Regulatory News

Final Results

26 April 2019

Strong growth delivered alongside investment in technology

Momentum continues into 2019

FairFX, the e-banking and international payments group, is pleased to announce its audited full year results for the year ended 31 December 2018.

Financial highlights:

  • Group turnover(1) in excess of £2.3 billion (2017: £1.1 billion), an increase of 111% (55% on like-for-like basis*)
  • Group revenue of £26.1 million (2017: £15.5 million), an increase of 69% (39% on like for like basis*)
  • Gross profit of £20.5 million (2017: £11.9 million), an increase of 60% (40% on a like for like basis*)
  • Adjusted EBITDA(2) of £7.51 million (2017: £0.95 million), an increase of over 680%
  • Adjusted PBT(3) of £6.79 million (2017: £0.90 million), an increase of over 650%

*Excluding the effect of the acquisition of City Forex in February 2018

(1) Turnover is measured by gross value of currency transactions sold of £1,783.7 million plus gross value of deposits into bank accounts of £585.5 million for a total of £2,369.2 million

(2) Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation charges, acquisition-related expenses, share-based payments, foreign exchange gains/losses on collateral posted, re-organisation costs and non-recurring items.

(3) Adjusted PBT is profit before tax, acquisition-related expenses, amortisation of acquisition intangibles, share-based payments, foreign exchange gains/losses on collateral posted, re-organisation costs and non-recurring items.

Operational highlights:

  • Acquisition of the City Forex business in February 2018 adding additional dealing and physical cash scale
  • Successful integration of City Forex payments, settlement and accounting platform into Group
  • Surpassed 1 million customers
  • Commenced self-issuance of cards under Mastercard direct membership
  • Significant investment into technology platforms to underpin continued growth and diversification
  • Commercial terms agreed to gain access to US markets for payments and corporate cards

Q1 2019 highlights:

  • Group turnover of £620.5 million (2017: £467.2 million), an increase of 33%
  • Group revenue of £7.0 million (2017: £4.9 million), an increase of 43% and ahead of Board's expectations
  • Growth across all segments over the same period in 2018
  • Achieved direct access to Faster Payments incorporating real-time gross settlement (RTGS) accounts at Bank of England underpinning significant developments in customer offering
  • Ahead of plans for supply chain rationalisation and improved commercial terms yielding wider profit margins

Commenting on the results and outlook, Ian Strafford-Taylor, Chief Executive Officer, said:

"2018 was a transformational year in the evolution of the Group. We continued our strong growth, both organic and via acquisition, and combined this with significant investment in our people and technology to lay the foundations for our ongoing expansion. The addition of the City Forex business in February provided both an increase in revenues and a payments platform that combines a full front-to-back process which is now yielding efficiencies and capacity across the whole Group.

"The Group has enjoyed a strong start to 2019, with the first quarter delivering a further jump in turnover along with improved margins helped by supply chain rationalisation and improved commercial terms. The investments in technology we made in 2018 are already bearing fruit in 2019, just one example being the granting of Bank of England settlement accounts and direct access to the Faster Payments scheme. Our technology platforms are now enabling us to iterate our product suites rapidly in terms of both improved customer experience and functionality. Against this backdrop, the Board is confident in achieving expectations for the full year."

 

For further information, please contact:

FairFX Group plc
Ian Strafford-Taylor, CEO
+44 (0) 20 7778 9308
Cenkos Securities plc
Max Hartley / Callum Davidson
Nick Searle
+44 (0) 20 7397 8900
Canaccord Genuity
Bobbie Hilliam / David Tyrrell
Alex Aylen
+44 (0) 20 7523 8150
Yellow Jersey PR
Charles Goodwin
Joe Burgess
Annabel Atkins
+44 (0) 7747 788 221
+44 (0) 7769 325 254

 

About FairFX Group

FairFX is a leading challenger brand in banking and payments that disintermediates the incumbent banks with a superior customer experience (CX) and low-cost operating model. Our business enables personal and business customers to make easy, low-cost payments both domestically and in a broad range of currencies and across a range of products all via one integrated system. The FairFX platform facilitates payments either direct to Bank Accounts or at 35 million merchants and over 1 million ATM's in a broad range of countries globally via Mobile apps, the Internet, SMS, wire transfer and MasterCard/VISA debit cards.

FairFX provides money movement services to both personal and business customers through four channels: Currency Cards, Physical Currency, International Payments and Bank Accounts. The Currency Card and Physical Currency offerings facilitate multiple overseas payments at points of sale and ATM's whereas the International Payments channel supports wire transfer foreign exchange transactions direct to Bank Accounts. For Corporates, FairFX has a market-leading business-expenses solution based around its corporate platform and prepaid card. This service can yield significant savings on a Corporate's expenses and procurement both domestically and overseas, through better controls and improved transparency. The platform also streamlines the downstream administrative processes and integrates into accounting software, thus saving costs. FairFX offers retail and business bank accounts with all the functionality you would expect from a bank, namely faster payments, BACS, direct debits, international payments and a debit card.

 

Chairman and Chief Executive Officer's statement

We are delighted to report a year of strong performance in line with our strategy, combined with further investment in technology to support future growth.

Trading performance

2018 was a milestone year for FairFX: our turnover for the year more than doubled to exceed £2 billion, and in August we passed the 1 million customer mark. Turnover - measured by the gross value of currency transactions sold, plus the gross value of customer funds deposited into bank accounts - reached £2.37 billion, in line with our expectations and represented an increase of 111% on the prior year (2017: £1.12 billion). Excluding the effect of the acquisitions of City Forex in February 2018, turnover grew by 55%.

Group revenue increased by 68.8% to £26.1m (2017: £15.5m). On a like for like basis (excluding the effect of the acquired City Forex) the increase was 39.4% to £21.5m. The percentage growth in revenues was lower than the corresponding growth in turnover, as a key part of the growth stemmed from International Payments (increase of 69%) and Corporate Cards (increase of 31%), which have lower revenue margins than retail cards. Revenue growth overall was underpinned by the Group adding 315,000 new UK-domiciled customers during 2018, bringing the total to over 1 million.

Gross profit grew by 72% to £20.5 million (2017: £11.9 million) a higher percentage growth than the revenue line. Excluding the City Forex acquisition in February, gross profit was £16.8m (an increase of 40.4%). This reflects margin enhancements delivered by the success of our strategy of supply chain rationalisation and improved management of direct costs, which is continuing into 2019. Accordingly, operating expenses increased by only 40% relative to the previous year, materially lower than the percentage increase in revenues

Adjusted EBITDA was £7.5 million for the 12-month period (2017: £1.0 million) an increase of 687%. The growth in EBITDA reflects the operational gearing that the Group now has with a significant retention of revenue growth flowing down to profits.

The statutory PBT of £2.1 million (2017: £0.2 million) is a significant uplift on the prior year and follows a similar theme, deriving from tremendous growth in revenue both organically and through acquisition whilst driving down supply chain costs and removing duplication where appropriate from overheads. Similarly, the adjusted PBT of £6.8 million (2017: £0.9million) demonstrates our operational gearing and ability to take advantage of further growth without needing to add significantly to overheads. Basic earnings per share increased to £1.68 (2017: £0.37) as a result of the significant increase in profitability.

Management has presented adjusted EBITDA and adjusted PBT because it monitors these performance measures at a consolidated level and it believes that they are more relevant to an understanding of the Group's sustainable financial performance than statutory profit figures. Adjusted EBITDA and adjusted PBT are calculated by adjusting statutory net profit as disclosed in the table below. Adjusted EBITDA and adjusted PBT are not defined performance measures in IFRS. The Group's definition of adjusted EBITDA and adjusted PBT may not be comparable with similarly titled performance measures and disclosures by other entities.

Adjusted EBITDA/PBT Calculation 2018 2017
  £ £
Statutory Net Profit 2,617,666 447,136
Amortisation of acquisition intangibles 794,959 220,325
Other amortisation charges 523,690 792
Depreciation costs 200,123 51,727
Tax credit (538,343) (217,687)
EBITDA 3,598,095 502,293
Acquisition-related costs (1) 297,484 269,769
Share based payments 53,765 112,961
Foreign exchange loss 20,274 68,186
Development costs (2) 1,404,962 -
Restructuring costs (3) 1,048,119 -
Marketing rebrand (4) 590,034 -
Recruitment costs (5) 499,617 -
Adjusted EBITDA 7,512,350 953,208
Other amortisation charges (523,690) (792)
Depreciation costs (200,123) (51,727)
Adjusted PBT 6,788,537 900,690

(1) Acquisition-related costs relate to the acquisition of subsidiaries (note 12) during the year. These include due diligence services, accounting services, legal services and stamp duty.
(2) Development costs relate to incremental, non-recurring staff costs incurred to support the substantial software development undertaken in the year.
(3) Restructuring costs relate to one-off non-recurring costs incurred including property reorganisation, staff costs and costs to cancel contracts (no longer required by the Group as a result of acquisition of subsidiaries). 
(4) Marketing rebrand costs relate to the one-off non-recurring costs attributable to the Group rebranding. These consist of consultant services, legal services and staff costs.
(5) Recruitment costs relate to one-off costs incurred in the significant scaling up the Group's workforce.

Overall, the Group balance sheet remains healthy, with net assets of £38.3 million (2017: £35.0 million). Non-current assets rose to £30.1 million (2017: £18.3 million) which is due to the combination of fair value accounting on the acquisition of City Forex, where intangible assets and goodwill totaled £5.0 million, and the significant increase in capital expenditure of £6.4 million (2017: £0.3 million). As a FinTech business, the Group has been investing in its platforms and infrastructure since its inception. Due to the substantial growth, acquisitions of two new businesses in two years (each with different technology stacks) and increased competition in the markets in which we operate we have significantly increased investment into technology in 2018 and will continue to do so. As we have communicated previously, we recognised in 2017 that one of the core strategies for our future success and growth was to invest more in our platform and products. Therefore, in keeping with our peers and within guidelines of accounting practice we are now adopting the same policy of capitalisation of investment into internally generated software which can then be depreciated over the asset-life of the products and platforms that we create. In 2018 this amounted to £5.2m of the total of £6.4 million of capital expenditure, which represents the combined investment across the whole Group.

The Group's cash position at year-end was £7.9 million (2017: £17.8 million - re-stated from £52.0 million by de-recognising cash held on behalf of customers) at the end of 2018. The Directors believe that this reporting of cash and cash equivalents gives a more informed view of the Group's cash position. The de-recognition of the cash held on behalf of customers also impacted the corresponding liability and so trade and other payables in 2017 was re-stated from £38.6m to £4.4 million. With regards to the decrease in cash year on year, this was due primarily to the acquisition of City Forex for £6.0 million cash, an increase in capital expenditure described above and an increase in collateral requirements with financial institutions in the supply chain to £1.6 million (2017: £0.9 million).

External market trends

Our performance in 2018 is particularly commendable considering the challenges in the external market and this has demonstrated the strength and durability of the Group. On the consumer side, retail travel cash and prepaid card sales were impacted by the exceptionally hot summer in the UK, which suppressed demand for overseas holidays. The sustained weakness of Sterling in the context of the ongoing uncertainty in relation to Brexit also presented headwinds. In addition, there was strong competition in the retail market space from challenger brands offering discounted pricing to attract customer numbers. Despite these factors, performance for our retail products has held its own and with the investments made in the customer experience (CX) and back end operations, the retail travel money products are well placed for the future as we have seen in 2019 to date.

Corporate customer growth continues to be strong, underpinned by the continuing strength of our corporate expenses platform. This is a core, differentiating product for the Group and gives us an "entry product" into corporates from which we can sell other services, such as international payments and banking services. We will continue to expand our offering to Corporates during 2019 and have a strong development pipeline of new functionality and improved CX .

Strategy

The current business strategy took shape in 2017 when we recognised the need to invest more into our technology and prepare the business for the next phase of its growth. This investment was targeted to achieve three key components of the overall strategy, namely differentiation, efficiency and scale.

Differentiation

A key differentiating factor for the Group is the breadth of products that we can offer, comprising physical cash, prepaid travel solutions, a corporate expense management platform, international payments and, most recently, a bank-grade current account offering. We are also unique in offering this across both app-based and web-based platforms that work on all devices. Lastly, but crucially, we allow customers to "self-serve" but also to speak directly to FairFX experts if they want to transact with human interaction. This broad offering is underpinned by a technology platform that is much deeper than those of our competitors in terms of direct integration to underlying payment schemes. This gives us both operational and economic advantages which widen our differentiation. Our strategy has been to consolidate this already unique offering and augment it further by converging the products with the objective of a group-wide unified view of a customer combined with seamless CX for the customers to access any or all of the products via one user journey. We have made great strides in this area in 2018 and will be deploying more functionality that fits this strategy in 2019.

In addition, two years ago, concurrent with our commitment to invest more into our technology, we recognised we needed to differentiate FairFX from the increasing competition in the form of so-called challenger brands. A key part of this was the recognition that we needed to broaden our product suite to reduce our reliance of the foreign exchange sector, and the success of this strategy is reflected in the proportion of revenues derived from non-FX activities for the 2018 financial year, which reached 33%, compared to 22% in 2017 and 10% in 2016.

The acquisition of an e-money licence in 2017 was our first step towards increasing diversification in earnings by becoming a digital banking services provider. Subsequently, acquiring CardOneBanking in August of that year accelerated our plans in the sector. We identified that banking in general for the Corporate market, but particularly in relation to SME's, was still heavily under-served by the mainstream banks. Given the success of our Corporate Card platform, itself a predominantly non-FX product, we already had a strong presence in that market segment and our announced strategy was to develop better banking products for this customer profile. A key step on that journey was the launch of the Fair Everywhere business current account in June 2018, leveraging our expertise in international payments and our new banking capabilities. Fair Everywhere allows businesses to manage their day-to-day banking and international money transfers from a single current account to make global business banking easier, faster and cheaper than with traditional providers. In 2019, we will further enhance the customer experience (CX) of our banking platforms and add functionality to support larger corporate clients. In addition, we are exploring ways to add lending to our proposition, by using credit supplied by a third-party bank or credit provider direct to our customers under a Credit Broker licence. As such we will not be incurring any credit risk and the loans will not sit on our balance sheet.

We will also be adding further enhancements, both new functionality and improved CX, to our Corporate Expenses platform during 2019 to fuel its continued growth. These measures will ensure that our revenues from non-FX related activities will continue to grow in 2019 and beyond.

Efficiency

A core strand of our strategy centres on initiatives and investment to generate operational efficiencies, through increasing scale and bringing in-house selective parts of the supply chain with the aim of reducing our costs, enhancing quality, optimising risk and increasing our speed to market for new products.

Increasing efficiency requires building additional capabilities into our platforms and, as such, we have a dedicated platform engineering team adding functionality across the Group augmented by an API engineering team that provides the communication layer between back-end and front-end technologies and applications. An example of their success in bringing processes in-house was the extensive project to achieve access to real-time gross settlement (RTGS) accounts with the Bank of England and concurrent direct membership of the Faster Payments scheme, as announced in February 2019.

Gaining full membership status of Mastercard in December 2017 allowed us to issue our own cards rather than paying a third-party provider. In practice, this takes time to fully implement without extensive re-carding of current cards, but the process has begun by moving Cardone Banking cards to self-issuance in 2018. The ability to self-issue provides us with greater leverage over the existing supply chains and we have utilised this, together with continually streamlining the incumbent supply chain itself to improve margins in the Group's corporate expense platform and anticipate that we will have completed this in Q2 2019. Concurrently, we are improving the commercial arrangements we have in all other product streams and as such we expect further improvements in gross profit margins as the year progresses.

A key enabler for enhancing our efficiency was the acquisition in February 2018 of City Forex, which had undertaken travel currency operations for us since 2007 but also had a strong international payments business. In addition to bringing further scale in international payments and travel currency, the acquisition also enabled us to control the entire supply chain for the travel currency service. City Forex has three branches in central London (which currently continue to operate under that brand) and a proprietary system for processing both travel currency and international payments. The Group has taken this platform (MTS) and invested in it further by establishing an engineering team around it,  such that it now provides a front-to-back integrated solution for international payments. The platform encompasses trade entry, settlements, reconciliation and direct integration into a general ledger which yield significant efficiencies and capacity for growth.

2018 saw continued investment in the CardOne business and platform, part of which came to fruition in February 2019, as mentioned above, with RTGS and direct membership of the UK Faster Payments Scheme (FPS). FPS is the fastest growing UK payment system and the only real-time 24/7 service that is in increasing demand from personal and business customers using both desktop and mobile applications. The FPS membership continues the Group strategy of streamlining the payment supply chain and will deliver lower payment processing costs, improved customer experience and facilitate product iteration. In addition, our membership of SWIFT has further reduced our reliance on third parties.

We are now able to offer retail and business bank accounts that include faster payments, BACs, direct debits, international payments and a debit card, and can create IBANs for customers with no other financial institution involved in the process, reducing cost per transaction.

We are also looking to integrate our internal operations by increasing the utilisation of our banking platform in Chester, which over time will become our operational hub for back end settlements to support all the card-based products and provide banking services to the Group such as processing faster payments.

Scale

A key goal in the payments industry is to maximise scale. The greater the scale of the business you process the lower the unit cost becomes and removal of sections of the supply chain become economically viable. Scale can be achieved both by organic growth and acquisitions.

To drive organic growth, one of our key strategies has been to invest in improving the CX of all our products. In the Corporate Platform this has manifested in us adding new features including multi-card top-up, a receipt upload functionality, VAT reporting and the ability to annotate expenses on-the-go via the app. These product enhancements significantly contributed to accelerated year-on-year growth rate of 31%. We also added functionality to the City Forex platform to improve the customer experience for international payments. Alongside our product development efforts, we are mindful to retain the element of human interaction in our customer support function. This is a source of differentiation for the Group, and we are proud that our high-quality customer service is recognised in our consistently excellent 5-star TrustPilot rating. In relation to our retail card product, the investment focus has been to improve the underlying platforms in 2018 so that we can iterate new products and improve CX quickly and consistently in 2019 and beyond.

A key element of our organic growth strategy is our ongoing work to identify and capitalise on the rich vein of cross-selling opportunities we have within the Group following the combination of three businesses in 18 months. We have established a dedicated cross-sale team within the Group identifying the key opportunities and implementing the necessary systems and CRM to maximise the potential. We have also scaled up our affiliate sales team and outbound sales efforts. Specifically, in the SME space, with over with 0.6 million businesses set up every year in the UK on average, there is promising growth potential from providing existing and new SME customers with current accounts, our business expenses solution and other ancillary services. In contrast to traditional banks, our lean cost base means that small businesses are an attractive segment for us, and we can offer customers a superior user experience at a lower cost due to our low-cost operating model.

To complement the measures above we have continued to maintain our marketing spend in 2018. The mix of spend has evolved to be less focussed on TV advertising and more in the digital and social arenas. We maintain strict controls over the ultimate cost per acquisition (CPA) of a customer to ensure profitability. However, we have improved our knowledge of our customer base over 2018 and have tailored our customer messaging accordingly to improve not only customer acquisition but also retention and re-activation. These measures, allied to the improved cross-selling initiatives described above, helped growth in 2018 and will drive future expansion in 2019.

To complement the organic growth initiatives outlined above, we have also looked to extend our addressable market by expanding our geographical presence. During the year we upgraded our FairFX Ireland entity in preparation for a full-service operation with an authorised payment institution (API) status. Working to provide our full suite of services out of the Irish subsidiary will have the added benefit of providing a natural hedge for all the potential outcomes of the Brexit process. For clarity, any outcome of Brexit, including a "no-deal" outcome, would not impact the ability of the Group to operate as we do currently because we are focussed on provision of services to UK customers and are not utilising any passporting of permissions within the EU at this time. At the end of 2018 we also made a significant step towards being able to service current demand from US citizens and businesses that we are not able to transact. Constrained by regulatory permissions, we had long been conscious of having to turn away transactions involving US citizens and businesses and so we are delighted to have entered a relationship with Metropolitan Commercial Bank, headquartered in New York City. The commercial agreement is expected to allow us to offer customers payment services across the United States. We are looking forward to servicing the latent demand for our services from US residents and entities, and, in the longer term, to evaluating options to develop a customer base in the United States in due course.

People and culture

We have grown from around 60 people 18 months ago to a team of 218 in 2018. This reflects a number of factors including organic growth, new businesses being brought into the Group and significant investment in our platforms resulting in more headcount in Engineering, Product and Design. Accordingly, during the year we invested in the key area of People Operations as we recognise how vital it is to have a working environment that is welcoming and inclusive. Success in this area yields an improved ability to hire and retain talent combined with a more motivated workforce. As we have grown we have put in place more formal processes covering people operations as a whole. These include the recently introduced weekly 'Highlights sessions' together with an open question forum to the Executive team, and bi-annual 'Base Camp' sessions to communicate with employees across the Group and "career camps" to help train managers in the Group on how to get the best from their people. In addition, we regularly monitor our employee engagement and we were pleased to receive an employee satisfaction score of 69.2% in our inaugural pulse survey in December and are working on areas identified for improvement.

Governance

Corporate governance is an important function of the Board and the respective committees. During the year the Board commissioned an external corporate governance advisor to carry out a corporate governance risk assessment. The Board is well advanced in implementing the advice of this assessment to further enhance governance and expects to complete the exercise by mid-2019.

In addition, during 2018 the Board adopted the Quoted Companies Alliance (QCA) corporate governance code which defines ten guiding principles to support the Group's medium to long-term success whilst simultaneously managing risks and providing an underlying framework of commitment and transparent communications with stakeholders. More details on the adoption of the QCA code can be found on the Company's website (www.fairfxplc.com)

Dividend

The Board does not recommend the payment of a dividend for 2018, since our capital allocation strategy at this stage is focused entirely on investing in the business to achieve our growth and efficiency objectives. However, the Board will continue to keep this under review.

Brexit Assessment

Business Model

The Group provides financial services to its customers, so no goods are supplied except for physical prepaid and debit card stock. All the Group's customers and primary suppliers are UK based so there is no material impact on cross border supplies of services or goods between the UK and the remaining members of the European Union (EU) post the UK leaving the EU. The Group holds regulatory licences that can be passported throughout the EU. The right to passport the regulatory licences to the remaining members of the European Union (EU) post the UK leaving the EU may be lost.

Revenue

To date, all FairFX revenues are derived from customers based in the UK and there are no current plans to launch into any other countries based in the European Union. There is therefore no regulatory impact on the current or near future revenue of FairFX due to the loss of regulatory passporting permissions to the EU. Clearly, any negative macro-economic effects of Brexit could impact the business, but the Group has a robust operation and revenue stream and hence the Board are confident in the prospects for the business regardless of the outcome.

Supply Chain

The Group does not import any goods from outside the UK and all the critical suppliers of services are provided by UK based suppliers. Therefore, no material impact is expected on the Group post Brexit in any of the deal scenarios.

Staff

The workforce is comprised of less than 10% EU nationals and with the UK government committing to providing right of work to existing EU nationals, no material impact is expected in any of the deal scenarios.

Marco-Economic Impact

The Group has stress tested the impact of various Brexit scenarios on the Group's 2019 business plans and concluded that with appropriate mitigations, there are no material negative impacts on the business model.

Outlook 

Our strong performance to date would not have been possible without the hard work and dedication of the FairFX team, who we wish to thank on behalf of the Board.

The acquisitions we made combined with the significant investments into improved platforms and efficiency made in 2017 and 2018 have given the business a solid foundation upon which to grow. We have a compelling proposition for our corporate and retail customers, built on integrated services that are intuitive to use and competitively priced, and we will continue our investment programme to improve the customer experience and reinforce the strengths of our business.

2019 has started well as demonstrated by the performance in Q1, with turnover for the first 3 months of 2019 at £620.5 million (2018: £467.2 million), an increase of 32.8%. Growth has been driven by expansion in International Payments, up 37.9% to £323.7 million (2018: £234.7 million), and our Corporate Expenses platform, which climbed 36.5% to £46.6 million (2018: £34.1 million). Revenues have increased at an even faster pace, rising 43% to £7.0 million (2018: £4.9 million) demonstrating the success of our supply chain rationalisation. The agreement of commercial terms with Metropolitan Commercial Bank is expected to open up promising opportunities in the US market to complement our operations in the UK and drive further growth for the Group as the year progresses.

Against this background, the Board is confident of achieving expectations for the full year.

We are well capitalised, have a capable team and a clear strategy to continue to create value for our stakeholders, and are excited about the future.

John Pearson
Chairman

25 April 2019
Ian Strafford - Taylor
Chief Executive Officer

25 April 2019

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018

All income and expenses arise from continuing operations. There are no differences between the profit for the year and total comprehensive income for the year, hence no Statement of Other Comprehensive Income is presented.

The notes below form an integral part of these financial statements.

    2018   2017
  Note £   £
         
Gross value of currency transactions sold 3.4 1,783,710,215   936,593,130
Gross value of currency transactions purchased 3.4 (1,763,246,570)   (923,028,865)
         
Revenue on currency transactions   20,463,645   13,564,265
Banking revenue   5,628,747   1,896,470
Revenue 4 26,092,392   15,460,735
Direct costs   (5,605,961)   (3,525,676)
Gross profit   20,486,431   11,935,059
         
Administrative expenses (excluding acquisition expenses)   (18,109,624)   (11,435,841)
Acquisition expenses   (297,484)   (269,769)
Profit before tax 5 2,079,323   229,449
         
Tax credit 8 538,343   217,687
Profit and total comprehensive income for the year   2,617,666   447,136
         
Earnings per share        
Basic 9 1.68   0.37
Diluted 9 1.64   0.36

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018

    Group   Company
    2018   2017   2018   2017
        (Restated*)        
  Note £   £   £   £
ASSETS                
Non-current assets                
Property, plant and equipment 10 941,826   137,580   -   -
Intangible assets and goodwill 11 27,107,873   17,649,128   -   -
Deferred tax asset 8 2,035,728   511,912   -   -
Investments 12 -   -   38,725,451   29,455,134
    30,085,427   18,298,620   38,725,451   29,455,134
Current assets                
Inventories 13 286,713   199,747   -   -
Trade and other receivables 14 7,150,750   3,779,768   4,907,704   13,212,504
Deferred tax asset 8 859,914   -   -   -
Derivative financial assets 18 1,181,892   303,775   -   -
Cash and cash equivalents 15 7,860,368   17,803,063   -   -
    17,339,637   22,086,353   4,907,704   13,212,504
TOTAL ASSETS   47,425,064   40,384,973   43,633,155   42,667,638
                 
EQUITY AND LIABILITIES                
Equity attributable to equity holders                
Share capital 16 1,553,682   1,553,682   1,553,682   1,553,682
Share premium   35,858,770   35,858,770   35,858,770   35,858,770
Share based payment reserve   1,748,105   1,144,832   835,148   781,383
Merger reserve   8,395,521   8,395,521   2,979,438   2,979,438
Contingent consideration reserve   543,172   543,172   543,172   543,172
Retained earnings / (deficit)   (9,832,880)   (12,450,546)   240,954   (1,123,092)
    38,266,370   35,045,431   42,011,164   40,593,353
Non-current liabilities                
Deferred tax liability 8 1,543,894   673,661   -   -
    1,543,894   673,661   -   -
Current liabilities                
Trade and other payables 17 6,679,131   4,402,838   1,621,991   2,074,285
Deferred tax liability 8 356,713   117,838   -   -
Derivative financial liabilities 18 578,956   145,205   -   -
    7,614,800   4,665,881   1,621,991   2,074,285
TOTAL EQUITY AND LIABILITIES   47,425,064   40,384,973   43,633,155   42,667,638

*Refer to note 3.1

The notes below form an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board on 25 April 2019 and were signed on its behalf by:

I A I Strafford-Taylor
Director

Company Registration number: 08922461

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018

Group Share
capital
  Share
premium
  Share
based
payment
  Retained
earnings /
(deficit)
  Merger
reserve
  Contingent
consideration
reserve
  Total
  £   £   £   £   £   £   £
At 1 January 2017 1,031,160   10,174,273   668,422   (12,897,682)   5,416,083   -   4,392,256
                           
Profit for the year -   -   -   447,136   -   -   447,136
Shares issued in year 522,522   25,684,497   -   -   2,979,438   -   29,186,457
Share based payment charge (note 20) -   -   476,410   -   -   -   476,410
Equity based acquisition consideration -   -   -   -   -   543,172   543,172
At 31 December 2017 1,553,682   35,858,770   1,144,832   (12,450,546)   8,395,521   543,172   35,045,431
                           
Profit for the year -   -   -   2,617,666   -   -   2,617,666
Share based payment charge (note 20) -   -   603,273   -   -   -   603,273
At 31 December 2018 1,553,682   35,858,770   1,748,105   (9,832,880)   8,395,521   543,172   38,266,370
                           
Company Share
capital
  Share
premium
  Share
based
payment
  Retained
earnings /
(deficit)
  Merger
reserve
  Contingent
consideration
reserve
  Total
  £   £   £   £   £   £   £
At 1 January 2017 1,031,160   10,174,273   668,422   (883,933)   -   -   10,989,922
                           
Loss for the year -   -   -   (239,159)   -   -   (239,159)
Shares issued in period 522,522   25,684,497   -   -   2,979,438   -   29,186,457
Share based payment charge (note 20) -   -   112,961   -   -   -   112,961
Equity based acquisition consideration -   -   -   -   -   543,172   543,172
At 31 December 2017 1,553,682   35,858,770   781,383   (1,123,092)   2,979,438   543,172   40,593,353
                           
Profit for the year -   -   -   1,364,046   -   -   1,364,046
Share based payment charge (note 20) -   -   53,765   -   -   -   53,765
At 31 December 2018 1,553,682   35,858,770   835,148   240,954   2,979,438   543,172   42,011,164

 

The following describes the nature and purpose of each reserve within owners' equity:

Share capital Amount subscribed for shares at nominal value.
Share premium Amount subscribed for shares in excess of nominal value less directly attributable costs.
Share based payment Fair value of share options granted to both Directors and employees.
Retained deficit Cumulative profit and losses are attributable to equity shareholders.
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve Arising on equity based contingent consideration on acquisition of subsidiaries.

Under the principles of reverse acquisition accounting, the Group is presented as if FairFX Group Plc had always owned the FairFX (UK) Limited Group.  The comparative and current period consolidated reserves of the Group are adjusted to reflect the statutory share capital and merger reserve of FairFX Group Plc as if it had always existed.

The notes below form an integral part of these financial statements

 

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018

Group

  Note 2018   2017
        (Restated*)
    £   £
         
Profit for the year   2,617,666   447,136
         
Cash flows from operating activities        
Adjustments for:        
Depreciation   200,123   51,727
Amortisation   1,318,649   221,117
Share based payment charge   53,765   112,961
Increase in deferred tax asset on share-based payment   549,508             -   
(Increase) in trade and other receivables   (1,551,213)   (697,755)
(Increase) in derivative financial assets   (878,117)   (79,891)
(Increase) in deferred tax asset   (2,383,730)   (511,912)
Increase in trade and other payables   1,899,118   2,128,893
Increase in deferred tax liabilities   878,369   791,499
Increase / (decrease) in derivative financial liabilities            433,751   (2,752)
(Increase) / decrease in inventories   (86,966)   38,031
Net cash inflow from operating activities   3,050,923   2,499,054
         
Cash flows from investing activities        
Acquisition of property, plant and equipment   (670,827)   (83,266)
Acquisition of intangibles   (5,758,957)   (193,757)
Acquisition of subsidiary, net of cash acquired   (6,563,834)   (12,827,261)
Investment in subsidiary undertaking   -   (1,255,748)
Net cash used in investing activities   (12,993,618)   (14,360,032)
         
Cash flows from financing activities        
Proceeds from issuance of ordinary shares   -   27,703,789
Costs directly attributable to share issuance   -   (1,541,641)
Net cash from financing activities   -   26,162,148
         
Net increase / (decrease) in cash and cash equivalents   (9,942,695)   14,301,170
Cash and cash equivalents at the beginning of the year   17,803,063   3,501,893**
Cash and cash equivalents at end of the year 15 7,860,368   17,803,063

* Refer to note 3.1

** This balance was previously reported as £8,523,985 however this has been adjusted by £5,022,092 and restated to £3,501,893.

The notes below form an integral part of these financial statements.

 

COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018

Company

    2018 2017
(Restated*)
    £ £
       
Profit / (loss) for the period   1,364,046 (239,159)
       
Cash flows from operating activities      
Adjustments for:      
Share based payment charge   53,765 112,961
(Increase) in trade and other receivables   (965,517) (2,489,078)
(Decrease) / increase in trade and other payables   (452,294) 2,615,276
Net cash inflow / (outflow) from operating activities   - -
       
Net increase / (decrease) in cash and cash equivalents   - -
Cash and cash equivalents at end of the period   - -

* Prior year cash flows from investing and financial activities have been restated to Nil and disclosed as cash flows from operating activities. This restatement has occurred due to the fact the Company does not have a bank account and all cash flow activities are funded by its subsidiaries.

The notes below form an integral part of these financial statements.

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018

The notes are available in the printable pdf of the results. To download it, please click here.

 

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