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 ) 10 MANAGEMENT D I SCUSS I ON AND ANA LYS I S 1. OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS GHL Systems Berhad (“the Group”) is a leading payment services provider in ASEAN with key business operations in Malaysia, Philippines, Thailand, Australia, Indonesia and Cambodia. The Group provides world-class payment services and solutions encompassing physical, internet and mobile payments and is one of the region’s top merchant acquirers. GHL manages and oversees more than 360,000 footprints in ASEAN that enables credit card, debit card, e-wallets, contactless payment, loyalty, prepaid 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 mainly of revenue derived from two (2) distinct sub segments: i) e-pay services which includes Telco prepaid and other 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 mainly of revenue derived from the sale, rental and maintenance of EDC terminals and other payment acceptance devices. 3. Solution Services comprises mainly of revenue derived from the sale and maintenance of hardware and software that are proprietary to the Group. These include network devices and related software, outsourced payment networks, management and processing of pre-paid and loyalty cards. The Group’s objective is to become ASEAN’s largest merchant acquirer by directly contracting with merchants (“merchant acquisition”) under its TPA initiative. These businesses 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 +17.9% yoy to RM299.1 million (2017 – RM253.7 million) with growth registered in all three business segments (i.e. TPA, Shared Services and Solutions Services) as well as all geographical markets. 2.2 Net Profit Pre-tax profits grew at +31.8% to RM33.5 million as compared to RM25.4 million a year ago. Pre-tax margin was improved from +10.0% to +11.2%, in 2018. Net profit after tax grew +20.0% yoy to RM24.6 million (2017 – RM20.5 million) driven by overall improving gross profit margin and higher volume of transactions and growth in all business segments and geographical markets, particularly in the TPA segment. 2.3 Taxation The effective tax rate for 2018 was 26.6% (2017 – 19.3%) which was higher than the statutory tax rate mainly due to deferred tax liabilities. Post-tax profit margins were stable at 8.2% in 2018 compared to 8.1% in 2017.