GHL System Berhad Annual Report 2020

A N N U A L R E P O R T 2 0 2 0 11 MANAGEMENT DISCUSSION AND ANALYSIS 1. OVERVIEW OF THE GROUP’s BUSINESS AND OPERATIONS GHL Systems Berhad (“the Group”) is a leading ASEAN payment services provider with operations in Malaysia, Philippines, Thailand, Indonesia, and Australia. The Group provides world-class payment services compassing physical, e-commerce, and QR payments, and is one of the region’s top merchant acquirers. GHL manages and oversees more than 383,600 footprint of payment touchpoints across its ASEAN markets that enable credit/ debit card, e-wallets, contactless payment, loyalty, prepaid credit top up, and bill collection payment services. The Group has three (3) core business pillars: 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 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 proprietary payment solutions which include customised online platforms, loan collections, loyalty systems and other bank or merchant specific applications. 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 declined -3.8% yoy to RM334.5 million (2019 – RM347.7 million) impacted by the global COVID-19 pandemic across its group operations. Declines registered in the TPA and Shared Services segments. Solutions Services segment, however, registered a RM3.0m yoy increase in revenue. Geographical wise, all the three key geographical markets of Malaysia, Thailand and Philippines’ 2020 revenue was lower year on year. 2.2 Net Profit Pre-tax profits declined -51.1% to RM21.3 million as compared to RM43.6 million a year ago. Pre-tax margins declined to 6.4% (FY2019 – 12.5%). Net profit after tax and minority interest declined in tandem by -52.8% yoy to RM13.5 million (2019 – RM28.7 million), with the majority of the declines coming from TPA and Shared Services. 2.3 Taxation The effective tax rate for 2020 was 57.2% (2019 – 29.1%) which was higher than the statutory tax rate mainly due to two large non cash expenses which are non-tax allowable. Post-tax and minority interest profit margins were lower at 4.1% in 2020 compared to 8.3% in 2019.