FairFX Group Plc
Annual Report
and Consolidated
Financial Statements
For the year ended
31st December 2015
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Annual Report 2015 Contents
Directors and advisors ________________________________________
Strategic report ______________________________________________
Corporate governance statement _______________________________
Directors’ report _____________________________________________
Directors’ responsibilities statement ____________________________
Independent Auditor’s Report __________________________________
Consolidated statement of comprehensive income ________________
Consolidated and company statement of financial position _________
Consolidated and company statement of changes in equity _________
Consolidated statement of cash flows ___________________________
Company statement of cash flows ______________________________
Notes to the consolidated financial statements ___________________
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Annual Report 2015 4
Annual Report 2015
Directors and advisors
Directors:
J Pearson (Chairman)
I A I Strafford – Taylor (Chief Executive Officer)
A Chowdhury
N S Jeffery
Company Secretary:
Clive Atkinson
Registered Number:
08922461 (England and Wales)
Registered Office:
Bankers:
Auditor:
3rd Floor Thames House
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
England
Barclays Bank Plc
7th Floor, United Kingdom House
180 Oxford Street
London
W1D 1EA
England
KPMG LLP
One Snowhill
Snow Hill Queensway
Birmingham
West Midlands
B4 6GH
England
Solicitors:
Berwin Leighton Paisner LLP
Nominated Advisor and Broker:
Adelaide House
London Bridge
London
EC4R 9HA
England
Cenkos Securities Plc
6.7.8 Tokenhouse Yard
London
EC2R 7AS
England
Annual Report 2015
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Strategic report
Chairman’s Statement
We are pleased to present the full year results of FairFX
Group Plc for the year ended 31 December 2015. This has
been another successful year for the Group following its
listing on AIM in 2014. We have been very pleased with
our performance and indeed with the results we have seen
throughout the year. The performance highlights for 2015
are as follows:
•
•
•
•
•
•
31.9% increase in turnover (Gross value of currency
transactions sold) to £626.8m
103,338 new customers added to the business
40% turnover growth to £299.2m within money transfer
and deliverable FX execution products
39.5% turnover growth to £241.0m in currency cards
31.8% increase in gross profit to £5.0m
£3.4m loss before tax
FairFX is a disruptive FinTech payment services company,
incorporated in 2005 and launched to the public in 2007, operating
principally in the foreign exchange space. FairFX concentrates
on “deliverable” foreign exchange (FX) which is the provision
of actual currency delivery rather than FX trading. Unlike the
FX trading industry, which is at the cutting edge of technology,
the deliverable FX sector is typically characterised by low-tech
solutions and poor transparency in both retail and corporate
sectors. FairFX was established to challenge that status quo
6
and deliver end-users better value combined with improved
transparency, service and convenience. FairFX achieves this by
enabling customers to transact seamlessly online or via mobile
for both travel money solutions and international payments. By
employing the best digital and mobile service solutions FairFX
avoids the costs of a branch or retail infrastructure – a saving we
pass on to our customers with better exchange rates. The ethos
of our business is to promote clarity of pricing and to avoid hidden
charges. FairFX systems were built from inception on the concept
of peer-to-peer (P2P) functionality and this will convey further
benefit to our customers as the business rolls out internationally.
FairFX has 4 key products which are offered to both retail and
business customers: prepaid currency cards usable worldwide
for purchases and cash withdrawals; a travel cash service
delivered via Royal Mail; an automated international payments
solution and a dealing service for higher value transactions.
In addition, for corporate customers FairFX have developed a
cloud-based solution that enables businesses to control travel
and entertainment expenses, based around the core prepaid
card product. All FairFX products are characterised by a simple
and fast online on-boarding process coupled with easy to use
innovative technology to reduce friction of adoption and usage.
Both FairFX’s retail and business offernings are expanding rapidly.
The business principally earns its revenues from the difference
between the FX rate it transacts with a customer and the rate at
which it covers this via the market or from another customer via
P2P. FairFX does not actively trade an FX position and is not taking
FX risk; rather it is an execution service which takes a spread
based on the volume of FX that passes through its products
and therefore the key to the business is to increase volumes
transacted whilst minimizing operational risk.
At the beginning of the year, we clearly stated our strategy of
focusing on the retail card space and performing a customer
land-grab through the deployment of marketing resources allied
to targeted, consumer-led technical innovation. Our results
prove the success of our approach as the number of new retail
cards sold has accelerated strongly compared to 2014. At the
same time our conversion percentages have improved across all
devices in terms of digital visitors becoming FairFX customers.
The emphasis since 2013 has been on exploiting our digital
early-mover advantage and expanding marketing activity in
order to increase awareness of FairFX’s value and service among
customers of traditional higher-cost providers such as the
banks, Post Office and bureaux de change at airports. We see a
significant opportunity to become a leading category brand and
for that reason we have invested heavily in marketing and building
brand awareness. Given the success of our strategy to date we
will continue to invest in targeted and measured marketing over
the next few years to further accelerate customer acquisition.
Annual Report 2015 Strategic report
Smart, segmented cross-selling opportunities exist throughout
the group’s offerings and are key to FairFX’s growth strategy. To
date we have focused on growing numbers of consumers in the
multi-payments space using the currency card and physical travel
money products. The group is building on existing relationships
with multi-pay customers with the aim of offering them the
convenience of our higher value, single-payment products.
Our technological developments are aligned to this strategy to
reduce the friction of moving from one FairFX product to another.
The Group has developed solid foundations over recent years as
a base for future growth and we continue to invest, in a targeted
fashion, in people and systems development. Innovation and
delivery of new system solutions is key to our future success
and it is important we continue to develop new capabilities
to retain our competitive advantage. We therefore invested
significantly in R&D and innovation to enhance all of our products
and services in 2015 as well as introducing “agile” methodology
to improve efficiency of project management and deployment
of new technology. FairFX is highly focused upon the ease of
use of its systems and products and is targeted towards mobile
functionality operating across all platforms and devices. To this
end, during 2015, for retail customers we significantly improved
the mobile-responsiveness of our website and developed a much
improved mobile App. In the corporate space, we have invested
further in developing our corporate card platform and started
developing a mobile app for corporate card users with the goal of
enhancing the card user experience an improving efficiency. The
first phase of development was released in January 2016 and was
very well received by customers.
After receiving its EEA-wide licence in 2014, the Group has
been working towards being able to offer its products in foreign
locations. The pilot for this is FairFX Ireland, which was developed
in 2015 and soft-launched in 2016 and provides the template for
further roll-outs. In turn this will then reinforce the P2P credentials
of the business.
FairFX also launched an App for the new Apple Watch in 2015 to
adapt to our customers’ changing technological needs and we are
exploring geo-location services and mobile wallets to enhance
users’ experience of its iOS and Android apps.
The Directors are confident that FairFX is extremely well placed to
continue its expansion with a robust business based on excellent
products and scalability.
John Pearson
Non-executive Chairman
14 April 2016
31.9%
increase in turnover (Gross value of currency
transactions sold) to £626.8m
new customers added to the business
103,338
39.5%
40%
turnover growth to £241.0m in currency cards
turnover growth to £299.2m within money transfer
and deliverable FX execution products.
increase in gross profit to £5.0m
31.8%
£3.4m
loss before tax
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Annual Report 2015
Strategic report
Chief Executive’s Statement
in website visits and a 50% higher conversion rate online and an
88% increase when accessing our website via mobile devices.
The launch of an enhanced mobile app in June 2015, followed by
regular updates throughout the year, also helped drive turnover
through the cards as it allows customers to access their card
accounts and top up on the go.
In September 2015 we launched a sub-brand for corporates called
“FairFX Business” together with a dedicated business section
on our website. These steps increased awareness of the FairFX
range of business solutions as well as providing a forum where
both existing and prospective corporate customers can get more
information about FairFX products. We saw an increase of 35% in
business product enquiries within 6 months, which helped drive a
40% uplift in turnover on the corporate card platform in 2015. The
site also opened opportunities to cross-sell existing retail prepaid
card customers onto our business products.
The single-pay products, namely FairPay and deliverable FX
execution (dealing), performed strongly in 2015 posting turnover
growth of 40% to £299.2 million (2014: £213.7 million). With the
further strengthening of our sales and dealing teams, we expect
to continue our expansion in 2016 and this has been borne out
in the first quarter. Multi-pay turnover, being prepaid cards and
travel cash, also achieved robust growth, increasing by 25% to
£327.6 million (2014: £261.7 million). However, within the multi-pay
product group the growth was much stronger in the higher margin
prepaid card product versus the travel-cash product. This shows
the success of our stated strategy for the year of focusing on the
prepaid card and demonstrates the effectiveness of the various
marketing and IT initiatives listed above. Within the multi-pay
category, Retail Prepaid card turnover grew by 39% to £200.4
million (2014: £143.9 million) and corporate card turnover by 40%
to £40.6 million (2014: £29.1 million)
Gross profit for 2015 was £5.0 million (2014: £3.8 million),
which comprised of margin on currency transactions of £7.4
million (2014: £5.5 million) less transaction costs of £0.4 million
(2014: £0.3 million) and other direct costs including all costs
associated with fulfilling the prepaid cards of £2.0 million (2014:
£1.4 million).
In line with expectations, the Group made a loss for the year of
£3.4 million (2014: loss £2.8 million). The Group continued to
make necessary investment in its operations and technology
for future growth and boosted its marketing to increase the
customer base and raise the brand profile. Specifically, the
reported loss was due to an increase in marketing spend to
We are very pleased to report that as a result of the funds
raised since our IPO in August 2014, the Group has had a
successful and strong year of growth in 2015 with turnover
up 31.9% to £626.8 million (2014: £475.3 million). We
added 103,338 new retail customers to the business
during 2015, a 19.6% increase on 2014, bringing the total
to 508,048 by the year end (2014: 404,710). Within that
total, the strategy of focusing on our core card product
was extremely successful with 75,039 new card customers
which represented a 56% increase on prior year of 48,071.
The Group continued its stated growth strategy and increased its
marketing expenditure to £3.2 million compared to £1.8 million for
2014. The increase reflects marketing investment in both direct
call-to-action TV advertising combined with sponsorship of the
Sky Sports F1 channel, which raised brand awareness amongst
our target audience by more than 70% (source: YouGov).
We also committed funds to accelerate the development of a
mobile-responsive website to further improve conversion of
customers. To expedite the process and to improve efficiency
going forward, we implemented an “agile” IT project management
methodology in 2015 which has transformed our productivity
in technological deployment providing a strong pipeline of
deployments planned for 2016.
The mobile responsive website went live at the end of May 2015
in line with the TV advert airing in June 2015. The combination of
increased awareness through the Sky F1 sponsorship and the TV
advert, together with our improved website, drove a 41% increase
£3.2 million (2014: £1.8 million), an increase in headcount cost
with average employee numbers rising to 65 (2014: 53) and the
charge for share options granted to incentivise management
and staff of £0.4 million (2014: £0.3 million).
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Annual Report 2015
Strategic report
The Group has also continued to strengthen and refine its
More specifically, growth on the retail side will be pursued using
compliance procedures and as a validation of this we are delighted
a two-pronged strategy. First, we intend to continue the strong
to announce that we were granted additional permissions by
trend of acquiring new customers, and second, we intend to
the FCA under the Authorised Payment Institution regulations
maximise the revenue generation from the existing customer
in February 2015. The granting of these permissions allows
base. We intend to acquire new customers by continuing targeted
FairFX to offer its customers improved protection of their
funds in comparison with many of our competitors. The Group
will continue to further enhance compliance processes as we
continue the lengthy process of application for an eMoney
licence, which we hope to complete in 2016.
People
We continued to selectively invest in talent in 2015 with an
average headcount of 65 (2014: 53). However, we feel that the
marketing combined with consumer-driven technological
development and we have a range of exciting deployments
planned ahead of the peak summer period. This combination is
expected to drive greater traffic to the site and more efficiently
convert that traffic into customers and transactions. For existing
customers, FairFX already benefits from strong customer loyalty
and high levels of reuse and repurchase. We intend to further
increase activity by using technology to improve mobile usability
and functionality and also make it easier to move from one FairFX
product to another. We expect this will ultimately create a FairFX
business has now reached a level where operational gearing will
kick in and large-scale increases in headcount are not needed as
payment ecosystem.
the Group expands.
On the Corporate side, FairFX intends to grow the usage of
its platform by increasing its inside-sales efforts contacting
There have been no changes to the Board of Directors in 2015.
The Board remains committed to the success of the Group,
corporates directly allied to targeted marketing, lead sourcing and
technical innovation. We have a pipeline of development planned
ensuring it is conducted in accordance with the highest levels
for the Corporate expenses management platform in 2016
of corporate governance. We look forward to reporting on the
including a full-service App that yields a significant increase
Group’s continued growth and development.
in usability, and therefore aides the sales process.
Strategy
Quarter 1 2016 Update
On the retail side of the business, FairFX will continue to focus
The results for the first quarter 2016 are encouraging and
on growth via the combination of marketing and technological
underpin our expectations for the full year. Against this
development and sees further opportunities for rapid expansion
backdrop, the Group envisages turnover and revenue patterns
in this marketplace, both in the UK and beyond.
month-to-month to be different this year due to certain macro
In addition, we are taking our experience in growing the retail
card business and applying it to our corporate card platform.
At over £30 billion (Source: Concur), the market size for UK
corporate expenses is a comparable to the UK travel money
market of £35 billion (Source: Mintel) and hence represents
a great opportunity for FairFX. Our corporate card expense
solution is a unique platform and enables us to use disruptive
technology to compete head-on with the charge-card
offerings which currently predominate. We will use a similar
model for growth as for the retail product but enhanced for
the different challenges of acquiring corporate customers. As
this is a growing market space and we are in a position to offer
a unique product solution, we are extremely excited by the
potential for this market and our product capabilities within it.
events. Since the start of 2016, customer trends within the
travel industry in the UK have changed in terms of timing of
decisions due to two major factors. The first is that Pound
Sterling has been weaker versus both the Euro and US Dollar
in sharp contrast to the same period in 2015, when customers
were taking advantage of a much stronger Pound to purchase
other currencies. The second is that in recent months there have
been various geopolitical events affecting travel decisions and
causing travellers to review their destination choices and delay
booking until nearer their travel dates. Recent evidence for this
was publicised by Thomas Cook on 22nd March 2016. It stated
that it continued to see a “volatile market environment with
customers shunning potential trouble spots and taking longer
to make up their minds”. We see this combination of factors
causing customers to delay loading their cards as they decide on
Accordingly, in the core UK market for FairFX, 2016 will see a
their holiday destination and hope for a rebound in the value of
continuation of the strategy for growth on the retail side of
the Pound. As a consequence, this year we expect to acquire a
the business but with increased priority given to simultaneous
greater proportion of new customers, with the commensurate
expansion of the corporate sector.
purchasing of currency cards, closer to their travel dates.
Annual Report 2015
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Annual Report 2015 Strategic report
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Annual Report 2015
Despite the changes in timing of customer behaviour, turnover
is broadly in line with last year at £145.5 million (2015: £152.2
million) and showing 3% growth when two exceptional dealing
transactions in 2015 are removed. Overall net percentage
margin is expected to be higher than 2015 because of a better
mix of business with the out-performance of the card product
versus cash. Single pay turnover, which is not so dependent on
travel activity but is influenced by the strength of Sterling, is up
8.5% at £83.6 million (2015: £77.0 million). In keeping with the
behavioural effects described, retail multi-pay product turnover
is down 27.1% at £48.6 million (2015: £66.7 million). However,
this masks the out-performance on the core focus of the retail
card product compared to the lower-margin cash product, with
retail card turnover only lagging 2015 by 9.2% for the quarter
and gaining strong momentum in March. In addition, spending
on retail cards by current customers is up by 25% on a like-for-
like basis and top-ups of existing cards are also up which shows
the existing client base is performing well and emphasises the
“stickiness” of the client base. We take great encouragement
from this and believe this demonstrates that potential new
customers are delaying their decisions for the reasons outlined
above and hence we expect further customer acquisition in the
coming months.
For the corporate card space, our renewed focus on this product
is producing excellent results with card turnover up 56.5%
over prior year to £13.3 million (Q1 2015: £8.5 million) and with
exciting new functionality and usability improvements planned
for 2016 we anticipate this growth to continue.
In addition, general activity in the last week of March (new
customers, cards sold and turnover) was our strongest so far
in 2016 and mirrored levels last seen in the summer of 2015 and
this has continued into April. We take this as further evidence
that consumers have been delaying their decisions but are
now choosing to transact as their trips become imminent.
Accordingly, we reiterate that the Company is confident that
it remains on course for its forecast growth in 2016. Customer
numbers continue to expand rapidly with 16,280 new customers
added in the first quarter, bringing the total to 524,328. Within
the new retail customer numbers, the strategic focus on
acquiring card customers rather than those for the lower margin
cash product can be seen given that 11,781 cards were sold in
the first quarter, with a discernable increase in momentum as
the quarter progressed. The current expansion of the business
will be further supported by the planned integrated marketing
campaigns across the key holiday travel periods in 2016. The
Group also sees the delaying of travel decisions playing into
the hands of its marketing strategy because we can target
customers more efficiently in concentrated bursts around our
Strategic report
planned marketing campaigns in June and July. The key focus of
our media spend will continue to be on above-the-line marketing
campaigns, including TV advertising, combined with targeted
digital presence and multiple deployments of consumer-driven
new technology. We expect this combination to improve the
performance of the marketing investment in terms of acquiring
new customers, whilst maximising revenues from the existing
client base.
The first quarter of 2016 was also notable for the completion
of a significant fundraising for the Company and a strategic
investment by Crystal Amber Fund Limited (“CA”). Overall,
the company raised £5.25 million, with £5 million coming from
CA, which meant the Company received £5.09 million net of
transaction fees. These funds will be deployed in a controlled
fashion by the Company to accelerate the key initiatives outlined
above. Namely, selected boosting of marketing combined with
The Group has cash reserves amounting to £3.6 million (2014:
£4.1 million).
The Group’s payables due within one year amount to £5.2
million (2014: £4.2 million). The directors do not foresee any
problems in the group being able to meet its obligations.
Market risk
Market risk arises from the Group’s use of foreign currency
(see below).
Interest rate risk
The Group is subject to interest rate risk as its bank balances
are subject to interest at a floating rate. Due to the current
low levels of borrowings, the Group is not materially affected
by changes in interest rates.
more rapid deployment of new technology both for retail and
Foreign currency risk
corporate customers. The Company is also improving its data
capabilities and stitching together better digital analysis with
our customer data to better target new customers and optimize
performance with the existing client base.
The Group’s balance sheet currency exposure is primarily
managed by matching currency assets with currency
borrowings. The largest currency liabilities are created on
entering into forward foreign currency transactions.
Outlook
Based on the performance and further progress made in Q1
2016, the Group remains in line with market expectations for
As at 31 December 2015, the Group is not sensitive to
movements in the strength of Sterling as no material foreign
currency balances are held.
the full year.
Fair value risk
Derivative financial assets and liabilities are measured at
fair value. The Group does not include a fair value of other
financial assets and liabilities as the carrying amount is a
reasonable approximation of fair value.
In Conclusion
We look forward to delivering further growth in the coming year and
continuing to meet the expectations of all of our stakeholders.
Principal risks and uncertainties
The directors have reviewed the risks and uncertainties facing
the group and consider the key risk to be financial risk. The
Group’s overall risk management programme focuses on
maximising its financial assets and minimising financial liabilities
whilst not engaging in speculation.
Credit risk
The Group’s receivables amounts to £2.0 million (2014: £1.6
million). The receivables include an amount of £1.0 million
(2014: £1.0 million) of trade receivables. The directors are of
the opinion that all these amounts are recoverable and the
group has no significant credit risk.
Liquidity risk
The group monitors rolling forecast of the group’s liquidity
requirements to ensure it has sufficient cash to meet its
operational cash requirements.
Ian Strafford - Taylor
Chief Executive Officer
14 April 2016
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Annual Report 2015
Corporate governance statement
Statement of compliance
The directors recognise the value and importance of high standards of corporate governance. Accordingly, whilst the UK Corporate
Governance Code does not apply to AIM companies, the directors have regard to the requirements of the UK Corporate Governance
Code to the extent they consider appropriate in light of the group’s size, stage of development and resources. The Board also
proposes, so far as practicable, to follow the recommendations set out in the corporate governance guidelines for smaller quoted
companies published by the Quoted Companies Alliance.
The corporate governance guidelines were devised by the Quoted Companies Alliance, in consultation with a number of significant
institutional small company investors, as an alternative corporate governance code applicable to AIM companies. An alternative
code was proposed because the Quoted Companies Alliance considers the UK Corporate Governance Code to be inapplicable for
many AIM companies. The corporate governance guidelines state that: ‘‘The purpose of good corporate governance is to ensure
that the company is managed in an efficient, effective and entrepreneurial manner for the benefit of all shareholders over the
longer term’’.
Board of directors
The Board is responsible for the overall management of the group including the formulation and approval of the group’s long term
objectives and strategy, the approval of budgets, the oversight of the group’s operations, the maintenance of sound internal control
and risk management systems and the implementation of group strategy, policies and plans. Whilst the Board may delegate specific
responsibilities, there is a formal schedule of matters specifically reserved for decision by the Board; such reserved matters include,
amongst other things, approval of significant capital expenditure, material business contracts and major corporate transactions. The
Board meets formally on a regular basis to review performance.
The Board has established an audit committee and a remuneration committee and formally delegated duties and responsibilities as
described below. The attendance record of each relevant Director at Board and committee meetings during 2015 is as follows:
Board
(5 meetings)
Audit
Committee
(2 meetings)
Remuneration
Committee
(2 meetings)
John Pearson
Ian Strafford-Taylor
Ajay Chowdhury
Nick Jeffery
5
5
4
5
2
n/a
2
n/a
2
n/a
n/a
2
Audit committee
The audit committee is responsible for monitoring the integrity of the group’s financial statements, reviewing significant financial
reporting issues, reviewing the effectiveness of the group’s internal control and risk management systems and overseeing the
relationship with the external auditor (including advising on their appointment, agreeing the scope of the audit and reviewing the audit
findings). The audit committee comprises Ajay Chowdhury and John Pearson and is chaired by Ajay Chowdhury. The audit committee
has met twice during the year and will meet at least 3 times a year in future at appropriate times in the reporting and audit cycle and
otherwise as required. The audit committee also meets regularly with the company’s external auditor.
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Annual Report 2015
Annual Report 2015 Corporate governance statement
Remuneration committee
The remuneration committee is responsible for determining and
agreeing with the Board the framework for the remuneration
of the chairman, the executive directors and other designated
senior executives and, within the terms of the agreed
framework, determining the total individual remuneration
packages of such persons including, where appropriate,
bonuses, incentive payments and share options or other share
awards. The remuneration of non- executive directors is a
matter for the Board. No director is involved in any decision as to
his or her own remuneration.
The remuneration committee comprises John Pearson
and Nicholas Jeffery and is chaired by Nicholas Jeffery. The
remuneration committee has met twice during the year and will
meet at least 3 times a year in future and otherwise as required.
Share dealing code
The company has adopted, with effect from Admission, a share
dealing code for directors and applicable employees of the group
for the purpose of ensuring compliance by such persons with the
provisions of the AIM Rules relating to dealings in the company’s
securities (including, in particular, dealing during close periods in
accordance with Rule 21 of 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 company will take
proper steps to ensure compliance by the directors and applicable
employees of the group with the terms of the share dealing code
and the relevant provisions of the AIM Rules (including Rule 21).
The Corporate Governance Statement was approved and
authorised for issue by the Board on 14 April 2016 and was signed
on its behalf by:
I A I Strafford - Taylor
Chief Executive Officer
Annual Report 2015
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Annual Report 2015
Directors’ report
The directors present their annual report and consolidated financial statements for the year
ended 31 December 2015.
Financial reporting
The consolidated financial statements for the year ended 31 December 2015 are set out on pages 18 to 41 for FairFX Group Plc.
These have been prepared in accordance with the group’s accounting policies under International Financial Reporting Standards
(IFRS) as adopted by the European Union.
Principal activity
The principal activity of the group during the year was that of a dedicated provider of foreign exchange payment services to both
private clients and corporations through prepaid currency cards, travel cash and international money transfers.
The group’s trading entity FairFX Plc is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009
for the provision of payment services.
The principal activity of the company is focussed on share ownership of the FairFX companies.
The company was incorporated on 4 March 2014, and on 22 July 2014 acquired the entire shareholding of FairFX (UK) Limited
(previously named FairFX Group Limited) through a share for share exchange. For the consolidated financial statements of the group,
prepared under IFRS, the principles of reverse acquisition under IFRS 3 “Business Combinations” have been applied. The steps to
restructure the group had the effect of FairFX Group Plc being inserted above FairFX (UK) Limited. The holders of the share capital of
FairFX (UK) Limited were issued fifty shares in FairFX Group Plc for one share held in FairFX (UK) Limited. The shares of the company
were admitted to trading on AIM on 5th August 2014.
Post balance sheet event
On 29th March 2016, the Group completed a placing of 26,250,000 new Ordinary Shares at 20p per share with Crystal Amber Fund
Limited, an AIM listed fund which invests in small and mid-cap UK equities and other institutional investors which raised £5.1 million
(net of expenses).
Dividends
The directors do not recommend the payment of a dividend for the year ended 31 December 2015 (2014: nil).
Directors
The following directors have held office during the financial year and up to the date of approval of these financial statements.
I A I Strafford – Taylor
A Chowdhury
N S Jeffery
J Pearson
(appointed 4th March 2014)
(appointed 28th July 2014)
(appointed 28th July 2014)
(appointed 21st November 2014)
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Annual Report 2015
Annual Report 2015
Directors’ report
Directors’ interests
The directors who held office at 31 December 2015 held the following shares in the company:
I A I Strafford - Taylor
Shareholding %
2.8%
Ordinary 1p shares
2015
2,127,750
The directors held the following unexercised share options in the company:
I A I Strafford - Taylor
A Chowdhury
N S Jeffery
J Pearson
Option price £
Number Granted
Date Granted
0.22
0.36
0.36
0.36
0.36
0.58
1.16
1.74
192,950
1,789,300
1,535,750
88,889
88,889
120,000
120,000
120,000
28/07/2014
28/07/2014
28/07/2014
28/07/2014
28/07/2014
01/11/2014
01/11/2014
01/11/2014
Auditor
KPMG LLP have expressed their willingness to continue in office as auditors and a resolution seeking to reappoint them will be
proposed at the forthcoming Annual General Meeting.
Going concern
The financial statements have been prepared on a going concern basis. In line with forecasts, the group has reported a net loss for
the year of £3.4 million. The net loss was primarily due to investment for growth in marketing and other resources. The Group will
continue to invest in growth in the foreseeable future; however, the Directors believe that the group will break even in the year ended
31 December 2016 in line with stated strategy, and are budgeting as such. Further information in relation to the group’s business
activities is set out in the Strategic Report section of this report on pages 6 to 11.
Based on the company and group’s budgets and financial projections, the Directors are satisfied that the business is a going concern.
This assessment is based on whether there is sufficient liquidity and financing to support the business, the post balance sheet
trading of the Group, the regulatory environment and the effectiveness of risk management policies. Based on their assessment, the
Directors have a reasonable expectation that the company and group has adequate resources to continue in operational existence
for the foreseeable future and therefore the accounts are prepared on a going concern basis.
The Directors’ Report was approved by the Board on 14 April 2016 and signed on its behalf by:
I A I Strafford-Taylor
Chief Executive Officer
3rd Floor Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
15
Annual Report 2015
Directors’ responsabilities statement
The Directors’ Report and the consolidated
financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare group and
parent company financial statements for each financial year.
As required by the AIM Rules of the London Stock Exchange
they are required to prepare the group financial statements
in accordance with IFRSs as adopted by the EU and applicable
law and have elected to prepare the parent company financial
statements on the same basis.
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 parent company
and of their profit or loss for that period. In preparing each of the
group and parent company financial statements, the directors
are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable
and prudent;
•
•
state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and the Parent Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect fraud and
other irregularities.
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Each of the Directors whose names and functions are
listed in the Directors Report conf irm that to the best of
their knowledge:
•
the Group financial statements which have been prepared
in accordance with IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and
loss of the Group; and
•
the Financial review contained in the Strategic
Report includes a fair review of the development and
performance of the business and the position of the
Group, together with a description of the principal risks
and uncertainties that it faces.
In accordance with Section 418, each of the persons who are
directors at the time when this Directors’ report is approved has
confirmed that:
(a) so far as the Director is aware, there is no relevant audit
information of which the company’s auditors are unaware; and
(b) that the Director has taken all the steps that he ought
to have taken as a Director in order to be aware of any
relevant audit information and to establish that the
company’s auditors are aware of that information.
I A I Strafford-Taylor
Chief Executive Officer
16
16
Annual Report 2015
Annual Report 2015 Independent auditor’s report to the members of FairFX Group Plc
We have audited the financial statements of FairFX Group Plc for the year ended 31 December 2015 set out on pages 18 to
41 The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
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.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 16, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion
on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
as at 31 December 2015 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion 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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where 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.
Andrew Walker (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham - B4 6GH
14 April 2016
17
Annual Report 2015
Consolidated statement of comprehensive income
Gross value of currency transactions sold
Gross value of currency transactions purchased
Revenue on currency transactions
Direct costs
Gross profit
Administrative expenses
AIM Listing expenses
Loss before tax and from operations
Tax expense
Loss for the year
Loss per share
Basic
Diluted
Note
2015
£
2014
£
4
4
5
8
9
9
626,827,807
475,345,811
(619,387,847)
(469,864,995)
7,439,960
5,480,816
(2,412,073)
(1,666,109)
5,027,887
3,814,707
(8,423,285)
(5,966,697)
-
(678,056)
(3,395,398)
(2,830,046)
-
-
(3,395,398)
(2,830,046)
(4.76p)
(4.76p)
(4.41p)
(4.41p)
All income and expenses arise from continuing operations. There are no differences between the loss for the year and total
comprehensive income for the year.
The notes on pages 23 to 41 form an integral part of these financial statements.
18
Annual Report 2015
Consolidated and company statement of financial position
Note
10
11
12
13
18
14
15
ASSETS
Non-current assets
Property, plant and equipment
Investments
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity attributable to Equity holders
Share capital
Share premium
Share based payment reserve
Merger reserve
Retained deficit
Group
2015
£
80,754
-
2014
£
112,759
Company
2015
2014
£
-
£
-
-
1,260,857
884,969
80,754
112,759
1,260,857
884,969
95,094
1,965,003
115,711
3,615,056
5,790,864
161,149
1,637,178
47,141
4,085,137
5,930,605
-
-
4,624,571
2,943,621
-
-
-
-
4,624,571
2,943,621
5,871,618
6,043,364
5,885,428
3,828,590
768,660
5,313,780
667,421
5,416,083
704,758
3,522,752
279,136
5,416,083
768,660
5,313,780
667,421
-
704,758
3,522,752
279,136
-
(11,457,492)
(8,062,094)
(883,933)
(699,056)
Total equity
708,452
1,860,635
5,865,928
3,807,590
Current Liabilities
Borrowings
Trade and other payables
Derivative financial liabilities
16
17
18
-
4,463,925
699,241
5,163,166
334,882
3,847,847
-
4,182,729
-
19,500
-
19,500
-
21,000
-
21,000
TOTAL EQUITY AND LIABILITIES
5,871,618
6,043,364
5,885,428
3,828,590
The notes on pages 23 to 41 form an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board on 14 April 2016 and were signed on its behalf by:
I A I Strafford-Taylor
Director
Company Registration number: 08922461
19
Annual Report 2015
Consolidated and company statement of changes in equity
Group
At 1 January 2014
Loss for the year
Shares issued in year
Share based payment
charge (Note 20)
At 31 December 2014
Loss for the year
Shares issued in year
Share based payment
charge (Note 20)
Share
capital
£
614,743
-
90,015
-
Share
premium
£
-
-
3,522,752
-
Share
based
payment
£
-
-
-
279,136
Retained
deficit
Merger
reserve
£
£
(5,232,048)
(2,830,046)
-
-
5,416,083
-
-
-
Total
£
798,778
(2,830,046)
3,612,767
279,136
704,758
3,522,752
279,136
(8,062,094)
5,416,083
1,860,635
-
63,902
-
-
1,791,028
-
-
-
388,285
(3,395,398)
-
-
-
-
-
(3,395,398)
1,854,930
388,285
At 31 December 2015
768,660
5,313,780
667,421
(11,457,492)
5,416,083
708,452
Company
At 1 January 2014
Loss for the year
Shares issued in period
Share based payment
charge (Note 20)
Share
capital
Share
premium
Share
based
payment
Retained
deficit
Merger
reserve
£
£
£
£
-
-
704,758
-
-
-
3,522,752
-
-
-
-
279,136
(699,056)
-
-
At 31 December 2014
704,758
3,522,752
279,136
(699,056)
Loss for the period
Shares issued in period
Share based payment
charge (Note 20)
-
63,902
-
-
1,791,028
-
-
-
388,285
(184,877)
-
-
At 31 December 2015
768,660
5,313,780
667,421
(883,933)
Total
£
-
(699,056)
4,227,510
279,136
3,807,590
(184,877)
1,854,930
388,285
5,865,928
£
-
-
-
-
-
-
-
-
-
The following describes the nature and purpose of each reserve within owners’ equity:
Share capital
Share premium
Share based payment
Retained deficit
Merger reserve
Amount subscribed for shares at nominal value.
Amount subscribed for shares in excess of nominal value less costs directly attributable to the
Initial Public Offer of the company’s shares.
Fair value of share options granted to both directors and employees.
Cumulative profit and losses are attributable to equity shareholders.
Arising on reverse acquisition from group reorganisation.
Under the principles of reverse acquisition accounting, the group is presented as if FairFX Group Plc had always owned the FairFX (UK)
Limited group. The comparative and current period consolidated reserves of the group are adjusted to reflect the statutory share
capital and merger reserve of FairFX Group Plc as if it had always existed.
20
Annual Report 2015 Consolidated statement of cash flows
Group
Loss for the year
(3,395,398)
(2,830,046)
Note
2015
£
2014
£
Cash flows from operating activities
Adjustments for:
Depreciation
Share based payment charge
(Increase)/decrease in trade and other receivables
(Increase) in derivative financial assets
(Decrease) in borrowings
Increase in trade and other payables
Increase in derivative financial liabilities
Decrease/(Increase) in inventories
55,165
388,285
(327,825)
(68,570)
(334,882)
616,078
699,241
66,055
55,537
279,136
30,191
(47,141)
(111,628)
1,309,045
-
(84,868)
Net cash flow used by operating activities
(2,301,851)
(1,399,774)
Cash flows from investing activities
Acquisition of property, plant and equipment
(23,160)
(134,144)
Net cash used in investing activities
(23,160)
(134,144)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Costs directly attributable to share issuance
1,980,971
(126,041)
4,161,104
(548,337)
Net cash from financing activities
1,854,930
3,612,767
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(470,081)
4,085,137
2,078,849
2,006,288
Cash and cash equivalents at end of the year
14
3,615,056
4,085,137
The notes on pages 23 to 41 form an integral part of these financial statements.
21
Annual Report 2015 Company statement of cash flows
Company
Note
2015
£
2014
£
Loss for the period
(184,877)
(699,056)
Cash flows from operating activities
Adjustments for:
Share based payment charge
388,285
279,136
(Increase) in trade and other receivables
(1,680,950)
(2,943,621)
(Decrease)/ increase in trade and other payables
(1,500)
21,000
Net cash flow used by operating activities
(1,479,042)
(3,342,541)
Cash flows from investing activities
Investment in subsidiary undertaking
(375,888)
(270,225)
Net cash used in investing activities
(375,888)
(270,225)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Costs directly attributable to share issuance
1,980,971
(126,041)
4,161,104
(548,338)
Net cash from financing activities
1,854,930
3,612,766
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at end of the period
-
-
-
-
The notes on pages 23 to 41 form an integral part of these financial statements.
22
Annual Report 2015 Notes to the consolidated financial statements
1. General information
FairFX Group Plc (the “company”) is a limited liability company incorporated and domiciled in England and Wales and whose
shares are quoted on AIM, a market operated by The London Stock Exchange. The group’s principal activity is that of selling of
foreign currency via technology platforms offered on the internet.
The company and group’s consolidated financial statements for the year ended 31 December 2015 were authorised for issue
on 14 April 2016 and the consolidated and company statement of financial position signed by I A I Strafford - Taylor on behalf of
the board.
2. New standards, amendments and interpretations to published standards
The Group applied all applicable IFRS standards and all applicable interpretations published by the International Accounting
Standards Board (IASB) and its International Financial Reporting Interpretations Committee (IFRIC) for the year ended 31
December 2015.
Adoption of new and revised accounting standards and interpretations:
•
IAS 19 Defined Benefit Plans: Employee Contributions (Amendment). Clarifies the requirements that relate to how
contributions from employees or third parties that are linked to service should be attributed to periods of service.
The adoption of the new applicable standards have not had a significant impact on the financial reporting of the Group.
The following standards and interpretations (and amendments thereto) have been issued by the IASB and the IFRIC which are
not yet effective and have not been adopted, many of which are either not relevant to the group and parent company or have no
material effect on the financial statements of the group and parent company.
IFRS 14 Regulatory Deferral Accounts
IFRS 11 Accounting for acquisitions of interests in Joint Operations (Amendment)
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Amendments)
IAS 27 Equity Method in Separate Financial Statements (Amendments)
IAS 1 Disclosure Initiative (Amendments)
IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS
28 Investment In Associates and Joint Ventures
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 16 Leases
Effective Dates *
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2018
1 January 2018
1 January 2019
* The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations. As the group and
parent company prepares its financial statements in accordance with IFRS as adopted by the European Union (EU), the application
of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU Endorsement
mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard of
interpretation but the need for endorsement restricts the group and parent company’s discretion to adopt standards.early
Annual Report 2015
23
Notes to the consolidated financial statements
3. Basis of presentation and significant
accounting policies
The principal accounting policies applied in the preparation of
the group and parent company’s financial statements are set
out below. These policies have been consistently applied to all
the years presented, unless otherwise stated.
The financial statements have been prepared on a historical
cost basis with the exception of derivative financial
instruments which are measured at fair value through profit
or loss.
3.1 Basis of presentation
These financial statements are prepared in accordance with
AIM Regulations, International Financial Reporting Standards,
International Accounting Standards and Interpretations
(collectively IFRSs) issued by the International Accounting
Standards Board (IASB) as adopted by the European Union
(“adopted IFRSs”). The financial statements are presented in
sterling, the company’s and group’s functional currency.
IFRS requires management to make certain critical
accounting estimates and to exercise judgement in the
process of applying the company’s and group’s accounting
policies. These estimates are based on the directors’ best
knowledge and past experience and are explained further in
note 3.21.
The Group has changed its accounting treatment of
and notes. The effect of this reorganisation was to insert
one new company into the group, a new holding company,
FairFX Group Plc. The impact of the shares subscribed from
the IPO are included within the results for the year ended 31
December 2015 and are disclosed fully in note 15.
FairFX Group Plc acquired the entire share capital of FairFX
(UK) Limited (previously named FairFX Group Limited) on
22 July 2014 through a share for share exchange. For the
consolidated financial statements of the Group, prepared
under IFRS, the principles of reverse acquisition under IFRS
3 “Business Combinations” were applied. The steps to
restructure the group had the effect of FairFX Group Plc
being inserted above FairFX (UK) Limited. The holders of the
share capital of FairFX (UK) Limited were issued fifty shares in
FairFX Group Plc for one share held in FairFX (UK) Limited.
By applying the principles of reverse acquisition accounting
the group is presented as if FairFX Group Plc had always
owned and controlled the FairFX Group Plc had always owned
and controlled the FairFX group. Comparatives have also
been prepared on this basis. Accordingly, the assets and
liabilities of FairFX Group Plc have been recognised at their
historical carrying amounts, the results for the periods prior
to the date the company legally obtained control have been
recognised and the financial information and cash flows
reflect those of the “former” FairFX (UK) Limited group. The
comparative and current year consolidated revenue of the
group are adjusted to reflect the statutory share capital,
Derivative financial assets and liabilities in the year ended
share premium and merger reserve of FairFX Group Plc as if it
31 December 2015. Derivate financial assets and liabilities
had always existed.
are recorded at fair value through the profit or loss and
offset in the Statement of Financial Position (see notes
3.8 and 3.9). For consistency, the prior year comparative
balances have been restated in the Statement of Financial
Position. This restatement did not result in any impact on
the prior year loss.
In the opinion of the directors, based on the group’s
budgets and financial projections, they have satisfied
themselves that the business is a going concern. The
board has a reasonable expectation that the group has
adequate resources to continue in operational existence
for the foreseeable future and therefore the accounts are
prepared on a going concern basis.
3.2 Basis of consolidation
On 5th August 2014, FairFX Group Plc listed its shares on
AIM, a market operated by the London Stock Exchange. In
preparation for the Initial Public Offering (“IPO”) the group
was restructured. The restructure impacted a number of
current year and comparative primary financial statements
On publishing the parent company financial statements here,
together with the group financial statements, the company
is taking advantage of exemption in section 408 of the
Companies Act 2006 not to present the individual income
statement and related notes of the parent company which
form part of these approved financial statements.
3.3 Foreign currency
In preparing these financial statements, transactions in
currencies other than the company and group’s functional
currency (foreign currencies) are recorded at the rates of
exchange prevailing on the dates of the transaction. At
each statement of financial position date monetary items
in foreign currencies are translated at the rate prevailing at
statement of financial position date.
Exchange differences arising on the settlements of monetary
items and on the retranslation of monetary items are
included in the consolidated statement of comprehensive
income for the year.
24
Annual Report 2015
Notes to the consolidated financial statements
3.4 Inventories
3.10 Provisions
Inventories are valued at the lower of cost and net realisable
A provision is recognised in the statement of financial
value on a first in first out basis. Inventories comprise of stock
position when the company and group has a present legal
of prepay and travel cards not yet distributed to customers.
or constructive obligation as a result of a past event, and it is
3.5 Trade and other receivables
Trade and other receivables are recognised initially at fair
value. Subsequent to initial recognition, they are measured at
amortised cost using the effective interest method, less any
provision for impairment losses.
Trade receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in
an active market. A provision for the impairment of trade
probable that an outflow of economic benefits will be required
to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at
a pre-tax rate that reflects the current market assessment
of the time value of money and, where appropriate, the risks
specific to the liability.
3.11 Taxation
The tax expense represents the sum of the tax currently payable.
receivables is recognised when there is objective evidence
The tax currently payable is based on taxable profit for
that the Group will not be able to collect all amounts due
the year. Taxable profit differs from net profit as reported
according to the original terms of the receivables. Significant
in the statement of comprehensive income because it
financial difficulties of the debtor, probability that the debtor
excludes items of income or expense that are taxable or
will enter bankruptcy or financial reorganisation and default
deductible in other years and it further excludes items that
or significant delinquency in payments are considered
are never taxable or deductible. The liability for current
indicators that the trade receivable may be impaired.
tax is calculated using tax rates that have been enacted or
Impairment on trade receivables is written off to the
substantively enacted by the consolidated statement of
statement of comprehensive income when it is recognised
financial position date.
as being impaired.
Other receivables are recognised at fair value.
3.6 Cash and cash equivalents
These include cash in hand and deposits held at call with banks.
3.7 Trade and other payables
These are initially recognised at fair value and then carried at
amortised cost using the effective interest method. These
arise principally from the receipt of goods and services.
3.8 Derivative financial assets and liabilities
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.
3.9 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net
account reported in the statement of financial position if, and only if,
there is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, or to
realise the assets and settle the liabilities simultaneously.
3.12 Deferred tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for:
•
•
temporary differences on the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor
taxable profit or loss;
temporary differences related to investments in
subsidiaries to the extent that the group is able to
control the timing of the reversal of the temporary
differences and it is probable that they will not reverse
in the foreseeable future; and
•
taxable temporary differences arising on the initial
recognition of goodwill.
The measurement of deferred tax reflects the tax
consequences that would follow the manner in which the
group expects, at the end of the reporting period, to recover
or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the
reporting date.
25
Annual Report 2015 Notes to the consolidated financial statements
Deferred tax assets and liabilities are offset if there is a
3.16 Interest expense recognition
legally enforceable right to offset current tax liabilities and
assets, and they relate to taxes levied by the same tax
authority on the same taxable entity, or on difference tax
entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences to the extent
that it is probable that future taxable profits will be available
against which they can be utilised. Deferred tax assets
are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
3.13 Investments in subsidiaries
Investment in subsidiary undertakings are stated at cost less
impairment in value.
3.14 Income recognition
Revenue is recognised when a binding contract is entered
into by a client and the margin is fixed and determined.
The margin is the difference between the rate offered to
clients and the rate the Company receives from its liquidity
providers. When the group enters into a contract for
forward delivery with a client it also enters into a separate
matched forward contract with its bankers. As each trade
is booked back to back with a liquidity provider the margin is
accounted for once the binding contract is formed.
3.15 Research and development
Research costs are expensed as incurred. Expenditure on
IT software and development is recognised as an intangible
asset when the company can demonstrate the technical
feasibility of completing the intangible asset so that it will
be available for use or sale, its intention to complete and its
ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to
complete the asset and the ability to measure reliably the
expenditure during development.
Following initial recognition of the development expenditure
as an asset, the cost model is applied requiring the asset to
be carried at cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of the asset
begins when development is complete and the asset is
available for use. It is amortised over the period of expected
future benefit. During the period of development, the asset
is tested for impairment annually.
Interest expense is recognised as interest accrues, using the
effective interest method, on the net carrying amount of the
financial liability.
3.17 Borrowings
Borrowings other than bank overdrafts are recognised initially
at fair value less attributable transaction costs. Subsequent
to initial recognition, borrowings are stated at amortised cost
with any difference between the amount initially recognised
and redemption value being recognised in the consolidated
statement of comprehensive income over the period of the
borrowings, using the effective interest method.
3.18 Property, plant and equipment
Items of property, plant and equipment are stated at cost of
acquisition or production cost less accumulated depreciation
and impairment losses.
Depreciation is charged so as to write off the cost or valuation
of assets over their estimated useful lives, using the straight
line method, on the following basis:
Plant and equipment
Fixtures and fittings
Leasehold improvements
33%
20%
10%
A full year’s depreciation is charged in the year of acquisition
and none in the year of disposal.
3.19 Share-based payments
Employees (including directors) of the group receive
remuneration in the form of share-based payment
transactions, whereby employees render services as
consideration for equity instruments (equity-settled
transactions). In situations where equity instruments are
issued and some or all of the goods or services received by
the entity as consideration cannot be specifically identified,
they are measured as the difference between fair value of the
share-based payment and the fair value of any identifiable
goods or services received at the grant date. The cost of
equity-settled transactions with employees, is measured
by reference to the fair value at the date on which they are
granted. The fair value is determined using an appropriate
pricing model, further details of which are given in note 20.
The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over the
period in which the performance and/or service conditions
are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (‘the vesting
date’). The cumulative expense recognised for equity settled
26
Annual Report 2015
Notes to the consolidated financial statements
charge or credit for a period represents the movement in
Where substantially all of the risks and rewards incidental to
cumulative expense recognised as at the beginning and end
ownership are not transferred to the company and group (an
of that period.
No expense is recognised for awards that do not ultimately
vest, except for awards where vesting is conditional upon a
market condition, which are treated as vesting irrespective
of whether or not the market condition is satisfied, provided
that all other performance and/or service conditions are
satisfied. Where the terms of an equity-settled award are
modified, the minimum expense recognised is the expense
as if the terms had not been modified. An additional expense
“operating lease”), the total rentals payable under the lease
are charged to the statement of comprehensive income on
a straight-line basis over the lease term. Benefits received
and receivable as an incentive to enter into an operating
lease are spread on a straight line basis over the lease term.
3.21 Critical judgements and estimations
Judgements
is recognised for any modification, which increases the total
In the process of applying the group’s accounting policies,
fair value of the share-based payment arrangement, or is
management makes various judgements which can
otherwise beneficial to the employee as measured at the date
significantly affect the amounts recognised in the financial
of modification. Where an equity settled award is cancelled,
statements. They are also required to use certain critical
it is treated as if it had vested on the date of cancellation, and
accounting estimates and assumptions regarding the future
any expense not yet recognised for the award is recognized
that may have a significant risk of giving rise to a material
immediately. However, if a new award is substituted for the
adjustment to the carrying values of assets and liabilities
cancelled award, and designated as a replacement award on
within the next financial year. The critical judgements are
the date that it is granted, the cancelled and new awards are
considered to be the following:
treated as if they were a modification of the original award, as
described on the previous paragraph.
(i) Share based payments
In order to calculate the charge for share-based
The dilutive effect of outstanding options is reflected as
compensation as required by IFRS 2, the Group makes
additional share dilution on the computation of earnings
estimates principally relating to the assumptions used in its
per share.
Where the company grants options over its own shares to
the employees of its subsidiaries it recognises, in its individual
financial statements, an increase in the cost of investment in
its subsidiaries equivalent to the equity settled share-based
option-pricing model as set out in note 20. The accounting
estimates and assumptions relating to these share-based
payments would have no impact on the carrying amounts of
assets and liabilities within the next annual reporting period
but may impact expenses and equity.
payment charge recognised.
(ii) Measurement of fair values
3.20 Leased assets
Where substantially all of the risks and rewards incidental to
ownership of a leased asset have been transferred to the
company and group (a “finance lease”), the asset is treated
as if it had been purchased outright. The amount initially
recognised as an asset is the lower of the fair value of the
leased property and the present value of the minimum
lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability.
Lease payments are analysed between capital and interest.
The interest element is charged to the statement of
comprehensive income over the period of the lease and is
calculated so that it represents a constant proportion of the
The Group’s accounting policies and disclosures require
measurement of fair values with regard to Derivative
financial assets and liabilities. When measuring the fair value
of an asset or a liability, the Group uses observable market
data as far as possible. Fair values are categorised into
different levels in a fair value hierarchy based on the inputs
used in the valuation techniques as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities.
Level 2: inputs other than quoted prices included in
Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
lease liability. The capital element reduces the balance owed
•
Level 3: inputs for the asset or liability that are not based
to the lessor.
on observable market data (unobservable inputs).
27
Annual Report 2015
Notes to the consolidated financial statements
4. Revenue and segmental analysis
Segment results are reported to the Board of Directors (being the chief operating decision maker) to assess both performance
and strategic decisions. The Board of Directors reviews financial information on revenue the following segments: Currency cards,
FairPay, Dealing and Central (which includes overheads and corporate costs). The revenue is wholly derived from within the UK.
2015
Segment revenue
Direct costs
Administrative expenses
AIM listing expenses
Currency
Cards
FairPay
Dealing
Central
£
£
£
£
Total
£
4,446,460
828,044
2,127,682
37,774
7,439,960
-
-
-
-
-
-
-
-
-
(2,412,073)
(2,412,073)
(8,423,285)
(8,423,285)
-
-
Loss before tax and from operations
4,446,460
828,044
2,127,682
(10,797,584)
(3,395,398)
Total assets
Total liabilities
Total net assets
2014
Segment revenue
Direct costs
Administrative expenses
AIM listing expenses
-
-
-
-
-
-
-
-
-
5,871,618
5,871,618
(5,163,166)
(5,163,166)
708,452
708,452
Currency
Cards
FairPay
Dealing
Central
£
£
£
£
Total
£
3,057,454
695,330
1,364,603
363,429
5,480,816
-
-
-
-
-
-
-
-
-
(1,666,109)
(1,666,109)
(5,966,697)
(5,966,697)
(678,056)
(678,056)
Loss before tax and from operations
3,057,454
695,330
1,364,603
(7,947,433)
(2,830,046)
Total assets
Total liabilities
Total net assets
-
-
-
-
-
-
-
-
-
6,043,364
6,043,364
(4,182,729)
(4,182,729)
1,860,635
1,860,635
28
28
Annual Report 2015
Annual Report 2015 Notes to the consolidated financial statements
5. Loss before tax
Loss before tax is stated after charging the following:
Operating lease – property
Depreciation of plant and equipment and fixtures and fittings
Net foreign currency differences
Research & development costs
Amounts charged by the group’s auditor are as follows:-
Audit fees:-
Fees payable for the audit of the annual report and financial statements
Fees payable for the audit of subsidiaries
Total audit fees
Other services:-
Taxation services
Corporate finance services
Other assurance services
Total non-audit fees
Total Fees
2015
£
258,790
55,165
151,822
714,847
2015
£
21,000
24,000
45,000
-
-
-
-
45,000
2014
£
135,486
55,537
41,490
514,976
2014
£
21,000
34,000
55,000
1,000
140,000
15,000
156,000
211,000
The above audit fee is payable solely to the Group’s current auditor, KPMG LLP. These amounts are shown exclusive of VAT.
6. Staff costs
Number of employees
The average number of employees (including directors) during the year was:-
Administrative staff
Employee costs
Wages and salaries
Social security costs
2015
Number
65
2015
£
3,101,177
351,254
3,452,431
2014
Number
53
2014
£
2,349,651
265,221
2,614,872
There were no pension payments in respect of either year. Further information regarding share options is given in note 20.
29
Annual Report 2015 Notes to the consolidated financial statements
7. Directors’ remuneration
2015
£
2014
£
Emoluments
366,621
441,040
The total amount payable to the highest paid director in respect of emoluments was £227,500 (2014: £392,500)
The total amount payable to all Directors in the consolidated Group was £468,288 (2014: £532,540). Prior year numbers have
been restated to exclude £69,544 of employers national insurance erroneously included.
There were no pension payments in respect of either year. Further information regarding share options is given in note 20.
8. Taxation
Current year tax expenses
2015
2014
£
-
-
£
-
-
Factors affecting tax charge for the period
The charge for the year can be reconciled to the (loss) per the consolidated statement of comprehensive income as follows:
2015
£
2014
£
Loss before taxation: Continuing operations
(3,395,398)
(2,830,046)
Taxation at the UK corporation rate tax of 20% (2014: 21%)
(687,568)
(594,310)
Capital allowances in arrears /(advance) of depreciation
Share based payments
Net impact of R&D tax credit claim
Expenses not deductible for tax purposes
Tax losses utilised
Tax losses for which no deferred tax asset utilised
Total tax for the year
6,626
78,628
92,349
9,882
-
500,083
-
(8,999)
58,619
25,489
8,700
-
510,501
-
The group has estimated losses of £8,612,311 (2014: £7,315,029) available for carry forward against future trading profits. The
company and group have incurred losses in the current year. Deferred tax assets are recognised for tax losses carried forward
to the extent that the realisation of the related tax benefit through future taxable profits is considered more likely than not. The
decision to recognise any asset will be taken at such point recovery is reasonably certain, when the group returns to profitability.
The Group has an unrecognised deferred tax asset of £1,722,462 (2014: £1,536,156) in respect of losses that can be carried
forward against future taxable income for the period between one year and an indefinite period of time.
30
Annual Report 2015
Notes to the consolidated financial statements
The Finance Act 2013 was substantively enacted on 2 July 2013. This reduced the main rate of corporation tax to 21% with effect
from 1 April 2014 and 20% with effect from 1 April 2015.
9. Loss per share
Basic loss per share
The calculation of basic loss per share has been based on the following loss attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding. The loss after tax attributable to ordinary shareholders is £3,395,398 (2014:
£2,830,046 loss) and the weighted average number of shares in issue for the period is 71,316,169 (2014: 64,128,356).
Diluted loss per share
The calculation of diluted earnings per share has been based on the loss attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding, after adjustment for the effects of all dilutive potential ordinary shares. The loss
after tax attributable to ordinary shareholders is £3,395,168 (2014: £2,830,046 loss) and the weighted average number of shares
is 71,316,169 (2014: 64,128,356).
10. Property, plant and equipment
Group
Cost
At 1 January 2015
Additions
At 31 December 2015
Depreciation
At 1 January 2015
Charge for the year
At 31 December 2015
Net book value
At 31 December 2015
Plant and
machinery
Fixtures and
fittings
Leasehold
improvements
£
£
£
216,796
19,400
236,196
143,045
49,391
192,436
11,588
3,044
14,632
7,621
1,809
9,430
38,935
716
39,651
3,894
3,965
7,859
Total
£
267,319
23,160
290,479
154,560
55,165
209,725
43,760
5,202
31,792
80,754
At 31 December 2014
73,751
3,967
35,041
112,759
31
Annual Report 2015 Notes to the consolidated financial statements
11.Investments
Company - Shares in subsidiary undertakings
Cost
Additions
At 31 December
Provisions for diminution in value
At 31 December
Net Book Value
At 31 December
2015
£
884,969
375,888
1,260,857
2014
£
-
884,969
884,969
-
-
1,260,857
884,969
In the opinion of the directors the aggregate value of the company’s investment in subsidiary undertakings is not less than the
amount included in the statement of financial position.
Holdings of more than 20%
The company holds the share capital (both directly and indirectly) of the following companies:
Subsidiary Undertaking
FairFX (UK) Limited
FairFX Plc *
FairFX Corporate Limited *
FairFX Wholesale Limited *
FairFS Limited *
Fair Foreign Exchange Ireland Limited *
* Share capital held indirectly
12. Inventories
Group
Country of
registration or
incorporation
Shares Held
Class
%
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Ireland
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100 Trading
100 Trading
100 Dormant
100 Dormant
100 Dormant
100 Dormant
2015
£
2014
£
Finished goods
95,094
161,149
The group’s inventories comprise stock of cards.
32
Annual Report 2015 Notes to the consolidated financial statements
13. Trade and other receivables
Group
2015
£
2014
£
Trade receivables
1,046,473
1,013,080
Company
2015
2014
£
-
£
-
Amounts due from group undertakings
Other receivables
Prepayments and accrued income
-
811,977
106,553
-
4,624,571
2,943,621
460,492
163,606
-
-
-
-
1,965,003
1,637,178
4,624,571
2,943,621
Information about the Group’s exposure to credit and market risks, and impairment losses for trade and other receivables, is
included in Note 19.2.
14. Cash and cash equivalents
Group
Cash at bank
2015
£
2014
£
3,615,056
4,085,137
Included in cash and cash equivalents at 31 December 2015 was £2,877,514 of customer trading funds (2014: £2,054,109).
All the cash is held in the name of the trading company FairFX Plc.
15.Share capital
Group and Company
Authorised, issued and fully paid up capital
76,866,039 ordinary shares of £0.01 each
2015
£
2014
£
768,660
704,758
Under the principles of reverse acquisition accounting, the group is presented as if FairFX Group Plc had always owned the
FairFX (UK) Limited group. The comparative and current period consolidated reserves of the group are adjusted to reflect the
statutory share capital and merger reserve of FairFX Group Plc as if it had always existed.
During the year, the company made the following share issue:
Date of Issue
No Shares
Issued
Price per
share
Gross value of
shares issued
Nominal Value
of shares issued
Costs of
share issues
Share
Premium
13 November 2015
6,390,229
£0.31
£1,980,971
£0.01
£126,041
£1,791,028
In accordance with IAS 32 Financial Instruments: Presentation, costs incurred which are directly applicable to the raising of
finance, are offset against the share premium created upon the share issue.
The holders of the ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the company.
Annual Report 2015
33
Notes to the consolidated financial statements
16. Borrowings
Group
Shareholder loan
Details of Shareholder loans are included in Note 22 below.
17. Trade and other payables
Trade payables
Taxation and social security
Accruals and deferred income
Group
2015
£
2014
£
3,950,139
3,232,827
115,918
397,868
88,165
526,855
4,463,925
3,847,847
2015
£
-
-
2014
£
334,882
334,882
Company
2015
2014
£
-
-
19,500
19,500
£
-
-
21,000
21,000
2014
£
Group
2015
£
2014
£
Company
2015
£
Current
4,463,925
3,847,847
19,500
21,000
18.Derivative financial assets and financial liabilities
18.1 Derivative financial assets
Financial assets at fair value through profit or loss
Fair Value
2015
£
Notional
Principal
2015
£
Foreign exchange forward contracts
Total financial instruments at fair value
115,711
115,711
10,882,130
10,882,130
Fair Value
2014
£
47,141
47,141
Notional
Principal
2014
£
6,261,923
6,261,923
34
Annual Report 2015 Notes to the consolidated financial statements
18.2 Derivative financial liabilities
Financial liabilities at fair value through profit or loss
Fair Value
2015
£
Notional
Principal
2015
£
Foreign exchange forward contracts
Total financial instruments at fair value
699,241
699,241
11,385,381
11,385,381
Fair Value
2014
£
-
-
Notional
Principal
2014
£
6,214,782
6,214,782
19. Financial instruments
The Group’s financial instruments comprise cash and various items arising directly from its operations. The main purpose of
these financial instruments is to provide working capital for the Group. In common with other businesses, the group is exposed
to the risk that arises from its use of financial instruments. This note describes the Group’s objectives, policies and processes
for managing those risks and the methods used to measure them. Further quantitative information is found throughout these
consolidated financial statements.
19.1 Principal financial instruments
The principal financial instruments of the Group, from which financial instrument risk arises, are as follows:
Financial instruments held at amortised cost
Cash and cash equivalents
Borrowings
Trade and other payables
Trade and other receivables
Financial instruments held at fair value through profit or loss
Derivative financial assets – Forward foreign exchange contracts
Derivative financial liabilities – Forward foreign exchange contracts
Trade and other payables generally have short time to maturity.
2015
£
2014
£
3,615,056
-
(4,463,925)
1,965,003
2015
£
115,711
(699,241)
4,085,137
(334,882)
(3,847,847)
1,637,178
2014
£
47,141
-
Forward foreign exchange contracts fall into level 2 of the fair value hierarchy as set out in note 3.21(ii) since 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).
35
Annual Report 2015 Notes to the consolidated financial statements
19.2 Financial risk management objectives and policies
Credit risk
The Group trades only with recognised, credit worthy customers. All customers who wish to trade on credit are subject
to credit verification checks. Customer balances are checked daily to ensure that the risk of exposure to bad debts is
minimised and margined accordingly. The Group’s risk is the risk that financial loss arises from the failure of a customer or
counterparty to meet its obligations under a contract. The Group had no significant concentrations of risk with customers
and counterparties at 31 December 2015.
The Group’s exposure to credit related losses, in the event of non-performance by customers relates mostly to
wholesale business. The risk on wholesale business is minimal as group polices require new customers to be reviewed for
creditworthiness before standard payment and delivery terms and conditions are entered into. Individual credit terms are
set and monitored regularly.
The Group’s cash balances are all held with major banking institutions. The majority of trade receivables are due from
credit worthy customers and or financial institutions and are automatically settled within a few days of arising.
The credit risks from other financial contractual relationships including other receivables are not considered material.
Where forward contracts are not fully settled by the maturity date, appropriate action is agreed with the customer to roll
forward the contract to a future date.
The ageing of financial assets at the statement of financial position date is as follows:
2015
Current and
not impaired
£
Trade and other receivables
1,965,003
Derivative financial assets
115,711
Less than
3 months
overdue
4 to 6
months
overdue
Over 6
months
overdue
Individually
impaired
£
-
-
£
-
-
£
-
-
£
-
-
2014
Current and
not impaired
£
Trade and other receivables
1,637,178
Derivative financial assets
47,141
Less than
3 months
overdue
4 to 6
months
overdue
Over 6
months
overdue
Individually
impaired
£
-
-
£
-
-
£
-
-
£
-
-
Total
£
1,965,003
115,711
Total
£
1,637,178
47,141
Liquidity risk
Management of liquidity risk is achieved by monitoring budgets and forecasts and actual cash flows and available cash
balances.
The daily settlement flows in respect of financial asset and liability, spot and swap contracts require adequate liquidity
which is provided through intra-day settlement facilities.
Further details of the risk management objectives and policies are disclosed in the Principal risks and uncertainties
section of the Strategic report.
36
Annual Report 2015 Notes to the consolidated financial statements
The table below analyses the Group’s gross undiscounted financial liabilities by their contractual maturity date.
2015
Borrowings
2014
Borrowings
Trade and other payables
4,463,925
Derivative financial liabilities
230,564
245,436
223,241
On demand
and within 1
month
Between
1 and 3
months
Between
3 and 12
months
On demand
and within
1 month
Between
1 and 3
months
Between
3 and 12
months
Over
1 year
£
-
£
-
£
-
-
£
-
-
Total
£
-
4,463,925
699,241
£
-
-
-
£
-
-
-
£
-
-
-
Over
1 year
£
Total
£
334,882
334,882
-
-
3,847,847
-
Trade and other payables
3,847,847
Derivative financial liabilities
-
Market risk
Market risk arises from the Group’s use of foreign currency. This is detailed below.
Interest rate risk
The Group is subject to interest rate risk as its bank balances are subject to interest at a floating rate. Due to the current low
levels of borrowings, the Group is not materially affected by changes in interest rates.
Foreign currency risk
The Group’s balance sheet currency exposure is primarily managed by matching currency assets with currency borrowings.
The largest currency liabilities are created on entering into forward foreign currency transactions.
As at 31 December 2015, the Group is not sensitive to movements in the strength of Sterling as no material foreign
currency balances are held.
37
Annual Report 2015 Notes to the consolidated financial statements
Fair value risk
The following table shows the carrying amount of financial assets and financial liabilities. It does not include a fair value as
the carrying amount is a reasonable approximation of fair value.
31 December 2015
Loans and
receivables
Other financial
liabilities
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
Financial liabilities not measured at fair value
Borrowings
Trade and other payables
£
3,615,056
1,965,003
5,580,059
-
-
-
Total
£
3,615,056
1,965,003
5,580,059
-
£
-
-
-
-
(4,463,925)
(4,463,925)
(4,463,925)
(4,463,925)
31 December 2014
Loans and
receivables
Other financial
liabilities
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
Financial liabilities not measured at fair value
Borrowings
Trade and other payables
£
4,085,137
1,637,178
5,722,315
£
-
-
-
-
-
-
(334,882)
(3,847,847)
(4,182,729)
Total
£
4,085,137
1,637,178
5,722,315
(334,882)
(3,847,847)
(4,182,729)
All financial instruments are classified as level 1 financial instruments in the fair value hierarchy, with the exception of
Derivative financial assets and liabilities and Borrowings which are level 2 financial instruments.
Capital management policy and procedures
The Group’s capital management objectives are:
•
•
to ensure that the group and company will be able to continue as a going concern; and
to maximise the income and capital return to the company’s shareholders.
The parent 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; and
as a company regulated by the Payment Service Regulations 2009, the company is required to maintain a capital
requirement of either 10% of fixed overheads for the preceding year or the initial capital requirement of €20,000,
whichever is the higher.
Since its incorporation, the parent company has complied with these requirements, which are unchanged since the
previous year end.
38
Annual Report 2015
Notes to the consolidated financial statements
20. Share options
The group issues equity-settled share-based payments to certain directors and employees. Equity-settled share based
payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair
value of options granted has been calculated with reference to the Black-Scholes option pricing model. The fair value determined
at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.
During the year ended 31 December 2015, there were no share based payment transactions within the group.
During the year ended 31 December 2014, there were a number of share based payment transactions within the group. These
included an agreed cancellation of the share options in existence at the start of the year and a subsequent granting of new
options at various exercise prices. These movements are disclosed within the tables below:
Historic options
Outstanding at 1 January
Cancelled during the year
Outstanding at 31 December
2014
Exercise price (£)
0.10
0.10
0.10
2014
Number
142,228
(142,228)
-
Historically, the Group granted share options to its director and employees as well as external third parties. At the start of
2014 there were 142,228 unexercised share options. Of these options 48,681 were granted to two directors of the Group. The
directors consider that the fair value of the options was immaterial and therefore no charge has been made in the statement of
comprehensive income for 2014. The entirety of these options were cancelled in 2014.
Options issued during year ended 31 December 2014
Granted during the year
Granted during the year
Granted during the year
Granted during the year
Granted during the year
Granted during the year
Outstanding at 31 December
2014
Exercise price (£)
0.07
0.22
0.36
0.58
1.16
1.74
2014
Number
200,000
447,750
4,352,828
120,000
120,000
120,000
5,360,578
The above share options issued in FairFX Plc have been granted to both directors and employees of the group. At the 31
December 2015, there were unexercised share options amounting to 7% of the company’s total issued shares. Of the above
options 4,055,778 have been granted to directors of the company, with an additional 854,800 having been granted to an individual
who is director of a wholly owned subsidiary within the group. All of the above options are exercisable one year following the
company’s Admission to AIM from 5th August 2015 and will lapse on 3 November 2019.
39
Annual Report 2015 Notes to the consolidated financial statements
The directors have valued the share options at date of grant using the Black-Scholes pricing model. Details of the inputs made
into that model are disclosed in the table below
Weighted average share price (£)
Weighted average exercise price (£)
Expected volatility
Expected option life in years
Risk-free rate
Expected dividends
Fair value of the options granted (£)
a
b
0.45
variable
21%
4.5
1.09%
none
variable
c
a. The weighted average exercise price varies dependent upon the amount stipulated in the individual option deeds.
The exercise price ranges from £0.07 - £1.74.
b. Expected volatility has been determined on the share price from date of admission up to 31st December 2014
c. A summary of the fair value of the options granted is summarised in the table below. If the fair value of the option was
deemed to be nil it is marked accordingly.
Exercise price (£)
Fair Value (£)
0.07
0.22
0.36
0.58
1.16
1.74
0.28
0.20
0.12
-
-
-
The total fair value of the options is £667,420. The charge incurred has been spread over the vesting period, from 28th July 2014
to 5th August 2015 with £388,285 being expensed to the statement of comprehensive income for the year ended 31 December
2015 (2014: £279,136).
The most significant assumption used when arriving at the valuation is volatility. A movement of 5% in this assumption would
have an income statement effect of approximately £60,000.
21. Financial commitments
As at 31 December 2015 the Group had the following annual commitments under non-cancellable operating leases. The total
future value of the minimum lease payments is as follows:
Not later than one year
Later than one year and not later than five years
Land and buildings
2015
£
189,537
-
189,537
2014
£
218,927
189,537
408,464
The Group took an assignment of the lease on its office premises on 6th May 2014. The lease runs until 12th November 2016 at
an annual rental of £148,688 and a service charge of £80,132. An incentive, paid by the assignor on assignment of the lease of
£100,000, is amortised over the remaining term of the lease.
40
Annual Report 2015 Notes to the consolidated financial statements
22. Related party transactions
Loans from related parties
Included within Current borrowings are amounts of nil (2014: £334,882) due to Pembar Limited. Pembar Limited is a company
incorporated in British Virgin Islands and is the controlling party of FairFX Group Plc. The transaction was concluded at arm’s
length. Details of the loan is as follows:
•
The loan from Pembar Limited dated 9 June 2006 carried interest at a rate of 2% over the Bank of England base rate and
was repayable in full by 9 June 2016. The lender converted his loan into share capital as part of the share issue on 13th
November 2015 (see note 15).
Key management personnel
Key management who are responsible for controlling and directing the activities of the group comprises the executive
Directors, the Non-executive Directors and senior management. The key management compensation is as follows:-
2015
£
2014
£
Salaries, fees and other short term employee benefits
1,003,120
855,246
There are no other related party transactions which, as a single transaction or in their entirety, are or may be material to the
Company and have been entered into by the Company or any other member of the Group during the year ended 31 December
2015.
23. Ultimate controlling party
Pembar Limited holds a significant interest In FairFX Group Plc, albeit short of necessary level to exert control over the
entity. However, there are individuals connected to the directors of Pembar Limited through familial links who also have
shareholdings in FairFX Group Plc. Consequently, it is the opinion of the directors that Pembar Limited is the company’s
immediate parent company.
The ultimate controlling party is The General Trust Company SA, an off-shore trust which wholly owns Pembar Limited.
24. Post balance sheet events
On 29th March 2016, the Group completed a placing of 26,250,000 new Ordinary Shares at 20p per share with Crystal Amber
Fund Limited, an AIM listed fund which invests in small and mid-cap UK equities and other institutional investors which raised
£5.1 million (net of expenses).
41
Annual Report 2015 Notes
42
Annual Report 2015 Annual Report 2015
43
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68, Upper Thames Street
London, EC4V 3BJ
www.fairfx.com