Annual Report
For the year ended 31 December 2020
Page 1
Contents
Strategic Report ........................................................................................................................
Strategic Framework ..................................................................................................................... 2
Performance Highlights ................................................................................................................ 3
Chairman’s Statement .................................................................................................................. 4
Chief Executive Officer’s Review ................................................................................................ 5
Our Services ..................................................................................................................................... 8
Chief Financial Officer’s Review ............................................................................................... 10
Principal Risks and Uncertainties .............................................................................................. 12
Governance ...............................................................................................................................
Board of Directors ......................................................................................................................... 15
Corporate Governance Report .................................................................................................. 17
Section 172 Statement ................................................................................................................ 20
Audit Committee Report ............................................................................................................. 21
Directors’ Remuneration Report .............................................................................................. 24
Directors’ Report ........................................................................................................................... 27
Financial Statements ...............................................................................................................
Independent Auditor’s Report ................................................................................................... 32
Consolidated Financial Statements ........................................................................................ 38
Notes to the Financial Statements ......................................................................................... 43
Company Information ................................................................................................................. 68
Annual Report and Accounts 2020
1
STRATEGIC REPORT
Strategic Framework
Cornerstone is…
A payments focused fintech business
that makes managing currency simple
for international SMEs
With a clear strategy to grow via…
Buy-and-build acquisitions
Roll-up and integrate independent FX brokers to drive scale and profitability
Growing in-house sales capacity
Hiring experienced additional sales resource
Building our sales and marketing capabilities
Developing broader products and services
Multi-currency e-money accounts, accounting system integrations and open
banking services
Focusing on larger SME customers
UK SMEs underserved by traditional banks
Larger clients will drive greater revenues
…to create value for shareholders.
Annual Report and Accounts 2020
2
Performance Highlights
For the Group for the year ended 31 December 2020
STRATEGIC REPORT
Revenue
£1.7m
(2019*: £1.2m)
Payments Flow
£462m
(2019*: £336m)
Number of Clients
732
(2019*: 530)
New Clients Onboarded
328
(2019*: 181)
Transformational Acquisitions
Post Period
FXPress Payment
Services
Avila House
Admission to trading on
AIM raising gross
proceeds of £2.7m
Financial Summary
Revenue of £1.7m (2019*: £1.2m)
Gross margin of 29.8% (2019*: 43.4%)
Loss before tax of £2.2m (2019*: £0.08m loss), after incurring £1.2m
in transaction costs and share-based payments during the year
Loss per share of 14.99p (2019*: 0.73p loss)
Cash and cash equivalents at 31 December 2020 of £0.2m (31
December 2019: £0.08m)
Post period, raised gross proceeds of £2.7m through the
placing of ordinary shares and convertible loan note facilities
* For the audited nine-month period to 31 December 2019
Annual Report and Accounts 2020
3
Chairman’s Statement
I want to begin my maiden statement as
Cornerstone’s Chairman by acknowledging
the contribution of all those involved in our
successful IPO in April 2021. A trusted and
dedicated team worked tirelessly to deliver
our vision. We are now Cornerstone FS plc
and have embarked on an ambitious
journey.
Amid a year of global upheaval, 2020 was a
for us; establishing
milestone period
Cornerstone’s foundations, making two key
acquisitions, and culminating, post period,
in our admission to AIM.
We have come to the market to build a
significant business
in the provision of
payment services; foreign exchange and
currency risk management. We are focused
on sector consolidation, supported by
acquisitions,
our
exceptional team, and our advanced and
highly scalable platform.
expertise
the
of
for
Our IPO is a key part of this strategy as we
believe using Cornerstone’s shares as
acquisition currency will be an attractive
prospect
sellers. Acquisition and
integration will provide economies of scale
and enhanced profitability through a lower
marginal cost base. We will also grow
organically, broadening our products and
services with multi-currency e-money
accounts and
leveraging open banking
services, as well as increasing our sales &
marketing efforts. Our in-house technology
capability will enable expansion of the
range of services and will accommodate
effective integration of acquisitions.
STRATEGIC REPORT
is
the
small,
The UK
As our CEO, Julian Wheatland, discusses
further in his review, we are delivering this
strategy against a supportive market
backdrop.
leading
international location for foreign currency
trading. Outside of the
large financial
institutions, the market is highly fragmented
comprising numerous
specialist
brokerages – many of which are struggling
to meet increasing regulatory burdens and
the cost of new technology. We are focused
on SME customers, an expanding segment
of the UK business
is
typically under-served by major banks and
financial institutions. In addition, the UK’s
Open Banking
the
opportunity for us to develop additional
services and functionality complementary
to our existing offer. These trends support
our ambitions.
Initiative provides
landscape that
We have the people in place who can
execute on our strategy. Our management
team includes the founders of FXPress (our
main operating subsidiary) and also several
recent high-calibre appointments who,
together, bring extensive experience in the
foreign exchange payments market and in
building growth technology businesses. We
have an accomplished Board that has a
of
significant
experience; a track record of delivery in
capital markets, corporate governance, and
finance, as well as commercial expertise.
breadth
depth
and
I look forward to working with our team and
engaging with our stakeholders as we
embark on our journey as a listed company
and bring our strategy to life.
Elliott Mannis
Chairman
7 June 2021
Annual Report and Accounts 2020
4
Chief Executive Officer’s Review
STRATEGIC REPORT
is a great pleasure
It
to present
Cornerstone’s first annual report as a public
first as CEO.
company – and my
Cornerstone’s
IPO, which
successful
occurred, post period, in April 2021 and
raised £2.7m, was an important milestone
and a key element in our strategy to grow
the business through acquisition as well as
continuing development of our own highly
scalable, cloud-based software platform.
transformational
The period under review in this annual report
was
for Cornerstone.
During 2020, we undertook two acquisitions
to establish what Cornerstone is today: a
fintech business that makes managing
currency simple for
international SMEs.
While, along with the rest of the industry, our
trading volumes were impacted by COVID-
report that we
19,
I am pleased to
successfully navigated
the disruption
caused by the pandemic and progressed the
delivery of our strategy.
2020 and
Our accomplishments of
subsequent
to our
employees, customers, shareholders and the
Board, to whom I express my gratitude.
IPO are
thanks
Transformational Acquisitions
We completed the acquisition of FXPress
Payment Services Ltd (“FXPress”), a provider
of advanced payment systems as platform-
as-a-service to SMEs, in September 2020.
Alongside this, we disposed of the legacy
Cornerstone consumer business, with
FXPress becoming our main operating
entity, and adopted the name ‘Cornerstone
FS plc’ (having previously been ‘Cornerstone
Brands’). This marked our foundational step
towards our goal of building a significant
business in the provision of international
payment services for SMEs.
Shortly thereafter, we acquired Avila House
Limited (“Avila House”), a licensed small e-
money
institution. This expanded our
product and service capability to provide
to multi-currency
clients with access
accounts with
IBAN numbers
individual
where they can deposit and retain funds for
future use. By bringing together the e-money
assets of Avila House and the technology of
FXPress, we signalled our
intention to
establish a portfolio of products and
services to optimise the foreign exchange
payments process for small- and medium-
sized businesses.
Performance
Ahead of the COVID-19 outbreak, FXPress,
which is our main operating entity, was
delivering strong growth, with revenue for
the first half of 2020 being 28% ahead of the
same period of 2019. However, the public
in
lockdowns and associated reduction
economic activity led to a contraction in our
trading volumes. As a result, for the full year,
we delivered slight growth on a pro rata
basis, with revenue of £1.7m for the 12 months
ended 31 December 2020 compared with
£1.2m
for the nine months ended 31
December 2019.
The majority of this revenue continued to be
generated by clients we serve on a white
label basis, with revenue generated through
our introducer network (which is primarily
white label partners but also introducer
brokers) accounting for 88% (2019 period:
84%). Clients we serve directly contributed
12% (2019 period: 16%) of total revenue. By
client type, corporates accounted for 92%
of total revenue (2019 period: 91%) and high
net worth individuals accounted for 8%
(2019 period: 9%). As at 31 December 2020,
we had 732 active clients, compared with
530 a year earlier, and during the year
onboarded 328 new clients (2019: 181).
trades accounted
Spot
for 94% of
transactions (2019 period: 95%), and forward
currency contracts for 6% (2019 period: 5%),
and 87% of revenue (2019 period: 90%), with
the difference reflecting the higher levels of
Annual Report and Accounts 2020
5
commission
transactions.
charged
on
forward
Brexit
STRATEGIC REPORT
2020,
FXPress
conducted
During
transactions between 59 different currency
(2019 period: 43), with 88% of
pairs
transactions
various
combinations of Sterling, Euros and US
Dollars (2019 period: 89%).
between
being
In total, payments worth over £462m were
transacted through our platform in 2020
compared with approximately £336m for the
nine months ended 31 December 2019.
impacted by
I am pleased to note that our sales have not
the UK’s
been directly
withdrawal from the European Union. While,
like the rest of the UK financial services
industry, we are currently unable to market
our services into the EU from the UK, we are
not prevented from doing business in the
region. We have relatively few European
clients and they have continued to trade
with us. We are also currently considering
options to be able to resume marketing our
services in the EU.
Product Enhancement
Markets
As part of our continued and ongoing
programme of investment and development
of our cloud-based technology platform,
several enhancements were implemented
during the year. In addition to integration
with new banking and payment partners, we
introduced new platform features including:
• virtual IBANs to allow each client to
have their own account in their name
with a unique IBAN;
integration with Xero, a popular
accounting platform, to allow seamless
organisation of payment runs; and
the launch of payment tracking, to
allow clients to see the progress of their
payments en route to the payee.
•
•
COVID-19
As noted, COVID-19 and the associated
economic slowdown resulted in a reduction
in our trading volumes compared with the
start of the year. However, Cornerstone
successfully navigated the transition from
office to home working for our employees, in
line with government guidance, and
implemented a number of cost saving
measures. Our operations
continued
effectively with no disruption to service
provision. This was achieved thanks to the
cloud-based nature of our platform as well
as the commitment of our employees who,
on behalf of the Board, I would like to thank
for their efforts.
The onset of COVID-19 disrupted the growth
trajectory of FX trading in the UK, with
average daily turnover increasing by 49%
between April 2016 and April 2019 only to
decline by 15% by April 2020 (Bank of
England’s Foreign Exchange Joint Standing
Committee survey). However, there was
recovery towards the end of the year: in
October 2020, while 10% below the same
period of the prior year, average daily
turnover was 7% higher than six months
earlier. In addition, despite the pandemic as
well as the UK’s withdrawal from the
European Union, the UK’s exports market
managed to grow by £0.7 billion in 2020.
Our target market also continued to expand
in 2020. The number of SMEs in the UK
increased during the year. Moreover, a study
from Sage and Capital Economics found
that, in response to the economic effects of
COVID-19, many SMEs have turned to cross-
border trade, with 67% of those surveyed
either taking or considering measures to
increase their revenue through exports in
new markets. At the same time, the
fundamental demand driver for our services
remains: SMEs continue to seek better
quality and more bespoke services than
those provided by the major financial
institutions traditionally dominating the
foreign exchange market.
Annual Report and Accounts 2020
6
STRATEGIC REPORT
Strategy Execution & Outlook
In 2020, we took the initial steps in executing
on our growth strategy. We brought together
the FXPress platform and business with the
Avila House e-wallet services under the
Cornerstone umbrella. We invested in sales
automation technology as part of our plan to
increase our sales efforts and we made a
strategic hire with the appointment of a
highly experienced Chief Product Officer. We
achieved a fundamental milestone, post
period, with the completion of our IPO on AIM,
which lays the foundations for our pursuit of
further acquisitions.
Post year end, we have seen volumes
increase and we have continued to expand
our customer base. This year, we have
179 new customer accounts,
opened
increasing our total number of customers to
over 810, which gives us a strong base on
which to build.
While we are still at the beginning of our
journey, with our strong team and highly
scalable platform, we believe we are well-
placed to take advantage of the meaningful
opportunities to build a significant business
offering technology-enabled
international
payment services. We
look forward to
reporting on our progress.
Julian Wheatland
Chief Executive Officer
7 June 2021
Annual Report and Accounts 2020
7
Our Services
STRATEGIC REPORT
Annual Report and Accounts 2020
8
We’re on a mission to reimagine the
treasury and accounting workflow of
businesses through our flagship product,
bringing Open Banking, third party
platforms and online multi-currency
accounts together to provide finance
teams with a 360 degree view of their
financial operations.
Page 2
Chief Financial Officer’s Review
STRATEGIC REPORT
I am pleased to present the Chief Financial
Officer’s Review for the first annual report of
Cornerstone FS plc. The 12 months ended 31
December 2020 covers a period prior to our
IPO on AIM and primarily prior to the
establishment of the Group.
Basis of preparation
3
the
IFRS
under
reverse
time of
Cornerstone completed the acquisition of
FXPress Payment Services Ltd (“FXPress”) on
9 September 2020. As FXPress reversed into
Cornerstone, when
it did not have an
existing trade, the transaction cannot be
considered a business combination, as at
the
takeover,
Cornerstone did not meet the definition of a
business,
“Business
Combinations”. As the transaction is capital
in nature and completed through the issue
of shares, it falls within the scope of IFRS 2
‘Share-based payments’. Any difference in
the fair value of shares deemed to be issued
by the legal subsidiary (FXPress) and the fair
value of net identifiable assets in the legal
parent (Cornerstone FS plc) will form part of
In
the deemed cost of acquisition.
accounting for the acquisition of FXPress,
the Group incurred a one-off share-based
payment charge
income
statement of £0.2m. In addition, a merger
relief reserve of £5.6m has been created at
both the Group and Company level, and a
negative
reserve
reverse acquisition
created of £3.1m at the Group level.
through
its
While the consolidated financial information
has been issued in the name of Cornerstone
FS plc, the legal parent, it represents in
substance the continuation of the financial
information of the legal subsidiary, FXPress.
As such, the prior-period comparatives for
the nine-month period ended 31 December
represent the results of FXPress only, and
commensurate
last
with
accounting reference period. The results of
Cornerstone have been added to the Group
financials from 9 September 2020. The
results of Avila House are consolidated
FXPress’
within FXPress for the period following the
acquisition on 19 October 2020 (see note 11
to the financial statements).
Financial performance
The Group’s revenue for the 12 months to 31
December 2020 was £1.7m compared with
£1.2m for the nine months to 31 December
2019, representing slight growth on a pro
rata basis. This reflects a strong first half of
the year being largely offset by a weaker
second half due to the impact of the COVID-
19 pandemic, as discussed further in the
Chief Executive Officer’s Review. Revenue
was generated almost entirely from the
provision of
foreign exchange and
payments services in the form of spot and
forward trades, accounting for 87% and 13%
of revenue respectively (nine-month period
ended 31 December 2019: 90% and 10%).
The slight increase in total revenue was due
to growth in the Group’s core revenue
streams, namely: sales generated from its
introducer network (for revenue by origin),
revenue
which
originating via white label partners and also
introducer brokers, and
from
corporate clients for revenue by client type.
comprises
primarily
sales
Revenue by origin Revenue generated via
the Group’s network of introducers was
£1.4m for 2020 compared with £1.0m for the
nine-month period ended 31 December 2019,
accounting for 88% of total revenue (2019
period: 84%). Direct revenue was £0.2m for
both 2020 and the prior nine-month period,
accounting for 12% and 16% respectively.
Revenue by client type Corporate accounts
remained the largest contributor to revenue
by client type, generating £1.5m in 2020
(2019 period: £1.1m), accounting for 92%
(2019 period: 91%) of total revenue. High net
worth individuals (“HNWIs”) generated £0.1m
for both 2020 and the earlier period,
accounting for 8% and 9% of total revenue
respectively.
Annual Report and Accounts 2020
10
Gross margin for 2020 was 29.8% (2019
period: 43.4%) with the reduction due to
both the increasing proportion of revenue
derived through our introducer network and
that revenue being more greatly weighted
towards network partners who receive
higher rates of commission.
Total administrative expenses were £2.7m in
2020 compared with £0.6m for the nine-
month period ended 31 December 2019. This
includes:
• £0.8m
the
acquisitions of FXPress and Avila House
and to the IPO (2019 period: £nil), which
completed post year end;
in costs
related
to
to
the
• £0.4m in share-based payment charges
(2019 period: £nil), including a £0.2m
reverse
related
charge
acquisition of FXPress; and
staff and consultant costs of £0.9m
compared with £0.3m in the nine-month
period ended 31 December 2019 as the
Group prepared itself for growth and its
IPO.
•
The Group recognised a loss before tax of
£2.2m for 2020 compared with £0.08m for
the earlier period, which primarily reflects
the greater administrative expenses, but
lower gross margin. Loss per
also the
ordinary share on a basic and diluted basis
was 14.99 pence (2019 period: 0.73 pence),
primarily due to the greater loss, but also
due to the larger share capital in 2020 (see
note 14 to the financial statements).
Financial position
As at 31 December 2020, the Group had cash
and cash equivalents of £0.2m (31 December
2019: £0.08m). This followed a pre-IPO fund
raise during the year amounting to £1.0m, of
which £0.8m was received in cash and £0.2m
arose through the issue of new ordinary
shares to settle service fee payments.
During the year, the Group also continued to
invest in the development of its technology
platform, which accounted for £0.2m of the
increase in intangible assets to £0.3m (31
December 2019: £0.01m).
STRATEGIC REPORT
Post period, the Group’s balance sheet was
strengthened with the raising of gross
proceeds of £2.2m via a placing of new
ordinary shares. The Group also has access
to £0.45m in convertible loan note facilities
(see note 19 to the financial statements).
Key performance indicators
The Group measures its performance using
the following key indicators:
Revenue
• Why it is a KPI: This is the main
source of income to the business
and drives our business model.
• Performance 2020: £1.7m (2019
period: £1.2m)
Payments Flow
• Why it is a KPI: This is the volume of
funds passing through our platform
and is an indicator of its scalability.
As we focus on acquisitive growth,
we expect to see a significant
increase here without a
commensurate increase in opex.
• Performance 2020: £462m (2019
period: £336m)
New Clients Onboarded
• Why it is a KPI: It is a key indicator
of future revenue growth, especially
as we build out our product
enhancements with a focus on
making customers ‘stickier’.
• Performance 2020: 328 (2019 period:
181)
Operating Expenses
• Why it is a KPI: Effective control of
opex is key to the Group’s strategy
and an indicator of sound
management.
• Performance 2020: £2.7m (2019
period: £0.6m)
Judy Happe
Chief Financial Officer
7 June 2021
Annual Report and Accounts 2020
11
STRATEGIC REPORT
Principal Risks and Uncertainties
The Directors consider the principal risks and uncertainties facing the Group, and the key
measures taken to mitigate those risks, are as follows:
Risk
How the risk is managed
Liquidity
There is a risk that the Group will not
have sufficient capital to meet the
regulatory capital requirement for an
authorised financial services business
and that it is unable to meet its
financial obligations when due.
The Group operates a matched-
principal brokerage model, meaning
it executes a matching trade with its
liquidity provider on receipt of a client
order. The Group does not enter into
speculative trades or trades funded
from its own balance sheet and does
not fund client margin calls from its
own funds. In addition, the Group has
an experienced finance team that
provides effective management of
the Group’s operational financial
exposures, with a strong focus on
cash control.
Counterparty
is a risk that the Group’s
There
services provider could
liquidity
its agreement with the
terminate
Group or that its systems may fail or
are not operational for a period of
time, which could have a materially
the Group’s
adverse
business and operations.
impact on
Competition
financial
There is a risk that competitors with
greater
resources may
develop software that is superior to
the Group’s technology and they may
also adopt more aggressive pricing
models or undertake more extensive
advertising
marketing
and
campaigns. Such competitors may
also attract
key
employees or prospective employees,
which could
level of
service that the Group can give to its
customers or the ability to expand its
service offering.
the Group’s
impact the
The Group has a very good working
relationship with Velocity Trade
International Ltd, its liquidity services
provider, and has been trading on
agreed terms for over ten years.
However, should Velocity choose to
terminate the agreement or should its
systems
has
arrangements in place to transfer its
business to another liquidity provider.
the Group
fail,
Significant barriers to entry exist in
the markets
in which the Group
operates, such as the requirement for
the
regulatory authorisation and
technical
and
skill,
experience required to develop a
proprietary technology platform.
expertise
payments
The Group’s management has
extensive experience in the foreign
exchange
market,
including of designing, building and
running IT systems and departments
in the financial services sector. A core
tenet of the Group’s strategy is to
grow via acquisition to benefit from
the scalability of its platform as well
as enhance its technology or service
Annual Report and Accounts 2020
12
STRATEGIC REPORT
offering. The Group’s vision
is to
become an end-to-end solution for
SME payments processing, which
would further integrate the Group’s
technology
customers’
into
systems and increase ‘stickiness’.
its
the majority of
The Board has established an
incentive scheme
employee share
its senior
and
management
significant
shareholders or option holders,
aligning their interests with those of
the Group.
are
The Group employs an experienced
Compliance and Money Laundering
Reporting Officer who is responsible
for monitoring the Group’s activities,
managing the Group’s regulatory and
reporting obligations and ensuring
that all FCA
requirements are
adhered to.
In addition, the Group retains the
services of Compliancy Services, a
specialist regulatory and compliance
advisory service, to support the
Compliance and Money Laundering
Officer.
Group’s
experienced
The
management team seeks to adapt to
adverse conditions. The cost base is
closely monitored and cost saving
measures would be implemented to
maintain solvency if required. The
Group’s vision is also to broaden its
offering to become an end-to-end
payments solution provider for SMEs,
which would diversify the revenue
mix.
is entirely
The Group’s platform
deployed on Amazon Web Services,
which is trusted by numerous major
organisations that require robust,
scalable, secure and cost-effective
services. AWS has a number of
internationally
recognised
certifications and accreditations
demonstrating compliance with third-
party assurance frameworks.
Regulation
Macro-
economic,
including
COVID-19
Information
technology
Limited,
Services
subsidiary, FXPress
The Group’s
Payment
is
authorised and regulated by the FCA
as an Authorised Payment Institution
and Avila House Limited is a Small
Electronic Money
Institution. The
withdrawal of, or any amendment to,
a regulatory approval required by the
subsidiaries or any of their Directors
or employees could result
in an
adverse change to, or the cessation
of, the Group’s business or a material
part thereof.
for
foreign
International trade is a key driver of
demand
exchange
services. A slowdown in international
trade caused by global macro-
economic factors – such as economic
and political conditions, and natural
disasters and epidemics, including
the ongoing impact of COVID-19 –
could adversely impact the Group’s
business transaction turnover.
it
is a risk that the Group’s
There
technology
be
platform may
compromised or breached by cyber-
attacks and that
is unable to
prevent or detect unauthorised
access to, or disclosure of, clients’
confidential personal and financial
information. Such an event could
in breaches of obligations
result
under applicable
laws or clients
agreements and have an adverse
Annual Report and Accounts 2020
13
impact on the Group’s reputation and
financial performance.
STRATEGIC REPORT
Additionally, the Group uses two
factor
utilising
authentication
OAuth2 protocol for client login and
periodically commissions penetration
testing of its systems.
Acquisitions
is
its ability to
A key risk to the Group delivering its
identify
strategy
acquisition opportunities and execute
successful acquisitions
(including
migrating those businesses onto the
is
Group’s
dependent on a number of factors,
including sufficient funding.
platform),
which
record
The Directors of the Group have a
of
track
demonstrable
business growth through mergers and
acquisitions, and
integration. The
Group’s platform has been designed
it has the
to be scalable and
capability to process a significant
increase
transaction volume
without the need for any redesign of
platform architecture. A key element
of the Group’s acquisition strategy is
its ability to use
its shares as
acquisition currency.
in
Annual Report and Accounts 2020
14
GOVERNANCE
Board of Directors
Elliott Michael Mannis, CPA, CA, Non-Executive Chairman
Committee Membership: Audit Committee, Remuneration Committee
Elliott is the Chairman and shareholder of London Bridge Capital (an FCA authorised corporate
finance firm). Elliott was formerly Chief Executive at D1 Oils, an AIM listed biofuels business and,
prior to that, he was Group Finance Director at AWG, the FTSE 250 holding company for Anglian
Water. In addition to his role at London Bridge Capital, Elliott is Chairman of Permastore Group,
the independent non-executive at Infram Energy, and is an ambassador (previously a Trustee)
for the Woodland Trust. Elliott qualified as a Chartered Accountant with Price Waterhouse in
Vancouver, Canada and holds Canadian professional accountancy designations. He has
worked in Europe, principally the UK, since 1988.
Julian David Wheatland, CEng, Chief Executive
Julian is an experienced Chief Executive with an extensive track record of scaling technology
businesses through organic growth and acquisition. Julian was Chief Executive of a £400m
international technology investment portfolio at Consensus Business Group, before leaving in
2009 to establish Hatton International, a finance and technology advisory firm providing
services to the defence and energy sectors. From 2007, Julian served as a non-executive director
and then chairman of Strategic Communication Laboratories (later renamed SCL Group), which
subsequently, in 2017, acquired SCL Analytics, the holding company for the SCL/Cambridge
Analytica companies. From 2015 Julian was CFO and COO of the SCL/Cambridge Analytica
companies and, after these companies experienced significant difficulties, in April 2018 became
a Director and CEO of these companies in order to achieve an orderly wind down of the business
and place the companies
into administration/bankruptcy. Julian has held numerous
directorships in an executive and non-executive capacity, in both private and public companies.
Judy Amanda Happe, ACA, Chief Financial Officer
Judy is an experienced corporate executive and Chief Financial Officer with a background in
fundraising, mergers and acquisitions and post-deal integration. Most recently Judy was CFO of
XenZone (now AIM listed Kooth Plc). Prior to that Judy was with AVG Technologies for seven years
including a period after its acquisition by Avast Software in October 2016. Starting as finance
director, Judy moved through a number of roles giving her responsibility for post-deal
integration, management and guidance for AVG’s portfolio of acquisitions and acting as joint
single point of contact during the $1.3bn sale of AVG to Avast. Judy commenced her career as a
chartered accountant with Saffrey Champness.
Glyn Anthony Barker, FCA, Independent Non-Executive Director
Committee Membership: Audit Committee (Chairman), Remuneration Committee
Glyn is currently a non-executive director of Transocean Ltd, Chairman of Berkeley Group plc,
Chairman of Irwin Mitchell and Senior Advisor to Novalpina Capital. Glyn was previously
Managing Partner of PwC UK and Senior Independent Director of Aviva plc.
Annual Report and Accounts 2020
15
GOVERNANCE
Daniel Song Mackinnon, Independent Non-Executive Director
Committee Membership: Audit Committee, Remuneration Committee
Daniel (“Dan”) is a corporate financier. After graduating from the University of Oxford, he began
his career with Rothschild working as an analyst in the Consumer, Real Estate and Healthcare
teams. He then joined Emerald Investment Partners as Investment Director, working in a small
team alongside the founder to originate, structure and execute a variety of transactions across
multiple sectors, jurisdictions and public as well as private markets. Amongst others, this included
the IPO of Cairn Homes Plc in 2015, raising €440m on the LSE Main Market, the mezzanine debt
financing component of a £1.6bn fully funded take-private bid for pub company Punch Taverns
plc in 2016 and the 2018 acquisition of a £180m debt position in Interserve plc and worked on the
subsequent restructuring, de-listing and equitisation alongside Cerberus, Davidson Kempner &
Angelo Gordon.
Gareth Maitland Edwards, Non-Executive Director
Committee Membership: Audit Committee, Remuneration Committee (Chairman),
Gareth is a qualified solicitor and was previously a partner at law firm Pinsent Masons LLP, where
he held both the positions of Global Head of Corporate and International Development Partner.
He is currently a strategic consultant and an Executive Director of London Bridge Capital
Limited, an FCA authorised corporate finance boutique. He has significant public markets
experience and is Chairman of Honye Financial Services Limited and Senior Independent
Director of Alina Holdings plc (previously known as The Local Shopping REIT plc) and Anemoi
International Limited, which are all quoted on the London Stock Exchange; and he also brings
significant AIM experience to the Board, having acted on the AIM Disciplinary and Appeals
Committee until 2017 and is currently a Non-Executive Director of AIM quoted Various Eateries
plc and Chairman of Nightcap plc.
Philip Barry, Non-Executive Director
Philip (“Phil”) is a co-founder of FXPress. Having worked previously in both the financial and
property sectors, Phil moved to Monaco in 2006 to work with John Paul Thwaytes, another co-
founder of FXPress, to help manage the foreign exchange exposure of a company portfolio. In
2010, Phil, together with Bill Newton and John Paul Thwaytes founded FXPress.
Annual Report and Accounts 2020
16
Corporate Governance Report
The Board recognises the importance of
sound corporate governance and the Group
has adopted
the Quoted Companies
(QCA
Alliance Corporate Governance
Code). The Board considers that the Group
complies with the QCA Code in all respects,
and details of its compliance can be found
on the Corporate Governance page of
Cornerstone’s website.
The Board
is
for
responsible
The Board
the
management of the business of the Group,
setting the strategic direction of the Group
and establishing the policies of the Group. It
is the Board’s responsibility to oversee the
financial position of the Group and monitor
its business and affairs on behalf of the
shareholders, to whom the Directors are
accountable. The primary duty of the Board
is to act in the best interests of the Group at
all times. The Board will also address issues
relating to internal control and the Group’s
approach to risk management.
The Group will hold board meetings monthly
and whenever issues arise which require the
urgent attention of the Board.
Processes are in place to ensure that each
Director is, at all times, provided with such
information as is necessary for them to
discharge their duties.
The Board has adopted Terms of Reference,
which have a clear and specific schedule of
matters reserved for the Board, including
corporate governance, strategy, major
investments, financial reporting and internal
controls.
Board Directors
The Board comprises
two Executive
Directors, a Non-Executive Chairman and
four Non-Executive Directors of which two
(Glyn Barker and Daniel Mackinnon) are
independent. The Board
deemed to be
GOVERNANCE
considers
that Glyn and Daniel are
independent in character and judgement
and that there are no business or other
relationships likely to affect, or which could
appear to effect, their judgement. The Board
believes that it has an appropriate balance
of sector, financial and public markets skills
and experience, an appropriate balance of
personal qualities and capabilities and an
appropriate balance between executive
and non-executive directors.
The Non-Executive Directors are expected
to devote at least two days per month to the
affairs of the Group and such additional
time as may be necessary to fulfil their roles.
Brief biographical details of each of the
Directors are set out
in the Board of
Directors section on pages 15-16.
Board Committees
The Group has established a remuneration
committee (the “Remuneration Committee”)
and an audit committee
(the “Audit
Committee”) with formally delegated duties
and responsibilities.
The Remuneration Committee comprises
Gareth Edwards as Chairman, Glyn Barker,
Dan Mackinnon and Elliott Mannis, and
meets not less than twice each year. The
committee is responsible for the review and
recommendation of the scale and structure
of remuneration for senior management,
including any bonus arrangements or the
award of share options with due regard to
the interests of the shareholders and the
performance of the Group.
The Audit Committee comprises Glyn Barker
as Chairman, Dan Mackinnon, Gareth
Edwards and Elliott Mannis and meets not
less than twice a year. The committee is
responsible for making recommendations to
the Board on the appointment of auditors
and the audit fee and for ensuring that the
is
financial performance of the Group
In
properly monitored and
reported.
Annual Report and Accounts 2020
17
addition, the Audit Committee will receive
and review reports from management and
the auditors relating to the interim report,
the annual report and accounts and the
internal control systems of the Group.
Board Effectiveness
review
regularly
The Board will
the
effectiveness of its performance as a unit, as
well as that of its committees, and the
individual Directors and will monitor and
promote a healthy corporate culture.
The Non-Executive Chairman is responsible
for ensuring an effective Board. The Group
intends to establish a formal process for
evaluating the performance of the Board,
the committees and the individual Directors
that
against
members of the Board provide a relevant
and effective contribution.
its objectives
to ensure
Shareholder Engagement
The Group will seek to engage with
shareholders to understand the needs and
the
expectations of all elements of
shareholder base.
The
and
full-year
The Board
is committed to open and
ongoing engagement with the Group’s
shareholders to understand the needs and
expectations of all elements of
the
shareholder
Board will
base.
communicate with shareholders primarily
through the annual report and accounts; the
interim
results
announcements; trading updates (where
required or appropriate); annual general
meetings; the investor relations section of
the Cornerstone website; and, in due course,
the Chief
regular meetings between
Executive Officer, Chief Financial Officer
and institutional investors and analysts to
ensure that the Group’s strategy, financials
are
business
and
communicated effectively.
developments
GOVERNANCE
relations by its financial PR adviser, Luther
Pendragon.
Stakeholders
The Board believes that its stakeholders
(other than shareholders) are its employees,
its customers and its counterparties. In order
to understand their needs, interests and
expectations, the Group will work directly
and closely with customers, counterparties
and staff to enhance its products and
software platform to provide the best FX
trading experience.
its corporate social
The Group takes
responsibilities seriously and is focused on
maintaining effective working relationships
across a wide range of stakeholders,
including employees, existing and new
direct
other
intermediaries and professional advisers
that it collaborates with as part of its
business strategy, in order to achieve long-
term success.
Introducers,
customers,
The Executive Directors will maintain an
ongoing dialogue with stakeholders to
inform strategy and the day-to-day running
of the business.
Share Dealing Code
The Group has adopted and operates a
share dealing code governing the share
dealings of the Directors and applicable
employees with a view
to ensuring
compliance with
the AIM Rules. The
Directors consider that this share dealing
code is appropriate for a company whose
shares are admitted to trading on AIM. The
Group
to ensure
compliance by the Directors and applicable
employees with the terms of the share
dealing code and the relevant provisions of
the AIM Rules.
takes proper steps
Annual General Meeting
The Chief Financial Officer is the primary
contact for shareholders and there is a
dedicated contact facility for shareholder
questions and comments. The Group
is
its shareholder
supported
in managing
The next Annual General Meeting of the
Group will be held at 11.00am on Wednesday
30 June 2021 at the Group’s head office at 1
Poultry, London EC2R 8EJ. In view of the
ongoing COVID-19 pandemic and the
Annual Report and Accounts 2020
18
GOVERNANCE
uncertainty regarding restrictions on travel
and public gatherings, the Directors have
decided
that shareholders will not be
permitted to attend the AGM in person. The
Board remains committed to shareholder
engagement and participation, and therefore
shareholders will be able to access the meeting
via teleconference link. Further details can be
found in the Notice of AGM that has been
published on the Group’s website.
Annual Report and Accounts 2020
19
Section 172 Statement
Section 172 of the Companies Act 2006
requires each Director of the Group to act in
the way he or she considers, in good faith,
would most likely promote the success of the
Group for the benefit of its members as a
whole. In this way, 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
Group’s employees; need to foster the
Group’s
relationships with
suppliers, customers and other material
stakeholders;
the Group’s
impact of
operations on local communities and the
environment; desirability of the Group
maintaining a reputation for high standards
of business conduct; and need to act fairly
between members of
In
discharging its Section 172 duties, the Board
has considered the factors set out above
and the views of key stakeholders.
the Group.
business
Details of the key stakeholder engagement
undertaken, and intended, by the Group to
inform decision-making and enhance Board
understanding are set out below.
Customers
The Directors engage with direct customers
on an informal basis to ensure that the
Group’s quality, efficiency and service levels
meet both the standard expected by the
customer and the very high standards the
Group sets for itself.
GOVERNANCE
Employees
The Directors intend to engage regularly
with employees and maintain an open
dialogue. Due to the small size of the Group’s
current workforce,
is currently
conducted on an ad hoc basis, but the
Directors intend to implement a formal
structure as the team expands.
this
Counterparties, white label partners and
introducers
The Group operates an extensive network of
white
introducing broker
relationships and there is a regular and
these business
ongoing dialogue with
partners, proportional to their scale and
importance to the Group.
label and
The Group’s principal counterparties, such
as its liquidity provider, Velocity, are some of
its
stakeholder
relationships and the Directors aim to have
regular interaction with these partners.
standing
longest
Investors
The Board
is committed to open and
ongoing engagement with the Group’s
shareholders to understand the needs and
expectations of all elements of
the
shareholder
Board will
base.
communicate with shareholders primarily
through the annual report and accounts,
announcements issued via the Regulatory
News Service and the Annual General
Meeting. There is a dedicated contact
facility
for shareholder questions and
comments on the website.
The
Annual Report and Accounts 2020
20
Audit Committee Report
Dear shareholder,
I am pleased to present Cornerstone’s
maiden Audit Committee report following
our IPO in April 2021. The year under review
in this annual report covers a period prior to
the establishment of the Audit Committee,
however I wish to take this opportunity to
introduce you to the members of the
committee and our role going forward.
Membership and meetings
The members of the Audit Committee are:
• Glyn Barker (Chairman), Independent
Non-Executive Director
• Elliott Mannis, Non-Executive
Chairman
• Gareth Edwards, Non-Executive
Director
• Daniel Mackinnon, Independent Non-
Executive Director
The Audit Committee members, which
include our two Independent Non-Executive
Directors, bring a wealth of
relevant
financial, commercial and capital markets
experience.
In particular, Elliott Mannis
qualified as a Chartered Accountant with
Price Waterhouse in Canada and was Group
Finance Director at AWG, the FTSE 250
holding company for Anglian Water, and I
had a 35-year career with PwC, holding a
number of senior posts including Managing
Partner and Head of Assurance. Further
biographical details can be found in the
Board of Directors section on pages 15-16.
intervals
The Audit Committee will meet at least twice
a year at appropriate
in the
financial reporting and audit cycle and
otherwise as required. Only members of the
committee have the right to attend the
meetings. However, the Chief Financial
Officer and external audit lead partner will
be invited to attend on a regular basis and
other non-members may be invited to attend
as and when appropriate and necessary.
GOVERNANCE
The Company Secretary is secretary to the
Audit Committee.
Governance and effectiveness
Outside of the formal meeting programme,
the Chairman of the Audit Committee and,
as appropriate,
the other committee
members, will maintain a dialogue with key
the Group’s
individuals
governance, including the Chairman of the
Board (who is a member of the committee),
the Chief Executive, the Chief Financial
Officer and the external audit lead partner.
involved
in
its duties
The committee undertakes
in
accordance with its terms of reference,
which will be reviewed at least annually to
ensure that they remain fit for purpose and in
line with best practice guidelines. The
committee will arrange for periodic reviews
is
of
operating at maximum effectiveness.
its own performance to ensure
it
Responsibilities and activities
services,
in a way that
The Audit Committee’s responsibility is to
ensure that financial information published
by the Group properly presents its activities
is fair,
to stakeholders
balanced and understandable. The Audit
Committee oversees the effective delivery
of audit
including making
recommendations to the Board on the
appointment of auditors and the audit fee.
In addition, the Audit Committee supports
the Board in meeting its responsibilities in
respect of overseeing the Group’s internal
control systems, business risk management,
arrangements
for whistleblowing and
related compliance issues.
As noted above, going forward we will also
report in the Group’s Annual Report on our
activities during the year under review. This
include, among other matters, an
will
explanation of how the Audit Committee
has addressed the effectiveness of the
Annual Report and Accounts 2020
21
external audit process; the significant issues
that the committee considered in relation to
the financial statements; and how these
issues were addressed.
Since its establishment in March 2021, the
Audit Committee has met to approve the
appointment of Haysmacintyre LLP as
auditor and to approve this Annual Report
and financial statements. In its advisory
capacity, the Audit Committee confirmed to
the Board that, based on its review of the
Annual Report and financial statements and
internal
the
disclosures, the Annual Report and financial
statements, taken as a whole, are fair,
balanced and understandable, and provide
necessary information for shareholders to
assess
and
its business model and
performance,
strategy.
the Group’s
controls
position
support
that
Risk management and internal controls
review
internal control and
In supporting the Board in maintaining an
effective internal control environment, the
Audit Committee will keep under review the
Group’s internal financial controls systems
risk
and other
management
the
systems;
methodology for reporting risk to the Board;
set triggers for reporting and escalation of
significant emerging
the
adequacy and security of the Group’s
its employees and
arrangements
in
concerns,
contractors
confidence, about possible wrongdoing in
financial reporting or other matters; and
review the Group’s procedures for detecting
fraud and preventing bribery and receive
reports on non-compliance.
review
risks;
raise
for
to
GOVERNANCE
intend to review the risk register regularly
throughout the year.
is subject to
In providing foreign exchange services to its
clients, the Group
legal
requirements to deter and detect financial
crime and
is required to maintain a
framework with appropriate mitigation
measures and control mechanisms
to
manage the operational and security risks
relating to the payment services it provides.
Accordingly, the Group has implemented
policies, controls and procedures
to
mitigate and effectively manage the risks of
money laundering and terrorist financing.
The Group conducts reviews of its anti-
money
using
specialist third party compliance experts,
with the most recent compliance audit
concluding in May 2020. The Group is also
required to submit regular reports to the FCA
on a range of subject matters in this regard.
compliance
laundering
Further details of the Group’s financial risk
management are set out under note 16 to the
financial statements.
Internal audit
audit
function.
At present, the Group does not have an
internal
The Audit
Committee believes that, owing to the
Group’s size, management is able to derive
assurance as
the adequacy and
effectiveness of internal controls and risk
management procedures without an
internal audit function. However, the Audit
Committee will keep under review the need
for an internal audit function as the business
develops.
to
The Group has established a risk framework
including a risk register that is managed by
the Chief Financial Officer and
risk
management policies,
including anti-
bribery, corruption, anti-money laundering
and financial crime, financial risk, fraud,
information
security
policies. The risk register is intended to be
signed off annually by the Board and
included in the Annual Report. The Chief
Executive Officer and the Audit Committee
technology and
External auditor and independence
Haysmacintyre LLP were appointed as
external auditor in April 2021 following a
competitive tender process. The auditor
confirmed its independence as auditor of
the Group through written confirmation to
the Group, and the Audit Committee
monitors the relationship to ensure that
auditor independence and objectivity are
maintained.
Annual Report and Accounts 2020
22
GOVERNANCE
A summary of fees paid to the external
auditor, including the breakdown between
fees for audit and non-audit services, is set
out in note 2 to the financial statements.
Glyn Barker
Audit Committee Chairman
7 June 2021
Annual Report and Accounts 2020
23
Directors’ Remuneration Report
GOVERNANCE
The Remuneration Committee presents its
report on Directors’ remuneration for the
year ended 31 December 2020. The
disclosures comply with the requirement of
the Companies Act 2006, the Corporate
Governance Code
the Quoted
Companies Alliance and applicable AIM
Rules.
of
Remuneration Committee
The Remuneration Committee was
established in March 2021 in preparation for
the Group’s IPO. Its members are:
• Gareth Edwards (Chairman), Non-
Executive Director
• Elliott Mannis, Non-Executive
Chairman
• Glyn Barker, Independent Non-
Executive Director
• Daniel Mackinnon, Independent Non-
Executive Director
for
the
and
review
Directors
The Remuneration Committee will meet at
least twice each year. The committee is
and
responsible
recommendation of the scale and structure
of remuneration for the Chairman, the
senior
Executive
bonus
including
management,
arrangements or the award of share options
with due regard to the interests of the
shareholders and the performance of the
Group. The remuneration of the Non-
Executive Directors is a matter for the Board
or the shareholders (within the limits set in
the articles of association). No director or
senior manager shall be involved in any
decisions as to their own remuneration.
any
Service Agreements
The Executive Directors are employed under
service agreements that are subject to
notice periods, for both the Group and the
individual, of nine months for the Chief
Executive Officer and six months for the
Chief Financial Officer. Their service
agreements
include standard summary
termination provisions and post termination
restrictive covenants that apply for nine and
six months for the Chief Executive Officer
and Chief Financial Officer respectively.
The Executive Directors are entitled to
receive an annual salary of £180,000 and
£140,000 for the Chief Executive Officer and
the Chief Financial Officer respectively, with
an entitlement to a pension contribution and
discretionary bonus.
In addition, the Group has entered into
agreements with the Executive Directors to
make an annual grant of options equal to
5% and 1.5%, for the Chief Executive Officer
and Chief Financial Officer respectively, of
any increase in the fully diluted capital of
the Company which has occurred in the 12
months immediately prior to the date of
grant to be exercisable at a price equal to
the average mid-market closing price of the
Ordinary Shares over the relevant 12-month
period.
Letters of Appointment
Non-Executive Directors are appointed
under a letter of appointment with the
Director
Non-Executive
Group.
appointments are subject to notice periods
of three months for either the Group or the
individual.
The Chairman will receive a fee of £50,000
per annum and is entitled to an annual
payment of £28,000 payable through the
allotment of Ordinary Shares priced at the
average mid-market closing price for the
ten business days prior to such payment
the audited
Following
being made.
the Group
turnover of
consolidated
exceeding £8 million, the Chairman will
become entitled to receive a fee of £65,000
per annum and his entitlement to payment
in shares will be £37,000 per annum.
Annual Report and Accounts 2020
24
The Non-Executive Directors (excluding the
Chairman) will receive a fee of £35,000 per
annum and is entitled to an annual payment
of £20,000 payable through the allotment of
Ordinary Shares priced at the average mid-
market closing price for the ten business
days prior to such payment being made.
Directors’ Remuneration
GOVERNANCE
Following the audited consolidated turnover
of the Group exceeding £8 million, the Non-
Executive Directors will become entitled to
receive a fee of £50,000 per annum and their
entitlement to payment in shares will be
£28,000 per annum.
The following table details the Directors’ remuneration for the years ended 31 December 2020
and 2019:
Salary/
Fees
£
Bonus
£
Pension
£
Benefits
£
Executive Directors
Julian Wheatland, CEO1
85,000
Judy Happe, CFO2
22,436
Non-Executive Directors
Elliott Mannis, Chairman3
Glyn Barker3
Gareth Edwards4
Daniel Mackinnon3
-
-
-
-
Philip Barry5
9,350
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2020
£
85,000
22,436
-
-
-
-
9,350
Total
2019
£
-
-
-
-
-
-
-
1. Appointed as a director of Cornerstone Brands Ltd on 22 July 2020. Service agreement with
Cornerstone FS plc effective 1 October 2020.
2. Appointed 4 November 2020.
3. Appointment effective 6 April 2021.
4. Appointed as a director of Cornerstone Brands Ltd on 22 July 2020. Appointment as a Non-Executive
Director of Cornerstone FS plc effective as of 6 April 2021.
5. Philip Barry was a director of FXPress prior to its acquisition by Cornerstone on 9 September 2020 and
he was paid £58,000 in fees during 2020 (9 months ended 31 December 2019: £21,000), of which £9,350
covered the post-acquisition period. Mr Barry’s appointment as a Non-Executive Director of
Cornerstone became effective 6 April 2021.
In addition to the above, a share-based compensation charge of £20,088 was recognised in the
year ended 31 December 2020 in respect of options granted to Directors (as disclosed in the
following Directors’ Interests paragraph). The charge represents the fair value of options at the
date of grant, recognised over the vesting period and comprised £15,452 in respect of Julian
Wheatland and £4,636 in respect of Judy Happe.
Social security costs of £9,453 were incurred in respect of the Directors’ remuneration listed above.
Annual Report and Accounts 2020
25
GOVERNANCE
Directors’ Interests
During the year to 31 December 2020, the Group granted to directors the following options over
ordinary shares:
Date of grant
Number of
options
Earliest date of
vesting
Exercise price
Julian Wheatland, CEO
2 December 2020
922,677
2 December 2021
50 pence
Judy Happe, CFO
2 December 2020
276,803
2 December 2021
50 pence
The Group also agreed to make an annual grant of additional options to Julian Wheatland and
Judy Happe equal to 5% and 1.5% respectively of any increase in the fully diluted capital of the
Group which has occurred in the 12 months immediately prior to the date of grant to be
exercisable at a price equal to the average mid-market closing price of the ordinary shares over
the relevant 12-month period.
No other options are held by Directors.
As at the date of publication of this Annual Report, the interests of the Directors in the share
capital of the Group were as follows:
Number of ordinary
shares
Percentage of issued
share capital
Executive Directors
Julian Wheatland, CEO
Judy Happe, CFO
Non-Executive Directors
Elliott Mannis, Chairman
Glyn Barker
Gareth Edwards
Daniel Mackinnon
Philip Barry*
24,593
8,196
199,852
22,728
327,952
0
3,561,922
0.12
0.04
0.99
0.11
1.62
0
17.57
* Philip Barry’s holding includes 356,173 ordinary shares of which he is not the beneficial holder.
Annual Report and Accounts 2020
26
Directors’ Report
audited
The Directors present their annual report
and
financial
statements for the year ended 31 December
2020.
consolidated
Principal Activities
Cornerstone FS plc provides international
payment, currency risk management and
electronic account services using
its
proprietary cloud-based multi-currency
payments platform. The Group primarily
provides these services, on a white label
SaaS basis via third-party aggregators, to
SMEs that engage in international trade. A
minority of the Group’s revenue is derived
from servicing clients directly and from high-
net worth individuals. The business also
provides same currency payment services
liquidity
for
services to other foreign exchange brokers.
its customers and provides
Business Review and Results
The review of the Group’s business, strategy,
principal risks and uncertainties and outlook
are included in the Strategic Report section
on pages 2-14. The consolidated financial
statements for the year ended 31 December
2020 are set out on pages 38-67. The
Group’s loss after taxation for the year was
£2.2 million.
Dividends
The Directors do not recommend the
payment of a dividend for 2020. The
Directors do not anticipate paying dividends
for at least two years following the IPO to
enable the Group to focus and apply its
resources to growth, both organically and
through acquisition.
Directors
The following Directors held office during
the year and up to the date of the approval
of these financial statements (unless as
otherwise indicated):
GOVERNANCE
•
•
Elliott Mannis (appointment effective 6
April 2021)
Julian Wheatland (appointed as a director
of Cornerstone Brands Ltd on 22 July 2020;
service agreement with Cornerstone FS plc
effective 1 October 2020)
• Judy Happe (appointed 4 November 2020)
• Glyn Barker (appointment effective 6 April
2021)
• Gareth Edwards (appointed as a director
of Cornerstone Brands Ltd on 22 July 2020;
appointment as a Non-Executive Director of
Cornerstone FS plc effective 6 April 2021)
• Daniel Mackinnon (appointment effective
6 April 2021)
• Philip Barry (appointment effective 6 April
2021)
Biographies of the Directors, including their
Board committee memberships, are set out
on pages 15-16. Details of the Directors’
remuneration and their interests in the share
capital of the Group can be found in the
Directors’ Remuneration Report on pages
24-26.
Directors’ Indemnity
All Directors and officers of the Group have
the benefit of the
indemnity provision
contained
the Group’s Articles of
Association. The Group also has Directors’
and Officers’ liability insurance in respect of
itself and its directors and officers.
in
Share Capital
is a public
incorporated
limited
Cornerstone FS plc
company
in England and
Wales and its shares are quoted on the AIM
market of the London Stock Exchange. As at
the date of approval of this Directors’
Report, the outstanding issued share capital
of the Group comprised 20,277,582 ordinary
shares of £0.01 each. There are no shares
held
in treasury. Further detail on the
Group’s share capital can be found in note
14 to the financial statements.
Annual Report and Accounts 2020
27
Significant Shareholders
As at the date of approval of this Directors’ Report, to the best of the Group’s knowledge, the
following shareholders had a significant interest in the Group’s issued share capital:
GOVERNANCE
Number of shares
% of issued share capital
Name
Philip Barry*
William Newton**
Stephen Flynn
John Paul Thwaytes
Robert Lee
Terence Everson
3,561,922
2,530,787
2,435,442
1,605,569
1,426,635
773,690
Vela Technologies plc
645,902
David Ryan***
622,000
17.57
12.48
12.01
7.92
7.04
3.82
3.19
3.07
* Philip Barry’s holding includes 356,173 ordinary shares of which he is not the beneficial owner
** William Newton’s holding includes 81,967 ordinary shares registered in the name of his wife
*** David Ryan’s holding includes 270,000 ordinary shares registered in the name of his wife
Subsequent Events
On 26 February 2021, 24,326 Ordinary Shares
were issued at a price of £0.407 each on the
exercise of warrants.
On 17 March 2021, the Company and William
Newton entered into a facility to borrow
£350,000 from William Newton at any time
until 31 December 2023 on not less than 20
Business Days’ notice in consideration of the
Company issuing William Newton with 6%
unsecured convertible loan notes 2024.
On 25 March 2021, the Company and Robert
Lee entered
into a facility to borrow
£100,000 from Robert Lee at any time until 31
December 2023 on not less than 20 Business
in consideration of
Days’ notice
the
Company
issuing Robert Lee with 6%
unsecured convertible loan notes 2024. A
drawdown notice was issued to Mr Lee on 17
May 2021 requesting payment of the
£100,000 loan by 14 June 2021.
loan notes 2024 bear
The convertible
interest at the rate of 6% per annum and will
be redeemable on the occurrence of usual
events of default and, in any event, on 31
March 2024. They may be converted in
tranches of £50,000 at a subscription price
of 61 pence per share at any time until a
redemption notice is served.
On 6 April 2021 the Company was admitted
to AIM, London Stock Exchange's market for
small and medium size growth companies.
The Company placed 3,664,648 new
ordinary shares at a price of 61 pence per
ordinary share, raising gross proceeds of
£2,235,435. The shares sold under the
placing represent approximately 18 per cent
of the Company's issued share capital. In
listing,
connection with the Company’s
63,114 warrants were
the
Company’s broker, Peterhouse Capital
Limited, on 6 April 2021 with an exercise
price of 61 pence per share and expiry date
of 6 April 2023.
issued
to
There are no other events subsequent to the
balance sheet date that require disclosure in
these financial statements.
Annual Report and Accounts 2020
28
Financial Instruments
Disclosures regarding financial instruments
are provided in note 16 to the financial
statements.
Donations
The Group did not make any political or
charitable donations during the year.
Corporate Governance
review of
A
the Group’s corporate
governance is provided in the Corporate
Governance Report on pages 17-19.
Stakeholder Engagement
Details of the Group’s engagement with
stakeholders can be found in the Section 172
Statement on page 20 and in the Corporate
Governance Report on pages 17-19.
Auditor
Haysmacintyre LLP have expressed their
willingness to continue in office as auditor. A
resolution to reappoint Haysmacintyre as
the Group’s auditor will be proposed at the
Annual General Meeting on Wednesday 30
June 2021.
Disclosure of Information to Auditor
The Directors who held office at the date of
approval of this Directors’ Report confirm
that, so far as they are each aware, there is
no relevant audit information of which the
Group’s auditors are unaware; and each
Director has taken all the steps they might
reasonably be to have taken as a Director to
make themselves aware of any relevant
audit information and to establish that the
Group’s auditor is aware of that information.
Going Concern
During the year ended 31 December 2020,
the Group made a loss of £2,154,698, which
has resulted in the balance sheet showing a
net liabilities position of £135,923. Post year-
end,
the Group’s balance sheet was
strengthened with the raising of gross
GOVERNANCE
proceeds of £2.2m via a placing of new
ordinary shares following the Company’s
admission to AIM. The Group also has
access to £0.45m in convertible loan note
facilities.
The Directors have prepared a cash flow
forecast covering a period extending 24
months from 31 December 2020. The
Directors have taken
into account the
placing proceeds mentioned above, the
historical growth and the inherent risks and
uncertainties facing the Group’s business,
and have derived forecast assumptions that
are their best estimate of the future
development of Group’s business. The
Directors have also run various scenario
planning forecasts alongside their best-
estimate forecast assumptions which all
to
indicate sufficient cash
continue to finance the Group’s working
capital requirements over the forecast
period.
resources
The Directors are mindful of COVID-19 and
the impact that this has had on operations is
discussed further in note 20. The Board have
reviewed forecasts in light of this and do not
consider
to be any material
uncertainties pertaining to the Group’s
ability to discharge its liabilities as they
arise.
there
For these reasons, the Directors continue to
the going concern basis of
adopt
the Group’s
accounting
financial statements.
in preparing
Statement of Directors’ Responsibilities
The Directors are responsible for preparing
the Strategic Report, the Directors’ Report
and the financial statements in accordance
with applicable law and regulations.
Company
law requires the Directors to
prepare Group and Company financial
statements for each financial year. The
Directors are required by the AIM Rules of
the London Stock Exchange to prepare
Group financial statements in accordance
International Financial Reporting
with
Standards
(“IFRS”) as adopted by the
European Union (“EU”) and have elected
Annual Report and Accounts 2020
29
the
under company
Company
in
accordance with IFRS as adopted by the EU.
to prepare
statements
law
financial
The financial statements are required by law
and IFRS adopted by the EU to present fairly
the financial position and performance of
the Group and Company; the Companies
Act 2006 provides
in relation to such
financial statements that references in the
relevant part of that Act to financial
statements giving a true and fair view are
references
fair
presentation.
their achieving a
to
Under company law the 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 the Company and of the profit or loss of
the Group for that period.
In preparing each of the Group and
the
Company
Directors are required to:
statements,
financial
•
select suitable accounting policies and
then apply them consistently;
• make
judgements and accounting
estimates that are reasonable and
prudent;
state whether they have been prepared
in accordance with IFRS adopted by the
EU; and
•
GOVERNANCE
inappropriate to presume that the
Group and the Company will continue in
business.
the Company’s
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
transactions and
and
disclose with reasonable accuracy at any
time the financial position of the Group and
the Company and enable them to ensure
that the financial statements comply with
the Companies Act 2006. They are also
responsible for safeguarding the assets of
the Group and the Company and hence for
taking reasonable steps for the prevention
and detection of
fraud and other
irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Group’s website.
Legislation in the United Kingdom governing
the preparation and dissemination of
financial statements may differ
from
legislation in other jurisdictions.
On behalf of the Board
Julian Wheatland
Chief Executive Officer
7 June 2021
• prepare the financial statements on the
is
going concern basis unless
it
Annual Report and Accounts 2020
30
FINANCIAL STATEMENTS
For the year ended 31 December 2020
Annual Report and Accounts 2020
31
FINANCIAL STATEMENTS
Independent Auditor’s Report
TO THE MEMBERS OF CORNERSTONE FS PLC
Opinion
We have audited the financial statements of Cornerstone FS PLC (the “Parent Company”) and its
subsidiaries (the “Group”) for the year ended 31 December 2020 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company
Statement of Financial Position, the Consolidated and Parent Company Statements of Cash
Flows, the Consolidated and Parent Company Statements of Changes in Equity and notes to the
financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 December 2020 and of the Group’s loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European
Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements section of our report. We are
independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
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.
Our audit procedures to evaluate the directors’ assessment of the Group and the Parent
Company’s ability to continue to adopt the going concern basis of accounting included, but were
not limited to:
• Undertaking an initial assessment at the planning stage of the audit to identify events or
conditions that may cast significant doubt on the Group and the Parent’s ability to
continue as a going concern;
• Evaluating the methodology used by the directors to assess the Group and the Parent’s
ability to continue as a going concern;
• Reviewing the directors’ going concern assessment and evaluating the key assumptions
used and judgments applied;
Annual Report and Accounts 2020
32
FINANCIAL STATEMENTS
• Reviewing the liquidity headroom and applying a number of sensitivities to the base
forecast assessment of the directors to ensure there was sufficient headroom to adopt
the going concern basis of accounting;
• Reviewing the appropriateness of the directors’ disclosures in the financial statements.
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 ability to continue as a going concern for a period of at least twelve months from when
the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our 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) we identified. These
matters included 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 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.
Key Audit Matter Description
How the matter was addressed in the audit
Reverse Acquisition accounting in the Group’s
financial statements
On 9 September 2020 the Parent Company
acquired the entire share capital of FXPress
Payment Services Limited (“FXPress”) satisfied by
the issue of 1,401,275,638 ordinary shares for a
consideration of £5,697,773.
The acquisition has been treated as a Reverse
Takeover since following the transaction, 96.42%
of the shares in the Parent Company, were owned
by previous FXPress shareholders.
The Parent Company did not have an existing
trade prior to the transaction and therefore did
in
not meet the definition of a business,
accordance with IFRS 3: “Business Combinations”
(“IFRS 3”)
The transaction could not be considered to be a
business combination and has been treated as a
share-based payment transaction in accordance
with IFRS 2 Share-based Payment (“IFRS 2”)
There is a risk that the accounting treatment does
not follow the requirements of IFRS 2 and IFRS 3.
Our audit work reviewed and considered the
Board’s assessment that the:
•
Transaction was a Reverse Takeover
• Parent Company was not a business prior
to the transaction and therefore the
transaction was
business
combination
not
a
•
Transaction was a share-based payment
within the scope of IFRS 2
We also reviewed the valuation of the share-
based payment of £211,000 and
the
assumptions which underpinned it, as well as
the consolidation adjustments in respect of
the transaction.
Annual Report and Accounts 2020
33
FINANCIAL STATEMENTS
The Board assessed the full details of the
takeover, concluding that the legal acquirer
could not be defined as a business and therefore
the accounting
in
treatment
accordance with IFRS 2 and not IFRS 3.
should be
This has been reflected within the financial
statements.
Valuation of
in
Company’s financial statements
investments
the Parent
How the matter was addressed in the audit
The Parent Company acquired a new subsidiary,
FX Press.
Our audit work considered, but was not
restricted to, the following work:
The Parent Company’s Statement of Financial
Position as at 31 December 2020 includes a total
investment of £6,147,773, in 100% of the ordinary
share capital of FXPress.
There is a risk that this investment might be
overstated within the financial statements.
The Board concluded that there no impairment
required to the carrying value of the investment,
based on their assessment of the forecasted
future cash flows of the business and the
proximity of the acquisition to the year-end.
Since 31 December 2020, the Parent Company
has floated on AIM and raised cash to support its
growth plans.
Our application of materiality
• A review of the calculation of the valuation
of the initial investment in FXPress in line
with the transaction documentation to
ensure that the value had been calculated
correctly.
• A review of the impairment assessment
prepared by the Board in respect of the
carrying value of the investment in FXPress
in accordance with
forecast
performance in all scenarios.
the
• A review of post year-end activity of the
business.
We apply the concept of materiality both in planning and performing our audit, in evaluating the
effect of misstatements and in forming an option. For the purpose of determining whether the
financial statements are free from material misstatement, we define materiality as the
magnitude of a misstatement or an omission from the financial statements, or related
disclosures, that would make it probable that the judgment of a reasonable person, relying on
the information would have been changed or influenced by the misstatement or omission. We
also determine a level of performance materiality, which we used to determine the extent of
testing need, to reduce to an appropriately low level the risk that the aggregate of uncorrected
and undetected misstatement exceeds materiality for the financial statements as a whole.
Annual Report and Accounts 2020
34
FINANCIAL STATEMENTS
The materiality for the Group financial statements as a whole was set at £118,000. This was
determined with reference to a combination of 2% of gross assets of the Parent Company, since
a key performance indicator ("KPI") is the valuation of the business and 5% of the projected
Group loss for the year, the loss being a combination of both the revenue and operating expenses
KPIs in an exceptional year.
On the basis of our risk assessment and review of the Group’s control environment, performance
materiality was set at 75% of materiality, being £88,500.
The reporting threshold to the Audit and Risk Committee was set as 5% of materiality, being
£5,900. If in our opinion differences below this level warranted reporting on qualitative grounds,
these would also be reported.
The materiality for the Parent Company financial statements was set at the same level as noted
above.
On the basis of our risk assessment and review of the Parent Company’s control environment,
performance materiality was set at 75% of materiality, being £88,500 and the reporting threshold
was the same as the Group.
An overview of the scope of our audit
Our audit scope included all components of the Group which are all registered companies in the
United Kingdom. Our assessment of audit risk, our evaluation of materiality and our allocation of
performance materiality determine our audit scope for the Group. This enables us to form an
opinion on the financial statements. We take into account size, risk profile, the organisation of
the Group and the internal control environment when assessing the level of work to be
performed.
Based on our assessment of the accounting processes, the industry in which the Group operates
and the control environment we concluded that it was appropriate to undertake an entirely
substantive audit approach. Our audit procedures included testing of income and expenditure,
assets, liabilities and equities. We have set out how we tested the key audit matters in the Key
Audit Matters section above.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion 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 such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in 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 in this regard.
Annual Report and Accounts 2020
35
FINANCIAL STATEMENTS
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent company and its
environment obtained in the course of the audit, we have not identified material misstatements
in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
•
adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records
and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors 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 Parent 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 Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s 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
auditor’s 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.
Annual Report and Accounts 2020
36
FINANCIAL STATEMENTS
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud.
Based on our understanding of the company and industry, we identified that the principal risks
of non-compliance with laws and regulations related to regulatory requirements for the
Investment advisory business and trade regulations, 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, income tax, payroll tax and sales tax.
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 posting inappropriate journal entries to revenue and management bias in
accounting estimates. Audit procedures performed by the engagement team included:
Inspecting correspondence with regulators and tax authorities;
•
• Discussions with management including consideration of known or suspected instances of
•
•
non-compliance with laws and regulation and fraud;
Evaluating management’s controls designed to prevent and detect irregularities;
Identifying and testing journals, in particular journal entries posted with unusual account
combinations, postings by unusual users or with unusual descriptions; and
• Challenging assumptions and judgments made by management in their critical accounting
estimate.
A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the company's members those matters we are required to state to them in an Auditor's report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Simon Wilks
(Senior Statutory Auditor)
For and on behalf of Haysmacintyre LLP
Statutory Auditors
Date: 7 June 2021
10 Queen Street Place
London
EC4R 1AG
Annual Report and Accounts 2020
37
FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
For the year ended 31 December 2020
REVENUE
Cost of sales
GROSS PROFIT
ADMINISTRATIVE EXPENSES
Share-based compensation
Further adjustments to underlying profit from operations (see below)
Other administrative expenses
TOTAL ADMINISTRATIVE EXPENSES
Underlying loss from operations
Stated after the add back of:
- share-based compensation on reverse acquisition
- other share-based compensation
- transaction costs
LOSS FROM OPERATIONS
Finance and other income
Finance costs
LOSS BEFORE TAX
Income tax expense
LOSS FOR THE YEAR
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
Loss per ordinary share – basic & diluted (pence)
Year
ended
31 December
2020
£
9-month
period ended
31 December
2019
£
Notes
1
1,664,237
(1,167,929)
1,240,938
(702,000)
496,308
538,938
2
14
14
14
2
3
3
6
7
(358,443)
(793,577)
(1,499,589)
-
-
(620,117)
(2,651,609)
(620,117)
(1,003,281)
(81,179)
211,281
147,162
793,577
-
-
-
(2,155,301)
(81,179)
603
-
-
(370)
(2,154,698)
(81,549)
-
________
-
________
(2,154,698)
(81,549)
(2,154,698)
(81,549)
(14.99)
_______
(0.73)
_______
All amounts are derived from continuing operations.
The Notes to the Financial Statements form an integral part of these financial statements.
Annual Report and Accounts 2020
38
FINANCIAL STATEMENTS
Group and Company Statement of Financial Position
As at 31 December 2020
ASSETS
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Investments
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
EQUITY
Share capital
Share premium
Share-based payment reserve
Merger relief reserve
Reverse acquisition reserve
Retained earnings
TOTAL EQUITY
CURRENT LIABILITIES
Trade and other payables
TOTAL EQUITY AND LIABILITIES
Group
31
December
2020
£
Group
31
December
2019
£
Company
31
December
2020
£
Company
31
July
2020
£
Notes
8
9
10
12
14
13
320,972
8,464
-
_______
329,436
570,159
183,675
_______
753,834
_______
1,083,270
_______
165,887
951,422
54,215
5,557,645
(3,140,631)
(3,724,461)
_______
(135,923)
_______
1,219,193
_______
1,083,270
_______
6,076
1,050
-
_______
7,126
355,370
78,265
_______
433,635
_______
440,761
_______
91,559
1,543,988
-
-
-
(1,569,763)
_______
65,784
_______
374,977
_______
440,761
_______
226,278
-
6,147,773
_______
6,374,051
238,810
96,394
_______
335,204
_______
6,709,225
_______
165,887
951,422
54,215
5,557,645
-
(1,083,751)
_______
5,645,418
_______
1,063,837
_______
6,709,255
_______
-
-
100
_______
100
95,000
-
_______
95,000
_______
95,100
_______
286
8,186,967
-
-
-
(8,092,153)
_______
95,100
_______
-
_______
95,100
_______
A separate profit and loss account for the parent company is omitted from the Group financial statements
by virtue of section 408 of the Companies Act 2006. The Company loss for the five-month period ended 31
December 2020 was £1,173,655 (seven-month period ended 31 July 2020: profit of £63,418).
The financial statements were approved by the Board of Directors and authorised for issue on 7 June 2021
and are signed on its behalf by:
Julian Wheatland
Chief Executive Officer
Annual Report and Accounts 2020
39
FINANCIAL STATEMENTS
Group Statement of Changes in Equity
For the year ended 31 December 2020
Balance at 1 April 2019
Issue of shares
Loss and total comprehensive income for the year
Balance at 31 December 2019
Parent company reflected on reverse acquisition
Issue of FXPress Payment Services Ltd shares prior to acquisition
Share-based payments for FXPress Payment Services Ltd shares
prior to acquisition
Costs of raising equity in FXPress Payment Services Ltd
Reverse acquisition adjustment
Issue of shares
Issue of consideration shares
Costs of raising equity
Share-based payments (note 14)
Loss and total comprehensive income for the year
Balance at 31 December 2020
Share capital
£
82,496
Share premium
£
1,146,676
Share-based
payment
reserve
£
-
9,063
-
_______
91,559
5,197
12,037
-
-
(103,596)
20,562
140,128
-
-
-
_______
165,887
_______
397,312
-
_______
1,543,988
-
565,426
-
(50,000)
(2,059,414)
1,007,557
-
(56,135)
-
-
_______
951,422
_______
-
-
_______
-
-
-
92,947
(92,947)
-
-
-
54,215
-
_______
54,215
_______
Merger relief
reserve
£
-
-
-
_______
-
-
-
-
-
-
5,557,645
-
-
-
_______
5,557,645
_______
Reverse
acquisition
reserve
£
-
-
-
_______
-
-
-
-
-
2,557,142
-
(5,697,773)
-
-
-
_______
(3,140,631)
_______
Retained
earnings
£
(1,488,214)
-
(81,549)
_______
(1,569,763)
-
-
-
-
-
-
-
-
-
(2,154,698)
_______
(3,724,461)
_______
Total
£
(259,042)
406,375
(81,549)
_______
65,784
5,197
577,463
92,947
(50,000)
301,185
1,028,119
-
(56,135)
54,215
(2,154,698)
_______
(135,923)
_______
Annual Report and Accounts 2020
40
FINANCIAL STATEMENTS
Company Statement of Changes in Equity
For the five months ended 31 December 2020
Share
capital
£
Share
premium
£
Balance at 1 January 2020
Profit and total comprehensive
income for the period
286
8,186,967
-
-
Balance at 31 July 2020
286
8,186,967
Bonus issues
Capital reduction
Issue of consideration shares
Issue of other shares
Costs of raising equity
Share-based payments
Loss and total comprehensive
income for the period
Balance at 31 December 2020
4,911
-
140,128
20,562
-
-
-
_______
165,887
_______
(4,911)
(8,182,057)
-
1,007,558
(56,135)
-
-
_______
951,422
_______
Share-
based
payment
reserve
£
-
-
-
-
-
-
-
-
54,215
-
_______
54,215
_______
Merger relief
reserve
£
Retained
earnings
£
Total
£
-
-
-
(8,155,571)
31,682
63,418
63,418
(8,092,153)
95,100
-
-
5,557,645
-
-
-
-
8,182,057
-
-
-
-
_______
(1,173,655)
_______
5,557,645
_______
(1,083,751)
_______
-
-
5,697,773
1,028,120
(56,135)
54,215
(1,173,655)
_______
5,645,418
_______
Annual Report and Accounts 2020
41
FINANCIAL STATEMENTS
Group and Company Cash Flow Statement
For the year ended 31 December 2020
Group
Year ended
31 December
2020
Notes
£
Group
9-month
period
ended
31 December
2019
£
Company
5-month
period
ended
31 December
2020
£
Company
7-month
period
ended
31 July 2020
£
(2,154,698)
(81,549)
(1,173,655)
63,418
3
3
14
8,9
(603)
-
358,443
22,270
-
370
-
3,656
(603)
-
54,215
16,638
-
-
-
26,541
(83,297)
(120,731)
(370,302)
800,188
1,000,240
_______
(857,645)
-
_______
(857,645)
96,290
_______
1,069,655
_________
(1,315,279)
_______
(101,964)
(404,052)
(425,132)
-
_______
(101,964)
-
_________
(404,052)
-
_______
(425,132)
9
8
(9,144)
(335,436)
_______
(344,580)
-
-
_______
-
-
(242,916)
_________
(242,916)
-
-
_______
-
14
1,212,032
-
95,000
603
-
_______
1,307,635
406,375
(381,300)
-
-
(370)
_______
24,705
647,759
-
95,000
603
-
__________
743,362
-
-
-
-
_______
-
105,410
(77,259)
96,394
(425,132)
78,265
_______
183,675
425,132
_______
-
===================== ===================== ===================== =====================
-
________
96,394
155,524
_______
78,265
Loss before tax
Adjustments to reconcile profit before tax to
cash generated from operating activities:
Finance income
Finance costs
Share-based compensation
Depreciation and amortisation
(Increase)/decrease in accrued income,
trade and other receivables
Increase/(decrease) in trade and other
payables
Cash used in operations
Income tax paid
Cash used in operating activities
Investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Cash used in investment activities
Financing activities
Shares issued (net of costs)
Repayment of shareholder loans
Loans received
Interest and similar income
Interest and similar charges
Cash generated from financing activities
Increase/(decrease) in cash and cash
equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
Annual Report and Accounts 2020
42
FINANCIAL STATEMENTS
Notes to the Financial Statements
For the year ended 31 December 2020
BASIS OF PREPARATION
Cornerstone FS plc is a public limited company, incorporated and domiciled in England. The Company was
admitted to AIM, London Stock Exchange's market for small and medium size growth companies, on 6 April
2021. The registered office of the Company is The Old Rectory, Addington, Buckingham, England, MK18 2JR,
and its principal business address is 1 Poultry, London, EC2R 8EJ. The main activities are set out in the
Strategic Report on pages 2-14.
These financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (“IFRS”) for the year ended 31 December 2020 and the
comparative 9-month period to 31 December 2019, and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The financial statements have been prepared in sterling,
which is the Group’s presentation currency and the functional currency of each Group entity. They have
been prepared using the historical cost convention except for the measurement of certain financial
instruments.
The parent company accounts have also been prepared in accordance with IFRS and using the historical
cost convention. The accounting policies set out below have been applied consistently to the parent
company where applicable.
Monetary amounts in these financial statements are rounded to the nearest pound.
The preparation of the financial statements requires management to make estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities at the date of the financial statements. If in the future such estimates and assumptions, which are
based on management’s best judgement at the date of the financial statements, deviate from the actual
circumstances, the original estimates and assumptions will be modified as appropriate in the year in which
the circumstances change.
NEW STANDARDS AND INTERPRETATIONS
As of the date of approval of these financial statements, the following Standards and Interpretations which
have not been applied in these financial statements were in issue but not yet effective:
•
•
IFRS 17 Insurance Contracts (effective p/c on or after 1 January 2021).
Amendments to IAS 1, presentation of financial statements on classification of liabilities
(effective p/c on or after 1 January 2022).
Some of these standards and amendments have not yet been endorsed by the EU which may cause their
effective dates to change.
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have
no material impact on the financial statements of the Group. The Group does not intend to apply any of
these pronouncements early.
IMPACT OF NEW INTERNATIONAL REPORTING STANDARDS, AMENDMENTS AND INTERPRETATIONS
The following Standards and Interpretations have been considered and applied in these financial
statements:
•
•
•
•
IFRIC 23 Uncertainty over Income Tax Positions
Amendments to IFRS 9 Prepayment Features with Negative Compensation
Amendments to IAS 28 Long-term interests in Associates and Joint Ventures
IFRS 16 Leases
Annual Report and Accounts 2020
43
FINANCIAL STATEMENTS
There has been no material impact on the financial statements as a result of adopting these Standards and
Interpretations.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and its
subsidiary undertakings. Entities are accounted for as subsidiary undertakings when the Group is exposed
to or has rights to variable returns through its involvement with the entity and it has the ability to affect
those returns through its power over the entity.
Details of subsidiary undertakings and % shareholding:
-
FXPress Payment Services Ltd
-
Avila House Limited
-
CS Commercial Limited
Cornerstone EBT Trustee Limited -
100% owned by the Company
100% owned by FXPress Payment Services Ltd
100% owned by the Company
100% owned by the Company
All subsidiary undertakings have an accounting reference date ended 31 December.
Although the consolidated financial information has been issued in the name of Cornerstone FS plc
(“Cornerstone”), the legal parent, it represents in substance continuation of the financial information of the
primary legal subsidiary, FXPress Payment Services Ltd.
The assets and liabilities of the primary legal subsidiary are recognised and measured in the consolidated
financial statements at the pre-combination carrying amounts and not re-stated at fair value.
The retained earnings and reserves balances recognised in the consolidated financial statements reflect
the retained earnings and other reserves of the primary legal subsidiary immediately before the business
combination and the results of the period from 1 January 2020 to the date of the business combination are
those of the primary legal subsidiary only.
As FXPress Payment Services Ltd reversed into Cornerstone when Cornerstone did not have an existing
trade, the transaction cannot be considered a business combination, as at the time of the reverse takeover,
Cornerstone did not meet the definition of a business, under IFRS 3 “Business Combinations”. As the
transaction is capital in nature and completed through the issue of shares, it falls within the scope of IFRS 2
‘Share-based payments’. Any difference in the fair value of shares deemed to be issued by the legal
subsidiary (FXPress Payment Services Ltd) and the fair value of net identifiable assets in the legal parent
(Cornerstone FS plc) forms part of the deemed cost of acquisition.
GOING CONCERN
During the year ended 31 December 2020, the Group made a loss of £2,154,698, which has resulted in the
balance sheet showing a net liabilities position of £135,923. Post year-end, the Group’s balance sheet was
strengthened with the raising of gross proceeds of £2.2m via a placing of new ordinary shares following the
Company’s admission to AIM. The Group also has access to £450,000 in convertible loan note facilities.
The Directors have prepared a cash flow forecast covering a period extending 24 months from 31 December
2020. The Directors have taken into account the placing proceeds mentioned above, the historical growth
and the inherent risks and uncertainties facing the Group’s business, and have derived forecast
assumptions that are their best estimate of the future development of Group’s business. The Directors have
also run various scenario planning forecasts alongside their best-estimate forecast assumptions, which all
indicate sufficient cash resources to continue to finance the Group’s working capital requirements over the
forecast period.
The Directors are mindful of COVID-19 and the impact that this has had on operations is discussed further
in note 20. The Board have reviewed forecasts in light of this and do not consider there to be any material
uncertainties pertaining to the Group’s ability to discharge its liabilities as they arise.
For these reasons, the Directors continue to adopt the going concern basis of accounting in preparing the
Group’s financial statements.
Annual Report and Accounts 2020
44
FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE
The Group applies IFRS 15 Revenue from Contracts with Customers for the recognition of revenue. IFRS 15
established a comprehensive framework for determining whether, how much and when revenue is
recognised. It affects the timing and recognition of revenue items, but not generally the overall amount
recognised.
The performance obligations of the Group’s revenue streams are satisfied on the transaction date or by the
provision of the service for the period described in the contract. Revenue is not recognised where there is
evidence to suggest that customers do not have the ability or intention to pay. The Group does not have
any contracts with customers where the performance obligations have not been fully satisfied.
The Group derives revenue from the provision of foreign exchange and payment services. When a contract
with a client is entered into, it immediately enters into a separate matched contract with its institutional
counterparty.
Spot and forward revenue is recognised when a binding contract is entered into by a client and the rate is
fixed and determined. Revenue represents the difference between the rate offered to clients and the rate
received from its institutional counterparties.
INVESTMENTS
Investments in subsidiary undertakings are accounted for at cost less impairment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the Group Statement of Financial Position when
the Group has become a party to the contractual provisions of the instrument.
Derivative financial instruments
Derivative financial assets and liabilities are carried as assets when their fair value is positive and as
liabilities when their fair value is negative. Changes in the fair value of derivatives are included in the income
statement. The Group’s derivative financial assets and liabilities at fair value through profit or loss comprise
solely of forward foreign exchange contracts.
Trade, loan and other receivables
Trade and loan receivables are initially measured at their transaction price. Trade and loan receivables
are held to collect the contractual cash flows which are solely payments of principal and interest.
Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate
method. The Directors have considered the impact of discounting trade and loan receivables whose
settlement may be deferred for lengthy periods and concluded that the impact would not be material.
An impairment loss is recognised for the expected credit losses on trade and loan receivables when there
is an increased probability that the counterparty will be unable to settle an instrument’s contractual cash
flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying
amount of the receivable and are recognised in profit or loss.
Trade payables
Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective
interest method.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
An instrument will be classified as a financial liability when there is a contractual obligation to deliver cash
or another financial asset to another enterprise.
Annual Report and Accounts 2020
45
FINANCIAL STATEMENTS
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of any outstanding bank overdraft which is integral to the Group’s cash
management.
INTANGIBLE ASSETS
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised
to the extent that it is probable that the expected future economic benefits attributable to the asset will
flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it
is separable or when it arises from contractual or other legal rights.
Amortisation is charged on a straight-line basis through the profit or loss within administrative expenses.
The rates applicable, which represent the Directors’ best estimate of the useful economic life, are as follows:
Internally developed software
Software costs
Other intangible assets
– 3 years
– 3 years
– 3 years (no charge in the first period of ownership)
PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment is initially recorded at cost and is subsequently measured at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation, which is charged through the profit or loss within administrative expenses, is provided at rates
calculated to write off the cost less residual value of each asset over its expected useful life, as follows:
Computer equipment
- 25% straight line
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
PROVISIONS
Provisions are recognised when the Group has a present obligation as a result of a past event which it is
probable will result in an outflow of economic benefits that can be reliably estimated.
SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown
in share premium as a deduction from the proceeds.
SHARE-BASED COMPENSATION
Where share options are awarded to employees, the fair value of the options at the date of grant is charged
to the income statement over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately,
the cumulative amount recognised over the vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting
condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the
options, measured immediately before and after the modification, is also charged to the income statement
over the remaining vesting period. Where equity instruments are granted to persons other than employees,
the income statement is charged with fair value of goods and services received.
Cancelled or settled options are accounted for as an acceleration of vesting and the amount that would have
been recognised over the remaining vesting period is recognised immediately.
Annual Report and Accounts 2020
46
FINANCIAL STATEMENTS
The proceeds received net of any attributable transaction costs are credited to share capital (nominal value)
and share premium when the options are exercised.
Fair value is measured by use of the Black-Scholes pricing model which is considered by management to be
the most appropriate method of valuation.
EMPLOYEE BENEFITS
The Group operates a defined contribution pension scheme. The pension costs charged in the financial
statements represent the contribution payable by the Group during the year.
The costs of short-term employee benefits are recognised as a liability and an expense in the period the
related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange
for that service.
TAXATION
Current income tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted at the reporting date. Current income tax relating to items recognised
directly in equity or other comprehensive income is recognised in equity and not in the consolidated
statement of comprehensive income.
Deferred income tax is provided on all temporary differences at the reporting date arising between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax
assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Deferred tax assets have not been recognised in respect of the Group’s tax losses carried forward.
Research and Development tax credits are not recognised as receivables until the claims have been
submitted and agreed by HMRC.
CRITIAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting judgements
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
IMPAIRMENT
At each accounting reference date, the Group reviews the carrying amounts of its intangibles, property,
plant and equipment to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an
indefinite useful life is tested for impairment annually and whenever there is an indication that the asset
may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.
Annual Report and Accounts 2020
47
FINANCIAL STATEMENTS
An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a
revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried in at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation increase.
SHARE-BASED COMPENSATION
The fair value of share-based awards is measured using the Black-Scholes model which inherently makes
use of significant estimates and assumptions concerning the future applied by the Directors. Such estimates
and judgements include the expected life of the options and the number of employees that will achieve the
vesting conditions. Further details of the share option scheme are given in note 14.
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the alternative performance measure of underlying profit/(loss) from operations. This
measure is not defined under IFRS, nor is it a measure of financial performance under IFRS.
This measure is sometimes used by investors to evaluate a company’s operational performance with a long-
term view towards adding shareholder value. This measure should not be considered an alternative, but
instead supplementary, to profit/(loss) from operations and any other measure of performance derived in
accordance with IFRS.
Alternative performance measures do not have generally accepted principles for governing calculations
and may vary from company to company. As such, the underlying profit/(loss) from operations quoted
within the Group Statement of Comprehensive Income should not be used as a basis for comparison of the
Group’s performance with other companies.
UNDERLYING PROFIT/(LOSS) FROM OPERATIONS
The Group uses underlying profit/(loss) from operations, defined as profit/(loss) from operations, adding
back share-based compensation and transaction costs associated with the Group’s AIM listing and
acquisitions strategy.
The underlying loss from operations is reconciled back to the loss from operations within the Group
Statement of Comprehensive Income.
Annual Report and Accounts 2020
48
FINANCIAL STATEMENTS
1
REVENUE AND SEGMENTAL REPORTING
All of the Group’s revenue arises from activities within the UK. Management considers there to be
only one operating segment within the business based on the way the business is organised and
the way results are reported internally.
Revenue is as follows:
Total revenue
2
LOSS FROM OPERATIONS
Loss from operations is stated after charging:
Share-based compensation on reverse acquisition
Other share-based compensation
Transaction costs
Expensed software development costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Short-term (2018 IAS 17 operating) lease rentals
Group
Year ended 31
December
2020
£
_______
1,664,237
_______
Group
9-month
period ended
31 December
2019
£
_______
1,240,938
_______
Group
Year ended
31 December
2020
£
Group
9-month
period ended
31 December
2019
£
211,281
147,162
793,577
42,333
1,730
20,540
70,697
_______
-
-
-
43,000
729
2,926
69,992
_______
Annual Report and Accounts 2020
49
2 LOSS FROM OPERATIONS (continued)
Amounts payable to the Group’s auditor in respect of both audit and non-audit services:
FINANCIAL STATEMENTS
Audit Services
- Statutory audit
Other Services
The auditing of accounts of associates of the
Company pursuant to legislation:
- Audit of subsidiaries and its associates
3
INTEREST AND SIMILAR ITEMS
i.
ii.
Total finance and other income
Total finance costs
4
EMPLOYEES
Year ended 31
December 2020
£
15,000
9-month period
ended 31
December 2019
£
-
16,500
-------------------------
31,500
=========================
8,000
-------------------------
8,000
=========================
Group
Year ended 31
December 2020
£
603
_______
-
_______
Group
9-month
period ended
31 December
2019
£
-
_______
370
_______
The average monthly numbers of employees in the Group (including the Directors) during the year
was made up as follows (the Company has no employees other than the Directors):
Directors
Employees
Year ended 31
December
2020
Number
-
9
_______
9
_______
9-month
period ended
31 December
2019
Number
-
6
_______
6
_______
Annual Report and Accounts 2020
50
EMPLOYMENT COSTS
Wages and salaries
Social security costs
Pension costs
Share-based compensation
FINANCIAL STATEMENTS
Year ended 31
December
2020
£
9-month
period ended
31 December
2019
£
618,522
68,455
5,930
26,787
_______
719,694
_______
135,557
13,899
4,073
-
_______
153,529
_______
REMUNERATION OF KEY MANAGEMENT PERSONNEL
The remuneration of the Directors, who are the key management personnel of the Group, is set out
below in aggregate. Further information about the remuneration of the individual directors is
provided in the Directors’ Remuneration Report on pages 24-26.
Salaries and fees
Share-based compensation
Social security costs
Number of Directors to whom retirement benefits are accruing
under a defined contribution scheme
The remuneration in respect of the highest paid Director was:
Salaries and fees
Share-based compensation
Social security costs
Year ended 31
December
2020
£
9-month
period ended
31 December
2019
£
116,786
20,088
9,453
_______
146,327
_______
-
-
-
_______
_______
Number
Number
-
-
Year ended 31
December
2020
£
9-month
period ended
31 December
2019
£
85,000
15,452
5,580
_______
106,032
_______
-
-
-
_______
-
_______
During the year no (2019: nil) Directors exercised any (2019: nil) share options.
Annual Report and Accounts 2020
51
FINANCIAL STATEMENTS
5
PENSION COSTS
The Group operates a defined contribution pension scheme. The scheme and its assets are held by
independent managers. The pension charge represents contributions due from the Group and
amounted to £5,930 (2019: £4,070). At 31 December 2020 contributions of £2,490 remained
outstanding and are included within other payables (31 December 2019: £543).
6
TAXATION
The tax on the loss on ordinary activities for the period was as follows:
CURRENT TAX:
UK Corporation tax
Deferred tax
Tax on loss on ordinary activities
Loss before taxation
Loss multiplied by main rate of corporation tax in the UK of 19%
(9-month ended 31 December 2019: 19%)
EFFECTS OF:
Expenses not deductible for tax purposes
Share-based payments
Other deductions in period
Tax losses carried forward
Current tax
Group
Year ended 31
December
2020
£
_______
Group
9-month
period ended
31 December
2019
£
_______
-
-
_______
-
_______
Group
Year ended 31
December
2020
£
(2,154,698)
_______
-
-
_______
-
_______
Group
9-month
period ended
31 December
2019
£
(81,549)
_______
(409,393)
(15,494)
155,158
68,104
(1,446)
185,577
_______
-
_______
656
-
-
14,838
_______
-
_______
As at 31 December 2020, the Group had prepared but not yet submitted a Research and
Development tax credits reclaim, the estimated net benefit of which is approximately £62,000. It
has not been recognised as an asset due to its contingent nature.
As at 31 December 2020, the Group had tax losses carried forward of £2,847,347 (31 December 2019:
£1,860,098). Deferred tax has not been recognised in respect of these tax losses. The standard rate
of corporation tax applicable to the Group for the year ended 31 December 2020 was 19.0%. The
UK government has indicated that the rate of corporation tax may be increased to 25% with effect
from 1 April 2023.
Annual Report and Accounts 2020
52
FINANCIAL STATEMENTS
7
LOSS PER SHARE
The loss per share of 14.99p is based upon the loss of £2,154,698 (2019: loss of £81,549) and the
weighted average number of ordinary shares in issue for the year of 14,370,030 (2019: 11,221,348).
The loss incurred by the Group means that the effect of any outstanding warrants and options
would be considered anti-dilutive and is ignored for the purposes of the loss per share calculation.
Annual Report and Accounts 2020
53
8
GROUP INTANGIBLE ASSETS
COST
At 1 January 2020
Additions
Acquired through business combination
At 31 December 2020
AMORTISATION
At 1 January 2020
Charge for the period
At 31 December 2020
NET BOOK VALUE
At 31 December 2020
At 31 December 2019
FINANCIAL STATEMENTS
Internally
developed
software
£
-
242,916
-
_______
242,916
-
16,638
_______
16,638
Software costs
£
Other
£
15,611
-
-
_______
15,611
9,535
3,902
_______
13,437
-
-
92,520
_______
92,520
-
-
_______
-
Total
£
15,611
242,916
92,520
_______
351,047
9,535
20,540
_______
30,075
226,278
_______
-
_______
2,174
_______
6,076
_______
92,520
_______
-
_______
320,972
_______
6,076
_______
Other intangible assets comprise regulatory licenses held at cost and are not amortised in the first period
of ownership.
COMPANY INTANGIBLE ASSETS
COST
At 1 August 2020
Additions
At 31 December 2020
AMORTISATION
At 1 August 2020
Charge for the period
At 31 December 2020
NET BOOK VALUE
At 31 December 2020
At 31 July 2020
Internally
developed
software
£
-
242,916
_______
242,916
-
16,638
_______
16,638
Software costs
£
Other
£
-
-
_______
-
-
-
_______
-
-
-
_______
-
-
_______
Total
£
-
242,916
_______
242,916
-
16,638
_______
16,638
226,278
_______
-
_______
-
-
_______
_______
-
-
226,278
_______
-
_______
_______
_______
Annual Report and Accounts 2020
54
9
GROUP PROPERTY, PLANT AND EQUIPMENT
FINANCIAL STATEMENTS
COST
At 1 January 2020
Additions
At 31 December 2020
DEPRECIATION
At 1 January 2020
Charge for the period
At 31 December 2020
NET BOOK VALUE
At 31 December 2020
At 31 December 2019
Computer Equipment
£
6,531
9,144
15,675
5,481
1,730
7,211
8,464
1,050
Annual Report and Accounts 2020
55
10
INVESTMENTS
FINANCIAL STATEMENTS
Cost or Valuation
At 1 August 2020
Additions
Disposals
At 31 December 2020
Net Book value
At 31 December 2020
At 31 July 2020
Investments in
Subsidiaries
£
100
6,147,773
(100)
6,147,773
6,147,773
100
The Company’s investment as at 31 December 2020 represents the initial investment in FXPress
Payment Services Ltd on 9 September 2020 and a further £450,000 invested on 31 December 2020.
On 9 September 2020, the Company acquired the entire issued share capital of FXPress Payment
Services Ltd (“legal subsidiary”) for a consideration of £5,697,773, satisfied by the issue of
1,401,275,638 shares.
Prior to the acquisition, on 7 July 2020, the legacy business and trade of Cornerstone (formerly
Cornerstone Brands, a consumer product business) together with its trade, assets and liabilities,
was hived down to a newly incorporated wholly-owned subsidiary, CSTT Limited (“CSTT”).
Cornerstone’s investment in CSTT, stated at cost, was £100. The disposal of CSTT to the prior
owners of the legacy business was approved by shareholders at a general meeting on 26 August
2020 and completed on 9 September 2020.
As the legal subsidiary reversed into the Company (“legal parent”), without an existing trade, this
transaction cannot be considered a business combination, as the legal parent did not meet the
definition of a business, under IFRS 3 “Business Combinations”.
As the transaction is capital in nature and completed through the issue of shares it falls within the
scope of IFRS 2 ‘Share-based payments’. Any difference in the fair value of shares deemed to be
issued by the legal subsidiary and the fair value of net identifiable assets in the legal parent will
form part of the deemed cost of acquisition.
Annual Report and Accounts 2020
56
Shares in subsidiary and associate undertakings are stated at cost. As at 31 December 2020,
Cornerstone FS plc owned the following principal subsidiaries which are included in the
consolidated accounts:
FINANCIAL STATEMENTS
Subsidiary
FXPress Payment Services Ltd
Avila House Limited
CS Commercial Limited
(audit exempt)
Cornerstone EBT Trustee Limited
(audit exempt)
11
AVILA HOUSE ACQUISITION
Principal
Activity
Foreign
Exchange
and
Payment
Services
Country of
Incorporation
Northern
Ireland
E-money and
Payment
Services
England and
Wales
Dormant
Employee
Benefit
Scheme
Trustee
England and
Wales
England and
Wales
Registered Office
1 Elmfield
Avenue,
Warrenpoint,
Newry,
Co. Down, BT34
3HQ
The Old Rectory,
Addington,
Buckinghamshire,
MK18 2JR
The Old Rectory,
Addington,
Buckinghamshire,
MK18 2JR
The Old Rectory,
Addington,
Buckinghamshire,
MK18 2JR
Percentage
of Ownership
100 per cent.
100 per cent.
100 per cent.
100 per cent.
On 19 October 2020 FXPress Payment Services Ltd acquired the entire issued share capital of Avila
House Limited (“Avila House”), a company which has a small electronic money institution licence
focused on multi-currency e-wallets, for a total consideration of £92,685 (satisfied by £60,000 in
shares and £32,685 in cash). The acquisition was made in line with the Group’s strategy to allow
clients to leave funds on deposit, effectively providing them with multi-currency current accounts.
The Group determined that the activities and assets acquired represent a business as defined
under IFRS 3 Business Combinations and has accounted for the transaction accordingly.
The net assets acquired at the date of acquisition were determined to be £92,520, representing the
fair value of the FCA registered small electronic money institution licence, which was the only asset
held by Avila House at the time of acquisition.
No goodwill arose as a result of the acquisition.
Since the acquisition date, Avila House has not generated any revenue (also in line with the Group’s
product development roadmap) and generated a loss of £3,822, which is included in the
consolidated financial statements.
Annual Report and Accounts 2020
57
12
CURRENT TRADE AND OTHER RECEIVABLES
FINANCIAL STATEMENTS
Trade receivables
Prepayments and accrued income
Derivative financial assets at fair value
Other receivables
Amounts due from Group undertakings and
undertakings in which the Company has a
participating interest
Taxes and social security
Company Company
Group
31
December
2020
£
Group
31
December
2019
£
31
December
2020
£
8,405
24,623
299,035
140,378
7,720
-
281,134
66,516
-
9,600
-
131,492
31 July
2020
£
-
-
-
-
-
-
97,718 -
_______
570,159
_______
_______
355,370
_______
-
97,718
_______
238,310
_______
95,000
-
_______
95,000
_______
For the year ended 31 December 2020, £nil was recorded as a bad debt expense (nine-month period
ended 31 December 2019: £nil).
As at 31 December 2020, the Group had a contingent asset in respect of Research and
Development tax credits for which a reclaim had been prepared, but not yet submitted (31
December 2019: £nil). The estimated net benefit of the claim is approximately £62,000 and has not
been included in current receivables due to its contingent nature.
13
CURRENT TRADE AND OTHER PAYABLES
Trade payables
Derivative financial liabilities at fair value
Other tax and social security
Other payables and accruals
Amount due to Group undertakings
Group
31
December
2020
£
525,064
216,061
47,273
430,795
-
_______
1,219,193
_______
Group Company Company
31
December
2019
£
101,577
249,989
5,458
17,953
-
_______
374,977
_______
31
December
2020
£
238,654
-
17,411
290,773
516,999
_______
1,063,837
_______
31 July
2020
£
-
-
-
-
-
_______
-
_______
Annual Report and Accounts 2020
58
FINANCIAL STATEMENTS
14
SHARE CAPITAL AND RESERVES
Allotted, called up and fully paid
Ordinary shares of £0.00001 each as at 1 August 2020
Bonus issue of £0.00001 shares 9 August 2020
Consolidation to £0.0001 9 August 2020
Issue of consideration shares of £0.0001 9 September 2020
Bonus issue of £0.0001 shares 10 September 2020
Issue of new shares of £0.0001 16 September 2020
Consolidation to £0.01 shares 2 October 2020
Issue of new shares of £0.01 October to December 2020
Ordinary shares of £0.01 each at 31 December 2020
Ordinary
shares Share capital
£
286
2,573
-
140,128
2,336
1,344
-
19,219
_______
165,886
_______
No.
28,597,462
257,377,158
(257,377,158)
1,401,275,638
23,363,722
13,438,678
(1,452,008,745)
1,921,853
_______
16,588,608
_______
At 31 December 2020 share subscriptions of £131,492, comprising £2,630 share capital and £128,862
share premium, remained unpaid (31 July 2020: £nil).
The following changes in the share capital of the Company have taken place in the five-month
period ended 31 December 2020:
• On 26 August 2020, the Company issued 9 bonus shares for every share in issue and
subsequently consolidated such shares, in respect of each relevant class of shares, on the
basis of 10 shares of £0.00001 each into 1 share of £0.0001 each;
•
•
•
•
•
•
•
on 9 September 2020, 1,401,275,638 new A ordinary shares of £0.0001 each were issued as
consideration shares to FXPress Payment Services Ltd shareholders pursuant to the
acquisition;
on 10 September 2020, 23,363,722 new bonus E ordinary shares of £0.0001 each were issued;
on 16 September 2020, 13,438,598 new A ordinary shares of £0.0001 each were issued at a
price of £0.005 each and 80 new A ordinary shares of £0.0001 each were issued for the
purposes of ensuring there would be a whole number of shares in issue upon the proposed
consolidation on 2 October 2020;
on 2 October 2020, the entire issued share capital of the Company comprising different
classes of shares were re-designated and consolidated on the basis of 100 shares of £0.0001
each into 1 Ordinary Share of £0.01 each;
on 3 October 2020, 1,390,018 Ordinary Shares were issued at a price of £0.50 each and
211,835 Ordinary Shares were issued in consideration for services at an equivalent price of
£0.50 per share;
on 19 October 2020, 120,000 Ordinary Shares were issued as consideration shares to the
shareholders of Avila House in accordance with the terms of the share purchase agreement;
and
on 1 December 2020, 200,000 Ordinary Shares were issued at a price of £0.50 each.
All Ordinary Shares are equally eligible to receive dividends and the repayment of capital and
represent equal votes at meetings of shareholders.
As at 31 December 2020, £131,492 of issued share capital was unpaid (31 December 2019: £26,247).
The following describes the nature and purpose of each reserve within owner’s equity:
Share capital: Amount subscribed for shares at nominal value.
Annual Report and Accounts 2020
59
FINANCIAL STATEMENTS
Share premium: Amount subscribed for share capital in excess of nominal value, less costs of
share issue.
Share-based payment reserve: The share-based payment reserve comprises the cumulative
expense representing the extent to which the vesting period of warrants and share options has
passed and management’s best estimate of the achievement or otherwise of non-market
conditions and the number of equity instruments that will ultimately vest.
Merger relief reserve: Effect on equity of the consideration shares issued over their nominal
value.
Reverse acquisition reserve: Effect on equity of the reverse acquisition of FXPress Payment
Services Ltd.
Retained losses: Cumulative realised profits less cumulative realised losses and distributions
made, attributable to the equity shareholders of the Company.
Options
The Company operates an Enterprise Management Inventive (“EMI”) Scheme equity-settled
share-based remuneration scheme for employees.
Each of the option agreements under the EMI scheme provides that the relevant options vest, as
to one third of the shares comprised in them, on each of the first three anniversaries of the date
of grant. Once vested, the options are exercisable at any time. The options are also exercisable
in the event of a change of control. If the optionholder’s employment within the Group is
terminated, other than for gross misconduct, any options vested may be exercised within 90
days of such termination (12 months in the case of the optionholder’s death). Otherwise the
options lapse five years after the date of grant. The options also lapse, inter alia, if the
optionholder is adjudged bankrupt or proposes a voluntary arrangement or other scheme in
relation to his/her debts.
Outstanding as at 1 August 2020
Granted during the period
Outstanding as at 31 December 2020
Ordinary
shares
No.
Weighted
average
exercise price
£
-
1,599,480
_______
1,599,480
_______
-
0.50
_______
0.50
_______
On 2 December 2020 Julian Wheatland was granted options over 922,677 Ordinary Shares at an
exercise price of £0.50 per share. The Company has also agreed to make an annual grant of
additional options to Julian Wheatland equal to 5% of any increase in the fully diluted capital of
the Company which has occurred in the 12 months immediately prior to the date of grant to be
exercisable at a price equal to the average mid-market closing price of the Ordinary Shares over
the relevant 12-month period.
On 2 December 2020 Judy Happe was granted options over 276,803 Ordinary Shares at an
exercise price of £0.50 per share. The Company has also agreed to make an annual grant of
additional options to Judy Happe equal to 1.5% of any increase in the fully diluted capital of the
Company which has occurred in the 12 months immediately prior to the date of grant to be
exercisable at a price equal to the average mid-market closing price of the Ordinary Shares over
the relevant 12-month period.
On 2 December 2020 a further 400,000 options were granted to other senior employees at an
exercise price of £0.50 per share.
Annual Report and Accounts 2020
60
FINANCIAL STATEMENTS
The Black-Scholes model was used for calculating the cost of options. The model inputs for the
options issued were:
- 2 December 2020
Grant date
Share price at grant date - 50 pence
- 50 pence
Exercise price
- 0.8%
Risk free rate
- 83.7% (based on reference to the Group’s quoted competitors)
Expected volatility
- 5 years
Contractual life
Market performance conditions were ignored in determining the fair value of options.
The weighted average contractual life of the options is five years (2019: zero).
No options were exercised during the current year (2019: nil).
Warrants
Between 15 January 2020 and 31 March 2020 FXPress Payment Services Ltd granted 14,911,060
warrants to various advisors, employees and directors with an average exercise price of £0.050
and a term of five years. Due to failure to satisfy a vesting condition specified at the grant date,
the fair value of 9,155,930 warrants issued to employees and ex-employees was assessed to be
zero.
The remaining 5,755,130 warrants were estimated to have an average fair value of £0.016 per
warrant at the grant date using the Black-Scholes valuation model. The principal inputs into the
model were:
Share price at grant date
Risk-free rate
Expected Volatility
Contractual life
- between 4.7 pence and 5.5 pence
- 0.75%
- 25%
- 5 years
In connection with the reverse acquisition of the Company on 9 September 2020, the Directors
of Cornerstone wrote to the holders of the 9,155,930 outstanding FXPress Payment Services Ltd
warrants, agreeing to exchange their warrants for warrants in Cornerstone in return for waiving
all rights under their FXPress Payment Services Ltd warrants.
As a result of the effective cancellation of the FXPress Payment Services Ltd warrants, FXPress
Payment Services Ltd recognised an accelerated share-based payment charge of £92,947 for
the year-ended 31 December 2020 (9 months ended 31 December 2019: £nil).
On 3 October 2020 Cornerstone granted 778,460 warrants to the former holders of FXPress
Payment Services Ltd warrants with an average exercise price of £0.31 and an average term of
four years and 117 days. Between 5 October 2020 and 10 December 2020 Cornerstone granted
1,000,000 warrants with an exercise price of £0.50 and a term of five years. The Cornerstone
warrants were estimated to have an average grant date fair value of £0.342 per warrant using
the Black-Scholes valuation model. The principal inputs into the model were:
Share price at grant date
Risk-free rate
Expected volatility
Contractual life
- between 16.6 pence and 50 pence
- 0.8%
- 83.7%
- between 4 years & 105 days and 5 years
The Group share-based compensation charge for the year ended 31 December 2020 of £147,162
(9-month period ended 31 December 2019: £nil) consists of £92,947 in relation to the accelerated
share-based payment charges in respect of the cancelled warrants in FXPress Payment Services
Ltd, £27,428 in respect of the replacement warrants granted in Cornerstone and £26,787 in
respect of the Cornerstone options.
Annual Report and Accounts 2020
61
15
RELATED PARTY TRANSACTIONS
FINANCIAL STATEMENTS
Details of key management compensation are included in note 4. Key management are considered
to be the Directors of the Group.
Transactions with subsidiaries
During the year, the Company and FXPress Payment Services Ltd entered into various transactions
with each other including software development charges, licenses fees and working capital
support. The net balance of transactions between the companies are held on an interest free inter-
Group loan which has no terms for repayment. At the year end, the Company owed £516,999 (2019:
£nil) to FXPress Payment Services Ltd.
Other related parties:
All of the amounts below were in respect of the year ended 31 December 2020.
Fees of £50,000 (2019: £nil) in connection with fundraising activities were due to LGEC Capital
Partners LLP, of which Gareth Edwards is a Designated Member. The amount was unpaid at the
year-end.
Corporate finance advisory fees of £49,323 were due to London Bridge Capital Limited, a company
of which Gareth Edwards and Elliott Mannis are directors and Elliott Mannis is the shareholder.
£36,135 remained due to London Bridge Capital Limited at the year-end (2019: £nil).
Terry Everson, a director of FXPress Payment Services Ltd and a significant shareholder in
Cornerstone, was paid consulting fees of £24,000 via Hazelwood Financial Ltd, a company of
which he is a director and significant shareholder (9 months ended 31 December 2019: £54,000). As
at 31 December 2020, a loan of £10,000 made by the Group to Terry Everson remained unpaid (31
December 2019: £nil).
William Newton, a director of FXPress Payment Services Ltd and a significant shareholder in
Cornerstone, was paid consulting fees of £8,333 (9 months ended 31 December 2019: £21,000).
Stephen Flynn, a director of FXPress Payment Services Ltd and a significant shareholder in
Cornerstone, was paid consulting fees of £68,871 via JF Technology (UK) Ltd, a company of which
he is a director and significant shareholder (9 months ended 31 December 2019: £21,500).
David Mason, a director of FXPress Payment Services Ltd, was paid consulting fees of £85,800 (9
months ended 31 December 2019: £nil).
Jason Conibear, a former director of FXPress Payment Services Ltd, was paid consulting fees of
£42,650 (9 months ended 31 December 2019: £15,000).
Annual Report and Accounts 2020
62
16
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts with
customers
Foreign currency forward contracts with
institutional counterparty
Cash and cash equivalents
Trade receivables
Other receivables
FINANCIAL LIABILITIES
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts with
customers
Foreign currency forward contracts with
institutional counterparty
Trade payables
Other payables
FINANCIAL STATEMENTS
Group
31
December
2020
£
Group Company Company
31
December
2019
£
31
December
2020
£
31 July
2020
£
253,077
182,117
45,958
99,017
_______
299,035
183,675
8,405
165,001
_______
656,116
_______
_______
281,134
78,265
7,720
66,516
_______
433,655
_______
-
-
-
-
_______
-
96,394
-
141,092
_______
237,486
_______
_______
-
-
-
95,000
_______
95,000
_______
Group
31
December
2020
£
Group Company Company
31
December
2019
£
31
December
2020
£
31 July
2020
£
55,869
120,754
160,192
129,235
-
-
-
-
_______
216,061
525,064
430,795
_______
1,171,920
_______
_______
249,989
101,577
17,953
_______
369,519
_______
_______
-
238,654
807,772
_______
1,046,426
_______
_______
-
-
-
_______
-
_______
All financial assets and liabilities have contractual maturity of less than one year.
Annual Report and Accounts 2020
63
Derivative financial assets and liabilities
Derivative financial assets not designated as hedging instruments
FINANCIAL STATEMENTS
Foreign currency forward contracts with
customers
Foreign currency forward contracts with
institutional counterparty
31 December 2020
31 December 2019
Fair Value
£
Notional
Principal
£
Fair Value
£
Notional
Principal
£
253,077
14,686,425
182,117
4,986,924
5,785,633
45,958
_______
_______
299,035 20,472,058
_______
_______
99,017
_______
4,971,285
_______
281,134 9,958,209
_______
_______
Derivative financial liabilities not designated as hedging instruments
Foreign currency forward contracts with
customers
Foreign currency forward contracts with
institutional counterparty
31 December 2020
31 December 2019
Fair Value
£
Notional
Principal
£
Fair Value
£
Notional
Principal
£
55,869
4,392,467
120,754
4,535,780
160,192
_______
216,061
_______
12,390,456
_______
16,782,923
_______
129,235
_______
249,989
_______
5,192,152
_______
9,727,932
_______
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Foreign currency
forward contracts are measured at fair value on a recurring basis.
There are three levels of fair value hierarchy:
•
•
•
Level 1 – the fair value of financial instruments traded in active markets is based on quoted
market prices at the end of the reporting period.
Level 2 – valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable.
Level 3 – valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable.
Foreign currency forward contracts with customers generally require immediate settlement on the
maturity date of the individual contract and fall into level 2 of the fair value hierarchy above. Level
2 comprises those financial instruments which can be valued using inputs other than quoted prices
that are observable for the asset or liability either directly (i.e. prices) or indirectly (i.e. derived from
prices). The fair value of forward foreign exchange contracts is measured using observable forward
exchange rates for contracts with a similar maturity at the reporting date.
The net gain on financial assets at fair value through profit or loss for year ended 31 December 2020
was £4,839 (9 months ended 31 December 2019: £13,250).
Annual Report and Accounts 2020
64
FINANCIAL STATEMENTS
Financial instruments – risk management
Financial assets primarily comprise trade and other receivables, cash and cash equivalents and
derivative financial assets. Financial liabilities comprise trade and other payables, shareholder
loans and derivative financial liabilities. The main risks arising from financial instruments are
market risk (including foreign currency risk and interest rate risk), liquidity risk, credit risk and
counterparty risk.
Market risk
Market risk for the Group comprises foreign exchange risk and interest rate risk. The Group
operates as a riskless matched principal broker for deliverable non-speculative spot and forward
foreign currency transactions, with each trade with its clients matched with an identical trade with
an institutional counterparty. Therefore, foreign exchange risk is mitigated through the matching
of foreign currency assets and liabilities between clients and institutional counterparties which
move in parity.
The Group’s cash balances are primarily held in Pound Sterling and the Group does not hold
significant cash balances in foreign currencies.
Interest rate risk affects the Group to the extent that it implicitly impacts the price of foreign
currency forward contracts. However, this risk is mitigated in the same way as foreign currency
risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall
due. The Group has extensive controls to ensure that it has sufficient cash or working capital to
meet its cash requirements to mitigate this risk.
As per the Going Concern note above, the Directors have prepared a cash flow forecast taking
into account proceeds from the IPO fund raise, the historical growth in the Group’s business and
the inherent risks and uncertainties facing the Group’s business to assess the Group’s working
capital requirements.
The Group also has systems in place to monitor the margin requirements of its clients and its margin
requirement with the institutional counterparty for the back-to-back foreign currency forward
contract on a real-time basis and request any necessary top up payment from the clients. The
Group also has the right to close any position if no margin is given.
Credit risk
Credit risk is the risk that clients do not meet their contractual obligations in respect of the currency
spot and forward contracts which leads to a financial loss. All customers are subject to credit
verification checks. Approximately 90% of the Group’s trades are spot currency contracts which
are required to be settled within two working days. For forward currency contracts, as noted above,
clients are required to provide margin that mitigates credit exposure. Trade limits are applied to all
clients. The Group has systems to monitor trade limits and collateral requirements on a real-time
basis. The Group does not have any significant concentration of exposures within its client base.
Counterparty risk
Each trade between a client and the Group is matched with an identified trade with Velocity Trade
International (“Velocity”), which is a global foreign exchange liquidity and trade provider that
provides pricing, execution and settlement services for the Group.
The Group also has brokerage accounts with alternative institutional counterparties and could
transact with them instead if Velocity is unable to provide liquidity.
Annual Report and Accounts 2020
65
Management of settled and open trades are conducted via Currency Cloud, the GV (formerly
Google Ventures) backed global payments and FX platform. Client funds are transferred to
Velocity via Currency Cloud for additional protection and to reduce counterparty risk.
FINANCIAL STATEMENTS
17
FINANCIAL COMMITMENTS
The Group is not considered to have any operating lease commitments. The offices utilised by the
Group are serviced offices, which have a short notice period and therefore it has not been
considered necessary to disclose these as an operating lease commitment.
18
CAPITAL MANAGEMENT
The capital structure of the business consists of cash and cash equivalents, debt and equity. Equity
comprises share capital, share premium and retained losses and is equal to the amount shown as
‘Equity’ in the balance sheet. The Group’s current objectives when maintaining capital are to:
•
•
safeguard the Group’s ability to operate as a going concern so that it can continue to
pursue its growth plans;
provide a reasonable expectation of future returns to shareholders; and
• maintain adequate financial flexibility to preserve its ability to meet financial obligations,
both current and long term.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital
structure and adjusts it in the light of changes in economic conditions and the risk characteristics
of underlying assets.
The Company is subject to the following externally imposed capital requirements:
•
as a public limited company, the Company is required to have a minimum issued share
capital of £50,000.
FXPress Payment Services Ltd, a wholly-owned subsidiary of the Company, is subject to the
following capital requirement under the Payment Service Regulations 2017:
•
either 10% of fixed overheads for the preceding year or the initial capital requirement of
€50,000, whichever is the higher.
19
EVENTS AFTER THE REPORTING DATE
On 26 February 2021, 24,326 Ordinary Shares were issued at a price of £0.407 each on the exercise
of warrants.
On 17 March 2021, the Company and William Newton entered into a facility to borrow £350,000
from William Newton at any time until 31 December 2023 on not less than 20 Business Days’ notice
in consideration of the Company issuing William Newton with 6% unsecured convertible loan notes
2024.
On 25 March 2021, the Company and Robert Lee entered into a facility to borrow £100,000 from
Robert Lee at any time until 31 December 2023 on not less than 20 Business Days’ notice in
consideration of the Company issuing Robert Lee with 6% unsecured convertible loan notes 2024.
A drawdown notice was issued to Robert Lee on 17 May 2021 requesting payment of the £100,000
loan by 14 June 2021.
The convertible loan notes 2024 bear interest at the rate of 6% per annum and will be redeemable
on the occurrence of usual events of default and, in any event, on 31 March 2024. They may be
converted in tranches of £50,000 at a subscription price of 61 pence per share at any time until a
redemption notice is served.
On 6 April 2021, the Company was admitted to AIM, London Stock Exchange's market for small and
medium size growth companies. The Company placed 3,664,648 new ordinary shares at a price of
Annual Report and Accounts 2020
66
FINANCIAL STATEMENTS
61 pence per ordinary share, raising gross proceeds of £2,235,435. The shares sold under the placing
represent approximately 18 per cent of the Company's issued share capital. In connection with the
Company’s listing, 63,114 warrants were issued to the Company’s broker, Peterhouse Capital
Limited, on 6 April 2021 with an exercise price of 61 pence per share and an expiry date of 6 April
2023.
20
COVID-19
The COVID-19 pandemic developed rapidly in 2020, with a significant number of cases. Measures
taken by the UK government to contain the virus have affected economic activity. The Group has
taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and
health measures for its people such as social distancing and working from home.
All staff have successfully worked remotely during government-advised lockdowns and have had
full access to the Group’s technology platform that allows them to connect virtually and continue
to operate as normal on business activities.
The impact on the Group’s business and results has not been significant. The Group will continue
to follow the UK government policies and advice and do its utmost to continue its operations in the
best and safest way possible without jeopardising the health and safety of its people.
Annual Report and Accounts 2020
67
FINANCIAL STATEMENTS
Registrar
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Financial PR Adviser
Luther Pendragon
48 Gracechurch Street
London
EC3V 0EJ
Company Information
Registered Office
The Old Rectory
Addington
Buckinghamshire
MK18 2JR
Principal Trading Address
1 Poultry
London
EC2R 8ET
Company Registration Number
08367949
Company Secretary
Hanh Jelf, TH Jelf LLP
Nominated & Financial Adviser
SPARK Advisory Partners Limited
5 St John’s Lane
London
EC1M 4BH
Joint Brokers
Peterhouse Capital Limited
80 Cheapside
London
EC2V 6EE
Pello Capital Limited
7th Floor
10 Lower Thames Street
London
EC3R 6AF
Auditors
Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG
Solicitors
TH Jelf LLP
The Old Rectory
Addington
Buckinghamshire
MK18 2JR
Annual Report and Accounts 2020
68