Registered number: 08720992
MONESE LTD
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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MONESE LTD
CONTENTS
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Directors' responsibilities statement
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Independent auditor's report
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Consolidated statement of profit or loss
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Consolidated statement of other comprehensive income
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Consolidated statement of financial position
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Company statement of financial position
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Consolidated statement of changes in equity
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Company statement of changes in equity
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Consolidated statement of cash flows
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Notes to the consolidated financial statements
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MONESE LTD
COMPANY INFORMATION
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Blick Rothenberg Audit LLP
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Chartered Accountants & Statutory Auditor
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MONESE LTD
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their strategic report for Monese Ltd (“Monese”) for the year ended 31 December 2022.
The principal activity of Monese is to provide affordable retail financial products and services to customers in a number of countries through its own financial services platform and through its network of partners. In particular, Monese is focused on providing its customers with current account and various related payment services, including multi-currency current accounts, debit cards, a cash deposit network and other international payment services, such as foreign exchange and remittance services.
Business review and future developments
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Monese launched its first mobile banking services in late 2015, initially in the UK and later across a range of European markets. Monese is now available to customers in 31 countries with a significant proportion of its customers using the service as their primary banking account, receiving their salary and making payments and everyday purchases on their account or on a Monese debit card.
In October 2022 Monese took a significant step with the transfer of certain customer accounts onto its own EMI licence for a portion of its UK customers. This process will be completed with the remaining accounts and balances transferring in 2024.
As part of the development of the business in 2022, Monese invested to build its Platform business with the development of an integrated end-to-end banking software solution, securing substantial customer wins with large financial institutions. This business has been identified as a strategic growth area for the group. It is envisioned that institutional customers will be able to use the Platform purely as a technology subscription, or with added operational support such as onboarding and customer support.
The group’s revenue for the year ending 31 December 2022 was £27.7m (2021: £17.6m), growing as a result of growth in its active customer numbers, primarily in the UK.
Direct costs increased significantly for the year to £26.8m (£2021: £17.2m), along with revenue, due to increased customer volumes and customer acquisition costs.
Administrative expenses have increased to £31.3m (2021: £18.5m) as the group continued to invest in platform technology and further develop its product and service offering. The group’s headcount averaged 349 employees during the year (2021: 251).
The loss on ordinary activities after taxation increased to £30.5m in the year (2021: loss of £18.0m as restated), the increase year on year as a result of the factors noted above.
While additional losses are anticipated with further growth in the business, the directors believe that the group will continue to be able to access the funding needed to support these anticipated future losses and planned growth on account of the group’s business performance to date and its prospects.
At the year end, the group had cash in hand of £15.6m (2021: £5.8m). However, of this, £4.0m represents funds safeguarded on behalf of customers to which the group issued e-money under its EMI license.
There is material uncertainty on the success of raising future fundraising and therefore the going concern status of the company, which is covered further below and in Note 2.4 to the financial statements.
The group continued to invest in software development and recognising intangible assets created as a result. As at 31 December 2022 intangible assets of £9.0m (2021: £8.0m) had been recognised.
In the financial year ended 31 December 2022, the group raised equity funding of £42.3m with the final round of its Series C funding in January 2022 and a strategic investment from HSBC in September 2022.
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MONESE LTD
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
As 2023 unfolds, the strategic direction of the group remained on course. The costs incurred in 2022 were the result of considerable investment in building the banking platform. Our largest customers have immediately recognised benefits from this investment with accelerated development of their plans. On the retail side of the business, the company is moving to improve the unit economics of the Monese offering, reducing customer acquisition costs and enhancing profitability. Combined, the group is on track to achieve its financial and strategic objectives.
Financial key performance indicators
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The directors monitor customer acquisition, retention and activity numbers, as well as revenue, costs, earnings, cash burn rates and the remaining available funding runway, as the key performance indicators of the group. While the group incurred a loss in the financial period, this was as anticipated and in line with the group’s business plan.
The directors also monitor the net asset position of the group. The net asset position of the group as at 31 December 2022 increased significantly to £8.3m (2021: £3.0m net liability), with losses incurred in 2022 offset by the substantial series C equity investment from shareholders. As mentioned in the business review section, the group continues to secure additional funding and working capital to support the business.
Other key performance indicators
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The directors are committed to promoting the health, safety and welfare of staff members and ensure appropriate measures are undertaken in this regard.
The directors are mindful of environmental issues and have sought to minimise the impact of the group's activities on the environment.
Principal risks and uncertainties
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The group’s principal risks relate to the volume and nature if its customers’ transaction activity, the resilience of the group’s platform and those of its partners, the regulatory environment in which the group operates, and funding.
The directors remain confident in the group's long-term strategy. The current focus is therefore on achieving a higher mix of organic growth while continuing to invest in new product and market initiatives to drive the future growth and profitability of the business. In parallel, the directors continue to implement changes with the aim of lowering costs, improving working practices and improving liquidity
In relation to operating risks and customer transaction activity, the group’s revenue is dependent on customers remaining active users of their Monese accounts to make regular payments and card transactions. The group builds and promotes products and services that provide functionality to facilitate such activity to support its customers and to mitigate the risk that active customer numbers or average transaction volumes fall to a non-viable level.
As a financial services provider, in common with all other firms in this industry, Monese is subject to the risk of criminal activity and money laundering. In order to mitigate such risks, the group has developed robust ‘know your customer’ and anti money laundering policies and procedures and continues to invest to minimise these risks and has done so from its inception as a group.
In relation to platform resilience, the group faces risks associated with potential system interruptions arising on its own platform or of those of its key partners. The group’s operations have a high dependency on a number of third-party partners, whose own platform resilience is critical for the continuity of a number of the group’s core operations. The group employs specialists to monitor and deploy processes and procedures to help mitigate such risks, as well as mitigate the potential risk of a data- or cyber-related security breach that could adversely impact the ability of the group to conduct its operations.
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MONESE LTD
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
The group conducts activities in regulated financial service markets and is therefore subject to the risk of regulatory changes potentially affecting the conduct or its operations in multiple jurisdictions. The group’s risk and compliance functions conduct regular horizon scanning activities to try to anticipate such changes to ensure that the business is fully compliant with all rules and regulations.
Given its stage of evolution, the group is reliant on access to sufficient amounts of new funding to finance its current operations and growth plans. The group faces the risk that should such funding not be available, the ability of the group to conduct its operations in their current form will be adversely and potentially severely affected. The group successfully raised equity funding in excess of £42.3m in the period and Management believes the company will continue to be successful in obtaining the capital required to meet its future funding needs, as well as providing sufficient liquidity to fund operations for at least twelve months from the date of approval of these accounts.
As the going concern status of the company is dependent upon securing funds and upon the performance of the business against forecasts and cash flow projections, the directors are of the opinion that the matters described above represent material uncertainties, as actual outcomes may differ to expectations.
Notwithstanding these material uncertainties, the directors have a reasonable expectation the company will continue to be successful raising additional funds to implement its strategy on the path to future profitability, and that the company has access to adequate resources to fund operations for at least twelve months from the date of approval of these financial statements as referred to in Note 2.4 to the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Post balance sheet events
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The group continued to develop in 2023, with a number of strategic initiatives and commercial opportunities. In summary these were:
∙Formalising the development of the platform business with the creation of a wholly-owned, unregulated subsidiary (XYB Ltd.) and the transfer of the platform business from Monese Ltd. to this company. The ultimate aim will be the creation of a holding company to enable the regulated and unregulated parts of the group to cooperate but manage risks independently.
∙Completing the delivery of a software platform, with a considerable one-off licence fee that accelerated revenues and significantly improved the cash position of the group.
∙Signing a partnership with a leading systems integrator for some services we provide to platform customers and to increase the delivery bandwidth of the platform business. This also accelerated revenue and improved the cash position of the group.
There have been no other significant events affecting the group since the year end.
This report was approved by the board and signed on its behalf.
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MONESE LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors present their report and the financial statements for the year ended 31 December 2022.
The loss for the year, after taxation, amounted to £30,515,065 (2021 - loss restated £18,043,256).
The directors do not recommend the payment of a dividend (2021: £nil)
The directors who served during the year were:
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L L Subroyen (resigned 25 April 2023)
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A Choudrie (appointed 28 February 2022, resigned 21 September 2023)
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A Economou (appointed 29 March 2022)
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M Vallance (appointed 5 December 2022)
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S Y W Chang (appointed 21 September 2023, resigned 21 September 2023)
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Research and development activities
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During the year, the group spent £4.2m (2021: £6.0m) on research and development activities, of which £2.8m (2021: £5.7m) has been capitalised.
These accounts to 31 December 2022 do not include potential corporation tax relief in respect of qualifying research and development activities undertaken during the year. The company is subject to an open tax enquiry with regards to its R&D claim for the years ended 31 December 2018 to 31 December 2020. The company is confident of the validity of its prior claims, however as the enquiry is ongoing and the outcome presently uncertain the company has not yet submitted its 2022 claim nor recorded the potential relief in these accounts. Note 28 to the financial statements discloses the contingent liability in respect of the open enquiry.
Matters covered in the Strategic Report
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As permitted by s414c(11) of the Companies Act 2006, the directors have elected to disclose information, required to be in the directors' report by Schedule 7 of the 'Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008', in the strategic report.
Disclosure of information to auditor
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Each of the persons who are directors at the time when this directors' report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the company and the group's auditor is unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company and the group's auditor is aware of that information.
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MONESE LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
This report was approved by the board and signed on its behalf.
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MONESE LTD
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
The directors are responsible for preparing the group strategic report, directors' report and the consolidated financial statements, in accordance with applicable law.
Company law requires the directors to prepare consolidated financial statements for each financial year. Under that law they have elected to prepare the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the UK and the parent company financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 'Reduced Disclosure Framework' (FRS 101).
Under company law the directors must not approve the consolidated financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing each of the consolidated and parent company financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make judgements and estimates that are reasonable and prudent;
∙for the consolidated financial statements, state whether they have been prepared in accordance with IFRS as adopted by the UK, subject to any material departures disclosed and explained in the financial statements;
∙for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙assess the group and company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
∙use the going concern basis of accounting unless they either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
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MONESE LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MONESE LTD
We have audited the financial statements of Monese Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of financial position, the company statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity, the company statement of changes in equity and the related notes, including a summary of significant accounting policies set out on pages 25 - 38. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
∙the financial statements give a true and fair view of the state of the group's and the parent company's affairs as at 31 December 2022 and of the group's loss for the year then ended;
∙the group financial statements have been properly prepared in accordance with IFRSs as adopted by the United Kingdom;
∙the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
∙the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. 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 the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
Material uncertainty related to going concern
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We draw attention to note 2.4 in the financial statements, which indicates that the company is in the process of seeking additional funds from investors. These events or conditions, along with the other matters as set forth in note 2.4, indicate that material uncertainties exist that may cast significant doubt on the group's and company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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MONESE LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MONESE LTD (CONTINUED)
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. 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. 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.
Opinion on other matters prescribed by the Companies Act 2006
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In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the group strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the group strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
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 its environment obtained in the course of the audit, we have not identified material misstatements in the group 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:
∙adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
∙the parent company financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors' remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement on page 8, 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 group's and 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 group or the parent company or to cease operations, or have no realistic alternative but to do so.
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MONESE LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MONESE LTD (CONTINUED)
Auditor's responsibilities for the audit of the financial statements
objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
∙the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
∙we identified the laws and regulations applicable to the group through discussions with directors and other management, and from our commercial knowledge and experience of the sector;
∙we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the group, including the Companies Act 2006, e-money regulations, taxation legislation and data protection, anti-bribery, employment and health and safety legislation;
∙we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management; and
∙identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit
We assessed the susceptibility of the group’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
∙making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
∙considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
∙performed analytical procedures to identify any unusual or unexpected transactions;
∙reviewed a sample of journal entries to identify unusual transactions;
∙assessed whether judgements and assumptions made in determining the accounting estimates set out in note 4 were indicative of potential bias; and
∙investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures
which included, but were not limited to:
∙agreeing financial statement disclosures to underlying supporting documentation;
∙reading the minutes of meetings of those charged with governance;
∙enquiring of management as to actual and potential litigation and claims; and
∙reviewing correspondence with HMRC and relevant regulators.
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MONESE LTD
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MONESE LTD (CONTINUED)
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 for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's 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. 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.
Jaykishan Shah (senior statutory auditor)
for and on behalf of
Blick Rothenberg Audit LLP
Chartered Accountants
Statutory Auditor
16 Great Queen Street
Covent Garden
London
WC2B 5AH
Date: 29 December 2023
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MONESE LTD
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2022
The notes on pages 25 to 65 form part of these financial statements.
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MONESE LTD
STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Items that will or may be reclassified to profit or loss:
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Exchange gains arising on translation on foreign operations
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Total comprehensive income
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Total comprehensive income attributable to:
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The notes on pages 25 to 65 form part of these financial statements.
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MONESE LTD
REGISTERED NUMBER: 08720992
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
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Property, plant and equipment
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Trade and other receivables
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Trade and other receivables
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Cash and cash equivalents
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Trade and other liabilities
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Trade and other liabilities
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MONESE LTD
REGISTERED NUMBER: 08720992
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2022
Issued capital and reserves attributable to owners of the parent
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Share based payment reserve
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The financial statements on pages 13 to 65 were approved and authorised for issue by the board of directors and were signed on its behalf by:
The notes on pages 25 to 65 form part of these financial statements.
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MONESE LTD
REGISTERED NUMBER: 08720992
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
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Property, plant and equipment
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Other non-current investments
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Trade and other receivables
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Trade and other receivables
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Cash and cash equivalents
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Trade and other liabilities
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Trade and other liabilities
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MONESE LTD
REGISTERED NUMBER: 08720992
COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2022
Issued capital and reserves attributable to owners of the parent
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Share based payments reserve
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The company's loss for the year was £30,408,405 (2021 loss restated - £18,024,763).
The financial statements on pages 13 to 65 were approved and authorised for issue by the board of directors and were signed on its behalf by:
The notes on pages 25 to 65 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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Share based payments reserve
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Total attributable to equity holders of parent
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At 1 January 2022 (as previously stated)
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Prior year adjustment (see note 29)
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At 1 January 2022 (as restated)
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Comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Share based payments charge
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Total contributions by and distributions to owners
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The notes on pages 25 to 65 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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Share based payments reserve
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Total attributable to equity holders of parent
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Comprehensive income for the year
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Loss for the year (as restated see note 29)
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Total comprehensive loss for the year
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Total comprehensive income for the year (as restated)
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Contributions by and distributions to owners
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Share based payments charge as restated (see note 29)
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Total contributions by and distributions to owners (as restated)
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At 31 December 2021 (as restated)
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The notes on pages 25 to 65 form part of these financial statements.
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|
MONESE LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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Share based payments reserve
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At 1 January 2022
(as previously stated)
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Prior year adjustment (see note 29)
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At 1 January 2022
(as restated)
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Comprehensive income for the year
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Total comprehensive income for the year
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Contributions by and distributions to owners
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Share based payments charge
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Total contributions by and distributions to owners
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|
|
The notes on pages 25 to 65 form part of these financial statements.
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|
MONESE LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
Share based payments reserve
|
|
|
|
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|
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|
|
|
|
|
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|
|
|
|
|
Comprehensive income for the year
|
|
|
|
|
|
|
Loss for the year (as restated see note 29)
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Total comprehensive income for the year (as restated)
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Contributions by and distributions to owners
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Share based payments costs (as restated (see note 29)
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Total contributions by and distributions to owners
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At 31 December 2021 (as restated)
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The notes on pages 25 to 65 form part of these financial statements.
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|
MONESE LTD
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Cash flows from operating activities
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Depreciation of property, plant and equipment
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Amortisation of intangible fixed assets
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(Gain)/loss on sale of property, plant and equipment
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Share-based payment expense
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Movements in working capital:
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Increase in trade and other receivables
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(Increase)/decrease in inventories
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Increase/(decrease) in trade and other payables
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Cash outflow from operations
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Income taxes received/(paid)
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Net cash used in operating activities
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Cash flows from investing activities
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Investment in subsidiaries
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Purchases of property, plant and equipment
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Sale of property, plant and equipment
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Investment in intangible assets
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Net cash used in investing activities
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|
MONESE LTD
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
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Cash flows from financing activities
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Payment of lease liabilities
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Net cash from financing activities
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Net cash increase/(decrease) in cash and cash equivalents
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Cash and cash equivalents at the beginning of year
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Cash and cash equivalents at the end of the year
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The notes on pages 25 to 65 form part of these financial statements.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Monese Ltd (the 'company') is a limited company incorporated in England. The company's registered office is at Eagle House, 163 City Road, London, EC1V 1NR. These consolidated financial statements comprise the company and its subsidiaries (collectively the 'group' and individually 'group companies'). The parent company financial statements present information about the company as a separate entity and not about its group.
The group is primarily involved in acting as an Electronic Money Directive ("EMD") agent, which comprises the provision of current accounts, with debit cards and payment services.
These financial statements are presented in pounds sterling (£) because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out below.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these group financial statements.
2.Accounting policies
The group financial statements consolidate those of the company and its subsidiaries. The parent company financial statements present information about the company as a separate entity and not about its group.
The consolidated financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with International Financial Reporting Standards as adopted in the United Kingdom ("UK-adopted IFRS"). The separate financial statements of the parent company are prepared in accordance with the Companies Act 2006 as applicable to companies using Financial Reporting Standard 101 (FRS 101).
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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New IFRS Accounting standards and interpretations
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a) Standards issued and effective beginning on or after 1 January 2022
There are no new standards, IFRIC interpretations and amendments that are effective for the first time for the financial year beginning 1 January 2022 that had a material impact on the group. The details are below:
∙Reference to the Conceptual Framework - Amendments to IFRS 3
∙Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
∙Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
Annual Improvements to IFRS Accounting Standards 2018 - 2020 cycle
∙IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter
∙IFRS 9 Financial instruments - Fees in the '10 per cent' test for derecognition of financial liabilities
∙IAS 41 Agriculture - Taxation in fair value measurements
These amendments had no impact on the consolidated financial statements of the group.
b) Standards issued but not yet effective
The IFRS standards and IFRIC interpretations that are issued, but not yet effective, up to the date of issuance of the group's financial statements are disclosed below. The group intends to adopt standards, if applicable, when they become effective. The details are below:
∙IFRS 17: Insurance Contracts
∙Amendments to IAS 1: Classification of Liabilities as Current or Non-Current
∙Amendments to IAS 8: Accounting Policies
∙Changes in Accounting Estimates and Errors, Amendments to IAS 12: Income Taxes
The directors do not expect that the adoption of the new standards and amendments to the existing standards listed above will have a material impact on the consolidated financial statements of the group in future periods.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company and its subsidiaries. Control is achieved where the parent has sufficient power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Consolidation of a subsidiary begins when the company obtains control over the subsidiary and ceases when the company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the company gains control until the date when the company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the group are eliminated in full on consolidation.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
The group has incurred a loss for the year of £30.5m (2021 restated loss: £18.0m) and is forecast to continue incurring losses, in line with its business plan. The group successfully raised over £40m during the year through its equityt funding round, and as a result at 31 December 2022 the group's net assets increased to £8.3m (2021: £3.0m net liabilities) with cash in hand of £15.6m (2021: £5.8m).
Performance of the group has continued to be in line with plan in the post year-end period, with focus on achieving revenue growth, path to future profitability, and enhancing value through new and existing strategic partnerships. Whilst cash-burn is closely managed and expected to reduce, Management believe the company will need to raise additional funds in 2024 to provide sufficient liquidity to continue to finance the planned growth of the group in line with the group’s business plan. Discussions are underway with investors and financiers for debt or equity funding, or a combination thereof. Management are hopeful that this process will result in raising sufficient funds to continue to execute its business plans as intended.
Whilst the directors could also consider curtailing growth ambitions and development works to reduce cash-burn in the short-term if this proves necessary, the status of the company as a going concern is dependent upon securing future additional funding and upon the continued performance of the business against budgets, forecasts and cash flow projections. The group faces the risk that should such funding not be available, the ability of the group to conduct its operations in their current form will be adversely and potentially severely affected. The directors are of the opinion that the matters described above represent material uncertainties to the going concern status of the group, as actual outcomes may significantly differ to expectation.
Notwithstanding the material uncertainties, the directors have a reasonable expectation that the group will have adequate resources to continue in operational existence and meet its liabilities as they fall due for the foreseeable future, being a period of at least twelve months from the date of approval of these financial statements. In making this assessment, the directors have considered the operations of the group in the post year-end period, as well as considering impact of current economic and political uncertainty and forecasts for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the group, liabilities incurred by the group to the former owners of the acquiree and the equity interests issued by the group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:
∙deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively;
∙liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date (see note 2.13); and
∙assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note 2.5) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment 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 its carrying amount, 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 based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Revenue comprises of subscription fees (recognised over time) and transaction fees (recognised at point in time) in the normal course of business, net of discounts and other sales related taxes.
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over a product or service to a customer.
The group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the transaction prices for the time value of money.
Subscription fees
Subscription fee income represents monthly and annual subscription fees for customers. Subscription fees received in advance are initially recognised as deferred income and are recognised as revenue in the income statement on straight line basis over the period of the subscription.
Transaction fees
Card and payments income represents transactional related income including interchange fees receivable from the group’s card issuing partner, fair usage fees for cash withdrawals outside of customer plans allowances, and top up fees and is recognised at the time of the transaction.
Banking as a service income
Income generated from the platform represents license, support services and recharges fees receivable from the corporate customers. License fees relate to monthly fees pre-determined in the contract, these are invoiced each month and are recognised on a straight line basis, any uninvoiced amounts are recognised in accrued or deferred income. Support services and recharges fees relate to continuous development, consultancy and hosting services provided to the customers as required and are recognised at the time of the transaction.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
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(i) The group as a lessor
|
Amounts due from lessees under finance leases are recognised as receivables at the amount of the group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the group's net investment outstanding in respect of the leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
When the group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
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(ii) The group as a lessee
|
The group assesses whether a contract is or contains a lease, at inception of a contract. The group recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements 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. 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 asset are consumed.
The lease liability is 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. [Provide an explanation how the incremental borrowing rate is determined].
Lease payments included in the measurement of the lease liability comprise:
∙fixed lease payments (including in-substance fixed payments), less any lease incentives;
The lease liability is included in the 'Loans and borrowings' line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (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 liability, lease payments made at or before the commencement day and any initial direct costs. 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 underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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(ii) The group as a lessee (continued)
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The right-of-use assets are included in the 'Property, Plant and Equipment' and 'Investment Property' lines, as applicable, 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 note 2.15.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The group has used this practical expedient.
In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purposes of presenting these consolidated financial statements, the assets and liabilities of the group's foreign operations are translated into pounds using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (and attributed to non-controlling interests as appropriate).
Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the group with no future related costs are recognised in profit or loss in the period in which they become receivable
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the balance sheet. The assets of the plan are held separately from the company in independently administered funds
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Share-based payment transactions of the company
|
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 26.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated consolidated profit and loss account because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The group's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
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(iii) Current and deferred tax for the year
|
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. Where 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.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
|
|
Property, plant and equipment
|
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the group.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the lease term. Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following range:
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Long-term leasehold property
|
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in statement of profit or loss.
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(i) Intangible assets acquired separately
|
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
|
|
Intangible assets (continued)
|
|
(ii) Internally-generated intangible assets
|
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
∙the technical feasibility of completing the intangible asset so that it will be available for use or sale;
∙the intention to complete the intangible asset and use or sell it;
∙the ability to use or sell the intangible asset;
∙how the intangible asset will generate probable future economic benefits;
∙the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
∙the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
|
(iii) Derecognition of intangible assets
|
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first in, first out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
|
|
Cash and cash equivalents
|
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments.
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.
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
|
Derecognition of financial assets
|
The group derecognises a financial asset 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 party. If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
|
|
Financial liabilities and equity instruments
|
|
(i) Classification as debt or equity
|
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the company's own equity instruments is recognised and deducted directly in 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.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
|
|
Financial liabilities and equity instruments (continued)
|
|
(iii) Financial liabilities
|
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the group, and commitments issued by the group to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held for trading, or (iii) designated as at FVTPL, are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (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 expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.
Derecognition of financial liabilities
The group derecognises financial liabilities 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, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
|
Disclosure exemptions - parent company individual financial statements
|
In preparing its individual financial statements under FRS 101, the company has taken advantage of the following disclosure exemptions permitted by FRS 101:
∙the requirements of IFRS 7 Financial Instruments: Disclosures
∙the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement
∙the requirements of IAS 7 Statement of Cash Flows
∙the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
This information about the parent company is included within these consolidated group results.
The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own profit and loss account in these financial statements.
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
Accounting estimates and judgements
|
|
4.1 Estimates and assumptions
|
Capitalisation of development costs and estimation of useful economic life
The group capitalises certain development costs associated with its technology platform where the criteria for capitalisation are determined to be met. Initial capitalisation of costs is based on management’s judgement that technological and economic feasibility is confirmed, including probable future economic benefit. In determining the amounts to be capitalised, management makes assumptions regarding allocation of time spent by its technology engineering staff across qualifying activities and projects. At 31 December 2022, the carrying amount of capitalised development costs was £9,377,869 (2021: £7,925,854). Management estimate the useful economic life of the platform to be 5 years, based on their assessment of the lifetime of core functionality and timetable for major upgrades as well as consideration of the duration of customer contracts.
Lease - estimating the incremental borrowing costs
The group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate ("IBR") to measure lease liabilities. The IBR is the rate of interest that the group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The group estimates the IBR using observable inputs for example, interest rates observed in other borrowing arrangements identified by the group.
Share-based payments
The group awards equity settled share options to certain employees. The fair value determined at the grant date is expensed on a graded vesting calculation over the vesting period. The fair value is calculated using a Black-Scholes fair value model with the estimated level of vesting reviewed annually by management. The valuation is inherently judgemental and has a number of assumptions, including probability of an exit event within option lifetime, value per share, volatility, risk-free rate and time to maturity and an estimate of the proportion of employees remaining in employment throughout the vesting period. The expense recorded in the year-end in relation to share-based payments is £1.1m (2021 restated: £1.2m).
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
The following is an analysis of the group's revenue for the year from continuing operations:
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Analysis of revenue by country of destination:
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Timing of revenue recognition:
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Goods and services transferred at a point in time
|
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Goods and services transferred over time
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|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
The operating loss is stated after charging:
|
|
|
|
Tangible fixed assets - depreciation
|
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|
|
Intangible fixed assets - amortisation
|
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|
|
Difference on foreign exchange
|
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|
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Share-based payment costs
|
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|
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During the year, the group obtained the following services from the company's auditor:
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|
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Fees payable to the company's auditor for the audit of the consolidated and parent company's financial statements
|
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|
Fees payable to the company's auditor and its associates in respect of: Taxation compliance and advisory services
|
|
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
Employee benefit expenses
|
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Employee benefit expenses (including directors) comprise:
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Defined contribution pension cost
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In addition to the above staff costs recorded in the profit and loss account, there are further staff costs of £2.8m (2021: £3.8m) which have been capitalised as part of intangible fixed assets.
|
|
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the group, including the directors of the company listed on page 2, and the Financial Controller of the company.
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Defined contribution scheme costs
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The monthly average number of persons, including the directors, employed by the group during the year was as follows:
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Operational and technology staff
|
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|
|
|
|
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
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Directors national insurance
|
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|
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Group contributions to pension schemes
|
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During the year, retirement benefits were accruing to the following number of directors in respect of qualifying services:
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|
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Defined contribution schemes
|
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The highest paid director's emoluments were as follows:
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Group contributions to pension schemes
|
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|
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|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
Finance income and expense
|
|
Recognised in profit or loss
|
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Total interest income arising from financial assets measured at amortised cost or FVOCI
|
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Other interest receivable
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Interest on lease liabilities
|
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|
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|
|
|
Net finance expense recognised in profit or loss
|
|
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
12.1 Income tax recognised in profit or loss
|
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|
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Current tax on profits for the year
|
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Research and development tax credit
|
|
|
|
|
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|
|
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to losses for the year are as follows:
|
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Income tax credit/expense
|
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Tax using the company's domestic tax rate of 19% (2021:19%)
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Non-tax deductible amortisation and depreciation
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Expenses not deductible for tax purposes
|
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Capital allowances for the year in excess of depreciation
|
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Research and development tax credit
|
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Unrelieved tax losses carried forward
|
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|
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Other differences leading to a (decrease) in the tax charge
|
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|
|
|
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|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
12.Tax expense (continued)
|
12.1 Income tax recognised in profit or loss (continued)
|
Changes in tax rates and factors affecting the future tax charges
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25% for companies with profits of over £250,000. A small profits rate will also be introduced for companies with profits of £50,000 or less so that they will continue to pay corporation tax at 19%. From this date companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate. This new law was substantively enacted on 24 May 2021. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements. The company has losses carried forward of £135.3m (2021: £105.2m).
A deferred tax asset in respect of losses has not been recognised given uncertainty over the timing of future profits to utilise losses.
|
Property, plant and equipment
|
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Long-term leasehold property
|
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Foreign exchange movements
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|
Foreign exchange movements
|
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|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
13.Property, plant and equipment (continued)
|
|
Long-term leasehold property
|
|
|
|
|
|
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|
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|
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|
|
Accumulated depreciation and impairment
|
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|
|
Charge owned for the year
|
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|
Charge owned for the year
|
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|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Long-term leasehold property
|
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|
|
|
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Foreign exchange movements
|
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|
Foreign exchange movements
|
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|
|
Long-term leasehold property
|
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|
|
|
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|
|
|
|
|
Accumulated depreciation and impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge owned for the year
|
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|
|
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|
|
Charge owned for the year
|
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|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Technology platform development
|
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|
|
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|
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|
|
Technology platform development
|
|
|
|
|
|
|
|
|
Accumulated amortisation and impairment
|
|
|
|
|
|
|
|
|
|
Charge for the year - owned
|
|
|
|
|
|
|
|
|
|
Charge for the year - owned
|
|
|
|
|
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|
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|
|
|
|
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
Details of the group's subsidiaries at the end of the reporting period are as follows:
|
|
|
|
|
Place of incorporation and operation
|
Proportion of ownership interest (%)
|
|
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|
|
|
|
|
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|
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|
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|
|
Provision of financial services
|
|
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|
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Provision of financial services
|
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|
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|
Provision of financial services
|
|
|
|
|
|
Provision of financial services
|
|
|
|
|
The registered office of the subsidiaries are as follows:
Monese Finance Ltd, Eagle House, 163 City Road, London, EC1V 1NR, United Kingdom.
Monese EU SA, Avenue Arnaud Fraiteur 15-23, 1050 Ixelles, Brussels, Belgium.
Monese Credit Limited, 20 Harcourt Street, Dublin 2, Dublin, D02 H364, Ireland.
Monese Europe OU, Telliskivi tn 60/2, Tallinn, Republic of Estonia
The total carrying amount of other non-current invesmtents at £990,257 (2021: £670,930) relates to wholly owned subsidiaries listed above. The movement in the year relates entirely to the incorporation of Monese Euope OU.
|
|
Impairment losses totalling £253,003 (2021: £136,535) in relation to stocks were recognised in statement of profit and loss during the year.
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current trade and other receivables
|
|
|
|
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
|
|
|
|
Total current trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current trade and other receivables
|
|
|
|
|
|
|
|
Amounts due from group undertakings
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
|
|
|
|
Total current trade and other receivables
|
|
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
Total non-current trade and other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost
|
|
|
|
|
|
|
|
|
|
|
|
Total current trade and other payables
|
|
|
|
Other payables of £4.3m (2021: £0.2m) includes safeguarded client funds of £4.0m (2021: £nil)
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
|
|
|
|
|
|
Total non-current trade and other payables
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed to group undertakings
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost
|
|
|
|
|
|
|
|
|
|
|
|
Total current trade and other payables
|
|
|
|
Other payables of £4.3m (2021: £0.2m) includes safeguarded client funds of £4.0m (2021: £nil)
|
|
MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
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|
Total loans and borrowings
|
|
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Within total other loans, an amount of £1.3m (2021: £2.8m) represents a loan from a third-party investor which is repayable via monthly installments over a 42-month period and is charged interest at a rate of 10.5% per annum. This loan is secured by way of fixed and floating charges over the assets of the company.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Share capital (continued)
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Between January 2022 and June 2022, the company issued 15,872,999 Series C shares of £0.00001 each, for total consideration amounting to £13.1m. On 2 September 2022, the company issued 12,797,881 D Convertible Preferred Share shares of £0.00001 each, for a total consideration amounting to £29m.
The ordinary shares, Series A shares, Series B shares and Series C shares rank pari passu in all respects save that on a winding up the order of priority of distribution will be to holders of the Series C shares, followed by holders of Series B shares, followed by holders of the Series A shares and followed by holders of the ordinary shares, equal to the amount subscribed. In the event of a sale of the company or a qualifying Initial Public Offering, the Series A shares, Series B shares and Series C shares shall convert to ordinary shares. In addition, a holder of the Series A, Series B or Series C shares may request that their shares be converted to ordinary shares of £0.00001.
The D Convertible Preferred Share shares confer on each holder the right to receive notice of and to attend, speak and vote at all general meetings of the company and to receive and vote on proposed written resolutions of the company.
Share premium
The reserve records the amount above the nominal value received for shares issued, less transactions costs.
Foreign exchange reserve
The foreign exchange reserves represent the cumulative foreign exchange currency translation movement on the assets and liabilities of the group’s international operations at year-end exchange rate.
Other reserves
Other reserves comprise the equity component of the convertible loan notes measured at fair value, reflecting the capitalisation of convertible loan notes in the prior years.
Share based payment reserves
This records the fair value of equity settled share options issued.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Analysis of amounts recognised in other comprehensive income
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Exchange differences arising on translation of foreign operations
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Exchange differences arising on translation of foreign operations
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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The group has lease contracts for various office spaces used in its operations. Leases of office spaces generally have lease terms between 2 and 5 years.
The group also has certain leases of office equipment with low value. The group applies the 'lease of low-value assets' recognition exemptions for these leases.
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Lease liabilities are due as follows:
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Contractual undiscounted cash flows due
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Between one year and five years
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Lease liabilities included in the Consolidated statement of financial position at 31 December
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The following amounts in respect of leases have been recognised in profit or loss:
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Interest expense on lease liabilities
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Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
24.Leases (continued)
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(ii) Finance leases - lessor
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The group has a lease contract for sub-letting some of its unused office spaces to a sub-tenant, which has been determined as a finance lease.
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The following table summarises the undiscounted lease payments receivable after the reporting date.
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Between one and two years
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Total undiscounted lease payments receivable
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Net investment in the lease
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Lease income from finance lease contracts in which the group acts as a lessor is as below:
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Finance income on the net investment in finance leases
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(iii) Operating leases - lessor
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The group has lease contracts for sub-letting some of its unused office spaces to sub-tenants, which have been determined as an operating lease.
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The following table summarises the undiscounted lease payments receivable after the reporting date.
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Between one and two years
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Total undiscounted lease payments
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Lease income from operating lease contracts in which the group acts as a lessor is as below:
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Financial instruments - fair values and risk management
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25.1 Financial risk management objectives
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The group’s principal financial liabilities comprise loans and borrowings, and trade and other payables. The main purpose of these financial liabilities is to finance the group’s operations. The group’s principal financial assets include trade receivables, and cash and short-term deposits that derive directly from its operations.
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25.2 Market risk - foreign exchange risk
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The group operates in overseas markets by selling products in local currencies. It is therefore subject to currency exposures on translating overseas branches financial results primarily in respect of Euros. Foreign exchange risk arises from recognised assets and liabilities and net investments in foreign operations. The group does not utilise derivative contracts to manage its foreign exchange risk.
Cash flow forecasting is performed by central group management. Group management monitors liquidity requirements on an on-going basis to ensure the group has sufficient cash to meet its operational needs at all times and to ensure that the group does not breach borrowing covenants. The principal risk in forecasting cash flows arises from uncertainties over the conversion of sales pipeline to cash inflows. Surplus cash is kept on instant access deposit to ensure sufficient working capital is available at all times.
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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26.1. Employee share option plan of the company
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Details of the employee share option of the company
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The group has a share option scheme for certain employees (including directors). Options are exercisable at 0.001 pence per share. Certain of the options have a vesting period of between 3 and 4 years. There are also options which only become exercisable on a future critical event, such as an initial public offering of the business.
If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the business before the options vest.
The accounts include a share-based payment charge of £1.1m (2021: restated £1.2m) which relates to all options granted. This charge is inherently judgemental as set out in Note 4.
The following share-based payment arrangements were in existence during the current and prior years:
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MONESE LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Related party transactions
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Balances and transactions between the company and its subsidiaries, which are related parties of the company, have been eliminated on consolidation and are not disclosed in this note.
There is an open enquiry by HM Revenue and Customs (HMRC) into the company's claim for research and development expenditure relief included in the corporation tax returns for the years ended 31 December 2018 to 31 December 2020. The company continues to engage with HMRC in the provision of further information and, at the time of the approval of the financial statements, the enquiry is on-going with the outcome presently being uncertain. Therefore, no provision has been recognised in relation to this.
During the year ended 31 December 2022, the group identified a prior period error in relation to accounting for share options granted to its employees. Previously, share options with exit-event based exercise conditions were not recognised in the share-based payment charge on the basis that the exit-event was unlikely to occur. However the likelihood of the exit-event occuring (considered as a non-vesting condition) in the 10-year life of the option should have been reflected in the grant-date fair value. The group has performed an exercise to value all options, including those with an assessment of the likelihood of the exit-event occuring. As a result, a prior year adjustment has resulted in an increase in the share based payment charge recorded in administrative expenses in the year ended 31 December 2021 resulting in an increase in the loss for the financial year by £1,217,899, and a corresponding increase in the share-based payment reserves by £1,217,899 at 31 December 2021. There has been no impact on net assets nor previously reported taxation for the period.
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The group’s objectives in managing capital are to safeguard the group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
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The group does not have a formal capital management policy. However, the capital position is reviewed regularly in light of forward-looking forecasts. In addition, following the activation of the EMI license in October 2022, Monese Ltd is subject to the FCA regulations requiring the company to maintain sufficient regulatory capital resources. The group has historically utilised a combination of equity, convertible loans, and term loans in order to maintain sufficient resources to continue as a going concern. Going forward the group will continue to consider its future capital and cash requirements on a regular basis and will seek to raise additional equity or debt as circumstances require.
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