TIDMAQX
RNS Number : 3152G
Aquis Exchange PLC
29 March 2022
29 March 2022
Aquis Exchange PLC
("Aquis", the "Company" or the "Group")
Final results for the year ended 31 December 2021
and
Board appointments
Pre-tax profit growth in excess of five times vs the prior
year
Aquis Exchange PLC (AQX.L), the exchange services group, is
pleased to announce its audited results for the year ended 31
December 2021.
Highlights:
-- Revenue up 42% to GBP16.2 million (FY20: GBP11.4 million)
-- Pre-tax profit up 540% to GBP3.2 million (FY20: GBP0.5 million)
-- Profit after tax up 330% to GBP4.3 million (FY20: GBP1.0
million)
-- Basic EPS up 300% to 16p (FY20: 4p)
-- Cash and cash equivalents at 31 December 2021 of GBP14.0
million (31 December 2020: GBP12.3 million)
-- Membership of Aquis Exchange (AQX) grew to 39 (FY20: 33)
and there was a 24% increase in the average monthly usage,
in terms of chargeable orders (4Q 2021 vs 4Q 2020)
-- Market share of all pan-European trading at 5.2% in 4Q21
(4.7% 4Q20) reflecting a number of factors including significant
market volatility, an industry-wide move to dark trading
venues and client trading strategies
-- Overall share of available liquidity of 24%, the highest
of any European MTF
-- Aquis Stock Exchange (AQSE) completed first year under new
rule book, with a record 24 admissions completed during
2021
Post-period highlights:
-- Encouraging start to current trading, with the Company's
trading in line with expectations, notwithstanding continued
macroeconomic uncertainty and high levels of market volatility
-- Agreed transferral of the business activities of UBS MTF,
the non-displayed matching pool of UBS AG, to Aquis, as
announced on 16 March 2022
-- Fields Wicker-Miurin OBE and Dr. Ruth Wandhöfer appointed
as independent Non-Executive Directors of the Company, and
Richard Fisher appointed to the board and acting as Chief
Financial Officer following the AGM
-- Completed the dual listing of the Company's shares on the
Aquis Stock Exchange Growth Market today, a tangible demonstration
of belief in the market
Alasdair Haynes, Chief Executive Officer of Aquis,
commented:
"I am delighted to be reporting such strong financial results
today, with revenue up 42% and profit before tax increased in
excess of five times from what we recorded in FY20. It is clear we
have now transformed into a business with dependable revenues,
generating significant profits, and with a very robust financial
position. We have shown we are able to not only withstand periods
of intense volatility and uncertainty, but to continue growing and
investing throughout them. This gives us great confidence going
forward.
Operationally, it has been an incredibly busy and fruitful year
for the Group across all divisions, as we delivered the first year
of Aquis Stock Exchange under its innovative new rulebook,
harmonised data revenues across the business and made further
progress against our 'cloud native exchange' plans in our
Technologies business. This momentum has continued post-period end,
with our dual listing on Aquis Stock Exchange, a reflection of our
confidence in AQSE as a home for growth businesses. Most recently,
in a milestone for the Group, we announced we would be assuming the
business activities of UBS' dark pool. This development will be
accretive for our business, expand our offering and provide access
into a new part/segment of the market.
Looking forward, heightened volatility and uncertainty stemming
from the wider geo-political environment is set to continue, but
nonetheless, we remain focused on the execution of our growth
strategy and delivering increased value for our stakeholders.
Trading so far has been in line with market expectations and we
approach the remainder of the year with a positive outlook."
An overview of the results from Alasdair Haynes, CEO, is
available to view on this link:
https://bit.ly/3DjKdo3
The Group will be hosting webinars for analysts and retail
investors today at 09.30 and 14.30 respectively.
If you would like to register for the analyst webinar, please
contact aquis@almapr.co.uk . Investors who would like to attend the
retail investor webinar can sign up to Investor Meet Company for
free and add themselves to the meeting via
https://www.investormeetcompany.com/aquis-exchange-plc/register-investor
. Investors who have already registered will be automatically
invited.
Enquiries:
Aquis Exchange PLC Tel: +44 (0)20 3597
6321
Alasdair Haynes, CEO
Jonathan Clelland, CFO and COO Tel: +44 (0)20 3597
Belinda Keheyan, Head of Marketing 6329
VSA Capital Limited (AQSE Corporate Adviser) Tel: +44(0)20 3005
5000
Andrew Raca
Pascal Wiese
Liberum Capital Limited (Nominated Adviser Tel: +44 (0)20 3100
and Broker) 2000
Clayton Bush
Chris Clarke
Edward Thomas
Kane Collings
Canaccord Genuity Limited (Joint Broker) Tel: +44 (0) 20 7523
Bobbie Hilliam 8000
Patrick Dolaghan
Alma PR (Financial PR Adviser) Tel: +44 (0)20 3405
0209
Susie Hudson aquis@almapr.co.uk
Kieran Breheny
Matthew Young
Notes to editors:
About Aquis Exchange PLC
Aquis Exchange PLC is an exchange services group, which operates
pan-European cash equities trading businesses (Aquis Exchange),
growth and regulated primary markets (Aquis Stock Exchange/AQSE)
and develops/licenses exchange software to third parties (Aquis
Technologies).
Aquis Exchange is authorised and regulated by the UK Financial
Conduct Authority and France's Autorité des Marchés Financiers to
operate Multilateral Trading Facility businesses in the
UK/Switzerland and in EU27 respectively. Aquis operates lit order
books and does not allow aggressive non-client proprietary trading,
which has resulted in lower market impact and signalling risk on
Aquis than other trading venues in Europe. According to independent
studies, trades on Aquis are less likely to lead to price movement
than on other lit markets. Aquis uses a subscription pricing model
which works by charging users according to the message traffic they
generate, rather than a percentage of the value of each stock that
they trade.
Aquis Stock Exchange (AQSE) is a stock market providing primary
and secondary markets for equity and debt products. It is
authorised as a Recognised Investment Exchange, which allows it to
operate a regulated listings venue. The AQSE Growth Market is
divided into two segments 'Access' and 'Apex', with different
levels of admission criteria. The Access market focuses on earlier
stage growth companies, while Apex is the intended market for
larger, more established businesses.
Aquis Technologies is the software and technology division of
Aquis Exchange PLC. It creates and licenses cutting-edge,
cost-effective matching engine and trade surveillance technology
for banks, brokers, investment firms and exchanges.
Aquis Exchange PLC (AQX.L) is listed on the Alternative
Investment Market of the LSE (AIM) market. For more information,
please go to www.aquis.eu
Chair's Statement
Overview
This is my first official communication since being appointed
Chair of Aquis Exchange PLC (AQX) with effect from 1st January 2022
and it is with great pleasure that I am able to report that the
Group delivered significant increases in revenue and net profit
before tax reflecting strong performances from each of the Group's
3 business activities. These results were particularly noteworthy
given the continued COVID-19 challenges and the requirement to
handle the impact of the UK's exit from the EU.
Overall Group net revenue increased by 42% from GBP11.4m to
GBP16.2m and net profit before tax by in excess of 500% from
GBP0.5m to GBP3.2m driven primarily by the pan-European secondary
market trading activities and material increases in data
revenues.
During 2021 we were able to recommence trading in Swiss shares,
increase our overall pan-European secondary trading market share
and manage the transition of a significant part of the secondary
exchange trading business from the UK to France. Our aim is to
further develop our presence in Europe and enhance client
relationships within the EU 27 markets and this includes
transferring Jonathan Clelland, Group CFO & COO to Paris where
he has taken on the additional responsibility of CEO of Aquis
Exchange Europe (AQEU).
We also significantly increased data revenue following the
harmonisation of our offering and made material progress in our
Technologies division whilst innovative changes to Aquis Stock
Exchange (AQSE) increased liquidity and narrowed spreads which
helped drive growth in new issues.
In addition, we continued to invest in all areas of our
activities including the recruitment of David Stevens who has
joined as Chief Revenue Officer (CRO) and Richard Fisher as
Director of Finance (DoF), who subject to satisfactory completion
of the regulatory due diligence and other processes currently under
way, which are required under AIM Rules, and approval at the AGM in
April 2022, will step up to take over the CFO responsibilities
currently held by Jonathan Clelland.
We retained our flexible partial remote working environment
demonstrating how important robust business continuity plans and
effective working practices supported by a positive culture
throughout the organisation is during a rapidly changing and
challenging period.
We have also continued with the AQSE integration, the
strengthening of the Paris office and continued to invest in our
technology division making further significant progress with the
target of creating exchange grade cloud platforms.
Board and Governance
The Aquis Exchange PLC Board ("the Board") continued to evolve
in line with the Group's expansion and subsequent corporate
governance requirements during the year. Niki Beattie retired as
Chair on 31st December 2021 having served in that role for 9 years
and I was appointed Chair in her place. I would like to formally
thank and recognise Niki for all her hard work in helping Aquis to
successfully reach this stage of its growth and evolution.
Succession plans have also been established to cover other
non-executive board members as they come towards the end of their
nine-year tenure.
The Group consists of 3 regulated entities: AQX, AQEU and AQSE,
which holds a UK Recognised Investment Exchange Licence (RIE), that
allows it to offer primary listings as well as secondary markets
trading. All three entities require appropriate independent Board
governance.
Aquis complies with the FCA's Senior Management and
Certification Regime (SM&CR), which ensures that the identified
individuals; namely the Chair, CEO, CFO and Head of Regulation have
clearly prescribed assigned governance responsibilities.
We are pleased to announce that Fields Wicker-Miurin and Ruth
Wandhofer will join the Board of Aquis as independent non-executive
directors, subject to satisfactory completion of the regulatory due
diligence and other processes currently under way, which are
required by the AIM Rules, and approval at the next AGM. Fields has
a distinguished career with over 40 years' experience as an
executive in financial services, a social entrepreneur focused on
leadership, and a non-executive director and committee chair of the
boards of both global companies and government departments. From
1994-7 she led the transformation of the London Stock Exchange
(LSE) and the London equity markets while CFO and Strategy Director
and from 2006-7 she was the only non-US member of the NASDAQ
Technical Advisory Council. Fields was one of only 6 experts (and
the only British one) advising the EU Parliament on financial
services harmonisation in the lead-up to the Prospectus Directive.
She currently serves as a non-executive director and member and
chair of key committees of the main boards of BNP Paribas (the
eurozone's largest bank) and Scor (the world's 4th largest
reinsurance company) and is Deputy Chair of the Royal College of
Art & Design. It is our intention, as part of our succession
planning process, that Fields will take over the Senior Independent
Director role from Richard Bennett.
Ruth has considerable financial services experience. Following a
senior Executive career at Citi Bank she has served on a number of
Boards as an Independent Non- Executive Director including the
London Stock Exchange from 2018 to 2020 and currently Gresham
Technologies Plc and Permanent TSB Plc in Ireland. At Aquis, Ruth
will also sit on the ARCC and Aquis Europe subsidiary Board.
Danny Lopez joined the Board of AQSE as an independent Director
during the year. Danny is the CEO of Glasswall Solutions, an
award-winning cybersecurity firm that delivers unique protection
against sophisticated cyber threats in files and documents through
its ground-breaking technology. Danny is also an independent
non-executive director of Innovate Finance, an independent industry
body that champions the global FinTech community in the UK.
Culture, Stakeholder Engagement and Section 172 Duties
The Board continued its engagement with key stakeholders,
particularly focusing on employees and shareholders. During the
year I assumed responsibility as the appointed representative of
the Board to liaise with employees. We also undertook our third
annual employee engagement survey and once again overall feedback
was very positive. In addition, the Chair and various members of
the Board continued with a program to meet with key shareholders
when possible either in person or remotely.
The Board discharged its Section 172 (1) duties in a number of
ways, details of which are set out in the Annual Report and include
significant time focusing on strategy for the Group, considering
employees well-being during another very challenging year and
undertaking training in particular in the area of risk assessment
in order to improve the Board's effectiveness and maintain high
standards of conduct.
Environment, Social and Corporate Responsibility
The Board is focussed on the Company's responsibility to both
individually grow and operate on a sustainable basis and more
importantly the wider role that we play as an exchange operator, in
bringing issuers and investors together to create a sustainable
ecosystem where capital flows and investment can occur. This offers
us an opportunity to make a difference not only through our own
actions but also by creating an environment for other companies and
investors to make a difference.
From the outset Aquis has been committed to improving the
efficiency of markets through transparency and innovation. In
addition, we aim to stimulate growth in the economy by listening to
the needs of issuers and creating a supportive, fair and low-cost
environment for capital raisers to list instruments, particularly
for innovative young companies. We are committed to educating and
collaborating with these issuers about the expectations and
benefits of creating and adhering to ESG policies.
We have already made progress with our ESG plans through
integrating diversity objectives into our business plans and
reducing our environmental impact, details of which are set out in
the Strategic Report.
Our focus for the year ahead
All of the Aquis business lines are set for further profitable
growth and we continue to invest for future growth.
We recently announced the initiative to assume the business
activities of UBS MTF, the non-displayed matching pool, which we
anticipate will be finalised in April 2022. This initiative
represents a significant extension of the equities trading services
Aquis offers its clients and will complement its existing suite of
lit liquidity pools and range of order types. The pan-European
secondary market trading activities remains the core of the Aquis
Group and this initiative offers us the opportunity to expand our
client offering. This decision recognises that in recent years
there has been a change in the market's attitude towards, and
increase in, the use of non-displayed liquidity pools.
Our Board will undergo further planned changes as the longer
serving Non-Executive Directors retire from the Board, but with our
on-going commitment to succession planning, we are confident of
being able to maintain stability and continue to focus on ensuring
the business delivers on its strategy across all the aspects of the
business.
Glenn Collinson, Chair
Chief Executive's Report
The Aquis Group delivered material progress across all its
business activities during 2021 building on the maiden profit of
2020 against a backdrop of continued challenging economic
uncertainty.
The Group dealt comfortably with the requirement to continue to
run the exchange platforms remotely during the periods of lockdown.
It also managed to grow market share of the pan-European equities
market, achieving 5.2% market share of all trading including
auctions during 4Q21, compared to 4.7% during 4Q20.
Very strong growth from higher trading levels within Aquis
Exchange was supplemented by growth in the technology and data
divisions, together with the successful integration of AQSE
following the acquisition in 2020. Our growth continues to be
driven by the compelling nature of our subscription model and the
strength of our industry-leading exchange software platform. We
offer a faster and more reliable trading venue to all market
participants compared to other international trading venues; the
benefits of which are clearly now flowing through into improved
financial results.
This resulted in the Group reporting a 42% growth in revenue to
GBP16.2m (net of provisions) and a pre-tax profit of GBP3.2m in
2021, compared to a profit of GBP0.5m in 2020. This increase
demonstrates the significant progress made during the last 12
months and provides the Group with the profitable platform to
continue to invest and grow its principal business activities.
The Ukrainian conflict has resulted in extremely volatile market
conditions and there is no certainty as to when this conflict will
be resolved; however, at this stage, I do not believe this will
have a material adverse effect on the Group. In addition, there
remains some macro-economic uncertainty given the continued
presence of COVID-19 and the lack of certainty of the full impact
of Brexit; however, I believe that our strong team and technology
platform should enable us to overcome these and future challenges
.
Aquis Exchange
Over the period, the secondary market multilateral trading
facility ("MTF") platforms operated by the Group in London and
Paris delivered growth despite challenging economic and regulatory
conditions. In March 2019, the Company had established a French
subsidiary with full regulatory approval to operate an MTF covering
the European Union, AQEU. The transition from London to Paris took
place seamlessly in January 2021 with an uninterrupted service to
all our clients.
The number of trading members grew from 33 to 39 and a number of
members increased their activity levels, leading exchange revenue
to increase by 26% to GBP9.8m.
Aquis Exchange's market share of all pan-European trading
including auctions and dark pools strengthened to 6.0% 2Q21 before
partially reversing to 5.2% 4Q21. This is compared to a market
share of 4.7% 4Q20 and 1.8% at the time of the IPO in June 2018.
The second half decrease reflected the more volatile trading
conditions during 2H21 which resulted in an industry wide move from
lit to dark pools of liquidity. However, overall volumes executed
on the Aquis platforms during 2H21 were approximately the same as
1H21 and we are confident our lower toxicity and 24% liquidity will
ultimately underpin long-term market growth. Our proposed
acquisition of the UBS MTF activities will also add immediate
market share, providing us with access to dark pool trading. Our
Market at Close ("MaC") order type, launched in August 2019, made a
material contribution to trading volumes on the platform and we
anticipate it will grow further during 2022. As the MaC allows
members to enter orders for matching on the Aquis platform at the
closing price of the primary market, we now operate across a larger
cross-section of all available trading.
Aquis Exchange offered clients the ability to trade in excess of
1,700 stocks and ETFs across 15 European Markets as at the end of
December 2021. From the 4th February 2021 we were able to restart
offering trading in the Swiss market following the UK / Swiss
agreement at the beginning of 2021. Overall, the available
liquidity, equal to approximately 24% of total pan-European equity
liquidity should underpin future market share growth.
Brexit and COVID-19 continued to present challenges during the
period, and it is very encouraging that we have delivered such
strong growth despite these issues and further demonstrates the
highly competitive nature of our exchange business. This
performance during a very challenging period is reflective of the
significant efforts by all the Aquis employees during long periods
of remote working.
Aquis Technologies
In addition to the exchange business, Aquis licenses its leading
exchange related technology to a variety of international financial
services clients across different asset classes. Revenue from
technology licensing in 2021 grew to GBP3.4m (net of provisions),
reflecting the increasing interest in our high-calibre, in-house
technology; however, revenue recognition remains lumpy and the
timing of this accounting recognition difficult to predict.
Aquis Technologies continues to develop its technology platforms
to support growth across different asset classes internationally
and during the year made further progress in the plan to create a
cloud native exchange.
Aquis Market Data
Data revenues increased 159% in 2021 to reach GBP2.3m as the
Group implemented a harmonised data structure. Data is seen as a
key pillar of the Aquis strategic plan, and we expect that it will
continue to make a material contribution to the Group.
As demonstrated by the increased revenue, data is becoming a key
contributor to the Group results; however, it may increase further
in importance in the long-term if a consolidated tape for Europe is
implemented. Introducing a consolidated tape for Equities in Europe
should improve the quality and pricing of market data and lead to a
fairer distribution of data fees across the various European
trading venues. The Group is continually monitoring European
Commission plans and market demand to introduce such a tape and is
well placed to understand and grow the Group data activity as this
market in Europe develops.
Aquis Stock Exchange (AQSE)
Following the acquisition of AQSE in March 2020 we successfully
completed the technology migration, concluded a consultation period
with industry participants in order to assess opportunities to
enhance the market functionality and launched an innovative market
making scheme, which has significantly enhanced liquidity and
narrowed spreads of stocks. These innovations have supported the
growth of AQSE including additional market makers, corporate
advisers, brokers and 24 new issuers during the year an increase of
approximately 30% compared to the number of companies at 31
December 2020. We have a strong pipeline of new companies and dual
listed Aquis Exchange PLC with effect from 29 March 2022.
The acquisition of AQSE has provided us with the ability to
operate a Recognised Investment Exchange (RIE) giving our business
the same status as the large national exchanges in Europe and
providing further resilience in the face of possible regulatory
headwinds.
Underpinned by the Group's proven technology and a track record
of transparency and innovation, we have already made material
progress in building AQSE into a competitive and disruptive primary
marketplace, particularly as MiFID II and the FCA Wholesale Markets
Review continues to put the traditional business model of national
exchanges under pressure. I believe that we have a unique
opportunity to build a pan-European, technology-driven, listing
exchange for growth companies, overcoming several issues faced by
small and mid-cap market participants today.
Further Investment in Research and Development (R&D)
The Group continued to invest in R&D throughout 2021 and
will do so in 2022 in order to maintain and enhance the quality of
its technology and its ability to be able to deliver new products
and platform enhancements to its clients. Our proven trading
platform has been developed in-house and is based on proprietary
technology, which does not rely on third party software suppliers.
The effectiveness and reliability of our technology was
demonstrated through our initial response to COVID-19 and the
requirement to maintain a flexible semi-remote working environment
and the transition of trading activities following Brexit both of
which were achieved seamlessly. The quality of our technology
underpins our Group strategy and is also one of the principal
reasons for the growth in our technology licensing business.
I believe this structure and continued investment in R&D
gives us a significant competitive advantage on functionality,
price and ability to deliver. Aquis' nimble technology organisation
ensures expeditious product development and, together with Aquis'
further investment, will allow the Group to react quickly to
dynamic market conditions. We intend to continue to work on further
developments which will foster future growth.
Resources
During 2021 we continued to invest in personnel resources across
a number of departments including the key hires of a Chief Revenue
Officer (CRO) and Director of Finance (DoF) both of whom have
joined the Executive Committee.
To deliver against our current planned or future initiatives we
will where needed continue to further strengthen our team in
particular in support of the sales and technology activities.
Outlook
Post year-end we announced the initiative to take over the UBS
MTF dark pool activities which we anticipate will be finalised in
April 2022. This is a very exciting initiative offering us the
opportunity to expand our overall pan- European equities market
offering and feedback from the clients has been very positive.
There remains some macro-economic uncertainty given the
continued presence of COVID-19 and the lack of certainty of the
full impact of Brexit; however, I believe that our strong team and
technology platform should enable us to overcome these and future
challenges. Our technology systems have dealt efficiently with
significantly higher messaging volumes caused by increased
volatility, and we continue to have an effective remote operating
capability in place. Although it is difficult to forecast with any
degree of certainty the effect of these events on the broader Group
for the time being, I remain confident in our unique proposition
and ready to achieve the next level of operational, financial and
strategic success.
There has been an encouraging start to the current financial
year and so far in 2022 trading continues in line with current
market expectations.
We are already delivering on our vision of a transformation of
primary markets for small and mid-cap stocks through Aquis Stock
Exchange where we have a pipeline of 50-60 companies looking to IPO
and expect the growth of the Exchange to continue at pace
throughout FY22.
We continue to invest in our business to ensure that we maintain
our ability to grow. This investment should support the aim of
broadening and improving our market position through innovation and
excellence. We will continue to promote the Aquis values of
transparency, fairness and simplicity, enabling our end customers
to get better performance and results.
Our principal aim in the future remains to deliver robust and
sustainable returns for the benefit of shareholders and all our
other stakeholders in the medium and long term and our highly
capable and experienced management team remains focused on serving
our clients as we grasp the opportunities ahead and, in particular,
on delivering our shared goals, and our vision for transformation
of primary markets for small and mid-cap stocks.
Alasdair Haynes
Chief Executive Officer
Strategic Report
Overview of the business
Aquis Exchange Plc ("Aquis" or "the Company"), is the principal
operating company and the holding company of an exchange services
group ("the Group") which operates three principal divisions: Aquis
Exchange, Aquis Technologies and Aquis Stock Exchange.
-- Aquis Exchange, a pan-European Multi-Lateral Trading Facility
(MTF) operator that provides secondary market trading in
pan-European stocks that are listed on other exchanges.
-- Aquis Technologies provides exchange and regulatory technology to third parties.
-- Aquis Stock Exchange Limited ("AQSE") is a Recognised
Investment Exchange ("RIE"). It runs a primary market for small and
medium size issuers and secondary market trading in those
stocks.
The Company also has a French subsidiary, Aquis Exchange Europe
SAS, ("AQEU"), an MTF established to enable European clients to
continue to trade EU stocks, which provides secondary market
trading in EU 27 stocks listed on other exchanges.
The Company and AQSE are regulated by the UK Financial Conduct
Authority ("FCA"), while AQEU is regulated by the Autorité de
Contrôle Prudentiel et de Resolution ("ACPR") and the Autorité des
Marchés Financiers ("AMF").
Following the UK exit from the EU 99% of all EU continuous
trading moved from the exchange business in London (AQXE) to AQEU
on 4th January 2021. This move was handled seamlessly.
The Group has made significant progress in the development of
its activities since the IPO in June 2018 and is well positioned to
realise its primary objective which is to become the leading
technology driven exchange services group and also to help drive
improved transparency and fairness in the securities trading market
through the introduction and enhancement of competition and
innovation. With these guiding principles the Group's main focus is
to:
-- Capitalise on regulatory and technical shifts in market
infrastructure by providing an exchange which offers deeper
liquidity and transparency, higher quality execution for
intermediaries and investors;
-- Continue to increase the number of members of Aquis Exchange
and associated trading volumes by providing a robust and innovative
platform that responds to their needs;
-- License its proven technology platform to third parties that
require trading or market surveillance technology; and
-- Positively address the current market issues of spread and
liquidity in small and mid-cap trading through AQSE's RIE
status
The trading platform for all Group entities is run on the same
trading technology and all entities apply a unique
subscription-based pricing model based on electronic messaging
traffic and a lit market. This means that the dealing price prior
to the trade is transparent to the whole market. This is in
contrast to pricing on dark and grey markets, where price discovery
is only available to the market post-trade.
AQXE and AQEU MTFs apply a non-aggressive trading model, which
means that certain types of trading behaviour are not allowed, and
it encourages more passive trades to rest in its order book. This
creates greater depth of liquidity and less potential for
information leakage or "toxicity" in the market. Independent
studies have verified that Aquis' non-aggressive trading model has
materially lower toxicity than its competitors, which reduces
adverse price movements thereby lowering the implicit costs of
trading for the end investor. This is a significant positive
differentiating factor.
AQSE is focused on creating a primary market for growth company
issuers and a secondary market for the trading of their stocks.
Clients and Competitive Landscape
The client base of all three entities consists, principally, of
investment banks and brokers acting on behalf of institutions such
as pension funds, asset managers and retail brokers to execute
their orders and, in the case of AQSE, it includes the issuers who
wish to raise capital on the platform.
The principal competitors to Aquis business are the incumbent
national exchanges and other pan-European trading venues. In
secondary markets they charge customers on a per transaction model
to allow fully aggressive trading.
Since Aquis commenced trading it has increased its market share
of EU secondary markets trading, which has grown to reach an
average of 5.2% of the overall pan-European market of all trading
including auctions and dark pools during 4Q21, an increase of 11%
compared to the 4Q20 average of 4.7%. This business is well
positioned to benefit from regulatory changes, which support
transparent, low toxicity growth on "lit" markets as well as
fairness and non-discriminatory behaviours. The regulatory trends
and institutional support for greater transparency in European
equities trading also support future business growth.
Aquis' matching engine and surveillance technology has been
operating successfully for a number of years. It has been developed
for multi-asset class trading and is attracting customers wishing
to license the technology as the trading engine for a broad range
of instruments. The Company's principal technology customers are
new equity trading venues where the market is opening up to
competition as well as exchanges specialising in digital assets,
MTF operators across asset classes and market participants
requiring real time market surveillance. Aquis delivered a proof of
concept for cloud-based exchange technology in partnership with AWS
and the Singapore Stock Exchange in 2020 and continues to see
significant interest in this space. Competitors of the licensing
business are other matching engine providers and surveillance
software providers.
We are a strong supporter of the regulatory principles such as
best execution and greater transparency for markets that have been
introduced and we are committed to complying with market
regulation. We believe that we are well placed to manage any
regulatory divergence between the UK and EU given our robust and
agile business model, our lean cost structure and our technology
leadership.
The Board has established for the senior Executives clear
financial and non-financial KPIs for the Group. For 2021 these were
revenue, earnings before interest, taxation, depreciation and
amortisation (EBITDA) , quality of technology, planning,
sustainability and compliance with regulations and corporate
governance. The Group has established financial and non-financial
KPIs to allow clear performance measurement against the most
important targets set by the Board. Financial KPIs represent 70%
and non-financial 30%. The financial KPIs are based on target
revenue and net profit before tax. The non-financial KPIs address
strategy, resources, information and communication . Further
details are given in the Remuneration Report.
Financial Review
It has been a year of very strong revenue growth during 2021.
The breakdown of the principal revenue activities is as
follows:
Group
---------- ---------- --------------
2021 2020 YoY Growth
GBP GBP %
====================================== ========== ========== ==============
Revenue analysed by class of business
Subscription fees 9,766,046 7,738,284 26.2
Licence fees 4,404,606 2,319,700 89.9
Issuer fees 692,743 524,402 32.1
Data vendor fees 2,319,360 894,867 159.2
-------------------------------------- ---------- ---------- --------------
17,182,755 11,477,253 49.7
-------------------------------------- ---------- ---------- --------------
The Group generated EBITDA for the year of GBP4.3m compared to
GBP1.5m in the previous year. The continued growth in profits
during 2021 is primarily attributable to increased exchange revenue
as members' subscriptions have risen as a result of increased
trading levels, as well as increased revenue from data, technology
licensing and issuer fees.
The trade receivables resulting from revenue from licensing
technology contracts attract an IFRS 9 (impairment provision on the
trade receivables arising from contract assets). This year the
application of IFRS 9 has resulted in an impairment provision
during the year of GBP972k (2020: GBP109k).
The profit before taxation for the 2021 financial year of
GBP3.2m compares very favourably with the profit before taxation in
2020 of GBP0.5m. Profit after tax increased more than 300% to
GBP4.3m and EPS (fully diluted) more than 400% to 15p per share.
The profit before taxation is after applying amortisation charges
to internally generated intangible assets, as well as depreciation
and finance charges, which reflect the accounting treatment of
leases under IFRS 16. In December 2021 Aquis signed a lease
agreement for a new office and will move into this in Q2 2022, with
the existing property lease maturing in May 2022. The lease
liabilities arising are amortised over the life of the leases,
attracting a finance expense charge amounting to GBP26k for 2021,
whereas the right of use assets are depreciated on a straight-line
basis over the life of the lease, attracting a depreciation charge
of GBP149k for 2021. These costs are in line with the 2020
results.
The Group's cash and cash equivalents as at 31 December 2021
were GBP14.0m (2020: GBP12.3m) maintaining the Group's strong cash
conversion rate.
Group investments, productivity and capital management
The Group has continued to invest in its technology offering,
including the creation and enhancement of new order types,
enhancements to the surveillance system and auction systems and
further technical development to enable the move into different
asset classes. In addition, the Group has made further investment
in personnel resources as it continues to develop capability and
brand awareness.
The Group is required to maintain sufficient capital to meet the
regulatory obligations for all entities. These are calculated and
updated annually. At 31 December 2021 the Company ICARA requirement
amounted to GBP3.9m (2020: GBP3.2m). The individual entities of the
Group meet the respective FCA and ACPR capital adequacy
requirements with plenty of headroom for further investment in
business operations.
The Board considers that its investments have contributed to the
Group's ability to gain new clients, broaden its customer base and
increase revenue. The Group recognises the importance of continuing
to enhance productivity, and the commitment to future investment,
both technically and in terms of resource training and development.
The Group has established both short- and long-term incentive plans
based on performance for all employees, which are set out in more
detail in the Report of the Nomination & Remuneration Committee
and aligns the employees' interests with the long-term strategic
objectives of the Group.
In deciding its investment plans, Group management receive a
detailed analysis of the exchange and client technical
opportunities and related time requirements on a quarterly basis,
and then determine the personnel and other resources that it wishes
to allocate to these opportunities. This information also includes
an estimate of the deployment cost.
Future development of the business
In order to support its long-term vision and in order to
strategically position for continued growth, Aquis has invested
significantly in its business differentiators, R&D in the
technology platform, brand and personnel resources. The Group is
cognisant of the importance of such investments to maintain
innovation and strong quality delivery.
AQSE Acquisition
Following the acquisition of AQSE in March 2020, the Group has
invested significant expense and resource into re-building the
market presence and brand and has started to realise some of the
anticipated synergies across the Group's exchange memberships, data
offering and use of technology.
Stakeholder Management
The Group complies with the requirements prescribed by S172 of
the Companies Act to disclose how the Company promotes its success
for the benefit of all stakeholders.
The Board is acutely aware that the Group's long-term success
and sustainable value creation is critically reliant on maintaining
good relations with all stakeholders and ensuring that decisions
are made after taking account of the principal stakeholders'
interests. Specific stakeholder considerations undertaken by the
Board this year included, but were not limited to, the Group's
handling of the continued challenges posed by the COVID-19 pandemic
and the Group's handling of Brexit.
In arriving at these decisions, the Board has assessed the
likely consequences of any decision in the long term, the interests
of the Group's employees, the need to foster the Group's business
relationships with suppliers, customers and others, the impact of
the Group's operations on the broader community, the desirability
of the Group maintaining a reputation for high standards of
business conduct, and the need to act fairly between shareholders
of the Company.
Details on how Aquis and its Board engage with its principal
stakeholders, are given below.
Clients
Management pro-actively gathers regular feedback from clients,
both positive and negative, in order to understand their
ever-evolving needs, identify any improvements that would result in
better client outcomes or satisfaction and to foster good client
relations. This is regularly fed to the Board at meetings or on an
ad hoc basis, if required.
Shareholders
Executive Management meet with the key shareholders at
appropriate times during the year and provide feedback to the
Board.
Additionally, the Chair and other Non-Executive Directors
continued, where possible, to engage with a subset of key
shareholders through one-on-one meetings during the last quarter of
2021 to introduce the new Chair and to ensure that their views and
opinions are clearly understood. Shareholders have been extremely
appreciative of these meetings and feedback is provided to the
Board in both written and verbal updates.
Employees
The Group promotes a positive and inclusive culture. Team
meetings and Group briefings are held on a regular basis to ensure
all personnel are informed of the Group's performance and key
strategic objectives and goals. In addition, during the year Glenn
Collinson took over the responsibility as the Board's nominated
representative for employee engagement and facilitated meetings
with employees so as to ensure that their voices are heard through
an independent ear from the Board.
This was complemented by the annual employee engagement survey,
which allowed employees to provide feedback in confidence. The
Group first implemented the employee engagement survey in 2019 and
results have been consistently positive. The Executive develops an
action plan to address the key areas highlighted with particular
emphasis on our core values and on investing further in employee
training and career development.
Suppliers
The Group has identified key suppliers that include suppliers of
office hardware and consumables, as well as suppliers such as
liquidity providers and advisers such as auditors, brokers,
recruitment agents, legal advisers and PR consultants. The Group
seeks the independent and experienced view of its key advisers on
various matters as and when required. Sometimes this is directly
with the Board, or the Board will ensure that the Executive reports
on advice provided to the Group when needed.
Regulators
The Group takes an open and co-operative approach with its
regulators and positively embraces the FCA's 11 principles of
business. The Group submits regular returns to the FCA, the ACPR
and the AMF, and employees whose roles encompass compliance
activities are encouraged to attend regular external presentations
and workshops arranged by the regulators on topical issues, and
also receive regular professional update training. All new and
existing employees and advisers are made aware of the FCA, ACPR and
AMF's principles of business, and undergo training required by
finance professionals working at an equities exchange group. The
Group arranges regular compliance assessments to provide assurance
that the Group is meeting the requirements of the regulator.
During the year the Board undertook training, which covered
reminders of Directors' duties in the UK and Europe with regards to
the regulation and oversight of financial market
infrastructures.
Compliance with Section 172 (1) of the Companies Act 2006
Section 172 of the Companies Act 2006 requires a Director of a
company to act in the way he or she considers, in good faith, would
most likely promote the success of the company for the benefit of
its members as a whole. As such, Section 172 requires a Director to
have regard, amongst other matters, to the:
-- Likely consequences of any decisions in the long-term
-- Interests of the Company's employees
-- Need to foster the Company's business relationships with suppliers, customers and others
-- Impact of the Company's operations on the community and environment
-- Desirability of the company maintaining a reputation for high standards of business conduct
-- Need to act fairly as between members of the company
We set out below some examples of how the Directors have had
regard to the matters set out in Section 172(1) when discharging
their Section 172 duty and the effect of that on certain of the
decisions taken by them.
Board Effectiveness and High Standards of Business Conduct
The Board remains committed to high standards of corporate and
regulatory governance. During the year we undertook training, which
covered reminders of directors' duties under UK law, under the UK
Corporate Governance Code and also under UK and European regulation
with regards to the oversight of financial market infrastructures.
Additionally, it explored how to improve the Group's cyber security
risk management frameworks and became more informed about the
policy-making environment for financial markets in Europe.
Consequences of Long-Term Decisions
Considerable time was spent focusing on the Group's strategy and
challenging management to think about the longer-term impact of
decisions, how those decisions were in line with the Group's
values, the long-term sustainability of the Company and its
subsidiaries and the desire to maintain its reputation. All Board
members took part in focused risk management training in the
year.
The Board has also undertaken succession planning both for the
Executive and the Board. Niki Beattie reached her nine-year tenure
as a director on 31st December 2021 when she ceased to be
independent and stepped down as the Chair and as a Non-Executive
Director. She was succeeded by Glenn Collinson. Two other NEDs are
also coming towards the end of their nine-year tenure during the
next 12-18 months when they will cease to be independent. The Board
operates a skills matrix to map the requirements of the
organisation against the current skills and composition of the
Group Board and the skills and composition gaps that will be
created as the Group evolves and directors move off the Board. This
matrix is updated at least annually and was used effectively in the
search for the latest additions to the Boards of both Aquis and
AQSE.
During 2021, the Group recruited a new Chief Revenue Officer
(CRO) and a new Director of Finance (DoF). Management plan to
recruit additional employees, in particular in the technology area
in the UK and France during 2022.
COVID-19 and The Interests of Employees
COVID-19 continued to present significant challenges for every
firm including Aquis during 2021. The Board monitored the
day-to-day operations, the business continuity plans and the
employees' well-being carefully throughout the year. This continued
as the various lockdowns unfolded and included considering work
from home issues as well as the office environment for the periods
between lockdowns.
The Board has also ensured engagement with employees through the
engagement survey and the nomination of a Board representative to
meet with employees when possible.
Our ESG journey
Our Purpose
In its role as a disruptor, Aquis' aim has always been to
improve financial markets by maintaining the utmost transparency
and least market toxicity for the benefit of the end investor. In
this way it reduces both the explicit and implicit costs of trading
that are borne by investors.
In addition, the Group is also focused on stimulating growth in
the economy by listening to the needs of issuers and creating a
supportive, fair and low-cost environment for capital raisers to
list instruments, particularly for innovative growth companies
while ensuring an appropriate balance of investor protection. Aquis
also recognises the pivotal role it has to play in educating those
issuers about ESG and how they can set and achieve goals and
facilitating their disclosures to investors.
Our Culture, Diversity and Employee Well-being
The Group is committed to ethical business conduct and expects
the highest standards of integrity to be followed by the Directors
and all employees. The Aquis Group culture is underpinned by the
following core values:
-- Trust (integrity, competence and deliver what and when we say we will);
-- Pro-activity (discipline and initiative);
-- Openness (transparency);
-- Excellence (through creativity and innovation);
-- Collaboration (through positive, collegiate and free thinking); and
-- Respect.
Despite a further increase in employee numbers in 2021 the Group
has a relatively small resource base, and therefore has
concentrated on recruiting personnel with a high degree of
specialist skills. The Group provides on- going training and
support with the aim of ensuring that personnel retain and enhance
their technical skills and that employees feel that there is
opportunity to develop within the Group.
The Group has a Diversity and Inclusion Policy that emphasises
Aquis' desire to create a supportive and inclusive culture amongst
the whole workforce. We believe it is in the best interests of the
Company and the wider community to promote diversity and eliminate
discrimination in the workplace. Our aim is to ensure that all
employees and job applicants are given equal opportunity and that
our organisation is representative of all sections of society. Each
employee will be respected and valued and able to give their best
as a result.
The policy reinforces our commitment to providing equality and
fairness to all in our employment and not providing less favourable
facilities or treatment on the grounds of age, disability, gender
reassignment, marriage and civil partnership, pregnancy and
maternity, race, ethnic origin, colour, nationality, national
origin, religion or belief, or sex and sexual orientation.
We are opposed to all forms of unlawful and unfair
discrimination. All employees, management, agency, casual workers,
and independent contractors no matter whether they are part-time,
full-time, or temporary, will be treated fairly and with respect.
When Aquis selects candidates for employment, promotion, training,
or any other benefit, it will be on the basis of their aptitude and
ability. All employees will be given help and encouragement to
develop their full potential and utilise their unique talents.
Therefore, the skills and resources of our organisation will be
fully utilised, and we will maximise the efficiency of our whole
workforce. Aquis' commitments are:
-- To create an environment in which individual differences and
the contributions of all team members are recognised and
valued.
-- To create a working environment that promotes dignity and respect for every employee.
-- To not tolerate any form of intimidation, bullying, or
harassment, and to discipline those that breach this policy.
-- To make training, development, and progression opportunities available to all staff.
-- To promote equality in the workplace, which Aquis believes is
good management practice and makes sound business sense.
-- To encourage anyone who feels they have been subject to
discrimination to raise their concerns so we can apply corrective
measures.
-- To encourage employees to treat everyone with dignity and respect.
-- To regularly review all our employment practices and
procedures so that fairness is maintained at all times.
Aquis has implemented an equality, diversity and inclusion
policy which has been communicated to all employees emphasising
that they are obligated to comply with all its requirements and
promote fairness in the workplace. The policy is also be drawn to
the attention of agents, stakeholders, customers and job
applicants. It is therefore very pleasing to report that gender and
non-gender diversity strengthened further during the course of the
year. It was also pleasing to see that through focused effort with
external recruiters a more diverse selection of candidates made it
through to the shortlists, at all levels of seniority and we
believe our diversity and inclusion policies will have a positive
impact on the successful execution of the Group strategy.
This year the Group has established aspirational 3-year
diversity targets for the Board and for the employees. These
targets have been established to underpin the importance the Board
places on this issue and to provide clear guidance and focus on
these aspirations. The Board has established a target to increase
the overall female NED ratio. During 2021 the Board assessed the
profiles and skill sets of the current Board Directors, including
potential retirees during the next 3 years in order to help the
Company meet its 3-year aspirational diversity targets.
The employee targets are set out below:
1. improve all diversity ratios
2. increase the management team diversity ratios
3. decrease the female / male seniority gender pay gap
4. include more comprehensive employee statistical analysis in the annual report
5. create a targeted diversity inclusive supplementary
development program for employees who we believe have the potential
to be promoted to Exco in the next 5 years
6. implement a more comprehensive mentoring system
In addition, the Group has established targets over the next
three years (i.e. to 2025) where the aspirations are to:
-- reduce the average seniority pay-gap by 12% from 37% to 25%.
-- meet the Hampton Alexander Review target of at least 30% of board members being female
-- have a gender pay (seniority) gap no worse than the UK Financial Services industry average
The flexible working policies which we implemented in 2020 have
proved very successful. During the last quarter of 2021 we saw an
increased desire for a partial return to work from a large % of our
employees which we have supported whilst adhering to government
recommended health guidelines.
The Group runs an annual anonymous employee survey and arranges
regular meetings with the Board nominated employee representative.
In addition, employees have regular one-to-one sessions with their
immediate line manager and annual reviews where development plans
are discussed to ensure individuals' objectives are aligned to the
business strategy and to improve levels of employee engagement.
The Group has a commitment towards preventing slavery and human
trafficking throughout our supply agreements: the Group complies
with the Modern Slavery Act 2015 (MSA) and adopts a zero-tolerance
approach towards slavery and human trafficking and expects all
those in our supply chain (and contractors) to comply with the
MSA.
Consumption and The Environment
The Directors endeavour to promote the consumption of resources
in a manner that fosters the long-term sustainability of the
business and the environment in which it operates and are conscious
of the requirement to monitor these activities.
Although the Group has a small number of personnel and
associated office space, it recognises that it contributes directly
to carbon emissions through its consumption of energy, waste and
water, through staff travel and, indirectly, through its
consumption of supplies and equipment including office
hardware.
During the year on average employees continued to work remotely
for material periods due to the COVID-19 pandemic which contributed
to reduced carbon emissions associated with employees commuting to
the office and the Group remains committed to continuing to operate
a flexible remote working structure which will continue to have an
incidental beneficial effect on carbon emissions. In addition, the
building electricity provider for the current Aquis office obtains
energy from 100% renewable electricity and carbon neutral gas. Good
progress has been made in the year with regard to the 2 data
centres used by Aquis, and we are pleased to note that both are now
powered by 100% renewable energy.
We have also continued progress on the target to deliver a cloud
native exchange. While most major financial exchanges operate using
physical data centres, the infrastructure required to run a trading
environment is massive, costly and unfriendly to the environment
because of the fact that servers must always be "on" and
significant duplicative processing occurs. If trading firms could
leverage all the benefits of running a cloud-based solution, the
cost optimisation, scalability and resiliency would make a positive
contribution to reducing the impact on the environment.
Governance
When Aquis listed in 2018, it voluntarily chose to follow the
highest standards of corporate governance when it committed to
adhering to the UK Corporate Governance Code and the Directors have
implemented appropriate measures to comply, so far as practicable,
with the Code.
Aquis and AQSE are directly authorised and regulated by the FCA
and AQEU is regulated by the ACPR and the AMF. The Group fully
complies with the relevant rules and guidelines in all respects and
monitors that compliance throughout the year.
The Group's objective is to establish an open and cooperative
relationship with all regulators, and it positively embraces the
FCA's 11 principles of business. The Group submits regular returns
to the FCA, and employees whose roles encompass compliance
activities are encouraged to attend regular external presentations
and workshops arranged by the FCA on topical issues, and also
receive regular professional update training. All new and existing
employees and advisers are made aware of the FCA's principles of
business, and undergo training required by finance professionals
working at an equities exchange group. The Group arranges regular
compliance assessments to provide assurance that the Group is
meeting the requirements of the regulator.
The wider community
Aquis has been involved in a number of charitable and community
enhancing initiatives e.g. supporting the NHS and Help for Heroes
throughout the year and employees have shown their desire to make a
difference.
Knowledge Transfer Project
Aquis is proud to have started the partnership process with the
University of Derby as part of a two-thirds government funded
Knowledge Transfer Project ("KTP") that will involve industry-led
research and development on Artificial Intelligence for trading
platform surveillance alerts that will promote an efficient and
accurate market abuse monitoring system.
Current surveillance systems are deterministic, handcrafted,
generate a high percentage of false positive alerts and run a high
risk of human fatigue and/or boredom. Consequently, market abuse
events may often be missed when analysing a large number of false
positives. As part of our mission to improve transparency in
financial markets, this partnership will publish research papers on
machine learning techniques that will mitigate human error in
detecting fraudulent trading practices that harm the integrity of,
and trust in, financial systems that are critical for the modern
economy.
As part of our mandate to strive for innovation, we are excited
for what the future holds for machine learning and artificial
intelligence in the trading industry and are encouraged by the
widespread support for this project.
Next Steps in Our ESG Journey
During the strategic planning process, we assessed a number of
potential ESG initiatives Our short-term goal is to complete the
assessment of the sustainability risk factors of the Group's
day-to-day activities and translate them into a meaningful
Group-wide ESG strategy that can be woven into our main strategic
goals.
In addition, during 2022 we aim to:
-- Develop a formal ESG policy
-- Set formal short, medium and longer term non-financial goals
on material ESG topics that are directly relevant to our
business
-- Introduce a first round of formal initiatives to reduce ESG impact and manage ESG risk
-- Undertake an initial assessment of potential broader ESG
initiatives that may have a positive impact on the wider community
through the Group's role as a primary exchange
Principal risks and uncertainties
The identification and management of risk is an integral part of
the execution of Aquis' strategic vision and operations. The below
provides an overview of the principal risks facing the Group:
STRATEGIC RISKS
Risk Risk Description Mitigation
Economic The effects of Ukraine, Aquis derives revenues
landscape COVID-19 and Brexit on from both fee and contractual
the global, European and annuity-based streams,
UK economic conditions which is less impacted
and the speed of recovery by cyclical market driven
may negatively affect the trends.
Group's trading volumes The recent horrific events
resulting in lower revenues in Ukraine have caused
or increased costs. immeasurable suffering
and harm but are not expected
to have a material adverse
effect on the economic
landscape nor on the Group's
trading volumes.
Whilst COVID-19 had a material
negative effect on the
economic landscape for
many countries; the UK
and European economies
have made substantial recoveries
during the last 18 months
and overall total market
volumes have remained strong
Since Brexit pan-European
trading has shifted almost
100% to the Group's MTF
subsidiary in France, AQEU,
that has full regulatory
approval from the ACPR
to allow the Group to continue
to operate as an MTF.
----------------------------- ----------------------------------
Risk Risk Description Mitigation
Legal/Regulation The Group operates highly Senior management consistently
regulated entities, including monitor regulatory developments
two MTFs and an RIE and including the MifiD review and
is required to maintain Wholesale Markets Review, which
sufficient regulatory capital are discussed and actioned at
and comply with all legal Audit Risk and Compliance Committee
and regulatory requirements (ARCC) meetings and engage regularly
necessary to operate the and directly with regulators
Group's business. All three including where appropriate formal
group entities hold regulatory responses to consultation documents.
licences and must hold their The Board reviews a quarterly
own capital. dashboard that incorporates the
There is the risk that current Group's behaviour and statistics
regulation or future changes in relation to regulatory
could have an adverse obligations.
effect on the Group. Possible The Board also places considerable
impacts may be (but are importance on having competent
not limited to): staff and advisors to help manage
* Sustained downturn in revenues could put the legal and regulatory risk.
regulatory capital at risk; The Board considers regulators
as key stakeholders and endeavours
to maintain positive working
* One of the group entities could be subject to a fine relationships with the regulators
or a lawsuit which may draw on the entities' finances for each group entity.
Each member of the Group currently
has sufficient excess regulatory
* Change in regulation may increase costs for the Group capital to deal with any potential
or require unanticipated investments changes in regulation.
Changes in regulation are usually
accompanied by a period of
* Inability to meet regulatory requirements could consultation
result in a licence being withdrawn and prevent the that allows market participants
Group entity from operating its core business to provide feedback before changes
are made and a further period
to prepare for change once changes
In addition, changes in in regulation are determined.
tax law may result in an The Group consistently reviews
increase in the overall the risks associated with possible
tax burden of the Group changes in tax legislation.
which could have a materially
adverse effect on the Group's
business.
------------------------------------------------------------ -------------------------------------
Risk Risk Description Mitigation
Competition The Group operates in a Aquis' competitive differentiation
highly competitive global is underpinned by its subscription-based
industry. model and lack of aggressive trading.
The principal competitors This is hard for incumbent exchanges
to the trading business to replicate without significantly
are the national exchanges, impacting their own revenue models
other pan-European MTFs which have always been based on
/ Recognised Investment a per transaction basis and on
Exchanges (RIEs) which currently charging significant data fees
charge customers on a per to participants who trade aggressively.
transaction model and accept Whilst the effects of competitor
both passive and aggressive behaviour can never be fully mitigated,
market makers. These exchanges the Company has consistently increased
have significant market its secondary market trading market
share and could move to share since it was formed. Senior
copy Aquis' subscription management initiatives
fee model and/or differentiate to reduce this risk include: consistent
between passive and aggressive monitoring of competitor activity
trading. and, maintaining close customer
Other competitors to the relationships so as to understand
exchange business are ad their evolving needs, and the acquisition
hoc OTC trading and Systematic of a primary listing business thereby
Internalisers ("SIs") which gaining RIE status.
operate off-exchange models Following the change in the tick
and make money through spreads. size regime for SIs in June 2021
New technologies such as their competitive advantage was
distributed ledger technology removed, and their market share
are emerging but have yet gains have decreased.
to gain ground in trading, As a disruptive firm, Aquis remains
clearing custodian services vigilant about changing technologies
and settlement of equities. and how it might embrace them to
further its business model.
------------------------------------ -------------------------------------------
Intellectual The Group is reliant on The Group has taken steps that
property and copyright, trade secret are consistent with industry practice
data protection protection, database rights to reduce these risks by establishing
and confidentiality and controls to protect the confidentiality
licence agreements with and integrity
its employees, clients and of customer information, and these
others to protect its intellectual controls are consistently reviewed
property rights. for their effectiveness at quarterly
The Group is subject to ARCC meetings.
a number of laws relating
to privacy and data protection,
including the UK's Data
Protection Act 1988 and
the Privacy and Electronic
Communications (EC Directive)
Regulations 2003 and the
EU General Data Protection
Regulation (GDPR).
------------------------------------ -------------------------------------------
OPERATIONAL RISKS
Risk Risk Description Mitigation
Technology The operation of the Group A defining feature of the
is critically reliant on Aquis business model is
the smooth and efficient its high calibre, in-house
functioning of technology. technology. The technology
Technological failures was built and is maintained
would negatively affect by highly skilled employees.
clients and the Group's Aquis actively seeks to
ability to deliver on performance retain the employees through
obligations. It could also flexible attractive working
result in regulatory scrutiny practices and remuneration
or fines or requirements policies and to continually
for further investment. enhance the technology
Failure to protect Intellectual to meet client requirements.
Property could mean that The Group's key infrastructure,
competitors gain access development and operational
to Aquis' technology or activities are prioritised
make Aquis susceptible accordingly, and resources
to external infiltration. are closely and consistently
These risks could adversely monitored and reviewed
affect the firm's financial with the aim to ensure
and competitive situation. smooth functioning of technology
at all times.
Aquis technology is securely
maintained to protect it
from unauthorised access
with full back up and version
control if remediation
is required.
Aquis has system control
features that are regularly
tested to protect data
and Intellectual Property
(IP).
The Group maintains a Disaster
Recovery plan that encompasses
input from all departments
and is continuously monitored
and reviewed by appropriately
experienced individuals.
The comprehensive back
up and contingency plans
in place are tested regularly.
The Board reviews a quarterly
dashboard that incorporates
technology performance
statistics and operational
resilience.
----------------------------------- ----------------------------------
Risk Risk Description Mitigation
COVID-19 There remains a risk that The Group continued to successfully
the COVID-19 pandemic could operate a partial remote working
still negatively impact plan throughout 2021 and this remains
personnel being able to in place, with all staff demonstrating
operate the exchanges. adaptive and flexible behaviours
There are also risks to The processes that the Group has
clients, liquidity providers, adopted are in accordance with
suppliers, markets and the UK and French government guidelines.
economy in general. This plan mitigated against and
It is possible that governments will continue
or regulators could impose to mitigate against potential resource
extraordinary measures such shortages.
as closures of the market The Group has demonstrated and
for a prolonged period. is confident that it can operate
Remote working practices the exchanges remotely for a prolonged
across the industry may period.
slow overall technology The Group's clients and liquidity
programs at client and supplier providers have also demonstrated
organisations which may that they
have a longer- term impact can remotely manage their activities
on Aquis. This could manifest successfully. Key suppliers have
in new members not joining also successfully adopted disaster
any of the Aquis entities recovery procedures.
in the anticipated timelines Equity markets were at times during
or slower adoption of new 2021 very volatile, experiencing
products developed by Aquis. significantly higher than normal
volumes. During these periods the
Company did not experience any
significant issues or delays and
the system has proven that it has
more than sufficient capacity to
operate the market.
Aquis is not overly reliant on
new members to achieve its growth
plans. The main source of anticipated
growth in trading is from the increase
in volumes of current customers.
--------------------------------- ----------------------------------------
Risk Risk Description Mitigation
Cyber security The Group's networks and The Board reviews a quarterly
those of its third-party dashboard that incorporates cyber
service providers may be technology monitoring.
vulnerable to security risks, Regular penetration tests are
cyber-attack or other leakage undertaken by a third party and
of sensitive data. a new employee cyber- training
Potential outcomes of such program was developed to address
an attack might include this issue.
outages of the market, possible Internal exercises to alert employees
attacks which seek to hold to the possibility of phishing
Aquis to ransom, unintended emails are held regularly.
movements of the company The MTF has "kill" switches in
finances or generally create place which are intended to restrict
reputational and financial clients if rogue behaviour is
risk. evidenced.
The Group takes precautions to
protect data in accordance with
applicable laws. Extensive risk
management protocols are adopted
in the IT control framework so
as to prevent, detect and respond
proactively to cyber security
attacks.
The comprehensive back up and
contingency plans in place are
tested regularly.
--------------------------------- ---------------------------------------
Key management The Group has a relatively The Group has established emergency
personnel low headcount and hence staffing plans for Senior Executives.
and employees is exposed to key person The N&RC reviews immediate and
risk. medium-term succession plans
The Group's future development and the ARCC assesses key person
and prospects depend on risk.
its capacity to attract Aquis employs a number of strategies
and retain key personnel. to ensure the Group is able to
attract and retain a high calibre
of talent. The Group employs
a rigorous recruitment process
and offers competitive salaries
and benefits, whilst promoting
a culture of diversity,
high performance and inclusion
from the top. The Group continues
to demonstrate its ability to
recruit high-quality individuals
and is clearly viewed as a dynamic
and attractive employer.
--------------------------------- ---------------------------------------
Risk Risk Description Mitigation
Client concentration The nature of equity financial The Company initially concentrated
markets is that the majority on connecting to large investment
of volumes are undertaken banks, brokers and is now broadening
by a small pool of market its client base to reduce client
participants. This risk concentration but recognises that
has been increased as some volumes from smaller participants
of the smaller market participants are not likely in aggregate to
have decided to route via be as large.
larger banks that maintain The Company can offset some of
direct exchange memberships. the risk of industry concentration
The Group revenue is therefore through the quality of the MTF
dependent on a concentrated exchange offering.
number of customers and The Company seeks to maintain positive
significant change to one relationships with all current
customer's flow could negatively and future members of its MTF exchange
impact revenues. and to be vigilant for change at
any client.
The Group has diversified its business
activities to include technology
sales, data and market gateways
and entering the primary exchange
business following the acquisition
of AQSE.
------------------------------------ ----------------------------------------
Risk Risk Description Mitigation
Liquidity provision In most trading venues globally, This risk is mitigated internally
concentration - there is considerable symbiosis through a number of actions
Aquis between the venue and the including those set out
liquidity providers on which below, and externally through
the venues rely to make the likely evolution of
continuous prices and enhance the structure of the European
liquidity. equity market.
In Europe, where there is Internally, management are
significant competition working to maintain a close
between a limited number relationship with all market
of trading venues, the ability makers to ensure that there
to attract continues to be positive
significant liquidity to synergies for all parties.
the venue is critical. The Aquis
barriers to entry are even is also actively seeking
higher for new trading venues, to continue to grow membership
which must build liquidity and diversify its liquidity
from scratch and differentiate providers.
themselves to attract and As Aquis' market share increases
retain it. further, more natural liquidity
Market makers themselves should be attracted thus
have differing business diluting the concentration
models and trading strategies; risk away from a small number
as a result, they may be of liquidity providers to
attracted to different types a broader set of investor
of venues depending on the flows.
value proposition. Externally, the market share
Aquis has a highly differentiated growth that Aquis has achieved
business model compared to date is a strong indication
to the incumbent platforms, of the benefits to its members
both dramatically reducing and liquidity providers
the cost of trading and and makes it likely that
also not permitting aggressive natural liquidity will continue
trading by market makers. to grow, making the Aquis
This has been a driver of marketplace deeper and more
Aquis' success to date. attractive for all counterparties.
The number of market makers Additional liquidity providers
that have trading models are likely to follow over
currently aligned with Aquis' time as they should be
business philosophy is even incentivised to adapt or
more concentrated than on create new models that capitalise
the main markets. Therefore, on Aquis' value proposition
Aquis has always relied and interaction with a wider
heavily on a small number set of trading flows.
of key market makers to The number of liquidity
support liquidity and a providers in European equity
wider group to supplement markets is still relatively
it. These market makers small today, reflecting
have not always been the the continued need to invest
same organisations and have in technology and regulatory
changed over time. oversight. However, as the
Nonetheless, it is a risk effects of MiFID II, particularly
that if a key market maker with its mandate for best
decides to change its business execution, continue to reduce
model or philosophy it would competition in liquidity
cause a short-term disruption provision, the Group's low
in the total liquidity provided toxicity model and innovative
and could impact Aquis' offerings will continue
ability to differentiate to counter this risk
itself through the prevention
on non- aggressive trading
flow.
----------------------------------- ------------------------------------
Risk Risk Description Mitigation
Liquidity Provision A relatively small, but The AQSE Market Maker warrant
Concentration - growing, population of market scheme should ensure this
AQSE makers support AQSE with risk is effectively countered
similar risks to those identified on that Exchange.
above with regard to potential
short-term impact if one
were to change its business
model or approach.
----------------------------------- -----------------------------------
Supplier risk The Group is exposed to Aquis has back up plans
the failure of a key supplier. in place for key suppliers
Examples include loss of and has agreed procedures
data supplied to Aquis which and thresholds in place
is an important input into for managing this when necessary.
the trading platform.
This may impact the ability
to undertake market surveillance.
----------------------------------- -----------------------------------
FINANCIAL RISKS
The Group's current assets comprise cash and liquid resources
including trade receivables arising directly from its operations.
The main financial risks are capital, credit, liquidity and foreign
currency risks. The Group actively manages the balance sheet and
risks without the use of any financial derivatives.
The Group has materially increased its profits during 2021
demonstrating that it has been able to manage the strategic and
operational risks; however future results could be negatively
impacted if any of the risks outlined above were to occur.
Financial risk management disclosures have been made in Note 6 of
the Group Financial Statements accompanying this report.
Viability statement
The Directors have undertaken a detailed review of the Group's
prospects, taking account of the Group's current position and
principal underlying business risks and its prospects for the
period 2022 - 2026. These include considering the impact during
2021 and potential future impact due to Ukraine, COVID-19 and
Brexit. The Directors consider this to be an appropriate period
considering the target business and revenue growth, and the
objective to maintain and enhance profitability during this
period.
The Group maintains a strong equity capital position which has
been strengthened during 2021 as profitability has been enhanced.
This result complemented by the Group achieving and in certain
areas exceeding its goals and taking account of its ability to
execute successfully its principal strategic objectives and
operating goals during continued challenging circumstances, the
Directors have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due
over the period of their assessment.
This assessment has concentrated in particular on the key
differentiating factors that the Group has established, the quality
and resiliency of the Group's technology, the brand and market
position, and the reputation and quality of the experience of its
key personnel resources.
This Strategic Report was approved by the Board of Directors on
28 March 2022 and is signed on its behalf by:
Alasdair Haynes
CEO
Jonathan Clelland
CFO
Consolidated and Company Statement of Comprehensive Income
For the year ended 31 December 2021
Group Company
Notes 2021 2020 2021 2020
GBP GBP GBP GBP
Profit and loss
Revenue 11 17,182,755 11,477,253 9,454,737 9,860,328
Impairment charge 12 (972,161) (100,174) (972,161) (97,760)
Operating expenses 13 (11,930,400) (9,855,927) (4,038,026) (7,443,194)
-------------------------------------- ----- ------------- --------------- ----------- -----------
Earnings before interest, taxation,
depreciation and amortisation 4,280,194 1,521,152 4,444,550 2,319,374
Interest income 15 444 14,632 444 14,632
Depreciation and amortisation 13 (1,032,240) (1,030,290) (1,026,980) (1,030,290)
Finance expense 13 (35,010) (41,835) (35,010) (41,835)
Finance income 13 8,835 6,736 8,835 6,736
-------------------------------------- ----- ------------- --------------- ----------- -----------
Profit before taxation 3,222,223 470,395 3,391,839 1,268,616
Income tax credit 18 - 307,616 - 307,616
Deferred tax 17 1,088,543 203,717 1,088,543 203,717
-------------------------------------- ----- ------------- --------------- ----------- -----------
Profit for the year 4,310,766 981,728 4,480,382 1,779,951
--------------------------------------------- ------------- --------------- ----------- -----------
Other comprehensive income 76,899 (531) - -
------------- --------------- ----------- -----------
Foreign exchange differences
on translation of foreign operations 32
-------------------------------------- ----- ------------- --------------- ----------- -----------
Other comprehensive income/(loss)
for the year 76,899 (531) - -
--------------------------------------------- ------------- --------------- ----------- -----------
Total comprehensive income for the
year 4,387,665 981,197 4,480,382 1,779,951
--------------------------------------------- ------------- --------------- ----------- -----------
Earnings per share (pence)
Basic
Ordinary shares 19 16 4 16 7
Diluted
Ordinary shares 19 15 3 16 6
Consolidated and Company Statement of Financial Position
As at 31 December 2021
Group Company
Notes 2021 2020 2021 2020
GBP GBP GBP GBP
Assets
Non-current assets
Goodwill 16,20 83,481 83,481 - -
Intangible assets 16 753,714 916,256 753,714 916,256
Property, plant and equipment 21 4,146,333 1,578,554 3,563,758 1,578,554
Investment in subsidiaries 22 - - 6,884,202 6,484,202
Investment in trust 23 - - 1,856,964 486,127
Deferred tax asset 17 1,292,260 203,717 1,292,260 203,717
Trade and other receivables 24 2,744,656 839,630 2,731,174 839,630
9,020,444 3,621,638 17,082,072 10,508,486
Current assets
Trade and other receivables 24 3,768,947 2,924,067 4,372,554 2,943,368
Cash and cash equivalents 25 14,046,399 12,268,418 7,094,964 6,179,566
Total assets 26,835,790 18,814,123 28,549,589 19,631,420
Liabilities
Current liabilities
Trade and other payables and
short term lease liabilities 6, 26 3,783,587 2,810,710 3,196,516 2,292,106
Net current assets 14,031,759 12,381,775 8,271,002 6,830,828
Non-current liabilities 3,422,744 995,081 2,915,920 995,081
Lease liabilities 27
3,422,744 995,081 2,915,920 995,081
Total liabilities 7,206,331 3,805,791 6,112,436 3,287,187
Net total assets 19,629,460 15,008,332 22,437,153 16,344,234
Equity
Called up share capital 28 2,750,545 2,716,970 2,750,545 2,716,970
Share premium account 29 11,771,462 10,892,135 11,771,462 10,892,135
Other reserves 30 1,118,314 760,543 1,448,430 748,525
Treasury shares 31 (1,526,835) (489,625) - -
Retained earnings 5,438,167 1,127,401 6,466,716 1,986,604
Foreign currency translation
reserve 32 77,807 908 - -
Total equity 19,629,460 15,008,332 22,437,153 16,344,234
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Foreign
Currency
Share Share Other Retained Treasury Translation
Group Notes Capital premium reserves earnings Shares Reserve Total
============ ====== =============== =============== ================ ============== =============== ================ ===========
Balance at 1
January
2020 2,714,956 10,839,981 377,766 145,673 (327,809) 1,439 13,752,006
Profit for
the year 981,728 981,728
Foreign
exchange
differences
on
translation
of foreign
operations 32 (531) (531)
Issue of new
shares 28,29 2,014 52,154 54,168
Movement in
share-based
payment
reserve 30 382,777 382,777
Movement in
Treasury
Shares 31 (161,816) (161,816)
Balance at
31 December
2020 2,716,970 10,892,135 760,543 1,127,401 (489,625) 908 15,008,332
------------ ------ --------------- --------------- ---------------- -------------- --------------- ---------------- -----------
Balance at 1 January
2021 2,716,970 10,892,135 760,543 1,127,401 (489,625) 908 15,008,332
-------------------- --------------- --------------- ---------------- -------------- --------------- ---------------- -----------
Profit for
the year - - - 4,310,766 - 4,310,766
Foreign
exchange
differences
on
translation
of foreign
operations 32 - - - - - 76,899 76,899
Issue of new
shares 28,29 33,575 879,327 - - - - 912,902
Movement in
share-based
payment
reserve 30 - - 357,771 - - - 357,771
Movement in
Treasury
Shares 31 - - - - (1,037,210) (1,037,210)
------------ ------ --------------- --------------- ---------------- -------------- --------------- ---------------- -----------
Balance at 31
December
2021 2,750,545 11,771,462 1,118,314 5,438,167 (1,526,835) 77,807 19,629,460
-------------------- --------------- --------------- ---------------- -------------- --------------- ---------------- -----------
Company Statement of Changes in Equity
For the year ended 31 December 2021
Share Share Other Retained
Company Notes Capital premium reserves earnings Total
================= ======= ================== ================== =================== ================= ==========
Balance at 1
January
2020 2,714,956 10,839,981 368,367 206,383 14,129,687
Profit for the
year - - - 1,779,951 1,779,951
Issue of new
shares 28,29 2,014 52,154 - - 54,168
Movement in
share-based
payment reserve 30 - - 380,158 - 380,158
Balance at 31
December
2020 2,716,970 10,892,135 748,525 1,986,334 16,343,964
----------------- ------- ------------------ ------------------ ------------------- ----------------- ----------
Balance at 1 January 2021 2,716,970 10,892,135 748,525 1,986,334 16,343,964
-------------------------- ------------------ ------------------ ------------------- ----------------- ----------
Profit for the
year - - - 4,480,382 4,480,382
Issue of new
shares 28,29 33,575 879,327 - - 912,902
Movement in
share-based
payment reserve 30 - - 699,905 - 699,904
----------------- ------- ------------------ ------------------ ------------------- ----------------- ----------
Balance at 31 December
2021 2,750,545 11,771,462 1,448,430 6,466,716 22,437,153
-------------------------- ------------------ ------------------ ------------------- ----------------- ----------
Consolidated and Company Statement of Cash Flows
For the year ended 31 December 2021
Group Company
Notes 2021 2020 2021 2020
GBP GBP GBP GBP
Cash flows from operating
activities
Cash generated by operations 33 3,157,517 2,129,563 2,748,346 2,228,339
Tax refunded 18 -- 307,616 -- 307,616
Finance expense on lease liabilities 27 (26,175) (35,099) (26,175) (35,099)
------------------------------------- ----- ----------- ----------- ----------- -----------
Net cash outflow from operating
activities 3,131,342 2,402,080 2,722,171 2,500,856
-------------------------------------------- ----------- ----------- ----------- -----------
Investing activities
Recognition of software development
costs 20 (350,893) (642,695) (350,893) (642,695)
Purchase of property, plant
and equipment 21 (319,519) (115,351) (314,384) (115,351)
Investment in subsidiaries -- (259,400) -- --
Capital injection into AQSE
and Aquis Europe 22 -- -- (400,000) (4,046,436)
Interest received 13 444 14,632 444 14,632
------------------------------------- ----- ----------- ----------- ----------- -----------
Net cash used in investing activities (669,968) (1,002,815) (1,064,833) (4,789,851)
-------------------------------------------- ----------- ----------- ----------- -----------
Financing activities
Issue of new shares 28,29 912,902 54,168 912,902 54,168
Purchase of treasury shares 31 (1,100,000) -- (1,100,000) --
Principal portion of lease
liability 2,23 (573,194) (195,346) (554,842) (195,346)
------------------------------------- ----- ----------- ----------- ----------- -----------
Net cash generated from/(used in)
financing activities (760,292) (141,178) (741,940) (141,178)
-------------------------------------------- ----------- ----------- ----------- -----------
Net increase/(decrease) in
cash and cash equivalents 1,701,082 1,258,088 915,398 (2,430,173)
Cash and cash equivalents
at the beginning of the year 25 12,268,418 11,010,861 6,179,566 8,609,739
Effect of exchange rate changes
on cash and cash equivalents 32 76,899 (531) -- --
------------------------------------- ----- ----------- ----------- ----------- -----------
Cash and cash equivalents
at the end of the year 25 14,046,399 12,268,418 7,094,964 6,179,566
------------------------------------- ----- ----------- ----------- ----------- -----------
Notes to the Financial Statements
1. SIGNIFICANT CHANGES IN THE REPORTING PERIOD
The following events and transactions had an impact on the
financial position and performance of the Group and/or Company
during the period:
Following the end of the Brexit transition arrangements, from 1
January 2022 Aquis Europe SAS, a 100% owned subsidiary of the Group
earns that element of exchange revenue relating to EU27 stocks,
with Aquis Exchange Plc (the Company) now recording only that
element of exchange revenue relating to UK and Swiss stocks. There
is no impact at a Group level.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Company information
Aquis Exchange PLC is a public limited company which is
incorporated and domiciled in the United Kingdom. Its registered
office is located at Palladium House, 1-4 Argyll Street, London,
W1F 7LD.
Accounting convention
The Group's consolidated and the Company's financial statements
are prepared in accordance with UK-adopted international accounting
standards and the Companies Act 2006.
The "requirements of the Companies Act 2006" here means accounts
being prepared in accordance with "international accounting
standards" as defined in section 474(1) of that Act.
The financial statements have been prepared on the historical
cost basis.
The Group does not hold any financial instruments at fair value
through profit or loss.
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
Going concern
At the time of approving the financial statements, the Directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future and
thus continue to adopt the going concern basis of accounting in
preparing the financial statements.
The Group has made an increased profit in 2021 against prior
year and has substantial cash reserves and a strong balance sheet,
due to high levels of investment within the Group. There has been a
growth in revenue between the current year and comparative years.
Additional revenue growth is projected for 2022, with profits
forecasted for future years.
Coronavirus has continued to impact the global economy in 2021
and caused a significant amount of uncertainty. Whilst this has not
hindered the business in a discernible way to date, which is
evidenced by the revenue growth and profit generated during the
year, there remains a risk that there may be a longer-term impact
on revenues and/or costs and therefore the Directors continue to
closely monitoring how the situation develops and are ready to
address any negative impact on the business if necessary.
The end of 2020 marked the end of the transition period
following the UK's departure from the EU, and a trade agreement was
reached at the end of the year, which did not address financial
services. While the agreement ended years of uncertainty regarding
a no-deal Brexit, there are significant costs for the UK's
financial services industry, and it
is anticipated there will be a long-lasting effect on the UK
economy. With its European subsidiary and a well-planned and
executed transition of EU securities trading, the Group has been
well-positioned to respond quickly to the changes in legislation.
However, it remains difficult to predict the overall impact of
Brexit on the future trading landscape for both the financial
services industry and the wider UK economy.
The Ukrainian conflict has resulted in extremely volatile market
and there is no certainty as to when this conflict will be
resolved, however at this stage, the Directors do not believe that
this could have a material adverse effect on the group.
Taking the above into account in light of the Group's current
position and principal risks as discussed in the Strategic Report
section of this annual report, the Directors have assessed the
prospects of the Group for the foreseeable future and there is no
material uncertainty as to the Group's ability to continue to adopt
the going concern basis of accounting in preparing the financial
statements over a period of at least 12 months from the date of
approval of these financial statements.
Consolidation
Group
The consolidated financial statements comprise the financial
statements of the Company and its subsidiary companies with all
inter-company balances and transactions eliminated.
Investments in subsidiary companies' shares, loans and other
contributions are recognised at cost. These are reviewed for
impairment when events indicate that the carrying amount may not be
recoverable and are accounted for in the Company's financial
statements at cost less accumulated impairment losses.
The results of Aquis Stock Exchange Limited and Aquis Exchange
Europe SAS have been consolidated in the Group financial statements
for the year ended 31 December 2021.
The Group consolidated financial statements also include
treasury shares and cash held by two separate trusts ("the Trusts")
that administers the Company's employee share incentive plan and
also hold shares purchased by the Company in preparation for future
settlement of employee share awards made to date. The Trusts have
been consolidated based on the IFRS 10 criteria for control over
the Trust being met:
The Trusts were established to (i) facilitate the acquisition
and holding of shares under the Aquis Exchange PLC Share Incentive
Plan and (ii) facilitate the acquisition and holding of shares
under the Aquis Exchange PLC Restricted Share Plan.
The activities of the Trusts are limited by the agreements in
place; and
The Trusts do not have any assets outside of the partnership
share money received and the shares purchased. The use of any
shares or cash that remain in the Trust funds once the trustee no
longer holds any shares relating to the SIP or RSP, is directed by
the company. The Trust itself has no rights to any dividends.
Accounting Policies
Revenue
Revenue comprises amounts derived from the provision of services
which fall within the Company's ordinary activities, net of value
added tax. It represents amounts receivable for subscription fees,
the licensing of software, the provision of data to third-party
vendors, and fees relating to listings on the Aquis Stock Exchange
(AQSE), all of which are net of value added tax. Revenue is
recognised once the performance obligations for each activity have
been satisfied.
All the revenue streams are generated by contracts with
customers and revenue is therefore recognised in accordance with
IFRS 15.
Revenue from exchange subscription-based services is recognised
in the accounting year in which the services are rendered, by
reference to the ongoing contractual obligation to provide the
services.
Revenue from licensing contracts is assessed for each contract
and split into three performance obligations:
Project fees and maintenance fees which are recognised over time
as the obligations are met; and
Licensing for which fees are considered a "right to use" licence
under IFRS 15 and are therefore recognised at a point in time when
control of the licence passes to the customer.
Revenue from the provision of data to third-party vendors is
comprised of the annual fees paid by the redistributors, member
firms and multi-media firms for access to real time and/or end of
day data. An additional monthly fee is received based on the number
of users the vendors provide the data to each month, variable based
on usage for the prior month, is charged in arrears and is
recognised in the month it is incurred.
Revenue from AQSE issuer fees is comprised of initial
application and admission fees, annual fees, and further issue
fees. Both application and admission fees are recognised monthly
over the expected life of a company's admission. An
estimation is required to determine the length of time the
securities will remain listed on the exchange, the details of which
are set out below. Annual issuer fees relate to fees paid by
issuers to maintain a listing on the exchange and are discussed
below, while further issue fees relate to fees in respect of
further issues by listed companies are recognised at the point in
time they occur.
Annual issuer and data fees are paid by the customers in advance
and are initially recognised as deferred revenue, then released
over time as the performance obligation is fulfilled.
Estimated listing period for Aquis Stock Exchange securities
In recognising application and admission fees, the Company
determines the expected length of time each new security will be
listed on AQSE. The estimate is based on historical analysis of
listing durations in respect of the companies listed on AQSE. The
length of time a security remains listed incorporates significant
uncertainty as it is based on factors outside the control of the
Company and which are inherently difficult to predict.
Based on the available information and incorporating
management's predictions, it is currently estimated that an average
security will remain listed for a period of 9 years. Application
and admission fees are recognised monthly over this period. It is
estimated that a one year increase/ decrease in the deferral period
would cause a GBP4,657 decrease /GBP5,821 increase in annual
revenue released respectively. The estimated listing periods will
be reassessed at each reporting date to ensure they reflect the
best estimates of the Group.
Intangible assets other than goodwill
Internally developed intangible assets arising from the
capitalisation of Research and Development expenditures are
recognised in the financial statements when all of the following
criteria are met:
The technical feasibility of completing the intangible asset so
that it will be available for use or sale is established;
There is an intention to complete the intangible asset and use
or sell it;
The Group has the ability to use or sell the intangible
asset;
The existence of a market for the output of the intangible asset
or the intangible asset itself or, if it is to be used internally,
the usefulness of the intangible asset can be demonstrated;
Adequate technical, financial and other resources are available
to complete the development and to use or sell the intangible
asset; and
The Group has the ability to measure reliably the expenditure
attributable to the intangible asset during its development.
Where the above criteria are not met, costs incurred in research
and development are recognised in the Statement of Comprehensive
Income as incurred.
Amortisation is recognised in order to write off the cost or
valuation of the assets, less their residual values over their
useful lives. The development of trading platforms has been
amortised over 3 years on a straight-line basis reflecting
management's estimate of the useful life of the technology, the
rationale of which is discussed in Note 4.
Business Combination
Aquis Exchange PLC (the acquirer) purchased 100% of the shares
of NEX Exchange Limited (which subsequently changed its name to
Aquis Stock Exchange Limited (AQSE)) on 11 March 2020 (the
acquisition date). Business combinations are recorded using the
acquisition method. Identifiable assets acquired and liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date. Acquisition-related costs are
expensed as incurred. The excess of the consideration transferred
over the fair value of the net identifiable assets is recorded as
goodwill.
Goodwill
In March 2020 the acquisition of AQSE gave rise to goodwill in
the consolidated financial statements. Goodwill is initially
measured at cost, being the excess of the aggregate of the
consideration transferred over the net identifiable assets acquired
and liabilities assumed. Goodwill is assessed for impairment
annually. Note 20 provides further detail on the impairment
assessment for goodwill as at 31 December 2021.
Property, plant and equipment (excluding right-of-use
assets)
All property, plant and equipment are stated at historical cost
less depreciation or impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the
items.
Subsequent expenditure is included in the asset's carrying
amount or is recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be
measured reliably. All other repair and maintenance costs are
charged to the income statement during the financial period in
which they are incurred.
Depreciation is recognised so as to write off the cost or
valuation of assets, less their residual values, over their useful
lives on the following basis:
Fixtures, fittings and equipment: 5 years straight line.
Computer equipment: 3 years straight line.
Impairment of tangible and intangible assets
At each reporting end date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Cash and cash equivalents
Cash and cash equivalents include cash at bank.
Financial assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Financial assets
are initially measured at fair value plus transaction costs and are
subsequently measured in their entirety at either amortised cost or
fair value, depending on the classification of the financial
assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured
subsequently at amortised cost:
The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Trade and other receivables
Trade receivables are amounts due from customers for services
performed in the ordinary course of business. Other receivables are
defined as amounts due that are outside the ordinary course of
business. If collection is expected in one year or less (or in the
normal operating cycle of the business if longer), they are
classified as current assets. If not, they are presented as
non-current assets.
Contract assets
Contract assets are recognised for licensing fees recognised at
inception of a licensing contract but not yet billed under IFRS 15.
Contract assets are initially measured at fair value and
subsequently measured at amortised cost and are stated net of any
expected credit loss provision (ECL) recognised in accordance with
IFRS 9, as detailed in Note 12. Contract assets are presented on
the Statement of Financial Position as trade receivables. The right
to consideration becomes unconditional once the customer has been
billed.
Rent deposit asset
Under IFRS 16, a rent deposit is accounted for as a financial
asset if:
The collateral provided to the lessor is not a payment relating
to the right to use the underlying assets and hence is not a lease
payment as defined;
The difference between the nominal amount and fair value of the
rent deposit at the commencement date represents an additional
lease payment which is prepaid and is included in initial carrying
amount of the Right of Use (ROU) asset; and
The prepaid ROU portion is subsequently measured in terms of
IFRS 16 i.e. is depreciated over the term of the lease. Further
disclosures are provided in Note 27.
Impairment of financial assets
The Group has considered the impact of the application of an
expected credit loss model when calculating impairment losses on
current and non-current contract assets and other financial assets
at amortised cost (presented within trade and other receivables).
In applying IFRS 9 the Group must consider the probability of a
default occurring over the contractual life of its trade
receivables and contract asset balances on initial recognition of
those assets. Note 12 details the Group's credit risk assessment
procedures.
Financial liabilities
All financial liabilities are measured subsequently at amortised
cost using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees and
points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where
appropriate) a shorter period, to the amortised cost of a financial
liability.
In 2021 the Group did not hold any Financial liabilities beyond
Trade and other payables, Accrued Expenses and the lease
liabilities recognised under IFRS 16 as described in the "Leases"
sub-section below.
Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade and other payables are
not interest bearing and are initially recognised at fair
value.
Equity instruments
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are charged against the share premium account.
Earnings per share
The earnings per share (EPS) calculations are based on basic
earnings per ordinary share as well as diluted earnings per
ordinary share. The basic EPS is calculated by dividing the profit
after tax of the Group by the weighted average number of ordinary
shares that were in issue during the year. The diluted EPS takes
into account the dilution effects which would arise on conversion
of all outstanding share options and share awards under the
Employee Share Incentive Plan.
Taxation
The tax expense/(credit) represents the sum of the tax currently
payable/(repayable) and deferred tax.
An R&D tax credit is claimed annually from HMRC based on the
employee costs involved in developing Aquis' systems and
technology. It is recognised as a credit to the profit and loss in
the year it is received.
Current tax
The current income tax charge/ (credit) is calculated on the
basis of the tax laws enacted or substantively enacted at the
balance sheet date in the country where the company operates and
generates taxable income. Management
periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax
authorities.
Deferred tax
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related
deferred income tax asset is realised, or the deferred income tax
liability is settled.
Deferred income tax assets are recognised only to the extent
that it is probable that future measurable taxable profit will be
available against which the temporary differences can be
utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Employee benefits
The costs of short-term employee benefits are recognised as a
liability and an expense, unless those costs are required to be
recognised as part of the cost of inventories or non-current
assets.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
Termination benefits are recognised as an expense when the Group
is demonstrably committed to terminate the employment of an
employee or to provide termination benefits, as set out within IAS
19.
Retirement benefits
Pension obligations
The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as
an employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
Share-based payments
EMI Options
Equity-settled share-based payments are measured at fair value
at the date of grant by reference to the fair value of the equity
instruments granted using the US Options Binomial model. The fair
value determined at the grant date is expensed on a straight-line
basis over the vesting period, based on the estimate of shares that
will eventually vest. A corresponding adjustment is made to
equity.
When the terms and conditions of equity-settled share-based
payments at the time they were granted are subsequently modified,
the fair value of the share-based payment under the original terms
and conditions and under the modified terms and conditions are both
determined at the date of the modification. Any excess of the
modified fair value over the original fair value is recognised over
the remaining vesting period in addition to the grant date fair
value of the original share-based payment. The share-based payment
expense is adjusted if the modified fair value is less than the
original fair value.
Cancellations or settlements (including those resulting from
employee redundancies) are treated as an acceleration of vesting
and the amount that would have been recognised over the remaining
vesting period is recognised immediately.
Employee Share incentive plan
Shares purchased under the share incentive plan are recognised
as share-based payments under IFRS 2. Partnership shares are
purchased by employees and matching shares are those purchased by
Aquis at a ratio of 2:1. The shares are held in a trust ("the
Trust"), with matching shares required to be held for three years
before being transferred to the employee. The fair value of both
the partnership and matching shares are recognised in the
share-based payment reserve. Partnership shares vest immediately
while matching shares will vest over the three-year holding period.
The market value of shares when they are purchased is assumed to
approximate the fair value of the shares.
The cash transferred to the Trust is recognised as an investment
in the Company's accounts. In line with IFRS 10 guidance, the Trust
is consolidated in the Group accounts with the fair value of the
shares held in the trust recognised as a debit entry within equity.
This accounting treatment was initially adopted in 2020.
Restricted shares
Restricted shares are share based and will vest three years
after the grant date subject to continued employment. Similar to
share-based payments they are measured at fair value determined at
the grant date using the Black Scholes model. The fair value is
expensed on a straight-line basis over the vesting period, with the
corresponding adjustment being made to reserves.
Leases
The Group assesses whether a contract is or contains a lease at
inception of the contract. The Group recognises a right of use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For
these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. Lease payments
included in the measurement of the lease liability comprise:
Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
The amount expected to be payable by the lessee under residual
value guarantees;
The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the
consolidated statement of financial position and is subsequently
measured by increasing the carrying amount to reflect interest on
the lease liability (using the effective interest method) and by
reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding
adjustment to the related right-of-use asset) whenever:
The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a
revised discount rate.
The lease payments change due to changes in an index or rate or
a change in expected payment under a guaranteed residual value, in
which cases the lease liability is remeasured by discounting the
revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a revised
discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any
initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment
losses. The right-of-use assets are included in property, plant and
equipment in the consolidated statement of financial position and
are depreciated over the term of the
lease. The Group applies IAS 36 to determine whether a
right-of-use asset is impaired and accounts for any identified
impairment loss as described in the 'Property, Plant and Equipment'
policy. Variable rents that do not depend on an index or rate are
not included in the measurement the lease liability and the
right-of-use asset.
Foreign exchange
Functional and presentation currency
Items included in the financial statements of the Group are
measured using the currency of the primary economic environment in
which the entity operates ('the functional currency'). The
financial statements are presented in UK Pound Sterling (GBP),
which is the Group's functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
at year end exchange rates are recognised in profit or loss.
All foreign exchange gains and losses recognised in the income
statement are presented net within 'operating expenses'.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the reporting date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in a
foreign exchange translation reserve (attributed to non-controlling
interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign
operation or a partial disposal of an interest in a joint
arrangement or an associate that includes a foreign operation of
which the retained interest becomes a financial asset), all of the
exchange differences accumulated in a foreign exchange translation
reserve in respect of that operation attributable to the owners of
the Group are reclassified to profit or loss.
3. ADOPTION OF NEW AND REVISED STANDARDS AND CHANGES IN
ACCOUNTING POLICIES New IFRS Standards that are effective for the
current year
There were no new standards effective during the year ended 31
December 2021.
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not yet been
applied in these financial statements, were in issue. The Directors
do not expect that the adoption of the Standards listed below will
have any impact on the financial statements of the Group in future
periods:
IFRS 17 Insurance Contracts
---------------------------- --------------------------------------
Amendments to IFRS 9, IAS 39 Interest rate benchmark reform
and IFRS 17
---------------------------- --------------------------------------
Amendments to IFRS 3 Definition of a business
---------------------------- --------------------------------------
Amendments to IAS 1 and IAS Definition of material
8
---------------------------- --------------------------------------
Amendment to IAS 12 Income taxes
---------------------------- --------------------------------------
Amendment to IAS 16 Property, plant and equipment
---------------------------- --------------------------------------
Amendment to IAS 37 Provisions, contingent liabilities and
contingent assets
---------------------------- --------------------------------------
Amendment to IAS 41 Agriculture
---------------------------- --------------------------------------
IFRS 1 First time adoption of IFRS
---------------------------- --------------------------------------
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In applying the Group's accounting policies, which are described
in Note 2, the Directors are required to make judgements, estimates
and assumptions about the carrying amount of assets and liabilities
that are not readily apparent from other sources. Management has
shown these matters as judgements where they relate to a
significant policy and the judgement has a material impact on the
reported balance. The estimates and associated assumptions are
based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements
The following are the critical judgements, apart from those
involving estimations (which are presented separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in financial statements.
Judgements in relation to performance obligations
In making their judgement, the Directors considered the detailed
criteria for the recognition of revenue set out in IFRS 15, and in
particular, whether revenue is recognised at a point in time or
over time. Following an assessment of the technology licensing
contract portfolio, and the obligations that Aquis has under each
contract, the Directors are satisfied that obligations contained
therein be split into the following performance obligations, and
that the revenue from each licensing contract should be assessed
individually. The identified performance obligations and the timing
of revenue recognition on delivering the licence contracts as
follows:
Implementation/ project fees: these are upfront, non-refundable
fees that a customer pays in order to obtain the user agreement.
Even if the user acceptance certificate is never issued, the
implementation fee cannot be reclaimed and so the revenue is
guaranteed and can be recognised at the time of invoice as Aquis
becomes unconditionally entitled to payment.
Licensing fees: The customer is liable to pay the monthly
licensing fee from the date of signing the user acceptance
agreement (contract inception date). At this point in time Aquis
has fulfilled its promise to deliver the licence (i.e. the system
has been deployed in the client's production environment) and this
performance obligation is fulfilled.
Management uses judgement when assessing the recoverability of
the licencing fees, and recognises them only when their collection
is assumed to be highly probable. This assessment takes into
consideration the current status of the client's business,
including whether the exchange system is active with products/
securities added and members trading on it. The licensing fees are
recognised at a point in time, which occurs after the contract is
signed and once Aquis is satisfied that receiving the licencing
fees is highly probable.
Maintenance fees: fees to maintain the system are recognised
over the course of the licensing contract as Aquis fulfils its
performance obligation to maintain the system. Management have
estimated a fixed annual amount per contract, which reflects the
time spent supporting the client's platform and upgrading the
software in accordance with the contractual terms.
Changes in identification of performance obligations could
impact the timing of revenue recognition for licensing contract
assets and is thus a critical accounting judgement.
Capitalisation of internally generated intangible assets
resulting from Research and Development
Internally generated Intangible assets are capitalised when, in
management's judgement, the criteria for capitalisation under IAS
38 (listed in Note 2) have been met. The direct costs incurred in
the research and development of Aquis' exchange platform and
associated technology and systems are capitalised.
Management reviews the time spent by the development team in
developing and maintaining the systems used internally by Aquis
when determining the amount to be capitalised within each
period.
Critical accounting estimates
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting date that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Estimating the useful life of intangible assets
The expected useful life of an intangible asset is estimated to
be 3 years. In making this judgement management have taken into
account product upgrade cycles, the pace of change of regulation as
well as benchmarking against other companies with internal systems
and technology research and development.
Expected credit loss of contract assets
An impairment for the expected credit loss of contract assets
that arise as a result of applying IFRS 15 to licensing revenue is
required under IFRS 9. This impairment is an accounting estimate
which is calculated based on the Directors' best estimates of the
probability of default and loss given default. The quantification
of the assumptions and stresses for the year are disclosed in Note
12 of the financial statements.
In arriving at these estimates, the Directors have assessed the
range of possible outcomes using reasonable and supportable
forward-looking information, which is based on assumptions for the
future movement of different economic drivers and how these drivers
will affect each other.
Aquis' assessment of the credit risk associated with a licensing
customer is conducted at inception of the contract (but before the
user agreement is signed) and includes factors that are specific to
the customer, general economic conditions and an assessment of both
the current as well as the forecast direction of these
conditions.
The credit risk assessment is conducted by means of a take-on
assessment which comprises of a series of relevant criteria for a
licensing contract that are scored according to the specific
circumstances of the customer, with scores for each parameter
typically ranging from 1-4. The assessment evaluates the
following:
-- Level of funding;
-- Regulatory approvals;
-- Market, industry and business model;
-- Macro-economic forecasts;
-- Corporate governance/ Group management;
-- Whether the client is revenue generating;
-- Level of client profitability;
-- Contract length and the associated range of economic
scenarios therein;
-- Payment history; and
-- External credit ratings.
The above assessment will determine the customer category upon
inception of the contract, and the inputs to the expected credit
loss model is determined thereon.
The credit risk assessment and associated inputs to the expected
credit loss model (probability of default and loss given default)
are critical assessments that could impact both the provision for
expected credit losses as well as the movement in the provision
reflected in the income statement.
Deferred tax asset
Deferred tax assets are recognised to the extent that their
utilisation is probable. The utilisation of deferred tax assets
will depend on whether it is possible to generate sufficient
taxable income in the respective tax type and jurisdiction. A total
net deferred tax asset of GBP1,292k is recognised in the current
period, since profitability is expected to continue for at least
the next 3 years. The deferred tax asset is calculated based on
expected profitability over this period as Aquis is a high growth
company and there is considerable uncertainty in estimating
financial performance beyond this length of time.
Various factors are used to assess the probability of the future
utilisation of deferred tax assets, including, operational plans
and loss-carry forward periods. To reflect the uncertainty in the
accuracy of business forecasts, the model uses modest growth rates
and applies a probability weighting to each type of revenue. The
impact of flexing the discount rates used by +2%/-2% for exchange
and data revenue and by +5%/-5% for new licencing contracts would
be +GBP272,100/-
GBP272,100, so that the deferred tax asset would be GBP1,604,493
in an upside scenario with lower probability discount rates or
GBP1,060,274 in a downside scenario with higher probability
discount rates.
Share-based payments
The US binomial model and Black Scholes model are used to
estimate the value of the EMI options and the restricted shares.
The resulting values are recognised straight-line over the vesting
period as an expense, with the corresponding amounts recognised as
equity in the balance sheet. The model requires the following
inputs: grant date, exercise price, expiry, expected life of
options, expected volatility, and the risk-free interest rate. The
expected life and expected volatility require the use of estimates.
Volatility is estimated based on the historical average for the
available data up to the grant date, while the expected life of the
options is based on management's judgement of when the options will
be exercised, which is assumed to be an average of 5 years. No EMI
options were granted during the year but management notes that a 5%
decrease/increase in expected volatility leads to a
+GBP41,732/-GBP42,347 variance in the 2021 expense. Similarly, for
a 1 year increase/decrease in the expected life of the options,
this would lead to a +GBP16,592/-GBP18,603 variance. Note 14
provides further disclosure on the amounts recognised in these
financial statements.
5. CORPORATE INFORMATION
Aquis Exchange PLC (the 'Group') is licensed to operate a
multilateral trading facility (MTF) enabling members to trade
across fifteen European markets and to provide exchange software
under licence.
6. FINANCIAL RISK MANAGEMENT
The Group seeks to protect its financial performance and the
value of its business from exposure to adverse changes in capital
commitments, as well as credit, liquidity and foreign exchange
risks.
The Group's financial risk management approach is not
speculative. The Group's Audit, Risk and Compliance Committee
provides assurance that the governance and operational controls are
effective to manage risks within the Board-approved risk appetite,
supporting a robust Group risk management framework.
The Group's objectives when managing these risks are detailed
below.
Capital risk management and capital commitments
Risk Description Risk management approach
There is a risk that Group entities The Group's objectives when managing
may not maintain sufficient capital capital are to safeguard the Group's
to meet their obligations. The ability to continue as a going concern
Group comprises regulated entities. so that it can provide returns for
It considers that: shareholders and benefits for other
Increases in the capital requirements stakeholders.
of its regulated companies, or The Group maintains a level of capital
A scarcity of equity (driven by that is well in excess of regulatory
its own performance or financial requirements. Maintaining a strong
market conditions) either separately capital structure is a key priority
or in combination are the principal for the Group. If there was an erosion
risks to managing its capital. of capital for any reason the Group
may issue new shares or sell assets
to ensure capital adequacy requirements
are met (referenced in table below).
The Group continuously monitors
its level of capital in order to
ensure it remains compliant with
regulatory capital requirements.
Aquis reviews capital resources
and requirements on a monthly basis.
Proposed investment requirements,
capital expenditure and potentially
increasing capital resources through
equity or debt issuance are assessed
annually as part of the budgeting
process, as well as on an ad-hoc
basis as required.
The Group supports both Aquis Europe
and AQSE in maintaining capital
adequacy, and holds sufficient capital
to be able to inject capital into
the businesses as and when required.
----------------------------------------
The Return on Assets (ROA) is the amount of net profit/(loss)
returned as a percentage of total assets.
ROA
2021 2020
Group GBP GBP
=============================== ========== ==========
Profit for the year 4,310,766 981,728
Total assets as at 31 December 26,875,790 18,814,123
Return on assets (%) 16% 5%
------------------------------- ---------- ----------
There was no capital expenditure contracted for at the end of
the reporting year that had not been provided for.
Credit risk
Risk Description Risk management approach
The Group's credit risk relates The Directors make a judgement
to its customers being unable to on the credit quality of the Group's
meet their obligations to the Group customers based upon the customers'
either in part or in full. financial position, the recurring
nature of billing and collection
arrangements and, historically,
a low incidence of default.
Aquis' assessment of the credit
risk associated with a licensing
customer is conducted at inception
of the contract (but before the
user agreement is signed) and includes
factors that are specific to the
customer, general economic conditions
and an assessment of both the current
as well
as the forecast direction of these
conditions. Based on this assessment,
the prospective customer is assigned
to a customer category with an
appropriate risk rating.
Aquis has also considered the impact
of the Coronavirus pandemic on
credit risk by incorporating an
assessment of how COVID-19 has
affected the risk profile of each
client, modifying risk ratings
where necessary.
Aquis' credit risk management processes
are applied to all trade receivables
and are calculated using a lifetime
ECL method, as detailed in Note
12.
----------------------------------------
Liquidity Risk
Risk Description Risk management approach
The Group's operations are exposed The Group maintains sufficient
to liquidity risk to the extent liquid resources to meet its financial
that they are unable to meet their obligations as and when they become
daily payment obligations. due in the ordinary course of business.
Management monitors forecasts of
the Group's cash flow quarterly
through an assessment of cash resources
that are in excess of regulatory
capital requirements. The Group
is solvent with net current assets
in excess of GBP14.0 million (2020:
GBP12.4 million), with the majority
of the debtor's book (excluding
contract assets as set out in Note
24) being short term in nature.
The Group is also funded entirely
by equity, with no external debt
funding obligations to be met.
----------------------------------------
The Group is not materially exposed to market risk including
interest rate or foreign exchange risk.
The following tables detail the Group and Company's remaining
contractual maturity for its non-derivative financial liabilities
with agreed repayment periods. The tables have been drawn up based
on the discounted cash flows of financial liabilities based on the
earliest date on which the Group or Company can be required to pay.
There is no exposure to interest rate changes since the Group and
Company have no external debt obligations, and the interest rate on
the lease liability is the rate implicit in the lease and as such
is not subject to change over the term of the lease.
Group 1 Year 2-5 years 5+ years Total
========================= ========= ========= ========= =========
31 December 2021
Trade and other payables 3,575,350 - - 3,575,350
Lease Liabilities 208,236 1,623,226 1,799,519 3,630,981
------------------------- --------- --------- --------- ---------
3,783,586 1,623,226 1,799,519 7,206,331
------------------------- --------- --------- --------- ---------
31 December 2020
Trade and other payables 2,616,097 - - 2,616,097
Lease Liabilities 194,613 714,704 280,377 1,189,694
------------------------- --------- --------- --------- ---------
2,810,710 714,704 280,377 3,805,791
------------------------- --------- --------- --------- ---------
Company 1 Year 2-5 years 5+ years Total
========================= ========= ========= ========= =========
31 December 2021
Trade and other payables 3,045,535 - - 3,045,535
Lease Liabilities 150,981 1,376,301 1,539,620 3,066,902
------------------------- --------- --------- --------- ---------
3,196,516 1,376,301 1,539,620 6,112,437
------------------------- --------- --------- --------- ---------
31 December 2020
Trade and other payables 2,097,493 - - 2,097,493
Lease Liabilities 194,613 714,704 280,377 1,189,694
------------------------- --------- --------- --------- ---------
2,292,106 714,704 280,377 3,287,187
------------------------- --------- --------- --------- ---------
The tables below have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest date on
which the Group or Company can be required to pay.
Group 1 Year 2-5 years 5+ years Total
========================= ========= ========= ========= =========
31 December 2021
Trade and other payables 3,575,350 - - 3,575,350
Lease Liabilities 326,024 1,927,289 1,945,800 4,199,113
------------------------- --------- --------- --------- ---------
3,901,374 1,927,289 1,945,800 7,774,463
------------------------- --------- --------- --------- ---------
31 December 2020
Trade and other payables 2,616,097 - - 2,616,097
Lease Liabilities 230,445 921,780 345,668 1,497,893
------------------------- --------- --------- --------- ---------
2,846,542 921,780 345,668 4,113,990
------------------------- --------- --------- --------- ---------
Company 1 Year 2-5 years 5+ years Total
========================= ========= ========= ========= =========
31 December 2021
Trade and other payables 3,045,535 - - 3,045,535
Lease Liabilities 254,264 1,640,250 1,676,700 3,571,212
------------------------- --------- --------- --------- ---------
3,299,799 1,640,250 1,676,700 6,616,747
------------------------- --------- --------- --------- ---------
31 December 2020
Trade and other payables 2,616,097 - - 2,616,097
Lease Liabilities 230,445 921,780 345,668 1,497,893
------------------------- --------- --------- --------- ---------
2,846,542 921,780 345,668 4,113,990
------------------------- --------- --------- --------- ---------
Both the Group and the Company have no derivative financial
liabilities.
Risk Description Risk management approach
The Group operates in the UK and In order to mitigate the impact
Europe, with Sterling as its principal of unfavourable currency exchange
currency of operation. The Group rate movements on consolidated
companies invoice revenues and earnings and net assets, Aquis
incur the majority expenses in Exchange Europe SAS maintains the
GBP. A relatively small percentage majority of its net assets (primarily
of the overall Group's expenses comprising of regulatory cash)
are incurred in Euros in relation in a Sterling denominated bank
to the French subsidiary. As a account so as to minimise fluctuations
result, foreign exchange risk arises in the GBP/EUR exchange rate on
mainly from the translation of a consolidated basis.
the Group's foreign currency earnings,
assets and liabilities into its
reporting currency, Sterling.
An immaterial amount of cash held
by Aquis Exchange Europe SAS is
held in a euro denominated bank
account, with the remaining cash
held in a Sterling denominated
bank account, hedging the Group
against foreign exchange fluctuations
in cash and cash equivalents. Since
the net asset value of the Aquis
Exchange Europe SAS
is predominately comprised of cash,
there is negligible exposure to
the Group of foreign exchange rate
fluctuations.
---------------------------------------
7. OPERATING SEGMENTS
The Aquis Group can be split into 3 operating segments, each
offering multiple products and services and benefiting from Group
synergies. The specific focus of these activities are:
1. Aquis Exchange - operator of MTF and related services. The
Group operates two MTFs: Aquis Exchange (AQXE), which is UK
regulated and Aquis Exchange Europe (AQEU), which is French
regulated. Another revenue stream for this division is the
provision of data services to third party vendors;
2. Aquis Stock Exchange (AQSE) - primary listings and trading
business. Within this division is AQSE Main Market, AQSE Growth
Market, AQSE Trading and the provision of data services;
3. Aquis Technologies - developer of exchange technology and
services. The product offering includes Aquis Matching Engine,
Aquis Market Surveillance, Aquis Market Gateway and related
services including market surveillance and operations.
The Group has no discontinued operations.
Aquis Exchange PLC is the parent company and comprises AQXE and
Aquis Technologies. It owns 100% of its two subsidiaries, AQEU and
AQSE. Management monitors the Group's overall performance regularly
using a set of established Key Performance Indicators including
revenue, EBITDA and profit before taxation. When monitoring the
performance of each operating segment individually, management
examines the discrete financial information available which will
normally include revenue and EBITDA for each division. In line with
IFRS 8 the operating segments are reported separately as
follows:
Aquis
2021 AQXE & AQSE Technologies Total
AQEU
==================================== =========== =========== ======================= ============
Revenue 10,897,483 1,880,666 4,404,606 17,182,755
Impairment Charge - - (972,161) (972,161)
Costs (8,817,828) (2,103,103) (1,009,469) (11,930,400)
Operating Profit/ (Loss) 2,079,655 (222,437) 2,422,976 4,280,194
Depn, amortisation and net interest (1,057,971) - - (1,057,971)
Profit/ (Loss) before taxation 1,021,684 (222,437) 2,422,976 3,222,223
Aquis
2020 AQXE & AQEU AQSE Technologies Total
=========================== ============= =========== ======================= ===========
Revenue 7,936,036 1,221,517 2,319,700 11,477,253
Impairment Charge (97,760) (2,414) - (100,174)
Costs (6,687,237) (1,754,950) (1,413,740) (9,855,927)
Gross Profit/ (Loss) 1,151,039 (535,847) 905,960 1,521,152
Depn, amortisation and net
interest (1,050,757) - - (1,050,757)
Profit before taxation 100,282 (535,847) 905,960 470,395
The tables above represent the segment-level information that is
monitored by the Chief Operating Decision Makers, which are the
Chief Executive Officer and the Chief Financial Officer. All
non-current assets are held centrally by Aquis Exchange PLC, apart
from the lease liability for the Paris office. The geographical
analysis of the non-current assets is as follows; UK: GBP6,565k,
France: GBP583k and South Africa: GBP1,912k, Total: GBP9,060k.
Gross revenue from 2 customers amounted to GBP3,785k (2020:
GBP117k) arising from licence and maintenance fees. There are no
other customers with revenue greater than 10% of total revenue for
the Group.
8. EMPLOYEES
The monthly average number of persons (including Executive
Directors) employed by the Group during the year was:
2021 2020
Group Number Number
============================ ======= =======
Management 2 2
IT 19 20
Compliance and Surveillance 10 8
Operations 9 6
Business Development 8 6
Finance 4 3
Marketing 2 1
---------------------------- ------- -------
54 46
---------------------------- ------- -------
The monthly average number of persons (including Executive
Directors) employed by the Company during the year was:
2021 2020
Company Number Number
============================ ======= =======
Management 2 2
IT 18 19
Compliance and Surveillance 4 4
Operations 8 5
Business Development 5 4
Finance 3 2
Marketing 2 1
---------------------------- ------- -------
42 37
---------------------------- ------- -------
Their aggregate remuneration was comprised of:
2021 2020
Group GBP GBP
====================== ========= =========
Salaries and wages 6,129,802 4,573,007
Social security costs 815,822 718,885
Other pension costs 183,941 138,891
Share based payments 571,834 392,897
Employee benefits 165,617 148,992
---------------------- --------- ---------
7,867,016 5,972,673
---------------------- --------- ---------
2021 2020
Company GBP GBP
====================== ========= =========
Salaries and wages 4,605,033 3,535,759
Social security costs 560,051 519,061
Other pension costs 145,884 112,907
Share based payments 576,609 363,164
Employee benefits 165,357 148,633
---------------------- --------- ---------
6,052,934 4,679,524
---------------------- --------- ---------
9. RETIREMENT BENEFIT SCHEME
Defined contribution schemes
The Group operates a defined contribution pension scheme for all
qualifying employees. The assets of the scheme are held separately
from those of the Company in an independently administered
fund.
A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. The Group
has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the
current and prior periods.
10. DIRECTORS REMUNERATION
Detail on Directors remuneration are included within the
Directors Report (see page 30).
11. REVENUE
An analysis of the Group's and Company's
revenue is as follows:
Group Company
========================================== ============= ==== ============== ====
2021 2020 2021 2020
GBP GBP GBP GBP
Revenue analysed by class of business
Exchange fees 9,766,046 7,738,284 3,476,206 7,111,000
Licence fees 4,404,606 2,319,700 4,404,606 2,319,700
Data vendor fees 2,319,360 894,867 1,573,925 429,628
Issuer fees 692,743 524,402 - -
-------------------------------------- ---------- ---------- --------- ---------
17,182,755 11,477,253 9,454,737 9,860,328
-------------------------------------- ---------- ---------- --------- ---------
Revenues from customers by operating segment and class of
business is as follows:
Group Company
2021 2020 2021 2020
GBP GBP GBP GBP
Revenue analysed by operating segment
and class of business
AQXE & AQEU
Exchange fees 9,323,559 7,506,408 3,476,206 7,111,000
Data vendor fees 1,573,925 429,628 1,573,925 429,628
AQSE
Exchange fees 442,487 231,876 - -
Data vendor fees 745,435 465,239 - -
Issuer fees 692,743 524,403 - -
Aquis Technologies
Licence fees 4,404,606 2,319,700 4,404,606 2,319,700
-------------------------------------- ---------- ---------- --------- ---------
17,182,755 11,477,253 9,454,737 9,860,328
-------------------------------------- ---------- ---------- --------- ---------
Revenues from customers attributable to the United Kingdom,
Europe and the rest of the world is as follows:
Group Company
========================================= ========== ========== ========= =========
2021 2020 2021 2020
GBP GBP GBP GBP
========================================= ========== ========== ========= =========
Revenue analysed by region
United Kingdom 12,048,156 8,780,442 5,764,371 7,629,888
Europe 1,598,511 1,989,508 621,987 1,733,587
Rest of the world (Africa/Americas/Asia) 3,536,088 707,303 3,068,380 498,853
----------------------------------------- ---------- ---------- --------- ---------
17,182,755 11,477,253 9,454,738 9,860,328
----------------------------------------- ---------- ---------- --------- ---------
Exchange fees and data vendor fees:
Subscription fees and some data vendor fees are accounted for
under IFRS 15 and are all recognised at point in time as they
reflect variable revenue determined on a monthly basis.
In addition to the variable monthly fee some AQSE data vendors
pay an annual fee for access to real time and/or end of day data,
which is recognised over time as the performance obligation of
providing data is fulfilled.
The Group begins to recognise monthly exchange fees, data vendor
fees, and connectivity fees when the customer conformance test is
satisfactorily concluded, and an acceptance certificate is issued.
This is then verified by the customer starting to utilise the
platform, which is the point in time that the Group determines that
the customer has obtained control of the goods and services.
The Group determines the transaction price based primarily on
the relative standalone prices. In the case of exchange,
connectivity and data fees, invoices are raised monthly in arrears
and there is no obligation for a refund, return or any other
similar obligation. There is no variable consideration in any
customer contracts, and the transaction price is allocated in full
at a single point in time when the customer obtains control of the
goods.
Licence fees:
Aquis Exchange PLC provides technology services under licence to
clients. The services comprise the provision of an exchange
platform and / or a surveillance system and may also include
support services comprising basic infrastructure support or
additional services. The duration of the licences varies between 1
and 6 years and will consist of an implementation fee, and, post
implementation, a monthly licence fee for the duration of the
contract. The monthly fees also cover system maintenance and system
upgrades that typically occur every 12 - 18 months. The licensing
contracts are accounted for under IFRS 15 and any corresponding
contract assets are subject to IFRS 9 provisioning, as disclosed
further in Note 12.
The revenue from licensing contracts with customers has been
categorised reflecting the nature, amount, customer categorisation
(see also Note 12), contract duration and uncertainty of revenue
and cash flows. Revenue from licensing contracts is assessed for
each contract and is recognised as and when each performance
obligation is satisfied.
The Company determines the transaction price of the licensing
contract based primarily on the competitive landscape. For
licensing contracts, the Company has assessed the expected credit
loss of each client individually. The transaction price is
allocated according to the Group's obligations to the client over
the course of licence period on the basis of the relative
standalone selling price.
Performance obligation (PO) Recognition of revenue upon completion
PO1: Implementation fees Implementation/ project fees
are upfront, non-refundable fees
that a customer pays in order
to obtain the user agreement.
Even if the user acceptance certificate
is never issued, the implementation
fee cannot be reclaimed and so
the revenue is guaranteed and
can be recognised at the time
of invoice as Aquis becomes unconditionally
entitled to payment.
----------------------------------------------
PO2: Licencing fees At a point in time upon signing
the user acceptance agreement,
as the Company has fulfilled
its promise to deliver the licence
(i.e. the system has been deployed
in the client's production environment).
A corresponding contract asset
(trade receivable) is recognised
to reflect the customer's obligation
to pay the monthly licensing
fee over the remaining term of
the contract.
----------------------------------------------
PO3: Maintenance fees Over the course of the licensing
contract, as the performance
obligation to maintain the system
is settled and the customer benefits
from using the system.
----------------------------------------------
The aggregate amount of the transaction price per customer
category that has been allocated to the performance obligations for
the year is as follows:
2021
=== ========= ========== === =========
Group GBP GBP GBP GBP GBP
========= === ========= ========== === =========
Category 1 2 3 4 Total
========= === ========= ========== === =========
PO1 - - - - -
PO2 - 3,788,615 - 3,788,615
PO3 - 59,943 25,080 - 85,023
--------- --- --------- ---------- --- ---------
- 3,848,558 25,080 - 3,873,638
--------- --- --------- ---------- --- ---------
2020
========= ======= ========== ===== =========
Group GBP GBP GBP GBP GBP
========= ========= ======= ========== ===== =========
Category 1 2 3 4 Total
========= ========= ======= ========== ===== =========
PO1 50,000 - - - 50,000
PO2 1,201,755 - 451,440 - 1,653,195
PO3 27,006 111,883 11,577 5,160 155,626
--------- --------- ------- ---------- ----- ---------
1,278,761 111,883 463,017 5,160 1,858,821
--------- --------- ------- ---------- ----- ---------
Customer risk category definitions: 1 - High, 2 - Moderately
High, 3 - Moderately Low and 4 - Low
The licensing fees line item also includes connectivity fees for
licensing contract customers that are recognised at a point in time
as they reflect variable revenue determined on a monthly basis, and
are underpinned by a separate agreement. These fees total GBP530k,
(2020: GBP461k).
The resultant contract assets at year end are disclosed as per
Note 24. In aggregate the total revenue that reflects future
performance obligations and has yet to be recognised is
GBP1,190k.
Issuer fees:
Issuer fees are accounted for under IFRS 15 and are recognised
over time. They can be separated into the following categories:
Application and admission fees: These are charged upfront to
prospective companies wishing to be admitted to AQSE. They are
recognised monthly over the expected life of a company's admission.
Deferred Revenue is shown as per Note 26.
Annual fees: These are fees paid annually by companies listed on
AQSE. They are charged in advance and are recognised over the
year.
Further issue fees: These are charged to companies already
listed on AQSE wishing to issue further securities. In this case
revenue is recognised at the point in time of the further
issue.
12. IMPAIRMENT
IFRS 9 provisioning is applied to technology licensing contract
assets and to other trade receivables based on management estimates
of the collectability of contracts over their useful life, and
which are re-assessed at each renewal. The Group applies a
simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for trade receivables and
contract assets and therefore the ECL for each contract is assessed
on a lifetime basis rather than at each reporting date. As the
simplified approach is adopted it is not necessary to consider the
impact of a significant increase in credit risk.
The Group has two types of financial assets that are subject to
the expected credit loss model:
Contract assets relating to technology licensing contracts
(Company and Group)
Trade receivables relating to services provided by AQSE
(Group)
The Group have concluded that the trade receivables and contract
assets have different risk characteristics and therefore the
expected credit loss rates for each type of asset are measured
separately. Since they comprise a portfolio of only a small number
of clients, contract assets have been assessed on a
client-by-client basis while trade receivables have been grouped
based on shared credit risk characteristics and the days past due.
Further details on both methodologies can be found below.
Group Company
2021 2020 2021 2020
GBP GBP GBP GBP
Balance of impairment provisions
at 1 Jan 2021 526,271 410,841 508,601 410,841
Trade receivable ECL Provision at
11 March 2020 - 15,256 - -
ECL write off - (9,236) - (9,236)
Expected credit loss /(reversal) 972,161 109,410 972,161 106,998
---------------------------------- --------- ------- --------- -------
Balance of impairment provision 1,498,432 526,271 1,480,762 508,601
---------------------------------- --------- ------- --------- -------
2021 2020 2021 2020
GBP GBP GBP GBP
Contract Asset ECL provision 1,480,762 508,601 1,480,762 508,601
Trade receivable ECL provision 17,183 17.670 - -
Other provisions 487 - - -
-------------------------------- --------- ------- --------- ------------------------
Balance of impairment provision 1,498,432 526,271 1,480,762 508,601
-------------------------------- --------- ------- --------- ------------------------
During contract negotiation Aquis assesses the potential credit
risk of a prospective client prior to committing to the contract.
Aquis' assessment of the credit risk associated with a licensing
customer is conducted at inception of the contract (but before the
user agreement is signed) and includes factors that are specific to
the customer, general economic conditions and an assessment of both
the current as well as the forecast direction of these conditions.
Based on this assessment, the prospective customer is assigned to a
customer category with an appropriate risk rating.
A probability of default (PD) occurring during the lifetime of
the contract ranging from 0-49% is applied to each client based on
the assigned risk category. The model includes lifetime PD applied
to each year of the contract, based on the assumption that the PD
will reduce over time.
The credit risk of Aquis' technology clients ranges from those
that are in infant start up stages (i.e. riskier) to those that are
highly liquid and solvent conglomerates (little to no risk). As
such, the Directors view the range of PD's for the portfolio
to be between 49% for those with the highest level of risk to 0%
for those that are so near to a zero level of risk that the PD is
zero in substance. The Directors are comfortable that the PD
assigned is sufficiently accurate to reflect the elevated risk
associated with each start up when considering the idiosyncratic
circumstances and risk factors of each client. The Directors would
not enter into any contract where the PD is deemed to be any higher
than 49%.
The loss given default is also quantified on a
customer-by-customer basis and is done through an assessment of the
recovery rate the Directors anticipate will be applied to the
customer in the event of liquidation. Currently the low number of
technology clients allows Aquis to assess each contract
individually on the appropriate credit risk category, and this
is determined based on several factors including any future
macro-economic changes, the sensitivity to these potential changes
and the impact that these may have on the recoverability of the
outstanding debt.
The portfolio of technology contracts held by Aquis have PDs
that have an observable relationship with time, i.e. the PD will
decrease each year as the contract progresses. The credit risk of
the contracts is directly linked to the success of the business and
its ability to raise capital, which increases each year the company
successfully continues in operation.
Although the full risk assessment is completed only at the start
of the contract and at each renewal date, Aquis regularly assesses
whether macro-economic factors could have a bearing on the success
of the client and the recoverability of the outstanding debt.
The GBP1,480,762 expected credit loss provision for the year
(2020: GBP508,601) has been calculated with reference to
estimations based on the probability of default and a loss given
default as described above, and has been analysed for each
individual contract taking into account the nature, amount,
customer categorisation, contract duration and uncertainty of
revenue and cash flows.
As at 31 December 2021, the average contract duration for the
portfolio of technology contracts is 2.7 years. The contracts are
short-to-medium term in length and the ECL model incorporates the
impact of a significant change in macroeconomic circumstances on
the expected PD over the life of the contracts. The macroeconomic
variables are based on 3-year average forecast rates for 2022-2024,
which is an appropriate timescale based on the average contract
duration. The baseline rates are defined using the rates forecast
by the Monetary Policy Committee ("MPC"). The macroeconomic
indicators used in the analysis are as follows:
Macroeconomic Indicators 3 year Downside % Baseline Upside
average forecast % %
================================ ========== ======== ======
UK GDP - 3% 1.6% 5%
UK unemployment 7% 4.2% 2%
UK CPI Inflation 1.2% 2.5% 5.0%
-------------------------------- ---------- -------- ------
In order to quantify the impact of movement in credit losses
that occur as a result of macro-economic developments, the
Directors have flexed the probability of default associated with
each client category in three scenarios: a baseline
scenario (maintaining the status quo, keeping each assessment
criteria reflecting current client circumstances and forecast
macroeconomic indicators), a downside scenario (prolonged
recession), and an upside scenario (fast economic recovery).
The model incorporates all three possible outcomes by attaching
a probability weighting to each scenario. The range of outcomes is
detailed in the table below:
Group and Company At 31 December Downside Baseline Upside
2021 GBP GBP GBP
================================= ========= ========= =========
Impairment provision 1,682,547 1,480,762 1,281,452
Impact on PD 5% 0% - 5%
Probability weighting 25% 50% 25%
--------------------------------- --------- --------- ---------
Expected credit loss of Aquis Stock Exchange trade
receivables
In line with IFRS 9 guidance, the Group has applied a simplified
"Expected Credit Loss" (ECL) model on AQSE trade receivables. In
doing so the Group has considered the probability of a default
occurring over the contractual life of the financial asset on
initial recognition of the asset. Loss allowances for financial
assets measured at amortised cost are deducted from the gross
carrying amount of the assets. When a trade receivable is
determined to be uncollectible, it is written off against the
provision account for trade receivables.
The simplified provision matrix is based on historic default
rates over the expected life of the trade receivables and is
adjusted for forward-looking estimates. The trade receivables
balance is split into 8 separate categories depending on the age of
each debt, ranging from 0 days past due to over 90 days past due.
An appropriate estimation of the probability of default is applied
to each category of debt, based on both historical default rates
and expectations for the future.
The key assumptions in calculating the ECL for AQSE trade
receivables are that the probability of default increases with the
age of the debt and that the debts are homogenous, i.e. the credit
risk assessment is based on age rather than by individual client.
The expected loss rates are based on historical analysis of credit
losses experienced since the acquisition and adjusted to reflect
current and forward-looking information. AQSE trade receivables
have been assessed to have a higher risk of impairment than the
rest of the Group's trade receivables due to a number of older
debts being identified and written off on acquisition.
Trade receivables have payment terms of 30 days from the date of
billing. For debts older than 90 days, debts are assessed on a
case-by-case basis and are written off if there is no reasonable
expectation of recovery. During the year a total of GBP29,240 of
trade receivables were written off relating to debts from companies
that had ceased membership with AQSE. The contractual rights to
cash flows from the financial assets were deemed to have
expired.
The total loss allowance calculated by applying the expected
loss rate to the trade receivables balance in each age bucket. The
total portion of the ECL balance relating to AQSE trade receivables
as at 31 December 2021 was GBP17,183 (2020: GBP17,670) which was
comprised as follows:
0 1-29 30-59 60-89 90-124 125 - 150-179 Over
Days past days days days days days 149 days 180 Total
Due days days
================== ====== ============ ====== ===== ======== ===== ======= ====== =======
Expected loss
rate 0.5% 1% 3% 5% 10% 25% 50% 100% N/A
Trade receivables 83,947 19,650 11,405 5,200 3,200 - 1,200 15,044 139,646
ECL Provision 420 197 342 260 320 - 600 15,044 17,183
------------------ ------ ------------ ------ ----- -------- ----- ------- ------ -------
13. OPERATING EXPENSES
EBITDA is stated after charging:
Group Company
Operating Expenses 2021 2020 2021 2020
GBP GBP GBP GBP
Fees payable to the Company's auditor
for the audit of the company's financial
statements 222,000 225,559 167,000 126,431
Fees payable to the Company's auditor
for the Client Asset audit 7,500 6,300 7,500 6,300
Share-based payments 571,834 392,897 576,609 363,164
Exchange loss/(gains) - 5,958 - 6,144
Employee costs 7,295,182 5,579,775 5,476,325 4,316,360
Operating costs (Net of intercompany
recharge) 3,833,884 3,645,438 (2,189,408) 2,624,795
------------------------------------------ ---------- --------- ----------- ----------------
11,930,400 9,855,927 4,038,026 7,443,194
------------------------------------------ ---------- --------- ----------- ----------------
Other operating expenses comprise marketing fees, data centre
and other service fees incurred in the ordinary course of
business.
Profit before taxation is stated
after charging:
Group Company
=================== ==== ============== ====
2021 2020 2021 2020
Depreciation, amortisation and finance GBP GBP GBP GBP
costs
Depreciation of property, plant and
equipment 518,806 550,620 513,546 550,620
Amortisation of intangible assets 513,434 479,670 513,434 479,670
------------------------------------ --------- --------- --------- ---------
1,032,240 1,030,290 1,026,980 1,030,290
------------------------------------ --------- --------- --------- ---------
Net finance expense (Note 27) 26,175 35,099 26,175 35,099
------------------------------------ --------- --------- --------- ---------
1,058,415 1,065,389 1,053,155 1,065,389
------------------------------------ --------- --------- --------- ---------
Total expenses were as follows:
Group Company
=============================== ===== ==== ============== ====
2021 2020 2021 2020
GBP GBP GBP GBP
Total expenses 12,988,815 10,921,316 5,091,181 8,508,583
--------------- ----------- ----------- ------------ ------------
14. SHARE-BASED PAYMENTS
Group Company
2021 2020 2021 2020
GBP GBP GBP GBP
EMI options granted 160,052 227,084 152,577 205,601
Restricted share awards 314,222 55,317 314,222 55,317
Company Share Ownership Plan awards 19,045 - 19,045 -
Shares purchased under employee Share
Incentive Plan 78,515 110,496 90,765 102,243
-------------------------------------- ------- ------- ------- -------
571,834 392,897 576,609 363,164
-------------------------------------- ------- ------- ------- -------
Employee Share Incentive Plan
The share incentive plan is administered by Equiniti ("the
Trust"). The Trust purchases shares in Aquis on the open market on
behalf of employees that have elected to take part. The scheme
allows employees to become shareholders in the Company in a tax
efficient manner, with the Company purchasing two matching shares
for every partnership purchased by the employee.
The terms of the matching shares include that they must be held
by the Trust for three years before they can be transferred or
sold, and the employee must remain employed with the Company
throughout this period. The fair value of the matching shares
purchased by the company are expensed over the three year vesting
period. Management assumes that the cost of the shares is a close
approximation of the fair value of the shares as the market price
tends to be reflective of the discounted value of research
analysts' medium-term projections.
2021 2020
======================================================== ================= =================
Employee Share incentive plan
----------------- -----------------
Number of shares issued under the plan to participating
employees 139,543 104,656
-------------------------------------------------------- ----------------- -----------------
EMI Share Options
There is one approved EMI scheme, which was initiated in June
2018 when the first options were granted. In April 2020 the second
allotment approved in and deferred from November 2019 because Aquis
was in a close period was made with a total of 740,250 options
being granted. Options vest in 3 equal tranches, one, two and three
years after grant. The options expire after 10 years.
Of the total number of options granted, 335,753 were exercised,
none expired and 24,526 were forfeited during the year.
In accordance with IFRS 2, the Group has estimated the fair
value of options using a US binomial option valuation model and
spread the estimated value against the profit and loss account over
the life of the vesting period.
The exercise price for the options granted on 14 June 2018 is
GBP2.69 per share to be settled in cash at the date of exercise.
The weighted average remaining contractual life of options
outstanding at the end of the reporting period amounted to
5.5 months.
The US binomial model with an average expiry duration of 5
years, volatility of 24 and risk-free interest rate of 1.1067% was
used to calculate the fair value of the options granted on 14 June
2018. All options are exercisable at a price of GBP2.69 and the
weighted average expected life of the options is estimated to be 5
years.
The exercise price for the options granted on 16 April 2020 is
GBP3.47 per share to be settled in cash at the date of exercise.
The weighted average remaining contractual life of options
outstanding at the end of the reporting period amounted to
2 years 3.5 months.
The US binomial model using an average expiry duration of 5
years, volatility of 20 and risk-free interest rate of 0.16% was
used to calculate the fair value of the options granted on 16 April
2020. All options are exercisable at a price of GBP3.47 and the
weighted average remaining expected life of the options is
estimated to be 5 years.
2021 2021 2020 2020
Details of the EMI Number of Average Number Average
scheme Shares Exercise Price of Shares Exercise
are as follows: (GBP) Price (GBP)
Outstanding at the
beginning
of the period 1,297,421 3.15 560,407 2.69
Granted during the
period - - 776,250 3.47
Forfeited during the
period (24,526) 3.07 (19,099) 3.34
Exercised during the
period (335,753) 2.70 (20,137) 2.69
Expired during the - - - -
period
Outstanding at the end
of the period 937,143 3.31 1,297,421 3.15
Exercisable at the end
of the period 453,643 3.11 186,802 2.69
CSOP
The Group has implemented a CSOP employee option scheme in 2021.
Initial grants amounting to 100,000 options at a grant price of
GBP6.58 were made in April 2021. Options vest three years after
grant and expire after 10 years.
Details of the CSOP scheme are as follows:
Number of Average Exercise Price
shares (GBP)
0 -
* Outstanding at the beginning of the period
* Granted during the period 100,000 6.85
* Forfeited during the period (4,195) 6.85
0 -
* Exercised during the period
0 -
* Expired during the period
* Outstanding at the end of the period 95,805 6.85
0 -
* Exercisable at the end of the period
RSP
The Group implemented a RSP senior executive option scheme in
2020. Total grants made in April 2021 amounted to 88,320 options at
a grant price of GBP6.85. Options vest three years after grant,
with an additional held period of a further 2 years and expire
after 10 years.
Details of the RSP scheme are as follows:
2021 2021 2020 2020
Number of Average Exercise Number Average Exercise
shares Price (GBP) of shares Price (GBP)
* Outstanding at the beginning of the period 140,448 3.64 - -
* Granted during the period 88320 6.85 140,448 3.64
- - - -
* Forfeited during the period
- - - -
* Exercised during the period
- - - -
* Expired during the period
* Outstanding at the end of the period 228,768 4.88 140,448 3.64
- - - -
* Exercisable at the end of the period
15. INTEREST INCOME
Group Company
---------------- ------------------------------ ------------------------------
Interest Income 2021 2020 2021 2020
GBP GBP GBP GBP
---------------- --------------- ------------- --------------- -------------
Bank Deposits 444 14,632 444 14,632
---------------- --------------- ------------- --------------- -------------
16. BUSINESS COMBINATION
Business acquisition
On 11 March 2020 Aquis Exchange PLC acquired 100% of the issued
share capital of NEX Exchange Limited, a UK based Recognised
Investment Exchange. It has since been rebranded as Aquis Stock
Exchange (AQSE). The acquisition has broadened the Group's service
offering, including the ability to offer companies wishing to go
public a primary listing on its growth market. It complemented the
existing exchange services of the Group and has enabled the Group
to expand its strategic offering.
Details of the purchase consideration is as follows:
Purchase consideration: GBP
======================== =========
Cash paid 2,877,118
------------------------ ---------
The assets and liabilities recognised as a result of the
acquisition are as follows:
Current assets:
Cash 2,617,718
Trade and other receivables 653,390
Current liabilities:
Trade and other payables (477,471)
Add: Goodwill 83,481
---------------------------------- ---------
Net assets arising on acquisition 2,877,118
---------------------------------- ---------
The assets acquired and liabilities assumed have been recognised
at their fair values measured at the acquisition date. There were
no intangible assets identified at the acquisition date.
There were no acquisitions in the year ending 31 December
2021.
17. DEFERRED TAX ASSET
A deferred tax asset of GBP1,292,260 relating to unused tax
losses has been recognised in the current period. The losses are
considered able to offset against the Company's taxable profits
expected to arise in the next three accounting periods.
The assessment of future taxable profits involves a significant
degree of estimation, which management have based on the latest
budget for the Company approved by the Board which reflects the
improvement trading performance largely due
to the continued expansion of the business as discussed in the
Strategic Report. The preparation of the budget involves a rigorous
review process by the Board, whereby each revenue stream and cost
is scrutinised and challenged in detail so that the final version
is considered to be an accurate and plausible representation of
what is likely to be achieved in the period.
In calculating the deferred tax asset, management have applied a
conservative approach by using probability adjusted revenues,
applying lower probabilities to budgeted revenue from more
uncertain sources such as large technology licencing contracts,
with the effect of reducing estimated profits over the 3-year
period from the original forecasts. The analysis predicts
profitability is still achievable even when revenues are reduced to
reflect this adjustment.
The deferred tax balance comprises temporary differences
attributable to:
2021 2020
Group and Company GBP GBP
========================= ============ ============
Deferred tax
------------ ------------
Tax losses 1,292,260 203,717
------------------------- ------------ ------------
Total deferred tax asset 1,292,260 203,717
------------------------- ------------ ------------
Movement in deferred tax balance:
2021 2020
Group and Company GBP GBP
============================================== ============ =======
Movements
------------ -------
At 1 January 203,717 -
---------------------------------------------- ------------ -------
Origination and reversal of timing difference 1,024,211 203,717
Rate change 64,332 -
---------------------------------------------- ------------ -------
At 31 December 1,292,260 203,717
---------------------------------------------- ------------ -------
The Group has combined losses of GBP48,125,182 (2020:
GBP51,941,924) available for carry forward and to be used against
future trading profits of the same trade in which they were
generated. This is comprised of trading losses totalling
GBP47,944,397 generated in the UK by Aquis Exchange PLC and
Aquis Stock Exchange Limited and losses totalling
GBP130,785 generated in France by Aquis Exchange Europe SAS.
The Company has estimated losses of GBP13,099,278 (2020:
GBP17,043,108) available for carry forward against future trading
profits.
18. INCOME TAX
Group Company
=============== =================== ===================
Current tax 2021 2020 2021 2020
GBP GBP GBP GBP
=============== ==== ============= ==== =============
R&D tax credit - (307,616) - (307,616)
--------------- ---- ------------- ---- -------------
The credit for 2020 can be reconciled to the loss per the income
statement as follows:
Group Company
------------------------------------------- -------------------- --------------------
2021 2020 2021 2020
GBP GBP GBP GBP
------------------------------------------- --------- --------- --------- ---------
Profit for the year before taxation 3,222,223 470,395 3,391,839 1,268,618
------------------------------------------- --------- --------- --------- ---------
Expected tax charge based on a corporation
tax rate of 19.00% 612,222 89,375 644,449 241,037
Effect of expenses not deductible
in determining taxable profit 10,407 55,246 10,294 51,165
Unutilised tax losses carried forward 41,917 70,204 - -
Losses utilised against taxable profits (735,805) - (732,782) (77,377)
Deferred tax not recognised 71,259 - 78,038 -
Permanent capital allowances in excess
of depreciation - 34,109 - 34,109
Depreciation on assets not qualifying
for tax allowances - 846 - 846
Additional R&D allowance for qualifying
expenditure - (247,000) - (247,000)
Non-trade loan relationship credits - (2,780) - (2,780)
Research and development tax credit - (307,616) - (307,616)
------------------------------------------- --------- --------- --------- ---------
Taxation credit for the year - (307,616) - (307,616)
------------------------------------------- --------- --------- --------- ---------
19. EARNINGS PER SHARE
Group Company
2021 2020 2021 2020
Number of Shares
Weighted average number of ordinary
shares for basic earnings per share 27,339,947 27,164,230 27,339,947 27,164,230
Weighted average number of ordinary
shares for diluted earnings per share 28,456,875 28,281,234 28,456,875 28,281,234
--------------------------------------- ------------ ------------ ------------ ------------
Earnings
------------ ------------ ------------ ------------
Profit for the year from continued
operations 4,310,766 981,728 4,480,382 1,779,951
--------------------------------------- ------------ ------------ ------------ ------------
Basic and diluted earnings per share
(pence)
------------ ------------ ------------ ------------
Basic earnings per ordinary share 16 4 16 7
--------------------------------------- ------------ ------------ ------------ ------------
Diluted earnings per ordinary share 15 3 16 6
--------------------------------------- ------------ ------------ ------------ ------------
Basic earnings per share is in respect of all activities of the
Group and diluted earnings per share takes into account the
dilution effects which would arise on conversion or vesting of all
outstanding share options and share awards under the Employee Share
Incentive Plan (SIP).
20. INTANGIBLE ASSETS
Group Total
Developed Intangible
trading Other Group Assets
platforms Intangibles Goodwill Excl
Goodwill
===================== =============================== ===================== ================ =====================
Cost
As at 01/01/2020 2,055,326 - - 2,055,326
Additions- internally
generated 642,695 - 83,481 642,695
As at 31/12/2020 2,698,021 - 83,481 2,698,021
Additions- internally
generated/
acquired 313,463 37,430 - 350,893
--------------------- ------------------------------- --------------------- ---------------- ---------------------
As at 31/12/2021 3,011,484 37,430 83,481 3,048,915
--------------------- ------------------------------- --------------------- ---------------- ---------------------
Accumulated
amortisation and
impairment
As at 01/01/2020 1,302,096 - - 1,302,096
Charge for the year 479,670 - - 479,670
As at 31/12/2020 1,781,766 - - 1,781,766
Charge for the year 505,514 7,920 - 513,434
--------------------- ------------------------------- --------------------- ---------------- ---------------------
As at 31/12/2021 2,287,280 7,920 - 2,295,200
--------------------- ------------------------------- --------------------- ---------------- ---------------------
Carrying amount
As at 31/12/2021 724,204 29,510 83,481 753,714
--------------------- ------------------------------- --------------------- ---------------- ---------------------
As at 31/12/2020 916,256 - 83,481 916,256
--------------------- ------------------------------- --------------------- ---------------- ---------------------
All intangible assets within the Group are held by the
Company.
Goodwill
On 11 March 2020 the Group acquired NEX Exchange Limited which
resulted in recognition of goodwill of GBP83,481. The cash
generating unit associated with the goodwill is determined to be
the assets associated with the investment in AQSE.
The goodwill arising on consolidation represents the growth
potential of the primary listings exchange and the synergies with
the rest of the business. AQSE has no intangible assets.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to a
cash generating unit, being the net assets related to Aquis Stock
Exchange.
The recoverable amounts of the cash generating unit has been
determined based on a value-in-use calculation using discounted
cash flow forecasts based on business plans prepared by management
for a three-year period ending
31 December 2024, using an estimated terminal growth rate of 2%,
and a pre-tax discount factor of 7.75%.
No impairment loss has been recognised during the year, as
management believes the value in use of Aquis Stock Exchange is
significantly higher than the carrying value and is unlikely to be
materially impaired.
21. PROPERTY, PLANT AND EQUIPMENT
Fixtures, fittings Computer Total
Group and equipment Equipment Right of Total
Use Asset
==================== =============================================== =============== ========== ===========
Cost
As at 31/12/2019 249,497 2,098,270 1,444,159 3,791,927
Additions 2,328 113,024 - 115,351
-------------------- ----------------------------------------------- --------------- ---------- -----------
As at 31/12/2020 251,825 2,211,295 1,444,159 3,907,278
-------------------- ----------------------------------------------- --------------- ---------- -----------
Additions 72,636 246,885 3,758,437 4,077,958
Disposals - (68,926) (963,837) (1,032,764)
-------------------- ----------------------------------------------- --------------- ---------- -----------
As at 31/12/2021 324,461 2,389,254 4,238,759 6,952,474
-------------------- ----------------------------------------------- --------------- ---------- -----------
Accumulated depreciation and impairment
As at 31/12/2019 127,572 1,477,366 173,166 1,778,104
Charge for the year 50,492 326,962 173,166 550,620
-------------------- ----------------------------------------------- --------------- ---------- -----------
As at 31/12/2020 178,064 1,804,328 346,332 2,328,724
-------------------- ----------------------------------------------- --------------- ---------- -----------
Charge for the year 51,938 312,092 154,748 518,779
Disposals - (41,362) - (41,362)
-------------------- ----------------------------------------------- --------------- ---------- -----------
As at 31/12/2021 230,002 2,075,058 501,080 2,806,141
-------------------- ----------------------------------------------- --------------- ---------- -----------
Carrying amount
As at 31/12/2021 94,458 314,196 3,737,679 4,146,333
-------------------- ----------------------------------------------- --------------- ---------- -----------
As at 31/12/2020 73,761 406,966 1,097,827 1,578,553
-------------------- ----------------------------------------------- --------------- ---------- -----------
Fixtures, fittings Computer Total
Company and equipment Equipment Right Total
of
Use Asset
==================== =============================================== =============== ============= ===========
Cost
As at 31/12/2019 249,497 2,098,270 1,444,159 3,791,927
Additions 2,328 113,024 - 115,351
As at 31/12/2020 251,825 2,211,294 1,444,159 3,907,278
Additions 67,500 246,885 3,175,765 3,490,150
Disposal - (68,926) (963,837) (1,032,764)
-------------------- ----------------------------------------------- --------------- ------------- -----------
As at 31/12/2021 319,325 2,389,253 3,656,087 6,364,664
-------------------- ----------------------------------------------- --------------- ------------- -----------
Accumulated depreciation and impairment
As at 31/12/2019 127,572 1,477,366 173,166 1,778,104
Charge for the year 50,492 326,962 173,166 550,620
As at 31/12/2020 178,064 1,804,328 346,332 2,328,724
Charge for the year 51,965 312,092 149,488 513,545
Disposal - (41,362) - (41,362)
-------------------- ----------------------------------------------- --------------- ------------- -----------
As at 31/12/2021 230,029 2,075,058 495,820 2,800,907
-------------------- ----------------------------------------------- --------------- ------------- -----------
Carrying amount
As at 31/12/2021 89,296 314,195 3,160,267 3,563,758
-------------------- ----------------------------------------------- --------------- ------------- -----------
As at 31/12/2020 73,761 406,966 1,097,827 1,578,554
-------------------- ----------------------------------------------- --------------- ------------- -----------
22. INVESTMENT IN SUBSIDIARIES
2021 2020
Company GBP GBP
=========================== ============ ============
Investment in subsidiaries 6,884,202 6,484,202
--------------------------- ------------ ------------
Details of the Company's subsidiaries at 31 December 2021 are
set out in the following table. The investments are measured using
the equity method in Aquis Exchange PLC's standalone accounts.
Country of Ownership Voting Name of Carrying Carrying
Name of incorporation interest power business amount amount
undertaking (%) held (%) 2021 2020
================== ====================== ============ ========= ================= ================== ==========
Recognised
Aquis Stock Investment
Exchange UK 100 100 Exchange 3,677,118 3,277,118
European
Aquis Exchange Equities
Europe SAS France 100 100 Exchange 3,207,084 3,207,084
------------------ ---------------------- ------------ --------- ----------------- ------------------ ----------
The registered office of Aquis Exchange Europe SAS is 231 rue
Saint Honoré, 75001 Paris, France. The registered office of Aquis
Stock Exchange Limited is 77 Cornhill, London EC3V 3QQ, UK.
During the year Aquis Exchange PLC made capital contributions to
Aquis Stock Exchange of GBP400,000.
Both investments were assessed for impairment at year end.
Although Aquis Stock Exchange was loss-making in 2021, this
performance was in line with expectations and is expected to reach
profitability in 2022. Therefore, in line with IAS 36 guidance, no
impairment provision has been recognised in Aquis Exchange PLC's
financial statements. The following table summarises the movement
in the carrying amounts of the subsidiaries during the year:
Aquis Stock Exchange Aquis Exchange
Europe SAS
===================== ===================================================================== ===============
Carrying amount 2020 3,277,118 3,207,084
Capital injection 400,000 -
Carrying amount 2021 3,677,118 3,207,084
--------------------- --------------------------------------------------------------------- ---------------
23. INVESTMENT IN TRUSTS
The following table shows the total amount the Company has
invested in the two Trusts in respect of the Share Incentive Plan
and also the Restricted Share Plan as at the reporting date:
2021 2020
Company GBP GBP
===================== ============ ============
Investment in Trusts 1,856,964 486,127
--------------------- ------------ ------------
24. TRADE RECEIVABLES, CONTRACT ASSETS AND OTHER RECEIVABLES
Current Non-current Total
Group 2021 2020 2021 2020 2021 2020
GBP GBP GBP GBP GBP GBP
Trade receivables 1,884,329 1,500,524 - - 1,884,329 1,500,524
Technology licence
contract assets 1,112,576 1,132,029 2,415,824 617,805 3,528,400 1,749,834
Other receivables 339,353 11,911 328,832 221,825 668,185 233,736
Prepayments 432,689 279,603 - - 432,689 279,603
------------------- --------- --------- --------- ------- --------- ---------
3,768,947 2,924,067 2,744,656 839,630 6,513,603 3,763,697
------------------- --------- --------- --------- ------- --------- ---------
Current Non-current Total
Company 2021 2020 2021 2020 2021 2020
GBP GBP GBP GBP GBP GBP
Trade receivables 1,747,286 1,384,467 - - 1,747,286 1,384,467
Technology licence
contract assets 1,112,576 1,132,029 2,415,824 617,805 3,528,400 1,749,834
Other receivables 313,225 6,941 315,350 221,825 628,575 228,766
Intercompany receivables 804,406 177,266 - - 804,406 177,266
Prepayments 395,061 242,665 - - 395,061 242,665
------------------------- --------- --------- --------- ------- --------- ---------
4,372,554 2,943,368 2,731,174 839,630 7,103,728 3,782,998
------------------------- --------- --------- --------- ------- --------- ---------
The following details the trade receivables and contract assets
that are stated net of any credit impairment provision, as set out
previously in Note 12 in accordance with IFRS 9.
Group Company
Trade receivables 2021 2020 2021 2020
GBP GBP GBP GBP
Gross trade receivables 1,930,498 1,540,230 1,747,286 1,406,505
Gross contract assets 5,009,162 2,236,397 5,009,162 2,236,397
Expected credit loss provision (1,526,931) (526,271) (1,480,762) (508,601)
------------------------------------ ------------ --------- ----------- ------------
Trade receivables net of provisions 5,412,729 3,250,357 5,275,686 3,134,300
------------------------------------ ------------ --------- ----------- ------------
25. CASH AND CASH EQUIVALENTS
Group Company
==== ============== ====
2021 2020 2021 2020
GBP GBP GBP GBP
Cash at bank 14,046,399 12,268,418 7,094,964 6,179,566
------------- ----------- ----------- ------------ ------------
Cash and cash equivalents are held with authorised
counterparties of a high credit standing, in secured investments.
Management does not expect any losses from non-performance by the
counterparties holding cash and cash equivalents, and there are no
material differences between their book and fair values.
Cash held by Aquis Exchange Europe SAS is predominantly held in
a Sterling denominated bank account, hedging the Group against
foreign exchange fluctuations in cash and cash equivalents of the
subsidiary
26. TRADE AND OTHER PAYABLES AND SHORT TERM LEASE
LIABILITIES
Group Company
Current 2021 2020 2021 2020
GBP GBP GBP GBP
Trade payables 170,934 263,398 162,989 251,136
Accruals 1,811,168 1,524,793 1,564,785 1,301,073
Deferred Revenue 882,525 431,792 270,900 43,127
Social security and other taxation 506,638 426,745 494,107 242,588
Intercompany payables - - 552,754 454,182
Other payables 204,085 163,982 - -
Short term lease liabilities 208,237 - 150,981 -
----------------------------------- --------- --------- --------- ---------
3,783,587 2,810,710 3,196,516 2,292,106
----------------------------------- --------- --------- --------- ---------
27. LEASES
Right of Use Assets
The right-of use asset was measured at the amount equal to the
lease liability, plus prepaid lease payments (being the unamortised
portion of the rent deposit asset). The right of use asset is
depreciated over the term of the lease and was accounted for during
the year ended 31 December 2021 as follows:
Property
GBP
==================================== =========
Carrying amount at 1 January 2020 1,270,993
Depreciation for the year (173,166)
Carrying amount at 31 December 2020 1,097,827
Additions 3,758,437
Disposals (963,837)
Depreciation for the year (154,748)
------------------------------------ ---------
Carrying amount at 31 December 2021 3,737,679
------------------------------------ ---------
Rent deposit asset
The rent deposit asset (excluding the prepaid right of use
portion which has been included in the calculation of the right of
use asset above) is a financial asset measured at amortised cost
and was accounted for during the year ended 31 December 2021 as
follows:
Rent deposit
asset
GBP
========================================= ============
Carrying amount at 1 January 2020 222,029
Finance income on rent deposit asset for
the year 6,736
Carrying amount at 31 December 2020 228,765
Additions 374,442
Finance income on rent deposit asset for
the year 8,835
----------------------------------------- ------------
Carrying amount at 31 December 2021 612,042
----------------------------------------- ------------
Of which are:
Current 283,212
Non-current 328,830
----------------------------------------- ------------
612,042
----------------------------------------- ------------
The non-current and current portions of the rent deposit asset
are both included in 'Other Receivables' (Trade and Other
Receivables) on the Statement of Financial Position.
Lease liability
The lease liability is calculated as the net present value of
the fixed payments (including in-substance fixed payments), less
any lease incentives receivable (e.g. any rent-free periods). The
lease payments are discounted using the interest rate implicit in
the lease. The lease liability is measured at amortised cost and
was accounted for during the year ended 31 December 2021 as
follows:
Lease liability
GBP
=========================================== ===============
Carrying amount at 1 January 2020 1,378,304
Finance expense on lease liability for the
year 41,835
Lease payments made during the year (230,445)
------------------------------------------- ---------------
Carrying amount at 31 December 2020 1,189,694
------------------------------------------- ---------------
Additions 3,563,025
Reduction in assumed lease liability (926,303)
Finance expense on lease liability for the
year 35,010
Lease payments made during the year (230,445)
------------------------------------------- ---------------
Carrying amount at 31 December 2021 3,630,981
------------------------------------------- ---------------
Of which are:
Current 208,237
Non-current 3,422,744
------------------------------------------- ---------------
3,630,981
------------------------------------------- ---------------
The non-current and current portions of the lease liability are
included in 'Lease liability' and 'Other Payables' (Trade and Other
Payables) on the Statement of Financial Position respectively.
Net finance expense on leases
31-Dec-21 31-Dec-20
GBP GBP
======================================= ========= =========
Finance expense on lease liability 35,010 41,835
Finance income on rent deposit asset (8,835) (6,736)
--------------------------------------- --------- ---------
Net finance expense relating to leases 26,175 35,099
--------------------------------------- --------- ---------
The finance income and finance expense arising from the Groups
leasing activities as a lessee have been shown net where applicable
as is permitted by IAS 32 where criteria for offsetting have been
met.
Amounts recognised in profit and loss
31-Dec-21 31-Dec-20
GBP GBP
============================================ ========== =========
Depreciation expense on right-of-use assets (149,488) (173,166)
Finance expense on lease liability (35,010) (41,835)
Finance income on rent deposit asset 8,835 6,736
Short term lease expense (37,568) (25,726)
-------------------------------------------- ---------- ---------
Net impact of leases on profit or loss ( 213,231) (233,991)
-------------------------------------------- ---------- ---------
The property leases (of which there are three) in which the
Group is the lessee do not contain variable lease payment
terms.
28. SHARE CAPITAL
2021 2020
Group and Company GBP GBP
======================================= ========= =========
Ordinary share capital
Issued and fully paid
27,169,700 Ordinary shares of 10p each 2,716,970 2,714,956
Issue of 335,750 new shares 33,575 2,014
--------------------------------------- --------- ---------
2,750,545 2,716,970
--------------------------------------- --------- ---------
29. SHARE PREMIUM ACCOUNT
2021 2020
Group and Company GBP GBP
============================= ========== ==========
At the beginning of the year 10,892,135 10,839,981
Issue of new shares 879,327 52,153
----------------------------- ---------- ----------
At the end of the year 11,771,462 10,892,135
----------------------------- ---------- ----------
30. OTHER RESERVES
Group Company
================================= ========================== ==========================
2021 2020 2021 2020
GBP GBP GBP GBP
================================= ============ ============ ============ ============
Reserves relating to share-based
payments 1,118,314 760,543 1,448,430 748,525
--------------------------------- ------------ ------------ ------------ ------------
The reserves relating to share-based payments reflects the cost
recognised to date for the fair value of the approved Employee
Share Plans estimated using the US binomial and Black Scholes
option valuation models.
31. TREASURY SHARES
2021 2020
Group GBP GBP
================================ ========= ========
At the beginning of the year 489,625 318,410
Purchase of additional shares 1,211,907 199,459
Shares vested or sold by trusts (177,975) (40,262)
Cash held by trusts 3,278 12,018
-------------------------------- --------- --------
At the end of the year/period 1,526,835 489,625
-------------------------------- --------- --------
As at 31 December 2021 139,543 shares were held in the SIP
Trust, and a further 150,000 shares held in the RSP/EMI Trust.
32. FOREIGN CURRENCY TRANSLATION RESERVE
In 2019 the Group established a Multilateral Trading Facility
(MTF) in France through its subsidiary, Aquis Exchange Europe SAS.
The translation of the European subsidiary' assets into Sterling,
the functional currency of the Group, results in foreign exchange
differences that have been recognised in Other Comprehensive Income
and accumulated in a separate component of equity as illustrated
below.
2021 2020
Group GBP GBP
======================================================= ====== =====
At the beginning of the year 908 1,439
Foreign exchange differences on translation of foreign
operations recognised in OCI 76,899 (531)
------------------------------------------------------- ------ -----
At the end of the year 77,807 908
------------------------------------------------------- ------ -----
33. CASH GENERATED BY OPERATIONS
2021 2020
Group GBP GBP
=================================================== =========== ===========
Profit for the year after tax 4,310,766 981,728
--------------------------------------------------- ----------- -----------
Adjustments for:
Taxation credited - (307,616)
Deferred tax (1,088,543) (203,717)
Interest income (444) (14,632)
Amortisation and impairment of intangible assets 505,514 479,670
Depreciation and impairment of property, plant and
equipment 518,779 550,620
Equity settled share based payment expense 571,834 392,897
Other gains/losses 324,876 39,814
Movement in working capital:
Increase in trade and other receivables (2,749,906) (1,100,337)
Increase in trade and other payables 764,641 1,311,136
--------------------------------------------------- ----------- -----------
Cash generated/ (absorbed) by operations 3,157,517 2,129,563
--------------------------------------------------- ----------- -----------
2021 2020
Company GBP GBP
================================================= =========== ===========
Profit for the year after tax 4,480,382 1,779,951
------------------------------------------------- ----------- -----------
Adjustments for:
Tax credit - (307,616)
Deferred tax (1,088,543) (203,717)
Interest income (444) (14,632)
Amortisation and impairment of intangible assets 513,434 479,670
Depreciation and impairment of property, plant
and equipment 513,545 550,620
Equity settled share based payment expense 576,609 363,164
Other gains/losses 320,664 (114,892)
Movement in working capital:
Increase in trade and other receivables (3,320,730) (1,128,488)
Increase in trade and other payables 753,428 824,278
------------------------------------------------- ----------- -----------
Cash generated/ (absorbed) by operations 2,748,346 2,228,339
------------------------------------------------- ----------- -----------
34. RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the directors, who are key management
personnel, is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures.
2021 2020
Group GBP GBP
======================================= ========= =======
Salaries and other short term benefits 797,788 761,709
Share-based payments 528,070 69,268
--------------------------------------- --------- -------
Total 1,325,858 830,977
--------------------------------------- --------- -------
During the year the Group has entered into, in the ordinary
course of business, with other related parties. All transactions
between Aquis Exchange PLC and its subsidiaries are eliminated on
consolidation. There are no related party balances outstanding at
Group level. Costs incurred by the Company on behalf of its
subsidiary companies are recharged to these companies through a
Management fee and service charge, which for 2021 represented a net
recharge of GBP4,965k to Aquis Europe SAS and a net recharge of
GBP494k to Aquis Stock Exchange Limited. The net cash payments in
the year and balances outstanding at the year end were;
2021 2021 2021
GBP000s Receipts GBP000s GBP000s Amounts
and Payments Amounts owed owed to related
from related parties
Group and Company parties
========================= ============================= ============================= =============================
Aquis Stock Exchange Ltd (82) 390 -
Aquis Europe SAS 193 414 553
------------------------- ----------------------------- ----------------------------- -----------------------------
Total 111 804 553
------------------------- ----------------------------- ----------------------------- -----------------------------
2020 2020 2020
GBP000s GBP000s Amounts GBP000s
Receipts owed from Amounts owed
Group and Company and Payments related parties to related
parties
===================== ======================== =============================== ===========================
Aquis Stock Exchange
Ltd 485 177 -
Aquis Europe SAS - - 54
--------------------- ------------------------ ------------------------------- ---------------------------
Total 485 177 54
--------------------- ------------------------ ------------------------------- ---------------------------
35. CONTROLLING PARTY
In the opinion of the Directors, there is no single overall
controlling party.
No individual shareholder had a shareholding of 10% or above as
at 31 December 2021.
36. EVENTS OCCURING AFTER THE REPORTING PERIOD
The Ukrainian conflict has resulted in extremely volatile market
conditions and there is no certainty as to when this conflict will
be resolved; however, at this stage, the Directors do not believe
this could have a material adverse effect on the Group and consider
this to be a non-adjusting post balance sheet event at
31.12.21.
The COVID-19 pandemic has continued to cause considerable health
and economic uncertainty and significant market volatility and
volumes. Notwithstanding the significant adverse effect this has
had and may continue to have on the economy and whilst it is
possible that this pandemic may result in further adverse effects
on the Group at this stage the Directors do not believe that they
will be material.
In March 2022 Aquis announced the intention, subject to
contract, to assume the business activities of UBS MTF, the
non-displayed matching pool of UBS AG.
Aquis announced during March 2022 of the intention to dual-list
on Aquis Stock Exchange Limited whilst remaining listed on the AIM
market of the London Stock Exchange.
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END
FR FFFIVVDITFIF
(END) Dow Jones Newswires
March 29, 2022 02:10 ET (06:10 GMT)
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