TIDMCSFS
RNS Number : 4868Z
Cornerstone FS PLC
16 May 2023
Certain information contained within this Announcement is deemed
by the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as applied in
the United Kingdom. Upon publication of this Announcement, this
information is now considered to be in the public domain.
16 May 2023
Cornerstone FS Plc
("Cornerstone" or "the Company" or "the Group")
Final Results
Notice of AGM and Publication of Annual Report
Cornerstone FS Plc (AIM: CSFS), a foreign exchange and payments
company offering multi-currency accounts to businesses and
individuals, announces its final results for the year ended 31
December 2022. In addition, the Company gives notices of its annual
general meeting ("AGM") and publication of its annual report and
accounts, both of which are being posted on the Company's website
at: https://investors.cornerstonefs.com/document-centre/ .
Highlights
-- Revenue increased 110% to GBP4.8m (2021: GBP2.3m)
-- Gross margin improved to 60.9% (2021: 51.6%)
-- Adjusted* EBITDA loss reduced to GBP0.9m (2021: GBP1.3m loss)
-- Transacted payments totalling GBP584m (2021: GBP363m), up 61%
-- Number of active customers increased by 38% to 803 (2021: 583)
-- Acquired Capital Currencies, a well-established foreign
exchange broker, and Pangea FX, a specialist FX and treasury
consultancy
-- Expanded the Group's partnerships to increase the number of
currencies, countries and sectors that it services, and, post
period, introduce new products
-- Entered an agreement to sell Avila House Ltd, a non-core
subsidiary, for GBP300k and licence the Group's platform to the
buyer, which completed post period
-- Cash and cash equivalents at 31 December 2022 were GBP682k (31 December 2021: GBP348k)
* Excluding share-based compensation, transaction costs and
depreciation & amortisation charges (see the Financial Review
for further detail)
James Hickman, CEO of Cornerstone, said:
"During 2022, Cornerstone continued to deliver on its strategy,
improved operationally and achieved a strong financial performance
with revenues more than doubling and an increase in gross margin.
This growth was accelerated by two acquisitions during the year,
which also supported the completion of our transition to a business
that services customers directly. Through the expansion of our
offer, enhancement of our platform and strengthening of our team,
we took important actions to position Cornerstone for an even
greater 2023.
"The strong trading momentum experienced in 2022 has been
sustained into the current year, and we remain on track for a
significant increase in revenue for full year 2023 and are
optimistic in terms of adjusted EBITDA positivity. As a result, and
as we continue to broaden our partnership network and offer, we
remain confident in the future and look forward to reporting on our
progress."
Enquiries
Cornerstone FS Plc +44 (0)203 971 4865
James Hickman, Chief Executive Officer
Judy Happe, Chief Financial Officer
SPARK Advisory Partners Limited (Nomad) +44 (0)203 368 3550
Mark Brady, A dam Dawes
SP Angel Corporate Finance LLP (Broker) +44 (0)203 470 0470
Jeff Keating, Harry Davies-Ball
G racechurch Group (Financial PR) +44 (0)204 582 3500
Harry Chathli, Claire Norbury
About Cornerstone FS Plc
Cornerstone FS Plc (AIM: CSFS) is a foreign exchange and
payments company offering multi-currency accounts to businesses and
individuals. Headquartered in the City of London, Cornerstone
combines a proprietary technology platform with a high level of
personalised service to support clients with payments in over 35
currencies in more than 100 countries. With a track record of over
12 years, Cornerstone has the expertise, experience and expanding
global partner network to be able to execute complex cross-border
payments. It is fully regulated by the Financial Conduct Authority
as an Electronic Money Institution. www.cornerstonefs.com
Operational Review
The year to 31 December 2022 was a period of significant change,
which has continued into 2023, during which the Group implemented
fundamental improvements to its business. Cornerstone delivered a
strong performance in 2022 and took actions to position the Group
for an even greater 2023.
Two key milestones during the year were the acquisitions of
Capital Currencies, a well-established foreign exchange broker, and
Pangea FX, a specialist FX and treasury consultancy. Both
businesses have made an excellent contribution to Cornerstone. In
particular, Capital Currencies boosted the direct client base while
Pangea FX brought two senior sales executives who were made
responsible for leading the sales function.
Since welcoming a new CEO, James Hickman, in September 2022, the
Group's focus has been on driving direct sales and fully
commercialising the platform, while maintaining control over costs.
A key element of this was growing the sales team, which started in
September, beginning with the appointments from Pangea FX, and has
been strengthened thereafter and post year end. Cornerstone has
expanded - and continues to expand - its network of referral
partners, which consists of corporates that provide services to
other businesses or high net worth individuals ("HNWIs"), such as
accountants or real estate agents, and who recommend Cornerstone to
their clients for currency transactions and payments.
Multiple actions have been taken to commercialise the platform
more fully by enhancing and expanding the Group's offering - a key
element of which is increasing the number of counterparties. This
also reflects the refocusing of the strategy on developing the
Group's own products and services as opposed to seeking
integrations with enterprise resource planning or accounting
systems. As described further below, the Group has:
-- Increased the number of currencies, countries and sectors that it services
-- Introduced new products
-- Upgraded the platform user interface and features
-- Improved the transactional process
-- Enhanced customer service
To further monetise the platform as well as realise the value of
a non-core asset, in December 2022 Cornerstone entered a share
purchase agreement ("SPA") for the sale of its subsidiary, Avila
House Ltd. ("Avila"), to Aspire Commerce Ltd. ("Aspire") as well as
entering a software licensing agreement for Aspire to licence the
Group's platform. Upon completion of the SPA post year end, the
Group received GBP300k in cash and the licensing agreement, which
is for a period of 12 months, will generate a minimum of GBP290k.
Cornerstone acquired Avila in 2020 as it is registered with the
Financial Conduct Authority ("FCA") as a small electronic money
institution, however, this more limited licence was supplanted with
the Group's primary operating subsidiary, Cornerstone Payment
Solutions, subsequently being approved by the FCA as an authorised
electronic money institution. This transaction with Aspire reflects
the value of an e-money registration as well as the Cornerstone
platform.
To accelerate the transition to direct revenue, the Group also
took the strategic decision to offboard almost all its historic
white label business - only maintaining a small number of accounts
that meet a particular profitability threshold. This commenced
towards the end of the year, but primarily took place, and has been
completed, in the current year.
Performance
For the year under review, Cornerstone delivered another twelve
months of significant growth in revenue to GBP4.8m (2021: GBP2.3m).
This reflects a substantial increase in revenue generated by
clients that are served directly. The proportion of total revenue
that was accounted for by direct clients increased to 78%, compared
with 56% for the previous year, being GBP3.8m (2021: GBP1.3m).
Revenue generated through the Group's introducer network accounted
for 22% of total revenue (2021: 44%) and was GBP1.1m (2021:
GBP1.0m).
By client type, there was an increase in revenue generated by
both corporate accounts and HNWIs. This includes particularly
strong growth in revenue from HNWIs, which was primarily due to the
addition of the Asia team. As a result, the proportion of total
revenue accounted for by HNWIs increased to 53% (2021: 25%) with
corporate accounts contributing 47% (2021: 75%). However, for the
majority of the HNWI revenue (and nearly exclusively for the Asia
team's HNWI revenue), whilst the underlying transaction is with an
individual, the relationship is via a corporate that provides
services to the HNWI - and, as a result, it is a recurring revenue
stream. As noted above, the Group has been successfully expanding
this referral network.
Revenue continued to be generated from the provision of foreign
exchange and payments services in the form of spot and forward
transactions, accounting for 92% and 8% of revenue respectively
(2021: 89% and 11%).
During 2022, transactions were conducted between 58 different
currency pairs (2021: 42), with 86% of transactions being between
various combinations of Sterling, Euros and US Dollars (2021: 91%),
reflecting an expansion of the Group's payment capabilities.
During 2022, the Group transacted payments totalling GBP584m
compared with GBP363m in the previous year.
Enhancing our offer
A key focus has, and continues to be, the enhancement of the
Group's offer, primarily through growing its counterparty network
to expand its product capabilities. At the same time, internal
development has been undertaken to improve the Group's platform as
well as its service provision.
Expanding our product
A core element of the Group's strategy is to establish a global
payments network that will enable Cornerstone customers to be able
to pay in from, and pay out to, any jurisdiction and via any
payment method. While it is still relatively early days, important
steps have been taken in implementing this strategy.
New counterparty partnerships have been established, which
enables the Group to broaden the number of currencies and countries
where it can transact as well as expanding the business sectors
that it can serve. The Group can now pay out to 70+ countries with
49 pay-out currencies and 32 pay-in currencies.
The Group has also made significant progress towards expanding
its product offering with regards to payment method. The Group
expects to be able to launch its first initiative later this year,
which will be a very exciting development for Cornerstone.
To be able to support customers with more of their business
needs, the Group has formed strategic partnerships with specialised
and alternative lenders to offer a range of funding solutions. In
particular, the Group recently launched a lending platform in
partnership with Swoop Finance ("Swoop"), which enables the Group
to seamlessly refer customers to a lending partner that it has
pre-vetted to ensure that they can meet the customers'
requirements. This service increases the Group's value to its
customers while it also receives commission on referrals. It also
enhances the Group's competitive offer to potential customers who
want to utilise Cornerstone's FX services (rather than those of
their traditional bank), but who are hesitant to move away from
their traditional bank as they require their lending
facilities.
Enhancing our platform
During the year, internal development work continued to improve
the platform with a focus on user interface and user experience.
Certain features have also been added in response to customer
feedback to ensure that the Group's platform is tailored to
customers' needs. These improvements and the additional
functionality, alongside new counterparty partnerships as noted
above, have also enabled Cornerstone to broaden the target customer
base, such as now being able to cater for businesses in further
sectors.
Improving our service
Cornerstone is committed to continuously improving the service
that it provides to its customers. This includes developments to
enhance the automation in transactional processes to increase the
speed of payments. The Group has introduced new customer service
systems to better track, and thereby improve, response times to
customer queries. It is also working on enhancements to the
onboarding process to make the transition to the Group's platform
as effortless as possible for new customers.
Actions such as these, which stem from one of the Group's core
values of always putting customers first, mean that the Group is
well prepared for the introduction of the FCA's Consumer Duty
regulation later this year, which sets higher and clearer standards
for consumer protection across financial services. This also goes
together with the Group's steadfast commitment to regulatory
compliance and transparency. The Group has always adhered to the
highest standards in this respect and its governance has been
strengthened with the new additions to the Board, in particular
with John Burns bringing substantial experience in regulation and
compliance in the payments industry.
Financial Review
Revenue for the 12 months to 31 December 2022 increased by 110%
to GBP4.8m compared with GBP2.3m for the previous year. This
reflects strong underlying growth, driven by the revenue generated
by clients that the Group serves directly, as well as the
contribution from Capital Currencies and Pangea FX, which were
acquired during the year.
As a result of the increased contribution to revenue from
clients that are served directly, gross margin improved
substantially to 60.9% in 2022 (2021: 51.6%). The improvement in
gross margin combined with the increased revenue enabled the Group
to achieve significant growth in gross profit to GBP2.9m (2021:
GBP1.2m).
Operating expenses were GBP8.6m in 2022 compared with GBP5.4m
for the previous year. This primarily reflects movements of:
-- GBP1.9m increase in share-based (non-cash) compensation to
GBP4.3m (2021: GBP2.3m), which predominantly relates to share-based
incentivisation for the Asia team and the General Manager APAC and
Middle East;
-- GBP1.6m increase in other administrative expenses to GBP4.2m
(2021: GBP2.6m); and partly offset by
-- GBP0.3m decline in transaction costs related to the Company's
IPO and its acquisition strategy.
In the second half of the year, the Company reached an agreement
with Robert O'Brien, the General Manager APAC and Middle East, and
the Asia team to vary the terms of their incentivisation agreement,
as a result of performance being ahead of expectations. As a result
of the agreed settlement, the Group recognised an accelerated
charge for the year ended 31 December 2022 such that the full value
of the total charge estimated upon initial recognition of GBP6.1m
has been cumulatively expensed (GBP4.3m for the year ended 31
December 2022 and GBP1.8m for the year ended 31 December 2021).
Accordingly, there is no further share-based compensation to be
recognised in future periods in respect of Mr. O'Brien and the Asia
team.
The GBP1.6m increase in other administrative expenses included a
GBP862k increase in staff-related costs (excluding share-based
compensation) primarily reflecting the additional hires made from
mid-2021 onwards, including the headcount acquired with Capital
Currencies and Pangea FX in 2022. Depreciation and amortisation
costs increased by GBP249k, including GBP90k related to the
amortisation of the value attributed to the customer base acquired
through the acquisitions of Capital Currencies and Pangea FX.
Rental and IT costs increased by GBP230k largely owing to rent
discounts realised during the COVID-19 restrictions in 2021 and the
increased office space in 2022 to cater to the expanded workforce.
Legal and professional fees increased by GBP142k due to the Company
becoming public part way through the comparative period (6 April
2021).
Net finance expenses were GBP133k (2021: net finance income of
GBP1,262). This primarily reflects acquisition-related adjustments
as well as loan note interest, partially offset by an increase in
other interest.
Loss before tax was GBP5.8m for 2022 (2021: GBP4.2m loss), which
primarily reflects the greater operating expenses. Loss per
ordinary share on a basic and diluted basis was 17.26 pence (2021:
21.24 pence loss), which reflects an increase in the weighted
average number of ordinary shares in issue to 32,506,335 (2021:
19,317,407).
Excluding share-based compensation, transaction costs and
depreciation & amortisation charges, the Group's adjusted
operating expenses (consisting of administrative expenses) as a
proportion of revenue improved to 79% (2021: 107%). As a result,
the Group's adjusted EBITDA loss was reduced to GBP0.9m (2021:
GBP1.3m).
As at 31 December 2022, the Group had cash and cash equivalents
of GBP682k (31 December 2021: GBP348k). This followed the raising,
during the year, of:
-- gross proceeds of GBP870k via the placing of, and
subscription for, new ordinary shares, which was partly used to
fund the initial GBP586k cash consideration for the acquisition of
Capital Currencies; and
-- a total of approximately GBP1.1m through the placing of new
ordinary shares (GBP860k) and the issue of a convertible loan note
(GBP225k).
The loan note was issued to one investor who also took shares up
to the maximum amount allowed before obtaining FCA approval (9.9%
of the Company's issued share capital). Application for FCA
approval was made during the year and the loan note was converted
automatically into shares on approval being received in February
2023.
Outlook
The strong trading momentum experienced in 2022 has been
sustained into the current year and, as previously announced,
increased during Q1 2023 resulting in a better-than-expected
revenue performance for the first quarter. This also included
Cornerstone achieving its first, unaudited, quarter of being EBITDA
positive (on an adjusted basis).
While trading in Q2 2023 has reverted from exceptionally high to
the originally budgeted levels of growth, the Group remains on
track for a significant increase in revenue for full year 2023 over
2022 and is optimistic in terms of adjusted EBITDA positivity. This
reflects the advancement being made across the business and as the
Group realises the benefits of the enhancements made to its
operations and offer towards the end of 2022 and to date in
2023.
The Board is also pleased to have completed the sale of Avila,
which, along with the licensing agreement with Aspire, will support
the Group's cash position. In addition, post year end certain
incentivisation and settlement arrangements were varied with Robert
O'Brien, General Manager APAC and Middle East, and Craig Strong,
Director of Capital Currencies (see note 20), which has also been
immediately beneficial to the business.
As a result, and as Cornerstone continues to broaden its
partnership network and offer, the Board remains confident in the
future and looks forward to reporting on the Group's progress.
Notice of AGM and Publication of Annual Report
The Company gives notice that its AGM will be held at 11.00am
BST on 20 June 2023 at the office of Gracechurch Group, 48
Gracechurch Street, London, EC3V 0EJ.
The Notice of AGM and form of proxy, along with the Company's
annual report and accounts for the year ended 31 December 2022, are
being posted to shareholders and are available on the Company's
website at: https://investors.cornerstonefs.com/document-centre/
.
Group Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
Notes GBP GBP
REVENUE 1 4,821,996 2,301,172
Cost of sales (1,885,503) (1,113,995)
GROSS PROFIT 2,936,493 1,187,177
ADMINISTRATIVE EXPENSES 2
Share-based compensation 15 (4,284,039) (2,338,495)
Further adjustments to adjusted EBITDA
(see below) (500,529) (554,902)
Other administrative expenses (3,805,812) (2,469,575)
TOTAL ADMINISTRATIVE EXPENSES (8,590,380) (5,362,972)
Adjusted EBITDA loss (869,319) (1,282,398)
Stated after the add back of:
- share-based compensation 15 4,284,039 2,338,495
- transaction costs 99,365 402,515
- amortisation of intangible assets 386,542 148,094
- depreciation of property, plant and
equipment 14,622 4,293
--------------------------------------- ----- ----------- -----------
LOSS from operations 2 (5,653,887) (4,175,795)
Finance and other income 3 37,947 1,622
Finance costs 3 (171,257) (360)
LOSS BEFORE TAX (5,787,197) (4,174,533)
Income tax credit 6 175,365 70,764
________ ________
LOSS FOR THE YEAR (5,611,832) (4,103,769)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (5,611,832) (4,103,769)
Loss per ordinary share - basic
& diluted (pence) 7 (17.26) (21.24)
_______ _______
All amounts are derived from continuing operations.
The Notes to the Financial Statements form an integral part of
these financial statements.
Group and Company Statement of Financial Position
As at 31 December 2022
Group Group Company Company
31 December 31 December 31 December 31 December
2022 2021 2022 2021
Notes GBP GBP GBP GBP
assets
NON-CURRENT ASSETS
Intangible assets 8 2,315,637 577,447 611,507 484,927
Tangible assets 10 39,677 21,542 - -
Investments 11 - - 8,017,622 6,349,758
_______ _______ _______ _______
2,355,314 598,989 8,629,129 6,834,685
CURRENT ASSETS
Trade and other receivables 12 1,339,110 493,244 700,720 248,996
Cash and cash equivalents 682,346 348,102 495,627 139,579
_______ _______ _______ _______
2,021,456 841,346 1,196,347 388,575
_______ _______ _______ _______
total assets 4,376,770 1,440,335 9,825,476 7,223,260
_______ _______ _______ _______
equity and liabilities
equity
Share capital 15 480,362 202,776 480,362 202,776
Share premium 5,496,829 3,074,355 5,496,829 3,074,355
Share-based payment reserve 1,489,765 2,392,710 1,489,765 2,392,710
Deferred consideration reserve 950,920 - 950,920 -
Merger relief reserve 5,557,645 5,557,645 5,557,645 5,557,645
Reverse acquisition reserve (3,140,631) (3,140,631) - -
Retained earnings (10,924,791) (7,828,230) (8,365,764) (4,907,402)
_______ _______ _______ _______
TOTAL EQUITY (89,901) 258,625 5,609,757 6,320,084
_______ _______ _______ _______
LIAIBILITIES
NON-CURRENT LIABILITIES
Loan notes 13 2,172,578 - 2,172,578 -
Deferred tax 6 99,816 - - -
_______ _______ _______ _______
2,272,394 - 2,172,578 903,176
CURRENT LIABILITIES
Trade and other payables 14 1,969,277 1,181,710 1,818,141 903,176
Loan notes 13 225,000 - 225,000 -
_______ _______ _______ _______
2,194,277 1,181,710 2,043,141 903,176
_______ _______ _______ _______
TOTAL EQUITY AND LIABILITIES 4,376,770 1,440,335 9,825,476 7,223,260
_______ _______ _______ _______
A separate profit and loss account for the Parent company is
omitted from the Group's financial statements by virtue of section
408 of the Companies Act 2006. The Company loss for the year ended
31 December 2022 was (GBP5,973,633) (year ended 31 December 2021:
loss of (GBP3,823,651)).
The financial statements were approved by the Board of Directors
and authorised for issue on 15 May 2023 and are signed on its
behalf by:
James Hickman
Chief Executive Officer
The Notes to the Financial Statements form an integral part of
these financial statements.
Group Statement of Changes in Equity
For the year ended 31 December 2022
Share-based Deferred Merger Reverse
Share Share payment consideration relief acquisition Retained
capital premium reserve reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
Balance at 1
January 2021 165,887 951,422 54,215 - 5,557,645 (3,140,631) (3,724,461) (135,923)
Issue of
shares 36,889 2,208,447 - - - - - 2,245,336
Costs of
raising
equity - (85,514) - - - - - (85,514)
Share-based
payments
(note 15) - - 2,338,495 - - - - 2,338,495
Loss and total
comprehensive
income
for the year - - - - - - (4,103,769) (4,103,769)
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2021 202,776 3,074,355 2,392,710 - 5,557,645 (3,140,631) (7,828,230) 258,625
Issue of
shares 210,423 1,905,234 - - - - - 2,115,657
Costs of
raising
equity - (87,310) - - - - - (87,310)
Share-based
payments
(note 15) - - 4,284,039 - - - - 4,284,039
Settlement of
equity-based
incentives 67,163 604,550 (5,186,984) - - - 2,515,271 (2,000,000)
Deferred
equity-based
consideration - - - 950,920 - - - 950,920
Loss and total
comprehensive
income
for the year - - - - - - (5,611,832) (5,611,832)
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2022 480,362 5,496,829 1,489,765 950,920 5,557,645 (3,140,631) (10,924,791) (89,901)
_______ _______ _______ _______ _______ _______ _______ _______
The Notes to the Financial Statements form an integral part of
these financial statements.
Company Statement of Changes in Equity
For the year ended 31 December 2022
Share-based Deferred Merger
Share Share payment consideration relief Retained
capital premium reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP
Balance at 1
January 2021 165,887 951,422 54,215 - 5,557,645 (1,083,751) 5,645,418
Issue of
shares 36,889 2,208,447 - - - - 2,245,336
Costs of
raising
equity - (85,514) - - - - (85,514)
Share-based
payments
(note 15) - - 2,338,495 - - - 2,338,495
Loss and total
comprehensive
income
for the year - - - - - (3,823,651) (3,823,651)
_______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2021 202,776 3,074,355 2,392,710 - 5,557,645 (4,907,402) 6,320,084
Issue of
shares 210,423 1,905,234 - - - - 2,115,657
Costs of
raising
equity - (87,310) - - - - (87,310)
Share-based
payments
(note 15) - - 4,284,039 - - - 4,284,039
Settlement of
equity-based
incentives 67,163 604,550 (5,186,984) - - 2,515,271 (2,000,000)
Deferred
equity-based
consideration - - - 950,920 - - 950,920
Loss and total
comprehensive
income
for the year - - - - - (5,973,633) (5,973,633)
_______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2022 480,362 5,496,829 1,489,765 950,920 5,557,645 (8,365,764) 5,609,757
_______ _______ _______ _______ _______ _______ _______
The Notes to the Financial Statements form an integral part of
these financial statements.
Group and Company Cash Flow Statement
For the year ended 31 December 2022
Group Group Company Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2022 2021 2022 2021
GBP GBP GBP GBP
Notes
Loss before tax (5,787,197) (4,174,533) (6,131,818) (3,890,085)
Adjustments to
reconcile
profit
before tax to
cash generated
from operating
activities:
Finance income 3 (37,947) (1,622) - -
Finance costs 3 171,257 360 162,757 -
Equity-settled
share-based
payment 32,595 - 32,595 -
Share-based
compensation 15 4,284,039 2,338,495 4,284,039 2,338,495
Depreciation
and 8 &
amortisation 10 401,164 152,386 296,133 145,920
Increase in
accrued
income,
trade and
other
receivables 12 (845,866) (54,577) (451,724) (141,678)
Increase in
trade and
other
payables 14 757,250 682,374 896,573 559,196
_______ _______ _________ _______
Cash used in
operations (1,024,705) (1,057,117) (911,445) (988,152)
Income tax
received 6 158,188 70,764 158,188 66,434
_______ _______ _________ _______
Cash used in
operating
activities (866,517) (986,353) (753,257) (921,718)
Investing
activities
Acquisition of
property,
plant
and equipment 10 (17,198) (17,371) - -
Acquisition of
intangible
assets 8 (422,713) (404,568) (422,713) (404,569)
Acquisition of
subsidiary,
net of cash
acquired 9 (552,128) - - -
Investment in
Group
companies 11 - - (631,335) (201,985)
_______ _______ _________ _______
Cash used in
investment
activities (992,039) (421,939) (1,054,048) (606,554)
Financing
activities
Shares issued
(net of costs) 15 1,992,694 1,571,457 1,992,694 1,571,457
Loans received 13 225,000 - 225,000 -
Interest and
similar income 3 37,947 1,622 - -
Interest and
similar
charges 3 (62,841) (360) (54,341) -
_______ _______ __________ _______
Cash generated
from financing
activities 2,192,800 1,572,719 2,163,353 1,571,457
Increase in
cash and cash
equivalents 334,244 164,427 356,048 43,185
Opening cash
and cash
equivalents 348,102 183,675 139,579 96,394
_______ _______ ________ _______
Closing cash
and cash
equivalents 682,346 348,102 495,627 139,579
===================== ===================== ===================== =====================
The Notes to the Financial Statements form an integral part of
these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2022
BAsis of preparation
Cornerstone FS plc is a public limited company, incorporated and
domiciled in England. T he Company was admitted to AIM, London
Stock Exchange's market for small and medium size growth companies,
on 6 April 2021 . The registered office of the Company is The Old
Rectory, Addington, Buckingham, England, MK18 2JR, and its
principal business address is 75 King William Street, London EC4N
7BE. The main activities are set out in the Strategic Report of the
Company's annual report and accounts for the year ended 31 December
2022.
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
United Kingdom ("IFRS") for the years ended 31 December 2021 and 31
December 2022, and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The financial
statements have been prepared in sterling, which is the Group's
presentation currency and the functional currency of each Group
entity. They have been prepared using the historical cost
convention except for the measurement of certain financial
instruments.
The parent company accounts have also been prepared in
accordance with IFRS (as adopted by the United Kingdom) and using
the historical cost convention. The accounting policies set out
below have been applied consistently to the parent company where
applicable.
Monetary amounts in these financial statements are rounded to
the nearest pound.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting year. These estimates and assumptions
are based upon management's knowledge and experience of the
amounts, events or actions. Actual results may differ from such
estimates.
The critical accounting estimates are considered to relate to
the following:
Fair values of assets acquired in business combinations : The
Group recognises the fair value of customer relationships acquired
through business combinations reflecting discounted future cash
flows from the acquired customers and incorporating an estimated
rate of attrition of the customer base.
Deferred consideration : Total compensation for acquisitions
includes an element of deferred consideration payable, subject to
the revenue performance post-acquisition. Management use historical
information and management forecasts to estimate a liability, using
the discounted cashflow methodology, to derive a fair value of the
deferred consideration payable.
Intangible assets : The Group recognises intangible assets in
respect of software development costs. This recognition requires
the use of estimates, judgements and assumptions in determining
whether the carrying value of such assets is impaired at each year
end.
Investments in subsidiary undertakings (Company financial
statements only) : The Company's Statement of Financial Position
includes investments stated at cost in its subsidiary undertakings.
The continuing recognition at cost requires judgements and
estimates including an assessment of whether the carrying value of
such investments is impaired at each year end.
NEW STANDARDS AND INTERPRETATIONS
As of the date of approval of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet
effective:
-- IFRS 17 Insurance Contracts (effective for periods commencing 1 January 2023)
-- Amendments to IAS 1, presentation of financial statements on
classification of liabilities (effective for periods commencing on
or after 1 January 2023)
-- Amendments to IAS 8 - definition of accounting estimates
(effective for periods commencing 1 January 2023)
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Group. The Group does not intend
to apply any of these pronouncements early.
IMPACT OF NEW INTERNATIONAL REPORTING STANDARDS, AMMENTS AND
INTERPRETATIONS
The following Standards and Interpretations have been considered
and applied in these financial statements:
-- COVID-19-Related Rent Concessions beyond 30 June 2021 - Amendment to IFRS 16
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
There has been no material impact on the financial statements as
a result of adopting these Standards and Interpretations.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings. Entities
are accounted for as subsidiary undertakings when the Group is
exposed to or has rights to variable returns through its
involvement with the entity and it has the ability to affect those
returns through its power over the entity.
Details of subsidiary undertakings and % shareholding:
Cornerstone Payment Solutions Ltd - 100% owned by the Company
Cornerstone - Middle East FZCO - 100% owned by the Company
Avila House Limited - 100% owned by Cornerstone Payment
Solutions Ltd
Capital Currencies Limited - 100% owned by the Company
Pangea FX Limited - 100% owned by the Company
All subsidiary undertakings have an accounting reference date
ended 31 December.
On 23 December 2022, the Company announced the agreement of the
sale of Avila House Limited to Aspire Commerce Ltd. Avila House
remained under the control of the Group until the sale completed on
26 April 2023 following receipt of regulatory approval from the
Financial Conduct Authority ("FCA").
BUSINESS COMBINATIONS
The Group financial statements recognise business combinations
using the acquisition method when control is transferred to the
Group. The consideration transferred in the acquisition is
generally measured at fair value, as are the identifiable net
assets acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised in profit
or loss immediately. Transaction costs are expensed as incurred,
except if related to the issue of debt or equity securities. The
consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the
date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not re-measured and settlement
is accounted for within equity. Otherwise, other contingent
consideration is re-measured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
GOING CONCERN
During the year ended 31 December 2022, the Group made an
adjusted EBITDA loss (excluding non-cash share-based compensation,
depreciation & amortisation costs and non-recurring
transactions costs) of GBP869,319. At 31 December 2022 the Group
balance sheet showed a net liabilities position of GBP89,901,
including a negative profit and loss reserve of GBP10,924,791, and
a cash balance of GBP682,346. Post year-end, the Group's balance
sheet has strengthened with the conversion of a GBP225,000 loan
note to equity on 6 February 2023 following receipt of permission
from the FCA for a shareholder to increase their shareholding
beyond 9.9% of the issued share capital of the Company. Further,
the Group received proceeds of GBP300,000 on 26 April 2023
following the completion of the sale of Avila House Limited.
Although the Group has historically generated losses, the
trading position of the Group has continued to improve since the
year-end with a strong focus on cost control combined with strong
revenue growth. As a result, the Group expects to begin generating
a cash inflow before financing activities during 2023.
The Directors have prepared cash flow forecasts covering a
period to 31 December 2024. The Directors have derived forecast
assumptions that are their best estimate of the future development
of the Group's business taking into account projected increase in
revenues, continued investment in the development of the software
platform and organic sales and marketing efforts.
The Directors have prepared various scenario planning forecasts
alongside their best-estimate forecast assumptions, including a
scenario in which sales growth falls below management expectations
and various cash mitigation measures are implemented, which all
indicate sufficient cash resources to continue to finance the
Group's working capital requirements over the forecast period.
For these reasons, the Directors continue to adopt the going
concern basis of accounting in preparing the Group's financial
statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
revenue
The Group applies IFRS 15 Revenue from Contracts with Customers
for the recognition of revenue. IFRS 15 established a comprehensive
framework for determining whether, how much and when revenue is
recognised. It affects the timing and recognition of revenue items,
but not generally the overall amount recognised.
The performance obligations of the Group's revenue streams are
satisfied on the transaction date or by the provision of the
service for the period described in the contract. Revenue is not
recognised where there is evidence to suggest that customers do not
have the ability or intention to pay. The Group does not have any
contracts with customers where the performance obligations have not
been fully satisfied.
The Group derives revenue from the provision of foreign exchange
and payment services. When a contract with a client is entered
into, it immediately enters into a separate matched contract with
its institutional counterparty.
Spot and forward revenue is recognised when a binding contract
is entered into by a client and the rate is fixed and determined.
Revenue represents the difference between the rate offered to
clients and the rate received from its institutional
counterparties.
INVESTMENTS
Investments in subsidiary undertakings are accounted for at cost
less impairment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the
Group Statement of Financial Position when the Group has become a
party to the contractual provisions of the instrument.
Derivative financial instruments
Derivative financial assets and liabilities are carried as
assets when their fair value is positive and as liabilities when
their fair value is negative. Changes in the fair value of
derivatives are included in the income statement. The Group's
derivative financial assets and liabilities at fair value through
profit or loss comprise solely of forward foreign exchange
contracts.
Trade, loan and other receivables
Trade and loan receivables are initially measured at their
transaction price. Trade and loan receivables are held to collect
the contractual cash flows which are solely payments of principal
and interest. Therefore, these receivables are subsequently
measured at amortised cost using the effective interest rate
method. The Directors have considered the impact of discounting
trade and loan receivables whose settlement may be deferred for
lengthy periods and concluded that the impact would not be
material.
An impairment loss is recognised for the expected credit losses
on trade and loan receivables when there is an increased
probability that the counterparty will be unable to settle an
instrument's contractual cash flows on the contractual due dates, a
reduction in the amounts expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment
losses are adjusted against the carrying amount of the receivable
and are recognised in profit or loss.
Trade payables
Trade payables are initially recognised at fair value and
subsequently at amortised cost using the effective interest
method.
Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified according to the substance
of the contractual arrangements entered into. An instrument will be
classified as a financial liability when there is a contractual
obligation to deliver cash or another financial asset to another
enterprise.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
For the purposes of the Cash Flow Statement, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of any outstanding bank overdraft which is integral to the
Group's cash management.
Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets and liabilities of a subsidiary, associate
or jointly controlled entity at the date of acquisition. Goodwill
on acquisition of subsidiaries is separately disclosed in note
9.
Goodwill is not amortised; it is recognised as an asset,
allocated to cash generating units for the purpose of impairment
testing and reviewed for impairment at least annually. Any
impairment is recognised immediately in profit or loss and is not
subsequently reversed.
other INTANGIBLE aSSETS
An intangible asset, which is an identifiable non-monetary asset
without physical substance, is recognised to the extent that it is
probable that the expected future economic benefits attributable to
the asset will flow to the Group and that its cost can be measured
reliably. The asset is deemed to be identifiable when it is
separable or when it arises from contractual or other legal
rights.
Amortisation is charged on a straight-line basis through the
profit or loss within administrative expenses. The rates
applicable, which represent the Directors' best estimate of the
useful economic life, are as follows:
Customer relationships - 5 years
Internally developed software - 3 years
Software costs - 3 years
Other intangible assets - 3 years (no charge in the first period
of ownership)
property, plant and equipment
All property, plant and equipment is initially recorded at cost
and is subsequently measured at cost less accumulated depreciation
and any recognised impairment loss.
Depreciation, which is charged through the profit or loss within
administrative expenses, is provided at rates calculated to write
off the cost less residual value of each asset over its expected
useful life, as follows:
Computer equipment - 25% straight line
Leasehold improvements - in line with the term of the underlying
leased asset
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or
loss.
PROVISIONS
Provisions are recognised when the Group has a present
obligation as a result of a past event which it is probable will
result in an outflow of economic benefits that can be reliably
estimated.
SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds.
SHARE-BASED COMPENSATION
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the income statement
over the vesting period. Non-market vesting conditions are taken
into account by adjusting the number of equity instruments expected
to vest at each balance sheet date so that, ultimately, the
cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. Market vesting
conditions are factored into the fair value of the options
granted.
As long as all other vesting conditions are satisfied, a charge
is made irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the income statement over the remaining vesting period. Where
equity instruments are granted to persons other than employees, the
income statement is charged with fair value of goods and services
received.
Cancelled or settled options are accounted for as an
acceleration of vesting and the amount that would have been
recognised over the remaining vesting period is recognised
immediately.
The proceeds received net of any attributable transaction costs
are credited to share capital (nominal value) and share premium
when the options are exercised.
Fair value is measured by use of the Black-Scholes pricing model
which is considered by management to be the most appropriate method
of valuation.
employee benefits
The Group operates a defined contribution pension scheme. The
pension costs charged in the financial statements represent the
contribution payable by the Group during the year.
The costs of short-term employee benefits are recognised as a
liability and an expense in the period the related service is
rendered at the undiscounted amount of the benefits expected to be
paid in exchange for that service.
TAXATION
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted at the
reporting date. Current income tax relating to items recognised
directly in equity or other comprehensive income is recognised in
equity and not in the consolidated statement of comprehensive
income.
Deferred income tax is provided on all temporary differences at
the reporting date arising between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes. Deferred tax assets and liabilities are offset when the
Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate
to taxes levied by the same tax authority.
Deferred tax assets have not been recognised in respect of the
Group's tax losses carried forward.
Research and Development tax credits are not recognised as
receivables until the claims have been submitted and agreed by
HMRC.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting judgements will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
IMPAIRMENT
At each accounting reference date, the Group reviews the
carrying amounts of its intangibles, property, plant &
equipment and investments to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any).
Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried in at a revalued amount, in
which case the reversal of the impairment loss is treated as a
revaluation increase.
DEFERRED CONSIDERATION
Total compensation for acquisitions includes an element of
deferred consideration payable, subject to the revenue performance
post-acquisition. Management use historical information and
management forecasts to estimate a liability, using the discounted
cashflow methodology, to derive a fair value of the deferred
consideration payable.
SHARE-BASED COMPENSATION
The fair value of share-based awards is measured using the
Black-Scholes model which inherently makes use of significant
estimates and assumptions concerning the future applied by the
Directors. Such estimates and judgements include the expected life
of the options and the number of employees that will achieve the
vesting conditions. Further details of the share option scheme are
given in note 15 .
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the alternative performance measure of adjusted
EBITDA/(EBITDA loss). This measure is not defined under IFRS, nor
is it a measure of financial performance under IFRS.
This measure is sometimes used by investors to evaluate a
company's operational performance with a long-term view towards
adding shareholder value. This measure should not be considered an
alternative, but instead supplementary, to profit/(loss) from
operations and any other measure of performance derived in
accordance with IFRS.
Alternative performance measures do not have generally accepted
principles for governing calculations and may vary from company to
company. As such, the adjusted EBITDA/(EBITDA loss) quoted within
the Group Statement of Comprehensive Income should not be used as a
basis for comparison of the Group's performance with other
companies.
During the year ended 31 December 2022, the Group adopted
adjusted EBITDA as an alternative performance measure having made
reference to underlying profit/(loss) from operations in prior
periods. The Group adopted the new alternative performance measure
in order to more closely align with competitors, financial analyst
coverage and the Group's own guidance.
ADJUSTED EBITDA/(EBITDA LOSS)
The Group uses adjusted EBITDA/(EBITDA loss), defined as
profit/(loss) from operations, adding back share-based
compensation, transaction costs associated with the Group's
acquisition strategy and depreciation & amortisation
charge.
The adjusted EBITDA loss is reconciled back to the loss from
operations within the Group Statement of Comprehensive Income.
1 revenue and SEGMENTAL REPORTING
All of the Group's revenue arises from its activities within the
UK (although a proportion of revenue is derived from customers
incorporated or residing outside of the UK). Management considers
there to be only one operating segment within the business based on
the way the business is organised and the way results are reported
internally.
Revenue is as follows:
Group Group
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
_______ _______
Total revenue 4,821,996 2,301,172
_______ _______
Group Group
Year ended Year ended
31 December 31 December
2022 2021
2 LOSS FROM OPERATIONS GBP GBP
Loss from operations is stated after charging:
Share-based compensation 4,284,039 2,338,495
Transaction costs 99,365 402,515
Expensed software development costs 86,941 97,556
Depreciation of property, plant and equipment 14,622 4,293
Amortisation of intangible assets 386,541 148,094
Short-term (2018 IAS 17 operating) lease rentals 252,308 86,434
_______ _______
Amounts payable to the Group's auditor in respect of both audit
and non-audit services:
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
Audit Services
* Statutory audit 40,000 25,000
Other Services
Due diligence services - 18,000
The auditing of accounts of associates of
the Company pursuant to legislation:
* Audit of subsidiaries and its associates 49,450 30,250
------------------------- -------------------------
89,450 73,250
========================= =========================
3 INTEREST AND SIMILAR ITEMS
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
Total finance and other income
Bank interest receivable 37,947 1,622
========================= =========================
Total finance costs
Unwinding of discount 108,416 -
Loan note interest 53,500 -
Other interest payable and charges 9,341 360
------------------------- -------------------------
171,257 300
========================= =========================
4 EMPLOYEES
The average monthly numbers of employees in the Group (including
the Directors) during the year was made up as follows (the Company
has no employees other than the Directors):
Year ended Year ended
31 December 31 December
2022 2021
Number Number
Directors 7 8
Employees 27 14
_______ _______
34 22
_______ _______
Year ended Year ended
31 December 31 December
Employment costs 2022 2021
GBP GBP
Wages and salaries 1,977,588 1,309,251
Social security costs 251,010 182,414
Pension costs 49,200 38,307
Share-based compensation 4,155,094 2,195,782
_______ _______
6,432,892 3,725,754
_______ _______
remuneration of key management personnel
The remuneration of the Directors, who are the key management
personnel of the Group, is set out below in aggregate. Further
information about the remuneration of the individual directors
is provided in the Directors' Remuneration Report of the Company's
annual report and accounts for the year ended 31 December 2022
.
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
Salaries and fees 794,712 680,553
Bonus 43,044 76,800
Share-based compensation (credit) / charge (125,443) 311,469
Social security costs 123,024 84,022
_______ _______
835,337 1,152,844
_______ _______
Number Number
Number of Directors to whom retirement benefits
are accruing under a defined contribution
scheme 3 3
_______ _______
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
The remuneration in respect of the highest
paid Director was:
Salaries and fees 140,000 180,000
Bonus 31,360 43,200
Share-based compensation charge 30,173 177,000
Pension and other benefits 7,046 9,000
_______ _______
208,579 409,200
_______ _______
During the year, 1,348,867 options were forfeited by Julian
Wheatland, a former director, leading to a share-based compensation
credit for the year ended 31 December 2022 in respect of Mr.
Wheatland of GBP192,452 (year ended 31 December 2021: share-based
compensation charge of GBP177,000).
During the year, no (2021: nil) Directors exercised any (2021:
nil) share options.
5 Pension costs
The Group operates a defined contribution pension scheme. The
scheme and its assets are held by independent managers. The pension
charge represents contributions due from the Group and amounted to
GBP49,200 (2021: GBP38,307). At 31 December 2022 contributions of
GBP59,054 remained outstanding and are included within other
payables (2021: GBP25,864).
6 taxation
The tax on the loss on ordinary activities for the period was as
follows:
Group Group
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
_______ _______
Current Tax:
Current tax credit (158,188) (70,764)
Deferred tax credit (17,177) -
_______ _______
Income tax credit (175,365) (70,764)
_______ _______
Group Group
Year ended Year ended
31 December 31 December
2022 2021
GBP GBP
Loss before taxation (5,787,197) (4,174,533)
_______ _______
Loss multiplied by main rate of corporation
tax in the UK of 19% (2021: 19%) (1,099,567) (793,161)
Effects of:
Surrender of tax losses for research & development
tax credit refund (158,188) (70,764)
Expenses not deductible for tax purposes 29,261 66,649
Share-based payments 814,037 444,314
Other adjustments in period 65,825 (702)
Tax losses carried forward 190,444 282,900
_______ _______
Current tax credit (158,188) (70,764)
_______ _______
As at 31 December 2022, the Group had prepared but not yet
submitted a Research and Development tax credits reclaim, the
estimated net benefit of which is approximately GBP135,000 During
the year ended 31 December 2022, the Group received a Research and
Development tax credit refund of GBP158,188 (2021: GBP70,764) in
respect of its reclaim for the year ended 31 December 2021.
As at 31 December 2022, the Group had tax losses carried forward
of GBP5,013,429 (31 December 2021: GBP4,147,682). Deferred tax has
not been recognised in respect of these tax losses. The standard
rate of corporation tax applicable to the Group for the year ended
31 December 2022 was 19%. The UK government has announced, with
effect from 1 April 2023, an increase in the corporation tax main
rate from 19% to 25% for companies with profits over GBP250,000 and
the introduction of a small profits rate of 19% applicable to
companies with profits of not more than GBP50,000, with marginal
relief available for profits up to GBP250,000.
DEFERRED TAX
The Group recognised the following movement in deferred tax
liabilities (year ended 31 December 2021: GBPnil) :
Non-current
Balance balance
as at 1 Acquired Recognised as at 31
January in business to profit December
2022 combination or loss 2022
GBP GBP GBP GBP
Intangibles - 116,993 (17,177) 99,816
_______ _______ _______ _______
Based on the valuation of acquisition intangibles and enacted UK
corporation tax rates, during the year ended 31 December 2022 the
Group has acquired deferred tax liabilities of GBP80,382 in
relation to its acquisition of Capital Currencies Limited and
GBP36,611 in relation to its acquisition of Pangea FX Limited (note
9). The deferred tax will be released to the income statement as
the underlying intangible assets are amortised or otherwise
recognised via impairment in profit or loss.
7 LOSS PER SHARE
The loss per share of 17.26p (2021: 21.24p) is based upon the
loss of GBP5,611,832 (2021: loss of GBP4,103,769) and the weighted
average number of ordinary shares in issue for the year of
32,506,335 (2021: 19,317,407).
The loss incurred by the Group means that the effect of any
outstanding warrants and options would be considered anti-dilutive
and is ignored for the purposes of the loss per share
calculation.
8 GROUP INTANGIBLE ASSETS
Internally
Customer developed Software
Goodwill relationships software costs Other Total
GBP GBP GBP GBP GBP GBP
COST
At 1 January 2022 - - 647,485 15,611 92,520 755,616
Additions - - 422,713 - - 422,713
Acquired through business
combinations 1,086,262 615,756 - - - 1,702,018
_______ _______ _______ _______ _______ _______
At 31 December 2022 1,086,262 615,756 1,070,198 15,611 92,520 2,880,347
AMORTISATION
At 1 January 2022 - - 162,558 15,611 - 178,169
Charge for the period - 90,408 296,133 - - 386,541
_______ _______ _______ _______ _______ _______
At 31 December 2022 - 90,408 458,691 15,611 - 564,710
NET BOOK VALUE
At 31 December 2022 1,086,262 525,348 611,507 - 92,520 2,315,637
_______ _______ _______ _______ _______ _______
At 31 December 2021 - - 484,927 - 92,520 577,447
_______ _______ _______ _______ _______ _______
Other intangible assets comprise regulatory licenses held at
cost and are not amortised.
Company INTANGIBLE ASSETS
Internally
developed
software Total
GBP GBP
COST
At 1 January 2022 647,485 647,485
Additions 422,713 422,713
_______ _______
At 31 December 2022 1,070,198 1,070,198
AMORTISATION
At 1 January 2022 162,558 162,558
Charge for the period 296,133 296,133
_______ _______
At 31 December 2022 458,691 458,691
NET BOOK VALUE
At 31 December 2022 611,507 611,507
_______ _______
At 31 December 2021 484,927 484,927
_______ _______
9 BUSINESS COMBINATIONS
CAPITAL CURRENCIES LIMITED
The Group acquired 100% of the share capital of Capital
Currencies Limited ("Capital Currencies") on 1 February 2022.
Capital Currencies was a well-established foreign exchange broker
located in Tunbridge Wells, specialising in the provision of
currency exchange and international payments. Capital Currencies is
authorised and regulated by the FCA as an authorised payment
institution permitted to provide payment services.
The rationale for the acquisition was to expand Cornerstone's
presence in its core target market and, in line with the Group's
stated strategy, increase revenue generated by direct clients. By
bringing Capital Currencies' clients onto Cornerstone's technology
platform, the Group benefits from the rationalisation of payments
to banking partners across the combined organisation as well as
recognising other synergistic savings, such as in compliance costs
and overheads.
The recognised value of assets acquired and liabilities assumed
and the fair value of consideration at the date of acquisition were
as follows:
GBP
Intangibles 423,064
Tangible fixed assets 14,584
Trade and other receivables 27,842
Cash acquired 58,351
Trade and other payables (57,939)
Deferred tax provision (80,382)
Net assets on acquisition 385,520
Goodwill on acquisition 1,043,319
Total consideration 1,428,839
Initial consideration - cash 586,335
Deferred contingent consideration 842,504
Total consideration 1,428,839
Goodwill comprises the value of expected synergies arising from
the acquisition and additional value attributed by the acquirer in
relation to the future expected cash flows, which is not separately
recognised.
In determining the value of acquired customer relationships,
forecast cash flows were discounted using a weighted average cost
of capital ("WACC") of 13%. Based on the valuation of the
intangibles and enacted UK corporation tax rates a deferred tax
provision of GBP80,382 was recognised as a result of the identified
intangible asset.
Deferred consideration related to the acquisition of Capital
Currencies was agreed at acquisition as payable as follows:
-- On the first anniversary of completion, two times Capital
Currencies' revenue for the 12-month period leading up to 31
January 2023, less the initial cash consideration already paid.
-- On the second anniversary of completion, three times Capital
Currencies' revenue for the 12-month period leading up to 31
January 2024, less cumulative amounts already paid.
Deferred consideration has been assessed using historical
information and management forecasts to estimate amounts payable
which have been discounted at a WACC of 13%.
As disclosed in note 20, on 18 March 2023, the Company announced
it had agreed a variation of the above deferred consideration
payments that postponed the above measurement and settlement
periods by one calendar year in each instance and gave the Company
the option to settle the deferred consideration in cash. The
discounted consideration shown above does not reflect the impact of
this extension.
PANGEA FX LIMITED
The Group acquired 100% of the share capital of Pangea FX
Limited ("Pangea") on 1 September 2022. Pangea FX is a specialist
FX and treasury consultancy with a strategic focus on helping its
clients control the impact currency volatility has on their
business, primarily through providing a bespoke service to
corporate clients in the UK.
The rationale for the acquisition was to accelerate the Group's
growth through the addition of two experienced senior sales
executives - the principals of Pangea - who are responsible for
leading the Group's sales function in the UK and Dubai. The Group
has also benefited from the migration of Pangea's existing client
base to the Cornerstone platform as well as certain operational
synergies such as from closing the Pangea operating base and
relocating the employees to the Group's main office.
The recognised value of assets acquired and liabilities assumed
and the fair value of consideration at the date of acquisition were
as follows:
GBP
Intangibles 192,962
Tangible fixed assets 976
Trade and other receivables 30,737
Cash acquired 856
Trade and other payables (12,568)
Deferred tax provision (36,611)
Net assets on acquisition 176,081
Goodwill on acquisition 42,944
Total consideration 219,025
Initial consideration - cash 25,000
Payment to discharge Directors' loans 21,447
Loan notes (undiscounted) 172,578
Total consideration 219,025
Goodwill comprises the value of expected synergies arising from
the acquisition and additional value attributed by the acquirer in
relation to the future expected cash flows, which is not separately
recognised.
In determining the value of the acquired customer relationships
that comprise the intangible assets, forecast cash flows were
discounted using a WACC of 13%. Based on the valuation of the
intangibles and enacted UK corporation tax rates a deferred tax
provision of GBP36,611 was recognised as a result of the identified
intangible asset.
The payment of the loan note principal of GBP172,578 is
contingent on achieving future revenue targets over a period of two
years from the acquisition date. Based on current and forecast
performance it has been assumed that the contingent consideration
will be paid in full. A 6% coupon rate is payable on the loan note
principal, quarterly in arears. As the loan note debt instrument is
expected to be held to maturity, with the only related cash flows
being the principal and interest, the loan note principal is shown
without any time-value discount.
10 GROUP property, plant and equipment
Computer Leasehold
equipment improvements Total
GBP GBP GBP
COST
At 1 January 2022 33,046 - 33,046
Additions 17,198 - 17,198
Acquired through business combinations 976 14,583 15,559
_______ _______ _______
At 31 December 2022 51,220 14,583 65,803
AMORTISATION
At 1 January 2022 11,504 - 11,504
Charge for the period 8,275 6,347 14,622
_______ _______ _______
At 31 December 2022 19,779 6,347 26,126
NET BOOK VALUE
At 31 December 2022 31,441 8,236 39,677
_______ _______ _______
At 31 December 2021 21,542 - 21,542
_______ _______ _______
11 investments
Investments
in
Subsidiaries
GBP
Cost or Valuation
At 1 January 2022 6,349,758
Additions 1,667,864
------------
8,017,622
Net Book Value
At 31 December 2022 8,017,622
------------
At 31 December 2021 6,349,758
------------
The Company's investment as at 31 December 2022 represents its
investments in its direct subsidiaries of GBP6,367,773 in
Cornerstone Payment Solutions Ltd (2021: GBP6,347,773),
GBP1,428,839 in Capital Currencies (2021: GBPnil), GBP219,025 in
Pangea FX Limited (2021: GBPnil) and GBP1,985 in Cornerstone -
Middle East FZCO (2021: GBP1,985).
During the year ended 31 December 2022, the Company invested a
further GBP20,000 in support of the increased regulatory capital
requirements for Cornerstone Payment Solutions Ltd.
Further, as disclosed in note 9 investments in subsidiaries
acquired in the year amounted to GBP1,428,839 in respect of Capital
Currencies, which was acquired on 1 February 2022 (year-ended 31
December 2021: GBPnil) and GBP219,025 in respect of Pangea FX
Limited (2021: GBPnil).
Shares in subsidiary and associate undertakings are stated at
cost. As at 31 December 2022, Cornerstone FS plc owned the
following principal subsidiaries, which are included in the
consolidated accounts:
Principal Country Registered Percentage
Subsidiary Activity of Incorporation Office of Ownership
----------------------------- ------------ ----------------- ------------------ -------------
Cornerstone Payment Solutions Foreign Northern 1 Elmfield 100 per
Ltd Exchange Ireland Avenue, cent.
and Payment Warrenpoint,
Services Newry,
Co. Down,
BT34 3HQ
Cornerstone - Middle East Consultancy United Arab 100 per
FZCO Emirates Dubai Silicon cent.
Oasis, DDP,
Building
A2, Dubai,
United Arab
Emirates
Avila House Limited E-money England The Old Rectory, 100 per
and Payment and Wales Addington, cent.
Services Buckinghamshire,
MK18 2JR
Capital Currencies Limited Authorised England 100 per
Payment and Wales The Old Rectory, cent.
Institution Addington,
Buckinghamshire,
MK18 2JR
Pangea FX Limited Foreign England 100 per
Exchange and The Old Rectory, cent.
White Label Wales Addington,
Buckinghamshire,
MK18 2JR
CS Commercial Limited and Cornerstone EBT Trustee Limited, which
were dormant and 100% owned by the Company, were both dissolved
during the year.
12 current trade and other receivables
Group Group Company Company
31 December 31 December 31 December 31 December
2022 2021 2022 2022
GBP GBP GBP GBP
Trade receivables 221,669 - - -
Prepayments and accrued income 131,010 90,360 39,465 31,118
Derivative financial assets at
fair value 635,473 322,710 - -
Other receivables 53,062 42,525 - 10,000
Amounts due from Group undertakings - - 363,359 170,229
Taxes and social security 297,896 37,649 297,896 37,649
_______ _______ _______ _______
1,339,110 493,244 700,720 248,996
_______ _______ _______ _______
For the year ended 31 December 2022 GBPnil was recorded as a bad
debt expense (31 December 2021: GBPnil).
As at 31 December 2022, the Group had a contingent asset in
respect of Research and Development tax credits for which a reclaim
had been prepared, but not yet submitted. The estimated net benefit
of the claim is approximately GBP135,000(2021: GBP158,000) and has
not been included in current receivables due to its contingent
nature.
13 loan notes
Group Group Company Company
31
31 December 31 December 31 December December
2022 2021 2022 2021
GBP GBP GBP GBP
CURRENT
Convertible loan notes 225,000 - 225,000 -
_______ _______ _______ _______
NON-CURRENT
Loan notes 2,172,578 - 2,172,578 -
_______ _______ _______ _______
The current convertible loan note of GBP225,000 was issued
pursuant to the Company's fundraising on 5 August 2022 to a placee
pending approval from the FCA to allow the placee to increase their
shareholding to over 10%. The FCA granted such approval and the
loan note was converted into 3,461,538 new ordinary shares of one
penny each at an exercise price of 6.5 pence per share on 6
February 2023 (see note 20).
The non-current non-convertible loan notes comprise GBP2,000,000
issued to Robert O'Brien (the "Robert O'Brien loan note") and
GBP172,578 of deferred consideration in relation to the acquisition
of Pangea FX Limited (see note 9). Both loan notes have a 6% coupon
rate payable quarterly in arrears. The Robert O'Brien loan note was
issued pursuant to a settlement of his share-incentivisation
arrangement with the Company and was due for repayment on 31 July
2025. Post year end, the repayment date was varied to 31 July 2026.
The Pangea FX Limited loan note is payable on 31 August 2024
contingent upon achieving future revenue targets over a period of
two years from the acquisition date. Based on current and forecast
performance it has been assumed that the loan notes will be paid in
full.
14 current trade and other payables
Group Group Company Company
31
31 December 31 December 31 December December
2022 2021 2022 2021
GBP GBP GBP GBP
Trade payables 362,035 346,255 162,128 212,561
Derivative financial liabilities
at fair value 563,676 290,292 - -
Other tax and social security 515,750 60,349 50,640 10,923
Other payables and accruals 527,816 484,814 179,818 244,033
Amount due to Group undertakings - - 1,425,555 435,659
_______ _______ _______ _______
1,969,277 1,181,710 1,818,141 903,176
_______ _______ _______ _______
15 Share capital AND Reserves
Allotted, called up and fully paid
Ordinary
shares Share capital
No. GBP
Ordinary shares of GBP0.01 each as
at 1 January 2022 20,277,582 202,776
Issue of new shares of GBP0.01 27,758,617 277,586
_______ _______
Ordinary shares of GBP0.01 each at
31 December 2022 48,036,199 480,362
_______ _______
At 31 December 2022 share subscriptions of GBPnil remained
unpaid (31 December 2021: GBPnil).
The following changes in the share capital of the Company have
taken place in year ended 31 December 2022:
-- On 27 January 2022, 3,283,034 ordinary shares were issued at
a price of GBP0.265 in connection with a placing and
subscription
-- On 8 April 2022, 123,000 ordinary shares were issued at a
price of GBP0.265 in consideration for investor relations
services
-- On 5 August 2022, 13,230,765 ordinary shares were issued at a
price of GBP0.065 in connection with a placing
-- On 5 August 2022, 6,386,818 ordinary shares were issued at a
price of GBP0.100 being the equity element of a settlement with
Robert O'Brien and his team related to their share-based
incentivisation agreement
-- On 24 August 2022, 360,000 ordinary shares were issued at a
price of GBP0.10025 in part settlement of the share-based
remuneration for the non-executive board and company secretary in
respect of the year ended 31 December 2021
-- On 7 October 2022, 4,375,000 ordinary shares were issued at a
price of GBP0.008 upon conversion of a loan note
All ordinary shares are equally eligible to receive dividends
and the repayment of capital and represent equal votes at meetings
of shareholders.
The following describes the nature and purpose of each reserve
within owner's equity:
Share capital : Amount subscribed for shares at nominal
value.
Share premium : Amount subscribed for share capital in excess of
nominal value, less costs of share issue.
Share-based payment reserve : The share-based payment reserve
comprises the cumulative expense representing the extent to which
the vesting period of warrants and share options has passed and
management's best estimate of the achievement or otherwise of
non-market conditions and the number of equity instruments that
will ultimately vest.
Deferred consideration reserve: Reflects equity-based contingent
consideration on the acquisition of subsidiaries.
Merger relief reserve : Effect on equity of the consideration
shares issued over their nominal value.
Reverse acquisition reserve : Effect on equity of the reverse
acquisition of Cornerstone Payment Solutions Ltd.
Retained losses : Cumulative realised profits less cumulative
realised losses and distributions made, attributable to the equity
shareholders of the Company.
Options
The Company operates an Enterprise Management Incentive ("EMI")
Scheme equity-settled share-based remuneration scheme for
employees.
Under the scheme the options are exercisable at any time. The
options are also exercisable in the event of a change of control.
If the option holder's employment within the Group is terminated,
other than for gross misconduct, any options vested may be
exercised within 90 days of such termination (12 months in the case
of the option holder's death), otherwise the options lapse five
years after the date of grant. The options also lapse, inter alia,
if the option holder is adjudged bankrupt or proposes a voluntary
arrangement or other scheme in relation to his/her debts.
31 December 2022 31 December 2021
Weighted Weighted
average average
exercise exercise
Number price Number price
GBP GBP
Outstanding at the beginning of
the year 1,599,480 0.50 1,599,480 0.50
Granted during the year 1,893,454 0.23 - -
Forfeited/waived during the year (1,786,603) (0.46) - -
_______ _______ _______ _______
Total outstanding 1,706,331 0.24 1,599,480 0.50
_______ _______ _______ _______
Total exercisable 184,535 0.50 533,160 0.50
_______ _______ _______ _______
The Black-Scholes model was used for calculating the cost of
options. The model inputs for each of the options issued were:
8 March 8 March 8 March 1 September
GRANT DATE 2022 2022 2022 2022
Exercise price (pence) 36.2 61.0 26.5 10.0
Share price at grant date (pence) 16.5 16.5 16.5 9.0
Risk free rate 2.1% 2.1% 2.1% 2.7%
Expected volatility 90.1% 90.1% 90.1% 129.5%
Contractual life (years) 5 5 5 5
The expected volatility reflects the assumption that historical
volatility of comparable quoted companies is indicative of future
trends, which may not necessarily be the actual outcome.
The weighted average contractual life of the options is five
years (2021: five years).
No options were exercised during the current year (2021:
nil).
The Group's share-based compensation charge for the year ended
31 December 2022 of GBP4,284,039 (2021: GBP2,338,495) consists of
GBP128,943 in relation to warrants granted in Cornerstone (2021:
GBP142,712), a net credit of GBP222,577 in respect of the
Cornerstone options (2021: charge of GBP306,833), GBP36,836 in
respect of equity settled share-based payments related to the
non-executive Board member's service agreements (2021: GBP81,370)
and GBP4,340,837 of other share-based compensation (2021:
GBP1,807,580).
Other share-based compensation
On 27 September 2021 the Company announced the appointment of
Robert O'Brien as General Manager APAC and Middle East. As part of
his remuneration package over the first two years he and his team
were entitled to receive share-based incentivisation based on a
multiple of revenue generation and contribution to profit.
Upon initial recognition of the share-based incentivisation, the
forecasted performance of Robert O'Brien and his team over the
two-year period, resulted in an expected share-based compensation
charge over the two-year period of GBP6,148,417 based on the share
price at the grant date on 1 August 2021 of 29.5 pence per
share.
On 4 August 2022, the Company announced the variation of the
share incentive arrangement between the Company and Robert O'Brien
and his team. The terms of the original incentivisation
arrangements were varied such that 1) Mr. O'Brien was issued a loan
note with a value of GBP2 million and carrying a coupon rate of 6%,
repayable by the Company on 31 July 2025 (which was subsequently
varied to be repayable on 31 July 2026); 2) Mr. O'Brien was issued
and allotted 4,286,818 new ordinary shares at a price of 10p per
share; 3) the three senior members of Mr. O'Brien's team were
allotted and issued 2,100,000 new ordinary shares at a price of 10p
per share; and 4) the issue of a further 5,113,182 new ordinary
shares to Mr. O'Brien at a price of 10p per share following receipt
from the FCA of permission for Mr. O'Brien to increase his holding
to more than 9.9% of the issued share capital of the Company. As a
result of the agreed settlement, the Company recognised an
accelerated charge for the year ended 31 December 2022 such that
the full value of the total charge estimated upon initial
recognition of GBP6,148,417 has been cumulatively expensed
(GBP4,340,837 for the year ended 31 December 2022 and GBP1,807,580
for the year ended 31 December 2021).
A transfer from the share-based payment reserve to the profit
and loss reserve of GBP5,186,984 was recognised for the year ended
31 December 2022 reflecting the issue of the GBP2 million loan
note, allotment of 6,386,818 new ordinary shares at a price of 10p
per share to Robert O'Brien and his team (GBP3,153,950) and the
issue of 329,492 shares at a price of 10.025 pence per share on 28
August 2022 in respect of equity-settled remuneration under the
non-executive Board member's service agreements.
No warrants were granted in the year.
16 Related party transactions
Details of key management compensation are included in note 4.
Key management are considered to be the Directors of the Group.
Transactions with subsidiaries
During the year, the Company and Cornerstone Payment Solutions
Ltd entered into various transactions with each other including
software development charges, licenses fees and working capital
support. The net balance of transactions between the companies are
held on an interest-free inter-Group loan which has no terms for
repayment. At the year end, the Company owed GBP1,404,408 (2021:
GBP435,659) to Cornerstone Payment Solutions Ltd.
During the year, the Company also provided working capital
support to Avila House Limited, Cornerstone - Middle East FZCO and
Capital Currencies Limited. The net balance of transactions between
the companies are held on an interest-free intra-Group loan which
has no terms for repayment. At the year end, Avila House Limited
owed the Company GBP259,617 (2021: GBP150,041), Cornerstone -
Middle East FZCO owed the Company GBP60,500 (2021: GBP20,188) and
Capital Currencies Limited owed the Company GBP43,242 (2021:
GBPnil).
Other related parties
All of the amounts below were in respect of the year ended 31
December 2022.
During the year ended 31 December 2022, the Group generated
revenue of GBP1,617,467 under a referral agreement with Atlantic
Partners Asia ("APA"), a significant shareholder in the Company
(year ended 31 December 2021: GBP481,330). As at 31 December 2022,
APA owed the Group GBP221,669 (31 December 2021: GBPnil).
As at 31 December 2022 an amount of GBP8,750 was due from Terry
Everson, a director of Cornerstone Payment Solutions Ltd and a
shareholder in Cornerstone (31 December 2021: GBP8,750).
On 28 September 2022 William Newton, a director and significant
shareholder of the Company, assigned his un-drawn convertible loan
note of GBP350,000 to APA.
During the year ended 31 December 2022, William Newton repaid a
loan made by the Group to him of GBP10,000 (balance outstanding as
at 31 December 2021: GBP10,000).
During the year ended 31 December 2022, the Group incurred
charges of GBP45,000 (2021: GBPnil) under a computer services
agreement with JF Technology (UK) Ltd of whom Stephen Flynn (a
former Director of the Company and a significant shareholder) is a
director and a majority shareholder. As at 31 December 2022
GBP18,000 was payable to JF Technology (UK) Ltd (balance
outstanding as at 31 December 2021: GBPnil).
The transactions with Robert O'Brien are disclosed in notes 13,
15 and 20.
17 FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
Group Group Company Company
31
31 December 31 December 31 December December
2022 2021 2022 2021
GBP GBP GBP GBP
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts
with customers 504,106 359,077 - -
Foreign currency forward contracts
with institutional counterparty 131,367 33 - -
_______ _______ _______ _______
635,473 359,110 - -
Cash and cash equivalents 682,346 348,102 495,627 139,579
Trade receivables 221,669 - - -
Other receivables 184,072 132,885 402,824 211,347
_______ _______ _______ _______
1,723,560 840,097 898,451 350,926
_______ _______ _______ _______
FINANCIAL LIABILITIES
Group Group Company Company
31
31 December 31 December 31 December December
2022 2021 2022 2021
GBP GBP GBP GBP
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts
with customers 165,156 290,292 - -
Foreign currency forward contracts
with institutional counterparty 398,520 - - -
_______ _______ _______ _______
563,676 290,292 - -
Trade payables 362,035 346,255 162,128 212,561
Other payables 527,816 484,814 1,605,373 679,692
Loan notes 2,397,578 - 2,397,578 -
_______ _______ _______ _______
3,851,105 1,121,361 4,165,079 892,253
_______ _______ _______ _______
All financial assets and liabilities have contractual maturity
of less than one year with the exception of loan notes of
GBP2,172,578 (2021: GBPnil).
Derivative financial assets and liabilities
Derivative financial assets not designated as hedging
instruments
31 December 2022 31 December 2021
Notional Notional
Fair Value Principal Fair Value Principal
GBP GBP GBP GBP
Foreign currency forward contracts
with customers 504,106 9,042,956 359,077 12,508,939
Foreign currency forward contracts
with institutional counterparty 131,367 3,377,597 33 12,544
_______ _______ _______ _______
635,473 12,420,553 359,110 12,521,483
_______ _______ _______ _______
Derivative financial liabilities not designated as hedging
instruments
31 December 2022 31 December 2021
Notional Notional
Fair Value Principal Fair Value Principal
GBP GBP GBP GBP
Foreign currency forward contracts
with customers 165,156 3,337,362 290,292 9,874,438
Foreign currency forward contracts
with institutional counterparty 398,520 8,715,534 - -
_______ _______ _______ _______
563,676 12,052,896 290,292 9,874,438
_______ _______ _______ _______
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Foreign currency
forward contracts are measured at fair value on a recurring
basis.
There are three levels of fair value hierarchy:
-- Level 1 - the fair value of financial instruments traded in
active markets is based on quoted market prices at the end of the
reporting period.
-- Level 2 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
Foreign currency forward contracts with customers generally
require immediate settlement on the maturity date of the individual
contract and fall into level 2 of the fair value hierarchy above.
Level 2 comprises those financial instruments which can be valued
using inputs other than quoted prices that are observable for the
asset or liability either directly (i.e., prices) or indirectly
(i.e., derived from prices). The fair value of forward foreign
exchange contracts is measured using observable forward exchange
rates for contracts with a similar maturity at the reporting
date.
The net gain on financial assets at fair value through profit or
loss for year ended 31 December 2022 was GBP3,300 (2021: net loss
of GBP29,661).
Financial instruments - risk management
Financial assets primarily comprise trade and other receivables,
cash and cash equivalents and derivative financial assets.
Financial liabilities comprise trade and other payables,
shareholder loans and derivative financial liabilities. The main
risks arising from financial instruments are market risk (including
foreign currency risk and interest rate risk), liquidity risk,
credit risk and counterparty risk.
Market risk
Market risk for the Group comprises foreign exchange risk and
interest rate risk. The Group operates as a riskless matched
principal broker for deliverable non-speculative spot and forward
foreign currency transactions, with each trade with its clients
matched with an identical trade with an institutional counterparty.
Therefore, foreign exchange risk is mitigated through the matching
of foreign currency assets and liabilities between clients and
institutional counterparties which move in parity.
The Group's cash balances are primarily held in Pound Sterling
and the Group does not hold significant cash balances in foreign
currencies.
Interest rate risk affects the Group to the extent that it
implicitly impacts the price of foreign currency forward contracts.
However, this risk is mitigated in the same way as foreign currency
risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group has
extensive controls to ensure that it has sufficient cash or working
capital to meet its cash requirements to mitigate this risk.
As per the Going Concern note above, the Directors have prepared
a cash flow forecast taking into account a projected increase in
revenues and continued investment in the development of the Group's
platform and organic sales & marketing efforts and the inherent
risks and uncertainties facing the Group's business to assess the
Group's working capital requirements. The Board reviews cash flow
projections on a regular basis and has authority controls in place
so as not to commit to material expenditure without being satisfied
that sufficient funding is available to the Group.
The Group also has systems in place to monitor the margin
requirements of its clients and its margin requirement with the
institutional counterparty for the back-to-back foreign currency
forward contract on a real-time basis and request any necessary top
up payment from the clients. The Group also has the right to close
any position if no margin is given.
Credit risk
Credit risk is the risk that clients do not meet their
contractual obligations in respect of the currency spot and forward
contracts which leads to a financial loss. All customers are
subject to credit verification checks. Approximately 90% of the
Group's trades are spot currency contracts which are required to be
settled within two working days. For forward currency contracts, as
noted above, clients are required to provide margin that mitigates
credit exposure. Trade limits are applied to all clients. The Group
has systems to monitor trade limits and collateral requirements on
a real-time basis. The Group does not have any significant
concentration of exposures within its client base.
Counterparty risk
Each trade between a client and the Group is matched with an
identified trade with Velocity Trade International ("Velocity"),
which is a global foreign exchange liquidity and trade provider
that provides pricing, execution and settlement services for the
Group.
The Group also has brokerage accounts with alternative
institutional counterparties and could transact with them instead
if Velocity is unable to provide liquidity.
Management of settled and open trades are conducted via Currency
Cloud, the GV (formerly Google Ventures) backed global payments and
FX platform, and Banking Circle. Client funds are safeguarded with
Banking Circle in line with the Group's requirements under the
Electronic Money Regulations 2011 for additional protection and to
reduce counterparty risk.
18 Financial commitments
The Group is not considered to have any operating lease
commitments. The offices utilised by the Group are serviced
offices, which have a short notice period and therefore it has not
been considered necessary to disclose these as an operating lease
commitment.
19 CAPITAL MANAGEMENT
The capital structure of the business consists of cash and cash
equivalents, debt and equity. Equity comprises share capital, share
premium and retained losses and is equal to the amount shown as
'Equity' in the balance sheet. The Group's current objectives when
maintaining capital are to:
-- safeguard the Group's ability to operate as a going concern
so that it can continue to pursue its growth plans;
-- provide a reasonable expectation of future returns to shareholders; and
-- maintain adequate financial flexibility to preserve its
ability to meet financial obligations, both current and long
term.
The Group sets the amount of capital it requires in proportion
to risk. The Group manages its capital structure and adjusts it in
the light of changes in economic conditions and the risk
characteristics of underlying assets.
The Company is subject to the following externally imposed
capital requirements:
-- as a public limited company, the Company is required to have
a minimum issued share capital of GBP50,000.
Cornerstone Payment Solutions Ltd, a wholly-owned subsidiary of
the Company, is subject to the following capital requirement under
the Electronic Money Regulations 2011:
-- 2% of the average outstanding e-money issued by the
Electronic Money Institution (based on a 6-month rolling average),
or the initial capital requirement of EUR350,000, whichever is the
higher.
Capital Currencies Limited, a wholly-owned subsidiary of the
Company, is subject to the following capital requirement under the
Payment Service Regulations 2017:
-- either 10% of fixed overheads for the preceding year or the
initial capital requirement of EUR20,000, whichever is the
higher.
Cornerstone Payment Solutions Ltd and Capital Currencies Limited
complied with the above requirements for all periods during the
year ended 31 December 2022.
20 EVENTS AFTER THE REPORTING DATE
Variation of Incentivisation and Settlement Arrangements
On 8 March 2023, the Company announced that it had agreed to
vary certain incentivisation and settlement arrangements with
Robert O'Brien, General Manager APAC and Middle East, and Craig
Strong, Director of Capital Currencies.
The repayment date of Mr. O'Brien's GBP2 million loan note has
been extended by one year such that it is now repayable by the
Company on 31 July 2026.
The Company has agreed with Mr. Strong to vary the terms of the
original earn-out consideration in respect of the Capital
Currencies acquisition as follows:
-- The first tranche of the earn-out consideration is now
assessable on revenue performance for the year ending 31 January
2024 and the second tranche is assessable on revenue performance
for the year ending 31 January 2025 - both representing an
extension of one year.
-- The Company now has the option, at its discretion, to satisfy
one or both of the earn-out payments in cash as opposed to one half
of the first tranche being payable in ordinary shares and the other
half in convertible loan notes and the second tranche to be payable
in ordinary shares.
Other events after the reporting date
On 13 January 2023, the Company issued and allotted 806,182 new
ordinary shares at a price of 6.501 pence per share to a
Non-Executive Director, the Company Secretary and four former
Non-executive Directors as part of their annual remuneration set
out in the Company's admission document dated 26 March 2021.
On 13 January 2023, the Company granted options over ordinary
shares of 1 penny each in the capital of the Company. James Hickman
was granted 1,000,000 options at an exercise price of 10 pence per
share and 1,000,000 options at an exercise price of 20 pence per
share. Judy Happe was granted 550,000 options and Jordanna Curtis
200,000 both at an exercise price of 10 pence per share. In
addition, the Company granted a further 299,180 options to other
staff members. All options are intended to qualify as Enterprise
Management Incentive options pursuant to the Income Tax (Earnings
and Pensions) Act 2003.
On 6 February 2023, the Company issued and allotted 8,574,720
new ordinary shares following receipt of permission from the FCA
for Robert O'Brien and Mark Horrocks to increase their respective
shareholdings beyond 9.9% of the issued share capital of the
Company. The shares were issued at a price of 10 pence and 6.5
pence per share respectively. The shares issued to Mark Horrocks
were for the conversion of a GBP225,000 loan note issued to him as
part of the Company's fundraising announced on 5 August 2022.
On 26 April 2023, the Group completed the sale of Avila House
Ltd to Aspire Commerce Ltd and received GBP300,000 in cash in
consideration following the receipt of regulatory approval from the
FCA.
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END
FR ZZGMKRKLGFZM
(END) Dow Jones Newswires
May 16, 2023 02:00 ET (06:00 GMT)
Cornerstone Fs (LSE:CSFS)
過去 株価チャート
から 4 2024 まで 5 2024
Cornerstone Fs (LSE:CSFS)
過去 株価チャート
から 5 2023 まで 5 2024
