strategic, non-
financial objectives if it determines, in exceptional circumstances,
acting reasonably in the best interests of the Company, that the
overall circumstances cannot justify it.
• There are Recovery (Clawback) provision in exceptional
circumstances
Further details of the structure of the 2021 Executive Directors’
Annual Cash Bonus Plan are included in the Annual Report on
Remuneration.
Executive Directors’ Awards in 2021 under the Aquis Exchange Omnibus
Share Plan
As set out in last year’s report, the first award under the Aquis
Exchange Omnibus Share Plan was made in 2020 in the form of
restricted shares. The N&RC considered carefully whether to retain
the restricted share structure or grant performance shares in 2021.
Given the continued difficulty in setting robust three-year financial
targets, it was decided to again grant restricted share awards but to
enhance the Underpin that for the restricted shares to vest in 2024
the profitability of the Group must not decrease below the level in
the 2020 financial year. It also decided that the awards should be at
the same level as last year as per the Remuneration Policy and since
the share price at the time of the grant is expected to be higher
than in June 2020 this award will be for restricted shares with a value
of 65% of base salary for both for Alasdair Haynes and Jonathan
Clelland. These awards will be granted shortly after the Annual
General Meeting on the last trading day in April, consistent with
the Group’s share dealing policy. Further details are provided in the
Annual Report on Remuneration.
Shareholder Engagement
During 4Q2019, members of the N&RC conducted an extensive
consultation with major shareholders on the Remuneration
35
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy
Executive and Non-Executive Directors’ Remuneration Policy
The Aquis Directors’ Remuneration Policy was adopted in 2020 following an extensive shareholder consultation exercise undertaken in
2019. Its purpose is to motivate Executive Directors and employees appropriately in the context of the Group’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.
For Executive Directors and other senior executives Aquis operates a remuneration structure comprising salary, benefits, annual cash bonus
and a long-term incentive comprised of annual grants of either restricted shares or performance shares under the Aquis Exchange Share
Omnibus Plan adopted in 2020. All long-term incentive awards under this Policy will vest after three years based on continued service and
the achievement of underpin tests and thereafter are subject to a 2-year holding period with associated withholding (malus) and recovery
(clawback) provisions.
The key advantages of restricted shares are:
•
•
•
•
It reduces uncertainties created from trying to forecast a realistic 3-year financial target at this stage of the Group’s development;
It helps to create a simple pay structure;
It provides a structure which promotes genuine long-term alignment and stewardship of the share price; and
It reduces the potential quantum relative to a more highly leveraged ‘traditional’ performance share plan (as fewer restricted shares will
be granted in comparison to a comparable award of performance shares).
In addition, the Group continues to take a prudent approach to the positioning of salaries and cash bonus potential relative to market
comparisons. The Group has concluded that this remains the right approach as it continues to invest in the business.
36
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
The table below provides a summary of the proposed Remuneration Policy for Executive Directors:
Element
Base salary
Purpose
Operation
Maximum
Performance
N&RC reviews the salaries
of Executive Directors each
year taking due account of all
the factors described.
Recruit and retain
executives of a high
calibre.
Reflects an individual’s
experience, role and
performance.
Prevents unnecessary
risk taking
There is no maximum.
Board is guided by average
increases across the
workforce. However, higher
% increases may be awarded
on occasion, for example
(but not limited to):
• Where an individual is
promoted or has been
recruited on a below
market rate; or
•
In relation to a change
in size, scale or scope
of an individual’s role or
responsibilities or in the
size or complexity of
the business or where
salaries have fallen
significantly below mid-
market levels.
Salaries are paid monthly.
They are reviewed annually
and normally fixed for
12 months commencing
1 January.
In deciding appropriate levels,
the Board considers:
•
•
•
the role, experience,
responsibility &
performance of the
individual,
increases applied to the
broader workforce and
relevant market
information for similar
roles in broadly similar
UK listed companies and
companies of a similar
size.
The Board considers the
impact of any salary increase
on the total remuneration
package prior to awarding
any increases.
37
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
Operation
Benefits include:
•
•
Private health cover
(individual and family),
permanent health cover
and life assurance cover.
Executive Directors
are also eligible to
participate in any
all-employee HMRC
approved share
schemes, on the
same basis as other
employees.
• Any reasonable
business-related
expenses can
be reimbursed if
determined to be a
taxable benefit.
• Relocation or related
expenses may be
offered including tax
equalisation to ensure
the executive is no
better or worse off.
•
Executive Directors
may be offered other
benefits if considered
appropriate and
reasonable by the
N&RC.
Executive Directors as
well as other staff are
eligible to receive employer
contributions of 5% of base
salary to the Group’s Pension
Plan (which is a defined
contribution plan)
Performance
N/A
Maximum
There is no maximum as
costs may vary in accordance
with market conditions.
HMRC tax-approved
limits will apply to all share
schemes.
N/A
The current Executive
Directors have elected not
to participate in the Group
Pension Plan. New Executive
Directors in the future, who
participate in the Group
Pension Plan, will receive
employer contributions
which are in line with those
given to the majority of the
Group’s workforce.
Element
Benefits
Purpose
Recruit and retain
executives of a high
calibre.
Pension
To provide retirement
benefits in line with the
overall Group Policy.
38
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Element
Purpose
Operation
Maximum
Performance
Annual cash
bonus
To incentivise the
achievement of
annual financial and/
or strategic business
targets, appropriately
stretching, in line with
shareholder interests.
An overall maximum of 80%
of salary will apply.
Participation in the bonus
plan is at the discretion of
the Board.
Bonus payment is
determined after the year
end, based on performance
against targets set prior to
the start of each year.
For Executive Directors,
bonus payments are paid in
the April after year end and
after the announcement of
the financial results for the
year.
Bonus payments are subject
to recovery and withholding
provisions in the event of
financial misstatement, error
or gross misconduct -see
below for more details.
Performance metrics are
selected annually based
on the Group’s strategic
objectives. The bonus will be
based on the achievement
of an appropriate mix of
challenging financial, strategic
or personal targets, tailored
each year to reflect business
priorities.
Outcomes will be based on
the achievement of financial
measures (e.g. revenue,
profit), representing a
majority of the bonus with a
minority (up to 30%) on key
strategic objectives.
For financial measures, a
sliding scale of targets is set
by the N&RC, taking into
account factors such as the
business outlook for the year.
Nothing is payable for
performance below
a minimum level of
performance.
Where non-financial targets
operate, it may not always
be practicable to set targets
on a graduated scale. Where
these operate, not more
than 25% will be payable
for achieving the threshold
target.
The metrics, and proportion
of bonus that can be earned
against each metric, will
be disclosed in the Annual
Report on Remuneration
each year for the following
year.
The calculation of the annual
bonuses from the actual
performance achieved against
each bonus target will be
described retrospectively
each year in the Annual
Report on Remuneration.
39
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
Purpose
Operation
Maximum
Performance
Incentivises Executive
Directors and senior
executives to achieve
successful execution of
business strategy over
the longer term.
Aligns the interests of
the Executives, senior
staff and shareholders.
Also helps to provide
long-term retention.
Maximum grant level of
65% of salary in the form of
restricted shares for current
Executive Directors (and
an overall policy limit of
100% of salary to be used in
cases such as recruitment).
Under the Aquis Exchange
Omnibus Share Plan, it
would be possible to grant
Performance Shares with
a maximum grant of up to
130% of salary for 2021
onwards although the
current intention is to make
Restricted Share awards only.
The N&RC will consult first
with shareholders if it wishes
to issue Performance Shares
in the future.
Restricted Share awards
will be share based and
will vest three years after
grant subject to continued
employment.
No performance conditions
will apply although
appropriate underpins will
operate.
The underpins will be set
prior to grant and it is
envisaged that they will
always include thresholds
relating to an assessment
of financial progress,
maintenance of regulatory
capital and compliance.
Details of the underpins will
be disclosed in the Annual
Report on Remuneration in
the year of each award.
In future years, if the Board
decides to grant Performance
Shares to Executive
Directors, the terms of
such awards (including the
selection of appropriate
performance measures,
targets, vesting & holding
periods, dividend provision
and recovery & withholding
provisions) will be subject
to prior shareholder
consultation.
Participation and individual
award levels will be
determined annually at the
discretion of the Board within
the Policy.
Awards are normally granted
annually in the form of nil
cost options under the Aquis
Exchange Omnibus Share
Plan.
Award levels will be subject
to the individual limit and will
take into account matters
such as market practice,
overall remuneration, and
the performance of both the
Group and the Executive
being granted the award.
Awards normally vest after
three years subject to
continued employment.
A holding period will apply
under which all participants
are required to retain their
net of tax vested awards for
two years post vesting.
A dividend equivalent
provision allows the Group
to pay dividend equivalents,
at the Board’s discretion, on
vested awards (in cash or
shares) up to the point of
exercise or sale (but no later
than the expiry of the holding
period). This may assume the
reinvestment of dividends on
a cumulative basis.
Awards are subject to
recovery and withholding
provisions in the event of
financial misstatement, error
or gross misconduct – see
below for more details.
Element
Long Term
Incentives
40
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Maximum
N/A
Performance
N/A
Element
Purpose
Operation
Shareholding
guidelines
To align the interests
of management and
shareholders and
promote a long- term
approach.
The Policy for all Executive
Directors on shareholding
will be amended such that
each will be expected to
build up and hold their own
shareholding in the Company
to a value of at least 200%
of their base salary in line
with market practice in this
area. Furthermore, all vested
restricted share awards
should be retained on a net
of tax basis until the guideline
has been met.
The Board has also formalised
its post-cessation policy in the
light of the provisions of the
UK Corporate Governance
Code. It is the Group’s policy
that good leavers’ share
awards should vest on the
normal vesting date and be
subject to testing in relation
to the underpins and a pro
rata reduction. Thereafter,
such vested share awards
for good leavers will still
also be subject to the 2-year
holding period and the same
associated withholding and
recovery conditions as for
those not leaving. Vested
shares awards for good
leavers that are still within
the 2-year holding period,
will continue to be held
to the end of that holding
period. The Group believes
that these post leaving
conditions provide sufficient
shareholder protection whilst
not risking unfairly penalising
good leavers by forcing a
further holding periods for
shares released from vested
awards first granted more
than 5 years ago or for shares
acquired independently from
the Group’s share plans with
good leavers’ own resources.
41
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
Element
Purpose
Operation
Maximum
Performance
Neither the Non-Executive
Chair nor the Non-Executive
Directors are eligible for
any performance related
remuneration.
There is no maximum.
However, any increase to
fees will be considered in
light of the expected time
commitment in performing
the roles, increases received
by the wider workforce and
market rates in comparable
companies.
Non-Executive
Chair and
Non-Executive
Directors’ fees
To attract and retain a
high-quality Chair and
experienced Non-
Executive Directors.
The Non-Executive Chair
receives a single fee covering
all her duties. The Non-
Executive Directors receive
a basic fee and additional
fees payable for chairing or
being a member of the Audit,
Risk & Compliance, or the
Nomination & Remuneration
Committees or the Group’s
Regulated Subsidiary Boards.
The Chair and Non-
Executive Directors shall be
entitled to have reimbursed
all expenses that they
reasonably incur in the
performance of their duties.
The level of fees of the
Non-Executive Directors
reflects the time commitment
and responsibility of their
respective roles. Their fees
are reviewed from time to
time against broadly similar
UK listed companies and
companies of a similar size.
In exceptional circumstances,
additional fees may be
payable to reflect a
substantial increase in time
commitment of the Non-
Executive Chair or Directors.
Consideration of employment conditions elsewhere in the Group
• The size of an award and/or a payment;
Whilst the N&RC does not consult directly with employees on the
Directors’ Remuneration Policy, the N&RC does receive periodic
updates regarding salary increases and remuneration arrangements
across the Group. This is borne in mind when determining the
Remuneration Policy and payments for the Directors.
Bonus and Restricted Share Plan Discretions
The Group will operate the Annual Cash Bonus Plan and Aquis
Exchange Omnibus Share Plan according to their respective rules and
in accordance with the AIM Rules and HMRC rules, where relevant.
A copy of the Aquis Exchange Omnibus Share Plan rules is available
on request from the Company Secretary. The Board, consistent with
market practice, retains discretion over a number of areas relating
to the operation and administration of these plans. These include
(but are not limited to) the following (albeit the level of award is
restricted as set out in the Policy table above):
• Who participates in the plans;
• The timing of grant of award and/or payment;
• Discretion relating to the measurement of performance in the
event of a change of control or reconstruction;
• Determination of a good leaver (in addition to any specified
categories) for incentive plan purposes based on the rules of
each Plan and the appropriate treatment chosen;
• Adjustments required in certain circumstances (e.g. rights issues,
corporate restructuring, on a change of control and special
dividends); and
• The ability to adjust existing performance conditions and
underpins for exceptional events, including any M&A activity so
that they can still fulfil their original purpose whilst being no less
stretching.
Recruitment and Promotion Policy
The remuneration package for a new Executive Director will be
established in accordance with the Group’s approved Remuneration
Policy subject to such modifications as are set out below.
42
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Salary levels for Executive Directors will be set in accordance with
the Remuneration Policy, taking into account the experience and
calibre of the individual and their existing remuneration package.
Benefits will generally be provided in line with the approved Policy,
with relocation or other related expenses provided for if necessary.
A pension contribution or cash in lieu in line with the pension
contributions provided to the majority of the workforce may be
offered.
The structure of variable pay elements of Executive Directors will
be in accordance with the Group’s approved Policy detailed above.
The maximum variable pay opportunity will be as set out in the
Remuneration Policy table, different performance measures may be
set initially for the annual cash bonus in the year of joining, taking
into account the responsibilities of the individual, and the point
in the financial year that he or she joined the Board. The bonus
will be pro-rated to reflect the proportion of the financial year
served. A Restricted Share award can be made shortly following an
appointment (assuming the Group is not in a close period).
In the case of external recruitment, if it is necessary to buy out
incentive pay or benefit arrangements (which would be forfeited on
leaving the previous employer), this may be provided, taking into
account the form (cash or shares), timing and expected value (taking
into account the likelihood of meeting any existing performance
criteria) of the remuneration being forfeited. Replacement share
awards, if used, may be granted using the Group’s existing share
plans to the extent possible, although awards may also be granted
outside of these schemes if necessary and as permitted under the
AIM Rules. The intent of any such award would be to ensure that, as
far as possible, the expected value and structure of the award will be
no more generous than the amount forfeited.
In the case of an internal recruitment, any outstanding variable pay
awarded in relation to the previous role will be allowed to pay out
according to its terms of grant or adjusted as considered desirable to
reflect the new role.
Service Contracts and Payments for Loss of Office
The Group’s policy is to have service contracts for Executive
Directors that continue indefinitely unless determined by their notice
period. Under the Executive Directors’ service contracts and, in
line with the policy for new appointments, no more than 6 months’
notice of termination of employment is required by either party.
All Non-Executive Directors have letters of appointment with
the Group for an initial period of three years or on renewal for
a shorter period as set out in the table below. Appointments
may be terminated with three months’ notice. The appointment
letters for the Chair and Non-Executive Directors provide that no
compensation is payable on termination, other than accrued fees and
expenses.
For Executive Directors, the Group may, in its absolute discretion, at
any time after notice is served by either party, terminate a Directors’
contract with immediate effect by paying an amount equal to base
salary for the then unexpired period of notice plus the fair value of
contractual benefits subject to the deduction of tax.
An Executive Director’s service contract may be terminated without
notice for certain events such as gross misconduct or a serious
breach of contract. No payment or compensation beyond salary
(and the value of holiday entitlement) accrued up to the date of
termination will be made if such an event occurs. Any statutory
payments required by law will be made.
Recovery (Clawback) provisions for Executive Directors in the
Annual Cash Bonus Plan
For Executive Directors only, the Board may, in the exceptional
circumstances defined below, decide to Clawback annual cash bonus
payments.
The Board may decide at any time prior to the second anniversary
of the date on which annual cash bonuses are paid, that the
individual to whom the annual cash bonus was paid shall be subject
to Clawback: (i) after due consideration, the Board forms the view
that one or more of the circumstances envisaged in (a) to (f) below
applies; and (ii) such Clawback is, in the Board’s opinion, appropriate.
The circumstances which may give rise to the application of this
provision are, for any period from Financial Year 2019 onwards:
(a) The Board forms the view that the Group materially misstated
its financial results for whatever reason and that such
misstatement resulted either directly or indirectly in the value of
the annual cash bonus paid being greater than would have been
the case had that misstatement not been made; or
(b) The Board forms the view that any calculation in connection
with the annual cash bonus or any assessment of any underpins
and/or any other condition imposed on the cash bonus was
based on an error, or on inaccurate or misleading information
or assumptions and that such error, information or assumptions
resulted either directly or indirectly in the value of cash bonus
paid being greater than would have been the case had that
error not been made; or
(c) It is determined by the Board that the relevant individual
committed serious misconduct that warrants or could have
warranted his summary dismissal as a result of his misconduct;
or
(d) The Group becomes insolvent or is put into administration
(under the Insolvency Act 1986) and the Board determines that
such insolvency or administration arose from events occurring
(in whole or substantial part) during any period in which the
relevant individual was an Executive Director; or
(e) There are circumstances which in the Board’s opinion have (or
would have if made public) a sufficiently significant impact on the
reputation of the Group or of any of its subsidiaries to justify the
application of this provision; or
(f)
The Board forms the view that there has been a serious failure
of risk management within the Group or any of its subsidiaries
to justify the application of this provision.
43
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
Change of Control provisions for Executive Directors in Aquis
Exchange Omnibus Plan
Implementation of Remuneration Policy in 2021
Executive Directors’ base salaries from 1 January 2021
In the event of a change of control, unvested share awards shall vest
on the date of such event. The Board shall determine the number
of vested shares by (i) applying an assessment of any underpins
imposed on the vesting of the award, and (ii) by applying a pro
rata reduction based on the period of time after the grant date and
ending on the early vesting date relative to the period of three years
(counting part of any month as a whole month), unless the Board,
acting fairly and reasonably, decides that the reduction in the number
of vested shares is inappropriate in any particular case in comparison
with the original award when it may increase the number of vested
shares to such higher number as it decides is appropriate.
Good Leaver (including Retirement) provisions for Executive
Directors in Aquis Exchange Omnibus Plan
If prior to vesting of any shares an individual ceases to be a director
or employee of the Group by reason of (a) death, (b) injury or
disability evidenced to the satisfaction of the Board; (c) retirement
with the agreement of the Board; (d) redundancy (within the
meaning of the Employment Rights Act 1996 or applicable local law
equivalent); or (e) for any other reason, if the Board so decides then
his/her awards shall vest on the normal vesting date, unless the Board
decides in exceptional circumstances that his/her award shall vest on
leaving.
The Board shall determine the number of shares that will vest by (i)
applying any underpin test at the time of vesting, whether early or at
the normal vesting date; and (ii) applying a pro rata reduction to the
number of shares based on the period of time from the date of grant
to the date of cessation relative to the period of 3 years (counting
part of any month as a whole month) unless the Board, acting fairly
and reasonably, decides that the reduction in the number of vested
shares is inappropriate in any particular case when it may increase
the number of shares that will vest to such higher number as it
decides is appropriate.
Withholding (Malus) and Recovery (Clawback) provisions for
Executive Directors in Aquis Exchange Omnibus Plan
The Board may decide:(i) at any time prior to the date on which an
award vests that an unvested award is subject to Malus; and/or (ii)
at any time prior to the second anniversary of the date on which
an award vests, that the individual to whom the award was granted
shall be subject to Clawback, or both: (i) after due consideration,
the Board forms the view that one or more of the circumstances
envisaged in (a) to (f) of the provisions established for the Annual
Cash Bonus applies; and (ii) such Malus and/ or Clawback is, in the
Board’s opinion, appropriate. The Board shall not be obliged to
prefer the application of Malus over Clawback or vice versa.
Annual Report on Remuneration
The information below includes details, firstly, how we intend to
operate the Remuneration Policy in 2021 and, secondly, details of
the pay outcomes in respect of the 2020 financial year.
The Executive Directors’ base salaries are determined by assessment
of the Group and individual performance in 2020 and also
benchmarking against Executive Directors’ salaries in other UK
listed companies in the Group’s market sector of a similar size and
performance. The outcome of this review was to maintain Alasdair
Haynes and Jonathan Clelland’s base salaries. Alasdair Haynes’ base
salary will remain at £250,000 p.a. and Jonathan Clelland’s base
salary will remain at £235,000 p.a. This is in the context of increases
provided to the general workforce of on average around 3%.
Executive Directors’ Benefits
The Executive Directors’ remuneration packages include private
health cover (individual and family), permanent health cover and
life assurance cover. The current Executive Directors have elected
to not participate in the Group Pension Plan. In addition to public
holidays the Executive Directors are entitled to 25 working days of
paid holiday in each complete holiday year.
Executive Directors’ 2021 Annual Cash Bonus Plan
For both Executive Directors, the maximum bonus opportunity for
2021 will be capped at 80% of base salary, which is the same as in
2020. For on-target performance, bonus payout will be 40% of base
salary. At threshold performance, below which no bonus will be paid,
the bonus payout will be 5% of base salary.
The objectives and their weightings for the year ending 31 December
2021, for both Executive Directors are:
Group Financial KPI 1: Profit Before Tax
Group Financial KPI 2: Revenue
Strategic, non-financial objectives
Maximum bonus opportunity
Bonus Weighting (%
of salary)
18.67%
37.33%
24.00%
80.00%
The financial objectives therefore constitute 70% of the available
bonus, and the non-financial objectives 30%.
As an underpin, a minimum level of Profit Before Tax must be
achieved before any payment can be made against the financial
element of the Annual Cash Bonus plan. There is no formal underpin
for the strategic, non-financial objectives but the N&RC and Board
will retain discretion to reduce (including to nil) cash bonuses based
on non-performance against strategic, non-financial objectives if it
determines, in exceptional circumstances, acting reasonably in the
best interests of the Company, that the overall circumstances cannot
justify it.
44
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Executive Directors’ Awards in 2021 under the Aquis Exchange Omnibus Share Plan
The Aquis Exchange Omnibus Share Plan forms the main, equity-based element of Executive Directors’ and other senior executive’s
remuneration.
Consistent with the approach taken last year and the limit set out in the Directors’ Remuneration Policy, the Restricted Share awards
proposed for 2021 are 65% of base salary for both for Alasdair Haynes and Jonathan Clelland.
These awards will vest on the 3rd anniversary after the grant date subject to underpin conditions being met. They are then subject to a
further two-year holding period during which Recovery (Malus) and Withholding (Clawback) conditions apply.
The Restricted Share Awards will be subject to underpins that must be met before vesting can occur. The underpins are based on a minimum
level of underlying performance of the Group over the three-year period and delivery against the Group’s strategy and plans. As such the
underpins will require that the profitability of the Group must not decrease below the level in the 2020 financial year and may include growth
in market share in the Aquis Exchange business, sustainable profit delivery and financial progress taking into account expansion and investment
plans, the avoidance of a material failure in governance or an illegal act resulting in significant regulatory or reputational damage and/or
material financial loss to the Group or any of its subsidiaries, and social factors such as culture and employee engagement. When considering
these factors, the N&RC will consider overall performance while recognising that fast growing financial and technology companies may require
capital expenditure and investment.
Chair and Non-Executive Director fees
The remuneration for the Chair and Non-Executive Directors, which consists solely of fees, is summarised in the table below in the section
on Single figure of total remuneration for Directors.
Single figure of total remuneration for Directors
The following tables present all elements of remuneration received by the Directors in 2020 (and 2019).
The remuneration of the Directors is also disclosed in Note 11 of the financial statements.
2020 (Audited)
Director
Executive Directors
Alasdair Haynes
Jonathan Clelland
Non-Executive Directors
Niki Beattie
Richard Bennett
Mark Spanbroek
Mark Goodliffe
Glenn Collinson(1)
David Vaillant(2)
Deirdre Somers(3)
Salary/Fees
£250,000
£235,000
£55,000
£40,000
£35,000
£44,029
£40,000
£31,250
£5,000
Performance
bonus actual(4)
Taxable benefits(5)
£135,896
£127,742
£5,664
£7,589
Long Term
Incentives(6)
£34,634
£34,634
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£426,194
£404,965
£55,000
£40,000
£35,000
£44,029
£40,000
£31,250
£5,000
(1) Glenn Collinson resigned from the Board in March 2020 and was appointed a Non-Executive Director of Aquis Stock Exchange Limited
(2) David Vaillant joined the Aquis Exchange Europe SAS Board in September 2019 and the Aquis Exchange PLC Board in June 2020
(3) Deirdre Somers joined the Board in October 2020
(4) The detailed calculation of the performance bonus is described in the section on 2020 annual cash bonus below
(5) Taxable benefits comprise private health care
(6)
Executive Directors were granted share options under the Aquis EMI Option Plan 2018 at the time of IPO 14 June 2018. The values shown are the gains
made at the date of vesting 14 June 2020. No further awards are to be made under this plan.
45
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
2019 (Audited)
Director
Executive Directors
Alasdair Haynes
Jonathan Clelland
Non-Executive Directors
Niki Beattie
Richard Bennett
Mark Spanbroek
Mark Goodliffe
Glenn Collinson(1)
Salary/Fees
Performance
bonus actual
Taxable benefits(2)
Long Term
Incentives(3)
Total
£225,000
£225,000
£68,150
£68,150
£7,693
£8,202
£87,794
£87,794
£388,637
£389,146
£50,000
£40,000
£35,000
£40,000
£40,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£50,000
£40,000
£35,000
£40,000
£40,000
(1) Glenn Collinson joined the Board in January 2019
(2) Taxable benefits comprise private healthcare
(3)
Executive Directors were granted share options under the Aquis EMI Option Plan 2018 at the time of IPO 14 June 2018. The values shown are the gains
made at the date of vesting 14 June 2019. No further awards are to be made under this plan
Executive Directors’ 2020 annual cash bonus
In 2020, both the Group Financial KPIs and the Strategic, Non-financial, Individual KPIs for both Alasdair Haynes and Jonathan Clelland were
the same. Performance against them was as follows:
Group Financial Objective
(KPI) 1: Operating Profit
Group Financial Objective
(KPI) 2: Revenue (net of ECL)
Strategic, Non-financial
Objectives (KPIs)
Total
Maximum Bonus
Opportunity
(% of salary)
Threshold
Target
Maximum
Actual Result
Bonus outcome
(% of salary)
28%
£0.00m
£0.30m
£0.68m
£1.52m
28%
28%
£10.04m
£11.11m
£12.27m
£11.47m
16.4%
See the table
below
24%
80%
12%
24%
10%
10%
54.4%
Performance against the financial bonus measures resulted in a payout of 54.4% of salary out of 80.0%.
The Strategic, Non-financial KPIs (30% of the bonus) are set out below together with the performance outcome.
Strategic, Non-financial KPIs
Performance outcome (either Not met target, Partially met
target, Met target, or Exceeded target)
Grow membership and show market share progression for Aquis
Exchange.
Partially met target through growth in message traffic of current
members
Invest to grow Aquis Technologies
Building a sustainable Aquis business
Partially met target through investment in personnel and capital
Met target through successful integration of AQSE, improved
diversity, stakeholder satisfaction feedback and investment.
Maintain Regulatory, Technical and Supervisory systems to avoid any
breaches
Met target through no regulatory breaches and meeting targets e.g.
Brexit, SMCR
46
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
The measurement of the strategic non-financial KPIs is based on a combination of qualitative factors and the audited financial statements.
Further details on the 4 strategic non-financial KPIs are as follows:
To ensure that Aquis exchange continues to increase member numbers and market share of the overall pan-European equity market the
number of member contracts, growth in message traffic and resulting revenue was verified and market share independently checked against
available 3rd party data sources.
The objective of investing in Aquis technologies is to reduce the risk of exchange failure and to increase the number of technology licensing
contracts. There were no outages and technology contracts increased during 2020.
The purpose of building a sustainable Aquis business is to diversify revenue sources and enhance employee gender and ethnic diversity. The
acquisition of AQSE enabled Aquis to be able to enter the primary equity market and also increased the percentage of revenues derived from
data by 165%. Gender diversity increased by 60% compared to 2019 and the employee satisfaction survey scored highly.
In order to maintain external confidence in the quality and performance of the Aquis business activities it is crucial to avoid any regulatory,
technical or supervisory breaches. This was achieved during 2020 including the preparation leading to the successful Brexit transition on
4th January 2021.
The data used to measure and verify the KPIs was derived from independent sources and internal management reports. No significant
assumptions were made in measuring the KPIs and the calculation method for all the financial and non-financial KPIs was consistent with prior
years and there were no changes to the underlying accounting policies.
Executive Directors’ Awards in 2020 under the Aquis Exchange Omnibus Share Plan
On 15th June 2020, Alasdair Haynes was granted 45,775 and Jonathan Clelland 43,028 restricted share awards under the Aquis Exchange
Omnibus Share Plan. These awards are valued at face value from the share price of £3.55 at 15th June 2020 and therefore represent 65%
base salary as already disclosed in Remuneration Policy in the 2019 Directors Remuneration Report. Further details on the valuation, vesting
schedule and conditions of this award are described below in the table below on Outstanding Share Plan awards.
These Restricted Share Awards are subject to underpins, which are objectives that must be met before vesting can occur. The underpins
are based on a minimum level of underlying performance of the Group over the three-year period and delivery against the Group’s strategy
and plans. As such the underpins may include growth in market share in the Aquis Exchange business, sustainable profit delivery and financial
progress taking into account expansion and investment plans, the avoidance of a material failure in governance or an illegal act resulting in
significant regulatory or reputational damage and/or material financial loss to the Group or any of its subsidiaries, and social factors such as
culture and employee engagement. When considering these factors, the N&RC and Board will consider overall performance while recognising
that fast growing financial and technology companies may require capital expenditure and investment.
Executive Directors’ vesting during 2020 of share-based awards under previous long term incentive plans
Only previous awards that are subject to time-based vesting, with no performance conditions attached, vested during the year. These awards
were granted in June 2018 under the Aquis EMI option scheme, vesting over a 3-year period with an exercise price of £2.69 per share. Full
details on the vesting status of all share plan awards for the Executive Directors are set out in the Outstanding Share Plan awards table below.
47
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
Outstanding Share Plan awards
Details of all outstanding awards under all Share Plans for the Executive Directors are set out below.
Director
Type of award
Award date
Share (or
EMI Option
Exercise)
Price at grant
Unvested
at 1 January
2020
Awarded
during the
year
Lapsed during
the year
Alasdair
Haynes
Jonathan
Clelland
Aquis EMI
Option Plan
2018
Aquis EMI
Option
Aquis
Omnibus
Share Plan
2020
Aquis EMI
Option Plan
2018
Aquis EMI
Option Plan
2018
Aquis
Omnibus
Share Plan
2020
14th June 2018
£2.69
80,545
19th November
2019
£3.47
80,000
0
0
15th June 2020
£3.55
0
45,755
14th June 2018
£2.69
80,545
19th November
2019
£3.47
80,000
0
0
15th June 2020
£3.55
0
43,028
0
0
0
0
0
0
Option
vested but
not exercised
during the
year
Unvested at
31 December
2020
40,272
40,273
Earliest date
shares from
most recent
award could be
acquired
Latest date
shares from
most recent
award could be
acquired
14th June
2019
13th June
2028
0
0
80,000
45,755
16th April
2021
16th April
2030
15th June
2023
14th June
2030
40,272
40,273
14th June
2019
13th June
2028
0
0
80,000
16th April
2021
16th April
2030
43,028
15th June
2023
14th June
2030
(1)
Awards under the Aquis EMI Share Option plan 2018 are at-market share options. They are subject to time-based vesting in three equal tranches on the
1st, 2nd and 3rd anniversary of the award.
(2) Aquis Exchange PLC was under close period at the original award date of 19th November 2019, therefore this award was deferred to 16th April 2020.
(3)
Awards under the Aquis Omnibus Share Plan are options to acquire shares in Aquis Exchange PLC at an exercise price of 10p/share, vest 3 years after the
date of the award subject to the Group exceeding underpin conditions and are held for a further 2 years post vest subject to certain withholding (malus)
and recovery (clawback) conditions described in the Aquis Exchange Remuneration Policy.
Directors’ shareholdings and share interests
The following table summarises the shareholdings and share interests of the Directors at 31 December 2020.
Director
Executive
Alasdair Haynes
Jonathan Clelland
Retirement Benefit Schemes
Pension obligations
Shares
Options vested but
not exercised
Options unvested
SIP
Total
1,491,551
576,000
80,545
80,545
120,273
120,273
5,505
5,505
1,697,874
782,323
The Group has defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into
a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to
pay all employees the benefits relating to employee service in the current and prior periods.
The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee
benefit expense as and when they become 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 Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from
those of the Group in an independently administered fund.
The total costs charged to income in respect of defined contribution plans in 2020 are £314,610 (2019: £ 274,154).
48
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Both Alasdair Haynes and Jonathan Clelland have elected not to participate in the Group pension plan.
All Employee Share Plans
The Group operates an HMRC approved Share Investment Plan (SIP).
Share Investment Plan (SIP)
All employees are eligible to participate in the SIP scheme and during 2020 31 employees including the Executive Directors subscribed to the
scheme. As at, 31 December 2020 104,656 shares in the Company were held in the SIP.
Directors’ service contracts terms
The Group 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.
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
David Vaillant
Deirdre Somers
Date of contract
Term
June 2020
June 2020
June 2020
March 2018
December 2021
March 2023
February 2022
March 2021
June 2020
September 2022
October 2020
October 2023
All Directors’ service contracts are available for inspection on request from the Company Secretary.
Other information about the N&RC
The N&RC members have no personal financial interest in matters to be decided, no potential conflicts of interests arising from cross
directorships and no day to day involvement in running the business. The Non-Executive Directors are not eligible for pensions and do not
participate in the Group’s bonus or share schemes.
The N&RC received help during the year from:
• CFO&COO, Jonathan Clelland, who attends meetings as an Observer and acted as the Secretary at the meetings. The Chief Executive,
Alasdair Haynes also attended some meetings upon invitation. No individual takes part in discussions relating to their own remuneration
and benefits
•
the N&RC’s appointed external adviser FIT Remuneration Consultants LLP. FIT’s fees for advice provided to the N&RC during 2020
were £35,900 covering the benchmarking of Executive Directors salaries, fees for Non -Executive Directors and the establishment of
a new share option scheme to replace the expired EMI Share Option Scheme. FIT does not provide any other services to the Group
and the N&RC is satisfied that it provides independent and objective remuneration advice. FIT is a signatory to the Code of Conduct
for Remuneration Consultants in the UK, details of which can be found on the Remuneration Consultants Group’s website at www.
remunerationconsultantsgroup.com.
49
ANNUAL REPORT & ACCOUNTS 2020 Remuneration Policy continued
External Non-Executive Directors Appointments
Executive Directors are permitted, where appropriate and with Board approval, to take Non-Executive Directorships with other organisations
in order to broaden their knowledge and experience in other markets and countries. Fees received by the Executive Directors in their
capacity as directors of these companies are retained, reflecting the personal responsibility they undertake in these roles. Neither of the
Executive Directors currently holds an appointment of this nature.
2020 AGM Remuneration Resolution Voting Outcome
Directors’ Remuneration Report
For
Against
15,418,015
96.9%
273,501
1.7%
Withheld
219,208
1.4%
On behalf of the Board and the Nomination & Remuneration Committee.
Richard Bennett
Chairman, Nomination & Remuneration Committee
30 March 2021
50
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Independent auditors’ Report
to the members of Aquis Exchange PLC
Report on the audit of the financial statements
Opinion
In our opinion, Aquis Exchange Plc’s group financial statements and company financial statements (the “financial statements”):
•
•
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2020 and of the group’s and company’s profit
and the group’s and company’s cash flows for the year then ended;
have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act
2006; 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 Accounts, which comprise: Consolidated and company statements
of comprehensive income for the year ended 31 December 2020; Consolidated and company statements of financial position as at 31 December
2020; Consolidated statement of changes in equity for the year ended 31 December 2020, Company statement of changes in equity for the year
ended 31 December 2020, Consolidated and company statements of cash flows for the year ended 31 December 2020, and the notes to the financial
statements, which include a description of the significant accounting policies.
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union
As explained in note 2 to the group financial statements, the group, in addition to applying international accounting standards in conformity with
the requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
In our opinion, the group financial statements have been properly prepared in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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 group 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
Audit scope
• 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 key judgements and accounting estimates, 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 management bias that represented a risk of
material misstatement due to fraud.
Key audit matters
•
Timing of revenue recognition in relation to technology license fees (group and company)
•
•
•
Valuation of the expected credit loss for contract assets (group and company)
Valuation of deferred tax assets (group and company)
Impact of COVID-19 (group and company)
Materiality
• Overall group materiality: £114,500 (2019: £130,000) based on 1% of total revenue.
• Overall company materiality: £98,600 (2019: £130,000) based on 1% of total revenue.
•
Performance materiality: £85,875 (group) and £73,950 (company).
51
ANNUAL REPORT & ACCOUNTS 2020 Independent auditors’ Report
to the members of Aquis Exchange PLC continued
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.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related
to failure to maintain sufficient regulatory requirements or breaches of FCA regulations that may impact the ability of the group to continue as a
recognised investment exchange, and we considered the extent to which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act
2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override
of controls), and determined that the principal risks were related to the potential to post manual journal entries to manipulate financial performance,
or for management bias in the judgements and assumptions used in significant accounting estimates. The group engagement team shared this risk
assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit
procedures performed by the group engagement team and/or component auditors included:
• Discussions with management and those charged with governance including consideration of known or suspected instances of non-compliance
with laws and regulations and fraud;
•
•
•
Identifying and testing journal entries, in particular any manual journal entries posted with unusual account combinations, with descriptions
indicating a higher level of risk and material post year end adjustment entries;
Incorporating unpredictability into the nature, timing and/or extent of our testing;
Reviewing key correspondence with the FCA;
• Challenging assumptions and judgements made by management in their significant accounting estimates, in particular
in relation to the expected credit losses for contract assets, valuation of deferred tax assets and accounting for share based payment schemes;
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws
and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
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.
Valuation of deferred tax assets is a new key audit matter this year. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition in relation to technology license fees (group and
company)
In accordance with the accounting policies set out in Note 2 “Basis
of preparation and accounting policies”, 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 when other recognition criteria have been met. This can
be either over time or point in time which impacts the timing of the
recognition of the revenue.
The total revenue recognised from licence fees in the year ending 31
December 2020 was £1.8m, as explained in Note 12 “Revenue”. We
focused on this area as there is judgement required in the identification
of performance obligations as well as the timing of the revenue
recognition for each obligation. This creates a risk of licence fees not
being recognised in an appropriate period which could lead to a material
misstatement.
We understood management’s process for identifying revenue from
licence fees and appropriately recognising it under the requirements of
the Group’s accounting policies, including identification of performance
obligations and the apportionment of revenue to each obligation.
We reviewed all relevant contracts to determine whether fees were
recognised in accordance with contractual terms under IFRS 15 and
that licence fees were appropriately recognised either as “point in time”
or “over-time”, depending on the performance obligation. Where
there is judgement in allocating revenues, we have critically challenged
management on this judgement. We have also re-performed the
calculations based on the contractual terms to ensure that the revenue
was recognised accurately and in the correct period.
Based on the work performed, we found management’s judgement over
recognition of revenue to be reasonable given the evidence obtained.
52
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 Key audit matter
How our audit addressed the key audit matter
Valuation of the expected credit loss for contract assets (group and
company)
In accordance with the accounting policies set out in Note 2 “Basis of
preparation and accounting policies”, the Group is required to account
for expected credit loss (“ECL”) for contract assets arising from the
technology licensing fees.
As at 31 December 2020, the Group has recognised ECL provision
for the technology licensing contract assets with a total of £508k as
described in Note 13 “Impairment”.
Estimating ECL for 2020 requires a significant level of management
judgement given the lack of default history to predict the probability of
default (“PD”), the uncertainty in macroeconomic forecasts, in particular
given the backdrop of the COVID pandemic, and the fact that the
Group’s licensing customers primarily consist of start-up companies with
no external credit scores. There is a risk that inappropriate or incorrect
inputs could lead to a material misstatement in the ECL.
Valuation of deferred tax assets (group and company)
Aquis recorded a profit for the first time in 2020. Management
recognised deferred tax in relation to some of their carried forward tax
losses based on their expected future profitability for a period of three
years.
As at 31 December 2020, the Group recognised a total deferred tax
asset of 203k, as described in Note 18 “Deferred tax asset”.
There are high levels of inherent uncertainty and management
judgement associated with budgeting future profitability, in particular
as COVID-19 has led to high levels of economic and market volatility
which made forecasting inherently challenging. There is therefore a
significant amount of estimation uncertainty in this accounting estimate.
As such, we have considered that the valuation of deferred tax assets is
a key audit matter.
We understood management’s process for calculating the ECL for their
contract assets including identification of Probability of Default (‘PD’)
and Loss Given Default (‘LGD’).
We assessed management’s credit risk policy and the ECL model for
reasonableness, including critically challenging management’s derivation
of PD and LGD. We obtained third party information about the history,
status and regulatory maturity of the underlying counterparties.
We tested the appropriateness of management's multiple economic
scenarios through benchmarking the assumptions for the base case and
scenario weights to external forecasts and distributions . We concluded
that management’s multiple economic scenarios and ascribed weights
are appropriate.
We performed substantive procedures over the validity of the data
inputs and accuracy of ECL by re-performing the model calculation.
We substantively tested the PD rates used by management by
benchmarking them against historical default rates from external credit
ratings.
We performed sensitivity analysis by flexing the PD and LGD by a
reasonable range and found that the ECL was not materially impacted.
We reviewed the disclosure of the accounting estimate and expected
credit losses and agreed that it was appropriate. Based on the work
performed, we found management’s estimate of the ECL to be
supported by the evidence obtained.
We understood management’s process for recognising and estimating
deferred tax assets. We engaged our tax specialists to review the
recognition and the three year period for their revenue and profit
forecasts which they have applied to their deferred tax calculation.
Together with our specialists we consider that three years is in line
with market practice given the uncertainty of predicting further into the
future.
We reviewed management’s revenue and profit forecasts and critically
assessed the assumptions used in the cash-flow model. We tested
management’s forecasts for the key revenue streams through reviewing
the customer level analysis and technology licensing contracts to
see whether the forecasts are supported by the renewability of the
customers, probability of any new customers and reliability of the
increase in trading volumes. We obtained audit evidence around new
contracts and changes in fee structures, which supported management’s
assumptions.
We also assessed the impact of COVID-19 on the Group’s customers
with regard to timely payments and profitability, and determining
whether the forecasts are achievable through comparing management’s
latest forecast to the year to date actuals.
We performed sensitivity analysis to determine the sensitivity of the
forecasts and resultant impact on deferred tax assets to changes in
revenue growth rates. We concluded that management’s estimation was
within a range of reasonable alternative scenarios.
We reviewed the disclosure of the accounting estimate and deferred
tax assets and agreed that it was appropriate. Based on the work
performed, we found management’s valuation of deferred tax assets to
be supported by the evidence obtained.
53
ANNUAL REPORT & ACCOUNTS 2020
Independent auditors’ Report
to the members of Aquis Exchange PLC continued
Key audit matter
How our audit addressed the key audit matter
Impact of COVID-19 (group and company)
The impact of the Covid-19 pandemic has resulted in unprecedented
economic conditions and fiscal and monetary response from
governments and regulators. The Covid-19 pandemic has also changed
the way that companies operate their businesses, with one of the most
substantial impacts being the transition to remote working.
A substantial proportion of the Group’s employees have been working
remotely during 2020. Our audit team has also been working remotely
for most of 2020.
The impact of the Covid-19 pandemic and resulting uncertainty has
impacted a number of the estimates in the group financial statements
and company financial statements. The impact on the most significant
accounting estimates and our audit is set out in the other key audit
matters in this opinion:
• Valuation of the expected credit loss for contract assets (group
and company);
• Valuation of deferred tax assets (group and company).
We discussed our assessment of the impact of COVID-19 on the
Group’s operations with the ARCC during planning. We also discussed
how we planned our audit strategy with our team working remotely.
We engaged with management in a manner consistent with our audit
during prior years, albeit remotely using video and telephone calls.
All of the information and audit evidence we requested is provided
in electronic format. We shared information using share-screen
functionality in video calls and our secured encrypted information
sharing software.
Apart from our considerations of the impact on the most significant
accounting estimates outlined in the other key audit matters, we have
also considered the impact of COVID-19 on management’s going
concern assessment. In forming our conclusions, our procedures in
respect of going concern included evaluating the Group’s capital and
liquidity positions under multiple scenarios, including considerations of
the impact of COVID-19.
Based on the work performed, we are satisfied that the matter has
been appropriately evaluated and reflected in the financial statements,
and that there is no material uncertainty about the Group’s ability to
continue as a going concern for at least 12 months following the date of
this report.
We also assessed the adequacy of disclosures related to COVID-19
included in the annual report financial statements and assessed these to
be appropriate.
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 Group and the Company, the financial reporting process and the industry in which they operate.
For our audit of Group financial statements, we have scoped in Aquis Exchange Europe SAS and Aquis Stock Exchange Limited for the period upon
acquisition, referred together as “components” financial statement line items to the extent they are material to the Group. Subject to the overall
materiality thresholds outlined in the section below, we have allocated the materiality to the audit of the components. We engaged PwC France
(“component auditors”) to perform the audit procedures for Aquis Exchange Europe SAS, who are also the local statutory auditors of the entity. We
determined the level of involvement we needed in their audit work to be able to conclude whether sufficient and appropriate audit evidence had
been obtained as a basis for our opinion on the Group financial statements as a whole. This included regular communications with the component
auditors throughout the audit, the issuance of instructions, and a review of the results of their work.
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
How we determined it
Rationale for benchmark applied
54
Financial statements - group
Financial statements - company
£114,500 (2019: £130,000).
£98,600 (2019: £130,000).
1% of total revenue
1% of total revenue
Total revenue is the primary measure to
assess the performance of the group, and is a
generally accepted auditing benchmark. In the
prior year, average profit/loss before tax over
the past three years was the primary measure
to assess the performance of the group. Since
the group achieved profit during the year, we
determined the change of benchmark for our
materiality to be reflective of the nature and
size of the group.
Total revenue is the primary measure to assess
the performance of the company, and is a
generally accepted auditing benchmark. In the
prior year, average profit/loss before tax over
the past three years was the primary measure
to assess the performance of the company.
Since the company achieved profit during the
year, we determined the change of benchmark
for our materiality to be reflective of the nature
and size of the company.
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality
allocated across components was between £36,000 and £99,000.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent
of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was
75% of overall materiality, amounting to £85,875 for the group financial statements and £73,950 for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and
the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £5,725 (group audit)
(2019: £6,500) and £4,930 (company audit) (2019: £6,479) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of accounting
included:
•
Performing a risk assessment to identify factors that could impact the going concern basis of accounting, including the impact of Covid-19.
• Understanding and evaluating the group’s financial forecasts and the group’s liquidity and regulatory capital under various downside scenarios.
•
Evaluating the adequacy of the disclosures made in the financial statements in relation to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the company’s ability
to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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 our work undertaken in the course of the audit, the Companies Act 2006 requires 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 2020 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 group and company and their environment obtained in the course of the audit, we did not identify
any material misstatements in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006.
55
ANNUAL REPORT & ACCOUNTS 2020 Independent auditors’ Report
to the members of Aquis Exchange PLC continued
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, 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 group’s and 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 group or 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.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it
typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items
for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population
from which the sample is selected.
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.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
•
•
•
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
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
records and returns.
We have no exceptions to report arising from this responsibility.
Mike Wallace (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
30-03-2021
56
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 Consolidated and Company Statements of
Comprehensive Income
For the year ended 31 December 2020
Income Statement
Revenue
Impairment (charge)/credit
Administrative expenses
Operating profit/(loss)
Investment income
Depreciation and amortisation
Finance expense
Finance income
Profit before taxation
Income tax credit/(expense)
Deferred tax
Profit/(loss) for the year
Other comprehensive income
Foreign exchange differences on translation of foreign
operations, net of tax
Other comprehensive loss for the year
Total comprehensive income/(loss) for the year
Earnings per share (pence)
Basic
Ordinary shares
Diluted
Ordinary shares
Group
2020
£
2019
Restated
£
Company
2020
£
2019
Restated
£
Notes
12
11,477,253
6,891,994
9,860,328
6,627,994
13,23
(100,174)
284,993
(97,760)
284,993
14
(9,855,927)
(7,171,216)
(7,443,194)
(6,840,840)
1,521,152
14,632
5,771
41,699
2,319,374
14,632
72,147
36,303
(1,030,290)
(928,191)
(1,030,290)
(928,191)
(41,835)
(47,653)
(41,835)
(47,653)
6,736
470,395
307,616
203,717
981,728
6,538
6,736
6,538
(921,836)
1,268,618
(860,856)
265,254
–
307,616
203,717
265,254
–
(656,582)
1,779,951
(595,602)
(531)
(531)
1,439
1,439
–
–
981,197
(655,143)
1,779,951
(595,602)
4
3
(3)
(3)
7
6
(3)
(3)
16
14
28
28
19
18
33
20
20
The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.
57
ANNUAL REPORT & ACCOUNTS 2020AQUIS EXCHANGE PLC
Consolidated and Company Statements of Financial Position
As at 31 December 2020
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Investment in trust
Deferred tax asset
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Net current assets
Non-current liabilities
Lease liabilities
Total liabilities
Net total assets
Equity
Called up share capital
Share premium account
Other reserves
Treasury shares
Retained earnings
Foreign currency translation reserve
Total equity
Group
2020
£
83,481
916,256
2019
Restated
£
–
Company
2020
£
–
2019
Restated
£
–
753,230
916,256
753,230
1,578,554
2,013,823
1,578,554
2,013,823
–
–
203,717
839,630
–
–
–
966,922
6,484,202
2,437,766
486,127
203,717
839,630
318,410
–
966,922
3,621,638
3,733,975
10,508,486
6,490,151
Notes
17,21
20
21
24
16
22,25
22,25
2,924,067
1,696,438
2,943,368
1,687,587
26
12,268,418
11,010,861
6,179,566
8,609,739
18,814,123
16,441,274
19,631,420
16,787,477
27,28
2,810,710
1,499,574
2,292,106
1,467,826
12,381,775
11,207,725
6,830,828
8,829,500
28
995,081
1,189,694
995,081
1,189,694
995,081
1,189,694
995,081
1,189,694
3,805,791
2,689,268
3,287,187
2,657,520
15,008,332
13,752,006
16,344,234
14,129,957
29
30
31
32
33
2,716,970
2,714,956
2,716,970
2,714,956
10,892,135
10,839,981
10,892,135
10,839,981
760,543
377,766
748,525
368,367
(489,625)
(327,809)
–
–
1,127,401
145,673
1,986,604
206,653
908
1,439
–
–
15,,008,332
13,752,006
16,344,234
14,129,957
The notes to the financial statements on pages 61 to 96 form an integral part of these financial statements. The financial statements on
pages 57 to 58 were approved by the Board of Directors and authorised for issue on 30 March 2021 and are signed on its behalf by:
Alasdair Haynes
CEO
58
Jonathan Clelland
CFO
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
AQUIS EXCHANGE PLC COMPANY REGISTRATION NUMBER: 07909192
Notes
Share Capital
£
Share premium
£
Other reserves
£
Retained earnings
£
Treasury shares
£
2,714,956
10,839,981
92,446
802,255
–
(656,582)
Group
Balance at 1 January 2019
Restated loss for the year
Foreign exchange differences on
translation of foreign operations
Restated movement in share-
based payment reserve
Restated movement in treasury
shares
Restated at 31 December 2019
Balance at 1 January 2020
Profit for the year
Foreign exchange differences on
translation of foreign operations
Issue of new shares
Movement in share-based
payment reserve
Recognition of treasury shares
Balance at 31 December 2020
–
–
–
–
–
–
–
–
2,714,956
10,839,981
2,714,956
10,839,981
–
–
–
–
2,014
52,154
–
285,319
–
377,766
377,766
–
–
–
–
–
382,777
33
31
32
33
31
Foreign Currency
Translation
Reserve
£
Total
£
–
–
14,449,638
(656,582)
1,439
1,439
–
285,319
–
–
–
–
–
–
–
(327,809)
–
(327,809)
145,673
(327,809)
1,439
13,752,006
145,673
(327,809)
1,439
13,752,006
981,728
–
981,728
–
–
–
–
–
–
(161,816)
(531)
–
–
(531)
54,168
382,777
(161,816)
2,716,970
10,892,135
760,543
1,127,401
(489,625)
908
15,008,332
Company Statement of Changes in Equity
For the year ended 31 December 2020
Restated movement in share option reserve
31
Company
Balance at 1 January 2019
Restated loss for the year
Restated balance at 31 December 2019
Balance at 1 January 2020
Profit for the year
Issue of new shares
Movement in share option reserve
Balance at 31 December 2020
Notes
Share Capital
£
Share premium
£
Other reserves
£
Retained earnings
£
Total
£
2,714,956
10,839,981
92,446
802,255
14,449,638
–
–
–
–
2,714,956
10,839,981
2,714,956
10,839,981
–
–
2,014
52,154
–
(595,602)
(595,602)
275,921
368,367
368,367
–
–
–
275,921
206,653
14,129,957
206,653
14,129,957
1,779,951
1,779,951
–
–
52,154
380,158
31
–
–
380,158
2,716,970
10,892,135
748,525
1,986,604
16,344,234
59
ANNUAL REPORT & ACCOUNTS 2020AQUIS EXCHANGE PLC
Consolidated and Company Statements of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Cash generated by operations
Tax refunded
Finance expense on lease liabilities
Net cash inflow from operating activities
Investing activities
Payment of software development costs
Purchase of property, plant and equipment
Investment in subsidiaries
Capital injection into AQSE and Aquis Europe
Interest received
Net cash used in investing activities
Financing activities
Issue of new shares
Principal portion of lease liability
Group
2020
£
2019
£
Company
2020
£
Notes
2019
£
438,105
265,254
34
19
28
21
22
23
16
2,129,563
385,606
2,228,339
307,616
265,254
307,616
(35,099)
(47,653)
(35,099)
(47,653)
2,402,080
603,207
2,500,856
655,706
(642,695)
(562,271)
(642,695)
(562,271)
(115,351)
(509,342)
(115,351)
(509,342)
(259,400)
–
–
–
–
(2,437,766)
(4,046,436)
–
14,632
41,699
14,632
36,303
(1,002,815)
(1,029,914)
(4,789,851)
(3,473,076)
29,30
54,168
–
54,168
–
28
(195,346)
(182,792)
(195,346)
(182,792)
Net cash generated from/ (used in) financing activities
(141,178)
(182,792)
(141,178)
(182,792)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
1,258,088
(609,499)
(2,430,173)
(3,000,162)
11,010,861
11,618,921
8,609,739
11,609,901
(531)
1,439
–
–
12,268,418
11,010,861
6,179,566
8,609,739
26
33
26
60
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements
For the year ended 31 December 2020
1 SIGNIFICANT CHANGES IN THE REPORTING PERIOD
The following events and transactions had an impact on the financial position and performance of the Group and/or Company during the
period:
• The acquisition of NEX Exchange Limited (which has changed its name to Aquis Stock Exchange Limited) in March 2020 which
resulted in an increase in the Group’s current assets and current liabilities, the details of which are disclosed in Note 15.
2 BASIS OF PREPARATION AND ACCOUNTING POLICIES
Company information
Aquis Exchange PLC is a public limited company which is incorporated and domiciled in the United Kingdom. Its registered office is located at
Palladium House, 1-4 Argyll Street, London, W1F 7LD.
Accounting convention
The Group’s consolidated and the Company’s financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) as adopted for use in the European Union and
in conformity with the requirements of the Companies Act 2006.
The “requirements of the Companies Act 2006” here means accounts being prepared in accordance with “international accounting
standards” as defined in section 474(1) of that Act, as it applied immediately before Implementation Period completion day (end of transition
period, including where the company also makes use of standards which have been adopted for use within the United Kingdom in accordance
with regulation 1(5) of the International Accounting Standards and European Public Limited Liability Company (Amendment etc.) (EU Exit)
Regulations 2019.
The financial statements have been prepared on the historical cost basis.
The Group does not hold any financial instruments at fair value through profit or loss.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Going concern
At the time of approving the financial statements, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future and thus continue to adopt the going concern basis of accounting in preparing the
financial statements.
The Group has made a profit for the first time since its inception this year and has substantial cash reserves and a strong balance sheet, due to
high levels of investment within the Group. There has been a growth in revenue between the current year and comparative years. Additional
revenue growth is projected for 2021, with profits forecasted for future years.
The Coronavirus impact has adversely impacted the global economy in 2020 and caused a significant amount of uncertainty. Whilst this
has not hindered the business in a discernible way to date, which is evidenced by the revenue growth and profit generated during the year,
there is a risk that there may be a longer-term impact on revenues and/or costs and therefore the Directors are closely monitoring how the
situation develops and are ready to address any negative impact on the business if necessary.
The end of 2020 marked the end of the transition period following the UK’s departure from the EU, and a trade agreement was reached at
the end of the year, which did not address financial services While the agreement ended years of uncertainty regarding a no-deal Brexit, there
are significant costs for the UK’s financial services industry, and it is anticipated there will be a long-lasting effect on the UK economy. With
its European subsidiary and a well-planned and executed transition of EU securities trading, the Group has been well-positioned to respond
quickly to the changes in legislation. However, it remains difficult to predict the overall impact of Brexit on the future trading landscape for
both the financial services industry and the wider UK economy.
Taking the above into account in light of the Group’s current position and principal risks as discussed in the Strategic Report section of this
annual report, the Directors have assessed the prospects of the Group for the foreseeable future and there is no material uncertainty as to
the Group’s ability to continue to adopt the going concern basis of accounting in preparing the financial statements over a period of at least
12 months from the date of approval of these financial statements.
61
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
Consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies with all inter-company
balances and transactions eliminated. The attribution to non-controlling interests has not been presented since all subsidiaries are 100% held.
There were no discontinued operations in any of the periods presented.
Investments in subsidiary companies’ shares, loans and other contributions are recognised at cost. These are reviewed for impairment when
events indicate that the carrying amount may not be recoverable and are accounted for in the Company’s financial statements at cost less
accumulated impairment losses.
The results of Aquis Stock Exchange Limited and Aquis Exchange Europe SAS have been consolidated in the Group financial statements for
the year ended 31 December 2020.
The consolidated financial statements also include treasury shares and cash held by the trust (“the Trust”) that administers the Company’s
employee share incentive plan. The Trust has been consolidated based on the IFRS 10 criteria for control over the Trust being met:
• The Trust was established to facilitate the acquisition and holding of shares under the Aquis Exchange PLC Share Incentive Plan;
• The activities of the Trust are limited by the agreement in place; and
• The Trust does not have any assets outside of the partnership share money received and the shares purchased. The use of any shares
or cash that remain in the Trust fund once the trustee no longer holds any shares relating to the SIP, is directed by the company. The
Trust itself has no rights to any dividends.
Accounting policies
Revenue
Revenue comprises amounts derived from the provision of services which fall within the Company’s ordinary activities, net of value added
tax. It represents amounts receivable for subscription fees, the licensing of software, the provision of data to third-party vendors, and fees
relating to listings on the Aquis Stock Exchange (AQSE), all of which are net of value added tax. Revenue is recognised once the performance
obligations for each activity have been satisfied.
All the revenue streams are generated by contracts with customers and revenue is therefore recognised in accordance with IFRS 15.
Revenue from exchange subscription-based services is recognised in the accounting year in which the services are rendered, by reference to
the ongoing contractual obligation to provide the services.
Revenue from licensing contracts is assessed for each contract and split into three performance obligations:
•
•
Project fees and maintenance fees which are recognised over time as the obligations are met; and
Licensing fees which are considered a “right to use” licence under IFRS 15 and are therefore recognised at a point in time when
control of the licence passes to the customer.
Revenue from the provision of data to third-party vendors is comprised of the annual fees paid by the redistributors, member firms and
multi-media firms for access to real time and/or end of day data. An additional monthly fee is received based on the number of users the
vendors provide the data to each month, variable based on usage for the prior month, is charged in arrears and is recognised in the month it
is incurred.
Revenue from AQSE issuer fees is comprised of initial application and admission fees, annual fees, and further issue fees. Both application and
admission fees are recognised monthly over the expected life of a company’s admission. An estimation is required to determine the length
of time the securities will remain listed on the exchange, the details of which are discussed in Note 5. Annual issuer fees relate to fees paid
by issuers to maintain a listing on the exchange and are discussed below, while further issue fees relate to fees in respect of further issues by
listed companies are recognised at the point in time they occur.
Annual issuer and data fees are paid by the customers in advance and are initially recognised as deferred revenue, then released over time as
the performance obligation is fulfilled.
62
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 Estimated listing period for Aquis Stock Exchange securities
In recognising application and admission fees, the Company determines the expected length of time each new security will be listed on AQSE.
The estimate is based on historical analysis of listing durations in respect of the companies listed on AQSE. The length of time a security
remains listed incorporates significant uncertainty as it is based on factors outside the control of the Company and which are inherently
difficult to predict.
Based on the available information and incorporating management’s predictions, it is currently estimated that an average security will remain
listed for a period of 9 years. Application and admission fees are recognised monthly over this period. It is estimated that a one year increase/
decrease in the deferral period would cause a £3,649 decrease /£2,919 increase in annual revenue released respectively. The estimated listing
periods will be reassessed at each reporting date to ensure they reflect the best estimates of the Group.
Intangible assets other than goodwill
Internally developed intangible assets arising from the capitalisation of Research and Development expenditures are recognised in the financial
statements when all of the following criteria are met:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale is established;
• There is an intention to complete the intangible asset and use or sell it;
• The Group has the ability to use or sell the intangible asset;
• The existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset can be demonstrated;
• Adequate technical, financial and other resources are available to complete the development and to use or sell the intangible asset;
and
• The Group has the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Where the above criteria are not met, costs incurred in research and development are recognised in the Statement of Comprehensive
Income as incurred.
Amortisation is recognised in order to write off the cost or valuation of the assets, less their residual values over their useful lives. The
development of trading platforms has been amortised over 3 years on a straight-line basis reflecting management’s estimate of the useful life
of the technology, the rationale of which is discussed in Note 5.
Business Combination
Aquis Exchange PLC (the acquirer) purchased 100% of the shares of NEX Exchange Limited (which subsequently changed its name to Aquis
Stock Exchange Limited (AQSE)) on 11 March 2020 (the acquisition date). Business combinations are recorded using the acquisition method.
Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred. The excess of the consideration transferred over the fair value of the net identifiable assets
is recorded as goodwill.
Goodwill
In March 2020 the acquisition of AQSE gave rise to goodwill in the consolidated financial statements. Goodwill is initially measured at cost,
being the excess of the aggregate of the consideration transferred over the net identifiable assets acquired and liabilities assumed. Goodwill is
assessed for impairment annually. Note 21 provides further detail on the impairment assessment for goodwill as at 31 December 2020.
Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation or impairment. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent expenditure is included in the asset’s carrying amount or is recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other
repair and maintenance costs are charged to the income statement during the financial period in which they are incurred.
63
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
Depreciation is recognised so as to write off the cost or valuation of assets, less their residual values, over their useful lives on the following
basis:
•
Fixtures, fittings and equipment: 5 years straight line.
• Computer equipment: 3 years straight line.
Impairment of tangible and intangible assets
At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Cash and cash equivalents
Cash and cash equivalents include cash at bank.
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Financial assets are initially
measured at fair value plus transaction costs and are subsequently measured in their entirety at either amortised cost or fair value, depending
on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
• The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash
flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income:
• The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
the financial assets; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). In 2020, the Group did not hold
any Financial Assets measured at FVTPL.
Trade and other receivables
Trade receivables are amounts due from customers for services performed in the ordinary course of business. Other receivables are defined
as amounts due that are outside the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle
of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
64
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 Contract assets
Contract assets are recognised for licensing fees recognised at inception of a licensing contract but not yet billed under IFRS 15. Contract
assets are initially measured at fair value and subsequently measured at amortised cost and are stated net of any expected credit loss provision
(ECL) recognised in accordance with IFRS 9, as detailed in Note 13. Contract assets are presented on the Statement of Financial Position as
trade receivables. The right to consideration becomes unconditional once the customer has been billed.
Rent deposit asset
Under IFRS 16, a rent deposit is accounted for as a financial asset if:
• The collateral provided to the lessor is not a payment relating to the right to use the underlying assets and hence is not a lease
payment as defined;
• The difference between the nominal amount and fair value of the rent deposit at the commencement date represents an additional
lease payment which is prepaid and is included in initial carrying amount of the Right of Use (ROU) asset; and
• The prepaid ROU portion is subsequently measured in terms of IFRS 16 i.e. is depreciated over the term of the lease.
Further disclosures are provided in Note 28.
Impairment of financial assets
The Group has considered the impact of the application of an expected credit loss model when calculating impairment losses on current and
non-current contract assets and other financial assets at amortised cost (presented within trade and other receivables). In applying IFRS 9 the
Group must consider the probability of a default occurring over the contractual life of its trade receivables and contract asset balances on
initial recognition of those assets. Note 13 details the Group’s credit risk assessment procedures.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method. The effective interest method is a
method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,
or (where appropriate) a shorter period, to the amortised cost of a financial liability.
In 2020 the Group did not hold any Financial liabilities beyond Trade and other payables, Accrued Expenses and the lease liabilities recognised
under IFRS 16 as described in the “Leases” sub-section below.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if
longer). If not, they are presented as non-current liabilities. Trade and other payables are not interest bearing and are initially recognised at fair
value.
Accrued expenses
Accrued expenses are recognised at fair value and are recognised in the accounting period in which those transactions, events, or
circumstances occur.
Fair value measurement
The carrying amounts of financial assets and liabilities (including trade and other receivables, cash and cash equivalents, trade and other
payables) are assumed to approximate their fair values because of the short period to maturity and credit risk, except for technology licensing
contract assets, which comprise both current and non-current balances and are stated net of any expected credit loss provision in accordance
with IFRS 9 as detailed in Notes 13 and 23.
Equity instruments
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are charged
against the share premium account.
65
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
Earnings per share
The earnings per share (EPS) calculations are based on basic earnings per ordinary share as well as diluted earnings per ordinary share. The
basic EPS is calculated by dividing the profit after tax of the Group by the weighted average number of ordinary shares that were in issue
during the year. The diluted EPS takes into account the dilution effects which would arise on conversion of all outstanding share options and
share awards under the Employee Share Incentive Plan.
Taxation
The tax expense/(credit) represents the sum of the tax currently payable/(repayable) and deferred tax.
An R&D tax credit is claimed annually from HMRC based on the employee costs involved in developing Aquis’ systems and technology. It is
recognised as a credit to the profit and loss in the year it is received.
Current tax
The current income tax charge/ (credit) is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date
in the country where the company operates and generates taxable income. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future measurable taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as
part of the cost of inventories or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the Group is demonstrably committed to terminate the employment of
an employee or to provide termination benefits.
Retirement benefits
Pension obligations
The Group has defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into
a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to
pay all employees the benefits relating to employee service in the current and prior periods.
The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee
benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
Share-based payments
EMI Options
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments
granted using the US Options Binomial model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting
period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
66
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair
value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined
at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting
period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is adjusted if the
modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount
that would have been recognised over the remaining vesting period is recognised immediately.
Employee Share incentive plan
Shares purchased under the share incentive plan are recognised as share-based payments under IFRS 2. Partnership shares are purchased by
employees and matching shares are those purchased by Aquis at a ratio of 2:1. The shares are held in a trust (“the Trust”), with matching
shares required to be held for three years before being transferred to the employee. The fair value of both the partnership and matching
shares are recognised in the share-based payment reserve. Partnership shares vest immediately while matching shares will vest over the three-
year holding period. The market value of shares when they are purchased is assumed to approximate the fair value of the shares.
In line with IFRS 10 guidance the cash transferred to the Trust is recognised as an investment in the Company’s accounts. The Trust is
consolidated in the Group accounts with the fair value of the shares held in the trust recognised as a debit entry within equity.
This accounting treatment was adopted in 2020 and was applied retrospectively in the form of a prior year restatement. Notes 3 and 37
provide further detail on the accounting amendment relating to prior year.
Restricted shares
Restricted shares are share based and will vest three years after the grant date subject to continued employment. Similar to share-based
payments they are measured at fair value determined at the grant date using the US Options Binomial model. The fair value is expensed on a
straight-line basis over the vesting period, with the corresponding adjustment being made to reserves.
Leases
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right of use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture
and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term
of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by
using the rate implicit in the lease. Lease payments included in the measurement of the lease liability comprise:
•
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
•
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position and is subsequently measured by increasing
the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to
reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use
asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised
discount rate.
67
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at
the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses. The right-of-use assets are presented as a separate line in the consolidated statement of financial position
and are depreciated over the term of the lease. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts
for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy. Variable rents that do not depend on an index or
rate are not included in the measurement the lease liability and the right-of-use asset.
Foreign exchange
Functional and presentation currency
Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the
entity operates (‘the functional currency’). The financial statements are presented in UK Pound Sterling (£), which is the Group’s functional
and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
All foreign exchange gains and losses recognised in the income statement are presented net within ‘administrative expenses’.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated
at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive income and accumulated in a foreign exchange translation reserve (attributed
to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of
control over a subsidiary that includes a foreign operation or a partial disposal of an interest in a joint arrangement or an associate that
includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in a foreign
exchange translation reserve in respect of that operation attributable to the owners of the Group are reclassified to profit or loss.
3 RESTATEMENT OF COMPARATIVES
Employee Share Incentive Plan
In 2018 a share incentive plan (“SIP”) for employees was created. The scheme allows employees to purchase shares in Aquis from their gross
salary (“partnership shares”), with Aquis matching the number of shares purchased by the employee at a ratio of 2:1 (“matching shares”). The
scheme is administered by a trust “the Trust” to purchase shares on behalf of employees. Matching shares must be held in the trust for three
years before they can be sold or transferred.
The SIP was previously accounted for as an expense, with amounts recognised to the profit and loss account as and when payments were
transferred to the trust. However, this has been corrected to be accounted for as share-based payments under IFRS 2. This has been applied
retrospectively in line with IAS 8, restating the opening balances. Under the revised treatment, the fair value of the shares purchased are
recognised as an expense over the vesting period, with a share-based payment reserve being created in the balance sheet. The partnership
shares are assumed to vest immediately while the matching shares are assumed to vest over three years. The amount paid or payable
to the trust is recognised as an investment in trust in the Company accounts. Management assumes that the cost of the shares is a close
approximation of the fair value of the shares as the market price tends to be reflective of the discounted value of research analysts’ medium-
term projections.
68
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 Additionally, as the Company fulfils the definition of control over the trust under the IFRS 10, the shares purchased by the trust and residual
cash is consolidated in the Group accounts. Accordingly in the Group accounts, treasury shares are recognised in equity and they offset
against the share-based payment reserves over 3 years.
The restatement comprises a £148k reduction in the expense recognised during 2018 and 2019, and recognition of a share-based payment
reserve amounting to £157k. The investment in trust in the Company’s accounts amounted to £318k and the fair value of the treasury shares
recognised in the Group’s accounts amounted to £318k in 2019. Note 37 provides further detail on the prior year adjustments made in
respect of the share incentive plan.
Expected credit loss model
The ECL model was adjusted to correct the ECL provision recognised in 2019. Note 37 provides further detail on the adjustment.
4 ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN ACCOUNTING POLICIES
New IFRS Standards that are effective for the current year
There were no new standards effective during the year ended 31 December 2020.
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not yet been applied in
these financial statements, were in issue and adopted by the EU. The Directors do not expect that the adoption of the Standards listed below
will have any impact on the financial statements of the Group in future periods:
IFRS 17
Insurance Contracts
Amendments to IFRS 9, IAS 39 and IFRS 17
Interest rate benchmark reform
Amendments to IFRS 3
Amendments to IAS 1 and IAS 8
Conceptual Framework
Definition of a business
Definition of material
Amendments to References to the Conceptual Framework in IFRS
Standards
5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In applying the Group’s accounting policies, which are described in Note 2, the Directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
Critical judgements
The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the Directors
have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in
financial statements.
Judgements in relation to performance obligations
In making their judgement, the Directors considered the detailed criteria for the recognition of revenue set out in IFRS 15, and in particular,
whether revenue is recognised at a point in time or over time. Following an assessment of the technology licensing contract portfolio, and
the obligations that Aquis has under each contract, the Directors are satisfied that obligations contained therein be split into the following
performance obligations, and that the revenue from each licensing contract should be assessed individually. The identified performance
obligations and the timing of revenue recognition on delivering the licence contracts as follows:
•
Implementation/ project fees: these are upfront, non-refundable fees that a customer pays in order to obtain the user agreement.
Even if the user acceptance certificate is never issued, the implementation fee cannot be reclaimed and so the revenue is guaranteed
and can be recognised at the time of invoice as Aquis becomes unconditionally entitled to payment.
69
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
•
Licensing fees: The customer is liable to pay the monthly licensing fee from the date of signing the user acceptance agreement
(contract inception date). At this point in time Aquis has fulfilled its promise to deliver the licence (i.e. the system has been deployed
in the client’s production environment) and this performance obligation is fulfilled. Management uses judgement when assessing the
recoverability of the licencing fees, and recognises them only when their collection is assumed to be highly probable. This assessment
takes into consideration the current status of the client’s business, including whether the exchange system is active with products/
securities added and members trading on it. The licensing fees are recognised at a point in time, which occurs after the contract is
signed and once Aquis is satisfied that receiving the licencing fees is highly probable.
• Maintenance fees: fees to maintain the system are recognised over the course of the licensing contract as Aquis fulfils its performance
obligation to maintain the system. In management’s judgement maintenance fees comprise between 3-5% per annum of the overall
value of the contract reflecting time spent supporting the client’s platform and upgrading the software in accordance with the
contractual terms.
Changes in identification of performance obligations could impact the timing of revenue recognition for licensing contract assets and is thus a
critical accounting judgement.
Critical accounting estimates
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date that may have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Capitalisation of internally generated intangible assets resulting from Research and Development
Internally generated Intangible assets are capitalised when, in management’s judgement, the criteria for capitalisation under IAS 38 (listed in
Note 2) have been met. The direct costs incurred in the research and development of Aquis’ exchange platform and associated technology
and systems are capitalised.
Management reviews the time spent by the development team in developing and maintaining the systems used internally by Aquis when
determining the amount to be capitalised within each period.
Estimating the useful life of intangible assets
The expected useful life of an intangible asset is estimated to be 3 years. In making this judgement management have taken into account
product upgrade cycles, the pace of change of regulation as well as benchmarking against other companies with internal systems and
technology research and development.
Expected credit loss of contract assets
An impairment for the expected credit loss of contract assets that arise as a result of applying IFRS 15 to licensing revenue is required under
IFRS 9. This impairment is an accounting estimate which is calculated based on the Directors’ best estimates of the probability of default and
loss given default. The quantification of the assumptions and stresses for the year are disclosed in Note 13 of the financial statements.
In arriving at these estimates, the Directors have assessed the range of possible outcomes using reasonable and supportable forward-looking
information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each
other.
Aquis’ assessment of the credit risk associated with a licensing customer is conducted at inception of the contract (but before the user
agreement is signed) and includes factors that are specific to the customer, general economic conditions and an assessment of both the
current as well as the forecast direction of these conditions.
The credit risk assessment is conducted by means of a take-on assessment which comprises of a series of relevant criteria for a licensing
contract that are scored according to the specific circumstances of the customer, with scores for each parameter typically ranging from 1-4.
The assessment evaluates the following:
•
Level of funding;
• Regulatory approvals;
• Market, industry and business model;
• Macro-economic forecasts;
70
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 • Corporate governance/ Group management;
• Whether the client is revenue generating;
•
Level of client profitability;
• Contract length and the associated range of economic scenarios therein;
•
•
Payment history; and
External credit ratings.
The above assessment will determine the customer category upon inception of the contract, and the inputs to the expected credit loss model
is determined thereon.
The credit risk assessment and associated inputs to the expected credit loss model (probability of default and loss given default) are critical
assessments that could impact both the provision for expected credit losses as well as the movement in the provision reflected in the income
statement.
Deferred tax asset
Deferred tax assets are recognised to the extent that their utilisation is probable. The utilisation of deferred tax assets will depend on
whether it is possible to generate sufficient taxable income in the respective tax type and jurisdiction. A deferred tax asset of £203,717 is
recognised in the current period, since profitability is expected to continue for at least the next 3 years. The deferred tax asset is calculated
based on expected profitability over this period as Aquis is a high growth company and there is considerable uncertainty in estimating financial
performance beyond this length of time.
Various factors are used to assess the probability of the future utilisation of deferred tax assets, including, operational plans and loss-carry
forward periods. To reflect the uncertainty in the accuracy of business forecasts, the model uses modest growth rates and discount rates on
each type of revenue based on probabilities. The impact of flexing the discount rates used by +2%/-2% for exchange and data revenue and by
+5%/-5% for new licencing contracts would be +£147,604/-£171,169, so that the deferred tax asset would be £351,321 in an upside scenario
with lower probability discount rates or £32,548 in a downside scenario with higher probability discount rates.
Share-based payments
The US binomial model is used to estimate the value of the EMI options and the restricted shares. The resulting values are recognised
straight-line over the vesting period as an expense, with the corresponding amounts recognised as equity in the balance sheet. The model
requires the following inputs: grant date, exercise price, expiry, expected life of options, expected volatility, and the risk-free interest rate.
The expected life and expected volatility require the use of estimates. Volatility is estimated based on the historical average for the available
data up to the grant date, while the expected life of the options is based on management’s judgement of when the options will be exercised,
which is assumed to be an average of 5 years. For the EMI options granted during the year, a 5% decrease/increase in expected volatility leads
to a +£41,732/-£42,347 variance in the 2020 expense. Similarly, for a 1 year increase/decrease in the expected life of the options, this would
lead to a +£16,592/-£18,603 variance. Note 15 provides further disclosure on the amounts recognised in these financial statements.
6 CORPORATE INFORMATION
Aquis Exchange PLC (the ‘Group’) is licensed to operate a multilateral trading facility (MTF) enabling members to trade across fourteen
European markets and to provide exchange software under licence.
71
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
7 FINANCIAL RISK MANAGEMENT
The Group seeks to protect its financial performance and the value of its business from exposure to adverse changes in capital commitments,
as well as credit, liquidity and foreign exchange risks.
The Group’s financial risk management approach is not speculative. The Group’s Audit, Risk and Compliance Committee provides assurance
that the governance and operational controls are effective to manage risks within the Board-approved risk appetite, supporting a robust
Group risk management framework.
The Group’s objectives when managing these risks are detailed below.
Capital risk management and capital commitments
Risk Description
Risk management approach
There is a risk that Group entities may not maintain sufficient
capital to meet their obligations. The Group comprises regulated
entities. It considers that:
The Group’s objectives when managing capital are to safeguard the
Group’s ability to continue as a going concern so that it can provide
returns for shareholders and benefits for other stakeholders.
•
Increases in the capital requirements of its regulated
companies, or
• A scarcity of equity (driven by its own performance
or financial market conditions) either separately or in
combination are the principal risks to managing its capital.
The Group maintains a level of capital that is well in excess of
regulatory requirements. Maintaining a strong capital structure
is a key priority for the Group. If there was an erosion of capital
for any reason the Group may issue new shares, return capital to
shareholders or sell assets to ensure capital adequacy requirements
are met (referenced in table below).
The Group continuously monitors its level of capital in order to
ensure it remains compliant with regulatory capital requirements.
Aquis reviews capital resources and requirements on a monthly
basis. Proposed investment requirements, capital expenditure and
potentially increasing capital resources through equity or debt
issuance are assessed annually as part of the budgeting process, as
well as on an ad-hoc basis as required.
The Group supports both Aquis Europe and AQSE in maintaining
capital adequacy, and holds sufficient capital to be able to inject
capital into the businesses as and when required.
The ROA is the amount of net profit/(loss) returned as a percentage of total assets.
Group
Profit/(loss) for the year
Total assets as at 31 December
Return on assets (%)
2020
£
2019
Restated
£
981,728
656,582
18,814,123
16,441,274
5%
–4%
There was no capital expenditure contracted for at the end of the reporting year that had not been provided for.
72
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Credit risk
Risk Description
The Group’s credit risk relates to its customers being unable to
meet their obligations to the Group either in part or in full.
Liquidity risk
Risk Description
The Group’s operations are exposed to liquidity
risk to the extent that they are unable to meet
their daily payment obligations.
Risk management approach
The Directors make a judgement on the credit quality of the
Group’s customers based upon the customers’ financial position,
the recurring nature of billing and collection arrangements and,
historically, a low incidence of default.
Aquis’ assessment of the credit risk associated with a licensing
customer is conducted at inception of the contract (but before
the user agreement is signed) and includes factors that are specific
to the customer, general economic conditions and an assessment
of both the current as well as the forecast direction of these
conditions. Based on this assessment, the prospective customer is
assigned to a customer category with an appropriate risk rating.
Aquis has also considered the impact of the Coronavirus pandemic
on credit risk by incorporating an assessment of how COVID-19
has affected the risk profile of each client, modifying risk ratings
where necessary.
Aquis’ credit risk management processes are applied to all trade
receivables and are calculated using a lifetime ECL method, as
detailed in Note 13.
Risk management approach
The Group maintains sufficient liquid resources to meet its financial
obligations as and when they become due in the ordinary course
of business. Management monitors forecasts of the Group’s cash
flow quarterly through an assessment of cash resources that are in
excess of regulatory capital requirements. The Group is solvent with
net current assets in excess of £12.1 million (2019: £11.2 million),
with the majority of the debtor’s book being short term in nature.
The Group is also funded entirely by equity, with no external debt
funding obligations to be met.
The Group is not materially exposed to market risk including interest rate or foreign exchange risk.
The following tables detail the Group and Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed
repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group or Company can be required to pay. There is no exposure to interest rate changes since the group and company have no
external debt obligations, and the interest rate on the lease liability is the rate implicit in the lease and as such is not subject to change over
the term of the lease.
Group
31 December 2020
Trade and other payables
Lease Liabilities
31 December 2019
Trade and other payables
Lease Liabilities
1 Year
£
2,616,097
194,613
2,810,710
2-5 years
£
–
714,704
714,704
5+ years
£
Total
£
–
2,616,097
280,377
1,189,694
280,377
3,805,791
1,499,574
188,610
1,688,184
–
692,685
692,685
–
1,499,574
497,037
497,037
1,378,304
2,877,878
73
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
1 Year
£
2,097,493
194,613
2,292,106
2-5 years
£
–
714,704
714,704
5+ years
£
Total
£
–
2,097,493
280,377
1,189,694
280,377
3,287,187
1,467,826
188,610
1,656,436
–
692,658
692,658
–
1,467,827
497,037
497,037
1,378,304
2,846,130
Risk management approach
In order to mitigate the impact of unfavourable currency exchange
rate movements on consolidated earnings and net assets, Aquis
Exchange Europe SAS maintains the majority of its net assets
(primarily comprising of regulatory cash) in a Sterling denominated
bank account so as to minimise fluctuations in the GBP/EUR
exchange rate on a consolidated basis.
Company
31 December 2020
Trade and other payables
Lease Liabilities
31 December 2019
Trade and other payables
Lease Liabilities
Both the Group and the Company have no derivative financial liabilities.
Foreign exchange
Risk Description
The Group operates in the UK and Europe, with Sterling as its
principal currency of operation. The Group companies invoice
revenues and incur the majority expenses in GBP. A relatively small
percentage of the overall Group’s expenses are incurred in Euros in
relation to the French subsidiary. As a result, foreign exchange risk
arises mainly from the translation of the Group’s foreign currency
earnings, assets and liabilities into its reporting currency, Sterling.
An immaterial amount of cash held by Aquis Exchange Europe SAS
is held in a euro denominated bank account, with the remaining
cash held in a Sterling denominated bank account, hedging the
Group against foreign exchange fluctuations in cash and cash
equivalents. Since the net asset value of the Aquis Exchange
Europe SAS is predominately comprised of cash, there is negligible
exposure to the Group of foreign exchange rate fluctuations.
8 OPERATING SEGMENTS
The Aquis Group can be split into 3 operating segments, each offering multiple products and services and benefitting from Group synergies.
The specific focus of these activities are:
Aquis Exchange – operator of MTF and related services. The Group operates two MTFs: Aquis Exchange (AQXE), which is UK regulated
and Aquis Exchange Europe (AQEU), which is French regulated. Another revenue stream for this division is the provision of data services
to third party vendors;
Aquis Stock Exchange (AQSE) – primary listings and trading business. Within this division is AQSE Main Market, AQSE Growth Market,
AQSE Trading and the provision of data services;
Aquis Technologies – developer of exchange technology and services. The product offering includes Aquis Matching Engine, Aquis
Market Surveillance, Aquis Market Gateway and related services including market surveillance and operations.
1)
2)
3)
74
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Aquis Exchange PLC is the parent company and comprises AQXE and Aquis Technologies. It owns 100% of its two subsidiaries, AQEU
and AQSE. Management monitors the Group’s overall performance regularly using a set of established Key Performance Indicators including
revenue, net profit and EBITDA. When monitoring the performance of each operating segment individually, management examines the
discrete financial information available which will normally include revenue and gross profit for each division. In line with IFRS 8 the operating
segments are reported separately as follows:
2020
Revenue
Impairment charge
Operating costs
Gross profit / (loss)
Depreciation, amortisation and net interest
AQXE & AQEU
AQSE
Aquis Technologies
Total
7,936,036
1,221,517
2,319,700
11,477,252
(97,760)
(2,414)
–
–
(6,687,237)
(1,754,950)
(1,413,740)
(9,855,927)
1,151,039
(535,847)
905,960
1,521,152
(1,050,757)
–
–
(1,050,757)
Profit / (loss) before tax from continuing operations
100,282
(535,847)
905,960
470,395
In the current year, due to the expansion of the technology licencing business and the acquisition of Aquis Stock Exchange, Management
has decided it is appropriate to assess business performance based on the three operating segments identified above. In previous years,
Management monitored the performance of both the exchange business and the technology licencing business under one operating segment.
For comparative purposes the 2019 financial performance of the exchange and licencing businesses has been restated under separate
operating segments in the following table:
2019
Revenue
Impairment credit
Operating costs
Gross loss
Depreciation, amortisation and net interest
Loss before tax from continuing operations
AQXE & AQEU
AQSE
Aquis Technologies
Total
5,622,632
284,993
(5,998,794)
(91,169)
(927,607)
(1,018,776)
–
–
–
–
–
–
1,269,362
6,891,994
–
–
(1,172,422)
7,171,216
96,940
5,771
–
(927,607)
96,940
921,836
The tables above represent the segment-level information that is monitored by the Chief Operating Decision Makers, which are the Chief
Executive Officer and the Chief Financial Officer. All non-current assets are held centrally by Aquis Exchange PLC. There were no non-current
assets located outside the UK as at 31 December 2020.
9
EMPLOYEES
The monthly average number of persons (including Executive Directors) employed by the Group during the year was:
Group
Management
IT
Compliance and Surveillance
Operations
Business Development
Finance
Marketing
2020
Number
2019
Number
2
20
8
6
6
3
1
46
2
18
4
5
5
2
1
37
75
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
The average number of persons (including Executive Directors) employed by the Company during the year was:
Company
Management
IT
Compliance and Surveillance
Operations
Business Development
Finance
Marketing
Their aggregate remuneration was comprised of:
Group
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Employee benefits
Company
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Employee benefits
2020
Number
2019
Number
2
19
4
5
4
2
1
37
2
17
4
4
4
2
1
34
2020
£
2019
Restated
£
4,573,007
3,390,768
718,885
138,891
392,897
148,992
436,448
274,154
210,403
–
5,972,673
4,311,773
2020
£
2019
Restated
£
3,535,759
3,192,131
519,061
112,907
363,164
148,633
365,363
274,154
210,403
–
4,679,524
4,042,051
10 RETIREMENT BENEFIT SCHEME
Defined contribution schemes
The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from
those of the Group in an independently administered fund.
The total costs charged to income in respect of defined contribution scheme are £112,907 (2019: £274,154).
76
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
2020
£
1,082,020
13,253
69,268
1,164,541
2019
£
791,300
15,895
175,588
982,783
2020
£
2019
£
385,896
293,150
5,664
34,634
7,693
59,445
426,194
360,288
2020
£
998,917
13,253
69,268
1,081,438
2019
£
791,300
15,895
175,588
982,783
11 DIRECTORS’ REMUNERATION
Group
Salaries, fees and bonuses
Taxable benefits
Share-based payments
Remuneration for qualifying services
Remuneration disclosed above includes the following amounts paid to the highest paid director:
Salary and bonus
Taxable benefits
Share-based payments
Remuneration for qualifying services
Company
Salaries, fees and bonuses
Taxable benefits
Share-based payments
Remuneration for qualifying services
12 REVENUE
An analysis of the Group’s revenue is as follows:
Revenue analysed by class of business
Subscription fees
Technology licensing fees
Data vendor fees
Issuer fees
Group
2020
£
2019
£
Company
2020
£
7,738,284
5,285,000
2,319,700
1,269,362
894,867
524,402
337,632
–
7,111,000
2,319,700
429,628
–
–
2019
£
5,021,000
1,269,362
337,632
Revenues from customers attributable to the United Kingdom and the rest of the world is as follows:
11,477,253
6,891,994
9,860,328
6,627,994
Revenue analysed by region
United Kingdom
Rest of World
Group
2020
£
8,780,442
2,696,811
11,477,253
2019
£
5,200,390
1,691,604
6,891,994
Company
2020
£
7,767,475
2,092,853
9,860,328
2019
£
5,200,390
1,427,604
6,627,994
77
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
Subscription fees and data vendor fees:
Subscription fees and some data vendor fees are accounted for under IFRS 15 and are all recognised at point in time as they reflect variable
revenue determined on a monthly basis.
In addition to the variable monthly fee some AQSE data vendors pay an annual fee for access to real time and/or end of day data, which is
recognised over time as the performance obligation of providing data is fulfilled.
The Group begins to recognise monthly subscription fees, data vendor fees, and connectivity fees when the customer conformance test is
satisfactorily concluded, and an acceptance certificate is issued. This is then verified by the customer starting to utilise the platform, which is
the point in time that the Group determines that the customer has obtained control of the goods.
The Group determines the transaction price based primarily on the competitive landscape. In the case of subscription, connectivity and
data fees, invoices are raised monthly in arrears and there is no obligation for a refund, return or any other similar obligation. There is no
constrained variable consideration in any customer contracts, and the transaction price is allocated in full at a single point in time when the
customer obtains control of the goods.
Licence fees:
Aquis Exchange PLC provides technology services under licence to clients. The services comprise the provision of an exchange platform
and / or a surveillance system and may also include support services comprising basic infrastructure support or additional services (including
with the Software as a Service (“SaaS”) model, for example with some surveillance clients). The duration of the licences varies between 1
and 5 years and will consist of an implementation fee, and, post implementation, a monthly licence fee for the duration of the contract. The
monthly fees also cover system maintenance and system upgrades that typically occur every 12 – 18 months. The licensing contracts are
accounted for under IFRS 15 and any corresponding contract assets are subject to IFRS 9 provisioning, as disclosed further in Note 13.
The revenue from licensing contracts with customers has been categorised reflecting the nature, amount, customer categorisation (see also
Note 13), contract duration and uncertainty of revenue and cash flows. Revenue from licensing contracts is assessed for each contract and is
recognised as and when each performance obligation is satisfied.
The Company determines the transaction price of the licensing contract based primarily on the competitive landscape. For licensing contracts,
the Company has assessed the expected credit loss of each client individually. The transaction price is allocated according to the Group’s
obligations to the client over the course of licence period. There is no constrained variable consideration in any customer contracts.
The licensing fees line item also includes connectivity fees for licensing contract customers that are recognised at a point in time as they reflect
variable revenue determined on a monthly basis, and are underpinned by a separate agreement.
Performance obligation (PO)
PO1: Implementation fees
PO2: Licensing fees
PO3: Maintenance fees
78
Recognition of revenue upon completion
Implementation/ project fees are upfront, non-refundable fees that
a customer pays in order to obtain the user agreement. Even if the
user acceptance certificate is never issued, the implementation fee
cannot be reclaimed and so the revenue is guaranteed and can be
recognised at the time of invoice as Aquis becomes unconditionally
entitled to payment.
At a point in time upon signing the user acceptance agreement, as
the Company has fulfilled its promise to deliver the licence (i.e. the
system has been deployed in the client’s production environment).
A corresponding contract asset (trade receivable) is recognised to
reflect the customer’s obligation to pay the monthly licensing fee
over the remaining term of the contract.
Over the course of the licensing contract, as the performance
obligation to maintain the system is settled and the customer
benefits from using the system.
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 The aggregate amount of the transaction price per customer category that has been allocated to the performance obligations for the year is
as follows:
Group
Category
PO1
PO2
PO3
£
1
50,000
1,201,754
2020
£
2
–
–
£
3
–
£
4
–
£
1
135,000
451,440
–
171,000
2019
£
2
–
–
£
3
–
£
4
50,000
203,707
247,608
27,006
111,883
11,577
5,160
740
1,278,760
111,883
463,017
5,160
306,740
128,995
128,995
18,287
4,453
221,994
302,133
Customer risk category definitions: 1 – High, 2 – Moderately High, 3 - Moderately Low and 4 – Low.
Issuer fees:
Issuer fees are accounted for under IFRS 15 and are recognised over time. They can be separated into the following categories:
Application and admission fees: These are charged upfront to prospective companies wishing to be admitted to AQSE. They are recognised
monthly over the expected life of a company’s admission.
Annual fees: These are fees paid annually by companies listed on AQSE. They are charged in advance and are recognised over the year.
Further issue fees: These are charged to companies already listed on AQSE wishing to issue further securities. In this case revenue is
recognised at the point in time of the further issue.
13 IMPAIRMENT
IFRS 9 provisioning is applied to technology licensing contract assets and to other trade receivables based on management estimates of
the collectability of contracts over their useful life, and which are re-assessed at each renewal. The Group applies a simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance for trade receivables and contract assets and therefore
the ECL for each contract is assessed on a lifetime basis rather than at each reporting date. As the simplified approach is adopted it is not
necessary to consider the impact of a significant increase in credit risk.
The Group has two types of financial assets that are subject to the expected credit loss model:
• Contract assets relating to technology licensing contracts; and
• Trade receivables relating to services provided by AQSE.
The Group have concluded that the trade receivables and contract assets have different risk characteristics and therefore the expected credit
loss rates for each type of asset are measured separately. Since they comprise a portfolio of only a small number of clients, contract assets
have been assessed on a client-by-client basis while trade receivables have been grouped based on shared credit risk characteristics and the
days past due. Further details on both methodologies can be found below.
79
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
The movement in the provision balance was affected by the recognition of an ECL on AQSE trade receivables, the release of the ECL on
existing contracts, the recognition of an ECL against new contracts, and the reversal of a provision against a technology licencing contract
that was terminated during the year. The movements in the provision balance are shown in the table below The balance outstanding at the
reporting date represents the exposure at default (EAD).
Balance of impairment provisions at 1 Jan 2020
AQSE ECL Provision at 11 March
ECL write off1
Impairment charge/(credit)
Balance of impairment provisions at the end of the year
Group
2020
£
410,841
15,256
(9,236)
109,410
526,271
2019
£
Company
2020
£
2019
£
695,834
410,841
695,834
–
–
(284,993)
410,841
–
(9,236)
106,998
508,601
–
–
(284,993)
410,841
1 The ECL write off relates to a reversal of the ECL provision following the early termination of a licencing contract during the year. This resulted in a
corresponding write off of trade receivables amounting to £104k.
Technology licensing contract assets
During contract negotiation Aquis assesses the potential credit risk of a prospective client prior to committing to the contract. Aquis’
assessment of the credit risk associated with a licensing customer is conducted at inception of the contract (but before the user agreement
is signed) and includes factors that are specific to the customer, general economic conditions and an assessment of both the current as well
as the forecast direction of these conditions. Based on this assessment, the prospective customer is assigned to a customer category with an
appropriate risk rating. A probability of default occurring during the lifetime of the contract (PD) ranging from 0-50% is applied to each client
based on the assigned risk category. The model has been enhanced during the year with a lifetime PD applied to each year of the contract,
based on the assumption that the PD will reduce over time.
The credit risk of Aquis’ technology clients ranges from those that are in infant start up stages (i.e. riskier) to those that are highly liquid and
solvent conglomerates (little to no risk). As such, the Directors view the range of PD’s for the portfolio to be between 50% for those with
the highest level of risk to 0% for those that are so near to a zero level of risk that the PD is zero in substance. The Directors are comfortable
that 50% is sufficiently accurate to reflect the elevated risk associated with each start up when considering the idiosyncratic circumstances and
risk factors of each client. The Directors would not enter into any contract where the PD is deemed to be any higher than 50%.
The loss given default is also quantified on a customer-by-customer basis and is done through an assessment of the recovery rate the
Directors anticipate will be applied to the customer in the event of liquidation. Currently the low number of technology clients allows Aquis
to assess each contract individually on the appropriate credit risk category, and this is determined based on several factors including any
future macro-economic changes, the sensitivity to these potential changes and the impact that these may have on the recoverability of the
outstanding debt.
The portfolio of technology contracts held by Aquis have PDs that have an observable relationship with time, i.e. the PD will decrease each
year as the contract progresses. The credit risk of the contracts is directly linked to the success of the business and its ability to raise capital,
which increases each year the company successfully continues in operation.
Although the full risk assessment is completed only at the start of the contract and at each renewal date, Aquis regularly assesses whether
macro-economic factors could have a bearing on the success of the client and the recoverability of the outstanding debt.
The £508,601 expected credit loss provision for the year (2019: £410,841) has been calculated with reference to estimations based on the
probability of default and a loss given default as described above, and has been analysed for each individual contract taking into account the
nature, amount, customer categorisation, contract duration and uncertainty of revenue and cash flows.
80
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 As at 31 December 2020, the average contract duration for the portfolio of technology contracts is 2.7 years. The contracts are short-to-
medium term in length and the ECL model incorporates the impact of a significant change in macroeconomic circumstances on the expected
PD over the life of the contracts. The macroeconomic variables are based on 3-year average forecast rates for 2021-2023, which is an
appropriate timescale based on the average contract duration. The baseline rates are defined using the rates forecast by the Monetary Policy
Committee (“MPC”). The macroeconomic indicators used in the analysis are as follows:
Macroeconomic Indicators
3 year forecast average 2021-2023
UK GDP
UK unemployment
UK CPI Inflation
Downside
%
0.2%
7.3%
0.1%
Baseline
%
5.2%
5.3%
2.1%
Upside
%
7.2%
4.3%
2.6%
In order to quantify the impact of movement in credit losses that occur as a result of macro-economic developments, the Directors have
flexed the probability of default associated with each client category in three scenarios: a baseline scenario (maintaining the status quo, keeping
each assessment criteria reflecting current client circumstances and forecast macroeconomic indicators), a downside scenario (prolonged
recession), and an upside scenario (fast economic recovery). The model incorporates all three possible outcomes by attaching a probability
weighting to each scenario. The range of outcomes is detailed in the table below:
Company
At 31 December 2020
Impairment provision
Impact on PD
Probability weighting
The ageing debtor profile for the technology licensing contract assets was as follows:
Contract assets
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
More than 180 days past due
Total
Downside
£
Baseline
£
Upside
£
523,727
476,115
452,310
+10%
35%
–
50%
2020
£
–5%
15%
2019
£
2,141,397
1,814,090
25,000
25,000
45,000
–
10,000
10,000
10,000
–
2,236,397
1,844,090
A total of £104,272 was written off during the year relating to debts where there was no reasonable expectation of recovery.
Expected credit loss of Aquis Stock Exchange trade receivables
In line with IFRS 9 guidance, the Group has applied a simplified “Expected Credit Loss” (ECL) model on AQSE trade receivables. In doing so
the Group has considered the probability of a default occurring over the contractual life of the financial asset on initial recognition of the asset.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. When a trade
receivable is determined to be uncollectible, it is written off against the provision account for trade receivables.
The simplified provision matrix is based on historic default rates over the expected life of the trade receivables and is adjusted for forward-
looking estimates. The trade receivables balance is split into 5 separate categories depending on the age of each debt, ranging from 0 days
past due to over 90 days past due. An appropriate estimation of the probability of default is applied to each category of debt, based on both
historical default rates and expectations for the future, including the implementation of Group credit control policies to AQSE debts that
existed at the acquisition date.
The key assumptions in calculating the ECL for AQSE trade receivables are that the probability of default increases with the age of the debt
and that the debts are homogenous, i.e. the credit risk assessment is based on age rather than by individual client. The expected loss rates
are based on historical analysis of credit losses experienced within the 9.5 months since the acquisition and adjusted to reflect current and
forward-looking information including the implementation of more stringent credit control policies since acquisition. AQSE trade receivables
81
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
have been assessed to have a higher risk of impairment than the rest of the Group’s trade receivables due to a number of older debts being
identified and written off on acquisition.
Trade receivables have payment terms of 30 days from the date of billing. For debts older than 90 days, debts are assessed on a case-by-
case basis and are written off if there is no reasonable expectation of recovery. During the year a total of £29,240 of trade receivables were
written off relating to debts from companies that had ceased membership with AQSE. The contractual rights to cash flows from the financial
assets were deemed to have expired.
The total loss allowance calculated by applying the expected loss rate to the trade receivables balance in each age bucket. The total portion of
the ECL balance relating to AQSE trade receivables as at 31 December 2020 was £17,670 which was comprised as follows:
Days past due
Expected loss rate
Trade receivables (£)
Provision (£)
0 days
1%
57,715
289
1–29 days
30–59 days
60–89 days
90–124 days
125 – 149 days
150–179 days
Over 180 days
1%
43,640
436
3%
18,745
562
5%
2,770
139
10%
17,910
1,791
25%
50%
–
–
–
–
75%
19,270
14,453
14 ADMINISTRATIVE EXPENSES
Operating loss is stated after charging:
Administrative expenses
Fees payable to the Group’s auditors for the audit of the Group’s financial
statements
Fees payable to the Group’s auditor for the Client Asset audit
Share-based payments (Note 15)
Exchange loss/(gains)
Employee costs
Other administrative expenses
Group
2020
£
225,559
6,300
392,897
5,958
5,579,775
3,645,438
9,855,927
2019
Restated
£
79,991
6,300
210,403
(7,483)
4,101,370
2,780,635
7,171,216
Company
2020
£
126,431
6,300
363,164
6,144
4,316,360
2,624,795
7,443,194
2019
Restated
£
50,950
6,300
210,403
(7,483)
3,831,648
2,749,022
6,840,840
Other administrative expenses comprise marketing fees, data centre and other service fees incurred in the ordinary course of business.
82
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
Profit before taxation is stated after charging:
Depreciation, amortisation and finance costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net finance expense (Note 28)
Total expenses were as follows:
Total expenses
Expenses
15 SHARE-BASED PAYMENTS
Group
2020
£
550,620
479,670
1,030,290
2019
£
481,611
446,580
928,191
Company
2020
£
550,620
479,670
1,030,290
35,099
41,115 –
35,099
1,065,389
969,306
1,065,389
2019
£
481,611
446,580
928,191
41,115 –
969,306
Group
2020
£
2019
£
Company
2020
£
2019
£
10,921,316
8,140,522
8,508,583
7,810,146
The table below shows the total expenses arising from share-based payment transactions recognised during the period as part of employee
expenses:
EMI options granted
Restricted share awards
Shares purchased under Employee Share Incentive Plan
Employee Share Incentive Plan
Group
Company
2020
227,084
55,317
110,496
392,897
2019
Restated
120,245
–
90,158
210,403
2020
205,601
55,317
102,243
363,164
2019
Restated
120,245
–
90,158
210,403
The share incentive plan is administered by Equiniti (“the Trust”). The Trust purchases shares in Aquis on the open market on behalf of
employees that have elected to take part. The scheme allows employees to become shareholders in the Company in a tax efficient manner,
with the Company purchasing two matching shares for every partnership purchased by the employee. The terms of the matching shares
include that they must be held by the Trust for three years before they can be transferred or sold, and the employee must remain employed
with the Company throughout this period. The fair value of the matching shares purchased by the company are expensed over the three year
vesting period. Management assumes that the cost of the shares is a close approximation of the fair value of the shares as the market price
tends to be reflective of the discounted value of research analysts’ medium-term projections.
During the year a total of 50,127 shares were awarded, 6,729 vested and 2,218 were forfeited, with a fair value of £124,510, £30,281 and
£9,981 respectively. The following table shows the number of shares held in the Trust at the reporting date:
Employee Share incentive plan
Number of shares issued under the plan to participating employees
104,656
63,476
2020
2019
EMI Share Options
There is one approved EMI scheme, which was initiated in June 2018 when the first options were granted. In April 2020 the second allotment
approved in and deferred from November 2019 because Aquis was in a close period was made with a total of 740,250 options being
granted. Options vest in 3 equal tranches, one, two and three years after grant. The options expire after 10 years.
83
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
Of the total number of options granted, 20,137 were exercised, none expired and 11,098 were forfeited during the year.
In accordance with IFRS 2, the Group has estimated the fair value of options using a US binomial option valuation model and spread the
estimated value against the profit and loss account over the life of the vesting period.
The exercise price for the options granted on 14 June 2018 is £2.69 per share to be settled in cash at the date of exercise. The weighted
average remaining contractual life of options outstanding at the end of the reporting period amounted to 5.5 months.
The US binomial model with an average expiry duration of 5 years, volatility of 24 and risk-free interest rate of 1.1067% was used to calculate
the fair value of the options granted on 14 June 2018. All options are exercisable at a price of £2.69 and the weighted average expected life
of the options is estimated to be 5 years.
The exercise price for the options granted on 16 April 2020 is £3.47 per share to be settled in cash at the date of exercise. The weighted
average remaining contractual life of options outstanding at the end of the reporting period amounted to 2 years 3.5 months.
The US binomial model using an average expiry duration of 5 years, volatility of 20 and risk-free interest rate of 0.16% was used to calculate
the fair value of the options granted on 16 April 2020. All options are exercisable at a price of £3.47 and the weighted average remaining
expected life of the options is estimated to be 5 years.
560,406
740,250
(11,098)
(20,137)
–
1,269,421
351,918
Details of the EMI scheme are as follows:
• Outstanding at the beginning of the period
• Granted during the period
• Forfeited during the period
• Exercised during the period
• Expired during the period
• Outstanding at the end of the period
• Exercisable at the end of the period
16
INVESTMENT INCOME
Interest income
Bank deposits
17 BUSINESS COMBINATION
Group
2020
£
2019
£
Company
2020
£
2019
£
14,632
41,699
14,632
36,303
On 11 March 2020 Aquis Exchange PLC acquired 100% of the issued share capital of NEX Exchange Limited, a UK based Recognised
Investment Exchange. It has since been rebranded as Aquis Stock Exchange (AQSE). The acquisition has broadened the Group’s service
offering, including the ability to offer companies wishing to go public a primary listing on its growth market. It complements the existing
exchange services of the Group and has enabled the Group to expand its strategic offering. Further details can be found in the Strategic
Report.
Details of the purchase consideration is as follows:
Purchase consideration
Cash paid
£
2,877,118
84
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
The assets and liabilities recognised as a result of the acquisition are as follows:
Group
Current assets:
Cash
Trade and other receivables
Current liabilities:
Trade and other payables
Add: Goodwill
Net assets arising on acquisition
£
2,617,718
653,390
(477,471)
83,481
2,877,118
The assets acquired and liabilities assumed have been recognised at their fair values measured at the acquisition date. There were no
intangible assets identified at the acquisition date.
In the year ended 31 March 2020, AQSE delivered revenues of £1.6m and a loss before tax of £1.6m. The Group has brought the year end
of AQSE to 31 December in line with other Aquis Group companies. The consolidated results to 31 December 2020 include the 9.5 months
results for AQSE from 11 March to 31 December 2020.
The acquired business contributed revenues of £1.2m and a loss before tax of £0.5m to the Group for the period of 9.5 months from
11 March to 31 December 2020.
There were no acquisitions in the year ending 31 December 2019.
18 DEFERRED TAX ASSET
A deferred tax asset of £203,717 relating to unused tax losses has been recognised in the current period. The losses are considered to be
able to offset against the Company’s taxable profits expected to arise in the next three accounting periods. The assessment of future taxable
profits involves a significant degree of estimation, which management have based on the latest budget for the Company approved by the
Board which reflects the improved trading performance largely due to the continued expansion of the business as discussed in the Strategic
Report. The preparation of the budget involves a rigorous review process by the Board, whereby each revenue stream and cost is scrutinised
and challenged in detail so that the final version is considered to be an accurate and plausible representation of what is likely to be achieved in
the period.
In calculating the deferred tax asset, management have applied a conservative approach by using probability-adjusted revenues, applying
lower probabilities to budgeted revenue from more uncertain sources such as large technology licensing contracts, with the effect of reducing
estimated profits over the 3-year period from the original forecasts. The analysis predicts profitability is still achievable even when revenues
are reduced to reflect this adjustment. The model uses modest growth rates and is sensitive to the discount rate used in each year. The
impact of flexing the discount rates used upwards or downwards within a reasonable range would be +£147,604/-£171,169, so that the
deferred tax asset would be £351,321 in an upside scenario with lower probability discount rates or £32,548 in a downside scenario with
higher probability discount rates.
A deferred tax balance of £9,642,727 based on the remaining unused losses of the Group has not been recognised. The losses can be carried
forward indefinitely and have no expiry date. Of this balance, £3,011,951 relates to the unrecognised deferred tax balance of the Company.
There was no deferred tax asset recognised in 2019.
The deferred tax balance comprises temporary differences attributable to:
Group and Company
Deferred tax
Tax losses
Total deferred tax asset
2020
£
203,717
203,717
2019
£
–
–
85
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
Movement in deferred tax balance:
Group and Company
Movements
At 1 January 2020
(Charged)/credited to profit or loss
At 31 December 2020
£
–
203,717
203,717
The Group has combined losses of £51,941,924 (2019: £18,386,969) available for carry forward and to be used against future trading profits
of the same trade in which they were generated. This is comprised of trading losses totalling £51,511,244 generated in the UK by Aquis
Exchange PLC and Aquis Stock Exchange Limited and losses totalling £430,681 generated in France by Aquis Exchange Europe SAS.
The Company has estimated losses of £17,043,108 (2019: £18,386,969) available for carry forward against future trading profits.
19
INCOME TAX CREDIT
Current tax
R&D tax credit
Group
2020
£
2019
Restated
£
Company
2020
£
2019
Restated
£
(307,616)
(265,254)
(307,616)
(265,254)
The credit for the year can be reconciled to the profit/(loss) per the income statement as follows:
Profit/(loss) for the year before taxation
470,395
(921,836)
1,268,618
Group
2020
£
2019
Restated
£
Company
2020
£
Expected tax charge/(credit) based on a corporation tax rate of 19.00%
Effect of expenses not deductible in determining taxable profit
Unutilised tax losses carried forward
Losses utilised against taxable profits
Permanent capital allowances in excess of depreciation
Depreciation on assets not qualifying for tax allowances
Additional R&D allowance for qualifying expenditure
Non-trade loan relationship credits
Research and development tax credit
Taxation credit for the year
20 EARNINGS PER SHARE
Number of Shares
2019
Restated
£
(860,856)
(163,563)
72,596
144,903
–
(52,765)
(1,171)
–
–
89,375
55,246
70,204
–
34,109
846
(247,000)
(2,780)
(175,149)
33,784
195,301
241,037
51,165
–
–
(77,377)
(52,765)
(1,171)
–
–
34,109
846
(247,000)
(2,780)
(307,616)
(265,254)
(307,616)
(265,254)
(307,616)
(265,254)
(307,616)
(265,254)
Group
2020
2019
Company
2020
2019
Weighted average number of ordinary shares for basic earnings per share
27,164,230
27,149,559
27,164,230
27,149,559
Weighted average number of ordinary shares for diluted earnings per share
28,281,234
27,713,683
28,281,234
27,713,683
Earnings
Profit/(Loss) for the year from continued operations
Basic and diluted earnings per share (pence)
Basic earnings/(loss) per ordinary share
Diluted earnings/(loss) per ordinary share
981,728
(671,327)
1,779,951
(610,347)
4
3
(3)
(3)
7
6
(3)
(3)
Basic earnings per share is in respect of all activities of the Group and diluted earnings per share takes into account the dilution effects which
would arise on conversion or vesting of all outstanding share options and share awards.
86
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
21
INTANGIBLE ASSETS
Cost
As at 01/01/2019
Additions- internally generated
As at 31/12/2019
Additions- internally generated
As at 31/12/2020
Accumulated amortisation and impairment
As at 01/01/2019
Charge for the year
As at 31/12/2019
Charge for the year
As at 31/12/20120
Carrying amount
As at 31/12/2020
As at 31/12/2019
Goodwill
Group
Developed
trading platforms
Group
Goodwill
Company
Developed
trading platforms
1,493,055
562,271
2,055,326
642,695
2,698,022
855,516
446,580
1,302,096
479,670
1,781,766
–
–
–
83,481
83,481
–
–
–
–
–
1,493,055
562,271
2,055,326
642,695
2,698,022
855,516
446,580
1,302,096
479,670
1,781,766
916,256
753,230
83,481
–
916,256
753,230
On 11 March 2020 the Group acquired NEX Exchange Limited which resulted in recognition of goodwill of £83,481. The cash generating
unit associated with the goodwill is determined to be the assets associated with the investment in AQSE.
The goodwill arising on consolidation represents the growth potential of the primary listings exchange and the synergies with the rest of the
business. AQSE has no intangible assets.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to a cash generating unit, being the net assets related to Aquis Stock Exchange.
The recoverable amounts of the cash generating unit has been determined based on a value-in-use calculation using discounted cash flow
forecasts based on business plans prepared by management for a five-year period ending 31 December 2025, using an estimated terminal
growth rate of 2%.
No impairment loss has been recognised during the year, as management believes the value in use of Aquis Stock Exchange is significantly
higher than the carrying value and is unlikely to be materially impaired.
87
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
22 PROPERTY, PLANT AND EQUIPMENT
Group
Cost
As at 01/01/2019
Additions
Recognition of IFRS 16 Right of Use Asset
As at 31/12/2019
Additions
As at 31/12/2020
Accumulated depreciation and impairment
As at 01/01/2019
Charge for the year
As at 31/12/2019
Charge for the year
As at 31/12/2020
Carrying amount
As at 31/12/2020
As at 31/12/2019
Company
Cost
As at 31/12/2018
Additions
Recognition of IFRS 16 Right of Use Asset
As at 31/12/2019
Additions
As at 31/12/2020
Accumulated depreciation and impairment
As at 01/01/2019
Charge for the year
As at 31/12/2019
Charge for the year
As at 31/12/2020
Carrying amount
As at 31/12/2020
As at 31/12/2019
88
Fixtures,
fittings and
equipment
£
Computer
Equipment
£
Non–current
Right of Use Asset
£
246,463
1,591,963
3,034
–
506,308
–
249,497
2,098,270
2,328
113,024
–
–
1,444,159
1,444,159
–
Total
£
1,838,426
509,342
1,444,159
3,791,927
115,351
251,825
2,211,294
1,444,159
3,907,278
1,218,891
258,475
1,477,366
326,962
1,804,328
–
1,296,493
173,166
173,166
173,166
346,332
481,611
1,778,104
550,620
2,328,724
406,966
620,905
1,097,827
1,270,993
1,578,554
2,013,823
77,602
49,970
127,572
50,492
178,064
73,761
121,925
Fixtures,
fittings and
equipment
£
Computer
Equipment
£
Non–current
Right of Use Asset
£
246,463
1,591,963
3,034
–
506,308
–
249,497
2,098,270
2,328
113,024
–
–
1,444,159
1,444,159
–
Total
£
1,838,426
509,342
1,444,159
3,791,927
115,351
251,825
2,211,294
1,444,159
3,907,278
77,602
49,970
127,572
50,492
178,064
1,218,891
258,475
1,477,366
326,962
1,804,328
–
1,296,493
173,166
173,166
173,166
346,332
481,611
1,778,104
550,620
2,328,724
73,761
121,925
406,966
620,905
1,097,827
1,270,993
1,578,554
2,013,823
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 23
INVESTMENT IN SUBSIDIARIES
Company
Investment in subsidiaries
2020
£
2019
£
6,484,202
2,437,766
Details of the Company’s subsidiaries at 31 December 2020 are set out in the following table. The investments are measured using the equity
method in Aquis Exchange PLC’s standalone accounts.
Name of undertaking
Aquis Stock Exchange Limited
Aquis Exchange Europe SAS
Country of
incorporation
Ownership interest
(%)
Voting power held
(%)
Name of business
UK
France
100
100
100
100
Recognised
Investment Exchange
European Equities
Exchange
Carrying
amount (£)
2020
3,277,118
Carrying
amount (£)
2019
–
3,207,084
2,437,766
The registered office of Aquis Exchange Europe SAS is 231 rue Saint Honoré, 75001 Paris, France. The registered office of Aquis Stock
Exchange Limited is 77 Cornhill, London EC3V 3QQ, UK.
During the year Aquis Exchange PLC made capital contributions to Aquis Europe of £769,318 and £400,000 to Aquis Stock Exchange.
Both investments were assessed for impairment at year end. Although both investments were loss-making in 2020, this performance was in
line with expectations. Aquis Europe is expected to reach profitability in 2021 and AQSE in 2022. Therefore, in line with IAS 36 guidance, no
impairment provision has been recognised in Aquis Exchange PLC’s financial statements. The following table summarises the movement in the
carrying amounts of the subsidiaries during the year:
Carrying amount 2019
Investment in subsidiary
Capital injection
Carrying amount 2020
24 INVESTMENT IN TRUST
Aquis Stock Exchange
Limited
£
Aquis Exchange
Europe SAS
£
–
2,437,766
2,877,118
400,000
–
769,318
3,277,118
3,207,084
The following table shows the total amount the Company has invested in the Trust in respect of the Share Incentive Plan as at the reporting
date:
Company
Investment in Trust
25 TRADE AND OTHER RECEIVABLES
Group
Trade receivables
Technology licence contract assets
Other receivables
Prepayments
2020
£
2019
Restated
£
486,127
318,410
Current
Non–current
Total
2020
£
1,500,524
1,132,029
11,911
279,603
2019
Restated
£
1,523,494
–
6,736
1696,438
2020
£
–
617,805
221,825
–
2019
Restated
£
751,629
–
215,293
–
2020
£
1,500,524
1,749,834
233,736
279,603
2019
Restated
£
2,275,123
–
222,029
166,208
2,924,067
1,696,438
839,630
966,922
3,763,697
2,663,360
89
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
Company
Trade receivables
Technology licence contract assets
Other receivables
Intercompany receivables
Prepayments
Current
Non–current
2020
£
1,384,467
1,132,029
6,941
177,266
242,665
2019
Restated
£
1,514,439
–
6,941
–
166,208
2020
£
–
617,805
221,825
–
–
2019
Restated
£
751,629
–
215,293
–
–
Total
2020
£
1,384,467
1,749,834
228,766
177,266
242,665
2019
Restated
£
2,266,068
–
222,234
–
166,208
2,943,368
1,687,587
839,630
966,922
3,782,998
2,654,509
The following details the trade receivables that are stated net of any credit impairment provision, as set out previously in Note 13 in
accordance with IFRS 9.
Trade receivables
Gross trade receivables
Gross contract assets
Impairment
Trade receivables net of provisions
26 CASH AND CASH EQUIVALENTS
Cash at bank
Group
Company
2020
£
1,540,230
2,236,397
2019
Restated
£
2,685,964
–
2020
£
1,406,505
2,236,397
2019
Restated
£
2,676,909
–
(526,271)
(410,841)
(508,601)
(410,841)
3,250,357
2,275,123
3,134,300
2,266,068
Group
2020
£
2019
£
Company
2020
£
2019
£
12,268,418
11,010,861
6,179,566
8,609,739
Cash and cash equivalents are held with authorised counterparties of a high credit standing, in secured investments. Management does not
expect any losses from non-performance by the counterparties holding cash and cash equivalents, and there are no material differences
between their book and fair values.
Cash held by Aquis Exchange Europe SAS is predominantly held in a Sterling denominated bank account, hedging the Group against foreign
exchange fluctuations in cash and cash equivalents of the subsidiary.
27 TRADE AND OTHER PAYABLES
Current
Trade payables
Accruals
Deferred Revenue
Social security and other taxation
Intercompany payables
Other payables
90
Group
2020
£
2019
£
Company
2020
£
2019
£
263,398
130,396
251,136
215,031
1,524,793
1,053,313
1,301,073
1,034,636
431,792
426,745
–
–
173,540
–
43,127
242,588
454,182
–
173,540
163,982
142,325
–
44,619
2,810,710
1,499,574
2,292,106
1,467,826
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
28 LEASES
The impact on the Group’s assets and liabilities, and the related effects on profit and loss, of the Group’s leasing activities (the Group as a
lessee) are detailed below.
Right of Use Assets
The right-of use asset was measured at the amount equal to the lease liability, plus prepaid lease payments (being the unamortised portion
of the rent deposit asset). The right of use assets is depreciated over the term of the lease and was accounted for during the year ended
31 December 2020 as follows:
Carrying amount at 1 January 2019
Depreciation for the year
Carrying amount at 31 December 2019
Depreciation for the year
Carrying amount at 31 December 2020
Of which are:
Current
Non-current
Property
£
1,444,159
(173,166)
1,270,993
(173,166)
1,097,827
173,166
924,661
1,097,827
The non-current and current portions of the right of use asset are included in ‘Property, Plant and Equipment’ and Trade and Other
Receivables on the Statement of Financial Position respectively.
Rent deposit asset
The rent deposit asset (excluding the prepaid right of use portion which has been included in the calculation of the right of use asset above) is
a financial asset measured at amortised cost and was accounted for during the year ended 31 December 2020 as follows:
Carrying amount at 1 January 2019
Finance income on rent deposit asset for the year
Carrying amount at 31 December 2019
Finance income on rent deposit asset for the year
Carrying amount at 31 December 2020
Of which are:
Current
Non-current
Rent deposit asset
£
215,491
6,538
222,029
6,736
228,765
6,941
215,293
222,234
The non-current and current portions of the rent deposit asset are both included in Trade and Other Receivables on the Statement of
Financial Position.
91
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
Lease liability
The lease liability is calculated as the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives
receivable (e.g. any rent-free periods). The lease payments are discounted using the interest rate implicit in the lease. The lease liability is
measured at amortised cost and was accounted for during the year ended 31 December 2020 as follows:
Carrying amount at 1 January 2019
Finance expense on lease liability for the year
Lease payments made during the year
Carrying amount at 31 December 2019
Finance expense on lease liability for the year
Lease payments made during the year
Carrying amount at 31 December 2019
Of which are:
Current
Non-current
Lease liability
£
1,561,096
47,653
(230,445)
1,378,304
41,835
(230,445)
1,189,694
194,613
995,081
1,189,694
The non-current and current portions of the lease liability are included in ‘Lease liability’ and Trade and Other Payables on the Statement of
Financial Position respectively.
Net finance expense on leases
Finance expense on lease liability
Finance income on rent deposit asset
Net finance expense relating to leases
2020
£
41,835
(6,736)
35,099
2019
£
47,653
(6,538)
41,115
The finance income and finance expense arising from the Group’s leasing activities as a lessee have been shown net where applicable as is
permitted by IAS 32 where criteria for offsetting have been met.
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Finance expense on lease liability
Finance income on rent deposit asset
Net impact of leases on profit or loss
2020
£
2019
£
(173,166)
(173,166)
(41,835)
(47,653)
6,736
6,736
(208,265)
(214,083)
The property lease (of which there is only one) in which the Group is the lessee does not contain variable lease payment terms.
The total cash outflow for leases amounts to £230,445 (2019: £230,445).
92
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
29 CALLED UP SHARE CAPITAL
Group
Ordinary share capital
Issued and fully paid
27,169,696 Ordinary shares of 10p each (2019: 27,149,559)
Issue of 20,137 new shares
30 SHARE PREMIUM ACCOUNT
Group
At the beginning of the year
Issue of 20,137 new shares
At the end of the year
31 OTHER RESERVES
2020
£
2019
£
2,714,956
2,714,956
2,014
–
2,716,970
2,714,956
2020
£
2019
£
10,839,981
10,839,981
52,154
–
10,892,135
10,839,981
Reserves relating to share-based payments
760,543
368,366
748,525
368,367
Group
2020
£
2019
Restated
£
Company
2020
£
2019
Restated
£
32 TREASURY SHARES
Group
At the beginning of the year
Purchase of additional shares
Shares sold by the trust
Cash held by Trust
At the end of the year
2020
£
318,410
199,459
(40,262)
12,018
489,625
2019
Restated
£
121,851
196,558
–
9,399
327,809
33 FOREIGN CURRENCY TRANSLATION RESERVE
In 2019 the Group established a Multilateral Trading Facility (MTF) in France through its subsidiary, Aquis Exchange Europe SAS. The
translation of the European subsidiary’ assets into Sterling, the functional currency of the Group, results in foreign exchange differences that
have been recognised in Other Comprehensive Income and accumulated in a separate component of equity as illustrated below.
Group
At the beginning of the year
Foreign exchange differences on translation of foreign operations recognised in OCI
At the end of the year/period
2020
£
1,439
(531)
908
2019
£
–
1,439
1,439
93
ANNUAL REPORT & ACCOUNTS 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
34 CASH GENERATED BY OPERATIONS
Group
Profit/(Loss) for the year after tax
Adjustments for:
Taxation credited
Deferred tax
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)
Prior year adjustments
Gains/(losses) on transition of accounting standards
Movement in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated/ (absorbed) by operations
Company
Profit / (Loss) for the year after tax
Adjustments for:
Taxation credited
Deferred tax
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
Prior year adjustments
Gains/ losses on transition of accounting standards
Movement in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated/(absorbed) by operations
94
2020
£
2019
Restated
£
981,728
(656,582)
(307,616)
(265,254)
(203,717)
–
(14,632)
(41,699)
479,670
550,620
392,897
39,814
–
–
(1,100,337)
1,311,136
2,129,563
2020
£
446,580
481,611
210,403
(156,586)
(205,142)
(120,369)
85,434
607,210
385,606
2019
Restated
£
1,779,951
(595,602)
(307,616)
(265,254)
(203,717)
–
(14,632)
(36,303)
479,670
550,620
363,164
446,580
481,611
210,403
(114,892)
(147,566)
–
(205,142)
(120,369)
(1,128,488)
824,278
2,228,339
94,284
575,463
438,105
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020
35 RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the Directors of the Company, who are key management personnel, is set out below in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures. Key management compensation relates to the Executive Directors who have
authority for planning, directing and controlling the Group.
Group
Salaries and other short-term benefits
Share-based payments
Inter-company transactions with subsidiary undertakings
2020
£
761,709
69,268
830,977
2019
£
602,195
175,589
777,784
The Company has intercompany balances with its subsidiary undertakings. Details as at 31 December 2020 are shown in the table below:
Counterparty
Aquis Exchange Europe SAS
Aquis Stock Exchange Limited
Amount (owed to) /due from as at:
2020
(53,720)
(223,195)
2019
Term
(84,634)
Repayable on demand
–
Repayable on demand
At year end, a balance of £400,000 was payable to AQSE in respect of additional capital to be injected into the entity. During the year, the
Company recharged operating costs to its subsidiaries on a proportionate basis.
36 CONTROLLING PARTY
In the opinion of the Directors, there is no single overall controlling party. No individual shareholder had a shareholding of 10% or above as at
31 December 2020.
37 RESTATEMENT OF COMPARATIVES
The prior year adjustments are as follows:
1)
Accounting for expenses arising from the share incentive plan as share-based payments under IFRS 2 and recognition of the investment
in Trust in Company accounts and consolidation of the Trust in Group accounts under IFRS 10;
2) The ECL model was updated resulting in a net decrease in the ECL provision of £42k.
The following table summarises the impact of the adjustments on the associated accounts in 2019:
Group
Treasury shares
Share-based payment expense
Share-based payment reserve
Employee costs
Other expenses
Impairment Credit (SOCI)
ECL Provision (SOFP)
2019 (as per
prior year financial
statements)
£
Adjustment
£
2019
restated balance
£
–
(327,809)
(327,809)
120,245
212,691
4,474,507
2,660,390
242,585
453,249
90,158
165,075
210,403
377,766
(373,137)
4,101,370
120,245
2,780,635
42,408
(42,408)
284,993
410,841
95
ANNUAL REPORT & ACCOUNTS 2020 Notes to the Financial Statements continued
For the year ended 31 December 2020
Company
Investment in Trust
Share-based payment expense
Share-based payment reserve
Employee costs
Other expenses
Impairment Credit (SOCI)
ECL Provision (SOFP)
2019 (as per
prior year financial
statements)
£
–
120,245
212,691
4,204,785
2,628,777
242,585
453,249
Adjustment
£
318,410
90,158
155,676
2019
restated balance
£
318,410
210,403
368,367
(373,137)
3,831,648
120,245
2,749,022
42,408
(42,408)
284,993
410,841
38 EVENTS OCCURRING AFTER THE REPORTING PERIOD
AQSE Market Maker Warrant Scheme
From 1 January 2021 a new market maker warrant incentive scheme will commence, the purpose of which is to improve the liquidity and
functioning of the AQSE Apex market. The scheme will involve issuing warrants to eligible market makers over a 3-year period, giving them
the option to purchase up to 19.9% of the shares in AQSE. Market makers will become eligible for the scheme if they meet a defined set of
performance criteria, and the number of warrants to be issued to each market maker will be determined by AQSE.
The warrants will be accounted for in accordance with IFRS 15, with a debit to revenue and corresponding credit to equity being recognised
in each year of the scheme based on the fair value of the warrants and the expectation of the number of awards likely to vest at the end of
that year. The first charge will be recognised in 2021.
Proposed Corporation Tax Increase
On 3 March 2021 the Chancellor announced that the UK corporation tax rate would increase to 25% from April 2023. This does not have a
material impact on the financial position of the Group as at 31 December 2021.
The Directors can confirm that there were no other significant post-balance sheet events.
96
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 Notes
97
ANNUAL REPORT & ACCOUNTS 2020 Notes continued
E X C H A N G E P L C
W W W. AQUIS.EU
98
AQUIS EXCHANGE PLCANNUAL REPORT & ACCOUNTS 2020 E X C H A N G E P L C
WWW.AQUIS.EU