GHL System Berhad Annual Report 2019

A N N U A L R E P O R T 2 0 1 9 11 1. OVERVIEW OF THE GROUP’s BUSINESS AND OPERATIONS GHL Systems Berhad (“the Group”) is a leading ASEAN payment services provider with key operations in Malaysia, Philippines, Thailand, Indonesia, Cambodia, and Australia. The Group provides world-class payment services compassing physical, internet, and mobile payments, and is one of the region’s top merchant acquirers. GHL manages and oversees more than 397,500 footprint of payment touchpoints across its ASEAN markets that enable credit card, debit card, e-wallets, contactless payment, loyalty, prepaid credit top up, and bill collection payment services. The Group has three (3) core business segments, and they are as follow: 1. Transaction Payment Acquisition (“TPA”) comprises revenue derived from two (2) distinct sub segments: i) e-pay services which include Telco prepaid and other credit top-up facilities and bill collection services for consumers (“reload and collection services”) and; ii) GHL’s direct merchant acquiring and electronic payment services (“electronic payment services”). 2. Shared Services comprises revenue derived from the sale, rental, and maintenance of EDC terminals and other payment acceptance devices. 3. Solution Services comprises revenue derived from the sale and maintenance of hardware and software that are proprietary to the Group. These include payment network solutions, outsourced payment networks, management, and processing of pre-paid and loyalty cards. The Group’s focus is to become ASEAN’s largest merchant acquirer by directly contracting with merchants (“merchant acquisition”) under its TPA initiative. These business segments have since grown rapidly, resulting in a higher proportion of annuity income and a significant change in the business segment mix for the Group (See Sections 2.5 and 3.1 for details). GHL has been listed on Bursa Malaysia since 2003. 2. DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS AND CONDITIONS Analysis of Financial Results 2.1 Revenue Group revenue grew +16.3% YOY to RM347.7 million (2018 – RM299.1 million) with growth registered in the TPA and Shared Services segments. Solutions Services segment, however, registered a RM2.6m YOY decline in revenue. Geographical wise, Malaysia and Philippines' 2019 revenue was higher year on year but Thailand registered a 20% decline as it had a huge hardware sale project in 2018 which completed in February 2019. 2.2 Net Profit Pre-tax profits grew at +18.6% to RM39.7 million as compared to RM33.5 million a year ago. Pre-tax margins grow by 0.2% in 2019 as compared to +1.2% in 2018. Net profit after tax grew +9.9% YOY to RM27.0 million (2018 – RM24.6 million), mainly driven by growth in the TPA and Shared Services segments. 2.3 Taxation The effective tax rate for 2019 was 32.0% (2018 – 26.6%) which was higher than the statutory tax rate mainly due to deferred tax liabilities non-tax allowable expenses. Post-tax and minority interest profit margins were stable at 7.8% in 2019 compared to 8.2% in 2018. MANAGEMENT DISCUSSION AND ANALYSIS