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Delivering the World’s Currencies
2013 Baydonhill Plc 21 New Street, London EC2M 4TP
Tel: +44 (0)20 7594 0584 Fax: 0870 330 5950 Email: enquiries@baydonhillfx.com
Web: baydonhillfx.com
Registered in England and Wales No: 03910588
Report and Financial Statements
For The Year Ended 31 March 2013
Baydonhill Plc
Contents Directors and Advisers
1
Directors’ Report
3
Chairman’s and Chief Executive Officer’s Statement
2
Directors’ Responsibilities Statement
6
Corporate Governance Statement
7
Independent Auditor’s Report
9
Income Statement
10
Statement of Changes in Equity
12
Statement of Financial Position
11
Statement of Cash Flows
13
Notes to the Financial Statements
14
Directors and Advisers Directors Sir Eric Peacock KCMG – Executive Chairman Wayne Mitchell – Chief Executive Officer Richard Matthews – Executive Director Julian Kelly – Finance Director Geoffrey Mayhill – Non-Executive Director Charles McLeod – Non-Executive Director Secretary Jerome Loir 160 Brompton Road Knightsbridge London SW3 1HW Company Number 03910588 Registered Office 21 New Street London EC2M 4TP Bankers Bank of Ireland Bow Bells House 1 Bread Street London EC4M 9BE
Auditors Nexia Smith & Williamson Chartered Accountants 25 Moorgate London EC2R 6AY
Nominated Adviser and Broker Merchant Securities Limited 51-55 Gresham Street London EC2V 7EL Solicitors Norton Rose 3 More London London SE1 2AQ
Registrars and Receiving Agents Neville Registrars Ltd Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA
Financial Communications Consultants Square1 Consulting Limited 22 Eastcheap London EC3M 1EU Annual Report & Accounts 2013
1
Baydonhill Plc
Chairman’s and Chief Executive Officer’s Statement Year ended 31 March 2013 Introduction
2013 was a successful year for the Company. In the year under review the Company increased its reported underlying operating profit (operating profit before unrealised IFRS charge) to £556,987 compared to the underlying operating loss on the same basis for the previous year of £166,478. Total foreign exchange turnover grew to £1,249,082,580 an increase of 16 per cent. over the prior year.
The Company has continued to invest in its payment platform and also to develop products in specific vertical sectors. In November 2012 the Company delisted from the AIM market as the benefit did not justify the high costs. Financial Review
The profit before tax for the financial year was £33,028 compared to a loss of £65,031 in 2012, which after expensing costs of £466,805 (2012: income £240,170) relating to the unrealised fair value adjustment of forward agreements on a mark to market basis. The unrealised fair value adjustment was restated last year, correcting an error in the accounting of the revenue of deferred forwards which should have been included during the year. The Directors remain satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised and so a deferred tax asset of £1,032,651 is maintained on the balance sheet. The Company reviewed five year profit forecasts with underlying assumptions, where relevant, in line with those experienced in the year ended 31 March 2013. The forecast indicated that the losses would be utilised within five years.
Gross turnover (representing the gross value of foreign exchange currency transactions undertaken) for the Company for the year under review was £1,249 million, an increase of 16 per cent. from the previous year’s figure of £1,079 million. Gross profit (representing foreign exchange commission earned net of payments to affiliates and bank charges) increased to £5,153 million from £5,032 million in the previous year before adjusting forward contracts at the year end to fair value, as required by International Financial Reporting Standards (IAS 39). Total equity at 31 March 2013 amounted to £1,014,550 compared to £1,056,008 at 31 March 2012 (restated). People
In the year under review Julian Kelly was appointed as Director to replace Sarah Collis as Finance Director. Richard Matthews was also appointed as non-executive Director in October 2012 and as executive Director in February 2013. Charles McLeod left the Board in September 2012. We thank him for his contribution since 2001. Outlook
The corporate business remains strong, achieving a growth of 13 per cent. over the period April 2013 to July 2013 compared to the previous year. The Company has continued to develop the StudyPay product during the year under review. This product has continued to grow and we expect significant growth in the current year.
The Company has also been developing an online offering for private clients. This was launched in July 2013 and initial take up has been positive.
Sir Eric Peacock KCMG Chairman 6 September 2013
2
Annual Report & Accounts 2013
Wayne Mitchell Chief Executive Officer 6 September 2013
Baydonhill Plc
Directors’ Report Year ended 31 March 2013
The Directors present their report and the financial statements for the year ended 31 March 2013. General information
Baydonhill PLC is a public limited company which is incorporated in the United Kingdom. The Company’s registered number is 03910588. Baydonhill PLC is an Authorised Payment Institution with the Financial Conduct Authority (formerly the Financial Services Authority). Principal activities
The principal activities of the Company comprise the provision of cross border payment services and the provision of foreign currency exchange related products and the arrangement of overseas mortgages up to 31 October 2011. In the year under review, the Company considers there to be two divisions; the Corporate and Retail Divisions. Directors
Directors who served during the year were: – – – – –
Sir Eric Peacock KCMG Wayne Mitchell Julian Kelly Sarah Collis Richard Matthews
– Geoffrey Mayhill – Charles McLeod – Arthur Hughes
Chairman Chief Executive Officer Finance Director (appointed 26 February 2013) Finance Director (resigned 5 September 2012) Director (appointed as Non-Executive Director on 30 October 2012 and as Executive Director on 26 February 2013) Non-Executive Director Non-Executive Director (resigned 14 September 2012) G. Mayhill Alternate Director (resigned 11 February 2013)
Enhanced Business Review: Risks and Uncertainties
The Company operates in a competitive environment effected, amongst other things, by the impact of macro-economic factors on the propensity of our customers to buy the services we offer and by the activities of our competitors. The Company also operates in an environment of ever increasing compliance obligations from both regulators and suppliers which increases the Company’s cost base and can impact upon the type of business that can be serviced. Changes in economic conditions will affect the level of demand for our services. For example, the recession and falling house prices impact upon the demand for foreign exchange to buy property abroad. The recession also impacts the demand for foreign currency by corporates.
The competitive risk from the activities of our competitors manifests itself in price pressure and the number of calls required to secure an appointment. The Company develops innovative solutions to address client needs and maintains the highest level of customer service to maximise customer retention. Details of financial risks are provided in note 25 to the Financial Statements and a general review of the business is included within the Chairman’s and Chief Executive Officer’s Report on page 2. Key performance indicators
In addition to the monthly management accounts and information that is produced and monitored against the Company’s plan and the previous year’s performance, the Board uses Key Performance Indicators (“KPIs”) in the management of the key risks of the business and as a measure of the business efficiencies of the Company. The KPIs cover the following: – sales performance measured against prior year. Sales increased from £1,079,048,798 to £1,124,082,580;
– costs and overheads are monitored in light of Sales performance and gross profit and correspondingly increased from £4,502,784 to £4,685,991 for the year.
Annual Report & Accounts 2013
3
Baydonhill Plc
Directors’ Report continued
Year ended 31 March 2013 Financial risk management
Details of the Company’s financial instruments and its policies with regard to financial risk management are given in note 25 to the financial statements. Results for the year and dividends
The loss for the year after taxation was £41,457 (2012: loss £307,856). The Directors have not recommended the payment of a dividend (2012: £Nil). Disclosure of information to the auditors
In the case of each person who was a director at the time this report was approved:
– so far as that Director was aware there was no relevant available information of which the Company’s auditors were unaware; and – that Director had taken all steps that the Director ought to have taken as a director to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors were aware of that information.
This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. Corporate Social Responsibility
The Company has a low adverse impact on the environment. In spite of this we recognise the need to minimise this impact wherever possible and we have implemented a number of initiatives to achieve this aim including recycling paper, mobile phones, toner cartridges, IT equipment and furniture as well as an awareness campaign around saving energy. Furthermore, as a business we have moved from a focus on print advertising and direct mail shots to online campaigns and received approval from shareholders to post the Financial Statements online. In addition to this we actively seek to work with suppliers that take measures to minimise their impact on the environment. During the year, Baydonhill was proud to start supporting a wonderful charity called Fresh20. Their mission is aimed at reducing poverty, improving health and preventing death by enabling the provision of clean water for drinking and sanitation purposes globally. The Company directly contributed to a well in the village Androtsa Ambony (Madagascar), where a population of 258 individuals now have access to clean water and sanitation.
Baydonhill also remains a Fellow of the Animal Health Trust charity, which exists to fight disease and injury in animals. Thanks to their pioneering work improving diagnosis, treatment and prevention, horses, dogs and cats are living healthier, happier lives – in the UK and across the world. We are also proud to be a supporter of AiTO’s Sustainable Tourism programme, who believes tourism can be a force for good and should benefit the lives of those whose countries we visit. In recognition and support of the efforts individuals make with regard to fund raising, we support employees both in terms of fund raising and time, allowing them to partake in activities in the local community. Supplier payment policy and practice
It is the Company’s policy that payments to suppliers are made in accordance with those terms and conditions agreed between the Company and its suppliers, provided that all trading terms and conditions have been complied with.
Within trade creditors are amounts owed to clients under spot or forward contracts. Excluding these amounts, and amounts owed to a related party under deferred settlement terms, at 31 March 2013, the Company had an average of 19 days’ purchase (2012: 37) to trade creditors. Disabled employees
Applications for employment by disabled persons are fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Company continues and that appropriate training is arranged. It is the policy of the Company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
4
Annual Report & Accounts 2013
Baydonhill Plc
Directors’ liability insurance
During the year, Directors’ and Officers’ Liability Insurance was maintained for Directors and other officers of the Company as permitted by the Companies Act 2006. Going concern
The Company reported an operating loss for the year to 31 March 2013, in line with the Board’s strategy. The Directors have reviewed the projected cash flow for the period to September 2014 and consider that the Company will have adequate resources to meet its liabilities as they fall due for a period of at least twelve months from the date of approval of these financial statements and indicate that no additional funding is required. Accordingly, they consider it appropriate to continue to prepare the financial statements on a going concern basis. Auditors
A resolution to re-appoint the auditors, Nexia Smith & Williamson, will be proposed at the next Annual General Meeting. Approved by the Board of Directors and signed on behalf of the Board.
Wayne Mitchell Director
6 September 2013
Annual Report & Accounts 2013
5
Baydonhill Plc
Directors’ Responsibilities Statement Year ended 31 March 2013
The Directors are responsible for preparing the Directors‘ report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements the Directors are required to: – select suitable accounting policies and then apply them consistently; – make judgments and estimates that are reasonable and prudent;
– state whether applicable IFRS, as adopted by the European Union, have been followed subject to any material departures disclosed and explained in the financial statements; and – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.
6
Annual Report & Accounts 2013
Baydonhill Plc
Corporate Governance Statement Year ended 31 March 2013
The Board of Baydonhill PLC is committed to achieving good standards of corporate governance, integrity and business ethics for all activities. The Company has taken steps to comply with the UK Corporate Governance Code in so far as it can be applied practically, given the size of the Company and the nature of its operations. Audit Committee
The Audit Committee consists of Sir Eric Peacock as Chairman and Geoffrey Mayhill. The Chief Executive Officer of the Company, Wayne Mitchell, may also be invited to attend certain meetings of the Audit Committee. The Committee will meet at least twice a year, linked to the timing of the publications of the Company’s results. The Committee will also meet on an ad hoc basis when necessary. The external auditors may also be invited to attend these meetings. The Committee operates within specific terms of reference which include: – considering the appointment of external and internal auditors; – reviewing the relationship with external auditors;
– reviewing the financial reporting and internal control procedures;
– reviewing the management of financial matters and focusing upon the independence and objectivity of the external auditors; and – reviewing the consistency and appropriateness of accounting policies on a year to year basis. Remuneration Committee
The Remuneration Committee consists of Sir Eric Peacock as Chairman and Geoffrey Mayhill. The Chief Executive Officer of the Company, Wayne Mitchell, may also be invited to attend certain meetings of the Remuneration Committee. Role of the Remuneration Committee
The Remuneration Committee reviews and determines on behalf of the Board and Shareholders of the Company the pay, benefits and other terms of service of the Executive Directors of the Company and the broad pay strategy with respect to senior Company employees. Best Practice
To the extent that such principles are relevant to the current circumstances of the Company, the provisions of, inter alia, the Directors’ Remuneration Report Regulations 2002 and the UK Corporate Governance Code are taken into account. Remuneration policy
The objective of the Company’s remuneration policy is to provide remuneration in a form and amount to attract, retain and motivate high quality management. The remuneration policy of the Company has three principal components: Basic salaries
Basic salaries are determined by the Remuneration Committee bearing in mind the salaries paid in other similar companies. Within that frame of reference, it is intended that pay should be at the mid-market rate. Bonuses
Bonuses are payable according to the achievement by the Company of certain pre-determined Company targets including earnings and development milestones. The level of bonuses payable on achievement of the targets is set at the level to provide the necessary incentives for Executive Directors and senior managers. There are appropriate adjustments to the bonus payable in the event of over or under-achievement of the Company against those targets. Share Option Scheme
The Company has not issued any unapproved share options during the year. Share options issued under the 2004 Enterprise Management Incentive Plan (“the EMI plan”) no longer qualify for favourable tax treatment.
Annual Report & Accounts 2013
7
Baydonhill Plc
Corporate Governance Statement continued Year ended 31 March 2013
Employee benefit trust
The 4Less Group 2004 Employee Settlement (“the EBT”) is a discretionary trust capable of benefiting all employees and former employees of the Company and certain of their dependants and the Company made an initial contribution of £100 to the Trustees. The trust has never issued any options and is in the process of being closed. Directors’ remuneration
The particulars of the remuneration of the Directors is set out in note 8 to the financial statements. Directors’ service contracts
All Executive Directors are employed under service contracts. The services of the Executive Directors may be terminated by six months’ notice. Independent Directors
The UK Corporate Governance Code requires that the Board of Directors includes Independent Directors. There are currently no Independent Directors (as defined by the Code) by virtue of length of service (Sir Eric Peacock), previous management responsibilities, (Charles McLeod), and representative of the majority shareholder (Geoffrey Mayhill). The Company will complete an assessment of any skills gaps on the Board and determine whether additional directors should be appointed. Attendance at Board Meetings
There were eight Board Meetings during the year with attendance as detailed below: – Sir Eric Peacock
8
– Sarah Collis
3
– Wayne McLeod
– Charles McLeod
– Geoffrey Mayhill
– Richard Matthews – Julian Kelly
8
Annual Report & Accounts 2013
8 1 6 3 5
Baydonhill Plc
Independent Auditor’s Report to the members of Baydonhill Plc Year ended 31 March 2013
We have audited the financial statements of Baydonhill PLC for the year ended 31 March 2013 which comprise the Income Statement, Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes 1 to 29. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 6, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (United Kingdom and Ireland). Those standards require us to comply with the Auditing Practices Board’s (“APB’s”) Ethical Standards for Auditors. Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements
In our opinion the financial statements:
– give a true and fair view of the state of the Company’s affairs as at 31 March 2013 and of its loss for the year then ended; – have been properly prepared in accordance with IFRSs as adopted by the European Union; and – have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: – adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or – the financial statements are not in agreement with the accounting records and returns; or – certain disclosures of Directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit. Philip Quigley Senior Statutory Auditor, for and on behalf of Nexia Smith & Williamson Statutory Auditor Chartered Accountants 25 Moorgate London EC2R 6AY
6 September 2013
The maintenance and integrity of the Baydonhill Plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Annual Report & Accounts 2013
9
Baydonhill Plc
Income Statement Year ended 31 March 2013
2013 £
2012 Restated £
1 5
1,249,082,580 (1,243,929,784) (466,805)
1,079,048,798 (1,074,016,068) 240,170
Gross profit Administrative expenses Administrative expenses – Exceptional items
5
4,685,991 (4,595,809) –
5,272,900 (4,502,784) (696,424)
Operating profit Finance costs Finance income
4 9 9
90,182 (80,207) 23,052
Continuing Activities Turnover Cost of sales Cost of sales – Exceptional items Total cost of sales
Total Administrative expenses
Profit/(loss) before taxation Taxation Loss for the financial year
Notes
10
(1,244,396,589)
(4,595,809)
33,027 (74,485)
(41,458)
(1,073,775,898)
(5,199,208) (73,692) (160,600) 21,877
(65,031) (242,825)
(307,856)
There were no recognised other comprehensive income for 2013 or 2012 other than those included in the Income Statement.
10
Annual Report & Accounts 2013
Baydonhill Plc
Statement of Financial Position 31 March 2013
2013 £
2012 Restated £
11 12 13 18
57,376 248,362 10 1,032,651
30,410 458,206 10 1,107,136
Current assets Trade and other receivables Derivative financial assets – forward contracts Cash and cash equivalents
14 25 15
92,380,610 1,572,150 18,719,003
73,609,899 405,533 7,688,551
Current liabilities Trade and other payables Derivative financial liabilities – forward contracts
16 25
(112,064,425) (631,181)
(80,868,633) (621,472)
(23,843) 1,314,556
213,878 1,809,640
1,014,550
1,056,008
578,338 4,672,645 (4,236,433)
578,338 4,672,645 (4,194,975)
Non-current assets Plant and equipment Intangible assets Investments in subsidiaries Deferred tax Total non-current assets
Total current assets
Total current liabilities
Net current liabilities Total assets less current liabilities
Notes
Non-current liabilities
17
Equity Share capital Share premium Retained earnings
19 19
Net assets
1,338,399
112,671,763
(112,695,606)
(300,006)
1,014,550
1,595,762
81,703,983
(81,490,105)
(753,632)
1,056,008
The financial statements were approved and authorised for issue by the Board of Directors on 6 September 2013 and were signed on its behalf by:
Wayne Mitchell Director
Company Registration Number: 03910588
Annual Report & Accounts 2013
11
Baydonhill Plc
Statement of Changes in Equity Year ended 31 March 2013
Balance at 1 April 2012 as previously reported Prior year adjustments
Balance at 1 April 2012 after restatement Total comprehensive income for the year Balance at 31 March 2013
Balance at 1 April 2011 Total comprehensive income for the year (Restated)
Balance at 31 March 2012 (Restated)
12
Annual Report & Accounts 2013
Share capital £
Equity component of Share convertible premium loan notes £ £
Retained earnings £
Total Equity £
578,338 –
4,672,645 –
– –
(4,386,071) 191,096
864,912 191,096
578,338
4,672,645
–
(4,194,975)
1,056,008
578,338
4,672,645
–
(4,236,433)
1,014,550
Equity component of Share convertible premium loan notes £ £
Retained earnings £
Total Equity £
–
Share capital £
–
578,338
4,672,645
578,338
4,672,645
–
–
–
(41,458)
(41,458)
–
(3,887,119)
1,363,864
–
(4,194,975)
1,056,008
–
(307,856)
(307,856)
Baydonhill Plc
Statement of Cash Flows Year ended 31 March 2013
Net cash generated/(used in) from operating activities Investing activities Interest received Purchases of intangible assets Purchases of plant and equipment Net cash used in investing activities Financing activities Decrease in borrowings Increase in borrowings Issue of shares Interest paid
Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
Notes
20
9 12 11
25 25 9
15 15
2013 £
2012 Restated £
11,649,298
(7,820,126)
(135,008)
(80,771)
23,052 (102,631) (55,429)
(403,632) – – (80,206)
(483,838)
11,030,452 7,688,551
18,719,003
21,877 (91,314) (11,334)
– 260,076 – (56,910)
203,166
(7,697,731) 15,386,282 7,688,551
Annual Report & Accounts 2013
13
Baydonhill Plc
Notes to the Financial Statements Year ended 31 March 2013
1
Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the period covered by these financial statements. Basis of preparation
The financial statements have been prepared in accordance with IFRS as adopted by the European Union applied in accordance with the provisions of the Companies Act 2006.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial instruments.
The Company has taken advantage of section 402 of the Companies Act 2006 and not prepared consolidated accounts incorporating the investments referred to in note 13, as the Directors consider that their inclusion is not material for the purpose of giving a true and fair view. The accounts therefore present information about the Company. Going concern
The Company reported an operating loss for the year to 31 March 2013, in line with the Board’s strategy. The Directors have reviewed the projected cash flow for the period to September 2014 and consider that the Company will have adequate resources to meet its liabilities as they fall due for a period of at least twelve months from the date of approval of these financial statements. Accordingly, they consider it appropriate to continue to prepare the financial statements on a going concern basis. Adoption of new standards and interpretations
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (“IASB”) and the IFRS Interpretations Committee of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 April 2012. There is no impact on the Financial Statements of these adoptions. At the date of authorisation of these financial statements the following standards and interpretations relative to the Company were in issue but not yet effective and therefore have not been applied in these financial statements: – IAS 12: (Amended), Deferred Tax recovery of underlying assets (effective 1 January 2013)
– IAS 1: (Amended), Presentation of Items of Other Comprehensive Income (effective 1 July 2012) – IFRS 13: Fair Value Measurement (effective 1 January 2013)
– IFRS 7: Disclosure: Offsetting Financial Assets and Financial Liabilities (effective 1 January 2013) – IFRS 9: Financial Instruments (effective 1 January 2014)
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, with the exception of IFRS 9 which has not yet been finalised and so the Directors are not able to fully assess the potential impact.
14
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
1
Accounting policies continued
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the year end date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each year end date and amended to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised that are substantively enacted at the balance sheet date. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. Revenue recognition
Turnover represents the gross value of foreign exchange currency transactions, including transaction fees, undertaken by the Company’s foreign currency business. Purchases of currency relating to such transactions are treated as cost of sales. Turnover is recognised after receiving the client’s authorisation. Where the Company enters into contracts with its clients, it is also entered into matched contracts with its banker. Prior year adjustments
The financial statements for the year ending 31 March 2012 have been restated to correct an error made in the treatment of revenue on future forwards which should have been included during the year. See note 2 for further information. Share-based payments
The cost of share-based compensation arrangements, whereby employees and Directors receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the Income Statement.
The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The assumptions underlying the number of awards expected to vest are subsequently adjusted for the effects of non market-based vesting conditions to reflect the conditions prevailing at the year end date. Fair value is measured by the use of a Black-Scholes pricing model taking into account the terms upon which the options were granted and spread over the period during which the employees become unconditionally entitled to the options. The charge made in respect of the share-based payments is matched by an equal adjustment to the profit and loss reserve, thereby having no impact on the Company’s closing reserves or equity.
Annual Report & Accounts 2013
15
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
1
Accounting policies continued
Plant and equipment
Plant and equipment are stated at historical cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, on the following bases: Office equipment Leasehold improvements Intangible assets
– –
3 years over the life of the lease
Intangible assets are stated at historical cost less accumulated amortisation and impairment losses.
Amortisation is charged to the Income Statement on a straight-line basis over the estimated useful lives of the intangible assets. The useful lives are as follows: On-line system
Investments in subsidiaries
–
3–5 years
Investments in subsidiaries are stated at cost less any provision for impairment. Financial instruments
Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Trade and other receivables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment.
Cash and cash equivalents comprise cash held by the Company and short-term bank deposits with an original maturity of three months or less. Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Financial liabilities and equity instruments issued by the Company are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Interest bearing loans are initially recorded at fair value, which is ordinarily equal to the proceeds received net of direct issue costs. Finance costs are accounted for on an accruals basis in the Income Statement using the effective interest method. Derivative financial instruments
Derivative financial instruments are recognised on the Company’s Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. The instrument is derecognised from the Statement of Financial Position when the contractual rights or obligations arising from that instrument expire or are extinguished. Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the Income Statement. Foreign currency
Transactions denominated in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each year end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the year end date. Exchange gains and losses which arise from normal trading activities are included in the Income Statement as incurred.
16
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
1
Accounting policies continued
Operating leases
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the term of the lease. Pension costs
Contributions to defined contribution schemes are charged to the Income Statement as they become payable in accordance with the rules of the scheme. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Statement of Financial Position. Exceptional items
Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Company’s financial statements.
2
Restatement of year ending 2012
The basis for the prior period adjustment is that the revenue recognition policy for Baydonhill is to recognise turnover after receiving the client’s authorisation. However in the prior year the Company deferred the profit element of £251,442 on contracts entered into at the respective year end, which should have been included during the year, on the basis that their delivery was for a date after the respective year end. This income should not have been deferred and hence has been adjusted together with the related deferred tax effect. The correction affects the income statement as follows:
Cost of sales – exceptional Operating profit/(loss) Loss before tax Taxation Loss after tax It also affects the statement of financial position as follows;
Trade and other receivables Deferred tax Retained earnings
2012 £
(11,272) (177,750) (316,473) (182,479) (498,952) 2012 £
73,358,457 1,167,482 (4,386,071)
2012 Restated £
240,170 73,692 (65,031) (242,825) (307,856)
2012 Restated £
73,609,899 1,107,136 (4,194,976)
The adjustment incurred tax losses in the period being reduced by £251,442. The deferred tax asset at 31 March 2012 was reduced by £60,346 (£251,442 x 24%), increasing the tax charge by the same amount. The tax charge in 2012 became £242,825 and the deferred tax asset at 31 March 2012 £1,107,136.
Annual Report & Accounts 2013
17
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
3
Critical accounting judgements and key sources of estimate uncertainty
The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the year end date and the reported amounts of revenues and expenses during the reporting period. 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. Critical accounting judgements: Deferred tax asset
Deferred tax in respect of unutilised trading losses has been recognised in full since the year 31 March 2010. The Company has prepared a five year forecast which suggests sufficient taxable profits to utilise the outstanding tax losses within five years. The tax rates substantively enacted as at 31 March 2013 have been adopted in computing the deferred tax asset. Subsequent to the year end, it has been announced that corporation tax rates will be further reduced, this will reduce the deferred tax asset (see note 18). In addition, it is possible that the corporate tax rates are reduced or profits may fail to materialise. The position will be reviewed at least six monthly. Key sources of estimation uncertainty: Credit risk
The trade receivables balances predominantly represent amounts not yet due under forward contracts. There is a possibility, that, if a forward contract fails to deliver, the market loss may exceed the deposit held from the customer. The mark to market position of outstanding forward contracts is monitored regularly and for the majority of customers there is an option to make a margin call. In respect of all other trade receivables, a full line by line review of trade receivables is carried out regularly. The Directors have made provisions for impairments where there is some evidence that not all amounts will be recoverable. Impairment of intangibles
Intangibles are a significant asset and represent the cost of the online trading system. There is no off the shelf software against which the net book value or the useful economic life of the software can be compared. However, the reasonableness of the value is assessed by the present value of the gross profits generated from customers who trade online rather than via a dealer. Share-based payments
In determining the fair value of equity settled share-based payments and the related charge to the Income Statement, the Company makes assumptions about future events and market conditions, in particular, judgement must be made as to the likely number of shares that will vest, and the fair value of each award granted. The fair value is determined using a valuation model which is dependent on further estimates, including the Company’s future dividend policy, employee turnover, the timing with which options will be exercised and the future volatility in the price of the Company’s shares. Such assumptions are based on publicly available information. Different assumptions about these factors to those made by the Company could materially affect the reported value of share-based payments.
18
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
4
Operating profit Operating profit for the year is stated after charging: Depreciation of plant and equipment Amortisation of intangible assets Staff costs Operating lease rentals
5
Note 11 12 8
Exceptional items Cost of Sales Unrealised fair value adjustment on forward contracts Administrative expenses Restructuring costs associated with exiting certain categories of business
6
£
2012 Restated £
28,462 312,475 3,248,631 94,257
21,809 259,597 3,225,063 91,949
2013 £
2012 Restated £
(466,805)
240,170
–
(696,424)
2013 £
2012 £
(466,805)
Auditor’s remuneration Fees payable to the Company’s auditor for the audit of the Company’s annual account
Fees payable to the Company’s auditor and its associates’ for other services: – Other services relating to taxation – All other services
2013
(456,254)
42,000
35,000
7,180 –
12,918 3,600
Annual Report & Accounts 2013
19
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
7
Business and geographical segments
Management has determined the operating segments by considering the business from both a geographic and product perspective. For management purposes, the Company is currently organised into two operating divisions: Corporate and Retail. These divisions are the business segments for which the Company reports its segment information internally to the Board of Directors. The Company’s operations are predominantly in the one geographical segment, the United Kingdom.
The results of each segment have been prepared using accounting policies consistent with those of the Company as a whole.
Included in revenues arising from the sale of foreign currency exchange is one customer (2012: one customer) within the Corporate Division, with total revenues of approximately £435 million (2012: £280 million) which contributed more than 10 per cent. of the Company’s revenues. Corporate Retail Division Division Unallocated Total Year ended 31 March 2013 £ £ £ £ Turnover Cost of Sales Gross profit
Operating profit/(loss) Finance costs Finance income
Profit/(loss) before taxation Taxation
Profit/(loss) for the year from continuing operations Capital expenditure Depreciation and amortisation Turnover
Year ended 31 March 2012 Turnover Cost of Sales Gross profit
Operating profit/(loss) Finance costs Finance income
Profit/(loss) before taxation Taxation
Profit/(loss) for the year from continuing operations Capital expenditure Depreciation and amortisation Turnover
20
Annual Report & Accounts 2013
1,119,968,250 (1,115,887,290)
129,110,234 (128,042,494)
599,237 – –
203,754 – –
4,080,960
599,237 –
4,096 1,249,082,580 (466,805) (1,244,396,589)
1,067,740
(462,709)
4,685,991
203,754 –
(769,964) (74,485)
33,027 (74,485)
(712,809) (80,207) 23,052
(90,182) (80,207) 23,052
599,237
203,754
(844,449)
1,119,968,250
129,110,234
4,096
1,249,082,580
Corporate Division £
Retail Division £
Unallocated £
Total £
1,244,792
202,610
29,531 279,013
42,825 28,261
932,463,423 (928,637,925)
146,585,375 (145,340,583)
536,399 – –
(52,594) – –
3,825,498
85,704 33,658
(41,458)
158,060 340,937
– 202,610
1,079,048,798 (1,073,795,898)
(410,113) (160,600) 21,877
73,692 (160,600) 21,877
5,272,900
536,399 –
(52,594) –
(548,836) (242,825)
536,399
(52,594)
(791,661)
(307,856)
932,463,423
146,585,375
–
1,079,048,798
76,764 259,598
67,050 –
11,334 21,809
(65,031) (242,825)
155,148 281,407
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
8
Staff costs
The average number of persons, including Executive Directors, was: Selling Administration
2013 Number
2012 Number
56
59
£
£
2,835,786 322,369 19,280 71,196
2,849,375 323,172 17,963 34,553
31 25
Staff costs for the above persons were: Wages & salaries Social security costs Pension costs Other staff costs
Directors’ remuneration Directors’ remuneration in aggregate comprised: Aggregate remuneration Company pension contributions to money purchase schemes
31 28
3,248,631
3,225,063
2013 £
2012 £
368,900 11,400
353,816 11,400
380,300
365,216
Retirement benefits are accruing to one (2012: one) Director under the Company’s money purchase pension scheme. No Directors (2012: Nil) are accruing benefits under defined benefit schemes.
During the year ended 31 March 2013, the highest emolument and compensation made to a director was: Pension Total contributions to remuneration money including Aggregate purchase pension remuneration schemes contributions £ £ £
Director
169,595
11,400
180,975
During the year ended 31 March 2012, the highest emolument and compensation made to a director was: Pension contributions to Total money emoluments Aggregate purchase and remuneration schemes compensation £ £ £ Director
177,232
11,400
188,632
Annual Report & Accounts 2013
21
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
9
Finance costs and finance income Bank loans and overdrafts Extended payment terms from Group companies in respect of on-line system Interest due on loans from Group undertakings Other Interest
2013 £
1,108 20,685 58,004 410
2012 £
37,002 41,580 62,110 19,908
Finance costs
80,207
160,600
Interest receivable and similar income
23,052
21,877
2013 £
2012 Restated £
(74,485)
(242,825)
10 Taxation Current tax Deferred tax
– (74,485)
– (242,825)
The difference between the total tax expense shown above and the amount calculated by applying the standard rate of United Kingdom corporation tax to the loss before tax is as follows: 2013 2012 Restated £ £
Profit/(loss) before taxation
Tax on loss on ordinary activities at standard United Kingdom corporation tax rate of 24 per cent. (2012: 26 per cent.)
Effects of: Expenses not deductible for tax purposes Other permanent differences Adjustment to tax charge in respect of previous periods Reduction of tax rates on the deferred tax asset Reversal of previously recognised losses in respect of the deferred tax asset Total tax charge for the year
22
Annual Report & Accounts 2013
33,028
(65,031)
7,927
(16,908)
12,511 120 9,029 44,898 –
6,307 – – 185,191 68,235
74,485
242,825
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
11 Plant and equipment Cost At 1 April 2011 Additions Disposals
At 1 April 2012 Additions Disposals
Leasehold improvements £
Office equipment £
Total £
165,358 – –
674,525 11,334 (721)
839,883 11,334 (721)
At 31 March 2013
165,358 – –
165,358
685,138 55,429 (613,791)
850,496 55,429 (613,791)
Depreciation At 1 April 2011 Charge for the year Disposals
165,358 – –
633,380 21,809 (461)
798,738 21,809 (461)
At 1 April 2012 Charge for the year Disposals
126,776
292,134
At 31 March 2013
165,358 – –
165,358
654,728 28,462 (613,790)
820,086 28,462 (613,790)
Net book amount At 31 March 2012
–
30,410
30,410
At 31 March 2013
12 Intangible assets Cost At 1 April 2011 Additions At 1 April 2012 Additions Disposals
At 31 March 2013 Amortisation At 1 April 2011 Charge for the year
–
69,400
57,376
234,758
57,376
On-line system £ 1,166,079 143,813
1,309,892 102,631 (879,211) 533,312
592,089 259,597
At 1 April 2012 Charge for the year Disposals
851,686 312,475 (879,211)
Net book amount At 31 March 2012
458,206
At 31 March 2013
At 31 March 2013
248,950
248,362
Annual Report & Accounts 2013
23
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
13 Investment in subsidiaries Cost and net book amount
£
At 1 April 2012 and 31 March 2013
10
Details of the investments in which the Company holds 20 per cent. or more of the nominal value of any class of share capital are as follows:
The Company holds 100 per cent. of the issued share capital of the following companies. All subsidiaries are dormant and registered in England and Wales. Share capital Reserves £ £
Baydonhill International Mortgages Limited FLG Insurance Brokers Limited Currencies 4Less Limited
14 Trade and other receivables Trade receivables Less: provision for impairment
Trade receivables – net Prepayments and accrued income Amount due by Group undertaking
2 2 1
(309,977) (100,898) 1
2013
2012 Restated £
£
92,251,562 (103,889)
73,561,876 (418,063)
92,380,610
73,609,899
92,147,673 211,327 21,610
73,143,813 466,086 –
Trade receivables and forward contracts constitute the only financial assets within the category “Loans and Receivables” as defined by IAS 39.
Trade receivables and forward contracts are non-interest bearing and are generally not yet due or less than 3 days past due.
Of the trade receivables and forward contracts balance at the end of the year, £Nil (2012: £Nil) is due from the Company’s largest counterparty. There are one (2012: four) counterparties where the balance of trade receivables represents more than 5 per cent. of the total balance of trade receivables.
A provision for impairment of trade receivables is established when there is no objective evidence that the Company will be able to collect all amounts due according to the original terms. The Company considers factors such as default or delinquency in payment, significant financial difficulties of the debtor and the probability that the debtor will enter bankruptcy in deciding whether the trade receivable is impaired.
24
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
14 Trade and other receivables continued
The ageing analysis of these trade receivables prior to any provision for impairment is as follows: 2013 Not yet due Up to 3 months past due
The movement in the bad debt provision can be analysed as follows: Opening position Amount charged to the Income Statement Amount written off as uncollectible Bad debt provision released Closing position
£
92,168,820 82,742
2012 Restated £
69,838,045 3,723,831
92,251,562
73,561,876
2013 £
2012 £
418,063 69,538 (12,036) (371,676)
410,274 80,095 (72,306) –
103,889
418,063
2013 £
2012 £
Trade receivables up to three months past due includes £103,889 (2012: £418,063) of impaired trade receivables.
15 Cash and cash equivalents Cash at bank Short term bank deposits (held in US Dollar) Secured funding (held in Sterling) Cash at bank and in hand are analysed by currency as follows: Sterling balances Euro balances US Dollar balances Other currencies
17,678,541 16,446 1,024,016
6,653,419 15,615 1,019,517
18,719,003
7,688,551
2013 £
2012 £
10,820,649 4,360,698 1,857,537 639,657
17,678,541
2,027,155 1,600,121 2,108,065 918,078
6,653,419
The Directors consider that the carrying amount of these assets approximates to their fair value. The credit risk on liquid funds is limited because the counterparty is a bank with a high credit rating.
Annual Report & Accounts 2013
25
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
16 Trade and other payables Amounts owed to Group undertakings Loans from Group companies Trade payables Trade payables in respect of expenses Other tax and social security Accruals and deferred income Other creditors
2013 £
417,459 180,000 110,318,115 259,122 67,904 679,825 150,000
112,064,425
2012 £
965,333 280,000 77,886,816 347,397 317,565 652,674 418,848
80,868,633
Trade payables in respect of expenses comprise amounts outstanding for administrative and other ongoing costs. The average credit period taken for trade purchases is 19 days (2012: 37 days). No interest is charged on the outstanding balance. The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
17 Non-current liabilities Other creditors Loans from Group companies
2013 £
75,000 225,006
300,006
2012 £
225,000 528,632
753,632
All the loans from Group undertakings are stated at amortised cost using the effective interest method.
The amount due to ASPone Limited, fully repaid at year end (2012: £118,632), attracted interest at 10 per cent. per annum.
The amount due to Wallich & Matthes Holding BV of £405,000 (2012: £410,000) attracts interest at a rate of 12 per cent. There is no material difference between the amortised costs and their value.
26
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
18 Deferred tax
2013 £
At 1 April (Charged) to the Income Statement
1,107,136 (74,485)
At 31 March
At 1 April 2012 For the year
At 31 March 2013
2012 Restated £
1,349,961 (242,825)
1,032,651
1,107,136
Tax losses £
Short term timing differences £
Accelerated capital allowances £
Total recognised £
851,633
23,895
157,123
1,032,651
898,876 (47,243)
108,762 (84,867)
99,498 57,625
107,136 (74,485)
Recognition of deferred tax
In order to recognise the deferred tax asset arising from prior period trading losses, the Directors must be satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. The Company prepared a five year profit forecast with underlying assumptions consistent with those experienced in the year ended 31 March 2013, where appropriate, or updated to reflect changes in the assumptions since 31 March 2013. The forecast indicated that the losses would be utilised in full within five years, and the Directors therefore decided it would be appropriate to continue to recognise the deferred tax asset in full. Other factors affecting future tax
As at 31 March 2013, trading losses of approximately £3.7 million (2012: £3.7 million) are available to carry forward against future profits of the same trade. These tax losses will reduce the corporation tax charge in future years until they have been utilised. On 22 June 2010 the Government announced its intention to propose to parliament a staggered reduction in the corporation tax of 1% every year culminating in a rate of 24% for the tax year 2014/15. The 2011, 2012 and 2013 Budgets accelerated the reduction resulting in a rate of 24% from 1 April 2012 reducing to a rate of 21% for the tax year 2014/15 and 20% for the tax year 2015/16. As at 31 March 2013, the further reduction in the tax rate for the tax year 2015/16 has not been substantively enacted. The deferred tax expense for 2013 would have increased by approximately £134,694.
19 Share capital and share premium
2013 £
2012 £
750,000
750,000
Number
Share capital £
Share premium £
57,833,750
578,338
4,672,645
Authorised 75,000,000 Ordinary Shares of 1 pence each
Allotted, called up and fully paid Ordinary Shares of 1 pence each At 31 March 2013 and 2012
The Company has one class of Ordinary Shares which carry no right to fixed income.
At the end of the year the Company had not granted any warrants in respect of Ordinary Shares.
Annual Report & Accounts 2013
27
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
20 Net cash (used in)/generated from operating activities Operating profit Depreciation charge Amortisation charge (Increase)/decrease in receivables and derivative financial assets Increase/(decrease) in payables and derivative financial liabilities Cash generated from operations Tax paid
2013 £
2012 Restated £
90,182 28,462 312,475 (19,938,328) 31,155,503
73,692 21,809 259,597 34,000,539 (42,175,763)
11,649,298
(7,820,126)
11,649,298 –
(7,820,126) –
21 Operating lease commitments
At the year-end date the Company has lease agreements in respect of properties and equipment. The future minimum lease payments under non-cancellable leases are follows: Due: Within one year
2013 £
2012 £
36,179
36,179
22 Pension commitments
The Company operates two defined contribution pension schemes. The assets of the schemes are held separately from those of the Company in independently administered funds. The pension cost charge represents contributions payable by the Company to the funds for the year and amounted to £19,280 (2012: £15,150). There was £Nil (2012: £Nil) owing to the pension schemes at the end of the year.
23 Related party transactions
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Company. In the opinion of the Board, the Company’s key management are the Directors of Baydonhill PLC. Information regarding their compensation is given below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. 2013 2012 £ £ Salaries and other short-term employee benefits
380,300
380,300
394,444
394,444
During the year the Company entered into contracts to purchase foreign exchange on an arm’s length basis on behalf of the following related parties. The total value of the transactions during the year were: 2013 2012 £ £ Ekwienox Limited, the ultimate parent company Arthur Hughes, the ultimate controlling party Charles McLeod, a director of the Company Buckley Jewellery, Sir Eric Peacock is chairman of the company Sarah Collis, a director of the Company ASPOne, a company controlled by Ekwienox Limited Stevenage Packaging, Sir Eric Peacock is chairman of the company IFATEK, Richard Matthews is director of the company Richard Matthews, a director of the Company Wayne Mitchell, a director of the Company
28
Annual Report & Accounts 2013
1,685,177 455,435 – 1,954,737 – 33,779 74,726 6,150 3,166 711
431,615 1,404,558 38,921 545,486 1,566 – – – – –
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
23 Related party transactions continued
During the year the Company incurred the following costs from related parties that have been reflected in the Financial Statements. 2013 2012 £ £
Ekwienox Limited, in respect of executive, non-executive fees and insurance recharges ASPone Limited, a company controlled by Ekwienox Limited, in respect of the development of an online trading system and associated hosting, maintenance and consultancy charges IFATEK Wallich & Matthes Holding BV, interest on loan note Tauristic Marketing Limited, a company controlled by Mr Charles McLeod in respect of Directors fees and introducer commissions Dragon International Limited, a company controlled by Sir Eric Peacock The Consulting Consortium Biomnia
At the end of the year the following amounts were owed to related parties: Ekwienox Limited ASPone Limited Charles McLeod IFATEK Ekwienox Fx Limited Wallich & Matthes Holding BV Dragon International The Consulting Consortium At the end of the year, the following amounts were owed from related parties: Arthur Hughes Ekwienox Limited
62,054
134,854
295,985 54,962 –
294,167 – 62,110
2013 £
2012 £
12,896 64,020 10,346 6,495
13,628 34,500 – –
95,258 38,227 – 283 – 688,974 8,960 2,070
241,899 667,785 3,182 – 167,945 685,969 22,967 –
2013 £
2012 £
– 21,610
154,947 –
Annual Report & Accounts 2013
29
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
24 Share-based payments
The Company issued 1,380,000 unapproved share options in December 2010 and 800,000 unapproved share options in October 2009. The Company had, under a previously approved Enterprise Management Incentive Plan, granted options in April 2004 and February 2005.
All options are settled by the issue of shares. The principal terms and conditions of the options outstanding at the year end are as follows: Entitled Number of Exercise Vesting period Exercise Date of grant employees options price from grant period
December 2010 October 2009
February 2005 April 2004
Employees and certain Directors Employees and certain Directors Director Employees and certain Directors
Outstanding at the beginning of the year Forfeited during the year Issued during the year Outstanding at the year end Exercisable at the end of the year
920,000
18.00p
2.75 years
Sept 2013 – Sept 2018
15,333
60.00p
3 years
Apr 2007 – Apr 2014
600,000 50,000
5.75p 55.00p
Number of options
1,775,333 (190,000) – 1,585,333 935,333
3 months 3 years
2013 Weighted average exercise price 15.26p 18.00p – 14.94p 18.69p
Jan 2010 – Dec 2014 Feb 2008 – Feb 2015
Number of options
2,247,333 (472,000) – 1,775,333 665,333
2012
Weighted average exercise price 14.79p 12.99p – 15.26p 10.70p
The options outstanding at 31 March 2013 had exercise prices ranging from 5.75 pence to 60 pence (2012: 5.75 pence to 60.00 pence) and the weighted average remaining contractual life was four years (2012: four years).
The fair value of the options and shares granted have been measured using the Black Scholes valuation model. In arriving at the fair value, each option grant has been valued separately, with the exception of certain options which were issued simultaneously on identical terms which have been aggregated. Volatility has been estimated by reference to the historical volatility in the Company’s share price over a period of six months prior to each grant date. The following table lists the main assumptions used in the model for the options granted in the year to 31 March 2013: Volatility (per cent.) Risk-free interest rate (per cent.) Expected life of options (years) Expected life of share-based payments (years) Weighted average share price – options (pence) Weighted average share price – share based payments (pence) Expected dividends
28.73 2.78 2.95 7.75 17.80 18.00 Nil
The charge recognised for share-based payments in respect of options issued and vested during the year was £Nil (2012: £Nil).
30
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
25 Financial instruments
The Company’s financial instruments comprise derivatives relating to forward contracts, cash and cash equivalents, borrowings and items such as trade payables and trade receivables which arise directly from its operations. The main purpose of these financial statements is to provide finance for the Company’s operations.
The Company’s operations expose it to a variety of financial risks including credit risk, liquidity risk, interest rate risk and foreign currency exchange rate risk. Given the size of the Company, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company’s finance department. Financial assets and liabilities by category
The carrying values of financial assets and liabilities, which are principally denominated in Sterling, Euros or US Dollars, were as follows: Assets at fair Loans & value through Non-financial receivables profit and loss assets Total £ £ £ £
Assets 2013 Plant and equipment Intangible assets Investments in subsidiaries Deferred tax Trade and other receivables Derivative financial assets Cash and cash equivalents Amount due by Group companies Assets 2012 (Restated) Plant and equipment Intangible assets Investments in subsidiaries Deferred tax Trade and other receivables Derivative financial assets Cash and cash equivalents
– – 10 – 92,147,673 – 18,719,003 –
– – – – – 1,572,150 – –
57,377 248,362 – 1,032,651 211,327 – – 21,610 1,571,327
114,010,163
– – 10 – 73,143,813 – 7,688,551
– – – – – 405,533 –
30,410 458,206 – 1,107,136 466,086 – –
30,410 458,206 10 1,107,136 73,609,899 405,533 7,688,551
110,866,686
80,832,374
1,572,150
405,533
2,061,838
57,377 248,362 10 1,032,651 92,359,000 1,572,150 18,719,003 21,610
83,299,745
Carrying values do not differ materially from their fair value at both 31 March 2013 and 31 March 2012.
Annual Report & Accounts 2013
31
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
25 Financial instruments continued
Financial assets and liabilities by category continued
Liabilities 2013 Non-current liabilities Other payables Derivative financial liabilities Trade and other payables Amounts due to Group companies
Amortised cost £
Liabilities at fair value through profit and loss £
Non-financial assets £
Total £
75,000 998,851 – 110,318,115 822,459
– – 631,181 – –
– 150,006 – – –
75,000 1,148,857 631,181 113,318,115 822,459
Liabilities 2012 Non-current liabilities Other payables Derivative financial liabilities Trade and other payables Amounts due to Group companies
753,632 1,317,636 – 77,886,816 1,245,333
– – 621,472 – –
– 418,848 – – –
753,632 1,736,484 621,472 77,886,816 1,245,333
112,214,425
81,203,417
631,181
621,472
150,006
418,848
112,995,612
82,243,737
Carrying values do not differ materially from their fair value at both 31 March 2013 and 31 March 2012. Fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Level 2: Level 3:
quoted (unadjusted) prices in active markets for identical assets or liabilities;
other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Unlisted equity investments are included in Level 3. The fair value of the embedded derivative is determined using the present value of the estimated future cash flows based on financial forecasts.
As at 31 March 2013, the only financial instruments measured at fair value were derivative financial instruments and these are classified as Level 1.
32
Annual Report & Accounts 2013
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
25 Financial instruments continued Credit risk
The Company’s credit risk is primarily attributable to its forward contracts. The Company has implemented policies that require appropriate credit checks on potential customers before sales are made and a credit approval process where the client is seeking either payment by Direct Debit or a deposit waiver on forward contracts. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the Board.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: 2013 2012 Restated £ £ Trade receivables at fair value Derivative financial assets Cash and cash equivalents
92,380,610 1,572,150 18,719,003
112,671,763
73,609,899 405,533 7,688,511
81,703,983
Interest rate risk
The Company has both interest bearing assets and interest bearing liabilities. Interest bearing assets comprise only cash and cash equivalents which earn interest at a variable rate. Interest bearing liabilities are primarily the loans from Group undertakings; both of these attract interest at fixed rates. Details of the terms of the Company’s borrowings are disclosed in note 16. Interest rate sensitivity
The Company’s borrowings during the year were at fixed interest rates, there is therefore no sensitivity to a change in interest rates. Liquidity risk
The Company’s policy is to manage its capital requirements and liquidity through a combination of retained earnings, the issue of equity and borrowings from Group undertakings. The Company monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due.
The table below shows the contractual maturity analysis of the undiscounted residual contractual cashflows of the Company’s liabilities: Less than 1 year 1 to 2 years 2 to 5 years Total £ £ £ £
2013 Amounts due to Group companies Loans from Group companies Trade and other creditors Derivative financial liabilities 2012 Amounts due to Group companies Loans from Group companies Trade and other creditors Derivative financial liabilities
379,232 180,000 111,505,199 631,181
– 180,000 75,000 –
– 45,000 – –
379,232 405,000 111,580,199 631,181
112,695,612
255,000
45,000
112,995,612
965,333 280,000 79,623,299 621,472
– 636,273 150,000 –
– – 75,000 –
965,333 916,273 79,848,299 621,472
81,490,104
786,273
75,000
82,351,377
Annual Report & Accounts 2013
33
Baydonhill Plc
Notes to the Financial Statements continued Year ended 31 March 2013
25 Financial instruments continued Foreign currency exchange rate risk
The Company is exposed to foreign currency exchange rate risk in connection with revenue generated during the year in currencies other than Sterling. There is no exposure on the balances owing to and from customers under both spot and forward contracts as these have been mitigated by spot and forward contracts with a bank.
The principal currencies other than Sterling in which revenue is generated are the Euro and the US Dollar. A 10 per cent. strengthening of these currencies against Sterling over the course of the year would have increased gross profits by £57,284 (2012: £79,397) and £59,188 (2012: £258,914) respectively assuming that all other variables remain constant.
26 Capital risk management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and maintain optimal capital structure to reduce the cost of capital. The Company defines capital as being share capital plus reserves. The Board of Directors monitors the level of capital as compared to the Company’s long-term debt commitments and adjusts the ratio of debt to capital as is determined to be necessary, by issuing new shares, reducing or increasing debt, paying dividends and returning capital to shareholders. The Company is not subject to any externally imposed capital requirements.
27 Contingent liabilities
There were no contingent liabilities at 31 March 2013 (2012: none).
28 Commitments and guarantees
The Company has a facility with its bankers for spot and forward foreign exchange trading up to a maximum contingent risk amount outstanding (as determined by the bank) of £4.5 million (2012: £4.5 million). The contingent risk at the year end amounted to £2.7 million (2012: £3.24 million).
The Company had authorised software developments which had not been delivered at 31 March 2013. This totalled £40,000 (2012: £38,500).
29 Parent companies and controlling parties
The immediate parent company and controlling party is Ekwienox Fx Limited. Ekwienox Limited is the ultimate parent company of Baydonhill PLC and is the largest and smallest company which prepares group accounts including Baydonhill PLC. These are available from their registered office, 160 Brompton Road, Knightsbridge, London, SW3 1HW. Ekwienox Limited is under the control of Mr Arthur Hughes.
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Annual Report & Accounts 2013
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Delivering the World’s Currencies
2013 Baydonhill Plc 21 New Street, London EC2M 4TP
Tel: +44 (0)20 7594 0584 Fax: 0870 330 5950 Email: enquiries@baydonhillfx.com
Web: baydonhillfx.com
Registered in England and Wales No: 03910588
Report and Financial Statements
For The Year Ended 31 March 2013