Half-year Report

SafeCharge International Group Limited

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

Interim results for the six months ended 30 June 2017

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

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

Overview and current trading

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

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

Financial highlights

Financial highlights

Operational highlights

David Avgi, CEO of SafeCharge, said:

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

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

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

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

- Ends -

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

2 Cash flows from operations before working capital adjustments and tax

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

For more information

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

Forward looking statements

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

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

About SafeCharge

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

www.safecharge.com 

Chairman's statement

Introduction

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

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

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

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

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

Board and governance

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

Staff

On behalf of the Board, I would like to say a special thanks to our staff, all of whom who have made a substantial contribution to our ongoing achievements and to welcome the new colleagues who joined in 2017, who are already making a big contribution to the development of our business.

Dividend

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

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

Roger Withers

Chairman

12 September 2017

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

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

Chief Executive's review

Introduction

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

Strategy

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

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

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

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

Customers

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

Partnerships

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

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

Infrastructure and technology

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

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

People

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

Financial performance in H1 2017

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

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

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

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

SafeCharge Acquiring

Another success during the first half was the continued strong growth in our own Acquiring services. SafeCharge Own Acquiring transaction value for the period totalled US$811 million (H1 2016: US$395 million) closing the period with a run-rate in excess of US$1.8 billion, with more than 20% of the Group's transaction volumes processed through its own acquiring platform in June. Importantly, the approval ratios achieved were high and competitive against those of more established competitors. Acquiring also enables SafeCharge to provide benefits such as rapid onboarding for new customers and remains a key focus for the Group.

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

Looking to the future

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

Regulation

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

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

Outlook

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

David Avgi

Chief Executive Officer

12 September 2017

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

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

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

Financial review

Highlights

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

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

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

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

Revenues

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

Foreign currency exposure and impact

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

The Group generates revenues in multiple currencies, the most significant being the US dollar, euro and sterling, accounting for approximately 62% of income in the period with the balance of revenues generated in a wide range of other currencies.

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

The Group's financial results for the period incurred a minor negative impact due to a strengthening of the US dollar against certain currencies during the period. The Directors estimate that revenues and Adjusted EBITDA* were approximately US$0.4 million lower than would have been reported on a constant currency basis. Results stated on a constant currency basis, a non-IFRS measure, are calculated by applying the average exchange rate of the comparable period in the prior year to current period local currency results.

Margins

Gross Profit and Adjusted EBITDA* margins decreased to 57.3% (H1 2016: 60.6%) and 29.4% (H1 2016: 32.1%) respectively, primarily as a result of the customers base reshape undertaken in 2016 as well as the focus of the Company on high quality customers which upgraded the quality of revenues and customer base.

Expenses

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

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

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

Tax

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

Profit after tax

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

Payments working capital items 

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

Cash flow

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

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

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

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

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

Financial position

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

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

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

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

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

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

Dividend

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

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

Tsach Einav

Chief Financial Officer

12 September 2017

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

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

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2017

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

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(*) Represents amount less than one thousand US$

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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

1. General information

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

2. Significant accounting policies

Basis of preparation

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

Going concern

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

Adoption of new and revised IFRSs

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

(i) Standards and Interpretations adopted by the EU

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

Basis of consolidation

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

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

2. Significant accounting policies (continued)

Business combinations

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

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

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

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

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

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

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

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

Goodwill

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

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

2. Significant accounting policies (continued)

Revenue recognition

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

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

Clients' deposits

All money held on behalf of clients has been excluded from the balances of cash and cash equivalents and amounts due to clients, brokers and other counterparties. Clients' money is not held directly, but is placed on deposit in segregated bank accounts with a financial institution (See Note 12).

Tax

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

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

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

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

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

Property, plant and equipment

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

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

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.

2. Significant accounting policies (continued)

Intangible assets

Internally‑generated intangible assets ‑ research and development expenditure

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

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

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

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

Externally acquired intangible assets

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

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

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

Amortisation

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

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

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

Available-for-sale investments

Investments are recognised and de-recognised on trade date. The Group manages its investments with a view to profiting from the receipt of investment income and capital appreciation from changes in the fair value of equity investments. Quoted investments are designated as available-for-sale and subsequently carried in the statement of financial position at fair value with unrealised gain or loss being recognised in available-for-sale reserve within other comprehensive income. Fair value is measured using the closing bid price at the reporting date, where the investment is quoted on an active stock market. Unquoted investments are valued at the price of recent transaction if this is representative of fair value.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

2. Significant accounting policies (continued)

Significant judgements and estimates

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

3. Segmental analysis 

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

Geographical analysis of revenue

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

Geographical analysis of non-current assets

4. Earnings per share

4. Earnings per share (continued)

5. Finance income and expense

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

6. Property, plant and equipment

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

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

6. Property, plant and equipment (continued)

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

7. Intangible Assets

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

7. Intangible Assets (continued)