SafeCharge Regulatory News (SCH)

SafeCharge International Group Limited

("SafeCharge", the "Company", or the "Group")

Interim Results for the six months ended 30 June 2014

SafeCharge (AIM: SCH), the international provider of payments services, risk management and IT solutions for online businesses, today announces its maiden interim results for the six months ended 30 June 2014 following its successful IPO in April.

Highlights

§ Significant increases in processing volumes, revenue and profitability

§ Revenues up 77% to US$34.4m (H1 2013: US$19.4m)

§ Gross Profit up 78% to US$20.3m (H1 2013: US$11.5m)

§ Adjusted EBITDA(1) up 117% to US$10.8m (H1 2013: US$5m)

§ Adjusted Profit before tax(1) US$10.3m (H1 2013: US$4.5m). Profit before tax as reported for the period US$5.6m (H1 2013:US$1.2m)

§ Strong cash conversion from EBITDA continues

§ Maiden Interim dividend of US cents 2.88 per share

§ Cash balances as at 30 June of US$142m (30 June 2013 US$9.7m)

§ The Board expects that results for the full year to 31 December 2014 will be materially ahead of current market expectations

(1) Adjusted EBITDA and Adjusted Profit before tax are calculated after adding back certain non-cash charges and cash expenses relating to professional costs incurred in respect of the Company's Initial Public Offering and terminated projects. (See Consolidated Statement of Comprehensive Income.)

Operational highlights

§ Successful, oversubscribed IPO in April 2014 raising US$125m before expenses

§ Launch of significant new customers, including Ladbrokes, FXDD and Gaijin

§ Winner of Payments Company of the Year at the eGaming Review B2B Awards

§ Post balance sheet event: Attained Principal Membership of VISA Europe

Current trading and outlook

Trading since the Company's profit upgrade released on 30 June 2014 has continued to be strong and as a result the Directors are pleased to announce that both revenues and EBITDA for the full year to 31 December 2014 are expected to be materially ahead of current market expectations.

Roger Withers, Non-executive Chairman, said: 

"I am delighted to report SafeCharge's maiden interim results following its successful fund raise and admission to AIM earlier this year. The first half of 2014 was a landmark period for the Group. We completed a successful, oversubscribed IPO that was strongly supported by blue chip institutional investment funds and operationally, the business performed strongly, exceeding management and market expectations. We gained a number of significant new clients and post the period end secured a major advance with the award of principal member status for merchant acquiring by VISA Europe. This significantly complements the MasterCard membership approved in 2013 and enhances the company's status as a leading global business in the expanding payment processing arena. Our growth is driven primarily by the growth of international internet penetration and the rapid development of e-commerce as a powerhouse in retail, financial services and currency trading platforms. 

"As a demonstration of confidence in the Company, the Board is pleased to announce the payment of a maiden interim dividend of US cents 2.88 per share which will be payable on 17 October 2014.

"SafeCharge is well placed to capitalise on both its position in the payments industry and strong balance sheet. Our strong momentum and clearly identified growth opportunities mean that the Board looks to the future with strong confidence. SafeCharge is well positioned for sustained growth in a highly dynamic and rapidly evolving marketplace."

- Ends -

For more information

About SafeCharge

SafeCharge International Group Limited is a global provider of payments service, risk management and IT solutions for online businesses. The SafeCharge group has a diversified, blue chip client base and is a trusted payment partner for customers from various e-commerce verticals. SafeCharge has been Payment Card Industry Data Security Standard ("PCI-DSS") Level 1 certified since 2007 and is listed on the London Stock Exchange AIM market (LSE: SCH).   The Company's wholly owned subsidiary, SafeCharge Limited, is regulated as a Payment Institution by the Central Bank of Cyprus, license no. 115.1.2.15, under EU directive. SafeCharge Limited has principal membership status for merchant acquiring by VISA Europe and MasterCard Europe. The SafeCharge group has operations in the UK, Cyprus, Bulgaria, Israel, Germany and Austria. www.safecharge.com 

Chief Executive's review

Introduction

The first six months of 2014 have been transformational for SafeCharge, highlighted by the Company's successful IPO in early April raising US$125m.

The scale of the business is best represented by the near US$4 billion of payments processed in the period. This provided the foundation for the strong financial performance and provides visibility on future earnings. Strong cash conversion from EBITDA was evident with Adjusted Profit before tax increasing to US$10.3 million from US$4.5 million compared to the first half of 2013. Revenues increased by 77% to US$34.4 million from US$19.4 million in the comparable period.

During the period SafeCharge continued to build its position as a market leader in the payments processing industry. SafeCharge's best in class services are allowing clients to outsource their PCI requirements and compliance across PC, tablet and mobile. The high quality of SafeCharge's PCI solutions saw Ladbrokes, the international online and land-based gambling group; migrate to SafeCharge in time for essential sporting events such as the football World Cup and the Aintree horse racing festival renowned for the Grand National.

During the first half of the year, the Group launched its services for a number of other significant new customers, , including FXDD and, Gaijin, the games developer which will contribute towards future growth. The Company's pipeline of prospective clients remains very strong and continues to increase.

In line with the Company's declared strategy, we continue to evaluate a variety of acquisition proposals, as well as organic investment opportunities that can provide strategic synergies and help to accelerate our expansion. We look forward to updating shareholders on progress at the appropriate time.

Financial summary

Revenues of US$34.4m were up 77% when compared to the same period in 2013 and 45% up compared to H2 2013.

Gross profit margin increased to 59% (2013: 58%) as a result of business mix and the introduction of higher margin services.

The increase in revenues and hence gross profit, combined with the Group's relatively fixed cost base, resulted in a significant increase in Adjusted EBITDA, which was up by 117% to US$10.8m (H1 2013: US$5m) with Adjusted EBITDA margins increasing to in excess of 31%. The business remains highly cash generative with balances at 30 June 2014 of US$142m.

Adjusted EBITDA for H1 2014 excludes share based payments charges and costs of US$3.8m incurred in respect of the Company's IPO.

Corporate development

In August we announced that the Company had become a principal member of VISA Europe, which in conjunction with its membership of MasterCard Europe, is a significant achievement and key part of SafeCharge's strategy to position itself as a leading player in global on-line payments.

Membership of the schemes enables the Group to directly acquire and process VISA and MasterCard transactions for merchants in the UK and across Europe. The membership status also reduces SafeCharge's direct acquiring cost structure, accelerates the merchant acquisition process and improves its competitive position for winning new business.

Projects

The Company continues to invest in the further development and expansion of its payment technologies.

The Company made important progress in its plans to simplify the acceptance of online payments for small and medium businesses by releasing rapid onboarding solutions. These solutions enable new customers to simply and rapidly integrate and go live with the Company's payment systems and solutions. The Company believes these technologies will help to further accelerate the growth of its highly successful solution for small and medium business customers.

During the period, significant progress was made with the development of the digital wallet and SafeCharge remains on-course for a launch in Q1 2015.

Personnel

Given the Group's significant growth there has been a managed increase in the number of its employees. The Company's development function has been expanded and, following a decision by the Board to target certain new industry sectors, the Group is in the process of hiring a small number of specialist sales persons who will bring with them sector specific experience and contacts.

As at the end of July the Company employed 233 staff (approximately 200, 27th March 2014).

Awards and recognition

SafeCharge continues to be recognised as a leader in global payment solutions and in June won Payments Company of the Year at the prestigious annual eGaming Review B2B awards.

Current trading and outlook

Trading since the Company's profit upgrade released on 30 June 2014 has continued to be strong and as a result the Directors are pleased to announce that both revenues and EBITDA for the full year to 31 December 2014 are expected to be materially ahead of current market expectations.

Dividend

At the time of the Company's IPO the Board stated its intention to declare a final dividend for the financial year ended 31 December 2014 and a policy of paying out up to 50% of adjusted EBITDA by way of dividend. Given the strong performance of the Company in the first half of 2014 the Board has decided to bring forward the payment of its first dividend and to declare a maiden interim dividend in respect of 2014 of US cents 2.88 per share. The interim dividend, which represents approximately 40% of adjusted EBITDA for the first half, will become payable on 17 October 2014 to shareholders on the register as at 26 September 2014. For those shareholders wishing to receive their dividends in sterling the last date for currency elections is 29 September 2014.

The Board expects to follow its stated policy of paying out up to 50% of adjusted EBITDA by way of total dividends for the full year.

David Avgi

Chief Executive

9 September 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

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

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

1. General information

SafeCharge International Group Limited (hereinafter - the Company) was established in 2006 as a private limited company. The Company is an international provider of payments services, risk management and IT solutions for online businesses.

On 2 April 2014, the Company's shares were listed for trading on the AIM market of the London Stock Exchange in the Company's initial public offering ("IPO"). As part of the IPO, the Company raised £75.75 million (about US$126 million), before expenses, via the placing of 46,759,260 new Ordinary Shares. Subsequent to the IPO, the total number of issued Ordinary Shares is 149,759,260. The net effect from the IPO to the equity is US$121,921,000 which equals the gross funds received from the IPO amounting to US$126,074,000 less transaction costs in respect of the equity share issue amounting to US$4,153,000. US$121,916,000 of this net increase has been included in the share premium account.

2. Basis of preparation

The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Company's latest annual audited financial statements.

The financial information for the period ended 30 June 2014 does not constitute the full statutory accounts for that period. The Independent Auditors' Report on the Annual Report and Financial Statements for 2013 was unqualified, and did not draw attention to any matters by way of emphasis.

Adoption of new standards and interpretations

A number of new standards, interpretations and amendments to existing standards which became effective for the first time for accounting periods beginning on or after 1 January 2014, unless otherwise stated, have been adopted in these financial statements.  The nature and effect of adopting these is given below.

IAS 1 - Presentation of items of Other Comprehensive Income - Amendments to IAS 1

The amendment requires that items of other comprehensive income must be grouped together in two sections - those that will or may be reclassified into profit or loss and those that will not. The amendment affects presentation only and hence there is no effect on the Group's financial position.

IFRS 10 - Consolidated Financial Statements

IFRS 10 supersedes IAS 27 (2008) Consolidated and Separate Financial Statements and SIC-12 Consolidation -Special Purpose Entities, and introduces a single 'control model' for all entities, whereby control exists when all of the following conditions are present:

- power over investee

- exposure, or rights, to variable returns from investee

- ability to use power over investee to affect the entity's returns from investee

An entity is required to consider all relevant facts and circumstances when assessing whether it controls the investee. Other changes introduced by IFRS 10 include:

- The introduction of the concept of 'de facto' control for entities with less than a 50% ownership interest in an entity, but which have a large shareholding compared to other shareholders.

2. Basis of preparation (continued)

Adoption of new standards and interpretations (continued)

- Potential voting rights are only considered when determining if there is control when they are substantive (holder has practical ability to exercise) and the rights are exercisable when decisions about the investee's activities that affect the investor's return will or can be made.

IFRS 10 did not materially affect the consolidation of the financial statements and therefore has no effect on the

Group's financial position or performance.

IFRS 12 - Disclosure of interests in Other Entities

IFRS 12 sets out the disclosure requirements relating to an entity's interests in subsidiaries and associates. The standard requires a reporting entity to disclose information that helps users to assess the nature and financial effects of the reporting entity's relationship with other entities. As the new standard affects only disclosure, there is no effect on the Group's financial position or performance.

IAS 27 - Separate Financial Statements

IAS 27 contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates, when an entity prepares separate financial statements. IAS 27 requires an entity preparing separate financial statements to account for those investments at cost or in accordance with the applicable financial instruments standard. The adoption of this standard has no impact on the Company's financial position or performance.

3. Significant accounting policies

The principal accounting policies adopted in the preparation of these interim consolidated financial statements are set out below. These policies have been consistently applied to all periods presented in these interim consolidated financial statements unless otherwise stated.

Basis of consolidation

The Group interim consolidated financial statements comprise the financial statements of the Company and the financial statements of the subsidiaries.

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

Business combinations

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

3. Significant accounting policies (continued)

Business combinations (continued)

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

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

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

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

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

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

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

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

3. Significant accounting policies (continued)

Business combinations (continued)

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

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

Goodwill 

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

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

Revenue recognition

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

· Commission fees for payment processing and risk management services

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

· Revenue from sale of online shopping applications and related services 

Sales from online shopping applications and related services result from online purchases by clients and revenue from these sales is recognised at the time the service is performed.

3. Significant accounting policies (continued)

Finance income and finance costs

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

Interest expense and other borrowing costs are charged to the income statement based on the effective interest rate basis.

Foreign currency

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

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

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

For the purpose of presenting consolidated financial information, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in United States Dollars using exchange rates prevailing on the reporting date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised in the income statement in the period in which the foreign operation is disposed of.

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to the income statement.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

3. Significant accounting policies (continued)

Tax

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

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

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

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

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

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

Property, plant and equipment

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

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

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

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

3. Significant accounting policies (continued)

Property, plant and equipment (continued)

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

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

Internally‑generated intangible assets ‑ research and development expenditure

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

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

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

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

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

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

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

Intangible assets

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

3. Significant accounting policies (continued)

Intangible assets (continued)

Amortisation is calculated at annual rates estimated to write off the costs of the assets over their expected useful lives and is charged to operating expenses from the point the asset is brought into use. The principal annual rates used for this purpose, which are consistent with those of the previous years, are:

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

Financial instruments

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

Trade receivables

Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Loans granted

Loans originated by the Group by providing money directly to the borrower are categorised as loans and are carried at amortised cost. This is defined as the fair value of cash consideration given to originate those loans as is determined by reference to market prices at origination date. All loans are recognised when cash is advanced to the borrower.

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

3. Significant accounting policies (continued)

Financial instruments (continued)

Financial assets

(1) Classification

The Group has financial assets in the following categories. Management determines the classification of financial assets at initial recognition.

· Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after the reporting date. These are classified as non current assets. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

(2) Recognition and measurement

Regular way purchases and sales of financial assets are recognised on trade‑date which is the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through the income statement. Financial assets carried at fair value through the income statement are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have

been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ''financial assets at fair value through the income statement'' category are presented in the income statement in the period in which they arise. Dividend income from financial assets at fair value through the income statement is recognised in the income statement when the Group's right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis, making maximum use of market inputs and relying as little as possible on entity specific inputs. Equity investments for which fair values cannot be measured reliably are recognised at cost less impairment.

The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available‑for‑sale financial assets the cumulative loss which is measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement, is removed from equity and recognised in the income statement.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

3. Significant accounting policies (continued)

Financial instruments (continued)

Financial Assets (continued)

For financial assets measured at amortised cost, if in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash at bank and short‑term bank deposits.

Financial liabilities

The Group has financial liabilities in the following categories:

· Borrowings

Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

· Trade payables

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

Derecognition of financial assets and liabilities

Financial assets

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

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

· the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through' arrangement; or

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

3. Significant accounting policies (continued)

Derecognition of financial assets and liabilities (continued)

Financial liabilities

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

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

Impairment of assets

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

Share capital

Ordinary shares are classified as equity.

Provisions

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

Share‑based compensation

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

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

3. Significant accounting policies (continued)

Clients' deposits

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

4.Earnings per share

The basic earnings per share of 3.85c (June 2013: 0.16c, December 2013: (1.33c)) is calculated on a profit/(loss) after tax of US$4,839,000 (June 2013: US$155,000, December 2013: (US$1,331,000)) and 125,829,630 (June 2013: 100,000,000, December 2013: 100,000,000) being the weighted average number of ordinary shares in issue during the period ended 30 June 2014.

Diluted earnings per share of 3.78c (June 2013: 0.15c, December 2013: (1.33c)) is calculated on a profit/(loss) after tax of US$4,839,000 (June 2013:US$155,000, December 2013: (US$1,331,000)) and 128,090,618 (June 2013: 103,375,761, December 2013: 103,814,630) being the weighted average number of ordinary shares taking into account the weighted average number of outstanding share options.

5. Business Combinations during the period

On 10 March 2014 the Company acquired the assets and liabilities of GTS Online Solutions Limited ("GTS"). GTS operated an online payment processing service and is controlled by a former board member of the Company who resigned in 2013. Under the terms of the transaction, the Company acquired the business agreements of GTS with clients, as well as the intellectual property of GTS. The cash consideration for the acquisition by the Company was US$792,000. Furthermore, the Company assumed net liabilities of GTS in the amount of US$453,000 and waived a receivable balance from GTS in the amount of US$422,000. Total consideration amounting to US$1,667,000 has been attributed to customer contracts intangible assets. Additionally, a further acquisition of assets and liabilities for a separate business was completed in the period with consideration of US$109,000.

6. Loans to associated undertakings

The principal amount of the loan receivable from the parent company together with the interest accrued, amounted to US$35m at 31 December 2013 and this was repaid by way of declaration of dividend with no cash movement.

7. Intangible Assets

7. Intangible Assets (continued)

INDEPENDENT REVIEW REPORT TO SAFECHARGE INTERNATIONAL GROUP LIMITED

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 which comprises consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and related explanatory notes that have been reviewed.

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.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

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.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

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 Ireland) 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 2014 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

London

United Kingdom

Date

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).