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Annual Report & Financial Statements
2022
Annual Report and Financial Statements | Page 2
Table of Contents
Annual Report
Who We Are ..................................................................................................................................................................... 05
Chairman’s Statement ...................................................................................................................................................... 09
CEO’s Statement ............................................................................................................................................................... 11
Board of Directors ............................................................................................................................................................. 16
Corporate Social Responsibility ........................................................................................................................................ 20
Directors’ Report .............................................................................................................................................................. 25
Corporate Governance Statement of Compliance ........................................................................................................... 38
Remuneration Report ....................................................................................................................................................... 48
Statement of the Directors pursuant to Capital Market Rule 5.68 ................................................................................... 52
Company Information ....................................................................................................................................................... 53
Directors’ Responsibility for the Financial Statements ..................................................................................................... 54
Financial Statements
Statements of Financial Position ...................................................................................................................................... 56
Statements of Profit or Loss ............................................................................................................................................. 58
Statements of Comprehensive Income ............................................................................................................................ 59
Statements of Changes in Equity ...................................................................................................................................... 60
Statements of Cash Flows ................................................................................................................................................. 64
Notes to the Financial Statements ................................................................................................................................... 66
Independent Auditors’ Report ........................................................................................................................................ 188
Annual Report and Financial Statements | Page 3
Annual Report
Annual Report and Financial Statements | Page 5
Who We Are
A global technology leader
shaping the future of payments
RS2 Group is one of the world’s leading providers of omni/multichannel payment software and end-
to-end payment solutions for both issuers and acquirers on a single payment platform.
The Group has over a 30-year history of designing and operating payment technologies and solutions
for a wide range of customers across various industries such as banking, e-commerce, and retail.
With seven offices spread across the globe, the Group provides innovative, sustainable, secure
payment solutions and services along the entire payment value chain and is the technology partner
of choice for banks, large financial institutions, Integrated Software Vendors (ISVs), Payment
Facilitators (PayFacs), Independent Sales Organisations (ISOs) and merchants throughout Europe,
North America, Latin America (LATAM), Asia Pacific (APAC) and the Middle East.
The Group’s cutting-edge payment solutions are used by more than 250 customers in 35 countries,
allowing its customers to provide services to more than 16 million merchants and over 350 million
cards around the globe through the various business lines of the Group. Among these customers are
5 of the top 20 multinational and local acquirers.
Following the approval and issuance of an Electronic Money Institution (EMI) license by the German
regulator, the German Federal Financial Supervisory Authority (BaFin), for the Group’s subsidiary RS2
Financial Services GmbH, the Group is now continuing its exciting journey towards becoming a
leading, full service, global payments player.
One single platform
enabling global commerce
The Group’s BankWORKS® platform is built on a state-of-the-art Application Programming Interface
(API)-based micro services technology, providing end-to-end payment, such as payment gateway,
switching of payment transactions originated from Point-of-Sale (POS), ATM, e-Commerce, InAPP,
clearing and settlement, chargeback management integrated in the merchant portal, fraud and risk
monitoring, reporting and statement, and a sub-GL accounting and automated reconciliation that fully
integrates with the client’s general ledger.
Annual Report and Financial Statements | Page 6
Who We Are (continued)
The uniqueness of the solution, being one single global platform deployed on the cloud, provides the
customer, through one single API sandbox integration, the ability to transact globally, integrating with
local acquirers and issuers, to increase their conversion rate, reduce their interchange and other
related fees and charges, and provide them with quick access to the market. The Group is well-
positioned to service multinational customers and process their international and local payments,
providing them with one single view, consolidated reporting, and reconciliation of their entire business
in multi-languages, multi-currencies including crypto, and other digital currencies in multiple time
zones.
Business Lines
- covering the entire payment value chain
The Group provides a fully integrated, digital Omni-/multichannel payment solutions as well as value-
added services across the entire payments value chain through three global business lines.
Processing Solutions
- Processing of payment transactions utilising BankWORKS® software
A full-feature end-to-end processing solution for issuing and acquiring through a single integration to
RS2’s unique BankWORKS® cloud platform. Customers can manage their entire payment services
such as authorisation, on boarding, payment gateway, security and fraud, chargebacks, reconciliation,
and settlement as well as optimise their interchange.
Processing of payment transactions utilising BankWORKS® software;
Platform as a service (PAAS) on a private/public cloud solution for acquiring, issuing, clearing
and settlement covering multiple Omni channels;
Provision of installation services (setup); and
Other services including statements, chargebacks, merchant portal and e-commerce
gateway.
Annual Report and Financial Statements | Page 7
Who We Are (continued)
Software Solutions
- Licensing of BankWORKS® software to banks and financial institutions
RS2’s modular, highly scalable, and flexible software solutions are developed in-house and cover all
areas of payment, including card issuance, merchant acquiring, clearing and settlement, online
switching and authorisation, PIN management, customer services, e-commerce, and dispute and
fraud management, allowing its customers to rapidly and cost-effectively set up their system by
configuring only those products and modules required for business.
The Group provide flexible collaboration models to suit customers’ business needs:
Term or perpetual licenses for banks and financial institutions to utilise its BankWORKS
®
issuing and acquiring platform;
Installation, depending on size and scope of installation;
Customisation, implementation, and installation services;
Upgrades, enhancements, customisation and on-going support for its BankWORKS
®
platform,
as well as updates mandated by international card organisations;
Additional services, including but not limited to, onsite support for testing, implementation and
training, beyond the originally defined scope of the initial implementation; and
Value Added Services.
Merchant Solutions
- Offering issuing and acquiring payment solutions directly to merchants
The Group’s subsidiary RS2 Financial Services GmbH holds an EMI-Licence from the German
regulator, BaFin, enabling the Group to provide a wide array of services using one single platform that
integrates through a strong wide range of APIs to the merchant’s online businesses and physical
shops, consolidating the entire business of the merchant across all the Omni-/ multichannel payments
offering them one-stop-shop services including but not limited to:
E-Commerce
Card not present (incl.
Payment Service Provider
(PSP) Services
Card present (incl. POS
Terminals & Network
Services)
InAPP-Payments
Payment Gateway
Chargeback Management
Call Centre Services
Issuing of Prepaid Cards
Fraud and Risk Monitoring
Services
Reporting and Reconciliation
Interchange Optimisation
Smart Routing increasing the
approval rate
Dynamic Currency Conversion
Instalments
Recurring Payments
Annual Report and Financial Statements | Page 8
The Group has
however strived to
achieve important
milestones across
all business lines
ensuring it is on
track with its
strategic roadmap.
Mario Schembri
Chairman
Annual Report & Financial Statements | Page 9
Chairman’s Statement
2022 has been a challenging year – the economic outlook has been uncertain given the recent
disruptions brought about by the COVID-19 pandemic, followed by the war in Ukraine and presently,
the rising of inflation and interest rates. The Group has however strived to achieve important
milestones across all business lines ensuring it is on track with its strategic roadmap.
During 2022, the Group continued to execute its strategy of expanding its client base and increase
its product offering in different markets throughout Europe, Middle East, North America, Latin
America, and Asia Pacific.
In the Merchant Solutions business, after obtaining an Electronic Money Institution (EMI) license from
the German regulator, BaFin, in 2021, the Group reached its next important milestone of launching its
acquiring business through RS2 Financial Services GmbH. The company obtained its principal
membership from both VISA and MasterCard and passported its licence to Austria.
The EMI license enables the Group to manage merchant funding, provide acquiring services and to
issue payment instruments. It is also part of the Group’s strategy to shift its revenue model from
dependencies on one-time licence fees towards ongoing and recurring revenue streams based on
transaction volumes processed.
Under its Processing Solutions business, the Group has exceeded the one billion mark of technical
transactions processed – over the past twelve months more than 1.25 billion technical transactions
were processed on the BankWORKS
®
platform. This trend is expected to continue to increase through
further processing of transactions of the Group’s existing and new clients. In fact, the Group has won
several new major outsourcing clients in Singapore, Malaysia, Mexico, Chile and Peru.
On the Software Solutions business side, the Group has an outsourced processing agreement with
one of the largest banks in the United States, on a hybrid licensing and processing model, to deliver
Global Acquiring and Issuing Services, further endorsing the power of our platform. In the US, the
Group will continue to offer acquiring processing to Payment Facilitators (PayFacs), Payment Service
Providers (PSPs) and Independent Sales Organisation (ISOs) and to attract tier one financial
institutions and banks of all sizes that are increasingly opting for outsourcing models for their
payments processing operations, in order to lower costs, reduce complexity and minimise risks. The
Group’s US arm will also be introducing a new business line of servicing Issuer Processing.
I would like to take this opportunity to thank our team members across the world for their commitment
and dedication, our Chief Executive Officer (CEO) who has worked tirelessly to execute the Group’s
strategy and our Board of Directors for their support throughout the year.
I would also like to thank our shareholders, clients and partners for their continued trust and support.
We look forward to continuing this journey together – beyond payments.
Mario Schembri
Chairman
28 April 2023
Annual Report and Financial Statements | Page 10
The Group has
made strong
progress and
executed its key
strategic priorities
at a steady pace.
Radi Abd El Haj
Chief Executive Officer
Annual Report and Financial Statements | Page 11
CEO’s Statement
Despite a challenging economic environment, 2022 has proven to be a year of continued execution of
strategy, growth, and resilience to remain on track to achieve the Group’s long-term targets. This was
possible thanks to our dedicated global Team, Management and Board of Directors, who reacted very
quickly to new challenges and adapted to the lessons learnt during the turmoil from the COVID-19
pandemic, solidifying the Group’s more robust organisation for any turbulence ahead.
Resilient Business Performance in 2022
The 2022 financial results show a stable top line compared to prior year, despite the current market
conditions. Together with the repercussions resulting from the COVID-19 pandemic, the Russian invasion
of Ukraine has magnified the slowdown in the global economy, which entered a period of feeble growth
and elevated inflation. This affected the Group’s results for the year by way of customers delaying
projects or stretching investments to bare minimum. A significant stagnation in investment was noted
mid-year 2022, so the Group applied counter measures and started seeing positive ramp up in the top
line and bottom line in the last few months of the year.
Regional update
The Group executed strategic milestones to increase its customer base and diversify its global business
across various regions. These include the following:
In Europe, the Group achieved a major milestone in 2021 by obtaining an EMI license by the
German regulator, BaFin, which is crucial for the execution of the Group’s strategy of diversifying
its business and service offering. The obtaining of the E-money License enabled the Group to
launch its acquiring business in Europe through its subsidiary RS2 Financial Services GmbH at
the end of Q3 2022.
RS2 Financial Services has successfully achieved a pivotal milestone in obtaining its principle
membership from VISA as well as MasterCard. With this achievement the subsidiary started the
migration of its merchant portfolio residing in RS2 Zahlungssysteme GmbH to its own license,
providing the merchant with a one stop shop that includes acquiring services, POS terminals and
e-commerce services.
While the initial focus of this subsidiary company was on the German market, the Company has
already passported its license to 10 additional European markets.
Annual Report and Financial Statements | Page 12
CEO’s Statement (continued)
In LATAM, the Group continued to increase its customer base and regional expansion adding
Mexico, Chile and Peru to the current operational markets, namely Brazil, Columbia and
Argentina. In these markets, the Group is offering transaction processing services to Payment
Service Providers (PSPs), banks and financial institutions that provide acquiring services to
online merchants, as well as stores and shops.
The Group also added local payment methods enhancing the acceptance rate of customers,
which in turn, mitigates fraud risk and increases customer’s profitability and satisfaction.
The Group has enabled a large regional issuer, through its partner in Colombia, to issue in excess
of 1 million cards to its customers.
In North America, the Group continued to ramp up its client base with respect to the Independent
Sales Organisations (ISOs) while also enhancing its strategy to focus on the following three
business lines:
o Enterprise business, whereby RS2 manages the client’s private infrastructure on the
cloud, in addition to providing processing and other services;
o Acquiring processing, which focuses on Payment Facilitators (PayFacs), Payment
Service Providers (PSPs) and follow up on the existing ISO pipeline;
o Issuing processing (a new business line) by partnering with a payment service provider
that serves over 400 community banks in the US.
In Asia Pacific (APAC), services were extended to Singapore and Australia in addition to the
current operational markets in Vietnam, Philippines, Malaysia and New Zealand.
In the Philippines, the Group added InstaPay, the real-time online local scheme, which will allow
the offering of services to banks’ consumers in the market, using our own developed mobile
application for peer-to-peer fund transfers, utility bill payments, issuing of wallets and pre-paid
cards and other banking services. This developed software application will be used across the
Group, globally.
Delivering on Our Strategic Priorities
The Group has made strong progress and executed its key strategic priorities at a steady pace. This will
strongly position the Group to increase the pace of its growth into 2023 and beyond. In 2022, the Group
remained focused on its strategy of growing and expanding its Managed Services business and
accelerating its global expansion, as well as commencing its Direct Merchant Acquiring and Issuing
Services in Europe.
The product offering for Direct Merchant Acquiring will cover international credit and debit card acquiring
services, Girocard acquiring services (being a German interbank network and debit card service), Point
of Sale (POS) terminals, E-Commerce, as well as Payment Service Provider (PSP) and Network Service
Provider (NSP) services.
Annual Report and Financial Statements | Page 13
CEO’s Statement (continued)
The Group is ramping up its business by initially cross selling acquiring services into the portfolio of RS2
Zahlungssysteme GmbH. Eventually this is expected to increase through organic growth via on-boarding
of sales partners, and potential selective add-on acquisitions of profitable merchant portfolios. This new
acquiring business line will provide the Group with a higher profit margin as compared to the processing
model, by charging a percentage of each individual transaction.
The Group continued to expand its outsourcing business through its subsidiary, RS2 Smart Processing
Limited, by increasing the number of services offered to existing customers, enabling them to enter new
markets and consolidating their global business. At the same time, direct services will be offered to
merchants mainly in Europe with the intention of following them internationally utilising the global
Acquiring and Issuing platform capabilities.
RS2 Smart Processing continued to innovate to expand its market reach. In this respect RS2 Smart
Processing is developing a fully digitalised service enabling a client to self-onboard and configure the
services required for its business’ and market needs. This service will be offered in a fully automated
manner without the need of human intervention using Software as a Service.
Technology and Platform Update
As a technology provider, we always make sure that we are on the forefront of new technologies that
contribute to the highest security standard, reliability, and performance. Over the last two years, our
dedicated Technology team have been working on the redesign of our systems, by selecting the right
technologies to best support our customers and our colleagues across the globe, both from a technology
and a delivery perspective. This allows the Group to work with the latest technology available on the
market. Our team commenced working on the delivery of a new version of the RS2 platform, with the
aim of becoming a complete micro-services environment, supporting a wide range of Application
Programming Interfaces (APIs), while also reducing our costs and dependency on specific databases
and software technologies, which in return will provide us with more flexibility and increase our
profitability margins.
The Group has been enhancing its BankWORKS® platform by adding additional capabilities and products
to provide a variety of services to its clients and business partners. The team continues to add more
Application Programming Interface (APIs) to allow easy and quick integration with the BankWORKS®
platform, thereby successfully increasing its service offering and capabilities.
Our Product team is in constant discussion and collaboration with our clients, to determine the best way
of enhancing operation efficiency, increasing security and positioning BankWORKS® ahead of
competition. This has already been notably recognised by our clients using our Merchant Portal, which
eliminates more than 40% of time normally required in call-centres, as it provides merchants with a self-
service portal. This gives them access to real-time information without the need of contacting our call-
centre.
Annual Report and Financial Statements | Page 14
CEO’s Statement (continued)
RS2’s Customers also enjoy the use of our powerful onboarding APIs to set up new merchants in a very
short span of time. So much so, one of our Latin American clients has onboarded over 800,000
merchants within a day.
Our newly developed reconciliation product will provide customers with a powerful, fully digitalised tool,
which will enable them to reconcile their entire business through all payment channels, also eliminating
manual operations, thereby improving efficiency, and providing full control over their income and
expenses, while automating the feed into their general ledger system.
RS2 is also working on launching its new Partner Portal, which will provide Payfacs, ISVs and PSPs access
to their clients’ portfolio. Rich with specialised capabilities, it will enable these clients to digitalise their
data access, chargeback capabilities, reporting and service management.
Our infrastructure and technology services are constantly enhanced to optimise platform security and
performance. The latest improvements conducted by our team allow the Group to process 33million
clearing transactions per hour (i.e., 31billion transactions per year or 4.2k authorisations per second).
This achievement will lower the requirement of infrastructure costs per transaction, which will benefit
the Group’s profit as the number of processed transactions continues to increase. RS2’s Security team
continues to actively improve the security of our network and infrastructure, which is necessary to
mitigate any cyber threat to our environment, thus ensuring secure transactions for all our clients.
Looking Forward
The Group continues to focus on implementing and delivering its strategy around its main business
pillars. For the managed services business, this is being done by continuing to build on its global
expansion servicing ISVs and Payfacs. This also includes adding more enterprise clients, such as tier
one banks and financial institutions, which would require building a private cloud and running their
operations. The Group also aims to increase the Issuing processing business in markets where our
acquiring services are already provided.
The Group also plans to invest further in its infrastructure to strengthen the technology and complete
the product offering in order to play a more active role in the digitalisation of the whole customer journey,
to offer omni-channel solutions and to go beyond traditional payment solutions. This includes the
provision of our own electronic cash register (ECR) and mobile devices as well as reward and loyalty
programs.
The Group is also exploring some merger and acquisition activities to increase its merchant portfolio.
To further enable our rapid expansion and growth, the Group continues to nurture its hub of
internationally renowned C-Level Executives and industry specialists. Our vast network with banks and
partners around the globe will aid the implementation of the Group’s third business model of Merchant
Services and will also facilitate the roll-out in Europe.
Annual Report and Financial Statements | Page 15
CEO’s Statement (continued)
The goal is to eventually leverage the Group’s network to offer true global Issuing and Acquiring services
and products to our customers, allowing them to control their business and access their data in real-
time to mitigate their risk, anticipate their revenue and expenses, and manage their cash flow. We will
continue to focus on regional expansion and provide the respective products and services in the
different markets.
Business is expected to ramp up with a stronger pipeline, gearing up for the coming year, which, together
with the launch of several exciting new products for the Group, including merchant reconciliation
modules, merchant and partner portals and tokenisation for issuing services, amongst others, will lead
the Group to a successful 2023 and beyond.
Closing Remarks
I would like to take this opportunity to thank our talented global team in Europe, the USA, Asia Pacific
and the Middle East for their dedication, loyalty and continuous outstanding support which has
translated into RS2’s success; our Management and Board for supporting us throughout our journey; and
the support of our esteemed shareholders who have continued believing in us.
Stay with us and share our success to continue our global journey.
Let’s be together - beyond payments.
Thank you for your continued support and dedication.
Radi Abd El Haj
Chief Executive Officer
28 April 2023
Annual Report and Financial Statements | Page 16
Board of Directors
Mario Schembri
Chairman & Non-Executive Director
Mr. Schembri joined RS2 in 1999 as Regional Manager, Mediterranean Region and took on the role of
Deputy Chief Executive Officer in 2006. Mr. Schembri was appointed Chief Executive Officer in January
2008 and Chairman in January 2012.
Mr. Schembri has extensive knowledge related to card management systems, with diverse exposure to
the international card organisations including VISA International, MasterCard and DINERS Club
International. Up to the time of joining the Company, Mr. Schembri had been in the banking industry for
26 years and has vast experience relating to retail banking operations, product management and co-
ordination. He also served as a lecturer and examiner for the IFS for a period of 12 years.
Radi Abd El Haj
CEO & Executive Director
Mr. El Haj joined RS2 in 1997 as a Project Manager for Tier 1 European banks where he was responsible
for the implementation of corporate card programs, later promoted to Customer Relationship Manager
in 2002 and Head of Sales and Implementation in 2004. Mr. El Haj was appointed Chief Executive Officer
in January 2012.
In the cards and payments industry, Mr. El Haj specialises in the areas of issuing, acquiring, clearing and
settlement, e-commerce and accounting. His international experience, professional contacts in various
regions and working closely with the Technical and Product Development Units within the Group, has
contributed in providing RS2’s clients with a global compliant platform.
Annual Report and Financial Statements | Page 17
Board of Directors (continued)
Dr. Robert Tufigno LL.D.
Non-Executive Director
Dr. Tufigno, LL.D., has vast experience in company law, contract law, financial services, employment
law, maritime law and legislative drafting. Dr. Tufigno, who is also an Arbitrator, has practised in the fields
of general commercial law, property law and litigation. He has also acted as Chairman of Malta’s
Employment and Training Corporation and as Chairman of Malta’s Housing Authority, and as past Board
Director of Lohombus Bank. Dr. Tufigno is a Partner at GTG Advocates.
Franco Azzopardi
Non-Executive Director
Mr. Azzopardi, a Certified Public Accountant with a UK postgraduate MSc in Finance, spent twenty-
seven years working in public practice, ten of which with Deloitte Haskins and Sells and later in a firm he
co-founded in 1990. In 2007 he exited the firm to contribute more towards the strategic direction of
Boards of Directors. He specialises in corporate strategy, governance, risk and finance. He is today a
professional director and a registered fellow member of the UK Institute of Directors. He serves on
Boards of Directors, Audit, and Risk and Compliance Committees of both listed and private companies
in various sectors including banking and software. He is also former CEO of the leading logistics company
in Malta. His focus there was sustainable growth in shareholder value, highest degree of readiness for
public listing, and investor-family governance. As part of his social responsibility he also contributed
towards the development of the Malta Institute of Accountants. He is a fellow member serving on
Council since 2007. He was also elected and served as President of the Institute for the term 2015-
2017.
Annual Report and Financial Statements | Page 18
Board of Directors (continued)
John Elkins
Non-Executive Director
Mr. Elkins currently serves on the boards of FINCA International, ELATERAL Ltd., Card Dynamics, the
Dean’s Advisory Board for the Lundquist School of Business at the University of Oregon and RS2
Software p.l.c. and RS2 Software INC.
Mr. Elkins served as President, International Regions at First Data (a global leader in electronic payments
with operations in 35 countries) until June 2015. Mr. Elkins had full responsibility for over 8,000
employees and all markets outside of the United States.
Mr. Elkins served as a Senior Adviser at McKinsey & Company (2007-2009). Between 2002 and 2007 he
served as Executive Vice-President and Global Chief Marketing Officer for Visa International. Mr. Elkins
was the founder, former Chairman and CEO of FutureBrand, built from a start-up into one of the leading
worldwide corporate brand and design consultancies.
Prof. Dr. Raša Karapandža
Non-Executive Director
Prof. Karapandža is a Professor of Finance and serves as Vice Dean Education at EBS University,
Germany. He also serves as an academic director of the Masters in Finance programme and head of
chair of finance. He received a PhD degree in economics and finance from Barcelona Graduate School
of Economics, University Pompeu Fabra, Barcelona. He has been a visiting research scholar at New York
University and at University of California at Berkeley. He currently also serves as a visiting professor at
New York University (NYU). Prof. Karapandža’s work has been featured in top media outlets like The
Wall Street Journal, The New York Times, and Der Spiegel. He advised members of the US congress on
the topics of regulating cryptocurrencies and other block chain related technologies. He was elected
favourite professor by the EBS business school’s student body for his teaching ten years in a row — in
2009 through 2020. At EBS University Prof. Karapandža teaches Investments, Finance, Corporate
Finance, Asset Pricing and Fintech class. At NYU Prof. Karapandža teaches a Fintech course as well as
NYU Stern courses on Foundation of Financial Markets and Advanced Investments.
Annual Report and Financial Statements | Page 19
Board of Directors (continued)
David Price
Non-Executive Director
Mr. Price is the Managing Director of Client Coverage in Barclaycard Commercial Payments, a proven
leader within the payments industry, with 15 years’ experience of working within the Barclays Group. Mr.
Price is currently responsible for the Corporate Business within Commercial Payments as well as building
propositions across the whole Barclays Corporate network. Prior to working in commercial payments,
Mr. Price spent 12 years in Payment Acceptance at Barclaycard, where he developed specialisations
across new product deployment, multinational client acquisition and relationship management. His
extensive payments experience and dedicated client focus gives Mr. Price an extremely interesting
perspective on payment trends, regulation and most importantly what this means to Barclaycard’s
customers and clients.
Dr. Ivan Gatt LL.D.
Company Secretary
Dr. Gatt LL.D. represents clients in a broad spectrum of substantive legal areas. Having vast experience
in advising companies and board committees on corporate governance, he has facilitated a variety of
transactions, including securities offerings, venture capital investments, corporate acquisitions,
regulatory and compliance matters. In addition, he assists clients with annual general meeting
preparation and gives advice on numerous regulatory and compliance matters. Dr. Gatt has presided
over the Levy Appeals Board and the Customs and Excise Tax Appeals Board of the Ministry of Finance.
Dr. Gatt is a Partner at GTG Advocates.
Annual Report and Financial Statements | Page 20
KSU Freshers‘ Week
Ladybird Foundation
Corporate Social
Responsibility
Luxol St. Andrews
Futsal Club
Wildlings OCR
Kavallieri Handball Club
ICTSA Industry Expo
Annual Report and Financial Statements | Page 21
Corporate Social Responsibility
RS2’s Corporate Social Responsibility (CSR) strategy is aligned with Company culture and values
embedded in its ethical principles. Within the RS2 Group, we are committed to creating value and
building a sustainable future for our customers, team members, shareholders and the broader
community in which we operate.
RS2’s social responsibility activities are primarily focused on strengthening global communities,
supporting people, education, philanthropic organisations, sports clubs and improving the environment.
We are dedicated to continuous improvement, and are committed to evolving our environmental, social
and community initiatives going forward. Our priorities fall within three pillars: People, Social Initiatives
and Environment.
People
Building a thriving, diverse, inclusive workplace. Our people are one of RS2’s greatest strengths. We
believe that company culture focused on diversity and inclusion is the key driver of creativity and
innovation. We strive to make RS2 a great place to work and foster a culture of inclusion and diversity
where all team members are treated with respect and equality, regardless of gender, ethnicity, sexual
orientation, gender identity, religious beliefs, or other characteristics. At RS2, we have more than 480
team members with 51 different nationalities which highlights our diversity. Having a team from diverse
backgrounds helps bring fresh ideas and drives innovation, advancing RS2’s growth and success. Our
female team members comprise 33.5% of the Company and we are focused on increasing the proportion
of women in all levels of the Group.
Learning and Developing Skills. The skills and competencies of our team members are important for
RS2’s growth and lasting success. With comprehensive training and development programs, RS2
continuously supports our teams to further develop their skill set. The Company’s Trainings Academy
provides a variety of comprehensive virtual and instructor-led courses that focus on technical, business
and IT skills to strengthen and enrich team members’ expertise. Furthermore, RS2’s Compliance Portal
gives access to legal, ethics and global compliance training. Through videos, interactive sessions and
short quizzes, our teams enhance their knowledge and professionalism, ensuring adherence to legal
regulations and the ethical use of data and resources to help prevent any conflicts of interest. All team
members and managers are obliged to receive compliance training which covers courses such as Anti-
Fraud and Payments Handling, General Data Protection, Payment Card Industry Data Security Standards
and Security Awareness and Information security.
RS2 offers regular scholarships to its staff with the intention of honing hard skills. The scheme aims to
grow internal knowledge on relevant areas and beyond. Since launching this benefit, the take-ups have
been regular. The company has, in turn increased its allocated budget to ensure that such requests can
be entertained.
Annual Report and Financial Statements | Page 22
Corporate Social Responsibility (continued)
Improving Mental Health & Well-Being. The COVID-19 pandemic also posed a mental health challenge
for individuals. In support of team members’ emotional health and their overall well-being, we
encouraged all team members to join several virtual mental health sessions, organised by our Human
Resources team in collaboration with the Richmond Foundation. RS2 has stepped up its effort to ensure
that mental well-being will retain the importance it warrants in the post COVID-19 era. In collaboration
with Richmond Foundation, RS2 will be financing any such therapy sessions as per required by the
company employees. A key element will be that the identity of the employees who seek assistance, will
at no point be disclosed. This will ensure that such assistance extends beyond the workplace.
Attracting New Talents. Our recruitment process starts at universities and educational institutes, giving
RS2 the opportunity to meet potential candidates and to identify future professionals. RS2 frequently
participates in fairs organised by the aforementioned educational bodies. These include, yet are not
limited to KSU Malta Careers Expo; KSU Freshers’ Week; ICTSA Industry Expo; KSM Freshers’ Week, etc.
Furthermore, our Human Resources team nurtures a close relationship with the faculties and universities,
helping to unlock a talent pool of well-educated and high-potential students.
Social Initiatives
RS2 is committed to positively contribute to society by leveraging our knowledge and actively
supporting local communities.
Promoting Education. RS2 promotes various initiatives to give numerous young people the relevant
exposure and the right training required to become future contributors to the Fintech industry. For the
past years, RS2 has made it a point to partake wholeheartedly in events and programs that promote job
exposure opportunities to students. One such event is MITA’s Student Placement Program. The
partnership, with the said agency, has given rise to scores of students gaining hands-on work experience
within diverse departments at RS2. To unlock potential, students are mentored by senior executives and
given the opportunity to delve and participate in projects which in turn sharpen their technical skills. RS2
provides students the possibility to work during both the summer holidays and the scholastic year. Upon
completion of studies, many students have been offered full-time employment with the Group. It is also
worth mentioning that RS2 has regularly collaborated with MCAST and acted as the main sponsor for
select events, to provide their students with experience in a technology company. RS2 firmly believes
that this program provides value to the local community while creating a gateway for RS2 to gain
prospective new employees with new talents.
Supporting Communities. RS2 supports various philanthropic organisations as well as numerous sports
and culture programs. Some of these organisations have continued to receive our ongoing support for a
number of years and have grown to consider RS2 as a loyal partner and contributor.
Annual Report and Financial Statements | Page 23
Corporate Social Responsibility (continued)
Furthermore, RS2 works with organisations involved in alleviating local social issues, using a fund with
volunteer donations from employees to donate to charitable institutions. In the reporting year, RS2 has
supported the following organisations in Malta; Philippines; Germany and Jordan:
Dar tal-Providenza Ladybird Foundation
Puttinu Cares Cystic Fibrosis Fundraising
L-Istrina
Dar Merhba Bik
Women for Domestic
Violence
Taalof Al Khair
MCAST
Kavallieri Handball Club
Wildlings OCR Team
Luxol St Andrews Futsal Club
SSV Heidelberg Basketball
All of RS2’s CSR activities help to promote a strong and healthy team relationship, which proves to be
highly beneficial given the extensive growth the Group has experienced in the past couple of years.
Environment
At RS2, we remain committed to minimise our footprint on the environment by reducing our energy
consumption, limiting waste and conserving water across our facilities globally. We encourage all team
members to engage in environmental and sustainable initiatives.
Reducing our environmental footprint. The business model of RS2, in essence, has minor
environmental impact. While our global digital platform eliminates paper usage, saving trees, conserving
water and mitigating climate change, our operations impact the environment. However, RS2 is still
committed to reduce its environmental footprint by increasing the eco-efficiency of our data centres,
offices and reducing of business travels. As part of our CO2 reduction effort, RS2 has started replacing
the majority of its car fleet with hybrid vehicles. Adopting these hybrid technologies will help reduce
RS2’s carbon footprint due to less fuel consumption resulting in lower CO2 emissions. To further limit
paper usage in the offices, RS2 utilises digital signatures for various administrative purposes.
Using water efficiently. Since water is the source of all life, RS2 is taking all possible measures to use
water more efficiently and has also implemented conserving practices such as water-efficient
landscaping across our office footprint. In our office building in Malta, the Company uses rainwater
collected in an underground reservoir for planned and controlled irrigation through the use of automatic
control timers and feeders. This ensures the optimisation of water usage according to crop type and
season.
Using electricity efficiently. Reducing energy-use lowers the running costs and protects the climate at
the same time. The Company has taken important steps to use electricity efficiently by converting to
LED lighting in its offices and implementing motion sensor lights to conserve energy.
Annual Report and Financial Statements | Page 24
Corporate Social Responsibility (continued)
Reducing waste. We aim to drive a culture of continuous environmental improvement by disposing and
separating waste generated by our Company in a safe and responsible manner in the necessary bins
placed in various key areas. The generated waste and disposal methods are measured and reported to
ensure we are making progress in our effort to reduce waste.
RS2 is confident that it will continue to achieve a balanced and holistic value for its stakeholders and will
strive continuously to promote sound CSR initiatives. At the same time, RS2 will continue to positively
affirm its efforts to become a sustainable Group and a market leader within the Fintech industry. We will
continue to innovate and evolve our efforts going forward.
Annual Report and Financial Statements | Page 25
Directors’ Report
For the year ended 31 December 2022
The Directors present their report, together with the financial statements of RS2 Software p.l.c. (the
“Company”) and its subsidiaries, RS2 Smart Processing Limited, RS2 Software INC., RS2 Software LAC
LTDA, RS2 Software APAC Inc., RS2 Germany GmbH and RS2 Merchant Services Europe GmbH, together
with its subsidiaries RS2 Financial Services GmbH and RS2 Zahlungssysteme GmbH (collectively
referred to as the “Group”), for the year ended 31 December 2022.
Board of Directors
Mr. Mario Schembri (Chairman)
Mr. Radi Abd El Haj (CEO)
Dr. Robert Tufigno
Mr. Franco Azzopardi
Mr. John Elkins
Prof. Raša Karapandža
Mr. David Price
Principal activities
The Group and the Company are principally engaged in the development, installation, implementation
and marketing of computer software for financial institutions under the trademark of BankWORKS
®
(Licencing Solutions). Through its subsidiaries, the Group acts as service provider with the use of
BankWORKS
®
(Processing Solutions) and has also established its own ‘Acquiring’ business line by making
use of a financial institution license obtained through BaFin, the German regulator (Merchant Solutions).
The Company also enhanced its activities to include acquisition and holding of shares and like
instruments, in entities whose activities are complimentary to the business of the Company, including
entities that are payment, financial or credit institutions, and provider of services to such institutions as
well as merchants.
Business review and future developments
2022 has proven to be a year of continued execution of strategy to deliver the planned growth of the
Group.
The Group has extended its offering in Latin America (LATAM) through market entry in Mexico, Columbia
and Peru, where transaction processing services to Payment Service Providers (PSPs), banks and
financial institutions, which provide acquiring services to online merchants, stores and shops, will be
serviced. In Asia Pacific (APAC), services were extended to Singapore and Malaysia. In the Philippines,
the Group is in the process of adding InstaPay, the real-time online local scheme, which will allow the
offering of services to banks in the market using our own developed mobile application for fund transfers,
bill payments and other banking services.
Annual Report and Financial Statements | Page 26
Directors’ Report (continued)
The US subsidiary, while continuing to ramp up its client base with respect to the Independent Sales
Organisations (ISO) processing business, has, enhanced its strategy and will be primarily focused on the
following three business lines:
• Enterprise business, whereby RS2 manages the client’s private infrastructure on the cloud, in
addition to providing processing and other services;
• Acquiring processing, which focuses on Payment Facilitators (PayFacs), Payment Service
Providers (PSPs) and follow up on the existing ISO pipeline;
• Issuing processing (a new business line).
RS2 Smart Processing continues to increase its transaction processing volumes through new and
existing customers. It is also working on standardising its product and service offering to improve time-
to-market and profitability, thus enabling the Group to also offer services to smaller clients. This
subsidiary company is developing a fully digitalised service enabling a client to self-onboard and choose
the services required for its business and market needs.
The Group’s investment in human resources provided the necessary support in order to successfully
launch the new acquiring business and obtain the EMI License, through BaFin. This enabled RS2 to
provide a wide range of payment acceptance and other financial services to merchants and consumers
across Europe, as well as to process cross-border merchant payments globally. The new acquiring
business will reinforce the shift in the revenue model for RS2 Group, from dependence on one-time
license fees to ongoing and recurring revenue based on the number and value of transactions processed.
The launch of the Group’s Financial Services sector, following the acquisition of its EMI license, was
concluded successfully in the second quarter of 2022. In addition to this, the German subsidiary became
a principle member of Visa and MasterCard. As an EMI institution and principle member, the Group is
now able to provide direct acquiring and issuing services to merchants, which were set in motion in
2022.
In the first half of 2021, RS2 Software p.l.c. successfully raised €15,731,800 in its Preference Shares
Public Offering (PO). A total number of 8,989,600 shares were subscribed for at the offer price of €1.75
per share. Such shares carry a nominal value of €0.06 per share. In line with the Group’s business
strategy, the additional liquidity generated from the Preference Shares PO enabled it to accelerate
growth over the coming years by further investing in both the US and Merchant Solutions arms of the
Group, as well as a number of internal projects and infrastructure.
During the year under review, the Company registered revenues from its principal activities of €19.7m
(2021: €24.5m) and a profit before tax of €1.8m (2021: €5.3m). The Managed Services arm of the Group,
RS2 Smart Processing Limited which is principally engaged in the processing of payment transactions
with the use of BankWORKS®, recorded revenues of €11.7m (2021: €7.5m) and a profit before tax of
€4.0m (2021: €2.1m) while RS2 Software INC., which serves as the US arm of the Group with specific
focus on the provision of Managed Services in North America, recorded revenues of €14.7m (2021:
€16.1m) and a loss before tax of €0.1m (2021: profit before tax of €0.8m). RS2 Software APAC Inc. is
currently supporting the Company in product development and its expansion in the APAC region. The
RS2 German subsidiaries focus mainly on direct merchant acquiring and issuing services using one
platform that integrates through API to the merchant’s website or store, thereby consolidating the entire
Annual Report and Financial Statements | Page 27
Directors’ Report (continued)
business of the merchant across all the respective payment channels.
During the year under review, upon consolidating all of its activities, the Group generated revenues of
€37.5m (2021: €38.7m) and registered a profit before tax of €1.8m (2021: €6.4m). At 31 December 2022,
the Group’s total assets amounted to €43.4m (2021: €47.6m), whereas its current assets exceeded its
current liabilities by €3.6m (2021: €7.5m). The Board of Directors is confident that the Group can
continue to operate as a going concern for the next 12 months from date of approval of the financial
statements as set out on in the Going Concern section below.
A comprehensive review of the business and performance of the Group during the year under review,
and an indication of future developments are given in the CEO’s Statement set out on pages 10 to 15 of
this Annual Report.
Conflict between Russia and Ukraine
In February 2022, Russia launched a large-scale military invasion on Ukraine, one of its neighbours to
the southwest, marking a major escalation to a conflict which began in 2014. The Group and Company
do not have any customers domiciled in such countries, and no significant impact was/is expected to be
incurred on that front.
That being said, the conflict between Russia and Ukraine brought about high and increasing inflation
rates, resulting from restricted supply of oils, gas and grains, an energy crisis and the looming threat of
recession, while recovering from the economic shocks of a global pandemic. This challenging economic
environment resulted in customers being cautious to execute signed projects whilst also holding back
on new ones.
Prices for energy intensive commodities has increased across Europe following the current economic
conditions. Over the past years, RS2 has moved towards a cloud-based infrastructure. Cloud computing
enables users to share resources by being connected to remote data centres. Data centres tend to be
more energy efficient than individual servers distributed around the Group and large companies offering
cloud services are constantly working to make their computing facilities more energy efficient.
Cash flow projections and assumptions taken are updated to reflect observable trends related to
customer spending and increases in costs. These movements have been modelled into the Group’s
budgets and impairment testing. The discount rates used in the determination of the assets’ value in use
have been further updated to reflect current market assessments of the time value of money through
the current risk-free rate when calculating the Weighted Average Cost of Capital.
Going forward, energy prices, inflation, interest rates and economic growth will depend on how the
conflict in Ukraine will evolve.
Going Concern
Management has prepared a going concern assessment for RS2 Group, based on the 2022 financials
whilst also taking into consideration approved budgets covering periods 2023 to 2025.
The 2022 financial results for the Group show a stable top line compared to prior year, despite the
current market conditions. The decline in Company revenues were compensated for by increases in
revenue from subsidiaries, which is in line with the Group‘s strategy of transforming its revenue model
from licence revenue to managed services and merchant services.
Annual Report and Financial Statements | Page 28
Directors’ Report (continued)
Amplifying the repercussions resulting from the COVID-19 pandemic, the Russian invasion of Ukraine
has magnified the slowdown in the global economy which entered a period of feeble growth and
elevated inflation. This affected the Group’s forecast for the year by way of customers delaying projects
or stretching investments to bare minimum. A significant stagnation in investments was noted mid-year
2022, so the Group quickly applied counter measures and as a result, a positive ramp up in top line and
bottom line was noted in the last few months of the year.
With the onboarding of new clients, RS2 has processed more than 1.25 billion technical transactions over
the past 12 months on the BankWORKS
®
platform. This increase is expected to continue to progress
gradually by way of an increase from RS2’s existing clients as well as the onboarding of new clients.
The payments industry is constantly evolving and 2023 is shaping up to be a year of significant
innovation and change with focus on making payments more convenient, secure, and personalised for
consumers. Taking advantage of the latest advancements in technology and security, customers can
expect a seamless payment experience when paying online or at a store.
RS2 Group will continue to concentrate on implementing and delivering its strategy around its main
business pillars of growing and expanding the managed service business, ramping up the US expansion
and building its own direct acquiring business. The Group also plans to invest further in its infrastructure
to strengthen the technology and complete the product to play a more active role in the digitalisation of
the whole customer journey, to offer omni-channel solutions and go beyond traditional payment
solutions.
The outlook for 2023 is that business will ramp up with a stronger pipeline gearing up for the coming
year, which, together with the launch of several exciting new products for the Group, including Merchant
reconciliations modules, Merchant and Partner Portals and Tokenisation for Issuing Services amongst
others, will lead the Group to a successful 2023 and beyond.
From a profitability viewpoint, in 2023, both Software (Licensing) and Managed Services Solutions are
expected to deliver a positive bottom-line contribution. When it comes to the Merchant Solutions arm of
the Group, RS2 Zahlungssysteme GmbH will continue to provide solid growth and steady revenues whilst
RS2 Financial Services GmbH is expected to start generating a positive bottom line after 2025. The latter
will continue to ramp up business organically through direct merchants and partners.
From a liquidity point of view, RS2 Group has a solid cash position. RS2 Software p.l.c. has an overdraft
facility of €10m with APS Bank to meet any working capital requirements which was not being utilised
as at 31 December 2022. This illustrates that the Group’s gearing has also improved when compared to
prior year, with the Group now solely holding a minor bank loan.
In this respect, the Board of Directors is confident that the Group can, not only continue to operate as a
going concern for 12 months from the end of the reporting period, but will continue to see substantial
growth over the coming years.
Annual Report and Financial Statements | Page 29
Directors’ Report (continued)
Principal Risks and Uncertainties
In its operations, the Group has exposure to credit risk, liquidity risk and market risk. The Group’s
objectives, policies, and processes target to mitigate the effect of such risk by constantly measuring
and managing such risk, whilst proactively managing its capital. A more comprehensive outlook of such
risk exposure and the Group’s response can be viewed in Note 6 to these financial statements.
Non-financial risks
i. Market forces and competition
The market in which the Group operates is characterised by rapidly evolving technology and industry
standards, as well as new competitors such as FinTechs and Big Techs entering the market, driving
change and market disruption, bringing new business models to the market. RS2 must be able to
compete with such companies and meet the need for innovation in its industry. In this regard, over the
past years, the Group continued to enhance its platform by adding new tools that streamline the
operation of its clients and differentiate it from competition in order to onboard more businesses from
various industries on its platform globally. In the last years, the Group invested significantly in its
proprietary BankWORKS
®
. This investment represents development work carried out internally by the
Group on enhancement of BankWORKS
®
and its functionality.
ii. Dependence on key clients
RS2 generally benefits from a highly diversified global client base, including Banks, PayFacs, PSPs, ISVs,
acquirers and issuers. However, since some of its clients are large global corporates with a high
aggregated payment and processing volume, these key clients stand for a large proportion of the Group’s
revenue. Although Management believes that its relationships with these key clients are stable, its ability
to renew existing agreements with them, or to enter into new contractual relationships on commercially
attractive terms, depends on a range of commercial and operational factors and events, any of which
may be beyond RS2’s control.
To broaden its client base, markets and opportunities, the Group is investing significantly in its US
subsidiary, namely its processing platform that will be the foundation of the processing solution in the
US, as well as in the operations to ramp up. Furthermore, the Group injected equity and capital reserves
to setup its third business line being Merchant Services, including its attainment of an EMI license. In
line with the Group’s strategic shift towards Merchant Solutions, the Group acquired Kalicom
Zahlungssysteme GmbH in 2020 (Later renamed to RS2 Zahlungssysteme GmbH). This acquisition
provided RS2 with a quick start into the direct acquiring business with immediate capabilities of selling,
installing and servicing terminals, and processing card transactions in the German market for small and
mid-size accounts.
iii. Software risk
It is an inherent risk of this industry that software applications could contain undetected errors which
could lead to the software not operating as intended. Any failure of the Group’s current or future
Annual Report and Financial Statements | Page 30
Directors’ Report (continued)
platforms, software and technology infrastructure, including the Cloud-Solution, could materially
adversely affect its business, results of operations, financial condition or prospects. In this regard, RS2
has developed and continues to develop its own bespoke processing platform BankWORKS
®
, software
and technology infrastructure and operates and maintains the processing-platform, which are critical
to RS2’s operations, customer service and reputation.
iv. Cyber security risk
Similar to business and technology, cyber threat evolves and is always present. The most common cyber
security threats result in risks associated with either data breach or service provision disruptions. The
nature of RS2’s business and of its customers and partners, who use the processing services involve
systems and environments that possess large amounts of sensitive data. RS2 cloud services and data
centres as well as its operations, store and transmit sensitive information related to cardholders,
merchants and financial institutions including names, addresses and accounts amongst other
information that could be vulnerable to computer viruses, physical and cyber-criminal attacks and web
fraudsters that could lead to destruction or theft of transaction data and/or personal data. This could
lead to financial losses or delays in providing services to the customers. To mitigate such risk, the Group
will continue expanding its security resources and tools to fight and protect its systems and facilities in
order to cover any attack or eventualities using its disaster recovery system and procedures that has
been built in various locations to fit this purpose. In this regard, vulnerability scanning, awareness
training, ongoing investments in security operations, incident security planning, supply chain monitoring,
information security policies, insurance and compliance with regulatory requirements through annual
audits are carried out.
V. Risk to intellectual property and proprietary rights
The Group regards its intellectual property as critical to its success. It relies and will rely on a combination
of trade secret, copyright, trademark and non-disclosure laws, domain name, registrations and other
contractual agreements and technical measures to protect its intellectual property rights (IPR). To
mitigate this risk, RS2 generally seeks to enter into confidentiality or license agreements with its
employees, consultants and clients. The Directors consider that, currently, RS2 has appropriate systems
and procedures to control access to and distribution of its intellectual property documentation and other
proprietary information and are continually on the lookout for new tools to protect its IPR in the future.
Dividends and Bonus Issues
The Group’s strategic focus is on becoming the Company of choice in the global payments industry and
towards this end, requires further investment in infrastructure and business development. For this
reason, the Board is not recommending any final dividends for the year ending 31 December 2022 (2021:
nil).
Annual Report and Financial Statements | Page 31
Directors’ Report (continued)
During 2022 the Directors authorised the distribution of a bonus issue to shareholders (on a pro rata
basis) of 1 share for every 8 shares held. The date of allotment of the bonus shares to eligible members
was 7 November 2022.
This bonus issue of 25.24million shares of €0.06each (fully paid up) was funded via the share premium
reserve generated through the recent preference share public offering. The bonus shares rank pari passu
in all respects with the existing listed share capital of the Company.
Reserves
Retained earnings amounting to €24.0m (2021: €22.8m) for the Company and €2.6m (2021: €5.0m) for
the Group are being carried forward.
Key Figures
The Group
2022
2021
2020
2019
2018
€
€
€
€
€
Revenues (Eur 000s) 37,516
38,680
26,813
22,100
25,008*
EBITDA (Eur 000s) 3,800
8,760
(1,464)
(210)
7,846
EBITDA margin (%)
1
0
.
1
3
%
22.65%
-
5.46%
-
0.95%
31.37%
Profit/(loss) before tax (Eur 000s) 1,778
6,416
(3,889)
(2,115)
6,565
Earnings per ordinary share (Euro) €0.00
€0.02
-€0.02
-€0.01
€0.03
Earnings per preference share (Euro) €0.00
€0.02
-
-
-
Equity to asset ratio (%) 55.71%
53.41%
18.56%
44.28%
61.51%
Debt/equity ratio multiple
0.
80
0.87
4.39
1.26
0.63
* Includes the release of deferred income as at 1 January 2018, amounting to €5.6m, as a result of the
adoption of IFRS 15.
As from 1 January 2021, fines and penalties started to be accounted for under Other Expenses instead
of under Finance Costs. As such, EBITDA and EBITDA margin figures between 2018 and 2020 have been
re-stated accordingly.
Subsequent Events
Agreement entered into by Board of Directors of RS2 Software INC.
An agreement was entered into by four US directors and RS2 Software INC., dated 6 March 2023,
where each director was awarded a bonus payment of up to $120,000 (€112,718 as at 6 March
2023). Such amount is payable in tranches across 2023.
Annual Report and Financial Statements | Page 32
Directors’ Report (continued)
Restructuring of the Board of Directors of RS2 Software INC.
In April 2023, it was decided to streamline the Board of Directors across RS2 Group Companies.
Consequently, the number of Board Members at RS2 Software INC. was reduced.
Pursuant to Capital Market Rule 5.62
Upon due consideration of the Company’s profitability, balance sheet, capital adequacy and solvency,
the Directors are satisfied that at the time of approving the financial statements, the Company has
adequate resources to continue operating as a going concern for the foreseeable future.
Pursuant to Capital Market Rule 5.64
Rule 5.64.1 - Share capital structure
The Company’s authorised ordinary share capital is of €18,000,000, divided into 300,000,000 ordinary
shares, at €0.06 each. The Company's issued ordinary share capital is of €13,025,384 divided into
217,089,727 ordinary shares of €0.06 each, each ordinary share being fully paid up. All of the issued
Ordinary Shares of the Company form part of one class of Ordinary Shares in the Company, which shares
are listed on the Malta Stock Exchange. All of the Ordinary Shares have the same rights and entitlement
and rank pari passu between themselves.
The following are highlights attached to the Ordinary Shares:
Dividends:
The shares carry equal rights to participate in any distribution of dividends declared by the Company.
Voting rights:
Each share shall be entitled to two (2) votes at the meetings of the shareholders.
Pre-emption rights:
Subject to the limitations contained in the Memorandum and Articles of Association, shareholders are
entitled to be offered any new shares to be issued by the Company, in proportion to their current
shareholding, before such shares are offered to the public or to any person not being a shareholder.
Annual Report and Financial Statements | Page 33
Directors’ Report (continued)
Capital distributions:
The shares carry the right for the holders thereof to participate in any distribution of capital made
whether on a winding up or otherwise.
Transferability:
The shares are freely transferable in accordance with the rules and regulations of the Malta Stock
Exchange applicable from time to time.
Other:
The shares are not redeemable.
The Company’s authorised preference share capital amounts to €3,600,000, divided into 60,000,000
preference shares, at €0.06 each. The Company's issued preference share capital amounts to €606,800
divided into 10,113,329 preference shares of €0.06 each, each preference share being fully paid up. All
of the issued Preference Shares of the Company form part of one class of Preference Shares in the
Company, which shares are listed on the Malta Stock Exchange. All of the Preference Shares have the
same rights and entitlement and rank pari passu between themselves.
The following are highlights attached to the Preference Shares:
Dividends:
When a dividend is declared payable in respect of any financial period, the holders of Preference Shares
shall be entitled to a dividend at a premium (“Premium Dividend”) over the dividend distributed and
payable to the holders of Ordinary Shares. Such Premium Dividend shall be determined by the Board of
Directors at the time of issue of the dividend but shall not be less than ten per cent (10%).
Bonus Shares:
The holders of Preference Shares shall qualify in the same manner as the holders of Ordinary Shares to
be entitled to any bonus shares issued by the Company.
Annual Report and Financial Statements | Page 34
Directors’ Report (continued)
Voting rights:
The holder shall not be entitled to vote at the meetings of the shareholders except for the purpose of:
1) reducing the capital of the Company; or
2) winding up of the Company; or
3) where the proposition to be submitted directly affects their rights and privileges; or
4) when the dividend on their shares is in arrears by more than six (6) months.
In such case where the holder of Preference Shares shall have the right to vote, such shareholder shall
have one (1) vote in respect of each Preference Share held.
Pre-emption rights:
The holders of Preference Shares shall not have any rights of pre-emption in respect of allotment of
Preference shares to officers and employees of the Company and, or its subsidiaries.
Capital distributions:
The holders of Preference Shares shall not be entitled to participate in the assets of the Company except
by way of distribution of assets to its members on its winding up and this in the same manner as holders
of Ordinary Shares. In any such case the holders of Preference Shares shall not enjoy any preference
over the holders of the other shares.
Transferability:
The shares are freely transferable in accordance with the rules and regulations of the Malta Stock
Exchange applicable from time to time.
Other:
The shares are non-cumulative and are not redeemable.
Rule 5.64.3 - Holding in excess of 5% of the share capital
On the basis of the information available to the Company as at 31 December 2022, Information
Technology Management Holding Limited (ITM) and Barclays Bank P.l.c. (Barclays) hold 96,567,522 and
35,216,796 ordinary shares respectively, equivalent to 47.82% and 17.44% of the Company’s total issued
share capital.
Annual Report and Financial Statements | Page 35
Directors’ Report (continued)
In his capacity as ultimate shareholder of ITM, Radi Abd El Haj indirectly holds 47.82% of the issued share
capital of the Company. As far as the Company is aware, no other person holds an indirect shareholding
in excess of 5% of its total issued share capital.
Rule 5.64.5 – Employee share option scheme
The Company’s share option scheme is administered by the Board of Directors. The decision of the
Board on all disputes concerning share options is final.
Rule 5.64.7 – Restrictions on transfer of securities
By virtue of an agreement entered between ITM and Barclays, ITM undertook that, for so long as it holds
more than 10% of the issued share capital of the Company, upon receiving any offer from third parties
to acquire securities it holds in the Company, it is required to offer any such shares that it is desirous to
transfer to Barclays.
Rule 5.64.8 - Appointment and replacement of directors
The Memorandum and Articles of the Company regulates the appointment of directors. Article 55.1 of
the Articles of Association provides that a member holding not less than 0.5% of the issued share capital
of the Company having voting rights or a number of members who in the aggregate hold not less than
0.5% of the issued share capital of the Company having voting rights shall be entitled to nominate fit and
proper persons for appointment as directors of the Company. In addition, the directors themselves, or a
committee appointed for the purpose by the directors, may make recommendations and nominations to
the shareholders for the appointment of directors at the next Annual General Meeting.
Furthermore, in accordance with the provisions of Article 55.1(d) of the Articles of Association, the Board
of Directors, may, at any time, appoint a director if it believes that the appointment would be beneficial
to the Company due to the skill, expertise and knowledge of such person.
Article 55.3 of the Articles of Association of the Company also provides that in the event that the Board
is of the opinion that none of the directors appointed or elected in accordance with the provisions of
these Articles is a non-executive independent director competent in accounting and/or auditing as
required by the Capital Market Rules relating to the composition of the Audit Committee, the Board shall,
during the first Board meeting after the Annual General Meeting, appoint a person who is independent
and competent in accounting and/or auditing as a non-executive director, and shall appoint such person
to the Audit Committee.
Unless they resign or are removed, directors shall hold office for a period of one year. Directors whose
term of office expires, or who resign or are removed, are eligible for re-appointment.
Annual Report and Financial Statements | Page 36
Directors’ Report (continued)
Any director may be removed at any time by the Company in a general meeting, provided that the
director who is to be removed shall be given the opportunity of making representations. A resolution for
the appointment and/or removal of a director shall be considered to be adopted if it received the assent
of more than fifty percent of the members present and voting at the general meeting.
Rule 5.64.8 - Amendments to the Memorandum and Articles of Association
Amendments to the Memorandum and Articles of Association of the Company are regulated by the
Companies Act, 1995 (Chapter 386, Laws of Malta). Subject to the provisions of Article 79 of the Act,
and the Approval of the Malta Financial Services Authority, the Company may, by extraordinary
resolution, alter or add to its Memorandum and Articles of Association.
Rule 5.64.9 - Powers of the Board members
The directors are vested with the management of the Company, and their powers of management and
administration emanate directly from the Memorandum and Articles of Association and the law. The
directors are empowered to act on behalf of the Company and in this respect have the authority to enter
into contracts and sue and be sued in representation of the Company. In terms of the Memorandum and
Articles of Association they may do all such things that are not, by the Memorandum and Articles of
Association, reserved for the Company in general meeting.
By virtue of an extraordinary resolution of the shareholders dated 15 December 2020, the Board of
Directors is authorised to issue any share capital of the Company, which is unissued, which authority is
valid for a maximum period of five (5) years, renewable for further periods of five (5) years each. As at
31 December 2022, the Company had eighty two million, nine hundred and ten thousand, two hundred
and seventy three (82,910,273) Ordinary Shares and forty nine million, eight hundred eighty six
thousand, six hundred and seventy one (49,886,671) Preference Shares in unissued share capital.
Rule 5.64.11 – Agreements with employees
The Company and one of its subsidiaries, have agreements with employees holding senior management
positions and directors providing for compensation upon termination based on either an agreed fixed
amount or the then applicable annual salary. Such agreements include a non-competition clause,
precluding such employees from competing with the Company and one of its subsidiaries, in the event
that their employment is terminated. In order for these non-competition clauses to be enforceable, the
Company and one of its subsidiaries, are bound to grant these individuals a sum based on an agreed
fixed amount or the then applicable annual salary.
Annual Report and Financial Statements | Page 37
Directors’ Report (continued)
During 2019, one of Company’s subsidiaries entered into a number of agreements with five employees,
to the effect of allocating 5,626 share options in the subsidiary, with 75% vesting taking place over 36
months during which the employee must be in office and the remaining 25% vesting taking place over
the next 12 months, during which the employee must be in office. On the tenth anniversary of the grant
date or on the termination of employment, any award shares that have not vested shall automatically be
forfeited. Upon termination, all shares issued upon exercise of the options shall be subject to a call option
by the company to repurchase at fair market value. Three of the five individuals terminated their
employment, while the remaining two individuals signed an amendment to the original agreement
granting the share options to be effective from their respective employment start date. From the total
allocated share options of 5,626 during 2019, 1,563 share options remain in effect as at 31 December
2022.
Other disclosures pursuant to Rule 5.64
No disclosures are being made pursuant to Rules 5.64.2, 5.64.4, 5.64.6, 5.64.10 as these are not
applicable to the Company.
Approved by the Board of Directors on 28 April 2023 and signed on its behalf by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 38
Corporate Governance Statement of
Compliance
For the year ended 31 December 2022
Pursuant to the Malta Financial Services Authority Capital Market Rules 5.94 and 5.97, RS2 Software
p.l.c. (“the Company”) is hereby presenting a statement of compliance with the Code of Principles of
Good Corporate Governance (“the Principles” or “the Code”) for the year ended 31 December 2022,
which details the extent to which the Principles have been adopted, as well as the effective measures
taken by the Company to ensure compliance with these Principles.
Good corporate governance is the responsibility of the Board of Directors (“the Board”), which adopts
the Principles and endorses them accordingly. The Board believes that adoption of the Principles is
evidence of the Company’s commitment to a more transparent governance structure in the best interest
of its shareholders and the market as a whole.
As demonstrated by the information set out in this statement, together with the information contained
in the Remuneration Report, the Company believes that it has, save as indicated in the section entitled
“Non-Compliance with the Code”, throughout the accounting period under review, applied the Principles
and complied with the provision of the Code. In the Non-Compliance Section, the Board indicates and
explains the instances where it has departed from or where it has not applied the Code, as allowed by
the Code.
Part 1: Compliance with the Code
Principle One: The Board
The Board is composed of one (1) executive director and six (6) non-executive directors.
All the Directors, individually and collectively, are of the appropriate calibre with the necessary skills,
diversity of knowledge and experience to assist them in providing leadership, integrity and judgement in
directing the Company.
The Board is entrusted with establishing the long-term strategy, objectives and policies of the Company
and ensuring that these are pursued within the parameters of the relevant laws and regulations and best
business practices.
Further detail in relation to the Committees and the responsibilities of the Board may be found in Principle
four of this statement.
Principle Two: Chairman and Chief Executive
In line with the Principles, the roles of the Chairman and the CEO are kept separate. The Company adopts
a structure of clear division of responsibilities between the running of the Board and the management
of the Company’s business. The Chairman is responsible to lead and set the agenda of the Board. The
Chairman ensures that the Board’s members are all actively engaged in discussions and receive precise,
timely and objective information so that the Directors can take judicious and rigorous decisions to be
able to effectively monitor the performance of the Company.
Annual Report and Financial Statements | Page 39
Corporate Governance Statement of
Compliance (continued)
The Chairman is also responsible for communicating with shareholders. During 2022, the position of
Chairman was occupied by Mr. Mario Schembri.
The delegation of specific responsibilities to appropriate Committees, namely the Audit Committee and
the Remuneration Committee is taken care of by the Board. On the other hand, the CEO takes care of
the day-to-day running of the Company’s business. During 2022, this position was occupied by Mr. Radi
Abd El Haj.
Principle Three: Composition of the Board
The number of directors shall be not less than three (3) and not more than eight (8) individuals. This
range provides diversity of thought and experience without hindering effective discussion or diminishing
individual accountability. Members of senior management also attend meetings, albeit without a vote, at
the request of the Board, as and when necessary. The Board is currently composed of one (1) executive
director (CEO) and six (6) non-executive independent directors. In determining the independence or
otherwise of its Directors, the Board has considered, amongst others, the Principles relating to
independence contained in the Code, the Company’s own practice as well as general good practice.
In accordance with Code Provision 3.2 of the Code, the Board has taken the view that the business
relationship existing between the Company and two of its directors, Mr. Mario Schembri and Dr. Robert
Tufigno, is not significant and thus does not undermine the said Directors’ ability to consider
appropriately the issues which are brought before the Board. Apart from possessing valuable experience,
the Board feels that the Directors in question are able to exercise independent judgement and are free
from any relationship which can hinder their objectivity. Furthermore, with respect to the non-executive
directors Mr. Mario Schembri, Dr. Robert Tufigno and Mr. Franco Azzopardi, despite their longevity of
service, the Board retains that there are no relevant factors that impair their objectivity or that could
influence or exert bias in their judgement and hence they are determined to be independent.
The appointment of directors to the Board is reserved exclusively to the Company’s shareholders, except
in so far as an appointment may be made to fill a casual vacancy on the Board or to comply with the
provision of the Capital Market Rules, relating to the members of the Audit Committee. Prior to being
appointed as directors, nominees undergo a due diligence process by the Company, to establish that
they are fit and proper persons.
Principle Four: The Responsibilities of the Board
The Board has the first level responsibility of executing the four basic roles of corporate governance
namely accountability, monitoring, strategy formulation and policy development. The Board regularly
reviews and evaluates corporate strategy, major operational and financial plans, risk policy and the
performance of the Company. The Board has a formal schedule of matters reserved for it to discuss and
includes a review of management’s implementation of corporate strategy and corporate objectives,
assessment of the Company’s present and future operations, opportunities, risks and threats emanating
from the external environment as well as current and future strengths and weaknesses.
Annual Report and Financial Statements | Page 40
Corporate Governance Statement of
Compliance (continued)
When a Director is unable to agree with a decision of the Board, because a proposed course of action is
not deemed to be consonant with his statutory or fiduciary duties and responsibilities, and all reasonable
steps have been taken to resolve the issue, the Director can either opt to formally note his reasons for
objection to any decision of the Board, or alternatively if the decision is of such material importance,
then resignation may be the better alternative. When a Director feels that resignation may be a better
alternative to submission, which objectively is of material importance to the shareholders, then an
appropriate announcement will be made.
Board Committees
The Board has established the Audit Committee and the Remuneration Committee.
Audit Committee
The Audit Committee’s terms of reference, which have been approved by the Malta Financial Services
Authority, are modelled on the provisions of the Capital Market Rules, primarily to monitor the financial
reporting process and the effectiveness of the Company’s internal control procedures. Whilst the
Committee vets and approves related party transactions, it also considers the materiality and the nature
of related party transactions to ensure that the arm’s length principle is adhered to.
The Audit Committee is responsible for managing the Board’s relationship with external auditors,
monitoring the audit of the annual and consolidated accounts, making recommendations to the Board
on their appointment and monitoring their independence, especially with respect to non-audit services.
In addition, the Audit Committee is responsible for considering whether a financial internal audit function
is required and makes recommendations accordingly to the Board. In the event that the Committee
determines the necessity of an internal audit function, it shall recommend the role, functions and remit
and how the establishment of such function shall add value to the Company. The Committee shall
constantly monitor and assess the role and effectiveness of the internal audit function. Moreover, the
Audit Committee shall review the Company’s arrangements related to whistle blowing, also ensuring that
such arrangements allow proportionate and independent investigation of such matters and appropriate
follow up action.
Mr. Franco Azzopardi, an independent non-executive director appointed by the Board, acts and serves
as Chairman, whilst Dr. Robert Tufigno and Prof. Raša Karapandža, both independent non-executive
directors, act as members. No changes in the composition of the committee took place during the year
ended 31 December 2022. The Company Secretary, Dr. Ivan Gatt, acts as secretary to the Committee.
Annual Report and Financial Statements | Page 41
Corporate Governance Statement of
Compliance (continued)
Mr. Franco Azzopardi is a qualified accountant and auditor who the Board considers as the person
competent in accounting and auditing. Prof. Raša Karapandža is a professor of finance and serves as an
academic director of the Master in Finance programme and is deemed to be a competent member of
the Audit Committee. Dr. Robert Tufigno has practised in the fields of general commercial law, property
law and litigation and due to his legal expertise, Dr. Robert Tufigno is deemed a competent member of
the Audit Committee by the Board. The Board of Directors of the Company considers that the Audit
Committee as a whole has the required competence relevant to the payment software industry. In fact,
each member has an individual skill set which complements the skills required in this industry.
The members of the Audit Committee are free from any business, family or other relationship with the
Company, its controlling shareholder and the management of either. Dr. Robert Tufigno is a partner in
GTG Advocates (legal advisors to the Company); however such relationship is not considered to be
significant and does not create a conflict of interest such as to jeopardise exercise of his free judgement.
The executive directors, members of senior management and the external auditors are invited to attend
meetings at the request of the Committee, as and when required.
Meetings held: 5
Attended
Mr. Franco Azzopardi 5
Dr. Robert Tufigno 5
Prof. Raša Karapandža 5
Principle Five: Board Meetings
Meetings of the Board are held as frequently as necessary and are notified by the Company Secretary
with appropriate notice before the meeting. Each agenda for the forthcoming meeting is accompanied
by such papers and documents as are necessary to make directors informed of the issues to be
discussed and in particular the decisions they are expected to take. Meetings may also include
presentations by Management, whilst other information and documentation is made available for perusal
by the directors, at their request. After each Board meeting and before the next, minutes that faithfully
record attendance and decisions are circulated to all directors. Members of senior management attend
meetings at the request of the Board, as and when necessary.
When the audit committee’s monitoring and review activities reveal cause for concern or scope for
improvement, it shall make recommendations to the Board on actions needed to address the issue or
improvements to be made. The Board shall satisfy itself that any issues raised by the audit committee
and the external Auditor and communicated to the Board, have been adequately addressed.
Annual Report and Financial Statements | Page 42
Corporate Governance Statement of
Compliance (continued)
The Board meetings were attended as follows:
Meetings held: 5
Attended
Executive Director
Mr. Radi Abd El Haj (CEO) 5
Non-executive Directors
Mr. Mario Schembri (Chairman) 5
Dr. Robert Tufigno 5
Mr. Franco Azzopardi 5
Mr. John Elkins 5
Prof. Raša Karapandža 5
Mr. David Price 2
Dr. Ivan Gatt occupies the position of Company Secretary.
Principle Six: Information and professional development
The CEO is appointed by the Board and enjoys the full confidence of the Board. The CEO, although
responsible for the recruitment and selection of senior management, consults with the Remuneration
Committee and the Board on the appointment of, and on a succession plan, for senior management.
As part of the Company’s succession planning, the Board implements appropriate schemes to recruit,
motivate and retain highly qualified individuals by creating the right environment and opportunities to
move forward within the organisation. On their appointment, new directors are provided with briefings
by the CEO and the other Chief Officers on the activities of their respective business area. Ongoing
training of directors, management and employees is seen as very important.
The Directors have access to the advice and services of the Company Secretary and supporting legal
advice, and are entitled, as members of the Board, to take independent professional advice on any
matter relating to their duties, at the Company’s expense. The Directors are fully aware of their
responsibility to always act in the best interest of the Company and its shareholders as a whole,
irrespective of whoever appointed them to the Board.
Annual Report and Financial Statements | Page 43
Corporate Governance Statement of
Compliance (continued)
Principle Seven: Evaluation of the Board
During the year under review, the Board undertook an evaluation of its own performance. The Board
appointed a sub-committee, comprised of Dr. Robert Tufigno and Mr. Franco Azzopardi to carry out the
performance evaluation of the Board and its Committees. The evaluation exercise was conducted
through a Board effectiveness questionnaire. The results were communicated to the Chairman and then
discussed at Board level and there were no material changes in the Company’s governance structures
and organisation to report.
Principle Eight: Committees
The Remuneration Committee is dealt with under a separate section in the Annual Report entitled
“Remuneration Report” which can be found on pages 48 to 51. This section also includes a “Remuneration
Statement” which deals with the remuneration of Directors and senior management.
Principles Nine and Ten: Relations with Shareholders, Market, and Institutional Shareholders
The Company is highly committed to having an open and communicative relationship with its
shareholders and investors. At the Company’s Annual General Meeting (AGM), the Board ensures that
information is communicated to the shareholders in a transparent and accountable manner. The ordinary
business at the AGM is to consider the financial statements of the Company, the directors’ and auditors’
report for the period, to approve any dividend recommendation by the directors, to elect the directors
and to appoint the auditors. The Chairman ensures that all Directors of the Board who include the
Chairmen of the Audit and Remuneration Committees are available at the AGM in order to answer
questions.
The Board also considers the Annual Report to be an effective document which, in addition to statutory
disclosures, contains detailed information about the Company and its performance.
At the time of the AGM or whenever there are any significant events affecting the Company, meetings
are held with institutional investors, financial intermediaries and stockbrokers. The Board recognises the
importance of providing the market with regular, timely, accurate, comprehensive and comparable
information in sufficient detail to enable investors to make informed decisions. Periodic Company
announcements are issued in accordance with the Capital Market Rules to maintain a fair and informed
market in the Company’s equity securities. The Board discharges its obligations under the Memorandum
and Articles of Association, legislation, rules and regulations by having in place formal procedures for
dealing with potentially price-sensitive information and ensuring the proper conduct of its officers and
staff in this regard. These procedures are incorporated in an Internal Code of Dealing which is drawn up
in accordance with the requirements of the Capital Market Rules and which applies to all directors and
key employees of the Company.
Annual Report and Financial Statements | Page 44
Corporate Governance Statement of
Compliance (continued)
The Board believes that shareholders should have an opportunity to send communications to the Board.
Any communication from a shareholder, to the Board generally or to a particular director, should be in
writing, signed, contain the number of shares held in the sender’s name and should be delivered to the
attention of the Company Secretary at the principal offices of the Company.
Any two members of the Company holding at least five per cent (5%) of the shares conferring a right to
attend and vote at general meetings of the Company, may convene an Extraordinary General Meeting in
accordance with the provisions of the Articles of Association.
The Company’s presence is also on the worldwide web through its website at www.rs2.com, which
contains information and news about the Company, its products, developments and activities, as well
as an investors section.
Principle Eleven: Conflicts of Interest
The Directors are strongly aware of their responsibility to act at all times in the interest of the Company
and its shareholders as a whole, and of their obligation to avoid conflicts of interest, irrespective of
whoever appointed them to the Board.
The Board has approved an Internal Code of Dealing that details the obligations of the directors, as well
as those of senior management and other individuals having access to sensitive information, on dealings
in the equity of the Company within the parameters of the law and the Principles. Each Director has
declared his interest in the share capital of the Company distinguishing between beneficial and non-
beneficial interest.
In accordance with the provisions of the Articles of Association of the Company, any actual, potential or
perceived conflict of interest must be immediately declared by a Director to the other members of the
Board, who then (also possibly through a referral to the Audit Committee) decide on whether such a
conflict exists. In the event that the Board perceives such interest to be conflicting with the Director’s
duties, the conflicted director is required to leave the meeting and both the discussion on the matter
and the vote, if any, on the matter concerned, are conducted in the absence of the conflicted Director.
When a Director has a continuing material interest that conflicts with the interests of the Company, he
is required to take effective steps to eliminate the grounds for conflict. In the event that such steps do
not eliminate the grounds for conflict, then the Director should consider resigning.
Principle Twelve: Corporate Social Responsibility
The Company understands that it has an obligation towards society at large to put into practice sound
principles of Corporate Social Responsibility (CSR). It is therefore committed to embark on initiatives
which support the community, the environment, as well as sports and arts.
Annual Report and Financial Statements | Page 45
Corporate Governance Statement of
Compliance (continued)
The Company recognises the importance of good CSR principles in its dealings with its employees. In
this regard, it actively encourages open communication, teamwork, training and personal development,
whilst creating opportunities based on performance, creativity and initiative. The Company is committed
towards social investment and the quality of life of its work force and their families, and of the local
community in which it operates.
Part 2: Non Compliance with the Code
Principle Four: The Responsibilities of the Board
Principle 4.2.7: The Code recommends the development of a succession policy for the future
composition of the Board of Directors. The Company does not consider this principle to be applicable to
it on the basis that appointment of Directors is a matter which is reserved exclusively to the Company’s
shareholders (except as specified herein).
Principle Eight B: Nomination Committee
The Memorandum and Articles of Association of the Company regulates the appointment of directors.
Article 55.1 of the Articles of Association provides that a member, holding not less than 0.5% of the
issued share capital of the Company, having voting rights, or a number of members who in the aggregate
hold not less than 0.5% of the issued share capital of the Company, having voting rights, shall be entitled
to nominate fit and proper persons for appointment as directors of the Company. In addition, the
directors themselves or a committee appointed for the purpose by the Board may make
recommendations and nominations to the shareholders for the appointment of directors at the next AGM.
Within this context, the Board believes that the setting up of a Nomination Committee is currently not
suited to the Company since it will not be able to undertake satisfactorily its full functions and
responsibilities as envisaged by the spirit of the Code. Notwithstanding this, the Board will retain under
review the issue relating to the setting up of a Nomination Committee.
Principle Nine (Code provision 9.3): Relations with shareholders and with the market
The Company firmly believes that shareholder participation is an essential precondition for effective
corporate governance. The Company has fully implemented the Shareholders Rights Directive (Directive
2007/36/EC) as transposed in Maltese Law and to this regard, has introduced a number of measures
aimed at facilitating the exercise of shareholders’ rights and protecting the shareholders’ interests.
Annual Report and Financial Statements | Page 46
Corporate Governance Statement of
Compliance (continued)
The measures currently available for shareholders, notably the right to put items on the agenda of the
AGM, and to table draft resolutions, and the right to ask questions, provide the necessary safeguards
for the protection of the shareholders’ interests. To this regard, the Company does not believe that the
current corporate structure requires it to introduce (a) procedures to resolve conflicts between minority
shareholders and controlling shareholders; and/or (b) the possibility for minority shareholders to formally
present an issue to the Board.
Pursuant to Capital Market Rule 5.97
Rule 5.97.4 – Internal Control and Risk Management Systems in relation to the Financial
Reporting Process
The Board is ultimately responsible for the Group’s system of internal control and for reviewing their
effectiveness. Such systems are designed to manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable, as opposed to absolute, assurance against
material misstatement or loss.
Management is responsible for the identification and evaluation of key risks applicable to the different
areas of business. The Board reviews its risk management policies and strategies and oversees their
implementation to ensure that identified key risks are properly assessed and managed. An internal audit
function has been set up to ensure that appropriate controls are in place and to review how such key
risks are mitigated.
Financial reporting standards are applicable to all entities of the Group. Systems and procedures are in
place to identify, control and report on the high-risk areas. The Board and the Audit Committee receive
management information, giving an analysis of financial and business performance and position,
including variances against budgets.
On a bi-annual basis, a discussion is held with the Audit Committee on the processes in place to generate
this financial information. A discussion on the results is also held on a bi-annual basis with the Board of
Directors.
Rule 5.97.6 – General Meetings
Pursuant to the Company’s statutory obligations in terms of the Companies Act and the MFSA Capital
Market Rules, the Annual Report and financial statements, the declaration of a dividend, the election of
directors, the appointment of the auditors, the authorisation of the directors to set their remuneration,
and other special business, are proposed and approved at the Company’s AGM. The Board of Directors
is responsible for developing the agenda for the AGM and sending it to the shareholders.
The AGM is conducted in accordance with Articles of the Company and has the powers therein defined.
The shareholders’ rights can be exercised in accordance with the Articles of the Company.
The Memorandum and Articles of the Company may be amended by means of an extraordinary
resolution (as defined in the Articles) of the Company during general meetings.
Annual Report and Financial Statements | Page 47
Corporate Governance Statement of
Compliance (continued)
All shareholders registered in the Shareholders’ Register on the Record Date as defined in the Capital
Market Rules, have the right to attend, participate and vote in the general meeting. A shareholder or
shareholders holding not less than 5% in nominal value of all the shares entitled to vote at the general
meeting may request the Company and/or table draft resolutions for items included in the agenda of a
general meeting. Such requests are to be received by the Company at least fourty six (46) days before
the date set for the relative general meeting.
A shareholder who cannot participate in the general meeting can appoint a proxy by written or electronic
notification to the Company. Every shareholder represented in person or by proxy is entitled to ask
questions which are pertinent and related to items on the agenda of the general meeting and to have
such questions answered by the directors or such persons as the directors may delegate for that
purpose.
Mr. Mario Schembri Mr. Radi Abd El Haj
Chairman Director
28 April 2023
Annual Report and Financial Statements | Page 48
Remuneration Report
For the year ended 31 December 2022
Remuneration Report
Terms of Reference and Membership
The remit of the Remuneration Committee (“the Committee”) is set out in the Terms of Reference
adopted by the Board of Directors. The Committee is composed of three (3) non-executive directors,
Dr. Robert Tufigno (Chairman), Mr. Franco Azzopardi and Mr. Mario Schembri. The CEO is invited to
attend meetings of the Committee where appropriate. The Chairman of the Committee, Dr. Robert
Tufigno, is independent in accordance with Code Provision 8.A.1.
Meetings
The Committee held one (1) meeting during the period under review.
Attended
Dr. Robert Tufigno 1
Mr. Franco Azzopardi 1
Mr. Mario Schembri 1
Remuneration Statement
Remuneration of Directors
The determination of the remuneration arrangements for Board members is determined by the
Committee. The Committee is primarily responsible for devising appropriate packages needed to attract,
retain and motivate executive and non-executive directors with the right qualities and skills for the
proper management of the Company and for ensuring compliance with the relevant provisions and
regulations of good corporate governance on remuneration and related matters.
The Company has agreements with directors providing for compensation upon termination based on
either an agreed fixed amount or the then applicable annual salary. These agreements include a non-
competition clause, precluding such employees from competing with the Company in the event that their
employment is terminated. Upon termination of employment of the said directors, the Company is bound
to grant these individuals a sum based on either an agreed fixed amount or on their annual salary as
compensation.
During the year, there were no director contracts which were terminated.
Annual Report and Financial Statements | Page 49
Remuneration Report (Continued)
Remuneration Statement – Senior Management
The Committee also makes recommendations on the remuneration of senior management. Upon making
such recommendations, it considers that members of senior management of the Company are provided
with appropriate incentives to encourage enhanced performance and are, in a fair and responsible
manner, rewarded for their individual contributions to the success of the Company.
There have been no significant changes in the Company’s remuneration policy during the financial year
under review and no significant changes are intended to be effected during 2022.
In addition, the Committee is responsible for authorising all remuneration arrangements involving share
options. In the case of the CEO and Chief Officers, the Committee is of the view that the link between
remuneration and performance is reasonable and appropriate.
Non-cash benefits to which the CEO and Chief Officers are entitled are the use of a company car and
health insurance. Other benefits include the rental of a residential property. The death-in-service benefit
also forms part of the contract of employment of senior management personnel on the same terms
applicable to all other Company employees.
The Company has agreements with employees holding senior management positions providing for
compensation upon termination, based either on an agreed fixed amount or on the then applicable
annual salary.
These agreements include a non-competition clause, precluding such employees from competing with
the Company in the event that their employment is terminated. Upon termination of employment of
senior management, the Company is bound to grant these individuals a sum based on their annual salary
as compensation. The Company has opted not to disclose further information regarding the
remuneration to be paid to its senior executives pursuant to its non-competition clause on the basis that
it is commercially sensitive.
Code Provision 8.A.5
Directors
For the financial period under review, the aggregate remuneration of the Directors of the Company
was as follows:
Fixed Remuneration €484,336
Variable Remuneration €200,000
Fixed remuneration as full-time employees of the Company €756,127
Others €42,840
Annual Report and Financial Statements | Page 50
Remuneration Report (Continued)
Directors' total remuneration, split out by component, for the financial year ended 31 December 2022,
was as follows:
Fixed
Remuneration
Variable
Remuneration
Fixed
remuneration as
full-time
employees of
the Company Others Total
€
€
€
€
€
Mr. Mario Schembri (Chairman)
201,556
-
-
-
201,556
Mr. Radi Abd El Haj (CEO) 54,000
200,000
756,127
-
1,010,127
Dr. Robert Tufigno 76,500
-
-
-
76,500
Mr. Franco Azzopardi 76,500
-
-
-
76,500
Mr. John Elkins
14,280
-
-
42,840
57,120
Prof. Raša Karapandža 61,500
-
-
-
61,500
Mr. David Price* -
-
-
-
-
484,336
200,000
756,127
42,840
1,483,303
* Mr. David Price is the Managing Director of Client Coverage in Barclaycard Commercial Payments. No
remuneration is paid by the Company as he is remunerated accordingly by Barclays Group, being one of
the shareholders of RS2 Software p.l.c..
In terms of Code Provision 8.A.5 of the Malta Financial Services Authority Capital Market Rules, the CEO
of RS2 Software p.l.c. received remuneration of €120,000 by one of the subsidiaries during the financial
year ended 31 December 2022. The total emoluments the CEO was entitled to for this financial year
amounted to €1,130,127.
The Remuneration Committee is guided by a policy which binds the members of the committee and
defines parameters on constitution of committees, membership, frequency of meetings, the duties and
defines other obligations of the committee under a section named other matters.
Within section four (titled Duties) of the aforementioned policy; the Committee has the vested powers
to agree on the remuneration package of the Directors based on parameters as set out in section 4
(iv). The committee has full visibility of the Company’s projected budgets for a three-year span and is
also aware of Company performance for any quarter and year. The remuneration of each Director,
together with the responsibility carried by each member, ensures fair compensation to ensure
achievement of the expected results of the Company, as outlined in the budgets, and ensures that the
overall remuneration package remains competitive when positioned in the market. The performance
criteria applied in 2022 were based on the increased responsibility that is expected to be carried by the
Directors on various fronts including but not limited to; achievement of performance targets, retention
of existing clients, adherence to governance rules and regulations in the various regions of established
subsidiaries and ensuring best practices, as well as continuing to optimise management and operations
practices of the Group.
Annual Report and Financial Statements | Page 51
Remuneration Report (Continued)
The performance criteria on which the variable component of remuneration was awarded included both
an objective evaluation (results-based) and strategic measures (behaviour-focused).
The Committee measured these qualities and abilities as critical performance criteria. The evaluation
process also focused on the ability to align the Company’s operations with the strategy of the
organisation and integration with the overall organisation’s goals.
Senior Management personnel
For the financial period under review, the aggregate remuneration of the senior management personnel
of the Company, other than those that serve as Directors, was as follows:
Fixed Remuneration €1,120,844
Variable Remuneration €324,133
Share-based Payments €Nil
Share Options €Nil
Others €Nil
The contents of the Remuneration Report have been reviewed by the external auditor to ensure that the
information that needs to be provided in terms of Chapter 12 of the Capital Market Rules including
Appendix 12.1 has been included.
Dr. Robert Tufigno
Chairman, Remuneration Committee
28 April 2023
Annual Report and Financial Statements | Page 52
Statement of the Directors pursuant to Capital
Market Rule 5.68
For the year ended 31 December 2022
We, the undersigned declare that to the best of our knowledge, the financial statements set out on pages
55 to 187 are prepared in accordance with the requirements of International Financial Reporting
Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the Group and that the Directors’ Report includes a fair view of the
performance of the business and the position of the Company and the Group, together with a description
of the principal risks and uncertainties that they face.
Signed on behalf of the Board of Directors on 28 April 2023 by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 53
Company Information
For the year ended 31 December 2022
Directors Mr Mario Schembri (Chairman)
Mr. Radi Abd El Haj (CEO)
Dr. Robert Tufigno
Mr. Franco Azzopardi
Mr. John Elkins
Prof. Raša Karapandža
Mr. David Price
Company Secretary Dr. Ivan Gatt
Registered Office RS2 Buildings
Fort Road, Mosta MST 1859
Malta
Country of Incorporation Malta
Company Registration No C 25829
Auditors Deloitte Audit Limited
Deloitte Place
Triq L-Intornjatur
Central Business District
CBD 3050, Malta
Legal Advisors Gatt Tufigno Gauci Advocates
66, Old Bakery Street
Valletta VLT 1454
Malta
Annual Report and Financial Statements | Page 54
Directors’ Responsibility for the Financial
Statements
For the year ended 31 December 2022
The Companies Act, 1995 (Chapter 386, Laws of Malta) requires the Directors of the Company to prepare
financial statements for each financial period which give a true and fair view of the financial position of
the Company and the Group as at the end of the financial period and of the profit or loss of the Company
and the Group for that period in accordance with the requirements of International Financial Reporting
Standards as adopted by the EU.
The Directors are responsible for keeping proper accounting records which disclose with reasonable
accuracy, at any time, the financial position of the Group and the Company and to enable them to ensure
that the financial statements have been properly prepared in accordance with the provisions of the Act.
The Directors are also responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
Additionally, the directors are responsible for:
the preparation and publication of the Annual Financial Report, including the consolidated
financial statements and the relevant tagging requirements therein, as required by Capital
Markets Rule 5.56A, in accordance with the requirements of the European Single Electronic
Format Regulatory Technical Standard as specified in the Commission Delegated Regulation (EU)
2019/815 (the “ESEF RTS”),
designing, implementing, and maintaining internal controls relevant to the preparation of the
Annual Financial Report that is free from material non-compliance with the requirements of the
ESEF RTS, whether due to fraud or error,
and consequently, for ensuring the accurate transfer of the information in the Annual Financial
Report into a single electronic reporting format.
The Directors, through oversight of management, are responsible to ensure that the Group
establishes and maintains internal control to provide reasonable assurance with regards to the
reliability of financial reporting, effectiveness and efficiency of operations and compliance with
applicable laws and regulations.
Management is responsible, with oversight from the Directors, to establish a control environment and
maintain policies and procedures to assist in achieving the objective of ensuring, as far as possible, the
orderly and efficient conduct of the Group’s business. This responsibility includes establishing and
maintaining controls pertaining to the Group’s objective of preparing financial statements as required by
the Act and managing risks that may give rise to material misstatements in those financial statements.
In determining which controls to implement to prevent and detect fraud, Directors consider the risks that
the financial statements may be materially misstated as a result of fraud.
Signed on behalf of the Board of Directors on 28 April 2023 by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 55
Financial Statements
Annual Report and Financial Statements | Page 56
Statements of Financial Position
As at 31 December
THE GROUP
THE COMPANY
2022
2021
2022
2021
Note
€
€
€
€
ASSETS
Property, plant and equipment
8
7,546,388
7,733,728
Right-of-use assets
9
405,080
429,882
Intangible assets and goodwill
10
11,689,983
9,095,509
Investments in subsidiaries
11
-
-
19,714,175
17,942,984
Loans receivable
14
2,110,148
2,107,484
Finance lease receivable
9
-
-
Total non-current assets
41,465,774
37,309,587
Trade and other receivables
14
21,504,839
17,308,767
Finance lease receivable
9
-
-
Loans receivable
14
22,667
945,790
Prepayments
610,081
809,777
Accrued income and contract costs
15
435,806
6,148,870
Inventory
13
-
-
Cash at bank and in hand
16
186,109
1,260,672
Total current assets
22,759,502
26,473,876
Total assets
64,225,276
63,783,463
Annual Report and Financial Statements | Page 57
Statements of Financial Position (Continued)
As at 31 December
THE GROUP
THE COMPANY
2022
2021
2022
2021
Note
€
€
€
€
EQUITY
Ordinary Share Capital
17
13,025,383
11,578,114
Preference Share Capital
17
606,800
539,376
Reserves
17
11,995,697
13,287,365
Retained earnings
17
24,036,138
22,840,874
Total equity attributable
to equity holders of the
Company
49,664,018
48,245,729
Non-controlling interest
(3,724,251 )
(4,792,747 )
-
-
Total equity
49,664,018
48,245,729
LIABILITIES
Bank borrowings
18
620,748
1,124,000
Lease liabilities
9
418,614
434,944
Employee benefits
28,29
3,006,384
3,473,288
Deferred tax liability
19
2,231,346
1,698,403
Total non-current
liabilities
6,277,092
6,730,635
Bank borrowings
18
511,854
497,942
Trade and other payables
20
2,495,123
1,419,710
Lease liabilities
9
16,329
15,868
Current tax payable
1,556,904
2,951,368
Accruals
21
1,806,309
1,508,055
Provisions
32
116,523
407,516
Employee benefits
28,29
-
-
Deferred income
21
1,781,124
2,006,640
Total current liabilities
8,284,166
8,807,099
Total liabilities
14,561,258
15,537,734
Total equity and liabilities
64,225,276
63,783,463
The accompanying Notes on pages 66 to 187 are an integral part of these financial statements.
Approved and authorised for issue by the Board of Directors on 28 April 2023 on its behalf by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 58
Statements of Profit or Loss
For the year ended 31 December
THE GROUP THE COMPANY
2022
2021
2022
2021
Note
€
€
€
€
Revenue 22 37,516,061
19,723,729
24,526,965
Cost of sales
(25,679,758 )
(21,734,786 )
(13,585,802)
(15,263,080)
Gross profit
6,137,927
9,263,885
Other income 23
28,028
252,051
Marketing and promotional
expenses
(1,634,528 )
(1,383,922 )
(432,405)
(357,523)
Administrative expenses
(10,339,684 )
(8,453,193 ) (4,625,102)
(3,952,621)
Other expenses 23
(67,098 )
(65,173 ) (16,561)
(36,883)
Exchange gain on operating
activities
23
518,006
758,201
Impairment loss on trade
receivables and contract
assets 23 (135,733 )
(583,607 )
(133,418)
(134,778)
Reversal/(Provision) for legal
claims and related expenses
(406,179 )
290,973
(406,179)
Results from operating activities
1,767,448
5,386,153
Finance income 24
65,076
85,917
Finance costs 24
(82,503 )
(200,010 )
(56,977)
(159,263)
Net finance (costs)/income
(36,494 )
(142,504 )
8,099
(73,346)
Profit before income tax 23
1,775,547
5,312,807
Income tax expense 25
(2,028,433 )
(3,067,436 )
(633,896)
(1,798,045)
(Loss)/Profit for the year
(249,991 )
1,141,651
3,514,762
(Loss)/Profit for the year
attributable to:
Owners of the Company
(64,408 )
3,514,762
Non-controlling interest
(185,583 )
-
(Loss)/Profit for the year
(249,991 )
3,514,762
Earnings per ordinary share
26
€0.000
€0.013
€0.005
€0.016
Earnings per preference
share
26 €0.000
€0.015
€0.006
€0.017
The accompanying Notes on pages 66 to 187 are an integral part of these financial statements.
Annual Report and Financial Statements | Page 59
Statements of Comprehensive Income
For the year ended 31 December
THE GROUP THE COMPANY
2022
2021
2022
2021
Notes
€
€
€
€
(Loss)/Profit for the year
(249,991 )
1,141,651
3,514,762
Other comprehensive income
Items that are or may be
reclassified to profit or loss
Foreign currency translation
differences on foreign operations
(429,215 )
(430,720 )
-
-
Items that will not be
reclassified to profit or loss
Net change in fair value of
investment in equity
instruments
designated at FVTOCI upon
initial recognition
-
9,465
Remeasurement in net
defined benefit liability
28
531,638
46,319
(368,441 )
531,638 55,784
Total comprehensive
(loss)/income
(73,192 )
1,673,289
3,570,546
Total comprehensive
i
ncom
e
/(loss)
attributable
Owners of the Company
1,673,289 3,570,546
Non
-
controlling interest
(
)
(147,471 )
-
-
Total comprehensive
(loss)/
income for the year
(
)
1,673,289
3,570,546
The accompanying Notes on pages 66 to 187 are an integral part of these financial statements.
Annual Report & Financial Statements | Page 60
Statements of Changes in Equity
For the year ended 31 December
THE GROUP
Attributable to equity holders of the Company
Ordinary
Preference
Employee
Share
Non-
Share
Share
Share
Translation
benefits
Other
option
Retained
controlling
Total
Capital
Capital
premium
reserve
reserve
reserve
reserve
Earnings
Total
interest
Equity
Note
€
€
€
€
€
€
€
€
€
€
€
Balance at 1 January 2022
(167,601 )
(1,700,164 )
(4,792,747 )
Comprehensive income for the
year
Loss for the year
-
-
-
-
-
-
-
(64,408 )
(64,408 )
(185,583 )
(249,991 )
Other comprehensive income
Foreign currency translation
differences
-
-
-
(274,264 )
-
-
-
-
(274,264 )
(154,951 )
(429,215 )
Remeasurement in net defined
benefit liability
28
-
-
-
-
-
-
-
-
Total other comprehensive
(loss)/income for the year
-
-
-
(274,264 )
-
-
-
(154,951 )
Total comprehensive
(loss)/income for the year
-
-
-
(274,264 )
-
-
(64,408 )
(340,534 )
(73,192 )
Transactions with owners of
the Company
Bonus Issue
17
(1,514,693 )
-
-
-
-
-
-
-
-
Share Options Exercised
-
-
-
-
-
-
(53,613 )
-
-
-
Acquisition of NCI without a change
in control
17
-
-
-
(76,039 )
-
-
-
(3,129,398 )
(3,205,437 )
(947,807 )
Reclass of controlling and
non-controlling profit
17
-
-
-
-
-
-
(848,600 )
-
(1,514,693 )
(11,553 )
-
-
(53,613 )
(2,291,671 )
(2,356,837 )
(947,807 )
Vested share-based payments
29
-
-
-
-
-
(255,000 )
-
-
(255,000 )
-
(255,000 )
Balance at 31 December 2022
(453,418
)
(1,094,150 )
-
-
(3,724,251 )
Annual Report & Financial Statements | Page 61
Statements of Changes in Equity
For the year ended 31 December
THE GROUP
Attributable to equity holders of the Company
Ordinary
Prefe
renc
e
Fair
Employ
e
e
Share
Non
-
Share
Share
Other
Share
Translation
value
benefits
Other
option
Retained
controlling
Total
Capital
Capital
Equity
premium
reserve
reserve
reserve
Reserve
reserve
Earnings
Total
interest
Equity
Note
€
€
€
€
€
€
€
€
€
€
€
€
€
Balance at 1 January 2021
-
(136,556 )
(221,068 )
(1,752,978 )
(4,645,276 )
Comprehensive income for the
year
Profit for the year
-
-
-
-
-
-
-
-
-
Other comprehensive income
Foreign currency translation
differences
-
-
-
-
-
-
-
-
-
(484,187 )
(430,720 )
Net change in fair value of equity
investments designated as upon
initial recognition
-
-
-
-
-
-
-
-
-
-
Remeasurement in net defined
benefit liability 28
-
-
-
-
-
-
-
-
-
-
Total other comprehensive
income/(loss) for the year
-
-
-
-
-
-
-
(484,187 )
(368,441 )
Total comprehensive
income/(loss) for the year
-
-
-
-
-
-
(147,471 )
Transactions with owners of the
Company
Preference Share Issue 17
-
-
-
-
-
-
-
-
-
Share Options Exercised
-
-
-
-
-
-
-
-
(23,650 )
-
-
-
Share Issuance Costs 17
-
(355,054 )
-
-
-
-
-
-
-
-
(355,054 )
-
(355,054 )
Reclassification of preference
share issuance costs 17
-
(136,556 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(23,650 )
-
Transfer upon disposal of
investments
12
-
-
-
-
-
(86,692 )
-
-
-
-
-
-
Balance at 31 December 2021
-
(167,601 )
-
(1,700,164 )
(4,792,747 )
Annual Report & Financial Statements | Page 62
Statements of Changes in Equity (Continued)
For the year ended 31 December
THE COMPANY Ordinary
Preference
Share
Employee
Share
Share
Share
Other
option
benefits
Retained
capital
capital
premium
Reserves
Reserve
reserve
earnings
Total
Note
€
€
€
€
€
€
€ €
Balance at 1 January 2022
11,578,114
47,766 15,193,501 255,000 53,613 (1,723,139) 22,840,874 48,245,729
Comprehensive income for the year
Profit for the year
-
-
- - - - 1,141,651 1,141,651
Other comprehensive income
Remeasurement in net defined benefit liability
28
-
-
- - - 531,638 - 531,638
Total other comprehensive income for the
year
-
-
- - - 531,638 - 531,638
Total comprehensive income for the year
-
-
- - - 531,638 1,141,651 1,673,289
Transactions with owners of the Company
Bonus Issue
17
1,447,269
67,424
(1,514,693) - - - - -
Share Options exercised
-
- -
- (53,613) - 53,613 -
1,447,269 67,424 (1,514,693) - (53,613) - 53,613 -
Vested share-based payments
29
-
- -
(255,000) - - - (255,000)
Balance at 31 December 2022
13,025,383 115,190 13,678,808 - - (1,191,501) 24,036,138 49,664,018
The accompanying Notes on pages 66 to 187 are an integral part of these financial statements.
Annual Report & Financial Statements | Page 63
Statements of Changes in Equity (Continued)
For the year ended 31 December
THE COMPANY
Ordinary
Preference
Share
Employee
Share
Share
Other
Share
Fair Other
option
benefits
Retained
capital
capital
equity
premium
Reserve
Reserv Reserve
reserve
earnings
Total
Note
€
€
€
€
€
€
€
€
€ €
Balance at 1 January 2021
11,578,114 - (136,556) 1,077 77,227 255,000 77,263 (1,769,458)
19,215,770 29,298,437
Comprehensive income for the year
Profit for the year
- - - - - - - -
3,514,762 3,514,762
Other comprehensive income
Remeasurement in net defined benefit
liability
28
- - - - - - - 46,319
- 46,319
Net change in fair value of equity
investments designated as FVTOCI upon
initial recognition
-
-
-
- 9,465
-
-
-
- 9,465
Total other comprehensive income for
the year
-
-
- - 9,465 - - 46,319
- 55,784
Total comprehensive income for the year
- - - - 9,465 - - 46,319
3,514,762 3,570,546
Transactions with owners of the Company
Preference Share Issue
17
- 539,376 - 15,192,424 - - - -
- 15,731,800
Share Options exercised
- - - - - - (23,650) -
23,650 -
Share Issuance Costs
17
- (355,054) - - - - - -
- (355,054)
Reclassification of preference share
issuance costs
17
-
(136,556)
136,556 - - - - -
- -
- 47,766 136,556 15,192,424 - - (23,650) -
23,650 15,376,746
Transfer upon disposal of investments
12
- - - - (86,692) - - -
86,692 -
Balance at 31 December 2021
11,578,114 47,766 - 15,193,501 - 255,000 53,613 (1,723,139)
22,840,874 48,245,729
15,731,800
Annual Report & Financial Statements | Page 64
Statements of Cash Flows
For the year ended 31 December
THE GROUP
THE COMPANY
2022
2021
2022
2021
Notes
€
€
€
€
Cash flows from operating activities
(Loss)/Profit for the year (249,991 )
Adjustments for:
Depreciation 8, 9 1,054,999 1,099,279 283,733 345,827
Amortisation of
intangible assets
10
909,60
4
1,043,599
Provision for impairment loss on
receivables 23
132,714
132,416
Bad debts written off 23 5,077 227,067 704 2,362
Interest payable 24 98,938 206,335 55,164 161,850
Interest receivable
24
(46,009
)
(56,846 )
(
65,076
)
(85,257)
Provisions (256,594 )
406,179
Unwinding of discount on post-
employment benefits 28
64,734 93
Post
-
employment benefit written
off/settled during the year 28
- (111,420)
Unwinding of discount on deposit (3,023 )
Employee share benefits 29 269,994 332,630 - -
Impairment loss on intangible assets
10
-
17,055
Loss on disposal of property, plant &
equipment
-
Income tax 25 2,028,433 3,067,436 633,897 1,798,045
Provision for exchange fluctuations
23, 24
(1,123,313
)
(195,971 )
(124,543
)
(850,714)
Change in fair value of derivative 24 - (660 )
- (660)
Changes in trade and other receivables 859,438 (5,151,924 )
1,137,633 (403,138)
Changes in trade and other payables (2,692,154 )
(1,948,637 )
(81,723)
(552,871)
Change in other related parties’ balances
(
)
(
193,422
)
(5,142,473)
Inventories (324,359 )
(255,000 )
(59,853 )
-
(255,000)
-
- Employee benefits 29
Cash generated from operating activities 533,245 2,639,315 3,356,744 275,655
Interest paid (42,630 )
(168,527 )
(42,624)
(148,862)
Interest paid on lease liabilities
9
(
)
(57,472 )
(12,540)
(12,988)
Interest received 472 248 39,393 56,434
Income taxes paid (1,543,082 )
(1,455,412 )
(1,495,383)
(1,404,346)
Net cash
(used in)/
generated from operating
activities
(1,108,303 )
Cash flows from investing activities
Acquisition of property, plant and equipment
(
)
(1,056,042 )
(
79,233
)
(131,792)
Acquisition of intangible asset (150,000 )
(83,900 )
- -
Acquisition of right of use asset (5,000 )
Capitalised development costs 10 (2,740,347 )
(3,262,293 )
(3,504,078)
(2,783,666)
Proceeds from sale of asset
-
-
Advances to subsidiaries
(6,305,225)
(6,558,200)
Repayment of advances from subsidiaries
7,475,406
5,006,721
Disposal of non-current asset held for sale
-
305,671
Finance lease receipts
Net cash used in investing activities
(
)
(4,020,226 )
(2,413,130
)
(4,161,266)
Annual Report & Financial Statements | Page 65
Statements of Cash Flows (Continued)
For the year ended 31 December
THE GROUP THE COMPANY
2022
2021
2022
2021
Note
€
€
€
€
Cash flows from financing activities
Proceeds from issue of share capital
-
15,731,800
Dividends paid
(1,846 )
-
(1,846)
Repayments of bank borrowings
(489,861 ) (483,907 )
(489,861)
(483,907)
Repayment of lease liabilities
(470,196 ) (392,003 )
(15,869)
(15,425)
Payments of preference share issue costs
(460,054 )
-
(460,054)
Net cash
(used in)/
generated from financing
activities
(960,057 ) 14,393,990
(505,730)
14,770,568
Net movement in cash and cash equivalents
(5,080,423 )
(1,073,270)
9,375,195
Cash and cash equivalents at 1 January
1,260,630 (8,117,145)
Effect of exchange rate fluctuations on cash
held
(1,814)
2,580
Cash and cash equivalents at 31 December 16 3,493,547 8,217,856
185,546 1,260,630
The accompanying Notes on pages 66 to 187 are an integral part of these financial statements.
Annual Report & Financial Statements | Page 66
Notes to the Financial
Statements
Annual Report & Financial Statements | Page 67
Notes to the Financial Statements
1 Reporting Entity
December 2022 comprise the Company and its subsidiaries (collectively referred to as “the Group” and
individually as “Group entities”).
The Group and the Company are principally engaged in the development, installation, implementation
and marketing of computer software for financial institutions under the trademark of BankWORKS®
(Licencing Solutions). Through its subsidiaries, the Group acts as service provider with the use of
BankWORKS® (Processing Solutions) and has also established its own ‘Acquiring’ business line by
making use of a financial institution license obtained through BaFin, the German regulator (Merchant
Solutions).
2 Basis of Preparation
2.1 Statement of Compliance
The consolidated and separate financial statements (“the financial statements”) have been prepared and
presented in accordance with International Financial Reporting Standards as adopted by the EU (“IFRS”
or “the applicable framework”). All references in these financial statements to IAS, IFRS or SIC / IFRIC
interpretations refer to those adopted by the EU. These financial statements have also been drawn up
in accordance with the provisions of the Companies Act, 1995 (Chapter 386, Laws of Malta ), and Article
4 of Regulation 1606/2002/EC, which requires the companies having their securities traded on a
regulated market of any EU member state to prepare their consolidated financial statements in
conformity with IFRS as adopted by the EU. Details of the accounting policies are included in Note 4 to
these financial statements. Legal Notice 19 of 2009 as amended by Legal Notice 233 of 2016,
Accountancy Profession (Accounting and Auditing Standards) (Amendments) Regulations, 2016, which
defines compliance with generally accepted accounting principles and practice as adherence to IFRS as
adopted by the EU was also adhered to when preparing and presenting these financial statements.
2.1.2 Going Concern
Management has prepared a going concern assessment for RS2 Group, based on the 2022 financials
whilst also taking into consideration approved budgets covering periods 2023 to 2025.
RS2 continues to observe the economic landscape to assess potential risks to its future operations.
Climate change is a topic increasingly gaining momentum because of its potential effect on companies‘
business models, cash flows, financial position and financial performance. While most industries are likely
to be affected by climate change and efforts to manage its impact, some will be more affected by others.
The Group is currently not aware of any present indicators but will continue to monitor the situation so
that if any indicators arise through its customer base, supply chain, bankers, insurers, investors or
jurisdiction, these will be disclosed and reflected accordingly in the Group‘s Annual Report.
Annual Report & Financial Statements | Page 68
2 Basis of Preparation (Continued)
2.1 Statement of Compliance (Continued)
2.1.2 Going Concern (Continued)
The 2022 financial results for the Group show a stable top line compared to prior year, despite the
current market conditions. Amplifying the repercussions resulting from the COVID-19 pandemic, the
Russian invasion of Ukraine has magnified the slowdown in the global economy which entered a period
of feeble growth and elevated inflation. This affected the Group’s forecast for the year by way of
customers delaying projects or stretching investments to bare minimum. A significant stagnation in
investments was noted mid-year 2022, so the Group quickly applied counter measures and as a result,
a positive ramp up in top line and bottom line was noted in the last few months of the year.
With the onboarding of new clients, RS2 has processed more than 1.25 billion technical transactions over
the past 12 months on the BankWORKS
®
platform. This increase is expected to continue to progress
gradually by way of an increase from RS2’s existing clients as well as the onboarding of new clients.
The payments industry is constantly evolving and 2023 is shaping up to be a year of significant
innovation and change with focus on making payments more convenient, secure, and personalised for
consumers. Taking advantage of the latest advancements in technology and security, customers can
expect a seamless payment experience when paying online or at a store.
RS2 Group will continue to concentrate on implementing and delivering its strategy around its main
business pillars of growing and expanding the managed service business, ramping up the US expansion
and building its own direct acquiring business. The Group also plans to invest further in its infrastructure
to strengthen the technology and complete the product to play a more active role in the digitalisation of
the whole customer journey, to offer omni-channel solutions and go beyond traditional payment
solutions.
The outlook for 2023 is that business will ramp up with a stronger pipeline gearing up for the coming
year, which, together with the launch of several exciting new products for the Group, including Merchant
reconciliations modules, Merchant and Partner Portals and Tokenisation for Issuing Services amongst
others, will lead the Group to a successful 2023 and beyond.
During the year under review, on consolidating all of its activities, the Group generated revenues of
€37.5m (2021: €38.7m) and registered a profit before tax of €1.8m (2021: €6.4m). At 31 December 2022,
the Group’s total assets amounted to €43.4m (2021: €47.6m), whereas its current assets exceeded its
current liabilities by €3.6m (2021: €7.5m). On the other hand, the Company registered revenues from its
principal activities of €19.7m (2021: €24.5m) and a profit before tax of €1.8m (2021: €5.3m). At 31
December 2022, the Company’s total assets amounted to €64.2m (2021: €63.8m), whereas its current
assets exceeded its current liabilities by €14.5m (2021: €17.7m).
From a liquidity point of view, RS2 Group has a solid cash position. RS2 Software p.l.c. has an overdraft
facility of €10m with APS Bank to meet any working capital requirements which was not being utilised
as at 31 December 2022. This illustrates that the Group’s gearing has also improved when compared to
prior year, with the Group now solely holding a minor bank loan.
Annual Report & Financial Statements | Page 69
2 Basis of Preparation (Continued)
2.1 Statement of Compliance (Continued)
2.1.2 Going Concern (Continued)
In this respect, the Board of Directors is confident that both the Group and the Company can, not only
continue to operate as a going concern for 12 months from the end of the reporting period, but will
continue to see substantial growth over the coming years.
2.2 Basis of Accounting
Details of the Group’s accounting policies are included in Note 4. Changes to significant accounting
policies are described in Note 3.
2.3 Basis of Measurement
The financial statements have been prepared on the historical cost basis, except for certain derivative
financial instruments and financial instruments measured at fair value. The methods used to measure
fair values are discussed further in Note 5.
2.4 Functional and Presentation Currency
These financial statements are presented in Euro, which is the Company’s functional currency.
2.5 Use of Estimates and Judgements
In preparing these financial statements, Management has made judgements, estimates and assumptions
that affect the application of the Group's and the Company’s accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods
affected.
Annual Report & Financial Statements | Page 70
2 Basis of Preparation (Continued)
2.5 Use of Estimates and Judgements (Continued)
Information about judgements, assumptions and estimation uncertainties that have a significant risk of
uncertainty which may result in a material adjustment to the carrying amounts of assets and liabilities is
included in the following notes:
Note 2.5.1 impairment reviews
Note 4.6.7 useful life of internally generated computer software, software
rights and customer and other related contractual relationship
Note 5.1.3 and
Note 29.3 cash-settled share-based payments
Note 6 recoverability assessment on trade and other receivables
Note 10.8 and
Note 10.9 impairment test for cash generating unit (CGU) containing goodwill;
key assumptions underlying recoverability
Note 10.8.4,
Note 10.9.4
and
Note 11 recoverability of investment in subsidiaries
Note 28 measurement of defined benefit obligations
In accordance with the requirements of IAS 1 Presentation of Financial Statements, assumptions and
other sources of estimation uncertainty that require Management's most difficult, subjective or complex
judgements include impairment reviews, the estimation of the fair value of the liability for the cash-
settled share-based payment arrangement and the determination of whether the fee for the
implementation activity (without the sale of a licence) relates to a distinct performance obligation and
whether that activity results in the transfer of a promised good or service to the customer.
Annual Report & Financial Statements | Page 71
2 Basis of Preparation (Continued)
2.5 Use of Estimates and Judgements (Continued)
2.5.1 Impairment Reviews
The determination of the recoverable amount involves significant management judgement. In most cases
this involves an assessment as to whether the carrying value of assets can be supported by the present
value of future cash flows derived from such assets using cash flow projections which have been
discounted at an appropriate rate. In calculating the present value of the future cash flows, certain
assumptions are required to be made in respect of highly uncertain matters, as noted below.
With respect to goodwill and intangible assets not yet put in use, IFRS requires Management to
undertake a test for impairment at least annually and at each reporting period if there is an indication
that the asset may be impaired. The Group currently undertakes an annual impairment test covering
goodwill and also reviews other certain financial and non-financial assets at least annually to consider
whether a full impairment review is required.
There are a number of assumptions and estimates involved in calculating the present value of future
cash flows from the Group’s businesses, including Management’s expectations of:
• growth in earnings before interest, tax, depreciation and amortisation (EBITDA), calculated as
adjusted operating profit or loss before depreciation and amortisation;
• timing and quantum of future capital expenditure;
• uncertainty of future technological developments;
• long-term growth rates; and
• the selection of discount rates to reflect the risks involved.
The selection of assumptions and estimates by Management involves significant judgement and small
changes in these assumptions could result in the determination of a recoverable amount which is
materially different to the results obtained using the variables selected by the Company. This is
particularly so in respect to the discount rate and growth rate assumptions used in the cash flow
projections. Changes in the assumptions used could significantly affect the Group’s impairment
evaluation and, hence, results.
Annual Report & Financial Statements | Page 72
3 New Standards and Changes in Significant Accounting Policies
3.1 New Standards and Interpretations Not Yet Adopted
A number of new standards are effective for annual periods beginning on or after 1 January 2023 and
earlier application is permitted, however the Group and the Company have not early adopted the new or
amended standards in preparing these financial statements. These standards include the following:
• Amendments to IAS 1 - Presentation of Financial Statements: Classification of Liabilities as
Current or Non-Current. The amendments affect only the presentation of liabilities in the
statement of financial position. They clarify that the classification should be based on rights that
are in existence at the end of the reporting period, that classification is unaffected by
expectation about whether an entity will exercise its right to defer settlement of a liability; and
make clear that settlement refers to the transfer to the counterparty of cash, equity instruments,
other assets or services. The amendments are effective for annual periods beginning on or after
1 January 2024.
• Amendments to IAS 1 - Presentation of Financial Statements, IFRS Practice statement 2:
Disclosure of Accounting Policies. The amendments are intended to help preparers in deciding
which accounting policies to disclose in their financial statements. The amendments are
effective for annual periods beginning on or after 1 January 2024.
• Amendments to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors:
Definition of Accounting Estimates. The amendments are intended to help preparers distinguish
changes in accounting policies from changes in accounting estimates. The amendments are
effective for annual periods beginning on or after 1 January 2023, with earlier application
permitted. An entity shall apply the amendments to changes in accounting estimates and
changes in accounting policies that occur on or after the beginning of the first annual reporting
period in which it applies the amendments.
• Amendments to IAS 12 – Income Taxes: Deferred Tax related to Assets and Liabilities arising
from a Single Transaction. The amendments clarify that where payments that settle a liability are
deductible for tax purposes, it is a matter of judgement whether such deductions are attributable
for tax purposes to the liability recognised in the financial statements or to the related asset
component. Under the amendments, the initial recognition exception does not apply to
transactions that, on initial recognition, give rise to equal taxable and deductible temporary
differences. It only applies if the recognition of a lease asset and lease liability (or
decommissioning liability and decommissioning asset component) give rise to taxable and
deductible temporary differences that are not equal. The amendments are effective for annual
periods beginning on or after 1 January 2023.
• Amendments to IFRS 16 – Leases: The amendment is intended to improve the requirements for
sale and leaseback lease arrangements. It specifies how a seller-lessee measures the lease
liability arising in a sale and leaseback transaction, to ensure that a seller-lessee does not
recognise any amount of the gain or loss that relates to the right of use retained. The
amendments are affective for annual periods beginning on or after 1 January 2024.
The Group and the Company are in the process of assessing the potential impact, if any, of these
Standards on these financial statements.
Annual Report & Financial Statements | Page 73
3 New Standards and Changes in Significant Accounting Policies (Continued)
3.2 Changes in Significant Accounting Policies
During the financial year ended 31 December 2022, the Group and the Company adopted new standards,
amendments and interpretations to existing standards that are mandatory for the Group’s and the
Company’s accounting period beginning on 1 January 2022. The adoption of the following standards did
not result in significant changes to the Group’s accounting policies impacting the financial performance
and position:
• Amendments to IAS 16 – Property, Plant and Equipment (PP&E). The amendment prohibits an
entity to deduct from the cost of and item of PP&E proceeds received from selling items
produced while the entity is preparing the asset for its intended use. Proceeds from selling such
samples, together with the cost of producing them, are recognised in profit or loss. Asset being
tested will not be depreciated as it is not ready for its intended use. The Group does not hold
such items of PP&E.
• Amendments to IAS 37 - Provisions, Contingent Liabilities and Contingent Assets: Onerous
contracts - Cost of fulfilling a contract. The amendment explains that the direct cost of fulfilling
a contract comprises the incremental costs of fulfilling that contract and an allocation of other
costs that relate directly to fulfilling contracts. The main provisions related to RS2 Group are legal
fees and a provision for source code issues therefore the provisions of the Group do not fall
within this amendment. The Group will continue following this amendment and the costs being
considered when assessing whether a contract is onerous are consistent with the
aforementioned costs.
• Amendments to IFRS 3 – Business Combinations – reference to the conceptual framework. The
amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of
potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within
the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, or IFRIC 21 Levies,
if incurred separately. The exception required entities to apply the criteria in IAS 37 or IFRIC 21,
respectively, instead of the Conceptual Framework, to determine whether a present obligation
exists at the acquisition date and clarifies that contingent assets do not qualify for recognition
at acquisition date. There were no business combinations at RS2 Group in 2022.
• Amendments to IFRS 9: Financial Instruments – fees included in the 10% test for derecognition
of financial liabilities. When entities restructure loans with existing lenders, they are required to
quantitively assess the significance of the difference in cash flows based on the old and new
contractual terms. The Group did not restructure any loans with existing lenders therefore this
amendment is not applicable to the Group’s Financial Statements.
Annual Report & Financial Statements | Page 74
4 Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these
financial statements and have been applied consistently by Group entities.
4.1 Basis of Consolidation
4.1.1 Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to direct
the relevant activities that significantly affect the subsidiary's returns. In assessing control, there should
also be exposure, or rights, to variable returns from its involvement with the subsidiary and the ability of
the Group to use its powers over the subsidiary to affect the amount of the Group's returns.
The financial statements of the subsidiary companies are included in the consolidated financial
statements from the date that control commences until the date that control ceases. The accounting
policies of the subsidiaries have been amended where necessary to align them with the policies adopted
by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-
controlling interest even if doing so causes the non-controlling interests to have a deficit balance.
Non-controlling interests in the net assets of consolidated subsidiaries are presented separately from
the holding company’s owners’ equity therein. Non-controlling interests in the profit or loss and other
comprehensive income of consolidated subsidiaries are also disclosed separately.
4.1.2 Transactions Eliminated on Consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing these consolidated financial statements.
4.2 Foreign Currency
4.2.1 Foreign Currency Transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group
entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are translated to the functional currency at the exchange rate
as at that date. The foreign currency gain or loss on monetary items is the difference between the
amortised cost in the functional currency at the beginning of the period, adjusted for effective interest
and payments during the period, and the amortised cost in foreign currency translated at the exchange
rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated to the functional currency at the exchange rate
as at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognised in profit or loss except for
differences arising on the revaluation of non-monetary items in respect of which gains and losses are
recognised in other comprehensive income. Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Annual Report & Financial Statements | Page 75
4 Significant Accounting Policies (Continued)
4.2 Foreign Currency (Continued)
4.2.2 Foreign Operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated to the functional currency using exchange rates as at the reporting date. The
income and expenses of foreign operations are translated to the functional currency at exchange rates
as at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and presented within equity
in the foreign currency translation reserve. However, if the operation is a non-wholly owned subsidiary,
then the relevant proportion of the translation difference is allocated to non-controlling interests. When
a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation
reserve is transferred to profit or loss as part of the profit or loss on disposal.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither
planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a
monetary item are considered to form part of a net investment in a foreign operation and are recognised
in other comprehensive income in the consolidated financial statements, and are presented within equity
in the foreign currency translation reserve.
4.3 Financial Instruments
4.3.1 Non-Derivative Financial Assets
The Group initially recognises loans and receivables and deposits on the date that they are entered into.
All other financial assets are recognised initially on the trade date at which the Group becomes a party
to the contractual provisions of the instrument.
Financial assets not classified at fair value through profit or loss (FVTPL), are initially recognised at fair
value plus directly attributable transaction costs.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that is created or retained by the Group is
recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount is presented in the statement of financial
position when, and only when, the Group has a legal right to offset such amounts and intends to either
settle such amounts on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following principal non-derivative financial assets: loans, trade receivables,
investments and cash and cash equivalents.
Annual Report & Financial Statements | Page 76
4 Significant Accounting Policies (Continued)
4.3 Financial Instruments (Continued)
4.3.1 Non-Derivative Financial Assets (Continued)
4.3.1.1 Classification of Financial Assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost or
fair value.
Debt instruments are subsequently measured at amortised cost, if they meet the following conditions:
• the financial asset is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows; and
• the contractual terms of the financial asset give rise to cash flows that are solely payments of
principal and interest on the principal amount outstanding on specified dates.
Debt instruments are subsequently measured at fair value through other comprehensive income
(FVTOCI), if they meet the following conditions:
• the financial asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling the financial assets; and
• the contractual terms of the financial asset give rise to cash flows that are solely payments of
principal and interest on the principal amount outstanding on specified dates.
By default, all other financial assets are subsequently measured at FVTPL.
Despite the foregoing, the Group may make the following irrevocable election/designation at initial
recognition of a financial asset:
• the Group may irrevocably elect to present subsequent changes in fair value of an equity
investment in other comprehensive income if certain criteria are met; and
• the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI
criteria as measured at FVTPL, if doing so eliminates or significantly reduces a measurement or
recognition inconsistency.
The Business Model
An assessment of business models for managing financial assets is fundamental to the classification of
a financial asset. The Group determines the business models at a level that reflects how groups of
financial assets are managed together to achieve a particular business objective.
Annual Report & Financial Statements | Page 77
4 Significant Accounting Policies (Continued)
4.3 Financial Instruments (Continued)
4.3.1 Non-Derivative Financial Assets (Continued)
4.3.1.2 Debt Instruments Measured at Amortised Cost
The following financial assets are classified within this category – trade and other receivables, cash at
bank and loans receivable.
Appropriate allowances for expected credit losses (ECLs) are recognised in profit or loss in accordance
with the Group’s accounting policy on ECLs. Changes in the carrying amount as a result of foreign
exchange gains or losses, impairment gains or losses and interest income are recognised in profit or
loss.
Interest income is recognised using the effective interest rate method and is included in the line item
‘Finance income’.
Trade receivables which do not have a significant financing component are initially measured at their
transaction price and are subsequently stated at their nominal value less any loss allowance for ECLs.
4.3.1.3 Equity Instruments Designated as FVTOCI
The Company and the Group do not have such financial assets at the end of the current year.
On initial recognition, the Company may make an irrevocable election to designate investments in equity
instruments as FVTOCI. Designation as FVTOCI is not permitted if the equity instrument is held for
trading or if it is contingent consideration recognised by an acquirer in a business combination to which
IFRS 3 applies.
Such financial assets are subsequently measured at fair value. Gains and losses arising from changes in
fair value, including foreign exchange gains and losses, are recognised in other comprehensive income.
The cumulative gain or loss that is recognised in other comprehensive income is not subsequently
transferred to profit or loss.
Dividends on these equity instruments are recognised in profit or loss unless the dividends clearly
represent recovery of part of the cost of the investment. Dividends are included within ‘Other income’.
4.3.2 Non-Derivative Financial Liabilities
The Group initially recognises all financial liabilities, except for debt securities issued and subordinated
liabilities, on the trade date at which the Group becomes a party to the contractual provisions of the
instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled
or expired.
Financial assets and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to
settle on a net basis or realise the asset and settle the liability simultaneously.
The Group's non-derivative financial liabilities include: loans, borrowings and trade and other payables.
Such financial liabilities are recognised initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using
the effective interest rate method.
Trade payables are stated at their nominal value, unless the effect of discounting is material.
Annual Report & Financial Statements | Page 78
4 Significant Accounting Policies (Continued)
4.3 Financial Instruments (Continued)
4.3.3 Derivative Financial Instruments
The Group held a derivative financial instrument to hedge its interest rate risk exposures. The interest
rate swap matured during the year ended 31 December 2021. The Group did not apply hedge accounting
principles.
Derivatives are initially recognised at fair value; attributable transactions are recognised in profit or loss
as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein
are accounted for in profit or loss.
4.3.4 Share Capital
The terms of financial instruments that are issued, the substance of the contractual arrangement and
the definitions of a financial liability, a financial asset and an equity instrument are evaluated to determine
whether the financial instruments issued are financial liabilities, financial assets or equity instruments or
whether they contain separate components, in which case such components are classified separately
as financial liabilities, financial assets and equity instruments. An equity instrument is any contract that
evidences a residual interest in the assets of the company after deducting all of its liabilities. Equity
instruments are recorded as the proceeds received, net of direct issue costs. The Company’s ordinary
shares, as well as its preference shares, are classified as equity. Incremental costs directly attributable
to the issue of ordinary and preference shares are recognised as a deduction from equity.
4.3.5 Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three
months or less. Bank overdrafts that are repayable on demand and form part of the Company’s cash
management are included as a component of cash and cash equivalents for the purpose of the statement
of cash flows and are presented as current liabilities in the statement of financial position.
4.4 Property, Plant and Equipment
4.4.1 Recognition and Measurement
Property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Borrowing costs related to the acquisition and construction of qualifying assets are capitalised as
incurred.
Gains and losses on disposal of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised
net within 'Other income' in profit or loss.
Annual Report & Financial Statements | Page 79
4 Significant Accounting Policies (Continued)
4.4 Property, Plant and Equipment (Continued)
4.4.2 Subsequent Costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will flow
to the Group and its cost can be measured reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised
4.4.3 Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount
substituted for cost, less its residual value.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
part of an item of property, plant and equipment, since this most closely reflects the expected pattern
of consumption of the future economic benefits embodied in the asset. Buildings constructed on leased
land are depreciated over the shorter of the lease term and their useful lives unless it is reasonably
certain that the Group will obtain ownership at the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
• buildings 25 - 50 years
• electrical and plumbing installation 15 years
• furniture, fixtures & fittings 10 years
• air-conditioning 6 years
• motor vehicles 5 years
• computer equipment 4 years
• terminals 4 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and
adjusted as appropriate.
Annual Report & Financial Statements | Page 80
4 Significant Accounting Policies (Continued)
4.5 Leases
4.5.1 Leases as a Lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group
recognises a right-of-use (ROU) asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term
of 12 months or less) and leases of low-value assets (such as tablets and personal computers, small
items of office furniture and telephones). For these leases, the Group recognises the lease payments as
an operating expense on a straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern of the lessee's benefit.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily
determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments), less any lease incentives
receivable;
• Variable lease payments that depend on an index or rate, initially measured using the index or
rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
and
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an
option to terminate the lease.
The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow the
funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic environment,
over a similar term, and with a similar security.
The lease liability is presented in the statement of financial position as a separate line item.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the
lease liability (using the effective interest rate method) and by reducing the carrying amount to reflect
the lease payments made.
The Group re-measures the lease liability (and makes a corresponding adjustment to the related ROU
asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase
option, in which case the lease liability is re-measured by discounting the revised lease payments
using a revised discount rate;
• The lease payments change due to changes in an index or rate or a change in expected payment
under a guaranteed residual value, in which cases the lease liability is re-measured by
discounting the revised lease payments using an unchanged discount rate (unless the lease
payments change is due to a change in a floating interest rate, in which case a revised discount
rate is used); or
Annual Report & Financial Statements | Page 81
4 Significant Accounting Policies (Continued)
4.5 Leases (Continued)
4.5.1 Leases as a Lessee (Continued)
• A lease contract is modified and the lease modification is not accounted for as a separate lease,
in which case the lease liability is re-measured based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification.
The Group did not make any such adjustments during the periods presented.
Right-of-use assets
The ROU assets comprise the initial measurement of the corresponding lease liability, lease payments
made at or before the commencement date, less any lease incentives received and any initial direct
costs. They are subsequently measured at cost less accumulated depreciation and impairment losses,
and adjusted for certain re-measurement of the lease liability.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the
site on which it is located or restore the underlying asset to the condition required by the terms and
conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the
costs relate to a ROU asset, such costs are included with the related ROU asset amount, unless those
costs are incurred to produce inventories.
ROU assets are depreciated over the shorter period of the lease term and useful life of the underlying
asset. If a lease transfers ownership of the underlying asset, or the cost of the ROU asset reflects that
the Group expects to exercise a purchase option, the related ROU asset is depreciated over the useful
life of the underlying asset. The depreciation starts at the commencement date of the lease.
The ROU assets are presented in the statement of financial position as a separate line item.
The Group applies IAS 36 to determine whether an ROU asset is impaired and accounts for any identified
impairment loss as described in Note 4.10.3.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease
liability nor the ROU asset. The related payments are recognised as an expense in the period in which
the event or condition that triggers those payments occurs and are included within 'Other expenses' in
profit or loss.
4.5.2 Leases as a Lessor
The Group enters into lease agreements as a lessor with respect to its rented terminals. Leases for which
the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease
substantially transfer all the risks and rewards of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease as two
separate contracts. The sub-lease is classified as a finance or operating lease by reference to the ROU
asset arising from the head lease.
Annual Report & Financial Statements | Page 82
4 Significant Accounting Policies (Continued)
4.5 Leases (Continued)
4.5.2 Leases as a Lessor (Continued)
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the
Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to
reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the
leases.
Subsequent to initial recognition, the Group regularly reviews the estimated unguaranteed residual value
and applies the impairment requirements of IFRS 9, recognising an allowance for ECLs on the finance
lease receivables.
Finance lease income is calculated with reference to the gross carrying amount of the finance lease
receivables, except for credit-impaired financial assets for which interest income is calculated with
reference to their amortised cost (i.e. after a deduction of the loss allowance).
When a contract includes both lease and non-lease components, the Group applies IFRS 15 to allocate
the consideration under the contract to each component.
4.6 Intangible Assets
4.6.1 Re-Acquired Rights
When as part of a business combination, the Group re-acquires a right that it had previously granted to
the acquiree to use one or more of its recognised or unrecognised assets, an intangible asset is
recognised separately from goodwill. The value of the re-acquired rights is measured on the basis of the
remaining contractual term of the related contract regardless of whether market participants would
consider potential contractual renewals in determining its fair value. A settlement gain or loss is
recognised by the Group when the terms of the contract giving rise to a re-acquired right are favourable
or unfavourable, relative to the terms of current market transactions, for the same or similar items.
4.6.2 Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. Goodwill
represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative, it is
recognised immediately in profit or loss.
Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.
Annual Report & Financial Statements | Page 83
4 Significant Accounting Policies (Continued)
4.6 Intangible Assets (Continued)
4.6.3 Internally Generated Computer Software Development
Development activities involve a plan or design for the production of new or substantially improved
products and processes. Development expenditure is capitalised only if development costs can be
measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and the Group intends to and has sufficient resources to complete development
and to use or sell the asset.
The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are
directly attributable to preparing the asset for its intended use. Other development expenditure is
recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and
accumulated impairment losses.
4.6.4 Software Rights
Software rights that are separable or arise from contractual or other legal rights are recognised as
intangible assets if it is probable that the expected future economic benefits that are attributable to the
asset will flow to the entity and the cost of the asset can be measured reliably.
Software rights are initially measured at cost. Subsequent to initial recognition, software rights are
recognised at cost less any accumulated amortisation and any accumulated impairment losses.
4.6.5 Customer and Other Related Contractual Relationship
Customer and other related contractual relationship acquired as a result of a business combination are
initially recognised at their fair value at the date of acquisition, and are subsequently amortised on a
straight-line basis based on the timing of projected cash flows of the contracts over their estimated
useful lives.
4.6.6 Subsequent Expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in
the specific asset to which it relates and when it meets the definition of an intangible asset and the
recognition criteria. All other expenditure is recognised in profit or loss as incurred.
Annual Report & Financial Statements | Page 84
4 Significant Accounting Policies (Continued)
4.6 Intangible Assets (Continued)
4.6.7 Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its
residual value.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date that they are available for use since this most closely
reflects the expected patterns of consumption of the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
• internally generated computer software 15 years
• software rights 15 years
• computer software 4 years
• other software 15 years
• customer and other related contractual relationship 12 years
The amortisation method, useful life and residual value are reviewed at each financial year-end and
adjusted if appropriate.
The assessment of all four categories of the useful life of software is based on the following factors:
• The software is the main driver of the Group’s revenue and is expected to remain so for the
foreseeable future;
• Highly qualified teams with robust expertise which enables the software to be efficiently
managed;
• It is a mature product with years of development, knowhow and expertise;
• The software is maintained on a continuous basis to ensure that it keeps up with the technical,
technological and commercial changes;
• Industry and market demands are stable due to the increase in technological change in the
payment processes field;
• The company operates in a niche market with significant barriers to entry;
• The company owns the Intellectual property rights (IPR) for the software and therefore there is
no definite period of control over the asset; and
• The usage of the asset is not dependent on the useful life of assets of other companies.
The assessment of useful life of customer and other related contractual relationship is based on the
following factors:
• The average churn rate of customers based on historical figures;
• The extent to which the churn rate is expected to fluctuate on particular market segments due
to technological upgrades; and
• The company operates in a competitive market which brings about its own challenges and
affects the churn rate, however there is also an element of loyalty towards existing integrations.
Annual Report & Financial Statements | Page 85
4 Significant Accounting Policies (Continued)
4.7 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of purchased inventory are
determined after deducting rebates and discounts. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price less all estimated costs of completion and
costs to be incurred in marketing, selling and distribution.
4.8 Investments in Subsidiaries
Investments in subsidiaries are shown in the statement of financial position of the Company at cost less
any impairment losses.
Loans advanced by the Company to its subsidiaries for which settlement is neither planned nor likely to
occur in the foreseeable future, are treated as an extension to the Company’s net investment in those
subsidiaries and included as part of the carrying amount of investments in subsidiaries to the extent that
they represent a capital contribution.
4.10 Impairment
4.10.1 Investments in Subsidiaries
The carrying amounts of the Company’s investments in subsidiaries are reviewed at each reporting date
to determine whether there is an indication of impairment. If such indication exists, then the asset’s
recoverable amount is estimated.
The recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-
in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable
amount. Impairment losses are recognised in profit or loss.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined if no impairment loss had been recognised.
4.10.2 Non-Derivative Financial Assets
4.10.2.1 Expected Credit Losses
The Group recognises a loss allowance for ECLs on financial assets measured at amortised cost, as well
as contract assets and lease receivables. The amount of ECLs is updated at each reporting date to
reflect changes in credit risk since initial recognition.
For trade receivables and contract assets that do not contain a significant financing component, the
Group applies the simplified approach and recognises lifetime ECL.
Annual Report & Financial Statements | Page 86
4 Significant Accounting Policies (Continued)
4.10 Impairment (Continued)
4.10.2 Non-Derivative Financial Assets (Continued)
4.10.2.1 Expected Credit Losses (Continued)
If evidence of a significant increase in credit risk at the individual instrument level is not yet available,
the Group performs the assessment of significant increases in credit risk on a collective basis by
considering information on, for example, a group or sub-group of financial instruments. Where the Group
does not have reasonable and supportable information that is available without undue cost or effort to
measure lifetime ECLs on an individual instrument basis, lifetime ECLs are measured on a collective
basis. In such instances, the financial instruments are grouped on the basis of shared credit risk
characteristics, such as the nature, size and industry. Where a collective basis is applied, a provision
matrix is used, whereby a fixed provision rate is applied depending on the number of days that a trade
receivable is outstanding. The following steps are followed in order to estimate the ECL on trade
receivables:
Step 1: Determine the appropriate groupings of trade receivables into categories of shared credit risk
characteristics.
IFRS 9 does not provide any explicit guidance or requirement on how to group trade receivables. To be
able to apply a provision matrix to trade receivables, the population of individual trade receivables should
first be aggregated into groups of receivables that share similar credit risk characteristics. Management
deems that the most appropriate manner is the trade receivable aged analysis. Moreover, for the
purpose of the Group’s ECL calculation, the provision matrix is prepared in accordance with its default
definition.
Step 2: Determine the period over which historical loss rates are obtained to develop estimates of
expected future loss rates.
Once the sub-groups are identified, historical loss data needs to be collected for each sub-group. Again,
IFRS 9 does not provide specific guidance on how far back the historical data should be collected.
Judgement is needed to determine the period over which reliable historical data can be obtained that is
relevant to the future period over which the trade receivables will be collected. Management deems a
14-month period to be reasonable to consider for ECL calculation purposes.
Step 3: Determine the historical loss rates.
Once sub-groups have been identified and the period over which loss data will be captured has been
selected, the Group determines the expected loss rates for each sub-group sub-divided into past-due
categories (i.e. a loss rate for balances that are 0 days past due, a loss rate for 1-30 days past due, a
loss rate for 31-60 days past due, etc.). In this respect, losses incurred over the 14-month period
considered for this exercise are to be taken for each ageing bucket. Dividing invoiced amounts in each
ageing bucket by the losses incurred results in the loss rates to be used for each ageing bucket.
Annual Report & Financial Statements | Page 87
4 Significant Accounting Policies (Continued)
4.10 Impairment (Continued)
4.10.2 Non-Derivative Financial Assets (Continued)
4.10.2.1 Expected Credit Losses (Continued)
Step 4: Consider forward looking macro-economic factors and adjust historical loss rates to reflect
relevant future economic conditions.
The historical loss rates calculated in Step 3 reflect the economic conditions in place during the period
to which the historical data relate. While they are a starting point for identifying expected losses, they
are not necessarily the final loss rates that should be applied to the carrying amount. Albeit, Management
deems that the historical loss rates were incurred under economic conditions that are representative of
those expected to exist in the foreseeable future.
Step 5: Calculate the expected credit losses.
The ECL of each sub-group determined in Step 1 should be calculated by multiplying the current gross
receivable balance plus contract assets by the loss rate. The summation of all the ECLs of each ageing
bucket results in the total ECL of the portfolio.
For all other financial instruments, the Group uses the general approach and recognises lifetime ECLs
when there has been a significant increase in credit risk since initial recognition. If, on the other hand,
the credit risk on the financial instrument has not increased significantly since initial recognition, the
Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.
The assessment of whether lifetime ECLs should be recognised is based on significant increases in the
likelihood or risk of default occurring since initial recognition, instead of evidence of a financial asset
being credit-impaired at the reporting date or an actual default occurring.
Lifetime ECLs represent the ECLs that will result from all possible default events over the expected life
of a financial instrument. In contrast, 12-month ECLs represents the portion of lifetime ECLs that is
expected to result from default events on a financial instrument that are possible within 12 months after
the reporting date.
The Group recognises an impairment gain or loss in profit or loss for all financial assets with a
corresponding adjustment to their carrying amount, except for investments in debt instruments that are
measured at FVTOCI, for which the loss allowance is recognised in other comprehensive income and
accumulated in equity, and does not reduce the carrying amount of the financial asset in the statement
of financial position.
Annual Report & Financial Statements | Page 88
4 Significant Accounting Policies (Continued)
4.10 Impairment (Continued)
4.10.2 Non-Derivative Financial Assets (Continued)
4.10.2.1 Expected Credit Losses (Continued)
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial
recognition, the Group compares the risk of default occurring on the financial instrument as at the
reporting date with the risk of default occurring on the financial instrument at the date of initial
recognition. In making this assessment, the Group considers both the quantitative and the qualitative
information that is reasonable and supportable, including historical experience and forward-looking
information that is available without undue cost or effort and, where applicable, the financial position of
the counterparties.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a
financial asset has increased significantly since initial recognition when contractual payments are more
than 30 days past due, unless the Group has reasonable and supportable information, that is available
without undue cost or effort, that demonstrates otherwise.
Despite the above assessment, the Group assumes that the credit risk on a financial instrument has not
increased significantly since initial recognition if the financial instrument is determined to have low credit
risk at the reporting date. Accordingly, for these financial assets, the loss allowance is measured at an
amount equal to 12-month ECL. The Group has applied the low credit risk assumption for cash at bank
held with banks rated as investment grade.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of that financial asset have occurred.
Evidence that a financial asset is credit-impaired includes observable data about the following events:
a) significant financial difficulty of the issuer or the borrower;
b) a breach of contract, such as a default or past due event;
c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's
financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not
otherwise consider;
d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
or
e) the disappearance of an active market for that financial asset because of financial difficulties.
Annual Report & Financial Statements | Page 89
4 Significant Accounting Policies (Continued)
4.10 Impairment (Continued)
4.10.2 Non-Derivative Financial Assets (Continued)
4.10.2.1 Expected Credit Losses (Continued)
Based on past experience and reasonable and supportable information which corroborates this
experience, as adjusted (where necessary) for forward-looking information, the Group and the Company
consider that default has occurred when a financial asset is more than 300 days past due.
Write-off policy
The Company writes off a financial asset when there is information indicating that the
counterparty is in severe financial difficulty and there is no realistic prospect of recovery.
Measurement and recognition of ECLs
For financial assets, the credit loss is the difference between all contractual cash flows that are due to
the Group in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the original effective interest rate. ECLs represent the weighted average of credit losses.
The assessment of the probability of default, and loss given default, is based on historical data adjusted
by forward-looking information, where applicable. Forward-looking information considered includes,
where applicable, the future prospects of the industries in which the Group’s debtors operate, as well as
consideration for various external sources of actual and forecasted economic information that relate to
the Group’s core operations.
4.10.3 Non-Financial Assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have
indefinite useful lives, the recoverable amount is estimated each year at the same time. An impairment
loss is recognised if the carrying amount of an asset or its cash generating unit (CGU) exceeds its
estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value-in-use and its fair value less costs
to sell. In assessing value-in-use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or groups of assets
(CGU).
Subject to an operating segment ceiling test, for the purpose of goodwill impairment testing, CGUs to
which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects
the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a
business combination is allocated to groups of CGUs that are expected to benefit from the synergies of
the combination.
Annual Report & Financial Statements | Page 90
4 Significant Accounting Policies (Continued)
4.10 Impairment (Continued)
4.10.3 Non-Financial Assets (Continued)
assets recognised at a revalued amount, the impairment loss is recognised in other comprehensive
income to the extent that it does not exceed the amount in the revaluation recognised for that asset.
Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of
any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the
CGU on a pro-rata basis.
recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. In addition to this, an impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
4.11 Short-Term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided.
The Group contributes towards the respective state pension defined contribution plan in accordance
with local legislation, and to which it has no commitment beyond the payment of fixed contributions.
Obligations for contributions to the defined contribution plan are recognised immediately in profit or loss.
4.12 Share-Based Payment Transactions
The grant-date fair value of equity-settled share-based payment awards granted to employees is
recognised as an employee expense, with a corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The amount recognised as an expense is
adjusted to reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised as an expense is based
on the number of awards that meet the related services and non-market performance conditions at the
vesting date.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired,
measured initially at the fair value of the liability. As at each reporting date until the liability is settled,
and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair value
recognised in profit or loss for the year.
Annual Report & Financial Statements | Page 91
4 Significant Accounting Policies (Continued)
4.13 Employee Benefits
Non-competition post-employment benefits due to employees holding senior management positions are
payable upon cessation for whatever reason, based on either a fixed amount or the then applicable
annual salary. The cost of providing for these post-employment benefits is determined using the
projected unit method, with estimations being carried out at each reporting date. In line with the
recognition of other provisions, the post-employment benefits are recognised when the Group has a
present legal or constructive obligation as a result of past events, when it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation. The liability recognised
in the statement of financial position represents the present value of the expected future payments
required to settle the obligation at the end of the reporting period. The present value of a defined benefit
obligation is determined by discounting the estimated future cash outflows to be paid on termination
using market yields. Such yields are denominated in the currency in which the benefits will be paid and
have terms to maturity approximating the estimated termination date. The Directors consider this to be
an appropriate proxy to a high-quality corporate bond. The service cost and the net interest on the net
defined benefit liability are recognised in profit or loss. Re-measurements of the net defined benefit
liability, are recognised in other comprehensive income and are not reclassified to profit or loss in a
subsequent period. Re-measurements may include changes in the present value of the defined benefit
obligation arising from experience adjustments and the effects of changes in the actuarial assumptions.
Such re-measurements are reflected immediately in retained earnings.
4.14 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The unwinding of discount is recognised as a finance cost.
4.15 Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision
is based on historical warranty data and a weighting of all possible outcomes against their associated
probabilities.
4.16 Revenue
Revenue is recognised when the Group or the Company satisfies a performance obligation by
transferring control of a promised good or service to a customer. Revenue is measured based on the
consideration specified in a contract with a customer and excludes amounts collected on behalf of third
parties. Determining the timing of the transfer of control, at a point in time or over time, requires
judgement.
Annual Report & Financial Statements | Page 92
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.1 Licenses
4.16.1.1 Perpetual Licenses and Significant Customisation/ Implementation Services
License fees arise from software license agreements where the Group grants non-exclusive licenses to
use specific BankWORKS® modules. In the case of perpetual licenses, the fee is generally a one-time
fee.
The Group accounts for individual products and services separately if they are distinct, that is, if a
product or service is separately identifiable from other promises in the contract (i.e. the promise to
transfer the good or service is distinct within the context of the contract) and if a customer can benefit
from it either on its own or together with other resources that are readily available to the customer (i.e.
the good or service is capable of being distinct).
In accordance with IFRS 15, the Group is required to assess each arrangement to understand whether
licenses are distinct from the significant implementation and customisation services provided with that
license and from the other services provided. For the purposes of understanding whether the licenses
are distinct, management is required to consider additional criteria including whether the customers can
benefit from the use of the license alone or otherwise and whether there exist activities which require
significant integration, modification or which are otherwise interdependent.
In this respect, Management has assessed that in the majority of the Group’s contracts, the license and
the significant implementation and customisation services are to be considered as one performance
obligation in terms of the above criteria.
The Group has determined that revenue from this performance obligation should be recognised provided
the criteria for the recognition of a contract are satisfied, including having an enforceable right to
payment. In this case, in accordance with IFRS 15, revenue is recognised as each licensed system is
customised and set up according to the customer’s specific needs, by reference to the stage of
satisfaction of the performance obligation.
Payment for the license and the significant customisation services is generally fixed and is payable by
the customer in advance by way of milestone payments. Any cash received in advance of the provision
of the customisation services is therefore recognised as a contract liability, thus representing the entity’s
obligation to perform the obligation. Such amounts are recognised as revenue over the customisation
period.
Such contracts are not deemed to be a significant financing component, as the period between the
recognition of revenue under the stage of completion and the payment is less than one year.
Management has also considered IFRS 15’s impact on contracts in which consideration for the promise
is variable. For the license business, this is relevant for contracts in which the Group’s consideration is
based on a percentage of revenues that are earned by the client from its own customers. For this variable
consideration, the Group concludes that it cannot include its estimate of such revenues in the
transaction price until the uncertainty is resolved.
This is based on the fact that the variability of the fee based on the customer’s own revenues indicates
that the Group cannot conclude that it is highly probable that a significant reversal in the cumulative
amount of revenue recognised would not occur. Accordingly, such estimates are not included before
they are earned.
Annual Report & Financial Statements | Page 93
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.1 Licenses (Continued)
4.16.1.2 Term License with The Provision of Implementation Activities and Managed
Services
The Group is party to a term license agreement with an option by the customer of acquiring the source
code through an additional license for a longer term. The agreement also governs the provision by the
Group of implementation activities at the inception of the contract and of managed services during the
term of the agreement.
The Group accounts for individual products and services separately if they are distinct, that is, if a
product or service is separately identifiable from other promises in the contract (i.e. the promise to
transfer the good or service is distinct within the context of the contract) and if a customer can benefit
from it either on its own or together with other resources that are readily available to the customer (i.e.
the good or service is capable of being distinct).
In accordance with IFRS 15, the Group assesses whether licenses are distinct from the significant
implementation and customisation services provided with that license and from the other services
provided. For the purposes of understanding whether the licenses are distinct, Management considers
additional criteria including whether the customers can benefit from the use of the license alone or
otherwise and whether there exist activities which require significant integration, modification or which
are otherwise interdependent. In this respect, Management has assessed that the license and the
significant implementation and customisation services are to be considered as one performance
obligation in terms of the above criteria.
The Group recognises the related fee for customisation and implementation activities over the
customisation period. This is established on the basis that the infrastructure is owned, managed and
governed by the customer and is hosted on its own system and that by the time the customised software
is live, the customer has already obtained and paid for that system, without having to pay an additional
amount for such customisation and implementation activities such that upon the exercise of the option
to acquire the additional license, the customer has the contractual right and the practical ability to
perform the managed services itself.
The Group recognises the revenue attributable to the term license at a point in time, immediately upon
each periodic renewal of the license agreement to the extent that the contract is either cancellable or
to the extent that there is no history of enforcing contracts. The Group invoices the customer quarterly
in advance, based on volume tiers which are trued-up annually.
Annual Report & Financial Statements | Page 94
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.1 Licenses (Continued)
4.16.1.2 Term License with The Provision of Implementation Activities and Managed
Services (Continued)
The Group does not consider the customer’s option to represent a material right that the customer would
not receive without entering into that contract and accordingly the Group concludes that this option
does not represent another performance obligation in the arrangement. Accordingly, the entire license
fee is being recognised in profit or loss as it arises, without any deferral. The uniqueness of the contract
increases the element of judgement that is applied in this respect. This conclusion is based on the fact
that the pricing of the option did not alter the pricing of the remaining components of the contract, the
pricing of the option does not give rise to a discount for the license being provided and the option was
granted as security for continuity of service.
Given that the contractual form of the exercise price of the option is a function of the cumulative license
fees paid by the customer prior to that option being exercised, the Group has projected the applicable
exercise price during the option period based on its projections of the annual license fees expected to
be applicable to the customer on the basis of the expected volume of transactions. Based on the pricing
of the exercise price, in conjunction with the additional costs (including employee costs for handling and
managing the software) that would need to be incurred by the customer following the exercise of the
option, the Group believes that the likelihood of the option being exercised is very low.
For managed services, refer to the accounting policy in 4.16.2.
4.16.2 Services
The Group provides (a) transaction processing services; (b) maintenance services, such as ongoing
support for BankWORKS®, software enhancements and software upgrades; and (c) other services,
including change requests.
The agreements for the maintenance services and the other services are either entered into (i) at the
same time with the sale of the license; or (ii) after the sale of the license, as part of a comprehensive
package. Where the agreements are entered into at the same time with the sale of the license, the Group
assesses whether such agreements need to be combined with the license contract for the purpose of
IFRS 15.
The Group accounts for individual products and services separately if they are distinct, that is, if a
product or service is separately identifiable from other promises in the contract (i.e. the promise to
transfer the good or service is distinct within the context of the contract) and if a customer can benefit
from it either on its own or together with other resources that are readily available to the customer (i.e.
the good or service is capable of being distinct).
Annual Report & Financial Statements | Page 95
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.2 Services (Continued)
Transaction processing is determined to be a performance obligation which is distinct from the
corresponding implementation or customisation activities that are performed in advance of such
transaction processing (see Note 4.16.2.1). Transaction processing services are regarded as a series of
distinct services that are substantially the same and that have the same pattern of transfer to the
customer; the performance obligation is the fact that the Group needs to stand ready to perform, which
obligation is satisfied over time. The consideration in respect of such services contains variable elements
that are dependent on the volume of transactions processed, with a minimum monthly fee; Management
allocates the variable fees charged for each transaction to the time period in which the Group has the
contractual right to bill the customer since such payments relate specifically to the Group’s efforts to
satisfy the performance obligation and allocating that amount entirely to that specific time period is
consistent with the allocation objective in IFRS 15. The Group accordingly recognises the monthly billings
to customers as revenue in the month of billing.
Maintenance services are generally billed quarterly or annually in advance. Regardless of whether the
corresponding agreements for such services are entered into at the same time with the sale of the
license, these services are determined to be distinct from the corresponding licenses under IFRS 15.
Revenues allocated to the maintenance services are recognised over time in accordance with IFRS 15,
as the customer simultaneously receives and consumes all of the benefits provided by the entity as the
entity performs. The transaction price is recognised as a contract liability at the time of receipt.
Revenue from other additional services requested by the client outside the scope of the original contract,
such as changes that are requested after the sale of the license and/or the period of customisation, are
generally treated as a separate contract if the scope of the contract increases because of the addition
of services that are distinct and the price charged is calculated at a man-rate per hour that reflects the
standalone selling price of such additional services. This performance obligation is generally recognised
over the period of such service. The Group charges for other services on a fixed cost basis. As the
current systems in place assess progress of completion based on the lifecycle of the delivery it is
concluded that the output method is the more appropriate method for measuring revenue that is
recognised over time by observing the value to the customer transferred to date relative to the remaining
services promised.
Revenue from services provided in comprehensive packages continues to be recognised over time under
IFRS 15 unless separate performance obligations are identified.
There should not be a significant financing component in relation to such services as the period between
the recognition of revenue and the payment is always less than one year.
Annual Report & Financial Statements | Page 96
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.2 Services (Continued)
4.16.2.1 Implementation and Customisation Fees Followed by Transaction
Processing Services
Where the Group receives a fee for customisation and implementation activities without the sale of a
license, which are followed by transaction processing services, it assesses whether the fee relates to
the transfer of a promised good or service.
Where the fee relates to an activity that the Group is required to undertake at or near contract inception
to fulfil the contract and that activity does not result in the transfer of a promised good or service to the
customer, the fee is treated as an advance payment for future goods or services and, therefore, is
recognised as revenue when those future goods or services are provided.
Where the fee relates to a distinct performance obligation and that activity results in the transfer of a
promised good or service to the customer, the related revenue is recognised over the customisation
period. Determining whether the activity represents a distinct performance obligation and whether it
results in a transfer of a promised good or service to the customer requires judgement.
This is based on the Group’s conclusion that by the time the customised software is live, the customer
has already obtained and paid for the right to have that software solution hosted elsewhere, without
having to pay an additional amount for such customisation and implementation activities, subject to a
migration fee as a separate service that is distinct and a penalty for the cancellation of future transaction
processing services (which reduces with the number of remaining months) and without the requirement
for a different service provider to pay for an additional license in this regard.
4.16.3 Acquiring Business
The acquiring business includes the sale and rental of payment terminals and associated maintenance
services, including consultation, installation and repairs.
4.16.3.1 Sale of Terminals and Terminal Equipment
The Group enters into a sales contract or sales order with the customer, whereby the consideration for
the terminals or terminal equipment being sold is determined. Simultaneously, the goods are shipped,
the invoice is forwarded to the customer and the consideration is due immediately. The Group has
determined that revenue from this performance obligation should therefore be recognised immediately
provided that the criteria for the recognition of a contract are satisfied, including having an enforceable
right to payment.
Annual Report & Financial Statements | Page 97
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.3 Acquiring Business (Continued)
4.16.3.2 Maintenance of Terminals and Terminal Equipment
The Group enters into a maintenance contract with the customer, specifying the monthly maintenance
fee and the relevant period. The monthly maintenance fee is due and payable on a monthly basis. The
Group has determined that revenue from this performance obligation should therefore be recognised on
a monthly basis in line with the applicable maintenance period provided that the criteria for the
recognition of a contract are satisfied, including having an enforceable right to payment.
The agreements for the maintenance services are generally entered into at the same time with the rental
agreement, which defines all conditions and fees for the different services being provided. Where the
agreements are entered into at the same time with the rental agreement, the Group assesses whether
such agreements need to be combined with the rental contract for the purpose of IFRS 15.
4.16.3.3 Fees per Processed Transaction
The Group also charges transaction fees depending on the type of terminal. The Group enters into a
contract with the customer, specifying the transaction fee for the applicable period. The sum of the
transaction fees due per month are aggregated and billed to the client. These are payable on a monthly
basis. The Group has determined that revenue from this performance obligation should therefore be
recognised on a monthly basis in line with the applicable maintenance period provided that the criteria
for the recognition of a contract are satisfied, including having an enforceable right to payment.
4.16.3.4 Fees based on operated Transaction Volume
The Group also earns revenue based on transaction volume processed by the customer terminals, both
from Giro cards and credit cards. In the case of the former, a commission is earned based on a
percentage of the total transaction volume processed by Giro cards. This commission is clearly defined
in the contract the Group has with its customers.
The Group has determined that revenue from this performance obligation should therefore be
recognised on a monthly basis in line with the applicable period provided that the criteria for the
recognition of a contract are satisfied, including having an enforceable right to payment. In the case of
revenue generated from transactions of credit cards, the Group has a contract directly with the acquirer,
rather than the customer. The Group therefore receives a monthly commission from the profit generated
by the acquirer from the Group’s customers, based on transaction volume generated by credit cards.
The Group has determined that revenue from this performance obligation should therefore be
recognised on a monthly basis in line with the applicable period provided that the criteria for the
recognition of a contract are satisfied, including having an enforceable right to payment.
Annual Report & Financial Statements | Page 98
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.4 Contract Costs
Contract costs that are recognised as an asset are amortised on a systematic basis that is consistent
with the transfer to the customer of the goods or services to which the asset relates. An impairment loss
is recognised in profit or loss to the extent that the carrying amount of the asset exceeds (a) the
remaining amount of consideration that the entity expects to receive in exchange for the goods or
services to which the asset relates; less (b) the costs that relate directly to providing those goods or
services and that have not been recognised as expenses. An impairment reversal is recognised when
the impairment conditions no longer exist or have improved but the increased carrying amount of the
asset shall not exceed the amount that would have been determined (net of amortisation) if no
impairment loss had been recognised previously.
Incremental costs of obtaining a contract
The incremental costs of obtaining a contract with a customer are recognised as an asset if the entity
expects to recover those costs. Costs to obtain a contract that would have been incurred, regardless of
whether the contract was obtained, are recognised as an expense when incurred, unless those costs
are explicitly chargeable to the customer.
Applying the practical expedient in paragraph 94 of IFRS 15, the Company recognises the incremental
costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that
the entity otherwise would have recognised is one year or less.
Costs to fulfil a contract
The costs incurred in fulfilling a contract with a customer that are not within the scope of another
Standard are recognised as an asset only if (a) the costs relate directly to a contract or an anticipated
contract that the entity can specifically identify; (b) the costs generate or enhance resources of the
entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future;
and (c) the costs are expected to be recovered.
4.16.5 Contract Modifications
A contract modification, such as changes that are requested after the sale of the license and/or the
period of customisation, is accounted for as a separate contract if (a) the scope of the contract increases
because of the addition of promised goods or services that are distinct; and (b) the price of the contract
increases by an amount of consideration that reflects the entity’s standalone selling prices of the
additional promised goods or services and any appropriate adjustments to that price to reflect the
circumstances of the particular contract.
Annual Report & Financial Statements | Page 99
4 Significant Accounting Policies (Continued)
4.16 Revenue (Continued)
4.16.5 Contract Modifications (Continued)
For a contract modification that is not accounted for as a separate contract, the entity accounts for the
promised goods or services not yet transferred at the date of the contract modification based on the
specific facts and circumstances. A contract modification is accounted for as if it were a termination of
the existing contract and the creation of a new contract if the remaining goods or services are distinct
from the goods or services transferred on or before the date of the contract modification. A contract
modification is accounted for as if it were a part of the existing contract if the remaining goods or services
are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at
the date of the contract modification. If the remaining goods or services are partly distinct and partly not
distinct, the effects of the modification on the unsatisfied (including partially unsatisfied) performance
obligations in the modified contract are accounted for in a manner that is consistent with the objectives
of IFRS 15.
4.16.6 Allocation of A Discount
Where a discount is provided, the Group and the Company allocate that discount entirely to one or more,
but not all, performance obligations in the contract if the following criteria are met: (a) the entity regularly
sells each distinct good or service (or each bundle of distinct goods or services) in the contract on a
standalone basis; (b) the entity also regularly sells on a standalone basis a bundle (or bundles) of some
of those distinct goods or services at a discount to the standalone selling prices of the goods or services
in each bundle; and (c) the discount attributable to each bundle of goods or services is substantially the
same as the discount in the contract and an analysis of the goods or services in each bundle provides
observable evidence of the performance obligation (or performance obligations) to which the entire
discount in the contract belongs. If these criteria are not met, the discount is allocated proportionately
to all performance obligations in the contract.
4.16.7 Allocation of Variable Consideration
The Group and the Company allocate a variable amount (and subsequent changes to that amount)
entirely to a performance obligation or to a distinct good or service that forms part of a single
performance obligation if both of the following criteria are met: (a) the terms of a variable payment relate
specifically to the entity’s efforts to satisfy the performance obligation or transfer the distinct good or
service (or to a specific outcome from satisfying the performance obligation or transferring the distinct
good or service); and (b) allocating the variable amount of consideration entirely to the performance
obligation or the distinct good or service is consistent with the allocation objective in IFRS 15 when
considering all of the performance obligations and payment terms in the contract.
Annual Report & Financial Statements | Page 100
4 Significant Accounting Policies (Continued)
4.17 Finance Income and Costs
Finance income comprises interest income on bank balances, loans receivable, movements in provisions
for non-operating exchange gains, finance income arising on measuring receivables at amortised cost
using the effective interest rate method, gains on derivatives recognised in the profit or loss and finance
income on the net investment in finance leases. Interest income is recognised as it accrues in profit or
loss, using the effective interest rate method as further described in the accounting policies for non-
derivative financial assets.
Finance costs comprise interest expense on borrowings, movements in provisions for non-operating
exchange losses, and finance cost arising on measuring payables at amortised cost using the effective
interest rate method recognised in profit or loss.
Borrowing costs that are not directly attributable to the acquisition and construction of qualifying assets
are recognised in profit or loss.
Foreign currency gains and losses are reported on a net basis.
4.18 Government Grants
Government grants are recognised as income over the periods necessary to match them to the costs
for which they are intended to compensate, on a systematic basis. Government grants that are
receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs, are recognised in profit or loss in
the period in which they become receivable.
If a grant is compensation for expenses or losses already incurred, or for which there are no future
related costs, it is recognised in profit or loss in the period in which is becomes receivable. A grant
relating to income is deducted by the Group from the related expense.
Government grants are not recognised until there is reasonable assurance that the respective entity will
comply with the conditions attaching to them and the grants will be received. A forgivable loan from
government is treated as a government grant when there is reasonable assurance that the entity will
meet the terms for forgiveness of the loan.
4.19 Income Tax
Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in
profit or loss except to the extent that it relates to a business combination, or items recognised directly
in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Annual Report & Financial Statements | Page 101
4 Significant Accounting Policies (Continued)
4.19 Income Tax (Continued)
Deferred tax is not recognised for the following temporary differences: the initial recognition of assets
or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is
probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised
for taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, and deductible temporary differences to the
extent that it is probable that future taxable profits will be available against which they can be used.
Future taxable profits are determined based on business plans for individual subsidiaries in the Group
and the reversal of temporary differences. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such
reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent
that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when
they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be realised simultaneously.
4.20 Earnings Per Share
The Group presents basic Earnings per Share (EPS) data for its ordinary shares. For the purpose of this
calculation and for the purpose of Note 26, an ordinary share is an equity instrument that is subordinate
to all other classes of equity instruments. The terms of preference shares issued by the Company are
assessed to determine whether they share the characteristics of ordinary shares and have any
preference attributed to them. In case that such shares have no preference attributed to them, such
instruments are considered as ordinary shares for the purpose of this calculation, regardless of the legal
name assigned to them.
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding during the period. Shares are usually
included in the weighted average number of shares from the date consideration is receivable (which is
generally the date of their issue).
The Group presents in the statement of comprehensive income basic earnings per share for each class
of ordinary shares that has a different right to share in profit for the period.
Annual Report & Financial Statements | Page 102
4 Significant Accounting Policies (Continued)
4.21 Segment Reporting
An operating segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses relating to transactions with any
of the Group’s other components.
Operating results of all operating segments are regularly reviewed by the Group’s chief operating
decision maker to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available.
4.22 Dividends
Dividends to holders of equity instruments are recognised as liabilities in the period in which they are
declared. These are recognised directly in equity.
4.23 Non-Current Assets Classified as Held for Sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the asset or disposal group is available for
immediate sale in its present condition. Management must be committed to the sale, which should be
expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets and disposal groups classified as held for sale are measured at the lower of the
assets’ previous carrying amount and fair value less costs to sell, unless the measurement provisions of
such assets and liabilities (such as financial assets within the scope of IFRS 9) are scoped out of IFRS 5.
An impairment loss is recognised in profit or loss. Non-current assets are not depreciated (or amortised)
while they are classified as held for sale or while they are part of a disposal group classified as held for
sale.
5 Determination of Fair Values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities. Fair values have been determined for measurement
and/or disclosure purposes based on the following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
When measuring the fair value of an asset or liability, the Group uses observable market data whenever
sufficient data is available.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the
valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted market prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
Annual Report & Financial Statements | Page 103
5 Determination of Fair Values (Continued)
If the inputs used to measure the fair value of an asset or a liability might be categorised in different
levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the
same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement.
5.1 Measurement of Fair Values
5.1.1 Loans Receivable
The fair value of loans receivable is estimated as the present value of future cash flows, discounted at
the market rate of interest at the reporting date. This fair value is determined for disclosure purposes
and is categorised as Level 2 of the fair value hierarchy.
5.1.2 Non-Derivative Financial Liabilities
Fair value is calculated based on the present value of future principal and interest cash flows, discounted
at the market rate of interest at the reporting date. Such non-derivative financial liabilities entail bank
borrowings, which have been categorised as Level 2 fair values.
5.1.3 Share-Based Payment Transactions
The fair value of employee share options or awards is measured using inputs that include the share price
at measurement date, the exercise price of the instrument, if any, expected volatility (based on an
evaluation of the Company’s historic volatility) where appropriate, the life of the instrument, expected
dividends to the extent applicable, and the risk-free interest rate. Service and non-market performance
conditions attached to the transactions are not considered in determining fair value.
For the cash-settled share-based payment arrangements, further disclosures are provided in Note 29.3.
Expected dividends were not included in the fair value measurement since the individual is entitled to
the rights of a shareholder, including the right to receive dividends from the date of grant of shares.
5.1.4 Finance Lease Receivables
The fair value of the finance lease receivables is classified as Level 2 and was calculated using the
discounted cash flow method using an appropriate discount rate.
5.2 Fair Values Versus Carrying Amounts
The reported carrying amounts at the respective reporting dates of the Group's and Company's current
financial instruments are a reasonable approximation of their fair values in view of their short-term
maturities. Derivative financial instruments are carried at fair value.
The Group's and Company's carrying amounts of other financial assets and liabilities, other than the
Company's investment in subsidiaries, in the statement of financial position are a reasonable
approximation of their respective fair values.
Annual Report & Financial Statements | Page 104
6 Financial Risk Management
6.1 Overview
The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management of
capital. Further quantitative disclosures are included throughout these financial statements. The
Company's exposure to such risks is substantially similar to that of the Group unless otherwise stated.
6.2 Risk Management Framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls, as well as to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions
and the Group’s activities. The Group, through its training and management standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees understand
their roles and obligations.
The Group’s Audit Committee oversees how Management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
Annual Report & Financial Statements | Page 105
6 Financial Risk Management (Continued)
6.3 Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group's trade receivables from
customers, finance lease receivables, loans receivable, contract assets, and cash held with financial
institutions.
Specifically, the Group’s exposure to credit risk arising from its trade receivables, is influenced mainly by
the individual characteristics of each customer. The demographics of the Group’s customer base,
including the default risk of the industry and country in which customers operate, have less of an
influence on credit risk.
The majority of the Group’s customers have been transacting with the Group for several years, and
losses have occurred infrequently. In monitoring customer credit risk, customers are classified according
to their credit characteristics, geographic location and ageing profile. Trade receivables relate to the
Group’s customers to whom services are rendered.
6.3.1 Exposure to Credit Risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting dates was as follows:
Carrying amount
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Non-current assets
Loans receivable from
related parties
-
- 2,110,148 2,107,484
Finance lease receivables 158,833
97,702 - -
158,833
97,702 2,110,148 2,107,484
Current assets
Trade and other receivables 6,355,216
6,065,903 21,504,839 17,308,767
Finance lease receivables 83,619
56,440 - -
Loans receivable from
related parties
195,862
945,565
22,667 945,790
Accrued income and contract
costs
2,130,015
3,776,538
435,806 6,148,870
Cash at bank 3,491,226
8,214,173 184,404 1,258,534
12,255,938
19,058,619 22,147,716 25,661,961
Annual Report & Financial Statements | Page 106
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.1 Exposure to Credit Risk (Continued)
The maximum exposure to credit risk for trade and other receivables, finance lease receivables, loans
receivable, and accrued income, at the respective reporting dates by geographic region was as follows:
Carrying amount
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Non-current assets
Europe 158,833
97,702 2,050,000 2,050,000
South America -
- 60,148 57,484
158,833
97,702 2,110,148 2,107,484
Current assets
Europe 4,980,310
4,875,367 4,693,156 6,292,504
Middle East 487,268
780,587 472,431 771,095
South America 592,366
574,385 259 259
North America 1,529,250
3,687,834 16,504,333 17,074,338
Asia 1,175,518
926,273 293,133 265,231
8,764,712
10,844,446 21,963,312 24,403,427
The nature of the Group and the Company’s activities is to service financial institutions (including banks)
and accordingly a significant proportion of receivables fall within this industry. In 2022, 47% (2021: 66%)
of the Group’s revenue is attributable to sales transactions with two (2021: three) major customers in the
banking and payments industry as per Note 7.4. The below table shows the receivable balances together
with accrued income due by these major customers as at 31 December 2022 and 2021 respectively.
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Customers situated in Europe 1,827,066
1,565,574 - 1,565,574
Customers situated in North
America
1,321,536
2,744,129 - -
3,148,602
4,309,703 - 1,565,574
Annual Report & Financial Statements | Page 107
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses
The Group establishes an allowance for impairment that represents its estimate of incurred losses in
respect of trade and other receivables. This allowance represents specific provisions against individual
exposures and a collective provision where necessary, unless this is considered to be immaterial.
The tables below detail, by credit risk rating grades, the gross carrying amount of financial assets.
THE GROUP THE COMPANY
Bank balances
2022 2021 2022 2021
€ € € €
External rating grades
A+ 3,290,265 7,033,351 126,415 94,483
BBB+ 142,503 16,329 - -
BBB- 708 20,999 708 20,999
Unrated 57,750 1,143,494 57,281 1,143,052
Gross/net carrying amount at
31 December
3,491,226 8,214,173 184,404 1,258,534
The Group’s cash is placed with reputable financial institutions; such that Management does not expect
any institution to fail to meet repayments of amounts held in the name of the Group.
THE GROUP THE COMPANY
Finance lease receivables
2022 2021 2022 2021
€ € € €
Internal rating grades
Performing* 242,452 154,142 - -
Gross/net carrying amount at
31 December
242,452 154,152 - -
THE GROUP THE COMPANY
Loans receivable
2022 2021 2022 2021
€ € € €
Internal rating grades
Performing* 195,862 945,565 2,132,815 3,053,274
Gross/net carrying amount at
31 December
195,862 945,565 2,132,815 3,053,274
*The contracting party has a low risk of default and does not have any past due amounts (12m ECL). In
respect of finance lease receivables and loans receivables, expected credit losses for the Group and
Company amount to €nil as at 31 December 2022 (2021: €nil).
Annual Report & Financial Statements | Page 108
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE GROUP
31 December 2022
Lifetime ECL not-credit
impaired
Lifetime ECL credit
impaired
Trade debtors, contract assets and
finance lease receivables
Individual
Impairments
Collective
Impairments
Individual Impairments
€ € €
Internal rating grades
Not in default - simplified model
applied
2,658,667 6,640,937 -
In default - - 15,682
Gross carrying amount at 31
December
2022
2,658,667 6,640,937 15,682
Loss allowance at 31 December
2022
- (571,921) (15,682)
Net carrying amount at 31
December
2022
2,658,667 6,069,016 -
The following table illustrates the Group’s gross carrying amounts for its trade debtors and contract
assets as at 31 December 2022, split by ageing buckets, as well as the lifetime ECL thereon.
THE GROUP
Trade debtors and contract assets
Not
past
due
<30 31-60 61-90 91-120 121-150 151-180 181-210 211-
240
241-
270
271-
300
>300 Total
€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000
31 December
2022
Expected credit
loss rate
1.9% 3.3% 6.5% 14.2% 32.4% 53.2% 29.0% - 39.8% 53.3% - 100% 8.6%
Estimated total
gross carrying
amount at
default 4,176 1,202 486 109 217 217 8 - 6 8 - 212 6,641
Lifetime ECL 80 40 32 15 70 115 2 - 2 4 - 212 572
Annual Report & Financial Statements | Page 109
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE COMPANY
31
December 2022
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade debtors, contract assets and finance
lease receivables
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Internal rating grades
Not in default - simplified model applied 20,170,968 2,077,807 -
In default - - -
Gross carrying amount at 31 December
2022
20,170,968 2,077,807 -
Loss allowance at 31 December 2022 - (308,130) -
Net carrying amount at 31 December 2022 20,170,968 1,769,677 -
The following table illustrates the Company’s gross carrying amounts for its trade debtors and contract
assets as at 31 December 2022, split by ageing buckets, as well as the lifetime ECL thereon.
THE COMPANY
Trade debtors and contract assets
Not
past
due
<30 31-60 61-90 91-120 121-
150
151-
180
181-
210
211-
240
241-
270
271-
300
>300 Total
€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000
31 December 2022
Expected credit loss rate 1.3% 2.5% 9.8% 21.3% 38.6% 55.8% - - - - - 100% 14.8%
Estimated total gross
carrying amount at default 1,407 178 13 20 149 200 - - - - - 111 2,078
Lifetime ECL 18 4 1 4 58 112 - - - - - 111 308
Annual Report & Financial Statements | Page 110
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE GROUP
31 December 2021
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade debtors, contract
assets and finance
lease receivables
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Internal rating grades
Not in default - simplified model applied 4,912,678 5,536,513 -
In default - - 4,339
Gross carrying amount at 31 December
2021
4,912,678 5,536,513 4,339
Loss allowance at 31 December 2021 - (452,608) (4,339)
Net carrying amount at 31 December 2021 4,912,678 5,083,905 -
The following table illustrates the Group’s gross carrying amounts for its trade debtors and contract
assets as at 31 December 2021, split by ageing buckets, as well as the lifetime ECL thereon.
THE GROUP
Trade debtors and contract assets
Not
past
due
<30 31-60 61-90 91-120 121-150 151-180 181-210 211-
240
241-
270
271-
300
>300 Total
€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000
31 December
2021
Expected credit
loss rate
4.0% 8.0% 14.9% 23.3% 31.1% 53.9% - 85.6% - - - 100% 8.2%
Estimated total
gross carrying
amount at
default 4,477 522 208 95 53 37 - 9 - - - 136 5,537
Lifetime ECL 178 42 31 22 16 20 - 8 - - - 136 453
Annual Report & Financial Statements | Page 111
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE COMPANY
31 December 2021
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade debtors, contract assets and finance
lease receivables
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Internal rating grades
Not in default - simplified model applied 21,070,349 2,562,704 -
In default - - -
Gross carrying amount at 31 December
2021
21,070,349 2,562,704 -
Loss allowance at 31 December 2021 - (175,416) -
Net carrying amount at 31 December 2021 21,070,349 2,387,288 -
The following table illustrates the Company‘s gross carrying amounts for its trade debtors and contract
assets as at 31 December 2021, split by ageing buckets, as well as the lifetime ECL thereon.
THE COMPANY
Trade debtors and contract assets
Not
past
due
<30 31-60 61-90 91-120 121-150 151-180 181-210 211-
240
241-
270
271-
300
>300 Total
€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000
31 December
2021
Expected credit
loss rate
1.6% 3.1% 14.2% - - - - - - - - 100% 6.8%
Estimated total
gross carrying
amount at
default 2,118 194 134 - - - - - - - - 117 2,563
Lifetime ECL 33 6 19 - - - - - - - - 117 175
Annual Report & Financial Statements | Page 112
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
Write-offs during the reporting period amounted to €5,077 (2021: €1,272,653) and €704 (2021: €2,362)
for the Group and the Company, respectively. No reversals of write-offs happened during the year ended
31 December 2022 (2021: €nil).
THE GROUP
31 December 2022
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade debtors, contract assets and finance
lease receivables
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Opening balance at 1 January 2022 - 452,608 4,339
Movement during the year - 119,313 11,343
Closing balance 31 December 2022 - 571,921 15,682
THE GROUP
Lifetime ECL not-credit
impaired
Trade debtors
Contract
assets Total
€ € €
Balance as at 1 January 2021 43,000 - 43,000
Increase in loss allowance arising from new
financial assets recognised in 2021
313,532 139,076 452,608
Decrease in loss allowance from
derecognition of financial assets in 2021
(43,000) - (43,000)
Balance as at 31 December 2021 313,532 139,076 452,608
Increase in loss allowance arising from new
financial assets recognised in 2022
300,716 19,817 320,533
Increase in loss allowance on financial
assets in 2022
131,563 - 131,563
Decrease in loss allowance from
derecognition of financial assets in 2022
(193,707) (139,076) (332,783)
Balance as at 31 December 2022 552,104 19,817 571,921
Annual Report & Financial Statements | Page 113
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE COMPANY
31 December 2022
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade
receivables and contract assets
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Opening balance at 1 January 2022 - 175,416 -
Movement during the year - 132,714 -
Closing balance 31 December 2022 - 308,130 -
THE COMPANY
Lifetime ECL not-credit
impaired
Trade debtors
Contract
assets Total
€ € €
Balance as at 1 January 2021 43,000 - 43,000
Increase in loss allowance arising from new
financial assets recognised in 2021
158,240 17,176 175,416
Decrease in loss allowance from
derecognition of financial assets in 2021
(43,000) - (43,000)
Balance as at 31 December 2021 158,240 17,176 175,416
Increase in loss allowance arising from new
financial assets recognised in 2022
191,415 5,542 196,957
Increase in loss allowance on financial
assets in 2022
24,064 - 24,064
Decrease in loss allowance from
derecognition of financial assets in 2022
(71,131) (17,176) (88,307)
Balance as at 31 December 2022 302,588 5,542 308,130
Annual Report & Financial Statements | Page 114
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE GROUP
31 December 2021
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade debtors, contract assets and finance
lease receivables
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Opening balance at 1 January 2021 - 43,000 54,745
Movement during the year - 409,608 (50,406)
Closing balance 31 December 2021 - 452,608 4,339
THE COMPANY
31 December 2021
Lifetime ECL not-credit
impaired
Lifetime ECL
credit impaired
Trade receivables and contract assets
Individual
Impairments
Collective
Impairments
Individual
Impairments
€ € €
Opening balance at 1 January 2021 - 43,000 -
Movement during the year - 132,416 -
Closing balance 31 December 2021 - 175,416 -
Annual Report & Financial Statements | Page 115
6 Financial Risk Management (Continued)
6.4 Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations, which are
associated with its financial liabilities that are settled by delivering cash or another financial asset, as
they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group monitors its cash flow requirements on a regular basis and ensures that it has sufficient cash
on demand to meet expected operational expenses; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted.
The following are the contractual maturities of financial liabilities, including estimated interest payments.
Carrying
amount
Contractual
Cash flows
12 months
or less 1 - 2 years
2 - 5 years
More than
5 years
31 December 2022
€ € € € € €
The Group
Secured bank loans
1,132,602
1,167,492
536,123
535,560
95,809
-
Accrued expenses 2,831,024
2,831,024
2,831,024
-
-
-
Trade and other
payables 1,107,346
1,107,346
1,107,346
-
-
-
Post-employment
benefits 3,377,398
3,908,761
-
-
270,090
3,638,671
Lease liabilities 2,412,974
2,627,231
518,235
387,091 898,724
823,181
10,861,344
11,641,854 4,992,728
922,651
1,264,623
4,461,852
Carrying
amount
Contractual
Cash flows
12 months
or less 1 - 2 years
2 - 5 years
More than
5 years
31 December 2022
€ € € € € €
The Company
Secured bank loans 1,132,602
1,167,492
536,123
535,560
95,809
-
Accrued expenses
1,8
06
,
309
1,8
06
,
309
1,8
06
,
309
-
-
-
Trade and other
payables 2,495,123
2,495,123
2,495,123
-
-
-
Post-employment
benefits 3,006,384
3,472,502
-
-
270,090
3,202,412
Lease liabilities 434,943
545,587
28,409
31,249
93,748
392,181
8,
875
,
361
9,
487
,
013
4,
865
,
964
566,809
459,647
3,594,593
Annual Report & Financial Statements | Page 116
6 Financial Risk Management (Continued)
6.4 Liquidity Risk (Continued)
Carrying
amount
Contractual
Cash flows
12 months
or less 1 - 2 years
2 - 5 years
More than
5 years
31 December 2021
€ € € € € €
The Group
Secured bank loans 1,621,942
1,694,008
535,603
535,560
622,845
-
Accrued expenses 3,455,711
3,455,711
3,455,711
-
-
-
Trade and other
payables 1,895,735
1,895,735
1,895,735
-
-
-
Post-employment
benefits 3,909,546
3,916,201
-
-
270,090
3,646,111
Lease liabilities 2,181,930
2,399,474
458,239
423,606
939,448
578,181
13,064,863
13,361,129 6,345,288
959,166
1,832,383
4,224,292
Carrying
amount
Contractual
Cash flows
12 months
or less 1 - 2 years
2 - 5 years
More than
5 years
31 December 2021
€ € € € € €
The Company
Secured bank loans
1,621,942
1,694,008
535,603
535,560
622,845
-
Accrued expenses 1,508,055
1,508,055
1,508,055
-
-
-
Trade and other
payables 1,419,710
1,419,710
1,419,710
-
-
-
Post-employment
benefits 3,473,288
3,479,942
-
-
270,090
3,209,852
Lease liabilities
450,812
573,997
28,409
28,409
124,998
392,181
8,473,807
8,675,712 3,491,777
563,969
1,017,933
3,602,033
Further disclosures on liquidity risk are provided in Note 2.1.2.
Annual Report & Financial Statements | Page 117
6 Financial Risk Management (Continued)
6.5 Market Risk
Market risk is the risk that changes in market prices, namely foreign exchange rates, interest rates and
equity prices will affect the Group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
6.5.1 Currency Risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other
than the functional currency of the Company, the Euro. The currencies in which these transactions are
primarily denominated are USD, PHP, NZD and GBP.
The Group relies on natural hedges between inflows and outflows in currencies other than the Euro, and
does not otherwise hedge against exchange gains or losses which may arise on the realisation of
amounts receivable and settlement of amounts payable in foreign currencies.
The Group’s exposure to foreign currency risk as at 31 December was as follows, based on notional
amounts:
2022
NZD CHF
PHP USD JOD BRL GBP CAD ISK
The Group
Trade receivables
747,660
-
7,783,641
940,027
-
-
661,205
-
-
Accrued income
-
-
3,305,502
1,437,153
-
-
73,699
-
-
Cash at bank
72
216
3,267,031
2,038,758
-
87,220
1,133
432
14,207
Trade payables
-
-
(102,592)
(120,578)
(24,000)
(16,011)
-
-
-
Deferred income
(18,042)
-
-
(226,561)
-
-
(263,730)
-
-
Gross statement of
financial position
exposure
729,690
216
14,253,582
4,068,799
(24,000)
71,209
472,307
432
14,207
2022
NZD CHF
PHP
USD JOD
BRL
GBP CAD ISK
The Company
Trade receivables
-
-
- 11,593,736
-
-
661,205
-
-
Loans r
eceivable
from related parties -
-
- 65,000
-
-
-
-
-
Accrued income
-
-
- 346,357
-
-
73,699
-
-
Cash at bank
-
-
- 39
-
-
960
-
-
Trade payables
-
-
- (31,767)
(24,000)
-
-
-
-
Deferred income
-
-
- (171,843)
-
-
(263,730)
-
-
Gross statement of
financial position
exposure
-
-
- 11,801,522
(24,000)
-
472,134
-
-
Annual Report & Financial Statements | Page 118
6 Financial Risk Management (Continued)
6.5 Market Risk (Continued)
6.5.1 Currency Risk (Continued)
2021
NZD
CHF
PHP
USD
JOD
BRL
GBP
CAD
ISK
The
Group
Trade receivables 466,181 - 3,764,777 3,966,295 - - 584,221 - -
Accrued income 189,129 - 685,714 1,411,500 - - 258,872 - -
Cash at bank
51 216
2,506,749 5,391,072 -
228,32
0 128,366 432 14,207
Trade payables
- - (1,225,687) (136,044) 32 (16,165) (3,014) - -
Deferred income
(45,042) - - (176,131) - - (263,730) - -
Gross statement of
financial position
exposure
610,319 216 5,731,553 10,456,692 32 212,155 704,715 432 14,207
2021
NZD CHF
PHP
USD JOD
BRL
GBP CAD ISK
The Company
Trade receivables
-
-
- 9,509,403
-
-
584,221
- -
Loans receivable
from related parties
-
-
- 65,000
-
-
-
- -
Accrued income
-
-
- 4,949,911
-
-
258,872
- -
Cash at bank
-
-
- 18,260
-
-
125,033
- -
Trade payables
-
-
(176,636) (4,119)
32
-
(3,014)
- -
Deferred income
-
-
- (159,208)
-
-
(263,730)
- -
Gross statement of
financial position
exposure
-
-
(176,636) 14,379,247
32
-
701,382
- -
The following significant exchange rates applied during the year:
Average rate Reporting date spot rate
2022
2021 2022 2021
NZD
1 0.6030
0.5980
0.5953
0.6032
CHF
1 0.9953
0.9249
1.0155
0.9680
USD
1 0.9496
0.8455
0.9376
0.8829
JOD
1 1.3383
1.1923
1.3144
1.2399
BRL 1 0.1838
0.1568
0.1773
0.1585
PHP 1 0.0174
0.0172
0.0169
0.0173
GBP 1 1.1727
1.1633
1.1275
1.1901
CAD 1 0.7302
0.6745
0.6925
0.6948
ISK 1 0.0070
0.0067
0.0066
0.0068
Annual Report & Financial Statements | Page 119
6 Financial Risk Management (Continued)
6.5 Market Risk (Continued)
6.5.1 Currency Risk (Continued)
Sensitivity Analysis
A 10 percent strengthening of the Euro against the following currencies as at 31 December would have
(decreased)/increased equity and profit or loss by the amounts shown below. This analysis assumes
that all other variables, in particular interest rates, remain constant. The analysis is performed on the
same basis for 2021.
THE GROUP THE COMPANY
Equity Profit or loss Equity
Profit or
loss
€ € € €
31 December 2022
NZD (43,439)
(43,439)
-
-
CHF (22)
(22)
-
-
USD (381,474)
(381,474) (1,106,462
)
(1,106,462)
JOD 3,155
3,155
3,155
3,155
BRL (1,263)
(1,263)
-
-
PHP (24,028)
(24,028)
-
-
GBP (53,252)
(53,252) (53,23
2)
(53,232)
CAD (30)
(30)
-
-
ISK (9)
(9)
-
-
THE GROUP THE COMPANY
Equity Profit or loss Equity
Profit or
loss
€ € € €
31 December 2021
NZD (36,813)
(36,813)
-
-
CHF (21)
(21)
-
-
USD (923,247)
(923,247)
(1,269,579)
(1,269,579)
JOD (4)
(4)
(4)
(4)
BRL (3,362)
(3,362)
-
-
PHP (9,923)
(9,923)
306
306
GBP (83,867)
(83,867)
(83,470)
(83,470)
CAD (30)
(30)
-
-
ISK (10)
(10)
-
-
A 10 percent weakening of the Euro against the above currencies as at 31 December would have had
the equal but opposite effect on the above currencies to the amounts shown above, on the basis that
all other variables remain constant.
Annual Report & Financial Statements | Page 120
6 Financial Risk Management (Continued)
6.5 Market Risk (Continued)
6.5.2 Interest Rate Risk
The Group’s borrowings are subject to an interest rate that varies according to revisions made to the
Bank’s Lending Base Rate. In prior years, the Group had entered into an interest rate swap for the
purpose of hedging the risk of changes in cash flows related to interest payments on one of its facilities.
This interest rate swap matured in 2021.
Interest on certain loans receivable, bank borrowings and cash at bank are also tested for interest rate
risk.
6.5.2.1 Interest Rate Profile
At the reporting date the interest rate profile of the Group’s and the Company’s interest-bearing financial
instruments was:
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Fixed rate instruments
Financial assets
195,400
944,103 - 944,103
Variable rate instruments
Financial assets
3,491,226
8,214,173 2,234,404 3,308,534
Financial liabilities
(1,132,602)
(1,621,942) (1,132,602) (1,621,942)
2,358,624
6,592,231 1,101,802 1,686,592
6.5.2.2 Interest Rate Risk
The Group is exposed to interest rate risk on its financial instruments arising from movements in the
Bank’s 3-month Euribor rate.
The Group has evaluated the extent of the discontinuation of the IBOR rates on existing bank borrowings.
In view that there are no plans by the European Central Bank to discontinue or replace Euribor, the Group
does not expect any material impact brought about by the Interest rate benchmark reform on its financial
instruments and interest rate risk management strategy.
Annual Report & Financial Statements | Page 121
6 Financial Risk Management (Continued)
6.5 Market Risk (Continued)
6.5.2 Interest Rate Risk (Continued)
6.5.2.3 Cash Flow Sensitivity Analysis for Variable Rate Instruments
A change of 100 basis points in interest rates at the reporting date would increase/(decrease) equity and
profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
foreign currency rates, remain constant. The analysis is performed on the same basis for 2021.
THE GROUP
Profit or loss Equity
100 bp
increase
100 bp
decrease
100 bp
increase
100 bp
decrease
€
€ € €
31 December 2022
Variable rate instruments 23,586
(23,586) 23,586 (23,586)
31 December 2021
Variable rate instruments
65,922
(65,922) 65,922 (65,922)
THE COMPANY
Profit or loss Equity
100 bp
increase
100 bp
decrease
100 bp
increase
100 bp
decrease
€
€ € €
31 December 2022
Variable rate instruments 11,018
(11,018) 11,018 (11,018)
31 December 2021
Variable rate instruments
16,866
(16,866) 16,866 (16,866)
Annual Report & Financial Statements | Page 122
6 Financial Risk Management (Continued)
6.6 Capital Management
The Group’s policy is to maintain a strong capital base so as to maintain investors, creditors and market
confidence and to sustain future development of the business. The capital structure consists of debt
and items presented within equity in the statement of financial position. The Board of Directors monitors
the return on capital, which the Group defines as net operating income divided by total shareholders’
equity. The Board of Directors also monitors the level of dividends to ordinary and preference
shareholders. The Board of Directors manage the Company’s capital structure and make adjustments to
it, in light of changes in economic conditions.
The capital structure is reviewed on an ongoing basis. Based on recommendations of the Directors, the
Company balances its overall capital structure through the payment of dividends, new share issues, as
well as the issue of new debt or redemption of existing debt. There were no changes in the Group’s
approach to capital management during the year.
During the financial year ending 31 December 2021, RS2 Software p.l.c. successfully raised €15,731,800
by way of a Preference Share PO. The additional liquidity generated from the Preference Share PO has
enabled the Group to continue implementing its business strategy.
The Group is not subject to externally imposed capital requirements.
7 Operating Segments
The Group has three reportable segments, as described below, which represent the Group’s business
units. The business units offer different services and are managed separately because they require
different operating and marketing strategies. For each of the business units, the Group’s Board of
Directors reviews internal management reports on a bi-annual basis. The following summary describes
the operations in each of the Group’s reportable segments:
•
Software (License) solutions
- Licensing of the Group’s BankWORKS® software to banks and
service providers, including maintenance and enhanced services thereto.
•
Processing solutions
- Processing of payment transactions utilising the Group’s BankWORKS®
software.
•
Merchant solutions
- includes issuing and acquiring payment solutions directly to merchants,
including terminal and PSP gateway services.
Information regarding the results of each reportable segment is included below. The internal
management reports that are reviewed by the Group’s Board of Directors include the results of each
subsidiary, with additional disclosures showing disaggregated revenues attributable to each reportable
segment. Inter-segment pricing is determined on an arm’s length basis.
Annual Report & Financial Statements | Page 123
7 Operating Segments (Continued)
7.1 Information About Reportable Segments
Software
(Licensing)
solutions
Processing
solutions
Merchant
solutions
Total reportable
segments
€
€
€
€
Year ended 31 December
2022
External revenues 14,109,884
20,836,098
2,570,079
37,516,061
Inter-segment revenues
8,052,624
44,607
533,644
8,630,875
Segment revenues
22,162,508
20,880,705
3,103,723
46,146,936
Finance income 70,266
2,897
33,975
107,138
Finance expense (69,428)
(4,310)
(69,894)
(143,632)
Depreciation and
amortisation
(1,464,339)
(826,615)
(196,871)
(2,487,825)
Movement in provision for
impairment loss on
receivables
(132,714)
(2,315)
-
(135,029)
Movement in amounts
written off
(704)
-
-
(704)
Reportable segment
profit/(loss) before income
tax
2,373,324
3,828,102
(1,187,954)
5,013,472
Income tax expense (581,687)
(1,391,224)
(55,522)
(2,028,433)
Reportable segment assets
64,958,732
19,155,776
4,665,256
88,779,764
Capital expenditure 2,413,804
431,146
269,501
3,114,451
Reportable segment
liabilities
16,430,634
25,474,357
3,562,142
45,467,133
Annual Report & Financial Statements | Page 124
7 Operating Segments (Continued)
7.1 Information About Reportable Segments (Continued)
Software
(Licensing)
solutions
Processing
solutions
Merchant
solutions
Total
reportable
segments
€
€
€
€
Year ended 31 December
2021
External revenues 17,850,900
18,759,855
2,069,108
38,679,863
Inter-segment revenues
8,928,725
-
336,953
9,265,678
Segment revenues
26,779,625
18,759,855
2,406,061
47,945,541
Finance income 85,917
8
27,960
113,885
Finance expense (209,689)
(5,183)
(58,574)
(273,446)
Depreciation and
amortisation
(1,802,668)
(534,908)
(124,455)
(2,462,031)
Movement in provision for
impairment loss on
receivables
(132,416)
956,112
-
823,696
Movement in amounts
written off
(2,360)
(1,398,962)
(5,980)
(1,407,302)
Reportable segment
profit/(loss)before income
tax
6,324,505
2,865,598
(974,000)
8,216,103
Income tax expense (1,854,616)
(1,157,686)
(55,134)
(3,067,436)
Reportable segment
assets
63,522,518
23,906,099
6,439,326
93,867,943
Capital expenditure 2,968,282
1,217,147
184,121
4,369,550
Reportable segment
liabilities
17,500,939
26,212,878
2,776,235
46,490,052
Annual Report & Financial Statements | Page 125
7 Operating Segments (Continued)
7.2 Reconciliations of Reportable Segment Profit or Loss, Assets and Liabilities, And Other
Material Items
2022 2021
€ €
External revenues
Total revenue for reportable segments
46,146,936
47,945,541
Elimination of inter-segment transactions
(8,630,875)
(9,265,678)
Consolidated revenue
37,516,061
38,679,863
Finance income
Total finance income for reportable segments
107,138
113,885
Elimination of inter-segment transactions
(61,129)
(56,379)
Consolidated finance income
46,009
57,506
Finance
expense
Total finance expense for reportable segments
143,632
273,446
Elimination of inter-segment transactions (61,129)
(73,436)
Consolidated finance expense
82,503
200,010
Depreciation and amortisation
Total depreciation and amortisation for reportable segments
2,487,825
2,462,031
Elimination of inter-segment transactions (502,648)
(260,157)
Consolidated depreciation and amortisation
1,985,177
2,201,874
Profit before income tax
Total profit before income tax for reportable segments
5,013,472
8,216,103
Elimination of inter-segment transactions
(3,235,030)
(1,800,439)
Consolidated reportable segment profit before income
tax
1,778,442
6,415,664
Assets
Total assets for reportable segments
88,779,764
93,867,943
Elimination of computer software
(3,972,222)
(1,768,432)
Elimination of contract assets
(6,766,850)
(21,441,744)
Elimination of other inter-segment assets
(34,688,442)
(23,050,799)
Consolidated total assets
43,352,250
47,606,968
Liabilities
Total
liabilities for reportable segments 45,467,133
46,490,052
Elimination of inter
-segment balances (19,477,643)
(19,173,055)
Elimination of inter
-segment accruals (6,972,684)
(5,321,619)
Elimination of other inter
-segment liabilities
184,800
184,947
Consolidated total liabilities
19,201,606
22,180,325
Annual Report & Financial Statements | Page 126
7 Operating Segments (Continued)
7.2 Reconciliations of Reportable Segment Profit or Loss, Assets and Liabilities, And Other
Material Items (Continued)
Except for revenues, the line items in the above tables are allocated as follows – (a) Software (Licensing)
solutions comprises the results and financial position of RS2 Software plc, RS2 Germany GmbH, RS2
Software APAC Inc. and RS2 Software LAC LTDA, (b) Processing comprises the results and financial
position of RS2 Software INC. and RS2 Smart Processing Limited and (c) Merchant Solutions comprises
the results and financial position of RS2 Merchant Services Europe GmbH, RS2 Financial Services GmbH
and RS2 Zahlungssysteme GmbH. The revenue of RS2 Software INC. is allocated to the following two
segments – Software (Licensing) solutions and Processing.
Assets allocated to reportable segments exclude the BankWORKS® license held by RS2 Smart
Processing Limited and RS2 Software INC. and any contract assets recognised in relation to services
provided between the three segments. Likewise, the Group liabilities exclude accruals, inter-segment
balances and inter-segment liabilities.
7.3 Geographical Information
In presenting information for the Group on the basis of geographical segments, revenue is based on the
geographical location of its customers. The following non-current segment assets are based on the
geographical location of the assets and exclude financial instruments.
Revenues
Non-Current
assets
€
€
Year ended 31 December 2022
Malta 149,007
20,167,845
UK and Ireland 12,975,228
-
USA 14,640,689
4,816,615
Other countries 9,751,137
4,396,779
37,516,061
29,381,239
Year ended 31 December 2021
Malta 230,928
18,947,012
UK and Ireland 14,393,360
-
USA 16,122,061
4,141,760
Other countries 7,933,514
3,997,882
38,679,863
27,086,654
Other countries comprise revenue based on geographical location of customers, which individually are
immaterial and do not exceed 10% of total revenue.
Annual Report & Financial Statements | Page 127
7 Operating Segments (Continued)
7.4 Major Customers
For the year ended 31 December 2022, revenues from two (2021: three) major customers of the licensing
and processing segments amounted to €3,923,223, and €13,541,706 respectively (2021: €4,546,317,
€5,766,566 and €15,024,008 respectively) of the Group's total revenues.
Annual Report & Financial Statements | Page 128
8 Property, Plant and Equipment
8.1 The Group
Land and
buildings
Leasehold
Improvements
Equipment,
furniture and
fittings
Motor
Vehicles
Terminals
Total
Cost
€
€
€
€ €
€
Balance at 1 January 2021
7,977,167
1,403,128
4,794,272
227,286 32,032
14,433,885
Reclassifications
-
66,091
(66,091)
- (993)
(993)
Additions
-
-
1,038,293
19,631 5,583
1,063,507
Disposals
-
-
-
(5,000) -
(5,000)
Effects of movement in exchange
rates
-
554
70,209
535
-
71,298
Balance at 31 December 2021
7,977,167
1,469,773
5,836,683
242,452 36,622
15,562,697
Balance at 1 January 2022
7,977,167
1,469,773
5,836,683
242,452 36,622
15,562,697
Reclassifications
20,260
405
(707,662)
- (3,940)
(690,937)
Additions
13,416
1,487
162,528
27,093 19,579
224,103
Disposals
(9,421)
-
(61,026)
- -
(70,447)
Effects of movement in exchange
rates
-
(630)
52,042
(1,124) -
50,288
Balance at 31 December 2022
8,001,422
1,471,035
5,282,565
268,421 52,261
15,075,704
Depreciation
Balance at 1 January 2021
1,346,515
361,623
3,726,061
194,474 2,873
5,631,546
Depreciation for the year
101,703
59,938
456,630
26,097 22,003
666,371
Disposals
-
-
-
(2,145) -
(2,145)
Effects of movement in exchange
rates
-
556
43,818
491 -
44,865
Balance at 31 December 2021
1,448,218
422,117
4,226,509
218,917
24,876
6,340,637
Balance at 1 January 2022
1,448,218
422,117
4,226,509
218,917 24,876
6,340,637
Depreciation for the year
96,255
60,186
388,094
13,506 6,976
565,017
Released on disposals
(1,774)
-
(36,038)
- -
(37,812)
Reclassifications
(8,249)
8,249
(45,800)
- -
(45,800)
Effects of movement in exchange
rates
-
(629)
31,355
(926) -
29,800
Balance at 31 December 2022
1,
534,450
489,923
4,
5
6
4
,1
20
23
1,497
31,852
6,
851
,8
42
Carrying amounts
At 1 January 2021
6,630,652
1,041,505
1,068,211
32,812 29,159
8,802,339
At 31 December 2021
6,528,949
1,047,656
1,610,174
23,535 11,746
9,222,060
At 31 December 2022
6,
466,972
981,112
718,445
36,924 20,409
8,223,862
Annual Report & Financial Statements | Page 129
8 Property, Plant and Equipment (Continued)
8.2 The Company
Land and
buildings
Leasehold
Improvements
Equipment,
furniture and
fittings
Motor Vehicles
Total
€
€
€
€
€
Cost
Balance at 1 January 2021
7,9
7
7,168
1,330,722
2,634,727
175,034
12,117,651
Additions - - 136,600 - 136,600
Reclassifications - 7,989 (7,989) - -
Balance at 31 December 2021 7,977,168 1,338,711 2,763,338 175,034 12,254,251
Balance at 1 January 2022
7,977,168
1,338,711
2,763,338
175,034
12,254,251
Additions 13,416 1,487 64,330 - 79,233
Disposals (9,421) - - - (9,421)
Reclassifications
20,2
59
40
6
(20,665)
-
-
Balance at 31 December 2022
8,001,42
2
1,340,60
4
2,807,003
175,034
12,324,06
3
Depreciation
Balance at 1 January 2021 1,338,263 332,142 2,373,520 161,431 4,205,356
Depreciation for the year 97,404 - 204,160 13,603 315,167
Reclassifications
4,303
52,797
(57,100)
-
-
Balance at 31 December 2021
1,439,970
384,939
2,520,580
175,034
4,520,523
Balance at 1 January 2022 1,439,970 384,939 2,520,580 175,034 4,520,523
Depreciation for the year
96,2
55
53,
0
45
109,626
-
258,9
26
Released on disposals (1,774) - - - (1,774)
Balance at 31 December 2022 1,534,451 437,984 2,630,206 175,034 4,777,675
Carrying amounts
At 1 January 2021 6,638,905 998,580 261,207 13,603 7,912,295
At 31 December 2021 6,537,198 953,772 242,758 - 7,733,728
At 31 December 2022
6,466,
97
1
902,6
20
176,797
-
7,546,388
Annual Report & Financial Statements | Page 130
9 Leases
9.1 The Group as a Lessee
This note provides information about lease agreements for which the Group was a lessee during 2022.
These include:
9.1.1 Leased Premises Gozo
An agreement was entered into for an emphyteutical grant for leased land at Imġarr Road, Xewkija, Gozo
under a deed with the Government of Malta. The lease is for a twenty five-year term, lasting until April
2039. Upon expiration of the emphyteutical grant, the emphyteutical site and any improvements thereon
shall devolve to the Government without any obligation on the latter to compensate the Company.
9.1.2 Leased Offices USA
An agreement for leased offices in Denver, USA. The initial term of the lease was for a five-year term,
commencing in 2016 up until March 2021. The initial lease agreement included an option for the lessee
to renew for a further four-year term or to terminate subject to a notice in writing provided that the
conditions of the contract agreement are satisfied. The option to extend the term was taken up and a
lease contract renewal agreement was entered into as of April 2021 valid until June 2024.
9.1.3 Leased Offices Philippines
An agreement for leased offices in Manila, Philippines. The lease was for a three-year period
commencing during June 2016, and was subsequently renewed in June 2019 for another five-year term,
up until June 2024. The renewal of this lease was treated as a new lease in accordance with IFRS 16.
The agreement includes an option to renew the lease term provided that both parties mutually agree on
the new contract provisions. The lease may be terminated prior to the lease termination date; however,
in so doing the lessee will be liable to penalties.
9.1.4 Leased Offices Germany
An agreement for leased offices in Neu-Isenburg, Germany. This agreement was entered into with a
related party on 1 January 2019. The lease is for a ten-year term, lasting until December 2028, with an
extension clause that stipulates that if the tenancy is not terminated by either party at least six months
before the end date, this is renewed again for another five-year term. Accordingly, the enforceable
period of this lease (and the lease term) is 10 years.
Annual Report & Financial Statements | Page 131
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.4 Leased Offices Germany (Continued)
An agreement for leased offices in Reinsdorf, Germany. At acquisition date of RS2 Zahlungssysteme
GmbH, 1 January 2020, the remaining period of the lease was for 6 months up until June 2020, with an
extension clause that stipulates that if the tenancy is not terminated by either party at least three months
before the end date, this is renewed for a further one-year term. The lease was renewed for a further
one-year term in July 2021 and later terminated on 30 March 2022.
An agreement for leased offices in Reinsdort, Germany. This agreement was entered on 1 December
2022. The lease is for a five-year term, lasting until November 2027. Accordingly, the enforceable period
of this lease (and the lease term) is five years.
An agreement for leased offices in Neu-Isenburg, Germany. This agreement was entered into with a
related party on 1 February 2022. The lease is for a five-year term, lasting until December 2026, with an
extension clause which the lessor has granted the unilateral right to renew unless terminated by the
lessee at least six months before the end date, this is renewed again for another five-year term.
Accordingly, the enforceable period of this lease (and the lease term) is 10 years.
9.1.5 Leased Cars in Germany
Various agreements for leased cars in Germany. The leases are for a three-year term, ending between
August 2022 and November 2025. The enforceable period of such leases (and the lease term) is 3 years.
These agreements were entered into at different points in time between August 2019 and December
2022. The lease rate is based on driven kilometres (20k-30k) per annum.
Annual Report & Financial Statements | Page 132
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.6 Group and Company Leases
The following table presents the carrying amounts of the Group’s and the Company’s ROU assets
recognised and the movements during the period:
T
HE GROUP
Land and
buildings
Cars
Total
€
€
€
As at 1 January 2021 2,161,779 83,403
2,245,182
Additions to right-of-use assets 221,821 87,294
309,115
Depreciation charge for the year (371,179)
(61,729)
(432,908)
Effects of movement in exchange rates 1,125 -
1,125
As at 31 December 2021 2,013,546 108,968
2,122,514
As at 1 January 2022 2,013,546
108,968
2,122,514
Additions to right-of-use assets 641,311
59,842
701,153
Depreciation charge for the year (416,879)
(73,103)
(489,982)
Disposal -
(4,621)
(4,621)
Effects of movement in exchange rates 16,187
-
16,187
As at 31 December 2022 2,254,165
91,086
2,345,251
THE COMPANY
Land and
buildings
Total
€
€
As at 1 January 2021 460,542
460,542
Depreciation charge for the year (30,660) (30,660)
As at 31 December 2021 429,882
429,882
Balance at 1 January 2022 429,882
429,882
Depreciation charge for the year (24,802) (24,802)
Balance at 31 December 2022 405,080
405,080
Annual Report & Financial Statements | Page 133
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.6 Group and Company Leases (Continued)
The following table presents the carrying amounts of the Group's and the Company's lease liabilities
and the movements during the period:
THE GROUP
Land and
buildings
Cars
Total
€
€
€
As at 1 January 2021 2,193,822 84,024
2,277,846
Additions 221,831
68,794
290,625
Accretion of interest 54,963
2,509
57,472
Payments (387,945)
(61,530)
(449,475)
Effects of movement in exchange rates 5,462 -
5,462
As at 31 December 2021 2,088,133 93,797
2,181,930
As at 1 January 2022 2,088,133
93,797
2,181,930
Additions 641,311
54,831
696,142
Disposal -
(4,734)
(4,734)
Accretion of interest 54,700
1,608
56,308
Payments (458,608)
(67,896)
(526,504)
Effects of movement in exchange rates 9,832
-
9,832
As at 31 December 2022 2,335,368
77,606
2,412,974
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Current
472,293 410,767 16,329 15,868
Non-current
1,940,681 1,771,163 418,614 434,944
THE COMPANY
Land and
buildings
Total
€
€
As at 1 January 2021 466,237
466,237
Accretion of interest 12,988 12,988
Payments (28,413)
(28,413)
As at 31 December 2021 450,812
450,812
Balance at 1 January 2022 450,812
450,812
Accretion of interest 12,540 12,540
Payments (28,409)
(28,409)
Balance at 31 December 2022 434,943
434,943
Annual Report & Financial Statements | Page 134
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.6 Group and Company Leases (Continued)
The maturity analysis of lease liabilities is disclosed in Note 6.4.
The following are the amounts recognised in profit or loss for financial years ended 31 December:
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Depreciation expense
489,982
432,908 24,802
30,660
Interest expense on lease liabilities
56,308
57,472 12,540
12,988
Expenses relating to short-term
leases
126,836
56,866 1,300
-
Total amount recognised in profit or
loss
673,126
547,246 38,642
43,648
The total cash outflow for leases amounted to €526,504 and €28,409 (2021: €449,475 and €28,413)
for the Group and the Company, respectively.
9.2 The Group as a Lessor
9.2.1 Operating Lease Arrangements
No variable lease payments exist as at 31 December 2022 and 2021 with respect to the leases held by
the Group and Company.
Operating leases, in which the Group is the lessor, relate to:
a) rental of a small number of POS terminals owned by the Group which are not of a specialised
nature with lease terms of less than three (3) years. During this lease term, the customers cannot
terminate the contract without paying a penalty for early termination; and
b) rental of POS terminals to taxi drivers in Berlin. The lease agreement with taxi drivers does not
have any specific lease term. The terminals are not of a specialised nature and taxi drivers may
choose to obtain POS terminals from other suppliers. In addition, the lessee may choose to
cancel the contract, providing three months’ notice without incurring penalties. The option to
extend or renew the contract is considered to be highly unlikely due to other available options
for taxi drivers. The lessee does not have an option to purchase the terminals at the expiry of
the lease period.
No residual value guarantees apply with respect to the leases held by the Group and the Company as at
31 December 2022 and 2021.
Annual Report & Financial Statements | Page 135
9 Leases (Continued)
9.2 The Group as a Lessor (Continued)
9.2.1 Operating Lease Arrangements (Continued)
Maturity analysis of operating lease receipts:
THE GROUP
2022
2021
€
€
Within 1 year 5,803
3,717
Between 1 and 2 years 1,452
1,109
Total 7,255
4,826
The following table presents the amounts reported in profit or loss:
THE GROUP
2022
2021
€
€
Lease income on operating leases 42,897
53,317
Depreciation for the year (6,976)
(22,003)
Total 35,921
31,314
9.2.2 Finance Lease Receivables
THE GROUP
2022
2021
€
€
Balance on 1 January 154,142
130,514
Additions during the year 159,789
68,764
Release of receivables during the year (105,454)
(73,017)
Unwinding of interest 33,975
27,881
Balance at 31 December 242,452
154,142
Annual Report & Financial Statements | Page 136
9 Leases (Continued)
9.2 The Group as a Lessor (Continued)
9.2.2 Finance Lease Receivables (Continued)
THE GROUP
2022
2021
€
€
Amounts receivable under finance leases:
Within 1 year 120,469
82,735
Between 1 and 2 years 94,365
65,907
Between 2 and 3 years 65,140
50,626
Between 3 and 4 years 26,716
45,312
More than 4 years 401
-
Undiscounted lease payments 307,091
244,580
Less unearned finance income (64,639)
(90,438)
Present value of lease payments receivable 242,452
154,142
Impairment loss allowance -
-
Net investment in the lease 242,452
154,142
Undiscounted lease payments analysed as:
Recoverable within 12 months 120,469
82,735
Recoverable after 12 months 186,622
161,845
307,091
244,580
Net investment in the lease analysed as:
Recoverable within 12 months 83,619
56,440
Recoverable after 12 months 158,833
97,702
242,452
154,142
During the years ended 31 December 2022 and 2021, the Group entered into finance leasing
arrangements with customers as a lessor, through the rental of POS terminals owned by the Group. The
duration of the rental contracts differs from one customer to another, however the average term of the
finance lease entered into is four (4) years. During this rental period, the customer cannot terminate the
contract without incurring a penalty for early termination. Ownership of the terminal is not transferred to
the customer at the end of the contract term.
Annual Report & Financial Statements | Page 137
9 Leases (Continued)
9.2 The Group as a Lessor (Continued)
9.2.2 Finance Lease Receivables (Continued)
The Group determined that for those contracts having a remaining life of three (3) years or more, and
therefore equal or longer than 75% of the economic life of the terminals, the lessor has a finance lease,
even though the title is not transferred.
The Group is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are
denominated in Euro.
Residual value risk on terminals under lease is not significant, because of the existence of a secondary
market with respect to the asset.
The following table presents the amounts included in profit or loss:
THE GROUP
2022
2021
€
€
Finance income on the net investment in
finance leases 33,975
27,881
The Group’s finance lease arrangements do not include variable payments.
The average effective interest rate contracted approximates 20 per cent (2021: 24%) per annum.
None of the finance lease receivables at the end of the reporting period are past due, and taking into
account the historical default experience and the future prospects of the industries in which the lessees
operate, the Management of the Group consider that no finance lease receivable is impaired.
9.3 The Company as a Lessor
For the years ended 31 December 2022 and 2021, the Company did not enter into any lease agreements
for which the Company was a lessor.
Annual Report & Financial Statements | Page 138
10 Intangible Assets and Goodwill
10.1 The Group
Goodwill
Internally
generated
computer
software
Software
rights
Other
computer
software
Customer and
other related
contractual
relationship Total
€ € € € € €
Cost
Balance at 1 January 2021
1,869,720 21,156,390 3,000,000 816,893 594,309 27,437,312
Additions
- 3,262,293 11,900 72,000 - 3,346,193
Effects of movement in
exchange rates
50,646 581,328 - 55,996 - 687,970
Balance at 31 December
2021
1,920,366 25,000,011 3,011,900 944,889 594,309 31,471,475
Balance at 1 January 2022
1,920,366 25,000,011 3,011,900 944,889 594,309 31,471,475
Additions
- 2,740,348 150,000 - - 2,890,348
Reclassifications
- - 727,088 (40,091) - 686,997
Effects of movement in
exchange rates
40,694 360,388 67,597 - - 468,679
Balance at 31 December
2022
1,961,060 28,100,747 3,956,585 904,798 594,309 35,517,499
Amortisation
Balance at 1 January 2021
- 12,733,598 1,825,000 1,621 49,526 14,609,745
Charge for the year
- 840,661 200,000 12,405 49,529 1,102,595
Impairment during the year
- - 17,055 - - 17,055
Balance at 31 December
2021
- 13,574,259 2,042,055 14,026 99,055 15,729,395
Balance at 1 January 2022
- 13,574,259 2,042,055 14,026 99,055 15,729,395
Charge for the year
- 635,462 199,928 45,264 49,524 930,178
Reclassifications
- - - 45,800 - 45,800
Balance at 31 December
2022
- 14,209,721 2,241,983 105,090 148,579 16,705,373
Carrying amounts
At 1 January 2021
1,869,720 8,422,792 1,175,000 815,272 544,783 12,827,567
At 31 December 2021
1,920,366 11,425,752 969,845 930,863 495,254 15,742,080
At 31 December 2022
1,961,060 13,891,026 1,714,602 799,708 445,730 18,812,126
Annual Report & Financial Statements | Page 139
10 Intangible Assets and Goodwill (Continued)
10.2 The Company
Internally
generated
computer
software
Software
rights
Total
€
€
€
Cost
Balance at 1 January 2021 18,920,578 3,000,000 21,920,578
Additions 2,783,666 - 2,783,666
Balance at 31 December 2021 21,704,244 3,000,000 24,704,244
Balance at 1 January 2022 21,704,244 3,000,000 24,704,244
Additions 3,504,078 - 3,504,078
Balance at 31 December 2022 25,208,322 3,000,000 28,208,322
Amortisation
Balance at 1 January 2021 12,723,081 1,825,000 14,548,081
Amortisation for the year 843,599 200,000 1,043,599
Impairment during the year - 17,055 17,055
Balance at 31 December 2021 13,566,680 2,042,055 15,608,735
Balance at 1 January 2022 13,566,680 2,042,055 15,608,735
Amortisation for the year 718,016 191,588 909,604
Balance at 31 December 2022 14,284,696 2,233,643 16,518,339
Carrying amounts
At 1 January 2021 6,197,497 1,175,000 7,372,497
At 31 December 2021 8,137,564 957,945 9,095,509
At 31 December 2022 10,923,626 766,357 11,689,983
10.3 Amortisation
The amortisation of internally generated computer software, customer and other related contractual
relationship and software rights is included in cost of sales, whereas amortisation of other computer
software is included in administrative expenses.
Annual Report & Financial Statements | Page 140
10 Intangible Assets and Goodwill (Continued)
10.4 Internally Generated Computer Software
The internally generated computer software, which is continually under development, is recognised
annually and the relative amortisation is charged annually in line with the accounting policy in Note 4.6.7.
RS2 Software INC. has not begun amortising their internally generated computer software as yet since
its ISO business has not gone live yet. The remaining amortisation period ranges depending on when
the assets are available for use, and does not exceed 15 years being the total amortisation period.
10.5 Software Rights
Software rights comprise of BankWORKS® reacquired software rights. The BankWORKS® software rights
were re-acquired by the Company through two separate transactions in 2009 and 2011 and the carrying
amount as at 31 December 2022 amounted to €1,714,602 (2021: €969,845).
In 2011 the Company re-acquired BankWORKS® software rights from a customer situated in the
Scandinavian region. The relative amortisation is charged annually in line with the accounting policy in
Note 4.6.7. The remaining amortisation period for the software rights amounts to 4 years (2021: 5 years).
In 2009, upon the business combination of RS2 Software INC., the Group reacquired the BankWORKS®
software rights previously granted. During 2022 the Group reclassified such rights to software rights
from other computer software. No relative amortisation has currently been charged in line with the
accounting policy in Note 4.6.7.
10.6 Other Computer Software
At 31 December 2022, other computer software with a carrying amount of €799,708 (2021: €930,863)
comprise of bank identification number sponsorship costs relating to RS2 Financial Services GmbH and
licenses acquired.
During 2022, the Group modified the classification of a reacquired right from other computer software
to software rights (see Note 10.5). Furthermore, the Group modified the classification of the classification
processing licenses acquired in 2021 from Property Plant and Equipment to Other Computer Software.
The relative amortisation is charged annually in line with the accounting policy in Note 4.6.7. The
remaining amortisation period ranges depending on when the assets are available for use, and does not
exceed 15 years being the total amortisation period.
10.7 Customer and Other Related Contractual Relationship
Upon acquisition of Kalicom Zahlungssysteme GmbH on 1 January 2020, the Group also acquired an
existing customer base and other contractual relationship. The relative amortisation is charged annually
in line with the accounting policy in Note 4.6.7. The remaining amortisation period for the customer and
other related contractual relationship amounts to 9 years (2021: 10 years).
Annual Report & Financial Statements | Page 141
10 Intangible Assets and Goodwill (Continued)
10.8 Impairment Testing for Cash-Generating Unit Containing Goodwill
(RS2 Software INC.)
Goodwill primarily arose from the acquisition of 26% of the issued share capital of RS2 Software LLC
(formerly Transworks LLC) in 2009. During 2014, the Company acquired a further 38.2% shareholding in
RS2 Software LLC for $500,000. In 2018, RS2 Software LLC was merged into a newly formed company,
RS2 Software INC., in which the Company held the same percentage holding that it held in RS2 Software
LLC. For the purposes of impairment testing of goodwill arising on the acquisition of RS2 Software LLC
(now merged into RS2 Software INC.), the recoverable amount of the related CGU containing goodwill
was based on its value-in-use and was determined by discounting the projected future cash flows to be
generated from RS2 Software INC. As at the end of 31 December 2022, the total shareholding stood at
72.57% (2021: 56.47%). Management prepared forecasts of net cash flows for the five-year period 2023
- 2027 (2021: 2022 - 2026) and applied growth rates for subsequent years.
10.8.1 Past Performance and Outlook
North America presents the largest market in the growing global payment industry. Electronic payment
growth continues to benefit from secular trends. Mega-mergers in the card processing market have
created a void of providers to serve ISOs, ISVs and PayFacs. Legacy players have blurred the value chain
and operate patchworks of legacy platforms cobbled together through acquisitions and technology-
oriented new entrants still focus on niche markets but creating massive shareholder value. RS2 Software
INC. has adapted and certified RS2 Software p.l.c.’s proven BankWORKS® payment processing platform
for the North American Market, activated its first BIN sponsorship and hired a core team.
RS2 Software INC. offers a global, complete and modern cloud-based processing platform
(issue/settle/acquire) for any form of payment (including crypto-currency), with rich functionality and
API enablement. RS2 Software INC. is positioned as a leading service provider in the United States that
enables innovators to create their own payment ecosystem. Focus is on filling the void created by mega-
mergers: target customers are technical ISOs, ISVs, PayFacs and technology companies with merchant
base. The core global platform is enabled for online and offline processing and the company has an
ambitious product roadmap for the years to come.
10.8.2 Assumptions
There are a number of assumptions and estimates involved in calculating the present value of future
cash flows from the Group’s businesses, including Management’s expectations of:
• growth in forecast net cash flows, calculated as adjusted operating profit or loss before
depreciation and amortisation;
• timing and quantum of future capital expenditure;
• uncertainty of future technological developments;
• long-term growth rates; and
• discount rates to reflect the risks involved.
Annual Report & Financial Statements | Page 142
10 Intangible Assets and Goodwill (Continued)
10.8 Impairment Testing for Cash-Generating Unit Containing Goodwill
(RS2 Software INC.) (Continued)
10.8.2 Assumptions (Continued)
In order to estimate the Enterprise Value of the subsidiary, which was used by Management for the
purposes of impairment testing of goodwill arising on the acquisition of RS2 Software LLC (now merged
into RS2 Software INC.) as well as impairment testing of the Company’s investment in the US subsidiary,
an income approach valuation methodology has been considered.
The key assumptions used in the calculation of the value-in-use of RS2 Software INC. are the forecasted
net cash flows and the discount rate, used in a risk-adjusted cash flow forecast.
The cash flow projections used to calculate value-in-use consider the forecast net cash flows for five
years and a terminal growth rate of 2.48% (2021: 1.86%). These projections comprise cash flow
movements based on:
• revenue expected to be generated over the following five years, with growth being projected on
the forecasted sales volumes and charges. Such revenue forecasts comprise the revenue
potential of current leads and ongoing negotiations with prospective clients, as well as revenue
expected from new targets.
• expenses expected to be incurred to generate forecasted revenues. Such expenses mainly
encompass wages and salaries for staff engaged in management, operations, sales and
administration; operating costs including hosting and software related; consultancy fees,
travelling and other ancillary expenses.
For 2022 and 2021, the projection risk of 6.0% as well as a small company risk premium of 3.5% were
reflected in the forecasted net cash (outflows)/inflows.
Discount rate*:
2022
2021
Post
-tax
17.8%
15.2%
Pre
-tax
21.6%
18.4%
* The discount rate is a measure based on the US risk-free rate, industry specific risk rate and the
estimated projection risk rate of the business initiative. The discount rate reflects the current market
assessments of the time value of money and Management's assessment of the risks specific to the
projected cash flows.
Annual Report & Financial Statements | Page 143
10 Intangible Assets and Goodwill (Continued)
10.8 Impairment Testing for Cash-Generating Unit Containing Goodwill
(RS2 Software INC.) (Continued)
10.8.3 Terminal Growth Rate
Cash flows beyond 2027 have been extrapolated using a terminal growth rate of 2.48% (2021: 1.86%).
The terminal growth rate was determined based on Management's estimate of the long-term
compounded annual cash flow growth rate, consistent with the assumption that a market participant
would make.
10.8.4 Assessment
At Company level, the recoverable amount of RS2 Software INC. was determined to be higher than its
carrying amount. The carrying amount comprises the cost of the investment in shares and advances to
RS2 Software INC. at 31 December 2022 which stood at €11.7m (2021: €10.9m).
At Group level, the carrying amount of the CGU, which includes internally generated as well as other
computer software in relation to RS2 Software INC., amounts to €5.9m (2021: €7.7m), of which goodwill
amounts to €0.7m (2021: €0.7m).
In line with the outcome of such assessments, Management is of the opinion that the investment in RS2
Software INC., both from a Company and a Group perspective, is not impaired.
10.9 Impairment Testing for Cash-Generating Unit Containing Goodwill
(RS2 Zahlungssysteme GmbH)
During the period ending on 31 December 2020, goodwill arose from the acquisition of 100% of the
issued share capital of Kalicom Zahlungssysteme GmbH (renamed to RS2 Zahlungssysteme GmbH) by
RS2 Group (RS2 Holding Europe GmbH). For the purposes of impairment testing of goodwill arising on
this acquisition, the recoverable amount of the related CGU containing goodwill was based on its value-
in-use and was determined by discounting the projected future cash flows to be generated from RS2
Zahlungssysteme GmbH. For this purpose, Management prepared forecasts of net cash flows for the
five-year period 2023 - 2027 (2021: 2022 - 2026) and applied growth rates for subsequent years.
10.9.1 Background and Outlook
RS2 Zahlungssysteme GmbH is an ISO and payment provider business for SMEs and selected key
account merchants across Germany. The services provided by RS2 Zahlungssysteme GmbH include
network service provider, giro card (an interbank network and debit card service virtually connecting all
German ATMs and banks) and credit card acceptance, terminals, terminal management, technical
maintenance and a wide range of value added services. The acquisition is a starting point for RS2`s
direct merchant business with more than 4,000 terminals and over 1,800 merchants under management.
Annual Report & Financial Statements | Page 144
10 Intangible Assets and Goodwill (Continued)
10.9 Impairment Testing for Cash-Generating Unit Containing Goodwill
(RS2 Zahlungssysteme GmbH) (Continued)
10.9.2 Assumptions
There are a number of assumptions and estimates involved in calculating the present value of future
cash flows from the Group’s businesses, including Management’s expectations of:
• growth in forecast net cash flows, calculated as adjusted operating profit or loss before
depreciation and amortisation;
• timing and quantum of future capital expenditure;
• uncertainty of future technological developments;
• long-term growth rates; and
• discount rates to reflect the risks involved.
The key assumptions used in the calculation of the value-in-use of RS2 Zahlungssysteme GmbH, are the
forecasted net cash flows and the discount rate, used in a risk-adjusted cash flow forecast.
The cash flow projections used to calculate value-in-use consider the forecast net cash flows for five
years and a terminal growth rate of 1.34% (2021: 1.06%). These projections comprise cash flow
movements based on:
• revenue expected to be generated over the following five years, with growth being projected on
the forecasted sales volumes and charges. Such revenue forecasts comprise the revenue
potential of current leads and ongoing negotiations with prospective clients, as well as revenue
expected from new targets.
• expenses expected to be incurred to generate forecasted revenues. Such expenses mainly
encompass wages and salaries for staff engaged in operations; operating costs; and other
ancillary expenses.
For both 2022 and 2021, the projection risk of 4% as well as a small company risk premium of 2% were
reflected in the forecasted net cash (outflows)/inflows.
Discount rate*:
2022 2021
Post
-tax
12.6%
10.5%
Pre
-tax
16.3%
13.7%
* The discount rate is a measure based on the German risk-free rate, industry specific risk rate, the
estimated projection risk rate of the business initiative as well as a small company risk premium. The
discount rate reflects the current market assessments of the time value of money and Management's
assessment of the risks specific to the projected cash flows.
Annual Report & Financial Statements | Page 145
10 Intangible Assets and Goodwill (Continued)
10.9 Impairment Testing for Cash-Generating Unit Containing Goodwill (RS2 Zahlungssysteme
GmbH) (Continued)
10.9.3 Terminal Growth Rate
Cash flows beyond 2027 have been extrapolated using a terminal growth rate of 1.34% (2021: 1.06%).
The terminal growth rate was determined based on Management's estimate of the long-term
compounded annual cash flow growth rate, consistent with the assumption that a market participant
would make.
10.9.4 Assessment
At Group level, the carrying amount of the CGU, which includes customer and other related
contractual relationship in relation to RS2 Zahlungssysteme GmbH, amounts to €1.7m (2021:
€2.0m), of which goodwill amounts to €1.3m (2021: €1.3m). In line with the outcome of such an
assessment, Management is of the opinion that this CGU is not impaired.
11 Investments in Subsidiaries
11.1 Movement Schedule of Investments in Subsidiaries
THE COMPANY
2022 2021
€ €
Balance at 1 January 17,942,984 16,306,108
Contribution to subsidiaries 1,771,191 1,636,876
Balance at 31 December
19,714,175 17,942,984
11.2 Contributions to Subsidiaries
Contributions to subsidiaries are unsecured, interest free and represent capital contributions.
Annual Report & Financial Statements | Page 146
11 Investments in Subsidiaries (Continued)
11.3 Further Details About RS2 Software P.L.C.’s Investment in Subsidiaries
Registered office
Ownership interest
fully paid-up Nature of business
2022 2021
% %
RS2 Smart
Processing Limited
RS2 Buildings,
Fort Road,
Mosta MST1859,
Malta
99.92
99.92
Transaction
processing services
with the use of
BankWORKS®
RS2 Software INC.
Twelfth floor,
Suite No. 1285,
South Ulster, Denver,
Colorado
USA
72.57
56.47
Transaction
processing services
with the use of
BankWORKS®
RS2 Software LAC
LTDA
Rua Manoel de Nóbrega
Município de São Paulo
Estado de São Paulo
Brazil
99.00
99.00
Provision of support
and other related
services to the
Company and
its clients
RS2 Software APAC
Inc.
Unit 1501 AccraLaw Tower
2nd Avenue Corner 30th
Street
Bonifacio Global City
Barangay Fort Bonifacio
Taguig City 1634, Metro
Manila
Philippines
99.99
99.99
Provision of
support and
other related
services to the
Company and
its clients
RS2 Germany GmbH
Martin-Behaim-Straße 15A
63263 Neu-Isenburg
Germany
100.00
100.00
Provision of support
and other related
services to the
Company
RS2 Merchant
Services
Europe GmbH
Martin-Behaim-Straße 15A
63263 Neu-Isenburg
Germany
100.00
100.00
Holding company
Annual Report & Financial Statements | Page 147
11 Investments in Subsidiaries (Continued)
11.3 Further Details About RS2 Software P.L.C.’s Investment in Subsidiaries (Continued)
In addition, RS2 Merchant Services Europe GmbH owns the following subsidiaries:
Registered office
Ownership interest
fully paid-up Nature of business
2022 2021
% %
RS2 Financial
Services GmbH
Martin-Behaim-Straße 15A
63263 Neu-Isenburg
Germany
100.00
100.00
Merchant Solutions
RS2
Zahlungssysteme
GmbH
Martin-Behaim-Straße 15A
63263 Neu-Isenburg
Germany
100.00
100.00
Merchant Solutions
11.4 Investment in RS2 Software INC.
LLC. On 16 February 2018, a new company, RS2 Software INC. was incorporated and the Company held
64.2% shareholding in it. The newly formed corporation merged with RS2 Software LLC on 28 March
2018, with the former company being the remaining company. As further disclosed in Note 14.1, during
the year ended 31 December 2022, the Company’s investment in RS2 Software INC. increased to 72.57%
following the repayment of an outstanding loan with its parent company.
As further detailed in Note 29.3, in February 2018, the Group recruited a new CEO for its North American
business. This executive was granted 12,500 new shares in RS2 Software INC., with certain vesting
conditions and restrictions. Furthermore, in March 2019, the Group granted 5,626 share options to its
management, with certain vesting conditions and restrictions. These arrangements are accounted for as
cash-settled and accordingly a corresponding liability is recognised in the Group financial statements.
During the period in which such individuals will hold the shares, the Group’s effective voting rights will
be reduced accordingly. The carrying amount is tested for impairment as disclosed in Note 10.8.4.
As at 31 December 2022 issued ordinary share capital in RS2 Software INC. amounted to €1,398,576
(2021: €1,398,576). Loss for the year amounts to €137,477 (2021: profit of €773,577) and the
accumulated losses total €4,554,090 (2021: €4,265,379). The translation reserve of RS2 Software INC.
comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations. This reserve is non-distributable and amounts to a negative €439,968 (2021:
€234,020).
Annual Report & Financial Statements | Page 148
11 Investments in Subsidiaries (Continued)
11.5 Investment in RS2 Smart Processing Limited
On 29 May 2012, the Company subscribed to and was allotted 1,200 shares in RS2 Smart Processing
Limited, a company registered in Malta, representing 99.92% of the share capital of this subsidiary.
During 2015, RS2 Smart Processing Limited increased its authorised share capital to 1,500,000 ordinary
shares at a nominal value of €1.00 each. The increase in share capital was fully subscribed to by the
existing shareholders as at 31 December 2014 in a proportionate manner.
At Company level, the recoverable amount of RS2 Smart Processing Limited was determined to be higher
than its carrying amount. The carrying amount comprises the cost of the investment in shares and
advances to RS2 Smart Processing Limited at 31 December 2022 which stood at €1.8m (2021: €2.2m).
The key assumptions used in the calculation of the value-in-use of RS2 Smart Processing Limited are
the forecasted net cash flows and the discount rate and any major fluctuations in these unobservable
inputs may significantly impact the estimated recoverable amount and consequently, any excess of such
amount over the carrying amount.
As at 31 December 2022 issued ordinary share capital in RS2 Smart Processing Limited amounted to
€1,500,000 (2021: €1,500,000). Profit for the year amounted to €2,574,355 (2021: €934,336) and the
accumulated gains amounted to €1,845,422 (2021: losses of €728,933). Other reserves relates to post-
employment benefits to key management personnel amounting to €97,354 (2021: €22,978).
11.6 Investment in RS2 Software LAC LTDA
On 16 September 2015, the Company subscribed to and was allotted 3,465 shares in RS2 Software LAC
LTDA, a company registered in Brazil, representing 99.00% of the share capital of this subsidiary.
As at 31 December 2022 issued ordinary share capital in RS2 Software LAC LTDA amounted to €789
(2021: €789). Profit for the year amounts to €6,830 (2021: loss of €2,189) and accumulated losses
amounted to €29,412 (2021: €36,242). The translation reserve of RS2 Software LAC LTDA comprises all
foreign currency differences arising from the translation of the financial statements of foreign operations.
This reserve is non-distributable and amounts to €12,376 (2021: €15,047).
11.7 Investment in RS2 Software APAC Inc.
On 4 April 2016, the Company subscribed to and was allotted 55,745 shares of PhP100 each in RS2
Software APAC Inc., a company registered in the Philippines, representing 99.99% of the share capital
of this subsidiary.
As at 31 December 2022 issued ordinary share capital in RS2 Software APAC Inc. amounted to €112,105
(2021: €112,105). Profit for the year amounts to €494,498 (2021: €958,957) and the retained earnings
reserve totals €1,986,342 (2021: €1,506,508). The translation reserve of RS2 Software APAC Inc.
comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations. This reserve is non-distributable and amounts to a negative €99,319 (2021: €41,886).
Annual Report & Financial Statements | Page 149
11 Investments in Subsidiaries (Continued)
11.7 Investment in RS2 Software APAC Inc. (Continued)
At Company level, the recoverable amount of RS2 Software APAC Inc. was determined to be higher than
its carrying amount. The carrying amount comprises the cost of the investment in shares and advances
to RS2 Software APAC Inc. at 31 December 2022 which stood at €1.1m (2021: €1.1m). The key
assumptions used in the calculation of the value-in-use of RS2 Software APAC Inc. are the forecasted
net cash flows and the discount rate. Any major fluctuations in these unobservable inputs may
significantly impact the estimated recoverable amount and consequently, any excess of such amount
over the carrying amount.
11.8 Investment in RS2 Germany GmbH
On 2 February 2018, the Company subscribed to and was allotted 1 share equivalent to €25,000 in RS2
Germany GmbH, a company registered in Germany, representing 100.00% of the share capital of this
subsidiary.
As at 31 December 2022 issued ordinary share capital in RS2 Germany GmbH amounted to €25,000
(2021: €25,000). Profit for the year amounts to €40,858 (2021: loss of €1,642) and the retained earnings
reserve totals €667,407 (2021: €626,549).
At Company level, the recoverable amount of RS2 Germany GmbH was determined to be higher than its
carrying amount. The carrying amount comprises the cost of the investment in shares and advances to
RS2 Germany GmbH at 31 December 2022 which stood at €0.7m (2021: €0.7m). The key assumptions
used in the calculation of the value-in-use of RS2 Germany GmbH are the forecasted net cash flows and
the discount rate and any major fluctuations in these unobservable inputs may significantly impact the
estimated recoverable amount and consequently, any excess of such amount over the carrying amount.
11.9 Investment in RS2 Merchant Services Europe GmbH
On 1 November 2019, the Company subscribed to and was allotted 25,000 shares equivalent to €25,000
in RS2 Merchant Services Europe GmbH a company registered in Germany, representing 100.00% of the
share capital of this subsidiary.
As at 31 December 2022, issued ordinary share capital in RS2 Merchant Services Europe GmbH
amounted to €25,000 (2021: €25,000). The loss for the year amounts to €1,243,476 (2021: €1,029,134)
and the accumulated losses total €3,301,885 (2021: €2,058,409). Other reserves amount to €4,400,000
(2021: €2,850,000).
At Company level, the recoverable amount of RS2 Merchant Services Europe GmbH was determined to
be higher than its carrying amount. The carrying amount comprises the cost of the investment in shares
and advances to RS2 Merchant Services Europe GmbH at 31 December 2022 which stood at €4.4m
(2021: €2.9m). The key assumptions used in the calculation of the value-in-use of RS2 Merchant
Services Europe GmbH are the forecasted net cash flows and the discount rate and any major
fluctuations in these unobservable inputs may significantly impact the estimated recoverable amount
and consequently, any excess of such amount over the carrying amount.
Annual Report & Financial Statements | Page 150
11 Investments in Subsidiaries (Continued)
11.10 Restrictions on Assets and Liabilities
Other than as disclosed, there are no significant restrictions on the ability to access or use assets, and
settle liabilities of the Group.
11.11 Non-Controlling Interests
As at 31 December 2022, RS2 Software p.l.c.’s investment in RS2 Software INC. stood at 72.57% (2021:
56.47%), whilst the NCI’s percentage shareholding stood at 27.43% (2021: 43.53%). On the other hand,
RS2 Software p.l.c.’s investment in RS2 Software LAC LTDA stood at 99.00% (2021: 99.00%), whilst the
NCI’s percentage shareholding stood at 1.00% (2021: 1.00%).
RS2 Software INC.
2022 2021
NCI percentage
27.43% 43.53%
€ €
Non-current assets
11,128,972 8,982,568
Current assets
3,564,307 8,545,143
Non-current liabilities
- (1,407,823)
Current liabilities
(18,288,761) (19,220,712)
Net liabilities
(3,595,482) (3,100,824)
Net liabilities attributable to NCI
(
9
86
,
241
)
(1,349,789)
Adjustments:
Share of capital contribution due to the Company
(2,
633,
347)
(4,244,818)
Other adjustments
(
107,19
6
)
801,498
Net assets attributable to other NCI
2,
5
33
362
Net liabilities attributable to total NCI
(3,724,251) (4,792,747)
Revenue
14,
685,238
16,122,061
(Loss)/
Profit
(137
,
477)
773,577
Other comprehensive
loss
(
4
4
6
,
370
)
-
,
Total comprehensive
(loss)/income
(583,847) 773,577
(Loss)/
Income attributable to NCI
(
1
8
7
,
758
)
336,738
Profit/(
Loss
)
attributable to other NCI
2,
1
75
(22)
(
Loss)/Profit attributable to total NCI
(185,583) 336,716
Other comprehensive loss
attributable to NCI
(
15
4
,
667
)
(484
,
171)
Other comprehensive loss
attributable to other NCI
(28
4
)
(16)
Other comprehensive loss
attributable to total NCI
(154,951) (484,187)
Cash flows from operating activities
(
947
,
382
)
1,646,126
Cash flows from investing activities
(
2,
059
,
738
)
(1,778,253)
Cash flows from financing activities
(dividends to NCI: nil)
(70,835) 98,489
Net movement in cash and cash equivalents
(3,077,955) (33,638)
Annual Report & Financial Statements | Page 151
12 Non-Current Asset Classified as Held-For-Sale
This asset comprised an investment in a company incorporated in the US which engages in the provision
of end-to-end electronic payment platforms. Under IFRS 9, this investment was classified as an equity
instrument designated at FVTOCI upon initial recognition, but was subsequently reclassified to Non-
Current Asset classified as Held-for-Sale at 31 December 2020.
In November 2020, Management were informed that investment holders in the aforementioned company
were given an option to sell part or all of their holdings based on a specific valuation price. As
Management deemed this sale price to be reasonable, it expressed interest in disposing of the full
investment held, due to the fact that this is deemed to no longer be in line with RS2 Group’s strategy. In
this respect, the equity value as at end of December 2020 was reclassified from Other Investment to
Non-Current Asset classified as Held-for-Sale and the book value was adjusted to match the offered
selling price of €296,205 (being the fair value at date of disposal), with the gain in fair value of investment
in equity instruments being taken to other comprehensive income. This sale was concluded successfully
during 2021 and this asset was subsequently derecognised in the books of the Company. No significant
gains or losses were recorded upon disposal of this investment in 2021 when compared to the carrying
amount as at 31 December 2020. As further disclosed in Note 23.1, dividends received from this
investment in 2022, in relation to 2021, amounted to €11,468 (2021: €10,230).
13 Inventories
THE GROUP
2022 2021
€ €
Current
Finished goods
– terminals at cost
245,813 81,244
Inventories recognised as an expense during the year ended 31 December 2022 amounted to €187,080
(2021: €54,026). These were included in cost of sales.
Write-downs of inventories to net realisable value amounted to €10,850 (2021: €3,608).
None of these inventories have been pledged as security for liabilities (2021: none).
Annual Report & Financial Statements | Page 152
14 Trade and Other Receivables
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Current
Trade receivables
5,117,198 5,210,591 596,518 1,315,537
Amounts owed by subsidiaries
- - 20,158,085 15,303,578
Amounts owed by other related
parties
745,498 686,846 745,498 686,846
Other receivables
492,520 168,466 4,738 2,806
6,355,216 6,065,903 21,504,839 17,308,767
Transactions with related parties are set out in Note 31 to these financial statements.
Trade receivables for the Group and the Company are shown net of impairment losses recognised during
the year as disclosed in Note 23.4.
Information about the Group’s and the Company’s exposure to credit and market risks for trade
receivables is included in Note 6.
14.1 Loans Receivable
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Non-current
Loans receivable from group companies
- - 2,110,148 2,107,484
Current
Loans receivable from parent company
- 944,103 - 944,103
Amounts owed by group companies
- - 22,205 225
Amounts owed by other related parties
195,862 1,462 462 1,462
195,862 945,565 22,667 945,790
Amounts due by parent company were unsecured and bore interest at the rate of 3% per annum. During
the year ended 31 December 2022, the parent company settled the balance by way of a sale of shares
which it held in a subsidiary company.
Amounts due by RS2 Software LAC LTDA of €60,148 as at 31 December 2022 (2021: €57,484) were
unsecured, repayable on demand and did not bear any interest.
Amount due by RS2 Financial Services GmbH of €50,000 as at 31 December 2022 (2021: €50,000) was
unsecured and bear interest of 2.7% per annum over the 3-month Euribor. Such amount is repayable by
2025.
Amount due by RS2 Zahlungssysteme GmbH of €2.0m (2021: €2.0m) was unsecured and bears interest
of 2.7% per annum over the 3-month Euribor. Such amount is repayable by 2024.
Annual Report & Financial Statements | Page 153
14 Trade and Other Receivables (Continued)
14.1 Loans Receivable (Continued)
Amounts owed by other related parties were unsecured and bears interest of 2.7% per annum. Such
amount is repayable by 2023. Subsequent to year end, the Group entered into an agreement with the
other related party, whereas the amount owed shall be offset through the purchase of assets by the
Group from the other related party of assets.
Transactions with related parties are set out in Note 31 to these financial statements. The Group’s and
the Company’s exposure to credit and market risks for loans receivable are disclosed in Note 6.
15 Accrued Income and Contract Costs
THE GROUP THE COMPANY
2022
2021
2022
2021
€ € € €
Current
Contract assets owed by third parties
2,046,920 3,468,459 352,711 760,770
Contract assets owed by subsidiary
-
-
-
5,080,021
Contract assets owed by other related
parties
83,095 308,079 83,095 308,079
2,130,015 3,776,538 435,806 6,148,870
THE GROUP THE COMPANY
2022
2021
2022
2021
€
€
€
€
Category of activity
License fees excluding customisation
216,663
268,297
216,663
268,297
Service fees, transaction processing and
customisation
1,864,848
3,500,070
213,835
5,190,007
Maintenance fees
33,733
7,615
-
273,600
Re-imbursement of expenses
-
556
-
120
Other recharges
14,771
-
5,308
416,846
2,130,015
3,776,538
435,806
6,148,870
Annual Report & Financial Statements | Page 154
15 Accrued Income and Contract Costs (Continued)
Significant changes in the contract assets balances during the period are as follows:
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Balance at 1 January
3,776,538
2,331,450 6,148,870 9,505,302
Increases as a result of further
progress
1,097,385
3,394,931 127,722 5,190,279
Release of opening contract
assets to revenue
(2,856,735)
(1,819,543)
(5,913,8
47)
(8,511,643)
Other movements
(6,432
)
4,776 61,427 (17,892)
Movement on expected credit
losses on contract assets
119,
259
(135,076) 11,634 (17,176)
Balance at 31 December
2,130,015
3,776,538 435,806 6,148,870
Transactions with related parties are set out in Note 31 to these financial statements.
In relation to implementation and customisation which is followed by transaction processing services,
the following applies: (a) where the fee is treated as an advance payment for future goods or services
and is therefore recognised as revenue when those future goods or services are provided, the related
costs are amortised on a straight-line basis over the period that the related future service is expected
to be transferred to the customer; and (b) where the fee relates to a distinct performance obligation and
that activity results in the transfer of a promised good or service to the customer, the related revenue
and costs are recognised over the customisation period.
16 Cash and Cash Equivalents
THE GROUP THE COMPANY
2022
2021
2022
2021
€
€
€
€
Cash at bank
3,491,226
8,214,173
184,404
1,258,534
Cash in hand
2,884
3,725
1,705
2,138
Bank overdraft
(563)
(42)
(563)
(42)
3,493,547
8,217,856
185,546
1,260,630
Bank overdraft relates to a bank overdraft facility from APS Bank p.l.c., as detailed in Note 18.
As at 31 December 2022, an amount of €65,299 relates to restricted cash held at bank by RS2 Financial
Services GmbH (2021: €nil). These represent amounts deposited at bank on behalf of the subsidiary’s
customers.
Annual Report & Financial Statements | Page 155
17 Capital and Reserves
17.1 Share Capital
GROUP AND COMPANY
2022 2021
ISSUED SHARE CAPITAL
€ €
Ordinary shares – issued and fully paid-up
217,089,
727 (2021: 192,968,569)
shares at
€0.06 per share
13,025,383
11,578,114
Preference shares – issued and fully paid-up
10,113,3
29 shares (2021: 8,989,600)
at
€0.06 per share
606,800
539,376
Authorised Share Capital
On 31 December 2021, the issued share capital of the Company consisted of €11,578,114 in ordinary
shares of €0.06 each and €539,376 in preference shares of €0.06 each. On 7 November 2022, the
Company issued 24,121,158 ordinary shares fully paid and 1,123,729 preference shares, by way of
capitalisation of reserves, in the proportion of 1:8 for the year ended 31 December 2022.
Shareholder Rights
Ordinary shares
Ordinary shareholders are entitled to two votes per share at the meetings of the Company and are
entitled to receive dividends as declared from time to time. All ordinary shares shall rank pari passu.
Preference shares
During the year ended 31 December 2021, the Company issued 8,989,600 preference shares with a
nominal value of €0.06 per share, at an offer price of €1.75. The shares are denominated in EUR. The
Preference Shares carry the right to participate in the Company’s profits in the form of non-cumulative
dividends at a premium of not less than 10% over the dividend distributed and payable to the holders of
Ordinary Shares.
The Preference Shareholders have the right to attend general meetings of the Company but, save for
specific circumstances as documented in the Company’s Memorandum and Articles of Association, do
not have the right to vote at any general meeting of the Company. In those cases, where Preference
Shareholders have the right to vote, such Preference Shareholders have one vote in respect of each
Preference Share whereas Ordinary Shareholders have two in respect of each Ordinary Share. The
Preference Shareholders carry the right to participate in any distribution of capital made whether on a
winding up or otherwise, pari passu with all other Ordinary Shares. The Preference Shares are not
redeemable or convertible into any other form of security.
Preference share capital is shown net of total share issuance costs of €491,610 (2021: €491,610) directly
attributable to the issue of the preference shares. Share issuance costs relate to expenditure associated
with issuing preference shares and include registration fees, legal fees and marketing expenses.
Annual Report & Financial Statements | Page 156
17 Capital and Reserves (Continued)
17.1 Share Capital (Continued)
17.2 Share Premium
As at 31 December 2021, share premium reserve amounted to €15,193,501, of which:
• an amount of €15,192,424 represents the share premium on the subscription of 8,989,600
preference shares of a nominal value of €0.06 each at a share price €1.75 each
• an amount of €1,077 represents the balance of premium on issue of five million (5,000,000)
ordinary shares of a nominal value of €0.20 each at a share price of €0.80 each. This share
premium balance is net of transaction costs of €207,266 directly attributable to the issue of the
ordinary shares.
During the year ended 31 December 2022, the Company allotted 25,244,887 bonus shares (1 for every
8 held) at a nominal value of €0.06 each, amounting to €1,514,693 out of its share premium reserve,
resulting in a balance of €13,678,808 under the share premium reserve.
During 2012, the Company allotted 2,499,956 bonus shares (1 for every 15 held) at a nominal value of
€0.20 each, amounting to €499,991 out of its share premium reserve.
During 2013, the Company allotted 2,500,000 bonus shares (1 for every 16 held) at a nominal value of
€0.20 each, amounting to €500,000 out of its share premium reserve.
During the year ended 31 December 2014, the Company allotted 2,500,000 bonus shares (1 for every 17
held) at a nominal value of €0.20 each, amounting to €500,000 out of its share premium reserve.
During the year ended 31 December 2016, the Company allotted 5,000,000 bonus shares (1 for every 18
held) at a nominal value of €0.20 each, amounting to €500,000 out of its share premium reserve.
During the year ended 31 December 2017, the Company allotted 13,194,432 bonus shares (1 for every
12 held) approved by the AGM held on 20 June 2017 at a nominal value of €0.06 each, amounting to
€791,666 out of its share premium reserve.
17.3 Reserves
17.3.1 Translation Reserve
The translation reserve of the Group comprises all foreign currency differences arising from the
translation of the financial statements of foreign operations. This reserve is non-distributable.
17.3.2 Share Option Reserve
The share option reserve represents the fair value at grant date of the employees’ expense in respect of
equity-settled share-based payments based on the vesting period.
17.3.3 Other Reserve
The other reserve relates to share-based payments granted by the Company to its employees under its
employee share-based payment arrangement.
Annual Report & Financial Statements | Page 157
17 Capital and Reserves (Continued)
17.2 Share Premium (Continued)
17.3.4 Fair Value Reserve
The fair value reserve represents the cumulative gains and losses arising on the revaluation of equity
investments at FVTOCI that have been recognised in other comprehensive income.
17.3.5 Employee Benefits Reserve
The employee benefits reserve includes non-competition post-employment benefits due to employees
holding senior management positions as further disclosed in Note 28 to these financial statements.
17.4 Retained Earnings
During the year ended 31 December 2019, the Company allotted 21,440,950 bonus shares (1 for every
8 held) approved by the AGM held on 18 June 2019 at a nominal value of €0.06 each, amounting to
€1,286,457 out of its retained earnings.
17.5 Availability of Reserves for Distribution
The non-distributable reserves include the Share premium reserve, Employee benefits reserve, Fair
value reserve, Translation Reserve, Other reserves and the Share option reserve.
18 Borrowings
GROUP AND COMPANY
2022 2021
€ €
Non
-current liabilities
Bank loan
620,748 1,124,000
At end of year
620,748 1,124,000
Current liabilities
Bank loan
511,291 497,900
Bank overdraft
563 42
At end of year
511,854 497,942
Annual Report & Financial Statements | Page 158
18 Borrowings (Continued)
The following table illustrates a reconciliation of opening and closing balances of borrowings for both
the Group and Company:
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Opening balance
1,621,942 11,763,096 1,621,942 11,763,096
Interest charged on bank loan
42,008 51,694 42,008 51,694
Interest charged on overdraft
616 97,168 616 97,168
Other interest charged
6 19,665 - -
Principal paid on bank loan
(489,861) (483,907) (489,861) (483,907)
Interest paid on bank loan
(42,008) (51,694) (42,008) (51,694)
Interest paid on overdraft
(616) (97,168) (616) (97,168)
Other interest paid
(6) (19,665) - -
Movement in
bank overdraft
521 (9,657,247) 521 (9,657,247)
Closing balance
1,132,602 1,621,942 1,132,602 1,621,942
Annual Report & Financial Statements | Page 159
18 Borrowings (Continued)
Bank borrowings represent the balance on two banking facilities. The first facility is a loan which was
sanctioned to the Company on 19 December 2019 to finance the investment cost relating to the cost of
acquisition of a merchant acquiring company based in Germany, repayable over a period of 5 years and
subject to interest at the rate of 2.7% over the 3-month Euribor rate, floored at 0% per annum.
The second facility is an overdraft facility used for working capital requirements in connection with
routine business operations, repayable on demand at the Bank's discretion and is subject to interest at
the rate of 2.7% over the 3-month Euribor rate, floored at 0% per annum. During 2020, there was a
temporary increase of up to €6.5m on the second facility, which expired on 30 April 2021. The bank
overdraft balance was later settled in May 2021.
18.1 Collateral Hedged Against Bank Borrowings
All facilities are secured by first general hypothec over the Company's assets, first special hypothec and
special privileges over the land situated in Mosta with a carrying amount of €6,458,723 and a pledge on
a comprehensive insurance policy covering the hypothecated property.
18.2 Undrawn Overdraft Facilities
As at 31 December 2022, the Group had undrawn overdraft facilities of €10.0m (2021: €10.0m).
Annual Report & Financial Statements | Page 160
19 Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
THE GROUP
Assets Liabilities Balance
2022
2021
2022
2021 2022
2021
€
€
€
€
€
€
Property, plant and
equipment
-
-
(92,551)
(143,535)
(92,551)
(143,535)
Intangible assets
-
166,364
(3,201,999)
(2,634,975)
(3,201,999)
(2,468,611)
Impairment loss on
receivables
5,489
126
-
-
5,489
126
Provision for
exchange
fluctuations
14,470
51,984
(5,333)
-
9,137
51,984
Provision for legal
claims
40,315
45,193
-
-
40,315
45,193
Other provisions
-
97,438
-
-
-
97,438
Unabsorbed losses
-
-
(16,143)
(24,804)
(16,143)
(24,804)
Temporary
difference
on expected credit
losses under IFRS 9
200,188
158,413
-
-
200,188
158,413
Temporary
difference
on revenues
previously
recorded
under IFRS 15
188,545
188,545
(184,800)
(292,600)
3,745
(104,055)
Temporary
difference
on leases under
IFRS 16
12,955
311
(25,519)
(2,281)
(12,564)
(1,970)
Temporary
difference
arising from other
liabilities
25,532
2,281
-
-
25,532
2,281
Tax
assets/(liabilities)
487,494
710,655
(3,526,345)
(3,098,195)
(3,038,851)
(2,387,540)
Set off of tax
(487,494)
(710,655)
487,494
710,655
-
-
Net tax liabilities
-
-
(3,038,851)
(2,387,540)
(3,038,851)
(2,387,540)
Annual Report & Financial Statements | Page 161
19 Deferred Tax Assets and Liabilities (Continued)
THE COMPANY
Assets Liabilities Balance
2022 2021 2022 2021 2022 2021
€ € € € € €
Property, plant and
equipment -
-
(90,970)
(95,399)
(90,970) (95,399)
Intangible assets -
-
(2,497,657) (2,043,278)
(2,497,657) (2,043,278)
Provision for
exchange
fluctuations 7,620
47,391
- - 7,620 47,391
Provision for legal
claims 40,315
45,193
- - 40,315 45,193
Other provisions -
97,438
- - - 97,438
Temporary difference
on expected credit
losses under IFRS 9 107,846
61,396
- - 107,846 61,396
Temporary difference
on revenues
previously recorded
under IFRS 15 188,545
188,545
- - 188,545 188,545
Temporary difference
on leases under
IFRS 16 12,955
311
- - 12,955 311
Tax assets/(liabilities) 357,281
440,274
(2,588,627)
(2,138,677)
(2,231,346) (1,698,403)
Set off of tax (357,281)
(440,274)
357,281 440,274 - -
Net tax liabilities
-
-
(
2,
231
,
346
)
(1,698,403)
(
2,
231
,
346
)
(1,698,403)
The deferred tax liability includes the temporary differences between the written down value and the
net book value of the Group’s and Company's assets.
Deferred tax assets have not been recognised in respect of tax losses, until such time as more definitive
information becomes available that sufficient tax profit will be available against which the Group can use
the benefits therefrom. The unused tax losses on which no deferred tax asset is recognised at 31
December 2022 amounted to €3,010,683 (2021: €2,956,977).
Annual Report & Financial Statements | Page 162
19 Deferred Tax Assets and Liabilities (Continued)
Movement in temporary differences during the year are as follows:
THE GROUP
Balance
1 Jan 2021
Recognised
in profit
or loss
Balance
31 Dec 2021
Recognised
in profit
or loss
Balance
31 Dec 2022
€
€
€
€ €
Property, plant and
equipment (108,154)
(35,381)
(143,535)
50,984
(92,551)
Intangible assets (2,165,468)
(303,143)
(2,468,611)
(733,388)
(3,201,999)
Impairment loss on
receivables 431,782
(431,656)
126
5,363
5,489
Provision for exchange
fluctuations 358,708
(306,724)
51,984
(42,847)
9,137
Provision for legal
claims -
45,193
45,193
(4,878)
40,315
Other provisions -
97,438
97,438
(97,438)
-
Unabsorbed losses 342,505
(367,309)
(24,804)
8,661
(16,143)
Temporary difference
on expected credit
losses under IFRS 9 (15,050)
173,463
158,413
41,775
200,188
Temporary difference
on revenues previously
recorded under IFRS 15
(104,055)
-
(104,055)
107,800
3,745
Temporary difference
on leases under IFRS 16
1,051
(3,021)
(1,970)
(10,594)
(12,564)
Temporary difference
arising from other
liabilities 2,329
(48)
2,281
23,251
25,532
(1,256,352)
(1,131,188)
(2,387,540)
(651,311)
(3,038,851)
Annual Report & Financial Statements | Page 163
19 Deferred Tax Assets and Liabilities (Continued)
THE COMPANY
Balance
1 Jan 2021
Recognised
in profit
or loss
Balance
31 Dec 2021
Recognised
in profit
or loss
Balance
31 Dec 2022
€
€
€
€ €
Property, plant and
equipment (104,044)
8,645
(95,399)
4,429
(90,970)
Intangible assets (1,805,481)
(237,797)
(2,043,278)
(454,379)
(2,497,657)
Provision for exchange
fluctuations 345,141
(297,750)
47,391
(39,771)
7,620
Provision for legal
claims -
45,193
45,193
(4,878)
40,315
Other provisions -
97,438
97,438
(97,438)
-
Temporary difference
on expected credit
losses under IFRS 9 (15,050)
76,446
61,396
46,450
107,846
Temporary difference
on revenues
previously recorded
under IFRS 15 188,545
-
188,545
-
188,545
Temporary difference
on leases under
IFRS 16 3,379
(3,068)
311
12,644
12,955
(1,387,510)
(310,893)
(1,698,403)
(532,943)
(2,231,346)
Annual Report & Financial Statements | Page 164
20 Trade and Other Payables
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Trade payables
474,461
1,400,994 172,359 508,230
Other payables
156,640
64,961 4,942 198,477
Dividends payable
33,045
33,045 33,045 33,045
Other taxes and social securities
425,827
383,939 319,414 317,605
Amounts due to other related
parties
17,373
12,796 1,965,363 362,353
1,107,346
1,895,735 2,495,123 1,419,710
Transactions with related parties are set out in Note 31 to these financial statements.
The Group’s and the Company’s exposure to currency and liquidity risk related to trade and other
payables is disclosed in Note 6.
21 Accruals and Deferred Income
21.1 Accruals
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Accrued expenses owed to third
parties
2,257,062
2,844,289 1,308,045 922,849
Amounts due to other related
parties
573,962
611,422 498,264 585,206
2,831,024
3,455,711 1,806,309 1,508,055
Annual Report & Financial Statements | Page 165
21 Accruals and Deferred Income (Continued)
21.2 Deferred Income
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Current
Contract liabilities owed by third parties
1,345,614
1,254,231 955,675 1,061,241
Contract liabilities owed by
subsidiary
-
- 528,000 528,000
Contract liabilities owed by other
related parties
297,337
312,771 297,337 312,771
1,642,951
1,567,002 1,781,012 1,902,012
Deferred income owed by subsidiary
-
- 112 104,628
1,642,951
1,567,002 1,781,124 2,006,640
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Category of activity
License fees excluding
customisation
26,250
26,250 506,250 506,250
Service fees, transaction
processing and customisation
376,044
188,967 90,514 78,457
Maintenance fees
1,181,157
1,292,285 1,124,748 1,257,805
Comprehensive packages
59,500
59,500 59,500 59,500
1,642,951
1,567,002 1,781,012 1,902,012
Deferred income owed by
subsidiary
-
- 112 104,628
1,642,951
1,567,002 1,781,124 2,006,640
Significant changes in the contract liabilities balances during the period are as follows:
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Balance at 1 January
1,567,002
1,863,783 1,902,012 2,105,229
Release of opening contract liabilities
to revenue
(445,659)
(580,774) (273,585) (572,674)
Increases due to cash received,
excluding amounts recognised as
revenue during the year
378,069
398,072 125,945 398,072
Other movements
143,539
(114,079) 26,752 (28,615)
Balance at 31 December
1,642,951
1,567,002 1,781,124 1,902,012
Annual Report & Financial Statements | Page 166
22 Revenue
22.1 Disaggregation of Revenue
Revenue is stated after deduction of sales rebates and indirect taxes and comprises revenue from
contracts with customers (except for operating lease income).
In the following table, revenue is disaggregated by category of activity. The below table also includes a
reconciliation of the disaggregated revenue with the Group’s reportable segments.
Software (Licensing)
solutions
Processing
solutions
Merchant solutions
Total
2022
2021 2022 2021 2022 2021
2022 2021
Category of
activity €
€ € € € €
€ €
License fees
excluding
customisation
5,546,918 4,965,218 - - - - 5,546,918 4,965,218
Service fees,
transaction
processing and
customisation
4,968,994 9,115,727 17,049,559 16,145,211 - - 22,018,553 25,260,938
Maintenance
fees
2,879,970 3,059,168 237,668 117,167 - - 3,117,638 3,176,335
Comprehensive
packages
714,000 714,000 3,548,871 2,536,482
-
- 4,262,871 3,250,482
Re
-
imbursement
of expenses
- - - (42,219) - - - (42,219)
Operating lease
income
- - - - 42,897 27,881 42,897 27,881
Acquiring
revenue
- - - - 2,527,184 2,041,228 2,527,184 2,041,228
14,109,882 17,854,113 20,836,098 18,756,641 2,570,081 2,069,109 37,516,061
38,679,863
The revenue recognised in the Group’s statements of profit or loss during the year ended 31 December
2022 amounted to €1.7m (2021: €2.3m) in relation to implementation activities (without the sale of a
license) which are considered to be a distinct performance obligation resulting in the transfer of a
promised good or service to the customer.
The below table outlines the Company’s revenue disaggregated by category of activity.
2022 2021
€ €
Category of activity
Licence fees
3,713,960 3,337,656
Service fees
11,519,878 16,520,262
Maintenance fees
3,775,512 3,945,703
Comprehensive packages
714,000 714,000
Re-imbursement of expenses
379 9,344
19,723,729 24,526,965
Annual Report & Financial Statements | Page 167
22 Revenue (Continued)
22.1 Disaggregation of Revenue (Continued)
In the following tables, revenue is disaggregated by primary geographical markets. The below table also
includes a reconciliation of the disaggregated revenue with the Group’s reportable segments.
Software (Licensing)
solutions
Processing
solutions
Merchant
solutions
Total
2022
2021
2022
2021
2022
2021
2022
2021
Geographical
markets €
€
€
€
€
€
€
€
Europe
8,118,747 12,110,410 7,425,406 4,330,851 2,570,081 2,069,109 18,114,234 18,510,370
Middle East
401,585 730,946 192,507 105,104 - - 594,092 836,050
North America
5,222,931 4,650,218 9,417,738 11,471,802 - - 14,640,669 16,122,020
South America
-
- 1,935,211 1,151,728 - - 1,935,211 1,151,728
Asia
366,619 362,539 1,865,236 1,697,156 - - 2,231,855 2,059,695
14,109,882 17,854,113 20,836,098 18,756,641 2,570,081 2,069,109 37,516,061 38,679,863
As outlined in the above table, the Group’s revenue is mainly generated through sales transactions
concluded with customers situated in Europe and North America (2021: Europe and North America).
The below table outlines the Company’s revenue disaggregated by primary geographical markets.
2022 2021
€ €
Geographical markets
Europe
11,749,635 14,241,202
Middle East
401,585 730,947
North America
7,484,550 9,494,564
Asia
87,959 60,252
19,723,729 24,526,965
Annual Report & Financial Statements | Page 168
22 Revenue (Continued)
22.2 Contract Balances
The following table provides information about the Group’s and the Company's receivables, contract
assets and contract liabilities from contracts with customers.
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Receivables, which are included
in ‘Trade and other receivables’
6,355,216 6,065,903 21,504,839 17,308,767
Contract assets
2,130,015 3,776,538 435,806 6,148,870
Contract liabilities
(1,642,951)
(1,567,002)
(1,781,012) (1,902,012)
The contract assets primarily relate to the Group’s rights to consideration for work completed but not
billed at the reporting date. The contract assets are transferred to receivables when the rights become
unconditional. This usually occurs when the Group issues an invoice to the customer. The contract
liabilities primarily relate to the advance consideration received from customers, for which the revenue
recognition criteria are not yet met.
22.3 Future Revenues
The following tables include revenue expected to be recognised in the future related to performance
obligations that are unsatisfied (or partially unsatisfied) at 31 December 2022 and 2021.
2022
THE GROUP
2023 2024
2025 and
beyond Total
€ € € €
License fees
12,314 150,000 150,000 312,314
Services fees
165,408 73,354 62,499 301,261
2022
THE COMPANY
2023 2024
2025 and
beyond Total
€ € € €
License fees
12,314 150,000 630,000 792,314
Services fees
2,460 62,500 110,500 175,460
Annual Report & Financial Statements | Page 169
22 Revenue (Continued)
22.3 Future Revenues (Continued)
2021
THE GROUP
2022 2023
2024 and
beyond Total
€ € € €
License fees
19,964 - 300,000 319,964
Services fees
108,065 10,763 125,000 243,828
2021
THE COMPANY
2022 2023
2024 and
beyond Total
€ € € €
License fees
19,964 - 780,000 799,964
Services fees
5,940 - 173,000 178,940
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information
about remaining performance obligations that have original expected durations of one year or less. The
Group also does not disclose information about the remaining performance obligations that have a fixed
amount and for which the Group has a right to invoice the customer in the amount that corresponds
directly with the value of the entity’s performance completed to date in accordance with paragraph B16
of IFRS 15.
The above also excludes fees from transaction processing services that are recognised in terms of Note
4.16.2.
23 Profit Before Income Tax
The Group’s and Company’s profit before income tax includes total fees charged by the auditors of the
Group and Company for:
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Audit fee
201,086
200,195 196,086 195,195
Total fees payable for other
assurance services
10,000
10,000 10,000 10,000
Total fees payable for
non-audit services other than
other assurance and tax advisory
services
26,000
24,500 - 2,000
237,086
234,695 206,086 207,195
Annual Report & Financial Statements | Page 170
23 Profit Before Income Tax (Continued)
The fees payable to other auditors of the subsidiaries in relation to audit services for 2022 amount to
€45,603 (2021: €9,863).
23.1 Other Income
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Other income
355,372
323,014 16,560 241,821
Dividend receivable
11,468
10,230 11,468 10,230
366,840
333,244 28,028 252,051
During the years ended 31 December 2022 and 2021, the Company was granted funds through schemes
administered by Malta Enterprise, MITA and other government bodies. These schemes consist of both
Maltese government schemes as well as schemes emanating from European Union funds. For 2022,
grants amounted to €10,360 (2021: €16,775) which are captured as part of other income in the note
above.
23.2 Other Expenses
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Fines and penalties
14,916 26,066 10,176 15,931
Impairment loss on intangible
asset
- 17,055 - 17,055
Loss on disposal of property, plant
and equipment
32,638 - 7,647 -
Other expenses
19,544 22,052 (1,262) 3,897
67,098 65,173 16,561 36,883
23.3 Exchange Gain on Operating Activities
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Unrealised operating exchange
gains
1,106,878 189,646 126,356 848,127
Realised operating exchange
gains/(losses)
425,364 (17,725) 391,650 (89,926)
1,532,242 171,921 518,006 758,201
Annual Report & Financial Statements | Page 171
23 Profit Before Income Tax (Continued)
23.4 Impairment Loss on Trade Receivables and Contract Assets
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Increase in provision for impairment
loss on trade receivables
130,656 356,540 132,714 132,416
Bad debts written off
5,077 227,067 704 2,362
135,733 583,607 133,418 134,778
23.5 Expenses by Nature
THE GROUP THE COMPANY
2022 2021 2022 2021
Note
€ € € €
Wages and salaries
27 22,733,853 19,960,906 10,219,607 10,330,465
Directors’ emoluments
27 1,663,860 1,579,106 1,543,860 1,459,106
Non-competition benefits
27 73,866 93 64,734 93
Share-based arrangements
27 269,994 332,628 - -
Subcontracted costs
990,333 712,578 5,037,828 4,901,109
Professional fees
1,387,831 1,204,477 284,158 233,259
Consultancy fees
2,065,938 2,472,780 1,572,200 2,025,643
Travelling expenses
332,726 190,076 164,145 97,220
Participation in fairs and seminars
145,491 1,644 101,919 -
Depreciation
8, 9
1,054,999 1,099,279 283,728 345,827
Amortisation
10 930,178 1,102,595 909,604 1,043,599
Impairment loss on trade
receivables and contract assets
23.4
135,733 583,607 133,418 134,778
Impairment on intangible asset
- 17,055 - 17,055
Recharge of expenses to
intercompany
- - (755,574) (685,052)
Other expenses
5,815,405 3,370,036 (1,057,312) 247,962
37,600,207 32,626,860 18,502,315 20,151,064
Annual Report & Financial Statements | Page 172
24 Finance Income and Finance Costs
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Bank interest income 3,140
1,413 244 240
Interest on loans receivable 3,704
27,473 64,832 85,017
Change in fair value of interest
rate swap
-
660 - 660
Other interest and similar income
39,165
27,960 - -
Finance income
46,009
57,506 65,076 85,917
Bank interest expense (42,630) (148,863) (42,624) (148,862)
Other expenses - - - -
Non-operating unrealised
exchange gain/(loss)
16,435 6,325 (1,813) 2,587
Interest expense on lease
liabilities
(56,308) (57,472) (12,540) (12,988)
Finance costs
(82,503) (200,010) (56,977) (159,263)
Net finance
(costs)/income (36,494)
(142,504) 8,099 (73,346)
All the above items of finance income and cost are recognised in profit or loss.
Annual Report & Financial Statements | Page 173
25 Income Tax Expense
25.1 Recognised in Profit or Loss
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Current tax expense
Current tax charge for the year
1,376,948
1,935,066 100,919 1,487,119
Withholding tax on interest
received 34
33 34 33
Foreign tax charge for the year
-
1,149 - -
1,376,982
1,936,248 100,953 1,487,152
Deferred tax expense
Origination and reversal of
temporary differences 651,451
1,131,188 532,943 310,893
Income tax expense
2,028,433
3,067,436 633,896 1,798,045
25.2 Reconciliation of Effective Tax Rate
The income tax expense for the year and the result of the accounting profit multiplied by the tax rate
applicable in Malta, the Company’s country of incorporation, are reconciled as follows:
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Profit before income tax
1,778,442
6,415,664 1,775,547 5,312,807
Income tax using the domestic
income tax rate of 35%
622,455
2,245,482 621,441
1,859,482
Effect of tax rates in foreign
jurisdictions
211,134
(204,736) -
-
Tax effect of:
Non-taxable income
95,796
1,812 -
(231)
Non-deductible expenses
211,959
294,511 3,561
5,577
Different tax rates on bank
interest income
(46)
(48) (46)
(48)
Depreciation charges not
deductible by way of capital
allowances
1,874
(96,986)
-
-
Unrecognised deferred tax
assets on unrelieved tax
losses
(328,202)
263,982
-
-
Elimination of intercompany
transaction
1,024,460
630,154 -
-
Other disallowed expenses
189,003
(66,735) 8,940
(66,735)
Income tax expense
2,028,433
3,067,436 633,896 1,798,045
Annual Report & Financial Statements | Page 174
26 Earnings Per Share
On 31 December 2021, the issued share capital of the Company consisted of €11,578,114 in ordinary
shares of €0.06 each and €539,376 in preference shares of €0.06 each. On 7 November 2022, the
Company issued 24,121,158 ordinary shares fully paid and 1,123,729 preference shares, by way of
capitalisation of reserves, in the proportion of 1:8 for the year ended 31 December 2022.
The calculation of basic earnings per share is calculated by dividing the profit attributable to owners of
the Company (the numerator) by the weighted average number of ordinary shares outstanding during
the year (the denominator). The weighted average number of shares outstanding for 2022 and 2021 is
adjusted for the bonus shares issued during the year ended 31 December 2022.
The earnings used in the calculation is net of all expenses including taxes, minority interests and
preference dividends on preference shares which do not meet the definition of ordinary shares for the
purpose of this calculation. For the Group’s ordinary shares, the EPS was derived by dividing the loss of
the Group of €61,268 (2021: profit of €2,912,160) and the profit of the Company of €1,085,999 (2021:
€3,398,808) by 217,089,727 (2021 restated: 217,089,727), being the equivalent weighted-average
number of shares outstanding during the year.
For the Company’s preference shares, which meet the definition of another class of ordinary shares for
the purpose of this calculation, the EPS was derived by dividing the loss of the Group of €3,140 (2021:
profit of €99,352) and the profit of the Company of €55,652 (2021: €115,954) by 10,113,329 (2021
restated: 6,732,983), being the equivalent weighted-average number of shares outstanding during the
year.
Earnings per ordinary share of the Group and the Company for the year ended 31 December 2022
amounted to €0.000 (2021 restated: €0.013 ) and €0.005 (2021 restated: €0.016) respectively. Earnings
per preference share of the Group and the Company for the same reporting period amounted to €0.000
(2021 restated: €0.015 ) and €0.006 (2021 restated: €0.017) respectively.
Due to the variable element on the preference share entitlement, on the basis of trends in the current
share price, an assumption has been taken where the preference dividend will not exceed 10% of the
dividend on the ordinary shares.
Annual Report & Financial Statements | Page 175
27 Personnel Expenses
Personnel expenses incurred by the Group and the Company during the year are analysed as follows:
THE GROUP THE COMPANY
2022
2021 2022 2021
Note
€
€ € €
Directors’ emoluments:
Fees
484,335
477,484 484,335 477,484
Remuneration
1,000,695
1,000,604 880,695 880,604
Indemnity insurance
103,398
25,586 103,398 25,586
Fringe benefits
75,432
75,432 75,432 75,432
Key management personnel
emoluments:
Remuneration
2,824,368
2,376,402 1,434,702 1,181,282
Non-competition benefits
28 73,866
93 64,734 93
Share-based arrangements
29 269,994
324,978 - -
Fringe benefits
13,275
10,396 10,275 7,396
4,845,363
4,290,975 3,053,571 2,647,877
Other personnel emoluments:
Wages and salaries
18,172,951
16,082,209 8,181,100 8,619,093
Social security contributions
1,723,259
1,491,899 593,530 522,694
Share-based arrangements
29 -
7,650 - -
24,741,573
21,872,733 11,828,201 11,789,664
Personnel expenses incurred during the year include share-based arrangements. Other personnel
The weekly average number of persons employed by the Group and the Company during the year were
as follows:
THE GROUP THE COMPANY
2022 2021 2022 2021
No. No. No. No.
Operating 370 322 201 201
Management and administration 94 96 51 56
464 418 252 257
Annual Report & Financial Statements | Page 176
28 Post-Employment Benefits
Non-competition post-employment benefits due to employees holding senior management positions are
payable upon cessation based on an agreed fixed amount or the then applicable annual salary. Such
benefits are commensurate to the non-compete clauses which bind personnel not to compete with the
Company, or its subsidiaries, for periods ranging between one and three years. This liability is recognised
in the statement of financial position and represents the present value of the defined benefit obligation
as at 31 December 2022 based on the following:
i) Discount rate, determined by reference to market yields at the end of the reporting period. This
discount rate is used to discount the liability to the net present value;
ii) The expectation of the respective employees’ termination date; and
iii) The expected future salary growth in line with the Group’s policies.
The discount rate is based on market yields arising on high-quality Corporate Bonds. Such yields are
denominated in the currency in which the benefits will be paid and have terms to maturity approximating
the estimated termination date. The Directors consider such rates to be an appropriate proxy to a high-
quality corporate bond.
When estimating the expected years to retirement, the Directors considered the current age and the
expected retirement age of key management personnel. An average of the remaining number of years
each member of key management personnel is expected to work until retirement age, is deemed to be
a more realistic period to consider compared to other terms.
A reasonable growth rate was used when determining the future salary growth rates to be deployed in
the valuation model, which assumption considered the general percentage increases of the more recent
years and also the Group’s budgeted projections.
The movement in the liability is as follows:
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Post-employment liabilities
Present value at 1 January
3,909,546
4,073,687 3,473,288 3,630,934
Recognised in profit or loss:
Discount unwind
73,866
93 64,734 93
Post-employment benefit
written off/settled during
the year
-
(111,420) - (111,420)
Recognised in other
comprehensive income:
Remeasurement adjustment
(606,014)
(52,814) (531,638) (46,319)
Present value at 31 December
3,377,398
3,909,546 3,006,384 3,473,288
Annual Report & Financial Statements | Page 177
28 Post-Employment Benefits (Continued)
Balances as at 31 December 2022 are deemed to fall due after more than one year. The re-measurement
adjustment is as a result of financial actuarial losses resulting from an adjustment in the annual salary of
certain executives.
Post-employment benefit exposes the Group and the Company to the following risks:
i) Interest rate risk, since a decrease in market yield will increase the liability; and
ii) Longevity risk, since the longer the key management person remains in office the higher the
liability.
The significant assumptions applied by the Company in respect of post-employment benefits were as
follows:
THE GROUP THE COMPANY
2022
2021 2022 2021
Discount rates 0% - 2.5%
0% - 0.029% 0% - 2.5% 0% - 0.029%
Expected years to termination
(weighted average)
6.42 yrs
6.51 yrs
6.41 yrs
6.52 yrs
Rate of projected salary
increase
3%
3%
3%
3%
The cost of providing for these post-employment benefits is determined using the projected unit credit
method, with estimations being carried out at each reporting date. Due to the nature of the assumptions,
in accordance with the provisions of IAS 19, the Group and the Company did not involve a qualified
actuary in the measurement of their post-employment benefit obligations.
The Group and the Company are providing sensitivity analysis in connection with the key assumption
applied. This analysis is prepared at the end of each reporting period and shows how the liability would
be affected by such hypothetical changes in the assumptions that were reasonably possible at that date,
while holding all other assumptions constant. The below sensitivity is for illustrative purposes only and
may not be representative of the actual changes in the post-employment benefits obligation. This is
due to the fact that it is unlikely that a change in assumptions would occur in isolation of one another.
• If the discount rate is 100 basis points higher (lower) with all other assumptions held constant,
the net present value of the post-employment benefit obligation decreases by €173,192
(increases by €173,227) at Company level and decreases by €196,372 (increases by €198,016)
at Group level.
• If the expected years to termination increases (decreases) by two years with all other
assumptions held constant, the net present value of the post-employment benefit obligation
increases by €18,558 (decreases by €30,188) at Company level and increases by €22,045
(decreases by €33,613) at Group level.
• If the salaries of key management personnel increase (decrease) by an additional 1% over the
budgeted increase with all other assumptions held constant, the net present value of the post-
employment benefit obligation increases by €167,868 (decreases by €170,428) at Company
level and increases by €191,916 (decreases by €193,226) at Group level.
Annual Report & Financial Statements | Page 178
29 Share-Based Payment Arrangements
At 31 December 2022, the Group had the following share-based payment arrangements.
29.1 RS2 Employee Share Option Scheme (Equity-Settled)
An RS2 Employee Trust was set up during the year ended 31 December 2010 to purchase and hold
750,000 ordinary shares in the Company in order to satisfy the future exercise of options by employees
in accordance with the scheme.
The number of shares in respect of which share options were granted under the Scheme in a three (3)
year period was limited to 2% of the then issued share capital of the Company (850,000 shares). Options
were exercisable at any time up to eight (8) years from the date on which the options are granted and
the scheme was implemented during 2011, being the first year of performance, and 2013, being the last
year of performance.
During the year ended 31 December 2022, a total of 20,960 share options were exercised, whilst the
79,640 share options outstanding after 11 February 2022 expired. The weighted average exercise price
amounted to €0.66 (2021: €0.64) during the year ended 31 December 2022.
This RS2 Employee Share Option Scheme expired in February 2022. The unexercised shares are no
longer available to be exercised by the employees and subsequent to the bonus issue of November
2022, the shares held by the trust amounted to 506,174 as at 31 December 2022.
29.2 Performance-Related Share-Based Payment (Equity-Settled)
In 2017, the Company entered into an agreement with a newly recruited employee holding a senior
management position whereby should the employee achieve a pre-set percentage over the agreed
performance target linked to net profit over three consecutive calendar years commencing from date of
employment, the Company, may at its absolute discretion, grant to the particular employee a one-time
assignment of shares to the equivalence of a pre-agreed Euro amount. At the end of the three-year
period, the Board discussed the aforementioned employee’s agreement and the respective benefit that
could be awarded. As the Group is fulfilling its growth strategy, and is still heavily investing in territories
such as the US and Germany, this resulted in a net loss rather than a net profit at the end of the three-
year period. Despite this, the obligation to this employee is still being honoured by awarding the
individual 85% of the total agreed upon compensation.
In this respect, as at 31 December 2021, a provision of €255,000 was included in the Group’s and
Company’s Other Reserves. The movement in this provision from 2019 to 2020 reflected a change in
estimate resulting in a change in the estimated payment from 100% to 85%.
During the year ended 31 December 2022, this employee agreed to receive the respective amount in
cash instead of shares and the Company settled the full amount of €255,000 during March 2022.
Annual Report & Financial Statements | Page 179
29 Share-Based Payment Arrangements (Continued)
29.3 Performance-Related Share-Based Payment (Cash-Settled)
In terms of an agreement entered into in February 2018, an executive (referred to as 'key management
personnel' in Note 27) of RS2 Software INC. was granted 12,500 new shares in the subsidiary (the ‘Award
shares’), with certain vesting conditions and restrictions. In terms of the agreement, upon transfer of the
Award shares to the individual, the latter obtained all the rights of a shareholder, including the right to
vote and to receive any dividends with respect to such shares, provided however that the individual may
not sell, transfer, pledge or assign unvested Award shares.
The Award shares shall vest monthly in equal instalments over a service period of 36 months with an
accelerated vesting upon a Change of Control Event during the vesting period and with the requirement
to forfeit all Award Shares (whether vested or unvested) in the case of termination or resignation during
a fixed specified period from the date of grant.
The arrangement also includes the right by the company to repurchase and the right by the executive
to sell the vested Award shares at fair market value in the case of termination or resignation happening
after the expiration of a fixed specified period. The aforementioned executive’s employment with RS2
Software INC. was terminated in December 2020, with all the remaining unvested shares becoming
automatically vested in terms of the arrangement, and accordingly, the right to sell the vested shares
was triggered.
Following the termination of employment of the executive, a management’s third party expert was
engaged in order to assist in the valuation of the minority stake held in RS2 Software INC. The liability
as at 31 December 2020, amounting to €1m (USD 1.2m), is based on that valuation, which was approved
by the Board of RS2 Software INC. In estimating the liability, certain assumptions were made, as further
herein.
RS2 Software INC.'s Board of Directors held several meetings and in-depth discussions whereby the
Board agreed to offer a maximum amount of €1.32m (USD 1.5m) in this respect. The Board of the
subsidiary believes that this amount exceeds the fair market value of the 12,500 shares. The subsidiary’s
offer was accepted by the executive in the first quarter of 2022 as full and final settlement of the share
buy-back transaction.
In terms of agreements entered into in March 2019, five management personnel of RS2 Software INC.
were granted 5,626 share options in the subsidiary (the ‘share options’), with certain vesting conditions.
The weighted average exercise price amounts to USD 7.12. In terms of the agreement, upon vesting of
the share options, the participant may exercise all or a portion of the options vested to the extent of the
shares vested. Three of the five individuals terminated their employment, while the remaining two
individuals signed an amendment to the original agreement granting the share options to be effective
from their respective employment start date. From the total allocated share options, 1,563 share options
remain in effect as at 31 December 2022 and 2021.
Annual Report & Financial Statements | Page 180
29 Share-Based Payment Arrangements (Continued)
29.3 Performance-Related Share-Based Payment (Cash-Settled) (Continued)
The share options shall vest to 75% after not less than three but not more than four years of continued
service completed since the grant date and to 100% after not less than four years of continued service
are completed since the grant date. Options will become fully exercisable and vested as of the time of
a Change in Control with the requirement to forfeit share options (vested and unvested) in the case of
termination for cause. Upon termination, all shares issued upon exercise of the options shall be subject
to a call option by the company to repurchase at fair market value. Based on the terms of the contracts,
it is concluded that the company has a present obligation to settle in cash, hence their classification as
cash-settled share-based payment arrangements.
The key assumptions used in the calculation of the value of the cash-settled share-based awards for
the remaining two management personnel of RS2 Software INC. are the forecasted net cash flows and
the discount rate used in a risk-adjusted cash flow forecast, with the pre-tax discount rate used being
21.6%.
The outstanding share options were fully vested by 31 December 2022 (2021: 95%).
THE GROUP THE COMPANY
2022
2021 2022 2021
€
€ € €
Non-current liabilities
Share-based payments -
57,038 - -
Current liabilities
Share
-based payments 355,163
1,350,784 - -
30 Capital Commitments
The Group and the Company have no capital commitments in 2022 and 2021.
Annual Report & Financial Statements | Page 181
31 Related Parties
31.1 Parent and Ultimate Controlling Party
The Company is owned by ITM Holding Limited , a local registered company which holds 50.04% (2022:
50.04%) of ordinary shares and 0.32% (2022: 0.32%) of preference shares in RS2 Software p.l.c.. ITM’s
registered office is 66, Old Bakery Street, Valletta, Malta. The ultimate parent company of the Group is
Radi Abd El Haj indirectly holds 50.04% (2022: 50.04%) of the issued ordinary share capital and 0.32%
(2022: 0.32%) of the issued preference share capital of the Company.
Given that the Preference Shareholders shall not, save for specific circumstances as documented in the
Company’s Memorandum and Articles of Association, have the right to vote at any general meeting of
the Company, as disclosed in Note 17.1, as a result, the voting rights vested in the Ordinary Shareholders
were not diluted as a consequence of the Offer.
31.2 Identity of Related Parties
The Company has a related party relationship with its parent company, its subsidiaries, the Company’s
key management personnel (including its Directors and the Company’s senior management), and entities
in which the Directors or their immediate relatives have an ownership interest and management entities
that provide key management personnel services to the Group (“other related parties”). The
compensation of such management entities amount to €76,129 (2021: €45,456) and is included in the
table below as part of the legal and administrative services.
The Company uses the legal services of GTG Advocates in relation to advice given to the Company.
Amounts were billed based on normal market rates for such services and were due and payable under
normal payment terms. The Company also uses consultancy services by one of the Directors amounting
to €42,840 (2021: €38,157).
Directors of the Company hold directly and indirectly 49.40% (2021: 51.36%) of the voting shares of the
Company.
Annual Report & Financial Statements | Page 182
31 Related Parties (Continued)
31.3 Related Party Transactions
THE GROUP THE COMPANY
2022 2021 2022 2021
€ € € €
Parent company
Interest charged to 3,704 27,473 3,704 27,473
Subsidiaries
Support services provided to 11,233,477 12,533,450
Support services provided by (4,324,272) (4,665,067)
Other related parties
Depreciation charge on
right-of-use asset
222,862 172,000 - -
Interest expense on lease
liability
25,978 20,904 - -
Legal and administrative
services provided by
229,749 286,590 153,620 241,134
Support services provided to 3,739,946 4,546,317 3,739,946 4,546,317
Support services not yet
invoiced provided to
407,469 308,079 407,469 308,079
to/by related parties is set out in Notes 14, 15, 20 and 21 to these financial statements. Such amounts
due to/by related parties are unsecured, repayable on demand and do not bear any interest other than
disclosed in those notes.
In addition, as further disclosed in Note 9.1.4, the Group has an agreement for leased offices in Neu-
Isenburg, Germany, with a related party. As at 31 December 2022, ROU assets amounting to €1,535,996
(2021: €1,203,999) and lease liabilities amounting to €1,572,429 (2021: €1,232,593) relating to this lease
are included within the Group’s Statements of Financial Position. The depreciation charge for the year in
relation to this asset amounts to €222,862(2021: €172,000) and the interest expense for the year in
relation to this lease liability amounted to €25,978 (2021: €20,904).
Annual Report & Financial Statements | Page 183
32 Provisions and Contingent Liabilities
Significant changes in the provision balances for the Group and the Company during the period are as
follows:
THE GROUP
Legal
disputes
with former
employees
Provision for
legal claim
by debtor
Provision for
rectification
of work
Provision for
costs
incurred in
relation to
professional
advice
Total
€ € € € €
At 1 January 2021 - - - - -
Additional provision in
the year
12,579 116,543 178,394
100,000
407,516
At 31 December 2021 12,579 116,543 178,394 100,000 407,516
At 1 January 2022 12,579 116,543 178,394 100,000 407,516
Additional provision in
the year 33,922 - - - 33,922
Utilisation of provision (12,579) - (178,394) (9,000) (199,973)
Decrease in provision
during the year - - -
(91,000) (91,000)
Foreign exchange
movements - (20) - - (20)
At 31 December 2022 33,922 116,523 - - 150,445
Annual Report & Financial Statements | Page 184
32 Provisions and Contingent Liabilities (Continued)
THE COMPANY
Legal
dispute with
former
employee
Provision for
legal claim
by debtor
Provision for
rectification
of work
Provision for
costs
incurred in
relation to
professional
advice Total
€ € € € €
At 1 January 2021 - - - - -
Additional provision in the
year
12,579 116,543 178,394
100,000 407,516
At 31 December 2021 12,579 116,543 178,394 100,000 407,516
At 1 January 2022 12,579 116,543 178,394 100,000 407,516
Utilisation of provision (12,579) - (178,394) (9,000) (199,973)
Decrease in provision
during the year
- - -
(91,000) (91,000)
Foreign exchange
movements
- (20) - - (20)
At 31 December 2022 - 116,523 - - 116,523
The amounts in respect of the provisions detailed above in Notes 32.1 to 32.4 are expected to be settled
within the next year, although an element of uncertainty still exists.
32.1 Provision for Legal Claim by Debtor
During the year ended 31 December 2021, a provision was booked in relation to a claim by one of the
Company’s debtors. Although it transpired that the Company was not legally obliged to settle any
amounts in relation to the claim raised, the Company offered the debtor an amount of €116,523 as a
discount against future services. As at 31 December 2022, the claim is yet to be resolved.
32.2 Legal Disputes with Former Employees
During the year ended 31 December 2021, a provision was booked in relation to an ongoing dispute with
a former employee of RS2 Software p.l.c., whose employment was terminated on 26 May 2020. During
the first quarter of 2022, an out of court settlement agreement took place in respect of this legal
obligation by RS2 Software p.l.c. and a payment of €12,579 took place.
Moreover, during 2022, a provision was booked in relation to an ongoing dispute with a former employee
of RS2 Software INC., whose employment was terminated in September 2022. The Company is in the
process in attempting to resolve this dispute outside of court. In this regard a provision of €33,922 has
been recognised in the consolidated financial statements of the Group.
Annual Report & Financial Statements | Page 185
32 Provisions and Contingent Liabilities (Continued)
32.3 Provision for Costs incurred in relation to professional advice
During the year ended 31 December 2021, a provision of €100,000 was accounted for by the Group and
the Company in relation to expenses incurred to date covering advice obtained from various legal
advisors. During the year ended 31 December 2022, €9,000 of this provision have been utilised and the
remaining amount of €91,000 has been reversed.
32.4 Provision for Rectification of Work
During the year ended 31 December 2021, the Group and the Company accounted for a provision of
€178,394 in respect of rectification of work which needed to be carried out imminently. This amount was
utilised in full in 2022.
33 Subsequent Events
33.1 Agreement entered into by Board of Directors of RS2 Software INC.
An agreement was entered into by four US directors and RS2 Software INC., dated 6 March 2023, where
each director was awarded a bonus payment of up to $120,000 (€112,718 as at 6 March 2023). Such
amount is payable in tranches across 2023.
33.2 Restructuring of the Board of Directors of RS2 Software INC.
In April 2023, it was decided to streamline the Board of Directors across RS2 Group Companies.
Consequently, the number of Board Members at RS2 Software INC. was reduced.
Annual Report & Financial Statements | Page 186
34 Comparative Information
Comparative figures disclosed in the main components of these financial statements have been
reclassified to conform with the current year’s disclosure format for the purpose of compliance with the
International Financial Reporting Standards, and the requirements of the Maltese Companies Act (Cap.
386).
In Note 6.3.2, under Group, specifically “Lifetime ECL not-credit impaired”, an amount of €4,912,678 was
reclassified from “Collective Impairments” to “Individual Impairments”. Loss allowances thereon
amounted to €nil.
THE GROUP
Lifetime ECL not-credit impaired
Individual
Impairments
Individual
Impairments
Collective
Impairments
Collective
Impairments
(restated)
(as reported) (restated)(as reported)
202
1
2021 2021 2021
Internal rating
grades
€
€ € €
Not in default - simplified model applied
4,912,678
- 5,536,513 10,449,191
In default
-
- - -
Gross carrying amount at 31 December
4,912,678
- 5,536,513 10,449,191
Loss allowance at 31 December
-
- (452,608) (452,608)
Net carrying amount at 31
December
4,912,678
- 5,083,905 9,996,583
In Note 6.3.2, under Company, specifically “Lifetime ECL not-credit impaired”, an amount of €320,129
was reclassified from “Collective Impairments” to “Individual Impairments”. Loss allowances thereon
amounted to €nil.
THE COMPANY
Lifetime ECL not-credit impaired
Individual
Impairments
Individual
Impairments
Collective
Impairments
Collective
Impairments
(restated)
(as reported) (restated)(as reported)
202
1
2021 2021 2021
Internal rating
grades
€
€ € €
Not in default - simplified model applied
21,070,
349
20,750,220 2,562,704 2,882,833
In default
-
- - -
Gross carrying amount at 31 December
21,070,
349
20,750,220 2,562,704 2,882,833
Loss allowance at 31 December
-
- (175,416) (175,416)
Net carrying amount at 31 December
21,070,349
20,750,220 2,387,288 2,707,417
Annual Report & Financial Statements | Page 187
34 Comparative Information (Continued)
In Note 20, under the Group figures, an amount of €353,595 was reclassified from “Trade Payables” to
“Other taxes and social securities”.
THE GROUP
(restated) (as reported)
2021 2021
Trade payables
1,400,994 1,754,589
Other
taxes and social securities
383,939 30,344
In Note 22.1, under Processing solutions, an amount of €2,536,482 was reclassified from “Service fees,
transaction processing and customisation” to “Comprehensive packages”. In addition, under Merchant
solutions, amounts of €2,016,958 and €24,270 were reclassified from “Service fees, transaction
processing and customisation” and “Maintenance fees” (respectively) to the “Acquiring revenue” line
item.
Processing solutions Merchant solutions
(restated)
(as reported) (restated)(as reported)
202
1
2021 2021 2021
Category of
activity
€
€ € €
Service fees, transaction processing and
customisation
16,145,
211
18,681,693 - 2,016,958
Maintenance fees
-
- - 24,270
Comprehensive packages
2,536,482
- - -
Acquiring revenue
-
- 2,041,228 -
In Note 23.5, under the Group figures, an amount of €17,055 has been reclassified from “Other expenses”
to “Impairment on intangible asset”.
THE GROUP
(restated) (as reported)
2021 2021
Impairment on intangible asset
17,055 -
Other expenses
3,370,036 3,387,091
Annual Report & Financial Statements | Page 188
Independent Auditors’
Report
rs2.com
RS2 Software p.l.c.
RS2 Buildings, Triq Il-Fortizza,
Il-Mosta MST 1859
Malta
+356 2134 5857
info@rs2.com