5th Apr 2005 07:00
NETeller PLC05 April 2005 Neteller Plc FOR IMMEDIATE RELEASE Year end results for the period ended 31 December 2004 for NETeller plc All figures in US$ unless otherwise stated Financial Highlights For the year ended 31 December 2004 NETELLER Plc is pleased to announce that: • Average daily sign ups 1,821 (2003: 910)• Total year end members 1.25 million (2003: 0.59 million)• Revenue $82.6 million (£45.0 million) + 130% from 2003• EBITDA $48.5 million (£26.5 million)• Profit before tax $45.8 million (£ 25.0 million)• Net profit $33.0 million (£18.0 million)• EPS $0.28 (£0.15) based on total shares outstanding Gord Herman, President and CEO for NETELLER stated "Our first year results inthe public market have achieved or exceeded what we had anticipated. The growthin revenue, member sign ups and earnings are all in line with our expectations.Implementation of our strategy to proceed with geographic expansion andincreased market penetration is proceeding successfully as evidenced by ouracquisition in the Asian market and the 1.5 millionth signup milestone which wasachieved last week. Our current momentum and outlook for 2005 are very positive." The following comparisons between 2004 and 2003 are between the Group andNETELLER Inc, the predecessor company. The operations of NETELLER Inc wereacquired by the Group on 31 December 2003. Year ended 31 Year ended % change Q4 2004 Q4 2003 December 31 December 2004 2004 to 2003 unaudited 2004 2003 Q4 to Q3 Q4 to Q4 31 December Revenue 27,591,548 12,551,875 82,580,750 35,941,217 26% 120% 130% Cost of sales 8,371,069 3,763,485 25,268,536 11,746,420 26% 122% 115%Gross profit 19,220,479 8,788,390 57,312,214 24,194,797 26% 119% 137% General and Admin 4,141,282 1,705,066 9,272,925 3,831,963 95% 143% 142%Other expense (income) Management bonus 11,322,251 1,058,000 24,494,474 na Foreign exchange (1,375,622) 193,162 (1,555,014) 118,618 163% (gain) loss Depreciation and 847,354 54,506 2,717,725 102,620 31% amortisation Gain on sale of assets (6,566,761) (6,566,761) ncProfit before tax 15,607,465 2,080,166 45,818,578 2,213,883 18% nc nc Income tax expense 2,583,554 (81,456) 12,797,319 (24,134) -38% nc nc (recovery)Net Profit 13,023,911 2,161,622 33,021,259 2,238,017 46% nc ncBasic and fully diluted na na $ 0.37 na na na naearnings per share-weighted average shares outstandingEarnings per share - $ 0.11 na $ 0.28 na 46% na natotal outstandingDaily Sign ups 2,072 1,068 1,821 910 -1% 94% 100%Total Members at December 1,251,031 586,477 1,251,031 586,477 18% 113% 113%31Average Daily Receiptsfrom members $2,348,669 $ 1,142,282 $ 1,807,943 $ 797,025 21% 106% 127% Notes na not applicable - the calculation is not available for the comparative period nc not comparable - the change from the comparative period to current is driven by the change from a private to a public entity and the comparable amounts are not relevant * - $ to £ conversion are calculated using 2004 average rate of 0.5457 £ per $. Presentation There will be an analyst presentation on 5th April at 0930hrs at Citigate DeweRogerson, 3 London Wall Buildings, London Wall, EC2M 5SY Enquiries Gord Herman, Chief Executive44 (0) 1624 698 703 Dale Johnson, Executive Vice President44 (0) 1624 698 705 Eric Hughes, Chief Financial Officer001 403 769 3625 Citigate Dewe Rogerson44 (0) 207 638 9571Sarah Gestetner/Seb Hoyle/ George Cazenove CHIEF EXECUTIVE'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2004 MESSAGE TO SHAREHOLDERS It gives me great pleasure to announce our 2004 preliminary results for NETELLERPLC (NETELLER or the Company). We believe we exceeded all targets with oneexception being tax, which is now behind us. Further, we continued to executeon our mission of becoming the World's Leading Money Service System with theexpansion of our EU and Asian operations. 2004 was a year of transition whichset the solid foundation for our continued growth, and I am excited about theopportunities and fulfillment in this coming year. The ability of this Company to positively adapt to a rapidly changingenvironment, and thrive in it, has been the result of an enormous amount of workand a tribute to the entire NETELLER team. Our achievements in 2004 include the following: Corporate Relocation We re-located our corporate head office to the Isle of Man (the Island) during2004 from our original base in Calgary, Canada. This move was driven by several motivations. Firstly, global expansion (thenumber one strategy of the Company) requires us to better understand the marketswe are entering and the Isle of Man's central location provides us with goodaccess to our three primary geographic locations (North America, the EuropeanUnion and Asia). This strategic move also provides us with access to ourinvestors and a large portion of our merchant base. Second, we were attracted tothe Island's commitment to developing a centre of excellence for business ande-commerce. Third, the tax friendly jurisdiction of the Island is an attractiveattribute for Internet-based companies such as NETELLER. While the corporate taxrate for 2004 does not reflect the benefits of the lower tax regime in theIsland, we are poised to reap the rewards of this move in the 2005 fiscalperiod. Initial Public Offering (IPO) During the year, NETELLER moved into the public domain with the successfullaunch of the Company on the Alternative Investment Market (AIM) of the LondonStock Exchange on 14 April 2004. We have grown the Company from an initial market capitalization of £239,600,000to a year-end value of £409,716,000. This represents a significant return to ourinitial investors who purchased shares during the IPO. The IPO raised £30 million before costs for the Company. The principal purposesof the IPO were to create liquidity for the Company's shares, to increasecorporate visibility within the business and investor community, to attracthighly skilled employees through the granting of stock options, and to provideaccess to capital. The capital raised in the IPO will be used to financeacquisitions and growth in operations and will enable us to accelerate thedevelopment of future generations of our world-class payment platform andservices. The process of going public also brought two independent directors onto theboard of the Company as we welcomed John Webster and Don Lindsay. Both John andDon bring extensive management and board experience to our team and we continueto benefit from their contributions to the Company. Expansion of Product Offering 2004 saw several significant changes in the way we moved money via the Internet.In February 2004, we successfully launched the first phase of our globalcurrency payment platform. This initiative enabled our members and merchants toeasily and conveniently transact in three additional currencies to the U.S.Dollar: the British Pound, the Euro and the Canadian Dollar. Although the U.S.Dollar remains the predominant currency for transactions, we are pleased to seesignificant growth in the use of the European currencies. This also enablesmembers to change currencies at minimal cost as NETELLER charges bank wholesalerates plus 1.9%, a lower rate than charged by most other institutions. During the year we also introduced the Direct Accept product for our merchants.This allows our members to instantly deposit funds into the system while thereceiving merchant pays the related transaction fees. This product has proven tobe very popular and has resulted in shifting some members from no-fee EFTs(Electronic Fund Transfers) to fee generating transactions. Online payments have forever changed the way that money moves betweenindividuals and businesses. Our global currency payment platform, coupled withour continued development of innovative payment options will ensure thattransferring money online will be made easier and more cost effective forindividuals and businesses alike. FSA Authorisation We received authorisation from the United Kingdom's Financial Services Authority(FSA) for our subsidiary, NETELLER UK Limited, to operate as a regulated e-moneyissuer in October 2004. The FSA was one of the first regulators in Europe toimplement the e-Money Directive and to develop a clear interpretation of therules and regulations that apply to e-money issuers. The e-Money Directive wasconceived in order to allow a level playing field for on-line payment providersto compete with the banks and to maintain the appropriate levels of protectionfor consumers. The strong regulatory environment administered by the FSA was akey reason for NETELLER's decision to base its operations in Europe and to liston the AIM. Becoming a regulated e-money issuer qualifies NETELLER as one of only a verysmall number of firms able to legally issue e-money in the European Union. Weintend to passport this regulated status into all 25 European Union memberstates, opening previously untapped markets for the Company. This will enhanceour competitive advantage in our pursuit of full-scale penetration of theEuropean market, as unregulated companies that operate in the European Union inthis sector are likely to come under increased scrutiny by regulators. FSAauthorisation will benefit our merchants by allowing them to capitalize onemerging opportunities in crossing boundaries in their pursuit of increasedgrowth and profits. Distributed Architecture We successfully launched new processing and data management systems in the Isleof Man in the fourth quarter of 2004, dubbed Distributed Architecture. This wasa major achievement by our IT team and the culmination of 12 months of carefulplanning and scheduling. The implementation of Distributed Architecture completed the requirements tochange to a reduced effective corporate tax rate from a historical level of 33%to an anticipated rate of 10% in 2005, resulting in improved profitability andcash flow. The Company's principal subsidiary companies, NT Services Ltd. inCanada and FSA-regulated NETELLER (UK) Limited in London, England, will continueto be subject to local tax rates. Growth NETELLER enjoyed spectacular growth during 2004. Our member base increased 113%,from 586,477 to 1,251,031 in the 12 months, the greatest year-over-year membergrowth the Company has experienced. As a result, our average daily receipts frommembers grew 109%, from $1.1 million in Q4 2003 to $2.3 million in Q4 2004. Average daily sign ups for 2004 was 1,821, commencing at 1,634 per day in Q1 andgrowing to 2,072 in Q4. This rapid growth saw the Company add its 1,000,000thmember on 6 September 2004, just five years after operations commenced. Ouroutstanding ability to add new members with minimal cost continues to drivegrowth in our revenue while our margins stay constant. Growth in our member base was driven by three key factors. Firstly, ourcontinued development and implementation of products and services offer ourmembers and merchants clear and compelling value propositions. Secondly, theCompany's key served market is expanding quickly. Thirdly, we have leveragedstrong relationships with our global merchant base to attract new members. Asian Expansion We were pleased to announce the strategic acquisition of Quick AccessInternational Company Limited, a Macau-based debit card payment processor, on 3March 2005. The acquisition is the first of several initiatives in the Company'splanned launch into Asia. While the acquisition was completed in early 2005, itis the result of almost one year of extensive due diligence on the region andthe company. Quick Access' established customer base, business relationships,payment platform and positive bottom line were key factors in evaluating theopportunity. This acquisition expands our geographical footprint, builds globalbrand presence and enables us to continue as a preferred service provider to ourmerchants that are developing services in China. Quick Access will provide ourmerchants robust access to the Chinese payment network, a service currentlyunmatched by our competitors. Employee Growth Fuelled by explosive market demand and a commitment to offering our members andmerchants exceptional service, our employee base doubled to over 320 in 2004.Through this growth we added a diverse range of new departments includingCustomer Help, Quality Assurance, Investigations, Marketing and Human Resources,and added significantly to our existing Customer Service, Security and ITdepartments. With NETELLER's emergence as the industry leading platform for online paymentsin the gaming industry, we remain committed to providing exceptional productsand services as a competitive advantage. For this reason, we continue to investheavily in the development of our next generation payments platform, products,employee hiring and training. Additionally, we continue to focus on forginglong-term relationships with our merchants and members. Neteller has attracted a high quality team with in-depth industry and technicalexperience. This team will build upon the value propositions we offer ourmerchants and members through improved market analysis, customer help, qualityassurance in IT and customer service, fraud prevention, identity verification,and anti-money laundering processes. In an ever-increasing knowledge andcreativity-based global economy, the skills and experience of our team iscrucial to our continued success. Regulatory environment As a Company operating within a relatively new industry, the legislativeenvironment in different parts of our operational area is subject to possiblechange. The company monitors the legislative environment in all significantcountries to manage the risks and rewards posed to operations by changes tolegislation. Awards We were delighted in October 2004 when our call centre in Calgary won the CAM-XCall Centre Award of Distinction in recognition of achieving consistently highstandards in customer service. The call centre is staffed 24/7 with multilingualstaff to handle questions and give quality care to our members around the world.This award is determined by an extensive evaluation process of anonymousevaluators calling into our system to test our staff's knowledge, attitude andspeed of answer. Maintaining a high level of customer service is a key strategiccompetitive advantage. Finally, NETELLER was nominated for the IPO of the year by the Listed Companiesof the AIM exchange on the London Stock Exchange. The size of the offering andsuccess of the stock price subsequent to issue were key factors in thenomination. * * * The past year has proven our ability to successfully execute on our goals,objectives, commitments and plan. We are steadily assembling a solid foundationin support of our primary objective of becoming the global leader in providingonline payment services. We are energized by the momentum of our business and encouraged by the array ofnew opportunities that we see before us. We are confident that the combinationof our team, knowledge, partnerships, customers and strategic plan that willenable us to execute successfully on our end vision of becoming the World'sLeading Money Transfer System. FINANCIAL REVIEW The completion of 2004 has brought to conclusion a very successful year forNETELLER. The Company has continued to grow operations and profitability in allsignificant areas of the income statement. Sales for 2004 are $82.6 million which are up 130% from 2003. Fee revenue fromtransactions for the year totaled $80 million. These fees are reflecting anincreased member base resulting in more funds coming into the Company on a dailybasis. The fee revenue per member dollar receipted into the Company has improved from$0.123 to $0.125 from 2003 to 2004. The Q4 revenue per member dollar receiptedhas improved to $0.128 from $0.119 for the corresponding period in 2003. Revenue in Q4 of 2004 is $27.6 million, up 26% from Q3 in 2004. Althoughsignups were static from Q3 to Q4 due to normal seasonal factors, the existingmembership base of over 1 million drove revenue higher during the quarter. The fees earned per dollar coming into the system have improved due to severalfactors. NETELLER introduced Direct Accept during the year whereby merchantspay a reduced Instacash rate in place of the members paying. This has resultedin members switching from free but delayed forms of funding accounts to instantmethods. The introduction of multiple currencies has improved our revenueposition as we earn fees each time a member converts to a different currency.During Q4, this new revenue source has resulted in an additional $0.005 perdollar into the Company. Included in the $82.6 million for the year is $1.8 million of interest revenuefrom funds invested. The funds are from the IPO, the profits from operations andinvested trust funds. The invested trust funds pertain to amounts owing tomembers and merchants. Direct Costs The Company kept direct costs in line with sales through the year atapproximately 31% of sales. The main components of direct costs are customer services and bad debts. Customer service is predominantly composed of the call centre and support staffin the Canadian subsidiary. Staff levels at the call centre have risen in linewith revenue from 55 staff at the beginning of the year to 187 at year end. Theservices provided by the call centre include customer support, fraud andsecurity, account retention and investigations. The account retention andinvestigations departments are new in 2004 and have resulted in improvedretention rates and a slight improvement in bad debts. Bad debts remain the largest direct cost of the Company. The costs areprimarily caused by insufficient funds in bank accounts when members useInstacash to fund their accounts. The increase in the percentage of fundscoming into the system using Instacash could have resulted in an increased levelof bad debts. The Company has, however, increased preventative controls onmember accounts to keep this expense at similar levels to the prior year. General and administration (G &A) General and administrative expenses were up significantly in Q4 of 2004 due toseveral factors. The Company recorded share option expenses in Q4 of 2004 of $0.4 million as theshare option program was finalized in October. The share option expenses are afactor of the number of options granted, the share volatility, the risk freeinterest rate and other factors. In future years the share option expenses arelikely to increase as the number of options issued will increase. Year-end accruals for professional fees accounted for $0.6 million pertaining toour year-end obligations as a public company. Also in Q4 2004, the Company expensed through G & A approximately $0.3 millionof Goods and Services Tax receivable which was determined to be uncollectible. During 2004, NETELLER has added in-house legal, human resources, quality andassurance testing, facilities management, internal audit and in-house trainingdepartments. In addition, the system support, accounting and reporting, andprocessing areas all required significant staff additions to keep pace with thegrowth of the Company. Foreign exchange gain NETELLER has expanded beyond a single currency Company in 2004 which has givenrise to foreign currency exposure. The Company initially raised £30 millionduring the IPO which was converted into US dollars for a $1 million gain onforeign exchange. During the remainder of 2004, and especially in Q4, the US$exchange rate fell against other currencies resulting in further gains as theCompany holds currencies other than the US$. Also in Q4 of 2004, the Company entered into several forward contracts for thepurchase of Canadian dollars in 2005. These contracts are to ensure that theactual exchange rate experienced by the Company has some protection againstfurther US$ devaluation. As required under International Financial ReportingStandards, the Company is required to revalue these contracts at 31 December2004 which resulted in a further $0.1 million gain. Depreciation and amortisation Depreciation and amortisation of $2.7 million includes the amortisation of theinitial intangible assets of $2.2 million plus an additional $0.5 millionprimarily from assets added during the year. Taxes The tax rate experienced by the Company fell from 33% to 17% in Q4 as theCompany continued to move operations to the Isle of Man. The completion of themove to the Isle of Man will ensure that the expected tax rate moves toapproximately 10% for 2005. Balance sheet Cash and cash equivalents balances at 31 December 2004 are the unrestricted cashof the Company at that date. Prior to 31 December 2004, the Company hadincluded in cash all amounts including that which pertained to member andmerchant balances. In Q3 of 2004, the Company opened trust accounts with itsprincipal bankers in the Isle of Man and gave legal right of offset betweenthese trust accounts and the Company's member and merchant balances. The effectof this is to net the cash and member and merchant liabilities presented on thebalance sheet and disclose these amounts in the notes to the financialstatements. Restricted cash is the surplus amount of cash held in the trust accounts inexcess of the member and merchant balances. The Company, as a matter of policy,holds small amounts of excess cash in the accounts to ensure intraday balancemovements do not result in a shortfall in the cash position. The net excess isdisclosed as a corporate asset. Prepaid expenses primarily include deposits made on foreign exchange contractsin place at year end. Due from members has increased to $1.6 million of estimated recoverablebalances. This is in line with the increased level of business. Capital assets have increased from an opening balance of $1 million to $5.7million. The assets purchased include land and building in Canada, buildingimprovements and furniture to accommodate the increased staffing levels. As theCompany member base has increased, the hardware, software and databaserequirements have also increased requiring a significant upgrade of the assetbase. The Company has an efficient rate of employment of capital assets as theafter tax net profits are 5.3 times total capital assets employed in theCompany. Intellectual property has been amortised over its useful life of 3 years during2004 as planned. Due to members and merchants have been removed from the face of the balancesheet and disclosed in the notes to the financial statements due to the legalright of offset as discussed under restricted cash. Share capital has increased from the nominal $1 at 1 January 2004 primarily dueto the IPO share proceeds of £30 million ($46 million net of share issue costs).The Company has also set up an equity reserve of $0.4 million for the totalamount of share based compensation expenses. Earnings per share (EPS) The EPS based on the issued and outstanding ordinary shares of 119,800,000 forthe year ended 31 December 2004 is $0.28. The EPS based on weighted averageshares outstanding of 89,636,165 is $0.37. The weighted average sharesoutstanding of 89 million is significantly impacted by the 120 million sharesissued in April 2004. GORD HERMANChief Executive Officer 5 April 2005 CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2004 & AS OF 31 DECEMBER 2003 31 December 2004 31 December 2003 US$ US$ASSETSCURRENTCash and cash equivalents (Note 2) 76,969,314 31,030,455Restricted cash (Note 3) 1,783,787 -Receivable from members (Note 4) 1,655,000 565,000Trade and other receivables 32,499 54,045Prepaid expenses and deposits 837,810 85,705Receivable from NETELLER Inc. - 17,081,598Funds held in trust - 6,500,000 81,278,410 55,316,803NON-CURRENT ASSETSCapital assets (Note 5) 5,714,265 1,000,000Intangible assets 4,850,810 6,500,000Portfolio investment, at cost 75,000 25,000 91,918,485 62,841,803 LIABILITIESCURRENTTrade and other payables 2,616,196 -Payable to members and merchants - 48,868,070Income taxes payable 9,209,356 -Notes payable to NETELLER Inc. - 7,473,633Due to shareholders - 6,500,099 11,825,552 62,841,802SHAREHOLDERS' EQUITYShare capital 39,708 1Share premium 46,651,224 -Equity reserve on share option issuance 380,742 -Accumulated profits 33,021,259 - 80,092,933 1 91,918,485 62,841,803 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 US$ Revenue (Note 6) 82,580,750Cost of salesCustomer support 7,011,251Website maintenance 2,618,791Deposit and withdrawal fees 3,894,126Bad debts 11,744,368Gross profit 57,312,214 Operating expenses/(income)General and administrative 9,272,925Management bonus 1,058,000Foreign exchange gain (1,555,014)Depreciation and amortisation 2,717,725Profit before tax 45,818,578 Income tax expense (Note 7) 12,797,319 Net profit for the year 33,021,259 Basic and diluted earnings per share (Note 8) $0.37 Comparative figures for the Consolidated Income Statement are not presented asthe Company was incorporated on 31 October 2003 and had no income or expenses and made neither profit or a loss in the two month period from the date of incorporation until 31 December 2003; accordingly no income statement is presented for this period. CONSOLIDATED STATEMENT OF CASH FLOWS Two month Year ended period ended 31 December 2004 31 December 2003 US$ US$OPERATING ACTIVITIESProfit before tax 45,818,578 Adjustments for:Depreciation and amortisation 2,717,725Unrealised foreign exchange loss 34,650Loss on sale of capital assets 3,755Share option expense 380,742Operating cash flows before movements in working capital 48,955,450 Increase in receivable from members (1,174,242)Decrease in trade and other receivables 21,546Increase in prepaid expenses and deposits (618,767)Increase in trade and other payables 2,250,257Cash generated by operations 49,434,244 Income tax paid (3,587,963) Net cash from operating activities 45,846,281 INVESTING ACTIVITIESDecrease in payable to members and merchantsDue to legal offset from investment in Trust accounts (Note 5) (48,868,070)Purchase of capital and intangible assets (5,830,709)Proceeds on sale of capital assets 44,154Purchase of portfolio investment (50,000)Restricted cash accounts (1,783,787) Net cash used in the investing activities (56,488,412) FINANCING ACTIVITIESProceeds on issuance of shares, net of share issuance costs 46,690,931 1Receipt of receivable from NETELLER Inc. 17,081,598Receipt of funds held in trust 6,500,000Repayment of amounts due to shareholders (6,500,099)Repayment of notes payable to NETELLER Inc. (7,473,633) Net cash generated from financing activities 56,298,797 1 INCREASE IN CASH AND CASH EQUIVALENTSDURING THE PERIOD 45,656,666 1 CASH AND CASH EQUIVALENTS ACQUIREDON PURCHASE OF BUSINESS 31,030,454 NET EFFECT OF FOREIGN EXCHANGE ONCASH AND CASH EQUIVALENTS 282,193 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31,030,455 CASH AND CASH EQUIVALENTS, END OF PERIOD 76,969,314 31,030,455 FOR THE YEAR ENDED 31 DECEMBER 2004 & THE TWO MONTH PERIOD ENDED 31 DECEMBER 2003 SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 1. STATUS OF FINANCIAL INFORMATION The financial information set out in this press release does not constitute the Company's statutory accounts for the year ended 31 December 2004 or the two month period from 31 October 2003 to 31 December 2003. The financial information for the period ended 31 December 2003 is derived from the statutory accounts for that period. The auditors reported on those accounts and their report was unqualified. The statutory accounts for the year ended 31 December 2004 will be finalized on the basis of the financial information presented by the directors in this annual press release. The financial information set out in this press release for the year ended 31 December 2004 has been prepared using the same accounting policies as those adopted in the statutory accounts for the two month period ended 31 December 2003. 2. CASH AND CASH EQUIVALENTS Cash and cash equivalents include: As at As at 31 December 2004 31 December 2003 US$ US$ Barclays Global Investors Liquidity Fund 17,499,361 19,033,888 Cash balances 50,913,460 11,996,567 Cash balances held by related parties 8,556,493 76,969,314 31,030,455 3. RESTRICTED CASH The Company holds trust accounts with its principal banker which are segregated from operating funds. Balances in the trust accounts are maintained at a sufficient level to fully offset amounts owing to NETELLER merchants and members. There exists a legal right of offset between the balances owing to the members and merchants and the cash balances segregated in the trust accounts. As such only the net balance of surplus cash is disclosed on the balance sheet as Restricted Cash. The trust account arrangement had not been implemented at 31 December 2003 and hence no legal right of offset existed at that date. The consolidated statement of cash flows reflects the effect of the implementation of the trust arrangements during the year ended 31 December 2004. At 31 December 2004, the Company has the following balances: Trust Account Funds Balance Owing Restricted Cash US$ US$ US$ Members 56,309,576 55,831,314 478,262 Merchants 53,137,533 51,832,008 1,305,525 109,447,109 107,663,322 1,783,787 4. RECEIVABLE FROM MEMBERS As at As at 31 December 31 December 2004 2003 US$ US$ Receivable from members 9,655,942 2,149,642 Provision for doubtful accounts (8,000,942) (1,584,642) 1,655,000 565,000 Receivable from members consist of member accounts that are due from members and are in the process of collection. The net receivable from members represents the accounts which are expected to be collected through the normal course of business. 5. CAPITAL ASSETS Furniture Communication and Computer Computer Building and Equipment Equipment Equipment Software Improvements Land Total US$ US$ US$ US$ US$ US$ US$ Cost As at 31 December 352,500 54,200 125,000 23,000 445,300 1,000,000 2003 Additions 86,500 250,754 1,723,494 733,864 1,525,939 936,396 5,256,947 Disposals (47,909) (49,099) (97,008) As at 31 December 439,000 257,045 1,848,494 707,765 1,971,239 936,396 6,159,939 2004 Accumulated Depreciation As at 31 December 2003 Charge for the Year 101,032 25,045 137,025 158,793 72,878 494,773 Disposals (49,099) (49,099) As at 31 December 101,032 25,045 137,025 109,694 72,878 445,674 2004 Net book value As at 31 December 337,968 232,000 1,711,469 598,071 1,898,361 936,396 5,714,265 2004 Net book value As at 31 December 352,500 54,200 125,000 23,000 445,300 1,000,000 2003 SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2004 6. REVENUE An analysis of the Group's revenue is as follows: Year Ended 2004 US$ Transaction fees 80,714,613 Investment Income 1,866,137 Total revenue 82,580,750 7. TAX The Company is incorporated in the Isle of Man and has received an exemption under the provisions of Income Tax (Exempt Companies) Act 1984 and accordingly pays no company income tax in the Isle of Man. Year Ended 2004 US$ Current Tax IOM corporation tax - Foreign Tax Foreign tax on profits 8,051,940 Foreign withholding taxes on royalties 4,745,379 Total foreign tax 12,797,319 Corporation Tax is calculated at 0 per cent (2003: 0 per cent) of the estimated assessable profit in the Isle Of Man for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The charge for the year can be reconciled to the profit per the income statement as follows: Year Ended 2004 US$ Profit before tax 45,818,578 Tax at the IOM income tax rate of 0% - Effect of different tax rates of subsidiaries operating in other jurisdictions 12,797,319 Income tax expense and effective tax rate for the year 12,797,319 At 31 December 2004, foreign taxes of $9,209,356 are outstanding. 8. EARNING PER SHARE From continuing operations The calculation of the basic and diluted earnings per share is based on the following data: Year Ended 2004 US$ Earnings Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity share holders of the parent 33,021,259 Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share 89,636,165 Effect of dilutive potential ordinary shares due to employee share options 228,849 Weighted average number of ordinary shares for the purpose of diluted earnings per share 89,865,014 Basic earnings per share $0.37 Fully diluted earnings per share $0.37 ADDITIONAL INFORMATION FOR THE TWELVE MONTH PERIOD ENDED 31 DECEMBER 2003 The ADDITIONAL INFORMATION on the following page has been prepared from theaccounting records of NETELLER Inc. for the year ended 31 December 2003. Whileit does not form part of the financial statements for the year ended 31December 2004 it should be read in conjunction with them as it provides a basisof comparison between the operational activity of the enterprise from year toyear. The Additional Information has not been subject to an independent audit. INCOME STATEMENT FOR THE TWELVE MONTH PERIOD ENDED 31 DECEMBER 2003 US$ Revenue 35,941,217 Cost of sales 11,746,420 Gross profit 24,194,797 Operating expenses General and administrative 3,831,963 Management bonus 24,494,474 Foreign Exchange 118,618 Depreciation and amortisation 102,620 (Gain) on sale of assets (6,566,761) Profit before tax 2,213,883 (Recovery of) Income tax (24,134) Net profit for the period 2,238,017 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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