Interim Results

SafeCharge International Group Limited

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

Interim results for the six months ended 30 June 2018

Strong financial performance with processed volume growth of 59%, revenue growth of 26% and increase of 15% in Adjusted EBITDA from H1 2017, continued platform development and investment in sales and marketing to accelerate our entry into new markets and verticals

SafeCharge (AIM: SCH), a leading payments technology company, is pleased to announce its interim results for the six months ended 30 June 2018.

Financial and operational summary

Financial highlights

Operational highlights

David Avgi, CEO of SafeCharge, said:

"I am pleased to report a strong set of results for the first half of 2018. Thanks to intensified marketing efforts and a strengthened sales team, SafeCharge's robust infrastructure, advanced technology and innovative approach to payments are gaining increased market recognition. This resulted in Tier 1 customer wins and a strong sales pipeline. Significant revenue growth is also being achieved from existing customers who appreciate SafeCharge's high quality of account management and customer support. 

We are only at the beginning of our journey. Our highly scalable proprietary Payments Engine has been designed to deliver superior performance translating into a better user experience and increased revenues for our customers."

Current trading and outlook

The Group has enjoyed a good start to the second half of 2018, benefiting from continued growth from our existing customers and the launch of new clients. The Board remains confident that the outcome for the year will be in line with market expectations, with revenue at the top-end of market expectations. The Directors look forward with confidence to the rest of 2018 and beyond.

Presentation

A presentation of the interim results for analysts and investors will be held today at 9.30am in the offices of FTI Consulting at 200 Aldersgate Street, 9th Floor, London, EC1A 4HD.

The presentation will be audiocast live at the following website:

https://www.investis-live.com/safecharge/5b7d26b6a2d81c0a00f69619/dsfg

The presentation will also be accessible via a live conference call:

Dial-in no for UK: 020 3936 2999

Dial-in no for all other locations: +44 20 3936 2999

Conference password: 024484

- Ends -

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

2 Cash flows from operations before working capital adjustments and tax.

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

For more information

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

Forward looking statements

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

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

About SafeCharge

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

www.safecharge.com

Chairman's statement

Introduction

I am delighted to report that the first half of 2018 was a further period of strong financial performance and growth for the Group. Revenue grew 26% to US$66.8 million and Adjusted EBITDA* increased by 15% to US$18.0 million compared to H1 2017, with the Group continuing to generate significant free cash flow from its operations. Once again, revenue growth has been driven through new customer wins and expanded relationships with existing customers. Furthermore, during the period we continued to successfully grow our acquiring business with excellent performance.

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

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

Board and governance

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

In accordance with Rule 26 of the AIM Rules for Companies, the Company confirms that it observes the UK Corporate Governance Code. The "Corporate Governance" page of the Company's website sets out how the Company complies with that code.

Staff

On behalf of the Board, I would like to thank our employees, who have made a substantial contribution to our ongoing achievements, as well as welcoming our new colleagues who joined during 2018 and are already greatly contributing to the development of our business.

Dividend

Recognising the Group's continued strong cash generation, the Board has recommended an interim dividend of 8.86 US$ cents per share, an increase of 15% compared to H1 2017. This represents 75% of Adjusted EBITDA* for the period, in line with the Company's existing policy of paying 75% of Adjusted EBITDA* (as long as there is no material M&A transaction). The Board expects the full year dividend to be 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 1.30, being the rate at 4.30 pm on 12 September 2018. As a result, those shareholders entitled to the interim dividend will receive 6.82 pence per share. The interim dividend will become payable on 12 October 2018 to those shareholders on the Company's register as at the record date of 28 September 2018. The ex-dividend date is 27 September 2018.

Roger Withers

Chairman

13 September 2018

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

Chief Executive Officer's review

Introduction

The first half of 2018 was a period of further success for the Group. We continued to make significant progress and achieved financial and operational growth across the Group. Processed volume grew by 59% to US$6.7 billion, revenue grew by 26% reaching US$66.8 million and Adjusted EBITDA* increased by 15% to US$18.0 million. Of particular note was the continued success and strong growth of SafeCharge Acquiring, with approximately 27% of the Group's transaction volumes processed through its own acquiring platform during the period (H1 2017: 19%). Across all our activities we continued to invest in our products and services, focusing on growing and diversifying the business into new markets, industries and geographies. 

Strategy

The Group has a clear organic growth strategy targeting both its existing customer base and new customers with value-added products and services. SafeCharge distinguishes itself by its innovative solutions and products. We continue to focus on expanding our partner ecosystem to develop new products that allow the Group to strengthen its position in the market, and acquire new customers. SafeCharge has developed its own Native+ Payments Engine. Native, because it has been built from the ground-up as a platform to cover the full payment value chain, providing merchants with the superior performance of an end-to-end secure payment processing solution. And + because it enables connection to other payment and risk management partners. The combination of a proprietary solution with open access to third party partners defines the foundation of SafeCharge's value proposition - to put merchants in control and empower them to achieve more through the transformational capabilities of modern payments technology.

Infrastructure and technology

During the period, the Group continued to invest in its infrastructure and to further develop its processing technologies. Our highly scalable payments platform is capable of handling rapidly increasing transaction volumes and offers our customers 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 for our customers is transaction duration. The SafeCharge platform continues to perform well on this metric, with transaction times competitive with best in class operators.

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

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

Next to its innovative value proposition, SafeCharge also differentiates itself by offering one of the largest payment method portfolios in the market, with over 150 payment methods and growing. This makes it easy for international customers to provide a seamless buying experience all around the world.

Customers

During the period, we successfully launched a number of significant new Tier 1 customers, including the global ride sharing company Gett, the online retail platform The Level Group, the online ecommerce platform Global-e, the national Danish gaming operator Danske Spil and the Italian licensed gaming and betting operator Snai. Further new customers, including Gala Leisure, Intralot, OnlineStore.IT and World Duty Free, will be launched during the second half of 2018 and early 2019.

Partnerships

During the period, we invested a further US$18.5 million in Nayax, a leading global cashless payment solutions provider for the unattended machine industry. Following the initial investment of the Company in Nayax in December 2016, this takes our total investment in Nayax to US$24.5 million. This investment follows the successful processing of Nayax through our platform in 2017 and is based on our strategy to expand within the cashless payments industry in which Nayax specialises. SafeCharge's investment will support Nayax's growth and will strengthen the operational collaboration between the two companies, with expected processing of more than 500 million Euros of Nayax transactions through our Acquiring platform over the years 2018-2021.

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

M&A

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.

People

Our employees are at the heart of the Group's success and we are proud of the expertise and professionalism of our teams. During the 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 382 employees (H1 2017: 344) with approximately 54% in R&D and technology, 15% in sales and marketing, and 12% in risk and compliance.

Financial performance in H1 2018

The operational momentum built over recent years continued into the first half of 2018. This momentum enabled SafeCharge to deliver further growth and entry into new markets.

The number of processed transactions grew by 56%, reaching 117.8 million transactions for the period (H1 2017: 75.6 million), and the value of transactions grew by 59%, reaching US$6.7 billion (H1 2017: US$4.2 billion). This increase in volumes was driven by growth from existing clients and new high-volume customers.

Revenue for the period grew by 26% to US$66.8 million, compared to the same period in 2017. Gross Profit increased by 20% to US$36.6 million (H1 2017: US$30.4 million) with the Gross Profit Margin decreasing to 55% (H1 2017: 57%) due to the higher quality and lower risk of the overall customer base. Adjusted EBITDA* increased by 15% to US$18.0 million (H1 2017: US$15.6 million) with EBITDA margin of 27% for the period (H1 2017: 29%).

SafeCharge remained highly cash generative with US$16.3 million of cash flow from operating activities before working capital changes and tax paid in the six month period (H1 2017: US$16.2 million), and free cash flow** of US$11.3 million (H1 2017: US$9.5 million), representing cash conversion*** of 82% (H1 2017: 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$1,825 million (H1 2017: US$811 million), with approximately 27% of the Group's transaction volumes processed through its own acquiring platform during the period (H1 2017: 19%). SafeCharge Acquiring also enables the Group to provide benefits such as rapid onboarding for new customers and remains a key focus for the Group.

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

Looking to the future

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

Regulation

Through its membership of, 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:

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

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

Current trading and outlook

The Group has enjoyed a good start to the second half of 2018, benefiting from continued growth from our existing customers and the launch of new clients. The Group is confident that its focus on Tier 1 customers and new markets driven by a healthy sales pipeline will yield profitable revenue growth in 2018 and beyond.

David Avgi

Chief Executive Officer

13 September 2018

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

** 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.

*** 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.

Financial review

Highlights

Revenue for the period grew by 26% to US$66.8 million (H1 2017: US$53.0 million), Gross profit increased by 20%, reaching US$36.6 million (H1 2017: US$30.4 million) and Adjusted EBITDA* grew by 15%, reaching US$18.0 million (H1 2017: US$15.6 million).

Cash conversion remained strong, with cash flows from operations (before working capital adjustments and tax paid) of US$16.3 million (H1 2017: US$16.2 million) and free cash flow** of US$11.3 million (H1 2017: US$9.5 million), reflecting cash conversion*** of 82% (H1 2017: 79%). Profit after tax for the period was US$11.9 million (H1 2017: US$12.2 million).

During the period, the Group paid US$13.1 million in dividends and invested US$18.5 million in the cashless payments company Nayax and US$2.6 million in capitalised development costs. The Group ended the period with US$86.1 million of cash and cash equivalents and US$35.0 million of equity investments. The Group remained debt free during the period.

Revenue

Revenue increased by 26% to US$66.8 million (H1 2017: US$53.0 million) during the period, driven by new customer wins and expanded relationships with existing customers. New clients who began processing payments through the Group's systems in the last 12 months and the relationship with them was concluded during this period generated revenue of US$6.5 million during the first half of 2018.

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 revenue in multiple currencies, the most significant being the US dollar, Euro and Sterling, accounting for approximately 64% of income in the period with the balance of revenue generated in a wide range of other currencies.

SafeCharge has operations in several jurisdictions and incurs the majority of its operating costs in US dollars, Euros, Israeli shekels and Sterling (the most significant being Israeli shekels accounting for approximately 35% of operating costs).

The Group's financial results for the period were positively impacted due to strengthening of certain currencies against the US dollar. The Directors estimate that revenue and Adjusted EBITDA* were approximately US$3.1 million and US$0.6 million, respectively, higher than would have been reported on a constant currency basis. Results stated on a constant currency basis, a non-IFRS measure, are calculated by applying the average exchange rate of the comparable period in the prior year to current period local currency results.

Margins

The gross profit margin decreased to 54.8% (H1 2017: 57.3%) due to the higher quality and lower risk of the overall customer base in accordance with our strategy to focus on high quality customers and to enter into new markets. Adjusted EBITDA* margin decreased to 26.9% (H1 2017: 29.4%) primarily due the reduction in the gross profit margin as well as hiring a number of senior personnel in sales and marketing and an increase in associated marketing costs as part of our growth strategy and in order to accelerate our entrance into new sectors and geographies.

Expenses

Employee related costs, which account for the majority of SafeCharge's operating expenses and equate to approximately 20% of revenue, increased by 32% in the period, amounting to US$13.5 million (H1 2017: US$10.2 million) primarily as a result of increased headcount and salary increases. During the period the Group invested in additional resources, including hiring a number of senior personnel in sales and marketing to support growth and implement our strategy to enter new verticals and markets.

The Group incurred share-based payment charges totalling US$0.8 million in the period (H1 2017: US$0.5 million). Depreciation and amortisation of US$3.4 million was charged in the period (H1 2017: US$2.2 million), which included a US$0.9 million charge in respect of depreciation of computer equipment (H1 2017: US$0.8 million) and US$2.3 million (H1 2017: US$1.3 million) of amortisation of intangible assets including amortisation of US$1.4 million relating to capitalised development costs (H1 2017: US$0.4 million).

During the period, the Group recorded an unrealised fair value gain on equity investments of US$0.7 million in accordance with the new accounting standard, IFRS 9. The Group's reported net finance expense of US$1.3 million (H1 2017: US$1.4 million income) was primarily due to foreign exchange differences.

Tax

The Group's reported tax expense was US$1.2 million (H1 2017: US$1.4 million) in respect of its operations across multiple jurisdictions, representing a blended tax rate of 9% on reported profit before tax.

Payments working capital items 

During the first half of 2017, the Company completed the share acquisition of GTS, an online payment processing service, which was rebranded as SafeCharge Digital. In these operations, client money held on behalf of clients is included in the Group balances of cash and cash equivalents, settlement assets and merchant processing liabilities since no legal right exists to offset between this cash and the corresponding merchant processing liabilities. As at the reporting date, the related cash balances amounted to US$9.4 million (H1 2017: US$8.1 million), settlement assets amounted to US$1.6 million (H1 2017: US$1.8 million), and merchant processing liabilities amounted to US$11.0 million (H1 2017: US$9.9 million).

Cash flow

SafeCharge continues to be highly cash generative. In the first half of the year the Group generated US$16.7 million net cash from operating activities (excluding movements in payments working capital) (H1 2017: US$14.6 million). Net cash from operating activities including movements in payments working capital amounted to US$16.8 million. Free cash flow** was US$11.3 million (H1 2017: US$9.5 million), reflecting cash conversion*** of 82% (H1 2017: 79%).

The Group's cash outflow in respect of investing activities was US$29.9 million (H1 2017: US$5.6 million). This outflow included the following: (i) US$18.5 million of investment in the cashless payments company Nayax; (ii) US$2.8 million of investment in intangible assets (H1 2017: US$3.1 million) with the majority being capitalised development expenses; (iii) US$2.9 million (H1 2017: US$2.2 million) in payments for the acquisition of property, plant and equipment (primarily computer equipment for the data centres as well as leasehold improvements and office equipment for new offices of the Group); (iv) US$2.5 million related to the investments in Saxo Payments and Meshulam Payment Solutions; and (v) US$6.4 million of a deposit that is held as a collateral by card schemes; offset by repayment of a US$2.9 million working capital facility provided to a certain customer in the prior year.

The Group's cash outflow in respect of financing activities was US$9.7 million (H1 2017: US$19.4 million) reflecting US$13.1 million for the final 2017 dividend payment, offset by US$3.4 million received from the exercise of share options.

Overall during the period there was a net decrease in cash and cash equivalents of US$22.8 million (H1 2017: US$2.3 million) and the Group closed the period with US$86.1 million (H1 2017: US$113.0 million) in cash and cash equivalents.

Financial position

The Group closed the period with total assets of US$182.8 million (H1 2017: US$178.0 million), including US$86.1 million (H1 2017: US$113.0 million) of cash and cash equivalents and US$35.0 million of equity investments (H1 2017: US$9.1 million of available-for-sale investments and US$0.6 million of assets classified as held for sale; starting this period these assets are presented as equity investments in accordance with the new accounting standard, IFRS 9). The Company's cash was held in current accounts and on-call deposit accounts. 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 2018 was US$38.6 million (H1 2017: US$37.2 million) of which US$10.1 million (H1 2017: US$10.2 million) related to goodwill and US$8.8 million (H1 2017: US$9.7 million) related to IP technology, licences and domains. During the period, the Group capitalised US$2.6 million (H1 2017: US$2.9 million) relating to technology development costs.

Total current assets decreased to US$91.8 million (H1 2017: US$ 124.7 million), with cash decreasing to US$86.1 million primarily as a result of the final dividend payment and the additional investment in Nayax. Current liabilities increased to US$24.3 million (H1 2017: US$ 21.0 million) mainly comprising an increase in trade and other payables by US$1.9 million primarily due to the increase in employee expenses related payables and an increase of US$1.2 million in merchant processing liabilities.

Total equity attributable to equity holders increased to US$157.4 million (H1 2017: US$156.1 million) principally as a result of the increase in retained earnings and exercise of share options offset by the dividends paid and the treasury shares purchased by the Company in the second half of 2017.

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

Dividend

Recognising the Group's continued strong cash generation, the Board has recommended an interim dividend of 8.86 US$ cents per share, an increase of 15% compared to H1 2017. This represents 75% of Adjusted EBITDA* for the period, in line with the Company's existing policy of paying 75% of Adjusted EBITDA* (as long as there is no material M&A transaction). The Board expects the full year dividend to be 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 1.30 being the rate at 4.30 pm on 12 September 2018. As a result, those shareholders entitled to the interim dividend will receive 6.82 pence per share. The interim dividend will become payable on 12 October 2018 to those shareholders on the Company's register as at the record date of 28 September 2018. The ex-dividend date is 27 September 2018.

Tsach Einav

Chief Financial Officer

13 September 2018

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

** 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.

*** 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.

SAFECHARGE INTERNATIONAL GROUP LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

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 provision of global omni‐channel payments services from card acquiring and issuing to payment processing and checkout, all underpinned by advanced risk management solutions.

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 financial information for the six month period ended 30 June 2018 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 2017 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

The Group accounting policies are consistent with those used in the previous annual report, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2018, and will be adopted in the 2018 annual financial statements. New standards impacting the Group that will be adopted in the annual financial statements for the year ended 31 December 2018, and which have given rise to changes in the Group's accounting policies are:

· IFRS 9 Financial Instruments; and

· IFRS 15 Revenue from Contracts with Customers

Details of the impact these two standards have had are given below. Other new and amended standards and interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.

IFRS 9 Financial Instruments

IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement, and has had a significant effect on the Group in the following areas:

· Equity investments classified as available-for-sale financial assets under IAS 39 Financial Instruments: Recognition and Measurement have been classified as being at Fair Value through profit or loss (FVTPL) under IFRS 9. All fair value gains in respect of those assets are recognised in profit or loss and accumulated in retained earnings. Unrealised fair value movements on available-for-sale investments recognised prior to 31 December 2017 under IAS 39 (and therefore accumulated in available-for-sale reserve) have been transferred to retained earnings.

· Impairment provisions on financial assets measured at amortised cost (such as trade and other receivables) have been calculated in accordance with IFRS 9's expected credit loss model, which differs from the incurred loss model previously required by IAS 39. This has had no impact on the impairment provision at 1 January 2018 from that previously reported.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 has replaced IAS 18 Revenue and IAS 11 Construction Contracts as well as various interpretations previously issued by the IFRS Interpretations Committee.

The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 introduces a single model for revenue recognition, in which an entity recognises revenue in accordance with that core principle by applying the following five steps:

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

2. Identify the performance obligations in the contract.

3. Determine the transaction price.

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

5. Recognise revenue as each performance obligation is satisfied.

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

The Group revenue recognition was in line with IFRS 15 guidance effective 1 January 2018 hence there is no significant impact on Group revenue recognition following the adoption of IFRS 15.

2. Significant accounting policies (continued)

Standards and Interpretations not yet effective

IFRS 16 - "Leases" ("IFRS 16")

In January 2016, the IASB issued IFRS 16 - Leases which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous leases standard, IAS 17. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17 and instead introduces a single lessee accounting model whereby a lessee is required to recognise assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognise depreciation of leased assets separately from interest on lease liabilities in the income statement. IFRS 16 is effective from January 1, 2019 with early adoption allowed only if IFRS 15 - Revenue from Contracts with Customers is also applied. At 30 June 2018 operating lease commitments amounted to US$6.6 million. The effect of discounting those commitments is anticipated to result in right-of-use assets and lease liabilities of approximately US$5.3 million being recognised at 1 July 2018. However, further work still needs to be carried out to determine whether and when extension and termination options are likely to be exercised, which may result in the actual liability recognised being higher than this. The Board is still considering if it will apply the modified retrospective or the restatement approach in IFRS 16. Instead of recognising an operating expense for its operating lease payments, the Group will instead recognise interest on its lease liabilities and amortisation on its right-of-use assets. This will increase reported EBITDA by an amount which will approximate to its current operating lease cost, which for the period ended 30 June 2018 was approximately US$0.6 million.

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.

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 interim financial statements of all the Group companies are prepared using uniform accounting policies. All intercompany 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. 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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

2. Significant accounting policies (continued)

Business combinations (continued)

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 IFRS 9, 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.

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. 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.

2. Significant accounting policies (continued)

Property, plant and equipment (continued)

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

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

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

Intangible assets

Internally‑generated intangible assets ‑ research and development expenditure

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

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

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

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

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

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

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset 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.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

2. Significant accounting policies (continued)

Intangible assets (continued)

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 assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. Other than financial assets in a qualifying hedging relationship, the Group's accounting policy for each category is as follows:

Fair value through profit or loss

This category comprises only in-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income in the finance income or expense line. Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Amortised cost

These assets arise principally from the provision of goods and services to customers (eg trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

2. Significant accounting policies (continued)

Financial assets (continued)

Fair value through profit or loss

The Group has a number of strategic investments in listed and unlisted entities which are not accounted for as subsidiaries, associates or jointly controlled entities. For those investments, the Group has made an irrevocable election to classify the investments at fair value through profit or loss rather than through other comprehensive income as the Group considers this measurement to be the most representative of the business model for these assets. They are carried at fair value with changes in fair value recognised in profit or loss.

Dividends are recognised in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment, in which case the full or partial amount of the dividend is recorded against the associated investments carrying amount.

Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in the fair value through other comprehensive income reserve.

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 2017.

3. Segmental analysis 

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

Geographical analysis of revenue

Analysis of revenue by geographical region is made according to the jurisdiction of the Group's direct 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

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 2018:

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

6. Property, plant and equipment (continued)

Audited Property, plant and equipment Note for the year ended 31 December 2017:

7. Intangible Assets

Unaudited Intangible Assets Note for the period ended 30 June 2018:

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

7. Intangible Assets (continued)