FIN.L Regulatory News (FIN)

20 August 2019

Finablr PLC ("Finablr") interim results for six months ended June 30, 2019

Finablr reports Group Adjusted Income growth of 9.1% year-on-year (YoY) to US$742million and Adjusted EBITDA growth of 26.9% YoY to US$103million; reaffirms guidance.

Notes:

1. Adjusted Group Income is calculated as total income, as adjusted for disposed /discontinued operations & non-core operations and impairments, entities not included in the financials but being brought into the group as part of reorganization, 100% of Income from JVs and associates, presented on a Constant Exchange Rate (CER) basis. The constant-currency financial information has been calculated by applying the 2019 period average exchange rate to the Group's actual performance in the prior period. A reconciliation of the Group's Adjusted Income and EBITDA to the reported numbers is given Financial Review Section of this report.

2. Adjusted Group EBITDA is calculated as Profit before interest, taxes, depreciation and amortization adjusted as adjusted for disposed /discontinued operations & non-core operations and impairments, entities not included in the financials but being brought into the group as part of reorganization, 100% of Income from JVs and associates and exceptional & ene off costs presented on a CER basis. A reconciliation of the Group's Adjusted Income and EBITDA to the reported numbers is given Financial Review Section of this report.

3. Net Debt is calculated as gross debt (comprising borrowings excluding borrowings from related parties) minus usable cash.

4. Basic and Diluted Earnings per Share (EPS) are the same. The figure is in US$.

5. FY 2018 numbers restated and presented on a CER basis.

6. Adjusted EBITDA margin calculated as Adjusted Group EBITDA / Adjusted Group Income.

7. Free Cash Flow is calculated as Group Adjusted EBITDA minus maintenance capital expenditure.

8. Usable Cash is calculated as reported bank balances and cash minus client money and net due to financial institutions, working capital cash in vaults and tills and other cash, which comprises buffer cash, regulatory cash and bank overdrafts and other relevant short-term bank loans.

FINANCIAL HIGHLIGHTS

·; Group Adjusted Income of US$742.2million in H1 2019, up 9.1% (H1 2018 US$680.5million).

o Income growth across all business segments

o B2B and Payment Technology Solutions Adjusted Income up 20.5% to US$161.0million

·; Group Adjusted EBITDA up 26.9% to US$103.3million (US$81.4million in H1 2018)

o 195 bps EBITDA margin expansion, to 13.9%

o Highest segmental contribution from B2B and Payment Technology Solutions

·; Aggregate processed volume of US$64.9billion for H1 2019 (H1 2018 US$56.7billion)

o Stable take rates across the platform

·; Net debt of US$334.1million, reduced by US$230.9million from 31 December 2018

o Group Adjusted Free Cash Flow of US$99million with high conversion ratio

o Usable cash of US$486.2million (US$311.7million FY 2018)

o Net debt/ LTM EBITDA ratio 1.4x at end of H1 2019 versus 2.7x at end of 2018

·; Total Capex of US$44million in H1 2019, of which US$22million relating to Technology 

Promoth Manghat, Group Chief Executive Officer:

"Finablr delivered strong results at the upper end of our guidance, with growth in each of our three segments and across our channels and products. B2B and Payment Technology Solutions, our fastest growing segment and now the single largest contributor to Group EBITDA, enjoyed growth from existing customers and continued pipeline momentum.

We were disciplined in the execution of our strategy as we continued with our technology transformation, created new partnerships and focused on high growth markets. 

The markets in which we operate are characterized by increasing mobility and demand for invisible payments by consumers and businesses. Our strong first half results underscore this trend. Finablr's platform, combining global regulatory licencing, omni-channel distribution and differentiated technology, uniquely positions us to continue capturing these opportunities.

We expect to perform in line with the guidance that we shared at the time of our IPO."

OUTLOOK

The Group reaffirms the guidance and outlook it provided at the time of its IPO, namely:

Over the medium term, the Group is targeting high single-digit Group Adjusted Income growth, driven by continued double-digit growth in the Cross-Border Payments & Consumer Solutions and B2B & Payment Technology Solutions segments, which are expected to represent approximately 50% of Group Adjusted Income over the same time. In the B2B & Payment Technology Solutions segment, the Group's target is to achieve an additional US$150million in Segment Adjusted Income in the medium term.

The Group is also targeting a Group Adjusted EBITDA margin of 20.0% in the medium term, driven by changes in the Group's business mix between its segments and segmental margin expansion.

The Group is targeting capital expenditure to trend towards 3.0 to 4.0% of Adjusted Income, with a leverage ratio remaining under 2.5x net debt to adjusted EBITDA, and an effective tax rate of 18.0 to 20.0%, over the medium term.

OTHER INFORMATION

This document represents Finablr's half-yearly report for the purposes of the Disclosure and Transparency Rules (DTRs) issued by the Financial Conduct Authority (DTR 4.2). In this context: (i) the condensed set of financial statements can be found from page 20; (ii) pages 5 to 18 comprise the interim management report; and (iii) the Directors' responsibility statement can be found on page 19. No material related parties' transactions additional to those disclosed in the prospectus published by Finablr PLC on 15 May 2019 have taken place in the first six months of the year.

ENQUIRIES

Finablr

Ryan Ayache, Head of Investor Relations +971 56 681 53 21

Faiz Akbar Habib, Head of Group Communications +971 52 623 11 13 / +44 7912 895375

Brunswick Group

Gill Ackers, Diana Vaughton +44 207 404 5959

ANALYST AND INVESTOR WEBCAST

Finablr will hold a webcast at 9.00 am BST on Tuesday 20 August 2019 which can be accessed here.

To participate in the webcast via telephone and to submit questions please dial in before the start of the webcast.

UK: +44 (0)330 336 9105

UAE: 8000 3570 2653

US: +1 323 794 2551

Conference ID: 3365338

ABOUT FINABLR

Finablr (www.finablr.com) is a global platform which provides Cross-Border Payments and Consumer Solutions, Consumer Foreign Exchange Solutions and B2B and Payment Technology Solutions to consumers and businesses in the large and growing payments and foreign exchange market. In the year ended 31 December 2018, Finablr processed more than 150million transactions and the U.S. dollar equivalent of US$114.5billion in volumes, touching over a billion lives. As at 31st December 2018, the Group had more than 23million retail customers and was serving over 1,500 corporate and institutional partners, including banks, financial institutions, supermarkets, foreign exchange specialists, mobile wallet operators and payments and technology companies such as Google India and WeChat Pay.

CAUTIONARY STATEMENT

This announcement may contain forward-looking statements, including 'forward-looking statements' within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts.

These forward-looking statements and other statements contained in this document regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Finablr group (the "Group"). Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. Important factors that could cause the Group's actual results to so vary include, but are not limited to: global and regional economic, social and political changes; fluctuations in foreign exchange rates; rapid technological changes in the financial services market; actions taken by the Group's competitors, such as consolidation of key competitors; the loss of a trademark or diminution in the perceived quality associated with the Group's brands; new or existing legal, regulatory and licensing requirements, including anti-money laundering, sanctions and anti-bribery laws; status of operations of the Group's computer and communication systems, including the its proprietary processing platforms, as well as third-party systems; and actions of the Group's agents and third-party partners and service providers.

Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

PERFORMANCE OVERVIEW

(Except where otherwise stated, all numbers and commentary in this section are stated on an adjusted and constant exchange rate basis)

Group Adjusted Income in H1 2019 grew 9.1% YoY to US$742.2million, on the back of higher processed volumes and stable take rates across the platform.

Group Adjusted EBITDA was US$103.3million, up 26.9% YoY, reflecting a 195bps expansion in Group Adjusted EBITDA margin. This was driven by improved margins in all segments and a mix shift reflecting the strong growth in B2B and Payment Technology Solutions.

Usable cash increased to US$486.2million at end of H1 2019, versus US$311.7million at year-end 2018.

Given the low capex and growing EBITDA, the Group continues to generate healthy free cash flows with conversion rates above 90%.

Seasonality

The Group is subject to seasonality as the Consumer Foreign Exchange Solutions primarily serves the leisure segment of the travel industry, which peaks during the summer in the Northern hemisphere where this business is present. Other seasonal factors such as migrant worker remittances, which are higher during festival seasons, may also affect the Group's quarterly and half yearly results of operations.

Historically, Income has generally shown a 45:55 split over H1 and H2, with EBITDA trending towards 40:60.

Segmental Overview

Notes:

1. Segment Adjusted Income is calculated as income by segment, as adjusted for entities not included in the financial statements and 100% of JVs and associates and CER.

2. Segment Adjusted EBITDA is calculated as EBITDA by segment, as adjusted for entities not included in the financial statements and 100% of JVs and associates and CER.

3. Segment Adjusted EBITDA margin calculated as Segment Adjusted EBITDA / Segment Adjusted Income. 

4. Take rates are defined as Segment Adjusted Income divided by the corresponding processed volumes

All three segments delivered growth in H1 2019. Higher processed volumes reflect the Group's investments across its brands and platforms, and the trust of our customers, regulators and stakeholders. During the period, across brands and channels, Finablr deployed new assets and technologies, gained market share and maintained take rates across the platform.

Cross-Border Payments and Consumer Solutions ('Cross-Border Payments')

Finablr offers the convenience and simplicity of moving money globally through a full suite of cross-border payment solutions. This segment caters to customer preferences across digital and physical channels, diverse pay-in and pay-out modes, for purposes ranging from peer-to-peer payments supporting individual needs, to large investment flows or corporate payments.

The segment continued to grow strongly at 11.6% YoY, increasing its contribution to Group Adjusted Income to 25.5% from 25.0% in H1 2018. The segment saw rising volumes across its network. Geographically, the Middle East and Africa is a key growth region, with most operations in the region showing sustained volume expansion.

Segment Adjusted EBITDA increased by 14.0% to US$56.7million in H1 2019. Strong volumes and a slight uptick in margins were the key drivers.

Consumer Foreign Exchange Solutions ('Consumer FX')

In a world of increasing mobility, Finablr fulfils the needs of global travellers through multiple channels spanning ATMs, online portals, mobile applications and stores. Key offerings in the segment include purchase and sale of foreign currency, issuance of prepaid travel cards and value-added services such as VAT refund services.

Consumer FX continued to grow in H1 2019, with Segment Adjusted Income increasing 3.0% in H1 2019 vs H1 2018.

Income growth was driven by stronger margins in the Americas; expansion of the channel footprint through the deployment of new ATMS in Europe and additional stores and kiosks in Asia and the Middle East; and new or renewed contracts at airports in Germany and the Middle East. This was partially offset by the Group's strategic decision to exit contracts in France and Turkey. 

Take rates in the segment have increased by 82bps to 5.53% in H1 2019 from H1 2018. Segment Adjusted EBITDA was US$37.6 million, an increase of 34.4% vs H1 2018. This growth was driven by Segment Adjusted EBITDA margin expanding by 229bps to 9.8%, with the improving margin reflecting the reduced cost base that has been achieved through the renegotiation and termination of certain airport contracts.

B2B and Payment Technology Solutions ('B2B')

Over the past 40 years, Finablr has developed robust payments and foreign exchange capabilities backed by a scalable technology platform, a broad and diversified distribution network and operating licenses in key markets. This segment offers a combination of technology, licensing and distribution capabilities enabling our partners to provide a wide range of services spanning cross-border payments, foreign exchange, stored value platforms, digital gifting and acquiring services to their customers.

The B2B segment continued to be the fastest growing segment with a 20.5% Adjusted Income growth rate in H1 2019, contributing to 21.7% of Group Adjusted Income (vs. 19.6% in H1 2018). Income growth was driven by increased volumes in Asia, Africa and Brazil due to higher demand for banknotes, as well as a ramp-up of volumes in Payment Technology Solutions contracts with Mobile Wallet Operators and Payments and Technology companies including Google in India and The World Bank. 

Segment Adjusted EBITDA reached US$60.3million in H1 2019, up 26.9% YoY (US$47.5million in H1 2018), benefitting from growth in volumes as marginal costs decreased.

With an Adjusted EBITDA Margin of 37.4%, the B2B segment was the largest contributor to Group Adjusted EBITDA.

Shared and allocated costs

Central and shared costs grew by 22.7% YoY to US$59.3million, from US$48.3million in H1 2018.

This reflects the significant investments in talent made during H2 2018 both to prepare the business for the next phase of growth and to enhance the Group's technical teams. H1 2019 included the full run-rate costs of these investments, with central and shared costs expected to be at a similar level in H2 2019.

CEO REPORT

IPO and Group reorganization

Finablr was successfully admitted into the Premium segment of the Main Market of the London Stock Exchange on May 15, 2019. Prior to the listing, the Group completed the legal restructuring that resulted in Finablr PLC being the ultimate owner of all the Group companies.

Maiden results as a public company

Finablr is pleased to report a strong set of results for the H1 2019 period; our first as a publicly listed company. Finablr generated Group Adjusted Income of US$742.2million in H1 2019, reflecting a growth of 9.1% YoY. Group Adjusted EBITDA for the period stood at US$103.3million, a growth of 26.9% YoY assisted by margin expansion of 195bps to 13.9%.

The Group continued to deliver robust financial performance, driven by the strengths of its integrated technology platform, omni-channel distribution capabilities, global regulatory licencing, and end-to-end control across the payments value chain. Overall, the Group remains on track with expectations for core business performance in line with the medium-term guidance given at the time of its IPO.

Segment Update

The Group demonstrated strong financial performance with growth across all business segments, with aggregate volumes of US$64.9billion processed in H1 2019, representing a YoY growth of 14.4%. The pricing environment for the Group remained stable with take rates across business segments in line with expectations. The Group benefits from attractive secular growth drivers across each of its business segments, whilst the diversified and global nature of the Group's operations also provides resilience to macro shocks or headwinds in any geography or segment.

Cross-Border Payments and Consumer Solutions

The Cross-Border Payments segment registered robust growth with segment volumes of $21.8billion processed in H1 2019. The Group's global regulatory licenses, omni-channel distribution capabilities, and control across the cross-border payments value chain creates strong commercial advantages.

During the period, the Group witnessed consistent market share gains. Additionally, the Group is profiting from its early presence in key markets that are at the cusp of digital adoption. Digital volumes are benefitting from the strong uptake for online, mobile and self-service kiosks solutions. The convenience of these services is also driving customer adoption. Marketing investments have begun to yield good results particularly in digital, delivering improved customer acquisition and engagement metrics.

The Group continues to make significant progress in rationalizing and optimizing its channel mix. Emphasis is on broadening coverage of low touch digital channels including accelerated deployment of self-service kiosks across key markets. In the period, over 100 self-service kiosks were deployed in the UAE, which have begun to contribute to transaction and volume growth. Additionally, the Group also continues to strengthen its global distribution network with partnerships initiated with key ecosystem partners including banks, Money Transfer Operators (MTO's) and Mobile wallet operators in H1 2019. 

Consumer Foreign Exchange Solutions

The Consumer FX segment delivered positive revenue performance in H1 2019, up 3% YoY, capitalizing on the continued growth in travel and tourism. The focus on enhancing efficiencies and exiting low profitability and low margin markets helped drive significantly improved financial performance despite a slight reduction in volumes.

The strength of Finablr's brands and the Group's position as the leading global provider of consumer FX services is key to attracting and retaining partners. The Group renewed contractual agreements with Heathrow airport.

B2B and Payments Technology Solutions

The B2B segment represents the fastest growing and most profitable segment in the Group. Volumes processed in the segment grew 27.5% on a YoY basis to reach $36.1billion across the suite of services spanning cross border payments, foreign exchange, and payments technology solutions. The Group continues to see a strong trend of financial intermediation by payments and technology companies keen to use Finablr's capabilities.

Our global regulatory licensing, omni-channel distribution capabilities and early investments in building the technology platform positions us well to capture opportunities with global partners. Overall pipeline momentum remains strong across existing and new clients. In the period, the Group launched its partnership with LG in North America, integrating its digital gifting capabilities within the LG Pay digital wallet.

Continued progress on Strategy Execution

The Group has a five-pillar strategy focused on strategic partnerships, accelerating digital revenues, targeting growth markets, enhancing engagement & community building and driving innovation through strategic investments and selective bolt-on acquisitions. We continued to make progress across all these strategic imperatives.

Our sales momentum remains strong and we are engaged in conversations with some of the largest technology platform providers and global corporations to expand relationships and to drive innovative payments experiences for their customer bases. The low marginal cost that Finablr's platform offers creates strong commercial advantages for partners.

Emerging markets represent an important area of focus for the Group and we are seeing significant traction and growth in digital adoption as these markets mature. H1 2019 saw sustained expansion of the Group's operations in high growth markets particularly on the digital side with continued volume growth and new solutions launched. A notable development here was the acquisition of a majority interest in BayanPay a provider of payment aggregation and mobile wallet solutions in Saudi Arabia, strengthening the Group's ability to tap the significant potential in the Kingdom.

The Group continues to pursue investments and bolt on acquisitions that will build its IP, capabilities and commercial synergies. In H1 2019, the Group completed the acquisition of PEaaS to enhance product development capabilities, particularly in customer experiences for invisible payments across Finablr and partner assets.

Additionally, the Group also progressed its IP strategy in the period by filing its first provisional patent application covering c.100 individual patents with an additional 20 innovation disclosures in the process of being drafted for filing. A holistic framework to develop IP assets and protect the Group's IP through continued patent applications has been institutionalized internally.

Technology Transformation and Product Initiatives

Our ongoing technology transformation program remains on track and on budget.

Technology represents a key lever for the Group to drive top and bottom-line growth through enhancements across the platform. We continue to evaluate, invest in, and deploy new IP and technologies such as blockchain, AI and ML, IoT, voice, and responsible profiling and analytics. These will enable us to deliver differentiated experiences for our customers, to optimize the movement of funds across our global infrastructure, and to enhance our risk management and fraud mitigation capabilities.

Promoth Manghat

Group Chief Executive Officer

20th August 2019

FINANCIAL REVIEW

During the first half of the 2019 financial year, the Group continued to demonstrate growth across all business segments.

Reported and Adjusted numbers

The discussion of financial results in this document contains certain non-IFRS financial measures. The Group believes these measures provide investors with additional information about underlying results and trends, as well as insight into some of the metrics used to evaluate the business. These measures include Group Adjusted Income, Group Adjusted EBITDA, Group Adjusted EBITDA Margin, Group Adjusted Free Cash Flow, Group Adjusted Cash Conversion, Group Usable Cash, Segment Adjusted Income, Segment Adjusted EBITDA, and Segment Adjusted EBITDA margin.

Given below is a table that reconciles the Group Adjusted Income and EBITDA to the reported numbers.

ADJUSTED NUMBERS

Adjusted Income

All segments contributed to Adjusted Income growth of 9.1% YoY. Growth was driven by a mix of growing physical and digital assets, new contracts and market share gains.

The Cross-Border segment witnessed strong top-line growth of 11.6% YoY for the period through higher processed volumes, consistent market share gains in its key markets and further expansion in its digital initiatives. H1 2019 saw the deployment over 100 self-service kiosks in the UAE which have begun to contribute meaningfully towards overall transaction and volume growth.

Growth in our Consumer FX segment remains in line with sector trends. The launch of VAT refunds at Dubai and Abu Dhabi Airports and the addition of new ATMs in Italy are the latest examples of our commitment to serving customers at key locations on economically attractive terms. During the period, we remained disciplined in our decisions on whether to renew or renegotiate airport contracts and this focus contributed to the increase in margins in this segment.

The B2B segment continues to be a key growth engine with 20.5% growth YoY, reflecting the group's ability to deliver innovative services to our consumers and technology solutions to enterprises globally. The network effect of added products across our diversified platform is also deepening our penetration with existing clients, creating win-win partnerships that will continue to create value for our customers and our shareholders.

Adjusted EBITDA and shared costs

Group Adjusted EBITDA for the period grew by 26.9% YoY with improvement across all segments.

The Cross-Border Payments segment's Adjusted EBITDA reached US$56.7million in H1 2019, an increase of 14.0% vs H1 2018. Strong volumes and a slight uptick in margins were the key drivers.

The Consumer FX segment's Adjusted EBITDA was US$37.6million, an increase of 34.4% vs H1 2018. This growth was driven by an improved cost base from renegotiated or terminated airport contracts resulting in a margin expansion of 229bps to 9.8%, and increased transaction volumes.

The B2B segment's Adjusted EBITDA reached US$60.3million in H1 2019, an increase of 26.9% vs H1 2018, benefitting from growth in volumes as marginal costs decrease. With an Adjusted EBITDA margin of 37.4%, it was the largest contributor to Group Adjusted EBITDA. 

Central and shared costs grew by 22.7% YoY to US$60million, from US$48.3million in H1 2018. 2018 marked the start of significant investments relating to talent acquisition and preparation for the next phase of the Group's growth. In 2019, we expect to see the full year impact of the hiring done throughout 2018.

Business volumes and take rates

Take rates remained broadly stable across segments during the period, with a slight uptick in our Consumer FX segment driven by higher yields on certain products. Volumes continue to grow as anticipated, reflecting new physical and digital asset deployment, as well deepening and new partnerships leading to market share gains.

REPORTED NUMBERS

Income

Income increased by US$42.7million, or 6.2%, from US$690.8million in H1 2018 to US$733.6million in H1 2019. This increase was primarily due to increases in foreign currency exchange gains and fee income, which grew by US$36million or 5.4%, from US$669.8million in H1 2018 to US$705.8million in H1 2019.This increase was primarily due to a mix of growing physical and digital assets, new contracts and market share gains in all the three segments.

Expenses

Expenses decreased by US$65million, or 10.8%, from US$602million in H1 2018 to US$537million in H1 2019. This was primarily due to decrease in operating and administrative expenses following the adoption of IFRS 16: Leases, as lease expenses decreased by US$91million for H1 2019. Excluding the impact of IFRS 16, operating expenses increased by 4%. 

·; Employee's salary and benefits

Employee's salary and benefits increased by US$9.0million, or 3.8%, from US$237.6million to US$246.7million, primarily due to an increase in the proportion of higher skilled, higher cost employees in the workforce.

·; Operating and administrative expenses

Operating and administrative expenses decreased by US$74.1million, or 20.3%, from US$365.0million in H1 2018, to US$290.9million in H1 2019. This decrease was due to the impact of adoption of IFRS 16: Leases. 

Flotation costs

The statement of accounts for six months ended June 2019 includes costs incurred in relation to completion of the Company's Premium Listing on the London Stock Exchange. Of the costs related to the primary offering, US$21.0million has been deducted from the share premium account and US$1.1million has been charged to the consolidated statement of comprehensive income. The Flotation costs also include US$24.9million relating to part of the share-based incentive in relation to shares granted to senior management of the company without issue of fresh shares by the company in connection with initial public offering. Though there is no cash impact, IFRS 2 still requires that an expense be recognized where the benefits form part of the remuneration of employees for their services to the Company (even if the shares are settled by a shareholder rather than the Company itself).

Finance costs

Finance costs increased by US$20.1million, or 40.9% from US$49.2million in H1, 2018 to US$69.3million in H1 2019. The increase is primarily attributable to the effect of IFRS 16 which has resulted in increase of interest expense to the tune of US$21.1million offset by a reduction of interest expense on shareholder loans, which were waived as part of the reorganisation.

Depreciation and amortisation

Depreciation and amortisation increased by US$80.4million, or 193.3%, from US$41.6million in H1 2018 to US$121.9million in H1 2019. This increase was primarily due to adoption of IFRS 16, which has resulted in an increase of US$76million.

Liquidity and Capital Resources

The Group's principal liquidity requirements arise from funding operational expenses such as employees' salaries and benefits, rents, trading costs, servicing and repayment of loans, investments in technology, strategic investments and acquisitions. During the periods under review, the Group's liquidity needs were primarily funded with cash generated internally by operating activities and bank borrowings.

Cash flows

The table below sets out the changes to the Group's cash from operating, investing and financing activities in H1 2018 and H1 2019.

·; Net cash from operating activities

Net cash from operating activities increased by US$487.9million, or 377.0%, from US$129.4million for the period ended June 2018, to US$617.3million for the period ended June 2019. The change is largely attributable to an advance received from an existing B2B customer just prior to period end, which was settled post reporting period.

·; Net cash used in investing activities

Net cash in investing activities arose from the purchase of tangible and intangible assets US$43.9million, and investment in subsidiaries/joint ventures US$39.7million.

·; Net cash from/ (used in) financing activities

Net cash inflow from financing activities was mainly contributed by the proceeds from issue of share through the Initial Public Offering amounting to US$174.3million (gross proceeds minus share issue expense). The Group also repaid borrowings of US$37.5million during the period.

Capital expenditure

The table below sets forth the Group's capital expenditure for the periods indicated.

During the period, Finablr continued to invest in its digital capabilities and technology transformation. Overall capex spend was US$44million, of which US$39.7million was for growth, including US$22.1million for Technology. 

Outside of business as usual Capex, Finablr also increased its stakes in previously announced acquisitions BayanPay (US$17.0million) and PEaaS (US$10.8million). In the case of BayanPay, while the consideration was paid in June, post signing of transaction documents, the acquisition was completed only on August 1, 2019.

Debt

Gross debt at the end of June 2019 was US$820.3million with Net debt at US$334.1million, reduced by US$230.9million from 31 December 2018 due to loan repayments of US$37million and increase in useable cash from IPO proceeds of US$174.3million. Net Debt to EBITDA (LTM) has decreased to 1.4x as of June 30, 2019.

For the purpose of computation of gross debt, we have excluded the Obligations of Visa B shares amounting to US$18.2million as this is not covered under any of the existing covenant testing obligations. Moreover, a further US$104.8million (US$96.6million of current liabilities and US$8.3million of non-current liabilities) of borrowings by the Group's India operations have also been excluded, as this liability is offset by a corresponding asset in the Group balance sheet for an amount of US$119.5million. Similarly to the Obligations of Visa B shares, this borrowing is not covered under any of the existing covenant testing obligations.

Dividends

No dividend was declared for the period ending on June 30, 2019.

Rahul Pai

Group Chief Financial Officer

20th August, 2019

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks that could have a material impact on the Group's long-term performance as set out in the Group's IPO prospectus dated 15th May 2019 have not changed since the IPO and remain valid at the date of this report. Furthermore, the Group does not expect these risk factors to change materially for the coming six months period.

The key risks in no specific order of priority are:

·; Demand for the Group's products and services may be affected by global and regional economic, social and political changes.

·; The Group operates in competitive markets.

·; The Group's businesses and the markets in which they operate are subject to rapid technological changes.

·; The Group is subject to extensive legal, regulatory and licensing risks.

·; The Group's business is subject to extensive AML, sanctions and anti-bribery regulation, related compliance costs and third-party risks.

·; The Group is subject to extensive data protection and privacy legislation.

·; The Group's ability to remain competitive depends in part on its ability to protect its brands and reputation.

·; The Group is dependent on relationships with its agents and third-party partners and service providers to deliver its services and products.

·; The Group's B2B & Payment Technology Solutions segment income is dependent on a number of exclusive and non-exclusive customer relationships.

·; The Group may be unable to protect or continue to use its intellectual property.

·; The Group is dependent on information technology systems to operate its businesses.

·; The integrity, reliability and efficiency of the Group's internal controls and procedures may not be successful.

·; The Group's businesses are subject to currency exchange rate risk.

·; The Group is subject to counterparty risk.

·; The Group is reliant on its nostro bank accounts, primarily for U.S. dollars, as well as settlement currencies.

·; The Group's systems by nature of connectivity to an ecosystem of partner systems may fail due to a number of factors, including those beyond its control.

·; The Group may not be able to source U.S. dollar banknotes and other currencies on attractive financing terms or at all.

·; The Group's business is exposed to potential losses due to the high volume of banknotes it handles, as well as customer fraud.

·; The Group's developer platforms subject it to additional risks.

·; The Group is exposed to political, social and macroeconomic risks relating to the United Kingdom's potential exit from the European Union.

·; A significant change or disruption in international migration patterns could adversely affect the Group's business, results of operations and financial condition.

·; The Consumer Foreign Exchange Solutions segment operates a significant portion of its retail business through airport concessions.

·; The Group has grown, and may continue to grow, through acquisitions that give rise to risks and challenges.

·; The Group's growth strategy also depends on its ability to enter into strategic partnerships, enter new markets and further develop its product offering.

·; The Group requires access to capital to operate and grow its business, which may be impaired by its debt service obligations and covenant requirements.

·; The Group is subject to liquidity risk.

·; The Group's ability to attract and retain qualified management and specialist staff is critical to its success and growth.

·; A number of the Group's employees are unionised, and wage increases or work stoppages by the unionised employees may have a material adverse effect on the Group's business.

·; Litigation or investigations involving the Group or its agents could result in material settlements, fines or penalties and may adversely affect the Group's business, results of operations and financial condition.

·; The Group is subject to tax regulations and policies which are complex and subject to change.

·; The Group's insurance coverage may be insufficient to cover its losses.

·; Risks related to the Group's corporate structure

·; The majority ownership interest of the Group's UAE operations is held through trustee and nominee arrangements, which are in line with established market practice in the UAE but may be challenged under existing UAE legislation.

GOING CONCERN

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the directors continue to adopt the going concern basis in preparing the interim condensed financial statements.

Directors' Responsibility statement

The directors confirm that this unaudited condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and that to the best of their knowledge, the Business and Finance Reviews contained herein includes a fair review of:

·; The important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements as required by DTR 4.2.7R;

·; The principal risks and uncertainties for the remaining six months of the year as required by DTR 4.2.7R; and

·; Related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Group during the first six months of the current financial year as required by DTR 4.2.8R.

Details of the current Directors of Finablr PLC are available on our website at www.finablr.com

By order of the Board

Promoth Manghat

Group Chief Executive Officer

20th August 2019

Finablr PLC

Interim Consolidated Financial Statements

30 June 2019

INDEPENDENT REVIEW REPORT TO FINABLR PLC

Introduction

We have been engaged by Finablr PLC (the "Company", the "Group") 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 Interim Consolidated Income Statement, the Interim Consolidated Statement of Comprehensive Income, the Interim Consolidated Statement of Financial Position, the Interim Consolidated Cash Flow Statement, the Interim Consolidated Statement of Changes in Equity and related explanatory notes 1 to 25. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

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 Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

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.

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 United Kingdom. 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. 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.

Conclusion

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 International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Other matter

The comparatives shown in the condensed set of financial statements, contained within the interim report, for the six months ended 30 June 2018, are unaudited and not reviewed.

Ernst & Young LLP

London

20 August 2019

Notes:

1. The maintenance and integrity of the Finablr PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

FINABLR PLC

INTERIM CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2019

The attached notes 1 to 25 form part of these interim consolidated financial statements.

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2019

The attached notes 1 to 25 form part of these interim consolidated financial statements.

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2019

The attached notes 1 to 25 form part of these interim consolidated financial statements.

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2019

The attached notes 1 to 25 form part of these interim consolidated financial statements.

The interim consolidated financial statements were authorised for issue by the Board of Directors on 19 August 2019 and were signed on its behalf by:

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2019

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2019

The attached notes 1 to 25 form part of these interim consolidated financial statements.

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2019 (Unaudited)

The attached notes 1 to 25 form part of these interim consolidated financial statements.

FINABLR PLC

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2018 (unaudited and not reviewed)

The attached notes 1 to 25 form part of these interim consolidated financial statements.

1 CORPORATE INFORMATION

The interim consolidated financial statements of Finablr PLC and its subsidiaries (collectively the 'Group') for the six months ended 30 June 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard 34 (IAS 34) "Interim Financial Reporting" as adopted by the European Union (EU) and were authorised for issue by the Board of Directors on 19 August 2019.

Finablr PLC (the "Company" or "Parent'') is a Company which was incorporated in England and Wales on 26 July 2018. The Group is engaged in cross-border payments and consumer solutions, consumer foreign exchange solutions, business to business (B2B) and payments technology solutions businesses.

The Company completed its Premium Listing on the London Stock Exchange on 15 May 2019 by offering 175,000,000 shares of £1 each at a premium of 75 pence per share. The offering was made by issue of 87,653,174 new shares in the primary market and 87,346,826 promoter shares in the secondary market combining to 25% of total number of shares in the Company (700,000,000 shares). The Company's registered address is 17th Floor, The Tower, The Bower, 207 Old Street, London, EC1V 9NR, United Kingdom.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's combined historical financial information for the year ended 31 December 2018 which was part of the prospectus dated 15 May 2019 issued for the initial public offering (IPO). Comparative amounts presented for the interim consolidated balance sheet relate to the Group's position as at 31 December 2018. All other comparative amounts presented relate to the six months ended 30 June 2018 which are unaudited and not reviewed.

All notes to the interim consolidated financial statements relate to continuing operations.

The preparation of the interim consolidated financial statements requires management to make estimates and assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at the date of the interim consolidated financial statements. Although these estimates and assumptions are based on management's best judgement at the date of the interim consolidated financial statements, actual results may differ from these estimates.

The interim consolidated financial statements are unaudited but have been reviewed by the auditors and their review opinion is in included in this report.

The interim consolidated financial statements do not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

2.1 BASIS OF PREPARATION

The interim consolidated financial statements for the six months ended 30 June 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

Functional and reporting currency

The interim consolidated financial statements are presented in US Dollars as this is one of the most globally recognised currencies. Items included in the financial statements of individual Group companies are recorded in their respective functional currencies which is the currency of the primary economic environment in which each entity operates and converted into the Groups' presentation currency in accordance with the Groups' accounting policy on foreign currencies.

2.2 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE GROUP

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's combined historical financial information as at 31 December 2018, except for the adoption of new standards effective as of 1 January 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. 

New standards, interpretations and amendments adopted by the group (continued) 

The Group applies, for the first time, IFRS 16 Leases that requires restatement of previous financial statements. As required by IAS 34 Interim Financial Reporting, the nature and effect of these changes are disclosed below. Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the interim consolidated financial statements of the Group.

IFRS 16 'Leases'

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model. The standard is effective for annual periods beginning on or after 1st January 2019.

The main changes to the recognition and measurement of leases for lessees are:

·; At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability).

·; At the commencement date of a lease, a lessee will recognise an asset representing the right to use the underlying asset during the lease term (i.e. the right of use asset).

·; Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right of use asset.

The Group adopted IFRS 16 on 1st January 2019 using the modified retrospective approach utilising the practical expedients outlined in the standard. The Group:

·; Used a single discount rate to a portfolio of leases with reasonably similar characteristics;

·; Relied on its assessment of whether leases are onerous immediately before the date of initial application as an alternative to performing an impairment review;

·; Applied the short-term leases exemptions to leases with lease term that end within 12 months at the date of initial application;

·; Applied the low-value lease exemptions to leases with a net present value of less than USD 6,300;

·; Applied the intangible assets exemption.

The effect of adoption of IFRS 16 is as follows:

Impact on the statement of financial position (increase/(decrease)) as at 31st December 2018 (unaudited):

New standards, interpretations and amendments adopted by the group (continued)

a) Nature of the effect of adoption of IFRS 16

The Group has lease contracts for various items of property, plant, machinery, vehicles and other equipment. Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest (recognised as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in the statement of profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognised under Prepayments and Trade and other payables, respectively.

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases where it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. In accordance with the modified retrospective method, the Group applied IFRS 16 retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application. In applying the practical expedients of IFRS 16 outlined above, there was no adjustment to retained earnings upon transition. In accordance with the modified retrospective method, comparative information has not been restated.

Leases previously accounted for as operating leases

The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

The lease liabilities as at 1st January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:

Unaudited

*Weighted average incremental borrowing rate as at 1st January 2019 considered by Travelex is 13.30%. The rest of the Group has considered the discounting rate to be equal to the incremental borrowing rates at each of the specific geographies factored with the respective country risk premiums.

New standards, interpretations and amendments adopted by the group (continued)

b) Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which have been applied from the date of initial application:

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below USD 6,300). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business strategy).

New standards, interpretations and amendments adopted by the group (continued)

c) Amounts recognised in the statement of financial position and profit or loss

Set out below are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:

 Set out below are the amounts recognized in income statement for the six months ended 30 June 2019

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

·; Whether an entity considers uncertain tax treatments separately

·; The assumptions an entity makes about the examination of tax treatments by taxation authorities

·; How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

·; How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to be followed.

The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements.

Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company's and the subsidiaries' tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments.

New standards, interpretations and amendments adopted by the group (continued)

The Group determined, based on its tax compliance and transfer pricing study that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The interpretation did not have an impact on the consolidated financial statements of the Group.

Amendments to IAS 19: Plan Amendment, Curtailment or Settlement

The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event, and the discount rate used to remeasure that net defined benefit liability (asset).

These amendments had no impact on the consolidated financial statements of the Group as it did not have any plan amendments, curtailments, or settlements during the period.

Amendments to IAS 28: Long-term interests in associates and joint ventures

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate and joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures. These amendments are not expected to have material impact on the consolidated financial statements of the Group.

IFRS 3 Business Combinations

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1st January 2019, with early application permitted. These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where a joint control is obtained.

IFRS 11 Joint Arrangements

A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured.

An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1st January 2019, with early application permitted.

These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where a joint control is obtained. 

New standards, interpretations and amendments adopted by the group (continued)

IAS 12 Income Taxes

The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognised those past transactions or events.

An entity applies the amendments for annual reporting periods beginning on or after 1st January 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.

Since the Group's current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

IAS 23 Borrowing Costs

The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted.

Since the Group's current practice is in line with these amendments, they had no impact on the Interim consolidated financial statements of the Group 

2.3 SIGNIFICANT ACCOUNTING POLICIES

The Group's accounting policies dealing with material items are set out below.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, any acquisition date fair value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date and any resulting gain or loss is recognised in the income statement. It is then considered in the determination of goodwill.

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.

Significant accounting policies (continued)

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

Investments in joint ventures

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Entities whose economic activities are controlled jointly by the Group and others are initially recorded at cost and subsequently accounted for under the equity method. The investment is initially recognised at cost using the acquisition method. Any goodwill or fair value adjustments attributable to the Group's share in the entity are included in the carrying value of the investment.

All subsequent changes to the Group's share of interest in the equity of the joint venture are recognised in the Group's carrying amount of the investment. Changes resulting from the profit or loss generated by the joint venture are reported in the income statement.

When the Group's share of losses in an equity accounted investment exceeds its interest in the joint venture, the Group does not recognise further losses, unless obliged to make good these losses on behalf of the entity. If the entity subsequently reports profits, the Group resumes the recognition of its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognised.

Unrealised gains and losses on transactions between the Group and joint ventures are eliminated to the extent of the Group's interest in the entity. Amounts reported in the financial statements of the joint ventures have been reviewed to ensure consistency with the accounting policies of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, and then recognises the loss within 'Share of profit from joint venture' in the statement of profit or loss.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment.

The Group earns fees, commissions and currency margins on its products provided to customers and currency gains and losses on its currency positions and hedging activities which are recognised on an accruals basis. The key components of revenue are described below:

Significant accounting policies (continued)

Foreign currency exchange gains

Foreign currency gain is the difference between the cost and selling price of currency (foreign currency margin) and the revaluation of open foreign exchange positions to fair value and commissions earned on the sale and purchase of currencies. Margin and commission revenue is recognised as earned when the transaction occurs.

Commissions

Revenue earned through ATM transactions comprises commission-based fees on customers making ATM transactions and interchange fees and is recognised as earned when the transaction is made.

Revenue relating to outsourced travel money services for banknotes and wholesale banknote fulfilment consists of margin, commission and fees charged on the fulfilment of currency orders, net of rebates. Revenue is recognised when earned under the terms of the related contracts when the transaction is deemed to be fulfilled, which in the case of banknotes is normally on delivery. Commission, postage and telex and other income are recognised on an accruals basis.

Revenue from the sale of insurance policies is recognised at the time of sale of the insurance policy and represents the commission earned on the sale of the policy.

Revenue from travellers' cheques consists of interest earned on the investment of funds generated from the issue of travellers' cheques for the period from their original issue to the date of their encashment. This is recognised in the period to which it relates. Commissions and fees are recognised when earned.

Commission on VAT refund is recognised as and when the refund is made to the customer.

Income from business support services

Revenue from back office support services is recognised when the services are rendered.

Finance income

Interest income is recognised on an effective interest method.

Other income

Dividend income is recognised when the right to receive dividends is established.

Property rental income is recognised on a straight-line basis over the life of the lease.

Foreign currencies

The Group's interim consolidated financial statement is presented in USD, which is also the Company's functional currency. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

i) Transactions and balances

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Significant accounting policies (continued)

Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group's net investment in a foreign operation. These are recognised in OCI until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).

ii) Group companies

On consolidation, the assets and liabilities of foreign operations are translated into USD at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is reclassified to profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

Intangible assets

i) Goodwill

The excess of the fair value at the date of acquisition of the investments in subsidiaries over the fair value of net assets acquired which is not otherwise allocated to individual assets and liabilities is determined to be goodwill. Goodwill is initially measured at cost, and is reviewed at least annually for impairment. Any impairment is recognised immediately in the Group's consolidated statement of profit or loss and is not subsequently reversed.

ii) Concession contracts & brand names

Concession contracts and brand names acquired in a business combination are recognised at fair value at the acquisition date. Concession contracts and brand names have a finite useful life and are carried at cost and amortised over their useful life. Any impairment is recognised immediately in the Group's consolidated statement of profit or loss and is not subsequently reversed.

iii) Licenses

Licenses acquired in a business combination are recognised at fair value at the acquisition date. Licenses have an indefinite useful life and are reviewed at least annually for impairment.

iv) Trademarks

Trademarks acquired in a business combination are recognised at fair value at the acquisition date. Trademarks have an indefinite useful life and are reviewed at least annually for impairment.

v) Customer relationships

Customer relationships represent the cost incurred when acquiring major outsourcing agreements and relationships recognised on business combinations. These are amortised on a straight-line basis over the term or expected term of the relationships and are reviewed at least annually for impairment.

Other intangible assets, which comprise non-compete agreements and lease rights at retail locations, are measured at cost and amortised over their expected useful lives.

Significant accounting policies (continued)

vi) Website development

Website development acquired in a business combination is recognised at fair value at the acquisition date. Website development is amortised over the useful economic life of three years and assessed for impairment whenever there is an indication that the website development may be impaired. The amortisation period and the amortisation method for website development is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on website development is recognised in the statement of profit or loss in the expense category that is consistent with the function of the website development.

vii) Other intangible assets

Computer software comprises off the shelf packages, modified to meet the Group's requirements, software developed in house, including the development of in house digital capabilities, and software purchased as part of business combinations. Internal and external costs are capitalised to the extent that they are directly attributable to the development of modified software provided they meet the recognition criteria under IAS 38. Capitalised costs are amortised on a straight-line basis over their estimated useful lives.

Amortisation is calculated on a straight-line basis using the following rates:

Customer relationships 4% - 20% per annum

Computer software (developed in-house and purchased off the shelf) 10% - 33% per annum

Concession contracts 10% per annum

Corporate brand 5% - 10% per annum

Other 12.5% - 50% per annum

Property and equipment

Property and equipment are initially recorded at cost and depreciated so as to write off the cost of the asset over its estimated useful life. Cost includes expenditure, which is directly attributable to bringing the asset into working condition for its intended use.

Depreciation is calculated on a straight-line basis using the following rates:

Freehold land Nil

Freehold and long leasehold property 2% per annum or over the lease term if shorter

Buildings 2% - 10% per annum

Short leasehold property 10% - 20% per annum or over the lease term if shorter

Leasehold improvements 2% - 33% per annum

Fixtures and fittings 10% - 50% per annum

Computer hardware 20% - 50% per annum

Motor vehicles 16.7% - 25% per annum

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.

Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property and equipment. All other expenditure is recognised in the income statement as the expense is incurred.

Capital work in progress

Properties or assets in the course of development for in house use, supply or administrative purpose are carried at cost, less any recognized impairment loss. Cost includes all direct costs attributable to the design and development of the property including related staff costs, allocated overheads and depreciation, in accordance with the Group's accounting

policy. When the assets are ready for intended use, the capital work in progress is transferred to the appropriate property and equipment or intangible assets category and is depreciated in accordance with the Group's policies.

Significant accounting policies (continued)

Impairment of non-financial assets

The Group assesses at each reporting date or more frequently if events or changes in circumstances indicate that a non-financial asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. Where the carrying amount of an asset (or cash-generating unit) exceeds its recoverable amount, the asset (or cash-generating unit) is considered impaired and is written down to its recoverable amount.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount but only to the extent that it has been impaired.

Taxation

Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the statement of financial position date.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. Deferred tax is, however, neither provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits are assessed for recognition as deferred tax assets.

Deferred tax is provided in respect of fair value adjustments arising on acquisitions. Provision for deferred tax is based on the difference between the carrying value of the asset and its income tax base.

Deferred tax assets and liabilities are calculated, at tax rates that are expected to apply to their respective period of realisation, provided legislation or rulings governing such rates are enacted or substantively enacted at the statement of financial position date. Deferred tax liabilities are always provided for in full and are not discounted. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income.

Management bases its assessment of the probability of offset against future taxable income on the Group's latest approved forecasts, which are adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The specific tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset that deferred tax asset is recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of profit or loss, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity or other comprehensive income.

Employees' end of service benefits

Employees' end of service benefits are provided in accordance with employment regulations of the countries where the Group operates.

Travelex Holdings Limited operates defined contribution schemes and contributions are charged to the income statement. The Group operates a defined benefit pension plan in the United Arab Emirates. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.

Significant accounting policies (continued)

Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability, are recognised immediately in the Interim consolidated statement of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

- The date of the plan amendment or curtailment, and

- The date that the Group recognises related restructuring costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under employees' salaries and benefits:

- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements

- Net interest expense or income

Travellers' cheques, investments and structured deposits

In May 2013 the Group entered into a reimbursement and insurance policy with AmTrust which ensures that the encashment of properly presented travellers' cheques will be honored in perpetuity. The agreement with AmTrust involved paying an insurance premium. As part of the agreement, at inception the Group provided funds to AmTrust to cover future encashment of MasterCard branded and non-branded travellers' cheques in bankruptcy-remote vehicles.

Travellers' cheque float and structured deposits which relate to monies received in advance on issuance of Visa branded travellers' cheques are held as investments on the statement of financial position. These are restricted to use within the travellers' cheques business. These monies received in advance are placed in a series of structured deposits with financial institutions and these are discounted to net present value using the effective interest rate method.

The liability for travellers' cheques was initially recorded at face value and subsequently adjusted for travellers' cheques which have been encashed.

The travellers' cheques awaiting redemption liability is denominated in the currency of the travellers' cheque and translated at the statement of financial position date. The travellers' cheques are payable on demand. The reimbursement right held by the Group to recover in full the value of encashed qualifying cheques is recognised as an asset with carrying value equal to the carrying value of the associated liability. No separate assets are recognised for the insurance premium paid nor the reimbursement funds contributed at inception of the agreement.

2.4 FINANCIAL INSTRUMENTS

Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

Financial instruments (continued)

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

- Financial assets at amortised cost (debt instruments, cash and cash equivalents and trade receivables);

- Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);

- Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments); and

- Financial assets at fair value through profit or loss.

The Group has the following financial assets:

Cash and cash equivalents

Cash and cash equivalents include cash in hand, bank balances and short-term deposits with original maturities of three months or less (classified as financial assets at amortised cost). However in the interim consolidated cash flow statement, due to banks and outstanding bank overdrafts (classified as financial liabilities at amortised cost) are netted off against cash and cash equivalents.

Financial assets at amortised cost (debt instruments)

The Group measures financial assets at amortised cost if both of the following conditions are met:

- The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Financial assets at fair value through OCI (debt instruments)

The Group measures debt instruments at fair value through OCI if both of the following conditions are met:

- The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and

- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.

Financial instruments (continued)

Financial assets designated at fair value through OCI (equity instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the right of payment has been established.

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss.

A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when:

- The rights to receive cash flows from the asset have expired; or

- The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 

Financial instruments (continued)

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

For debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt instrument. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 30 days past due.

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.

Financial instruments (continued)

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss.

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing loans and borrowings.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset, and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Derivative financial instruments

Initial recognition and subsequent measurement

The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and options including collar and put options as well as call spreads to economically hedge its foreign exchange risks, interest rate risks and fair value risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivatives are taken directly to the income statement.

3 FINANCIAL RISK MANAGEMENT

The primary risk arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks and the Group's financial risk management objectives and policies are consistent with that disclosed in the combined financial statements as at and for the year ended 31 December 2018.

4 STATUS OF RESTRUCTURING AND BUSINESS COMBINATION UNDER COMMON CONTROL

During 2019, Finablr Group was restructured to establish a new holding Company Finablr PLC which was incorporated on 26 July 2018. On 14th May 2019, Finablr PLC issued shares to the shareholders of Finablr Limited to acquire 100% ownership in Finablr Limited. Given that the entities were under common control, this transaction was accounted for under the pooling of interest method, where the consolidated financial statements of Finablr PLC are presented as a continuation of the existing Group as if Finablr PLC had been established from 1 January 2018, with all intercompany balances eliminated on consolidation. Consequently, the comparative information for the six months ended 30 June 2018 and as at 31 December 2018 presented in the interim consolidated financial statements are the results and financial position of Finablr Limited, as Group restructuring was completed in May 2019.

As at 14 May 2019, the Group has completed all the steps under the restructuring as follows:

• The entire issued share capital of Travelex Holdings Limited was transferred to Finablr Limited on 15 April 2019;

• The entire issued share capital of UX Holdings Limited was transferred to Finablr Limited on 18 April

2019;

• The entire issued share capital of UAE Exchange UK Limited was transferred to Finablr Limited on 18

April 2019;

• Capitalisation of shareholders' loan notes amounting to USD 129.0 million as at 31 December 2018 (plus accrued interest thereon as at 31 March 2019, interest thereafter till the transfer date is waived) in Travelex Holdings Limited;

• Waiver of shareholders' loan notes amounting to USD 45.7 million as at 31 December 2018 (plus accrued interest thereon as at 18 April 2019) in UX Holdings Limited and;

• UX Holdings Limited acquired a direct 40 per cent interest in the legal capital and the entire beneficial ownership of UAE Exchange Centre LLC on 7 May 2019.

In connection with Group's French banking subsidiary, Banque Travelex S.A., the Autorite´ de Controle Prudentiel et de Resolution ("ACPR") requested that, in order to retrospectively confirm the approval status of Finablr PLC in connection with its interposition between the ultimate shareholders and Finablr Limited, which occurred on 8 May 2019, Finablr PLC should submit a further application for change of control approval. This application was submitted on 30 April 2019.

Given the previous approval granted to the ultimate shareholders and Finablr Limited, the Group believes this application to be technical in nature, but, as a matter of French law, it could take up 90 business days for the ACPR and the European Central Bank ("ECB") to complete their assessment. The Group believes, including based on the previous approval of Finablr Limited and the advice of French regulatory counsel, that the new approval will be granted. However, there can be no assurance that the ACPR and ECB will approve the application in a timely fashion or at all, nor that the ACPR or ECB will not seek to impose monetary fines on the Company or otherwise seek to sanction the Company for having effected the indirect transfer of shares in Banque Travelex S.A. to Finablr PLC without having first received the approval of the ECB for such indirect change in control.

The entire issued share capital of Finablr Limited has been transferred to Finablr PLC on 8 May 2019. This transaction falls outside the scope of IFRS 3 - Business Combinations, so the pooling of interest method is applied, and the interim consolidated financial statements of the Group are presented as a continuation of the existing Group. The following accounting treatment was applied:

• the assets and liabilities of the previous parent company, Finablr Limited, were recognised and measured in the interim consolidated financial statements at the pre-combination carrying amounts, without restatement to fair value; and

Status of restructuring and business combination under common control (continued)

• the retained earnings and other equity balances of Finablr Limited immediately before the business combination, and the results of the period from 1 January 2019 to the date of the business combination are those of Finablr Limited as the company did not trade prior to the transaction.

• The Group Restructuring Reserve amounting to USD 407,567 thousands arising on the acquisition of Finablr Limited by Finablr PLC as part of the restructuring has been offset against accumulated losses

Comparative information

The financial information for the comparative period has been prepared on a basis that combines the results and assets and liabilities of the entities by applying the principles underlying the consolidation procedures of IFRS 10 'Consolidated Financial Statements' ("IFRS 10") as at these dates. Internal transactions and balances within the Group have been eliminated on combination.

5 BUSINESS COMBINATION

UX Holdings Limited acquired from Dr. B.R. Shetty approximately 37% of the share capital of Unimoni Financial Services Limited (a company incorporated in India) in February 2019. In May 2019, UX Holdings Limited subscribed for its full entitlement of new ordinary shares of Unimoni Financial Services Limited in a rights issue and increased its interest in the share capital of Unimoni Financial Services Limited to 75.12 % of the total issued share capital of Unimoni Financial Services Limited. The Group acquired Unimoni Financial Services Limited in order to further penetrate the growing India market.

In April 2019, the Group entered into an agreement to purchase 50.0 % of the issued share capital and 100.0 % beneficial interest in, Jordan UAE Exchange LLC, subject to regulatory approval. The transaction is not completed as on 30 June 2019. The Group has decided to acquire Jordan & UAE Exchange LLC as part of Group's strategy to expand into the Jordan market. 

In May 2019, the Group acquired an 86.7 % interest in PEaaS LLC, a product engineering and service firm in the United States, and acquired 100 % of business of PEaaS Software LLP, a product engineering and service firm in India, for a consideration of USD 12.55 million. The Group has a call option over the remaining 13.3 % interest in PEaaS LLC that it can exercise after the sixth anniversary of the acquisition. Group completed the acquisition of PEaaS to enhance product development capabilities, particularly in customer experiences for invisible payments across Finablr and partner assets.

In December 2018, the Group entered into an agreement to purchase the entire issued share capital of MoneyDart Global Services Inc. from Dr. B.R. Shetty for a consideration of USD 9.28 million. Completion of the transfer of MoneyDart Global Services Inc. took place in May 2019. MoneyDart Global Services Inc DBA Xpress Money was acquired as part of Group's strategy to further deepen its presence in US market.

Business combination (continued)

The fair values of the identifiable assets and liabilities of entities acquired as at the date of acquisition are as follows: