TIDMNETW
RNS Number : 9450I
Network International Holdings PLC
14 August 2019
Network International Holdings Plc
Results for the six months ended 30 June 2019
Group financial summary
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
---------------------------------------------------------- -------------- -------------- -----------
Select Financials(1)
Revenues 152,345 135,592 12.4%
Underlying EBITDA 76,392 67,086 13.9%
Underlying EBITDA margin excluding share of an associate 47.2% 47.0% 0.2%
Underlying net income 43,847 41,728 5.1%
Profit from continuing operations 15,764 35,316 (55.4)%
Underlying earnings per share (USD cents) 8.77 8.35 5.0 %
Reported earnings per share (USD cents) 2.94 6.42 (54.2)%
Key Performance Indicators (KPIs)(1)
Total processed volume (TPV) (USD m) 21,543 19,443 10.8%
Number of cards hosted (m) 13.5 12.7 6.3%
Number of transactions (m) 367.4 330.8 11.1%
---------------------------------------------------------- -------------- -------------- -----------
Financial and operating highlights
-- Strong revenue growth of 12.4% (12.7% on a constant currency basis) across the business:
o Middle East delivered growth of 9.3%, driven by increased TPV,
transaction growth and the diversification provided by new products
and services
o Africa continued its strong growth trajectory with a 21.6%
increase in revenues on the back of significant volume growth in
the number of cards hosted and TPV, complemented by increased
cross-sell across the customer base
-- Underlying EBITDA increased by 13.9% due to strong revenue
growth, while underlying EBITDA margin excluding share of an
associate was 47.2% after absorbing incremental public company
costs, in-line with guidance
-- Profit from continuing operations decreased by 55.4% due to
higher specially disclosed items primarily relating to costs
associated with listing including share-based compensation
charge
-- Customer momentum remained strong, with several customers
including Emirates NBD and Emirates Islamic renewing contracts, and
the signing of new direct acquiring customers and new financial
institutions, including in Saudi Arabia
-- N-Genius Online, the new payments gateway, has been
well-received by both stand-alone and integrated customers in the
Middle East, with plans to gradually roll-out in Africa later this
year
-- Technology transformation is on track for completion this
year with customers representing more than 96% of revenues now
migrated to the new platforms
-- Signed commercial agreement with Mastercard, which will help
drive accelerated adoption of digital payments in our markets and
provide incremental upside to our guidance in medium term
Simon Haslam, Chief Executive Officer, commented:
"Following our successful listing on the London Stock Exchange
in April 2019, I am pleased to report that Network International
has delivered a strong first half performance, with revenue and
underlying EBITDA growth of 12.4% and 13.9%, respectively.
Our markets are exposed to a number of strong secular trends
that we aim to capture through the execution of our strategic
agenda. Over the last six months, we have successfully extended
contracts with some of our largest customers, deployed exciting new
products at scale and strengthened our sales and innovation
pipeline. I am also pleased to report that our technology
transformation remains on track for completion in 2019, with
customers representing more than 96% of revenues migrated to the
new platforms already. These platforms will underpin the growth of
the organisation for many years to come.
I also have the pleasure of announcing that following the
cornerstone investment by Mastercard at the time of listing, we
have now signed a commercial agreement that will form the basis of
our strategic partnership and identifies the areas where we can
collaborate to drive growth in the development of digital payments
in the markets we operate in.
Looking ahead to the rest of the year, we are well positioned to
deliver on the guidance shared at the time of listing and
anticipate delivering low double-digit constant currency organic
revenue growth while maintaining stable underlying EBITDA margin.
We expect our performance to accelerate to low-to-mid-teen organic
constant currency revenue growth along with further moderate
operating leverage over the medium-to-long term, with a number of
growth accelerators being pursued that are expected to provide
incremental upside in due course."
Enquiries
Network International Tel: +971 (0) 4 303 2435
Rohit Malhotra, Chief Financial Officer
Finsbury Tel: +44 (0) 207 251 3801
Analysts & Investors
Andy Parnis, Robert Allen
Media
James Leviton, Angy Knill
Results Presentation
A conference call for analysts and investors will be held today
at 9.00am UK / 12.00pm GST. To participate, interested parties are
asked to dial +44 (0)330 336 9127 (UK) / 8000 3570 2653 (UAE) /
+1 323 994 2093 (US) / +44 (0)330 336 9127 (ROW) 10 minutes
prior to the scheduled start of the call using the reference
6905071. Alternatively, details of the audio webcast of the call
can be found at
https://investors.networkinternational.ae/investors/earnings-call/.
A replay of the call will be available from 12pm UK / 3pm GST on 14
August.
Forward Looking Statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results or operation and
businesses of Network International Holdings Plc. Such statements
and forecasts by their nature involve risks and uncertainty because
they relate to future events and circumstances. There are a number
of other factors that may cause actual results, performance or
achievements, or industry results, to be materially different from
those projected in the forward-looking statements. These factors
include general economic and business conditions; changes in
technology; timing or delay in signing, commencement,
implementation and performance of programmes, or the delivery of
products or services under them; industry; relationships with
customers; competition; and ability to attract personnel. You are
cautioned not to rely on these forward-looking statements, which
speak only as of the date of this announcement. We undertake no
obligation to update or revise any forward-looking statements to
reflect any change in our expectations or any change in events,
conditions or circumstances.
CEO Review
Following our successful admission to the London Stock Exchange
in April 2019, I am pleased to report our first set of results for
the six-month period to 30 June 2019. In summary, Network
International has delivered a strong underlying financial
performance in-line with the guidance shared at the time of
listing, while making good progress on our operational and
strategic priorities.
Strong underlying financial performance across the business
The Group delivered revenues of USD 152.3 million, a 12.4%
increase year-on-year (12.7% on a constant currency basis). This
was driven by good performance across both the regions and business
lines, demonstrating the continued execution of our strategy and
justifying the investments made over the last couple of years on
technology, product capabilities and people.
The strong revenue growth was underpinned by a 10.8% increase in
total processed volumes (TPV) across direct acquiring and acquirer
processing, a 6.3% growth in total number of cards hosted (11.5%
excluding impact of our previously disclosed First Gulf Bank (FGB)
exit in H2 2018), and an 11.1% increase in the number of
transactions processed. The growth from our existing customer base,
combined with new customer wins and the increased cross-sell of
products and services, has delivered 11.3% revenue growth in
Merchant Solutions and 12.8% in Issuer Solutions, respectively.
Middle East revenues, which contributed 73% of total revenues
(six months ended 30 June 2018: 75%), increased 9.3% year-on-year
to USD 111.5 million. Segment contribution increased by 11.4%
year-on-year to USD 81.5 million. Meanwhile, Africa revenues, which
represents 27% of total revenues (six months ended 30 June 2018:
25%), increased 21.6% year-on-year to USD 40.8 million, with good
growth across all the regions. This strong revenue growth has
resulted in segment contribution increasing by 21.1% year-on-year
to USD 28.3 million.
Underlying EBITDA increased by 13.9% to USD 76.4 million, driven
by topline growth, while underlying EBITDA margin excluding share
of an associate was broadly stable at 47.2%, compared to 47.0% for
last year, after absorbing incremental costs associated with being
a listed entity. This reflects the benefits of economies of scale
and operating leverage inherent in the business.
Underlying net income increased by 5.1% year-on-year to USD 43.9
million, driven by EBITDA growth partially offset by a higher
depreciation and amortisation charge as recent capex is brought
into service. During the first half, we repriced our debt facility
which is expected to reduce the interest margins going forward.
Profit from continuing operations decreased by 55.4% to USD 15.8
million, primarily due to higher specially disclosed items (SDIs)
driven by one-off costs incurred in relation to the listing, higher
share-based compensation charge in relation to the pre-listing
incentive plans and the amortisation of expenditure on the Group's
IT transformation programme.
Uniquely positioned to capture payments growth in MEA region
Network International continues to benefit from the structural
shift from cash to digital payments across the Middle East and
Africa (MEA) region. We also continue to see an increase in
outsourcing of both merchant and issuer processing activities by
financial and non-financial institutions, further building on our
first mover advantage in the region.
While the Group is subject to macroeconomic conditions that
affect consumers, business and government spending and growth in
its markets, we are confident that the combination of our
market-leading scale in the MEA region, end-to-end presence across
the payments value chain and market leading technology resulting
from our IT transformation programme, will continue to deliver
strong organic growth. This is further supported by our ongoing
success in cross-sell and up-sell of our product capabilities to
existing customers across both Merchant and Issuer Solutions, while
continuing to acquire new customers across the region.
Strategic execution delivering improved financial and
operational performance
Our strategy is designed to ensure that Network International
benefits both from the strong secular shift from cash to digital
payments in the markets in which we operate, and also to leverage
and extend our competitive advantage. Our sustained financial and
operational performance demonstrates our ability to execute against
the strategy.
-- Capitalise on structural market growth and adoption of
digital payments in the MEA region: Ongoing structural changes
continue to occur throughout the region and we continue to unlock
new opportunities for Network International as a result. For
example, we have issued first cards on the new Meeza payment scheme
in Egypt and separately, were confirmed as a participant in the new
regulatory sandbox set up by the Saudi Arabian Monetary
Authority.
-- Expand customer base by capitalising on key themes and
trends: Due to our unique positioning as the only pan-regional
player of scale, we remain the partner of choice for both new and
existing clients across the MEA region. During the first half of
the year, we have renewed a number of customer contracts including
contracts with Emirates NBD and Emirates Islamic for another five
years. At the same time, we have had continued success in our SME
growth initiative, as well as in targeted verticals such as
Government and Supermarkets.
-- Product expansion and market penetration: We continue to
develop new innovative products and at the same time monetise, the
investments made in product capabilities over prior years. N-Genius
Online, our proprietary online gateway product, went into pilot
earlier in the year and we have now expanded the number of
customers using the service. During the second half of the year, we
anticipate migrating several of our existing clients onto this new
capability. Following the launch of Falcon and Card Control towards
the end of 2018, we now have a strong sales pipeline for these
products. We continue to rollout our N-Genius capability in the
UAE, both for stand-alone and integrated customers, and we plan to
gradually roll-out the product to customers across Africa later in
the year.
-- Leverage technology investments and benefit from economies of
scale: Migration of our customers to the new technology platforms
continue to progress well with customers representing more than 96%
of revenues already migrated and we are on track to migrate the
remaining customers before the end of the year. Furthermore, we are
actively pursuing our digitalisation strategy as we continue to
implement various automation initiatives within the organisation.
Following our listing, we are also focused on accelerating the
separation of shared services from Emirates NBD, with the programme
scoping already in progress.
-- Pursue opportunities for acceleration: In the short-term, we
continue to look for further opportunities, including inorganic, to
accelerate growth across the business. Over the past six months, we
have focused on ensuring that our market entry into Saudi Arabia is
a success. At this point, we have appointed a country general
manager, set-up a legal entity, opened an office, signed new
customers and are in discussions with other potential new
customers.
-- Mastercard strategic partnership: We have signed our
commercial agreement with Mastercard - one of the world's leading
payments firms - which includes its commitment to invest USD 35
million through Network International spread over the next five
years, focusing on the adoption of digital payments across the
region, which will provide incremental upside to our guidance over
the medium-term.
Our people and giving back
Our strong performance over the past six months is testament to
the hard-work and dedication of our colleagues, all of whom
demonstrated considerable endeavour and enterprise before, during
and since the completion of the listing on the London Stock
Exchange. We continue to focus on our employees, inspiring them to
stay and grow with the company, by creating an engaging "Great
Place to Work", which is fundamental to our success.
We are proud of the progress we have made during the period.
This includes integrating our three facilities in Cairo into a new
office that brings several teams in that market closer together
whilst also engaging in CSR activities that benefit the local
communities and environment, including Blood Donation drives,
efforts to reduce paper waste in the UAE and offering Iftar meals
during Ramadan to those less fortunate.
Outlook
Looking ahead to the rest of the year, we remain conscious of
the current market volatility and geopolitical environment, but we
are confident that we will perform in-line with the guidance set
out at the time of listing.
As such, our overall guidance remains unchanged, with low
double-digit constant currency organic revenue growth while
maintaining stable underlying EBITDA margin in the near term, and
an acceleration to low-to-mid-teen organic constant currency
revenue growth along with further moderate operating leverage over
the medium-to-long term. In addition to this, several opportunities
are under development to accelerate growth, including the
partnership with Mastercard and these are expected to provide
further upside to our guidance over the medium term.
As highlighted earlier, we have now migrated customers
representing more than 96% of revenues to our new technology
platform and we remain confident of the transformation programme
completing by the end of 2019 with the associated capex also
finishing in the second half of this year. We are pleased that our
strategy to enter the Saudi Arabian market is developing more
quickly than originally envisaged which has given us the confidence
to start making necessary investments that will allow us to unlock
this meaningful opportunity and provide upside to our revenue and
EBITDA guidance in the medium to long term. We are also seeking to
accelerate the separation of shared services infrastructure from
Emirates NBD to improve our operational flexibility and best
position Network International for long term growth and this will
result in pulling forward part of the investment we expected to
make over four years to the near term.
Finally, the Board also confirms its intention to pay a dividend
of 15% of underlying net income for the period of the 2019
financial year post listing, to be paid in the first half of
2020.
Simon Haslam
Chief Executive Officer
14 August 2019
Financial Review(2)
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
------------------------------------------------ -------------- -------------- -------------
Revenues 152,345 135,592 12.4%
------------------------------------------------ -------------- -------------- -------------
Underlying EBITDA(3) 76,392 67,086 13.9%
------------------------------------------------ -------------- -------------- -------------
Underlying depreciation and amortisation (D&A) (17,010) (13,078) (30.1)%
Net interest expense (12,405) (9,473) (31.0)%
Underlying taxes (3,130) (2,807) (11.5)%
Underlying net income(3) 43,847 41,728 5.1%
------------------------------------------------ -------------- -------------- -------------
Specially disclosed items
Affecting EBITDA (21,771) (1,601) (1260.0)%
Affecting net income (6,312) (4,811) (31.2)%
------------------------------------------------ -------------- -------------- -------------
Profit from continuing operations 15,764 35,316 (55.4)%
------------------------------------------------ -------------- -------------- -------------
Earnings per share
Underlying (USD cents) 8.77 8.35 5.0 %
Reported (USD cents) 2.94 6.42 (54.2)%
------------------------------------------------ -------------- -------------- -------------
Revenues
The Group's total revenue grew by 12.4% year-on-year to USD
152.3 million, or 12.7% on a constant currency basis.
Merchant Solutions
Revenues for Merchant Solutions business line (45% of total
revenue) increased by 11.3% year-on-year to USD 69.1 million. This
was primarily driven by a 10.8% increase in TPV, with healthy
growth in direct acquiring in UAE and Jordan as well as strong
growth in acquirer processing across the two segments. Revenues was
also aided by continued product cross-sell and increased terminal
rentals from increasing numbers of SME customers.
Issuer Solutions
Revenues for Issuer Solutions business line (54% of total
revenue) increased by 12.8% year-on-year to USD 81.7 million. This
was driven by a 6.3% increase in the number of cards hosted
(excluding the impact of exit of FGB, number of cards have
increased by 11.5%) and a 11.1% increase in the number of
transactions processed across the MEA region.
This volume growth was further supported by increased revenues
from the cross-sell of existing products such as loyalty management
as well as recently introduced capabilities such as Falcon and Card
Control. Revenue from project related work also performed well
during the period, which will help drive growth in recurring
revenues going forward.
Other
The Group's other revenue was USD 1.6 million and remains at 1%
of total revenue.
Personnel, selling and operating expenses
Six months ended 30 June
2019 2018
USD'000 USD'000
Specially Specially
Disclosed Underlying Disclosed Underlying Underlying
Reported items Results Reported items Results Change
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Salaries and
allowances 32,034 (3,171) 28,863 26,103 (731) 25,372 13.8%
Bonus and
sales
incentives 4,399 - 4,399 4,360 - 4,360 0.9%
Share based
compensation 5,378 (5,244) 134 906 (906) - -
Terminal and
other benefits 3,794 - 3,794 3,906 - 3,906 (2.9)%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Total personnel
expenses 45,605 (8,415) 37,190 35,275 (1,637) 33,638 10.6%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Technology
and
communication
costs 20,982 - 20,982 20,117 - 20,117 4.3%
Third party
processing
services costs 11,001 - 11,001 8,813 - 8,813 24.8%
Legal and
professional
fees 16,432 (13,553) 2,879 1,899 (25) 1,874 53.6%
Provision
for doubtful
debts 363 - 363 514 - 514 (29.4)%
Other general
and
administrative
expenses 7,868 197 8,065 6,913 61 6,974 15.6%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Selling,
operating
and other
expenses 56,646 (13,356) 43,290 38,256 36 38,292 13.1%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Depreciation
and
amortisation 23,322* (6,312) 17,010 17,396(4) (4,318) 13,078 30.1%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Net Interest
expense 12,405 - 12,405 9,473 - 9,473 31.0%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Taxes 3,130 - 3,130 3,300 (493) 2,807 11.5%
---------------- ------------- ------------- --------------- ------------- ------------- --------------- ---------------
Personnel expenses
The Group's reported personnel expenses increased to USD 45.6
million in the period, representing a 29.3% increase. This was
driven by an increase in specially disclosed items affecting
personnel expenses, mainly due to the cash and share-based
incentive plan related to the offering - the Management Incentive
Award Plan and IPO Cash Bonus.
Adjusted for these specially disclosed items, the Group's
underlying personnel expenses increased by 10.6% to USD 37.2
million in the period, primarily driven by the salary inflationary
effect and a nominal increase in headcount.
The Group expects SDIs affecting personnel expenses to be higher
in the second half of the year compared to the first half, as a
result of a one-off LTIP grant made to all employees in recognition
of their valuable contribution earlier this year that made the
listing on the London Stock Exchange possible.
Selling, operating & other expenses
The Group's reported selling, operating & other expenses
were USD 56.6 million in the period, an increase of 48.1%. This was
largely due to an increase in the Specially Disclosed Items
affecting selling, operating & other expenses, namely expenses
incurred during the period in relation to the listing, such as fees
to various advisors.
Adjusted for the above, the Group's underlying selling,
operating & other expenses increased to USD 43.3 million in the
period, representing a 13.1% increase. This was primarily driven by
an increase in third party processing costs associated with the
procurement of terminals sold to acquirer processing customers and
consultancy costs incurred to deliver project work, as well as
incremental costs incurred as a publicly listed company, such as
directors' fees.
Underlying EBITDA
The Group's underlying EBITDA increased to USD 76.4 million
during the period, an increase of 13.9%. This was due to an
increase in revenues across both business lines and operating
segments and was partially offset by an increase in the underlying
personnel costs and selling, operating & other expenses as
explained above.
Despite incremental costs being incurred post-listing, the
underlying EBITDA margin (which excludes the Group's share of its
associate) remained broadly stable at 47.2% during the first half
of 2019 as compared to 47.0% during same period last year,
benefitting from operating leverage and economies of scale.
Share of EBITDA of an Associate
The Group's share of EBITDA of its associate, Transguard Cash
LLC, was USD 4.5 million during the period, representing a healthy
32.2% growth year-on-year. This increase was driven by Transguard
Cash's acquisition of G4S Cash Services in the UAE towards the end
of 2018 and organic growth in the business.
Depreciation & amortisation
The Group's reported depreciation & amortisation charge
increased to USD 21.4 million in the period, an increase of 34.1%.
This increase was driven by 30.1% increase in the underlying
depreciation and amortisation charge to USD 17.0 million and
increase in Specially Disclosed Items affecting D&A due to
higher charge on the capitalised spends on the Group's IT
Transformation programme, as anticipated in our guidance.
The increase in the underlying depreciation and amortisation
charge was primarily due to a higher amortisation charge on
computer software as a result of additions made during the year and
the annualisation impact of last year's additions. The Group's
share of depreciation and amortisation of its associate was USD 1.9
million in 2019.
Net Interest expense
The Group's reported net interest expense increased to USD 12.4
million in the period, an increase of 31.0%. The increase was
driven by higher interest rates on the acquisition financing
facility, in line with the movements in benchmark LIBOR and EIBOR
rates, as well as a higher interest cost on the working capital
facility due to increased utilization and lower income from the
investment of surplus funds in bank deposits during the period. It
also includes the amortisation of costs incurred for the repricing
and amendment of the acquisition financing facility undertaken
during the period and the benefits of reduction in the interest
margin to be realised throughout the remainder of the year.
Taxes
The Group's taxes decreased to USD 3.1 million in the period,
representing a 5.2% decrease on a reported basis but an increase of
11.5% on an underlying basis, primarily due to higher profits in
taxable jurisdictions across the Group.
The Group's underlying effective tax rate for the six-month
period ended June 2019 and June 2018 was 6.7% and 6.3%,
respectively.
Specially disclosed items
Specially disclosed items are items of income or expenses
recognised in a given period, which management believes, due to
their nature or size, should be disclosed separately to give a more
comparable view of the period to period underlying financial
performance. The table below presents a breakdown of the specially
disclosed items.
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
--------------------------------------------------- ---------------------------- ----------- -----------
Items affecting underlying EBITDA:
Reorganisation, restructuring and settlements (1) 1,087 756 43.8%
Share-based compensation (2) 5,244 906 478.8%
M&A and IPO related costs (3) 15,677 - -
Other one-off items (4) (237) (61) 288.5%
--------------------------------------------------- ---------------------------- ----------- -----------
Total SDIs affecting underlying EBITDA 21,771 1,601 1260.0%
--------------------------------------------------- ---------------------------- ----------- -----------
Items affecting underlying net income:
Amortisation related to IT transformation (5) 4,210 2,216 90.0%
Amortisation of acquired intangibles (6) 2,102 2,102 -
Tax expense for legacy matters - 493 -
--------------------------------------------------- ---------------------------- ----------- -----------
Total SDIs affecting underlying net income 6,312 4,811 31.2%
--------------------------------------------------- ---------------------------- ----------- -----------
Total specially disclosed items 28,083 6,412 338.0%
--------------------------------------------------- ---------------------------- ----------- -----------
(1) Includes non-recurring costs that arose from one-off
initiatives to reduce the ongoing cost base and improve efficiency
of the business.
(2) Includes charges for the period in relation to Management
Incentive Award Plan (MIP Plan) and IPO Cash Bonus, both of which
were specific one-off payments resulting from the listing.
(3) These are one-off expenses incurred during the period in
relation to the Initial Public Offering and includes fees paid to
various advisors.
(4) Includes items that do not fit into any other categories as
above and primarily relate to unrealised loss / (gain) from
re-measurement of foreign currency denominated assets or
liabilities (USD 1.4 million in 2019 and USD (0.1) million in
2018), netted off by one-off recoveries and dividend from visa
shares (USD 1.6 million in 2019 and Nil in 2018). The unrealised
foreign currency gains and losses arose mainly from the significant
volatility in the EGP-USD exchange rates over the last few years,
caused by macroeconomic challenges in Egypt including high
inflationary pressure and short-term restrictions on foreign
currency remittances. The resultant gains and losses do not
represent the core performance of operations of the Group and hence
have been shown as specially disclosed items to provide a better
view of the underlying performance of the business.
(5) Includes amortisation of capitalised costs associated with
the significant one-off IT Transformation Programme that the Group
has undertaken over the last few years. This includes the
development of a new card management platform (including costs
related to migration of customers from the legacy platforms), the
Group's own proprietary payment gateway, and a significant one-off
upgrade of the switching system. The spend incurred on the IT
transformation programme is truly one-off in nature and is not
expected to be incurred again for a considerable period of time.
The total capex incurred to date on this programme is significantly
higher than spends on any other programme that the Group has
undertaken in the past or will undertake in the foreseeable future.
The amortisation of incremental capital expenditure that will be
incurred on the ongoing maintenance of the platform, including
hardware upgrades and enhancement of functional capabilities, will
be treated as part of the core operations of the business and not
included within specially disclosed items.
(6) Amortisation charge on the intangible assets recognised in
the Group's statement of financial position as part of the Group's
acquisition of Emerging Market Payments Services in 2016.
Loss from discontinued operations
The Group's loss from discontinued operations was USD 1.4
million, representing operating losses for the period in its
non-core assets, namely Mercury and acquiring business in
Bahrain.
Underlying net income
The Group's underlying net income for the period was USD 43.8
million, an increase of 5.1% over the same period last year. This
increase was primarily driven by an increase in underlying EBITDA
as explained above, and partially offset by the higher underlying
D&A charge, net interest expense and taxes.
Cash and liquidity
Cash flow
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
-------------------------------------------------------- ---------------------------- ------------ ------------
Net cash flows from operating activities before
settlement related balances 42,429 15,846 167.7%
Changes in settlement related balances 549 121,613 (99.5)%
Net cash flows from operating activities 42,978 137,459 (68.7)%
-------------------------------------------------------- ---------------------------- ------------ ------------
Net cash outflows from investing activities (42,530) (27,788) (53.1)%
Net cash outflows from financing activities (12,027) (17,698) 32.0%
-------------------------------------------------------- ---------------------------- ------------ ------------
The Group's net cash flow from operating activities, before
settlement related balances was USD 42.4 million during the period,
demonstrating improved operating performance of the Group. The
Group's net cash outflows from investing activities were USD 42.6
million during the period, which is mainly related to spends on
property, equipment and intangible assets, including spends on the
IT Transformation programme. The Group's net cash outflows from
financing activities were USD 12.0 million during the period, which
primarily reflected part repayment of the acquisition financing
facility in line with the contractual amortisation schedule.
Capital expenditure
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
------------------------------------------------ -------------- -------------- ----------
Total capital expenditure 36,765 17,693 107.8%
IT transformation capital expenditure 18,302 7,065 159.1%
------------------------------------------------ -------------- -------------- ----------
Capital expenditure (ex. IT transformation) 18,463 10,628 73.7%
of which is growth capital expenditure 6,072 4,382 38.6%
of which is maintenance capital expenditure(5) 12,391 6,246 98.4%
The increase in Group's capital expenditure by USD 19.1 million
during the period was largely driven by higher spends on IT
Transformation programme to migrate customers to the new Network
One platform, upgrade to the switching system and development of
the Group's new proprietary payment gateway, N-Genius online. The
increase in maintenance capital expenditure was primarily driven by
higher spends on enhancing technology infrastructure, including
upgrading storage capacity and the new central facility in Cairo,
Egypt, which are not expected to repeat in the second half.
Underlying free cash flow
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
--------------------------------------------------------------- -------------- -------------- ------------
Profit from continuing operations 15,764 35,316 (55.4)%
Depreciation and amortisation 21,436 15,984 34.1%
Net interest expense 12,405 9,473 31.0%
Taxes 3,130 3,300 (5.2)%
Share of depreciation of an associate 1,886 1,412 33.6%
Specially disclosed items affecting Underlying EBITDA 21,771 1,601 1260.0%
Underlying EBITDA 76,392 67,086 13.9%
--------------------------------------------------------------- -------------- -------------- ------------
Changes in working capital before settlement related balances 8,176 (33,363) (124.5)%
Taxes paid (6,295) (552) 1040.4%
Maintenance capital expenditure (12,391) (6,246) 98.4%
Underlying free cash flow 65,882 26,925 144.7%
--------------------------------------------------------------- -------------- -------------- ------------
The increase in Group's underlying free cash flow by USD 39.0
million was driven by growth in EBITDA and changes in working
capital before settlement related balances, largely due to timing
of various payments. This was partly offset by higher taxes paid in
2019 compared with the same period last year and higher maintenance
capital expenditure to enhance technology infrastructure and the
opening of a new central facility in Egypt.
Dividends
In line with the guidance given at the time of listing, the
Group did not pay a dividend in the half year ended 30 June 2019.
The Board confirms its intention to pay a dividend of 15% of
underlying net income for the 2019 financial year, to be paid in
the first half of 2020.
Total debt
As at 30 June 2019, the Group's total debt amounted to USD 426.2
million, which included the amount outstanding under both its
acquisition financing facility (USD 313.8 million) and working
capital overdraft facility (USD 112.4 million). The Group
successfully completed the repricing of its acquisition financing
facility during the period, which will result in a decrease in the
interest margin by 75bps.
The Group is required to meet the prescribed financial covenant
that net debt / underlying EBITDA (leverage ratio as per the
methodology and definitions given in the financing document) shall
not exceed 3.5:1. Based on the calculation methodology agreed in
the financing documents, the Group's leverage ratio as at 30 June
2019 was 1.9:1.
Business segment overview
Middle East
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
------------------------ -------------- -------------- ----------
Revenues 111,511 102,007 9.3%
Contribution(6) 81,452 73,101 11.4%
Contribution margin(6) 73.0% 71.7% 1.3%
------------------------ -------------- -------------- ----------
The Group's largest segment by revenue is the Middle East, which
includes over six countries and represented 73% of the Group's
total revenue in the period. The Group's key countries in the
region include the UAE (which represented 60% of the Group's total
revenue during the period) and Jordan (the second largest market),
with Saudi Arabia offering significant growth opportunities.
The Group's total revenue in the Middle East increased by USD
9.5 million to USD 111.5 million, representing an increase of 9.3%
with growth coming from both Merchant Solutions and Issuer
Solutions. The increase was largely driven by an increase in TPV
and an increase in number of transactions processed and was further
complemented by cross sales of products and services.
The increase in TPV was driven by growth in the Government
Services, Education and Retail verticals of direct acquiring, as
well as very strong growth momentum in acquirer processing
relationships. Revenue growth has also been supported by an
increase in revenue derived from sale of terminals and project
related work, which will drive higher recurring revenues going
forward, while focusing on cross-sell of new product capabilities
such as Card Control and Advanced Fraud Solutions to existing
customers.
The Group also successfully renewed contracts with number of its
customers in the region, including Emirates NBD and Emirates
Islamic, which were renewed during the first half of the year for a
further term of five years. We continue to sign new customers in
Saudi Arabia, as well as large number of direct acquiring customers
in the UAE in the key and SME segment.
Contribution for the Middle East segment increased by USD 8.4
million, to USD 81.5 million, representing an increase of 11.4%.
Contribution margin increased from 71.7% to 73.0% in 2019 as a
result of the operating leverage inherent in the business.
Within the Middle East business unit, the Group expects to see
continued structural market growth driven by the ongoing cash to
digital payment conversion and an acceleration in e-commerce.
Against this backdrop, Network International will focus on
cross-sell of value-added services to existing and new customers,
looking at bank outsourcing opportunities and focusing on untapped
segments (i.e. SMEs). In the longer term, the Group sees
opportunities for acceleration through deeper geographic
penetration into key markets, particularly in Saudi Arabia where it
has already acquired a commercial licence and offices, at Expo2020
in the UAE and through further rapid growth in the adoption of new
payment technologies.
Africa
Six months ended 30 June
2019 2018
USD'000 USD'000 Change
------------------------ -------------- -------------- ----------
Revenues 40,834 33,585 21.6%
Contribution(7) 28,330 23,393 21.1%
Contribution margin(7) 69.4% 69.7% (0.3)%
------------------------ -------------- -------------- ----------
The Group's Africa segment operates across over forty countries
and represented 27% of the Group's total revenue in the period. The
revenue contribution for each of the Group's three main regions in
Africa was 46% in Northern Africa, 33% in Sub-Saharan Africa and
21% in Southern Africa. The Group's key markets in the region
include Egypt, Nigeria and South Africa.
The Group's revenue in Africa increased by USD 7.2 million to
USD 40.8 million during the period, representing a strong growth of
21.6% year-on-year. This growth was driven by an increase in the
number of cards hosted and TPV across the markets, and the growth
was further complemented by greater cross-sell of products and
services to our existing 160 + customer relationships in
Africa.
In terms of customer wins, we signed new acquirer processing
relationships in all three regions in Africa during the period and
agreed with several existing customers to roll-out N-Genius POS
solution across various markets in a gradual manner. We also
successfully signed new prepaid hosting clients in all the three
regions, including in Egypt, to launch cards under the new Meeza
payment scheme.
Contribution for the Africa segment increased by USD 4.9
million, to USD 28.3 million, a 21.1% increase during this period
with contribution margin of 69.4% in 2019 as compared to 69.7% in
2018.
The Group expects strong structural market growth across its
Africa footprint, supported by the cash to digital payment
conversion and supported by government initiatives driving
financial inclusion. Against this backdrop, the Group believes
there are good market indicators for continued growth, especially
in bank outsourcing and accelerating cross-sell opportunities with
existing customers, focusing on digital solutions. In the longer
term, the Group expects opportunities for acceleration through
entry into new markets, either via partnerships or via strategic
investments.
Principal risks and uncertainties
The principal risks which could have a material impact on the
Group's long-term performance as set out in the Group's IPO
prospectus dated 1 April 2019, remain valid at the date of this
report. The key risks in no specific order of priority are:
-- If the Group cannot keep pace with rapid developments and
change in its industry and provide new services to its clients, the
use of its services could decline, reducing its revenue and
profitability
-- The digital payments industry is highly competitive, and the
Group competes with certain firms that are larger and have greater
financial resources
-- Real or perceived data breaches and unauthorised disclosure
of data, whether through cybersecurity breaches, computer viruses
or otherwise, could expose the Group to liability, protracted and
costly litigation and damage its reputation
-- The Group is subject to counterparty risks associated with its ownership structure in the UAE
-- The Group is subject to the credit risk that its Merchant
Solutions customers will be unable to satisfy obligations for which
it may also be liable
-- The Group may fail to successfully execute its strategy,
including expanding its share of its existing digital payments
markets, developing new capabilities and expanding into new
geographies in the MEA region
-- The Company's strategic partner arrangement with Mastercard
limits its ability to enter into similar arrangements with other
international payment schemes, such as Visa and American Express,
which could result in more limited opportunities for strategic
partnerships in the future
-- The Group may experience software defects, undetected errors
and development delays, which could damage customer relations,
decrease its potential profitability and expose it to liability
-- The Group is dependent on third-party vendors to provide
certain licences, products and services and its business and
operations could be disrupted by any problems with its significant
third-party vendors
-- The Group is exposed to risks relating to its ability to
manage ongoing changes to its technology systems
-- A substantial portion of the Group's revenue is dependent on
its continued membership in international payment schemes
-- The Group derives a material portion of its revenue from
services provided to Emirates NBD, and also relies on Emirates NBD
for certain shared services
Directors' Responsibility statement
We confirm that to the best of our knowledge:
The unaudited condensed consolidated financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the European Union
The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period and any changes in the related party
transactions described in the last annual report historical
financial information in part
F-1 of Network International Holdings Plc prospectus dated 1
April 2019 that could do so.
By Order of the Board
Simon Haslam,
Chief Executive Officer
Rohit Malhotra,
Chief Financial Officer
INDEPENT REVIEW REPORT TO NETWORK INTERNATIONAL HOLDINGS PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2019 which comprises the condensed
consolidated statement of financial position, condensed
consolidated statement of profit or loss, condensed consolidated
statement of comprehensive income, condensed consolidated statement
of changes in equity, condensed consolidated statement of cash
flows, and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2019 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
The company has not previously produced a half-yearly report
containing a condensed set of financial statements. As a
consequence, the review procedures set out above have not been
performed in respect of the comparative period for the six months
ended 30 June 2018.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of
Network International LLC for the year ended 31 December 2018 were
prepared in accordance with International Financial Reporting
Standards as adopted by the EU. The directors are responsible for
preparing the condensed set of financial statements included in the
half-yearly financial report in accordance with IAS 34 as adopted
by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Michael Harper
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
14 August 2019
Condensed Consolidated Interim Financial Statements
Condensed consolidated statement of profit or loss
Six months ended 30 June Year ended
31 December
(Unaudited) (Audited)
Continuing operations Note 2019 2018 2018
USD'000 USD'000 USD'000
------------------------------------------------------------- ----- ------------- ------------ -------------
Revenues 5 152,345 135,592 297,935
------------------------------------------------------------- ----- ------------- ------------ -------------
Personnel expenses 6 (45,605) (35,275) (88,084)
Selling, operating & other expenses 7 (56,646) (38,256) (85,455)
Depreciation and amortisation (21,436) (15,984) (34,572)
Impairment losses on assets - - (17,945)
Share of profit of an associate 2,641 2,012 3,325
------------------------------------------------------------- ----- ------------- ------------ -------------
Profit before interest and tax 31,299 48,089 75,204
Net interest expense 8 (12,405) (9,473) (20,159)
Gain on disposal of investment securities - - 2,648
------------------------------------------------------------- ----- ------------- ------------ -------------
Profit before tax 18,894 38,616 57,693
Taxes 9 (3,130) (3,300) (10,956)
------------------------------------------------------------- ----- ------------- ------------ -------------
Profit from continuing operations 15,764 35,316 46,737
Discontinued operations:
Loss from discontinued operations, net of taxes 14 (1,380) (3,432) (23,317)
------------------------------------------------------------- ----- ------------- ------------ -------------
Profit for the period 14,384 31,884 23,420
------------------------------------------------------------- ----- ------------- ------------ -------------
Attributable to:
Equity holders of the Group 14,711 32,076 26,235
Non-controlling interest (327) (192) (2,815)
------------------------------------------------------------- ----- ------------- ------------ -------------
Profit for the period 14,384 31,884 23,420
------------------------------------------------------------- ----- ------------- ------------ -------------
Earnings per share (Basic and diluted) - in USD / cents 17 2.942 6.415 5.247
------------------------------------------------------------- ----- ------------- ------------ -------------
Earnings per share - Continuing operations - in USD / cents
(Basic and diluted) 17 3.152 7.063 9.347
------------------------------------------------------------- ----- ------------- ------------ -------------
The notes on pages 27 to 49 form part of these condensed
consolidated interim financial statements.
Condensed consolidated statement of comprehensive income
Six months ended 30 June Year ended
31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
---------------------------------------------------------------- ------------- ------------ -------------
Profit for the period 14,384 31,884 23,420
Other comprehensive income
Items that may subsequently be reclassified to profit or loss:
Foreign currency translation difference on foreign operations 2,705 707 6,414
Items that will never be reclassified to profit or loss
Re-measurement of terminal benefits - - 268
Net change in other comprehensive income 2,705 707 6,682
Total comprehensive income for the period 17,089 32,591 30,102
---------------------------------------------------------------- ------------- ------------ -------------
Attributable to:
Equity holders of the Group 17,416 32,783 32,917
Non-controlling interest (327) (192) (2,815)
Total comprehensive income 17,089 32,591 30,102
---------------------------------------------------------------- ------------- ------------ -------------
The notes on pages 27 to 49 form part of these condensed
consolidated interim financial statements.
(Unaudited) (Audited)
30 June 30 June
2019 2018 31 December 2018
Note USD'000 USD'000 USD'000
-------------------------------------------- ----- ------------ ------------ -----------------
Assets
Non-current assets
Property and equipment 54,800 37,990 54,489
Intangible assets and goodwill 10 424,037 400,461 409,007
Investment in joint venture and associate 54,497 53,260 51,856
Investment securities 246 13,491 246
Long term receivables 592 553 740
Total non-current assets 534,172 505,755 516,338
Current assets
Scheme debtors 11 214,753 149,796 222,693
Trade and other receivables 89,516 85,797 73,848
Restricted cash 11 86,722 98,955 71,896
Cash and cash equivalents 56,381 125,061 60,275
Assets held for sale 4,100 22,346 4,417
-------------------------------------------- ----- ------------ ------------ -----------------
Total current assets 451,472 481,955 433,129
-------------------------------------------- ----- ------------ ------------ -----------------
Total assets 985,644 987,710 949,467
-------------------------------------------- ----- ------------ ------------ -----------------
Liabilities
Non-current liabilities
Borrowings 13 243,816 279,399 279,297
Other long-term liabilities 22,516 13,452 24,693
Deferred tax liabilities 1,736 1,047 2,324
Total non-current liabilities 268,068 293,898 306,314
Current liabilities
Merchant creditors 11 189,871 225,470 185,523
Trade and other payables 135,928 91,746 116,575
Borrowings 13 182,426 102,683 147,691
Liabilities held for sale 432 7,069 1,668
-------------------------------------------- ----- ------------ ------------ -----------------
Total current liabilities 508,657 426,968 451,457
-------------------------------------------- ----- ------------ ------------ -----------------
Shareholders' equity
-------------------------------------------- ----- ------------ ------------ -----------------
Share capital 15 65,100 1,559,796 1,559,796
Share premium 15 - 6,184 6,184
Foreign exchange reserve 15 (20,570) (28,982) (23,275)
Reorganisation reserve 15 (1,552,365) (1,552,365) (1,552,365)
Other reserves 15 7,543 7,225 7,543
Retained earnings 1,710,753 273,578 195,028
Equity attributable to equity holders 210,461 265,436 192,911
Non-controlling interest (1,542) 1,408 (1,215)
-------------------------------------------- ----- ------------ ------------ -----------------
Total shareholders' equity 208,919 266,844 191,696
-------------------------------------------- ----- ------------ ------------ -----------------
Total liabilities and shareholders' equity 985,644 987,710 949,467
-------------------------------------------- ----- ------------ ------------ -----------------
Condensed consolidated statement of financial position
The notes on pages 27 to 49 form part of these condensed
consolidated interim financial statements.
______________________ ______________________
Simon Haslam Rohit Malhotra
Chief Executive Officer Chief Financial Officer
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2019
(Unaudited)
Equity
Foreign attributable
Share Share exchange Reorganisation Other Retained to equity Non-controlling Total
capital premium reserve reserve reserves earnings holders interest equity
--------------- ------------ -------- ---------- ---------------- --------- ---------- ------------- ---------------- --------
USD'000
--------------- ----------------------------------------------------------------------------------------------------------------------
As at 1
January 2019 1,559,796 6,184 (23,275) (1,552,365) 7,543 195,028 192,911 (1,215) 191,696
Total
comprehensive
income for the
period
Profit for the
period - - - - - 14,711 14,711 (327) 14,384
Other
comprehensive
income for the
period:
Foreign
currency
translation
differences
in foreign
operation - - 2,705 - - - 2,705 - 2,705
Total other
comprehensive
income for
the period - - 2,705 - - - 2,705 - 2,705
Total
comprehensive
income for
the period - - 2,705 - - 14,711 17,416 (327) 17,089
Capital
reduction
(Note 1) (1,494,696) (6,184) - - - 1,500,880 - - -
Share based
payments
(LTIP) - - - - - 134 134 - 134
As at 30 June
2019 65,100 - (20,570) (1,552,365) 7,543 1,710,753 210,461 (1,542) 208,919
--------------- ------------ -------- ---------- ---------------- --------- ---------- ------------- ---------------- --------
The notes on pages 27 to 49 form part of these consolidated
financial statements.
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2018
(Unaudited)
Equity
Foreign attributable
Share Share exchange Reorganisation Other Retained to equity Non-controlling Total
capital premium reserve reserve reserves earnings holders interest equity
--------------- ---------- -------- --------- --------------- --------- --------- ------------- ---------------- ---------
USD'000
--------------- ------------------------------------------------------------------------------------------------------- ---------
As at 1
January 2018 1,559,796 6,184 (29,689) (1,552,365) 11,344 259,147 254,417 1,600 256,017
Impact of
adopting IFRS
9 at 1
January 2018 - - - - (4,364) 955 (3,409) - (3,409)
Impact of
adopting IFRS
16 at 1
January 2018 - - - - - 343 343 - 343
--------------- ---------- -------- --------- --------------- --------- --------- ------------- ---------------- ---------
Restated
balance at 1
January 2018 1,559,796 6,184 (29,689) (1,552,365) 6,980 260,445 251,351 1,600 252,951
--------------- ---------- -------- --------- --------------- --------- --------- ------------- ---------------- ---------
Total
comprehensive
income for the
period
Profit for the
period - - - - - 32,076 32,076 (192) 31,884
Other
comprehensive
income for the
period:
Foreign
currency
translation
differences - - 707 - - - 707 - 707
Total other
comprehensive
income for
the period - - 707 - - - 707 - 707
Total
comprehensive
income for
the period - - 707 - - 32,076 32,783 (192) 32,591
Transferred to
statutory
reserve - - - - 245 (245) - - -
Director's
fees(8) - - - - - (1,000) (1,000) - (1,000)
Dividends paid - - - - - (17,698) (17,698) - (17,698)
--------------- ---------- -------- --------- --------------- --------- --------- ------------- ---------------- ---------
As at 30 June
2018 1,559,796 6,184 (28,982) (1,552,365) 7,225 273,578 265,436 1,408 266,844
--------------- ---------- -------- --------- --------------- --------- --------- ------------- ---------------- ---------
The notes on pages 27 to 49 form part of these condensed
consolidated interim financial statements.
Condensed consolidated statement of changes in equity
For the year ended 31 December 2018
(Audited)
Equity
Share Foreign attributable
Share premium exchange Reorganisation Other Retained to equity Non-controlling Total
capital reserve reserve reserves earnings holders interest equity
---------------- ---------- --------- --------- --------------- --------- --------- ------------- ---------------- ---------
USD'000
---------------- ---------------------------------------------------------------------------------------------------------------------
As at 1 January
2018 1,559,796 6,184 (29,689) (1,552,365) 11,344 259,147 254,417 1,600 256,017
Impact of
adopting IFRS
9 at 1 January
2018 - - - - (4,364) 955 (3,409) - (3,409)
Impact of
adopting IFRS
16 at 1
January 2018 - - - - - 343 343 - 343
---------------- ---------- --------- --------- --------------- --------- --------- ------------- ---------------- ---------
Restated
balance at 1
January 2018 1,559,796 6,184 (29,689) (1,552,365) 6,980 260,445 251,351 1,600 252,951
---------------- ---------- --------- --------- --------------- --------- --------- ------------- ---------------- ---------
Total
comprehensive
income for the
year
Profit for the
year - - - - - 26,235 26,235 (2,815) 23,420
Other
comprehensive
income for the
year:
Foreign
currency
translation
differences - - 6,414 - - - 6,414 - 6,414
Disposal of
re-measurement
of defined
benefit plan - - - - 50 (50) - - -
Re-measurement
of defined
benefit
liability - - - - 268 - 268 - 268
Total other
comprehensive
income for the
year - - 6,414 - 318 (50) 6,682 - 6,682
Total
comprehensive
income for the
year - - 6,414 - 318 26,185 32,917 (2,815) 30,102
Transferred to
statutory
reserve - - - - 245 (245) - - -
Director's
fees(9) - - - - - (1,500) (1,500) - (1,500)
Dividends paid - - - - - (89,857) (89,857) - (89,857)
---------------- ---------- --------- --------- --------------- --------- --------- ------------- ---------------- ---------
As at 31
December 2018 1,559,796 6,184 (23,275) (1,552,365) 7,543 195,028 192,911 (1,215) 191,696
---------------- ---------- --------- --------- --------------- --------- --------- ------------- ---------------- ---------
The notes on pages 27 to 49 form part of these condensed
consolidated interim financial statements.
Condensed consolidated statement of cash flows
Six months ended 30 June Year ended
31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
-------------------------------------------------------------------------- ------------ ------------- -------------
Operating activities
Profit for the period from operations 14,384 31,884 23,420
Adjustments for:
Depreciation, amortisation and impairment 21,799 16,498 54,117
Net Interest expense and taxes 15,535 10,953 31,115
Foreign exchange losses and others 3,943 1,021 5,786
Loss on sale of assets - - 11,331
Share of profit from an associate (2,641) (2,012) (3,325)
Fair value loss on investment securities held at fair value through
profit or loss - (1,843) -
LTIP plan 134 - -
Changes in long term receivables and other liabilities (2,029) 3,256 11,137
Interest paid (10,577) (8,998) (19,892)
Taxes paid (6,295) (552) (5,420)
Director's fees paid - (1,000) (1,500)
Changes in working capital before settlement related balances (1) 8,176 (33,361) (2,575)
Net cash inflows before settlement related balances 42,429 15,846 104,194
Changes in settlement related balances (2) 549 121,613 12,685
Net cash inflows from operating activities 42,978 137,459 116,879
-------------------------------------------------------------------------- ------------ ------------- -------------
Investing activities
Purchase of intangible assets & property and equipment (42,891) (28,380) (68,470)
Dividends received from an associate - - 2,741
Interest received 361 592 1,644
Disposal of investment securities - - 14,050
Disposal of subsidiary - - 4,812
Net cash outflows from investing activities (42,530) (27,788) (45,223)
-------------------------------------------------------------------------- ------------ ------------- -------------
Financing activities
Repayment of borrowings (9,915) - -
Payment of debt issue cost (2,112) - -
Payment of dividends - (17,698) (89,857)
Payment of lease liabilities - - (2,298)
Net cash outflows from financing activity (12,027) (17,698) (92,155)
-------------------------------------------------------------------------- ------------ ------------- -------------
Net increase / (decrease) in cash and cash equivalents (11,579) 91,973 (20,499)
Cash reclassified as part of held for sale (2,000) (4,655) (1,977)
Cash and cash equivalents at the beginning of the period (3) (42,466) (19,990) (19,990)
Cash and cash equivalents at the end of the period (3) (56,045) 67,328 (42,466)
-------------------------------------------------------------------------- ------------ ------------- -------------
(1) Changes in working capital before settlement related
balances reflects movements in trade and other receivables and
trade and other payables adjusted for non-cash items.
(2) Changes in settlement related balances reflects movement in
scheme debtors, merchant creditors and restricted cash.
(3) Includes the cash and cash equivalents reported within
current assets in the statement of financial position, offset by
the overdraft balances reported within current borrowings in the
statement of financial position and disclosed in note 13.
The notes on pages 27 to 49 form part of these condensed
consolidated interim financial statements.
Notes to the condensed consolidated financial statements
1. Legal status and activities
Network International Holdings PLC ("the Company") listed its
shares on the London Stock Exchange in April 2019. The principal
activities of the Group are enabling payments acceptance at
merchants, acquirer processing, switching financial transactions,
hosting cards and processing payment transactions and providing end
to end management services, digital payment services and
e-Payments.
The registered office of the Company is situated in England and
Wales.
The condensed consolidated interim financial statements of the
Group as at and for the six months period ended 30 June 2019
comprise the Company and its subsidiaries (together referred to as
the "Group") and the Group's interest in associates.
These are the first condensed consolidated interim financial
statements of the Group following the reorganisation of the Group
to facilitate the listing. The result of the application of the
capital reorganisation is to present the condensed consolidated
interim financial statements (including comparatives) as if the
Company has always owned the Group. The share capital structure of
the Company as at the date of the Group reorganisation is pushed
back to the first date of the comparative period (1 January 2018).
A Group reorganisation reserve is created as a separate component
of equity, representing the difference between the share capital of
the Company at the date of the Group reorganisation and that of the
previous top organisation of the Group, Network International
LLC.
The principal steps of the Group reorganisation were as
follows:
-- On 27 February 2019, the Company was incorporated by Network
International LLC for 100 ordinary shares of GBP 1 each.
-- On 20 March 2019, Network International LLC transferred
investment in Network International Holdings PLC to the
shareholders.
-- On 29 March 2019, the existing share capital of the Company
comprising of 100 shares of GBP 1 each was split 10:1 into 1000
shares of GBP 0.10 each. Subsequently, on the same day, the Company
issued 1,396 new shares of GBP 0.10 each for GBP 139 / USD 180.
This was followed by a share consolidation resulting in total share
capital comprising of 100 shares of GBP 2.396 / USD 3.119592 each.
The net effect of this restructuring of capital was to increase the
nominal value per share to GBP 2.396 / USD 3.119592 for 100 shares
outstanding.
-- On 29 March 2019, the Company issued 499,999,900 shares to
existing shareholders (254,999,949 to Emirates NBD and 244,999,951
to WP / GA) of par value GBP 2.396 / USD 3.119592 per share in
exchange for acquiring the shares of the subsidiary (Network
International Holding 1 Limited) and the shareholder's receivables
from Network International Holding 1 Limited. This resulted in
creation of share capital of USD 1,559,795,688 and share premium of
USD 6,183,530 (being the difference between the carrying value of
the shareholder's receivable of USD 13,614,704 and the
corresponding nominal value of shares issued of USD 7,431,174).
-- On 1 April 2019, the Company undertook a capital reduction by
reducing the nominal value of its shares in issue from GBP 2.396 /
USD 3.119592 to GBP 0.1000 per share / USD 0.1302 and cancellation
of share premium created above.
The capital reduction resulted in the creation of distributable
reserves of USD 1,507,767,530. The difference in the GBP/USD
foreign exchange rate between the date of share issuance and
capital reduction resulted in the creation of a foreign exchange
difference of USD 6,888,000, which would be considered as a
realised loss and hence, has been netted off against the Company's
retained earnings on the consolidated statement of financial
position.
2. Basis of preparation
Statement of compliance
These condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
34 "Interim Financial Reporting" issued by the International
Accounting Standards Board as adopted by EU.
Included within these condensed consolidated interim financial
statements are alternative performance measure (APM) which are
disclosed in note 3 (and appendix on APM).
These condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006 and do not include all the information
required for a complete set of IFRS consolidated financial
statements. The Company was incorporated on
27 February 2019 and has never prepared statutory accounts
within the meaning of section 434 of the Companies Act 2006.
As described in Note 1, the Company was incorporated in order to
facilitate the listing of the Group and accounting for such a group
reorganisation requires these condensed consolidated interim
financial statements to be prepared on the basis that the Company
has always owned the Group, including for comparative periods.
Therefore, these interim condensed consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements of Network International LLC for
the year ended 31 December 2018, prepared in accordance with IFRS
as adopted by the EU. These are included within the Prospectus
dated 1 April 2019 available at the Company's website. Selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since these last annual
audited consolidated financial statements of Network International
LLC as at and for the year ended 31 December 2018.
The accounting policies applied in these interim financial
statements are the same as those applied in the last annual
financial statements (the policy for recognising and measuring
income taxes in the interim period is described in Note 9).
Basis of measurement
The condensed consolidated interim financial statements have
been prepared under the historical cost basis except for the
liability for defined benefit obligation, which is recognised at
the present value of the defined benefit obligation and financial
assets at fair value through profit or loss which are measured at
fair value.
Functional and presentation currency
Items included in the interim financial statements of each of
the Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The presentation currency of the Group is United States
Dollar ("USD") as this is a more globally recognised currency. All
financial information presented in USD has been rounded to the
nearest thousands, except when otherwise indicated.
Use of estimates and judgments
The preparation of condensed consolidated interim financial
statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgments made by management in
applying the Group's accounting policies and the key sources of
estimates uncertainty were the same as those which were applied to
the audited financial statements as at and for the year ended 31
December 2018.
Basis of consolidation
The condensed consolidated interim financial statements as at,
and for the period ended 30 June 2019 comprises results of the
Company and its subsidiaries. The condensed consolidated interim
financial statements of the subsidiaries is prepared for the same
reporting period as that of the Company, using consistent
accounting policies. All inter-company transactions, profits and
balances are eliminated on consolidation.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group and cease to be consolidated
from the date on which control is transferred out of the Group.
Going Concern
The Directors have updated their latest going concern assessment
prepared at the time of issuing the Prospectus described above.
This assessment covers a period of more than twelve months from the
date of approval of these condensed consolidated interim financial
statements, and the Directors are satisfied that the Group has
sufficient resources available to continue to meet their
liabilities as they fall due for the foreseeable future.
3. Alternative performance measures
The Group uses these alternative performance measures to enhance
the comparability of information between reporting periods either
by adjusting for uncontrollable or one-off items, to aid the user
of the financial statements in understanding the activities taking
place across the Group. In addition these alternative measures are
used by the Group as key measures of assessing the Group's
underlying performance on day-to-day basis, developing budgets and
measuring performance against those budgets and in determining
management remuneration.
Specially Disclosed Items
Specially disclosed items are items of income or expenses that
have been recognised in a given period which management believes,
due to their nature or size should be disclosed separately, to give
a more comparable view of the period to period underlying financial
performance. The table below presents a breakdown of the specially
disclosed items.
Six months ended 30 June Year ended
31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
----------------------------------------------------------------- ------------- ------------ -------------
Items affecting underlying EBITDA:
Reorganisation, restructuring and settlements(1) 1,087 756 3,375
Share-based compensation (2) 5,244 906 10,907
M&A and IPO related costs (3) 15,677 - 3,681
Other one-off items (4) (237) (61) 3,377
----------------------------------------------------------------- ------------- ------------ -------------
Total specially disclosed items affecting underlying EBITDA 21,771 1,601 21,340
----------------------------------------------------------------- ------------- ------------ -------------
Items affecting underlying net income:
Amortisation related to IT transformation (5) 4,210 2,216 5,499
Amortisation of acquired intangibles (6) 2,102 2,102 4,204
Tax expense for legacy matters - 493 4,364
----------------------------------------------------------------- ------------- ------------ -------------
Total specially disclosed items affecting underlying net income 6,312 4,811 14,067
----------------------------------------------------------------- ------------- ------------ -------------
Total specially disclosed items 28,083 6,412 35,407
----------------------------------------------------------------- ------------- ------------ -------------
1) Includes non-recurring costs that arise from one-off
initiatives to reduce the ongoing cost base and improve efficiency
of the business (USD 1.0 million during the period ended 30 June
2019, USD 0.8 million during the period ended 30 June 2018 and USD
1.8 million for the year ended 31 December 2018) and significant
one-off settlements with third parties (Nil during the periods
ended 30 June 2019 and 2018, USD 1.6 million for the year ended 31
December 2018).
2) Includes charge for the period in relation to the Management
Incentive Award Plan (MIP Plan) and IPO Cash Bonus, both of which
were specific one-off payments resulting from the listing.
3) These are one-off expenses incurred during the period in
relation to the Initial Public Offering including fees paid to
various advisors.
4) Includes items that do not fit into any other categories
above and primarily relates to unrealised loss / (gain) from
re-measurement of foreign currency denominated assets or
liabilities (USD 1.4 million during the period ended 30 June 2019,
USD (0.1) million during the period ended 30 June 2018 and USD
(0.5) million for the year ended 31 December 2018). It also
includes provisions against unrecoverable balances and settlement
accruals (Nil during the periods ended 30 June 2019 and 30 June
2018 and USD 3.9 million for the year ended 31 December 2018) and
netted off by one-off recoveries and dividend from visa shares (USD
1.6 million during the period ended 30 June 2019 and Nil during the
period ended and year ended 30 June 2018 and
31 December 2018, respectively). The unrealised foreign currency
gains and losses arose mainly from the significant volatility in
the EGP-USD exchange rates over the last few years, caused by
macroeconomic challenges in Egypt including high inflationary
pressure and short-term restrictions on foreign currency
remittances. The resultant gains and losses do not represent the
core performance of operations of the Group and hence have been
shown as specially disclosed items to provide a better view of the
underlying performance of the business.
5) Includes amortisation of capitalised costs associated with
the significant one-off IT Transformation Programme that the Group
has undertaken over the last few years. This includes development
of a new card management platform (including costs related to
migration from legacy platforms), the Group's own proprietary
payment gateway, and a significant one-off upgrade of the switching
system. The spend incurred on the IT transformation programme is
truly one-off in nature and is not expected to be incurred again
for a considerable period of time. The total capex incurred till
date on this programme is significantly higher than spends on any
other programme that the Group has undertaken in the past or will
undertake in the foreseeable future. The amortisation of
incremental capital expenditure that will be incurred on the
ongoing maintenance of the platform including hardware upgrades and
enhancement of functional capabilities, will be treated as part of
the core operations of the business and not included within
specially disclosed items.
6) Amortisation charge on the intangible assets recognised in
the Group's statement of financial position as part of the Group's
acquisition of Emerging Market Payments Services in 2016.
Underlying EBITDA
Underlying EBITDA is defined as earnings before interest, taxes,
depreciation & amortisation, impairment losses on assets (if
any), gain on sale of investment securities (if any), share of
depreciation of an associate and specially disclosed items
affecting underlying EBITDA. The table below presents a
reconciliation of the Group's reported profit from continuing
operations to underlying EBITDA.
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
------------------------------------------------------- --------- -------- -------------
Profit from continuing operations 15,764 35,316 46,737
Depreciation and amortisation 21,436 15,984 34,572
Impairment losses on assets - - 17,945
Net interest expense 12,405 9,473 20,159
Taxes 3,130 3,300 10,956
Gain on disposal of investment securities - - (2,648)
Share of depreciation from an associate 1,886 1,412 2,978
Specially disclosed items affecting underlying EBITDA 21,771 1,601 21,340
Underlying EBITDA 76,392 67,086 152,039
------------------------------------------------------- --------- -------- -------------
Underlying net income
Underlying net income represents the Group's profit from
continuing operations adjusted for impairment losses on assets (if
any), gain on disposal of investment securities (if any) and
specially disclosed items. Underlying net income is considered by
the Group to give a more comparable view of period-to-period
profitability.
The table below presents a reconciliation of the Group's
reported profit from continuing operations to underlying net
income.
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
----------------------------------------------------------- --------- -------- -------------
Profit from continuing operations 15,764 35,316 46,737
Impairment losses on assets - - 17,945
Gain on disposal of investment securities - - (2,648)
Specially disclosed items affecting underlying EBITDA 21,771 1,601 21,340
Specially disclosed items affecting underlying net income 6,312 4,811 14,067
----------------------------------------------------------- --------- -------- -------------
Underlying net income 43,847 41,728 97,441
----------------------------------------------------------- --------- -------- -------------
Taxes (excluding taxes for legacy matters) 3,130 2,807 6,592
----------------------------------------------------------- --------- -------- -------------
Underlying net income before Tax 46,977 44,535 104,033
----------------------------------------------------------- --------- -------- -------------
4. Segment reporting
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker (Group
leadership team) to allocate resources and assess performance. For
each identified operating segment, the Group has disclosed
information that is assessed internally to review and steer
performance.
The Group manages its business operations on a geographic basis
and reports two operating segments, i.e. i) Middle East and ii)
Africa. The Group reviews and manages the performance of these
segments based on total revenues and Contribution for each
operating segment.
Contribution is defined as segment revenues less operating costs
(personnel cost and selling, operating & other expenses) that
can be directly attributed to or controlled by the segments.
Contribution does not include allocation of shared costs that are
managed at group level and hence shown separately under central
function costs.
Statement of profit and loss for the six months ended 30 June 2019
Middle East Africa Corporate Total
------------------------------------------------------- ------------ ------- ---------- -----------
USD'000
------------------------------------------------------- ----------------------------------------------
Revenues 111,511 40,834 - 152,345
------------------------------------------------------- ------------ ------- ---------- -----------
Contribution 81,452 28,330 - 109,782
Contribution margin (%) 73% 69% - 72%
Central functions costs - - (37,917) (37,917)
Specially disclosed items affecting Underlying EBITDA - - - (21,771)
Depreciation and amortisation - - - (21,436)
Share of profit of an associate - - - 2,641
Net interest expense - - - (12,405)
Taxes - - - (3,130)
------------------------------------------------------- ------------ ------- ---------- -----------
Profit from continuing operations 15,764
------------------------------------------------------- ------------ ------- ---------- -----------
Statement of financial position as at 30 June 2019
Middle East Africa Corporate Total
------------------------------------------------------- ------------ ------- ---------- -----------
USD'000
------------------------------------------------------- ----------------------------------------------
Current assets 260,500 24,890 166,082 451,472
Non-current assets 31,630 2,109 500,433 534,172
Total assets 292,130 26,999 666,515 985,644
------------------------------------------------------- ------------ ------- ---------- -----------
Current liabilities 217,552 3,141 287,964 508,657
Non-current liabilities 10,066 - 258,002 268,068
Total liabilities 227,618 3,141 545,966 776,725
------------------------------------------------------- ------------ ------- ---------- -----------
Statement of profit and loss for the six months ended 30 June
2018
Middle East Africa Corporate Total
------------------------------------------------------- ------------ ------- ---------- ---------
USD'000
------------------------------------------------------- --------------------------------------------
Revenues 102,007 33,585 - 135,592
------------------------------------------------------- ------------ ------- ---------- ---------
Contribution 73,101 23,393 - 96,494
Contribution margin (%) 72% 70% - 71%
Central functions costs - - (32,832) (32,832)
Specially disclosed items affecting Underlying EBITDA - - - (1,601)
Depreciation and amortisation - - - (15,984)
Share of profit of an associate - - - 2,012
Net interest expense - - - (9,473)
Taxes - - - (3,300)
------------------------------------------------------- ------------ ------- ---------- ---------
Profit from Continuing Operations 35,316
Statement of financial position as at 30 June 2018
Middle East Africa Corporate Total
------------------------------------------------------- ------------ ------- ---------- ---------
USD'000
------------------------------------------------------- --------------------------------------------
Current assets 191,081 17,949 272,925 481,955
Non-current assets 25,022 1,487 479,246 505,755
------------------------------------------------------- ------------ ------- ---------- ---------
Total assets 216,103 19,436 752,171 987,710
------------------------------------------------------- ------------ ------- ---------- ---------
Current liabilities 248,262 3,899 174,807 426,968
Non-current liabilities 9,719 - 284,179 293,898
------------------------------------------------------- ------------ ------- ---------- ---------
Total liabilities 257,981 3,899 458,986 720,866
------------------------------------------------------- ------------ ------- ---------- ---------
Statement of profit and loss for the year ended 31 December
2018
Middle East Africa Corporate Total
------------------------------------------------------- ------------ ------- ---------- ---------
USD'000
------------------------------------------------------- --------------------------------------------
Revenues 223,822 74,113 - 297,935
------------------------------------------------------- ------------ ------- ---------- ---------
Contribution 163,887 52,358 - 216,245
Contribution margin (%) 73% 71% - 73%
Central functions costs - - (70,509) (70,509)
Specially disclosed items affecting Underlying EBITDA - - - (21,340)
Depreciation and amortisation - - - (34,572)
Impairment losses on assets - - - (17,945)
Share of profit of an associate - - - 3,325
Net interest expense - - - (20,159)
Gain on disposal of investment securities - - - 2,648
Taxes - - - (10,956)
------------------------------------------------------- ------------ ------- ---------- ---------
Profit from Continuing Operations 46,737
------------------------------------------------------- ------------ ------- ---------- ---------
Statement of financial position as at 31 December 2018
Middle East Africa Corporate Total
------------------------- ------------ ------- ---------- --------
USD'000
------------------------- -------------------------------------------
Current assets 263,776 22,560 146,793 433,129
Non-current assets 39,169 660 476,509 516,338
------------------------- ------------ ------- ---------- --------
Total assets 302,945 23,220 623,302 949,467
------------------------- ------------ ------- ---------- --------
Current liabilities 227,676 8,800 214,981 451,457
Non-current liabilities 9,986 - 296,328 306,314
------------------------- ------------ ------- ---------- --------
Total liabilities 237,662 8,800 511,309 757,771
------------------------- ------------ ------- ---------- --------
Revenues split by region
Middle East
The Group's primary Middle Eastern market is the UAE, with
Jordan considered the second most significant. The UAE contributed
81% of the total Middle East revenue during the period ended 30
June 2019 (year ended 31 December 2018: 83% and period ended 30
June 2018: 83%) and Jordan contributed 13% during the same period
(year ended 31 December 2018: 13% and period ended 30 June 2018:
13%). In both markets, the Group provides merchant acquiring,
acquirer processing and issuer solutions services to various
financial and non-financial institutional clients.
Africa
The Group's key regions in Africa are North Africa, Sub-Saharan
Africa and Southern Africa.
-- North Africa: Egypt is the leading market for the Group in
North Africa, with Network International currently providing
services to several of Egypt's leading financial institutions
across both merchant and issuer solution requirements. North Africa
contributed 46% of total African revenues during the period ended
30 June 2019 (year ended 31 December 2018: 46% and period ended 30
June 2018: 42%).
-- Sub-Saharan Africa: In sub-Saharan Africa, the Group is most
established in Nigeria, serving several of Nigeria's leading
financial institutions primarily with issuer processing solutions.
Sub-Saharan Africa contributed 33% of total African revenues during
the period ended 30 June 2019 (year ended 31 December 2018: 33% and
period ended 30 June 2018: 37%).
-- Southern Africa: South Africa represents the largest market
in southern Africa, specifically focused around retail processing
services. South Africa contributed 21% of the total Africa revenues
during the period ended 30 June 2019 (year ended 31 December 2018:
20% and period ended 30 June 2018: 21%).
5. Revenues
Merchant Solutions
Under Merchant Solutions, the Group provides a broad range of
technology-led payment solutions to merchants through a full
omni-channel service, which allows them to accept payments of
multiple types, across multiple payment channels. The Group offers
functionality in most types of payment acceptance, whether
in-store, online or on a mobile device, by providing access to a
global payments network through its agile, integrated, secure,
reliable and highly scalable technology platforms, Network One and
Network Lite. The Group's Merchant Solutions business comprises its
direct acquiring businesses and acquirer processing services,
through which the Group provides processing services for its
financial institution clients for their direct acquiring
business.
Issuer Solutions
Through its Issuer Solutions business line, the Group provides a
range of innovative card products and services to its consumers.
The Group provides its Issuer Solutions customers with a
comprehensive proposition supporting all components of the card
issuing value chain, including account hosting, transaction
processing, settlement, reconciliation, chargebacks and other
ancillary services. The Group provides its Issuer Solutions
customers with the ability to open card accounts for consumers and
issue and create a range of card products, including credit, debit,
Islamic, pre-paid and digital / virtual cards. The Group also
provides support for its Issuer Solutions customers to enable them
to host and manage a large portfolio of card product solutions,
ranging from simple card usage to VIP card products, including
highly configurable and personalised usage.
The Group's sources of revenues can be broadly categorised into
transaction-based revenues and non-transaction-based revenues:
-- Transaction based revenues, includes revenue generated
through a combination of (a) a gross merchant service charge (MSC),
charged to the merchant on the total processed volume (TPV); (b) a
fee per transaction processed and billed, (c) a fee per card hosted
and billed and d) a variable fee for provision of value-added
services including foreign exchange services. The revenue is
reported on a net basis, i.e., after the deduction of interchange
and scheme fees paid to the card issuer and payment schemes
respectively.
-- Non-transaction based revenues, includes but not limited to
revenue generated through provision of various value-added services
(those that are fixed periodic charge), rental from point-of-sale
(POS) terminals and project-related revenues.
Interchange fees are the fees paid to the card issuing banks
that are generally based on transaction value but could also be a
fixed fee combined with an ad valorem fee. Scheme fees are the fees
paid to the payment schemes for using cards licensed under their
brand names and for using their network for transaction
authorisation and routing. The breakdown of revenues is as
under:
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
------------------------------- ------------------- ------------------- ------------------------
Merchant Solutions 69,115 62,106 136,317
Issuer Solutions 81,675 72,424 157,069
Other 1,555 1,062 4,549
------------------------------- ------------------- ------------------- ------------------------
Revenues 152,345 135,592 297,935
------------------------------- ------------------- ------------------- ------------------------
6. Personnel expenses
The Group's personnel expenses include salaries & wages,
allowances, bonuses and terminal & other benefits recognised
during the period, when the associated services are rendered by the
employees. The details of personnel expenses are as follows:
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
----------------------------- --------- -------- -------------
Salaries and allowances 32,034 26,103 56,986
Bonus and sales incentives 4,399 4,360 11,564
Share based compensation10 5,378 906 10,907
Terminal and other benefits 3,794 3,906 8,627
Personnel expenses 45,605 35,275 88,084
----------------------------- --------- -------- -------------
7. Selling, operating and other expenses
Selling, operating and other expenses consist primarily of
selling costs, technology and communication related expenses,
processing service costs, legal & professional charges,
provision for doubtful debts (i.e. expected credit losses on
financial assets) and other general and administrative expenses.
The details of selling, operating and other expenses are as
follows:
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
---------------------------------- --------- -------- -------------
Technology and communication
cost 20,982 20,117 43,426
Third party processing services
cost 11,001 8,813 16,833
Legal and professional fees11 16,432 1,899 11,263
Provision for doubtful debts 363 514 809
Other general and administrative
expenses 7,868 6,913 13,124
Selling, operating and other
expenses 56,646 38,256 85,455
---------------------------------- --------- -------- -------------
8. Net interest expense
Interest expense comprises of interest expense on borrowings.
All borrowing costs are recognised in the consolidated statement of
profit or loss using the effective interest method.
Interest income comprises of interest income on funds invested.
Interest income is recognised in the consolidated statement of
profit or loss, using the effective interest method. The breakdown
of net interest expense is as follows:
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
---------------------- --------- -------- -------------
Interest cost 12,766 10,065 21,804
Interest income (361) (592) (1,645)
Net interest expense 12,405 9,473 20,159
---------------------- --------- -------- -------------
9. Taxes
Income tax expense is recognised at an amount determined by
multiplying the profit before tax for the interim period by
management's best estimate of the weighted average annual income
tax rate expected for the full financial year, adjusted for the tax
effect of certain items recognised in full in the interim period.
As such, the effective tax rate in the interim financial statements
may differ from management's estimate of the effective tax rate for
the annual financial statements.
The Group's reconciliation of effective tax in respect of
continuing operations is as follows:
Six months ended Year ended
30 June 31 December
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
-------------------------------------------------- ------------------- ------------------- ------------------------
Profit before tax from operations 18,894 38,616 57,693
Tax using the tax rate applicable in - - -
UAE (1)
Effect of tax rates in foreign
jurisdictions 4,115 2,501 12,174
Tax effect of:
Non-deductible expenses 617 - 673
Tax-exempt income 19 (66) (148)
Other allowable deduction (285) (14) (473)
Tax incentives / rebates (2,496) - (6,213)
Withholding tax 1,455 - -
Carry forward losses - (64) (64)
Deferred tax (716) 105 283
Changes in estimates related to prior
years 115 617 4,364
Other adjustments 306 221 360
-------------------------------------------------- ------------------- ------------------- ------------------------
Income tax expense 3,130 3,300 10,956
-------------------------------------------------- ------------------- ------------------- ------------------------
(1) As the Group's largest operations are in UAE, the tax rate
applied in this tax reconciliation is that of UAE, rather than the
rate applying in the UK where the Company is incorporated.
10. Impairment testing of goodwill
At the year ended 31 December 2018, impairment testing of
goodwill was performed at the Cash Generating Unit ("CGU") level.
For this purpose, management considered two CGUs, namely; Jordan
and Africa Business.
At the year ended 31 December 2018, the impairment testing
resulted in no impairment for Jordan and Africa CGUs. The Group
carries out an annual assessment for the impairment of the
Goodwill; no assessment was carried out at 30 June 2019 as no
indicators of impairment were noted during the interim period.
11. Scheme debtors, merchant creditors and restricted cash
Scheme debtors and merchant creditors represent intermediary
balances that arise as part of the daily acquiring settlement
process.
Scheme debtors
Scheme debtors consist primarily of the Group's receivables from
the card schemes or networks for transactions processed on behalf
of merchants, where it is a member of that particular scheme or
network.
Merchant creditors
Merchant creditors consist primarily of the Group's liability to
merchants for transactions that have been processed but not yet
settled.
The Group has limited ability to influence the working capital
related to scheme debtors and merchant creditors, which is referred
to as settlement related balances, on a day-to-day basis, as these
are principally driven by the volume of transactions and the time
elapsed since the last clearing by card issuers / payment schemes,
which is why these balances fluctuate from one reporting date to
another.
Restricted cash
Restricted cash represents amounts payable for deferred
settlements of transactions to merchants and other third parties
that have been withheld in accordance with its contractual rights
to cover the risk of charge back and are eventually payable on
demand or as mutually agreed. Furthermore, there is a corresponding
liability included in the merchant creditor balance.
12. Related party balances and transactions
In the interim financial statements for the half year ended on
30 June 2019, there are no significant changes to the nature of
related parties disclosed in the annual consolidated financial
statements for the Group as at and for the year ended 31 December
2018 except as mentioned in the below:
Prior to listing, Emirates NBD PJSC and WP/GA Dubai IV B.V.,
owned 51% and 49% of the Company's Ordinary Shares, respectively.
Subsequently, the Company's Ordinary Shares were admitted by the
London Stock Exchange. Emirates NBD PJSC and WP/GA Dubai IV B.V.
retained 25.51% and 24.5% of the Company's Ordinary Shares and sold
25.49% and 24.5% in the free market, respectively. As on
30 June 2019, Emirates NBD PJSC and WP/GA Dubai IV B.V. own
22.45% and 20.25% of the Company's Ordinary Shares,
respectively.
Related party transactions during the period are set out in the
table below:
Six months ended Year ended
(Unaudited) (Audited)
30 June 2019 30 June 2018 31 December 2018
Emirates NBD PJSC USD'000 USD'000 USD'000
----------------------------------- ------------- ------------- -----------------
Transactions for the period
Revenues 28,790 22,644 48,384
Expenses (3,705) (3,899) (7,772)
Net Interest expense / (income) 688 117 (96)
Balances as at 30 June / December
Due (to) / from balances - net (19,185) 10,536 10,955
Bank balance 119,060 198,836 101,822
Overdraft facility (106,292) (55,371) (97,995)
Commitments (off-balance sheet) 4,324 4,345 1,764
Transguard Cash LLC (an associate of the Group)
------------------------------------------------- -------- -------- --------
Transactions for the period
Share of EBITDA 4,527 3,424 6,303
Share of Depreciation (1,886) (1,412) (2,978)
Share of Net Profit 2,641 2,012 3,325
Balances as at 30 June / December
Due to balance - 322 122
Key management personnel compensations
---------------------------------------- ------ ------ ------
Personnel expenses 5,484 4,147 6,306
13. Borrowings
Non-current borrowings
On 10 May 2016, Network International LLC has entered into a
syndicated conventional and Islamic facility of USD 350 million
provided by various banks with Citibank N.A., London Branch, acting
as one of the mandated lead arrangers, for the acquisition of
Emerging Markets Payments Services. The facility consists of AED
and USD tranches of a conventional financing and one AED tranche of
an Islamic financing facility. The terms of the financing were
amended effective 18 March 2019 and were updated to reflect the
terms described below.
The facility carries an applicable interest period coupon rate
of EIBOR plus margin on the AED conventional financing and murabaha
financing and LIBOR plus margin on the USD conventional financing.
The margin is calculated by reference to the Leverage (underlying
EBITDA / net debt, as per definition and methodology provided in
the financing documents), based on a grid with the pricing reducing
as Leverage of the Group reduces and vice versa. The margin is
initially set at 2.50% per annum applicable on the AED conventional
financing and Islamic financing and 2.75% per annum applicable on
the USD conventional financing and will be recalibrated based on
the 2019 half yearly financial statements and each half yearly
financial statements thereafter.
The Group made an early repayment of USD 16.3 million in 2017
and a scheduled repayment of USD 10 million in H1 2019, against all
tranches proportionally. The Group incurred a debt issuance cost
amounting to USD 13.6 million which has been capitalised and netted
off from the carrying amount of the loan.
Current borrowings
Current borrowings include the current portion of term loan
facility amounting to USD 70 million, in addition to the unsecured
overdraft facility from Emirates NBD. The unsecured overdraft
facility from Emirates NBD carries an interest at the rate of one
month EIBOR plus 240 basis points (2018: one month EIBOR plus 250
basis points).
The table below provides a breakdown of the borrowing:
Six months ended Year ended
30 June 31 December 2018
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
------------------------------------- --------------------- ------------------------- -----------------------------
Non-Current borrowing 243,816 279,399 279,297
Current borrowing 182,426 102,683 147,691
------------------------------------- --------------------- ------------------------- -----------------------------
Total 426,242 382,082 426,988
------------------------------------- --------------------- ------------------------- -----------------------------
Split into:
Syndicated acquisition
financing
* Non-Current portion 243,816 279,399 279,297
* Current portion 70,000 44,950 44,950
------------------------------------- --------------------- ------------------------- -----------------------------
Sub Total 313,816 324,349 324,247
------------------------------------- --------------------- ------------------------- -----------------------------
Bank overdraft (for
working capital) 112,426 57,733 102,741
Total 426,242 382,082 426,988
------------------------------------- --------------------- ------------------------- -----------------------------
14. Discontinued operations and assets held for sale
A discontinued operation is a component of the Group's business,
for which the operations and cash flows can be clearly
distinguished from the rest of the Group and which:
-- represents a separate major line of business or geographic area of operations;
-- is part of a single coordinated plan to dispose of a separate
major line of business or geographic area of operations; or
-- is a subsidiary acquired exclusively with a view to resale
Classification as a discontinued operation occurs at the earlier
of disposal or the operation meeting the criteria to be classified
as held-for-sale.
Cash flows generated from / (used in) discontinued
operations
Six months ended Year ended
30 June 31 December 2018
(Unaudited) (Audited)
2019 2018 2018
USD'000 USD'000 USD'000
------------------------------------------------------------------- --------- -------- ------------------
Net cash (used in) / generated from operating activities 2,073 2,466 (501)
Net cash used in investing activities (73) (528) (238)
Net cash (used in) / generated from financing activities - - -
------------------------------------------------------------------- --------- -------- ------------------
Net cash flows (used in) / generated from discontinued operations 2,000 1,938 (739)
------------------------------------------------------------------- --------- -------- ------------------
15. Share capital
Ordinary shares are classified as equity. Incremental costs (if
any) directly attributable to the issue of ordinary shares are
recognised as a deduction from equity.
(Unaudited) (Audited)
30 June 2019 30 June 2018 31 December 2018
USD'000 USD'000 USD'000
-------------------------------------------------- -------------- -------------- -----------------
Issued and fully paid up
500,000,000 shares of USD 0.1302
(2018: 500,000,000 shares of USD 3.119592 each) 65,100 1,559,796 1,559,796
-------------------------------------------------- -------------- -------------- -----------------
The share capital of the Group represents the share capital of
the parent company, Network International Holdings PLC. As
described in Note 1, this Company became the Group's ultimate
parent company in April 2019. Prior to this the share capital of
the Group represented the share capital of the previous parent,
Network International LLC.
Movements in the Company's share capital from the date of
incorporation to reporting date are described in Note 1. There have
not been any other changes to the Company's share capital since the
steps laid out in Note 1.
Reserves comprise of the following:
Foreign exchange reserves include the cumulative net change due
to changes in value of subsidiaries functional currency to USD from
the date of previous reporting period to date of current reporting
period.
Reorganisation reserves include the reserve created as part of
restructuring undertaken by the group as mentioned in Note 1.
Other reserves include statutory reserves and fair value
reserves.
Statutory reserves are the reserves representing a proportion of
profit that are required to be maintained in subsidiary companies
based on the local regulatory laws of the respective countries in
which the Group operates.
16. Share-based compensation
Pre-IPO - Management Incentive Award Plan and IPO Cash Bonus
Network International LLC, a subsidiary of the Group, operates
the following incentive plans
- Network International LLC Management Incentive Award Plan (MIP Plan)
MIP Plan is a pre-existing phantom share incentive plan. The MIP
awards have been made to 33 members of the Group's management,
including the Chief Executive Officer. Each award entitles
participants to receive a cash payment that is calculated by
reference to the offering price of the Group at Admission as
determined by the Remuneration Committee acting in good faith. The
Network International LLC MIP acts as a retention tool in respect
of the Group's senior management participants as the continued
vesting of the existing awards and payment in respect of the part
of the existing awards which have vested are conditional upon the
participant remaining employed within the Group.
- Network International LLC IPO Cash Bonus
Network International LLC has awarded eight members of the
Group's management (Grantees), including to the Chief Executive
Officer, cash bonus awards (Cash Bonus Awards) subject to and
conditional upon the Listing. Grantees are entitled to receive a
cash payment which is calculated by reference to the offering price
of the Group at Admission as determined by the Remuneration
Committee acting in good faith. The Cash Bonus Awards are subject
to time vesting. 50 % of the Cash Bonus Awards will vest on
Listing. One sixth of the Cash Bonus Awards will vest on each of
the first two anniversaries of the Listing, and a one sixth of the
Cash Bonus Award will vest on the date which is 30 months after
Listing.
The aggregate amount that has been allocated to the eligible
employees amounted to USD 33.2 million which will be paid to the
employees in tranches. As at 30 June 2019, the Group has recorded a
liability of USD 6.3 million based on the net present value of the
vesting condition and accordingly recognised a charge of USD 5.2
million in the Condensed consolidated statement of profit or
loss.
Post-IPO - LTIP
Post IPO, the Group established a long-term equity settled
share-based incentive plan (Network International Holdings Long
Term Incentive Plan "LTIP Plan") which is awarded to the eligible
employees and subject to the condition specified under the LTIP
plan rules. The Award will vest on the third anniversary of the
Date of Grant, unless an event occurs before then which causes the
Award to vest under the rules of the LTIP Plan. Multiple
performance conditions apply to the Award (including market and
non-market), and the Award may only vest to the extent that the
performance condition have been satisfied.
At the date of awards granted, the Group has calculated the fair
value of the grants to recognise a charge amounting to USD 0.1
million in the condensed consolidated statement of profit or loss
for the six-month period ended 30 June 2019 with a corresponding
increase in equity.
17. Earnings per share
Basic earnings / (loss) per share amounts are calculated by
dividing the profit / (loss) attributable to owners of the parent
by the weighted average number of ordinary shares in issue during
the financial period.
Diluted earnings / (loss) per share amounts are calculated by
dividing the profit / (loss) attributable to owners of the parent
by the weighted average number of ordinary shares in issue during
the financial period adjusted for the effects of potentially
dilutive options.
The basic and diluted earnings per share is based on earnings of
USD 14.7 million (30 June 2018 and 31 December 2018: USD 32.1
million and USD 26.2 million respectively) and USD 15.8 million for
continuing operations (30 June 2018 and 31 December 2018: USD 35.3
million and USD 46.7 million respectively) and net loss of USD 1.1
million for discontinued operations (30 June 2018 and
31 December 2018: USD 3.2 million and USD 20.5 million
respectively). The profit attributable to the equity holders for
the six months period ended 30 June 2019 is based on 500,000,000
shares
(30 June 2018 and 31 December 2018: 500,000,000 shares). There
is no change in the number of shares used in the calculation of
weighted average number of shares in issue because the principles
of reverse acquisition have been applied in accordance with IAS 33.
As there were no changes to the number of shares in issue by
Network International LLC during the comparative period and up to
the date of the reverse acquisition, and no changes to the number
of shares in issue by Network International Holdings Plc subsequent
to the reverse acquisition and up to 30 June 2019, the same number
is used in all periods presented.
Six months ended Year ended
30 June 31 December 2018
(Unaudited) (Audited)
2019 2018 2018
In USD / cents In USD / cents In USD / cents
-------------------------------- -------------------------- -------------------------- ----------------------------
Earnings per share (Basic and
diluted) 2.942 6.415 5.247
Earnings per share - continuing
operations
(Basic and diluted) 3.152 7.063 9.347
Earnings per share -
discontinued
operations
(Basic and diluted) (0.209) (0.648) (4.093)
-------------------------------- -------------------------- -------------------------- ----------------------------
18. Financial instruments
The Group measures the fair value using the following fair value
hierarchy that reflects the significance of input used in making
these measurements.
Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
Level 2: Inputs other than quoted prices included within Level 1
that are observable either directly
(i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using: quoted market prices in
active markets for similar instruments; quoted prices for identical
or similar instruments in markets that are considered less than
active; or other valuation techniques in which all significant
inputs are directly or indirectly observable from market data.
Level 3: Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments for which significant unobservable adjustments
or assumptions are required to reflect differences between the
instruments.
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy.
Accounting classifications and fair values
Carrying value Fair value
-------------------------------- ------------------------------------------------
As at 30 June 2019 (Unaudited) Financial
(USD'000) assets Financial liabilities Total carrying value Total fair value Level 1 Level 2 Level 3
---------- ---------------------- --------------------- ----------------- -------- -------- ---------
Financial assets measured at
fair value
Investment securities 246 - 246 246 - 246 -
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- ---------
Financial assets not measured
at fair value
Scheme debtors 214,753 - 214,753 214,753 - - 214,753
Trade and other receivables 89,516 - 89,516 89,516 - - 89,516
Restricted cash 86,722 - 86,722 86,722 86,722 - -
Cash and cash equivalents 56,381 - 56,381 56,381 56,381 - -
Long term receivables 592 - 592 592 - - 592
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- ---------
447,964 - 447,964 447,964 143,103 - 304,861
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- ---------
Financial liabilities not
measured at fair value
Merchant creditors - 189,871 189,871 189,871 - - 189,871
Trade and other payables - 135,928 135,928 135,928 - - 135,928
Borrowings - current - 182,426 182,426 182,426 - - 182,426
Other long-term liabilities - 22,516 22,516 22,516 - - 22,516
Borrowings - non-current - 243,816 243,816 243,816 - - 243,816
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- ---------
- 774,557 774,557 774,557 - - 774,557
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- ---------
Accounting classifications and fair values
Carrying value Fair value
-------------------------------- -----------------------------------------------
As at 30 June 2018 (Unaudited) Financial
(USD'000) Assets Financial liabilities Total carrying value Total fair value Level 1 Level 2 Level 3
---------- ---------------------- --------------------- ----------------- -------- -------- --------
Financial assets measured at
fair value
Investment securities 13,491 - 13,491 13,491 - 13,491 -
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- --------
Financial assets not measured
at fair value
Scheme debtors 149,796 - 149,796 149,796 - - 149,796
Trade and other receivables 85,797 - 85,797 85,797 - - 85,797
Restricted cash 98,955 - 98,955 98,955 98,955 - -
Cash and cash equivalents 125,061 - 125,061 125,061 125,061 - -
Long term receivables 553 - 553 553 - - 553
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- --------
460,162 - 460,162 460,162 224,016 - 236,146
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- --------
Financial liabilities not
measured at fair value
Merchant creditors - 225,470 225,470 225,470 - - 225,470
Trade and other payables - 91,746 91,746 91,746 - - 91,746
Borrowings - current - 102,683 102,683 102,683 - - 102,683
Other long-term liabilities - 13,452 13,452 13,452 - - 13,452
Borrowings - non-current - 279,399 279,399 279,399 - - 279,399
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- --------
- 712,750 712,750 712,750 - - 712,750
-------------------------------- ---------- ---------------------- --------------------- ----------------- -------- -------- --------
Accounting classifications and fair values
Carrying value Fair value
---------------------------------- -------------------------------------------------
As at 31 December 2018 (Audited) Financial
(USD'000) Assets Financial liabilities Total carrying value Total fair value Level 1 Level 2 Level 3
---------- ---------------------- --------------------- ----------------- --------- -------- ---------
Financial assets measured at fair
value
Investment securities 246 - 246 246 - 246 -
---------------------------------- ---------- ---------------------- --------------------- ----------------- --------- -------- ---------
Financial assets not measured at
fair value
Scheme debtors 222,693 - 222,693 222,693 - - 222,693
Trade and other receivables 73,848 - 73,848 73,848 - - 73,848
Restricted cash 71,896 - 71,896 71,896 71,896 - -
Cash and cash equivalents 60,275 - 60,275 60,275 60,275 - -
Long term receivables 740 - 740 740 - - 740
---------------------------------- ---------- ---------------------- --------------------- ----------------- --------- -------- ---------
429,452 - 429,452 429,452 132,171 - 297,281
---------------------------------- ---------- ---------------------- --------------------- ----------------- --------- -------- ---------
Financial liabilities not
measured at fair value
Merchant creditors - 185,523 185,523 185,523 - - 185,523
Trade and other payables - 116,575 116,575 116,575 - - 116,575
Borrowings - current - 147,691 147,691 147,691 - - 147,691
Other long-term liabilities - 24,693 24,693 24,693 - - 24,693
Borrowings - non-current - 279,297 279,297 279,297 - - 279,297
---------------------------------- ---------- ---------------------- --------------------- ----------------- --------- -------- ---------
- 753,779 753,779 753,779 - - 753,779
---------------------------------- ---------- ---------------------- --------------------- ----------------- --------- -------- ---------
19. Contingencies and commitments
(Unaudited) (Audited)
30 June 2019 30 June 2018 31 December 2018
USD'000 USD'000 USD'000
------------------------ ------------- ------------- -----------------
Contingent liabilities 4,832 6,294 4,966
Commitments 9,762 6,274 11,497
------------------------ ------------- ------------- -----------------
14,594 12,568 16,463
------------------------ ------------- ------------- -----------------
Contingent liabilities include guarantees provided by the Group
through banks for contractual obligations to third parties. Prior
period contingencies also include contingent liabilities for tax
related matters, which have been settled subsequently. Commitments
represents Contracts entered or Purchase orders issued by the Group
for purchase of goods or availing services related to Capital or
Operating expenditure against which goods and services have not
been received as at the reporting date.
20. Subsequent events
There were no subsequent events identified until the date of the
issuance of these condensed consolidated interim financial
statements.
APPIX -
Alternative Performance Measures and Key Performance
Indicators
Alternative Performance Measures:
The Group uses these alternative performance measures to enhance
the comparability of information between reporting periods, by
adjusting for uncontrollable or one-off items, to aid the user of
the financial statements in understanding the activities taking
place across the Group. In addition, these alternative measures are
used by the Group as key measures of assessing the Group's
underlying performance on day-to-day basis, developing budgets and
measuring performance against those budgets and in determining
management remuneration.
Constant Currency Revenues
Constant Currency Revenue is current period revenues
recalculated by applying the average exchange rate of the prior
period to enable comparability with the prior period revenues.
Foreign currency revenue is primarily denominated in Egyptian Pound
(EGP); the average rate of one EGP per USD for first half of 2018
and 2019 are 17.8 and 17.3 respectively.
Contribution
Contribution is defined as business segment revenues less
operating costs (personnel cost and selling, operating & other
expenses) that can be directly attributed to or controlled by the
segments. Contribution does not include allocation of shared costs
that are managed at group level and hence shown separately under
central function costs.
Underlying EBITDA
Underlying EBITDA is defined as earnings before interest, taxes,
depreciation & amortisation, impairment losses on assets (if
any), gain on sale of investment securities (if any), share of
depreciation of an associate and specially disclosed items
affecting Underlying EBITDA.
Underlying EBITDA Margin Excluding Share of an Associate
Underlying EBITDA Margin Excluding Share of an Associate is
defined as Underlying EBITDA before Share of an Associate divided
by the revenues.
Underlying Net Income
Underlying Net Income represents the Group's Profit from
continuing operations adjusted for impairment losses on assets (if
any), gain on disposal of investment securities (if any) and
specially disclosed items.
Underlying Free Cash Flow
Underlying Free Cash Flow is calculated as the profit from
continuing operations adjusted for depreciation & amortisation,
impairment losses (if any), net interest expense, taxes, gain on
disposal of investment securities, share of depreciation of an
associate, specially disclosed items affecting Underlying EBITDA,
changes in working capital before settlement related balances,
taxes paid and maintenance capital expenditure.
The Group uses Underlying Free Cash Flow as an operating
performance measure that helps Management determine the conversion
of Underlying EBITDA to Underlying Free Cash Flow. The Group only
includes maintenance capital expenditure in the calculation of
Underlying Free Cash Flow as the other categories of capital
expenditure are either one off in nature (i.e. Transformation) or
are discretionary (i.e. Growth).
Underlying Effective Tax Rate
The Group's Underlying Effective Tax Rate is defined as the tax
expense (excluding taxes for legacy matters) as a percentage of the
Group's Underlying Net Income before Tax.
Underlying Earnings Per Share (EPS)
The Group's underlying EPS is defined as the underlying net
income (as explained above) divided by the number of ordinary
shares as at 30 June 2019 (i.e. 500,000,000).
Key Performance Indicators:
To assist in comparing the Group's financial performance from
period to period, the Group uses certain key performance indicators
which are defined as follows.
Total Processed Volume (TPV) (USD m)
TPV is defined as the aggregate monetary volume of purchases
processed by the Group within its merchant solutions business
line.
Number of cards hosted (m)
Number of cards hosted is defined as the aggregate number of
cards hosted and billed by the group within its issuer solutions
business line.
Number of transactions (m)
Number of transactions is defined as the aggregate number of
transactions processed and billed by the Group within its issuer
solutions business line.
(1) Select Financial includes Alternative Performance Measures
(APMs) that are arrived at by adjusting specially disclosed items
(SDIs) from the reported numbers, the rationale for which is
detailed on Page 10. See details in the Appendix for APMs and
definition of KPIs and refer Note 3 in the condensed consolidated
interim financial statements for the reconciliation of reported
figures to the APMs.
(2) Alternative Performance Measures (APMs) are arrived at by
adjusting specially disclosed items (SDIs) from the reported
numbers, the rationale for which is detailed in Page 10. See
details in the Appendix for APMs
3 See Note 3 of the condensed consolidated interim financial
statements for the reconciliation of reported figures to the
APMs
(4) Includes share of depreciation from an associate amounting
to USD 1.9 million (2018: USD 1.4 million)
(5) Maintenance capital expenditure refers to capital
expenditure required to be incurred for operational needs
(additions or improvements) to sustain the current level of
operations of the Group
(6) See details in the appendix for Alternative Performance
Measures (APMs)
(7) See details in the appendix for Alternative Performance
Measures (APMs)
(8) Director's fees has have been disclosed under consolidated
statement of changes in equity in the comparative periods in line
with the interpretation and provisions of the UAE laws.
9 Director's fees has have been disclosed under consolidated
statement of changes in equity in the comparative periods in line
with the interpretation and provisions of the UAE laws.
(10) Share based compensation includes a management incentive
award plan and IPO cash bonus charge amounting to USD 5.2 million
(2018: USD 0.9 million) and LTIP plan charge amounting to USD 0.1
million (2018: nil). Refer to note 16 for details.
(11) Includes expenses incurred in relation to the listing
amounting to USD 13.5 million (2018: Nil)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR VXLFFKVFLBBV
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