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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cornerstone Fs Plc | LSE:CSFS | London | Ordinary Share | GB00BNG7CD28 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.50 | -1.30% | 38.00 | 37.00 | 39.00 | 38.50 | 38.00 | 38.50 | 155,784 | 14:02:37 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Catalog, Mail-order Houses | 4.82M | -5.61M | -0.0977 | -3.89 | 21.82M |
From Apr 2022 to Apr 2024
TIDMCSFS
RNS Number : 7286Q
Cornerstone FS PLC
30 June 2022
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 .
30 June 2022
Cornerstone FS plc
("Cornerstone", the "Company" or the "Group")
Final Results
Notice of AGM and Publication of Annual Report
Cornerstone FS plc (AIM: CSFS), the cloud-based provider of international payment, currency risk management and electronic account services to SMEs, announces its final results for the year ended 31 December 2021. In addition, the Company gives notices of its annual general meeting ("AGM") and publication of its annual report and accounts, both of which are now available to download from the Company's website at https://investors.cornerstonefs.com/document-centre/ .
Highlights
-- Admitted to trading on AIM and raised gross proceeds of GBP2.7m through the placing of ordinary shares and convertible loan note facilities
-- Total revenue increased by 38% to GBP2.3m (2020: GBP1.7m) -- Gross margin improved substantially to 51.6% (2020: 29.8%) -- Onboarded 416 new clients (2020: 328) -- Strong strategic progress:
o Significant growth in revenue generated by direct clients, which accounted for the majority of Group revenue
o Appointed a new team to market the Group's services to businesses located in Asia that support high net worth individuals ("HNWIs") invest in the UK
o Obtained authorisation as an Authorised Electronic Money Institution ("AEMI") to enable expansion of service offering
o Expanded internationally with the opening of an office in Dubai
o Post period, acquired Capital Currencies Limited ("Capital Currencies"), a well-established foreign exchange broker specialising in the provision of currency exchange and international payments
Julian Wheatland, Chief Executive Officer of Cornerstone, said:
"We have made excellent progress in delivering the strategic objectives that we outlined at the time of our IPO last year and also achieving a strong increase in revenue. In particular, we have significantly grown sales to direct clients, brought the majority of our white label business in-house, delivered substantial product enhancements and made acquisitions of other FX businesses. While we are still at the relative beginning of our journey, I am proud of what we have achieved to date.
"The strong trading momentum of 2021 has been sustained into the current year and through the first half. The investments made last year into enhancing our product offering and strengthening our team are continuing to drive an increase in trading and expansion of our customer base. As a result, and combined with the contribution from the acquisition this year of Capital Currencies, the Board continues to expect to achieve significant revenue growth for full year 2022, in line with market expectations."
Enquiries
Hot Features
Premium
+44 (0)203 971
Cornerstone FS plc 4865
Julian Wheatland, Chief Executive
Officer
Judy Happe, Chief Financial Officer
+44 (0)203 368
SPARK Advisory Partners Limited (Nomad) 3550
Mark Brady, Neil Baldwin
+44 (0)203 470
SP Angel Corporate Finance LLP (Broker) 0470
Jeff Keating, Harry Davies-Ball
+44 (0)207 618
Luther Pendragon (Financial PR) 9100
Harry Chathli, Claire Norbury
About Cornerstone FS plc
Cornerstone FS plc is a payments focused fintech business that makes managing currency simple for SMEs. It provides international payment, currency risk management and electronic account services using a proprietary cloud-based multi-currency payments platform. These services are delivered directly and via white label partners on a SaaS basis to UK-based SMEs that engage in international trade. Cornerstone also serves some high-net worth individual clients.
Headquartered in the City of London with offices in Tunbridge Wells and Dubai, Cornerstone is admitted to trading on AIM under the trading symbol 'CSFS'. For more information, please visit www.cornerstonefs.com.
Operational Review
The year to 31 December 2021 has been a period of considerable development and successful growth for the Group. Cornerstone was admitted trading on AIM in April 2021 with an express strategy to build a business in the provision of payment services, foreign exchange and currency risk management. Since then, it has made excellent progress in delivering these objectives and achieved significant growth during the year, with that momentum having continued into 2022.
Significant Progress since IPO
Cornerstone came to the market with the intention of pursuing an aggressive expansion strategy - which the Group began to deliver during the year.
The first step following the IPO was the appointment of a new team to market the Group's services to businesses located in Asia, with a primary focus on firms supporting HNWIs acquiring real estate in the UK. This is a large and growing market opportunity, which has been accelerated by the pandemic. The new team, which is based in London, joined from Vorto Trading Ltd ("Vorto"), which is Cornerstone's largest white label partner. Since coming on board in the second half of the year, the Asia team has performed incredibly well - surpassing expectations. By being part of Cornerstone's business and under the Cornerstone brand, the Asia team has been able to market a broader range of products and services, to a broader range of customers.
The Group further expanded its geographical reach with the establishment of a new office in Dubai to market is services to foreign investors, particularly those investing in real estate in the Emirate and businesses located there. The Directors believe this represents a significant and expanding market opportunity. Robert O'Brien was appointed as General Manager APAC and Middle East to lead the new office, who was also previously at Vorto where he was the largest revenue generator. The Group is seeing strong demand for its services in Dubai, with the office having commenced generating revenue, and it is also providing Cornerstone with access to wider potential opportunities across the region.
A significant milestone was achieved, post year end in February, with the acquisition of Capital Currencies, a well-established foreign exchange broker that is authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services. Capital Currencies is a strong strategic fit for Cornerstone as its client base is primarily UK corporates, with a particular focus on larger SMEs, with over 90% of revenue being generated by clients that it services directly. By bringing Capital Currencies' clients onto Cornerstone's technology platform, the Group can benefit from economies of scale and from the cross-selling of more services. The integration is progressing well with all significant integration milestones having been met. This includes progress on migrating all Capital Currencies customers onto the Cornerstone platform, and these customers have begun to be offered additional, higher value, services such as forward contracts. The acquisition is expected to be earnings accretive from the current financial year.
Performance
Cornerstone achieved significant growth in 2021, with trading momentum increasing throughout the year. Revenue for the 12 months ended 31 December 2021 was GBP2.3m, a year-on-year increase of 38% (2020: GBP1.7m). This reflects a very strong second half of the financial year, with revenue 75% higher than in the first six months of 2021.
In line with the Group's stated strategy, this growth primarily reflects a significant increase in revenue generated by clients that the Group serves directly. The proportion of total revenue that was accounted for by direct clients increased to 56% compared with 12% for the previous year, being GBP1.3m (2020: GBP0.2m). A key contributor to this growth was the new Asia team that was brought on board in the second half of the year.
Revenue generated through the Group's introducer network (which is primarily white label partners, who use Cornerstone's technology, but also introducer brokers) accounted for 44% of total revenue (2020: 88%) and was GBP1.0m (2020: GBP1.4m). On a reported basis this represents a reduction due to some revenue that the Group previously generated through the introducer network now being serviced directly. However, on an underlying basis, there was an increase in revenue generated through the Group's introducer network in 2021 compared with 2020.
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 during the year. As a result, the proportion of total revenue accounted for by HNWIs increased to 25% (2020: 8%) with corporate accounts contributing 75% (2020: 92%).
The total number of clients that traded with Cornerstone during the year grew to 583 compared with 541 for 2020. Cornerstone onboarded 416 new clients in 2021, an increase from 328 in the previous year. This reflects the sustained expansion in the scale of Cornerstone's business.
Spot trades accounted for 96% of transactions (2020: 94%) and 89% of revenue (2020: 87%). Higher margin forward currency contracts accounted for 4% of transactions (2020: 6%) and 11% of revenue (2020: 13%). The difference between the volume of transactions and proportion of revenue reflects the higher levels of commission charged on forward transactions.
During 2021, transactions were conducted between 42 different currency pairs (2020: 59), with 91% of transactions being between various combinations of Sterling, Euros and US Dollars (2020: 88%).
Product Enhancement
During the year, and in line with the Group's stated strategy, the Group made a number of significant enhancements to its offer. Firstly, the Group undertook a major rebuild of the user interface of the platform to substantially modernise its appearance, streamline certain pathways and make the functionality more intuitive. This is part of the Company's ongoing programme of investment and development of the Group's technology platform as the Company looks to continuously expand and upgrade its features.
A key milestone was achieved with the receipt of FCA approval - via the Group's primary operating subsidiary, Cornerstone Payment Solutions Ltd (formerly FXPress Payment Services Ltd) - to become an AEMI. This allows the Group to receive payments and customer funds that can be held on account for an indefinite purpose and time - enabling Cornerstone to offer a more convenient service as customers can leave money with the Group rather than needing to put it into, and taking it out of, the system for each foreign exchange transaction or international payment. Importantly, being an AEMI will also enable Cornerstone to develop further technology-enabled products and services that take advantage of the UK's Open Banking Initiative. This forms a key part of the Group's vision to develop a fully-connected workflow platform for SMEs that will provide a single access point to manage and execute all of their payments - with or without an FX element.
Post year end, the Group made another significant enhancement through securing an additional payment partner and liquidity provider, Banking Circle, which sits alongside Currency Cloud and Velocity. All trades placed with the Group by clients are replicated in a back-to-back contract with a third-party liquidity provider, which provides pricing, execution and settlement services. By partnering with Banking Circle, not only does this provide more resilience by having multiple suppliers, but it expands the Group's business offering in several respects. Firstly, it enables the Group to provide clients with European IBANs (with some customers wanting a European IBAN rather than a UK IBAN). It also enables Cornerstone to service a broader range of countries and industries thanks to the range of services and partnerships that Banking Circle has in place.
Delivering on Strategy
Accordingly, since the IPO last year, the Group has made great progress in delivering against the stated strategy. In particular, the Group has:
-- Made acquisitions of other FX businesses -- Brought the majority of its white label business in-house -- Significantly grown sales to clients that it serves directly -- Delivered product enhancements
-- Obtained authorisation as an AEMI - an important step towards being able to develop a full-connected workflow platform for SME payments
-- Expanded internationally
-- Strengthened the management team - bringing in highly experienced individuals to drive the business forward
Financial Review
Revenue for the 12 months to 31 December 2021 increased by 38% to GBP2.3m compared with GBP1.7m for the previous year. This reflects sustained momentum throughout the year and underlying growth across the business - driven, in particular, by revenue generated by clients that the Group serves directly.
Revenue by origin Revenue generated by clients that the Group serves directly increased more than six-fold to GBP1.3m (2020: GBP0.2m), accounting for 56% of total revenue (2020: 12%). Revenue generated through the Group's introducer network (which is primarily white label partners, who use Cornerstone's technology, but also introducer brokers) was GBP1.0m (2020: GBP1.4m), representing 46% of total revenue (2020: 88%). While this represents a reduction in indirect revenue, on an underlying basis there was an increase due to some of the revenue that had previously been generated through the introducer network now being serviced directly.
Revenue by client type Corporate accounts remained the largest contributor to revenue by client type, generating GBP1.7m in 2021 (2020: GBP1.5m), accounting for 75% (2020: 92%) of total revenue. There was significant growth in revenue from HNWIs, which increased to GBP0.6m (2020: GBP0.1m) and accounted for 25% of total revenue compared with 8% for the previous year.
Revenue by product Revenue continued to be generated from the provision of foreign exchange and payments services in the form of spot and forward trades, accounting for 89% and 11% of revenue respectively (2020: 87% and 13%).
Gross margin improved substantially to 51.6% (2020: 29.8%) due to the increased contribution to revenue from clients that the Group serves directly. The improvement in gross margin combined with the greater revenue generated a significant increase in gross profit to GBP1.2m compared with GBP0.5m for the previous year.
Total administrative expenses were GBP5.4m in 2021 compared with GBP2.7m for the previous year. This primarily reflects an increase of:
-- GBP1.9m in share-based compensation to GBP2.3m (2020: GBP0.4m), which includes GBP1.8m in share-based incentivisation for the new Asia team and the General Manager APAC and Middle East; and
-- GBP1.1m in other administrative expenses to GBP2.6m (2020: GBP1.5m), which relates to expenses associated with the Group's IPO and other public company requirements.
Loss before tax was GBP4.2m for 2021 (2020: GBP2.2m loss), which primarily reflects the greater administrative expenses. Loss per ordinary share on a basic and diluted basis was 21.24 pence (2020: 14.99 pence loss).
As at 31 December 2021, the Group had cash and cash equivalents of GBP348k (31 December 2020: GBP184k). During the year, the Group raised gross proceeds of GBP2.2m via a placing of new ordinary shares. At year end, the Group also had access to GBP450k in convertible loan note facilities. Post year end, the Group raised gross proceeds of GBP870k through the placing of, and subscription for, new ordinary shares, which was partly used to fund the initial cash consideration and integration costs of the Group's acquisition of Capital Currencies Limited.
Going Concern
The Group has bank balances of approximately GBP0.28m at the date of approval of these financial statements and is carefully managing its cash resources, with the support of its professional advisers and its key stakeholders, who are creditors of the business.
It also has convertible loan note facilities of a further GBP0.45m that are available to be called on 20-days' notice (GBP0.1m of which cannot be called until 13 January 2023).
The Directors have prepared cash flow forecasts covering a period extending 18 months from the date of approval of these financial statements, i.e. to 31 December 2023, taking into account projected increase in revenues, continued investment in the development of the software platform and organic sales and marketing efforts.
The cash flow forecasts assume that further equity fundraising will be necessary over the coming months in order to implement Cornerstone's growth strategy and for the Group to continue to operate as a going concern.
Although the Group has had past success in fundraising and continues to attract interest from investors, making the Board confident of fundraising success, there can be no guarantee that such fundraising will be available.
These circumstances indicate the existence of a material uncertainty, related to going concern. The financial statements do not include any adjustments that would result if the Company or Group was unable to continue as a going concern.
After careful consideration, the Directors consider that they have reasonable grounds to believe that the Group can be regarded as a going concern and for this reason they continue to adopt the going concern basis in preparing the Group's financial statements.
Outlook
The strong trading momentum of 2021 has been sustained into the current year and through the first half. In the first quarter of 2022, the Group achieved its highest ever quarterly revenue - reflecting underlying growth across the business as well as the first contribution from Capital Currencies. The investments made last year into enhancing Cornerstone's product offering and strengthening the team are continuing to drive an increase in trading volumes and expansion of the Group's customer base. As a result, the Board continues to expect to achieve significant revenue growth for full year 2022, in line with market expectations.
The Group continues to pursue acquisition opportunities and is actively progressing its organic growth strategy - including plans to launch a new e-wallet solution this year and secure further integrations with accounting platforms. With a strong team and highly scalable platform, the Group continues to believe it is well-placed to take advantage of the meaningful opportunities to build a significant business offering technology-enabled international payment services.
Accordingly, the Board remains confident in Cornerstone's prospects and looks forward to reporting on its progress.
Notice of AGM and Publication of Annual Report
The Company gives notice that its AGM will be held at 11.00am BST on 25 July 2022 at the office of Luther Pendragon, 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 2021, have been posted to shareholders and will be made available on the Company's website: https://investors.cornerstonefs.com/document-centre/.
Group Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Notes GBP GBP
REVENUE 1 2,301,172 1,664,237
Cost of sales (1,113,995) (1,167,929)
GROSS PROFIT 1,187,177 496,308
ADMINISTRATIVE EXPENSES 2
Share-based compensation 14 (2,338,495) (358,443)
Further adjustments to underlying profit
from operations (see below) (402,515) (793,577)
Other administrative expenses (2,621,962) (1,499,589)
TOTAL ADMINISTRATIVE EXPENSES (5,362,972) (2,651,609)
Underlying loss from operations (1,434,785) (1,003,281)
Stated after the add back of:
- share-based compensation on reverse
acquisition - 211,281
- other share-based compensation 14 2,338,495 147,162
- transaction costs 14 402,515 793,577
------------------------------------------- ----- ----------- -----------
LOSS from operations 2 (4,175,795) (2,155,301)
Finance and other income 3 1,622 603
Finance costs 3 (360) -
LOSS BEFORE TAX (4,174,533) (2,154,698)
Income tax income/(expense) 6 70,764 -
________ ________
LOSS FOR THE YEAR (4,103,769) (2,154,698)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (4,103,769) (2,154,698)
Loss per ordinary share - basic
& diluted (pence) 7 (21.24) (14.99)
_______ _______
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 2021
Group Group Company Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
Notes GBP GBP GBP GBP
assets
NON-CURRENT ASSETS
Intangible assets 8 577,447 320,972 484,927 226,278
Tangible assets 9 21,542 8,464 - -
Investments 10 - - 6,349,758 6,147,773
_______ _______ _______ _______
598,989 329,436 6,834,685 6,374,051
CURRENT ASSETS
Trade and other receivables 12 493,244 570,159 248,996 238,810
Cash and cash equivalents 348,102 183,675 139,579 96,394
_______ _______ _______ _______
841,346 753,834 388,575 335,204
_______ _______ _______ _______
total assets 1,440,335 1,083,270 7,223,260 6,709,255
_______ _______ _______ _______
equity and liabilities
equity
Share capital 14 202,776 165,887 202,776 165,887
Share premium 3,074,355 951,422 3,074,355 951,422
Share-based payment reserve 2,392,710 54,215 2,392,710 54,215
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 (7,828,230) (3,724,461) (4,907,402) (1,083,751)
_______ _______ _______ _______
TOTAL EQUITY 258,625 (135,923) 6,320,084 5,645,418
_______ _______ _______ _______
CURRENT LIABILITIES
Trade and other payables 13 1,181,710 1,219,193 903,176 1,063,837
_______ _______ _______ _______
TOTAL EQUITY AND LIABILITIES 1,440,335 1,083,270 7,223,260 6,709,255
_______ _______ _______ _______
A separate profit and loss account for the Parent company is omitted from the Group financial statements by virtue of section 408 of the Companies Act 2006. The Company loss for the year ended 31 December 2021 was GBP3,823,651 (five-month period ended 31 December 2020: loss of GBP1,173,655).
Group Statement of Changes in Equity
For the year ended 31 December 2021
Share-based Reverse
Share Share payment Merger relief acquisition Retained
capital premium reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP
Balance at 1
January 2020 91,559 1,543,988 - - - (1,569,763) 65,784
Parent company
reflected on
reverse
acquisition 5,197 - - - - - 5,197
Issue of
FXPress
Payment
Services
Ltd shares
prior to
acquisition 12,037 565,426 - - - - 577,463
Share-based
payments for
FXPress
Payment
Services Ltd
shares prior
to
acquisition - - 92,947 - - - 92,947
Costs of
raising
equity in
FXPress
Payment
Services Ltd - (50,000) - - (50,000)
Reverse
acquisition
adjustment (103,596) (2,059,414) (92,947) - 2,557,142 - 301,185
Issue of
shares 20,562 1,007,557 - - - - 1,028,119
Issue of
consideration
shares 140,128 - - 5,557,645 (5,697,773) - -
Costs of
raising
equity - (56,135) - - - - (56,135)
Share-based
payments
(note 14) - - 54,215 - - - 54,215
Loss and total
comprehensive
income
for the year - - - - - (2,154,698) (2,154,698)
_______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2020 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 14) - - 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
_______ _______ _______ _______ _______ _______ _______
Company Statement of Changes in Equity
For the year ended 31 December 2021
Share-based Merger
Share payment relief Retained
Capital Share premium reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP
Balance at 1 August
2020 286 8,186,967 - - (8,092,153) 95,100
Bonus issues 4,911 (4,911) - - - -
Capital reduction - (8,182,057) - - 8,182,057 -
Issue of consideration
shares 140,128 - - 5,557,645 5,697,773
Issue of other shares 20,562 1,007,558 - - - 1,028,120
Costs of raising equity - (56,135) - - - (56,135)
Share-based payments - - 54,215 - - 54,215
Loss and total comprehensive
income for the period - - - - (1,173,655) (1,173,655)
Balance at 31 December
2020 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 - - 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
_______ _______ _______ _______ _______ _______
Group and Company Cash Flow Statement
For the year ended 31 December 2021
Group Group Company Company
5-month
Year ended Year ended Year ended period
31 December 31 December 31 December ended
2021 2020 2021 31 December
2020
GBP GBP GBP GBP
Notes
Loss before tax (4,174,533) (2,154,698) (3,890,085) (1,173,655)
Adjustments to
reconcile
profit
before tax to
cash generated
from operating
activities:
Finance income 3 (1,622) (603) - (603)
Finance costs 3 360 - - -
Share-based
compensation 14 2,338,495 358,443 2,338,495 54,215
Depreciation
and
amortisation 2 152,386 22,270 145,920 16,638
Increase in
accrued
income,
trade and
other
receivables 12 (54,577) (83,297) (141,678) (370,302)
Increase in
trade and
other
payables 13 682,374 1,000,240 559,196 1,069,655
_______ _______ _________ _______
Cash used in
operations (1,057,117) (857,645) (988,152) (404,052)
Income tax
received 6 70,764 - 66,434 -
_______ _______ _________ _______
Cash used in
operating
activities (986,353) (857,645) (921,718) (404,052)
Investing
activities
Acquisition of
property,
plant
and equipment 9 (17,371) (9,144) - -
Acquisition of
intangible
assets 8 (404,568) (335,436) (404,569) (242,916)
Investment in
group
companies 10 - - (201,985) -
_______ _______ _________ _______
Cash used in
investment
activities (421,939) (344,580) (606,554) (242,916)
Financing
activities
Shares issued
(net of costs) 14 1,571,457 1,212,032 1,571,457 647,759
Loans received - 95,000 - 95,000
Interest and
similar income 3 1,622 603 - 603
Interest and
similar
charges 3 (360) - - -
_______ _______ __________ _______
Cash generated
from financing
activities 1,572,719 1,307,635 1,571,457 743,362
Increase in
cash and cash
equivalents 164,427 105,410 43,185 96,394
Opening cash
and cash
equivalents 183,675 78,265 96,394 -
_______ _______ ________ _______
Closing cash
and cash
equivalents 348,102 183,675 139,579 96,394
===================== ===================== ===================== =====================
Notes to the Financial Statements
For the year ended 31 December 2021
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 1 Poultry, London, EC2R 8EJ. The main activities are set out in the Strategic Report of the 2021 Annual Report.
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 2020 and 31 December 2021, 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:
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 p/c on or after 1 January 2023).
-- Amendments to IAS 1, presentation of financial statements on classification of liabilities (effective p/c on or after 1 January 2023).
-- Amendments to IFRS 3 - reference to the conceptual framework (effective p/c on or after 1 January 2023)
-- Amendments to IAS 16
Some of these standards and amendments have not yet been endorsed by the EU which may cause their effective dates to change.
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.
IMPACT OF NEW INTERNATIONAL REPORTING STANDARDS, AMMENTS AND INTERPRETATIONS
The following Standards and Interpretations have been considered and applied in these financial statements:
-- IFRIC 23 Uncertainty over Income Tax Positions -- Amendments to IFRS 9 Prepayment Features with Negative Compensation -- Amendments to IAS 28 Long-term interests in Associates and Joint Ventures -- IFRS 16 Leases
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 (formerly FXPress Payment Services 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
CS Commercial Limited - 100% owned by the Company Cornerstone EBT Trustee Limited - 100% owned by the Company
All subsidiary undertakings have an accounting reference date ended 31 December.
Although the consolidated financial information were issued in the name of Cornerstone FS plc ("Cornerstone"), the legal parent, the financial statements for the comparative year ended 31 December 2020, represent in substance the continuation of the financial information of the primary legal subsidiary, Cornerstone Payment Solutions Ltd.
For the year ended 31 December 2020 the assets and liabilities of the primary legal subsidiary are recognised and measured in the consolidated financial statements at the pre-combination carrying amounts and not re-stated at fair value. The retained earnings and reserves balances reflect the retained earnings and other reserves of the primary legal subsidiary immediately before the business combination and the results of the period from 1 January 2020 to the date of the business combination are those of the primary legal subsidiary only.
As Cornerstone Payment Solutions Ltd reversed into Cornerstone when Cornerstone did not have an existing trade, the transaction was not considered to be a business combination, as at the time of the reverse takeover, Cornerstone did not meet the definition of a business, under IFRS 3 "Business Combinations". As the transaction was capital in nature and completed through the issue of shares, it fell within the scope of IFRS 2 'Share-based payments'. Any difference in the fair value of shares deemed to be issued by the legal subsidiary (Cornerstone Payment Solutions Ltd) and the fair value of net identifiable assets in the legal parent (Cornerstone FS plc) forms part of the deemed cost of acquisition.
GOING CONCERN
The Group has bank balances of approximately GBP0.28m at the date of approval of these financial statements and is carefully managing its cash resources, with the support of its professional advisers and its key stakeholders, who are creditors of the business.
It also has convertible loan note facilities of a further GBP0.45m that are available to be called on 20-days' notice (GBP0.1m of which cannot be called until 13 January 2023).
The Directors have prepared cash flow forecasts covering a period extending 18 months from the date of approval of these financial statements, i.e., to 31 December 2023, taking into account projected increase in revenues, continued investment in the development of the software platform and organic sales and marketing efforts.
The cash flow forecasts assume that further equity fundraising will be necessary over the coming months in order to implement Cornerstone's growth strategy and for the Group to continue to operate as a going concern.
Although the Group has had past success in fundraising and continues to attract interest from investors, making the Board confident of fundraising success, there can be no guarantee that such fundraising will be available.
These circumstances indicate the existence of a material uncertainty, impacting the Company and the Group's ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Company or Group was unable to continue as a going concern.
After careful consideration, the Directors consider that they have reasonable grounds to believe that the Group can be regarded as a going concern and for this reason they continue to adopt the going concern basis 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.
INTANGIBLE aSSETS
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.
Amortisation is charged on a straight-line basis through the profit or loss within administrative expenses. The rates applicable, which represent the Directors' best estimate of the useful economic life, are as follows:
Internally developed software - 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
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.
SHARE-BASED COMPENSATION
The fair value of share-based awards is measured using the Black-Scholes model which inherently makes use of significant estimates and assumptions concerning the future applied by the Directors. Such estimates and judgements include the expected life of the options and the number of employees that will achieve the vesting conditions. Further details of the share option scheme are given in note 14 .
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the alternative performance measure of underlying profit/(loss) from operations. This measure is not defined under IFRS, nor is it a measure of financial performance under IFRS.
This measure is sometimes used by investors to evaluate a company's operational performance with a long-term view towards adding shareholder value. This measure should not be considered an alternative, but instead supplementary, to profit/(loss) from operations and any other measure of performance derived in accordance with IFRS.
Alternative performance measures do not have generally accepted principles for governing calculations and may vary from company to company. As such, the underlying profit/(loss) from operations quoted within the Group Statement of Comprehensive Income should not be used as a basis for comparison of the Group's performance with other companies.
UNDERLYING PROFIT/(LOSS) FROM OPERATIONS
The Group uses underlying profit/(loss) from operations, defined as profit/(loss) from operations, adding back share-based compensation and transaction costs associated with the Group's AIM listing and acquisitions strategy.
The underlying loss from operations is reconciled back to the loss from operations within the Group Statement of Comprehensive Income.
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
2021 2020
GBP GBP
_______ _______
Total revenue 2,301,172 1,664,237
_______ _______
Group Group
Year ended Year ended
31 December 31 December
2021 2020
2 LOSS FROM OPERATIONS GBP GBP
Loss from operations is stated after charging:
Share-based compensation on reverse acquisition - 211,281
Other share-based compensation 2,338,495 147,162
Transaction costs 402,515 793,577
Expensed software development costs 97,556 42,333
Depreciation of property, plant and equipment 4,293 1,730
Amortisation of intangible assets 148,094 20,540
Short-term (2018 IAS 17 operating) lease rentals 86,434 70,697
_______ _______
Amounts payable to the Group's auditor in respect of both audit and non-audit services:
Year ended Year ended
31 December 31 December
2021 2020
GBP GBP
Audit Services
* Statutory audit 25,000 15,000
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 30,250 16,500
------------------------- -------------------------
73,250 31,500
========================= =========================
Group Group
Year ended Year ended
31 December 31 December
3 INTEREST AND SIMILAR ITEMS 2021 2020
GBP GBP
i. Total finance and other income 1,622 603
_______ _______
ii. Total finance costs (360) -
_______ _______
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
31 Year ended
December 31 December
2021 2020
Number Number
Directors 8 -
Employees 14 9
_______ _______
22 9
_______ _______
Year ended Year ended
31 December 31 December
Employment costs 2021 2020
GBP GBP
Wages and salaries 1,309,251 618,522
Social security costs 182,414 68,455
Pension costs 38,307 5,930
Share-based compensation 2,195,782 26,787
_______ _______
3,725,754 719,694
_______ _______
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 in the 2021
Annual Report.
Year ended Year ended
31 December 31 December
2021 2020
GBP GBP
Salaries and fees 680,553 116,786
Bonus 76,800 -
Share-based compensation 311,469 20,088
Social security costs 84,022 9,453
_______ _______
1,152,844 146,327
_______ _______
Number Number
Number of Directors to whom retirement benefits
are accruing under a defined contribution
scheme 3 -
_______ _______
Year ended Year ended
31 December 31 December
2021 2020
GBP GBP
The remuneration in respect of the highest
paid Director was:
Salaries and fees 180,000 85,000
Bonus 43,200 -
Share-based compensation 177,000 15,452
Pension and other benefits 9,000 -
_______ _______
409,200 100,452
_______ _______
During the year no (2020: nil) Directors exercised any (2020: 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 GBP38,307 (2020: GBP5,930). At 31 December 2021 contributions of GBP25,864 remained outstanding and are included within other payables (2020: GBP2,490).
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
2021 2020
GBP GBP
_______ _______
Current Tax:
Research & development tax credit 70,764 -
UK Corporation tax - -
Deferred tax - -
_______ _______
Tax on loss on ordinary activities 70,764 -
_______ _______
Group Group
Year ended Year ended
31 December 31 December
2021 2020
GBP GBP
Loss before taxation (4,174,533) (2,154,698)
_______ _______
Loss multiplied by main rate of corporation
tax in the UK of 19% (2020: 19%) (793,161) (409,393)
Effects of:
Surrender of tax losses for research & development
tax credit refund 70,764 -
Expenses not deductible for tax purposes 66,649 155,158
Share-based payments 444,314 68,104
Other deductions in period (702) (1,446)
Tax losses carried forward 282,900 185,577
_______ _______
Current tax 70,764 -
_______ _______
As at 31 December 2021, the Group had prepared but not yet submitted a Research and Development tax credits reclaim, the estimated net benefit of which is approximately GBP158,000. During the year ended 31 December 2021 the Group received a Research and Development tax credit refund of GBP70,764 in respect of its reclaim for the year ended 31 December 2020.
As at 31 December 2021, the Group had tax losses carried forward of GBP4,147,682 (31 December 2020: GBP2,847,347). 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 2021 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.
7 LOSS PER SHARE
The loss per share of 21.24p is based upon the loss of GBP4,103,769 (2020: loss of GBP2,154,698) and the weighted average number of ordinary shares in issue for the year of 19,317,407 (2020: 14,370,030).
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
developed Software
software costs Other Total
GBP GBP GBP GBP
COST
At 1 January 2021 242,916 15,611 92,520 351,047
Additions 404,569 - - 404,569
_______ _______ _______ _______
At 31 December 2021 647,485 15,611 92,520 755,616
AMORTISATION
At 1 January 2021 16,638 13,437 - 30,075
Charge for the period 145,920 2,174 - 148,094
_______ _______ _______ _______
At 31 December 2021 162,558 15,611 - 178,169
NET BOOK VALUE
At 31 December 2021 484,927 - 92,520 577,447
_______ _______ _______ _______
At 31 December 2020 226,278 2,174 92,520 320,972
_______ _______ _______ _______
Other intangible assets comprise regulatory licenses held at cost and are not amortised.
Company INTANGIBLE ASSETS
Internally
developed Software
software costs Other Total
GBP GBP GBP GBP
COST
At 1 January 2021 242,916 - - 242,916
Additions 404,569 - - 404,569
_______ _______ _______ _______
At 31 December 2021 647,485 - - 647,485
AMORTISATION
At 1 January 2021 16,638 - - 16,638
Charge for the period 145,920 - - 145,920
_______ _______ _______ _______
At 31 December 2021 162,558 - - 162,558
NET BOOK VALUE
At 31 December 2021 484,927 - - 484,927
_______ _______ _______ _______
At 31 December 2020 226,278 - - 226,278
_______ _______ _______ _______
9 GROUP property, plant and equipment
Computer Equipment
GBP
COST
At 1 January 2021 15,675
Additions 17,371
At 31 December 2021
33,046
--------------
DEPRECIATION
At 1 January 2021 7,211
Charge for the period 4,293
At 31 December 2021
11,504
--------------
NET BOOK VALUE
At 31 December 2021 21,542
--------------
At 31 December 2020 8,464
--------------
10 investments
Investments
in
Subsidiaries
GBP
Cost or Valuation
At 1 January 2021 6,147,773
Additions 201,985
At 31 December 2021
6,349,758
------------
Net Book value
At 31 December 2021 6,349,758
------------
At 31 December 2020 6,147,773
------------
The Company's investment as at 31 December 2021 represents its investments in its direct subsidiaries of GBP6,347,773 in Cornerstone Payment Solutions Ltd (formerly FXPress Payment Services Ltd) (2020: GBP6,147,773) and GBP1,985 in Cornerstone - Middle East FZCO (2020: nil).
During the year ended 31 December 2021 the Company invested a further GBP200,000 in support of the increased regulatory capital requirements for Cornerstone Payment Solutions Ltd in advance of it becoming an Authorised Electronic Money Institution.
Shares in subsidiary and associate undertakings are stated at cost. As at 31 December 2021, 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 (formerly FXPress Payment Exchange Ireland Avenue, cent.
Services Ltd) 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
CS Commercial Limited Dormant England 100 per
(audit exempt) and Wales The Old Rectory, cent.
Addington,
Buckinghamshire,
MK18 2JR
Cornerstone EBT Trustee Dormant England 100 per
Limited and The Old Rectory, cent.
(audit exempt) Wales Addington,
Buckinghamshire,
MK18 2JR
12 current trade and other receivables
Group Group Company Company
31 December 31 December 31 December 31 December
2021 2020 2021 2020
GBP GBP GBP GBP
Trade receivables - 8,405 - -
Prepayments and accrued income 90,360 24,623 31,118 9,600
Derivative financial assets at
fair value 322,710 299,035 - -
Other receivables 42,525 140,378 10,000 131,492
Amounts due from Group undertakings
and undertakings in which the
Company has a participating interest - - 170,229 -
Taxes and social security 37,649 97,718 37,649 97,718
_______ _______ _______ _______
493,244 570,159 248,996 238,810
_______ _______ _______ _______
For the year ended 31 December 2021 GBPnil was recorded as a bad debt expense (31 December 2020: GBPnil).
As at 31 December 2021, 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 GBP158,000 (2020: GBP62,000) and has not been included in current receivables due to its contingent nature.
13 current trade and other payables
Group Group Company Company
31
31 December 31 December 31 December December
2021 2020 2021 2020
GBP GBP GBP GBP
Trade payables 346,255 525,064 212,561 238,654
Derivative financial liabilities
at fair value 290,292 216,061 - -
Other tax and social security 60,349 47,273 10,923 17,411
Other payables and accruals 484,814 430,795 244,033 290,773
Amount due to Group undertakings - - 435,659 516,999
_______ _______ _______ _______
1,181,710 1,219,193 903,176 1,063,837
_______ _______ _______ _______
14 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 2021 16,588,608 165,886
Issue of new shares of GBP0.01 3,688,974 36,890
_______ _______
Ordinary shares of GBP0.01 each at
31 December 2021 20,277,582 202,776
_______ _______
At 31 December 2021 share subscriptions of GBPnil remained unpaid (31 December 2020: GBP131,492, comprising GBP2,630 share capital and GBP128,862 share premium).
The following changes in the share capital of the Company have taken place in year ended 31 December 2021:
-- On 26 February 2021, 24,326 Ordinary Shares were issued at a price of GBP0.407 each on the exercise of warrants.
-- On 6 April 2021, the Company placed 3,664,648 new ordinary shares at a price of GBP0.61 each on its admission to AIM.
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.
Merger relief reserve : Effect on equity of the consideration shares issued over their nominal value.
Reverse acquisition reserve : Effect on equity of the reverse acquisition of FXPress Payment Services Ltd.
Retained losses : Cumulative realised profits less cumulative realised losses and distributions made, attributable to the equity shareholders of the Company.
Options
The Company operates an Enterprise Management Inventive ("EMI") Scheme equity-settled share-based remuneration scheme for employees.
Each of the option agreements under the EMI scheme provides that the relevant options vest, as to one third of the shares comprised in them, on each of the first three anniversaries of the date of grant. Once vested, the options are exercisable at any time. The options are also exercisable in the event of a change of control. If the 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.
Weighted
average
Ordinary exercise
shares price
No. GBP
Outstanding as at 1 January 2020 - -
Granted during the year 1,599,480 0.50
_______ _______
Outstanding as at 1 January 2021 1,599,480 0.50
Granted during the year - -
_______ _______
Outstanding as at 31 December 2021 1,599,480 0.50
_______ _______
The weighted average contractual life of the options is five years (2020: zero).
No options were exercised during the current year (2020: nil).
Warrants
On 6 April 2021 the Company granted 63,114 warrants with an exercise price of GBP0.61 and a term of 2 years to the Company's broker Peterhouse Capital Limited, in connection with the Company's IPO and representing 5% of the number of shares issued to Peterhouse Capital Limited's investors on IPO.
The warrants were estimated to have a grant date fair value of GBP0.27 per warrant using the Black-Scholes valuation model. The principal inputs into the model were:
Share price at grant date - 61 pence Risk-free rate - 0.8% Expected Volatility - 80.6% Contractual life - 2 years
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.
On 26 February 2021, 24,326 warrants were exercised at a price of GBP0.407 each.
The Group share-based compensation charge for the year ended 31 December 2021 of GBP2,338,495 (2020: GBP147,162) consists of GBP7,102 in relation to the accelerated share-based payment charges in respect of the exercised warrants, GBP135,610 in relation to other warrants granted in Cornerstone (2020: GBP120,375), GBP306,833 in respect of the Cornerstone options (2020: GBP26,787), GBP81,370 in respect of equity settled share-based payments related to the non-executive Board member's service agreements (2020: GBPnil) and GBP1,807,580 of other share-based compensation (2020: GBPnil).
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 will be entitled to receive share-based incentivisation based on a multiple of revenue generation and contribution to profit. This will be measured at the end of both years. In the first year, any new ordinary shares earned under this incentivisation plan would be issued at the lower of the IPO Placing Price (61 pence per share) or the average closing price of Cornerstone shares for the 20 business days prior to issue. In the second year, any new ordinary shares earned under this incentivisation plan would be issued at the average closing price of Cornerstone shares for the 20 business days prior to issue. The charge recognised in respect of this share-based incentivisation agreement is GBP1,807,580 for the year ended 31 December 2021 (2020: GBPnil) which is based on the forecasted performance of Robert O'Brien and his team over the two-year period as of the reporting date, and based on the share price at the grant date on 1 August 2021 of 29.5 pence per share.
15 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 GBP435,659 (2020: GBP516,999) to Cornerstone Payment Solutions Ltd.
During the year, the Company also provided working capital support to Avila House Limited and Cornerstone - Middle East FZCO. 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, Avila House Limited owed the Company GBP150,041 (2020: GBPnil) and Cornerstone - Middle East FZCO owed the Company GBP20,188 (2020: GBPnil).
Other related parties
All of the amounts below were in respect of the year ended 31 December 2021.
Terry Everson, a director of Cornerstone Payment Solutions Ltd and a significant shareholder in Cornerstone, was paid consulting fees of GBP1,250 via Hazelwood Financial Ltd, a company of which he is a director and significant shareholder (2020: GBP24,000). This fee prepaid a loan of made by the Group to Terry Everson leaving a net balance of GBP8,750 unpaid as at 31 December 2021 (31 December 2020: GBP10,000).
The Company and William Newton, a director of the company, entered into a convertible loan note instrument whereby the Company may borrow up to GBP350,000 from Willian Newton at any time until 31 December 2023. In the event of a drawdown and the Company issuing William Newton with unsecured convertible loan notes, the loan notes may be converted at a subscription price of 26.5 pence per share. To date, the Company has not drawn down on this facility.
As at 31 December 2021, a loan of GBP10,000 made by the Group to William Newton, a director of the Company remained unpaid (31 December 2020: GBPnil).
16 FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
Group Group Company Company
31
31 December 31 December 31 December December
2021 2020 2021 2020
GBP GBP GBP GBP
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts
with customers 359,077 253,077 - -
Foreign currency forward contracts
with institutional counterparty 33 45,958 - -
_______ _______ _______ _______
359,110 299,035 - -
Cash and cash equivalents 348,102 183,675 139,579 96,394
Trade receivables - 8,405 - -
Other receivables 132,885 165,001 211,347 141,092
_______ _______ _______ _______
840,097 656,116 350,926 237,486
_______ _______ _______ _______
FINANCIAL LIABILITIES
Group Group Company Company
31
31 December 31 December 31 December December
2021 2020 2021 2020
GBP GBP GBP GBP
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts
with customers 290,292 55,869 - -
Foreign currency forward contracts
with institutional counterparty - 160,192 - -
_______ _______ _______ _______
290,292 216,061 - -
Trade payables 346,255 525,064 212,561 238,654
Other payables 484,814 430,795 679,692 807,772
_______ _______ _______ _______
1,121,361 1,171,920 892,253 1,046,426
_______ _______ _______ _______
All financial assets and liabilities have contractual maturity of less than one year.
Derivative financial assets and liabilities
Derivative financial assets not designated as hedging instruments
31 December 2021 31 December 2020
Notional Notional
Fair Value Principal Fair Value Principal
GBP GBP GBP GBP
Foreign currency forward contracts
with customers 359,077 12,508,939 253,077 14,686,425
Foreign currency forward contracts
with institutional counterparty 33 12,544 45,958 5,785,633
_______ _______ _______ _______
359,110 12,521,483 299,035 20,472,058
_______ _______ _______ _______
Derivative financial liabilities not designated as hedging instruments
31 December 2021 31 December 2020
Notional Notional
Fair Value Principal Fair Value Principal
GBP GBP GBP GBP
Foreign currency forward contracts
with customers 290,292 9,874,438 55,869 4,392,467
Foreign currency forward contracts
with institutional counterparty - - 160,192 12,390,456
_______ _______ _______ _______
290,292 9,874,438 216,061 16,782,923
_______ _______ _______ _______
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 loss on financial assets at fair value through profit or loss for year ended 31 December 2021 was GBP29,661 (2020: net gain of GBP4,839).
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 have 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.
17 Financial commitments
The Group is not considered to have any operating lease commitments. The offices utilised by the Group are serviced offices, which have a short notice period and therefore it has not been considered necessary to disclose these as an operating lease commitment.
18 CAPITAL MANAGEMENT
The capital structure of the business consists of cash and cash equivalents, debt and equity. Equity comprises share capital, share premium and retained losses and is equal to the amount shown as 'Equity' in the balance sheet. The Group's current objectives when maintaining capital are to:
-- safeguard the Group's ability to operate as a going concern so that it can continue to pursue its growth plans;
-- provide a reasonable expectation of future returns to shareholders; and
-- maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of underlying assets.
The Company is subject to the following externally imposed capital requirements:
-- as a public limited company, the Company is required to have a minimum issued share capital of 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.
Prior to becoming an Authorised Electronic Money Institution in August 2021, Cornerstone Payment Solutions Ltd was 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 EUR50,000, whichever is the higher.
Cornerstone Payment Solutions Ltd complied with both of these above requirements for the relevant periods during the year ended 31 December 2021.
19 EVENTS AFTER THE REPORTING DATE
Acquisition of Capital Currencies Limited
On 1 February 2022, the Company completed the acquisition of Capital Currencies Limited, a well-established foreign exchange broker specialising in the provision of currency exchange and international payments, authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services.
The consideration payable for the Acquisition consists of GBP0.586 million in cash on completion subject to customary working capital adjustments with further earn-out consideration payable over two years after completion in two tranches 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 amount already paid to the sellers in respect of the Acquisition. One half of the earn-out will be satisfied in the issue of convertible loan notes to the sellers with a 6% coupon interest and the remaining half shall be satisfied by the issue of consideration shares to the sellers.
-- on the second anniversary of completion, three times Capital Currencies' revenue for the 12-month period leading up to 31 January 2024, less the amounts already paid (or deemed paid) to the sellers in respect of the Acquisition. The final earn-out payment shall be satisfied by the issue of consideration shares to the sellers.
Total consideration is capped at GBP3 million.
Any convertible loan notes issued to the sellers under the earn-out payment is for a term of 2 years from the date of issue and the sellers may elect to convert at any time prior to termination date. Any interest is payable quarterly in arrears with the principal repayable at the end of the two-year term. The conversion price per share is at the mid-market price of the Company's share in the 20 dealing days preceding the issue of the convertible loan notes.
Any consideration shares issued to the sellers under the earn-out payment is priced per share as the sum equal to the average mid-market
price of the Company's share in the 20 dealing days preceding the issue of the consideration shares.
Any shares received by the sellers under the Acquisition (save for any shares issued under the convertible loan notes) are subject to a 12-month lock-in from the date of issue (subject to certain limited exceptions) and, for a further period of 12 months thereafter, the sellers will only dispose of any interests in the shares on an orderly market basis through the Company's brokers. The sellers have also agreed that any shares issued under the convertible loan notes will only be disposed, for a period of 12 months from the date of issue, through the Company's brokers.
Other events after the reporting date
On 27 January 2022 the Company announced a placing and subscription raising total gross proceeds of GBP870,004 following which a total of 3,283,034 new ordinary shares of one penny each in the capital of the Company were admitted to AIM.
On 8 March 2022, the Company granted options over ordinary shares of 1 penny each in the capital of the Company. Julian Wheatland was granted 426,190 options at an exercise price of 36.15 pence per share. Judy Happe was granted 127,857 options at an exercise price of 36.15 pence per share. In addition, the Company granted a further 239,407 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 8 April 2022, the Company allotted and issued 123,000 new ordinary shares of 1 penny each in the Company at a price of GBP0.265. The new shares were issued and allotted to the recipient as consideration for investor relations services.
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June 30, 2022 02:00 ET (06:00 GMT)
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