Final Results

SafeCharge International Group Limited

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

Results for the year ended 31 December 2016

Strong financial performance, platform development and focus on high quality customers sets foundations for stronger future growth

SafeCharge (AIM: SCH), a leader in advanced payment technologies, is pleased to announce its results for the year ended 31 December 2016.

Overview and current trading

Following a successful year to 31 December 2016 and building on the strong trading and operational momentum achieved in Q4, the Group has made a good start to 2017. Transaction volumes continue to grow in our core payment processing and acquiring platform and the Group has a strong sales pipeline. The company continues to generate significant free cash flow, which is being returned to shareholders through the company's dividend. The Directors look forward with confidence to 2017 and beyond.

The Board is issuing guidance for 2017 with revenues expected to be in the range of US$115m to US$118m, and Adjusted EBITDA between US$36m and US$38m. This will be driven by continued growth from our existing client base and over $1bn in annualised processing volumes from new clients due to start processing in 2017.

Financial highlights

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

** Results stated on a constant currency basis, a non-IFRS measure, are calculated by applying the average exchange rate of the comparable period in the prior year to current period local currency results. 

Operational highlights

David Avgi, CEO of SafeCharge, said:

"I am pleased to report a good set of results. It has been another year of strong performance in the core business and the Company has made positive steps with the implementation of its organic growth strategy. We continue to invest in our payment and risk platform to support future growth and are delighted that our customers recognise the benefits that SafeCharge's payments solutions bring to them.

"The Group is confident that its focus on delivering high quality revenue combined with a substantial pipeline of new business will yield further revenue growth in 2017 and build stronger profitable momentum in 2018."

- Ends -

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

For more information

About SafeCharge

SafeCharge is a global provider of technology-based multichannel payments services and risk management solutions for demanding businesses. The Group has a diversified, blue chip client base and is a trusted payment partner for customers from several e-commerce verticals. SafeCharge has been Payment Card Industry Data Security Standard ("PCI-DSS") Level 1 certified since 2007 and is listed on the London Stock Exchange AIM market (AIM: SCH). The Company's wholly owned subsidiary, SafeCharge Limited, is an authorised Electronic Money Institution regulated by the Central Bank of Cyprus and a principal member of MasterCard Europe and VISA Europe. The Group has operations in the UK, Guernsey, Cyprus, Bulgaria, Israel, Austria, Singapore and Hong Kong.

www.safecharge.com

Chairman's statement

Introduction

It gives me great pleasure to report that 2016 was a further period of strong financial performance and development for the Group. Revenues grew 4% to US$104.1 million and Adjusted EBITDA* increased by 7% to US$33.3 million with the Group continuing to generate significant free cash flows from its operations.

These results are all the more pleasing given the progress management has made with reshaping the Group's customer base; diversifying the business into new sectors and geographic markets; and making our first moves into card-present and land-based payments acquiring. This has also been a year in which we focused on building quality across our business and attracting new and experienced staff who are already helping us to implement our strategy.

SafeCharge's impressive performance was primarily driven by its core business, which benefitted from approximately US$7.7 million of revenues generated from new customer wins. Core revenues (excluding 2015 acquisitions) grew by 11% on a constant currency basis, despite forgoing business as part of our strategy to reshape the Group's customer base.

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

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

Board and governance

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

In October, we announced the strengthening of the Board with the appointments of Jeremy Nicholds and Robert Caplehorn as non-executive directors. Both Jeremy and Robert bring with them considerable experience from within the payments industry where they have held senior roles within multinational organisations.

Staff

On behalf of the Board, I would like to say a special thanks to our staff, all of whom who have made a substantial contribution to our achievements throughout the year and to welcome the new colleagues who joined in 2016, who are already making a big contribution to the development of our business.

Dividends

The Company's stated dividend policy is to pay-out at least 50% of Adjusted EBITDA. Given the Group's strong underlying growth in earnings and cash generation, the Board has recommended a final dividend of 9.47 US$ cents per share, giving a total dividend of 16.47 US$ cents per share for the year (2015: 11.30 US$ cents), representing 75% of Adjusted EBITDA* for the period.

The dividend will be paid in sterling and therefore it will be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.2396, being the rate at 4.30 pm on 20 March 2017. As a result, those shareholders entitled to the dividend will receive 7.64 pence per share. Subject to shareholder approval at the annual general meeting, to be held on 19 May 2017, the final dividend will become payable on 23 May 2017 to those shareholders on the Company's register as at the record date of 5 May 2017. The ex-dividend date is 4 May 2017.

Roger Withers

Chairman

21 March 2017

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

Chief Executive's review

Introduction

We continued to make significant progress and achieve financial and operational success across the Group in 2016. Of particular note was the success and growth of SafeCharge Acquiring and our entry into the "card present" vertical. Across all our activities we continued to invest in our products and services, focusing on improved quality across all areas of our business.

Strategy

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

In late 2015 the Directors began a programme to reshape and improve the quality of the Group's customer base. This programme continued to be implemented throughout 2016 and included a planned reduction in exposure to certain sectors and verticals. The changes were made in anticipation of evolving regulatory, commercial and customer requirements. As a result of our work, we have improved the mix of high quality, low risk customers across a diverse range of industries.

In 2016, the Group also made substantial progress in its strategy to enter new sectors and geographies. A notable achievement was the entry into the "card present" environment, through our partnership with Nayax, a market leader in unattended contactless industry. Nayax's point of sale devices are installed in over 50,000 machines across Europe for which we have developed an integrated payments processing and acquiring solution. The Nayax solution has not just led to substantial transaction volumes being processed through our networks: it holds added significance as our first integration of off-line payments into our online environment and serves as an important case study. As such, it is pleasing to be able to report that it is attracting a great deal of interest from our customers. Other achievements included the on-going global roll-out of the Group's first airline customer in the travel vertical and the launch of new customers in Romania, Italy and Portugal.

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

Focus on quality

Throughout 2016, we focused on building quality across all areas within the Group, including:

i. Customers

The Group took active steps to reduce its exposure to certain sectors and verticals, where management felt the regulatory and commercial environments were likely to deteriorate. Although this necessitated the forgoing of over US$5 million revenues and associated profits, the Board felt this was in the best long term interest of the Company. Alongside this, the quality of revenues was enhanced from further Tier 1 client launches such as Sisal.it, the online gaming platform of Italian gaming operator Sisal, Israeli national airline, EL AL, SunBingo and Paddy Power Betfair, one of the world's leading sports betting groups.

ii. Infrastructure and technology

The Group continues to invest in its infrastructure and further develop its core processing technologies. In 2016 a new data centre was deployed in the Netherlands adding new capacity and redundancy into the payments platform. Our highly scalable payments platform is capable of handling rapidly increasing transaction volumes and offers our customers a best-in-class technology with a comprehensive product suite. 

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

PAY.com received further investment during 2016 and in order to more effectively integrate it into the Group, it has now been merged into our core operation, resulting in the closure of the Dublin office. The move resulted in a lower cost base and a product that is more aligned to our customer offering. Over $3 million of non core, unprofitable revenue was closed down. The Board is optimistic for the future of PAY.com as a complementary product that can be offered to a range of customers.

The Group recently opened an office in Singapore and a satellite office in Hong Kong with a further satellite office planned for the United States during 2017. These will be small regional offices focused on sales and marketing to significant local clients. We have much to offer a range of high-transaction businesses in the Asian and US markets and establishing new offices in these geographies demonstrates our commitment to these important markets. Our intention is to grow these offices as the Group wins new clients in these regions.

iii. People

Our staff are at the heart of the Group's success and we are proud of the expertise and professionalism of our teams. In 2016 the Group successfully recruited a number of talented senior managers from well-established businesses in the payments sector. Additions included senior personnel in sales; account management; and risk and compliance. These new team members are already helping the Group win and manage sustainable, high quality business in both existing and target verticals and geographies.

Investments in risk and compliance expertise will help the Group to manage, (and stay ahead of) the increasingly complex global regulatory and risk environment. The Group ended the year with 344 employees with over 50% in R&D and technology and 15% in risk and compliance.

Robert Caplehorn and Jeremy Nicholds, two veterans of the payments industry, joined during the Board this year, having worked for PayPal and Visa Europe respectively. The net addition of one new non-executive Board member brings the Group into compliance with the UK Corporate Governance Code on composition of the Board.

Financial performance in 2016

Transaction volumes grew by 17%, reaching US$8.1 billion for the full year (2015: US$6.9 billion). This growth in volumes was driven by the growth of existing clients and supplemented by the launch of new high volume customers.

Total Group revenues for the year ended 31 December 2016 increased 4.3% to US$104.1 million (2015: US$99.8 million). This was despite the closure of non-profitable card services business lines and a managed reduction of certain activities, which had a combined impact on revenues of over $8 million. The strength of the US dollar also served to dampen revenues when translated into the Group's reporting currency. Given these three factors, the Board was pleased with the reported outcome for the year.

Underlying gross profit margins improved slightly to 58.3% (2015: 57.8%) while Adjusted EBITDA margins strengthened to 32% (2015: 31.2%) for the full year, benefiting from the cost reduction initiatives including the restructuring of PAY.com. Cash generated from operating activities remained strong in 2016 at 80% of Adjusted EBITDA.

Core processing business performance

I am pleased to report that despite the steps taken to reduce exposure to certain sectors (and the effect of currency headwinds) the Group's core revenues grew 11% on a constant currency basis to US$101.5 million (2015: US$91.5 million) primarily driven by a number of new Tier 1 customers who launched in the period. Adjusted EBITDA on a constant currency basis grew to US$35.3 million (2015: U$31.1 million), up 13.5%.

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

In order to speed up the on-boarding process for new clients, the Group has implemented an automated on-boarding process and developer's portal. This enables merchants to upload their account take-on and know-your-customer documents into our systems. The process is faster due to its automated nature and highlights which documents or processes still remain to be completed, giving the merchant complete visibility on where they are in the process.

Other value-added products include Payment Card Industry Data Security Standard (PCI DSS Level 1) de-scoping and fraud management. Every business or merchant that accepts payment via debit or credit card has a contractual obligation with its acquiring bank (or acquirer) to be PCI DSS compliant. SafeCharge reduces the time and financial cost of compliance to its clients by assuming responsibility for the handling and storage of the card data. SafeCharge's PCI solution supports full tokenisation, increasing the security of client details stored in the system. Additionally, our fraud management tool is becoming widely adopted by customers. Using a deep historical transaction dataset our fraud management tool conducts over 150 checks on each transaction before it is processed. The system is designed to manage and keep chargebacks below industry tolerance levels and the decision to proceed with the payment is made expeditiously, ensuring abandoned transactions are minimised.

The Group continues to expand the array of payment methods it accepts with over 100 Alternative Payment Methods (APMs) integrated alongside the traditional credit and debit card formats. Notable additions in 2016 include ApplePay, AndroidPay and, in China, China Union Pay, Alipay and WeChat Pay, which have high usage on Asian e-commerce sites. Expansion into Asia will be facilitated by our new offices in Singapore and Hong Kong.

SafeCharge Acquiring

SafeCharge Acquiring continued its strong growth trajectory throughout 2016, with own acquiring volumes for the year totalled US$970 million (2015: US$191 million) closing the year with a run-rate in excess of US$1.2 billion. Importantly, the approval ratios achieved were high and competitive against those of more established competitors. Acquiring also enables SafeCharge to provide benefits such as rapid on-boarding for new customers and remains a key focus for the Group.

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

Looking to the future

The Group has a robust and scalable platform that can accommodate transaction volumes over 20 times greater than currently processed. Management remains committed to roll-out its technology-based solutions to new markets and, as such, has a number of priorities for 2017 and beyond:

Regulation

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

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

Outlook

The Group is confident that its focus on higher quality earnings from its healthy pipeline will yield revenue growth in 2017 and build even stronger profitable momentum in 2018 and beyond.

David Avgi

Chief Executive

21 March 2017

Financial review

Highlights

Group revenues in the period increased to US$104.1 million (2015: US$99.8 million) with Adjusted EBITDA* reaching US$33.3 million (2015: US$31.1 million). This growth was achieved despite the closure of non-profitable businesses acquired in the previous year; the steps taken to reduce exposure to certain sectors and markets; and the impact of foreign currency headwinds.

The conversion of Adjusted EBITDA* to cash remained strong, with cash flows from operations (before working capital and tax paid) of US$30.8 million (2015: US$27.3 million) up 12.8%. Profit after tax for the period increased to US$26.6 million (2015: US$22.9 million) up 16.2%.

During the period the Group paid US$21.9 million in dividends, acquired US$6.3million of its own shares which are held in treasury and invested US$5 million in capitalised development costs. The Group ended the financial year with US$115.4 million (2015: US$114.9 million) of cash and cash equivalents, US$8.5million in available-for-sale assets (2015: US$18.6 million). The Group additionally remained debt free during the period.

Revenues

Revenues increased across the Group's principal business lines during the year, reaching record levels in the fourth quarter. In the Group's core business revenues increased by 8% reaching US$98.7 million (2015: US$91.5 million) in the period. This performance was achieved despite the steps taken to reduce exposure to certain sectors and markets. The Directors estimate that these steps reduced the revenues that would otherwise have been achieved by Group by more than US$5 million in 2016. New clients who began processing payments through the Group's systems amounted to US$7.7 million during 2016.

In line with management's strategy, the quality and diversification of the Group's client revenues improved during the year. Alongside significant Tier 1 new customer wins, the Directors focused on actively reshaping the Group's customer base, diversifying into new sectors and geographic markets; and making its first moves into card-present and land-based payments acquiring.

Foreign currency exposure and impact

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

The Group generates revenues in multiple currencies, the most significant being the US dollar, euro and sterling, accounting for approximately 65% of income in the year with the balance of revenues generated in a wide range of other currencies.

SafeCharge has operations in a number of jurisdictions and incurs the majority of its operating costs in euros, Israeli shekels and sterling.

The Group's 2016 financial results were negatively impacted by the strengthening of the US dollar against certain currencies during the year. The Directors estimate that revenues and Adjusted EBITDA* were approximately US$2.8 million and US$2.0 million lower than would have been reported on a constant currency basis. Results stated on a constant currency basis, a non-IFRS measure, are calculated by applying the average exchange rate of the comparable period in the prior year to current period local currency results.

Margins

Gross profit margin strengthened slightly in the year to 58.3% (2015: 57.8%) benefiting from the transfer of volume from third party acquirers to SafeCharge's own platform. Consolidated Adjusted EBITDA margin improved to 32% (2015: 31.2%) whilst the EBITDA margin in the core business (core payments business, which accounted the majority of revenues and excludes 2015 acquisitions) increased to 33.2% as the Company's core cost base and operational capabilities enjoyed economies of scale from greater revenues and gross profit.

Profit from operations before finance income and tax in the period increased by 18%, reaching US$26.1 million (2015: US$22.2 million).

Expenses

Employee related costs, which account for the majority of SafeCharge's operating expenses and equate to approximately 19% of sales, increased by 8.5% primarily as a result of increased headcount and salary increases. Costs in the core business increased in the year as the Group invested in additional resources, including hiring a number of senior personnel to support growth and implement its strategy in existing and new sectors, verticals and markets.

The Group incurred share-based payment charges of US$672,000 in the year (2015: US$1.37 million). Furthermore, the Group incurred restructuring costs of US$2.1 million, primarily within the SafeCharge Card Services business, including costs relating to the transfer of the development and operations of PAY.com to the Group's Bulgarian operation and the closure of the Dublin office.

Net finance income of US$1.9 million (2015: US$0.6 million) primarily related to the net gain on the disposal of available for sale assets. Depreciation and amortisation of US$4.1 million was charged in the period (2015: US$3.2 million) which included a US$1.5 million charge in respect of depreciation of computer equipment (2015: US$1.2 million) and US$2.4 million (2015: US$1.9 million) amortisation of intangible assets including, for the first time, amortisation of capitalised development costs relating to the SafeCharge Acquiring platform.

Tax 

The Group reported a net tax expense of US$1.5 million (2015: tax income of US$124,000); a blended tax rate of 5.3% on reported profits before tax, representing income tax charges of US$1.3 million due on profits generated by the Company's subsidiary companies, and deferred tax on amortisation of intangibles of US$174,000.

Cash flow

SafeCharge continues to generate significant cash flows from its activities. During 2016 the Group generated US$30.8 million from operations before working capital and tax paid (2015: US$27.3 million).

Working capital movements produced a net cash outflow of US$3.0 million (2015: US$2.0 million inflow) with cash flows from operations of US$26.6 million (2015: US$ 27.7 million) in the period.

The Group generated a net inflow from investing activities of US$62,000 (2015: US$45.4 million outflow). This inflow included US$11.9 million of cash provided by the sale of the stake held in FinTech AG, which realised a profit of US$643,000. Outflows included US$6.0 million related to the investment in Nayax, US$5.0 million of capitalised development expenses and US$1.3 million (2015: US$1.8 million) in payments for the acquisition of property, plant and equipment, (primarily computer hardware).

Net cash outflow from financing activities was US$26.2 million (2015: US$13.9 million) reflecting US$21.9 million of dividend payments, US$6.3 million in respect to the purchase of Company shares to be held in treasury, (offset by US$1.3 million received from the exercise of share options).

Overall there was a net increase in cash and cash equivalents of US$473,000 (2015: US$31.6 million decrease) during the year and the Group closed the period with US$115.4 million (2015: US$114.9 million) in cash and cash equivalents.

Financial position

The Group closed the year with total assets of US$172.9 million (2015: US$182.2 million) including US$115.4 million (2015: US$114.9 million) of cash and cash equivalents and US$8.5 million (2015: US$18.6 million) of available-for-sale investments. The majority of the Company's cash is held in current accounts and on-call deposit accounts, with US$53 million held on call deposit. The net book value of intangible assets held at 31 December 2016 was US$33.4 million (2015: US$31.0 million) which included US$5.0 million (2015: US$5.0 million) of capitalised technology development costs in the year. These costs included those in relation to development of the PAY.com platform, the major development of which is nearing completion.

Total current assets decreased to US$125.7 million (2015: US$127.3 million) with current liabilities decreasing to US$11.7 million (2015: US$14.1 million) due mainly to a fall in trade and other payables.

Total equity attributable to equity holders decreased to US$160.5 million (2015: US$167.3 million) primarily as a result of the increase in retained earnings during the year offset by a reduction in the value of available-for-sale reserves, following the sale of the FinTech AG stake and US$6.3 million in treasury stock reserves representing 2.4 million ordinary shares purchased by the Company during 2016.

As mentioned above, the Group closed the year free of debt.

Dividends

Following the announcement of the interim dividend paid in September, the Board has recommended a final dividend of 9.47 US$ cents per share giving a total dividend of 16.47 US$ cents per share (2015: 11.30 US$ cents per share) for the year, representing 75% of Adjusted EBITDA* for the period.

In order to facilitate simpler settlement, shareholders will be paid their dividends in sterling. The dividend will therefore be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.2396, being the rate at 4.30 pm on 20 March 2017. As a result those shareholders entitled to the final dividend will receive 7.64 pence per share.

Tim Mickley

Chief Financial Officer

21 March 2017

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2016

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2016

On 21 March 2017 the Board of Directors of Safecharge International Group Limited approved and authorised these consolidated financial statements for issue and were signed on their behalf by:

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2016

(*) represents amount less than 1 thousand US$

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December 2016

Notes to the Accounts

1. General information 

Safecharge International Group Limited (hereinafter - the 'Company') was incorporated in British Virgin Islands on 4 May 2006 as a private company with limited liability. On 30 October 2015 the Company re-domiciled to Guernsey. Its registered office is at Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 2HT. The principal activities of the Company and its subsidiaries (hereinafter - the 'Group') are the provision of payments services, technologies and risk management solutions for multi--channel businesses.

2. Accounting policies

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

Basis of preparation

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

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

These financial statements do not constitute the Group's statutory financial statements for the year ended 31 December 2016 or the year ended 31 December 2015. Statutory accounts will be filed following the Company's Annual General Meeting. The auditors have reported on these accounts and their report was unqualified.

Adoption of new and revised IFRSs

During the current year the Group adopted all the new and revised IFRSs that are relevant to its operations and are effective for accounting periods beginning on 1 January 2016.

(i) Standards and Interpretations adopted by the EU

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

Basis of consolidation

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

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

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

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

Business combinations

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

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

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:

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.

(2) Recognition and measurement

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

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

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

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

Cash and cash equivalents

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

Trade receivables

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

Loans granted

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

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

Financial liabilities

The Group has financial liabilities in the following category:

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:

Financial liabilities

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

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

Impairment of non-financial assets

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

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

Share capital

Ordinary shares are classified as equity.

Treasury shares

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

Provisions

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

Share‑based compensation

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

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

Clients' deposits

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

Other expenses

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

Operating leases

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

3. Financial risk management

Financial risk factors

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

3.1 Market risk

Interest rate risk

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

The Group is exposed to interest rate risk to the extent that investment revenue earned on cash and cash equivalents is subject to fluctuations in interest rates. The Group's exposure to interest rate risk is limited as investments are held in liquid and short-term bank deposits. A sensitivity analysis has been performed wherein a 0.25% change in deposit interest rates offered would impact the profit before tax by US$133,000 (2015: US$150,000). 0.25% has been used as a benchmark for sensitivity analysis as it reflects the estimated exposure in the coming year.

Currency risk

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

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

Sensitivity analysis

A 10% strengthening of the United States Dollar against the following currencies at 31 December 2016 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the United States Dollar against the relevant currency, there would be a materially equal and opposite impact on the profit and other equity. 10% has been used as a benchmark for the sensitivity analysis as it reflects the expected exposure in the coming year.

3.2 Credit risk

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

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

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

The Group has issued a working capital facility deed which is interest-free and with a fixed payment term of 12 months from issue. The facility is secured on specified revenue volumes.

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

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 Compliance Officer, as well as by the monitoring controls applied by the Group.

3.6 Capital risk management

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

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

4. Critical accounting estimates and judgments

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

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

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

5. Segmental analysis

Management considers that the Group's activity as a single source supplier of online payments services, technologies and risk management solutions, constitutes one operating and reporting segment, as defined under IFRS 8.

Geographical analysis of revenue

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

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 2016 the Group distributed US$11,340,000, 7.30 US$ cents per share (2015: US$8,518,000, 5.28 US$ cents per share), as a final dividend for the year ended 31 December 2015.

In September 2016 the Board of Directors approved the payment of an interim dividend of US$10,608,000, 7.0 US$ cents per share (2015: US$6,032,000, 4.0 US$ cents per share) as an interim dividend.

The interim dividend included in the consolidated statement of changes in equity report was based on the conversion exchange rate as of dividend declaration date. The interim dividend included in the consolidated statement of cash flow was based on the conversion exchange rate as of dividend payment date, resulting in a foreign exchange difference of US$728,000 (2015: nil).

11. Property, plant and equipment 

12. Intangible assets

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

Goodwill is measured at cost less any accumulated impairment losses.

The Group has domain names and licences with an indefinite life with a carrying value of US$2,122,000 (2015: US$2,122,000). It is expected that these domain names and licenses with indefinite lives will be held for an indefinite period of time and are expected to generate economic benefits. There is no foreseeable limit on the period of time over which domain names and acquiring licenses are expected to contribute to the cash flows of the Group. Domain names and licences with an indefinite life are checked for impairments at each reporting date or more frequently if there are indicators that the carrying value is impaired. As of the reporting date no impairment was found. Management is committed to continue to provide long term investment into these assets in order for them to continue to provide future economic benefits.

Impairment tests of intangible assets

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

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

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

Cash flows projections for the intangible assets derived from CreditGuard Limited business combination were projected based on financial budgets approved by management covering 2017 to 2023 based on the use of the economic life of the acquired assets. Revenue rates for 2017 and onwards had an average growth of 8% per annum. A pre‑tax discount rate of 13% was applied in determining the recoverable amount of the intangible assets. The discount rate was estimated based on an industry average cost of capital and reflects specific risks relating to the relevant intangible assets.

Cash flows projections for the intangible assets derived from Safecharge Card Services Limited business combination were projected based on financial budgets approved by management covering 2017 to 2026 based on the use of the economic life of the acquired assets. Revenue rates for 2017 and onwards had an average growth of 67% per annum based on the early life stage of the products and the forecasted growth within their market. A pre‑tax discount rate of 15% was applied in determining the recoverable amount of the intangible assets. The discount rate was estimated based on an industry average cost of capital and reflects specific risks relating to the relevant intangible assets.

Sensitivity analysis was performed on the key inputs, being the growth and discount rates. A significant increase in the discount rate won't indicates impairment and no reasonable change in the growth rate led to impairment.

13. Subsidiaries

The details of the Company's subsidiaries as at 31 December 2016 are as follows: