SINGAPORE - Catalist-listed trading platform developer Ayondo is going ahead to sell its UK unit Ayondo Markets Limited (AML) for £5.7 million (S$10.2 million) to reduce its liabilities.
AML, a 99.9 per cent-owned indirect unit of Ayondo, is one of two primary subsidiaries through which the group offers social trading and brokerage services in the UK. Previously on April 16, the Singapore Exchange's regulation unit instructed Ayondo to put on hold its plan to dispose of AML, pending clarity over the group's financial situation as well as AML's compliance with a UK authority.
In a regulatory filing on Wednesday (May 8), Ayondo said it had entered into a sale purchase agreement on May 7 for the disposal of AML to Netherlands-registered BUX Holdings, a white label partner of the group. This will be done via the sale of Sycap Group (UK)'s wholly owned shares in AML. Sycap is a 99.9 per cent-held subsidiary of Ayondo Holding AG, which in turn is owned by Ayondo.
Out of the sale proceeds from BUX, £1 will be paid in cash, and the remaining £5.7 million will be used to discharge most of the £5.9 million owed to AML by Ayondo and three of its units as of end-December 2018.
Ayondo and BUX Holdings is also entering a separate agreement with AML, which allows AML to withhold up to £900,000 from rebates payable to the group, as a full settlement of the group's share of further loss, and the amount in excess of the receivables balance. This agreement will take effect upon the completion of the AML disposal.
The agreement was struck after Ayondo and BUX Holdings agreed to share a further loss of £1.8 million from AML following adjustments to withdrawal of client bonuses granted to AML clients in fiscal 2018. AML also recorded poor performance in January and February 2019, the group added.
Ayondo also said its board had confirmed that the capital ratio figures submitted to regulator Financial Conduct Authority in the UK (FCA) in AML's quarterly reports were in line with market practice. The board also noted that the FCA has not raised any concerns on the computation of the Common Equity Tier 1 (CET1) ratio, Ayondo said.
On its rationale for the AML disposal, Ayondo said the group faced working capital deficiency from continued losses. The group's fiscal 2018 performance was negatively impacted by regulatory changes relating to product intervention imposed by European and UK regulators in 2018, unfavourable trading conditions in the group's core contract for difference markets, especially in the second and third quarters of 2018, Ayondo said.
It was also not able to capitalise on improved volatility during the last quarters of 2018 due to tighter regulatory capital position as a result of its declining cash situation. This had also reduced marketing spend, which in turn had an "adverse impact" on client acquisition, it said.
"With the proposed disposal, the group will be able to focus on further enhancing and increasing market share of its social trading platform and related products in Europe and through strategic partnership focus on Asia, including China, to drive revenue growth and achieve profitability," it added.
Ayondo was listed in Singapore in March last year. Its shares were halted and then suspended from trading since Jan 30 pending clarity over AML issues, and last traded at $0.048 on Jan 29. Its chief executive Robert Paul Lempka had resigned earlier that month to pursue other interests.