GHL System Berhad Annual Report 2018

G H L S y s t e m S B e r h a d ( 2 9 3 0 4 0 - D ) 14 3. PERFORMANCE BY BUSINESS SEGMENT AND GEOGRAPHY (cont’d) 3.1 Performance By Business Segment (cont’d) a) Transaction Payment Acquisition (“TPA”) Segment (cont’d) (ii) GHL (electronic payment services) This electronic payment services business is driven by our TPA arrangements with leading domestic banks in our respective markets as well as a leading China e-wallet provider which is expanding into ASEAN. The existing GHL TPA data, as shown in Table 2, comprises the following activities: a) Various MDR revenue sharing arrangements under direct contracts with merchants and banks in Malaysia, Thailand and Philippines. b) Malaysian domestic debit card (“MyDebit”) merchant acquisition. c) Internet TPA (“eGHL”). d) e-wallet providers. A summary of key data relating to the electronic payment business is found in Table 2 below. While transaction values processed grew strongly at +44.9%, transaction margin declined YOY due to downtrend of MDR in line with lower interchange fee imposed by regulators and ongoing competition in the market, in terms of monthly rental. Over the longer term, however, margin should stabilise as more merchants are onboard and a larger portfolio is built as our overseas TPA in Philippines and Thailand gather momentum. The introduction of domestic e-wallets in all three markets in 2018 is expected to contribute positively in 2019 and going forward. Table 2 11.5% 9.3% 2017 (RM’mil) 23.6 230.1 Annuity Non-annuity 34.4 264.7 2018 (RM’mil) 20% 10% 0% Revenue By Business Segment 61.0% 34.2% 71.9% 21.9% 6.2% 4.8% Total RM253.7m 2017 (RM’mil) 15.7 182.3 TPA Solution Services 14.6 182.4 2018 (RM’mil) Total RM299.1m 250.0 300.0 200.0 150.0 100.0 50.0 0% 55.7 Shared Services 102.1 e-pay (All stated in RM'millions unless st ted otherwise) Transaction Value Processed 3,763.3 3,684.9 -2.1% Gross Revenue 139.4 124.8 -10.5% Gross Revenue / Transaction Value (Note 1) 3.7% 3.4% -8.1% Gross Profit 45.6 43.9 -3.7% Gross Profit / Transaction Value (Note 1) 1.2% 1.2% - Merchant Footprint - e-pay Only (Thousands) 36.4 38.0 4.4% YTD 2017 YTD 2018 % change GHL Electronic payments TPA (All stated in RM'millions unless stated otherwise) Transaction Value Processed (Note 1) 4,334.2 6,279.9 44.9% Gross Revenue 44.8 57.9 29.2% Gross Revenue / Transaction Value (Note 2) 1.0% 0.9% -10.0% Gross Profit (Note 3) 20.9 23.7 13.4% Gross Profit / Transaction Value (Note 2) 0.5% 0.4% -20.0% Merchant Footprint - TPA Only (Thousands) 32.9 58.7 78.4% % change YTD 2017 (Restated) YTD 2018 Note 1 – The 2018 Transaction Value Processed includes transactions relating to Philippine’s Bancnet transactions which were previously omitted in 2017 which has been restated. Bancnet inclusion commenced only in 2017 due to regulatory changes. Note 2 – Gross Revenue or Gross Profit respectively divided by the Transaction Value Processed expressed as a %. Note 3 – The gross profit has been restated as a result of changes in indirect costs allocation basis due to required improvements to our internal business processes to include certain network service and compliance fees, as well as support expenses relating to the TPA business that were previously included in the administrative operating expenses. This reclassification from operating expenses to cost of goods sold is intended to more accurately reflect the gross margins of this epayment TPA segment. MANAGEMENT D I SCUSS I ON AND ANA LYS I S C O N T ’ D