Results for the year ended 31 December 2018

SafeCharge International Group Limited

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

Results for the year ended 31 December 2018

Strong financial and operational performance with processed volume growth of 45%, revenue growth of 24% and an increase of 11% in Adjusted EBITDA from 2017; Successful entry into new markets and verticals as well as investment in sales and marketing to deliver further growth and expansion into new geographies

SafeCharge (AIM: SCH), a leading payments technology company, is pleased to announce its results for the year ended 31 December 2018.

Financial and operational summary

Financial highlights

Operational highlights

David Avgi, CEO of SafeCharge, said:

"The year 2018 was another period of strong financial performance and continued growth. We demonstrated excellent performance and successful entry into new markets and verticals. We have continued to innovate, develop and deliver our payment products and technologies, enabling us to deepen our relationships and win new business with large scale customers.

During 2019 we will continue to invest in building our sales teams to accelerate our entry into new markets, as well as to invest further in innovative products to our customers. 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

Building on the record revenues and transaction processing volumes achieved in Q4 2018, the Group has made an excellent start to 2019 with a strong sales pipeline in both existing and new verticals.

Outlook

The Directors look forward with confidence to 2019 and beyond.

The Board is issuing guidance for 2019 with revenues expected to be in the range of US$155m to US$165m, and Adjusted EBITDA1 between US$40m and US$42m. This will be driven by continued growth from our existing client base and new customers due to start processing in 2019.

Presentation

A results presentation 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/5c7fc06f186fe71000bc1945/iopp

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: 105551

- Ends -

1 Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, aborted acquisition costs and contingent remuneration, restructuring and settlement costs, share-based payments charge, unrealised fair value movements on equity investments recognised in the period income statement and share of post-tax loss of equity-accounted investments (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 2018 was a further period of strong financial performance and growth for the Group. Revenue grew 24% to US$138.5 million and Adjusted EBITDA* increased by 11% to US$37.3 million compared to 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 which delivered an excellent performance.

The Group remained highly cash generative. We closed the year after payment of dividends (US$26.8 million) and further investment in the cashless payments company Nayax (US$18.5 million), with US$93.1 million of cash and cash equivalents and no debt.

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

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

Board and governance

The Board remains committed to ensuring a robust governance structure is in place and, whilst recognising the size of the Company, is working to comply with best practice corporate governance. I would like to welcome Susanne Chishti who joined the Board earlier this month as a non-executive director of the Company. Her extensive experience in the banking and FinTech sectors will further strengthen the Board and will be invaluable as we continue to grow the business.

The Company observes the UK Corporate Governance Code (the "Code"), and the Board considers that the Company has been compliant with the principles of the Code since the beginning of 2019.

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 a final dividend of 9.45 US$ cents per share, giving a total dividend of 18.31 US$ cents per share for the year (2017: 16.89 US$ cents). This represents 75% of Adjusted EBITDA* for the period, in line with the Company's current policy of paying 75% of Adjusted EBITDA* (as long as there is no material M&A transaction).

The dividend shall be paid in sterling and therefore it will be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.3085, being the rate at 4.30 pm on 12 March 2019. As a result, those shareholders entitled to the dividend will receive 7.22 pence per share. Subject to shareholder approval at the annual general meeting, to be held on 22 May 2019, the final dividend will become payable on 24 May 2019 to those shareholders on the Company's register as at the record date of 3 May 2019. The ex-dividend date is 2 May 2019.

Roger Withers

Chairman

12 March 2019

* Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, aborted acquisition costs and contingent remuneration, restructuring and settlement costs, share-based payments charge, unrealised fair value movements on equity investments recognised in the period income statement and share of post-tax loss of equity-accounted investments (See Consolidated Statement of Comprehensive Income).

Chief Executive Officer's review

Introduction

The year 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 45% to US$13.9 billion, revenue grew by 24% reaching US$138.5 million and Adjusted EBITDA* increased by 11% to US$37.3 million. Of a particular note was the continued success and strong growth of SafeCharge Acquiring, with 29% of the Group's transaction volumes processed through our own acquiring platform during the year (2017: 22%). 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.

SafeCharge's unique value proposition is supported by three strong pillars which are global reach, omnichannel payments through a single unified platform, SafeCharge Native+ Payment Engine, and innovation.

Global Reach

SafeCharge offers one of the largest payment method portfolios in the market, with over 150 payment methods and growing, integrated alongside the traditional credit and debit cards solutions. This makes it easy for international customers to provide a seamless buying experience all around the world.

During the year, SafeCharge became one of the first partners of Visa to successfully enable merchants to support two new innovative Visa payment solutions: Visa Checkout and Visa Direct, both considerably improving the user's payment experience. In addition, SafeCharge has delivered solutions for merchants seeking to expand in North America, for the US market with local card acquiring as well as the popular ACH online bank payment method eCheck and Interac for the Canadian market. In Europe, SafeCharge is a leading partner for retailers to accept the most popular Chinese payment methods Alipay and WeChat Pay.

Other achievements during the period included the opening of new offices in Shenzhen and Mexico. 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.

Omnichannel

SafeCharge is one of the only players in the market able to provide merchants with a truly omnichannel solution connecting to one unified platform: SafeCharge Payments Engine. This makes it easy for merchants to process and manage payments through all channels - across online, mobile, and point of sale - through one contract and one technical interface. It also means merchants get a clear view of their payments activity across all channels and can track performance and streamline operations.

Innovation

With its Native+ Payment Engine, SafeCharge is bringing a new approach to payments by offering both an advanced proprietary technology as well as access to a broad range of partners. This new approach gives merchants flexibility and control to build a best-of-breed payments infrastructure that suits the most complex requirements and innovative business models. SafeCharge's open payments architecture enables connections to over 15 acquiring payments partners with total transparency into data, processes and pricing. Last but not least, SafeCharge enables fully-customisable risk management capabilities that provide the safest and most secure way to process multi-directional transactions. During the year SafeCharge launched Reconciliation Manager and, more recently, Identity Manager, two very innovative products leveraging the company's unique experience and expertise in the payments industry.

Infrastructure and technology

During 2018, 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.

Customers

We successfully launched a number of significant new Tier 1 customers in the year, including the global ride sharing company Gett, the online retail platform The Level Group, the national Danish gaming operator Danske Spil and the Italian licensed gaming and betting operator Snai. Further new customers, including Kiwi.com, Intralot, OnlineStore.IT and World Duty Free, will be launched during 2019.

Partnerships

During the year, we invested a further US$18.5 million in Nayax, a leading global cashless payment solutions provider for the unattended machine industry. This investment followed the successful processing of Nayax's transactions through our platform in 2017. Our strategy has been to expand within the cashless payments industry in which Nayax specialises, support their growth and to 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 light of the success of the partnership, in January 2019 we agreed to extend our acquiring agreement with Nayax to the end of 2024 and agreed that the Nayax's founding shareholders will, by the end of 2022, buyback SafeCharge's shareholding in Nayax for a consideration equal to the cumulative investment of US$24.5 million plus 9% interest per year calculated from 15 February 2018 until payment is received.

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, including the procurement of external support for our due diligence processes as appropriate. 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, investigated 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 year the Group successfully recruited a number of talented senior managers from well-established businesses in the payments sector, including senior personnel in sales and marketing. These new team members are already helping the Group win and manage sustainable, high quality business in both existing and target verticals and geographies. The Group ended the period with 390 employees (2017: 360) with approximately 54% in R&D and technology, 16% in sales and marketing, and 13% in risk and compliance.

Financial performance in 2018

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

The number of processed transactions grew by 47%, reaching 255.1 million transactions for the full year (2017: 173.8 million), and the value of transactions grew by 45%, reaching US$13.9 billion (2017: US$9.6 billion). This increase in volumes was driven by growth from existing clients and new high-volume customers.

Revenue for the year ended 31 December 2018 grew by 24% to US$138.5 million, compared to the prior year. Gross Profit increased by 14% to US$73.8 million (2017: US$64.5 million) with the Gross Profit Margin decreasing to 53.3% (2017: 57.8%) due to our entry into new markets and verticals as well as our focus on Tier 1 customers. Adjusted EBITDA* grew by 11% to US$37.3 million (2017: US$33.7 million) with EBITDA margin of 26.9% for the full year (2017: 30.2%).

SafeCharge remained highly cash generative with US$33.5 million of cash flow from operating activities before working capital changes and tax paid in the period (2017: US$32.3 million), and free cash flow** of US$23.0 million (2017: US$20.5 million), representing cash conversion*** of 84% (2017: 83%).

SafeCharge Acquiring

A notable success during the year was the continued strong growth in our own acquiring services. SafeCharge Own Acquiring transaction value for the period totalled US$4.0 billion (2017: US$2.2 billion), with approximately 29% of the Group's transaction volumes processed through its own acquiring platform during the year (2017: 22%). 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 2019 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 year, 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. Furthermore, in January 2019 SafeCharge Limited has secured permission under the UK FCA's Temporary Permissions Regime to continue to provide payment services to merchants in the UK even in the event of a "Hard Brexit".

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 an excellent start to 2019, 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 2019 and beyond.

David Avgi

Chief Executive Officer

12 March 2019

* 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, share-based payments charge, unrealised fair value movements on equity investments recognised in the period income statement and share of post-tax loss of equity-accounted investments (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 year grew by 24% to US$138.5 million (2017: US$111.7 million), Gross profit increased by 14%, reaching US$73.8 million (2017: US$64.5 million) and Adjusted EBITDA* grew by 11%, reaching US$37.3 million (2017: US$33.7 million).

Cash conversion remained strong, with cash flows from operations (before working capital adjustments and tax paid) of US$33.5 million (2017: US$32.3 million) and free cash flow** of US$23.0 million (2017: US$20.5 million), reflecting cash conversion*** of 84% (2017: 83%). Profit after tax for the period increased by 4% to US$24.8 million (2017: US$23.8 million).

During the year, the Group paid US$26.8 million in dividends and invested US$18.5 million in the cashless payments company Nayax and US$6.0 million in capitalised development costs. The Group ended the period with US$93.1 million of cash and cash equivalents and US$36.5 million of equity investments. The Group remained debt free during the year.

Revenue

Revenue increased by 24% to US$138.5 million (2017: US$111.7 million) during the year, driven by new customer wins and expanded relationships with existing customers, reaching record levels in the fourth quarter. New clients (defined as those who began processing payments through the Group's systems in the last 12 months and where the relationship with them was concluded during this period) generated revenue of US$12.5 million during 2018 (2017: US$6.5 million).

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 65% 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 33% of operating costs).

The Group's financial results for the year were positively impacted due to strengthening of certain currencies against the US dollar. The Directors estimate that revenue and Adjusted EBITDA* were approximately US$1.6 million and US$0.2 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 53.3% (2017: 57.8%) due to our entry into new markets and verticals as well as our focus on Tier 1 customers in accordance with our strategy. Adjusted EBITDA* margin decreased to 26.9% (2017: 30.2%) 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 19% of revenue, increased by 21% in the year, amounting to US$26.2 million (2017: US$21.7 million) primarily as a result of increased headcount and salary increases. During the year the Group invested in additional resources, including hiring a number of senior personnel in sales and marketing to support growth and implement our strategy to enter new verticals and markets.

The Group incurred share-based payment charges totalling US$1.5 million in the period (2017: US$1.1 million). Depreciation and amortisation of US$7.3 million was charged in the period (2017: US$5.2 million), which included a US$1.9 million charge in respect of depreciation of computer equipment (2017: US$1.6 million) and US$5.3 million (2017: US$3.0 million) of amortisation of intangible assets, including amortisation of US$3.3 million relating to capitalised development costs (2017: US$1.1 million). Furthermore, during the year the Group incurred aborted acquisition costs and contingent remuneration of US$1.0 million (2017: US$0.4 million).

During 2018, the Group recorded an unrealised fair value gain on equity investments of US$1.9 million in accordance with the new accounting standard, IFRS 9. The Group's reported net finance expense of US$2.0 million (2017: US$1.5 million income) was primarily due to foreign exchange differences.

Tax

The Group's reported tax expense was US$2.3 million (2017: US$2.4 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 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$7.9 million (2017: US$9.3 million), settlement assets amounted to US$1.6 million (2017: US$1.7 million), and merchant processing liabilities amounted to US$9.5 million (2017: US$11.0 million).

Cash flow

SafeCharge continues to be highly cash generative. In 2018 the Group generated US$32.3 million net cash from operating activities (excluding movements in payments working capital) (2017: US$29.9 million). Net cash from operating activities including movements in payments working capital amounted to US$30.9 million. Free cash flow** was US$23.0 million (2017: US$20.5 million), reflecting cash conversion*** of 84% (2017: 83%).

The Group's cash outflow in respect of investing activities was US$34.1 million (2017: US$10.1 million). This outflow included the following: (i) US$18.5 million of investment in the cashless payments company Nayax; (ii) US$6.3 million of investment in intangible assets (2017: US$6.1 million), with the majority being capitalised development expenses; (iii) US$3.5 million (2017: US$3.8 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$2.8 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$12.6 million (2017: US$35.6 million) reflecting US$26.8 million of dividend payments, offset by US$14.2 million received from the exercise of share options.

Overall during the period there was a net decrease in cash and cash equivalents of US$15.8 million (2017: US$6.5 million) and the Group closed the year with US$93.1 million (2017: US$108.9 million) in cash and cash equivalents.

Financial position

The Group closed the year with total assets of US$192.2 million (2017: US$182.2 million), including US$93.1 million (2017: US$108.9 million) of cash and cash equivalents and US$36.5 million of equity investments (2017: US$13.9 million of available-for-sale investments and US$0.7 million of assets classified as held for sale; starting this year 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 31 December 2018 was US$39.1 million (2017: US$39.2 million) of which US$9.9 million (2017: US$10.5 million) related to goodwill and US$8.0 million (2017: US$9.6 million) related to IP technology, licences and domains. During the year, the Group capitalised US$6.0 million (2017: US$5.8 million) relating to technology development costs.

Total current assets decreased to US$99.6 million (2017: US$ 118.4 million), with cash decreasing to US$93.1 million primarily as a result of the dividend payments and the additional investment in Nayax. Current liabilities decreased to US$23.1 million (2017: US$ 25.1 million) mainly due to a decrease in trade and other payables by US$0.6 million and decrease of US$1.6 million in merchant processing liabilities.

Total equity attributable to equity holders increased to US$168.1 million (2017: US$155.9 million) principally as a result of the earnings and exercise of share options during the year, offset by the dividends paid.

In January 2019, we agreed with the Nayax's founding shareholders that they will, by the end of 2022, buyback SafeCharge's shareholding in Nayax for a consideration equal to the cumulative investment of US$24.5 million plus 9% interest per year, calculated from 15 February 2018 until payment is received.

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

Dividend

Recognising the Group's continued strong cash generation, the Board has recommended a final dividend of 9.45 US$ cents per share, giving a total dividend of 18.31 US$ cents per share for the year (2017: 16.89 US$ cents). This represents 75% of Adjusted EBITDA* for the period, in line with the Company's current policy of paying 75% of Adjusted EBITDA* (as long as there is no material M&A transaction).

The dividend shall be paid in sterling and therefore it will be subject to a conversion exchange rate from US dollars based on a GBP/USD rate of 1.3085, being the rate at 4.30 pm on 12 March 2019. As a result, those shareholders entitled to the dividend will receive 7.22 pence per share. Subject to shareholder approval at the annual general meeting, to be held on 22 May 2019, the final dividend will become payable on 24 May 2019 to those shareholders on the Company's register as at the record date of 3 May 2019. The ex-dividend date is 2 May 2019.

Tsach Einav

Chief Financial Officer

12 March 2019

* Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, aborted acquisition costs and contingent remuneration, restructuring and settlement costs, share-based payments charge, unrealised fair value movements on equity investments recognised in the period income statement and share of post-tax loss of equity-accounted investments (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.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2018

*Adjusted EBITDA is a non-GAAP, company-specific measure which is earnings excluding finance income, finance expense, taxes, depreciation, amortisation, aborted acquisition costs and contingent remuneration, restructuring and settlement costs, share-based payments charge, unrealised fair value movements on equity investments recognised in the period income statement and share of post-tax loss of equity-accounted investments. Where not explicitly mentioned, Adjusted EBITDA refers to Adjusted EBITDA from continuing operations.

The attached notes form an integral part of these consolidated financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2018

On 12 March 2019 the Board of Directors of SafeCharge International Group Limited approved and authorised these consolidated financial statements for issue and they were signed on their behalf by:

The attached notes form an integral part of these consolidated financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2018

 (*) represents amount less than 1 thousand US$

The attached notes form an integral part of these consolidated financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS 

Year ended 31 December 2018

The attached notes form an integral part of these consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year ended 31 December 2018

1. General information

SafeCharge International Group Limited (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 Group are the 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. Accounting policies

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

Basis of preparation

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

The Company does not prepare stand-alone financial statements, as the Companies (Guernsey) Law, 2008 does not require it. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and requires Management to exercise its judgment in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on Management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Adoption of new and revised IFRSs 

During the current year the Group adopted all the new and revised IFRSs that are relevant to its operations and are effective for accounting periods beginning on 1 January 2018.

Changes in accounting policies

a) New standards, interpretations and amendments effective from 1 January 2018

New standards impacting the Group that have been 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 (IFRS 9) (see Note 30); and

· IFRS 15 Revenue from Contracts with Customers (IFRS 15)

IFRS 15 Revenue from Contracts with Customers: IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. Under IFRS 15, revenue is recognised when a customer obtains control of the goods or services.

Determining the timing of the transfer of control - at a point in time or over time - requires judgement. The Group has adopted IFRS 15 using the cumulative effect method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). Accordingly, the information presented for 2017 has not been restated - i.e. it is presented, as previously reported, under IAS 18, IAS 11 and related interpretations. Additionally, the disclosure requirements in IFRS 15 have not generally been applied to comparative information.

Due to the nature of the revenue of the Group and the low number of fixed revenue contracts in existence, the transition to IFRS 15, net of tax, on retained earnings as at 1 January 2018 is not material. Hence, the impacts of adopting IFRS 15 on the Group's statement of financial position as at 31 December 2018 and its statement of profit or loss and OCI for the year then ended is also not material. IFRS 15 did not have a significant impact on the Group's accounting policies with respect to other revenue streams. For more detailed information about reportable segments, see Note 5.

Other new and amended standards and Interpretations issued by the International Accounting Standards Board (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.

b) New standards, interpretations and amendments not yet effective

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these is:

· IFRS 16 Leases (mandatorily effective for periods beginning on or after 1 January 2019)

· IFRIC 23 Uncertainty over Income Tax Positions (effective 1 January 2019).

IFRS 16 Leases: Adoption of IFRS 16 will result in the Group recognising right-of-use assets and lease liabilities for all contracts that are, or contain, a lease. For leases currently classified as operating leases, under current accounting requirements the Group does not recognise related assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual financial statements the total commitment.

The Board has decided it will apply the modified retrospective adoption method in IFRS 16, and, therefore, will only recognise leases on balance sheet as at 1 January 2019. In addition, it has decided to measure right-of-use assets by reference to the measurement of the lease liability on that date. This will ensure there is no immediate impact to net assets on that date. At 31 December 2018, operating lease commitments amounted to US$6,429,000 (see note 29), which is not expected to materially different to the anticipated position on 31 December 2019 or the amount which is expected to be disclosed at 31 December 2018. Assuming the Group's lease commitments remain at this level, the effect of discounting those commitments is anticipated to result in right-of-use assets and lease liabilities of approximately US$5,071,000 being recognised on 1 January 2019. However, further work still needs to be carried out to determine whether and when extension and termination options are likely to be exercised, which will result in the actual liability recognised being higher than this.

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 the amount of its current operating lease cost, which for the year ended 31 December 2018 was approximately US$1,324,000.

IFRIC 23 Uncertainty over Income Tax Positions: IFRIC 23 clarifies how to recognise and measure current and deferred income tax assets and liabilities when there is uncertainty over income tax treatments. When there is uncertainty over income tax treatments.

Other: The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group.

Basis of consolidation

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

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

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

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

Business combinations

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

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

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

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

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

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

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

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

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

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

Goodwill

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

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

Revenue recognition

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

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

The majority of the Group's revenue is derived from selling services with revenue recognised at a point in time when services have been delivered to the customer.

Based on the services provided by the Group, excluding certain rebates provided to customers, no return, refund or other similar obligations exist. Moreover, no warranties and related obligations exist.

Finance income and finance expense

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

Interest expense and other borrowing costs are charged to the statement of comprehensive income based on the effective interest rate basis. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the statement of comprehensive income for the period.

Foreign currency

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

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

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

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

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

Tax

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

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

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

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

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

Dividends

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

Property, plant and equipment

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

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

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

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

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

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

Intangible assets

Internally‑generated intangible assets ‑ research and development expenditure

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

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

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

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

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

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

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

Externally acquired intangible assets

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

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

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

Amortisation

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

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

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

Financial instruments

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

Financial assets

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.

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 classifies 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.

Amortised cost

These assets arise principally from the provision of goods and services to customers (e.g. 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.

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. Starting 1st January 2018 upon adoption of the IFRS 9 purchases and sales of financial assets measured at fair value through profit and loss are recognised on settlement date with any changes in fair value between trade date and settlement date has been recognised in profit or loss.

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

Available‐for‐sale investments (continued)

transaction if this is representative of fair value or using other valuation techniques not based on observable inputs.

Available‐for‐sale investments accounting policy refer to 2017 comparatives.

Cash and cash equivalents

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

Trade receivables

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging.

The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.

The expected loss rates are based on the Group's historical credit losses. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers.

Upon adoption of IFRS 9, the directors don't consider there to be a material expected credit loss.

Loans granted

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

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

Financial liabilities

The Group has financial liabilities in the following category:

· Trade payables

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

· Contingent consideration

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

Derecognition of financial assets and liabilities

Financial assets

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

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

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

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

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

Financial liabilities

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

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

Impairment of non-financial assets

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

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

Share capital

Ordinary shares are classified as equity.

Treasury shares

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

Provisions

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

Share‑based compensation

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

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

Clients' deposits

All money held on behalf of clients has been excluded from the balances of cash and cash equivalents and amounts due to clients, brokers and other counterparties. Client money is not held directly, but is placed on deposit in segregated bank accounts with a financial institution. The amounts held on behalf of the clients at the reporting date are included in Note 17.

Administrative expenses

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

Other expenses

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

Operating leases

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

3. Financial risk management

Financial risk factors

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

3.1 Market risk

Interest rate risk

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

The Group is exposed to interest rate risk to the extent that investment revenue earned on cash and cash equivalents is subject to fluctuations in interest rates. The Group's exposure to interest rate risk is limited as investments are held in liquid and short-term bank deposits. A sensitivity analysis has been performed wherein a 0.25% change in deposit interest rates offered would impact the profit before tax by US$95,000 (2017: US$125,000). 0.25% has been used as a benchmark for sensitivity analysis as it reflects the estimated exposure in the coming year.

Currency risk

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

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

Sensitivity analysis

A 10% strengthening of the United States Dollar against the following currencies at 31 December 2018 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the United States Dollar against the relevant currency, there would be a materially equal and opposite impact on the profit and other equity. 10% has been used as a benchmark for the sensitivity analysis as it reflects the expected exposure in the coming year.

3.2 Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. Cash balances are held with high credit quality financial institutions rated "Ba2" and above according to Moody's Investors Service's ratings, and the Group has policies to limit the amount of credit exposure to any financial institution.

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

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

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

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

3.3 Liquidity risk

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

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

3.4 Operational risk

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

3.5 Compliance risk

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

3.6 Capital risk management

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

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

4. Critical accounting estimates and judgments

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

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

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

· Impairment of goodwill and other intangible assets

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

· Valuation of equity investments

The Group uses valuation techniques to derive the fair values of equity investments. The valuation methods include estimates and judgements in order to determine the most appropriate basis to be adopted (see Note 18).

5. Segmental analysis

Management considers that the Group's activity as a single source supplier of global omni‐channel payments services from card acquiring and 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 customer. This does not reflect the region of the end users of the Group's customers, whose locations are worldwide.

Geographical analysis of non-current assets

6. Auditors' remuneration

7. Finance income and expense

8. Tax Expense

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

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

9. Earnings per share

10. Dividends

In May 2018, the Group distributed US$13,221,000, 9.20 US$ cents per share (2017: US$14,539,000, 9.47 US$ cents per share), as a final dividend for the year ended 31 December 2017.

In September 2018, the Board of Directors approved the payment of US$13,557,000, 8.86 US$ cents per share (2017: US$11,282,000, 7.69 US$ cents per share) as an interim dividend.

11. Property, plant and equipment