Powering
payments
for everyone
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Network International Holdings Plc
Annual Report and Accounts 2020
Our purpose is to enable and
lead the transition from cash
to digital payments across
the Middle East and Africa.
We are Network International, the
leading payment solutions provider
in the Middle East and Africa.
159
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Strategic report
Our Industry
At a Glance
COVID-19 Response
Chairman’s Statement
Our Business Model
Our Markets
Chief Executive Officer’s Review
Our Strategic Framework
Key Performance Indicators
Stakeholder Engagement
Operating Review
Business Review
Chief Financial Officer’s Review
Responsible Business
Financial statements
Independent Auditor’s Report
Consolidated Statement
of Financial Position
Consolidated Statement
of Profit or Loss
Consolidated Statement
of Other Comprehensive Income
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
Statement of Financial Position
Statement of Changes in Equity
2
4
6
8
10
12
14
18
26
28
30
38
42
56
Non-Financial Information Statement 71
Notes to the Financial Statements
Contact Information
Principal Risks and Uncertainties
Directors’ Duties
Corporate governance
Corporate Governance Report
Board of Directors
Executive Management Team
Corporate structure
Audit and Risk Committee Report
Nomination Committee Report
Directors’ Remuneration Report
Directors’ Report
Viability Statement
Going Concern Statement
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Visit investors.networkinternational.ae
to read our Annual Report
1
Who We Work For
The people we serve are at the heart
of everything we do. That is why we
have built a business based on long-term
partnerships; serving over 80,000
merchants, and enabling over 200 financial
institutions to deliver payment services
to 16 million card holding consumers.
Building
long-standing
customer partnerships
Enabling
a smooth transition
to e-commerce
Supporting
our talented
workforce
Find out more
P20
Find out more
P23
Find out more
P24
Strategic reportCorporate governanceFinancial statements 2
Our Industry
The digital consumer payments
industry is built around services that
allow businesses to provide digital
payment options to consumers.
Who is involved in the payments chain?
Merchant
Person or company selling
products or services, either
offline or online.
Direct Merchant Acquirer
The institution that
maintains the merchant’s
account, enabling the
merchant to accept digital
payments and taking on
the risk of the transaction.
Acquirer Processor
Acts on behalf of the merchant
acquirer, providing the technology
and operations to authorise
transactions, route them to the
appropriate payment scheme and
receive settlement information.
Issuer Processor
Acts on behalf of the issuer
and the payment schemes,
authorising transactions and
ensuring the transfer of funds
from the consumer’s bank
account to the issuer.
Issuer
The institution that provides
payment methods or services to
the consumer and is responsible
for debiting funds from the
consumer’s account.
Payment Scheme
Includes card payment
schemes such as Mastercard,
Visa, American Express and
Diners Club, alongside other
digital payment schemes.
The schemes connect the
acquirer to the issuer, routing
transaction information,
authorisation and settlement.
Network International Holdings Plc
Annual Report and Accounts 2020
3
How our industry works
Consumer
Merchant
Issuer
Issuer
Processor*
Acquirer
Processor*
Payment
Schemes
Merchant
Acquirer*
Key
Flow of funds
Processes
Where Network International provides services
*
The Consumer initiates the
transaction with the Merchant.
The Payment Scheme receives the
request for payment authorisation and
routes the transaction to the Issuer.
The Payment Scheme forwards
authentication to the Merchant
Acquirer (or Acquirer Processor).
The Merchant’s acceptance products
(point-of-sale terminal or online
gateway) transmit card details and
transaction information to the
Merchant Acquirer.
The Merchant Acquirer (or Acquirer
Processor) identifies the Payment
Scheme and transfers transaction
details to that Payment Scheme.
The Issuer (or Issuer Processor)
assesses fraud risk for the transaction,
verifies sufficient funds or credit is
available and sends authorisation to
the Payment Scheme.
The Merchant Acquirer (or Acquirer
Processor) sends authorisation to the
Merchant, approving the transaction.
The Merchant Acquirer sends
funds to the Merchant’s account,
and receives funds from the
Issuer via the Payment Scheme.
Learn more about merchant settlement in the Operating Review
See page 32
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
4
At a Glance
Understanding our business
Our purpose is to enable and lead the transition from cash
to digital payments across the Middle East and Africa (‘MEA’),
the fastest growing payments markets in the world.
We have two business lines
Merchant Solutions
Issuer Solutions
› Direct acquiring services
Enabling merchants to accept digital payments.
› Acquirer processing services
› Issuer processing services
Hosting and processing credit, debit and prepaid
cards for our customers.
For our bank customers, on behalf of their merchants.
› Fraud solutions
› Payment acceptance solutions
Inbuilt and managed fraud operations.
Proprietary omnichannel solutions and products.
› Loyalty solutions
› Loyalty solutions
Card loyalty schemes and management.
Merchant loyalty programmes and management.
› Value Added Services
› Value Added Services
Including customer data analytics, dynamic currency
conversion and payment plans.
Including instant card issuance, card control
services and customer data analytics.
Merchant Solutions revenue
USD 109.4m
Issuer Solutions revenue
USD 165.0m
We provide services for
80k+
merchants
USD 33.5bn
Total Processed
Volume3
15 yrs+
We provide services for
200+
15 yrs+
average customer tenure4
financial institutions
average customer tenure4
758m
Transactions
processed3
16m
Number of
cards hosted3
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations of reported figures to APMs.
1
2 Share count impacted by issuance of 50m additional shares for DPO acquisition.
3 This is a KPI. For definition please refer to page 55.
4 Refers to average tenure of relationship with top 10 customers.
5 Does not include the 2% of revenues which are not allocated to a geographical operating segment.
Network International Holdings Plc
Annual Report and Accounts 2020
5
Financial highlights 2020
Revenue
USD 284.8m
(15.1)%
Underlying EBITDA1
USD 112.6m
(33.2)%
Read more
See page 42
Profit from continuing operations
USD 5.6m
(90.2)%
Underlying EPS1,2
USD 6.7cents
(62.1)%
We operate across the MEA, providing services to customers in more than 50 countries
Middle East
70%5
of revenue
Key addressable markets
include the United Arab
Emirates (‘UAE’), Jordan
and Saudi Arabia.
Africa
28%5
of revenue
Key addressable markets
include Egypt, Nigeria and
South Africa.
The case for investment
We are the only pan-regional provider of digital payment
solutions, with scale and presence across the entire acquiring
and issuing payments chain.
Strong long-term growth
supported by clear secular trends
and a growth strategy that has
potential further accelerators.
Quality infrastructure
and assets, managed by
a world-class team.
Our diversified and resilient
omnichannel payments
platforms are scaled, well-
invested and integrated.
Robust financial track
record that creates
shareholder value
through sustainable
earnings growth.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 6
COVID-19 Response
Our key priorities
for a changing world
1
Working for
our customers
Our payments and processing capabilities continued
uninterrupted and have not been affected by the
pandemic. Supporting customers remained a
business priority. In Merchant Solutions, we provided
fee reductions for a number of SME merchants and
assistance in transitioning their businesses online.
In Issuer Solutions, we assisted bank customers and
their cardholders by enabling payment holidays, or
extending expiries on cards where suppliers could
not guarantee a replacement.
Chief Executive
Officer’s Review
See page 14
2
Balancing short-term disruption
with long-term focus
Whilst COVID-19 has been
impactful, the business is
well positioned to navigate
through, both from an
operational and balance
sheet perspective. At the
same time, we continued
to be focused on pursuing
the growth opportunities
presented by our markets.
Emerging data indicates an
acceleration in the transition
from cash to digital payments,
which underpins our
confidence in the long-term
industry fundamentals.
From February, COVID-19
and the related lockdowns
impacted consumer spending
and tourism across our
regions, and the Merchant
Solutions business saw a
significant reduction in
Total Processed Volume
(‘TPV’). Issuer Solutions was
more resilient, with some
contractual fixed billings
or minimums that cushioned
lower transaction volumes.
In the second half of the
year, we saw improved KPIs
throughout the business, as
consumer spending patterns
began to normalise.
Network International Holdings Plc
Annual Report and Accounts 2020
When COVID-19 started to impact our
business, we developed a Coronavirus
Management Strategy and subsequently
implemented a series of control
measures and actions across the Group.”
Nandan Mer
Chief Executive Officer
“ COVID-19 has begun
to reshape the way
we work, shop,
gather and interact
together. Including
our attitudes to
digital payments and
accelerating the move
away from cash.”
Ron Kalifa OBE
Chairman
Chief Executive
Officer’s Review
See page 14
7
3
Maintaining a robust
financial position
As a result of the financial
impact on our business,
we took a number of prudent
actions to reduce operational
expenses and capital
spending across the business.
The Board and Executive
Management Team have also
foregone elements of their
compensation.
Chief Financial
Officer’s Review
See page 42
During the year we
successfully refinanced
our syndicated lending
facility and ended the period
with a strong balance sheet
position and leverage of
2.3x1,2, comfortably within
the lending covenants of 3.5x.
2.3x
Leverage
(net debt: underlying
EBITDA)1,2
4
Looking after
our people
We made an early and phased
implementation of working from home
across all of our office locations, starting
in early March, with a seamless transition
in working practices. We ensured our
colleagues were provided with virtual
medical services and engaged the
services of a leading well-being
consultancy to provide emotional and
mental health support. Whilst the
majority of our colleagues continue to
work from home, we have implemented
a phased and fluid return to our offices,
dependent upon government guidance
in our markets.
89%
Employee
satisfaction with
our response
to COVID-19
Responsible
Business
See page 56
“ As consumer
purchasing behaviour
shifts online, Network
plays a critical role,
being the region’s
largest enabler of
digital commerce.”
Nandan Mer
Chief Executive Officer
Read our online
strategic case study
See page 22
Read our online strategic
case study
See page [x]
5
Pulling together through
strength of leadership
We have strong governance
and are led by Executive
Management and a Board
of Directors with extensive
experience across payments,
international finance and
developed market regulation.
We established a COVID-19
Assessment Team to monitor
and actively respond to the
evolving pandemic, which
oversees our response to
colleagues, business
operations, supply chain,
cyber security infrastructure
and financial stability.
We ensured our Executive
Management Team stayed
in touch with colleagues
and the leadership team
has given virtual monthly
updates on our business and
response to the pandemic.
We also helped colleagues
stay connected through
our ‘Talk-to-HR’ virtual
forum and ‘NetworkFlix’
social platform.
Principal Risks
and Uncertainties
See page 72
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for
APM definitions and the reconciliations of reported figures to APMs.
2 Excludes funds raised for DPO acquisition.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 8
Chairman’s Statement
Building our business to
capture long-term growth
Following an unprecedented year,
I am pleased to report that Network
International finished 2020 in a
strong position. We have maintained
new business momentum, seen
strong demand for online payment
acceptance, expanded our
capabilities through the launch
of a digital product platform in
partnership with Mastercard, and
we continue to work towards
completing the acquisition of DPO.
In withstanding the challenges of
the year we have proved that our
business model is resilient and we
can look ahead with confidence.
I believe Network International is
uniquely positioned to benefit from
the acceleration towards digital
transactions and the substantial
growth opportunities in our markets.
We also sought to address concerns
through virtual forums, delivered by
Board members and management.
This approach resonated. Based
on an independent internal survey
examining our response to the
pandemic, overall satisfaction
amongst employees was 89%.
This helped to ensure that
our payments and processing
activities remained uninterrupted
for customers and allowed us to
provide other forms of support,
including fee reductions and cash
support for smaller merchants,
online products which allowed
merchants to keep trading, and
the execution of projects for
larger bank customers to deliver
new or adapted services to their
cardholders.
Responding to COVID-19;
pulling together through strength
of leadership
2020 was a uniquely challenging year,
with everyone across our business –
and indeed the world – impacted by
the pandemic. Considering this, the
Board focused its efforts on our
customers, colleagues, shareholders
and stakeholders. We established a
COVID-19 Assessment Team early
in the crisis to oversee our response
across areas such as employee
engagement, operations, supply chain,
cyber security and financial stability.
COVID-19 had a significant short-
term financial impact on our business;
where lockdown restrictions, reduced
international travel and dampened
consumer spending all led to a
decline in digital transactions. As
a result, our revenues declined by
(15.1)% during the year and underlying
net income1 declined by (60.7)%.
We were pleased to see digital
transaction volumes across our
markets beginning to recover during
the latter part of the year and we
exited 2020 with good momentum.
We implemented a range of
measures to keep our colleagues
safe and engaged. The transition to
remote working was seamless due
to the existing flexible working policy
in place, while our systems and
technology infrastructure remained
robust. Our leadership team
kept colleagues informed through
regular dialogues and updates.
In order to mitigate the short-term
financial impact we took prudent
actions to reduce operational
expenses and capital spending.
At the same time we sought to
maintain investment in future growth
opportunities. This ensured we exited
the year with ample liquidity and a
strong balance sheet, with significant
headroom to our covenants.
Our business is
successfully navigating
through the challenges
presented by the
pandemic, and we have
continued to prioritise
strategic focus and
investment into areas that
will ensure we capitalise
on the significant
opportunities in our
fast growing markets.”
Ron Kalifa OBE
Chairman
Network International Holdings Plc
Annual Report and Accounts 2020
9
Enhancing Board composition
and expertise
Network’s Board consists of an
experienced, diverse and majority
independent group of Directors,
with expertise across payments,
international finance and developed
market regulation. There remained
strong attendance at virtual meetings
throughout the pandemic, as well
as invaluable experience and insight
provided to Network’s Executive
Management Team.
substantial improvement in our
Employee Engagement Survey, with
a score of 73% (up from 65% in 2019).
Our responsible business philosophy
has seen enhancement, where our aim
is to integrate environmental, social
and governance (‘ESG’) practices into
our day-to-day business activities,
strategic planning and performance
evaluation processes. We are currently
developing a new three-year ESG
strategy, which will be shared in 2021.
As our business has evolved, we have
added more bespoke capabilities and
independence with the appointment
of a further four Independent Non-
Executive Directors (two in January
2020 and two in January 2021). We
also appointed Rohit Malhotra, our
long-serving CFO, to the Board in
June last year and of course welcome
Nandan Mer, who joined as our new
CEO in February this year.
The Board places considerable
importance on engagement with
and feedback from shareholders.
The Executive Management Team
has an ongoing dialogue and series
of meetings – many of which were
virtual this year – with institutional
investors and analysts that are
engaged by Network’s Investor
Relations function. I met with our
largest shareholders to discuss
matters of Corporate Governance
and broader strategic topics, while
the Chair of the Remuneration
Committee, Victoria Hull, also
consulted investors regarding the
Remuneration Policy implementation.
Supporting our people
and communities
Our people are at the heart of our
business and are instrumental in the
delivery of our strategy. During 2020,
we reviewed and enhanced our
engagement approach to ensure
we continue to meet the employee
engagement provisions of the UK
Corporate Governance Code. This
included a Board-level review of
our activities and the alignment of
our Engagement Framework. Our
Group-wide employee turnover rate
has fallen over the past three years;
from 10% in 2018, to 4% in 2020.
Furthermore, we have seen a
Looking ahead and building our
business for long-term growth
Our overall strategic approach
and investment priorities remain
consistent, with a focus on the
significant growth opportunities on
offer in our markets. The past year
has seen an acceleration in the
transition from cash to digital
payments, underpinning our
confidence in long-term industry
fundamentals. This acceleration
includes an increased demand for
online payment acceptance, where
we will continue to leverage our
products and support merchants
moving their businesses online.
Given our conviction around the
potential growth opportunities for
the business, the Board has decided
not to declare an ordinary dividend
in respect of the 2020 financial year.
This decision has been taken after
careful consideration and in order to
ensure capital allocation is prioritised
towards such opportunities that will
drive growth, generate attractive
returns for shareholders and also
maintain financial flexibility.
We will continue working towards
completing the acquisition of
DPO Group. DPO will improve our
capabilities in the African payments
space through technology, market
access and high growth segments.
With such a strong outlook, we expect
the acquisition to deliver a double-
digit return within three to four years,
and significantly higher thereafter.
Our entry to Saudi Arabia will be
another important growth driver and
we remain committed to expanding
our presence in that market during
2021 when border restrictions ease.
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
Welcoming our new
Chief Executive Officer
It is with great pleasure that we
have recently welcomed Nandan
Mer as Chief Executive Officer.
Simon Haslam is retiring from
Network, after a long and
successful career in financial
services. Following a rigorous
global leadership search, the
Board approved the appointment
of Nandan Mer, who has an
extensive and proven track
record of building businesses
in a number of global markets
with leading financial institutions.
Nandan spent the most recent
11 years of his career with
Mastercard, including as Strategy
Head for International Markets
and President of the Japanese
business. This experience makes
him an excellent appointment to
lead us through the next phase
of our ambitious growth plans.
As Chairman, I would like to
thank Simon for his invaluable
contribution as CEO and wish
him well in his retirement. He
leaves behind a strong business
and legacy of success.
Nomination Committee Report
See page 128
To conclude I would like to extend
my thanks to our employees for their
delivery, to our shareholders for
their ongoing support, and to our
customers for their belief and trust in
our ability to do what they ask of us.
Ron Kalifa OBE
Chairman
7 March 2021
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 10
Our Business Model
A pan regional diversified
payments business
Operating at scale across both Merchant and Issuer Solutions
Multiple product and
service capabilities
Across point-of-sale,
e-commerce, physical and
virtual cards, mobile wallets
and value added services
Powered by partnerships
With key global payments
platforms, such as
our strategic partnership
with Mastercard
Underpinned by
strong governance
Led by Executive
Management and a Board of
Directors with substantial
experience across payments,
international finance and
developed market regulation
Payment
Acceptance
Direct
Acquiring
Merchant
Solutions
Our
payment
solutions
Issuer
Processing
Issuer
Solutions
Acquirer
Processing
Value Added
Services
USD 33.5bn
Total Processed Volume (‘TPV’)2
Revenue streams
Net Merchant Service Charge
Transaction fees on FX, chargeback
Sale and rental of POS terminals
Value Added Services
cards hosted2 758m
16m
transactions2
Revenue streams
Fee per card
Fee per transaction
Value Added Services
Network International Holdings Plc
Annual Report and Accounts 2020
11
End-to-end capabilities and presence
across the payments value chain anchor
our competitive position.
Operating Review
See page 30
Value inputs
Value outputs
Unmatched regional resources
and relationships
Generating long-term value
Pan regional presence across
the Middle East and Africa
>50
countries where we provide services
Newly invested
technology platforms
99.9%
system availability
Long-standing customer
relationships
15
years’ average customer tenure3
Talented, highly skilled
employees
6
years’ average tenure
Experienced management team
20
years’ of industry experience
on average
Customers
Helping to grow their
businesses in a secure,
cost effective way.
Employees
Striving to make
Network International
a great place to work.
>80k
merchants
>200
financial institutions
73%
engagement score
Communities
Working to drive financial
inclusion, supporting
the communities in which
we operate.
15%
digital payments share
of transactions in MEA
Investors
Through strategic
success and
financial growth.
6.7 cents
Underlying EPS1
1.2 cents
Reported EPS
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
2 This is a KPI. For definition please refer to page 55.
3 Refers to average tenure of relationship with top 10 customers.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 12
Our Markets
Well positioned in an
underpenetrated market
We benefit from a clear leadership position in digital payments
across the MEA, spanning the payments value chain.
Key drivers of digital payments in MEA
Cash to digital payments conversion
MEA is the most underpenetrated
digital payments market globally
2017-2019 digital payments share
of transactions by volume1
%
4
5
%
1
5
%
7
3
%
3
3
%
2
2
%
5
1
%
1
2
%
3
1
%
9
1
%
6
1
%
6
1
%
4
1
%
4
1
%
4
%
2
%
8
Europe
South
Africa
Egypt Middle
East
UAE
Saudi
Arabia
Africa Nigeria
2017
2019
2017–2019 average cards per adult1
8
9
.
1
2
9
.
1
2
3
.
1
4
2
.
1
6
0
2
.
9
8
.
1
2
4
.
1
6
3
.
1
1
3
0
.
2
3
0
.
2
5
0
.
3
4
0
.
2
3
0
.
4
2
0
.
5
6
0
.
5
5
0
.
Europe
South
Africa
Egypt Middle
East
UAE
Saudi
Arabia
Africa Nigeria
2017
2019
Forecast payment card transaction volume
growth on point-of-sale devices; 2019-2025E1
%
9
2
Fostering consumer comfort with digital payments
› Perception of digital
payments as seamless and
effortless for the consumer
› Overcoming consumer
concerns, particularly in
relation to security and fraud
Our approach
Facilitating an improved
experience; through providing
solutions that allow our
customers to bring digital
payments to more consumers.
Developing acceptance (merchants’ ability
to accept digital payments)
› Proliferation of acceptance
devices and technologies
across channels (offline,
online, mobile)
In particular, low cost
devices and acceptance
using smartphones, which
is particularly applicable
to small/micro merchants
›
Our approach
Development and distribution
of our N-Genius™ proprietary
point-of-sale (‘POS’) devices
and online gateway.
Investment and development
of low cost acceptance
technologies, including QR code
and text message enabled
smartphone acceptance.
Developing issuance (of digital payment media
by banks and financial institutions)
Our approach
Assisting issuer bank customers
with more efficient customer
onboarding, and support for
easy to use payments solutions
such as digital wallets, P2P
payments and virtual cards.
› For payment cards: growth in
the banked population, which
is still under developed across
some of our markets. e.g.
60% of African adults are not
part of the banking system1
› For mobile devices: growth
in smartphones and
comfort with mobiles as a
means of storing money
Supporting infrastructure
› Broadband connections
› Smartphone penetration
› Delivery / fulfilment
infrastructure for e-commerce
Network International Holdings Plc
Annual Report and Accounts 2020
Our approach
Evolve customer products and
solutions that respond to
technology trends and changing
end consumer demands.
%
5
1
%
0
1
%
9
%
7
%
6
%
6
%
6
Nigeria
Africa MEA Egypt Europe
South
Africa
Middle
East
Saudi
Arabia
%
5
UAE
13
Accelerating with growth in e-commerce
COVID-19
Growth is expected to be particularly strong
in online and alternative payments methods
Accelerating market dynamics
E-commerce penetration of retail1
%
0
4
1
.
%
6
7
.
%
4
6
.
%
1
.
4
%
1
.
1
North
America
Europe Middle
MEA
Africa
East
Proportion of population with internet access1
Smartphone penetration rates1
North America 88%
Europe 83%
Middle East 66%
MEA 37%
Africa 31%
Middle East 84%
North America 84%
Europe 71%
MEA 58%
Africa 51%
Point-of-sale terminals
› Acceleration in year-on-year (y/y) growth rates in POS
terminals in key markets in 2020, e.g. 64% in Saudi
Arabia (25% in 2019) and 50% in Nigeria (39% in 2019)2
E-commerce
› Material increase in projected growth rates for
e-commerce transactions in the UAE. Forecast
CAGR for period 2019-23E was 9.8% pre COVID-19,
and has been revised up to 25.2%3
› Licences for online freelancers and businesses
in Dubai increased 132% in 20204
› E-commerce transactions using Saudi Arabia’s
domestic scheme Mada increased c.280% y/y
in value and c.350% in volume during 20205
Mobile money
› 48.8% y/y increase in the value of transactions during
July to December 2020, for mobile money operator
M-Pesa, which operates in seven African countries
Contactless payments
› Multiple countries across the MEA have raised the limit
for contactless payments, increasing its adoption.
e.g. limit increased by: 67% in UAE; 100% in Egypt;
100% in Saudi Arabia
1
Source: Edgar, Dunn & Co. 2019 data used due to timelag of several
months post calendar year end in production of data for Network regions.
2 Source: Saudi Central Bank; Nigeria Inter-Bank Settlement System plc.
3 Source: GlobalData.
4 Source: Dubai Economy.
5 Source: Saudi Central Bank.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 14
Chief Executive Officer’s Review
Exciting future
growth opportunities
Market transition to digital payments
COVID-19 is further accelerating
market growth
We are seeing a number of trends
and developments through the
pandemic that indicate fast changing
Government and consumer
sentiment towards cash. Whilst some
of these trends may temper as the
pandemic recedes, we believe it is
likely there has been a structural
acceleration towards digital
payments across our markets.
› ATM usage declining in the UAE:
Analysing the cards hosted by
Network International in the UAE
in January 2020, a cohort of
consumers who used their cards
almost exclusively at ATMs to
withdraw cash are now only using
their card at the ATM for less than
half (47%) of their transactions
in December 2020, with the
remainder taking place at a
POS terminal or online.
› Deployment of POS terminals
accelerating in some markets: The
number of POS terminals in Nigeria
has increased by 50%, and by
c64% in Saudi Arabia during 2020.
› Accelerating e-commerce
growth through the pandemic:
A Mastercard study published in
November 2020 has revealed that
nearly three out of four consumers
in the Middle East and Africa are
shopping more online than they
did before the pandemic.
› Mobile money transactions also
growing strongly: The Central
Bank of Kenya enabled measures
to facilitate increased use of mobile
money transactions, instead of
cash, through the pandemic. The
monthly value of mobile money
payments grew by 44.5% from
March to November 2020.
Delivery of strategic and
business initiatives
Our strategy is to provide solutions
that allow our customers to bring
digital payments to more consumers
across our regions, leveraging our
scale and competitive advantages.
Progress across the core business
Whilst COVID-19 had a significant
impact on transactions and volumes
during the year, we saw a steady
recovery in trading through the
second half and exited the year with
positive momentum across both
business lines. In our core market of
the UAE, domestic direct acquiring
fully recovered to prior year levels as
we reached December 2020, whilst
international volumes (which largely
represent overseas visitors) also
benefited from a pickup in tourism
over the holiday period. Data from
STR Global showed hotel occupancy
for Dubai returning to almost 70%
through December. Naturally,
the pace of new business slowed
through the pandemic as banks
focused more on the immediate
operational challenges caused by
COVID-19. But our relationships with
existing customers and the pipeline
of opportunities remains strong and
we are already seeing a pickup in
new business wins during 2021,
such as the recent signings of Kuda
Digital Bank and Carbon Bank in
Nigeria, Bank Windhoek in Namibia
and Bank Gabarone in Botswana.
I have been deeply
impressed by the
breadth of experience
in our team, the strength
of our long-standing
relationships with
customers and the
exciting outlook for
our business. Network
has the scale and
capabilities to capture
the significant growth
opportunities that
are available across
our markets.”
Nandan Mer
Chief Executive Officer
Network International Holdings Plc
Annual Report and Accounts 2020
15
Our response to COVID-19
Our business purpose and strategy, to enable the
transition from cash to digital payments across
our regions, has remained consistent throughout
the pandemic. However, in the short term
COVID-19 has had a substantial impact on our
financial performance over the course of 2020.
As a result we developed a Coronavirus
Management Strategy to oversee our response
for our colleagues, business operations, supply
chain, cyber security infrastructure and financial
stability. This strategy has served us well and we
have seen customer and colleague support for
the actions we have taken.
COVID-19 Response
See page 6
Middle East
New customer wins: In Merchant
Solutions this includes a number
of new POS direct acquiring
merchant customers such as
Alexander McQueen, Adidas and
Western Union. We won the
e-commerce direct acquiring
business for NowNow (noon.com’s
on-demand delivery app, part of
the digital ecosystem of products
and services from the Noon Group),
major supermarket Spinneys and
Majid Al Futtaim Management
Services. We have also signed
partnership arrangements with
several global brands, including
HyperPay, in the online acquiring
space. In Issuer Solutions we won
a competitive tender to provide
exclusive services across five
countries for CareemPAY and a
mandate to support the issuance
of the first Islamic credit card
for a bank customer in Jordan.
Contract renewals: We renewed a
significant contract with Abu Dhabi
Commercial Bank to provide fully
outsourced Merchant Solutions and
we also renewed our Issuer Solutions
contract with United Arab Bank.
Growth in online payments: Our
N-Genius™ roll-out continues apace
and we finished the year with c.1,900
merchants using our proprietary
online gateway, an increase of c.1,600
during the year and with record
volumes processed through our
platform during December. This is
reflected in our TPV growth from
e-commerce merchants (excluding
Government and airline online TPV)
which grew at 53% during the year
(versus 16% y/y growth in 2019).
Cross-sell of products and value
added services: We saw good
demand from merchants for our
Easy Payment Plan, which allows
consumers to set up a monthly
repayment plan for goods or services
purchased through a POS terminal.
(The Easy Payment Plan is a service
we enable, where the lending is
provided by the cardholder’s issuing
bank). We have also expanded our
contracts with UAE based tourism
authorities that will see them
leverage merchant spending data
in order to better understand
domestic consumer and tourist
spending patterns.
Africa
New customers: Payment processing
outsourcing wins included: Issuer and
Merchant Solutions for Access Bank
Kenya, Merchant Solutions for CCA
Cameroon Bank, and Issuer Solutions
services for Globus Bank in Nigeria
and Republic Bank in Ghana.
Expanded contracts: We have
supported eight of our banking
customers with the issuance and
processing of expanded card
portfolios, including well-known
institutions such as Fidelity Bank,
Access Bank and RCS Group.
We have further expanded our
relationship with GTBank into a
ninth country by supporting their
subsidiary in Côte d’Ivoire, and
Woolworths Financial Services
in South Africa has renewed our
Issuer Solutions contract.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 16
Chief Executive Officer’s Review continued
Cross-sell of products: We continue
to upsell to existing customers
across the region, signing expanded
contracts with Polaris Bank Nigeria
and ARCA Nigeria, e-commerce
Merchant Solutions using our
N-Genius™ payment gateway for
NBS Bank Malawi, and the rollout
of our N-Genius™ POS devices
continues with Standard Bank and
Orabank across eight countries.
We are also working towards
N-Genius™ gateway implementation
with customers after certification
in five countries.
New market entry: In Africa we will
be launching services in Sudan, a
new market entry which has been
supported through our partnership
with Mastercard. We will be providing
Issuer Solutions to Faisal Islamic Bank
by enabling the bank to issue and
accept Mastercard branded debit,
credit and prepaid cards through
ATMs, POS terminals and online.
This makes Faisal Islamic Bank one
of the first in the country to obtain
a card issuing and acquiring licence
from Mastercard.
Executing on our strategic
partnership with Mastercard
Our strategic partnership with
Mastercard is progressing well
and we have launched a new
digital product platform which will
accelerate the adoption of digital
payments across all our markets.
With this new digital platform we
will help our customers to enable
mobile-based payments for their end
consumers and merchants across
various payment channels. Merchants
will now have one simple to use
technology interface through which
they will be able to accept multiple
payment types, ranging from
USSD (text message), QR codes,
to POS terminals and e-commerce,
with mobile money and SoftPoS
(technology which allows merchants
to accept contactless card payments
directly on their smartphone or
tablet) coming later in 2021. Payment
issuers and banks will be able to offer
their consumers state-of-the-art
payment solutions including digital
wallets, person-to-person (‘P2P’)
payments and virtual cards. The
launch of this platform is the first in
a series of steps towards delivering
simplified, collaborative payment
solutions across the payments value
chain in the Middle East and Africa.
Accelerating growth through the
proposed acquisition of DPO
We continue to progress towards
completing the acquisition of DPO.
Regulatory approvals are still
outstanding in a small number of
countries, which we expect to finalise
and complete in the second quarter.
DPO is the largest online commerce
payments platform operating at scale
across Africa, offering online and
mobile money payment services to
over 59,000 active merchants across
19 countries. DPO benefits from a well
invested technology platform with
a unique combination of intellectual
property, products, licences and
partnerships in multiple markets,
which is particularly advantageous
to global merchant brands operating
across the continent. The acquisition
will further consolidate our presence
in Africa, strengthening our position
across the entire payments value
chain and accelerating our growth.
Whilst the acquisition is not yet
complete and the 2020 financial
performance of DPO is not
consolidated within our financial
results, we are providing an indicative
business and trading update for
DPO. The business is performing
well, having seen over 30% y/y
TPV growth in constant currency.
Our commitment to a sustainable
and responsible business
We are committed to operating
sustainably and responsibly across
our entire business. We aim to
operate in a way that maintains
strong ethics, respects human rights,
supports responsible labour practices
and safeguards the environment –
while promoting positive social and
economic impacts in the markets
in which we operate. In 2020 we
began working with an expert third
party on the development of a new
ESG Strategy. This includes a gap
analysis to benchmark our existing
approach against international
sustainability best practice, prevailing
legal requirements and evolving
stakeholder expectations. The
outputs from this process will inform
the development and rollout of the
new strategy in 2021.
Our colleagues are at the heart of our
business and are instrumental in the
delivery of our strategy. We are very
pleased to have seen the results of
our annual Employee Engagement
Survey during the period. Overall
we saw both an improvement in
survey participation, where 83% of
colleagues participated (2019: 72%),
and a significant step up in overall
engagement to 73% (2019: 65%).
Colleagues were also highly satisfied
with the business’s approach to
employee wellbeing, care and remote
working arrangements through the
COVID-19 pandemic.
As a digital payments provider,
our business activities support and
promote the financial inclusion of
communities across the markets in
which we operate. This includes our
ongoing participation in the ‘Smart
Dubai Government’ initiative which
works to accelerate the adoption of
digital payments across the Emirate,
or our support of Egypt’s Meeza
national payment scheme. In
addition, our support for community
development projects helps us to
deliver further social and economic
benefits at a local level. In 2020, over
140 colleagues volunteered in local
community initiatives. The Group also
collaborated with or made charitable
donations to community organisations
that support food distribution, cultural
development and individuals with
additional needs across the UAE,
South Africa and Egypt.
Responsible Business
See page 56
Network International Holdings Plc
Annual Report and Accounts 2020
17
2020 financial year. This decision
has been taken after careful
consideration and in order to ensure
capital allocation is prioritised
towards such opportunities that will
drive growth, generate attractive
returns for shareholders and also
to maintain financial flexibility.
Outside of core investment, we
will deploy capital to continue the
separation of shared services from
Emirates NBD. This includes the
separation of a shared data centre
in the UAE and the deployment of
independent human resources and
finance systems in order to improve
our operational flexibility. We also
remain excited by the opportunity
in Saudi Arabia, which is one of the
largest payments markets in the
MEA region. We intend to progress
with our market entry as soon as
border restrictions ease and when
this occurs, we will update investors
on the financial opportunity and
expected returns from this new
market entry. Our capital investment
budget for Saudi Arabia remains the
same as previously communicated
and is incorporated in our 2021
financial guidance.
In summary: We have started to see
a recovery from the impacts of the
pandemic and the underlying drivers
of the business and our markets
remain strong. We have seen some
headwinds to trading during the
initial months of 2021, linked to the
rise in COVID-19 cases across the
UAE and some restrictive measures
that have been introduced. Whilst
the fluidity of the pandemic creates
some uncertainty our overall outlook
is unchanged at this stage. There is
an intense focus on strong execution
and maintaining the good momentum
in the business.
Nandan Mer
Chief Executive Officer
7 March 2021
Network International Holdings Plc
Annual Report and Accounts 2020
Future strategic focus
As the digital payments leader in
markets with significant structural
and secular trends, Network
International has strong foundations.
Whilst our overall strategic approach
remains consistent, a CEO transition
will bring elements of change and
new ideas. We intend to ensure that
we remain at the forefront of rapidly
evolving customer needs so that
we can grow our share and extend
our leadership position across our
markets. Our strategic aspirations will
place more focus upon acceleration
and innovation in order to deliver
profitable high growth.
Core business and Mastercard
strategic partnership: We will
continue to support our merchant
and financial institution customers
through their ongoing recovery from
COVID-19. In our acquiring business
we will place emphasis on growing
high value merchant sectors within
the online and SME segments, and
providing further value to merchants
through the launch of interactive
data and spending analytic
dashboards. In Issuer Solutions we
will have a strong focus on new
business generation, including the
cross-sell of value added services
such as our digital payment platform
into the existing customer base.
Our Mastercard partnership will
focus on the rollout of the newly
launched commercial card solution,
the digital payment platform and
executing against our market entry
to Sudan. We will also continue
working together to explore the
development of low cost payment
acceptance solutions which are
targeted at the African market.
Completion and integration of DPO:
Whilst ensuring post-completion
that DPO continues to grow its TPV
and revenues ahead of the market,
we will work hard to cross-sell
DPO’s services to our existing bank
customers in order to support the
delivery of revenue synergies.
Capital allocation and Saudi Arabia
market entry: Our capital allocation
policy is designed to support both
the core business and growth
opportunities, whilst generating
appropriate returns. In such
attractive markets our business has
substantial opportunities to deploy
capital through both organic and
inorganic investment, in order to
deliver incremental profitable growth
and returns. Given our conviction
around the potential growth
opportunities for the business, the
Board has decided not to declare
an ordinary dividend in respect of the
Strategic reportCorporate governanceFinancial statements 18
18
Our Strategic Framework
Focused on profitable growth
now and for the future
Our purpose is to enable and lead the
transition from cash to digital payments
across the Middle East and Africa.
Create a Network
Culture for our people
Read more on page 56
Strong risk management
and governance framework
Read more on page 72
1 Capitalise on digital
payments adoption and
enable financial inclusion
2 Expand customer base
and focus on high value
segments
3 Develop commercial
arrangements with
strategic partners
Goals
› Support structural market growth in digital
Goals
› Expand our range of services to
Goals
› Develop relationships or commercial
›
payments through leading capabilities
Increase consumer access to digital
payments through building low cost solutions
existing customers
› Win new processing customers by capitalising
on our scale and service advantage
› Support financial inclusion initiatives by
working with governments and NGOs
› Win merchants in high value segments such
as SMEs, hospitality and online payments
› Explore and develop our solution to mobile
money payments
Progress in the year
› Expanded our work with the UAE
governments to include northern Emirates’
Smart Governments, along with Smart
Dubai Government
Progress in the year
› Renewed significant contracts with key
customers such as: ADCB in the UAE, United
Arab Bank across the Middle East and
Woolworths Financial Services in South Africa
› Signed multiple new Issuer Solutions
›
customers
› Supported Egyptian bank customers with
› Expanded Issuer Solutions services and
Central Bank of Egypt initiatives to rollout an
additional 100,000 point-of-sale acceptance
points across the country
› Made preparations to extend our capabilities
and digital solutions offering in Saudi Arabia
contracts for: RCS Group in South Africa,
Fidelity Bank Ghana, GTBank in Côte d’Ivoire,
Rokel Commercila Bank in Ghana, Access
Bank in Ghana, Access Bank in Nigeria and
Tyme Bank in South Africa
Future focus
› Support the UAE governments with digital
wallet rollout and e-dirham expansion plans
› Leverage our role in Dubai EXPO2020
Identify opportunities to work with
›
governments and NGOs to support digital
payments adoption across our markets
› Continue to explore ways to work with
mobile money solutions and operators
› Signed new merchant relationships,
including: Alexander McQueen, Adidas and
Luxury Fashion Gulf, online acquiring
for Spinneys supermarkets and NowNow
(part of Noon Group)
› SME merchant sales and relationship strategy
refreshed and significant growth in business
› Developed new ‘Customer Value
Propositions’ for key acquiring segments,
such as hospitality, SME and healthcare
Future focus
› Target new bank payment processing
outsourcing contracts and expand
relationships with existing customers
› Focus on high value customer segments and
sectors along with Fintech businesses
› Leverage existing relationships and focus on
cross-sell opportunities between business lines
Network International Holdings Plc
Annual Report and Accounts 2020
agreements to support the execution
of our strategy; that underpin or enhance
our market knowledge, distribution or
product capabilities
Progress in the year
› Developed the first set of product
initiatives with Mastercard as part of our
commercial agreement, which includes
the digital product platform and corporate
card solutions
Increased our online digital partner
network to include global/regional
payment service providers
› Executed on our strategic partnership
with CR2 in Africa, to accelerate managed
services of digital banking channels
Future focus
› Continue to deliver on commercial
initiatives with Mastercard and
strengthen our strategy to take digital
and e-commerce solutions to market
› Target new partnerships with mobile
network operators, online payment
service processors, Fintech businesses
and payment aggregators to unlock the
digital and alternative payments markets
› Assess and pursue strategic partnerships
with existing clients
19
6
Pursue
opportunities
for acceleration
5
Leverage
technology and
build capabilities
1
Capitalise on
digital payments
adoption and
enable financial
inclusion
Our
strategic
pillars
4
Product expansion
and market
penetration
2
Expand customer
base and focus on
high value segments
3
Develop
commercial
arrangements
with strategic
partners
4 Product expansion
and market penetration
5 Leverage technology
and build capabilities
Goals
› Develop best in class products that enhance
speed, efficiency and value for customers
Goals
› Ensure we have the capabilities and
scale to support our growth
› Adapt products to the local market to
› Optimise and invest further in our
enable rollout across the region
technology infrastructure
› Bring value add insights to customers
through our data analytics capability
Progress in the year
› N-Genius™ point-of-sale devices successfully
deployed across eight countries in Africa,
with key customers such as Standard Bank
and Orabank
› Ongoing rollout of N-Genius™ point-of-sale
devices across the regions
› Enabling MIR acceptance (the Russian credit
card scheme) across our merchant point-of-
sale terminals
› Expanded our N-Genius™ online gateway
sales to c.1,900 merchants across the UAE
Future focus
› Continue rollout of the N-Genius™ product
platform to existing and new customers
across the MEA
› Develop best in class products that enhance
speed, efficiency and value for customers
› Launch and rollout our digital product
platform, delivering new issuing and
acceptance capabilities across the entire
payments value chain
› Continue to develop data analytics solutions
for customers
› Enhance responsiveness and efficiency
through creating shared service principles
› Digitise customer facing and support
functions to optimise efficiency and
governance
Progress in the year
› Network ‘New Ways of Working’ has been
launched to optimise resources, automate
processes and create capacity across
the business
› Plan for separation of shared services and
technology resources from Emirates NBD
› Update the technology strategic plan for
entry to Saudi Arabia in anticipation of
market entry
› Ongoing enhancement to risk and
control functions
Future focus
› Ongoing enhancement of our
technology platforms
› Continue advancing the separation
of shared services from Emirates NBD
› Continue the entry and deployment of
our capabilities into Saudi Arabia
› Enhance data analytics capability: to serve
customers and enhance internal processes
6 Pursue opportunities
for acceleration
Goals
› Through both accelerated organic
and acquisitive options, focus on
opportunities that will: consolidate
or expand our geographic position
in the MEA; or provide new product
or technology capabilities
Progress in the year
› Announced the acquisition of DPO,
the largest online commerce payments
platform operating across Africa
› Updated our preparations and plans to
extend our services into Saudi Arabia,
in anticipation of market entry
Future focus
› Complete the DPO acquisition, with
a focus on integration and delivery of
organic and synergy growth targets
› Commence entry into Saudi Arabia
market when COVID-19 related border
restrictions ease
› Target further growth accelerator
opportunities, such as significant payment
processing outsourcing contracts
We have 11 principal risks
that apply to each of our
strategic pillars
See page 79
Key Performance Indicators
See page 26
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 20
Strategic case study
Building long-standing
customer partnerships
Underpinning the strength
of our business model.
From acorns to oak trees
Our business is built on the strength
and depth of relationships with over
80,000 merchants and over 200
financial institution customers.
It takes years to build customer
relationships of this scale, which is
reflective of our market leading
services and technology platforms,
and trusted reputation. Such
relationships typically start small and
expand over time; as we become a
trusted partner, see our services grow
as our customers grow; and as we
develop innovative solutions to meet
the evolving payments landscape.
Supporting ADCB with fully
outsourced services across
Merchant and Issuer Solutions
Abu Dhabi Commercial Bank (‘ADCB’) is one
of our largest customers in the Middle East.
Our partnership started in 2005, with
Network International providing outsourced
Issuer Solutions.
Over time, we have become an outsourced
processor for the entirety of ADCB’s credit
card portfolios. In 2017, ADCB decided to
capitalise on the scale of their business banking
relationships and move into merchant acquiring.
Having already worked hand in hand with ADCB
to provide Issuer Solutions services, we were
a natural partner. We are currently providing
fully outsourced Merchant Solutions services,
including: acquirer processing, merchant
support, onboarding e-commerce merchants
and procurement of point-of-sale terminals.
Our relationship is based upon strong
commercial foundations and the beneficial
economics of outsourced payments solutions,
which delivers outstanding service to ADCB’s
customers and a growing revenue stream
to Network International. The strength and
benefits of the relationship to both parties is
reflected in the recent renewal of our contract
to provide Merchant Solutions services for a
further five-year period.
Network International Holdings Plc
Annual Report and Accounts 2020
1 Refers to average tenure of relationship with top 10 customers.
15 years average tenure of our customer relationships1 Strategic report
21
Our role is to support our
customers in bringing digital
payments to more consumers.
For merchants, what may start with
providing point-of-sale in-store digital
transaction acceptance, often evolves
with increased scale, omnichannel
solutions and value added services
over time.
Carrefour is a long-standing merchant
customer, going back 18 years. Having
started our partnership as their acquirer
of choice in Dubai, we have grown our
volumes and services alongside them
as they have expanded across the
Emirates, moved to innovative self
checkout and into online acquiring.
Carrefour was also the first and largest
grocery merchant in the region to
accept the NOL prepaid smartcard,
which has increased the range of
payment options for the end consumer.
Issuer Solutions services
for RCS Group
Our 15-year partnership with RCS
typifies the development of our
relationships with Issuer Solutions
customers. What may start as a
small card processing outsourcing
agreement, often expands across
multiple portfolios, services and
countries over time.
RCS, a division of BNP Paribas
Personal Finance, is a consumer
financial services provider
operating across Southern Africa.
Our partnership began in 2006,
with outsourced processing
services for their retail store cards.
From the initial portfolio of just over
1m cards, we now provide issuer
processing services for their entire
card portfolio of over 4.5m cards
across five countries, alongside
data analytics and risk management
services. We are also supporting
them as they transition to become
a global card scheme issuer with
Mastercard and Visa.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 22
Strategic case study
In response to COVID-19, we
are seeing strong demand from
merchants who want to shift
their traditional in-store business
to an omnichannel approach.
The pandemic has accelerated consumer and merchant
demand for online payments. Through 2020, we saw 53%
y/y growth in our online directly acquired TPV1, compared
with 16% y/y growth during 2019.
We have also won a number of mandates to facilitate
online payments for merchants; and formed partnerships
with multiple global brands in the online acquiring space.
Dubai Duty Free
Moved to our N-Genius™ online
gateway during 2020. This now
provides Dubai Duty Free with
a user friendly and simplified
payment processing experience,
by partnering with Network
International across the entire
acquiring value chain, as a
processor, acquirer and
gateway provider.
“ At Al Fardan Exchange,
we are very happy to
partner with Network
International and use their
proprietary payment
gateway, N-Genius™
online. This has completely
revamped the payments
experience of our
customers, with the
new technology and
robust infrastructure.”
Al Fardan Exchange
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic report
23
Enabling a smooth
transition to e-commerce
Supporting merchants through offering more
payment options to their customers.
A payment gateway is a collection
of online services and software that
enables merchants to accept customer
payments through their website, mobile
applications, and email payment links.
Accepting online payments
E-commerce and online payment
acceptance is still relatively nascent in
our regions. In the UAE for example, less
than 20%2 of TPV across the Emirates
come from online transactions.
But consumer demand is changing, and in
our fast evolving market place, merchants
increasingly need to be positioned to
accept online payments, as well as in
their stores, outlets and offices.
N-Genius™ online payment gateway
N-Genius™ is our proprietary online
payment acceptance gateway.
We provide the gateway either
directly to merchants in the UAE
and Jordan, or on a third-party
basis to our bank customers.
N-Genius™ online allows merchants
to accept payments in real-time from
their consumers, either online, or from
a mobile phone (PayByLink or QR code
enabled). The gateway has market
leading transaction acceptance rates
and a wide range of payment options.
Having launched the gateway in
2019 we have seen good uptake by
customers, such as Dubai Duty Free
and Mahzooz, and particularly strong
demand through the pandemic.
c.1,900
customers signed to
N-Genius™ online
53%
y/y growth in our
online payment TPV1
1 Excluding Government and airline online TPV.
2 Source: EDC market sizing report 2019 forecast. Based on regional market data.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 24
Strategic case study
Supporting our
talented workforce
Our people are at the heart of our business. Indeed, our
current and future success relies on our ability to attract,
develop and retain the top global talent in our industry.
Ensuring the well-being of our people
We are committed to ensuring that our
people are engaged, motivated, happy
and safe at work. Never has this been
more important than during 2020, as we
have worked together to successfully
navigate the COVID-19 pandemic.
Furthermore, we recognise the
immeasurable value that a diverse
workforce brings in terms of driving
innovation, creativity and the sharing
of new ideas across our business.
Creating an environment where our people can thrive
We work tirelessly to build and maintain a supportive and nurturing workplace.
Our efforts include:
› Employee engagement: We maintain
› An equal, diverse and inclusive working
a range of digital communication
channels to support and encourage open
communication between employees and
managers. We also undertake Group-
wide engagement surveys to ensure we
remain responsive to employee views.
› Talent management: Our holistic approach
is underpinned by our Talent Management
Framework. This supports the development
of our employees across the different
stages of their careers, whilst helping to
ensure they are engaged and consistently
perform to the best of their abilities.
› Group-wide employee benefits: In
addition to competitive base salaries and
performance-linked bonuses, we offer
Group-wide benefits ranging from extended
maternity and paternity leave, to healthcare
cover and competitive pension plans.
› Learning and development: Our
approach to learning and development
(‘L&D’) is underpinned by a robust
L&D architecture, which supports the
implementation of a consistent, responsive
and centrally managed learning model.
This has been strengthened by our
new L&D Charter, which we rolled out
during the year to further define our
development vision, objectives, and
related roles and responsibilities.
Network International Holdings Plc
Annual Report and Accounts 2020
environment: We promote the fair
treatment of all employees, irrespective
of personal characteristics. As reflected
in our revised Equality, Diversity and
Inclusion Policy, we place particular
emphasis on promoting gender inclusion
and equality across our workforce.
1,309
Total workforce
(2019: 1,309)
3.8%
Employee turnover rate
(2019: 7.1%)
To find out more about these and other
efforts see ‘Helping our People Thrive’
See page 60
Strategic report
25
Empowering diversity and
progress in the workplace by
treating everyone with respect,
dignity and fairness.
“ It feels good to be part of
an organisation that upholds
diversity and acknowledges
that excellence does not
recognise gender. Network
International empowers
women to thrive in a safe,
secure and inclusive
workplace where people
with diverse backgrounds
can work and grow together.”
Desiree Daniels: Responsible Business
Champion, South Africa
73%
Group-wide employee
engagement score
(2019: 65%)
54
Nationalities represented
across our global workforce
(2019: 53)
Empowerment initiatives
Are supported throughout the
organisation, from the Executive
level and throughout the
workforce. Just one example is
our ‘This Girl Can’ initiative. This
is focused on creating a safe
space and networking group
to discuss challenges faced by
women who work across our
Africa team. Helping them to
learn additional skills and tools
to develop in the workplace.
We have also expanded
our networking and skills
development sessions for
female employees from the
UAE to all of our regions.
These sessions, which are open
to all female employees, focus
on areas such as pitching /
presentation skills, negotiation
skills and conflict resolution.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 26
Key Performance Indicators
Measuring our progress
We use financial and operational metrics to
measure the progress of our strategic goals.
Financial
Revenue
USD 284.8m
(15.1)%
Underlying EBITDA1
USD 112.6m
(33.2)%
Underlying EPS1,3
USD 6.7 cents
(62.1)%
Operational
Total Processed Volume2 (‘TPV’)
USD 33.5bn
(23.4)%
Number of cards hosted2
16.2m
+14.1%
Number of transactions2
758.1m
+0.8%
2020
2019
2018
2020
2019
2018
2020
6.7
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
284.8
335.4
298.0
Definition
Total revenue generated
by the Group.
112.6
168.5
147.4
Definition
Earnings before interest, taxes, depreciation &
amortisation (‘D&A’), impairment losses on assets,
gain on sale of investment securities, share of
depreciation of an associate and Specially Disclosed
Items (‘SDIs’) affecting underlying EBITDA.
17.7
17.5
Definition
Profit from continuing operations adjusted for
impairment losses on assets, gains on disposal
of investment securities and SDIs; which is
divided by the weighted average number of
shares outstanding.
33.5
43.8
39.9
Definition
The aggregate monetary value of purchases
processed by the Group within its Merchant
Solutions business line.
16.2
14.2
13.6
758.1
752.0
681.4
Definition
The aggregate number of cards hosted and
billed by the Group within its Issuer Solutions
business line.
Definition
The aggregate number of transactions
processed and billed by the Group within
its Issuer Solutions business line.
2019 and 2018 financial KPIs have been reclassified according to the presentation of our financial statements in 2020.
For further detail on the reclassifications please refer to the CFO Review.
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
2 This is a KPI. For definition please refer to page 55.
3 Share count impacted by issuance of 50m additional shares for DPO acquisition.
Network International Holdings Plc
Annual Report and Accounts 2020
Importance
Growing revenue across the Group
indicates underlying market growth
and share gains.
Importance
By choosing to invest in and grow
the business, we enable ongoing
profit growth.
Importance
Ensures a focus on the entire income
statement, profitable growth and
shareholder value creation.
Importance
Processed volumes indicates the
underlying growth and health of
the Merchant Solutions business.
Importance
An indicator of the underlying
growth and health of the Issuer
Solutions business.
Importance
An indicator of the underlying
growth and health of the Issuer
Solutions business.
Our KPIs are all closely
aligned with our six
strategic priorities
1
Capitalise on digital
payments adoption and
enable financial inclusion
2
Expand customer
base and focus on
high value segments
3
Develop commercial
arrangements with
strategic partners
4
Product expansion
and market penetration
5
Leverage technology
and build capabilities
6
Pursue opportunities
for acceleration
Read more
See page 18
27
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 28
Stakeholder Engagement
Our engagement
with major
stakeholders
Section 172 Directors’ Duties
The Board is aware and highly supportive of its duties
to promote the success of the Company in accordance
with section 172 of the Companies Act. A summary of
how we deliver for our stakeholders is outlined below.
Further details on the Board’s activities
in relation to stakeholder engagement
are included on page 88
Our customers
The trust of our customers has been
fundamental to our success and the length
of our relationships with our merchant and
issuing customers are testament to the
strength of those partnerships. Overall
responsibility for customer relationships
and engagement lies with our local
regional relationship managers. Our key
merchant and issuing customers will
have a dedicated account or relationship
manager, who at a minimum will host
monthly and quarterly meetings, which
have mainly taken place in a virtual
environment this year.
We were able to successfully host a
three-day conference for African
customers, in Egypt, prior to the
COVID-19 pandemic, which gave our
customers the opportunity to network
with peers, the Network International
team, and understand future service
and product development.
Through the pandemic, supporting
customers remained a business priority;
we provided fee reductions for a number
of SME merchants and assistance in
transitioning their businesses online; whilst
in Issuer Solutions, we assisted bank
customers and their cardholders by
enabling payment holidays, or extending
expiries on cards where suppliers could
not guarantee a replacement.
The development of our existing
customer relationships, as well as the
signing of new customers, is discussed
in more detail in the CEO’s Review see
page 14, as well as in the Operating
Review, see page 30.
Our people
Our communities
We place enormous focus on the support,
talent development and engagement
of our people. A detailed review of our
employee support and engagement
policies can be found on page 62 of
the Responsible Business section.
During the year, we enhanced our
engagement with colleagues to ensure
they kept safe and were fully supported
whilst working from home. To ensure
there was a regular flow of information
and opportunities for giving feedback
we launched a range of virtual
engagement mechanisms, which are
more fully described on pages 62
and 63. As part of their oversight
responsibilities, a Board level review
was undertaken in line with the
requirements of the UK Corporate
Governance Code.
We are committed to having a positive
impact upon our host societies and as
a digital payments provider throughout
our regions, our business activities
support and promote the financial
inclusion of communities. Our support
for community development and charity
projects helps us to deliver further social
and economic benefits at the local level.
Our generation of economic value is
distributed to investors, employees
and other stakeholders.
A detailed review of our community
engagement policies can be found on page
68 of the Responsible Business section.
AED 5m
in donations and discounted fees
to support UAE small businesses
through the pandemic
>80k
merchant customers
>200
financial institution customers
CEO’s Review
See page 14
73%
employee
engagement score
Corporate social
responsibility
See page 59
Network International Holdings Plc
Annual Report and Accounts 2020
29
and scale of services, this process
may also include an operational risk
and compliance assessment, financial
stability checks, data protection and
cyber security assessments.
Our Vendor Code of Conduct
encompasses principles and
expectations as to how our suppliers
conduct business, and engage, with
us. These expectations encompass
business integrity; the treatment
of employees and compliance with
modern slavery requirements;
anti-bribery and anti-corruption
standards; safeguarding of data
and confidential information; and
a commitment to promoting
environmental sustainability.
In order to support our suppliers and
work collaboratively, we have placed an
emphasis on relationship management.
We encourage our suppliers to provide
our colleagues with training, so that we
can better understand their technical
services and approach. This is
supplemented by regular discussions
to address resolution management
and improved ways of working on both
sides. We have also implemented a
‘purchasing plan’ with some suppliers
to provide them with advance notice
of our requirements to allow them to
prepare accordingly.
Our shareholders
The Executive Management Team,
Investor Relations team, and members
of the Board have engaged frequently
with institutional shareholders,
and potential shareholders. Whilst
COVID-19 prevented in-person
meetings, these were substituted
with virtual meetings. The Board
was cognisant of the shareholder
experience during the year, and open
to understanding feedback and issues
raised by the market. This informed
our decision to increase engagement
and enhance financial disclosures.
The Executive Management Team
and Investor Relations team have
participated in over 800 meetings
with over 270 institutions, including
sector conferences and a wide range
of virtual fireside meetings hosted by
We have also implemented a
performance development plan
which was established for the first
time in 2019. This is aimed at
strengthening suppliers’ performance
and capabilities, based on five main
categories: quality of service, delivery
timelines, responsiveness, and price
and technology capabilities. During
2020, we carried out over 40 supplier
evaluations to assess their capabilities,
and to ensure that both customers
and suppliers work in harmonisation
for improved service levels. We saw
a significant improvement in scoring
when compared with the 2019 outcomes.
To maintain continuous support
and manage any potential supplier
risks, periodic on-site reviews were
conducted for certain suppliers during
the first quarter of 2020. In response
to COVID-19, an additional assessment
was conducted for 80 vendors in
order to assess their resiliency and
ability to continue to provide
uninterrupted services.
Corporate social
responsibility
See page 59
the sellside analyst community. Lines
of communication with shareholders
are supplemented by announcements
and trading statements, alongside
information and presentations posted
to the corporate website. During the
year we increased the number of
scheduled announcements to the
market, in light of the pandemic, and
also significantly increased our data
and financial disclosure.
The Chairman also met with a number of
shareholders during the year, to discuss
matters of Corporate Governance and
broader strategic topics; whilst the
Chair of the Remuneration Committee,
Victoria Hull, consulted with major
shareholders regarding the proposed
Remuneration Policy during the period.
Our suppliers
We are supported by a number of
third-party suppliers, to enable us
to deliver high-quality service to our
customers. We are committed to
maintaining a reliable and ethical
supply chain and to achieve this we
work with our suppliers in a number of
ways – through detailed due diligence
at the start of the relationship; getting
our suppliers’ commitment to abide by
our Vendor Code of Conduct; regular
interactions to ensure we are working
together collaboratively; and supplier
evaluation throughout the relationship
to assess the quality of service and
minimise any risks.
Supplier due diligence is conducted
before on boarding new third-party
suppliers. Depending on the scope
USD 6.7cents
underlying EPS1
USD 1.2cents
reported EPS
CEO’s Review
See page 14
CFO’s Review
See page 42
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for
APM definitions and the reconciliations of reported figures to APMs.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 30
Operating Review
Merchant Solutions
Merchant Solutions revenue
USD
109.4
million
We provide services and
solutions that allow over
80,000 merchants to accept
card or digital payments
from consumers, through a
broad range of omnichannel
products that can accept
multiple payments types.
In Merchant Solutions, we
provide direct acquiring
services to merchants,
as well as white-label and
acquirer processing services
to bank customers.
Network International Holdings Plc
Annual Report and Accounts 2020
Direct acquiring and
acquirer processing services
Direct acquiring:
In the UAE and Jordan, we contract
directly with merchants for their
acquiring services, all under our own
brand and for which we assume the
credit risk. We provide solutions that
allow merchants to accept digital
consumer payments and facilitate
those transactions by obtaining
authorisation with the payment
schemes before settling the transaction
into the merchant’s bank account.
White-labelling and
acquirer processing:
We provide acquirer processing
services to bank customers, which
allows them to maintain merchant
relationships and retain the credit
risk, whilst we provide the processing
function and operations support.
This provides banks with a market-
leading solution without the need
for significant investment or
additional capabilities.
Value Added Services:
We also provide merchant customers
with a wide array of additional
services that complement our core
direct acquiring offering, including:
› Loyalty programmes to help
customers drive repeat sales and
increase loyalty.
› Dynamic Currency Conversion
(‘DCC’) and Multi-Currency
Pricing (‘MCP’) allows merchants
to allow consumers to pay in their
home currency, while facilitating
the foreign exchange conversion
and merchant payment.
› Easy Payment Plans that allow
consumers to convert high
value purchases into monthly
instalments, although we do
not bear the credit risk as a part
of this service.
31
How we generate our
revenue in Merchant
Solutions:
› Transaction based revenue:
The aggregate value of digital
transactions processed by
our merchant customers is
known as the Total Processed
Volume. Our revenue is the
Net Merchant Service Fee,
which is based on a percentage
of the TPV. The Net MSF is
the resultant charge after
interchange (paid to card
issuing banks) and scheme
fees (paid to card schemes
such as Mastercard or Visa)
are deducted from the Gross
MSF charged to a merchant.
› Non-transaction based
revenue: Fees from Value
Added Services, rental streams
from POS terminals and project
related revenues.
› SmartView Interactive Dashboard
and Performance Reports provide
in-depth analysis of a customer’s
business based on key payments-
related metrics.
› 3DSecure is an industry standard
card security solution which
reduces online fraud and increases
protection for both merchant
customers and their consumers.
› Digital Onboarding offers a secure,
flexible, and fully automated
solution that allows SME customers
to be onboarded digitally in a
swifter timeframe.
› Data analytics and insights to help
merchants and customers better
understand consumer spending
patterns and other dynamics.
Network International Holdings Plc
Annual Report and Accounts 2020
Omnichannel payment
acceptance solutions
Our products that allow
merchants to accept digital
payments
Offline:
Through our N-Genius™
POS terminals
Newly launched smartphone
payment acceptance app
Online:
Through our proprietary
e-commerce payment
gateway, N-Genius™ online
Strategic reportCorporate governanceFinancial statements 32
32
Operating Review continued
Merchant settlement processes
In the direct acquiring business,
Network International is responsible
for the settlement of funds to
merchant customers, and assumes
the credit risk associated with this.
This settlement process is a funding
cycle that iterates daily, and is
reflective of the TPV, processed
on behalf of merchant customers,
in the immediate preceding days.
In line with general market practice
in the Middle East, when a consumer
conducts a digital transaction with
a merchant, Network International
generally remits cash due to the
merchant on the day following the
transaction (‘T+1’). These balances
payable to merchants are included
in the ‘merchant creditors’ balance
on the Group’s consolidated balance
sheet. We subsequently receive
funds into our bank accounts
through the scheme settlement
processes on T+2 and from any
issuing banks on T+1. These balances
are included in the ‘scheme debtors’
balance. At any given point in time
there will be around two days of
‘scheme debtor’ receivables pending
to Network International, whereas
‘merchant creditor’ payables are
outstanding for only a day. As a
result of this, a working capital
requirement arises equal to these
settlement balances. This working
capital requirement is funded by our
banking partners via an overdraft
facility which is continuously settled
as the schemes remit money to us.
The relative movements of scheme
debtors and merchant creditors
often follow a similar trajectory,
although there are a number of
circumstances in which they can
vary. For example: i) if the period end
falls on a weekend, when banks are
closed in the US but open in the UAE,
this creates a snapshot of elevated
settlement balances because it
causes an extra day delay (‘T+2/3’)
in receipt of funds through the
scheme settlement processes;
ii) currency mix of TPV, which can
impact scheme settlement timelines;
iii) there are small number of
merchants who are not settled daily;
iv) TPV in the last few days prior to
period end.
Restricted cash balances should
be considered separately, and are
discussed in the next section, related
to chargebacks and collateral.
How we generate our
Net Merchant Service Fee (MSF)
Our revenue is the Net
Merchant Service Fee (‘MSF’),
which is based on a percentage
of the TPV. The Net MSF is
the resultant charge, after
interchange and scheme fees
are deducted from the Gross
MSF charged to the merchant.
CASH TO MERCHANT
the Gross MSF
Bank
account
CASH CONVERSION
Net MSF remittance
paid directly to Network
International – The
resultant charge after
interchange and scheme
fees are deducted.
%
Scheme fees
%
Issuer/banks
Day of
transaction
PROCESS TIMELINE
T+1
PROCESS TIMELINE
T+2/3
Network remits cash due
to the merchant
settles the merchant for
the value of the transaction, typically
on T+1 basis; post authorisation from
the payment schemes.
Network collection
collects from the
schemes and issuing banks,
for the value of the transaction,
minus the interchange and
scheme fees as applicable.
A consumer pays a merchant
for goods/services
is responsible for the
settlement of funds to merchant
customers. No cash released
by Network International until
authorised by schemes/issuers.
Network International Holdings Plc
Annual Report and Accounts 2020
Chargebacks and collateral
If a consumer contests a transaction
with a merchant, and the merchant
is unable or unwilling to provide
a refund, Network International
holds the potential liability for that
transaction. Where the consumer
is unable to receive redress from the
merchant, the consumer may raise a
refund request with their card issuer.
For example, if the consumer is
dissatisfied with goods or services
purchased, if there is non delivery of
goods or services, if the transaction
is fraudulent, or if the cardholder was
charged but the transaction did not
complete due to technical issues.
In the ordinary course of business,
refunds will be the responsibility
of the merchant. However, if the
merchant is unable to cover the
cost of the refund, the acquirer
will be liable for the transaction.
In order to manage our risk
appropriately, Network International
holds collateral against selected
merchants where we see a higher
risk of potential chargebacks.
Such collateral can be held in the
form of restricted cash (where we
defer payment of a proportion
of the settlement funds otherwise
due), or we receive a cash deposit
from the merchant.
As a result of these risk management
disciplines, Network International
has historically low chargeback
losses, which in 2020 were only
0.003% of TPV.
33
Risk management of
merchant customers
We process all the transactions
associated with the merchant
acquiring business line, through
our own platforms, and do not
rely on third parties to conduct
such activities.
We follow a thorough risk assessment
process before onboarding any
merchant. This involves KYC (Know
Your Customer) and AML (Anti-
Money Laundering) checks, as well as
risk based underwriting to assess the
credit worthiness of the merchant.
The vast majority of our direct
acquiring business is through
direct relationships with the
merchant. However, we also process
transactions for merchants who
contract with an aggregator partner.
An aggregator will work with a
number of merchant customers,
which are typically SME businesses.
Whilst Network International
contracts with the aggregator, it is
the aggregator who contracts with
the end merchant and ultimately
bears the credit risk. When we
work with aggregators, we agree
the associated risk appetite and
parameters and ensure that the
aggregator follows our credit risk
management guidelines. Whilst
the aggregator holds the merchant
relationship, Network International
will also undertake KYC checks on
each of the merchants contracted
through the aggregator.
Network International does not
provide any merchant lending, or
merchant cash-advance services,
and therefore we have no financial
risk associated with such services.
0.003%
chargeback loss as a % of TPV
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 34
Operating Review continued
Issuer Solutions
Issuer Solutions revenue
USD
165.0
million
Our Issuer Solutions
business supports financial
institutions in the region,
where we act as an
outsourced service provider
to manage their card
operations – across debit,
credit, prepaid, virtual,
ATM, or retail cards.
Network International Holdings Plc
Annual Report and Accounts 2020
Issuer processing solutions
We provide outsourced processing
services for card issuing financial
institution customers. We connect
these card issuing customers with
card schemes (such as Mastercard
and Visa) to facilitate, authorise and
settle transactions for their card
holding consumers. Network
International is not an issuer of
cards, and we do not provide lending
to consumers or cardholders.
Card solutions
We provide financial institution
customers with the ability to open
card accounts for consumers, and
issue and create a range of card
products, including credit, debit
and prepaid cards. We allow them
to manage the entire life cycle of
cards issued through our advanced
Card Management System, which
has the ability to manage over 200
card types. Through this service,
customers do not have to develop
their own in-house technology or
operations capability, reducing their
long-term costs as a card issuer.
Value Added Services
As with our Merchant Solutions
business, we also offer a set of
products and Value Added Services
to complement our core processing
capabilities, such as fraud solutions
and data analytics.
› Advanced Fraud Solutions,
3D Secure and Falcon is a
comprehensive, end-to end fraud
management solution for financial
institution customers to defend
against card fraud.
› ATM solutions include our
operating of JONET, the principal
ATM switch in Jordan, which
connects member banks and
payment schemes to support
cash withdrawals and other
ATM services.
› Data analytics provides financial
institutions with insights, SmartView
dashboards and insights related to
spending and transaction patterns
of cardholders.
› Card Control is a tool that allows
cardholders to control the types of
transactions they approve on their
cards, providing them with more
control while reducing instances
of fraud for card issuers.
› Instant Issuance enables instant
issuance of debit, credit and
prepaid cards as well as activation
and PIN set up, either at our
customers’ branches or other
specified locations.
› Loyalty Programmes enable
financial institutions to manage
loyalty programmes including cash
back rewards, points and miles.
› Electronic Billing is a payment
service that allows financial
institutions to offer a comprehensive
utility bill payment service to their
customers through their website
or ATMs.
35
How we generate our
revenue in Issuer
Solutions:
There are three revenue streams
in Issuer Solutions:
› Revenue per card hosted:
A fee based on the number
of cards hosted for a customer
(not linked to the number
of transactions conducted
on the card).
› Revenue per transaction:
A fee per transaction
processed on a card (not linked
to the value of the transaction).
› Value added services:
A blend of fixed fees, or fees
linked with cards hosted,
or transactions processed.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 36
Operating Review continued
Technology
Network has recently invested in the
development, and completion, of two core
payment processing platforms, Network One
and Network Lite. The core systems used to
power our platforms are commercial solutions
from leading international technology providers.
These have been supplemented with adjacent
systems and services to provide a flexible,
predictable and robust operating model that
delivers high-quality payment processing
solutions for all our customer needs.
Network International Holdings Plc
Annual Report and Accounts 2020
37
Network One
Network One is a one-stop solution
for payment processing that is
highly scalable and available,
and services the most advanced
requirements of our customers.
It serves both Issuer Solutions and
Merchant Solutions needs, and is
designed and engineered using
the Way4 card and merchant
management system from the
OpenWay Group. We have
integrated this with the Base-24
switching platform supplied by
ACI-worldwide, to provide switching
capability to manage the payments
transaction traffic to and from card
schemes. Network One also offers a
sophisticated range of Value Added
Services through an integration
layer, enabled by our proprietary
application programming interface
(‘API’) technologies, that connect
directly to our customers.
Network Lite
Our strategic approach to technology
The Network Lite platform is a
compact yet powerful system,
designed to meet the core
processing needs of the African
customer market. It uses an
integrated software solution
from Compass Plus known
as Tranzware; and supports
debit, credit, ATM and acquirer
processing.
From a technology perspective,
the services provided by Network
International can be categorised
under four main areas: Issuing
services, Acquiring services,
Switching services and Value
Added Services.
› Issuing services: On behalf of
card issuing financial institutions,
we operate a Card Management
System (‘CMS’) which plays the
role of hosting card information.
This system is used to authorise
transactions that are initiated by
the cardholders.
› Acquiring services: On behalf
of merchants and acquirers,
we operate a merchant
management and point-of-sale
solution that enables merchants
to accept card and other forms
of digital payment, as well as
support them with settlement
of funds.
› Switching services: In order to
complement all the previously
mentioned services, we operate
a payment switch that serves
as a gateway to domestic and
international card schemes,
as well as banks and financial
institutions.
› Value Added Services:
We operate various different
technology platforms, including:
an artificial intelligence driven
fraud management solution; an
industry leading loyalty platform
to support financial institutions
in providing loyalty services to
their customers; as well as a risk
management solution that helps
card holders control card usage
and increase security.
The need to stand out in an
ever changing market requires
continuous innovation in our
services. In our strategic approach
to technology, we are exploring
solutions such as the ability to
support financial institutions with
the issuance of virtual cards to
replace physical plastic, and the use
of those cards in mobile wallets.
In addition, unlike traditional
switching, the need for real-time
payments has become increasingly
encouraged by central banks and
card schemes, which is another area
of development. In acquiring, the
market is evolving towards the use
of mobile phones and devices as a
means to store and transfer money,
which generates additional needs
for our customers around security
and compliance. We will also
continue to enhance our existing
platforms to enable an increasingly
automated, self-service and digital
first approach to customer
onboarding. Finally, we are also
exploring various partnership
opportunities with technology
providers and Fintechs, to support
the enablement of next generation
payment solutions to our customers.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 38
Business Review
Middle East
Middle East revenue
USD
198.2
million
65.5%
Contribution margin1
Strategic focus
› End-to-end payments solutions,
with direct acquiring in the UAE
and Jordan
› Scale and leadership, given our
25+ year presence in the region and
long-term blue chip customer base
› Strategy focused on consolidation,
high value customer segments and
cross-selling
› Customer demand for value added
services such as fraud protection,
loyalty solutions and data analytics
› Significant future growth
opportunity in Saudi Arabia
A selection of our partners
1
This is an alternative performance measure (‘APM’). See note 5 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
Network International Holdings Plc
Annual Report and Accounts 2020
Our market position
Our operations in the Middle East are
broadly balanced across Merchant
Solutions and Issuer Solutions.
Overseen from our head office in
Dubai, we have been present in the
Middle East since 1994, where our
primary markets are the UAE and
Jordan, which are the only regions
in which we provide direct acquiring
services to merchants.
The Middle East continues to show
a fast-moving transition from cash
to digital payments. Whilst there
has been some short-term negative
impact on the business, due to
COVID-19, we are seeing evidence
that the transition to digital payments
will speed up as a result of the
pandemic shifting consumer
spending behaviours.
The majority of our competitors
across the Middle East market are
financial institutions, conducting their
own acquiring and issuing payments
activities. Our competitive advantage
is based upon our breadth of service
offering across the entire payments
value chain, pan regional approach,
long-term local presence and history
of strong relationships. We have the
number one market share position in
Merchant Solutions across the UAE,
and in Issuer Solutions, we look to
capture outsourcing opportunities
as banks and financial instructions
streamline their business models.
Our strategy across the Middle East
is to consolidate our market leading
position across the region and the
payments value chain. For the UAE
and Jordan, our focus is on delivering
end-to-end payment solutions, with
direct acquiring a specific focus,
targeting high value customer
segments. Cross-selling is also a
strategic priority, specifically across
our value added services, such as
fraud protection, loyalty solutions
and data analytics, where we
continue to see strong demand.
The Kingdom of Saudi Arabia
remains a large new market
opportunity for us in the future.
39
Demand for our N-Genius™ online
gateway also accelerated, with
over 1,600 merchant signings
during the year.
Online strategic case study
See page 22
In Issuer Solutions, we secured
the competitive tender to provide
exclusive services across five
countries for CareemPAY. This is a
five-year agreement and is a part of
Careem’s digital payments initiative
enabling its captains to access their
daily trip earnings in real-time via a
Visa card. We also renewed our
Issuer Solutions contract with United
Arab Bank for a further three years.
As a part of our Coronavirus
Management Strategy, we paused
our market entry to Saudi Arabia,
linked to the border closures and
supply chain restrictions associated
with the pandemic. We remain
committed to expanding our
presence there, given the significant
growth opportunity this will provide
to our business, and we intend to
progress with our market entry as
soon as border restrictions and
supply chains ease.
CEO’s Review
See page 14
Our performance during the year
Our performance during the year was
significantly impacted by COVID-19,
due to the stringent lockdowns and
merchant closures for much of the
second quarter. The TPV in Merchant
Solutions were particularly impacted
by the decline of international tourism
into the UAE. However, since the
easing of lockdown measures across
the region, we have seen a gradual
and steady improvement across both
business lines, and exited 2020 with
transactions and TPV from domestic
transactions showing a recovery
to 2019 levels. Whilst international
related TPV remained low, tourism
into the UAE began to increase
towards the end of the year.
Supporting our customers through
the lockdowns was a priority and
we implemented a number of
initiatives, including fee reductions
and cash support for a number of
SME merchants.
Our COVID-19 Response
See page 6
We successfully delivered on a
number of strategic initiatives and
new customer signings. In Merchant
Solutions we signed a number of new
direct acquiring merchant customers,
including: Alexander McQueen,
Bvlgari, Adidas and Luxury Fashion
Gulf, the online acquiring for NowNow
(part of Noon Group) and Jimmy
Choo. We also signed a partnership
agreement with online payments
services provider, HyperPay.
Middle East, an accelerating payments market
21%
digital payments share
of transactions
252m
population, growing
at 1.7%
0.52
payment cards per adult
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 40
Business Review continued
Africa
Africa revenue
USD
80.0
million
67.9%
Contribution margin1
Strategic focus
› Most underpenetrated and
fast growing payments market
in the world
› Our competitive strength
is rooted in a pan African presence
across the payments value chain,
with an ability to localise our
approach in a highly varied and
fragmented market
› We are the regional leader with
a loyal and developing customer
base. Retaining significant
headroom to grow with existing
customers and win new business
› With opportunities to further
accelerate our growth through
the proposed acquisition of
DPO, or winning significant
outsourcing contracts
A selection of our partners
1
This is an alternative performance measure (‘APM’). See note 5 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
Network International Holdings Plc
Annual Report and Accounts 2020
41
We are also working towards
N-Genius™ gateway implementation
with bank customers after
certification in three countries.
During the year, we also announced
our intention to acquire DPO, which
will provide a significant growth
opportunity. DPO is the largest online
commerce platform operating at
scale across Africa, which offers
online and mobile money payments
services to over 59,000 merchants.
Whilst COVID-19 has resulted in
some short-term challenges, we
are seeing indicators that the shift
from cash to digital payments is
accelerating, supporting growth
of the digital payments market
and long-term growth potential
for our business.
Our performance during the year
Our performance during the period
was impacted by COVID-19, where
our major markets: Egypt, South
Africa and Nigeria, all experienced
stringent lockdown measures during
the second quarter. The wider
economic impacts of COVID-19
across the continent have also led
to a slowing in the outsourcing of
payments processing activities by
banks, albeit this is expected to be
short term, with no structural change
in this dynamic. The weighting of our
Africa operations to Issuer Solutions
did support the resilience of the
business, as not all revenue streams
are directly linked to underlying
transaction volumes, but are also
generated from the hosting of card
portfolios and value added services.
Despite the challenges associated
with COVID-19, we successfully
expanded card processing contracts
with Fidelity Bank Ghana, and added
two million accounts hosted on
our platform for RCS Bank in South
Africa. Further successes for our
Issuer Solutions business included
new customers such as Globus Bank
in Nigeria and Republic Bank in
Ghana, and contract renewals from
Woolworths Financial Services in
South Africa. In Merchant Solutions,
the launch and rollout of our
N-Genius™ POS devices throughout
the continent continued with
Standard Bank and Orabank across
eight countries, and with Arab
African International Bank in Egypt.
Our market position
We provide a full range of Merchant
and Issuer Solutions services across
Africa, with a strong base on the
issuing side of the business. We are
active across more than 40 countries
and operate a hub and spoke model
to manage customer relationships
across the continent, often retaining
local relationship managers, with
dedicated operational centres in
Egypt, Nigeria, South Africa and
the UAE.
The African market is diverse and
complex, comprising multiple
regulators, currencies and languages,
with numerous local payment
schemes. However, Africa continues
to represent a high growth market at
an early stage of the digital payments
transition, where our business
opportunity and growth are primarily
driven by the move from banks to
outsource their payments activities.
Network International is the only
independent payment solutions
provider operating across the
continent, at scale, with a wider
range and quality of services
compared with local independent
competitors. Whilst some of the
larger international competitors
occasionally participate, they do not
operate at scale across the continent.
Our growth strategy is centred
around four themes: winning new
customers across our markets,
growing and expanding relationships
with existing customers, widening
our product solutions and value
added services, and developing
and enabling alternative payments
solutions to support growth across
the payments market.
Africa, the most underpenetrated payments market
14%
digital payments share
of transactions
1.3bn
population, growing
at 2.4%
0.32
cards per adult
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 42
Chief Financial Officer’s Review
Positive free cash flow generation
in a challenging environment
Financial review
Select financials
Revenue
Underlying EBITDA1
Underlying EBITDA margin (excl. share of associate)1
Profit from continuing operations
Underlying net income1
Underlying earnings per share (USD cents)1,2
Reported earnings per share (USD cents)2,3
Underlying free cash flow (underlying FCF)1
Cash flow from operating activities
Leverage4
Leverage (including funds raised for DPO acquisition)4
Segmental results
Middle East revenue
Africa revenue
Other revenue5
Middle East contribution margin1
Africa contribution margin1
Business line results
Merchant Solutions revenue
Issuer Solutions revenue
Other revenue5
Key Performance Indicators6
Total Processed Volume (‘TPV’) (USD m)
Total number of cards hosted (m)
Total number of transactions (m)
2020
USD’000
20197
USD’000
Change
(15.1)%
(33.2)%
(11.3)pp
(90.2)%
(60.7)%
(62.1)%
(89.6)%
(25.2)%
(18.8)%
0.7x
–
335,379
168,522
47.4%
57,317
88,309
17.7
11.5
69,232
132,426
1.6x
1.6x
244,833
90,546
–
(19.0)%
(11.6)%
–
72.9%
70.6%
(740)bps
(270)bps
152,955
177,572
4,852
(28.5)%
(7.1)%
114.7%
43,779
(23.4)%
14.2
752.0
14.1%
0.8%
284,844
112,561
36.1%
5,598
34,664
6.7
1.2
51,790
107,500
2.3x
0.0x
198,224
80,020
6,600
65.5%
67.9%
109,415
165,011
10,418
33,540
16.2
758.1
Updates to the presentation
of the financial information
In 2020, management has
undertaken a review of its disclosures
including APMs. In undertaking this
review, management has sought to
simplify the disclosures and has taken
into account evolving best practice
from the FRC and ESMA guidance on
the use of APMs, and feedback from
investors and other key stakeholders
following the issuance of Network’s
first set of accounts as a UK listed
group. Key updates include:
a) reclassifications, where prior year
comparatives have also been
reclassified on the same basis, and;
b) reconciliations and analysis
(on the next page).
We embraced the
challenges of 2020,
taking proactive steps
to manage our cost base,
which minimised the
impact to the bottom
line. Our balance sheet
remains strong with good
liquidity in the business,
and we generated
positive free cash flows
in a tough environment.”
Rohit Malhotra
Chief Financial Officer
Network International Holdings Plc
Annual Report and Accounts 2020
43
Underlying free cash flow
(Underlying FCF)1: In order to
enhance the clarity of underlying
cash flow performance; and to aid
the comparability of our financial
KPIs with peers, we have included
additional deductions in the
definition of underlying FCF1 which
are: SDIs affecting EBITDA; and the
share of EBITDA, less dividends
received from associate Transguard
Cash. Further detail on page 52.
In order to aid understanding of the
financial information, the table below
shows the key financial highlights for
the year, without the impact of the
above mentioned reclassifications:
Revenue
Underlying EBITDA
Underlying net income
Underlying FCF
Underlying EPS
(USD cents)
2020
USD’000
284,219
113,820
50,105
80,873
2019
USD’000
334,906
172,314
104,764
103,237
9.6
21.0
b) Reconciliations and analysis
› A reconciliation of reported
operating cash flow to underlying
FCF1. Further detail on page 53.
› A detailed breakdown and analysis
of net interest expenses. Further
detail on page 47.
› A reconciliation of the movement
in net debt from the prior to
current year. Further detail on
page 55.
› A reconciliation of capital
expenditure to capital spend in the
consolidated statement of cash
flows. Further detail on page 52.
Financial highlights
Revenue
Profit from continuing operations
USD 284.8m
(15.1)%
USD 5.6m
(90.2)%
Underlying EBITDA1
Underlying EPS1,2
USD 112.6m
(33.2)%
USD 6.7cents
(62.1)%
› Unrealised foreign exchange
(gains/losses): arise mainly in
relation to FX volatility. As these
are not material in the current or
prior periods, and are expected to
remain immaterial in future periods,
the Group no longer believes it is
necessary to report separately as
an SDI. Further detail on page 49.
› Amortisation related to
IT transformation: The IT
transformation was a historical
one-off capital investment project
that included the development
of a new technology and card
management platform, the Group’s
proprietary payment gateway,
and a significant upgrade to
the switching system. Following
completion of the project, and in
response to shareholder feedback
regarding the classification of this
item, amortisation related to the
IT transformation has now been
classified within underlying
depreciation and amortisation.
Further detail on page 49.
a) Reclassifications (prior year
comparatives have been
reclassified on the same basis)
Mercury Payments Services LLC: is a
domestic scheme where the Group
retains 70% ownership, and was an
asset held for sale at 31 December
2019. The disposal process has been
delayed due to the niche nature of the
asset and disruption as a result of the
pandemic. As per IFRS requirements,
the criteria for recognising Mercury as
a discontinued operation is no longer
satisfied. The financial performance
of Mercury is now included as part of
continuing operations. Further details
on page 48.
Specially Disclosed Items:
Underlying EBITDA1 and underlying
net income1 now include items that
were previously classified as Specially
Disclosed Items (SDIs).
› Reorganisation, restructuring and
settlements: these expenses are
not material in the period, nor are
they anticipated to be material
in future periods. The Group no
longer believes it is necessary
to report such items separately,
and they are therefore classified
within underlying expenses.
Further detail on page 49.
1
This is an alternative performance measure (‘APM’). See notes 4 and 5 of the consolidated financial statements for APM definitions and the reconciliations
of reported figures to APMs.
2 Average share count has increased as a result of the issuance of 50 million new shares to fund the DPO acquisition.
3 Reported earnings per share is calculated after deducting the non-controlling interest from the profit for the year, in line with the IFRS requirement.
4 Refer to page 54 for the leverage ratio computation and reconciliation of net debt figures to the consolidated financial statements.
5 Other revenue primarily includes revenues recognised relating to the Mastercard strategic partnership. See details on page 44.
6 For KPI definitions, please refer to page 55.
7 There have been reclassifications in financial measures due to the change in presentation of some Specially Disclosed Items (SDIs) and the treatment of Mercury
as a continuing operation. Details on pages 48 and 49.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 44
Chief Financial Officer’s Review continued
Total revenue
Total revenue declined by (15.1)%
(similar on a constant currency
basis2) to USD 284.8 million (2019:
USD 335.4 million). This now includes
USD 0.6 million of revenue from
Mercury (2019: USD 0.5 million)
which was previously classified as
a discontinued operation (further
detail can be found on page 48).
Performance through the period was
significantly impacted by COVID-19
related lockdowns, and the
resultant reductions in transactions
throughout our regions, which is
described in the relevant business
line sections below.
Revenue results by
operating segment
Middle East
The Group’s largest segment is the
Middle East, where revenues are
generated from both Merchant and
Issuer Solutions and represents 70%
of total revenue (2019: 73%). During
the period, Middle East revenue
declined by (19.0)% to USD 198.2
million (2019: USD 244.8 million).
This represented a broadly flat
performance through the first
quarter, where we experienced
normal trends until mid-February,
following which there was an initial
reduction in Merchant Solutions
TPV as a result of reduced inbound
tourism to the UAE. From March
onwards, more significant COVID-19
related impacts were seen across
both business lines as a result of
the stringent lockdown measures
implemented across the region.
The impact was less severe in
Issuer Solutions due to the resilient
nature of the revenue streams and
contractual minimums or fixed
billings, which are discussed further
in the business line section below.
This resulted in H1 2020 Middle East
revenues declining by (15.3)% y/y.
The second half remained impacted
by COVID-19 with reduced
transactions, domestic spending
and lower international tourism,
Year-on-year (y/y) growth
Total revenue
of which Merchant Solutions
of which Issuer Solutions
Network International Holdings Plc
Annual Report and Accounts 2020
with revenues declining by (22.2)%,
but saw a progressive recovery
across both business lines towards
the end of the year. Contribution1 for
the Middle East segment declined by
(27.2)%, to USD 129.9 million (2019:
USD 178.4 million), with contribution
margin1 reducing by (740) bps to
65.5% (2019: 72.9%). This is reflective
of revenue reductions on a largely
fixed cost base.
Africa
The Group’s Africa segment operates
across 43 countries and contributed
28% of total revenue in the period
(2019: 27%). Africa revenue declined
by (11.6)% to USD 80.0 million
(2019: USD 90.5 million), which is
also largely attributed to COVID-19.
Performance in Africa was less
impacted than the Middle East, linked
to the weighting of the business
towards Issuer Solutions, which
demonstrates greater resilience
due to the nature of the revenue
streams. Some of our major markets
in Africa, such as Egypt and Nigeria,
experienced particularly stringent
lockdown measures in the first half.
This created a number of challenging
dynamics, including: significantly
reduced transaction volumes;
limited new card issuance and an
increased rate of card inactivation
and cancellation as a result of our
financial institution clients being
cost conscious; and lower TPV
in Merchant Solutions acquirer
processing. As a result H1 2020 Africa
revenues declined by (10.5)%. During
the second half, lockdown measures
began to ease across a number of
countries and as we exited the year,
transaction volumes and business
momentum were improving. Africa
H2 2020 revenues declined by
(12.6)% y/y, but this was more
reflective of a strong comparable
period in the prior year where the
final quarter of 2019 saw a revenue
benefit from a number of financial
institution customers renewing card
portfolios and requesting additional
project based services.
Contribution1 for the Africa segment
declined by (15.1)%, to USD 54.3
million (2019: USD 64.0 million),
with contribution margin1 reducing
by (270) bps to 67.9%. This was
reflective of the revenue reductions
on a direct cost base which is largely
fixed and remained broadly flat
compared with the prior year.
Other revenue, not allocated
to an operating segment
The Group’s other revenue, which
contributes 2.3% of total revenue,
is derived from solutions developed
as part of the Mastercard strategic
partnership during the period (2019:
Nil). The solutions developed in 2020
included the launch of the corporate
card and digital platform (discussed
in the CEO’s Review). These solutions
are developed for use with
customers across both the Middle
East and Africa, and therefore are
not allocated to either of the two
operating segments.
Revenue results by
business line
We serve customers via two core
business lines: Merchant Solutions
and Issuer Solutions.
Merchant Solutions revenue
Revenue for the Merchant Solutions
business, which comprised 38% of
total revenue, decreased by (28.5)%
to USD 109.4 million (2019: USD
153.0 million). Total TPV3 declined
by (23.4)% to USD 33.5 billion
(2019: USD 43.8 billion). In Merchant
Solutions our revenues are generated
through fees dependent upon the
value of transactions (‘TPV’3) as
well as through value added services
and are tightly correlated to the
underlying value of transactions
taking place. Merchant Solutions
services are largely focused on our
direct acquiring markets in the UAE
and Jordan, with performance over
the first half period therefore closely
linked to the lockdown measures in
place and the related reduction in
consumer spending. Through the
Q1
0%
(8)%
2%
Q2
(23)%
(43)%
(10)%
H1
(12)%
(26)%
(4)%
Q3
(17)%
(30)%
(6)%
Q4
(19)%
(31)%
(13)%
H2
(18)%
(30)%
(10)%
FY
(15)%
(28)%
(7)%
second half of the year, as the
lockdown measures started to ease
in the region, we saw a gradual and
ongoing improvement in domestic
TPV3 which recovered to prior year
levels as we exited the period.
International volumes (which are
largely spends from international
travellers) remained significantly
depressed at (60)% y/y, reflective
of reduced tourism and business
travel into the region, but showed
promising improvement as we exited
the year where the UAE was one of
only a few countries open to tourism.
We also continued to see an
acceleration and growing participation
of online TPV3, with growth of 53%
y/y from e-commerce merchants
(excluding Government and airline
online TPV3).
Take rates4 were slightly lower than
the prior year, driven by: the change
in merchant segment mix as a result
of the pandemic, where we saw an
increased participation of TPV3 from
lower margin sectors; regulatory
changes introduced in Jordan during
August, where caps have been placed
on the fees we charge to merchants;
and higher non-TPV related revenue
streams in the prior year.
Refunds and chargebacks remained
low and within expected tolerances
through the pandemic, with no
significant increases in unrecoverable
chargebacks or single client losses.
This is representative of our diverse
merchant sector base and the
ongoing steps we have taken to
manage our risks, including holding
cash reserves where appropriate.
Issuer Solutions revenue
Revenue for Issuer Solutions, which
comprises 58% of total revenue,
decreased by (7.1)% to USD 165.0
million (2019: USD 177.6 million). In
Issuer Solutions we generate revenue
from three streams: fees linked with
the number of cards hosted on our
platform; fees linked to transaction
volumes; and fees from value added
services. Our customers are typically
2020 trends in directly acquired Total Processed Volume (‘TPV’)3
Sector trends in directly processed TPV, (y/y) growth
%
40
20
0
-20
-40
-60
-80
-100
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total TPV
of which Retail
of which Supermarkets
of which Travel & Entertainment
of which Other (Government, Healthcare & Education, Other)
Domestic and International trends in directly processed TPV, (y/y) growth
%
20
0
-20
-40
-60
-80
-100
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total TPV
of which Domestic
of which International
1
This is an alternative performance measure (‘APM’). See note 5 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
2 For constant currency definition, please refer to page 55.
3 For KPI definitions, please refer to page 55.
4 Take rates are an output measure in the Merchant Solutions business, and reflect revenue as a proportion of TPV.
45
financial institutions, where we have
multi-year contracts in place and a
number have contractual minimums.
Therefore our revenues for this
business line are somewhat
correlated to underlying transaction
volumes but have a greater resilience
due to the card hosting and
contractually fixed elements and
were therefore fairly defensive in the
face of COVID-19 challenges. Issuer
Solutions experienced normal trading
through January and February but
following the implementation of
lockdown measures across nearly
all of our markets towards the end
of March, we saw a reduction in
revenues of just over (10)% year-
on-year through Q2. As lockdowns
started to ease and consumer
confidence began to recover across
a number of countries, we saw a
gradual improvement in transactions
and absolute revenues in the
business line improved sequentially
through Q3 and Q4. The two KPIs
associated with Issuer Solutions
include the number of cards hosted
on our platform3, which grew by 14.1%
to 16.2 million, and transaction
volumes3, which were largely flat at
758.1 million. During the year, we
adjusted the billing mechanism for
one of our larger bank customers.
Previously, the customer was billed
according to the number of cards
and accounts hosted but has now
moved to billing based on the
number of cards hosted and
transactions processed, which is our
preferred approach. Without this
change, the number of transactions
billed would have declined by (8)%,
which is reflective of COVID-19
impacts, and growth in cards hosted
and billed would have been 19%.
Whilst overall we saw growth in the
number of cards hosted, this number
was significantly boosted by the
addition of 2.1 million prepaid retail
cards from RCS Group in South
Africa. Aside from this addition,
COVID-19 significantly limited new
card issuance due to the closure
of bank branches, and financial
pressures on banks also led to a
greater number of inactive card
cancellations than would otherwise
occur in a normal year.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 46
Chief Financial Officer’s Review continued
Other revenue not allocated
to a business line
The Group’s other revenue of USD
10.4 million, which contributes 4% of
total revenue, is mainly derived from
the Mastercard strategic partnership,
cash advance fees on withdrawals
from ATMs, and foreign exchange
gains / (losses) arising from the
Merchant and Issuer Solutions
business lines.
Expenses
Personnel expenses: Total personnel
expenses were USD 97.0 million
(2019: USD 96.7 million). This includes
SDIs of USD 10.4 million (2019: USD
14.5 million). Underlying personnel
expenses1 now includes expenses
relating to reorganisation, restructuring
and settlements (USD Nil; 2019: USD 2.1
million) that were previously classified
as an SDI. The prior year has also
been reclassified on the same basis.
Adjusting for SDIs, on a like for like
basis, underlying personnel expenses1
were USD 86.5 million (2019: USD 82.3
million), 5.1% higher when compared
with the prior year, reflecting our
growth in employee headcount, added
in the second half of 2019, offset by
COVID-19 related cost saving measures
such as a hiring freeze and reduced
payout for annual performance
bonuses and sales incentives.
Selling, operating and other
expenses: Total selling, operating
and other expenses were USD 103.2
million (2019: USD 106.4 million).
This includes SDIs of USD 7.7 million
(2019: USD 12.3 million).
Underlying selling, operating and
other expenses1 grew by 1.5% to USD
95.5 million (2019: USD 94.1 million).
This reflects: our ongoing investments
in cyber security, IT systems and
compliance; costs associated with the
roll out of our product range; and the
stronger uptake of online payment
solutions during the year. Third-party
costs were lower y/y reflecting the
reduction in volumes and transactions
processed through the period.
(Whilst we conduct all core payments
processing activities in-house, we
utilise third-party vendors to provide
certain components of our value
added services such card embossing
and personalisation services, SMS
services and 3D secure). We also
saw a reduction in spends across
discretionary expenses, travel and
entertainment, advertising and
marketing as a result of our COVID-19
cost saving measures.
Expected credit losses (‘ECL’)
increased to USD 2.2 million (2019:
USD 0.5 million). The increase is
reflective of: i) the provision on
chargeback and other receivables
(related to POS rental and other
charges) at USD 1.8 million (2019:
USD 0.3 million). While this has
increased y/y, our overall provision
on chargeback losses and other
receivables remains very low despite
the pandemic and tough economic
environment; ii) the provision for
issuer and acquirer processing
receivables at USD 0.4 million (2019:
USD 0.2 million). Although some
payments from customers were
delayed during the pandemic, the
overall provision remained low as a
result of our proactive steps taken
to ensure payments.
Share of EBITDA1 of associate
The Group’s share of EBITDA of
associate, Transguard Cash, was USD
9.7 million (2019: USD 9.5 million).
Transguard Cash provides end to end
ATM management services in the
UAE and business performance was
impacted by the lockdown measures
in place, resulting in reduced volumes
of ATM replenishments and cash
collections from merchant outlets,
which was offset by cost savings and
operational efficiencies, resulting in
the share of EBITDA being marginally
higher than 2019.
Expenses
Salaries and allowances
Bonus and sales incentives
Share-based compensation
Terminal and other benefits
Total personnel expenses
Technology and communication costs
Third-party costs
Legal and professional fees
Provision for expected credit loss
Other general and administrative expenses
Selling, operating and other expenses
Depreciation and amortisation
Share of depreciation from associate
Total depreciation and amortisation
Net Interest expense
Write-off of unamortised debt issuance cost
Unrealised foreign exchange losses
Taxes
Network International Holdings Plc
Annual Report and Accounts 2020
2020
USD’000
Specially
Disclosed
items
–
–
(10,445)
–
(10,445)
–
–
(7,696)
–
–
(7,696)
(4,204)
–
(4,204)
–
–
–
–
Reported
71,965
3,787
10,870
10,311
96,933
44,288
23,518
22,102
2,183
11,083
103,174
51,537
3,863
55,400
21,669
6,721
328
4,704
Underlying
results1 (A)
71,965
Reported2
63,647
2019
USD’000
Specially
Disclosed
Items2
(2,572)
Underlying
results1,2 (B)
61,075
3,787
425
10,311
86,488
44,288
23,518
14,406
2,183
11,083
95,478
47,333
3,863
51,196
21,669
6,721
328
4,704
11,498
11,398
10,201
96,744
42,358
26,786
24,762
510
12,008
106,424
46,817
4,222
51,039
24,844
–
1,894
6,638
–
(10,679)
(1,203)
(14,454)
–
–
(13,987)
–
1,651
(12,336)
(4,202)
–
(4,202)
–
–
–
–
11,498
719
8,998
82,290
42,358
26,786
10,775
510
13,659
94,088
42,615
4,222
46,837
24,844
–
1,894
6,638
Change
(A&B)
17.8%
(67.1)%
(40.9)%
14.6%
5.1%
4.6%
(12.2)%
33.7%
328.0%
18.9%
1.5%
11.1%
(8.5)%
9.3%
(12.8)%
–
(82.7)%
(29.1)%
47
Underlying EBITDA1
Underlying EBITDA1 decreased by (33.2)% to USD 112.6 million (2019: USD 168.5 million). This now includes losses
from Mercury, which were USD (1.3) million (2019: USD (1.7) million), an asset which was previously classified as a
discontinued operation (further detail can be found on page 48).
Underlying EBITDA margin1 (which excludes the Group’s share of its associate, Transguard Cash) was 36.1% (2019:
47.4%). The decrease in underlying EBITDA margin is reflective of COVID-19 related impacts, including: the reduction
in revenues for the period; our largely fixed cost base; alongside the full weighting of expenses associated with being
a publicly listed business that were only partially reflected in the 2019 comparative period.
The table below presents a reconciliation of the Group’s reported profit from continuing operations to underlying EBITDA1.
Profit from continuing operations
Depreciation and amortisation
Write-off of unamortised debt issuance cost
Net interest expense
Unrealised foreign exchange losses
Taxes
Share of depreciation from associate
Specially Disclosed Items affecting EBITDA
Underlying EBITDA1
2020
USD’000
20192
USD’000
5,598
51,537
6,721
21,669
328
4,704
3,863
18,141
112,561
57,317
46,817
–
24,844
1,894
6,638
4,222
26,790
168,522
Depreciation and amortisation
The Group’s total depreciation and amortisation (‘D&A’) charge, including the share of depreciation from associate,
Transguard Cash, increased by USD 4.4 million to USD 55.4 million (2019: USD 51.0 million). This includes an SDI
of USD 4.2 million (2019: USD 4.2 million) for the amortisation of acquired intangibles. The Group’s underlying
D&A1 charge grew by 9.3% to USD 51.2 million (2019: USD 46.8 million). The underlying D&A charge now includes
USD 14.1 million of amortisation related to the Group’s IT transformation project (2019: USD 10.7 million) which was
previously classified as an SDI.
Net interest expense
The Group’s reported net interest expense decreased by USD 3.2 million to USD 21.7 million (2019: USD 24.8 million).
Net interest expense is composed of: i) interest charged on the drawdown or utilisation of our syndicated term loan
facility and revolver facility; ii) interest charged on utilisation of the working capital overdraft facilities (mainly used for
funding settlement related balances); iii) amortisation of the costs associated with issuance of the syndicated term
loan facility; and iv) IFRS 16 lease financing and other charges. The overall decline in the net interest charge y/y largely
reflects lower underlying interest rates, despite higher facility utilisation and lower amortisation of debt issuance costs.
Interest expense on:
Term loan facilitya
Revolving credit facility
Bank overdrafts for working capital
Debt issuance amortisation
Other interest expense
Interest income
Net interest expense
2020
USD’000
12,935
1,837
3,780
1,642
1,916
(441)
2019
USD’000 Comments
16,800 Average drawdown in 2020: USD 354 million. Average interest rate of 3.4%b.
Average drawdown in 2019: USD 325 million, Average interest rate of 5.0%c.
2020 cost also includes c. USD 1 million of commitment fees.
200 Average drawdown in 2020: USD 55 million. Average interest rate of 3.1%.
Average drawdown in 2019: USD 5 million. Average interest rate of 3.7%
2,800 UAE working capital facility contributes c.80% of the associated costs.
Average utilisation in 2020 c.USD 75 million, average interest rate 4.1%.
Average utilisation in 2019 c.USD 55 million, average interest rate 4.4%.
Remaining ~20% of the cost is associated with working capital facilities
in Jordan and Egypt.
4,504 Amortisation of debt issuance cost costs associated with term loan
and revolving credit facility.
1,833 Relates to interest charges on lease liabilities.
(1,293) Relates to interest income on fixed deposits.
21,669
24,844
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations of reported figures
to APMs.
2 There have been certain reclassifications that have also been adjusted in the prior year period, and are discussed in the respective sections of the CFO’s Review.
a Syndicated debt facility was refinanced during H1 2020. The current interest rates associated with the new facility are 3/6 month EIBOR +2.45% on the AED tranche
and 3/6 month LIBOR +2.70% on the USD tranche. Covenants set at 3.5x net debt: underlying EBITDA.
b Opening balance USD 290 million, closing balance USD 375 million (gross of debt issuance costs).
c Opening balance USD 334 million, closing balance USD 290 million (gross of debt issuance costs).
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 48
Chief Financial Officer’s Review continued
Unrealised foreign exchange losses
Unrealised foreign exchange losses relate to the translation of the Group’s foreign currency denominated assets and
liabilities. These were previously classified as an SDI within selling, operating & other expenses but are now reported
as a separate line item below ‘profit before interest and tax’. The charge during the year was USD 0.3 million (2019:
USD 1.9 million). The prior year has also been reclassified on the same basis.
Write-off of unamortised debt issuance cost
This cost relates to the write-off of capitalised debt issuance fees associated with the previous syndicated debt facility,
following the re-financing of the facility.
Taxes
The Group’s total tax charge during the period was USD 4.7 million (2019: USD 6.6 million) with an underlying
effective tax rate of 11.9% (2019: 7.0%). Whilst the applicable tax rates in our operating jurisdictions remain
unchanged, the underlying effective tax rate is higher than prior years and is reflective of two factors: i) COVID-19
impact on the business and the associated lower proportion of profits from the UAE where corporate tax is not
payable; and ii) the reclassification of amortisation associated with the technology transformation programme
into underlying financial performance.
Profit from continuing operations, underlying net income, reported and underlying EPS1
Profit from continuing operations was USD 5.6 million (2019: USD 57.3 million). Underlying net income1 declined
by (60.7)% to USD 34.7 million (2019: USD 88.3 million).
The table below presents a reconciliation of the profit from continuing operations to underlying net income1.
Profit from continuing operations
Write-off of unamortised debt issuance cost
Specially Disclosed Items affecting EBITDA
Specially Disclosed Items affecting net income
Underlying net income1
2020
USD’000
20192
USD’000
5,598
6,721
18,141
4,204
34,664
57,317
–
26,790
4,202
88,309
Earnings per share
During the period, 50,000,000 additional shares were issued as part of the capital raising to fund the proposed
acquisition of the DPO Group. This is described in more detail below.
Reported earnings per share from continuing operations is 1.2 USD cents (2019: 11.5 USD cents) and underlying
earnings per share (‘EPS’)1 declined by (62.1)% to 6.7 USD cents.
Underlying net income1 (USD’000)
No. of shares (’000)*
Underlying earnings per share1 (USD cents)
*
Weighted average number of ordinary shares in issue during the financial period.
2020
34,664
520,833
6.7
20192
88,309
500,000
17.7
Assets previously classified as discontinued operations
During the period, losses from discontinued operations were Nil (2019: USD 0.4 million). Prior year losses reflect those
from Merchant Solutions services in Bahrain, which have now been closed.
Mercury is a domestic scheme where the Group retains 70% ownership. In 2018, it was classified as a discontinued
operation, as part of a strategic decision made to divest the scheme. Management remains committed to the sale
of Mercury and is exploring various opportunities. However, the sale process has been delayed due to the niche nature
of the asset and disruption to the process as a result of the pandemic. As per IFRS requirements, the criteria for
recognising Mercury as a discontinued operation are no longer satisfied and the financial performance of Mercury for
2020 is now included as part of continuing operations. The prior year has also been reclassified on the same basis.
Network International Holdings Plc
Annual Report and Accounts 2020
49
The table below demonstrates the consolidation impact of Mercury on key income statement items:
Revenue
Underlying EBITDA
Underlying net income
Discontinued operations
Net profit
2020
USD’000
2019
USD’000
Currently
presented
284,844
112,561
34,664
–
5,598
Mercury
results
Without
consolidation
(625)
1,259
1,346
(1,346)
–
284,219
113,820
36,010
(1,346)
5,598
Currently
presented
335,379
168,522
88,309
–
56,958
Mercury
results
(473)
Without
consolidation
334,906
1,660
1,694
(1,694)
–
170,182
90,003
(1,694)
56,958
Specially Disclosed items (‘SDIs’)1
SDIs are items of income or expenses that have been recognised in a given period which management believes,
due to their materiality and being one-off /exceptional in nature, should be disclosed separately to give a more
comparable view of the period-to-period underlying financial performance.
SDIs affecting EBITDA during the period were USD 18.1 million (2019: USD 26.8 million) and SDIs affecting net income
were USD 4.2 million (2019: USD 4.2 million).
The key SDIs affecting EBITDA in the period were:
Share-based compensation: Includes the charge related to the Management Incentive Award Plan, IPO Cash Bonus, and
certain Long Term Incentive Plans awarded to Group-wide eligible employees, all of which are specific payments relating
to the Group’s Initial Public Offering (‘IPO’). These charges will decline in 2021, after which they will no longer recur.
M&A and IPO related costs: This includes costs incurred during the period, including those paid for diligence,
advisory, and execution in relation to the proposed acquisition of DPO. The prior year period includes one-off
expenses related to the IPO. In 2021 such costs are expected to be lower and reflect the remainder of costs expected
to be incurred through to completion of the acquisition.
The key SDIs affecting net income in the period were:
Amortisation of acquired intangibles: Amortisation charge on the intangible assets recognised in the Group’s
consolidated statement of financial position from the acquisition of Emerging Market Payments Services in 2016.
Items affecting EBITDA
Reorganisation, restructuring and settlements
Share-based compensation
M&A and IPO related costs
Other one-off items
Total SDIs affecting EBITDA
Items affecting net income
Amortisation related to IT transformation
Amortisation of acquired intangibles
Total SDIs affecting net income
Total specially disclosed items
2020
USD’000
(A)
2019
USD’000
(B)
2019
Reclassification
USD’000
–
10,445
7,696
–
18,141
–
4,204
4,204
22,345
–
10,679
16,111
–
26,790
–
4,202
4,202
30,992
2,132
–
–
1,894
4,026
10,735
–
10,735
14,761
2019
Previously
reported
USD’000
2,132
10,679
16,111
1,894
30,816
10,735
4,202
14,937
45,753
Change
(A&B)
–
(2.2)%
(52.2)%
–
(32.3)%
–
–
–
(27.9)%
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations of reported figures
to APMs.
2 There have been certain reclassifications that have also been adjusted in the prior year period, and are discussed in the respective sections of the CFO’s Review.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 50
Chief Financial Officer’s Review continued
Cash flow
The Group’s net cash flow from operating activities was USD 107.5 million (2019: USD 132.4 million), a decrease of
USD (24.9) million and reflective of the movement in our settlement related balances as well as the decrease in our
profit from operations. The Group’s net cash flow from operating activities, before settlement related balances, was
USD 88.2 million (2019: USD 92.0 million).
The Group’s net cash outflow from investing activities was USD (49.0) million (2019: USD (75.5) million), reflecting
the lower capital expenditure, mainly on account of completion of the IT transformation programme.
The Group’s net cash movement from financing activities was USD 325.2 million (2019: USD (30.0) million) which
reflects: i) the issuance of share capital of USD 258.7 million (gross proceeds of USD 264.7 million, net of issuance
expenses of USD 6.0 million); ii) net proceeds from the refinancing of syndicated debt facility (USD 79.6 million,
net of repayment of the outstanding principal from the prior facility and debt issuance costs of USD 6.7 million for
the new facility; iii) purchase of shares under the Long Term Incentive Plan (‘LTIP’) for eligible Group employees
(USD (10.4) million); iv) payment on account of lease liabilities (USD (4.6) million); and v) issuance of subsidiary’s
capital (Mercury) to non-controlling interest of USD 2.0 million.
Net cash flows from operating activities before settlement related balances
Changes in settlement related balances
Net cash movement from operating activities
Net cash movement from investing activities
Net cash movement from financing activities
2020
USD’000
88,214
19,286
107,500
(49,038)
325,229
20192
USD’000
92,035
40,391
132,426
(75,494)
(30,036)
Change
(4.2)%
(52.3)%
(18.8)%
(35.0)%
–
Working capital
The Group’s working capital requirements are broadly classified into the following two categories:
Settlement related working capital
Background to settlement related working capital: mainly pertains to the funding cycle associated with the direct
merchant acquiring business in the UAE. In line with market practice in the Middle East, which can differ to other
global markets, Network International generally remits cash due to its merchant customers on the day following a
transaction (‘T+1’) and we receive funds into our bank accounts through the scheme settlement processes on T+2 and
from any issuing banks on T+1. Therefore, at any given point in time, there will be around two days of ‘scheme debtor’
receivables pending whereas ‘merchant creditor’ payables are outstanding for only a day, although there are certain
circumstances that can cause this timing to vary, which are detailed below. As a result, a working capital requirement
arises in order to fund these settlement balances. This funding is provided by our banking partners via an overdraft
facility which is continuously settled as schemes remit money to us.
Scheme debtor and merchant creditor balances on our balance sheet are reflective of a snapshot in time at a period
end. The balances and their relative movements can be determined by: i) the day of the week on which period end
falls. For example, if the period end falls on a weekend, when banks are closed in the US but open in the UAE, this
causes an extra day delay (‘T+2/3’) in receipt of funds through the scheme settlement processes; ii) the proportion
of merchants who are not settled on a daily basis; iii) TPV in the last few days prior to the period end; and iv) currency
mix of TPV and receipt of such funds through the scheme settlement processes.
Restricted cash should be considered separately, and mainly represents settlement amounts withheld for a period
of time from merchants, predominantly airlines, where there is a higher risk of potential chargebacks. These withheld
balances form part of the merchant creditor balance.
The definition of net debt which is specified in our syndicated lending syndicate documentation excludes the
overdraft facilities which are mainly used to facilitate settlement related working capital balances, and restricted cash
balances. Settlement related working capital should be considered as very short term in nature, against which the
counterparty risk lies with global payment schemes, for consumer transactions which have already been approved
by both schemes and issuing banks.
Network International Holdings Plc
Annual Report and Accounts 2020
51
Movement in 2020 settlement related balances: During the period, there was an inflow of USD 19.3 million (2019:
USD 40.4 million) in settlement related balances. Scheme debtors declined by USD 19.8 million, (10.7)% y/y, which
is reflective of y/y decline in TPV during the last few days of December 2020.
Restricted cash declined marginally. Whilst the restricted cash balance increased through the first half of the year
as we prudently withheld merchant funds as collateral to manage chargeback risk through the initial stages of the
pandemic, we released funds during the second half as those risks reduced.
Merchant creditors declined by USD 2.0 million. Excluding settlement related balances on hold, merchant creditors
were marginally lower compared to 2019. This also reflects TPV processed during the last few days of December,
which was lower y/y, but was offset by two factors: i) some merchants are not settled on a daily basis and amounts
payable to them increased at the end of the year; and ii) the regulatory changes to acquiring fees in Jordan have also
contributed, where there has been a timing delay between the implementation of the regulation and the reduction in
our fees, leading to reimbursement delays to some merchants.
Scheme debtors
Restricted cash
Total merchant creditors
Settlement balances on-hold*
Other merchant creditors
Settlement related working capital balances
* Represents the off-set balance to restricted cash
2020
USD’000
165,436
52,550
(165,142)
(51,688)
(113,454)
52,844
20192
USD’000
185,268
54,029
(167,167)
(53,245)
(113,922)
72,130
Cash inflow/
(outflow)
USD’ 000
19,832
1,479
2,025
(1,557)
(468)
19,286
Working capital before settlement related balances
This represents the amount of capital used by the Group to fund its day-to-day trading operations, other than the
settlement related balances as explained above. The overall cash movement in working capital before settlement
related balances was USD 19.6 million, largely driven by trade receivables which were lower y/y as a result of the
proactive steps taken to ensure timely payment from issuer and acquirer processing customers.
Trade receivables & chargeback receivables
(net of provisions for expected credit losses)
Prepayments and other receivables
Trade and other payables
Items excluded*:
Capex accrual
Provisions for expected credit losses (refer to page 46)
Other movements**
Subtotal
Working capital before settlement related balances
2020
USD’000
20192
USD’000
2020 vs. 2019
USD’000
45,874
22,000
(127,732)
(59,858)
71,228
17,268
(127,453)
(38,957)
25,354
(4,732)
279
20,901
3,595
(2,183)
(2,732)
(1,320)
19,581
* These items are excluded as they are either shown separately in the consolidated statement of cash flows or are non-cash in nature.
** Other movement mainly includes movement in advance taxes paid, share-based compensation liability and interest payables.
Capital expenditure
The business has taken a cautious approach to managing capital spending during the period as a result of the
COVID-19 pandemic and associated reduction in revenue. This included a pause in our market entry to Saudi Arabia,
which was impeded by border closures.
Total capital expenditure
Core capital expenditure:
of which is maintenance capital expenditure1
of which is growth capital expenditure1
IT transformation capital expenditure1
2020
USD’000
20192
USD’000
46,470
46,470
21,038
25,432
–
84,265
45,662
25,725
19,937
38,603
Cash inflow/
(outflow)
USD’000
(44.9)%
1.8%
(18.2)%
27.6%
(100)%
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations
of reported figures to APMs.
2 There have been certain reclassifications that have also been adjusted in the prior year period, and are discussed in the respective sections of the CFO’s Review.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
52
Chief Financial Officer’s Review continued
Core capital expenditure consists of both maintenance and growth capex. Maintenance capital expenditure relates
to that incurred for additions or improvements that sustain the existing operations of the Group. Growth capital
expenditure relates to that associated with delivering business growth, including: onboarding of new customers,
expansion of services with existing customers or the development of new product offerings.
Maintenance capital expenditure was USD 21.0 million (2019: USD 25.7 million) and was mainly composed of
investment in regard to maintaining and enhancing our technology infrastructure, and capex incurred for the
separation of shared services from Emirates NBD.
Growth capital expenditure was USD 25.4 million (2019: USD 19.9 million) and was mainly composed of investment
in regard to the procurement of POS terminals for new merchant relationships, product development including those
built in partnership with Mastercard and onboarding of new issuer and acquirer processing customers.
Reconciliation of capital expenditure to capital spend in the consolidated statement of cash flows
Total capital expenditure
Goods/services received in the current period, but yet to be paid
Transformation capital expenditure
Growth and maintenance capex
Goods/services received in prior period, and paid in the current period
Transformation capex
Growth and maintenance capex
Total consolidated capital expenditure spend (as per consolidated statement of cash flows)
2020
USD’000
46,470
20192
USD’000
84,265
–
(12,639)
7,296
8,937
50,064
(7,296)
(12,959)
8,711
6,589
79,310
Change
(44.9)%
–
(2.5)%
(16.2)%
35.6%
(36.9)%
Underlying free cash flow1
Underlying free cash flow1 (underlying FCF) was USD 51.8 million (2019: USD 69.2 million), reflective of the reduction
in revenue and operating profit due to the COVID-19 pandemic. Underlying FCF now includes deductions that were
not previously included in our definition, including: SDIs affecting EBITDA; and the share of EBITDA for associate
Transguard Cash less dividends.
Profit from continuing operations
Depreciation and amortisation
Write-off of unamortised debt issuance cost
Net interest expense
Unrealised foreign exchange losses
Taxes
Share of depreciation of associate
Specially Disclosed Items affecting EBITDA
Underlying EBITDA1
Changes in working capital before settlement related balances
Taxes paid
Core capital expenditure
Specially Disclosed Items affecting EBITDA
Adjustment for share of EBITDA of associate, less dividend
Underlying free cash flow1
2020
USD’000
5,598
51,537
6,721
21,669
328
4,704
3,863
18,141
112,561
19,581
(6,058)
(46,470)
(18,141)
(9,683)
51,790
20192
USD’000
57,317
46,817
–
24,844
1,894
6,638
4,222
26,790
168,522
(9,625)
(10,415)
(45,662)
(26,790)
(6,798)
69,232
Change
(90.2)%
10.1%
–
(12.8)%
(82.7)%
(29.1)%
(8.5)%
(32.3)%
(33.2)%
–
(41.8)%
1.8%
(32.3)%
42.4%
(25.2)%
As per the historical 2019 Annual Reports and Accounts, underlying FCF was stated as USD 103.2 million. For ease
of understanding, the table below shows the reconciliation between underlying FCF as stated then, and the new
definition as described above.
Network International Holdings Plc
Annual Report and Accounts 2020
Underlying free cash flow – as reported above
Impact of items not previously included in definition of underlying cash flow:
Underlying EBITDA (Mercury and SDI reclassification – as explained earlier)
Specially Disclosed Items affecting EBITDA
Adjustment for share of EBITDA of associate, less dividends
Changes in working capital before settlement related balances and capital expenditure – related to
Mercury (as previously classified as discontinued operation)
Underlying free cash flow – old presentation
2020
USD’000
51,790
2019
USD’000
69,232
1,259
18,141
9,683
–
80,873
3,792
26,790
6,798
(3,375)
103,237
Reconciliation of cash flows from operating activities to underlying free cash flow
Net cash inflows from operating activities
Less: Cash inflows included in the statutory cash flow but not in the underlying free cash flow
Changes in settlement related balances, long-term receivables and other liabilities
Charge for share-based payment
Add: Cash outflows included in the statutory cash flow but not in the underlying free cash flow
Dividends received from associate
Interest paid
Others*
Underlying free cash flow before capital expenditure
Core capital expenditure
Underlying free cash flow1
2020
USD’000
107,500
20192
USD’000
132,426
(19,942)
(4,070)
(35,405)
(1,404)
–
16,985
(2,213)
98,260
(46,470)
51,790
2,723
21,300
(4,746)
114,894
(45,662)
69,232
53
Change
(25.2)%
(66.8)%
(32.3)%
42.4%
–
(21.7)%
Change
(18.8)%
(43.7)%
189.9%
–
(20.3)%
(53.4)%
(14.5)%
1.8%
(25.2)%
* Others include provision for expected credit losses, foreign exchange gains and losses, and loss from discontinued operations.
Capital raise for the acquisition of DPO
The Group is working towards the completion of the DPO acquisition. The acquisition was announced on 28 July 2020,
and subsequently an equity capital raise was completed to support funding.
The total consideration for DPO is USD 288 million, to be paid as a mixture of cash and equity vendor consideration
shares. The vendor consideration portion totals USD 63 million and constitutes a rollover of USD 50 million by Apis
Partners (the former private equity owner) and USD 13 million by the co-founders of DPO, into Network International
shares. The issuance of these Network shares will be executed at completion. The remainder of the consideration will
be funded from the equity capital raise of 50 million shares at a price of 410p, that took place on 28 July 2020 raising
gross proceeds of USD 265 million. Of the gross proceeds, USD 6.0 million was used for costs associated with the
equity raise which are accounted for in the statement of changes in equity.
Debt
The Group’s total debt, including current borrowings, amounted to USD 434.5 million (2019: USD 377.4 million).
Syndicated term loan
Principal outstanding
Unamortised debt issuance cost
Sub total
Revolving credit facility
Lease liability
Bank overdraft (for working capital)
Total
Non-current borrowing
Current borrowing
Total
2020
USD’000
2019
USD’000
375,000
288,744
(6,134)
(7,814)
368,866
35,000
925
29,681
280,930
35,000
1,619
59,895
434,472
377,444
369,025
65,447
434,472
211,783
165,661
377,444
Change
29.9%
(21.5)%
31.3%
0.0%
(42.9)%
(50.4)%
15.1%
74.2%
(60.5)%
15.1%
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations
of reported figures to APMs.
2 There have been certain reclassifications that have also been adjusted in the prior year period, and are discussed in the respective sections of the CFO’s Review.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 54
Chief Financial Officer’s Review continued
During the year, we refinanced our syndicated debt facility with a group of 16 banks who have a global and regional
presence. The refinancing was conducted for the purposes of providing the Group with increased liquidity to fund
growth accelerator projects, as well as for general corporate purposes. The new facility carries similar interest rates
and the same financial covenants as the prior.
The facility is for USD 525 million and replaced the Group’s USD 350 million term financing facility, which had a drawn
down balance of USD 289 million (gross of debt issuance cost of USD 7.8 million) on 31 December 2019. At inception
of the new facility, USD 375 million was drawn, of which USD 289 million was used to repay the previous facility, USD
6.7 million used to pay for issuance costs and the remainder held as part of our cash balances for future investment
requirements. USD 79 million remains unutilised and is included as cash in the financial statements. The undrawn
balance remains available for a period of one year from the date of refinancing which can be further extended subject
to approval from the lenders.
The new facility consists of both conventional AED and USD tranches with a coupon of EIBOR plus margin and LIBOR
plus margin respectively, together with one USD denominated Islamic finance tranche with a coupon of LIBOR plus
margin. The margin is calculated by reference to the leverage (net debt / underlying EBITDA), as per the definition
and methodology provided in the financing documents. Financial covenants limits are set to 3.5x net debt: underlying
EBITDA. Capital repayments will commence in 2022.
Our leverage ratio3, which represents net debt3 to underlying EBITDA1, is calculated as per the methodology provided
in the financing facility agreement with the lending banks. Under these agreements net debt excludes: the overdraft
facilities which are mainly used to facilitate settlement related working capital balances; and restricted cash balances
which are largely the amounts withheld from merchants for a period of time to cover the risk of chargebacks. EBITDA
is measured on an underlying basis over the last 12-month period.
Leverage ratio
Net debt
Underlying EBITDA1
Leverage ratio
Leverage ratio – excluding the cash raised to fund the acquisition of DPO
Net debt
Underlying EBITDA1
Leverage ratio
2020
USD’000
252
112,561
0.0
2020
USD’000
259,655
112,561
2.3
20192
USD’000
273,754
168,522
1.6
20192
USD’000
273,754
168,522
1.6
The table below provides the reconciliation of net debt as per the consolidated financial statements and methodology
prescribed in the financing agreement.
Particulars
Non-current borrowings
Current borrowings
Cash balance
Net debt as per consolidated financial statements
Less: Working capital facility overdraft (refer to note 15 of the consolidated financial statements)
Less: Cash balance (share of held for sales assets and associate)
Add: Unamortised debt issuance cost
Other adjustments *
Net debt as per the financing facility agreement – including cash raised for DPO acquisition
Cash generated from equity raise (net of issuance cost)
Net debt as per the financing facility agreement – excluding cash raised for DPO acquisition
2020
USD’000
369,025
65,447
(398,781)
35,691
(29,681)
(11,422)
6,134
(470)
252
259,403
259,655
20192
USD’000
211,783
165,661
(45,473)
331,971
(59,895)
(3,598)
7,814
(2,538)
273,754
–
273,754
*
Other adjustments include restricted cash of the Group’s subsidiaries and adjustment for any temporary end of day excess / short drawdown position of the working
capital facility.
Network International Holdings Plc
Annual Report and Accounts 2020
The table below reconciles the movement in net debt through the period:
Opening balance
Proceeds from new borrowing
Term loan
Revolving credit facility
Repayment of borrowing
Term loan
Revolving credit facility
ATM lease liabilities
Cash balances
Cash balance of associate (50%)
Others*
Closing balance – including cash raised for DPO acquisition
Cash generated from equity raise (net of issuance cost)
Closing balance – excluding cash raised for DPO acquisition
55
2020
USD’000
273,754
2019
USD’000
278,473
375,000
40,000
–
35,000
(288,751)
(40,000)
(694)
(353,308)
(7,908)
2,159
252
259,403
259,655
(44,918)
–
(652)
14,802
1,089
(10,040)
273,754
–
273,754
*
Others mainly include changes in restricted cash from Group subsidiaries, cash balance relating to non-controlling interest of Mercury, Merchant Solutions services in
Bahrain and adjustment for any temporary end of day excess / short drawdown position of the working capital facility.
Definitions
Constant currency revenue
Constant currency revenue is current period revenue recalculated by applying the average exchange rate of the prior
period to enable comparability with the prior period revenue. Foreign currency revenue is primarily denominated in
Egyptian Pound (‘EGP’). The other non-US backed currencies that have a significant impact on the Group as a result
of foreign operations in Nigeria and South Africa are the Nigerian Naira (‘NGN’) and the South African Rand (‘ZAR’)
respectively. The table shows the average rate of these currencies per USD for 2020 and 2019.
Egyptian Pound (‘EGP’)
Nigerian Naira (‘NGN’)
South African Rand (‘ZAR’)
2020
Average rate
15.8
359.4
15.6
2019
Average rate
16.8
306.4
14.4
Key performance indicators
To assist in comparing the Group’s financial performance from period-to-period, the Group uses certain key
performance indicators which are defined as follows.
Total Processed Volume (‘TPV’) (USD million)
TPV is defined as the aggregate monetary volume of purchases processed by the Group within its Merchant Solutions
business line.
Number of cards hosted (million)
Number of cards hosted is defined as the aggregate number of cards hosted and billed by the Group within its Issuer
Solutions business line.
Number of transactions (million)
Number of transactions is defined as the aggregate number of transactions processed and billed by the Group within
its Issuer Solutions business line.
Rohit Malhotra
Chief Financial Officer
7 March 2021
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations of reported figures
to APMs.
2 There have been certain reclassifications that have also been adjusted in the prior year period, and are discussed in the respective sections of the CFO’s Review.
3 These are alternative performance measures, the definitions and calculations of which are included in this section.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
56
Responsible Business
Our commitment to a sustainable
and responsible business
2020 key performance highlights
Helping our people thrive…
More on page 60
73%
Group-wide employee
engagement score
(2019: 65%, 2017: 52%)
3.8%
Employee turnover rate
(2019: 7.1%, 2018: 10.2%)
54
Nationalities represented
across our global workforce
(2019: 53, 2018: 49)
Safeguarding our environment…
More on page 66
c.40,000
single use plastic-paper cups
removed from our offices at
the start of 2020
14 tonnes
(approximate) volume of mixed
waste recycled at our office in Egypt
Joined the Mastercard Priceless
Planet Coalition to help address
climate change
Our contribution to society…
More on page 68
AED 5m
pledged in donations and
discounted fees to support
UAE-based small businesses
during the COVID-19 pandemic
140+
employee volunteers
contributed to community
development initiatives
100%
of employees trained
on our Code of Conduct
Network International Holdings Plc
Annual Report and Accounts 2020
57
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 58
Responsible Business continued
Our
approach
At Network International,
we are committed to
operating sustainably and
responsibly in all that we do.
We aim to do business in a way
that maintains strong business ethics,
respects human rights, supports
responsible labour practices and
safeguards the environment – while
promoting positive social and
economic impacts in the markets
in which we operate.
Beyond this, we recognise that
sustainable and responsible business
practice is also about:
› Driving the profitable growth of
our Company to deliver ongoing
benefits to our stakeholders –
including employees, shareholders,
customers and local communities
› Minimising our risks and maximising
our opportunities, in the context of
a changing external environment
Indeed, this way of doing business
supports sustainable growth and
is very much integrated into our
business model, as our digital
payments services help support the
financial inclusion of communities
across the Middle East and Africa.
Network International Holdings Plc
Annual Report and Accounts 2020
Our contribution to the UN Sustainable
Development Goals (‘SDGs’)…
Ensure healthy lives and promote well-being
for all at all ages
We implement a range of measures focused on employee
well-being, including the provision of private healthcare
cover in excess of legal requirements in the countries in
which we employ our staff. In 2020, we launched new
counselling and engagement initiatives to support the
well-being of our employees amid COVID-19.
See page 59.
Achieve gender equality and empower
all women and girls
We place particular emphasis on promoting gender
inclusion and equality across our workforce. In 2020,
we continued the implementation of our gender
empowerment programme and rolled out our enhanced
Equality Diversity and Inclusion Policy.
See pages 60 to 61.
Promote inclusive and sustainable economic
growth, full and productive employment and
decent work for all
Our digital payment products and services help to
increase financial inclusion in communities across the
Middle East and Africa. We also work with a number
of host governments to contribute to national financial
inclusion initiatives and support the development and
enhancement of national payments infrastructure.
See pages 68 to 69.
As our approach to responsible business continues to evolve, we plan
to undertake a further analysis and mapping of our positive and negative
impacts on the SDGs. This will help us to identify – and focus our efforts
on – those Goals where we can make the most meaningful contribution.
Group values
Our values underpin our
activities and support our
approach to sustainable
and responsible business.
t e r
c
C h a r a
C
o
l
l
a
b
o
r
a
t
i
o
n
C
u
s
t
o
m
e
r
s
u ity
Co n t i
n
How corporate social
responsibility is managed
Our approach is guided by our
overarching Corporate Social
Responsibility (‘CSR’) Policy. The
Policy commits us to, amongst other
things, acting with respect for our
employees, communities, customers,
suppliers and the environment.
In addition, we are guided by a range
of supporting policies and standards
(which are described in further
detail throughout this section).
Most notably, this includes our:
› Code of Conduct
› Employee Charter
› Equality, Diversity and
Inclusion Policy
› Health, Safety and
Environment (‘HSE’) Policy
Our approach is led by our Group
Chief Human Resources Officer,
who is a member of the Executive
Management Team. This senior-
level oversight helps ensure that
responsible practices are integrated
into the strategic planning of the
organisation, as well as into day-to-
day business activities.
As our approach evolves, we aim to
transition towards the more holistic
management of our environmental,
social and governance (‘ESG’) risks,
opportunities and impacts. In 2020,
we began working with an expert
third party on the development
of a new, three-year ESG Strategy.
This includes a gap analysis to
benchmark our existing approach
against prevailing legal requirements,
international sustainability best
practice and evolving stakeholder
expectations. The outputs from
this process will inform the
development and rollout of the
new strategy in 2021.
59
Case study
Our response to COVID-19
As the COVID-19 pandemic
emerged in early 2020, we
implemented a range of immediate
measures to keep our people safe,
minimise operational disruption
and help support vulnerable
businesses in our supply chain.
› The launch of several remote
engagement initiatives to help
keep our employees informed
during the pandemic. This
included the hosting of virtual
weekly, Group-wide update
sessions led by our CEO.
Our response was coordinated
through our specially established
COVID-19 Assessment Committee
– led by our CEO and Chief Risk
Officer – and implemented with
support from our Group Human
Resources team. Key measures
included:
› A Group-wide transition to remote
working for all employees, often
in advance of relevant guidance
from our host governments. This
process was supported by our
already well embedded Flexible
Working Policy, which we
implemented in 2018.
› The review and enhancement
(where necessary) of our private
health cover to help ensure all
employees can access testing
and/or treatment services,
as well as online medical
consultations for non-COVID-19
related health conditions.
› The rollout of new employee
well-being initiatives, including
online awareness sessions
focused on mental health, as well
as the commissioning of expert
third parties to provide remote
counselling to employees across
the Group, see page 62.
› The provision of AED 5 million
in donations and discounted fees
to help small- and medium-sized
enterprises (‘SMEs’) in our UAE
supply chain to withstand the
financial impacts of the
pandemic, see page 68.
In August 2020, we commissioned
an independent Employee
Engagement Survey to help gauge
the impact of these measures. This
found high levels of satisfaction
amongst our workforce and will
help inform future crisis response
planning, see page 65.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 60
Responsible Business continued
Helping our people thrive
The nature of our business – which
involves the provision of market
leading digital payment solutions,
as well as the maintenance of long-
standing customer relationships –
means we are highly reliant on our
ability to attract, develop, motivate
and retain high-quality employees.
In this context, we continue to focus
on making Network International
an ‘Employer of Choice’ across our
regions. As set out in our Employee
Charter, we are committed to
providing a working environment
for our people that offers equal
opportunities, competitive terms of
employment, safe working conditions,
and effective communication and
engagement. In support of this,
we also provide our employees
with high-quality learning and
development opportunities.
Our ongoing success in this area
is reflected in our Group-wide
employee turnover rate, which has
been steadily falling over the past
three years, from 10.2% in 2018 to
3.8% in 2020.
Diversity and inclusion
Network International recognises
the value that a diverse workforce
brings in terms of driving innovation,
creativity and the sharing of new
ideas. The global nature of our
business means we benefit from
a highly diverse international
workforce – with the total number
of nationalities represented within
our business growing from 49 in
2018 to 54 in 2020.
We aim to ensure that all those
participating in our workplace
are treated with respect, dignity
and fairness. We promote the
fair treatment of all employees,
irrespective of age, gender, race,
national or ethnic origin, religion,
language or physical ability. This is
reflected in our updated Equality
Diversity and Inclusion Policy, that
supports our ongoing alignment to
best practice standards, and ensures
we continue to seek to exceed
legislative requirements.
Our people are at the
heart of our business and
are instrumental in the
delivery of our strategy.
In 2020, their dedication
and commitment helped
the business to seamlessly
realign priorities in light
of the COVID-19 pandemic
and successfully navigate
the related operational
and financial challenges.
Workforce profile in 2020
1,309
Total workforce
(2019: 1,309)
UAE:
678
(2019: 687)
Egypt:
430
(2019: 422)
South Africa:
39
(2019: 37)
Jordan:
149
(2019: 151)
Nigeria:
13
(2019: 12)
Network International Holdings Plc
Annual Report and Accounts 2020
The policy also includes additional
country-specific wording to ensure
our ongoing compliance with
Emiratisation legislation in the UAE
as well as Broad-Based Black
Economic Empowerment (‘B-BBEE’)
legislation in South Africa.
As reflected in our revised policy,
we place particular emphasis on
promoting gender inclusion and
equality across our workforce. In
particular, female empowerment is
not just measured by sheer numbers
but by the level of engagement with
women in the workforce and the
opportunities they have. This includes
encouraging female participation
from recruitment onwards and
across every level of the organisation.
Our empowerment initiatives are
supported throughout the
organisation, from the Executive level
and throughout the workforce. Just
one example is our ‘This Girl Can’
initiative, that is focused on workplace
gender empowerment and equality,
as well as career development and
progression for female employees.
This included hosting a series of
engagement sessions led by
inspirational female leaders from the
financial technologies sectors. We
have also expanded our networking
and skills development sessions for
female employees from the UAE to all
of our regions. These sessions, which
are open to all female employees,
focus on areas such as pitching /
presentation skills, negotiation skills
and conflict resolution. Several of
our female employees participated
in the virtual ‘Women of the Future
Summit’, an external initiative which
included a range of interactive
sessions focused on personal and
professional development. Our
women also celebrated International
Women’s Day across the Group. This
included the hosting of our second
Workforce gender balance
annual Beacon Award, which
recognises female employees
across our regions who embody
our Group values.
We believe that given the right
environment and opportunities,
a combination of fair and just working
conditions and policies designed to
minimise work-family conflict, the
promotion and leadership of women
employees will continue to build.
Our colleagues are strengthened and
supported by this compassionate,
flexible and family-first approach.
We also provide access to regional
leading maternity benefits and a
work culture that accommodates
typical events in a parent’s life – from
parent-teacher meetings to a child
falling ill. We believe our HR policies
help us create a balanced, equitable
work culture and retain our talented
women employees.
This approach is reflected in the
female engagement scores from
the annual Employee Engagement
Survey, which were at 77% overall and
higher than the survey average. As
part of this, we strive to give women
the same career and pay progression
as men, understanding our gender
pay gap is a further step in promoting
positive change. In the context of
our UAE-based employees, which
form the majority of our workforce,
the mean gender pay gap (total
remuneration) is 17%, whilst the
median gender pay gap is 24%. Rather
than a case of unequal pay for equal
work, our pay gap is primarily due
to the uneven distribution between
men and women across the business,
which is mainly related to the markets
in which we operate. This continues to
be an area that management and the
Remuneration Committee are keeping
under review for 2021 and we are
taking various measures to grow our
overall female population, particularly
for senior roles.
Total workforce
Board of Directors1
Executive Management Team
Senior managers
(reporting into the Executive
Management Team)
Male
1,012
8
7
49
Female
297
3
3
15
% female
(2020)
23%
27%
30%
23%
% female
(2019)
23%
9%
30%
25%
1 Gender balance snapshot captured as of January 2021. All other figures refer to end 2020.
61
Network International
Employee Charter
Fair Treatment
Promoting inclusion and
equal opportunity throughout
our organisation
Fair Compensation
Ensuring fair remuneration
and work time standards
Safety and Security
Providing a safe and high-quality
work environment
Communication
Maintaining an ‘open door policy’
and providing relevant updates
concerning our organisation
In addition, we continue to support
opportunities for employees with
additional needs or disabilities
through the ongoing application of
our Equality, Diversity and Inclusion
Policy. This underpins our efforts
to foster an inclusive work culture
and to ensure equal access and fair
opportunities for employees with
additional needs or disabilities.
Finally, in South Africa we are
proud to have renewed our B-BBEE
annual certificate with a Level Eight
compliance rating.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 62
Responsible Business continued
Our comprehensive approach to employee engagement
We encourage open communication
between employees and managers
on an ongoing basis – and maintain
a range of communication channels
in support of this. These include:
› A dedicated email address, which
enables employees to submit
questions and/or provide
feedback directly to our CEO
› A regular series of Group-wide
town hall meetings, led by
our CEO, which provides an
opportunity for groups of
employees across all grades
to share their views and ideas
with executive management
› A monthly remote strategy
session (‘NI Connect’), led
by our CEO and Executive
Management Team, in which
key progress against our
strategy is communicated
to senior managers
› An online forum (‘HR Exchange’),
which provides a regular platform
for employees to share their views
and ideas with senior members
of the Human Resources team.
One example this year saw our
first Q&A session on executive
pay in the context of the wider
workforce reward framework
(see page 135) Where
appropriate, the team follows
up with relevant functions to
address some of the issues raised
› Annual Employee Engagement
Surveys to further support
two-way communication,
feedback and idea sharing
between our employees and
management. These also
inform the development of
new management actions
to help address employee
concerns and respond to
their ideas, see page 63
Employee engagement
In 2020, we implemented several
new initiatives to help enhance
communication with our workforce
in the context of increased
uncertainty relating to COVID-19.
This included the launch of:
› Monthly virtual engagement sessions
led by our Executive Management
Team to provide updates on the
performance of the business and
our ongoing response to the virus
› Video messaging from our CEO
and Chairman to help address
employee concerns over global
developments relating to the virus
› A virtual ‘Talk to HR’ forum to help
answer employee questions on
related human resources issues
› ‘NetworkFlix’, a social platform to
enable managers and employees
to share their experiences and
achievements through home videos
› ‘Virtual Travel Diary’, an online
networking initiative for employees
to share their previous travel
experiences and keep in touch
whilst working remotely
› We commissioned a leading
external engagement company
to conduct an independent survey
in order to gauge employee
satisfaction regarding our response
to COVID-19 – and to inform future
management actions, see page 65
We also reviewed and enhanced our
engagement approach to ensure
we continue to meet the employee
engagement provisions of the UK
Corporate Governance Code. This
included a Board-level review of our
engagement activities and overall
Engagement Framework to confirm
alignment. In addition, we launched
several actions to further support
Board-level engagement. This
included a Group-wide virtual
training session on our Remuneration
Framework led by the Chair of the
Remuneration Committee.
Talent management
We apply a holistic approach to
talent management, which underpins
our efforts to attract, develop,
motivate and retain a creative,
capable and committed workforce.
Our approach is set out in our Talent
Management Framework (‘TMF’),
which is supported by a robust
performance management system.
The TMF seeks to develop our
employees across all career stages,
whilst helping to ensure they are
engaged and consistently perform
to the best of their abilities. This is
based on four key elements:
› Assessing performance and
potential: All employees are
subject to regular performance
management and appraisal.
Employee performance is
measured using an ‘Objectives,
Goals, Strategies & Measures’
(‘OGSM’) framework, and their
potential is understood by their
attributes and likely behaviours
› Creating talent pools: Based on
their potential and performance,
all employees are assessed using
a ‘9-Box Talent Grid’. This helps
us to identify talent pools based
on employees’ current and
potential contribution to the
organisation and supports the
rapid development of our high-
potential individuals, including
through the implementation of
tailored coaching and mentoring
interventions
› Succession planning: We apply
a structured succession planning
process, focused on the high-
potential employees identified
through the 9-Box Talent Grid, to
help ensure we develop and retain
the necessary skills to deliver on
our Group strategic objectives
› Employee development planning:
We implement structured learning
and development plans that
are aligned to – and support –
our Group strategic objectives
(see ‘Learning and development’
on page 64)
Network International Holdings Plc
Annual Report and Accounts 2020
63
Group-wide employee
benefits
We provide a range of workplace
benefits to our employees.
These include:
› Competitive base salaries and
bonuses for the achievement
of performance targets
› Extended maternity and
paternity leave (in excess of
what is required by law across
the numerous countries
where we employ our staff)
› Healthcare cover (in excess of
what is required by law across
the numerous countries where
we employ our staff)
› Life insurance cover
› Competitive pension plans
Case study
Responding to our Employee Engagement Survey
In our 2020 Employee Engagement
Survey, Network International
achieved an overall engagement
score of 73% (2019: 65%), based
on a participation rate of 83%
(2019: 72%). This reflected
improved scoring across most
of the key areas surveyed – and
placed Network International
ahead of many of the international
technology companies and regional
financial services companies who
are benchmarked as part of the
process. Key areas of strength
included brand loyalty, diversity
and inclusion, and performance
management. Notably high
engagement levels amongst female
employees was an additional area
of strength. The survey also
highlighted areas for potential
improvement and these findings
have informed the development
of appropriate management
actions – each of which will be
overseen by an employee-led
focus group. Key planned actions
for 2021 will focus on learning
and development, employee
recognition, and enhanced
collaboration between different
functions of the organisation.
We will undertake a further
Employee Engagement Survey
in 2021 to continue building our
understanding of employee views,
and to monitor the progress of
these related management actions.
73%
overall engagement score
In 2020, we expanded our Long
Term Incentive Plan (‘LTIP’) – which
was launched for the Executive
Management Team in 2019 – to
around 80 high potential senior
managers. It includes the awarding
of stock options for the achievement
of financial and non-financial targets.
We also run regular awards
programmes to recognise high
performing employees. This includes
our ‘Group Star of the Month’
programme, which recognises
one employee and one team from
across the Company that have
gone above and beyond their regular
responsibilities to demonstrate
outstanding behaviour, performance
or commitment. Monthly winners
receive a prize and are publicly
recognised in a Group-wide email
communication.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 64
Responsible Business continued
Case study
Participating in the Visa Global Challenge
In 2020, 20 teams from Network
International participated in the
Visa Global Challenge – an
interactive, global competition that
challenges participants through a
range of simulation-based learning
scenarios. As part of the challenge,
teams of four from a range of
global organisations competed
over a period of 10 weeks to
develop a simulated card and
payments business. The challenge
provides participants with practical
experience in business strategy
and teamwork, whilst offering
valuable strategic insight into the
payments industry. Three of our
teams finished in the top 10 of the
competition, out of 178 teams who
competed globally.
20
teams from Network International
participated in the Challenge
Additional learning and development
initiatives launched during the year
included:
› Our ‘Network Café’ initiative, a
series of online training sessions in
which employees from across the
Group provide one-hour lunchtime
training to colleagues with a focus
on professional and personal
development. Training topics were
informed by a Group-wide survey
of employee interests and skills
requirements
› Our ‘Network Learning Forum’, a
Group-wide email-based learning
programme providing training in
self-management skills, public
speaking, communication and the
setting of ‘SMART’ goals, amongst
other topics
Employee training
Number of
staff trained
Number of
training hours
Training coverage
for the Group
2020
2019
2018
1,309
1,309
573
11,879 21,040 4,697
100% 100%
75%
Health, safety and well-being
We are fully committed to delivering
a healthy, safe, productive and stable
working environment for all our
employees – as well as supporting
the broader health and well-being
of our employees.
Our Health, Safety and Environment
(‘HSE’) Policy guides our HSE
management activities, and sets out
our overarching commitments to:
› Comply with legal and regulatory
HSE requirements
› Provide a safe environment for our
staff, customers and third parties
› Develop and embed a safety
culture that supports health,
safety and well-being
› Reduce HSE risks and hazards
on an ongoing basis
Learning and development
We are committed to supporting
the development of our employees’
‘hard’ and ‘soft’ professional skills,
to the benefit of both the individual
and the Company.
Our L&D approach is based on
the ‘70-20-10 Learning Model’.
This focuses on:
› 70% ‘on-the-job’: L&D through
day-to-day tasks, enhanced
responsibilities, challenges and mini
collaborative role-based projects
› 20% mentorship: L&D through
guidance and advice from more
experienced mentors. In 2020,
21 employees from our talent
pools benefited as mentees under
this programme
› 10% formal training programmes:
L&D through structured external
and/or in-house formal training. This
includes online programmes across
a range of technical, functional and
operational modules – as well as
mandatory compliance training
Our approach is underpinned by a
robust L&D architecture that helps
support the ongoing implementation
of a consistent, responsive and
centrally managed learning model.
This is based on, amongst other inputs:
› Feedback from our annual OGSM
employee reviews
› An annual, Group-wide ‘Training-
Needs-Analysis’ process
› Feedback from employee surveys
In 2020, we rolled out a new L&D
Charter in response to employee
feedback from our 2019 Engagement
Survey. The new Charter helps to
further define our development
vision, objectives, and related roles
and responsibilities.
In the context of COVID-19, all
mandatory training sessions,
including induction and policy
refresher sessions, were transformed
into e-learning sessions.
Network International Holdings Plc
Annual Report and Accounts 2020
65
› The rollout of regular, Group-wide
communications to raise awareness
around preventative measures /
common symptoms, and to
provide key travel updates
› Group-wide, remote mental
health awareness and stress
management sessions to support
employee well-being during the
COVID-19 pandemic
› The hosting of a series of online
wellness sessions focused on
yoga, mental well-being and
stress management
Our policy commitments are
implemented through our HSE
Management System. This is
supported by a comprehensive
governance structure that includes
the following roles and responsibilities:
Following the onset of COVID-19,
we shifted the emphasis of the
programme to help support
employee well-being in the context
of the virus and the shift to remote
working, see page 59. This included:
› The commissioning of International
SOS to provide telephone-based
mental well-being counselling to
employees working remotely
across the Group
› The establishment of a ‘COVID-19
hotline’ staffed by our HR team to
address employee questions relating
to preventive measures, travel
restrictions, health insurance and
how to access medical assistance
› The Group Risk Committee is
responsible for ensuring that the
adequate framework, governance
and resources are in place to
implement and maintain an
effective management system
› The Group Safety Committee is
responsible for overseeing HSE
activities on an ongoing basis.
This includes the provision of
guidance to help enhance the
management system
› The Health and Safety team
implements the management
system and monitors and measures
its performance on a regular basis
› Group Internal Audit evaluates
through periodic reviews whether
the management system is
effectively implemented and
maintained
Our HSE Policy and HSE Management
System also cover our environmental
impacts. For more information on
environmental stewardship at Network
International, see ‘Safeguarding our
environment’, page 66.
In early 2020, we continued to
implement our Employee Wellness
Programme. This included the
rollout of:
› Group-wide, remote nutrition and
diabetes awareness raising sessions
› Dental checkups for employees
in the UAE
› Consultations with General
Practitioners for employees in
the UAE and Egypt
› Influenza vaccinations, vision
tests and general heath checkups
for employees in Egypt
Case study
Measuring our response to COVID-19
In August 2020, Network
International commissioned a
leading external engagement
company, Kincentric, to conduct
an independent employee survey
focused on our response to
COVID-19. The survey aimed
to gauge levels of workforce
satisfaction with our response –
and to inform future management
actions. In total, over 1,000
employees (representing 83%
of our workforce) participated
across the Group.
89%
overall satisfaction score
The survey recorded an overall
satisfaction score of 89%, with
key areas of strength including:
› Senior leadership communication
and response: 94%
› Level of Company support for
employee wellness, health and
safety: 92%
› Virtual work effectiveness: 89%
› Manager concern and
connection: 87%
› Company approach to helping
employees manage stress
relating to COVID-19: 80%
The findings will also help inform
future crisis response planning at
Network International.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 66
Responsible Business continued
Safeguarding our environment
We are committed to the implementation
of environmentally responsible practices
across our business.
Energy and carbon emissions
Carbon emissions (2020)
Scope 1: nil
Scope 2: 919 tons of CO2
Carbon intensity
(CO2 emissions per
employee): 0.8 tons CO2
per employee p.a.
This is the first year that we have
measured and reported on our
annual direct (Scope 1) and
indirect (Scope 2) greenhouse gas
GHG emissions, as part of our
obligations as a listed company
on the London Stock Exchange.
We will continue to monitor our
emissions in future years to inform
trend analysis, as well as future
emissions reduction measures.*
*Carbon emissions methodology and assumptions
Network International has reviewed
its sources of carbon emission and
has concluded the following:
– Based on the methodology
adopted, Network International’s
Scope 2 emissions are
919 tons of CO2.
– NOTE 1: Nigeria and South Africa
employees were in the process
of relocating premises in 2020.
Due to the limited number of
employees (<50 in total) operating
out of these locations and the
lockdown due to COVID-19, the
impact in 2020 for these regions
would be negligible and hence
have not been considered.
– NOTE 2: Premises with electricity
costs bundled with the lease /
rental contracts have also not
been considered due to inability
to decouple the electricity
consumption from rental.
› Network International’s Intensity
Ratio computation is an extension
of the GHG methodology wherein
the Scope 2 emissions are divided
by the number of employees in
the respective offices to arrive
at the Group level intensity ratio
in CO2 emissions per head.
› None (0%) of our carbon emissions
or energy consumption come from
the UK or the offshore area of the UK.
› Scope 1: Network International’s
office buildings & cooling systems
are not dependent on gas / oil
consumption resulting in ‘nil’
Scope 1 emissions. Network
International does own 11 vehicles
which have no material impact in
2020 due to the work from home
arrangements put in place for
a significant part of the year.
› Scope 2: Network International
conducted a preliminary assessment
of power consumption in offices
across the Group & standardised
the consumption units for
reporting purposes (in KwHr).
– The computation methodology
applied for carbon emissions is the
product of ‘electricity consumption
in KwHr) for the region’ & ‘the
Emission Factor for the region’.
The resultants are aggregated to
arrive at the Group level emission.
– Emission factors for the
regions have been referred to
from the IEA.org – Emission
factors aggregator report.
Network International Holdings Plc
Annual Report and Accounts 2020
Our HSE Policy sets out our
overarching commitments to
minimise our impact on the
environment through pollution
prevention; reduce our consumption
of natural resources as well as our
emissions; and to recycle our waste.
For more information on our HSE
Management System, see ‘Health,
safety and well-being’ on page 64.
In addition, we seek to minimise
environmental impacts beyond our
immediate operations. This includes
leveraging our payment platforms to
help our merchants reduce their
volume of printed receipts (page 67),
as well as working with partners in
our wider value chain to help address
climate change (page 67).
Waste and recycling
The majority of the waste we create
comes from end-of-life IT equipment
and other office-related waste. The
closure of our global offices amidst
the COVID-19 pandemic has resulted
in the temporary reduction in the
volume of our office-based waste.
In early 2020, we completed an
initiative to replace all single use
plastic-paper cups with reusable
cups across our global offices and
canteens. This has resulted in
approximately 40,000 single use
cups being removed from our
business on an annual basis.
We also continued to implement
a range of initiatives under our
Group-wide recycling programme.
This included:
› A partnership with a third-party
waste management company at
our Egypt office, which resulted
in the recycling of approximately
14 tonnes of mixed waste
67
Case study
Helping address climate change through
the Priceless Planet Coalition
In October 2020, Network
International joined the Mastercard
Priceless Planet Coalition. The
initiative brings together companies,
merchants, banks, cities and
consumers from across the globe
to take action on climate change.
The goal is to plant 100 million
trees by 2025 and to re-grow
forests in regions of high global
need, as a way of capturing CO2.
Forestation efforts will be
supported by corporate and
consumer donations, and led by
Conservation International and
the World Resources Institute.
Focus will be on areas with the
highest potential for positive
climate, community development
and biodiversity impacts. Three
locations have been identified in
Kenya, Brazil and Australia, with
tree planting planned to start in
2021. Beyond this, the project will
be expanded to other locations.
Network International will act as
the ‘preferred acquirer’ for Priceless
Planet Coalition and will provide
payment processing services free
of charge for any digital donations
made in the UAE.
100m
trees to be planted by 2025
› The installation of new recycling
units to increase the recycling of our
office waste in the UAE and Egypt
Beyond our immediate operations,
we also work to reduce waste within
our supply chain. For example, our
payment acceptance terminals allow
merchant customers to reduce the
size and volume of paper receipts.
This has resulted in up to a 40%
reduction in receipt rolls for some
of our merchants in the UAE.
The office-based, technology-enabled
nature of our business means the
majority of our CO2 emissions relate
to energy consumption at our offices
(e.g. from lighting, air conditioning
and computer systems).
Group-wide electricity consumption
1,954,132 Kwh
Energy consumption at our offices
has been temporarily reduced by the
global transition of our workforce to
remote working. Nonetheless, we are
still taking small steps to reduce our
energy consumption and minimise the
carbon footprint of our offices. For
example, in early 2020 we installed
motion sensor activated lighting
systems at our office in the UAE. In
addition, we installed sensor activated
taps at offices across the Group
to help reduce water wastage and
to support COVID-19 prevention
measures. We hope to benefit from
the full impact of these measures once
we return to office-based working.
The COVID-19 pandemic has also
significantly reduced the amount of
business travel undertaken by our
employees. Prior to the pandemic,
we already used video conferencing
as an alternative to business travel,
where possible, in line with the
requirements of our Travel Policy.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 68
Responsible Business continued
Our contribution to society
Network International is committed to having
a positive impact upon our host societies.
Our most important social impacts are enabled
through our business model.
Case study
Supporting SMEs through COVID-19
While small- and medium-sized
enterprises (‘SMEs’) are key
contributors to the UAE’s economy,
they are highly vulnerable to the
financial impacts of COVID-19.
In March 2020, Network
International pledged the
equivalent of AED 5 million in cash
donations and discounted fees
to help ease the financial burden
on SMEs during the pandemic.
Our pledge included the following
measures:
› Cash donations to help provide
liquidity for our most severely
impacted SME clients. We
prioritised long-standing clients,
with an emphasis on the
smallest merchants who are
in particular need of additional
financial support
› The waiving of merchant service
fees for three months for new
SME users of our N-Genius™
online payment platform – to help
small businesses to transition
from physical to online sales
› The waiving of minimum
transaction fees for some
merchant clients for three
months to help further reduce
cost pressures
Through these ongoing efforts,
we hope to play an important
role in supporting our SME clients
through the crisis.
As a digital payments provider
throughout our regions, our business
activities support and promote the
financial inclusion of communities. In
addition, our support for community
development projects helps us to
deliver further social and economic
benefits at the local level; whilst
the economic value we generate
is distributed to our investors and
employees, amongst other key
stakeholders.
In this context, we are also fully
committed to fulfilling our obligations
towards – and maintaining the trust
of – all our stakeholders. This includes
respecting internationally recognised
human rights and acting with integrity
and honesty in all that we do.
Supporting financial inclusion
The nature of our products and
services, which are focused on
digitising and enhancing payment
services, help to lower transaction
costs and increase financial inclusion
in communities across the Middle
East and Africa. Furthermore, we
work with a number of our host
governments to contribute to
national financial inclusion initiatives
and support the development and
enhancement of national payments
infrastructure. This includes:
› Ongoing participation in the ‘Smart
Dubai’ initiative to help support the
acceleration of digital payments in
the Emirates
› Ongoing participation in the
Government of Egypt’s ‘Meeza’
national payment programme which
helps Egyptian citizens receive and
make payments electronically, pay
bills via ATMs and at government
departments, and access state
benefits and government subsidies
Network International Holdings Plc
Annual Report and Accounts 2020
69
Case study
Network International Society Satisfaction Survey
During the year, we conducted our
sixth Society Satisfaction Survey.
We conduct the survey on an annual
basis to measure awareness and
perceptions of our Group among
UAE residents. This includes a focus
on perceptions around the ethical
integrity of our business as well as
our approach to CSR.
The 2020 survey involved 212
participants (2019: 198) and
recorded a Society Satisfaction
Index (‘SSI’) score of 75% (2019:
65%), exceeding our target score
of 70%. The SSI is a measure of
how an organisation is perceived
by its stakeholders.
Based on the outputs of the survey,
we identified several opportunities to
help further enhance our contribution
to society. This included the
development of a new recycling
programme with an external partner
in Egypt, see page 67, as well the
distribution of food, clothes and
amenities to communities across our
regions of operation which have been
disproportionately impacted by
COVID-19. We began implementation
of these initiatives in 2020.
212
participants took part in the
2020 Social Satisfaction Survey
Key examples focused on addressing
the social and economic impact of
COVID-19 include:
Further examples focused on
addressing broader societal
challenges include:
› Employees donating blood to help
the medical community respond
to COVID-19
› Employees in Jordan volunteering
to deliver food parcels to 100
families through the NAUA
Foundation
› Employees in the UAE volunteering
with the Beit Al Khair Society to
distribute meals, benefitting 1,060
local community members who
have been severely impacted by
the pandemic
› Employees in the UAE volunteering
through the Special Needs Future
Development Center to support
40 children with special needs
› Employees in Egypt volunteering
through the Land of Love
Association to support adults
with special needs
› Employees in South Africa taking
part in the ‘Women for Change
– Virtual Race’ to raise awareness
of violence against women
› Employees in South Africa taking
part in food distribution to
vulnerable groups, in collaboration
with the Central Hockey Club
In addition, Network International
continued to make donations to
the Rashid Center for People of
Determination and the Sheikh
Mohammed Centre for Cultural and
Social Understanding in the UAE.
Network International Holdings Plc
Annual Report and Accounts 2020
Community development
We are committed to maximising our
positive impacts on local communities.
We support the philanthropic efforts
of our employees to help drive a
‘bottom-up’, employee-led approach
to community development across
the Group. Most volunteering takes
place during working hours, and
employees are given the opportunity
to suggest volunteering-led initiatives
for inclusion in the Company’s annual
CSR programme.
During lockdown, over 140
employees volunteered to support
community development initiatives
across the Group.
Strategic reportCorporate governanceFinancial statements 70
Responsible Business continued
Business ethics
Network International is committed to
applying the highest ethical standards.
This commitment is established in our
Code of Conduct,3 which requires all
our employees and any third parties
acting on behalf of the Group to act
ethically and in full compliance with all
applicable laws and regulations. All
employees receive annual refresher
training on the Code of Conduct.
Our approach to business ethics
is further set out in a range of
supporting policies (which are
available to employees, not published
externally). This includes our:
› Anti-Bribery and
Anti-Corruption Policy
› Sanctions Policy
› Anti-Money Laundering /
Counter Terrorism Funding
(‘AML/CTF’) Policy
› Conflicts of Interest Policy
› Market Abuse Regulation
(‘MAR’) Manual
› Whistleblower’s Policy
Network International operates a
zero-tolerance approach to modern
slavery and human trafficking. We
do not employ bonded, forced or
compulsory labour and would never
knowingly support or do business
with any organisation involved in
these issues. Based on the nature of
our business and the goods and
services we procure from third-party
suppliers – the majority of whom are
in the technology and/or payments
sectors – we assess there to be a low
risk of modern slavery and human
trafficking in our supply chains.
We assess this risk on an ongoing
basis through due diligence
undertaken on all suppliers prior
to engagement – and, periodically,
throughout the contract term –
as set out in our Group Procurement
Policy and Vendor Code of Conduct.
We also undertake periodic onsite
audits on a number of suppliers.
Finally, we include standard terms
in all our contracts to reinforce our
opposition to modern slavery and
human trafficking.
In future, we plan to further enhance
our standard terms and conditions
with suppliers to support our
ongoing alignment with the UK
Modern Slavery Act. We also plan
to conduct related awareness
training for employees involved
in supply chain management.
For further details, see the link to
our Modern Slavery Statement at:
network.ae/en/contents/view/
modern-slavery-act.
In 2020, we strengthened our
compliance procedures through
the launch of a confidential and
anonymous 24-hour whistleblowing
hotline and related online reporting
channel, operated by an independent
third party. Employees can also
continue to raise concerns via a
direct telephone line to our Chief
Risk Officer and Group Company
Secretary. These channels enable
employees to safely raise concerns
about actual or potential fraud,
malpractice, or wrongdoing without
fear of reprisal. In addition to
business ethics, these channels
accept concerns related to any
other matter that employees feel
is unacceptable in the workplace.
Our approach to business ethics
is described in more detail in the
Corporate Governance Report
on page 100.
Human rights
Network International is committed
to respecting fundamental human
rights and labour standards. Whilst
we do not have a standalone human
rights policy, we have implemented
a range of policies that support
these commitments. These include
our Code of Conduct and
Whistleblower’s Policy.
In addition, our human rights
requirements are embedded
within our Group Procurement Policy,
as well as our Vendor Code of
Conduct. These require suppliers to
demonstrate that they provide safe
working conditions, treat workers
with dignity and respect and apply
ethical and legal employment
practices. Violations of the Vendor
Code of Conduct will lead to the
termination of our relationship with
a supplier.
3 Network International, Code of Conduct: https://investors.networkinternational.ae/media/1231/network-
international-code-of-conduct-mar2020.pdf.
Network International Holdings Plc
Annual Report and Accounts 2020
Non-Financial Information Statement
The table and cross-references below aim to help stakeholders better understand
our approach to key non-financial matters.
71
Reporting
requirement
Example internal policies
and standards
Page reference
Environmental matters
Corporate Social Responsibility (‘CSR’) Policy
Health, Safety and Environment (‘HSE’) Policy
Climate change
Employees
CSR Policy
HSE Policy
Code of Conduct
Employee Charter
HSE Policy
Equality, Diversity and Inclusion Policy
Learning & Development (‘L&D’) Charter
Employee Engagement Survey
Human rights
Code of Conduct
Whistleblower Policy
Group Procurement Policy
Vendor Code of Conduct
Modern Slavery Statement
Social matters
CSR Policy
Anti-corruption
and anti-bribery
Code of Conduct
Anti-Bribery and Anti-Corruption Policy
Sanctions Policy
Anti-Money Laundering / Counter Terrorism
Funding (‘AML/CTF’) Policy
Conflicts of Interest Policy
Market Abuse Regulation (‘MAR’) Manual
Whistleblower’s Policy
Business model
N/A
Principal risks
and uncertainties
Enterprise Risk Management Framework
59
64
59
64
100
61
64
60
64
63
100
101
70
70
70
59
100
70
70
70
70
70
101
10
73
Non-financial key
performance indicators
N/A
56, throughout
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 72
Principal Risks and Uncertainties
Introduction from the Chief Risk Officer
and Group Company Secretary
Overview
We have continued to make further
progress in maturing our approach
to risk management, building on
the firm foundations we laid in 2019.
For example, we have embedded a
strong culture of risk management
which supports good governance
and sound risk management
practices across the Group. We
operate in dynamic markets across
the Middle East and Africa which
can be impacted by a multitude of
geopolitical events and regulatory
changes. Therefore, our continued
growth in the region, together with
our expansion plans for the
Saudi Arabia and Africa markets
alongside rapid technological
developments in the payments
industry present shifting demands
on our operational and technology
capabilities. All of these factors
continue to expose our business
to multiple challenges, risks and
uncertainties. Consequently, the
effective and efficient identification
and management of these risks is
key to the successful achievement
of our strategic objectives.
COVID-19
The speed and impact of the
COVID-19 pandemic on people and
commerce around the world was
unprecedented. On page 6 of this
report, we explain our strategic
response to mitigate the impacts
of the pandemic on our business:
› Working for our customers;
› Balancing short-term disruption
with a long-term focus;
› Maintaining a robust
financial position;
› Looking after our people; and
› Pulling together through
strength of leadership.
› With the onset of the pandemic, we
established a COVID-19 Assessment
Team, chaired by the Group CEO,
to rapidly assess the emerging
situation and its impacts on our
business and our colleagues.
› Our robust Business Continuity
programme ensured that the
Group was able to swiftly transition
to remote working across all our
markets while maintaining services
and resiliency at high levels.
› We also re-evaluated our
control framework, assessing
the extent to which it could
be adversely impacted in the
short term in order to maintain
operational resiliency.
› A temporary principal risk relating
to COVID-19 was also created to
monitor the Group’s response to
the pandemic against additional
key risk indicators which were used
by management to assess risks,
in addition to being reported to
the Audit and Risk Committee.
Jay Razzaq
Chief Risk Officer and
Group Company Secretary
We continue to evolve
our risk profile as the
business grows and we
expand our geographical
footprint in the Middle East
and Africa region. We have
also made considerable
progress in embedding
our Enterprise Risk
Management Framework
(‘ERMF’) across all three
lines of defence. Our ERMF
and governance model are
aligned with our operating
model which helps us
in managing risks in the
changing economic,
political and market
environments.”
Jay Razzaq
Chief Risk Officer and
Group Company Secretary
Network International Holdings Plc
Annual Report and Accounts 2020
Credit risk
With the onset of the COVID-19
pandemic at the end of Q1 ’20, we
experienced a significant impact
to trading, linked to the social
distancing and lockdown measures
implemented across nearly all of the
markets in which we operate. This
impacted a number of our merchants’
ability to trade. We rapidly took steps
to assess the impact of our potential
loss rates, particularly from those
merchants that were offering delayed
delivery of products and services.
› We formulated three stress
scenarios focusing on certain
delayed delivery merchants
and their expected chargeback
volumes up to June 2020,
December 2020 and June 2021.
› We considered how each of
these scenarios was impacted
in different segments within
our portfolio against actual
unrecoverable chargeback losses.
› Increased refund requests arising
from cancellations of bookings from
our airlines, travel agencies, tour
operators and hotels merchants
were closely monitored and
recovered from those merchants.
› As a result of our proactive risk
mitigating actions and prudent
risk management approach our
chargeback losses were only
0.003% of Total Processing
Volume at the end of 2020.
More about credit risk
See page 86
73
ERMF
The Group continues to make good
progress in further embedding the
ERMF, having established a clear risk
governance model utilising the three
lines of defence model to ensure
effective risk management, oversight
and assurance. In addition, the ERM
Committee, which was constituted
in 2020 with representatives from
the management team and Group
Internal Audit, has established regular
meetings to monitor and review
various enterprise level risks within
the Group, to provide effective
oversight of the ERMF and to report
its findings to support the work
of the Audit and Risk Committee.
Examples of the steps we have taken
to embed our ERMF and evidence of
a strong risk culture are given within
this section on Principal Risks and
Uncertainties (from pages 76 to 78).
Regulatory compliance – Keeping pace with regulatory changes
Ghana:
We have a robust framework in place
› The new Payment Systems and
to ensure compliance with changes
in the law and we are committed to
adhering to the highest regulatory
standards in our markets of operation.
UAE:
› The UAE Federal law on relaxation
of restrictions on foreign ownership of
business in UAE, which may open the
possibility of reviewing the sponsorship
structure for the Group’s UAE business.
Services Law requires the Group
to set up a local Ghanaian company
with a 30% local shareholding
partner, to be able to continue
servicing Ghanaian customers.
The Group is subject to an increasing
array of regulations that affect the
payments industry in jurisdictions in
which our products and services are
used by our merchant and financial
institutions customers. In response
to this the Group performs timely
reviews of new and emerging laws
and regulations to assess the impact
on the Group’s overall risk profile.
The assessments are reviewed by
our Regulatory & Privacy Change
Management Committee who
provide direction to Group on the
impact, implementation requirements
and the ongoing monitoring of
compliance with laws and regulations.
› In the Middle East and Africa we
have seen several examples of
new legislative and regulatory
requirements that have been or
are expected to be introduced
in the near future. These include:
› The Central Bank also invited
comments on their proposed Retail
Payments Services Regulation
with an intention to finalise which
is proposed for implementation for
2021; the Group’s UAE business would
be governed by these regulations.
Saudi Arabia:
› The Saudi Arabia Monetary
Authority issued a new payments
regulation under which a payment
service provider licence is required
to be obtained by the Group’s
Saudi Arabian entity to provide
payments services in Saudi Arabia.
Egypt:
› The Egypt Central Bank enacted
a new Banking law in 2020, under
which the Egyptian subsidiary will
be required to obtain a payment
system operator licence.
South Africa:
› A new Protection of Personal
Information Act of South Africa
came into effect in 2020 to regulate
the processing of personal data by
data controllers and data processors.
Regulatory change will remain a
key area of focus in the year ahead
to ensure we continue to identify
and assess changes in a timely
manner and effectively embed new
requirements into our business
operations. The Group will ensure we
are organisationally aligned to assess
and where applicable meet all new
regulatory obligations as they emerge.
More about our regulatory compliance
See page 83
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 74
Principal Risks and Uncertainties continued
COVID-19
On pages 6 and 7 of this Annual
Report, we explain the key priorities
of our Coronavirus Management
Strategy in rapid response to
mitigate the impact of COVID-19
on our business, protecting our
customers, our people and our
financial position. For example, we
implemented a number of practical
support measures for customers
across the business and our
programme of cash support to
micro-SMEs which was very well
received. We approached this rapidly
emerging risk by establishing a
COVID-19 Assessment Team to
monitor the situation, develop our
Coronavirus Management Strategy
and actively respond to the needs
of our customers and colleagues.
A temporary principal risk was
created to support the Committee
to understand and monitor the
impact of the pandemic on the
Group’s risk profile. The risk was
monitored and reported during
the first half of 2020 by identification
of early warning indicators as the
business responded to COVID-19.
The reporting of COVID-19 as a
standalone risk has now ceased and
we continue to monitor the COVID-19
impact as part of the existing
principal risk framework. In the
principal risk section below we will
explain how COVID-19 has impacted
some of our principal risks and
the actions taken by the Group
to manage those risks.
Cyber security – Combatting evolving cyber risks
and continuing to invest in security enhancements
The security of our systems and the
data we are trusted to manage is of
utmost importance to us.
› Cyber attacks are undeniably a
global threat for businesses and
individuals with the frequency and
sophistication of attacks increasing
every year. Governments and
regulators across our markets are
increasingly recognising cybersecurity
as a systemic risk resulting in the
emergence of regulations and
standards to combat the emerging
cyber threats. The Group has invested
in and continuously enhanced the
security capabilities to combat and
to be resilient against such risk.
Further, the COVID-19 pandemic
has changed the way our colleagues
are accessing corporate networks
creating a new set of challenges
from a cyber-risk perspective. We
have proactively addressed these
challenges and mobilised additional
security monitoring and controls.
› The Group adheres to a number
of industry leading information
security standards and practices.
These risk governance measures,
security practices and certifications
give our investors and customers
confidence in our security approach.
› We continue to invest in and enhance
our cyber security frameworks
and capabilities to improve our
security posture and resilience.
› The Group continuously uses an
intelligence driven defence in depth
approach for early detection and
response to cyber threats.
› We continually evaluate threat levels
for the most prevalent attack types
and their potential outcomes.
› We ensure our colleagues remain
aware of cyber security issues and
know how to report incidents as
part of our defence strategy.
› Our governance structure around
cyber security was calibrated
further to respond to the new
and emerging cyber risks.
› The Group manages personal and
cardholder data for its customers and
employees. During the year, the Group
made further progress to strengthen
its data privacy practices by adopting
a Group-wide Data Protection Policy
and enhancing internal data privacy
controls including the appointment of
a Group Data Protection Officer and
expanding the scope of its existing
Regulatory Change Management
Committee to include Data Privacy.
More about cyber security
See page 80
Network International Holdings Plc
Annual Report and Accounts 2020
75
Principal and emerging risk trends
We continue to see the risk trends
remaining stable for our principal
risks with further investments in
our cyber security and technology
infrastructure being particularly
noteworthy. However, we recognise
that we operate in a dynamic
business environment and that our
risk profile will continue to evolve
over time. We continue to remain
focused on new and emerging risks
which could adversely affect our
accepted risk profile and strategic
planning in the longer term.
We have revisited these risks which
are primarily driven by external
factors including cyber, regulation,
market stability and climate change.
The increasing risk on execution is
driven by increased levels of activity
and we continue to assess, prioritise
and increase our capacity to deliver
against our strategic objectives.
Further detail on the new and
emerging risks can be found
on page 87. The Board has
also reaffirmed the Group’s risk
appetite for the year 2021.
How we manage risk
We have a dynamic, practical
and action-oriented ERMF, which
helps us in proactively responding
to changes in our business
environment, whilst continuing
to deliver on our expectations
of increased transparency, value
protection and creation. This is
supported by our use of the three
lines of defence model and the
functional responsibilities and
oversight committees that support it.
We have implemented most of the
core components as part of the
ERMF design and the remaining
components are on track to be
implemented within the committed
timelines during 2021. Risk profiles
have now been documented for all
business units across the Group in
the form of risk assessments which
help business and support functions
in identifying, mitigating and
reporting their risks and controls.
Corporate risks, which act as the ‘link’
between the principal risks and unit
level risks, have also been defined.
This helps in creating a common
risk taxonomy across the Group
and ensures consistency of
understanding and reporting of
actual and emerging risk events.
The Group continues to use its ERMF
to enable management to make
sound risk-based decisions in relation
to strategic initiatives. The proposed
DPO acquisition was a recent
example where the Group developed
a separate risk profile of the DPO
business to determine how the
Group’s overall risk profile would be
How we manage risk
Setting risk strategy,
appetite and culture.
Monitoring of Board
Committees’
performance.
Quarterly reporting
Quarterly reporting
Oversees the
implementation of the
ERMF and risk culture.
Monitoring of principal
risks and KRIs.
Quarterly reporting
1st Line of Defence
2nd Line of Defence
3rd Line of Defence
Assesses ERM
capabilities.
Implements and leads
any major initiatives
or changes.
Manages each of the
risk divisions and
ensures effective
implementation of risk
management practices.
Quarterly reporting
Quarterly reporting
Quarterly reporting
Owners of the risks
and internal control.
Accountable for
performance of
activities within the
stated risk appetite
and tolerance limits.
Support Functions
(Operations, IT, HR,
Finance, Products,
Marketing, Strategy)
Reviews and
monitors risks,
internal controls,
mandatory
reporting, regulatory,
card schemes
requirements and
mitigations.
Compliance Function
(Regulatory, AML,
Sanctions and Card
schemes guidelines
monitoring)
Provides assurance
to Executive
Management and
Board committees on
the application and
effectiveness of the
ERM framework and
risk culture.
Additional Assurance
Provision
Network International Holdings Plc
Annual Report and Accounts 2020
Board of Directors (‘BOD’)Board Committees (Board Audit and Risk Committee)Network Executive Management CommitteeEnterprise Risk Management Committee (‘ERMC’)Issuing and Acquiring Business (Middle East and Africa)Risk Management Function (Operational, Fraud, Credit and Information Security)Internal Audit (‘IA’)Strategic reportCorporate governanceFinancial statements 76
Principal Risks and Uncertainties continued
impacted by the acquisition. This
allowed where relevant for short and
longer-term mitigating actions to be
agreed and in due course mobilised.
Our approach to risk management
At Network International, we maintain
a robust and sustainable ERMF, which
ensures risks are properly identified,
assessed against tolerance levels and
appropriately managed across the
Group. Our ERMF is designed to
minimise the potential threats to
achieve our objectives. In 2020,
we completed a thorough risk
assessment process that commenced
in 2019 initially prioritising higher risk
areas followed by lower risk business
units. The overall approach was
underpinned by a bottom-up
approach and examined from
a top-down perspective.
During the year, management
has sought to build a richer
understanding of the risks facing
the Group’s operations. A number
of our successes as part of the
management of our operational
risks are set out below:
› We completed all functional
risk assessments across all
Group locations;
› We implemented risk and control
self-assessments (‘RCSA’) for our
operations function;
› We completed questionnaire-
based risk reviews for our critical
vendors to provide comfort over
those partners critical to our
delivery and supply chain cycle
during the COVID-19 pandemic;
› We revised all our existing risk
management policies to be
aligned with the ERMF which
were approved by the Board
and rolled out to our colleagues.
While 2020 has been a challenging
year due to the COVID-19 pandemic,
the Group has emerged stronger as a
result of a successful implementation
of a robust Business Continuity
programme which enabled the Group
to continue to provide services to
our customers seamlessly.
Risk appetite
Risk appetite is the amount of risk
we are willing to take in pursuit of
our objectives. It defines the level of
risk at which appropriate actions are
needed to reduce risk to a level that
we are willing to accept. As defined
in our principal risks disclosure we
consider risks from a low, balanced
and high perspective. Our risk
appetite is not static and may change
over time in line with changing
capabilities for managing risk
and our business environment.
The risk appetite statement is
reviewed and approved by the
Board annually.
Our approach to risk management
Risk Identification
› Consideration of initial
risk information, causes,
sources, events and
circumstances which
could have material impact.
› Assignment of risk
ownership and
development of
documentation.
Inherent Risk
Assessment
› Application of inherent risk
scoring based on inherent
impact and probability.
Inherent scoring does not
consider mitigation controls.
›
› Prioritisation of risk and
control activities.
Existing Controls
›
Identification and
assessment of controls that
mitigate risk event occurring.
› Assessment of design and
operating effectiveness.
Residual Risk
Assessment
› Application of residual risk
scoring based on residual
impact and probability.
› Residual scoring considers
the existing control
environment.
Business Environment
Oversight
› Utilisation of our business
understanding and internal/
external sources.
› Understanding of our
business strategy and
defined risk appetite.
› The ERMC and Executive
Management Committee
provide ongoing review
and challenge to facilitate
the approach.
› The Board, Audit and Risk
Committee and Group
Internal Audit provide further
review and challenge and set
the overall risk appetite.
Risk Monitoring
& Reporting
› The Group monitors the
risks for any changes in
risk trend.
› Reports and escalates
as per cycle and criteria.
Action Planning
› Risk treatment approach
is considered for each risk
(treat, tolerate, terminate
or transfer).
› Development of risk
mitigation plans including
target dates and
responsible persons.
Network International Holdings Plc
Annual Report and Accounts 2020
77
Group Risk Appetite Statement
“At Network International, our growth
strategy is focused on maintaining
our position as the best payments
partner in the Middle East and Africa.
We accept that these markets are
subject to higher levels of geo-
political uncertainty and business
risk than those in more developed
markets, and are also accepting of
any concentration risk based upon
our entry into these markets and
territories, though we act to mitigate
this through revenue diversification.
We will aim to balance this against
a low appetite for any risks that
compromise the confidentiality,
integrity or availability of our data,
our customers’ data or our cyber
security position. Additionally, we
look to minimise our exposure to
any risk which will adversely impact
our stakeholders, operational
performance or compliance with
relevant regulation and legislation.
Network International has a low
appetite to incur losses from
financial risk.
We will support this appetite with
a level of investment that ensures
we have suitable levels of policy
and controls to effectively manage
these risks, facilitate decision
making and continue to support
our growth strategy.
This means as a business that we
have an informed appetite to taking
risks which will enable us to drive
growth in a sustainable manner
providing an adequate and stable
return on investment and which limits
our exposure to those areas where
we have a low risk appetite and
effectively control those to which
we have a greater appetite for risk.
We believe that managing these
risks in the right way will support
our aim of enabling commerce in
the world’s most under penetrated
payments markets.”
Risk culture
The Group is committed to
embedding a strong risk culture
to support good governance and
sound risk management practice.
The Board and the Executive
Management Team play a key
role in directing and influencing
this by ensuring that:
› a risk based approach is used during
key decision making. A recent
example has been the response by
the Group to COVID-19 pandemic,
where the Group applied its ERMF
to support management in making
sound risk based decisions by
developing a new temporary
principal risk to understand the
impact of COVID-19 on our existing
principal and emerging risks.
Additionally, a separate risk profile
of the DPO business was also
developed to understand how the
DPO risk profile might impact the
Group’s overall risk profile;
› a consistent tone from the top
and clear responsibilities for risk
identification and challenge; refer
to responsible business section
on page 56;
› employees have risk management
accountability and escalate issues
on a timely basis;
› our incentive structures described
within our Remuneration Report
on page 132 promote a risk
aware culture to effectively
manage risk and remunerate
employees accordingly;
› we adopt a culture of “learning
from our mistakes” to foster
continuous improvement of
processes and controls;
› whistleblowing, an independent
confidential whistleblowing
service to enable employees to
raise their concerns through an
independent route;
› risk awareness is embedded within
the Group and is grounded in our
strong ethical values and culture.
Our risk management philosophy
is cascaded top down and bottom
up and runs through all our
management, employees and
connected stakeholders.
To improve risk awareness across the
Group a comprehensive online training
programme has been developed
covering important risk and
compliance topics. We have had very
high levels of participation from our
colleagues across the Group in 2020.
The importance of risk culture is
reinforced in the Group’s policies
and standards and the Code of
Conduct, to which all our colleagues
attest annually as part of the annual
training programme.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 78
Principal Risks and Uncertainties continued
Focus areas for 2021
In 2021 we will focus on further embedding our approach to risk management throughout our business, markets and
support functions to build an even richer picture of risk information.
The priorities for Group Risk throughout 2021 will be:
Priorities for 2021
Rationale
Completion of the Governance Risk and
Compliance platform implementation.
This will provide us with a centralised tool for managing risks, controls, risk
assessments and loss management. The platform enables cross-functional
collaboration and alignment.
Complete the implementation of RCSA
for all functional units.
RCSA helps the first line function in developing its control testing standards for the
identified controls documented in the risk assessments and tests its effectiveness on
defined frequencies. RCSA also helps in promoting and embedding a risk awareness
and management culture across the Group through effective process governance.
Completion of the Annual Assurance
plan for 2021.
To provide assurance on the effectiveness of Group’s current control environment
by the second line of defence and to ensure these are aligned and meeting the
overall Group’s business objectives.
Completion of separation of Network
International Group ‘Cyber Security
services’ from Emirates NBD Group.
To achieve self-sufficiency in the area of Cyber Security and implement enhanced
security solutions in line with the Group requirements.
Integration of Group ERM framework into
DPO Group business (post acquisition).
Implementing an integration strategy with prioritised focus on control functions as
per ERM framework.
To further enhance our acquiring fraud
monitoring capabilities with the
implementation of new e-commerce
risk control tools.
To support growth in e-commerce business with the required risk controls.
The completed priorities for Group Risk in 2020:
Priorities for 2020
Benefits
Enhanced whistleblowing process.
Appointed an independent and confidential whistleblowing service for the Group
and rolled out awareness and communication on the revised whistleblowing process.
Completed the compliance
assurance reviews.
Assessment of compliance risks of the changing regulations, emerging business
risks and ongoing money laundering and sanctions risk.
Embedding of ERM framework.
Further strengthen Group’s risk culture by rolling out awareness and
communication on the ERM framework to our colleagues across the Group.
Completed ‘bottom-up’ risk
assessments for all functional units.
Helps business and support functions in documenting and assessing their risks
and controls for all Group functions.
Initiation of RCSA.
Implemented RCSA for our operations function and are on track for completing
the remaining functional units. The RCSA helps the first line of defence in
developing its control testing standards for the identified controls documented
in the ‘bottom-up’ risk assessments and tests its effectiveness on defined
frequencies. RCSA also helps in promoting and embedding a risk awareness and
management culture across the Group through effective process governance.
Implementation of key cyber security
enhancements.
Implementation of Group-wide end-point detection and response (‘EDR’) solution
across all end-points and servers to protect against malware attacks.
Enhanced email protection, phishing triaging and anti-spoofing controls across
the Group.
Enhancements in the DDOS protection across the Group including a simulation
exercise to test the efficiency of the controls.
Acquiring fraud module of Way4 system was implemented.
To mitigate chargeback risk posed by certain delayed delivery merchants,
due to COVID-19 pandemic impacting their trade volumes.
Implemented a new acquiring fraud
monitoring system.
Acquiring portfolios of UAE and Jordan
were subjected to a stress testing
exercise focusing on travel and
subscription merchants to mitigate
risk of chargeback.
Network International Holdings Plc
Annual Report and Accounts 2020
79
Our principal risks
We have completed a robust
assessment of emerging and
principal risks that we consider are
most likely to have an impact on
our business in the future. Not all
risks facing the business are listed;
however, we have highlighted on
page 87 those emerging risks that
we consider may have an impact on
the business. These risks are not listed
in any particular order of priority.
‘Execution risk’ disclosed last year
as an emerging risk is now being
included as a new principal risk.
The Group has committed significant
capital in order to pursue its strategic
initiatives including M&A and plans to
enter new markets. To achieve these
strategic initiatives, the Group plans
to make further investments in its
infrastructure, product development
and people. These strategic initiatives
if not executed well may negatively
impact our return on investment and
may expose us to adverse financial
and reputational risks. Inclusion
of the new principal risk reflects
increased focus on execution risk in
FY21 in light of the DPO acquisition,
ENBD separation, planned Saudi
Arabia market entry and revenue
growth plans for Africa.
In addition, two principal risks ‘Fraud’
and ‘Credit’, which were disclosed last
year as separate principal risks, are
now combined. Primarily both these
risks are posed by chargebacks, fees,
charges and scheme fines and have
similar mitigating controls (with the
exception of non-customer related
fraud incidents). Additional controls
and enhanced key risk indicators
have been introduced through the
COVID-19 period and notwithstanding
the perceived higher risks associated
with businesses impacted as a
result of COVID-19, actual losses
experienced from both a fraud and
credit perspective have remained
stable throughout the year and well
within the ‘low’ loss rate threshold.
For 2020, the overall risk profile
of the Group was managed at
acceptable levels with the majority
of the Group’s principal risks falling
within the ‘Informed’ risk rating.
The overall residual risk trend
when compared broadly to the
risk profile for the prior 12 months
has been stable due to the
continuous investments in the
Group’s infrastructure, resources,
governance model and internal
control framework.
The following section contains
information about the principal
risks, including a summary of the
progress made in 2020 and the
priorities for 2021, their potential
impact, our risk appetite and the
link to our strategic priorities.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 80
Principal Risks and Uncertainties continued
Link to strategic priorities
1
Capitalise on digital payments adoption
and enable financial inclusion
2
Expand customer base and focus
on high value segments
3
Develop commercial arrangements
with strategic partners
4
Product expansion and
market penetration
5
Leverage technology
and build capabilities
6
Pursue opportunities
for acceleration
Risk appetite rating defined
Risk trends defined
Low – We will ensure
that we have sufficient
controls and mitigations
in place to allow for
a low level of risk whilst
recognising there
may be a limited
reward potential.
Informed – An approach
which we feel could
deliver reasonable
rewards, economic
or otherwise, by
managing the risk
in an informed way.
High – Willing to
consider opportunities
with higher levels of
risk in exchange for
potential greater reward.
Decrease in
principal risk
impact and/or
probability at
residual level.
No change in
principal risk
impact and/or
probability at
residual level.
Increase in
principal risk
impact and/or
probability at
residual level.
Cyber Security
Breach of the Group’s infrastructure resulting in the compromise of data or service
disruption through cyber security breaches.
Strategic priorities
1
5
Risk impact
Progress during 2020
2021 plan
Risk trend
An external cyber-
attack, insider threat
or third-party breach
could cause the loss
of confidential data
or service disruption
leading to financial
loss and reputational
damage.
› Completed the revalidation of the Cyber
Security Maturity Assessment (‘CSMA’)
report gaps across all Group locations.
› Continued investment and implementation
of new age security solutions to safeguard
the Group from emerging risks.
› Continued education and cyber security
awareness programmes for the workforce.
COVID-19 response
› Completed additional security reviews
on all remote access (‘VPN’) solutions
to ensure secure WFH.
›
›
Implemented relevant actions from various
security advisories on cyber threats and
emerging trends in light of COVID-19.
Increased vigilance by 24/7 security
monitoring teams across all locations.
› Enhanced Distributed Denial of
Service (‘DDOS’) protection across
Group infrastructure.
›
Improve our incident response
through implementation
of next generation security
operations centre (‘SOC’).
› Continued investment and
implementation of new age
security solutions to safeguard
the Group from new threats.
› Cyber security mobilisation
in new markets of operation
to ensure our controls are
standardised across the Group.
› Continued education and
cyber security awareness
programmes for the workforce.
› Following the DPO acquisition,
further refine pre-completion
work on DPO cyber controls.
Risk appetite: Low
The Group will not accept risks
which may compromise the
confidentiality, integrity and
availability of its data and its
customers’ data.
Network International Holdings Plc
Annual Report and Accounts 2020
81
Technology Resilience
Risk of interruption to critical production services and delays to projects caused by limited
availability of technical skills, poor delivery by vendors, software defects introduced to
production which could expose the Group to financial losses (e.g. client claims and loss
of business) and reputational impact.
Strategic priorities
1
2
4
5
Risk impact
Progress during 2020
2021 plan
Risk trend
Risk appetite: Informed
We are accepting some level
of modest disruption, within the
relative norms of the markets
in which we operate. However
we ensure appropriate levels of
resilience are in place to minimise
the impact to our customers.
› Further investment into our
technology and security
infrastructure, including
opening of a new datacentre
in the Middle East (Dubai)
and further expansion of the
existing facility in Abu Dhabi
including targeted completion
of ENBD datacentre separation.
› Group-wide IT disaster recovery
and business continuity testing
to be completed.
› Further enhance and improve
the End of day and Start of day
process – to reduce processing
time and ensure better
compliance to SLAs.
› Continue to drive automaton
across business operations and
IT for predictable outcomes.
Undesired level of
service to customers
due to failure or poor
performance of
technology and/or
system operating
environment resulting
in customer attrition,
financial and/or
reputational loss.
› Developed UAE Data Centre build and
readiness plan.
› Stabilised the core platforms, closed open
issues and implemented test-driven
development for improved deliverable quality.
›
›
Increased regression testing coverage
enhancement and automation of
regression testing.
Initiated work on developing a standard
‘structured service catalogue’ for issuing
clients on core platform.
› Automated monitoring dashboards
to allow data-driven decisions and identify
issues proactively.
›
Introduced improvements in software
deployment process which reduces
downtime during system maintenance.
COVID-19 response
›
Increased Internet Bandwidth capacity
to manage the additional load of
remote working.
› Monitoring of technology daily
productivity dashboards.
› Reassessed critical technology vendors
and obtained assurance from these vendors
for continuity of services.
› Provided uninterrupted field support
across UAE, Egypt and Jordan for
point-of-sales support and ATM service,
24x7 service from contact centre.
› Supported ad-hoc urgent system change
requests from clients on payment
deferrals, holiday solutions, changes in
ATM withdrawal limits as per central bank
mandates during COVID-19 pandemic.
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements 82
Principal Risks and Uncertainties continued
Operational Resilience
Risk of inability to execute operational processes and deliver on contractual obligations due
to operational inefficiencies and discontinuity, defects, errors and delays, which could damage
customer relations, decrease potential profitability and expose the Group to liability.
Strategic priorities
1
2
4
Risk impact
Progress during 2020
2021 plan
Risk trend
Risk appetite: Informed
Whilst we continue to enhance
our control framework across the
Group we are accepting of some
degree of operational failure from
time to time provided the impact
of failures remains within
acceptable limits.
An unexpected
disruption to
operational
performance that
may cause damage
to customer
relations or financial
loss to the business.
› Automated majority of our Middle East
manual processes through Robotic Process
Automation (‘RPA’). Based on the success
of the Middle East processes, we have
commenced automation in Africa.
› Continue to expand the scope
of automation through RPA
in Africa and other functions
in Middle East to minimise
processing errors.
› The Group Operations across portfolios
› To further enhance our straight
through processing and minimal
touch point engagement, plan
to introduce digital onboarding
for the merchant acquiring
business in the Middle East,
self-service solution for the
merchants in Middle East, and
remote ATM management for
the Egypt business.
› Automation of customer
metrics for alignment and
ensuring more engaged clients.
have been carrying out continuous process
improvement tracking (‘CPIT’) to critically
evaluate the process flow and eliminate
avoidable steps for better straight through
processing (‘STP’).
› Completed risk assessments (‘RAs’)
and implemented RCSAs programme
for all operations units as part of ERMF.
COVID-19 response
› Established COVID-19 assessment team
to monitor and actively respond to the
COVID-19 situation.
› Performed an assessment of our pre-
COVID-19 control environment and
introduced enhanced controls in a number of
areas in response to COVID-19 to ensure that
the control environment remains effective
and supports the remote working model.
› Swiftly activated Business Continuity Plan
(‘BCP’) by moving all units to work from
home. Currently all operations functions
across all geographies are working from
home seamlessly.
› The effectiveness of automation was visible
during the pandemic as teams could
seamlessly move to a work from home scenario
while continuing to maintain service delivery
standards and continued customer satisfaction.
Strategy and Business
Risk of Group’s ability to maintain its position as the best payments partner
in the Middle East and Africa.
Strategic priorities
1
2
3
4
5
6
Risk impact
Progress during 2020
2021 plan
Risk trend
We do not retain our
strategic position as
the best payments
partner in the Middle
East and Africa,
impacting our ability
to maintain market
share and to meet
growth and profit
targets.
› Continued to enhance and expand product
› Focus on delivering DPO
capabilities within the Group.
› Launched Commercial Card proposition
enabling Network Mastercard and their
customers to capture B2B payment streams.
› Launched a Digital Platform to enable
business plan and commercial
synergies once the transaction
has closed.
› Focus on delivery of Saudi
Arabia business plan.
broader adoption of digital payments in
MEA through the reduction in marginal cost
of deploying payment capabilities and
enabling the Group to better engage with
alternative payment methods in the region.
› Delivery of commercial benefit
associated with investment
in new product, in particular
gateway, N-Genius™ digital,
commercial card.
› Proposed acquisition of DPO gives access
to faster e-commerce revenue pools and
ability to provide a broader set of
capabilities to existing customers.
› Continue to deepen
relationship with Mastercard
enabling value generation
for both organisations.
Risk appetite: Informed
Revenue growth in line with
investor expectations and no
dilution of Group’s market position
in its markets of operation.
COVID-19 response
›
Implemented a number of practical
support measures for customers
across the business and our programme
of cash support to micro-SMEs.
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83
People
Inability to attract, develop and retain a skilled workforce and inconsistent organisational
culture across the Group.
Strategic priorities
1
2
4
5
6
Risk impact
Progress during 2020
2021 plan
Risk trend
Risk appetite: Informed
Group annual attrition rate not
to exceed defined parameters
however we accept a modest
number of regretted losses
which do not materially impact
operational efficiency or impact
our customers.
We are unable to
effectively manage
our workforce to
ensure consistent
delivery of the
Group’s strategy
and/ or operational
performance.
› Launched a new L&D Charter in response
› Health and wellness
to employee feedback from our 2019
Engagement Survey.
initiatives to continue as
ongoing activities.
› Mental well-being will
continue to be a key focus
area given the continuing
impact of the pandemic.
› Focus on the following
initiatives: career counselling,
mentorship, job shadowing,
job rotation and role-specific
training programmes.
› Continue to recognise
and reward our people
through various awards and
recognition programmes.
› Developed training calendars for
employees based on the training
requirements obtained from the
performance appraisal process and the
Training Needs Analysis ‘TNA’ survey.
› Excellent scores achieved from the
Employee Engagement Survey as well
as COVID-19 Actions – Feedback survey
(highlighted in a case study in the
Responsible Business section see page 65.
› Updated Diversity & Inclusion Policy
and Processes.
› Appointment of new highly qualified and
business relevant Group CEO.
COVID-19 response
›
Introduced a wide range of initiatives
to promote staff well-being, health and
morale in light of COVID-19 pandemic.
Including virtual medical services and
mental health consultancy services.
›
Increased focus on leadership
communication via enhanced contact
points with employees through virtual
forums, video messaging and social
media platforms.
› Sanitising and deep cleaning of Group
offices and implemented precautionary
measures. Group’s office layouts have
been altered to ensure adherence to
social distancing norms & thereby a safe
work environment.
Refer to Responsible Business section
for more details and case studies.
Regulatory Compliance
Failure or inability to comply with relevant laws, regulations & scheme obligations. Failure to
identify monitor & respond to changing regulations or scheme rules. Failure to comply with
regulatory reporting requirements in a timely manner.
Strategic priorities
1
2
4
5
6
Risk impact
Progress during 2020
2021 plan
Risk trend
A breach or non-
compliance to legal
or regulatory
standards leading to
penalties, sanctions
or reputational
damage.
› Completed compliance assurance reviews
in line with our annual compliance plan.
› Reviewed and updated all compliance
policies.
› Launched new service to provide an
independent confidential whistleblowing
reporting service where all staff can raise
their concerns.
› Continued monitoring of new and
emerging regulations in the MEA region
by Regulatory and Data Privacy Change
Management Committee which may
impact operating models within existing
and new markets.
Refer to regulatory compliance section in the
risk introduction and highlights on page 73
for more details.
› Compliance Monitoring Plan
to include new themed reviews
to capture market abuse
regulations and a review of
the whistleblower process.
› Continued focus on timely
implementation of
new requirements from
regulatory change.
› Further strengthening
compliance capabilities in
certain markets to meet
regulatory requirements
(Jordan/Nigeria/Ghana).
Risk appetite: Low
The Group will not accept
practices which could cause
breaches of laws, regulations or
scheme rules; or a delay and/or
failure to adapt its systems,
processes and controls to prevent
material compliance breaches
and/or regulatory censure.
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements 84
Principal Risks and Uncertainties continued
Geo-Political
Risk of significant political, social and economic instability in one or more of the Group’s
target markets which could have a material adverse effect on the Group’s business, financial
condition and results of operations.
Strategic priorities
1
2
3
4
6
Risk impact
Progress during 2020
2021 plan
Risk trend
A geo-political event
within our markets
that impacts our
ability to do business
or to meet our
strategic objectives.
› Completed country risk assessments
of markets the Group identified as
high risk.
› Reviewed evolving regulatory changes
in the payments markets where the
Group provides its services.
› Completed due diligence review
for issuing clients across all regions.
COVID-19 response
› Continued management focus on
executing acceleration opportunities
to further diversify business mix.
› The Group will continue to
closely monitor the markets
which have been identified
as high risk.
› Post DPO acquisition the
geographic footprint will
expand for the combined
Group and an assessment will
be conducted on countries
where the Group does not
have any business activities.
Risk appetite: High
The Group’s growth strategy is
focused on markets which are
likely to be subject to higher levels
of political, legal, economic and
social instability than those in
more developed markets.
Financial
Financial risks for the Group arise mainly from the following three elements: (1) Not having
sufficient liquidity to meet our obligations as they fall due; (2) Exposure to adverse movements
in foreign exchange rates arising from Group’s foreign operations and transactions in currencies
other than AED and pegged currencies; and (3) Exposure to adverse interest rate risk primarily
on our variable rate long-term borrowing/revolving line of credit, which we use to manage
our working capital needs.
Strategic priorities
1
2
3
4
6
Risk impact
Progress during 2020
2021 plan
Risk trend
Our liquidity,
foreign exchange
or interest rate risks
are not effectively
managed affecting
the business’s
ability to meet its
financial obligations,
profitability targets
or working
capital needs.
›
Implemented financial risk management
policies related to Liquidity, Interest Rate
and Cash Management.
› Further refining of robust stress
testing to ensure liquidity risks remain
fully manageable even under severe
stress scenarios.
› Refinanced and upsized the Group’s
term loan to ensure that we have
ample liquidity headroom to meet
our financial obligations.
› Realised savings in interest costs due
to the lower interest rate environment
and effective renegotiation on our
term loan margins.
COVID-19 response
› Enhanced monitoring of liquidity
position and covenant compliance
throughout the year in view of
the pandemic.
› The Group is in the process
of developing policies to
further manage financial
risks concerning FX, debt
management and derivative
and financial instruments.
› Continued monitoring of
liquidity position to ensure
sufficient funds and liquidity
headroom are available in
our borrowing facilities across
the Group.
› Exercise extension option
available on our revolver credit
facility that will allow us to
have further access to liquidity
if required.
Risk appetite: Informed
The Group will manage its
liquidity, FX and interest
rate risks in line with agreed
policies and thresholds.
Network International Holdings Plc
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85
Third Party
The Group‘s reliance on third parties to provide systems, technology infrastructure,
product development and service delivery. Risk of data breaches of third-party’s
systems, service disruptions with no alternatives, non-compliance to contractual
obligations, applicable laws and international standards.
Strategic priorities
1
3
4
5
Risk impact
Progress during 2020
2021 plan
Risk trend
A third-party
provider does not
meet its obligations,
which negatively
impacts our customer
relationships, and
causes disruption
to business
performance.
›
Completed 40% desktop based reviews
conducted through due diligence
questionnaires for high risk vendors.
The reviews helped to ensure that these
vendors were compliant with Group
internal policies.
› Completed vendor contract reviews
for high risk vendors to identify
contractual risks.
› Completed financial stability reviews
for high risk vendors.
› Completed vendor name screening
against all international sanction list
and adverse media.
COVID-19 response
› Vendors which were considered critical
during the COVID-19 pandemic were
identified and assurances were obtained
for continuity of services.
› Continue to complete the
remaining desktop reviews
through due diligence
questionnaires for high-risk
vendors.
› Monitoring and closure of
issues identified as part of
desktop reviews with the
high risk vendors.
› The Group will continue to
address the contractual
risks identified during the
vendor contract reviews,
as appropriate.
› Enhancing of vendor
onboarding due diligence
process.
› Continue to monitor vendor
service performance for high
risk vendors.
› Develop an assurance
programme for medium
risk vendors.
Risk appetite: Informed
The Group will not accept risks
which may compromise the
confidentiality, integrity and
availability of its data and its
customers’ data.
Execution
Our ambitious growth and expansion plans could be compromised if we are not able to
deliver critical internal transformational projects or strategically important projects within
expected deadlines. Our growth plans could create heightened levels of risk with regard
to people and organisational capacity as we execute our growth plans to ensure on time
delivery without disruption to our day to day operations.
Strategic priorities
1
2
3
4
5
6
Risk impact
Progress during 2020
2021 plan
Risk trend
We fail to deliver
critical strategic
projects on time and
on budget, deferring
or stalling growth and
increasing operational
and capital expenses.
› Developed UAE Data Centre build and
› Complete the UAE Data
readiness plan.
› Completed pre-work for Saudi Arabia
Data Centre build and readiness plan.
› Developed ground work for ‘New Ways
of Working’ initiative.
› Completed risk assessment on the
proposed DPO acquisition. Documented
risks, assumptions, issues and
dependencies with mitigation actions.
Centre migration and physical
separation from Emirates
NBD Data Centres.
› Continue to execute the Saudi
Arabia entry including work
on Saudi Arabia Data Centre.
› Continuous evolution of
optimising the way we
work under the ‘New Ways
of Working’ initiative.
› DPO, continue to build out
integration plan until
completion, then execute.
› Monitoring the progress
of key strategic projects.
Risk appetite: Informed
The Group has limited appetite
for late or over budget delivery
of critical strategic projects.
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements 86
Principal Risks and Uncertainties continued
Fraud and Credit
Risk of compromise of card or merchant data or compromise of systems or networks or
collusive merchants with the intention of performing unauthorised payment transactions
for financial or non-financial gain resulting in losses to the Group or Group’s clients.
Risk of financial or non-financial losses arising due to internal or external parties making
a negligent and/or intentional fraudulent misrepresentation against the Group or any
of its clients. The risk of merchants’ inability to meet obligations resulting in chargebacks,
refunds, scheme fines, fees and other charges. Risk of clients’ inability to settle invoices
for services received as part of issuing or acquiring processing. The risk that the Group
will be liable for meeting the settlement obligation of sponsored issuing clients where
such clients are unable to do so or comply with scheme rules.
Strategic priorities
1
2
4
5
Risk impact
Progress during 2020
2021 plan
Risk trend
Higher level of losses
resulting in material
impact on reported
results and material
damage to reputation.
› Fraud risk KRIs have remained well
› To further enhance our
acquiring fraud monitoring
capabilities with the
implementation of new
e-commerce risk control tools.
› Enhanced monitoring of
delinquency levels of processing
clients’ receivables to ensure
that losses are minimised.
› With the planned acquisition
of DPO and its portfolio of
e-commerce merchants in
Africa, their credit risk profile
will be assessed to measure
the impact on Group’s overall
risk profile.
Risk appetite: Informed
Acquiring fraud losses as a
percentage of sales to be less
than market average of 6.3 bps.
Enterprise level fraud losses
to be less than 5% of EBITDA.
Unrecoverable chargebacks and
credit losses to revenue ratio
not to exceed more than 5% by
portfolio. All sponsored issuing
clients’ settlements to be cleared
within 15 days.
below thresholds.
›
Implemented a new acquiring fraud
monitoring system.
› Credit risk KRIs have remained well below
thresholds despite COVID-19.
› Credit pre-approval provided for straight
through e-com merchant onboarding.
COVID-19 response
› Fraud monitoring processes were
conducted with enhanced due diligence.
›
Implemented controls for preventing any
malicious processing transfer by blocking
of all system level access for Operations
staff for after office hours.
› Acquiring portfolios of UAE and Jordan
were subjected to a stress testing exercise
focusing on travel and subscription
merchants. Unrecovered chargebacks and
refunds of these merchants were well
below the forecasted stress scenarios and
also well within accepted risk appetite KRIs.
› Chargebacks and refunds of airline and
selected high risk merchants were paid
from withheld reserves or through
pre-funding arrangements in place
with merchants.
› Unrecovered chargebacks and refunds
of the Group Acquiring portfolio reduced
to less than pre COVID-19 levels and were
well within accepted risk appetite KRIs.
›
Implemented enhanced risk profiling
and early risk warning monitoring of
SME merchant portfolio.
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87
Emerging risks
Emerging risks have the potential
to increase in significance and affect
the performance of the Group and,
as such, are continually monitored
through our existing risk management
processes by risk owners at all levels
of the Group. We also use tools such
as horizon scanning, operational risk
aggregation and external sources
to support our analysis. The outputs
of these processes are reported to
the Audit and Risk Committee and
Board of Directors for their review
and assessment.
Our ERM process ensures
emerging risks are considered to
aid the Audit and Risk Committee’s
assessment of whether the Group
is adequately prepared for the
potential opportunities and threats
they present. The process enables
new risks to be discussed at an
early stage, allowing us to analyse
them thoroughly and assess
potential exposure.
We closely monitor emerging
risks and with time they may
become principal risks as they
mature. Emerging risks may also
be superseded by other risks or
cease to be relevant as the internal
or external environment in which
we operate evolves. Additionally, we
recognise that some of our principal
risks are more volatile or fast
changing than others and, therefore,
would benefit from the increased
management processes that apply
to emerging risks. A non-exhaustive
list of some current emerging risks
of relevance to the Group and those
principal risks that are subject to
the emerging risk process are set
out below.
Increasingly sophisticated
cybersecurity threats:
We expect to see an increase in
the level of sophistication of cyber
related attacks as a result of the
shifting geo-political tensions in
the MEA. We regularly intercept
sophisticated and malicious
third-party attempts to identify and
exploit system vulnerabilities, or
which aim to penetrate or bypass
our security measures, in order to
gain unauthorised access to our
networks and systems or those
of our associated third parties.
We follow a defence-in-depth
model to ensure we are proactively
employing multiple methods of
defence at different layers to protect
our systems against intrusion and
attack. However, we cannot always
be certain that these measures will
be successful and will be sufficient
to counter all current and emerging
cyber threats.
See page 74 and 80 for more details.
Climate change:
In an ever-changing world, we
recognise that we have a responsibility
to meet our environmental and
sustainability commitments and
obligations. We have made progress
over the last year in measuring and
reporting our energy consumptions.
We will continue to develop systems
to report on GHG emissions, and to
understand the risks that a changing
climate may present to our business.
Competition risk:
Network recognises that COVID-19
has accelerated the shift from cash
to digital payments resulting in an
increasingly competitive landscape in
the Middle East and Africa region. Our
ability to grow our business and deliver
an exceptional customer experience
may be impeded by new market
entrants and established payments
service providers operating in certain
territories, be it though competitive
pricing, enhanced capabilities and
solutions, or skilled resources with local
market knowledge.
New and emerging regulatory
changes in the MEA:
The increase in growth and innovation
of payments services and the proposed
DPO acquisition exposes the Group
to a number of additional regulatory
regimes focusing on payment services
and data governance. The Group’s
ability to navigate these changing
environments will be a long-term driver
of competitive advantage.
In the short to medium term these
initiatives could present increased
complexity and cost to our
operating model.
See page 73 and 83 for more details.
Political change:
Our business focus is on the emerging
markets of Middle East and Africa.
We recognise some countries within
this region have a history of political
volatility. The risk of continued
political and economic change could
affect our operating results. Changes
in governments may increase the
complexity of serving customers in
a country due to actual or potential
political or military conflict; and the
imposition of UN, US or other sanctions
may restrict our ability to service
customers in those countries.
See page 84 for more details.
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88
Directors’ Duties
Statement in respect of S.172(1) Companies Act 2006
Directors’ duties
The Directors of the Company, as those of all UK companies, must act in accordance with a set of general duties,
which are set out in the UK Companies Act 2006 (‘the Act’).
S.172 (1) of that Act is summarised as follows:
A director of a company must act in a way he/she considers, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other
matters) to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
The Directors’ duties are included as part of the Board induction programme given to all newly appointed Directors
prior to attending their first Board meeting. The Directors are mindful of their duties and Board papers address
stakeholder factors where judged relevant.
How the Directors consider the matters set out in S.172 (1) (a) to (f)
The Strategic Report, Governance Report, Remuneration Report and Directors’ Report from pages 1, 90, 132 and 149
respectively disclose in detail: the mechanisms by which management and the Board engage with, receive regular
information on, and assess the relationships with shareholders, employees, suppliers, customers, regulators and the
community; the emphasis the Board has placed on developing a healthy culture amongst the Directors, reflecting the
values and high standards of business conduct they encourage across the organisation; the importance the Directors
place on positively maintaining those values and relationships; and the progress made in achieving high standards of
business conduct and compliance with the 2018 UK Corporate Governance Code (‘the Code’).
By way of example:
› The Board is focused on the consequences of its decision making over the long term and the impact on each
of our stakeholder groups. Our strategy, which is key to building our business for long-term growth, is focused on
providing solutions that allow customers to bring digital payments to more consumers across the MEA region. In
pursuing our strategy, we are capitalising on growth opportunities across our markets and delivering solid financial
performance. Pages 18 and 19 in the Strategic Report present our strategic framework, set in the context of our
purpose, and the progress we have made during the year. The Board continuously keeps the strategy under review
at each Board meeting and sets aside a two-day meeting dedicated to a thorough development review. The Board
also sets an annual budget and provides oversight of sound financial and internal controls across the Group. The
Board, supported by the work of the Audit and Risk Committee, has embedded a robust risk culture across the
Group, under which risks are identified, mitigated and monitored against a pre-determined risk appetite in respect
of each principal risk category.
› Our strategy, which is driving the success of the Company, is dependent upon our solid business relationships with
our customers, business strategic partners, suppliers, and regulators (please refer to pages 56 to 70 in this report).
The Board is mindful of our purpose (described on page 9) and of maintaining and developing those relationships
when reviewing the strategy. During the year and throughout the COVID-19 pandemic, the Board has increased its
focus on maintaining its relationships with, and protecting the interests of, our stakeholders.
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› The Board has overseen the progression of our People agenda, has ensured there are good levels of bilateral
engagement with the wider workforce and a significant focus on the development and support of our employees
as fully described in the ‘our people’ section of this report on pages 60. As with our other stakeholder groups,
the Board has increased its engagement with our wider workforce to protect their interests during the COVID-19
pandemic. The Remuneration Committee is cognisant that the CEO to employee pay ratio is a key lens when
considering the appropriateness of executive pay outcomes. The Remuneration Committee also ensures that wider
colleague pay and policies, and cultural context are intertwined with its remit and activities.
› We support the communities in which we operate, by creating employment and opportunities for our people,
supporting the businesses of our customers and helping them to understand and service their consumers.
Our businesses provide community support as described in the Responsible Business section of this report on
page 68 and by taking steps to safeguard our environment as described in the Safeguarding our environment
section of this report on page 66.
› The Board, under the leadership of the Chair, has ensured there is a positive culture amongst the Directors,
reflecting the values it encourages across the organisation (please refer to the section on the Group’s values
and culture on page 100 in the Corporate Governance Report).
› The Board has continued to uphold high standards of corporate governance as it makes significant progress
towards full compliance with the Code, reflecting the interests of our shareholders as a London Listed Company
(as described in the Corporate Governance Report on pages 99). By way of example, the Board ensured an orderly
transition in its membership with the appointment of two additional Independent Non-Executive Directors in
January 2020, three months prior to three Directors (who had each been previously appointed under the relevant
provisions of the respective Relationship Agreements with the Company’s former PE owners) vacating their
positions. The Board was further strengthened by the appointment of two additional Independent Non-Executives
at the start of 2021. The broad range of skills, experience and knowledge possessed by our diverse Board is detailed
on page 92.
› The Company has a strategic and commercial agreement with Mastercard as described within the Governance
Report on page 109. Separately at the time of the IPO, Mastercard acquired shares in the Company giving them
total voting rights of 9.08% (as disclosed in the Directors’ Report on page 151). Such investment was made in
the market at arm’s-length and does not confer any additional rights over and above those enjoyed by other
shareholders, although the strategic agreement allows Mastercard to nominate an Observer to the Board, such
Observer may attend meetings and receive papers, but not vote.
In the performance of its role, and ingrained in its decision-making processes, the Board has regard to, and believes
it has discharged, its duties reflected in S.172 (1) of the Act.
The Strategic Report has been approved and is signed by order of the Board by:
Nandan Mer
Chief Executive Officer
7 March 2021
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 90
Corporate Governance Report
Dear Shareholder,
Introduction
I am pleased to report that we have
further enhanced our governance
practices during the year, building
on the firm foundations we laid in
2019. We have carefully managed
the construct of our Board to reflect
the transition of the Company’s
ownership from private equity to
that of a UK-listed constituent of the
FTSE 250; and we have overseen
the ongoing development of our
culture with the implementation of
our Enterprise Risk Management
Framework and our People agenda,
while strengthening the engagement
with our customers, employees,
shareholders, and other stakeholders
during a challenging year brought
about by the COVID-19 situation.
The Board
I would like to welcome Nandan Mer,
who we appointed as our new Group
CEO with effect from 1 February 2021.
Nandan has a wide breadth of
experience across the consumer credit
and payment industries in several
international markets, including within
the Middle East and Africa. He has a
strong track record of building and
growing businesses over 30 years in a
number of global markets with leading
financial institutions; and strong sector
expertise makes him an excellent
appointment to lead Network through
the next stage of our ambitious
strategic growth plans. I would like to
pay special thanks to Simon Haslam
for his invaluable contribution during
his tenure as our CEO. Simon leaves
a strong business and a legacy of
success and we wish him well in
his retirement.
Over a year ago now, the appointment
of Anil Dua and Ali Mazanderani on
22 January 2020 as Independent
Non-Executive Directors strengthened
our Board with their significant
expertise in the payments space and
operations throughout the Middle East
and Africa. Later in the year, we
announced the appointment of Diane
Radley and Monique Shivanandan
as Independent Non-Executive
Directors with effect from 1 January
2021. Both Diane and Monique bring
invaluable skills, experience and
knowledge as they have had rich
careers in their respective fields, as
well as in executive roles, and will
reinforce the Board’s skillset to help
the Company achieve its strategic
objectives in Technology and
Product areas and the Africa region.
We are also delighted that Rohit
Malhotra, our highly experienced
Group Chief Financial Officer since
2015, joined the Board on 2 June
2020. Following all these changes,
I am delighted to report that we
have a strong, balanced and diverse
Board, the composition of which
is fully aligned with UK Corporate
Governance Code requirements.
All newly appointed Directors
undergo a comprehensive induction
programme, which we have
developed further during the year
as we learn from our experience.
This complements the ongoing
development programme we
introduced last year, comprising
a series of strategy support
presentations at regular Board
meetings. The aim of these two
programmes is to continuously
develop the Board’s effectiveness
by ensuring all Directors possess the
knowledge to be able to contribute
fully to the Board’s review and
development of strategy.
We conducted a thorough externally
facilitated Board evaluation in the
second half of the year, which
provided useful insights to develop an
action plan more fully disclosed within
the Governance Report on page 111.
We have carefully
managed the construct
of the Board… and
have increased our
engagement with
our customers and
employees during
this challenging year.”
Ron Kalifa OBE
Chairman
Network International Holdings Plc
Annual Report and Accounts 2020
91
Finally, I would like to give thanks
again to Shayne Nelson, Daniel
Zilberman and Aaron Goldman,
who resigned from our Board on
30 April 2020 in alignment with
the reductions in shareholdings and
the termination of the Relationship
Agreements with our former private
equity owners.
Engagement with our shareholders
and other key stakeholders
Active engagement with our
shareholders and key stakeholders
is of great importance to us.
We have a programme of regular
meetings with our major shareholders
led by our CEO and our CFO, to
discuss strategy and performance.
I have also met with many of our
investors to discuss matters of
governance and broader strategic
topics. The Board welcomes
feedback from investors and the
market in general and during the year,
this informed our decision to further
increase engagement and enhance
financial disclosures. Victoria Hull,
chair of the Remuneration
Committee, has engaged with them
to discuss our approach to executive
remuneration, including the
performance measures and targets
for our annual and long-term
incentive arrangements. Our
performance measures are fully
aligned with the targets and KPIs
for the delivery of our strategy.
We will continue with our enhanced
programme of engagement in 2021
and beyond and look forward to
your support at our second Annual
General Meeting on 20 May 2021.
Continual focus on our many
stakeholders is crucial to the effective
running of our business and, in view of
the challenges brought about by the
COVID-19 situation, we have increased
our engagement, particularly with our
customers, to understand their issues
and protect them where possible.
More details on the engagement with
the Company’s stakeholders can be
found in the Strategic Report on page
28 and our S.172 statement can be
found on pages 88 to 89, which
provides examples of how the Board
has considered stakeholders in its
decision making.
Employees and culture
The recruitment, motivation,
development and retention of our
employees at all levels is critical to the
success of our business and the Board
monitors progress carefully at every
Board meeting. As most of our
employees have been working from
home for a large part of the year, their
health and well-being and increased
engagement to understand their
concerns has been one of the key
priorities. Management has launched a
number of regular virtual engagement
initiatives to carry out a two-way
flow of communication and Q&As,
details of which are summarised on
page 62. Furthermore, management
has progressed our People agenda
with the roll out of our new Employee
Charter and our updated Equality,
Diversity and Inclusion Policy, which
are more fully described in our
Responsible Business section from
page 60. We have also enhanced our
risk culture with the implementation
of our new Enterprise Risk
Management Framework (‘ERMF’),
which defined the way we identify and
manage risk; a good example, worthy
of highlighting here, is in respect of the
proposed DPO acquisition where the
Group developed a separate risk profile
of their business to demonstrate how
the DPO risk profile might impact the
Group’s overall risk profile.
Management has been working
in partnership with all employees
to embed our desired culture
throughout the organisation for
the benefit of our business and all
who work within it. I am particularly
pleased that as a result of their
collective efforts, our employee
engagement score has improved
by eight percentage points to 73%.
A full summary of the excellent
progress made in the development
of our people and our culture is given
as part of the Strategic Report on
pages 64 to 65.
Ron Kalifa OBE
Chairman
7 March 2021
Group values
Our values underpin our activities and support our
approach to sustainable and responsible business.
› Character We are accountable to our employees
and our customers. We maintain the utmost
integrity in all our interactions at all times
› Customer Our customers come first. We are
committed to being a valued partner to all
our customers
› Continuity We continuously innovate and seek
to excel in everything we do as we expand our
reach into new markets
› Collaboration Teamwork is the cornerstone
of our success
For more details, please see the Strategic Report from page 56.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 92
Corporate Governance Report continued
Highlights of progress made during 2020
At Network International, we have taken great strides
to embed solid governance throughout our organisation.
Here are the highlights of the significant progress we
have achieved during the year:
Board composition
Board gender diversity
Nationality of the Directors
1
1
6
2
1
Chair
27%
Executive Directors
Senior Independent
Director
Independent
Non-Executive
Directors
Non-Executive
Director
Skills and experience
1
1
Men
Women
1
1
1
73%
British
American
Indian
6
Singaporean
South African
UAE National
Ron
Kalifa OBE
Darren
Pope
Anil
Dua
Victoria
Hull
Ali
Mazanderani
Habib
Al Mulla
Diane
Radley
Monique
Shivanandan
Suryanarayan
Subramanian
Chairman
Senior
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Independent
Non-Executive
Director
Non-Executive
Director
Africa
Africa
ME
South Africa
Listed NED
Experience
Financial Services/
Payments Industry
Experience
Doing Business/
market knowledge
in MEA
Finance/Audit
Experience
HR/REMCO
Experience
M&A activity
Technology
& Product
Fintech
Trends
Please see page 113 for details on how the Board has evolved since the IPO in April 2019.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic report
Corporate governance
Financial statements
93
The Board
We have built a strong and diverse Board with a breadth of skills,
experience, and knowledge. We have appointed four independent
Non-Executive Directors, ensuring an orderly transition when
introducing more independence on the Board; and two Executive
Directors, managing the seamless succession of our CEO.
Board effectiveness:
› We have developed a comprehensive forward programme of work
to ensure we cover the breadth of responsibilities and duties for
the Board and each of its Committees.
› We conducted our first Board and Committee evaluation and have
agreed an action plan to support our continuous development.
› We have further developed our knowledge of the business and
a positive culture within the Boardroom.
› The review concluded that the Board was considered highly effective
with follow up actions primarily focused on building stronger Board
relationships in a COVID-19 impacted environment and formalising
ongoing business knowledge development.
Risk management and assurance:
› We have established a clear
Our people and culture:
› We have progressed our
risk governance model utilising
the three lines of defence
model to ensure effective
risk management, oversight
and assurance.
› We have embedded our
Enterprise Risk Management
Framework throughout our
organisation and there is an
ongoing process to identify
and evaluate risk, supporting
our decision making and the
way we manage our business.
› To support the proposal
to acquire DPO, the Group
developed a separate risk
profile of their business to
demonstrate how the DPO
risk profile impacted the
Group’s overall risk profile.
› We monitored the impact
of the COVID-19 situation on
our people, our customers
and our financial position.
› We strengthened our Group
Internal Audit function and
welcomed the improvement
in its effectiveness.
People agenda with the roll out
of our new Employee Charter.
Management has been working
in partnership with all employees
to embed our desired culture
throughout the organisation for
the benefit of our business and
all who work within it.
› We have increased our
engagement with our people,
supporting them with their
health and well-being during a
difficult year when most of our
employees have been working
from home.
› As a result of the collective
efforts of our people across
the organisation, our employee
engagement score has
improved by eight percentage
points to 73%.
› We have formalised the
approach to reviewing all
our workforce engagement
mechanisms through the
Remuneration Committee,
which reports its findings
to the Board.
Understanding the views
of our shareholders:
› The Board receives regular
updates from the Company’s
brokers and Investor Relations
team on investor perceptions in
relation to strategy, performance
governance and remuneration.
› The Board was cognisant of
the shareholder experience
during the year, and open to
understand feedback and
issues raised by the market.
This informed the Company’s
decision to increase shareholder
engagement and enhance
financial disclosures.
› The Chairman has also engaged
with a number of larger sized
shareholders during the year,
to discuss matters of Corporate
Governance and broader
strategic topics; whilst the
Chair of the Remuneration
Committee, Victoria Hull,
consulted with major
shareholders regarding the
proposed Remuneration Policy.
› Despite the unprecedented
challenges brought about by
the COVID-19 restrictions, we
held a successful Annual General
Meeting enabling shareholders
to fully participate electronically.
Understanding the views
of our other stakeholders:
› The Board is highly supportive
of its duties to promote the
success of the Company,
engage with, and support
broader stakeholder groups.
› There is much focus and
oversight of key customer
relationships, which is
fundamental to the success
of the business.
› The Board ensures it is kept
informed and up to date on
key supplier relationships,
including the requisite vendor
Code of Conduct.
› The Board is also highly
supportive of the financial aid
donated to community projects
and charities in our markets.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 94
Board of Directors
Ron Kalifa OBE
Independent Chairman
Nandan Mer
Group Chief Executive Officer
Committee membership
Chair of Nomination Committee
and member of Remuneration
Committee
Committee membership
None
Darren Pope
Senior Independent
Non-Executive Director
Committee membership
Chair of Audit and Risk
Committee and member of
Nomination Committee
Anil Dua
Independent
Non-Executive Director
Committee membership
Member of Audit and Risk
Committee
Appointed
March 2019
Appointed
February 2021
Appointed
March 2019
Appointed
January 2020
Other current appointments
Chairman of FutureLearn
Non-Executive Director,
England & Wales Cricket Board
Non-Executive Director,
Court of the Bank of England
Non-Executive Director,
Transport For London
Previous experience
Mr Kalifa has significant
experience in the payments
industry. He was Chief Executive
Officer of Worldpay for over
10 years, building and leading
Worldpay into a premier global
payments company. He is also an
operating partner to Advent
International and its advisers.
Mr Kalifa also sits on the boards
of the England & Wales Cricket
Board and Transport for London,
and is a member of the Council
of Imperial College, London.
Mr Kalifa was awarded an OBE
in 2018 for services to Financial
Services and Technology. Very
recently, Mr. Kalifa chaired the
Independent Review of UK
Fintech published by the UK
Government in February 2021.
Other current appointments
None
Previous experience
Mr Mer has more than 30 years’
experience in building and
growing businesses, and
has a strong background in
payments, consumer finance and
corporate banking, in addition
to the Middle East and African
markets. Prior to joining Network
International, Mr Mer had an
11-year career at Mastercard,
serving as Strategy Head for
International Markets, President
for the Japanese business and
Head of Global Consumer Credit
and Loyalty Solutions. He has
also held senior positions at
American Express, Citigroup
and United Bank for Africa.
Other current appointments
Senior Independent Director,
Equiniti Group plc
Independent Non-Executive
Director, Virgin Money UK plc
Chairman of UK Subsidiary of
Silicon Valley Bank
Previous experience
Mr Pope is a qualified accountant
with over 30 years of experience
in the financial services industry.
Most recently, Mr Pope served as
CFO and Board Member of TSB
Bank plc. Mr Pope has held a
number of other senior positions
at Lloyds Banking Group, Egg plc
and Prudential plc. He additionally
chairs the Audit committee
at Equiniti PLC and the
Remuneration Committee at
Virgin Money UK PLC.
Other current appointments
Non-Executive Director,
Liquid Telecom
Non-Executive Director,
African Export Import Bank
Non-Executive Director, Nouvobanq
Independent Non-Executive
Director, Heirsholdings Oil and
Gas Limited
Previous experience
Mr Dua has extensive experience
operating in the pan-African
financial services sector. Mr Dua
is Founding Partner at Gateway,
a private equity fund specialising
in dynamic growth markets
including Africa, the Middle East
and Asia. Prior to this, Mr Dua
worked for over 35 years with
Standard Chartered Bank in Asia,
Africa, Europe and US, where
he held various roles including
Regional CEO West Africa and
Regional Head of Origination
and Client Coverage, Africa.
Network International Holdings Plc
Annual Report and Accounts 2020
95
Victoria Hull
Independent
Non-Executive Director
Committee membership
Chair of Remuneration
Committee, and member
of Nomination Committee
Rohit Malhotra
Group Chief Financial Officer
Committee membership
None
Ali Mazanderani
Independent
Non-Executive Director
Committee membership
Member of Remuneration
Committee
Habib Al Mulla
Independent
Non-Executive Director
Committee membership
Member of Nomination
Committee
Appointed
March 2019
Appointed
June 2020
Appointed
January 2020
Appointed
March 2019
Other current appointments
Senior Independent Director,
Ultra Electronics plc
Non-Executive Director,
RBG Holdings plc
Other current appointments
Mr Malhotra serves on the
Network International Board
of Directors
Previous experience
Ms Hull is a former Executive
Director of Invensys plc, a
FTSE 100 global industrial and
software company, and former
Executive Director of Telewest
Communications plc. Ms Hull
has experience across many
diverse sectors, including an
extensive Corporate Governance
and Remuneration Committee
background. Her legal career
commenced at Clifford Chance
LLP in 1986 where she gained
knowledge and experience
working internationally on
M&A for both public and
private companies.
Previous experience
Mr Malhotra has more than 20
years of experience in financial
activities. Prior to joining Network
International in 2010, he was
previously the Head of Financial
Policy and Processes at Emirates
NBD. Prior to that, he was one
of the senior team leads in the
Global Balance Sheet Reporting
function of American Express,
working closely with the Investor
Relations team and before that
he managed the Financial
Planning activities for Nestle’s
South Asia Region.
Other current appointments
Non-Executive Director,
Stone Co. Limited
Non-Executive Director,
NET1 UEPS
Non-Executive Director,
TTMFS Singapore PTE Limited
Chairman, SaltPay
Previous experience
Mr Mazanderani has extensive
experience in the global
payments industry. Most recently,
Mr Mazanderani was a partner
at Actis LLP, a global emerging
markets investment firm. He has
led multiple financial technology
transactions, ranging from
growth equity investments to
leveraged buyouts in global
businesses. Prior to this, Mr
Mazanderani served as Lead
Strategy Consultant at the First
National Bank of South Africa
and as a Consultant at OC&C
Strategy Consultants in London.
He currently serves as a
Non-Executive Director for
Stone Co Limited.
Other current appointments
Partner, Baker McKenzie
Habib AlMulla
Previous experience
Dr Habib has extensive experience
in UAE law. Dr Habib was Chairman
of the CIArb (Chartered Institute
of Arbitrators) UAE Committee,
Chairman of the board of trustees
for the Dubai International
Arbitration Centre (‘DIAC’), and
on the Board of Governors of
American University in Dubai.
Dr Habib was the architect of the
legal framework establishing the
Dubai International Financial
Centre. Dr Habib also served as
Chairman of the Legislative
Committee of the Dubai Financial
Services Authority (‘DFSA’).
Dr Habib has held numerous
government positions, including
as a member of the UAE Federal
National Council, the federal
parliament of the UAE, member
of the Legislative Committee,
member of the Economic
Committee, Director of the
Institute of Advanced Legal and
Judicial Studies, in charge of
training judges and prosecutors in
the Emirate of Dubai and Chairman
of the UAE Jurists Association.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements Suryanarayan Subramanian
Non-Executive Director
Simon Haslam
Outgoing CEO
Committee membership
None
Mr. Haslam led the business
through the 2020 financial year,
announcing his retirement at
the start of 2021. Mr. Haslam
stepped down from the CEO
position on 31 January 2021,
but will remain with the Group
throughout his six-month notice
period to ensure a smooth
transition to Mr. Mer.
96
Board of Directors continued
Diane Radley
Independent
Non-Executive Director
Monique Shivanandan
Independent
Non-Executive Director
Committee membership
Member of Audit and Risk
Committee and Remuneration
Committee with effect from
1 January 2021
Committee membership
Member of Audit and Risk
Committee with effect from
1 January 2021
Appointed
January 2021
Appointed
January 2021
Appointed
March 2019
Other current appointments
Non-Executive Director,
Transaction Capital Limited (‘JSE’)
Non-Executive Director, Murray and
Roberts Holdings Limited (‘JSE’)
Non-Executive Director, Base
Resources Limited (‘ASX’)
Non-Executive Director, Redefine
Properties Limited (‘JSE’)
Previous experience
Ms Radley has extensive
experience of the African market
and specialises in finance,
audit and risk related matters.
Ms Radley was previously Chief
Executive Officer at Old Mutual
Investment Group from 2011 to
2016 having held the position
of Group Finance Director
from 2008. She has led the
Transaction Services Group
at PwC South Africa.
Other current appointments
Member of digital advisory
board, Fannie Mae.
Ms Shivanandan is the Group
Chief Information Security
(‘CISO’) for HSBC, leading
the cyber security function
for the Group.
Other current appointments
Director, Tanfeeth LLC
Director, DenizBank A.G.
Independent Director, DXB
Entertainments PJSC
Independent Chair of Audit
Committee, Kuwait Food Co
(Americana)
Previous experience
Ms Shivanandan specialises in
technology transformation in
financial services with a specific
focus on business transformation
leveraging technology and
Fintech advisory. She was most
recently Group Chief Information
Officer at Chubb leading a
team of over 5,000 employees
globally, delivering change, and
service & information security.
She has acted as a technology
leader and digital transformation
advisor, holding senior roles at
Aviva, BT Group and Capital
One Financial.
Previous experience
Mr Subramanian was Chief
Financial Officer of the Emirates
NBD Group in Dubai from
September 2010 until January
2020. Mr Subramanian has over
30 years’ experience in Banking
and Finance, primarily in South
East Asia and the Far East with
Standard Chartered Bank and
Royal Bank of Canada, covering
various CFO roles in geographic
and business structures across
Wholesale Banking, Retail
and Wealth Management.
Mr Subramanian has also worked
with the Ministry of Finance
and Accounting and Corporate
Regulatory Authority in Singapore.
Network International Holdings Plc
Annual Report and Accounts 2020
97
Executive Management Team
Nandan Mer
Group Chief
Executive Officer
Rohit Malhotra
Group Chief
Financial Officer
Andrew Key
Managing Director –
Africa
Mark Diamond
Group Chief Digital,
Technology and
Operations Officer
Jay Razzaq
Chief Risk Officer
and Group
Company Secretary
Joined
February 2021
Joined
October 2010
Joined
July 2017
Joined
March 2020
Joined
April 2017
Role
Rohit is the Group
Chief Financial Officer
and is responsible for
overseeing the financial
activities of the Group.
Having joined the
Company in October
2010, Rohit has been
actively involved in the
growth of the Company
for many years, including
the acquisition of
Emerging Markets
Payments Holdings
in 2016.
Previous experience
Previously, Rohit was
the Head of Financial
Policy and Processes
at Emirates NBD, where
he led Finance systems
implementation across
the Group. Prior to that,
Rohit was one of the
senior team leads in the
Global Balance Sheet
Reporting function of
American Express,
working closely with the
Investor Relations team
and before that he
managed the Financial
Planning activities for
Nestle’s South Asia Region.
Role
Nandan is the Group
Chief Executive Officer
of the Group and works
closely with the Chairman
and Board members to
set strategic expansion
goals for the organisation
and lead the Executive
Management Team in
the accomplishment
of these objectives.
Previous experience
Nandan has more than
30 years’ experience in
building and growing
businesses, and has a
strong background in
payments, consumer
finance and corporate
banking, in addition to
the Middle East and
African markets. Prior
to joining Network
International, Nandan
had an 11-year career at
Mastercard, serving as
Strategy Head for
International Markets,
President for the
Japanese business and
Head of Global Consumer
Credit and Loyalty
Solutions. He has also
held senior positions at
American Express,
Citigroup and United
Bank for Africa.
Role
Andrew is the Managing
Director for the Group’s
Africa operations and
is responsible for the
acquiring and issuing
business activities of
the Group in Africa,
and for developing a
comprehensive strategy
to drive business
growth in the region.
Role
Mark is the Group’s Chief
Digital, Technology and
Operations Officer. Mark
is responsible for leading
the Group’s Technology
and Operations functions
and is responsible for
defining and delivering
Network International’s
digital, technology and
operations strategy
and capabilities across
the enterprise.
Previous experience
Mark has more than
21 years’ experience
of technology in the
banking industry. Most
recently Mark was CIO of
Alrajhi Bank, the world’s
largest Islamic Bank with
over 10 million customers.
Prior positions include
Head of Transformation
at Deutsche Bank, where
he led the global strategy
and infrastructure
transformation across 65
jurisdictions, and CIO of
RBS’s Retail Bank and
Business Operations.
Previous experience
Most recently, Andrew
was the President
of Elavon Europe, a
subsidiary of US Bancorp
(‘USB’), and responsible
for the entire P&L of
the European business
of Elavon. He was
accountable for the
diverse range of partner
relationships that deliver
distribution or product
capabilities to Elavon’s
European business and
led the team of 1,400
colleagues located in
six markets, providing
end-to-end payments
services to 350,000+
customers. Prior to
Elavon, Andrew held key
positions in organisations
such as Mastercard,
Lloyds Banking Group
and Barclaycard.
Role
Jay is the Chief Risk
Officer and Group
Company Secretary and
has overall responsibility
for the Risk, Compliance
and Legal functions.
Her responsibilities
include the management
and oversight of all
risk-related disciplines
across the Group,
including enterprise risk
management, regulatory
and compliance, data
governance and
information security,
and the legal and
secretariat teams.
Previous experience
Jay joined the Group
from Elavon, a subsidiary
of US Bancorp, where she
served as Head of Legal
– International Markets.
Jay has over 21 years’
experience working
across a number of major
financial institutions
including Citigroup and
Royal Bank of Scotland
Plc. She has advised
on legal, regulatory
and compliance issues
impacting the retail
financial services and
payments services
sectors in particular,
across a number of
jurisdictions in Europe
and Latin America.
Jay is a qualified Solicitor
in England and Wales.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 98
Executive Management Team continued
Paul Clarke
Head of Product and
Innovation
Hend Al Ali
Group Head of Human
Resources and Facilities
Andrew Hocking
Group Chief Strategy
Officer
Mona Al Ghurair
Group Chief
Marketing Officer
Simon Haslam
Outgoing CEO
Simon led the business
through the 2020
financial year, announcing
his retirement at the start
of 2021. Simon stepped
down from the CEO
position on 31 January
2021, but will remain with
the Group throughout his
six-month notice period
to ensure a smooth
transition to Nandan Mer.
Joined
June 2017
Joined
July 2013
Joined
April 2017
Joined
October 2010
Role
Hend is the Group’s Head
of Human Resources
and Facilities and is
responsible for leading
the Group’s human
resourcing functions
across the UAE, Jordan
and Africa, developing
and implementing the
Group’s human
resource strategy and
programmes. Under her
stewardship, the Group
has won government
recognition and awards
for human development
and Emiratisation.
Previous experience
Hend has more than
21 years’ experience
working with and leading
HR departments at
various national and
international operations
based in the UAE. She
is a recipient of the
prestigious Dubai Human
Development Award
given by the Dubai
Economic Department.
She is also part of the
Women’s Committee in
the Banking Sector, which
is run by the Emirates
Institute for Banking and
Financial Studies.
Role
Andrew is the Group’s
Chief of Strategy and
Analytics Officer and, in
his role, he leads market
intelligence, strategy
development, corporate
development and
analytics functions within
Network International.
Previous experience
Andrew was previously
Head of Strategic
Planning at Elavon
working across North
America, South America
and Europe. Prior to this
he held a number of
positions at Barclaycard
and Absa across both
issuing and acquiring
covering Europe and
Africa where he led the
Absa Card’s strategy
and change management
function.
Role
Mona is the Group’s Chief
Marketing Officer. In her
role, Mona manages the
teams responsible for
branding, public relations,
communications, and
events. She drives the
branding and marketing
strategy for the Group,
optimally leveraging
various promotion and
publicity platforms,
regionally and
internationally, to
maximise visibility
for the Network
International brand.
Previous experience
Mona has more than
19 years of experience
in the marketing industry
and has worked with
Network International
for more than 15 years,
during which time she
has also been involved
with the product, sales
and business
development units.
Role
Paul is the Head of
Product and Innovation
and is responsible for
transforming the Group
into a world-class
product and innovation-
centric organisation and
oversees the end-to-end
product lifecycle from
ideation, delivery and
in-life management.
Previous experience
Paul was previously the
Managing Director at
Barclaycard Payment
Services, responsible for
product development
and execution. He has
delivered many strategic
initiatives and was
instrumental in creating
a world-class product
organisation and
achieving real business
change through product
development. In his
previous tenures in
payments majors like
Elavon Merchant Services
and Worldpay, Paul was
responsible for the
product portfolio
across key markets in
Europe, Mexico and
South America.
Network International Holdings Plc
Annual Report and Accounts 2020
99
Compliance with the UK Corporate
Governance Code
The Board recognises that good corporate governance plays a key role
towards delivering the sustainable success of the Company, thereby
enhancing shareholders’ value and contributing to wider society.
Examples of sound governance
contributing to our success are
included in this report and
throughout the Strategic Report
on pages 1 to 89.
The Board is committed to the
principles of corporate governance
contained in the UK Corporate
Governance Code 2018 (‘the Code’),
which is publicly available at
www.frc.org.uk.
This report sets out how the
Company applied the principles
of the Code and its compliance
with the provisions of the Code
during the year. Throughout 2020,
we have continued to enhance our
governance arrangements, building
on the significant progress following
our IPO in the prior year.
The Company complied with the
Code throughout the year 2020, and
up to the date of this report, except
as follows:
› Although there are comprehensive
and effective employee engagement
mechanisms in place, which are
regularly and effectively reviewed by
the Board along with the progress
being made with the implementation
of the new Employee Charter (as
described within the Responsible
Business section of the Strategic
Report on page 60), the Board’s
approach is not as anticipated by
provision 5 of the Code. Full details
of the Board’s approach is disclosed
in the workforce engagement
section on page 62.
› For the period 1 to 21 January 2020,
the Company did not comply with
provision 11 (at least half the Board,
excluding the Chair, should be
Independent Non-Executive
Directors) and provision 24 (Audit
and Risk Committee composition
should comprise Independent
Non-Executive Directors with a
minimum membership of three. The
Chair of the Board should not be a
member). From 22 January 2020,
the Company complied with those
two provisions as two additional
Independent Non-Executive
Directors were appointed to the
Board, one of those Directors was
appointed to the Audit and Risk
Committee and the Chairman
stepped down from that Committee.
› For the period 2 June 2020 to the
end of the year, the Company did
not comply with provision 32
regarding the composition of the
Remuneration Committee.
Throughout the year, the Board with
the support of the Nomination
Committee took steps to strengthen
the Board with the appointment of
additional Independent Non-
Executive Directors and to allocate
memberships of the Board’s
Committees in line with the skills and
experience of all the Independent
Non-Executive Directors, avoiding
over-reliance on individuals where
possible. From 2 June 2020, there
were only two Independent
Non-Executive Directors on the
Remuneration Committee, being
one short of the Code requirement
for a minimum of three such
Directors. As permitted by the
Code, the Chairman of the
Company, Ron Kalifa, has been a
member of the Remuneration
Committee throughout the year, but
as he is not independent, he could
not be counted towards the
minimum membership of three.
On 1 January 2021, two newly
appointed Independent Non-
Executive Directors joined the
Board and one of those Directors
joined the Remuneration
Committee and therefore, from
that date and up to the date of
this report, the composition of
the Remuneration Committee
is fully compliant with provision
32 of the Code.
Further explanations of our progress
and intentions are given in the
relevant parts of this report.
Role and responsibilities of the
Board of Directors
The Board is responsible for
providing strategic leadership to
promote the long-term sustainable
success of the Company. The Board
has established and regularly reviews
at its meetings the Company’s
purpose, values and strategy;
additionally, the Board held a two-
day strategy meeting during the year.
The Board also ensures that the
necessary resources are in place for
the Company to meet its objectives
and measures performance against
those objectives at its regular Board
meetings. It has set and has been
overseeing a framework of prudent
and effective controls, which enables
risks to be identified, assessed and
managed; more information about
the new Enterprise Risk Management
Framework, which has been rolled
out and implemented during the
year, is included in the Audit and
Risk Committee section of this report
and within the Principal Risks and
Uncertainties section of the Strategic
Report. The Board ensures that
there is effective engagement
with shareholders and other key
stakeholders, including the
workforce, and receives regular
reports at its meetings so it
understands the views of those
parties. The Board regularly assesses
and monitors the culture of the
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 100
Corporate Governance Report continued
The Group’s governance structure
The Board
Board responsibilities and activity reported on pages 102 to 105
Audit and Risk Committee
Committee report on page 115
Nomination Committee
Committee report on page 128
Remuneration Committee
Committee report on page 132
Executive Management Team
See pages 97 to 98
Enterprise Risk
Management Committee
See page 112
organisation so it can satisfy itself
that the Company’s values and
culture are aligned with its long-
term sustainable future. Further
information in these vital areas is
given throughout this report and
the Strategic Report.
The Group’s purpose, business
model and strategy
The Board is responsible for
establishing the Group’s purpose,
business model and strategy, which
are described on pages 10 and 18
within the Strategic Report of this
Annual Report and Accounts.
The Group’s values and culture
The Board has endorsed and
continuously applies a Code of
Conduct that is available on the
Company’s website at https://
investors.networkinternational.ae/
investors/corporate-governance/.
The Code of Conduct requires
everyone at every level across the
organisation, including the Directors,
to act ethically and in compliance
with all applicable laws and
regulations. Furthermore, this code
requires all Directors and employees
to act in the best interests of the
Company and shareholders, and to
act professionally, exhibiting high
levels of integrity and commitment.
Under the leadership of the
Chairman, the Board ensures that
all decisions taken by it and the
Network International Holdings Plc
Annual Report and Accounts 2020
behaviours of each Board member,
both in formal meetings and regular
engagement with employees and
other stakeholders across the
business, are aligned and are
consistent with the values set out
in the Code of Conduct. The Code
expects high standards of integrity
along with professional and personal
behaviour within and outside
working hours in a manner that
protects the Group’s reputation
and its interests.
Significant progress with our People
agenda has been achieved during
2020, as described in the Responsible
Business section of the Strategic
Report on pages 60 to 65. Despite
COVID-19 related challenges,
the CEO, with the support of his
executive colleagues, continues to
take the necessary steps to ensure
this culture remains embedded
across the organisation, including
through regular training programmes,
internal communications and
reminders at team meetings.
The Board acknowledges the
continued focus on employees to
inspire them to stay and grow with the
Company through the development
of an engaging “Great Place to Work”
and the introduction in 2019 of a new
Talent Management Framework and
an Employee Charter, and in 2020 of
a new Learning and Development
Charter and the updated Equality
Diversity and Inclusion Policy,
all of which reinforce the Group’s
commitments to employees.
The Board assesses and monitors
culture in a variety of ways including:
feedback from employee focus
groups and surveys; reports from the
HR, Risk, Compliance and Internal
Audit functions, including reports of
all matters raised under the Group’s
Whistleblowing Helpline and the way
in which management has addressed
all issues raised; reports from the
external auditors; and face to face
meetings and meetings with the
direct reports of senior management
in the absence of those senior
management. At each of its
meetings, the Board reviews and
discusses the CEO’s report, which
includes a comprehensive section
on progress with the People agenda,
including employee health and
well-being, COVID-19 safety, working
from home arrangements and the
additional support given to facilitate
this, regular communication and
engagement (enhanced during 2020
as the majority of employees have
been working from home), the roll
out of the new Learning and
Development Charter (introduced
in response to employee feedback
in the 2019 engagement survey),
and community support initiatives.
The Board is greatly encouraged
by the investment in our people as
described on pages 60 to 65 and
the 8-percentage point improvement
in overall employee engagement
in 2020.
The Company’s culture was enhanced
during 2020, in part as a result of
the considerable progress made
embedding our new ERMF, which is
more fully described in the Audit and
Risk Committee section of this report
on pages 115 to 127, and in the Principal
Risks and Uncertainties section of the
Strategic Report on pages 72 to 89.
The ERMF is reinforced by and
complements other relevant policies
and formal regulatory and compliance
training programmes including in
relation to securities dealing (in line
with the Market Abuse Regulations),
the avoidance of conflicts of interest,
anti-fraud, anti-money laundering,
anti-bribery and corruption,
competition, data protection and
information security, business
continuity, disaster recovery, and
health and safety.
Participation in these mandatory
training programmes and compliance
with their requirements is regularly
reviewed by the Group’s Executive
Management Team (Network
Leadership Team) and the Board
to ensure that a positive culture is
maintained across the organisation.
The Board believes that the culture
is aligned with, and will continue to
evolve alongside, the Company’s
purpose, values and strategy.
Whistleblowing
The Group encourages its employees
at every level to communicate
any concerns they have through
a variety of channels, including
employee forums, team meetings,
line management or HR. In addition,
the Company has in place a
whistleblowing or ‘speak up’ policy,
which allows employees to raise
matters in confidence should they
not wish to raise them through any
of the above channels. This includes
a dedicated hotline established for
this purpose, which is operated
confidentially by an experienced
third-party service provider.
Concerns raised through the hotline
are sent simultaneously to the Senior
Independent Director and Chair
of the Audit and Risk Committee
for information and the Chief Risk
Officer for action. All matters raised
through the helpline are investigated
thoroughly and, regardless of the
outcome, formally reported to the
Audit and Risk Committee. The Chair
of the Audit and Risk Committee
presents his report to the Board on
the proceedings at each Audit and
Risk Committee meeting, and if any
matters have been raised through
the helpline, the same are brought to
the Board’s knowledge. To support
the Board’s work in assessing culture
as described above, and at the
direction of the Audit and Risk
Committee, Group Internal Audit
conducted a review of the Group’s
whistleblowing arrangements
towards the end of 2020. Their
findings were positive in respect of
the measures taken by management
to increase whistleblowing awareness
and training amongst employees
(which resulted in staff increasingly
using the whistleblowing framework
to highlight important areas for
management to review and address
as appropriate) and the way in
which issues were dealt with by
management and the flow of
information to the Audit and
Risk Committee. A number of
recommendations were made
by Group Internal Audit (‘GIA’) and
adopted by management to enhance
the whistleblowing framework,
including confirming the Senior
Independent Director’s role as
the Whistleblowers’ Champion,
completing the roll out of
screensaver communications to
all remaining employees, including
questions in future Employee
Engagement Surveys about
awareness and willingness to report
issues, revising the Whistleblower’s
Policy so it now explicitly applies
to the Company’s external parties
such as vendors and customers
and adding a link to the Company’s
website so that external
whistleblowers can report issues of
concern via the dedicated hotline.
Workforce engagement
The Board acknowledges that
the Company does not meet the
qualifying criteria to report on some
of the recently introduced legislation
in The Companies (Miscellaneous
Reporting) Regulations 2018.
Specifically, reporting on employee
101
engagement does not apply directly
to the Company as it employs fewer
than 250 employees in the UK.
However, the Board believes it is
important to be progressive and
embrace the spirit of this regulation,
as it regards the wider workforce
as key stakeholders and therefore
it is imperative to engage on matters
that concern them.
To this aim, there are solid and
effective levels of bilateral
engagement that continue
between Executive Directors, senior
management, and the wider
workforce, as described in this
Corporate Governance Report and
within the Responsible Business
section of the Strategic Report
on pages 62 to 63. For example,
employees’ concerns and
suggestions can be raised through
a host of communication channels
across the Group such as direct and
indirect engagement with the CEO
via a dedicated “Ask Nandan”,
previously “Ask Simon”, email
address, “Coffee with Nandan”,
previously “Coffee with Simon”, and
townhalls. Additionally, this year
a number of remote engagement
initiatives were regularly held to
ensure we significantly enhanced
our two-way communication with
employees during this difficult
year (please see pages 62 and 63).
The Board is also pleased that
workforce engagement was further
encouraged during the year through
the implementation of the new
Employee Charter, which further
encourages the involvement and
participation of employees in the
Company’s performance.
During the year, the Board
established a formalised approach
to reviewing all our workforce
engagement mechanisms through
the Remuneration Committee, which
reports its findings to the Board.
In addition, the views of our people
and initiatives taken by management,
as it drives implementation of the
Company’s new Employee Charter,
are summarised within the CEO
report, and presented to each
Board meeting. Furthermore, all
whistleblowing issues and the way
in which they are being resolved
are reported to the Audit and
Risk Committee.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 102
Corporate Governance Report continued
Although the COVID-19 situation in
2020 has made this significantly more
difficult, our Non-Executive Directors
normally have many opportunities
to meet with employees at all levels,
often without the employee’s manager
being present. The Board believes that
the Group’s employee engagement
mechanisms are highly effective
and appropriate as they encourage
dialogue between the executive and
employees and provide opportunities
for employees to raise issues via many
avenues and the Board has visibility
of the activity and progress.
Shareholder engagement
The Board has continued with its
engagement with our investors,
which it considers vital to create
a mutual understanding of views.
Regular meetings have been held
with our major shareholders led
by our Chief Executive Officer and
Chief Financial Officer; the Chairman
has met with shareholders on
matters of governance and broader
strategic topics; and the Chair of
the Remuneration Committee has
engaged with shareholders to discuss
our approach to Remuneration Policy
and practice. More information on our
shareholder engagement is disclosed
within the Strategic Report on page
29, in the Chairman’s Governance
Letter on page 90 and in the
Remuneration Committee Chair’s
letter on page 135. Regular
feedback of these meetings
is given to the Board.
In addition, our brokers and our
Investor Relations team provide
regular reports to the Board of
investor perceptions of the Company
in relation to strategy, performance,
governance and remuneration. These
reports also include commentary
on market expectations, share price
performance, market trends and
feedback from investors and sell
side analysts.
The Group Company Secretary,
who acts as the first point of contact
in respect of governance related
matters, shall maintain contact with
each of our major shareholders to
enquire whether they would find it
helpful to deepen their ongoing
engagement by meeting with either
the Chairman and/or the Senior
Independent Director. She will also
Network International Holdings Plc
Annual Report and Accounts 2020
contact major shareholders as soon
as this Annual Report and the notice
convening the AGM are published to
re-introduce herself in case they wish
to raise any questions or concerns
ahead of lodging their proxy votes.
The AGM provides an opportunity
for shareholders to vote on a range
of issues either by proxy and/or in
person, when they can ask questions
of the Board members including the
Chairs of the Board Committees.
In view of the COVID-19 situation
and the Stay At Home Measures
introduced by the UK Government
in March 2020, the Board conducted
the AGM held on 30 April 2020 as
a hybrid meeting, thereby enabling
shareholders to participate fully by
electronic means.
The Company uses its website and
email as its primary means of
communication with shareholders.
The Annual Report, announcements
of results and other matters and
general information can all be found
on the Group’s website https://
investors.networkinternational.ae/
investors/. Enquiries from shareholders
can be addressed to the Group’s
investor relations function through
the contact provided on the
Group’s website.
Other key stakeholder engagement
The Board also recognises the
importance of continuous
engagement with the Company’s
other key stakeholders and ensures
that formal programmes are in place
to ensure that management fully
understand the requirements and
views of the stakeholders including
customers, suppliers, and regulators.
Regular feedback from stakeholders,
backed by KPIs, is given to the Board
and its Committees by the CEO (for
example, a comprehensive section
on customers is included in all CEO
reports to the Board) and other
senior management. More
information on key stakeholders
and engagement is available in
the Strategic Report at page 20.
Matters reserved for the Board
The Board has a schedule of matters
reserved for its approval, which
can be found on the Company’s
corporate website at https://
investors.networkinternational.ae/
investors/corporate-governance/
and has a formal structure of
delegated authority, whereby
specified aspects of management
and control of the Group have been
delegated to the Board Committees
and the Chief Executive Officer.
The Executive Management Team
and the regional operating divisions
support the Chief Executive Officer
in his day-to-day management of
the Group’s affairs. The Board has
approved the terms of reference for
the Audit and Risk, Nomination and
Remuneration Committees and the
role and responsibility documents for
the Chairman, Chief Executive Officer
and the Senior Independent Director,
all of which can be found on the
Company’s corporate website.
The powers of the Directors are set
out in the Company’s Articles of
Association, which are also available
on the Company’s corporate website.
In line with its schedule of matters
reserved, the Board is specifically
responsible for:
› Strategy, including:
– Responsibility for the overall
management and oversight
of the Group;
– The approval of the Group’s
strategic aims and its business
plan, and the review of the
Group’s performance in the
light of these;
– Setting the Company’s values
and standards; and
– Approval of the extension of
the Group’s activities into new
business outside the Group’s
existing business or geographic
areas, or the cessation of
any material part of the
Group’s business.
› Capital and structure, including:
– Changes to the Group’s capital
structure, including the issue
and buy-back of any securities;
– Material changes to the Group’s
corporate structure, the Group’s
management or control
structure; and
– Changes to the Company’s
listing or status as a plc and
recommendations to alter the
Articles of Association, registered
office or name of the Company.
› Board, Committee and other
› Engagement and communication
appointments:
– Changes to the structure, size
and composition of the Board,
including the specific roles of
Chairman, CEO and Senior
Independent Director, following
recommendations from the
Nomination Committee, and
determining the division of
responsibilities of those roles,
which should be set out in writing;
– The terms of engagement
and remuneration of the
Non-Executive Directors;
– Proposals for the re-election
of Directors by shareholders
at the AGM;
– Proposals for the appointment,
re-appointment or removal of
the external auditors;
– Establishing the Board’s
Committees, including the
chair and composition of
those Committees;
– Succession planning for all Board
and senior management roles;
– The appointment and removal
of the Chief Executive Officer
and the Company Secretary;
– Appointments to the boards of
principal operating subsidiaries;
and
– Delegated authority to Directors
and senior management.
› Remuneration:
– Determining the Group’s
Remuneration Policy, including
the approval of share plans and
pension plans; and
– The approval of any large-scale
redundancy programmes.
› Financial and reporting:
– Approval of the Annual
Report and Accounts, and
the preliminary and half year
results announcements;
– Approval of the annual budget,
capital and revenue expenditure
over the limits delegated to
management, estimates and
forecasts made public;
– Approval of the dividend policy,
declarations of interim dividends
and recommendations of final
dividends; and
– Approval of and changes to
accounting and tax policies.
with shareholders and other
stakeholders:
– Ensuring effective engagement
with the Group’s shareholders
and other stakeholders, including
the workforce, in order to
understand their views;
– Convening of all general
meetings of shareholders and
approval of resolutions proposed
to those meetings; and
– Approval of all circulars,
prospectuses, listing particulars
and market announcements
concerning matters decided
by the Board.
› Contracts:
– Approval of any transaction
that would be required by
the UK Listing Rules to be
announced to the market;
– Approval, amendment or
termination of any commitment
or arrangement (or series of
such matters) with a value of
greater than USD 20 million;
– Any proposed acquisition or
disposal of shares in a listed
company; and
– Any binding commitment to
enter into a material strategic
alliance, joint venture, partnership
or profit-sharing arrangement.
› Capital expenditure and financing:
– The approval of investments
and capital projects, borrowings,
indemnities and guarantees
for an amount in excess of
USD 20 million;
– The creation of any mortgage,
charge or pledge etc. over all or
part of the Company, its assets
and uncalled capital; and
– The issue by any member of the
Group of any debt instruments
in excess of USD 20 million.
› Corporate Governance:
– Approval and oversight of the
Group’s Corporate Governance
arrangements.
› Internal control:
– Approval of the Group’s risk
appetite and appropriate
policies on and systems of risk
management and internal control;
103
– Approval of the risk management
and internal control framework;
– Monitoring and, at least annually
and reviewing the effectiveness
of the system of risk management
and internal control.
› Policies:
– Approval and oversight of
material policies and procedures
of the Group.
Board activity during the year
At each Board meeting, the
Chief Executive Officer presents
a comprehensive update on the
strategy and business performance
across the Group and the Chief
Financial Officer presents a detailed
analysis of the financial performance,
both at Group and operating
segment levels. This year, both the
CEO and the CFO have also apprised
the Board on the impact of the
COVID-19 pandemic on the Group’s
business, customers, people and
finances, and the steps taken to
minimise the pandemic’s impact.
In view of the critical importance
to the Group’s business, the Board
reviews progress reports on the roll
out of our highly secure Android
based payment platform N-Genius™,
new markets, new avenues with
existing customers, progress with
new key customers, and acquisition
opportunities. This is in addition
to the regular in-depth review of
these platforms and cyber security
conducted by the Audit and Risk
Committee. The Board continuously
reviews the Group’s strategy at each
of its meetings and, in addition, holds
one dedicated two-day strategy
meeting each year. Executives below
Board level attend relevant parts
of Board and Committee meetings
in order to make presentations and
answer questions on their area of
responsibility. This gives the Board
access to a broader group of
executives and senior managers
and helps the Directors make
assessments when considering
the Group’s succession plans.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 104
Corporate Governance Report continued
Board activity during the year
At its meetings during 2020, the Board discharged its responsibilities,
and in particular it reviewed:
› Macroeconomic
perspectives
› Opportunities
under the
strategic
partnership
with Mastercard
– commercial
agreement
signed in 2019
› Development
and strategy
support
presentations
Operational
› CEO reports at
each Board
meeting
› DPO integration
planning
and progress
reporting
› Roll out of our
highly secure
Android based
payment
platform
N-Genius™
› Implementation
of the new
Enterprise Risk
Management
Framework
Business and
financial
performance
› Ongoing review
of the business,
customer,
people and
financial risks of
the COVID-19
situation
› CFO reports
at each Board
meeting
› Financial
forecasts
› Annual budget
Reporting
› Review and
approval of the
2019 ARA and
the 2020 H1
results, and all
statements and
confirmations
therein
› Review and
approval of
Regulatory
News Service
announcements,
including trading
updates, issued
to the market
Strategic
› Annual strategic
review
› Feedback from
the annual
strategic review
and discussion
› M&A pipeline
and specific
M&A proposals,
including the
acquisition of
DPO Group
› Placing of
equity shares
› Product
overview
and outlook
› Separation
from ENBD
› Approval of
capital projects
requiring Board
approval under
the Delegation
of Authority
Network International Holdings Plc
Annual Report and Accounts 2020
105
› Meetings
between the
Chairman and
the Independent
NEDs
› Governance
enhancements
in compliance
with the 2018
UK Corporate
Governance
Code
Internal
control
and risk
› Enterprise Risk
Management
Framework
› Review of
principal risks
› Risk appetite
› Annual review of
internal control
› Annual review
of viability
Shareholder
and
stakeholder
oversight
› Reports from
Investor Relations
and brokers
› Ongoing
oversight of
progress with
the Group’s
People agenda
› Ongoing
oversight of
the corporate
culture and
review of the
2020 Employee
Engagement
Survey results
› Engagement
with the
Company’s other
stakeholders
including
Mastercard and
customers
Directorate
› Appointment of
two Independent
NEDs in January
2020
› Acceptance of
the resignation
of three NEDs
in April 2020
› Appointment of
a new Executive
Director in June
2020
› Appointment of
two Independent
NEDs in January
2021
› Oversight of
the work of the
Nomination
Committee in
respect of the
search for a new
Group CEO prior
to the retirement
of Simon Haslam
Governance
› Composition of
the Board’s
Committees
upon the
strengthening
of the Board
during the year
› Approval of
matters
recommended
by the Board’s
Committees
› Notice of the
2020 Annual
General Meeting
and subsequent
review of the
voting results
of that meeting
› Policy and
insurance
approvals
› Board
effectiveness
review
We have developed a comprehensive programme of
work to ensure we cover the breadth of responsibilities
and duties of the Board, and each of its Committees,
and to allow executive management to plan and
resource their support work.”
Ron Kalifa OBE
Chairman
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 106
Corporate Governance Report continued
Effectiveness of risk management
and internal control systems
Each year, the Board, through the
work of the Group Audit and Risk
Committee, conducts a review of the
effectiveness of the Group’s system
of risk management and internal
control in line with the FRC Guidance
on Risk Management, Internal Control
and Related Financial and Business
Reporting. The Board approved
the Enterprise Risk Management
Framework in early 2020 and has
monitored its implementation
throughout the year. There is an
ongoing process for the identification
and evaluation of risk management
and internal control processes. For
example, as a result of the COVID-19
pandemic, a temporary principal
risk was created in spring 2020 to
understand and monitor the impact
of the pandemic on the Group’s
risk profile. The work conducted
by management is complemented,
supported and challenged by the
controls assurance work carried out
independently by the Group Internal
Audit function. Regular reports on
control issues are presented to the
Audit and Risk Committee by the
Chief Internal Auditor. The Board,
in reviewing the effectiveness of
the system of risk management
and internal control, can confirm
that necessary actions have been
or are being taken to remedy any
significant failings or weaknesses
identified from that review. Further
details of the ERMF can be found
on page 73.
Board composition
As at 31 December 2020, the
Board comprised the Non-Executive
Chairman (independent on
appointment), two Executive
Directors, five Independent Non-
Executive Directors and one non-
independent Non-Executive Director.
The biographical details of each of
the current Directors can be found on
pages 94 to 96 and on the Group’s
investor website at https://investors.
networkinternational.ae/who-we-are/
leadership/board-of-directors/.
The Chairman
The Chairman leads the Board and is
responsible for its overall effectiveness
in directing the Company. Ron Kalifa
has been the Chairman throughout
the year. He was independent on
appointment in March 2019.
The roles and responsibilities of the
Chairman and Chief Executive
Officer are separate and distinct and
have been clearly set out in writing
and approved by the Board. These
documents can be found on the
Group’s investor website at https://
investors.networkinternational.ae/
investors/corporate-governance/.
The Senior Independent Director
Darren Pope has been the Senior
Independent Director throughout
the year. The Senior Independent
Director is available to shareholders
should they have concerns that
cannot be resolved through the
normal channels involving the Chief
Executive Officer or the Chairman.
The Board-approved Role and
Responsibilities of the Senior
Independent Director are set out
in writing and can be found on the
Group’s investor website at https://
investors.networkinternational.ae/
investors/corporate-governance/.
CEO succession
Following a thorough process and
global leadership search conducted
by the Nomination Committee, and
upon its recommendation, the Board
appointed Nandan Mer as Group
CEO with effect from 1 February
2021. This followed Simon Haslam’s
decision to retire from the Company
after 40 years in the financial
services industry. Simon stepped
down as Group CEO on 31 January
2021 and remains with the Company
throughout his six-month notice
period to ensure a smooth transition.
Board and Committee membership,
appointments and diversity
Following the IPO, ENBD and
WP/GA continued to be significant
shareholders in the Company, with
each entering into a Relationship
Agreement with the Company
on 1 April 2019.
Network International Holdings Plc
Annual Report and Accounts 2020
Under the Relationship Agreements
between the Company and ENBD,
and the Company and WP/GA,
ENBD had the right to nominate
for appointment up to three Non-
Executive Directors, and WP/GA
had the right to nominate for
appointment up to two Non-
Executive Directors to the Board in
accordance with the terms of their
respective Relationship Agreements.
During November 2019, consequent
to each of ENBD and WP/GA
reducing their percentage holding
of voting rights in the Company, the
Relationship Agreements with them
automatically terminated, and they
ceased to be entitled to nominate
Non-Executive Directors for
appointment to the Board. The
Company did not immediately
exercise its right to procure the
resignation of ENBD’s or WP/GA’s
nominated Directors, on the grounds
that in the first year of operation as a
listed company, the skills, knowledge
and experience of Shayne Nelson,
Suryanarayan Subramanian, Aaron
Goldman and Daniel Zilberman and
the contribution of each to the
deliberations of the Board continued
to be important.
Three of the four shareholder
nominated directors, Shayne Nelson,
Daniel Zilberman and Aaron Goldman,
resigned from the Board at the
Company’s first Annual General
Meeting on 30 April 2020. The
remaining Director Suryanarayan
Subramanian, at the Company’s
request, has continued as a Board
member in order to provide support
and continuity, given his long-standing
experience with the business and
market, and his financial expertise. For
these reasons, Mr Subramanian was
invited to attend the Audit and Risk
Committee meetings throughout the
year. From the start of 2021, he was
invited to attend the meetings of both
the Audit and Risk Committee and
the Remuneration Committee. He is
not a member of those Committees,
does not receive any additional fee
for his attendance, has no voting
rights and is not counted towards the
quorum. ENBD has since, by its letter
dated 16 July 2020, confirmed that
Suryanarayan Subramanian does not
represent ENBD’s interest on the
Company’s Board.
With the advice of the Nomination
Committee, the Board appointed
Anil Dua and Ali Mazanderani as
Independent Non-Executive Directors
with effect from 22 January 2020,
Rohit Malhotra, Group Chief Financial
Officer, as Executive Director, with
effect from 2 June 2020, and Diane
Radley and Monique Shivanandan as
Independent Non-Executive Directors
with effect from 1 January 2021. As at
the date of this report, the ratio of
Independent Non-Executive Directors
(excluding the Chairman) to other
Directors is 7:3 which continues to be
in compliance with the requirements
of the Code.
The composition of the Board’s
Committees was further strengthened
during year and to the date of this
report by the appointment of four
additional Independent Non-
Executive Directors as detailed above.
The current compositions of the
Board’s Committees and the changes
made during the year are shown in
the relevant Committee sections on
pages 92 to 93. The search, selection
and appointment process for Non-
Executive Directors is shown in the
section on the Nomination
Committee on page 128.
When considering the appointment
of new Independent Non-Executive
Directors, the Nomination Committee
and the Board have regard to its
Board Appointments Policy, which
provides for diversity across a
range of attributes, including skills,
knowledge and experience, gender
and ethnicity, to meet the needs
of the business.
The Board Appointment Policy can
be found on the Group’s investor
website at https://investors.
networkinternational.ae/investors/
corporate-governance/.
Directors’ conflicts of interest
The UK Companies Act has codified
the Directors’ duty to avoid a conflict
situation in which they have, or can
have, an interest that conflicts,
or possibly may conflict, with the
interests of the Company. The Board
has established a process to identify
and authorise conflicts. Directors
have to notify the Group Company
Secretary as soon as they become
aware of actual or potential conflict
situations. A Director will not be in
breach of that duty if the relevant
matter has been authorised in
accordance with the Articles of
Association. Such a decision to
authorise a conflict of interest can
only be made by Directors who do
not have any interest in the matter
being considered.
The Nomination Committee also
reviews the interests of candidates
prior to making recommendations
to the Board for the appointment
of new Directors. The Nomination
Committee and the Board applied
the above principles and process
throughout the period to the date
of this report and confirm these
have operated effectively.
External appointments
The Directors are required to first
seek and obtain the approval of the
Board before accepting any other
significant appointment. The Board
will only grant approval if it is satisfied
that the proposed appointment
would not give rise to a conflict of
interest and the Director in question
has given assurance that they expect
to be able to devote sufficient time
to meet their Board responsibilities.
Confirmation of Director
independence
At its meeting on 7 March 2021,
as part of a thorough review of
Corporate Governance against the
Code, the Board considered the
independence of the Non-Executive
Directors. In doing so, they considered
the criteria set out in provision 10
of the Code amongst other matters
and determined that six of our
Non-Executive Directors, namely
Victoria Hull, Habib Al Mulla, Darren
Pope, Anil Dua, Ali Mazanderani,
Diane Radley and Monique
Shivanandan were independent.
In reaching the above determination
of independence, the Board
considered the following (which
was fully disclosed in paragraph
6.9 on page 201 of the Additional
Information Section of the Prospectus
published prior to the IPO):
› Habib Al Mulla is related to the
Vice Chairman of ENBD, by virtue
of being married to the Vice
Chairman of ENBD’s sister; and
107
› Habib Al Mulla is the Executive
Chairman of Baker McKenzie Habib
Al Mulla, Chairman of the Board of
Trustees of the Dubai International
Arbitration Centre and is a UAE
lawyer with over 30 years’
experience. As the head of Baker
McKenzie Habib Al Mulla’s Disputes
practice, Habib Al Mulla may
occasionally be contacted by
ENBD in the context of providing
general advice or clarification in
his area of expertise but in the
vast majority of engagements
other partners from within Baker
McKenzie Habib Al Mulla have
ultimate responsibility for the
relevant engagement. Habib Al
Mulla has himself never had a
business relationship with the Vice
Chairman of ENBD nor with ENBD.
Habib Al Mulla had confirmed to the
Board that he was not acting for or
with ENBD and shall at all times act
independently without influence
from the Vice Chairman of ENBD
or ENBD.
On the basis of the above, the Board
had concluded that Habib Al Mulla
is independent, as defined in the UK
Corporate Governance Code.
Confirmation of the Chairman’s
independence on appointment
As disclosed in paragraph 6.8
on page 201 of the Additional
Information Section of the Prospectus
published prior to the IPO, Ron Kalifa
was an Executive Director of
Worldpay until May 2019. In March
2019, Fidelity National Information
Services, which is one of the Group’s
competitors, announced a merger
with Worldpay (which completed
in July 2019). Notwithstanding this
situation, the Board determined
at the time that Ron Kalifa was
independent on appointment
as Chairman of the Company.
The other Non-Executive Directors
Of the Directors who held office
during the year:
› Shayne Nelson, Aaron Goldman
and Daniel Zilberman stepped
down as Directors of the Company
from the date of the first Annual
General Meeting of the Company
on 30 April 2020;
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 108
Corporate Governance Report continued
There is a thorough induction
programme for newly appointed
Directors and this can be tailored
to meet individual needs. Overall,
the aim of the induction programme
is to introduce new Directors to:
› The nature of the Company, its
purpose, values and strategy, its
businesses, the markets in which it
operates, its challenges and risks;
› The legal and regulatory
environment in which the
Company operates;
› The Company’s relationships
with its main stakeholders and
how these are managed; and
› The organisation’s culture;
and to build a link with the
Company’s people.
Inductions will typically include
meetings with members of the
Executive Management Team, and
other senior management, both at
Group and the operating divisions,
where they receive thorough
briefings aligned with the aims set
out above. Individual induction
requirements will be monitored by
the Chairman, with the support of the
Group Company Secretary, to ensure
that newly appointed Directors gain
sufficient knowledge about the
Group to enable them to contribute
to the Board’s deliberations as swiftly
as possible. The induction process
has evolved as the experience of
inducting each new Director is
built upon.
The induction programmes for
Anil Dua and Ali Mazanderani were
conducted in line with the above and
included extensive engagement
meetings with many members of the
management team in the areas of
HR, Product, Technology, Operations,
Audit, Risk, Strategy and Finance.
These induction meetings were well
received, not just by the Directors,
but also by the members of the
management team who gained first
hand exposure to new members
of the Board. As of the date of this
report, the induction programmes
of Diane Radley and Monique
Shivanandan are well advanced.
Operation of the Board and
its Committees
The Board and its Committees each
have a schedule so they can operate
effectively, ensure comprehensive
coverage of their responsibilities, and
allow executive management to plan
and resource their support work.
Prior to scheduled meetings, the
Chairman (or Committee Chairman),
with the support of the Group
Company Secretary, liaises with the
Executive Management Team to fine
tune and finalise the agenda. The
Chairman, CEO and Group Company
Secretary review the papers for
the meeting and these are then
circulated to the Directors one week
prior to the meeting. The Directors
have access to a fully encrypted
electronic portal system, which
allows them to receive and review
papers quickly and securely on a
tablet or PC. Due to the impact
of the COVID-19 pandemic, most
of the scheduled Board meetings
during the year were held through
video conference.
At scheduled Board meetings, the
Chairman meets with the Independent
Non-Executive Directors in the
absence of the other Non-Executive
Directors, CEO and the CFO.
The Group Company Secretary,
who was appointed by the Board,
acts as secretary to the Board and
its Committees, and works with
the Chairman and the Executive
Management Team as described
above to ensure there is a smooth
flow of information and attends
each meeting. The Group Company
Secretary is also responsible
for advising and supporting
the Chairman, the Board and
its Committees on Corporate
Governance matters. All Directors
have access to the advice and
services of the Group Company
Secretary, and through her, have
access to independent professional
advice in respect of their duties, at
the Company’s expense. Jay Razzaq
has held the position of Group
Company Secretary from
27 February 2019. Her biographical
details can be found on page 97.
› Suryanarayan Subramanian, who
was nominated for appointment
to the Board pursuant to the
relationship agreement between
the Company and ENBD, continued
as a Director. He has informed
the Board that, with effect from
1 January 2020, he no longer holds
the position of the Group Chief
Financial Officer of ENBD. ENBD
has also informed by its letter dated
16 July 2020 that Suryanarayan
Subramanian does not represent
ENBD’s interest on the Company’s
Board. Accordingly, the Board
acknowledges that in accordance
with provision 10 of the Code,
Suryanarayan Subramanian
cannot presently be regarded as
independent, but is satisfied that
since 1 January 2020, there is no
ongoing conflict of interest.
Re-appointment of Directors
In accordance with the Code and the
Company’s Articles of Association,
every Director shall be subject to
annual re-election by shareholders at
each Annual General Meeting. The
Notice convening the Annual General
Meeting to be held on 20 May 2021
sets out, in respect of each Director
standing for re-election, the specific
reasons why their contribution is,
and continues to be, important to
the Company’s long-term success.
Board development and induction
Throughout the year under review,
the Board reviewed a series of
development and strategy support
presentations at each of its meetings.
This series, together with ongoing
business reviews, was designed to
ensure that the new Directors gained
a high level of knowledge about the
Group so that all Directors could
contribute to the Board’s ongoing
review and development of strategy.
At Board meetings and, where
appropriate, Committee meetings,
the Directors receive updates
and presentations on business
developments. In addition to gaining
a better understanding of those
businesses, these programmes also
increase the exposure of senior
talent to the Board and also the
Board’s presence across the Group.
Network International Holdings Plc
Annual Report and Accounts 2020
109
Board Observer
Under the Cornerstone Agreement signed by the Company with Mastercard at the time of the IPO, Mastercard is
entitled to appoint an Observer to the Company’s Board for so long as Mastercard does not dispose of the shares
acquired by it. The Observer may attend all Board meetings and receive all Board papers, but may not vote at Board
meetings. As per the terms of the Cornerstone Agreement, the Observer is excluded for matters where a conflict arises
or where the matter is considered to be commercially or legally sensitive. The first Observer is Mr Raghu Malhotra.
Board meetings and attendance
The Board and its Committees have regular scheduled meetings throughout the year and supplementary meetings
are held as and when necessary. The table below shows the number of scheduled Board and Committee meetings
attended by each Director out of the number convened during the year 2020. Non-attendance at one Board meeting
each by Dr. Habib Al Mulla and Ali Mazanderani was due to prior overseas travel commitments which were unavoidable.
Each of the Directors has given a firm commitment to being able to give sufficient time to enable them to fulfil their
duties, including attendance at meetings, in 2021.
Individual Director attendance at scheduled meetings during the year 2020
Name
No. of meetings held
Ron Kalifa
Simon Haslam
Darren Pope
Victoria Hull
Habib Al Mulla
Suryanarayan Subramanian
Anil Dua
Ali Mazanderani
Rohit Malhotra
Board
7
7/7
7/7
7/7
7/7
6/7
7/7
7/7
6/7
4/4**
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committee
7
1/1*
–
7/7
7/7
–
–
7/7
4/4*
–
2
2/2
–
2/2
2/2
2/2
–
–
–
–
5
5/5
–
2/2*
5/5
2/2*
–
–
4/4
–
* Not a member for the entire year. Please refer to the respective Committee reports for more details.
** Rohit Malhotra joined the Board on 2 June 2020.
Attendance at scheduled meetings during the year 2020 by former Directors who resigned with effect from
30 April 2020
Name
No. of meetings held
Shayne Nelson
Daniel Zilberman
Aaron Goldman
Board
3
2/3
3/3
2/3
Audit and Risk
Committee
–
Nomination
Committee
–
Remuneration
Committee
–
–
–
–
–
–
–
–
–
–
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 110
Corporate Governance Report continued
Board effectiveness evaluation
The Board recognises the benefit of a thorough evaluation process to reflect on the Board’s strengths and the
challenges it faces, and to identify opportunities to continuously improve effectiveness.
Our Board evaluation process in 2020:
1. The Board agreed to have an externally facilitated Board effectiveness review conducted in 2020.
2. Discussions were initiated with three reputed external agencies shortlisted for carrying out the Board effectiveness
evaluation, and Egon Zehnder were selected.
3. The Chairman discussed and agreed the scope of the evaluation with Egon Zehnder. Separately, the Senior
Independent Director led the evaluation of the Chairman.
4. Egon Zehnder conducted individual private interviews with each of the Directors and other Board attendees
(see below). They also reviewed Board and Committee agendas, papers and minutes.
5. Egon Zehnder prepared a report of their findings from the review, identifying strengths, challenges and
opportunities to improve and embed higher performance.
6. Egon Zehnder’s report was first shared with the Chairman and the SID and then presented to, and discussed by,
the Board, which agreed an action plan to enhance Board effectiveness for the year ahead.
7. The action plan will be continually monitored by the Chairman with the support of the Company Secretary.
8. The Board evaluation to be conducted in 2021 will be carried out internally but will reflect on the actions from
the 2020 external review.
Process and context
A thorough evaluation of the Board and its Committees was conducted by Egon Zehnder and the table above
explains the process undertaken over a two-month period in the autumn of 2020.
Egon Zehnder was appointed in view of their specific knowledge of the Board and to align the review work with their
assignment in respect of the CEO succession process and the search for additional Independent Non-Executive
Directors. Egon Zehnder also conducted the search resulting in the appointments in January 2020 of Ali Mazanderani
and Anil Dua. See the Nomination Committee report on page 128 for details of the processes in respect of these
Board appointments.
The Board determined that the best time to conduct its first effectiveness review would be around 18 months after
the formation of the Board (at the time of the IPO), allowing time for the Board to adapt and develop following the
changes made to its composition in the first half of 2020. Nevertheless, the evaluation was conducted at a time of
transition and significant activity for a new Board in a difficult market, including: the short tenure of most of the
Directors; being in the midst of a major acquisition; having to deal with the significant additional business challenges
brought about by the pandemic; and being unable to interact face to face as a Board and with management due
to the COVID-19 restrictions. A CEO succession process and a search for additional Independent NEDs were also
underway at the time the review was conducted.
Private discussions were held between Egon Zehnder and each Director, the Board Observer appointed under the
agreement with Mastercard (see page 109 of this Governance Report) and the Chief Risk Officer and Group Company
Secretary. These interviews covered Board structure, composition, processes, and behaviours. Individual feedback
sessions were offered to the Directors by Egon Zehnder.
The comprehensive report prepared by Egon Zehnder was debated by the Board, which then agreed an action plan
for improvement, in February 2021.
Network International Holdings Plc
Annual Report and Accounts 2020
111
Summary of outputs
The Board effectiveness review concluded that the Board was operating very effectively with all members feeling
enabled to contribute to the work of the Board and its Committees. The report recognised that there was a good
team spirit, engagement, and energy around the Boardroom table (albeit virtual for most of the year); heavy lifting
by the Committees allowed the Board to focus on higher level topics and there was a good allocation of time on
the agendas; and good resilience had been shown when dealing with the many challenges (as described above).
Significant progress had been achieved in many areas supported by the Directors’ high governance standards, led
by the Chairman. There is a high degree of confidence in the Chairman, and admiration for the Committee Chairs
and the support given by the Company Secretary.
It was recognised that at this stage of the Board’s evolution and in view of the COVID-19 restrictions experienced
throughout most of the year, there was opportunity and potential to develop the Board’s effectiveness and Egon
Zehnder’s report set out a number of key themes that emerged from their review and set out some clear
recommendations for consideration.
The recommendations from the emerging themes focused on developing a more comprehensive set of induction
teach in sessions for Directors on various aspects of the business to build on the induction sessions on joining.
These were to be delivered through a series of online sessions over a three-month period.
The following table presents a high-level summary of the outputs from the 2020 Board effectiveness evaluation and
the actions agreed by the Board.
Outputs from the 2020 Board evaluation
Board agreed actions
› Conclude the search for two additional
› Action completed with the appointment
Independent Non-Executive Directors with the
attributes identified by the Nomination Committee.
of Diane Radley and Monique Shivanandan
with effect from 1 January 2021.
› Further enhance the induction process (currently
›
challenging due to COVID-19 restrictions).
Induction process to be benchmarked against the
FTSE 250 and improvements made as required.
› Continued preparation for top bench succession.
› Additional Nomination Committee meetings
› Allocate agenda time on:
– People, organisational capability and culture.
– Competitive landscape.
› Enhance the strategic debate by allocating
time for input by the broader management
team and NEDs with specific expertise.
› Wider management population to undertake
training of FTSE governance requirements
and standards – to be reinforced by
NEDs with expertise in that area.
built into the corporate calendar.
› Board’s forward programme to
reflect this recommendation.
› Board’s forward programme to
reflect this recommendation.
› Training programme developed and being
rolled out in the first half of the year.
› Produce clearer and more concise Board
materials with more inclusive terminology.
› Review of Board materials underway, to
be benchmarked against FTSE standards.
› Foster stronger relationships to
support their Board roles.
› Directors to arrange virtual sessions among
themselves and members of the Executive
Management Team, given the lack of
opportunity for physical meetings and Board
dinners due to the COVID-19 restrictions.
The Group’s performance management system applies to management at all levels. The individual performance
of the Chief Executive Officer is reviewed separately by the Chairman (and of the CFO by the CEO) and by the
Remuneration Committee. Further details of the Executive Directors’ performance measures and objectives and
their achievement against them are disclosed in the Remuneration Report on pages 139 to 145.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 112
Corporate Governance Report continued
Management Committees
› Executive Management Team
› Enterprise Risk Management
Committee
In addition to the members of the
Board, the day-to-day management
of the Company’s operations
is conducted by its executive
management team called the
Network Leadership Team which is
made up of the key business heads
of each function, and includes the
Executive Management Team
(please refer to pages 97 to 98
for details).
The Network Leadership Team
is chaired by the Group CEO,
and convenes throughout the year
based on a series of planned
meetings. These include a weekly
Sunday morning management
meeting which focuses on
opportunities, risks and challenges;
a monthly management meeting to
review business performance; and
a quarterly three-day management
meeting that goes beyond business
performance, and includes specific
agenda items such as full day talent
management reviews, presentation
of business cases and staff
engagement sessions.
Some of the topics discussed and
agreed at the Network Leadership
Team meeting, many of which then
subsequently came to the Board
for approval in 2020, included:
– Saudi Arabia On-Soil
Business Case
– Separation from ENBD
– 2021 budget submission
– Employee Engagement Survey
Results & Action Plans
– Culture
– Net Promoter Score – Results
& Action Plans
Operating an appropriate and
effective risk management and
internal control system is essential
to achieving the Group’s strategic
objectives and maintaining service
delivery targets. The Enterprise Risk
Management Committee has general
oversight and sets the ‘tone from the
top’ in respect of risk management.
It has a mandate to manage and
oversee all aspects of operational
risk, financial risk, credit risk, fraud
risk, compliance, business continuity,
and information security governance.
During 2020, the ERMC reviewed
regular reports in respect of the
above areas of its mandate, including
the Group’s principal risks and new
and emerging risks. Additionally, the
Committee reviewed specific reports
into the Coronavirus Management
Response Strategy and impact
assessments on the Group’s
acquiring portfolio, status updates
on embedding the ERMF, principal
risk deep dives, IT disaster recovery
testing and analyses of the risks
associated with retargeting the
timelines for certain projects delayed
due to COVID-19.
The members of the ERMC are as
follows: Chief Risk Officer and Group
Company Secretary (Chairperson),
Group Chief Executive Officer, Group
Chief Financial Officer, Group Chief
Internal Auditor, Managing Director
Middle East, Managing Director
Africa, Group Chief Digital,
Technology and Operations Officer.
The Board’s perspective on Risk &
Control is covered in the Principal
Risks section within the Strategic
Report at page 72 and within the
Audit and Risk Committee Report
on page 115.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic report
Corporate governance
Financial statements
113
113
The evolution of our Board
Since our IPO in April 2019, we have carefully managed the construct of our Board to reflect the transition from
private equity ownership to that of a UK-listed constituent of the FTSE 250. At Network International, we have
been able to attract both Executive and Non-Executive Directors of the highest calibre in line with our exacting
requirements. Our Board has a breadth of skills, experience, and knowledge, is diverse by a range of measures,
and has a strong cohort of Independent Non-Executive Directors – fully aligned with the requirements of the
Code and investor expectations.
Date
Directorate change
Pre-IPO: February/
March 2019
Appointment of the first Directors
Ron Kalifa, Independent Chairman
Ratio of Independent
Directors to other
Directors (excluding
the Chairman)*
3:5
Number of
Directors
9
Simon Haslam, Group Chief Executive Officer
Darren Pope, Senior Independent Director
Victoria Hull, Independent Non-Executive Director
Habib Al Mulla, Independent Non-Executive Director
Shayne Nelson, Non-Executive Director
Suryanarayan Subramanian, Non-Executive Director
Aaron Goldman, Non-Executive Director
Daniel Zilberman, Non-Executive Director
Appointment of two additional Independent
Non-Executive Directors
Anil Dua, Independent Non-Executive Director
Ali Mazanderani, Independent Non-Executive Director
Three Non-Executive Directors (nominees of the former major
shareholders) step down at the conclusion of the 2020 AGM.
Suryanarayan Subramanian, Non-Executive Director,
invited to remain on the Board.
Resigning Directors:
Shayne Nelson, Non-Executive Director
Aaron Goldman, Non-Executive Director
Daniel Zilberman, Non-Executive Director
Appointment of our serving CFO to the Board as an
Executive Director
Rohit Malhotra, Group Chief Financial Officer
Appointment of two additional Independent
Non-Executive Directors
Diane Radley, Independent Non-Executive Director
Monique Shivanandan, Independent Non-Executive Director
22 January 2020
30 April 2020
2 June 2020
1 January 2021
1 February 2021
Succession of the Group Chief Executive Officer
Nandan Mer appointed as Group Chief Executive Officer
Simon Haslam retires, remaining with the Company throughout
his six-month notice period to ensure a smooth transition
11
8
9
11
11
5:5
5:2
5:3
7:3
7:3
* the Code requires that at least half the Board, excluding the Chair, should be Non-Executive Directors whom the Board considers to be independent.
The current Directors and their biographies are detailed on pages 94 to 96.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 114
Corporate structure
Network International
Holdings Plc
The Links Group
(UAE local sponsor)
Nominee
arrangements
for 51% beneficial
ownership
51%
Legal ownership
through SPV at DIFC1
49%
Legal & 100% beneficial
ownership through
SPV 1 at DIFC11
100%
Legal & beneficial
ownership through
SPV 2 at DIFC1
UAE business
Non-UAE business2
27 March 2021, the foreign ownership
restrictions will be abolished, allowing
foreign investors to hold 100% of
the share-capital of their onshore
companies, subject to exceptions
for certain strategic commercial
activities/sectors. We will evaluate
the impact of these changes once
the New Decree is fully enacted.
The requirement for a local sponsor
Currently, UAE law restricts the level
of direct foreign ownership of UAE
based companies. A UAE company
or UAE nationals must hold at least
51% of the share capital. This law
regulates legal ownership and not
economic ownership.
Network’s UAE sponsor
We use the Links Group, which is
owned by Equiom Group, and which
provides trust and fiduciary services
in 15 jurisdictions globally. Links is
generally recognised in the UAE
as one of the leading providers of
business formation and corporate
support services, and has provided
services to over 350 international
companies since 2002.
The contractual arrangement
with our nominee allows for the
transfer of the full economic
benefit (including all dividends,
distributions and voting rights)
over the sponsor’s shareholding
to Network International Holdings
plc, which retains full management
control over the business.
On 27 September 2020, the UAE
issued the Federal Decree-Law
No. (26) of 2020 (‘New Decree’)
amending certain provisions of
Federal Law No. (2) of 2015 on
Commercial Companies. The New
Decree came into force partially on
2 January 2021 and repealed the
existing Foreign Direct Investment
law. Once fully enacted on
1 Special Purpose Vehicle registered at Dubai International Finance Centre Freezone.
2 Includes Jordan, rest of Middle East operations and Africa operations.
UAE = United Arab Emirates.
Network International Holdings Plc
Annual Report and Accounts 2020
115
Audit and Risk Committee Report
Darren Pope
Committee
Chairman
The Committee has focused
on monitoring the impact
of the COVID-19 pandemic
on our people, customers,
our financial position and
the mitigating actions
taken by management, the
integrity of the financial
statements, progressing
the implementation of our
Enterprise Risk Management
Framework, reviewing our
principal and emerging risks,
reviewing our risk appetite,
reviewing the outputs and
performance of our second
and third lines of defence,
and monitoring our cyber
and data security protocols.”
Darren Pope
Committee Chairman
Other members
Ron Kalifa (until 4 February 2020)
Victoria Hull (until 1 January 2021)
Anil Dua (from 4 February 2020)
Ali Mazanderani (from 2 June
2020 until 1 January 2021)
Diane Radley (from 1 January 2021)
Monique Shivanandan
(from 1 January 2021)
Number of meetings held
in the year
7 plus a further 6 meetings to
monitor the human, customer and
financial impacts of the COVID-19
situation and management’s
mitigating actions.
Attendance
Darren Pope (Chair)
Ron Kalifa
Victoria Hull
Anil Dua
Ali Mazanderani
13/13
1/1
13/13
12/13
5/5
Meetings also regularly attended by:
› Simon Haslam, Chief Executive
Officer; since 1 February 2021,
Nandan Mer, Chief Executive Officer
› Rohit Malhotra, Chief Financial Officer
› Suryanarayan Subramanian,
Non-Executive Director
› Jay Razzaq, Chief Risk Officer
and Group Company Secretary
Ian Cox, Chief Internal Auditor
›
› KPMG LLP
Read Directors’ biographies
on pages 94 to 96
The Board has satisfied itself that
a majority of the members of the
Committee have recent and relevant
financial experience and the Committee
as a whole has competence relevant
to the sector in which the Company
operates, as required by the Code.
Dear Shareholder
I am pleased to present the Audit
and Risk Committee report for the
year ended 31 December 2020.
This report describes the work
of the Committee during the year
and reports on how we have applied
the principles and provisions of
section 4 of the 2018 UK Corporate
Governance Code (‘the Code’)
relating to audit, risk and internal
control. Management and the
Committee have continued to
develop and apply high standards
to ensure that the Group meets
the investor and stakeholder
expectations of a UK listed company.
COVID-19
Similar to other listed companies
COVID-19 created new challenges
in the way the Group was required
to operate. During the early stages
of the pandemic the Committee
established a new COVID-19 principal
risk including key risk indicators, to
ensure appropriate visibility of the
various consequences of COVID-19
and the risk mitigation actions taken.
In addition, the Committee asked
the Chief Financial Officer, Chief Risk
Officer and Group Internal Audit
to pay particular attention to the
resilience of both financial and
operating controls and performance.
It is an enormous credit to the team
that, during the year, the business
was able to ensure there was no
material adverse impact to its people,
business operations, supply chains
or its cybersecurity framework.
In addition, the Committee undertook
a detailed review of a number of risk
and technology projects and initiatives
that were being deferred due to
COVID-19 to ensure that, where
required, appropriate compensating
controls were in place to manage
any residual risks.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 116
Audit and Risk Committee Report continued
Disclosures and year end reporting
During the year, the Committee
continued to focus on refining
its disclosures to enhance the
transparency of the Group’s external
reporting. As you would expect for
a relatively recently listed entity, we
have listened carefully to the views
of our shareholders as to how we
could most meaningfully present the
Group’s results for them. The most
material change has been to move IT
transformation costs out of Specially
Disclosed Items. We remain confident
that this level of core IT spend is
very unlikely to be repeated in the
foreseeable future. The impact of this
change is fully reconciled on pages
49, 50 and 52 and other less material
enhancements have been outlined
on page 120 in this report.
As you would expect in the current
pandemic, particular attention
has been given to viability testing
to ensure that the stress testing
applied to the business is sufficient,
stretching and that any management
actions deployed are achievable,
proportionate, and properly costed.
This work excluded the benefit
of cash generated from the equity
raise to support the DPO Group
acquisition. This work evidenced
that the business was robust to
even quite extreme multi-variant
downside scenarios.
External auditor
To gain maximum assurance and
out of an abundance of caution,
but in view of the understandable
market uncertainty with regard to
the Wirecard failure, the Committee
asked KPMG to increase its revenue
coverage for 2020 to 97% from
91% last year and to obtain bank
confirmations for all cash balances.
In addition, the Committee asked
Internal Audit to complete assurance
work on most of the remaining 3%
of revenues not covered by KPMG.
Network International Holdings Plc
Annual Report and Accounts 2020
As part of the ongoing regulatory
work of the Financial Reporting
Council (FRC), KPMG were subject to
an FRC quality review of their audit of
the Group’s 2019 financial statements.
This review detailed on page 126
highlighted a small number of findings
giving further reassurance to the
Committee as to the quality of the
work of the auditor. All observations
by the FRC were, in our view,
not significant and KPMG have
implemented all recommendations
into this year’s audit where applicable.
Internal Audit
In the first full year since the
appointment of our new Chief
Internal Auditor, we have seen a
significant upskilling of the function
including the recruitment of a new
Head of Technology Auditor and
our first use of data analytics to test
a full audit population rather than a
sample. Overdue audit actions remain
low, despite the challenges brought
about by COVID-19, illustrating
the high level of focus on control
throughout the organisation.
While Internal Audit’s reviews have
identified improving trends, they
also highlight areas to improve, and
so we will continue to be focused
on monitoring and improving
our control environment where
applicable. Internal Audit also
introduced an assessment of
Management’s Control Approach
(‘MCA’) in 2020 to start assessing
our risk and control culture and
embedding of the ERMF.
Enterprise Risk Management
Framework
Considerable progress was made
on embedding the Enterprise Risk
Management Framework during
2020 despite certain limitations,
including travel restrictions, created
by COVID-19, with the vast majority
of the framework components now
implemented. A regular cadence of
meetings of management and the
Committee are in place to monitor
both completion and embedding of
the framework. Regular reporting of
key risk indicators to the Committee
indicate a general trend of reducing
risk with the most obvious residual
risk being the impact of COVID-19
on the short-term financials.
Assurance
We have continued to develop our
overall assurance approach this year
with a highly integrated plan across
Group Risk and Group Internal Audit.
This plan ensures strong coverage
by both principal risks and operating
geographies which, combined
with assurance activities being
performed by third-party providers,
gives considerable assurance to
the Committee.
Given the nature of the Group’s
business we give considerable focus
to cyber risks. We engaged Protiviti, a
third-party consulting firm with deep
expertise in this area, to undertake
a review of existing cyber security
maturity in Q3 2018 and, during 2020,
we largely completed the agreed
three-year roadmap to further
strengthen our cyber security
framework. Protiviti returned in 2020
to validate the effectiveness of the
enhancements made and we believe
we have created a defence in depth
mode which is now embedded
consistently across the Group. We
recognise this is an evolving risk which
we will continue to closely monitor
to ensure we maintain and where
required improve our cyber defences.
Looking ahead
In the year ahead, we will continue to
monitor progress in these important
areas with a particular focus on the
completion of the implementation
of the Enterprise Risk Management
Framework and assessing its
effectiveness as evidence of an
effective risk culture across the Group.
Darren Pope
Chair, Audit and Risk Committee
7 March 2021
117
Compliance with the Code
Throughout the year, there was full
compliance with section 4 of the
Code, other than in respect of
provision 24 (composition of the
Committee) for the period from
1 January to 4 February 2020 when
the Chairman of the Company
was a member of the Committee.
An explanation is given in the
paragraph below.
Composition of the Committee
The Audit and Risk Committee is
comprised solely of Independent
Non-Executive Directors. The
changes in membership of the
Committee during the year reflect
the development of the Board with
the appointment of additional
Independent Non-Executive Directors.
From the IPO of the Company in
April 2019, Ron Kalifa, the Chairman
of the Board, was a member of the
Committee, given his relevant
experience and sector knowledge.
He stepped down from the
Committee on 4 February 2020 and
was replaced on the same date by
Anil Dua. Ali Mazanderani joined the
Committee on 2 June 2020 and, upon
further strengthening of the Board he
and Victoria Hull stepped down from
the Committee upon the appointment
of Diane Radley and Monique
Shivanandan on 1 January 2021.
Role of the Committee
The Board has delegated to the
Committee authority to:
› Establish and oversee the
Company’s relationship with
its external auditor, including
monitoring their independence,
with oversight and approval of
non-audit work, and approving
the terms of their engagement
and remuneration;
› Review and approve the annual
external audit plan;
› Assess the effectiveness of the
external audit process;
› Approve the Internal Audit plan,
review Internal Audit Reports
(ensuring management actions are
performed without delay), monitor
and review the effectiveness of the
Group’s Internal Audit function;
Summary of principal activities
of the Committee during the year
During the year, the Committee
reviewed the following (more detail
is given on the key matters reviewed
on pages 119 and 120:
Financial
› The integrity of the 2019 full year
results, the 2020 half year results
and in 2021, 2020 full year results
(including a review of significant
accounting judgements and
estimates set out in comprehensive
reports prepared by the Group
CFO) and the processes
underpinning their preparation,
verification and management
sign offs;
› Information in support of
statements in the 2019 (in 2021,
in the 2020 Annual Report)
Annual Report in respect of going
concern, longer-term viability,
internal control, the report being
fair balanced and understandable
and disclosure of information
to the auditor.
› The implementation of the key
actions arising from the Financial
Position & Prospects Procedures
risk assessment prepared during
the IPO process; and
› An annual review of tax compliance
across the Group and the
approval of the Group Tax Strategy
and Policy.
The Committee reviewed the
above, challenged management
as appropriate and concluded that
the appropriate financial reporting
processes are in place and controls
are operating effectively.
› Monitor the integrity of the
financial statements including a
review of the significant accounting
judgements and estimates
contained in them;
› Review the content of the Annual
Report and Accounts and assess
whether it is fair, balanced and
understandable;
› Review the Group’s risk profile, its
principal risks and uncertainties
and advise the Board in respect
of risk appetite and the potential
impacts on the Group;
› Review the Group’s internal
financial controls and the
Group’s internal control and
risk management systems;
› Oversee the Group’s compliance
function and review reports from
the Chief Risk Officer relating to
compliance matters; and
› Oversee the tax policy and strategy,
and the Group’s tax function.
Each year, the Committee reviews its
terms of reference; no substantive
changes were made during the
year. The Committee has a forward
work programme and additionally
compares its prior year activities
against its responsibilities within the
terms of reference to ensure full
compliance. To enable it to carry out
its duties effectively, the Committee
relies on information and support
from management across the
business as well as a professional
relationship with the external auditor.
The full terms of reference of the
Committee can be found on the
Group’s investor website at https://
investors.networkinternational.ae/
investors/corporate-governance/.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 118
Audit and Risk Committee Report continued
External audit
› The half year review and annual
audit plans and scope, including
the external auditor’s response
to emerging risks in the context
of Network’s business;
Risk, controls and compliance
› Continuing the implementation of
the Enterprise Risk Management
Framework, a review of risk
appetite and assessment of
risk culture;
Governance
› Separate meetings were held in the
absence of management with the
Group Internal Auditor, the external
auditor and the Chief Risk Officer
and Company Secretary;
› The half year review and full year
audit reports;
› Reports on auditor independence
– non-audit services and fees; and
› The effectiveness of the external
audit process.
The Committee has reviewed
the external audit process, its
effectiveness as well as future
plans and satisfied itself with the
performance of external auditors
and their independence.
Internal Audit
› Approval of a Group Internal
Audit charter, aligned and
compliant with the guidance
published by the Chartered
Institute of Internal Auditors;
› A comprehensive review of the
principal risks and new and
emerging risks, including COVID-19
and the emerging situation
at Wirecard in the context
of Network’s business;
› Assessment of the three lines
of defence model;
› Review and approval of the
Compliance Plan, the Group
Risk Assurance Plan and the
Coordinated Assurance Plan
for 2021;
› Regular review of risk and
compliance reports;
› Reviewed progress of the Cyber
Security road map and emerging
cyber threats; and
› Review of conduct and
› Approval of resource enhancements
whistleblowing incidents.
› Review of the Financial Reporting
Council’s Guidance on Corporate
Reporting;
› Policy reviews and approvals;
› The review of a number of key
considerations taken from publicly
available information in respect of
the broader sector and geographic
risks including market failures,
as part of an overall approach
to improving the management
of risk; and
› Reviewed the Group’s
Whistleblowing arrangements,
noting the GIA report that the
key components of an effective
whistleblowing framework
are in place (see page 101 for
more details).
The Group’s risk management
framework and compliance
monitoring activities were
appropriately developed and
materially effective in the
assessment and escalation
of material Group risks.
for Group Internal Audit;
› The Group Internal Audit plan
for 2021;
› The Group Coordinated Assurance
Plan for 2021; and
› The reports from Group Internal
Audit activity.
The Committee concluded that
the strengthening of the Group
Internal Audit function had
resulted in the planned improvement
in its effectiveness.
Network International Holdings Plc
Annual Report and Accounts 2020
119
Key audit and risk matters considered by the Committee during the year:
Key matter considered
ERMF implementation Approved by the
Board in 2019, the
focus in 2020 was
to implement and
embed the framework
across the Group.
The Group risk
management
framework and
culture remain
central to its success.
Response to COVID-19 Ensuring the Group’s
mitigating actions
were timely and
proportionate
to the new risks
that emerged and
that impacts on
stakeholders were
avoided or mitigated.
Reviewing significant
events
Review Wirecard’s
failings to ensure that
all relevant learnings
are considered by
the Board out of an
abundance of caution,
to extend KPMG
procedures to give
additional confidence
in the reported
revenue of Network
International given
sector uncertainty.
Committee review and conclusion
The Committee:
› Approved the implementation of the ERMF across the Group and reviewed
regular progress reports; and
› Welcomed the significant progress of implementing and embedding the
ERMF; examples of this have been:
– Constitution of the ERM Committee.
– Completed all functional risk assessments across the Group.
– Introduced risk and control self-assessment ‘RCSA’ across Group operations.
– Alignment of all risk related policies with the ERMF.
– Defining corporate risks which act as the bridge between the principal risks
and unit level risks.
– Applied its ERMF in making sound risk based decisions for strategic projects.
– This initiative is ongoing to ensure that an enhanced risk aware culture is
firmly embedded throughout the organisation with every employee
responsible for the management of risk. Group Internal Audit has tested the
embedding process during 2020 and will do so again in 2021.
The Committee:
› Established COVID-19 as a principal risk and agreed key risk indicators to
ensure visibility of the consequences of the pandemic and the risk mitigation
actions taken;
› Held bi-weekly meetings to monitor the Group’s response and workforce
well-being, and specifically:
Asked the Group Risk to:
› Enhance control framework to support remote working (system access);
› Provide additional assurance around vendors; and
› Enhance cyber defence monitoring in response to COVID-19.
Asked GIA to:
› Comment on the risk framework and the process for the inclusion of new and
emerging risks.
› Consider and report to the Committee on specific new risks including
management’s response to COVID-19 with a focus on: (i) The impact on
controls due to staff working from home, and (ii) Specific areas of heightened
risks such as cyber, credit and fraud.
› Reviewed the impact of COVID-19 and management’s response on each
of the principal risks – see the Principal Risks and Uncertainties section of the
Strategic Report on page 72.
The Committee:
› Received analyses of the Wirecard situation that could be ascertained
from public sources and reviewed in the context of Network’s business;
› Requested KPMG to:
– increase its revenue coverage such that in-scope coverage for the 2020
Group audit now covers 97% of the Group’s revenue, up from 91% in the
prior year;
– request independent bank confirmations for 100% of the Group’s cash
balances;
– include additional granular reporting in the external auditor’s report to the
BARC at the end of the year, including but not limited to specific details of
business processes related to merchant acquiring revenue, arrangements
with third parties, and bank confirmations as noted above.
Asked GIA to consider and report:
› With regard to Wirecard, on any enhancements needed to the internal audit
approach given the lessons learnt from Wirecard, to ensure that revenue and
revenue reconciliation and fraud controls are a priority in all applicable
internal audits;
› To bring forward the next internal audit of merchant and schemes
reconciliation and settlement to Q1 2021, and to complete a thematic review
of any revenues not included within the full scope of audits of components
performed by KPMG for the external audit.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 120
Audit and Risk Committee Report continued
Key matter considered
Key cyber security
enhancements
Ensuring the Group’s
cyber defences
are robust and
maintained in line
with international
best practices.
Proposed DPO
acquisition
COVID-19 – impact
assessment on
acquiring
Ensure loss rates
remained within
risk appetite.
Committee review and conclusion
The Committee:
› Received regular reports on the remediation status of the Cyber Security
Maturity Assessment plan.
› Was updated on global threats events and the relevance of these threats
to the Group.
› Reviewed the progress of key cyber security projects which were planned
for 2020 including:
– Implementation of Group-wide end-point detection and response (EDR)
solution across all end-points and servers to protect against malware attacks.
– Implementation of Privileged Access Management (PAM) solutions in
Egypt and Jordan locations in line with the standardisation strategy.
– Enhanced email protection, phishing triaging and anti-spoofing controls
across the Group.
– Enhancements in the DDOS protection across the Group including a
simulation exercise to test the efficiency of the controls.
The Committee:
› Asked management to develop a separate risk profile of the DPO business
to demonstrate how the DPO risk profile could impact the Group’s overall risk
profile upon completion of the proposed acquisition.
› Asked management to develop a day one operating model for the acquired
business to ensure that risk oversight for senior risk managers and the
Committee was immediately in place upon completion.
› Asked Internal Audit to complete additional independent assurance work over:
– the due diligence process used in the potential acquisition of DPO, and the
due diligence and risk management information presented to the Board.
– the Group’s subsequent risk mitigation and integration programmes in
relation to DPO.
The Committee asked the Risk function to assess (through the development
of stress scenarios) the impact the COVID-19 related restrictions could have
on the Group’s direct acquiring portfolios in UAE and Jordan, with particular
focus on delayed delivery merchants’ ability to meet the incoming chargeback
and refund liabilities in light of significantly reduced sales volumes.
› Periodically reviewed the actual chargeback loss rates against the
stress scenarios.
Enhanced disclosures
Listened to the views
of shareholders.
The Committee directed that enhanced disclosures be made in the 2020
Annual Report including:
› Expanded information on the business model in the Strategic Report
(on pages 10 to 11).
›
Improvements/clarifications to reporting of SDIs and therefore APMs
more broadly.
› Additional details of the settlement cycle working capital balances, including
numeric tables and commentary to explain the cycle itself and the specific
balance movements year on year.
Network International Holdings Plc
Annual Report and Accounts 2020
121
Significant issues considered by the Audit and Risk Committee in relation to the financial statements
The key areas of judgement considered, and key conclusions and actions taken by the Committee during the year, which
ensure that appropriate rigour has been applied to the 2020 Annual Report and Accounts, are detailed as follows:
Key issue/
area of focus
Consolidated
financial
statements
Brief description
Committee review and conclusion
Applicable accounting
standards.
Accounting, tax
and financial
reporting
Impact of
applicable new
accounting
standards and
interpretations
To review and challenge
the appropriateness
of the contents of the
Group’s Annual Report
and Accounts,
preliminary results
announcement, interim
results announcement,
and other trading
announcements and
investor presentations.
To review the impact
of new accounting
standards on the
consolidated financial
statements.
The Group consolidated financial statements for 2019 were prepared in accordance
with International Financial Reporting Standards (‘IFRS’) issued by the International
Accounting Standards Board (‘IASB’) as adopted by EU, in line with the
requirement of listing rules. In the 2020 consolidated financial statements,
management proposed changing the basis of preparation to:
These Group financial statements were prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
These Group financial statements were also prepared in accordance with
International Financial Reporting Standards (‘IFRS’) as issued by the International
Accounting Standards Board (‘IASB’).
As per the rationale provided by management, this change will allow the Group
to continue to avail the exemption available under IFRS 10 ‘Consolidated Financial
Statements’ that allows the entities to not prepare the consolidated financial
statement at the sub group level (Mauritius, UAE, Egypt level) if its ultimate or any
intermediate parent produces consolidated financial statements that are available
for public use and comply with IFRS.
The Committee reviewed management’s rationale and approved the proposed
changes in basis of preparation of the consolidated financial statements as this
did not have any impact on the amounts reported or the required disclosures.
The Committee reviewed the process for the production of the reports under the
remit of the Chief Financial Officer, and the level of involvement of cross-functional
subject matter experts, including monitoring the procedures in place to ensure that
all contributors attested to the completeness, accuracy and appropriateness of the
disclosures provided. The Committee concluded that the process followed was
adequate and in line with industry best practices.
The Committee reviewed the update presented by the Chief Financial Officer
on the amendments and interpretations applicable for the first time in 2020.
The Committee noted the updates and concluded that these changes do not
have any significant impact on the consolidated financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 122
Audit and Risk Committee Report continued
Key issue/
area of focus
Accounting policies
and practices and
estimates
Brief description
Committee review and conclusion
To review and challenge
the appropriateness of
the Group’s accounting
estimates and
judgements.
The Committee reviewed the detailed update provided by the Chief Financial
Officer on accounting estimates and judgements used in the preparation of the
consolidated financial statements and disclosures made to this effect. Other
than those separately discussed in the report, these accounting estimates and
judgements relate to the following items:
Critical Accounting Judgement
i. Specially Disclosed Items
Critical Accounting Estimates
›
Impairment of goodwill and non financial assets
Non Critical Accounting Estimates
i. Held for sale classification
› Revenue recognition
›
Impairment of loans and receivables
› Employee benefits
› Useful life of tangible and intangible assets
› Taxes
The Committee noted management’s update that these accounting estimates and
judgements used in Group’s financial statements for the year ended 31 December
2020 are similar to what was disclosed in 2019 ARA with following changes:
› Judgement related to ‘Held for sale classification’ which has been moved from
critical judgement area to non-critical as Mercury is no longer treated as
‘discontinued operations’ in 2020.
› Accounting estimates related to Employee benefits has been moved to ‘Non-
Critical’ because the changes in the relevant assumptions used in estimating
the employee benefits obligations is not expected to cause a significant risk
of material adjustments to the carrying amounts of assets and liabilities.
These accounting estimates and judgements have been applied on a consistent
basis in preparation of the 2020 consolidated financial statements and the ARA.
The Committee discussed the update provided and concluded that the accounting
estimates and judgements are appropriate and that sufficient disclosures have
been made in the consolidated financial statements for these items.
While computing the alternative performance measures (‘APM’), management
treats certain items of income or expenses that have been recognised in a given
period as Specially Disclosed Items (‘SDIs’), which management believes, due to
their materiality and being one-off/exceptional in nature, should be disclosed
separately, to give a more comparable view of the period to period underlying
financial performance.
In line with the Committee’s continued focus on refining disclosures to enhance
the transparency of the Group’s external reporting, during the year, management
proposed to make some changes in disclosures related to SDIs, whereby certain
items of expenses that were previously included in SDIs will now be considered
while measuring underlying financial performance. In management’s view these
changes are appropriate and necessary to help users of the financial statements
to better understand the Group numbers.
The Committee noted management’s proposal and after discussion and
deliberations agreed with management’s proposal and these changes have been
incorporated in the consolidated financial statements and ARA for the year ending
31 December 2020.
To review and
challenge the proposed
changes in alternative
performance measures
(‘APM’) used by
management in
measuring financial
performance and
the disclosures
provided in the
financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
123
Key issue/
area of focus
Accounting policies
and practices and
estimates continued
Brief description
Committee review and conclusion
To review
management’s proposal
on additional
disclosures to be added
in the financial
statements and ARA.
In line with Committee’s continued focus on refining disclosures to enhance the
transparency of the Group’s external reporting, during the year management
has proposed to include some additional disclosures and reconciliations in the
consolidated financial statements and ARA for the year ending 31 December 2020
to make these documents more useful to the reader. These changes broadly related
to the following items:
i. Reconciliation of reported operating cash flow to underlying free cash flow
ii. Additional disclosures on consolidated and net debt and movements in
net debt
iii. Analysis of the financing cost
iv. Additional disclosures related to working capital
v. Reconciliation between capital expenditure numbers appearing in the statement
of cash flows, tangible / intangible assets schedule and total capital expenditure
appearing in the APM note
The Committee noted management’s proposal and, after discussion and
deliberations agreed with management’s proposal and these changes have been
incorporated in the consolidated financial statements and ARA for the year ending
31 December 2020.
To review and
challenge the
alternative performance
measures (‘APM’) used
by management in
measuring financial
performance related
to underlying free
cash flow.
Management has historically used underlying free cash flow (underlying FCF) as an
alternative performance measure (‘APM’) to measure the net cash flow conversion
capability of the Group. In the 2019 ARA, the underlying free cash flow has been
computed without deducting SDIs impacting EBITDA, and adjustment for share
of EBITDA and dividend received from associate Transguard Cash.
In line with common practice across the industry, management proposed to the
Committee to deduct the above mentioned two items from underlying EBITDA to
arrive at underlying FCF as management believes that the revised computation of
the underlying FCF figure would give a more appropriate presentation of cash flow
conversion capability of the Group.
To review and
challenge the
impairment analysis
on intangible assets
carried out by
management.
To review and
challenge the financial
performance of Mercury
to be shown as part of
continuing operations
in the consolidated
financial statements for
2020 and the adequacy
of disclosures made in
notes 6 and 16 of the
financial statements.
Based on the above, the Committee agreed with management’s proposal and
concluded that it is appropriate to change the definition of underlying cash flow
to be reported in the financial statements for the year ending 31 December 2020.
As part of the yearly reporting and closing exercise, management has conducted
and presented to the Committee a detailed assessment on potential impairment
of the business transformation platform and goodwill carried in the books as at
31 December 2020. Goodwill impairment assessment was carried out based on
discounted cash flow methodology to estimate the value in use.
The Committee reviewed and challenged management’s assessment and
concluded that there is no indication of any impairment in the carrying value
of these assets; and goodwill is not required to be impaired.
Mercury operates the ‘Mercury’ payment scheme in UAE which is a domestic
payment card network.
In 2018 the Group’s Board made a strategic decision to divest the scheme operation
of the Group and accordingly classified Mercury as ‘held for sale’ in the 2018 and 2019
consolidated financial statements under applicable IFRS, as adopted by the EU.
Management remains committed to the disposal of the Mercury business and is
exploring various opportunities. However the disposal process has been delayed
due to the niche nature of the asset and disruption as a result of the COVID-19
pandemic. During the year, management conducted an assessment to confirm
whether Mercury still qualifies for the extension for the classification as ‘held for
sale’ for the consolidated financial statements for 2020. Management
recommended that as the criteria for recognising Mercury as held for sale are no
longer satisfied, the financial performance of Mercury for 2020 will be included
as part of continuing operations. Appropriate disclosures have been made in the
financial statements in note 16.
The Committee reviewed management’s assessment and agreed with the change
to include Mercury financial performance as part of continuing operations in the
consolidated financial statements for the year ending 31 December 2020.
The Committee also reviewed the disclosures made in this regards in notes 6 and 16
of the financial statements and was satisfied that the disclosures are appropriate.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
124
Audit and Risk Committee Report continued
Key issue/
area of focus
Accounting policies
and practices and
estimates continued
Brief description
Going concern
assessment.
Committee review and conclusion
Due to the COVID-19 pandemic, management has carried out a detailed exercise
during the interim financial reporting (30 June 2020) as well as for the year ended
31 December 2020. This included a detailed review of the forecast from 2020 to 2022
to cover a period of at least 18 months from the end of the respective accounting
periods. The detailed assessment was done under base case assumptions, and
further stress tested under severe but plausible downside scenarios. These forecasts
also included a projection of the leverage ratio for each of the periods to check any
potential breaches of financial covenants under the financing agreements.
The Committee reviewed the going concern assessment carried out by
management and challenged management on assumptions, stress scenarios
considered and various mitigants incorporated in downside scenarios.
After discussion and deliberations, the Committee approved that the consolidated
financial statements for the year ending 31 December 2020 should be prepared on
a going concern basis.
Review of viability
assessment including
the scenarios and
sensitivities considered
by management.
As per provision 31 of the 2018 UK Corporate Governance Code,
the Directors are required to satisfy themselves that they have a reasonable
expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the longer period (longer than 12 months),
i.e. the business is viable.
The Committee reviewed the viability assessment carried out by management.
Due to the impact of the COVID-19 pandemic the Committee challenged
management on the assumptions, stress scenarios considered and various
mitigants incorporated in downside scenarios. The Committee asked management
to consider additional sensitivities which are very severe and in many cases closer
to reverse stress tests designed to break the business.
After discussions and deliberations the Committee concluded that:
i. Various possible mitigants which have been considered by management,
wherever required in various sensitivities as modelled, to offset the impact
of adverse assumptions, are achievable in the time period modelled and the
cost to achieve is reasonable.
ii. The mitigants do not fundamentally impact on the operational integrity
of the business or its ability to grow again in the future.
iii. The Group is viable and will be able to continue in operation and meet its
liabilities as they fall due over the three-year period ending 31 December 2023.
Please refer to further details in the viability statement section on page 155
of the ARA.
The Chief Financial Officer provided an update on management’s review of the
recent documents published by the FRC related to key topics on reporting and
disclosures in the ARA of listed companies, the impact on the Group financial
statements and proposed actions.
The Committee reviewed the update and concluded that appropriate actions have
been taken by management to make the required changes by incorporating the
Committee’s feedback and mapping the reporting and disclosures in the ARA to
FRC recommendations.
FRC publications
related to thematic
reviews of reporting
and disclosures in the
Annual Report and
Accounts (‘ARA’).
Network International Holdings Plc
Annual Report and Accounts 2020
Group Internal Audit
The Committee oversees the activity
of the GIA. GIA is responsible,
amongst other things, for evaluating
the effectiveness of the Group’s risk
management, control and governance
processes. As mentioned on page 116,
the Audit and Risk Committee and
management supported the newly
appointed Chief Internal Auditor to
re-resource and enhance the skills
of the GIA function. As expected,
this strengthened the quality and
coverage of the third line of defence
assurance work provided to the
Group. A risk-based internal audit plan
is prepared by GIA on an annual basis.
The internal audit plan, which is
reviewed and approved by the Audit
and Risk Committee, considers key
risks and emerging strategic risks
maintained in the risk registers. In
addition, as part of the annual planning
cycle, GIA consults with senior
management across the business,
considers the results of previous
audits (internal and external) and
monitors the implementation status
of audit recommendations. This
activity ensures that GIA focuses
on the most significant risk areas
and related key controls.
In approving this plan, the Committee
concluded that the Internal Audit
function was sufficiently resourced
and skilled to deliver the plan and
the overall scope of the plan was
appropriate given the key and
emerging risks.
Regular updates were received
throughout the year from the Chief
Internal Auditor. These included inputs
on the overall control framework
which showed an improving risk trend
and high levels of management risk
awareness meant the overdue high
and medium risk audit actions
remained low.
GIA additionally reviewed key
strategic programmes and its
work is covered on page 127.
With the endorsement of the
Committee, the Chief Internal Auditor
developed a GIA Transformation
Plan, part of which involved enhancing
the already strong core business
operations skill set of the team with
additional recruitment, thereby
eliminating reliance on external
resource. GIA works closely with the
other assurance providers across the
three lines of defence (e.g. Group Risk)
to enhance coverage and minimise
duplication. The Coordinated
Assurance Plan for 2021 (approved by
the Committee and referred to above)
is designed to optimise assurance
coverage for each of the principal risks
by coordinating external (third party)
risk assurance, Group risk assurance
(second line of defence) and GIA
coverage (third line of defence).
The Chief Internal Auditor reports
to the Audit and Risk Committee
Chairman, and it is the role of the
Audit and Risk Committee (as stated
in its terms of reference) to assess
the effectiveness of the Chief Internal
Auditor and the GIA function. A
formal internal self-assessment of GIA
against the Chartered Institute of
Internal Auditors (‘IIA’) standards and
general industry best practice was
conducted during the first half of
2020. The Committee reviewed a
comprehensive report of the findings
of the assessment and concluded
that significant progress had been
achieved against the GIA
Transformation Plan in the six months
since the appointment of the new
Chief Internal Auditor; and GIA was, in
the main, conforming to IIA standards
and aligning to best practice.
Further progress against the GIA
Transformation Plan and issues
identified through the self-assessment
was achieved during the second half
of the year to achieve a high level of
conformance with IIA standards and a
move towards full alignment, in 2021,
to industry best practice. GIA will
conduct a further self-assessment
during 2021, the results of which will
be presented to and reviewed by the
Committee. The Chief Internal Auditor
attends all meetings of the Audit and
Risk Committee and meets separately
with that Committee in the absence
of management at least twice a year.
The Chief Internal Auditor also has a
secondary reporting line to the Chief
Executive Officer and has a standing
invite to, and attends, the Group’s
Leadership Team meetings.
125
Group Risk and Group Compliance
During the year, the Committee
continued to monitor the
implementation of the key actions
identified during the Financial
Position and Prospects Procedures
risk assessment prepared by PwC
during the IPO process and all issues
have been remediated. A key
component of that work was the
further development last year of the
enterprise level principal risks, risk
appetite statements and Board level
KRIs which are underpinned by
existing policies, procedures and
controls applicable to front line
business activity. These have
supported the work of Group Risk
and the Committee during the year.
This work is summarised on page 65.
The Committee has also focused
on the Compliance programme,
monitoring progress against the
2020 compliance plan and assurance
plan. The Committee received
reports on the outcomes of
assurance reviews conducted which
were focused on testing the
effectiveness of AML/KYC and
sanctions compliance and monitoring
key regulatory changes impacting
the Group’s markets of operation.
The Group also enhanced its existing
whistleblower reporting process by
appointing an external confidential
whistleblowing service to enable
employees to raise their concerns
through an independent route.
A comprehensive whistleblower
awareness campaign was also
launched to ensure all employees
were informed of the process to
raise concerns directly with Group
HR and Group Risk Officer.
The Committee regularly receives
reports on whistleblowing policy
and processes and monitors all
reported and substantiated cases.
The Committee also received
assurance from GIA in 2020 that
the whistleblower programme
is adequately designed and
operating effectively.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 126
Audit and Risk Committee Report continued
The Chief Risk Officer is also the
Group Company Secretary and
reports to the Chief Executive Officer
as well as having a clear reporting
line into both the Chairman of the
Board and the Chairman of the
Committee. The Chief Risk Officer
and Group Company Secretary
attends all meetings of the Audit
and Risk Committee and meets
separately with that Committee
in the absence of management
at least twice a year.
Additional risk monitoring
The Committee considered a
number of new and emerging risks
in the period. This included the
impacts of COVID-19 on business
performance, business risks and
people, and other sector and
geographic risks. Additionally, the
Committee reviewed the robustness
of systems and processes in place
that ensured the Group was not
exposed to similar risks.
As a result, certain additional
activities were undertaken with
respect to the Group’s business
model and practices to satisfy the
Committee with regard to new and
emerging risks and the Group’s
responses and mitigations, and these
are summarised on pages 119 to 120.
External auditor
During the year the Committee
undertook a review of the external
auditor’s effectiveness which
concluded very strong support for
the quality and responsiveness of
the audit work received. A request
for minor improvements in the
audit lead in one geography were
implemented quickly.
KPMG’s 2019 audit was also subject
to an FRC Audit Quality Review
(‘AQR’). In January 2021, following its
review of KPMG’s audit of the 2019
Annual Report, the FRC’s Audit
Quality Review (‘AQR’) team wrote
to the Audit and Risk Committee
Chairman. The Committee
considered the overall outcome of
the review to be positive, with a small
number of findings identified. The
findings were presented to the Audit
and Risk Committee at its February
2021 meeting. The Chairman of the
Audit and Risk Committee also met
Network International Holdings Plc
Annual Report and Accounts 2020
with the FRC independently to discuss
the report and was encouraged by the
feedback received. All actions that are
relevant have been implemented
already with regard to the 2020 audit.
Non-audit services
A policy is in place which requires
all non-audit work proposed to be
carried out by the external auditor
to be pre-authorised by the
Chief Financial Officer and/or the
Committee (depending on the
amount involved) to ensure that the
provision of non-audit services does
not impair the external auditor’s
independence or objectivity. This
policy is compliant with the revised
FRC Ethical Standard 2019 and the
auditor can only be engaged to
provide specific non-audit services
as described within this new
standard. The adoption of the
Revised FRC Ethical Standard 2019
did not have a significant impact
on the Group, as the Group already
applied KPMG’s FTSE 350 non-audit
services policy which incorporated
similar restrictions in addition to
those provided by the previous FRC
Ethical Standard 2016.
The total fees payable to Group’s
auditor in respect of 2020 amounted
to USD 990,000, out of which the
fee for non-audit services, which was
wholly in respect of the half year
review, is USD 159,000. KPMG did
not provide any other services to the
Group in 2020. Comparative figures for
the prior year are included in note 21 to
the financial statements on page 202.
Independence
Both the Board and the external
auditors, KPMG, have safeguards
in place to protect the objectivity of
the external auditors. KPMG have
confirmed their independence as
auditor of the Company in a letter
addressed to the Directors.
Risk appetite and approach
to risk management
The Board’s risk appetite, the Group’s
approach to risk management within
its risk framework and new, emerging
and principal risks were robustly
reviewed in 2020 and are more
fully described in the Principal Risks
and Uncertainties section on pages
72 to 87.
Risk management and internal
control systems
The Group operates the ‘three
lines of defence’ model which
clearly identifies accountabilities
and responsibilities as follows:
› Business line management has
primary responsibility for the
management of risk;
› Risk and Compliance functions
assist management in developing
their approach to fulfil their
responsibilities; and
› The Internal Audit function checks
that the risk management process
and risk management framework
are effective and efficient.
For more details, please refer to the
Risk section on pages 75 and 76.
Board statements and
confirmations following review
and recommendation from the
Audit and Risk Committee
Internal control and risk
management in relation to the
financial reporting process
The Group has a thorough assurance
process in place in respect of
the preparation, verification and
approval of financial reports.
This process includes:
› the involvement of highly
experienced and professional
employees, supported by
professional advisors where
appropriate;
› formal sign-offs from the GCEO,
the outgoing GCEO, Group CFO
and Chief Risk Officer;
› comprehensive review by key
internal Group functions;
› a transparent process to ensure
full disclosure of information to
the external auditor;
› engagement of a professional
and experienced firm of
external auditors;
› review and challenge by executive
management; and
› oversight by the Audit and Risk
Committee, involving (among
other duties):
– A detailed review of key
financial reporting judgements
which have been discussed by
management, including the level
and clarity of the disclosures
around alternative performance
measures (‘APMs’), Specially
Disclosed Items (‘SDIs’) and
segment reporting;
– Review and, where appropriate,
challenge on matters including:
› The consistency of, and any changes
to, significant accounting policies
and practices during the year;
› Significant adjustments resulting
from the external audit;
› Unadjusted differences;
› The going concern assumption;
› The viability statement;
› The Company’s statement on risk
management and internal control
systems; and
› GIA review of the Annual Report
and Accounts verification process
and control.
Review of the effectiveness of
the risk management and internal
control systems
Detailed information in respect
of the risk management systems
is included in the Risk report on
page 75.
During the year, the Board,
through the work of the Committee,
has conducted a review of the
effectiveness of the Group’s system
of risk management and internal
control in line with the FRC Guidance
on Risk Management, Internal Control
and Related Financial and Business
Reporting. There is an ongoing
process for the identification and
evaluation of risk management and
internal control processes.
127
After careful review and consideration
of all relevant information, including
the KPMG review and principal risks,
the Directors were satisfied that, taken
as a whole, the 2020 Annual Report
and Accounts is fair, balanced and
understandable and have affirmed
that view to the Board.
Going concern
The Board’s statement in respect
of adopting the going concern
basis of accounting is given on
page 158 and in note 2 (d) to the
financial statements on page 175.
The Committee reviewed and
challenged the going concern
assessment undertaken by
management, including assessments
of the Group’s liquidity and funding
position, and confirmed to the Board
that it is appropriate for the Group’s
financial statements to be prepared
on a going concern basis.
Viability
The Board’s statement in respect
of the Group’s longer-term viability
is given on page 155.
The Committee reviewed and
challenged the viability assessment
(including the three-year time horizon
selected) undertaken by management
in the 2020 Annual Report and
Accounts. The Committee
considered the process to support
the viability statement in conjunction
with an assessment of principal risks,
strategy and business model
disclosures, taking into account
the assessment carried out by
management of stress testing results
and risk appetite. The Committee
recommended the Viability
Statement (as set out on pages 155
to 157) to the Board for approval.
Group Internal Audit, Risk and Finance
have independently assessed the
overall risk and control framework
to be materially effective for the
existing business, which has matured
significantly during 2020 with
continued planned improvements
during 2021. The work conducted
by management is complemented,
supported and challenged by the
controls assurance work carried out
by the Group Internal Audit function.
Regular reports on control issues are
presented to the Audit and Risk
Committee by the Chief Internal
Auditor. The Board, in reviewing the
effectiveness of the system of risk
management and internal control, can
confirm that necessary actions have
been or are being taken to remedy
any significant failings or weaknesses
identified from that review.
Fair, balanced and understandable
The Directors confirm that they
consider the Annual Report
and Accounts, taken as a whole:
› is fair, balanced and
understandable; and
› provides the information
necessary for shareholders to
assess the Company’s position
and performance, business
model and strategy.
In making this confirmation, the
Directors took into account their
knowledge of the business, which
is kept up to date with regular
reports, updates and business
reviews circulated prior to and
discussed at each Board meeting,
and supplemented by a variety of
written reports, verbal updates and
presentations given at Board and
Committee meetings as well as a
regular flow of information about
the business between meetings.
The Directors then took into account
the thorough preparation and
verification process conducted by
management in respect of the
Annual Report and Accounts, as
described above, and:
i.
a formal audit by KPMG,
external auditors;
a formal review by the Audit
and Risk Committee; and
iii. a final review by the Board
ii.
of Directors.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 128
Nomination Committee Report
Ron Kalifa OBE
Committee
Chairman
Meetings also regularly attended by:
› Jay Razzaq, Chief Risk Officer and
Group Company Secretary
Read Directors’ biographies
on pages 94 to 96
Other members
Victoria Hull
Darren Pope
Habib Al Mulla
Number of meetings
held in the period
3
Attendance
Ron Kalifa (Chair)
Victoria Hull
Darren Pope
Habib Al Mulla
3/3
3/3
3/3
3/3
We have created a
stronger, balanced, and
diverse Board to support
our strategic objectives
and take the Company
through its next phase
of growth.”
Ron Kalifa OBE
Committee Chairman
Dear Shareholder
In 2020, we created a stronger,
balanced, and diverse Board, with
the appointment of four additional
Independent Non-Executive
Directors and our long serving CFO
as an Executive Director. We were
delighted at the start of this year
to announce the appointment of
Nandan Mer as Group CEO from
1 February 2021. Nandan’s
appointment follows Simon Haslam’s
decision to retire from the Company
after 40 years in the financial services
industry. Our new colleagues have a
breadth of skills, experience and
knowledge to support our strategic
objectives and take the Company
through its next phase of growth.
Anil Dua and Ali Mazanderani
were appointed to the Board on
22 January 2020 and Diane Radley
and Monique Shivanandan joined
us on 1 January 2021. We are also
pleased that Rohit Malhotra, our
highly experienced Group Chief
Financial Officer since 2015, joined
the Board on 2 June 2020. Each
of our newly appointed Directors
undertake a thorough induction
programme, which is described
within the Governance Report
on page 108.
Although Simon stepped down
from the Board on 31 January 2021,
he remains with the Company
throughout his six-month notice
period to ensure a smooth transition.
I am satisfied with the thorough
Board appointments process
described below and very pleased
that we have been able to attract
both Executive and Non-Executive
Directors of the highest calibre in
line with our exacting requirements.
It is also satisfying that these
appointments bring diversity to the
Board across a range of measures,
including gender and ethnicity,
in line with investor expectations.
In the latter part of the year,
the Committee reviewed the
implementation of the Company’s
policy on equality, diversity and
inclusion that lies within the Group’s
Employee Charter launched in 2019.
We were pleased with the clear
linkage with the Company’s strategy
and values and the significant
progress made against the objectives
despite the extraordinary challenges
our people faced during the year.
Network International Holdings Plc
Annual Report and Accounts 2020
The safety and well-being of our
employees is always a priority.
Since the outbreak of the COVID-19
situation in the early part of 2020,
most of our people have worked
from home and management’s
priority has been to support
employees through these challenging
times. Whilst management’s
initiatives have been successful and
well received by employees, as
evidenced by the eight percentage
point improvement in overall
employee engagement, remote
working has set back the Board’s
engagement with the talent pipeline
as such engagement has been
restricted to those who present to,
or attend, Board and Committee
meetings. This will be a priority in the
current year when the Committee
will also focus on Executive
Management succession planning
and diversity within the Network
Leadership Team.
Ron Kalifa OBE
Chairman and Chair of
the Nomination Committee
7 March 2021
129
Composition of the Committee
Ron Kalifa (Board Chairman and
Chairman of the Committee) and
Independent Non-Executive
Directors Victoria Hull, Darren Pope
and Habib Al Mulla were members of
the Committee throughout the year.
Role of the Committee
The Board has delegated to the
Committee authority to:
› Review the size and structure of
the Board, to consider succession
planning for Directors and the
Executive Management Team
and to lead the process for the
appointment of new Directors;
› Ensure there is clarity in respect of
the role description and capabilities
required for such appointments;
Principal activities of the
Committee during the period
In the period from 1 January 2020
to the date of this report, the
Committee carried out the following:
› Conducted a review of the skills,
experience and knowledge of the
Non-Executive Directors and
mapped them against the strategy
of the Group;
› Conducted a thorough process
(described below) to identify and
appoint additional Independent
Non-Executive Directors;
› Conducted a thorough CEO
selection process;
› recommended the appointment of
our long-serving CFO to the Board;
› Considered the independence,
effectiveness and time
commitment of the Directors
before reviewing the proposed
election or re-election of the
Directors at the 2020 and
2021 AGMs;
› Upon the strengthening of the
Board by the appointment of
additional Independent Non-
Executive Directors, conducted a
review of, and made changes to,
the memberships of the Board’s
Committees; and
› Reviewed the implementation of
the Company’s policy on equality,
diversity and inclusion that lies
within the Group’s Employee
Charter launched in 2019, noting
the clear linkage with the
Company’s strategy and values
and the significant progress made
against the objectives (as reported
within the Responsible Business
section of the Strategic Report
on pages 60 to 61.
› Conduct a review of the skills,
experience, knowledge and
diversity of the Directors and lead
on the annual evaluation of the
effectiveness of the Board, its
Committees and individual
Directors (the evaluation of the
Chairman to be led by the Senior
Independent Director);
› In the light of the above, consider
the re-election of each Director
in advance of each AGM;
› Review the membership and
Chairmanships of each of the
Board’s Committees;
› Approve and actively monitor the
Company-wide policy on diversity
and inclusion, including gender,
ethnicity, social background,
cognitive and personal strengths,
sector experience and professional
background, and review against
the strategic priorities and the main
trends and factors affecting the
long-term success of the Company;
› Review and monitor the pipeline
of talent below Board level;
› Review as and when required
the Directors’ potential conflicts
of interest; and
› Make recommendations to the
Board on all the above matters
as appropriate.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 130
Nomination Committee Report continued
The leadership and oversight of the
first annual Board evaluation, which
was conducted in second half of the
year, was conducted by the Board
and the process, outcomes and
action plans are disclosed on page
104 of the Governance Report.
In 2021, the Committee will also:
› Review succession planning and
the pipeline of talent for the
Executive Management Team,
taking account of the challenges
and opportunities facing the
Company, the gender balance of
the senior population* and future
leadership requirements;
› Review a programme of ongoing
engagement meetings between
the Chairman, Independent NEDs
and high potential talent across
the Group; and
› Review the Committee’s activities
measured against its terms of
reference.
Board appointments process
As described within the section on
Board and Committee membership
and diversity on page 106, ENBD
and WP/GA each reduced their
share interest below the level that
entitled them to nominate for
appointment Non-Executive
Directors to the Board. Upon the
reduction in shareholdings the
Company had the right under the
respective Relationship Agreements
to procure the resignation of such
appointed Directors from the Board.
However, the Company decided not
to exercise such right immediately
on the grounds that until the
appointment of additional
independent Directors, the skills,
knowledge and experience of
Shayne Nelson, Aaron Goldman
Daniel Zilberman and Suryanarayan
Subramanian and the contribution
that each makes to the deliberations
of the Board and the Company’s
long-term sustainable success
would continue to be of benefit
to the Company.
The Committee conducted a
thorough process to identify and
appoint additional Independent
Non-Executive Directors. As part
of that process the Committee:
› Reviewed the Code requirements,
investor expectations and the
Board’s objectives in relation
to Board composition, including
independence and diversity;
› Reviewed the skills, experience
and knowledge of the continuing
individual Directors and the Board
collectively and conducted a gap
analysis by mapping the results
against the strategic priorities and
main trends affecting the long-
term success of the Company;
› Reviewed and agreed the
experiential requirements of
additional Directors and considered
and agreed the attributes that
would be desirable to ensure best
fit with the culture of the Board and
the organisation; and
› Considered the timing of Board
composition changes to balance
Code compliance, investor
expectations and the reduction
in holdings of major shareholders
with ongoing support and
continuity provided by the
experienced outgoing Directors.
Having conducted the above review,
the Committee considered the
approach to be taken to identify
a range of high calibre candidates
for the role of Independent Non-
Executive Director and agreed to
appoint the international search
and selection firm Egon Zehnder
to support it in its search. The
Committee provided Egon Zehnder
with a comprehensive brief based on
the above review process and that
included a detailed assessment of
the skills and experience required,
under the headings: Board/Non-
Executive Director experience,
sector, business environment and
personal traits. These skills and
experience requirements were also
ranked by the Committee as one
of essential, preferred or acceptable
so as to allow the calibration of each
candidate against the preferred
requirements. Egon Zehnder
conducted a comprehensive search
and produced a diverse shortlist of
12 candidates. The final selection
process involved interviews with the
Chairman and separately the other
members of the Committee.
As a result of this process Anil Dua
and Ali Mazanderani were appointed
to the Board on 22 January 2020
and Shayne Nelson, Aaron Goldman
and Daniel Zilberman continued to
serve on the Board until the AGM
held on 30 April 2020. The Board
also agreed that Suryanarayan
Subramanian (who was no longer
employed by, nor represented,
ENBD) would remain as a Board
member, in order to provide support
and continuity, given his long-
standing experience with the
business and market.
The Committee agreed that the
process followed was thorough and
rigorous, and that the calibre of
candidates identified by Egon
Zehnder and placed on the shortlist
was very high. Anil Dua and Ali
Mazanderani were selected and
recommended for appointment to
the Board because they met in full
the Committee’s requirements
with their significant expertise in
the Company’s sector and markets,
which will support the Group’s
strategy. In particular, Ali has an
extensive background in the global
payments industry and Anil’s financial
services experience has been focused
on the African continent.
In the second half of 2020, the
Committee followed the same
thorough and rigorous Board
appointments process as described
above, with the objective of
enhancing the Board’s skill set
through the appointment of
individuals with extensive experience
in technology, Africa and also in
the product area to support the
* The Company’s approach to diversity and inclusion, and statistics in respect of our gender diversity, are disclosed in the People section on pages 60 and 61.
Network International Holdings Plc
Annual Report and Accounts 2020
Company’s strategic objectives
and take it through its next phase
of growth. The objective also sought
to address the lack of gender
diversity in the Board’s then
composition. Upon being briefed
by the Committee, Egon Zehnder
conducted a comprehensive search
and identified a number of high
calibre candidates for further
consideration and interview. Diane
Radley and Monique Shivanandan,
who were appointed to the Board
with effect from 1 January 2021, were
selected for appointment because
they met in full the Committee’s
requirements. Their appointments
further strengthen the Board’s
independence and deepen its
requisite experience with Diane
having extensive finance, audit
and risk experience having served
on boards in executive and non-
executive director capacities at
major South African businesses;
and Monique being a recognised
technology leader with over 30
years of experience working for
large global companies within the
telecommunications, banking and
insurance sectors. Monique also
has non-executive director board
experience.
Also, in the second half of the year,
Simon Haslam indicated he would
like to retire after a long and
successful career of over 40 years.
To assist with the search for a
successor, the Committee fully
briefed and engaged Egon Zehnder
to identify suitable candidates with
a strong track record of growing
businesses, with a breadth of
experience in financial services,
preferably payments, and experience
of international markets, especially
the Middle East and Africa. A number
of prospects were introduced by the
Chairman and other members of the
Board, leading to the decision by
the Committee to recommend the
appointment of Nandan Mer with
effect from 1 February 2021.
Egon Zehnder also facilitated the
Board and Committee evaluation
in 2020, which gave them a unique
insight into the culture and workings
of the Board that would assist
them in their search for appropriate
candidates for appointment. Egon
Zehnder do not have any other
connection with the Company
or individual Directors.
Board Appointments Policy
Appointments to the Board are
made on merit against objective
criteria, including consideration of
the strategic priorities and main
trends affecting the long-term
success of the Company, and with
due regard for the benefits of
diversity on the Board. This process
is led by the Committee, which
evaluates the skills, experience
and knowledge of the Directors
and identifies the requirements of
additional Directors before making
recommendations to the Board.
The Board Appointments Policy
recognises the benefits of diversity
including gender diversity and
reinforces the Board’s principle
that appointments are made on
merit, in line with current and future
requirements and reflect the UK
listing, its UAE base and international
activity of the Group. Appointments
to date have been in line with
that policy.
The Board endorses the aims of the
Hampton-Alexander Review entitled
‘FTSE Women Leaders – Improving
gender balance in FTSE Leadership’
and aims to improve the gender
diversity of the Board over time.
A copy of the Company’s Board
Appointments Policy can be found
on the Group’s investor website at
https://investors.networkinternational.
ae/investors/corporate-governance/
131
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 132
Directors’ Remuneration Report
Victoria Hull
Committee Chair
Other members
Habib Al Mulla, Ron Kalifa, Darren
Pope, Ali Mazanderani
Report structure
This report consists of two sections:
Number of meetings
held in the period
8
Attendance1
Victoria Hull (Chair)
Habib Al Mulla2
Ron Kalifa
Darren Pope2
Ali Mazanderani3
Section 1: Remuneration Overview
pages 136 to 139
Chair Statement, summary
of Directors’ Remuneration
Policy including intended
implementation in 2021 and
remuneration in context.
Section 2: Annual Report on
Remuneration pages 140 to 148
Remuneration received by the
Executive and Non-Executive
Directors in the financial year
ending 31 December 2020.
8/8
5/5
8/8
5/5
7/8
1
The FY20 meetings listed for each Remuneration Committee member reflect the number of meetings
they were eligible to attend as members of the Remuneration Committee during the year. As and
when required, Suryanarayan Subramanian has been asked to attend by invitation to provide advice
and expertise.
2 Darren Pope and Habib Al Mulla left the Remuneration Committee on 2 June 2020 and attended all
meetings to which they were invited.
3 Ali Mazanderani was unable to attend one of the meetings held during the period since joining the
Remuneration Committee on 22 January 2020.
Without doubt, 2020 has
been a very challenging
year for the Company
and our shareholders.
As a Committee, we
have sought to take into
account the performance
of the business and to
reflect this in our
remuneration outcomes.”
Victoria Hull
Chair of the Remuneration
Committee
Dear Shareholder
I am pleased to present to you
the Directors’ Remuneration
Report (‘DRR’) for the year ended
31 December 2020. This DRR
is presented in two sections:
1) Remuneration Overview; and
2) Annual Report on Remuneration.
Firstly, I would like to thank all
our shareholders for your support
during this period of uncertainty
as the global pandemic impacted
so many of our markets and
presented unforeseen challenges
for our business.
Without doubt, 2020 has been a very
challenging year for the Company and
our shareholders. As a Committee,
we have sought to take into account
the performance of the business and
to reflect this in our remuneration
outcomes. The Executive Management
Team has moved quickly to respond
appropriately, taking into account
the impact and views of all our
key stakeholders.
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements
for APM definitions and the reconciliations of reported figures to APMs.
Network International Holdings Plc
Annual Report and Accounts 2020
Whilst the COVID-19 pandemic has
had a significant short-term financial
impact on our business, we exited
the year with positive momentum
across all of our business lines. Our
revenues declined by 15.1% during
the year and underlying net income1
declined by 60.7%. Whilst Q4 2020
total revenue was down 19% on the
previous year, absolute revenues in
Q4 were higher than Q3, reflecting
the continuing recovery in card
and digital transactions across
our markets, and particularly
encouraging trading in December.
Despite the current circumstances
and after carefully balancing our
operational expenses and capital
spending, we closed the year with a
strong balance sheet, with leverage
of 2.3x net debt: underlying EBITDA1,
and significant headroom to our
covenants of 3.5x.
Response to the pandemic
Earlier this year, acknowledging the
impact the pandemic has had on
the economy and our shareholders,
the Group CEO, Simon Haslam,
voluntarily waived his salary increase
due from 1 April 2020, his 2020
annual bonus and 2020 LTIP award.
From 1 May 2020, the Chairman and
the Non-Executive Directors agreed
to a voluntary 25% reduction of their
fees for the remainder of the year.
The CFO was appointed as an
Executive Director on 2 June 2020
and upon his appointment he also
waived his 2020 annual bonus.
There will be no further increase
in fees for the Chairman and CEO
in 2021.
CEO retirement and recruitment
After 40 years in the financial sector,
Simon Haslam decided to retire as
Group CEO. Following a rigorous
search and selection process
supported by external advisors, we
are pleased to announce that Nandan
Mer, formerly Mastercard Strategy
Head – International Markets,
succeeded Simon as Group CEO
effective 1 February 2021.
Simon stepped down as Group CEO
and from the Board of Directors on
31 January 2021 but will remain with
the Company throughout his six-month
notice period to ensure a smooth
transition. Simon will continue to receive
his fixed salary and benefits during his
notice period. He will receive retirement
provisions in the form of an end of
service gratuity as per UAE practice.
Simon’s in-flight LTIP awards will be
pro-rated and vest on their original
vesting date, and continue to be subject
to the achievement of performance
conditions, as well as malus and
clawback provisions. As a good leaver,
shares Simon acquired as part of the
conversion of pre-IPO incentives from
cash to shares will continue to vest on
the normal date. Simon will be eligible
to receive a pro-rated annual bonus for
the time worked during 2021, subject
to achievement of the relevant
performance conditions. Any bonus
awarded will be payable on the normal
date in 2022, and will be subject to
malus and clawback provisions. Any
payments made will be disclosed in full
in the Annual Report relating to the
financial year. Simon will not be eligible
to receive an award under the LTIP
during 2021. Simon will also be entitled
to a relocation payment of one month’s
salary to support his departure from
the UAE. No ex gratia payments will
be provided.
Nandan Mer’s remuneration will be in
line with the current Remuneration
Policy, and his salary will be similarly
aligned to Simon Haslam’s, at
$550,000 per annum. He will not
receive any additional sign-on or
buyout awards, but will be granted an
LTIP award equal to 300% salary in
his first year of employment to help
ensure that he is rewarded for driving
value from the current share price
over a three-year period, and increase
shareholder alignment.
CFO appointed to the Board
On 2 June 2020, Rohit Malhotra was
appointed to the Board in his existing
role as Group CFO. Rohit has been an
integral member of the Company for
more than 10 years and has held the
Group CFO role since June 2015. He
is an excellent addition to our Board
and will provide valuable insights
on steering through the challenges
posed by the ongoing pandemic
while seizing fresh opportunities as
businesses adapt.
NED appointments
Ali Haeri Mazanderani and Anil Dua
were appointed to the Board as
Independent Non-Executive Directors,
effective 22 January 2020. Ali Haeri
Mazanderani joined the Audit
and Risk Committee and the
Remuneration Committee, and
Anil Dua joined the Audit and
Risk Committee.
Diane Radley and Monique
Shivanandan were appointed to
the Board as Independent Non-
Executive Directors, effective
1 January 2021. Diane Radley joins
the Audit and Risk Committee and
the Remuneration Committee,
and Monique Shivanandan joins
the Audit and Risk Committee.
As mentioned in last year’s Annual
Report, Shayne Nelson, Daniel
Zilberman and Aaron Goldman
stepped down from the Board at the
AGM on 30 April 2020 as planned.
133
FY20 Directors’ pay arrangements
Fixed pay and Board fees
As noted above, the CEO voluntarily
waived his salary increase for FY20.
His salary was therefore unchanged
at $547,000. The CFO’s salary on
his appointment to the Board was
set at $457,000. As mentioned
previously, the Chairman and the
Non-Executive Directors agreed
to a voluntary 25% reduction of their
fees for the remainder of the year
from 1 May 2020.
Annual Deferred Bonus Plan (‘ADBP’)
The maximum opportunity under
the ADBP is 200% of fixed salary
with anything payable in excess of
100% of salary deferred into shares
for three years. The performance
assessment under the ADBP for
2020 was to be based on a balanced
scorecard of financial metrics (75%)
and non-financial metrics (25%). As
previously disclosed to shareholders,
both the CEO and CFO advised the
Remuneration Committee that they
would waive any bonus payable for
2020 performance, in the light of
the impact of COVID-19.
2020 LTIP
As noted above, the CEO had
decided to waive his LTIP award in
respect of 2020. Notwithstanding
this decision, the Committee felt
that continuing to award LTIP
awards in respect of the CFO and
other members of the Company’s
leadership team was important to
ensure the alignment and continued
motivation of our management team
during this period. As a result, the
2020 LTIP awards were granted in
the form of conditional awards to the
CFO and other members of the
leadership team on 19 August 2020
and consisted of three elements: i) an
award of up to 200% of fixed salary
(calculated by reference to the IPO
offer price of £4.35 as this was higher
than the average share price
calculated over a period of up to 30
days prior to the grant) conditional
on the achievement of stretching
EPS (50%), revenue (25%) and
relative TSR (25%) performance
metrics, consistent with the 2019 LTIP
award; ii) a kicker which can enhance
the award value by 50% based on
the achievement of absolute TSR at
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 134
Directors’ Remuneration Report continued
Illustration and application of the current Directors’ Remuneration Policy for 2020
The charts below illustrate the potential split between the different elements of the Directors’ remuneration under four
different performance scenarios: Minimum, Target, Maximum including kicker and Maximum with 50% share price growth.
Simon Haslam
CEO
Rohit Malhotra1
CFO
’
)
0
0
0
D
S
U
(
n
o
i
t
a
r
e
n
u
m
e
R
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
4,140
421%
3,320
281%
1,788
112%
94%
94%
585
94%
5%
1%
187%
187%
5%
1%
5%
1%
5%
1%
585
94%
5%
1%
94%
94%
Minimum
Target
Max
(includes impact
of kicker)
Max
+ 50% SP
growth impact
Actual
3,500
3,000
2,500
2,000
1,500
1,000
500
0
3,462
422%
2,775
281%
1,494
112%
94%
94%
488
94%
4%
2%
Minimum
Target
187%
187%
4%
2%
4%
2%
94%
94%
4%
2%
Max
(includes impact
of kicker)
Max
+ 50% SP
growth impact
4%
2%
488
94%
Actual
Fixed salary (USD)
Benefits
Gratuity
Annual Bonus
LTIP
1 To aid comparability we have used Rohit Malhotra’s full year annualised remuneration elements for his actual remuneration.
the end of the performance period
along with full achievement of the
other performance conditions; and
iii) a ROCE underpin over the three-
year performance period which
could reduce levels of vesting by
10% if not met.
Pre-IPO cash awards
As previously disclosed, the
Company accelerated the vesting of
a portion of the final tranche of the
pre-IPO cash awards for both the
CEO and CFO on the condition that
they used the proceeds to acquire
shares in the Company. As a result,
the CEO and CFO acquired 200,295
and 167,536 shares respectively at
£4.10 per share, being the share price
at which equity was raised through
an accelerated book building
process. These shares are subject to
a holding period such that they will
be released on the same terms and
conditions and timings as the relevant
portion of the pre-IPO cash awards.
FY21 Directors’ pay arrangements
Fixed pay
The newly appointed CEO, having
been appointed in 2021, will not
receive a salary increase in 2021.
The CFO’s base salary will be kept
under review during 2021, taking
into account corporate and individual
performance. As such, Simon
Haslam’s salary will continue to be
$547,000 p.a. The newly appointed
CEO, Nandan Mer’s, salary has been
set at $550,000 p.a. The CFO, Rohit
Malhotra’s, salary remains at
$457,000 p.a.
Annual Deferred Bonus Plan (‘ADBP’)
The maximum opportunity under the
ADBP will remain at 200% of fixed
salary with any payment in excess of
100% of salary being deferred into
shares with a three-year holding
period. The performance assessment
under the ADBP will continue to be
based on a balanced scorecard of
financial metrics (75%) and non-
financial metrics (25%).
2021 LTIP
The approved 2021 LTIP award to be
granted to the Executive Directors
will consist of an award of 300% of
salary for the CEO, and 200% of
salary for the CFO, conditional on the
achievement of adjusted EPS (50%),
revenue (25%) and relative TSR (25%)
performance metrics, consistent with
the 2020 LTIP award. No kicker
element will apply for the 2021 LTIP
award. The Remuneration Committee
will also apply an underpin to the
award vesting such that it is satisfied
that the Company’s Return on
Capital Employed (‘ROCE’) is at an
appropriate level to ensure the
effective deployment of capital and
the quality of its earnings growth.
At the time of preparing the
Company’s Annual Report and
Accounts, the performance targets
for the 2021 LTIP award are not
finalised; they will be announced
prior to the AGM on 20 May 2021 by
release of a regulatory news service
(‘RNS’) announcement.
Network International Holdings Plc
Annual Report and Accounts 2020
Shareholder engagement
The Remuneration Committee
values investor feedback and
carefully considers the AGM voting
results each year.
We remain committed to ensuring
we have an open and constructive
dialogue with shareholders around
Executive remuneration
arrangements. I have engaged with
a number of shareholders in the
early part of the year mainly around
the need to delay the setting of LTIP
targets, in light of the disruption and
uncertainty caused by the pandemic.
I look forward to gaining your support
at the AGM on 20 May 2021.
Once again, I would like to thank you
all for your support and engagement
throughout the past year and I
remain at your disposal should you
have any questions.
As always, I would like to thank
my fellow Remuneration Committee
members, and those who supported
the Remuneration Committee,
for their commitment and
guidance especially during this
unprecedented period.
Victoria Hull
Chair of the Remuneration Committee
7 March 2021
Continuous improvement /
wider workforce
Despite the challenges of the
pandemic, we have continued to
provide all employees their salaries
in full throughout the year, and have
not made any redundancies.
This year saw our first recorded Q&A
session with the wider workforce on
Executive pay arrangements as part
of our 2020 employee engagement
initiatives. Employees across the
Group i.e. UAE, South Africa, Jordan,
Nigeria and Egypt were contacted
and encouraged to participate.
I am pleased to report that all the
questions raised were answered, and
the recording has been circulated
locally via employee weblink. Whilst
there were no suggestions from
employees concerning Executive
pay, the Remuneration Committee
and the Group Chief Human
Resources Officer intend to support
employees at every opportunity
should they have any suggestions
to support understanding of the
Directors’ pay arrangements in the
context of the reward framework
for the wider employee population.
Given the exceptional circumstances
of this year we carried out an
employee feedback survey on
COVID-19 actions alongside the
annual Employee Engagement
Survey. We are also pleased to report
an 8% improvement in our 2020
Employee Engagement Survey and
an 89% highly satisfied score on our
COVID-19 actions feedback survey.
Additionally in 2020, the Human
Resources team put in a number of
measures to guide employees during
the onset of the pandemic, followed
by a smooth migration to working-
from-home, the provision of remote
healthcare and the introduction of a
mental health well-being helpline.
135
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 136
Directors’ Remuneration Report continued
Section 1: Remuneration Overview
At a glance: Summary of Directors’ Remuneration Policy and implementation in 2021
Our Directors’ Remuneration Policy (DRP) was approved by 96.6% of shareholders at our AGM on 30 April 2020 and
is intended to be in place for three years from the date of approval. The DRP is summarised in the table below along
with our intended operation in 2021. Our full DRP, including details relating to recruitment, change of control, loss of
office, malus and clawback, discretion, Non-Executive Director (NED) fees, and service contracts, is available in our
Annual Report relating to the 2019 financial year on our website: (https://investors.networkinternational.ae/
media/1237/netint-annual-report-030420.pdf).
DRP element and
link to strategy
Operation (Policy)
Fixed Salary
To provide competitive fixed
remuneration that will attract and
retain key Executive Directors
and reflect their experience and
position in the Company.
Executive Directors’ fixed salaries are reviewed annually, and any
changes normally take effect from 1 April, in line with the wider
workforce. Fixed salaries may also be reviewed where there is a
change in position or responsibility.
Fixed salaries are comprised of a fixed basic salary and a fixed
allowance, as per local market practice.
Performance measures, assessment
and proposed operation in 2021
Nandan Mer: $550,000 p.a.
Simon Haslam: $547,000 p.a.
Rohit Malhotra: $457,000 p.a.
When determining an appropriate fixed salary, the Remuneration
Committee considers:
› remuneration practices within the Company;
› the general performance of the Company;
› salaries within the ranges paid by the companies in the comparator
group for remuneration benchmarking;
› any change in scope, role and responsibilities; and
› the economic environment.
In general, fixed salary increases will be in line with the approach
for the wider workforce, unless there is a material change in role,
experience or prevailing market conditions.
A retirement benefit may be provided in line with local market practice.
This may be by way of a contribution to a pension scheme or cash
allowance in lieu of pension benefits.
Capped at 15% of fixed salary. This is in line with the minimum pension
contributions requirement of the UAE Federal law applicable to UAE
nationals and citizens of the Gulf Cooperation Council countries,
subject to change from time to time.
Retirement Benefit
To provide a competitive Company
contribution, in line with local
practice, that enables effective
retirement planning.
End of Service Gratuity
To provide an end of service
gratuity payment upon termination,
as required under the UAE Labour
Law for non-UAE nationals.
End of service contributions are accrued by the Company. The amount
of the end of service gratuity accrual is not prepaid annually. The end
of service gratuity will be paid as a lump sum cash payment following
termination, typically based on length of service and final base salary.
In certain circumstances, the payment may be calculated by reference to
fixed salary. Limited to two years’ base salary by the UAE Labour Law.
The Executive Directors do not
currently receive a pension or cash
in lieu, but are eligible for an end of
service gratuity, in line with local
market practice (see below).
The Executive Directors are eligible
for end of service gratuity.
Annual Bonus
To incentivise the achievement
of annual objectives which
support the Company’s short-
term performance goals and
protect longer-term interests
of the Company.
Performance measures and targets are chosen annually, to support the
Company strategy as required. Performance measures are a range of
interdependent financial measures (at least 50%) such as Revenue and
EBITDA, and non-financial objectives.
Maximum opportunity of 200% of
salary with anything payable in
excess of 100% of salary deferred
for three years.
Any portion of an Executive Director’s annual bonus amount over 100%
of annual fixed salary is deferred into shares with a three-year holding
period (to which no further performance conditions are attached).
The remainder of an annual bonus is paid in cash.
Maximum bonus of 200% of annual fixed salary.
Targets are commercially sensitive
and will be disclosed retrospectively.
LTIP
To support the long-term strategic
objectives of the Company.
Annual grant of share awards (structured as conditional share awards
or nil-cost options) subject to stretching performance conditions
measured over three years, and a two-year post-vesting holding period.
Performance measures and targets chosen annually, to support the
Company strategy as required.
Dividend equivalents may accrue on shares vesting and will typically
be paid in shares at the time of vesting, to the extent that shares vest.
Award of up to 200% of fixed salary. A clawback period of two years
from vesting applies to LTIP awards. Ability to award a kicker
opportunity of up to 50% of the LTIP award maximum, subject to
additional performance condition(s).
Ability to award up to 300% of fixed salary in special circumstances
such as recruitment of an Executive Director. The kicker element and
the exceptional maximum LTIP award of 300% will not be both
awarded to the same Executive Director in a single award.
It is proposed that the 2021 LTIP
is granted at 300% of salary for
the CEO and 200% for the CFO
(without the kicker element).
The measures and weightings
proposed are in line with 2020:
Adjusted EPS (50%)
Revenue (25%)
Relative TSR (25%)
Network International Holdings Plc
Annual Report and Accounts 2020
137
DRP element and
link to strategy
Pre-IPO Incentives IPO
Cash bonus/MIP Awards
To enable Executive Directors
to meet their shareholding
requirements earlier, and to
improve the alignment of
Executive Directors’ interests
and those of shareholders.
Shareholding Guidelines
To align the interests of
Executive Directors with the
interests of shareholders.
Operation (Policy)
Performance measures, assessment
and proposed operation in 2021
IPO Cash Bonus and MIP payments awarded at IPO are due to be paid
in cash over the period to October 2021.
N/A
Ability to accelerate the vesting of a portion of the IPO Cash Bonus/MIP
awards (of a minimum amount equal to 200% of fixed salary) provided
the cash is used to invest in shares of the Company. The shares will be
subject to a holding period and will be released on the same terms as
the portion of the IPO Cash Bonus and MIP awards for which vesting
will be accelerated. Clawback provisions will continue to apply.
Discretion to accelerate the vesting of IPO Cash Bonus/MIP awards of
a minimum equal to 200% of fixed salary to enable cash to be used to
invest in shares.
Executive Directors have five years from joining the Company to build
up a minimum shareholding requirement of fixed salary. Post-cessation,
Executive Directors will have to retain their full shareholding
requirement for 12 months, and retain half of their shareholding
requirement for a further 12 months.
Shares relating to awards to be granted after the date of the 2020 AGM
will be included for the purposes of the post-cessation shareholding
requirement. Shares relating to awards granted before this date, as well
as any shares purchased by the Executive Directors (and for the
avoidance of doubt, the pre-IPO cash payments converted into shares),
will not be included.
The Remuneration Committee will ensure that there is the necessary
contractual agreement between the Company and the Executive
Directors and/or enforcement mechanism in place to enforce the
post-cessation shareholding requirement.
The Executive Directors have a
shareholder guideline of 300%
of fixed salary.
All-Employee Share Plans
To encourage employees to
become shareholders in the
Company and thereby align their
interests with those of shareholders.
There are no all-employee share plans currently in place, but this will
remain under review.
N/A
Employee engagement
Share ownership across our employees
To encourage employee share ownership across the Company, shortly after the listing, all employees in our various
geographies received a one-time award of shares equal to the greater of one month’s salary or 250 shares. The Company
believes that extending share ownership throughout the workforce will encourage loyalty and engagement, whilst allowing
employees to participate in the Company’s success. It also aligns the employees’ interests with those of shareholders.
Direct engagement with employees
Whilst the requirement to report on employee engagement does not apply directly to the Company as it employs
fewer than 250 employees in the UK, the Remuneration Committee believes it is important that the Company is
progressive and embraces the spirit of this regulation. The Company aspires to place its people at the heart of its
business. Key actions that reflect how the Company engages with employees are described in the ‘Responsible
Business’ section of the Strategic Report. Improvements to strengthen direct employee engagement with the Board
and the Remuneration Committee will be pursued in FY21.
Remuneration engagement
The Remuneration Committee takes into account total budgeted salary expenditures and remuneration allocation
principles to ensure fairness and alignment of the salary increases across the full employee population, including those
relating to the Executive Directors and the Executive Management Team. The Remuneration Committee has oversight of
the remuneration arrangements for all employees across the Group, and it is satisfied that the core elements of executive
pay align with the wider workforce, but differ based on scope, responsibility, seniority level and location. In summary:
› Competitive benefits and pension are provided in line with local market and legislation;
› Employees participate in either an annual bonus plan or a sales incentive scheme. The Executive Management Team
participates in the incentive plans for Executive Directors: the ADBP and the LTIP;
› All employees employed at the time of IPO were awarded a one-time award of shares post-IPO (granted under the
LTIP); and
› The award and structure of recognition and retention payments, where necessary, to reflect the 2019 LTIP ‘underwriting’.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 138
Directors’ Remuneration Report continued
Section 1: Remuneration Overview continued
Indicative gender pay gap
We are committed to creating an inclusive workplace with equality and fairness at the heart of our practices and
policies. The programmes and engagement initiatives supporting our inclusive philosophy are detailed on page 25.
As part of this, we strive to give women the same career and pay progression as men. Understanding our gender
pay gap is a further step in promoting positive change. In the context of our UAE-based employees, which form
the majority of our workforce, the mean gender pay gap (total remuneration) to 31 December 2019 is 17%, whilst
the median gender pay gap is 24%. The male population equates to 73% of the overall population whilst the female
population is 27%. Rather than a case of unequal pay for equal work, our pay gap is primarily due to the uneven
distribution between men and women across the business, which is mainly related to the markets in which we
operate. This continues to be an area that management and the Remuneration Committee are keeping under review
for 2021 and we are taking various measures to grow our overall female population, particularly for senior roles.
These measures include improvements in the competitiveness of reward, as well as examining our policies around
career management, recruitment and retention.
Remuneration alignment to financial and strategic performance
Annual Deferred
Bonus Plan (‘ADBP’)
Long Term
Incentive Plan (‘LTIP’)
Performance
measures
Financial
Revenue
EBITDA
Adjusted Earnings Per Share (‘EPS’)
Relative TSR
Absolute TSR
ROCE (underpin)
Strategic
Master Transitional Services Agreement
Key Regional Market Growth
Stakeholder Management & People
Risk, Governance & Internal Audit
2020 performance overview
Revenue
USD
Underlying EBITDA1
USD
Master Transitional
Services Agreement2
Key Regional
Market Growth
Stakeholder
Management & People
Risk, Governance
& Internal Audit
-15.1% from FY19
-33.2% from FY19
$284.8m
$112.6m
Separation of
shared services
from Emirates NBD
Bank PJSC on plan
and cost targets.
Completed transition
to next generation
technology platforms.
Customers migrated.
Multiple customer wins.
Progressed our entry
to Saudi Arabia market.
8 percentage point
improvement in
Employee
Engagement Survey.
Constituted the
Enterprise Risk
Management
Committee (‘ERMC’).
Completed the annual
revision exercise of
Group’s principal and
emerging risks as part
of the risk disclosure
required for the
Annual Report and
Accounts (‘ARA’)
for 2020.
1
This is an alternative performance measure (‘APM’). See note 4 of the consolidated financial statements for APM definitions and the reconciliations
of reported figures to APMs.
2 Network International LLC and Emirates NBD Bank PJSC have entered into a master transitional services agreement (‘MTSA’). Under the MTSA, Emirates NBD Bank PJSC
provides certain IT and operational services to Network International LLC for a transitional period of three years, unless agreed otherwise by the parties in writing.
Network International Holdings Plc
Annual Report and Accounts 2020
139
Section 2: Annual Report on Remuneration
Executive Directors’ remuneration
Figure 1: Single total figure table (audited)
The table below sets out the single total figure of remuneration for the Executive Directors in FY20. For the CFO, the
period is from 2 June 2020 (the date the CFO was appointed to the Board) to 31 December 2020. To aid transparency,
we have also disclosed the CFO’s payments on an annualised basis. None of the FY20 nor FY19 remuneration payouts
are linked to share price growth, and as such, no estimate of the amount of single figure remuneration linked to share
price growth is reported. The former CEO and the CFO waived any bonus entitlement in respect of FY20. Noting
this and the fact that no LTIPs were due to vest in FY20, the Remuneration Committee is satisfied that the total
remuneration for the Executive Directors is appropriate in the context of business performance, motivation, and
retention. No discretion was exercised to determine the total remuneration as a result. To aid transparency, we have
also disclosed the CEO and CFO’s payments on an annualised basis.
Executive
Year
Director
Simon Haslam7 FY20
Fixed salary
USD’000
547
Benefits1
USD’000
7
Annual
bonus2
USD’000
0
LTIP
vested3
USD’000
0
End of
service
gratuity4
USD’000
31
Pre-IPO
incentives5
USD’000
0
Sub-Total
(fixed pay)
USD’000
585
Sub-Total
(variable
pay)
USD’000
0
Total6
USD’000
585
FY19
From
27/02/2019
(date of
appointment)
Rohit Malhotra7 From
02/06/2020
(date of
appointment)
Annualised figures
Executive
Director
Year
Simon Haslam FY19
Rohit Malhotra FY20
463
269
5
6
532
0
0
0
26
8,150
494
8,682
9,176
12
0
288
0
288
Fixed salary
USD’000
547
Benefits
USD’000
6
Annual
bonus
USD’000
629
LTIP
vested
USD’000
0
End of
service
gratuity
USD’000
31
Pre-IPO
incentives
USD’000
8,150
Sub-Total
(fixed pay)
USD’000
584
Sub-Total
(variable
pay)
USD’000
8,779
Total
USD’000
9,363
457
10
0
0
21
0
488
0
488
Figures reported have been annualised for comparison purposes where the Director was not a member of the Board for the full year.
1 Relates to private medical insurance. This benefit is non-pensionable.
2 Simon Haslam and Rohit Malhotra waived their ADBP bonus payment for FY20. For Simon in FY19 this represents 57.5% of maximum (or 115% of fixed salary), of which
100% of fixed salary (USD 547k) was paid in cash and the portion above 100% of fixed salary (15% or USD 82k) was deferred into shares with a three-year holding period
(with no further performance measures attached). No discretion applied.
3 No LTIP awards vested in FY19 and FY20.
4 Relates to the provision accrued during the year.
5 Relates to the IPO cash bonus and the MIP awards which were earned on IPO. Detailed disclosures provided in the 2019 Annual Report.
6 No other item of remuneration received in FY20 other than as disclosed in the table.
7 Simon Haslam and Rohit Malhotra received Pre-IPO incentives in 2019 amounting to USD 8,150,000 and USD 5,783,000 respectively, with no further performance conditions
and phased vesting to 2021.
Fixed salary
The Remuneration Committee had proposed a salary increase which was to have been effective from 1 April 2020
for the CEO, taking into consideration his additional responsibility, salary benchmarks and retention challenges in the
Fintech sector. The CEO subsequently voluntarily waived his salary increase in light of the COVID-19 pandemic and
wider economic impact.
Benefits
The benefits offering and operations are in line with local market practice. The benefits for the Executive Directors
and the Executive Management Team are aligned to those offered to the employees located in the UAE. Core benefits
include: private medical insurance for self, spouse and up to three children, health screening, life insurance and
relocation allowances (where applicable). Executive Directors are also eligible for the reimbursement of UK income
tax liability incurred in respect of the conduct of their Executive Director duties necessarily performed in the UK.
End of service gratuity
As required under the UAE Labour Law for non-UAE nationals, the Executive Directors will be eligible to receive an
end of service gratuity payment upon termination. The annual contribution accrued by the Company is based on 21
days’ fixed salary for each of the first five years of service, and 30 days’ fixed salary for each additional year of service.
The amounts accrued in respect of this are set out in the single total figure table. There were no additional pension
contributions paid to the Executive Directors in FY20.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 140
Directors’ Remuneration Report continued
Section 2: Annual Report on Remuneration continued
Executive Directors’ remuneration continued
Annual Deferred Bonus Plan (‘ADBP’)
2020 annual bonus (audited)
The Remuneration Committee reviewed the structure of the annual bonus arrangements and determined that its
structure remained appropriate and aligned with FTSE 250 market practice and our sector. To support the Company’s
growth journey, performance was intended to once again focus on revenue (45%) and EBITDA (30%). The remaining
25% of the annual bonus was to be reviewed against a scorecard of individual measurable objectives identified as
critical to the business strategy development in FY20. The performance targets for FY20 were set prior to the onset
of the COVID-19 pandemic, and both Executive Directors agreed to waive any amount payable in respect of FY20.
The targets set at the beginning of 2020, for reference, are below:
Figure 2: 2020 annual bonus metrics (audited)
Performance measures
Weighting
Targets
Payout levels (as a % of max)
Outcome (2020 actuals)
Performance achieved
Bonus achieved (% of max.)
Bonus earned (USD’000)
Financial (75%)
Revenue (USDm)
45%
EBITDA (USDm)
30%
405.3
100%
190
25%
374.4
25%
386
50%
284.8
N/A
N/A
0%
210
100%
200
50%
112.6
N/A
N/A
0%
Performance
measures
Weighting
Targets
Payout levels
(as a % of max)
Outcome
(2020 Actuals)
Performance
achieved
Bonus achieved
(% of max.)
Bonus earned
Master Transitional Services
Arrangement (‘MTSA’)
5%
Key Regional
Markets Growth
7.5%
Stakeholder Management
& People
5%
Risk, Governance
& Internal Audit
7.5%
Acceptable
Above
Expected
Strong
Acceptable
Above
Expected
Strong
Acceptable
Above
Expected
Strong
Acceptable
Above
Expected
Strong
Strategic (25%)
20-30% 50-60% 80-100% 13-26% 40-53% 80-100% 13-26% 40-53% 80-100% 13-26% 40-53% 80-100%
N/A
N/A
N/A
0%
N/A
N/A
N/A
0%
N/A
N/A
N/A
0%
N/A
N/A
N/A
0%
Figure 3: 2020 performance strategic measures
Strategic measures
Performance summary
Master Transitional
Services Arrangement
(‘MTSA’)
5%
Key Regional
Markets Growth
7.5%
Stakeholder
Management
& People
5%
Risk, Governance
& Internal Audit
7.5%
› Separation of shared services from Emirates NBD Bank PJSC on plan and cost targets.
› Completed transition to next generation technology platforms.
› Customers migrated.
› Multiple customer wins.
› Progressed our entry to Saudi Arabia market.
› 8 percentage point improvement in Employee Engagement Survey.
› Constituted the Enterprise Risks Management Committee (‘ERMC’).
› Completed the annual revision exercise of Group’s principal and emerging risks as part of the risk disclosure required for
the Annual Report and Accounts (‘ARA’) for 2020.
Network International Holdings Plc
Annual Report and Accounts 2020
141
Long Term Incentive Plan (‘LTIP’)
LTIP awards vested in 2020
The first awards under the LTIP were granted in 2019 and will vest in 2022, subject to the achievement of the
performance criteria measured over the period up to 31 December 2021.
Figure 4: 2020 LTIP awards granted (audited)
LTIP awards were granted on 19 August 2020 as conditional share awards. It was pre-determined that the share price
used to calculate the number of shares awarded would be the higher of the IPO offer price of £4.35 (which is the
same share price as the 2019 LTIP awards) or the average share price calculated over a period of up to 30 trading
days prior to the date of grant. The £4.35 share price was used to ensure that Executives did not receive a benefit
from a fall in the Company’s share price shortly before the date of grant. The conditional share awards will vest three
years after the award grant date, to the extent that the Remuneration Committee is satisfied that the performance
conditions to 31 December 2022 have been met. Malus provisions apply to the end of the vesting period, and
clawback provisions apply for two years following vesting. Any dividend accrual during the performance period and
expiry of the holding period may be awarded in the form of additional shares.
Executive Director1
Rohit Malhotra
Award
type
LTIP – conditional
shares
Basis of
award
%
Base Award – 200%
of fixed salary
Kicker – 100% of
fixed salary
Shares
awarded
160,369
Face value
of award2
(USD’000)
Percentage of
award vesting at
threshold
performance
End of
performance
period
860,225
25%
31/12/2022
80,185
430,115
0%
31/12/2022
1 Simon Haslam declined to accept an LTIP grant in 2020.
2 The face value of the award is based on the closing share price on the date prior to the award (£4.09). The conversion USD exchange rate used is 1.3115 which is based on
an average of over five trading days prior to the date of grant.
Figure 5: 2020 LTIP award performance conditions (audited)
As disclosed to shareholders following the grant of the 2020 LTIP awards in August, the Remuneration Committee
decided to defer the setting of performance targets. This was to ensure that the performance targets would be
appropriately stretching and commensurate with the Group strategy. The approved performance conditions for the
2020 LTIP award are: i) Adjusted Earnings per Share (‘EPS’); ii) Revenue; and iii) Relative Total Shareholder Return
(‘TSR’). In addition to these performance conditions, the kicker element of the award is subject to an absolute TSR
performance measure. The award is also subject to an ROCE underpin.
The Remuneration Committee views EPS and Revenue as measures which are key to support the delivery of the
future strategy of the Company. TSR is measured against the FTSE 250 index, reflecting the Company’s positioning
on the London Stock Exchange. 25% of the award will vest for threshold performance increasing on a straight-line
vesting between threshold and maximum (100%). Targets outlined in the table below take into account market
consensus, current budget estimates and market practice around metric calibration for UK listed companies.
Metrics
Adjusted EPS
Revenue
Relative TSR
Absolute TSR
ROCE
Weighting
50%
25%
25%
Kicker
Underpin – reduction to
levels of vesting by 10%
if not met
Threshold
(25% vesting)
18.27c
$386.1m
Median
Maximum
(100% vesting)
20.53c
$441.9m
Upper Quartile
Share price + dividends paid must be at least £7.50p at the end of the performance period, and the
other performance criteria to be met in full, then award increases by 50%
14.0% ROCE achieved in FY22 (excluding DPO acquisition)
2021 LTIP awards
Noting that this is the first LTIP award for the new CEO and the enhanced award is intended to improve alignment
with shareholders by creating an opportunity to acquire shares based on the achievement of stretching performance
targets. For the 2021 LTIP, the Remuneration Committee proposes to grant the Executive Directors an award of 300%
of fixed salary for CEO and 200% for the CFO.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 142
Directors’ Remuneration Report continued
Section 2: Annual Report on Remuneration continued
Executive Directors’ remuneration continued
It is proposed that the 2021 LTIP awards will be conditional on the achievement of adjusted EPS (50%), revenue
(25%) and relative TSR (25%) performance metrics, consistent with the 2020 LTIP award excluding the kicker element.
The Remuneration Committee also agreed to underpin Return on Capital Employed (‘ROCE’) similar to the 2020 awards.
Details of the performance targets attached to the 2021 LTIP will be announced prior to the AGM on 20 May 2021 by
release of an RNS announcement.
Pre-IPO incentives
Figure 6: IPO cash bonus and MIP awards
Network International LLC awarded selected members of the Group’s management, including the Executive Directors,
cash bonus awards subject to and conditional upon listing. Details of these awards for the CEO were disclosed in the
single figure total table in the 2019 DRR. The CFO’s award terms and vesting schedules are identical to those awarded
to the CEO. The full value of these awards in 2019 amounted to USD 8,150,000 and USD 5,783,000 for the CEO and
CFO respectively, with no further performance conditions and phased vesting to 2021. These values include USD
393,000 vesting in 2020 for the CEO, and USD 356,000 for the CFO.
2020 IPO Cash Bonus awards to shares conversion
No new awards will be made under the pre-IPO incentive plans. As per shareholder approval at last year’s AGM, vesting
of the portion of the remaining cash payments equivalent to 200% of the Executive Directors’ fixed salary was
accelerated on the condition that the cash was used by the Executive Directors to purchase shares in the Company at a
price of £4.10, which is equal to the share price at which equity was raised through an accelerated book building process.
This is considerably higher than the actual share price at the time of the transaction on 7 September 2020. The
acquired shares will be subject to a holding period and released in October 2021 on the same terms and conditions as
the relevant portion of the pre-IPO cash awards for which vesting was accelerated. However, the Executive Directors
will be encouraged to retain their shares over a longer period of time, as the purchased shares will count towards the
shareholding requirement of 300% of fixed salary. The conversion of awards to shares will enable the Executive
Directors to meet their shareholding requirements earlier, thus enhancing the alignment of Executive Directors’
interests with those of shareholders.
Details of the number of shares acquired by each Executive Director are set out below:
Executive Director
Simon Haslam
Rohit Malhotra
IPO cash award (2021 Tranche)
to share conversion (Shares)
200,295
167,536
Figure 7: Executive Directors’ shareholding and share interests (audited)
The DRP requires Executive Directors to hold shares equivalent in value to 300% of their fixed salary within a five-year
period from their appointment date. The Executive Directors committed to purchasing shares in the Company at the
prevailing market price using the accelerated portion of the MIP and IPO cash bonus awards, equal to 200% of fixed salary.
This took place on 7 September 2020. The purchased shares will count towards the 300% shareholding requirement.
Additionally, in relation to the 2019 annual bonus payout, an award of deferred shares equal to 7.5% of maximum,
or 15% of fixed salary, was made shortly after the 2020 AGM, and those shares also count towards the
shareholding requirement.
Shareholding
Shareholding
requirement
(% of fixed
salary)1
300%
Shareholding
requirement %
met (of fixed
salary)2,3
159%
Shares
beneficially
owned
50,926
300%
141%
20,000
Unvested
With
performance
conditions
With
performance
conditions
Without
performance
conditions
Without
performance
conditions2
LTIP-2019
145,479
95,803
LTIP-2020 ADBP – shares
15,683
–
IPO cash bonus
conversion
to shares)3
200,295
240,554
9,226
167,536
Executive Director1
Simon Haslam
Rohit Malhotra
1
For the purposes of the shareholding requirement, only the net number of unvested share awards not subject to performance conditions is included, in line with
institutional investor guidelines.
2 The shareholding requirement calculation is based on annualised fixed salary.
3 The closing share price of £3.266 as at 31 December 2020 has been used for the purpose of calculating the current shareholding as a percentage of salary.
Network International Holdings Plc
Annual Report and Accounts 2020
143
Payment to past Directors/payment for loss of office (audited)
There were no payments to past Directors or payments for loss of office in FY20 or FY19.
Figure 8: Performance and Executive Directors’ remuneration
The graph below illustrates the Company’s Total Shareholder Return (‘TSR’) performance against the FTSE 250
for FY20. The FTSE 250 was selected as the appropriate comparator as the Company is a constituent of the index.
The graph shows the performance of a hypothetical £100 investment over that period. The remuneration data for
the Executive Directors is set out in the table below the TSR chart.
O
P
I
e
c
n
i
s
R
S
T
160
140
120
100
80
60
40
Apr 19
Jun 19
Aug 19
Oct 19
Dec 19
Feb 20
Apr 20
Jun 20
Aug 20
Oct 20
Dec 20
Network International
FTSE-250
Data sourced from DataStream from Refinitiv.
Total remuneration of Executive Directors
Simon Haslam
Year
FY20
Rohit Malhotra
FY19
From 27/02/2019
(appointment date)
From 02/06/2020
(appointment date)
Annualised figures
Total single figure
remuneration
(fixed pay)
(USD’000)
585
Total single figure
remuneration
(variable)
(USD’000)
0
Total single figure
remuneration
(USD’000)
585
Annual bonus
payment
(% of maximum)
0.0%
LTIP
vesting
(% of maximum)
n/a
494
288
8,682
0
9,176
288
115%
0.0%
n/a
n/a
Simon Haslam
Rohit Malhotra
Year
FY19
FY20
Total single figure
remuneration
(fixed pay)
(USD’000)
584
Total single figure
remuneration
(variable)
(USD’000)
8,779
Total single figure
remuneration
(USD’000)
9,363
Annual bonus
payment
(% of maximum)
115%
LTIP
vesting
(% of maximum)
n/a
488
0
488
0.0%
n/a
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
144
Directors’ Remuneration Report continued
Section 2: Annual Report on Remuneration continued
Percentage change in remuneration of Directors and employees
The table below shows the percentage change in the remuneration of Directors and the average UAE colleague for FY20.
Executive Directors
Simon Haslam
Rohit Malhotra
Non-Executive Directors
Ron Kalifa
Darren Pope
Victoria Hull
Ali Mazanderani
Anil Dua
Habib Al Mulla
Suryanarayan Subramanian
Daniel Zilberman3
Shayne Nelson3
Aaron Goldman3
Comparator group
Average UAE Colleague4
0.0%
N/A
3.3%
0.0%
-4.8%
N/A
N/A
4.2%
1.6%
0.0%
0.0%
0.0%
6.0%
Salary or fees1
(% change from
FY19 to FY20)
Benefits2
(% change from
FY19 to FY20)
Bonus
(% change from
2018/19 to
2019/20)
-100.0%
N/A
0.0%
0.0%
0.0%
N/A
N/A
0.0%
0.0%
0.0%
0.0%
0.0%
9.1%
N/A
0.0%
0.0%
0.0%
N/A
N/A
0.0%
0.0%
0.0%
0.0%
0.0%
20.9%
-10.2%
1
The percentage changes have been calculated using the salary or fees, benefits and short-term incentives as set out in the single total figure table for FY19 and FY20.
For Directors these reflect the actual amounts earned whilst they were on the Board for each year, and include the 25% fee reduction in 2020 where applicable. For Rohit,
Ali and Anil no comparisons are available as they were appointed to the Board in FY20.
2 Gratuity has been excluded.
3 These individuals stepped down from the Board on 30 April 2020 which is prior to the date when fees were reduced. For comparison, fees have been annualised.
4 The CEO and CFO end of service gratuities have been excluded as they are not actually paid/received during the year. Average UAE Colleague data is based on
methodology ‘C’ i.e. 2019 v/s 2018 for UAE. Gratuity is not included.
Indicative CEO pay ratio
Similar to the gender pay gap, the Company is exempt from the CEO pay ratio legislation as there are fewer than 250
employees in the UK. However, a CEO pay ratio is considered when determining senior remuneration, and is being
disclosed voluntarily to provide information about the appropriateness of pay outcome, to consider wider workforce
remuneration and to ensure transparency. The CEO’s total pay, as per the FY20 single total figure remuneration, is
compared to the total pay of the UAE-based employees as they represent the majority of our workforce and they
share the same legal, tax and currency context for pay and benefits as the CEO. The calculation is based on
methodology C of the regulations.
The table below discloses the CEO’s total pay as compared to that of the UAE-based workforce at the 25th percentile,
median and 75th percentile, and we will build on it each year accompanied by a narrative to explain any changes.
Year
2020 (excl. Pre-IPO incentives)
Year
2019 (excl. Pre-IPO incentives)
Method
C
Method
A1
25th percentile
pay ratio
13:1
25th percentile
pay ratio
26:1
Median
pay ratio
8:1
Median
pay ratio
16:1
75th percentile
pay ratio
5:1
75th percentile
pay ratio
10:1
1 As committed in the 2019 DRR, 2019 figures have been restated using Methodology A, excluding pre-IPO incentives.
Relative importance of the spend on pay (audited)
The table below indicates how the earnings of Executive Directors compare with other financial disbursements.
Distributions to shareholders by way of dividend2
Total tax contributions3
Overall spend on pay including Executive Directors4
1 Calculated on the same basis as the single total figure of remuneration on page 139.
2 Dividends to shareholders include interim and final dividends paid in each financial year.
3 As set out in the consolidated statement of cash flow (see note 24 of the financial statements for further information).
4 Employee costs includes wages and salaries, social security, pension and share-based costs at actual exchange rates
(see note 20 of the consolidated financial statements for further information).
Network International Holdings Plc
Annual Report and Accounts 2020
FY201
(USD’000)
0
6,058
96,933
FY19
(USD’000)
0
10,415
96,744
145
For every $1 spent on Executive Directors’ remuneration by the Company in FY20, $0 was made in dividend
payments, $6.9 was paid in tax and $111 was spent on employee costs.
Fees retained for external Non-Executive Directorships
Executive Directors may hold positions in other companies as Non-Executive Directors (‘NEDs’) and retain the fees.
Neither Executive Directors held a NED position with another company in FY20 or FY19, and as such no fees for
external appointments are being reported.
Non-Executive Directors’ remuneration
Figure 9: 2020 Non-Executive Directors’ single total figure table (audited)
The table below sets out the single total figure of remuneration for each Non-Executive Director in FY20.
Fees1
(GBP’000)
Benefits2
(GBP’000)
Annual
bonus
(GBP’000)
LTIP
vested
(GBP’000)
End of
service
gratuity
(GBP’000)
Pre-IPO
incentives
(GBP’000)
Sub-Total
(fixed pay)
(GBP’000)
Sub-Total
(variable
pay)
(GBP’000)
Total3
(GBP’000)
375
363
129
129
100
105
75
72
12
12
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
387
376
129
129
100
105
75
72
70
N/A
N/A
N/A
N/A
N/A
70
66
N/A
N/A
N/A
N/A
N/A
66
62
61
25
61
25
61
25
61
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
62
61
25
61
25
61
25
61
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
387
376
129
129
100
105
75
72
70
66
62
61
25
61
25
61
25
61
Non-Executive
Director
Ron Kalifa
(Chairman)
Year
FY20
From
13/03/2019
to
31/12/2019
Darren Pope FY20
(Senior
From
Independent
13/03/2019
Director)
to
31/12/2019
Victoria Hull FY20
From
13/03/2019
to
31/12/2019
Habib
Al Mulla
Ali Haeri
Mazanderani
Anil Dua
Suryanarayan
Subramanian
Aaron
Goldman
Daniel
Zilberman
Shayne
Nelson
FY20
From
29/03/2019
to
31/12/2019
From
22/01/2020
to
31/12/2020
From
22/01/2020
to
31/12/2020
FY20
From
13/03/2019
to
31/12/2019
FY20
From
13/03/2019
to
31/12/2019
FY20
From
13/03/2019
to
31/12/2019
FY20
From
13/03/2019
to
31/12/2019
1 2020 fees are based on actual amounts earned in the year and include the temporary 25% reduction in fees.
2 Relates to a payment for the purposes of obtaining private health insurance.
3 No other item of remuneration received in FY20 other than as disclosed in the table.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 146
Directors’ Remuneration Report continued
Section 2: Annual Report on Remuneration continued
Figure 10: Non-Executive Directors’ shareholding (audited)
The NEDs do not participate in any of the Company’s incentive arrangements. There is no shareholding requirement
policy in place for NEDs.
The table below indicates the shareholding of the NEDs as at 31 December 2020, including those held by connected persons.
Non-Executive Director
Ron Kalifa
Darren Pope
Victoria Hull
Habib Al Mulla
Suryanarayan Subramanian
Ali Haeri Mazanderani
Anil Dua
Number of shares
held as at
31 December 2020
599,156
Number of shares
held as at
31 December 2019
564,156
8,824
66,319
0
0
44,290
0
0
0
0
0
0
0
Figure 11: Directors’ agreements for service
Non-Executive Directors (‘NEDs’)
The appointments of each of the NEDs are for an initial term of three years from the date of appointment until the
conclusion of the Company’s AGM occurring approximately three years from that date, unless terminated by either
party on three months’ notice, in the case of the Independent NEDs, and one month’s notice in the case of the
Non-Independent NEDs. The appointment of each Independent Non-Executive Director is also subject to annual
re-election at the general meeting of the Company.
Non-Executive Director
Ron Kalifa
Darren Pope
Victoria Hull
Habib Al Mulla
Title
Independent Board Chair
Senior Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Suryanarayan Subramanian
Non-Executive Director
Ali Haeri Mazanderani
Anil Dua
1 From January 2021.
Independent Non-Executive Director
Independent Non-Executive Director
Date of
appointment
13-Mar-19
13-Mar-19
13-Mar-19
29-Mar-19
13-Mar-19
22-Jan-20
22-Jan-20
Notice period
3 months
3 months
3 months
3 months
Unexpired term1
1 year 4 months
1 year 4 months
1 year 4 months
1 year 4 months
1 month
1 year 4 months
3 months
2 years 4 months
3 months
2 years 4 months
Executive Directors
The Remuneration Committee’s policy for setting notice periods for Executive Directors is that a six-month period
will apply unless the Remuneration Committee determines that 12 months would be more appropriate in the
circumstances. The Remuneration Committee may, in exceptional circumstances arising on recruitment, allow a
longer period, which would in any event reduce to either six or 12 months following the first year of employment.
The Company can immediately terminate employment by making a payment in lieu of notice period, or in exceptional
circumstances (e.g. misconduct). Post-termination restrictions can be applied for up to 12 months following the
cessation of employment.
Executive Director
Simon Haslam
Nandan Mer
Rohit Malhotra
Title
Outgoing CEO
Group Chief Executive Officer
Group Chief Financial Officer
Date of
appointment
27-Feb-2019
1-Feb-2021
2-Jun-2020
Notice period
6 months
6 months
6 months
Report on the Remuneration Committee
Remuneration Committee remit
The Remuneration Committee’s Terms of Reference can be found on our website at (investors.networkinternational.ae/
investors/corporate-governance). In summary, the Remuneration Committee makes recommendations to the Board
regarding the Company’s policy relating to Executive remuneration and its cost, giving full consideration to the matters
set out in the Corporate Governance Code. It determines on the Board’s behalf, the entire individual remuneration
packages for each Executive Director, the Chair of the Board and the Executive Management Team. The Remuneration
Committee meets at least five times each year and otherwise as the Chair of the Remuneration Committee requires.
Network International Holdings Plc
Annual Report and Accounts 2020
147
Figure 12: Remuneration Committee composition and meetings
The table below indicates the number of meetings held during 2020 and Remuneration Committee member attendance.
Member
Victoria Hull
Habib Al Mulla2
Ron Kalifa
Darren Pope2
Ali Haeri Mazanderani3
Member since
13 March 2019
29 March 2019
13 March 2019
13 March 2019
22 January 2020
FY20
meetings
8
Number of
meetings attended1
8
% of meeting
attendance
100%
5
8
5
8
5
8
5
7
100%
100%
100%
88%
1
The FY20 meetings listed for each Remuneration Committee member reflect the number of meetings they were eligible to attend as members of the Remuneration
Committee during the year. As and when required, Suryanarayan Subramanian has been asked to attend by invitation to provide advice and expertise.
2 Darren Pope and Habib Al Mulla left the Remuneration Committee on 2 June 2020 and attended all meetings to which they were invited.
3 Ali Mazanderani was unable to attend one of the meetings held during the period since joining the Remuneration Committee on 22 January 2021.
Figure 13: Remuneration Committee activity
The following table is a summary of the Remuneration Committee’s activity during FY20. The Remuneration
Committee typically meets a minimum five times a year. During FY20, the Remuneration Committee met eight
times at scheduled meetings.
The agenda items discussed at the meetings are summarised below.
February 2020
March 2020
June 2020
August 2020
October 2020
December 2020
› Update on the FY19 bonus outturn
› Review of CEO/CFO remuneration for 2020
› Update on FY20 performance conditions
› Update on DRR progress and review draft DRR
› Review of FY20 DRP
› Approval of Executive Directors’ salary increases
› Approval of FY20 annual bonus metrics
› Approval of LTIP base awards for Executive Directors
› Approval of cash to equity conversion
› Update on shareholder engagement process
› Update on shareholder consultation process
› Update on 2020 LTIP ROCE approach
› Approval of the DRR
› Approval of amended LTIP rules
› Approval of FY20 annual bonus targets
› Consideration of FY20 LTIP targets
› Approval of shareholders’ letters and RNS
› Approval of 2019 Annual Deferred Bonus
› Approval of IPO bonus shares acquisition & dividends
› Approval of the amended LTIP and ADBP rules
› Approval of treatment of dividends related to deferred share awards
› Approved NLT senior management & ‘below NLT’ Long-Term Incentive Strategy
› Update on Board approach to employee engagement
› Approval of the 2020 LTIP awards for CFO & NLT senior management.
› Approval of the IPO bonus shares acquisition share price
› Approval of Board approach to employee engagement
› Approval of Remuneration Committee’s approach to workforce engagement on Executive pay
› Approval of 2020 LTIP targets
› Approval of the retention proposal for NLT senior management team
› Update on workforce engagement on Executive Pay Communications Plan
› Update on DRR timeline
› Approval of the CFO Director Fees & Tax Proposal
› Update on Employee Engagement Survey & HR Response to COVID-19
› Update on 2020 annual bonus approach
› Update on 2020 annual Pay Review approach
› Approval of the 2021 annual bonus measures and structure
› Approval of the 2021 LTIP measures and structure
› Revised update on DRR timeline
› Approval of remuneration package for incoming CEO and MD Middle East
› Approval of termination package for current CEO and MD Middle East
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 148
Directors’ Remuneration Report continued
Section 2: Annual Report on Remuneration continued
Figure 14: Statement of voting
The table below sets out last year’s voting outcomes including the Remuneration Policy which was approved by
shareholders at the AGM on 30 April 2020.
Remuneration Policy (Binding)
Votes
“For”
426,988,793
Remuneration Report (Advisory)
426,177,846
Votes
“For” %
96.59%
99.07%
Votes
“Against”
Votes
“Against” %
% of
Issued Share
Capital Voted
Votes
Total
15,089,568
4,007,859
3.41%
442,078,361
0.93%
430,185,705
88.42%
86.04%
Votes
“Withheld”
10,890,205
22,782,861
Remuneration Committee advisors and other attendees
The Remuneration Committee is authorised to obtain external advice from independent consultants where it
considers it appropriate in carrying out its responsibilities. During FY20, PwC advised the Remuneration Committee
on all aspects of the Remuneration Policy for the Executive Directors and members of the Executive Management
Team, including the development of the policy prior to the IPO. PwC was appointed prior to listing following a
selection process. PwC is a member of the Remuneration Consultants Group and the voluntary code of conduct of
that body is designed to ensure objective and independent advice is given to remuneration committees. Fees of
£144,108 were paid to PwC during the year in respect of remuneration advice received, accrued on a time and
expenses basis. PwC provides other services to the Company, in relation to accounting, tax advice, reporting, internal
audit and risk management. The Remuneration Committee is satisfied that no conflicts of interest in regards to advice
provided to the Remuneration Committee exist. It is also satisfied that the members of PwC team do not have
connections with the Company which might impair their independence. Allen & Overy LLP also provided advice on
legal matters, such as the contractual terms of the incentive plan rules, and compliance with legal and regulatory
requirements in the operation and reporting of incentive arrangements.
The Remuneration Committee also seeks internal support from the CEO, Chairman, Chief Risk Officer and Group
Company Secretary, Group Head of Human Resources and Facilities, and Principal Reward Consultant as necessary
and appropriate. All may attend the Remuneration Committee meetings by invitation, although none of them are
present for any discussions on their own remuneration.
Victoria Hull
Chair of the Remuneration Committee
7 March 2021
This DRR has been prepared in accordance with the relevant provisions of The Companies Act 2006, The Companies
(Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, The Companies
(Miscellaneous Reporting) Regulations 2018, Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 and the Listing Rules. Where required data has been audited
by KPMG and this is indicated appropriately.
Network International Holdings Plc
Annual Report and Accounts 2020
149
Directors’ Report –
Other Statutory Disclosures
The Directors present their report for the financial year ended 31 December 2020.
Information included in the Strategic Report
As permitted by legislation, the following matters which would otherwise be required to be included in the Directors’
Report have instead been included in the Strategic Report on pages 14 to 69:
Subject matter
Likely future developments in the business
Research and development
Employment of disabled persons
Employee engagement
Relationships with suppliers, customers and others
Disclosures concerning greenhouse gas emissions
Diversity
Energy consumption and carbon emissions
Page reference
14
36
61
62
28
66
60
66
Corporate Governance Statement
The information that fulfils the requirements of the corporate governance statement for the purposes of the FCA’s
Disclosure Guidance and Transparency Rules can be found in the Corporate Governance Report on pages 90 to 112
and the Strategic Report on pages 1 to 89 (which are incorporated into this Directors’ Report by reference) and in
this Directors’ Report.
Cautionary statement
This Annual Report has been prepared for and only for the members of the Company, as a body, and no other
persons. The Company, its Directors, employees, agents or advisors do not accept or assume responsibility to any
other person to whom this document is shown or into whose hands it may come and any such responsibility or liability
is expressly disclaimed. By their nature, the statements concerning the risks and uncertainties facing the Group in this
Annual Report involve uncertainty since future events and circumstances can cause results and developments to
differ materially from those anticipated. The forward-looking statements reflect knowledge and information available
at the date of preparation of this Annual Report and the Company undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report should be construed as a profit forecast.
Disclosure of information under LR 9.8.4R
The information that fulfils the reporting requirements relating to the following matters can be found on the
pages identified:
Subject matter
Arrangements under which the employee benefit trust has waived or agreed to waive dividends/future dividends
Page reference
151
Share capital
The structure of the issued share capital of the Company as at 31 December 2020 and information about the issue
of shares during 2020 are set out in note 18 (on page 200) to the financial statements. The Company has one class
of share: ordinary shares of £ 0.10 each.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 150
Directors’ Report – Other Statutory Disclosures continued
Issue and buy-back of shares
1. Issue of shares
The Directors were granted authority on 30 April 2020 to allot shares in the Company: (i) up to one third of the
Company’s issued share capital; and (ii) up to a further one third of the Company’s issued share capital in connection
with a rights issue.
The Directors were also granted authority on 30 April 2020 to disapply pre-emption rights. This authority disapplies
pre-emption rights over 10% of the Company’s issued share capital.
These authorities apply until the AGM to be held in 2021 or, if earlier, at the close of business on the date falling 15
months after the resolutions conferring them were passed on 30 April 2020. The Board currently intends to seek
to renew these powers in line with relevant institutional guidelines at the 2021 AGM.
Pursuant to the authorities given by the shareholders at the AGM held on 30 April 2020, a further 50,000,000
ordinary shares of 10p each in the capital of the Company (representing approximately 10% of the then current issued
ordinary shares of the capital of the Company) were issued on 31 July 2020 by way of a non-pre-emptive placing. The
gross proceeds raised of approximately £205 million will be used predominantly to fund the acquisition of DPO Group
for a total consideration of USD 288 million.
2. Buy-back of shares
The Company was granted authority on 30 April 2020 to purchase in the market up to 10% of its issued ordinary
shares, subject to certain conditions laid out in the authorising resolution. This authority applies until the AGM to be
held in 2021 or, if earlier, at the close of business on the date falling 15 months after the resolution conferring it was
passed on 30 April 2020. The Board currently intends to seek to renew this authority at the 2021 AGM.
The Directors did not exercise the authority to make market purchases of shares in the financial period under review.
Shareholder rights
The rights attaching to the ordinary shares are governed by the Company’s Articles of Association and prevailing
legislation. There are no specific restrictions on the size of a shareholding. Subject to applicable law and the Articles
of Association, holders of ordinary shares are entitled to:
› receive all shareholder documents, including notice of any general meeting;
› attend, speak and exercise voting rights at general meetings, either in person or by proxy; and
› participate in any distribution of income or capital.
Restrictions on voting
There are no specific restrictions on the shareholders’ ability to exercise their voting rights, save and except in
situations where the Company is legally entitled to impose such restrictions (usually where amounts remain unpaid
on the shares after request, or the shareholder is otherwise in default of an obligation to the Company). Currently
all issued shares are fully paid.
Shares held by the Company’s employee benefit trust
The Company has established an employee benefit trust to hold shares for satisfying the awards made under its
employee share plans. The Deed of Trust requires the trustees to abstain from voting on the shares held in trust at
any general meeting of the Company.
Restrictions on the transfer of ordinary shares
Ron Kalifa, Chairman, has an interest in 564,156 ordinary shares in the Company that were acquired pursuant to the
terms of the consultancy agreement entered into on 13 March 2019 between WP/GA and RMK Consulting Services
Ltd., a company wholly owned by Mr Kalifa. Further details in respect of these shares and the consultancy agreement
are disclosed in the Remuneration Report on page 146. The 564,156 shares held by RMK Consulting Services Ltd may
not be transferred to any party during the period of three years following 10 April 2019 being the date when the
shares were admitted to trading on the London Stock Exchange.
The transfer of ordinary shares is governed by the general provisions of the Company’s Articles of Association and
prevailing legislation. There are no restrictions on the transfer of the ordinary shares other than: (i) as set out in the
consultancy agreement described in the preceding paragraph; (ii) as set out in the Articles of Association; and (iii)
certain restrictions which may from time to time be imposed by laws and regulations (for example insider trading
laws and regulations, which prohibit the transfer of shares by Directors, officers and employees at certain times and
otherwise require such individuals to obtain approval to deal in the ordinary shares in the Company in accordance
with the Company’s share dealing rules).
Network International Holdings Plc
Annual Report and Accounts 2020
151
Notifiable interests in voting rights
At 31 December 2020, and updated as at 1 March 2021, the Company had been notified of the following interests in
voting rights over the issued share capital of the Company:
Shareholder
The Capital Group Companies, Inc
Mastercard UK Holdco Limited
Harding Loevner LP
Emirates NBD Bank PJSC
Wellington Management Group LLP
As at 31 December 2020
As of 1 March 2021
Number of
voting rights
67,510,165
49,950,000
30,942,257
28,634,626
26,735163
% interest in
voting rights
12.27
9.08
5.63
5.21
4.86
Number of
voting rights
83,684,865
49,950,000
25,572,878
28,634,626
26,735,163
% interest in
voting rights
15.22
9.08
4.65
5.21
4.86
Nature of
Interest
Indirect
Direct
Direct
Direct
Indirect
Information provided to the Company under the Disclosure Guidance and Transparency Rules is publicly available via
the regulatory information service and on the Company’s website.
As at 1 March 2021, no Directors and/or their connected persons had an interest in 3% or more of the voting rights of
the Company.
Dividends
In view of the ongoing COVID-19 situation, the Board took the prudent step (announced on 2 April 2020) of deferring
the previously announced proposed final dividend in respect of 2019. No dividends were paid during the year. The
Directors do not recommend the payment of a dividend in respect of the financial year ended 31 December 2020.
Directors’ appointments
The names of the current Directors, the date on which each was appointed and the unexpired term of Service
Contract for each Director are disclosed in the Remuneration Report on page 146.
The appointment and replacement of Directors is governed by the Company’s Articles, the UK Corporate Governance
Code, the UK Companies Act 2006 and related legislation. Directors may be appointed by the Board, on the
recommendation of the Nomination Committee, or by the Company by ordinary resolution.
All Directors are subject to the election or re-election by shareholders at each Annual General Meeting.
Further information on the appointments to the Board is set out in the Corporate Governance Report on page 106.
Directors’ conflicts of interest
Directors are under a duty to declare any conflict or potential conflict of interest that may arise from time to time.
The Board considers and may authorise any conflict or potential conflict as appropriate. Directors with a conflict
do not participate in the discussion or vote on the matter in question. More details on how the Directors’ conflicts
of interest are addressed are in the Governance Report at page 107.
Powers of the Directors
Subject to the Company’s Articles of Association, the prevailing legislation and any directions by special resolution,
the business and affairs of the Company are managed by the Directors. Details of the current authorities to issue and
buy back shares are set out on page 150.
Qualifying third-party indemnity and Directors’ and Officers’ Liability Insurance
In accordance with its Articles of Association, the Company has granted a qualifying third-party indemnity, to the
extent permitted by law, to each Director and the Group Company Secretary. The Company also maintains Directors’
and Officers’ Liability Insurance.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 152
Directors’ Report – Other Statutory Disclosures continued
Significant agreements (change of control)
The common terms agreement dated 10 May 2016 (amended on 18 March 2019 and 7 August 2019) for a term facility
entered into by one of the subsidiaries of the Company and various lenders, to which the Company also acceded as
a guarantor along with other Group companies, provides for the ability to individual lenders to cease funding further
utilisation requests, and to seek repayment of all sums funded by them together with interest and other amounts
payable, on 10 business days’ notice in the event of (i) any person or group of persons acting in concert (other than
ENBD and WP/GA) acquiring (directly or indirectly) equity share capital having the right to cast more than 30% of
the votes capable of being cast in general meetings of the said subsidiary or the Company; or (ii) any sale of all or
substantially all of the businesses or assets of the Network International Group.
The revolving credit facility agreement dated 31 October 2019 entered into by one of the subsidiaries of the Company
and various lenders, to which the Company is also a signatory along with other Group companies as a guarantor,
provides for the ability to individual lenders to cease funding further utilisation requests, and to seek repayment of all
sums funded by them together with interest and other amounts payable, on 10 business days’ notice in the event of (i)
any person or group of persons acting in concert (other than ENBD and WP/GA) acquiring (directly or indirectly) equity
share capital having the right to cast more than 30% of the votes capable of being cast in general meetings of the said
subsidiary; or (ii) any sale of all or substantially all of the businesses or assets of the Network International Group.
In addition there are a number of agreements that take effect, alter, or terminate upon a change of control of the
Company. None are considered to be significant in terms of the Group as a whole.
Compensation for loss of office
Information in respect of Directors’ remuneration, including any contractual arrangements on termination
of employment, is disclosed in the Remuneration Report on page 139.
Financial instruments
In relation to the use of financial instruments by the Company, information in respect of:
a) the financial risk management objectives and policies of the Company, and
b) the exposure of the Company to credit risk, liquidity risk, market risk and operational risk, is disclosed in the
financial statements on pages 212 to 216.
Suppliers’ payment policy
Terms of payment are agreed with individual suppliers prior to supply. The Group aims to pay its suppliers promptly,
in accordance with terms agreed for payment, provided the goods or services have been provided in accordance
with the agreed terms and conditions.
Future developments
An indication of likely future developments in the business of the Company are included in the Strategic Report
on pages 14 to 19.
Branches outside the UK
The Company does not have any branches outside the UK. The Company has a number of subsidiary companies that
are operating in different countries in which they have been incorporated.
Donations
In line with the Company’s policy, no political donations were made, and no political expenditure was incurred during
the year.
Details of the Group’s charitable activities are included in the Strategic Report on page 68.
Amendment of Articles of Association
The Company’s Articles of Association may be amended by special resolution of shareholders. The Company’s
Articles of Association adopted by shareholders with effect from 10 April 2019, being the date of the IPO and the
admission of shares traded on the London Stock Exchange, are available on the Company’s website.
Going Concern and Viability Statements
The statements required to be included in the Annual Report following UK Corporate Governance Code provisions
30 and 31 can be found on pages 155 to 158 respectively and are incorporated into this Directors’ Report by reference.
Network International Holdings Plc
Annual Report and Accounts 2020
153
Disclosure of information to auditors
In accordance with Section 418 of the Companies Act 2006, each person who is a Director of the Company as at the
date of approval of this report confirms that:
› so far as the Director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and
› the Director has taken all the steps that he or she ought to have taken as a Director in order to make him/herself
aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and Accounts and the Group and Parent Company
financial statements in accordance with applicable law and practice.
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year.
Under that law they are required to prepare the Group financial statements in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law and have
elected to prepare the Parent Company financial statements in accordance with UK accounting standards and
applicable law, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
In addition the Group financial statements are required under the UK Disclosure Guidance and Transparency Rules
to be prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union (‘IFRS as adopted by the EU’). In addition the Group financial
statements were also prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (‘IFRS as issued by the IASB’).
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period.
In preparing each of the Group and Parent Company financial statements, the Directors are required to:
› Select suitable accounting policies and then apply them consistently;
› Make judgements and estimates that are reasonable and prudent;
› For the Group financial statements, state whether they have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union (‘IFRS as adopted by the EU’), and International Financial Reporting
Standards as issued by International Accounting Standards Board (‘IFRS as issued by the IASB’);
› For the Parent Company financial statements, state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and explained in the Parent Company financial statements;
› Assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
› Use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration report and Corporate Governance statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements 154
Directors’ Report – Other Statutory Disclosures continued
Responsibility statement of the Directors in respect of the Annual Report
We confirm that to the best of our knowledge:
› The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included
in the consolidation taken as a whole; and
› The Strategic Report includes a fair review of the development and performance of the business and the position
of the Company and the undertakings included in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s position and performance, business model
and strategy.
The Directors’ Report has been approved and is signed by order of the Board by:
Nandan Mer
Chief Executive Officer
7 March 2021
Registered Office:
Suite 1,
3rd Floor,
11-12 St James’s Square,
London, SW1Y 4LB
United Kingdom
Registered number:
11849292
Network International Holdings Plc
Annual Report and Accounts 2020
155
Viability statement
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the Group’s
prospects over a period longer than the 12 months required by the Going Concern statement.
Viability timeframe:
The Directors have assessed the Group’s viability over a period of three years from 31 December 2020. This period
was selected as an appropriate timeframe based on the following rationale:
› This time horizon is captured by our business planning cycle and a period during which principal risks (particularly
those of an operational nature over which we have more control) typically develop;
› The three-year period is also in line with long-term management incentive plan;
› The continuously innovating nature of the industry makes it difficult to predict with sufficient confidence how
competition, customer demand delivery mechanisms and other risks will evolve beyond a three-year timeframe; and
› The continuing changing macroeconomic and political environment, globally and regionally, presents greater
uncertainty into a forecasting period longer than three years.
Whilst the Directors have no reason to believe the Group will not be viable over a longer period than three years,
we believe that a three-year period presents shareholders with a reasonable degree of confidence, while providing
a longer-term perspective.
Assessment of prospects:
The Group gets a significant portion of its recurring revenues through long-term contracts with its diversified portfolio
of clients and aims at stable low to mid teen revenue growth strategy, as evidenced both by its past performance,
resilience and the position it occupies in the market.
The key factors supporting the Group’s prospects are:
› Long-term, loyal, blue-chip clients – Over the past 20 years, the Group has built long-standing and trusted
relationships with many of the leading merchants, financial institutions and card issuers operating in the MEA
region. The Group’s clients, on the Merchant Solutions side, include more than 80,000 merchants, and on the
Issuer Solution side, more than 200 leading financial institutions in its region of operations.
› Proprietary technology – The Group has developed its own independent, integrated, reliable and highly secure
next generation technology platforms, Network One and Network Lite, which serve both our Issuer and Merchant
Solutions business lines. Both principal platforms comprise core authorisation and card management systems
from commercial off-the-shelf providers to benefit from leading international technologies, which have been fully
integrated and tailored to the markets and regions in which the Group operates.
› Leadership position – We are the leading enabler of digital commerce across the Middle East and Africa (‘MEA’)
region, which is the world’s most underpenetrated payments market. The Group is the only pan-regional provider
of digital payments solutions at scale, with presence across the entire payments value chain. The Group sits at the
heart of the MEA payments ecosystem and operates a deeply entrenched network driving adoption of digital
payments across the region.
› The Group’s management team, which includes executives with regional and international experience, has been
instrumental in developing the Group into a leading digital payments provider in the MEA region. The members
of the Group’s management team have extensive industry experience in the financial services, payments and
technology sectors and a track record of execution at leading organisations regionally and internationally.
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements 156
Viability statement continued
Assessment process and key assumptions
The Group’s prospects are assessed primarily through its strategic and financial planning process. This includes
preparation of a detailed Group budget based on zero based budgeting. This process is led by the Group‘s Chief
Executive Officer and Chief Financial Officer, in conjunction with divisional and functional management teams.
The Board participates fully in the annual process to review, challenge and approve the annual operating budget.
The output of the annual budget process is a set of objectives, and a clear explanation of the key assumptions and
risks to be considered when agreeing the plan culminating into a detailed set of financial forecasts.
The Group also has a long-term strategy in place which helps drive the business forward. The strategy is reviewed
and updated on a periodic basis. Detailed financial forecasts for a time horizon of three years are prepared, with the
first year of the financial forecast forming the Group’s operating budget in line with overall Group strategy.
Business plans for subsequent years are firmed up based on the detailed budget in line with the overall strategic plan.
The operating budget is further updated through a rolling forecast process. Progress against financial budgets and
key objectives are reviewed in detail on a monthly basis by Group’s management team and the Board. Mitigating
actions are taken whether identified through actual trading performance or through the rolling forecast process.
The latest budget (for 2021) was reviewed and approved by the Board in December 2020. This budget is based
on Group’s current position and its prospects over the forthcoming year, and in line with Group’s stated strategy.
However, the proposed acquisition of DPO and specifically the proceeds from the equity raise to fund the acquisition,
have been excluded from the scenario analysis, except for the DPO specific scenario, which has been used to illustrate
the marginal impact of a poorly executed DPO acquisition on the Group’s viability.
The Group’s long-term prospects are guided by the following strategic priorities:
› Capitalise on structural market growth and regional adoption of digital payments
› Expand customer base
› Expand regional leadership position
› Leverage technology investment
The Group’s financial forecasts are based on the following key assumptions:
› Organic revenue growth of high double digit in 2021 post expected recovery from COVID-19 pandemic;
› Improvement in EBITDA margin in 2021 over 2020 as the business continues to recover from the pandemic;
› Stable Capex spends on core business post completion of transformation programme;
› No dividend payment to the shareholders;
› No change in capital structure of the Group (except required for the acquisition of DPO);
› Further Revenue and EBITDA upside from growth accelerator opportunities, such as partnership with Mastercard,
deeper geographic penetration in Saudi Arabia, large outsourcing opportunities and strategic M&A, which may
require additional investment.
Network International Holdings Plc
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157
Assessment of viability
Although the output of the Group’s strategic and financial planning reflects the management’s best estimate of the
future prospects of the business, the Group has also assessed the impact of severe yet possible scenarios. These
scenarios are designed to explore the Group’s resilience to the principal risks as set out in the ARA and combinations
of correlated risks. The key scenarios tested can be summarised as:
1.
Slowdown in card spends due to sluggish market conditions for various reasons including geo-political
scenario and impact of COVID-19 pandemic for a longer period impacting both Merchant Solutions and
Issuer Solution revenues
2. Data breaches
3. Loss of business/major clients
4. Technological interruption
Stress testing metrics
Principal Risks
Cyber security
Technology resilience
Operational resilience
Strategy and Business
People
Regulatory and Compliance
Geo-political
Financial (Liquidity)
Fraud
Credit
Third party
Slowdown in card
spends due to slow
market activity
Data breaches /
cyber attack
Loss of business /
major clients
Technological
interruption
–
–
–
ü
–
–
ü
ü
–
ü
–
ü
ü
ü
ü
–
ü
–
–
ü
–
ü
–
–
–
ü
ü
ü
ü
ü
–
–
–
ü
ü
ü
ü
–
ü
–
–
–
–
ü
The results of the stress testing demonstrate that, due to the Group’s cash generation ability and ongoing availability
of sufficient liquidity, Network will be able to withstand the impact of both each scenario individually as well as all the
scenarios happening simultaneously. The mitigants considered as part of this stress testing include initiatives to be
taken to reduce operating expenses, and to minimise capital expenditure. The Board assessed these mitigants as both
achievable and proportionate to the stress considered.
While performing the above stress testing, some risks are outside the Group’s control and the potential implications
are difficult to predict (i.e. catastrophic risks due to any unforeseen geo-political scenarios or otherwise), and have
not been considered in the scenario testing.
Viability Statement
Based on the results of their analysis, the Directors confirm that they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period ending
31 December 2023.
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements
158
Going Concern Statement
The Directors have adopted the going concern basis in preparing these consolidated financial statements after
assessing the principal risks and having considered the impact of COVID-19 on the Group financial performance
including under a base case and a severe but plausible downside scenario. The COVID-19 pandemic has significantly
impacted the performance of the Group throughout the period, and is discussed in detail in the ‘COVID-19 response’.
In making this assessment, the Directors have considered a forecast period of more than 12 months (until June 2022),
estimating key performance indicators including revenues, underlying EBITDA, underlying and reported net income,
capital expenditure and liquidity position of the Group based upon the known and expected impacts of COVID-19 as
of now. The base forecast has been done based on the budget for 2021 approved by the Board. The base forecast
excludes the impact of the acquisition of DPO and the proceeds of the equity raise to fund the acquisition.
The forecast has been done based on assumptions related to key variables including but not limited to Transaction
Processing Volumes (‘TPV’), number of cards hosted and transactions processed, which are the key drivers of the
Group revenues and cash flows. Both business lines of Merchant Solutions and Issuer Solutions have been impacted
differently by the COVID-19 crisis. In Merchant Solutions, the Group’s revenues are generated through fees dependent
upon the value of transactions processed (‘TPV’), as well as through value added services, and overall are very closely
correlated to the underlying value of transactions taking place, and hence, significantly impacted with COVID-19
pandemic. While in Issuer Solutions, the Group’s customers are typically financial institutions, where we have multi-
year contracts in place and a number of them have contractual minimums. Therefore our revenues for this business
line are somewhat correlated to underlying transaction volumes, but have a greater resilience due to the card hosting
and contractually fixed elements.
During the period, the Group has refinanced the syndicated term lending facility. The loan placement was
considerably over subscribed by banks with both global and regional presence. The Group has additional committed
revolving credit lines in place. The Group continues to have significant liquidity headroom to meet its financial
obligations, as described in the ‘Chief Financial Officer’s Review’ section in the Strategic Report. The Group’s leverage
ratio also remains below the maximum threshold prescribed under the financing facility agreement in the base case
scenario as well as under the severe but plausible downside scenario as described below.
The base forecast has been further stress tested by using a severe but plausible downside scenario, to assess the
Group’s resilience against the possible adverse effect of the continued impact of the COVID-19 pandemic on the
economy. In the stress scenario, the Directors assumed slower economic recovery as compared to the base case
forecast and assumed that recovery of financial performance to the level of 2019 could be delayed until mid-2022.
The Group forecasted revenues for 2021 and 2022 under stress scenario assumptions are lower than they would
have been prior to onset of the COVID-19 pandemic (2019 revenues: USD 335.4 million).
The costs do not go down in the same proportion as the decrease in revenues as a significant proportion of the
Group’s cost base is fixed in nature. This also impacts the headroom available in the Group’s leverage ratio. However,
with forecast operating cash flow generation and available and committed financing facilities as explained above,
the leverage ratio remains below the threshold in the downside scenario.
Furthermore, the Directors further assessed and concluded that the proposed acquisition of DPO Group does
not materially impact the headroom available in the Group’s leverage ratio under the base case and the severe
but plausible downside scenario.
Having considered the above factors, the Directors have a reasonable expectation that the Group has adequate
resources to remain in operation for at least 12 months from the approval of these consolidated financial statements
and therefore continue to adopt the going concern basis in preparing the consolidated financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
159
Independent Auditor’s Report to the Members
of Network International Holdings Plc
1. Our opinion is unmodified
We have audited the financial statements of Network International Holdings plc (‘the Company’) for the year ended
31 December 2020 which comprise the consolidated statement of financial position, consolidated statement of profit or
loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity, consolidated
statement of cash flows, Parent Company statement of financial position, Parent Company statement of changes in equity,
and the related notes, including the accounting policies in note 2.
In our opinion:
› the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 December 2020 and of the Group’s profit for the year then ended;
› the Group financial statements have been properly prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union (IFRS as adopted by the EU);
› the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
› the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation to the extent applicable.
Additional opinion in relation to IFRSs as issued by the IASB
As explained in note 2 (a) of the consolidated financial statements, the Group, in addition to complying with its legal
obligation to apply international accounting standards in conformity with the requirements of the Companies Act,
has also applied IFRSs as issued by the International Accounting Standards Board (‘IASB’).
In our opinion the Group financial statements have been properly prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our report to the Audit and Risk Committee.
We were first appointed as auditor by the Directors on 28 March 2019. The period of total uninterrupted engagement is
for the two financial years ended 31 December 2020. We have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited by that standard were provided.
Materiality:
Group financial statements as a whole
USD 3.0m (2019: USD 4.0m)
4.7% (2019: 4.3%) of normalised profit before tax
Coverage
Key audit matters
Recurring risks
93.4% (2019: 88.0%) of Group profit before tax
vs 2019
Revenue recognition on acquiring revenue
Alternative Performance Measures
Recoverability of parent’s investment in subsidiary undertaking
Event driven
Going Concern
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 160
Independent Auditor’s Report to the Members of Network International Holdings Plc
continued
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. We summarise below the key audit matters, in arriving at our audit opinion
above, together with our key audit procedures to address those matters and, as required for public interest entities, our
results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon,
and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
Revenue recognition – acquiring revenue – 64% of Merchant Solutions revenue of USD 109.4m
(2019: 64% of Merchant Solutions revenue of USD 152.5m)
Refer to page 72 of Principal Risks and Uncertainties and page 115 of the Audit and Risk Committee Report.
The risk
Data capture: Acquiring revenue is recognised based on
the value and nature of transactions processed and the
rates agreed with merchants and other parties. The value
of transactions is extracted from operational IT systems
through which payments are processed. These operational
IT systems are highly complex in nature.
Processing error (IT systems): There is a risk that these
systems may not be configured correctly from the outset
such that revenues are calculated incorrectly that data does
not correctly flow through the operational IT systems, and
that unauthorised changes may be made to any of these
systems, which may result in the misstatement of revenue.
Processing error (finance processes): The output from the
operational IT systems is used to calculate and record
revenue balances. Accurate revenue recognition requires
core finance processes accurately reporting on and
reconciling the transactions as reported by the IT systems.
Our response
Our procedures included:
Control design: Testing IT controls relating to access to
programs and data, program change and development
and computer operations in order to address the risk of
unauthorised changes being made to the operation of
IT application controls.
Control design and operation: Testing the design,
implementation and operating effectiveness of IT application
controls, including controls around customer set up and
changes to master data that are designed to ensure the
appropriate rates are assigned to each merchant in the system
based on signed contract terms.
Control re-performance: Testing the operating effectiveness
of the manual controls over the reconciliation of transactions
as reported by the IT systems.
Reperformance: On a sample basis vouching items recorded
back to source data including:
› Agreeing key system inputs from which the revenue amounts
are derived to the source documents to assess the data
integrity of these inputs.
› Recalculating of the revenue to be recognised, disaggregated
by merchant and scheme, based upon the key system inputs.
› Examining cash receipts from schemes and third-party
confirmations.
› Reviewing customer complaints data to assess whether
any recognised revenue amount is in dispute.
Assessing whether the Group’s disclosures in respect
of revenue recognition provide sufficient detail for users
to understand the nature of transactions.
Our results
We found the revenue recognised in respect of acquiring
revenue to be acceptable (2019: acceptable).
Network International Holdings Plc
Annual Report and Accounts 2020
161
Alternative Performance Measures
Throughout the Annual Report and financial statements.
The risk
Presentation appropriateness
The Group has to comply with the ESMA Guidelines on
Alternative Performance Measures (‘APMs’) that require
equal prominence, consistency, clear definitions, and
reconciliations to equivalent IFRS measures. An APM is
any financial measure that is not extracted directly from
the IFRS financial statements – for Network this includes
items such as Underlying EBITDA, Underlying Net Income,
Underlying EPS, and constant currency measures. In
addition, where certain items are excluded from an APM
(for example Specially Disclosed Items), there are criteria
that need to be met.
There is a risk that the financial statement disclosures and
other disclosures to the market (including in the front-half
narrative) do not comply with these requirements.
Our response
Our procedures included:
Alternative Performance Measures: For each APM verifying
that the requirements of the ESMA guidelines are met
through challenging management and critically assessing
disconfirming evidence (for example around these measures
being balanced and presenting equally positive and negative
results). We assessed that each APM was presented with a
meaningful label, had a clear description and explanation
and no more prominence than the IFRS equivalents.
Specially Disclosed Items (‘SDIs’): In assessing the
appropriateness of adjustments to the IFRS equivalents,
we assessed whether each SDI was exceptional by nature,
incidence or size, was not a recurring item and clearly
described by management.
Our results
We found the presentation of the Alternative Performance
Measures in the context of the Annual Report and financial
statements to be acceptable (2019: acceptable).
Going concern
Refer to note 2 (d) to the consolidated financial statements and page 124 of the Audit and Risk Committee Report.
The risk
Our response
Disclosure quality
The financial statements explain how the Board has formed a
judgement that it is appropriate to adopt the going concern
basis of preparation for the Group and Parent Company.
That judgement is based on an evaluation of the inherent
risks to the Group’s and Company’s business model and how
those risks might affect the Group’s and Company’s financial
resources or ability to continue operations over a period to
the end of June 2022.
The risks most likely to adversely affect the Group’s and
Company’s available financial resources and/or metrics
relevant to debt covenants over this period were:
› The impact of COVID-19 restrictions affecting the Group’s
performance;
› Reduced consumer confidence leading to slowdown in
card spends.
There are also less predictable but realistic second order
impacts, such as the risks of technical and operational
interruptions which impact the Group’s ability to execute
its strategy in the near to medium term.
The risk for our audit was whether or not those risks were
such that they amounted to a material uncertainty that may
have cast significant doubt about the ability to continue as
a going concern. Had they been such, then that fact would
have been required to have been disclosed.
Considering whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period
by assessing the Directors’ sensitivities over the level of
available financial resources and covenant thresholds
indicated by the Group’s financial forecasts taking account
of severe, but plausible, adverse effects that could arise from
these risks individually and collectively.
Our procedures also included:
Historical comparisons: considering the historical accuracy of
the Group’s cash flow forecasts and growth rates by assessing
the accuracy of previous forecasts to actuals.
Sensitivity analysis: considering sensitivities over the level of
available financial resources indicated by the Group’s financial
forecasts taking account of plausible (but not unrealistic)
adverse effects that could arise from these risks individually
and collectively.
Our sector experience: assessing and challenging the key
assumptions in the forecasts used by the Directors by
benchmarking these against external forecasts and our
sector knowledge.
Assessing transparency:
› considering whether the going concern disclosure in note 2 (d)
to the financial statements gives a full and accurate description
of the Directors’ assessment of going concern.
Our results
We found the going concern disclosure in note 2 (d) without
any material uncertainty to be acceptable (2019: acceptable).
Network International Holdings Plc
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Strategic reportCorporate governanceFinancial statements 162
Independent Auditor’s Report to the Members of Network International Holdings Plc
continued
Recoverability of Parent Company’s investment in subsidiaries (USD 1,553 million)
Refer to page 221 (accounting policy) and page 224 (financial disclosures).
The risk
Low risk, high value
The carrying amount of the Parent Company’s investments
in subsidiaries represents 100% of the Company’s total
assets. Their recoverability is not at a high risk of significant
misstatement or subject to significant judgement. However,
due to their materiality in the context of the Parent Company
financial statements, this is considered to be the area that
had the greatest effect on our overall Parent Company audit.
Our response
Our procedures included:
Tests of details: Comparing the carrying amount of 100% of
investments with the relevant subsidiaries’ draft balance sheet
to identify whether their net assets, being an approximation
of their minimum recoverable amount, were in excess of their
carrying amount and assessing whether those subsidiaries
have historically been profit-making.
Comparing valuations: For the investments where the
carrying amount exceeded the net asset value, comparing
the carrying amount of the investment with the expected
value of the business based on a suitable multiple of the
subsidiaries’ profit.
Comparing the carrying value of the investments to the
market capitalisation of the Group.
Our results
We found the Group’s assessment of the recoverability of the
investment in subsidiaries to be acceptable (2019: acceptable).
3. Our application of materiality and an overview of the scope of our audit
Materiality
Materiality for the Group financial statements as a whole was set at USD 3.0m (2019: USD 4.0m), determined with reference
to a benchmark of Group profit before tax, normalised to exclude reorganisation, restructuring and settlement, share-based
compensation, and M&A and IPO related costs, and normalised by averaging over the last three years due to fluctuations in
the business environment, as disclosed in note 4, of USD 64.3m (2019: normalised Group profit before tax of 92.4m), of which
it represents 4.7%(2019: 4.3% of 2019 normalised Group profit before tax).
Materiality for the Parent Company financial statements as a whole was set at USD 1.5m (2019: USD 3.4m), determined with
reference to Company total assets (2019: total assets), of which it represents 0.1% (2019: 0.2%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements
in individual account balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 75% (2019: 75%) of materiality for the financial statements as a whole, which equates
to USD 2.25m (2019: USD 3.0m) for the Group and USD 1.13m (2019: USD 2.55m) for the Parent Company. We applied this
percentage in our determination of performance materiality because we did not identify any factors indicating an elevated
level of risk.
We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding
USD 0.15m (2019: USD 0.2m), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Scope
Of the Group’s 16 (2019: 16) reporting components, we subjected 7 (2019: 5) to full scope audits for Group purposes.
The components within the scope of our work accounted for the following percentages of the Group’s results:
Audits for Group reporting purposes
Group
revenue
Group profit
before tax
Group
total assets
97.6%
93.4%
96.6%
The remaining 2.4% (2019: 9.4%) of total Group revenue, 6.6% (2019: 12.0%) of total Group profit before tax and 3.4% (2019:
7.4%) of total Group assets is represented by 9 (2019: 11) reporting components, none of which individually represented more
than 4% (2019: 6%) of any of the total Group revenue, Group profit before tax or total Group assets. For these residual
components, we performed an analysis at an aggregated Group level to re-examine our assessment that there were no
significant risks of material misstatement within these.
Network International Holdings Plc
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163
The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks
detailed above and the information to be reported back. The Group audit team approved the component materiality, which
ranged from USD 0.75m to USD 2.55m (2019: USD 1.2m to USD 3.4m), having regard to the mix of size and risk profile of the
Group across the components. The work on 6 (2019: 4) of the Group’s 7 (2019: 5) components was performed by component
auditors and the audit of the Parent Company was performed by the Group audit team. For those items excluded from
normalised Group profit before tax, the component teams performed procedures on items relating to their components.
The Group team performed procedures on the remaining excluded items.
On account of the travel restrictions in place during the performance of the audit, the Group team has not visited any
component auditor and instead held virtual conference meetings with all component auditors (2019: the Group audit team
visited 2 component locations in UAE and Jordan). At these meetings the Group team discussed the audit strategy, the
ongoing audit efforts and focus areas, and the findings reported to the Group audit team were discussed in more detail.
Any further work required by the Group team was then performed by the component auditor.
4. Going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the
Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s
financial position means that this is realistic. They have also concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a going concern for a period up to the end of June 2022
(‘the going concern period’).
An explanation of how we evaluated management’s assessment of going concern is set out in the related key audit matter
in section 2 of this report.
Our conclusions based on this work:
› we consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate;
› we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events
or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as
a going concern for the going concern period;
› we have nothing material to add or draw attention to in relation to the Directors’ statement in note 2 (d) to the financial
statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt
over the Group and Company’s use of that basis for the going concern period; and
› the related statement under the Listing Rules set out on page 175 is materially consistent with the financial statements and our
audit knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee
that the Group or the Company will continue in operation.
5. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (‘fraud risks’) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
› Enquiring of Directors, the Audit and Risk Committee, internal audit and inspection of policy documentation as to the Group’s
high-level policies and procedures to prevent and detect fraud , including the internal audit function, and the Group’s channel
for ‘whistleblowing’, as well as whether they have knowledge of any actual, suspected or alleged fraud.
› Reading Board and Audit and Risk Committee minutes.
› Considering remuneration incentive schemes and performance targets for Directors.
› Using analytical procedures to identify any usual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout
the audit. This included communication from the Group to full scope component audit teams of relevant fraud risks identified
at the Group level and request to full scope component audit teams to report to the Group audit team any instances of fraud
that could give rise to a material misstatement at Group level.
As required by auditing standards, we perform procedures to address the risk of management override of controls and the
risk of fraudulent revenue recognition, in particular the risk that the Issuer Solutions revenue is recorded in the incorrect
period and the risk that Group and component management may be in a position to make inappropriate accounting entries.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 164
Independent Auditor’s Report to the Members of Network International Holdings Plc
continued
We also identified a fraud risk related to Annual Report disclosures not being in line with ESMA Guidelines on Alternative
Performance Measures (‘APMs’), in response to possible pressures to meet profit targets.
Further detail in respect of Annual Report disclosures is set out in the key audit matter disclosures in section 2 of this report.
We performed procedures including:
›
Identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the
identified entries to supporting documentation. These included those posted by senior finance management, those posted and
approved by the same user, and those posted to unusual accounts.
› Performing controls and substantive testing at full scope components with Issuer Solutions revenue to verify that these have
been recorded in the correct period.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience, and through discussion with the Directors and other
management (as required by auditing standards), and discussed with the Directors and other management the policies
and procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations throughout our team and remained alert to any indications of
non-compliance throughout the audit. This included communication from the Group to full-scope component audit teams
of relevant laws and regulations identified at the Group level, and a request for full scope component auditors to report to
the Group team any instances of non-compliance with laws and regulations that could give rise to a material misstatement
at Group level.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation (including related companies legislation), distributable profits legislation, and taxation legislation and we assessed
the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation.
We identified the following areas as those most likely to have such an effect: anti-bribery, and certain aspects of company
legislation recognising the financial and regulated nature of the Group’s activities and its legal form. Auditing standards limit
the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and
other management and inspection of regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will
not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly,we do not express an audit
opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material misstatements in the other information.
Network International Holdings Plc
Annual Report and Accounts 2020
165
Strategic Report and Directors’ Report
Based solely on our work on the other information:
› we have not identified material misstatements in the Strategic Report and the Directors’ Report;
›
›
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures
in respect of emerging and principal risks and the Viability Statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
› the Directors’ confirmation within the Viability Statement on page 155 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those that would threaten its business model, future performance,
solvency and liquidity;
› the Principal Risks and Uncertainties disclosures describing these risks and how emerging risks are identified, and explaining how
they are being managed and mitigated; and
› the Directors’ explanation in the Viability Statement of how they have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out on page 155, under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these
statements is not a guarantee as to the Group’s and Company’s longer-term viability.
7. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
› adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
› the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
› certain disclosures of Directors’ remuneration specified by law are not made; or
› we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 153, the Directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error; assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group
or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 166
Independent Auditor’s Report to the Members of Network International Holdings Plc
continued
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance
is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
9. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state
to the Company’s members those matters we are required to state to them in an auditor’s report and the further matters we
are required to state to them in accordance with the terms agreed with the Company, and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for the opinions we have formed.
Michael Harper (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
7 March 2021
Network International Holdings Plc
Annual Report and Accounts 2020
167
Consolidated Statement of Financial Position
as at 31 December
Assets
Non-current assets
Goodwill
Intangible assets
Property and equipment
Investment in associate
Investment securities
Long-term receivables
Total non-current assets
Current assets
Scheme debtors
Receivables and prepayments
Restricted cash
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Borrowings
Other long-term liabilities
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Merchant creditors
Trade and other payables
Borrowings
Total current liabilities
Shareholders’ equity
Share capital
Share premium
Foreign exchange reserve
Reorganisation reserve
Other reserves
Retained earnings
Equity attributable to equity holders
Non-controlling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
Notes
2020
USD’000
2019*
USD’000
8
8
7
9
10
11
10, 12
12
15
17
24.2
10
14
15
262,609
188,523
50,285
59,808
246
2,617
564,088
165,436
67,874
52,550
398,781
684,641
1,248,729
369,025
21,584
1,837
392,446
165,142
127,732
65,447
358,321
262,561
186,499
57,400
54,432
246
2,533
563,671
185,268
88,496
54,029
45,473
373,266
936,937
211,783
24,379
1,788
237,950
167,167
127,453
165,661
460,281
18
71,557
18
252,279
18
(19,438)
18 (1,552,365)
18
4,773
1,741,609
498,415
65,100
–
(20,115)
(1,552,365)
5,851
1,742,096
240,567
(453)
497,962
(1,861)
238,706
1,248,729
936,937
* 2019 figures have been re-presented following the classification of Mercury Payments Services LLC (‘Mercury’, a subsidiary of the Group) from discontinued operations to
continuing operations in 2020.
The notes on pages 174 to 218 form part of these consolidated financial statements. These consolidated financial statements
were approved and authorised for issue by the Board of Directors on 7 March 2021 and signed on its behalf by:
Nandan Mer
Director and Chief Executive Officer
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 168
Consolidated Statement of Profit or Loss
for the year ended 31 December
Continuing operations
Revenue
Personnel expenses
Selling, operating and other expenses
Depreciation and amortisation
Share of profit of associate
Profit before interest and tax
Net interest expense
Write-off of unamortised debt issuance cost
Unrealised foreign exchange losses
Profit before tax
Taxes
Profit from continuing operations
Discontinued operations
Loss from discontinued operations, net of taxes
Profit for the year
Attributable to:
Equity holders of the Group
Non-controlling interest
Profit for the year
Notes
2020
USD’000
2019*
USD’000
19
284,844
335,379
20
21
7, 8
9
22
15
24
(96,933)
(103,174)
(51,537)
5,820
(96,744)
(106,424)
(46,817)
5,299
39,020
90,693
(21,669)
(6,721)
(328)
(24,844)
–
(1,894)
10,302
(4,704)
63,955
(6,638)
5,598
57,317
16
–
(359)
5,598
56,958
6,155
(557)
57,604
(646)
5,598
56,958
Earnings per share (basic and diluted) in USD cents
Earnings per share – Continuing operations (basic and diluted) in USD cents
23
23
1.2
1.2
11.5
11.6
* 2019 figures have been re-presented following the classification of Mercury Payments Services LLC (‘Mercury’, a subsidiary of the Group) from discontinued operations to
continuing operations in 2020.
The notes on pages 174 to 218 form part of these consolidated financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
169
Consolidated Statement of Other Comprehensive Income
as at 31 December
Profit for the year
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Foreign currency translation difference on foreign operations
Items that will never be reclassified to profit or loss
Re-measurement of defined benefit liability
Net change in other comprehensive income
Total comprehensive income for the year
Attributable to:
Equity holders of the Group
Non-controlling interest
Total comprehensive income
The notes on pages 174 to 218 form part of these consolidated financial statements.
2020
USD’000
5,598
2019
USD’000
56,958
677
3,160
(1,365)
(1,692)
(688)
1,468
4,910
58,426
5,467
(557)
59,072
(646)
4,910
58,426
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 6
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171
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
172
Consolidated Statement of Cash Flows
for the year ended 31 December
Operating activities
Profit for the year from operations
Adjustments for:
Depreciation and amortisation
Write-off of unamortised debt issuance cost
Provision for expected credit losses
Net interest expense
Taxes
Foreign exchange losses and others
Loss on sale of assets
Share of profits from associate
Charge for share-based payment
Changes in long-term receivables and other liabilities
Interest paid
Taxes paid
Changes in working capital before settlement related balances1
Net cash flows before settlement related balances
Changes in settlement related balances2
Net cash flows from operating activities
Investing activities
Purchase of intangible assets and property and equipment
Dividends received from associate
Sale of intangible assets and property and equipment
Interest received
Net cash flows from investing activities
Notes
2020
USD’000
2019*
USD’000
5,598
56,958
7,8
15
11
22
24
17
11
4.6
9
51,537
6,721
2,183
21,669
4,704
358
–
(5,820)
4,070
656
(16,985)
(6,058)
19,581
46,817
–
510
24,844
6,638
6,471
17
(5,299)
1,405
(4,986)
(21,300)
(10,415)
(9,625)
88,214
92,035
19,286
40,391
107,500
132,426
(50,064)
–
585
441
(49,038)
(79,310)
2,723
–
1,093
(75,494)
* 2019 figures have been re-presented following the classification of Mercury Payments Services LLC (‘Mercury’, a subsidiary of the Group) from discontinued operations to
continuing operations in 2020.
1 Changes in working capital before settlement related balances reflects movements in receivables and prepayments and trade and other payables adjusted for non-cash items.
2 Changes in settlement related balances reflects movements in scheme debtors, merchant creditors and restricted cash.
The notes on pages 174 to 218 form part of these consolidated financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
173
Notes
2020
USD’000
2019*
USD’000
415,000
(328,751)
(10,425)
(6,676)
(4,620)
1,965
264,737
(6,001)
35,000
(44,918)
(12,821)
(2,903)
(4,394)
–
–
–
325,229
(30,036)
383,691
–
(169)
26,896
744
405
(14,422)
(42,467)
369,100
(14,422)
Financing activities
Proceeds from new borrowings
Repayment of borrowings
Purchase of treasury shares
Payment of debt issuance cost
Payment of lease liabilities
Issuance of subsidiary’s capital to non-controlling interest
Proceeds from issuance of new shares
Payment of share issuance expenses
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash as part of held for sale
Effect of movements in exchange rates on cash held
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (refer (i) below)
Note (i): Cash and cash equivalents – as per consolidated statement of financial position
Bank overdraft
12
15
398,781
(29,681)
369,100
45,473
(59,895)
(14,422)
* 2019 figures have been re-presented following the classification of Mercury Payments Services LLC (‘Mercury’, a subsidiary of the Group) from discontinued operations to
continuing operations in 2020.
The notes on pages 174 to 218 form part of these consolidated financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
174
Notes to the Consolidated Financial Statements
1. Legal status and activities
Network International Holdings PLC (the ‘Company’) listed its shares on the London Stock Exchange on 12 April 2019.
The principal activities of the Group are enabling payments acceptance at merchants, acquirer processing, switching
financial transactions, hosting cards and processing payment transactions and providing end to end management
services and digital payment services.
The registered office of the Company is situated in England and Wales.
The consolidated financial statements of the Group as at and for the year ended 31 December 2020 comprise the Company
and its subsidiaries (together referred to as the ‘Group’) and the Group’s interest in associates.
A Group reorganisation was done in 2019 prior to its listing on the London Stock Exchange to facilitate the process. The result
of the application of the capital reorganisation was to present the consolidated financial statements of 2019 as if the Company
had always owned the Group. A Group Reorganisation Reserve was created as a separate component of equity, representing
the difference between the share capital of the Company at the date of the Group reorganisation and that of the previous top
organisation of the Group, Network International LLC.
The principal steps of the Group reorganisation were as follows:
› On 27 February 2019, the Company was incorporated by Network International LLC for 100 ordinary shares of GBP 1 each.
› On 20 March 2019, Network International LLC transferred investment in Network International Holdings PLC to the shareholders.
› On 29 March 2019, the existing share capital of the Company comprising 100 shares of GBP 1 each was split 10:1 into 1,000 shares
of GBP 0.10 each. Subsequently, on the same day, the Company issued 1,396 new shares of GBP 0.10 each for GBP 139 / USD 180.
This was followed by a share consolidation resulting in total share capital comprising 100 shares of GBP 2.396 / USD 3.119592
each. The net effect of this restructuring of capital was to increase the nominal value per share to GBP 2.396 / USD 3.119592 for
100 shares outstanding.
› On 29 March 2019, the Company issued 499,999,900 shares to existing shareholders (254,999,949 to Emirates NBD PJSC and
244,999,951 to WP / GA) of par value GBP 2.396 / USD 3.119592 per share in exchange for acquiring the shares of the subsidiary
(Network International Holding 1 Limited) and the shareholder’s receivables from Network International Holding 1 Limited. This
resulted in the creation of share capital of USD 1,559,795,688 and share premium of USD 6,183,530 (being the difference between
the carrying value of the shareholder’s receivable of USD 13,614,704 and the corresponding nominal value of shares issued of
USD 7,431,174).
› On 1 April 2019, the Company undertook a capital reduction by reducing the nominal value of its shares in issue from GBP 2.396 /
USD 3.119592 to GBP 0.1000 per share / USD 0.1302 and cancellation of share premium created above.
The capital reduction resulted in the creation of distributable reserves of USD 1,507,767,530. The difference in the GBP/USD
foreign exchange rate between the date of share issuance and capital reduction resulted in the creation of a foreign exchange
difference of USD 6,888,000, which would be considered as a realised loss and hence, has been netted off against the
Company’s retained earnings on the consolidated statement of financial position.
During the year, the Group has increased its share capital. For details, please refer to note 18 of these consolidated
financial statements.
2. Basis of preparation
(a) Statement of compliance
These Group financial statements were prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
These Group financial statements were also prepared in accordance with International Financial Reporting Standards (‘IFRS’)
as issued by the International Accounting Standards Board (‘IASB’). Included within these consolidated financial statements
are alternative performance measures (‘APM’) which are disclosed in note 4.
Network International Holdings Plc
Annual Report and Accounts 2020
175
(b) Basis of measurement
The consolidated financial statements have been prepared under the historical cost basis except for the liability for defined
benefit obligation, which is recognised at the present value of the defined benefit obligation, and financial assets at fair value
through profit or loss, which are measured at fair value.
(c) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The Company’s functional currency is GBP.
The presentation currency of the Group is United States Dollar (‘USD’) as this is a more globally recognised currency and
moreover two of the Group’s largest entities’ functional currencies (United Arab Emirates dirhams (‘AED’) for Network
International LLC and Jordanian Dinar (‘JOD’) for Network International Services Limited Jordan) are pegged with USD.
All financial information presented in USD has been rounded to the nearest thousands, except when otherwise indicated.
(d) Going concern
The Directors have adopted the going concern basis in preparing these consolidated financial statements after assessing
the principal risks and having considered the impact of COVID-19 on the Group financial performance including under a base
case and a severe but plausible downside scenario. The COVID-19 pandemic has significantly impacted the performance
of the Group throughout the period, and is discussed in detail in the ‘COVID-19 response’.
In making this assessment, the Directors have considered a forecast period of more than 12 months (until June 2022),
estimating key performance indicators including revenues, underlying EBITDA, underlying and reported net income, capital
expenditure and liquidity position of the Group based upon the known and expected impacts of COVID-19 as of now. The
base forecast has been done based on the budget for 2021 approved by the Board. The base forecast excludes the impact
of the acquisition of DPO and the proceeds of the equity raise to fund the acquisition.
The forecast has been done based on assumptions related to key variables including but not limited to Transaction
Processing Volumes (‘TPV’), number of cards hosted and transactions processed, which are the key drivers of the Group
revenues and cash flows. Both business lines of Merchant Solutions and Issuer Solutions have been impacted differently
by the COVID-19 crisis. In Merchant Solutions, the Group’s revenues are generated through fees dependent upon the value
of transactions processed (‘TPV’), as well as through value added services, and overall are very closely correlated to the
underlying value of transactions taking place, and hence, significantly impacted by the COVID-19 pandemic. In Issuer
Solutions, the Group’s customers are typically financial institutions, where we have multi-year contracts in place and a
number of them have contractual minimums. Therefore our revenues for this business line are somewhat correlated to
underlying transaction volumes, but have a greater resilience due to the card hosting and contractually fixed elements.
During the period, the Group has refinanced the syndicated term lending facility. The loan placement was considerably over
subscribed by banks with both global and regional presence. The Group has additional committed revolving credit lines in
place. The Group continues to have significant liquidity headroom to meet its financial obligations, as described in the ‘Chief
Financial Officer’s Review’ section in the Strategic Report. The Group’s leverage ratio also remains below the maximum
threshold prescribed under the financing facility agreement in the base case scenario as well as under severe but plausible
downside scenario as described below.
The base forecast has been further stress tested by using a severe but plausible downside scenario, to assess the Group’s
resilience against the possible adverse effect of the continued impact of the COVID-19 pandemic on the economy. In the
stress scenario, the Directors assumed slower economic recovery as compared to the base case forecast and assumed that
recovery of financial performance to the level of 2019 could be delayed until mid-2022. The Group forecasted revenues for
2021 and 2022 under stress scenario assumptions are lower than they would have been prior to onset of the COVID-19
pandemic (2019 revenues: USD 335.4 million).
The costs do not go down in the same proportion as the decrease in revenues as a significant proportion of the Group’s
cost base is fixed in nature. This also impacts the headroom available in the Group’s leverage ratio. However, with forecast
operating cash flow generation and available and committed financing facilities as explained above, the leverage ratio
remains below the threshold in the downside scenario.
Furthermore, the Directors further assessed and concluded that the proposed acquisition of DPO Group does not materially
impact the headroom available in the Group’s leverage ratio under the base case and the severe but plausible downside scenario.
Having considered the above factors, the Directors have a reasonable expectation that the Group has adequate resources
to remain in operation for at least 12 months from the approval of these consolidated financial statements and therefore
continue to adopt the going concern basis in preparing the consolidated financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 176
2. Basis of preparation continued
(e) New standards and interpretations
New standards and interpretations that are effective.
The following amendments and interpretations apply for the first time in 2020, but do not have any significant impact
on the consolidated financial statements.
› Amendments to IFRS 3: clarify the definition of business
› Amendments to IFRS 7, 9 and IAS 39: addressing issues affecting financial reporting in the period leading up to IBOR reform
› Amendments to IAS 1 and IAS 8: update the definition of material
› Amendments to References to the Conceptual Framework in IFRS Standards:
– Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20,
IFRIC 22, and SIC-32 to update those pronouncements with regard to the revised Conceptual Framework.
(f) Accounting judgements and estimates
The preparation of consolidated financial statements requires Directors to make judgements and estimates that affect the
application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Critical accounting judgements
Accounting judgements made by the Directors in the process of applying the Group’s accounting policies, that have the most
significant effect on the amounts recognised in the consolidated financial statements, are as follows:
Specially Disclosed Items
i.
The Directors have exercised their judgement to identify one-off items, either income or expense in nature, and has
separately disclosed these items as Specially Disclosed Items (‘SDIs’) in the notes to the consolidated financial statements.
The Directors consider the following key criteria when exercising their judgement to classify any items as SDI:
› Whether the item being considered is material and represents a one-off / exceptional event that needs to be disclosed separately
as an SDI; and
› Will it aid the user of the financial statements in understanding the activities taking place across the Group by enhancing the
comparability of information between reporting periods.
The Directors classified these items under SDIs to compute underlying metrics (referred as alternative performance measures
in the Annual Report and notes to the consolidated financial statements) to assess the Group’s underlying performance on a
day-to-day basis, developing budgets and measuring performance against those budgets and in determining management
remuneration. For further details on Specially Disclosed Items, please refer to note 4 of these consolidated financial statements.
Critical accounting estimates
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting
period that could have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below:
Impairment review of goodwill and non-financial assets
i.
Impairment testing requires the Directors to assess whether the carrying value of assets or a cash generating unit (‘CGU’) can
be supported by their recoverable amount (i.e. the greater of value in use or its fair value less costs to sell). An impairment loss
is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 177
Goodwill
The Group performs an impairment assessment at least on an annual basis, and more regularly if impairment indicators exist.
This requires an estimation of the recoverable amount of the CGUs to which the goodwill is allocated.
The Group has identified Africa and Jordan as two separate CGUs of the Group. The key assumptions considered by the
Group in identifying Africa and Jordan as CGUs included the following:
› The CGUs considered by the Group are the smallest units that include the asset and generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
› Africa and Jordan are the two separate units of the Group to which goodwill has been allocated.
The recoverable amount of an asset or CGU is based on its value in use which is calculated by estimating the future cash
flows and discounting them to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to that asset or CGU.
More details of the assumptions, recoverable amount and sensitivity analysis are provided in note 8.1 of these consolidated
financial statements.
Non-critical judgements and estimates
Following are the accounting judgements and estimates that have been exercised and applied in these consolidated financial
statements, but do not have a significant effect on the amounts recognised in these consolidated financial statements. The brief
description of these accounting judgements and estimates and the rationale of not considering these critical judgements and
estimates is as follows:
Held for sale classification
i.
The Directors classified Mercury Payments Services LLC (‘Mercury’, a subsidiary of the Group) operations as discontinued
operations in 2018 and 2019 and considered this as a critical accounting judgement. As at 31 December 2020, management
has reassessed its classification in line with IFRS 5 and classified it under continuing operations (for details, please refer to
note 16 of these consolidated financial statements) and therefore believes that classification of Mercury is no longer a critical
judgement area in preparing the consolidated financial statements.
Employee benefits
ii.
Employee benefits were considered a significant estimate in 2019. During the year, the Directors have reassessed and
concluded that the sensitivity of changing the relevant assumptions used in estimating the employee benefits obligations
is not expected to cause a significant risk of material adjustments to the carrying amounts of assets and liabilities within
the next financial year. Accordingly, the Directors have classified employee benefits as a non-critical estimate.
The Group’s net obligation in respect of defined benefit plans is calculated as the present value of the defined benefit obligation
at the end of the reporting period. The present value of the net defined benefit pension obligation is dependent on a number of
factors that are determined on an actuarial basis, using a number of assumptions. These assumptions include salary increments,
discount rates, and retirement age and mortality rates. The Group’s employee benefits obligation as at 31 December 2020
amounted to USD 12.8 million (2019: USD 10.9 million) as disclosed in note 17.1 under other long-term liabilities.
The following are the principal actuarial assumptions at the reporting date:
Discount rate p.a.
Pre-retirement non-death/disability termination rate p.a.
Salary escalation rate p.a.
Involuntary termination rate p.a.
Retirement age
31 December 2020
1.75%
14.5% until end-2020 going down by 0.5% each year
to an ultimate rate of 12.5% p.a. from 2024 onward
3.50%
Nil
60
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 178
2. Basis of preparation continued
Non-critical judgements and estimates continued
Sensitivity analysis
Reasonable possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions
constant, would have affected the defined benefit obligation as follows:
Discount rate p.a.
+ / (-) in defined benefit obligation (in USD’000)
Salary escalation rate p.a.
+ / (-) in defined benefit obligation (in USD’000)
Voluntary exit rate
+ / (-) in defined benefit obligation (in USD’000)
(+) 0.5 percentage
(-) 0.5 percentage
2.25%
(402)
4.00%
432
1.25%
429
3.00%
(410)
Withdrawal rate 9.5% until
end-2020 going down by 0.5%
each year to an ultimate rate of
7.5% p.a. from 2024 onward
831
Withdrawal rate 19.5% until
end-2020 going down by 0.5%
each year to an ultimate rate of
17.5% p.a. from 2024 onward
(552)
Revenue recognition
iii.
The Group has certain non-transaction based project related revenue. The management applied judgement in measuring the
progress of the project through an internal process to recognise revenue based on the completion of the project. The project
related revenue (where the Group applies its judgement in measuring the completion status of the project) is only 2% (2019:
3%) of the total Group’s revenue and hence the Directors do not consider this as a critical accounting judgement that has
most significant effect in preparing these consolidated financial statement.
Impairment of loans and receivables
iv.
The Group is following the Simplified approach under the IFRS 9 provisioning model for estimating the impairment of financial
assets, under which the Group measures the loss allowance at an amount equal to full lifetime expected credit losses.
The Group applies a provision matrix which uses historical loss experience for each trade receivables segment and adjusts
the historical loss rates for current conditions, and reasonable and supportable forecasts of future economic conditions.
The Group has considered receivables outstanding for more than 180 days as default under IFRS 9. The expected credit loss
recognised during the year amounted to USD 2.2 million (2019: USD 0.5 million).
Please refer to note 11 of these consolidated financial statements for the details of the provision made during the year.
The Directors have assessed the sensitivity of the various estimates used in computing the provision including considering
changing probability of default (‘PD’) and macroeconomic factors used in the model and concluded that a reasonable
possible change in assumptions would not have a material impact.
Taxes
v.
The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the
Group’s total tax charge involves estimation and judgement in respect of certain matters particularly on recognising deferred
tax assets and uncertain tax position. Judgement and estimation involved in deferred tax mainly relates to the carried
forward tax losses, based on management’s assessment that it is probable that there will be sufficient and suitable taxable
profits in the relevant legal entity against which these tax losses can be set off in the future. Judgement and estimation
involved in current tax accruals relates to uncertain tax position until a conclusion is reached with the relevant tax authority
or through a legal process.
In the Directors’ view, both the recognition of deferred taxes and corporate tax accruals is not considered a critical judgement
or estimate for these consolidated financial statements and it does not have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 179
Intangible assets and property and equipment – estimation of useful life
vi.
Intangible assets (excluding goodwill) and property and equipment represents 15.1% (2019: 19.9%) and 4.0% (2019: 6.1%)
of the Group’s total assets, respectively. Intangible assets and property and equipment are amortised / depreciated on a
straight-line basis in the consolidated statement of profit or loss over their estimated useful lives (except for leased assets
which are depreciated over the shorter of the lease term and their useful lives), from the date that they are available for use.
The useful life of these intangible assets and property and equipment depends on management’s estimate of the period
over which economic benefit will be derived from the asset. Directors assess the useful lives for these assets when they are
acquired, based on their prior experience with similar assets and after considering the impact of other relevant factors such
as any expected changes in technology. In the Directors’ view, if any of these estimates related to useful life of intangible
assets and property and equipment are revised during the year ending 31 December 2020, this is not expected to result in
material adjustment to the carrying values of intangible assets. Hence estimates related to the useful life of the intangible
assets and property and equipment are not considered critical for the purpose of the consolidated financial statements.
3. Accounting policies
Except as described in note 2 (e), the Group has consistently applied the accounting policies to all periods presented in these
consolidated financial statements.
During the year, the Group has reclassified unrealised foreign exchange losses amounting to USD 0.3 million (2019: USD 1.9 million)
from selling, operating and other expenses to a separate line item in the consolidated statement of profit or loss, after profit before
interest and tax. Accordingly, prior year figures have been reclassified. An unrealised foreign exchange loss arises due to the
volatility in the Group’s foreign currency denominated assets and liabilities and is typically immaterial in amount. Therefore, the
Group believes that presenting this as a separate line item after profit before interest and tax is more appropriate classification
for the user of the consolidated financial statements.
Furthermore, the Group no longer classifies unrealised foreign exchange losses as Specially Disclosed Items (SDIs), as
explained further in note 4.
The accounting policies below describe the basis of consolidation and foreign currencies accounting policies that relates to
the consolidated financial statements as a whole. The other specific accounting policies are described in the note to which
they relate.
(a) Basis of consolidation
Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration paid by the Group
to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities
incurred or assumed and the equity interests issued by the Group, which includes the fair value of any asset or liability
arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether
they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and
liabilities assumed are generally measured at their acquisition-date fair values.
Any goodwill that arises is tested annually for impairment.
Subsidiaries
i.
Subsidiaries are the entities controlled by the Group. The Group controls an entity when it is exposed to, or has right to,
variable returns from its involvement in the entity and has the ability to affect those returns through its powers over the
entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on
which control commences until the date on which control ceases.
Transactions eliminated on consolidation
ii.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity
accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 180
3. Accounting policies continued
(a) Basis of consolidation continued
iii. Non-controlling interests
Non-controlling interest is that portion of equity in a subsidiary that is not attributable, directly or indirectly, to the Parent
Company. Non-controlling interests are measured at their proportionate share of the subsidiaries’ identifiable net assets.
They are presented as a separate item in the consolidated financial statements.
Loss of control
iv.
On a loss of control, the Group de-recognises the assets and liabilities of the subsidiary, any non-controlling interests and
the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised
in the consolidated statement of profit or loss. If the Group retains any interest in the previous subsidiary, then such interest
is measured at fair value at the date that control is lost. Subsequently, that retained interest is accounted for as an
equity-accounted investee or in accordance with Group accounting policy for financial instruments depending on the level
of influence retained.
Foreign currency transactions
(b) Foreign currencies
i.
Transactions in foreign currencies are translated into the respective functional currency of Group entities at the spot
exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional
currency at the spot exchange rate at that date.
The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency
at the beginning of the year, adjusted for effective profit and payments during the year, and the amortised cost in the foreign
currency translated at the spot exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional
currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured
based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognised in the consolidated statement of profit or loss,
except for investment securities designated at fair value through other comprehensive income, where the exchange
translation is recognised in the consolidated statement of other comprehensive income.
Foreign operations
ii.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to USD at exchange rates at the reporting date. The income and expenses of foreign operations are translated to
USD at exchange rates at the dates of the transactions or an appropriate average rate. Equity elements are translated at the
date of the transaction and not retranslated in subsequent periods.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency
translation reserve (‘foreign exchange reserve’) in equity. However, if the foreign operation is a non-wholly-owned subsidiary,
then the relevant proportion of the translation difference is allocated to non-controlling interests.
When a foreign operation is disposed of entirely or partially such that control, significant influence or joint control is lost, the
cumulative amount in the translation reserve related to that foreign operation is reclassified to the consolidated statement of
profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that
includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to
non-controlling interests. When the Group disposes of only part of its investment in associate or joint venture that includes
a foreign operation retaining significant influence or joint control, the relevant proportion of the cumulative amount is
reclassified to the consolidated statement of profit or loss.
4. Alternative performance measures
The Group uses these alternative performance measures to enhance the comparability of information between reporting
periods by adjusting for uncontrollable or one-off items, to aid the user of the financial statements in understanding the
activities taking place across the Group. In addition these alternative performance measures are used by the Group as
key measures of assessing the Group’s underlying performance on day-to-day basis, developing budgets and measuring
performance against those budgets and in determining management remuneration.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 181
4.1 Specially Disclosed Items
Specially Disclosed Items (‘SDIs’) are items of income or expenses that have been recognised in a given period which
management believes, due to their materiality and being one-off / exceptional in nature, should be disclosed separately,
to give a more comparable view of the period-to-period underlying financial performance.
Certain items that were previously reported as SDIs have been reconsidered and the Directors are no longer reporting
them as SDIs. These items are i) expenses relating to reorganisation, restructuring and settlement; ii) unrealised loss / (gain)
from re-measurement of foreign currency denominated assets or liabilities; and iii) amortisation associated with the IT
transformation programme.
The table below presents a breakdown of the Specially Disclosed Items for each of the years ended 31 December 2020 and 2019.
Items affecting EBITDA
Reorganisation, restructuring and settlements
Share-based compensation1
M&A and IPO related costs2
Other one-off items
Total SDIs affecting EBITDA
Items affecting net income
Amortisation related to IT transformation
Amortisation of acquired intangibles3
Total SDIs affecting net income
2020
USD’000
2019
USD’000
2019
Reclassification4
USD’000
2019
Previously
reported
USD’000
–
10,445
7,696
–
18,141
–
4,204
4,204
–
10,679
16,111
–
26,790
–
4,202
4,202
2,132
–
–
1,894
4,026
10,735
–
10,735
2,132
10,679
16,111
1,894
30,816
10,735
4,202
14,937
Total SDIs
22,345
30,992
14,761
45,753
1 Includes charge for the year in relation to the Management Incentive Award Plan, IPO Cash Bonus, and Long Term Incentive Plan, all of which were specific one-off
payments relating to the listing.
2 These are one–off expenses incurred in relation to proposed acquisition of DPO (2019: expenses related to the Initial Public Offering including fees paid to various advisors).
3 Amortisation charge on the intangible assets (acquired under business combination) recognised in the Group’s consolidated statement of financial position as part of the
Group’s acquisition of Emerging Market Payments Services (‘EMP’) in 2016.
4 Specially Disclosed Items: below items are no longer classified as SDIs.
a) Reorganisation, restructuring and settlements: these expenses are not material in the period, nor are they anticipated to be material in future periods. The Group no
longer believes it is necessary to report such items separately, and they are therefore classified within underlying expenses.
b) Unrealised foreign exchange (gains/losses): arise mainly in relation to FX volatility. As these are not material in the current or prior periods, and are expected to remain
immaterial in future periods, the Group no longer believe it is necessary to report separately as an SDI.
c) Amortisation related to IT transformation: The IT transformation was a historic one-off capital investment project that included the development of a new technology
and card management platform, the Group’s proprietary payment gateway, and a significant upgrade to the switching system. Following completion of the project, and
in response to shareholder feedback regarding the classification of this item, amortisation related to the IT transformation has now been classified within underlying
depreciation and amortisation.
4.2 Underlying EBITDA
Underlying EBITDA is defined as earnings from continuing operations before interest, taxes, depreciation and amortisation,
write-off of unamortised debt issuance cost, unrealised foreign exchange losses, share of depreciation of associate and
Specially Disclosed Items affecting EBITDA. The table below presents a reconciliation of the Group’s reported profit from
continuing operations to underlying EBITDA for each of the years ended 31 December 2020 and 2019.
Profit from continuing operations
Depreciation and amortisation
Write-off of unamortised debt issuance cost
Net Interest expense
Unrealised foreign exchange losses
Taxes
Share of depreciation from associate
Specially Disclosed Items affecting EBITDA
Underlying EBITDA
2020
USD’000
2019
USD’000
5,598
51,537
6,721
21,669
328
4,704
3,863
18,141
112,561
57,317
46,817
–
24,844
1,894
6,638
4,222
26,790
168,522
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 182
4. Alternative performance measures continued
4.3 Underlying EBITDA margin excluding share of associate
Underlying EBITDA margin excluding share of associate represents the Group’s underlying EBITDA margin which is
considered by the Group to give a more comparable view of period-to-period EBITDA margins.
The table below presents a computation of the Group’s underlying EBITDA margin, which is defined as underlying EBITDA
before share of associate divided by the revenue.
Revenue
Underlying EBITDA
Share of EBITDA of associate
Underlying EBITDA before share of associate
Underlying EBITDA margin excluding share of associate
2020
USD’000
2019
USD’000
284,844
335,379
112,561
(9,683)
102,878
36.1%
168,522
(9,521)
159,001
47.4%
4.4 Underlying net income
Underlying net income represents the Group’s profit from continuing operations adjusted for write-off of unamortised debt
issuance cost and specially disclosed items. Underlying net income is considered by the Group to give a more comparable
view of period-to-period profitability.
The table below presents a reconciliation of the Group’s reported profit from continuing operations to underlying net income
for each of the years ended 31 December 2020 and 2019.
Profit from continuing operations
Write-off of unamortised debt issuance cost
Specially Disclosed Items affecting EBITDA (refer to note 4.1)
Specially Disclosed Items affecting net income (refer to note 4.1)
Underlying net income
2020
USD’000
5,598
6,721
18,141
4,204
34,664
2019
USD’000
57,317
–
26,790
4,202
88,309
4.5 Underlying earnings per share (‘EPS’)
The Group’s underlying EPS is defined as the underlying net income (as explained above) divided by the weighted average
numbers of ordinary shares at the end of the relevant financial year.
Underlying net income (USD’000)
Weighted average number of shares (’000)
Underlying EPS (USD cents)
2020
34,664
520,833
6.7
2019
88,309
500,000
17.7
4.6 Capital expenditure
The table below provides the split of total capital expenditure into the IT transformation programme, growth and
maintenance capital expenditure for 2020 and 2019. Growth and maintenance capital expenditure collectively are
referred to as core capital expenditure (ex. IT transformation).
Total capital expenditure
Core capital expenditure
of which is maintenance capital expenditure
of which is growth capital expenditure
IT transformation capital expenditure
Network International Holdings Plc
Annual Report and Accounts 2020
2020
USD’000
46,470
46,470
21,038
25,432
–
2019
USD’000
84,265
45,662
25,725
19,937
38,603
Notes to the consolidated financial statements continued Reconciliation of capital expenditure to the cash spend in the consolidated statement of cash flows
Total capital expenditure
Goods and services received in the current period, but yet to be paid
Transformation capital expenditure
Growth and maintenance capital expenditure
Goods and services received in the previous period, and paid in the current period
Transformation capital expenditure
Growth and maintenance capital expenditure
Total consolidated capital expenditure spend (as per cash flows)
183
2020
USD’000
46,470
2019
USD’000
84,265
–
(12,639)
(7,296)
(12,959)
7,296
8,937
50,064
8,711
6,589
79,310
4.7 Underlying free cash flow
Underlying free cash flow is calculated as underlying EBITDA adjusted for changes in working capital before settlement
related balances, taxes paid, core capital expenditure, SDI affecting EBITDA and adjustment for share of EBITDA of associate,
less dividend. The Group uses underlying free cash flow as an operating performance measure that helps management
determine the conversion of underlying EBITDA to underlying free cash flow.
Underlying EBITDA
Changes in working capital before settlement related balances
Taxes paid
Core capital expenditure
Specially Disclosed Items affecting EBITDA
Adjustment for share of EBITDA of associate, less dividend
Underlying free cash flow
4.8
Reconciliation of cash flows from operating activities to underlying free cash flow
Net cash inflows from operating activities
Less: Cash flows included in the statutory cash flows but not in the underlying free cash flow
Changes in settlement related balances, long-term receivables and other liabilities
Charge for share-based payment
Add: Cash flows included in the statutory cash flows but not in the underlying free cash flow
Dividends received from associate
Interest paid
Others*
Underlying free cash flow before capital expenditure
Core capital expenditure
Underlying free cash flow
2020
USD’000
112,561
19,581
(6,058)
(46,470)
(18,141)
(9,683)
51,790
2019
USD’000
168,522
(9,625)
(10,415)
(45,662)
(26,790)
(6,798)
69,232
2020
USD’000
107,500
2019
USD’000
132,426
(19,942)
(4,070)
(35,405)
(1,404)
–
16,985
(2,213)
98,260
(46,470)
51,790
2,723
21,300
(4,746)
114,894
(45,662)
69,232
* Others include provision for expected credit losses, foreign exchange gains and losses, and loss from discontinued operations.
4.9 Underlying effective tax rate
The Group’s underlying effective tax rate is defined as the underlying taxes as a percentage of the Group’s underlying net
income before tax. The underlying effective tax rate for the Group for 2020 and 2019 was 11.9 % and 7.0%, respectively.
Underlying net income before tax
Taxes
Underlying effective tax rate
2020
USD’000
39,368
4,704
11.9%
2019
USD’000
94,947
6,638
7.0%
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 184
5. Segment reporting
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker (Network Leadership Team) and the Board of Directors to allocate
resources and assess performance. For each identified operating segment, the Group has disclosed information that is
assessed internally to review and steer performance.
The Group manages its business operations on a geographic basis and reports two operating segments, i.e. i) Middle East
and ii) Africa. The Group reviews and manages the performance of these segments based on total revenue and contribution
for each operating segment. Contribution is defined as segment revenue less operating costs (personnel cost and selling,
operating and other expenses) that can be directly attributed to or controlled by the segments. Contribution does not
include allocation of shared costs that are managed at Group level and hence shown separately under central function costs.
31 December 2020
Statement of profit or loss
Middle East
Africa
Non-
attributable
Total
198,224
80,020
6,600*
284,844
USD’000
* USD 6.6 million (2019: Nil) relates to the revenue derived from solutions developed as part of the Mastercard strategic partnership.
Statement of financial position
Middle East
Africa
Non-
attributable
129,934
65.5%
–
–
–
–
–
–
129,934
54,314
67.9%
–
–
–
–
–
–
54,314
6,600
–
(95,019)
(18,141)
(51,537)
5,820
(21,669)
(4,704)
(178,650)
187,697
33,387
221,084
193,454
12,996
206,450
USD’000
23,613
3,142
26,755
5,632
–
5,632
473,331
527,559
1,000,890
159,235
379,450
538,685
190,848
67.0%
(95,019)
(18,141)
(51,537)
5,820
(21,669)
(4,704)
5,598
Total
684,641
564,088
1,248,729
358,321
392,446
750,767
Middle East
Africa
USD’000
Non-
attributable
Total
244,833
90,546
–
335,379
178,429
72.9%
–
–
–
–
–
–
178,429
63,964
70.6%
–
–
–
–
–
–
63,964
–
–
(85,286)
(26,790)
(46,817)
5,299
(24,844)
(6,638)
(185,076)
242,393
72.3%
(85,286)
(26,790)
(46,817)
5,299
(24,844)
(6,638)
57,317
Revenue
Contribution
Contribution margin (%)
Central functions costs
Specially Disclosed Items affecting EBITDA
Depreciation and amortisation
Share of profit of associate
Net interest expense
Taxes
Profit from continuing operations
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
31 December 2019
Statement of profit or loss
Revenue
Contribution
Contribution margin (%)
Central functions costs
Specially Disclosed Items affecting
EBITDA
Depreciation and amortisation
Share of profit of associate
Net interest expense
Taxes
Profit from continuing operations
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Middle East
Africa
USD’000
Non-
attributable
227,521
42,321
269,842
205,167
11,722
216,889
28,975
2,108
31,083
10,357
–
10,357
116,770
519,242
636,012
244,757
226,228
470,985
185
Total
373,266
563,671
936,937
460,281
237,950
698,231
Middle East
The Group’s primary market in the Middle East region is UAE whereas the second most significant market is Jordan. In both
the markets, the Group provides Merchant Acquiring, Acquirer Processing and Issuer Solutions services to various financial
and non-financial institutional clients.
Africa
Under the Africa region, the Group’s key sub-markets are North Africa, sub-Saharan Africa and Southern Africa.
(i) North Africa
One of the most significant markets in North Africa is Egypt. The Group currently provide services to several of Egypt’s
leading financial institutions, for both their Merchant Acquiring and Issuer Solution needs. North Africa contributed 47%
of the total Africa revenue in 2020 (2019: 47%).
(ii) Sub-Saharan Africa
One of the most significant markets in sub-Saharan Africa is Nigeria where the Group has an established presence serving
several of Nigeria’s leading financial institutions, mainly providing Issuer Processing services. Sub-Saharan Africa contributed
36% of the total Africa revenue in 2020 (2019: 32%).
(iii) Southern Africa
The significant market in Southern Africa is South Africa, where the Group provides retail processing services. South Africa
contributed 17% of the total Africa revenue in 2020 (2019: 21%).
Major customer
The Group’s major customer is Emirates NBD PJSC and its subsidiaries whose revenue accounts for approximately 21.4%
(2019: 18.1%) of the total Group revenue (refer to note 13).
All of the revenue of Emirates NBD PJSC comes from Issuer Solutions and is included under the Middle East segment.
Please refer to note 19 for the split of revenues by business lines (i.e. Merchant and Issuer Solutions).
6. Business combination and disposals
6.1 Network International Investment Pte. Ltd.
On 29 October 2012, the Group through its subsidiary Network International Investment Pte. Ltd., (‘NIIPL’) entered into an
agreement to purchase 75% shareholding of TimesOfMoney Private Limited (‘ToM’) for a consideration of USD 49.2 million.
For the remaining 25%, the Group entered into a call-put option agreement with the buyer, which the Group had exercised
in 2015 and acquired the remaining stake at a consideration of USD 21.7 million. The stake was acquired in 2016.
The Group disposed of ToM in various stages and the last part of the business (software business division) was disposed
of in November 2018.
There has been no acquisition or disposal during the year.
6.2 Mercury Payments Services LLC (Mercury)
On 13 November 2016, the Group entered into an agreement with First Abu Dhabi Bank (previously known as National Bank
of Abu Dhabi PJSC (‘NBAD’)) to form a limited liability company, Mercury Payments Services LLC. Mercury operates the
‘Mercury’ payment scheme in UAE which is a domestic payment card network that permits members to issue cards on
network and to acquire transactions on such network and offers other Value Added Services.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 186
6. Business combination and disposals continued
6.2 Mercury Payments Services LLC (‘Mercury’) continued
During 2018 and 2019, the Group classified Mercury as discontinued operations and after reassessment classified it in
continuing operation as at 31 December 2020 in line with the guidance of IFRS 5. Please refer to note 16 for details on
discontinued operations.
6.3 Network International Investment Holding Limited (previously known as Emerging Markets Payments Holding
(Mauritius) Limited)
On 1 March 2016, the Group entered into an agreement to purchase 100% shareholding of Network International
Investment Holding Limited for a consideration of USD 255.8 million. The Group had recognised goodwill amounting
to USD 260.1 million (refer to note 8 for details).
6.4 DPO Group (3G Direct Holdings Limited)
On 28 July 2020, the Group entered into an agreement to acquire 100% stake in 3G Direct Pay Holdings Limited (‘DPO’
or ‘DPO Group’), the leading, high-growth online commerce platform in Africa, for a total consideration of approximately
USD 288 million (the ‘Transaction’). The consideration will be funded through the proceeds from an equity placing
representing 10.0% of the Company’s existing issued share capital, USD 50 million vendor consideration shares issued to Apis
Growth Fund I, managed by Apis Partners (‘Apis’), and USD 13 million consideration shares issued to the DPO co-founders.
As of 31 December 2020, the transaction is subject to customary closing conditions including regulatory and anti-trust
approvals. Accordingly, these consolidated financial statements have not consolidated the DPO financial statements.
7. Property and equipment
Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the
cost of materials and direct employee cost, any other costs directly attributable to bringing the asset to a working condition
for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property or equipment have different useful lives, they are accounted for as separate items
(major components) of property and equipment.
Subsequent costs
The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item if it is
probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured
reliably. The costs of the day-to-day servicing of property and equipment are recognised in the consolidated statement
of profit or loss as incurred.
Depreciation
Depreciation is recognised in the consolidated statement of profit or loss on a straight-line basis over the estimated useful
lives of each part of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term
and their useful lives. Land is not depreciated.
The estimated useful lives are as follows:
Leasehold improvements
Furniture and fixtures
Office equipment
Building
Computer hardware
Years
3 – 10
3 – 10
3 – 5
20 – 50
3 – 10
Depreciation methods, useful lives and residual values are reassessed at the reporting date. Gains and losses on disposals are
determined by comparing proceeds with the carrying amount. The differences are included in the consolidated statement of
profit or loss.
Capital work in progress (‘CWIP’)
Capital work in progress for property and equipment and intangible assets represent spends related to the assets that are
under development and are classified as such until the completion of the development work and are ready for use. Once put
to use, these assets are amortised in line with the applicable Group accounting policy.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 2020
Cost
Balance as at 1 January 2020
Additions
Disposals
Transfers from CWIP
Transfers from intangibles
Transfers to intangibles
Right of use asset additions during the year
Derecognition of right of use assets
Effects of change in foreign exchange
Land and
building
Right of
use asset
Leasehold
improvement,
furniture and
fixtures
USD’000
Computer
and office
equipment
Capital work
In progress
(‘CWIP’)
5,729
–
(72)
–
–
–
–
–
144
17,410
–
–
–
–
–
1,227
(984)
37
5,846
347
(206)
7
–
–
–
–
30
142,795
2,307
(2,319)
7,853
324
–
–
–
(451)
6,167
8,002
–
(7,860)
–
(528)
–
–
(32)
187
Total
177,947
10,656
(2,597)
–
324
(528)
1,227
(984)
(272)
As at 31 December 2020
5,801
17,690
6,024
150,509
5,749
185,773
Accumulated depreciation and impairment
Balance at 1 January 2020
Charge for the year
Disposals
Depreciation on right of use asset
Effects of change in foreign exchange
741
157
(72)
–
25
4,949
–
–
2,400
(89)
4,155
668
(201)
–
–
107,434
14,648
(2,239)
–
(356)
3,268
–
–
–
–
120,547
15,473
(2,512)
2,400
(420)
Balance as at 31 December 2020
851
7,260
4,622
119,487
3,268
135,488
Carrying value
4,950
10,430
1,402
31,022
2,481
50,285
2019
Cost
Balance as at 1 January 2019
Additions
Disposals
Transfers from CWIP
Transfers to intangibles
Transfers from intangibles
Right of use asset additions during the year
Effects of change in foreign exchange
5,729
–
–
–
–
–
–
–
9,917
–
–
–
–
–
6,563
930
4,169
1,519
(23)
112
–
45
–
24
127,086
6,587
(2,701)
11,873
–
–
–
(50)
12,962
7,614
–
(11,985)
(1,319)
–
–
(1,105)
159,863
15,720
(2,724)
–
(1,319)
45
6,563
(201)
As at 31 December 2019
5,729
17,410
5,846
142,795
6,167
177,947
Accumulated depreciation and impairment
Balance at 1 January 2019
Charge for the year
Disposals
Depreciation on right of use asset
Effects of change in foreign exchange
684
57
–
–
–
1,858
–
–
3,004
87
3,559
582
(17)
–
31
96,005
14,779
(2,690)
–
(660)
3,268
–
–
–
–
105,374
15,418
(2,707)
3,004
(542)
Balance as at 31 December 2019
741
4,949
4,155
107,434
3,268
120,547
Carrying value
4,988
12,461
1,691
35,361
2,899
57,400
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 188
8. Intangible assets and goodwill
Goodwill
Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of cost of an acquisition over the fair value
of the Group’s share of the net identifiable assets. It is carried at cost less accumulated impairment losses and is tested
annually for impairment.
Acquired intangibles
At the date of acquisition of a subsidiary or associate, intangible assets that are deemed separable and that arise from
contractual or other legal rights are capitalised and included within the net identifiable assets acquired. These intangible
assets are initially measured at fair value, which reflects market expectations of the probability that the future economic
benefits embodied in the asset will flow to the Group, and are amortised on the basis of their expected useful lives.
At each reporting date, these assets are assessed for indicators of impairment. In the event that an asset’s carrying
amount is determined to be greater than its recoverable amount, the asset is written down immediately.
The estimated useful lives are as follows:
Customer relationships
Brands
Years
6 – 7
Indefinite
Other intangible assets
Except for goodwill and acquired intangible assets, all other intangible assets are amortised on a straight-line basis in the
consolidated statement of profit or loss over their estimated useful lives, from the date that they are available for use.
The estimated useful lives are as follows:
Computer software
Years
4 – 10
Computer software acquired by the Group is stated at cost less accumulated amortisation and accumulated impairment loss
(if any).
Subsequent expenditure on software is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation is recognised in the consolidated
statement of profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it is
available for use.
Research and development costs
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the consolidated statement of profit or loss as incurred. Development activities involve a
plan or design for the production of new or substantially improved products and processes. Development expenditure is
capitalised only if development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete
development and to use or sell the asset. The expenditure capitalised includes the cost of materials, staff salaries, overhead
costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other
development expenditure is recognised in the consolidated statement of profit or loss as incurred. Capitalised development
expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 189
Capital work in progress (‘CWIP’)
Please refer to note 7 for the CWIP Group accounting policy.
2020
Goodwill
Computer
software
Customer
contracts
Brands
CWIP
Total
Cost
Balance as at 1 January 2020
Additions
Disposal/Utilisation
Transfers from CWIP
Transfers from property and equipment
Transfers to property and equipment
Effects of change in foreign exchange
262,561
–
–
–
–
–
48
233,284
1,887
(718)
34,428
–
(30)
(206)
USD’000
32,397
–
–
–
–
–
–
2,780
–
–
–
–
–
–
56,998
33,927
(357)
(34,428)
528
(294)
70
588,020
35,814
(1,075)
–
528
(324)
(88)
As at 31 December 2020
262,609
268,645
32,397
2,780
56,444
622,875
Amortisation and impairment
Balance at 1 January 2020
Charge for the year
Disposal/Utilisation
Effects of change in foreign exchange
–
–
–
–
81,022
29,460
(576)
(305)
Balance as at 31 December 2020
Carrying value
–
262,609
109,601
159,044
19,086
4,204
–
–
23,290
9,107
–
–
–
–
–
2,780
38,852
–
–
–
38,852
17,592
138,960
33,664
(576)
(305)
171,743
451,132
2019
Goodwill
Computer
software
Customer
contracts
Brands
CWIP
Total
Cost
Balance as at 1 January 2019
Additions
Disposal/Utilisation
Transfers from CWIP
Transfers from property and equipment
Transfers to property and equipment
Effects of change in foreign exchange
262,307
–
–
–
–
–
254
162,313
6,125
(284)
63,497
1,319
–
314
USD’000
32,397
–
–
–
–
–
–
3,214
–
(434)
–
–
–
–
59,773
62,420
–
(63,497)
–
(45)
(1,653)
520,004
68,545
(718)
–
1,319
(45)
(1,085)
As at 31 December 2019
262,561
233,284
32,397
2,780
56,998
588,020
Amortisation and impairment
Balance at 1 January 2019
Charge for the year
Disposal/Utilisation
Effects of change in foreign exchange
Balance as at 31 December 2019
Carrying value
–
–
–
–
–
262,561
56,935
24,086
(285)
286
81,022
152,262
14,777
4,309
–
–
19,086
13,311
433
–
(433)
–
–
2,780
38,852
–
–
–
38,852
18,146
110,997
28,395
(718)
286
138,960
449,060
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 190
Impairment testing
8. Intangible assets and goodwill continued
8.1
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there
is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is
tested annually for impairment.
For impairment testing, assets are grouped together into smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or cash generating units (‘CGUs’). Goodwill
arising out of business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies
of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to that asset or CGU.
Impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in the consolidated statement of profit or loss. They are first allocated to reduce the
carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets in the
CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss has been recognised.
Goodwill is not deductible for tax purposes.
During the year, impairment testing of goodwill was done based on CGU. For this purpose, management considered two
CGUs based on their geographical location, namely Jordan and Africa business.
Jordan and Africa CGU
The goodwill relates to cash generating units of Jordan and Africa arising mainly from the acquisition of Network International
Investment Holding Limited (previously known as Emerging Markets Payments Holding (Mauritius) Limited and Network
International Payment Services (S.A.E.)). The goodwill of Network International Investment Holding Limited is allocated to
Jordan and Africa.
During the year, the impairment testing resulted in Nil impairment for Jordan and Africa CGUs (2019: Nil).
For 2020, the recoverable amount for Jordan (USD 209.1 million) and Africa (USD 549.1 million) has been calculated based
on the CGUs’ value in use. The carrying value of Jordan and Africa amounted to USD 53.4 million and USD 387.7 million
respectively. It was determined by discounting the future cash flows expected to be generated. The calculation of the value
in use was based on the following key assumptions:
a) Management has estimated the revenue growth, underlying EBITDA and level of working capital needed to support the
business. The estimates are based on past experience and expectations of future changes in the market including the
impact of the pandemic caused by COVID-19.
b) Cash flows are projected based on past experience, actual operating results and future business plan for five years based
on declining revenue growth rate. The forecast period is based on the Group’s long-term perspective with respect to the
operation of each CGU.
c) Discount rate used for Jordan and Africa business CGU was 12.1% and 14.8% respectively.
d) In determining the recoverable amounts for the CGUs the terminal growth rate is 3%.
The key assumptions described above may change as economic and market conditions change. The Group estimates that possible
changes in these assumptions are not expected to cause the recoverable amount to decline below the carrying amount.
For 2019, the recoverable amount was calculated using the Group CGUs’ fair value less cost to sell. The fair values are based
on 2020 forecast EBITDA and peer companies’ EBITDA multiples. The average EBITDA multiple used was ‘17.6’.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 191
Below is the goodwill allocated to different CGUs and the carrying value of intangible assets having indefinite life.
Jordan
Africa
Goodwill
2020
USD’000
30,647
231,962
262,609
2019
USD’000
30,647
231,914
262,561
Indefinite life
intangible assets
2019
USD’000
2020
USD’000
2,780
–
2,780
2,780
–
2,780
Sensitivity analysis
The Directors have done the sensitivity analysis by changing the underlying assumptions used to determine the recoverable
amount of the two CGUs. The Directors noted that changing the discount rate (to 10% and 16%) and terminal growth rate (to 2.5%
and 3.5%), individually and together, would not cause the carrying amount of the CGU to be higher than the recoverable amount.
9. Investment in associate
The Group’s interest in equity-accounted investee comprises its interest in associate. Interest in an associate is accounted
for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial
recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive
income of equity-accounted investees, until the date on which significant influence or joint control ceases. The goodwill is
included within the carrying amount of the investment and is assessed for impairment as part of that investment.
Name and nature of investment
Ownership
Place of incorporation
As at 1 January
Share of profits
Dividends received
Fair value reserve (re-measurement of defined benefit liability)
As at 31 December
Cash and cash equivalents
Other current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets (100%)
Total revenue
Total expenses
Net profit (100%)
Transguard Cash LLC
Associate
50%
United Arab Emirates
2020
USD’000
54,432
5,820
–
(444)
59,808
24,043
22,057
49,814
17,409
4,515
73,990
91,556
(79,915)
11,641
2019
USD’000
51,856
5,299
(2,723)
–
54,432
8,228
23,672
51,319
15,969
4,013
63,237
100,948
(90,350)
10,598
10. Scheme debtors and merchant creditors
Scheme debtors and merchant creditors represent intermediary balances that arise as part of the daily settlement process
related to Network’s direct acquiring business and processing of transactions on behalf of Network’s issuer processing and
acquirer processing clients in accordance with contractual arrangements.
Scheme debtors
Restricted cash
Merchant creditors
Settlement balances on-hold*
Other merchant creditors
Settlement related working capital balances
* Represents the off-set balance to restricted cash.
2020
USD’000
165,436
52,550
(165,142)
(51,688)
(113,454)
52,844
2019
USD’000
185,268
54,029
(167,167)
(53,245)
(113,922)
72,130
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 192
10. Scheme debtors and merchant creditors continued
Scheme debtors
Scheme debtors consist primarily of the Group’s receivables from the issuer banks, card schemes for transactions processed
for merchants, and settlement related receivables from issuer processing clients for amounts settled to card schemes on
their behalf.
Merchant creditors
Merchant creditors consist primarily of the Group’s liability to merchants for transactions that have been processed but not
yet settled including any deferred settlements or amounts withheld to cover chargeback risks. This also includes balances
received from card schemes to be settled to acquirer processing clients.
The Group has limited ability to influence the working capital related to scheme debtors and merchant creditors (which is
referred to as settlement related balances) on a day-to-day basis, as these are principally driven by the volume and mix of
transactions and the time elapsed since the last clearing by card issuers/payment schemes, which is why these balances
fluctuate from one reporting date to another.
Scheme debtor and merchant creditor balances are reflective of a snapshot in time at a period end. The balances and their
relative movements can be determined by: i) the day of the week on which the period end falls. For example, if the period
end falls on a weekend, when banks are closed in the US but open in the UAE, this causes an extra day delay (‘T+2/3’) in
receipt of funds through the scheme settlement processes; ii) proportion of merchants who are not settled on a daily basis;
iii) TPV in the last few days prior to the period end; and iv) currency mix of TPV and receipt of such funds through the
scheme settlement processes.
11. Receivables and prepayments
Receivables and prepayments are initially recognised at fair value in the period to which they relate. They are held
at amortised cost, less provision (if any). Provisions are presented net with the related receivable on the consolidated
statement of financial position.
2020
USD’000
49,820
2,048
7,669
5,717
1,562
7,052
73,868
(5,994)
67,874
2020
USD’000
5,047
2,183
(1,236)
–
5,994
2019
USD’000
74,084
2,191
8,235
4,096
1,154
3,783
93,543
(5,047)
88,496
2019
USD’000
6,444
510
(1,805)
(102)
5,047
Trade receivables
Chargeback receivables
Prepaid expenses
Advance taxes
Security deposits
Other receivables
Less: Provision for impairment
The movements in the provision for impairment are as follows:
As at 1 January
Charge during the year
Amounts written off
Amounts reversed
As at 31 December
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued Below is the change in working capital before settlement related balances:
Trade receivables & chargeback receivables
(Net of provisions for expected credit losses)
Prepayments and other receivables
Trade and other payables
Items excluded*
Capital expenditure accrual (refer note 14)
Provisions for expected credit losses (refer above)
Other movements
Working capital before settlement related balances
193
2020
USD’000
2019
USD’000
2020
vs 2019
45,874
22,000
(127,732)
(59,858)
71,228
17,268
(127,453)
(38,957)
–
–
–
–
–
–
–
–
25,354
(4,732)
279
20,901
3,595
(2,183)
(2,732)
19,581
* These items are excluded as they are either shown separately in the statement of cash flows or are non-cash in nature.
12. Cash and cash equivalents and restricted cash
12.1 Cash and cash equivalents
Cash and cash equivalents include cash on hand, unrestricted balances held with banks and highly liquid financial assets with
original maturities of less than three months, which are subject to an insignificant credit risk, and are used by the Group in
the management of its short-term commitments. Cash and cash equivalents are carried at amortised cost in the consolidated
statement of financial position.
Cash and cash equivalents
2020
USD’000
398,781
2019
USD’000
45,473
12.2 Restricted cash
Restricted cash largely includes amounts payable for deferred settlements of transactions to merchants and other third parties
that have been withheld in accordance with their contractual rights or otherwise remained unpaid not in ordinary course of
business and are eventually payable on demand or as mutually agreed. The breakdown of restricted cash is as follows:
Settlement balances on-hold
Cash collaterals and collaterals against bank guarantees
2020
USD’000
51,689
861
52,550
2019
USD’000
53,245
784
54,029
13. Related party balances and transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Related parties include associates, parent, subsidiaries, and key
management personnel or their close family members. The terms and conditions of these transactions have been mutually
agreed between the Group and the related parties. Key management personnel consists of the Network Leadership Team.
Management believes that the terms and conditions of these transactions are comparable with those that could be obtained
from third parties.
Transguard Cash LLC
Transactions for the year (refer to note 9) – there are no receivable / payable balances as at 31 December 2020 and 2019.
Directors’ remuneration
Directors’ remuneration during the year *
End of service benefits (two Executive Directors)
Key management personnel remuneration **
Salaries and allowances
Terminal and other benefits
2020
USD’000
2019
USD’000
1,577
44
4,391
11,124
2,363
31
4,006
13,504
* Directors’ remuneration includes the cash component of Pre-IPO incentive.
** Key management personnel remuneration includes remuneration for two Executive Directors whose salaries are also included in Directors’ remuneration above.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 194
13. Related party balances and transactions continued
In 2020, Emirates NBD PJSC is not a related party as its shareholding has been reduced to less than 10%. Details of the
related party transactions and balances for the year ended 31 December 2019 are as follows:
Emirates NBD PJSC Group
Transactions for the year
Revenue
Expenses
Net interest expense
Balances as at 31 December
Receivable balances
Bank balance
Prepaid amounts included under:
Long-term receivables
Receivables and prepayments
Overdraft facility
Performance and other guarantees (refer to note 30)
14. Trade and other payables
Accrued expenses
Staff benefits
Current portion of share-based payment liability
Provision for bonus and sales incentives
Terminal and other benefits
Unpaid capital expenditure
Merchant deposits
Unclaimed balances
Tax and other related liabilities
Interest payable
Deferred income (refer to note below)
Other liabilities
2019
USD’000
60,714
7,399
1,981
18,603
73,873
2,326
1,078
(51,204)
7,506
2019
USD’000
33,717
7,224
11,539
819
23,023
5,448
5,946
15,123
1,918
6,895
15,801
127,453
2020
USD’000
44,194
9,403
2,236
3,590
19,428
4,934
6,325
14,327
3,683
5,356
14,256
127,732
Deferred income relates to the Group contractual liabilities for the project related revenues (refer to note 19 and note 2(f)).
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 195
15. Borrowings
The Group’s total borrowings amounted to USD 434.5 million (2019: USD 377.4 million).
During the period, the Group refinanced the syndicated debt facility with a syndicate of 16 banks who have both a global
and regional presence. The refinancing was conducted for the purposes of providing the Group with a larger facility and
increased liquidity to fund growth accelerator projects, as well as for general corporate purposes. The new facility carries
similar interest rates and the same financial covenants as the prior facility.
The facility is for USD 525 million and replaced the Group’s USD 350 million term financing facility, which had a drawn down
balance of USD 289 million on 31 December 2019. The new facility consists of both AED and USD tranches of conventional
financing and one USD tranche of Islamic financing facility. The facility carries a quarterly coupon rate of EIBOR plus margin
on the AED conventional financing and LIBOR plus margin on the USD conventional financing and equivalent on the Islamic
finance tranche. The margin is calculated by reference to the leverage (net debt / underlying EBITDA, as per definition and
methodology provided in the financing documents), based on a grid which provides for reduced pricing as the leverage of
the Group reduces and vice versa. The margin was initially set at 1.95% per annum applicable on the AED conventional
financing and 2.20% per annum applicable on the USD conventional and Islamic financing tranches. Financial covenants limits
are set to 3.5x net debt: underlying EBITDA. The facility has a tenor of six years. Principal repayments will commence in 2022.
The revolving credit facility was availed in November 2019, syndicated with three banks for general corporate funding
purposes and carries an applicable interest period coupon rate of LIBOR plus a leverage linked margin, currently at 2.10%
(2019: 1.85%). During the year, the Group has drawn an additional USD 40 million which was subsequently repaid. This has
been classified as a current liability.
The table below provides a breakdown of the borrowings:
Term loan
Principal outstanding
Unamortised debt issue cost
Net amount included in borrowings
Revolving credit facility
Lease liability
Bank overdraft (for working capital)
Total
Split into:
a) Term loan
› Non-current portion (a)
› Current portion (b)
Sub Total
b) Revolving credit facility
› Current portion (b)
Sub Total
c) Lease liability
› Non-current portion (a)
› Current portion (b)
Sub Total
Bank overdraft (for working capital) (b)
Total
As per consolidated statement of financial position
Non-current borrowings (a)
Current borrowings (b)
Total
2020
USD’000
2019
USD’000
375,000
(6,134)
368,866
35,000
925
29,681
434,472
288,744
(7,814)
280,930
35,000
1,619
59,895
377,444
368,866
–
368,866
210,930
70,000
280,930
35,000
35,000
35,000
35,000
159
766
925
29,681
434,472
853
766
1,619
59,895
377,444
369,025
65,447
434,472
211,783
165,661
377,444
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
196
16. Discontinued operations and assets held for sale
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
› represents a separate major line of business or geographic area of operations;
›
›
is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or
is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be
classified as held for sale.
The key criteria for held for sale classification is the commitment from the appropriate level of management to sell the asset,
and an active programme to locate a buyer and complete the plan within 12 months from the date of classification except for
the extension period allowed under IFRS 5 as mentioned below.
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is
re-presented as if the operation had been discontinued from the start of the comparative year.
Assets and liabilities held for sale comprises assets and liabilities that are classified as held-for sale or distribution if it is highly
probable that they will be recovered primarily through sale or distribution rather than through continuing use.
Immediately before classification as held for sale or held for distribution, the assets, or components of a disposal group, are
remeasured in accordance with the Group’s other accounting policies.
Following are the components that the Group classified as discontinued operations in prior years.
a) Acquiring operation with Ahli United Bank B.S.C. (‘AUB’) – the Group closed its Merchant Acquiring services in Bahrain
(through AUB) in 2019 and therefore, does not have any assets or liabilities relating to this business in the Group’s
consolidated statement of financial position as at 31 December 2019 and 31 December 2020.
b) Mercury Payments Services LLC (‘Mercury’) – Mercury was classified as discontinued operation in the 2018 and 2019
Group financial statements as the Group’s Board made a strategic decision to divest the scheme operation of the Group.
Management remains committed to the disposal of Mercury and is exploring various opportunities. However, the disposal
process has been delayed due to the niche nature of the asset and disruption as a result of the pandemic. Therefore, the
Group was not able to conclude the sale during the year and has accordingly classified Mercury as continuing operations
and prior year figures have been reclassified in line with the criteria under IFRS 5.
Below are the profit or loss, cash flows and assets and liabilities position of the Group’s discontinued operations.
Loss from discontinued operations
During the year, discontinued operation resulted in Nil loss (2019: USD (0.4) million relating to AUB).
Cash flows used in discontinued operations
During the year, discontinued operation resulted in Nil cash (2019: USD (0.7) million relating to AUB).
Assets and liabilities held for sale
As at the reporting date, discontinued operation resulted in Nil assets and liabilities held for sale (2019: Nil).
17. Other long-term liabilities
Staff benefits
Lease liabilities for right of use assets
17.1 Staff benefits
Employee end of service benefits (refer a)
Share-based compensation (refer b)
Network International Holdings Plc
Annual Report and Accounts 2020
Notes
17.1
25.2
2020
USD’000
12,836
8,748
21,584
2019
USD’000
13,353
11,026
24,379
12,836
–
12,836
10,870
2,483
13,353
Notes to the consolidated financial statements continued 197
Employee end of service benefits
a)
The Group’s employee end of service benefits include gratuity benefit scheme, defined contribution plans and UAE pension
fund (on behalf of its UAE national employees), in line with laws of the local jurisdiction where the Group operates in
(i.e. mainly UAE, Jordan and Africa).
Pensions are provided by way of a contribution to a personal pension scheme or cash allowance in lieu of pension benefits.
End of Service Gratuity is provided to non-UAE nationals as a lump sum cash payment following the end of service, based on
the length of service. The charge and the liability recognised for gratuity schemes are calculated through actuarial valuation
carried out by the external qualified actuary valuer, using the Projected Unit Credit (‘PUC’) actuarial method. Under UAE law,
there is no requirement to invest these contributions to any assets for the purpose of settling these obligations, and
accordingly there are no associated plan assets.
The Group determines the net interest expense on the net defined benefit liability for the period by applying the discount
rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit
liability taking into account any changes in the net defined benefit liability during the period as a result of contributions and
benefit payments.
Net interest expense and other expenses related to defined benefit plans are recognised in the consolidated statement of
profit or loss. Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, are recognised
immediately in the consolidated statement of other comprehensive income.
The Group’s employee benefits obligation as at 31 December 2020, included in ‘employee end of service benefits’ above,
amounted to USD 12.8 million (2019: USD 10.9 million). The details of the assumptions used and the sensitivity analysis are
disclosed under note 2 (f) ‘Accounting judgements and estimates’.
Share-based compensation
b)
The Group currently operates the following share-based compensation plans:
› Management Incentive Award Plan (‘MIP’) and IPO Cash Bonus
› Long Term Incentive Plan (‘LTIP’)
MIP and IPO cash bonus are cash settled share-based payment plans, whereas LTIP is an equity-settled share-based payment.
Key features and accounting policy with respect to Group Incentive Plans are as below:
Cash-settled share-based payment
The accounting treatment of cash-settled share-based payment plans are dependent upon fulfilment of any of the following
conditions that determine whether the Group has received the services that entitle the employees to receive cash (or any
other assets) of the entity, under a share-based payment arrangement:
› Service conditions
› Performance conditions
› Period of employment
In such incentive plans vesting conditions are either service conditions or performance conditions. Service conditions require
the employee to complete a specified period of service. Performance conditions require the employee to complete a specified
period of service and specified performance targets. Award payments vest when the associated vesting conditions are satisfied
and the Group recognises the cost associated with such incentive plans in the consolidated statement of profit or loss.
The period over which cost needs to be recognised will commence from the grant date and will continue till such periods
over which the employees render associated services or meet the conditions of the plan. The total liability of the grants
vested at a reporting date is fair valued. Subsequently the fair value of the liability is re-measured at each reporting date
and the date of settlement. Any change in fair value is recognised within the consolidated statement of profit or loss in that
period, for any catch up element.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 198
17. Other long-term liabilities continued
Equity-settled share-based payment
Equity-settled share-based payment transactions, in which the Group receives services as consideration for equity
instruments of the parent entity (including shares or share options).
For equity-settled share-based payment transactions, the Group measures the services received, and the corresponding
increase in equity, directly, at the fair value of the services received. If the fair value cannot be estimated reliably, the Group
measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity
instruments granted. For transactions with employees and others providing similar services, the Group measures the fair
value of the equity instruments granted, because it is typically not possible to estimate reliably the fair value of employee
services received. The fair value of the equity instruments granted is measured at grant date.
For services measured by reference to the fair value of the equity instruments granted, all non-vesting conditions are taken
into account in the estimate of the fair value of the equity instruments.
However, vesting conditions that are not market conditions are not taken into account when estimating the fair value of
the shares or options at the relevant measurement date. Instead, vesting conditions are taken into account by adjusting
the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount
recognised for services received as consideration for the equity instruments granted is based on the number of equity
instruments that eventually vest. Hence, on a cumulative basis, no amount is recognised for services received if the equity
instruments granted do not vest because of failure to satisfy a vesting condition (other than a market condition).
The fair value of equity instruments granted should be based on market prices, if available, and to take into account the terms
and conditions upon which those equity instruments were granted. In the absence of market prices, fair value is estimated,
using a valuation technique to estimate what the price of those equity instruments would have been on the measurement
date in an arm’s length transaction between knowledgeable, willing parties.
The Group has calculated the fair value of the equity instruments granted by applying well-established principles of financial
analysis, adapted as appropriate to meet the requirements of valuing individual incentive plans. For the valuation of the plan
with only non-market conditions, the Black-Scholes model has been used whereas, for the valuation of the incentive plan with
market condition, the Monte-Carlo model has been used to compute the fair value of the equity instruments.
After the vesting date and a corresponding increase in equity, no subsequent adjustment to total equity shall be made.
The Group will not subsequently reverse the amount recognised for services received from an employee if the vested equity
instruments are later forfeited or, in the case of share options, the options are not exercised. However, a transfer within
equity is allowed, i.e. a transfer from one component of equity to another.
Below are the key features of Group incentive plans:
Management Incentive Award Plan and IPO Cash Bonus
Network International LLC, a subsidiary of the Group, operates the following incentive plans.
– Network International LLC Management Incentive Award Plan (‘MIP Plan’)
MIP Plan is a pre-existing phantom share incentive cash settled plan. The MIP awards have been made to 33 members of the
Group’s management, including the Chief Executive Officer. Each award entitles participants to receive a cash payment that
is calculated by reference to the offering price of the Group at Admission as determined by the Remuneration Committee
acting in good faith. The Network International LLC MIP acts as a retention tool in respect of the Group’s senior management
participants as the continued vesting of the existing awards and payment in respect of the part of the existing awards which
have vested are conditional upon the participant remaining employed within the Group.
– Network International LLC IPO Cash Bonus
Network International LLC has awarded eight members of the Group’s management (Grantees), including the Chief Executive
Officer, cash bonus awards (Cash Bonus Awards) subject to and conditional upon the listing. Grantees are entitled to receive
a cash payment which is calculated by reference to the offering price of the Group at Admission as determined by the
Remuneration Committee acting in good faith. The Cash Bonus Awards are subject to time vesting. 50% of the Cash Bonus
Awards will vest on listing. One sixth of the Cash Bonus Awards will subsequently vest on each of the first two anniversaries
of the listing and a one sixth of the Cash Bonus Awards will subsequently vest on the date which is 30 months after listing.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 199
The aggregate amount that has been allocated to the eligible employees for the MIP Plan and IPO Cash Bonus amounted to
USD 33.2 million which will be paid to the employees in tranches. As at 31 December 2020, the Group has recorded a liability
of USD 9.4 million (2019: USD 9.7 million) based on the net present value of the vesting condition and accordingly recognised
a charge of USD 6.8 million (2019: 10.0 million) in the consolidated statement of profit or loss.
Long Term Incentive Plan (‘LTIP’)
The Group has established a long-term equity-settled share-based incentive plan (Network International Holdings Long Term
Incentive Plan ‘LTIP Plan’) which is awarded to the eligible employees and subject to the condition specified under the LTIP
Plan rules through three grants.
The key features of grants 1 and 3 are as follows:
› Under the grants, the plan is rolled out to select eligible employees of the Group.
› The awards under these grants will normally vest on the third anniversary of the date of grant, unless an event occurs before then
which causes the award to vest under the rules of the LTIP Plan.
› Multiple performance conditions apply to the award (including market and non-market), and the award may only vest to the
extent that the performance conditions have been satisfied.
Under grant 2, the plan is rolled out to all the employees of the Group based on meeting some eligibility criteria, as an
incentive in recognition of the efforts to support the listing of the Group. The award vesting is subject only to the participant’s
continued employment with the Group.
Below are the details of three grants:
Particulars
Date of grant
Grant date share price
Grant 1
Grant 2
Grant 3
17 May 19
GBP 5.3
24 October 19
13 March 20
19 August 20
GBP 5.25
GBP 4.33
GBP 4.08
Contractual life
of options
Vesting condition
a) Adjusted EPS
b) Revenue
c) Relative TSR
Service condition only 1.5 years
a) Adjusted EPS
b) Revenue
c) Relative TSR
3 years
3 years
Details of number of shares to be vested under grants 1 and 3 for the achievement of performance conditions:
Awards vesting
Weighting
0%
Adjusted EPS
(50%)
Revenue
25%
less than 12% compound growth p.a.
CAGR
25%
100%
12% compound growth p.a.
16.5% compound growth p.a.
Relative TSR
25%
below median performance
company achieves median positioning relative
to the comparator Group
company achieves upper quartile positioning
relative to the comparator Group
Note: For all the elements of the award vesting is subject to a share price underpin of GBP 4.35 at the end of vesting period.
Detail of the valuation assumptions:
Description
Valuation model
Risk free interest rate
TSR comparator group
Dividend equivalent
Grant 1
Black-Scholes and
Monte-Carlo model
0.69% p.a.
Constituents of the FTSE
250 at the time of grant
0% (assumed
participants entitled to
dividends or dividends
equivalents)
Grant 2
13 March 2020
19 August 2020
Black-Scholes
Black-Scholes and Monte-Carlo model
0.51% p.a.
0.69% p.a.
0.006% p.a.
Grant 3
–
Constituents of the FTSE 250 at the time of grant
3% assumed
dividend yield
0% (assumed participants entitled to dividends
or dividends equivalents)
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 200
17. Other long-term liabilities continued
Long Term Incentive Plan (‘LTIP’) continued
At the date of the awards granted, the Group has calculated the fair value of all the grants to recognise a charge amounting
to USD 4.1 million (2019: 1.4 million) in the consolidated statement of profit or loss for the year ended 31 December 2020 with
a corresponding increase in equity.
Below is the breakdown of all share-based compensation plans mentioned above under current and non-current liabilities.
Scheme
MIP Plan and IPO
Settlement
Cash settled
Cash Bonus
Conditions
Vesting conditions
as per the scheme
Scheme
LTIP – Grant 1 ,2
Settlement
Equity settled
and 3
Conditions
Service and / or
performance
conditions
Below is the current and non-current portion of the LTIP:
Non-current portion
Current portion (included under note 14)
Liability
USD’000
P&L charge
USD’000
31 December
2020
31 December
2019
31 December
2020
31 December
2019
9,403
9,707
6,800
9,994
Cumulative P&L charge
USD’000
P&L charge
USD’000
31 December
2020
31 December
2019
31 December
2020
31 December
2019
5,475
1,405
4,070
1,405
2020
USD’000
–
9,403
9,403
2019
USD’000
2,483
7,224
9,707
18. Share capital and reserves
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised
as a deduction from equity.
Issued and fully paid up
550,000,000 shares of GBP 0.10 each (2019: 500,000,000 shares of GBP 0.10 each)
2020
USD’000
2019
USD’000
71,557
65,100
On 31 July 2020, the Company issued additional share capital equivalent to 50 million shares. The shares were issued at a
price of USD 5.3 per share (GBP: 4.1 per share; par value: GBP 0.10 each). Accordingly, the Company’s share capital has
increased by USD 6.5 million and the Company has recognised share premium of USD 258.3 million, out of which an amount of
USD 6.0 million has been set off in relation to the costs that are directly attributable to the issuance of additional share capital.
Reserves comprise the following:
Foreign exchange reserves amounted to USD (19.4) million (2019: USD (20.1) million), include the cumulative net change
due to changes in value of subsidiaries’ functional currency to USD from the date of the previous reporting period to the
date of the current reporting period.
Reorganisation reserves amounted to USD (1.5) billion (2019: USD (1.5) billion, include the reserve created as part of
restructuring undertaken by the Group in 2019.
Other reserves include statutory reserve amounting to USD 7.5 million (2019: USD 7.3 million) and fair value reserve
amounting to USD (2.7) million (2019: USD (1.4) million). Statutory reserve is the reserve representing a proportion of profit
that is required to be maintained in subsidiary companies based on the local regulatory laws of the respective countries in
which the Group operates.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 201
19. Revenue
Merchant Solutions
Under Merchant Solutions, the Group provides a broad range of technology-led payment solutions to its merchants through
a full omnichannel service allowing them to accept payments of multiple types, across multiple payment channels. The Group
offers functionality in most aspects of payment acceptance, whether in-store, online or on a mobile device, by providing
access to a global payments network through its agile, integrated, secure, reliable and highly scalable technology platforms,
Network One and Network Lite. The Group’s Merchant Solutions business comprises its direct acquiring businesses and
acquirer processing services, whereby the Group provides processing for its financial institutions direct acquiring business.
The Group generates both transactional and non-transactional revenue (refer below for detail) under Merchant Solutions.
Issuer Solutions
Through its Issuer Solutions business line, the Group provides a range of innovative card products and services to its
consumers. The Group provides its Issuer Solutions customers with a comprehensive proposition supporting all components
of the card issuing value chain, including account hosting, transaction processing, settlement, reconciliation, chargebacks
and other ancillary services. The Group provides its Issuer Solutions customers with the ability to open card accounts for
consumers and issue and create a range of card products, including credit, debit, Islamic, pre-paid and digital/virtual cards.
The Group also provides support for its Issuer Solutions customers to enable them to host and manage a large portfolio of
card product solutions ranging from simple card usage to VIP card products, including highly configurable and personalised
usage. The Group generates both transactional and non-transactional revenue (refer below for detail) under Issuer Solutions.
For both Merchant and Issuer Solutions, the Group’s sources of revenue can be broadly categorised into transaction based
revenue and non-transaction based revenue.
› Transaction based revenue: includes revenue generated through a combination of: (a) a Gross Merchant Service Charge (‘MSC’),
charged to the merchant on the total processed volume (‘TPV’); (b) a fee per transaction processed and billed; (c) a fee per card
hosted and billed; and (d) fees for the provision of Value Added Services including foreign exchange services. The revenue is
reported on a net basis, i.e. after the deduction of interchange and scheme fees paid to the card issuer and payment schemes,
respectively. The transactional based revenue is recognised at a point in time in line with the Group accounting policy.
Interchange fees are the fees that are paid to the card issuing banks which are generally based on transaction value, but
could also be a fixed fee combined with an ad valorem fee. Scheme fees are the fees paid to the payment schemes for
using cards licensed under their brand names and for using their network for transaction authorisation and routing.
› Non-transaction based revenue: includes but is not limited to revenue generated through provision of various value-added
services (those that are fixed periodic charge), rental from point-of-sale (‘POS’) terminals and project related revenue.
The non-transactional based revenue is recognised at a point in time or over time depending upon the type of service
being provided, contractual terms and timing when the performing obligation is met by the Group, in line with the Group
accounting policy.
The Group recognises the revenue over time mainly in the following cases:
› Project related revenue, where the Group provides services to develop or enhance the tangible / intangible assets which are short
term in nature; and
› Other services provided by the Group where customer simultaneously receives and consumes the benefits as and when the
Group performs its obligation.
The breakdown of revenue is as follows:
Merchant Solutions
Issuer Solutions
Other revenue
2020
USD’000
109,415
165,011
10,418
284,844
2019
USD’000
152,955
177,572
4,852
335,379
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
202
20. Personnel expenses
The Group’s personnel expenses include salaries, allowances, bonuses and terminal and other benefits recognised during the
period, when the associated services are rendered by the employees. The details of personnel expenses are as follows:
Salaries and allowances
Bonus and sales incentives
Share-based compensation*
Terminal and other benefits**
Total number of employees
2020
USD’000
71,965
3,787
10,870
10,311
2019
USD’000
63,647
11,498
11,398
10,201
96,933
96,744
1,309
1,309
* Share-based compensation includes charge for management incentive award plan (‘MIP’) and IPO Cash Bonus, amounting to USD 6.8 million (2019: USD 10.0 million) and
LTIP Plan charge amounting to USD 4.1 million (2019: USD 1.4 million). Refer to note 17 for details.
** Social security cost and pension cost amounted to USD 1.4 million (2019: USD 1.1 million) and USD 0.2 million (2019: USD 0.2 million) respectively.
21. Selling, operating and other expenses
Selling, operating and other expenses consist primarily of technology and communication related expenses, processing
service costs, legal and professional charges, provision for expected credit loss and other general and administrative
expenses. The details of selling, operating and other expenses are as follows:
Technology and communication cost
Third-party cost
Legal and professional fees
Provision for expected credit losses
Other general and administrative expenses
21.1 Auditor remuneration
The details of Group’s auditor remuneration are as follows:
Total fees to the Group’s auditor for the audit of the Group’s Annual Report and Accounts
Total fees to the Group’s auditor for other services:
Review of half yearly financial information
Other non-audit services – IPO related
Other non-audit services
2020
USD’000
44,288
23,518
22,102
2,183
11,083
103,174
2019
USD’000
42,358
26,786
24,762
510
12,008
106,424
2020
USD’000
786
2019
USD’000
779
159
–
46
991
113
902
38
1,832
22. Net interest expenses
Interest expenses comprise interest expense on borrowings and lease liabilities. All borrowing costs are recognised in the
consolidated statement of profit or loss using the effective interest method. Interest income comprises interest income
on funds invested. Interest income is recognised in the consolidated statement of profit or loss, using the effective interest
method. The breakdown of net interest expenses is as follows:
Interest on term loan facility
Interest on revolving credit facility
Interest on bank overdrafts
Amortisation of debt issuance cost
Other interest expense
Interest income
Network International Holdings Plc
Annual Report and Accounts 2020
2020
USD’000
12,935
1,837
3,780
1,642
1,916
(441)
21,669
2019
USD’000
16,800
200
2,800
4,504
1,833
(1,293)
24,844
Notes to the consolidated financial statements continued 203
23. Earnings per share (‘EPS’)
Basic earnings / (loss) per share amounts are calculated by dividing the profit / (loss) attributable to owners of the parent
by the weighted average number of ordinary shares in issue during the financial period.
Diluted earnings / (loss) per share amounts are calculated by dividing the profit / (loss) attributable to owners of the parent
by the weighted average number of ordinary shares in issue during the financial period adjusted for the effects of potentially
dilutive options.
The basic and diluted earnings per share is based on earnings of USD 6.2 million (2019: USD 57.6 million), USD 6.2 million for
continuing operations (2019: USD 57.9 million) and nil for discontinued operations (2019: USD (0.4) million).
During the year the Company issued 50.0 million new ordinary shares and earnings per share is computed on weighted
average number of 520.8 million shares (2019: 500,000,000 million shares). For 2019, there was no change in the number
of shares used in the calculation of weighted average number of shares in issue because the principles of reverse acquisition
were applied in accordance with IAS 33, following the Group reorganisation in April 2019 prior to the Group’s listing on the
London Stock Exchange. For details on the Group reorganisation, please refer to note 1.
There is no change in the basic and diluted (‘EPS’). The diluted earnings per share have been calculated after considering
potential dilutive options for the Group’s scheme for employee share-based payments.
The profit attributable to the equity holders for the year ended 31 December 2020 is based on weighted average number
of 520,833,333 shares (2019: 500,000,000 shares).
Earnings per share (basic and diluted)
Earnings per share – Continuing operations (basic and diluted)
Earnings per share – Discontinued operations (basic and diluted)
2020
USD cents
1.2
1.2
–
2019
USD cents
11.5
11.6
(0.072)
24. Taxes
Taxes comprise current and deferred tax. Current tax and deferred tax is recognised in the consolidated statement
of profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.
Current tax payable also includes any tax liability arising from the declaration of dividends. Goodwill is not deductible for
tax purposes.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
› temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss;
› temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the
Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in
the foreseeable future; and
› Taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based
on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are
offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 204
24. Taxes continued
Deferred tax continued
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that
it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
24.1 Taxes
The tax expense recognised in the consolidated statement of profit or loss is as follows:
Deferred tax expense / (benefit)
Current tax expense
Adjustment for prior periods
Tax expenses
24.2 Deferred tax liability
Balance as at 1 January
Deferred tax expense / (benefit)
Effects of change in foreign exchange
Balance as at 31 December
24.3 Reconciliation of effective tax
Profit before tax from continuing operations
Tax using the Company’s domestic tax rate*
Effect of tax rates in foreign jurisdictions
Tax effect of:
Non-deductible expenses
Tax-exempt income
Other allowable deduction
Tax incentives / rebates
Carry forward losses
Deferred tax expense / (benefit)
Adjustment for prior periods
Other adjustments
Income tax expense
2020
USD’000
17
4,327
360
4,704
2019
USD’000
(725)
5,984
1,379
6,638
2020
USD’000
2019
USD’000
1,788
17
32
1,837
2020
USD’000
10,302
–
6,649
638
–
(608)
(2,266)
(84)
17
360
(2)
4,704
2,324
(725)
189
1,788
2019
USD’000
63,955
–
8,617
1,345
(123)
(1,260)
(2,665)
–
(725)
1,379
70
6,638
* As the Group’s largest operations are in UAE, the tax rate applied in this tax reconciliation is that of UAE (i.e. Nil), rather than the rate applying in the UK where the
Company is incorporated.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 24.4 Reconciliation of deferred tax
2020
Deferred tax asset
Provisions and other items
Deferred tax liability
Property and equipment and intangibles
Foreign exchange differences
Balance as at 31 December
2019
Deferred tax asset
Provisions and other items
Deferred tax liability
Property and equipment and intangibles
Foreign exchange differences
205
Balance at
1 Jan
Recognised
in P&L
Recognised
in OCI
Balance
at 31 Dec
1,294
(32)
–
1,262
(600)
(2,482)
15
–
–
(32)
(585)
(2,514)
(1,788)
(17)
(32)
(1,837)
500
794
–
1,294
(465)
(2,359)
(135)
66
–
(189)
(600)
(2,482)
Balance as at 31 December
(2,324)
725
(189)
(1,788)
25. Leases
Overview
The Group early adopted IFRS 16 in 2018 using the modified retrospective approach.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
Group assesses whether:
› The contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct
or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then
the asset is not identified;
› The Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use;
› The Group has the right to direct the use of the asset. The Group has this right when it has the decision making rights that are
relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what
purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either:
– The Group has the right to operate the asset; or
– The Group designed the asset in a way that predetermines how and for what purpose it will be used.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the
contract to each lease component on the basis of their relative stand-alone prices.
Accounting policy for the lessee
The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right of use asset is subsequently depreciated using the straight line method from the commencement date to the earlier
of the end of the useful life of the right of use asset or the end of the lease term. The estimated useful lives of the right of use
assets are determined on the same basis as those of property and equipment. In addition, the right of use asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 206
25. Leases continued
Accounting policy for the lessee continued
Lease payments included in the measurement of the lease liability comprise the following:
› Fixed payments, including in-substance fixed payments.
› Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date.
› Amounts expected to be payable under a residual value guarantee.
› The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change
in future lease payments arising from a charge in an index or rate, if there is a change in the Group’s estimate of the amount
expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise
a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right
of use asset, or is recorded in the consolidated statement of profit or loss if the carrying amount of the right of use asset has
been reduced to zero.
The Group presents right of use assets that do not meet the definition of investment property in ‘property, plant and
equipment’ and lease liabilities in ‘other payables’ in the consolidated statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected to take exemption for certain lease contracts that have either a lease term of 12 months or are
low-value. The Group recognises the lease payments associated with these leases as an expense on a straight line basis over
the lease term.
The Group leases offices to carry out its operations in different locations. Information about leases for which the Group is a
lessee is presented below:
25.1 Right of use assets
Balance as at 1 January
Additions during the year
Depreciation charge for the year
Derecognition of right-of-use assets
Effect of change in foreign exchange
Balance as at 31 December
2020
USD’000
12,461
1,227
(2,400)
(984)
126
10,430
2019
USD’000
8,059
6,563
(3,004)
–
843
12,461
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 25.2 Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 31 December
Current
Non-current (refer to note 17)
Discounted lease liabilities included in the statement of financial position at 31 December
25.3 Amounts recognised in the consolidated statement of profit or loss
Interest expense on lease liabilities
Depreciation of right of use assets
207
2020
USD’000
2019
USD’000
3,871
10,510
3,184
17,565
2,301
8,748
11,049
3,976
11,691
5,092
20,759
2,048
11,026
13,074
2020
USD’000
1,843
2,400
2019
USD’000
1,714
3,004
The expense relating to leases of low-value assets and short-term lease assets that are not a part of the above right of use
assets and lease liabilities (as the Group has availed exemption of short-term lease and low-value assets under IFRS 16)
amounted to USD 0.1 million (2019: USD 0.1 million).
Accounting policy for the lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and
rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an
operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major
part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses
the lease classification of a sub-lease with reference to the right of use asset arising from the head lease, not with reference to
the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it
classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Group applies IFRS 15 to allocate the consideration in
the contract.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term.
The Group leases out its point of sales (‘POS’) terminals. The Group has classified these leases as operating leases, because
they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.
The rental income recognised by the Group as at 31 December 2020 was USD 6.4 million (2019: USD 6.2 million).
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 208
26. Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities
Equity
Lease
liability
for right of
use asset
USD’000
Term loan
& revolving
credit
facility
USD’000
ATM lease
liability
USD’000
Retained
earnings
USD’000
Share
capital &
premium
USD’000
Non-
controlling
interest
2020
Opening balance
Acquisition of loan
Repayment of loan
Payment of debt issuance cost
Issuance of new shares
Payment of lease liabilities
Purchase of treasury shares
Issuance of subsidiary’s capital to
non-controlling interest
Total changes from financing cash flows
The effect of changes in foreign
exchange rates
Liability related changes
Recognition of lease liabilities under
IFRS 16
Derecognition of lease liability
Amortisation of debt issuance cost
Write-off of unamortised debt
issuance cost
Interest expense
Interest paid
Total liability related changes
13,074
–
–
–
–
(3,934)
–
–
9,140
(177)
1,227
(984)
–
1,843
–
2,086
1,619
–
–
–
–
(686)
–
315,930
415,000
(328,751)
(6,676)
–
–
–
(12,821)
–
–
–
–
–
(10,425)
65,100
–
–
–
258,736
–
–
–
–
–
–
–
–
–
Total
USD’000
382,902
415,000
(328,751)
(6,676)
258,736
(4,620)
(10,425)
–
933
–
395,503
–
(23,246)
–
323,836
1,965
1,965
1,965
708,131
–
–
–
–
–
73
(81)
(8)
–
–
–
1,642
6,721
–
–
8,363
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(177)
1,227
(984)
1,642
6,721
1,916
(81)
10,441
Closing balance
11,049
925
403,866
(23,246)
323,836
1,965
718,395
2,301
8,748
8,102
–
–
–
(3,748)
–
4,354
766
159
35,000
368,866
324,247
35,000
(44,918)
(2,903)
2,271
–
–
–
(646)
–
1,625
–
–
311,426
–
(12,821)
(12,821)
–
–
–
–
–
–
–
–
–
–
–
–
1,565,980
–
–
–
(1,500,880)
–
–
65,100
1,900,600
–
35,000
–
(44,918)
–
–
(2,903)
– (1,500,880)
(4,394)
–
(12,821)
–
369,684
–
443
–
–
–
–
–
443
Current portion
Non-current portion
2019
Opening balance
Acquisition of loan
Repayment of loan
Payment of debt issuance cost
Capital reduction
Payment of lease liabilities
Purchase of treasury shares
Total changes from financing cash flows
The effect of changes in foreign
exchange rates
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued Liabilities
Equity
Lease
liability
for right of
use asset
USD’000
Term loan
& revolving
credit
facility
USD’000
ATM lease
liability
USD’000
Retained
earnings
USD’000
Share
capital &
premium
USD’000
Non-
controlling
interest
Liability related changes
Recognition of lease liabilities under IFRS 16
Amortisation of debt issuance cost
Interest expense
Interest paid
Total liability related changes
6,563
–
1,714
–
8,277
–
–
114
(120)
(6)
–
4,504
–
–
4,504
–
–
–
–
–
–
–
–
–
–
Closing balance
13,074
1,619
315,930
(12,821)
65,100
Current portion
Non-current portion
2,048
11,026
766
853
105,000
210,930
–
–
–
–
–
–
–
–
–
–
–
–
209
Total
USD’000
6,563
4,504
1,828
(120)
12,775
382,902
–
–
27. Financial instruments
Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
› those to be measured subsequently at fair value (either through OCI (‘FVTOCI’), or through profit or loss (‘FVTPL’); and
› those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets: whether the financial asset is
held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the
contractual terms of the cash flows or whether contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding. Management determines the
classification of its investment at initial recognition.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
› the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
› the contractual terms of the financial asset give rise to cash flows on specified date that are solely payments of principal and
interest on the principal amount outstanding.
A debt instrument is measured at FVTOCI only if it meets both of the following conditions and is not designated as at FVTPL:
› the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets; and
› the contractual terms of the financial asset give rise to cash flows on specified date that are solely payments of principal and
interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to designate the
instrument under the classification of FVTOCI with subsequent changes in fair value being recorded in other comprehensive
income. This election is made on an investment-by-investment basis.
In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces
an accounting mismatch that would otherwise arise.
All other financial assets are classified as measured at FVTPL.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 210
27. Financial instruments continued
Recognition and measurement
Receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial
liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured
at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
Financial assets at fair value through other comprehensive income (‘FVTOCI’) are carried at fair value. After initial
measurement, the Group presents fair value gains and losses on equity investments in OCI, there is no subsequent
reclassification of fair value gains and losses in respect of equity investment securities designated as FVTOCI to the
consolidated statement of profit or loss following the derecognition of the investment. Dividends from such investments
continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established.
Reclassifications
Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its
business model for managing financial assets.
Derecognition of financial instruments
The Group derecognises financial assets when the contractual right to the cash flows from the financial assets expires, or
when it transfers the rights to receive the contractual cash flows on the financial assets in a transaction in which substantially
all the risk and rewards of ownership of the financial assets are transferred or in which the Group neither transfers nor retains
substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the consolidated statement of financial
position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either
to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses
arising from a group of similar transactions.
Impairment
During the year, the Group has applied the ECL model in accordance with IFRS 9 as disclosed in note 2 (f).
Fair value measurement principles
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the
Group has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument.
A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide
pricing information on an ongoing basis. If there is no quoted price in an active market, then the Group uses valuation techniques
that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into account in pricing a transaction.
Fair value hierarchy
The Group measures the fair value using the following fair value hierarchy that reflects the significance of inputs used in making
these measurements.
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly
(i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar
instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other
valuation techniques in which all significant inputs are directly or indirectly observable from market data.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 211
Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes
inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation.
This category includes instruments that are valued based on quoted prices for similar instruments for which significant
unobservable adjustments or assumptions are required to reflect differences between the instruments.
Accounting classifications and fair values
As at 31 December 2020
USD’000
Financial assets measured at fair value
Investment securities
Financial assets not measured at fair value
Scheme debtors
Receivables and prepayments
Restricted cash
Cash and cash equivalents
Long-term receivables
Financial liabilities not measured at fair value
Merchant creditors
Trade and other payables
Borrowings – Current
Other long-term liabilities
Borrowings – Non-current
As at 31 December 2019
USD’000
Financial assets measured at fair value
Investment securities
Financial assets not measured at fair value
Scheme debtors
Receivables and prepayments
Restricted cash
Cash and cash equivalents
Long-term receivables
Financial liabilities not measured at fair value
Merchant creditors
Trade and other payables
Borrowings – Current
Other long-term liabilities
Borrowings – Non-current
–
–
–
–
–
–
–
–
–
–
–
–
–
Carrying value
Fair value
Financial
assets
Financial
liabilities
Total
carrying
value
Total fair
value
Level 1
Level 2
Level 3
246
165,436
67,874
52,550
398,781
2,617
687,258
–
–
–
–
–
–
–
246
246
–
246
165,436
67,874
52,550
398,781
2,617
687,258
165,436
67,874
52,550
398,781
2,617
687,258
–
–
52,550
398,781
–
451,331
165,436
67,874
–
–
2,617
235,927
–
–
–
–
–
–
165,142
127,732
65,447
21,584
369,025
748,930
165,142
127,732
65,447
21,584
369,025
748,930
165,142
127,732
65,447
21,584
369,025
748,930
Carrying value
Financial
assets
Financial
liabilities
Total
carrying
value
Total fair
value
–
–
–
–
–
–
165,142
127,732
65,447
21,584
369,025
748,930
Fair value
Level 1
Level 2
Level 3
246
185,268
88,496
54,029
45,473
2,533
375,799
–
–
–
–
–
–
–
246
246
–
246
185,268
88,496
54,029
45,473
2,533
375,799
185,268
88,496
54,029
45,473
2,533
375,799
–
–
54,029
45,473
–
99,502
185,268
88,496
–
–
2,533
276,297
–
–
–
–
–
–
167,167
127,453
165,661
24,379
211,783
696,443
167,167
127,453
165,661
24,379
211,783
696,443
167,167
127,453
165,661
24,379
211,783
696,443
–
–
–
–
–
–
167,167
127,453
165,661
24,379
211,783
696,443
–
–
–
–
–
–
–
–
–
–
–
–
–
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements
212
28. Risk management
The Group has exposure to the following risks:
› Credit risk
› Liquidity risk
› Market risk
› Operational risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and
processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the
establishment and oversight of the Group’s Enterprise Risk Management Framework.
The Group is committed to embedding a strong risk culture to support good governance and sound risk management
practice. The Board and management play a key role in directing and influencing this by ensuring:
› that a risk based approach is used during key decision making;
› consistent tone from the top and clear responsibilities for risk identification and challenge;
› employees have risk management accountability and escalate issues on a timely basis;
› our incentive structures promote a risk aware culture to effectively manage risk and remunerate employees accordingly; and
› we adopt a culture of ‘learning from our mistakes’ to foster continuous improvement of processes and controls.
The importance of risk culture is reinforced in the Group’s policies and standards and the Code of Conduct, to which all
employees receive annual training as part of the attestation process.
Our risk governance model operates on the three lines of defence concept which ensures effective risk management, risk
oversight and assurance. The First Line of Defence comprises all employees engaged in revenue generating and customer
facing areas of the Group including support functions. Employees are responsible for identifying the risks within their
respective activities and for the effective management of those risks through the development of appropriate policies,
standards and controls. Employees are accountable for performing their activities within stated risk appetites and risk
tolerance limits established by the Second Line of Defence and for escalating and reporting risk events to the Second Line.
The Second Line of Defence is responsible for translating the risk appetite and strategy approved by the Board into
actionable risk limits, policies and programmes under which the First Line activities are to be performed. The Second Line
is also responsible for monitoring the performance of the First Line against these limits, policies and programmes. The Third
Line of Defence comprises the Group Internal Audit function (‘GIA’). They provide independent assurance to the Board and
management over the effectiveness of governance, risk management and control.
There are a number of priority areas that are vital to establishing a robust and sustainable risk assessment system for the
Group, key to which is the process that we have in place. Further detail on the seven step risk management reporting process
is outlined below:
Inherent Risk Assessment
1. Risk Identification
2.
3. Existing Controls
4. Residual Risk Assessment
5. Action Planning
6. Risk Monitoring and Reporting
7. Oversight
Credit risk
Credit risk is a risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations,
and arises principally from the Group’s scheme debtors, receivables and cash and cash equivalents held with banks.
The Group’s principal exposure to credit risk for its Merchant Solutions business is the risk of chargebacks by card issuers
and penalties from payment schemes where the merchant is unable to settle the sum due. The Group seeks to mitigate such
risk in part by creating reserve balances for merchants with a higher risk profile. The Group is also subject to credit risk for
the receivables due from the payment schemes for its acquiring business and to banks and financial institutions for its Issuer
Solutions business.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 213
As part of the Group’s Issuer Solutions business, the Group provides card issuance, hosting, transaction processing and
other Value Added Services to various financial institutions. Some of these financial institutions also rely on the Group’s
principal membership with various payment schemes to issue credit and debit cards as affiliate banks of the Group which
results in counterparty risk arising through possible non-payment of settlement funds. To mitigate this risk, wherever
possible, the Group conducts transactions with reputed financial institutions only and seeks to hold reserve balances
on a case by case basis as well.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each counterparty. However,
management also considers the factors that may influence the credit risk of its counterparties, including the default risk
of the industry and the country in which counterparties operate.
A vast majority of the Group counterparties have been transacting with the Group for over four years. Management has
established a process under which each new counterparty is analysed individually for credit worthiness before the Group’s
standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, if they are
available, and in some cases bank references.
The Group establishes an allowance for impairment that represents its expected credit losses in respect of receivables.
At 31 December, the maximum exposure to credit risk (net of provisions) by geographic region is as follows:
Middle East
Africa
The maximum exposure to credit risk (net of provisions) by type of counterparty is as follows:
Schemes
Banks
Others
Not credit impaired (0-180 days)
Credit impaired (181 days and above)
Less: Loss allowances
2020
USD’000
615,849
55,527
671,376
2019
USD’000
307,748
53,395
361,143
2020
USD’000
165,436
495,370
10,570
671,376
2020
USD’000
672,532
4,838
(5,994)
671,376
2019
USD’000
185,268
170,032
5,843
361,143
2019
USD’000
358,276
7,914
(5,047)
361,143
Exposure to credit risk is monitored on an ongoing basis. Cash is placed with good credit rating banks. Major bank ratings are
as follows:
Name of the bank
Emirates NBD PJSC
Standard Chartered Bank
Arab African International Bank
Citibank N.A.
Name of the bank
Emirates NBD PJSC
Standard Chartered Bank
Arab African International Bank
2020
USD’000
158,412
13,428
2,329
260,272
2019
USD’000
73,873
11,439
4,434
Rating
P-2
P-1
B
P-1
Rating
P-2
P-1
B
Agency
Moody’s
Moody’s
Capital Intelligence
Moody’s
Agency
Moody’s
Moody’s
Capital Intelligence
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 214
28. Risk management continued
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities
that are settled by cash or other financial assets. The Group’s approach to managing liquidity is to ensure that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s business and reputation. The Group maintains adequate working
capital facilities for various Group entities with reputable banks in respective countries. A significant part of the Group’s
short-term liquidity requirements arises out of its settlement requirements pertaining to its direct acquiring business, where
it typically makes payments to settle with merchants in advance of receiving payment from the schemes for the payment
amount incurred on the card. In particular, in the UAE, the Group generally receives payments from the card issuing banks
and payment schemes one business day after it has remitted funds to the merchants and these receivables are recorded on
its balance sheet as scheme debtors. Since the Group’s settlement amount with merchants is based on the total amount of
the card transaction less merchant discount and settlement fees, its acquiring payment cycle can result in temporary, but
significant, liquidity requirements for which it principally uses its revolving credit facility.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and
undiscounted and include estimated interest payment and exclude the impact of netting agreements.
31 December 2020
Contractual cash flows
USD’000
Merchant creditors
Trade and other payables
Borrowings – Current
Other long-term liabilities
Borrowings – Non-current
Carrying
amount
165,142
127,732
65,447
21,584
369,025
Total
165,142
145,936
67,086
26,530
412,709
2 months
or less
165,142
39,455
31,089
–
–
2-12
months
–
106,481
35,997
–
–
1-2 years
2-5 years
–
–
–
16,701
50,244
–
–
–
6,645
348,763
More than
5 years
–
–
–
3,184
13,702
Total
748,930
817,403
235,686
142,478
66,945
355,408
16,886
31 December 2019
USD’000
Merchant creditors
Trade and other payables
Borrowings – current
Other long-term liabilities
Borrowings – non-current
Contractual cash flows
Carrying
amount
167,167
127,453
165,661
24,379
211,783
Total
167,167
129,381
177,818
39,961
230,872
2 months
or less
2-12
months
1-2 years
2-5 years
More than
5 years
167,167
48,473
63,493
–
–
–
80,908
114,325
–
–
–
–
–
27,142
230,872
–
–
–
7,727
–
–
–
–
5,092
–
Total
696,443
745,199
279,133
195,233
258,014
7,727
5,092
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Group’s exposure to market risk arises from:
› Equity price risk
› Currency risk
›
Interest rate risk
Equity price risk
Equity price risk arises from the change in fair value of equity investments. The Group’s investment in securities classified as
investment in fair value through profit or loss is exposed to equity price risk. With the change of 100 basis point in the price,
keeping other factors constant, the price of the securities would increase / (decrease) by USD 2,460 only.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 215
Interest rate risk
The Group’s long-term indebtedness and revolving line of credit for acquiring settlement needs and other working capital
requirements are held at a variable rate of interest. The interest rates for these credit facilities are based on a fixed margin
plus a market rate of interest. Interest rate changes do not affect the market value of such debt but could impact the amount
of the Group’s interest payments and accordingly the Group’s future earnings and cash flows.
At the reporting date, the interest profile of the Group’s interest bearing financial assets and liabilities are as follows:
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
2020
USD’000
2019
USD’000
50
7,242
22
8,052
129
427,230
46,283
369,392
Currency risk
The Group is exposed to foreign exchange rate risk as a result of its foreign operations as well as transactions in currencies
other than AED which is the Group’s functional currency. A substantial portion of the Group’s revenue (95.4% of 2020
revenue and 96.2% of 2019 revenue) is either incurred in US dollars or currencies pegged to the US dollar, including the AED.
The Group’s foreign operations are principally in Egypt, Nigeria, Jordan and South Africa whose functional currencies are the
Egyptian Pound, Nigerian Naira, Jordanian Dinar and South African Rand respectively. Translation of foreign operations is
recognised under ‘other comprehensive (loss) / income’, whereas the translation effect of transactions and balances in
foreign currencies is reflected in the consolidated statement of profit or loss of the respective period. In addition, as part of
the Group’s role as a Merchant Acquirer, it may settle with merchants in currencies other than those in which it receives funds
from payment schemes. Although the Group settles such transactions using the spot market rates, it is subject to a certain
degree of currency risk and it recognises any such gains or losses in the income statement.
At 31 December 2020
Total financial assets
Scheme debtors
Receivables and prepayments
Restricted cash
Cash and cash equivalents
Long-term receivables
Investment securities
Total financial liabilities
Merchant creditors
Trade and other payables
Borrowings – current
Other liabilities
Borrowings – non-current
Net position
USD
USD’000
AED
USD’000
EGP
USD’000
JOD
USD’000
Others
USD’000
Total
USD’000
7,215
15,916
44,207
273,931
–
246
341,515
46,293
14,150
38,016
–
284,668
150,513
35,175
–
105,519
2,496
–
293,703
107,173
93,568
21,115
14,004
84,357
1,681
5,916
323
6,949
10
–
14,879
1,701
8,180
–
7,045
–
383,127
(41,612)
320,217
(26,514)
16,926
(2,047)
4,858
10,021
–
4,539
111
–
19,529
1,948
10,495
6,316
–
–
18,759
770
1,169
846
8,020
7,843
–
–
17,878
8,027
1,339
–
535
–
165,436
67,874
52,550
398,781
2,617
246
687,504
165,142
127,732
65,447
21,584
369,025
9,901
7,977
748,930
(61,426)
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 216
28. Risk management continued
Currency risk continued
At 31 December 2019
Total financial assets
Scheme debtors
Receivables and prepayments
Restricted cash
Cash and cash equivalents
Long-term receivables
Investment securities
Total financial liabilities
Merchant creditors
Trade and other payables
Borrowings – current
Other liabilities
Borrowings – non-current
Net position
USD
USD’000
AED
USD’000
EGP
USD’000
JOD
USD’000
Others
USD’000
Total
USD’000
15,529
18,357
53,773
9,224
–
246
157,205
55,025
–
20,422
2,325
–
2,631
6,932
234
6,379
98
–
9,903
7,068
–
1,782
110
–
–
1,114
22
7,666
–
–
185,268
88,496
54,029
45,473
2,533
246
97,129
234,977
16,274
18,863
8,802
376,045
57,480
11,907
68,258
2,483
96,875
105,175
93,862
90,971
13,947
114,908
1,583
8,307
–
7,717
–
127
9,135
6,432
–
–
2,802
4,242
–
232
–
167,167
127,453
165,661
24,379
211,783
237,003
(139,874)
418,863
(183,886)
17,607
(1,333)
15,694
3,169
7,276
1,526
696,443
(320,398)
Sensitivity analysis
As USD is pegged with AED and JOD, the table below calculates the effect of a reasonably possible movement of the USD
currency rate against the various currencies, with all other variables held constant, on the profit or loss (due to the fair value
of currency sensitive monetary assets and liabilities).
Assumed change from year end exchange rates
2020 – USD’000 + / (-)
2019 – USD’000 +/ (-)
EGP 1% Others 1%
(20)
(13)
80
15
Operational risk
Operational risk is the risk of direct or indirect losses arising from a variety of incidents with the Group’s processes, personnel,
technology and infrastructure, and from external factors other than credit, market and liquidity risks.
The Group has implemented an Operational Risk Management Policy which is aligned to the Enterprise Risk Management
Framework to identify, assess, manage and monitor its operational risks across all business processes.
Operational risk management practices are embedded in the organisation risk culture through the application of the
following operational risk management processes. These processes are guided (as deemed appropriate) by the seven
step risk management reporting process outlined above in the risk management section.
› Risk Assessment (‘RA’)
› Risk and Control Self-Assessment (‘RCSA’)
› Key Risk Indicators (‘KRIs’)
›
Incident and Loss Management (‘ILM’)
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued 217
Capital management
The Board of Directors monitors the Group’s performance in relation to its long-term business plan and its long-term
profitability objectives.
There were no changes in the Group’s approach to capital management during the year. The Group has complied with
all externally imposed capital requirements.
The Group’s key objectives on capital management are as follows:
› to comply with all the regulatory requirements in markets we operate in;
› to maintain a strong capital base with optimum capital structure so as to maintain investor, creditor and market confidence;
› to provide adequate funds to meet requirements of future growth; and
› to optimise returns for shareholders.
The Board of Directors monitors both the demographic spread of shareholders, as well as the return on capital
(the Group defines this as shareholders’ equity).
29. Group entities
Company name
Registered address
Direct subsidiaries of Network International Holdings PLC (the ultimate parent entity)
Network International Holding 1 Limited
Unit GV-00-03-01-BC-10-0, Level 1, Gate Village
Building 3, Dubai International Financial Centre,
P O Box 9275, Dubai, United Arab Emirates
2020
100%
Network International Holding 2 Limited
Unit GV-00-03-01-BC-10-0, Level 1, Gate Village
100%
Indirect subsidiaries of the ultimate parent entity
Network International LLC *
Building 3, Dubai International Financial Centre,
P O Box 9275, Dubai, United Arab Emirates
Level: 101-201 – Emirates NBD – AL Barsha (2),
P O Box 4487, Dubai UAE
Mercury Payments Services LLC
Level: 101-201 – Emirates NBD – AL Barsha (2),
Diners Club (UAE) LLC
P O Box 4487, Dubai UAE
Level: 101-201 – Emirates NBD – AL Barsha (2),
P O Box 4487, Dubai UAE
Network International Investment Pte. Ltd.
Network International Investment Holding Limited
Network International Services (Mauritius) Limited
Network International Payments Services Nigeria Limited
112, Robinson Road, # 05-01, Singapore 068902
Les Cascades, Edith Cavell Street, Port-Louis, Mauritius
Les Cascades, Edith Cavell Street, Port-Louis, Mauritius
11th Floor, Heritage Place, 21 Lugard Avenue, Ikoyi,
Lagos, Nigeria
49%
70%
100%
100%
100%
100%
100%
Network International Payment Services Proprietary Limited
Black River Park, North Park Block B, 2nd Floor, Office 1
100%
& 2, 2 Fir Street, Observatory, 7925, South Africa
Network International Services Limited Jordan
Abdul Raheem Al-Wakeed St Building No. 43 Shmeisani
100%
Amman, Jordan
Network International Payment Services (S.A.E.)
Building 13C01, Southern Business Park C, Cairo Festival
99.9%
City, Cairo, Egypt. 92, Tahrir Street, Dokki, Giza
Network International Egypt Company (S.A.E.)
Building 13C01, Southern Business Park C, Cairo Festival
98%
City, Cairo, Egypt. 92, Tahrir Street, Dokki, Giza
Egyptian Smart Cards Company
Building 13C01, Southern Business Park C, Cairo Festival
99.9%
Diners Club Services Egypt (S.A.E.)
Network International Arabia Limited
City, Cairo, Egypt. 92, Tahrir Street, Dokki, Giza
55 Kods Sharif Street, Mohandessin, Giza, Egypt
Building Number: 3074, Prince Mohammed Bin
Abdulaziz Road, Level 29, Tower B, Olaya Towers, P O
Box: 15870, Postal Code: 11454, Riyadh, Saudi Arabia
98%
100%
NI Payment Services (Ghana) Ltd.
GL-144-8556, Number 7, Airport road, Airport
100%
Liberation Rd ACCRA
La Dade-Kotopon Greater ACCRA
P O Box CT 6217, Cantonments-ACCRA Ghana
Associate of Network International LLC
Transguard Cash LLC
B Wing, 1st Floor, Dubai Airport Free Zone
50%
* 51% shareholding of Network International LLC is owned by Leaf Holding Limited (a company registered under Dubai International Financial Centre, Dubai) which is a local
sponsor as per the requirements of UAE laws.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 218
30. Contingencies and commitments
Performance and other guarantees
Commitments
2020
USD’000
13,358
6,384
19,742
2019
USD’000
8,399
3,155
11,554
Performance and other guarantees includes guarantees given by the banks on Group’s behalf to the clients for performance
and other obligations as per relevant contracts.
Commitments includes capital expenditure commitments against what the Group has committed with different vendors to
procure the assets but has not yet acquired them.
31. Subsequent events
Except for the below, there was no subsequent event identified until the date of the issuance of these consolidated financial
statements.
On 27 September 2020, the UAE issued Federal Decree-Law No. (26) of 2020 (‘New Decree’) amending certain provisions
of Federal Law No. (2) of 2015 on Commercial Companies. The New Decree came into force partially on 2 January 2021, and
repealed the existing Foreign Direct Investment law. Once fully enacted on 27 March 2021, the foreign ownership restrictions
will be abolished, allowing foreign investors to hold 100% of the share capital of their onshore companies in UAE, subject to
exceptions for certain strategic commercial activities / sectors.
The above change is relevant to the Group’s existing structure in relation to one of the Group entities in UAE, i.e. Network
International LLC which is 51% owned by Leaf Holding Limited (a company registered under Dubai International Financial
Centre, Dubai) which is a local sponsor. The Group will evaluate the impact of the above change on the Group’s financial
statements once the New Decree is fully enacted.
Network International Holdings Plc
Annual Report and Accounts 2020
Notes to the consolidated financial statements continued Network International Holdings PLC
Statement of Financial Position
as at 31 December
Assets
Non-current assets
Investment in subsidiaries
Total non-current assets
Current assets
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Due to a related party
Other payables
Total current liabilities
Total liabilities
Shareholders’ equity
Share capital
Share premium
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
219
Note
2020
USD’000
2019
USD’000
6
1,553,158
1,553,158
1,553,158
1,553,158
303
259,913
260,216
147
–
147
1,813,374
1,553,305
7
8
26,433
7,228
5,486
2,042
33,661
7,528
33,661
7,528
71,557
252,279
1,455,877
65,100
–
1,480,677
1,779,713
1,545,777
1,813,374
1,553,305
The notes on pages 221 to 225 form part of these financial statements. These financial statements were approved and
authorised for issue by the Board of Directors on 7 March 2021 and signed on its behalf by:
Nandan Mer
Director and Chief Executive Officer
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 220
Network International Holdings PLC
Statement of Changes in Equity
For the year ended 31 December
As at 1 January 2020
Total comprehensive loss for the year
Purchase of treasury shares
Share-based payment
Issuance of new shares
Share issuance cost
Share capital
USD’000
65,100
Share
premium
USD’000
Retained
earnings
USD’000
Total
shareholders’
equity
USD’000
–
1,480,677
1,545,777
–
–
–
6,457
–
–
–
–
258,280
(6,001)
(18,445)
(10,425)
4,070
–
–
(18,445)
(10,425)
4,070
264,737
(6,001)
As at 31 December 2020
71,557
252,279
1,455,877
1,779,713
As at 27 February 2019
Total comprehensive loss for the period
Purchase of treasury shares
Share-based payment
As at 31 December 2019
Share capital
USD’000
65,100
–
–
–
65,100
Share
premium
USD’000
Retained
earnings
USD’000
Total
shareholders’
equity
USD’000
–
–
–
–
–
1,500,880
1,565,980
(8,787)
(12,821)
1,405
(8,787)
(12,821)
1,405
1,480,677
1,545,777
The notes on pages 221 to 225 form part of these financial statements.
Network International Holdings Plc
Annual Report and Accounts 2020
221
Notes to the Financial Statements
1. Basis of preparation
Network International Holdings PLC (the ‘Company’) was incorporated on 27 February 2019. The Company was incorporated
as part of a reorganisation to facilitate the listing of Network International Group (Network International Holdings PLC and
its subsidiaries ‘the Group’) on the London Stock Exchange. The Company’s accounts are prepared based on FRS 102, the
Financial Reporting Standard applicable in the UK and Republic of Ireland.
These financial statements were prepared in accordance with Financial Reporting Standard 102, the Financial Reporting
Standard applicable in the UK and Republic of Ireland (‘FRS 102’). No profit and loss account is presented for the Company
as permitted by section 408 of the Companies Act 2006. The net loss after tax for the Company was USD 18.4 million
(2019: USD 8.8 million) for the year ended 31 December 2020.
As permitted by FRS 102, the Company has taken advantage of the disclosure exemptions available under that standard in
relation to financial instruments, capital management, and presentation of a cash flow statement, standards not yet effective
and related party transactions. Where relevant, equivalent disclosures have been given in the consolidated financial
statements of Network International Holdings PLC, which the Company is consolidated in. We expect to continue to take
advantage of this disclosure exemption for the foreseeable future. The financial statements have been prepared on the
historical cost basis, except for financial instruments which are measured at fair value.
The Company listed its shares on the London Stock Exchange on 12 April 2019.
The principal steps of the Group reorganisation were as follows:
› On 27 February 2019, the Company was incorporated by Network International LLC for 100 ordinary shares of GBP 1 each.
› On 20 March 2019, Network International LLC transferred investment in Network International Holdings PLC to the shareholders.
› On 29 March 2019, the existing share capital of the Company comprising 100 shares of GBP 1 each was split 10:1 into 1,000 shares
of GBP 0.10 each. Subsequently, on the same day, the Company issued 1,396 new shares of GBP 0.10 each for GBP 139 / USD 180.
This was followed by a share consolidation resulting in total share capital comprising 100 shares of GBP 2.396 / USD 3.119592
each. The net effect of this restructuring of capital was to increase the nominal value per share to GBP 2.396 / USD 3.119592 for
100 shares outstanding.
› On 29 March 2019, the Company issued 499,999,900 shares to existing shareholders (254,999,949 to Emirates NBD PJSC and
244,999,951 to WP / GA) of par value GBP 2.396 / USD 3.119592 per share in exchange for acquiring the shares of the subsidiary
(Network International Holding 1 Limited) and the shareholders’ receivables from Network International Holding 1 Limited. This
resulted in the creation of share capital of USD 1,559,795,688 and share premium of USD 6,183,530 (being the difference between
the carrying value of the shareholders’ receivable of USD 13,614,704 and the corresponding nominal value of shares issued of
USD 7,431,174).
› On 1 April 2019, the Company undertook a capital reduction by reducing the nominal value of its shares in issue from GBP 2.396 /
USD 3.119592 to GBP 0.1000 per share / USD 0.1302 and cancellation of share premium created above.
The capital reduction resulted in the creation of distributable reserves of USD 1,507,767,530. The difference in the GBP/USD
foreign exchange rate between the date of share issuance and capital reduction resulted in the creation of a foreign exchange
difference of USD 6,888,000, which would be considered as a realised loss and hence, has been netted off against the
Company’s retained earnings on the consolidated statement of financial position.
2. Functional and presentation currency
The Company’s functional currency is British Pound (‘GBP’). The Company’s financial statements have been presented in
United States Dollar (‘USD’) to align with the Group presentation currency. All financial information presented in USD has
been rounded to the nearest thousands, except when otherwise indicated.
3. Going concern
The Company acts as the ultimate holding company of Network International Group (the ‘Group’). The Group has made a
profit of USD 5.6 million (2019: USD 57.0 million) with cash inflow from operating activities of USD 107.5 million (2019: USD
132.4 million) for the year and has a net asset position of USD 498.0 million as at 31 December 2020 (2019: 238.7 million).
Furthermore, the Group meets its day-to-day working capital and financing requirements through its cash generated from
operations and its banking facilities.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 222
Notes to the financial statements continued
3. Going concern continued
The Directors have adopted the going concern basis after assessing the principal risks and having considered the impact of
COVID-19 on Group financial performance including under a base case and a severe but plausible downside scenario. The base
forecast has been further stress tested by using a severe but plausible downside scenario, to assess the Group’s resilience
against the possible adverse effect of the continued impact of the COVID-19 pandemic on the economy.
The Directors have, based on the assessment, the Group’s and the Company’s future business plan and other due considerations,
a reasonable expectation that the Company has adequate resources to continue in operational existence for a period of 12 months
from the date of approval of these financial statements. Accordingly, the financial statements have been prepared on a going
concern basis.
Investment in subsidiaries
4. Significant accounting policies
a.
Investments in subsidiaries are accounted for at cost less, where appropriate, provisions for impairment. Given the impact
of COVID-19 on the Group’s financial performance, management has considered whether there are any impairment indicators.
Based on the management assessment, including sufficient liquidity and positive net current asset position of the Company
and the Group and the temporary impact of COVID-19, management concludes that there are no such impairment indicators.
Dividends
b.
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
Dividends payable to the Company’s shareholders are recognised as a liability and deducted from shareholders’ equity in
the period in which the shareholders’ right to receive payment is established.
Financial instruments
c.
Non-derivative financial instruments comprise other receivables and other payables due to a related party.
Recognition and initial measurement
i.
All financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially
measured at fair value plus, for an item not at fair value through profit & loss (‘FVTPL’), transaction costs that are directly
attributable to its acquisition or issue.
Classification and subsequent measurement
ii.
Financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through OCI (‘FVOCI’) – debt
investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition
unless the Company changes its business model for managing financial assets, in which case all affected financial assets are
reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
›
›
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
As of 31 December 2020, the Company’s financial assets include other receivables and cash and cash equivalents. All these
financial assets are measured at amortised cost.
Financial liabilities
Financial liabilities are classified as measured at amortised cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in
profit or loss.
As of 31 December 2020, the Company’s financial liabilities include other payables and due to a related party. All these
financial liabilities are measured at amortised cost.
Network International Holdings Plc
Annual Report and Accounts 2020
223
iii. Derecognition of financial instruments
Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or
it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards
of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of
the risks and rewards of ownership and it does not retain control of the financial asset.
In cases where the Company enters into transactions whereby it transfers assets recognised in its statement of financial
position, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets
are not derecognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows of the modified liability
are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration
paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Share-based compensation
d.
The Company currently operates the following share-based compensation plans for its Group entity employees:
› Long Term Incentive Plan (‘LTIP’)
The LTIP is an equity-settled share-based payment. The Company’s accounting policy with respect to this incentive plan
is as follows:
Equity-settled share-based payment
Equity-settled share-based payment transactions, in which the Company receives services as consideration for equity
instruments of the parent entity (including shares or share options).
For equity-settled share-based payment transactions, the Company measures the services received, and the corresponding
increase in equity, directly, at the fair value of the services received. If the fair value cannot be estimated reliably, the
Company measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the
equity instruments granted. For transactions with employees and others providing similar services, the Company measures
the fair value of the equity instruments granted, because it is typically not possible to estimate reliably the fair value of
employee services received. The fair value of the equity instruments granted is measured at grant date.
For services measured by reference to the fair value of the equity instruments granted, all non-vesting conditions are taken
into account in the estimate of the fair value of the equity instruments. However, vesting conditions that are not market
conditions are not taken into account when estimating the fair value of the shares or options at the relevant measurement
date. Instead, vesting conditions are taken into account by adjusting the number of equity instruments included in the
measurement of the transaction amount so that, ultimately, the amount recognised for services received as consideration for
the equity instruments granted is based on the number of equity instruments that eventually vest. Hence, on a cumulative
basis, no amount is recognised for services received if the equity instruments granted do not vest because of failure to satisfy
a vesting condition (other than a market condition).
The fair value of equity instruments granted should be based on market prices, if available, and take into account the terms
and conditions upon which those equity instruments were granted. In the absence of market prices, fair value is estimated,
using a valuation technique to estimate what the price of those equity instruments would have been on the measurement
date in an arm’s length transaction between knowledgeable, willing parties.
The Company has calculated the fair value of the equity instruments granted by applying well-established principles of
financial analysis, adapted as appropriate to meet the requirements of valuing individual incentive plans. For the valuation of
the plan with only non-market conditions, the Black-Scholes model has been used, whereas, for the valuation of the incentive
plan with market conditions, the Monte-Carlo model has been used to compute the fair value of the equity instruments.
After vesting date and a corresponding increase in equity, no subsequent adjustment to total equity shall be made. The
Company will not subsequently reverse the amount recognised for services received from an employee if the vested equity
instruments are later forfeited or, in the case of share options, the options are not exercised. However, a transfer within equity
is allowed, i.e. a transfer from one component of equity to another.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 224
Notes to the financial statements continued
5. Critical accounting estimates and judgements
The preparation of financial statements requires Directors to make judgements and estimates that affect the application
of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods. During the year, management has not applied any accounting
estimates and judgements that are critical for the preparation of the Company’s financial statements.
6. Investment in subsidiaries
Investment in Network International Holding 1 Limited
Investment in Network International Holding 2 Limited*
2020
USD’000
1,553,158
–
1,553,158
2019
USD’000
1,553,158
–
1,553,158
* As at 31 December 2020, the investments in Network International Holding 1 Limited (as above) and Network International Holding 2 Limited (USD 100) comprises 100% of
their ordinary share capital.
The Directors have assessed whether the Company‘s fixed asset investments require impairment. In making this assessment,
the relationship between the Company’s market capitalisation and the carrying value of its investments has been considered,
in addition to the disruption attributable to the COVID-19 pandemic and the effect of this on future trading. The assessment
did not result in any impairment in 2020 (2019: Nil).
7. Due to a related party
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Related parties include associates, parent, subsidiaries, and key
management personnel or their close family members. The terms and conditions of these transactions have been mutually
agreed between the Group and the related parties. Key management personnel consists of the Network Leadership Team.
Network International LLC
2020
USD’000
26,433
2019
USD’000
5,486
8. Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised
as a deduction from equity.
Issued and fully paid up
550,000,000 shares of GBP 0.10 each (2019: 500,000,000 shares of GBP 0.10 each)
2020
USD’000
2019
USD’000
71,557
65,100
On 31 July 2020, the Company has issued additional share capital equivalent to 50 million shares. The shares were issued
at a price of USD 5.3 per share (GBP: 4.1 per share; par value: GBP 0.10 each). Accordingly, the Company’s share capital has
increased by USD 6.5 million and the Company has recognised share premium of USD 258.3 million, out of which an amount of
USD 6.0 million has been set off in relation to the costs that are directly attributable to the issuance of additional share capital.
Network International Holdings Plc
Annual Report and Accounts 2020
225
9. Share-based compensation
The Company has established a long-term equity-settled share-based incentive plan (Network International Holdings Long
Term Incentive Plan ‘LTIP Plan’) which is awarded to the eligible employees and subject to the condition specified under the
LTIP Plan rules through three grants.
The key features of grants 1 and 3 are as follows:
› Under the grants, the plan is rolled out to select eligible employees of the Group.
› The awards under these grants will normally vest on the third anniversary of the date of grant, unless an event occurs before then
which causes the award to vest under the rules of the LTIP Plan.
› Multiple performance conditions apply to the award (including market and non-market), and the award may only vest to the
extent that the performance condition have been satisfied.
Under grant 2, the plan is rolled out to all the employees of the Group based on meeting some eligibility criteria, as an
incentive in recognition of the efforts to support the listing of the Group. The award vesting is subject only to the participant’s
continued employment with the Group.
Below are the details of both grants:
Particulars
Date of grant
Grant date
share price
Grant 1
Grant 2
Grant 3
17 May 19
GBP 5.3
24 Oct 19
13 March 20
GBP 5.25
GBP 4.33
19 August 20
GBP 4.08
Vesting condition
a) Adjusted EPS
b) Revenue
c) Relative TSR
Service condition only
a) Adjusted EPS
b) Revenue
c) Relative TSR
Contractual life
of options
3 years
1.5 years
3 years
Details of number of shares to be vested under grants 1 and 3 for the achievement of performance conditions:
CAGR
Relative TSR
Awards vesting
Adjusted EPS
Revenue
Weighting
0%
(50%)
less than 12% compound growth p.a.
25%
25%
100%
12% compound growth p.a.
16.5% compound growth p.a.
25%
below median performance
company achieves median positioning relative to the
comparator Group
company achieves upper quartile positioning relative
to the comparator Group
Note: For all the elements of the award vesting is subject to a share price underpin of GBP 4.35 at the end of vesting period.
Detail of the valuation assumptions:
Description
Valuation model
Risk free interest rate
Grant 1
Black-Scholes and
Monte-Carlo model
0.69% p.a.
Constituents of the
Grant 2
13 March 2020
19 August 2020
Black-Scholes
Black-Scholes and Monte-Carlo model
0.51% p.a.
0.69% p.a.
0.006% p.a.
Grant 3
TSR comparator group
FTSE 250 at the time
of grant
–
Constituents of the FTSE 250 at the time of grant
Dividend equivalent
0% (assumed
participants entitled to
dividends or dividends
equivalents)
3% assumed dividend
0% (assumed participants entitled to dividends
yield
or dividends equivalents)
At the date of the awards granted, the Company has calculated the fair value of all the grants to recognise a charge
amounting to USD 4.1 million (2019: USD 1.4 million) in the statement of profit or loss for the year ended 31 December 2020
with a corresponding increase in equity.
Network International Holdings Plc
Annual Report and Accounts 2020
Strategic reportCorporate governanceFinancial statements 226
Contact Information
Registered Office
Suite 1,
3rd Floor,
11-12 St James’s Square,
London SW1Y 4LB
United Kingdom
Head Office
Network International
Level 1, Network Building,
Al Barsha 2, Dubai,
United Arab Emirates.
Tel: +971 4 3032431
Fax: +971 4 3495377
Registered number
11849292
Investor Relations
investorrelations@network.global
Company Secretary
secretariat@network.global
Auditors
KPMG LLP
15 Canada Square,
London E14 5GL
United Kingdom
Corporate brokers
Citigroup Global Markets Limited
Citigroup Centre,
33 Canada Square,
Canary Wharf,
London E14 5LB
United Kingdom
Registrars
Link Group
10th Floor,
Central Square,
29 Wellington Street,
Leeds LS1 4DL
United Kingdom
J.P. Morgan Securities plc
25 Bank St,
Canary Wharf,
London E14 5JP
United Kingdom
Network International Holdings Plc
Annual Report and Accounts 2020
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Registered Office
Suite 1,
3rd Floor,
11-12 St James’s Square,
London SW1Y 4LB
United Kingdom
Head Office
Level 1,
Network Building,
Al Barsha 2, Dubai,
United Arab Emirates
investors.networkinternational.ae