TIDMSCH
RNS Number : 0183A
SafeCharge International Group Ltd
21 March 2017
SafeCharge International Group Limited
('SafeCharge,' the 'Company' and together with its subsidiaries,
the 'Group')
Results for the year ended 31 December 2016
Strong financial performance, platform development and focus on
high quality customers sets foundations for stronger future
growth
SafeCharge (AIM: SCH), a leader in advanced payment
technologies, is pleased to announce its results for the year ended
31 December 2016.
Overview and current trading
Following a successful year to 31 December 2016 and building on
the strong trading and operational momentum achieved in Q4, the
Group has made a good start to 2017. Transaction volumes continue
to grow in our core payment processing and acquiring platform and
the Group has a strong sales pipeline. The company continues to
generate significant free cash flow, which is being returned to
shareholders through the company's dividend. The Directors look
forward with confidence to 2017 and beyond.
The Board is issuing guidance for 2017 with revenues expected to
be in the range of US$115m to US$118m, and Adjusted EBITDA between
US$36m and US$38m. This will be driven by continued growth from our
existing client base and over $1bn in annualised processing volumes
from new clients due to start processing in 2017.
Financial highlights
31-Dec-16 31-Dec-15 Change
US$m US$m %
---------------------------------------- ---------- ---------- -------
Core Revenues (constant currency**) 101.5 91.5 11
---------------------------------------- ---------- ---------- -------
Adjusted EBITDA* (constant currency**) 35.3 31.1 14
---------------------------------------- ---------- ---------- -------
Processing Volumes 8,082 6,934 17
---------------------------------------- ---------- ---------- -------
Own Acquiring volumes 970 191 >400
---------------------------------------- ---------- ---------- -------
Statutory revenues 104.1 99.8 4
---------------------------------------- ---------- ---------- -------
Revenues (constant currency**) 106.9 99.8 7
---------------------------------------- ---------- ---------- -------
Statutory gross profit 60.7 57.7 5
---------------------------------------- ---------- ---------- -------
Adjusted EBITDA* 33.3 31.1 7
---------------------------------------- ---------- ---------- -------
Statutory profit after tax 26.6 22.9 16
---------------------------------------- ---------- ---------- -------
Cash balances at year end 115.4 114.9 0
---------------------------------------- ---------- ---------- -------
17.57 15.10
Earnings per share US$c US$c 16
---------------------------------------- ---------- ---------- -------
9.47 7.30
Recommended final dividend US$c US$c 30
---------------------------------------- ---------- ---------- -------
16.47 11.30
Total dividend US$c US$c 46
* Adjusted EBITDA is a non-GAAP, company-specific measure which
is earnings excluding interest, taxes, depreciation, amortisation,
acquisition costs and contingent remuneration, restructuring costs
and share-based payments charge (See Consolidated Statement of
Comprehensive Income).
** 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.
Operational highlights
-- Successful launch of a fully serviced global
payment solution to Tier 1 customers, including
Sisal, Nayax, EL AL, Betfair, and SunBingo
-- Reshaping of the existing customer base undertaken
during 2016 to upgrade the quality of revenues
-- A strong pipeline of new customers in digital
services, online retail, video and travel to
be launched during 2017
-- Significant growth in volumes processed through
SafeCharge Acquiring and completion of card
present certification
-- Multi-channel and airline solutions launched,
global roll-out continues
-- Key Board and senior staff appointments to strengthen
the management team
-- Expansion into Italian domestic market with
recruitment of an experienced local business
development team and first Tier 1 client wins
-- Offices in SE Asia and United States opening
in Q1 2017, with Singapore already operational
-- Continued investment in infrastructure & technologies
to support future growth
-- Investment in Risk & Compliance to navigate
the complex regulatory backdrop
David Avgi, CEO of SafeCharge, said:
"I am pleased to report a good set of results. It has been
another year of strong performance in the core business and the
Company has made positive steps with the implementation of its
organic growth strategy. We continue to invest in our payment and
risk platform to support future growth and are delighted that our
customers recognise the benefits that SafeCharge's payments
solutions bring to them.
"The Group is confident that its focus on delivering high
quality revenue combined with a substantial pipeline of new
business will yield further revenue growth in 2017 and build
stronger profitable momentum in 2018."
- Ends -
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.
For more information
SafeCharge International
Group Limited
David Avgi, Chief Executive
Officer
Tim Mickley, Chief Financial
Officer
c/o Bell Pottinger +44 (0) 20 3772 2500
Shore Capital
Mark Percy
Toby Gibbs +44 (0) 20 7408 4090
Bell Pottinger
David Rydell
Joanna Davidson
Anna Legge +44 (0) 20 3772 2500
About SafeCharge
SafeCharge is a global provider of technology-based multichannel
payments services and risk management solutions for demanding
businesses. The Group has a diversified, blue chip client base and
is a trusted payment partner for customers from several e-commerce
verticals. SafeCharge has been Payment Card Industry Data Security
Standard ("PCI-DSS") Level 1 certified since 2007 and is listed on
the London Stock Exchange AIM market (AIM: SCH). The Company's
wholly owned subsidiary, SafeCharge Limited, is an authorised
Electronic Money Institution regulated by the Central Bank of
Cyprus and a principal member of MasterCard Europe and VISA Europe.
The Group has operations in the UK, Guernsey, Cyprus, Bulgaria,
Israel, Austria, Singapore and Hong Kong.
www.safecharge.com
Chairman's statement
Introduction
It gives me great pleasure to report that 2016 was a further
period of strong financial performance and development for the
Group. Revenues grew 4% to US$104.1 million and Adjusted EBITDA*
increased by 7% to US$33.3 million with the Group continuing to
generate significant free cash flows from its operations.
These results are all the more pleasing given the progress
management has made with reshaping the Group's customer base;
diversifying the business into new sectors and geographic markets;
and making our first moves into card-present and land-based
payments acquiring. This has also been a year in which we focused
on building quality across our business and attracting new and
experienced staff who are already helping us to implement our
strategy.
SafeCharge's impressive performance was primarily driven by its
core business, which benefitted from approximately US$7.7 million
of revenues generated from new customer wins. Core revenues
(excluding 2015 acquisitions) grew by 11% on a constant currency
basis, despite forgoing business as part of our strategy to reshape
the Group's customer base.
In addition to a robust financial performance, we remain
committed to advancing our technologies and expanding the Group's
product offering, thereby strengthening customer engagement whilst
growing and diversifying the business into new markets, industries
and geographies.
The Board continues to focus on making effective use of the
Group's cash resources, investigating the potential for strategic
and complementary acquisitions, whilst continuing to apply strict
criteria when assessing such acquisition opportunities.
Board and governance
The Board remains committed to ensuring a robust governance
structure is in place and, whilst recognising the size of the
Company, is working to comply with corporate best practice.
In October, we announced the strengthening of the Board with the
appointments of Jeremy Nicholds and Robert Caplehorn as
non-executive directors. Both Jeremy and Robert bring with them
considerable experience from within the payments industry where
they have held senior roles within multinational organisations.
Staff
On behalf of the Board, I would like to say a special thanks to
our staff, all of whom who have made a substantial contribution to
our achievements throughout the year and to welcome the new
colleagues who joined in 2016, who are already making a big
contribution to the development of our business.
Dividends
The Company's stated dividend policy is to pay-out at least 50%
of Adjusted EBITDA. Given the Group's strong underlying growth in
earnings and cash generation, the Board has recommended a final
dividend of 9.47 US$ cents per share, giving a total dividend of
16.47 US$ cents per share for the year (2015: 11.30 US$ cents),
representing 75% of Adjusted EBITDA* for the period.
The dividend will 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 1.2396, being the rate at 4.30 pm on 20 March 2017.
As a result, those shareholders entitled to the dividend will
receive 7.64 pence per share. Subject to shareholder approval at
the annual general meeting, to be held on 19 May 2017, the final
dividend will become payable on 23 May 2017 to those shareholders
on the Company's register as at the record date of 5 May 2017. The
ex-dividend date is 4 May 2017.
Roger Withers
Chairman
21 March 2017
* Adjusted EBITDA is a non-GAAP, company-specific measure which
is earnings excluding interest, taxes, depreciation, amortisation,
acquisition costs and contingent remuneration, restructuring costs
and share-based payments charge (See Consolidated Statement of
Comprehensive Income).
Chief Executive's review
Introduction
We continued to make significant progress and achieve financial
and operational success across the Group in 2016. Of particular
note was the success and growth of SafeCharge Acquiring and our
entry into the "card present" vertical. Across all our activities
we continued to invest in our products and services, focusing on
improved quality across all areas of our business.
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 welcomed
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 late 2015 the Directors began a programme to reshape and
improve the quality of the Group's customer base. This programme
continued to be implemented throughout 2016 and included a planned
reduction in 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.
In 2016, the Group also made substantial progress in its
strategy to enter new sectors and geographies. A notable
achievement was the entry into the "card present" environment,
through our partnership with Nayax, a market leader in unattended
contactless industry. Nayax's point of sale devices are installed
in over 50,000 machines across Europe for which we have developed
an integrated payments processing and acquiring solution. The Nayax
solution has not just led to substantial transaction volumes being
processed through our networks: it holds added significance as our
first integration of off-line payments into our online environment
and serves as an important case study. As such, it is pleasing to
be able to report that it is attracting a great deal of interest
from our customers. Other achievements included the on-going global
roll-out of the Group's first airline customer in the travel
vertical and the launch of new customers in Romania, Italy and
Portugal.
The Group continues to invest significant resources 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 year none met
the Group's strict investment criteria.
Focus on quality
Throughout 2016, we focused on building quality across all areas
within the Group, including:
i. Customers
The Group took active steps to reduce its exposure to certain
sectors and verticals, where management felt the regulatory and
commercial environments were likely to deteriorate. Although this
necessitated the forgoing of over US$5 million revenues and
associated profits, the Board felt this was in the best long term
interest of the Company. Alongside this, the quality of revenues
was enhanced from further Tier 1 client launches such as Sisal.it,
the online gaming platform of Italian gaming operator Sisal,
Israeli national airline, EL AL, SunBingo and Paddy Power Betfair,
one of the world's leading sports betting groups.
ii. Infrastructure and technology
The Group continues to invest in its infrastructure and further
develop its core processing technologies. In 2016 a new data centre
was deployed in the Netherlands adding new capacity and redundancy
into the payments platform. 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 making a decision 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% throughout the year. 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.
PAY.com received further investment during 2016 and in order to
more effectively integrate it into the Group, it has now been
merged into our core operation, resulting in the closure of the
Dublin office. The move resulted in a lower cost base and a product
that is more aligned to our customer offering. Over $3 million of
non core, unprofitable revenue was closed down. The Board is
optimistic for the future of PAY.com as a complementary product
that can be offered to a range of customers.
The Group recently opened an office in Singapore and a satellite
office in Hong Kong with a further satellite office planned for the
United States during 2017. These will be small regional offices
focused on sales and marketing to significant local clients. We
have much to offer a range of high-transaction businesses in the
Asian and US markets and establishing new offices in these
geographies demonstrates our commitment to these important markets.
Our intention is to grow these offices as the Group wins new
clients in these regions.
iii. People
Our staff are at the heart of the Group's success and we are
proud of the expertise and professionalism of our teams. In 2016
the Group successfully recruited a number of talented senior
managers from well-established businesses in the payments sector.
Additions included senior personnel in sales; account management;
and risk and compliance. These new team members are already helping
the Group win and manage sustainable, high quality business in both
existing and target verticals and geographies.
Investments in risk and compliance expertise will help the Group
to manage, (and stay ahead of) the increasingly complex global
regulatory and risk environment. The Group ended the year with 344
employees with over 50% in R&D and technology and 15% in risk
and compliance.
Robert Caplehorn and Jeremy Nicholds, two veterans of the
payments industry, joined during the Board this year, having worked
for PayPal and Visa Europe respectively. The net addition of one
new non-executive Board member brings the Group into compliance
with the UK Corporate Governance Code on composition of the
Board.
Financial performance in 2016
Transaction volumes grew by 17%, reaching US$8.1 billion for the
full year (2015: US$6.9 billion). This growth in volumes was driven
by the growth of existing clients and supplemented by the launch of
new high volume customers.
Total Group revenues for the year ended 31 December 2016
increased 4.3% to US$104.1 million (2015: US$99.8 million). This
was despite the closure of non-profitable card services business
lines and a managed reduction of certain activities, which had a
combined impact on revenues of over $8 million. The strength of the
US dollar also served to dampen revenues when translated into the
Group's reporting currency. Given these three factors, the Board
was pleased with the reported outcome for the year.
Underlying gross profit margins improved slightly to 58.3%
(2015: 57.8%) while Adjusted EBITDA margins strengthened to 32%
(2015: 31.2%) for the full year, benefiting from the cost reduction
initiatives including the restructuring of PAY.com. Cash generated
from operating activities remained strong in 2016 at 80% of
Adjusted EBITDA.
Core processing business performance
I am pleased to report that despite the steps taken to reduce
exposure to certain sectors (and the effect of currency headwinds)
the Group's core revenues grew 11% on a constant currency basis to
US$101.5 million (2015: US$91.5 million) primarily driven by a
number of new Tier 1 customers who launched in the period. Adjusted
EBITDA on a constant currency basis grew to US$35.3 million (2015:
U$31.1 million), up 13.5%.
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.
In order to speed up the on-boarding process for new clients,
the Group has implemented an automated on-boarding process and
developer's portal. This enables merchants to upload their account
take-on and know-your-customer documents into our systems. The
process is faster due to its automated nature and highlights which
documents or processes still remain to be completed, giving the
merchant complete visibility on where they are in the process.
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 full tokenisation,
increasing the security of client details stored in the system.
Additionally, our fraud management tool is becoming widely adopted
by customers. Using a deep historical transaction dataset our fraud
management tool conducts over 150 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 100 Alternative Payment Methods (APMs) integrated
alongside the traditional credit and debit card formats. Notable
additions in 2016 include ApplePay, AndroidPay and, in China, China
Union Pay, Alipay and WeChat Pay, which have high usage on Asian
e-commerce sites. Expansion into Asia will be facilitated by our
new offices in Singapore and Hong Kong.
SafeCharge Acquiring
SafeCharge Acquiring continued its strong growth trajectory
throughout 2016, with own acquiring volumes for the year totalled
US$970 million (2015: US$191 million) closing the year with a
run-rate in excess of US$1.2 billion. Importantly, the approval
ratios achieved were high and competitive against those of more
established competitors. Acquiring also enables SafeCharge to
provide benefits such as rapid on-boarding for new customers and
remains a key focus for the Group.
Using our best in class smart routing technology, we are able to
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 20 times greater than
currently processed. Management remains committed to roll-out its
technology-based solutions to new markets and, as such, has a
number of priorities for 2017 and beyond:
-- Further investment in the platform to accommodate
the needs of emerging businesses in new economies,
such as peer-to-peer payments; e-marketplaces;
SME payments; and crowd funding;
-- Strengthening of its service and sector expertise
by adding local service and account teams with
domain expertise in our target markets;
-- A new website which will allow merchants to
download Application Programming Interfaces
(APIs) reducing the time to market; and
-- A comprehensive marketing programme, including
branding and communications to support the Group's
strategic objectives.
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 changes
being introduced as a result of regulation. The principal
regulatory work currently undertaken by the Group includes:
-- European Banking Authority rules on Secure Customer
Authentication;
-- Brexit: potential changes to the passporting
rules;
-- 4(th) AML Directive: the proposed risk-based
approach and changes to due diligence requirements;
-- Introduction of PSD2: open access and the increasingly
competitive environment;
-- EU General Data Protection Regulations: proposed
changes.
In light of the continuously evolving regulatory environment
SafeCharge is tirelessly improving its policies and procedures. As
such, the Group is well placed to help its customers maximise the
opportunities arising from regulatory change.
Outlook
The Group is confident that its focus on higher quality earnings
from its healthy pipeline will yield revenue growth in 2017 and
build even stronger profitable momentum in 2018 and beyond.
David Avgi
Chief Executive
21 March 2017
Financial review
Highlights
Group revenues in the period increased to US$104.1 million
(2015: US$99.8 million) with Adjusted EBITDA* reaching US$33.3
million (2015: US$31.1 million). This growth was achieved despite
the closure of non-profitable businesses acquired in the previous
year; the steps taken to reduce exposure to certain sectors and
markets; and the impact of foreign currency headwinds.
The conversion of Adjusted EBITDA* to cash remained strong, with
cash flows from operations (before working capital and tax paid) of
US$30.8 million (2015: US$27.3 million) up 12.8%. Profit after tax
for the period increased to US$26.6 million (2015: US$22.9 million)
up 16.2%.
During the period the Group paid US$21.9 million in dividends,
acquired US$6.3million of its own shares which are held in treasury
and invested US$5 million in capitalised development costs. The
Group ended the financial year with US$115.4 million (2015:
US$114.9 million) of cash and cash equivalents, US$8.5million in
available-for-sale assets (2015: US$18.6 million). The Group
additionally remained debt free during the period.
Revenues
Revenues increased across the Group's principal business lines
during the year, reaching record levels in the fourth quarter. In
the Group's core business revenues increased by 8% reaching US$98.7
million (2015: US$91.5 million) in the period. This performance was
achieved despite the steps taken to reduce exposure to certain
sectors and markets. The Directors estimate that these steps
reduced the revenues that would otherwise have been achieved by
Group by more than US$5 million in 2016. New clients who began
processing payments through the Group's systems amounted to US$7.7
million during 2016.
In line with management's strategy, the quality and
diversification of the Group's client revenues improved during the
year. Alongside significant Tier 1 new customer wins, the Directors
focused on actively reshaping the Group's customer base,
diversifying into new sectors and geographic markets; and making
its first moves into card-present and land-based payments
acquiring.
Foreign currency exposure and impact
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 65% of income in the year with the balance of
revenues generated in a wide range of other currencies.
SafeCharge has operations in a number of jurisdictions and
incurs the majority of its operating costs in euros, Israeli
shekels and sterling.
The Group's 2016 financial results were negatively impacted by
the strengthening of the US dollar against certain currencies
during the year. The Directors estimate that revenues and Adjusted
EBITDA* were approximately US$2.8 million and US$2.0 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.
Margins
Gross profit margin strengthened slightly in the year to 58.3%
(2015: 57.8%) benefiting from the transfer of volume from third
party acquirers to SafeCharge's own platform. Consolidated Adjusted
EBITDA margin improved to 32% (2015: 31.2%) whilst the EBITDA
margin in the core business (core payments business, which
accounted the majority of revenues and excludes 2015 acquisitions)
increased to 33.2% as the Company's core cost base and operational
capabilities enjoyed economies of scale from greater revenues and
gross profit.
Profit from operations before finance income and tax in the
period increased by 18%, reaching US$26.1 million (2015: US$22.2
million).
Expenses
Employee related costs, which account for the majority of
SafeCharge's operating expenses and equate to approximately 19% of
sales, increased by 8.5% primarily as a result of increased
headcount and salary increases. Costs in the core business
increased in the year as the Group invested in additional
resources, including hiring a number of senior personnel to support
growth and implement its strategy in existing and new sectors,
verticals and markets.
The Group incurred share-based payment charges of US$672,000 in
the year (2015: US$1.37 million). Furthermore, the Group incurred
restructuring costs of US$2.1 million, primarily 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.
Net finance income of US$1.9 million (2015: US$0.6 million)
primarily related to the net gain on the disposal of available for
sale assets. Depreciation and amortisation of US$4.1 million was
charged in the period (2015: US$3.2 million) which included a
US$1.5 million charge in respect of depreciation of computer
equipment (2015: US$1.2 million) and US$2.4 million (2015: US$1.9
million) amortisation of intangible assets including, for the first
time, amortisation of capitalised development costs relating to the
SafeCharge Acquiring platform.
Tax
The Group reported a net tax expense of US$1.5 million (2015:
tax income of US$124,000); a blended tax rate of 5.3% on reported
profits before tax, representing income tax charges of US$1.3
million due on profits generated by the Company's subsidiary
companies, and deferred tax on amortisation of intangibles of
US$174,000.
Cash flow
SafeCharge continues to generate significant cash flows from its
activities. During 2016 the Group generated US$30.8 million from
operations before working capital and tax paid (2015: US$27.3
million).
Working capital movements produced a net cash outflow of US$3.0
million (2015: US$2.0 million inflow) with cash flows from
operations of US$26.6 million (2015: US$ 27.7 million) in the
period.
The Group generated a net inflow from investing activities of
US$62,000 (2015: US$45.4 million outflow). This inflow included
US$11.9 million of cash provided by the sale of the stake held in
FinTech AG, which realised a profit of US$643,000. Outflows
included US$6.0 million related to the investment in Nayax, US$5.0
million of capitalised development expenses and US$1.3 million
(2015: US$1.8 million) in payments for the acquisition of property,
plant and equipment, (primarily computer hardware).
Net cash outflow from financing activities was US$26.2 million
(2015: US$13.9 million) reflecting US$21.9 million of dividend
payments, US$6.3 million in respect to the purchase of Company
shares to be held in treasury, (offset by US$1.3 million received
from the exercise of share options).
Overall there was a net increase in cash and cash equivalents of
US$473,000 (2015: US$31.6 million decrease) during the year and the
Group closed the period with US$115.4 million (2015: US$114.9
million) in cash and cash equivalents.
Financial position
The Group closed the year with total assets of US$172.9 million
(2015: US$182.2 million) including US$115.4 million (2015: US$114.9
million) of cash and cash equivalents and US$8.5 million (2015:
US$18.6 million) of available-for-sale investments. The majority of
the Company's cash is held in current accounts and on-call deposit
accounts, with US$53 million held on call deposit. The net book
value of intangible assets held at 31 December 2016 was US$33.4
million (2015: US$31.0 million) which included US$5.0 million
(2015: US$5.0 million) of capitalised technology development costs
in the year. These costs included those in relation to development
of the PAY.com platform, the major development of which is nearing
completion.
Total current assets decreased to US$125.7 million (2015:
US$127.3 million) with current liabilities decreasing to US$11.7
million (2015: US$14.1 million) due mainly to a fall in trade and
other payables.
Total equity attributable to equity holders decreased to
US$160.5 million (2015: US$167.3 million) primarily as a result of
the increase in retained earnings during the year offset by a
reduction in the value of available-for-sale reserves, following
the sale of the FinTech AG stake and US$6.3 million in treasury
stock reserves representing 2.4 million ordinary shares purchased
by the Company during 2016.
As mentioned above, the Group closed the year free of debt.
Dividends
Following the announcement of the interim dividend paid in
September, the Board has recommended a final dividend of 9.47 US$
cents per share giving a total dividend of 16.47 US$ cents per
share (2015: 11.30 US$ cents per share) for the year, representing
75% of Adjusted EBITDA* for the period.
In order to facilitate simpler settlement, shareholders will be
paid their dividends in sterling. The dividend will therefore be
subject to a conversion exchange rate from US dollars based on a
GBP/USD rate of 1.2396, being the rate at 4.30 pm on 20 March 2017.
As a result those shareholders entitled to the final dividend will
receive 7.64 pence per share.
Tim Mickley
Chief Financial Officer
21 March 2017
* Adjusted EBITDA is a non-GAAP, company-specific measure which
is earnings excluding interest, taxes, depreciation, amortisation,
acquisition costs and contingent remuneration, restructuring costs
and share-based payments charge (See Consolidated Statement of
Comprehensive Income).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2016
Note 2016 2015
US$000s US$000s
Revenue 5 104,139 99,818
Cost of sales (43,473) (42,168)
Gross profit 60,666 57,650
Salaries and employee expenses (19,649) (18,116)
Share-based payments charge 18 (672) (1,373)
Depreciation and amortisation 11,12 (4,139) (3,188)
Premises and other costs (3,008) (2,854)
Other expenses (4,684) (5,554)
Acquisition costs and contingent
remuneration 25 (322) (1,543)
Restructuring costs 25 (2,070) (2,860)
Total operating costs (34,544) (35,488)
--------------------------------------- ------ -------------------- ---------------
Adjusted EBITDA* 33,325 31,126
Depreciation and amortisation (4,139) (3,188)
Share-based payments charge (672) (1,373)
Acquisition costs and contingent
remuneration (322) (1,543)
Restructuring costs (2,070) (2,860)
--------------------------------------- ------ -------------------- ---------------
Profit from operations 26,122 22,162
Finance income 7 2,332 771
Finance expense 7 (413) (203)
Profit before tax 28,041 22,730
Tax (expense)/income 8 (1,487) 124
Profit after tax attributable
to equity holders of the parent 26,554 22,854
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 (4,805) 7,718
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 (618) (1,901)
Total comprehensive income
for the year 19,371 28,671
Earnings per share for profit
attributable to the owners
of the parent during the year
Basic (cents) 9 17.57 15.10
Diluted (cents) 9 17.32 14.79
*Adjusted EBITDA is a non-GAAP, company-specific measure which
is earnings excluding interest, taxes, depreciation, amortisation,
share-based payments charge, acquisition costs and contingent
remuneration, and restructuring costs. Where not explicitly
mentioned, Adjusted EBITDA refers to Adjusted EBITDA from
continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2016
Note 31/12/2016 31/12/2015
US$000s US$000s
Assets
Non--current assets
Property, plant and equipment 11 2,346 2,848
Intangible assets 12 33,441 31,023
Available-for-sale investments 17 8,504 18,610
Other receivables 15 2,665 1,036
Total non-current assets 46,956 53,517
Current assets
Trade and other receivables 14 10,329 12,383
Cash and cash equivalents 16 115,357 114,884
Total current assets 125,686 127,267
Assets classified as held
for sale 17 267 1,384
Total assets 172,909 182,168
Equity
Share capital 18 15 15
Share premium 19 125,169 123,828
Capital reserve 19 622 622
Available-for-sale reserve 19 1,153 7,718
Translation reserve 19 (1,424) (806)
Share options reserve 19 2,662 2,221
Treasury shares reserve 18 (6,281) -
Retained earnings 38,577 33,740
Total equity attributable
to equity holders of parent 160,493 167,338
Non--current liabilities
Provisions 20 260 243
Deferred tax liability 21 479 290
Contingent consideration 24 - 168
Total non-current liabilities 739 701
Current liabilities
Trade and other payables 22 9,709 12,345
Contingent consideration 24 343 202
Taxes payable 23 1,625 1,582
Total current liabilities 11,677 14,129
Total equity and liabilities 172,909 182,168
On 21 March 2017 the Board of Directors of Safecharge
International Group Limited approved and authorised these
consolidated financial statements for issue and were signed on
their behalf by:
David Avgi Timothy Simon Mickley
Director Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2016
Share Treasury Share Capital Available-for-sale Translation Share Retained Total
capital shares premium reserve reserve reserve options earnings equity
reserve reserve attributable
to
equity
holders
of
parent
Note US$000s US$000s US$000s US$000s US$000s US$000s US$000s US$000s US$000s
Balance
at 1 January
2015 15 - 123,182 622 - 1,095 960 25,324 151,198
Comprehensive
income
Profit for
the year - - - - - - - 22,854 22,854
Other comprehensive
income/(loss)
for the
year - - - - 7,718 (1,901) - - 5,817
Total comprehensive
income for
the year - - - - 7,718 (1,901) - 22,854 28,671
Contributions
by and
distributions
to owners
Dividends 10 - - - - - - - (14,550) (14,550)
Exercise
of options * - 646 - - - (112) 112 646
Share-based
payments 18 - - - - - - 1,373 - 1,373
Total contributions
by and
distributions
to owners * - 646 - - - 1,261 (14,438) (12,531)
Balance
at 31 December
2015 15 - 123,828 622 7,718 (806) 2,221 33,740 167,338
Comprehensive
income
Profit for
the year - - - - - - - 26,554 26,554
Unrealised
fair value
movements
on
available-for-sale
investments 17 - - - - (4,805) - - - (4,805)
Realised
fair value
movements
on
available-for-sale
investments
reclassified
to profit
or loss 17 - - - - (1,760) - - - (1,760)
Exchange
difference
arising
on the translation
and consolidation
of foreign
companies'
financial
statements - - - - - (618) - - (618)
Total comprehensive
income for
the year - - - - (6,565) (618) - 26,554 19,371
Contributions
by and
distributions
to owners
Dividends 10 - - - - - - - (21,948) (21,948)
Exercise
of options * - 1,341 - - - (231) 231 1,341
Purchase
of own shares 18 (*) (6,281) - - - - - - (6,281)
Share-based
payments 18 - - - - - - 672 - 672
Total contributions
by and
distributions
to owners - (6,281) 1,341 - - - 441 (21,717) (26,216)
Balance
at 31 December
2016 15 (6,281) 125,169 622 1,153 (1,424) 2,662 38,577 160,493
(*) represents amount less than 1 thousand US$
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2016
Note 2016 2015
US$000s US$000s
Cash flows from operating activities
Profit before tax 28,041 22,730
Adjustments for:
Depreciation of property, plant
and equipment 11 1,739 1,316
Amortisation of intangible assets 12 2,400 1,872
Exchange difference arising
on the translation of non-current
assets in foreign currencies (36) 165
Charge to statement of comprehensive
income for provisions 20 17 82
Gain on sale of available-for-sale
assets (1,760) -
Finance income 7 (244) (242)
Share-based payments charge 18 672 1,373
Cash flows from operations before
working capital 30,829 27,296
Decrease in trade and other
receivables 425 2,468
(Decrease) in trade and other
payables (3,394) (491)
Cash flows from operations 27,860 29,273
Tax paid (1,289) (1,588)
Net cash flows from operating
activities 26,571 27,685
Cash flows from investing activities
Payment for acquisition of intangible
assets 12 (5,330) (5,359)
Payment for acquisition of property,
plant and equipment 11 (1,279) (1,774)
Acquisition of available-for-sale
investments 17 (6,609) (12,276)
Acquisition of subsidiaries,
net of cash acquired 25 - (21,271)
Loans granted 14 - (5,000)
Interest received 7 244 242
Proceeds from disposal of property,
plant and equipment - 30
Proceeds from disposal of available-for-sale 13,036 -
investments
Net cash flows provided by/(used
in) investing activities 62 (45,408)
Cash flows from financing activities
Proceeds from exercise of stock
options 1,341 646
Purchase of own shares to be
held as treasury shares 18 (6,281) -
Dividends paid 10 (21,220) (14,550)
Net cash flows used in by financing
activities (26,160) (13,904)
Increase/(decrease) in cash
and cash equivalents 473 (31,627)
Cash and cash equivalents at
beginning of the year 114,884 146,511
Cash and cash equivalents at
end of the year 16 115,357 114,884
Acquisition of subsidiaries,
net of cash acquired
--------------------------------- ------- ---------- ----------
2016 2015
Note US$000s US$000s
Acquisition of SafeCharge Card
Services Limited (formerly
named: 3V Transaction Services
Limited) 25(A) - 13,780
Acquisition of CreditGuard
Limited 25(B) - 7,491
---------- ----------
- 21,271
--------------------------------- ------- ---------- ----------
Notes to the Accounts
1. General information
Safecharge International Group Limited (hereinafter - 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
(hereinafter - the 'Group') are the provision of payments services,
technologies and risk management solutions for multi--channel
businesses.
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.
These financial statements do not constitute the Group's
statutory financial statements for the year ended 31 December 2016
or the year ended 31 December 2015. Statutory accounts will be
filed following the Company's Annual General Meeting. The auditors
have reported on these accounts and their report was
unqualified.
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 2016.
(i) Standards and Interpretations adopted by the EU
Amendments
IFRS Interpretations Committee -- Annual Improvements to IFRSs 2010-2012 Cycle
(effective for annual periods beginning on or
after 1 February 2015).
-- Annual Improvements to IFRSs 2011-2013 Cycle
(effective for annual periods beginning on or
after 1 January 2015).
The impact of these standards on the consolidated financial
statements of the Group has not yet been fully assessed by the
Board of the Directors.
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 5 years
costs
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
based on unobservable inputs.
(2) Recognition and measurement
Regular way 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.
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$133,000 (2015: US$150,000).
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
2016 2015 2016 2015
US$000s US$000s US$000s US$000s
Euro 3,514 4,672 16,771 33,762
United Kingdom Pounds 1,205 1,488 6,473 5,525
New Israeli Shekel 3,476 3,630 3,319 2,079
Other 361 43 6,673 6,772
8,556 9,833 33,236 48,138
Sensitivity analysis
A 10% strengthening of the United States Dollar against the
following currencies at 31 December 2016 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
2016 2015
US$000s US$000s
Euro (1,326) (2,909)
United Kingdom Pounds (527) (404)
New Israeli Shekel 16 155
Other (631) (673)
(2,468) (3,831)
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 has issued a working capital facility deed which is
interest-free and with a fixed payment term of 12 months from
issue. The facility is secured on specified revenue volumes.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date was:
2016 2015
US$000s US$000s
Trade and other receivables 5,329 7,383
Working capital facility deed 5,000 5,000
Cash and cash equivalents 115,357 114,884
Other non--current receivables 2,665 1,036
128,351 128,303
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 Carrying Contractual 3 months Between Between More
2016 Amounts cash or less 3--12 1--5 than
flows months years 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 - -
31 December Between
2015 Carrying Contractual 3 3--12 Between More
amounts cash months months 1--5 than
flows or years 5
less years
US$000s US$000s US$000s US$000s US$000s US$000s
Trade and
other
payables 12,345 12,345 12,345 - - -
Contingent
Consideration 370 370 - 202 168 -
12,715 12,715 12,345 202 168 -
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 Compliance 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
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 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).
5. Segmental analysis
Management considers that the Group's activity as a single
source supplier of online payments services, technologies and 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.
2016 2015
US$000s US$000s
Europe 97,383 96,452
Rest of the World 6,756 3,366
104,139 99,818
Geographical analysis of non-current assets
2016 2015
US$000s US$000s
Guernsey 9,977 7,561
Europe 18,326 35,928
Asia 17,673 9,596
North America 980 432
46,956 53,517
6. Auditors' remuneration
2016 2015
US$000s US$000s
Audit services
Parent company and Group audit 93 127
Audit of overseas subsidiaries 108 114
Audit related assurance services 29 26
Non-audit services
Non-audit assurance services 108 62
Tax compliance - 2
338 331
7. Finance income and expense
2016 2015
US$000s US$000s
Finance income
Interest received 244 242
Foreign exchange differences 328 529
Net gain on disposal of available-for-sale
financial assets transferred from 1,760 -
equity (See Note 17)
2,332 771
Finance expense
Bank fees (413) (203)
(413) (203)
Net finance income 1,919 568
8. Tax Expense
2016 2015
US$000s US$000s
Current tax:
Charge for the year 1,313 1,163
Deferred tax:
Charge/(income) for the year 174 (1,287)
Total tax charge/(income) in the
income statement 1,487 (124)
The tax charge for the year can be reconciled to accounting
profit as follows:
2016 2015
US$000s US$000s
Profit before taxation 28,041 22,730
Tax at effective rate in Guernsey - -
Higher rates of current income tax
in overseas jurisdictions (See Note
21) 1,313 1,163
Deferred tax on other timing differences 174 (1,287)
Total tax charge/(income) 1,487 (124)
There was no tax effect on other comprehensive income in the
current or prior year.
9. Earnings per share
2016 2015
US$ US$
Basic (cents) 17.57 15.10
Diluted (cents) 17.32 14.79
2016 2015
US$000s US$000s
Profit after tax for the year 26,554 22,854
2016 2015
Number Number
Denominator- basic
Weighted average number of equity
shares 151,156,990 151,392,582
Denominator - diluted
Weighted average number of equity
shares 151,156,990 151,392,582
Weighted average number of share
options 2,138,685 3,122,231
Weighted average number of shares 153,295,675 154,514,813
10. Dividends
2016 2015
US$000s US$000s
Dividends 21,948 14,550
21,948 14,550
In May 2016 the Group distributed US$11,340,000, 7.30 US$ cents
per share (2015: US$8,518,000, 5.28 US$ cents per share), as a
final dividend for the year ended 31 December 2015.
In September 2016 the Board of Directors approved the payment of
an interim dividend of US$10,608,000, 7.0 US$ cents per share
(2015: US$6,032,000, 4.0 US$ cents per share) as an interim
dividend.
The 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 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 (2015: nil).
11. Property, plant and equipment
Leasehold Motor Furniture, Computer Total
improvements vehicles fixtures equipment
and office
equipment
US$000s US$000s US$000s US$000s US$000s
Cost
Balance at 1 January
2015 629 264 525 3,881 5,299
Additions 43 - 22 1,709 1,774
Additions through
business acquisitions 16 - 150 320 486
Disposals (81) - - - (81)
Foreign exchange rate
movement (31) (28) (59) (295) (413)
Balance at 31 December
2015 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
Depreciation
Balance at 1 January
2015 332 160 240 2,476 3,208
Charge for the year 40 39 75 1,162 1,316
On disposals (9) - - - (9)
Foreign exchange rate
movement (20) (11) (27) (240) (298)
Balance at 31 December
2015 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
Net book amount
Balance at 31 December
2016 246 12 282 1,806 2,346
Balance at 31 December
2015 233 48 350 2,217 2,848
12. Intangible assets
Customer Domains
Goodwill contracts IP technology and licenses Development Total
US$000s US$000s US$000s US$000s US$000s US$000s
Cost
Balance at 1
January 2015 - 1,776 682 2,034 2,173 6,665
Assets
acquired
on business
combinations 10,237 3,219 10,481 - - 23,937
Additions - - 224 88 5,003 5,315
Foreign
exchange
rate
movement (787) (10) (1,209) - (37) (2,043)
Balance at 31
December
2015 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
Amortisation
Balance at 1
January 2015 - 265 669 - 45 979
Amortisation
for the year - 603 1,106 - 163 1,872
Balance at 31
December
2015 - 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
Net book
amount
Balance at 31
December
2016 9,324 3,559 7,277 2,122 11,159 33,441
Balance at 31
December
2015 9,450 4,117 8,403 2,122 6,931 31,023
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$2,122,000 (2015: 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 2017 to 2023
based on the use of the economic life of the acquired assets.
Revenue rates for 2017 and onwards had an average growth of 8% per
annum. 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 2017 to 2026 based on the use of the economic life of the
acquired assets. Revenue rates for 2017 and onwards had an average
growth of 67% per annum based on the early life stage of the
products and the forecasted growth within their market. A pre--tax
discount rate of 15% 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 won't indicates impairment and no reasonable change in the
growth rate led to impairment.
13. Subsidiaries
The details of the Company's subsidiaries as at 31 December 2016
are as follows:
Name Country Principal activities Holding
of incorporation %
British
ELoad Solutions Limited Virgin Islands Holding company 100
XT Commerce International
Limited Cyprus Sales company 80
xt: Commerce GmbH Austria Sales company 80
Safecharge Technologies British
Limited Virgin Islands Sales company 100
Safecharge (Israel) Development and
Limited Israel support company 100
Webcharge Limited Israel Dormant 100
Safecharge Limited Cyprus Payment Institution 100
Marketing and
Safecharge (UK) Limited United Kingdom support company 100
Safecharge (Bulgaria) Development and
EOOD Bulgaria support company 100
Sales, development
CreditGuard Limited Israel and support company 100
Safecharge Card Services Sales, development
Limited Ireland and support company 100
Safecharge Services
Limited Cyprus Dormant 100
Safecharge (USA)
Inc. Delaware Dormant 100
Safecharge Pte Ltd Singapore Dormant 100
Safecharge Hong Kong
Limited Hong Kong Dormant 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
2016 2015
US$000s US$000s
Trade receivables 3,567 4,340
Receivables from related companies
(Note 26) 343 391
Other receivables 1,419 2,652
Loans and advances 5,000 5,000
10,329 12,383
The fair values of trade and other receivables due within one
year approximate to their carrying amounts as presented above.
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
2016 2015
US$000s US$000s
Deposits 2,665 1,036
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:
2016 2015
US$000s US$000s
Cash and cash equivalents 115,357 111,496
Bank deposits - 3,388
115,357 114,884
The Group holds cash and cash equivalents amounting to
US$90,434,000 as at 31 December 2016 (2015: US$96,734,000) on
behalf of clients. The amounts represent cash received on
transactions processed by the Group which is then paid on to its
clients. In substance, the Group's management consider these
transactions do not entitle the Group to an asset and have
therefore not recorded the resulting asset or liability to clients
in its statement of financial position.
At 31 December 2016, the Group had contingent liabilities
amounting to US$NIL (2015: US$3,209,000) in respect of guarantees
issued by banks on behalf of a subsidiary in favour of third
parties in the ordinary course of business. These guarantees are
secured by bank deposits of that subsidiary of this amount.
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 Level Level
1 2 3
US$000s US$000s US$000s US$000s
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
======== ======== ======== ========
Available-for-sale investments 18,610 17,610 1,000 -
Available-for-sale investments
classified as held for
sale 1,384 - - 1,384
Total at 31 December
2015 19,994 17,610 1,000 1,384
======== ======== ======== ========
18. Available-for-sale investments including classified as held
for sale (continued)
There have been no transfers of financial instruments between
levels during the year.
The following is a reconciliation of the movement in the group
financials assets classified at Level 3 during the year:
2016 2015
US$000s US$000s
Balance brought forward 1,384 -
Realised gain for the period recognised
in profit or loss (1,117) -
Fair value movement recognised in
the consolidated statement of comprehensive
income - 1,384
Fair value at 31 December 267 1,384
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 2015 the
unrealised increase in valuation of US$1,384,000 was recorded as an
available-for-sale reserve. Sensitivity analysis has been performed
on the key inputs of the valuation, being the discount rate and the
future cash flows, but this did not result in material differences
to fair values recognised or profit or loss. Accordingly, this
analysis has not been presented.
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 income statement and included
within finance income.
The remaining available-for-sale investments are held at fair
value and measured based on Level 1 and Level 2 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.
In June 2015 the Group invested US$11,276,000 (EUR10,084,500) in
FinTech Group AG, a business listed on the Frankfurt Stock
exchange, for a 5% equity interest as part of a strategic
partnership. As 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.
The total unrealised fair value movement of US$4,805,000
comprises a loss of US$5,691,000 on Fintech Group AG, a gain of
US$895,000 on 2C2P, and an exchange difference of US$9,000.
In December 2016, the Group invested US$6,000,000 in Nayax Ltd
& Dually Ltd, an unquoted business based in Israel. This was in
exchange for approximately 4% of issued share capital. Nayax Ltd
& Dually Ltd shares are unquoted. This investment is classified
as Level 2 for the purposes of disclosure in the fair value
hierarchy as the valuation is based on observable market prices
from recent transaction.
19. Share capital
2016 2016 2016 2016 2015 2015
Number Number Ordinary Treasury Number Ordinary
of Ordinary of Treasury shares shares of Ordinary shares
shares shares US$000s US$000s shares US$000s
Authorised
Ordinary shares
of US$0.0001
each unlimited - 15 - unlimited 15
Issued and fully
paid
Balance at 1
January 151,583,998 - 15 - 151,209,141 15
Exercise of
options 397,174 - * - 374,857 (*)
Purchase of own
shares (2,400,000) 2,400,000 (*) * - -
Exercise of
options
from treasury 512,490 (512,490) * (*) - -
Balance at 31
December 150,093,662 1,887,510 15 * 151,583,998 15
(*) represents amount less than 1 thousand US$
In 2016 the Company purchased 2.4 million of ordinary shares in
total consideration of US$6,281,000.
The Company operates an equity--settled share-based remuneration
scheme for employees, executive Directors and certain senior
management. The only vesting condition being that the individual
remains an employee of the Group over an agreed period (vesting
period).
In November 2016 the Company adopted a Long Term Incentive Plan
(LTIP) for executive Directors and certain senior management. The
awards include nil-cost options and their vesting is subject to
certain performance conditions.
The movement in share options was as follows:
2016 2016 2015 2015
Weighted Weighted
average Number average Number
exercise exercise
price price
US$ US$
Outstanding
at the beginning
of the year 3.01 10,446,392 2.93 10,421,637
Granted
during the
year 2.68 555,809 3.81 660,000
Forfeited
during the
year 3.46 (624,877) 3.57 (260,388)
Exercised
during the
year 1.94 (909,664) 1.88 (374,857)
Outstanding
at the end
of the year 2.91 9,467,660 3.01 10,446,392
The weighted average remaining contractual life of share options
outstanding at 31 December 2016 is 7.56 years (2015: 8.37 years).
The exercise price of the options outstanding at 31 December 2016
ranged between US$NIL and US$3.88 (2015: US$1 and US$3.88). The
maximum term of the options granted is 10 years.
Of the total number of options outstanding at 31 December 2016,
5,854,147 with a weighted average exercise price of US$3.07 (2015:
3,725,939 with weighted average price of US$2.75) had vested and
were exercisable.
The share-based payment charge in the statement of comprehensive
income amounts to US$672,000 (2015: US$1,373,000).
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:
2016 2015
Expected volatility 18%-25% 18%-25%
Weighted average US$3.01 US$3.01
exercise price
Risk free interest 0.25%-0.665% 0.25%-0.665%
rate ranging
Contractual life 10 years 10 years
Dividend growth
rate 3% 3%
The expected volatility of the options is based on the implied
volatility from exchange traded options of the company's shares,
the historical volatility of the share price over the most recent
that corresponds with the expected life of the option, and the
historical or implied volatility of similar entities. The expected
life of the option is based on the maturity date and is not
necessarily indicative of exercise pattern that may occur. The
options include a service condition as the individuals
participating in the plan must be employed by the Company for a
certain period of time in order to earn the right to exercise the
share options. A sensitivity analysis has been performed based on
other comparable companies wherein a 3% change in the expected
volatility during 2016 would impact the statement of comprehensive
income by US$NIL (2015: US$14,000). 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.
20. 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.
21. Provisions for other liabilities and charges
Severance
Pay
US$000s
Balance at 1 January 2015 115
Arising on business combination 46
Charged to statement of comprehensive income 82
Balance at 31 December 2015 243
Charged to statement of comprehensive income 17
Balance at 31 December 2016 260
22. Deferred tax liability
2016 2015
US$000s US$000s
Balance at the beginning of the year 290 -
Arising on business combination - 1,585
Recognised in statement of comprehensive
income 174 (1,287)
Foreign currency revaluation impact 15 (8)
479 290
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$4,607,000 (2015: US$2,789,000).
The asset has not been recognised as the timing of its realisation
remains uncertain or its use is dependent on the existence of
future taxable profits against which the tax losses and other
temporary differences can be utilised.
During 2016 the Group recognised a deferred tax asset in respect
of losses from subsidiaries acquired on business combinations in
the amount of US$NIL (2015: US$1.3 million).
During the reporting period there was no tax charged or credited
directly to equity.
There were no changes in the tax rates charged during 2015 and
2016.
23. Trade and other payables
2016 2015
US$000s US$000s
Trade payables 828 1,721
Other payables 8,879 10,534
Payables to Related Parties (Note
26) 2 90
9,709 12,345
The fair values of trade and other payables due within one year
approximate to their carrying amounts as presented above.
24. Taxes payable
2016 2015
US$000s US$000s
Income tax and other taxes 1,625 1,582
1,625 1,582
25. Contingent consideration
Contingent consideration relates to acquisitions that took place
during 2015 (see Note 25).
Details of the determination of Level 3 fair value measurements
are set out below.
Contingent consideration arrangements:
2016 2015
US$000s US$000s
At 1 January 370 -
Arising from business combination - 1,246
Contingent remuneration 170 1,344
Foreign exchange rate movement 13 (153)
Amounts paid (210) (2,067)
At 31 December 343 370
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
(see Note 25 for further details). 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$170,000 (2015: US$1,344,000) has
been charged to acquisition costs in the statement of comprehensive
income.
Further disclosure on contingent consideration is provided in
Note 25.
26. Acquisitions during previous period
A. Acquisition of 3V Transaction Services Limited
On 8 January 2015, the Group acquired 100% of the share capital
of 3V Transaction Services Limited (which later changed its name to
Safecharge Card Services Limited) for a consideration of US$15.7
million (EUR14.5 million), of which US$13.8 million (EUR11.6
million) was paid on completion. In 2016 the Group finalised the
agreement of net assets at completion and received a refund of EUR1
million as a working capital adjustment. Accordingly consideration
and goodwill were reduced by US$1.1 million as at 31 December 2015.
Safecharge Card Services Limited is a technology provider which
specialises in tools for issuing, processing and management of
pre-paid card programmes.
In the second half of 2015 the Group implemented a restructuring
plan in Safecharge Card Services Limited and for the year ended 31
December 2016 incurred restructuring costs of US$1,900,000 (2015:
US$2,900,000) (including costs relating to early settlement of
deferred terms with 3V Transaction Services' founders, professional
services and legal costs) recognised in the consolidated statement
of comprehensive income.
In addition to cash paid on acquisition, a further amount of
EURNIL (2015: EUR2.9 million) was originally payable over the
following three years to certain key individuals and was dependent
on their continued employment. Therefore, as required by IFRS 3,
this was being charged to consolidated statement of comprehensive
income and not included as consideration for the purpose of the
business combination. US$NIL (2015: US$974,000) was charged to
acquisition costs for the year in relation to contingent
remuneration. In the second half of 2015 the Group made a payment
of EUR2 million in full settlement of the contingent remuneration
and contingent consideration (see Note 24).
A. Acquisition of 3V Transaction Services Limited
(continued)
A deferred tax asset of US$NIL (2015: US$1.3 million) was
recognised on acquisition related to tax losses brought forward
(upon which no asset was previously recognised) which has been set
against an equivalent deferred tax liability on intangible assets
arising on acquisition, included within tax payable (see Note
21).
B. Acquisition of CreditGuard Limited
On 9 January 2015, the Group acquired 100% of the share capital
of CreditGuard Limited for an initial cash consideration of US$8
million and contingent consideration capped at US$0.4 million (not
recognised during the reporting period). CreditGuard Limited is a
payment service provider for a wide range of businesses.
In addition to cash paid on acquisition, a further amount of
US$0.6 million was originally payable over the following three
years to certain key individuals in their capacity of now being
employees of the Group and was dependent on their continued
employment. Therefore, as required by IFRS 3, this was charged to
consolidated statement of comprehensive income and not included as
consideration for the purpose of the business combination.
US$170,000 (2015: US$370,000) has been charged to acquisition costs
in relation to contingent remuneration for the year.
27. Related party transactions
The Company is controlled by Northenstar Investments Limited,
the immediate parent company, which is incorporated in the British
Virgin Islands. The ultimate parent company and controlling party
is the Goodfidelity Trust, established under the laws of the Isle
of Man. Mr. Teddy Sagi is the sole ultimate beneficiary of the
Goodfidelity Trust.
The following transactions were carried out with related
parties:
27.1 Related party transactions
2016 2015
US$000s US$000s
Salaries and consultancy fees paid
to executive Directors (2,411) (2,012)
Services received from related party
by virtue of common control (224) (154)
Revenue from services provided to
companies related by virtue of common
control 10,522 11,380
Share-based payments expense related
to executive Directors (500) (676)
7,387 8,538
The details of key management compensation (being the
remuneration of the executive and non-executive Directors) are set
out below:
Directors' compensation 2016 2015
US$000s US$000s
Short term benefits of Directors 1,361 1,185
Share-based benefits of executive
Directors 500 676
Bonuses to executive Directors 1,050 827
2,911 2,688
27.2 Receivables from related parties (Note 14)
2016 2015
Name Nature of transactions US$000s US$000s
Related party by virtue Provision of consulting
of common control services 343 391
343 391
27.3 Payables to related parties (Note 22)
2016 2015
Name Nature of transactions US$000s US$000s
Related party by virtue
of common control Trade payable 2 90
2 90
27.4 Client monies held on behalf of related parties
2016 2015
Name Nature of transactions US$000s US$000s
Related parties by Trade payable
virtue of common control to clients 7,469 8,691
7,469 8,691
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.
28. Contingent liabilities
The Group had guarantees as at 31 December 2016 and 31 December
2015 (see Note 16). The Group had no other contingent
liabilities.
29. Commitments
Operating lease commitments
The Group has entered into operating leases with future
aggregate minimum lease payments under non--cancellable operating
leases of US$1,777,000 (2015: US$1,428,000) due in less than 1 year
and US$6,489,000 (2015: US$3,115,000) due between 1 and 5
years.
30. Events after the reporting period
In January 2017 the Company purchased for treasury 2,200,000
shares of the Company, in total consideration of US$5,336,000.
There were no other material events after the reporting period,
which have a bearing on the understanding of the consolidated
Financial Statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UAORRBUAOURR
(END) Dow Jones Newswires
March 21, 2017 03:01 ET (07:01 GMT)
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