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rs2.com
Annual Report & Financial Statements
2023
RS2 PLC
Annual Report and Financial Statements | Page 2
Table of Contents
Annual Report
Who We Are ............................................................................................................................................. 04
Chairman’s Statement ............................................................................................................................. 08
CEO’s Statement ....................................................................................................................................... 11
Board of Directors.................................................................................................................................... 20
Corporate Social Responsibility .............................................................................................................. 24
Directors’ Report ...................................................................................................................................... 28
Corporate Governance Statement of Compliance ................................................................................. 41
Remuneration Report ................................................................................................................................ 51
Statement of the Directors pursuant to Capital Market Rule 5.68 ........................................................ 55
Company Information .............................................................................................................................. 56
Directors’ Responsibility for the Financial Statements .......................................................................... 57
Financial Statements
Statements of Financial Position............................................................................................................. 59
Statements of Profit or Loss .................................................................................................................... 61
Statements of Comprehensive Income .................................................................................................. 62
Statements of Changes in Equity............................................................................................................ 63
Statements of Cash Flows ...................................................................................................................... 67
Notes to the Financial Statements .......................................................................................................... 69
Independent Auditors’ Report ............................................................................................................... 192
Annual Report and Financial Statements | Page 3
Annual Report
Annual Report and Financial Statements | Page 4
Who We Are
A global payments technology leader
RS2 is a leading provider of global omnichannel payment
software and processing solutions for both issuing and
acquiring on one single platform.
The RS2 global, cloud-native platform provides an end-to-
end payment solution to banks, large financial institutions,
integrated software vendors (ISVs), payment facilitators
(PayFacs), independent sales organisations (ISOs), and
merchants throughout Europe, North America, Latin America
(LATAM), the Asia Pacific (APAC) region, and the Middle East
– covering travel, hospitality, retail, gaming, FX, health care
and more. Our 35-year track record and reliable technology
makes us a trusted partner for the full payments ecosystem.
Following the approval and issuance of an Electronic Money
Institution (EMI) licence by the German regulator, the German
Federal Financial Supervisory Authority (BaFin), for the
Group’s subsidiary RS2 Financial Services GmbH, the Group
is now a leading, full service, global payments player.
Our Vision
To deliver global, scalable, agile solutions combined with best
in-class customer service across the entire payments value
chain.
Our Mission
To empower the payments ecosystem to benefit from the
digitalization of financial services by removing complexity
and opening up opportunities that deliver success for their
business.
35+
Years of
experience
7
Global
offices
31bn
Transactions
per year
40+
Countries
served by RS2
80mn
Transactions
per hour
Top 20
Acquirers
choose RS2
8.6K
Authorizations
per second
>99.99%
Platform
uptime
480+
Employees
Global
Reach
with local
presence
RS2 Today
Annual Report and Financial Statements | Page 5
Who We Are (continued)
Our Solutions
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.
RS2 global platform
The Group’s BankWORKS® platform is built on a state-of-the-art Ap plication 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.
This allows our clients to get to market fast, customize their payments processes, and adapt with ease
as market demand evolves.
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.
Merchant
Network / Card Scheme
Consumer / Card Holder
Annual Report and Financial Statements | Page 6
Who We Are (continued)
Processing Solutions
A full-feature end-to-end processing solution for issuing and acquiring through a single API 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.
Software Solutions
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 licences 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.
Annual Report and Financial Statements | Page 7
Who We Are (continued)
Merchant Solutions
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
Chairman’s Statement
Annual Report and Financial Statements | Page 9
Chairman’s Statement
Mario Schembri
Chairman
I am pleased to say that 2023 may be considered as being a pivotal year for RS2. After
several months of negotiations, RS2 has secured another major processing outsourcing
agreement with one of the largest acquirers in the United States. This is considered to
be a milestone achievement, following the fruition and continued execution of the
Group’s growth strategy.
During the year, 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 area of operations, after obtaining an Electronic Money Institution (EMI) licence
from the German regulator, BaFin, in 2021, RS2 Financial Services GmbH has been able to offer its
solutions and services directly to merchants. Furthermore, through the passporting of its licence, RS2’s
services are available to several countries within Europe.
The EMI licence enables the Group to manage merchant funding and provide acquiring services. 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.
Annual Report and Financial Statements | Page 10
Chairman’s Statement (continued)
Under its Processing Solutions business, the Group has continued to increase its yearly processed
volumes, now reaching approximately 1.5 billion transactions on the BankWORKS® platform. This is a
20% increase over the previous year. This trend is expected to continue through further processing of
transactions of the Group’s existing and new clients.
On the Software Solutions business side, the Group now has signed on a second outsourced processing
agreement, and is now providing its services to two of the largest banks in the United States on a hybrid
licencing and processing model to deliver Global Acquiring and Issuing Services. This will further endorse
the power of our platform in the region. In the USA, the Group will continue to offer acquiring processing
to Payment Facilitators (PayFacs), Payment Service Providers (PSPs) and Independent Sales
Organisation (ISOs). We expect to be able to attract tier one financial institutions and banks of all sizes.
Indeed financial institutions and banks are increasingly opting for outsourcing models for their payments
processing operations in order to lower costs, reduce complexity and minimise risks.
I would like to take this opportunity to thank our team members in all regions 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.
Mario Schembri
Chairman
23 April 2024
Annual Report and Financial Statements | Page 11
CEO’s Statement
Annual Report and Financial Statements | Page 12
CEO’s Statement
Radi Abd El Haj
Chief Executive Officer
Following a series of demanding years marked by exceptional market circumstances,
RS2 has closed 2023 on a positive trajectory by securing various processing
outsourcing deals with leading acquirers globally while also gaining traction in the
acquiring sector in Europe. These major accomplishments highlight RS2's resilience
and effective long-term planning, made achievable through the commitment of a
dedicated global team, management and board of directors.
Strong Business Performance in 2023
The financial results results of 2023 show an increase in revenue when compared to the previous year,
in a time when RS2 was still recovering from various market challenges. Alongside the ongoing effects
of the COVID-19 pandemic, the Russian invasion of Ukraine exacerbated the global economic slowdown,
leading to a period of slow growth and heightened inflation. In contrast to previous years where
customers postponed projects or minimized investments, we are currently witnessing a notable increase
in client inquiries and demands, indicating a positive shift in the business landscape.
Annual Report and Financial Statements | Page 13
CEO’s Statement(continued)
Subsidiaries Update
RS2 p.l.c. and its subsidiaries continue broadening their business across regions and lines of operation,
evolving from licencing to processing, and now also to acquiring business in Europe.
RS2 Smart Processing Limited
RS2 Smart Processing Limited is committed to delivering cutting-edge payment solutions and top-tier
services to our global customers and partners, tailored to their ever-changing market needs within the
dynamic payment landscape. Through strategic investments in robust and scalable cloud infrastructure,
we ensure seamless integration via user-friendly APIs while ensuring comprehensive security measures
to safeguard sensitive payment data.
Beyond technological advancement, we prioritize customer support and partnership relationships. By
automating operations and integrating robotics to enhance efficiency, we free up resources allowing
also for further innovation. Our dedicated support team operates 24-hours a day, 7-days a week, 365-
days per year, through the ‘following the sun’ principle possible by operating from various regions
globally, to promptly address any technical issues or inquiries and ensuring utmost client satisfaction.
We also collaborate with other technology partners in order to complement our service offering. This
includes loyalty and reward programs, cashier systems, soft-POS (software point of sale – revolutionary
new technology which allows merchants to accept card payments directly on their phone or devices),
and additional value-added services.
As we are managing very sensitive data we adhere to strict compliance requirements within the
payments industry, such as PCI DSS, GDPR, TIBER, and DORA, focusing on security and regulatory
requirements.
From a business perspective, RS2 Smart Processing has experienced substantial growth in new markets,
customer base and transaction volumes with over 75 billion EURO processed on our private cloud in the
past twelve months, marking a 20% increase from the previous year. We attribute this growth to strong
client relationships and expanded services, enabling rapid merchant and cardholder onboarding and
market expansion.
Additionally, we are set to provide state-of-the-art issuing services to payment service providers (PSPs)
and independent sales vendors (ISVs), leveraging our platform's capabilities for loans, funding,
purchasing, and B2B (business to business) transactions. Implementations are underway in Europe, Asia
Pacific, and Latin America, while also negotiating further processing agreements.
Annual Report and Financial Statements | Page 14
CEO’s Statement(continued)
Continuing on our commitment for innovation, we continue to enhance reporting tools to empower
clients in making informed decisions and optimizing payment processes based on data-driven insights.
With a focus on continuous innovation, reliability, customer-centricity, and compliance, we position
ourselves as a leading technology payment processor, driving growth and success for our clients and
our business alike.
RS2 Software Inc.
RS2 Software Inc., the Group’s US arm, operates across three primary lines of business:
• Acquiring Processing for ISVs, PayFacs, and ISOs
Throughout 2023, RS2 Software Inc. secured seven processing agreements with significant ISVs
and PayFacs, with plans to roll out services for some of them in the latter half of 2024. The company's
strategic focus is on attracting large ISVs and PayFacs, positioning itself for international expansion.
RS2 has cultivated robust relationships with major payment schemes, solidifying its position as a
preferred processing partner. These partnerships are poised to drive business growth not only in the
US but also globally. Currently, negotiations are underway for an additional five deals, with a
promising pipeline extending into 2024/2025.
• Enterprise Managed Services for Tier One Financial Institutions
RS2 Software Inc. secured a six-year processing agreement with one of the top five acquirers in the
US. The project's scope involves building the entire processing infrastructure on the cloud and
overseeing daily operations, from merchant onboarding to clearing and settlement, up to merchant
statementing. The company is actively pursuing similar engagements with other enterprises within
this business model.
• Issuing Processing
Having completed the development of its service offering and product portfolio, RS2 Software Inc.
has partnered with a regional technology provider offering core banking services to community
banks. This partnership will facilitate the launch of issuing processing services once a bank
sponsorship is secured.
Annual Report and Financial Statements | Page 15
CEO’s Statement(continued)
RS2 Financial Services GmbH
RS2 Financial Services GmbH, a licenced financial entity regulated by German authorities, now operates
under https://www.beyondbyrs2.com/, offering services directly to merchants and expanding its reach
to other European countries.
To facilitate business scalability, the company has entered into distribution agreements with various
ISOs in Germany that cater to small and medium-sized merchants, while its sales team focuses on larger
merchant enterprises. This symbiotic partnership allows partners to concentrate on merchant sales and
service, while RS2 Financial Services GmbH provides acquiring licences and processing services.
In a bid to offer comprehensive services, the company has collaborated with various providers to furnish
additional offerings such as cashier systems, point-of-sale (POS) machines, soft-POS solutions, and
loyalty and reward programs tailored to small and medium-sized merchants.
Embracing a digital approach, RS2 Financial Services GmbH provides APIs for partners to seamlessly
onboard and service their merchant base. This streamlined process has attracted over twelve partners,
enabling rapid onboarding of merchants within hours, a significant improvement over the weeks-long
process experienced by partners in the German market.
Moreover, large European and multinational merchants are targeted and serviced through the company's
dedicated key account management team.
As RS2 Financial Services GmbH embarks on its growth journey, the diligent execution of its business
strategy is poised to establish the company as a prominent leader in the European issuing and acquiring
market.
RS2 Software APAC Inc.
RS2 Software APAC Inc. continues to play a crucial role in supporting the development and operations
of the Group, serving as an extension of the global team. Concurrently, it oversees client relationships
and support within the Asia Pacific market. In anticipation of emerging payment trends in Asia, the
company has also pioneered the development of a payment application for InstaPay, a real-time
alternative payment method in the region. This application enables consumers to make payments using
digital cards stored within the app, facilitating bill payments, account-to-account transfers, and other
financial services. To date, the company has secured letters of intent to provide this platform to small
and medium-sized banks as a white-label solution for their customers. Additionally, the company is
actively exploring outsourcing opportunities with banks in the Philippines.
Annual Report and Financial Statements | Page 16
CEO’s Statement(continued)
RS2 Germany GmbH
RS2 Germany GmbH's Product team remains dedicated to pioneering solutions that optimize operational
efficiency for both our Group and its clients. Our primary objective is to ensure merchants and
cardholders enjoy an exceptional user experience, cultivating loyalty and satisfaction. One notable
accomplishment is the creation of a reconciliation portal, effectively streamlining the laborious manual
processes involved in reconciling acquiring business. Moreover, we've launched a merchant portal
providing access to transactional, reporting, and financial data, thereby empowering our clients further.
The Portal provides an integrated workflow enhancing customer service and reducing customers’ service
calls. The team also continues to enhance the merchant’s onboarding journey by providing digital
onboarding tools to ensure a quick and fully complaint process. A partner portal was also provided to
help acquirers increase their sales and profitability, which enhances the cooperation between ISVs, ISO’s
PayFacs and their acquirers. A new product initiative is currently also being built which will provide an
acquirer with predication tools aimed at reducing the attrition rate of their customers.
The Product team is currently focused on developing new open banking products and services. These
offerings will be available to all our clients across various business lines, including processing within RS2
Smart Processing, as well as for issuing and acquiring through RS2 Financial Services GmbH.
Additionally, these innovations will extend to our licenced clients within RS2 p.l.c..
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 2024 and beyond. In 2023, 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.
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.
Annual Report and Financial Statements | Page 17
CEO’s Statement(continued)
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 a software as a service model.
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 past years, our
dedicated Technology team have been working on the enhancement of our platforms from the
infrastructure perspective as well as from the product technology point of view , by selecting the right
technologies to best support our customers and our colleagues across the globe, both from a technology
and a delivery perspective allowing 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 also 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 interfaces (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. 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.
Annual Report and Financial Statements | Page 18
CEO’s Statement(continued)
RS2 is also working on launching its new Partner Portal, which will provide Payfacs (payment facilitators),
ISVs (independent software vendors) and PSPs (payment service providers) 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 80 million
transactions per hour (i.e., 31billion transactions per year or 8.6k authorisations per second). This
achievement lowers 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 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 is also investing 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.
Annual Report and Financial Statements | Page 19
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 2024 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
23 April 2024
Annual Report and Financial Statements | Page 20
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 21
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, insurance and software. He is currently CEO of a listed entity
actively involved in strategic corporate finance. 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 22
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 p.l.c.
(previously 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.
Natalie Strange
Non-Executive Director
Natalie Strange, Corporate Strategy Director- Barclaycard Payments is a proven leader within the
payments industry with 19 years of experience within the Barclays Group. Natalie Strange supports the
Barclaycard Payments executive team shape commercial strategy for Corporate and Small Business
segments across the Issuing and Acceptance business. Natalie Strange has extensive customer
experience spanning holding various leadership posts within Barclaycard Payments from leading
International and Ecommerce Account teams and UK New Business teams for Barclaycard Payments,
Acceptance and Specialist Products.
Annual Report and Financial Statements | Page 23
Board of Directors (continued)
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.
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 is a Partner at
GTG Advocates.
Annual Report and Financial Statements | Page 24
Corporate Social Responsibility
Our Values
We innovate, we collaborate, we empower
RS2’s values reflect our objectives internally and externally, our priorities, and the beliefs by how we
conduct ourselves and carry out business activities. They guide all of us in everything we do and in how
we engage with each other and our surroundings.
KSU Freshers‘ Week
Ladybird Foundation
Luxol St. Andrews
Futsal Club
Wildlings OCR
ICTSA Industry Expo
Annual Report and Financial Statements | Page 25
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 26
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 27
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 28
Directors’ Report
For the year ended 31 December 2023
The Directors present their report, together with the financial statements of RS2 p.l.c. (previously 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 2023.
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
Ms. Natalie Strange
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 licence 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
The Group has made strong progress and executed its key strategic priorities at a steady pace. In 2023,
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 Group has secured a major processing outsourcing agreement with one of the largest acquirers in
the United States thereby securing another Tier 1 bank under its enterprise managed services. 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:
Annual Report and Financial Statements | Page 29
Directors’ Report (continued)
• 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 company has executed letters of intent
with clients in Europe, Asia Pacific and Latin America, for which implementation has already started,
while also negotiating several processing agreements.
In Asia Pacific (APAC), the Group developed 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.
The Group’s investment in human resources provides the necessary support to successfully launch the
new acquiring business and obtain the EMI Licence, through BaFin. This enabled RS2 to provide a wide
range of payment acceptance and other financial services to merchants and consumers across Europe
and 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 licence 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 licence, 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.
During the year under review, the Company registered revenues from its principal activities of €18.2m
(2022: €19.7m) and a profit before tax of €2.3m (2022: €1.8m). 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 €13.6m (2022: €11.7m) and a profit before tax of
€1.2m (2022: €4m) 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 €17.2m (2022:
€14.7m) and a profit before tax of €2.0m (2022: loss before tax of €0.1m). 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
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
€39.7m (2022: €37.5m) and registered a profit before tax of €1.4m (2022: €1.8m). At 31 December 2023,
the Group’s total assets amounted to €49.4m (2022: €43.4m), whereas its current assets exceeded its
current liabilities by €0.04m (2022: €3.6m).
Annual Report and Financial Statements | Page 30
Directors’ Report (continued)
The Board of Directors is confident that the Group can continue to operate as a going concern for the
12 months from the end of the reporting period 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 12 to 19 of
this Annual Report.
Key Figures
The Group
2023
2022
2021
2020
2019
€
€
€
€
€
Revenues (Eur 000s)
39,672
37,516
38,680
26,813
22,100
EBITDA (Eur 000s)
4,138
3,800
8,760
(1,464)
(210)
EBITDA margin (%)
10.43%
10.13%
22.65%
-5.46%
-0.95%
Profit/(loss) before tax (Eur 000s)
1,438
1,778
6,416
(3,889)
(2,115)
Earnings per ordinary share (Euro)
-€0.00
€0.00
€0.02
-€0.02
-€0.01
Earnings per preference share (Euro)
-€0.00
€0.00
€0.02
-
-
Equity to asset ratio (%)
46.75%
55.71%
53.41%
18.56%
44.28%
Debt/equity ratio multiple
1.14
0.80
0.87
4.39
1.26
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.
Reserves
Retained earnings amounting to €22.4m (2022: €24.0m) for the Company and retained losses of €0.9m
(2022: retained earnings of €2.6m) for the Group are being carried forward.
Dividends
On 30
th
August 2023, the Directors authorised the distribution of an interim scrip dividend of €3,000,000
where each Ordinary and Preference Shareholder was giving the option to receive either cash or new
Ordinary Shares or Preference Shares as applicable, at an attribution price of €1.23 per Ordinary Share
and €1.43 per Preference Share. The net dividend was equivalent to €0.01c315 per Ordinary Share and
€0.01c446 per Preference Share.
An amount of €1,344,297.88 was paid in cash, whilst a total of 1,313,974 new Ordinary Shares and a
total of 28,320 new Preference Shares were allotted.
Annual Report and Financial Statements | Page 31
Directors’ Report (continued)
The Group continues to focus on its growth strategy, which 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 2023 (2022: nil).
Conflicts shaping the economic environment
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.
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 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.
Following the conflict in the Middle East, the impact on energy and financial markets has been limited
and temporary. After an initial surge, oil prices retreated and are now below pre-conflict levels, reflecting
changes in global demand conditions (as there was no disruption to oil production). Natural gas prices
have also come down after a large spike but are still about 25 percent above pre-conflict levels.
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 and the Middle East will evolve.
Going Concern
Management has prepared a going concern assessment for RS2 Group, based on the 2023 financials
whilst also taking into consideration approved budgets covering periods 2024 to 2026.
The 2023 financial results for the Group show growth in revenue compared to prior year. The decline in
Company revenues was 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 32
Directors’ Report (continued)
Amplifying the repercussions resulting from the COVID-19 pandemic, the Russian invasion of Ukraine
magnified the slowdown in the global economy in 2022 which entered a period of feeble growth and
elevated inflation. This had affected the Group’s forecast for the year by way of customers delaying
projects or stretching investments to bare minimum. The Group experienced a positive turnaround
towards the end of 2022 which continued into 2023 whereby investment from clients resumed.
With the onboarding of new clients, RS2 has processed approximately 1.5 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.
During the last few decades, as the payments industry has grown, it has rapidly embraced new
technologies, in the process opening new avenues to serve customers. Along with these changes, the
composition of revenue sources has been evolving. Cash usage has decreased rapidly over the past five
years. Net interest margin is driving a greater share of growth, and players are moving into less
penetrated areas of the payments value chain. Together, these changes suggest that the industry is
poised to be defined by a new business model.
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 2024 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 2024 and beyond.
From a profitability viewpoint, in 2023, both Software (Licensing) and Managed Services Solutions have
delivered a positive bottom-line contribution. Under Merchant Solutions, 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 is confident in its ability to meet any working capital
requirements.
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.
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.
Annual Report and Financial Statements | Page 33
Directors’ Report (continued)
Pursuant to Capital Market Rule 5.64
Rule 5.64.1 - Share capital structure
The Company’s authorised share capital is of €21,600,000, divided into €18,000,000 Ordinary Shares
and €3,600,000 Preference Shares.
Ordinary Share Capital
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 €13,104,222 divided into
218,403,701 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 34
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.
Preference Share Capital
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 €608,499
divided into 10,141,649 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 35
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 2023, Information
Technology Management Holding Limited (ITM) and Barclays Bank P.l.c. (Barclays) hold 109,799,922
and 39,618,896 ordinary shares respectively, equivalent to 48.04% and 17.34% of the Company’s total
issued share capital.
Annual Report and Financial Statements | Page 36
Directors’ Report (continued)
In his capacity as ultimate shareholder of ITM, Radi Abd El Haj directly and indirectly holds 48.36% 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 subsidiary’s share option scheme is administered by the Board of Directors of the relative
subsidiary. 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.
Annual Report and Financial Statements | Page 37
Directors’ Report (continued)
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.
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 27 June 2022, 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
2023, the Company had eighty one million, five hundred and ninety six thousand, two hundred and ninety
nine (81,596,299) Ordinary Shares and forty nine million eight hundred and fifty eight thousand, three
hundred and fifty one (49,858,351) 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 38
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
2023.
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.
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
• 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.
Annual Report and Financial Statements | Page 39
Directors’ Report (continued)
• 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.
• 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
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.
• 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
Annual Report and Financial Statements | Page 40
Directors’ Report (continued)
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.
• 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.
Subsequent Events
Chief Commercial Officer no longer engaged by the Company
On 12th January 2024, the Company announced that the Chief Commercial Officer is no longer engaged
by the Company with immediate effect.
Approved by the Board of Directors on 23 April 2024 and signed on its behalf by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 41
Corporate Governance Statement of
Compliance
For the year ended 31 December 2023
Pursuant to the Malta Financial Services Authority Capital Market Rules 5.94 and 5.97, RS2 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 2023, 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 42
Corporate Governance Statement of
Compliance (continued)
The Chairman is also responsible for communicating with shareholders. During 2023, 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 2023, 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 43
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.
An Internal Audit function has been set up and the Committee constantly monitors and assesses 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 2023. The Company Secretary, Dr. Ivan Gatt, acts as secretary to the Committee.
Annual Report and Financial Statements | Page 44
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: 4
Attended
Mr. Franco Azzopardi 4
Dr. Robert Tufigno 2
Prof. Raša Karapandža 4
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 45
Corporate Governance Statement of
Compliance (continued)
The Board meetings were attended as follows:
Meetings held: 3
Attended
Executive Director
Mr. Radi Abd El Haj (CEO) 3
Non-executive Directors
Mr. Mario Schembri (Chairman) 3
Dr. Robert Tufigno 3
Mr. Franco Azzopardi 3
Mr. John Elkins 3
Prof. Raša Karapandža 3
Mr. David Price (resigned 2 May 2023) 1
Ms. Natalie Strange (appointed 2 May 2023) -
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 46
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 51 to 54. 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 47
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 48
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 provisions 9.3 and 9.4): 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 49
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 systems 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 50
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 forty 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.
Mario Schembri Radi Abd El Haj
Chairman Director
23 April 2024
Annual Report and Financial Statements | Page 51
Remuneration Report
For the year ended 31 December 2023
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 two (2) meetings during the period under review.
Attended
Dr. Robert Tufigno 2
Mr. Franco Azzopardi 2
Mr. Mario Schembri 2
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 persons 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 52
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 2023.
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 an allowance in relation to 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 €484,562
Variable Remuneration €200,000
Fixed remuneration as full-time employees of the Company €756,127
Others €42,354
Annual Report and Financial Statements | Page 53
Remuneration Report (Continued)
Directors' total remuneration, split out by component, for the financial year ended 31 December 2023,
was as follows:
Fixed
Remuneration
Variable
Remuneration
Fixed
remuneration
as full-time
employees of
the Company
Others
Total
€
€
€
€
€
Mr. Mario Schembri (Chairman)
201,944
-
-
-
201,944
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
14,118
-
-
42,354
56,472
Prof. Raša Karapandža
61,500
-
-
-
61,500
Mr. David Price*
-
-
-
-
-
Ms. Natalie Strange*
-
-
-
-
-
484,562
200,000
756,127
42,354
1,483,043
*Mr. David Price, who resigned as director of the Company on 2 May 2023, 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 p.l.c.. Similarly,
Natalie Strange, who was appointed as a director of the Company on the same date, is the Corporate
Strategy Director - Barclaycard Payments and is remunerated accordingly by Barclays Group.
In terms of Code Provision 8.A.5 of the Malta Financial Services Authority Capital Market Rules, Mr. Radi
Abd El Haj received remuneration of €120,000 by one of the subsidiaries during the financial year ended
31 December 2023. The total emoluments Mr. Radi Abd El Haj was entitled to for this financial year
amounted to €1,130,127. Mr. John Elkins has received remuneration of $60,000 by another subsidiary
during the financial year ended 31 December 2023. The total emoluments Mr. John Elkins was entitled
to for this financial year amounted to €111,962.
The Remuneration Committee is guided by its Terms of Reference 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 Terms of Reference; 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 2023 were based on the 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
Annual Report and Financial Statements | Page 54
Remuneration Report (Continued)
and ensuring best practices, as well as continuing to optimise management and operational practices of
the Group.
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 €957,603
Variable Remuneration €175,000
Share-based Payments €nil
Share Options €nil
Others €nil
The following table presents the annual change of remuneration on a full-time equivalent of employees
of the Company other than directors over the most recent five financial years:
2023
2022
2021
2020
2019
Fixed Remuneration
-15%
29%
1%
-32%
18%
Variable Remuneration
-46%
1%
13%
-35%
60%
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
23 April 2024
Annual Report and Financial Statements | Page 55
Statement of the Directors pursuant to Capital
Market Rule 5.68
For the year ended 31 December 2023
We, the undersigned declare that to the best of our knowledge, the financial statements set out on pages
58 to 191 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 23 April 2024 by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 56
Company Information
For the year ended 31 December 2023
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 (resigned 2
nd
May 2023)
Ms. Natalie Strange (appointed 2
nd
May 2023)
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 57
Directors’ Responsibility for the Financial
Statements
For the year ended 31 December 2023
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 23 April 2024 by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 58
Financial Statements
Annual Report and Financial Statements | Page 59
Statements of Financial Position
As at 31 December
THE GROUP
THE COMPANY
2023
2022
2023
2022
Note
€
€
€
€
ASSETS
Property, plant and equipment
8
7,371,119
7,546,388
Right-of-use assets
9
380,279
405,080
Intangible assets and goodwill
10
15,719,363
11,689,983
Investments in subsidiaries
11
-
-
20,770,982
19,714,175
Loans receivable
13
-
-
58,690
2,110,148
Finance lease receivable
9
-
-
Total non-current assets
44,300,433
41,465,774
Trade and other receivables
13
22,036,471
21,504,839
Finance lease receivable
9
-
-
Loans receivable
13
2,065,161
22,667
Prepayments
751,963
610,081
Accrued income and contract assets
14
277,900
435,806
Inventories
12
-
-
Cash at bank and in hand
15
1,605,388
186,109
Total current assets
26,736,883
22,759,502
Total assets
71,037,316
64,225,276
Annual Report and Financial Statements | Page 60
Statements of Financial Position (Continued)
As at 31 December
THE GROUP
THE COMPANY
2023
2022
2023
2022
Notes
€
€
€
€
EQUITY
Ordinary Share Capital
16
13,104,222
13,025,383
Preference Share Capital
16
608,499
606,800
Reserves
16
13,604,356
11,995,697
Retained (losses)/earnings
16
(911,757 )
22,414,540
24,036,138
Total equity attributable
to equity holders of the
Company
49,731,617
49,664,018
Non-controlling interest
11
(3,078,949 )
(3,724,251 )
-
-
Total equity
49,731,617
49,664,018
LIABILITIES
Bank borrowings
17
187,110
620,748
Lease liabilities
9
398,949
418,614
Employee benefits
27,28
3,036,968
3,006,384
Deferred tax liability
18
2,622,818
2,231,346
Total non-current
liabilities
6,245,845
6,277,092
Bank borrowings
17
6,934,572
511,854
Trade and other payables
19
5,239,822
2,495,123
Lease liabilities
9
19,665
16,329
Current tax payable
608,444
1,556,904
Accruals
20
1,114,290
1,806,309
Provisions
31
-
116,523
Employee benefits
27,28
-
-
Deferred income
20
1,143,061
1,781,124
Total current liabilities
15,059,854
8,284,166
Total liabilities
21,305,699
14,561,258
Total equity and liabilities
71,037,316
64,225,276
The accompanying Notes on pages 69 to 191 are an integral part of these financial statements.
Approved and authorised for issue by the Board of Directors on 23 April 2024 on its behalf by:
Mario Schembri Radi Abd El Haj
Chairman Director
Annual Report and Financial Statements | Page 61
Statements of Profit or Loss
For the year ended 31 December
THE GROUP
THE COMPANY
2023
2022
2023
2022
Note
€
€
€
€
Revenue
21
18,168,105
19,723,729
Cost of sales
(24,920,429 )
(25,679,758 )
(11,606,544)
(13,585,802)
Gross profit
6,561,561
6,137,927
Other income
22
69,528
28,028
Marketing and promotional
expenses
(2,201,491 )
(1,634,528 )
(476,078)
(432,405)
Administrative expenses
(10,254,676 )
(10,339,684 )
(3,026,165)
(4,625,102)
Other expenses
22
(142,164 )
(67,098 )
(10,151)
(16,561)
Exchange (loss)/gain on
operating activities
22
(586,363 )
(454,433)
518,006
Impairment loss on trade
receivables and contract
assets
22
(336,829 )
(135,733 )
(330,941)
(133,418)
Reversal for legal claims and
related expenses
116,512
290,973
Results from operating activities
2,449,833
1,767,448
Finance income
23
118,672
65,076
Finance costs
23
(306,297 )
(82,503 )
(257,322)
(56,977)
Net finance (costs)/income
(263,678 )
(36,494 )
(138,650)
8,099
Profit before income tax
22
2,311,183
1,775,547
Income tax expense
24
(1,394,974 )
(2,028,433 )
(931,797)
(633,896)
Profit/(Loss) for the year
(249,991 )
1,379,386
1,141,651
(Loss)/Profit for the year
attributable to:
Owners of the Company
(513,855 )
(64,408 )
1,379,386
1,141,651
Non-controlling interest
(185,583 )
-
-
Profit/(Loss) for the year
(249,991 )
1,379,386
1,141,651
(Loss)/Earnings per ordinary
share
25
-€ 0.002
€0.000
€ 0.006
€0.005
(Loss)/Earnings per preference
share
25
-€ 0.002
€0.000
€ 0.007
€0.005
The accompanying Notes on pages 69 to 191 are an integral part of these financial statements.
Annual Report and Financial Statements | Page 62
Statements of Comprehensive Income
For the year ended 31 December
THE GROUP
THE COMPANY
2023
2022
2023
2022
Note
€
€
€
€
Profit/(Loss) for the year
(249,991 )
1,379,386
1,141,651
Other comprehensive income
Items that are or may be
reclassified to profit or loss
Foreign currency translation
differences on foreign
operations
(429,215 )
-
-
Items that will not be
reclassified to profit or loss
Remeasurement in net
defined benefit liability
27
32,510
531,638
32,510
531,638
Total comprehensive
income/(loss)
(73,192 )
1,411,896
1,673,289
Total comprehensive
(loss)/income attributable
to:
Owners of the Company
(337,187 )
1,411,896
1,673,289
Non-controlling interest
(340,534 )
-
-
Total comprehensive
income/(loss) for the year
(73,192 )
1,411,896
1,673,289
The accompanying Notes on pages 69 to 191 are an integral part of these financial statements.
Annual Report and Financial Statements | Page 63
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 2023
(453,418 )
(1,094,150 )
(3,724,251 )
Comprehensive income for the
year
(Loss)/Profit for the year
(513,855 )
(513,855 )
Other comprehensive income
Foreign currency translation
differences
Remeasurement in net defined
benefit liability
27
Total other comprehensive
income for the year
Total comprehensive
income/(loss) for the year
(513,855 )
(337,187 )
Transactions with owners of
the Company
Scrip issue
16
(1,656,687 )
Cash dividends
16
(1,344,297 )
(1,344,297 )
(1,344,297 )
(3,000,984 )
(1,344,297 )
(1,344,297 )
Balance at 31 December 2023
(313,971 )
(1,056,929 )
(911,757 )
(3,078,949 )
The accompanying Notes on pages 69 to 191 are an integral part of these financial statements.
Annual Report and Financial Statements | Page 64
Statements of Changes in Equity (Continued)
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
27
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
16
(1,514,693 )
Share Options Exercised
(53,613 )
Acquisition of NCI without a change
in control
16
(76,039 )
(3,129,398 )
(3,205,437 )
(947,807 )
Reclass of controlling and
non-controlling profit
16
(848,600 )
(1,514,693 )
(11,553 )
(53,613 )
(2,291,671 )
(2,356,837 )
(947,807 )
Vested share-based payments
28
(255,000 )
(255,000 )
(255,000 )
Balance at 31 December 2022
(453,418 )
(1,094,150 )
(3,724,251 )
Annual Report and Financial Statements | Page 65
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 2023
13,025,383
606,800
13,187,198
-
-
(1,191,501)
24,036,138
49,664,018
Comprehensive income for the year
Profit for the year
-
-
-
-
-
-
1,379,386
1,379,386
Other comprehensive income
Remeasurement in net defined benefit
liability
27
-
-
-
-
-
32,510
-
32,510
Total other comprehensive income for the
year
-
-
-
-
-
32,510
-
32,510
Total comprehensive income for the year
-
-
-
-
-
32,510
1,379,386
1,411,896
Transactions with owners of the Company
Scrip issue
16
78,839
1,699
1,576,149
-
-
-
(1,656,687)
-
Cash dividends
16
-
-
-
-
-
-
(1,344,297)
(1,344,297)
78,839
1,699
1,576,149
-
-
-
(3,000,984)
(1,344,297)
Balance at 31 December 2023
13,104,222
608,499
14,763,347
-
-
(1,158,991)
22,414,540
49,731,617
The accompanying Notes on pages 69 to 191 are an integral part of these financial statements.
Annual Report and Financial Statements | Page 66
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
539,376
14,701,891
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
27
-
-
-
-
-
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
16
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
28
-
-
-
(255,000)
-
-
-
(255,000)
Balance at 31 December 2022
13,025,383
606,800
13,187,198
-
-
(1,191,501)
24,036,138
49,664,018
Annual Report and Financial Statements | Page 67
Statements of Cash Flows
For the year ended 31 December
THE GROUP
THE COMPANY
2023
2022
2023
2022
Notes
€
€
€
€
Cash flows from operating activities
Profit/(Loss) for the year
(249,991 )
1,379,386
1,141,651
Adjustments for:
Depreciation
8, 9
279,383
283,733
Amortisation of intangible assets
10
1,366,422
909,604
Provision for expected credit losses
22
330,941
132,714
Bad debts and contract assets written off
22
-
704
Interest expense
23
256,736
55,164
Interest income
23
(42,619 )
(46,009 )
(118,672)
(65,076)
Provisions
31
(124,392 )
(256,594 )
(116,523)
(290,973)
Unwinding of discount on
post-employment benefits
27
63,094
64,734
Unwinding of discount on deposit
(3,023 )
-
-
Employee share benefits
28
-
-
Loss on disposal of property, plant and
equipment
22
-
7,647
Income tax
24
931,797
633,897
Provision for exchange fluctuations
22, 23
(1,123,313 )
647,276
(124,543)
Property, plant and equipment write-offs
8
-
-
5,019,840
2,749,256
Changes in trade and other receivables
(3,240,221 )
27,211
1,137,633
Changes in trade and other payables
(2,692,154 )
6,030,246
(81,723)
Change in other related parties’ balances
(33,440 )
(529 )
(233,846)
(193,422)
Inventories
(176,637 )
(324,359 )
-
-
Employee benefits
28
(255,000 )
-
(255,000)
Cash generated from operating activities
10,843,451
3,356,744
Interest paid on bank loan and overdraft
17
(240,859 )
(42,630 )
(240,859)
(42,624)
Interest paid on lease liabilities
9
(58,402 )
(56,308 )
(12,080)
(12,540)
Post-employment benefit paid during the
year
27
(26,440 )
-
-
Interest received
76,136
39,393
Income taxes paid
(1,907,837 )
(1,543,082 )
(1,488,782)
(1,495,383)
Net cash generated from/(used in) operating
activities
(1,108,303 )
9,177,866
1,845,590
Cash flows from investing activities
Acquisition of property, plant and equipment
8, 32
(102,536 )
(222,170 )
(79,313)
(79,233)
Acquisition of intangible asset
10
(92,498 )
(150,000 )
-
-
Acquisition of right-of-use asset
32
(5,000 )
-
-
Capitalised development costs
10
(4,748,582 )
(2,740,347 )
(5,395,802)
(3,504,078)
Advances to subsidiaries
-
-
(1,850,000)
(6,305,225)
Repayment of advances from subsidiaries
-
-
843,193
7,475,406
Finance lease receipts
9
-
-
Net cash used in investing activities
(4,801,721 )
(3,012,063 )
(6,481,922)
(2,413,130)
Annual Report and Financial Statements | Page 68
Statements of Cash Flows (Continued)
For the year ended 31 December
THE GROUP
THE COMPANY
2023
2022
2023
2022
Notes
€
€
€
€
Cash flows from financing activities
Dividends paid
16, 32
(815,024 )
(815,024)
-
Repayments of bank borrowings
17
(444,163 )
(489,861 )
(444,163)
(489,861)
Repayment of lease liabilities
(518,544 )
(470,196 )
(16,329)
(15,869)
Net cash used in financing activities
(1,777,731 )
(960,057 )
(1,275,516)
(505,730)
Net movement in cash and cash equivalents
(5,080,423 )
1,420,428
(1,073,270)
Cash and cash equivalents at 1 January
185,546
1,260,630
Effect of exchange rate fluctuations on cash
held
(33,828 )
(586)
(1,814)
Cash and cash equivalents at 31 December
15
1,605,388
185,546
Non-cash financing and investing activities
32
The accompanying Notes on pages 69 to 191 are an integral part of these financial statements.
Annual Report and Financial Statements | Page 69
Notes to the Financial
Statements
Annual Report and Financial Statements | Page 70
Notes to the Financial Statements
1 Reporting Entity
and incorporated in Malta with registration number C25829. The registered address of the Company is
for the year ended 31 December 2023 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 Accounting 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 material 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 2023 financials
whilst also taking into consideration approved budgets covering periods 2024 to 2026.
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 and Financial Statements | Page 71
2 Basis of Preparation (Continued)
2.1 Statement of Compliance (Continued)
2.1.2 Going Concern (Continued)
The 2023 financial results for the Group show growth in revenue compared to prior year. 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.
Amplifying the repercussions resulting from the COVID-19 pandemic, the Russian invasion of Ukraine
magnified the slowdown in the global economy in 2022 which entered a period of feeble growth and
elevated inflation. This had affected the Group’s forecast for the year by way of customers delaying
projects or stretching investments to bare minimum. The Group experienced a positive turnaround
towards the end of 2022 which continued into 2023 whereby investment from clients resumed.
With the onboarding of new clients, RS2 has processed approximately 1.5 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.
During the last few decades, as the payments industry has grown, it has rapidly embraced new
technologies, in the process opening new avenues to serve customers. Along with these changes, the
composition of revenue sources has been evolving. Cash usage has decreased rapidly over the past five
years. Net interest margin is driving a greater share of growth, and players are moving into less
penetrated areas of the payments value chain. Together, these changes suggest that the industry is
poised to be defined by a new business model.
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 2024 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 2024 and beyond.
During the year under review, on consolidating all of its activities, the Group generated revenues of
€39.7m (2022: €37.5m) and registered a profit before tax of €1.4m (2022: €1.8m). At 31 December 2023,
the Group’s total assets amounted to €49.4m (2022: €43.4m),whereas its current assets exceeded its
current liabilities by €0.04m (2022: €3.6m). On the other hand, the Company registered revenues from
its principal activities of €18.2m (2022: €19.7m) and a profit before tax of €2.3m (2022: €1.8m). At 31
December 2023, the Company’s total assets amounted to €71.0m (2022: €64.2m), whereas its current
assets exceeded its current liabilities by €11.7m (2022: €14.5m).
Annual Report and Financial Statements | Page 72
2 Basis of Preparation (Continued)
2.1 Statement of Compliance (Continued)
2.1.2 Going Concern (Continued)
From a liquidity point of view, RS2 p.l.c. (previously RS2 Software p.l.c.) has an overdraft facility of €10m
with APS Bank p.l.c. to meet any working capital requirements. As at 31 December 2023 €3.6m was not
being utilised.
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 material 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 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
amounts disclosed in the financial statements and notes have been rounded off to the nearest currency
unit unless otherwise stated.
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.
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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 4.5.7
useful life of internally generated computer software, software rights and
customer and other related contractual relationship
Note 5.1.3 and
Note 28.3
cash-settled share-based payments
Note 6
recoverability assessment on trade and other receivables
Note 10.1 and
Note 10.2
capitalisation of internally generated computer software
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 21
identification of performance obligations; allocation of transaction price to
performance obligation as well as revenue recognition whether over time
or a point in time
Note 27
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 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 and Financial Statements | Page 74
2 Basis of Preparation (Continued)
2.5 Use of Estimates and Judgements (Continued)
2.5.1 Impairments 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.
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3 New Standards and Changes in Material 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 2024 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 and Non-Current Liabilities with Covenants. 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; make clear that settlement refers to the transfer to the counterparty of cash, equity
instruments, other assets or services; and introduce additional presentation and disclosure
requirements for liabilities that are subject to covenants. The amendments are effective for annual
periods beginning on or after 1 January 2024.
• 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 effective
for annual periods beginning on or after 1 January 2024.
• Amendments to IAS 7 and IFRS 7 - Disclosures: Supplier Finance Arrangements: The amendments
specify disclosure requirements to enhance the current requirements, which are intended to assist
users of financial statements in understanding the effects of supplier finance arrangements on an
entity’s liabilities, cash flows and exposure to liquidity risk. The amendments are effective for annual
periods beginning on or after 1 January 2024.
• Amendments to IAS 21 – Lack of exchangeability: This amendment specifies how an entity should
assess whether a currency is exchangeable and how it should determine a spot exchange rate when
exchangeability is lacking. The amendments are effective for annual periods beginning on or after 1
January 2025.
The Group and the Company are in the process of assessing the potential impact, if any, of these
Standards on these financial statements.
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3 New Standards and Changes in Material Accounting Policies
(Continued)
3.2 Changes in Material Accounting Policies
During the financial year ended 31 December 2023, 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 2023. 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 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 2023. The Group has adopted this change and shall
be reflected within this set of financial statements.
• 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. No
such material changes have been occurred by the Group during the current financial year.
• 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 IAS 12 – Income Taxes: International Tax Reform – Pillar Two Model Rules. The
amendments introduce a mandatory temporary exception to the accounting for deferred taxes
arising from the jurisdictional implementation of the Pillar Two model rules as well as disclosure
requirements for affected entities to help users of the financial statements better understand an
entity’s exposure to Pillar Two income taxes arising from that legislation, particularly before its
effective date. The disclosure requirements are effective for annual periods beginning on or after 1
January 2023. The Group has adopted this change and shall be reflected within this set of financial
statements.
Annual Report and Financial Statements | Page 77
4 Material 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.
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4 Material 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.
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4 Material 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.
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4 Material 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.
4.3.2 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.
4.3.3 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.
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4 Material Accounting Policies (Continued)
4.3 Financial Instruments (Continued)
4.3.4 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 Leases
4.4.1 Leases as a Lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group
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.
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4 Material Accounting Policies (Continued)
4.4 Leases (Continued)
4.4.1 Leases as a Lessee (Continued)
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 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 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. bThe Group did not make any such adjustments during
the periods presented. b
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
derlying 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
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 4.7.3.
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4 Material Accounting Policies (Continued)
4.4 Leases (Continued)
4.4.1 Leases as a Lessee (Continued)
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.
4.4.2 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.
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.
4.5 Intangible Assets
4.5.1 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.
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4 Material Accounting Policies (Continued)
4.5 Intangible Assets (Continued)
4.5.2 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.
4.5.3 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.
4.5.4 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.
4.5.5 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.
4.5.6 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 and Financial Statements | Page 85
4 Material Accounting Policies (Continued)
4.5 Intangible Assets (Continued)
4.5.7 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 and Financial Statements | Page 86
4 Material Accounting Policies (Continued)
4.6 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.
4.7 Impairments
4.7.1 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.
eImpairment 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.
4.7.2 Non-Derivative Financial Assets
4.7.2.1 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 and Financial Statements | Page 87
4 Material Accounting Policies (Continued)
4.7 Impairment (Continued)
4.7.2 Non-Derivative Financial Assets (Continued)
4.7.2.1 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 and Financial Statements | Page 88
4 Material Accounting Policies (Continued)
4.7 Impairment (Continued)
4.7.2 Non-Derivative Financial Assets (Continued)
4.7.2.1 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 and Financial Statements | Page 89
4 Material Accounting Policies (Continued)
4.7 Impairment (Continued)
4.7.2 Non-Derivative Financial Assets (Continued)
4.7.2.1 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 and Financial Statements | Page 90
4 Material Accounting Policies (Continued)
4.7 Impairment (Continued)
4.7.2 Non-Derivative Financial Assets (Continued)
4.7.2.1 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.
4.7.3 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 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 and Financial Statements | Page 91
4 Material Accounting Policies (Continued)
4.7 Impairment (Continued)
4.7.3 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.
4.8 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.
4.9 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
Annual Report and Financial Statements | Page 92
4 Material Accounting Policies (Continued)
4.9 Employee Benefits (continued)
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.
RA 7641 under Philippines law provides for the minimum retirement pay to qualified private sector
employees in the Philippines. Benefits due under RA 7641 are accounted for as defined benefit plan
under IAS 19. An employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five
(65) years which is declared the compulsory retirement age, who has served at least five (5) years in the
said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2)
month salary for every year of service, a fraction of at least six (6) months being considered as one
whole year. The Group is in compliance of the minimum requirement of RA 7641 as at December 31,
2023 and has a non-contributory defined benefit plan for its employees. The present value of the
defined benefit obligation, and the related current service cost and past service cost, were measured
using the projected unit credit method, with actuarial valuations being carried out at the end of each
annual reporting period. Remeasurements comprising actuarial gains and losses are recognised
immediately in the statement of financial position with a charge or credit to other comprehensive income
in the period in which they occur. Remeasurements recognised in other comprehensive income are not
reclassified. Past service cost is recognised in profit or loss when the plan amendment or curtailment
occurs. Net interest is calculated by applying a discount rate to the net defined benefit liability or asset.
Defined benefit costs are split into three categories:
• Service costs, which includes current service cost, past service cost and gains and losses on
curtailments and settlements
• Net interest expense or income
• Remeasurements
The group recognises service costs within profit or loss as cost of sales and administrative expenses
(Note 22.5). Net interest expense or income is recognised within finance costs (see Note 23).
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.
4.10 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.
Annual Report and Financial Statements | Page 93
4 Material Accounting Policies (Continued)
4.11 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.
In cases where there is transfer of control of a promised good or service to a customer, and this is not
yet invoiced for, the Group recognises a contract asset. Once an invoice is issued to the customer, this
contract asset is then recognised as a trade receivable. On the other hand, in cases where the Group
invoices the customer prior to transfer of control of a promised good or service happening, a contract
liability is recognised. Once the transfer of control to the customer happens, the contract liability is then
recognised as revenue.
4.11.1 Licenses
4.11.1.1 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 when
the performance obligation has been satisfied by transferring control of a promised good or service to a
customer. 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.
Annual Report and Financial Statements | Page 94
4 Material Accounting Policies (Continued)
4.11 Revenue (Continued)
4.11.1 Licenses (Continued)
4.11.1.1 Perpetual Licenses and Significant Customisation/Implementation Services
(Continued)
Such contracts are not deemed to have 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.
The Group recognises revenue on the output method as the current systems in place assess the
progress of completion based on the lifecycle of the delivery. This is deemed to be the more appropriate
method for measuring revenue over time by observing the value to the customer transferred to date
relative to the remaining deliverables promised.
4.11.1.2 Term License with the Provision 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 two 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
Annual Report and Financial Statements | Page 95
4 Material Accounting Policies (Continued)
4.11 Revenue (Continued)
4.11.1 Licenses (Continued)
4.11.1.2 Term License with the Provision Implementation Activities and Managed
Services (Continued)
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 over 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.
The Group recognises revenue on the output method as the current systems in place assess the
progress of completion based on the lifecycle of the delivery. This is deemed to be the more appropriate
method for measuring revenue over time by observing the value to the customer transferred to date
relative to the remaining deliverables promised.
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 4.11.2.
4.11.2 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.
Annual Report and Financial Statements | Page 96
4 Material Accounting Policies (Continued)
4.11 Revenue (Continued)
4.11.2 Services (Continued)
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).
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 4.11.2.1). 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, that is, when the performance obligation is satisfied by
transferring control to the client.
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.
The Group recognises revenue on the output method as the current systems in place assess the
progress of completion based on the lifecycle of the delivery. This is deemed to be the more appropriate
method for measuring revenue over time by observing the value to the customer transferred to date
relative to the remaining deliverables promised.
Annual Report and Financial Statements | Page 97
4 Material Accounting Policies (Continued)
4.11 Revenue (Continued)
4.11.2 Services (Continued)
4.11.2.1 Implementation and Customisation Fees Followed by Transaction Processing
Services
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.
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.
4.11.3 Acquiring Business
The acquiring business includes the sale and rental of payment terminals and associated maintenance
services, including consultation, installation and repairs.
4.11.3.1 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 revenue, where the performance obligation is satisfied
by transferring control, is satisfied.
Annual Report and Financial Statements | Page 98
4 Material Accounting Policies (Continued)
4.11 Revenue (Continued)
4.11.3 Acquiring Business (Continued)
4.11.3.2 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 reflecting the performance obligation
being satisfied through the transfer of control.
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.
4.11.3.3 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 reflecting the performance
obligation being satisfied through the transfer of control.
4.11.3.4 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 reflecting the performance obligation
being satisfied through the transfer of control. 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 and Financial Statements | Page 99
4 Material Accounting Policies (Continued)
4.11 Revenue (Continued)
4.11.4 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.
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.
4.11.5 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 and Financial Statements | Page 100
4 Material Accounting Policies (Continued)
4.12 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.
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.
4.13 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.
The accounting policy information about operating segments is the same as that described as part of
the material accounting policy information of the Group disclosed in Note 4.
Annual Report and Financial Statements | Page 101
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).
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 28.3.
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.
Annual Report and Financial Statements | Page 102
5 Determination of Fair Values
5.1 Measurement of Fair Values (Continued)
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.
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 and Financial Statements | Page 103
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
2023
2022
2023
2022
€
€
€
€
Non-current assets
Loans receivable from
related parties
-
-
58,690
2,110,148
Finance lease receivables
190,324
158,833
-
-
190,324
158,833
58,690
2,110,148
Current assets
Trade and other receivables
7,527,306
6,355,216
22,036,471
21,504,839
Finance lease receivables
99,890
83,619
-
-
Loans receivable from
related parties
2,107
195,862
2,065,161
22,667
Accrued income and contract
costs
3,846,197
2,130,015
277,900
435,806
Cash at bank
3,670,070
3,491,226
1,604,585
184,404
15,145,570
12,255,938
25,984,117
22,147,716
Annual Report and Financial Statements | Page 104
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 cash at bank, 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
2023
2022
2023
2022
€
€
€
€
Non-current assets
Europe
190,324
158,833
-
2,050,000
South America
-
-
58,690
60,148
190,324
158,833
58,690
2,110,148
Current assets
Europe
7,480,559
6,454,617
8,716,897
4,877,560
Middle East
158,152
487,268
144,426
472,431
South America
298,069
607,834
259
259
North America
5,523,916
3,405,277
16,803,943
16,504,333
Asia
1,684,874
1,300,942
318,592
293,133
15,145,570
12,255,938
25,984,117
22,147,716
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 2023, 34% (2022: 47%)
of the Group’s revenue is attributable to sales transactions with one major customer (2022: two 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 2023 and
2022 respectively.
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Customers situated in Europe
-
1,827,066
-
-
Customers situated in North
America
2,412,140
1,321,536
-
-
2,412,140
3,148,602
-
-
Annual Report and Financial Statements | Page 105
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
2023
2022
2023
2022
€
€
€
€
External rating grades
AA-
342,044
-
-
-
A+
805,436
3,290,265
46,425
126,415
BBB+
967,000
142,503
-
-
BBB-
13,354
708
13,354
708
Unrated
1,542,236
57,750
1,544,806
57,281
Gross/net carrying amount at
31 December
3,670,070
3,491,226
1,604,585
184,404
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
2023
2022
2023
2022
€
€
€
€
Internal rating grades
Performing*
290,214
242,452
-
-
Gross/net carrying amount at
31 December
290,214
242,452
-
-
THE GROUP
THE COMPANY
Loans receivable
2023
2022
2023
2022
€
€
€
€
Internal rating grades
Performing*
2,107
195,862
2,123,851
2,132,815
Gross/net carrying amount at
31 December
2,107
195,862
2,123,851
2,132,815
Annual Report and Financial Statements | Page 106
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
*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 2023 (2022: €nil).
THE GROUP
31 December 2023
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
7,075,049
4,843,895
-
In default
-
448,823
-
Gross carrying amount at 31
December 2023
7,075,049
5,292,718
-
Loss allowance at 31 December
2023
-
(704,050)
-
Net carrying amount at 31
December 2023
7,075,049
4,588,668
-
The following table illustrates the Group’s gross carrying amounts for its trade debtors and contract
assets as at 31 December 2023, 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
2023
Expected credit
loss rate
2.3%
1.9%
2.3%
4.5%
6.1%
75.7%
18.3%
26.7%
84.4%
85.5%
85.3%
100.0%
13.3%
Estimated total
gross carrying
amount at
default
3,602
59
667
204
135
23
7
10
18
26
92
449
5,293
Lifetime ECL
84
1
15
9
8
18
1
3
16
22
78
449
704
Annual Report and Financial Statements | Page 107
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE COMPANY
31 December 2023
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
21,170,239
1,349,557
-
In default
-
433,646
-
Gross carrying amount at 31 December
2023
21,170,239
1,783,203
-
Loss allowance at 31 December 2023
-
(639,071)
-
Net carrying amount at 31 December 2023
21,170,239
1,144,132
-
The following table illustrates the Company’s gross carrying amounts for its trade debtors and contract
assets as at 31 December 2023, 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 2023
Expected credit loss rate
5.5%
10.8%
26.5%
37.5%
55.7%
76.1%
80.5%
80.5%
84.4%
85.3%
85.3%
100.0%
35.8%
Estimated total gross
carrying amount at default
1,160
5
16
9
-
23
-
-
18
26
91
434
1,783
Lifetime ECL
64
1
4
3
-
18
-
-
16
23
78
434
639
Annual Report and 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
6,429,321
-
In default
-
211,616
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 and 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
1,966,634
-
In default
-
111,173
-
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 and Financial Statements | Page 110
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
Write-offs during the reporting period amounted to €220,382 (2022: €5,077) and €nil (2022: €704) for
the Group and the Company, respectively. No reversals of write-offs happened during the year ended
31 December 2023 (2022: €nil).
THE GROUP
31 December 2023
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 2023
-
571,921
15,682
Movement during the year
-
132,129
(15,682)
Closing balance 31 December 2023
-
704,050
-
THE GROUP
Lifetime ECL
not-credit impaired
Trade debtors
Contract
assets
Total
€
€
€
Balance as at 1 January 2022
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 1 January 2023
552,104
19,817
571,921
Increase in loss allowance arising from
new financial assets recognised in 2023
260,790
18,815
279,605
Increase in loss allowance on financial
assets in 2023
253,310
-
253,310
Decrease in loss allowance from
derecognition of financial assets in 2023
(380,969)
(19,817)
(400,786)
Balance as at 31 December 2023
685,235
18,815
704,050
Annual Report and Financial Statements | Page 111
6 Financial Risk Management (Continued)
6.3 Credit Risk (Continued)
6.3.2 Impairment Losses (Continued)
THE COMPANY
31 December 2023
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 2023
-
308,130
-
Movement during the year
-
330,941
-
Closing balance 31 December 2023
-
639,071
-
THE COMPANY
Lifetime ECL
not-credit impaired
Trade debtors
Contract
assets
Total
€
€
€
Balance as at 1 January 2022
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 1 January 2023
302,588
5,542
308,130
Increase in loss allowance arising from new
financial assets recognised in 2023
197,821
16,805
214,626
Increase in loss allowance on financial
assets in 2023
253,310
-
253,310
Decrease in loss allowance from
derecognition of financial assets in 2023
(131,453)
(5,542)
(136,995)
Balance as at 31 December 2023
622,266
16,805
639,071
Annual Report and Financial Statements | Page 112
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
€
€
€
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 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
-
Annual Report and Financial Statements | Page 113
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 2023
€
€
€
€
€
€
The Group
Secured bank loans
7,121,682
7,153,897
6,965,426
188,471
-
-
Accrued expenses
2,630,674
2,630,674
2,630,674
-
-
-
Trade and other
payables
3,595,720
3,595,720
3,595,720
-
-
-
Employment benefits
4,088,747
8,281,351
624,567
-
283,585
7,373,199
Lease liabilities
2,268,299
2,491,576
453,366
377,386
992,393
668,431
19,705,122
24,153,218
14,269,753
565,857
1,275,978
8,041,630
Carrying
amount
Contractual
Cash flows
12 months
or less
1 - 2 years
2 - 5 years
More than
5 years
31 December 2023
€
€
€
€
€
€
The Company
Secured bank loans
7,121,682
7,153,897
6,965,426
188,471
-
-
Accrued expenses
1,114,290
1,114,290
1,114,290
-
-
-
Trade and other
payables
5,239,822
5,239,822
5,239,822
-
-
-
Employment benefits
3,036,968
3,439,025
-
-
270,090
3,168,935
Lease liabilities
418,614
517,176
31,249
31,249
93,747
360,931
16,931,376
17,464,210
13,350,787
219,720
363,837
3,529,866
Annual Report and Financial Statements | Page 114
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 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
-
-
-
Employment benefits
3,732,561
4,263,924
355,163
-
270,090
3,638,671
Lease liabilities
2,412,974
2,627,231
518,235
387,091
898,724
823,181
11,216,507
11,997,017
5,347,891
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
1,806,309
1,806,309
1,806,309
-
-
-
Trade and other
payables
2,495,123
2,495,123
2,495,123
-
-
-
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
The below table provides further details pertaining to the Group’s and the Company’s lease liabilities’
maturity analysis:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Year 1
453,366
518,235
31,249
28,409
Year 2
377,386
387,091
31,249
31,249
Year 3
357,054
308,867
31,249
31,249
Year 4
328,090
295,697
31,249
31,249
Year 5
307,249
294,160
31,249
31,250
Onwards
668,431
823,181
360,931
392,181
2,491,576
2,627,231
517,176
545,587
Less unearned interest
(223,277)
(214,257)
(98,562)
(110,644)
2,268,299
2,412,974
418,614
434,943
Analysed as
Non-current
1,860,806
1,940,681
398,949
418,614
Current
407,493
472,293
19,665
16,329
Further disclosures on liquidity risk are provided in Note 2.1.2.
Annual Report and Financial Statements | Page 115
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:
2023
NZD
CHF
PHP
USD
JOD
BRL
GBP
CAD
ISK
The Group
Trade receivables
1,565,459
-
3,844,903
3,017,783
-
-
380,179
-
-
Accrued income
-
-
1,304,464
3,754,038
-
-
169,937
-
-
Cash at bank
592
216
9,530,667
1,776,234
-
27,776
56,403
432
14,207
Trade payables
-
-
(1,533,728)
(233,232)
-
(15,719)
(4,618)
-
-
Deferred income
(18,042)
-
-
(137,167)
-
-
(272,575)
-
-
Gross statement of
financial position
exposure
1,548,009
216
13,146,306
8,177,656
-
12,057
329,326
432
14,207
2023
NZD
CHF
PHP
USD
JOD
BRL
GBP
CAD
ISK
The Company
Trade receivables
-
-
-
11,856,174
-
-
380,179
-
-
Loans receivable
from related parties
-
-
-
65,000
-
-
-
-
-
Accrued income
-
-
-
96,987
-
-
169,937
-
-
Cash at bank
-
-
-
1,461,643
-
-
56,230
-
-
Trade payables
-
-
-
(45,696)
-
-
(4,618)
-
-
Deferred income
-
-
-
(32,007)
-
-
(272,575)
-
-
Gross statement of
financial position
exposure
-
-
-
13,402,101
-
-
329,153
-
-
Annual Report and Financial Statements | Page 116
6 Financial Risk Management (Continued)
6.5 Market Risk (Continued)
6.5.1 Currency Risk (Continued)
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 receivable
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
-
-
The following significant exchange rates applied during the year:
Average rate
Reporting date spot rate
2023
2022
2023
2022
NZD
1
0.5675
0.6030
0.5713
0.5953
CHF
1
1.0290
0.9953
1.0799
1.0155
USD
1
0.9248
0.9496
0.9050
0.9376
JOD
1
1.3026
1.3383
1.2768
1.3144
BRL
1
0.1852
0.1838
0.1865
0.1773
PHP
1
0.0166
0.0174
0.0163
0.0169
GBP
1
1.1497
1.1727
1.1507
1.1275
CAD
1
0.6852
0.7302
0.6830
0.6925
ISK
1
0.0067
0.0070
0.0066
0.0066
Annual Report and Financial Statements | Page 117
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 2022.
THE GROUP
THE COMPANY
Equity
Profit or loss
Equity
Profit or loss
€
€
€
€
31 December 2023
NZD
(88,437)
(88,437)
-
-
CHF
(23)
(23)
-
-
USD
(740,059)
(740,059)
(1,212,860)
(1,212,860)
JOD
-
-
-
-
BRL
(225)
(225)
-
-
PHP
(21,452)
(21,452)
-
-
GBP
(37,895)
(37,895)
(37,875)
(37,875)
CAD
(30)
(30)
-
-
ISK
(9)
(9)
-
-
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)
(53,232)
(53,232)
CAD
(30)
(30)
-
-
ISK
(9)
(9)
-
-
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 and Financial Statements | Page 118
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.
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
2023
2022
2023
2022
€
€
€
€
Fixed rate instruments
Financial assets
1,686
195,400
-
-
Variable rate instruments
Financial assets
3,670,070
3,491,226
3,604,585
2,234,404
Financial liabilities
(7,121,682)
(1,132,602)
(7,121,682)
(1,132,602)
(3,451,612)
2,358,624
(3,517,097)
1,101,802
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 and Financial Statements | Page 119
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 2022.
THE GROUP
Profit or loss
Equity
100 bp
increase
100 bp
decrease
100 bp
increase
100 bp
decrease
€
€
€
€
31 December 2023
Variable rate instruments
(34,516)
34,516
(34,516)
34,516
31 December 2022
Variable rate instruments
23,586
(23,586)
23,586
(23,586)
THE COMPANY
Profit or loss
Equity
100 bp
increase
100 bp
decrease
100 bp
increase
100 bp
decrease
€
€
€
€
31 December 2023
Variable rate instruments
(35,171)
35,171
(35,171)
35,171
31 December 2022
Variable rate instruments
11,018
(11,018)
11,018
(11,018)
Annual Report and Financial Statements | Page 120
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 capital on the basis of the following ratios:
• Equity to asset ratio (%) – total equity divided by total assets
• Debt/equity ratio multiple – total liabilities divided by total equity (as shown in the statement of
financial position, including non-controlling interests)
The above ratios of the Group for the current and comparative financial periods are as follows:
2023
2022
€
€
Equity to asset ratio (%)
46.75%
55.71%
Debt/equity ratio multiple
1.14
0.80
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.
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 and Financial Statements | Page 121
7 Operating Segments (Continued)
7.1 Information About Reportable Segments
Software
(Licensing)
solutions
Processing
solutions
Merchant
solutions
Total
reportable
segments
€
€
€
€
Year ended 31 December
2023
External revenues
11,801,442
24,897,416
2,973,133
39,671,991
Inter-segment revenues
9,081,686
-
395,048
9,476,734
Segment revenues
20,883,128
24,897,416
3,368,181
49,148,725
Finance income
119,995
2,725
38,553
161,273
Finance expense
(293,117)
(2,586)
(129,248)
(424,951)
Depreciation and
amortisation
(1,931,738)
(884,651)
(231,840)
(3,048,229)
Movement in provision for
impairment loss on
receivables
(330,941)
214,494
-
(116,447)
Movement in amounts
written off
-
(218,612)
(1,770)
(220,382)
Reportable segment
profit/(loss) before income
tax
2,531,146
3,202,969
(1,748,791)
3,985,324
Income tax expense
(957,366)
(417,789)
(19,819)
(1,394,974)
Reportable segment assets
70,599,978
18,497,694
5,420,166
94,517,838
Capital expenditure
4,776,711
251,983
111,207
5,139,901
Reportable segment
liabilities
22,438,439
25,025,550
4,411,583
51,875,572
Annual Report and Financial Statements | Page 122
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
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 and Financial Statements | Page 123
7 Operating Segments (Continued)
7.2 Reconciliations of Reportable Segment Profit or Loss, Assets and Liabilities,
And Other Material Items
2023
2022
€
€
External revenues
Total revenue for reportable segments
49,148,725
46,146,936
Elimination of inter-segment transactions
(9,476,734)
(8,630,875)
Consolidated revenue
39,671,991
37,516,061
Finance income
Total finance income for reportable segments
161,273
107,138
Elimination of inter-segment transactions
(118,654)
(61,129)
Consolidated finance income
42,619
46,009
Finance expense
Total finance expense for reportable segments
424,951
143,632
Elimination of inter-segment transactions
(118,654)
(61,129)
Consolidated finance expense
306,297
82,503
Depreciation and amortisation
Total depreciation and amortisation for reportable segments
3,048,229
2,487,825
Elimination of inter-segment transactions
(611,995)
(502,648)
Consolidated depreciation and amortisation
2,436,234
1,985,177
Profit before income tax
Total profit before income tax for reportable segments
3,985,324
5,013,472
Elimination of inter-segment transactions
(2,546,964)
(3,235,030)
Consolidated reportable segment profit before income tax
1,438,360
1,778,442
Assets
Total assets for reportable segments
94,517,838
88,779,764
Elimination of computer software
(3,475,824)
(3,972,222)
Elimination of contract assets
(6,148,454)
(6,766,850)
Elimination of other inter-segment assets
(35,454,120)
(34,688,442)
Consolidated total assets
49,439,440
43,352,250
Liabilities
Total liabilities for reportable segments
51,875,572
45,467,133
Elimination of inter-segment balances
(19,211,340)
(19,477,643)
Elimination of inter-segment accruals
(6,524,027)
(6,972,684)
Elimination of other inter-segment liabilities
184,773
184,800
Consolidated total liabilities
26,324,978
19,201,606
Annual Report and Financial Statements | Page 124
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 p.l.c. (previously RS2 Software p.l.c.), 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 2023
Malta
-
23,341,245
UK and Ireland
10,018,038
-
USA
17,173,729
4,413,505
Other countries
12,480,224
4,425,453
39,671,991
32,180,203
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
Other countries comprise revenue based on geographical location of customers, which individually are
immaterial and do not exceed 10% of total revenue.
Annual Report and Financial Statements | Page 125
7 Operating Segments (Continued)
7.4 Major Customers
For the year ended 31 December 2023, revenues from one major customer (2022: two major customers)
of the licensing and processing segments amounted to €13,508,476 (2022: €3,923,223 and €13,541,706
respectively) of the Group's total revenues.
Annual Report and Financial Statements | Page 126
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 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
Balance at 1 January 2023
8,001,422
1,471,035
5,282,565
268,421
52,261
15,075,704
Additions
-
-
275,613
4,500
18,708
298,821
Disposals
-
-
(48,263)
-
(730)
(48,993)
Reclassifications
-
-
-
-
(11,047)
(11,047)
Write-off
-
-
(67,042)
-
-
(67,042)
Effects of movement in exchange
rates
-
(749)
(36,803)
(2,203)
-
(39,755)
Balance at 31 December 2023
8,001,422
1,470,286
5,406,070
270,718
59,192
15,207,688
Depreciation
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)
Reclassification
(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
4,564,120
231,497
31,852
6,851,842
Balance at 1 January 2023
1,534,450
489,923
4,564,120
231,497
31,852
6,851,842
Depreciation for the year
96,255
60,186
302,683
9,915
10,505
479,544
Released on disposals
-
-
(48,263)
-
-
(48,263)
Effects of movement in exchange
rates
-
(749)
(31,620)
(1,189)
-
(33,558)
Balance at 31 December 2023
1,630,705
549,360
4,786,920
240,223
42,357
7,249,565
Carrying amounts
At 1 January 2022
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
At 31 December 2023
6,370,717
920,926
619,150
30,495
16,835
7,958,123
Annual Report and Financial Statements | Page 127
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 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
20,259
406
(20,665)
-
-
Balance at 31 December 2022
8,001,422
1,340,604
2,807,003
175,034
12,324,063
Balance at 1 January 2023
8,001,422
1,340,604
2,807,003
175,034
12,324,063
Additions
-
-
79,313
-
79,313
Balance at 31 December 2023
8,001,422
1,340,604
2,886,316
175,034
12,403,376
Depreciation
Balance at 1 January 2022
1,439,970
384,939
2,520,580
175,034
4,520,523
Depreciation for the year
96,255
53,045
109,626
-
258,926
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
Balance at 1 January 2023
1,534,451
437,984
2,630,206
175,034
4,777,675
Depreciation for the year
96,255
53,045
105,282
-
254,582
Balance at 31 December 2023
1,630,706
491,029
2,735,488
175,034
5,032,257
Carrying amounts
At 1 January 2022
6,537,198
953,772
242,758
-
7,733,728
At 31 December 2022
6,466,971
902,620
176,797
-
7,546,388
At 31 December 2023
6,370,716
849,575
150,828
-
7,371,119
Refer to Note 17.1 for information on pledged assets as security by the Group and the Company.
8.3 Measurement bases, depreciation methods and useful lives
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.
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.
Annual Report and Financial Statements | Page 128
8 Property, Plant and Equipment (Continued)
8.3 Measurement bases, depreciation methods and useful lives (Continued)
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.
9 Leases
9.1 The Group as a Lessee
This note provides information about lease agreements for which the Group was a lessee during 2023.
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.
Annual Report and Financial Statements | Page 129
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.4 Leased Properties in 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.
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 can be renewed again for another five-year term.
Accordingly, the enforceable period of this lease (and the lease term) is 10 years.
An agreement for leased apartment for residential purposes in Neu-Isenburg, Germany. This agreement
was entered into with a related party on 1 February 2023. The lease is for a ten-year term, lasting until
January 2033. 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 to four-year term, ending
between August 2022 and May 2027. The enforceable period of such leases (and the lease term) is 3
to 4 years. These agreements were entered into at different points in time between February 2021 and
December 2023.
Annual Report and Financial Statements | Page 130
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.6 Group and Company Leases
The following tables present the carrying amounts of the Group’s and the Company’s ROU assets
recognised and the movements during the period:
THE GROUP
Land and
buildings
Cars
Total
€
€
€
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
As at 1 January 2023
2,254,165
91,086
2,345,251
Additions to right-of-use assets
239,331
137,658
376,989
Depreciation charge for the year
(441,337)
(79,581)
(520,918)
Effects of movement in exchange rates
(4,622)
-
(4,622)
As at 31 December 2023
2,047,537
149,163
2,196,700
THE COMPANY
Land and
buildings
Total
€
€
As at 1 January 2022
429,882
429,882
Depreciation charge for the year
(24,802)
(24,802)
As at 31 December 2022
405,080
405,080
Balance at 1 January 2023
405,080
405,080
Depreciation charge for the year
(24,801)
(24,801)
Balance at 31 December 2023
380,279
380,279
Annual Report and Financial Statements | Page 131
9 Leases (Continued)
9.1 The Group as a Lessee (Continued)
9.1.6 Group and Company Leases (Continued)
The following tables present 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 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
As at 1 January 2023
2,335,368
77,606
2,412,974
Additions
239,331
137,658
376,989
Accretion of interest
54,303
4,099
58,402
Payments
(502,257)
(74,689)
(576,946)
Effects of movement in exchange rates
(3,120)
-
(3,120)
As at 31 December 2023
2,123,625
144,674
2,268,299
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Current
407,493
472,293
19,665
16,329
Non-current
1,860,806
1,940,681
398,949
418,614
THE COMPANY
Land and
buildings
Total
€
€
As at 1 January 2022
450,812
450,812
Accretion of interest
12,540
12,540
Payments
(28,409)
(28,409)
As at 31 December 2022
434,943
434,943
Balance at 1 January 2023
434,943
434,943
Accretion of interest
12,080
12,080
Payments
(28,409)
(28,409)
Balance at 31 December 2023
418,614
418,614
Annual Report and Financial Statements | Page 132
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
2023
2022
2023
2022
€
€
€
€
Depreciation expense
520,918
489,982
24,801
24,802
Interest expense on lease liabilities
58,402
56,308
12,080
12,540
Expenses relating to short-term
leases
79,893
126,836
-
1,300
Total amount recognised in profit or
loss
659,213
673,126
36,881
38,642
The total cash outflow for leases amounted to €576,946 and €28,409 (2022: €526,504 and €28,409)
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 2023 and 2022 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 2023 and 2022.
Annual Report and Financial Statements | Page 133
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
2023
2022
€
€
Within 1 year
6,775
5,803
Between 1 and 2 years
2,416
1,452
Total
9,191
7,255
The following table presents the amounts reported in profit or loss:
THE GROUP
2023
2022
€
€
Lease income on operating leases
48,794
42,897
Depreciation for the year
(10,505)
(6,976)
Total
38,289
35,921
Lease income on operating leases is included in the Revenue (Note 21).
9.2.2 Finance Lease Receivables
THE GROUP
2023
2022
€
€
Balance on 1 January
242,452
154,142
Additions during the year
151,104
159,789
Release of receivables during the year
(141,895)
(105,454)
Unwinding of interest
38,553
33,975
Balance at 31 December
290,214
242,452
Annual Report and Financial Statements | Page 134
9 Leases (Continued)
9.2 The Group as a Lessor (Continued)
9.2.2 Finance Lease Receivables (Continued)
THE GROUP
2023
2022
€
€
Amounts receivable under finance leases:
Within 1 year
147,187
120,469
Between 1 and 2 years
119,716
94,365
Between 2 and 3 years
80,681
65,140
Between 3 and 4 years
30,518
26,716
More than 4 years
1,067
401
Undiscounted lease payments
379,169
307,091
Less unearned finance income
(88,955)
(64,639)
Present value of lease payments receivable
290,214
242,452
Impairment loss allowance
-
-
Net investment in the lease
290,214
242,452
Undiscounted lease payments analysed as:
Recoverable within 12 months
147,187
120,469
Recoverable after 12 months
231,982
186,622
379,169
307,091
Net investment in the lease analysed as:
Recoverable within 12 months
99,890
83,619
Recoverable after 12 months
190,324
158,833
290,214
242,452
During the years ended 31 December 2023 and 2022, 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.
Finance income on the net investment in finance leases is included in the Finance Income and Finance
Costs (Note 23).
Annual Report and Financial Statements | Page 135
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
2023
2022
€
€
Finance income on the net investment in finance leases
38,553
33,975
The Group’s finance lease arrangements do not include variable payments.
The average effective interest rate contracted approximates 23 per cent (2022: 20%) 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 considers that no finance lease receivable is impaired.
9.3 The Company as a Lessor
For the years ended 31 December 2023 and 2022, the Company did not enter into any lease agreements
for which the Company was a lessor.
Annual Report and Financial Statements | Page 136
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 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
Balance at 1 January 2023
1,961,060
28,100,747
3,956,585
904,798
594,309
35,517,499
Additions
-
4,748,582
37,498
55,000
-
4,841,080
Effects of movement in
exchange rates
(24,269)
(137,426)
(30,359)
-
-
(192,054)
Balance at 31 December
2023
1,936,791
32,711,903
3,963,724
959,798
594,309
40,166,525
Amortisation
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
Balance at 1 January 2023
-
14,209,721
2,241,983
105,090
148,579
16,705,373
Charge for the year
-
1,118,805
205,077
62,364
49,526
1,435,772
Balance at 31 December
2023
-
15,328,526
2,447,060
167,454
198,105
18,141,145
Carrying amounts
At 1 January 2022
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
At 31 December 2023
1,936,791
17,383,377
1,516,664
792,344
396,204
22,025,380
Annual Report and Financial Statements | Page 137
10 Intangible Assets and Goodwill (Continued)
10.2 The Company
Internally
generated
computer
software
Software
rights
Total
€
€
€
Cost
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
Balance at 1 January 2023
25,208,322
3,000,000
28,208,322
Additions
5,395,802
-
5,395,802
Balance at 31 December 2023
30,604,124
3,000,000
33,604,124
Amortisation
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
Balance at 1 January 2023
14,284,696
2,233,643
16,518,339
Amortisation for the year
1,174,834
191,588
1,366,422
Balance at 31 December 2023
15,459,530
2,425,231
17,884,761
Carrying amounts
At 1 January 2022
8,137,564
957,945
9,095,509
At 31 December 2022
10,923,626
766,357
11,689,983
At 31 December 2023
15,144,594
574,769
15,719,363
Refer to Note 17.1 for information on pledged assets as security by the Group and the Company.
Annual Report and Financial Statements | Page 138
10 Intangible Assets and Goodwill (Continued)
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.
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 4.5.7.
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 RS2 Software Inc. through two separate transactions in 2009 and 2011 and the
carrying amount as at 31 December 2023 amounted to €764,328 (2022: €794,685). 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 4.5.7.
In 2011 the Company re-acquired BankWORKS® software rights from a customer situated in the
Scandinavian region. The carrying amount as at 31 December 2023 amounted to €574,769 (2022:
€766,357). The relative amortisation is charged annually in line with the accounting policy in Note 4.5.7.
The remaining amortisation period for the software rights amounts to 3 years (2022: 4 years). As at 31
December 2023, the carrying amount of software rights for RS2 Financial Services GmbH amounted to
€177,567 (2022: €153,560).
10.6 Other Computer Software
At 31 December 2023, other computer software with a carrying amount of €792,344 (2022: €799,708)
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 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 4.5.7. 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.
Annual Report and Financial Statements | Page 139
10 Intangible Assets and Goodwill (Continued)
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 4.5.7. The remaining amortisation period for the customer and
other related contractual relationship amounts to 8 years (2022: 9 years).
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 2023, the total shareholding stood at
72.57% (2022: 72.57%). Management prepared forecasts of net cash flows for the five-year period 2024
- 2028 (2022: 2023 - 2027) 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 p.l.c.’s (previously RS2 Software p.l.c.) 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:
Annual Report and Financial Statements | Page 140
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)
• 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.
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 2.75% (2022: 2.48%). 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 2023 and 2022, 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*:
2023
2022
Post-tax
17.4%
17.8%
Pre-tax
21.0%
21.6%
* 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 and Financial Statements | Page 141
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 2028 have been extrapolated using a terminal growth rate of 2.75% (2022: 2.48%).
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 2023 which stood at €11.7m (2022: €11.7m).
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 €8.9m (2022: €5.9m), of which goodwill
amounts to €0.7m (2022: €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 2024 - 2028 (2022: 2023 - 2027) 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 and Financial Statements | Page 142
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 1.81% (2022: 1.34%). 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 2023 and 2022, 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*:
2023
2022
Post-tax
12.4%
12.6%
Pre-tax
16.1%
16.3%
* 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 and Financial Statements | Page 143
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 2028 have been extrapolated using a terminal growth rate of 1.81% (2022: 1.34%).
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 €2.7m (2022: €1.7m), of which
goodwill amounts to €1.3m (2022: €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
2023
2022
€
€
Balance at 1 January
19,714,175
17,942,984
Contribution to subsidiaries
1,056,807
1,771,191
Balance at 31 December
20,770,982
19,714,175
11.2 Contributions to Subsidiaries
Contributions to subsidiaries are unsecured, interest free and represent capital contributions.
Annual Report and Financial Statements | Page 144
11 Investments in Subsidiaries (Continued)
11.3 Further Details About RS2 p.l.c.’s (previously RS2 Software p.l.c.) Investment in
Subsidiaries
Registered office
Ownership interest
fully paid-up
Nature of business
2023
2022
%
%
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
72.57
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 and Financial Statements | Page 145
11 Investments in Subsidiaries (Continued)
11.3 Further Details About RS2 p.l.c.’s (previously RS2 Software p.l.c.) 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
2023
2022
%
%
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.
On 12 June 2009, the Company acquired control of RS2 Software LLC, a transaction processing
company in the United States of America, by acquiring 26% of the shares and voting interests in the
company. On 24 September 2014, the Company acquired a further 38.2% shareholding in RS2 Software
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. 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 and did not change during the current financial year.
As further detailed in Note 28.3, 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 2023 issued ordinary share capital in RS2 Software INC. amounted to €1,398,576
(2022: €1,398,576). Profit for the year amounts to €2,029,155 (2022: loss of €137,477) and the
accumulated losses total €2,524,934 (2022: €4,554,090). 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 €358,606 (2022:
€439,968).
Annual Report and Financial Statements | Page 146
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 2023 which stood at €1.0m (2022: €1.8m).
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 2023 issued ordinary share capital in RS2 Smart Processing Limited amounted to
€1,500,000 (2022: €1,500,000). Profit for the year amounted to €756,025 (2022: €2,574,355) and the
accumulated gains amounted to €2,601,447 (2022: €1,845,422). Other reserves relates to post-
employment benefits to key management personnel amounting to €97,261 (2022: €97,354).
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 2023 issued ordinary share capital in RS2 Software LAC LTDA amounted to €789
(2022: €789). Profit for the year amounts to €3,893 (2022: €6,830) and accumulated losses amounted
to €25,519 (2022: €29,412). 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 €11,566 (2022: €12,376).
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 2023 issued ordinary share capital in RS2 Software APAC Inc. amounted to €112,105
(2022: €112,105). Profit for the year amounts to €201,025 (2022: €494,498) and the retained earnings
reserve totals €2,187,367 (2022 €1,986,342). 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 €167,030 (2022:
€99,319). Employee benefits reserve relates to post-employment benefits and amounts to €4,801 (2022:
€nil).
Annual Report and Financial Statements | Page 147
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 2023 which stood at €1.1m (2022: €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 2023 issued ordinary share capital in RS2 Germany GmbH amounted to €25,000
(2022: €25,000). Loss for the year amounts to €10,526 (2022: profit of €40,858) and the retained
earnings reserve totals €656,881 (2022: €667,407).
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 2023 which stood at €0.7m (2022: €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 2023, issued ordinary share capital in RS2 Merchant Services Europe GmbH
amounted to €25,000 (2022: €25,000). The profit for the year amounts to €5,558 (2022: loss of
€1,243,476) and the accumulated losses total €28,324 (2022: €3,301,885). Other reserves amount to
€6,250,000 (2022: €4,400,000).
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 2023 which stood at €6.3m
(2022: €4.4m). 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 and Financial Statements | Page 148
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 2023, RS2 p.l.c.’s (previously RS2 Software p.l.c.) investment in RS2 Software INC.
stood at 72.57% (2022: 72.57%), whilst the NCI’s percentage shareholding stood at 27.43% (2022:
27.43%). On the other hand, RS2 p.l.c.’s (previously RS2 Software p.l.c.) investment in RS2 Software LAC
LTDA stood at 99.00% (2022: 99.00%), whilst the NCI’s percentage shareholding stood at 1.00% (2022:
1.00%).
RS2 Software INC.
2023
2022
NCI percentage
27.43%
27.43%
€
€
Non-current assets
11,711,071
11,128,972
Current assets
5,847,572
3,564,307
Current liabilities
(19,043,608)
(18,288,761)
Net liabilities
(1,484,965)
(3,595,482)
Net liabilities attributable to NCI
(407,326)
(986,241)
Adjustments:
Share of capital contribution due to the Company
(2,633,347)
(2,633,347)
Other adjustments
(41,459)
(107,196)
Net assets attributable to other NCI
3,183
2,533
Net liabilities attributable to total NCI
(3,078,949)
(3,724,251)
Revenue
17,173,729
14,685,238
Profit/(Loss)
2,029,155
(137,477)
Other comprehensive income/(loss)
319,996
(446,370)
,
Total comprehensive income/(loss)
2,349,151
(583,847)
Income/(Loss) attributable to NCI
556,597
(187,758)
Profit attributable to other NCI
644
2,175
Profit/(Loss) attributable to total NCI
557,241
(185,583)
Other comprehensive income/(loss) attributable to NCI
87,775
(154,667)
Other comprehensive income/(loss) attributable to other NCI
286
(284)
Other comprehensive income/(loss) attributable to total NCI
88,061
(154,951)
Cash flows from operating activities
(34,650)
(947,382)
Cash flows from investing activities
(1,455,757)
(2,059,738)
Cash flows from financing activities
(dividends to NCI: nil)
(73,849)
(70,835)
Net movement in cash and cash equivalents
(1,564,256)
(3,077,955)
Annual Report and Financial Statements | Page 149
12 Inventories
THE GROUP
2023
2022
€
€
Current
Finished goods – terminals at cost
248,608
233,255
Finished goods – terminals at net realisable value
33,785
12,558
282,393
245,813
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.
Inventories recognised as an expense during the year ended 31 December 2023 amounted to €141,290
(2022: €187,080). These were included in cost of sales.
Write-downs of inventories to net realisable value amounted to €8,562 (2022: €10,850).
None of these inventories have been pledged as security for liabilities (2022: none).
13 Trade and Other Receivables
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Current
Trade receivables
6,086,156
5,117,198
473,742
596,518
Amounts owed by subsidiaries
-
-
21,146,667
20,158,085
Amounts owed by other related
parties
413,325
745,498
413,325
745,498
Other receivables
1,027,825
492,520
2,737
4,738
7,527,306
6,355,216
22,036,471
21,504,839
Annual Report and Financial Statements | Page 150
13 Trade and Other Receivables (Continued)
Transactions with related parties are set out in Note 30 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 22.4.
Information about the Group’s and the Company’s exposure to credit and market risks for trade
receivables is included in Note 6.
13.1 Loans Receivable
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Non-current
Loans receivable from group companies
-
-
58,690
2,110,148
Current
Amounts owed by group companies
-
-
2,064,740
22,205
Amounts owed by other related parties
2,107
195,862
421
462
2,107
195,862
2,065,161
22,667
Amounts due by RS2 Software LAC LTDA of €58,690 as at 31 December 2023 (2022: €60,148) 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 was unsecured and
bore interest of 2.7% per annum over the 3-month Euribor. This amount was fully repaid in 2023.
Amount due by RS2 Zahlungssysteme GmbH of €2.0m (2022: €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 and Financial Statements | Page 151
13 Trade and Other Receivables (Continued)
13.1 Loans Receivable (Continued)
Amounts owed by other related parties were unsecured and bear interest of 2.7% per annum. Such
amount was repaid in 2023. The Group entered into an agreement with the other related party, whereas
the amount owed were offset through the purchase of assets by the Group from the other related party.
Transactions with related parties are set out in Note 30 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.
14 Accrued Income and Contract Assets
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Current
Contract assets owed by third parties
3,661,379
2,046,920
93,082
352,711
Contract assets owed by other related
parties
184,818
83,095
184,818
83,095
3,846,197
2,130,015
277,900
435,806
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Category of activity
License fees excluding customisation
-
216,663
-
216,663
Service fees, transaction processing and
customisation
3,839,312
1,864,848
277,900
213,835
Maintenance fees
-
33,733
-
-
Other recharges
6,885
14,771
-
5,308
3,846,197
2,130,015
277,900
435,806
Annual Report and Financial Statements | Page 152
14 Accrued Income and Contract Assets (Continued)
Significant changes in the contract assets balances during the period are as follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Balance at 1 January
2,130,015
3,776,538
435,806
6,148,870
Increases as a result of further
progress
3,798,515
1,097,385
257,291
127,722
Release of opening contract
assets to receivable
(1,936,004)
(2,856,735)
(403,931)
(5,913,847)
Written off
(146,969)
-
-
-
Other movements
(362)
(6,432)
(3)
61,427
Movement on expected credit
losses on contract assets
1,002
119,259
(11,263)
11,634
Balance at 31 December
3,846,197
2,130,015
277,900
435,806
Transactions with related parties are set out in Note 30 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.
15 Cash at bank and in hand
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Cash at bank
3,670,070
3,491,226
1,604,585
184,404
Cash in hand
4,097
2,884
803
1,705
3,674,167
3,494,110
1,605,388
186,109
As at 31 December 2022, an amount of €65,299 relates to restricted cash held at bank by RS2 Financial
Services GmbH, in 2023. These represented amounts deposited at bank on behalf of the subsidiary’s
customers.
Annual Report and Financial Statements | Page 153
16 Capital and Reserves
16.1 Share Capital
GROUP AND COMPANY
ISSUED SHARE CAPITAL
2023
2022
€
€
Ordinary shares – issued and fully paid-up
218,403,701 (2022: 217,089,727) shares at €0.06 per share
13,104,222
13,025,383
Preference shares – issued and fully paid-up
10,141,649 (2022: 10,113,329) shares at €0.06 per share
608,499
606,800
Authorised Share Capital
The Company’s authorised share capital consisted of €18,000,000 in ordinary shares divided into
300,000,000 shares of €0.06 each and €3,600,000 in preference shares divided into 60,000,000 of
€0.06 each.
Issued Share Capital
On 31 December 2022, the issued share capital of the Company consisted of €13,025,383 in ordinary
shares of €0.06 each and €606,800 in preference shares of €0.06 each. In November 2023, following
the scrip issue of shares, the issued ordinary shares increased by 1,313,974 whilst the issued preference
shares increased by 28,320 (refer to Note 16.4 for further details).
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.
Annual Report and Financial Statements | Page 154
16 Capital and Reserves (Continued)
16.2 Share Premium
As at 31 December 2022, share premium reserve amounted to €13,187,198, net of issuance costs of
€491,610. During the current financial reporting period, following the scrip issue of ordinary and
preference shares, this reserve increased by €1,576,149, resulting in a balance of €14,763,347, net of
issuance costs of €491,610 as at 31 December 2023. Share issuance costs relate to expenditure
associated with issuing preference shares and include registration fees, legal fees and marketing
expenses.
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.
During 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.
16.3 Reserves
16.3.1 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.
16.3.2 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.
16.3.3 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 27 to these financial statements.
Annual Report and Financial Statements | Page 155
16 Capital and Reserves (Continued)
16.4 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.
During the year ended 31 December 2023, the Company declared the payment of an interim dividend
of €3,000,984 (€2,854,741 for Ordinary Shares and €146,243 for Preference Shares), as scrip, i.e., giving
the option to shareholders to elect receiving the dividend in cash or through the issuance of new shares
at an attribution price of €1.23 for Ordinary Shares and €1.43 for Preference Shares. Election for cash
dividend totalled €1,238,552 for Ordinary Shares and €105,745 for Preference Shares. Election for scrip
shares totalled 1,313,974 Ordinary Shares amounting to €1,616,188 at an attribution price of €1.23 and
28,320 Preference Shares amounting to €40,499 at an attribution price of €1.43.
16.5 Availability of Reserves for Distribution
The non-distributable reserves include the Share premium reserve, Employee benefits reserve,
Translation Reserve, Other reserves and the Share option reserve.
17 Borrowings
GROUP AND COMPANY
2023
2022
€
€
Non-current liabilities
Bank loan
187,110
620,748
At end of year
187,110
620,748
Current liabilities
Bank loan
504,706
511,291
Bank overdraft
6,429,866
563
At end of year
6,934,572
511,854
Annual Report and Financial Statements | Page 156
17 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
2023
2022
2023
2022
€
€
€
€
Opening balance
1,132,602
1,621,942
1,132,602
1,621,942
Interest charged on bank loan
53,331
42,008
53,331
42,008
Interest charged on overdraft
191,464
616
191,464
616
Other interest charged
4
6
4
-
Principal paid on bank loan
(444,163)
(489,861)
(444,163)
(489,861)
Interest paid on bank loan
(49,391)
(42,008)
(49,391)
(42,008)
Interest paid on overdraft
(191,464)
(616)
(191,464)
(616)
Other interest paid
(4)
(6)
(4)
-
Movement in bank overdraft
6,429,303
521
6,429,303
521
Closing balance
7,121,682
1,132,602
7,121,682
1,132,602
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.
17.1 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 and buildings situated in Mosta with a carrying amount of €6,370,716
and a pledge on a comprehensive insurance policy covering the hypothecated property.
17.2 Undrawn Overdraft Facilities
As at 31 December 2023, the Group had undrawn overdraft facilities of €3.6m (2022: €10.0m).
Annual Report and Financial Statements | Page 157
18 Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
THE GROUP
Assets
Liabilities
Balance
2023
2022
2023
2022
2023
2022
€
€
€
€
€
€
Property, plant and
equipment
-
-
(169,192)
(92,551)
(169,192)
(92,551)
Intangible assets
-
-
(4,114,550)
(3,201,999)
(4,114,550)
(3,201,999)
Impairment loss on
receivables
-
5,489
-
-
-
5,489
Provision for
exchange
fluctuations
239,370
14,470
(2,622)
(5,333)
236,748
9,137
Provision for legal
claims
-
40,315
-
-
-
40,315
Unabsorbed losses
4,587
-
-
(16,143)
4,587
(16,143)
Temporary
difference
on expected credit
losses under IFRS 9
246,429
200,188
(756)
-
245,673
200,188
Temporary
difference on
revenues
previously
recorded under
IFRS 15
184,800
188,545
(184,800)
(184,800)
-
3,745
Temporary
difference on
leases under
IFRS 16
Right-of-use
assets
-
-
(153,414)
(167,297)
(153,414)
(167,297)
Temporary
difference on
leases under
IFRS 16 Lease
liabilities
146,515
152,230
-
-
146,515
152,230
Other temporary
differences
-
2,503
-
-
-
2,503
Temporary
difference on
inventories
-
-
(4,439)
-
(4,439)
-
Temporary
difference
arising from other
liabilities
22,992
25,532
-
-
22,992
25,532
Tax
assets/(liabilities)
844,693
629,272
(4,629,773)
(3,668,123)
(3,785,080)
(3,038,851)
Set off of tax
(844,693)
(629,272)
844,693
629,272
-
-
Net tax liabilities
-
-
(3,785,080)
(3,038,851)
(3,785,080)
(3,038,851)
Annual Report and Financial Statements | Page 158
18 Deferred Tax Assets and Liabilities (Continued)
THE COMPANY
Assets
Liabilities
Balance
2023
2022
2023
2022
2023
2022
€
€
€
€
€
€
Property, plant and
equipment
-
-
(167,294)
(90,970)
(167,294)
(90,970)
Intangible assets
-
-
(3,107,765)
(2,497,657)
(3,107,765)
(2,497,657)
Provision for
exchange
fluctuations
230,348
7,620
-
-
230,348
7,620
Provision for legal
claims
-
40,315
-
-
-
40,315
Temporary difference
on expected credit
losses under IFRS 9
223,676
107,846
-
-
223,676
107,846
Temporary difference
on revenues
previously recorded
under IFRS 15
184,800
188,545
-
-
184,800
188,545
Temporary difference
on leases under
IFRS 16 Right-of-use
assets
-
-
(133,098)
(141,778)
(133,098)
(141,778)
Temporary difference
on leases under
IFRS 16 Lease
liabilities
146,515
152,230
-
-
146,515
152,230
Other temporary
differences
-
2,503
-
-
-
2,503
Tax assets/(liabilities)
785,339
499,059
(3,408,157)
(2,730,405)
(2,622,818)
(2,231,346)
Set off of tax
(785,339)
(499,059)
785,339
499,059
-
-
Net tax liabilities
-
-
(2,622,818)
(2,231,346)
(2,622,818)
(2,231,346)
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 2023 amounted to €3,101,077 (2022: €3,010,683).
Annual Report and Financial Statements | Page 159
18 Deferred Tax Assets and Liabilities (Continued)
Movement in temporary differences during the year are as follows:
THE GROUP
Balance
1 Jan 2022
Recognised
in profit
or loss
Balance
31 Dec 2022
Recognised
in profit
or loss
Balance
31 Dec 2023
€
€
€
€
€
Property, plant and
equipment
(143,535)
50,984
(92,551)
(76,641)
(169,192)
Intangible assets
(2,468,611)
(733,388)
(3,201,999)
(912,551)
(4,114,550)
Impairment loss on
receivables
126
5,363
5,489
(5,489)
-
Provision for exchange
fluctuations
51,984
(42,847)
9,137
227,611
236,748
Provision for legal
claims
45,193
(4,878)
40,315
(40,315)
-
Other provisions
97,438
(97,438)
-
-
-
Unabsorbed losses
(24,804)
8,661
(16,143)
20,730
4,587
Temporary difference
on expected credit
losses under IFRS 9
158,413
41,775
200,188
45,485
245,673
Temporary difference
on revenues previously
recorded under IFRS 15
(104,055)
107,800
3,745
(3,745)
-
Temporary difference
on leases under
IFRS 16 Right-of-use
assets
(152,740)
(14,557)
(167,297)
13,883
(153,414)
Temporary difference
on leases under
IFRS 16 Lease
liabilities
157,784
(5,554)
152,230
(5,715)
146,515
Other temporary
differences
(7,014)
9,517
2,503
(2,503)
-
Temporary difference on
inventories
-
-
-
(4,439)
(4,439)
Temporary difference
arising from other
liabilities
2,281
23,251
25,532
(2,540)
22,992
(2,387,540)
(651,311)
(3,038,851)
(746,229)
(3,785,080)
Annual Report and Financial Statements | Page 160
18 Deferred Tax Assets and Liabilities (Continued)
THE COMPANY
Balance
1 Jan 2022
Recognised
in profit
or loss
Balance
31 Dec 2022
Recognised
in profit
or loss
Balance
31 Dec 2023
€
€
€
€
€
Property, plant and
equipment
(95,399)
4,429
(90,970)
(76,324)
(167,294)
Intangible assets
(2,043,278)
(454,379)
(2,497,657)
(610,108)
(3,107,765)
Provision for exchange
fluctuations
47,391
(39,771)
7,620
222,728
230,348
Provision for legal
claims
45,193
(4,878)
40,315
(40,315)
-
Other provisions
97,438
(97,438)
-
-
-
Temporary difference
on expected credit
losses under IFRS 9
61,396
46,450
107,846
115,830
223,676
Temporary difference
on revenues
previously recorded
under IFRS 15
188,545
-
188,545
(3,745)
184,800
Temporary difference
on leases under
IFRS 16 Right-of-use
assets
(150,459)
8,681
(141,778)
8,680
(133,098)
Temporary difference
on leases under
IFRS 16 Lease
liabilities
157,784
(5,554)
152,230
(5,715)
146,515
Other temporary
differences
(7,014)
9,517
2,503
(2,503)
-
(1,698,403)
(532,943)
(2,231,346)
(391,472)
(2,622,818)
Annual Report and Financial Statements | Page 161
19 Trade and Other Payables
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Trade payables
977,866
474,461
544,271
172,359
Other payables
1,375,639
156,640
560,544
4,942
Dividends payable
562,318
33,045
562,318
33,045
Other taxes and social securities
650,002
425,827
503,180
319,414
Amounts due to other related
parties
29,895
17,373
3,069,509
1,965,363
3,595,720
1,107,346
5,239,822
2,495,123
Transactions with related parties are set out in Note 30 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.
20 Accruals and Deferred Income
20.1 Accruals
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Accrued expenses owed to third
parties
2,244,967
2,257,062
761,844
983,912
Amounts due to other related
parties
385,707
573,962
352,446
822,397
2,630,674
2,831,024
1,114,290
1,806,309
20.2 Deferred Income
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Current
Contract liabilities owed to third parties
641,644
1,345,614
301,827
955,675
Contract liabilities owed to subsidiary
-
-
528,000
528,000
Contract liabilities owed to other
related parties
313,234
297,337
313,234
297,337
954,878
1,642,951
1,143,061
1,781,012
Deferred income owed to subsidiary
-
-
-
112
954,878
1,642,951
1,143,061
1,781,124
Annual Report and Financial Statements | Page 162
20 Accruals and Deferred Income (Continued)
20.2 Deferred Income (Continued)
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Category of activity
License fees excluding
customisation
26,250
26,250
506,250
506,250
Service fees, transaction
processing and customisation
311,616
376,044
68,472
90,514
Maintenance fees
557,512
1,181,157
508,839
1,124,748
Comprehensive packages
59,500
59,500
59,500
59,500
954,878
1,642,951
1,143,061
1,781,012
Deferred income owed by
subsidiary
-
-
-
112
954,878
1,642,951
1,143,061
1,781,124
Significant changes in the contract liabilities balances during the period are as follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Balance at 1 January
1,642,951
1,567,002
1,781,124
1,902,012
Release of opening contract liabilities
to revenue
(1,462,264)
(445,659)
(1,233,791)
(273,585)
Release of opening contract liabilities
to other income
(120,000)
-
-
-
Increases due to cash received,
excluding amounts recognised as
revenue during the year
895,162
378,069
595,728
125,945
Other movements
(971)
143,539
-
26,752
Balance at 31 December
954,878
1,642,951
1,143,061
1,781,124
No revenue is recognised in the current reporting period from performance obligations satisfied (or
partially satisfied) in previous periods (2022: nil).
Annual Report and Financial Statements | Page 163
21 Revenue
21.1 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 tables, revenue is disaggregated by category of activity and timing of revenue
recognition. These also include a reconciliation of the disaggregated revenue with the Group’s reportable
segments.
Software (Licensing)
solutions
Processing
solutions
Merchant solutions
Total
2023
2022
2023
2022
2023
2022
2023
2022
Category of
activity
€
€
€
€
€
€
€
€
License fees
excluding
customisation
5,413,775
5,546,918
-
-
-
-
5,413,775
5,546,918
Service fees,
transaction
processing and
customisation
3,295,119
4,968,994
21,249,763
17,049,559
-
-
24,544,882
22,018,553
Maintenance
fees
2,378,545
2,879,970
173,135
237,668
-
-
2,551,680
3,117,638
Comprehensive
packages
714,000
714,000
3,474,519
3,548,871
-
-
4,188,519
4,262,871
Operating lease
income
-
-
-
-
48,794
42,897
48,794
42,897
Acquiring
revenue
-
-
-
-
2,924,341
2,527,184
2,924,341
2,527,184
11,801,439
14,109,882
24,897,417
20,836,098
2,973,135
2,570,081
39,671,991
37,516,061
Software (Licensing)
solutions
Processing
solutions
Merchant solutions
Total
2023
2022
2023
2022
2023
2022
2023
2022
Timing of
revenue
recognition
€
€
€
€
€
€
€
€
At a point in time
-
-
-
-
249,514
274,702
249,514
274,702
Over time
11,801,439
14,109,882
24,897,417
20,836,098
2,723,621
2,295,379
39,422,477
37,241,359
11,801,439
14,109,882
24,897,417
20,836,098
2,973,135
2,570,081
39,671,991
37,516,061
The revenue recognised in the Group’s statements of profit or loss during the year ended 31 December
2023 amounted to €4.0m (2022: €1.7m) 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 following table outlines the Company’s revenue disaggregated by category of activity.
Annual Report and Financial Statements | Page 164
21 Revenue (Continued)
21.1 Disaggregation of Revenue (Continued)
2023
2022
€
€
Category of activity
Licence fees
3,640,207
3,713,960
Service fees
10,545,311
11,519,878
Maintenance fees
3,268,587
3,775,512
Comprehensive packages
714,000
714,000
Re-imbursement of expenses
-
379
18,168,105
19,723,729
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
2023
2022
2023
2022
2023
2022
2023
2022
Geographical
markets
€
€
€
€
€
€
€
€
Europe
6,004,418
8,118,747
7,385,357
7,425,406
2,973,135
2,570,081
16,362,910
18,114,234
Middle East
323,404
401,585
222,195
192,507
-
-
545,599
594,092
North America
5,086,618
5,222,931
12,087,111
9,417,738
-
-
17,173,729
14,640,669
South America
-
-
2,071,337
1,935,211
-
-
2,071,337
1,935,211
Asia
386,999
366,619
3,131,417
1,865,236
-
-
3,518,416
2,231,855
11,801,439
14,109,882
24,897,417
20,836,098
2,973,135
2,570,081
39,671,991
37,516,061
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 (2022: Europe and North America).
The below table outlines the Company’s revenue disaggregated by primary geographical markets.
2023
2022
€
€
Geographical markets
Europe
10,810,331
11,749,635
Middle East
323,404
401,585
North America
6,892,855
7,484,550
Asia
141,515
87,959
18,168,105
19,723,729
Annual Report and Financial Statements | Page 165
21 Revenue (Continued)
21.2 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
2023
2022
2023
2022
€
€
€
€
Receivables, which are included
in ‘Trade and other receivables’
7,527,306
6,355,216
22,036,471
21,504,839
Contract assets
3,846,197
2,130,015
277,900
435,806
Contract liabilities
(954,878)
(1,642,951)
(1,143,061)
(1,781,012)
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. Once the transfer of control to the customer happens, the contract
liability is then recognised as revenue.
21.3 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 2023 and 2022.
2023
THE GROUP
2024
2025
2026 and
beyond
Total
€
€
€
€
License fees
-
-
300,000
300,000
Services fees
2,762,988
81,000
125,000
2,968,988
2023
THE COMPANY
2024
2025
2026 and
beyond
Total
€
€
€
€
License fees
-
-
780,000
780,000
Services fees
-
-
173,000
173,000
Annual Report and Financial Statements | Page 166
21 Revenue (Continued)
21.3 Future Revenues (Continued)
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
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
4.11.2.
22 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
2023
2022
2023
2022
€
€
€
€
Audit fee
201,584
201,086
196,584
196,086
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
30,000
26,000
-
-
241,584
237,086
206,584
206,086
Annual Report and Financial Statements | Page 167
22 Profit Before Income Tax (Continued)
The fees payable to other auditors of the subsidiaries in relation to audit services for 2023 amount to
€73,836 (2022: €11,516).
22.1 Other Income
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Other income
355,487
355,372
69,528
16,560
Dividend receivable
-
11,468
-
11,468
355,487
366,840
69,528
28,028
During the years ended 31 December 2023 and 2022, 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 2023,
grants amounted to €69,528 (2022: €10,360) which are captured as part of other income in the note
above.
During 2023, no dividend has been recognised by the Group and Company for their investment in a US
company that was sold and derecognised in 2021 (2022: €11,468).
22.2 Other Expenses
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Fines and penalties
33,122
14,916
10,151
10,176
Write-off on equipment
67,042
-
-
-
Loss on disposal of property, plant
and equipment
730
32,638
-
7,647
Other expenses
41,270
19,544
-
(1,262)
142,164
67,098
10,151
16,561
22.3 Exchange (Loss)/Gain on Operating Activities
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Unrealised operating exchange
(losses)/gains
(764,076)
1,106,878
(646,690)
126,356
Realised operating exchange
gains
177,713
425,364
192,257
391,650
(586,363)
1,532,242
(454,433)
518,006
Annual Report and Financial Statements | Page 168
22 Profit Before Income Tax (Continued)
22.4 Impairment Loss on Trade Receivables and Contract Assets
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Increase in provision for impairment
loss on trade receivables and
contract assets
116,447
130,656
330,941
132,714
Bad debts written off
220,382
5,077
-
704
336,829
135,733
330,941
133,418
Annual Report and Financial Statements | Page 169
22 Profit Before Income Tax (Continued)
22.5 Expenses by Nature
THE GROUP
THE COMPANY
2023
2022
2023
2022
Notes
€
€
€
€
Wages and salaries
26
22,933,117
22,733,853
8,613,649
10,219,607
Directors’ emoluments
26
1,655,126
1,663,860
1,535,126
1,543,860
Non-competition benefits
26
70,971
73,866
63,094
64,734
Share-based arrangements
26
287,930
269,994
-
-
Post-employment benefits
26
75,041
-
-
-
Staff welfare
666,286
832,152
400,445
439,395
Subcontracted costs
1,201,117
990,333
5,247,335
5,037,828
Professional fees
1,493,592
1,387,831
261,708
284,158
Professional services
163,650
193,307
2,270
84,032
Consultancy fees
1,512,611
2,316,639
1,155,379
1,572,200
Audit fees
201,584
201,086
196,584
196,086
Accountancy fees
158,916
130,251
7,643
-
Water and electricity fees
153,321
158,323
83,431
83,629
Cleaning fees
165,319
198,130
64,860
83,805
Acquiring fees
1,623,496
1,420,291
-
-
Hosting services
907,778
716,666
-
-
Travelling expenses
532,729
332,726
240,623
164,145
Market research fees
203,200
11,870
203,200
-
Infrastructure costs
1,853,689
1,660,954
1,120,720
927,802
Advertising and promotion fees
206,515
66,744
106,299
25,379
Participation in fairs and seminars
164,888
145,491
112,025
101,919
Administrative subscriptions
161,269
179,146
138,338
156,198
Renewals of software licences
224,682
165,681
29,044
26,331
Card schemes
1,070,363
1,147,300
2,700
-
Telecommunication fees
264,752
276,056
131,859
142,362
Depreciation
8, 9
1,000,462
1,054,999
279,383
283,728
Amortisation
10
1,435,772
930,178
1,366,422
909,604
Insurance costs
803,518
752,185
165,427
290,346
Capitalised development costs
(4,421,024)
(2,659,317)
(5,078,047)
(3,381,202)
Impairment loss on trade
receivables and contract assets
22.4
336,829
135,733
330,941
133,418
Recharge of expenses to
intercompany
-
-
(1,557,669)
(755,574)
Other expenses
631,578
113,879
110,578
(131,475)
37,739,077
37,600,207
15,333,367
18,502,315
Annual Report and Financial Statements | Page 170
23 Finance Income and Finance Costs
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Bank interest income
2,744
3,140
19
244
Interest on loans receivable
-
3,704
118,653
64,832
Other interest and similar income
39,875
39,165
-
-
Finance income
42,619
46,009
118,672
65,076
Bank interest expense
(244,799)
(42,630)
(244,799)
(42,624)
Non-operating unrealised
exchange gain/(loss)
2,179
16,435
(586)
(1,813)
Interest expense on lease
liabilities and retirement benefit
obligation
(63,820)
(56,308)
(12,080)
(12,540)
Other
143
-
143
-
Finance costs
(306,297)
(82,503)
(257,322)
(56,977)
Net finance (costs)/income
(263,678)
(36,494)
(138,650)
8,099
All the above items of finance income and cost are recognised in profit or loss.
Annual Report and Financial Statements | Page 171
24 Income Tax Expense
24.1 Recognised in Profit or Loss
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Current tax expense
Current tax charge for the year
648,693
1,376,948
540,322
100,919
Withholding tax on interest
received
4
34
3
34
648,697
1,376,982
540,325
100,953
Deferred tax expense
Origination and reversal of
temporary differences
746,277
651,451
391,472
532,943
Income tax expense
1,394,974
2,028,433
931,797
633,896
24.2 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
2023
2022
2023
2022
€
€
€
€
Profit before income tax
1,438,360
1,778,442
2,311,183
1,775,547
Income tax using the domestic
income tax rate of 35%
503,426
622,455
808,914
621,441
Effect of tax rates in foreign
jurisdictions
(50,942)
211,134
-
-
Tax effect of:
Non-taxable income
2,179
95,796
-
-
Non-deductible expenses
301,665
211,959
3,551
3,561
Different tax rates on bank
interest income
(3)
(46)
(3)
(46)
Depreciation charges not
deductible by way of capital
allowances
(325)
1,874
-
-
Unrecognised deferred tax
assets on unrelieved tax
losses
(596,328)
(328,202)
-
-
Elimination of intercompany
transaction
891,440
1,024,460
-
-
Other disallowed expenses
343,862
189,003
119,335
8,940
Income tax expense
1,394,974
2,028,433
931,797
633,896
Annual Report and Financial Statements | Page 172
25 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. In November
2023, following the scrip issue of shares, the issued ordinary shares increased by 1,313,974 whilst the
issued preference shares increased by 28,320.
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 2023 and 2022 is
adjusted for the scrip issue of shares issued during the year ended 31 December 2023.
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 €488,883 (2022: €61,278) and the profit of the Company of €1,312,353 (2022: €1,086,171)
by 218,403,701 (2022: 218,403,701), 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 €24,972 (2022:
€3,130) and the profit of the Company of €67,033 (2022: €55,480) by 10,141,649 (2022: 10,141,649),
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 2023
amounted to negative €0.002 (2022: €0.000 ) and €0.006 (2022: €0.005) respectively. Earnings per
preference share of the Group and the Company for the same reporting period amounted to negative
€0.002 (2022: €0.000 ) and €0.007 (2022: €0.005) 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 and Financial Statements | Page 173
26 Personnel Expenses
Personnel expenses incurred by the Group and the Company during the year are analysed as follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
Note
€
€
€
€
Directors’ emoluments:
Fees
484,562
484,335
484,562
484,335
Remuneration
1,000,695
1,000,695
880,695
880,695
Indemnity insurance
94,437
103,398
94,437
103,398
Fringe benefits
75,432
75,432
75,432
75,432
Key management personnel
emoluments:
Remuneration
2,364,236
2,824,368
1,119,126
1,434,702
Non-competition benefits
27
70,971
73,866
63,094
64,734
Share-based arrangements
28
115,135
269,994
-
-
Fringe benefits
16,477
13,275
13,477
10,275
4,221,945
4,845,363
2,730,823
3,053,571
Other personnel emoluments:
Wages and salaries
18,785,503
18,172,951
6,935,552
8,181,100
Social security contributions
1,766,901
1,723,259
545,494
593,530
Share-based arrangements
28
172,795
-
-
-
Post-employment benefits
75,041
-
-
-
25,022,185
24,741,573
10,211,869
11,828,201
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
2023
2022
2023
2022
No.
No.
No.
No.
Operating
347
370
186
201
Management and administration
88
94
51
51
435
464
237
252
Annual Report and Financial Statements | Page 174
27 Post-Employment Benefits
The Group has non-competition post-employment benefits and retirement benefits obligations.
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. The movement in the liability is as
follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Post-employment liabilities
Present value at 1 January
3,377,398
3,909,546
3,006,384
3,473,288
Recognised in profit or loss:
Discount unwind
70,971
73,866
63,094
64,734
Current service cost for the year
75,041
-
-
-
Interest cost for the year
5,418
-
-
-
Post-employment benefits
settled during the year
(26,440)
-
-
-
Recognised in other comprehensive
income:
Remeasurement adjustment
(37,221)
(606,014)
(32,510)
(531,638)
Effects of movement in
exchange rates
(987)
-
-
-
Present value at 31 December
3,464,180
3,377,398
3,036,968
3,006,384
Balances as at 31 December 2023 are deemed to fall due after more than one year. The re-measurement
adjustment for the Group and Company (excluding the retirement benefit obligation) is as a result of
financial actuarial losses resulting from an adjustment in the annual salary of certain executives. In case
of the retirement benefit obligation, the gain on obligation is as a result of changes in financial
assumptions and experience adjustments (the effects of differences between the previous actuarial
assumptions and what has actually occurred)
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;
ii) Longevity risk - in case of non-competition post-employment benefits, the longer the key
management person remains in office the higher the liability. In case of retirement benefit
obligations, the present value of the defined benefit plan liability is calculated by reference to
the best estimate of the mortality of plan participants both during and after their employment.
An increase in the life expectancy of the plan participants will increase the plan’s liability;
iii) Investment risk - The present value of the defined benefit plan liability is calculated using a
discount rate determined by reference to high quality corporate bond yields; if the return on plan
asset is below this rate, it will create a plan deficit; and
iv) Salary risk - The present value of the defined benefit plan liability is calculated by reference to
the future salaries of plan participants. As such, an increase in the salary of the plan participants
will increase the plan’s liability.
Annual Report and Financial Statements | Page 175
27 Post-Employment Benefits (Continued)
27.1 Non-competition 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 2023 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 significant assumptions applied by the Company in respect of post-employment benefits were as
follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
Discount rates
2.11%
0% - 2.5%
2.11%
0% - 2.5%
Expected years to termination
(weighted average)
5.59 yrs
6.42 yrs
5.94 yrs
6.41 yrs
Rate of projected salary
increase
3%
3%
3%
3%
Annual Report and Financial Statements | Page 176
27 Post-Employment Benefits (Continued)
27.1 Non-competition post-employment benefits (Continued)
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
assumptions applied for the post-employment benefits (excluding the retirement benefit obligation)
(note 27.1) and the retirement benefit obligation (note 27.2). 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 €127,414
(increases by €201,509) at Company level and decreases by €149,348 (increases by €224,847)
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 €78,429 (decreases by €25,113) at Company level and increases by €84,976
(decreases by €31,549) 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 €164,462 (decreases by €156,446) at Company
level and increases by €187,082 (decreases by €177,994) at Group level.
27.2 Retirement benefit obligation
RA 7641 under Philippines law provides for the minimum retirement pay to qualified private sector
employees in the Philippines. Benefits due under RA 7641 are accounted for as defined benefit plan
under IAS 19. An employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five
(65) years which is declared the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half
(1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one
whole year. The Group is in compliance of the minimum requirement of RA 7641 as at December 31,
2023 and has a non-contributory defined benefit plan for its employees.
An actuary has been engaged to compute the valuation of the RS2 Software APAC Inc. Employees‘
Retirement Plan considering the existing employee data and the minimum retirement benefits under the
law. This liability is recognised in the statement of financial position and represents the present value of
the defined benefit obligation as at 31 December 2023 based on the following:
i) Discount rate at the end of the reporting period. This discount rate is used to discount the liability
to the net present value;
Annual Report and Financial Statements | Page 177
27 Post-Employment Benefits (Continued)
27.2 Retirement benefit obligation (Continued)
ii) The expectation of the respective employees’ termination date; and
iii) The expected future salary growth in line with the Group’s policies.
The significant assumptions applied by the Group in respect to the retirement benefit obligation were as
follows:
THE GROUP
2023
2022
Discount rates
6.02%
-
Rate of projected salary increase
2.5%
-
Amounts recognised in profit or loss in respect of these defined plans are as follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Service cost
Current service cost
75,041
-
-
-
Net interest expense
5,418
-
-
-
Components of defined benefit cost
recognised in profit or loss
80,459
-
-
-
The current service cost has been included in profit or loss as cost of sales and the net interest expense
has been included within finance cost (note 23). The remeasurement of the net defined benefit liability
is included in other comprehensive income.
Amounts recognised in other comprehensive income are as follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Actuarial gains and losses from
changes in financial
assumptions
(3,811)
-
-
-
Actuarial gains and losses arising
from experience adjustments
(1,080)
-
-
-
Remeasurement of the net
defined benefit liability
(4,891)
-
-
-
Annual Report and Financial Statements | Page 178
27 Post-Employment Benefits (Continued)
27.2 Retirement benefit obligation (Continued)
The amount included in the statement of financial position arising from the group’s obligations in respect
of its defined benefit retirement benefit plans is as follows:
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Present value of obligation
75,568
-
-
-
Benefits paid directly during the
year
(26,440)
-
-
-
Effects on movement on
exchange rates
(987)
-
-
-
Net liability arising from defined
benefit obligation
48,141
-
-
-
In presenting this sensitivity analysis, the present value of the defined benefit obligation has been
calculated using the Projected Unit Credit method at the end of the reporting period, which is the same
as that applied in calculating the defined benefit obligation liability recognized in the statements of
financial position.
• If the discount rate is 50 basis points higher (lower) with all other assumptions held constant, the
net present value of the post-employment benefit obligation decreases by €3,817 (increases by
€4,245) at Group level.
• If the salaries of employees increase (decrease) by an additional 100 basis points over the
budgeted increase with all other assumptions held constant, the net present value of the post-
employment benefit obligation increases by €8,994 (decreases by €7,378) at Group level.
Annual Report and Financial Statements | Page 179
28 Share-Based Payment Arrangements
At 31 December 2023, the Group had the following share-based payment arrangements.
28.1 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 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.
28.2 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 and Financial Statements | Page 180
28 Share-Based Payment Arrangements (Continued)
28.3 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 26) 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), was 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 2023 and 2022.
Annual Report and Financial Statements | Page 181
28 Share-Based Payment Arrangements (Continued)
28.3 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 2023 (2022: 100%).
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Current liabilities
Share-based payments
624,567
355,163
-
-
29 Capital Commitments
The Group and the Company have no capital commitments in 2023 and 2022.
Annual Report and Financial Statements | Page 182
30 Related Parties
30.1 Parent and Ultimate Controlling Party
The Company is owned by ITM Holding Limited , a local registered company which holds 50.27% (2022:
50.04%) of ordinary shares in RS2 p.l.c. (previously RS2 Software p.l.c.). ITM’s registered office is 66,
Old Bakery Street, Valletta, Malta. The ultimate parent company of the Group is RS2 Holding GmbH, a
company registered in Germany. In his capacity as ultimate shareholder of ITM, Radi Abd El Haj indirectly
holds 50.27% (2022: 50.04%) of the issued ordinary share capital and directly holds 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 16.1, as a result, the voting rights vested in the Ordinary Shareholders
were not diluted as a consequence of the preference share issuance that happened in 2021.
30.2 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 amounts to €56,412 (2022: €76,129) 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 €42,354 (2022: €42,840).
Directors of the Company hold directly and indirectly 51.94% (2022: 51.69%) of the voting shares of the
Company.
Annual Report and Financial Statements | Page 183
30 Related Parties (Continued)
30.3 Related Party Transactions
THE GROUP
THE COMPANY
2023
2022
2023
2022
€
€
€
€
Parent company
Interest charged to
-
3,704
-
3,704
Subsidiaries
Support services provided to
-
11,698,878
11,233,477
Support services provided by
-
(4,443,356)
(4,324,272)
Other related parties
Depreciation charge on
right-of-use asset
249,424
222,862
-
-
Interest expense on lease
liability
33,153
25,978
-
-
Legal and administrative
services provided by
210,115
229,749
153,703
153,620
Support services provided to
3,456,895
3,739,946
3,456,895
3,739,946
Support services not yet
invoiced provided to
342,449
407,469
342,449
407,469
to/by related parties is set out in Notes 13, 14, 19 and 20 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 agreements for
leased properties in Neu-Isenburg, Germany, with a related party. As at 31 December 2023, ROU assets
amounting to €1,525,902 (2022: €1,535,996) and lease liabilities amounting to €1,571,412 (2022:
€1,572,429) 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 €249,424 (2022: €222,862) and the
interest expense for the year in relation to this lease liability amounted to €33,153 (2022: €25,978).
Annual Report and Financial Statements | Page 184
31 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 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
At 1 January 2023
33,922
116,523
-
-
150,445
Utilisation of provision
(24,678)
-
-
-
(24,678)
Decrease in provision
during the year
(7,869)
(116,523)
-
-
(124,392)
Foreign exchange
movements
(478)
-
-
-
(478)
At 31 December 2023
897
-
-
-
897
Annual Report and Financial Statements | Page 185
31 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 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
At 1 January 2023
-
116,523
-
-
116,523
Decrease in provision
during the year
(116,523)
(116,523)
At 31 December 2023
-
-
-
-
-
The amounts in respect of the provisions detailed above in Notes 31.1 to 31.4 are expected to be settled
within the next year, although an element of uncertainty still exists.
31.1 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. During the financial year ending 31 December 2023, this provision has
been reversed.
31.2 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 p.l.c. (previously 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 p.l.c. (previously 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. In 2023, the US
subsidiary settled the dispute through a non-public settlement agreement of €24,678, with the
remaining portion of the provision amounting to €7,869 being reversed.
Annual Report and Financial Statements | Page 186
31 Provisions and Contingent Liabilities (Continued)
31.3 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 had been utilised and the
remaining amount of €91,000 has been reversed.
31.4 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.
32 Cash flow information
32.1 Non-cash investing and financing information
The Company had no material non-cash investing and financing activity-related transactions for the
years ended 31 December 2023 and 2022, except for the following:
• Outstanding cash dividends at 31 December 2023 amounted to €562,318 (2022: €33,045) –
Note 19.
The Group had no material non-cash investing and financing activity-related transactions for the years
ended 31 December 2023 and 2022, except for the following:
• Additions to PPE amounting to €196,285 in 2023 (2022: €nil) have been financed by offsetting
it with the loans receivable from RS Consult – Note 8.
• In 2023, the Group recognised additional right-of-use assets amounting to €376,989 (2022:
€701,153) – Note 9.
• The Group recognised additional finance lease receivable amounting to €151,104 in 2023 (2022:
€159,789) This amount has come from reclassifying a portion of the Group's inventory – Note 9.
• Outstanding cash dividends at 31 December 2023 amounted to €562,318 (2022: €33,045) –
Note 19.
33 Subsequent Events
33.1 Chief Commercial Officer no longer engaged by the Company
On 12th January 2024, the Company announced that the Chief Commercial Officer is no longer engaged
by the Company with immediate effect.
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).
Annual Report and Financial Statements | Page 187
34 Comparative Information (Continued)
In the Statements of Changes in Equity, under Group, a negative amount of €491,610 relating to the
share issuance costs, was reclassed from Preference Share Capital to Share Premium specifically in the
“Balance at 1 January 2022” and the Balance at “31 December 2022”.
THE GROUP
Preference Share Capital
Share Premium
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
Balance at 1 January 2022
539,376
47,766
14,701,891
15,193,501
Balance at 31 December 2022
606,800
115,190
13,187,198
13,678,808
In the Statements of Changes in Equity, under Company, a negative amount of €491,610 relating to the
share issuance costs, was reclassed from Preference Share Capital to Share Premium specifically in the
“Balance at 1 January 2022” and the Balance at “31 December 2022”.
THE COMPANY
Preference Share Capital
Share Premium
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
Balance at 1 January 2022
539,376
47,766
14,701,891
15,193,501
Balance at 31 December 2022
606,800
115,190
13,187,198
13,678,808
In Note 6.3.1, specifically the table showing the maximum exposure to credit risk for the Group and the
Company, the amount of €3,491,226 and €184,404 respectively relating to “Cash at bank“ was added.
Carrying amount
THE GROUP
THE COMPANY
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
Current assets
Europe
6,454,617
4,980,310
4,877,560
4,693,156
Middle East
487,268
487,268
472,431
472,431
South America
607,834
592,366
259
259
North America
3,405,277
1,529,250
16,504,333
16,504,333
Asia
1,300,942
1,175,518
293,133
293,133
Annual Report and Financial Statements | Page 188
34 Comparative Information (Continued)
In Note 6.3.2, Trade receivables which are 300+ days past due, amounting to €211,616 and €111,173 for
the Group and the Company respectively, have been reclassified from “Not in default – simplified model
applied“ to “In default” under Collective Impairments.
THE GROUP
THE COMPANY
31 December 2022
Lifetime ECL
not-credit
impaired
Lifetime ECL
not-credit
impaired
Lifetime ECL
not-credit
impaired
Lifetime ECL
not-credit
impaired
Trade debtors, contract assets
and finance lease receivables
Collective
Impairments
Collective
Impairments
Collective
Impairments
Collective
Impairments
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
Internal rating grades
Not in default - simplified model
applied
6,429,321
6,640,937
1,966,634
2,077,807
In default
211,616
-
111,173
-
In Note 6.4, Liquidity Risk, an amount of €355,163 relating to the employment benefits in the US
subsidiary at Group level (refer to Note 28.3) have been included within the table outlining the
contractual maturities of financial liabilities.
THE GROUP
Carrying
amount
Contractual
Cash flows
12 months
or less
1 - 2 years
2 - 5 years
More than
5 years
31 December 2022
€
€
€
€
€
€
(restated)
Employment benefits
3,732,561
4,263,924
355,163
-
270,090
3,638,671
(as reported)
Employment benefits
3,377,398
3,908,761
-
-
270,090
3,638,671
In Note 15, under Group and Company, the “Bank Overdraft” of (€563) was excluded.
THE GROUP
THE COMPANY
(restated)
(as reported)
(restated)
(as reported)
2022
2022
2022
2022
€
€
€
€
Cash at bank
3,491,226
3,491,226
184,404
184,404
Cash in hand
2,884
2,884
1,705
1,705
Bank overdraft
-
(563)
-
(563)
Annual Report and Financial Statements | Page 189
34 Comparative Information (Continued)
In Note 18, under Group, the split of deferred tax assets and liabilities, specifically the “Temporary
difference on leases under IFRS 16”, the amount of €12,955 under assets and (€25,519) under liabilities
was split between “Temporary difference on leases under IFRS 16 Right-of use assets”, “Temporary
difference on leases under IFRS 16 Lease liabilities” and “Other temporary differences” as follows.
THE GROUP
Assets
Liabilities
Balance
2022
2022
2022
2022
2022
2022
(restated)
(as reported)
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
€
€
Temporary difference on
leases under IFRS 16
-
12,955
-
(25,519)
-
(12,564)
Temporary difference on
leases under IFRS 16
Right-of-use assets
-
-
(167,297)
-
(167,297)
-
Temporary difference on
leases under IFRS 16
Lease liabilities
152,230
-
-
-
152,230
-
Other temporary
differences
2,503
-
-
-
2,503
-
In Note 18, under Company, the split of deferred tax assets and liabilities, specifically the “Temporary
difference on leases under IFRS 16”, the amount of €12,955 under assets was split between “Temporary
difference on leases under IFRS 16 Right-of use assets”, “Temporary difference on leases under IFRS 16
Lease liabilities” and “Other temporary differences” as follows.
THE COMPANY
Assets
Liabilities
Balance
2022
2022
2022
2022
2022
2022
(restated)
(as reported)
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
€
€
Temporary difference
on leases under
IFRS 16
-
12,955
-
-
-
12,955
Temporary difference
on leases under
IFRS 16 Right-of-use
assets
-
-
(141,778)
-
(141,778)
-
Temporary difference
on leases under
IFRS 16 Lease
liabilities
152,230
-
-
-
152,230
-
Other temporary
differences
2,503
-
-
-
2,503
-
Annual Report and Financial Statements | Page 190
34 Comparative Information (Continued)
In Note 18, under Group, the movement in temporary differences during the year, specifically the
“Temporary difference on leases under IFRS 16”, the amount of (€10,594) was split between “Temporary
difference on leases under IFRS 16 Right-of use assets”, “Temporary difference on leases under IFRS 16
Lease liabilities” and “Other temporary differences” as follows.
THE GROUP
Balance
1 Jan 2022
Recognised
in profit
or loss
Balance
31 Dec 2022
Balance
1 Jan 2022
Recognised
in profit
or loss
Balance
31 Dec 2022
(restated)
(restated)
(restated)
(as reported)
(as reported)
(as reported)
€
€
€
€
€
€
Temporary difference
on leases under
IFRS 16
-
-
-
(1,970)
(10,594)
(12,564)
Temporary difference
on leases under
IFRS 16 Right-of-use
assets
(152,740)
(14,557)
(167,297)
-
-
-
Temporary difference
on leases under
IFRS 16 Lease
liabilities
157,784
(5,554)
152,230
-
-
-
Other temporary
differences
(7,014)
9,517
2,503
-
-
-
In Note 18, under Company, the movement in temporary differences during the year, specifically the
“Temporary difference on leases under IFRS 16”, the amount of €12,644 was split between “Temporary
difference on leases under IFRS 16 Right-of use assets”, “Temporary difference on leases under IFRS 16
Lease liabilities” and “Other temporary differences” as follows.
THE COMPANY
Balance
1 Jan 2022
Recognised
in profit
or loss
Balance
31 Dec 2022
Balance
1 Jan 2022
Recognised
in profit
or loss
Balance
31 Dec 2022
(restated)
(restated)
(restated)
(as reported)
(as reported)
(as reported)
€
€
€
€
€
€
Temporary difference
on leases under
IFRS 16
-
-
-
311
12,644
12,955
Temporary difference
on leases under
IFRS 16 Right-of-use
assets
(150,459)
8,681
(141,778)
-
-
-
Temporary difference
on leases under
IFRS 16 Lease
liabilities
157,784
(5,554)
152,230
-
-
-
Other temporary
differences
(7,014)
9,517
2,503
-
-
-
Annual Report and Financial Statements | Page 191
34 Comparative Information (Continued)
In Note 20.1, under the Company figures, an amount of €324,133 was reclassified from “Accrued
expenses owed to third parties” to “Amounts due to other related parties”.
THE COMPANY
(restated)
(as reported)
2022
2022
Accrued expenses owed to third parties
983,912
1,308,045
Amounts due to other related parties
822,397
498,264
In Note 22.5, under the Group and the Company figures, amounts of €5,701,526 and €925,837
respectively were reclassified from “Other expenses” to other line items.
THE GROUP
THE COMPANY
2022
2022
2022
2022
(restated)
(as reported)
(restated)
(as reported)
€
€
€
€
Staff welfare
832,152
-
439,395
-
Professional services
193,307
-
84,032
-
Consultancy fees
2,316,639
2,065,938
1,572,200
1,572,200
Audit fees
201,086
-
196,086
-
Accountancy fees
130,251
-
-
-
Water and electricity fees
158,323
-
83,629
-
Cleaning fees
198,130
-
83,805
-
Acquiring fees
1,420,291
-
-
-
Hosting services
716,666
-
-
-
Market research fees
11,870
-
-
-
Infrastructure costs
1,660,954
-
927,802
-
Advertising and promotion fees
66,744
-
25,379
-
Administrative subscriptions
179,146
-
156,198
-
Renewals of software licences
165,681
-
26,331
-
Card schemes
1,147,300
-
-
-
Telecommunication fees
276,056
-
142,362
-
Insurance costs
752,185
-
290,346
-
Capitalised development costs
(2,659,317)
-
(3,381,202)
-
Other expenses
113,879
5,815,405
(131,475)
(1,057,312)
Annual Report and Financial Statements | Page 192
Independent
Auditors` Report
Independent Auditors’ Report
To the Members of RS2 p.l.c.
Report on the Audit of the Financial Statements
Opinion
We have audited the individual financial statements of RS2 p.l.c. (the Company) and the
consolidated financial statements of the Company and its subsidiaries (together, the Group), set
out on pages 59 to 191, which comprise the statements of financial position of the Company and
the Group as at 31 December 2023, and the statements of profit or loss, the statements of
comprehensive income, statements of changes in equity and statements of cash flows of the
Company and the Group for the year then ended, and notes to the financial statements,
including material accounting policy information. In our opinion, the accompanying financial
statements give a true and fair view of the financial position of the Company and the Group as
at 31 December 2023, and of the Company’s and the Group’s financial performance and cash
flows for the year then ended in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board (IFRS) as adopted by the European Union and have
been properly prepared in accordance with the requirements of the Maltese Companies Act
(Cap. 386).
Deloitte Audit Limited
Deloitte Place
Triq L-Intornjatur
Central Business District
CBD 3050
Malta
Tel: +356 2343 2000, 2134 5000
Fax: +356 2133 2606
info@deloitte.com.mt
www.deloitte.com/mt
Company Ref No: C51312
VAT Reg No: MT2013 6121
Exemption number: EXO2155
Deloitte Audit Limited is a limited liability company registered in Malta with registered office at Deloitte Place, Triq L-Intornjatur, Central
Business District, CBD 3050 Malta. Deloitte Audit Limited forms part of the Deloitte Malta firm. The Deloitte Malta firm consists of (i)
Deloitte, a civil partnership regulated in terms of the laws of Malta, constituted between limited liability companies, operating at Deloitte
Place, Triq L-Intornjatur, Central Business District, CBD 3050 Malta and (ii) the affiliated operating entities: Deloitte Advisory and
Technology Limited (C23487), Deloitte Audit Limited (C51312), Deloitte Corporate Services Limited (C103276) and Deloitte Tax Services
Limited (C51320), all limited liability companies registered in Malta with registered offices at Deloitte Place, Triq LIntornjatur, Central
Business District, CBD 3050 Malta. Deloitte Corporate Services Limited is authorised to act as a Company Service Provider by the Malta
Financial Services Authority. Deloitte Audit Limited is authorised to provide audit services in Malta in terms of the Accountancy Profession
Act. The Deloitte Malta firm is an affiliate of Deloitte Central Mediterranean S.r.l., a company limited by guarantee registered in Italy with
registered number 09599600963 and its registered office at Via Tortona no. 25, 20144, Milan, Italy. For further details, please visit
www.deloitte.com/mt/about.
Deloitte Central Mediterranean S.r.l. is the affiliate for the territories of Italy, Greece and Malta of Deloitte NSE LLP, a UK limited liability
partnership and member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of
its member firms are legally separate and independent entities. DTTL, Deloitte NSE LLP and Deloitte Central Mediterranean S.r.l. do not
provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.
For information, contact Deloitte Malta.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the Company
and the Group in accordance with the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants including International Independence
Standards (IESBA Code), as applicable to audits of financial statements of public interest
entities, together with the Accountancy Profession (Code of Ethics for Warrant Holders)
Directive (Maltese Code) that are relevant to our audit of the financial statements of public
interest entities in Malta. We have fulfilled our other ethical responsibilities in accordance with
the IESBA Code and the Maltese Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion. In conducting our audit, we have
remained independent of the Company and the Group and have not provided any of the non-
audit services prohibited by article 18A(1) of the Maltese Accountancy Profession Act (Cap. 281).
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. The key audit matters described below were addressed in the context of our audit of
the individual and consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Impairment testing of goodwill relating to the Group’s US and German operations recognised in
the consolidated financial statements.
Under IFRSs, the Group is required to annually test the amount of goodwill recognised in the
consolidated financial statements for impairment. These impairment tests are significant to our
audit because the amount of goodwill as at 31 December 2023 relating to the Group’s US
operations amounted to EUR0.7m and the amount of goodwill that arose on the acquisition of
Kalicom business in Germany amounted to EUR1.3m and these amounts are material to the
consolidated financial statements. In addition, the directors’ assessment process is highly
judgmental and is based on assumptions, such as forecasted business growth rates, profit
margins, weighted average cost of capital and effective tax rates, which are affected by
expected future market or economic conditions.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Impairment testing of goodwill relating to the Group’s US and German operations recognised in
the consolidated financial statements. (Continued)
Our audit procedures to address the risk of material misstatement on this matter included:
• Evaluating the design and implementation of key controls surrounding the Group’s
impairment assessment process.
• Involving an internal valuation specialist to assess the Group’s impairment testing
methodology determined from value-in-use calculations and the key assumptions applied
by the directors for this purpose.
• Performing scenario analysis of the impairment testing calculations to changes in key inputs
such as the projected growth rate and the weighted average cost of capital.
• Reviewing the impairment testing calculations for reasonability, mathematical accuracy and
consistency.
We also focused on the adequacy of the Group’s disclosures about those assumptions to which
the outcome of the impairment test is most sensitive, that is, those that have the most
significant effect on the determination of the recoverable amount of goodwill.
The Group’s disclosures about goodwill are included in note 10, which specifically explains that
the directors have assessed the carrying amount of goodwill as at 31 December 2023 to be
recoverable and that there is no impairment in the value of the goodwill.
Impairment testing of investment in US subsidiary and German subsidiary held by the Company
in the individual financial statements
As at 31 December 2023, the Company held an investment with a carrying amount of EUR11.7m
in its US subsidiary, RS2 Software Inc. The Company performed an impairment assessment of its
investment in this subsidiary by computing its value-in-use in conjunction with the testing of
impairment of goodwill arising on the US operations.
In addition, as at 31 December 2023, the Company also held an investment with a carrying
amount of EUR6.3m in the German intermediate holding company, RS2 Merchant Services
Europe GmbH. The Company performed an impairment assessment of its investment in this
subsidiary by computing the value-in-use arising from the two subsidiaries held by RS2
Merchant Services Europe GmbH, comprising the business of RS2 Zahlungssysteme GmbH
(previously Kalicom Zahlungssysteme KG) and the acquiring business being developed by RS2
Financial Services GmbH.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Impairment testing of investment in US subsidiary and German subsidiary held by the Company
in the individual financial statements (Continued)
The carrying amount of these investments are material to the Company’s financial statements
and the directors’ assessment process is highly judgmental and is based on assumptions, such
as forecast business growth rates, profit margins, weighted average cost of capital and
effective tax rates, which are affected by expected future market or economic conditions.
Our procedures to address the risk of material misstatement arising on this matter included:
• Evaluating the design and implementation of key controls surrounding the Company’s
impairment assessment process.
• Involving an internal valuation specialist to assess the Company’s impairment testing
methodology determined from value-in-use calculations and the key assumptions applied by
the directors for this purpose.
• Performing scenario analysis of the impairment testing calculations to changes in key inputs
such as the projected growth rate and the weighted average cost of capital.
• Reviewing the impairment testing calculations for reasonability, mathematical accuracy and
consistency.
We also focused on the adequacy of the Company’s disclosures in notes 10 and 11 about the key
assumptions that were used in the value-in-use calculations which have the most significant
effect on the determination of the recoverable amount of the investments in subsidiary. The
disclosures state that the recoverable amount of each of these investments in subsidiary was
determined by the Company to be higher than its carrying amount.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Other Information
The directors are responsible for the other information. The other information comprises (i) the
Who We Are section, (ii) the Chairman’s statement, (iii) the CEO’s statement, (iv) the Board of
Directors’ section, (v) the Corporate Social Responsibility section, (vi) the Directors’ Report, (vii)
the Corporate Governance Statement of Compliance, (viii) the Remuneration Report required
under Rule 12.26K of the Capital Markets Rules, (viii) the Statement of Directors pursuant to
Capital Market Rule 5.68, (ix) Company Information and (x) the Directors’ responsibilities for the
financial statements, which we obtained prior to the date of this auditor’s report.
However, the other information does not include the individual and consolidated financial
statements, our auditor’s report and the relevant tagging applied in accordance with the
requirements of the European Single Electronic Format, as defined in our
Report on Other Legal
and Regulatory Requirements
.
Except for our opinions on the Directors’ Report in accordance with the Maltese Companies Act
(Cap. 386), and on the Corporate Governance Statement of Compliance and on the
Remuneration Report in accordance with the Capital Markets Rules issued by the Malta Financial
Services Authority, our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
With respect to the Directors’ Report, we also considered whether the Directors’ Report includes
the disclosure requirements of Article 177 of the Companies Act (Cap. 386), and the statement
required by Rule 5.62 of the Capital Markets Rules on the Company’s and the Group’s ability to
continue as a going concern.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Other Information (Continued)
In accordance with the requirements of sub-article 179(3) of the Maltese Companies Act (Cap.
386) in relation to the Directors’ Report on pages 28 to 40, in our opinion, based on the work
undertaken in the course of the audit:
• the information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with those financial statements; and
• the Directors’ Report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company, the Group and their
environment obtained in the course of the audit, we have not identified any material
misstatements in the Directors’ Report.
Responsibilities of the Directors and the Audit Committee for the Financial Statements
As explained more fully in the Statement of Directors’ responsibilities on page 57, the directors
are responsible for the preparation of financial statements that give a true and fair view in
accordance with IFRSs as adopted by the European Union and the requirements of the Maltese
Companies Act (Cap. 386), and for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s
and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Company and/or the Group or to cease operations, or have no realistic
alternative but to do so.
The directors have delegated the responsibility for overseeing the Company’s and the Group’s
financial reporting process to the Audit Committee.
4
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Auditor’s Responsibilities for the Audit of the Financial Statements
This report, including the opinions set out herein, has been prepared for the Company’s
members as a body in accordance with articles 179, 179A and 179B of the Companies Act (Cap.
386).
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinions in accordance with articles 179, 179A and 179B of the
Companies Act (Cap. 386). Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
In terms of article 179A(4) of the Maltese Companies Act (Cap. 386), the scope of our audit does
not include assurance on the future viability of the Company and the Group or on the efficiency
or effectiveness with which the directors have conducted or will conduct the affairs of the
Company and the Group. The financial position of the Company and/or the Group may improve,
deteriorate, or otherwise be subject to change as a consequence of decisions taken, or to be
taken, by the management thereof, or may be impacted by events occurring after the date of
this opinion, including, but not limited to, events of force majeure.
As such, our audit report on the Company’s and the Group’s historical financial statements is not
intended to facilitate or enable, nor is it suitable for, reliance by any person, in the creation of
any projections or predictions, with respect to the future financial health and viability of the
Company and/or the Group, and cannot therefore be utilised or relied upon for the purpose of
decisions regarding investment in, or otherwise dealing with (including but not limited to the
extension of credit), the Company and/or the Group. Any decision-making in this respect should
be formulated on the basis of a separate analysis, specifically intended to evaluate the
prospects of the Company and/or the Group and to identify any facts or circumstances that may
be materially relevant thereto.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Auditor’s Responsibilities for the Audit of the Financial Statements (continued)
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s and the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s and the
Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company and/or the Group to cease to
continue as a going concern. Accordingly, in terms of generally accepted auditing standards,
the absence of any reference to a material uncertainty about the Company’s and/or the
Group’s ability to continue as a going concern in our auditor’s report should not be viewed as
a guarantee as to the Company’s and/or the Group’s ability to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
Companies or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of
the group audit. We remain solely responsible for our audit opinion.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Auditor’s Responsibilities for the Audit of the Financial Statements (Continued)
For the avoidance of doubt, any conclusions concerning the adequacy of the capital structure of
the Company, including the formulation of a view as to the manner in which financial risk is
distributed between shareholders and/or creditors cannot be reached on the basis of these
financial statements alone and must necessarily be based on a broader analysis supported by
additional information.
We communicate with the Audit Committee regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the Audit Committee, we determine those matters that
were of most significance in the audit of the individual and consolidated financial statements of
the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Report on Other Legal and Regulatory Requirements
Report on compliance of the Annual Financial Report 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”)
Pursuant to Capital Markets Rule 5.55.6 issued by the Malta Financial Services Authority, we
have undertaken a reasonable assurance engagement in accordance with the requirements of
the Accountancy Profession (European Single Electronic Format) Assurance Directive issued by
the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281), hereinafter
referred to as the “ESEF Directive 6”, on the annual financial report of the Company and the
Group for the year ended 31 December 2023, prepared in a single electronic reporting format.
Solely for the purposes of our reasonable assurance report on the compliance of the annual
financial report with the requirements of the ESEF RTS, the “Annual Financial Report” comprises
the Directors’ Report, Directors’ responsibilities for the Financial Statements, the Corporate
Governance Statement of Compliance, the annual financial statements, Company Information,
and the Independent auditor’s report, as set out in Capital Markets Rules 5.55.
Responsibilities of the Directors for the Annual Financial Report
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 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.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Auditor’s responsibilities for the Reasonable Assurance Engagement
Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report,
including the consolidated financial statements and the relevant electronic tags therein comply,
in all material respects, with the ESEF RTS, based on the evidence we have obtained. We
conducted our reasonable assurance engagement in accordance with the requirements of ESEF
Directive 6.
The nature, timing and extent of procedures we performed, including the assessment of the
risks of material noncompliance with the requirements of the ESEF RTS, whether due to fraud or
error, were based on our professional judgement and included:
• Obtaining an understanding of the Company’s and the Group’s internal controls relevant to
the financial reporting process, including the preparation of the Annual Financial Report, in
accordance with the requirements of the ESEF RTS, but not for the purpose of expressing an
assurance opinion on the effectiveness of these controls.
• Obtaining the Annual Financial Report and performing validations to determine whether the
Annual Financial Report has been prepared in accordance with the requirements of the
technical specifications of the ESEF RTS.
• Examining the information in the Annual Financial Report to determine whether all the
required tags therein have been applied and evaluating the appropriateness, in all material
respects, of the use of such tags in accordance with the requirements of the ESEF RTS.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our reasonable assurance opinion.
Reasonable Assurance Opinion
In our opinion, the Annual Financial Report for the year ended 31 December 2023 has been
prepared, in all material respects, in accordance with the requirements of the ESEF RTS.
This reasonable assurance opinion only covers the transfer of the information in the Annual
Financial Report into a single electronic reporting format as required by the ESEF RTS, and
therefore does not cover the information contained in the Annual Financial Report.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Report on Corporate Governance Statement of Compliance
Pursuant to Rule 5.94 of the Capital Markets Rules issued by the Malta Financial Services
Authority, the directors are required to include in the Company’s Annual Financial Report a
Corporate Governance Statement of Compliance explaining the extent to which they have
adopted the Code of Principles of Good Corporate Governance set out in Appendix 5.1 to
Chapter 5 of the Capital Markets Rules, and the effective measures that they have taken to
ensure compliance with those principles. The Corporate Governance Statement of Compliance
is to contain at least the information set out in Rule 5.97 of the Capital Markets Rules.
Our responsibility is laid down by Rule 5.98 of the Capital Markets Rules, which requires us to
include a report to shareholders on the Corporate Governance Statement of Compliance in the
Company’s Annual Financial Report.
We read the Corporate Governance Statement of Compliance and consider the implications for
our report if we become aware of any information therein that is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or that otherwise appears to be
materially misstated. We also review whether the Corporate Governance Statement of
Compliance contains at least the information set out in Rule 5.97 of the Capital Markets Rules.
We are not required to, and we do not, consider whether the directors’ statements on internal
control cover all risks and controls, or form an opinion on the effectiveness of the Company’s
corporate governance procedures or its risk and control procedures.
In our opinion, the Corporate Governance Statement of Compliance set out on pages 41 to 50
has been properly prepared in accordance with the requirements of Rules 5.94 and 5.97 of the
Capital Markets Rules.
Report on Remuneration Report
Pursuant to Rule 12.26K of the Capital Markets Rules issued by the Malta Financial Services
Authority, the directors are required to draw up a Remuneration Report, whose contents are to
be in line with the requirements listed in Appendix 12.1 to Chapter 12 of the Capital Markets
Rules.
Our responsibility is laid down by Rule 12.26N of the Capital Markets Rules, which requires us to
check that the information that needs to be provided in the Remuneration Report, as required in
terms of Chapter 12 of the Capital Markets Rules, including Appendix 12.1, has been included.
In our opinion, the Remuneration Report set out on pages 51 to 54 includes the information that
needs to be provided in the Remuneration Report in terms of the Capital Markets Rules.
Independent Auditors’ Report (Continued)
To the Members of RS2 p.l.c.
Matters on which we are required to report by exception under the Companies Act
Under the Companies Act (Cap. 386), we have responsibilities to report to you if in our opinion:
• Proper accounting records have not been kept;
• Proper returns adequate for our audit have not been received from branches not visited by
us;
• The financial statements are not in agreement with the accounting records and returns; or
• We have been unable to obtain all the information and explanations which, to the best of our
knowledge and belief, are necessary for the purpose of our audit.
We have nothing to report to you in respect of these responsibilities.
Auditor tenure
We were first appointed by the members of the Company to act as statutory auditor of the
Company and the Group on 19 June 2018 for the financial year ended 31 December 2018, and
were subsequently reappointed as statutory auditors by the members of the Company on an
annual basis. The period of total uninterrupted engagement as statutory auditor including
previous reappointments of the firm is six financial years.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee in accordance
with the provisions of Article 11 of the EU Audit Regulation No. 537/2014.
The audit was drawn up on 23 April 2024 and signed by:
David Delicata as Director
for and on behalf of
Deloitte Audit Limited
Registered auditor
Central Business District, Birkirkara, Malta
RS2.COM
RS2 p.l.c.
RS2 Buildings, Triq Il-Fortizza,
Il-Mosta MST 1859
Malta
+356 2134 5857
info@rs2.com
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