TIDMBOX
RNS Number : 4582O
Boxhill Technologies PLC
30 January 2019
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
Boxhill Technologies PLC
("Boxhill" or the "Company" or the "Group")
Final Results and Audited Annual Report and Accounts for the
Year to 31 January 2018
30 January 2019
The Board of Directors of Boxhill is pleased to announce the
publication of the audited annual report and accounts for the year
to 31 January 2018 (the "Annual Report").
The Annual Report will be published on the Company's website in
compliance with its articles of association and the electronic
communications provisions of the Companies Act 2006. A copy of the
Annual Report can also be accessed through the link below.
Annual Report
http://www.rns-pdf.londonstockexchange.com/rns/4582O_1-2019-1-29.pdf
Key extracts from the Annual Report can also be viewed
below.
For further information, contact:
Boxhill Technologies PLC 020 7493 9644
Tim Razzall, Executive Chairman
Website www.boxhillplc.com
Allenby Capital Limited (Nomad & Broker)
John Depasquale/Nick Harriss 020 3328 5656
Strategic report
The Directors present their Strategic Report on the Group for
the year ended 31 January 2018.
Operating and Financial Review for the year ending 31 January
2018
The principal activities of Boxhill Technologies PLC are that of
lottery administrators and the provision of payment processing
products and services.
Performance in the Payments processing business in the year to
31 January 2018 was impacted by a number of regulatory changes
limiting the volume of activity undertaken. These included the
residual effect of the 2016 Visa and Mastercard geographical
location regulations and then later in the year the impact of the
industry wide preparation for, and the ultimate introduction of,
MIFID II in early 2018.
During the year, the Group placed considerable focus and
investment in enhancing the suite of payment technologies and
related services that it offered its customers.
On 10 April 2017, the Company acquired all of the ordinary
shares in Timegrand Limited satisfied in full by the issue of
500,000,000 ordinary shares. Timegrand Limited holds intellectual
property and software, including a new 10-year licence, granted on
10 April 2017, to use an advanced payment gateway software system
known as the WPJ Services Control Centre, with advanced analytics
and security/fraud management as well as finance and administration
services. The acquisition of the Timegrand software asset further
enhances the offering of the Payments Division bringing about
improved efficiencies between our delivery and internal back office
functions.
In July 2017 EmexGo started issuing Virtual IBANs, with
development of the full functionality completed in November 2017,
meaning that its customers are able to supply their account
information in standardised international bank account format, with
the customer as the named beneficiary, to receive inward and make
outward payments. Available in multiple currencies this important
improvement makes Emex's services user friendly and therefore more
attractive to those wishing to use alternative payment platforms by
utilising internationally understood account formats which other
providers are unable to do.
Also in July 2017, a high value transfer service, facilitating
transactions in excess of EUR10,000,000, for corporate and
individual customers was launched. The service takes into account
the additional care and attention that such low frequency but high
value transactions require to complete smoothly.
While both the EmexGo and high value transfer services were
subsequently disposed of on 30 July 2018, the know how has been
rolled over into the new Market Access service (as described in the
post-balance sheet events).
Prize Provision Services Limited (PPSL) is licensed by the UK
Gambling Commission as an External Lottery Manager (ELM) to provide
administration services to societies. It administers all aspects
such as lottery draws, prizes, player accounts, financial and data
administration required by law to run a lottery.
During Summer 2017, the Board committed to investment in the
lottery in order to stimulate growth in this business. Following
this decision, PPSL completed a thorough operational overhaul which
reviewed all aspects of internal processes and the services
provided to clients.
Furthermore, in November 2017, PPSL launched the Sports Club
Lottery website to better support the large number of sports clubs
it provides services for and allow a specific focus on sporting
societies across Great Britain.
Financial key performance indicators ("KPI's")
KPIs provide an illustration of management's ability to
successfully deliver against the Group's strategic objectives. The
Board periodically reviews the KPIs of the Group taking into
account the strategic objectives and the challenges facing
implementation of such. The measures reflect the Group's
development focused strategy, the importance of a positive cash
position and our underlying commitment to ensuring safe operations.
These KPI's can be categorised into operational and financial.
These include, but are not limited to:
-- Revenue
-- Gross profit
-- EBITDA
-- Profit before taxation
The Group Board review these indicators at least once a month.
Explanations are sought and given for any material variances and
the management are required to provide plans to resolve any
performance failures as they occur during the year.
As the business grows and increases its expenditure on
internally generated and externally purchased tangible and
intangible assets, resulting in increased depreciation and
amortisation, the business has moved to measuring performance using
EBITDA as it provides a better measurement of underlying
operational performance.
EBITDA is defined as profit before tax, net finance costs,
depreciation and amortisation.
Financial Summary
For the full year to 31 January 2018 the Group incurred an
EBITDA loss of GBP1,628,000 compared to an EBITDA profit of
GBP38,000 for the year ended 31 January 2017.
In summary, for the year to 31 January 2018 the Group
performance was as follows:
Revenue : GBP1,367,000 (2017: GBP1,727,000)
Gross Profit : GBP914,000 (2017: GBP1,165,000)
EBITDA : Loss of GBP1,628,000 (2017 : Profit of GBP38,000)
Depreciation & Amortisation : GBP122,000 (2017 :
GBP26,000)
(Loss)/profit before tax : Loss of GBP1,751,000 (2017: Profit of GBP2,000)
As can be seen in note 3, the overall loss after tax is
comprised of a small loss of GBP16,000 (2017: profit of GBP46,000)
in the Lottery business and a loss of GBP1,147,000 (2017: Profit of
GBP337,000) in the Payment processing businesses, further reduced
by unallocated central costs of GBP588,000 (2017: GBP381,000).
Performance in the payments processing business in the year to
31 January 2018 was impacted by a number of regulatory changes
limiting the volume of activity undertaken. These included the
residual effect of the 2016 Visa and MasterCard geographical
location regulations and then later in the year the impact of the
Industry wide preparation for, and the ultimate introduction of,
MIFID II in early 2018.
Despite lower than anticipated revenue, particularly during the
first half of the year to 31 January 2018, the payment processing
business maintained its infrastructure and invested in a number of
internally developed systems and licences including the high value
transfer service and the introduction of virtual IBANS to Emexgo
customers. During the year, the Group recorded amortisation expense
on internally generated and acquired intangible assets of
GBP120,000 (2017: GBP26,000).
The Board, upon analysis of expenditure and a review of the
underlying performance of Emex, found that the team in Malta had
failed to deliver either the growth in revenues or the cost savings
required to ensure that the company operated at an acceptably
profitable level. The anticipated returns on investments in people,
travel and expenses were not delivered. The Operations Director and
the support team (with a few exceptions) were acting imprudently,
without reference to and inconsistent with The Company's strategy
of broadening its customer base across several industries,
consolidating certain business under the Emex brand and in
particular back end support and delivery services for the FX market
as well as FX services for existing clients. The Board had been
anticipating capitalising significant expenditure during the year
relating to the development of internal systems, but on subsequent
review, concluded it was not appropriate to do so. This expenditure
significantly increased the reported loss compared to the prior
year.
Following the previous year's consolidatory work, PPSL
implemented its growth strategy for the business. In addition to
the continued development of client services, 2018 saw the launch
of the Sports Club Lottery designed to support sporting societies
raise money through their own lottery. All sports societies who the
company provides services to are listed on the Sports Club Lottery
website and several new societies have already signed up.
As a result, the trend of reducing revenue experienced in the
Lottery segment for several years was halted in Autumn 2017, with
small month-on-month revenue growth experienced in the last couple
of months of the year to 31 January 2018, and this trend is
expected to continue through future periods.
Costs remained relatively stable in the year to 31 January 2018
compared to the prior year.
During the year to 31 January 2018 trade and other receivables
increased by GBP1,276,000, driven by the investment in the high
value transaction service with Phillite D UK Limited as announced
to the market in November 2017. In addition, the client balances
within other payables (as can be seen in note 19) increased by
GBP4,740,000 due to an increased volume of client funds held in
EmexGo, the Group's digital wallet services. Together these were
the major drivers of the increase in bank and cash balances as at
31 January 2018 to GBP2,151,000 (2016: GBP818,000), offset by cash
absorbed in the operating activities.
Post Balance Sheet events
Launch of Market Access Limited
During 2018, Boxhill Technologies plc established Market Access
Limited ("Market Access") as a wholly owned subsidiary to operate a
foreign exchange and treasury services business and provide payment
processing to low risk clients, with the intention of generating a
more stable growth pattern than had been seen with Emex's
traditional customer base. Additionally, the management will be
based in London and will benefit from the additional direct support
the Board and the team based there can offer.
Investment in technology has continued through 2018, with the
development of a software system called M3 Market Access. This
system is a specialist application for treasury and FX operations.
There are two primary offerings:
1. FX Broker - an in-house treasury management platform that
allows for front, middle, and back office functions
2. Customer Online - a cloud based portal which enables end
users to place trades and review activity
In October 2018, a beta version of Customer Online was released
to a handful of clients and a full production release was made in
November 2018.
Furthermore, and following the sale of the Emex companies to MDC
Nominees Ltd, Market Access has undertaken a review of gateway
solutions available in the market. As a result, Market Access will
operate its processing business through ICS, a gateway platform
with a strong global presence and a link to over 800 acquiring
banks worldwide. In the short-term, Market Access will lease the
platform, with a view to creating a stronger relationship/joint
venture in the future.
Market Access is led by Mark Harris who brings a great deal of
experience in FX. Mark has significant sales experience,
principally in FX companies such as Travelex and Baydonhill (which
was sold to Earthport PLC) and more recently has held a successful
career consulting to several fintech and payments companies.
Issue of Equity
On 23 April 2018 (admitted to trade on AIM with effect from 30
April 2018), new shares totalling 410,000,000 Ordinary Shares of
0.1 pence each ("Ordinary Shares") were issued in settlement of
amounts invoiced:
1. 140,000,000 Ordinary Shares for consultancy fees totalling
GBP140,000 from Moorhen Limited, a company controlled by Phil
Jackson, in relation to his contracted ongoing role within the
payment services division of the Group.
2. 10,000,000 Ordinary Shares for consultancy fees totalling
GBP10,000 from FS Business Limited, a company controlled by Andrew
Flitcroft, in relation to his contracted services as Finance
Director and company secretary of the Group.
3. The Board has agreed contractual terms with John Botros
trading as St. James Street Chambers in relation to the legal work
involved in the integration of Timegrand Limited with the newly
established Market Access in February 2018 and post-acquisition
dealings with the Gambling Commission for a total consideration of
GBP100,000.
4. The Board has agreed contractual terms with Bluedale
Corporate Limited in relation to the corporate finance work
involved in the establishment of Market Access Limited (announced
on 28 March 2018) and post-establishment activities for a total
consideration of GBP160,000. Bluedale is a company controlled by
John Botros.
Also, on 23 April 2018, share options were granted to Directors
and key management totalling 60,000,000 at an exercise price of 0.1
pence per share and a life of 5 years. Included in the Options were
20,000,000 granted to Arno Rudolf and 20,000,000 to Clive Hyman,
who are both directors of the Company. The Directors' Options were
not a contractual entitlement and have been granted to reward
additional work undertaken.
On 9 May 2018 (admitted to trade on AIM with effect from 14 May
2018), new shares totalling 50,000,000 Ordinary Shares of 0.1 pence
each were issued in settlement of invoices for consultancy fees
totalling GBP50,000 from Nineteen Twelve Management Limited, a
company controlled by James Rose.
Disposal of Subsidiaries
Following a substantial decline in certain payment processing
revenues during Q2 2018 due to a requirement by particular banks to
change the nature of transactions they are willing to deal with
following regulatory changes mentioned above, the business
announced a re-structuring of the Group (as described in the
Directors' report on page 6). On 30 July 2018, the Group separated
the provision of payment services to Non-Conforming Customers from
the rest of the Group through the sale of Emex (UK) Group Limited,
Emexconsult Limited and Emex Technologies Limited to MDC Nominees
Limited. This included the disposal of all assets and liabilities
that formed part of the Payment Processing operating segment as at
and for the year ended 31 January 2018. Further details are
described below.
The consideration for Emex was GBP2,000,000, satisfied through
the issue by MDC Nominees Limited of the Loan Note, which has the
following key terms:
-- Amount - GBP2,000,000
-- Term - 10 years
-- Interest rate - 0 per cent
-- Security - A debenture over the issued share capital of Emex
Technologies Limited, Emexconsult Ltd, Net World Limited and Emex
(UK) Group Limited
-- Repayment - by way of the establishment of a sinking fund
into which the net revenues of Emex resulting from the customers
left in place at the time of the transaction or any new
Non-Conforming Customers referred by Market Access shall be
transferred on a monthly basis and used for general working capital
purposes and any balance outstanding at the end of 10 years, after
the above sinking fund has been extinguished, by MDC Nominees
Limited.
As part of the Transaction, whilst Non-Conforming Customers of
Emex remained with the Emex Group Conforming customers were given
the opportunity from October 2018 to engage with Market Access
Limited as part of the transaction, clear of any liabilities. In
consideration of this arrangement for the Conforming Customers,
Boxhill agreed to issue 100,000,000 Shares to MDC.
Under the terms of the Transaction, Market Access continues to
have an ongoing commercial relationship with Emex, with Market
Access referring any new Non-Conforming Customers to Emex, and
Market Access providing certain ongoing support services to Emex.
Once the Loan Note is fully repaid, Market Access will receive a
commission of 50 per cent of the net revenues resulting from the
Non-Conforming Customers both in place at the time of the
Transaction and those subsequently referred to Emex by Market
Access.
The Board believes that this transaction will be financially
beneficial to the Group. While profits will be reduced in the
short-term until Market Access becomes more established, the
structure of the transaction will be neutral in terms of Group
cashflow in the short-term. The separation of the Conforming
Clients from the Non-Conforming Clients is anticipated to lead to
improved banking relationships for the Group, which in turn should
generate financial benefits over the medium term. Furthermore,
these businesses were in a significant net liabilities position
which had arisen from the working capital shortfall between cash
balances and client fund liabilities in EmexGo. Therefore, their
disposal helps to establish a better balance sheet position for the
continuing Group. Subsequent to the disposal, Emex Technologies
Limited has entered into administration. The Directors, having
taken external legal advice, are satisfied that the Group has no
further obligations or liabilities related to this matter.
MDC Nominees Limited is owned by John Botros, a director of
certain Group subsidiaries and, with persons closely associated (as
defined under the Market Abuse Regulation), a substantial
shareholder (as defined by the AIM Rules) of Boxhill. The
Transaction therefore constituted a related party transaction under
the AIM Rules.
Suspension of Shares
On 1 August 2018 trading in the Company's ordinary shares of 0.1
pence each ("Ordinary Shares") were suspended on AIM. This was as a
result of the Company being unable to finalise the annual report
and consolidated accounts for the year to 31 January 2018. As
stated in the announcement to the market on 1 August 2018, certain
outstanding information from one of the Company's banks remained
outstanding along with the final risk review relating to the high
value transfer service ("HVTS") announced on 28 July 2017. Whilst
the final risk review for the HVTS was resolved in early September
2018 (and announced to the Market on 17 September 2018), the
obtaining of the necessary information related to a bank account in
the name of Networld Ltd proved much harder than originally
expected. Following the dismissal of a former subsidiary director
(the "FSD"), a change to the bank account mandate for this bank
account (where the FSD was the sole authorised signatory) was not
possible.
These issues have also delayed the introduction of payment
processing services by Market Access and the receipt of amounts
from MDC Nominees Limited.
As a result of this and upon further investigation, the Board,
in consultation with our advisers, considered whether Networld
Limited (incorporated during the year) is a subsidiary of the
Group. We concluded that the Group did not control Networld Limited
as it was never owned by the Group, had not delivered any revenues
to the Group, and had been operated as a separate business over
which the Group did not and could not exercise control. As a
consequence, in accordance with relevant accounting standards,
Networld Limited has not been consolidated within the accounts of
the Group and it is not disclosed as a subsidiary owned by the
Group (at any point from its incorporation during the year ended 31
January 2018).
During the intervening time period between suspension and the
signing of these consolidated statutory accounts to 31 January
2018, a review of the Company has been successfully undertaken with
the company's Nominated Advisor, Allenby Capital Limited, prior to
the lifting of the suspension of trading on AIM following the
publication of these accounts and in accordance with the AIM Rules
for Companies.
It is therefore anticipated that following the publication of
these accounts, along with those for the six months to 31 July
2018, the suspension of share trading will be lifted and the
Company's shares will then continue to trade on AIM.
Change in Senior Management/Board
Graeme Paton - joins The Board as Chief Executive Officer
Cath McCormick - joins The Board as Finance Director
Ryan Porter - Removed from all subsidiaries
Andrew Flitcroft - steps down from the Board on 1 February 2019,
but remains as Company Secretary
Having overseen the reorganisation of the business, including
the sale of Emex to MDC Nominees Ltd, Lord Razzall and Clive Hyman
will not seek re-election at the AGM expected to be held in June or
July 2019.
In order to deliver improved centralised and fewer regional
controls the company is opening new operational offices in London
and senior staff based in UK will have direct operational and
financial responsibility for overseas operations, ensuring changes
in focus are reflected quickly and directly in our domestic and
overseas activities and continue to support our clients as changes
in regulations and technology mean that we must remain agile and
open to change as the market develops in a post Brexit world.
Lottery Product Offerings
In April 2018, Prize Provision Services Ltd (PPSL) entered into
an agreement with one of the UK's largest membership organisations.
The size of the opportunity generates an opportunity to
significantly increase the size of the lottery business on its
own.
PPSL will provide lottery administration, marketing and
promotional services along with a standalone website operated under
a bespoke brand.
The minimum viable product launched on December 1(st) , 2018 and
the first players entered into draws in January 2019.
In addition, a scratch-card product has recently been launched
which will be available to all lottery clients. The product offers
further choice and flexibility to all clients to be able to produce
a product which both immediately appeals to their supporters while
giving a good profit margin.
Expected to retail at GBP1 with a GBP1,000 top prize, the
scratch-cards are expected to best benefit those societies who
regularly meet face to face with supporters in any environment and
offer an impulse purchase which a subscription lottery does
not.
In addition, there is a strong pipeline of new Weather Lottery
and Sports Club Lottery charities and societies.
Operational Summary
The Board has demonstrated its commitment to resolving the
operational challenges faced through the year to 31 January 2018
and also the issues highlighted by the suspension in shares in
August 2018.
The Board has embarked on a programme of improvements across the
entire business, with a focus on control, agility and delivery.
There are immediate and planned changes to The Board, the first of
which are two executive appointments. Furthermore, the Company is
moving all operational controls into the UK and a new operational
office is being established in London, with improved facilities and
space so that all operations can be based in one place.
Outlook
Payment Services
The enhancements in technology and strong product offerings,
combined with the link to MDC Nominees Ltd for high risk clients,
positions Boxhill Technologies Plc as one of very few fintech
companies that can offer a true alternative to traditional banking.
Customers can open accounts with IBANs in their names, send and
receive money worldwide either on a peer to peer basis, via bank
wire or even directly to any card issued by a recognised issuer,
and now they are able to manage their foreign exchange and treasury
needs all in one place.
Working with low risk clients, enables Market Access to partner
with a wider network of acquiring banks, as Market Access is
unencumbered by the strict criteria that acquiring banks place on
high risk traffic. This should help to facilitate stronger and
longer acquiring bank relationships.
The extensive network of clients that Mark Harris brought with
him, combined with an increasing number of new clients that had
previously been put off doing business with Boxhill Technologies
plc, provides a strong pipeline of opportunity. Typical Market
Access clients include other FX companies (for technology), family
offices, sports and bloodstock companies, international property
developers and start-up companies across a range of industries.
Lottery
PPSL has completed roll out of a number of technology
improvements and rolled out the Sports Club Lottery focused on
raising funds for sports clubs including over 100 league and
non-league football clubs, alongside the Weather Lottery which
supports hundreds of local and national health and education
programmes.
In November 2018 PPSL announced that it is to operate the
lottery for on the UK's largest membership organisation. Already
players are being recruited despite only being at soft launch
stage. 2019 will see a number of player recruitment activities in
order to raise funds for the organisation's benevolent fund. This
includes dedicated online and offline marketing activity and
inclusion of lottery information with recruitment and membership
initiatives.
Principal risks and uncertainties facing the Group
There are a number of potential risks and uncertainties that
could have a material impact on the Group's long-term performance,
and the Group takes a positive approach to risk management.
Management and employees
The nature of the Group and its business model creates reliance
upon retaining and incentivising its senior management and certain
key employees, whose expertise will be important to the fortunes of
the Group going forward. The Directors have endeavoured to ensure
that the principal members of its management team are suitably
incentivised, but the retention of such staff cannot be
guaranteed.
The Group may need to recruit additional senior management and
other staff in order to further develop its business. There can be
no guarantee that such individuals will be recruited in the Group's
preferred timetable or at the cost levels anticipated by the Group.
Competition for staff is strong and therefore the Group may find it
difficult to retain key management and staff. The loss of key
personnel and the inability to recruit further key personnel could
have a material adverse effect on the future of the Group through
the impairment of the day-to-day running of the businesses and the
inability to maintain existing client relationships.
Economic risk
Demand for the Group's services may be significantly affected by
the general level of economic activity and economic conditions in
the regions and sectors in which the Group operates. Therefore, a
continuation of the challenging economic environment, especially in
regions or sectors where the Group's operations are focused, could
have a material adverse effect on the Group's business and
financial results.
Financial Risk
The Group's financial risk management strategy is based on sound
economic objectives and corporate practices. The main financial
risks concern the availability of funds to meet obligations as they
arise (liquidity risk) and fluctuations in exchange rates (exchange
rate risk).
Competition
The Group is engaged in business activities where there are a
number of competitors. Many of these competitors are larger than
the relevant businesses carried on by the Group and have access to
greater funds than the Group, which will potentially enable them to
gain market share at the expense of the Group.
Acquisitions
The Directors cannot discount circumstances where an acquisition
would support the Group's business strategy. However, there is no
guarantee that the Group will successfully be able to identify,
attract and complete suitable acquisitions or that the acquired
business will perform in line with expectations.
Funding and working capital
Maintaining a sufficient level of working capital is essential
to enable the Group to meet its foreseeable obligations and achieve
its strategy. Failure to manage working capital or to collect
receivables such as amounts due from Phillite D UK Limited of
GBP3,121,436 in a timely manner could impact upon the ability of
the Group to grow.
Management of growth
The ability of the Group to implement its strategy in an
expanding market requires effective planning and management control
systems. The Group's growth plans may place a significant strain on
its management, operational, financial and personnel resources. The
Group's future growth and prospects will, therefore, depend on its
ability to manage the growth and to continue to expand and improve
operational, financial and management information and quality
control systems on a timely basis, whilst at the same time
maintaining effective cost controls. Any failure to expand and
improve operational, financial and management information and
quality control systems in line with the Group's growth could have
a material adverse effect on its business, financial condition and
results of operations.
Market developments
Any failure to expand the Group's service offering in response
to customer demand and/or industry developments may have an adverse
effect on the Group's financial performance and prospects.
Reliance on Partners
Much of the Group's business is dependent on partners (acquiring
banks, charities, clubs, etc.). Changes in key relationships with
those partners, change of strategic direction by partner
organisations, changes in the viability of partner-owned
technology, economic and other business circumstances could all
have an adverse effect on the financial performance of the
Group.
Legal and regulatory matters
The Group is subject to a considerable degree of regulation and
legislation. Changes in or extensions of laws and regulations
affecting the industry in which the Group operates (or those in
which its customers operate) and the rules of industry
organisations could restrict or complicate the Group's business
activities, with the potential to increase compliance/legal costs
significantly.
As announced on 31 October 2017, the historic legal matters
surrounding the Company's relationship with its former regulated
payment processor, EUPay Group Limited ("EUPay") has been settled.
Phillite D UK Limited has independently of the Company taken
responsibility for the amounts owed by EUPay to the Group. As a
result of the settlement, Phillite D UK Limited is now in a
position to pursue the collection of these amounts without any
hindrance from litigation. This will facilitate the repayment of
the amounts outstanding to the Group.
Going concern
As a result of the challenges faced by the business in recent
periods, and as a result of the restructuring undertaken in the
last year, the Group is in the relatively early phases of its
longer-term strategy and has generated losses in the year ended 31
January 2018 and subsequently. As a result, there is a risk that it
is not able to achieve the forecast growth in revenue, profits and
cash flows and as a result it may not be able to continue as a
going concern. Further details are provided in the Directors'
Report on page 11 and in Note 1 to the financial statements.
Extract from Directors' Report
Going concern
UK Company Law requires Directors to consider whether it is
appropriate to prepare the financial statements on the basis that
the Company and the Group are going concerns. Furthermore, IAS 1
states that an entity shall prepare financial statements on a going
concern basis unless management either intends to liquidate the
entity or to cease trading, or has no realistic alternative but to
do so. Throughout the financial statements there are various
disclosures relating to Group funding and operational risks.
As disclosed in the Strategic Report on page 2, the Directors
have undertaken a significant restructuring of the Payment
Processing business subsequent to 31 January 2018 as a critical
part of the Group's strategy. As a result of the challenges faced
by the business in recent periods, and as a result of this
restructuring, the Group is in the relatively early phases of its
revised longer-term strategy and has generated losses in the year
ended 31 January 2018 and subsequently.
The two key elements of the restructuring that impact going
concern are the disposal of Emex (UK) Group Limited on 30 July 2018
and the launch of the new Market Access business during 2018.
Following the disposal of the Emex businesses to MDC Nominees on
30 July 2018, the Group has disposed of the majority of its
outstanding amounts owing to customers, along with certain trade
receivables and cash balances. The impact is an improvement from
the net current liability position at 31 January 2018 to a net
current asset position at 30 July 2018 and a relatively modest
fixed cost base for the group.
The launch of Market Access is a critical element of the future
of the Group's Payment Processing business. The Directors have
prepared cash flow projections for the period to 31 October 2020,
which indicate that the Group will generate significant revenue,
profit and cash inflows within a short period of time. In
particular, the projections demonstrate that the Group will be able
to address current cash flow shortfalls, and that it will be able
to meet its liabilities as they fall due for the foreseeable
future.
The Directors are therefore confident that, following the
disposal of the Emex businesses and the launch of Market Access,
the Group will be able to generate sufficient resources from its
trading to meet the Group's future cash flow requirements and
settle its liabilities as they fall due. Therefore, the Directors
are of the opinion that the Group has adequate resources to
continue in operation for the foreseeable future and they consider
it appropriate to adopt the going concern basis in preparing the
financial statements.
However, given that the Market Access business has only recently
been launched and there is therefore limited track record of
revenue, profit and cash flow generation, the substantial
achievement of the Group's cash flow forecasts represents a
material uncertainty that may cast significant doubt on the Group's
and the Parent Company's ability to continue as a going concern.
The Group and the Parent Company may, therefore, be unable to
continue realising their assets and discharging their liabilities
in the normal course of business, but the financial statements do
not include any adjustments that would result if the going concern
basis of preparation is inappropriate.
Independent auditor's report to the members of Boxhill
Technologies Plc
1. Our opinion is unmodified
We have audited the financial statements of Boxhill Technologies
Plc ("the Company") for the year ended 31 January 2018 which
comprise the Consolidated Statement of Profit and Loss and Other
Comprehensive Income, Consolidated Balance Sheet, Consolidated
Statement of Changes in Equity, Consolidated Cash Flow Statement,
Company Balance Sheet, Company Statement of Changes in Equity, and
the related notes, including the accounting policies in note 1.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent Company's affairs as at 31
January 2018 and of the Group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;
-- the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including FRS
102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
2. Material uncertainty related to going concern
We draw attention to note 1 to the financial statements which
indicates that the Group's and the parent Company's ability to
continue as a going concern is dependent upon the substantial
achievement of forecast cash flows. These events and conditions
represent a material uncertainty that may cast significant doubt on
the Group's and Parent Company's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
The risk - Disclosure quality
Following a significant restructuring of the Group's Payment
Processing business, the Group is in the relatively early phases of
its longer-term strategy and has generated losses in the year ended
31 January 2018 and subsequently. Projections for the period to 31
October 2020 have been prepared, indicating that the Group has
taken action to address current cash flow shortfalls, and that the
Payment Processing business will generate profit and cash inflows
within a short period of time, which will enable the Group and the
Company to meet its liabilities as they fall due for the
foreseeable future. The financial statements explain how the
Directors have formed a judgement that it is appropriate to prepare
the accounts of the Group and Parent Company on a going concern
basis. However, the Directors have concluded that the factors
discussed in note 1 represent a material uncertainty that may cast
significant doubt regarding the Group's and parent Company's
ability to continue as a going concern.
As this assessment involves a consideration of future events
there is a risk that the judgement is inappropriate. Furthermore,
clear and full disclosure of the of the facts and the directors'
rationale for the use of the going concern basis of preparation,
including that there is a related material uncertainty, is a key
financial statement disclosure. Auditing standards require such
matters to be reported as a key audit matter.
Our response
Our procedures included:
- Personnel interviews: inquiring of senior management and
challenging the assumptions used in the Directors' forecast models,
in particular those relating to forecast revenue, and corroborating
these against available evidence by inspecting agreements signed
with new and existing customers;
- Sensitivity analysis: we assessed reasonably possible downside
scenarios that would result in the cash flow falling below
operating expense requirements and considered whether they could be
considered to be reasonably possible; and
- Assessing transparency: Assessing the going concern disclosure
for clarity, including that there is disclosure of a material
uncertainty.
3. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matters, in decreasing order of
audit significance, were as follows:
Key audit matter The risk Our response
Recoverability of Forecast-based valuation Our procedures included:
Group goodwill and
of parent company's The carrying amount Benchmarking assumptions:
investment in subsidiaries of goodwill in the Comparing the group's
group and the parent assumptions to externally
Group goodwill: GBP1,673,000 company's investments derived data in relation
(2017: GBP1,673,000) in subsidiaries are to key inputs such
Parent company's investment significant and at as discount rates,
in subsidiaries: GBP1,344,000 risk of irrecoverability growth rates and cost
(2017: GBP1,902,000) as the group does inflation;
not have a track record Sensitivity analysis:
Refer to page 33, of profitability and Performing breakeven
62 (accounting policy generated a loss in analysis on the assumptions
and page 44, 63 (financial the current year. noted above and considering
disclosures) the likelihood that
The estimated recoverable these thresholds would
Risk vs. 2017: amount of these balances be reached;
is subjective due Comparing valuations:
to the inherent uncertainty Comparing the sum
involved in forecasting of the discounted
and discounting future cash flows to the
cash flows. group's market capitalisation
to assess the reasonableness
of those cashflows;
and
Assessing transparency:
Assessing whether
the group's disclosures
about the sensitivity
of the outcome of
the impairment assessment
to changes in key
assumptions reflected
the risks inherent
in the valuation of
goodwill in the group
and the parent company's
investment in subsidiaries.
------------------------------- ---------------------------------
Capitalisation of Accounting treatment Our procedures included:
internally generated
intangible assets The group capitalises Personnel interviews
external costs and and our business understanding:
GBP586,000 (2017: eligible employment Enquiring of management
GBPnil) costs incurred in and the Board, and
the development of inspecting minutes
Refer to page 34 (accounting software and establishment of meetings, project
policy and page 43 of regulatory licences timelines and status
(financial disclosures) as internally generated reports throughout
intangible assets. the year, to support
New risk 2018 Judgement is required the eligibility of
to determine whether the costs for capitalisation
the costs meet capitalisation in accordance with
criteria set out in the relevant accounting
the relevant accounting standards;
standards.
Accounting analysis:
Comparing a sample
of costs capitalised
to the narrative on
external invoices
or internal reports
of time allocation
to analyse the nature
of the costs and whether
they meet capitalisation
criteria per the applicable
accounting standards.
------------------------------- ---------------------------------
Valuation of purchased Subjective valuation Our procedures included:
Timegrand software
asset The group purchased Assessing the valuer's
the Timegrand software credentials: Evaluating
GBP1,504,000 (2017: asset on 10 April the competence, independence,
GBPnil) 2017 for consideration professional qualifications
of 500m equity shares. and experience of
Refer to page 34 (accounting external expert used
policy and page 43 The fair value of by the group;
(financial disclosures) the purchased software
asset has been calculated Methodology choice:
New risk 2018 using a replacement assessing the results
cost valuation technique, of the intangible
which requires estimation asset valuation report
of the cost of developing by checking that the
an equivalent software valuation was in accordance
asset. with relevant accounting
standards and acceptable
As there is a significant valuation practice;
level of judgement
involved in estimating Benchmarking assumptions:
the fair value of Challenging the key
the purchased software inputs used in determining
asset, we consider the valuation, in
this to be a significant particular cost rates,
audit risk. by comparing them
to externally derived
data.
------------------------------- ---------------------------------
4. Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was
set at GBP12,400 (2017: GBP16,000), determined with reference to a
benchmark of group revenue (of which it represents 0.91% (2017:
0.93%)). We consider group revenue to be the most appropriate
benchmark as it provides a more stable measure year on year than
group loss/profit before tax.
Materiality for the parent company financial statements as a
whole was set at GBP8,500 (2017: GBP7,000), determined with
reference to a benchmark of company total assets, of which it
represents 0.43% (2017: 0.24%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP600, in addition
to other identified misstatements that warranted reporting on
qualitative grounds.
Of the group's 9 (2017: 7) reporting components, we subjected 5
(2017: 5) to full scope audits for group purposes. For the residual
4 components, we performed analysis at an aggregated group level to
re-examine our assessment that there were no significant risks of
material misstatement within these.
The components within the scope of our work accounted for 100%
(2017: 100%) of total group revenue, 100% (2017: 100%) of group
loss before tax and 97% (2017: 99%) of total group assets.
All component audits, including the audit of the parent company,
were performed by the Group team using component materialities,
which ranged from GBP400 to GBP8,500, having regard to the mix of
size and risk profile of the Group across the components.
5. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic report and directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the
strategic report and the directors' report;
-- in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
-- in our opinion those reports have been prepared in accordance with the Companies Act 2006.
6. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent Company 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.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 20
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Group and parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe our responsibilities
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.
Simon Richardson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
29 January 2019
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
for year ended 31 January 2018
Note 2018 2017
GBP000 GBP000
Revenue 3 1,367 1,727
Cost of sales 4 (453) (562)
Gross profit 914 1,165
Administrative expenses 4,5,6 (2,665) (1,153)
Operating (loss)/profit (1,751) 12
Financial expenses 7 - (10)
(Loss)/profit before tax (1,751) 2
(Loss)/Profit for the year from continuing
operations (1,751) 2
Other comprehensive (loss)/income
Items that are or may be reclassified
subsequently to profit or loss:
Revaluation of equity investment
- Soccerdome (58) (62)
Other Comprehensive (loss) for the
year, net of income tax (58) (62)
Total comprehensive (loss) for the
year (1,809) (60)
Earnings per share
Basic earnings per ordinary share
(pence per share) 9 (0.08) 0.00
Diluted earnings per ordinary share
(pence per share) 9 (0.08) 0.00
------------------ ---------------
All of the profit/(loss) for the period is attributable to
equity holders of the Parent Company.
The notes on pages 30 to 59 of the Annual Report form part of
these financial statements.
Consolidated Balance Sheet
At 31 January 2018
Note 2018 2017
GBP000 GBP000
Non-current assets
Property, plant and equipment 10 29 1
Goodwill 12 1,673 1,673
Other intangible assets 11 2,037 67
Investments in equity instruments 13 222 280
Total non-current assets 3,961 2,021
Current assets
Trade and other receivables 15 3,225 1,949
Cash and cash equivalents 16 2,151 818
Total current assets 5,376 2,767
Total assets 9,337 4,788
Current liabilities
Trade and other payables 18 7,142 2,283
Bank and other borrowings 17 6 6
Total current liabilities 7,148 2,289
Total non-current liabilities - -
Total liabilities 7,148 2,289
Net assets 2,189 2,499
Equity attributable to equity holders
of the parent
Share capital 20 2,356 1,856
Share premium 21 3,020 3,020
Merger reserve 999 -
Revaluation reserves 13 222 280
Retained earnings (4,408) (2,657)
Total equity attributable to equity
holders of the Parent 2,189 2,499
The notes on pages 30 to 59 of the Annual Report form part of
these financial statements.
Consolidated Cash Flow Statement
for year ended 31 January 2018
Note 2018 2017
GBP000 GBP000
Cash flows from operating activities
(Loss) / Profit for the year (1,751) 2
Adjustments for:
Depreciation, amortisation and impairment 10-13 122 26
Financial expense 7 - 10
Movement in working capital:
(Increase) in trade and other receivables (1,275) (1,028)
Increase in trade and other payables 4,859 1,536
Cash generated by operations 1,955 546
Interest paid - (10)
Tax paid - -
Net cash from operating activities 1,955 536
Cash flows from investing activities:
Acquisition of property, plant and
equipment (30) (1)
Acquisition of intangible assets (5) (8)
Development expenditure (587) -
Net cash (used)/generated from investing
activities (622) (9)
Net cash used in financing activities - -
Net increase in cash and cash equivalents 1,333 527
Cash and cash equivalents at start
of period 818 291
Cash and cash equivalents at end
of period 2,151 818
There is no material difference between the fair value and the
book value of cash and cash equivalents.
The notes on pages 30 to 59 of the Annual Report form part of
these financial statements.
Notes to editors:
Boxhill Technologies PLC (AIM: BOX) is an AIM quoted lottery,
software, gaming and leisure company.
Boxhill has a range of ecommerce products that suit all
merchants' and customers' needs enabling secure payments. The
Company works within both regulated frameworks and in regions where
traditional partners struggle to offer safe, secure services.
In addition, Boxhill operates the Weather Lottery, which has
been in operation since 2002 and the Company holds one of the
limited number of UK external lottery manager's licences. Over
GBP5.4 million has been raised to date for good causes and the
lottery has paid over GBP4.9 million in prizes to winners.
Boxhill also has a joint venture agreement via Soccerdome Ltd
operating a five a side football complex in Nottingham.
The Annual Report is available on Boxhill Technologies PLC's
website at www.boxhillplc.com. Copies are available from the
Company at its registered office:
39 St James's Street, London, SW1A 1JD, United Kingdom
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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