TIDMNEO
RNS Number : 6956I
Neovia Financial PLC
17 March 2010
NEOVIA Financial Plc
2009 Audited Results
Wednesday, 17 March 2010 - NEOVIA Financial Plc (LSE: NEO) ("NEOVIA" or the
"Group"), the leading alternative payments business, presents its audited
results for the year ended 31 December 2009.
Financial highlights
· Group total revenue of $64.5m, down 15% (2008: $75.9m);
· Fee revenue of $62.9m in 2009, down 10% (2008: $69.8m);
· Gross margin at 54.6% in 2009 (2008: 61.8%);
· EBITDA of $8.0m in 2009 (2008: $16.0 million);
· Loss before tax and other items of $1.7m (2008: profit $6.4m); and
· Total Group cash of $73.5m at 31 December 2009 (2008: $82.3m).
Key performance indicators
· Active e-wallet users totalled 99,978 in Q4 2009 (Q4 2008: 97,673);
· E-wallet fee revenue per active e-wallet user $116 for 2009 (2008:
$128);
· Average daily sign ups 1,048 for 2009 (2008: 981); and
· Average daily receipts $488,641 for 2009 (2008: $457,442).
Operational highlights
· Newteller platform running, completion in April 2010 after extended
testing period;
· Focus on cost control with Business Transformation process commenced in
first quarter; and
· Transition to new CEO completed; substantial progress on evolving Group
strategy.
Dale Johnson, Chairman, commented: "Following a transition year characterised
by progress in dealing with internal and external challenges, including weaker
market conditions, the Board has renewed confidence in its updated business
strategy and executive leadership to deliver significantly improved shareholder
value in 2010 and beyond.
A relentless pursuit of improved operational efficiency, energetic organic
revenue growth and a disciplined approach to strategic development opportunities
are expected to drive materially improved financial performance.
The fourth quarter of 2009 saw stronger performance for both the e-wallet and
NETBANX businesses compared to the third quarter, and revenue for the first two
months of 2010 was in line with management's expectations. The Board continues
to be optimistic about the outlook for NEOVIA and remains confident about the
Group's prospects going forward with its adoption of a renewed strategy for
growth."
For further information contact:
NEOVIA Financial PlcEmail: investorrelations@neovia.com + 44 (0) 207 638 9571
(17 March)
+-------------+--------------------------+------------------------------+
| | |
+----------------------------------------+------------------------------+
| Mark Mayhew | President & CEO | |
+-------------+--------------------------+------------------------------+
| Doug Terry | CFO | |
+-------------+--------------------------+------------------------------+
| Andrew | VP Communications | + 44 (0) 1624 698 713 |
| Gilchrist | | |
+-------------+--------------------------+------------------------------+
| | |
+----------------------------------------+------------------------------+
| | |
| Citigate Dewe Rogerson | + 44 (0) 207 638 9571 |
+----------------------------------------+------------------------------+
| Sebastian Hoyle / George Cazenove | |
+----------------------------------------+------------------------------+
| | |
+----------------------------------------+------------------------------+
| | |
| Daniel Stewart & Co Plc | + 44 (0) 207 776 6550 |
+----------------------------------------+------------------------------+
| Paul Shackleton | |
+-------------+--------------------------+------------------------------+
Conference call details and further information
NEOVIA will hold a briefing for invited UK-based analysts at the offices of
Citigate Dewe Rogerson, 3 London Wall Buildings, London, EC2M 5SY, later this
morning at 11.00 a.m. From this time, copies of the analyst presentation and
the Group's annual report and accounts will be available on the Company's
website, www.neovia.com.
NEOVIA management will also host a conference call on 17 March 2010 at 2.00 pm
GMT (10.00 a.m. EST) for analysts and institutional investors that can be
accessed by dialling 0800 028 1277 (UK free call) or +44 (0)20 7806 1957
(International) or 1888 935 4577 (USA free-call). This call will take the
format of a short introduction by management, followed by a Question and Answer
session. A recording of the conference call will be available for a period of 7
days from 18 March 2010 (until 25 March 2010). To access the recording please
dial the following replay telephone number: +44 (0)20 7111 1244. The passcode
for this replay is 1370486#.
For any other information please contact NEOVIA Investor Relations at
investorrelations@neovia.com.
* * * * *
About NEOVIA Financial
Trusted by consumers and businesses in over 170 countries to move and manage
billions of dollars each year, NEOVIA Financial Plc is a leading alternative
payments business. Through the NEOVIA Payment Network, merchants use the NETBANX
processing service to simplify how they accept and settle card,
direct-from-bank, and cash payments, and the NETELLER payment account to
increase margins, capture new customers and increase customer lifetime values.
Being independent has allowed the company to support tens-of-thousands of
retailers and merchants in many geographies and across multiple industries.
NEOVIA Financial Plc is quoted on the London Stock Exchange's AIM, with a ticker
symbol of NEO. Subsidiary company NETELLER (UK) Ltd is authorised by the
Financial Services Authority (FSA) to operate as a regulated e-money issuer.
* * * * *
Disclaimer
This document contains forward-looking statements relating to future events and
future performance. In some cases, forward looking statements can be identified
by terminology such as "may", "will", "should", "expects", "projects", "plans",
"anticipates" and similar expressions. These statements represent management's
expectations or beliefs concerning among other things, future operating results
and various components thereof or the economic performance of the NEOVIA Group.
The projections, estimates and beliefs contained in such forward-looking
statements necessarily involve known and unknown risks and uncertainties, which
may cause the actual performance and financial results in future periods to
differ materially from any projections of future performance or results
expressed or implied by such forward-looking statements. Accordingly, readers
are cautioned that events or circumstances could cause results to differ
materially from those predicted.
Chairman's Statement
Introduction
It is 10 years since the original NETELLER e-wallet was founded in Calgary,
Canada. During that time, NEOVIA (formerly NETELLER Plc) has enjoyed much
success and faced more challenges than many entities would in a lifetime.
Following a difficult year in 2009, we enter 2010 with a renewed sense of
direction and optimism based on the vision and intense drive of our new CEO Mark
Mayhew, and on improving market opportunities.
2009 performance
NEOVIA Group total revenues declined from $75.9 million in 2008 to $64.5 million
in 2009. Group EBITDA was $8.0 million in 2009, down from $16.0 million in
2008. The loss after tax for 2009 was $9.8 million (2008: $8.1 million).
The Group faced many challenges during 2009, both internal and external, These
included the significant impact of a globally challenging economy on our core
customer market but also the consequences of internal events attaching to
organisational changes and unfulfilled acquisition activity. The Group
demonstrated resilience in addressing these challenges and setting the stage for
significant improvement this year.
In the light of the 2009 results, the Board does not recommend the payment of a
dividend but continues to keep this position under review.
People and the Board
I thank the management team and all our staff and acknowledge their efforts in a
trying economy for our merchants and our members. Our ability to adapt and
innovate has been one of NEOVIA's key strengths, and these characteristics
remain as cornerstones to support our next phase of growth.
A key objective for the Board in 2009 was to appoint and achieve a successful
transition to a new Chief Executive Officer, following the resignation of Ron
Martin early in the year.
After an extensive global search, the Board was pleased to announce on 19 August
the appointment of Mark Mayhew as President & Chief Executive Officer. With his
strong background in payments, cards, international operations, Plc governance,
consumer management and strategy formulation, Mark stood out as the right leader
for NEOVIA to fulfil its vision as the global online payments business. Mark has
made considerable progress since he started in the role on 1 September and he
adds significantly to our confidence in delivering much improved financial
results for 2010 and beyond.
I thank the members of the Board for their work throughout the year, especially
during the period when the Group was without a CEO. As reported last year, the
Board welcomed John Bateson and Jonathan Comerford as Non-Executive Directors in
January 2009.
I extend a special thank you to two of our Non-Executive Directors, Don Lindsay
and John Webster, who have indicated their intent not to seek re-election at the
Company's next Annual General Meeting. Don and John have been Non-Executive
Directors since the Company's admission to AIM in April 2004 and have served the
Company with outstanding commitment, loyalty and professionalism throughout
NEOVIA's life as a public company. The Board is currently assessing a slate of
prospective Non-Executive Director candidates so that timely appointments can be
made to ensure that the composition of the Board remains appropriate.
Finally, Doug Terry, the Company's Chief Financial Officer, will be stepping
down from his role to pursue personal interests following the publication of the
Company's results for 2009. We are grateful for Doug's contribution to the
Group over the past four years in managing and controlling the Group's finance
function. The Board, through the Nominations Committee, is well advanced in the
process of identifying a replacement and it is intended that this individual
will join the Board on appointment.
Governance
The Company remains committed to complying with the Combined Code in so far as
it is applicable to a company of NEOVIA's size and nature, being an AIM quoted
company. During the year the Board formed a Nominations Committee in recognition
of the importance of ensuring that the composition of the Board reflects the
needs of the Group on an ongoing basis.
Dividends
Given the challenging market conditions the Group faced during 2009 and the
financial performance during this transition year, the Board believes it is
prudent not to make a dividend payment for 2009. The Board continues to keep
this position under review.
Strategy
The Group's strategy has been comprehensively reviewed, updated and refined over
the past few months in pursuit of our desire to create a world class alternative
payments business. Short term, we are focusing on taking advantage of the
growth opportunities that leverage NEOVIA's strengths and improving broader
market conditions whilst strengthening the business's positioning for a newly
defined longer term strategy. This longer term strategy sees us growing the
NEOVIA payment network to become the leading alternative payments company in
our chosen vertical, product and geographic markets, targeting online gaming and
broader e-commerce market sectors through a "twin pillars" approach based on
sustainable stored value and straight-through-processing ("STP") businesses. We
will do this through organic growth, stimulated by significant improvements in
operating efficiency and the energetic development of our trusted brands,
augmented by high quality acquisitions that deliver access to new vertical,
product and geographic markets and/or provide specific skills.
Outlook
Following a transition year characterised by progress in dealing with internal
and external challenges, including weaker market conditions, the Board has
renewed confidence in its updated business strategy and executive leadership to
deliver significantly improved shareholder value in 2010 and beyond. A
relentless pursuit of improved operational efficiency, energetic organic revenue
growth, and a disciplined approach to strategic development opportunities are
expected to drive materially improved financial performance.
Dale Johnson
Chairman
16 March 2010
CEO's Statement
Introduction
I have been in position for six months. I have now had sufficient time to effect
reviews of the operational health of the Company as well as the prevailing
strategy and ambition of the Board and management colleagues to achieve the
strategy.
What is clear from the financial results for 2009 is that the Board's
expectations were not met; this in part reflects the significant impact of a
globally challenging economy on our core customer market but also the
consequences of specific internal events attaching to organisational changes and
unfulfilled acquisition activity. A material loss of momentum resulted and
unhelpful distractions hindered us from our key role in servicing merchants and
members.
What is less clear from short term financial results is achievement against
other objectives. As the Business Review that follows articulates, the position
looking forward is more rosy: the outlook for "alternative payments" is very
positive. The strong growth in online transactions, especially in e-commerce,
appears assured into the medium term at least; further development of channels
other than desktop will further stimulate traffic, whether smartphone, TV or
hybrid devices; continued maturity of "social networking" and monetising the
behaviour and sense of belonging to these tribal communities. Just these three
factors, the market participants driving their development and the
geodemographic shifts we are witnessing provide spectacular opportunity for the
payments industry, globally.
My job is to see NEOVIA is both an agitator for, and beneficiary of, these
changes. Ten years after the launch of the NETELLER e-wallet seems a good place
to start the next chapter in the Company's development. The focus for 2010 will
be to drive success on the operational agenda to deliver much improved financial
health AND the key first steps to realising our strategic ambition.
Strategic and operational review
One of my first tasks was to understand what was required to make NEOVIA "fit
for purpose" and to institute an immediate review of the business strategy, a
collective process involving the Group's Executive Management Team and Board.
Visiting the Group's operations globally, and spending the time to understand
how NEOVIA operates, I came to appreciate the efforts undertaken to refocus the
business following its withdrawal from the key markets of North America in 2007.
However, as the broader economic climate continues to challenge even the
largest, most diversified businesses, including many of our core customers, I
concluded that further steps could and should be taken to align NEOVIA's cost
structures and operational processes against current revenue expectations. The
key focus of our efforts in 2010 will be significant simplification - what we
do, how we do it and why we do it. Everything from operational footprint, via
corporate structures to the service provided to our merchants. And points in
between. We refer to this as Business Transformation.
The Board has therefore adopted a plan to streamline NEOVIA's costs and
processes throughout this current year with the aim of delivering a sustainable
improvement in operating performance as evidenced in our reported EBITDA. The
first steps have already been taken in this programme which will result in a
significant reduction in the employee count as certain roles are reallocated,
relocated or removed. The second phase of this programme focuses on improving
existing processes, removing inefficiencies and simplifying how NEOVIA operates.
The full financial benefits will likely be seen in the full year 2011
performance, but the operational efficiency improvements are expected to bear
material fruit this year.
To structure and lead this process, the Group recruited two individuals in
December 2009 who have considerable experience of managing business
transformation programmes with the scope and scale we seek. Dennis Jones joined
the executive team as Head of Business Transformation and Major Programmes from
RBS with substantial operational, cards, mergers and acquisitions, and
international business transformation expertise. Together with Stuart Minster,
Director of Business Transformation, (also from RBS
where he had senior executive responsibility for major change within the cards
division and was CEO of RBS US Commercial Cards) Dennis has oversight
responsibility for the change programme within NEOVIA. Phil Deeker has joined
the Group as Head of Human Resources - mobilising the resources at hand
requires strategic development of our skill-sets and Phil brings a wealth of
experience in helping organisations focus, align and achieve outstanding results
and is working alongside our existing HR team as we build our programmes,
acknowledging the importance of people to our success.
2010 objectives
NEOVIA has established three key objectives for 2010: first, to "conclude, embed
and leverage" the Newteller platform development. We are on track to switch
over our core e-wallet processing capabilities to the new platform in April
following an extensive testing regime. We will then look to "embed" Newteller
within our day-to-day operations, developing new products and programmes which
take full advantage of the enhanced capabilities Newteller provides. Later in
2010 will see the launch of a series of technology applications, neither
feasible nor cost effective under "OldTeller", which will leverage the
significant investment the Group has made and provide improved functionality and
offering to our customers.
Second, we will drive the Business Transformation programme to ensure that
material benefits can be achieved by end 2010, and sustained into the future.
This process will impact the entire business, and we look to our people to help
NEOVIA achieve the performance it is capable of.
Third, we will take the first steps to achieving the longer term strategy for
the business.
Longer term strategy
NEOVIA is a payment network focused on two "core" propositions - stored value
services, (through our NETELLER e-wallet and Net+ prepaid cards - together, our
NETELLER Payment Account) and straight through processing (STP) through our
NETBANX gateway offering. These are our "twin pillars". Success in the
payments business is about achieving scale; payments is a supply-side innovative
industry. Our revised strategy is to drive each of these lines of business
through organic growth and investment to achieve scale. Our historic focus has
been largely on the e-wallet product offering. We will seek to give greater
prominence to STP going forward. We will devote significant resources to develop
our capabilities so that we provide market-leading offerings to compete
effectively in the vertical, product and geographic markets we choose to focus
on.
Traditionally, online gaming has been the strong focus vertical for NEOVIA. Our
expertise in this segment is well established (along with our brands), and we
believe that we can leverage these skills across adjacent verticals. We will
therefore seek to extend our offerings into additional e-commerce markets,
particularly digital content and adjacent gaming markets (such as online
multi-role player and video gaming). Our stored value offering has particular
application for micropayments and we believe we can develop innovative products
to meet the difficult payment challenges where traditional consumer products do
not reach.
In pursuit of growth we will adopt "and" strategies: we will not reduce our
focus on online gaming as we continue to believe significant success is
achievable here. The market has been tested in 2009 and even stronger players
are emerging as a result of market "conditioning" and an evolving regulatory
landscape. We stand ready to serve our merchants as their business activities
change and see continued relevance of our knowledge, skills product and service
offerings.
Finally, our focus since 2007 has been on Europe and our emerging Asian
business. We have been successful at adding local payment and funding options
across many European countries. However, no alternative payments business can
be truly global without exposure to North American markets. We continue to
explore the best means to re-enter the online gaming market. Its regulatory
situation is complex and it would be premature to conclude definitively on if,
when or how the US market might be regulated. However, this fluidity presents a
substantial opportunity for those organisations that are well-positioned prior
to any potential regulatory change and the NETELLER brand remains a "power
brand" in our armoury.
NEOVIA has identified a number of key strategic and operational objectives to
clarify our intent for 2010 and beyond in support of our adopted Vision: to be
the leader in frictionless payments.
Strategic objectives
· Deliver enhanced end-to-end straight through processing capability for
merchants;
· Develop a meaningful North American market presence;
· Build greater scale in our stored value business;
· Broaden distribution through opening up our payment network; and
· Extend verticals outside of gaming.
Operational objectives
· Complete Business Transformation programme in 2010;
· Deepen penetration in online gaming market;
· Enhance risk management processes; and
· Build awareness of the brand portfolio - a unified brand and identity.
Measurement of objectives
The Group has historic objectives which were established at the end of 2007 as
part of the three year strategy through to 2010. Performance against these
measures has been impacted by the pressures of the challenging economic
environment and an inadequate focus on execution.
+-----------------+-----------------+----------------+------------+------------+
| Objective | Measures | Target - by | FY 2008 | FY |
| | include | end of 2010 | | 2009 |
+-----------------+-----------------+----------------+------------+------------+
| Gaming | Active e-wallet | More than | 97,673 | 99,978 |
| sector | users (1) | 250,000 | | |
| pre-eminence | | | | |
+-----------------+-----------------+----------------+------------+------------+
| Diversification | Non e-gaming | More than 30% | 16% | 16% |
| | revenue (2) | revenue | | |
+-----------------+-----------------+----------------+------------+------------+
| Profitable | Operating | Greater than | 22% | 13% |
| business | margin (3) | 35% | | |
+-----------------+-----------------+----------------+------------+------------+
(1) Active e-wallet users are those that make any transaction with their
e-wallet or Net+ card within the previous 90 day period
(2) Non e-gaming revenue is classified as revenues earned from non
e-gaming merchants, NETBANX (excluding e-gaming merchants), P2P and non-gaming
related investment income as a percentage of total reported revenue
(3) Operating margin is defined as operating profit before depreciation
and amortisation, stock option expense, foreign exchange gain/loss,
restructuring costs, impairment charges and investment gains or losses
A key part of developing a cohesive strategy is setting objectives against which
our performance can be measured. The three objectives above remain valid as
part of the Group's broader strategic goals, however in certain cases the
measures identified do not provide a sufficiently full picture of how the Group
is achieving against each objective.
The Board has therefore decided to adopt a broader basket of performance
measures against which it can track achievement of the Group's strategic and
operational objectives as set out above. Providing transparency as to what
drives our business helps to build confidence and understanding amongst our
shareholders, customers, staff and other stakeholders, which generates
sustainable longer term benefits, in terms of stock market valuation,
profitability and cash management.
Leveraging our key assets
A key element in achieving our Vision (and implied growth) will be the
successful leadership of our people - one of NEOVIA's greatest assets. We have
engaged our employees throughout the Transformation process to date, and the
Executive Management Team has worked to communicate the Group's strategy and
business goals. I believe strongly that a unified and clear vision with clear
objectives, supportive strategies and unambiguous policies attaching to our
values are essential for long-term success. Almost everything in this is new for
NEOVIA for 2010 - as will be the creation of a performance culture.
The Board recognises that rewarding performance will underpin the success of the
company. Therefore the Board recently approved adoption of a Long Term
Incentive Plan ("LTIP") which aligns the performance of the Executive Management
Team (including the CEO) with shareholders' interests. This will form part of a
revised approach to incentivising the leadership team to delivering improved
performance, placing a higher proportion of total compensation "at risk". The
Board has set aggressive targets for the LTIP vesting criteria which are EBITDA
focused. The Company's principal shareholders, representing almost 50%, were
consulted in advance and indicated their support in principle for the adoption
of such a plan.
Outlook
We seek to see NEOVIA poised to take full advantage of opportunities presented
in our chosen markets, whether from an improved macroeconomic environment,
greater effectiveness in our customer engagement or competitor deficiencies.
The pace at which we are working is materially greater than has existed in
recent years. We are mobilised to win. Our 2010 objectives are necessarily
focused on improving our operational capabilities and building an effective,
streamlined business with materially enhanced financial outcomes. Our longer
term strategic efforts will be concentrated on developing our payment network
along the "twin pillars" of stored value and straight-through-processing,
leveraging our significant intellectual property and technology investment,
especially in Newteller.
Mark Mayhew
President & CEO
16 March 2010
*****
Business Review
Introduction
NEOVIA delivered a broadly satisfactory performance for 2009 given the
challenging market conditions which continued throughout the year. Group
revenues decreased by 15% to $64.5 million (2008: $75.9 million) of which
interest income, considerably lower at $1.6m (2008: $6.1m), was a material
change.
2009 results
Revenue performance was disappointing reflecting in part the challenges faced by
our core online gaming merchants for much of the year. Fee revenues from our
e-wallet business fell 12%, while fees from NETBANX payment processing fell 10%,
despite improvements in Asia, largely as a result of the weakening of sterling
against the US dollar, our reporting currency.
Markets and customers
Online gaming remained the core market vertical for NEOVIA as we continued to
reinforce our leading position in providing payment solutions to merchants in
this sector. The traditional focus on online gambling merchants, particularly
poker, casino and sports betting operators, has been extended to bingo and
lottery operators. We announced a number of new merchants during the year,
including SBOBET and JAXX. Since the year end we have seen further success with
the signing of BSkyB, SEGA, Beatya!, GWBet and UWin, demonstrating the
continuing attractions of the NETELLER payment account for gaming merchants.
Estimates for growth for the online gaming market in 2010 range between zero and
around 10 per cent, according to certain industry commentators' assessments of
the combined negative macroeconomic factors alongside market evolution.
Regulation of online gaming markets, for example in Europe, is likely to be a
driver of growth, as evidenced in Italy in 2009, as well as anticipated
consolidation amongst the major operators as they seek to take advantage of
economies of scope and scale in serving and extending their customer bases.
NEOVIA has seen some early success in extending its payment solutions into
adjacent market verticals, such as the massive multiplayer online gaming market
(MMOG), virtual worlds and the gaming affiliate payments market. Contract wins
were announced with Mindark, the operator of the Entropia virtual universe, and
with other merchants such as Travian, a leading MMOG games developer and Virwox,
a virtual world currency exchanger. The NETELLER payment account has helped
affiliates who drive much online gaming business to be paid simply and quickly.
NETELLER won, for the third consecutive year, the iGaming Business Affiliate
Award for "Best Payment System for Affiliates" and our presence at the Affiliate
Trade Shows this year generated substantial interest in our offering to
affiliates. Similarly, the NETELLER payment account has proven an attractive
alternative option for customers to bring (and withdraw) funds from online
foreign exchange trading sites. NEOVIA signed ATLAS eForex in November 2009,
bringing to six the number of merchants using NETELLER in the forex trading
market, with AvaFX, FxPro, RetailFX, UWC (United World Capital) and FineXO
already customers of the Group.
As an alternative payments business, our growth and prospects are closely allied
to the growth and development of the broader e-commerce market, particularly
within our focus geographic markets of Europe and Asia Pacific. The trend for
transactions moving online continued throughout 2009 despite the significant
contractions in the broader economy, and it is estimated that the potential
market for online e-commerce could be as large as US$450 billion (excluding
North America) by 2012. We anticipate that our chosen markets could grow around
10% in 2010, as online purchasing activity is driven by increased broadband
penetration and customer familiarity and trust in alternative payments.
Key performance indicators
The Group's primary driver of fee revenue from its e-wallet is the active
e-wallet user base. An active e-wallet user is defined as a consumer whose
e-wallet account balance has changed during the past quarter. The change in
balance may be due to adding, removing, transferring or receiving funds.
The number of active e-wallets at the end of 2009 was 99,978, an improvement of
2% from the same period in 2008. European active e-wallets of 75,884 were down
3% from 2008 while Asian active e-wallets grew 15% to 15,843 (2008: 13,794).
Rest of world (ROW) active e-wallets numbered 8,251 - an increase of 38% over
the previous year. The overall increase is mainly attributable to an improving
trend in activity levels which the Group began to see in the latter half of
2009.
+------------+----------+----------+------------+----------+------------+
| Active | Q4 2009 | Q4 2008 | % growth | Q3 2009 | % growth |
| customers | | | | | |
+------------+----------+----------+------------+----------+------------+
| Europe | 75,884 | 77,916 | -3 % | 74,332 | 2 % |
+------------+----------+----------+------------+----------+------------+
| Asia | 15,843 | 13,794 | 15 % | 16,096 | -2 % |
| Pacific | | | | | |
+------------+----------+----------+------------+----------+------------+
| Rest of | 8,251 | 5,963 | 38 % | 7,929 | 4 % |
| World | | | | | |
+------------+----------+----------+------------+----------+------------+
| Total | 99,978 | 97,673 | 2 % | 98,357 | 2 % |
+------------+----------+----------+------------+----------+------------+
| | | | | | |
+------------+----------+----------+------------+----------+------------+
In contrast to the growth in active e-wallet numbers, the average fee revenue
earned per active e-wallet declined across all regions except Asia Pacific.
European fees per active e-wallet decreased by 11% to $117 in 2009 from $131 in
2008. Asia Pacific showed an improvement of 6% to $129. A decline of 20% in
ROW ($75 in 2009 vs. $93 in 2008) is due to the evolving product and promotion
mix. The Net+ prepaid MasterCard card is becoming the withdrawal method of
choice for e-wallet users, and is especially prevalent in countries where
payment is difficult. However, fees per transaction are generally lower,
resulting in more active e-wallet accounts but with lower fees per account.
Similarly, fee based promotions and bonuses are contributing to increased
customer activity, but also lead to a reduction in fees earned.
+----------------------------------+---------+----------+--------------+
| E-wallet revenue per active | FY 2009 | FY 2008 | % growth |
| e-wallet user ($) | | | |
+----------------------------------+---------+----------+--------------+
| Europe | 117 | 131 | -11 % |
+----------------------------------+---------+----------+--------------+
| Asia Pacific | 129 | 123 | 6 % |
+----------------------------------+---------+----------+--------------+
| Rest of World | 75 | 93 | -20 % |
+----------------------------------+---------+----------+--------------+
| Total | 116 | 128 | -10 % |
+----------------------------------+---------+----------+--------------+
In 2009, members deposited a daily average of $488,641 with the Group - up by 7%
from $457,442 in 2008. The increase is primarily due to penetration into new
geographic territories in both Central and Eastern Europe as well as Asia.
Deposits also increased since NETELLER members found it easier to withdraw funds
through improved withdrawal channels such as the Net+ prepaid MasterCard card.
Total receipts in 2009 totalled $178.4 million, an increase from $167.4 million
in 2008 which included deposits from North America.
Average daily sign-ups of new customers continued a positive trend throughout
the year. In 2009, 1,048 new customers signed up per day, an increase from 981
in 2008. Expansion of the NETELLER offering and improved conversion rates as a
result of a streamlined sign-up process helped drive this growth. As a lead
indicator of future business this is an encouraging trend.
The table below shows the Group's sign ups by region:
+--------------------+---------------------+---------------------+------------------+------------------+-------+--------+
| Average daily sign | Q1 | Q2 | Q3 | Q4 | FY | FY |
| ups | 2009 | 2009 | 2009 | 2009 | 2009 | 2008 |
+--------------------+---------------------+---------------------+------------------+------------------+-------+--------+
| Europe | 721 | 675 | 702 | 727 | 706 | 706 |
+--------------------+---------------------+---------------------+------------------+------------------+-------+--------+
| Asia Pacific | 148 | 164 | 194 | 155 | 165 | 160 |
+--------------------+---------------------+---------------------+------------------+------------------+-------+--------+
| Rest of World | 154 | 172 | 207 | 172 | 176 | 115 |
+--------------------+---------------------+---------------------+------------------+------------------+-------+--------+
| Total | 1,023 | 1,011 | 1,103 | 1,053 | 1,048 | 981 |
+--------------------+---------------------+---------------------+------------------+------------------+-------+--------+
The Group also generates revenue from non e-wallet related sources, including
its NETBANX gateway business and interest income on its own cash balances as
well as those held on behalf of members and merchants in trust accounts.
Developing our stored value solutions
The cornerstone of our stored value proposition is the NETELLER payment account,
which celebrated its tenth anniversary during 2009. We have signed up more than
1.7 million members since the first e-wallet was issued back in 1999, excluding
those that we issued to our former US members prior to 2007. The NETELLER
e-wallet provides a simple, secure and anonymous way for individuals to
transfer, pay and withdraw funds online to any number of merchants. NEOVIA's
focus has traditionally been on the online gaming market since payments to
merchants in this space have proven difficult and sometimes risky, due to
geographical, currency or timing issues. Our NETELLER e-wallet solution allows
merchants to receive indemnified funds from a signed up NETELLER consumer
("member") in return for payment of a fee to NEOVIA. We compete with more
traditional payment methods such as cards, but the incremental benefits of the
e-wallet are the anonymity, security and flexibility in funding, withdrawing and
managing money online that has been established over ten years.
We have continued to invest in the NETELLER payment account during 2009 to
ensure we offer our members and merchants the broadest range of payment
solutions. We launched a number of new deposit options, enabling consumers in
key European and Asian markets to more easily top up their e-wallets or pay on
our hosted checkout pages, including: Ukash in 9 new countries (Austria,
Belgium, Finland, France, Germany, Italy, Netherlands, Portugal and Greece);
free local bank deposits using the SEPA scheme for EU members; free local bank
deposits in India and Japan; and the addition of DIRECTebanking.com in Belgium.
The award winning Net+ prepaid MasterCard card, launched in October 2008, had a
successful first year in 2009. NETELLER members use their Net+ physical and
virtual MasterCard cards for instant payouts from their e-wallets and for making
secure online purchases. More than 70,000 Net+ cards have been issued to date,
with total spend via the Net+ card amounting to more than $200 million in more
than 1 million transactions. We continue to improve the Net+ value proposition
for our members, with the ability to earn NETPoints on Net+ transactions and
offering our VIP members reduced foreign exchange fees on their Net+ cards. The
innovative features of this industry-leading prepaid card were recognized with a
number of card industry awards (including the "Best New Prepaid Card" award at
the prestigious Cards & Payments Europe 2009 Awards) and the Net+ card regularly
features strongly in prepaid card comparison tables.
Early in the first quarter, our Person-to-Person (P2P) service was extended to
NETELLER Express-level members, allowing instant transfer of funds between
NETELLER e-wallet members. Building on this, the NETELLER Money Transfer service
(www.sendmoney.neteller.com) went live in July 2009 and is already showing
promising trends for new sign ups and volumes of funds transferred. This builds
on the unique feature of our stored value account by integrating the e-wallet
capabilities with the ease of use of the Net+ card and multi-account
functionality.
Payment processing
The Group's NETBANX business continues to make solid progress in developing a
leading gateway processing solution. We announced a number of significant
contract wins for NETBANX during 2009 including RSA MoreTH>N, a leading UK and
international insurer, the renewal of nPower's processing contract, and a number
of smaller merchants who rely on NETBANX's capabilities to power their online
commerce sites. The recently announced contract win with Arqiva's SeeSaw, the
new IPTV service, to use the NETBANX international gateway for all its online
payments represents a major success in our strategy to broaden our verticals
from the traditional gaming market focus and extend NETELLER product
capabilities into the new micropayments segment.
Continued investment in gateway processing was recognised by the industry as the
NETBANX Unified PayPageTM was nominated for the E-Consultancy "Innovation in
e-Commerce" Award in December 2009. The Unified PayPageTM allows merchants to
offer multiple payment types through a single integration and with the continued
addition of further payment options during the year (including PayPal) our
merchants now have access to an unrivalled number of payment options to offer
their customers.
Our NETBANX Asia business continued to be successful in attracting new merchant
business for its payment processing services across Asia Pacific. We will
continue to invest to ensure that we have a reliable, secure and efficient
operation, and anticipate further growth as more merchants appreciate the
capabilities we offer.
Newteller
Substantial progress was made during 2009 in the Group's Newteller technology
replatforming, and parallel running with the "OldTeller" platform ongoing during
the last two quarters of 2009 as part of scheduled deployment. The Newteller
platform is already running in production as part of the shadowing of the
existing platform, and a planned and sequential cut-across is scheduled to be
complete during April 2010. The anticipated benefits of Newteller lie in its
capacity to enable significant improvements to our operating environments (e.g.
more effective support for our global contact centre staff), cost savings
captured from automating numerous manual processes, greater operating
efficiencies by migrating multiple current systems on to a single platform and
flexibility to rapidly develop new functionalities to meet evolving market
opportunities. In addition, Newteller will provide enhanced capability in such
key areas as disaster recovery, service availability, risk management and
significantly reduced new product development and deployment lead times. A
number of exciting product initiatives are already being worked on to take
advantage of the availability of the Newteller platform later in 2010,
themselves an integral part of our Group-wide Business Transformation programme
launched in the fourth quarter of 2009.
Building our brand identity
We took further steps in 2009 to reinforce our brand identity, building on the
renaming of the Company in November 2008 to NEOVIA Financial Plc. Our NETELLER,
NETBANX and NET+ brands are recognised and trusted in their target markets. We
have actively promoted the NETELLER Payment Network at a number of major
sporting events, focusing on the gaming community with the "Payments you can bet
on" message.
The Group also delivered a number of targeted marketing programmes throughout
the year to drive member reactivation, conversion and retention. Such
programmes included the "What's my Sport" and "Chance" promotions, sponsorship
of a series of merchant events and tournaments, and a revamped NETPoints loyalty
programme.
Operational improvements
We continued to make progress in reducing our direct customer support costs,
while maintaining an effective and competitive service to our members. As
highlighted in our first half results, we successfully migrated all of our
English, non-voice, customer support to our Hong Kong operations. This has
already resulted in a 25% increase in member service efficiency through the end
of 2009. Further initiatives to improve and streamline our customer support
capabilities are being investigated for deployment within Business
Transformation.
Managing the risks the Group faces remains a key focus for us. As set out in
more detail in our Annual Report in the Business Risks section, we have
identified the key risks to our operations and performance within the following
areas: complex global operations; regulation and compliance; global economic
conditions; competition; product innovation; attracting the best talent;
security and fraud; transaction processing; and acquisitions and partnerships.
The Group adopts an Enterprise Risk Management ("ERM") approach to identifying,
assessing and mitigating risks it may face. Investment in this area has
continued during 2009 both as part of the Newteller replatforming and through
separate initiatives such as the ERTMS service, provided by Actimize, which
allows risk monitoring in real-time of transactions being processed through the
NETELLER payment account.
US update
On 21 August 2009, the Group announced that the Deferred Prosecution Agreement
("DPA") entered into effective 18 July 2007 with the US Attorney's Office for
the Southern District of New York had expired as scheduled. The Company also
received a copy of the Nolle Prosequi (Notice of Dismissal) of the Complaint
filed against it in this matter in the United States District Court for the
Southern District of New York. The
Company has complied with the DPA and is no longer subject to oversight by the
Monitor appointed pursuant to the DPA. The Group continues to believe that it
is strategically important to have a US-facing business as part of its
market-facing strategy and continues to investigate the most appropriate means
to achieve this objective.
Current trading and outlook
The Group ended 2009 with a stronger performance in the fourth quarter. Revenue
from our e-wallet was $12.3 million in Q4 compared to $11.4 million in Q3 2009,
largely resulting from growth of 10% in our European e-wallet fee revenue.
NETBANX also saw a promising improvement in revenue in the same period, with
$4.2 million in Q4, an increase of 22% from the $3.5 million in Q3 2009 with
European revenues growing 29% (21% after stripping out impact of currency
translation). Overall, revenue for Q4 was $16.8 million compared to $15.2
million in Q3 2009, an increase of 11%.
Revenue in the first two months of 2010 has been in line with management's
expectations and the Board continues to be optimistic about the outlook for
NEOVIA and remains confident about the Group's prospects going forward with its
adoption of a renewed strategy for growth.
*****
Financial Review
NEOVIA made steady progress despite the challenging market conditions which
persisted throughout most of 2009. The resilience of the Group's business model
has produced a broadly satisfactory financial performance. The results for the
Company and the consolidated Group results for the year ended 31 December 2009
are presented below.
Highlights
The Group's performance did not meet our full expectations: revenue, gross
margin and cash flow declined in 2009 compared to 2008, and as a result cost
management continued to be a major focus during 2009.
The Group reported a net loss of $9.8 million in 2009 (2008: $8.1 million loss).
The Group continued with development of its new stored value technology
platform, Newteller, throughout the year. Newteller consumed significant
resources and remains on track to launch in April 2010 following an extended
testing programme.
Revenue
Total revenue in 2009 decreased by 15% to $64.5 million (2008: $75.9 million).
Revenue is earned through fees charged to merchants and members for processing
of transactions via the NETELLER e-wallet or NETBANX gateway services. Revenue
is also earned on the Group's cash and the cash held by the Group on behalf of
merchants and members.
Revenue
($ millions) 2009 2008 %
growth Q3 2009 Q4 2009 % growth
Europe 35.7 42.2
-15 % 8.7 9.6 10 %
Asia Pacific 7.9 7.7
2 % 2.1 2.1 -3
%
Rest of World 2.2 2.0
14 % 0.6 0.6 -2 %
North America (1) 0.2 0.3
-37% 0.0 0.1 nm
Total e-wallet revenue 46.0 52.2 -12 %
11.4 12.3 8 %
NETBANX 4.8 6.2
-23 % 1.1 1.4 29 %
NETBANX Asia 12.1 11.4
6 % 2.4 2.8 18 %
Total fee revenue 62.9 69.8
-10 % 14.9 16.5 11 %
Interest 1.6 6.1
-73 % 0.3 0.3
-2 %
Total 64.5 75.9
-15 % 15.2 16.8 11 %
(1) Comprises fee revenue earned from Group's Canadian customers
related to non-gambling transactions
Transaction fee revenue from our top five countries represented 54% of the total
for 2009 (2008: 53%) while the top ten countries accounted for approximately 76%
(2008: 79%) of total transaction fees.
Fee revenues for the second half of 2009 totalled $31.4 million, compared with
$31.5 million for the first half.
E-wallet fee revenue
European e-wallet revenue decreased 15% to $35.7 million in 2009 (2008: $42.2
million). The recession and competitive pressure both had a significant impact
on the European market for online payments. Fee rebates continued to be used to
drive member activity, and this also reduced European revenues. A marginal 2%
increase in Asian e-wallet revenue from $7.7 million in 2008 to $7.9 million in
2009 was the result of an improving economic environment and fewer marketing
rebates being used. ROW e-wallet revenue increased 14% from $2.0 million in
2008 to $2.2 million in 2009 with new market penetration and good uptake of the
Net+ prepaid MasterCard card.
Gateway fee revenue
Gateway fees were earned from NETBANX Europe and NETBANX Asia, and totalled
$16.9 million in 2009, a decrease of 4% from 2008 revenues of $17.6 million.
NETBANX Europe revenue is mainly derived from the UK and saw a 23% decline from
$6.2 million in 2008 to $4.8 million in 2009, driven by the 15% depreciation of
sterling relative to the US dollar. NETBANX Asia gateway fees increased 6% from
$11.4 million in 2008 to $12.1 million in 2009. In July 2009, the NETBANX Asia
gateway was competitively re-priced to attract new business and increase
existing volume. The result was lower revenue, but correspondingly lower fee
rebates, allowing gross margins to improve. The growth in NETBANX Asia has
already out-paced the lower fee structure to show an overall growth year-on-year
of 6%. The success comes from leveraging the first-to-market advantage and
continuing to build strong, trusted relationships with merchants as the Asian
marketplace expands.
Interest revenue
Interest revenue in 2009 was $1.6 million, a significant decrease of 73% from
$6.1 million in 2008. In the first half of 2008, interest rates were
approximately 4%, which decreased to 1% at the end of 2008. Rates in 2009
stabilised between ½% to 1% resulting in a significant decline in interest
revenue. Low interest rates are expected to continue throughout 2010. Cash was
also consumed throughout the year due to Newteller development and other capital
expenditures, reducing principal balances by $18.8 million, further impacting
interest revenue.
Gross margin and direct costs
Gross margin declined in 2009 from 61.8% in 2008 to 54.6% in 2009.
Customer support comprises call centre services such as live chat, phone
support, translation services and verification services. Cost saving programmes
initiated in 2008 have continued to produce benefits in 2009. Reducing long
distance telephony use and translation services has continued to minimise costs
in the year. Furthermore, these services are now jointly provided by both the
Canadian and Asian offices. Costs incurred in Asia are significantly less
expensive. Lastly, the Canadian dollar depreciated relative to the US dollar by
7% on average, thereby reducing costs.
Website maintenance increased by 24% from $4.0 million in 2008 to $4.9 million
in 2009. In mid-2009, new disaster recovery facilities and server hosting were
established for both the current "OldTeller" platform and to support Newteller
on its completion - making up the increase.
Marketing and promotions decreased by 71% to $0.4 million from $1.5 million in
2008. The promotions in 2009 have been more focused which resulted in the
savings.
Deposit and withdrawal fees arise on facilitating the movement and settlement of
cash via the banking system and third party processors. These fees increased
marginally by 3% to $13.7 million in 2009 (2008: $13.3 million). During the
year, the NETBANX Asia gateway was re-priced, eliminating the need for fee
rebates. The decline in rebates was offset by the growth in volume through the
NETBANX Asia gateway. The depreciation of the pound sterling relative to the US
dollar and the general decline in volume through the NETBANX gateway in Europe
also contributed to savings. This was offset by increased costs from the
e-wallet. Payments outside of Europe are typically more expensive and both Asia
and ROW regions had volume growth in 2009. The use of the Net+ prepaid card
grew throughout the year, contributing to the increase in costs. The Net+ card
programme continues to support e-wallet growth, while diversifying the Group's
business.
Bad debt expense was $1.7 million in 2009, up from $0.2 million in 2008.
Significant provisions were recorded against member and merchant accounts in the
year. Approximately $1.0 million are non-recurring provisions that are required
due to indications of receivables impairment that arose in the year.
Operating expenses
General and administrative expenses decreased by 12% to $26.5 million from $30.2
million. Salary costs in both the UK and Canada were reduced in the year due to
the depreciation of the pound sterling (by 15%) and the Canadian dollar (by 7%)
relative to the US dollar, as well as targeted headcount reductions where
efficiencies could be found. Further savings in professional fees of $0.9
million are the result of reduced legal and professional work upon completion
and full adoption of the Group's market presence policy in 2008.
Share option expense decreased nominally by 3% to $2.6 million in 2009 (2008:
$2.7 million). No significant share option transactions took place in 2009.
The results from the Group's subsidiaries in Canada, the UK and Macau are
reported in local functional currencies. As required under IFRS, foreign
exchange gains or losses on consolidation of a subsidiary's balance sheet are
captured in equity, but the subsidiary's individual exposure to foreign currency
is captured in income. During 2009, foreign exchange losses of $0.1 million were
generated compared to gains of $0.3 million in 2008. The Group employs forward
foreign exchange contracts to mitigate exposure to financial risk associated
with foreign currency balances.
In 2009, depreciation and amortisation of $6.3 million (2008: $6.4 million)
included $3.9 million of amortisation of intangible assets (2008: $3.4 million)
and $2.5 million in depreciation of capital assets (2008: $3.0 million).
Depreciation of Newteller will begin on completion in 2010.
At each balance sheet date and upon events indicating an impairment assessment
is required, the Group reviews the carrying values of its tangible and
intangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. In the second quarter of 2009, impairment
testing was performed on the investment in Centricom Pty Ltd. These tests
revealed the cost of $4.6 million may not have a recoverable value and the
entire amount was recognised as an impairment loss. In the fourth quarter of
2009, the Group realised the mortgage receivable for $0.3 million less than the
carrying value and recognised this difference as a loss on disposal of assets.
Restructuring costs
Restructuring costs increased significantly from $1.1 million in 2008 to $2.4
million in 2009. The Group has selectively reduced headcount where efficiencies
can be realised resulting in severance payments in the year. Provisions against
suppliers and professional and legal fees relate to the previous North American
facing business.
Impairment of acquisition costs
On 1 December 2008, the Group entered into an agreement to acquire IDT
Corporation's European prepaid payment services division, IDT Financial Services
Holdings Limited ("IDTFSH"). The acquisition was conditional on Gibraltar FSC
regulatory approval, which NEOVIA became aware would not be granted on 20 March
2009. The Group incurred $0.9 million of acquisition costs including
professional and legal fees, travel expenses and internal labour in 2009
compared to $0.6 million in 2008. All of these costs have been recognised as an
expense.
Taxes
The tax model is based on the mark-up of services provided by various
subsidiaries to the Group's parent in the Isle of Man, where source revenues are
non-taxable because of the zero rate of tax on companies other than banks. In
2009, the provision for income taxes was a recovery of $0.2 million compared to
a recovery of $1.8 million in 2008.
In 2009, tax instalments to Canadian authorities were paid as assessed based on
2008 operating levels. The reduced business activity as a result of the
economic recession has reduced the actual tax payable.
Balance sheet
The cash and cash equivalents balance at 31 December 2009 of $61.0 million
represents the unrestricted cash of the Group (2008: $76.2 million). Included
in cash and cash equivalents is a transient cash balance that relates to
merchant transactions processed via the NETBANX and 1-Pay Direct gateway
operations. The gateway operations do not fall within the EU definition of
"e-money" nor does a legal right of offset exist between this cash and the
corresponding merchant liabilities. The cash and the merchant liabilities
relating to gateway operations are therefore both recognised on the face of the
balance sheet as cash and cash equivalents and trade and other payables
respectively.
The gross quantum of cash available to the Group, including restricted cash
surpluses and the excess of qualifying liquid assets held in respect of e-money
issued to European members over balances payable, totalled $73.5 million. This
compared with $82.3 million at 31 December 2008. These cash figures are before
deduction of current liabilities. The decline in cash is due to decreased
revenue in 2009 and continued investment into Newteller.
The Group maintains bank accounts which are segregated from operating funds and
which contain funds held on behalf of merchants and non-European members,
representing pooled customer funds. The bank accounts are designated as client
accounts. Balances in the segregated client accounts are maintained at a
sufficient level to fully offset amounts owing to the Group's merchants and
non-European members. A legal right of offset exists between the balances owing
to the merchants and non-European members and the cash balances segregated in
the client accounts. As such, only the net balance of surplus cash is disclosed
on the balance sheet as Restricted Cash. The Group, as a matter of policy,
holds small amounts of excess cash in the account to ensure intraday balance
movements do not result in a shortfall in the cash position. The net excess is
disclosed as a corporate asset.
In compliance with FSA rules and regulations, the Group held qualifying liquid
assets in respect of e-money issued to European members totalling $83.6 million
as at 31 December 2009. These funds are segregated from operating funds. The
balances are maintained at levels which are at least equal to the amounts owing
to European members of $76.4 million as at 31 December 2009. These qualifying
liquid assets and the amounts payable to European members are reported gross on
the balance sheet.
Total current liabilities of $100.0 million have increased from $80.5 million
due to the growth in amounts payable to European members as a result of greater
receipts from members in 2009. The increase in liabilities and the decrease in
total cash have resulted in a current ratio of 1.54 to 1 in 2009 (2008: 1.84 to
1).
In the fourth quarter of 2009, the Group realised the mortgage receivable for
$0.3 million less than the carrying value and recognised this difference as a
loss on disposal of assets.
The net book value of intangible assets as at 31 December 2009 was $32.1 million
compared to $17.9 million as at 31 December 2008. During the year, the Group
incurred significant development costs on the Newteller platform.
In the second quarter of 2009, the Group recorded the complete impairment of its
investment in Centricom Pty Limited of $4.6 million. This is classified on the
Company and Group balance sheets as an "Investment in associate".
Foreign currency exposure
Operating globally necessitates an increasing foreign currency exposure. The
objective of our treasury policy is to identify material foreign currency
exposures and to manage those exposures to minimise the potential effects of
currency fluctuations on our reported consolidated cash flow and results of
operations.
Off balance sheet arrangements
As of 31 December 2009, the Group had no off-balance sheet arrangements that
have, or are reasonably likely to have, a current or future material effect on
our consolidated financial condition, results of operations, liquidity, capital
expenditures or capital resources. All merchant and non-European member funds
are held in designated client accounts and excluded from our consolidated
balance sheet. There are no investments held at 31 December 2009 that are part
of US sub-prime investment vehicles.
* * *
The Group's audited consolidated financial statements and accompanying notes are
set out in Part 2 of the Audited Results statement and are also available at
www.neovia.com.
The Group's 2009 annual report and audited accounts is today published on the
Company's website and is being sent to shareholders accordingly. The Company
will hold its seventh annual general meeting in the Isle of Man on 29 April
2010. For further information, please contact investorrelations@neovia.com.
+--------------------------------------------------+-------------+-------------+
| Consolidated Balance Sheet |
| as at 31 December 2009 |
+------------------------------------------------------------------------------+
| | 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
+--------------------------------------------------+-------------+-------------+
| | $ | $ |
+--------------------------------------------------+-------------+-------------+
| ASSETS | | |
+--------------------------------------------------+-------------+-------------+
| Current | | |
+--------------------------------------------------+-------------+-------------+
| Cash and cash equivalents | 61,070,438 | 76,246,169 |
+--------------------------------------------------+-------------+-------------+
| Restricted cash (Note 4) | 5,152,253 | 2,941,543 |
+--------------------------------------------------+-------------+-------------+
| Qualifying Liquid Assets held for European | 83,612,310 | 63,444,278 |
| members (Note 5) | | |
+--------------------------------------------------+-------------+-------------+
| Receivable from members (Note 6) | 354,000 | 702,000 |
+--------------------------------------------------+-------------+-------------+
| Trade and other receivables | 793,188 | 1,253,586 |
+--------------------------------------------------+-------------+-------------+
| Prepaid expenses and deposits | 2,554,780 | 3,309,125 |
+--------------------------------------------------+-------------+-------------+
| | 153,536,969 | 147,896,701 |
+--------------------------------------------------+-------------+-------------+
| Non-current assets | | |
+--------------------------------------------------+-------------+-------------+
| Mortgage receivable (Note 7) | - | 616,119 |
+--------------------------------------------------+-------------+-------------+
| Property, plant & equipment (Note 8) | 7,828,139 | 8,759,068 |
+--------------------------------------------------+-------------+-------------+
| Intangible assets (Note 9) | 32,072,846 | 17,872,820 |
+--------------------------------------------------+-------------+-------------+
| Investment in associate (Note 10) | - | 5,085,074 |
+--------------------------------------------------+-------------+-------------+
| | 193,437,954 | 180,229,782 |
+--------------------------------------------------+-------------+-------------+
| | | |
+--------------------------------------------------+-------------+-------------+
| LIABILITIES | | |
+--------------------------------------------------+-------------+-------------+
| Current | | |
+--------------------------------------------------+-------------+-------------+
| Trade and other payables (Note 12) | 21,370,500 | 18,318,683 |
+--------------------------------------------------+-------------+-------------+
| Payable to European members (Note 5) | 76,384,591 | 60,307,346 |
+--------------------------------------------------+-------------+-------------+
| Taxes payable (Note 14) | 2,224,304 | 1,904,472 |
+--------------------------------------------------+-------------+-------------+
| | 99,979,395 | 80,530,501 |
+--------------------------------------------------+-------------+-------------+
| | | |
+--------------------------------------------------+-------------+-------------+
| | | |
+--------------------------------------------------+-------------+-------------+
| SHAREHOLDERS' EQUITY | | |
+--------------------------------------------------+-------------+-------------+
| Share capital (Note 15) | 39,725 | 39,725 |
+--------------------------------------------------+-------------+-------------+
| Share premium | 50,554,492 | 50,554,492 |
+--------------------------------------------------+-------------+-------------+
| Capital redemption reserve | 147 | 147 |
+--------------------------------------------------+-------------+-------------+
| Equity reserve on share option issuance | 8,601,168 | 5,954,728 |
+--------------------------------------------------+-------------+-------------+
| Translation reserve (Note 16) | (392,908) | (1,320,417) |
+--------------------------------------------------+-------------+-------------+
| Retained earnings | 34,655,935 | 44,470,606 |
+--------------------------------------------------+-------------+-------------+
| | 93,458,559 | 99,699,281 |
+--------------------------------------------------+-------------+-------------+
| | 193,437,954 | 180,229,782 |
+--------------------------------------------------+-------------+-------------+
| | | |
+--------------------------------------------------+-------------+-------------+
+------------------------------------------------+--------------+--------------+
| |
| Consolidated Statement of Cash Flows |
| for the Year Ended 31 December 2009 |
+------------------------------------------------------------------------------+
| | | YEAR |
| | YEAR | ENDED |
| | ENDED 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
+------------------------------------------------+--------------+--------------+
| | $ | $ |
+------------------------------------------------+--------------+--------------+
| OPERATING ACTIVITIES | | |
+------------------------------------------------+--------------+--------------+
| Loss before tax | (9,997,473) | (9,917,550) |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Adjustments for: | | |
+------------------------------------------------+--------------+--------------+
| Depreciation and amortisation | 6,342,598 | 6,351,788 |
+------------------------------------------------+--------------+--------------+
| Unrealised foreign exchange (gain)/loss | (3,571,426) | 7,158,047 |
+------------------------------------------------+--------------+--------------+
| Share option expense | 2,646,440 | 2,735,222 |
+------------------------------------------------+--------------+--------------+
| Investment loss (Note 10) | 533,116 | 773,143 |
+------------------------------------------------+--------------+--------------+
| Impairment loss (Notes 9 & 10) | 4,568,511 | 14,498,163 |
+------------------------------------------------+--------------+--------------+
| Asset disposal (Notes 7, 8 & 9) | 381,302 | 110,753 |
+------------------------------------------------+--------------+--------------+
| Operating cash flows before movements in | 903,068 | 21,709,566 |
| working capital | | |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Decrease/(increase) in receivable from | 348,000 | (227,000) |
| members | | |
+------------------------------------------------+--------------+--------------+
| Decrease/(increase) in trade and other | 460,398 | (518,186) |
| receivables | | |
+------------------------------------------------+--------------+--------------+
| Decrease/(increase) in prepaid expenses and | 754,345 | (600,878) |
| deposits | | |
+------------------------------------------------+--------------+--------------+
| Increase/(decrease) in trade and other | 2,751,524 | (4,859,987) |
| payables | | |
+------------------------------------------------+--------------+--------------+
| Forfeiture payable (Note 13) | - | (38,250,415) |
+------------------------------------------------+--------------+--------------+
| Cash generated/(consumed) by operations | 5,217,335 | (22,746,900) |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Tax refunded | 502,634 | 1,408,512 |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Net cash generated/(consumed) by operating | 5,719,969 | (21,338,388) |
| activities | | |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| INVESTING ACTIVITIES | | |
+------------------------------------------------+--------------+--------------+
| Increase in payable to European members | 16,077,245 | 3,274,682 |
+------------------------------------------------+--------------+--------------+
| Purchase of property, plant & equipment | (18,793,817) | (14,774,124) |
| and intangible assets | | |
+------------------------------------------------+--------------+--------------+
| Proceeds from disposal of property, plant | - | 32,894,740 |
| & equipment | | |
+------------------------------------------------+--------------+--------------+
| (Increase)/decrease in restricted cash | (2,210,710) | 7,876,062 |
| accounts | | |
+------------------------------------------------+--------------+--------------+
| Increase in Qualifying Liquid Assets held for | (20,168,032) | (1,559,175) |
| European members | | |
+------------------------------------------------+--------------+--------------+
| Investment in associate (Notes 10 & 11) | (16,553) | (1,486,768) |
+------------------------------------------------+--------------+--------------+
| Investment in joint venture (Note 11) | - | (205,564) |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Net cash (consumed)/generated by investing | (25,111,867) | 26,019,853 |
| activities | | |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| FINANCING ACTIVITIES | | |
+------------------------------------------------+--------------+--------------+
| Mortgage receivable (Note 7) | 284,563 | 148,432 |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Net cash generated by financing activities | 284,563 | 148,432 |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| (Decrease)/increase in cash and cash | (19,107,335) | 4,829,897 |
| equivalents during the year | | |
+------------------------------------------------+--------------+--------------+
| Net effect of foreign exchange on cash and | 3,871,720 | (3,716,493) |
| cash equivalents | | |
+------------------------------------------------+--------------+--------------+
| Translation of foreign operations | 59,884 | (5,617,518) |
+------------------------------------------------+--------------+--------------+
| | |
+------------------------------------------------+-----------------------------+
| Cash and cash equivalents, beginning of year | 76,246,169 | 80,750,283 |
+------------------------------------------------+--------------+--------------+
| | | |
+------------------------------------------------+--------------+--------------+
| Cash and cash equivalents, end of year | 61,070,438 | 76,246,169 |
+------------------------------------------------+--------------+--------------+
+------------------------------------------------+-------------+--------------+
| Consolidated Statement of Comprehensive Income |
| for the Year Ended 31 December 2009 |
+-----------------------------------------------------------------------------+
| | YEAR | YEAR ENDED |
| | ENDED 31 | |
| | DECEMBER | 31 |
| | 2009 | DECEMBER |
| | $ | 2008 |
| | | $ |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Revenue | | |
+------------------------------------------------+-------------+--------------+
| Transaction fees (Note 17) | 62,888,197 | 69,803,341 |
+------------------------------------------------+-------------+--------------+
| Investment income | 1,644,620 | 6,141,380 |
+------------------------------------------------+-------------+--------------+
| | 64,532,817 | 75,944,721 |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Cost of sales | | |
+------------------------------------------------+-------------+--------------+
| Customer support | 8,616,979 | 9,996,766 |
+------------------------------------------------+-------------+--------------+
| Website maintenance | 4,918,297 | 3,959,698 |
+------------------------------------------------+-------------+--------------+
| Marketing and promotions (Note 18) | 439,085 | 1,538,955 |
+------------------------------------------------+-------------+--------------+
| Deposit and withdrawal fees | 13,669,776 | 13,309,669 |
+------------------------------------------------+-------------+--------------+
| Bad debts | 1,664,048 | 174,399 |
+------------------------------------------------+-------------+--------------+
| Gross profit | 35,224,632 | 46,965,234 |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Operating expenses | | |
+------------------------------------------------+-------------+--------------+
| General and administrative | 26,521,093 | 30,170,128 |
+------------------------------------------------+-------------+--------------+
| Share option expense (Note 23) | 2,646,440 | 2,735,222 |
+------------------------------------------------+-------------+--------------+
| Management bonus | 708,934 | 799,212 |
+------------------------------------------------+-------------+--------------+
| Foreign exchange loss/(gain) | 144,919 | (289,991) |
+------------------------------------------------+-------------+--------------+
| Depreciation and amortisation (Note 19) | 6,342,598 | 6,351,788 |
+------------------------------------------------+-------------+--------------+
| Loss on investment (Note 10) | 533,116 | 773,143 |
+------------------------------------------------+-------------+--------------+
| (Loss)/profit before other items | (1,672,468) | 6,425,732 |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Other items | | |
+------------------------------------------------+-------------+--------------+
| Impairment loss (Notes 9 & 10) | 4,568,511 | 14,498,163 |
+------------------------------------------------+-------------+--------------+
| Restructuring costs (Note 20) | 2,442,875 | 1,113,927 |
+------------------------------------------------+-------------+--------------+
| Loss on disposal of assets (Notes 7, 8 & | 381,302 | 110,753 |
| 9) | | |
+------------------------------------------------+-------------+--------------+
| Acquisition costs impairment (Note 28) | 932,317 | 620,439 |
+------------------------------------------------+-------------+--------------+
| Loss before tax | (9,997,473) | (9,917,550) |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Income tax recovery (Note 14) | (182,802) | (1,830,929) |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Net loss for the year | (9,814,671) | (8,086,621) |
+------------------------------------------------+-------------+--------------+
| | | |
| Other comprehensive income/(loss) | 927,509 | (10,733,230) |
+------------------------------------------------+ + +
| Foreign currency translation differences | | |
| for foreign operations, | | |
| net of income tax | | |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Total comprehensive loss for the year | (8,887,162) | (18,819,851) |
+------------------------------------------------+-------------+--------------+
| | |
+------------------------------------------------+----------------------------+
| Basic (loss) per share (Note 21) | $(0.08) | $(0.07) |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| Diluted (loss) per share (Note 21) | $(0.08) | $(0.07) |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
| | | |
+------------------------------------------------+-------------+--------------+
+--------------------------------------------------------------------------+
| Company Statement of Changes in Equity |
| for the Year Ended 31 December 2009 |
+--------------------------------------------------------------------------+
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| | SHARE | SHARE | TOTAL | | EQUITY | TRANSLATION | CAPITAL | RETAINED | |
| | CAPITAL | CAPITAL | SHARE | | RESERVE | RESERVE ON |REDEMPTION | EARNINGS$ | TOTAL |
| | - | - |CAPITAL | SHARE | ON | FOREIGN | RESERVE | | $ |
| |ORDINARY |DEFERRED | $ | PREMIUM | SHARE | OPERATIONS | $ | | |
| | SHARES | SHARES | | $ | OPTION | $ | | | |
| | $ | $ | | | ISSUANCE | | | | |
| | | | | | $ | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Balance | | | | | | | | | |
| as at | 21,725 | 18,000 | 39,725 | 50,554,492 | 3,219,506 | 9,412,813 | 147 | 52,557,227 | 115,783,910 |
| 1 | | | | | | | | | |
| January | | | | | | | | | |
| 2008 | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Net loss | - | - | - | - | - | - | - | (8,086,621) | (8,086,621) |
| for the | | | | | | | | | |
| year | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Other | | | | | | | | | |
| comprehensive | | | | | | | | | |
| loss for the | | | | | | | | | |
| year | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Foreign | | | | | | | | | |
| currency | - | - | - | - | - | (10,733,230) | - | - | (10,733,230) |
| translation | | | | | | | | | |
| differences | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Total | | | | | | | | | |
| comprehensive | - | - | - | - | - | (10,733,230) | - | (8,086,621) | (18,819,851) |
| loss | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Equity | | | | | | | | | |
| reserve | - | - | - | - | 2,735,222 | - | - | - | 2,735,222 |
| on | | | | | | | | | |
| option | | | | | | | | | |
| issuance | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Balance | | | | | | | | | |
| as at 31 | 21,725 | 18,000 | 39,725 | 50,554,492 | 5,954,728 | (1,320,417) | 147 | 44,470,606 | 99,699,281 |
| December | | | | | | | | | |
| 2008 | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Balance | | | | | | | | | |
| as at | 21,725 | 18,000 | 39,725 | 50,554,492 | 5,954,728 | (1,320,417) | 147 | 44,470,606 | 99,699,281 |
| 1 | | | | | | | | | |
| January | | | | | | | | | |
| 2009 | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Net loss | - | - | - | - | - | - | - | (9,814,671) | (9,814,671) |
| for the | | | | | | | | | |
| year | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Other | | | | | | | | | |
| comprehensive | | | | | | | | | |
| loss for the | | | | | | | | | |
| year | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Foreign | | | | | | | | | |
| currency | - | - | - | - | - | 927,509 | - | - | 927,509 |
| translation | | | | | | | | | |
| differences | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Total | | | | | | | | | |
| comprehensive | - | - | - | - | - | 927,509 | - | (9,814,671) | (8,887,162) |
| loss | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Equity | | | | | | | | | |
| reserve | - | - | - | - | 2,646,440 | - | - | - | 2,646,440 |
| on | | | | | | | | | |
| option | | | | | | | | | |
| issuance | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| Balance | | | | | | | | | |
| as at 31 | 21,725 | 18,000 | 39,725 | 50,554,492 | 8,601,168 | (392,908) | 147 | 34,655,935 | 93,458,559 |
| December | | | | | | | | | |
| 2009 | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
| | | | | | | | | | |
+---------------+----------+----------+---------+------------+-----------+--------------+------------+------------------+--------------+
Notes to Consolidated Financial Statements for the Year Ended 31 December 2009
1. GENERAL
NETELLER plc (the "Company") was a private company incorporated under the laws
of the Isle of Man ("IOM") on 31 October 2003 and was registered as a public
company on 1 April 2004. NETELLER plc changed its name to NEOVIA Financial Plc
on 17 November 2008. The principal activities of the Company and the Group are
described in Note 2. The Group includes the Company and its wholly owned
subsidiaries as set out under "Principles of consolidation" in note 3 and
"Subsidiaries" in note 25.
These financial statements are presented in US dollars ("$") which is the
Company's functional currency.
At 31 December 2009, the Group had 447 employees (2008: 450 employees).
2. NATURE OF OPERATIONS
The Group provides services to businesses and individuals to allow the
processing of direct debit, electronic cheque and credit card payments. The
Group processes direct debit, electronic cheque and credit card payments for
internet merchants. NETELLER (UK) Ltd (a wholly-owned subsidiary of NEOVIA
Financial Plc) is authorised and regulated by the Financial Services Authority
in the United Kingdom as an e-money issuer.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable IOM
law and International Financial Reporting Standards ("IFRS"). The accounting
policies set out below have been applied consistently to all periods presented
in these consolidated financial statements, and have been applied consistently
by Group entities, except as explained in the note 'changes in accounting
policies'. The following principal accounting policies have been applied:
Changes in accounting policies
Determination and presentation of operating segments
As of 1 January 2009 the Group determines and presents operating segments based
on the information that internally is provided to the CEO, who is the Group's
chief operating decision maker. This change in accounting policy is due to the
adoption of IFRS 8 Operating Segments. Previously operating segments were
determined and presented in accordance with IAS 14 Segment Reporting. The new
accounting policy in respect of segment operating disclosures is presented as
follows.
Comparative segment information has been re-presented in conformity with the
transitional requirements of such standard. Since the change in accounting
policy only impacts presentation and disclosure aspects, there is no impact on
earnings per share.
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 that relate to transactions with any of the Group's other
components. An operating segment's operating results are reviewed regularly by
the CEO to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is
available.
Presentation of financial statements
The Group applies revised IAS 1 Presentation of Financial Statements (2007),
which became effective as of 1 January 2009. As a result, the Group presents in
the consolidated statement of changes in equity all owner changes in equity,
whereas all non-owner changes in equity are presented in the consolidated
statement of comprehensive income. Comparative information has been re-presented
so that it also is in conformity with the revised standard. Since the change in
accounting policy only impacts presentation aspects, there is no impact on
earnings per share.
Principles of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and enterprises controlled by the Company (and its subsidiaries) as
at the year end. Control is achieved where the Company has the power to govern
the financial and operating policies of an investee enterprise so as to obtain
benefits from its activities. The consolidated financial statements include the
accounts of the Company and its principal wholly owned subsidiaries, NETELLER
Operations Limited, NetAdmin Limited, Net ID Limited, NT Services Limited,
NETELLER (UK) Ltd, NetBanx Limited, Quick Access International Limited, 1155259
Alberta Limited, NT Services Building Corporation, NETELLER Express Limited, and
Cardload Incorporated. All inter-company transactions and balances between
Group enterprises are eliminated on consolidation.
In the non-consolidated financial statements of the Company, investments in
subsidiaries are stated at cost.
Investments in associates
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a joint venture. Significant
influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those
policies.
The results and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting. Under the equity
method, investments in associates are carried in the consolidated balance sheet
at cost as adjusted for post-acquisition changes in the Group's share of the net
assets of the associate, less any impairment in the value of individual
investments. Losses of an associate in excess of the Group's interest in that
associate (which includes any long-term interests that, in substance, form part
of the Group's net investment in the associate) are recognised only to the
extent that the Group has incurred legal or constructive obligations or made
payments on behalf of the associate.
Where a group entity transacts with an associate of the Group, profits and
losses are eliminated to the extent of the Group's interest in the relevant
associate.
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties
undertake an economic activity that is subject to joint control and when the
strategic financial and operating policy decisions relating to the activities of
the joint venture require the unanimous consent of the parties sharing control.
Joint venture arrangements that involve the establishment of a separate entity
in which each venturer has an interest are referred to as jointly controlled
entities. The Group has significant influence on the entity and reports its
interests in jointly controlled entities using the equity method of accounting.
Under the equity method, investments in joint ventures are carried in the
consolidated balance sheet at cost as adjusted for post-acquisition changes in
the Group's share of the net assets of the entity, less any impairment in the
value of individual investments.
Where the Group transacts with its jointly controlled entities, unrealised
profits and losses are eliminated to the extent of the Group's interest in the
joint venture.
Cash and cash equivalents
Cash equivalents are defined as short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
Intangible assets
Intellectual property is recorded at cost and is amortised on a straight-line
basis over its estimated useful life which is assessed to be three years.
Website development costs are recorded at cost and are amortised over their
estimated useful life using the declining-balance method at 30%.
Property, plant & equipment
Land is not depreciated. Property, plant & equipment are recorded at cost and
are amortised over their estimated useful lives, using the declining-balance
method, on the following basis:
Communication equipment 20%
Furniture and equipment 20%
Computer equipment 30%
Other assets are depreciated over their estimated useful lives, using the
straight-line method, on the following basis:
Computer software
2 years
Building & Leasehold Improvements
4% and 10 years respectively
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in income.
Impairment
The carrying amount of the Group's assets, other than deferred tax assets are
reviewed at each balance sheet date to determine whether there is any indication
of impairment. For goodwill and intangible assets that are not yet available
for use, the recoverable amount is estimated each year at the same time. If any
such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset
belongs.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of subsidiaries at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in the income statement and
is not subsequently reversed.
On disposal of a subsidiary, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Receivable from customers
Trade and other receivables, including receivables from customers, are stated at
their amortised cost less impairment losses and doubtful accounts.
Income tax
Income tax expense comprises current and deferred tax. Current tax 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.
The Group uses the balance sheet liability method of accounting for income
taxes. Temporary differences arising from the difference between the tax basis
of an asset or liability and its carrying amount on the balance sheet are used
to calculate deferred tax assets or liabilities. Deferred tax assets or
liabilities are calculated using tax rates anticipated to exist in the periods
that the temporary differences are expected to 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.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that future
taxable profits will be available against which they can be utilised. 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.
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 that relate to transactions with any of the Group's other
components. All operating segments' operating results are reviewed regularly by
the Group's CEO to make decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial information is
available.
Revenue recognition
The Group is involved in transaction processing services. Revenues from
transaction processing services are recognised at the time services are
rendered. Member revenue is recognised either as a fee calculated as a
percentage of funds processed or as a charge per transaction, pursuant to the
respective member agreements. Merchant revenue is recognised as a fee
calculated as a percentage of funds processed on behalf of merchants.
Interest income is accrued on a monthly basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Leases
All leases are classified as operating leases as the terms of the lease do not
transfer substantially all the risks and rewards of ownership to the lessee.
Payments made under operating leases are recognised in profit or loss on a
straight-line basis over the term of the lease.
Foreign exchange
The individual financial statements of each Group entity are presented in the
currency of the primary economic environment in which the entity operates (its
functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each entity are expressed in United States
dollars, which is the functional currency of NEOVIA Financial Plc, and the
presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date.
Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date when the fair
value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried
at fair value are included in profit or loss for the period, except for
differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary
items, any exchange component of that gain or loss is also recognised directly
in equity.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the Group's foreign operations (including comparatives) are
expressed in United States dollars using exchange rates prevailing on the
balance sheet date. Income and expense items (including comparatives) are
translated at the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the exchange rates at
the dates of the transactions are used. Exchange differences arising, if any,
are classified as equity and transferred to the Group's translation reserve.
Such translation differences are recognised in profit or loss in the period in
which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of foreign
operations are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
Related party transactions
Monetary related party transactions in the normal course of operations are
recorded at fair value, and transactions between related parties, not in the
normal course of operations, are recorded at the carrying value as recorded by
the transferor.
Use of estimates
The preparation of the Group's financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and contingencies at the date of the Group's financial statements,
and revenue and expenses during the reporting period. Actual results could
differ from those estimated. Significant estimates in the Group's financial
statements include depreciation and amortization, impairment testing of
long-lived assets, and share based payments. By their nature, these estimates
and assumptions are subject to measurement uncertainty and the effect on the
Group's financial statements of changes in estimates in future periods could be
significant.
Foreign exchange contracts
The Group uses foreign exchange contracts to reduce its exposure to adverse
fluctuations in foreign exchange rates. These financial instruments are
presented in the accompanying consolidated financial statements at fair value.
Fair values are based on market quotes, current foreign exchange rates or
management estimates, as appropriate, and gains and losses on the foreign
exchange contracts are reflected in the consolidated income statement. The
increase or decrease in the fair value of the contracts has been taken to
income.
Research and development
Research expenditure is written off to the income statement in the period in
which it is incurred.
Development expenditure is written off in the same way unless management is
satisfied as to the technical, commercial and financial viability of the
individual projects generating future economic benefits, and the Group intends
to and has sufficient resources to complete development and to use or sell the
asset. In this situation, the expenditure is capitalised at cost, less a
provision for any impairment in value, and is amortised on the commencement of
use over the period in which benefits are expected to be received by the Group.
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.
Share-based payments
The Company issues share options to certain employees, including Directors.
Share options are measured at fair value at the date of grant. The fair value
determined at the grant date of the share option is expensed on a straight-line
basis over the vesting period, based on the Company's estimate of shares that
will eventually vest. Fair value is measured using the trinomial lattice
pricing model. When necessary, the expected life used in the model is adjusted,
based on management's best estimates, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Offsetting
Financial assets and liabilities are set off and the net amount presented in the
balance sheet when, and only when, the Group has a legal enforceable right to
set off the amounts and intends either to settle on a net basis or to realise
the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the
accounting standards, or for gains and losses arising from a group of similar
transactions such as in the Group's trading activity.
Defined contribution pension plans
Obligations for contributions to defined contribution pension plans
are recognised as an expense in the income statement in the periods during which
services are rendered by employees.
Restructuring
A provision for restructuring is recognised when the Group has approved a
detailed and formal restructuring plan, and the restructuring either has
commenced or has been announced publicly. Future operating losses are not
provided for.
Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period, adjusted for own shares
held. Diluted EPS is determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number of ordinary shares
outstanding, adjusted for own shares held and for the effects of all dilutive
potential ordinary shares, which comprise convertible notes and share options
granted to employees.
New standards and interpretations not yet adopted
Other than those adopted early as explained above under 'changes in accounting
policies', a number of new standards, amendments to standards and
interpretations are not yet effective for the year ended 31 December 2009, and
have not been applied in preparing these consolidated financial statements. None
of these are expected to have a significant effect on the consolidated financial
statements of the Group.
4. RESTRICTED CASH
For NETELLER and NETELLER Asia E-wallet merchants and non-European members, the
Group maintains bank accounts with the Company's principal bankers which are
segregated from operating funds and which contain funds held on behalf of
customers, representing pooled customer funds. Balances in the segregated
accounts are maintained at a sufficient level to fully offset amounts owing to
the Group's merchants and members. A legal right of offset exists between the
balances owing to the merchants and members and the cash balances segregated in
the client accounts. As such, only the net balance of surplus cash is disclosed
on the balance sheet as Restricted Cash.
In 2009 the Company prospectively adjusted the classification of the Asian
member and merchant liabilities. Previously, Asian merchant and member
liabilities were classified under Quick Access International Limited. Starting
in 2009, all merchant and Non-European member balances are classified in the
Company.
At 31 December 2009, the Group had the following balances:
+----------------------------+------------+------------+------------+
| | CLIENT | BALANCE | RESTRICTED |
| | ACCOUNT | OWING | CASH |
| | FUNDS | | |
+----------------------------+------------+------------+------------+
| | $ | $ | $ |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Non-European members | 26,400,113 | 25,375,833 | 1,024,280 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Merchants | 60,954,194 | 56,826,221 | 4,127,973 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| | 87,354,307 | 82,202,054 | 5,152,253 |
+----------------------------+------------+------------+------------+
At 31 December 2008, the Group had the following balances:
+----------------------------+------------+------------+------------+
| | CLIENT | BALANCE | RESTRICTED |
| | ACCOUNT | OWING | CASH |
| | FUNDS | | |
+----------------------------+------------+------------+------------+
| | $ | $ | $ |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Non-European members | 24,062,805 | 23,489,751 | 573,054 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Merchants | 61,934,429 | 59,565,940 | 2,368,489 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| | 85,997,234 | 83,055,691 | 2,941,543 |
+----------------------------+------------+------------+------------+
At 31 December 2009, the Company had the following balances:
+----------------------------+------------+------------+------------+
| | CLIENT | BALANCE | RESTRICTED |
| | ACCOUNT | OWING | CASH |
| | FUNDS | | |
+----------------------------+------------+------------+------------+
| | $ | $ | $ |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Non-European members | 26,400,113 | 25,375,833 | 1,024,280 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Merchants | 60,954,194 | 56,826,221 | 4,127,973 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| | 87,354,307 | 82,202,054 | 5,152,253 |
+----------------------------+------------+------------+------------+
At 31 December 2008, the Company had the following balances:
+----------------------------+------------+------------+------------+
| | CLIENT | BALANCE | RESTRICTED |
| | ACCOUNT | OWING | CASH |
| | FUNDS | | |
+----------------------------+------------+------------+------------+
| | $ | $ | $ |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Non-European members | 24,062,804 | 22,960,796 | 1,102,008 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| Merchants | 61,934,429 | 56,238,035 | 5,696,394 |
+----------------------------+------------+------------+------------+
| | | | |
+----------------------------+------------+------------+------------+
| | 85,997,233 | 79,198,831 | 6,798,402 |
+----------------------------+------------+------------+------------+
The Company holds client account funds and balances owing to Merchants and
non-European members on behalf of its wholly owned subsidiary NETELLER
Operations Limited.
5. QUALIFYING LIQUID ASSETS HELD FOR EUROPEAN MEMBERS
In compliance with the Financial Services Authority rules and regulations, the
Group holds Qualifying Liquid Assets at least equal to the amounts owing to
European members. These amounts are maintained in accounts which are segregated
from operating funds.
The Group had the following balances:
+-------------------------------------+--------------+--------------+
| | AS AT 31 | AS AT 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+-------------------------------------+--------------+--------------+
| Qualifying Liquid Assets held for | 83,612,310 | 63,444,278 |
| European members | | |
+-------------------------------------+--------------+--------------+
| Payable to European members | (76,384,591) | (60,307,346) |
+-------------------------------------+--------------+--------------+
| | 7,227,719 | 3,136,932 |
+-------------------------------------+--------------+--------------+
6. RECEIVABLE FROM CUSTOMERS
The Group had the following balances:
+----------------------------------+----------------+-------------+
| | AS AT 31 | AS AT 31 |
| | DECEMBER 2009 | DECEMBER |
| | | 2008 |
+----------------------------------+----------------+-------------+
| | $ | $ |
+----------------------------------+----------------+-------------+
| | | |
+----------------------------------+----------------+-------------+
| Receivable from customers | 1,334,748 | 994,765 |
+----------------------------------+----------------+-------------+
| | | |
+----------------------------------+----------------+-------------+
| Provision for doubtful accounts | (980,748) | (292,765) |
+----------------------------------+----------------+-------------+
| | | |
+----------------------------------+----------------+-------------+
| | 354,000 | 702,000 |
+----------------------------------+----------------+-------------+
The Company had the following balances:
+-------------------------------------+-------------+--------------+
| | AS AT 31 | AS AT 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
+-------------------------------------+-------------+--------------+
| | $ | $ |
+-------------------------------------+-------------+--------------+
| | | |
+-------------------------------------+-------------+--------------+
| Receivable from customers | 31,199 | 11,360 |
+-------------------------------------+-------------+--------------+
| | | |
+-------------------------------------+-------------+--------------+
| Provision for doubtful accounts | (31,199) | (11,360) |
+-------------------------------------+-------------+--------------+
| | | |
+-------------------------------------+-------------+--------------+
| | - | - |
+-------------------------------------+-------------+--------------+
Receivable from customers consists of balances that are due from customers and
are in the process of collection. The net receivable from customers represents
the amounts which are expected to be collected through the normal course of
business.
7. MORTGAGE RECEIVABLE
The Group held a CAD $750,000 mortgage as a portion of the proceeds on the sale
of the Group's 41st Avenue property in Calgary, Alberta. On 17 December 2009, a
final cash payment of CAD $400,000 (US $378,920) was received. The remaining
CAD $350,000 (US$331,555) was written off and shown as a loss on the income
statement due to the inability of the purchaser to repay the full amount. The
amount shown on the cash flow statement is net of foreign currency translation
differences.
8. PROPERTY, PLANT & EQUIPMENT
The Group had the following balances:
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| | COMMUNICATION | FURNITURE | COMPUTER | COMPUTER | BUILDING | | |
| | EQUIPMENT | AND | EQUIPMENT | SOFTWARE | AND | LAND | TOTAL |
| | $ | EQUIPMENT | $ | $ | IMPROVEMENTS | $ | $ |
| | | $ | | | $ | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Cost | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 4,173,212 | 2,562,164 | 4,182,918 | 7,954,073 | 29,580,155 | 6,626,100 | 55,078,622 |
| December | | | | | | | |
| 2007 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Additions | 150,706 | 133,197 | 315,885 | 1,921,057 | 42,826 | - | 2,563,671 |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Disposals | - | (44,649) | (13,421) | (96,863) | (28,261,507) | (6,434,350) | (34,850,790) |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Exchange | (1,117,703) | (471,646) | (797,452) | (940,614) | (929,710) | (191,750) | (4,448,875) |
| difference | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 3,206,215 | 2,179,066 | 3,687,930 | 8,837,653 | 431,764 | - | 18,342,628 |
| December | | | | | | | |
| 2008 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Additions | 214,658 | 61,232 | 631,858 | 1,609,478 | - | - | 2,517,226 |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Disposals | - | (2,981) | - | - | - | - | (2,981) |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Re-classification | - | - | - | (1,658,622) | - | - | (1,658,622) |
| (Note 9) | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Exchange | 508,150 | 301,608 | 570,974 | 707,220 | 58,621 | - | 2,146,573 |
| difference | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 3,929,023 | 2,538,925 | 4,890,762 | 9,495,729 | 490,385 | - | 21,344,824 |
| December | | | | | | | |
| 2009 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Accumulated | | | | | | | |
| depreciation | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 1,464,320 | 866,036 | 2,740,135 | 3,712,860 | 1,990,118 | - | 10,773,469 |
| December | | | | | | | |
| 2007 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Charge for | 659,070 | 343,740 | 417,684 | 1,514,372 | 21,663 | - | 2,956,529 |
| the year | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Disposals | - | (13,217) | (9,905) | (96,863) | (1,877,097) | - | (1,997,082) |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Exchange | (610,897) | (206,410) | (556,217) | (712,364) | (63,468) | - | (2,149,356) |
| Difference | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 1,512,493 | 990,149 | 2,591,697 | 4,418,005 | 71,216 | - | 9,583,560 |
| December | | | | | | | |
| 2008 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Charge for | 439,495 | 251,497 | 396,289 | 1,371,070 | 17,824 | - | 2,476,175 |
| the year | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Disposals | - | (1,610) | - | - | - | - | (1,610) |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Exchange | 311,687 | 162,560 | 424,611 | 552,645 | 7,057 | - | 1,458,560 |
| Difference | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 2,263,675 | 1,402,596 | 3,412,597 | 6,341,720 | 96,097 | - | 13,516,685 |
| December | | | | | | | |
| 2009 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Net book | | | | | | | |
| value | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 2,708,892 | 1,696,128 | 1,442,783 | 4,241,213 | 27,590,037 | 6,626,100 | 44,305,153 |
| December | | | | | | | |
| 2007 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Net book | | | | | | | |
| value | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 1,693,722 | 1,188,917 | 1,096,233 | 4,419,648 | 360,548 | - | 8,759,068 |
| December | | | | | | | |
| 2008 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| Net book | | | | | | | |
| value | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| As at 31 | 1,665,348 | 1,136,329 | 1,478,165 | 3,154,009 | 394,288 | - | 7,828,139 |
| December | | | | | | | |
| 2009 | | | | | | | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
| | |
+-------------------+--------------------+--------------------+------------+-------------+--------------+-------------+--------------+
The Company had the following balances:
+-------------------+---------------+-------------------+---------+---+----------+--------------+-------------+
| | | FURNITURE | | | | |
| | COMMUNICATION | AND | COMPUTER | COMPUTER | BUILDING | |
| | EQUIPMENT | EQUIPMENT | EQUIPMENT | SOFTWARE | AND | TOTAL |
| | $ | $ | $ | $ | IMPROVEMENTS | $ |
| | | | | | $ | |
+-------------------+---------------+-------------------+-------------+----------+--------------+-------------+
| Cost | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 44,793 | 63,998 | 129,342 | 2,662,058 | 32,380 | 2,932,571 |
| December 2007 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Additions | 11,099 | 6,470 | 2,963 | 1,036,751 | 16,026 | 1,073,309 |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 55,892 | 70,468 | 132,305 | 3,698,809 | 48,406 | 4,005,880 |
| December 2008 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Additions | - | - | 206,646 | 456,735 | - | 663,381 |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Disposals | - | (2,902) | - | - | - | (2,902) |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Re-classification | - | - | - | (1,658,622) | - | (1,658,622) |
| (Note 9) | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 55,892 | 67,566 | 338,951 | 2,496,922 | 48,406 | 3,007,737 |
| December 2009 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Accumulated | | | | | | |
| depreciation | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 23,789 | 32,723 | 70,696 | 571,111 | 28,414 | 726,733 |
| December 2007 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Charge for the | 6,052 | 7,025 | 18,394 | 304,714 | 5,412 | 341,597 |
| year | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 29,841 | 39,748 | 89,090 | 875,825 | 33,826 | 1,068,330 |
| December 2008 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Charge for the | 5,210 | 6,048 | 19,817 | 376,243 | 1,609 | 408,927 |
| year | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Disposals | - | (1,589) | - | - | - | (1,589) |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 35,051 | 44,207 | 108,907 | 1,252,068 | 35,435 | 1,475,668 |
| December 2009 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Net book value | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 21,004 | 31,275 | 58,646 | 2,090,947 | 3,966 | 2,205,838 |
| December 2007 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Net book value | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 26,051 | 30,720 | 43,215 | 2,822,984 | 14,580 | 2,937,550 |
| December 2008 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| Net book value | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| As at 31 | 20,841 | 23,359 | 230,044 | 1,244,854 | 12,971 | 1,532,069 |
| December 2009 | | | | | | |
+-------------------+---------------+-------------------+---------+--------------+--------------+-------------+
| | | | | | | | |
+-------------------+---------------+-------------------+---------+---+----------+--------------+-------------+
2008
Disposal of property, furniture and equipment
The Group completed the sale of its principal property at 27th Avenue in
Calgary, Canada on 10 July 2008 for total consideration of CAD $33.5 million. A
loss of $75,805 was recorded on disposition. The Group will continue to lease
two areas of the property from the purchaser on usual commercial terms for a
period of three years and five years respectively following the sale. The Group
also disposed of furniture during the year with a carrying value of $34,948 for
net proceeds of $Nil. The total loss on disposal of assets was $110,753 for the
year.
2009
Disposal of property, furniture and equipment
The Group disposed of furniture and equipment with a net book value of $1,371
for Nil proceeds during the year. The total loss on disposal of furniture and
equipment was $1,014 for the Group (Company: $239). The Group recognised a
further loss on disposal of the 27th Avenue property of $4,075 due to legal fees
incurred subsequent to the sale.
9. INTANGIBLE ASSETS
The Group had the following balances:
+-------------------+--------------------+-------------------+------------------+
| | INTELLECTUAL | WEBSITE | TOTAL |
| | PROPERTY | DEVELOPMENT | $ |
| | $ | $ | |
+-------------------+--------------------+-------------------+------------------+
| Cost | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 18,425,350 | 12,253,294 | 30,678,644 |
| December 2007 | | | |
+-------------------+--------------------+-------------------+------------------+
| Additions | 118,787 | 11,939,882 | 12,058,669 |
+-------------------+--------------------+-------------------+------------------+
| Impairment loss | (8,638,038) | - | (8,638,038) |
+-------------------+--------------------+-------------------+------------------+
| Exchange | (3,164,125) | (1,951,368) | (5,115,493) |
| difference | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 6,741,974 | 22,241,808 | 28,983,782 |
| December 2008 | | | |
+-------------------+--------------------+-------------------+------------------+
| Additions | 44,349 | 16,228,525 | 16,272,874 |
+-------------------+--------------------+-------------------+------------------+
| Disposals | - | (60,984) | (60,984) |
+-------------------+--------------------+-------------------+------------------+
| Re-classification | - | 1,658,622 | 1,658,622 |
| (Note 8) | | | |
+-------------------+--------------------+-------------------+------------------+
| Exchange | - | 626,609 | 626,609 |
| difference | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 6,786,323 | 40,694,580 | 47,480,903 |
| December 2009 | | | |
+-------------------+--------------------+-------------------+------------------+
| Accumulated amortisation | | |
+----------------------------------------+-------------------+------------------+
| As at 31 | 9,130,885 | 3,662,031 | 12,792,916 |
| December 2007 | | | |
+-------------------+--------------------+-------------------+------------------+
| Charge for the | 1,142,334 | 2,252,925 | 3,395,259 |
| year | | | |
+-------------------+--------------------+-------------------+------------------+
| Impairment loss | (2,777,914) | - | (2,777,914) |
+-------------------+--------------------+-------------------+------------------+
| Exchange | (946,568) | (1,352,731) | (2,299,299) |
| difference | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 6,548,737 | 4,562,225 | 11,110,962 |
| December 2008 | | | |
+-------------------+--------------------+-------------------+------------------+
| Charge for the | 87,077 | 3,779,346 | 3,866,423 |
| year | | | |
+-------------------+--------------------+-------------------+------------------+
| Disposal | - | (16,326) | (16,326) |
+-------------------+--------------------+-------------------+------------------+
| Exchange | - | 446,998 | 446,998 |
| difference | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 6,635,814 | 8,772,243 | 15,408,057 |
| December 2009 | | | |
+-------------------+--------------------+-------------------+------------------+
| Net book value | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 9,294,465 | 8,591,263 | 17,885,728 |
| December 2007 | | | |
+-------------------+--------------------+-------------------+------------------+
| Net book value | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 193,237 | 17,679,583 | 17,872,820 |
| December 2008 | | | |
+-------------------+--------------------+-------------------+------------------+
| Net book value | | | |
+-------------------+--------------------+-------------------+------------------+
| As at 31 | 150,509 | 31,922,337 | 32,072,846 |
| December 2009 | | | |
+-------------------+--------------------+-------------------+------------------+
The Company had the following balances:
+-------------------+--------------------+-------------------+------------+------------+
| | INTELLECTUAL | WEBSITE | TOTAL | |
| | PROPERTY | DEVELOPMENT | $ | |
| | $ | $ | | |
+-------------------+--------------------+-------------------+------------+------------+
| Cost | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 6,617,143 | 7,556,520 | 14,173,663 | |
| December 2007 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Additions | 118,787 | 11,128,279 | 11,247,066 | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 6,735,930 | 18,684,799 | 25,420,729 | |
| December 2008 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Additions | 44,348 | 15,496,192 | 15,540,540 | |
+-------------------+--------------------+-------------------+------------+------------+
| Disposals | - | (60,984) | (60,984) | |
+-------------------+--------------------+-------------------+------------+------------+
| Re-classification | - | 1,658,622 | 1,658,622 | |
| (Note 8) | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 6,780,278 | 35,778,629 | 42,558,907 | |
| December 2009 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Accumulated | | | | |
| amortization | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 December 2007 | 1,840,013 | 8,343,267 | |
| 6,503,254 | | | |
+----------------------------------------+-------------------+------------+------------+
| Charge for the | 45,484 | 1,232,760 | 1,278,244 | |
| year | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 6,548,738 | 3,072,773 | 9,621,511 | |
| December 2008 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Charge for the | 87,076 | 1,890,827 | 1,977,903 | |
| year | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Disposal | - | (16,326) | (16,326) | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 6,635,814 | 4,947,274 | 11,583,088 | |
| December 2009 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Net book value | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 113,889 | 5,716,507 | 5,830,396 | |
| December 2007 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Net book value | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 187,192 | 15,612,026 | 15,799,218 | |
| December 2008 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| Net book value | | | | |
+-------------------+--------------------+-------------------+------------+------------+
| As at 31 | 144,464 | 30,831,355 | 30,975,819 | |
| December 2009 | | | | |
+-------------------+--------------------+-------------------+------------+------------+
The Group performs goodwill and intangible impairment tests at least annually or
whenever events or changes in circumstances indicate that the goodwill and
intangible carrying value for a business unit may not be recoverable.
2008
In the fourth quarter of fiscal 2008, the Group recorded goodwill and intangible
asset impairment of $8.6 million and $5.9 million respectively (net of any
related accumulated amortisation) representing complete impairment of goodwill
and intangible assets acquired on the purchase of NetBanx Limited in 2005. In
accordance with IAS 36, an impairment loss should be recognised when the
recoverable amount of an asset is less than its carrying amount. The
recoverable amount was deemed to be zero, based on an analysis of the unit's
future cash flow projections and management's best estimate of the set of
economic conditions that will exist over the remaining useful life of the
assets.
The recoverable amount of NetBanx Limited ('the cash-generating unit') was based
on value-in-use calculations. Those calculations used cash flow projections
based on actual operating results. A pre-tax discount rate of 5.5% had been
used in discounting the projected cash flows. The recoverable amount of the
cash-generating unit exceeded its carrying amount. The Board believed that any
reasonably possible change in the key assumptions on which the cash-generating
unit's recoverable amount was based would not cause the cash-generating unit's
carrying amount to exceed its recoverable amount.
2009
The Group and the Company recorded a write down of $44,658 (net of accumulated
amortization) for website development specifically related to a processer that
is no longer being used.
Included in the website development total cost of $35.8 million is an amount of
approximately $24 million recognised for the total cost of development of the
Group's new platform. The Board has determined the recoverable amount of the
asset under construction based on value-in-use calculations. Those calculations
use cash flow projections based on actual
operating results. A pre-tax discount rate of 5.5% has been used in discounting
the projected cash flows. The Board believes that any reasonably possible change
in the key assumptions on which the cash-generating unit's recoverable amount is
based would not cause the cash-generating unit's carrying amount to exceed its
recoverable amount.
10. INVESTMENT IN ASSOCIATE
In the second quarter of fiscal 2009, the Group recorded an impairment loss of
$4.6 million, representing complete impairment of the investment in Centricom
Pty Ltd. In accordance with IAS 36, an impairment loss should be recognised
when the recoverable amount of an asset is less than its carrying amount. The
recoverable amount was deemed to be zero, based on an analysis of the unit's
future cash flow projections and management's best estimate of the set of
economic conditions that will exist over the remaining useful life of the
assets.
+--------------------------+---------------+--------------+
| | AS AT 31 | AS AT 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+--------------------------+---------------+--------------+
| Cost | | |
+--------------------------+---------------+--------------+
| Opening balance | 5,085,074 | 4,115,626 |
+--------------------------+---------------+--------------+
| Share purchase | - | 1,742,591 |
+--------------------------+---------------+--------------+
| Contributions to | 16,553 | - |
| associate | | |
+--------------------------+---------------+--------------+
| Group and Company's | | |
| share of investment loss | (533,116) | (773,143) |
+--------------------------+---------------+--------------+
| Impairment loss | (4,568,511) | - |
+--------------------------+---------------+--------------+
| | - | 5,085,074 |
+--------------------------+---------------+--------------+
11. INTEREST IN JOINT VENTURE
On 24 November 2008, the Group disposed of its 50% interest in Centricom Europe
Limited, combined with cash of $1,486,768, for shares in Centricom Pty. During
2008, the Group contributed $205,564 to the operations of the joint venture. As
detailed in Note 10, the entire investment in Centricom Pty Ltd was subsequently
written off in 2009. The Group retains an economic interest in Centricom Pty
Limited of 25.4%.
12. TRADE AND OTHER PAYABLES
The Group had the following balances:
+------------------+------------+------------+
| | AS AT | AS AT 31 |
| | 31 | DECEMBER |
| | DECEMBER | 2008 |
| | 2009 | $ |
| | $ | |
+------------------+------------+------------+
| Accounts payable | 14,898,990 | 11,741,354 |
+------------------+------------+------------+
| Accrued accounts | 5,855,662 | 6,029,454 |
| payable | | |
+------------------+------------+------------+
| Payroll | 615,848 | 547,875 |
| liabilities | | |
+------------------+------------+------------+
| | 21,370,500 | 18,318,683 |
+------------------+------------+------------+
The Company had the following balances:
+------------------+-----------+-----------+
| | AS AT | AS AT 31 |
| | 31 | DECEMBER |
| | DECEMBER | 2008 |
| | 2009 | $ |
| | $ | |
+------------------+-----------+-----------+
| Accounts payable | 1,959,940 | 1,020,114 |
+------------------+-----------+-----------+
| Accrued accounts | 4,933,507 | 5,017,663 |
| payable | | |
+------------------+-----------+-----------+
| Payroll | 46,654 | 120,442 |
| liabilities | | |
+------------------+-----------+-----------+
| | 6,940,101 | 6,158,219 |
+------------------+-----------+-----------+
Included in Group accounts payable are merchant processing liabilities arising
from the gateway operations of NetBanx and NetBanx Asia. In addition, included
in cash and cash equivalents is a transient cash balance that relates to
merchant transactions processed via the gateway operations. The gateway
operations do not fall within the EU definition of "e-money" nor does a legal
right of offset exist between this cash and the corresponding merchant
liabilities.
13. FORFEITURE PAYABLE
On 18 July 2007, the Company entered into a Deferred Prosecution Agreement
("DPA") with the United States Attorney's Office for the Southern District of
New York ("USAO"). Pursuant to the DPA, the Company forfeited $136 million to
the USAO as disgorgement of certain profits received by the Group from the
activities described in the Statement of Admitted Facts attached to the DPA.
This amount included approximately $57.7 million which the USAO previously
seized. The Company satisfied the remaining portion of its forfeiture obligation
with a payment of $40 million on 15 October 2007, and $38.25 million paid on 16
January 2008.
On 18 July 2009, the Group's DPA formally expired as scheduled. Since 18 July
2007, the Group has complied with the DPA and is no longer subject to oversight
by the external audit monitor firm appointed under the DPA. The Group received
a copy of the Notice of Dismissal of the Complaint filed against NETELLER Plc on
19 August 2009.
The following details have been recorded:
+-------------------------+---------------+---------------+
| | YEAR ENDED | YEAR ENDED |
| | 31 DECEMBER | 31 DECEMBER |
| | 2009 | 2008 |
+-------------------------+---------------+---------------+
| | US$ | US$ |
+-------------------------+---------------+---------------+
| | | |
+-------------------------+---------------+---------------+
| Opening balance | - | (38,250,415) |
+-------------------------+---------------+---------------+
| 16 January 2008 payment | - | 38,250,415 |
+-------------------------+---------------+---------------+
| Forfeiture payable at | | - |
| the end of the year | | |
| | - | |
+-------------------------+---------------+---------------+
| | | |
+-------------------------+---------------+---------------+
| | | |
+-------------------------+---------------+---------------+
During 2008, NEOVIA Financial Plc reallocated $13,252,615 of the forfeiture to
NT Services Limited in recognition of NT Services Limited's share of related
profits in 2004 and 2005. On a consolidated basis, there were no additional
penalties assessed or recovered in 2008.
14. TAX
The Company is incorporated in the IOM and is subject to a tax rate of zero
percent and accordingly pays no tax in the IOM.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge for the year can be reconciled to the profit per the consolidated
income statement as follows:
+---------------+-------------+-------------+
| | YEAR | YEAR |
| | ENDED | ENDED |
| | 2009 | 2008 |
| | $ | $ |
+---------------+-------------+-------------+
| Loss | (9,997,473) | (9,917,550) |
| before | | |
| tax | | |
+---------------+-------------+-------------+
| Effect | 182,802 | 1,830,929 |
| of | | |
| different | | |
| tax rates | | |
| of | | |
| subsidiaries | | |
| operating in | | |
| other | | |
| jurisdictions | | |
+---------------+-------------+-------------+
| Effective | -1.83% | -18.46% |
| tax rate | | |
| for the | | |
| year | | |
+---------------+-------------+-------------+
At 31 December 2009, foreign taxes of $2,224,304 (2008: $1,904,472) were
outstanding.
15. SHARE CAPITAL
+-----------------------------------------+-----------+------------+
| | AS AT 31 | AS AT 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
+-----------------------------------------+-----------+------------+
| | GBP | GBP |
+-----------------------------------------+-----------+------------+
| Authorised: | | |
+-----------------------------------------+-----------+------------+
| 200,000,000 ordinary shares of | 20,000 | 20,000 |
| GBP0.0001 per share | | |
| (At 31 December 2008: 200,000,000 | | |
| ordinary shares of GBP0.0001 per share) | | |
+-----------------------------------------+-----------+------------+
| | | |
+-----------------------------------------+-----------+------------+
| 1,000,000 deferred shares of GBP0.01 | 10,000 | 10,000 |
| per share | | |
| (At 31 December 2008: 1,000,000 | | |
| deferred shares GBP0.01 per share) | | |
+-----------------------------------------+-----------+------------+
| | | |
+-----------------------------------------+-----------+------------+
| Issued and fully paid | $ | $ |
+-----------------------------------------+-----------+------------+
| 119,920,953 ordinary shares of | | |
| GBP0.0001 per share | 21,725 | 21,725 |
| (At 31 December 2008: 119,920,953 | | |
| ordinary shares of GBP0.0001 per share) | | |
+-----------------------------------------+-----------+------------+
| | | |
+-----------------------------------------+-----------+------------+
| 1,000,000 deferred shares of GBP0.01 | 18,000 | 18,000 |
| per share | | |
| (At 31 December 2008: 1,000,000 | | |
| deferred shares of GBP0.01 per share) | | |
+-----------------------------------------+-----------+------------+
| | | |
+-----------------------------------------+-----------+------------+
| Total share capital | 39,725 | 39,725 |
+-----------------------------------------+-----------+------------+
Holders of the ordinary shares are entitled to receive dividends and other
distributions, to attend and vote at any general meeting, and to participate in
all returns of capital on winding up or otherwise.
Holders of the deferred shares are not entitled to vote at any annual general
meeting of the Company and are only entitled to receive the amount paid up on
the shares after the holders of the ordinary shares have received the sum of
GBP1,000,000 for each ordinary share held by them and shall have no other right
to participate in assets of the Company.
16. TRANSLATION RESERVE
+--------------------------------------+-------------+--------------+
| | YEAR ENDED | YEAR ENDED |
| | 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+--------------------------------------+-------------+--------------+
| Balance at beginning of year | (1,320,417) | 9,412,813 |
+--------------------------------------+-------------+--------------+
| Arising on translation of foreign | 927,509 | (10,733,230) |
| operations | | |
+--------------------------------------+-------------+--------------+
| Balance at end of year | (392,908) | (1,320,417) |
+--------------------------------------+-------------+--------------+
Exchange differences relating to the translation from the functional currencies
of the Group's foreign subsidiaries into US dollars are brought to account by
entries made directly to the foreign currency translation reserve.
17. SEGMENTED REPORTING
The Group has two segments as disclosed below. For each of the segments, the
Group's CEO reviews internal management reports on at least a quarterly basis.
The following summary describes the operations in each of the Group's reportable
segments.
E-wallet: fees are generated on transactions between members and merchants using
the NETELLER and NETELLER Asia e-wallet systems.
Gateway: fees are generated through the NETBANX and NETBANX Asia gateway
platforms where consumer send money directly to merchants.
Information regarding the results of each reportable segment is included below.
Performance is measured based on revenue only given the transaction based
business model of the Group in which cost of sales and operating expenses are
shared across all products and regions and cannot be reasonably allocated
amongst the segments.
Reportable segments:
+------------------+-------------+------------+
| | YEAR ENDED | YEAR |
| | 31 | ENDED 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+------------------+-------------+------------+
| E-wallet | 46,006,831 | 52,285,510 |
+------------------+-------------+------------+
| Gateway | 16,881,366 | 17,517,831 |
+------------------+-------------+------------+
| | 62,888,197 | 69,803,341 |
+------------------+-------------+------------+
| | |
+------------------+-------------+------------+
Geographical information:
+------------------+-------------+------------+
| | YEAR ENDED | YEAR |
| | 31 DECEMBER | ENDED 31 |
| | 2009 | DECEMBER |
| | $ | 2008 |
| | | $ |
+------------------+-------------+------------+
| Europe | 40,479,088 | 48,394,378 |
+------------------+-------------+------------+
| Asia | 19,941,461 | 19,090,091 |
+------------------+-------------+------------+
| Rest of World | 2,467,648 | 2,318,872 |
+------------------+-------------+------------+
| | 62,888,197 | 69,803,341 |
+------------------+-------------+------------+
Major customer
The Group has one merchant who represents 13% of total fee revenue across all
reportable segments and geographies. In 2008 the merchant balances were not
material.
18. MARKETING AND PROMOTIONS
Total marketing and promotions costs for the year were $439,085 (2008:
$1,538,955). These consisted of targeted VIP rebates, fee rebates and cash paid
to contest winners.
19. PROFIT FROM OPERATIONS
Profit from operations has been arrived at after charging:
+--------------+-----------+-----------+-----------+-----------+
| | GROUP | COMPANY |
+--------------+-----------------------+-----------------------+
| | YEAR | YEAR | YEAR | YEAR |
| | ENDED | ENDED | ENDED | ENDED |
| | 31 | 31 | 31 | 31 |
| | DECEMBER | DECEMBER | DECEMBER | DECEMBER |
| | 2009 | 2008 | 2009 | 2008 |
| | $ | $ | $ | $ |
+--------------+-----------+-----------+-----------+-----------+
| Depreciation | 2,476,176 | 2,956,529 | 408,927 | 341,597 |
| of property, | | | | |
| plant and | | | | |
| equipment | | | | |
+--------------+-----------+-----------+-----------+-----------+
| Amortisation | 3,866,422 | 3,395,259 | 1,977,902 | 1,278,244 |
| of | | | | |
| intellectual | | | | |
| property | | | | |
+--------------+-----------+-----------+-----------+-----------+
| | 6,342,598 | 6,351,788 | 2,386,829 | 1,619,841 |
+--------------+-----------+-----------+-----------+-----------+
Remuneration of the auditors for audit, advisory and other services has been
recorded as follows:
+---------------------+------------+------------+
| | YEAR ENDED | YEAR ENDED |
| | | |
| | 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+---------------------+------------+------------+
| Audit services | | |
+---------------------+------------+------------+
| Statutory audit | 415,000 | 420,000 |
+---------------------+------------+------------+
| | | |
+---------------------+------------+------------+
| Non-audit services | | |
+---------------------+------------+------------+
| Tax and other | 132,000 | 71,000 |
| advisory services | | |
+---------------------+------------+------------+
| Total | 547,000 | 491,000 |
+---------------------+------------+------------+
20. RESTRUCTURING COSTS
The Group incurred restructuring costs relating to the challenging economic
conditions and the follow-on impact on the Group's operations post cessation of
its North American-facing business in the first quarter of 2007. Severance was
paid in 2009 to certain executives and call centre employees in response to
reduced business levels and the resulting need to achieve efficiencies. Other
restructuring costs included the write down and disposal of assets, amending and
settling vendor contracts and professional and legal fees incurred in the
resolution of the US situation (including the distribution of funds to US
members and negotiating potential sanctions against the Group culminating in the
DPA on 18 July 2007).
The Group has incurred the following costs:
+--------------------------------------+------------+------------+
| | YEAR ENDED | YEAR ENDED |
| | 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+--------------------------------------+------------+------------+
| Severance and retention | 1,840,359 | - |
+--------------------------------------+------------+------------+
| Supplier contract renegotiation | (94,922) | 421,363 |
| (recovery) | | |
+--------------------------------------+------------+------------+
| Provision for supplier receivable | 147,031 | 600,080 |
+--------------------------------------+------------+------------+
| Settlement of third party litigation | - | 6,523 |
+--------------------------------------+------------+------------+
| Professional and legal fees and | 512,409 | 82,784 |
| expenses | | |
+--------------------------------------+------------+------------+
| Other restructuring costs | 37,998 | 3,177 |
+--------------------------------------+------------+------------+
| | 2,442,875 | 1,113,927 |
+--------------------------------------+------------+------------+
| | |
+--------------------------------------+------------+------------+
The Company has incurred the following costs:
+----------------------------------------+------------+------------+
| | YEAR ENDED | YEAR ENDED |
| | 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
| | $ | $ |
+----------------------------------------+------------+------------+
| Severance and retention | 954,751 | - |
+----------------------------------------+------------+------------+
| Supplier contract renegotiation | (94,922) | 421,363 |
| (recovery) | | |
+----------------------------------------+------------+------------+
| Provision for supplier receivable | 147,031 | 600,080 |
+----------------------------------------+------------+------------+
| Settlement of third party litigation | - | 6,523 |
+----------------------------------------+------------+------------+
| Professional and legal fees and | 512,409 | 82,784 |
| expenses | | |
+----------------------------------------+------------+------------+
| Other restructuring costs | 37,998 | 2,389 |
+----------------------------------------+------------+------------+
| | 1,557,267 | 1,113,139 |
+----------------------------------------+------------+------------+
21. LOSS PER SHARE FROM CONTINUING OPERATIONS
The calculation of the basic and diluted earnings or loss per share is based on
the following data:
+-------------------------------+-------------+-------------+
| | YEAR | YEAR |
| | ENDED | ENDED 31 |
| | 31 | DECEMBER |
| | DECEMBER | 2008 |
| | 2009 | |
+-------------------------------+-------------+-------------+
| | $ | $ |
+-------------------------------+-------------+-------------+
| Loss | | |
+-------------------------------+-------------+-------------+
| Loss for the purposes of | (9,814,671) | (8,086,621) |
| basic and diluted earnings | | |
| per share being net loss | | |
| attributable to equity share | | |
| holders of the parent | | |
+-------------------------------+-------------+-------------+
| | | |
+-------------------------------+-------------+-------------+
| Number of shares | | |
+-------------------------------+-------------+-------------+
| Weighted average number of | | |
| ordinary shares for the | | |
+-------------------------------+-------------+-------------+
| purpose of basic loss per | 119,920,953 | 119,920,953 |
| share | | |
+-------------------------------+-------------+-------------+
| Effect of dilutive potential | 4,267 | - |
| ordinary shares due to | | |
| employee share options | | |
+-------------------------------+-------------+-------------+
| Weighted average number of | | |
| ordinary shares for the | 119,925,220 | 119,920,953 |
+-------------------------------+ + +
| purpose of diluted loss per | | |
| share | | |
+-------------------------------+-------------+-------------+
| | | |
+-------------------------------+-------------+-------------+
| Basic loss per share | $(0.08) | $(0.07) |
+-------------------------------+-------------+-------------+
| Fully diluted loss per share | $(0.08) | $(0.07) |
+-------------------------------+-------------+-------------+
22. OPERATING LEASE ARRANGEMENTS
At the balance sheet date, the Group had outstanding commitments for future
minimum lease payments, which fall due as follows:
+------------------+-----------+-----------+
| | AS AT | AS AT |
| | 31 | 31 |
| | DECEMBER | DECEMBER |
| | 2009 | 2008 |
+------------------+-----------+-----------+
| | $ | $ |
+------------------+-----------+-----------+
| Within one year | 1,853,289 | 1,651,017 |
+------------------+-----------+-----------+
| In the second to | 2,541,205 | 2,722,187 |
| fifth years | | |
| inclusive | | |
+------------------+-----------+-----------+
| After five years | 140,998 | 179,042 |
+------------------+-----------+-----------+
Operating lease payments represent rentals payable by the Group for certain of
its office properties. Current leases have a remaining average life of three
years. The lease payments recognised in expense for the year are $1,921,557
(2008: $965,746).
23. SHARE BASED PAYMENTS
The Company's share option plan was adopted pursuant to a resolution passed on 7
April 2004 and amended by the Board on 15 September 2008. The 2008 amendment
included the addition of a new 'approved' plan for UK based employees. Under
the 'approved' and 'unapproved' plans, the Board of Directors of the Company may
grant share options to eligible employees including directors of Group companies
to subscribe for ordinary shares of the Company.
No consideration is payable on the grant of an option. Options may generally be
exercised to the extent that they have vested. Options vest according to the
relevant schedule over the grant period following the date of grant. Typically,
options have been granted for a three and a half year grant period and have
vested in equal thirds on or about the anniversary of the grant date. However,
the Directors are permitted under the Plan Rules to alter the vesting schedule
and the grant period. The exercise price is determined by the Board of
Directors of the Company, and shall not be less than the market value at the
date of grant. The option plan provides for a grant price to equal the average
quoted market price of the Company shares on the three days prior to the date of
grant. Share options are forfeited if the employee leaves the Group before the
options vest. A participant of the share option plan has 30 days following the
date of grant to surrender the option and if surrendered, the option will not be
deemed granted.
On 17 June 2009, the Company granted 100,000 share options to eligible employees
to acquire ordinary shares at an exercise price of GBP0.50 per share, expiring
on 5 December 2012.
On 15 April, 2009, 78,809 options granted on 3 November 2005 with an exercise
price of GBP7.11 expired. Also on 15 April 2009, 7,000 options granted on 15
December 2005 with an exercise price of GBP7.15 expired.
On 14 October 2009, a total of 309,999 options granted on 14 April 2006 with an
exercise price of GBP8.06 expired.
Options recorded under share option expense may not agree to the total options
granted in the period. The accounting for options coincides with the day
following the last day for acceptance of the option, which is subsequent to
their date of grant.
Equity-settled share option plan
+-----------------+-------------+-----------+-------------+-----------+
| |31 DECEMBER | YEAR |31 DECEMBER | YEAR |
| | 2009 | ENDED | 2008 | ENDED |
| | WEIGHTED | 31 | WEIGHTED | 31 |
| | AVERAGE | DECEMBER | AVERAGE | DECEMBER |
| | EXERCISE | 2009 | EXERCISE | 2008 |
| | PRICE | OPTIONS | PRICE | OPTIONS |
| | GBP | | GBP | |
+-----------------+ + + + +
| | | | | |
+-----------------+-------------+-----------+-------------+-----------+
| Outstanding at | 1.49 | | 1.50 | |
| the | | 8,216,215 | | 6,699,116 |
| beginning of | | | | |
| year | | | | |
+-----------------+-------------+-----------+-------------+-----------+
| Granted during | 0.50 | 100,000 | 0.53 | 2,789,100 |
| the year | | | | |
+-----------------+-------------+-----------+-------------+-----------+
| Forfeited | 0.72 | (630,156) | 1.34 | (696,149) |
| during the year | | | | |
+-----------------+-------------+-----------+-------------+-----------+
| Exercised | - | - | - | - |
| during the year | | | | |
+-----------------+-------------+-----------+-------------+-----------+
| Expired during | 7.85 | (395,808) | 5.09 | (575,852) |
| the year | | | | |
+-----------------+-------------+-----------+-------------+-----------+
| Outstanding at | 0.86 | | 1.49 | |
| the end of year | | 7,590,521 | | 8,216,215 |
+-----------------+-------------+-----------+-------------+-----------+
| Exercisable at | 1.00 | | 1.36 | |
| the end of the | | 5,037,519 | | 2,799,126 |
| year | | | | |
+-----------------+-------------+-----------+-------------+-----------+
The weighted average share price at the date of exercise for share options
exercised during the year was GBPnil as no options were exercised in the year.
The options outstanding at the end of the period had a weighted average
remaining contractual life of 1.65 years (31 December 2008: 2.71 years).
The options granted in 2009 are priced using a trinomial lattice model to better
reflect factors including employee exercise behaviour, option life and option
forfeitures.
The inputs into the model are as follows:
+----------------+------------+----------+
| |YEAR ENDED | YEAR |
| | 31 |ENDED 31 |
| | DECEMBER |DECEMBER |
| | 2009 | 2008 |
+----------------+------------+----------+
| Weighted | GBP0.50 | GBP0.53 |
| average | | |
| exercise price | | |
+----------------+------------+----------+
| Expected | 56% | 56% |
| volatility | | |
+----------------+------------+----------+
| Expected life | 3.5 years | 4 years |
+----------------+------------+----------+
| Risk free | 0.5% | 2% |
| interest rate | | |
+----------------+------------+----------+
| Expected | - | - |
| dividends | | |
+----------------+------------+----------+
| Employee exit | 7% | 6.2% |
| rate | | |
+----------------+------------+----------+
Expected volatility was determined by calculating the historical volatility of
the Company's share price from the time of issue to the date of grant. The
expected life used in the model has been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
The Company recognised total expenses of $2,646,440 (2008: $2,735,222) related
to the equity-settled share-based payments transactions in 2009.
24. FINANCIAL INSTRUMENTS
Financial instruments consist of cash and cash equivalents, restricted cash,
Qualifying Liquid Assets held for European members, receivable from customers,
trade and other receivables, payable to members and merchants, payable to
European members and trade and other payables.
i) Fair values
The fair values of cash and cash equivalents, restricted cash, Qualifying Liquid
Assets held for European members, receivable from customers, trade and other
receivables, payable to European members and trade and other payables
approximate the carrying values due to the short-term nature of these
instruments.
ii) Credit risk and concentrations
The Group is exposed to credit risk to the extent that its members may charge
back credit card purchases. The Group manages the exposure to credit risk by
employing various online identification verification techniques, enacted
transaction limits and having a significant number of members. As these members
are geographically widespread and the merchants are active in various
industries, the exposure to credit risk and concentration is mitigated.
iii) Interest rate risk
The Group is exposed to interest rate risk to the extent that investment revenue
earned on cash and cash equivalents, client account funds, and Qualifying Liquid
Assets held for European members is subject to fluctuations in interest rates.
The Group's exposure to interest rate risk is limited as investments are held in
liquid and short-term funds.
iv) Currency risk
The Group is not significantly exposed to foreign currency exchange risk, as the
majority of the transactions are denominated in US dollars. The Group manages
the exposure to currency risk by commercially transacting in US dollars and by
limiting the use of other currencies for operating expenses, thereby minimising
the realised and unrealised foreign exchange gain/(loss). Where limited
exposures exist, these are managed through entering into forward foreign
exchange contracts as appropriate (Note 3).
v) Market segment risk
Market segment risk may arise due to adverse changes in legislation relating to
internet, payment processing or on-line gambling. The Group is exposed to
market segment risk to the extent that legislation impacts operational presence
and related revenue streams, which may be significant. The Group manages this
exposure through geographical diversification and participation in non gambling
sources of revenue. The Group closely monitors local legislation in key markets
(new or existing) and does not have economic reliance on any one country.
vi) Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its financial
obligations as they fall due. The Group's major exposure relates to trade
payables and amounts owed to European members. The latter are fully supported
by qualifying liquid assets (see note 4 for further details). Management
controls and monitors the Group's cash flow on a regular basis, including
forecasting future cash flows.
25.SUBSIDIARIES
Details of the Company's principal subsidiaries as at 31 December 2009 are as
follows:
+---------------+---------------+------------+------------+----------------+
| NAME OF | PLACE OF | PROPORTION | PROPORTION | PRINCIPAL |
| SUBSIDIARY | INCORPORATION | OF | OF VOTING | ACTIVITY |
| | AND OPERATION | OWNERSHIP | POWER HELD | |
| | | INTEREST | | |
+---------------+---------------+------------+------------+----------------+
| NETELLER | United | 100% | 100% | Authorised |
| (UK) Ltd | Kingdom | | | e-money |
| | | | | issuer |
+---------------+---------------+------------+------------+----------------+
| NT Services | Canada | 100% | 100% | Processing |
| Limited | | | | payments on |
| | | | | behalf of |
| | | | | the Company |
+---------------+---------------+------------+------------+----------------+
| NetBanx | United | 100% | 100% | Full service |
| Limited | Kingdom | | | payment |
| | | | | processing |
+---------------+---------------+------------+------------+----------------+
| Quick Access | Macau | 100% | 100% | Debit card |
| International | | | | payment |
| Limited | | | | processing |
+---------------+---------------+------------+------------+----------------+
| 1155259 | Canada | 100% | 100% | Financing |
| Alberta | | | | |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| NT Services | Canada | 100% | 100% | Property |
| Building | | | | leasing |
| Corporation | | | | company |
+---------------+---------------+------------+------------+----------------+
| Cardload | Canada | 100% | 100% | Dormant |
| Incorporated | | | | |
+---------------+---------------+------------+------------+----------------+
| NETELLER | Isle of Man | 100% | 100% | Dormant |
| Express | | | | |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| Lime | Isle of Man | 100% | 100% | Holding |
| Enterprises | | | | company |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| Jade | Isle of Man | 100% | 100% | Holding |
| Enterprises | | | | company |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| Net Group | Isle of Man | 100% | 100% | Holding |
| Holdings | | | | company |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| NetAdmin | Isle of Man | 100% | 100% | Employment & |
| Limited | | | | administration |
+---------------+---------------+------------+------------+----------------+
| Neteller | Isle of Man | 100% | 100% | e-money |
| Operations | | | | issuer |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| Net ID | Isle of Man | 100% | 100% | Identification |
| Limited | | | | verification |
+---------------+---------------+------------+------------+----------------+
| NetB Limited | Isle of Man | 100% | 100% | Holding |
| | | | | company |
+---------------+---------------+------------+------------+----------------+
| Cardload | Isle of Man | 100% | 100% | Dormant |
| Europe | | | | |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| Greenscroft | Isle of Man | 100% | 100% | Holding |
| Limited | | | | company |
+---------------+---------------+------------+------------+----------------+
| NEOVIA | United | 100% | 100% | Dormant |
| Financial | Kingdom | | | |
| Limited | | | | |
| (formerly NX | | | | |
| Systems UK | | | | |
| Limited) | | | | |
+---------------+---------------+------------+------------+----------------+
| Netinvest | United | 100% | 100% | Holding |
| Limited | Kingdom | | | company |
+---------------+---------------+------------+------------+----------------+
| Netpro | United | 100% | 100% | Holding |
| Limited | Kingdom | | | company |
+---------------+---------------+------------+------------+----------------+
| Netbanx BV | Netherlands | 100% | 100% | Holding |
| | | | | company |
+---------------+---------------+------------+------------+----------------+
| Charter | Hong Kong | 100% | 100% | Property |
| Access | | | | leasing |
| Limited | | | | company |
+---------------+---------------+------------+------------+----------------+
| NEOVIA | Gibraltar | 100% | 100% | Holding |
| (Gibraltar) | | | | company |
| Limited | | | | |
+---------------+---------------+------------+------------+----------------+
| NEOVIA | United | 100% | 100% | Dormant |
| Financial | Kingdom | | | |
| (UK) Limited | | | | |
+---------------+---------------+------------+------------+----------------+
26. INTERCOMPANY BALANCES
Details of the Company's intercompany balances are as follows:
+---------------+---------------------------------------------------+------------+
| | YEAR | YEAR |
| | ENDED | ENDED |
| | 31 | 31 |
| | DECEMBER | DECEMEBER |
| | 2009 | 2008 |
| | $ | $ |
+---------------+---------------------------------------------------+------------+
| Receivable | | |
| from | | |
| subsidiaries | | |
+---------------+---------------------------------------------------+------------+
| Receivable | 17,343,665 | 11,510,722 |
| from | | |
| NETELLER | | |
| (UK) Ltd | | |
+---------------+---------------------------------------------------+------------+
| Receivable | 1,996,676 | 1,785,896 |
| from | | |
| NetBanx | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Receivable | 3,415,741 | - |
| from Quick | | |
| Access | | |
| International | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Receivable | 167,391 | 104,642 |
| from | | |
| 1155259 | | |
| Alberta | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Receivable | 91,071 | 137,166 |
| from | | |
| NetAdmin | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Receivable | 183,343 | 268,969 |
| from Net | | |
| ID Limited | | |
+---------------+---------------------------------------------------+------------+
| | 23,197,887 | 13,807,395 |
+---------------+---------------------------------------------------+------------+
| Investment | | |
| in | | |
| subsidiaries | | |
+---------------+---------------------------------------------------+------------+
| Investment | 3,430,418 | 3,430,418 |
| in | | |
| NETELLER | | |
| (UK) Ltd | | |
+---------------+---------------------------------------------------+------------+
| Investment | 100 | 100 |
| in NT | | |
| Services | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Investment | 8,435,634 | 8,435,634 |
| in NetBanx | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Investment | 720,540 | 720,540 |
| in Quick | | |
| Access | | |
| International | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Investment | 67,001 | 67,001 |
| in 1155259 | | |
| Alberta | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| | 12,653,693 | 12,653,693 |
+---------------+---------------------------------------------------+------------+
| Due to | | |
| subsidiaries | | |
+---------------+---------------------------------------------------+------------+
| Due to | 11,779,487 | 3,031,205 |
| NT | | |
| Services | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Due to | - | 949,313 |
| Quick | | |
| Access | | |
| International | | |
| Limited | | |
+---------------+---------------------------------------------------+------------+
| Due to | 908,606 | - |
| Charter | | |
| Access | | |
| Co. | | |
| Ltd. | | |
+---------------+---------------------------------------------------+------------+
| | 12,688,093 | 3,980,518 |
+---------------+---------------------------------------------------+------------+
| | |
+---------------+----------------------------------------------------------------+
| | |
+---------------+---------------------------------------------------+------------+
27. INTERCOMPANY TRANSACTIONS
Details of the Company's intercompany transactions are as follows:
Transaction fees, as noted in the Company financial statements, represent
transaction fees earned in the Company's wholly owned subsidiary Neteller
Operations Limited, an e-money issuer. The Company holds trust account funds
and balances owing to Members and Merchants on behalf of Neteller Operations
Limited. All revenues are transferred to the Company in exchange for
transaction and processing services. Neteller Operations Limited is a company
registered in the Isle of Man and incorporated on 23 December 2005. There were
no intercompany balances at year end.
NetAdmin Limited, a wholly owned subsidiary of the Company, is a company
registered in the Isle of Man and incorporated on 23 December 2005. NetAdmin
Limited provides employment and administration services to the Company. All
expenses incurred in NetAdmin Limited are charged to the Company at cost. These
expenses were recognised in the Company income statement.
Net ID Limited, a wholly owned subsidiary of the Company, is a company
registered in the Isle of Man and incorporated on 11 April 2006. Net ID Limited
provides identification verification services to the Company. All expenses
incurred in Net ID Limited are charged to the Company at cost. These expenses
were recognised in the Company income statement.
28. ACQUISITION COSTS IMPAIRMENT
On 1 December 2008, the Group entered into an agreement to acquire IDT
Corporation's European Prepaid Payment Services Division, IDT Financial Services
Holdings Limited ("IDTFSH"). The proposed acquisition was subject to the
approval of the Gibraltar FSC and MasterCard accepting the proposed change of
control of IDTFSH. On 20 March 2009, the Gibraltar FSC advised the Group that
it was unable to consent to the acquisition. A substantial underlying
shareholder of the Company, who under Gibraltar banking law was to become a
controller of IDTFSH and about whom information therefore needed to be provided
to the FSC in connection with the approval process, refused to provide the
requisite notification to the FSC. The FSC in these circumstances determined
that it was unable to consent to the change of control of IDTFSH from IDT
Corporation to the Company.
Acquisition costs of $932,317 were expensed in 2009 (2008: $620,439). They are
considered to have no future economic benefit and have accordingly been expensed
in the year.
29. RELATED PARTIES
During the year, the Group and Company entered into the following transactions
with related parties who are not members of the Group or Company:
+---------------+--------------+--------------+--------------+--------------+
| | Purchase of | Amounts owed | Purchase of | Amounts owed |
| | goods and | to related | goods and | to related |
| | services in | parties 2009 | services in | parties 2008 |
| | 2009 | GBP | 2008 | GBP |
| | GBP | | GBP | |
+---------------+--------------+--------------+--------------+--------------+
| Amber | 17,982 | - | 41,979 | 5,031 |
| Business | | | | |
| Limited | | | | |
+---------------+--------------+--------------+--------------+--------------+
| Intelligence | 136,061 | - | - | - |
| Limited | | | | |
+---------------+--------------+--------------+--------------+--------------+
| JAC Group | 1,995 | | - | |
| Holdings | | 1,995 | | - |
| Limited | | | | |
+---------------+--------------+--------------+--------------+--------------+
Amber Business Limited was a related party of the Group and Company as John
Webster, a director and majority shareholder of Amber Business Limited, was a
Director of the Company throughout the period. Amber Business Limited provided
secretarial and administrative services to the Group in the Isle of Man, and all
transactions were at fair market value.
Intelligence Limited was a related party of the Group and Company as John
Webster, a director and majority shareholder of Intelligence Limited, was a
Director of the Company throughout the period. Intelligence Limited provided
executive search and recruitment services to the Group and all transactions were
at fair market value.
JAC Group Holdings Limited was a related party of the Group and Company as Mark
Mayhew, a director and shareholder of JAC Group Holdings Limited, was a Director
of the Company from 1 September 2009. A subsidiary of JAC Group Holdings
Limited provided travel and related booking services to the Group and all
transactions were at fair market value.
During the year, Dale Johnson (Non-Executive Chairman) provided consulting
services to the Group amounting to GBP10,687 (2008: GBP75,416).
30. CONTINGENT LIABILITIES
From time to time the Group is subject to legal claims and actions. The Group
takes legal advice as to the likelihood of success of the claims and actions and
no provision or disclosure is made where the Directors feel, based on that
advice, the action is unlikely to result in a material loss or a sufficiently
reliable estimate of the potential obligation cannot be made.
As at 31 December 2009, NetBanx Limited, a wholly owned subsidiary, has net
current liabilities. NEOVIA Financial Plc will continue to provide financial
support to enable NetBanx Limited to meet its existing and future liabilities
and continue as a going concern.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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