The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Introduction
The Executive Management (“ExCo”) of Montify Ltd (herewith known as the “Firm”) present this Strategic report for the period from 1st January 2022 to 31st December 2023 with the goal of providing a balanced and comprehensive analysis of the Firm's development in its initial accounting periods and its future outlook. The review is consistent with the current size, nature, and complexity of the Firm.
Principal activities
The Firm is an Authorised Electronic Money Institution (“AEMI”) with regulatory permissions to issue electronic money (“e-money”) and provide payment services. Payment services include:
Services enabling cash placement on a payment account.
Services enabling cash withdrawals from a payment account.
Execution of payment transactions (not covered by a credit line).
Execution of payment transactions (covered by a credit line).
Issuing payment instruments or acquiring payment transactions.
Money remittance.
The Firm was incorporated in the United Kingdom on 27th September 2019 under UK Companies House number 12230765, with a Registered Office address at New London House, 6, London Street, London, EC3R 7LP.
The Firm was authorised as an AEMI by the Financial Conduct Authority (“FCA”) under Firm Reference Number 901069 on 4th August 2020. The Firm thus commenced trading on the same date. The Firm’s ExCo have taken every opportunity to progress the business in line with its business plan and will continue to do so on an ongoing basis post the reference date of this Strategic Report.
The Firm’s development in the period in question consisted of ensuring organic growth both externally and internally. Essentially, ‘externally’ relates to the growth of the Firm’s client base and therefore focus on generating income whilst ‘internally’ relates to the corresponding increase in resources, both staffing and systems, to ensure the satisfactory management of governance, systems and controls and other major risks e.g., Compliance and Money Laundering Prevention.
During the course of the reporting period, the Firm continued making improvements to its infrastructure including system integration, development of new products and acquisition of new customers and business.
On 29 September 2023, the directors and shareholders entered into a share purchase agreement whereby all ordinary shares are to be purchased third parties. As part of this agreement, the purchaser transferred €200,000 to the company as a working capital loan, which will either convert into Ordinary Shares or a Convertible Loan Note depending on whether approval from The Financial Conduct Authority (FCA) is obtained. Please refer to Note 13 for further details of the conversion. As at the date of this report, no application has been made to the FCA and therefore the agreement has not been concluded. Preparations have begun for this process, however, with the intention to submit the application to the FCA in August or September 2024. Management do not anticipate any issues with approval of the transfer.
ExCo is responsible for all the Firm’s risk-related management policies and approves the parameters within which all aspects of risks are managed. During its normal course of business, the Firm is exposed to certain financial risks being, Earnings Growth Risk, Operational Risk, Liquidity Risk, Credit and Foreign Exchange Risks.
Earnings Growth Risk
The risk to both regulatory capital and shareholder value if the Firm is unable to grow its key products and services as described in ‘Principal Activities’ above, or are unable to add additional, complimentary products and services to assist in the growth of the Firm’s Balance Sheet.
ExCo has implemented an organic business growth model, where development costs and day-to-day operating expenses are managed in line with revenue growth. This ensures the Firm’s continued compliance with FCA regulatory capital requirements and is aligned with the growth in customer payments revenue.
Operational Risk
The risk of a direct or indirect losses resulting from the failure or ‘not fit for purpose’ information technology systems, governance, processes or controls due to hardware or software failure, staff or ExCo, or external factors. To manage, monitor and control operational risks, the Firm maintains a framework of policies, procedures and controls which are designed to ensure an appropriate and satisfactory environment within which operational risk can be appropriately monitored and controlled.
Liquidity Risk
The Firm does not maintain an elevated level of liquidity risk as the Firm's funds on an operational level and all safeguarded customer funds designated as ‘relevant funds’ are maintained in separate accounts with UK and EU credit institutions for which all required due diligence has been undertaken. The Firm’s shareholders via ExCo, maintain a policy of ensuring the adequate availability of financial resources for the Firm's current and future obligations i.e., on a ‘going concern’ basis.
Credit Risk
The Firm’s credit risk lies with its banking partners. The Firm uses diversification methods and continually monitors the potential for onboarding new credit institutions to diversify and minimise any possible credit risks however, the Firm believes that any credit risk exposure is negligible.
Foreign Exchange Risk
The Firm operates in a number of currencies and manages foreign exchange exposure by carefully matching assets and liabilities in each currency in order to avoid any exposure. All customer foreign exchange transactions are immediately executed at the prevailing foreign exchange market rates and thus the Firm does not maintain open currency positions longer than is necessary.
ExCo approves the Firm’s annual budget and reviews performance against budget on a monthly basis. Similarly, KPIs such as revenue, net profit and net assets are carefully monitored.
Revenue for the year-ending 31st December 2023 amounted to £193,940 and at the year-end, the Firm had net liabilities of £139,346. Whilst revenue compares favourably year-on-year, there is a significant reduction in equity, however, the Firm has plans in place to increase investment in the company.
ExCo can report an ongoing customer acquisition stream despite the circumstances following Russia’s invasion of Ukraine on 24th February 2022 and are confident of continued sustainable and profitable operations going forward.
ExCo hereby confirms compliance with Section 172{1) of the Companies Act 2006 in that they acted in good faith promoting the success of the Firm for the benefit of its stakeholders, and in doing so had regard (amongst other matters) to:
The consequences of any decisions in the long-term by ensuring that all due care, attention, and considerations were given to all aspects of the possible outcomes when making decisions at board level and that those decisions were made in the best interests of the stakeholders.
The interests of the Firm's employees by ensuring that consideration was given to employee equality, training, education and natural progression within the Firm, participation in shaping the Firm's strategy and product development, and actively engendering an ‘employee-centric’ environment.
The provision of reliable, safe, affordable, and fair products and services to its customers, by being continually attentive to their needs, developing new products and services, optimising the provision and costs for the Firm’s products and services, and promoting security of online payments.
The need to nurture the Firm’s business relationships with partners and suppliers by promoting mutually beneficial contractual arrangements, punctual settlement of invoices, and the sharing of industry insights and innovations.
The impact of the Firm's operations on the community and the environment by continually promoting reduction of environmental pollution by using electronic document workflow, reducing Co2 emissions by cutting unnecessary travel, particularly airline travel, and promoting the use of public transportation by the Firm's employees.
The Firm’s regulatory compliance requirements by maintaining timely and accurate reporting to regulatory, governmental, and taxation authorities, by maintaining a reputation for high standards of business conduct and integrity, and by maintaining a professional approach to all matters by ExCo and all employees at all levels.
The need to always act fairly by maintaining standards that ensured no bias to any particular group or individual.
On behalf of the board
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
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 an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
- the nature of the industry and sector across the UK and whether the financial results of our client differed from the industry trends.
-the legal and regulatory framework that the Company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements.
-the matters discussed among the audit engagement team during the planning process regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
Audit procedures performed included reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; discussions with the directors on their own assessment of the risks that irregularities may occur either as a result of fraud or error, their assessment of compliance with laws and regulations and whether they were aware of any instances of non-compliance, including any potential litigation or claims; performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; inspection of relevant legal correspondence and board minutes; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
Based on our understanding of the industry, we identified that the principal risks of non-compliance with laws and regulations related to the Financial Conduct Authority’s (“FCA”) regulations, Anti-Bribery and Corruption legislation, Anti-Money Laundering legislation and UK tax legislation, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006,Employment Laws, Tax and Pensions legislation and Health & Safety legislation. Audit procedures performed by the engagement team include:
- Review of correspondence and reports to the regulators, including the FCA
- Obtaining confirmations from third parties to verify the existence of cash balances
- Identifying and testing journal entries, including those journals posted to unusual account combinations and those posted with unusual descriptions.
No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls, and the nature,timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. There is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with the ISAs (UK).
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.
The notes on pages 13 to 22 form part of these financial statements.
Montify Ltd is a private company limited by shares incorporated in England and Wales. The registered office is New London House, 6 London Street, London, ECR 7LP.
The functional currency of the company is Euros as the day-to-day transactions predominantly occur in this currency. The presentational currency of the financial statements is Sterling as the company is incorporated in the UK and has opted to use this currency. Monetary amounts in these financial statements are rounded to the nearest £.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
There are no judgements or key estimates other than those disclosed in these accounting policies.
The average monthly number of persons (including directors) employed by the company during the year was:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
At the balance sheet date, the company has tax losses of £459,467 (2022: £331,782), resulting in a potential deferred tax asset of £114,867 (2022: £82,945), in respect of unutilised trading losses. As it cannot be foreseen, with any underlying certainty, as to when this asset will be realised in the near future, it has not been recognised in the accounts.
The Finance Act 2021 was substantially enacted in May 2021 and has increased the corporation tax rate from 19% to 25% with effect from 1 April 2023. The deferred taxation balances have been measured using the rates expected to apply in the reporting periods when the timing differences reverse.
Of the £2,547,284 (2022: £1,527,714) trade creditors at year end, £2,494,580 (2022: £1,506,750) relates to customer deposits which are held in Montify accounts.
Of the trade creditors as above, £48,033 (2022: £20,964) represents customer payments not yet paid and therefore remains part of customer deposits.
Of the £479,801 other creditors at year end, £299,008 relates to directors' loans. Refer to note 17 for more details.
Other creditors consists of a working capital loan of €200,000 from a current shareholder, received as part of the share purchase agreement entered into on 29 September 2023.
Under this agreement, the loan will either become a Convertible Loan Note or Ordinary Shares at the final closing of the agreement, depending on whether approval from the Financial Conduct Authority (“FCA”) is obtained.
If FCA approval is obtained, any residual unspent balance from the loan will become a Convertible Loan Note at the final closing of the agreement.
If FCA approval is not obtained, then the amount spent will become additional Ordinary Shares issued to the lender, and the residual value will be returned to the lender.
Operational accounts represents the company's own operating cash balances for general corporate purposes.
Safeguarding accounts represents safeguarded funds related to the company's regulated E-Money services. Client funds are held in segregated accounts with authorised credit institutions as part of the company's safeguarding policy.
Of the £2,503,595 (2022: £1,508,139) safeguarding accounts at year end, £9,015 represents operational cash that has not yet been transferred to the company's operational accounts.
Cash in transit represents customer payments not yet paid and therefore remains part of customer deposits.
Refer to note 12 for more detail.
Future commission income to the value of £7,031 (2022: £7,050), is included within accruals and deferred income (note 10) which has been received from a related party under common control.
Dividends totalling £0 (2022 - £0) were paid in the year in respect of shares held by the company's directors.