Company registration number 11312470 (England and Wales)
BCB GROUP HOLDINGS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
BCB GROUP HOLDINGS LIMITED
COMPANY INFORMATION
Directors
Mr O Tonkin
Mr P Prince
(Appointed 21 November 2023)
P Gelenbe
(Appointed 14 December 2023)
R Gonzalez Espinoza
(Appointed 2 September 2024)
Company number
11312470
Registered office
5 Merchant Square
London
W2 1AS
Auditor
Gravita Audit II Limited
Aldgate Tower
2 Leman Street
London
E1 8FA
BCB GROUP HOLDINGS LIMITED
CONTENTS
Page
Strategic report
1 - 6
Directors' report
7 - 8
Independent auditor's report
9 - 12
Profit and loss account
13
Group statement of comprehensive income
14
Group balance sheet
15
Company balance sheet
16
Group statement of changes in equity
17 - 18
Company statement of changes in equity
19
Group statement of cash flows
20
Notes to the financial statements
21 - 49
BCB GROUP HOLDINGS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -

The directors present the strategic report for the year ended 31 December 2023.

Review of the Business

BCB Group Holdings Limited (the “Company”) was incorporated on 16 April 2018. The Company is the parent company of the BCB Group of companies (collectively “BCB” or the “Group”), including the following principal trading subsidiaries: BCB Payments Limited, BCB Markets Limited (formerly BCB Prime Services Limited), BCB Markets (Switzerland) Sàrl and BCB Digital Limited (see note 15 for details of all Group subsidiaries).

 

BCB's primary activity is the provision of multi-currency payment services to corporate B2B customers operating in the digital asset industry or with a digital asset nexus. In addition, BCB provides OTC and web-based trading services for both foreign exchange and digital currencies to its corporate customers.

 

Instant B2B Payments

BCB operates the BLINC instant settlement network, allowing its customers (businesses only, no consumers) to pay and settle fiat currency transactions between each other instantly on a 24/7/365 basis. This network continues to see sustained growth, both by volume and number of transactions. Volume growth was 177% year on year to 31 December 2023. Transaction count growth was 162% year on year to 31 December 2023.

 

Multi-currency

BCB offers payments accounts in 23 fiat currencies. After the closure of two leading US banks involved in providing US dollar services to the digital asset industry in early 2023, the provision of reliable US dollar payment rails has been a significant challenge. BCB re-established US dollar services with alternative providers during 2023 and continues to seek to complement its existing network, both for trading and for payments, with additional high quality US dollar banking partners.

 

Commitment to tier 1 Jurisdictions and Regulatory Compliance

BCB Payments (Europe) SASU received final approval from the French regulator for an e-money licence (“French EMI”) in April 2024 with full passporting across the European Economic Area (EEA) achieved in June 2024. This licence highlights BCB’s strategic focus on acquiring tier 1 regulatory licences and combined with existing regulated operations in the United Kingdom and Switzerland, reinforces BCB's commitment to providing financial services within robust regulatory frameworks. The French EMI licence enables BCB to offer flexible and tailored payment and e-money solutions across the European Union. By leveraging passporting rights afforded by the EEA, BCB will expand its reach to provide seamless payment and e-money services to customers throughout the region.

 

Innovation in Digital Asset Services

In addition to the EMI licence, BCB secured a Digital Asset Service Provider (DASP) registration in France that enables BCB to offer digital currency custody, secure digital wallets (launched in Q2 2024), facilitate digital currency payments and offer trading of various digital currencies. By providing a comprehensive suite of digital currency services, BCB is catering to the growing demand for innovative financial products and services that leverage blockchain technology.

 

Regulatory Oversight in France

BCB Group’s French EMI and DASP licences are subject to oversight by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and the Autorité des Marchés Financiers (AMF). These regulatory bodies ensure compliance with French financial regulations and protect the interests of clients, consumers and investors.

 

Enhanced Trading Capabilities

To address the growing demand for efficient and secure trading solutions, BCB built BCB Markets, a self-service platform, accessible via both graphical user interface (GUI) and API offering customers smart order routing capabilities with low latency, high availability, and reliability. By providing this solution, BCB enhances its ability to serve the market's demand for innovative and complementary financial products and services.

BCB GROUP HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -

Bank acquisition

In December 2021, the Company entered into a conditional agreement to acquire Max Heinr. Sutor oHG (now Sutor Bank GmbH). In light of changing market conditions and following a period of negotiations the owners of Sutor Bank terminated the agreement in accordance with its terms in June 2023. Sutor Bank subsequently suspended interest payments on the €10 million loan note issued to BCB by Sutor Bank. Sutor Bank resumed interest payments during 2024. BCB is pursuing all means including a civil claim in the Hamburg Regional Court to secure the recovery of interest arrears. The court's preliminary findings appear to be in BCB’s favour. The directors continue to actively consider all options available to crystalise value from the loan note in the near term.

BCB GROUP HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Principal risks and uncertainties

BCB considers the following key risks to be most relevant to its current operations.

 

Market risks

BCB services the digital asset industry through the provision of payment services and trading. The Group limits its direct digital currency exposure to a strategic treasury holding in Bitcoin that is also used as a trade settlement float. The Group’s indirect exposure to digital currency price volatility arises from the impact on transaction and trading volumes (from which it derives revenue) where such volumes typically correlate to price volatility and digital currency market sentiment more broadly.

 

Customer concentration risk

Both the payments and trading businesses experience a high concentration of revenue from a small number of customers. The business strategy aims to reduce this concentration risk while continuing to prioritise servicing the customers from whom we generate the most revenue. As the digital currency market continues to recover we would expect these concentration levels to decrease with an overall increase in activity.

 

Product risk

The successful execution of the strategic plan is dependent on BCB’s product offering remaining in demand by the target market. With the growth in the digital asset ecosystem, we envisage an increase in competitors and it is critical that our offering remains relevant in this rapidly evolving ecosystem.

 

Dependence on key personnel and management risks

BCB’s business is dependent on retaining the services of its senior management team, and the loss of a key individual could have an adverse effect on the future of the Group’s business. BCB’s future success will also depend in large part upon its ability to attract and retain highly skilled personnel. This risk is managed by offering compensation (salaries, benefits and share options) that is competitive in the current market as well as a rewarding environment in which to work.

 

Regulatory risk

BCB operates in a rapidly evolving sector, the regulatory approach to which is not always certain and is still developing. The Group seeks to comply with all applicable laws and regulations. A breach of regulatory requirements may have adverse reputational, financial, or other impacts on the Group. In addition, regulatory factors may result in the withdrawal of service of our banking partners and other service providers, which could adversely affect the Group’s ability to trade. The board of directors considers these risks seriously and design, maintain and review the policies and processes so as to mitigate or avoid these risks.

 

Liquidity/solvency risk

BCB’s financial resources have decreased since its series A raise driven initially by the digital currency market downturn in 2022 and 2023 coupled with continued investment in its platforms and products. The losses reported in 2023 leave the Group with limited financial resources. While the Group’s budgets and forecasts show the path to breakeven without the need for further funding, there remains a risk that unexpected events could result in the Group having insufficient financial resources to meet its obligations.

 

Cyber risk

BCB trades digital currencies via software and hardware which may prove to be vulnerable to data security breaches in the future. Data security breach incidents may compromise the confidentiality, integrity or availability of data such that the data is vulnerable to access or acquisition by unauthorised persons. These data security breaches may result in the unrecoverable loss of digital currencies. The Group’s hardware and software devices may be breached and result in the loss of valuable data. Loss of the private keys required to access the digital currencies may result in irrecoverable loss of access to the digital currencies, which may not be covered by insurance (whether in full or part). In order to mitigate these risks, the Group holds its digital currencies with third party specialist digital asset custodians with a number of security measures in place.

BCB GROUP HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Group strategy and business model

BCB seeks to provide institutional grade payment, trading and settlement services to its B2B customer base, acting as the predominant supplier from tier 1 onshore jurisdictions to the corporate and institutional participants in the global digital asset ecosystem.

BCB minimises its direct exposure to digital currency prices while supplying payment services to the ecosystem. BCB holds Bitcoin as a treasury asset and currently uses this as a trading float along with other fiat and stablecoin currencies.

BCB reports its business across three segments as follows:

 

 

 

 

Effective 1 January 2024, our two Swiss subsidiaries (BCB Prime Services (Switzerland) Sàrl and BCB Payments (Switzerland) AG) were merged into one subsidiary, BCB Markets (Switzerland) Sàrl. This merger was carried out to simplify group operations and optimise capital allocation as we prioritise growth through the French EMI and DASP licences.

BCB GROUP HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
Key performance indicators

Revenue, revenue growth, gross profit and earnings before tax are the indicators most relevant to the Group.

 

BCB Payments segment revenue was £9,237,520 (2022: £9,871,310) representing a 6.4% decline year on year. Variable transaction fees accounted for 29% (2022: 40%) while recurring revenue increased to £4,758,478 (2022: £4,400,400). The key driver of this revenue composition change was the continued success in onboarding new customers and a move towards a recurring pricing model which partially offset a general decline in payments volume during the year and a drop in recurring revenue from USD accounts after the closure of our USD banking partners in spring 2023.

 

With the return to positive interest rates during 2023, BCB started to receive credit interest on cash balances. The credit interest earned on safeguarded customer funds in the financial year was £1,143,828 (2022: £nil).

 

BCB Markets segment revenue was £2,592,360 (2022: £3,364,533) representing a 23% decline year on year. The split between fiat and digital currency revenue was 31:69 (2022: 74:26). The key driver of this decrease and shift in revenue towards digital currency trading was sustained customer demand for digital asset to fiat trading compared with declines in demand for fiat to fiat, due to increasing market competition in the fiat-only trading sector.

 

Other revenues were £1,217,160 (2022: £2,493,866) representing a 51% decline year on year. The key driver of this decline was the rolling off of the customer consultancy contracts that were acquired with LAB577 in January 2022. This decline was anticipated at the time of acquisition.

 

Gross profit was £9,356,533 (2022: £11,755,427) representing a 20% decline year on year and a gross margin of 71.7% (2022: 74.7%). The key driver of both the gross profit and gross margin decrease was the reduction in revenue generated by the BCB Markets business segment that historically has a higher gross margin.

 

The loss before taxation was £25,532,066 (2022: £17,341,630). The 2023 loss includes an exceptional impairment of the Sutor Bank loan note and accrued interest of £8,890,158. The underlying loss before taxation was £16,641,908 representing a 4% decline year on year. This reflects the increased discipline and control over the cost base in 2023 as revenue fell.

 

The Group’s year end cash balance was £189,909,325 (2022: £29,419,625) including segregated, safeguarded customer funds of £176,120,488. Since interest is now earned on these funds, the directors concluded that they met the asset recognition criteria under UK GAAP. Accordingly, they are shown within cash with a corresponding customer liability in the balance sheet at 31 December 2023. These funds are fully segregated from BCB’s own funds in safeguarding bank accounts and term deposits at high quality banking institutions and approved money market funds (MMFs) in compliance with the FCA safeguarding regulations. No safeguarded customer funds were shown at the prior year end as none were contractually eligible for credit interest during the prior year.

 

The Group’s year end net assets amounted to £5,515,405 (2022: £28,341,162) reflecting the underlying loss for the year and the Sutor Bank loan note impairment. The directors expect net assets to grow in the near term as the Group reaches breakeven, completes its next strategic funding round and crystallises value from the Sutor Bank loan note.

Future Prospects

The directors remain positive about BCB’s prospects for the year ahead. They believe that the Group has and will continue to enhance its reputation and position in the digital assets markets to deliver profitable revenue growth. BCB’s plans include further product, regulatory and geographical expansion to de-risk its operations and consolidate its position at the centre of its chosen markets.

BCB GROUP HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
Promoting the success of the company

The directors believe they have acted in the way most likely to promote the success of the company for the benefit of its members as a whole as required by s172 of the Companies Act 2006.

 

The requirements of s172 are for the Directors to:

 

 

 

 

 

 

 

The long-term interests of BCB are most influenced by operational delivery, regulatory compliance, product innovation and balancing investment with the drive for profitability in the context of the Group’s liquidity ahead of its next funding round.

 

Growing BCB’s customer base and maintaining strong relationships with all stakeholders has always been and remains the key focus. Our banking partners remain critical suppliers to the business and building this network to ensure we continue to provide functional and reliable products while meeting safeguarding requirements is paramount. Positive engagement with our regulators continues, including new regulators in France, as we grow our licence portfolio.

 

The directors’ focus during 2023 was necessarily on streamlining the business following the significant investments in people and platforms during 2022. We saw a net reduction in headcount as the business right sized to reflect lower than expected activity and its financial resources. The opportunity was taken to make key changes to strengthen BCB’s Executive Committee and Senior Leadership Team.

 

The directors are committed to supporting employee development and well-being. We have appointed Wellbeing Champions, delivered training to enhance skills, notably regulatory compliance and cyber resilience, and improved communication of strategy, objectives and performance. In the coming year we look to maintain competitive compensation and enhance staff benefits. By fostering a positive and inclusive work environment, we aim to retain a motivated workforce that contributes to long-term business success.

 

On behalf of the board

Mr O Tonkin
Group CEO and co-founder
28 October 2024
BCB GROUP HOLDINGS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -

The directors present their annual report and financial statements for the year ended 31 December 2023.

Principal activities

The Group's principal activities is the provision of multi currency payment services to corporate B2B customers operating in the digital asset industry.

Directors

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Mr O Von Landsberg-Sadie
(Resigned 23 November 2023)
Mr O Tonkin
Mr P Prince
(Appointed 21 November 2023)
A Davis
(Appointed 14 December 2023 and resigned 30 July 2024)
P Gelenbe
(Appointed 14 December 2023)
R Gonzalez Espinoza
(Appointed 2 September 2024)
Auditor

In accordance with the company's articles, a resolution proposing that Gravita Audit II Limited be reappointed as auditor of the Group will be put at a General Meeting.

Statement of directors' responsibilities

The directors are responsible for preparing the Annual 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 Group and company, and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to:

 

 

 

 

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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 Group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

BCB GROUP HOLDINGS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
Statement of disclosure to auditor

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

On behalf of the board
Mr O Tonkin
Director
28 October 2024
BCB GROUP HOLDINGS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF BCB GROUP HOLDINGS LIMITED
- 9 -
Opinion

We have audited the financial statements of BCB Group Holdings Limited (the 'parent company') and its subsidiaries (the 'Group') for the year ended 31 December 2023 which comprise the Group profit and loss account, the group statement of comprehensive income, the Group balance sheet, the company balance sheet, the Group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

 

 

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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 Group's and parent 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

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

BCB GROUP HOLDINGS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF BCB GROUP HOLDINGS LIMITED
- 10 -

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

 

 

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

 

 

 

 

Responsibilities of directors

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 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 the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

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.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

We ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations. The laws and regulations applicable to the Group were identified through discussions with directors and other management. Of these laws and regulations, we focused on those that we considered may have a direct material effect on the financial statements or the operations of the company, including FCA authorised payment institution regulations, Companies Act 2006, taxation legislation, data protection, anti-bribery, anti-money-laundering, employment, environmental and health and safety legislation. The extent of compliance with these laws and regulations identified above was assessed through making enquiries of management and inspecting legal correspondence. The identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. 

BCB GROUP HOLDINGS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF BCB GROUP HOLDINGS LIMITED
- 11 -

We assessed the susceptibility of the Group’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: 

 

 

 

To address the risk of fraud through management bias and override of controls, we: 

 

 

 

 

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: 

 

 

 

 

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. 

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.

BCB GROUP HOLDINGS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF BCB GROUP HOLDINGS LIMITED
- 12 -

Use of our report

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.

Daniel Rose (Senior Statutory Auditor)
For and on behalf of Gravita Audit II Limited
28 October 2024
Chartered Accountants
Statutory Auditor
Aldgate Tower
2 Leman Street
London
E1 8FA
BCB GROUP HOLDINGS LIMITED
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
2023
2022
as restated
Notes
£
£
Turnover
3
13,047,040
15,729,709
Cost of sales
(3,690,507)
(3,974,281)
Gross profit
9,356,533
11,755,428
Administrative expenses
(26,078,902)
(29,737,385)
Exceptional item
4
(8,890,158)
-
0
Operating loss
5
(25,612,527)
(17,981,957)
Interest receivable and similar income
9
740,602
640,327
Interest payable and similar expenses
10
(832,680)
-
0
Fair value gains and losses on foreign exchange contracts
172,539
-
0
Loss before taxation
(25,532,066)
(17,341,630)
Tax on loss
11
566,129
463,405
Loss for the financial year
(24,965,937)
(16,878,225)
Loss for the financial year is all attributable to the owners of the parent company.
BCB GROUP HOLDINGS LIMITED
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
2023
2022
as restated
£
£
Loss for the year
(24,965,937)
(16,878,225)
Other comprehensive income
Currency translation gain taken to retained earnings
12,929
4,477
Total comprehensive income for the year
(24,953,008)
(16,873,748)
Total comprehensive income for the year is all attributable to the owners of the parent company.
BCB GROUP HOLDINGS LIMITED
GROUP BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 15 -
2023
2022
as restated
Notes
£
£
£
£
Fixed assets
Intangible Asset
12
4,960,024
6,569,989
Other intangible assets
12
-
89,317
Total intangible assets
4,960,024
6,659,306
Tangible assets
13
248,433
276,829
Investments
14
-
0
214,297
5,208,457
7,150,432
Current assets
Inventory
16
501,779
40,977
Debtors falling due after more than one year
17
-
8,508,683
Debtors falling due within one year
17
16,855,739
3,360,872
Cash at bank and in hand
18
189,909,525
29,419,625
207,267,043
41,330,157
Creditors: amounts falling due within one year
19
(201,621,550)
(20,087,464)
Net current assets
5,645,493
21,242,693
Total assets less current liabilities
10,853,950
28,393,125
Creditors: amounts falling due after more than one year
20
(5,283,796)
-
Provisions for liabilities
Provisions
22
51,963
51,963
Deferred tax liability
23
2,786
-
0
(54,749)
(51,963)
Net assets
5,515,405
28,341,162
Capital and reserves
Called up share capital
26
883
879
Share premium account
29
46,163,021
46,142,225
Equity reserve
27
1,313,703
-
0
Other reserves
28
3,138,060
2,343,445
Profit and loss reserves
(45,100,262)
(20,145,387)
Total equity
5,515,405
28,341,162
The financial statements were approved by the board of directors and authorised for issue on 28 October 2024 and are signed on its behalf by:
28 October 2024
Mr O Tonkin
Director
BCB GROUP HOLDINGS LIMITED
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023
31 December 2023
- 16 -
2023
2022
as restated
Notes
£
£
£
£
Fixed assets
Goodwill
12
2,241,223
-
0
Investments
14
1,942,622
5,554,996
4,183,845
5,554,996
Current assets
Debtors falling due after more than one year
17
-
0
8,508,683
Debtors falling due within one year
17
1,273,830
7,466,933
Cash at bank and in hand
224,239
5,812,178
1,498,069
21,787,794
Creditors: amounts falling due within one year
19
(4,611,494)
(4,958,345)
Net current (liabilities)/assets
(3,113,425)
16,829,449
Total assets less current liabilities
1,070,420
22,384,445
Creditors: amounts falling due after more than one year
20
(5,283,796)
-
Net (liabilities)/assets
(4,213,376)
22,384,445
Capital and reserves
Called up share capital
26
883
879
Share premium account
29
46,163,021
46,142,225
Equity reserve
27
1,313,703
-
0
Other reserves
28
3,131,366
2,338,618
Profit and loss reserves
(54,822,349)
(26,097,277)
Total equity
(4,213,376)
22,384,445

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £28,725,072 (2022 - £23,447,994 loss).

The financial statements were approved by the board of directors and authorised for issue on 28 October 2024 and are signed on its behalf by:
28 October 2024
Mr O Tonkin
Director
Company Registration No. 11312470
BCB GROUP HOLDINGS LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
Share capital
Share premium account
Equity reserve
Other reserves
Share warrants
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
£
As restated for the period ended 31 December 2022:
Balance at 1 January 2022
740
31,141,295
-
0
445,260
6,017,571
(3,266,812)
34,338,054
Year ended 31 December 2022:
Loss for the year
-
-
-
-
-
(16,878,225)
(16,878,225)
Other comprehensive income:
Currency translation differences
-
-
-
-
-
0
4,477
4,477
Total comprehensive income
-
-
-
-
-
(16,873,748)
(16,873,748)
Issue of share capital
26
111
10,040,397
-
-
-
-
10,040,508
Transfer to subsidiary legal reserve
-
-
-
4,827
-
(4,827)
-
Share based payments capital contribution
-
-
-
836,348
-
-
836,348
Share warrants converted
28
4,960,533
-
-
(4,960,561)
-
-
Balance at 31 December 2022
879
46,142,225
-
0
1,286,435
1,057,010
(20,145,387)
28,341,162
BCB GROUP HOLDINGS LIMITED
GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Share capital
Share premium account
Equity reserve
Other reserves
Share warrants
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
£
- 18 -
Year ended 31 December 2023:
Loss for the year
-
-
-
-
-
(24,965,937)
(24,965,937)
Other comprehensive income:
Currency translation differences
-
-
-
-
-
0
12,929
12,929
Total comprehensive income
-
-
-
-
-
(24,953,008)
(24,953,008)
Issue of share capital
26
4
20,796
-
-
-
-
20,800
Issue of convertible loan
21
-
-
1,313,703
-
-
-
1,313,703
Transfers to subsidiary legal reserve
-
-
-
1,867
-
(1,867)
-
Share based payments capital contribution
-
-
-
792,748
-
-
792,748
Balance at 31 December 2023
883
46,163,021
1,313,703
2,081,050
1,057,010
(45,100,262)
5,515,405
BCB GROUP HOLDINGS LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
Share capital
Share premium account
Equity reserve
Other reserves
Share warrants
Profit and loss reserves
Total
Notes
£
£
£
£
£
£
£
As restated for the period ended 31 December 2022:
Balance at 1 January 2022
740
31,141,295
-
0
445,260
6,017,571
(2,649,283)
34,955,583
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
-
-
-
-
(23,447,994)
(23,447,994)
Issue of share capital
26
111
10,040,397
-
-
-
-
10,040,508
Share-based payments capital contribution
-
-
-
836,348
-
-
836,348
Share warrants converted
28
4,960,533
-
-
(4,960,561)
-
-
Balance at 31 December 2022
879
46,142,225
-
0
1,281,608
1,057,010
(26,097,277)
22,384,445
Year ended 31 December 2023:
Profit and total comprehensive income
-
-
-
-
-
(28,725,072)
(28,725,072)
Issue of share capital
26
4
20,796
-
-
-
-
20,800
Issue of convertible loan
21
-
-
1,313,703
-
-
-
1,313,703
Share-based payments capital contribution
-
-
-
792,748
-
-
792,748
Balance at 31 December 2023
883
46,163,021
1,313,703
2,074,356
1,057,010
(54,822,349)
(4,213,376)
BCB GROUP HOLDINGS LIMITED
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
2023
2022
as restated
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
34
153,554,895
(125,228)
Income taxes (paid)/refunded
(74,810)
297,257
Net cash inflow from operating activities
153,480,085
172,029
Investing activities
Purchase of subsidiary
-
(4,987,299)
Purchase of tangible fixed assets
(145,985)
(258,622)
Proceeds from disposal of tangible fixed assets
4,704
-
Purchase of investments
-
(214,297)
Proceeds from disposal of investments
214,297
3,020,463
Interest received
359,127
640,327
Net cash generated from/(used in) investing activities
432,143
(1,799,428)
Financing activities
Proceeds from issue of shares
-
4,080,107
Issue of convertible loans
6,296,628
-
Cash on acquisition
-
2,127,481
Net cash generated from financing activities
6,296,628
6,207,588
Net increase in cash and cash equivalents
160,208,856
4,580,189
Cash and cash equivalents at beginning of year
29,419,625
24,839,436
Effect of foreign exchange rates
281,044
-
0
Cash and cash equivalents at end of year
189,909,525
29,419,625
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
1
Accounting policies
Company information

BCB Group Holdings Limited is a private limited company domiciled and incorporated in England and Wales. The registered office is 5 Merchant Square, London, W2 1AS.

 

The Group consists of BCB Group Holdings Limited and all of its subsidiaries. The principal activity of the Group is included in the Strategic Report.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being a member of a Group where the parent of that Group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:

 

 

 

 

1.2
Business combinations

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries are accounted for at cost less impairment.

 

Deferred tax is recognised on differences between the value of assets (other than goodwill) and liabilities recognised in a business combination accounted for using the purchase method and the amounts that can be deducted or assessed for tax, considering the manner in which the carrying amount of the asset or liability is expected to be recovered or settled. The deferred tax recognised is adjusted against goodwill or negative goodwill.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 22 -
1.3
Basis of consolidation

The consolidated Group financial statements consist of the financial statements of the parent company BCB Group Holdings Limited together with all entities controlled by the parent company (its subsidiaries).

 

All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.

 

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

 

Subsidiaries are consolidated in the Group’s financial statements from the date that control commences until the date that control ceases.

1.4
Going concern

The financial statements for the company show a net current liability position of £3,113,425 (2022: £16,829,449) and the Group has net current assets of £5,645,184 (2022: £21,242,693). They are prepared on a going concern basis as the directors are satisfied that the Group and company have the resources to continue in business for the foreseeable future (which has been taken as 12 months from the date of approval of these financial statements).

 

In making this assessment the directors have considered a wide range of information relating to present and future market conditions, revenue and profitability forecasts and cash flow projections. These projections reflect the current balance sheet, the Group's funding plans, regulatory capital requirements and capital commitments.

 

Accordingly, at the time of approving the financial statements, the directors believe that the Group and company have sufficient resources to continue their activities for the foreseeable future.

1.5
Revenue

Revenue is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business. The fair value of consideration considers trade discounts, settlement discounts and volume rebates, and is net of any VAT or other sales related taxes.

 

When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.

 

It is recognised when the specific criteria have been met for each of the following as described below:

 

Payments Segment

 

Set-up fees

Revenue is recognised upon provisioning customer accounts in line with signed contract agreements.

 

Subscription and minimum fees

Recognised on a monthly basis from customers with active accounts in line with signed contract agreements.

 

Transaction and related fees

Revenue is earned on transactions undertaken for customers and related services recognised on a monthly basis in arrears.

 

Balance fees

Revenue is earned on certain customer balances; this is recognised on a monthly basis in arrears.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 23 -

Credit interest

Interest earned on BCB's own funds is recognised as interest receivable in profit or loss, using the effective interest rate method.

 

Markets Segment

 

Foreign exchange and digital currency trades

Revenue represents the net value of foreign exchange and digital currency trades. Purchases of related currency and digital currencies are netted off against turnoverRevenue is recognised after receiving the customer’s authorisation to undertake a trade.

 

Purchases of related currency and digital currencies are netted off against turnover. Revenue is recognised after receiving the customer’s authorisation to undertake a trade.

 

Purchases of foreign currency and digital currencies are recognised when a back-to-back contract is agreed with a counterparty. The company enters into separate matched contracts with its counterparties in the majority of cases. Where trades are open at the end of a financial period, they are stated at fair value. The resulting gain or loss from the fair value movements is recorded in revenue.

Other revenues segment

 

Service revenue

Revenue from contracts for the provision of services is recognised by reference to the stage of completion, cost incurred and cost to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered.

 

Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

 

Interest earned on BCB'S own funds is recognised as interest receivable in profit or loss, using the effective interest rate method.

1.6
Intangible fixed assets

Goodwill represents the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life. The Group amortises goodwill over 5 years which it considers reasonable.

 

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

 

Amortisation is charged to administrative expense in the Group profit and loss account.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 24 -
1.7
Intangible fixed assets other than goodwill

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

 

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

 

Intangible fixed assets represent customer contracts acquired with LAB577 Ltd.

 

Amortisation is charged to administrative expense in the group profit and loss account.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Customer Contracts
12 months
1.8
Tangible fixed assets

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Fixtures and fittings
3 years straight line
Computers
3 years straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

1.9
Fixed asset investments

In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the Group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

Digital currencies not held for resale are initially measured at cost, and subsequently carried at fair value using prices sourced from active exchanges. Changes in fair value are recognised in profit or loss. The directors are monitoring developments in accounting practice for digital assets and currencies, notably that stablecoins that are readily convertible into cash, may in future meet the tests to be treated as financial assets.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 25 -
1.10
Impairment of fixed assets

At each reporting period end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

1.11
Inventory

Inventory consists of digital currencies held for sale by the company at the balance sheet date on a 'mark-to-market’ basis. Inventories are initially recognised at fair value, normally the transaction price, and subsequently carried at fair value using prices sourced from active exchanges. Changes in fair value are recognised in profit or loss.

1.12
Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include on-demand deposits at with banks, money market funds (MMFs), other short-term liquid investments with original maturities of three months or less and e-money held with payment service providers. Due to the short duration of the cash and cash equivalents (less than 3 months), the fair value approximates the carrying value at each reporting period.

The Group recognises financial assets and liabilities for funds customers hold in BCB payments accounts that are safeguarded at banking partners with whom we have a contractual right to earn credit interest. The liability is recognised upon receipt of cash and is derecognised when cash is paid to a beneficiary.

Interest income on safeguarded customer funds is earned from holding these funds as cash and cash equivalents or investing them into liquid permitted financial assets. These amounts are recognised as revenue in profit or loss using the effective interest rate method.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 26 -
1.13
Financial instruments

The Group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

 

Financial instruments are recognised in the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.

 

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

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.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

 

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

 

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group 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.

Classification of financial liabilities

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 Group after deducting all of its liabilities.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 27 -
Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies 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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.

1.14
Compound instruments

The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.

1.15
Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account 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 Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

1.16
Provisions

Provisions are recognised when the Group has a legal or constructive present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 28 -
1.17
Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

1.18
Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.19
Share-based payments

For cash-settled share-based payments, a liability is recognised for the goods and services acquired, measured initially at the fair value of the liability. At the balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using an appropriate valuation methodology. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.

 

Cancellations or settlements are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

1.20
Leases

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

1.21
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

 

In cases where subsidiaries' functional currencies are different from the functional currency of the Group, the foreign currencies are translated using the following method:

 

 

 

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 29 -
2
Judgements and key sources of estimation uncertainty
Critical judgements

In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions that affect the amounts reported in the balance sheet and profit and loss account. However, the nature of estimation means that actual outcomes could differ from these estimates. The accounting judgements, estimates and associated assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The following critical judgements and estimates had a significant effect on the amounts recognised in the financial statements:

 

a. Critical judgements in applying the Group’s accounting policies

Going Concern

As stated in note 1.4, the financial statements are prepared on a going concern basis. In making this assessment the directors have considered a wide range of information relating to the future. The Group operates in fast moving digital assets markets that, during 2022 and early 2023, experienced adverse market and regulatory sentiment. As a series A business, the Group’s success is dependent on revenue growth that is difficult to forecast with certainty, particularly in turbulent market conditions. In addition, the Group and the digital assets markets have a limited track record on which to base such forecasts. The forecasts prepared by the directors have been sensitised to attempt to reflect uncertainties which the group may face in the future. Based on these forecasts and the factoring in certain unknown events in the future, the directors are comfortable to adopt the going concern basis.

Safeguarded customer funds

During the financial year, a group subsidiary agreed with its banking partners for certain cash balances to accrue credit interest. As a result, these assets meet the recognition criteria under FRS 102, namely that of future economic benefits flowing to the entity and reliable measurement. However, these assets are solely held on customers’ behalf and are segregated in compliance with the FCA safeguarding regulations; they are not beneficially owned by the Group.

Nonetheless, the directors concluded that since holding safeguarded customer funds is core to the company’s business model and that interest income was earned on these assets and reported in the profit and loss account during the financial year, their omission would not accurately reflect the Group’s operations.

Accordingly, for the financial year, safeguarded customer funds with the contractual right to credit interest, are included in cash and cash equivalents (note 18) with a corresponding liability shown in creditors falling due within one year (note 19). Credit interest earned is included in revenue as it is a primary source of income directly related to the Group’s business model.

Impairment of loan

As stated in note 17, interest payments on the €10 million loan note issued by Sutor Bank were suspended during the financial year. Under the terms of the loan note, the suspension of interest payments triggered an impairment review. The directors determined that the note had no value at the year end and recognised an impairment charge for the principal and interest arrears. The directors judged that the civil claim in the Hamburg Regional Court (see note 36) did not provide sufficient evidence to reduce or avoid the impairment expense in the balance sheet date. However, they now believe that a partial reversal of the impairment charge is probable in the 2024 financial year.

b. Key accounting estimates and assumptions

Useful economic lives

The economic lives of intangible assets are estimated at between one and five years reflecting the fast moving digital assets markets. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 30 -
Goodwill

The recoverable amount calculated in the assessment of goodwill for impairment (note 12) resulted in headroom of over £110 million. The material unobservable input assumptions were: the revenue growth rate over the assumed four years to exit, the revenue multiple on exit and the discount rate to calculate the present value.

Sensitivity analysis

The sensitivity of the carrying value of goodwill to the unobservable input assumptions is:

 

 

 

 

In addition, a one year reduction in the useful economic life would reduce goodwill by £552,000.

Convertible loan note

The Company issued USD denominated convertible loan notes during the financial year. The loan notes have both equity and liability like features (note 21). The directors have split the proceeds between a financial liability and equity components, representing the fair value of the embedded option to convert the financial liability into equity. In order to calculate the liability component, the directors estimated the effective rate of interest at 21% based on a range of factors including interest rates for comparable instruments in the market.

 

The sensitivity of the liability and equity components to the effective rate of interest is:

 

 

Share based payment

Share based payments charges are based on the difference between the fair value of the option at the date of grant and the cost of the option. As set out in note 25, the fair value of the option is determined by using the Option Pricing Model with various assumptions to calculate the value of the company taking into account the share structure of the company.

 

The inputs into the estimation of the fair value of options and growth shares granted to directors and employees are inherently uncertain. The enterprise value, share price volatility and time to liquidity are particularly challenging to estimate accurately.

 

Sensitivity analysis

The sensitivity of the share based payments expenses:

 

 

 

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 31 -
3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by business segment
BCB Payments Revenue
9,237,520
9,871,310
BCB Markets Revenue
2,592,360
3,364,533
Other Revenue
1,217,160
2,493,866
13,047,040
15,729,709
2023
2022
£
£
Other revenue
Interest income on own funds
740,602
640,327
4
Exceptional item
2023
2022
£
£
Expenditure
Impairment of loan note and interest arrears
8,890,158
-
8,890,158
-

Exceptional item relates to the impairment of the long term loan and associated interest as further discussed in note 17.

5
Operating loss
2023
2022
£
£
Operating loss for the year is stated after charging/(crediting):
Exchange gains
(261,174)
(133,466)
Depreciation of owned tangible fixed assets
163,121
128,402
Impairment of loan notes
8,890,158
-
Amortisation of intangible assets
1,697,974
2,457,088
Loss on disposal of intangible assets
928
35,612
Share-based payments
792,743
836,348
Operating lease charges
986,412
879,817
6
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the group and company
47,000
43,000
Audit of the financial statements of the company's subsidiaries
112,250
132,047
159,250
175,047
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
6
Auditor's remuneration
(Continued)
- 32 -
For other services
Other taxation services
26,400
36,350
All other non-audit services
-
1,906
26,400
38,256
7
Employees

The average monthly number of persons (including directors) employed by the Group and company during the year was:

Group
Company
2023
2022
2023
2022
Number
Number
Number
Number
134
128
10
8

Their aggregate remuneration comprised:

Group
Company
2023
2022
2023
2022
£
£
£
£
Wages and salaries
12,881,907
11,920,632
3,019,781
2,634,840
Social security costs
1,692,916
1,642,879
312,402
235,289
Pension costs
203,389
137,447
15,982
11,487
14,778,212
13,700,958
3,348,165
2,881,616
8
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
587,662
511,500
Long term incentive schemes
441,787
523,904
Company pension contributions to defined contribution schemes
2,532
2,633
1,031,981
512,821
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
296,250
255,000
Long term incentive schemes
288,047
261,952
Company pension contributions to defined
1,321
1,312
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Directors' remuneration
(Continued)
- 33 -

The above remuneration and pension amounts relates to the five (2022: five) directors holding office during the year. The long term incentive schemes expense relates to the share based payments charge in respect of the share options and growth share plans (see note 25).

9
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest income on loan notes
652,207
640,327
Other interest income
88,395
-
Total income
740,602
640,327

Interest earned on safeguarded customer funds is included in revenue as explained in note 1.5.

10
Interest payable and similar expenses
2023
2022
£
£
Interest on bank overdrafts and loan notes
832,680
-

Interest payable is the interest accrued on the convertible loan notes.

11
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
(569,172)
(161,928)
Deferred tax
Origination and reversal of timing differences
3,043
(301,477)
Total tax credit
(566,129)
(463,405)

As of 1 April 2023, the main rate of UK corporation tax increased from 19% to 25%. As the company’s financial year straddles this date, a blended corporation tax rate of 23.5% has been applied which is calculated by apportioning the two tax rates on a weighted basis for the proportion of the financial year for which each main tax rate was applicable.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
11
Taxation
(Continued)
- 34 -

The actual credit 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:

2023
2022
£
£
Loss before taxation
(25,532,066)
(17,341,630)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
(6,000,036)
(3,294,910)
Tax effect of expenses that are not deductible in determining taxable profit
1,949,506
4,195,106
Tax effect of income not taxable in determining taxable profit
(1,251,184)
(3,013,128)
Adjustments in respect of prior years
(77,568)
(7,026)
Effect of change in corporation tax rate
9,846
(1,603)
Other non-reversing timing differences
-
(246,921)
R&D tax credits
(535,558)
(220,363)
Foreign exchange differences
14,741
-
0
Fixed Asset differences
(1,358)
(11,805)
Remeasurement - deferred tax changes in tax rates
(300,168)
(758,333)
Movement in deferred tax not recognised
5,720,891
2,854,717
Timing differences not recognised in the computation
(95,241)
40,861
Taxation credit
(566,129)
(463,405)
12
Intangible fixed assets
Group
Goodwill
Customer Contracts
Total
£
£
£
Cost
At 1 January 2023
8,048,359
1,071,803
9,120,162
Disposals
(5,076)
-
0
(5,076)
At 31 December 2023
8,043,283
1,071,803
9,115,086
Amortisation and impairment
At 1 January 2023
1,478,370
982,486
2,460,856
Amortisation charged for the year
1,608,657
89,317
1,697,974
Disposals
(3,768)
-
0
(3,768)
At 31 December 2023
3,083,259
1,071,803
4,155,062
Carrying amount
At 31 December 2023
4,960,024
-
0
4,960,024
At 31 December 2022
6,569,989
89,317
6,659,306
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
12
Intangible fixed assets
(Continued)
- 35 -
Company
Goodwill
£
Cost
At 1 January 2023
-
0
Additions - business combinations
3,634,416
At 31 December 2023
3,634,416
Amortisation and impairment
At 1 January 2023
-
0
Amortisation charged for the year
1,393,193
At 31 December 2023
1,393,193
Carrying amount
At 31 December 2023
2,241,223
At 31 December 2022
-
0

Group

The customer contracts and goodwill were acquired as part of the acquisition of LAB577 Limited in the prior financial year. Both are amortised on a straight line basis: contracts over 12 months and goodwill over 5 years.

 

Goodwill was assessed for impairment at the balance sheet date since challenging market conditions and the Group's results were both indicators of potential impairment. The recoverable amount was calculated on a revenue exit multiple basis using financial budgets extrapolated with estimated growth rates, discounted to the balance sheet date at an appropriate discount rate. The recoverable amounts being in excess of the carrying amounts, there was no impairment loss to recognise. The estimation uncertainty in these calculations are further explained in note 2 above.

 

Company

During the year, the Company executed its plan to transfer the business previous operated by its subsidiary, LAB577 Limited, to the Company. As a result of this movement, the carrying value of cost of investment, (which is the net of the consideration, fair value of assets on acquisition and impairment) has been transferred from fixed asset investment to goodwill as per the conditions in FRS 102 Section 19. The goodwill is subject to amortisation from the date of acquisition as per the accounting policy note.

 

Amortisation and impairment of intangible assets is charged to administration expenses.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 36 -
13
Tangible fixed assets
Group
Fixtures and fittings
Computers
Right of use
Total
£
£
£
£
Cost
At 1 January 2023
16,369
429,444
-
0
445,813
Additions
27,232
16,872
101,881
145,985
Disposals
(373)
(9,543)
-
0
(9,916)
Exchange adjustments
(1,014)
(5,662)
-
0
(6,676)
At 31 December 2023
42,214
431,111
101,881
575,206
Depreciation and impairment
At 1 January 2023
4,925
164,059
-
0
168,984
Depreciation charged in the year
8,141
140,830
14,150
163,121
Eliminated in respect of disposals
(62)
(5,150)
-
0
(5,212)
Exchange adjustments
(120)
-
0
-
0
(120)
At 31 December 2023
12,884
299,739
14,150
326,773
Carrying amount
At 31 December 2023
29,330
131,372
87,731
248,433
At 31 December 2022
11,444
265,385
-
0
276,829
14
Fixed asset investments
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Investments in subsidiaries
15
-
0
-
0
1,942,622
5,554,996
Other investments
-
0
214,297
-
0
-
0
-
0
214,297
1,942,622
5,554,996
Fixed asset investments not carried at market value

Investments in subsidiaries are held at cost less impairment.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
14
Fixed asset investments
(Continued)
- 37 -
Movements in fixed asset investments
Group
Other
£
Cost or valuation
At 1 January 2023
214,297
Disposals
(214,297)
At 31 December 2023
-
Carrying amount
At 31 December 2023
-
At 31 December 2022
214,297
Movements in fixed asset investments
Company
Shares in subsidiaries
£
Cost or valuation
At 1 January 2023
5,554,996
Additions
22,042
Transfer to goodwill related to business combination
(3,634,416)
At 31 December 2023
1,942,622
Carrying amount
At 31 December 2023
1,942,622
At 31 December 2022
5,554,996
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 38 -
15
Subsidiaries

Details of the company's subsidiaries at 31 December 2023 are as follows:

Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
BCB Payments Limited
5 Merchant Square
London W2 1AS
United Kingdom
Regulated Authorised Payment Institution
Ordinary
100.00
BCB Payments (Europe) SASU
2 rue Jean Lantier, 75001 Paris France
Authorised E-money Institution
Ordinary
100.00
BCB Payments (US) Inc.
108 Lakeland Avenue, Dover, County of Kent, 19901 Delaware, USA
Dormant Company
Ordinary
100.00
BCB Markets Limited
5 Merchant Square
London W2 1AS
United Kingdom
Foreign and digital
currency trading services
Ordinary
100.00
BCB Markets (Europe) SASU
2 rue Jean Lantier, 75001 Paris France
Registered Digital Asset Service Provider
Ordinary
100.00
BCB Markets
(Switzerland) Sàrl
Bahnhofstrasse 7, 6300 Zug,
Switzerland
Foreign and digital
currency trading services
Ordinary
100.00
BCB Digital Limited
5 Merchant Square  London W2 1AS  United Kingdom
Managed services to the
financial services sector
Ordinary
100.00
BCB Digital ZA (Pty) Ltd
11 Jamie Uys Street, Vorna Valley
Midrand, Gauteng 1684, South Africa
Managed services to the
financial services sector
Ordinary
100.00
LAB577 Limited
124 City Road, London, England, EC1V 2NX
Software development
Ordinary
100.00
BCB Group Management Sàrl
1 Haaptstrooss, L-6869 Wecker
Operator of a
Luxembourg
securitisation vehicle
Ordinary
100.00
BCB Issuer Limited
PO Box 95, 2A Lord Street
Douglas IM99 1HP, Isle of Man
Dormant Company
Ordinary
100.00
JDF Capital Limited
5 Merchant Square
London W2 1AS
United Kingdom
Dormant Company
Ordinary
100.00
BCB Digital GmbH
Nonnenbrücke 12, 96047 Bamberg
Unregulated Trading Subsidiary (inactive)
Ordinary
100.00
16
Inventory and Digital currencies
Group
Company
2023
2022
2023
2022
£
£
£
£
Digital currency for resale
501,779
40,977
-
0
-
0
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 39 -
17
Debtors
Group
Company
2023
2022
2023
2022
Amounts falling due within one year:
£
£
£
£
Trade debtors
14,258,614
942,175
-
0
-
0
Corporation tax recoverable
804,231
160,815
67,532
-
0
Amounts owed by group undertakings
-
-
419,169
5,797,578
Other debtors
915,345
1,609,485
710,825
1,602,716
Prepayments and accrued income
877,240
648,397
75,995
38,260
16,855,430
3,360,872
1,273,521
7,438,554
Deferred tax asset (note 23)
309
-
0
309
28,379
16,855,739
3,360,872
1,273,830
7,466,933
Amounts falling due after more than one year:
Other debtors
-
0
8,508,683
-
0
8,508,683
Total debtors
16,855,739
11,869,555
1,273,830
15,975,616

Trade debtors includes £13,327,873 (2022: £146,848) of currency and digital currency sales that had not been settled with BCB by counterparties at the balance sheet date.

 

Other debtors falling due after more than one year represent a loan note issued by Sutor Bank of €10 million. The loan note is redeemable at par by the issuer from 1 July 2027. The par value of the loan note may be adjusted (reversibly) downwards based on Sutor Bank's capital adequacy. Interest is payable monthly at an annual rate of 7.5%.

 

During the financial year Sutor Bank suspended interest payments, which being an indication of impairment prompted an impairment review at the balance sheet date. On the basis that there was insufficient evidence that interest and principal would be recovered, the directors concluded that a full impairment of the loan principal and accrued interest was appropriate. An impairment charge of £8,948,409 (2022: £nil) was charged to exceptional items (see note 4). The company is actively enforcing its rights under the loan agreement and is pursuing recovery of accrued interest (see note 36).

 

18
Cash and cash equivalents

Group

Cash at bank and in hand at the year end, includes £176,120,488 (2022: £nil) related to safeguarded customer funds. These funds are fully segregated from BCB’s own funds in safeguarding bank accounts and term deposits at high quality banking institutions and approved money market funds (MMFs) in compliance with the FCA safeguarding regulations. No safeguarded customer funds were shown at the prior year end as none were contractually eligible for credit interest during the prior year.

 

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 40 -
19
Creditors: amounts falling due within one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Safeguarded customer funds
176,120,488
-
-
-
Trade creditors
22,294,707
16,672,509
105,019
667,834
Amounts owed to group undertakings
-
0
-
0
4,021,678
3,671,152
Other taxation and social security
390,719
464,786
63,106
98,567
Deferred income
428,298
200,335
-
0
-
0
Other creditors
346,986
1,154,368
1,432
-
Accruals and deferred income
2,040,352
1,595,466
420,259
520,792
201,621,550
20,087,464
4,611,494
4,958,345

Trade creditors includes £21,362,309 (2022: £15,127,582) of currency purchases that had not been settled by the Group with counterparties at the balance sheet date.

 

Safeguarded customer funds are included in cash on the balance sheet in accordance with the accounting policy and key judgements (note 2a).

 

20
Creditors: amounts falling due after more than one year
Group
Company
2023
2022
2023
2022
Notes
£
£
£
£
Convertible loan notes
21
5,283,796
-
0
5,283,796
-
0
21
Convertible loan notes
Group
Company
2023
2022
2023
2022
£
£
£
£
Liability component of convertible loan notes
5,283,796
-
5,283,796
-

The company issued convertible loan notes for an aggregate consideration of $7,325,000 during the financial year. The notes are redeemable at the option of the holders on 28 January 2025. Interest accrues at 6% per annum payable on redemption or conversion. The company can require conversion upon a fund raise of $20 million or more.

 

The net proceeds received have been split between the financial liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity. The equity component has been valued at £1,313,703.

The liability component is measured at amortised cost, and the difference between the carrying amount of the liability at the date of issue and the amount reported in the balance sheet represents the effective interest rate less interest paid to that date. The effective rate of interest is 21%. The equity component of the convertible loan notes has been credited to the equity reserve.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 41 -
22
Provisions for liabilities
Group
Company
2023
2022
2023
2022
£
£
£
£
Other provisions
51,963
51,963
-
-

The other provisions represent the best estimates by the directors of the company's exposure to penalties on a tax dispute in 2021.

Movements on provisions:
Other provisions
Group
£
At 1 January 2023 and 31 December 2023
51,963
23
Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the Group and company, and movements thereon:

Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Group
£
£
£
£
Accelerated capital allowances
2,786
-
309
-
Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Company
£
£
£
£
Accelerated capital allowances
-
-
309
28,379
Group
Company
2023
2023
Movements in the year:
£
£
Asset at 1 January 2023
-
(28,379)
Charge to profit or loss
2,477
28,070
Liability/(Asset) at 31 December 2023
2,477
(309)

The deferred tax credit to the profit and loss in the current year is recognised as a result of business combinations in the year.

 

No deferred tax asset on losses is recognised as a result of uncertain timing of using the asset.

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 42 -
24
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
203,389
137,447

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund.

25
Share-based payment transactions

The Group operates share-based payment schemes for more senior employees to enable them to share in the future growth in value of the business. In the prior year, the schemes included tax advantaged and unapproved share option plans over ordinary shares. In the current year, the schemes include tax advantaged and unapproved share option plans over ordinary and ordinary 2 shares as well as a growth share plan over Z shares. All schemes related to equity instruments of the parent company.

 

Options are generally granted with an exercise price matching the prevailing market price of the underlying equity instrument. Options vest over three years from grant subject to continued employment by the Group and expire ten years after the date of grant. Generally, options are only exercisable upon exit subject to customary exemptions. Employees are not entitled to dividends until the options are exercised.

 

The Group is unable to directly measure the fair value of employee services received. Instead the fair value of the share options granted during the year was determined using an Options Pricing Model (OPM) to allocate the total equity value to individual ownership classes in the parent company's capital structure. The OPM used the Black-Scholes model to calculate the fair value of each equity tranche and option grant. The Black- Scholes model is internationally recognised as being appropriate to value employee share schemes similar to the Group's plans.

 

In the prior year, the parent company levied an intra-group recharge for share-based payment expense based on the directors’ estimate of the fair allocation to each subsidiary. In the current year, the parent company levied an intra-group recharge for share-based payment expense relating to the employees of each subsidiary, the cost of which offsets the capital contribution arising.

 

During the year, the parent company issued 277,008 (2022: 586,360) share-based options at a weighted average exercise price of £18.98 (2022: £34.31). The obligation to settle these options lies with the parent company.

 

The number of shares options and the weighted average price of such shares within BCB Group Holdings Limited is as follows:

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
25
Share-based payment transactions
(Continued)
- 43 -
Group and company
Number of share options
Weighted average exercise price
2023
2022
2023
2022
Number
Number
£
£
Outstanding at 1 January 2023
1,193,360
760,800
17.49
1.21
Granted
277,008
586,360
18.98
34.31
Forfeited
(96,132)
(79,800)
20.96
-
Exercised
-
(74,000)
-
0.91
Outstanding at 31 December 2023
1,374,236
1,193,360
17.04
17.49
Exercisable at 31 December 2023
-
-
-
-
Group
Company
2023
2022
2023
2022
£
£
£
£
Expenses recognised in the year
Arising from equity settled share based payment transactions
792,743
836,348
703,546
515,110
26
Share capital
Group and company
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary Share Capital of £0.0001 each
5,135,128
5,135,128
514
514
Ordinary 2 Shares of £0.0001 each
257,800
257,800
26
26
Ordinary Z Shares of £0.0001 each
582,600
542,600
58
54
5,975,528
5,935,528
883
879
2023
2022
2023
2022
Preference share capital
Number
Number
£
£
Issued and fully paid
Series A Preferred Shares of £0.0001 each
2,850,830
2,850,830
285
285
Preference shares classified as liabilities
285
285
Total equity share capital
883
879
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
26
Share capital
(Continued)
- 44 -

During 2023, the company issued 40,000 (2022: 542,600) £0.0001 Z Ordinary shares for £0.52 per share, under its growth share plan as further explained in note 25 above.

 

In January 2022, 215,589 Series A Preferred shares of £0.0001 were issued bringing the total series A funding to £34.4m. Also in January 2022 the company issued 338,328 Ordinary shares of £0.0001 each as part consideration for the acquisition of LAB577 Ltd, a software engineering venture studio. In June 2022, 281,578 of the warrants over Series A Preferred shares were converted into Series A Preferred shares leaving 60,000 warrants in issue.

27
Equity reserve

The equity component of the convertible loan notes has been credited to the equity reserve.

28
Other reserves

Group

 

Other reserves is made up of a Share Warrants balance of £1,057,010 (2022: £1,057,010), Share Based Payments reserves of £2,074,356 (2022: £1,286,435) and legal reserves of £6,694 (2022: £4,827).

 

Company

 

Other reserves is made up of a Share Warrants balance of £1,057,010 (2022: £1,057,010) and Share Based Payments reserves of £2,074,356 (2022: £1,281,608).

29
Share premium account
Group
Company
2023
2022
2023
2022
£
£
£
£
At the beginning of the year
46,142,225
31,141,295
46,142,225
31,141,295
Issue of new shares
20,796
15,000,930
20,796
15,000,930
At the end of the year
46,163,021
46,142,225
46,163,021
46,142,225
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 45 -
30
Business Combination

On 10 January 2023 the Group acquired 100% of BCB Digital GmbH, an inactive unregulated trading subsidiary domiciled in Germany. The acquisition was accounted for using the purchase method. The acquisition consideration paid was €25,000 (£22,042) in cash. There were no significant adjustments or goodwill arising on acquisition.

Book Value
Adjustments
Fair Value
Net assets acquired
£
£
£
Cash and cash equivalents
22,042
-
22,042
Goodwill
-
Total consideration
22,042
The consideration was satisfied by:
£
Cash
22,042
BCB Digital GmbH contributed revenue and profits as below to the group in the 12 month period from 10 January 2023.
£
Turnover
-
Loss after tax
(783)
31
Operating lease commitments
Lessee

At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Group
Company
2023
2022
2023
2022
£
£
£
£
Within one year
139,921
885,060
-
-
Between two and five years
67,623
75,000
-
-
207,544
960,060
-
-
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 46 -
32
Related party transactions
Remuneration of key management personnel

The remuneration of key management personnel is as follows.

2023
2022
£
£
Aggregate compensation
2,665,734
2,402,613

The directors consider all members of BCB’s Group Executive Committee (ExCo) to be key management. This committee had an average of 9 members during 2023 (2022: 7). The aggregate compensation includes non-cash share based payments expenses of £484,454 (2022: £643,491).

 

Transactions with related parties

The following amounts were outstanding at the reporting end date:

Amounts due from related parties
2023
2022
Balance
Balance
£
£
Group
Key management personnel - owed in respect of unpaid share capital
302,952
282,152
Company
Entities with control, joint control or significant influence over the company
419,169
5,797,578
Key management personnel
302,952
282,152
33
Controlling party

BCB Group Holdings Limited is the smallest and largest group the entity is consolidated into.

 

BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 47 -
34
Cash generated from/(absorbed by) group operations
2023
2022
£
£
Loss for the year after tax
(24,965,937)
(16,878,225)
Adjustments for:
Taxation credited
(566,129)
(463,405)
Investment income
(740,602)
(640,327)
Loss on disposal of intangible assets
928
35,612
Fair value gain on foreign exchange contracts
(172,539)
-
0
Amortisation and impairment of intangible assets
1,697,974
2,457,088
Depreciation and impairment of tangible fixed assets
163,121
128,402
Foreign exchange gains on cash equivalents
(261,174)
(133,466)
Equity settled share based payment expense
792,743
836,348
Impairment of loan notes
8,890,158
-
Non-cash share issuances
20,800
-
Movements in working capital:
Increase in inventory
(288,263)
(2,183)
(Increase)/decrease in debtors
(12,851,142)
7,145,892
Increase in safeguarded customer funds
176,120,488
-
Increase in creditors
5,486,506
7,315,925
Increase in deferred income
227,963
73,111
Cash generated from/(absorbed by) operations
153,554,895
(125,228)

As per note 18, cash and cash equivalents includes both own funds and customer funds which are segregated in safeguarding accounts. Total cash equals £189,909,525 of which £13,789,037 relates to own funds and £176,120,488 relates to safeguarded customer funds.

 

35
Analysis of changes in net funds - group
1 January 2023
Cash flows
Exchange rate movements
31 December 2023
£
£
£
£
Cash at bank and in hand
29,419,625
160,228,726
261,174
189,909,525
Convertible loan notes
-
(5,283,796)
-
(5,283,796)
29,419,625
154,944,930
261,174
184,625,729
Cash and cash equivalents include safeguarded funds of £176,120,488 (2022: £nil).
A corresponding liability is included in trade creditors.
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 48 -
36
Events after the reporting date

In December 2021, the company announced an investment in Sutor Bank GmbH based in Hamburg, Germany. Subject to regulatory approvals, the company expected to acquire 100% of Sutor Bank for an aggregate consideration of €25 million subject to a net asset adjustment and earn-out mechanism. In June 2023, In light of changing market conditions and following a period of negotiations, the owners of Sutor Bank terminated the sale and purchase agreement. The loan note issued by Sutor Bank of €10 million remains in place. As further explained in note 17 above, Sutor Bank suspended interest payments on the loan note during 2023.

In light of the change in circumstances, the directors reviewed their intentions with regards the loan note, being open to purchase offers from external parties. Accordingly, it is expected that this investment will be held at fair value in future. In addition, the company is pursuing all means including a civil claim in the Hamburg Regional Court to secure the recovery of interest arrears. Sutor Bank resumed interest payments during 2024. The court's preliminary findings appear to be in BCB’s favour. The directors continue to actively consider all options available to crystalise value from the loan note in the near term. On the basis of current facts, the directors believe that a partial reversal of the impairment charge against the loan note and interest arrears is probable in the 2024 financial year.

After the balance sheet date, the company agreed an extension of the convertible loan note redemption date to 31 December 2025.

37
Prior period adjustment
Reconciliation of changes in equity - group
1 January
31 December
2022
2022
£
£
Adjustments to prior year
Social security contributions
-
(215,056)
Equity as previously reported
34,338,054
28,556,218
Equity as adjusted
34,338,054
28,341,162
Analysis of the effect upon equity
Profit and loss reserves
-
(215,056)
Reconciliation of changes in loss for the previous financial period
2022
£
Adjustments to prior year
Social security contributions
(215,056)
Loss as previously reported
(16,663,169)
Loss as adjusted
(16,878,225)
Reconciliation of changes in equity - company
The prior period adjustments do not give rise to any effect upon equity in the company.
BCB GROUP HOLDINGS LIMITED
NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
37
Prior period adjustment
(Continued)
- 49 -
Reconciliation of changes in loss for the previous financial period
2022
£
Adjustments to prior year
Total adjustments
-
Loss as previously reported
(23,447,995)
Loss as adjusted
(23,447,995)
Notes to reconciliation

In preparing these financial statements, the directors identified an error in the previous years reported figures. The error related to the understatement of social security liabilities totaling £215,056. As a result of this, a prior year adjustment was required which has increased administrative expenses, and consequently the loss for the year to 31 December 2022. This adjustment has also increased the tax and social security creditors by £215,056 in the comparative figures.

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