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SCH Safecharge International Group Limited

435.00
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Share Name Share Symbol Market Type Share ISIN Share Description
Safecharge International Group Limited LSE:SCH London Ordinary Share GG00BYMK4250 ORD USD0.0001
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  0.00 0.00% 435.00 0.00 00:00:00
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SafeCharge International Group Ltd Half-year Report (4312Q)

12/09/2017 7:00am

UK Regulatory


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TIDMSCH

RNS Number : 4312Q

SafeCharge International Group Ltd

12 September 2017

SafeCharge International Group Limited

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

Interim results for the six months ended 30 June 2017

SafeCharge delivers strong underlying financial performance, platform development, global expansion and focus on high quality customers to set foundations for stronger future growth

SafeCharge (AIM: SCH), a leader in advanced payment technologies, is pleased to announce its interim results for the six months ended 30 June 2017.

Overview and current trading

The first half of 2017 was a period of solid performance and delivery for the Group. Transaction volumes continue to grow with very strong growth in the value of transactions processed through SafeCharge Acquiring. During the period, the Group successfully launched a fully serviced global payment solution to Tier 1 customers and it has a strong sales pipeline, although the revenue growth to maturity from these long-term Tier 1 clients is taking slightly longer than anticipated. The Company continues to generate significant free cash flow, which is being returned to shareholders through the Company's dividend.

The Group has enjoyed a strong start to the second half of 2017 benefiting from the launch of new clients, many of whom had started processing on the Company's global acquiring platform by the end of the first half of the year. The Board remains confident that the outcome for the year will be broadly in line with market expectations, and the Directors look forward with confidence to the rest of 2017 and beyond.

Financial highlights

 
                                             H1 2017   H1 2016   Change 
-------------------------------  -------------------  --------  ------- 
 Number of Transactions 
  (m)                                           75.6      58.0     +30% 
 Transaction Value (US$m)                      4,218     3,954      +7% 
 Own Acquiring Transaction 
  Value (US$m)                                   811       395    +105% 
 
 Revenues (US$m)                                53.0      52.2      +2% 
 Gross Profit (US$m)                            30.4      31.6      -4% 
 Adjusted EBITDA(1) (US$m)                      15.6      16.8      -7% 
 Cash flows from operations(2) 
  (US$m)                                        16.2      16.5      -2% 
 Reported profit after 
  tax (US$m)                                    12.2      15.2     -20% 
 Cash conversion(3)                              79%       86% 
 
 Cash balances at 
  period end                                  113.0      128.1     -12% 
 
 Diluted earnings 
  per share (US$c)                              8.06      9.88     -18% 
 Recommended interim dividend 
  per share (US$c)                              7.69       7.0     +10% 
 
 

Financial highlights

 
 --   Increase in transaction value by 7% to 
       US$4.2 billion 
 --   Continued revenue growth after the reshaping 
       of the existing customer base undertaken 
       during 2016 to upgrade the quality of revenues 
       which contributed US$4.6 million to the 
       comparative period 
 --   An impressive cash conversion, and strong 
       balance sheet with US$113 million of cash 
       balances and no debt 
 --   Increase of interim dividend by 10% 
 

Operational highlights

 
 --   Successful launch of a fully serviced global 
       payment solution to Tier 1 customers, including 
       888 and Plus500 
 --   A strong pipeline of customers, including 
       Bet365, Paddy Power, EuroBet and car rental 
       company Share'ngo, will be launched during 
       the second half of 2017 and 2018 
 --   Continued growth in the overall value of 
       transactions processed through SafeCharge 
       and very strong growth in value of transactions 
       processed through SafeCharge Acquiring 
 --   Strong growth in number of card present 
       transactions processed through SafeCharge 
       Acquiring platform 
 --   Airline certification by card schemes completed 
 --   Global expansion continues with successful 
       launch of WeChat Pay and integration to 
       Chase in the United States, and opening 
       of new offices in Singapore, United States 
       and Netherlands 
 --   Rebranding of the Group completed 
 --   Continued investment in infrastructure 
       & technologies to support future growth 
 
 

David Avgi, CEO of SafeCharge, said:

"I am pleased to report a solid set of results. The Company has performed well and made positive progress with the implementation of its organic growth strategy and focus on delivering high quality revenue. We continue to invest in our payment and risk platform to drive future growth and are delighted that our customers recognise the benefits that SafeCharge's payments solutions bring to them.

Whilst we continue to advance in our core verticals, the Group has made exciting progress in entering our new target sectors and geographies. Over the coming months we will continue to focus and invest further to build our sales teams to accelerate a successful entry into these markets.

The Group has enjoyed a strong start to the second half of 2017 benefiting from the launch of new clients, many of whom had started processing on the Company's global acquiring platform by the end of the first half of the year. The Group is confident that its focus on higher quality earnings driven by its healthy pipeline will yield revenue growth in 2017 and build even stronger profitable momentum in 2018 and beyond."

A meeting for analysts will be held at 9.30am on 12 September 2017 at Central Court, 25 Southampton Buildings, London, WC2A 1AL. Please dial 020 3059 8125 to join the conference call at 9:30am.

- Ends -

(1) 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)

(2) Cash flows from operations before working capital adjustments and tax

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

For more information

 
 SafeCharge International 
  Group Limited 
  David Avgi, Chief Executive 
  Officer 
  Tsach Einav, Chief Financial 
  Officer 
  c/o Bell Pottinger                +44 (0) 20 3772 2500 
 Jean Beaubois, Head of Investor 
  Relations                          +44 (0) 7826 936619 
 Shore Capital 
  Mark Percy 
  Toby Gibbs                        +44 (0) 20 7408 4090 
 Bell Pottinger 
  David Rydell 
  Jonathan Hodgkinson               +44 (0) 20 3772 2500 
 

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

Forward looking statements

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

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

About SafeCharge

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

www.safecharge.com

Chairman's statement

Introduction

This is another set of pleasing financial results with revenues growing 2% to US$53.0 million after foregoing business of approximately US$4.6 million revenues and associated profits which contributed to the comparative period in 2016 as part of the strategy we announced in our 2016 accounts to reshape the Group's customer base in anticipation of evolving regulatory, commercial and customer requirements. This meant that our Underlying Revenues** growth on a comparable basis to the same period in 2016 was 11%. Once again revenue growth has been driven through new customer wins and expanded relationships with existing customers and the Group remained highly operationally cash generative.

We closed the period after payment of the final dividend (US$14.5 million) and purchase of Company shares to be held in treasury (US$5.4 million), with US$113.0 million of cash and cash equivalents and no debt.

During the first half we have achieved very successful growth in our acquiring business. I am delighted to report that this business performed ahead of expectations in the first half, with more than 20% of the Group's transaction volumes processed through its own acquiring platform in June.

In July 2017 the Company purchased 1,500,000 of its own shares at an average price of 270 pence per share. These shares will be held in Treasury and used to satisfy the issue of shares in respect of the future exercise of share options.

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 best practice corporate governance.

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 ongoing achievements and to welcome the new colleagues who joined in 2017, who are already making a big contribution to the development of our business.

Dividend

Recognising the Group's continued strong cash generation, the Board has recommended an interim dividend of 7.69 US$ cents per share, an increase of 10% compared to H1 2016. This represents 75% of Adjusted EBITDA* for the first six months, according to the Company's existing policy of paying 75% of Adjusted EBITDA* for the full year (as long as there is no material M&A transaction). The Board expects the full year dividend to total 75% of Adjusted EBITDA* for the period.

The dividend shall be paid in sterling and therefore it will be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.318, being the rate at 4.30 pm on 11(th) September. As a result, those shareholders entitled to the interim dividend will receive 5.83 pence per share. The interim dividend will become payable on 13(th) October 2017 to those shareholders on the Company's register as at the record date of 29(th) September 2017. The ex-dividend date is 28(th) September 2017.

Roger Withers

Chairman

12 September 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).

** Underlying Revenues is a non-GAAP, company-specific measure which excludes revenues of US$4.6 million in H1 2016 related to reshape of customer base undertaken in 2016.

Chief Executive's review

Introduction

The first half of 2017 was a period of further success and growth for the Group building on the reshaping of the existing customer base undertaken during 2016 to upgrade the quality of revenues. Revenues grew by 2% and Underlying Revenues** grew by 11%, compared to the same period in 2016, reaching US$53.0 million. We continued to make significant progress and achieve financial and operational success across the Group in the first half of 2017. Of particular note was the continued success and strong growth of SafeCharge Acquiring.

Strategy

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

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

In the first half of 2017, the Group also made substantial progress in its strategy to enter new sectors and geographies. A notable achievement was the entry into the marketplace industry, through development of a new product Marketplace Manager. The product provides a solution that addresses marketplaces' major challenges head on, from operational control to regulatory compliance and bi-directional payments. Other achievements during the period included the completion of the rebranding of the Group as well as the opening of new offices in Singapore, the United States and the Netherlands. Establishing new offices in these regions demonstrates our commitment to these important markets. Our intention is to grow these offices as the Group wins new clients in these regions.

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

Customers

We successfully launched a number of significant new Tier 1 customers, including 888 and Plus500, and new customers, including Bet365, Paddy Power, EuroBet and car rental company Share'ngo, will be launched during the second half of 2017 and 2018.

Partnerships

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

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

Infrastructure and technology

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

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

People

Our staff are at the heart of the Group's success and we are proud of the expertise and professionalism of our teams. During the period the Group successfully recruited a number of talented senior managers from well-established businesses in the payments sector, including senior personnel in sales and marketing. These new team members are already helping the Group win and manage sustainable, high quality business in both existing and target verticals and geographies. The Group ended the period with 344 employees with approximately 50% in R&D and technology and 15% in risk and compliance.

Financial performance in H1 2017

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

The number of processed transactions grew by 30%, reaching 75.6 million transactions for the period (H1 2016: 58.0 million), and the value of transactions grew by 7%, reaching US$4.2 billion (H1 2016: US$4.0 billion). This increase in volumes was driven by growth from existing clients and supplemented by the launch of new high volume customers.

Revenues for the period grew by 2% to US$53.0 million, and Underlying Revenues** grew by 11%, compared to the same period in 2016. Gross Profit decreased by 4% to US$30.4 million (H1 2016: US$31.6 million) with the Gross Profit Margin decreasing to 57% due to the higher quality and lower risk of the overall customer base. Accordingly, the Adjusted EBITDA* decreased to US$15.6 million (H1 2016: US$16.8 million).

SafeCharge remained highly cash generative with US$16.2 million of free cash flow from operating activities before working capital changes and tax paid in the six month period, and free cash flow*** of US$9.5 million, representing cash conversion of 79%.

SafeCharge Acquiring

Another success during the first half was the continued strong growth in our own Acquiring services. SafeCharge Own Acquiring transaction value for the period totalled US$811 million (H1 2016: US$395 million) closing the period with a run-rate in excess of US$1.8 billion, with more than 20% of the Group's transaction volumes processed through its own acquiring platform in June. 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 onboarding for new customers and remains a key focus for the Group.

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

Looking to the future

The Group has a robust and scalable platform that can accommodate transaction volumes over 20 times greater than currently processed. Management remains committed to rolling-out its technology-based solutions to new markets and, as such, has a number of priorities for the second half of 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 the Group's service and sector expertise 
       by adding local service and account teams with domain 
       expertise in our target markets; and 
 --   Additional functionality to the new website which 
       will allow merchants to download Application Programming 
       Interfaces (APIs), thereby reducing the time to market. 
 

Regulation

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

 
 --   European Banking Authority rules on Strong Customer 
       Authentication; 
 --   Brexit: potential changes to the passporting rules; 
 --   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; and 
 --   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 has enjoyed a strong start to the second half of 2017 benefiting from the launch of new clients, many of whom had started processing on the Company's global acquiring platform by the end of the first half of the year. 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 Officer

12 September 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).

** Underlying Revenues is a non-GAAP, company-specific measure which excludes revenues of US$4.6 million in H1 2016 related to reshape of customer base undertaken in 2016.

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

Financial review

Highlights

Revenues for the period increased by 2% to US$53.0 million (H1 2016: US$52.2 million); this growth was achieved following the reshaping of the existing customer base undertaken during 2016 to upgrade the quality of revenues. Underlying Revenues** increasing 11% from US$47.6 million in the comparable period in 2016 to US$53.0 million.

Following the customer base reshape undertaken in 2016 and the improved quality of the customer base, Gross Profit decreased by 4%, reaching US$30.4 million (H1 2016: US$31.6 million) and Adjusted EBITDA* decreased by 7%, reaching US$15.6 million (H1 2016: US$16.8 million).

The cash conversion remained strong, with cash flows from operations (before working capital adjustments and tax paid) of US$16.2 million (H1 2016: US$16.5 million) and free cash flow*** of US$9.5 million (H1 2016: US$11.4 million), reflecting cash conversion of 79% (H1 2016: 86%). Profit after tax for the period was US$12.2 million (H1 2016: US$15.2 million).

During the period, the Group paid US$14.5 million in dividends, acquired US$5.4 million of its own shares which are held in treasury and invested US$2.9 million in capitalised development costs. The Group ended the period with US$113.0 million (H1 2016: US$128.1 million) of cash and cash equivalents and US$9.1 million in available-for-sale assets (H1 2016: US$1.9 million). The Group remained debt free during the period.

Revenues

Revenues increased during the period by 2% to US$53.0 million (H1 2016: US$52.2 million). This growth was achieved despite the steps taken in 2016 to reduce exposure to certain sectors and markets in anticipation of evolving regulatory, commercial and customer requirements. The Directors estimate that these certain sectors generated revenues and gross profit of US$4.6 million and US$2.9 million, respectively, in the first half of 2016. New clients who began processing payments through the Group's systems in the last 12 months generated revenues of US$3.8 million during the first half of 2017.

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 62% of income in the period with the balance of revenues generated in a wide range of other currencies.

SafeCharge has operations in several jurisdictions and incurs the majority of its operating costs in US dollars, euros, Israeli shekels and sterling.

The Group's financial results for the period incurred a minor negative impact due to a strengthening of the US dollar against certain currencies during the period. The Directors estimate that revenues and Adjusted EBITDA* were approximately US$0.4 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 and Adjusted EBITDA* margins decreased to 57.3% (H1 2016: 60.6%) and 29.4% (H1 2016: 32.1%) respectively, primarily as a result of the customers base reshape undertaken in 2016 as well as the focus of the Company on high quality customers which upgraded the quality of revenues and customer base.

Expenses

Employee related costs, which account for the majority of SafeCharge's operating expenses and equate to approximately 19% of revenues, remained almost unchanged throughout the period, amounting to US$10.2 million (H1 2016: US$10.3 million).

The Group incurred share-based payment charges of US$0.5 million in the period (H1 2016: US$0.4 million). In order to reduce foreign exchange exposure, the majority of the Group's assets are held in US dollars, its functional and presentation currency. The Group's reported net finance income of US$1.4 million (H1 2016: US$2.8 million) primarily due to foreign exchange differences. In the comparable period in 2016, net finance income included US$1.1 million gain due to the purchase of VISA Europe by VISA Inc, US$0.7 million gain on the sale of the investment in FinTech Group AG and US$1.0 million foreign exchange differences.

Depreciation and amortisation of US$2.2 million was charged in the period (H1 2016: US$2.1 million), which included US$1.3 million in respect of intangible asset amortisation (H1 2016: US$1.2 million).

Tax

The Group's reported tax expense is US$1.4 million (H1 2016: US$0.7 million) in respect of its operations across multiple jurisdictions, representing a blended tax rate of 10% on reported profit before tax, which included US$0.6 million in respect of prior years' taxes recorded during the period.

Profit after tax

The Group's reported profit after tax was US$12.2 million (H1 2016: US$15.2 million). The decrease was mainly caused by the reduction in gross profit of US$1.2 million as a result of the customer base reshape impact of US$2.9 million undertaken in 2016 offset by growth in existing and new customers, and one-off finance income recorded in the comparable period in 2016 of US$1.8 million in respect of the purchase of VISA Europe by VISA Inc and realised gain on the sale of the investment in FinTech Group AG. Other factors were the tax expense of US$0.6 million in respect of prior years' taxes recorded during the period, which was partly offset by an operating costs decrease of US$0.1 million and finance income increase of US$0.5 million related to foreign exchange differences and interest income.

Payments working capital items

During the period, the Company completed the share acquisition of GTS, an online payment processing service, now rebranded to SafeCharge Digital. In these operations, client money held on behalf of clients is included in the balances of cash and cash equivalents, settlement assets and merchant processing liabilities since no legal right exists to offset between this cash and the corresponding merchant processing liabilities. As at the reporting date, the related cash balances amounted US$8.1 million, settlement assets amounted to US$1.8 million, and merchant processing liabilities amounted to US$9.9 million.

Cash flow

SafeCharge continues to be highly cash generative. In the first half of the year the Group generated US$14.6 million net cash flows from operating activities before payments working capital (H1 2016: US$14.7 million). Net cash flows from operating activities after payments working capital amounted to US$22.7 million.

The Group's cash outflow in respect of investing activities was US$5.6 million (H1 2016: US$9.7 million inflow). This outflow included US$3.1 million of investment in intangible assets (H1 2016: US$2.8 million) with the majority being capitalised development expenses, US$2.2 million (H1 2016: US$0.6 million) in payments for the acquisition of property, plant and equipment (primarily computer equipment), and US$0.6 million related to the investment in YelloCo.

The Group's cash outflow in respect of financing activities was US$19.4 million (H1 2016: US$11.3 million) reflecting US$14.5 million of the final 2016 dividend payment and US$5.4 million in respect to the purchase of Company shares to be held in treasury, offset by US$0.5 million received from the exercise of share options.

Free cash flow*** was US$9.5 million (H1 2016: US$11.4 million), reflecting cash conversion of 79% (H1 2016: 86%). The change in cash conversion caused by increased investment in property, plant and equipment (mainly computer equipment).

Overall during the period there was a net decrease in cash and cash equivalents of US$2.3 million (H1 2016: US$13.2 million increase) and the Group closed the period with US$113.0 million (H1 2016: US$128.1 million) in cash and cash equivalents.

Financial position

The Group closed the period with total assets of US$178.0 million (H1 2016: US$179.3 million), including US$113.0 million (H1 2016: US$128.1 million) of cash and cash equivalents and US$9.1 million (H1 2016: US$1.9 million) of available-for-sale investments. The majority of the Company's cash was held in current accounts and on-call deposit accounts, with US$53 million held on call deposit. The Directors believe that SafeCharge's strong balance sheet provides a high degree of operational flexibility as it implements its growth strategy.

The net book value of intangible assets held at 30 June 2017 was US$37.2 million (H1 2016: US$33.1 million) of which US$10.2 million (H1 2016: US$9.6 million) related to Goodwill and US$9.7 million (H1 2016: US$10.3 million) related to IP technology, licenses and domains. During the period, the Group capitalised US$3.1 million (H1 2016: US$2.8 million) relating to technology development costs.

Total current assets decreased to US$124.7 million (H1 2016: US$ 138.8 million), with cash decreasing primarily as a result of the final dividend payment and the purchase of own shares. Current liabilities increased to US$21.0 million (H1 2016: US$ 13.1 million) mainly due to the merchant processing liabilities of US$9.9 million, offset by a US$1.9 million decrease in taxes payables due to prior years' taxes paid during the first half.

Total equity attributable to equity holders decreased to US$156.1 million (H1 2016: US$165.4 million) principally as a result of the dividends and the treasury shares purchased by the Company.

In July 2017 the Company purchased 1,500,000 of its own shares at an average price of 270 pence per share. These shares will be held in treasury and used to satisfy the issue of shares in respect of future exercise of share options.

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

Dividend

The Board has recommended the payment of an interim dividend of 7.69 US$ cents per share (H1 2016: 7.0 US$ cents), representing 75% of Adjusted EBITDA* for the period, in line with the Company's existing policy of paying 75% of Adjusted EBITDA* for the full year (as long as there is no material M&A transaction). Recognising the Group's continued strong cash generation the Board expects total dividend for the full year to be 75% of Adjusted EBITDA*.

The dividend shall be paid in sterling and will therefore be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.318, being the rate at 4.30 pm on 11(th) September. As a result, those shareholders entitled to the interim dividend will receive 5.83 pence per share. The interim dividend will become payable on 13(th) October 2017 to those shareholders on the Company's register as at the record date of 29(th) September 2017. The ex-dividend date is 28(th) September 2017.

Tsach Einav

Chief Financial Officer

12 September 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).

** Underlying Revenues is a non-GAAP, company-specific measure which excludes revenues of US$4.6 million in H1 2016 related to reshape of customer base undertaken in 2016.

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2017

 
                                                        Six months      Six months 
                                                          ended 30        ended 30    Year ended 31 
                                                         June 2017       June 2016    December 2016 
                                                       (Unaudited)     (Unaudited)        (Audited) 
                                                Note       US$000s         US$000s          US$000s 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Revenue                                           3        52,994          52,183          104,139 
 Cost of sales                                            (22,626)        (20,557)         (43,473) 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Gross profit                                               30,368          31,626           60,666 
 Salaries and employee expenses                           (10,219)        (10,281)         (19,649) 
 Share-based payments charge                                 (513)           (400)            (672) 
 Depreciation and amortisation                             (2,155)         (2,069)          (4,139) 
 Premises and other costs                                  (1,306)         (1,492)          (3,008) 
 Other expenses                                            (3,268)         (3,084)          (4,684) 
 Acquisition costs and contingent 
  remuneration                                    10          (61)            (95)            (322) 
 Restructuring costs                                         (777)         (1,014)          (2,070) 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Total operating costs                                    (18,299)        (18,435)         (34,544) 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Adjusted EBITDA*                                           15,575          16,769           33,325 
 Depreciation and amortisation                             (2,155)         (2,069)          (4,139) 
 Share-based payments charge                                 (513)           (400)            (672) 
 Acquisition costs and contingent 
  remuneration                                                (61)            (95)            (322) 
 Restructuring costs                                         (777)         (1,014)          (2,070) 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Profit from operations                                     12,069          13,191           26,122 
 Finance income                                    5         1,624           2,902            2,332 
 
 Finance expense                                   5         (178)           (137)            (413) 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Profit before tax                                          13,515          15,956           28,041 
 Tax expense                                               (1,353)           (741)          (1,487) 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Profit after tax attributable 
  to equity holders of the 
  Parent                                                    12,162          15,215           26,554 
--------------------------------------------  ------  ------------  --------------  --------------- 
 
 Other comprehensive income 
  for the period 
 
 Items that will be reclassified 
  subsequently to profit or loss 
  when specific conditions are met: 
 Unrealised fair value movements 
  on available-for-sale investments                9           320         (4,805)          (4,805) 
 Realised fair value movements 
  on available-for-sale investments 
  reclassified to profit 
  or loss                                          5             -         (1,760)          (1,760) 
 Exchange difference arising 
  on the translation and 
  consolidation of foreign 
  companies' financial statements                            2,052             300            (618) 
 Total comprehensive income 
  for the period                                            14,534           8,950           19,371 
============================================  ======  ============  ==============  =============== 
 Earnings per share for 
  profit attributable to 
  the owners of the Parent 
  during the period 
 Basic (cents)                                     4          8.20           10.03            17.57 
--------------------------------------------  ------  ------------  --------------  --------------- 
 Diluted (cents)                                   4          8.06            9.88            17.32 
--------------------------------------------  ------  ------------  --------------  --------------- 
 
   * 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. 
   Where not explicitly mentioned, Adjusted EBITDA refers 
   to Adjusted EBIDTA from continuing operations. 
 
   The attached notes are an integral part of the condensed 
   interim financial information. 
 
 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2017

 
                                             30 June       30 June   31 December 
                                                2017          2016          2016 
                                         (Unaudited)   (Unaudited)     (Audited) 
                                  Note       US$000s       US$000s       US$000s 
-------------------------------  -----  ------------  ------------  ------------ 
 
 Assets 
 Non-current assets 
 Property, plant and 
  equipment                        6           3,657         2,581         2,346 
 Intangible assets                 7          37,192        33,054        33,441 
 Available-for-sale 
  investments                      9           9,064         1,895         8,504 
 Other receivables                             2,744         2,681         2,665 
 Total non-current assets                     52,657        40,211        46,956 
-------------------------------  -----  ------------  ------------  ------------ 
 
 Current assets 
 Trade and other receivables                   9,773        10,735        10,329 
 Settlement assets                 12          1,776             -             - 
 Taxes receivable                                180             -             - 
 Cash and cash equivalents                   113,017       128,065       115,357 
 Total current assets                        124,746       138,800       125,686 
-------------------------------  -----  ------------  ------------  ------------ 
 
 Assets classified as 
  held for sale                    9             587           267           267 
-------------------------------  -----  ------------  ------------  ------------ 
 
 Total assets                                177,990       179,278       172,909 
===============================  =====  ============  ============  ============ 
 
 Equity 
 Share capital                                    15            15            15 
 Share premium                               125,672       123,908       125,169 
 Capital reserve                                 622           622           622 
 Available-for-sale 
  reserve                                      1,473         1,153         1,153 
 Translation reserve                             628         (506)       (1,424) 
 Share options reserve                         3,103         2,621         2,662 
 Treasury shares reserve           11       (11,679)             -       (6,281) 
 Retained earnings                            36,272        37,615        38,577 
 Total equity attributable 
  to equity holders of 
  Parent                                     156,106       165,428       160,493 
-------------------------------  -----  ------------  ------------  ------------ 
 
 Non-current liabilities 
 Provisions                                      233           295           260 
 Deferred tax liability                          612           387           479 
 Contingent consideration          10              -           102             - 
-------------------------------  -----  ------------  ------------  ------------ 
 Total non-current liabilities                   845           784           739 
-------------------------------  -----  ------------  ------------  ------------ 
 
 Current liabilities 
 Trade and other payables                     10,977        11,003         9,709 
 Merchant processing 
  liabilities                      12          9,882             -             - 
 Contingent consideration          10            180           153           343 
 Taxes payable                                     -         1,910         1,625 
-------------------------------  ----- 
 Total current liabilities                    21,039        13,066        11,677 
                                        ------------  ------------  ------------ 
 
 Total equity and liabilities                177,990       179,278       172,909 
===============================  =====  ============  ============  ============ 
 
 

The attached notes are an integral part of the condensed interim financial information.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2017

 
                                                Six months    Six months 
                                                     ended         ended     Year ended 
                                                   30 June       30 June    31 December 
                                                      2017          2016           2016 
                                               (Unaudited)   (Unaudited)      (Audited) 
                                        Note       US$000s       US$000s        US$000s 
------------------------------------  ------  ------------  ------------  ------------- 
 Cash flows from operating 
  activities 
 Profit before tax                                  13,515        15,956         28,041 
 Adjustments for: 
 Depreciation of property, 
  plant and equipment                      6           890           892          1,739 
 Amortisation of intangible 
  assets                                   7         1,265         1,177          2,400 
 Exchange difference 
  arising on the translation 
  of non-current assets 
  in foreign currencies                                219          (59)           (36) 
 Charge to statement 
  of comprehensive income 
  for provisions                                      (27)            52             17 
 Gain on sale of available-for-sale 
  assets                                   5             -       (1,760)        (1,760) 
 Finance income                            5         (215)         (157)          (244) 
 Share-based payments 
  charge                                               513           400            672 
------------------------------------  ------ 
 Cash flows from operations 
  before working capital                            16,160        16,501         30,829 
 Decrease in trade and 
  other receivables                                    477             3            425 
 Increase/(Decrease) 
  in trade and other payables                        1,192       (1,457)        (3,394) 
------------------------------------  ------ 
 Cash flows from operations 
  before movements in 
  payments working capital                          17,829        15,047         27,860 
 Increase in merchant 
  processing liabilities                  12         9,882             -              - 
 Increase in settlement 
  assets                                  12       (1,776)             -              - 
------------------------------------  ------  ------------  ------------  ------------- 
                                                    25,935        15,047         27,860 
 Tax paid                                          (3,247)         (336)        (1,289) 
------------------------------------  ------  ------------ 
 Net cash flows from 
  operating activities                              22,688        14,711         26,571 
------------------------------------  ------  ------------  ------------  ------------- 
 Cash flows from investing 
  activities 
 Payment for acquisition 
  of intangible assets                     7       (3,052)       (2,839)        (5,330) 
 Payment for acquisition 
  of property, plant and 
  equipment                                6       (2,197)         (624)        (1,279) 
 Acquisition of available-for-sale 
  investments                                        (560)             -        (6,609) 
 Interest received                         5           215           157            244 
 Proceeds from disposal 
  of available-for-sale 
  investments                              9             -        13,036         13,036 
------------------------------------  ------  ------------  ------------  ------------- 
 Net cash flows (used 
  in)/provided by investing 
  activities                                       (5,594)         9,730             62 
------------------------------------  ------  ------------  ------------  ------------- 
 Cash flows from financing 
  activities 
 Proceeds from exercise 
  of stock options                                     503            80          1,341 
 Purchase of own shares 
  to be held as treasury 
  shares                                  11       (5,398)             -        (6,281) 
 Dividends paid                            8      (14,539)      (11,340)       (21,220) 
 Net cash flows used 
  in financing activities                         (19,434)      (11,260)       (26,160) 
------------------------------------  ------  ------------  ------------  ------------- 
 (Decrease)/Increase in cash 
  and cash equivalents for 
  the period                                       (2,340)        13,181            473 
 Cash and cash equivalents 
  at the beginning of 
  the period                                       115,357       114,884        114,884 
------------------------------------  ------ 
 Cash and cash equivalents 
  at the end of the period                         113,017       128,065        115,357 
====================================  ======  ============  ============  ============= 
 
 

The attached notes are an integral part of the condensed interim financial information.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2017

 
 Unaudited consolidated statement of changes 
  in equity for the six months ended 30 June 
  2017: 
 
                                                                                                                                                            Total 
                                                                                                                                                           Equity 
                                                                                                                                                     Attributable 
                                                      Treasury                                                                    Share                 to Equity 
                               Share                    shares     Share           Capital   Available-for-sale   Translation   Options   Retained        Holders 
                             Capital                   reserve   Premium           Reserve              Reserve       Reserve   Reserve   Earnings      of Parent 
           Note              US$000s                   US$000s   US$000s           US$000s              US$000s       US$000s   US$000s    US$000s        US$000s 
---------------  -------------------  ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 
 Balance at 31 
  December 2016                   15                   (6,281)   125,169               622                1,153       (1,424)     2,662     38,577        160,493 
                 -------------------  ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 
 Comprehensive 
  Income 
 Profit for the 
  period                           -                         -         -                 -                    -             -         -     12,162         12,162 
 Exchange 
  difference 
  arising on 
  the 
  translation 
  and 
  consolidation 
  of foreign 
  companies' 
  financial 
  statements                       -                         -         -                 -                  320         2,052         -          -          2,372 
                 -------------------  ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 Total 
  comprehensive 
  income for 
  the 
  period                           -                         -         -                 -                  320         2,052         -     12,162         14,534 
 
 Contributions 
 by and 
 distributions 
 to owners 
 Dividends                         -                         -         -                 -                    -             -         -   (14,539)       (14,539) 
 Exercise of 
  options                          *                         -       503                 -                    -             -      (72)         72            503 
 Purchase of 
  own 
  shares                         (*)                   (5,398)         -                 -                    -             -         -          -        (5,398) 
 Share-based 
  payments 
  11                               -                         -         -                 -                    -             -       513          -            513 
                 -------------------  ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 Total 
  contributions 
  by and 
  distributions 
  to owners                        -                   (5,398)       503                 -                    -             -       441   (14,467)       (18,921) 
                 -------------------  ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 
 Balance at 30 
  June 2017                       15                  (11,679)   125,672               622                1,473           628     3,103     36,272        156,106 
                 ===================  ========================  ========  ================  ===================  ============  ========  =========  ============= 
 
 (*) Represents amount less than one thousand 
  US$ 
 
  Unaudited consolidated statement of changes 
  in equity for the six months ended 30 June 
  2016: 
                                                                                                                                                            Total 
                                                                                                                                                           Equity 
                                                                                                                                                     Attributable 
                                                                                                                                  Share                 to Equity 
                                                         Share     Share           Capital   Available-for-sale   Translation   Options   Retained        Holders 
                                                       Capital   Premium           Reserve              Reserve       Reserve   Reserve   Earnings      of Parent 
                                                       US$000s   US$000s           US$000s              US$000s       US$000s   US$000s    US$000s        US$000s 
------------------------------------  ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 
 Balance at 31 December 
  2015                                                      15   123,828               622                7,718         (806)     2,221     33,740        167,338 
                                      ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 
 Comprehensive Income 
 Profit for the period                                       -         -                 -                    -             -         -     15,215         15,215 
 Unrealised fair value 
  movements on available-for-sale 
  investments                                                -         -                 -              (4,805)             -         -          -        (4,805) 
 Realised fair value 
  movements on available-for-sale 
  investments reclassified 
  to profit or loss                                          -         -                 -              (1,760)             -         -          -        (1,760) 
 Exchange difference 
  arising on the translation 
  and consolidation 
  of foreign companies' 
  financial statements                                       -         -                 -                    -           300         -          -            300 
                                      ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 Total comprehensive 
  income for the period                                      -         -                 -              (6,565)           300         -     15,215          8,950 
 
 Contributions by 
  and distributions 
  to owners 
 Dividends                                                   -         -                 -                    -             -         -   (11,340)       (11,340) 
 Exercise of options                                         *        80                 -                    -             -         -          -             80 
 Share-based payments                                        -         -                 -                    -             -       400          -            400 
                                      ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 Total contributions 
  by and distributions 
  to owners                                                  *        80                 -                    -             -       400   (11,340)       (10,860) 
                                      ------------------------  --------  ----------------  -------------------  ------------  --------  ---------  ------------- 
 
 Balance at 30 June 
  2016                                                      15   123,908               622                1,153         (506)     2,621     37,615        165,428 
                                      ========================  ========  ================  ===================  ============  ========  =========  ============= 
 
 
 

(*) Represents amount less than one thousand US$

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2017

 
 Audited consolidated statement of changes 
  in equity for the year ended 31 December 
  2016: 
 
                                                                                                                                                                 Total 
                                                                                                                                                                Equity 
                                                                                                                                                          Attributable 
                                                    Treasury                                                                           Share                 to Equity 
                                  Share               shares     Share           Capital   Available-for-sale          Translation   Options   Retained        Holders 
                                Capital              reserve   Premium           Reserve              Reserve              Reserve   Reserve   Earnings      of Parent 
                                US$000s              US$000s   US$000s           US$000s              US$000s              US$000s   US$000s    US$000s        US$000s 
--------------------  -----------------  -------------------  --------  ----------------  -------------------  -------------------  --------  ---------  ------------- 
 
 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                         -                    -         -                 -              (4,805)                    -         -          -        (4,805) 
 Realised fair 
  value 
  movements on 
  available-for-sale 
  investments 
  reclassified 
  to profit or 
  loss                                -                    -         -                 -              (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                            -                    -         -                 -                    -                    -         -   (21,948)       (21,948) 
 Exercise of options                  *                    -     1,341                 -                    -                    -     (231)        231          1,341 
 Purchase of own 
  shares                            (*)              (6,281)         -                 -                    -                    -         -          -        (6,281) 
 Share-based 
  payments                            -                    -         -                 -                    -                    -       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 one thousand 
  US$ 
 
 

The attached notes are an integral part of the condensed interim financial information.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

1. General information

SafeCharge International Group Limited (hereinafter - the 'Company') was incorporated in the 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, technology and risk management solutions for omni--channel businesses.

2. Significant accounting policies

Basis of preparation

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Company's latest annual audited financial statements. The accounting policies are consistent with those used in the previous annual report. The financial information for the six month period ended 30 June 2017 does not constitute the full statutory accounts for that period. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 December 2016 was unqualified, and did not draw attention to any matters by way of emphasis.

Going concern

Based on the Group's cash balances and normal business planning and control procedures, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the accounts.

Adoption of new and revised IFRSs

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

(i) Standards and Interpretations adopted by the EU

 
 
  A number of new standards, amendments to standards and 
   interpretations are effective for annual periods beginning 
   after 1 January 2017, and have not been applied in preparing 
   these consolidated financial statements. Those which 
   may be relevant to the Group are set out below. The 
   Group does not plan to adopt these standards early. 
  (ii) Standards and Interpretations not adopted by the 
  EU 
  New standards 
 
          *    IFRS 9 "Financial Instruments" (effective for 
               annual periods beginning on or after 1 January 2018). 
 
 
          *    IFRS15 "Revenue from Contracts with Customers" 
               (effective for annual periods beginning on or after 1 
               January 2018). 
 
 
          *    IFRS 16 "Leases" (effective for annual periods 
               beginning on or after 1 January 2019). 
 
   IFRS 15 requires an assessment of all revenue streams 
   and whilst the Group is finalising their impact assessment, 
   the Directors do not anticipate that the adoption of 
   IFRS 15 standards will have a material impact on the 
   recognition of revenue. 
 
   The review of the impact of IFRS 16 and IFRS 9 will 
   require an assessment of all leases and the classification 
   and measurement of the Group's financial instrument 
   respectively. The Group is still assessing the likely 
   impact of adopting these standards. 
 
   Amendments 
 
                *    Recognition of deferred tax assets for unrealised 
                     losses (Amendments to IAS 12) (1 January 2017). 
 
 
                *    Disclosure Initiative: Amendments to IAS 7 (1 January 
                     2017). 
 
 
                *    Clarifications to IFRS 15 revenue from Contracts with 
                     Customers (1 January 2018). 
 
 
                *    Classification and Measurement of Share-based Payment 
                     Transactions (Amendments to IFRS 2) (1 January 2018). 
 

The impact of these standards on the consolidated financial statements of the Group has not yet been fully assessed by the Board of Directors.

Basis of consolidation

The Group interim consolidated financial statements comprise the financial statements of the Parent company SafeCharge International Group Limited and the financial statements of the subsidiaries.

The interim 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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

2. Significant accounting policies (continued)

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. The choice of measurement basis is made on a transaction--by--transaction basis.

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 acquisition--date fair value 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.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in the statement of comprehensive income. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit and loss where such treatment would be appropriate if that interest were disposed of.

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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

2. Significant accounting policies (continued)

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.

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. Clients' money is not held directly, but is placed on deposit in segregated bank accounts with a financial institution (See Note 12).

Tax

Income tax expense represents the sum of the tax currently payable.

Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the tax authorities. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is provided in full 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.

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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

2. Significant accounting policies (continued)

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 are measured as the difference between the net disposal proceeds and the carrying amount of the asset and 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, customer contracts and customer relationships 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 within IP technology. Subsequently computer software is carried at cost less any accumulated depreciation 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 are measured as the difference between the net disposal proceeds and the carrying amount of the asset and 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.

Available-for-sale investments

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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

2. Significant accounting policies (continued)

Significant judgements and estimates

There have been no changes in the nature of the critical accounting estimates and judgements as set out in Note 4 to the Group's audited financial statements for the year ended 31 December 2016.

3. 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 customers. This does not reflect the region of the end users of the Group's customers, whose locations are worldwide.

 
                        Six months     Six months           Year 
                             ended          ended          ended 
                           30 June        30 June    31 December 
                              2017           2016           2016 
                       (Unaudited)    (Unaudited)      (Audited) 
                           US$000s        US$000s        US$000s 
                     -------------  -------------  ------------- 
 Europe                     46,364         48,845         97,383 
 Rest of the World           6,630          3,338          6,756 
                     -------------  -------------  ------------- 
                            52,994         52,183        104,139 
                     =============  =============  ============= 
 

Geographical analysis of non-current assets

 
                   Six months     Six months    Year ended 
                        ended          ended   31 December 
                      30 June        30 June          2016 
                         2017           2016 
                  (Unaudited)    (Unaudited)     (Audited) 
                      US$000s        US$000s       US$000s 
                -------------  -------------  ------------ 
Guernsey               12,260          8,787         9,977 
Europe                 20,304         19,735        18,326 
Asia                   18,896         11,256        17,673 
North America           1,197            433           980 
                -------------  -------------  ------------ 
                       52,657         40,211        46,956 
                =============  =============  ============ 
 

4. Earnings per share

 
                                      Six months     Six months           Year 
                                           ended          ended          ended 
                                         30 June        30 June    31 December 
                                            2017           2016           2016 
                                     (Unaudited)    (Unaudited)      (Audited) 
                                             US$            US$            US$ 
                                   -------------  -------------  ------------- 
 
 Basic (cents)                              8.20          10.03          17.57 
 Diluted (cents)                            8.06           9.88          17.32 
                                   -------------  -------------  ------------- 
 
 
                                      Six months     Six months           Year 
                                           ended          ended          ended 
                                         30 June        30 June    31 December 
                                            2017           2016           2016 
                                     (Unaudited)    (Unaudited)      (Audited) 
                                         US$000s        US$000s        US$000s 
                                   -------------  -------------  ------------- 
 Profit after tax for the period          12,162         15,215         26,554 
                                   =============  =============  ============= 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

4. Earnings per share (continued)

 
                                     Six months   Six months    Year ended 
                                          ended        ended   31 December 
                                        30 June      30 June          2016 
                                           2017         2016 
                                         Number       Number        Number 
                                    -----------  -----------  ------------ 
Denominator - basic 
Weighted average number of equity 
 shares                             148,259,681  151,619,053   151,156,990 
                                    ===========  ===========  ============ 
 
Denominator - diluted 
Weighted average number of equity 
 shares                             148,259,681  151,619,053   151,156,990 
Weighted average number of share 
 options                              2,683,397    2,302,984     2,138,685 
                                    -----------  -----------  ------------ 
Weighted average number of shares   150,943,078  153,922,037   153,295,675 
                                    ===========  ===========  ============ 
 
 

5. Finance income and expense

 
                                                Six months     Six months    Year ended 
                                                     ended          ended   31 December 
                                                   30 June        30 June          2016 
                                                      2017           2016 
                                               (Unaudited)    (Unaudited)     (Audited) 
                                                   US$000s        US$000s       US$000s 
                                             -------------  -------------  ------------ 
Finance income 
Interest received                                      215            157           244 
Foreign exchange differences                         1,409            985           328 
Net gain on disposal of available-for-sale 
 financial assets transferred from 
 equity (See Note 9)                                     -          1,760         1,760 
                                             -------------  -------------  ------------ 
                                                     1,624          2,902         2,332 
                                             -------------  -------------  ------------ 
 
Finance expense 
Bank fees                                            (178)          (137)         (413) 
                                             -------------  -------------  ------------ 
                                                     (178)          (137)         (413) 
                                             -------------  -------------  ------------ 
 
Net finance income                                   1,446          2,765         1,919 
                                             =============  =============  ============ 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

6. Property, plant and equipment

Unaudited Property, plant and equipment Note for the period ended 30 June 2017:

 
 
 
                                Leasehold                  Furniture,      Computer 
                             improvements        Motor       fixtures     equipment     Total 
                                              vehicles     and office 
                                                            equipment 
                                  US$000s      US$000s        US$000s       US$000s   US$000s 
                          ---------------  -----------  -------------  ------------  -------- 
 Cost 
 Balance at 31 December 
  2016                                697          214            655         6,665     8,231 
 Additions                            432           32            238         1,495     2,197 
 Disposals                              -            -           (46)           (6)      (52) 
 Foreign exchange 
  rate movement                         -            -              -           131       131 
 Balance at 30 June 
  2017                              1,129          246            847         8,285    10,507 
                          ---------------  -----------  -------------  ------------  -------- 
 
 
 Depreciation 
 Balance at 31 December 
  2016                                451          202            373         4,859     5,885 
 Charge for the 
  period                               44           10             77           759       890 
 Disposals                              -            -           (46)           (6)      (52) 
 Foreign exchange 
  rate movement                         -            -              -           127       127 
 Balance at 30 June 
  2017                                495          212            404         5,739     6,850 
                          ---------------  -----------  -------------  ------------  -------- 
 
 Net book amount 
                          ---------------  -----------  -------------  ------------  -------- 
 Balance at 30 June 
  2017                                634           34            443         2,546     3,657 
                          ===============  ===========  =============  ============  ======== 
 
 

Unaudited Property, plant and equipment Note for the period ended 30 June 2016:

 
 
 
                                Leasehold                  Furniture,      Computer 
                             improvements        Motor       fixtures     equipment     Total 
                                              vehicles     and office 
                                                            equipment 
                                  US$000s      US$000s        US$000s       US$000s   US$000s 
                          ---------------  -----------  -------------  ------------  -------- 
 Cost 
 Balance at 31 December 
  2015                                576          236            638         5,615     7,065 
 Additions                             60            -             31           533       624 
 Foreign exchange 
  rate movement                         -            -              5            32        37 
 Balance at 30 June 
  2016                                636          236            674         6,180     7,726 
                          ---------------  -----------  -------------  ------------  -------- 
 
 
 Depreciation 
 Balance at 31 December 
  2015                                343          188            288         3,398     4,217 
 Charge for the 
  period                               75           11             62           744       892 
 Foreign exchange 
  rate movement                         -            -              3            33        36 
 Balance at 30 June 
  2016                                418          199            353         4,175     5,145 
                          ---------------  -----------  -------------  ------------  -------- 
 
 Net book amount 
                          ---------------  -----------  -------------  ------------  -------- 
 Balance at 30 June 
  2016                                218           37            321         2,005     2,581 
                          ===============  ===========  =============  ============  ======== 
 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

6. Property, plant and equipment (continued)

Audited Property, plant and equipment Note for the year ended 31 December 2016:

 
 
 
                                Leasehold                  Furniture,      Computer 
                             improvements        Motor       fixtures     equipment     Total 
                                              vehicles     and office 
                                                            equipment 
                                  US$000s      US$000s        US$000s       US$000s   US$000s 
                          ---------------  -----------  -------------  ------------  -------- 
 Cost 
 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 31 December 
  2015                                343          188            288         3,398     4,217 
 Charge for the 
  period                              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 
                          ===============  ===========  =============  ============  ======== 
 
 

7. Intangible Assets

Unaudited Intangible Assets Note for the period ended 30 June 2017:

 
 
 
                                                                Domains 
                                 Customer             IP            and 
                   Goodwill     contracts     technology       Licenses    Development     Total 
                    US$000s       US$000s        US$000s        US$000s        US$000s   US$000s 
                -----------  ------------  -------------  -------------  -------------  -------- 
 Cost 
 Balance at 31 
  December 
  2016                9,324         5,009         10,196          2,122         11,992    38,643 
 Additions                -             -            147              -          2,905     3,052 
 Foreign 
  exchange 
  rate 
  movement              857           319            769              -             46     1,991 
 Balance at 30 
  June 
  2017               10,181         5,328         11,112          2,122         14,943    43,686 
                -----------  ------------  -------------  -------------  -------------  -------- 
 
 
 Amortisation 
 Balance at 31 
  December 
  2016                    -         1,450          2,919              -            833     5,202 
 Amortisation 
  for 
  the period              -           300            567              -            398     1,265 
 Foreign 
  exchange 
  rate 
  movement                -             -             27              -              -        27 
 Balance at 30 
  June 
  2017                    -         1,750          3,513              -          1,231     6,494 
                -----------  ------------  -------------  -------------  -------------  -------- 
 
 Net book 
 amount 
                -----------  ------------  -------------  -------------  -------------  -------- 
 Balance at 30 
  June 
  2017               10,181         3,578          7,599          2,122         13,712    37,192 
                ===========  ============  =============  =============  =============  ======== 
 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

7. Intangible Assets (continued)

 
 
 
  Unaudited Intangible 
  Assets 
  Note for the period ended 
  30 June 2016: 
 
 
                                                               Domains 
                                  Customer            IP           and 
                    Goodwill     contracts    technology      Licenses    Development     Total 
                     US$000s       US$000s       US$000s       US$000s        US$000s   US$000s 
                 -----------  ------------  ------------  ------------  -------------  -------- 
 Cost 
 Balance at 31 
  December 
  2015                 9,450         4,985        10,178         2,122          7,139    33,874 
 Additions                 -             -           197             -          2,642     2,839 
 Foreign 
  exchange 
  rate movement          137            41           145             -             46       369 
 Balance at 30 
  June 
  2016                 9,587         5,026        10,520         2,122          9,827    37,082 
                 -----------  ------------  ------------  ------------  -------------  -------- 
 
 
 Amortisation 
 Balance at 31 
  December 
  2015                     -           868         1,775             -            208     2,851 
 Amortisation 
  for 
  the period               -           291           589             -            297     1,177 
 Balance at 30 
  June 
  2016                     -         1,159         2,364             -            505     4,028 
                 -----------  ------------  ------------  ------------  -------------  -------- 
 
 Net book 
 amount 
                 -----------  ------------  ------------  ------------  -------------  -------- 
 Balance at 30 
  June 
  2016                 9,587         3,867         8,156         2,122          9,322    33,054 
                 ===========  ============  ============  ============  =============  ======== 
 
 
   Audited Intangible Assets Note for the year ended 31 
   December 2016: 
 
 
                                                               Domains 
                                  Customer            IP           and 
                    Goodwill     contracts    technology      Licenses    Development     Total 
                     US$000s       US$000s       US$000s       US$000s        US$000s   US$000s 
                 -----------  ------------  ------------  ------------  -------------  -------- 
  Cost 
  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 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 
                 ===========  ============  ============  ============  =============  ======== 
 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

8. Shareholders' equity

Distribution of Dividend

In May 2017 the Group distributed US$14,539,000, 9.47 US$ cents per share (30 June 2016: US$11,340,000, 7.30 US$ cents per share), as a final dividend for the year ended 31 December 2016. 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 as an interim dividend.

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

Fair value hierarchy

Available-for-sale assets 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 
   At 30 June 2017                    9,064       -         -       9,064 
 
   Available-for-sale investments 
    classified as held for sale 
   At 30 June 2017                     587        -        587        - 
 
   Total at 30 June 2017              9,651       -        587      9,064 
                                    ========  ========  ========  ======== 
 
   Available-for-sale investments 
   At 30 June 2016                    1,895       -       1,895       - 
 
   Available-for-sale investments 
    classified as held for sale 
   At 30 June 2016                     267        -         -        267 
 
   Total at 30 June 2016              2,162       -       1,895      267 
                                    ========  ========  ========  ======== 
 
   Available-for-sale investments 
   At 31 December 2016                8,504       -       8,504       - 
 
   Available-for-sale investments 
    classified as held for sale 
   At 31 December 2016                 267        -         -        267 
 
   Total at 31 December 2016          8,771       -       8,504      267 
                                    ========  ========  ========  ======== 
 
 
  There have been transfers of financial instruments between 
  levels during the period. 
 
  The following is a reconciliation of the movement in 
  the Group's financial assets classified at Level 3 during 
  the period: 
                                                    30 June       30 June      31 December 
                                           2017 (Unaudited)          2016   2016 (Audited) 
                                                              (Unaudited) 
                                                    US$000s       US$000s          US$000s 
                                          -----------------  ------------  --------------- 
 
Balance brought forward                                 267         1,384            1,384 
Realised gain for the period recognised 
 in profit or loss                                        -       (1,117)          (1,117) 
Acquired during the period                              560             -                - 
Reclassification from/to Level 
 2                                                    8,237             -                - 
Fair value at period end                              9,064           267              267 
                                          =================  ============  =============== 
 
 
 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

9. Available-for-sale investments including classified as held for sale (continued)

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

At 30 June 2017 the AFS investment was valued at US$587,000 and an unrealised gain of US$320,000 was recognised in other comprehensive income.

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

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

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. At 31 December 2015, the investment was valued at $17,610,000 and an unrealised gain of $6,334,000 was recognised in other comprehensive income. In May 2016 the value of the available-for-sale asset fell to $11,919,000, and therefore an unrealised decrease in fair value of $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 of the six months ended 30 June 2016 period.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 3 for the purpose of disclosure in the fair value hierarchy, as the valuation is based on cost basis, due to unreliable fair value measures.

In May 2017, the Group invested US$560,000 in Yello Company Limited, an unquoted business based in France. This was in exchange for approximately 6.25% of issued share capital. This investment is classified as Level 3 for the purpose of disclosure in the fair value hierarchy, as the valuation is based on cost basis, due to unreliable fair value measures

10. Contingent consideration

Contingent consideration relates to acquisitions that took place during 2015.

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

Contingent consideration arrangements:

 
                                   Six months    Six months       Year ended 
                                        ended         ended      31 December 
                                      30 June       30 June   2016 (Audited) 
                                         2017          2016 
                                  (Unaudited)   (Unaudited) 
                                      US$000s       US$000s          US$000s 
                                 ------------  ------------  --------------- 
                                                                         370 
At 1 January                              343           370                - 
Contingent remuneration                    38            95              170 
Foreign exchange rate movement              4             -               13 
Amounts paid                            (205)         (210)            (210) 
At period end                             180           255              343 
                                 ============  ============  =============== 
 

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

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

Sensitivity analysis was performed on the key inputs, being the discount rate and probabilities applied, but this did not result in material differences to fair values recognised or profit or loss. Accordingly, this analysis has not been presented.

Contingent remuneration of US$38,000 (US$95,000 during the six months ended 30 June 2016) has been charged to acquisition costs and contingent remuneration in the statement of comprehensive income.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

11. Treasury shares

Unaudited Treasury shares Note for the period ended 30 June 2017:

 
 
 
 
                             Treasury     Treasury           Treasury 
                               shares       shares     shares reserve 
                               Number      US$000s            US$000s 
                          -----------  -----------  ----------------- 
 Balance at 1 January       1,887,510            *              6,281 
 Purchase of own shares     2,200,000            *              5,398 
 Exercise of options        (274,802)          (*)                  - 
  from treasury 
                          -----------  -----------  ----------------- 
 Balance at period 
  end                       3,812,708            *             11,679 
                          ===========  ===========  ================= 
 
 

(*) Represents amount less than one thousand US$

Audited Treasury shares Note for the year ended 31 December 2016:

 
 
 
 
                             Treasury     Treasury           Treasury 
                               shares       shares     shares reserve 
                               Number      US$000s            US$000s 
                          -----------  -----------  ----------------- 
 Balance at 1 January               -            -                  - 
 Purchase of own shares     2,400,000            *              6,281 
 Exercise of options        (512,490)          (*)                  - 
  from treasury 
                          -----------  -----------  ----------------- 
 Balance at period 
  end                       1,887,510            *              6,281 
                          ===========  ===========  ================= 
 
 

(*) Represents amount less than one thousand US$

No movement was applicable for the period ended 30 June 2016.

In July 2017 the Company purchased for treasury 1,500,000 shares of the Company in total consideration of US$ 5.2 million.

12. Settlement assets and merchant processing liabilities

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

Settlement assets

The settlement assets arise from the operations of GTS which amounted to US$1.8 million (30 June 2016: nil). Settlement assets result from timing differences in the settlement process of GTS. These timing differences arise primarily as a result of settlement amounts due from financial institutions and other payment processors. These amounts are typically funded to the Group within days of the transaction processing date.

Merchant processing liabilities

The merchant processing liabilities arise from the operations of GTS which amounted to US$9.9 million (30 June 2016: nil). In addition, an equivalent transient amount relating to merchant transactions processed via GTS operations is included in cash and cash equivalents and settlement assets. In these operations no legal right exists to offset between this cash and the corresponding merchant processing liabilities.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

13. Commitments

Strategic partnership and investment commitment

In June 2017 the Group has entered into a strategic partnership and commitment to invest up to Euro 3.3 million in a banking services company offering banking transaction services.

14. Events after the reporting period

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

Independent review report

INTRODUCTION

We have been engaged by the company to review the interim financial information in the interim report for the six months ended 30 June 2017 which comprises the Consolidated statement of comprehensive income, Consolidated statement of financial position, Consolidated statement of cash flows, Consolidated statement of changes in equity and related notes.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

DIRECTORS' RESPONSIBILITIES

The interim report, including the interim financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

OUR RESPONSIBILITY

Our responsibility is to express to the company a conclusion on the interim financial information in the interim report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in the interim report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants

London

United Kingdom

12 September 2017

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR LLFFTAFILLID

(END) Dow Jones Newswires

September 12, 2017 02:00 ET (06:00 GMT)

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