1 - Statement of accounting policies

 

The following accounting policies relate to the financial statements of CAB Payments Holdings plc ('the Company') and its subsidiaries (collectively referred to as 'the Group').

 

a) General information

The Company is incorporated and domiciled in England. On 4 July 2023 the Company was re-registered as a public limited company, CAB Payments Holdings plc, in order to align with its strategic objectives. The address of its registered office as at 31 December 2024 is 3 London Bridge St, London, SE1 9SG, England.

The Company's shares trade under the ticker code of CABP.L.

The Group is a market leader in business-to-business cross-border payments and foreign exchange, specialising in hard-to-reach markets.

 

b) Basis of preparation

The consolidated and Company financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies set out within these financial statements, and in accordance with the UK adopted International Accounting Standards (UK-adopted International Financial Reporting Standards ('IFRSs')) in conformity with the applicable legal requirements of the Companies Act 2006.

 

The principal accounting policies applied in the preparation of these financial statements are set out in this Note. These accounting policies have been consistently applied to all the years presented unless otherwise stated. The balance sheet has been presented in order of liquidity.

 

Comparatives have been restated due to prior period errors as set out in Note 9 and Note 19. This restatement was not as a result of a change of accounting policies and there is no impact to profit or loss and equity.

'Adjusting items' presented in the consolidated statement of profit or loss and related notes has been referred to as 'non-recurring expenses' in the prior year.

 

The preparation of consolidated and company financial statements in conformity with IFRS as adopted by the UK requires the use of certain critical accounting estimates which have been disclosed in Note 2.

 

The consolidated and Company financial statements are presented in British Pound Sterling (£). All values are rounded to the nearest thousand (£'000), except when otherwise indicated.

 

The Group and the Company have adopted the following new or amended IFRSs and interpretations that are effective from 1 January 2024, none of which had any material impact on the Company's or the Group's consolidated financial statements and the Company's financial statements.

 

 

Accounting standard		Amendment/interpretation
Amendments to IAS 1		Classification of Liabilities as Current or Non-current: clarify that the classification of liabilities as current or non-current is based solely on a company's right to defer settlement for at least 12 months at the reporting date. The right needs to exist at the reporting date and must have substance.
Amendments to IFRS 16, Leases		Lease Liability in a Sale-and-Leaseback requires a seller-lessee to account for variable lease payments that arise in a sale-and-leaseback transaction as follows: •     On initial recognition, include variable lease payments when measuring a lease liability arising from a sale-and-leaseback transaction. •     After initial recognition, apply the general requirements for subsequent accounting of the lease liability such that no gain or loss relating to the retained right of use is recognised.
Amendments to IAS 7, Statement of Cash Flows and IFRS 7, Financial Instruments: Disclosures (Amendment)		Supplier Finance Arrangements: requires an entity to disclose qualitative and quantitative information about its supplier finance programmes, such as terms and conditions - including, for example, extended payment terms and security or guarantees provided.

 

c) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all of the entities controlled by the Company made up to 31 December each year. Control is achieved when the Company:

•              has the power over the investee;

•              is exposed, or has rights, to variable return from its involvement with the investee; and

•              has the ability to use its power to affect its returns.

 

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

 

A subsidiary is an entity controlled directly or indirectly by the Company. The Company controls a subsidiary when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the investee.

 

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the consolidated profit or loss account from the date the Company gains control until the date when the Company ceases to control the subsidiary.

 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group's accounting policies.

 

All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between the members of the Group are eliminated on consolidation, with the exception of foreign currency gains and losses on intragroup monetary items denominated in a foreign currency of at least one of the parties.

 

The non-controlling interest (NCI) in subsidiaries is identified separately from the Group's equity therein. Interests of non-controlling shareholders represent ownership interests entitling them to a proportionate share of net assets upon liquidation initially being measured at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.

 

Subsequent to acquisition, the carrying amount of the NCI is the amount of those interests at initial recognition plus the NCI's share of subsequent changes in equity. Total comprehensive income is attributed to NCIs even if it results in the NCI having a deficit balance. Following the capital reorganisation in July 2023, there was no NCI as at 31 December 2024 or 31 December 2023.

 

Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

 

The Group has established employee benefit trusts (EBTs) to hold shares to meet the Group's obligation to provide shares awarded to employees under the share incentive plan. Shares held by the EBTs are deducted from equity and presented as Treasury Shares until such time that the shares settle. The EBT is controlled and recognised by the Company using the look-through approach, i.e. as if the EBT is included within the accounts of the Company.

 

d) Going concern

The Directors have assessed the ability of the Company and of the Group to continue as a going concern based on the net current asset position, regulatory capital requirements and estimated future cash flows. The Directors have formed the view that the Company and the Group have adequate resources to continue in existence for a period of 12 months from when these financial statements are authorised for issuance. Accordingly, the financial statements of the Company and the Group have been prepared on a going concern basis.

 

Critical to reaching this view were:

•              The output of internal stress assessments which were conducted at a Company and a Group level and modelled the impact of severe yet plausible stresses which underpinned the Going concern assessment.

•              The output of the reverse stress testing assessment which modelled the scenarios that would have to occur in order for the Group to fall below its Total Capital Requirement (being the aggregate of Pillar 1 and Pillar 2A capital requirements).

 

In reaching their conclusions, the Directors also considered the results of the 2024 ILAAP, the 2024 Going concern assessment, and the 2024 Recovery Plan.

 

i. Internal stress assessments

In total, three stresses were considered:

•              Market & Climate Change Stress which modelled the impacts of a severe global recession which leads to increased credit defaults and widespread credit rating downgrades, a low interest rate environment detrimentally impacting Net Interest Income and GBP sharply depreciating against USD which led to material increases in USD denominated Credit Risk Weighted Assets (CRWA);

•              Idiosyncratic Stress which modelled the impact of a material reduction in revenue driven by idiosyncratic events; and

•              A Combined Stress which modelled the impact of the Market & Climate Stress occurring concurrently with the Idiosyncratic Stress.

The Group's most recent ICAAP was approved by the Board  in early 2024 and thus its conclusions were based on a version of the corporate plan agreed by the Board during December 2023. As part of this Going Concern assessment, severe, but plausible Idiosyncratic, Market and Climate, and Combined stresses similar to those applied in the ICAAP are applied to the Group Corporate Plan which was Board approved during December 2024.

In all the stresses noted above the Group maintained sizeable surpluses to Total Capital Requirement.

 

ii. Reverse stress tests

The reverse stress tests are used to assess vulnerabilities of the Group and determine what extreme adverse events would cause the business to fail. Where any of these events are deemed to be plausible, the Group will adopt measures to mitigate the impact of such events where plausible.

The Group did not identify reasonably possible scenarios which could result in failure to continue in operational existence for a period of 12 months from when these financial statements are authorised for issuance.

 

iii. Conclusion

The Directors are of the view that:

•     There are no material uncertainties relating to events or conditions that cast significant doubt on the Company's and the Group's ability to continue as a going concern; and

•     The significant judgements and estimates made by management in determining whether or not the adoption of the going concern is appropriate are disclosed in Note 2.1. The forecasts and assumptions used for impairment assessments were the same used for the going concern assessment.

Accordingly, the financial statements have been prepared on a going concern basis.

 

e) Interest income and interest expense

 

i) Net interest income

Interest income and interest expense for all interest-bearing financial instruments, including interest accruals on related FX contracts, are recognised within Net interest income in the consolidated statement of profit or loss and other comprehensive income. The interest expense on financial liabilities and interest income on assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, is recognised using the effective interest method.

 

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.

 

ii) Net (loss)/gain on financial instruments measured at fair value through profit or loss

This balance comprises the interest income or interest expense on FX derivatives. It is measured at the contractual interest rate.

 

f) Fees and commission income

 

Fees and commission receivable which are not an integral part of the effective interest rate are recognised as income as the Group fulfils its performance obligations. Fees and commission income includes the following key revenue streams:

 

•     Account management and payment services: the Group's performance obligation in relation to account management services is to provide management or maintenance services to its current account holders. The revenue for these services is recognised over the life of the contract on a monthly basis as fees are received. Crown Agents Bank Ltd (CAB) provides the service.  Payment services fees relate to services offered by the Group to its clients by executing payment transactions. Revenue from providing services is recognised at a point in time when the services are rendered i.e. when the payments are executed.

•     Pension payment fees: pension payment fees are charged to pension companies for making payment to pension beneficiaries on their behalf. The Group acts as a principal in rendering these services to its clients. Revenue from providing services is recognised at a point in time when the services are rendered i.e., when the payments are executed.

•     Trade finance income

◦     Financial guarantee income: includes fixed fees earned for issuing financial guarantee contracts. The performance obligation of the Group is to provide financial assurance to the recipient of the guarantee in case of payment default. Revenue is recognised over the period of the contract term. The fees for providing financial guarantee services are charged and collected upfront.

◦     Income from letters of credit: the Group also receives fees in respect of the issue of letters of credit where the performance obligations are typically fulfilled towards the end of the client contract. Where it is unlikely that the letter of credit will be drawn down, it is recognised in fee and commission income over the life of the facility, rather than as an adjustment to the effective interest rate for loans expected to be drawn as they are short-term facilities. The fees for acceptance of letters of credits include fees and are charged and collected upfront. Other charges include advising fees, confirming bank fees, and bank charges, all of which are collected on the completion of the term of the letter of credit.

 

•     Electronic platform fees: fees for the services provided by the Group using its electronic platform to facilitate bulk payments to its clients. Revenue is recognised at a point in time when the services are rendered i.e., when the payments are executed.

 

•     Risk assessment fees: fees for enhanced due diligence services provided by the Group under fixed price contracts. Revenue is recognised over the period the service is provided. As the contracts are time-based contracts, revenue is determined on the time elapsed relative to the total period of the contract period. Fees are invoiced on the completion of services or on a quarterly basis. No significant element of financing is deemed present as the contract allows a credit term of 30 days.

 

•     FX Payment fees: commission earned for introducing a new client to a third party to facilitate cash payment transactions. Revenue is recognised at a point in time when the services are rendered by the third party.

 

g) Net foreign exchange gain

 

Net FX gain comprises the following:

•     Profit on settlement of FX contracts: these profits arise on FX Settlements involving the instruction of client payments to specific recipients. Under the Group's FX and payment services, clients agree to terms and conditions for all transactions at the time of signing a contract with the Group. On trade date the Group measures these cash flows at fair value, with further changes in fair value being recognised in profit or loss until the settlement of the contract. This balance includes both realised and unrealised FX income at year-end.

•     Remeasurement of non-sterling balances: Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions. At each period end foreign currency monetary items are translated to the functional currency using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined. FX gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of profit or loss except for FX gains and losses in relation to instruments measured at fair value through other comprehensive income (FVTOCI) which are recognised in other comprehensive income (OCI).

•     Fair value gains or losses on derivatives: this comprises the profits and losses on remeasurement of forward FX derivatives carried at fair value through profit and loss (FVTPL).

•     FX gain on payment transaction revenue: an FX gain or loss on payment transactions is the difference between the spot exchange rate between the functional currency and the foreign currency at the date of the payment transaction.

 

h) Foreign currency

 

(i) Functional and presentational currency

The Company's and the Group's functional and presentational currency is British Pound Sterling (£).

 

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

 

At each period end foreign currency monetary items are translated to the functional currency using the closing rate. Non‑monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

 

FX gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of profit or loss except for FX gains and losses in relation to instruments measured at fair value through other comprehensive income (FVTOCI) which are recognised in other comprehensive income (OCI).

 

(iii) Group companies

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated to the Group's presentational currency at exchange rates prevailing at the close of business on the balance sheet date. Income and expense items are translated at the exchange rates on the day of the transaction.

 

FX differences arising on the translation of a foreign operation are recognised in other comprehensive income and accumulated in the Foreign Currency Translation Reserve (FCTR).

 

 

(iv) Lack of exchangeability on currencies

If a currency becomes unexchangeable either for purposes of translating foreign currency transactions during the year or foreign operations and FX balance sheet balances to GBP at reporting date, management estimates the spot exchange rates for such currencies in line with IAS 21 requirements by using either:

 

•  an observable exchange rate without adjustment (e.g. exchange rates from the market sources or  independent providers like Reuters); and

• an estimation technique e.g. first subsequent available exchange rate from official independent sources.

The impact of this amendment has been assessed as not material to the Group at year-end.

 

 

i) Taxation

 

The tax expense for the period comprises current and deferred tax recognised in the reporting period. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. If current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Current or deferred tax assets or liabilities are not discounted.

 

Current tax

 

Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous years. Taxable profit differs from net profit as reported in profit or loss 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 end of the reporting period.

 

A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.

 

If a company within the Group incurs losses within the period, that company may surrender trading losses and other amounts eligible for relief from corporation tax to another Group company (the 'claimant company') for the claimant company to set off against its own profits for corporation tax purposes as permitted by HMRC.

 

Deferred tax

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax liability is not recognised if the temporary difference arises from the initial recognition of goodwill.

 

j) Intangible assets (excluding Goodwill)

 

Intangible assets (except for Goodwill) are stated at cost less accumulated amortisation and accumulated impairment losses. The residual value of such intangible assets is amortised, using the straight-line method, over their estimated useful lives, as follows:

 

•     Core accounting software - 12.5 years;

•     Other software - 5 years (subject to regular management assessment of the economic benefit of the asset); and

•     Brand/name - 50 years (acquired).

 

Costs associated with maintaining computer software are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

 

•     it is technically feasible to complete the software so that it will be available for use;

•     management intends to complete the software and use or sell it;

•     there is an ability to use or sell the software;

•     it can be demonstrated how the software will generate probable future economic benefits;

•     adequate technical, financial and other resources to complete the development and to use or sell the software are available; and

•     the expenditure attributable to the software during its development can be reliably measured.

 

Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Long-term software-as-a-service (SaaS) type contracts that do not meet the definition of an asset (rental of software) are expensed to profit and loss over the period of the contract in line with the benefits received.

 

k) Property, plant and equipment, and depreciation

 

Property, plant and equipment are stated in the statement of financial position at historic cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bring the asset to its working condition for its intended use. Depreciation commences when an asset becomes available for use and is calculated to write down assets to their residual value in equal instalments, on a straight-line basis over their estimated useful lives, as follows:

 

 

Leasehold improvements	Life of lease
Computer equipment	5 years
Fixtures and fittings	5 years
Artwork	20 years

 

l) Impairment of non-financial assets

 

At each statement of financial position date, non-financial assets not carried at fair value are assessed to determine whether there is an indication that the asset may be impaired, such as a decline in operational performance, geopolitical uncertainty, economic uncertainty i.e. rising interest rates and inflation, or changes in the outlook of future profitability among other potential indicators. If there is such an indication the recoverable amount of the asset is compared to the carrying amount of the asset.

 

Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identifiable cash inflows that are largely independent of the cash flows of other groups of assets. This should be at a level not higher than an operating segment. The recoverable amount of the asset is the higher of the fair value less costs to sell and value in use. Value in use is defined as the present value of the future cash flows before interest and tax obtainable as a result of the asset's continued use. These cash flows are discounted using a pre-tax discount rate that represents the current market risk-free rate and the risks inherent in the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. If the recoverable amount of the asset is estimated to be lower than the carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit or loss unless the asset has been revalued then the amount is recognised in other comprehensive income to the extent of any previously recognised revaluation. An impairment loss recognised on goodwill is not reversed in a subsequent period.

 

If an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the statement of profit or loss and other comprehensive income.

 

Goodwill is allocated on acquisition to the cash-generating unit expected to benefit from the synergies of the combination. Goodwill is included in the carrying value of cash-generating units for impairment testing.

 

Disposal groups held for sale are measured at the lower of their carrying amount and fair value less costs to sell. At initial classification of the disposal group as held for sale, the carrying amounts of all the individual assets and liabilities in the disposal group are measured in accordance with the Group's accounting policies. If fair value less costs to sell for the disposal group is below the aggregate carrying amount of all of the assets and liabilities included in the disposal group, the disposal group is written down. The impairment loss is recognised in profit or loss for the period.

 

m) Cash and cash equivalents

 

Cash and cash equivalents include cash in hand and deposits held at call with commercial or central banks and exposures to money market funds (transacted via open-ended investment companies). Cash equivalents are short-term highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

 

n) Goodwill

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group's interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of any non-controlling interest in the acquiree.

 

Goodwill is tested for impairment at the end of each accounting period.

 

On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill is accounted for at cost less accumulated impairment losses.

 

o) Financial instruments

 

Financial assets and financial liabilities are recognised in the Company and Group statements of financial position when the Company or Group becomes a party to the contractual provisions of the instrument.

 

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

 

(i) Financial assets

 

All regular way purchases or sales of financial assets are recognised and derecognised using trade date accounting. The trade date is the date of the commitment to buy or sell the financial asset.

All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

 

Classification of financial assets

 

Financial assets that meet the following conditions are measured subsequently at amortised cost:

•   the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

•   the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

Financial assets that meet the following conditions are measured subsequently at FVTOCI:

•   the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and

•   the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

Despite the foregoing, the Group and the Company may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if equity instruments are held as a strategic investment and not held with the intention to realise a profit.

 

By default, all other financial assets are measured subsequently at fair value through profit or loss.

The Group's financial assets measured at amortised cost consist of:

•           Cash and balances at central banks;

•           Loans and advances on demand to banks;

•           Other loans and advances to banks;

•           Other loans and advances to non-banks;

•           Investment in debt securities;

•           Other assets;

•           Accrued income; and

•           Unsettled transactions.

 

The nature of all financial items included in a given balance sheet line item is as shown in the respective note breakdown.

The Group's financial assets measured at FVTPL consist of money market funds and derivative financial instruments.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss.The Group's financial assets designated at FVTOCI comprise primarily its investment in equity securities, which are not held for trading. The equity instruments are held as a strategic investment and not held with the intention to realise a profit.

 

Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the Investment revaluation reserve. The cumulative gain or loss is not reclassified to profit or loss on disposal of the equity investments, instead, it is transferred to retained earnings.

 

Dividends on these investments in equity instruments are recognised in profit or loss in accordance with IFRS 9 unless the dividends clearly represent a recovery of part of the cost of the investment. Dividends are included in the 'Other operating income' line item in the statement of profit or loss and other comprehensive income.

 

Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost (Note 1 (e)) above. Interest income is recognised in the statement of profit or loss and other comprehensive income in the 'Net interest income' line item (Note 4).

 

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

 

(ii) Financial liabilities

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the contractual substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

 

Classification of financial liabilities

All financial liabilities are measured subsequently at amortised cost using the effective interest method or at fair value through profit and loss.

 

Financial liabilities at fair value through profit and loss

The Group's financial liabilities at fair value through profit and loss consist of derivative liabilities (see below for policy on derivative financial instruments).

Financial liabilities at fair value through profit and loss are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss.

 

Financial liabilities at amortised cost

The Group's financial liabilities at amortised cost consist of client accounts, unsettled transactions and other liabilities such as trade creditors, funds received in advance, transactions credited by third-party nostro providers and other creditors.

Financial liabilities at amortised cost are measured subsequently at amortised cost using the effective interest method (see Note 1(e) above).

 

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

 

(iii) Derivative financial instruments

The Group's derivatives policy only permits dealing in forward FX contracts to hedge, to provide services to clients or to facilitate cash management.

Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value at the reporting date.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.

Hedge accounting is not applied.

 

(iv) Offsetting

Financial assets and liabilities are offset and the net amounts presented in the financial statements only 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.

 

(v) Equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Repurchase of the Company's own equity instruments is recognised and deducted directly from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

 

(vi) Financial guarantee contracts and letter of credit confirmations/bill acceptances - provisions

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

 

Letters of credit confirmations/bill acceptances

A letter of credit confirmation/acceptance is a letter from an issuing bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. The Group confirms/accepts the letters of credit issued by an issuing bank and charges fixed fees which are received either in advance or at a later date.

Fees relating to financial guarantee contracts and letter of credit confirmations / bill acceptances issued by the Group can be received upfront and these fees are amortised on a straight-line basis to income over the year. The receivable increases over the life of the contract as service is performed with the corresponding recognition of income in the statement of profit or loss. All financial guarantee contracts issued by the Group are subsequently measured at the higher of:

 

•     the amount of the loss allowance determined in accordance with IFRS 9; and

•     the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the Group's revenue recognition policies.

 

Such amounts are presented as provisions on the statement of financial position and the remeasurement is included within the reversal of impairment/(impairment loss) on financial assets at amortised cost.

 

(vii) Impairment of financial assets

The Group recognises loss allowances for Expected Credit Loss (ECL) in accordance with IFRS 9 on financial assets.

Equity investments are not subject to impairment, consistent with IFRS 9.

ECLs are required to be measured through a loss allowance at an amount equal to:

 

•              12-month ECL (referred to as Stage 1); or

•              full lifetime ECL (referred to as Stage 2 and Stage 3).

 

For Stages 1 and 2, interest revenue is calculated on the gross carrying amount. Under Stage 3, interest revenue is calculated based on the net carrying amount (gross amount less ECL).

 

The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. For these financial assets, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

 

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

 

Significant increase in credit risk

 

The Group monitors all financial assets, financial guarantee contracts and letter of credit confirmations/bill acceptances that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Group will measure the loss allowance based on lifetime rather than 12-month ECL.

 

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered includes the future prospects of the industries in which the Group's debtors operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group's core operations.

 

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

•    an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;

•    significant deterioration in external market indicators of credit risk for a particular financial instrument, e.g., a significant increase in the credit spread, the credit default swap prices for the debtor, or the length of time or the extent to which the fair value of a financial asset has been less than its amortised cost;

•    existing or forecast adverse changes in business, financial or economic conditions that are  expected to cause a significant decrease in the debtor's ability to meet its debt obligations;

•       an actual or expected significant deterioration in the operating results of the debtor;

•       economic uncertainty i.e., inflation and rising interest rates;

•       geopolitical uncertainty;

•       significant increases in credit risk on other financial instruments of the same debtor; and

•       an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.

 

Irrespective of the outcome of the above assessment, the Group assumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:

 

 

•   the financial instrument has a low risk of default;

•   the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and

•   adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

 

The Group considers a financial asset to have low credit risk when the asset with a credit rating of 'investment grade' in accordance with the globally understood definition, and a high credit risk when the asset has a credit rating of 'sub-investment grade'. Throughout the lifetime of the account, the Group monitors the behaviour of the asset based on its financial position and assesses whether the asset has any amounts past due. The Group assigns a 'performing' status when the counterparty has a strong financial position and there is no past due amounts, and a 'non-performing' status when there is a degradation in the financial position and subsequent arrears.

 

For financial guarantee contracts and letter of credit confirmations/bill acceptances, the date that the Group becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument for impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition of a financial guarantee contract, the Group considers the changes in the risk that the specified debtor will default on the contract.

 

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

 

Definition of default

 

The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet the earlier of either of the following criteria are generally not recoverable:

 

•        when there is a breach of financial covenants by the debtor; or

•        information developed internally or obtained from external sources indicates that the debtor  is unlikely to pay its creditors, including the Group, in full.

 

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

 

Write-off policy

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Group's recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

 

Measurement and recognition of ECLs

 

ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Group under the contract and the cash flows that the Group expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset's Effective Interest Rate (EIR).

 

The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. As for the exposure at default, for financial assets, this is represented by the assets' gross carrying amount at the reporting date; for financial guarantee contracts and letter of credit confirmations/bill acceptances, the exposure includes the amount of guaranteed debt that has been drawn down as at the reporting date, together with any additional guaranteed amounts expected to be drawn down by the borrower in the future by default date determined based on historical trend, the Group's understanding of the specific future financing needs of the debtors, and other relevant forward-looking information.

 

For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate.

 

For a financial guarantee contract and letter of credit confirmations/bill acceptances, as the Group is required to make payments only in the event of a default by the debtor in accordance with the terms of the instrument that is guaranteed, the expected loss allowance is the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the Group expects to receive from the holder, the debtor, or any other party.

 

If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to 12-month ECL at the current reporting date.

 

The Group measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset's expected cash flows using the asset's original EIR, regardless of whether it is measured on an individual basis or a collective basis.

 

Presentation of ECL

 

Loss allowances for ECL are presented in the statement of financial position as follows:

•     for financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;

•     financial guarantee contracts: as a provision.

The Group recognises an increase or decrease in impairment in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

 

p) Employee benefits

 

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements, medical insurance and defined contribution pension plans. The Group has implemented a one-off Free Share Scheme following the 2023 listing and a Matching/Partnership Share Scheme, both schemes for all employees. The Group also provides share incentive schemes to Executive Directors and certain other key employees or senior management as follows:

 

•     Long-Term Incentive Plans;

•     a Matching/Partnership Share Incentive Plan (all employees);

•     a Free Shares Plan (all employees);

•     the rights to invest in restricted shares of Group companies*; and

•     the rights to restricted share units of Group companies*.

 

*               Applicable to 2023 only.

 

Short-term benefits

 

Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

 

Pension contributions

 

All pension contributions are accounted for as defined contributions and paid over on a monthly basis. No liability for pension entitlement accrues to the Group.

 

Share-based payment arrangements

 

The Group provides share-based payment arrangements to certain employees (as noted above).

The awards are equity-settled arrangements and are measured at fair value of the equity instruments at the grant date. The fair value is expensed on a straight-line basis over the vesting period. The fair value of the employee services received in exchange for the grant of the awards is recognised in employee benefit expenses together with a corresponding increase in equity (retained earnings), over the period in which the service and the performance conditions are fulfilled (the vesting period). The grant date fair value is not adjusted for subsequent changes in the fair value of the equity instruments.

 

Long-term incentive plan (LTIP) awards are subject to performance conditions. LTIP awards granted in 2023 and 2024 are subject to both market performance conditions (relating to Total Shareholder Returns) and non-market performance conditions (relating to Earnings Per Share).

 

Service conditions are not taken into account when determining the grant date and for fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. Any other conditions attached to an award, but without an associated service requirement, are non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award. Share awards vest when service conditions are met.

 

Where the equity-settled arrangements are modified before the vesting date, and are of benefit to the employee, the incremental fair value is recognised over the period from the date of modification to the date of vesting. If modified after vesting, it is recognised immediately. Where a modification is not beneficial to the employee there is no change to the charge for the share-based payment. Settlement and cancellations are treated as an acceleration of vesting and the unvested amount is recognised immediately in the statements of profit or loss and other comprehensive income.

 

The Group has no cash-settled arrangements.

 

q) Investments in subsidiaries

 

Investments in subsidiaries are non-monetary assets measured at cost less impairment. Refer to Note 2 for the judgements and estimates involved in the impairment assessment.

 

r) Discontinued operations and disposal group held for sale

 

Discontinued operations and disposal group held for sale is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

•           represents a separate major line of business or geographical area of operation;

•           is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation; or

•           is a subsidiary acquired exclusively with a view to resale.

 

Classification as a discontinued operation occurs upon disposal, abandonment or when the operations meet the criteria to be classified as held for sale. This condition is regarded as satisfied only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year of the date of classification. Property, plant and equipment, and intangible assets, once classified as held for sale, are not depreciated or amortised.

 

Disposal groups classified as held for sale are measured at the lower of the carrying value and the fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than continued use. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.

 

When the Group ceases to have control of an undertaking (disposal group), it is at this point that the Group ceases to consolidate the operations and any gain or loss on disposal is recognised in the Group consolidated statement of profit or loss. In addition, any movements previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

 

s) Provisions and contingent liabilities

 

Provisions are recognised in respect of present obligations arising from past events where it is probable that outflows of resources will be required to settle the obligations and they can be reliably estimated.  Provisions also comprises dilapidation provision on the leased office space and an ECL provision in relation to off balance sheet assets (i.e  financial guarantees, Working Capital commitments and letters of credit confirmations / bill acceptances).

 

Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or those present obligations where the outflows of resources are uncertain or cannot be measured reliably. Contingent liabilities are not recognised in the consolidated and Company financial statements but are disclosed unless they are remote.

 

t) Share capital

 

On issue of ordinary shares, any consideration received is included in equity net of any directly attributable transaction costs.

 

u) Earnings per share

 

i. Basic earnings per share

 

Basic earnings per share is calculated on the Group's profit or loss after taxation attributable to the owners of the parent and based on the weighted average of ordinary shares at the end of the year.

 

ii. Diluted earnings per share

 

Diluted earnings per share is calculated on the Group's profit or loss after taxation attributable to owners of the parent and based on the weighted average of ordinary shares at the end of the year and the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Performance-based employee share options are treated as contingently issuable shares because their issue is contingent upon satisfying specified conditions in addition to the passage of time.

 

v) Dividends

 

Dividends are recognised in the financial statements in the period they are paid.

 

w) Leases (Group as lessee)

 

The Group assesses whether a contract is, or contains, a lease, at inception of the contract. The Group recognises a right-of-use asset and corresponding lease liabilities with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (such as small items of fixtures and equipment and value of less than £10,000). For these leases, the Group recognises the lease payments as an Operating Expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

 

The lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

 

The incremental borrowing rate depends on the term, currency and start date of the lease and is determined based on a series of inputs including: the risk-free rate based on government bond rates; a country-specific risk adjustment; a credit risk adjustment based on bond yields; and an entity-specific adjustment when the risk profile of the entity that enters into the lease is different to that of the Group.

 

Lease payments included in the measurement of the Group's lease liabilities are fixed lease payments less any lease incentives receivable.

 

The lease liabilities are presented as a separate line in the consolidated statement of financial position.

 

The lease liabilities are subsequently measured by increasing the carrying amount to reflect interest on the lease liabilities (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The right-of-use assets comprise the initial measurement of the corresponding lease liabilities, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs and estimations of any dilapidation obligations. They are subsequently measured at cost less accumulated depreciation and impairment losses.

 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position.

 

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'impairment of non-financial assets' policy.

 

In line with IFRS 9, a liability is derecognised when the obligation in the contract is extinguished or cancelled, which in the context of the lease liabilities, they are derecognised when the Group and its subsidiaries have been legally released from the obligations by the creditors.

 

The dilapidation provision is recognised in accordance with IAS 37 when a present obligation exists due to a lease agreement requiring restoration of premises. It is initially measured at the best estimate of the expected costs to settle the obligation, discounted to present value if the time value of money is material. Subsequently, the provision is reviewed at each reporting date and adjusted for changes in estimates, such as cost revisions or discount rate changes. If initially discounted, the unwinding of the discount is recognised as an interest expense in profit or loss.

 

x) New and revised IFRS accounting standards in issue but not yet effective

 

At the date of authorisation of these consolidated financial statements, the Group has not applied the following new and revised IFRS Accounting Standards that have been issued but are not yet effective.

 

Accounting standard*		Details of amendment
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates:		Lack of Exchangeability (Issued August 2023). The standard is effective 1 January 2025.
Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures effective 1 January 2026		The amendments provide guidance related to: •     Financial assets with ESG-linked features; •     Settlement of financial liabilities by electronic payments.
New sustainability standards issued by the International Sustainability Standards Board (ISSB) effective 1 January 2026 in the UK		The ISSB issued its first two sustainability reporting standards on 26 June 2023. This included: •     General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1), the core framework for the disclosure of material information about sustainability-related risks and opportunities across an entity's value chain. •     Climate-related Disclosures (IFRS S2), the first thematic standard issued that sets out requirements for entities to disclose information about climate-related risks and opportunities.
IFRS 18 Presentation and Disclosure in Financial Statements effective 1 January 2027		IFRS 18 affects all companies, bringing significant changes to how companies present their income and what information companies need to disclose, and making certain 'non-GAAP' measures part of audited financial statements for the first time. There will be three new categories of income and expenses, two defined income statement subtotals and one single note on management-defined performance measures.
IFRS 19 Reduced Disclosures for Subsidiaries		To simplify and reduce the cost of financial reporting by subsidiaries while maintaining the usefulness of their financial statements. This standard is not applicable to the Group consolidated financial statements.

 

*               Anything not mentioned in the above table is not relevant.

 

The Group does not expect that the adoption of the Standards listed above will have a material impact on the consolidated and Company Financial Statements of the Group and the Company in future periods, with the exception of IFRS 18 where the impact has yet to be determined.