Final Results

SafeCharge International Group Limited

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

Results for the year ended 31 December 2017

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

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

Financial and operational summary

Financial highlights

Operational highlights

David Avgi, CEO of SafeCharge, said:

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

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

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

Current trading

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

Outlook

The Directors look forward with confidence to 2018 and beyond.

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

Analyst presentation

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

- Ends -

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

2 Cash flows from operations before working capital adjustments and tax

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

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

For more information

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

Forward looking statements

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

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

About SafeCharge

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

www.safecharge.com

Chairman's statement

Introduction

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

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

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

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

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

Dividend

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

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

Roger Withers

Chairman

14 March 2018

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

Chief Executive Officer's review

Introduction

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

Strategy

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

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

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

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

Customers

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

Partnerships

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

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

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

Infrastructure and technology

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

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

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

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

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

People

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

Financial performance in 2017

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

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

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

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

SafeCharge Acquiring

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

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

Looking to the future

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

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:

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

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

Outlook

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

David Avgi

Chief Executive Officer

14 March 2018

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

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

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

Financial review

Highlights

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

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

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

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

Revenues

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

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 most significant being Israeli shekels accounting for approximately 34% of operating costs).

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

Margins

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

Expenses

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

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

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

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

Tax

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

Payments working capital items 

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

Cash flow

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

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

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

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

Financial position

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

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

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

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

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

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

Dividend

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

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

Tsach Einav

Chief Financial Officer

14 March 2018

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

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

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2017

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2017

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2017

(*) represents amount less than 1 thousand US$

CONSOLIDATED STATEMENT OF CASH FLOWS 

Year ended 31 December 2017

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year ended 31 December 2017

1. General information

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

2. Accounting policies

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

Basis of preparation

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

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

Adoption of new and revised IFRSs 

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

(i) Standards and Interpretations adopted by the EU

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

(ii) Standards and Interpretations not yet effective

New standards

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

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

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

2. Identify the performance obligations in the contract.

3. Determine the transaction price.

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

5. Recognise revenue as each performance obligation is satisfied.

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

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

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

Basis of consolidation

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

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

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

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

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition‑date fair values of the assets transferred by the Group, liabilities incurred by the Group and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition‑related costs are generally recognised in the statement of comprehensive income as incurred.

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

· Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

· Liabilities or equity instruments related to share‑based payment arrangements of the acquiree or share‑based payment arrangements of the Group entered into to replace share‑based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share‑based Payment at the acquisition date; and

· Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non‑current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non‑controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition‑date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition‑date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non‑controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in the statement of comprehensive income as a bargain purchase gain.

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

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

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

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

Goodwill 

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

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

Revenue recognition

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

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

Finance income and finance expense

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

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

Foreign currency

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

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non‑monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non‑monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

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

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

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

Tax

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

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

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

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

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

Dividends

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

Property, plant and equipment

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

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

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

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

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

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

Intangible assets

Internally‑generated intangible assets ‑ research and development expenditure 

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

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

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

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

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

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

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of comprehensive income when the asset is derecognised.

Externally acquired intangible assets

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

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

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of comprehensive income when the asset is derecognised.

Amortisation

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

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

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

Financial instruments 

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

Financial assets

(1) Classification

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

· Loans and receivables

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

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

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

 (2) Recognition and measurement

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

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

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

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

Cash and cash equivalents

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

Trade receivables

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

Loans granted

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

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

Financial liabilities

The Group has financial liabilities in the following category:

· Trade payables

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

· Contingent consideration

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

Derecognition of financial assets and liabilities

Financial assets

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

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

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

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

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

Financial liabilities

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

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

Impairment of non-financial assets

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

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

Share capital

Ordinary shares are classified as equity.

Treasury shares

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

Provisions

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

Share‑based compensation

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

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

Clients' deposits

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

Administrative expenses

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

Other expenses

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

Operating leases

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

3. Financial risk management

Financial risk factors

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

3.1 Market risk

Interest rate risk

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

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

Currency risk

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

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

Sensitivity analysis

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

3.2 Credit risk

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

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

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

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

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

3.3 Liquidity risk

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

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

3.4 Operational risk

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

3.5 Compliance risk

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

3.6 Capital risk management

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

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

4. Critical accounting estimates and judgments

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

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

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

· Impairment of goodwill and other intangible assets

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

· Valuation of available for sale investments

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

5. Segmental analysis

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

Geographical analysis of revenue

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

Geographical analysis of non-current assets

6. Auditors' remuneration

7. Finance income and expense

8. Tax Expense

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

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

9. Earnings per share

10. Dividends

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

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

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

11. Property, plant and equipment

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

Goodwill is measured at cost less any accumulated impairment losses.

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

Impairment tests of intangible assets

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

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

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

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

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

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

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

13. Subsidiaries

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