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RNS

Final Results

Released 07:00 14-Mar-2018

RNS Number : 6286H
SafeCharge International Group Ltd
14 March 2018
 

 

SafeCharge International Group Limited

 

("SafeCharge", the "Company" and together with its subsidiaries, the "Group")

 

Results for the year ended 31 December 2017

 

Strong financial performance, continued platform development and investment in high quality global payment services set foundation for stronger future growth

 

SafeCharge (AIM: SCH), a leading payments technology company, is pleased to announce its results for the year ended 31 December 2017.

Financial and operational summary

 

31-Dec 2017

31-Dec

2016

Change

Number of transactions (m)

173.8

126.0

+38%

Transaction value (US$m)

9,637

8,082

+19%

Own Acquiring transaction value (US$m)

2,155

970

+122%





Revenues (US$m)

111.7

104.1

+7%

Gross profit (US$m)

64.5

60.7

+6%

Adjusted EBITDA1 (US$m)

33.7

33.3

+1%

Cash flows from operations2 (US$m)

32.3

30.8

+5%

Reported profit after tax (US$m)

23.8

26.6

-11%

Cash conversion3

83%

77%






Cash balances at year end

108.9

115.4

-6%





Diluted earnings per share (US$c)

15.78

17.32

-9%

Recommended final dividend per share (US$c)

9.20

9.47

-3%

Total dividend per share (US$c)

16.89

16.47

+3%

 

Financial highlights

 

·     

Continued strong revenue growth to US$111.7 million (2016: US$104.1 million) driven by new customer wins and expanded relationships with existing customers    

·     

Underlying Revenues4 growth of 17% on a comparable basis to the prior year, following the reshaping of the existing customer base undertaken in 2016 to upgrade the quality of revenues

·     

Excellent performance in H2 2017 with revenue growth of 11% in comparison with H1 2017

·     

Robust cash conversion of 83% (2016: 77%), and strong balance sheet with cash balances of US$108.9 million and no debt

·     

Total dividend of 16.89 US$ cents per share for 2017 (2016: 16.47 US$ cents)

Operational highlights

 

·     

Increase in transaction value by 19% to US$9.6 billion (2016: US$8.1 billion) with monthly volume exceeding US$ 1 billion for the first time in December 2017

·     

Excellent growth in value of transactions processed through SafeCharge Acquiring with c. 30% of the Group's transaction volumes processed through its own acquiring platform in December 2017

·     

Successful launch of a fully serviced global payment solution to Tier 1 customers, including 888, Plus500, Bet365, Paddy Power and EuroBet

·     

Payment Institution licence granted by the UK Financial Conduct Authority in January 2018 - in addition to the existing authorisation as a European Electronic Money Institution

·     

Global expansion continues with the successful launch of WeChat Pay and integration to JPMorgan Chase in the United States, and opening of new offices in Singapore, the United States and the Netherlands

·     

Further strategic investment in Nayax completed in February 2018 to continue our expansion within the cashless payments industry

 

David Avgi, CEO of SafeCharge, said:

 

"I am pleased to report a strong set of results. We demonstrated excellent performance, particularly in the second half of the year, and made good progress on our organic growth strategy. We also continue to invest in our payment and risk management platform to drive future growth and are delighted that our customers recognise the benefits that SafeCharge's payment solutions bring to them.

 

Whilst we continue to grow in our core vertical markets, the Group has made exciting progress in entering our new target sectors and geographies. During 2018 we will continue to focus and invest further to build our sales teams to accelerate our entry into new markets.

We look forward to the year ahead with optimism and remain confident that our focus on higher quality revenues driven by a healthy sales pipeline will yield profitable revenue growth in 2018 and beyond."

Current trading

 

Building on the record revenues and transaction processing volumes achieved in Q4 2017, the Group has made an excellent start to 2018 with a strong sales pipeline in both existing and new verticals. Transaction volumes continue to grow with volume exceeding US$ 1 billion for the first time in December 2017 and with very strong growth in the value of transactions processed through SafeCharge Acquiring.

 

Outlook

 

The Directors look forward with confidence to 2018 and beyond.

 

The Board is issuing guidance for 2018 with revenues expected to be in the range of US$125m to US$130m, and Adjusted EBITDA1 between US$36m and US$38m. This will be driven by continued growth from our existing client base and new customers due to start processing in 2018.

Analyst presentation

A results presentation for analysts will be held at 9.30am on 14 March 2018 at ETC Venues at 200 Aldersgate Street, London, EC1A 4HD.

 

- Ends -

 

1 Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, acquisition costs and contingent remuneration, restructuring and settlement costs, and share-based payments charge (See Consolidated Statement of Comprehensive Income)

2 Cash flows from operations before working capital adjustments and tax

3 Free cash conversion is an alternative performance measure the Group has adopted to demonstrate our ability to convert our profit from operations into cash that can be reinvested in the business through investment, returned to shareholders, or used to support our M&A strategy. The cash conversion rate is before payments working capital

4 Underlying Revenues is a non-GAAP, company-specific measure which excludes revenues of US$8.7 million in 2016 related to reshape of customer base undertaken in 2016

 

For more information

 

 SafeCharge International Group Limited

 David Avgi, Chief Executive Officer

 Tsach Einav, Chief Financial Officer

 c/o FTI Consulting

 

+44 (0) 20 3727 1725

 Jean Beaubois, Head of Investor Relations

 

+44 (0) 7826 936619

 Shore Capital

 Mark Percy

 Toby Gibbs

 

+44 (0) 20 7408 4090

 FTI Consulting

 Matthew O'Keeffe

 Elena Kalinskaya

 

+44 (0) 20 3727 1725

 

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

 

Forward looking statements

 

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements.

 

Any forward-looking statements in this announcement reflect SafeCharge's view with respect to future events as at the date of this announcement. Save as required by law or by the AIM Rules for Companies, SafeCharge undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.

 

About SafeCharge

 

SafeCharge International Group Limited (AIM: SCH) is the payment service partner for the world's most demanding businesses. SafeCharge provides global omnichannel payments services from card acquiring and issuing to payment processing and checkout, all underpinned by advanced risk management solutions. This fully featured proprietary payment platform connects directly to all major payment card schemes including Visa, MasterCard, American Express and Union Pay as well as over 150 local payment methods. With offices around the world, SafeCharge serves a diversified, blue chip client base and is a trusted payment partner for customers across a range of vertical markets. The Company has been listed on the AIM market of the London Stock Exchange since 2014.

 

www.safecharge.com

 

 

 

Introduction

 

It gives me great pleasure to report that 2017 was a further period of strong financial performance and development for the Group. Revenues grew 7% to US$111.7 million with an improved mix of high quality, low risk customers across a diverse range of industries, following the reshaping of the existing customer base in 2016. During the year we have achieved very successful growth in our acquiring business with performance ahead of expectations in 2017.

 

The Group remained highly cash generative. We closed the year after payment of dividends (US$25.8 million) and purchase of the Company's shares to be held in treasury (US$10.6 million), with US$108.9 million of cash and cash equivalents and no debt.

 

In addition to robust financial performance, we remain committed to advancing our technologies and expanding the Group's product offering, thereby strengthening customer engagement whilst growing and diversifying the business into new markets, industries and geographies. 

 

The Board continues to focus on making effective use of the Group's cash resources, investigating the potential for strategic and complementary acquisitions, whilst continuing to apply strict criteria when assessing such acquisition opportunities.

 

 

The Board remains committed to ensuring a robust governance structure is in place and, whilst recognising the size of the Company, is working to comply with best practice corporate governance.

 

Staff

 

On behalf of the Board, I would like to thank our employees, who have made a substantial contribution to our ongoing achievements and to welcome the new colleagues who joined in 2017 and are already making a big contribution to the development of our business.

 

 

Recognising the Group's continued strong cash generation, the Board has recommended a final dividend of 9.20 US$ cents per share, giving a total dividend of 16.89 US$ cents per share for the year (2016: 16.47 US$ cents). This represents 75% of Adjusted EBITDA* for the period, in line with the Company's existing policy of paying 75% of Adjusted EBITDA* (as long as there is no material M&A transaction).

 

The dividend shall be paid in sterling and therefore it will be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.3975, being the rate at 4.30 pm on 13 March 2018. As a result, those shareholders entitled to the dividend will receive 6.58 pence per share. Subject to shareholder approval at the annual general meeting, to be held on 14 May 2018, the final dividend will become payable on 23 May 2018 to those shareholders on the Company's register as at the record date of 4 May 2018. The ex-dividend date is 3 May 2018.

 

 

 

* Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, acquisition costs and contingent remuneration, restructuring and settlement costs, and share-based payments charge (See Consolidated Statement of Comprehensive Income).

 

 

Introduction

 

We continued to make significant progress and achieve financial and operational success across the Group in 2017. Revenues grew by 7% and Underlying Revenues** grew by 17%, reaching US$111.7 million. Of particular note was the success and strong growth of SafeCharge Acquiring, with approximately 30% of the Group's transaction volumes processed through its own acquiring platform in December 2017, as well as the excellent financial performance in the second half of the year with revenues growth of 11% from the first half of the year. Across all our activities we continued to invest in our products and services, focusing on growing and diversifying the business into new markets, industries and geographies. 

 

Strategy

 

The Group has a clear organic growth strategy designed to expand and diversify the value-added products and services offered to our clients. SafeCharge seeks to grow revenues from existing customers and attract new clients from within target sectors and verticals, such as online retail, travel and marketplaces. We have continued to invest in our technology-based solution, which has been well received by our clients. Through continued investment, SafeCharge aims to maximise its value proposition to customers, improving the acceptance, conversion and 'stickiness' of our products.

 

In 2016 the Company implemented a programme to reduce its exposure to certain sectors and verticals. The changes were made in anticipation of evolving regulatory, commercial and customer requirements. As a result of our work, we have improved the mix of high quality, low risk customers across a diverse range of industries.

 

During the year the Group made substantial progress in its strategy to enter new sectors and geographies. A notable achievement was the entry into the marketplace industry, through development of a new product Marketplace Manager. The product provides a solution that addresses marketplaces' major challenges head on, from operational control to regulatory compliance and bi-directional payments. Other achievements during the period included the implementation of the brand new look and feel of the Group as well as the opening of new offices in Singapore, the United States and the Netherlands. Establishing new offices in these regions demonstrates our commitment to these important markets. Our intention is to grow these offices as the Group wins new clients in these regions.

 

The Group continues to invest significant resources towards identifying and investigating potential acquisitions. These must have the potential to accelerate growth through identifiable synergies or add complementary products which would enhance SafeCharge's existing offering to its clients. Whilst a number of such opportunities were identified and reviewed over the period none met the Group's strict investment criteria.

 

We successfully launched a number of significant new Tier 1 customers, including 888, Plus500, Bet365, Paddy Power and EuroBet, and new customers, including an Italian licensed gaming and betting operator Snai, airline company Blue Panorama and the global ride sharing company Gett, will be launched during 2018.

 

Partnerships

 

During the period SafeCharge further developed its strategic partnership with Saxo Payments (Banking Circle), a global transactions services provider, to simplify cross border settlement accounts.

 

In addition, we initiated a new partnership with YelloCo, which has developed a new generation of payment terminals. YelloCo's product, YelloPad, has been designed to service a wide range of industries including retail, hospitality and healthcare.

 

In February 2018, we invested a further US$18.5 million in Nayax, a leading global cashless payment solutions provider for the unattended machine industry, and following the initial investment of the Company in Nayax in December 2016 it takes our total investment in Nayax to US$24.5 million. This investment follows the successful processing of Nayax through our platform in 2017 and is based on our strategy to expand within the cashless payments industry in which Nayax specialises. SafeCharge's investment will support Nayax's growth and will strengthen the operational collaboration between the two companies, with expected processing of more than 500 million Euros of Nayax transactions through our Acquiring platform over the next 4 years.

 

Infrastructure and technology

 

The Group continued to invest in its infrastructure and further develop its processing technologies. Our highly scalable payments platform is capable of handling rapidly increasing transaction volumes and offers our customers a best-in-class technology with a comprehensive product suite.

 

Platform robustness is one of the key metrics evaluated by existing and potential new customers when deciding on which payments provider to use. It is therefore pleasing to report that our customers continued to benefit from our industry leading service uptime of above 99.99% maintained throughout the period. Another key measure in the eyes of our customers is transaction duration. The SafeCharge platform continues to perform well on this metric, with transaction times competitive with best in class operators.

 

The Group's payment platform and multi-channel cashier products remain at the heart of the business. Clients value the reliability and robustness of our platform, while our cashier product continues to lead the field in its high conversion / low abandonment rates and scores highly with customers for its user-friendly features.

 

Other value-added products include Payment Card Industry Data Security Standard (PCI DSS Level 1) de-scoping and fraud management. Every business or merchant that accepts payment via debit or credit card has a contractual obligation with its acquiring bank (or acquirer) to be PCI DSS compliant. SafeCharge reduces the time and financial cost of compliance to its clients by assuming responsibility for the handling and storage of the card data. SafeCharge's PCI solution supports complete tokenisation, increasing the security of client details stored in the system. Additionally, our fraud management solution is becoming widely adopted by customers. Using an extensive historical transaction dataset our fraud management solution conducts dozens of checks on each transaction before it is processed. The system is designed to manage and keep chargebacks below industry tolerance levels and the decision to proceed with the payment is made expeditiously, ensuring abandoned transactions are minimised.

 

The Group continues to expand the array of payment methods it accepts with over 150 Alternative Payment Methods (APMs) integrated alongside the traditional credit and debit card formats.

 

People

 

Our employees are at the heart of the Group's success and we are proud of the expertise and professionalism of our teams. During the year the Group successfully recruited a number of talented senior managers from well-established businesses in the payments sector, including senior personnel in sales and marketing. These new team members are already helping the Group win and manage sustainable, high quality business in both existing and target verticals and geographies. The Group ended the year with 360 employees (2016: 344) with approximately 53% in R&D and technology and 14% in risk and compliance.

 

Financial performance in 2017

 

The operational momentum built over recent years continued into 2017. This momentum enabled SafeCharge to deliver further growth and improve the quality of revenues following the reshaping of the existing customer base undertaken during 2016.

 

The number of processed transactions grew by 38%, reaching 173.8 million transactions for the full year (2016: 126.0 million), and the value of transactions grew by 19%, reaching US$9.6 billion (2016: US$8.1 billion). This increase in volumes was driven by growth from existing clients and new high-volume customers.

 

Revenues for the year ended 31 December 2017 grew by 7% to US$111.7 million, and Underlying Revenues** grew by 17%, compared to the prior year. Gross Profit increased by 6% to US$64.5 million (2016: US$60.7 million) with the Gross Profit Margin decreasing slightly to 57.8% (2016: 58.3%) due to the higher quality and lower risk of the overall customer base offset by reduction in processing costs due to strong growth in the value of transactions processed through SafeCharge Acquiring. Adjusted EBITDA* increased to US$33.7 million (2016: US$33.3 million) with EBITDA margin of 30% for the full year. 

 

SafeCharge remained highly cash generative with US$32.3 million of cash flow from operating activities before working capital changes and tax paid in the period, and free cash flow*** of US$20.5 million, representing cash conversion of 83%.

 

SafeCharge Acquiring

 

Another success during the year was the continued strong growth in our own Acquiring services. SafeCharge Own Acquiring transaction value for the year totalled US$2,155 million (2016: US$970 million) closing the period with a run-rate in excess of US$3 billion, with approximately 30% of the Group's transaction volumes processed through its own acquiring platform in December 2017. Importantly, the approval ratios achieved were high and competitive against those of more established competitors. SafeCharge Acquiring also enables the Group to provide benefits such as rapid onboarding for new customers and remains a key focus for the Group.

 

Using our best in class smart routing technology, we can route transactions to our own acquiring or third-party acquirers with the highest acceptance levels. This benefits our clients as fewer transactions are rejected. Smart routing also protects clients as we are able to route transactions to multiple acquirers, thereby enabling our clients to keep trading if their preferred acquirer temporarily fails. 

 

Looking to the future

 

The Group has a robust and scalable platform that can accommodate transaction volumes over 10 times greater than currently processed. Management remains committed to rolling-out its technology-based solutions to new markets and, as such, has a number of priorities for 2018 and beyond:

·     

Further investment in the platform to accommodate the needs of emerging businesses in new economies, such as e-marketplaces and SME payments;

·     

Strengthening of the Group's service and sector expertise by adding local service and account teams with domain expertise in our target markets; and

·     

Additional functionality to the new website which will allow merchants to download Application Programming Interfaces (APIs), thereby reducing time to market.

 

Regulation

 

Through its membership and active involvement with organisations such as the PCI Security Standards Council, the Electronic Money Association and the Merchant Risk Council, as well as on-going dialogue with all the major card schemes, SafeCharge is well-informed and well prepared to take advantage of many of the regulatory changes being introduced. The principal regulatory work currently undertaken by the Group includes:

·     

European Banking Authority rules on Strong Customer Authentication;

·     

Brexit: potential changes to the passporting rules;

·     

Introduction of PSD2: open access and the increasingly competitive environment; and

·     

EU General Data Protection Regulations: proposed changes due in May 2018.

 

In January 2018, SafeCharge Financial Services Limited, a wholly owned UK subsidiary of the Company, was authorised by the Financial Conduct Authority (the "FCA") as a Payment Institution. This is in addition to SafeCharge Limited's existing authorisation as a European Electronic Money Institution. The authorisation allows SafeCharge Financial Services Limited to provide payments services in the UK in accordance with the Payment Services Regulations. It enables SafeCharge to continue expanding its services portfolio to its existing client base and to new clients, as well as future proofing the business post Brexit and potential changes to the passporting rules.

 

In light of the continuously evolving regulatory environment, SafeCharge is tirelessly improving its practices, policies and procedures. As such, the Group is well placed to help its customers maximise the opportunities arising from regulatory change.

 

The Group has enjoyed an excellent start to 2018 benefiting from continued growth from our existing customers and the launch of new clients during the second half of 2017. The Group is confident that its focus on higher quality revenues driven by a healthy sales pipeline will yield profitable revenue growth in 2018 and beyond.

 

 

 

* Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, acquisition costs and contingent remuneration, restructuring and settlement costs, and share-based payments charge (See Consolidated Statement of Comprehensive Income).

** Underlying Revenues is a non-GAAP, company-specific measure which excludes revenues of US$8.7 million in 2016 related to reshape of customer base undertaken in 2016.

*** Free cash flow is a non-GAAP figure defined as operating cash flow after working capital movements (excluding movements in payments working capital), interest, tax and capital expenditure.

Highlights

 

Revenues for the period increased by 7% to US$111.7 million (2016: US$104.1 million); this growth was achieved following the reshaping of the existing customer base undertaken during 2016 to upgrade the quality of revenues. Underlying Revenues** increased 17% from US$95.4 million in 2016 to US$111.7 million.

 

Gross profit grew by 6%, reaching US$64.5 million (2016: US$60.7 million) and Adjusted EBITDA* increased by 1%, reaching US$33.7 million (2016: US$33.3 million). 

 

The cash conversion remained strong, with cash flows from operations (before working capital adjustments and tax paid) of US$32.3 million (2016: US$30.8 million) and free cash flow*** of US$20.5 million (2016: US$20.2 million), reflecting cash conversion of 83% (2016: 77%). Profit after tax for the period was US$23.8 million (2016: US$26.6 million).  

 

During the year, the Group paid US$25.8 million in dividends, acquired US$10.6 million of its own shares which are held in treasury and invested US$5.8 million in capitalised development costs. The Group ended the period with US$108.9 million (2016: US$115.4 million) of cash and cash equivalents and US$13.9 million in available-for-sale assets (2016: US$8.5 million). The Group remained debt free during the year.

 

Revenues

 

Revenues increased by 7% to US$111.7 million (2016: US$104.1 million) during the year, reaching record levels in the fourth quarter. This growth was achieved despite the steps taken in 2016 to reduce exposure to certain sectors and markets in anticipation of evolving regulatory, commercial and customer requirements. The Directors estimate that these respective sectors generated revenues and gross profit of US$8.7 million and US$5.1 million, respectively, in 2016. Of particular note was the revenues growth in the second half of the year which increased by 11% to US$58.7 million from US$53.0 million generated in the first half of the year. New clients who began processing payments through the Group's systems in the last 12 months generated revenues of US$6.5 million during 2017, primarily during the second half of the year.

 

In order to reduce foreign exchange exposure, the majority of the Group's assets are held in US dollars, its functional and reporting currency.

 

The Group generates revenues in multiple currencies, the most significant being the US dollar, Euro and Sterling, accounting for approximately 62% of income in the period with the balance of revenues generated in a wide range of other currencies.

 

SafeCharge has operations in several jurisdictions and incurs the majority of its operating costs in US dollars, Euros, Israeli shekels and Sterling (the most significant being Israeli shekels accounting for approximately 34% of operating costs).

 

The Group's revenues for the year were positively impacted while the Adjusted EBITDA* incurred a minor negative impact due to strengthening of certain currencies (primarily Euros, Sterling and Israeli shekels) against the US dollar during the second half of the year. The Directors estimate that revenues were approximately US$1.7 million higher and Adjusted EBITDA* was approximately US$0.1 million lower than would have been reported on a constant currency basis. Results stated on a constant currency basis, a non-IFRS measure, are calculated by applying the average exchange rate of the comparable period in the prior year to current period local currency results.

 

 

The gross profit margin decreased slightly to 57.8% (2016: 58.3%) primarily as a result of the customer base reshape undertaken in 2016 as well as the focus of the Company on high quality customers which upgraded the quality of revenues and customer base, offset by reduction in processing costs due to strong growth in the value of transactions processed through SafeCharge Acquiring. Adjusted EBITDA* margin decreased to 30.2% (2016: 32.0%) primarily due to hiring a number of senior personnel in sales and marketing as well as an increase in associated marketing costs as part of our growth strategy and in order to accelerate our entrance into new sectors and geographies.

 

 

Employee related costs, which account for the majority of SafeCharge's operating expenses and equate to approximately 19% of revenues, increased by 11% in the year, amounting to US$21.7 million (2016: US$19.6 million) primarily as a result of increased headcount and salary increases. During the year the Group invested in additional resources, including hiring a number of senior personnel in sales and marketing to support growth and implement its strategy in existing and new sectors, verticals and markets.

 

The Group incurred share-based payment charges of US$1.1 million in the period (2016: US$0.7 million). Furthermore, the Group incurred restructuring and settlement costs of US$2.4 million (2016: US$2.1 million), primarily settlement costs and expenses within the SafeCharge Card Services business, including costs relating to the transfer of the development and operations of Pay.com to the Group's Bulgarian operation and the closure of the Dublin office.

 

The Group's reported net finance income of US$1.5 million (2016: US$1.9 million) primarily due to foreign exchange differences. In 2016, net finance income included a US$1.1 million gain due to the purchase of VISA Europe by VISA Inc and a US$0.7 million gain on the sale of the investment in FinTech Group AG.

 

Depreciation and amortisation of US$5.2 million was charged in the period (2016: US$4.1 million), which included a US$1.6 million charge in respect of depreciation of computer equipment (2016: US$1.5 million) and US$3.0 million (2016: US$2.4 million) amortisation of intangible assets including amortisation of capitalised development costs relating to the SafeCharge Acquiring platform which started during the prior year. 

 

The Group's reported tax expense was US$2.4 million (2016: US$1.5 million) in respect of its operations across multiple jurisdictions, representing a blended tax rate of 9% on reported profit before tax, which included US$0.6 million in respect of prior years' taxes recorded during the period.

 

Payments working capital items 

 

During the year, the Company completed the share acquisition of GTS, an online payment processing service, now rebranded as SafeCharge Digital. In these operations, client money held on behalf of clients is included in the balances of cash and cash equivalents, settlement assets and merchant processing liabilities since no legal right exists to offset between this cash and the corresponding merchant processing liabilities. As at the reporting date, the related cash balances amounted to US$9.3 million, settlement assets amounted to US$1.7 million, and merchant processing liabilities amounted to US$11.0 million.

 

SafeCharge continues to be highly cash generative. In 2017 the Group generated US$29.9 million net cash flows from operating activities before payments working capital (2016: US$26.6 million). Net cash flows from operating activities after payments working capital amounted to US$39.2 million. Free cash flow*** was US$20.5 million (2016: US$20.2 million), reflecting cash conversion of 83% (2016: 77%).

 

The Group's cash outflow in respect of investing activities was US$10.1 million (2016: US$0.1 million inflow). This outflow included US$6.1 million of investment in intangible assets (2016: US$5.3 million) with the majority being capitalised development expenses, US$3.8 million (2016: US$1.3 million) in payments for the acquisition of property, plant and equipment (primarily computer equipment for the data centres as well as leasehold improvements and office equipment for new offices of the Group), US$2.8 million related to the investments in Saxo Payments and YelloCo, and US$2.9 million of a working capital facility provided to a certain customer, which is secured against its on-going cash flows, offset by repayment of US$5 million of working capital facilities provided to certain customers in 2015.

 

The Group's cash outflow in respect of financing activities was US$35.6 million (2016: US$26.2 million) reflecting US$25.8 million of dividend payments and US$10.6 million in respect to the purchase of Company shares to be held in treasury, offset by US$0.9 million received from the exercise of share options.

 

Overall during the period there was a net decrease in cash and cash equivalents of US$6.5 million (2016: US$0.5 million increase) and the Group closed the year with US$108.9 million (2016: US$115.4 million) in cash and cash equivalents.

 

 

The Group closed the year with total assets of US$182.2 million (2016: US$172.9 million), including US$108.9 million (2016: US$115.4 million) of cash and cash equivalents and US$13.9 million (2016: US$8.5 million) of available-for-sale investments. The majority of the Company's cash was held in current accounts and on-call deposit accounts, with US$50 million held on call deposits. The Directors believe that SafeCharge's strong balance sheet provides a high degree of operational flexibility as it implements its growth strategy.

 

The net book value of intangible assets held at 31 December 2017 was US$39.2 million (2016: US$33.4 million) of which US$10.5 million (2016: US$9.3 million) related to goodwill and US$9.6 million (2016: US$9.4 million) related to IP technology, licences and domains. During the year, the Group capitalised US$5.8 million (2016: US$5.0 million) relating to technology development costs.

 

Total current assets decreased to US$118.4 million (2016: US$ 125.7 million), with cash decreasing primarily as a result of the dividend payments and the purchase of own shares. Current liabilities increased to US$25.1 million (2016: US$ 11.7 million) mainly due to the merchant processing liabilities of US$11.0 million and increase in trade and other payables by US$4.3 million primarily due to the move to new offices of the Group at the end of the year and an increase in employee expenses related payables, offset by a US$1.6 million decrease in taxes payables due to prior years' taxes paid during 2017.

 

Total equity attributable to equity holders decreased to US$155.9 million (2016: US$160.5 million) principally as a result of the dividends and the treasury shares purchased by the Company, offset by unrealised gain of available-for-sale investments.

 

In February 2018 the Company invested a further US$18.5 million in Nayax, a leading global cashless payment solutions provider for the unattended machine industry in order to support Nayax's strong growth and international expansion in cashless payment solutions. Following the initial investment of the Company in Nayax in December 2016, this takes the total investment by SafeCharge to US$24.5 million, representing approximately 11% of the issued share capital.

 

The Group closed the period with no debt and is well placed to secure further strategic investment opportunities as it seeks to grow its market-leading offer.

 

Recognising the Group's continued strong cash generation, the Board has recommended a final dividend of 9.20 US$ cents per share, giving a total dividend of 16.89 US$ cents per share for the year (2016: 16.47 US$ cents). This represents 75% of Adjusted EBITDA* for the period, in line with the Company's existing policy of paying 75% of Adjusted EBITDA* (as long as there is no material M&A transaction).

 

The dividend shall be paid in sterling and therefore it will be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.3975, being the rate at 4.30 pm on 13 March 2018. As a result, those shareholders entitled to the dividend will receive 6.58 pence per share. Subject to shareholder approval at the annual general meeting, to be held on 14 May 2018, the final dividend will become payable on 23 May 2018 to those shareholders on the Company's register as at the record date of 4 May 2018. The ex-dividend date is 3 May 2018.

 

 

 

* Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, acquisition costs and contingent remuneration, restructuring and settlement costs, and share-based payments charge (See Consolidated Statement of Comprehensive Income).

** Underlying Revenues is a non-GAAP, company-specific measure which excludes revenues of US$8.7 million in 2016 related to reshape of customer base undertaken in 2016.

*** Free cash flow is a non-GAAP figure defined as operating cash flow after working capital movements (excluding movements in payments working capital), interest, tax and capital expenditure.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

Year ended 31 December 2017

 

 

 






Note

2017

2016



US$000s

US$000s





Revenue

5

111,692

104,139

Cost of sales


(47,143)

(43,473)

Gross profit


64,549

60,666





Salaries and employee expenses


(21,675)

(19,649)

Share-based payments charge

18

(1,092)

(672)

Depreciation and amortisation

11,12

(5,166)

(4,139)

Premises and other costs


(2,743)

(3,008)

Other expenses


(6,452)

(4,684)

Acquisition costs and contingent remuneration


(352)

(322)

Restructuring and settlement costs


(2,430)

(2,070)





Total operating costs


(39,910)

(34,544)

Adjusted EBITDA*


33,679

33,325

Depreciation and amortisation


(5,166)

(4,139)

Share-based payments charge


(1,092)

(672)

Acquisition costs and contingent remuneration


(352)

(322)

Restructuring and settlement costs


(2,430)

(2,070)

Profit from operations


24,639

26,122

Finance income

7

1,954

2,332

Finance expense

7

(425)

(413)

Profit before tax


26,168

28,041





Tax expense

8

(2,356)

(1,487)





Profit after tax attributable to equity holders of the parent


23,812

26,554

 

Other comprehensive income for the year

 

Items that will be reclassified subsequently to profit or loss when specific conditions are met:




Unrealised fair value movements on available-for-sale investments

 

17,21

 

2,797

 

(4,805)

Realised fair value movements on available-for-sale investments

reclassified to profit or loss

 

7

 

-

 

(1,760)

Exchange difference arising on the translation and consolidation




of foreign companies' financial statements


3,304

(618)





Total comprehensive income for the year


29,913

19,371

Earnings per share for profit attributable to the owners of the parent during the year

 




Basic (cents)

9

16.14

17.57

Diluted (cents)

9

15.78

17.32





 

*Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, share-based payments charge, acquisition costs and contingent remuneration, restructuring and settlement costs. Where not explicitly mentioned, Adjusted EBITDA refers to Adjusted EBITDA from continuing operations.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2017

 

 






Note

31/12/2017

US$000s

31/12/2016

US$000s

Assets








Non‑current assets




Property, plant and equipment

11

6,197

2,346

Intangible assets

12

39,220

33,441

Available-for-sale investments

17

13,934

8,504

Other receivables

15

3,789

2,665

Total non-current assets


63,140

46,956





Current assets




Trade and other receivables

14

7,346

10,329

Settlement assets

27

1,713

-

Cash and cash equivalents

16

108,858

115,357

Taxes receivable

23

442

-

Total current assets


118,359

125,686





Assets classified as held for sale

17

694

267





Total assets


182,193

172,909









Equity




Share capital

18

15

15

Share premium

19

126,030

125,169

Capital reserve

19

622

622

Available-for-sale reserve

19

3,950

1,153

Translation reserve

19

1,880

(1,424)

Share options reserve

19

3,632

2,662

Treasury shares reserve

18

(16,900)

(6,281)

Retained earnings

19

36,690

38,577

Total equity attributable to equity holders of parent


155,919

160,493





Non‑current liabilities




Provisions

20

231

260

Deferred tax liability

21

957

479

Total non-current liabilities


1,188

739





Current liabilities




Trade and other payables

22

14,050

9,709

Merchant processing liabilities

27

11,036

-

Contingent consideration

24

-

343

Taxes payable

23

-

1,625

Total current liabilities


25,086

11,677









Total equity and liabilities


182,193

172,909





 

On 14 March 2018 the Board of Directors of Safecharge International Group Limited approved and authorised these consolidated financial statements for issue and they were signed on their behalf by:

 

 





David Avgi



Tsach Einav

Chief Executive Officer



Chief Financial Officer


 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2017



Share capital

Treasury shares reserve

Share premium

Capital reserve

Available-for-sale reserve

Translation reserve

 

Share options reserve

Retained earnings

 

Total equity attributable to equity holders of parent

 


Note

US$000s

US$000s

US$000s

US$000s

US$000s

US$000s

US$000s

US$000s

US$000s












Balance at 1 January 2016


 

15

 

-

 

123,828

 

622

 

7,718

 

(806)

 

2,221

 

33,740

 

167,338

Comprehensive income











Profit for the year


-

-

-

-

-

-

-

26,554

26,554

Unrealised fair value movements on available-for-sale investments

 

 

 

17

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(4,805)

 

 

-

 

 

-

 

 

-

 

 

(4,805)

Realised fair value movements on available-for-sale investments reclassified to profit or loss

 

 

 

 

 

17

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(1,760)

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(1,760)

Exchange difference arising on the translation and consolidation of foreign companies' financial statements


 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(618)

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(618)

Total comprehensive income for the year


 

-

 

-

 

-

 

-

 

(6,565)

 

(618)

 

-

 

26,554

 

19,371

Contributions by and distributions to owners











Dividends

10

-

-

-

-

-

-

-

(21,948)

(21,948)

Exercise of options


*

-

1,341

-

-

-

(231)

231

1,341

Purchase of own shares

18

(*)

(6,281)

-

-

-

-

-

-

(6,281)

Share-based payments

18

-

-

-

-

-

-

672

-

672

Total contributions by and distributions to owners


 

 

-

 

 

(6,281)

 

 

1,341

 

 

-

 

 

-

 

 

-

 

 

441

 

 

(21,717)

 

 

(26,216)












Balance at 31 December 2016


 

15

 

(6,281)

 

125,169

 

 

622

 

1,153

 

(1,424)

 

2,662

 

38,577

 

160,493

Comprehensive income











Profit for the year


-

-

-

-

-

-

-

23,812

23,812

Unrealised fair value movements on available-for-sale investments

 

 

 

17

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2,797

 

 

-

 

 

-

 

 

-

 

 

2,797

Exchange difference arising on the translation and consolidation of foreign companies' financial statements


 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

3,304

 

 

 

 

-

 

 

 

 

-

 

 

 

 

3,304

Total comprehensive income for the year


 

-

 

-

 

-

 

-

 

2,797

 

3,304

 

-

 

23,812

 

29,913

 

Contributions by and distributions to owners











Dividends

10

-

-

-

-

-

-

-

(25,821)

(25,821)

Exercise of options


*

-

861

-

-

-

(122)

122

861

Purchase of own shares

18

(*)

(10,619)

-

-

-

-

-

-

(10,619)

Share-based payments

18

-

-

-

-

-

-

1,092

-

1,092

Total contributions by and distributions to owners


 

 

-

 

 

(10,619)

 

 

861

 

 

-

 

 

-

 

 

-

 

 

970

 

 

(25,699)

 

 

(34,487)












Balance at 31 December 2017


 

15

 

(16,900)

 

126,030

 

622

 

3,950

 

1,880

 

3,632

 

36,690

 

155,919

 

(*) represents amount less than 1 thousand US$

 

CONSOLIDATED STATEMENT OF CASH FLOWS 

Year ended 31 December 2017

 

 






Note

2017

US$000s

2016

US$000s

Cash flows from operating activities




Profit before tax


26,168

28,041

Adjustments for:




Depreciation of property, plant and equipment

11

2,122

1,739

Amortisation of intangible assets

12

3,044

2,400

Write-off of property, plant and equipment

11

60

-

Exchange difference arising on the translation of non-current assets in foreign currencies


370

(36)

Non-cash movements in provisions within comprehensive income

20

(29)

17

Gain on sale of available-for-sale assets

17

-

(1,760)

Finance income

7

(496)

(244)

Share-based payments charge                                                           

18

1,092

672





Cash flows from operations before working capital


32,331

30,829

(Increase)/Decrease in trade and other receivables


(203)

425

Increase/(Decrease) in trade and other payables


2,130

(3,394)

Cash flows from operations before movements in payments working capital


34,258

27,860





Increase in settlement assets

27

(1,713)

-

Increase in merchant processing liabilities

27

11,036

-



43,581

27,860





Tax paid


(4,369)

(1,289)

Net cash flows provided by operating activities


39,212

26,571





Cash flows from investing activities




Payment for acquisition of intangible assets

12

(6,083)

(5,330)

Payment for acquisition of property, plant and equipment

11

(3,812)

(1,279)

Acquisition of available-for-sale investments

17

(2,797)

(6,609)

Loans granted


(2,936)

-

Loans repaid


5,000

-

Interest received

7

496

244

Proceeds from disposal of available-for-sale investments


-

13,036

Net cash flows (used in)/provided by investing activities


(10,132)

62





Cash flows from financing activities




Proceeds from exercise of stock options


861

1,341

Purchase of own shares to be held as treasury shares

18

(10,619)

(6,281)

Dividends paid

10

(25,821)

(21,220)

Net cash flows used in by financing activities


(35,579)

(26,160)





(Decrease)/Increase in cash and cash equivalents


(6,499)

473





Cash and cash equivalents at beginning of the year


115,357

114,884

Cash and cash equivalents at end of the year

16

108,858

115,357

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year ended 31 December 2017

 

1. General information

 

Safecharge International Group Limited (the 'Company') was incorporated in British Virgin Islands on 4 May 2006 as a private company with limited liability. On 30 October 2015 the Company re-domiciled to Guernsey.  Its registered office is at Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 2HT. The principal activities of the Company and its subsidiaries (the 'Group') are the provision of global omni‐channel payments services from card acquiring and issuance to payment processing and checkout, all underpinned by advanced risk management solutions.

 

 

2. Accounting policies

 

The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied by the Group in all years presented in these Consolidated Financial Statements.

Basis of preparation

 

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

The Company does not prepare stand-alone financial statements, as Guernsey law does not require it. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires Management to exercise its judgment in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on Management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

 

 

Adoption of new and revised IFRSs 

 

During the current year the Group adopted all the new and revised IFRSs that are relevant to its operations and are effective for accounting periods beginning on 1 January 2017.

 

(i) Standards and Interpretations adopted by the EU

 A number of amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017. Those which may be relevant to the Group are set out below. These have not had a material impact on the result for the year.

 

(ii) Standards and Interpretations not yet effective

 

New standards

• IFRS 9 - "Financial Instruments" ("IFRS 9"). IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance of IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through Other Comprehensive Income and fair value through Profit & Loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial assets. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in Other Comprehensive Income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one management actually uses for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. 

 

• IFRS 15 - "Revenue from Contracts with Customers" ("IFRS 15"). Upon first-time adoption, IFRS 15 will replace existing IFRS guidance on revenue recognition. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 introduces a single model for revenue recognition, in which an entity recognises revenue in accordance with that core principle by applying the following five steps:

1. Identify the contract(s) with a customer.

2. Identify the performance obligations in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to the separate performance obligations in the contract.

5. Recognise revenue as each performance obligation is satisfied.

 

IFRS 15 provides guidance about various issues related to the application of that model, including: recognition of revenue from variable consideration set in the contract, adjustment of transaction for the effects of the time value of money and costs to obtain or fulfil a contract. The standard extends the disclosure requirements regarding revenue and requires, among other things, that entities disclose qualitative and quantitative information about significant judgments made by management in determining the amount and timing of the revenue. The standard will be applied retrospectively for annual periods beginning on January 1, 2018, with transitional provisions.

 

• IFRS 16 - "Leases" ("IFRS 16"). In January 2016, the IASB issued IFRS 16 - Leases which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous leases standard, IAS 17. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17 and instead introduces a single lessee accounting model whereby a lessee is required to recognise assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognise depreciation of leased assets separately from interest on lease liabilities in the income statement. IFRS 16 is effective from January 1, 2019 with early adoption allowed only if IFRS 15 - Revenue from Contracts with Customers is also applied.

 

The Directors have assessed the impact that the adoption of these standards and interpretations will have on future periods and have concluded that none aside from IFRS 16 have a material impact on the financial statements of the Group. At 31 December 2017 operating lease commitments amounted to US$7.3 million. The effect of discounting those commitments is anticipated to result in right-of-use assets and lease liabilities of approximately US$6.0 million being recognised at 1 January 2018. However, further work still needs to be carried out to determine whether and when extension and termination options are likely to be exercised, which may result in the actual liability recognised being higher than this. The Board is still considering if it will apply the modified retrospective or the restatement approach in IFRS 16. Instead of recognising an operating expense for its operating lease payments, the Group will instead recognise interest on its lease liabilities and amortisation on its right-of-use assets. This will increase reported EBITDA by an amount which will approximate to its current operating lease cost, which for the year ended 31 December 2017 was approximately US$0.6 million.

Basis of consolidation

 

The Group consolidated financial statements comprise the financial statements of the parent company Safecharge International Group Limited and the financial statements of the subsidiaries as shown in Note 13 of the consolidated financial statements.

 

Subsidiaries are considered to be controlled where the Group has the power to direct activities of the investee, as well as the exposure to variable returns from the subsidiary and the power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

Subsidiaries are consolidated from the date that the Group gains control and de-consolidated from the date that control is lost.

 

The financial statements of all the Group companies are prepared using uniform accounting policies. All inter‑company transactions and balances between Group companies have been eliminated during consolidation.

 

Business combinations

 

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 and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition‑related costs are generally recognised in the statement of comprehensive income as incurred.

 

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

 

·             Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits 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 Share‑based Payment at the acquisition date; 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 the statement of comprehensive income as a bargain purchase gain.

 

Non‑controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non‑controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets.

 

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its fair value at acquisition date and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

 

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in the statement of comprehensive income.

 

 

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Goodwill 

 

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired undertaking at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets.

 

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an undertaking include the carrying amount of goodwill relating to the undertaking sold. Goodwill is allocated to cash‑generating units for the purpose of impairment testing.

Revenue recognition

 

Revenue comprises the invoiced amount for the sale of services net of Value Added Tax, rebates and discounts. Revenues earned by the Group are recognised on the following bases:

 

Service revenues are generated from fees charged to merchants for payment processing and risk management services. Revenues are generated by transaction related charges billed as both a percentage based discount fee of the payment volumes processed and a fee per transaction. In addition to this volume-dependent sales revenue, service revenues are derived from a variety of services fees, such as fees for monthly minimum transaction fee requirements, set up fees, and fees for other miscellaneous services. Discount and other fees related to payment transactions are recognised at the time the merchant's transactions are processed. Revenues are recognised gross, with any commission expenses paid to acquiring banks recognised as cost of sales. Revenues derived from service fees are recognised at the time the service is performed.

Finance income and finance expense

 

Finance income includes interest income which is recognised based on the effective interest rate basis.

 

Interest expense and other borrowing costs are charged to the statement of comprehensive income based on the effective interest rate basis.

Foreign currency

 

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in United States Dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

 

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non‑monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on 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.

 

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the statement of comprehensive income for the period. Exchange differences arising on the retranslation of non‑monetary items carried at fair value are included in the statement of comprehensive income for the period except for differences arising on the retranslation of non‑monetary items in respect of which gains and losses are recognised in other comprehensive income and then in equity. For such non‑monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income and then in equity.

 

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are expressed in United States Dollars using exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.  

 

Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are reclassified from other comprehensive income to profit or loss in the period in which the foreign operation is disposed of.

Tax

 

Income tax expense represents the current and deferred tax charges for the period.

 

Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and laws that have been enacted, or substantively enacted, by the reporting date.

 

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax.

 

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.

Dividends

 

Dividends are recognised when they become legally payable. Interim dividends are recognised in equity in the period in which they are paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.

Property, plant and equipment

 

Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses.

 

Depreciation is calculated on the straight‑line method so as to write off the cost of each asset to its residual value over its estimated useful life. The annual depreciation rates used are as follows:

 


Useful economic life

Furniture, fixtures and office equipment

10 years

Leasehold improvements

10 years

Motor Vehicles

5 years

Computer equipment

3 years

 

 

The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

 

Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down immediately to its recoverable amount.

 

Expenditure for repairs and maintenance of property, plant and equipment is charged to the statement of comprehensive income of the year in which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.

 

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.

Intangible assets

Internally‑generated intangible assets ‑ research and development expenditure 

 

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

 

An internally‑generated intangible asset arising from the Group's e‑business development is recognised only if all of the following conditions are met:

·             an asset is created that can be identified (such as software and new processes);

·             it is probable that the asset created will generate future economic benefits; and

·             the development cost of the asset can be measured reliably.

 

Internally‑generated intangible assets are amortised on a straight‑line basis over their estimated useful lives once the development is completed and the asset is in use. Where no internally‑generated intangible asset can be recognised, development expenditure is charged to the statement of comprehensive income in the period in which it is incurred.

 

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 the statement of comprehensive income when the asset is derecognised.

 

Externally acquired intangible assets

 

Externally acquired intangible assets comprise of licences, internet domains names, IP technology and customer contracts which are stated at cost less accumulated amortisation. Where intangible assets are acquired as part of a business combination they are recorded initially at their fair value. Carrying amounts are reviewed on each reporting date for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount.

 

Costs that are directly associated with identifiable and unique computer software products and internet domain names controlled by the Group and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditure which enhances or extends the performance of computer software programs beyond their original specifications is recognised as a capital improvement and added to the original cost of the computer software. Costs associated with maintenance of computer software programs are recognised as an expense when incurred. Computer software costs are amortised using the straight-line method over their useful lives, not exceeding a period of five years. Amortisation commences when the computer software is available for use and is included within administrative expenses.

 

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 the statement of comprehensive income when the asset is derecognised.

 

Amortisation

 

Amortisation is calculated at annual rates estimated to write off the costs of the assets over their expected useful lives and is charged to operating expenses from the point the asset is brought into use.

 

 

 

The principal annual rates used for this purpose, which are consistent with those of the previous years, are as follows:

 


Useful economic life

Domain names/Acquiring licences

Indefinite life

Internally generated capitalised development costs

5 years

Other licences

1 year

Customer contracts and customer relationships

5-15 years

IP technology

5-10 years

 

Management believes that the useful life of the domain names and acquiring license is indefinite. Domain names and acquiring license are reviewed for impairment annually.

Financial instruments 

 

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

 

(1) Classification

 

The Group has financial assets in the following categories. Management determines the classification of financial assets at initial recognition.

·             Loans and receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after the reporting date. These are classified as non-current assets. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

·             Available-for-sale investments and assets classified as held for sale

 

Investments are recognised and de-recognised on trade date. The Group manages its investments with a view to profiting from the receipt of investment income and capital appreciation from changes in the fair value of equity investments. Quoted investments are designated as available-for-sale and subsequently carried in the statement of financial position at fair value with unrealised gain or loss being recognised in available-for-sale reserve within other comprehensive income. Fair value is measured using the closing bid price at the reporting date, where the investment is quoted on an active stock market. Unquoted investments are valued at the price of recent transaction if this is representative of fair value or using other valuation techniques not based on observable inputs.

 

 (2) Recognition and measurement

Purchases and sales of financial assets are recognised on trade‑date which is the date on which the Group commits to purchase or sell the asset. Loans and receivables are carried at amortised cost using the effective interest rate method.

 

Where a fall in the value of an investment is prolonged or significant, it is considered an indication of impairment. In such an event, the investment is written down to fair value and the amounts previously recognised in the consolidated statement of comprehensive income in respect of cumulative changes in fair value, are taken to the consolidated income statement as an impairment charge.

 

Provision for specific doubtful debts is made when there is evidence that the Group may not be able to recover balances in full. Balances are written off when the receivable amount is deemed irrecoverable.

 

Available-for-sale financial assets are carried at fair value with changes in fair value generally recognised in other comprehensive income and accumulated in the available-for-sale reserve. In accordance with IAS 39, a significant or prolonged decline in the fair value of an available-for-sale financial asset is recognised in the consolidated statement of comprehensive income. Realised gains are reclassified from other comprehensive income to profit or loss on disposal of the asset.

Cash and cash equivalents

 

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash at bank and short‑term bank deposits with original maturities of three months or less.

Trade receivables

 

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Loans granted

 

Loans originated by the Group by providing money directly to the borrower are categorised as loans and are carried at amortised cost. Interest free advances are measured at the fair value of cash consideration given, discounted back to present value using a market rate of interest. All loans are recognised when cash is advanced to the borrower.

 

An allowance for loan impairment is established if there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms of loans. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans.

 

Financial liabilities

 

The Group has financial liabilities in the following category:

·             Trade payables

Trade payables and contingent consideration are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

·             Contingent consideration

Contingent consideration, resulting from business combinations, is recognised at fair value at the acquisition date as part of the business combination, and discounted where the time value of money is material. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date through the consolidated statement of comprehensive income, along with finance charges where discounting has been applied.

 

 

 

Derecognition of financial assets and liabilities

Financial assets

 

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

·             the rights to receive cash flows from the asset have expired;

·             the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay

them in full without material delay to a third party under a 'pass through' arrangement; or

·             the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities

 

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

Impairment of non-financial assets

 

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.

 

Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash‑generating units).

Share capital

 

Ordinary shares are classified as equity.

Treasury shares

Consideration paid for the purchase of own shares is recognised directly in equity. The cost of own purchased shares is presented as a separate reserve (the "treasury shares reserve").

Provisions

 

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

Share‑based compensation

 

The Group operates equity‑settled, share‑based compensation plans, under which the entity receives services from employees as consideration for the Company's equity instruments (options). The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non‑market vesting conditions (for example, profitability and sales growth targets). Non‑market vesting conditions are included in assumptions about the number of options that are expected to vest.

At each reporting date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and retained earnings when the options are exercised.

Clients' deposits

 

All money held on behalf of clients has been excluded from the balances of cash and cash equivalents and amounts due to clients, brokers and other counterparties. Client money is not held directly, but is placed on deposit in segregated bank accounts with a financial institution. The amounts held on behalf of the clients at the reporting date are included in Note 16.

 

Administrative expenses

 

Salaries and employee expenses, share-based payments charge, depreciation and amortisation, premises and other costs are considered as administrative expenses.

Other expenses

 

Other expenses charged in the consolidated statement of comprehensive income include marketing expenses, travel expenses, IT expenses and professional services.

Operating leases

 

Operating leases are recognised on a straight line method over the life of the lease.

 

3. Financial risk management

Financial risk factors

 

The Group is exposed to interest rate risk, credit risk, liquidity risk, currency risk, operational risk, compliance risk and capital risk management arising from the financial instruments it holds. The main risks arising from Financial Instruments are: Market risk, Credit risk, Liquidity risk, Operational risk, Compliance risk and Capital risk management. Each of these risks is examined in detail below.

3.1 Market risk

Interest rate risk

 

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly.

The Group is exposed to interest rate risk to the extent that investment revenue earned on cash and cash equivalents is subject to fluctuations in interest rates. The Group's exposure to interest rate risk is limited as investments are held in liquid and short-term bank deposits. A sensitivity analysis has been performed wherein a 0.25% change in deposit interest rates offered would impact the profit before tax by US$125,000 (2016: US$133,000). 0.25% has been used as a benchmark for sensitivity analysis as it reflects the estimated exposure in the coming year.

Currency risk

 

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group's functional and presentation currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the United States Dollars (the functional and presentation currency), the Euro, the United Kingdom Pounds and the New Israeli Shekel. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.

 

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

 

 


Liabilities

Assets





2017

2016

2017

2016


US$000s

US$000s

US$000s

US$000s






Euro

8,062

3,514

27,858

16,771

United Kingdom Pounds

1,549

1,205

9,715

6,473

New Israeli Shekel

4,788

3,476

3,317

3,319

Other

922

361

11,288

6,673


15,321

8,556

52,178

33,236

 

Sensitivity analysis

 

A 10% strengthening of the United States Dollar against the following currencies at 31 December 2017 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the United States Dollar against the relevant currency, there would be a materially equal and opposite impact on the profit and other equity. 10% has been used as a benchmark for the sensitivity analysis as it reflects the expected exposure in the coming year.

 


Profit or loss


2017

2016


US$000s

US$000s




Euro

(1,980)

(1,326)

United Kingdom Pounds

(817)

(527)

New Israeli Shekel

147

16

Other

(1,037)

(631)


(3,687)

(2,468)

 

3.2 Credit risk

 

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. Cash balances are held with high credit quality financial institutions rated "Baa1" and above according to Moody's Investors Service's ratings, and the Group has policies to limit the amount of credit exposure to any financial institution.

 

As of reporting date none of the Group financial assets were impaired or past due.

 

The Group has an established credit policy to ensure that it only transacts with counterparties that are able to meet satisfactory rating requirements. Counterparty limits are reviewed and set centrally by Management. Management is responsible for ensuring that it remains within these limits and the Risk function monitors and reports any exceptions to the policy. In individual cases, collateral is obtained for specific contractual relationships.

 

The Group provided loans and advances which are interest-free and with a fixed payment term of 12 months from issue. The loans and advances are secured on specified revenue volumes.  The loans and advances were fully repaid in February 2018.

 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

 

 


2017

2016


US$000s

US$000s




Trade and other receivables

4,410

5,329

Loans and advances

2,936

5,000

Cash and cash equivalents

108,858

115,357

Other non‑current receivables

             3,789

           2,665


         119,993

       128,351

3.3 Liquidity risk

 

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group has procedures with the object of minimising losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

 

The following tables detail the Group's remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

 

 

 

31 December 2017

 

 

Carrying

Amounts

                             

Contractual cash flows

                    

3 months or less

Between
3‑12 months

 

Between
1‑5 years

 

More than
5 years


US$000s

US$000s

US$000s

US$000s






Trade and other payables

14,050

14,050

14,050

-

-

-

 

Merchant processing liabilities

 

11,036

 

11,036

 

11,036

 

-

 

-

 

-

 


25,086

25,086

25,086

-

-

-

 

 

31 December 2016

 

Carrying

amounts

                             

Contractual cash flows

                    

3 months or less

Between
3‑12 months

 

Between
1‑5 years

 

More than
5 years


US$000s

US$000s

US$000s

US$000s

US$000s

US$000s








Trade and other payables

9,709

9,709

9,709

-

-

-

Contingent Consideration

343

343

-

343

-

-


10,052

10,052

9,709

343

-

-

 

3.4 Operational risk

 

Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control systems as well as the risk of human error and natural disasters. The Group's systems are evaluated, maintained and upgraded continuously.

3.5 Compliance risk

 

Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non‑compliance with laws and regulations of the state. The risk is limited to a significant extent due to the supervision applied by the Chief Risk Officer, as well as by the monitoring controls applied by the Group.

3.6 Capital risk management

 

The Group meets its objectives of managing capital and ensuring that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group's overall strategy remains unchanged from last year.

 

The Group considers its share capital and reserves to constitute its total capital. The Group's policy in respect of capital risk management is to maintain a strong capital base so as to retain investor and market confidence. The Group maintains sufficient cash resources to meet its liabilities as and when they fall due, taking into account cash forecasts. Liquidity risk is mitigated by the high levels of cash balances in the business.

 

 

4. Critical accounting estimates and judgments

 

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

 

The areas requiring the use of estimates and critical judgments that may potentially have a significant impact on the Group's earnings and financial position are impairment of goodwill, share-based payments, determination of fair value of intangible assets acquired and determination of fair value of contingent consideration.

·             Impairment of goodwill and other intangible assets

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units of the Group on which the goodwill together with the other intangible assets has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash‑generating units using a suitable discount rate in order to calculate present value (see Note 12).

·             Valuation of available for sale investments

The Group uses valuation techniques to determine more fair values of available for sale investments. The valuation methods include estimates and judgements in order to determine the most appropriate basis to be adopted (see Note 17).

 

 

5. Segmental analysis

 

Management considers that the Group's activity as a single source supplier of global omni‐channel payments services from card acquiring and issuance to payment processing and checkout with advanced risk management solutions, constitutes one operating and reporting segment, as defined under IFRS 8.

 

Geographical analysis of revenue

Analysis of revenue by geographical region is made according to the jurisdiction of the Group's direct customer. This does not reflect the region of the end users of the Group's customers, whose locations are worldwide.


2017

2016


US$000s

US$000s




Europe

96,962

97,383

Rest of the World

14,730

6,756


111,692

104,139




Geographical analysis of non-current assets


2017

2016


US$000s

US$000s




Guernsey

13,783

9,977

Europe

23,377

18,326

Asia

23,653

17,673

North America

2,327

980


63,140

46,956

 

6. Auditors' remuneration

 


2017

2016


US$000s

US$000s

Audit services



Parent company and Group audit

107

93

Audit of overseas subsidiaries

111

108

Audit related assurance services

-

29

Non-audit services



Non-audit assurance and tax services

54

108


272

338

7. Finance income and expense


2017

2016


US$000s

US$000s

Finance income



Interest received

496

244

Foreign exchange differences

1,458

328

Net gain on disposal of available-for-sale financial assets transferred from equity (See Note 17)

 

-

 

1,760


1,954

2,332




Finance expense



Bank fees

(425)

(413)


(425)

(413)




Net finance income

1,529

1,919

 

 

8. Tax Expense

 


2017

2016


US$000s

US$000s

Current tax:

Charge for the year

1,660

1,313

Charge for previous years

558

-

 

Deferred tax:



Charge for the year

138

174

Total tax charge in the income statement

2,356

1,487

 

 

The tax charge for the year can be reconciled to accounting profit as follows:

 


2017

2016


US$000s

US$000s




Profit before taxation

26,168

28,041

Tax at effective rate in Guernsey

-

-

Higher rates of current income tax in overseas jurisdictions

2,218

1,313

Deferred tax on other timing differences (See Note 21)

138

174

Total tax charge

2,356

1,487

 

There was no tax effect on other comprehensive income in the current or prior year.

 

 

9. Earnings per share

 


2017

2016


US$

US$




Basic (cents)

16.14

17.57

Diluted (cents)

15.78

17.32








2017

2016


US$000s

US$000s

Profit after tax for the year

 

23,812

 

26,554

 

 

 

 

2017

2016


Number

Number

Denominator- basic

Weighted average number of equity shares

 

147,551,477

 

151,156,990




Denominator - diluted



Weighted average number of equity shares

147,551,477

151,156,990

Weighted average number of share options

3,362,412

2,138,685

Weighted average number of shares

150,913,889

153,295,675

 

 



10. Dividends

 


2017

2016


US$000s

US$000s




Dividends

25,821

21,948


25,821

21,948

 

In May 2017 the Group distributed US$14,539,000, 9.47 US$ cents per share (2016: US$11,340,000, 7.30 US$ cents per share), as a final dividend for the year ended 31 December 2016.

 

In September 2017 the Board of Directors approved the payment of an interim dividend of US$11,282,000, 7.69 US$ cents per share (2016: US$10,608,000, 7.0 US$ cents per share) as an interim dividend.

 

The 2016 interim dividend included in the consolidated statement of changes in equity report was based on the conversion exchange rate as of dividend declaration date. The 2016 interim dividend included in the consolidated statement of cash flow was based on the conversion exchange rate as of dividend payment date, resulting in a foreign exchange difference of US$728,000 in 2016 (2017: US$NIL).

 

 

 

11. Property, plant and equipment


Leasehold improvements

Motor vehicles

Furniture, fixtures and office equipment

Computer equipment

   Total


US$000s

US$000s

US$000s

US$000s

US$000s

Cost






Balance at 1 January 2016

576

236

638

5,615

7,065

Additions

121

-

38

1,120

1,279

Foreign exchange rate movement

-

(22)

(21)

(70)

(113)

Balance at 31 December 2016

697

214

655

6,665

8,231

Additions

2,302

100

717

2,651

5,770

Write-off

-

(42)

(634)

(927)

(1,603)

Foreign exchange rate movement

55

41

143

540

779

Balance at 31 December 2017

3,054

313

881

8,929

13,177







Depreciation






Balance at 1 January 2016

343

188

288

3,398

4,217

Charge for the year

108

21

100

1,510

1,739

Foreign exchange rate movement

-

(7)

(15)

(49)

(71)

Balance at 31 December 2016

451

202

373

4,859

5,885

Charge for the year

205

23

289

1,605

2,122

Write-off

-

(39)

(609)

(895)

(1,543)

Foreign exchange rate movement

17

29

50

420

516

Balance at 31 December 2017

673

215

103

5,989

6,980

 

 






Net book amount






Balance at 31 December 2017

2,381

98

778

2,940

6,197

Balance at 31 December 2016

246

12

282

1,806

2,346

 

 

 

12. Intangible assets

 

 

Goodwill

 

Customer

contracts

 

 

IP technology

 

Domains and licenses

 

 

Development

 

 

Total


US$000s

US$000s

US$000s

US$000s

US$000s

US$000s

Cost







Balance at 1 January 2016

9,450

4,985

10,178

2,122

7,139

33,874

Additions

-

-

340

-

4,990

5,330

Foreign exchange rate movement

 

(126)

 

24

 

(322)

 

-

 

(137)

 

(561)

Balance at 31 December 2016

9,324

5,009

10,196

2,122

11,992

38,643

Additions

-

-

169

162

5,752

6,083

Foreign exchange rate movement

 

1,159

 

361

 

1,229

 

-

 

30

 

2,779

Balance at 31 December 2017

10,483

5,370

11,594

2,284

17,774

47,505








Amortisation







Balance at 1 January 2016

-

868

1,775

-

208

2,851

Amortisation for the year

-

582

1,193

-

625

2,400

Foreign exchange rate movement

 

-

 

-

 

(49)

 

-

 

-

 

(49)

Balance at 31 December 2016

-

1,450

2,919

-

833

5,202

Amortisation for the year

-

610

1,294

-

1,140

3,044

Foreign exchange rate movement

 

-

 

-

 

39

 

-

 

-

 

39

Balance at 31 December 2017

-

2,060

4,252

-

1,973

8,285

 

 







Net book amount







Balance at 31 December 2017

10,483

3,310

7,342

2,284

15,801

39,220

Balance at 31 December 2016

9,324

3,559

7,277

2,122

11,159

33,441

 

Goodwill represents the premium paid to acquire investments by the Group which were purchased in 2015.

 

Goodwill is measured at cost less any accumulated impairment losses.

 

The Group has domain names and licences with an indefinite life with a carrying value of US$2,284,000 (2016: US$2,122,000). It is expected that these domain names and licenses with indefinite lives will be held for an indefinite period of time and are expected to generate economic benefits. There is no foreseeable limit on the period of time over which domain names and acquiring licenses are expected to contribute to the cash flows of the Group. Domain names and licences with an indefinite life are checked for impairments at each reporting date or more frequently if there are indicators that the carrying value is impaired. As of the reporting date no impairment was found. Management is committed to continue to provide long term investment into these assets in order for them to continue to provide future economic benefits.  

 

Impairment tests of intangible assets

 

The recoverable amount of all intangible assets was determined based on value‑in‑use calculations by discounting the future pre‑tax cash flows generated from the continuing use of the unit and was based on the following key assumptions.

 

Management determined these key assumptions by assessing current market conditions and through the utilisation of forward looking external evidence:

 

The terminal value has been calculated assuming a long-term growth rate of 2% per annum in perpetuity, based on the Group's view of long-term nominal growth, which does not exceed market expectations.

 

Cash flows projections for the intangible assets derived from CreditGuard Limited business combination were projected based on financial budgets approved by management covering 2018 to 2024 based on the use of the economic life of the acquired assets. Revenue rates for 2018 to 2024 had an average growth of 8% per annum and indefinite growth of 2% for the period after 2024. A pre‑tax discount rate of 13% was applied in determining the recoverable amount of the intangible assets. The discount rate was estimated based on an industry average cost of capital and reflects specific risks relating to the relevant intangible assets.

 

 

Cash flows projections for the intangible assets derived from Safecharge Card Services Limited business combination were projected based on financial budgets approved by management covering 2018 to 2022 based on the use of the economic life of the acquired assets. Revenue rates for the five year period had an average growth of 122% per annum and indefinite growth of 2% after the first 5 years based on the early life stage of the products and the forecasted growth within their market. A pre‑tax discount rate of 12% was applied in determining the recoverable amount of the intangible assets. The discount rate was estimated based on an industry average cost of capital and reflects specific risks relating to the relevant intangible assets.

 

Sensitivity analysis was performed on the key inputs, being the growth and discount rates. A significant increase in the discount rate did not indicate impairment and no reasonable change in the growth rate led to impairment.

 

The discount rates applied would need to increase to 16% and 15% before any impairment arose. The growth rates would need to reduce to 7% and 117% before an impairment arose.

 

 

13. Subsidiaries

 

The details of the Company's subsidiaries as at 31 December 2017 are as follows: 

 

Name

 

Country of incorporation

Principal activities

Holding

%

ELoad Solutions Limited

British Virgin Islands

Holding company

100

XT Commerce International Limited

Cyprus

Sales company

80

xt: Commerce GmbH

Austria

Sales company

80

Safecharge Technologies Limited

British Virgin Islands

Sales company

100

Safecharge Limited

Cyprus

Electronic Money Institution

100

Safecharge (UK) Limited

United Kingdom

Marketing and support company

100

Safecharge (Bulgaria) EOOD

Bulgaria

Development and support company

100

Safecharge (Israel) Limited

Israel

Development and support company

100

CreditGuard Limited

Israel

Sales, development and support company

100

Safecharge Card Services Limited

Ireland

Sales, development and support company

100

Safecharge Services Limited

Cyprus

Dormant

100

Safecharge (USA) Inc.

Delaware

Sales company

100

Safecharge Pte Ltd

Singapore

Sales company

100

Safecharge Hong Kong Limited

Hong Kong

Dormant

100

GTS Online Solutions Ltd

British Virgin Islands

Holding company

 

100

GTS Online (UK) Ltd

United Kingdom

Support company

100

Safecharge Digital Limited (ex. GTS Online Ltd)

Cyprus

Sales company

100

Safecharge Financial Services Ltd

United Kingdom

Dormant (Payment Institution from January 2018)

100

Safecharge (Netherlands) B.V.

Netherlands

Marketing and support company

100

Safecharge (Italy) s.r.l.

Italy

Marketing and support company

100

XT Commerce International Limited and xt:Commerce GmbH are both loss making entities. All losses of these entities will be wholly suffered by the Group and therefore none of these losses have been transferred to non‑controlling interests and therefore separate disclosure in respect of NCI has not been presented in the statement of comprehensive income or statement of financial position.

 

 

14. Trade and other receivables

 


2017

2016


US$000s

US$000s




Trade receivables

3,109

3,567

Receivables from related companies (Note 25)

-

343

Other receivables

1,301

1,419

Loans and advances

2,936

5,000


7,346

10,329

 

The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above. The loans and advances in the amount of US$2,936,000 were fully repaid in February 2018.

 

The exposure of the Group to credit risk and impairment losses in relation to trade and other receivables is reported in Note 3 of the consolidated financial statements. As of reporting date none of the items in trade and other receivables have been impaired or are past due.

 

15. Other non‑current receivables

 


2017

2016


US$000s

US$000s




Deposits

3,789

2,665

Other non‑current receivables represent deposits that are held as collateral by card schemes, acquirers, rent bank guarantee and credit card guarantee as part of the Group's activities.

 

 

16. Cash and cash equivalents

 

Cash balances are analysed as follows:

 


2017

2016


US$000s

US$000s




Cash and cash equivalents

108,858

115,357


108,858

115,357

 

The Group holds cash and cash equivalents amounting to US$106,743,000 as at 31 December 2017 (2016: US$90,434,000) on behalf of clients. The amounts represent cash received on transactions processed by the Group which is then paid on to its clients. In substance, the Group's management consider these transactions do not entitle the Group to an asset and have therefore not recorded the resulting asset or liability to clients in its statement of financial position.

 

The exposure of the Group to credit risk in relation to cash and cash equivalents is reported in Note 3 of the consolidated financial statements.

 

 

17. Available-for-sale investments including classified as held for sale

 

Fair value hierarchy

The following assets types are carried at fair value after initial recognition.

 

The group uses the following hierarchy for determining and disclosing the fair value of financial assets by valuation technique:

 

Level 1: quoted (unadjusted) prices in active markets for identical assets,

Level 2: other techniques where all inputs, which have a significant effect on the recorded fair value, are observable either directly or indirectly; and

Level 3: techniques where inputs which have a significant effect on the recorded fair value that are not based on observable market data.

 

 


Total

Level 1

Level 2

Level 3


US$000s

US$000s

US$000s

US$000s






Available-for-sale investments

13,934

-

-

13,934

Available-for-sale investments classified as held for sale

 

694

 

-

 

694

 

-

Total at 31 December 2017

14,628

-

694

13,934






Available-for-sale investments

8,504

-

8,504

-

Available-for-sale investments classified as held for sale

 

267

 

-

 

-

 

267

Total at 31 December 2016

8,771

-

8,504

267






There have been transfers of financial instruments between levels during the year.

 

The following is a reconciliation of the movement in the Group financial assets classified at Level 3 during the year:


2017

2016


US$000s

US$000s




Balance brought forward

267

1,384

Fair value movement recognised in the consolidated statement of comprehensive income

2,633

-

Realised gain for the period recognised in profit or loss

-

(1,117)

Acquired during the period

2,797

-

Reclassification from Level 2

8,237

-

Fair value at 31 December

13,934

267

 

Assets classified as held for sale include the Group's shares in Visa Europe and the valuation is based on assessment of the consideration entitled to the Group as part of the purchase of Visa Europe by Visa Inc in 2016. These are based on unobservable inputs due to a discount rate of 6% applied to market price of shares to be converted and estimated cash due to be received. In June 2016 the Group received payment of US$1,117,000 as part of the purchase of Visa Europe by Visa Inc. and therefore this realised gain was recycled to the 2016 profit or loss/income statement and included within finance income. At 31 December 2017 the available-for-sale investment was valued at US$694,000 and an unrealised gain of US$427,000 was recognised in other comprehensive income.

 

The remaining available-for-sale investments are held at fair value and measured based on Level 3 inputs:

 

In April 2015, the Group invested US$1,000,000 in 2C2P, an unquoted business based in South East Asia. This was in exchange for approximately 2% of issued share capital. 2C2P shares are unquoted. In August 2016, the Group invested an additional US$609,000. As of 31 December 2016 the shares value was adjusted based on the share price of recent transactions with the unrealised increase in valuation of US$895,000 recorded as an available-for-sale reserve. This investment is classified as Level 3 for the purpose of disclosure in the fair value hierarchy, as the valuation is based on cost basis, as this the most reliable basis for FV measurement at the year-end.

 

In June 2015 the Group invested US$11,276,000 (€10,084,500) in FinTech Group AG, a business listed on the Frankfurt Stock exchange, for a 5% equity interest as part of a strategic partnership. At 31 December 2015, the investment was valued at US$17,610,000 and an unrealised gain of US$6,334,000 was recognised in other comprehensive income. In May 2016 the value of the available-for-sale asset fell to US$11,919,000, and therefore an unrealised decrease in fair value of US$5,691,000 was recognised in other comprehensive income. Subsequently, the Group sold all the investment in FinTech Group AG, with an overall realised gain of US$643,000, which has been recycled to the profit or loss and included within finance income in the year ended 31 December 2016.

 

In December 2016, the Group invested US$6,000,000 in Nayax, an unquoted business based in Israel. This was in exchange for approximately 4% of issued share capital. Nayax shares are unquoted. This investment is classified as Level 3 for the purpose of disclosure in the fair value hierarchy. At 31 December 2017, the investment was valued at US$8,633,000 (2016: US$6,000,000) based on share price of recent transactions and an unrealised gain of US$2,633,000 (2016: US$NIL) was recognised in other comprehensive income. The share price of the recent transaction was based on a valuation range subject to EBITDA performance and the revaluation of US$2,633,000 is based on the lower end of the valuation range. Should a valuation be achieved at the higher end of the range the carrying value could be uplifted by up to US$3,453,000 to US$12,086,000 based on specific performance measures being achieved by Nayax, which may result in a higher unrealised gain on this investment.

 

 

In 2017, the Group invested US$1,148,000 (€1,000,000) in Yello Company Limited, an unquoted business based in France, which has developed a new generation of payment terminals. Yello's product YelloPad, has been designed to service a wide range of industries including retail, hospitality and healthcare. This was in exchange for approximately 9.4% of issued share capital. This investment is classified as Level 3 for the purpose of disclosure in the fair value hierarchy, as the valuation is based on cost basis, as this the most reliable basis for FV measurement at the year-end.

 

In June 2017 the Group entered into a strategic partnership and commitment to invest up to €3.3 million in Saxo Payments (Banking Circle), an unquoted banking services company offering banking transaction services based in Luxemburg. In October 2017, the Group invested US$1,649,000 (€1,402,500) in Saxo Payments in respect of the investment commitment. This investment is classified as Level 3 for the purpose of disclosure in the fair value hierarchy, as the valuation is based on cost basis, as this the most reliable basis for FV measurement at the year-end. In February 2018 the Company invested additional US$1,231,000 (€990,000) in respect of this investment agreement.

 

18. Share capital

 


2017

2017

2017

2017

2016

2016

2016

2016


Number of Ordinary shares

Number of Treasury shares

Ordinary shares

US$000s

Treasury shares US$000s

Number of Ordinary shares

Number of Treasury shares

Ordinary shares

US$000s

Treasury shares US$000s

Authorised









Ordinary shares of US$0.0001 each              

unlimited

 

-

15

 

*

unlimited

 

-

15

 

-










Issued and fully paid









Balance at 1 January

150,093,662

1,887,510

15

*

151,583,998

-

15

-

Exercise of options

-

-

-

-

397,174

-

*

-

Purchase of own shares

(3,700,000)

3,700,000

(*)

*

(2,400,000)

2,400,000

(*)

*

Exercise of options from treasury

463,582

(463,582)

*

(*)

512,490

(512,490)

*

(*)

Balance at 31 December

146,857,244

5,123,928

15

*

150,093,662

1,887,510

15

*

 

(*) represents amount less than 1 thousand US$

 

In 2017 the Company purchased 3.7 million (2016: 2.4 million) of ordinary shares in total consideration of US$10,619,000 (2016: US$6,281,000).

 

The Company operates an equity‑settled share-based remuneration scheme for employees, executive Directors and certain senior management. The only vesting condition being that the individual remains an employee of the Group over an agreed period (vesting period). 

 

In November 2016 the Company adopted a Long Term Incentive Plan (LTIP) for executive Directors and certain senior management. The awards include nil-cost options and their vesting is subject to certain performance conditions.

 

The movement in share options was as follows:

 

                             

2017

2017

2016

2016

                             

Weighted average exercise price


Number

Weighted average exercise price


Number

                             

US$


US$


Outstanding at the beginning of the year                              

 

2.91

 

9,467,660

 

3.01

 

10,446,392

Granted during the year                       

 

2.70

 

4,332,285

 

2.68

 

555,809

Forfeited during the year                       

 

1.97

 

(630,538)

 

3.46

 

(624,877)

Exercised during the year

 

2.37

 

(463,582)

 

1.94

 

(909,664)

Outstanding at the end of the year       

 

2.90

 

12,705,825

 

2.91

 

9,467,660






 

 

The weighted average remaining contractual life of share options outstanding at 31 December 2017 equals to 7.47 years (2016: 7.56 years). The exercise price of the options outstanding at 31 December 2017 ranged between US$NIL and US$4.06 (2016: US$NIL and US$3.88). The maximum term of the options granted is 10 years.

 

Of the total number of options outstanding at 31 December 2017, 7,988,151 with a weighted average exercise price of US$3.18 (2016: 5,854,147 with weighted average price of US$3.07) had vested and were exercisable.

 

The share-based payment charge in the profit or loss amounts to US$1,092,000 (2016: US$672,000).

 

The total value of share options granted is calculated using the Black‑Scholes model. The fair value determined at the grant date is expensed over the vesting period of the options. The calculation is based on:

 


2017

2016

Expected volatility

18%-25%

18%-25%

Weighted average exercise price

US$2.90

US$2.91

Risk free interest rate ranging

0.25%-1.75%

0.25%-0.665%

Contractual life

10 years

10 years

Dividend yield rate

3%-5.5%

3%

 

The expected volatility of the options is based on the implied volatility from exchange traded options of the company's shares, the historical volatility of the share price over the most recent that corresponds with the expected life of the option, and the historical or implied volatility of similar entities. The expected life of the option is based on the maturity date and is not necessarily indicative of exercise pattern that may occur. The options include a service condition as the individuals participating in the plan must be employed by the Company for a certain period of time in order to earn the right to exercise the share options. A sensitivity analysis has been performed based on other comparable companies wherein a 3% change in the expected volatility during 2017 would impact the statement of comprehensive income by US$44,000 (2016: US$NIL). As of reporting date the movement of the volatility is not expected to have a significant impact on the share options valuation, and the share options valuation will be reassessed at each reporting date.

 

 

19. Reserves

 

The following describes the nature and purpose of each reserve within owner's equity:

 

Share premium

Related to the issuance of shares at a premium.

 

Capital reserve

Relates to capital introduced by shareholders for assets contributed to the Group for no consideration and without the issue of shares.

 

Share options reserve

The reserve was created to record the cumulative amount recognised in respect of share-based payments.

 

Treasury shares reserve

The reserve was created to record the purchase of own shares.

 

Translation reserve

Exchange differences relating to the translation of the net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. United States Dollars) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve are reclassified to the statement of comprehensive income on the disposal or partial disposal of the foreign operation.

 

Available-for-sale reserve

The available-for-sale reserve represents the movement in fair value of the Group's holdings in investments classified as available-for-sale.

 

Retained earnings reserve

The retained earnings reserve comprises:

·      results recognised through the consolidated and Company income statement;

·      dividends paid to equity shareholders; and

·      transactions relating to share-based payments.

 

20. Provisions for other liabilities and charges

Severance Pay


US$000s



Balance at 1 January 2016

243

Charged to statement of comprehensive income

17

Balance at 31 December 2016

260

Credited to statement of comprehensive income

(29)

Balance at 31 December 2017

231

 

 

21. Deferred tax liability


2017

2016


US$000s

US$000s




Balance at the beginning of the year

479

290

Recognised in statement of comprehensive income

138

174

Recognised in other comprehensive income

263

-

Foreign currency revaluation impact

77

15


957

479

 

At the reporting date the Group has in respect of losses from subsidiaries and other temporary differences, a deferred tax asset which has not been recognised of US$4,667,000 (2016: US$4,607,000). The asset has not been recognised as the timing of its realisation remains uncertain or its use is dependent on the existence of future taxable profits against which the tax losses and other temporary differences can be utilised.

 

During the reporting period there was tax charged of US$263,000 directly to equity.

 

There were no changes in the tax rates charged during 2017 and 2016.

 

 

22. Trade and other payables


2017

2016


US$000s

US$000s




Trade payables

2,032

828

Other payables

12,018

8,879

Payables to Related Parties (Note 25)

-

2


14,050

9,709

 

The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.

 

 

23. Taxes receivable/(payable)

 


2017

2016


US$000s

US$000s




Income tax and other taxes receivable/(payable)

442

(1,625)


442

(1,625)

 

 

24. Contingent consideration

 

Contingent consideration related to acquisitions that took place during 2015.

 

Details of the determination of Level 3 fair value measurements are set out below.

 

Contingent consideration arrangements:

 


2017

2016


US$000s

US$000s




At 1 January

343

370

Contingent remuneration

84

170

Foreign exchange rate movement

3

13

Amounts paid

(430)

(210)

At 31 December

-

343

 

 

All amounts potentially payable are based on performance measures and contingent remuneration. In January 2015, the Group acquired SafeCharge Card Services Limited and CreditGuard Limited. The amounts due for the acquisition included contingent consideration and contingent remuneration. The contingent consideration was payable over one year if specified performance measures are achieved. The contingent remuneration is recognised over the period when services are provided.

 

The fair value is determined considering the expected payment, discounted to present value using a risk-adjusted discount rate of 5%. The expected payments are determined by considering the possible performance criteria, the amount to be paid under each scenario, and the probability of each scenario. The significant unobservable inputs are the forecast performance criteria and the risk-adjusted discount rate. The estimated fair value would increase if the forecast performance criteria rate was higher or the risk-adjusted discount rate was lower.

 

Sensitivity analysis was performed on the key inputs including the discount rate and probabilities applied. Changes in key inputs did not give rise to material impact.

 

Contingent remuneration of US$84,000 (2016: US$170,000) has been charged to acquisition costs in the statement of comprehensive income.

 

 

25. Related party transactions

 

The Company is controlled by Northenstar Investments Limited, the immediate parent company, which is domiciled in the Isle of Man. Northenstar Investments Limited is wholly owned by Mr. Teddy Sagi.

 

On 27 June 2017, the holdings of Mr. Teddy Sagi (held indirectly) in Playtech plc shares decreased to 6.3% (31 December 2016: 21.93%). From this date Playtech plc no longer meets the definition of a related party. Accordingly, Playtech plc and its subsidiaries are not accounted as related parties from the same date. The transaction amounts with Playtech plc and its subsidiaries which are included in this Note reflects the period ended 27 June 2017, when they ceased to be related parties.

 

The following transactions were carried out with related parties:

25.1 Related party transactions


2017

2016


US$000s

US$000s




Remuneration paid to Directors

(4,112)

(2,411)

Services received from related party by virtue of common control

(159)

(224)

Revenue from services provided to companies related by virtue of common control

 

5,342

 

10,522

Share-based payments expense related to executive Directors

(750)

(500)


321

7,387

The details of key management compensation (being the remuneration of the executive and non-executive Directors) are set out below:

 

Directors' compensation

 

2017

 

2016


US$000s

US$000s




Short term benefits of Directors

1,662

1,361

Share-based benefits of executive Directors

750

500

Bonuses and compensation to executive Directors

2,450

1,050


4,862

2,911




25.2 Receivables from related parties (Note 14)



2017

2016

Name

Nature of transactions

US$000s

US$000s





Related party by virtue of common control

Provision of consulting services

-

343



-

343

25.3 Payables to related parties (Note 22)



2017

2016

Name

Nature of transactions

US$000s

US$000s





Related party by virtue of common control

Trade payable

-

2



-

2

25.4 Client monies held on behalf of related parties



2017

2016

Name

Nature of transactions

US$000s

US$000s





Related parties by virtue of common control

Trade payable to clients

636

7,469



636

7,469

 

The above balances are not recognised in the statement of financial position since they relate to client monies held on their behalf.

 

All related party transactions conducted on an arm's length terms and on a normal commercial basis.

 

Amounts disclosed above as related party transactions by virtue of common control include transactions with companies with common significant shareholder.

 

 

26. Contingent liabilities

The Group had guarantees as at 31 December 2017 and 31 December 2016 (see Note 15). SafeCharge Card Services Limited is currently involved in litigation in Ireland which is at early stages and it is not possible for Directors to assess its potential impact (if any) at this point in time. The Group had no other contingent liabilities.

 

 

27. Settlement assets and merchant processing liabilities

 

Following the acquisition of the assets and liabilities of GTS Online Solutions Limited ('GTS') on 10 March 2014, 100% of the shares of GTS were transferred to the Company, in January 2017, with no additional consideration. GTS operates an online payment processing service.

Settlement assets

 

The settlement assets arise from the operations of GTS which amounted to US$1.7 million (2016: US$NIL). Settlement assets result from timing differences in the settlement process of GTS. These timing differences arise primarily as a result of settlement amounts due from financial institutions and other payment processors. These amounts are typically funded to the Group within days of the transaction processing date.

 

Merchant processing liabilities

 

The merchant processing liabilities arise from the operations of GTS which amounted to US$11.0 million (2016: US$NIL). In addition, an equivalent transient amount relating to merchant transactions processed via GTS operations is included in cash and cash equivalents and settlement assets. In these operations no legal right exists to offset between this cash and the corresponding merchant processing liabilities.

 

 

28. Commitments

Operating lease commitments 

The Group has entered into operating leases with future aggregate minimum lease payments under non‑cancellable operating leases of US$1,974,000 (2016: US$1,777,000) due in less than 1 year and US$5,999,000 (2016: US$6,489,000) due between 1 and 5 years.

 

Strategic partnership and investment commitment

In June 2017 the Group has entered into a strategic partnership and commitment to invest up to €3.3 million in Saxo Payments (Banking Circle), a banking services company offering banking transaction services based in Luxemburg. The remaining investment commitment as of 31 December 2017 amounted to €1.9 million (see Note 17). US$1.23 million was invested in February 2018, leaving a remaining commitment of US$420,000.

 

 

29. Events after the reporting period

 

In February 2018 the Company invested a further US$18.5 million in Nayax, a leading global cashless payment solutions provider for the unattended machine industry in order to support Nayax's strong growth and international expansion in cashless payment solutions. This follows the initial investment of the Company in Nayax in December 2016 and takes the total investment by SafeCharge to US$24.5 million, representing approximately 11% of the issued share capital.

 

There were no other material events after the reporting period, which have a bearing on the understanding of the consolidated Financial Statements.

 


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