SJH.L Regulatory News (SJH)

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

Boxhill Technologies PLC

("Boxhill" or the "Company" or the "Group")

Final Results and Audited Annual Report and Accounts for the Year to 31 January 2018

30 January 2019

The Board of Directors of Boxhill is pleased to announce the publication of the audited annual report and accounts for the year to 31 January 2018 (the "Annual Report").

The Annual Report will be published on the Company's website in compliance with its articles of association and the electronic communications provisions of the Companies Act 2006. A copy of the Annual Report can also be accessed through the link below.

Annual Report http://www.rns-pdf.londonstockexchange.com/rns/4582O_1-2019-1-29.pdf

Key extracts from the Annual Report can also be viewed below.

For further information, contact:

Boxhill Technologies PLC 020 7493 9644

Tim Razzall, Executive Chairman

Website www.boxhillplc.com

Allenby Capital Limited (Nomad & Broker)

John Depasquale/Nick Harriss 020 3328 5656

Strategic report

The Directors present their Strategic Report on the Group for the year ended 31 January 2018.

Operating and Financial Review for the year ending 31 January 2018

The principal activities of Boxhill Technologies PLC are that of lottery administrators and the provision of payment processing products and services.

Performance in the Payments processing business in the year to 31 January 2018 was impacted by a number of regulatory changes limiting the volume of activity undertaken. These included the residual effect of the 2016 Visa and Mastercard geographical location regulations and then later in the year the impact of the industry wide preparation for, and the ultimate introduction of, MIFID II in early 2018.

During the year, the Group placed considerable focus and investment in enhancing the suite of payment technologies and related services that it offered its customers.

On 10 April 2017, the Company acquired all of the ordinary shares in Timegrand Limited satisfied in full by the issue of 500,000,000 ordinary shares. Timegrand Limited holds intellectual property and software, including a new 10-year licence, granted on 10 April 2017, to use an advanced payment gateway software system known as the WPJ Services Control Centre, with advanced analytics and security/fraud management as well as finance and administration services. The acquisition of the Timegrand software asset further enhances the offering of the Payments Division bringing about improved efficiencies between our delivery and internal back office functions.

In July 2017 EmexGo started issuing Virtual IBANs, with development of the full functionality completed in November 2017, meaning that its customers are able to supply their account information in standardised international bank account format, with the customer as the named beneficiary, to receive inward and make outward payments. Available in multiple currencies this important improvement makes Emex's services user friendly and therefore more attractive to those wishing to use alternative payment platforms by utilising internationally understood account formats which other providers are unable to do.

Also in July 2017, a high value transfer service, facilitating transactions in excess of €10,000,000, for corporate and individual customers was launched. The service takes into account the additional care and attention that such low frequency but high value transactions require to complete smoothly.

While both the EmexGo and high value transfer services were subsequently disposed of on 30 July 2018, the know how has been rolled over into the new Market Access service (as described in the post-balance sheet events).

Prize Provision Services Limited (PPSL) is licensed by the UK Gambling Commission as an External Lottery Manager (ELM) to provide administration services to societies. It administers all aspects such as lottery draws, prizes, player accounts, financial and data administration required by law to run a lottery.

During Summer 2017, the Board committed to investment in the lottery in order to stimulate growth in this business. Following this decision, PPSL completed a thorough operational overhaul which reviewed all aspects of internal processes and the services provided to clients.

Furthermore, in November 2017, PPSL launched the Sports Club Lottery website to better support the large number of sports clubs it provides services for and allow a specific focus on sporting societies across Great Britain.

Financial key performance indicators ("KPI's")

KPIs provide an illustration of management's ability to successfully deliver against the Group's strategic objectives. The Board periodically reviews the KPIs of the Group taking into account the strategic objectives and the challenges facing implementation of such. The measures reflect the Group's development focused strategy, the importance of a positive cash position and our underlying commitment to ensuring safe operations. These KPI's can be categorised into operational and financial. These include, but are not limited to:

• Revenue

• Gross profit

• EBITDA

• Profit before taxation

The Group Board review these indicators at least once a month. Explanations are sought and given for any material variances and the management are required to provide plans to resolve any performance failures as they occur during the year.

As the business grows and increases its expenditure on internally generated and externally purchased tangible and intangible assets, resulting in increased depreciation and amortisation, the business has moved to measuring performance using EBITDA as it provides a better measurement of underlying operational performance.

EBITDA is defined as profit before tax, net finance costs, depreciation and amortisation.

Financial Summary

For the full year to 31 January 2018 the Group incurred an EBITDA loss of £1,628,000 compared to an EBITDA profit of £38,000 for the year ended 31 January 2017.

In summary, for the year to 31 January 2018 the Group performance was as follows:

Revenue : £1,367,000 (2017: £1,727,000)

Gross Profit : £914,000 (2017: £1,165,000)

EBITDA : Loss of £1,628,000 (2017 : Profit of £38,000)

Depreciation & Amortisation : £122,000 (2017 : £26,000)

(Loss)/profit before tax : Loss of £1,751,000 (2017: Profit of £2,000)

As can be seen in note 3, the overall loss after tax is comprised of a small loss of £16,000 (2017: profit of £46,000) in the Lottery business and a loss of £1,147,000 (2017: Profit of £337,000) in the Payment processing businesses, further reduced by unallocated central costs of £588,000 (2017: £381,000).

Performance in the payments processing business in the year to 31 January 2018 was impacted by a number of regulatory changes limiting the volume of activity undertaken. These included the residual effect of the 2016 Visa and MasterCard geographical location regulations and then later in the year the impact of the Industry wide preparation for, and the ultimate introduction of, MIFID II in early 2018.

Despite lower than anticipated revenue, particularly during the first half of the year to 31 January 2018, the payment processing business maintained its infrastructure and invested in a number of internally developed systems and licences including the high value transfer service and the introduction of virtual IBANS to Emexgo customers. During the year, the Group recorded amortisation expense on internally generated and acquired intangible assets of £120,000 (2017: £26,000).

The Board, upon analysis of expenditure and a review of the underlying performance of Emex, found that the team in Malta had failed to deliver either the growth in revenues or the cost savings required to ensure that the company operated at an acceptably profitable level. The anticipated returns on investments in people, travel and expenses were not delivered. The Operations Director and the support team (with a few exceptions) were acting imprudently, without reference to and inconsistent with The Company's strategy of broadening its customer base across several industries, consolidating certain business under the Emex brand and in particular back end support and delivery services for the FX market as well as FX services for existing clients. The Board had been anticipating capitalising significant expenditure during the year relating to the development of internal systems, but on subsequent review, concluded it was not appropriate to do so. This expenditure significantly increased the reported loss compared to the prior year.

Following the previous year's consolidatory work, PPSL implemented its growth strategy for the business. In addition to the continued development of client services, 2018 saw the launch of the Sports Club Lottery designed to support sporting societies raise money through their own lottery. All sports societies who the company provides services to are listed on the Sports Club Lottery website and several new societies have already signed up.

As a result, the trend of reducing revenue experienced in the Lottery segment for several years was halted in Autumn 2017, with small month-on-month revenue growth experienced in the last couple of months of the year to 31 January 2018, and this trend is expected to continue through future periods.

Costs remained relatively stable in the year to 31 January 2018 compared to the prior year.

During the year to 31 January 2018 trade and other receivables increased by £1,276,000, driven by the investment in the high value transaction service with Phillite D UK Limited as announced to the market in November 2017. In addition, the client balances within other payables (as can be seen in note 19) increased by £4,740,000 due to an increased volume of client funds held in EmexGo, the Group's digital wallet services. Together these were the major drivers of the increase in bank and cash balances as at 31 January 2018 to £2,151,000 (2016: £818,000), offset by cash absorbed in the operating activities.

Post Balance Sheet events

Launch of Market Access Limited

During 2018, Boxhill Technologies plc established Market Access Limited ("Market Access") as a wholly owned subsidiary to operate a foreign exchange and treasury services business and provide payment processing to low risk clients, with the intention of generating a more stable growth pattern than had been seen with Emex's traditional customer base. Additionally, the management will be based in London and will benefit from the additional direct support the Board and the team based there can offer.

Investment in technology has continued through 2018, with the development of a software system called M3 Market Access. This system is a specialist application for treasury and FX operations. There are two primary offerings:

1. FX Broker - an in-house treasury management platform that allows for front, middle, and back office functions

2. Customer Online - a cloud based portal which enables end users to place trades and review activity

In October 2018, a beta version of Customer Online was released to a handful of clients and a full production release was made in November 2018.

Furthermore, and following the sale of the Emex companies to MDC Nominees Ltd, Market Access has undertaken a review of gateway solutions available in the market. As a result, Market Access will operate its processing business through ICS, a gateway platform with a strong global presence and a link to over 800 acquiring banks worldwide. In the short-term, Market Access will lease the platform, with a view to creating a stronger relationship/joint venture in the future.

Market Access is led by Mark Harris who brings a great deal of experience in FX. Mark has significant sales experience, principally in FX companies such as Travelex and Baydonhill (which was sold to Earthport PLC) and more recently has held a successful career consulting to several fintech and payments companies.

Issue of Equity

On 23 April 2018 (admitted to trade on AIM with effect from 30 April 2018), new shares totalling 410,000,000 Ordinary Shares of 0.1 pence each ("Ordinary Shares") were issued in settlement of amounts invoiced:

1. 140,000,000 Ordinary Shares for consultancy fees totalling £140,000 from Moorhen Limited, a company controlled by Phil Jackson, in relation to his contracted ongoing role within the payment services division of the Group.

2. 10,000,000 Ordinary Shares for consultancy fees totalling £10,000 from FS Business Limited, a company controlled by Andrew Flitcroft, in relation to his contracted services as Finance Director and company secretary of the Group.

3. The Board has agreed contractual terms with John Botros trading as St. James Street Chambers in relation to the legal work involved in the integration of Timegrand Limited with the newly established Market Access in February 2018 and post-acquisition dealings with the Gambling Commission for a total consideration of £100,000.

4. The Board has agreed contractual terms with Bluedale Corporate Limited in relation to the corporate finance work involved in the establishment of Market Access Limited (announced on 28 March 2018) and post-establishment activities for a total consideration of £160,000. Bluedale is a company controlled by John Botros.

Also, on 23 April 2018, share options were granted to Directors and key management totalling 60,000,000 at an exercise price of 0.1 pence per share and a life of 5 years. Included in the Options were 20,000,000 granted to Arno Rudolf and 20,000,000 to Clive Hyman, who are both directors of the Company. The Directors' Options were not a contractual entitlement and have been granted to reward additional work undertaken.

On 9 May 2018 (admitted to trade on AIM with effect from 14 May 2018), new shares totalling 50,000,000 Ordinary Shares of 0.1 pence each were issued in settlement of invoices for consultancy fees totalling £50,000 from Nineteen Twelve Management Limited, a company controlled by James Rose.

Disposal of Subsidiaries

Following a substantial decline in certain payment processing revenues during Q2 2018 due to a requirement by particular banks to change the nature of transactions they are willing to deal with following regulatory changes mentioned above, the business announced a re-structuring of the Group (as described in the Directors' report on page 6). On 30 July 2018, the Group separated the provision of payment services to Non-Conforming Customers from the rest of the Group through the sale of Emex (UK) Group Limited, Emexconsult Limited and Emex Technologies Limited to MDC Nominees Limited. This included the disposal of all assets and liabilities that formed part of the Payment Processing operating segment as at and for the year ended 31 January 2018. Further details are described below.

The consideration for Emex was £2,000,000, satisfied through the issue by MDC Nominees Limited of the Loan Note, which has the following key terms:

· Amount - £2,000,000

· Term - 10 years

· Interest rate - 0 per cent

· Security - A debenture over the issued share capital of Emex Technologies Limited, Emexconsult Ltd, Net World Limited and Emex (UK) Group Limited

· Repayment - by way of the establishment of a sinking fund into which the net revenues of Emex resulting from the customers left in place at the time of the transaction or any new Non-Conforming Customers referred by Market Access shall be transferred on a monthly basis and used for general working capital purposes and any balance outstanding at the end of 10 years, after the above sinking fund has been extinguished, by MDC Nominees Limited.

As part of the Transaction, whilst Non-Conforming Customers of Emex remained with the Emex Group Conforming customers were given the opportunity from October 2018 to engage with Market Access Limited as part of the transaction, clear of any liabilities. In consideration of this arrangement for the Conforming Customers, Boxhill agreed to issue 100,000,000 Shares to MDC.

Under the terms of the Transaction, Market Access continues to have an ongoing commercial relationship with Emex, with Market Access referring any new Non-Conforming Customers to Emex, and Market Access providing certain ongoing support services to Emex. Once the Loan Note is fully repaid, Market Access will receive a commission of 50 per cent of the net revenues resulting from the Non-Conforming Customers both in place at the time of the Transaction and those subsequently referred to Emex by Market Access.

The Board believes that this transaction will be financially beneficial to the Group. While profits will be reduced in the short-term until Market Access becomes more established, the structure of the transaction will be neutral in terms of Group cashflow in the short-term. The separation of the Conforming Clients from the Non-Conforming Clients is anticipated to lead to improved banking relationships for the Group, which in turn should generate financial benefits over the medium term. Furthermore, these businesses were in a significant net liabilities position which had arisen from the working capital shortfall between cash balances and client fund liabilities in EmexGo. Therefore, their disposal helps to establish a better balance sheet position for the continuing Group. Subsequent to the disposal, Emex Technologies Limited has entered into administration. The Directors, having taken external legal advice, are satisfied that the Group has no further obligations or liabilities related to this matter.

MDC Nominees Limited is owned by John Botros, a director of certain Group subsidiaries and, with persons closely associated (as defined under the Market Abuse Regulation), a substantial shareholder (as defined by the AIM Rules) of Boxhill. The Transaction therefore constituted a related party transaction under the AIM Rules.

Suspension of Shares

On 1 August 2018 trading in the Company's ordinary shares of 0.1 pence each ("Ordinary Shares") were suspended on AIM. This was as a result of the Company being unable to finalise the annual report and consolidated accounts for the year to 31 January 2018. As stated in the announcement to the market on 1 August 2018, certain outstanding information from one of the Company's banks remained outstanding along with the final risk review relating to the high value transfer service ("HVTS") announced on 28 July 2017. Whilst the final risk review for the HVTS was resolved in early September 2018 (and announced to the Market on 17 September 2018), the obtaining of the necessary information related to a bank account in the name of Networld Ltd proved much harder than originally expected. Following the dismissal of a former subsidiary director (the "FSD"), a change to the bank account mandate for this bank account (where the FSD was the sole authorised signatory) was not possible.

These issues have also delayed the introduction of payment processing services by Market Access and the receipt of amounts from MDC Nominees Limited.

As a result of this and upon further investigation, the Board, in consultation with our advisers, considered whether Networld Limited (incorporated during the year) is a subsidiary of the Group. We concluded that the Group did not control Networld Limited as it was never owned by the Group, had not delivered any revenues to the Group, and had been operated as a separate business over which the Group did not and could not exercise control. As a consequence, in accordance with relevant accounting standards, Networld Limited has not been consolidated within the accounts of the Group and it is not disclosed as a subsidiary owned by the Group (at any point from its incorporation during the year ended 31 January 2018).

During the intervening time period between suspension and the signing of these consolidated statutory accounts to 31 January 2018, a review of the Company has been successfully undertaken with the company's Nominated Advisor, Allenby Capital Limited, prior to the lifting of the suspension of trading on AIM following the publication of these accounts and in accordance with the AIM Rules for Companies.

It is therefore anticipated that following the publication of these accounts, along with those for the six months to 31 July 2018, the suspension of share trading will be lifted and the Company's shares will then continue to trade on AIM.

Change in Senior Management/Board

Graeme Paton - joins The Board as Chief Executive Officer

Cath McCormick - joins The Board as Finance Director

Ryan Porter - Removed from all subsidiaries

Andrew Flitcroft - steps down from the Board on 1 February 2019, but remains as Company Secretary

Having overseen the reorganisation of the business, including the sale of Emex to MDC Nominees Ltd, Lord Razzall and Clive Hyman will not seek re-election at the AGM expected to be held in June or July 2019.

In order to deliver improved centralised and fewer regional controls the company is opening new operational offices in London and senior staff based in UK will have direct operational and financial responsibility for overseas operations, ensuring changes in focus are reflected quickly and directly in our domestic and overseas activities and continue to support our clients as changes in regulations and technology mean that we must remain agile and open to change as the market develops in a post Brexit world.

Lottery Product Offerings

In April 2018, Prize Provision Services Ltd (PPSL) entered into an agreement with one of the UK's largest membership organisations. The size of the opportunity generates an opportunity to significantly increase the size of the lottery business on its own.

PPSL will provide lottery administration, marketing and promotional services along with a standalone website operated under a bespoke brand.

The minimum viable product launched on December 1st, 2018 and the first players entered into draws in January 2019.

In addition, a scratch-card product has recently been launched which will be available to all lottery clients. The product offers further choice and flexibility to all clients to be able to produce a product which both immediately appeals to their supporters while giving a good profit margin.

Expected to retail at £1 with a £1,000 top prize, the scratch-cards are expected to best benefit those societies who regularly meet face to face with supporters in any environment and offer an impulse purchase which a subscription lottery does not.

In addition, there is a strong pipeline of new Weather Lottery and Sports Club Lottery charities and societies.

Operational Summary

The Board has demonstrated its commitment to resolving the operational challenges faced through the year to 31 January 2018 and also the issues highlighted by the suspension in shares in August 2018.

The Board has embarked on a programme of improvements across the entire business, with a focus on control, agility and delivery. There are immediate and planned changes to The Board, the first of which are two executive appointments. Furthermore, the Company is moving all operational controls into the UK and a new operational office is being established in London, with improved facilities and space so that all operations can be based in one place.

Outlook

Payment Services

The enhancements in technology and strong product offerings, combined with the link to MDC Nominees Ltd for high risk clients, positions Boxhill Technologies Plc as one of very few fintech companies that can offer a true alternative to traditional banking. Customers can open accounts with IBANs in their names, send and receive money worldwide either on a peer to peer basis, via bank wire or even directly to any card issued by a recognised issuer, and now they are able to manage their foreign exchange and treasury needs all in one place.

Working with low risk clients, enables Market Access to partner with a wider network of acquiring banks, as Market Access is unencumbered by the strict criteria that acquiring banks place on high risk traffic. This should help to facilitate stronger and longer acquiring bank relationships.

The extensive network of clients that Mark Harris brought with him, combined with an increasing number of new clients that had previously been put off doing business with Boxhill Technologies plc, provides a strong pipeline of opportunity. Typical Market Access clients include other FX companies (for technology), family offices, sports and bloodstock companies, international property developers and start-up companies across a range of industries.

Lottery

PPSL has completed roll out of a number of technology improvements and rolled out the Sports Club Lottery focused on raising funds for sports clubs including over 100 league and non-league football clubs, alongside the Weather Lottery which supports hundreds of local and national health and education programmes.

In November 2018 PPSL announced that it is to operate the lottery for on the UK's largest membership organisation. Already players are being recruited despite only being at soft launch stage. 2019 will see a number of player recruitment activities in order to raise funds for the organisation's benevolent fund. This includes dedicated online and offline marketing activity and inclusion of lottery information with recruitment and membership initiatives.

Principal risks and uncertainties facing the Group

There are a number of potential risks and uncertainties that could have a material impact on the Group's long-term performance, and the Group takes a positive approach to risk management.

Management and employees

The nature of the Group and its business model creates reliance upon retaining and incentivising its senior management and certain key employees, whose expertise will be important to the fortunes of the Group going forward. The Directors have endeavoured to ensure that the principal members of its management team are suitably incentivised, but the retention of such staff cannot be guaranteed.

The Group may need to recruit additional senior management and other staff in order to further develop its business. There can be no guarantee that such individuals will be recruited in the Group's preferred timetable or at the cost levels anticipated by the Group. Competition for staff is strong and therefore the Group may find it difficult to retain key management and staff. The loss of key personnel and the inability to recruit further key personnel could have a material adverse effect on the future of the Group through the impairment of the day-to-day running of the businesses and the inability to maintain existing client relationships.

Economic risk

Demand for the Group's services may be significantly affected by the general level of economic activity and economic conditions in the regions and sectors in which the Group operates. Therefore, a continuation of the challenging economic environment, especially in regions or sectors where the Group's operations are focused, could have a material adverse effect on the Group's business and financial results.

Financial Risk

The Group's financial risk management strategy is based on sound economic objectives and corporate practices. The main financial risks concern the availability of funds to meet obligations as they arise (liquidity risk) and fluctuations in exchange rates (exchange rate risk).

Competition

The Group is engaged in business activities where there are a number of competitors. Many of these competitors are larger than the relevant businesses carried on by the Group and have access to greater funds than the Group, which will potentially enable them to gain market share at the expense of the Group.

Acquisitions

The Directors cannot discount circumstances where an acquisition would support the Group's business strategy. However, there is no guarantee that the Group will successfully be able to identify, attract and complete suitable acquisitions or that the acquired business will perform in line with expectations.

Funding and working capital

Maintaining a sufficient level of working capital is essential to enable the Group to meet its foreseeable obligations and achieve its strategy. Failure to manage working capital or to collect receivables such as amounts due from Phillite D UK Limited of £3,121,436 in a timely manner could impact upon the ability of the Group to grow.

Management of growth

The ability of the Group to implement its strategy in an expanding market requires effective planning and management control systems. The Group's growth plans may place a significant strain on its management, operational, financial and personnel resources. The Group's future growth and prospects will, therefore, depend on its ability to manage the growth and to continue to expand and improve operational, financial and management information and quality control systems on a timely basis, whilst at the same time maintaining effective cost controls. Any failure to expand and improve operational, financial and management information and quality control systems in line with the Group's growth could have a material adverse effect on its business, financial condition and results of operations.

Market developments

Any failure to expand the Group's service offering in response to customer demand and/or industry developments may have an adverse effect on the Group's financial performance and prospects.

Reliance on Partners

Much of the Group's business is dependent on partners (acquiring banks, charities, clubs, etc.). Changes in key relationships with those partners, change of strategic direction by partner organisations, changes in the viability of partner-owned technology, economic and other business circumstances could all have an adverse effect on the financial performance of the Group.

Legal and regulatory matters

The Group is subject to a considerable degree of regulation and legislation. Changes in or extensions of laws and regulations affecting the industry in which the Group operates (or those in which its customers operate) and the rules of industry organisations could restrict or complicate the Group's business activities, with the potential to increase compliance/legal costs significantly.

As announced on 31 October 2017, the historic legal matters surrounding the Company's relationship with its former regulated payment processor, EUPay Group Limited ("EUPay") has been settled. Phillite D UK Limited has independently of the Company taken responsibility for the amounts owed by EUPay to the Group. As a result of the settlement, Phillite D UK Limited is now in a position to pursue the collection of these amounts without any hindrance from litigation. This will facilitate the repayment of the amounts outstanding to the Group.

Going concern

As a result of the challenges faced by the business in recent periods, and as a result of the restructuring undertaken in the last year, the Group is in the relatively early phases of its longer-term strategy and has generated losses in the year ended 31 January 2018 and subsequently. As a result, there is a risk that it is not able to achieve the forecast growth in revenue, profits and cash flows and as a result it may not be able to continue as a going concern. Further details are provided in the Directors' Report on page 11 and in Note 1 to the financial statements.

Extract from Directors' Report

Going concern

UK Company Law requires Directors to consider whether it is appropriate to prepare the financial statements on the basis that the Company and the Group are going concerns. Furthermore, IAS 1 states that an entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. Throughout the financial statements there are various disclosures relating to Group funding and operational risks.

As disclosed in the Strategic Report on page 2, the Directors have undertaken a significant restructuring of the Payment Processing business subsequent to 31 January 2018 as a critical part of the Group's strategy. As a result of the challenges faced by the business in recent periods, and as a result of this restructuring, the Group is in the relatively early phases of its revised longer-term strategy and has generated losses in the year ended 31 January 2018 and subsequently.

The two key elements of the restructuring that impact going concern are the disposal of Emex (UK) Group Limited on 30 July 2018 and the launch of the new Market Access business during 2018.

Following the disposal of the Emex businesses to MDC Nominees on 30 July 2018, the Group has disposed of the majority of its outstanding amounts owing to customers, along with certain trade receivables and cash balances. The impact is an improvement from the net current liability position at 31 January 2018 to a net current asset position at 30 July 2018 and a relatively modest fixed cost base for the group.

The launch of Market Access is a critical element of the future of the Group's Payment Processing business. The Directors have prepared cash flow projections for the period to 31 October 2020, which indicate that the Group will generate significant revenue, profit and cash inflows within a short period of time. In particular, the projections demonstrate that the Group will be able to address current cash flow shortfalls, and that it will be able to meet its liabilities as they fall due for the foreseeable future.

The Directors are therefore confident that, following the disposal of the Emex businesses and the launch of Market Access, the Group will be able to generate sufficient resources from its trading to meet the Group's future cash flow requirements and settle its liabilities as they fall due. Therefore, the Directors are of the opinion that the Group has adequate resources to continue in operation for the foreseeable future and they consider it appropriate to adopt the going concern basis in preparing the financial statements.

However, given that the Market Access business has only recently been launched and there is therefore limited track record of revenue, profit and cash flow generation, the substantial achievement of the Group's cash flow forecasts represents a material uncertainty that may cast significant doubt on the Group's and the Parent Company's ability to continue as a going concern. The Group and the Parent Company may, therefore, be unable to continue realising their assets and discharging their liabilities in the normal course of business, but the financial statements do not include any adjustments that would result if the going concern basis of preparation is inappropriate.

Independent auditor's report to the members of Boxhill Technologies Plc

1. Our opinion is unmodified

We have audited the financial statements of Boxhill Technologies Plc ("the Company") for the year ended 31 January 2018 which comprise the Consolidated Statement of Profit and Loss and Other Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, Company Balance Sheet, Company Statement of Changes in Equity, and the related notes, including the accounting policies in note 1.

In our opinion:

· the financial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at 31 January 2018 and of the Group's loss for the year then ended;

· the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union;  

· the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

2. Material uncertainty related to going concern

We draw attention to note 1 to the financial statements which indicates that the Group's and the parent Company's ability to continue as a going concern is dependent upon the substantial achievement of forecast cash flows. These events and conditions represent a material uncertainty that may cast significant doubt on the Group's and Parent Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

The risk - Disclosure quality

Following a significant restructuring of the Group's Payment Processing business, the Group is in the relatively early phases of its longer-term strategy and has generated losses in the year ended 31 January 2018 and subsequently. Projections for the period to 31 October 2020 have been prepared, indicating that the Group has taken action to address current cash flow shortfalls, and that the Payment Processing business will generate profit and cash inflows within a short period of time, which will enable the Group and the Company to meet its liabilities as they fall due for the foreseeable future. The financial statements explain how the Directors have formed a judgement that it is appropriate to prepare the accounts of the Group and Parent Company on a going concern basis. However, the Directors have concluded that the factors discussed in note 1 represent a material uncertainty that may cast significant doubt regarding the Group's and parent Company's ability to continue as a going concern.

As this assessment involves a consideration of future events there is a risk that the judgement is inappropriate. Furthermore, clear and full disclosure of the of the facts and the directors' rationale for the use of the going concern basis of preparation, including that there is a related material uncertainty, is a key financial statement disclosure. Auditing standards require such matters to be reported as a key audit matter.

Our response

Our procedures included:

- Personnel interviews: inquiring of senior management and challenging the assumptions used in the Directors' forecast models, in particular those relating to forecast revenue, and corroborating these against available evidence by inspecting agreements signed with new and existing customers;

- Sensitivity analysis: we assessed reasonably possible downside scenarios that would result in the cash flow falling below operating expense requirements and considered whether they could be considered to be reasonably possible; and

- Assessing transparency: Assessing the going concern disclosure for clarity, including that there is disclosure of a material uncertainty.

3. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:

4. Our application of materiality and an overview of the scope of our audit

Materiality for the group financial statements as a whole was set at £12,400 (2017: £16,000), determined with reference to a benchmark of group revenue (of which it represents 0.91% (2017: 0.93%)). We consider group revenue to be the most appropriate benchmark as it provides a more stable measure year on year than group loss/profit before tax.

Materiality for the parent company financial statements as a whole was set at £8,500 (2017: £7,000), determined with reference to a benchmark of company total assets, of which it represents 0.43% (2017: 0.24%).

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £600, in addition to other identified misstatements that warranted reporting on qualitative grounds.

Of the group's 9 (2017: 7) reporting components, we subjected 5 (2017: 5) to full scope audits for group purposes. For the residual 4 components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these.

The components within the scope of our work accounted for 100% (2017: 100%) of total group revenue, 100% (2017: 100%) of group loss before tax and 97% (2017: 99%) of total group assets.

All component audits, including the audit of the parent company, were performed by the Group team using component materialities, which ranged from £400 to £8,500, having regard to the mix of size and risk profile of the Group across the components.

5. We have nothing to report on the other information in the Annual Report

The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Strategic report and directors' report

Based solely on our work on the other information:

· we have not identified material misstatements in the strategic report and the directors' report;

· in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

· in our opinion those reports have been prepared in accordance with the Companies Act 2006.

6. We have nothing to report on the other matters on which we are required to report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

· adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

· the parent Company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 20 the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

8. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Simon Richardson (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square

London

E14 5GL

29 January 2019

Consolidated Statement of Profit and Loss and Other Comprehensive Income

for year ended 31 January 2018

All of the profit/(loss) for the period is attributable to equity holders of the Parent Company.

The notes on pages 30 to 59 of the Annual Report form part of these financial statements.

Consolidated Balance Sheet

At 31 January 2018

The notes on pages 30 to 59 of the Annual Report form part of these financial statements.

Consolidated Cash Flow Statement

for year ended 31 January 2018

There is no material difference between the fair value and the book value of cash and cash equivalents.

The notes on pages 30 to 59 of the Annual Report form part of these financial statements.

Notes to editors:

Boxhill Technologies PLC (AIM: BOX) is an AIM quoted lottery, software, gaming and leisure company.

Boxhill has a range of ecommerce products that suit all merchants' and customers' needs enabling secure payments. The Company works within both regulated frameworks and in regions where traditional partners struggle to offer safe, secure services.

In addition, Boxhill operates the Weather Lottery, which has been in operation since 2002 and the Company holds one of the limited number of UK external lottery manager's licences. Over £5.4 million has been raised to date for good causes and the lottery has paid over £4.9 million in prizes to winners.

Boxhill also has a joint venture agreement via Soccerdome Ltd operating a five a side football complex in Nottingham.

The Annual Report is available on Boxhill Technologies PLC's website at www.boxhillplc.com. Copies are available from the Company at its registered office:

39 St James's Street, London, SW1A 1JD, United Kingdom