VISION AND MISSION CORPORATE PROFILE CORPORATE STRUCTURE CORPORATE INFORMATION FINANCIAL HIGHLIGHTS KEY PERFORMANCE INDICATORS MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY STATEMENT DIRECTORS’ PROFILE KEY SENIOR MANAGEMENTS’ PROFILE CORPORATE DIRECTORY CORPORATE GOVERNANCE OVERVIEW STATEMENT AUDIT AND RISK COMMITTEE REPORT STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL OTHER STATEMENTS AND DISCLOSURES 02 03 04 06 07 08 09 16 32 40 44 45 55 60 68 FINANCIAL STATEMENTS DIRECTORS’ REPORT STATEMENT BY DIRECTORS STATUTORY DECLARATION INDEPENDENT AUDITORS’ REPORT STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME STATEMENTS OF FINANCIAL POSITION STATEMENTS OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS LIST OF PROPERTIES ANALYSIS OF SHAREHOLDINGS NOTICE OF THIRTIETH ANNUAL GENERAL MEETING STATEMENT TO SHAREHOLDERS PROXY FORM 69 75 75 76 81 83 85 87 90 162 163 166 171 TABLE OF C NTENTS
OUR CORE VALUES CUSTOMER IS THE BOSS We listen, anticipate and deliver what our customers need TEAMWORK Together we can achieve more NO DISHONESTY Zero-tolerance for dishonesty in any form ADDICTED TO INNOVATION Our relentless pursuit of innovation is what drives us forward “BOLEH” ATTITUDE We are passionate and driven to make a difference. The ASEAN Payment People Payments Simplified OUR MISSION To be clearly recognised as the leading ASEAN payment services provider. Delivering powerful solutions to deeply rooted local relationships. We help merchants, financial institutions and telcos make money by simplifying their distribution, payment and collections needs. We provide ASEAN merchants with comprehensive solutions. AWARDS & RECOGNITION 2 23 The Edge Malaysia ESG Awards 2023 - Most Improved Performance Over 3 Years (Silver) Achieved ISO 27001 certification for secure management of merchants’ and customers' data in loan application process OUR VISION 02 GHL SYSTEMS BERHAD 199401007361 (293040-D)
CORPORATE PROFILE As ASEAN’s leading payment solutions provider, GHL’s reach spans across six countries; Malaysia, Philippines, Thailand, Indonesia, Singapore and Australia – stretching over a vast footprint of 480,000 payment touchpoints. At the forefront of the region’s cutting edge fintech, GHL empowers the payment revolution that is shaping today’s spending trend, offering extensive payment options, both offline and online to fulfil merchants and consumers’ needs. Our core activities are focused on these business pillars: Transaction Payment Acquisition Solution Services Shared Services • Transaction Payment Acquisition As one of the largest ASEAN Transaction Payment Acquirers, we acquire merchants and enable them for debit and credit card payments as well as digital wallets, allowing consumers to pay using these alternatives instead of cash. Riding the ASEAN cashless tide, alongside significant Asian digital payment players, GHL’s Mobile Payments enable major local and cross border e-wallets’ acceptance across our footprint of more than 480,000 payment touchpoints. Our internet payment gateway, eGHL, offers a secure Online Payment gateway that covers more than 100 scheme and non-scheme payment channels, with a single integration, throughout the ASEAN region. Our subsidiary e-pay, powering the Prepaid Topups & Bill Collection services, leads Malaysia’s mobile reload & bill payment collection network, processing over 19 million transactions, amounting to over RM500 million in value, nationwide per month. In addition, we provide a range of Value-Added Services to ensure financial inclusion. This includes short-term SME loans, with flexible payment options, allowing businesses to access the capital they need to expand and thrive. These services complement our core offerings, contributing to the growth of our businesses across the ASEAN region. • Shared Services GHL provides Payment Acceptance Devices such as Android All-in-One Point of Sales (POS) terminals and other devices, enabling them with complex payment applications, which are able to perform numerous electronic payment transaction types. • Solution Services GHL offers Payment Solutions that includes customised online payment platforms, payment collection solutions, integrated payment solutions, loyalty points capture/redemption solutions, loan repayment solutions, and other bank or merchant specific requirements designed to cater to our client’s specific business needs. We also offer both software and hardware solutions, supporting our client’s development of secure payment networks. 03 ANNUAL REPORT 2023
GHL Payments Sdn. Bhd. GHL Loyalty Sdn. Bhd. 99.99% 99.99% 97.74% GHL Systems Philippines, Inc. GHL (Thailand) Co., Ltd. GHL Electronic Payments Inc. GHL ePayments Pte. Ltd. GHL SYSTEMS BERHAD 199401007361 (293040-D) INCORPORATED IN MALAYSIA GHL CardPay Sdn. Bhd. Conscious Object Development Co., Ltd. GHL Transact Sdn. Bhd. GHL ePayments Co., Ltd. 100% 100% 100% 100% GHL Systems Australia Pty. Ltd. 100% 100% 99.99% GHL Myanmar Limited GHL Philippines Financing Services Inc. GHL Asia Paci c Limited GHL ePayments Sdn. Bhd. GHL Global Sdn. Bhd. GHL International Sdn. Bhd. 100% 100% 100% 100% 100% 99.99% 99.99% CORPORATE STRUCTURE 04 GHL SYSTEMS BERHAD 199401007361 (293040-D)
GHL Payment Services Sdn. Bhd. GHL BPO1 Sdn. Bhd. Mobiepay Sdn. Bhd. S Capital Sdn. Bhd. Sentripay Sdn. Bhd. Pay Here Sdn. Bhd. 40% GHL EFTPOS Sdn. Bhd. Paysys Technology Sdn. Bhd. Paysys Communications Sdn. Bhd. e-pay (M) Sdn. Bhd. e-pay Pakistan (Private) Limited PT e-pay Indonesia Electronic Payment Network (Thailand) Co. Limited PT Pembayaran Elektronik Indonesia Digital Salute Sdn. Bhd. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 60% 78.80% 16.00% 50% Paysys (M) Sdn. Bhd. CORPORATE STRUCTURE CONT’D 05 ANNUAL REPORT 2023
BOARD OF DIRECTORS CORPORATE INFORMATION MOHAMED RASHDI BIN MOHAMED GHAZALLI (Independent Non-Executive Chairman) LOH WEE HIAN (Executive Vice Chairman) DATO’ CHAN CHOY LIN (Independent Non-Executive Director) MATTEO STEFANEL (Non-Independent Non-Executive Director) RICHARD HENRY PHILLIPS (Non-Independent Non-Executive Director) SEAN S HESH (Executive Director and Group Chief Executive Officer) TAN LYE SIM (Independent Non-Executive Director) KUNG LEE SEE (Independent Non-Executive Director) COMPANY SECRETARIES Kuan Hui Fang (MIA 16876) (SSM PC No. 202008001235) Te Hock Wee (MAICSA 7054787) (SSM PC No. 202008002124) AUDIT AND RISK COMMITTEE Dato’ Chan Choy Lin (Chairman) Matteo Stefanel Tan Lye Sim Kung Lee See NOMINATION AND REMUNERATION COMMITTEE Dato’ Chan Choy Lin (Chairman) Matteo Stefanel Tan Lye Sim Kung Lee See AUDITORS BDO PLT (LLP0018825-LCA & AF0206) Level 8 BDO @ Menara CenTARa 360 Jalan Tuanku Abdul Rahman 50100 Kuala Lumpur PRINCIPAL BANKERS Ambank (M) Berhad Alliance Bank Berhad CIMB Bank Berhad Malayan Banking Berhad Standard Chartered Bank Malaysia Berhad Public Bank Berhad HSBC Bank Malaysia Berhad SHARE REGISTRAR Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur Tel : +6(03) 2783 9299 Fax : +6(03) 2783 9222 Email: is.enquiry@my.tricorglobal.com REGISTERED OFFICE Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur Tel : +6(03) 2783 9191 Fax : +6(03) 2783 9111 Email: info@my.tricorglobal.com STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Bhd (“BMSB”) BMSB Code : 0021 Reuters Code : GHLS.KL Bloomberg Code : GHLS MK WEBSITE www.ghl.com 06 GHL SYSTEMS BERHAD 199401007361 (293040-D)
2019 2020 2021 2022 2023 347,707* 334,514 360,166 460,366 410,423 2019 2020 2021 2022 2023 71,920 50,827 69,239 66,321 64,548 2019 2020 2021 2022 2023 0.59 0.42 0.45 0.48 0.45 2019 2020 2021 2022 2023 442,450 481,758 511,639 544,786 508,872 2019 2020 2021 2022 2023 28,724 13,549 28,305 28,808 28,158 REVENUE RM’000 SHAREHOLDERS’ EQUITY RM’000 EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTISATION (EBITDA) RM’000 PROFIT ATTRIBUTABLE TO EQUITY HOLDERS RM’000 NET ASSETS PER SHARE RM FINANCIAL HIGHLIGHTS 07 ANNUAL REPORT 2023
KEY PERFORMANCE INDICATORS FINANCIAL HIGHLIGHTS Year Financial Year Ended 31 December 2019 2020 2021 2022 2023 Revenue RM’000 347,707* 334,514 360,166 410,423 460,366 Gross Profit RM’000 150,475 144,326 140,109 142,745 152,234 Gross Profit Margin % 43.28 43.14 38.90 34.78 33.07 Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA) RM’000 71,920 50,827 69,239 66,321 64,548 Profit Attributable To Equity Holders RM’000 28,724 13,549 28,158 28,305 28,808 Shareholders’ Equity RM’000 442,450 481,758 508,872 511,639 544,786 Net Operating Cash Flow RM’000 91,506 44,350 88,615 (18,329) 44,086 Net Assets Per Share RM 0.59 0.42 0.45 0.45 0.48 Basic Earnings Per Share sen 2.56** 1.69 2.47 2.48 2.52 Total Borrowings RM’000 26,204 22,175 52,390 16,781 38,906 Net Gearing Ratio Net Cash Net Cash Net Cash Net Cash Net Cash Notes: * Revenue for FY 2019 is inclusive of revenue from discontinued operations. ** Basic earnings per share restated in accordance with MFRS 133 Earnings per share arising from bonus issue. 08 GHL SYSTEMS BERHAD 199401007361 (293040-D)
MANAGEMENT DISCUSSION AND ANALYSIS 1.0 OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS GHL Systems Berhad and its subsidiaries (“the Group” or “GHL”) is a leading ASEAN payment services provider with operations in Malaysia, Philippines, Thailand, Indonesia, Singapore and Australia. The Group provides endto-end payment services encompassing in-store, online, and QR payments acceptance, and is one of the region’s top merchant acquirers. GHL manages and oversees more than 480,000 payment touchpoints across its ASEAN footprint. These touchpoints facilitate a wide range of services including credit/debit cards, e-wallets, contactless payment, loyalty, prepaid credit top-up, and bill collection payment services. The Group has also recently introduced SME lending as another value-added service to its merchant base. The Group has three (3) core business pillars: (a) Transaction Payment Acquisition (“TPA”) mainly comprises revenue derived from two distinct sub segments: (i) GHL’s merchant acquiring and electronic payment services (“Electronic Payment Services”); and (ii) e-pay services which include Telco prepaid and other credit top-up facilities and bill collection services for consumers (“Reload and Collection Services”). (b) Shared Services comprises revenue derived from the sale, rental, and maintenance of Electronic Data Capture (“EDC”) terminals and other payment acceptance devices. (c) 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. 2.0 DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS AND CONDITIONS 2.1 Revenue In 2023, the Group recorded revenue of RM460.4 million, a 12.2% YoY increase, compared to RM410.4 million in 2022. The primary driver of this growth was the TPA segment, which exhibited strong performance across the key markets of Malaysia, the Philippines, and Thailand. In the Shared Services segment, there was a marginal 2.2% YoY increase, whereas the Solution Services segment saw 26.4% YoY growth. 2.2 Net Profit In 2023, the Group’s gross profit margin decreased to 33.1% from the previous year’s 34.8%, mainly due to shifts in business pillars, payment types, and merchant mix. Despite top-line revenue growth, net profit remained flat at RM28.8 million, up slightly from the 2022’s figure of RM28.3 million. This was due to increased Operating Expense (“OPEX”) related to the Direct Acquiring business, IT security, and cloud infrastructure. Furthermore, a provision of RM4.8 million for the Expected Credit Loss (“ECL”) linked to the newly launched lending business impacted the net profit. 2.3 Taxation The effective tax rate for 2023 was at 28.2% (2022: 30.2%), which is higher than the statutory tax rate mainly due to non-tax allowable expenses. 2.4 Profit Attributable to Equity Holders The profit attributable to equity holders recorded a marginal improvement to RM28.8 million, which was slightly higher than 2022’s RM28.3 million. Fully diluted earnings per ordinary share for the year amounted to 2.52 sen (2022: 2.48 sen). The year’s earnings performance reflects benefits from the Group’s continued investment into growing its merchant footprint as well as its investments into the Group’s IT infrastructure. 09 ANNUAL REPORT 2023
MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 2.0 DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS AND CONDITIONS (Cont’d) 2.5 Annuity versus Non-Annuity Revenue Annuity vs Non-Annuity Revenue (RM million) 410.4 2022 2023 339.6 Annuity Non-Annuity 379.1 70.8 81.3 460.4 82.7% 82.3% In 2023, the Group maintained a strong annuity-based revenue component of 82.3% of the total revenue (compared to 82.7% in 2022). The absolute revenue of both annuity and non-annuity grew in 2023, reflecting the growth of all its business pillars. The Group maintains a strategic focus on the growth of TPA businesses, while remaining dedicated to supporting its bank customers with their hardware and software requirements. With the ongoing economic recovery across all three geographical markets, the Group anticipates that its annuity revenue, resulting from its TPA segment, will continue to remain strong and grow in the upcoming years. 2.6 Liquidity and Capital Resources As at 31 December 2023, the Group’s net cash position amounted to RM127.4 million (31 December 2022: RM122.2 million). The Group also had RM6.3 million of Other Investments (31 December 2022: RM14.9 million) comprised of fixed income fund held by a financial institution. Key items that impacted the Group’s cash flow in 2023 were as follows: (a) Net cash generated from operating activities was RM59.5 million (2022: Net cash used in operating activities was RM10.5 million), mainly due to improvements in working capital. (b) An amount of RM53.5 million (2022: RM42.3 million) was spent on capital expenditure mostly related to the Group’s purchases of EDC terminals. (c) The Group repaid RM94.4 million of its bank borrowings and lease payables in 2023 (2022: RM57.7 million). The Group also drew-down fresh bank loans of RM114.6 million (2022: RM19.0 million) for working capital purposes. 2.7 Trends and Events Consumer cashless spending continued to rise in 2023, resulting in a 12.2% revenue growth. This healthy and sustainable growth was driven by Transaction Payment Value uptrend across all three (3) geographical markets and growth across all three (3) business pillars. Furthermore, this growth was equally present across both the recurring and non-recurring lines of business. The Group’s Transaction Payment Value grew across both its offline as well as online merchant base, in-line with regional growth in cashless spending. The expected boost from the return of tourism in our markets did not fully materialise in 2023, however efforts by the governments (e.g. visa-free travel) resulted in a pickup of tourism in the latter part of 2023, which will likely continue into 2024 and beyond. 10 GHL SYSTEMS BERHAD 199401007361 (293040-D)
MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 3.0 PERFORMANCE BY BUSINESS SEGMENT AND GEOGRAPHY 3.1 Performance by Business Segment As indicated earlier, the core business segments of the Group comprise the following: (a) Transaction Payment Acquisition (“TPA”); (b) Shared Services; and (c) Solution Services. An analysis of the performance of all three (3) business segments are as follows: (a) Transaction Payment Acquisition (“TPA”) segment The TPA business mainly comprises of two (2) distinct sub-segments, each in a different stage of development. They are: (i) GHL’s direct contractual relationships with merchants to provide in-store and online card payment and e-wallet payment acceptance (“Electronic Payment Services”); and (ii) e-pay’s direct contractual relationships with merchants to provide Telco prepaid reloads and other top-up facilities as well as bill collection services (“Reload and Collection Services”). Electronic Payment Services GHL Electronic Payment Services business leverages on our direct arrangement with international schemes, TPA arrangements with leading domestic banks in our respective markets, as well as agreements with cross border e-wallets and other local e-wallet providers in each of our respective markets. Revenue is generated through Merchant Discount Rate (“MDR”) and fees collected through the following activities: (a) Direct contracts with merchants. (b) Sharing arrangements under contracts with merchants and banks in Malaysia, Thailand, and the Philippines. (c) Domestic debit card processing. (d) E-commerce (“eGHL”) processing. (e) Cross-border and local e-wallet processing. 2023 Transaction Payment Value grew by 10.9% to RM22.9 billion resulting in a 29.6% growth in revenue from Electronic Payment Services. The blended gross revenue margin in 2023 was 0.73% compared to 0.63% a year ago. Gross profit was down 1.5%, however, to RM39.1 million due to changes in the merchant mix, payment type, and geographical mix in 2023. Electronic Payments Services (All stated in RM’millions unless stated otherwise) 2022 2023 Change Transaction Payment Value 20,677.4 22,922.9 10.9% Gross Revenue 129.5 167.8 29.6% Gross Revenue / Transaction Payment Value (Note 1) 0.63% 0.73% +0.10 pp Gross Profit (Note 2) 39.6 39.1 -1.5% Gross Profit / Transaction Payment Value (Note 1) 0.19% 0.17% -0.02 pp Merchant Footprint - TPA Only (Thousands) 121.9 138.1 13.3% Note 1 - Gross Revenue or Gross Profit respectively divided by the Transaction Payment Value expressed as a %. Note 2 - The gross profit of 2022 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 upgrades, as well as expenses relating to the Direct Acquiring business that were previously included in the OPEX. This reclassification from OPEX to COS (Cost of Sales) is intended to more accurately reflect the gross margins of this TPA segment. 11 ANNUAL REPORT 2023
MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 3.0 PERFORMANCE BY BUSINESS SEGMENT AND GEOGRAPHY (Cont’d) 3.1 Performance by Business Segment (Cont’d) (a) Transaction Payment Acquisition (“TPA”) segment (Cont’d) Reload and Collection Services e-pay is the leading provider of Reload and Collection Services in Malaysia, boasting an extensive network of approximately 61,000 acceptance points nationwide. These points encompass all major petrol chains, prominent convenience store chains, and general retailers. The e-pay brand is widely recognised among consumers across Malaysia. With over two decades of experience, e-pay unequivocally holds the position of market leader in Malaysia within the reload and collection services industry segment. e-pay’s Transaction Payment Value grew 7.3% in 2023 to RM5.93 billion, generating a revenue of RM139.6 million. The gross revenue margin declined by 0.18 pp to 2.35% in the year due to changes in the product mix as well as the merchant mix. e-pay (Reload and Collection services) (All stated in RM’million unless stated otherwise) 2022 2023 Change Transaction Payment Value 5,523.6 5,928.2 7.3% Gross Revenue 139.5 139.6 0.1% Gross Revenue / Transaction Payment Value (Note 1) 2.53% 2.35% -0.18 pp Gross Profit 44.7 44.3 -0.9% Gross Profit / Transaction Payment Value (Note 1) 0.81% 0.75% -0.06 pp Merchant Footprint - e-pay Only (Thousands) 54.9 61.3 11.8% Note 1 - Gross Revenue or Gross Profit respectively divided by the Transaction Payment Value expressed as a % (b) Shared Services Revenue for the Shared Services segment grew by 2.2% YoY to RM133.4 million (2022: RM130.5 million) attributed to higher EDC sales in Malaysia, which was offset by lower hardware sales in Thailand and a decline in rental revenue collected in Malaysia and the Philippines. (c) Solution Services Revenue for the Solution Services segment was up 26.4% YoY to RM13.9 million (2022: RM11.0 million) attributed to higher software sales in the Philippines and Thailand, along with higher maintenance services revenue in Malaysia. 3.2 Performance by Geographical Location In 2023, the Group’s revenue grew 12.2% YoY to RM460.4 million compared to RM410.4 million in 2022. This growth was primarily attributed to the growth in the TPA segment, which performed exceptionally well across the key markets of Malaysia, the Philippines, and Thailand. The Shared Services segment experienced a 2.2% increase, propelled by higher EDC sales in Malaysia. The Solution Services segment recorded a notable growth of 26.4%, attributed to increased maintenance services revenue in Malaysia and higher software sales in the Philippines and Thailand markets. Operations in Malaysia contributed RM355.6 million in revenue, which accounted for 77.2% of the Group’s total revenue. This represented a YoY growth of 9.4%, driven by the TPA segment’s strong performance, fuelled by increased transaction volume and value. In 2023, Shared Services experienced a 7.8% YoY growth due to higher hardware sales. Similarly, the Solution Services segment exhibited YoY growth, primarily attributed to increased maintenance fees collected as compared to 2022. 12 GHL SYSTEMS BERHAD 199401007361 (293040-D)
MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 3.0 PERFORMANCE BY BUSINESS SEGMENT AND GEOGRAPHY (Cont’d) 3.2 Performance by Geographical Location (Cont’d) The Philippines experienced a YoY revenue growth of 18.2% in revenue, amounting to RM66.1 million (2022: RM55.9 million). This growth was powered by improved TPA performance but tempered by lower rental revenue from Shared Services. The Solution Services segment contributed to the overall growth through increased software sales. In 2023, Thailand showed a significant growth in revenue, recording a YoY increase of 30.0% to RM36.8 million (2022: RM28.3 million). This improvement was attributed to enhanced performance in its TPA and Solution Services segments. The TPA segment in Thailand improved YoY, benefiting from higher local consumption and the return of tourism. Thailand experienced a decline in the Shared Services segment due to one-time hardware sales in 2022, which was not replicated in 2023. Other geographies contributed revenue of RM1.9 million (2022: RM1.3 million) to the Group’s total revenue for the year. As at end of December 2023, the Group’s payment touchpoints across the region was at approximately 480,000 points, a 14.5% growth YoY, while TPA touchpoints grew 12.8% to approximately 199,000 points. This large merchant touchpoint base has enabled the Group to process RM28.9 billion in payment transactions (10.1% YoY growth). Revenue by Country (RM million) 324.9 355.6 410.4 460.4 55.9 66.1 28.3 36.8 1.3 1.9 Malaysia Philippines 0.0 100.0 200.0 300.0 400.0 500.0 Thailand Others Group 2022 2023 4.0 KNOWN RISKS In the ordinary course of its operations, the Group is exposed to the following risks: 4.1 Merchant Performance Risk The Group currently contracts directly with merchants across two business models: (a) Direct Acquirer with Payment Schemes; and (b) Payment facilitator with financial institutions. In the event a merchant defaults in his obligations to the consumer for any particular sale, the consumer has the right to “chargeback” the transaction resulting in the sale amount to be refunded to consumer. The acquirer/payment facilitator would then have the right to recover the amount of the transaction from the merchant. The Group could potentially incur a loss if the merchant is no longer in business or is unable to reimburse the Group for the chargeback. The Group has, over the past years, invested significantly to develop and put in place, risk management policies, systems, practices, along with experienced risk managers to monitor merchant performance risk. The Group also implemented specific rules and other forms of controls in order to monitor and manage performance risks. These strict controls and Standard Operating Procedures (“SOP”) have effectively mitigated merchant performance risk, and as of the date of this report, there was negligible exposure arising from this risk. Industry fraud trends are regularly monitored for early detection and effective management of risk exposure. 13 ANNUAL REPORT 2023
MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 4.0 KNOWN RISKS (Cont’d) 4.2 Operational Risk Operational risk management, which forms part of the Group’s Enterprise Risk Management Framework, is a continual process applied by the Group in a half-yearly cycle that includes risk assessment, risk decision making, and implementation of risk controls, resulting in acceptance, mitigation, or avoidance of risks. In 2023, the Group reported 562 risks of which 516 (92%) were classified as minor and/or moderate risk. The remaining 8% were addressed with adequate and appropriate mitigation strategies to ensure that the residual risk is minimised. The Group places great importance on ensuring the continuity of all critical business functions and essential services. We have put in place policies, processes and systems under the Business Continuity Plan (“BCP”) and Disaster Recovery Plan (“DRP”) to respond to a range of unexpected disruptions to ensure continuous and uninterrupted conduct of business and provision of services to our customers. The Group has established a dedicated back-up site, with all requisite infrastructure and services to support our BCP operations. Annual BCP testing was conducted and tested for all Critical Business Functions (“CBF”) as part of operational resiliency in the event of a BCP activation. The Group successfully conducted BCP testing in October 2023 in accordance with Bank Negara Malaysia’s (“BNM”) Business Continuity Management guidelines and internal procedures. This BCP exercise witnessed the mobilisation of 318 HQ staff to ensure comprehensive testing and an accurate reflection of actual operational circumstances, which in turn, facilitated more effective formulation and implementation of remedial actions. 4.3 Cyber Risk As a leading payment solutions provider, the Group is committed to building and strengthening our team through improvement in our digital skills and access to the latest tools and technologies. The Group has placed an intense focus on continually strengthening its cybersecurity stance to safeguard the security and integrity of our systems against cybersecurity threats. The Group has implemented adequate measures to address these ever-evolving threats, in order to ensure protection of its stakeholder data as well as the integrity and availability of its services. The Group continues to enhance its information technology and resiliency capabilities by putting in place further cybersecurity controls. 4.4 Liquidity Risk As indicated in Section 2.6, the Group is in a net cash surplus position and therefore has no net gearing. Short-term purchases for Telco prepaid top-ups are funded with internally generated cash or Banker’s Acceptances. EDC terminal purchases are funded with bank term loans. The Group plans to fund its expansion in the Direct Acquiring business by additional bank term loans and internally generated cash where appropriate. 4.5 Foreign Currency Risk EDC terminals are purchased in USD and therefore can expose the Group to foreign currency risk, as the Group’s functional currency is Ringgit Malaysia. The Group minimises its exposure to foreign currency risk by purchasing USD spot at the time of recording the vendor liability. The Group does not hedge against any foreign currency fluctuations in the net asset value of its overseas subsidiaries as these investments are of a long-term nature. This would, however, be re-visited should a significant event occur that would cause a permanent diminution in the foreign currency denomination of its overseas subsidiaries. 4.6 Credit Risk Credit risk is the potential loss arising from customers’ failing to meet their financial contractual obligations. The Group’s credit risk strategy is to strike a balance between credit quality, earnings and sustainable growth. Periodic reviews of underwriting, credit and recovery policies are undertaken to ensure an acceptable credit risk exposures. 14 GHL SYSTEMS BERHAD 199401007361 (293040-D)
MANAGEMENT DISCUSSION AND ANALYSIS CONT’D 4.0 KNOWN RISKS (Cont’d) 4.6 Credit Risk (Cont’d) The current economic and geopolitical environment continues to challenge various industry sectors. To ensure a sustainable growth, the Group has taken various steps to enhance its credit risk management function. The Group regularly reviews its credit underwriting policies to ensure that the Group’s assets are safeguarded. Periodic Credit and Recovery reports that contain information on asset quality and risk factors are prepared and regularly presented to the Senior Management and the Board. This information is used to identify adverse credit risk trends, formulate corrective actions and fine-tune business strategies accordingly. 5.0 FUTURE PROSPECTS The Group believes, despite the global macroeconomic uncertainties, the 2023 upward trend of cashless spending will continue into 2024. The Group’s focus on high growth lines of business, such as omni-channel direct merchant acquiring is expected to contribute to the growth in revenue in 2024. The Shared and Solution Services businesses will also continue to enjoy a healthy pipeline of deals which will likely result in further growth. Notwithstanding the continued ASEAN recovery in travel, consumption and commercial activities, concerns remain around inflation and uncertain movement of interest rates. Geopolitical tensions and the ongoing conflict in Europe and the Middle East may impact global oil prices thus affecting the growth outlook of economies in our region. Despite these global headwinds, the Group’s diverse range of business pillars, merchant mix and geographical coverage continue to contribute to revenue growth driven by the growing adoption of cashless payments among ASEAN consumers for both their online and in-store transactions. Additionally, ASEAN governments’ push for digitisation for cross-border payments will be a significant catalyst for the Group’s future growth. The Group remains positive regarding the long-term potential of the ASEAN payments industry. We believe the trends of switching to e-payments and cashless channels will continue, hence providing a long runway for profitable growth for the Group in 2024 and beyond. 6.0 DIVIDENDS The Board of Directors has declared final single-tier dividend of 2.0 sen per ordinary share, amounting to RM22.8 million in respect of the financial year ended 31 December 2023, which will be payable on 10 May 2024, based on the latest number of ordinary shares. 15 ANNUAL REPORT 2023
SUSTAINABILITY STATEMENT 16 GHL SYSTEMS BERHAD 199401007361 (293040-D) ABOUT THE STATEMENT We proudly present GHL System Berhad’s (“GHL” or ‘the Group”) seventh Sustainability Statement (“Statement”) as part of our commitment to transparent disclosure of the Group’s sustainability performance. This statement summarises key highlights of our Environmental, Social & Governance (“ESG”) initiatives and is to be read jointly with our third standalone Sustainability Report. The Report provides a comprehensive disclosure from 1 January 2023 to 31 December 2023 (“FY2023”) and is available on our corporate website https://www.ghl.com/. REPORTING SCOPE AND BOUNDARIES The scope of this Statement and Sustainability Report covers disclosures and statements from our ASEAN operations, namely the Group Headquarters in Kuala Lumpur, Malaysia and the respective subsidiaries in other countries as follows: t ()- Malaysia t ()- 1IJMJQQJOFT t ()- 5IBJMBOE t ()- *OEPOFTJB t ()- "VTUSBMJB This Report also includes all the subsidiaries and related corporation of each of the respective countries as stated above, if any (please refer to Annual Report 2023 for the full list of our subsidiaries and related corporations). This Report also contains comparative quantitative information, wherever applicable and/or available. Relevant key performance indicators (“KPI”) have been established, tracked and disclosed to the best of our ability within this Report. The Group ensures that the production of this Report conforms to the highest reporting standards and industry’s best practices. Our Sustainability Report has been prepared with reference to the following: Global goals t 6OJUFE /BUJPO 4VTUBJOBCMF %FWFMPQNFOU (PBMT i6/ 4%(Tw t *OUFSHPWFSONFOUBM 1BOFM PO $MJNBUF $IBOHF i*1$$w Reporting Frameworks t #VSTB .BMBZTJB 4FDVSJUJFT #FSIBE T i#VSTB 4FDVSJUJFTw .BJO .BSLFU -JTUJOH 3FRVJSFNFOUT t #VSTB 4FDVSJUJFT 4VTUBJOBCJMJUZ 3FQPSUJOH (VJEF SE &EJUJPO t .BMBZTJBO $PEF PO $PSQPSBUF (PWFSOBODF i.$$(w PG 4FDVSJUJFT $PNNJTTJPO .BMBZTJB t (MPCBM 3FQPSUJOH *OJUJBUJWF i(3*w 4UBOEBSET t 5BTL 'PSDF PO $MJNBUF SFMBUFE 'JOBODJBM %JTDMPTVSF i5$'%w Rating Tools t '54& (PPE #VSTB .BMBZTJB ' (#. *OEFY t '54& (PPE #VSTB .BMBZTJB 4IBSJBI ' (#.4 *OEFY SUSTAINABILITY GOVERNANCE STRUCTURE The Group is committed to safeguarding shareholders’ interests, enhancing corporate values, and practicing corporate responsibility through our high-standards of corporate governance. The Group has established a sound corporate governance structure, under which the Board is responsible for the leadership and supervision of the Company and oversees the businesses, strategic decisions, and performance of the Group. The Management has established the Sustainability Committee (“SC”) to further strengthen the management of Sustainability matters and oversee the various aspects of the Company’s Sustainability affairs, including integrating and embedding sustainability agenda across the Group. The Board is assisted by the Group CEO who reviews and recommends to the Board all sustainability-related information that were collated and documented by the SC.
SUSTAINABILITY STATEMENT CONT’D 17 ANNUAL REPORT 2023 SUSTAINABILITY GOVERNANCE STRUCTURE (Cont’d) The SC is spearheaded by the Group Head of Legal, Compliance & Sustainability alongside the Group’s Heads of Departments (“HOD”) who are responsible for managing the Group’s sustainability initiatives. The SC is further assisted by the Sustainability Working Groups which implements the initiatives at operational level. Our sustainability leadership consists of four tiers, each with its own role and responsibility as illustrated in the diagram below. Board of Directors Holds ultimate accountability for GHL’s Sustainability Strategy Group CEO Responsible for overall implementation and management of GHL’s sustainability performance Sustainability Committee Led by Group Head of Legal Compliance & Sustainability Proposes ESG initiatives and provides oversight over the Company’s sustainability practices Sustainability Working Group Responsible for Data collection and implementation of ESG initiatives at operational level OUR APPROACH TO SUSTAINABILITY GHL is exploring and implementing sustainable solutions to address local and global challenges across its operating businesses. GHL’s Sustainability framework unifies these initiatives under the shared objective of strengthening our business resilience and enhancing our ability to adapt to climate impacts. At GHL, we are determined to raise awareness and educate not only our employees but also our clients, partners and stakeholders across the ASEAN region. Our effort includes incorporating and emphasising our environmental, social and governance (ESG) messaging in both our internal and external communication channels. GHL’s long-term targets include achieving lowcarbon operations, and committing to Net-Zero Emissions by 2050, in line with the 2015 Paris Agreement. GHL is committed to contributing towards the transition to a low carbon economy. We have initiated the process of integrating the TCFD Recommendations within our sustainability statement this year, ahead of the regulatory requirements of Bursa Securities’ Main Market Listing Requirements. In positioning GHL for longterm success and climate resilience in a rapidly changing business environment, we strive to manage the climate-related risks and capture the opportunities which may impact our business, strategy, and financial planning.
SUSTAINABILITY STATEMENT CONT’D 18 GHL SYSTEMS BERHAD 199401007361 (293040-D) OUR APPROACH TO SUSTAINABILITY (Cont’d) The Group’s sustainability values and framework are the key elements of our business practice in working towards becoming a more sustainable and socially responsible company that embraces sustainability values across all our business practices. The Group’s sustainability framework demonstrates the interconnectedness of our four sustainability pillars, supported by our reporting practices, initiatives, targets, and a culture of shared accountability to better reflect the company’s key focus areas and priorities. Our sustainability framework consists of four core sustainability pillars: t 1JMMBS $PSQPSBUF BOE #VTJOFTT *OUFHSJUZ t 1JMMBS $VTUPNFS (SPXUI t 1JMMBS 4VTUBJOBCMF 8PSLGPSDF BOE $PNNVOJUZ t 1JMMBS &OWJSPONFOUBM &YDFMMFODF We are committed to enhancing our business model in accordance with our Sustainability Framework, with the aim to create, deliver, and capture value for all our stakeholders without depleting the natural, economic, and social capital that we rely on. This is in line with our corporate commitments that address climate change, social injustice, and corporate governance; our membership in the CEO Action Network (“CAN”); and in accordance with the United Nations Sustainable Development Goals (“UN SDGs”). OUR SUSTAINABILITY JOURNEY GHL’s sustainability journey is a continued effort which sets out our progress towards our stated sustainability goals. Our journey consists of projects, activities, and initiatives from the beginning of our sustainability journey in 2021 and spanning through the end of 2023. The below illustration, captures our journey to realize our sustainability strategy of achieving low-carbon operations, and commitment to Net Zero Emissions by 2050, in line with the 2015 Paris Agreement – leading to positive impacts for both our organisation and the planet. SUSTAINABILITY JOURNEY 2021 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Our Continuous Initiatives 2023 z Creation of Sustainability Framework z Adoption of UN SDGs four goals – SDG : 8,9,13,16 z Establishment of KPI for measuring and tracking ESG z Instituted Sustainability Governance Structure z Communication to stakeholder engagement z Mapping Materiality Assessment z Implementation of New Policies – Anti Money Laundering Policy, Anti-Bribery and Corruption Policy, Whistleblowing Policy z Ensuring employee Diversity and Inclusivity z GHL Wellness Month z Partner Eco Ninja - 300 units tree planting z Installation of Solar Panel z Initiation to achieve 50% reduction in carbon emission by 2030 and net zero by 2050 z CAN – Co Lead for Work stream 2 z Workspace Flexibility – Work from home z CAN – Co Lead : Circular Economy z Complete 4 policies: Gender Diversity Policy, Labour & Human Rights Policy, Senior Management Remuneration Policy & Procedure, Climate Change Policy z CAN – Co Lead : Human Rights z Energy Consumption Tracker z Collaboration CAN: CSO – SDG z Partnership Activities : GHL CSR Box of Happiness z Listed in the FTSE4 Good Bursa Malaysia z Trueventus participation to share our insights. z Adoption of 17 SDGs z Published Sustainability Report 2022 z GHL’s ESG Supplier Assessment 2023 z 10 May 2023: CAN – Co Lead: Supply Chain z 17 May 2023: Collaboration CAN: BSR – Supply Chain z 22 June 2023: CAN – Lead: Cybersecurity z 22 July 2023: Biodiversity Impact Programme with Urban Hijau – Stage 1: Beekeeper Workshop z 20 September 2023: Partnering with CIMB – Cooler Earth Summit z Carbon Emissions Management - Measuring and Reporting of TCFD and Scope 1, 2 and 3 Emissions z Collaboration With CEO Action Network (“CAN”) z Photovoltaic Solar Panel z Partnering with EcoNinja on the Greening Malaysia Programme 2021-2025
SUSTAINABILITY STATEMENT CONT’D 19 ANNUAL REPORT 2023 OUR CONTRIBUTION TO THE UNITED NATIONS SUSTAINABILITY DEVELOPMENT GOALS (SDGs) The United Nations Sustainable Development Goals (“SDGs”) are a series of 17 ambitious and wide-reaching global targets set out by the United Nations (“UN”) in 2015 as a pathway for achieving global sustainability for all. The 17 different goal categories demonstrate a breadth of topics where sustainability can be applied. At GHL, we acknowledge that our business and operations have a role to play in ensuring these global goals are achieved. We have identified five SDG goals and targets as our main contribution across our value chain. OUR STAKEHOLDER MANAGEMENT We believe that clear and continuous communication with our stakeholders is crucial in building a robust and trusting partnership. We interact with our key stakeholders through various platforms to keep them abreast of their areas of concern and interest. Employees Local Community Shareholders Media Customers Suppliers Regulatory/ Government
SUSTAINABILITY STATEMENT CONT’D 20 GHL SYSTEMS BERHAD 199401007361 (293040-D) KEY PERFORMANCE HIGHLIGHTS The table below highlights the progress of GHL’s contribution to the 2050 Net Zero targets and our sustainability practices. The selected KPIs are aligned with our Four Core Sustainability Pillars and will be tracked on an annual basis. Our Four Core Pillars Our Targets Our Progress in FY2023 Corporate and Business Integrity 100% of our employees to complete annual training on our Anti-Bribery and Corruption Policy (“ABC”) Achieved Customer Growth To maintain a Net Promoter Score, with a target of above 50% by FY2025 Achieved Environmental Excellence To achieve 50% reduction in carbon emissions of our assets and operations by 2030 In-Progress z We have installed photovoltaic solar panels in our headquarters (HQ) office – to reduce reliance of grid electricity. z We are in the process to transition our operations on to the cloud, through partnership with Amazon Web Services (AWS). Sustainable Workforce and Community To conduct four Corporate Social Responsibility (“CSR”) programmes throughout our reporting period. Achieved GHL MATERIALITY ASSESSMENT The prioritisation of our 19 material sustainability matters is illustrated in the matrix below which outlines the ranking of each material matter based on its importance to GHL’s business operations and to the stakeholder groups. For FY2023, material topics under the Corporate and Business Integrity pillar ranked ‘Very High’, highlighting its significance to the Group and the stakeholders. Our reporting approach reflects improvements in management of our material sustainability matters by consolidating them under the four sustainability pillars. We aim to enhance our sustainability disclosures to be more transparent to our stakeholders.
SUSTAINABILITY STATEMENT CONT’D 21 ANNUAL REPORT 2023 GHL MATERIALITY ASSESSMENT (Cont’d) 11. Conducive Workplace 13. Talent Attraction and Retention 14. Employee Diversity and Inclusivity 16. Human Capital Development 17. Corporate Social Responsibility 18. Supply Chain Management 10. Climate Change 15. Waste Management 19. Water Stewardship 5. Customer Experience 7. Technology and Innovation 8. Product and Service Quality 12. Customer Empowerment Event 1. Customer Data Privacy 2. Cyber Security 3. Anti-Money Laundering Policy 4. Anti-Bribery and Corruption Policy 6. Whistleblowing Policy 9. Customer Due Diligence High Importance to GHL’s Business Operations Importance to GHL’s Stakeholders Very High Medium 1 2 4 3 5 7 6 9 8 10 11 14 13 12 15 16 17 18 19 Corporate and Business Integrity Customer Growth Environmental Excellence Sustainable Workforce and Community
SUSTAINABILITY STATEMENT CONT’D 22 GHL SYSTEMS BERHAD 199401007361 (293040-D) MAPPING OUR MATERIAL MATTERS We have categorised all material sustainability matters under the four sustainability pillars, and have mapped each one to the relevant stakeholder groups’ adopted SDGs as well as the management approach. UN SDGs Material Sustainability Matters Key Stakeholder Groups Key Highlights and Management Approach Corporate Business and Integrity Customer Data Privacy t $VTUPNFST 1. Periodic review of Privacy Statement with the Board’s oversight and ensuring the Statement is publicly available to stakeholders. Cyber Security t 3FHVMBUPST Government 1. Compliance with the Payment Card Industry Security Standards Council (“PCISSC”). 2. Dedicated IT professionals supported by robust company policies/procedures. 3. Established a comprehensive playbook to identify and handle suspected cyber security threats. Anti-Money Laundering Policy t 3FHVMBUPST Government t 4IBSFIPMEFST Investors 1. Reviewed and updated the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Policy in 2022. 2. Periodic review of Policy with audits conducted, which did not identify any risk areas or noncompliance. 3. Comprehensive employee training on customer due diligence and detection of suspicious transactions. Anti-Bribery and Corruption Policy t 3FHVMBUPST Government t &NQMPZFFT 1. Reviewed and updated the Anti-Bribery and Corruption (“ABC”) Policy in 2022 to ensure alignment with Malaysian Anti-Corruption Commission (“MACC”). 2. Annual training on ABC Policy, with additional MACC training for GHL Malaysia employees. 3. Group-wide on-boarding assessment, with zero operational areas identified as high risk and zero incidents of corruption recorded. Whistleblowing Policy t &NQMPZFFT 1. Reviewed and updated the Whistleblowing Policy in 2023, with translations available in the language of GHL’s respective countries of operation. 2. Received zero reports through the whistleblowing channel in FY2023, and disposed with accordingly. Customer Due Diligence t $VTUPNFST 1. Established a Know-Your-Customer customer due diligence (“CDD”) procedure for customer identification and background check. 2. Conducted a review of the CDD process which uncovered a potential risk area that was amended promptly.
SUSTAINABILITY STATEMENT CONT’D 23 ANNUAL REPORT 2023 MAPPING OUR MATERIAL MATTERS (Cont’d) UN SDGs Material Sustainability Matters Key Stakeholder Groups Key Highlights and Management Approach Customer Growth Customer Experience t $VTUPNFST 1. Upgraded the Merchant Portal services with dashboard enhancements to improve user experience. 2. Maintained the Net Promoter Score to gauge customer satisfaction. 3. Engagement of new customers through monthly Welcome Calls and provision of a Terminal User Guide. Technology and Innovation t $VTUPNFST 1. Launch of Digital Lending to enable small and medium enterprise customers to transition from traditional cash transactions. Product and Service Quality t $VTUPNFST 1. Regular review of merchant experience to inform GHL service quality monitoring. 2. Monthly Service-Level Agreements (“SLA”) Reports for banks to help communicate GHL’s progress against resolution of terminal fault calls. Customer Empowerment Event t $VTUPNFST t .FEJB 1. Key study case for the Chartered Financial Analyst (“CFA”) Research Institute to present an overview of Group’s operations, contribution and achievements in the cashless ecosystem. 2. Executive Director and Group Chief Executive Officer, Sean S Hesh, joined an esteemed panel of corporate leaders at HSBC Malaysia’s panel discussion themed ‘Accelerating Sustainability through the Digital Economy – Shaping A LongTerm Future’, sharing GHL’s commitment to sustainability and the importance of value-added services for SMEs. 3. CEO Malaysia, Kevin Lee’s was a panelist at the Verifone – 2023 APAC Partners Conference in Vietnam, sharing his insights on the emerging trends shaping the payment landscape across the Asia-Pacific region. Sustainable Workforce and Community Employee Diversity and Inclusivity t &NQMPZFFT 1. Diversity and inclusion training program embedded into onboarding program for new hires. 2. GHL came together for a fundraiser event to provide Muhang, GHL Malaysia’s front office assistant, with a new electric wheelchair. 3. GHL Malaysia organised a 2023 Blind Unity Race, in collaboration with the National Council For The Blind Malaysia, with participants from GHL Malaysia, e-pay Malaysia, and Paysys, alongside our CEOs from Malaysia, Thailand nad the Philippines for an impactful day. 4. Zero incidents of discrimination recorded at GHL.
SUSTAINABILITY STATEMENT CONT’D 24 GHL SYSTEMS BERHAD 199401007361 (293040-D) MAPPING OUR MATERIAL MATTERS (Cont’d) UN SDGs Material Sustainability Matters Key Stakeholder Groups Key Highlights and Management Approach Sustainable Workforce and Community Conducive Workplace t &NQMPZFFT 1. Reviewed and updated the Labour & Human Rights Policy 2. Regular Townhall sessions for employees to voice any grievances in the workplace. 3. Comprehensive workplace policy and guideline to curb COVID-19 infections. 4. Curated workshops for GHL Wellness Month to promote physical and mental care amongst employees. 5. Implementation of the Group Occupational Health Safety And Environment Policy. Talent Attraction and Retention t &NQMPZFFT 1. Emphasis on meritocracy during the recruitment and promotion process as outlined in the Gender Diversity Policy. 2. Fair remuneration for all employees in compliance with relevant local regulations. 3. Competitive employee benefits maintained starting in FY2020. 4. Participated in Career Exploration Day - Bridging the Gap between Industrial Expectation and Talents that was held in Sunway University. Human Capital Development t &NQMPZFFT 1. Launched the High Potential (“HIPO”) Program to support the growth of talent staff for leadership positions. 2. Internship opportunities for fresh university graduates. 3. A total of 7,589 training hours across the Group, amounting to an average of 8 hours per employee. Supply Chain Management t 4VQQMJFST 1. Continuous monitoring and planning by the Group to minimize disruption caused by supply chain partners. 2. Annual assessment of Group’s suppliers, with criteria and expectations appended in contracts. 3. Commenced engagement with suppliers for scope 3 carbon emission. Corporate Social Responsibility t -PDBM Community t &NQMPZFFT t .FEJB 1. We exercise our corporate responsibility through collaboration with local non-governmental organisations (“NGO”) for refugees, orphanages, old folks home and local indigenous community. 2. GHL Thailand volunteered to beach cleaning at Bang Sean Beach, Chonburi Province, Thailand.
RkJQdWJsaXNoZXIy NDgzMzc=