213800XVRNKWENNLKK60 2022-12-31 213800XVRNKWENNLKK60 2021-12-31 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 213800XVRNKWENNLKK60 2020-12-31 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:MergerReserveMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 netw:ReorganisationReserveMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:OtherReservesMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800XVRNKWENNLKK60 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:MergerReserveMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 netw:ReorganisationReserveMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:OtherReservesMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800XVRNKWENNLKK60 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:IssuedCapitalMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:SharePremiumMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:MergerReserveMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800XVRNKWENNLKK60 2020-12-31 netw:ReorganisationReserveMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:OtherReservesMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:RetainedEarningsMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800XVRNKWENNLKK60 2020-12-31 ifrs-full:NoncontrollingInterestsMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:IssuedCapitalMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:SharePremiumMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:MergerReserveMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800XVRNKWENNLKK60 2021-12-31 netw:ReorganisationReserveMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:OtherReservesMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:RetainedEarningsMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:NoncontrollingInterestsMember 213800XVRNKWENNLKK60 2021-12-31 ifrs-full:TreasurySharesMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:IssuedCapitalMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:SharePremiumMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:TreasurySharesMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:MergerReserveMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800XVRNKWENNLKK60 2022-12-31 netw:ReorganisationReserveMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:OtherReservesMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:RetainedEarningsMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 213800XVRNKWENNLKK60 2022-12-31 ifrs-full:NoncontrollingInterestsMember iso4217:USD iso4217:USD xbrli:shares
Network International Holdings Plc
Annual Report and Accounts 2022
Serving more
customers.
Better.
We are
Network
,
the leading payment
solutions provider
across the Middle East
and Africa.
Strategic Report
Highlights
2
Chairman’s Statement
4
Our Business Model
6
Our Markets
8
Group Chief Executive
Officer’s Review
10
Our Strategy
14
Our Strategy in Action
16
Operational and Financial
Key Performance Indicators
22
Stakeholder Engagement
24
Our Culture and Values
28
ESG Strategy
38
Task Force on Climate-related
Financial Disclosures
58
Operating Review
78
Group Chief Financial
Officer’s Review
88
Principal Risks and Uncertainties
102
Non-Financial Information Statement
116
Directors’ Duties
117
Corporate Governance
Corporate Governance Report
120
Board of Directors
126
Executive Management Team
129
Compliance with UK Corporate
Governance Code
131
Audit Committee Report
146
Risk & Technology
Committee Report
156
Nomination Committee Report
160
Directors’ Remuneration Report
164
Directors’ Report
190
Viability Statement
196
Going Concern Statement
199
Financial Statements
Independent Auditor’s Report
200
Consolidated Statement
of Financial Position
209
Consolidated Statement
of Profit or Loss
210
Consolidated Statement
of Other Comprehensive Income
211
Consolidated Statement
of Changes in Equity
212
Consolidated Statement
of Cash Flows
214
Notes to the Consolidated
Financial Statements
216
Statement of Financial Position
262
Statement of Changes in Equity
263
Notes to the Financial Statements
264
Contact Information
IBC
“Network has experienced significant
growth acceleration during 2022.
This is the result of our fast-growing
markets, an acceleration towards digital
payments catalysed by the pandemic,
and a revitalised strategic approach
which is creating a more agile and
effective business.
We face the future with excitement
knowing we have several growth levers
available, supported by the scale,
capabilities, people and trusted brand
to fulfil our purpose: of helping the
economies and customers we serve
to grow and prosper.”
Nandan Mer
Group Chief Executive Officer
Visit investors.networkinternational.ae
to read our Annual Report
Delivering a
growth focused strategy
Our growth ambition is supported by the multitude of opportunities
open to us in our fast-growing markets.
Unlocking a new revenue
opportunity in the Kingdom
of Saudi Arabia
We have made good progress, signing
four new customers in the year, which will
supplement our existing revenues.
Read more p16
Building our capabilities
across African markets
We are broadening our merchant reach
across Africa by further enhancing our
payment acceptance capabilities and
enabling merchants in the SME sector
to grow their business.
Read more p18
ACCELERATE
INNOVATE
Service innovation to
expand our relationships
with merchants in the UAE
We continue to innovate our products
and services, ultimately improving the
overall merchant experience and our
competitive positioning.
Read more p20
ACCELERATE
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
1
USD 438.4m
USD 352.2m
2022
2021
USD 178.6m
USD 143.5m
2022
2021
USD 80.1m
USD 56.6m
2022
2021
USD 15.7 cents
USD 11.6 cents
2022
2021
USD 14.5 cents
USD 10.4 cents
2022
2021
USD 81.9m
USD 61.9m
2022
2021
USD 119.2m
USD 51.7m
2022
2021
HIGHLIGHTS
A year in review
Financial highlights for the year ended 31 December 2022
Revenue
USD
438.4
m
+24.5% y/y
Merchant Services
Middle East
2
66
%
of revenue
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
Remaining percentage relates to ‘Other revenue’, which includes revenue relating to Mastercard strategic partnership.
Underlying EBITDA
1
USD
178.6
m
+24.5% y/y
Profit for the year
USD
80.1
m
+41.6% y/y
Underlying basic EPS
1
USD
15.7
cents
+35.3% y/y
Reported basic EPS
USD
14.5
cents
+39.4% y/y
Underlying free cash flow
1
USD
81.9
m
+32.3% y/y
Cash flow from operating activities
USD
119.2
m
+130.8% y/y
Cash flow from operating activities for the
comparative period has been restated to
reflect the recent change in IFRS guidance.
Segment highlights
Outsourced Payment Services
USD
183.3
m
revenue
+41.4% y/y
70.9
%
contribution margin
1
+50 bps y/y
USD
242.5
m
revenue
+13.3% y/y
70.6
%
contribution margin
1
+190 bps y/y
Africa
2
33
%
of revenue
Share buyback
USD
100
m
share buyback programme
launched, of which
USD
40.6
m
repurchased by end Dec 22
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
2
ACCELERATE
Serve more customers
›
Significant customer wins
Across merchants and financial institutions (FIs)
›
New market entry into Saudi Arabia
Supported by four new customer wins
›
Strengthened competitive position
More services for UAE merchants
›
Launched commercial payment services
Driving a new revenue opportunity
>
150
k
diverse merchant
relationships
200+
financial institution
and fintech customers
Read more p14
Strategic highlights
INNOVATE
Serve customers better
›
Widest range of payment methods
for merchants
>30 payment acceptance methods
›
Expanded value-added services
introduced >30 payment capabilities
& value-added services
›
Strengthened online SME capabilities
Launched DPO Pay in the UAE
›
Strategic acquiring partnership
Expanded relationship with our largest
customer, Emirates NBD
30
+
value-added services
for merchants and FIs
>
18,000
SMEs and global
enterprises enabled to
accept online payments
Read more p15
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
3
Sir Ron Kalifa OBE
Chairman
Dear Shareholders,
Last year, I shared my excitement
about Network’s renewed strategy
and the opportunity to raise the
bar to deliver value for shareholders.
Just over a year later, I am pleased
to see the business delivering on
this strategy with a profitable period
of high growth. This is thanks to
our improved execution, buoyed
by economic growth in our markets
and further structural acceleration
towards digital payments. We hope
this report demonstrates the
significant progress we have made
during the period and the strong
momentum across the business.
Growth acceleration through
the business
I continue to see improved business
performance and progress under
Nandan Mer’s leadership, supported
by the Executive Committee.
Our business has seen a significant
step up in its growth trajectory
through 2022, which is a result of
multiple factors: i) resilient economic
conditions and a strong rebound
from the pandemic across many of
our markets; ii) an acceleration away
from cash towards digital payments,
catalysed by both COVID-19 and
government initiatives; and iii) a
revitalised strategic approach which
is creating a more agile and effective
business, able to execute at pace
and maximise growth opportunities.
We have made significant strategic
progress during the year, having
delivered positive results on several
critical initiatives.
We have successfully established a
presence in Saudi Arabia, launched
direct-to-merchant services in Egypt
and continued the integration of
DPO Group, which has doubled the
Group’s e-commerce revenues. We
have also established contract wins
in the commercial payments space.
We reported financial results in
line with guidance, demonstrating
accelerated revenue growth of 24%
year on year, and delivering margin
expansion whilst also investing in new
growth opportunities. Cash generation
was strong having delivered underlying
free cash flow of USD 82 million,
which has supported balance sheet
deleveraging and the ability to
deliver further shareholder returns
through the initiation of a USD 100
million share buyback programme.
Group Chief Executive Officer’s
Review p10
Delivering with purpose
to help the business prosper
“Network has taken
a major step forward
in 2022. As a Board,
we could not have
delivered these results
without the continued
support of our
colleagues, customers
and shareholders.”
Sir Ron Kalifa OBE
Chairman
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
4
CHAIRMAN’S STATEMENT
Strong governance and leadership
Having made a number of changes
to the Board in the prior year,
the structure of our Board and
Committees remained largely
unchanged through 2022.
We have responded to shareholder
feedback on a number of areas.
The participation of female members
of the Board has increased to
33% but there is more to do in
this area and we are committed to
further improving this ratio over time.
We would like to thank
Suryanarayan Subramanian for
his guidance and contribution
to Network. Surya retired at the
end of December 2022, having been
a Director of Network since 2013
and a key contributor to the Group’s
growth journey from a privately
owned business to a publicly
listed company.
Corporate Governance Report p120
Minimising our environmental
impact
The Board plays a significant role
in developing and leading the ESG
strategy. Alongside our values,
ESG considerations are central to
ensuring the business remains truly
sustainable for all stakeholders.
In 2021 we undertook a thorough
review of our activities, developed
a refreshed strategy and made a
series of commitments to enhance
our future actions and disclosures.
In 2022, we are pleased to report
considerable progress across many
areas, particularly against our
measurement of environmental KPIs.
ESG Strategy p38
Outlook
The Board remains highly supportive
of the Executive Management Team
and their strategic plan. One of
the most exciting prospects for our
business is the number of growth
options available to us, whether that
be in new markets or new business
lines. The strength, depth and local
knowledge of our management
are what enables us to explore and
capitalise on these opportunities,
whilst continuing to ensure our
core business remains resilient
and delivers strong returns.
We are fortunate to be operating in
markets that continue to see positive
trends, although there are signs
of more challenging economic
indicators in some African markets.
This growth is further enhanced by
the transition from cash to digital
payments, which remains at an early
stage of adoption in our markets,
and our strong competitive position.
Given these factors, we expect
strong revenue growth in the high
teens for 2023.
Network has taken a major step
forward in 2022. As a Board,
we could not have delivered these
results without the continued
support of our colleagues, customers
and shareholders. Their support
remains key to our future success
and the positive culture that drives
our business. I am encouraged by the
strong momentum across the Group,
which will enable us to continue
to deliver for all stakeholders.
Sir Ron Kalifa OBE
Chairman
8 March 2023
A purposeful
transformation
Our purpose is clear – we enable
sellers of goods and services to find
more ways to trade and grow their
businesses and we support financial
institutions in providing inclusive
digital payment solutions for all
their customers. The Board continues
to oversee the management team
in their support of our major
stakeholder groups.
1
Growing shareholder value
We have delivered financial
results in line with guidance and
initiated a USD 100 million share
buyback programme, of which
we repurchased c.USD 40 million
in 2022.
Group Chief Financial Officer’s
Review p88
2
Supporting financial
inclusion across the region
We have supported over 2,000
Micro SMEs with digital payment
acceptance across Jordan and
Africa; businesses which are
crucial to the social and economic
development of any economy.
Group Chief Executive Officer’s
Review p10
3
Making Network an even
better place to work
We focused on training and
development during 2022,
more than doubling the number
of employee training hours
and launching new functional,
technical and Executive
Leadership Programmes.
ESG Strategy p38
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
5
Unrivalled on-the-ground presence in
23 markets
A comprehensive payments
one-stop-shop
Our licence to win
Operating across two consumer payment business lines
Creating value for all our stakeholders
Payment
acceptance
Direct-to-
merchant
Value-added
payment
services
We maintain direct
relationships with
merchant customers and
Payment Service Providers
(PSPs), enabling them to
accept digital payments
We provide merchants
with online or offline ways
to accept payments
We process over
USD 45bn
in payment volumes
1
on behalf of over
150k
merchants
We also provide
value-added services
including FX solutions,
data analytics,
merchant lending
3
and an e-commerce
store builder
Merchant Services
(42% of Group revenue
2
)
Merchants
Enable sellers of goods and
services to grow their businesses
by simplifying payments
>
150
k
diverse merchant
relationships
Colleagues
Achieve their professional
aspirations and financial
well-being
57
%
engagement score
Consumers
Provide unconstrained
low- cost ways to pay
for goods and services
18.0
m
customer credentials
under management
1
TPV restated to align with new segment reporting, excludes volumes processed on behalf of financial institution processing
customers which is now part of the Outsourced Payment Services business.
2
Remaining 3% relates to ‘other revenue’, which includes those relating to cash advance fees on withdrawals from ATMs,
FX gains/losses and the revenue from the Mastercard strategic partnership.
3
Network does not provide lending directly. Lending is facilitated through a third-party bank partner.
Consumers
Merchants
OUR BUSINESS MODEL
Purpose: Helping businesses
and economies prosper…
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
6
Scale with services across
>50 countries
Trusted payments experts
>1,900 employees
Digital payment
networks and
schemes
Acquirer
processing
Issuer
processing
Value-added
payment
services
We act as an outsourced
service provider for FIs,
fintechs and other payment
credential issuing customers;
managing and processing
their consumer payment
credentials and transactions
We manage
18.0m
payment credentials
and process
1.3bn
transactions on
behalf of over
200
financial institution
and fintech customers
Where a financial
institution (FI) maintains
the relationship with the
merchant, we provide
processing and operational
services to the FI
We also offer value-
added services including
advanced fraud solutions,
data analytics, loyalty
programmes, credit card
controls and Easy
Payment Plan options
Outsourced Payment Services
(55% of Group revenue
2
)
FIs, fintechs, MNOs
Enable issuers to provide a
range of payments solutions
to their consumers
200
+
financial institution and
fintech customers
Governments
Support financial inclusion
and economic growth
25
%
MEA digital Tx as %
of total Tx volume
4
Shareholders
Deliver superior revenue
growth and returns
15.7
cents
5
Underlying basic EPS
14.5
cents
Reported basic EPS
Stakeholder Engagement p24
4
Source: Edgar, Dunn & Company 2021 data, reflects MEA transaction volumes.
5
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.
Payment
credential issuing
institutions
… by simplifying commerce
and payments
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
7
27%
22%
38%
27%
30%
25%
58%
75%
7.6%
5.1%
2.4%
4.6%
3.6%
2.1%
2.1%
5.2%
1.6%
4.5%
5.3%
12.4%
5.1%
6.4%
6.6%
20.6%
OUR MARKETS
Succeeding in our
fast-growing markets
1
Economic performance remained strong
across our key growth markets
2
We operate across high-growth markets
which are experiencing an accelerating
transition from cash to digital payments
We operate across many markets that are
experiencing robust real GDP growth and an
expansion in personal consumption expenditure,
with the region rebounding strongly post pandemic.
Digital payments account for only 25% of transaction
volumes
1
in the MEA region. The underlying value
of digital transactions is expected to grow by a
low-teens percentage
2
CAGR between 2021–2025.
Economic conditions
are strong;
real GDP
growth supported by
the diversification of
business revenue and
its attractiveness as a
tourist destination.
Real GDP grew at its
fastest pace in nearly
a decade in 2022
,
driven by economic
diversification and its
business environment.
Economic activity
is robust,
with
performance driven
by strong consumer
demand and increased
investments.
Economic
environment is strong,
supported by
an increase in
exports and foreign
investments.
Performance has
been impacted by
unreliable energy
supply,
high
unemployment and
rising interest rates.
Economic recovery
remains strong,
following political and
economic reforms
which have contributed
to social development.
Source: Edgar, Dunn & Company, 2021 data.
1
Data for Jordan is 2020.
Evolution of the merchant payment acceptance
infrastructure has accelerated across our markets
The ongoing improvement in the payments landscape is
supportive to our strategy, to expand our merchant services
in new markets across the MEA.
The strong growth in the number of point-of-sale
devices, supported by a change in consumer behaviour,
is complementary to our market leading direct-to-merchant
offer in the UAE and Jordan, our recently launched
Merchant Services in Egypt, and our existing presence
in Africa, through DPO.
Point-of-sale devices
per 1,000 inhabitants
2019
2021
2019–2021
CAGR
UAE
24.4
27.6
6%
Jordan
3.4
4.3
12%
Egypt
0.9
1.7
40%
Africa
1.2
4.1
84%
Source: Edgar, Dunn & Company, World Bank country population data.
Digital payments as a % of transaction volume
1
2021
UAE
Jordan
United Kingdom
Saudi Arabia
South Africa
United States
Egypt
Kenya
2022 real GDP growth
Jordan
1
Saudi Arabia
UAE
Egypt
South Africa
Middle East &
Africa average
Europe average
North America
average
2021–25 PCE growth CAGR forecast
Source: IMF country data, 2022 y/y real GDP growth estimate
PCE – Personal Consumption Expenditure, Edgar, Dunn & Company data.
Network operates in MEA, US/UK data
shown for comparison purposes.
1
Edgar, Dunn & Company, 2021 data, transaction volumes.
2
Edgar, Dunn & Company, transaction value, forecast for total non-cash
payments excluding account to account.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
8
3
Government initiatives are paving the way
for significant growth in digital payments
Change in consumer behaviour is driving the use of
payment credentials
3
across our markets
Consumers are using their credentials more frequently
as a result of changing spending behaviours, with the shift
to digital payments accelerating as consumers become
more comfortable with the electronic method of payments.
This is further supported by the development of the
payments infrastructure in our regions.
We are seeing strong growth in the number
of transactions per card across our key markets
This trend is aligned with our strategy to expand our
Outsourced Payment Services business in existing
and new markets, supported by the increased use of
credentials and therefore the number of transactions
processed. We are also focused on providing additional
solutions beyond traditional payment methods to
credential issuing institutions, including digital wallets.
Transactions
per card, market data
2019
2021
2019–2021
CAGR
South Africa
65
94
20%
UAE
30
50
29%
Saudi Arabia
46
129
67%
Egypt
3
22
179%
Source: Edgar, Dunn & Company. Annual card transaction volumes divided by
the number of cards.
Continued shift away from cash payments is also driving
growth in the value of card transactions in the Middle
East and Africa
The value of digital payment transactions is expected
to grow ahead of the total number of credentials in the
Middle East and North Africa, supported by an increase
in the average spend per credential, with consumers using
credentials more frequently.
The increase in card transaction value is supportive to our
strategy of expanding our Outsourced Payment Services
business with consumers using their payment credentials
more frequently. It also supports our strategy within
Merchant Services as we i) enter new markets; ii) enhance
our digital offering; iii) expand payment type availability;
and iv) develop sector specific solutions, as consumers
spend more with their existing payment credential.
North
America
Africa
Europe
Middle
East
MENA
UAE
Saudi
Arabia
Egypt
34.2%
31.6%
16.5%
15.3%
12.6%
11.1%
4.8%
9.8%
Edgar, Dunn: Growth forecast for card transaction value
4
(CAGR 2021–2026)
United Arab Emirates
›
Introduction of a ‘National Instant Payments Platform’
(IPP) to enable bank to bank transfers across multiple
use cases, including person to person and business
to consumer instant payments.
›
Roll out of the UAE Domestic Card Scheme to lower
the cost of electronic payments.
›
Promotion of cross-border payments by connecting
the payment systems of central banks across the GCC.
Saudi Arabia
›
Mandating the presence of point-of-sale devices
at retail outlets to further reduce cash transactions.
›
Introducing an open banking framework, enabling
third parties with access to a bank’s systems and
customer data to create new products and services
– providing financial institutions with the opportunity
to innovate.
›
Maturing the fintech industry, with the Kingdom aiming
to become a global fintech centre, targeting over
500 active fintechs by 2030 vs the c.150 currently.
Egypt
›
2030 Vision includes the digitisation of the country’s
payments infrastructure through the e-payments act,
where all government transactions and the payment of
salaries of public workers are to be carried out digitally.
›
Recently introduced an Instant Payment Network,
enabling customers to make electronic payments
instantly, at any time, through the Central Bank’s
‘InstaPay’ app – allowing the transfer of funds
between accounts, 22 million Meeza cards
5
and
27 million mobile wallets
6
.
3
Credentials relates to consumer payment methods e.g. cards,
digital wallets amongst others.
4
Edgar, Dunn & Company growth forecast for card transaction value.
5 Egypt Central Bank.
6
https://www.wamda.com/2022/03/egypt-launches-digital-
payments-instapay
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
9
New business: record levels
of merchant and FI signings
Merchant signups:
2022 marked a record year for
merchant signups, primarily driven
by the SME sector in the UAE which
is a high margin strategic focus area.
SME signings increased significantly
as we progressed through the year,
supported by the launch of digital
onboarding, low-cost mobile phone
app payment acceptance and the
web-store builder associated with
our ‘DPO Pay’ package. We also
continue to attract new large
merchants, securing Anantara,
Taj Tower Hotel Group, Talabat,
Audemars Piguet, and Western
Union, amongst others.
FI wins:
The pace of new FI customer wins
for payment processing services
remains ahead of pre-pandemic
levels. We secured 18 new customers
in the period, including Fair Money
Digital Bank in Nigeria, Pivot Bank
in East Africa, alongside wins in the
Middle East including El Nilein in the
UAE and Blink Neo Bank in Jordan.
We renewed six notable existing
contracts and expanded portfolios
with customers through successful
cross-selling. In Acquirer Processing,
this included the deployment of
N-Genius™ payment terminals to
Access Bank in Botswana, extending
our partnership with Tymebank
in South Africa through the rollout
of mobile phone app payment
acceptance and signing new service
agreements with I&M Bank in Kenya
and Access Bank Ghana. In Issuer
Processing, we signed our first credit
credential processing agreement
in South Africa through a service
extension with Access Bank and
added new debit, credit and prepaid
credentials for Arab Bank Jordan.
We also reached a new milestone
with our largest customer Emirates
NBD, having signed a new strategic
Acquirer Processing partnership,
the first extension of this major
customer relationship into Acquirer
Processing. We are providing merchant
acquiring services to a number of
Emirates NBD’s institutional clients
in the UAE through white-labelled
services, including point-of-sale
terminals, processing and settlement
of funds. The partnership will also
extend to SME merchants through
a referral agreement that spans
digital payment acceptance,
lending and other banking services.
New capabilities: are
supporting new business
wins, faster onboarding
and revenue diversification
New payment methods give
merchants more reasons to
choose Network over competitors
›
Network offers merchants over
30
1
digital payments acceptance
options across cards, mobile
wallets and alternative payments.
›
UAE merchants benefited from a
wider selection of online payment
solutions through collaborations
with Amazon Payment Services
and Mastercard’s ‘Click to Pay’
checkout solution which securely
enrols and stores consumer
payment details; as well as loyalty
programme points acceptance
across major shopping malls and
hotels with SHARE.
›
In Jordan, merchants are now
able to accept QR code payments
through a partnership with CliQ.
Network was also the first to
launch Buy Now Pay Later (BNPL)
acceptance in Jordan during 2022,
through a partnership with Zoodpay.
›
UAE merchants can now accept
payments through more channels,
having introduced self-service
payment kiosks in partnership with
Nayax, which adds to our point-of-
sale (POS), mobile phone app and
online payment acceptance options.
New value-added services increase
merchant loyalty
›
Enabled faster sign up of merchants
having launched fully automated
digital onboarding.
›
Launched sector specific solutions.
Including a fully integrated payments
platform tailored to the hospitality
industry in partnership with
FreedomPay, providing merchants
with a unified view of transactions
across front desk reservations,
restaurants, bars, theme parks
and spas. We have also launched
Foodics Pay for SMEs in the food
and beverage space, reducing
costs for merchants by unifying
tasks such as single receipts,
daily settlements and chargeback
support on a single app.
›
Developed our e-commerce
payment services through
‘buy online and return in-store’
and rolling out a series of
e-commerce plugins for SME
merchants which provide online
stores, shopping carts, FX support
and search engine optimisation.
›
More lending options for SMEs;
having expanded our lending
partners in the UAE and launched
lending for the first time in Jordan,
in partnership with Sanadcom.
Our growth ambition is supported by the multitude
of opportunities open to us in our fast-growing markets
across the Middle East and Africa. At the centre of this
ambition is our purpose: to help businesses and economies
prosper by simplifying commerce and payments – for
merchants, financial institutions (FIs) and, ultimately, the
consumers they serve. To support our ambition, we are
delivering a strategy which both accelerates growth and
innovates across our services and capabilities.
GROUP CHIEF EXECUTIVE OFFICER’S REVIEW
Celebrating new wins and
strong strategic delivery
1
Number of payment options refers to largest market of the UAE and may be lower in other smaller markets.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
10
Our ambition
Our strategy
Medium-term
objective
Be the
fastest growing
and
most innovative
customer-centric payments company in the
Middle East and Africa.
ACCELERATE
Serve more customers
INNOVATE
Serve customers better
Further growth opportunities also available,
supported by investment
2
This is an Alternative Performance Measure (APM). See note 4
of the consolidated financial statements for APMs definition.
“We accelerated revenue growth
to 24.5% y/y in 2022, having also
achieved margin expansion whilst
investing in new opportunities.
This is the result of our revitalised
strategic approach which is creating
a more agile and effective business,
supported by strong economic
growth across our markets and
continued acceleration towards
digital payments.”
Nandan Mer
Group Chief Executive Officer
20
%+
revenue CAGR
45–50
%
underlying EBITDA margin
2
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
11
GROUP CHIEF EXECUTIVE OFFICER’S REVIEW (CONTINUED)
›
Enhanced data analysis dashboards
for merchants in the UAE,
having introduced self-service
capabilities. We have also brought
more data insights to merchants
in Jordan through our SmartView
report, providing SMEs with
in-depth actionable information
on their businesses.
New services for FIs are
diversifying revenue streams
›
New business line launched
in commercial payments,
representing a potential new
revenue pool and a cross-selling
opportunity to existing customers.
›
Accelerated customer onboarding
and simplified the integration
of new capabilities through the
launch of new APIs
1
, where we
now have over 150 APIs
1
in place.
›
Expanded fraud solutions to
include real time and artificial
intelligence monitoring, improved
credit-based analysis and
approvals for lenders through
our partnerships with FICO
(Falcon Fraud Prevention Solution)
and Mastercard (Brighterion).
›
Digital wallet services through
Network’s white label solutions,
supporting the issuance,
processing and management
of virtual cards for several
financial institutions.
›
Wallet provisioning, enabling FIs
to directly enrol cards on mobile
wallets, using their banking app.
DPO: focus on expanding
capabilities and merchant
reach in more challenging
market conditions
In its first full year of ownership
and integration as part of Network,
DPO has delivered considerable
value to our business. DPO has
provided us with direct-to-merchant
services across Africa for the first
time, alternative payment acceptance
capabilities and enabled us to take
new online payment services to
our merchants in other markets.
1
API – Application Programming Interface.
2
DPO was acquired on 28 September 2021, therefore DPO TPV and revenue are not presented in the Q1-Q3 2021 base. Pro forma data is presented for information only,
comparing 12 months of DPO in 2022 to 12 months in 2021.
3
Licences will be granted upon satisfaction of a number of customary conditions which Network is in the process of addressing before the expected date of launch/grant
of licence.
DPO has added revenue of USD
31.5 million to the Group in 2022
and whilst still a young business,
has transitioned quickly into
profitability with an underlying
EBITDA margin of c.20% (constant
FX, excluding exceptional items).
DPO operates across 21 high growth
African markets, with the majority
of the business based in South
Africa. On a pro forma basis
2
, 2022
Total Processed Volume (TPV) grew
29.6% y/y and revenue increased
27.0% y/y in constant FX. Whilst
growth in markets outside South
Africa remains strong, South Africa
is experiencing more challenging
macro-economic conditions, high
inflation and rising interest rates,
which is negatively impacting
consumer spending. Set against
this backdrop, DPO has focused
on delivering new capabilities and
services which are accelerating
merchant onboarding and
expanding our reach across sectors.
Real-time onboarding has been
rolled out across 19 countries; new
payment methods have been added,
including Airtel money in three
markets and account-to-account
payments in multiple markets; and
sector specific partnerships have
also been signed in the travel and
airline industries.
In the year ahead, our focus will
be to scale DPO’s presence in
markets outside South Africa
to further diversify the revenue
base, launch data analytics
and other value-added-services;
and cross-sell face-to-face payment
acceptance capabilities to
omni-channel merchants.
New markets: services
for FIs in Saudi Arabia
and merchants in Egypt
The Kingdom of Saudi Arabia
represents a new market for
Network. It is the largest economy
in the Middle East and offers a
dynamic payments landscape,
supported by the government’s
Vision 2030 to achieve c.70% digital
payments participation. Real GDP
growth in the Kingdom is growing
at its fastest pace in almost a decade,
supported by diversification of the
economy. We see the market as a
USD 50 million revenue opportunity
in the medium-long term and 2022
marked our entry to the processing
market. We have completed our
technology deployment on-soil in
line with budget and signed four
new FIs, bringing total customer
numbers to six in total and providing
a solid underpin to our revenue target.
In the future, further investment would
enable us to access an additional
revenue opportunity through merchant
payment services. We have already
taken the first steps towards this
opportunity, having successfully
received a Major Payment Institution
Category licence from the Saudi
Central Bank
3
.
Egypt is a long established and
successful processing services
market for Network where we serve
over 20 FIs across Acquirer and
Issuer Processing. We have recently
launched direct-to-merchant
payment services, focusing on the
SME segment. The deployment of
our technology stack is complete
and merchant services launched
during January 2023.
Technology: investing in
on-soil capabilities across
West, Central and South Africa
We will soon be deploying local,
on-soil technology capabilities to
better serve the West, Central and
South African markets. Africa is a
structurally attractive region with
a significant runway for future
growth where we expect to deploy
c.USD 5–10 million of capital
investment to launch on-soil
processing capabilities. This not only
unlocks further revenue opportunities
but will enhance our competitive
positioning and align us with
new regulatory legislations to
better serve customers locally.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
12
ESG: good progress on our
newly launched framework
Our ESG strategy is focused on
where we can have the most impact
in the regions in which we operate.
Supporting financial inclusion
We have implemented a number
of programmes which facilitate
lower cost, convenient payment
acceptance solutions and expand
our reach to unbanked customers
across the MEA. Notable examples
include the launch of payment
services to micro and SME merchants
in Egypt, and supporting the Jordanian
government in issuing prepaid cards
to low-income individuals.
Promoting responsible
business practices
We are cognisant that we conduct
business in markets where the risks
surrounding financial crime and
unethical business practices can
be elevated. As part of developing
our already robust risk and
governance practices, we increased
employee training on anti-bribery,
corruption, money laundering
and ‘know your customer’ policies;
and further enhanced our Group
procurement policy during the
year to ensure we engage with
our vendors in an ethical, non-
discriminatory and responsible
manner. Whilst colleague awareness
of whistleblowing arrangements
declined marginally to 92%
(2021: 94%), this largely reflects
the addition of newly acquired DPO
Group and overall still remains high.
Building a well-trained, inclusive
and diverse working environment
Our key focus areas include
employee training, engagement
and diversity. As a result of the
programmes launched in 2022,
employee training hours have
more than doubled and female
representation at the Senior
Manager level has improved to
33% (2021: 25%) as highlighted
on page 53. Whilst employee
engagement saw a reduction in
the year to 57% (2021: 65%), this
was influenced by some integration
and restructuring measures at
newly acquired DPO, as well as
initiatives to increase productivity.
Minimising our
environmental impact
We undertook a number of actions
to work towards our commitment
of delivering a carbon neutral
position on Scope 1 & 2 emissions
before 2030. This included the use
of Renewable Energy Certificates
which reduced our 2022 usage by
26%. We have also estimated our
Scope 3 emissions for the first time.
Looking ahead, it is our intention
to further develop our plans and
commitments towards a net zero
target and transition pathway.
Capital allocation: a growth
focused framework
Our capital allocation policy is
prioritised towards initiatives that will
support revenue and profit growth.
Firstly, to undertake investment
through organic opportunities which
will accelerate growth, such as our
entry to the Saudi Arabian market
or the launch of merchant services
in Egypt. We will also continue to look
at disciplined potential acquisitions,
focusing on three areas that include
in-market consolidation, accelerating
new market entries or obtaining
new products and capabilities.
We aim to maintain leverage at
a long-term average level of 1–2x
net debt: underlying EBITDA, and
where appropriate, will also deliver
shareholder returns. Given our
ongoing balance sheet deleveraging
and strong cash generation, we took
the decision to initiate a USD 100
million share buyback programme
during the year. We repurchased
a total value of USD 40.6 million
during 2022 and the programme
is currently ongoing.
Conclusions: a revitalised
business with a high
growth outlook
Network has experienced significant
growth acceleration during 2022.
This is the result of a strong rebound
from the pandemic across our
markets, acceleration towards
digital payments and a revitalised
strategic approach which is creating
a more agile and effective business.
We are fortunate to be operating
in markets that see positive growth
and economic trends, however,
we are cognisant of weakening
macro-economic conditions and
growth slowing in some markets
across Africa, as well as an inflationary
cost environment. We therefore
expect constant currency revenue
growth in the high teens for 2023,
supported by continued EBITDA
margin expansion. The year
ahead holds many further growth
opportunities, supported by our
scale, capabilities, people and
trusted brand.
Nandan Mer
Group Chief Executive Officer
8 March 2023
“We thank our colleagues and customers for
their support and delivery of such a strong
outcome. The year ahead holds many growth
opportunities, supported by our scale,
capabilities, people and trusted brand.”
Nandan Mer
Group Chief Executive Officer
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
13
Key initiatives
1
Faster sign-up of merchants and
financial institutions
Why:
Enhances the customer
experience; increases conversion
rates and reduces costs.
How:
Investment in automated,
digital and self-service onboarding.
›
Launched automated 60-minute
onboarding for merchants in the UAE.
›
Now have over 150 APIs
1
in place
to accelerate the onboarding of
merchants and financial institutions,
whilst also simplifying the integration
of new capabilities.
›
Launched automated, real-time
onboarding in 19 African markets
through DPO.
›
Further enhance digital onboarding
in regions outside of the UAE,
including Egypt, Jordan and
DPO markets in Africa.
›
Introduce further APIs to automate
the onboarding of partners.
›
Rolled out our SME focused ‘Tap-on-
Phone’ offering, enabling merchants
to accept payments through their
smart phone, at a lower cost, without
the need of a payment terminal.
›
Launched ‘DPO Pay’ to UAE merchants,
a cost-effective online payment solution,
providing SME merchants with a
webstore and payment checkout.
›
Launched an omni-channel platform
tailored to the hospitality industry,
in partnership with FreedomPay,
to provide merchants with a unified
view of transactions.
›
Win merchants in strategic focus
areas across SME and e-commerce.
›
Cross-sell and launch ‘Tap-on-Phone’
to DPO merchants in South Africa.
›
Expand our range of payment
methods that are locally and globally
relevant, including instant payments.
›
Scale the direct-to-merchant
opportunity in Egypt.
›
Completed our on-soil technology
deployment and market launch for
processing services in the Kingdom
of Saudi Arabia.
›
More than doubled the number of
outsourced payment services customers
in the Kingdom of Saudi Arabia, having
signed four new customers in the year.
›
Launched direct-to-merchant services
to SMEs in Egypt, having received
our Payment Facilitator and Payment
Services License.
›
Secure new financial institution
customers and expand our offering
in the Kingdom of Saudi Arabia.
›
Enhance our service delivery through
local resources, including the on-soil
deployment of our technology platforms.
›
Continued development of our Unified
Commerce services.
2
Grow the merchant base
Why:
Scale drives improved
returns on fixed investment through
operating leverage.
How:
Improve the market
competitiveness of our offer by
introducing more ways to accept
payments, more payment methods
and sector specific solutions.
3
Access new revenue pools
Why:
Provides incremental growth
opportunities that are complementary
to, and scale, our existing revenue base.
How:
Enter new markets across the
Middle East and Africa; or provide
new business lines and services
in existing markets.
Key progress:
OUR STRATEGY
A focused growth strategy
ACCELERATE
Serve more customers
Future focus
1
API – Application Programming Interface.
2
Network does not provide lending directly. Lending is facilitated through a third-party bank partner.
Further growth opportunities,
above our financial objectives,
would be supported by…
New markets
Winning large financial institution
and multi-market customers
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
14
›
Further expand our suite of value-added
services across merchant lending, loyalty
and sector specific solutions.
›
Broaden our partnership with Mastercard
and further enrich our capabilities
through schemes.
›
Introduce more enterprise data
analytics and dashboards for large
and multi-market merchants.
›
Scale loyalty solutions to support the
sign-up and retention of merchants.
›
Launch new value-added services to
support merchant needs in security
and loyalty.
›
Enhance Unified Commerce services
to provide a single centralised view of
transactions, across online and offline
payment channels.
›
Scale DPO’s presence rapidly in markets
outside South Africa to diversify the
revenue base.
›
Deploy DPO’s capabilities in markets
outside of the UAE, including Jordan,
Egypt and the Kingdom of Saudi Arabia.
1
Harness the power
of partnerships
Why:
Enhances our customer
proposition and further enriches our
capabilities for a lower investment.
How:
Enter partnerships with high
quality providers of adjacent products
and value-added services in key
growth areas.
2
Add new revenue streams
to every transaction
Why:
Integrate more deeply and extract
greater value by channelling more
products through our customer portfolio.
How:
Investment in the delivery
of adjacent value-added services,
either proprietarily or via partnerships.
3
Be the e-commerce
champion in the region
Why:
Enhance volume and revenue
growth by capturing a higher share
of this fast-growing channel.
How:
Expand our e-commerce capabilities
across the Group and scale DPO to retain
its market leading position across Africa,
providing the widest range of online
payment services for merchants.
Our medium to
long-term targets
INNOVATE
Serve customers better
Key initiatives
Key progress:
Future focus
›
Deepened our relationship with major
customer Emirates NBD through a
new strategic acquiring partnership.
›
Collaborated with Brighterion,
Mastercard’s artificial intelligence
arm, to provide new fraud mitigating
services; and launched 3D Secure 2.0
biometric authentication fraud
checking capabilities.
›
Launched several sector specific UAE
Merchant Solutions through partnerships
with FreedomPay in the hospitality sector,
Foodics in the food and beverage space
and Ezetap within the supermarket industry.
›
Became the first to offer Buy Now Pay
Later (BNPL) solutions to merchants
across the UAE and Jordan through our
partnerships with Zoodpay and Tabby.
›
Introduced SME lending
2
for Jordan
merchants in partnership with Sanadcom
and expanded merchant lending
2
in the
UAE through an additional partnership
with RAKBANK.
›
Expanded our fraud solutions in
partnership with FICO, to include
real-time credit-based analysis
and approvals.
›
Enhanced merchant reporting dashboards
in the UAE with self-service capabilities;
rolled out SmartView reports in Jordan,
providing SME merchants with data insights
and actionable business information.
›
Launched a white labelled mobile
wallet solution to support the issuance
of virtual cards, management and
remittance services.
›
Added new payment methods for all DPO
merchants in South Africa and Nigeria,
including account-to-account transfers.
›
Integrated DPO merchants with the Xero
accounting system, enabling them to
accept payments and invoice customers
via a secure payment link.
›
Rolled out multiple e-commerce
plugins for SME merchants including
i) WooCommerce – allowing merchants
to create an online store, cart and
checkout in 48 hours, and ii) Magento
2.0, providing merchants with FX
support and search engine optimisation.
›
Introduced omni-channel transaction
views for N-Genius™ customers through
our Unified Commerce offering.
3
This is an Alternative Performance Measure (APM). See note 4 of the consolidated financial statements for APMs definition.
Enabling new payment flows across business-to-business,
person-to-person or account-to-account payments
Would also require further operational
and capital investment beyond our
financial guidance objectives
20
%+
revenue CAGR
45–50
%
underlying EBITDA margin
3
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
15
73%
84%
27%
16%
20
21
2019
Volume of payment
Cash
Non-cash
Real GDP in KSA is expected to grow at its fastest
pace in almost a decade
Up c.8% year-on-year in 2022
1
, supported by the
diversification of the economy, which is expected to
improve the overall business environment. Consumer
spending remains resilient, and is expected to grow
at a c.5% CAGR between 2021–2025
2
. KSA also
has a fast-growing and relatively young population,
with 57% of individuals under the age of 35.
In 2021, non-cash payments accounted for 27%
of transaction volumes
3
in KSA.
The number of card transactions has more than tripled
in the Kingdom, as the overall volumes of point-of-sale
transactions reached USD 5.2 billion in 2021, compared
to USD 1.6 billion in 2019
4
, with e-commerce growing by
over 7x between 2021 and 2019
5
.
USD
5.2
bn
overall point-of-sale
transaction volumes
4
57
%
of KSA population is
under 35 years old
OUR STRATEGY IN ACTION
Unlocking a new revenue opportunity
in the Kingdom of Saudi Arabia
The Kingdom of Saudi Arabia (KSA) is the largest economy in the
Middle East, offering a dynamic payments landscape, supported by
‘Saudi Vision 2030’ to have c.70% digital payments penetration by 2025.
Percentage use of payment means by consumers
Source: Digital as a % of transaction volumes, 2021, Edgar, Dunn & Company data.
ACCESS NEW REVENUE POOLS
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
16
ACCELERATE
A year of good progress, with new
customer wins providing a solid
underpin to our medium to long-term
financial targets
We made significant progress on our market entry
and strengthened our presence in KSA
Deployed our on-soil technology platform and
established connections with both the domestic
(Saudi payments/MADA) and international schemes
Established our local office and sales team through
local talent
Strengthened our relationships with local regulators
and regional stakeholders
Won four new customers, taking our processing
customers to six in total, with a healthy future
pipeline in place
Approved to receive a Major Payment Institution
category licence from the Saudi Central Bank, enabling
us to provide direct-to-merchant services in the future
7
We are in a strong position to provide outsourced
payment processing services to financial institutions
and fintechs given our local presence, scale and history
of digital payments across the region.
The introduction of government initiatives
has promoted digital payments in the region,
some of which include:
›
Promotion of financial inclusion and an
improvement of the digital payments’
infrastructure through partnerships with
payment providers and banks.
›
Government mandate that all retail outlets
must have a point-of-sale device installed.
›
Increase in the limit on contactless payments
to SAR 300 (vs SAR 100 previously).
›
Launch of mobile payments such as Apple Pay
and MADA pay.
›
Enablement of new payment acceptance
methods including QR code and E-wallets.
›
Introduction of initiatives to make Saudi Arabia
a global fintech centre, with the government
targeting over 500 active fintechs by 2030
vs the c.150 at the end of 2022
6
.
Sources:
1
IMF country data, 2022 y/y real GDP growth.
2
Personal Consumption Expenditure (PCE) growth, Edgar, Dunn & Company.
3
Edgar, Dunn & Company data, 2021.
4
SAMA 2021 data, usage of payments by consumers – point-of-sale transaction
estimates include Debit (MADA), Credit and Prepaid payment cards.
5
E-commerce growth, SAMA statistical bulletin.
6
Fintech Saudi 2021/22 Annual Report.
7
Licences will be granted upon satisfaction of a number of customary conditions
which Network is in the process of addressing before the expected date of
launch/grant of licence.
Sources/interesting reads:
https://www.spa.gov.sa/viewstory.php?lang=en&newsid=2291861
IMF – Saudi Arabia at a glance (https://www.imf.org/en/News/
Articles/2022/08/09/CF-Saudi-Arabia-to-grow-at-fastest-pace).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
17
30
%
Africa digital payment growth
CAGR expected between
2021–2025
1
USD
31.5
m
DPO revenue
DPO has supported the doubling of Network’s
e-commerce revenue and enabled us to
introduce new services to our existing merchants
DPO has given us direct-to-merchant presence across
21 markets in Africa, with a significant runway for
growth, where digital payments are expected to grow
by 30% CAGR between 2021–2025
1
.
Strong financial performance at DPO
during 2022
›
TPV
2
USD 4.3 billion, up 19% y/y, or 30% y/y
in constant currency terms.
›
Revenue USD 31.5 million, up 17% y/y, or 27%
in constant currency.
›
Underlying EBITDA margins of c.20%, in constant
currency, excluding exceptional items.
OUR STRATEGY IN ACTION (CONTINUED)
We are broadening our merchant reach across Africa by
further enhancing our payment acceptance capabilities and
enabling merchants in the SME sector to grow their businesses.
Building our capabilities
across African markets
GROW THE MERCHANT BASE
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
18
One year on, the successful ongoing
integration of DPO, the largest
online merchant payment provider
across Africa
Enabling SMEs and global enterprises to accept
online payments
3
…
We have successfully integrated our sales and
operations teams.
Several new capabilities launched, including
real-time onboarding for merchants across
19 African markets, making it easier for merchants
to choose DPO as their payment provider of choice.
DPO has also expanded our suite of payment
acceptance methods, having added Airtel mobile
money and account-to-account payments in
multiple markets.
We will further scale our African merchant
business, launching omni-channel acceptance
and entering new markets
We plan to combine Network’s in-person point-
of-sale expertise with DPO’s online relationships,
ultimately moving towards a Unified Commerce
offering in South Africa.
We recently launched merchant payment
services into Egypt, focusing on the SME
and Micro SME space. We will offer Egyptian
merchants both e-commerce and face-to-face
payment acceptance platforms. Our services
will also support Egypt’s financial inclusion
journey, making digital payment acceptance
economically feasible for many small merchants
for the first time through low-cost smartphone
payment acceptance capability.
Note:
1
Edgar, Dunn & Company data, transaction value, e-commerce
(non-cash) 2021–2025 CAGR.
2
TPV – Total Processed Volume.
3
Providing online merchants with capabilities to accept mobile money,
cards & other payment types.
Online
payments
E-commerce
retail
Telecoms
Transportation
Insurance
Education
Travel/
entertainment
Multiple
sectors
… with a customised approach to local merchant needs,
operating across multiple sectors
ACCELERATE
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
19
Direct-to-merchant revenue momentum driven
by strong consumer spending in the UAE
We saw particularly strong performance in the UAE and
Jordan through 2022, with the UAE direct-to-merchant
business seeing strong y/y growth, significantly ahead
of pre-pandemic levels.
Domestic TPV (which represents spending from consumers
domiciled in the UAE and Jordan) increased 20% y/y,
reflective of the strength in consumer confidence and
supportive economic backdrop.
International TPV (which represents consumer spending
by overseas visitors to the UAE and Jordan) grew 64% y/y,
largely driven by an improvement in the tourism inflow
and sporting events including the FIFA World Cup.
Our ongoing focus on strategic segments continues
to pay off, with SME volumes up 41% y/y, and SME
participation
1
as a percentage of overall Group TPV
increasing significantly to 27% in 2022, from 17% in 2019.
Trends in online TPV (excluding Government & airline
TPV) were also strong in the year, up 39% y/y.
A strong year in UAE Merchant Services, driven by
record new wins and growth in strategic segments
›
We saw a record number of SME merchant signings
in the UAE and Jordan, with the pace of new wins
increasing significantly as we progressed through
the year.
›
The acceleration in new merchant wins has been
supported by the launch of new capabilities and
services, including automated onboarding for UAE
merchants. We remain focused on innovating the
Group’s products and capabilities suite in order
to best serve customers and maintain a market
leading position in our home region.
29
%
Direct-to-merchant Total
Processed Volume (TPV)
in the UAE and Jordan
grew 29% y/y
Service innovation to expand our
relationships with merchants in the UAE
OUR STRATEGY IN ACTION (CONTINUED)
HARNESS THE POWER OF PARTNERSHIPS AND ADD NEW REVENUE STREAMS
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
20
Our direct-to-merchant
services in the UAE cover
a variety of sectors
Hospitality:
FreedomPay
Our partnership with FreedomPay provides
merchants in the hospitality sector with a
unified view of transactions across their entire
operations, including front desk reservations,
restaurants, bars, theme parks and spas.
SME food and beverage:
Foodics Pay
Reducing costs for SME merchants, in
partnership with Foodics, by unifying tasks
such as single receipts, daily settlements
and chargeback support on a single app.
Retail:
SHAREPay
SHAREPay digital wallet: enabling members
of UAE loyalty programme SHARE to pay,
earn and redeem across major shopping
malls and hotels including Mall of the Emirates,
Carrefour and Westin.
INNOVATE
We continue to innovate our products and services,
to improve overall customer experience and our
competitive positioning.
Delivering faster customer sign-up and improving
experience
through digital capabilities.
Differentiating vs competitors
by providing
multiple ways to accept payments, including:
›
Point-of-sale payments
through our
proprietary N-Genius™ terminals
›
‘Tap-on-Phone’
, low-cost payment acceptance
through an app on a smartphone
›
Online payments
through N-Genius™ gateway
›
Unified Commerce
, providing omni-channel
transaction views for N-Genius™ customers
›
‘Buy Now Pay Later’
with multiple providers
›
‘Loyalty points redemption’
, with various schemes
Strengthening our competitive position
, by providing
the widest range of payment methods, including:
›
>30
payment acceptance methods
›
Card payments
including Mastercard and Visa,
alongside domestic schemes such as UnionPay and RuPay
›
Mobile money wallets
, including M-Pesa and Airtel
›
Digital wallets
including ApplePay and WeChatPay
Diversifying and broadening revenue streams
through value-added services
‘DPO Pay’
webstore builder
1
Proportion of total directly acquired TPV in UAE and Jordan.
2
API – Application Programming Interface.
3
Network International does not provide lending directly.
60 min
60-minute automated
onboarding of merchants
150+
APIs
2
available, supporting
the integration of new
capabilities and accelerating
customer onboarding
Merchant data
dashboards
Merchant
lending
3
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
21
438.4
284.8
352.2
20
22
2021
2020
178.6
112.6
143.5
20
22
2021
2020
15.7
6.8
11.6
20
22
2021
2020
OPERATIONAL AND FINANCIAL KEY PERFORMANCE INDICATORS
Measuring our progress
Financial
Revenue
USD
438.4
m
+24.5% y/y
Underlying EBITDA
1
USD
178.6
m
+24.5% y/y
Underlying basic EPS
1
USD
15.7
cents
+35.3% y/y
Definition
Total revenue generated
by the Group.
Why is this important to us?
Growing revenue across the
Group indicates structural
underlying market growth
and market share gains.
Link to strategy
Link to strategy
Link to strategy
Definition
Earnings for the year, before interest,
taxes, depreciation and amortisation,
unrealised foreign exchange gain/
losses, gain on disposal of subsidiary/
associate, share of depreciation from
associate and specially disclosed
items affecting EBITDA.
Why is this important to us?
Through monitoring margins we ensure
that our scale is generating cost leverage;
whilst at the same time we are investing
in appropriate areas in order to maintain
future revenue growth.
Definition
The underlying net income
attributable to shareholders
divided by the weighted average
number of ordinary shares during
the relevant financial year.
Why is this important to us?
Ensures a focus on profitable
growth and value attributable
to each shareholder.
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 101.
Faster signup of merchants and
financial institutions
Our KPI performance is evidence of the delivery of our broader strategy
Accelerate key initiatives
Innovate key initiatives
Grow the merchant base
Access new revenue pools
Harness the power of partnerships
Add new revenue streams to every transaction
Be the e-commerce champion in the region
We use financial and operational metrics to
measure the progress of our strategic goals.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
22
45.9
25.9
33.3
20
22
2021
2020
18.0
16.2
16.6
20
22
2021
2020
1.3bn
758.1m
979.9m
20
22
2021
2020
Operational
Total Processed Volume
3
(TPV)
USD
45.9
bn
+37.7% y/y
Number of credentials hosted
2
18.0
m
+8.4% y/y
Number of transactions
2
1.3
bn
+32.1%
Definition
The aggregate monetary volume
of purchases processed on behalf
of merchants within the Merchant
Services business line.
3
Why is this important to us?
Growing TPV is a proxy for
the success of the Merchant
Services business line. Indicating
an expansion in the number of
merchant customers and growing
volumes with both existing and
new customers.
Definition
The aggregate number of digital
payment credentials, such as cards
or mobile money wallets, managed
on behalf of our financial institution
(FI) and fintech customers in the
Outsourced Payment Services
business line.
Why is this important to us?
Growing the number of credentials
hosted is a proxy for the success
of the Outsourced Payment Services
business line. Indicating an expansion
in the number of FI customers and
the number of payment credentials
we manage on their behalf.
Definition
The aggregate number of
transactions processed, on digital
payment credentials that we
manage on behalf of our financial
institution and fintech customers
in the Outsourced Payment
Services business line.
Why is this important to us?
Growing the number of transactions
hosted is another proxy for the
success of the Outsourced Payment
Services business line. Indicating
an expansion in the number of
FI customers and the number
of transactions processed on the
payment credentials we manage
on their behalf.
3
TPV has been restated following the new segmentation of business lines with TPV now excluding acquirer processing volumes.
Link to strategy
Link to strategy
Link to strategy
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
23
STAKEHOLDER ENGAGEMENT
Our engagement with
major stakeholders
Taking key decisions by understanding the needs
and expectations of our stakeholders is critical to the
long-term sustainability and success of our business.
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.
Merchants
Our ‘Merchant Services’ customers include
businesses ranging from SMEs to multinationals,
in all fields of commercial life. They are essential
for driving economic growth and prosperity.
Consumers
Consumers are the users of the payments
value chain – a bank’s customer who uses a
digital payment credential, or a merchant’s
customer who uses the digital payment
credential to pay for the goods purchased
or services availed.
Colleagues
Retention and motivation of the high level
of talent of our colleagues is a key factor in
consistently achieving the high service levels
we strive to maintain across our business lines.
Shareholders
As the owners of our business, shareholder
support is key to the delivery of our purpose,
implementation of our strategy and ongoing
access to capital.
Governments
Governments play a critical role in the value chain
as they promote financial inclusion and economic
growth and provide regulatory oversight.
FIs, fintechs, MNOs
Our ‘Outsourced Payment Services’ customers
include large pan-regional and smaller single
country banks and fintechs, who provide
the rails for the business we are in.
“When we better serve our stakeholders,
it creates a positive impact and empowers
everybody to succeed – crucial for the
long-term sustainability of our business.”
Nandan Mer
Group Chief Executive Officer
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
24
Merchants
>USD
45
bn
in payment volumes
Their priorities
›
Innovative products and services
›
Multiple options to receive payments
›
Affordable and competitive pricing
›
Excellent customer experience
How we engage
›
Putting the customers at the
heart of the decisions we make
›
Contract discussions and
account management
›
Interaction and reviews
by relationship managers
›
Hosting regional customer meets
›
Customer needs drive our
product roadmap
›
Dedicated ‘Voice of Customer’ team
and customer support helpline
›
Net Promoter Score assessment
Strategic outcomes
›
Expansion of customer base
›
Retention of customers over long term
›
Increased customer confidence
›
Higher Net Promoter Score
›
Consolidation of leadership position
across geographies
›
Expanding services to new
markets providing customers
access to innovative and
economical payment solutions
›
Increased focus on Micro SME
and SME customers in transitioning
their businesses online
ACCELERATE
ACCELERATE
›
Launching new capabilities, making
it easier for merchants to grow their
business in an affordable manner
›
Real-time access to customer
account through digital platforms
INNOVATE
INNOVATE
>
150
k
diverse merchant
relationships
FIs, fintechs, MNOs
Their priorities
›
Innovative products and services and
latest technological enhancements
›
Competitive pricing and good value
›
Security against fraud
›
Timely delivery of solutions
›
Excellent customer experience
How we engage
›
Putting the customers at the
heart of the decisions we make
›
Contract discussions and
account management
›
Understanding growing
business requirements
›
Interaction and reviews by
relationship managers
›
Senior management engagement
with customers
›
Dedicated ‘Voice of Customer’ team
›
Net Promoter Score assessment
Strategic outcomes
›
Expansion of customer base
and retention over long term
›
Expansion of services over customers’
geographical footprint
›
Maintaining leadership position
across geographies
›
Increased customer confidence
›
Improvement in Net Promoter Score
Strategic decisions
Strategic decisions
›
New and innovative products to enable
customers to provide enhanced services
to their consumers
›
Continuous technology enhancements
›
Providing the right solutions to match
the customers’ requirements
›
Acceptability of customer payment
credentials over multiple platforms
›
Assisting issuer customers with
more efficient customer onboarding,
and support for easy-to-use payments
solutions such as digital wallets
›
State of the art information
security mechanisms
›
ISO certifications, multiple security
audits and performance reviews
200
+
financial institutions
and fintech customers
1.3
bn
transactions processed
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
25
STAKEHOLDER ENGAGEMENT (CONTINUED)
Their priorities
›
Reward and career development
›
Health and safety
›
Business ethics
›
Training
›
Diversity and inclusion
How we engage
›
Encouraging continued two-way
open communication with managers
›
Supporting health and well-being
of our colleagues
›
Training needs analysis and employee
engagement surveys across the Group
›
Visits by the Directors and Executive
Committee members to the regional offices
›
Promoting Diversity and Inclusion
Strategic outcomes
›
Implementation of training programmes
based on requirements of our colleagues
linked to our strategic priorities
›
Implementation of a three-year roadmap
of culture building training
›
Enhancement of skills and knowledge levels
in step with the marketplace demands
›
Helping our colleagues succeed by providing
regular growth and training opportunities
within the organisation
Colleagues
Their priorities
›
Low cost and convenient payment tools
›
Secure and quick transactions
›
Availability of alternative ways to digitally
store and transfer money and purchase
goods and services
How we engage
›
EConnecting the consumers with
businesses and financial institutions
by using our capabilities
›
Introducing secure, easy and multiple
options for the consumers to make
their payments
Strategic outcomes
›
Aspiring to be the fastest growing and
most consumer-centric payments company
in the MEA
›
Increased focus on SME and Micro SMEs
across the regions we operate, by enabling
digital payment acceptance for the services
they provide
›
Helping our merchant and bank/FI customers
in retaining their customers over the long term
›
Increased consumer confidence
›
Helping our customers in growing their
revenues and business
›
Consolidation of leadership position
across geographies
Consumers
Strategic decisions
›
A range of confidential whistleblowing
channels giving ability to raise concerns
›
Employee engagement surveys
and Board review of the feedback
›
Virtual and in-person town halls
›
Creation of Learning & Development
centres at several locations to design
and deliver high impact training
ACCELERATE
›
Diversity & Inclusion strategy and
emphasis on Group culture
INNOVATE
30
%
female representation
across the Group
+
38
%
Total Processed Volume
18.0
m
customer credentials
under management
Strategic decisions
›
Continuing to deliver market leading
consumer focused payment services
to merchants and financial institutions
›
Strengthening services to facilitate the
digital payments experience, including
new fraud solutions, lower cost payment
acceptance and broadening the range
of digital payments consumers can use
with our customers
ACCELERATE
›
Providing a smoother consumer
experience leading to a higher
transaction rate
INNOVATE
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
26
Their priorities
›
Drive financial inclusion and economic growth
›
Compliance with all relevant regulations
›
Prevention of fraud and breaches
›
Orderly and efficient operation of our
business in line with our purpose across
all markets
›
Corporate responsibility
How we engage
›
Engagement with regulators by providing
suggestions on innovative ways to
promote financial inclusion and drive
towards cashless economies
›
Interaction with regulators while framing
new regulations
›
Applications for grant of licences,
wherever required
›
Making regular submission of information
when required, or at prescribed intervals
›
Discussing new products with regulators and,
wherever required, seeking their approval
Strategic outcomes
›
Increased cooperation with governments
in the geographies where we operate
›
Grant of regulatory licences enabling
continuity of operations
›
Successful completion of regulatory audits
Their priorities
›
Strategic execution, business performance
and value generation
›
Transparent reporting with consistent
and relevant KPIs
›
Strong corporate governance
›
Thorough risk management and oversight
›
Strength of Group leadership
›
Integrated environmental, social and
governance strategy
How we engage
›
Comprehensive investor
relations programme
›
Investor roadshows, conferences,
roundtables and other events
›
Investor access to management
and the Board
›
Annual Report and Accounts, Half yearly
interim financial statements
Strategic outcomes
›
Improved transparency, disclosure
and ability for investors to understand
our financial reporting and business
›
Ongoing enhancement to our corporate
governance standards and agenda
›
Increased shareholder confidence in
our financial delivery and the execution
of our strategy
›
Board succession planning
Governments
Shareholders
23
markets
on-the-ground presence
25
%
MEA digital Tx as % of total
Tx volume
+
35
%
growth y/y
15.7
cents
Underlying basic EPS
Strategic decisions
›
Collaboration with government
for implementation of their digital
penetration targets
›
State of the art fraud monitoring
mechanisms supported by best-in-class
information security programmes
›
Regular reviews of control mechanisms
by Audit Committees at various levels
›
Monitoring of business risks by
the Enterprise Risk Management
Committee under supervision of
the Risk & Technology Committee
ACCELERATE
›
Ongoing assurance programme
delivered by our Compliance teams
›
Operation of our three lines of defence
›
Commenced monitoring of Scope 1
and Scope 3 emissions
INNOVATE
Strategic decisions
›
Increased availability of management
and number of investor events
and meetings
›
Increased attendance at sector and
regional investor conferences
ACCELERATE
›
Ensured Chairman and other Board
members met with major shareholders
on key topics through the year
›
Hosted a number of roundtables with
Executive Management on specialist
and deep dive topics
›
Integrated ESG performance into
Executive remuneration targets
INNOVATE
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
27
30
%
1
female representation
in 2022. Continuing to
meet our commitment
towards gender diversity
(2021: 29%)
65,692
1
Network training hours
have increased from
27,073 in 2021 to 55,526
in 2022
64
No. of countries
represented in our
Group-wide workforce
(2021: 63)
1
Includes Network and DPO.
2022 Key HR
performance
highlights
The Network Way
Our values
We put the
customer at
the heart of
everything
we do
We build better
every day
We aim for
scale and market
leadership
We move
fast, together
Be open and
honest with
positive intent
Own every
decision
Always do
the right thing
Celebrate wins,
sunshine failures
Our purpose
is to help businesses and economies prosper by simplifying commerce
and payments.
All that we do to deliver value for our merchant and financial institution
customers, governments, colleagues, consumers and shareholders
is underpinned by:
In 2023, we are redefining performance at the Group, with an enhanced
focus on the Network Way & Values, which, in addition to demonstrating our
commitment to each other, determine how we achieve our goals and deliver
on our commitments. Individual performance will be linked to both the ‘what
to do’ and the ‘how to do’. Adopting the Network Way & Values will underpin
the performance rating for all senior leaders and managers at the Group.
OUR CULTURE AND VALUES
Driving global cultural engagement
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
28
Carrying out regular reviews of
the level and quality of employee
engagement is important to
our Group. This helps us to
optimise business performance
by aligning outcomes with our
business goals, values and culture.
We also benchmark our results
against similar businesses across
our markets.
An important part of assessment
of our culture is our annual
employee engagement survey,
a platform for our employees to
voice their points of view in a safe
environment of anonymity and
complete confidentiality. Our 2022
employee engagement survey saw
our employee participation rise
to 84%, against 83% in 2021.
Our employee engagement score
for 2022 was 57%, and key areas
of positive feedback from our
colleagues included:
›
Increased focus on the
physical and mental well-being
of our colleagues
›
Effective identification and
utilisation of capabilities
›
Faster decision making
›
Empowerment of our colleagues
to enhance customer satisfaction
›
Automated performance
reviews in a structured manner
across the Group
›
Learning & Development
activities aligned with our
‘Network Ambition’, ‘Network
Way’ and our Values
Management has analysed the
results carefully and listened intently
to the feedback provided by
our colleagues in the survey.
The Board supports this additional
investment in our people and
will monitor progress throughout
the year. We will also sustain and
improve on the momentum created
so far to enable our people to
‘build better every day’.
Empowering and
connecting employees
1. ‘One Source – One Network’
intranet
The Group’s intranet has been built
on four key pillars: Communication,
Collaboration, Engagement and
Productivity. This platform allows
employees to connect and converse
with colleagues, irrespective of
location, and provides access to
an extensive hub of information and
other valuable resources for decision
making, workflow innovation and
best practices.
2. Automation of Employee
Self Service and performance
management processes
In line with our Network Way
of ‘building better every day’,
we have automated the employee
performance management
processes and linked personal
goals to the department objectives
and, in turn, to the wider corporate
goals. These goals included ESG-
based KPIs. Modules on Learning
& Development, career progression,
succession planning and core
HRMS were rolled out to give our
employees a seamless ‘One Source
– One Network’ experience.
Employee engagement
3. Workspace enhancement
We have invested in more
comfortable and energising
workspaces for our colleagues
by renovating existing offices,
creating additional capacity
and opening new ones.
4. Interactive leadership sessions
and town halls
Several Executive Committee
members held virtual town halls
as well as virtual interactive focus
group sessions. We also hosted
an in-person town hall at our Head
Office with Board members, giving
our colleagues an opportunity to share
their feedback and recommendations
on topics including strategy, women
empowerment and latest trends
in the payments industry. These
opportunities helped connect our
colleagues as well as keep them
motivated. The most recent event
was the Group-wide Al-Barsha
town hall jointly chaired by the
Group Chief Executive Officer,
Group Chief Human Resources
Officer and Group Chief Financial
Officer with the theme ‘Investing
in Our People’.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
29
OUR CULTURE AND VALUES (CONTINUED)
›
Celebrated ‘Employee
Appreciation Day’ in March
2022 to demonstrate our
gratitude to our colleagues
across the Group.
›
In the UAE, ‘Hag Al Laila’ (‘For
this night’), a long held
tradition of Emirati families,
was celebrated in March 2022
and March 2023, in the middle
of Sha’aban, the eighth month
in the Islamic Hijri calendar.
›
Network Jordan organised
a football tournament
in March 2022 as an
employee team-building
and collaboration initiative.
›
Network Jordan also arranged
an annual team building event
in June 2022 at Jordan’s first
tactical paintball field, giving
the colleagues an opportunity
to bond through games,
tasks and friendly competitions.
›
Network UAE’s cricket team
also participated in the
‘United Pro Sports Corporate
Cricket League 2022 – UAE’
and reached the semi-finals.
›
Network UAE conducted a
Summer Internship Programme
in July 2022 for our colleagues’
children to introduce them
to the payments business
and showcase employment
opportunities in a tech company.
›
Commemorated Flag
Day and the 51st UAE
National Day with employee
engagement activities.
›
DPO celebrated a number
of activities including:
–
Pride Month
–
Acts of Kindness
–
Game Night
–
It’s All About the Eggs
–
Africa Team Connect
–
Thoughtful Thursday
–
November Babies
–
Wellness Day
–
Father’s Day
In addition to the various Company-led initiatives, our colleagues across the Group have
also taken the lead to come together, appreciate and celebrate each other in many ways.
A snapshot of activities in 2022:
We rolled out the Training Needs Analysis (TNA) survey in 2022. The TNA will help us lay the foundation and
building blocks for enhancing technical, managerial and leadership capabilities of the workforce and supporting
the Group’s culture. We are also setting up Learning & Development (L&D) Centres of Excellence across several
regions where we operate.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
30
1
2
4
5
6
14
8
11
9
12
19
13
22
23
17
20
24
15
16
18
21
10
3
7
1,953
employees representing
With such a rapidly growing and widely distributed workforce,
we make no compromises when dealing with our employees’
safety and health. The many ways we ensure the well-being
of our colleagues include:
a
maintaining our highly competitive health & life
insurance cover.
b
enhancing our wellness initiatives with global and
region-specific programmes including vaccination
drives, yoga sessions, cancer awareness programmes,
women’s wellness programmes, mental well-being
webinars, blood donation drives and sports events.
c
continuing to provide counselling services for mental
well-being and stress management, which we started
during the pandemic in 2020.
There have been no major incidents with respect to our
colleagues’ safety and well-being across all regions in 2022.
Region
Team
size
1. UAE
685
2. Egypt
551
3. South Africa
307
4. Jordan
190
5. Kenya
128
6. Nigeria
28
7. Ghana
14
8. Israel
10
9. Ireland
2
10. England
2
11. Tanzania
6
12. Botswana
2
13. Cote d’Ivoire
2
14. Kingdom of Saudi Arabia
8
15. Rwanda
3
16. Uganda
2
17. Zambia
2
18. DR Congo
1
19. Ethiopia
1
20. Malawi
2
21. Namibia
2
22. Senegal
1
23. Zimbabwe
2
24. Mauritius
2
Total
1,953
Employee safety, health and well-being
64
nationalities working
with clients across
57
countries
The Network family has steadily grown to:
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
31
Assessing
Potential
Creating a
Talent Pool
Succession
Planning
Employee
Development
Planning
Having strong teams with diverse
skills, capabilities and backgrounds
helps us meet our customer
obligations and build towards
the future. To attract, retain and
motivate our workforce, we have
several initiatives that include
promoting in-house talent, investing
our colleagues through an Executive
Our proactive approach to talent management ensures
that we are able to:
›
effectively assess our people’s potential
and performance
›
create a skilled and ready talent pool to swiftly
take on additional responsibilities, when needed
›
plan succession for key positions
›
identify customised training and
development interventions
The talent review was conducted in February 2022,
and we ensured succession plans were in place for
all critical positions.
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 ensuring they are engaged and consistently
perform to the best of their capabilities and is based
on four key elements as shown below:
Education Programme and
Executive MBA programmes from
world-class universities. We also
recognise our top performers
through the monthly Star of the
Month and annual Beacon Awards.
These programmes and awards
strengthen the growth mindset
in our teams, sending the strong
message that we value superior
performance, and motivate
our colleagues.
We have deployed a three-pronged
approach to managing a diverse
workforce that stays committed
and accountable.
a
Listen to what
people need
We are committed to capturing
and using feedback from
our colleagues across the
organisation to drive ongoing
improvement in how we manage
our people. We do this through
regular surveys and ‘Speak-Up’
programmes.
b
Embrace change
We continue to assess new ways
of operating and understand the
challenges related to achieving
our desired culture. We have
enhanced and improved our office
layouts in key locations to give our
colleagues a more conducive work
environment. We have rolled
out ‘One Source – One Network’,
which will help in developing a
Group-wide culture enabled by
technology. This initiative involved
the rollout of an intranet portal
and HRMS services.
c
Create a sense
of belonging
Our purpose, core values and
the Network Way focus on
caring for our team members,
as the Group rises to face
challenges and opportunities
that come with change. This
continues to be overseen by
our Board. Our wide-ranging
processes, which include
performance management,
capability assessments and
key talent management, have
been enhanced to support and
manage our people through
their careers.
Strategic workforce planning
Talent management
OUR CULTURE AND VALUES (CONTINUED)
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ANNUAL REPORT AND ACCOUNTS 2022
32
Our colleagues are at the very
heart of our success. They define
and live the culture of the Group.
They develop world-class products,
services and solutions, based
on a deep understanding of our
customers’ requirements, think
creatively and work collaboratively.
Our managers and leaders inspire
and motivate their teams through
their thoroughness, professionalism
and integrity.
When we invest in our workforce and
their development, we are therefore
directly investing in our future.
Our L&D model is a key part
of our TMF (assess employee
potential, create talent pools,
plan for succession and employee
development). It follows the
70-20-10 model, with on-the-job
learning (70%), mentorship (20%)
and formal training programmes
(10%). Based on our understanding
of training needs from the TNA,
leadership surveys and the
employee engagement survey,
we identify and roll out targeted,
high-impact learning programmes.
These programmes help keep
our colleagues updated with latest
developments in technology and
evolving trends in the payments
and banking space, and are
underpinned by our culture, values
and the Network Way. In 2023,
we will develop a framework that
measures workshop engagements,
knowledge retention, application
of learning and habit formation
to ensure greater effectiveness
and return on investment from
our various L&D initiatives. We will
continue to regularly assess the
quality of all our vendors to ensure
maximum impact.
Learning & Development
Functional &
Technical Training
These include programmes on technology platforms, financial and payments
domains, Visa and Mastercard training, and process maturity, Business Loans
for New Merchants training in UAE, Cash@POS awareness sessions in Jordan,
Commercial Payments, AML, KYC and ‘Food for Thought’ (a series of monthly
sessions on our apps and frameworks).
Risk-Based Programmes
These include AML and Sanctions, Anti-Bribery and Anti-Corruption
(ABAC), Code of Conduct (COC), Market Abuse, Operational Risk and
Information Security.
Leadership Programmes
These include Developing & Leading High-Performance Teams
(Columbia Business School), Leadership & Influence, Critical Thinking
in a VUCA World, Team Building, Crisis Management, Decision
Making Skills, Conflict Management, Leadership Excellence and
Performance Management.
Behavioural Programmes
These include Collaboration & Communication, Emotional Intelligence,
Coaching & Empowerment, Public Speaking, Managing Difficult Conversations,
Social Skills, Planning & Preparedness and Business Writing.
Product & Sales Training
These include ‘Keep it 15’, a series of 15 minute sessions on a wide variety
of topics, Story Telling, Speak Easy, FICO, Freedom Pay, ZoodPay and CTFL.
Ethics & Conduct Training
These include Core Values training (on our four core Network values)
and Anti-Sexual Harassment training.
Listed below are some of our key L&D programmes:
Network International Holdings Plc
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OUR CULTURE AND VALUES (CONTINUED)
We believe that our L&D efforts will continue to significantly enhance the skills of our employees, keep the Group
competitive and increase job satisfaction. To ensure these outcomes, we will continue to deliver high-quality
bespoke global programmes, both virtual as well as in-person, which are relevant to our colleagues’ needs.
We will also ensure that our L&D programmes are aligned with the Group’s goals and objectives. We will maintain
our focus on our leadership development initiatives that will include training, mentorship and executive coaching.
Developing & Leading
High-Performance Teams
A virtual and tailored leadership programme
from Columbia Business School was held over
six days in September 2022 for 30 managers
from across all regions of the Group. The main
topics included Effective Teams, A Formula for
Team Success, Productivity and Performance,
Team Learning, Team Communication
vs Conflict and Change Leadership.
Young Leaders MBA
Scholarship Programme
This programme aims to accelerate the
development of a small number of Network’s
young professionals (under 30 years) who have
delivered an exceptional performance. Up to
two of our colleagues will be selected every
year by the Executive Committee to receive
a scholarship. Eligible applicants will be
supported to achieve admission to a full-time
two-year resident MBA programme at a
prestigious business school such as Harvard,
Stanford, MIT, Columbia, Yale, Wharton,
University of Chicago, Oxford University,
London Business School, Cambridge University
or Insead.
Manager on Duty
A programme for new managers in the
DPO business with the objective to enhance
understanding of the business from an
operational perspective and build knowledge
of the operating system.
Executive Education Programme
This programme aims to develop managerial
capabilities of our leaders. It will help our
high-performing managers to fill skill gaps and
broaden perspectives, and connect them with
a strong network. Up to two of our colleagues
(AVP grade and above) will be selected every
year by the Executive Committee to receive
the Executive MBA scholarship. Eligible
applicants will be required to obtain admission
into a three- month Executive Education
programme at a world-class university
such as Harvard, Stanford, MIT, Columbia,
Yale or Wharton.
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ANNUAL REPORT AND ACCOUNTS 2022
34
An overview with metrics
With operations across 57 countries, we are an international business that requires and benefits from a highly
diverse international workforce, represented by 64 nationalities across cultures, ethnicities and regional sensibilities.
Equality, diversity, and inclusion (EDI)
Gender
diversity
Female
28%
Male
72%
Female
29%
Male
71%
Female
30%
Male
70%
The Group is continuing
to meet the commitment
of gender diversity
by maintaining the
30
%
mark in 2022
2020
2021
2022
1%
increase
Initiative
Description
Beacon Award
As part of our commitment to gender equality in the workplace, the Group empowers
our women colleagues to thrive at work and achieve their personal and professional
aspirations through the Beacon Award. For the 2022 edition, we received 42 nominations
across the Group.
ME Women
Leaders’ Summit
To bring together women who have not only achieved significant success but have also
found a voice and a chair at the leadership table. This platform brings together great
women achievers who can share their struggles, journey, stories and success with other
aspiring women.
Pride Month (DPO)
To support a community of all sexual orientations, in line with our EDI policy.
Al Mostaqbal Al
Emirati programme
An immersive two-year programme to build a pipeline of high potential Emiratis,
who will learn about our Company and industry through stints in the Information
Technology, Operations, Processing and Acquiring departments.
‘Break the Bias’
Empowerment
Programme
‘Dealing with Microaggressions’, a three-part programme conducted for our
women employees.
Women Leaders’
Mentorship Programme
To enhance growth and career development for our deserving women leaders from
the earliest stages of their management career. Here, each of our Executive Committee
members plays the role of mentor.
Long Service Award
To recognise the valuable contribution of long-serving colleagues of Network.
Maternity &
Paternity Benefits
To support our colleagues who become parents, by providing them with work-life balance.
Effective Women
Empowerment
We conducted a web conference on ‘Effective Women Empowerment’, hosted by
Malavika Vardhan, owner of the HIVE and TEDx speaker.
Committee to
support our women
colleagues in Egypt
In 2022, a Committee was formed to drive a change in perceptions in Egypt about women’s
strengths and abilities. This Committee will be responsible for executing all initiatives
and events related to women in our Egypt office, will analyse feedback and input from
our women employees and will provide insights on improving our inclusivity. A ‘Trainer
of Trainers’ (TOT) will oversee all communication, so that it reflects our spirit of diversity.
We have several programmes to empower all our employees. They include the following:
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
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Al Mostaqbal Al Emirati Management
Associate programme
In furtherance of our commitment to support
the UAE Vision 2021: ‘A competitive economy
driven by knowledgeable and innovative Emiratis’,
an Associate programme ‘Al Mostaqbal Al
Emirati Management Associate programme’
was introduced during the year to build
a pipeline of talented Emirati leaders.
The programme’s main objective is to identify
Emiratis with leadership potential, provide
them with an environment to learn, equip them
with the necessary tools and develop them as
leaders capable of taking on the challenges of
running an enterprise in the payments space.
The associates will undergo an intense 24-month
programme, split into four rotational modules
in the following operating segments within the
Group: Information Technology, Operations,
Outsourced Payment Services and Merchant
Services, during which time they will work
on projects and other assignments under
the guidance of their reporting managers.
The programme will train the associates in a
professional work environment and behaviours
embodied in the Network Way. The programme
includes hands-on experience in our products,
technologies, decision making and critical
thinking. Each associate will also be assigned
a mentor for the duration of the programme.
B-BBEE
The Broad-Based Black Economic Empowerment
(B-BBEE) Act was implemented in 2003
with a key objective to advance economic
transformation and enhance the economic
participation of black people in South Africa’s
economy. Supporting the endeavours of the
South African government, we continue to
be compliant with the B-BBEE requirements,
presently being B-BBEE Level 8 Certified with
an aim to achieve B-BBEE Level 4 during 2023.
Network collaborates with American
University of Sharjah to empower
youth in fintech sector
Network joined hands with the American
University of Sharjah (AUS) to sponsor the
first FinTech Youth Hub, which commenced
on 17 November 2022. This collaboration will
create knowledge and career-building avenues
through a number of activities, aimed at
empowering youth, building the next generation
of talent and attracting the right talent to the
Network family. In the year ahead, Network
and AUS will launch training programmes,
career fairs and student competitions and
facilitate guest lectures from industry veterans.
OUR CULTURE AND VALUES (CONTINUED)
EDI programmes
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
36
The Group is committed to social
and environmental responsibility
in all aspects of its operations
and activities. This commitment
is an integral part of our business
strategy. Our CSR policy ensures
that all our CSR activities are
compliant with the spirit of the law,
ethical standards and international
norms on a voluntary basis.
Our Equality, Diversity and Inclusion
Policy aims to include and empower
differently-abled people.
In 2022, we have not only improved
our diversity numbers across different
regions, but have equipped our
offices with the necessary tools and
infrastructure requirements to enable
every differently-abled employee to
perform to their best strengths. As
part of our commitment to inclusion,
we have sensitised our colleagues
and managers to be inclusive, more
aware and empathetic to the diversity
in their teams and the organisation.
Initiative
Location
Network’s Ramadan CSR campaigns – To practise the virtues of charity
and compassion, Network donated Iftar meals to the less fortunate.
UAE, Egypt & Jordan
Network donated wheelchairs to the Omniyat Center for the Care and
Rehabilitation of People of Determination.
UAE
Network joined the ‘Earth Hour’ movement 2021 to support our planet
and played our part in shaping the future.
UAE, Egypt, Jordan, Nigeria,
South Africa
Network made a financial contribution to the non-profit organisation
Positive Impact Support in September 2022 for the purposes of
Socio-Economic development where the funds raised will be spent
focusing on Information and Communication Technology products.
Schools that benefit from the contributions made by Positive Impact
Support have 75% or more Black South African Beneficiaries.
South Africa
Organised ‘Blood Donation Drives’ in March and April 2022.
UAE
Participated in ‘Run for a Cause – Aquafina Amman Marathon’,
in October 2022.
Jordan
To celebrate the holiday season and Christmas spirit, we organised a festive
day of giving for disadvantaged youths at our Al Barsha office in December
2022. Network employees sang carols, gave cheer and brought joy to our
young guests. The main event was a ‘Gift a Dream’ activity in which our
employees turned backpacks into creative Christmas-themed gifts for the
disadvantaged children.
UAE
Our twin CSR objectives of ‘Doing
the right thing’ and ‘Being a force for
change’ guide our efforts. We are
ethical in all that we do and create
a culture of diversity, inclusion and
mutual respect in our organisation.
Here is a summary of our various CSR initiatives
Charitable activities
Empowering
differently-abled people
We ensure that our CSR impact is
felt in lasting and tangible ways in
three broad areas: our community,
our environment and our employees.
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ESG STRATEGY
Environmental, social and governance
(ESG) strategy and execution framework
Introduction
The Board plays an instrumental
role in leading our ESG strategy
and has ultimate accountability on
all ESG-related matters. The Board
believes that alongside the Group’s
values, ESG considerations are
central to ensuring the business
is truly sustainable over the long
term. In 2021, the Board undertook
a thorough review of the Group’s
position on ESG-related matters
taking into account the evolving
legal, regulatory and stakeholder
Our ESG strategy and execution framework is built
on four ESG strategic objectives:
We have adopted an integrated
approach in considering progress
against these objectives, which
are mutually reinforcing of progress
against our broader corporate
strategy. We believe that this approach
is important to managing risk and
ensuring that our ESG strategy creates
value in the short, medium and
long term. Our ESG objectives are
being integrated into the way we
do business. For example, our Group
Procurement Policy has been revised
to include ‘Responsible Procurement’
which is a commitment by the Group
to procure goods and services from
external vendors with expanded
due diligence, and setting specific
environmental, social and governance
conditions upfront, which the supplier
agrees to adhere to during the term
of their contract. In support of this,
during 2022 we rolled out ‘Ethical
and Sustainable procurement training’
for all colleagues involved in supplier
engagement. We strive to align our
business strategy with the UN SDGs
(Sustainable Development Goals)
to contribute to a better world.
1
Support the
advancement of
financial inclusion
in the markets
where we operate
2
Promote
responsible
business practices
under a robust
governance
framework
3
Continue to build
a well-trained,
happier, inclusive,
equal and
diverse working
environment
4
Minimise our
environmental
impact
landscape and approved a refreshed
ESG strategy and execution framework
as described in the 2021 Annual Report.
This strategy has four key components:
(i) Financial inclusion; (ii) Responsible
business practices and robust
governance; (iii) Diversity & Inclusion;
and (iv) Environmental impact.
In the 2021 Annual Report,
we published an expanded set
of ESG KPIs and made a series
of commitments to enhance the
ESG disclosure and actions over
2022 and beyond, including in
relation to Task Force on Climate-
related Financial Disclosures (TCFD)
compliance and Scope 1, 2 & 3
carbon emissions. In early 2022,
the Board Audit Committee set
viable stretch targets and approved
workstreams for delivery, overseeing
the management and execution of the
ESG strategy. The Audit Committee
also approved the appointment of
Corporate Citizenship (CC), a market
leading consultancy firm specialising
in strategic sustainability and ESG,
to assist with work to benchmark
the Group’s ESG performance and
to deliver against our commitments.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
38
1
Financial
inclusion
2
Responsible business
practices and robust
governance
3
Diversity &
Inclusion
4
Environmental
impacts
Strategic
priorities
›
Facilitate access
to banking/
mobile money
systems
›
Fair treatment
of customers
and suppliers
›
Adherence to highest
ethical standards
›
Respect for
human rights
›
Increase female
representation
›
Maintain ethnic diversity
›
Increase employee
engagement
›
Reduce Scope
1 & 2 emissions
›
Estimate and reduce
Scope 3 emissions
Tools
›
Lower cost
acceptance,
e.g. via
Tap-on-Phone
›
Digital platform
›
Policies
›
ESG Risk Framework
›
Employee awareness
and feedback
›
Equality, Diversity
& Inclusion Policy
›
Employee engagement
surveys
›
Learning & Development
›
Leadership development
programme
›
Use of renewables,
‘where possible’
›
Carbon offsets
›
Continuous monitoring
for proportionate
opportunities for
reduction
KPIs
›
Number of
Direct-to-Market
Micro SME
1
merchants
onboarded in
Jordan and Africa
›
Number of net
new credentials
in countries with
limited financial
inclusion
2
›
Zero tolerance for
fraud and corruption
›
Employee
turnover rate
›
Senior Manager
3
level
nationalities
›
% of female
representation at Senior
Manager level
›
Training hours
›
Employee
engagement survey
›
Gross CO
2
emissions
– Scope 1 tons CO
2
e
(carbon dioxide
emissions)
›
Gross CO
2
emissions
– Scope 2 tons CO
2
e
›
Carbon intensity
(Scope 1 & 2 emissions)
per employee
›
Gross Scope 1 & 2
emissions relative
to revenue (Kg CO
2
/
$m revenue)
›
Gross CO
2
emissions
– Scope 3 tons CO
2
e
4
UN SDG
alignment
1
Micro SME merchants defined as those with transaction volumes under USD 1 million.
2
Countries with low financial inclusion defined as those where combined penetration rate of bank accounts or mobile money accounts among adult population
is below 50%, based on data sourced via Edgar, Dunn & Company.
3
Senior Manager defined as an employee reporting directly to a member of the Executive Committee (includes Network and DPO).
4
Last year we disclosed only the business travel component of Scope 3 emissions, whereas this year we have estimated Scope 3 emissions in their entirety
and have expanded the KPI accordingly.
Our ESG strategy in summary
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
39
1
Financial inclusion:
›
In 2022, we made significant
progress in promoting financial
inclusion in the markets in which
we operate. By introducing
additional economic, secure and
convenient payment acceptance
solutions and focusing on
expanding our reach to unbanked
customers in various regions of
Middle East and Africa (MEA) we
saw (i) an increase in the number
of Direct-to-Market Micro SME
merchants onboarded in Jordan
and Africa from 2,305 in 2021
to 14,557 in 2022 and (ii) an
increase in the number of net
new credentials in countries
with limited financial inclusion
from 611,999 in 2021 to 900,923
in 2022.
›
There has been considerable
progress in implementation of the
financial inclusion programmes
disclosed in the 2021 Annual
Report. In 2022, we launched
an acquiring product in Egypt
focused on enabling SME merchants
to accept digital payments
including through Tap-on-Phone
(SOFTPOS) technology. In Jordan,
we collaborated with Jordan
Payments and Clearing Company
(JOPACC) to enable CliQ
(account-to-account payments
via wallets) functionality on
point-of-sale (POS) terminals,
thereby supporting the use of
mobile wallets for the unbanked
population. We also supported
the Jordanian Government in
issuing 60,000 pre-loaded cards
to low-income individuals to
purchase certain goods. See
pages 44 and 45 for further
details on these programmes.
ESG STRATEGY (CONTINUED)
Impact on our employees
An important benefit of
our ESG strategy is to give
clarity and prominence to
our employees on our ESG
strategic objectives. We aim
to galvanise our employees
around these objectives and to
develop a positive ESG culture,
supporting our employee
engagement and motivation
levels and enhancing the
Group’s reputation in the labour
market more broadly. Our goal
is for all of our employees to
take pride and satisfaction in
working for a company that is a
force for good, environmentally
and socially.
2
Responsible business practices
and robust governance:
We remain firmly committed to
operating an ethical supply chain
supported by responsible business
practices and policies which we
have further enhanced this year.
Our Group Procurement Policy
that aligns with our ESG objectives
ensures that we engage with our
vendors in an ethical, respectful,
non-discriminatory and
responsible manner.
3
Diversity & Inclusion:
We continue to operate a very
diverse workforce with 64 different
nationalities represented, with
continued progress on Board and
total workforce female representation.
Our recruitment and internal
promotion activity is increasingly
underpinned by a commitment
where possible to local workforces
being managed by local people
across our operational centres.
In 2022, we introduced the ‘Al
Mostaqbal Al Emirati Management
Associates programme’. The
programme’s objective is to identify
Emiratis with leadership potential,
provide them an environment to
learn and equip them with the
necessary tools to enable them to
become leaders capable of taking
on the challenges of running an
enterprise in the payments world.
We have made good progress against each pillar of our ESG
strategy during 2022, including against the commitments
relating to climate change outlined in our 2021 Annual Report:
>60
different nationalities
represented, with continued
progress on Board and total
workforce female representation
Notable areas
of progress in 2022
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
40
26
%
reduction in our Scope 1 & 2
emissions in 2022 over 2021
4
Environmental impacts:
a. Scope 1 & 2 emissions
– In the
2021 Annual Report we stated
that “We are confident that we will
be carbon neutral on Scope 1 & 2
emissions before 2030”. During 2022
we undertook the following actions:
›
We revised our methodology
to estimate our Scope 1 & 2
emissions. Published 2021 Scope 1
& 2 emissions were estimated at
1,007 tons CO
2
. We have enhanced
our data collection processes
enabling us to refine this estimate
to include refrigerants and fleet,
and to adjust pro forma for the
inclusion of DPO emissions from
January 2021. The revised 2021
estimate is 1,807 tons CO
2
e. Our
2022 Scope 1 & 2 emissions are
estimated at 1,907 tons CO
2
e,
applying the same revised
methodology, and prior to
the impact of the purchase
of Renewable Energy
Certificates (RECs).
›
We implemented measures
to reduce our Scope 1 & 2
footprint, for example installing
a more efficient HVAC (heating,
ventilation and air conditioning
system) and sun reflective window
screens in our Sharjah (UAE)
offices. We have assessed the
case for additional measures to be
implemented in 2023 and beyond.
Further details are included on
page 55.
›
Purchased unbundled RECs
corresponding to 564 tons CO
2
e.
These RECs were purchased
in UAE and South Africa where
the carbon reduction impact is
greatest. Including the impact of
the purchase of RECs, our 2022
Scope 1 & 2 emissions were 1,344
tons CO
2
e, a reduction of 26%
on 2021.
›
We are working to identify the
appropriate framework that
would help us set annual emissions
reduction targets for Scope 1, 2
& 3, consistent with a flightpath
to becoming carbon neutral
before 2030 and net zero in
an appropriate timeframe.
b. Scope 3 emissions
– Only the
business travel component of Scope
3 emissions was disclosed in the
2021 Annual Report. We committed
in our 2021 Annual Report to
enhance our data collection process
and build a modelling framework
to enable us to appropriately
estimate total Scope 3 emissions
and, depending on the availability
of customer and supplier data,
consider disclosing an estimate of
total Scope 3 emissions in our next
Annual Report. The first stage of this
work has been completed and we
have estimated and disclosed Scope
3 emissions in this report. With
this baseline, we will now undertake
work to responsibly provide a
timebound commitment to reach
overall net zero emissions (Scope
1, 2 & 3). We estimated our Scope 3
emissions across the 15 categories of
the GHG protocol (the international
standard for greenhouse gas
accounting) for 2022 at 34,540 tons
CO
2
e. The largest contributor was
the category of ‘Purchased Goods
and Services’ at 15,224 tons CO
2
e
or 44% of the total. For comparison
we estimated our Scope 3 emissions
for 2021 on the same basis at 32,531
tons CO
2
e.
c. TCFD
– We have made significant
progress in building upon our first
set of public disclosures on TCFD
published in our 2021 Annual Report.
We have identified the key climate-
based risks and opportunities in our
business, conducted climate-scenario
analysis and quantified the financial
impact range of the climate-based
risks and opportunities. We have
included in this Annual Report a full
set of TCFD disclosures (see pages
58 to 77).
Network International Holdings Plc
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Strategic Report
41
We have defined financial inclusion
as access to financial services,
primarily via access to the banking
system, but also via access to mobile
money providers.
The Group’s activities promote
financial inclusion by enabling banks
and other institutions to facilitate
the issuance of digital payment form
factors and to process payments
on behalf of their customers, and
by enabling merchants to affordably
accept payments from consumers
via these digital form factors.
1
Supporting the advancement
of financial inclusion in the
markets in which we operate
ESG STRATEGY (CONTINUED)
The Group operates in fast-growing markets in
the MEA where economic opportunity and financial
inclusion are key government policy objectives.
Access to financial services is a critical driver of
economic and social development, enabling safe
and secure storage and exchange of value, spurring
commerce and over time opening up access to
credit, insurance and other products that foster
economic growth.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
42
›
We will explore additional
use cases for the Mastercard
funded digital platform that
can promote financial inclusion
in our markets
›
Ramp up and grow our SME
merchant base in Egypt
Group KPIs
2021
2022
Targets
Number of Direct-to-Market Micro SME merchants onboarded
in Jordan and Africa
(Micro SME merchants defined as those with transaction volumes under
USD 1 million)
2,305
14,557
12.5% y/y growth in number of
Micro SME merchants onboarded
Number of net new credentials in countries with limited
financial inclusion
(Countries with low financial inclusion defined as those where combined
penetration rate of bank accounts or mobile money accounts among adult
population is below 50%, based on data sourced via Edgar, Dunn & Company)
611,999
900,923
8% y/y growth in number of net
new credentials
Focus areas for 2023
We are particularly proud of the
success we have had in supporting
SME and Micro SME merchants to
accept digital payments, given the
high social impact of this activity.
Reflecting our strategic focus on
this segment, the proportion of our
Total Processed Volume (TPV) on
behalf of SME merchants has risen
from 25% in 2021 to 27% in 2022.
We are continually adapting our business focus to accelerate the up-take
of digital payments, particularly among groups where there is a high resulting
social impact. We expect to continue to develop our programmes over time,
targeting two key impacts:
›
To enable merchants to accept
digital payments, in particular
where this has not been possible
or economic previously, including
by the use of Tap-on-Phone
technology (the cornerstone of
our recently launched offering in
Egypt) and especially among SME
and Micro SME merchants; and
›
To enable individual consumers
who are the end customers of our
bank customers to make digital
payments, in particular where this
has not previously been possible,
for example for individuals living
in remote areas with no nearby
bank branches.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
43
Financial inclusion
case studies:
ESG STRATEGY (CONTINUED)
In the 2021 Annual Report
we outlined key initiatives
underway across the
Group that are particularly
high impact in terms
of promoting financial
inclusion, highlighting
features of these
programmes that have
been implemented to
bring about certain socially
beneficial outcomes.
This list of initiatives is non-
exhaustive and designed to give
a flavour of activities pursued
across the Group with a financial
inclusion impact. Progress across
these initiatives during 2022 is
described on pages 44 and 45.
1
Edgar, Dunn & Company.
2 IMF.
3
National Payment System Report
(Q1 2021 and Dec 2022) – Reserve Bank of Malawi.
4 Network 2021 Annual Report.
Description
In 2022, we launched acquiring
services to merchants in Egypt
via a partner bank, through
a payments facilitation model.
The service in part uses a
Tap-on-Phone (also known as
SOFTPOS) acceptance solution,
allowing merchants to accept
payments via an app on a
smartphone. This solution helps
avoid or reduce the need for a
hardware terminal, eliminating
significant expense and making
digital payments acceptance
economic for many smaller
merchants, improving convenience
and supporting livelihoods.
The Group was one of the first
Tap-on-Phone acceptance solution
providers to go live in Egypt,
targeting smaller merchants.
Our innovative acceptance offering
is broad-based across payment
type including traditional cards.
In 2022, the Group completed
the SOFTPOS infrastructure build
and integration and our partner
banks – Alex Bank and Arab African
International Bank (AAIB) – received
approval from the Central Bank of
Egypt to begin onboarding merchants.
Financial inclusion impact
Digital payments penetration
rates in Egypt remain very low by
international standards. Transactions
via digital payments amounted to
30% of total transaction volumes
in Egypt in 2021
1
. The Group expects
that a substantial proportion
of merchants onboarded to its
Tap-on-Phone proposition will
be accepting digital payments
for the first time. By offering a
Tap-on-Phone acceptance solution
that is up to 15x cheaper than
equivalent terminal hardware,
the Group will digitally enfranchise
SMEs and Micro SMEs for whom
terminal rental fees have been
uneconomic. To access our digital
acceptance services, merchants
will need to open bank accounts
with our partner banks. The Group
will assist with this process.
As a result, not only will these
merchants be able to accept a
greater volume of payments by
more diverse means, increasing
their turnover and profitability,
they will also form banking
relationships enabling them over
time to access credit and other
financial products, with the effect
of spurring investment and economic
growth in Egypt more broadly.
The Group’s commitment
Consistent with our strategic
roadmap, over time we intend to
launch similar Tap-on-Phone driven
acceptance initiatives in other
jurisdictions, either directly or
in partnership with local financial
institutions. We will examine
the potential to structure these
programmes in a way that
maximises the financial inclusion
impact wherever possible.
Tap-on-Phone in Egypt
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
44
Supporting the financial inclusion of unbanked citizens
in Malawi via a branchless digital offering
Promoting financial inclusion in Jordan
Description
During 2022 the Group partnered
with NBS Bank, a mid-sized retail
bank in Malawi and a longstanding
client/partner, with the objective of
onboarding unbanked citizens via
a branchless offering that harnesses
the Group’s digital platform. The digital
platform was created in partnership
with our co-investment from Mastercard
as part of our core strategy. Using
this new digital platform NBS Bank in
Malawi will issue a Mastercard virtual
card that will enable its customers
to make a wide range of e-commerce
payments to merchants that accept
Mastercard locally and internationally.
In 2022, the Group completed its
technical readiness to begin the
integration of NBS Bank onto our
digital platform.
Financial inclusion impact
Malawi is one of the most
impoverished countries in the world,
with a population of 22 million and
GDP/capita of USD 523 (2022)
2
,
despite having made significant
economic and structural reforms
to encourage growth. Only 40%
of adults in Malawi are financially
included (defined as “using financial
institutions”)
4
. There are 493 ATMs
(as at March 2021) in the country, and
4,687 points of sale (as at December
2022)
3
that accept card payments.
Like many banks in Malawi, NBS Bank
faces a challenge reaching customers
in remote areas. The branchless
digital offering by the Group will
enable consumers in remote areas
to access financial services in a way
that has not previously been possible.
The Malawi use case is a good
example of how the Group is applying
our core strategy to drive positive
financial inclusion outcomes.
The Group’s commitment
In 2023, we will be live following
completion of the integration of
NBS Bank onto our digital platform,
enabling NBS to issue virtual cards
to its customers. We are examining
the potential to commit to similar
programmes with other banks in
Malawi, and to leverage our digital
platform investment for use in
other jurisdictions where similar
challenges exist.
As the market leader in Jordan for
acquiring and processing services,
the Group is in a strong position to
advance financial inclusion. GDP/
capita in Jordan was USD 4,670 in
2022
2
and rates of financial inclusion
remain relatively low by comparison
to the rest of the Middle East region,
with digital payments accounting for
22% of total transaction volumes in
2020
4
. The Group is supporting
numerous initiatives to advance
financial inclusion in the country.
We had identified two of these
initiatives in the 2021 Annual Report
and update on progress below.
a. Collaboration with Jordan
Payments and Clearing Company
(JOPACC), enabling account-to-
account payments
Description
In 2022, the Group collaborated with
CliQ (the Jordanian Instant Payment
System) and Jomopay (Jordanian
mobile payment switch) to enable
account-to-account payments via
wallets. The Group completed the
build of the platform that is used
to integrate with CliQ. The Group is
currently in the process of upgrading
all existing point-of-sale terminals
and revamping back-end operations
to support the new account-to-account
payment mechanism.
Financial inclusion impact
The objective in supporting this
programme is to assist the Jordanian
Government and NGOs to support
the use of mobile wallet payments
by sections of the population who
are currently unbanked, including low
income and refugee communities.
The Group’s commitment
In 2023, the Group expects to
complete the roll out of CliQ
functionality across all of its
operational POS devices in Jordan,
with all new merchants receiving
the CliQ functionality on their POS
devices as a default option.
b. Issuance of pre-loaded cards to
lower income communities
Description
The Group supports the Jordanian
Government (Royal Hashemite Court)
in a social initiative where twice a
year pre-loaded cards are distributed
to low-income individuals for use
in two marketplaces – the military
marketplace and the civil marketplace
– to buy certain goods (mainly
groceries and food).
Overall 60,000 pre-loaded cards
were issued during 2022.
Financial inclusion impact
Beyond the immediate benefit
of efficiently delivering funds to
disadvantaged citizens to purchase
certain goods, the programme
introduces many citizens to digital
payments for the first time,
fostering adoption amongst
the financially excluded.
The Group’s commitment
Reflecting the benefits of financial
inclusion, the Group provided issuer
processing services supporting
this programme for a nominal fee.
The Group intends to repeat its
participation in this successful and
impactful scheme in 2023.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
45
2
Promoting responsible
business practices under a
robust governance framework
We define responsible business
behaviour broadly to include,
for example:
Business ethics:
›
Treating customers fairly;
›
Operating a reliable, resilient
and ethical supply chain; and
›
Respecting human rights
and labour standards in all
our operations and markets,
across staff and suppliers.
Social:
›
Promoting equality, diversity
and inclusion and ensuring fair
treatment of all employees.
Governance:
›
Embedding ESG considerations
in all applicable activities of
the Group;
›
Being transparent about
taxes, levies and duties due
in the jurisdictions in which
we operate; and
›
Playing our part in protecting
payments systems from fraudulent
actors and cyber threats.
We are cognisant that we conduct
business in jurisdictions where there
are substantial growth opportunities,
but where, in some cases, the risks
surrounding financial crime and
unethical or irresponsible business
practices are elevated. We continue
to monitor our robust culture,
policy framework and governance
architecture to mitigate against
these risks and to promote ethical
business practices. Further details
of our governance framework are
included on pages 48 and 49 and
in the corporate governance section
of this Annual Report from page 120.
The Board is responsible for providing
oversight and direction on all
facets of the Group’s operations
and in applying the Code of Conduct,
which applies to the workforce,
management and the Board.
ESG STRATEGY (CONTINUED)
The Group recognises the importance of
operating responsibly and with the highest
ethical standards as we continue to advance
our business objectives.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
46
›
Reviewed the effectiveness of our
whistleblowing arrangements and
took steps to increase awareness
of our confidential facility amongst
all employees
›
Reinforced the annual training given
to all employees in respect of:
–
anti-bribery, anti-corruption
and anti-money laundering
policies; and
–
‘Know your customer’, standard
due diligence and enhanced
due diligence procedures
›
Increased focus on assurance
reviews, expanded the scope of
our assurance activities across
the business, complemented
by our Enterprise Risk Management
Framework (ERMF) and selected
internal audits, to ensure that our
policies are effective. Remedial
action has been overseen by
the Enterprise Risk Management
Committee (ERMC) and the
Risk & Technology Committee
›
Significantly progressed with
integration of our strong governance
standards into the DPO business
›
Further progressed our People
agenda by continuing to engage
our workforce on the Group’s values,
which underpin the execution of
our revised strategy, continuing our
strong engagement mechanisms
with all our stakeholders and
particularly our employees, offering
support to them as they returned
to the workplace, and presenting
a significant level of training and
growth opportunities
›
At Board level, through the Risk &
Technology Committee, continuing
the oversight of risk and the Group’s
culture of risk management
›
We remain focused on continuing
to embed ESG across businesses,
building capabilities, capacity and
improving how we measure and
disclose our progress on ESG
›
We will assess potential ESG
risks during our assessments
of third-party vendors and
remediate based on our policies
›
We will monitor and prepare
remediation plans for adverse
climate risk scenarios based on
the level of the risks
›
We will ensure compliance with
regulatory change requirements
and mandates which may come
into force in the future
At the highest-level the Board has
accepted management’s proposal that
progress against this ESG strategic
objective will be assessed against a
zero tolerance position in relation to
fraud, corruption and abuses of human
rights. The Board will continue to
monitor action taken by management
under this zero tolerance policy in
exposure to any breaches that come
to light either from the business or its
customers and suppliers. In addition,
we will track and take into account the
metrics below:
Group KPIs
2021
2022
Targets
Commentary
Customer complaints
1,018
1
1,467
2
6% y/y
The majority of the increase in customer complaints (327 out of an
increase of 449 complaints) was due to the inclusion of DPO data for
the first time in 2022. Excluding DPO, complaints increased by 12% in
the Network business due in part to issues arising from the transition
of a majority of our operations team from UAE to the Center of
Excellence in Egypt. The 2022 measure including DPO of 1,467
remains well within the Key Risk Indicator (KRI) threshold of 5,280.
Number of ESG
Board/Board
Committee meetings
3
6
At least five ESG
Board, Audit or Risk &
Technology Committee
meetings per annum
% of employees who
have completed the
Ethical and Sustainable
procurement training
N/A
76
2
95
The KPI was added in 2022 and the training was rolled out to all
employees interacting with our suppliers over the course of the year.
No data point is available for 2021.
Employees’ views on
human rights recorded
based on engagement
survey (% giving
a positive rating)
N/A
86
2
90
This KPI was added in 2022 and a question was added to the
employee engagement survey conducted in November 2022.
No data point is available for 2021.
Fines for unpaid
or overdue taxes
Nil
Nil
Nil material
% of employees
aware of
whistleblowing
options including
Safecall hotline
94
1
92
2
98
Awareness of the Group’s whistleblowing options as indicated in
responses to the employee engagement survey fell two percentage
points in 2022 to 92%. We believe this in part reflects that DPO
employees were included for the first time in 2022 in this survey.
Training and awareness measures with regards to the Group’s
Whistleblower Policy and reporting procedures will be enhanced
in 2023 to increase overall awareness among Group employees,
particularly for employees across DPO entities.
1
Only Network business.
2
Collectively for Network and DPO business.
Progress during 2022
Focus areas for 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
47
Management is responsible for the delivery of our ESG strategy under the oversight of the Board.
The Board, through the Audit Committee, plays an instrumental role in leading and supervising
the delivery of our ESG strategy by management. The progress against the Group’s ESG strategy
was considered by the Audit Committee on four separate occasions, by the Risk & Technology
Committee on one occasion and by the Board on one occasion during 2022. The Board is kept
apprised of the progress on the Group’s ESG programme by the Audit Committee. During 2023,
the Audit Committee, on behalf of the Board, will continue to oversee the implementation of the
longer-term ESG strategy and progress against ESG KPIs with a specific focus on the quality of
ESG reporting and its verifiable, repeatable and objective nature. This is in addition to its specific
requirements under the Task Force on Climate-related Financial Disclosures (TCFD).
ESG STRATEGY (CONTINUED)
Our overall risk management
approach is built on our risk appetite
and implemented Company-wide
through the ERMF. The Group’s
ERMF helps the Group to proactively
respond to changes in our business
environment, whilst supporting our
strategy of increased transparency
and simultaneously creating value
for our shareholders and our wider
stakeholder base (more information
on our risk approach is on page 105).
Our ESG approach is integrated
in our risk framework in the
following ways:
›
Close interaction between the
policy owners and the Risk
function to identify and manage
ESG-specific risks;
›
Close monitoring of the impact
of climate change across our
operations and calibrating our
response in line with evolving
regulations; and
›
Review of the management
of ESG risks by the Risk &
Technology Committee in the
context of the overall ESG strategy
and execution framework.
While the establishment of our
refreshed ESG strategy and
execution framework was an
important step in validating our
commitment as a responsible
Group, we have been in regular
communication with our clients,
governments, supply chain,
investors, and the wider public
to gather feedback on a range
of business and operational issues,
including perspectives on our ESG
strategy and execution framework.
We will continue to be in
regular communication with our
stakeholders on how the framework
could be further strengthened in
the years ahead.
In addition, Internal Audit will
continue to review the risk
management framework in 2023,
providing independent assurance
on the embedding of management
of ESG across all lines of defence.
Business ethics:
Policies and procedures
The Group remains committed
to applying the highest ethical
standards. This commitment
is established in our Code of
Conduct, 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 and related
policies. Our approach to business
ethics is further set out in a
range of supporting policies
(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 Policy; and
›
Modern Slavery Statement.
We carried out a compliance
assurance review of the effectiveness
of our confidential and anonymous
24-hour whistleblowing hotline and
related online reporting channel in
2021, operated by an independent
third party. As described on page
47, over 90% of staff are aware of
the ability to speak up on any
unethical behaviour or wrongdoing
including through this service
and feel able and willing to do so.
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 120.
General approach to ESG
governance and risk framework
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
48
Human rights
Internal
The Group 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 Equality, Diversity & Inclusion
Policy, Code of Conduct and
Whistleblower Policy. We received
positive feedback from our
colleagues when we asked them
about the Group’s commitment
on human rights as a part of our
employee engagement survey.
External
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.
The Group 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
practising modern slavery and
human trafficking, and have taken
steps to ensure our high standards
are maintained, including via our
revised Group Procurement Policy.
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 Risk Management
Policy. We also undertake periodic
on-site audits on a number of
suppliers. Where required, we
reinforce our opposition to modern
slavery and human trafficking in
our contracts. In future, we plan to
expand our mandatory compliance
training programme to include
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
.
Governance
Taxes
Taxes are an important part of
the Group’s social contributions.
We are committed to managing
our tax affairs in a responsible and
sustainable manner in support of
our business strategy. The Group has
developed a robust tax governance
framework to ensure the Group
obeys both the letter and spirit of tax
laws and regulations and pays the
due amount of tax in all jurisdictions
in which it does business.
The Group adopts a low appetite for
tax risks, which is also factored into
the Group’s business strategy and
assessment of all new opportunities.
It operates a model that aims to
maximise shareholder value in the
most efficient and socially fair manner.
The control processes adopted
ensure timely filing of returns based
on local tax laws and regulations
in countries in which we operate,
and with a monitoring system that
aims to be updated on any changes
in local tax rules.
The Group regards taxes as
an important part of its social
contribution and communicates
tax matters to all stakeholders in
a clear, responsible and consistent
manner in a way that enables
evaluation of the Group’s tax
matters by relevant stakeholders.
The above matters are covered
through the Group’s Tax Policy
Framework, which sets the
principles and procedures pertaining
to tax risk management and
processes throughout the whole
tax cycle to ensure sufficient tax
governance and transparency.
Our Tax Strategy is published
on the investor relations section
of our website and sets out the
key principles for managing taxes
established by the Board, accessible
here: 
https://investors.
networkinternational.ae/
media/1241/tax-strategy-
document-mar-30-2020_final.pdf
.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
49
ESG STRATEGY (CONTINUED)
3
Building a well-trained, happier,
inclusive, equal and diverse
working environment
People are at the heart of our business and are
instrumental to the delivery of our corporate
strategy and our ESG strategy. We promote
the fair treatment of all our employees, and
we believe that diversity and inclusion are key
drivers of innovation, creativity and equality.
We operate in 57 countries and
benefit from a highly diverse
international workforce of 1,953
FTEs (full time employees). We
emphasise the need for our local
offices and sales forces to be led
where possible by local people with
connections and expertise specific
to the market in which they operate.
Accordingly, our employee base
reflects the diverse cultures we
work in and our varied client base,
with 64 nationalities represented
today versus 63 in 2021. We continue
to invest to promote gender inclusion,
enhance levels of employee
engagement and improve learning
and development opportunities
for our employees.
Modern Slavery Policy
We are strongly opposed to slavery
and human trafficking, and endeavour
to lead by example in the way we do
business. We recognise that modern
slavery is a crime and a violation of
fundamental human rights. To ensure
that we and our supply chains
remain free of slavery and human
trafficking issues, we have adopted
the following controls and practices:
›
A strict Code of Conduct
and Whistleblower Policy
›
Supplier due diligence
and monitoring
›
Training
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
50
Employee engagement
Our employee engagement score
for 2022 was at 57%. 84% of
employees participated in the
survey as against 83% in 2021.
Key areas of positive feedback from
our colleagues included: increased
focus on the physical and mental
well-being of our colleagues;
effective identification and utilisation
of capabilities; empowerment of
our colleagues to enhance customer
satisfaction; automated performance
reviews in a structured manner
across the Group; and learning and
development efforts to align with
our ‘Network Ambition’, ‘Network
Way’ and our values.
Based on the feedback from the
2022 employee engagement survey,
a range of initiatives for 2023 to help
improve the engagement score will
be introduced. These include:
›
Developing stronger collaboration
among cross-functional teams
›
Extending and expanding
our Rewards and Recognition
programmes to further
encourage talent
›
Increasing the learning and
development opportunities
across the Group
›
Continuing to calibrate salary
with market trends
›
Upskilling our mid- and
senior-level management to
ensure high-calibre leadership
for future growth
From 2023, we will add a question
to the employee engagement survey
seeking employee feedback on our
delivery against our ESG strategy.
A few of our key 2022 employee
engagement initiatives included:
the ‘One Source – One Network’
intranet, the Network Summer
Internship Programme, while
Network DPO celebrated ‘Pride
Month’ and held a number of
activities such as ‘Acts of Kindness’,
Game Night, Africa Team Connect,
Thoughtful Thursday, Wellness Day
and Father’s Day. For more detail
on the 2022 employee engagement
initiatives, refer to pages 29 to 30.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
51
ESG STRATEGY (CONTINUED)
Equality, diversity
and inclusion
Having a diverse and culturally
intelligent workforce across regions
enables the Group to empathise
with our customers, develop more
relevant solutions and meet growing
customer expectations.
Our Equality, Diversity & Inclusion
Policy ensures we treat all
employees with fairness and dignity,
irrespective of age, gender, race,
nationality, ethnic origin, religion,
language or physical ability. We
listen to all our employees and are
inclusive in our decision making.
We ensure all our leaders are given
training on these topics and help
“The focus of the meeting was to share the
objectives of the council and discuss the
various achievements of women in fintech.
There was also a panel discussion on the
achievements and challenges of women in
SME banking and fintech. The interesting
thing about the council was that it comprised
women in different sectors in cards/payment/
retail banking across the world. The council
also shared views on the different ways that
women leaders are successful.”
Chinwe Uzoho
Regional Managing Director, West and Central Africa,
who attended the Global Council
The Global Council for Women in Banking
and Fintech
The Group joined the Global Council for Women in
Banking and Fintech in June 2022. This Council is a
global network and resource for women executives in
banking and fintech, dedicated to helping them achieve
their full potential in management. Three of our women
employees (Chinwe/Faith/Brenda) are now members
of this Council. Members benefit in multiple ways from
this membership:
›
networking opportunities with other women
professionals in banking and fintech
›
opportunities to learn best practices and seek confidential
advice from industry leaders on the challenges women
face in fintech, and on wider fintech matters
›
participation in a tailored management development
programme (from EM Normandie Business School
and Lafferty)
›
participation via webinar in special interest groups that
focus on areas such as consumer lending, including
credit cards, micro loans, BNPL, mortgages, alternative
data sources, sustainability/ESG and inclusion, SME
banking and fintech research, networking services, and
education on retail banking industry, payments and cards
›
access to the Lafferty’s Research & Advisory Services.
This provides briefs on how new tech-driven business
models are transforming the face of banking, case
studies from across the globe, and a series of reports
across the fields of consumer and SME banking, cards,
payments and mobile across the globe.
them cascade these behaviours to
their team members. We focus on
our diversity numbers and take
active steps to ensure we recruit
from all sections of society. In 2022,
we met our target of 33% female
representation at the Senior
Manager level
1
. The table below
references the proportion of female
representation across the Group
as of December 2022.
Proportion of female representation across the Group as of December 2022:
Category
Male
(2022)
Female
(2022)
Female %
(2022)
Female %
(2021)
Total workforce
1374
579
30
29
Board of Directors
6
3
33
30
A: Executive Management Team
9
2
18
25
B: Senior Managers
1
63
31
33
25
A+B: Executive Management Team & their direct reports
72
33
31
25
1
Senior Managers – ExCo direct reports.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
52
Group KPIs
2021
2022
Targets
Commentary
Employee
turnover rate
7.9%
1
11.6%
2
14%
In 2022, the employee turnover rate trended to a more normalised
level at 11.6%. While this measure is higher than 2021, the score in 2021
was flattened to some extent by the impact of COVID-19 on the hiring
activities of our peers. 2022 saw a rebalancing on this front to some
extent, and over the medium term we expect our annual turnover rate
to normalise at around 14%, reflecting the labour market dynamics in
the countries in which we operate. For more detail on measures that
have been put in place for employee retention, refer to page 32.
Training
hours
27,073
1
65,692
2
40 hours
(average) per
individual by 2026
In 2022, the average number of hours per individual was 34. The sharp
increase in total training hours in part reflects the addition of DPO
following the completion of the DPO acquisition. Training hours for
Network alone in 2022 were 55,526 hours, a 105% increase due to the
addition of numerous training programmes.
Employee
engagement
survey
65%
1
57%
2
3% annual
improvement
over time in line
with market
benchmarks
Refer to Employee engagement section on pages 29, 30 and 51.
Senior Manager level
nationalities
3
19
2
25
2
25
% of female
employees at Senior
Manager level
3
25
2
33
2
33
1
Only Network business.
2
Collectively for Network and DPO business.
3
Senior Manager level – ExCo direct reports.
KPIs
The below table shows our training metrics:
Employee training
2022 (YTD)
2021
2020
No. of staff trained
1,953
(100%)
1,351
2
(100%)
1,309
No. of training hours
65,692
1
27,073
11,879
1
Collectively for Network and DPO business.
2 Excluding DPO.
We have several programmes to create an inclusive and diverse
working environment. These include: Beacon Award; Middle East
Women Leaders’ Summit; Pride Month (DPO); Al Mostaqbal Al Emirati
programme; ‘Break the Bias’ Empowerment Programme; Women
Leaders Mentorship Programme; Network Long Service Award;
Maternity & Paternity benefits; and Effective Women Empowerment.
Learning & Development
Our Learning & Development
model is a key part of our Talent
Management Framework (assess
employee potential, create talent
pools, plan for succession and plan
for employee development). It
follows the 70-20-10 model of
learning, with on-the-job learning
(70%), mentorship (20%) and
formal training programmes (10%).
By understanding the training needs
of the Company from the TNA,
leadership surveys and inputs from
the employee engagement survey,
we are able to identify and roll
out targeted high-impact learning
programmes. These programmes
help keep our employees up to date
on the cutting edge of technology
and evolving trends in payments
and banking and bring in a culture
enshrined in our values and the
Network Way. For a detailed
description of the key Learning
& Development programmes,
refer to page 33.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
53
As a payment solutions provider in
the MEA, while we do not have an
extensive environmental footprint,
we are nonetheless committed to
reducing the environmental impact
of our overall operation.
In line with or ahead of commitments
stated in our 2021 Annual Report,
during 2022, we enhanced our
data collection processes, refined
our measurement of Scope 1 & 2
emissions, estimated for the first
time our Scope 3 emissions and took
steps to understand our exposure
to climate risks and opportunities.
We also formulated a preliminary
roadmap of measures to reduce
our Scope 1 & 2 emissions in 2023
and beyond. Based on the work
that has been undertaken so far, we
remain confident that we can follow
through on the commitments made
in the 2021 Annual Report: “Being
confident that we will be carbon
neutral on Scope 1 & 2 emissions
before 2030” and “Responsibly
providing a timebound commitment
to reach overall net zero emissions
(Scope 1, 2 & 3) in the near future”.
4
Minimising our
environmental impact
We acknowledge and support the scientific
evidence that climate change is having
a tangible and negative impact in our
markets, including through the intensity
and frequency of natural disasters.
ESG STRATEGY (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
54
Scope 1 & 2 carbon emissions
Measurement:
Scope 1 & 2 emissions reported in our
2021 Annual Report were 1,007 tons
CO
2
. This measure excluded DPO, the
acquisition of which was completed at
the end of October 2021. We have
refined our measurement of Scope 1
& 2 emissions during 2022, adding
emissions in respect of refrigerants
use and fleet, and including DPO
emissions (including a pro forma
2021 for comparison purposes
1
).
Following this methodology, the
total estimate of our Scope 1 & 2
emissions in 2021 was 1,807 tons
CO
2
e. In 2022 the equivalent
measure was 1,907 tons CO
2
e,
or 1,344 tons CO
2
e taking into
account the purchase of RECs
equivalent to 564 tons CO
2
e.
Reduction pathway:
The key starting point for our plans
to reduce our carbon footprint is
an accurate measure of our current
emissions. Our primary focus during
2022 has been on refining our
measure of Scope 1 & 2 emissions
and gathering data and creating a
methodology for estimating Scope 3
emissions. We have worked to deliver
estimates that are as robust as possible.
Having established this baseline,
we have implemented certain
measures over the course of 2022
to reduce our carbon emissions,
including for example installing
a more efficient HVAC (heating,
ventilation and air conditioning
system) and sun reflective window
screens in our Sharjah (UAE)
offices. We have also worked to
assess the viability of additional more
substantial measures to reduce our
Scope 1 & 2 emissions, including the
use of Power Purchase Agreements
(PPAs) for renewable energy.
We will report on progress against
such measures in our 2023 Annual
Report, and describe any further
measures that have been put into
planning or execution over the
course of the year.
Our first priority is to reduce Scope 1
& 2 emissions by as much possible,
using measures proportionate to our
size, carbon footprint and resources.
In practice, however, we may not be
able to entirely eliminate our Scope 1
& 2 emissions: there will be a residual
level of emissions after implementation
of the above measures. Our stated
confidence in achieving carbon
neutrality on Scope 1 & 2 emissions
before 2030 will require some
supplementing, with the purchase
of unbundled RECs and/or certain
types of carbon offsets to eliminate
residual emissions.
We believe that the purchase
of unbundled RECs and the use
of certain types of offsets, while
imperfect, represents a valid
and legitimate approach to the
elimination of residual emissions
and achievement of carbon neutrality
in time. Unbundled RECs are a
means of securing energy supplies
from the grid that are certified as
being derived from renewable
sources. Over time, greater demand
for RECs is expected to spur greater
supply of renewable energy.
While we are at the planning stage
in terms of measures to materially
reduce our residual emissions, in
2022 we purchased unbundled
RECs for an aggregate 679 MWH/
564 tons CO
2
e. RECs backed by
International-Renewable Energy
Certificate (I-REC) Standard were
purchased from renewable energy
suppliers in South Africa and UAE.
In UAE, the purchased RECs
link our energy consumption to
production at Maktoum Solar Park
Phase 3 – a solar farm with ground
mounted photo-voltaic cells.
In South Africa, the purchased
RECs link our energy consumption
to production at a solar farm at
Kalkbult – again deploying ground
mounted photo-voltaic cells.
The majority of the RECs were
purchased in South Africa given
the higher carbon reduction
impact reflecting the greater
usage of coal in power production
in this jurisdiction. Purchases in
South Africa were capped at 560
MWh/501 tons CO
2
e, equal to
our power consumption, while
purchases in UAE were capped
at 119 MWh/63 tons CO
2
e. The
purchase of RECs in UAE and
South Africa in aggregate reduced
our 2022 Scope 1 & 2 emissions
from 1,907 tons CO
2
e to 1,344
tons CO
2
e. This represents a 26%
reduction on our revised 2021
emissions (using the new measure
including DPO, fleet and
refrigerants) of 1,807 tons CO
2
e.
1
DPO was acquired on 28 September 2021.
Pro forma data is presented for information
only, comparing 12 months of DPO in 2022
to 12 months in 2021.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
55
0
5,000
10,000
15,000
20,000
Network
DPO
1 Purchased
Goods & Services
2 Capital
Goods
3 Fuel- and
Energy-related
Activities
4 Upstream
Transportation
& Distribution
5 Waste
Generated
in Operations
6 Business
Travel
7 Employee
Commuting
11 Use of
Sold Products
12 EOL
Treatment of
Sold Products
13,914
1,311
104
2,960
614
17
3,522
76
170
18
793
634
231
1,380
214
8,583
ESG STRATEGY (CONTINUED)
Scope 3 carbon emissions
Measurement:
In our 2021 Annual Report, only
the ‘Business Travel’ category of
Scope 3 emissions (507 tons CO
2
e)
was reported. Using an expanded
methodology, we have this year
estimated our total Scope 3
emissions across all categories
at 34,540 tons CO
2
e for 2022 and
32,531 tons CO
2
e for 2021 (2021
being pro forma for full year DPO
contribution). This methodology
analysed data across all 15
categories of Scope 3 emissions
(as defined by the GHG protocol).
Categories relevant to the Group
were identified, with the ‘Purchased
Goods and Services’ category
being the highest single contributor
of emissions in 2022 at 15,224 tons
CO
2
e (44% of the total).
2022 total Scope 3 emissions were
determined using available customer
and supplier data, estimates and
spend data. The split between tons
of emissions calculated from actual
absolute data, spend data and
estimated using proxies is 32%/
63%/5%. The most significant
factor in the 6% increase in Scope 3
emissions from 2021 to 2022 is the
increase in POS terminals provided
to customers, and corresponding
increase in lifetime energy consumed
by these terminals. In 2023, we intend
to focus on reducing our dependency
on proxy based estimates and spend
data to improve the quality of our
Scope 3 measurement. The below
chart provides a breakdown of the
total Scope 3 emissions across the
relevant categories in 2022:
Reduction pathway:
Having established for the first time
this year an estimate of our total
Scope 3 emissions, our plans for
reducing Scope 3 emissions will
be advanced in the coming year.
We will identify and prioritise the
most impactful measures, and seek
to integrate emissions reduction into
our business practices and policies,
including procurement.
We will work towards developing
a strategy and associated actions
designed to contribute to a
reduction in our Scope 3 emissions
over time. We will also consider
appropriate frameworks to establish
the quantum of annual Scope 3
emissions reductions that we could
target in due course in support
of ultimately implementing a
time-bound target for reaching
net zero emissions.
2022 Scope 3 – GHG emissions (tons CO
2
e)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
56
Emissions KPIs:
Though not formal ESG KPIs,
we track certain other measures
across the Group. Water
consumption
1
is estimated
at 1,253,258 gallons in 2022
versus 1,120,305 gallons in 2021.
In 2022, we recycled 3 tons
of paper waste from our UAE
offices alone, compared to
2.6 tons in 2021.
1
Water consumption data covers office
premises in UAE, Egypt, Jordan and South
Africa for 2022. For 2021 South Africa data
is excluded due to office consolidations
occurring after the completion of the
acquisition of DPO part way through the year.
Data for other office premises is not available.
Group KPIs
2021
2022
Targets
Gross CO
2
emissions
– Scope 1
tons CO
2
e
194
210
Year-on-year reductions
consistent with 2030
carbon neutral target
Gross CO
2
emissions
– Scope 2
tons CO
2
e
1,613
1,134
Gross CO
2
emissions
– Scope 3
tons CO
2
e
32,531
34,540
First intermediate targets
to be set in 2023 for 2024
Gross Scope 1 & 2
emissions relative to
revenue (KgCO
2
/$m
revenue)
0.005 Kg
CO
2
e per
dollar of
revenue
0.003 Kg
CO
2
e per
dollar of
revenue
Year-on-year
reductions consistent
with overall targets
Carbon intensity
(Scope 1 & 2
emissions)
per employee
1.02 tons of
CO
2
e per
employee
p.a.
0.7 tons of
CO
2
e per
employee
p.a.
Year-on-year
reductions consistent
with overall targets
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
57
Executive Summary
In our 2021 Annual Report and Accounts we set
out for the first time a set of TCFD disclosures.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
The emissions measurement and
reduction pathway workstream
examined different measures the
Group could take to reduce Scope 1
& 2 emissions. Most of the Group’s
emissions are from the use of
electricity. While there are several
good practice measures the Group
has undertaken or will undertake
to reduce electricity consumption,
the key levers available to the Group
to deliver a substantial reduction
in Scope 1 & 2 emissions are the
purchase of RECs and/or entering
into renewable PPAs. During 2022,
the Group purchased RECs with an
equivalent carbon reduction impact
of 564 tons CO
2
e. During 2023, the
Group will continue to assess whether
ongoing purchases of RECs, or
entering into PPAs where feasible,
or some combination of the two or
other measures, represent the most
appropriate way forward against our
emissions reduction objectives.
Under the climate scenario analysis
workstream we have identified and
prioritised climate-related risks and
opportunities and quantified where
possible their potential financial
impact on the business. Building
on this information we will enhance
our Key Risk Indicators (KRIs),
providing a more reliable framework
for monitoring climate-related risks
and determining over time whether
changes to our strategy are required
as risks evolve. Progress on this last
workstream is ongoing and will be
disclosed in our 2023 TCFD report.
The climate scenario analysis
workstream first identified a long
list of climate-related risks and
opportunities relevant to the Group.
These risks were scored over the
short, medium and long term, as well
as across three climate scenarios.
The scores were validated by the
TCFD working group and members
of the Group Executive Committee.
Of the top 10 risks, the following four
were mapped to risk factor pathways
and value drivers were modelled:
Figure 1: Risks mapped to risk factor pathways and value drivers for quantification
Risk
Risk factor pathway
Value drivers modelled
Increasing energy costs
Direct emissions costs and indirect
emissions costs
Electricity, fuel & carbon costs
Costs associated with decarbonisation
Incremental low-carbon capital expenditure
and avoided risk
RECs, PPAs, Electric Vehicle (EV) costs,
and shadow cost of carbon
Reduced payments revenue due to GDP loss
Incremental revenue
GDP impact on revenue and TPV
Physical damage from extreme weather
events to the Group’s facilities and the
infrastructure serving them
Physical risks
Country risk profiles & physical risk
assessments at key sites
These disclosures focused
on governance, strategy, risk
management, and metrics and
targets (all four pillars of TCFD).
This year, we have progressed our
TCFD work and substantially closed
remaining gaps in our disclosure,
focusing on two key workstreams:
1) emissions measurement and
reduction pathway analysis; and
2) climate scenario analysis. This
work has been supported by our
climate strategy advisor, Corporate
Citizenship (part of SLR), and
overseen by the TCFD working
group. The TCFD working group
is made up of key Network staff
and our climate strategy advisors.
As a result, we are pleased to
provide here a more comprehensive
set of TCFD disclosures, providing
greater depth across the TCFD
recommendations, and new
information about our strategy
for managing climate-related risks
and opportunities.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
58
Risks related to ‘increasing energy
costs’ and ‘costs associated with
decarbonisation’
were quantified
using a model which calculated
the costs of electricity, fuel,
carbon emissions, RECs,
PPAs and EVs, based on three
climate scenarios and three
‘decarbonisation scenarios’.
Conclusions:
This model’s outputs
support the implementation of
a more ambitious decarbonisation
scenario in two ways. Firstly, the
model indicates that, when
assuming an Orderly or Disorderly
transition scenario, and factoring
in the shadow costs of carbon,
the least ambitious decarbonisation
scenario is potentially more
expensive than the more ambitious
decarbonisation scenarios (see
Figure 11). Secondly, the model
indicates that the increased costs
to the Group from more ambitious
decarbonisation strategies are
relatively minor, ranging from USD
168k to USD 894k over the period
2022 – 2040 measured in terms
of net present value (see Figure 12).
Although the model does not
yet capture all costs associated
with decarbonisation, such as
capital costs required for PPAs,
these numbers are relatively low
compared with Group 2022 net
income of USD 80 million.
Risks related to ‘reduced
payments revenue due to GDP
loss’
were quantified in two steps.
First, by modelling the current
relationship between GDP and
revenue and TPV using Network
International’s historical data from
2017 to 2021, and World Bank GDP
data. Second, by applying this
relationship to future GDP data from
the NGFS REMIND MAgPIE model.
Conclusions:
Results from preliminary
modelling projected that under all
climate scenarios analysed, climate
change is projected to negatively
impact both the Group’s TPV and
revenue. This negative average
annual impact is projected to increase
from 2023 through to 2040. The
analysis showed that the estimated
annual loss due to climate change in
2040 will be of a comparable range
or less than current year-on-year
variability in revenue and TPV. The
Group acknowledges the limitations
of this preliminary analysis and
will consider how it can improve its
understanding by more accurately
and precisely mapping the existing
and projected impact of climate
change on TPV and revenue
pathways in future.
For
risks related to ‘physical
damage from extreme weather
events to the Group’s facilities and
the infrastructure serving it’
, two
value drivers were explored: country
risk profiles using consolidated risk
scores from a range of indices, and
qualitative physical risk profiles.
Climate risk ratings from three
different indices were consolidated
to give an indication of the countries
which are considered most
vulnerable to climate change risks.
Consolidated scores were assigned
by rank order based on average
ranking of each individual index.
Conclusions:
These scores showed
that the more vulnerable countries
do not represent a significant share
of the Group’s historical revenue,
and the highest earning countries
were generally less vulnerable to the
physical impacts of climate change.
Qualitative physical risk profiles
were created for five key countries,
using information from the World
Bank and World Resources Institute
Aqueduct Water Risk Atlas.
This work provided a high-level
view of physical climate risks,
which can inform future climate
scenario analysis.
The physical risk assessments
were conducted on five key sites
by estimating value at risk using
data from climate specialist,
CLIMSystems. The values at risk
considered 13 different climate
variables across several different
scenarios and time horizons.
Conclusions:
Air heatwave days is
the most important climate variable
as it creates the greatest value
at risk to all sites. Increases in air
heatwave days and maximum
temperature lead to risks that
include increased costs to cool
buildings, overheating of building
mechanisms, deterioration of
building materials, and loss of
productivity due to employees
experiencing heat stress, fatigue,
and negative effects on their health.
Mean sea level rise and extreme
water level are also two important
variables that lead to risks that
include flooding, accelerating storm
surge impacts, saltwater corrosion
as the groundwater table rises,
damage to underground cables,
and loss of productivity if facilities
are out of service. To mitigate
these risks, the Group will focus on
adaptation options. Examples may
include the installation of flood-
resilient materials and mechanisms
to cool buildings, and investment
in reinforcing structures. Overall
the analysis shows that value at
risk from climate change as a
result of physical damage to Group
properties (most of which are
leased) or reduction in productivity
is not material in the context of
the Group’s market capitalisation.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
59
TCFD Report 2022
Network International (the Group) welcomes the
TCFD recommendations as a useful framework
to communicate the results of our climate scenario
analysis, and our plans to enhance climate
resilience. Although the Group is not a carbon
intensive business, we recognise the need to
assess the broader potential market impacts
from climate change.
The Group has made climate-related disclosures consistent
with the TCFD recommendations and recommended disclosures,
in accordance with the FCA Listing Rule LR 9.8.6R(8) on pages
58 to 77. The table opposite shows where disclosures for each
recommendation can be found. The Group’s compliance
status is based on an assessment of disclosures against the
recommended elements outlined in the TCFD recommendations
report (2017) and the TCFD Implementing Guidance (2021).
Figure 2:
11 TCFD Recommended Disclosures
Governance
Read more p62
Strategy
Read more p64
Risk Management
Read more p74
Metrics and Targets
Read more p77
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
60
Reference
Compliance
status
Key actions
a)
Board oversight
Core Information:
pages 62–63
Disclosed
The Audit Committee has overseen the development and
implementation of the ESG programme, including TCFD,
on behalf of the Board. The focus of the Audit Committee has
been on the setting of viable targets, the workstreams to deliver
them and, in conjunction with the Risk & Technology Committee,
the assessment of the associated risks.
b)
Management’s role
Core Information:
page 63
Disclosed
The Group Chief Financial Officer and Group Chief Strategy
Officer are chiefly responsible for ESG, including TCFD.
a)
Climate-related
risks and
opportunities
Core Information:
pages 66–67
Disclosed
Climate-related risks and opportunities were identified and
scored over short-, medium- and long-term time horizons,
considering different future global warming scenarios. This work
is in its relatively early stages of development and the Audit
Committee, in conjunction with the Risk & Technology Committee,
will continue to review, refine and monitor the analysis as part
of its governance work.
b)
Impact of climate-
related risks and
opportunities
Core Information:
pages 67–73
Disclosed
Climate scenario narratives were developed and
the financial impacts of key climate-related risks
were modelled.
c)
Resilience of
the organisation’s
strategy
Core Information:
page 73
Disclosed
As a relatively low emitter, the Group has low exposure
to transition risk. We will continue to monitor the extent to
which the countries within which we operate are exposed to
climate change and consider how to increase our resilience.
a)
Identifying and
assessing climate-
related risks
Core Information:
page 66
Disclosed
Climate change is also considered a cross cutting risk which
has the potential to intensify many of the Group’s principal risks.
b)
Managing climate-
related risks
Core Information:
pages 66, 74–76
Disclosed
c)
Integration into
overall risk
management
Core Information:
page 74
Disclosed
a)
Climate metrics
Core Information:
page 77
Disclosed
The outputs of the climate scenario analysis and impact
quantification process provided metrics which the Group
will track going forward to monitor risk.
b)
GHG emissions
Core Information:
page 57, 77
Disclosed
Greenhouse gas emissions in 2022 were quantified as
Scope 1
– 210 tons CO
2
e
Scope 2
– 1,134 tons CO
2
e market-based (taking into account
the purchase of RECs equivalent to 564 tons CO
2
e)
Scope 3
– 34,540 tons CO
2
e
c)
Climate targets
Core Information:
page 77
Partially disclosed
We are confident that we will be carbon neutral on Scope 1 & 2
emissions before 2030. By carbon neutral we mean the
elimination or offsetting of Scope 1 & 2 emissions, either through
physical emissions reductions, or as regards residual emissions via
purchases of RECs or appropriate neutralisation offsets. We are
continuing to explore a range of target setting frameworks and
intend to disclose formal targets in future TCFD reports aligned
to the Paris Agreement.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
61
Board
Risk &
Technology
Committee
Audit
Committee
Oversees the
assessment and
development of the
climate risk-related
KRIs as a part of
the principal risks
framework
Oversees the
development and
implementation of
the ESG strategy,
including the TCFD work
programme. Reviews
climate-related risks,
net zero targets and
decarbonisation options
TCFD
working
group
Executive
Management
Committee
Head
of ESG
Validates climate
risk shortlist
Oversees TCFD
working group and
reports progress to
Board and Board
Committees
Peer review, gap analysis, risk and
opportunity identification and
scoring, climate scenario analysis,
financial impact modelling and
development of TCFD disclosure
Management & working level
Board & Committees
Governance
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (CONTINUED)
Board oversight
The Board of Directors has oversight
of, and accountability for, the Group’s
climate change strategy, as part
of the wider ESG strategy, which
includes TCFD. The Group is following
the TCFD framework guidance as
it seeks to increase resilience
to climate change and adjust its
strategy accordingly. This year
the Board, through the Audit
Committee, oversaw management’s
work to improve understanding
of the Group’s exposure to climate-
related risks and opportunities so
that these can be appropriately
considered in discussions regarding
risk management and strategy
planning (Figure 4).
The Audit Committee has oversight
of the ESG work programme,
including TCFD. This Committee
is comprised of four Directors and
is chaired by Darren Pope, Senior
Independent Director. The Audit
Committee is focused on the setting
of viable targets, the workstreams
to deliver them, and, in conjunction
with the Risk & Technology
Committee, assessment of the
associated risks. The Audit
Committee receives regular updates
from the Group Chief Financial
Officer and Group Chief Strategy
Officer, who is the Executive
Committee member responsible
for the ESG function and is
Corporate Development.
The in-house TCFD working group,
which undertook the bulk of the
TCFD work, provided regular
reporting to the Audit Committee.
The Group’s climate change
governance framework is outlined
in Figure 3.
Figure 3: Governance framework overview
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Climate change is discussed regularly by the Board and the Board Committees. The Audit Committee received
presentations throughout 2022 on climate-related risks and on options to deliver carbon neutral status before 2030,
and further engagement workshops are scheduled to take place in 2023. The Nomination Committee is required,
among other things, to consider the balance of skills, experience, independence, knowledge and diversity on the
Board, and the future challenges affecting the business, and would give appropriate weight to the climate change
considerations while recommending new appointments.
The table below summarises the key engagements for climate-related matters throughout 2022.
Figure 4: Board engagement related to climate change in 2022
Date
Audience
Topic
Board
April
Audit Committee
ESG strategy
June
Audit Committee
ESG update
August
Audit Committee
ESG strategy, TCFD, Emissions reductions
October
Audit Committee
TCFD, Emissions reductions
Management’s role
Management engaged with climate-related matters through the ERMF, as outlined in the risk management section.
The TCFD working group interviewed senior management as part of the TCFD process, including verifying risks
and opportunities. Through 2022, management personnel from across the business discussed their roles and
responsibilities in relation to climate change and TCFD. Members of the management team involved with these
discussions included: the Group Financial Controller, the Head of Financial Reporting, the Group Risk Officer,
the Company Secretary, the Head of Investor Relations, the Group Head of Procurement and the Group Head
of Administration and Facilities.
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Phase 1
Phase 2
Phase 3
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (CONTINUED)
While the Group is a relatively
low emitter of greenhouse gases
due to the nature of our operations,
we recognise that there are still
potential climate risks and
opportunities that need to be taken
into account. As a result, climate
change is a key consideration in
defining the strategic direction
of our business. We are working
to reduce emissions and proactively
manage our climate risks and
opportunities. In order to create a
strategy that is resilient to a range
of possible climate change outcomes,
we have conducted a detailed
scenario analysis exercise in line with
the TCFD’s recommendations and
guidance. During 2023 and beyond,
we will continue to review and refine
our strategic analysis through our
governance structures and the
outcome of the analysis will become
a proportionate input into our
strategic planning considerations.
This section outlines the purpose
of scenario analysis, the process
followed, the results, and how
they will be integrated into our
strategy, as well as our plans to
build on this analysis in the future.
The climate scenario analysis
process
Climate scenario analysis is the
practice of examining different
hypothetical but plausible climate
futures and exploring what
those futures might mean for an
organisation, then developing plans
and strategies based on what is
learned. There is considerable
uncertainty associated with the
impact of climate change on the
Group but climate scenario analysis
is undertaken to improve the
Group’s risk management and
decision making in response
to the climate future which does
materialise. Climate scenario
analysis is not intended to be a
set of predictions about the future.
Rather, it helps to bring key
uncertainties for the Group into
focus, to inform good strategic
planning and risk management.
The climate scenario analysis
process includes both qualitative
and quantitative approaches.
As part of the process, Corporate
Citizenship, our climate strategy
advisors, assisted with the
development of several scenario
narratives; scoring of key risks;
identification of value drivers;
and the creation of a model to
quantify the financial impact of
climate change in various scenarios.
Strategy
Gap
analysis
Identify actions
needed to achieve
full disclosure
against TCFD
recommendations
Identify climate-
related risks and
opportunities, verify
with stakeholders,
and score and
prioritise risks
across different
time horizons and
climate scenarios
Physical and transition
risk scenario analysis
to quantify potential
financial impacts and
stress test resilience
Incorporate findings
into risk management,
company strategy and
metrics and targets
Report findings
in FY 2022
Identification
of risks and
opportunities
Financial
impact
quantification
Integration
Disclosure
Figure 5: The TCFD process
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Timeframes and transition scenarios
Risks were considered across
three time horizons to identify
short-, medium-, and long-term
risk priorities. The time horizons,
which align to the Group’s existing
risk management framework, were:
›
Short-term: equivalent to 0–2 years.
›
Medium-term: equivalent to
2–10 years.
›
Long-term: equivalent to >10 years.
For the quantitative scenario analysis,
the financial impacts of key risks and
opportunities were modelled out
to 2040, which was judged to be a
reasonable timeframe for producing
decision-useful analysis.
Climate projections were taken
from the suite of climate models
published by NGFS, a consortium
of central banks providing scenario
analysis tools. These models were
used to inform risk scoring across
time horizons and for the financial
impact quantification. The NGFS
climate projections used are
derived from the following
representative scenarios: Orderly
Transition, Disorderly Transition,
and Hot House World. These are
illustrated in Figure 6.
Figure 6: Network for Greening the Financial System (NGFS) Climate Scenarios
NGFS Climate Scenarios
Scenario category
Orderly Transition
Disorderly Transition
Hot House World
Description
Orderly scenarios assume climate
policies are introduced early and
become gradually more stringent.
Both physical and transition risks
are relatively subdued.
Disorderly scenarios explore higher
transition risk due to policies being
delayed or divergent across
countries and sectors. For example,
carbon prices are typically higher
for a given temperature outcome.
Hot House World scenarios
assume that some climate policies
are implemented in some
jurisdictions, but globally efforts
are insufficient to halt significant
global warming, The scenarios
result in severe physical risk
including irreversible impacts like
sea-level rise.
Scenario category
Net Zero 2050
Delayed Transition
Current Policies
Description
This scenario limits global warming
to 1.5°C through stringent climate
policies and innovation, reaching
global net zero CO
2
emissions
around 2050.
Delayed Transition assumes annual
emissions do not decrease until
2030. Strong policies are needed
to limit warming to below 2°C.
Negative emissions are limited.
Current Policies assumes that
only current implemented policies
are preserved, leading to high
physical risks.
Temperature increase
by 2100
1.4°C
1.6°C
3.0°C+
Climate scenario narratives
The TCFD working group
developed a series of climate
scenario narratives, which are
descriptions of how climate change
scenarios could impact the Group.
These narratives supported the
identification of climate-related
risks and opportunities, and of
value drivers which were used to
quantify the impact of these risks.
In an Orderly Transition scenario,
regulatory and market action is
taken early to reduce emissions.
Energy costs may increase in the
near term, but there could be
financial benefits for the Group
as a result of reducing emissions.
Geopolitical risk increases are likely,
but these effects are less than in
Disorderly Transition and Hot House
World scenarios. While physical
risks are also less significant in
this scenario than in a Disorderly
Transition or a Hot House World
scenario, they should still be
incorporated into risk management.
In a Disorderly Transition scenario,
climate policies are delayed or
divergent across different countries
and sectors. Emissions increase
throughout the 2020s, followed by
a sharp decrease in the 2030s as
policies are implemented. Increase
in temperature is kept to below 2°C,
but temperature rises more than
in the Orderly Transition scenario.
More frequent droughts could impact
labour productivity, resulting in
significantly reduced GDP. This could
reduce disposable income and impact
the Group’s payments revenue.
More extreme weather events and
a long-term rise in temperature could
impact the Group’s employees and
the infrastructure on which its
operations rely, making adaptation
planning particularly crucial.
In a Hot House World scenario there
are no new policies to address climate
change. This may keep energy costs
lower than in an Orderly Transition
or a Disorderly Transition scenario,
but the impact of the acute and
chronic physical impacts on GDP
could severely impact payments
revenue. Geopolitical risk could be
further heightened compared to an
Orderly Transition or a Disorderly
Transition scenario, and the effects
of extreme weather events would
need to be carefully planned for.
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Climate-related risks and opportunities
The key risks and opportunities are summarised in Figure 7. Climate-related risks are listed in order of total risk score
(i.e. the sum of all risk scores across the three climate scenarios and the three timeframes). The colour indicates the
severity of the risk from green (low risk score) to red (high risk score).
These scores should be read and understood in the context of our overall assessment that the Group is a relatively
low risk business from a climate change perspective. The red assessment below should be read as a higher risk item
for a generally low risk business, and one that is likely to be manageable and unlikely to carry a fundamental impact.
These red items will be given relatively greater attention and oversight in coming years.
These risks have been incorporated into the Group’s existing risk management framework, the ERMF, and KRIs have been
agreed so that climate-related risks can be effectively monitored.
Risk
Short Term
Medium Term
Long Term
Management response
Related metric
Orderly
Disorderly
Hot House
Orderly
Disorderly
Hot House
Orderly
Disorderly
Hot House
Physical risks
Physical damage from
extreme weather events
to the Group’s facilities
and the infrastructure
serving it
Incorporate climate considerations into existing
ERMF. Develop de-risking strategy for facilities
which ensures that key sites and backup sites
are not exposed to the same risks from extreme
weather events.
Value at risk
Changes to climate
and extreme weather
events negatively
impacting employees
Ensure suitable working conditions. This includes
temperature control in offices, implementation
of flexible working hours where appropriate,
encouragement of regular breaks, and provision
of education to staff on how to prevent heat stress.
–
Transition risks
Reduced payments
revenue due to
disruptions to
the economy and
reduced GDP
Carefully monitor KRIs. Use this monitoring to inform
strategic decision making on, for example, acquisitions,
strategic investments, and which countries to focus
operations in.
Change in
Total Processed
Volume
Reduced payments
revenue due
to geopolitical
disruptions caused
by climate change
Carefully monitor KRIs. Use this monitoring to inform
strategic decision making on, for example, acquisitions,
strategic investment, and which countries to focus
operations in.
–
Loss of market share,
revenue, reputation, due
to consumer and client
sustainability demands
Continue to decarbonise operations, incorporate
climate considerations into Company strategy and
risk management, and ensure this is communicated to
stakeholders. Explore options to develop more circular
products and materials, and reduce energy consumption.
–
Costs from adopting
products, services,
or technologies
to decarbonise
Continue careful planning and modelling
of key value drivers. The Group has modelled
decarbonisation options as part of its emissions
workstream to determine appropriate timing
and minimise execution risk.
Decarbonisation
cost
Climate change leading
to increasing energy
costs and increasing
energy requirements
Purchase of RECs and potentially entering into
Power Purchase Agreements.
Fuel cost
Reduced access
to capital or
higher capital costs
due to investor
sustainability demands
Continue to implement and consider accelerating
decarbonisation timeline, and effectively communicate
this to stakeholders. Continue work to understand
and report climate-related risks in line with the
TCFD guidance. Incorporate climate considerations
into Company strategy and risk management.
–
Failure to meet
climate-related legislation
requirements increasing
‘compliance risk’
Proactively monitor and manage climate-related
legislative requirements.
–
Figure 7: Key climate-related risks
Strategy (continued)
Low risk
Medium risk
High risk
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Figure 8: Key climate-related opportunities
High level opportunity
Short Term
(0–2 years)
Medium Term
(2–10 years)
Long Term
(10+ years)
Opportunity score
Opportunity score
Opportunity score
Switching to low emissions energy sources such as solar panels and
EVs to reduce costs, increase resilience, and improve reputation
Partnerships, products, and services for low emissions
transport payments
Partnering to provide merchants, banks and consumers
with climate related data/info associated with transactions
Partnerships, products, and services for ‘sharing’ and
‘circular’ economy payments
Partnerships, products, and services for resilience,
disaster relief, and insurance payments
Improving the efficiency of data storage, transfer, and processing
to save energy, cost, and storage space
Reducing e-waste, re-using, re-selling, and recycling components,
engaging with suppliers to reduce the emissions of purchased components
Climate-related opportunities
Climate-related opportunities are shown in Figure 8, with the lighter blue representing a lower score and the darker
blue representing a high score. Our most significant opportunity in the near term is moving to lower emissions
energy sources, reducing costs and increasing climate resilience by lowering exposure to electricity prices. In the
medium term, developing new partnerships and products relating to decarbonisation of the global economy is likely
to be a key opportunity. In the long term, developing partnerships with stakeholders concerned with climate-related
payments data may increase in value.
Low
Medium
High
Figure 9: Value drivers for financial impact quantification
Financial impact quantification
As part of the impact quantification process value drivers were selected to model financial impact for the key
risks identified, as shown in the table below. As well as modelling financial impact, projections of value at risk were
produced to evaluate asset level physical risk at key sites. Qualitative physical risk profiles were also created for key
countries, and an assessment of vulnerability to climate risk was undertaken by consolidating scores from a range
of climate indices.
Risk
Risk factor pathway
Value drivers modelled
Increasing energy costs
Direct emissions costs and
indirect emissions costs
Electricity, fuel and
carbon costs
Costs associated with decarbonisation
Incremental low-carbon capital
expenditure and avoided risk
RECs, PPAs, EV costs,
and shadow cost of carbon
Reduced payments revenue due to GDP loss
Incremental revenue
GDP impact on revenue
and TPV
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Value driver
Approach
Electricity, fuel
and carbon costs
RECs, PPAs, EV
costs, and shadow
cost of carbon
These two value drivers were quantified using a model which altered the prices of fuel, electricity, RECs and carbon
based on three climate scenarios: i) a 1.5°C aligned ‘Orderly’ transition scenario; ii) a high warming ‘Hot House World’
scenario; and iii) a ‘Disorderly’ transition scenario where climate policy action is delayed until 2030. Baseline prices
were increased at percentage rates indicated by Integrated Assessment Models which varied based on climate scenario.
The consumption of electricity and fuel and the level of Scope 1 & 2 emissions was altered based on business growth
assumptions and three possible ‘decarbonisation scenarios’ where a reduction in emissions was achieved using a different
combination of RECs, on-site PPAs, off-site PPAs and EVs. The projections were modelled to 2040. The shadow carbon
cost was included to represent the transition risk to Network of emitting carbon and the externalities caused.
Annual price was multiplied by the relevant annual consumption/emissions based on the different scenario projections
up to 2040. A net present value calculation was applied to all costs up to 2040.
Strategy (continued)
Price projections based on 3 climate scenarios
›
‘Orderly’
›
‘Disorderly’
›
‘Hot House World’
Baseline prices
Business growth
Baseline electricity, fuel
consumption and emissions
3 decarbonisation scenarios
›
Least ambitious
›
Middle
›
Most ambitious
Cost of:
›
Electricity
›
Fuel
›
RECs purchases
›
PPAs (electricity)
›
Shadow carbon
NPV & Nominal
Figure 10: Energy, carbon and decarbonisation cost methodology
Quantity of
electricity, fuel,
carbon
Price of
electricity, fuel,
carbon
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Current Policies
Delayed Transition
Net Zero 2050
Current Policies
Delayed Transition
Net Zero 2050
Current Policies
Delayed Transition
Net Zero 2050
Most ambitious
Middle
Least ambitious
Electricity
Fuel
RECs
EV purchase cost
EV electricity cost
Shadow carbon cost
Million $
0
2
4
6
8
10
8.08
8.25
7.27
7.80
7.61
6.69
8.84
7.72
6.50
Quantification
Figure 12: Provisional cost differences between decarbonisation scenarios
Figure 11: Energy and decarbonisation costs
Energy and decarbonisation costs million $
NPV from 2022 – 2040
Provisional cost differences between decarbonisation scenarios
1
NPV 2022 – 2040
Excluding shadow cost of carbon ($)
Current Policies
Delayed Transition
Net Zero 2050
Most ambitious vs Least ambitious
816,368
894,861
675,569
Most ambitious vs Middle
591,440
645,209
507,216
Middle vs Least ambitious
224,928
249,652
168,352
1
Some significant costs associated with decarbonisation pathways are not yet captured in the model such as capital costs associated with PPAs.
We are continuing to explore decarbonisation options and these figures are provisional and subject to change.
Value driver
Approach
Impact of climate
change on GDP and
the effect of this on
transaction volumes
and revenue
To quantify the climate risk to revenue streams related to direct revenue from local operations and revenue linked
with the TPV for the UAE, the current relationship between these two key financial metrics and GDP was mapped
using Network International’s historical data and World Bank historical GDP data.
These relationships were then applied to the future time series of GDP (from the NGFS REMIND MAgPIE model) using
a statistical methodology which includes regression analysis, linear interpolation, and corrective factors. The climate
data also includes values for damages and losses associated with physical and transitional risks. This provided an
estimate for the projected nominal and net present value of revenue and TPV. Using these future timeseries, the losses
and cumulative totals were calculated. We have assumed a discount rate of 12.5% and that the historic relationships
remain constant into the future. A key takeaway from this finding is that with all other economic factors remaining
equal, including the exposure of climate change to the Group’s customers, as we move into the 21st century national
GDPs around the world will become increasingly impacted by damages and losses due to climate change.
Conclusions: The analysis showed that the estimated annual loss due to climate change in 2040 will be of a comparable
range or less than current year-on-year variability in revenue and TPV. Results from preliminary modelling projected that
under all climate scenarios analysed, climate change is projected to negatively impact both the Group’s TPV and revenue.
This negative average annual impact is projected to increase from 2023 through to 2040. The Group acknowledges
the limitations of this preliminary analysis and will consider how it can improve its understanding by more accurately
and precisely mapping the existing and projected impact of climate change on TPV and revenue pathways in future.
The way this should be interpreted is that in the event the world progresses down an Orderly, Disorderly, or Hot House
World, the losses that could be experienced by the Group are due to climate policy implementation costs, productivity
losses and physical damages that occur within those climate scenarios.
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0
2
4
6
8
10
12
14
16
Percentage loss
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
Hot House World
Disorderly Transition
Orderly Transition
Value driver
Approach
Asset level physical
risk assessments
of key sites
To understand how our operations may be impacted by climate change over different time horizons and scenarios
we estimated value at risk (VaR) for some of our key sites, using data from climate specialist CLIMsystems. Here, VaR
is defined as the extent of possible financial losses due to the physical impacts of climate change. VaRP is the value
at risk regarding productivity. VaRD is the value at risk regarding property damage. Five of our sites were selected
as most critical for assessment (two sites in the UAE, and one in each of South Africa, Egypt, and Jordan). These sites
were selected because they are key nodes in the Group’s operations. This assessment estimated the potential impact
on productivity (VaRP) as well as asset damage (VaRD), driven by the change in climate indicators relating to
temperature, rainfall, sea level rise, and fire risk.
Change in value at risk as a result of a range of physical climate variables was estimated out to 2050 for a Disorderly
Transition scenario (SSP2-4.5) and a Hot House World scenario (SSP5-8.5). The analysis showed that value at risk is
expected to increase over time at all sites, with a marked increase in a Hot House World scenario. The most important
climate variable is air heatwave days as it has the greatest percent change from the baseline for all five sites. Extreme
water level is another important variable in sites with a lower elevation. The data indicates that Sites 1 (Al Barsha,
Dubai, UAE) and 2 (Qasmiya, Sharjah, UAE) are likely to experience the greatest increase in value at risk over time.
The Group only owns one of the sites analysed, Site 3 (Shmeisani, Jordan), while the other sites are rented. The full
asset value of the four rented sites was estimated. It is important to note that as a tenant the Group would not incur
all the VaRD costs and also that much of the damage would likely be covered by insurance. Further analysis may be
undertaken in the future to more accurately determine the value at risk to the Group by taking into account factors
such as these. However, the analysis we have performed in 2022 indicates that the total VaR between 2022 and 2040
(measured in terms of NPV and a 12.5% discount rate) is not material compared with the Group’s market capitalisation.
The analysis showed that the risk is not expected to be financially material to the Group. The Group defines ‘material
risks’ as those likely to have a significant effect on the organisation’s assessments or decisions by users of its disclosures,
in line with the TCFD definition.
Strategy (continued)
Figure 13: Summary of indicative TPV and revenue losses caused by climate-related GDP loss
Quantification
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Figure 14: Summary of site information and the climate variables that had the greatest effect
on each site
Summary of site data
Air
heatwave days
(days/year)
Maximum
temperature
Mean sea
level rise
(cm)
Extreme
water level
(m)
Extreme
precipitation
(mm)
Site 1: Al Barsha, Dubai, UAE
About: Hot desert climate and by the coast
›
Most affected by mean sea level rise, air heatwave days
and extreme precipitation
›
Values are at risk from air heatwave days and extreme
water level
›
Greater loss to productivity than property damage
Site 2: Qasmiya, Sharjah, UAE
About: Hot desert climate and by the coast
›
Most affected by mean sea level rise, air heatwave days
and extreme precipitation
›
Values are at risk from air heatwave days and extreme
water level
›
Greater loss to productivity than property damage
Site 3: Shmeisani, Jordan
About: Hot summer Mediterranean climate and a high elevation
›
Most affected by air heatwave days and maximum
temperature
›
Values are at risk from air heatwave days and extreme
precipitation
›
Greater loss to productivity than property damage
Site 4: Cairo, Egypt
About: Hot desert climate and a relatively high elevation
›
Most affected by air heatwave days and maximum temperature
›
Values are at risk from air heatwave days
›
Greater loss to productivity than property damage
Site 5: Western Cape, South Africa
About: Warm summer Mediterranean climate
›
Most affected by mean sea level rise, air heatwave days
and extreme water level
›
Values are at risk from extreme water level and
extreme precipitation
›
Greater loss to property damage than productivity
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0
1
2
3
4
5
6
7
Western Cape, South Africa
Cairo, Egypt
Shmeisani
Al Qasmiya
Al Barsha
Air heatwave days (days/years)
Historical: 2005
2030
2050
Historical: 2005
2030
2050
Historical: 2005
2030
2050
Historical: 2005
2030
2050
Historical: 2005
2030
2050
Normalised loss – VaR (%)
Extreme water level
Extreme precipitation (mm)
KBDI fire risk (%)
Maximum temperature (days higher than 35°C)
Heating degree days (°C day/year)
Mean sea level rise (cm)
Cooling degree days (°C day/year)
Strategy (continued)
Figure 15: Locations for which an assessment of value at risk was carried out
Site 1
Al Barsha, Dubai, UAE
Site 2
Al Qasmiya, Sharjah, UAE
Site 3
Shmeisani, Jordan
Site 4
Cairo, Egypt
Site 5
Western Cape, South Africa
Figure 16: Total VaR results for all sites in the Hot House World from the baseline to 2050
1
2
3
4
5
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Quantification
VaRD and VaRP (%) results for each hazard, site and climate scenario were calculated for 2005, 2030 and 2050 by
climate data provider CLIMsystems. VaRD and VaRP percentages between 2022 and 2040 were determined using linear
interpolation. These percentages were applied to asset values (for VaRD) and 2021 revenues (for VaRP) of each site.
Figure 16 shows the sum of VaRD and VaRP percentages for the eight most important climate variables at each site,
assuming a Hot House World scenario. Asset values were given or estimated for each site and these values were multiplied
by VaRD percentages to determine potential monetary loss for each climate variable and year. 2021 revenue was given
for each site and these values were multiplied by VaRP percentages to determine potential monetary loss for each climate
variable and year. Net present value from 2022–2040 was also calculated based on these potential monetary loss values
using a discount rate of 12.5%. Results show a general trend of increased monetary loss in higher warming scenarios and
over time. We have not disclosed the VaR figures in this year’s report because the sums are not material in the context of
the Group’s market capitalisation and because of limitations in the analysis connected with the fact Network International
leases and does not own the freehold to all but one of its office premises and is unlikely, therefore, to be liable for the
majority of any damage to properties from climate change.
Value driver
Approach
Country risk profiles
In order to gain an understanding of vulnerability to climate risks at a country level for locations in which we operate,
we have assessed a range of climate indices and ratings. We collated results from:
›
The Germanwatch Global Climate Risk Index, which indicates a level of exposure and vulnerability to extreme events.
›
The Notre Dame Global Adaptation Initiative Country Index, which summarises a country’s vulnerability
to climate change and other global challenges in combination with its readiness to improve resilience.
›
The Aqueduct Water Risk Atlas Peak RepRisk Country ESG Risk Index, which quantifies business conduct risk
exposure related to environmental, social and governance issues.
Consolidated scores were assigned to each of the countries in which the Group operates, by ranking order based
on poorest ranking of each index.
Quantification
The consolidated scores showed that the most vulnerable countries in which the Group operates do not represent
a large share of revenue based on data from 2017 to 2021. The 15 most vulnerable countries, which were all located
in sub-Saharan Africa, were responsible for less than 5% of historical revenue. All but two of the top 10 highest
earners based on historical revenue fell in the less vulnerable half of countries in which the Group operates, and our
highest earner based on historical revenue (United Arab Emirates) was the least vulnerable to climate risks. We will
continue to monitor the relationship between physical climate risks, GDP and revenue.
Value driver
Approach
Conclusions
Qualitative country
risk profiles
Qualitative risk profiles were created for four
key countries in which we operate: United Arab
Emirates, Jordan, Egypt and South Africa.
These provide a high-level overview of physical
climate risk at country level.
Key physical risks were as follows:
›
United Arab Emirates – heatwaves and
sea level rise.
›
Jordan – drought, extremely high temperatures, storms,
landslides and flash floods.
›
Egypt – high temperatures, sea level rise and water availability.
›
South Africa – drought and desertification.
Strategic resilience to climate change:
Although further work will be undertaken to assess the Group’s resilience to
climate change, the results from this year’s climate scenario analysis indicate a resilience to climate change risks for the
following reasons: 1) The Group is a relatively low emitter of greenhouse gases which limits its transition risk exposure,
particularly to increased carbon taxes and energy costs. 2) It is not expected that climate change will reduce the
importance or viability of payment services. 3) This year’s climate scenario analysis exercise indicated that decarbonisation
can be achieved at relatively low cost, and that these costs are financially immaterial in the context of Group revenue.
4) The Group’s employees tend to work in temperature controlled environments and are not exposed to the elements.
5) The Group’s data centres are located in environments which are already extremely hot and so the infrastructure is
protected from excessive heat. 6) The Group’s data centres have backup generator facilities. 7) The Group does not own
the majority of its key data centres and so is insulated from much of the capital expenses which may occur when a climate
hazard causes damage. 8) The VaRD and VaRP modelling indicates that the financial cost of these climate hazards is
not material.
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TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (CONTINUED)
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 consumption. We will
continue to develop systems to
report on GHG emissions, and to
monitor the risks that a changing
climate may present to our business.
The Group has integrated climate
risk into the ERMF and the three
lines of defence model. This ensures
that all tiers of the risk management
structure and all risk owners are
aware of standalone climate risks,
and of the impact of climate on
existing risks.
The Enterprise Risk
Management Framework
We take a bottom-up approach to
management of our climate-related
risks, with the existing ERMF
establishing three lines of defence.
The first line is made up of the risk
owners, support functions such
as Operations, Finance, HR and
IT. They assess Enterprise Risk
Management capabilities, implement
changes, and report on a quarterly
basis to the Executive Committee
and to the Risk & Technology
Committee. The second line is
comprised of compliance functions
such as Regulatory, AML and
Sanctions, who manage each
risk division and ensure effective
implementation of risk management
practices. This line reports quarterly
to the Enterprise Risk Management
Committee and the Risk & Technology
Committee. The third line of defence
is made up of the Group Internal
Audit and an additional assurance
provision, who report to the Audit
Committee. These committees
oversee the ERMF and risk culture,
monitor principal risks and KRIs,
and report to the Board of Directors.
This framework is described in detail
on page 104.
Climate change is considered
to have the potential to increase
in significance and affect the
performance of the Group. Climate
change risk-related KRIs have been
developed and will be monitored
by risk owners under the ERMF.
Performance against the KRIs will
be reported to the Risk & Technology
Committee and, through the Risk
& Technology Committee, to the
Board of Directors.
In line with best practice, climate
change is also considered a cross
cutting risk which has the potential
to intensify many of the Group’s
principal risks. Extreme weather
events could impact operational
resiliency
by causing damage to
the Group’s facilities and supporting
infrastructure. Changes in climate
and an increase in extreme weather
events may exacerbate people
risk by causing a deterioration in
working conditions. An increase
in legislative and regulatory
requirements as part of efforts
to address climate change is
likely to increase compliance risk.
The potential for climate change
to disrupt economies and reduce
GDP may intensify financial risk.
Finally, climate change is likely to
exacerbate geopolitical disruptions,
which may increase the Group’s
geopolitical risk.
Risk management
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74
Climate impact on relevant principal risks
Operational
Resiliency
People
Risk
Compliance
Risk
Financial
Risk
Geopolitical
Risk
Primary Climate Risk
Physical damage from
extreme weather events
to the Group’s facilities
and the infrastructure
serving it.
Primary Climate Risk
Changes to climate
and extreme weather
events negatively
impacting employees.
Primary Climate Risk
Failure to meet climate-
related legislation
requirements increasing
‘compliance risk’.
Primary Climate Risk
Reduced payments
revenue due to
disruptions to economy
and reduced GDP.
Primary Climate Risk
Reduced payments
revenue due to
geopolitical disruptions
caused by climate change.
Impact
Interruption to services
and operations due to
impact on, e.g. mobile or
internet infrastructure,
or critical facilities
(e.g. data centres).
Impact
Difficulty in attracting
high-calibre talent if
climate credentials are
weak; reputational
damage if deteriorating
working conditions
from climate change
are not addressed.
Impact
Growing and changeable
climate-related regulatory
landscape increasing
demands (and costs) on
internal legal and
sustainability teams.
Secondary
Climate Risk
Reduced access to
capital or higher capital
costs due to investor
sustainability demands.
Impact
Exacerbation of the
potential for geopolitical
disruption due to reduced
disposable income,
increased physical
damages, economic
instability, e.g. impact
on GDP.
Climate change risk-related KRIs
have been developed based on the
Key Performance Indicators (KPIs)
to monitor on a quarterly basis.
In addition, Risk and Control Self
Assessment (RCSA) standards
have been documented for climate
change-related risks, and these will
be tested quarterly. The KRIs are
shown in Figure 18.
The Group’s principal and emerging
risks are refreshed and approved
by the Board twice each year.
This ensures that new developments
relating to climate change are
incorporated into the risk
management processes.
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Risk score
Opportunity score
Hazard
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (CONTINUED)
Risk and opportunity identification
and scoring
Although we are not a high emitting
business, we recognise that climate
change has the potential to impact
our operations. In order to manage
this, we have followed a process for
identifying and assessing climate-
related risks and opportunities so
that they can be integrated into our
broader risk management framework.
As part of the TCFD work, current
and anticipated climate-related risks
were categorised using the TCFD
categorisation for transition risks and
physical risks. Risks were identified
and scored by the TCFD working
group, validated in a workshop with
senior stakeholders, and presented
to the Audit Committee. Material
risks were determined using a
scoring hierarchy following the
IPCC (Intergovernmental Panel on
Climate Change) approach to risk
determination shown in Figure 1.
Figure 17: Risk and opportunity scoring methodology
We assess the likelihood, magnitude,
size of opportunity and ability to execute
across three climate scenarios and short-,
medium- and long-term time horizons.
Ability to
execute
Size of
opportunity
Magnitude
Size of impact
Likelihood
Chance of
occurring
Vulnerability
Adaptive capacity
Ability to adjust or respond
Sensitivity
Degree to which systems
could be affected
Exposure
Presence of systems that
could be affected
Opportunities are scored as
a function of their size and the
ability of the Group to execute
them. Characteristics of a large
opportunity include higher margin
products or services with lower
competition from competitors.
Characteristics of higher ability to
execute include being very aligned
to existing business model and
skillset of staff. The findings are
summarised in Figures 7 and 8
in the strategy section.
Risk management (continued)
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76
The Group conducted climate
scenario analysis using a range
of metrics including risk and
opportunity scoring based on the
TCFD classification (refer from page
66), estimation of value at risk across
different global warming scenarios,
and modelling of financial impact
for a range of selected value drivers
(refer from page 67). In terms of
cross-industry metrics recommended
by the TCFD, we are reporting on
three greenhouse gas emissions
(described below), value at risk
due to physical climate risks (refer
from page 66), and spending
on decarbonisation (refer from
page 69).
Emissions reporting
We disclosed our Scope 1 & 2
emissions in 2021. We began
reporting Scope 3 emissions
relating to business travel in 2021,
and progressed to reporting all
Scope 3 emissions in 2022. In 2021,
the Group’s Scope 1 & 2 emissions
were 194 and 1,613 tons CO
2
e
respectively (including refrigerants
and fleet) and Scope 3 emissions
Metrics and targets
were 32,531 tons CO
2
e. These totals
included DPO Group’s emissions.
Scope 3 emissions represented 95%
of the Group’s total 2021 emissions.
In 2022, the Group’s Scope 1 & 2
emissions were 210 and 1,134 tons
CO
2
e, respectively, and Scope 3
emissions were 34,540 tons CO
2
e.
Scope 3 emissions represented 96%
of the Group’s total 2022 emissions.
This is consistent with what would
be expected given the nature of our
operations. We have work under
way to ensure that the data used
to calculate our emissions is of high
quality, and we are considering
a range of options for emissions
reductions. All of our emissions have
been calculated in accordance with
the GHG protocol.
Emissions reduction targets
We have conducted an exercise
to map out our options to reduce
emissions. The Group is confident
it will become carbon neutral on
Scope 1 & 2 emissions before 2030
and has developed and will continue
to refine plans to reduce these
emissions, including this year by
purchasing RECs. These RECs will
adhere to the International REC
Standard (I-REC) to ensure they
are verifiable. This is a short-term
solution for emissions reductions,
and the Group is working to identify
longer-term measures such as PPAs
to further reduce emissions. We are
in the process of exploring a range
of target-setting frameworks.
Climate risk integration
As part of ongoing TCFD work,
a set of climate-related KRIs have
been agreed (Figure 18 below). The
Group will develop work on tracking
metrics associated with each KRI.
Tracking these metrics will inform
future actions to decarbonise and
increase resilience to climate-related
risks, and contribute to overall
refinements to our TCFD process.
Figure 18: Climate-related Key Risk Indicators
Principal risks
KRI appetite
Metrics
Operational
Resiliency
The Group will minimise physical damage from extreme
weather events to the Group’s facilities and the infrastructure
serving them in order to minimise interruption to services
and operations due to impact on premises, infrastructure,
telecommunications, power, utilities etc.
Number of events of extreme weather
conditions having negative impact on
services and operations.
People
Risk
The Group will minimise the negative impact of changes
in climate and of extreme weather events to its employees thus
reducing the Group’s difficulty in attracting high-calibre talent if
climate credentials are weak; reputational damage if deteriorating
working conditions from climate change are not addressed.
Number of vacant roles due to candidates
rejecting offers as a result of adverse impact
of climate and extreme weather conditions.
Compliance
Risk
The Group will not fail to meet climate-related legislation
requirements by ensuring that growing and changeable
climate-related regulatory landscape and increasing demands
(and costs) on internal legal and sustainability teams are met
in a timely manner.
Instances of missed climate-related
legislation requirements.
Financial
Risk
The Group will minimise impact on its revenue due to
disruptions to economy posed by climate risk and minimise
impact of reduced access to capital or higher capital costs
due to investor sustainability demands.
Impact on Group’s revenue due to climate risks.
Geopolitical
Risk
The Group will minimise impact on its revenue due to
geopolitical disruptions and/or increased regulatory
requirements resulting in increased CAPEX caused by climate
change and minimise the impact of exacerbation of the
potential for geopolitical disruption due to reduced disposable
income, increased physical damages, economic instability etc.
Impact on Group’s revenue due to geopolitical
disruptions and/or increased regulatory
requirements caused by climate change.
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OPERATING REVIEW
How our industry works
Outsourced Payment Services
Merchant Services
USD
183.3
m
Read more p80
Read more p84
USD
242.5
m
42
%
of Group
revenue
1
55
%
of Group
revenue
1
Technology
Technology is at the core of our
growth ambitions and our capabilities
are supported by our market leading
payment processing platforms.
99.9
%
systems availability
Read more p86
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ANNUAL REPORT AND ACCOUNTS 2022
78
The digital consumer payments industry is built
around interlinked services that allow businesses
to provide digital payment options to consumers,
for goods and services provided.
1
Remaining 3% of Group revenue mainly relates to revenue from Mastercard strategic partnership.
2
Denotes service provided by Network.
3
A push payment transaction begins with an individual sending/‘pushing’ money to a recipient (e.g. cash/cheque), rather than the recipient requesting/‘pulling’ payment
(e.g. automated digital wallet).
Traditional payments
Push payments
3
1
Consumer initiates transaction with
the merchant
2
Merchant’s payment acceptance device sends
transaction details to the merchant acquirer
3
Merchant acquirer requests authorisation
from digital payment network/scheme
4
Payment network/scheme requests
authorisation from the issuing institution
which has issued the consumer’s payment
cards or credential
5
Issuing institution authorises payment
to digital payment network/scheme
6
Digital payment network/scheme
authorises transaction
7
Merchant acquirer approves transaction
to merchant
8
Merchant delivers good or service
to the consumer
9
Purchase confirmation to consumer
A
Initiate
B
Authenticate
C
Get confirmation
D
Clear and settle
We act as an outsourced service
provider on behalf of financial
institutions, fintechs and other payment
credential issuing customers; managing
and processing their consumer payment
credentials and transactions.
PAYMENT
CREDENTIAL
ISSUING
INSTITUTION
CONSUMER
MERCHANT
ACQUIRING
BANK
DIGITAL
PAYMENT
NETWORKS
& SCHEMES
1
8
9
Direct-to-
merchant
2
Payment
acceptance
2
Payment
acceptance
1
7
2
3
4
6
C
B
A
D
5
Issuer
processor
2
The majority of our Merchant Services
business comes via a direct relationship
with the merchant, where we enable
them with online or offline ways to
accept digital payments.
In the case where a financial
institution maintains the relationship
with the merchant, we provide
processing and operational services
to the financial institution.
Merchant
acquirer/
processor
2
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ANNUAL REPORT AND ACCOUNTS 2022
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OPERATING REVIEW (CONTINUED)
Merchant
Services
We provide services and
solutions that allow over
150,000 merchants to
accept digital payments
from consumers. In the
Merchant Services division,
we have a direct relationship
with merchant customers,
enabling them to accept
digital payments and
settling funds directly
back to them following
a consumer transaction.
42
%
of Group revenue
USD
183.3
m
Merchant Services revenue
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
80
›
Data analytics and dashboards
which help merchants understand
their market, sector, segment
and consumer spending patterns
through dashboards, reports
and custom analytical studies.
Merchant settlement
processes
In the Merchant Services business,
Network 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 the Merchant Services business
in the UAE and Jordan
In line with general market practice
in the Middle East, when a consumer
conducts a digital transaction with
a merchant, Network 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 payment network and scheme
settlement processes on T+2/3 and
from issuing financial institutions
on T+1. These balances are included
in the ‘scheme debtors’ balance.
At any given point in time there
will be around two/three days
of ‘scheme debtor balances’
outstanding to Network, whereas
‘merchant creditor’ payables are
usually 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 own cash balances, as well as
banking partners via an overdraft
facility which is continuously settled
as the payment networks/schemes
remit money to us.
Merchant Services payment
acceptance solutions:
We are market leaders in the UAE
and Jordan, and are also present
in 21 markets in Africa, serving over
150,000 merchants.
Some of our value-added services:
›
Digital onboarding
enabling
the faster sign up of merchants,
lowering our costs and enhancing
the merchant experience.
›
Loyalty scheme points
redemption
through the
SHAREPay digital wallet,
enabling members of UAE
loyalty programme SHARE
to pay, earn and redeem across
major shopping malls and hotels.
›
Hospitality capabilities in
partnership with FreedomPay
,
providing merchants in the
hospitality industry with an
integrated payments platform.
›
Reducing costs for SMEs
operating in the food and
beverage space
by unifying
tasks such as single receipts,
daily settlements and chargeback
support on a single app, in
partnership with Foodics.
›
Unified Commerce services
,
providing merchants with a single,
centralised view of transactions
across online and offline payment
channels, including ‘Click and
Collect’ payment services and
‘Buy Online, Return in Store’ via
our proprietary N-Genius™ platform.
›
End-to-end online payment
services for SMEs
, providing
merchants with an online store,
shopping cart and checkout in
48 hours.
›
Merchant lending services in the
UAE and Jordan
with multiple
partners, where we facilitate the
promotion of lending services
to our merchant customers, with
no lending risk to our business.
The repayments to the lender can
be settled through the merchants’
online gateway or point-of-sale
(POS) payment receivables.
>
150
k
merchant relationships
Our Merchant
Services
We facilitate and process
transactions for merchants,
by obtaining authorisation
from digital payment networks
and schemes. Once authorised
by the relevant networks
and schemes, we settle the
funds into the merchant’s
bank account following
a consumer transaction.
We enable merchants to
accept digital payments;
offline, through a mobile or
point-of-sale device, or online.
Cards
QR codes
Mobile
money
wallets
Buy Now
Pay Later
Tap-on-Phone
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OPERATING REVIEW (CONTINUED)
How we generate revenue in Merchant Services
CASH TO MERCHANT
the Gross MSF
Bank account
CASH CONVERSION
% Net MSF
Network remits cash due
to the merchant
settles the merchant
for the value of the transaction;
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 until authorised
by schemes/issuers.
Network has no impact on scheme and interchange fees which are charges from third parties.
How we generate our Net Merchant Service Fee (MSF)
Third party fees
Interchange (which is paid to the payment credential issuing institutions)
and payment networks/scheme fees (paid to the networks/schemes
for the provision of the technical infrastructure).
Other revenues
›
Transaction fees on foreign exchange, chargeback
›
Sale and rental of POS terminals
›
Value-added services
Revenue generation
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 third party fees are
deducted from the Gross MSF charged to the merchant.
KPI: Total Processed Volume (TPV)
USD
45.9
bn
+37.7% y/y
Fee based on TPV
Net Merchant Service Fee
Gross Merchant Service Fee
Third party fees
Total Processed Volume (TPV) is the aggregate value of
digital transactions processed by our merchant customers.
%
Scheme fees
%
Issuer/banks
%
Other third party fees
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ANNUAL REPORT AND ACCOUNTS 2022
82
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 settlement from
schemes does not take place, or
banks may be closed; ii) the mix
of domestic versus international
transactions, which can impact
settlement timelines; iii) there are a
number of merchants who are not
settled daily; and iv) TPV trends in
the last few days prior to period end.
Restricted cash represents balances
specifically due to merchants.
At Network, restricted cash largely
represents a form of collateral
to manage the risk of merchant
chargebacks. It also includes cash
balances collected from card
schemes and financial institutions
but not settled to merchants,
for any merchants who take
a delayed settlement.
In the Merchant Services business
in African countries
Payments to merchants are made
after we have received settlement
from banks and mobile network
operators. This results in larger
merchant creditor balances when
compared to scheme debtor
balances. Restricted cash largely
represents cash balances already
received from banks and mobile
network operators, but not yet
remitted to merchants, this includes
merchant balances on-hold for
risk of chargeback.
Chargebacks and collateral
If a consumer disputes a transaction
with a merchant, and the merchant
is unable or unwilling to provide a
refund, the consumer can raise a
chargeback request to the issuing
bank. Network as the acquirer
holds the potential liability for that
transaction. This may be the case
if a consumer is unsatisfied 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. 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 holds
collateral against selected
merchants where we see a higher
risk of potential unrecoverable
chargebacks. 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 has historically low
chargeback losses, which in 2022
were only 0.0056% of TPV.
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 majority of our direct acquiring
business is through direct relationships
with merchants. 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 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 manages
the merchant relationship, Network
will also undertake KYC checks on
each of the merchants contracted
through the aggregator.
Network does not directly provide
any merchant lending or merchant
cash-advance services, and therefore
we have no financial risk associated
with such services.
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Strategic Report
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OPERATING REVIEW (CONTINUED)
Outsourced
Payment
Services
Outsourced Payment
Services support our
customers across two
business lines: i) issuer
processing services and ii)
acquirer processing services.
55
%
of Group revenue
USD
242.5
m
We have a diverse customer base,
working with over 200 financial institutions,
digital banks and fintech customers across
more than 50 countries.
Outsourced Payment Services revenue
Issuer processing:
Where we support payment credential
issuing customers in enabling their
customers to ‘make payments’
by managing and processing their
consumer payment credentials
and transactions. Issuer processing
represents the majority of our revenues
within Outsourced Payment Services.
Acquirer processing:
Where we enable financial institutions
(FIs), fintechs, and, indirectly, their
merchant customers, to ‘take payments’
from consumers. Within acquirer
processing, our clients maintain
the relationship with the merchants,
whilst we provide digital payment
acceptance, transaction processing
and other operational services.
How we generate revenue
Issuer processing
revenue
Revenue per credential
is based on the number
of credentials hosted for
a customer. This is not
linked to the number of
transactions conducted.
Fee per credential
KPI:
Number of credentials
Revenue per transaction
is based on the number
of transactions processed.
This is not linked to the
value of the transaction.
Fee per transaction
KPI:
Number of transactions
Other revenues
can include those associated
with value-added services.
Value-added services
(fixed fee or fee per
credential/transaction)
Acquirer processing
revenue
Revenue per merchant/
payment terminal/gateway
is based on providing
merchants with a
point-of-sale terminal,
online gateway or alternative
payment acceptance options.
Margin on TPV
1
based on the aggregate value
of transactions processed
through merchants.
Transaction/TPV
1
based on fixed fee which is
associated with the provision
of value-added services.
1
TPV – Total Processed Volume is the
aggregate value of transactions
processed in Merchant Services.
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Issuer processing:
We provide outsourced
processing services for
payment credential issuing
customers. We connect these
customers with digital payment
networks and schemes
to facilitate, authorise and
settle transactions for their
consumers. Through this
outsourced service, financial
institutions, fintechs and other
payment credential issuing
institutions do not have
to develop, invest and
maintain their own in-house
technology or payment
operation capabilities.
Credit cards
Debit cards
Prepaid cards
Virtual cards
Commercial cards
Mobile wallets
Acquirer processing:
Unlike in the Merchant Services
division where we have a direct
relationship with and process
transactions for our merchant
customers, within acquirer
processing the financial institution
maintains the relationship with
the merchant. We provide
processing and operational
services for the settlement of
transactions, including the transfer
of authorisation via the payment
networks and schemes to the
financial institution, on behalf
of their merchant relationships.
›
Enterprise fraud monitoring
through our partnership with
FICO, providing real time,
improved credit based analysis for
FIs, alongside monitoring enterprise
wide payment and non-payment
transactions for fraud prevention
and early detection.
›
Mobile wallet provisioning,
enabling financial institutions
to directly enrol cards on mobile
wallets, including the likes of
Apple and Samsung, using their
banking app.
(Network is not a lender and
does not issue or provide
credit directly to consumers.)
Our Outsourced Payment Services
›
Provision of digital wallet services
through Network’s white label
solutions, supporting the
issuance, processing and
management of virtual cards
for several financial institutions.
›
Card control solutions
which
enable consumers to control and
amend their cards in real-time
through an app, giving them
features such as enabling/
disabling cards, allowing/blocking
transactions, setting daily and
monthly spending limits, and
allowing/blocking international
or specific country transactions.
›
Data analytics
provides insights
and benchmarks on the spending
and transaction patterns of both
the credentials hosted as well
as aggregated regional trends.
Our SmartView dashboards and
reports allow our FI customers to
better understand their portfolio
performance and identify areas
of opportunity, and our payment
consultants help them to monetise
those opportunities.
›
Supporting financial inclusion
with Mastercard
and accelerating
the acceptance of digital payments
across all our markets, having
collaborated with Brighterion,
Mastercard’s artificial intelligence
arm, to provide fraud mitigating
and monitoring services.
Some of our value-added services:
We have an extensive range of value-added services that we provide to our
customers, either through our own in-house capabilities or through partnerships
with market leading third parties. Our value-added services include:
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
85
OPERATING REVIEW (CONTINUED)
Technology
Bringing our strategy to life through market leading
payment processing platforms
We have two main technology platforms serving all payments solutions
Network One
The platform provides an integrated and
cohesive payment suite for our larger, more
sophisticated clients across both Merchant
Services and Outsourced Payment Services.
The platform consists of the best in breed
in-house and third-party technology
solutions, and is highly configurable and
sophisticated, processing over 4.5 million
transactions a day.
Network Lite
Complementary to the Network One
platform, Network Lite is suited to smaller
merchants and financial institutions who
require more standardised solutions.
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ANNUAL REPORT AND ACCOUNTS 2022
86
Our technology
initiatives
Putting the customer
at the centre of our
offering by simplifying
the user experience and
increasing the speed to
market of new capabilities.
Simplifying the technology
infrastructure and accelerating new
market offerings, whilst providing
cost-effective scaling of our services
›
The cloud first approach allows us to
operate without physical assets and
data centres, eliminating complexity
by removing the need for hardware
installation and a physical technology
infrastructure. We are using the Cloud
and leveraging its benefits across
our newest platforms, applications
and new market entry strategies.
›
The use of the Cloud has
differentiated and accelerated
our market entry into the Kingdom
of Saudi Arabia, enabling us to
offer a fully modernised and digital
‘Payment-as-a-Service’ capability.
1
API – Application Programming Interface.
A single source of truth
across geographies
›
We have created our new Data Lake
capability on Microsoft’s Azure Cloud
to act as our unified source of data
across the Group. This is enabling our
merchants with access to real-time
insights about their portfolios or
payment transactions. We can
also gather and share information
quicker, reducing manual processes.
–
As we progress, additional
data from our markets is being
introduced, further enhancing
the dataset and enabling our
customers to learn and grow.
Supporting our payment capabilities
and simplifying their integration
›
We use APIs
1
to enhance our service
offering and to ensure an efficient
method of service consumption and
integration for our customers and
partners. This allows us to better
serve our customers, provide them
with faster services and enhance
our portfolio through faster integration
with partners, ultimately improving
the customer experience through
simpler and more agile integrations
of new capabilities.
›
We have a growing API
1
catalogue
of over 150 services, which we are
now publishing on our Developer
Portal, supporting the expansion
and digitisation of our payment
services, partnerships and
value-added services.
Accelerating merchant onboarding and enriching the consumer experience
›
We are automating and simplifying
the customer experience through the
creation of a digitised App Payments
Store for all payments services and
offerings. Our first success in this
space has been the roll out of our
Merchant Self-Service On-boarding
app which is simplifying how we
do business.
›
We have created a new app
experience that allows fintechs
to self on-board onto our Network
One platform and in doing so create
their own ‘test’ issuing products.
–
This allows the fintech to use our
standard APIs
1
and connect their
digital channel, wallet or app
to try out the variety of issuing
capabilities we have to offer.
–
This was proven successful
with a new fintech customer
in the Kingdom of Saudi Arabia,
having enabled a pre-paid card
capability co-branded with Visa
and Mastercard, in a few days.
›
Our Unified Commerce offering
provides merchants with the ability
to enable ‘Click and Collect’ payment
services and ‘Buy Online, Return in
Store’ via our proprietary N-Genius™
platform. We are developing services
to provide customers with a single,
centralised view of transactions across
online and offline payment channels,
as well as enhanced reporting tools
and data insights as merchants want
to view, manage and interact with
payments from all their adopted
payment channels in one place.
Cloud first approach
API
1
always
Digital experiences
Data
Network International Holdings Plc
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GROUP CHIEF FINANCIAL OFFICER’S REVIEW
Strong revenue growth and
record business momentum
Rohit Malhotra
Group Chief Financial
Officer and Group
Chief Strategy Officer
Key updates relating to
2022 financial statements
New financial operating
segment disclosures
As announced on 16 February
2023, we have updated our financial
segment reporting to align with
operational responsibilities. The new
segments are classified according
to customer groups:
i.
‘Merchant Services’
which directly
serves merchants (previously
known as Merchant Solutions):
Where we maintain direct
relationships with merchant
customers and Payment Service
Providers (PSPs), enabling
merchant customers to accept
digital payments. Merchant
Services includes services in
the UAE, Jordan, across Africa
(DPO Group) and newly launched
services in Egypt. (DPO Group
performance will not be reported
separately going forward.)
ii.
‘Outsourced Payment Services’
where we serve financial institutions
(FIs), fintechs and other customers
(previously known as Issuer Solutions).
The Outsourced Payment Services
segment supports customers
across two main business lines:
a.
Issuer processing – where we
support payment credential
issuing customers in enabling
their consumers to ‘make
payments’ by managing and
processing their consumer
payment credentials and
transactions. Issuer processing
represents the majority of
revenue within Outsourced
Payment Services.
b.
Acquirer processing – where we
enable FIs, fintechs and, indirectly,
their merchant customers to
‘take payments’ from consumers.
Within acquirer processing, our
clients maintain the relationship
with the merchants, whilst
we provide digital payment
acceptance, transaction processing
and other operational services.
There are two main adjustments
in the new financial segmentation,
which primarily reflects; i) the
movement of acquirer processing
revenues out of the business line
previously known as Merchant
Solutions into the newly classified
Outsourced Payment Services;
and ii) revenue relating to the
Diners scheme franchise in the
UAE, and Egypt has been moved
into the new Outsourced Payment
Services business line. Diners
was previously included in ‘other’
revenue. Comparative segmental
results for 2021 have been restated
on this new basis.
Geographical revenue disclosures
continue to be provided and can
be found on subsequent pages.
Reminder of strategic milestones
and their impact on the financial
statements
i.
Acquisition of DPO Group
:
Was completed on 28 September
2021. 2021 financials include a
three-month contribution from
DPO, whilst 2022 financials have
a full year contribution. We also
present 12-month y/y pro forma
growth for information purposes
only through this document.
“The financial performance in the year
was one reflecting record business
momentum and great progress on our
strategic priorities, having secured a
record level of new customers, launched in
new markets and expanded our presence
in Africa through the integration of DPO.”
Rohit Malhotra
Group Chief Financial Officer
and Group Chief Strategy Officer
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ANNUAL REPORT AND ACCOUNTS 2022
88
ii. Divestment of 50% stake in
Transguard (TG) Cash:
Was
completed in November 2021.
The prior year financials have
no revenue contribution from TG
Cash, as it was accounted for on
an equity accounting basis, but
include a 10-month contribution
of USD 8.5 million to underlying
EBITDA
1
and USD 4.7 million to
underlying net income
1
, prior to
the sale of our stake. Current year
financials do not include any
contribution from TG cash.
iii. Disposal of 70% holding in
Mercury Payments Services LLC
(Mercury):
Was completed in
January 2022. The underlying
results do not have any material
financial impact in the current
year. The prior year had an
immaterial revenue contribution
and included a USD (2.3) million
loss to both underlying EBITDA
1
and underlying net income
1
.
Financial review
2022
USD’000
2021
USD’000
14
y/y change
Select financials
Revenue
438,371
352,245
24.5%
Underlying EBITDA
1,2
178,603
143,477
24.5%
Underlying EBITDA margin
1,3
40.7%
38.3%
240bps
Profit for the year
80,104
56,558
41.6%
Underlying net income
1
86,880
63,192
37.5%
Underlying basic earnings per share
(USD cents)
1,4,5
15.7
11.6
35.3%
Reported basic earnings per share
(USD cents)
5
14.5
10.4
39.4%
Underlying free cash flow
(underlying FCF)
1
81,927
61,908
32.3%
Cash flow from operating activities
6
119,202
51,656
6
130.8%
Leverage
7
0.7x
0.9x
0.2x
Segmental results
8
Merchant Services revenue
9
183,347
129,670
41.4%
Outsourced Payment Services
revenue
11
242,510
214,082
11
13.3%
Other revenue
10,11
12,514
8,493
11
47.3%
Merchant Services contribution margin
1
70.9%
70.4%
50bps
Outsourced Payment Services
contribution margin
1
70.6%
68.7%
190bps
Geographical results
Middle East revenue
288,383
247,683
16.4%
Africa revenue
142,674
100,239
42.3%
Other revenue
10
7,314
4,323
69.2%
Key Performance Indicators
12
Total Processed Volume (TPV)
(USD m)
13
45,905
33,327
37.7%
Total number of credentials hosted (m)
18.0
16.6
8.4%
Total number of transactions (m)
1,294.0
979.9
32.1%
1
This is an Alternative Performance Measure (APM). See notes
4 and 5 of the consolidated financial statements for APMs
definition and the reconciliations of reported figures to APMs.
2
We announced the strategic exit of our stake in Transguard
Cash LLC on 10 November 2021. There is a 10-month
contribution from associate as part of underlying EBITDA
in 2021.
3
Underlying EBITDA margin in 2021 excludes the share
of contribution from associate Transguard Cash LLC,
which was sold in November 2021.
4
Underlying basic earnings per share is defined as underlying
net income attributable to the shareholders divided by the
weighted average number of ordinary shares during the
relevant financial year.
5
Weighted average share count for 2022 was 552.3 million
vs 552.9 million in 2021.
6
Cash flow from operating activities for the comparative period
has been restated to reflect the recent change in IFRS guidance
on the presentation of restricted cash in the statement of cash
flows. Please refer to note 2 (f) on page 217 for details.
7
Refer to page 99 for the leverage ratio computation
and reconciliation of net debt figures in the consolidated
financial statements.
8
Refer to page 88 for new financial operating segment
disclosures which require restatement of 2021 figures.
9
Merchant Services includes revenue from DPO Group, having
completed the acquisition on 28 September 2021. Therefore,
DPO contributed three months in the 2021 financials and
12 months in the 2022 financials.
10
Other revenue under segmental results primarily includes
cash advance fees on withdrawals from ATMs and foreign
exchange gains/(losses) arising from the Merchant Services
and Outsourced Payment Services business lines alongside
revenues recognised relating to the Mastercard strategic
partnership. Other revenues under Geographical results
includes only revenues recognised relating to the Mastercard
strategic partnership.
11
2021 other revenue has been restated in line with business
re-segmentation, following the movement of other revenue
relating to Diners into the Outsourced Processing Services
business line.
12 For definition of KPIs, please refer to page 101.
13
TPV has been restated following the new segmentation
of business lines, with TPV now primarily excluding acquirer
processing volumes.
14
DPO was acquired on 28 September 2021. There is therefore
a three-month contribution to the 2021 income statement,
cash flows and Total Processed Volume KPI.
15
For constant currency definition, please refer to page 100.
16
TPV – Total Processed Volume – the aggregate monetary volume of purchases processed by the Group within its Merchant Services business line.
Total revenue
Trends vs 2021:
Total revenue in
the year increased by 24.5% y/y
(26.6% on a constant currency
basis
15
) to USD 438.4 million (2021:
USD 352.2 million). This includes
a USD 31.5 million revenue
contribution from DPO Group
(2021: USD 7.5 million). Excluding
DPO’s contribution in both 2022
and 2021, revenue grew 18.0% y/y.
Revenue results by operating
segments
Merchant Services revenue
Merchant Services, which represents
42% of total revenue (2021: 37%),
grew 41.4% y/y to USD 183.3 million
(2021: USD 129.7 million), including
a USD 31.5 million contribution from
DPO Group. Excluding DPO, growth
in Merchant Services was 24.2% y/y.
Momentum was strong throughout
the year, largely a reflection of
supportive underlying market
conditions alongside a buoyant
UAE economy and ongoing strength
in consumer confidence. DPO saw
pro-forma full year 2022 revenue
growth of 17.1% y/y or 27.0% in
constant currency, with trading in
South Africa slowing towards the
end of the year due to growing
macroeconomic pressures including
an unreliable energy supply, high
unemployment and rising interest
rates. We continue to see strong
growth in markets outside of South
Africa, supported by a recovery
in international travel.
Total Processed Volume (TPV
16
),
which represents the monetary
volume of purchases processed
by the Merchant Services
business, increased by 37.7%
y/y to USD 45.9 billion (2021:
USD 33.3 billion). Prior year
TPV has been restated following
the new segmentation of business
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
89
GROUP CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
Outsourced Payment
Services revenue
Outsourced Payment Services
represents 55% of total Group
revenue (2021: 61%) and grew
13.3% y/y to USD 242.5 million
(2021: USD 214.1 million). Revenue
increased 15.4% y/y in constant
currency, following the depreciation
of local currencies in Africa, mainly
the Egyptian Pound.
We saw supportive dynamics across
new business signings, having
secured a total of 18 new financial
institutions in the year. We also saw
continued strength in both KPIs,
with the number of transactions
processed increasing 32.1% y/y,
and credentials hosted up 8.4% y/y.
Both the Middle East and Africa
saw y/y growth in the number of
credentials hosted and transactions
processed. The pace of revenue
growth in Outsourced Payment
Services was particularly strong
in the first nine months of the year,
driven by new business wins and
strong digital transaction growth,
with growth in Q4 slowing, mainly
due to the timing of new business
revenue streams and longer lead
times to onboard new customers.
Contribution
1
for the Outsourced
Payment Services segment increased
16.3% y/y, to USD 171.1 million
(2021: USD 147.1 million), with
margins up by 190 bps y/y to
70.6% (2021: 68.7%), reflecting
the strong operating leverage
inherent in the business.
Trends in directly acquired Total Processed Volume (TPV)
Direct to merchant TPV, y/y
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Direct TPV in UAE & Jordan
24%
44%
47%
29%
25%
23%
27%
27%
27%
27%
21%
20%
Retail
15%
34%
41%
37%
17%
22%
34%
32%
38%
40%
17%
23%
Supermarkets
3%
4%
11%
11%
7%
9%
8%
14%
16%
14%
18%
17%
Travel & Entertainment
59%
112%
116%
57%
62%
44%
48%
50%
43%
22%
10%
5%
Govt, Healthcare, Education
19%
37%
33%
20%
17%
20%
21%
21%
20%
28%
31%
30%
Direct TPV in UAE & Jordan
24%
44%
47%
29%
25%
23%
27%
27%
27%
27%
21%
20%
Domestic consumers
13%
27%
26%
21%
16%
19%
18%
18%
20%
24%
21%
18%
International consumers
70%
139%
164%
69%
73%
49%
94%
92%
70%
37%
22%
25%
Direct TPV in Africa (DPO)
1,2
33%
31%
34%
34%
33%
34%
31%
29%
29%
26%
25%
23%
1
DPO TPV and revenue is not present in the Q1-Q3 2021 base. Q1-Q3 y/y pro forma data is presented for information only, with Q4 on an actual basis.
2 Constant FX.
lines, with TPV now primarily
excluding acquirer processing
volumes. Excluding DPO, TPV
increased 28.9% y/y.
TPV trends in the UAE and Jordan:
Directly acquired TPV increased
28.9% y/y to USD 41.6 billion
(2021: USD 32.2 billion). Within this,
domestic TPV (which represents
spending from consumers domiciled
in the region) increased 20.0% y/y,
driven by a buoyant economic
environment and strong consumer
confidence. International TPV (which
represents consumer spending by
overseas visitors) grew 64.0% y/y,
reflecting both the UAE’s continued
attraction as a holiday destination
and a year of key events in the
region, including Dubai EXPO in
Q1 and the FIFA World Cup in Q4,
with international TPV particularly
strong in Q4 vs pre-pandemic levels.
The strong TPV performance was
also supported by growth across
our strategic focus segments, with
online TPV (excluding Government
and airlines) up 39.4% y/y, and SME
TPV up 41.2% y/y, aided by a record
number of new merchant wins and
the launch of new digital capabilities.
TPV trends in Africa (DPO Group):
On a 12-month pro-forma basis,
directly acquired TPV grew 19.3% y/y,
or 29.6% in constant currency.
Although strong, trends in the
region were impacted by a
challenging macro environment
in South Africa, particularly through
Q4, which negatively impacted
consumer spending. Growth in
markets outside of South Africa
remained strong.
Contribution
3
for the Merchant
Services segment increased 42.5%
y/y, to USD 130.0 million (2021:
USD 91.3 million), with margins up
by 50bps y/y to 70.9% (2021: 70.4%).
3
This is an Alternative Performance Measure (APM).
See note 4 of the consolidated financial statements
for APMs definition and the reconciliations of
reported figures to APMs.
1
This is an Alternative Performance Measure
(APM). See note 4 of the consolidated financial
statements for APMs definition and the
reconciliations of reported figures to APMs.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
90
Other revenue not allocated
to an operating segment
The Group’s other 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 Services
and Outsourced Payment Services
business lines.
Other revenue was USD 12.5 million,
up 47.3% y/y (2021: USD 8.5 million,
restated from USD 9.4 million in line
with the new segment reporting,
with other revenue relating to Diners
now included within Outsourced
Payment Services). This includes
USD 7.3 million of revenue (2021:
USD 4.3 million) recognised as
part of the Mastercard strategic
partnership, which continues
to progress well.
The strong revenue expansion
in other revenue in 2022 is
associated with our collaboration
with Brighterion, Mastercard’s
artificial intelligence arm, to provide
fraud mitigating services, as well as
initiatives launched in the prior year,
which were completed in 2022,
including the launch of 3D Secure
2.0 biometric authentication fraud
checking capabilities and ‘Fintech
in a box’, to support the issuance
of cards and processing services
for fintechs.
Revenue results by geography
Middle East
The Group’s largest geography is
the Middle East, where revenues
are generated from both Merchant
Services and Outsourced Payment
Services, representing 66% of Group
revenue (2021: 70%).
Revenue increased 16.4% y/y
to USD 288.4 million (2021:
USD 247.7 million), supported
by particularly strong growth
in the UAE, our largest market,
which experienced relatively
strong economic conditions,
resilient consumer confidence
and a strong year for tourism.
Africa
Revenue in Africa contributed
33% of total revenue in the
period (2021: 28%) and increased
42.3% y/y to USD 142.7 million
(2021: USD 100.2 million), including
a USD 31.5 million contribution
from DPO Group. Excluding DPO,
revenue growth was 19.8%. Growth
was relatively stronger in Northern
and Sub-Saharan Africa vs southern
Africa, with South Africa seeing
macro-economic challenges as
explained earlier. The region saw
continued expansion in associated
KPIs, particularly in the number
of transactions processed
between Q1-Q3.
Expenses and other line items
Reported
2022
USD’000
Specially
disclosed
items
Underlying
results
1
(A)
Reported
2021
USD’000
Specially
disclosed
items
Underlying
results
1
(B)
Change
(A&B)
Salaries and allowances
95,776
–
95,776
80,966
–
80,966
18.3%
Bonus and sales incentives
16,523
–
16,523
11,557
–
11,557
43.0%
Share-based compensation
5,952
–
5,952
7,550
(3,657)
3,893
52.9%
Terminal and other benefits
12,600
–
12,600
7,884
–
7,884
59.8%
Total personnel expenses
130,851
–
130,851
107,957
(3,657)
104,300
25.5%
Technology and communication costs
56,709
–
56,709
55,266
–
55,266
2.6%
Third-party costs
26,080
–
26,080
23,523
–
23,523
10.9%
Legal and professional fees
21,473
–
21,473
26,933
(7,261)
19,672
9.2%
Provision for expected credit loss
2,922
–
2,922
393
–
393
643.5%
Other general and administrative expenses
21,733
–
21,733
14,076
–
14,076
54.4%
Selling, operating and other expenses
128,917
–
128,917
120,191
(7,261)
112,930
14.2%
Depreciation and amortisation
71,429
(10,526)
2
60,903
60,958
(5,885)
55,073
10.6%
Share of depreciation from associate
–
–
–
3,768
–
3,768
(100.0)%
Total depreciation and amortisation
71,429
(10,526)
60,903
64,726
(5,885)
58,841
3.5%
Net interest expense
18,547
–
18,547
13,708
–
13,708
35.3%
Unrealised foreign exchange (gains)/losses
(2,639)
–
(2,639)
910
–
910
(390.0)%
Taxes
13,332
1,581
2
14,913
6,826
–
6,826
118.5%
1
This is an Alternative Performance Measure (APM). See note 4 of the consolidated financial statements for APMs definition and the reconciliations of reported figures to APMs.
2
SDI relating to amortisation of acquired intangibles in the above table is shown at gross level i.e. amortisation and its related tax impact are shown in their respective line items.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
91
GROUP CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
Expenses:
Total expenses (personnel expenses and selling, operating and other expenses) were USD 259.8 million
(2021: USD 228.1 million), with specially disclosed items (SDIs) of nil (2021: USD 10.9 million). Underlying total expenses
1
grew by 19.6% y/y or 10.3% y/y excluding DPO Group, whilst continuing to invest in new growth opportunities and
market entry into the Kingdom of Saudi Arabia.
Personnel expenses:
Total personnel expenses were USD 130.9 million (2021: USD 108.0 million), including SDIs
of nil (2021: USD 3.7 million). Underlying personnel expenses
1
were USD 130.9 million (2021: USD 104.3 million),
up 25.5% y/y, or 13.9% y/y excluding DPO, predominantly driven by investment in our people including talent
retention and inflation linked increases across the Group, alongside costs associated with the build of our new
local team in the Kingdom of Saudi Arabia.
Selling, operating and other expenses:
Total selling, operating and other expenses were USD 128.9 million (2021:
USD 120.2 million), including SDIs of nil (2021: USD 7.3 million). Underlying selling, operating and other expenses
1
grew by 14.2% to USD 128.9 million (2021: USD 112.9 million) or 7.1% excluding DPO. Growth was mainly attributable
to; i) direct costs associated with our revenue growth in Outsourced Payment Services, ii) our market entry
into the Kingdom of Saudi Arabia, iii) a higher charge for expected credit losses on trade and other receivables
(which is reflective of growth in the overall trade receivable balances due to higher revenues and the Group’s
prudent view on credit losses); and iv) resumption of controlled discretionary expenditure on travel and marketing.
Underlying EBITDA
1
Underlying EBITDA
1
increased by 24.5% to USD 178.6 million (2021: USD 143.5 million). Underlying EBITDA margin
1
was 40.7% (2021: 38.3%), a 240bps expansion y/y.
There are contributions to underlying EBITDA in either 2022 or 2021, that are not present in the comparable period.
These include: DPO Group (USD 5.0 million in 2022, USD 1.7 million in 2021); Transguard Cash LLC and Mercury
(nil in 2022, USD 6.2 million in 2021). Excluding these contributions, underlying EBITDA increased by 28% to
USD 173.6 million (2021: USD 135.6 million) and margin increased by 329 bps to 42.7% (2021: 39.4%), demonstrating the
Group’s strong strategic progress in the year. It is also evidence of the inherent operating leverage in our business
and the early benefits of our ability to ‘do more with less’, including insourcing our technology capabilities, as well
as establishing centres of excellence.
2022
USD’000
2021
USD’000
Profit for the year
80,104
56,558
Depreciation and amortisation
71,429
60,958
Net interest expense
18,547
13,708
Unrealised foreign exchange (gains)/losses
(2,639)
910
Taxes
13,332
6,826
Gain on sale of subsidiary/associate
(2,170)
(10,169)
Share of depreciation from associate
–
3,768
Specially disclosed items affecting EBITDA
–
10,918
Underlying EBITDA
1
178,603
143,477
Depreciation and amortisation
The Group’s total depreciation and amortisation (D&A) charge, increased by USD 6.7 million to USD 71.4 million
(2021: USD 64.7 million, including a USD 3.8 million share of depreciation from previous associate Transguard Cash
LLC). This includes an SDI of USD 10.5 million (2021: USD 5.9 million) for the amortisation of acquired intangibles.
The Group’s underlying D&A
1
charge grew 3.5% to USD 60.9 million (2021: USD 58.8 million), mainly relating to D&A
charges on new assets capitalised during the year, which were partially offset by assets retired during the period.
1
This is an Alternative Performance Measure (APM). See note 4 of the consolidated financial statements for APMs definition and the reconciliations of reported figures to APMs.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
92
Net interest expense
The Group’s net interest expense increased by USD 4.8 million to USD 18.5 million (2021: USD 13.7 million),
largely due to the increase in benchmark rates of the term loan facility.
2022
USD’000
2021
USD’000
Comments
Interest expense on:
Term loan facility
1,2
13,776
8,158
Largely represents interest and other fees. Average balance in 2022:
USD 356.2m. Average interest rate of 3.7% for the year (6.6% as at 31 Dec
2022). Average balance in 2021: USD 377m, Average interest rate of 2.1%.
Revolving credit facility
208
1,000
RCF outstanding balance was fully repaid during Q1-2022.
Bank overdrafts for
working capital
1,996
1,678
Relates to interest and commitment fees on overdraft facility for settlement
related working capital.
Debt issuance amortisation
1,766
1,444
Amortisation of debt issuance costs associated with term loan and revolving
credit facility.
Other interest expense
2,135
1,812
Relates to interest charges on lease liabilities, mainly on liabilities recognised
on right of use assets.
Interest income
(1,334)
(384)
Relates to interest income on bank deposits in Nigeria, Egypt and South Africa.
Net interest expense
18,547
13,708
1
Covenants are set at 3.5x net debt: underlying EBITDA.
2
Includes interest expense related to other term loan as well.
Unrealised foreign exchange gains/(losses)
Unrealised FX gains/(losses) relate to the translation of the Group’s foreign currency denominated assets and
liabilities. During the year, the non-recurring FX gain totalled USD 2.6 million (2021: USD (0.9) million) which is mainly
due to the depreciation of local currencies across several African countries, including Egypt, Nigeria, South Africa,
Ghana and Kenya.
Taxes
The Group’s total tax charge during the year was USD 13.3 million (2021: USD 6.8 million) with a reported effective
tax rate
1
of 14.3% (2021: 10.8%). The underlying tax charge was USD 14.9 million (2021: USD 6.8 million) with an
underlying effective tax rate of 14.7% (2021: 9.7%). The increase is mainly due to: i) overall higher taxable profits,
particularly in higher tax jurisdictions in Africa where we have seen strong revenue growth; ii) a full year impact
of the change in tax regulation in Mauritius which came into effect in July 2021; and iii) the movement of customer
contracts to our Nigerian business entity, where higher tax rates are applicable.
Profit for the year, underlying net income
1
, reported and underlying basic EPS
1
Profit for the year was USD 80.1 million (2021: USD 56.6 million) which includes a gain of USD 2.2 million from
the disposal of the 70% holding in Mercury Payments LLC, which was completed in January 2022. Underlying net
income
1
increased by 37.5% to USD 86.9 million (2021: USD 63.2 million).
2022
USD’000
2021
USD’000
Profit for the year
80,104
56,558
Gain on sale of subsidiary/associate
(2,170)
(10,169)
Specially disclosed items affecting EBITDA
–
10,918
Specially disclosed items affecting net income (net of tax impact)
8,946
5,885
Underlying net income
1
86,880
63,192
Reported basic earnings per share for the period was 14.5 USD cents (2021: 10.4 USD cents) and underlying basic
earnings per share (EPS)
1
increased by 35.3% to 15.7 USD cents (2021: 11.6 USD cents).
1
This is an Alternative Performance Measure (APM). See note 4 of the consolidated financial statements for APMs definition and the reconciliations of reported figures to APMs.
Network International Holdings Plc
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Strategic Report
93
GROUP CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
The weighted average share count during 2022 was 552,291,780 which is largely similar to 2021 as the increase
of 11,101,690 share in September 2021 (issued for the DPO acquisition) is offset by shares purchased under the
buyback programme launched in August 2022, (please refer to the Cash flow section below for details) and
shares purchased for LTIP Scheme. The total outstanding shares as at 31 December 2022 was 541,949,121.
2022
USD’000
2021
USD’000
Underlying net income
1
(USD’000)
86,880
63,192
Non-controlling interest (loss) (USD’000)
25
880
Underlying net income – attributable to equity holders (USD’000)
86,905
64,072
Weighted average number of shares (‘000)
552,292
552,859
Underlying basic earnings per share
1
(USD cents)
15.7
11.6
Specially disclosed items (SDIs)
1
SDIs are items of income or expense that have been recognised in a given period which management believes,
due to their materiality and being one-off in nature, should be disclosed separately to give a more comparable
view of underlying financial performance. There were no new SDIs classified during the year.
SDIs affecting EBITDA during the year were nil, as expected (2021: USD 10.9 million) and SDIs affecting net income
were USD 8.9 million net of tax (2021: USD 5.9 million).
Share-based compensation:
Prior year figures included the charge relating to the Management Incentive Award
Plan, Initial Public Offering (IPO) Cash Bonus, and certain Long-Term Incentive Plans awarded to eligible employees,
all of which were specific payments relating to the Group’s IPO and no longer recurring.
M&A costs:
Prior year figures include costs incurred relating to due diligence, advisory and execution in relation to the
acquisition of DPO. During the year, M&A costs were not material and therefore have not been disclosed separately.
The key SDIs affecting net income in the year were:
Amortisation of acquired intangibles (net of deferred tax impact):
Amortisation and tax on acquired intangibles
are treated as SDIs. These charges are based on judgements about their value and economic life and are the result
of the application of acquisition accounting. Whilst revenue recognised in the income statement does benefit
from the underlying intangibles that have been acquired, the amortisation costs bear no relation to the Group’s
underlying operational performance. The amortisation of acquired intangibles is not included in the analysis of
segment performance used by the Chief Operating Decision Maker.
During the year, the amortisation charge amounted to USD 10.5 million (2021: USD 5.9 million) on the intangible
assets recognised in the Group’s consolidated statement of financial position from the following acquisitions:
i) USD 4.2 million (2021: USD 4.2 million) from Emerging Market Payments Services in 2016; and ii) USD 6.3 million
(2021: USD 1.7 million) net of a tax related impact of USD (1.6) million (2021: nil) from the acquisition of DPO.
2022
USD’000
2021
USD’000
Items affecting EBITDA
Share-based compensation
–
3,657
M&A costs
–
7,261
Total SDIs affecting EBITDA
–
10,918
Items affecting net income
Amortisation net-off tax on acquired intangibles
8,946
5,885
Total SDIs affecting net income
8,946
5,885
Total specially disclosed items
8,946
16,803
1
This is an Alternative Performance Measure (APM). See note 4 of the consolidated financial statements for APMs definition and the reconciliations of reported figures to APMs.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
94
Cash flow
The Group’s net cash flow from operating activities was USD 119.2 million (2021: USD 51.7 million), an increase of
USD 67.5 million versus the prior year, mainly due to strong underlying business performance driving higher net
profit in the year.
The Group’s net cash outflow from investing activities was USD (59.7) million (2021: USD (178.9) million), which
mainly represents capital expenditure during the year. The movement of USD 119.2 million versus 2021 is largely
a reflection of the cash outflows for the acquisition of DPO Group in 2021 (USD 198.9 million), which was partially
offset by proceeds from the sale of our stake in Transguard Cash (USD 74.4 million).
The Group’s net cash movement from financing activities was USD (137.7) million (2021: USD (10.7) million),
mainly reflecting: i) cash outflows of USD (40.6) million for the share buyback programme (see below); ii)
a scheduled repayment on the syndicated loan facility of USD (37.5) million; iii) repayment of the RCF loan
of USD (35.0) million; and iv) purchase of the shares under the Long-Term Incentive Plan (LTIP) for eligible
Group employees of USD (16.9) million.
2022
USD’000
2021
USD’000
Change
Net cash movement from operating activities
119,202
51,656
131%
Net cash movement from investing activities
(59,744)
(178,913)
67%
Net cash movement from financing activities
(137,740)
(10,743)
(1,182)%
Share buyback programme
On 11 August 2022 we announced a share buyback programme (the ‘Initial Program’), in line with the Group’s
capital allocation strategy. The principal focus of the capital allocation strategy is to prioritise investment in order
to accelerate growth, including potential organic investments as well as disciplined selective acquisitions. Returns
to shareholders are also considered in the context of balance sheet leverage and upcoming investment opportunities.
Given the business’s strong cash generation and leverage position below the 1-2x average target range, the buyback
programme gives the opportunity to return some excess capital to shareholders whilst maintaining future flexibility
to invest in accelerating growth.
The Initial Program for the buyback of shares for up to an aggregate purchase price of USD 50 million was
completed on 27 January 2023. As announced on 26 January 2023, the Company initiated the second tranche
of the buyback programme, of up to an aggregate purchase price of a further USD 50 million, following the
completion of the Initial Program.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
95
GROUP CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
Underlying free cash flow
1
Underlying free cash flow (u.FCF) is calculated as underlying EBITDA adjusted for changes in other working capital
balances, taxes paid, total capital expenditure and in the prior year SDIs affecting EBITDA and adjustment for share
of EBITDA of associate, less dividend.
Underlying FCF
1
was USD 81.9 million (2021: USD 61.9 million), 32% higher than the prior year, driven by higher
underlying EBITDA
1
, and the absence of both SDIs affecting EBITDA and the share of EBITDA from TG cash.
This was mainly offset by changes in working capital before settlement related balances and higher taxes paid.
The Group uses u.FCF as an operating performance measure that helps management monitor the conversion
of underlying EBITDA to underlying free cash flow. u.FCF conversion improved to 46% in 2022 (2021: 43%).
2022
USD’000
2021
USD’000
Change
Profit for the year
80,104
56,558
42%
Depreciation and amortisation
71,429
60,958
17%
Net interest expense
18,547
13,708
35%
Unrealised foreign exchange (gains)/losses
(2,639)
910
(390)%
Taxes
13,332
6,826
95%
Gain on sale of subsidiary/associate
(2,170)
(10,169)
(79)%
Share of depreciation of associate
–
3,768
(100)%
Specially disclosed items affecting EBITDA
–
10,918
(100)%
Underlying EBITDA
1
178,603
143,477
24%
Changes in other working capital balances
(28,754)
(1,074)
2577%
Taxes paid
(8,773)
(4,842)
81%
Total capital expenditure
(59,149)
(56,272)
5%
Specially disclosed items affecting EBITDA
–
(10,918)
(100)%
Adjustment for share of EBITDA of associate, less dividend
–
(8,463)
(100)%
Underlying free cash flow
1
81,927
61,908
32%
Underlying free cash flow conversion
46%
43%
3%
Reconciliation of cash flows from operating activities to underlying free cash flow
2022
USD’000
2021
USD’000
Change
Net cash inflows from operating activities
119,202
51,656
131%
Changes in scheme debtors, merchant creditors, long-term receivables
and other liabilities
14,889
57,371
(74)%
Charge for share-based payment
(5,952)
(4,518)
32%
Interest paid
15,859
14,064
13%
Charge for expected credit losses
(2,922)
(393)
642%
Underlying free cash flow before capital expenditure
141,076
118,180
19%
Total capital expenditure
(59,149)
(56,272)
5%
Underlying free cash flow
1
81,927
61,908
32%
Capital expenditure
2022
USD’000
2021
USD’000
Change
Total capital expenditure
59,149
56,272
5%
Core capital expenditure:
53,430
43,955
22%
of which is maintenance capital expenditure
1
19,872
16,015
24%
of which is growth capital expenditure
1
33,558
27,940
20%
Saudi Arabia market entry
4,778
5,006
(5)%
Separation of shared services from Emirates NBD
941
7,311
(87)%
1
This is an Alternative Performance Measure (APM). See note 4 of the consolidated financial statements for APMs definition and the reconciliations of reported figures to APMs.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
96
Maintenance capital expenditure represents investments on additions or improvements to manage the existing
operations of the Group. Maintenance capital expenditure was USD 19.9 million in 2022 (2021: USD 16.0 million)
mainly spent on upgrading and servicing our technology infrastructure.
Growth capital expenditure represents investments made in delivering revenue growth, including but not limited
to the onboarding of new customers, expansion of services with existing customers or the development of new
product offerings. Growth capital expenditure was USD 33.6 million in the year (2021: USD 27.9 million) mainly
relating to investments in: i) new point-of-sale terminals to drive volume growth and support the signing of new
SME merchants in the UAE; ii) new capabilities to accelerate SME onboarding; and iii) enhancing our value-added
services through additional investments in fraud mitigation solutions and data analytics.
Capital expenditure to support the launch of processing into the Kingdom of Saudi Arabia (which is now complete)
amounted to USD 4.8 million (2021: USD 5.0 million), in line with expectations, having spent an aggregate of
c.USD 10 million on our market entry into the region.
Capital expenditure for the separation of shared services from Emirates NBD largely reflects investments on the
migration of our data centre and ERP implementation. These investments are now largely complete, with only
minimal spending to come in the future, which will not be disclosed separately. This totalled USD 0.9 million in
the year (2021: USD 7.3 million).
Reconciliation of capital expenditure to capital spend in the consolidated cash flows
2022
USD’000
2021
USD’000
Change
Total capital expenditure
59,149
56,272
5%
Goods/services received in the current period, but yet to be paid
(11,963)
(14,723)
(19)%
Goods/services received in prior period, and paid in the current period
18,222
13,513
35%
Total consolidated capital expenditure spend (as per consolidated statement
of cash flows)
65,408
55,062
19%
Working capital
The Group’s working capital requirements are broadly classified into the following two categories:
Settlement related working capital
2022
USD’000
2021
USD’000
Cash inflow/
(outflow)
USD’000
Scheme debtors
336,728
364,025
27,297
Restricted cash
119,357
86,801
(32,556)
Merchant creditors
(285,791)
(329,280)
(43,489)
Settlement related working capital balances
170,294
121,546
(48,748)
Movements in settlement related working capital balances are linked to the Merchant Services business line funding
cycle and represent those from both Network (UAE and Jordan) and DPO (Africa). The settlement related working
capital outflow during the year primarily arises from the UAE business, due to a larger decline in merchant creditors
compared to scheme debtors, as explained below.
Scheme debtors and merchant creditors:
Merchant creditor and scheme debtor balances generally reflect TPV
processed in the Merchant Services business line over the 2–3 days before the period end, as well as a number
of other factors that can include the day of the week on which the period ends. Overall, the merchant creditor
balance decreased by USD (43.5) million y/y and the scheme debtor balance decreased by USD (27.3) million y/y.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
97
GROUP CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
At Network,
which represents the majority of the balances: merchants generally receive funds before Network
obtains settlement from the card schemes and financial institutions, resulting in higher scheme debtor balances as
compared to merchant creditor balances. The majority of merchants receive settlement on a T+1 basis following a
consumer transaction. In 2022, the period ended on a Saturday on which day merchant settlements occurred as
usual in the UAE and the balance broadly represented one day of outstanding payments. In 2021, the period ended
on a Friday, which at that time was both a weekend and a day of religious observance; and no merchant payments
were remitted, resulting in approximately two days of outstanding payments. The 2022 merchant creditor balance
is therefore lower than at the end of 2021.
Network usually receives funds from the payment schemes on a T+2/3 basis, and from financial institutions on a T+1
basis. At the end of 2022, settlement from schemes for domestic TPV and financial institutions largely occurred as
normal, compared with 2021 which saw delayed domestic TPV and scheme settlements, for reasons related to the
day of the week as mentioned above. The resultant y/y decline in the scheme debtor balance is less than the y/y
decline in the merchant creditor balance.
At DPO,
the settlement timeline differs to Network. Payments to merchants are made after DPO has received
settlement payments from banks and mobile network operators and therefore results in larger merchant creditor
balances when compared to scheme debtor balances. The merchant creditor balance increased when compared
with the prior year, as the period ended on a Saturday, where payments were not remitted to merchants in the
African markets. This increase partly offset the decline in the UAE merchant creditor balance. The DPO scheme
debtor balance at the period end was de minimis, whilst the merchant creditor balance was USD 82.1 million out
of the total Group merchant creditor balance of USD 285.8 million.
Restricted cash:
Restricted cash represents balances specifically due to merchants. The restricted cash balance
of USD 119.4 million (2021: USD 86.8 million) is split between Network and DPO and has increased y/y mainly due
to the following:
At Network,
restricted cash largely represents cash held as a form of collateral to manage the risk of merchant
chargebacks and increased slightly during the year.
At DPO,
restricted cash largely represents cash balances already received from banks and mobile network
operators, but not yet remitted to merchants. This balance increased y/y, again due to the day of the week on
which the period ended in 2022, which was a Saturday when merchant settlements did not occur in multiple
African countries.
Other working capital balances
This represents the amount of capital used by the Group to fund its day-to-day trading operations, outside of
settlement flows in the Merchant Services business. The other working capital balances at USD 10.8 million are
2.5% of Group revenue. The overall change in other working capital balance is mainly due to: i) higher outstanding
receivables from customers across Africa, which is a reflection of our high growth in the region; and ii) a lower
unpaid expenses and unearned revenue balance compared to last year.
2022
USD’000
2021
USD’000
Change
USD’000
Trade receivables & chargeback receivables
77,301
65,675
(11,626)
(Net of provisions for expected credit losses)
Prepayments and other receivables
18,071
22,699
4,628
Trade, other payables and income tax payable
(127,943)
(145,331)
(17,388)
(32,571)
(56,957)
(24,386)
Items excluded
1
:
Capital expenditure accrual
14,378
20,637
6,259
Lease liabilities – current portion
4,262
3,282
(980)
Interest payable
223
101
(122)
Charge for expected credit losses
2,922
393
(2,529)
Tax liabilities
2
20,469
15,828
(4,641)
Other movements
1,122
(1,233)
(2,355)
Working capital changes
10,805
(17,949)
(28,754)
1
These items are excluded as these are either shown separately in the consolidated statement of cash flows or are non-cash in nature.
2
Tax liabilities include tax and other related liabilities under note 14 of USD 15.2 million (2021: USD 13.4 million), income tax payable in the statement of financial position
of USD 5.2 million (2021: USD 8.8 million) and net of advance taxes under note 11 of nil (2021: USD 6.4 million).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
98
Debt
The Group’s total debt, including current borrowings, amounted to USD 500.6 million in the year (2021: USD 491.3 million).
2022
USD’000
2021
USD’000
Change
Syndicated term loan
Principal outstanding
337,500
375,000
(10)%
Unamortised debt issue cost
(3,515)
(4,690)
(25)%
Net amount included in borrowings
333,985
370,310
(10)%
Other term loan – from business combination
7,365
8,754
(16)%
Revolving credit facility
–
35,000
(100)%
ATM lease liability
–
191
(100)%
Bank overdraft (for working capital)
159,287
77,089
107%
Total
500,637
491,344
2%
Non-current borrowings
265,291
336,739
(21)%
Current borrowings
235,346
154,605
52%
Total
500,637
491,344
2%
The long-term syndicated loan facility is utilised to increase the Group’s liquidity, fund inorganic growth opportunities
and other growth accelerator projects, as well as for general corporate purposes. The original facility was for
USD 525 million, of which USD 375 million was drawn in March 2020, which represents the opening balance at
the start of the prior period. We have since made a scheduled repayment of USD (37.5) million during 2022,
which represented 10% of the outstanding balance at the beginning of the year. The prepayment schedule increases
to 20% between 2023–25, with the remaining balance of 30% to be paid in full in 2026.
Our leverage ratio
1
, which represents net debt
1
to underlying EBITDA
1
, is calculated as per the methodology provided
in the financing facility agreement with the syndicated lending facility banks. Under these agreements net debt
excludes: a) the overdraft facilities which are mainly used to facilitate settlement related working capital balances;
and b) restricted cash balances. EBITDA is measured on an underlying basis over the last 12-month period and
financial covenants are set to 3.5x net debt: underlying EBITDA
1
.
Leverage ratio
1
Net debt movement
2022
USD’000
2021
USD’000
Net debt
118,683
127,724
Underlying EBITDA
1
178,603
143,477
Leverage ratio
0.7
0.9
The table below provides the reconciliation of net debt as per the consolidated financial information and methodology
prescribed in the financing agreement.
Particulars
2022
USD’000
2021
USD’000
Non-current borrowings
265,291
336,739
Current borrowings
235,346
154,605
Cash and cash equivalents (un-restricted)
(234,402)
(270,345)
Net debt as per consolidated financial information
266,235
220,999
Less: Working capital facility overdraft
(159,287)
(77,089)
Less: Cash balance (non-controlling interest of subsidiary)
–
(1,833)
Add: Unamortised debt issue cost
3,515
4,690
Other adjustments*
8,220
(19,043)
Net debt as per the financing facility agreement
118,683
127,724
* Other adjustments mainly include adjustment for any temporary end of day excess/short drawdown position of the working capital facility.
1
These are Alternative Performance Measures, the definitions and calculations of which are included in this section.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
99
GROUP CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
The table below reconciles the movement in net debt through the period:
Net debt movement
2022
USD’000
2021
USD’000
Opening balance
127,724
252
Repayment of borrowings
Term loan
(37,500)
–
Revolving credit facility
(35,000)
–
ATM lease liabilities
(191)
(734)
Other bank loans
(1,389)
8,754
Cash balances
35,943
128,436
Cash balances of held for sale entity (70%)
1,833
(1,833)
Others
1
27,263
(7,151)
Closing balance
118,683
127,724
1
Others includes changes in the adjustment for any temporary end of day excess/short drawdown position of the working capital facility.
Definitions
Foreign currencies which are not USD pegged
The non-USD pegged currencies that have an impact on the Group as a result of foreign operations in Egypt,
South Africa, Nigeria, Ghana and Kenya include the Egyptian Pound (EGP), South African Rand (ZAR),
Nigerian Naira (NGN), Ghanaian Cedi (GHS) and Kenyan Shilling (KES), respectively.
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) and South African Rand (ZAR).
Average rates
The table shows the average rate of these currencies per USD for the year of 2022 and 2021.
Currency rate vs USD
2022
Average rate
2021
Average rate
Egyptian Pound (EGP)
19.4
15.8
Nigerian Naira (NGN)
427.6
403.8
South African Rand (ZAR)
16.3
14.8
Ghanaian Cedi (GHS)
8.4
5.8
Kenyan Shilling (KES)
122.8
112.7
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
100
Investment for
further growth
opportunities
Stable balance
sheet
Shareholder
returns
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)
TPV is defined as the aggregate monetary volume of purchases processed by the Group within its Merchant
Services business line. The 2021 and 2022 TPV figures have been restated to primarily exclude the acquirer
processing volumes following the new business line segmentation, where acquirer processing is now within
the newly classified Outsourced Payment Services segment.
Number of credentials hosted
Number of credentials hosted is defined as the aggregate number of consumer payment credentials managed
and billed by the Group within its Outsourced Payment Services business line.
Number of transactions
Number of transactions is defined as the aggregate number of transactions processed and billed by the Group
within its Outsourced Payment Services business line.
›
Selective organic investment to accelerate growth, such as market entry into KSA,
Merchant Services launch in Egypt, and new business lines such as Commercial Payments.
›
Potential M&A, where we will be disciplined around targets, focusing on three strategic areas:
1) in market consolidation; 2) new market entry; and 3) new products and capabilities.
›
Leverage at 0.7x, below the 1–2x average target range over the medium to long term.
›
Comfortable stretching above the target range in the short term for appropriate M&A,
with a clear deleveraging profile.
›
Launched a share buyback programme of up to USD 100 million to deploy excess cash.
›
Repurchased 11.5 million shares through 2022, equivalent to USD 40.6 million.
Capital allocation policy prioritises investment for growth
Rohit Malhotra
Group Chief Financial Officer and Group Chief Strategy Officer
8 March 2023
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PRINCIPAL RISKS AND UNCERTAINTIES
Introduction from the Chief Risk Officer
and Group Company Secretary
“As our geographical footprint
continues to expand across the
Middle East and Africa, we continue
to ensure that our Enterprise
Risk Management Framework is
effectively embedded across the
Group to support the delivery of our
strategic objectives and long-term
shareholder value. Our risk universe
and governance model form the
basis of discussions across our three
lines of defence, keeping us abreast
of emerging risks.”
Jay Razzaq
Group Chief Risk Officer and
Group Company Secretary
Overview
Given the dynamic markets we operate in across
the Middle East and Africa, our approach to risk
management continues to mature across the Group.
A sound regulatory compliance monitoring and
reporting structure has been established across
the Group to ensure that we remain compliant
with regulatory requirements across all jurisdictions.
We have enhanced our risk oversight of our
third-party vendors and supply chain, which was
achieved by enhancing our policies, monitoring
and collaborative due diligence. Following the
acquisition of the DPO Group in 2021, we have
successfully implemented the Group’s Enterprise
Risk Management Framework (ERMF) and
processes across the DPO business. With
our continuous business expansion across
the Middle East and Africa, our risk appetite,
principal and emerging risks were also revaluated
and approved by the Board. Ensuring our focus
on our environmental, social and governance
responsibilities, we have also developed climate
change risk-related Key Risk Indicators (KRIs)
which have been integrated within our existing
principal risks framework.
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With the expansion of the Group’s business in 2022,
the following principal risks were in focus.
Operational Resiliency:
Managing operational resiliency
risk is critical for the Group to
protect its operations, maintain
the reputation and brand
image, comply with regulatory
requirements, and avoid losses,
damages and negative
consequences.
The Group has invested heavily
to ensure its ability to continue its
operations effectively in the face
of operational disruptions that
may be caused by cyber-attacks,
hardware failures, natural disasters
or human errors.
This was achieved through
a combination of robust risk
management processes, Disaster
Recovery (DR) planning, data
backup and recovery systems,
security measures and business
continuity planning. The ultimate
goal being to minimise downtime,
ensure continuity of services
and protect sensitive customer
information. Details of the
progress made by the Group
and future plans are explained
on page 109.
ERMF integration in DPO business:
›
Risk assessments for all DPO
business units have been
completed, enabling a 360°
view of the DPO business
and its risk profile.
›
A dedicated ERM team has been
established in DPO to manage
and monitor the implementation
of our risk framework, ensuring
alignment with Group standards
and best practices.
›
DPO businesses have been aligned
with the Group’s principal risks,
KRIs and reporting processes.
›
Risk champions have been
nominated across all DPO
businesses and trained on the
Group’s risk management practices.
Task Force on Climate-related
Financial Disclosures:
›
Climate change-related risk
continues to be monitored
as an emerging risk.
›
Current and anticipated climate-
related risks were categorised
using the TCFD categorisation
for transition risk and physical risk.
›
Risks were identified and scored
by the TCFD working group,
validated in a workshop with
senior stakeholders, and presented
to the Board Audit Committee.
›
Climate change risk-related KRIs
have been developed and have
been approved by the Board.
›
These climate change risk-related
KRIs have been integrated within
our existing principal risks and
will be monitored.
›
Risk and Control Self
Assessment (RCSA) standards
are being documented for
climate change-related risks
and will be tested periodically.
Execution:
The importance of managing
execution risk is crucial for
the Group to achieve its goals,
minimise losses, maintain
business continuity and increase
shareholder confidence in the
Group’s ability to deliver results.
Operating in developing and
volatile markets in the Middle East
and Africa, the Group’s strategic
plans are subject to the risk of
failing to achieve the desired
outcome or can be negatively
impacted by external factors
such as changes in technology,
regulations or market conditions.
This can include risks related
to the development and
implementation of new products
or services, expansion into new
markets and reliance on key
partnerships or technologies.
To overcome this, the Group has
engaged in initiatives to diversify
its revenue streams, partnered
with other companies, kept
abreast with regulatory changes,
strengthened its risk management
framework, invested in technology
and established a strong cyber
security process. Details of the
progress made by the Group
and future plans are explained
on page 110.
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2nd Line of Defence
Quarterly reporting
Quarterly reporting
Quarterly reporting
Quarterly reporting
1st Line of Defence
Quarterly reporting
3rd Line of Defence
Setting risk
strategy, appetite
and culture.
Monitoring of
Board Committees’
performance.
Oversees the
implementation of the
ERMF and risk culture.
Monitoring of principal
risks and KRIs.
Board Committees
(Audit Committee,
and Risk & Technology
Committee)
Manages each of
the risk divisions
and ensures effective
implementation of risk
management practices.
Enterprise Risk
Management
Committee
Assesses ERM
capabilities.
Implements and
leads any major
initiatives or changes.
Network Executive
Management
Committee
Provides assurance
to Executive
Management and
Board Committees
on the application
and effectiveness of
the ERM Framework
and risk culture.
Group Internal
Audit
External auditor
Reviews and
monitors risks,
internal controls,
mandatory reporting,
regulatory, card
scheme requirements
and mitigations. Also
ensures oversight
and governance
of technology risks.
Risk Management
function (Operational,
Fraud, Credit,
Information Security
and Technology Risk
working group)
Compliance function
(Regulatory, AML,
Sanctions and Card
schemes compliance
monitoring)
Owners of the risks
and internal control.
Accountable for
performance of
activities within the
stated risk appetite
and tolerance limits.
Issuing and
Acquiring Business
(Middle East
and Africa)
Support Functions
(Operations, IT, HR,
Finance, Products,
Marketing, Strategy)
Cyber security:
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Mitigating emerging cyber risks
and continuing to invest in our
cyber security programme to
provide secure, trusted commerce
and card payment solutions
across every touch point.
›
The security of our solutions,
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 year
on year. Governments and
regulators across our markets
are increasingly recognising
cyber security as a systemic
risk resulting in the emergence
of regulations and standards
to combat the emerging
cyber threats.
›
In addition, we expect to continue
to invest in resources to maintain
and enhance our information
security and controls and to
ensure we are able to investigate
and remediate any security
vulnerabilities.
›
We have implemented a dynamic
cyber security framework which
aims to be ahead of prevailing
cyber threats in our markets.
›
Management, organisational and
technical controls support the
mitigation of cyber security risk
in a dynamic payments industry.
›
For early detection and response
to cyber threats, the Group uses a
defence in depth approach driven
by Cyber Threat Intelligence (CTI).
CTI is knowledge, skills and
experience-based information
concerning the occurrence and
assessment of cyber threats
and is intended to help mitigate
potential attacks and harmful
events from occurring
in cyberspace.
›
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.
›
We maintain a cyber security
dashboard to keep the Risk
& Technology Committee and
the Board apprised of emerging
cyber security threats.
How we manage risk
Board of
Directors
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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.
Business environment
›
Utilisation of our business understanding and internal/external sources.
›
Understanding of our business strategy and defined risk appetite.
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.
Oversight
›
The ERMC and Executive Management Committee provide ongoing
review and challenge to facilitate the approach.
›
The Board, Audit Committee and Risk & Technology Committee,
supported by Group Internal Audit, provide further review and
challenge and set the overall risk appetite.
Existing controls
›
Identification and assessment of controls that mitigate risk
event occurring.
›
Assessment of design and operating effectiveness.
Risk monitoring & reporting
›
The Group monitors the risks for any changes in risk trend.
›
Reports and escalates as per cycle and criteria.
Residual risk assessment
›
Application of residual risk scoring based on residual impact
and probability.
›
Residual scoring considers the existing control environment.
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.
Our risk management
governance model
We have a dynamic, practical and
action-oriented risk management
governance model defined in the
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 continue to work closely with
our Risk & Technology Committee
to report on the progress of our risk
management practices, initiatives
and key projects. Some of the
key projects in 2022 included
Application Programming Interface
(API) programme, DPO synergies,
Saudi Arabia market entry, Merchant
Services in Egypt and Data Lake
for enterprise-wide data analytics.
Our ERMF model has enabled
management to make sound
risk-based decisions on strategic
initiatives. The Group is well poised
for its entry into the Saudi Arabia
market in a phased manner in 2023,
including the establishment of a
dedicated Risk, Compliance and
Information Security team. The
Group has successfully completed
the integration of ERMF across the
DPO business and all risk policies
and processes have been aligned
with the Group. Comprehensive
risk assessments were conducted
to support the expansion of our
products into new markets with our
Merchant Services being introduced
in Egypt, and the Group’s Data Lake
solution has been implemented
to enhance our enterprise-wide
data analytics capabilities.
Our approach to risk management
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 2022,
to mitigate the risk impact of the
Russia-Ukraine conflict as well as
the impact of inflation experienced
across our geolocations, we focused
on strengthening the risk teams
across the Group by hiring additional
risk resources for key roles.
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PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Several measures were taken
to enhance our sanctions compliance
controls in relation to the Russia-
Ukraine conflict. A due diligence
task force including risk, legal and
finance control functions was also
established to improve oversight
of third-party vendors and supply
chain to assess and mitigate our
risk exposures. Third-party vendor
security assessments conducted
by our information security team
have also been strengthened to
ensure that optimal standards are
maintained. The additional risk
resources across the Group have
supported us in strengthening
the assurance reviews, with more
focus on information technology-
related activities.
With the Group’s expansion into
new markets, increased regulatory
landscape and macroeconomic
uncertainties, we are now aiming to
move towards an agile model of risk
management across the Group from
the traditional waterfall approach
by instilling collaborative working
groups between Risk and Business
functions to support, manage
and mitigate risks while striving
to achieve business objectives.
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.
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 geopolitical
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 defences.
We will also aim to ensure our
environmental, social and governance
responsibilities are reflected in the
decisions we make. 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,
including environmental, social
and governance considerations.
The Group 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 ExCo 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
refresh of the Saudi Arabia market
entry risk profile before execution
of these strategic initiatives;
›
a consistent tone from the top
and clear responsibilities for risk
identification and challenge; refer
to ESG Strategy section on pages
38 to 57;
›
employees have risk management
accountability and escalate issues
on a timely basis;
›
our incentive structures described
within our Remuneration Report
on page 173 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; and
›
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
and mandatory online training
programme is in place covering
important risk and compliance
topics. We have had very high levels
of participation from our colleagues
across the Group in 2022.
In addition, in accordance with
our three lines of defence model,
Group Internal Audit completes
an annual plan of risk-based audits
that provides an independent
assessment of the Group’s control
environment and risk and control
culture. Operational Risk, Cyber
Security and Compliance work
closely with Group Internal Audit
to coordinate their respective
assurance plans to maximise the
combined assurance coverage
each year.
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.
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The completed priorities for Group Risk in 2022:
Priorities for 2022
Benefits
Completion of integration
of the Group’s ERM Framework
into DPO business.
Implemented and embedded an integration strategy with prioritised focus
on control functions in line with our ERM Framework. Consolidated the
existing risk management practices of DPO and aligned them to the Group
framework, taking into account local requirements.
Completion of the annual assurance
plan for 2022.
Provided 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.
Completed the enhancement of the
automation of our AML processes.
To ensure effective and timely monitoring of AML risks, a project was
completed for implementation of an AML monitoring system to support
our Merchant Services business in Jordan.
Focus areas for 2023
In 2023 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 2023 will be:
Priorities for 2023
Rationale
Risk and Control Self Assessment
(RCSA) testing to be rolled out
in DPO.
Implementing and embedding RCSA testing across the DPO business to
ensure operating effectiveness of the controls in place to mitigate the risks
identified in the risk assessments.
Completion of the annual assurance
plan for 2023.
To provide assurance on the effectiveness of Group’s current control
environment by the second line of defence and to ensure these are
aligned with and meeting the overall Group’s business objectives.
Completion of the compliance
monitoring plan for 2023.
Theme-based reviews to capture market abuse regulations, whistleblowing,
anti-bribery and anti-corruption programme and an end-to-end review
of the DPO AML framework to align with the Group’s practices.
Complete the enhancement of the
automation of our AML processes.
To ensure effective and timely monitoring of AML risks, a project is in
progress for implementation of an AML monitoring system to support
our Merchant Services business in UAE, South Africa and Saudi Arabia.
Our principal and emerging risks
It was a busy year with significant
time and focus given to monitoring
the principal and emerging risks
identified as facing the Group given
the macroeconomic uncertainties
and the rise in global inflation. This is
also attributed to the Russia-Ukraine
conflict which has had a direct
impact on global price levels with
cost of food and fuel having notably
risen and having a knock-on effect
on other industries. As a result, there
have been rigorous processes in
place to identify, evaluate and manage
the principal risks faced by the Group,
as well as the likelihood of a risk
occurring and the costs of control.
We completed a robust assessment
of the Group’s principal and
emerging risks, including those
that could result in events or
circumstances that might threaten
the Group’s business model, future
performance, solvency or liquidity
and reputation. The outcome of
the assessment concluded that no
changes were recommended for
2023 since the current principal risks
adequately define the overall risks
to the Group. Based on the global
economic uncertainties, a number
of changes were made to the linked
KRIs and underlying thresholds
to reinforce the Group’s current
principal risk framework.
With the implementation of the
Group’s ESG strategy, climate risk
was recognised as an emerging risk
in 2021. Since then, extensive work
has been undertaken in 2022 to
identify appropriate climate-related
risk measures to monitor the impact
of climate change on the Group.
Given that we are a low emitter
(as in TCFD), rather than creating
a standalone principal risk, we have
developed climate risk-related KRIs
which have been embedded into the
Group’s existing principal risk
framework. As climate risk continues
to evolve, the effect upon these risks
may change over time.
For 2022, 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.
Despite the heightened global risk,
our overall risk has remained stable
due to 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 2022 and the plans for 2023,
their potential impact, our risk appetite
and the link to our strategic priorities.
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PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Faster sign-up of merchants
and financial institutions
Link to strategic priorities
Grow the merchant base
Access new revenue pools
Harness the power
of partnerships
Add new revenue streams
to every transaction
Be the e-commerce
champion in the region
Cyber Security
Risk of breach of the Group’s infrastructure resulting in the compromise of data or service
disruption through cyber security breaches.
Strategic priorities
2
2
3
Risk impact
Progress during 2022
Plan for 2023
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.
›
A new Group CISO was hired in
June 2022 and we have refreshed
the cyber security strategy,
benchmarked our capabilities
against our international peer
group, redesigned our
organisational design for cyber
security and integrated our regions
into a Group aligned structure,
including the DPO business.
›
All regions, including our new
business in Saudi Arabia, have
been PCI DSS and PCI PIN certified
and our ISO 27001 certification
has been expanded for Africa
to include our Ghana and
Nigeria businesses.
›
We have implemented automation
tools to enhance the vulnerability
detection, reporting and mitigation
process. This is a significant
improvement to our security
posture which has reduced
timelines for treating critical
vulnerabilities.
›
We have continued to deploy
industry leading access
management and Privileged
Access Management controls
across the Group including Saudi
Arabia and Nigeria.
›
Automated the detection of
indicators of compromise (IOCs)
with our security operations centre
(SOC) to enhance protection and
reduce human dependency.
›
Complete the roll out of our single
SOC coverage for all regions
to unify our response efforts,
automate detection and provide
greater clarity on the threat
environment across all markets.
›
Continue to deploy protective
and detective controls across our
multi-Cloud environments to
support the Group’s ambition
to be quicker to market and be
the e-commerce champion for
the region.
›
Build a development, security
and operations (DevSecOps)
function to further integrate secure
software development lifecycle
practices across the Group as
we build new innovative features
to support customer needs.
›
Maximise the entire Group
information security footprint to
harness capability in the regions
and generate greater symmetry
across regions.
Increase in the number
and frequency of cyber
activity, potentially as
a consequence of the
Russia–Ukraine conflict.
Distributed denial of
service (DDOS) attacks
have increased across
the payments industry by
109% in terms of volume
and duration. Recent
malware attacks on clients
and vendors demonstrate
the supply chain risks
prevalent in the industry.
Risk appetite: Low
The Group will not
accept risks which
may compromise the
confidentiality, integrity
or availability of its
data or systems for the
benefit of customers.
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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.
Risk appetite rating defined
Risk trends defined
Operational Resiliency
Risk of interruption to critical production services and 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
3
1
2
3
Risk impact
Progress during 2022
Plan for 2023
Risk trend
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.
An unexpected disruption to
operational performance that
may cause damage to customer
relations or financial loss to the
business.
›
Completed our Group-wide
Disaster Recovery (DR) testing
for all applications across all
Group locations.
›
Completed the DR data centre
build, and core systems migration
in Jordan.
›
Completed the self-onboarding
portal build for UAE. Self-
onboarding portal build completed
for Saudi Arabia for pre-paid and
debit card issuers.
›
Completed the technological
production readiness for Saudi
Arabia market entry, including
proving of DR capability. Other
key strategic objectives completed
include Enterprise Resource
Planning (ERP), Application
Programming Interface (API),
and Data Lake for enterprise-wide
data analytics.
›
Continued with automation
and optimisation of processes
across regions to enable
scale in processing volumes,
faster turnaround times and
enhanced controls.
›
Completed the automation
of reports in Jordan for
customers to have instant
access to reports thereby
enhancing customer experience.
›
Enhanced security patching
process to mitigate cyber
security threats by implementing
monthly critical patches instead
of quarterly.
›
Hardware Security Module (HSM)
upgrade to enhance the stability
and security, and ensure payments
eco-system runs on hardware
compliant with PCI and regulatory
requirements in UAE.
›
Authorisation switch system
upgrade in GCC to extend
hardware and software support
until 2026.
›
Enhance UAE switch system to
support Payment Authorisation
Application Programming
Interfaces (APIs).
›
Optimise existing automation
solutions through re-engineering
and re-design at back office to
deliver more efficiencies across
all regions.
›
Continue to enhance self-service
portals to digitise and deliver
optimum services to customers.
›
Enhance systems availability
for Africa by implementing
High Availability on Network
Lite platform.
›
Improve resilience and increase
bandwidth for switch connectivity
to schemes.
Improvements in
maintaining high
availability of tier 1
systems, service levels
and disaster recovery
capabilities. Investments
in new data centre in
Jordan and enhanced
security patching process.
Risk appetite: Informed
We are accepting some
level of modest disruption
and operational failure
from time to time, within
the relative norms of the
markets in which we
operate, provided the
impact of failures remains
within acceptable limits.
However, we ensure
appropriate levels of
resilience are in place
to minimise the impact
to our customers.
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109
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Execution
Risk of the Group’s ability to maintain its position as the best payments partner in the Middle
East and Africa. Our ambitious growth and expansion plans could be compromised if we are
not able to deliver key strategic 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. Failure to do so could expose us to adverse financial and reputational risk and
negatively impact our return on investment.
Strategic priorities
1
2
3
1
2
3
Risk impact
Progress during 2022
Plan for 2023
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.
We fail to deliver critical
strategic projects on time
and on budget, deferring
or stalling growth and
increasing operational
and capital expenses.
›
Digital onboarding developed
to capture full suite of use-cases
and capabilities. Self-onboarding
capability developed for UAE and
digital onboarding enhanced in
Egypt, Jordan and DPO Africa.
›
Continued momentum in online
merchant sign-ups, supported
by DPO Pay in UAE.
›
ERM Framework implemented
in the DPO business as per the
integration plan.
›
Deployment of infrastructure in
Saudi Arabia and progressed on
securing the required licences
and certifications, with a healthy
business pipeline for 2023.
›
Expanded our products into
new markets with our Merchant
Services offering being introduced
to Egypt.
›
We have adopted a ‘Cloud First’
strategy for all new market entry
where permissible. This has been
implemented in Saudi Arabia
and can be replicated in other
markets as opportunities
present themselves.
›
Continue to deliver revenue
growth for the Group by cross-
selling both DPO and Network
products to existing customers
and in other markets.
›
Improve ease of doing business with
Network through advancement
in our technology platforms such
as APIs, self-onboarding and
self-service portals.
›
Explore new revenue streams by
extending our analytics offerings
through Cloud-based platforms
that support advance analytics.
›
Execute on all aspects of our 2023
strategic plan.
›
Continue expansion of our
product suite and value-added
services offering to client banks
and merchants.
Risk appetite: Informed
Revenue growth in line
with investor expectations
and no dilution of Group’s
market position in its
markets of operation.
The Group has limited
appetite for late or over
budget delivery of critical
strategic projects.
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110
People
Inability to attract, develop and retain a skilled workforce and inconsistent organisational
culture across the Group.
Strategic priorities
1
2
3
1
2
3
Risk impact
Progress during 2022
Plan for 2023
Risk trend
We are unable to effectively
manage our workforce to
ensure consistent delivery
of the Group’s strategy and/or
operational performance.
›
Corporate intranet portal was
rolled out to enable better
communication, collaboration,
engagement and productivity
in the workforce.
›
Automated the employee
performance management
process and also included
ESG-based KPIs.
›
Created more comfortable
and energising workspaces for
employees by renovating existing
offices and opening new offices
in UAE, Egypt, Jordan and
Saudi Arabia.
›
We delivered 60,244 hours of
training (YTD) covering 100% of
our employees across the Group.
›
Through the Training Needs
Analysis survey, we identified
and rolled out targeted high-
impact learning programmes,
Prevention of Sexual Harassment
(POSH), leadership skills for
managers, career counselling
and mentorship programmes.
›
Network crossed the 30% mark
for women representation in the
workforce in 2022.
›
Encouraged inclusive behaviour
and empowered our employees
through initiatives such as ‘Break
the Bias’, the ‘Beacon Award’ to
recognise our exemplary women
role models, ‘ME Women Leaders’
Summit’ and ‘Network Long
Service Award’.
›
Implement the Network Way
and values behaviours along
with alignment of core practices,
policies and procedures in the
DPO business.
›
Increase opportunities for
collaboration through initiatives
such as collaborative culture
workshops, ‘Cooperate and
Collaborate’ programmes,
and focus group meetings.
›
Enhance career development
by introducing skills and
competencies-based training
programmes, job rotation,
mentorship programmes, and
learning and development KPIs.
Engaged workforce
with moderate
attrition levels.
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.
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Strategic Report
111
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Compliance
Failure or inability to comply with relevant laws, regulations, scheme rules and mandatory
reporting requirements including failure to identify, monitor and respond to changing
regulations or scheme rules.
Strategic priorities
1
2
3
1
Risk impact
Progress during 2022
Plan for 2023
Risk trend
A breach of or noncompliance
with legal or regulatory
standards leading to
penalties, sanctions or
reputational damage.
›
Completed the annual
compliance assurance
reviews in line with the annual
compliance monitoring plan.
›
Regulatory Change Management
Committee monitored new
and emerging regulations in
the MEA region.
›
Acquired payments services
licences from regulators in
Ghana, Kenya and Egypt.
›
Received in principle approval
from Central Bank of UAE to
support the Group’s acquiring
business under ‘Retail Payments
Services and Card Scheme
Regulations’. The Group has also
received in principle approval
from the Saudi Arabian Central
Bank to conduct acquiring
business in Saudi Arabia.
›
Implemented an AML monitoring
system in Jordan to ensure
effective and timely monitoring of
AML risks related to our Merchant
Services business in Jordan.
›
Completion of our compliance
monitoring programme for the
year. The programme includes
theme-based reviews to capture
market abuse regulations,
whistleblowing, anti-bribery
and anti-corruption programme
and a further review of DPO AML
framework to align with the
Group’s practices.
›
Continue to implement new and
revised regulatory requirements
as and when received.
›
Further automation of our
AML monitoring process in
UAE and South Africa.
›
Continue to strengthen our
compliance capabilities in
our local regulated markets.
Wide ranging and
extensive sanctions as a
consequence of Russia–
Ukraine conflict and
inclusion of Myanmar in
the Financial Action Task
Force (FATF) blacklist.
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.
Geopolitical
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
1
3
Risk impact
Progress during 2022
Plan for 2023
Risk trend
A geopolitical event within our
markets that impacts our ability
to do business or to meet our
strategic objectives.
›
Completed country risk
assessments for markets the
Group identified as high risk.
›
Reviewed evolving regulatory
changes in the markets where
the Group provides its services.
›
Completed due diligence review
for issuing clients across all
relevant markets.
›
Assessment of new regulations,
amendments and local guidelines
for new market entries the Group
intends to progress with.
›
Risk assessments will be
conducted for regions where the
Group does not have a physical
presence, and provides services on
a cross-border basis, such as Libya,
Uganda, DRC Congo, etc.
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.
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112
Financial
Risk of the Group’s inability to have sufficient liquidity to meet its obligations including
minimum capital funding requirements across geographies as they fall due. Adverse
movements in foreign exchange rates arising from the Group’s foreign operations and
transactions in currencies other than AED and USD pegged currencies. Adverse interest rate
risk primarily on its variable rate long-term borrowing/revolving working capital line of credit
and exposure to inaccurate forecast of future business performance due to various forecasting
models being used.
Strategic priorities
1
2
3
1
2
3
Risk impact
Progress during 2022
Plan for 2023
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.
›
The Group has developed
policies to manage financial
risks concerning foreign
exchange rates and other
derivatives, debt management,
bank relationship management
and treasury operations.
›
On 11 August 2022, the Group
announced a share buyback
programme, the ‘Initial Program’.
As at 31 December 2022, shares
amounting to USD 40.6 million
have been purchased under the
Initial Program.
›
We continued monitoring our
liquidity position closely to ensure
sufficient funds and liquidity
headroom are available to meet
our liquidity requirements.
Initial share buyback programme
does not impact Group liquidity
position adversely.
›
Payment of term loan instalments
(USD 37.5 million) and repayment
of revolving credit facility of
USD 35 million. The revolving
credit facility has subsequently
matured and been cancelled.
›
We considered and analysed
options for interest rate hedge
during the year, based on interest
rate forecasts provided by our
banking partners, and concluded
not to proceed with interest rate
hedging, based on the interest rate
curves at the time of analysis.
›
The Group will ensure adherence
to policies to manage financial risk
arising from FX rate fluctuations,
interest rate changes and other
treasury activities.
›
With the completion of the Initial
Program of share buyback up
to an aggregate amount of
USD 50 million in 2023, the Group
launched buyback of a further
tranche of up to USD 50 million.
›
We will continue close monitoring
of our liquidity position to ensure
sufficient funds and liquidity
headroom are available to meet
our financial obligations and
share buyback programmes
are not expected to adversely
impact Group liquidity position.
›
Repayment of the term loan
instalment (USD 75 million)
as contractually due or earlier.
›
Continue to monitor interest rate
curves and appropriate decision
will be taken to hedge the interest
rates on our variable rate borrowings.
›
As LIBOR will cease to exist
by June 2023, we will prepare
for shifting to an alternative
risk-free rate ‘SOFR’ by proactively
engaging with banks to minimise
the impact of any expected
increase in effective rate on
our borrowings.
›
Monitor FX risk arising from
cash flows from international
locations subject to significant
currency fluctuations.
The Group has
sufficient liquidity
backed up by improved
business performance
post recovery from
the pandemic.
Risk appetite: Informed
The Group will manage
its liquidity, FX and
interest rate risks in line
with agreed policies
and thresholds.
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Strategic Report
113
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Risk impact
Progress during 2022
Plan for 2023
Risk trend
A third-party provider
does not meet its obligations,
which negatively impacts
our customer relationships,
and causes disruption to
business performance.
›
Re-engineered the annual vendor
risk assessment review process.
›
Thorough reviews were conducted
for vendors who provide critical
services to Network.
›
All significant findings identified
as part of the 2021 reviews were
closed in accordance with
agreed-upon mitigation plans.
›
A vendor performance
questionnaire was shared
with internal stakeholders to
measure the performance of
high-risk vendors.
›
Implemented annual financial
due diligence reviews and
contractual reviews for all
high-risk-rated vendors.
›
Continue to conduct risk
assessments for high and
medium-risk-rated vendors.
›
Monitor and close the open risks
with high-risk vendors identified
through reviews.
›
Address any contractual
deficiencies for high-risk vendors
identified during vendor review
process, where appropriate.
›
Monitor the performance
of high-risk vendors.
›
Redefine risk assessment
questionnaire based on the nature
of service the vendor delivers.
›
Create scope-specific scorecards
to measure the performance of
high-risk vendors utilising KPIs/
SLAs from their agreements.
›
Conduct financial due diligence
checks for high-risk vendors at the
time of onboarding.
›
Vendor lifecycle will be managed
through Oracle-based solution
with vendor onboarding, Risk and
Compliance approvals being
obtained through the system.
Risk appetite: Low
The Group will not
accept risks which
may compromise the
confidentiality, integrity
and availability of its data
and its customers’ data.
Risk impact
Progress during 2022
Plan for 2023
Risk trend
Higher level of losses resulting
in material impact on reported
results and material damage
to reputation.
›
Fraud detection processes and
best practices proven in the
UAE were implemented in the
new markets where the Group
has expanded the Merchant
Services portfolio.
›
Credit and fraud risk profile of the DPO
business was re-assessed and the
Group Enterprise Risk Management
Framework was embedded.
›
Close monitoring and recovery
efforts have resulted in reduced
delinquency levels of Outsourced
Payment Services business clients’
receivables and unrecoverable
chargeback. Credit losses were
at very low levels, well within our
risk appetite
›
A ‘state of the art’ system with
artificial intelligence and machine
learning driven fraud detection
and deflection capabilities will be
implemented in UAE for acquiring
fraud management.
›
Airline customer portfolio of the
DPO business which is currently
with other acquirers will be
migrated under the sponsorship
of the Group’s acquiring business
in UAE to benefit commercially
and to align with the Group’s risk
monitoring framework.
Risk appetite: Informed
Acquiring fraud losses as a
percentage of sales to be
less than market average of
6 bps. Enterprise level net
fraud losses to be less than
5% of the annual net profit of
previous year of the Group.
The ratio of unrecoverable
chargebacks and credit
losses to annual net profit of
previous year of the Group
not to exceed more than 5%
of portfolio. All sponsored
issuing clients’ settlements
to be cleared within 15 days.
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 the 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.
Third Party
Risk of the Group’s dependencies on various third parties to provide core systems, technologies,
infrastructure, product and service-related support which may increase the Group’s risk exposure
in the event of a material service disruption, delay or cyber-attack with no alternative arrangements.
Also, risk of failure of third parties to comply with contractual obligations, applicable laws and
international standards.
Strategic priorities
1
2
1
3
Strategic priorities
1
2
3
1
3
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114
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
Risk & Technology Committee and
Board of Directors for their review
and assessment.
Our ERM process ensures emerging
risks are considered to aid the Risk
& Technology 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 list of some current emerging
risks of relevance to the Group are set
out below.
1
Increasingly
sophisticated cyber
security threats:
We expect to see an increase
in the level of sophistication of
cyber-related attacks as a result
of the shifting geopolitical 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.
2
Competition risk:
The Group has contributed to the
acceleration of 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
Payment Service Providers operating
in certain territories, be it through
competitive pricing, enhanced
capabilities and solutions, or skilled
resources with local market knowledge.
3
Increasing
geopolitical risks:
The Russia–Ukraine conflict carries
significant risks for the world economy
that has yet to fully recover from
the impact of the global pandemic.
A further prolonged conflict will
pose additional risks to the global
economic recovery as the impact
of wide-ranging sanctions including
those affecting international financial
and payment systems take effect.
There is also a heightened risk in times
of political uncertainty on this scale of
an increase in the number, frequency
and scale of cyber-related activity
across all sectors.
Macroeconomic risk:
4
The recent surge in inflation, interest
rates, inflationary impact on costs
and merchant trading can have
an impact on markets that are not
properly regulated which can result
in both a short and long-term
concern for financial institutions
and Payment Service Providers.
Some of the macroeconomic factors
that can influence macro risk include
unemployment rates, interest rates,
exchange rates and commodity
prices. There are also potential
risks to financial stability from an
unchecked broadening of access
to credit in countries with weaker
regulatory supervision.
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Strategic Report
115
NON-FINANCIAL INFORMATION STATEMENT
The table and cross-references below aim to help stakeholders better understand the Group’s approach to
key non-financial matters and identify where they can find all relevant non-financial information in this report.
Reporting requirement
Internal policies and standards
Page
Environmental matters
Corporate Social Responsibility
Health and Safety
Environmental Management Policy
51
31
41
Climate change
Corporate Social Responsibility
Health and Safety Policy
51
31
Colleagues
Code of Conduct
Employee Charter
Health and Safety Policy
Equality, Diversity and Inclusion
Learning & Development
Employee engagement survey
Whistleblower Policy
48
162
31
35
33
29
132
Human rights
Modern Slavery Statement
Code of Conduct
Whistleblower Policy
Group Procurement Policy
Vendor Code of Conduct
49
48
132
49
49
Social matters
Corporate Social Responsibility
Equality, Diversity and Inclusion Policy
51
52
Anti-corruption and anti-bribery
Code of Conduct
Anti-Bribery and Anti-Corruption Policy
Sanctions Compliance Policy
Anti-Money Laundering/Counter Terrorism Funding (AML/CTF) Policy
Conflicts of Interest Policy
Market Abuse Regulation (MAR) Manual
Whistleblower Policy
48
33,48
48
48
48
48
132
Business model
N/A
6
Principal risks and uncertainties
Enterprise Risk Management Framework
102
Non-financial key
performance indicators
N/A
24, 28
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
116
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, 120, 164 and
190 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 consumers; 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. The Board is committed to building our business for long-term growth. Our ambition to
be the fastest growing and most innovative customer-centric payments company in the Middle East and Africa
is supported by our strategy that has two growth pillars: to accelerate – serve more customers; and to innovate
– serve customers better. Pages 6 to 9 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. 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 Risk & Technology Committee
and the Audit Committee, has embedded a robust risk and control 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 24 to 27 in this report).
The Board is mindful of our purpose (described on page 6) and of maintaining and developing those relationships
when reviewing the strategy. During the year, the Board has maintained its focus on monitoring the Group’s
relationships with our stakeholders.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Strategic Report
117
DIRECTORS’ DUTIES (CONTINUED)
›
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 ‘Culture and Values’ section of this report on pages 28 to 37 and within our ESG section
from page 38. The Remuneration Committee is cognisant that the CEO to employee pay ratio is a key lens when
considering the appropriateness of executive pay outcomes and ensures that wider colleague pay and policies,
and cultural context are intertwined with its remit and activities. The Remuneration Committee provides ongoing
monitoring and oversees the engagement mechanisms between management and the wider workforce and
regularly provides updates to the Board.
›
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 ESG Strategy section of this report on pages
38 to 57. This year, we have developed our TCFD reporting and provide more comprehensive disclosures on
pages 58 to 77, providing greater depth across the TCFD recommendations, and new information about our
strategy for managing climate-related risks and opportunities.
›
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 pages 28 to 37 within the Strategic Report and on page 132 in the Corporate Governance Report).
›
Strong governance is important to our business, and we are pleased with progress during the year in embedding
our high governance standards within DPO. The Risk & Technology Committee and the separate Audit Committee
created in 2021 made good use of the breadth of the experience of our Independent Non-Executive Directors.
Those Committees swiftly achieved a good rhythm of work, each covering their broad remit and, particularly
the Audit Committee, provided oversight of the Group’s ESG strategy. The membership of the Remuneration
Committee was strengthened during 2022 and continued to provide workforce engagement oversight. The
Nomination Committee expanded its workload, overseeing the implementation and progress made against
targets set within the Group’s Equality, Diversity and Inclusion Policy. Throughout 2022, the Committees provided
a huge level of quality support for the Board. The Board is satisfied that our governance arrangements comply
fully with the UK Corporate Governance Code, as explained within the Governance Report on pages 120 to 145.
›
The Company has a strategic and commercial agreement with Mastercard as described within the Governance
Report on page 137. Separately at the time of the IPO, Mastercard acquired shares in the Company (as disclosed
in the Directors’ Report on page 141). 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. The Company continually strives to improve the transparency of reporting and maintains
a comprehensive investor relations programme for the benefit of its shareholders.
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
Group Chief Executive Officer
8 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
118
Corporate Governance Report
120
Board of Directors
126
Executive Management Team
129
Compliance with the UK Corporate
Governance Code
131
Audit Committee Report
146
Risk & Technology
Committee Report
156
Nomination Committee Report
160
Directors’ Remuneration Report
164
Directors’ Report
190
Viability Statement
196
Going Concern Statement
199
Corporate
Governance
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
119
CORPORATE GOVERNANCE REPORT
Dear Shareholder,
Introduction
Strong governance is important
to our business, and it is particularly
pleasing that we now fully comply
with the UK Corporate Governance
Code (the Code). During the year,
we built upon our strong foundations
of sound governance, with integration
of the DPO business with the same
standards as the rest of the Group
having been largely completed.
We also strengthened the membership
of our Remuneration Committee and
satisfied ourselves that workforce
engagement oversight provided by
that Committee is wholly effective
and aligned with the requirements
of the Code. Full details of our
governance arrangements are
given throughout this report.
The Board and Committees
In recent years, we have constructed
a high calibre independent Board
and therefore we decided during
2022 not to make any additional
appointments. Accordingly, there
were no changes to the membership
of our Board during the year, until
the retirement of Suryanarayan
Subramanian, Non-Executive Director,
on 31 December 2022. On behalf
of the Board, I would like to take
this opportunity to thank Surya,
who has been a Director of Network
since September 2013 and a key
contributor to the Group’s growth
journey from a privately owned
business to a publicly listed company,
operating in high growth markets
across the Middle East and Africa.
Surya has made a tremendous
contribution to Network over
the years and the Board has
benefited greatly from his deep
knowledge of the financial services
sector within the MEA region.
His expertise, coupled with his
longstanding strategic and shareholder
experience, has helped lay the
foundations for Network’s future
growth. Surya left the Network
Board with our best wishes.
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. Comprehensive
feedback from engagement
with our shareholders and other
stakeholders is given to the Board
on a timely basis.
How we engage with our
stakeholders on p24–27
S.172 statement can be
found on p117–118
More details on the engagement with the Group’s stakeholders
can be found in the following sections of this report:
The Board welcomes
feedback from investors and
all stakeholders and we will
continue with our programme
of engagement in 2023 and
beyond and look forward to your
support at our fourth Annual
General Meeting on 18 May 2023.
More details on the engagement
with the Company’s stakeholders
can be found in the Strategic
Report on pages 24 to 27 and
our s.172 statement can be found
on pages 117 to 118, which provides
examples of how the Board has
considered stakeholders in its
decision making.
Group values
Our new values underpin the execution of our revised
strategy and support our approach to sustainable and
responsible business.
Be open and
honest with
positive intent
Own every
decision
Always do
the right thing
Celebrate wins,
sunshine failures
Actively engaging with
all of our stakeholders
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
120
In terms of Board diversity, we now
meet the gender targets set by
the Hampton-Alexander Review
and exceed the ethnicity targets
set by the Parker Review. We are
mindful of the new Listing Rule
gender and ethnicity targets, which
we will have to formally report
against next year, and we will take
these into account should we make
any further Board appointments
in the year ahead. This year we are
early adopting the disclosures and
will set out our progress and action
plans in future Annual Reports,
maintaining full transparency in all
we report and meeting the standards
rightly expected of our shareholders
and other stakeholders.
The Audit Committee and the
separate Risk & Technology Committee
that we created in 2021 made good
use of the breadth of the experience
of our Independent Non-Executive
Directors. I am pleased that those
Committees swiftly achieved
a good rhythm of work and,
throughout 2022, have provided
a huge level of quality support for
the Board. Also, we strengthened our
Remuneration Committee in February
2022 with the additional appointment
of Monique Shivanandan, bringing
the membership of that Committee
in line with the Code.
We conducted an externally
facilitated evaluation of the Board
that commenced at the end of
2022, which built on and refreshed
the useful insights gained from
our external evaluations in 2020
and early 2022. Our practice of
regular externally facilitated Board
reviews is a demonstration of our
commitment to continuous review
and improvement. Comprehensive
disclosure is made within the
Governance Report on page 141.
DPO acquisition and integration
During the year, the Board and
its Committees provided oversight
of the Group’s comprehensive
integration plans of the DPO business
which we acquired in the autumn of
2021, monitoring progress by tracking
a range of KPIs. As you will read in
the Principal Risks and Uncertainties
section from page 102, we have
successfully implemented the Group’s
Enterprise Risk Management
Framework (ERMF) and processes
across the DPO business.
Environmental, social and
governance strategy
In the past year, we have made
good progress against each pillar
of our environmental, social and
governance (ESG) strategy that the
Board approved in 2021. The Board,
supported by the work of the Audit
Committee, has enhanced the
existing framework of appropriate
policies and has provided oversight
of progress against a range of KPIs
on a regular basis. Our ESG strategy
and execution framework is fully
disclosed within the Strategic Report
on pages 38 to 57. As a Board, we
will ensure that the Group complies
with good ESG practices for a
company of comparable size and
operating in our industry and
geography, maintains transparent
disclosures and KPIs and ensures
that ESG compliant behaviour
is ingrained in the organisation.
Employees and culture
We believe that the quality of
the people who work across our
organisation differentiates us from
our competitors and drives our
performance. Accordingly, the
recruitment, motivation and retention
of our employees across all levels
is critical to the future success of the
business and the Board monitors
progress at each of its meetings.
In addition, the Remuneration
Committee provides detailed
oversight of our employee
engagement mechanisms, and
the Risk & Technology Committee
monitors the risk culture across
“Strong governance
is important to our
business and, therefore,
it is particularly pleasing
that we now fully
comply with the Code.”
Sir Ron Kalifa OBE
Chairman
the organisation. Both Committees
regularly report their findings to
the Board.
The diversity of our employees
reflects the global reach of our
business, and there are over 60
nationalities represented across our
workforce. We are pleased that active
steps to recruit from all sections of
society have resulted in our gender
diversity crossing the committed
30% mark across the organisation.
Our most recent employee
engagement survey, which included
employees working within our DPO
business for the first time, produced
lower results than in the prior year.
The reduction in scores is, we believe,
due to a number of factors best
summarised as the degree of
change throughout the organisation.
Management has analysed the results
carefully and has listened to the
concerns raised within the survey
and, with the support of the Board,
a range of initiatives have been
introduced to support our colleagues.
The Board supports this additional
investment in our people and will
monitor progress throughout the
year. Further details of the survey
results and the range of initiatives
that have been introduced are
disclosed on pages 26 and 39.
Our Nomination Committee
conducted a comprehensive review
of the Group’s talent pipeline for
senior management and ExCo
positions and was encouraged by
the wealth of high calibre individuals
across our regions. The Board now
has clear plans for improved exposure
to, and ongoing engagement with,
our senior people and high potential
employees across our Group.
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 28 to 37.
Sir Ron Kalifa OBE
Chairman
8 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
121
1
2
1
5
Chair
Executive Directors
Senior Independent
Director
Independent
Non-Executive
Directors
67%
33%
Men
Women
South African
UAE National
5
1
1
1
1
British
American
Indian
4
5
2–3 years
3–4 years
1
1
4
3
40–49
50–59
60–69
70–79
9
1,374
3
579
Senior management
Men
Women
Group-wide
Men
Women
CORPORATE GOVERNANCE REPORT (CONTINUED)
Highlights of progress
made during 2022
At Network, we maintain solid governance throughout our organisation and
drive the application of our Equality, Diversity and Inclusion Policy. Here are
the highlights of the significant progress we have achieved during the year:
Board composition
Board gender diversity
Nationality of the Directors
Board tenure
Board member ages
Gender diversity
Executive Committee & direct reports
Skills and experience
Ron
Kalifa
Darren
Pope
Anil
Dua
Victoria
Hull
Habib
Al Mulla
Diane
Radley
Monique
Shivanandan
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
Listed NED Experience
Financial Services/Payments
Industry Experience
Doing Business/Market
Knowledge in MEA
Africa
ME
South Africa
Finance/Audit Experience
HR/REMCO Experience
M&A Activity
Technology & Product
ESG
Fintech Trends
Please see page 145 for details on how the Board has evolved since the IPO in April 2019.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
122
Data on diversity of individuals on the Board and in its Executive Management
A) Gender
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board as defined
by the Listing
Rules (Chair,
SID, CEO, CFO)
Number of other
senior positions –
Chairs of Board
Committees
1
Number in
Executive
Management
Percentage
of Executive
Management
Men
6
67%
4
2
9
75%
Women
3
33%
0
2
3
25%
B) Ethnic background
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board as defined
by the Listing
Rules (Chair,
SID, CEO, CFO)
Number of other
senior positions –
Chairs of Board
Committees
1
Number in
Executive
Management
Percentage
of Executive
Management
White British
or other
white
4
44%
1
3
3
25%
Mixed
multiple
ethnic
groups
0
–
0
0
0
–
Asian/Asian
British
4
44%
3
1
4
33%
Black/
African/
Caribbean/
Black British
0
–
0
0
0
–
Other ethnic
group,
including
Arab
1
11%
0
0
5
42%
1
Audit Committee, Nomination Committee, Remuneration Committee and Risk & Technology Committee.
We have early adopted the tables required by LR 9.8.6R (10) and in each table have added an additional column
analysing the gender and ethnic background of the Chairs of the four Committees as we believe that those
Committees are vital to the effective functioning of the Board and, accordingly, the Committee Chairs should
be regarded as senior positions on the Board. Please see page 163 for further details.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
123
CORPORATE GOVERNANCE REPORT (CONTINUED)
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.
›
The Audit and Risk & Technology
Committees have enhanced the support
given to the Board within their respective
areas of responsibilities in their first full year
of operation since the separation of audit and
risk and creation of two Committees, one with
an added technology remit, in June 2021.
›
All three members of the Risk & Technology
Committee are members of the Audit
Committee to ensure a high degree of
coordination; and a joint meeting is held
at least once a year to review the Group’s
assurance plans before making
recommendations to the Board.
›
An externally facilitated Board and
Committee evaluation was carried out during
the year as we believe that the rigour and
expertise of an external review is significantly
beneficial and demonstrates a commitment
to continuous development. Our agreed
action plan builds upon the positive
momentum created in previous years.
›
The review covering 2022 concluded that
the Board was considered highly effective
with follow up actions primarily focused
on increasing the Board exposure to
senior talent and focusing deeper on talent
management, reviewing more structured
insights into strategic delivery, increasing
the review of culture and leadership and
scheduling more face to face Board meetings.
Risk management
and assurance:
›
The Risk & Technology Committee, formed
in June 2021, has completed its first full year
of operation, fully covering its wide remit of
responsibilities for providing risk management,
technology and compliance oversight to the
Group’s business and advising the Board on
the Group’s risk appetite, tolerance and strategy.
›
We have a clear risk governance structure
utilising the three lines of defence model to
ensure effective risk management, oversight
and assurance.
›
Our Enterprise Risk Management Framework is
now fully embedded throughout our organisation,
having been successfully implemented within
the DPO business, and there is an ongoing
process to identify and evaluate risk, supporting
our decision making and the way we manage
our business.
›
The Board, Audit Committee and Risk &
Technology Committee provided oversight
of the DPO integration plans.
›
The Audit Committee provided oversight of our
ESG programmes and set viable targets against
which progress was monitored.
›
An external quality assurance review of our
Group Internal Audit function, which was
strengthened in 2019/20, was carried out this
year by PWC. The results of that review were
exceptional and assessed the Group Internal
Audit function at the highest rating of 5 that
their review model could generate.
The Board
We have built a strong and diverse Board with a breadth
of skills, experience and knowledge. Our diversity metrics
are shown on pages 122 to 123.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
124
Our people and culture:
›
We have continued to progress our People
agenda. Management has been working in
partnership with all employees to ensure that
our new culture, introduced in 2021, remains
embedded throughout the organisation
in support of our strategy.
›
Our Nomination Committee has conducted a
thorough review of the talent pipeline across the
Group to identify potential successors for ExCo
and other senior management considering the
challenges and opportunities facing the Group
and future leadership requirements. Additionally,
the Nomination Committee reviewed the Group’s
Equality, Diversity and Inclusion (EDI) Policy
and monitored its implementation and progress
against objectives.
›
Management have developed a detailed plan
to improve the employee engagement scores
in 2023 (see page 51) following the lower results
in the 2022 employee engagement survey.
›
There are over 60 nationalities represented
across our workforce and, having taken active
steps to ensure we are recruiting from all sections
of society, gender diversity has crossed the
committed 30% mark across the organisation.
›
We have maintained our enhanced workforce
engagement mechanisms, which are reviewed
by 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 Chairman has also engaged with a
number of larger-sized shareholders during
the year, to discuss matters of corporate
governance and broader strategic topics.
›
Building on the success in previous years,
our third Annual General Meeting was
held by 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 on and oversight
of key customer relationships, which are
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
125
BOARD OF DIRECTORS
Sir Ron Kalifa OBE
Chairman
Committee membership
Chair of Nomination Committee and member
of Remuneration Committee
Appointed March 2019
Other current appointments
›
Non-Executive Director, England & Wales
Cricket Board
›
Non-Executive Director, Court of the Bank
of England
›
Trustee of the Royal Foundation of the
Duke and Duchess of Cambridge
›
Member, Build Back Better Council,
United Kingdom
Relevant experience
Sir Ron 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
advisors. Sir Ron also sits on the boards of
the Bank of England and the England & Wales
Cricket Board and Transport for London, and
is a member of the Council of Imperial College,
London. Sir Ron was awarded an OBE in
2018 for services to Financial Services and
Technology, and chaired the Independent
Review of UK Fintech published by the
UK Government in February 2021. In 2022,
Sir Ron was appointed as a Trustee of the
Royal Foundation of the Duke and Duchess
of Cambridge, and very recently received a
knighthood in the Queen’s Platinum Jubilee
Honours list for his work supporting the
financial services and technology industries
in the UK.
Victoria Hull
Independent
Non-Executive Director
Committee membership
Chair of Remuneration Committee and
member of Nomination Committee
Appointed March 2019
Other current appointments
›
Independent Non-Executive Director,
Alphawave Group plc
›
Independent Non-Executive Director,
IQE plc
›
Independent Non-Executive Director,
Hikma Pharmaceuticals plc
Relevant 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.
Nandan Mer
Group Chief Executive Officer
Committee membership
None
Appointed February 2021
Other current appointments
None
Relevant experience
Mr Mer has more than 32 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, 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
126
Anil Dua
Independent
Non-Executive Director
Committee membership
Member of Audit Committee
Appointed January 2020
Other current appointments
›
Non-Executive Director, Liquid Telecom
›
Non-Executive Director, African Export
Import Bank
›
Non-Executive Director, Geregu Power Plc
Relevant 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.
Darren Pope
Senior Independent
Non-Executive Director
Committee membership
Chair of Audit Committee and member
of Nomination Committee and Risk
& Technology Committee
Appointed March 2019
Other current appointments
›
Independent Non-Executive Director,
Virgin Money UK plc*
›
Chairman of UK subsidiary of Silicon
Valley Bank
›
Independent Non-Executive Director,
Hargreaves Lansdown plc
Relevant experience
Mr Pope is a qualified accountant with over
31 years of experience in the financial services
industry. 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 was the senior independent director of
Equiniti Group plc.
* Stepping down on 26 May 2023.
Diane Radley
Independent
Non-Executive Director
Committee membership
Chair of Risk & Technology Committee
and member of Audit Committee and
Remuneration Committee
Appointed January 2021
Other current appointments
›
Non-Executive Director, Transaction Capital
Limited (‘JSE’)
›
Non-Executive Director, Base Resources
Limited (‘ASX’)
›
Non-Executive Director, Redefine Properties
Limited (‘JSE’)
Relevant 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 at Old Mutual South Africa from
2008. She has led the Transaction Services
Group at PwC South Africa.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
127
BOARD OF DIRECTORS (CONTINUED)
Monique Shivanandan
Independent
Non-Executive Director
Committee membership
Member of Audit Committee, Remuneration
Committee and Risk & Technology Committee
Appointed January 2021
Other current appointments
›
Ms Shivanandan is the Group Chief
Information Security Officer (CISO)
for HSBC, leading the cyber security
function for the Group
Relevant experience
Ms Shivanandan specialises in technology
transformation in financial services with a
specific focus on business transformation
leveraging technology and Fintech advisory.
She was the 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.
Habib Al Mulla
Independent
Non-Executive Director
Committee membership
Member of Nomination Committee
Appointed March 2019
Other current appointments
›
Executive Chairman, Habib Al Mulla
& Partners
Relevant 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. He 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.
Rohit Malhotra
Group Chief Financial Officer and Group
Chief Strategy Officer
Committee membership
None
Appointed June 2020
Other current appointments
None
Relevant experience
Mr Malhotra has more than 22 years of
experience in financial activities. Prior to
joining Network 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
128
EXECUTIVE MANAGEMENT TEAM
Role
Sandeep is the Chief Business Transformation
and Technology Officer. He joined Network
in November 2022, and is responsible for
defining and delivering the Digital, Technology
& Operations strategy across the enterprise.
Relevant experience
Sandeep was most recently the Chief
Operating Officer and Interim CEO of Abu
Dhabi Islamic Bank (ADIB). Sandeep brings
with him over 30 years of consumer banking
and payments experience in business
management and technology. He has built, set
up and run technology and operations at Citi,
Discover Card, Barclays, Mashreq and ADIB.
Sandeep Chouhan
Chief Business
Transformation and
Technology Officer
Joined
November 2022
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.
Relevant experience
Nandan has more than 32 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, 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.
Nandan Mer
Group Chief
Executive Officer
Joined
February 2021
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.
Relevant 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.
Rohit Malhotra
Group Chief
Financial Officer
and Group Chief
Strategy Officer
Joined
October 2010
Role
Jay is the Group 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.
Relevant experience
Jay joined the Group in 2017 after working
at Elavon, a subsidiary of US Bancorp, where
she served as Head of Legal – International
Markets. Jay has over 25 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.
Jay Razzaq
Chief Risk Officer
and Group
Company
Secretary
Joined
April 2017
Role
Jamal is Group Chief Operations Officer,
responsible for leading operations across all
the markets served by the Group. Jamal’s 15
years of experience with Network in business,
technology, delivery management, governance
and operations helps enhance the Group’s
operational expertise and capabilities while
driving cost efficiencies and overall profitability.
Relevant experience
Prior to his current role at Network, Jamal was
SVP – Group Head of Delivery Management,
having previously worked as SVP – Group
Head of Governance where he oversaw strategic
and project governance across all streams of
Group Operations – including PMO, Audit and
Risk, Vendor Management, Quality and Controls,
and Inventory and Assets Management. His
previous positions with the Company include
VP – Head Of Enterprise Delivery Management,
VP – Head of Customer Experience, and
Associate Vice President for Projects.
Jamal Al Nassai
Group Chief
Operating Officer &
Country Head
– UAE
Joined
March 2008
Role
Andrew is the Managing Director – Acquiring
for the Group, responsible for the strategic
plan, financials, customer proposition and
overseeing all execution related to servicing
merchants and governments across all of the
Group’s geographies. He joined the Company
in 2017 and was the Managing Director for
Africa prior to his current role.
Relevant experience
Andrew has 26 years of experience with
a significant track record of success in the
payments industry. Andrew was previously
the President of Elavon Europe, a subsidiary
of US Bancorp (USB), and responsible for
the 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.
Andrew Key
Group Managing
Director –
Acquiring
Joined
July 2017
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
129
EXECUTIVE MANAGEMENT TEAM (CONTINUED)
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 resources strategy and programmes.
Under her stewardship, the Group has won
government recognition and awards for
human development and Emiratisation.
Relevant experience
Hend has more than 22 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.
Hend Al Ali
Group Head of
Human Resources
and Facilities
Joined
July 2013
Role
Navneet is Managing Director and Co-Head
of Processing – Middle East, leading a
client-focused business unit serving financial
institutions, fintechs and payment partners.
Prior to this, Navneet was Network’s Regional
Managing Director for Processing in the GCC.
Relevant experience
Navneet joined the Company in 2022 and has
over three decades of experience in retail
banking with domain expertise in cards,
payments, partnerships, unsecured loans,
digital, sales and distribution. Navneet
previously served as Senior Vice President for
Market Development – MENA at Mastercard.
Navneet Dave
Managing Director
and Co-Head of
Processing – Middle
East
Joined
February 2022
Role
Reda is the Managing Director and Co-Head
of Processing – Africa, leading a client-focused
business unit serving financial institutions,
fintechs and payment partners. Reda has been
with Network from 2007 to 2012 and since
2016 in several roles, including partnering with
the Kingdom of Saudi Arabia team to launch
the Group’s business in the Kingdom as well as
being Group Chief Sales Officer – Processing.
Relevant experience
Reda is passionate about payments
innovation, financial inclusions and cashless
societies, with over 23 years of experience
in Digital Payments, Strategic Planning
and Execution, New Market Entries and
Leadership Practices in multinational
payments organisations. He has also held
various leadership roles in international banks
across the Middle East, Africa and North
America including Citibank, United Bank and
Arab Bank. Reda holds a doctorate degree
from the University of Liverpool, UK, and a
Master’s degree from York University, UK.
Reda Helal
Managing Director
and Co-Head of
Processing – Africa
Joined
November 2016
Role
Abdulaziz is responsible for implementing
the strategy for driving business growth
in Saudi Arabia.
Relevant experience
Abdulaziz is well-known in the Saudi
payments industry, having been a member
of the Saudi Central Bank (SAMA) and having
played a major role in initiatives such as
growing the Saudi National Card Payment
Network (MADA). He was previously the
Head of Digital Banking and Payments at
Saudi British Bank (SABB) which he helped
build as the largest e-commerce acquirer in
Saudi Arabia. He was also a former Board
Member of Saudi Financial Lease Contract
Registry Company (SIJIL).
Abdulaziz
Al-Dahmash
Managing Director
– Kingdom of Saudi
Arabia
Joined
January 2022
Role
Dounia is the Group Chief Marketing Officer.
In her role, Dounia drives the marketing strategy
with a focus on brand management and the
development of the Group product marketing
strategy to enable and accelerate growth.
Having taken on key customer-facing roles
across the Middle East and Africa since joining
Network in 2017, she has a deep understanding
of the payments value chain and the needs of
key partners and stakeholders.
Relevant experience
Dounia has over 24 years of experience in
the payments industry, including Business
Development, Relationship Management,
Digital Payments, and Solutions Design. Her
various leadership roles in financial services
across the MEA region include stints with
Visa, Société Maghrébine de Monétique (S2M),
and Attijariwafa bank. She was previously in
charge of overseeing Network’s sales and
business development functions to achieve
revenue growth across the GCC markets.
Dounia Saidi
Group Chief
Marketing Officer
Joined
December 2017
Role
Ian is the Group’s Chief Internal Auditor,
responsible for leading Group Internal
Audit to provide independent assurance
to Executive Management and the Board
on the effectiveness of the Company’s
control framework and risk culture.
Relevant experience
Ian has more than 25 years of experience
in the financial services industry including
investment banking, insurance, payments
and retail banking. Prior to joining Network,
Ian worked for the Barclays Group where he
held positions including the head of internal
audit for the global retail and business banking
division, and the global Barclaycard business.
Ian Cox
Group Chief
Internal Auditor
Joined
September 2019
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
130
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 118.
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 2022, we have
maintained our high standards of
governance, and aligned those
standards within the DPO business
that was acquired in September 2021.
The Company complied with the
Code throughout the year, and up
to the date of this report, except
as follows:
For the period 1 January to
15 February 2022, the Company
did not comply with provision 32
regarding the composition of the
Remuneration Committee as only
two members of that Committee
were Independent Non-Executive
Directors, 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, is a member
of the Remuneration Committee
and was so during the January
to mid-February period, but as
Chairman, he could not be counted
towards the minimum membership
of three. On 15 February 2022,
Monique Shivanandan, Independent
Non-Executive Director, 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, including the Company’s
ESG strategy (see pages 38 to 57);
additionally, the Board held a
corporate strategy meeting during
the year, where the progress made
against the refreshed strategy for
accelerating growth and cultural
transformation was reviewed.
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. During 2022, the
Group’s Enterprise Risk Management
Framework (ERMF) and processes
were largely implemented across
the DPO business as that business
aligned with the standards and
practices of the rest of the Group.
More information about the ERMF
is included in 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
organisation so it can satisfy itself
that the Company’s values and
culture are aligned with its purpose
and long-term sustainable future.
Further information in these vital
areas is given throughout this
report and the Strategic Report.
CORPORATE GOVERNANCE REPORT (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
131
The Board
Board responsibilities and activity reported on pages 134 to 137
Executive Management Team
See pages 129 to 130
Enterprise Risk Management Committee
See page 144
The Group’s governance structure
CORPORATE GOVERNANCE REPORT (CONTINUED)
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 1 to 21 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 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.
Further progress with our People
agenda has been achieved during
2022, as described in the ‘Our Culture
and Values’ section and in the
relevant parts of the ESG section
within the Strategic Report on pages
28 to 37. During 2021, new values
in support of the revised strategy
were developed and rolled out
to all employees. The CEO, with the
support of his executive colleagues,
took the necessary steps to ensure
these new values and our positive
culture were embedded across
the organisation, including through
regular training programmes,
internal communications and
reminders at team meetings.
Our most recent employee
engagement survey, which included
employees working within our DPO
business for the first time, produced
lower results than in the prior year.
The reduction in scores is, we believe,
due to a number of factors best
summarised as the degree of
change throughout the organisation.
Management has analysed the
results carefully and has listened
to the concerns raised within the
survey and, with the support of
the Board, a range of initiatives
have been introduced to support
our colleagues. The Board supports
this additional investment in our
people and will monitor progress
throughout the year.
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 auditor; and face to face
meetings. A culture dashboard,
part of the CEO report, provides
the Board with a consistent range
of metrics aligned against each
element of the Network Way to
enable it to monitor and assess
the Group’s culture.
The Company has a positive risk
culture supported by the ERMF,
which is more fully described in the
Principal Risks and Uncertainties
section of the Strategic Report on
pages 102 to 115. During the year,
the Group’s ERMF and processes
were largely implemented across
the DPO business. 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 (Executive
Committee) 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 Group’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 Group has in place a
Audit Committee
See page 146
Remuneration Committee
See page 164
Risk & Technology Committee
See page 156
Nomination Committee
See page 160
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
132
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. The Whistleblowing
process was enhanced in 2021 and
since then, continuous steps have
been taken to ensure there is a
high level of awareness amongst
employees. The Whistleblowing
process includes a dedicated hotline,
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 Committee,
the designated Whistleblowers’
champion, 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
Committee. The Chair of the Audit
Committee presents his report to the
Board on the proceedings at each
Audit Committee meeting, and if any
significant 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
Committee, Group Internal Audit
conducted a review in 2021 of the
process for handling high risk issues
identified from whistleblowing cases
and found that the key components
of an appropriate whistleblowing
framework are in place and that
the framework is effective.
Workforce engagement
The Board acknowledges that
the Company does not meet the
qualifying criteria to report on some
of the legislation introduced under
The Companies (Miscellaneous
Reporting) Regulations 2018.
Specifically, reporting on employee
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 ‘Our Culture and
Values’ section and in the relevant
parts of the ESG section of the
Strategic Report on pages 28 to 37.
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 monthly Town Halls.
The Board maintains 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 Group’s
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 Committee.
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. The Board is satisfied
that the Group is in compliance
with the Code provisions in respect
of workforce engagement.
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; and the
Chairman has met with shareholders
on matters of governance and
broader strategic topics. More
information on our shareholder
engagement is disclosed within the
Strategic Report on page 24 and
in the Chairman’s Governance letter
on page 120. Regular feedback from
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 Board, through the Investor
Relations team, maintains contact
with each of our major shareholders
to enquire whether they would find
it helpful to deepen their ongoing
engagement by meeting with
the Chairman.
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.
Building on the experience during
the COVID-19 restrictions, and in line
with our commitment to make our
meetings as accessible as possible,
the Board conducted the AGM held
on 19 May 2022 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 Group’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 CEO reports to the Board) and
other senior management. More
information on key stakeholders
and engagement is available in the
Strategic Report on page 24.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
133
investors.networkinternational.ae
investors/corporate-governance/
CORPORATE GOVERNANCE REPORT (CONTINUED)
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, Risk & Technology,
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.
Matters reserved for the Board
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
134
Board, Committee and
other 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 auditor;
›
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 preliminary results
announcement, the Annual Report
and Accounts, the half year results
announcements and quarterly
trading updates;
›
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.
Engagement and communication
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;
›
Approval of the risk
management and internal
control framework; and
›
Monitoring and, at least annually,
reviewing the effectiveness of
the system of risk management
and internal control.
Policies:
›
Approval and oversight
of material policies and
procedures of the Group.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
135
Strategic
›
Ongoing strategic updates and progress reviews
at each meeting with selected deep dives into
specific strategic issues and key markets built
into the annual Board programme
›
Reviews of the M&A pipeline
›
Review of the Group’s technology strategy and
prioritisation of strategic technology projects
›
Approval of capital projects requiring Board
approval under the Delegation of Authority
Operational, business and financial performance
›
Review of CEO reports at each Board meeting
›
Assessment of the Group’s culture
›
CFO reports at each Board meeting
›
DPO performance reviews
›
Approval of and review of progress of the share
buyback programme
›
Review of financial forecasts
›
Approval of annual budget
Reporting
›
Review and approval of the 2021 preliminary
results announcement, the 2021 Annual Report
and Accounts and the 2022 H1 results, and all
statements and confirmations therein
›
Review and approval of Regulatory News Service
announcements, including quarterly trading
updates, issued to the market
CORPORATE GOVERNANCE REPORT (CONTINUED)
Board activity during the year
At its meetings during 2022, the Board
discharged its responsibilities, and in
particular it carried out:
At each Board meeting,
the Chief Executive Officer
presents a comprehensive
update on the strategy
and business performance
across the Group as well
as culture indicators and
stakeholder engagement;
and the Chief Financial
Officer presents a detailed
analysis of the financial
performance, both at
Group and operating
segment levels. In view of
the critical importance to
the Group’s business, the
Board reviews progress
reports on 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 the Group’s technology
strategy, technology
platforms and cyber
security conducted by
the Risk & Technology
Committee.
The Board continuously
reviews the Group’s strategy
at each of its meetings and,
in addition, holds one
dedicated 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.
“Our strong and
diverse Board
has met its
responsibilities
and duties
effectively
during 2022.”
Sir Ron Kalifa OBE
Chairman
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
136
Internal control and risk
›
Review of Enterprise Risk Management
Framework
›
Review of emerging and principal risks
›
Review and approval of Risk appetite
›
Annual review of internal control
›
Annual review of viability
Governance
›
Approval of amendments to the terms
of reference of the Risk & Technology
Committee and the Audit Committee
›
Approval of changes to the composition
of the Board’s Committees
›
Approval of matters recommended by the
Board’s Committees
›
All proposed resolutions within the Notice
of the 2022 Annual General Meeting and
subsequent review of the voting results
of that meeting
›
Policy and insurance approvals
›
Review of compliance with the Group’s
policy and approval of the Board’s annual
statement in respect of modern slavery
›
Regular reviews of performance against
the Group’s environmental, social and
governance strategy and approval of
relevant policies and related compliance
›
External Board effectiveness reviews
conducted in the early part of 2022 and
at the end of the year
›
Oversight of compliance with UK and US
sanctions imposed on business dealings
with third-party Russian financial institutions
›
Approval of change of registered office
›
Meetings between the Chairman and the
Independent NEDs
›
Governance enhancements in compliance
with the 2018 UK Corporate Governance Code
Directorate
›
Retirement of Suryanarayan Subramanian,
Non-Executive Director
›
Review and approval of Directors’ other
directorships and any potential or perceived
conflicts of interest
Shareholder and stakeholder oversight
›
Review of reports from Investor Relations
and brokers
›
Ongoing oversight of progress with the Group’s
People agenda
›
Ongoing oversight of the corporate culture and
the review of the 2022 employee engagement
survey results and management actions to
address employee concerns
›
Review of engagement with the Company’s other
stakeholders including Mastercard and customers
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
137
CORPORATE GOVERNANCE REPORT (CONTINUED)
Effectiveness of risk management
and internal control systems
Each year, the Board, through
the work of the Audit Committee
and the Risk & Technology
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.
There is an ongoing process for the
identification and evaluation of risk
management and internal control
processes. 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 Committee by the Group
Chief Internal Auditor. The Board,
through the work carried out by the
Audit Committee, in reviewing the
effectiveness of the system of risk
management and internal control,
can confirm that the internal
control environment is working
effectively in all material respects
and necessary actions have been
or are being taken to remedy any
significant failings or weaknesses
identified from that review.
Assessment of the Group’s
emerging and principal risks
The Board, through the work of
the Risk & Technology Committee,
carried out a robust assessment of
the Group’s emerging and principal
risks during the year. Disclosure
of these risks, the procedures
to identify them, the Board’s risk
appetite, and an explanation of
how they are being managed and
mitigated are included in the Risk
& Technology Committee report on
pages 156 to 159 and the Principal
Risks and Uncertainties section
on pages 102 to 115.
Board composition
As at 31 December 2022,
the Board comprised the
Non-Executive Chairman
(independent on appointment),
two Executive Directors and
six Independent Non-Executive
Directors (analysis determined
after one non-independent
Non-Executive Director retired
on that date). As at the date of
this report, the ratio of Independent
Non-Executive Directors to other
Directors (excluding the Chairman)
is 6:2 which continues to be in
compliance with the requirements
of the Code. The biographical details
of each of the current Directors can
be found on pages 126 to 128 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/
.
Board and Committee membership,
appointments and diversity
There were no changes to the
composition of the Board during
the year, other than the retirement
of Suryanarayan Subramanian on
31 December 2022.
The current compositions of the
Board’s Committees and the one
change made during the year
(the appointment of Monique
Shivanandan to the Remuneration
Committee on 15 February 2022)
are shown in the relevant Committee
sections on pages 146 to 189. In view
of his longstanding experience with
the business and the market, and his
financial expertise, Mr Subramanian
was invited to attend the meetings
of the Audit Committee and
the Remuneration Committee
until he retired from the Board
on 31 December 2022. He was not
a member of those Committees,
did not receive any additional fee for
his attendance, had no voting rights
and was not counted towards the
quorum. Please see below regarding
his independence and confirmation
that there was no conflict of interest
in respect of his attendance at
these meetings.
The search, selection and
appointment process for
Non-Executive Directors is shown
in the section on the Nomination
Committee on page 160.
When considering the appointment
of new Independent Non-Executive
Directors, the Nomination Committee
and the Board have regard to the
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 and
the Nomination Committee are
also mindful of the targets set
by the Hampton-Alexander Review
(gender) and the Parker Review
(ethnicity) (both of which have been
achieved by the Company) and the
recently introduced Listing Rule
requirements (not yet applicable
to the Company) in relation to both
gender and ethnicity composition
of the Board. Whilst the Listing Rule
requirement in relation to ethnicity
has been achieved, the Company
falls short of the target that at least
40% of the individuals on the Board
are women, and the target to have
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
138
one of the senior positions on the
Board of Chair, CEO, CFO and SID
held by a woman. These targets
were introduced in April 2022 and
are not applicable to the Company
until its 2023 financial year. The Board
and the Nomination Committee will
include these new targets in their
considerations throughout the
process prior to the appointment
of any new Director in the future.
The diversity of the Board members
is shown graphically on page 122.
We have early adopted by one year
the Listing Rule requirement to
present tables analysing gender
and ethnic background of the
Board and Executive Management
– see page 123. As these tables are
voluntary this year, we have inserted,
in addition to the requirement to
analyse the Directors who hold
senior Board positions as defined
by the Listing Rules, an additional
column in both tables analysing
the number of other senior positions
– Chairs of Board Committees – as
we believe that those Committees
are vital to the effective functioning
of the Board and, accordingly,
the Committee Chairs should be
regarded as senior positions on
the Board.
The Board Appointments 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,
if and when conducting a search
for additional Directors, 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.
Time commitment and
external appointments
The Board recognises the benefit
to the Company of those Directors
holding directorships in other
companies where no conflict of
interest arises. The Board requires
that the Non-Executive Directors
should have sufficient time to meet
their Board responsibilities and
acknowledges that such time
commitment may vary from time to
time, depending upon the demands
of the business and other external
events. In addition to attendance at
scheduled meetings, the Directors
are often required to attend ad-hoc
meetings, often at short notice.
The chart on page 141 discloses the
attendance record of each Director
in respect of the meetings of the
Board and each Committee of which
they are a member.
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 6 March 2023,
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, it considered
the criteria set out in provision 10
of the Code amongst other matters
and determined that all six Non-
Executive Directors, namely Victoria
Hull, Habib Al Mulla, Darren Pope,
Anil Dua, 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
›
Habib Al Mulla is the Executive
Chairman of Baker McKenzie
Habib Al Mulla, 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 (available on the Company’s
website), 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
139
CORPORATE GOVERNANCE REPORT (CONTINUED)
The other Non-Executive Directors
Of the Directors who held office
during the year:
›
Suryanarayan Subramanian,
Non-Executive Director,
was not regarded as being
independent during the year
until his retirement from the
Board on 31 December 2022.
›
He was nominated for
appointment to the Board in
March 2019 pursuant to the
relationship agreement between
the Company and ENBD (which
subsequently terminated on
13 November 2019), and continued
as a Director until his retirement
on 31 December 2022. He had
informed the Board that, with
effect from 1 January 2020,
he no longer held the position
of the Group Chief Financial
Officer of ENBD. ENBD also
informed by its letter dated
16 July 2020 that Suryanarayan
Subramanian did not represent
ENBD’s interest on the Company’s
Board. Accordingly, the Board
acknowledged that in accordance
with provision 10 of the Code,
Suryanarayan Subramanian could
not be regarded as independent,
but was satisfied that since
1 January 2020, there was 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 18 May 2023 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 all Directors gained a
high level of knowledge about the
Group so that they 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.
A thorough induction programme
was designed and developed in
previous years 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 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. In the
past, new Director induction
programmes have also included
extensive meetings with many
members of the management
team in the areas of HR, Product,
Technology, Operations, Audit,
Risk, Strategy and Finance. These
induction meetings are beneficial
not just for the Directors, but also
for the members of the management
team who gain first-hand exposure
to new members of the Board.
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.
Operation of the Board
and its Committees
The Board and its Committees
each have a forward programme of
work 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
ExCo 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. Since the lifting
of travel restrictions that had been
in place due to the COVID-19
pandemic, there was a combination
of physical, video conference and
hybrid scheduled Board and
Committee meetings during the year.
Additional ad-hoc meetings were
held by video conference in order to
facilitate attendance by the Directors
at short notice.
At scheduled Board meetings,
the Chairman meets with the
Independent Non-Executive
Directors in the absence of the
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 129.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
140
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 2022. Non-attendance at one Board
meeting each by Dr Habib Al Mulla and Victoria Hull and one Nomination Committee meeting by Victoria Hull was
due to unavoidable prior business commitments. In each case of absence, the concerned Director gave their inputs
to the Chairman/Committee Chair on the matters being taken up at the meetings.
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 2023. In late 2022, the Nomination Committee conducted a review of the
time commitments of each of the Non-Executive Directors – see page 162 for further details – and concluded that
each of the Directors had sufficient capacity available commensurate with the nature and size of the Group’s business.
Individual Director attendance at scheduled meetings during the year 2022
Name
Board
Audit
Committee
Risk & Technology
Committee
Nomination
Committee
Remuneration
Committee
No. of meetings held
8
8
7
5
6
Ron Kalifa
8/8
–
–
5/5
6/6
Nandan Mer
8/8
–
–
–
–
Darren Pope
8/8
8/8
7/7
5/5
–
Victoria Hull
7/8
–
–
4/5
6/6
Diane Radley
8/8
8/8
7/7
–
6/6
Monique Shivanandan
8/8
8/8
7/7
–
6/6
Habib Al Mulla
7/8
–
–
5/5
–
Anil Dua
8/8
8/8
–
–
–
Rohit Malhotra
8/8
–
–
–
–
Attendance at scheduled meetings during the year 2022 by former Directors who retired/resigned during
the year
Name
Board
Audit
Committee
Risk & Technology
Committee
Nomination
Committee
Remuneration
Committee
Suryanarayan Subramanian
7/8
–
–
–
–
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. The second annual
evaluation of the Board, which was finalised at the start of 2022, was facilitated by Egon Zehnder, building on
the outcomes and actions from the review they facilitated in the latter part of 2020. Both reviews were conducted
by way of questionnaires and individual interviews and the outputs and Board agreed actions from the second
evaluation were reported in the Company’s 2021 annual report and accounts.
In line with its commitment to ongoing review and improvement, the Board conducted a further evaluation at the
end of 2022. This review was facilitated by Egon Zehnder by way of a comprehensive questionnaire issued to each
of the Directors.
Our Board evaluation process at the end of 2022:
›
The Board agreed that its third Board effectiveness review should again be externally facilitated by Egon Zehnder
to provide consistency and continuity.
›
The Chairman discussed and agreed the scope of the evaluation with Egon Zehnder. Separately, the Senior
Independent Director led the evaluation of the Chairman.
›
Egon Zehnder issued comprehensive questionnaires to all Board members and reviewed the qualitative and
quantitative data collected from them.
›
Egon Zehnder prepared a report of their findings from the review, identifying strengths, challenges and
opportunities to improve and embed higher performance.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
141
CORPORATE GOVERNANCE REPORT (CONTINUED)
›
Egon Zehnder’s report was first shared with the Chairman and the Senior Independent Director and then
presented to and discussed by the Board, which agreed an action plan to enhance Board effectiveness for the
year ahead.
›
The action plan will be continually monitored by the Chairman with the support of the Company Secretary.
›
The Board evaluation to be conducted in 2023 will reflect on the actions from the late 2022 review.
Process and context
A thorough evaluation of the Board and its Committees was conducted by Egon Zehnder and the section above
explains the process undertaken at the end of 2022.
Egon Zehnder was appointed in view of their specific knowledge of the Board and to build upon the outcomes
and actions from the review they facilitated in late 2020 and early 2022. Egon Zehnder did not carry out any
other assignments for the Company during 2022, although as previously disclosed, they did conduct the searches
resulting in the appointments in January 2021 of Diane Radley and Monique Shivanandan as Independent
Non-Executive Directors and in February 2021 of Nandan Mer, Group CEO.
The latest review was carried out in the context of a full transition from the restrictions previously imposed
by governments in response to the COVID-19 pandemic; more than a full year’s operation of the Risk & Technology
Committee (separating risk from the Audit Committee in June 2021); and the retirement from the Board of Surya
Subramanian on 31 December 2022.
Egon Zehnder issued questionnaires to all Board members.
The comprehensive report prepared by Egon Zehnder was debated by the Board, which then agreed to an action
plan for improvement, in February 2023.
Summary of outputs
The Board effectiveness review concluded that the Board was functioning well and that its dynamics and culture
led to a high level of engagement around the Boardroom table, where open and honest debates take place and
members feel they can challenge each other, underpinned by very effective leadership from the Chair. Likewise,
the Committees continue to be well structured, are run effectively, and contribute strongly in their respective
areas of responsibility. The Board members bring a wealth of expertise and experience, and engage well with
senior management, with whom there is good exposure. The agendas cover the right areas leading to proactive
discussions with increasing time spent on forward looking issues. There continues to be a strong focus on risk
and a very good understanding of risk oversight. The Board is satisfied with the time spent on strategy and that
attention is given to ensuring that the right organisational resources are in place to execute on the strategy.
Overall, the Board members are well aligned with the growth agenda and support the Group’s strategic vision.
There continues to be a high degree of confidence in the Chairman, who provides strong and effective leadership.
He is proactive and keeps Board members up to date on relevant issues and possesses a high level of industry
knowledge and experience. The Chair fosters a transparent, trusting and inclusive collaborative culture and supports
debate and constructive challenge, and ensures everyone’s opinions are listened to.
Egon Zehnder’s report acknowledged a number of positives and key strengths, and identified areas for continued
improvement, including a deeper focus on talent management and succession planning, increasing more structured
insights into strategic delivery and ways to hold management to account, to increase Board discussions on the
organisation’s culture and leadership, increase the proportion of face-to-face Board meetings and at different office
locations, and a strengthening of Board paper quality and improvement in circulation times. Their report set out
some clear recommendations, which were discussed by the Board in February 2023.
The following table presents a high-level summary of the outputs and areas for continued improvement from the
late 2022 Board effectiveness evaluation and the proposed actions by the Board.
Outputs from the 2022 Board evaluation
Board agreed actions
A deeper focus on talent management and succession planning.
Increase the Board’s exposure to senior talent
To be built into the Board’s agenda and engagement programme
More structured insights into strategic delivery and ways to hold
management to account at each Board meeting
To be built into the Board’s agenda with sufficient time allocated
Further discussion on the softer aspects of the Board’s mandate such
as the organisation’s culture and leadership
To be built into the Board’s agenda with sufficient time allocated
Additional face-to-face Board meetings including in London
To be built into the Board’s agenda and engagement programme
Board papers to be strengthened and circulation times to be improved
Greater focus and priority to be given to this action in 2023
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ANNUAL REPORT AND ACCOUNTS 2022
142
Status update on the actions from the early 2022 evaluation
Outputs from the early 2022 Board evaluation
Board agreed actions
Status
Continued preparation for top bench succession
Additional Nomination Committee meetings
built into the corporate calendar
Additional meetings held in 2022. Deeper
focus on talent management and
succession planning in the plan for 2023
Increase exposure to management, particularly
below Executive team level to deepen the
understanding of the business and better
inform talent management discussions
Increased interactions with top talent, both
in Board meetings and less formal settings
Good exposure between the Board and
senior management. Solid relationship
between the Board and ExCo in terms
of knowledge sharing, information
and views. More focus required on the
Board’s engagement with the next level
of management – see the actions from
the late 2022 Board evaluation above
Enhance the strategic debate by allocating
time for input by the broader management
team and NEDs with specific expertise
Board’s forward programme to reflect
this recommendation
Achieved
Integrate strategic discussions about key
emerging themes and leadership development
and succession into the Board programme
Board’s forward programme to reflect
this recommendation
Achieved
Improve the distribution lead times of papers
issued prior to meetings to allow the Board
ample time for preparation
All papers to be issued at least five days
prior to meetings
There is an ongoing improvement plan,
although greater focus and priority to
be given to this action in 2023
Integrate more in-person events (both formal
and informal) into the corporate calendar to
further enhance Board level relationships
A programme of events spread throughout
the year to be developed
Good communication between meetings
takes place when needed. Additional
face-to-face meetings to be introduced in
2023 (see late 2022 effectiveness review
action above)
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 page 173.
Management Committees
Executive Committee
In addition to the members of the Board, the day-to-day management of the Group’s operations is conducted by
its Executive Management Team called the Executive Committee which is made up of the key business heads of
each function (please refer to pages 129 to 130 for details).
The ExCo is chaired by the Group CEO, and convenes throughout the year based on a series of planned meetings.
These include a weekly Monday 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 Executive Committee meetings, many of which then subsequently
came to the Board for approval in 2022, included:
›
business performance and performance against KRIs;
›
progress on the Group’s IT strategy;
›
continuous evaluation of the Group’s management structure;
›
progress of integration of DPO business with that of the Group;
›
progress of implementation of the Group’s ESG strategy;
›
business developments in different geographies in which the Group operates;
›
the Group’s approach to risk management;
›
results of the employee engagement survey;
›
progress on culture and Board engagement with workforce; and
›
review of the Group’s talent pool.
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Corporate Governance
143
CORPORATE GOVERNANCE REPORT (CONTINUED)
Enterprise Risk Management Committee
Operating an appropriate and effective risk management and internal control system is essential to achieving
the Group’s strategic objectives and maintaining service delivery commitments. The ERMC 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 2022, the ERMC reviewed regular reports in respect of the above areas of its mandate, including: ongoing
monitoring and deep dive reviews of the Group’s Principal Risks and new and emerging risks, performance
of KRIs against those risks, risk acceptance reports and risk disclosures in the Annual Report and half year results
announcement; and ongoing monitoring of technology resilience, cyber security, IT disaster recovery, fraud reports,
Credit Risk Management Committee reports, regulatory compliance, assurance plans, DPO integration progress
and the Enterprise Risk Management dashboard.
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 Technology Officer, Group Chief Internal Auditor,
Group Chief Operations Officer, Group Managing Director – Acquiring, Managing Director & Co-Head of Processing
– Middle East and Managing Director & Co-Head of Processing – Africa.
The Board’s perspective on Risk & Control is covered in the Principal Risks and Uncertainties section within the
Strategic Report on page 102 and within the Risk & Technology Committee report on page 156.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
144
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
Number of
Directors
Ratio of Independent
Directors to other
Directors (excluding
the Chairman)
1
Pre-IPO: February/
March 2019
Appointment of the first Directors
Ron Kalifa, Independent Chairman
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
9
3:5
22 January 2020
Appointment of two additional Independent
Non-Executive Directors
Anil Dua, Independent Non-Executive Director
Ali Mazanderani, Independent Non-Executive Director
11
5:5
30 April 2020
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
All other serving Directors are elected/re-elected
by shareholders at the AGM
8
5:2
2 June 2020
Appointment of our serving CFO to the Board
as an Executive Director
Rohit Malhotra, Group Chief Financial Officer
9
5:3
1 January 2021
Appointment of two additional Independent
Non-Executive Directors
Diane Radley, Independent Non-Executive Director
Monique Shivanandan, Independent Non-Executive Director
11
7:3
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
7:3
20 May 2021
Each Director is elected/re-elected by shareholders at the AGM
11
7:3
30 September 2021
Ali Mazanderani, Independent Non-Executive Director,
resigns from the Board
10
6:3
31 December 2022
Suryanarayan Subramanian, Non-Executive Director,
retires from the Board
9
6:2
1
The Code requires that at least half the Board, excluding the Chair, should be Non-Executive Directors whom the Board considers to be independent.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
145
Audit Committee report
Other members
Anil Dua
Diane Radley
Monique Shivanandan
Number of meetings held in the year
Eight.
Attendance
Darren Pope (Chair)
8/8
Anil Dua
8/8
Diane Radley
8/8
Monique Shivanandan
8/8
Meetings also regularly
attended by:
›
Nandan Mer, Group Chief Executive Officer
›
Rohit Malhotra, Group Chief Financial Officer
›
Suryanarayan Subramanian, Non-Executive Director
›
Jay Razzaq, Chief Risk Officer and
Group Company Secretary
›
Ian Cox, Group Chief Internal Auditor
›
Vimal Relli, Group Financial Controller
›
KPMG LLP
Read Directors’ biographies on pages 126 to 128
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.
“We continue to focus on the
production of high-quality,
well-controlled financial statements
to provide our stakeholders with the
best-quality insight into our business.
I have been particularly pleased with
the progress in our DPO financial and
audit integration and the exceptional
outcome from the independent
external quality review of our Internal
Audit area. We have additionally
significantly moved forward our ESG
agenda and are delivering rigour and
control around our progress here.”
Darren Pope
Committee Chair
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
146
Dear Shareholder
I am pleased to present the
Audit Committee report for the
year ended 31 December 2022.
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) other
than relating to Code provision
28 (assessment of principal and
emerging risks), which is included
in the separate Risk & Technology
Committee report on pages 156.
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.
DPO finance and Internal
Audit integration
The Committee provided oversight
of the DPO finance, financial control
and Internal Audit integration
programmes and was pleased
with the significant progress made
and the pace at which it had been
achieved. As a result, DPO’s internal
control framework made good
progress in 2022. While an area for
continued focus next year, as the
year progressed, the Committee
was encouraged by the improvement
in the closure rate of Internal Audit
issues by management in the DPO
business, demonstrating its growing
maturity and management’s focus
on alignment of standards within
that business with the rest of the
Network International Group.
Disclosures and year end reporting
We have maintained the high standards
of disclosure achieved in prior years,
having engaged with, and listened
to, our shareholders in respect of
the quality and transparency of the
Group’s external reporting.
We have undertaken a change in
accounting policy to re-present the
cash flow impact of restricted cash
within cash and cash equivalents,
in light of the IFRS agenda decision
in April 2022. This is fully disclosed
in note 2(f) on page 217.
The Committee has maintained its
focus on going concern to ensure
that the stress testing applied to
the business was made under severe
but plausible scenarios and that
any management actions deployed
are achievable, proportionate and
properly costed.
The most material accounting
estimate related to the assessment
of impairment of the carrying value
of DPO which is fully supported
by the latest business forecast and
robust to reasonable sensitivities
as to discount and terminal growth
rate assumptions.
ESG programme
As the Group expands on its
commitments and public disclosures
in relation to its ESG programme
(see pages 38 to 57), the Committee
was asked by the Board at the start
of the year to lead the oversight of
that programme, with a particular
focus on the setting of viable stretch
targets, the workstreams to deliver
them and, in conjunction with the
Risk & Technology Committee, the
assessment of strategic risks and
opportunities. The outcome of the
work to date is presented on pages
58 to 77 and demonstrates very
substantial compliance with the
requirements of TCFD. A formal
structure of regular reporting is
now in place with a key roadmap
against which performance can
be monitored by management
with oversight by the Committee.
External auditor
In the context of general market
uncertainty with regard to the
Wirecard failure, we had increased
our audit scope significantly in the
last couple of years. Audit scope
has now been marginally reduced
from 95% to 92% of the Group’s
revenues, but at this level it remains
very conservative and high in
the context of other FTSE 350
companies. This level reflects our
natural prudence rather than any
underlying concerns.
In view of KPMG’s long tenure as
external auditor, and as described
more fully in this report below, the
Group will conduct a formal audit
tender process in 2023, leading to the
appointment of a new external auditor
for the statutory audit commencing
with the 2024 financial year.
Internal Audit
Group Internal Audit (GIA) is
consistently a valued partner and
strong third line of defence within
the organisation as a result of the
ongoing significant upskilling of the
function, including in the areas of
technology and data, since 2019.
As mentioned above, management
within DPO has improved the level
of closure of Internal Audit issues
during the year and their efforts
are being supported by the rest of
the Group. Elsewhere in the Group,
there is strong closure of Internal
Audit issues by management and
overdue audit actions remain low,
illustrating the continuous high level
of focus on control.
Our first externally facilitated
external quality assurance review
of Group Internal Audit was
carried out this year by PWC.
The Committee was delighted that
their overall assessment was the
highest rating of 5 that their review
model generates. A tremendous
result for the GIA team but not
one that will make us complacent.
Assurance
We have continued to develop
our overall assurance approach this
year with a highly integrated plan
agreed with the Risk & Technology
Committee across Group Risk
and GIA. 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.
Whistleblowing
We continue to be pleased with the
usage of the whistleblowing facility
and the robust way in which all
matters raised are fully investigated.
We closely monitor these cases
as they are raised and the outcome
of each investigation and believe
the level of cases is symptomatic
of widespread awareness amongst
our people across the Group rather
than any concern as to our control
environment.
Looking ahead
We will continue to monitor the
quality of the Group’s financial
reporting and financial controls
and continue to refine and maintain
oversight of the ESG targets and
delivery programmes. The external
audit re-tendering will be a focus of
the Committee during 2023 as will
the transition to the new external
auditor after the audit of the 2023
results. We will continue to monitor
and prepare for any changes to
our processes and procedures in
response to the UK Government
proposals on the future of audit
and corporate governance.
Darren Pope
Chair, Audit Committee
8 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
147
AUDIT COMMITTEE REPORT (CONTINUED)
Compliance with the Code
Throughout the year, there was
full compliance with section 4
of the Code.
Composition of the Committee
The Audit Committee is comprised
solely of Independent Non-Executive
Directors. No changes were made
to the membership of the Committee
during the year.
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 GIA function;
›
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 adequacy and
effectiveness of the Group’s
internal financial controls and the
Group’s internal control systems,
including the Group’s procedures
for detecting fraud; and
›
Oversee the Group Tax Policy
and strategy, and the Group’s
Tax function.
Three members of the Committee
(Darren Pope, Diane Radley
and Monique Shivanandan) are
members of the Risk & Technology
Committee, which allows knowledge
exchange, alignment and the
avoidance of overlap or gaps of
work between the two Committees.
Furthermore, during the year,
the terms of reference of both
Committees were amended to
include a provision for holding an
annual joint meeting to consider
the reports on the assurance plans
prior to recommendation of the
annual financial statements to
the Board for approval. No other
substantive changes were made to
the Committee’s terms of reference
during the year. 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/
.
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.
Summary of principal activities
of the Committee during the year
During the year, the Committee
reviewed the following:
Financial and external reporting
›
The integrity of the 2021 full
year results, the 2022 half year
results and, in 2023, the 2022
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 2021
(in 2023, in the 2022) 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 Audit Committee reports
for inclusion in the 2021 (and in
2023 in the 2022) Annual Report;
›
The quarterly trading updates;
›
The DPO Finance and Group
Internal Audit integration plan;
›
The ‘expected credit losses’
back testing methodology
and process; and
›
An annual review of tax
compliance across the Group.
The Committee reviewed the
above, challenged management
as appropriate and concluded that
the appropriate financial reporting
processes are in place, judgements
and estimates are sound and
controls are operating effectively.
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;
›
The half year review and full year
audit reports;
›
The external audit strategy for
FY 2022;
›
The external auditor’s response
to their engagement with their
stakeholders and ensuring
smooth conduct of the audit of
the Group’s financial statements;
›
The external auditor’s review of
internal controls at regional levels;
›
Reports on auditor independence
– non-audit services and fees;
›
The effectiveness of the external
audit process;
›
Recommended the re-appointment
of KPMG as external auditor for
2023; and
›
The external audit re-tender
process and timeline.
The Committee reviewed the
external audit process, its
effectiveness as well as future
plans and satisfied itself with
the performance of the external
auditor and their independence.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
148
Internal Audit
›
The GIA Charter, to ensure
continued alignment and
compliance with the guidance
published by the Chartered
Institute of Internal Auditors;
›
The GIA strategy for coverage
of technology audits;
›
The GIA plan for 2023 split
between Network and DPO
and approved its implementation;
›
The reports from GIA reviews
and management’s responses
and improvement action plans;
›
Approval of the proposed
approach for, and a review of
the results of, the Group Internal
Audit externally facilitated quality
assurance review; and
›
Appointed PWC to conduct an
independent Quality Assessment
review with the presentation
of findings early in 2023.
The Committee concluded that
the strengthening of the GIA
function since 2019 had resulted
in the planned improvement in
its effectiveness.
ESG
›
The appointment of a specialist
ESG advisor to supplement
internal resources; and
›
Approval and oversight of
a phased plan to define ESG
strategy, set Scope 1 and 2 carbon
emission targets, define and
source Scope 3 measurements
and develop a materially compliant
TCFD report.
The Committee is very pleased
with the progress made and the
organisational commitment to ESG.
Refining of strategic and tactical
targets, actions and monitoring
will remain a multi-year project.
The Committee will also work
with the Risk & Technology
Committee to refine and oversee
management’s initial work on
risks and opportunities arising
from the Group’s ESG Strategy.
Governance
›
Separate meetings were held
in the absence of management
with the Chief Internal Auditor
and the external auditor;
›
Updates on matters raised under
the whistleblower arrangements;
›
Review of the procedures
for detecting internal fraud;
›
Status oversight of the critical
activities prior to the go-live
decision for the Oracle Fusion
Enterprise Resource Planning
implementation by the
Finance function;
›
An amendment to the terms of
reference (see page 148); and
›
A review of the Committee’s
work conducted measured
against its terms of reference.
Key audit matters considered by the Committee during the year:
Key matter considered
Committee review and conclusion
Action taken/enhancements as a result
of the Committee’s review
DPO integration
The Committee provided oversight of the DPO financial and internal
audit integration, monitoring achievements, overdue items and the next
steps with timelines so that progress could be tracked. The Committee
was pleased with the significant achievements made and the pace
at which they were achieved; and was encouraged by the significant
improvement in the closure rate of Internal Audit issues, demonstrating
management’s focus on aligning the standards within that business with
the rest of the Group.
The Committee will continue to oversee
the DPO integration programme until fully
complete and will closely monitor the
closure rate of Internal Audit issues.
ESG programme
The Committee provided oversight of the ESG programme and set
viable stretch targets and the workstreams for delivery. With the
Risk & Technology Committee, the Committee assessed the strategic
risks and opportunities of that programme. A formal structure of
regular reporting is now in place with a key roadmap against which
performance can be monitored by management with oversight by
the Committee. The Committee is satisfied with the rigour and control
around the programme.
The ESG programme has a formalised
strategy, with an understanding of both
risks and opportunities, with targets against
which performance can be monitored by
management and the Board/Committees.
External audit
In view of KPMG’s long tenure as external auditor, the Committee
decided that the Group should conduct a formal audit tender process
in 2023, leading to the appointment of a new external auditor for the
statutory audit commencing with the 2024 financial year.
The Committee will oversee the formal
external audit tender process and the
outcome and recommend to the Board
the appointment of a new external auditor.
Group Internal Audit
The Committee monitored regular reports from Group Internal Audit
(GIA) and is satisfied that the team is regarded as a valued partner and
strong third line of defence throughout the organisation. The Committee
engaged PWC to conduct an independent quality assurance review
and was delighted that their overall assessment of GIA was the highest
rating of 5 that their review model generates.
The Committee will continue to oversee
GIA, including the monitoring of their audit
reports and the closure of open issues
by management to ensure GIA remains
a valued partner to the business and a
strong third line of defence.
Taxation
The Committee reviewed the status of Group Tax compliance and
the key accomplishments of the Group Tax team during 2022, including
DPO integration, and approved the main focus areas of the Group Tax
team for 2023. The Committee was satisfied with performance.
The Committee will continue to oversee
the Group’s tax arrangements and the
performance of the Group Tax team.
Whistleblowing
The Committee continued to receive updates on all whistleblowing
cases raised and was satisfied that they were being addressed
appropriately by management.
The Committee will continue to monitor
all whistleblowing cases, their underlying
causes and the way in which they are being
addressed by management.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
149
AUDIT COMMITTEE REPORT (CONTINUED)
Significant issues considered by the Audit Committee in relation to the financial statements
The key areas of judgement considered, and actions taken by the Committee during the year, which ensured
that appropriate rigour has been applied to the 2022 Annual Report and Accounts, are detailed as follows:
Key issue/
area of focus
Brief description
Committee review and conclusion
Action taken/
enhancements
as a result of the
Committee’s review
Accounting,
tax and
financial
reporting
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.
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.
No action required.
Impact of
applicable new
accounting
standards and
interpretations
on the Group’s
accounting
policies
To review
and challenge
the impact of
new accounting
standards on
the consolidated
financial statements
and its accounting
policies.
The Committee reviewed the update presented by the Chief Financial Officer
on the amendments and interpretations applicable for the first time in 2022.
The Committee noted the updates and concluded that other than the change in
the accounting policy for the presentation of restricted cash in the consolidated
statement of cash flows, no other accounting standard changes and new
interpretations have any significant impact on the Group consolidated
financial statements.
Based on the
Committee conclusion,
the consolidated financial
statements have been
appropriately updated
to reflect the change in
the accounting policy for
the presentation of the
Group’s restricted cash.
Please refer to Note 2(f) of
the consolidated financial
statements for details.
Accounting
practices,
estimates and
judgements
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 Group consolidated financial statements and the related disclosures made.
Management assessed and concluded that other than estimates used in the assessment
of impairment related to one of the Group’s cash generating units (CGUs) i.e. DPO
(details of which are included in the consolidated financial statements), there
are no significant accounting judgements and estimates that affect the application
of accounting policies and reported amounts of assets and liabilities, income and
expenses in the consolidated financial statements for the year ended 31 December 2022.
The Committee has reviewed and stress tested the estimates used by management
in assessing the carrying value of the investment in DPO and supported the calculation
of the comfortable excess recoverable value of USD 66 million (recoverable amount
being 123.6% of carrying value). Given the relative size of the intangible asset the
Committee will, of course, continue to monitor the planned business growth supporting
this recoverable value.
The Committee will
continue to monitor
the performance of the
CGU and will ensure
appropriate action is taken
in case of any indication
of impairment in 2023.
Changes in
segment reporting
disclosures in
consolidated
financial statements.
In line with the IFRS requirement, the Group produces segment reporting disclosures
based on how the business operations are managed. During the year, the Group has
changed its operating segment reporting from geographic basis (Middle East and
Africa), to business lines (Merchant Services, Outsourced Payment Services) to align
operating segment disclosure in line with internal reporting that is used by the Chief
Operating Decision Makers (Network Executive Committee) and Board of Directors
to assess the Group’s performance and allocate resources. Detailed disclosure is
included in note 5 of the consolidated financial statements.
The Committee reviewed and assessed the appropriateness of the new segment
reporting approach and concluded that the change made in the disclosures
meaningfully aligns the operating segment disclosures with the internal reporting
and performance assessment.
Post approval of the
Committee, all related
disclosures in the
consolidated financial
statements have been
appropriately updated
to reflect the change in
the operating segments.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
150
Key issue/
area of focus
Brief description
Committee review and conclusion
Action taken/
enhancements
as a result of the
Committee’s review
Accounting
practices,
estimates and
judgements
Accounting
treatment of
share buyback.
On 11 August 2022, the Group announced a share buyback programme (the ‘Initial
Program’). The Initial Program was for buyback of shares for a maximum aggregate
market value equivalent to USD 50 million which ended on 27 January. The Company
has launched a share buyback for a further tranche of up to USD 50 million following
completion of the Initial Program.
The programme’s purpose was to reduce the capital of the Company and the ordinary
shares purchased as at 31 December 2022 were recorded under treasury shares in the
consolidated statement of changes in equity of the consolidated financial statements.
The Committee noted that the share buyback programme was duly approved by
the Board and the accounting treatment applied by the management in recording the
impact of share buyback in the Group’s consolidated financial statements is appropriate.
Post announcement
of the share buyback
programme to markets
on 11 August 2022,
the process of share
buyback was initiated
until 31 December 2022,
and shares amounting
to USD 40.33 million have
been purchased and
appropriately recorded
in the consolidated
financial statements.
To review and
challenge the
impairment analysis
on intangible assets
including goodwill
carried out by
management.
As part of the yearly reporting process, management has conducted and presented
to the Committee a detailed assessment on potential impairment of non-financial
assets and goodwill carried in the books as at 31 December 2022. 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 agreed with
management’s conclusion that there is no impairment in the carrying value of goodwill
and non-financial assets as at 31 December 2022.
The Group continue
to monitor the planned
business growth
supporting the
recoverable amount
of DPO.
Going concern
assessment.
Management has carried out a detailed assessment to validate the Group’s going
concern assumption. In making this assessment, a forecast period of more than
12 months (until June 2024) has been considered. The 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 2022 should be prepared on
a going concern basis.
No action required.
Please refer to note 2(d)
of the consolidated
financial statements
for detailed disclosure.
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 over a three-year time horizon,
carried out by management, and challenged them on the assumptions, stress
scenarios considered and various mitigants incorporated in downside scenarios.
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 2025.
Please refer to further details in the Viability Statement section on page 196 of the ARA.
No action required.
Please refer to page 196
of the ARA for details.
FRC publications
related to thematic
reviews of reporting
and disclosures
in 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.
Post approval of the
Committee, appropriate
changes have been made
in the ARA in line with
FRC recommendations.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
151
AUDIT COMMITTEE REPORT (CONTINUED)
Group Internal Audit
The Committee oversees the
activity of the GIA. GIA provides
the third line of defence assurance
work to the Group and is responsible,
amongst other things, for evaluating
the effectiveness of the Group’s
risk management, control and
governance processes. 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 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 the Board, the external auditor
and senior management across
the business, considers the results
of previous audits and monitors
industry trends. This activity ensures
that GIA focuses on the most
significant risk areas and related
key controls.
Although the approach for the
2023 Internal Audit plan for the
DPO business was the same
as for the rest of the Group’s
businesses, the risk assessment
was considered separately by
the Committee, recognising the
developing maturity of GIA’s risk
assessment of DPO as they progress
to completing first time audits
in all areas of that business.
Additionally, in recognition of the
Group’s transition from a processing
company to a technology driven
organisation and a significant
increase in technology spend,
the Committee also reviewed and
approved the Group’s technology
audit coverage strategy.
In approving the Internal Audit
plan for 2023, the Committee
concluded that the GIA function
was sufficiently resourced
and skilled to deliver the plan
(welcoming the upskilling of the
function having hired technology
and data skill sets over the past
two years) 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 covering the
delivery of the Internal Audit plan,
details of issued reports, and data
on management’s closure of audit
report actions. There remains a
consistent high level of management
closure of Internal Audit issues
across the Group excluding the DPO
business and, during the course of
the year, an improving closure rate
within the DPO business.
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 2023 was
reviewed and approved by the
Risk & Technology Committee.
The Chief Internal Auditor reports
to the Audit Committee Chair,
and it is the role of the Audit
Committee (as stated in its terms
of reference) to assess the
effectiveness of the Chief Internal
Auditor and the GIA function.
The Audit Committee terms of
reference require an independent
External Quality Assurance (EQA)
review of GIA by April 2023. During
the year, the Committee reviewed
the results of a formal tender
process and appointed PWC to
conduct this work. The Committee
approved the scope of the EQA
review, which commenced in the
latter part of the year. The EQA
concluded that Internal Audit was
operating at the highest level of
maturity with “the right level of
authority and gravitas”, “industry
expertise and technology skills”
and is a “well motivated team with
clear role and responsibilities and
direction”. There were of course
some relatively modest actions
which the Committee will oversee
delivery against.
The Chief Internal Auditor attends
all meetings of the Audit 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
Executive Committee meetings.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
152
Whistleblowing
Whistleblowing relates to concerns
which fall within the wider public
interest, such as a breach of our
policies and procedures; breaches
of law and regulation; and behaviour
that harms or is likely to harm the
reputation or financial well-being
of the Group. The Group 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 their
line management, HR or employee
forums. This includes a dedicated
hotline established for this purpose,
which is operated confidentially by
an experienced third-party service
provider. A significant majority of
the Group’s employees feel it is
safe to raise concerns through
the whistleblowing channels.
The Group takes all whistleblowing
cases seriously. Concerns raised
through the hotline are sent
simultaneously to the Chair of the
Audit Committee, the designated
whistleblowers’ champion, for
information, and the Chief Risk
Officer for action. The Committee
receives reports on whistleblowing
policy and processes and monitors
all reported and substantiated
cases. All matters raised through
the hotline are investigated
thoroughly and, regardless of the
outcome, formally reported to the
Audit Committee, and all significant
matters are reported by the Chair
of the Audit Committee to the
Board as part of his report on
the proceedings at each Audit
Committee meeting.
The Committee received assurance
from GIA in 2022 that the key
components of an appropriate
whistleblowing framework are
in place and that the framework
is effective. During the year,
the Committee reviewed all cases
raised under the whistleblowing
policy, noting the steps taken to
investigate them and the outcome
of those investigations.
External auditor
During the year the Committee
undertook a review facilitated by
Group Internal Audit of the external
auditor’s effectiveness using a
confidential survey. The survey
questions represent best practice
and include, for example, questions
explicitly on the external auditor
demonstrating professional
scepticism and challenge of
management’s key judgements.
While the review concluded that
the external auditor had operated
effectively for the Group’s 2021
audit, a small number of areas were
identified where improvements
should be made and these were
discussed between the Chair of the
Audit Committee, the Chief Internal
Auditor and KPMG who agreed
a remediation action plan.
External audit tender
KPMG were appointed as the
Group’s auditor in 2019 after a
formal audit tender process in
the months following the IPO
of the Company in 2019. Given
KPMG’s long tenure as the Group’s
external auditor, the Committee
recommended at that time that the
appointment should be for a period
of up to four or five years, at which
time consideration should be given
to conducting a re-tender process.
During the year, the Committee
reviewed and approved a proposal
that the Group should conduct a
formal audit tender process in 2023,
leading to the appointment of a new
external auditor for the statutory
audit commencing with the 2024
financial year. The Company has
complied with the Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of
Competitive Tender Processes and
Audit Responsibilities) Order 2014
for the financial year under review.
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.
However, the auditor KPMG have
identified and reported breaches
of the FRC Ethical Standard
(2016 and 2019) and IESBA Code
relating to non-audit services
provided by KPMG member firms
to Network Group entities, as per
their letter dated 1 March 2023
addressed to the Board Audit
Committee. The services, which
have been terminated, involved
assistance with the local statutory
financial statement preparation
and foreign language translation
in Egypt, Jordan and KSA and were
provided during the years ended
31 December 2019 to 31 December
2022. KPMG assessed the impact of
these breaches and concluded that
these breaches are considered less
significant and KPMG’s objectivity
and independence as auditor was
not compromised as these services
were routine, administrative and
mechanical in nature and involve
no management decision making
by the KPMG member firms.
The Audit Committee concurs
with KPMG’s view that this breach
is not significant and does not
impact the independence of KPMG
as Group Auditors.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
153
AUDIT COMMITTEE REPORT (CONTINUED)
The total fees payable to KPMG
(Group Auditor) in respect of 2022
amounted to USD 1.9 million,
out of which the fee for non-audit
services, (including half year
review and covenant compliance
certification), is USD 0.2 million.
Comparative figures for the prior
year are included in note 21.1 to the
financial statements on page 241.
Independence
Both the Board and the external
auditor, KPMG, have safeguards
in place to protect the objectivity
of the external auditors. In addition
to the non-audit services policy
referred to above, the Group also
has in place a policy that prohibits
the employment by the Group of
any current employee of KPMG
and restricts the employment by
the Group of former employees
of KPMG or any immediate family
member of an employee of KPMG.
KPMG have confirmed their
independence as auditor of the
Company in a letter addressed
to the Directors.
Board statements and
confirmations following
review and recommendation
from the Audit 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
Group CEO, 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
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;
–
That the report when taken
in the round is Fair Balanced
and Understandable;
–
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 102. In March 2023, a joint
meeting between the Committee
and the Risk & Technology
Committee was held to coordinate
their ongoing reviews of the Group’s
systems of risk management and
internal control before recommending
the following statement to the Board
for approval.
During the year, the Board,
through the work of the Audit
Committee and the Risk &
Technology Committee, have
conducted a coordinated 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
154
Group Internal Audit, Risk and
Finance have independently
assessed the overall risk and control
framework to be materially effective,
noting: the improvement to the
risk and control framework within
the DPO business during the year
as the integration measures taken
by management become effective;
and a high level of maturity
within the rest of the Group.
Further planned improvements
within DPO will continue during
2023. 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 Committee
by the Chief Internal Auditor.
The Committee, in reviewing the
effectiveness of the system of risk
management and internal control,
can confirm that whilst the Internal
Audits identified a number of issues
for management to address,
GIA did not identify any failings
or weaknesses that would be
classed as significant. GIA’s regular
reporting to the Audit Committee
included details of open and past
due-date audit issues and the
Audit Committee satisfied itself:
that management within DPO had
improved their audit issue closure
performance during the year; that
elsewhere throughout the Group
management had maintained their
strong record of closing Internal
Audit issues on time throughout
2022; and that necessary actions
have been or are being taken to
remedy any weaknesses identified.
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 review by the
Audit Committee;
ii.
a formal audit by KPMG,
external auditor; and
iii. a final review by the Board
of Directors.
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 2022 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 199 and in note 2(d) to the
consolidated financial statements
on page 216. 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 196.
The Committee reviewed and
challenged the viability assessment
(including the three-year time
horizon selected) undertaken
by management in the 2022
Annual Report and Accounts.
The Committee considered the
process to support the Viability
Statement in conjunction with
an assessment of principal risks
(carried out in tandem with the Risk
& Technology Committee), 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 196 to 198) to the Board
for approval.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
155
Risk & Technology Committee report
Other members
Darren Pope
Monique Shivanandan
Number of meetings held in the year
Seven.
Attendance
Diane Radley (Chair)
7/7
Darren Pope
7/7
Monique Shivanandan
7/7
The terms of reference of the Risk & Technology Committee
are available on the Group’s website at:
https://investors.
networkinternational.ae/investors/corporate-governance/
.
Meetings also regularly
attended by:
›
Nandan Mer, Group Chief Executive Officer
›
Rohit Malhotra, Group Chief Financial Officer
›
Jay Razzaq, Chief Risk Officer and
Group Company Secretary
›
Mark Diamond, Chief Technology
Officer, up to November 2022
›
Sandeep Chouhan, Chief Business Transformation and
Technology Officer, with effect from November 2022
›
Ian Cox, Group Chief Internal Auditor
›
KPMG LLP
Read Directors’ biographies on pages 126 to 128
“As the Group continues its
expansion across a number of
countries across the Middle East
and Africa, safeguarding the
Group’s reputation by ensuring
compliance with all regulatory
requirements, fostering strong
ethical business practices and
creating positive working
relationships with local regulators
will be critical to future success.”
Diane Radley
Committee Chair
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
156
Dear Shareholder
I am pleased to present the Risk &
Technology Committee report for
the year ended 31 December 2022.
This report describes the work of
the Committee during the year
and reports how we have applied
the principles and provisions of
section 4 of the 2018 UK Corporate
Governance Code (the Code)
relating to risk.
In addition to providing oversight
in respect of the Group’s risk
management, assurance and
compliance activities, we provide a
high level of support to the Board in
evaluating, monitoring and directing
the use of technology in support
of the Group’s strategic objectives.
In the past year, we have also provided
oversight and direction in respect
of the integration of DPO in all areas
within our remit. Each workstream
had key deliverables with timelines
and the Committee receives regular
updates on progress. Separately,
the Committee has provided oversight
in respect of the development of
climate change risk-related Key Risk
Indicators, which have been integrated
within our existing principal risks.
I am pleased to report that in
the Committee’s first full year of
operation since it was constituted
in June 2021, we have achieved a
good rhythm of work with the focus
and frequency of reports presented
to us fully covering the wide remit
of responsibilities as set out in our
terms of reference. 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.
We regularly review comprehensive
management dashboards setting
out KPIs in respect of key strategic
technology projects, tech up-time
resiliency and cyber security;
as well as monitoring the Group’s
risk profile and our assurance and
compliance programmes.
The Principal Risks and Uncertainties
section of the Annual Report from
page 102, which was reviewed and
approved by the Committee, sets
out our approach to risk management,
the successful implementation of
our ERMF and related processes
within DPO and our principal and
emerging risks and how they are
being mitigated in line with our
Board approved risk appetite.
With the acquisition of the DPO
Group and the entry into new
markets, the Group’s regulated
status as a payments services
provider has materially increased
in the past year and is expected
to continue growing as the Group’s
regulatory footprint expands.
In response to this increasing
oversight and regulatory change
from multiple regulators, a robust
framework has been developed
for the Group, and this is being
continuously enhanced to ensure
compliance with regulatory
requirements. The Committee
confirms that the Group is
committed to adhering to the
highest regulatory standards in
the markets where it operates and
has recently appointed Corporate
Country Officers in each market
where the Group has a material
presence. These officers play a
crucial role in protecting the Group’s
franchise within their countries of
operation, including forging positive
working relationships with our local
regulators and coordinating the
overall business efforts.
Our overall risk profile remained stable
for all our principal risks with no
material breach to our risk appetite.
Looking ahead, we will continue to:
›
Increase focus on those of our
principal risks where the risk
trend is increasing;
›
Monitor climate-related impacts
embedded in our principal risks;
›
Ensure appropriate assurance
and monitoring of key risks;
›
Increase focus on individual risk
items in deep dives to support
Board decision making;
›
Advise the Board on current
and future risk exposures;
›
Continue to work closely with
the Audit Committee;
›
Monitor the key technology
projects in support of strategy
delivery; and
›
Ensure strong cyber security
measures to protect the businesses.
Diane Radley
Chair, Risk & Technology Committee
8 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
157
RISK & TECHNOLOGY COMMITTEE REPORT (CONTINUED)
Compliance with the Code
Throughout the year, there was
full compliance with section 4 of
the UK Corporate Governance
Code relating to risk. The Committee
conducted a thorough and robust
review and assessment of the
Group’s emerging and principal risks
and a detailed description of those
risks, the procedures in place to
identify emerging risks and an
explanation of how these are
being managed or mitigated are
given within the Principal Risks
and Uncertainties section of the
Strategic Report on pages 102 to 115.
Composition of the Committee
The Risk & Technology Committee
is comprised solely of Independent
Non-Executive Directors. No changes
were made to the composition of
the Committee during the year
and to the date of this report.
Role of the Committee
The Committee is responsible
for providing risk management,
technology and cyber security
oversight to the Group’s business
and for advising the Board on the
Company’s risk appetite, tolerance
and strategy. It also supports Board
decision making by advising it on
current and future risk exposures
which have the potential to impact
on the delivery of the Group’s strategy.
The Board has delegated to the
Committee authority to:
›
Review the Group’s risk profile,
its principal risks and uncertainties
and advise the Board in respect
of risk appetite, management’s
mitigation plans and the potential
impacts on the Group; and to
oversee the Group’s Risk function;
›
Exercise ongoing oversight
in respect of the Technology
function, the technology real
estate, all related policies and
procedures, including disaster
recovery and cyber security, the
ongoing oversight of technology
acquisitions and developments
and to ensure that an Information
and Technology Governance
Framework is in place together
with a technology strategy
supporting the strategic intent
of the Group;
›
Oversee the Group’s Compliance
function, including oversight
of the Group’s Risk Assurance
and Compliance plans, and the
review and implementation of the
Group’s policies on the prevention
of bribery and corruption, and
money laundering.
Governance
All three members of the Committee
are also members of the Audit
Committee, which allows knowledge
exchange, alignment and the
avoidance of overlap or gaps of
work between the two Committees.
Furthermore, during the year,
the terms of reference of both
Committees were amended to
include a provision for holding an
annual joint meeting to consider
the reports on the assurance plans
prior to recommendation of the
annual financial statements to the
Board for approval.
The Committee has a forward
programme of work to ensure it
covers its areas of responsibility.
At the end of 2022, the Committee
conducted a review of its work
against its terms of reference
and concluded that it had fully
discharged its responsibilities.
To enable it to carry out its duties
effectively, the Committee relies
on information and support from
the Chief Risk Officer and Group
Company Secretary as well as other
management across the Group.
During the year, the Committee
twice met separately with the
Chief Risk Officer and Group
Company Secretary in the
absence of management.
The Chief Risk Officer and Group
Company Secretary reports to the
Chief Executive Officer as well
as having a clear reporting line
into the Chairman of the Board
and the respective Chairs of the
Audit Committee and the Risk
& Technology Committee.
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 2022 and are
more fully described in the Principal
Risks and Uncertainties section
on pages 102 to 115.
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;
›
The Risk and Compliance function
assists 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
158
Summary of principal activities of the Committee during the year
During the year, the Committee
reviewed the following:
Risk (including compliance)
›
The Group’s risk appetite and
approach to risk management
within its risk framework and
new, emerging and principal
risks. These are described
in the Principal Risks and
Uncertainties section on
pages 102 to 115.
›
The Group’s existing Key
Risk Indicators leading to
their classification for tier 1
and tier 2.
›
Oversight in respect of
the development of climate
change risk-related Key
Risk Indicators.
›
Review of the Group’s risk
policies, approved consequent
amendments and exercised
oversight over compliance
with Group policies, including
in relation to anti-bribery
and anti-corruption, vendor
risk management, the Group
Enterprise Risk Management
Framework, the Group
Operational Risk Policy,
and the Group Fraud Risk
Management Policy.
›
Risk Assurance and Compliance
monitoring reports.
›
Group Risk and Compliance
assurance and monitoring plans
for 2023 and approved the plan
for implementation.
›
ERMF integration plan within
the DPO business.
›
Procedures for detecting
internal fraud and the
effectiveness of anti-bribery
and anti-corruption controls.
›
Assurance activities to assess
whether the Group’s security
controls and processes were
working as intended and were
effective in protecting against
emerging threats and trends.
›
Reports on the outcomes of
assurance reviews conducted.
›
Review of the Group’s
insurance arrangements.
Technology
›
Monitoring the Group’s
technology strategy.
›
Monitoring the Technology
Resilience dashboard.
›
Monitoring the Group’s
cyber security arrangements
and resilience.
›
Assessment of the Group’s
strategic technology projects
with the aim of prioritising
future enhancements to
architecture which supports
Group strategy.
For more details, please refer
to the Principal Risks and
Uncertainties section on pages
102 to 115.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
159
Nomination Committee report
Other members
Victoria Hull
Darren Pope
Habib Al Mulla
Number of meetings held in the year
Five.
Attendance
Ron Kalifa (Chair)
5/5
Victoria Hull
4/5
Darren Pope
5/5
Habib Al Mulla
5/5
Meetings also regularly
attended by:
›
Jay Razzaq, Chief Risk Officer
and Group Company Secretary
Read Directors’ biographies on pages 126 to 128
“We share the importance
given increasingly by
shareholders and other
stakeholders on the gender
and ethnicity diversity of
individuals on the boards
of listed companies and we
are proud of the progress
we have made.”
Sir Ron Kalifa OBE
Committee Chair
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
160
Dear Shareholder
During the year, the Committee
conducted a comprehensive review
of the Group’s talent pipeline for
senior management and Executive
Committee (ExCo) positions and
was encouraged by the wealth of
high calibre individuals across our
regions. Having emerged from a
lengthy period of COVID-19 related
travel restrictions, the Board now
has clear plans for improved exposure
to, and ongoing engagement with,
our senior people and high potential
employees across our Group.
We also reviewed the
implementation and progress
made against targets set within
the Group’s Equality, Diversity
& Inclusion Policy, which was
approved by the Board in March
2022. Given the global nature of
our businesses we are proud to
have a highly diverse international
workforce, and comprehensive
information about our people and
the development programmes
to support them is set out within
the sections on Our Culture and
Values, and ESG on pages 28 to 57.
We continue to be pleased with
the operation of the Group’s
overarching Employee Charter
and its clear linkage with the
Company’s strategy and values
and the significant progress made
against the objectives.
In recent years, we have constructed
a strong and diverse independent
Board with individuals possessing a
broad range of skills and experience,
which we regularly assess against
the needs of our business (see
pages 126 to 128). Our assessment
in February 2022 led to the Board’s
decision not to make any further
appointments during the year.
Accordingly, there were no changes
to the membership of our Board
until the retirement of Suryanarayan
Subramanian, Non-Executive
Director, on 31 December 2022.
In my Governance highlights letter
on page 120, I pay tribute to Surya,
who made a tremendous contribution
to Network over the past nine years.
In our 2021 Annual Report, I
mentioned that the strength and
range of experience held by our
Non-Executive Directors (NEDs)
enabled us to spread the workload
amongst our NEDs. We formed
the Risk & Technology Committee,
separating the Board’s oversight of
risk from audit as well as broadening
support in terms of the execution of
our important technology strategy.
This arrangement has worked very
well, with positive feedback from
management in respect of the
insights given to them, and serves
to remind us that sound governance
is an important and integral part
of conducting business.
We regularly review our Committee
memberships, and these remained
unchanged after the appointment
of Monique Shivanandan as a member
of the Remuneration Committee
with effect from 15 February 2022.
We share the importance given
increasingly by shareholders and
other stakeholders on the gender
and ethnicity diversity of individuals
on the boards of listed companies
and we are proud of the progress
we have made. Our Board has
achieved the targets set by the
Hampton-Alexander Review
(gender) and the Parker Review
(ethnicity) and we have early
adopted, by one year, the analysis
required by the Listing Rules –
please see pages 122 and 123.
We are mindful of the enhanced
targets set by the Listing Rules and
are developing an action plan to
achieve them. The Board’s diversity
is a reflection of the diversity across
our Group; and we are pleased to
report within the Our Culture and
Values section of this Annual Report
that there are over 60 nationalities
represented across our workforce
and, having taken active steps to
ensure we are recruiting from all
sections of society, gender diversity
has crossed the committed 30%
mark across the organisation.
The Committee provides oversight
of the annual evaluation of the Board,
the Committees and the individual
Directors. We conducted a thorough
externally facilitated evaluation of
the Board that commenced at the
end of 2022 leading into the start
of 2023, which built on the useful
insights gained from our external
evaluations in 2020 and early 2022.
Comprehensive disclosure of the
Board’s agreed action plans and
progress made since previous
evaluations is made within the
Governance Report on page 143.
Our practice of regular externally
facilitated Board reviews
demonstrates our commitment
to continuous review and
improvement. I look forward
to reporting further progress
in the coming year.
Sir Ron Kalifa OBE
Chairman and Chair of
the Nomination Committee
8 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
161
Composition of the Committee
Ron Kalifa (Board Chairman and
Chair 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 the authority to:
›
Review the size and structure of
the Board, to consider succession
planning for Directors and the
ExCo 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;
›
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
Chair’s position 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.
Principal activities of the
Committee during the period
In the period from 1 January 2022
to the date of this report,
the Committee:
›
Conducted a review of the
time commitment of each of
the Non-Executive Directors
(NEDs) and separately considered
the independence, effectiveness
and time commitment of the
Directors before reviewing the
proposed election or re-election
of the Directors at the 2022 and
2023 AGMs;
›
Considered proposed changes
to external appointments held by
the Directors to ensure there were
no potential conflicts of interest
and that any proposed additional
external appointment did not
impact on the time commitment
the Director was able to give to
the Company;
›
Conducted a review of the skills,
experience and knowledge of
the Non-Executive Directors and
mapped them against the strategy
of the Group;
›
Reviewed the composition
of the Board’s Committees
and recommended to the Board
the appointment of Monique
Shivanandan to the Remuneration
Committee with effect from
15 February 2022;
›
Reviewed the implementation
of the Group’s policy on equality,
diversity and inclusion that lies
within the Group’s Employee
Charter launched in 2019, noting
the clear linkage with the Group’s
strategy and values and the
significant progress made against
the objectives (as reported, along
with diversity statistics, within
the ESG Strategy section of the
Strategic Report on pages 50
to 53 and within the Corporate
Governance section on page
122 to 123);
›
Reviewed the various external
stakeholder policies and current/
future targets in respect of Board
membership diversity – please see
page 122 and the Board diversity
charts on page 123;
›
Reviewed 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;
›
Reviewed the ongoing
engagement between the
Chairman, Independent NEDs
and high potential talent across
the Group.
›
Reviewed the Nomination
Committee report for inclusion
in the 2021 (and in 2023 in the
2022) Annual Report;
›
Reviewed the Committee’s terms
of reference and its annual work
programme measured against
those terms of reference; and
›
Provided leadership and oversight
of the second annual Board
evaluation, which was conducted
at the start of 2022, and the third
evaluation, which commenced at
the end of 2022, both of which
were conducted by Egon Zehnder,
building on the outcomes and
actions from the review they
conducted in the latter part of
2019. The process, outcomes
and action plans are disclosed
on pages 141 to 143 of the
Governance Report.
Commitment of
Non-Executive Directors
The Board seeks to attract and
retain high-calibre Non-Executive
Directors with a breadth of skills,
experience and knowledge that will
enable them to contribute fully to
the long-term sustainable success
of the Group. The Board also
recognises the benefit to the
Group of those Directors holding
directorships in other companies
where no conflict of interest arises.
The Board requires that the Non-
Executive Directors should have
sufficient time to meet their Board
responsibilities and acknowledges
that such time commitment may
vary from time to time, depending
upon the demands of the business
and other external events. In
addition to attendance at scheduled
meetings, the Directors are often
required to attend ad-hoc meetings,
often at short notice. The chart on
NOMINATION COMMITTEE REPORT (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
162
page 141 discloses the attendance
record of each Director in respect
of the meetings of the Board and
each Committee of which they are
a member.
At Network, the Board takes its
responsibilities seriously and has
in place, through the work of
the Nomination Committee,
the following to monitor the
commitment of each Director:
›
A thorough Board appointments
policy and process as described
below. This includes an assessment,
prior to any appointment being
made, of the time availability
of the candidate (noting the
commitments in respect of their
other roles, including their listed
company NED mandates)
compared against the expected
time commitment of the role at
the Company as stipulated in
the letter of appointment.
›
Application of the relevant
principles and provisions of
the Code in respect of time
commitment and contribution
and acknowledgement that some
investors have published policies
that seek to restrict the number
of mandates undertaken by
individual NEDs. Such investor
policies set mandate limits rather
than time commitment and
contribution, so the Board
has to recognise the range of
requirements and balance those
with the needs of the Group set
in the context of the Code.
›
As a condition within the NEDs’
letters of appointment, they are
required to obtain prior Board
approval before accepting any
additional appointments. Such
approval will only be given by
the Board if it is satisfied that the
proposed additional appointment,
taking into account their existing
mandates, will not impact on the
time commitment given to the
Company. The reasons for permitting
significant appointments will be
explained in the Annual Report.
›
The attendance and contribution
of individual Directors is
continuously monitored by
the Company Secretary and
Chairman respectively.
›
The annual Board evaluation
considers whether each Director
prepares for all meetings and
continues to contribute effectively.
In addition, in respect of each
Director the Board conducts an
assessment of their aggregate
time commitments for all their
mandates, including listed
companies, private companies,
trusts and any other appointment
that requires a time commitment
on their part, and considers
whether each individual has
sufficient time availability for
their role with Network.
›
At its meeting in March each year,
the Board considers in respect
of each Director standing for
re-election at the Annual General
Meeting (AGM), the specific
reason why their contribution is,
and continues to be, important
to the Group’s long-term success.
As part of this process, the Board
takes into account all outputs
from the Board evaluation,
including those summarised
above. Each of the NEDs standing
for election or re-election has
to first give assurance to the
Board that they remain committed
to their role and will ensure that
they devote sufficient time to it,
including attendance at Board
and Committee meetings.
Such assurance is disclosed
in the Notice of AGM.
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. The Board
Appointments Policy reflects the
above and the benefits of diversity
including gender diversity and also
reflects 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 has significantly improved the
gender diversity of the Board with
recent appointments. The Board has
achieved the Hampton-Alexander
diversity target with our Board now
comprising 33% women. The Board
exceeds the targets set out in the
Parker Review in respect of Board
member ethnicity. The Nomination
Committee and the Board are
mindful of the new Listing Rule
gender and ethnicity targets, which
the Company will have to formally
report against next year, and these
targets will be taken into account
in the process leading to future
Board appointments. The Board
has early adopted the Listing Rule
requirement to publish gender and
ethnicity diversity analysis tables in
the Annual Report and these can be
found on pages 122 to 123. 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/
.
Board Appointments Process
The Board Appointment Process
is led by the Committee and is
rigorous and thorough. In line with
the policy, the process involves
a review of the skills, experience
and knowledge of the existing
individual Directors and of the Board
collectively and the conduct of a
gap analysis by mapping the results
against the strategic priorities
and main trends affecting the
long-term success of the Company.
The Committee reviews the
experiential requirements of
additional Directors and then
considers and agrees the attributes
that would be desirable to ensure
best fit with the culture of the Board
and the organisation. The output
from that process is then used to
provide a comprehensive brief
to an external search and selection
firm, which is engaged to produce
a diverse shortlist of suitable
candidates. Candidates are
interviewed by the Chairman and
separately by each of the other
members of the Committee, and
also meet the senior executives
of the Company. The Committee
then considers the outputs from
the process and agrees a proposal
to the Board.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
163
Attendance
Meetings attended
1
Victoria Hull (Chair)
6/6
Ron Kalifa
6/6
Diane Radley
6/6
Monique Shivanandan
2
5/5
1
The FY22 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, out of a total six meetings
held. As and when required, Suryanarayan Subramanian has been asked
to attend by invitation to provide advice and expertise.
2
Member since 15 February 2022.
“We are putting forward our
revised Remuneration Policy
for shareholder approval, which
will support our strategy, and
aims to ensure that we continue
to retain and attract the best
talent to drive performance.”
Victoria Hull
Chair of the Remuneration Committee
Directors’ Remuneration Report
Report structure
This report consists of three sections:
1
Remuneration Overview
Pages 168 to 171
Chair Statement, Summary of proposed
Directors’ Remuneration Policy including intended
implementation in 2023 and remuneration in context.
2
Annual Report on Remuneration
Pages 172 to 180
Remuneration received by the Executive and
Non-Executive Directors in the financial year
ending 31 December 2022.
3
Directors’ Remuneration Policy
Pages 181 to 189
Our revised Directors’ Remuneration Policy to be
put to shareholders for approval at the 2023 AGM.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
164
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
100%
Nandan Mer
CEO
Fixed remuneration
Annual bonus
LTIP
Share price growth
Minimum
Target
Maximum
Maximum
(with 50% share
price appreciation)
605
1,749
2,695
3,190
100%
Rohit Malhotra
CFO
Minimum
Target
Maximum
Maximum
(with 50% share
price appreciation)
529
36%
31%
33%
34%
43%
23%
Actual
1,558
1,481
23%
40%
36%
2,268
20%
34%
31%
15%
2,679
Remuneration (USD’000)
Remuneration (USD’000)
43%
57%
Actual
1,402
35%
31%
34%
22%
41%
37%
19%
34%
16%
31%
Dear Shareholder
I am pleased to present to you
the Directors’ Remuneration
Report (DRR) for the year ended
31 December 2022. This DRR
is presented in three sections: 1)
Remuneration Overview, 2) Annual
Report on Remuneration and 3)
Directors’ Remuneration Policy.
This year has seen a notable
growth trajectory across our
markets, having delivered positive
results. Accelerated revenue growth
of 24%, coupled with margin
expansion, whilst also progressing
against our ESG ambitions is
reflected in the Executive Directors’
bonus outturns this year.
As this was the third year of our
previously approved Remuneration
Policy, we undertook a detailed
review and considered a number
of alternative approaches.
Following this review and having
consulted with a number of
our major shareholders, we are
putting forward a slightly revised
Remuneration Policy for shareholder
approval, which supports our
strategy and aims to ensure that
we continue to retain and attract the
best talent to drive performance.
FY22 Executive Directors’
pay arrangements
Fixed pay
The salary for the CEO was set
at USD 550,000 p.a. at the time
of his appointment in February 2021
and for the CFO at USD 457,454
set at the time of his appointment
to the Board in June 2020.
The salaries for both Executive
Directors have remained at these
levels throughout 2022.
Benefits
Core benefits include private
medical cover for self, spouse and
up to three children, life insurance
and relocation allowance. Executive
Directors are also eligible for the
reimbursement of any UK income
tax liability incurred in respect of
the conduct of their Executive duties
necessarily performed in the UK.
Annual Deferred Bonus Plan
(ADBP)
The maximum opportunity under
the ADBP is 200% of fixed salary.
Performance under the ADBP for
FY22 was based on a balanced
scorecard of financial metrics
(45% Revenue and 25% EBITDA)
and ESG-related strategic measures
(30%). On-target delivery against
our revenue and EBITDA growth
KPIs combined with the strong
achievement against strategic ESG
objectives has resulted in an annual
bonus payout level of 72.5% of
maximum (145% of fixed salary for
the CEO and CFO). The Committee
did not apply discretion to outcomes.
The Executive Directors have
voluntarily deferred half of their
bonus into shares for at least
18 months; with the portion over
100% of salary deferred into shares
for three years, in line with our Policy.
FY19 LTIP
Performance against targets for the
FY19 LTIP was assessed in the year,
which was based on EPS (50%),
Revenue (25%) and TSR relative to
the FTSE 250 (25%). The Committee
determined that no element of the
award would vest, and no discretion
was applied.
FY20 LTIP
Performance against targets for
the FY20 LTIP was assessed in
the year, which was based on EPS
(50%), Revenue (25%) and TSR
relative to the FTSE 250 (25%).
Strong performance was achieved
to the end of the performance
period against our financial measures,
exceeding the stretch EPS target
and performing strongly against
revenue targets. Relative TSR
performance was below median.
Final vesting will be assessed at
the end of the vesting period in
August 2023.
Illustration and application of the current Directors’ Remuneration Policy for 2022
The charts below illustrate the potential split between the different elements of the Directors’ remuneration
under four different performance scenarios: Minimum, Target, Maximum and Maximum with 50% share price
growth, alongside actual outcomes for the year.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
165
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
FY22 LTIP
The FY22 LTIP awards were granted
in the form of conditional awards to
the CEO, CFO and other members
of the leadership team on 25 April
2022. While the Policy allows for an
award of up to 200% of fixed salary,
the FY22 LTIP was scaled back to
180% of fixed salary for the CEO
and CFO in recognition that the share
price was lower than at the time of
the prior year’s award. Awards are
conditional on the achievement of
i) stretching EPS (50%), revenue (25%)
and relative TSR (25%) performance
metrics and ii) a ROCE underpin
over the three-year performance
period which could reduce levels
of vesting by 10% if not met.
Proposed Remuneration Policy
from FY23
We have put forward a slightly
revised Remuneration Policy for
FY23 for shareholder approval,
which we believe supports our
strategy and enables us to attract
and retain the right calibre of
executives. As part of this process,
the Committee engaged with our
largest shareholders and proxy
voting bodies, as well as internal
stakeholders, to develop the
proposed Policy. We considered
a number of structures when
developing our proposed Policy,
with shareholder feedback playing
a key role in us ultimately putting
forward a proposal largely in line
with our current Policy, with a
minor change in order to better
align our Policy with the markets
we operate in, whilst increasing
shareholder alignment:
Operation of the Annual Deferred
Bonus Plan (ADBP)
The main elements of the ADBP
are unchanged, with no change
to the maximum or the proportion
deferred into shares.
We propose amending the operation
of the deferred portion of the annual
bonus plan, such that the deferred
shares are awarded in full immediately
(at the same time as the cash bonus
is paid) and then released in equal
tranches over the three-year period
(i.e. one third per year), subject to
Executive Directors having met their
shareholding requirement (300%
of salary).
Corporate Intranet Portal
The Corporate Intranet Portal was
built on four key pillars, namely
Communication, Collaboration,
Engagement and Productivity.
The platform allows employees
to strike up a conversation
with colleagues irrespective
of location and provides access
to an extensive repository
of information and resources,
among others.
Automation of HR processes
and Employee Self Service (ESS)
During the year, Network
automated the employee
performance management
process and linked personal goals
to the department objectives
and in turn the corporate goals
including ESG-based KPIs.
The programme was followed
by rolling out modules on
Learning and Development,
Career progression, Succession
Planning and Core HRMS to give
our employees the complete ‘One
Source – One Network’ experience.
Continuous improvement/wider workforce
Leadership defined what Network stood for by articulating its Purpose,
Values, Ambition and the Network Way.
To embody and imbibe these values into our culture ‘Network DNA’,
a slew of initiatives was spearheaded in 2022, starting with ‘One Source
– One Network’ Intranet, followed by automation of HR processes
and Employee Self Service (ESS) and finally the enhancement and
expansion of office workspaces.
Workspace enhancement
The leadership put a significant
amount of emphasis around
the strategy of creating more
comfortable and energising
workspaces for employees
by renovating existing offices
and opening new ones in UAE,
Egypt, Jordan and KSA.
Focused interactive sessions
and town halls
All our technology-enabled
progress on employee engagement
was brought together through
constant connection of the
leadership with employees via
town halls and online interactive
focus sessions. These sessions
enable us to better gauge the
employee pulse and keep them
motivated. The most recent
Group-wide town hall was jointly
chaired by the CEO, CHRO
and CFO with the theme being
‘Investing in Our People’.
Be open and
honest with
positive intent
Own every
decision
Always do
the right thing
Celebrate wins,
sunshine failures
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
166
Allowing the deferred bonus
shares to be owned by the Executive
Directors at the outset creates
greater and more immediate
share ownership and shareholder
alignment. This approach, with
phased releasing of shares over the
three years, is more closely aligned
to key competitors for talent and
the markets we operate in.
FY23 Directors’ pay arrangements
Fixed pay
Effective 1 February 2023, the CEO’s
salary is USD 600,000 and the
CFO’s is USD 500,000. This reflects
a c.9% increase from 2022, just
below the average given to the
wider workforce (10%).
Decisions around salaries are linked
to the increased responsibilities of
both roles since salaries were last
set. When reviewing salaries, the
Committee noted that the CEO
and CFO have not received salary
increases since their appointments
to the Board in 2021 and 2020
respectively, voluntarily waiving
previous increases in light of broader
conditions. The CEO’s salary was set
in line with his predecessor at IPO
in 2019, and reflected that this was
the CEO’s first role as a main board
director in the listed environment.
The Company has notably
increased in size and complexity,
with the acquisition of DPO and
expansion into new markets,
and the responsibilities of both
Executive Directors have increased
substantially. Coupled with inflationary
pressures, the Committee is therefore
looking to make an additional
c.9% increase in 2024, to increase
the CEO’s and CFO’s salaries to
USD 650,000 and USD 550,000
respectively. This increase will only
be made subject to continued
corporate performance and wider
conditions. Salaries continue to be
set relatively conservatively against
the market, whilst providing a
fair and reasonable remuneration
package given overall performance
and responsibilities. Further details
can be found on page 180.
FY23 Annual Deferred Bonus
Plan (ADBP)
The maximum opportunity under
the ADBP will remain at 200%
of fixed salary. Any payment in
excess of 100% of fixed salary will
be deferred into shares, which
are released in equal tranches
over three years, subject to
the executive having met their
shareholding requirement.
The performance assessment under
the ADBP for 2023 will be based on
revenue (45%), EBITDA (25%), and a
range of ESG measures (30%) linked
to, for example, carbon footprint,
senior management diversity, and
robust governance processes.
Targets are commercially
sensitive and will be disclosed
in full retrospectively.
FY23 Long Term Incentive
Plan (LTIP)
The maximum opportunity under
the LTIP will remain at 200% of
salary, with the ability to award
up to 300% of fixed salary in
special circumstances such as
recruitment of an Executive Director.
The Committee will review the
performance measures and
weightings for the FY23 grant,
which will continue to be based on
stretching, predominantly financial,
metrics over a three-year period,
with a two-year holding period.
Full details around award size,
performance measures and
targets will be disclosed by RNS
announcement on grant.
Shareholder engagement
When developing the proposed
changes, the Committee has
consulted with our largest
shareholders and investor bodies.
In particular, we consulted extensively
on the appropriateness and
effectiveness of the current LTIP,
including considering alternatives.
During this consultation we noted
that there was a preference from
certain shareholders for the existing
LTIP structure to be retained.
Shareholder feedback is taken
into careful consideration by the
Committee, and the proposals set
out incorporate changes made
as a direct result of this feedback.
We are very grateful to those
shareholders for their time
and engagement.
We look forward to your support
at our AGM on 18 May 2023.
The Committee remains committed
to maintaining an open and
constructive dialogue with
shareholders, and I would like
to express my gratitude for
your support and engagement
throughout the year.
Victoria Hull
Chair of the Remuneration
Committee
8 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
167
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Section 1: Remuneration Overview
Proposed Remuneration Policy table
The table below summarises our proposed Directors’ Remuneration Policy (DRP) and implementation for FY23
subject to shareholder approval at our AGM on 18 May 2023. Full details of our proposed DRP can be found on
pages 181 to 189.
DRP element and link
to strategy
Operation (Policy)
Rationale for change
Performance measures,
assessment and proposed
operation in 2023
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 February. 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.
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.
No change. The current
approach remains
fit for purpose and
market-aligned.
Nandan Mer: USD 600,000
Rohit Malhotra: USD 500,000
Retirement benefit
To provide a competitive
Company contribution,
in line with local practice,
that enables effective
retirement planning.
A retirement benefit may be provided in line with
local market practice & wider workforce. 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.
No change. The current
approach remains
fit for purpose and
market-aligned.
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).
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.
No change. The current
approach remains
fit for purpose and
market-aligned.
The Executive Directors
are eligible for end
of service gratuity.
Benefits
To provide competitive
and cost effective
benefits in line with
local markets.
Core benefits include private medical cover for self,
spouse and up to three children, life insurance and
relocation allowance. Executive Directors are also
eligible for the reimbursement of UK income tax
liability incurred in respect of the conduct of their
Executive duties necessarily performed in the UK.
No change. The current
approach remains
fit for purpose and
market-aligned.
Private medical cover and life
insurance, in line with FY22.
Annual Deferred
Bonus Plan
To incentivise the
achievement
of annual objectives
which support the
Company’s short-term
performance goals and
protect long-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 bonus of 200% of annual fixed salary.
Any portion of an Executive Director’s annual
bonus amount over 100% of annual fixed salary
is deferred into shares of which one third are
released each year over three years, with no further
performance conditions.
Shares continue to be subject to the shareholding
requirement. The remainder of an annual bonus is
paid in cash.
Change from single
three-year vesting to one
third each year over three
years to create greater
and more immediate
share ownership and
shareholder alignment,
and better mirroring
arrangements found in
the markets we operate
in and compete for talent.
Maximum opportunity of
200% of salary with anything
payable in excess of 100% of
salary deferred and released
in equal tranches over three
years. Targets are commercially
sensitive and will be
disclosed retrospectively.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
168
DRP element and link
to strategy
Operation (Policy)
Rationale for change
Performance measures,
assessment and proposed
operation in 2023
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.
No change. The current
approach remains
fit for purpose and
market-aligned.
The Committee will review the
performance measures and
weightings for the FY23 grant,
which will continue to be based
on stretching, predominantly
financial, metrics over a
three-year period, with a
two-year holding period.
Full details around award size,
performance measures and
targets will be disclosed by
RNS announcement on grant.
Shareholding guidelines
To align the interests
of Executive Directors
with the interests
of shareholders.
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.
No change. The current
approach remains
fit for purpose and
market-aligned.
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.
No change.
N/A
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
169
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Remuneration alignment to financial and strategic performance
Strategic pillars
The key pillars of our corporate strategy, set out
below, are closely linked to our variable remuneration.
Our key strategic pillars focus on growing to provide
a service for more customers, whilst innovating to
better serve existing customers. Commitment to
ESG is reflected in both elements of the Policy.
›
Faster sign up of merchants and
financial institution customers.
›
Grow the merchant base by lowering
the cost of payment acceptance.
›
Access new revenue pools.
Accelerate
Innovate
›
Harness the power of partnerships.
›
Add new revenue streams to
every transaction.
›
Be the e-commerce champion
in the region.
›
Support the advancement of
financial inclusion in the markets
where we operate.
›
Promote responsible business practices
under a robust governance framework.
›
Continue to build a well-trained,
happier, inclusive equal and diverse
working environment.
›
Minimise our environmental impact.
Revenue growth (40%)
Primary KPI in the ‘accelerate’
strategy. Reflective of sign up of
new customers and partnerships;
as well as accessing new
revenue pools.
EBITDA (30%)
Ensures maintaining and
exceeding margins whilst
driving revenue, increasing
revenues per transaction.
Governance (15%)
Ensuring responsible business
practices as part of our
commitment to becoming
a champion in the industry.
Social (15%)
Covering key strategic areas
such as diversity and inclusion,
employee engagement and
financial inclusion.
Financial metrics
Metrics such as Revenue,
adjusted EPS and TSR
will ensure that long-term
shareholder value is
achieved through
underlying performance.
Annual bonus
Based on the key in-year
performance indicators linked to
delivery of our corporate strategy.
LTIP
The LTIP focuses on building
long-term shareholder value.
Employee engagement
Share ownership across our employees
The Company believes that extending share ownership throughout the workforce encourages loyalty and
engagement, whilst allowing employees to participate in the Company’s success. It also aligns the employees’
interests with those of shareholders.
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.
In subsequent years, the Company has awarded a small cohort of individuals with shares under our LTIP.
Direct engagement with employees
Whilst the requirement to report on employee engagement under the UK Corporate Governance Code 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.
ESG
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
170
To this end, the Committee evaluated the effectiveness of Network’s existing processes and employee engagement
channels across five key criteria from the Code:
›
Ensuring workforce views are taken into account by Directors in decision making
›
Effectiveness of processes to ensure employees are able to raise matters of concern and receive feedback
on steps taken to address those concerns
›
Adequacy of disclosures around employee engagement in external reporting
›
Ensuring key stakeholder views, including those of employees, are properly considered by the Board in its
discussions and decision making and whether those processes are clearly reported to shareholders through
the Annual Report
›
The method through which the Board engages with employees
Key actions that reflect how the Company engages with employees are described in the ‘Driving global cultural
engagement’ section of the Strategic Report. This includes a combination of town hall meetings, mechanisms
to allow employees to engage with the CEO directly through email and in person, Q&A sessions with members
of the Board and members of the leadership team, annual employee engagement survey and the independent
whistleblower reporting process. Where appropriate, we take action as a direct result of feedback from our
employees, for example in 2023 we will be increasing our focus on learning and development opportunities across
the Group, as well as rewarding employees through a range of rewards and recognition programmes. Further details
can be found on page 33.
Consideration of wider workforce remuneration
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.
Indicative gender pay gap
At Network, equality and fairness are the cornerstones of all our people practices and policies. The diversity
of our workforce enables us to create more innovative ideas, better understand our customers, and develop
more relevant solutions. We are committed to creating and nurturing an inclusive workplace through programmes
and engagement initiatives supporting our philosophy, which is further described in detail on pages 35 to 37.
Understanding the gender pay gap aids in promoting a positive change as part of these broader initiatives.
In the context of our UAE based employees, the mean gender pay gap (total remuneration) to 31 December 2022
is 20%, whilst the median gender pay gap is 29%. We understand that 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. The male population equates to 73% of the overall population whilst the female population is 27%.
As such, we are taking various measures to enhance our overall female population, particularly at more senior
levels. In FY22 the percentage of women in our Executive Management Team and their direct reports has
increased to 31%, up from 25% in FY21. In June 2022, we joined the Global Council for Women in Banking and
Fintech, aiming to support our women executives to achieve their full potential. We have a number of other
initiatives and programmes, including our ME Women Leaders’ Summit, our Women Leaders’ Mentorship
Programme, and ‘Break the Bias’ Empowerment Programme. Further details of the measures we are taking
can be found on pages 52 to 53.
Furthermore, we acknowledge the FCA’s rules relating to diversity on Boards and the Executive Committee.
Our Board members and senior leadership team encompass a range of ethnicities and cultural backgrounds.
Our Board currently comprises 33% women (25% at Executive Committee level), and no senior Board positions
(as defined by the Listing Rules) are held by women. Further details of these demographics can be found on pages
122 to 123. We recognise that this falls short of the FCA’s rules, but remain comfortable with our progress in light of
the markets we operate in. We continue to prioritise gender diversity at senior levels, and this year have introduced
gender diversity targets into our Executive Director annual bonus metrics, increasing accountability for delivering
on our diversity ambitions.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
171
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Section 2: Annual Report on Remuneration
Payments in FY22 were made under our current DRP, which was approved by 96.6% of shareholders at our AGM
on 30 April 2020. Full details of this DRP can be found on pages 136 to 139 of our 2020 Annual Report and Accounts,
available on our website
https://investors.networkinternational.ae/media/1304/annual-report-accounts-2020.pdf
.
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 FY22 and FY21.
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.
Executive
Director
Year
Fixed
salary
Benefits
1
Annual
bonus
– cash
Annual
bonus
– shares
LTIP
vested
2
End of
service
gratuity
3
Sub-total
(fixed pay)
Sub-total
(variable
pay)
Total
USD’000
USD’000
USD’000
USD’000
USD’000
USD’000
USD’000
USD’000
USD’000
Nandan Mer
FY22
550
23
399
399
–
32
605
797
1,402
FY21
(from 01/02/2021)
504
23
406
406
–
29
556
812
1,368
Simon Haslam
FY21
(to 31/01/2021
46
2
–
–
–
10
57
–
57
Rohit Malhotra
FY22
457
34
332
332
365
38
529
663
1,558
FY21
457
34
338
338
–
257
749
675
1,424
1
Relates to private medical insurance and life insurance. This benefit is non-pensionable.
2
The first LTIP awards, which were made in FY19, vested in May 2022 but did not yield a payout as performance conditions were not met. The performance conditions
for the FY20 LTIP were completed in the year. Final vesting will be determined in August 2023. Indicative vesting is based on a closing share price of £2.98 as at
31 December 2022. The conversion USD exchange rate used is 1.2066 (as at year end 2022).
3
Relates to the provision accrued during the year. The FY21 gratuity for Rohit Malhotra reflects a catch-up based on alignment with his employment contract.
›
No other items of remuneration received in FY22 other than as disclosed in the table.
›
Neither of the FY22 or FY21 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.
›
For the year FY22 bonus, the Executive Directors elected to receive a part of the cash element of their bonus in ordinary shares in addition to a portion which is deferred
into shares for three years under our Remuneration Policy; for further details see page 165.
Fixed salary (audited)
The Remuneration Committee determined that no changes would be made to Executive Director salaries at the
2022 salary review, taking into account the broader business and economic context.
Benefits (audited)
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. In FY22
benefits provided to Executive Directors related to private medical cover and life insurance. Executive Directors
are also eligible for the reimbursement of any UK income tax liability incurred in respect of the conduct of their
Executive Director duties necessarily performed in the UK.
End of service gratuity (audited)
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 FY22.
2022 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 once again focused on Revenue (45%) and EBITDA (25%). The remaining
30% of the annual bonus was reviewed against a scorecard of individual strategic measures which reflects the
introduction of ESG measures as part of our evolving strategy alongside our commitment to achieving financial
success and other strategic priorities.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
172
Figure 2: 2022 Annual bonus metrics (Audited)
Financial (70%)
Performance measures
Revenue (USDm)
EBITDA (USDm)
Weighting
45%
25%
Threshold
Target
Stretch
Threshold
Target
Stretch
Targets
425
440
450
175
180
185
Payout levels (as a % of max.)
25%
50%
100%
25%
50%
100%
Outcome (2022 Actuals)
446
180
Performance achieved
80%
50%
Bonus achieved (% of max.)
36%
12.5%
Bonus earned (USD’000) – Nandan Mer
396.0
137.5
Bonus earned (USD’000) – Rohit Malhotra
329.4
114.4
›
Revenue and EBITDA for the bonus outturn are calculated on a constant currency basis.
Strategic (30%)
ESG
Environment (E)
Social (S)
Governance (G)
Performance
measures
Carbon Footprint
(Scope 1 & 2)
Voice of the
Customer – Net
Promoter Score
(NPS)
Touching our
community
– Financial Inclusion
Voice of the
Employees
– Engagement
Score
Business
Sustainability
(Minimise data
leakage)
Strong Governance
Practices (Rapid
addressal of audit
highlights)
Weighting
5%
5%
5%
5%
5%
5%
Targets
Accept-
able
Above
Expect-
ed
Strong
Accept-
able
Above
Expect-
ed
Strong
Accept-
able
Above
Expect-
ed
Strong
Accept-
able
Above
Expect-
ed
Strong
Accept-
able
Above
Expect-
ed
Strong
Accept-
able
Above
Expect-
ed
Strong
Payout levels
(as a % of max.)
60%
80%
100%
60%
80%
100%
60%
80%
100%
60%
80%
100%
60%
80%
100%
60%
80%
100%
Outcome
(2022 Actuals)
See next section
Performance
achieved
100%
100%
100%
0%
100%
80%
Bonus
achieved
(% of max.)
5%
5%
5%
0%
5%
4%
Bonus earned
(USD’000)
– Nandan Mer
55.0
55.0
55.0
–
55.0
44.0
Bonus earned
(USD’000)
– Rohit Malhotra
45.7
45.7
45.7
–
45.7
36.6
Figure 3: 2022 performance measures
Strategic measures
Performance summary
Outcome
Carbon Footprint
(Scope 1 & 2)
5%
›
553 tons equivalent of RECs purchased to offset 27.8% of carbon emissions
(vs a total CO
2
emissions of 1,987 tons in 2021)
Above expected
Voice of the Customer –
Net Promoter Score (NPS)
5%
›
Net Promoter Score (2022): 31 pts (vs 2021 NPS: 27 pts)
Above expected
Touching our community –
Financial Inclusion
5%
›
Network delivered against the 3 financial inclusion initiatives planned for 2022
Above expected
Voice of the Employees
– Engagement Score
5%
›
84% of Network’s employee base took the survey in 2022 with a resultant
satisfaction score of 57% (3% lower vs benchmark)
Below threshold
Business Sustainability
(Minimise data leakage)
5%
›
No material data security breaches
Above expected
Strong Governance
Practices (Rapid addressal
of audit highlights)
5%
›
86% of all audit issues have been addressed within the stipulated timeframe/
original due dates versus the threshold of 75%
Above expected
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
173
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Long Term Incentive Plan (LTIP)
FY19 LTIP award
The FY19 LTIP was subject to EPS, Revenue and relative TSR performance measures. Final vesting for the 2019 LTIP
grant is reported as ‘Nil’. No Committee discretion was applied.
Weighting
Threshold
(25% vesting)
Maximum
(100% vesting)
Performance
period
Actual
performance
to end of
performance
period
1
Actual
vesting
Actual
proportion of
maximum
achieved
Performance
measure
Adjusted EPS (CAGR)
50%
12% compound
growth p.a.
16.5%
compound
growth p.a.
1 January 2019 –
31 December 2021
(15.8%)
0%
0%
Revenue (CAGR)
25%
12% compound
growth p.a.
14% compound
growth p.a.
1 January 2019 –
31 December 2021
1.4%
0%
0%
Relative TSR against
the FTSE 250
25%
Median
Upper quartile
10 April 2019 –
17 May 2022
Below median
0%
0%
1
Adjusted EPS and Revenue CAGR exclude DPO.
›
The weighted reduction in share count is 2m, which changes the EPS by less than 0.1c. As such, the share buyback programme did not impact the vesting outcomes
of the award.
FY20 LTIP award
The FY20 LTIP was subject to 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 was subject to an
absolute TSR performance measure. The award is also subject to an ROCE underpin, which if not met could
lead to a scale back of up to 10% of the amount vested. Final vesting will be reviewed and determined by the
Committee following the end of the vesting period on 19 August 2023, as well as the portion of the award linked
to share price appreciation.
Weighting
Threshold
(25% vesting)
Maximum
(100% vesting)
Performance
period
Actual
performance
to end of
performance
period
Actual
proportion
of maximum
achieved
Proportion
of award
achieved
Performance
measure
Adjusted EPS (CAGR)
50%
18.27
20.53
1 January 2020 –
31 December 2022
21
100%
50%
Revenue (CAGR)
25%
386.10
441.90
1 January 2020 –
31 December 2022
406.6
53%
13.3%
Relative TSR against
the FTSE 250
25%
Median
Upper
quartile
1 January 2020 –
31 December 2022
Below median
0%
0%
Indicative vesting (before ROCE underpin %)
63.3%
Indicative vesting (after ROCE underpin %)
63.3%
›
The weighted reduction in share count is 2m, which changes the EPS by less than 0.1c. As such, the share buyback programme did not impact the vesting outcomes
of the award.
›
Excluding impact of acquisition of DPO on number of shares, actual DPO performance and specially disclosed items related to amortization of IT transformation which
was excluded from underlying performance when 2020 LTIP targets were finalised.
FY22 LTIP award
Figure 4: 2022 awards granted
LTIP awards were granted on 25 April 2022 as conditional share awards. For the 2022 LTIP, the grant was reduced
to 180% of fixed salary, rather than the 200% stipulated in the policy, in order to mitigate potential windfall gains that
may be realised as a result of the lower share price at the time of grant.
The share price at which the awards were granted was determined to be £2.55, i.e. the higher of the average share
price calculated over a period of up to 30 trading days, or five trading days prior to 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 2024 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 vesting period and expiry of the holding period may be awarded in the form of additional shares.
Award
type
Basis of
award
%
Shares
awarded
Face value
of award
1
(USD)
Percentage of
award vesting at
threshold
performance
End of
performance
period
Executive Director
Nandan Mer
LTIP – conditional
shares
180% of
fixed salary
297,397
985,871
25%
31/12/2024
Rohit Malhotra
LTIP – conditional
shares
180% of
fixed salary
247,355
819,982
25%
31/12/2024
1
The face value of the award is based on the closing share price on the date prior to the award (£2.55). The conversion USD exchange rate used is 1.3000 which is based
on an average of over five trading days prior to the date of grant.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
174
Figure 5: 2022 award performance conditions
The approved performance conditions for the 2022 LTIP award are: i) Adjusted Earnings per Share (EPS),
ii) Revenue, and iii) Relative Total Shareholder Return (TSR).
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
Weighting
Threshold
(25% vesting)
Maximum
(100% vesting)
Adjusted EPS
1
50%
26.6
29.1
Revenue
1
25%
582
638
Relative TSR vs FTSE 250
1
25%
Median
Upper quartile
ROCE
Underpin which will reduce levels of
vesting by up to 10% if not met
15% ROCE in 2024
1
Straight-line vesting between points.
Figure 6: 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.
Unvested
Shareholding
With performance
conditions
Without performance
conditions
Executive
Directors
Shareholding
requirement
(% of fixed
salary)
1
Shareholding
requirement %
met (of fixed
salary)
2,3
Shares
beneficially
owned
LTIP-2021
LTIP-2022
LTIP-2020
ADBP 2019
– shares
ADBP 2021
– shares
IPO cash
bonus
conversion
to shares
3
Nandan Mer
300%
139%
80,885
278,120
297,397
N/A
–
131,269
–
Rohit Malhotra
300%
320%
20,000
154,215
247,355
101,514
9,226
109,181
167,536
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 £2.98 as at 31 December 2022 has been used for the purpose of calculating the current shareholding as a percentage of salary.
The conversion USD exchange rate used is 1.2066 (as at year end 2022).
Payments to past Directors/payments for loss of office (audited)
There were no payments to past Directors or payments for loss of office in FY22.
Figure 7: Performance and Executive Directors’ remuneration
The graph below illustrates the Company’s Total Shareholder Return (TSR) performance against the FTSE 250
from our IPO in April 2019 to 31 December 2022. 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.
0
20
40
60
80
100
120
140
TSR since IPO
Oct 21
Apr 19
Jul 19
Oct 19
Jan 20
Apr 20
Jul 20
Oct 20
Jan 21
Apr 21
Jul 21
Oct 22
Jan 22
Apr 22
Jul 22
Network International
FTSE-250
Data sourced from DataStream from Refinitiv.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
175
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Historic total remuneration of the CEO
Total single figure
remuneration
(fixed pay)
Total single figure
remuneration
(variable pay)
Total single figure
remuneration
Annual bonus
payment
LTIP
vesting
Executive Director
Year
(USD’000)
(USD’000)
(USD’000)
(% of maximum)
(% of maximum)
Nandan Mer
FY22
605
797
1,402
72.5%
N/A
FY21
(from 01/02/2021)
556
812
1,368
73.8%
N/A
Simon Haslam
FY21
(to 31/01/2021)
57
–
57
0.0%
N/A
FY20
585
–
585
0.0%
N/A
From 27/2/2019
(appointment date)
494
8,682
9,176
115.1%
N/A
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 FY22.
(% change from FY21 to FY22)
(% change from FY20 to FY21)
(% change from FY19 to FY20)
Salary
or fees
1
Benefits
2
Bonus
Salary
or fees
1
Benefits
2
Bonus
Salary
or fees
1
Benefits
2
Bonus
Executive Directors
Nandan Mer
0.0%
-8.3%
-1.8%
N/A
N/A
N/A
N/A
N/A
N/A
Rohit Malhotra
0.0%
0.0%
-1.8%
0.0%
249.8%
675%
N/A
N/A
N/A
Non-Executive Directors
Ron Kalifa
0.0%
23.3%
N/A
20.0%
-100%
N/A
3.3%
N/A
N/A
Darren Pope
3.2%
N/A
N/A
20.2%
N/A
N/A
0.0%
N/A
N/A
Victoria Hull
0.0%
N/A
N/A
20.0%
N/A
N/A
-4.8%
N/A
N/A
Anil Dua
0.0%
N/A
N/A
28.8%
N/A
N/A
N/A
N/A
N/A
Habib Al Mulla
0.0%
N/A
N/A
13.3%
N/A
N/A
4.2%
N/A
N/A
Suryanarayan Subramanian
0.0%
N/A
N/A
21.0%
N/A
N/A
1.6%
N/A
N/A
Monique Shivanandan
15.3%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Diane Radley
5.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Comparator group
Average UAE Colleague
3
-1.1%
1.2%
1820.1%
6.0%
20.9%
-10.2%
6.0%
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 FY21 and FY22.
2
End of service gratuities are not included in the calculations. The FY21 gratuity for Rohit Malhotra reflects a catch up based on alignment with his employment contract.
3
Average UAE Colleague data is based on methodology ‘C’ in UAE.
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 FY22 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. Based on the methodology, the CEO’s 2022 pay is compared against
the 2021 pay for the wider workforce, resulting in a widening of the ratio due to the fact that 2021 did not see
a Company-wide bonus payout due to the prevalent market conditions but chose to reward a selective cohort
of high performers for their contribution to the Company during trying times.
Year
Method
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
2022 (excl. Pre-IPO incentives)
C
28:1
17:1
11:1
2021 (excl. Pre-IPO incentives)
C
13:1
8:1
5:1
2020 (excl. Pre-IPO incentives)
C
13:1
8:1
5:1
2019 (excl. Pre-IPO incentives)
C
29:1
17:1
11:1
Employees’ total FTE remuneration (excl. CEO)
(USD’000)
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
Total FTE remuneration for 2022 pay ratio
51
81
122
Total FTE remuneration for 2021 pay ratio
45
72
111
Total FTE remuneration for 2020 pay ratio
46
76
118
Total FTE remuneration for 2019 pay ratio
41
69
104
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
176
Relative importance of the spend on pay
The table below indicates how the earnings of Executive Directors compare with other financial disbursements.
FY22
1
FY21
(USD’000)
(USD’000)
Distributions to shareholders by way of dividend
2
0
0
Total tax contributions
3
8,773
4,842
Overall spend on pay including Executive Directors
4
130,851
107,957
1
Calculated on the same basis as the single total figure of remuneration on page 172.
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 page 214 of the consolidated financial statements).
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).
For every $1 spent on Executive Directors’ remuneration by the Company in FY22, $0 was made in dividend
payments, $3.4 was paid in tax and $50 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 FY22.
Non-Executive Directors’ remuneration
Figure 8: 2022 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 FY22.
Non-Executive Director
Year
Fees
(GBP’000)
Benefits
1
(GBP’000)
Annual
bonus
(GBP’000)
LTIP
vested
(GBP’000)
End of
service
gratuity
(GBP’000)
Sub-total
(fixed pay)
(GBP’000)
Sub-total
(variable
pay)
(GBP’000)
Total
2
(GBP’000)
Ron Kalifa
FY22
450
22
N/A
N/A
N/A
472
–
472
(Chairman)
FY21
450
18
N/A
N/A
N/A
468
–
468
Darren Pope
FY22
160
N/A
N/A
N/A
N/A
160
–
160
(Senior Independent
Director)
FY21
155
N/A
N/A
N/A
N/A
155
–
155
Victoria Hull
FY22
120
N/A
N/A
N/A
N/A
120
–
120
FY21
120
N/A
N/A
N/A
N/A
120
–
120
Habib Al Mulla
FY22
85
N/A
N/A
N/A
N/A
85
–
85
FY21
85
N/A
N/A
N/A
N/A
85
–
85
Ali Haeri Mazanderani
3
FY22
–
N/A
N/A
N/A
N/A
–
–
–
FY21
64
N/A
N/A
N/A
N/A
64
–
64
Anil Dua
FY22
85
N/A
N/A
N/A
N/A
85
–
85
FY21
85
N/A
N/A
N/A
N/A
85
–
85
Suryanarayan
Subramanian
4
FY22
75
N/A
N/A
N/A
N/A
75
–
75
FY21
75
N/A
N/A
N/A
N/A
75
–
75
Monique Shivanandan
FY22
104
N/A
N/A
N/A
N/A
104
–
104
FY21
90
N/A
N/A
N/A
N/A
90
–
90
Diane Radley
FY22
105
N/A
N/A
N/A
N/A
105
–
105
FY21
100
N/A
N/A
N/A
N/A
100
–
100
1
Relates to a payment for the purposes of obtaining private health insurance.
2
No other item of remuneration received in FY22 other than as disclosed in the table.
3
Ali Haeri Mazanderani stepped down from his position as Independent Non-Executive Director on 30 September 2021.
4
Suryanarayan Subramanian stepped down from his position as Non-Executive Director on 31 December 2022. No payments were made for the loss of office.
Figure 9: 2022 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 2022, including those held by
connected persons.
Non-Executive Director
Number of shares
held at
31 December 2022
Number of shares
held at
31 December 2021
Ron Kalifa
599,156
599,156
Darren Pope
8,824
8,824
Victoria Hull
66,319
66,319
Habib Al Mulla
0
0
Suryanarayan Subramanian
0
0
Anil Dua
0
0
Monique Shivanandan
0
0
Diane Radley
30,000
15,000
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
177
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Figure 10: 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
Title
Original date of
appointment
Date of
re-appointment
Notice period
Unexpired term
1
Ron Kalifa
Board Chairman
13-Mar-19
19-May-22
3 months
2 years 4 months
Darren Pope
Senior Independent Non-Executive Director
13-Mar-19
19-May-22
3 months
2 years 4 months
Victoria Hull
Independent Non-Executive Director
13-Mar-19
19-May-22
3 months
2 years 4 months
Habib Al Mulla
Independent Non-Executive Director
29-Mar-19
19-May-22
3 months
2 years 4 months
Suryanarayan Subramanian
2
Non-Executive Director
13-Mar-19
N/A
N/A
N/A
Anil Dua
Independent Non-Executive Director
22-Jan-20
N/A
3 months
4 Months
Monique Shivanandan
Independent Non-Executive Director
01-Jan-21
N/A
3 months
1 year 4 months
Diane Radley
Independent Non-Executive Director
01-Jan-21
N/A
3 months
1 year 4 months
1
From January 2023.
2
Suryanarayan Subramanian stepped down from his position as Non-Executive Director on 31 December 2022.
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
Title
Date of appointment
Notice period
Unexpired term
1
Nandan Mer
Group Chief Executive Officer
01-Feb-2021
6 months
1 year 1 month
Rohit Malhotra
Group Chief Financial Officer
02-Jun-2020
6 months
5 months
1
From January 2023.
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.
Figure 11: Remuneration Committee composition and meetings
The table below indicates the number of meetings held during 2022 and Remuneration Committee member
attendance.
Member
Member since
FY22
meetings
Number of
meetings attended
1
% of meeting
attendance
Victoria Hull
13 March 2019
6
6
100%
Ron Kalifa
13 March 2019
6
6
100%
Monique Shivanandan
15 February 2022
5
5
100%
Diane Radley
01 January 2021
6
6
100%
1
The FY22 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
178
Figure 12: Remuneration Committee activity
The following table is a summary of the Remuneration Committee’s activity during FY22. The Remuneration
Committee meets a minimum five times a year. During FY22, the Remuneration Committee met six times at
scheduled meetings.
The agenda items discussed at the meetings are summarised below.
February 2022
›
2021 Performance Update & recognition for significant performance
›
Updates to terms of reference for the Remuneration Committee
March 2022
›
Update on DRR progress and review draft DRR for finalisation
›
Approval of 2022 Annual Bonus Measures & Targets
April 2022
›
Approach to 2022 LTIP targets and measures
›
EDs & ExCo compensation benchmarking
›
Board engagement with employees
August 2022
›
FTSE 250 mid-AGM season update
September 2022
›
EDs & ExCo Remuneration Policy scope review
November 2022
›
EDs remuneration review & shareholder consultation
›
2023 Remuneration Policy review
Figure 13: Statement of voting
The table below sets out last year’s Remuneration Report voting outcome, from our AGM held on 19 May 2022;
as well as the voting outcome of our Remuneration Policy which was approved by shareholders at the AGM on
20 May 2020.
Votes
“For”
Votes
“For” %
Votes
“Against”
Votes
“Against” %
Votes
Total
% of
Issued Share
Capital Voted
Votes
“Withheld”
Remuneration Policy (Binding)
426,988,793
96.59%
15,089,568
3.41%
442,078,361
88.42%
10,890,205
Remuneration Report (Advisory)
482,371,017
98.22%
8,751,958
1.78%
491,122,975
87.53%
2,773,678
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 FY22, 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 proposed updates to the policy effective from 2023. 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 £108,000 were paid to PwC during the year in respect of remuneration advice received by
the Remuneration Committee, 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 regard to advice provided to the Remuneration Committee exist. It is also
satisfied that the members of the 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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
179
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Implementation of proposed Remuneration Policy in FY23
Subject to approval of our proposed Remuneration Policy, we have set out below our intended implementation
for FY23.
FY23 salaries and intended increases for FY24
The Committee has increased salaries for FY23 for the reasons set out below. Taking on board shareholder
feedback, and acknowledging the wider workforce increases and current economic environment, we propose
to stagger increases over two years, subject to performance. Effective 1 February 2023, the CEO’s salary is
USD 600,000 and the CFO’s is USD 500,000. This reflects a c.9% increase from 2022, just below the average
given to the wider workforce (10%).
From 1 February 2024, it is intended there will be a further c.9% increase to the CEO’s and CFO’s salaries to
USD 650,000 and USD 550,000, respectively. This increase will only be made subject to continued corporate
performance and wider conditions.
Nandan Mer
›
Nandan’s salary was aligned with his predecessor, whose salary was set on IPO in April 2019. The salary for the
role of the CEO has therefore not increased in nearly four years.
›
Since being appointed in 2021, Nandan has overseen the successful acquisition of DPO which has doubled our
e-commerce revenue along with adding alternative payment capabilities and SME signings across the Group.
Nandan has also steered the Company through the challenges of increasing complexity, market turbulence
and delivering our new growth strategy – launching direct-to-merchant services in Egypt, new market entry
to Saudi Arabia, and establishing new commercial payments processing contracts.
Rohit Malhotra
›
Rohit’s salary was set upon being appointed to the Board on 2 June 2020 and has not been increased since
his appointment.
›
Since being appointed to the Board, Rohit has taken on the additional role of Group Chief Strategy Officer
(March 2021) and a number of other responsibilities such as leading the M&A function, and developing and
executing the ESG strategy.
›
Having been with the Company for 12 years, Rohit has deep financial knowledge of the Company and its market,
long standing and highly valuable corporate history with Network, has provided stability for shareholders and
also assimilated well on the increased complexity of the Company across his multiple roles.
The Committee reviews salaries taking into account our Remuneration Principles. Most notably, salaries provided
should provide a fair and reasonable remuneration package given overall performance and responsibilities,
and taking into account the competitiveness for top talent in the sector. The intended salaries continue to be set
relatively conservatively against the market, looking at the FTSE 101-225 as well as a global payment processing
peer group. The Executive Directors’ salaries have not increased in a number of years, whilst the complexity of
the business and the responsibilities of the roles have increased as both the CEO and CFO have demonstrable
experience and performance in their roles, as set out above.
FY23 Annual Deferred Bonus Plan (ADBP)
Executive Directors will be eligible to receive awards under the ADBP of up to 200% of fixed salary,
subject to achievement of performance conditions.
The performance assessment under the ADBP for 2023 will be based on Revenue (45%), EBITDA (25%),
and a range of strategic measures (30%) linked to, for example, carbon footprint, senior management diversity,
and robust governance processes. Targets are commercially sensitive and will be disclosed in full retrospectively.
Any payment in excess of 100% of fixed salary will be deferred into shares, which are released in equal tranches over
three years, subject to the executive having met their shareholding requirement.
FY23 Long Term Incentive Plan (LTIP)
Executive Directors will be granted awards under the LTIP. The Committee will review the performance measures
and weightings for the FY23 grant, which will continue to be based on stretching, predominantly financial, metrics
over a three-year period, with a two-year holding period. Full details around award size, performance measures and
targets will be disclosed by RNS announcement on grant.
Non-Executive Directors’ annual fees
FY23 fee levels for NEDs and the Chair remain unchanged since FY19. Actual fees received are disclosed in the
single total figure of remuneration for the relevant financial year.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
180
Section 3: Directors’ Remuneration Policy
Introduction
In accordance with the remuneration reporting regulations, the Policy as set out below will become formally
effective at the AGM on 18 May 2023, subject to shareholder approval. It is intended to apply for a period of
three years from the date of approval, unless a new Policy is approved by shareholders prior to its expiry.
Remuneration Principles
Our key principles when designing the Policy are outlined below:
›
Support our ambition to be the fastest-growing and most innovative customer-centric payments company in the
Middle East and Africa;
›
To attract, retain and motivate high-calibre talent to help us deliver our strategy and align with the long-term
interests of shareholders; and
›
To ensure that remuneration arrangements are clear, simple, and support our high-performance, principled and
inclusive culture.
Our proposed Remuneration Policy differs from the existing Policy in the operation of the annual bonus plan,
and we believe this change will prove to be attractive to both Executives Directors and shareholders, in line with
the principles set out above. Further details of our proposals can be found in the Policy table. Below we summarise
the key changes and the rationale for change:
Amending the operation of the deferred bonus plan
›
We are amending the deferred portion of the annual bonus plan so that the deferred shares are awarded in full
immediately (at the same time as the cash bonus is paid) and then ‘released’ in equal tranches over the three
year period (i.e. one third per year), subject to Executive Directors having met their shareholding requirement
(300% of salary).
›
Allowing the deferred bonus shares to be owned by the executives at the outset creates greater and more
immediate share ownership and shareholder alignment. This approach, with phased releasing of shares over
the three years, is more closely aligned to key competitors for talent.
Determining the Policy
The Committee’s process for determining the Policy included:
›
Developing a Policy which supports our strategy and alignment with the long-term interests of shareholders;
›
Consulting internally with Executive Directors and other relevant members of the Executive Management Team
to ensure that the proposals would motivate and retain key talent;
›
Considering the practices and governance in the markets we operate in and compete for talent in, alongside the
UK Corporate Governance Code;
›
Reviewing the wider workforce remuneration and incentives to ensure the approach to executive remuneration
is appropriately consistent;
›
Consulting externally with our Remuneration Committee consultants, for an independent view alongside broader
market insights from suitable peers; and
›
Carrying out a consultation exercise with major shareholders and investor bodies on our proposals.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
181
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Remuneration Policy table
The table below describes each of the elements of the remuneration package for the Executive Directors:
DRP element and link
to strategy
Operation (Policy)
Rationale for change
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 February. 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.
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.
No change. The current
approach remains
fit for purpose and
market-aligned.
Retirement benefit
To provide a competitive
Company contribution,
in line with local practice,
that enables effective
retirement planning.
A retirement benefit may be provided in line with local market practice
and wider workforce. 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.
No change. The current
approach remains
fit for purpose and
market-aligned.
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.
No change. The current
approach remains
fit for purpose and
market-aligned.
Benefits
To provide competitive
and cost effective
benefits in line with
local markets.
Core benefits include private medical cover for self, spouse and up to three
children, life insurance and relocation allowance. Executive Directors are also
eligible for the reimbursement of UK income tax liability incurred in respect
of the conduct of their Executive duties necessarily performed in the UK.
No change. The current
approach remains
fit for purpose and
market-aligned.
Annual Deferred
Bonus Plan
To incentivise
the achievement
of annual objectives
which support the
Company’s short-term
performance goals
and protect long-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 bonus of 200% of annual fixed salary. Any portion of an Executive
Director’s annual bonus amount over 100% of annual fixed salary is deferred
into shares of which one-third are released each year over three years,
with no further performance conditions.
Shares continue to be subject to the shareholding requirement. The remainder
of an annual bonus is paid in cash.
Change from single
three-year vesting to one
third each year over three
years to create greater
and more immediate share
ownership and shareholder
alignment, and better mirroring
arrangements found in the
markets we operate in and
compete for talent.
Long Term Incentive
Plan
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.
No change. The current
approach remains fit for
purpose and market-aligned.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
182
DRP element and link
to strategy
Operation (Policy)
Rationale for change
Shareholding guidelines
To align the interests
of Executive Directors
with the interests
of shareholders.
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.
No change.
The shareholding
guideline ensures
shareholder alignment.
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.
No change.
In approving this Policy, shareholders give the Company authority to honour any commitments previously entered
into with current or former Executive Directors (such as the vesting or exercise of past awards).
Key remuneration element of the Code
When designing the revised Policy, the Committee reflected the new remuneration elements of the UK Corporate
Governance Code:
Key remuneration
element of the Code
Alignment with our proposed revised Policy
A five-year period between the
date of grant and realisation for
equity incentives
›
The LTIP awards are subject to a three-year vesting period, followed by an additional two-year holding
period during which Executive Directors will be unable to sell their shares.
Phased release of
equity awards
›
The LTIP ensures the phased release of equity awards through annual rolling vesting.
›
The deferred portion of the annual bonus is released in annual tranches.
Discretion to override
formulaic outcomes
›
The Policy contains the ability to override formulaic outcomes and apply discretion where
deemed necessary.
Post-cessation shareholding
requirement
›
There is a two-year post-cessation shareholding requirement.
Pension alignment with
wider workforce
›
The potential pension entitlement for Executive Directors is capped at 15% of fixed salary, in line with
all-employee statutory pension requirements for UAE nationals and citizens of the Gulf Cooperation Council
countries, subject to change from time to time. The Executive Directors do not currently receive a pension,
instead they will be eligible to an end of gratuity payment upon termination, as required under the UAE
Labour Law for non-UAE nationals. The annual accrual is below this level.
Malus and clawback
›
Malus and clawback provisions meet the best practice under the Code.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
183
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Alignment with the Code
The table below describes how the Remuneration Committee has addressed each of the factors set out in Provision
40 of the Code.
Factor
How the Policy aligns
Clarity
›
The proposed Policy sets out clearly the basis for any payments and the terms of the incentive
arrangements operated.
›
The performance conditions used for the annual bonus and LTIP awards are based on a number
of the Company’s KPIs ensuring direct alignment between the successful implementation of the
strategy and the reward provided to the Executive Directors.
Simplicity
›
The Company’s share plans are designed to be easy to understand, simple and transparent to all stakeholders.
Risk
›
The Policy includes:
–
setting defined limits on the maximum awards which can be earned under the annual bonus and the LTIP;
–
requiring the deferral of a substantial proportion of the incentives in shares for a material period of time;
–
aligning the performance conditions with the strategy of the Company;
–
ensuring a focus on sustainable performance through the performance period of the LTIP awards;
–
ensuring there is sufficient flexibility to adjust payments through malus and clawback; and
–
an overriding discretion to depart from formulaic outcomes under the Company’s share plans.
›
These elements mitigate against the risk of target-based incentives by:
–
limiting the maximum value that can be earned;
–
deferring a significant proportion of the value earned in shares for the long term which helps ensure that
the performance earning the award was sustainable and thereby discouraging short-term behaviours;
–
aligning any reward to the agreed strategy of the Company;
–
focusing on the sustainability of the performance over the longer term under the LTIP;
–
reducing the awards or cancelling them if the behaviours giving rise to the awards are inappropriate; and
–
reducing the awards or cancelling them, if it appears that vesting is not linked to acceptable corporate or
individual performance.
Predictability
›
The Policy sets out clearly the potential rewards available to the Executive Directors depending on the
performance achieved. In addition, all the checks and balances set out above under Risk are disclosed
as part of the Policy.
Proportionality
›
The Company’s incentive plans clearly reward the successful implementation of the strategy and, through
deferral and measurement of performance over a number of years, ensure that the Executive Directors have
a strong drive to ensure that the performance is sustainable over the long term. Poor performance cannot
be rewarded due to the Committee’s overriding discretion to depart from the formulaic outcomes under the
incentive plans if they do not reflect underlying business performance.
Alignment to culture
›
A key element of our culture is to ensure long-term sustainable performance. This is reflected directly in the
type of performance conditions used in the Company’s incentive plans which assess sustainable performance
using a variety of non-financial and financial measures, as appropriate, including the use of ESG measures in
our annual bonus.
›
The focus on share ownership (and the partnership ethos encapsulated in share ownership) and long-term
sustainable performance is also a key part of the Company’s culture.
Statement of considerations of shareholder views
The Committee is dedicated to a continuous and open dialogue with shareholders on the issues of executive pay.
When developing the proposed Policy, the Committee engaged with the Company’s largest shareholders and
proxy voting bodies in order to obtain feedback on the proposed key remuneration changes and the 2023 Policy.
Following feedback, the Committee determined that it would continue with the existing Policy with only minor
amendments. Those that we engaged with were supportive of the continued operation of the LTIP and the proposal
to amend the operation of the Deferred Annual Bonus Plan and understood the supporting rationale. The Committee
considers that the consultation process with shareholders and the governance community is a valuable opportunity
to engage with shareholders and receive feedback. The Committee welcomes any shareholder feedback at the
AGM, and throughout the year.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
184
Considerations of employment conditions elsewhere in the Company
The remuneration policies and practices for all employees are determined in line with our overarching Remuneration
Principles. In setting the Policy for Executive Directors, the pay and conditions of all employees of the Company are
taken into account, for example when reviewing salary increases and by encouraging share ownership throughout
the Company.
The Committee also reviews and approves the remuneration structure for the management level below the
Executive Directors and uses this information to ensure consistency of approach. Whilst the Committee did
not engage directly with employees on the drafting of the Policy, our commitment to employee engagement,
including in respect of remuneration, is set out on page 133.
Malus and clawback
All incentive plans are subject to malus and clawback provisions. These are defined as:
›
Malus is the adjustment (including to zero) of unpaid incentive awards as a result of the occurrence of one or more
circumstances listed below.
›
Clawback is the recovery of incentive payments as a result of the occurrence of one or more of the circumstances
listed below.
The periods in which malus and/or clawback could apply are:
Annual bonus
Annual share grant awards
LTIP awards
Malus
To the day of payment
To the end of the deferral period
To the end of the vesting period
Clawback
Two years following
the bonus determination
N/A
Two years following vesting
The circumstances in which malus and/or clawback could apply are:
›
if the assessment of any performance target or condition in respect of an incentive award was based on error,
or inaccurate or misleading information;
›
if any information used to determine the number of shares subject to an award was based on error, or inaccurate
or misleading information;
›
the action or conduct of a participant does, in the reasonable opinion of the Board, amount to fraud and/or
gross misconduct;
›
events or behaviour of a participant led to the censure of the Company by a regulatory authority or have
a significant detrimental impact on the reputation of the Company, provided that the Board is satisfied
that the participant was, at least in part, responsible for the censure or reputational damage; and
›
corporate failure.
The Committee believes that the results of the plans provide sufficient powers to enforce malus and clawback
where required.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
185
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
100%
Nandan Mer
CEO
Fixed remuneration
Annual bonus
LTIP
Share price growth
Minimum
Target
Maximum
Maximum
(with 50% share
price appreciation)
655
1,975
3,655
4,555
100%
Rohit Malhotra
CFO
Minimum
Target
Maximum
Maximum
(with 50% share
price appreciation)
572
34%
30%
36%
1,672
19%
33%
49%
3,072
15%
26%
20%
39%
3,822
Remuneration (USD’000)
Remuneration (USD’000)
33%
30%
36%
18%
33%
49%
14%
26%
40%
20%
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Application of Policy
The chart below provides an illustration of what could be received by the CEO and CFO under the revised 2023 Policy.
Note:
Minimum pay is: fixed salary, benefits (private medical cover and life insurance), and the end of service gratuity accrued in the year.
On-target pay includes fixed salary, benefits, gratuity, 50% of the maximum bonus (equal to 100% of fixed salary) and 60% vesting of the LTIP awards (with grant levels
of 200% of fixed salary).
Maximum pay includes fixed salary, benefits, gratuity, and assumes 100% vesting of the annual bonus (200% of fixed salary) and the LTIP awards including the 50% kicker
(i.e. 300% of fixed salary).
An additional scenario sets out the value of the long-term incentive assuming a 50% increase in share price between grant and vesting. All amounts have been rounded
to the nearest USD 1,000.
Fixed salary levels (which are the base on which other elements of the package are calculated) are based on those applying at 1 February 2023.
Remuneration approach to recruitment and promotion
The Company’s approach is for the remuneration of any new Executive Director to be assessed in line with the
principles applied to the existing Policy. The Committee is mindful that it wishes to avoid paying more than it considers
necessary to secure a preferred candidate with the appropriate calibre and experience needed for the role.
In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder
sentiment regarding one-off or enhanced short-term or long-term incentive payments as well as considering
the appropriateness of any performance measures associated with an award.
The Committee’s Policy is not to provide replacement awards as a matter of course. However, should the
Committee determine that the individual circumstances of recruitment justified the provision of a replacement
award, the value of any incentives that will be forfeited on cessation of an Executive Director’s previous employment
will be calculated considering the following:
›
the proportion of the performance period completed on the date of the Executive Director’s cessation of employment;
›
the performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied; and
›
any other terms and conditions having a material effect on their value.
The Committee may then grant up to the same value as the lapsed value, where possible, under the Company’s
incentive plans. To the extent that it was not possible or practical to provide the buyout within the terms of the
Company’s existing incentive plans, a bespoke arrangement would be used.
The Committee has the ability to offer exceptional one-off LTIP awards, to a maximum of 300% of salary, in order
to support recruitment activity and broaden our prospective talent pool.
Where an individual joins after the start of the incentive grant, an award may be made to bring the executive onto
the ‘in-flight’ cycle, subject to the limits set out in the policy. Awards may be prorated for the portion of vesting
period served.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
186
Service contracts
The Committee’s Policy for setting notice periods is that a six-month period will apply for Executive Directors unless
the Committee determines that 12 months would be more appropriate in the circumstances. The 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
Title
Date of appointment
Notice period
Nandan Mer
Group Chief Executive Officer
01-Feb-21
6 months
Rohit Malhotra
Group Chief Financial Officer
and Group Chief Strategy Officer
02-Jun-20
6 months
Policy on payments for loss of office
The Committee will honour the Executive Directors’ contractual entitlements. If a contract is to be terminated,
the Committee will determine such mitigation as it considers fair and reasonable in each case.
Element
Loss of Office Policy
Fixed salary, benefits,
retirement benefit
›
These will be paid over the notice period. In addition, provision is retained to make a payment in lieu of notice.
›
End of service gratuity may be paid in cash following the termination of employment as required under the
UAE Labour Law for non-UAE nationals, and as described in the Policy.
Annual bonus
›
Good leavers: performance conditions will be measured at the bonus measurement date. Bonuses will normally
be time prorated for the period worked during the financial year (subject to exercise of discretion referred
to below). Deferred bonus awards will vest and be released according to normal timescales.
›
Other leavers: no bonus payable for the year of cessation, any unreleased deferred bonus share awards will lapse.
›
Discretion: The Committee has the following discretions:
–
to determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion
in circumstances where there is an appropriate business case which will be explained in full to shareholders;
–
to vest and release deferred shares at the end of the original deferral period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason resulting in the
cessation; and
–
to determine not to prorate the bonus for time. It is the Committee’s intention to use discretion not to prorate
in circumstances where there is an appropriate business case, which will be explained in full to shareholders.
LTIP
›
Good leavers: all in-flight awards will be prorated to time and performance.
›
Other leavers: any unvested awards lapse.
›
Discretion: the Committee has the following discretions:
–
to determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion
in circumstances where there is an appropriate business case, which will be explained in full to shareholders;
–
to determine that an award will vest on cessation, rather than on the normal vesting date (i.e. to measure
performance over the original performance period or at the date of cessation). The Committee will make
this determination depending on the type of good leaver reason resulting in the cessation; and
–
to determine not to prorate the number of shares which will vest based on the time from the date of grant to
the date of cessation. It is the Committee’s intention to use discretion to not prorate in circumstances where
there is an appropriate business case, which will be explained in full to shareholders.
A good leaver reason is defined as cessation in the following circumstances:
›
Death;
›
Ill health;
›
Injury or disability;
›
Redundancy;
›
Retirement;
›
Transfer of employment to a company which is not a Group company; and
›
Any other reason at the discretion of the Committee (except for dishonesty, fraud, misconduct or any other
circumstances justifying summary dismissal).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
187
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
Policy on payments in the event of a change of control
Element
Change of Control Policy
Annual bonus
›
Bonuses will be payable as soon as practicable after the relevant event, the amount of which will be
determined by the Board taking into account the extent to which the performance conditions have been met.
›
Discretion: the value of the bonus may be prorated to reflect the reduced period of time between the start
of the financial year and the relevant corporate event as a proportion of the relevant financial year unless the
Board otherwise decides.
Deferred bonus
›
Share awards made under the annual bonus plan will vest in full at the time of the relevant event.
LTIP
›
In the event of a takeover, scheme of arrangement, or winding-up of the Company, the LTIP awards will vest early.
The proportion of the LTIP awards which vest shall be determined by the Board taking into account the extent
to which any applicable performance conditions have been satisfied at that time. In addition, unless the Board
decides otherwise, vesting will be prorated to reflect the reduced period of time between grant and the
participant’s cessation of employment as a proportion of the normal vesting period. The Committee retains the
right to apply discretion to formulaic vesting outcomes, particularly noting any potential windfall gains that may
occur as a result of a change in control.
›
To the extent that LTIP awards granted as options vest in the event of a takeover, scheme of arrangement,
or winding-up of the Company, they may be exercised for a period of six months measured from the date
of the relevant event and will otherwise lapse at the end of that period.
›
In the event of a demerger, distribution or any other corporate event, the Board may determine that awards
will vest, to the extent determined by the Board taking into account the same factors as set out above.
›
If there is a corporate event resulting in a new person or company acquiring control of the Company, the Board
may (with the consent of the acquiring company) alternatively decide that awards may be replaced by equivalent
new awards over shares in the new acquiring company.
Board discretion
The Committee has the ability to exercise independent judgement and discretion when approving any of the
outcomes of the Policy, including the ability to override formulaic outcomes which may involve upward or
downward adjustments. Any discretion applied would take into account individual performance as well as
the Company’s performance, and the wider environment, including local labour laws such as Emiratisation.
›
The Committee may also exercise some administrative and/or operational discretion under relevant plan rules
approved by shareholders.
›
The Committee has the discretion to amend the Policy with regard to minor or administrative matters where
it would, in the opinion of the Committee, be disproportionate to seek or await shareholder approval.
›
Any exercise of discretion by the Committee will be communicated to shareholders in full in the Directors’
Remuneration Report. The use of discretion enables the Committee to ensure that outcomes are consistent
with business performance and the interests of shareholders.
›
The Committee retains the ability to amend or set different performance measures or targets if exceptional events
occur (for example, a strategic change, material acquisition and/or divestment, or a change in market conditions).
If the Committee determines that the performance measures and/or targets are no longer appropriate and the
amendment is required, they will be done in such a way that they achieve their original purpose and are not
materially less difficult to satisfy.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
188
Chair and Non-Executive Directors
The Policy for NEDs, other than the Chair of the Committee, is determined by the Chair and Executive Directors.
The fee for the Chair is determined by the Committee (without the Chair present).
Element
Operation
Maximum
Performance measures
and assessment
Non-Executive
Director fees
To provide a level of fees
to support recruitment and
retention of NEDs and a
Chair with the necessary
experience to advise and
assist with establishing and
monitoring the Company’s
strategic objectives.
The Policy for NEDs, other than the
Chair, is determined by the Chair and
Executive Directors. The fee for the
Chair is determined by the Committee
(without the Chair present).
NEDs are paid an annual fee
and additional fees for chairing
Committees. The Chair does
not receive any additional fees
for membership of Committees,
but may receive benefits such
as health insurance, or cash-in-lieu
of health insurance.
Fees are reviewed annually based
on equivalent roles in the comparator
group used to review salaries paid
to the Executive Directors.
NEDs do not participate in any variable
remuneration arrangements.
In general, the level of fee increase
of the NEDs and the Chair will be set
taking into account the general rise
in salaries across the wider workforce.
The Company will pay reasonable
expenses incurred by the NEDs
and may settle any tax incurred
in relation to these.
N/A
Victoria Hull
Chair of the Remuneration Committee
8 March 2023
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 2022
Corporate Governance
189
Directors’ Report –
Other Statutory Disclosures
The Directors present their report for the
financial year ended 31 December 2022.
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 1 to 118 and Governance Report
on page 120 onwards:
Subject matter
Page reference
Likely future developments in the business
14–15
Research and development
15 & 21
Key performance indicators
22–23
Employee engagement, development, inclusion and diversity
28–37
Relationships with suppliers, customers and others
24–27
Principal risks and uncertainties
102–115
Energy consumption, greenhouse gas and carbon emissions
40–41
Disclosures required under TCFD recommendations
58–77
Directors’ remuneration
164–189
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
120 to 145 and the Strategic Report on pages 1 to 118 (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
The information that fulfils the reporting requirements relating to the following matters can be found on the
pages identified:
Subject matter
Page reference
Arrangements under which the employee benefit trust has waived or agreed to waive dividends/future dividends
191
Listing Rule 9.8.6(8)
Climate-related financial disclosures consistent with TCFD
58–77
Share capital
The structure of the issued share capital of the Company as at 31 December 2022 and information about the issue
of shares during 2022 are set out in note 18 (on page 238) to the financial statements. The Company has one class
of share: ordinary shares of £0.10 each, and this is the only class of shares in issue and carrying voting rights.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
190
Issue and buy-back of shares
1. Issue of shares
The Directors were granted authority on 19 May 2022 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 19 May 2022 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 2023 or, if earlier, at the close of business on the date falling
15 months after the resolutions conferring them were passed on 19 May 2022. While the relevant institutional guidelines
support disapplication of pre-emption rights upto 20% of the Company’s issued share capital, the Board currently
intends to seek to renew these powers at the 2023 AGM, for 10% of the Company’s issued share capital in line with
the authority granted on 19 May 2022.
The Directors did not exercise the authority to allot shares in the Company and to disapply pre-emption rights
in the financial period under review.
2. Buyback of shares
The Company was granted authority on 19 May 2022 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 2023 or, if earlier, at the close of business on the date falling 15 months after the resolution conferring
it was passed on 19 May 2022. The Board currently intends to seek to renew this authority at the 2023 AGM.
Share buyback programme
On 11 August 2022, the Company announced the commencement of a share buyback programme with an aggregate
market value equivalent of up to USD 100 million, which started on 15 August 2022. The sole purpose of the share
buyback programme is to reduce the Company’s share capital. During the year upto 31 December 2022, the Company
bought back through market purchases on the London Stock Exchange 11,532,594 ordinary shares with a nominal
value of 10 pence each, representing 2.055% of the issued share capital of the Company when the programme started,
for a total consideration of approximately USD 40.63 million, including expenses of USD 0.3 million. The Board
has decided to cancel the shares so bought back except for a certain number to be maintained in treasury. As on
7 March 2023, 18,536,743 ordinary shares with a nominal value of 10 pence each have been bought back, out of
which 13,536,743 ordinary shares have been cancelled and 5,000,000 ordinary shares are being held in treasury.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
191
DIRECTORS’ REPORT – OTHER STATUTORY DISCLOSURES (CONTINUED)
Restrictions on the transfer of ordinary shares
Out of the shares issued on 28 September 2021 towards the stock component of the consideration of the purchase
consideration for acquisition of the DPO Group, 1,302,907 ordinary shares are subject to a lock up for 18 months
from the date of their issuance and may not be transferred to any party during this period.
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 page; (ii) as set out above; (iii) as set out in the Articles
of Association; and (iv) 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).
Notifiable interests in voting rights
At 31 December 2022, and updated as at 7 March 2023, the Company had been notified of the following interests
in voting rights of 3% or more over the issued share capital of the Company:
As at 31 December 2022
As at 7 March 2023
Shareholder
Number of
voting rights
% interest in
voting rights
Number of
voting rights
% interest in
voting rights
Nature of
Interest
The Capital Group Companies, Inc
78,900,226
14.36
81,783,484
15.07
Indirect
Mastercard UK Holdco Limited
49,950,000
9.09
49,950,000
9.21
Indirect
BlackRock, Inc.
35,210,334
6.41
27,425,055
5.05
Indirect
Emirates NBD Bank PJSC
31,020,844
5.64
31,020,844
5.72
Direct
Moneta Asset Management SAS
29,441,921
5.36
29,485,093
5.43
Indirect
Wellington Management Group LLP
28,011,122
5.10
28,011,122
5.16
Indirect
Harding Loevner LP
25,572,878
4.65
25,572,878
4.71
Indirect
Norges Bank
17,727,489
3.23
22,456,693
4.14
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 7 March 2023, no Directors and/or their connected persons had an interest in 3% or more of the voting rights
of the Company.
Dividends
The Directors do not recommend the payment of a dividend in respect of the financial year ended 31 December 2022.
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 178.
The changes in the year and up to the date of signing the financial statements are as follows:
›
the retirement of Suryanarayan Subramanian on 31 December 2022.
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 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 120.
Biographical details of the Directors are set out on pages 126 to 128, as are the reasons why the Board believes their
contribution is (and continues to be) important to the Company’s long-term sustainable success. This information
will also be set out in the circular which will accompany the notice of Annual General Meeting.
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 on page 139.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
192
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 191.
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.
Significant agreements (change of control)
The common terms agreement dated 25 March 2020 for a term facility entered into by one of the subsidiaries
of the Company and various lenders, to which the Company is also 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 any person or group of persons acting in concert 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 Company.
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 175.
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 252 to 258.
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 15.
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.
Political 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 37.
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 196 to 199 respectively and are incorporated into this Directors’ Report by reference.
Events after the balance sheet date
On 26 January 2023, the Group announced its intention to commence the second tranche of the share buyback
programme, for up to an aggregate market value of USD 50 million, following the completion of the initial share
buyback program. The second tranche commenced on the 28 January 2023. Other than the above, there were
no other subsequent events identified until the date of the issuance of these consolidated financial statements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
193
DIRECTORS’ REPORT – OTHER STATUTORY DISCLOSURES (CONTINUED)
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 in respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial
statements in accordance with applicable law and regulations.
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 UK-adopted
international accounting standards 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
were also prepared in accordance with International Financing Reporting Standards as issued by the International
Accounting Standards Board (‘IFRSs 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 the Group’s 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, relevant, reliable and prudent;
›
for the Group financial statements, state whether they have been prepared in accordance with UK-adopted
international accounting standards; and in accordance with International Financing Reporting Standards as
issued by the International Accounting Standards Board (‘IFRSs 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.
In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements will form part
of the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation.
The auditor’s report on these financial statements provides no assurance over the ESEF format.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
194
Responsibility statement of the Directors in respect of the annual financial 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/Directors’ Report includes a fair review of the development and performance of the
business and the position of the issuer 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
Group Chief Executive Officer
8 March 2023
Registered Office:
Suite 1, 7th Floor
50 Broadway
London, SW1H 0BL
United Kingdom
Registered number:
11849292
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
195
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 2022. 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 in line with the 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 to deliver revenue growth of 20%+ over the medium–long term, as supported by
underlying market growth, core business growth and strategic initiatives.
The key factors supporting the Group’s prospects are:
›
Long-term, loyal, blue-chip clients – Over the past 20 years, the Group has built longstanding 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 Services side, include more than 150,000 merchants, and on the
Outsourced Payment Services 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 Merchant Services
and Outsourced Payment Services. 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. Following the
acquisition of DPO, the largest e-commerce payment platform in Africa, we are able to leverage best in class
Cloud based proprietary technology to serve our merchant customers in the markets we operate in.
›
Leadership position – We are the leading payments solution provider in Middle East and Africa (MEA) region,
operating in structurally attractive, underpenetrated markets, with an accelerating digital payment adoption
rate. 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.
›
Group’s liquidity – The Group has a strong liquidity position which is effectively managed by the cash generated
in the business, term loans and overdraft facilities. These credit lines are availed to support our growth-oriented
strategy, as well as to meet our operational working capital requirements and for general corporate purposes.
As per the financing facility agreement for term loans, the Group is required to maintain a leverage ratio below the
threshold of 3.5x of underlying EBITDA. The leverage ratio as at 31 December 2022 was 0.7x which is well below
the threshold.
›
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
ANNUAL REPORT AND ACCOUNTS 2022
196
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 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 in 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 all business lines including DPO, are prepared for
a time horizon of 3–5 years, with the first year of the financial forecast forming the Group’s operating budget in line
with overall Group strategy. The business plan for subsequent years is firmed up based on the detailed budget in
line with overall strategic plan.
The operating budget is further updated through a rolling forecast process. Progress against financial budgets and
key objectives is reviewed in detail on a regular basis by the 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 2023) was reviewed and approved by the Board in December 2022. This budget is based on
the Group’s current position and its prospects over the forthcoming year, and in line with the Group’s stated strategy.
The Group’s long-term prospects are guided by the following strategic priorities, operating within the agreed
risk appetite:
›
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 at high teens in the near term, accelerating to 20%+ growth over medium to long term,
supported by underlying market growth and strategic initiatives;
›
EBITDA margin gradually returning to pre-pandemic levels, as we continue to deliver on new customer wins;
›
Stable Capex spends on core business;
›
No dividend payment to the shareholders; and
›
Continuing with our ongoing share buyback programme to further buy back shares amounting to USD 50 million
in market value; incremental Revenue and EBITDA uplift will come from growth opportunities, such as new markets,
winning large financial institutions and multi-market customers, whilst enabling new payment flows.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
197
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 plausible scenarios.
These scenarios are designed to assess the Group’s resilience to the principal risks as set out in the ARA and
combinations of correlated risks. The key scenarios tested have been summarised below:
1. Slowdown in card spends due to sluggish market conditions for various reasons. We have considered the
following downside scenarios to test the Group’s viability:
– Growth in the business plan is achieved up to 50% of projected growth.
– No growth in the business plan vs 2022 performance, with cost increasing at 5%.
– Decline in the performance by 5% y-o-y vs 2022 performance, with cost remaining same as in 2022.
2. Data breaches: The Group assessed its exposure of being held liable by its clients for any data breaches caused
by operational or cyber security reasons. We have considered losses on accounts of claims lodged by third
parties up to 7.5% of revenues, partly offset by the reimbursement up USD 25 million under insurance policies
taken by the Group.
3. Loss of business/major clients: Under this sensitivity, we tested the Group’s viability by considering the loss
of various top 5 clients including Emirates NBD to assess if it remains viable after losing its top clients.
4. Technological interruption: To test the Group’s viability against the risk of technological interruptions, we have
considered an incremental capital expenditure up to 10% over the yearly budgets, with 20% recurring operational
expenditure to mitigate the impact of these technological interruptions or unexpected redundancy.
5. Merchant attrition rate is doubled: We have considered an additional 100% spike in attrition rate on merchant base.
6. Geopolitical uncertainty impacting both international and domestic transactions volume.
Stress Testing Metrics
Slowdown in card
spends due to slow
market activity
Data breaches/
Cyber attack
Loss of business/
Major clients
Technological
interruption
Merchant attrition
rate is doubled
Geopolitical
uncertainty
Principal Risks
Cyber security
–
–
–
–
Operational resilience
–
–
–
–
Execution Risk
People
–
–
–
–
–
Compliance Risk
–
–
Geopolitical
–
–
Financial
–
–
Fraud & Credit
–
–
–
Third party
–
–
–
The results of the stress testing demonstrate that, due to the Group’s cash generation ability and the availability
of sufficient liquidity backed by existing lines of credit, Network would be able to withstand the impact. The Group
leverage ratio, after considering the above stress case scenario (individually and collectively), remains below the
threshold of 3.5x underlying EBITDA, as specified in the financing agreements. The mitigants considered as part
of this stress testing include: a) initiatives to be taken to reduce operating expenses by reducing personnel cost,
variable compensation and other discretionary spends of the business, and b) rationalisation of capital expenditure.
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 geopolitical 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 2025.
VIABILITY STATEMENT (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
198
The Directors have adopted the going concern basis in preparing these consolidated financial statements after
assessing the impact of the principal risks on the Group financial performance including under a base case and
severe but plausible downside scenarios.
In making this assessment, the Directors have considered cash flows and leverage forecasts prepared for a period
of at least 12 months from the date of approval of these financial statements, estimating key performance indicators
including revenues, underlying EBITDA, underlying and reported net income, capital expenditure and liquidity position
of the Group including the impact of the continued recovery from the COVID-19 pandemic. The base forecast has been
done based on the budget for 2023 approved by the Board. The forecast has been done based on assumptions
related to key variables including but not limited to Total Processed (TPV), number of cards credentials, and number
of transactions, which are the key drivers of the Group revenue and cash flow.
Revenue for both business lines, Merchant Services and Outsourced Payment Services, were impacted differently
by the COVID-19 pandemic. The business operations have shown a continued recovery from the impact of COVID-19
and now all KPIs are trending higher than pre-pandemic levels. In Merchant Services, the Group’s revenues are
generated through fees dependent upon the value of transactions processed (TPV), as well as through value
added services, and on an overall basis are very closely correlated to the underlying value of transactions processed,
and hence, were significantly impacted by the COVID-19 pandemic. Historically, Merchant Services revenues are
primarily generated in the UAE, Jordan and with the addition of DPO since September 2021, our direct-to-merchant
services have also been expanded to Africa. The Outsourced Payment Services revenues are broadly balanced across
Middle East and Africa. Under Outsourced Payment Services, 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 greater
resilience due to card hosting income stream and contractually fixed minimum revenue elements.
In terms of the Group’s liquidity position, we continue to have sufficient liquidity headroom to meet financial
obligations in the forecast period. The Group’s leverage ratio also remains below the maximum threshold prescribed
under the term financing facility agreement in the base case scenario as well as under severe but plausible downside
scenarios as described below. Please refer to note 15 and note 29 of the consolidated financial statements for details
of the Group’s drawn and available facilities. The Group has a strong liquidity position which is effectively managed
by the cash generated in the business, term loans and overdraft facilities. As per the financing facility agreement
for term loans, the Group is required to maintain a leverage ratio below the threshold of 3.5x net debt to underlying
EBITDA. The leverage ratio as at 31 December 2022 was 0.7x.
The base forecast has been further stress tested by using two severe but plausible downside scenarios, to assess
the Group’s resilience against plausible adverse economic factors. In these stress scenarios, the Directors considered
the following assumptions:
a) revenue growth is 50% lower than the base forecast
b) no revenue growth in the forecast period as compared to the actual 2022 performance
In both the downside scenarios as above, it has been assumed that the cost base will not decrease in proportion
to decreases 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 forecasted operating cash flow generation and
available committed financing facilities, leverage ratio remains below the threshold in the downside scenarios as well.
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 these consolidated financial statements.
Going Concern Statement
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance
199
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 2022 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 the notes to the Group financial statements, and the notes to
the Parent Company financial statements.
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 2022 and of the Group’s profit for the year then ended;
›
the Group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards;
›
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.
Additional opinion in relation to IFRSs as issued by the IASB
As explained in note 2(a) to the Group financial statements, the Group, in addition to complying with its legal obligation to
apply UK-adopted international accounting standards, has also applied International Financial Reporting Standards (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 committee.
We were first appointed as auditor by the directors on 28 March 2019. The period of total uninterrupted engagement
is for the four financial years ended 31 December 2022. 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. Apart from the matters noted below, we have not performed any non-audit services during
the year ended 31 December 2022 or subsequently which are prohibited by the FRC Ethical Standard.
During 2023, we identified that certain KPMG member firms had provided preparation of local GAAP financial statement
services and foreign language translation of those financial statements over the period 2019 to 2022 to some Group
entities. Some of these entities are and have been in scope for the group audit. The services, which have been terminated,
were administrative in nature and did not involve any management decision-making. The work had no direct or indirect
effect on Network International Holding Plc’s consolidated financial statements.
In our professional judgement we confirm that, based on our assessment of the breach, our integrity and objectivity as
auditor has not been compromised and we believe that an objective, reasonable and informed third party would conclude
that the provision of this service would not impair our integrity or objectivity for any of the impacted financial years.
The audit committee have concurred with this view.
Materiality:
Group financial statements as a whole
USD 4.0m (2021: USD 2.9m)
4.3% of profit before tax (2021: 4.5% of normalised profit before tax)
Coverage
92.1% (2021: 95.3%) of Group revenue
Key audit matters
vs 2021
Recurring risks
Revenue recognition on acquiring revenue
Recoverability of goodwill and parent’s investment in DPO
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
200
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 decreasing
order of audit significance, 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 – 73% of Merchant services revenue of USD 183.3m
(2021: 61% of Merchant Solutions revenue of USD 160.5m)
Refer to note 19 for accounting policy and financial disclosures.
The risk
Our response
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 operational
IT systems.
Our procedures included:
Control design:
For acquiring revenue excluding DPO, which represents
21% of acquiring revenue, 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 automated controls.
Control operation:
For acquiring revenue excluding DPO,
which represents 21% of acquiring revenue, testing the design,
implementation and operating effectiveness of automated 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:
For acquiring revenue including DPO,
testing the operating effectiveness of the manual controls over the
reconciliation of transactions as reported by the operational IT systems.
Re-performance:
On a sample basis checking 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 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.
Assessing whether the Group’s disclosures in respect of revenue
recognition provide sufficient detail for users to understand the
nature of transactions.
Our results
Our testing did not identify weaknesses in the design and operation
of controls that would have required us to expand the extent
of our planned detailed testing (2021: no weaknesses identified).
We found the revenue recognised in respect of acquiring revenue
to be acceptable (2021: acceptable).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
201
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF NETWORK INTERNATIONAL HOLDINGS PLC (CONTINUED)
Recoverability of goodwill and parent’s investment in DPO of USD 234.1m and USD 283.2m respectively
(2021: Goodwill and parent’s investment in DPO of USD 234.1m and USD 283.2m respectively)
Refer to page 151 of Audit Committee Report, accounting policy note 2(g) and note 8.2 to group financial statements
and notes 4 and 5 to parent company financial statements (financial disclosures)
The risk
Our response
Forecast-based assessment
The 3G Direct Pay Holdings Limited (“DPO”)
acquisition was completed in September 2021 –
this resulted in a significant amount of goodwill
in the Group as well as a significant parent
Company’s investment in DPO. The recoverable
amount of DPO goodwill and the parent
Company’s investment in DPO is predicated
on significant growth in the short to medium-term.
This growth may be impacted by internal and
external factors, which may influence its trading
such as economic and political uncertainty,
competition and consumer confidence affecting
card spends.
The estimated recoverable amount is subjective
due to the inherent uncertainty involved in
key assumptions relating to forecast financial
performance including revenue growth rates and
discount rate used in estimating the value in use.
The effect of these matters is that the estimated
recoverable amount of the goodwill and parent
Company’s investment has a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality
for the financial statements as a whole.
In our audit report last year this key audit matter
was in relation to the parent Company’s investment
in all its subsidiaries.
We performed the tests below rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Our procedures included:
Our sector experience:
We considered the consistency of the Group’s
forecasts with our understanding of the sector and business, including
changes in the business, in assessing whether these matters had been
appropriately captured in their value in use impairment models.
Our valuation expertise:
Our valuation specialists assisted us in
assessing the long-term growth rate and discount rate assumptions
used by the Group.
Benchmarking assumptions:
We challenged and compared the
Group’s assumptions to externally derived data, including sector
specific reports and our expectation based on our knowledge and
experience of the Group, in relation to key inputs such as projected
market growth and revenue growth rates.
Sensitivity analysis:
We performed sensitivity analysis which considered
reasonably possible changes in the key assumptions that were revenue
growth rates and discount rate, and their impact on the estimated
recoverable amounts.
Assessing transparency:
We considered the adequacy of the Group’s
disclosure of the key risks and sensitivity around the outcome, and
whether that disclosure reflected the risks inherent in the recoverable
amounts of goodwill and the parent Company’s investment in DPO.
Our results
We found the Group’s conclusion that there is no impairment of
goodwill and parent Company’s investment in 2022 to be acceptable
(2021: parent Company’s investment in all its subsidiaries: acceptable).
In our audit report last year, we included the valuation of DPO acquired intangible assets as a key audit matter. As this was an
event driven matter relevant to that year’s financial statements, it is not identified as a key audit matter in our report this year.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
202
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at USD 4.0m (2021: USD 2.9m), determined with reference
to a benchmark of Group profit before tax of USD 93.4m, of which it represents 4.3% (2021: 4.5% of 2021 normalised Group
profit before tax). In 2021 we normalised Group profit before tax by excluding the gain on sale of associate, share-based
compensation, and M&A Costs, as disclosed in note 4.1.
Materiality for the parent Company financial statements as a whole was set at USD 3.0m (2021: USD 1.5m), determined
with reference to a benchmark of parent Company total assets (2021: total assets), of which it represents 0.2% (2021: 0.1%).
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% (2021: 75%) of materiality for the financial statements as a whole, which equates
to USD 3.0m (2021: USD 2.18m) for the Group and USD 2.25m (2021: USD 1.13m) 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 Committee any corrected or uncorrected identified misstatements exceeding USD 0.20m
(2021: USD 0.15m), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Scope
Of the Group’s 40 (2021: 43) reporting components, we subjected 9 (2021: 6) 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:
Group
revenue
Group profit
before tax
Group
total assets
Full scope audits for Group purposes 2022
92.1 %
85.6 %
93.0 %
Full scope audits for Group purposes 2021
95.3 %
88.3 %
93.6 %
The remaining 7.9% (2021: 4.7%) of total Group revenue, 14.4% (2021: 11.7%) of Group profit before tax and 7.0% (2021: 6.4%)
of total Group assets is represented by 31 (2021: 37) reporting components, none of which individually represented more
than 2.4% (2021: 3.0%) of any of total Group revenue, Group profit before tax or Group total assets. For these components,
we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks
of material misstatement within these.
The Group 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 team approved the component materialities, which ranged from
USD 1.2m to USD 3.0m (2021: USD 0.75m to USD 2.5m), having regard to the mix of size and risk profile of the Group across
the components. The work on 8 of the 9 components (2021: 5 of the 6 components) was performed by component auditors
and the audit of the parent Company was performed by the Group team. For those items excluded from normalised Group
profit before tax in 2021, in that year the Group team performed procedures on the remaining excluded items.
The Group team visited 6 (2021: 1) component locations in UAE, South Africa and Egypt (2021: UAE) to assess the audit risk
and strategy. Video and telephone conference meetings were also held with these component auditors and the others that
were not physically visited. At these visits and meetings, the findings reported to the Group team were discussed in more
detail, and any further work required by the Group team was then performed by the component auditor.
We were able to rely upon the Group’s internal control over financial reporting in several areas of our audit, where our controls
testing supported this approach, which enabled us to reduce the scope of our substantive audit work; in the other areas the
scope of the audit work performed was fully substantive.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
203
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF NETWORK INTERNATIONAL HOLDINGS PLC (CONTINUED)
4. The impact of climate change on our audit
In planning our audit, we have considered the potential impacts of climate change on the Group’s business and its
financial statements.
As noted in the Metrics and Targets section of the Task Force on Climate-Related Financial Disclosures on page 77,
the Group have committed to reach carbon neutral for scope 1 and 2 emissions by 2030 and are at the early stages
of setting their strategy and execution framework to monitor and address this.
As part of our audit we have performed a risk assessment, which included enquiries of the Group’s risk and ESG finance
personnel, to understand the extent of the potential impact of climate change risk on the Group’s financial statements
and the Group’s preparedness for this. Taking into account the nature of the Group’s business and the relatively short lives
of most of the Group’s assets, we assessed that there was no significant impact on the financial statements or our audit
approach this year from climate change, and there was no impact on our key audit matters.
We have read the Group’s disclosure of climate related information in the front half of the annual report as set out
on pages 38 to 77 and considered consistency with the financial statements and our audit knowledge.
5. 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 parent Company or to cease their operations, and as they have concluded that the Group’s and the parent
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 at least a year from the date
of approval of the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks
to its business model and analysed how those risks might affect the Group’s and parent Company’s financial resources or
ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect
the Group’s and parent Company’s available financial resources and metrics relevant to debt covenants over this period
included reduced consumer confidence leading to slowdown in card spends.
We also considered less predictable but realistic second order impacts, such as the risks of technical and operational
interruptions which could impact the Group’s ability to execute its strategy in the near to medium term.
We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern
period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively
against the level of available financial resources and covenants indicated by the Group’s financial forecasts.
We assessed the completeness of the going concern disclosure.
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 parent 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 parent Company’s use of that basis for the going concern period, and we found the going
concern disclosure in note 2 (d) to be acceptable; and
›
the related statement under the Listing Rules set out on page 199 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 parent Company will continue in operation.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
204
6. 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 committee, and 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 committee minutes.
›
Considering remuneration incentive schemes and performance targets for directors.
›
Using analytical procedures to identify any unusual or unexpected transactions.
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 audit team 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 the 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 processing revenue of Outsourced Payments Services
is recorded in the incorrect accounting period and the risk that the Group and component management may be in a position
to make inappropriate accounting entries.
We also identified a fraud risk related to potential management bias in the determination of assumptions used by the
directors in its impairment assessment over the recoverability of goodwill and parent Company’s investment in DPO.
Further detail in respect of recoverability of goodwill and parent Company’s investment in DPO is set out in the key audit
matter disclosures in section 2 of this report.
We also 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 unauthorised users,
those posted with specific high-risk descriptions, and those posted to unusual account pairings.
›
For in-scope components, assessing the operating effectiveness of relevant controls within the processing revenue
stream of Outsourced Payments Services, and for a sample of transactions around the period end, assessing whether
revenue has been recorded in the correct period by comparing to source data.
›
Assessing whether the judgements made in making accounting estimates including assessing estimates linked
to recoverability of goodwill and parent Company’s investment are indicative of a potential bias.
Identifying and responding to risks of material misstatement related to 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.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including
the entity’s procedures for complying with regulatory requirements.
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 audit team 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 audit team any instances of non-compliance with laws and regulations that could give rise to
a material misstatement at the Group level.
The potential effect of these laws and regulations on the financial statements varies considerably.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
205
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF NETWORK INTERNATIONAL HOLDINGS PLC (CONTINUED)
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: payment service provider
licensing regulations, data localisation regulations, 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.
7. 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.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
206
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 on pages 107 and 138 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 196 to 198 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 parent Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the directors’
corporate governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial
statements and our audit knowledge:
›
the directors’ statement that they consider that the annual report and financial statements 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 section of the annual report describing the work of the Audit Committee, including the significant issues that
the audit committee considered in relation to the financial statements, and how these issues were addressed; and
›
the section of the annual report that describes the review of the effectiveness of the Group’s risk management and
internal control systems.
We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the
provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report
in this respect.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
207
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF NETWORK INTERNATIONAL HOLDINGS PLC (CONTINUED)
8. 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.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 194, 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.
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
.
The Company is required to include these financial statements in an annual financial report prepared using the single
electronic reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether
the annual financial report has been prepared in accordance with that format.
10. 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.
Simon Richardson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
9 March 2023
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
208
Consolidated Statement of Financial Position
As at 31 December
Notes
2022
USD’000
2021
USD’000
Assets
Non-current assets
Goodwill
8
495,782
496,695
Intangible assets
8
229,216
243,081
Property and equipment
7
58,148
59,584
Investment securities
246
246
Long-term receivables
333
3,735
Deferred tax assets
24.4
9,184
7,633
Total non-current assets
792,909
810,974
Current assets
Scheme debtors
10
336,728
364,025
Receivables and prepayments
11
95,372
88,374
Cash and cash equivalents (restricted)
10,12
119,357
86,801
Cash and cash equivalents (un-restricted)
12
234,402
270,345
Assets held for sale
16
–
4,347
Total current assets
785,859
813,892
Total assets
1,578,768
1,624,866
Liabilities
Non-current liabilities
Borrowings
15
265,291
336,739
Other long-term liabilities
17
18,520
25,815
Deferred tax liabilities
24.4
18,195
18,914
Total non-current liabilities
302,006
381,468
Current liabilities
Merchant creditors
10
285,791
329,280
Trade and other payables
14
122,711
136,505
Income tax payable
5,232
8,826
Borrowings
15
235,346
154,605
Liabilities held for sale
16
–
1,769
Total current liabilities
649,080
630,985
Shareholders’ equity
Share capital
18
73,077
73,077
Share premium
18
252,279
252,279
Treasury shares
18
(40,631)
–
Share merger reserve
18
52,971
52,971
Foreign exchange reserve
18
(36,501)
(19,693)
Reorganisation and other reserves
18
(1,544,066)
(1,547,389)
Retained earnings
1,870,715
1,802,501
Equity attributable to equity holders
627,844
613,746
Non-controlling interest
(162)
(1,333)
Total shareholders’ equity
627,682
612,413
Total liabilities and shareholders’ equity
1,578,768
1,624,866
Notes 1 to 32 form part of these consolidated financial statements.
These consolidated financial statements were approved and authorised for issue by the Board of Directors on 8 March 2023
and signed on its behalf by:
Nandan Mer
Director and Group Chief Executive Officer
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
209
 
Consolidated Statement of Profit or Loss
For the year ended 31 December
Notes
2022
USD’000
2021
USD’000
Revenue
19
438,371
352,245
Personnel expenses
20
(130,851)
(107,957)
Selling, operating and other expenses
21
(128,917)
(120,191)
Depreciation and amortisation
7,8
(71,429)
(60,958)
Share of profit of associate
9
–
4,694
Profit before interest, tax and gain on sale of a subsidiary/associate
107,174
67,833
Gain on sale of subsidiary/associate
9, 16
2,170
10,169
Net interest expense
22
(18,547)
(13,708)
Unrealised foreign exchange gains/(losses)
2,639
(910)
Profit before tax
93,436
63,384
Taxes
24
(13,332)
(6,826)
Profit for the year
80,104
56,558
Attributable to:
Equity holders of the Group
80,129
57,438
Non-controlling interest
(25)
(880)
Profit for the year
80,104
56,558
Basic earnings per share in USD cents
23
14.5
10.4
Diluted earnings per share in USD cents
23
14.3
10.4
Notes 1 to 32 form part of these consolidated financial statements.
Consolidated statement of profit or loss for the current and prior year represents results from continuing operations.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
210
 
 
Consolidated Statement of Other Comprehensive Income
For the year ended 31 December
2022
USD’000
2021
USD’000
Profit for the year
80,104
56,558
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Foreign currency translation difference on foreign operations
(16,808)
(255)
Items that will never be reclassified to profit or loss
Remeasurement of defined benefit liability
2,345
203
Net change in other comprehensive income
(14,463)
(52)
Total comprehensive income for the year
65,641
56,506
Attributable to:
Equity holders of the Group
65,666
57,386
Non-controlling interest
(25)
(880)
Total comprehensive income for the year
65,641
56,506
Notes 1 to 32 form part of these consolidated financial statements.
Consolidated statement of other comprehensive income for the current and prior year represents results from
continuing operations.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
211
 
Consolidated Statement of Changes in Equity
For the year ended 31 December
Share
capital
Share
premium
Treasury
shares
Share
merger
reserve
Foreign
exchange
reserve
Reorganisation
reserve
Other
reserves
1
Retained
earnings
Equity
attributable
to equity
holders
Non-
controlling
interest
Total
shareholders’
equity
USD’000
As at 1 January 2022
73,077
252,279
–
52,971
(19,693)
(1,552,365)
4,976 1,802,501
613,746
(1,333)
612,413
Total comprehensive income for the year
Profit for the year
–
–
–
–
–
–
–
80,129
80,129
(25)
80,104
Other comprehensive income for the year:
Foreign currency translation differences
–
–
–
–
(16,808)
–
–
–
(16,808)
–
(16,808)
Remeasurement of defined benefit liability
–
–
–
–
–
–
2,345
–
2,345
–
2,345
Total other comprehensive income for the year
–
–
–
–
(16,808)
–
2,345
–
(14,463)
–
(14,463)
Total comprehensive income for the year
–
–
–
–
(16,808)
–
2,345
80,129
65,666
(25)
65,641
Increase in legal reserve
–
–
–
–
–
–
978
(978)
–
–
–
Purchase of treasury shares
1
–
–
(40,631)
–
–
–
–
(16,889)
(57,520)
–
(57,520)
Share-based payment
–
–
–
–
–
–
–
5,952
5,952
–
5,952
Disposal of subsidiary with NCI
–
–
–
–
–
–
–
–
–
1,196
1,196
As at 31 December 2022
73,077
252,279
(40,631)
52,971
(36,501)
(1,552,365)
8,299
1,870,715
627,844
(162)
627,682
1
Refer to note 18.
Notes 1 to 32 form part of these consolidated financial statements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
212
Share
capital
Share
premium
Share
merger
reserve
Foreign
exchange
reserve
Reorganisation
reserve
Other
reserves
1
Retained
earnings
Equity
attributable
to equity
holders
Non-
controlling
interest
Total
shareholders’
equity
USD’000
As at 1 January 2021
71,557
252,279
–
(19,438)
(1,552,365)
4,773
1,741,609
498,415
(453)
497,962
Total comprehensive income for the year
Profit for the year
–
–
–
–
–
–
57,438
57,438
(880)
56,558
Other comprehensive income for the year:
Foreign currency translation differences
–
–
–
(255)
–
–
–
(255)
–
(255)
Remeasurement of defined benefit liability
–
–
–
–
–
203
–
203
–
203
Total other comprehensive income for the year
–
–
–
(255)
–
203
–
(52)
–
(52)
Total comprehensive income for the year
–
–
–
(255)
–
203
57,438
57,386
(880)
56,506
Issuance of new shares
1,520
–
53,100
–
–
–
–
54,620
–
54,620
Share issuance cost
–
–
(129)
–
–
–
–
(129)
–
(129)
Purchase of treasury shares
1
–
–
–
–
–
–
(5,563)
(5,563)
–
(5,563)
Share-based payment
–
–
–
–
–
–
9,017
9,017
–
9,017
As at 31 December 2021
73,077
252,279
52,971
(19,693)
(1,552,365)
4,976
1,802,501
613,746
(1,333)
612,413
1
Refer to note 18.
Notes 1 to 32 form part of these consolidated financial statements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
213
 
Consolidated Statement of Cash Flows
For the year ended 31 December
Notes
2022
USD’000
2021
USD’000
(Restated)
2
Operating activities
Profit for the year from operations
80,104
56,558
Adjustments for:
Depreciation and amortisation
7,8
71,429
60,958
Provision for expected credit losses
11
2,922
393
Net interest expense
22
18,547
13,708
Taxes
24
13,332
6,826
Unrealised foreign exchange gains/(losses)
(2,639)
910
Gain on sale of a subsidiary/associate
9,16
(2,170)
(10,169)
Share of profit of associate
9
–
(4,694)
Charge for share-based payment
27
5,952
4,518
Interest paid
(15,859)
(14,064)
Taxes paid
(8,773)
(4,842)
Net cash flows before working capital balances
162,845
110,102
Changes in scheme debtors
27,297
(198,589)
Changes in merchant creditors
(43,489)
164,138
Changes in long-term receivables and other liabilities
1,303
(22,921)
Changes in other working capital balances
1
(28,754)
(1,074)
Net cash flows from operating activities
2
119,202
51,656
Investing activities
Purchase of intangible assets and property and equipment
4.7
(65,408)
(55,062)
Sale of intangible assets and property and equipment
–
92
Proceeds from sale of subsidiary/associate
4,330
74,440
Interest received
1,334
550
Acquisition of subsidiary, net of cash acquired
–
(198,933)
Net cash flows from investing activities
(59,744)
(178,913)
1
Changes in other working capital balances reflects movements in receivables and prepayments and trade, other payables, and income tax payable
adjusted for non-cash items.
2
Comparative year has been restated to reflect the change in IFRS guidance on the presentation of restricted cash in the statement of cash flows.
Please refer to note 2f.
Notes 1 to 32 form part of these consolidated financial statements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
214
 
 
Notes
2022
USD’000
2021
USD’000
(Restated)
2
Financing activities
Repayment of borrowings
(73,368)
–
Purchase of treasury shares (share buyback)
(40,631)
–
Purchase of treasury shares (share-based payments)
(16,889)
(5,563)
Payment of debt issuance cost
(591)
–
Payment of lease liabilities
(6,261)
(5,051)
Payment of share issuance expenses
–
(129)
Net cash flows from financing activities
(137,740)
(10,743)
Net decrease in cash and cash equivalents
(78,282)
(138,000)
Cash as part of held for sale
–
(2,619)
Effect of movements in exchange rates on cash held
(7,303)
(974)
Cash and cash equivalents at the beginning of the year
280,057
421,650
Cash and cash equivalents at the end of the year
12
194,472
280,057
Notes 1 to 32 form part of these consolidated financial statements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
215
 
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 address of the Company’s office is Suite 1, 7th floor, 50 Broadway, London SW1H 0BL, England.
The registration number of the Company is 11849292.
The consolidated financial statements of the Group as at and for the year ended 31 December 2022 comprise the Company
and its subsidiaries (together referred to as the ‘Group’).
2. Basis of preparation
(a) Statement of compliance
These Group financial statements have been prepared in accordance with UK-adopted international accounting standards.
These Group financial statements were also prepared in accordance with the International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB). Included within these consolidated financial
statements are Alternative Performance Measures (APMs) which are disclosed in note 4.
(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 functional currency of two of the Group’s largest entities, (United Arab Emirates Dirham (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 on the Group’s financial performance including under a base case and severe but plausible
downside scenarios.
In making this assessment, the Directors have considered cash flows and leverage forecasts prepared for a period of at
least 12 months from the date of approval of these financial statements, estimating key performance indicators including
revenues, underlying EBITDA, underlying and reported net income, capital expenditure and liquidity position of the Group
including the impact of the continued recovery from the COVID-19 pandemic. The base forecast has been done based on
the budget for 2023 approved by the Board. The forecast has been done based on assumptions related to key variables
including but not limited to Total Processed Volumes (TPV), number of credentials hosted, and number of transactions,
which are the key drivers of the Group revenue and cash flow.
Revenue for both business lines, Merchant Services and Outsourced Payment Services, were impacted differently by the
COVID-19 pandemic. The business operations have shown a continued recovery from the impact of COVID-19 and now
all KPIs are trending higher than pre-pandemic levels. In Merchant Services, the Group’s revenues are generated through
fees dependent upon the value of transactions processed (TPV), as well as through value-added services, and on an overall
basis are very closely correlated to the underlying value of transactions processed, and hence, were significantly impacted
by the COVID-19 pandemic. Historically, Merchant Services Revenues are primarily generated in the UAE, Jordan and
with the addition of DPO since September 2021, our direct-to-merchant services have also been expanded to Africa,
whilst Outsourced Payment Services revenues are broadly balanced across Middle East and Africa. Under Outsourced
Payment Services, 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 greater resilience due to card hosting income stream and contractually fixed
minimum revenue elements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
216
In terms of the Group’s liquidity position, we continue to have sufficient liquidity headroom to meet financial obligations
in the forecast period. The Group’s leverage ratio also remains below the maximum threshold prescribed under the
term financing facility agreement in the base case scenario as well as under severe but plausible downside scenarios as
described below. Please refer to note 15 and note 29 of the consolidated financial statements for details of the Group’s
drawn and available facilities. The Group has a strong liquidity position which is effectively managed by the cash generated
in the business, term loans and overdraft facilities. As per the financing facility agreement for term loans, the Group is
required to maintain a leverage ratio below the threshold of 3.5x net debt to underlying EBITDA. The leverage ratio
as at 31 December 2022 was 0.7x.
The base forecast has been further stress tested by using two severe but plausible downside scenarios, to assess the
Group’s resilience against plausible adverse economic factors. In these stress scenarios, the Directors considered the
following assumptions:
a)
revenue growth is 50% lower than the base forecast
b)
no revenue growth in forecast period as compared to the actual 2022 performance
In both the downside scenarios as above, it has been assumed that the cost base will not decrease in proportion
to decreases 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 forecasted operating cash flow generation and available
committed financing facilities, the leverage ratio remains below the threshold in the downside scenarios as well.
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 these consolidated financial statements.
(e) New standards and interpretations
The following amendments and interpretations apply for the first time in 2022, but do not have any significant impact
on the consolidated financial statements.
›
Amendments to IFRS 7, 9 and 16, and IAS 39: addressing issues affecting financial reporting in the period leading
up to IBOR reform;
›
Amendments to IFRS 4 – insurance contracts;
›
Amendments to IAS 37– Onerous contracts: cost of fulfilling a contract; and
›
Amendments to IAS 16 – Property, plant and equipment (proceeds before intended use).
The following amendments and interpretations apply for the first time in beginning on or after 1 January 2023.
›
Reference to the Conceptual Framework (Amendments to IFRS 3);
›
IFRS 17 Insurance contracts;
›
Amendments to IFRS 17 Insurance Contracts: Initial application of IFRS 17 and IFRS 9 – Comparative Information;
›
Accounting Policies, Changes in Accounting Estimates and Errors: definition (Amendments to IAS 8);
›
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality
Judgements; and
›
Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction – Amendments to IAS 12 Income Taxes.
Based on the preliminary assessment, the impact of the above amendments and interpretations is not expected to be
significant on the consolidated financial statements.
(f) Accounting policy change
The Group has changed its accounting policy for the presentation of restricted cash in the consolidated statement of cash
flows. The change is made after considering the guidance provided in the IFRS Interpretations Committee agenda decision
(finalisation of agenda decision – Demand Deposits with Restrictions on Use arising from a Contract with a Third Party
(IAS 7)) issued by the International Accounting Standards Board (IASB) in April 2022.
The agenda decision explains that irrespective of third-party contractual restrictions on the use of demand deposits,
restricted cash qualifies as cash under IAS 7. For better presentation and to comply with the agenda decision, the Group
has changed its accounting policy for disclosure of ‘restricted cash’ by reclassifying it from changes in the working capital
(under cash flows from operating activities) to cash and cash equivalents in the consolidated statement of cash flows.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
217
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Basis of preparation (continued)
The change in presentation is also reflected in the comparative period. The below table shows the impact of the change
in presentation on the related items in the comparative figures.
2021
USD’000
Cash flows from operating activities – previously reported
17,405
Changes in restricted cash during the period
34,251
Cash flows from operating activities – as restated
51,656
Cash and cash equivalents – statement of cash flows – previously reported
193,256
Restricted cash
86,801
Cash and cash equivalents – statement of cash flows – as restated
280,057
In the consolidated statement of financial position, restricted cash continues to be presented separately from other cash
and cash equivalents as a disaggregation of the total cash and cash equivalents as that presentation is more relevant
to an understanding of the financial position.
(g) 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. 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.
Critical accounting judgements and estimates
During the year, the Directors believe that other than the estimates used in performing the impairment testing of one
of the Group’s Cash Generating Unit ‘CGU’ (DPO) as detailed below, there are no significant accounting judgements and
estimates made by the Directors in the process of applying the Group’s accounting policies that have a significant effect
on the amounts recognised in the consolidated financial statements.
Impairment testing requires the Directors to assess whether the carrying value of assets or a CGU can be supported
by their recoverable amount (i.e., the greater of value in use or its fair value less costs to sell). The key assumptions that
Directors have used in performing impairment test of DPO are cash flow projections, pre-tax discount rate and terminal
growth rate. Refer to note 8.2 for details.
Non-critical judgements and estimates
During the year, the Group has consistently applied the following non-critical accounting judgements and estimates to all
periods presented. The brief description of these accounting judgements and estimates is included in the respective notes
of the consolidated financial statements.
i.
Specially disclosed items (SDI) (refer to note 4)
ii.
Intangible assets and property and equipment, estimation of useful life (refer to notes 7 & 8)
iii.
Impairment of loans and receivables (refer to note 11)
iv. Held for sale classification (refer to note 16)
v.
Employee benefits (refer to note 17)
vi. Revenue recognition (refer to note 19)
vii. Taxes (refer to note 24)
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.
The accounting policies below describe the basis of consolidation and foreign currencies’ accounting policies that relate to the
consolidated financial statements as a whole. The other specific accounting policies are described in the note to which they relate.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
218
(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.
i. Subsidiaries
Subsidiaries are the entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights 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.
ii. Transactions eliminated on consolidation
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.
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.
iv. Loss of control
On the loss of control, the Group derecognises 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 the Group accounting policy for financial instruments depending
on the level of influence retained.
(b) Foreign currencies
i. Foreign currency transactions
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
219
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Accounting policies (continued)
ii. Foreign operations
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 Alternative Performance Measures (APMs) 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 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.
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 in nature, should be disclosed separately, to give a
more comparable view of the period-to-period underlying financial performance.
The table below presents a breakdown of the specially disclosed items for each of the years ended 31 December 2022
and 2021.
2022
USD’000
2021
USD’000
Items affecting EBITDA
Share-based compensation
1
–
3,657
M&A costs
2
–
7,261
Total SDIs affecting EBITDA
–
10,918
Items affecting net income
Amortisation and tax on acquired intangibles
3,4
8,946
5,885
Total SDIs affecting net income
8,946
5,885
Total specially disclosed items
5
8,946
16,803
1
The charge related to the Management Incentive Award Plan, IPO Cash Bonus, and Long-Term Incentive Plan awarded to Group-wide eligible employees, all of which
are specific payments relating to the Group’s Initial Public Offering (IPO).
2
This included costs incurred, during the period, for due diligence, advisory, and execution in relation to the acquisition of DPO. During the current year, M&A costs are
not material, and therefore have not been disclosed separately.
3.
Amortisation and tax on acquired intangibles (net of deferred tax impact) are treated as SDIs. These charges are based on judgements about their value and economic
life and are the result of the application of acquisition accounting. Whilst revenue recognised in the income statement does benefit from the underlying intangibles that
have been acquired, the amortisation costs bear no relation to the Group’s underlying operational performance. The amortisation of acquired intangibles is not included
in the analysis of segment performance used by the Chief Operating Decision Maker.
4.
During the year, the amortisation charge amounted to USD 10.5 million (2021: USD 5.9 million) on the intangible assets recognised in the consolidated statement of financial
position from the following acquisitions: i) USD 4.2 million (2021: USD 4.2 million) from Emerging Market Payments Services in 2016 and; ii) USD 6.3 million compared
to USD 1.7 million for the last quarter of 2021, net of a tax related impact of USD (1.6) million (2021: nil) from the acquisition of DPO.
5. Other than the tax impact explained in the note 4 above, the SDIs do not have any tax impact.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
220
4.2 Underlying EBITDA
Underlying EBITDA is defined as earnings for the year, before interest, taxes, depreciation and amortisation, unrealised
foreign exchange gain/losses, gain on disposal of subsidiary/associate, share of depreciation from associate, and specially
disclosed items affecting EBITDA. The table below presents a reconciliation of the Group’s reported profit for the year
to underlying EBITDA for each of the years ended 31 December 2022 and 2021.
2022
USD’000
2021
USD’000
Profit for the year
80,104
56,558
Depreciation and amortisation
71,429
60,958
Net interest expense
18,547
13,708
Unrealised foreign exchange (gains)/losses
(2,639)
910
Taxes
13,332
6,826
Gain on disposal of subsidiary/associate
(2,170)
(10,169)
Share of depreciation from associate
–
3,768
Specially disclosed items affecting EBITDA
–
10,918
Underlying EBITDA
178,603
143,477
4.3 Depreciation and amortisation to underlying depreciation and amortisation
Underlying depreciation and amortisation exclude amortisation on acquired intangibles and include share of depreciation
from associate. The table below presents a computation of the Group’s depreciation and amortisation to underlying
depreciation and amortisation.
2022
USD’000
2021
USD’000
Depreciation and amortisation
71,429
60,958
Amortisation on acquired intangibles
(10,526)
(5,885)
Share of depreciation from associate
–
3,768
Underlying depreciation and amortisation
60,903
58,841
4.4 Underlying EBITDA margin excluding share of associate
Underlying EBITDA margin excluding share of associate represents the Group’s underlying EBITDA margin which is defined
as underlying EBITDA before share of associate divided by the revenue.
2022
USD’000
2021
USD’000
Revenue
438,371
352,245
Underlying EBITDA
178,603
143,477
Share of EBITDA of associate
–
(8,462)
Underlying EBITDA before share of associate
178,603
135,015
Underlying EBITDA margin excluding share of associate
40.7%
38.3%
4.5 Underlying net income
Underlying net income represents the Group’s profit for the year adjusted for gain on disposal of a subsidiary/associate,
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 to underlying net income for each of the years
ended 31 December 2022 and 2021.
Notes
2022
USD’000
2021
USD’000
Profit from the year
80,104
56,558
Gain on disposal of subsidiary/associate
(2,170)
(10,169)
Specially disclosed items affecting EBITDA
4.1
–
10,918
Specially disclosed items affecting net income
4.1
8,946
5,885
Underlying net income
86,880
63,192
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
221
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Alternative Performance Measures (continued)
4.6 Underlying basic earnings per share (EPS)
The Group’s underlying basic EPS is defined as the underlying net income attributable to the shareholders divided by the
weighted average number of ordinary shares during the relevant financial year.
Notes
2022
USD’000
2021
USD’000
Underlying net income (USD’000)
86,880
63,192
Non-controlling interest (loss) (USD’000)
25
880
Underlying net income – attributable to equity holders (USD’000)
86,905
64,072
Weighted average number of shares (’000)
23
552,292
552,859
Underlying basic EPS (USD cents)
15.7
11.6
4.7 Capital expenditure
The table below provides the split of total capital expenditure into the growth and maintenance capital expenditure
(collectively referred to as core capital expenditure), Kingdom of Saudi Arabia market entry and Separation of shared
services from Emirates NBD.
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.
2022
USD’000
2021
USD’000
Total capital expenditure
59,149
56,272
Core capital expenditure
53,430
43,955
of which is maintenance capital expenditure
19,872
16,015
of which is growth capital expenditure
33,558
27,940
Kingdom of Saudi Arabia market entry
4,778
5,006
Separation of shared services from Emirates NBD
941
7,311
Reconciliation of capital expenditure to the cash spend in the consolidated cash flow
2022
USD’000
2021
USD’000
Total capital expenditure
59,149
56,272
Goods and services received in the current period, but yet to be paid
(11,963)
(14,723)
Goods and services received in the previous period, and paid in the current period
18,222
13,513
Total consolidated capital expenditure spend (as per consolidated statement of cash flows)
65,408
55,062
4.8 Underlying free cash flow
Underlying free cash flow is calculated as underlying EBITDA adjusted for changes in other working capital, taxes paid,
total capital expenditure, and in the prior year SDIs 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.
2022
USD’000
2021
USD’000
Underlying EBITDA
178,603
143,477
Changes in other working capital balances
1
(28,754)
(1,074)
Taxes paid
(8,773)
(4,842)
Total capital expenditure
(59,149)
(56,272)
Specially disclosed items affecting EBITDA
–
(10,918)
Adjustment for share of EBITDA of associate, less dividend
–
(8,463)
Underlying free cash flow
81,927
61,908
1
Changes in other working capital balances reflects movements in receivables and prepayments and trade, other payables and income tax payable adjusted
for non-cash items.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
222
4.9 Reconciliation of cash flows from operating activities to underlying free cash flow
2022
USD’000
2021
USD’000
Net cash inflows from operating activities
1
119,202
51,656
Changes in scheme debtors, merchant creditors, long-term receivables and other liabilities
14,889
57,371
Charge for share-based payment
(5,952)
(4,518)
Interest paid
15,859
14,064
Charge for expected credit losses
(2,922)
(393)
Underlying free cash flow before capital expenditure
141,076
118,180
Total capital expenditure
(59,149)
(56,272)
Underlying free cash flow
81,927
61,908
1
Cash flow from operating activities for the comparative period has been restated to reflect the recent change in the IFRS guidance on the presentation of restricted cash
in the consolidated statement of cash flows. Please refer to note 2(f) for details.
4.10 Underlying effective tax rate
The Group’s underlying effective tax rate is defined as taxes as a percentage of the Group’s underlying net income before
tax. The underlying effective tax rate for the Group for 2022 and 2021 was 14.7 % and 9.7%, respectively.
2022
USD’000
2021
USD’000
Underlying net income before tax
101,793
70,018
Underlying taxation
1
14,913
6,826
Underlying effective tax rate
14.7%
9.7%
1
Underlying tax is defined as reported tax during the year of USD 13.3 million (2021: USD 6.8 million) adjusted for related SDI USD (1.6) million (2021: nil) from the acquisition of DPO.
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 Executive Committee) 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.
During the year, Group has changed its internal reporting structure and accordingly changed its operating segments
under IFRS 8 from geographical view (i.e. Middle East and Africa) to business line view – Merchant Services and Outsourced
Payment Services (previously named Merchant Solutions and Issuer Solutions). Furthermore, certain revenue line items
including acquirer processing revenues have been moved from the business line previously known as Merchant Services
and into the newly classified Outsourced Payment Services business line. Consistent to last year, DPO revenues are part
of Merchant Services, as it does not meet the quantitative threshold of reportable segments under the Group’s accounting
policy and IFRS 8. The Group has applied its reasonable judgement to aggregate DPO results into merchants service based
on the a) similar economic characteristics of future cash flows, b) nature of Group services (i.e., merchant acquiring
products); and c) the Group’s method to provide these services to its merchants.
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.
2022
Statement of profit or loss
Merchant
Services
Outsourced
Payments
Services
Non-
attributable
Total
USD’000
Revenue
183,347
242,510
12,514
438,371
Contribution
130,024
171,130
12,514
313,668
Contribution margin (%)
70.9%
70.6%
–
71.6%
Central functions costs
–
–
(135,065)
(135,065)
Depreciation and amortisation
–
–
(71,429)
(71,429)
Gain on sale of subsidiary
–
–
2,170
2,170
Net interest expense
–
–
(18,547)
(18,547)
Unrealised foreign exchange gains
–
–
2,639
2,639
Taxes
–
–
(13,332)
(13,332)
Profit for the year
130,024
171,130
(221,050)
80,104
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
223
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Segment reporting (continued)
Statement of financial position
Merchant
Services
Outsourced
Payment
Services
Non-
attributable
Total
USD’000
Current assets
462,590
70,796
252,473
785,859
Non-current assets
62,936
35,385
694,588
1
792,909
Total assets
525,526
106,181
947,061
1,578,768
Current liabilities
477,514
2,152
169,414
649,080
Non-current liabilities
–
–
302,006
302,006
Total liabilities
477,514
2,152
471,420
951,086
1
This includes goodwill amounting to USD 495.8 million.
2021
Statement of profit or loss (restated)
Merchant
Services
Outsourced
Payment
Services
Non-
attributable
Total
USD’000
Revenue
129,670
214,082
8,493
352,245
Contribution
91,261
147,096
5,805
1
244,162
Contribution margin (%)
70.4%
68.7%
–
69.3%
Central functions costs
–
–
(109,146)
(109,146)
Specially disclosed items affecting EBITDA
–
–
(10,919)
(10,919)
Depreciation and amortisation
–
–
(60,958)
(60,958)
Share of profit of associate
–
–
4,694
4,694
Gain on sale of an associate
–
–
10,169
10,169
Net interest expense
–
–
(13,708)
(13,708)
Unrealised foreign exchange losses
–
–
(910)
(910)
Taxes
–
–
(6,826)
(6,826)
Profit for the year
91,261
147,096
(181,799)
56,558
1
2021: Non-attributable contribution has direct cost of USD 2.7 million associated to Mercury.
Statement of financial position (restated)
Merchant
Services
Outsourced
Payment
Services
Non-
attributable
Total
USD’000
Current assets
456,402
60,098
297,392
813,892
Non-current assets
62,485
31,120
717,369
1
810,974
Total assets
518,887
91,218
1,014,761 1,624,866
Current liabilities
445,088
70
185,827
630,985
Non-current liabilities
–
–
381,468
381,468
Total liabilities
445,088
70
567,295
1,012,453
1
This includes goodwill amounting to USD 496.7 million.
The table below shows the segmental allocation of the Group’s revenues and non-current assets as per geographical regions.
Revenues
Middle East
Africa
Non-
attributable
Total
USD’000
2022
288,383
142,674
7,314
438,371
2021
247,683
100,239
4,323
352,245
Non-current assets
Middle East
Africa
Non-
attributable
Total
USD’000
31 December 2022
33,195
1,972
757,742
792,909
31 December 2021
32,985
4,266
773,723
810,974
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
224
Middle East
The Group’s primary market in the Middle East region is UAE while the second most significant market is Jordan. In both
markets, the Group provides merchant services and outsourced payment services to various financial and non-financial
institutional clients.
Africa
Under the Africa region, the Group’s key sub-markets are North Africa, West & Central Africa, East Africa and Southern Africa.
(i) North Africa
One of the most significant markets in North Africa is Egypt. The Group currently provide outsourced payment services to
several of Egypt’s leading financial institutions. North Africa contributed 36% of the total Africa revenue in 2022 (2021: 41%)
and 12% of Group revenues (2021: 12%).
(ii) West & Central Africa
The significant markets in West & Central Africa are Nigeria and Ghana, where the Group has an established presence serving
several leading financial institutions, mainly providing outsourced payment services. West & Central Africa contributed 26%
of the total Africa revenue in 2022 (2021: 30%) and 9% of Group revenues (2021: 9%).
(iii) East Africa
The significant market in East Africa is Kenya where the Group provides its services. East Africa contributed 10% of the
total Africa revenue in 2022 (2021: 6%) and 3% of Group revenues (2021: 2%).
(iv) Southern Africa
The significant market in Southern Africa is South Africa, where the Group provides merchant services and outsourced
payment services. South Africa contributed 28% of the total Africa revenue in 2022 (2021: 23%) and 9% of Group revenues
(2021: 7%).
Major customer
The Group’s major customer is Emirates NBD PJSC and its subsidiaries whose revenue accounts for approximately 15.2%
(2021: 18.7%) of total Group revenue.
All of the revenue of Emirates NBD PJSC comes from outsourced payment services.
6. Business combination and disposals
6.1 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.
In December 2021, the Group entered an agreement to sell its 70% shareholding in Mercury. The sale was subsequently
completed on 14 January 2022 for a consideration of USD 4.5 million. Post completion adjustment, the Group received
USD 4.3 million, resulting in a gain on disposal of USD 2.2 million. As at 31 December 2021, the Group has classified
Mercury as ‘Held for sale’ in the consolidated financial statements. Refer to note 16 for details.
6.2 Network International Investment Holding 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 recognised goodwill amounting to USD 260.1 million
(refer to note 8 for details).
3G Direct Pay Holdings Limited – Direct Pay Online (DPO)
On 28 July 2020, the Group entered into an agreement to acquire (the ‘Transaction’) a 100% stake in 3G Direct Pay
Holdings Limited (‘DPO’), the leading, high-growth online commerce platform in Africa. The agreement was amended
by the deed of amendment and restatement dated 7 April 2021, and the deed of amendment dated 28 September 2021.
The acquisition was subsequently completed on 28 September 2021. The total consideration for the transaction amounted
to USD 291.5 million, of which USD 228.8 million was paid in cash and the balance was paid in the form of 11.1 million shares
at an agreed share price of GBP 4.1 per share (amounting to USD 62.7 million). The fair value of shares transferred at the date
of acquisition (i.e. 28 September 2021), was GBP 3.59 per share, resulting in a fair value of consideration of USD 283.4 million
(cash – USD 228.8 million and fair value of shares – USD 54.6 million).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
225
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Business combination and disposals (continued)
The acquisition of DPO will help further consolidate the Group’s presence in Africa, strengthen our position across the
entire payments value chain and accelerate our growth. This acquisition widens the Group’s capabilities across online,
mobile and alternative payments; bring an extensive and diverse range of direct merchant relationships to our business;
and provide a wider range of solutions for the Group’s existing customers.
The details of the consideration, fair value of the net assets at the date of acquisition and residual goodwill are as follows:
2021
USD’000
Cash paid
228,769
Share capital issued
54,620
Fair value of consideration transferred (A)
283,389
Recognised amounts of identifiable net assets
Property and equipment
1,944
Acquired intangible assets
63,400
Intangible assets
321
Deferred tax assets
5,239
Trade and other receivables
11,492
Restricted cash
45,487
Cash and cash equivalents
29,836
Total assets (B)
157,719
Borrowings – non-current
5,677
Other long-term liabilities
849
Merchant creditors
45,867
Deferred tax liability
15,528
Trade and other payables
35,648
Borrowings – current
4,844
Total liabilities (C)
108,413
Fair value of assets acquired (B-C = D)
49,306
Goodwill on acquisition (A – D)
234,083
Goodwill capitalised represents the expected future benefits of improving the breadth of the Group’s service offering and
anticipated operational synergies, providing the Group with access to future merchants in African markets where online
payments are expected to grow.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
226
Depreciation
Depreciation is recognised in 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:
Years
Leasehold improvements
3 – 10
Furniture and fixtures
3 – 10
Office equipment
3 – 8
Building
20 – 50
Computer hardware
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.
The useful life of these 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 property and equipment are
reasonably changed during the year ending 31 December 2023, this would not be expected to result in material adjustment
to the carrying values of intangible assets. Hence estimates related to useful life of the property and equipment are not
considered critical for the purpose of the consolidated financial statements.
Capital work in progress (CWIP)
Capital work in progress for property and equipment and intangible assets represents spending related to 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.
Land and
building
Right of
use asset
Leasehold
improvement,
furniture and
fixtures
Computer
and office
equipment
Capital
work in
progress
(CWIP)
Total
USD’000
2022
Cost
Balance as at 1 January 2022
5,736
23,448
6,910
165,955
5,600
1
207,649
Additions
–
–
1,909
4,030
14,331
20,270
Right of use asset additions during the year
–
3,412
–
–
–
3,412
Disposals
(145)
–
(92)
(3,924)
–
(4,161)
Transfers from CWIP
–
–
1,083
16,096
(17,179)
–
Transfers to/from intangible assets
–
–
(38)
1,286
–
1,248
Effects of change in foreign exchange
(157)
(4,222)
(546)
(5,018)
(544)
(10,487)
As at 31 December 2022
5,434
22,638
9,226
178,425
2,208
217,931
Accumulated depreciation and impairment
Balance at 1 January 2022
947
10,321
5,245
131,552
–
148,065
Charge for the year
338
–
1,063
16,156
–
17,557
Disposals
(145)
–
(92)
(3,924)
–
(4,161)
Depreciation on right of use asset
–
3,812
–
–
–
3,812
Effects of change in foreign exchange
(217)
(1,006)
(541)
(3,726)
–
(5,490)
Balance as at 31 December 2022
923
13,127
5,675
140,058
–
159,783
Carrying value
4,511
9,511
3,551
38,367
2,208
58,148
1
CWIP balance of USD 3.3 million previously impaired has been removed from cost and amortisation opening balance since carrying value of the balance is Nil.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
227
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Property and equipment (continued)
Land and
building
Right of
use asset
Leasehold
improvement,
furniture and
fixtures
Computer
and office
equipment
Capital
work in
progress
(CWIP)
Total
USD’000
2021
Cost
Balance as at 1 January 2021
5,801
17,690
6,024
150,509
5,749
185,773
Additions
–
–
145
4,608
18,025
22,778
Right of use asset additions during the year
–
4,933
–
–
–
4,933
Disposals
–
–
(99)
(777)
–
(876)
Transfers from CWIP
–
–
253
14,653
(14,906)
–
Transfers to intangible assets
–
–
–
(3,376)
–
(3,376)
Reclassified as held for sale
–
–
–
(15)
–
(15)
On assets acquired in business combination
–
872
624
445
–
1,941
Effects of change in foreign exchange
(65)
(47)
(37)
(92)
–
(241)
As at 31 December 2021
5,736
23,448
6,910
165,955
8,868
210,917
Accumulated depreciation and impairment
Balance at 1 January 2021
851
7,260
4,622
119,487
3,268
135,488
Charge for the year
143
–
735
14,698
–
15,576
Disposals
–
–
(98)
(686)
–
(784)
Reclassified as held for sale
–
–
–
(15)
–
(15)
Transfers to intangible assets
–
–
–
(1,738)
–
(1,738)
Depreciation on right of use asset
–
3,050
–
–
–
3,050
Effects of change in foreign exchange
(47)
11
(14)
(194)
–
(244)
Balance as at 31 December 2021
947
10,321
5,245
131,552
3,268
151,333
Carrying value
4,789
13,127
1,665
34,403
5,600
59,584
8. Intangible assets and goodwill
Acquired intangibles
At the date of acquisition of a subsidiary or associate, intangible assets that are deemed separable or 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:
Years
Customer relationship
10 years
Brands
10 years – indefinite
Developed technology
5 years
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
228
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:
Years
Computer software or technology platform
4 – 10 years
Computer software acquired by the Group is stated at cost less accumulated amortisation and accumulated impairment
loss (if any). The useful life of these intangible assets 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
are reasonably changed during the year ending 31 December 2023, this would not be expected to result in material
adjustment to the carrying values of intangible assets. Hence estimates related to useful life of the intangible assets
are not considered critical for the purpose of the consolidated financial statements. 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.
Goodwill
Computer
software
Customer
relationships
Technology
development
and brands
CWIP
Total
USD’000
2022
Cost
Balance as at 1 January 2022
496,695
301,685
75,397
21,664
20,874
1
916,315
Additions
–
3,346
–
–
35,533
38,879
Disposal
–
(316)
–
–
–
(316)
Reclassification
–
321
–
(321)
–
–
Transfers from CWIP
–
25,486
–
–
(25,486)
–
Transfers to/from property and equipment
–
5
–
–
(1,253)
(1,248)
Effects of change in foreign exchange
(913)
(318)
–
–
(765)
(1,996)
As at 31 December 2022
495,782
330,209
75,397
21,343
28,903
951,634
Amortisation and impairment
Balance at 1 January 2022
–
145,668
28,669
2,202
–
176,539
Charge for the year
–
39,534
8,504
2,022
–
50,060
Disposal
–
(316)
–
–
–
(316)
Reclassification
–
1,697
–
(1,697)
–
–
Effects of change in foreign exchange
–
353
–
–
–
353
Balance as at 31 December 2022
–
186,936
37,173
2,527
–
226,636
Carrying value
495,782
143,273
38,224
18,816
28,903
724,998
1
CWIP balance of USD 38.9 million previously impaired has been removed from cost and amortisation opening balance since carrying value of the balance is Nil.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
229
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Intangible assets and goodwill (continued)
Goodwill
Computer
software
Customer
relationships
Technology
development
and brands
CWIP
Total
USD’000
2021
Cost
Balance as at 1 January 2021
262,609
268,645
32,397
2,780
56,444
622,875
Additions
–
5,820
–
–
27,674
33,494
On assets acquired in business combination
234,083
1,837
43,000
18,884
–
297,804
Disposal
–
(59)
–
–
–
(59)
Transfers from CWIP
–
24,392
–
–
(24,392)
–
Transfers from property and equipment
–
3,376
–
–
–
3,376
Reclassified as held for sale
–
(1,074)
–
–
–
(1,074)
Effects of change in foreign exchange
3
(1,252)
–
–
–
(1,249)
As at 31 December 2021
496,695
301,685
75,397
21,664
59,726
955,167
Amortisation and impairment
Balance at 1 January 2021
–
109,601
23,290
–
38,852
171,743
Charge for the year
–
34,751
5,379
2,202
–
42,332
Disposal/utilisation
–
(59)
–
–
–
(59)
Reclassified as held for sale
–
(266)
–
–
–
(266)
Transfers from property and equipment
–
1,738
–
–
–
1,738
Effects of change in foreign exchange
–
(97)
–
–
–
(97)
Balance as at 31 December 2021
–
145,668
28,669
2,202
38,852
215,392
Carrying Value
496,695
156,017
46,728
19,462
20,874
739,776
8.1 Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the cost of an acquisition over the fair value
of the Group’s share of the net identifiable assets. Goodwill is carried at cost less accumulated impairment losses and is
tested annually for impairment.
The goodwill related to cash generating units of Africa and Jordan arose mainly from the acquisition of Network
International Investment Holding Limited in 2016 (subsequently amalgamated with Network International Services
(Mauritius) Limited). The Goodwill relating to the cash generating unit of DPO arose from the acquisition of DPO in 2021.
Goodwill
Indefinite life intangible
assets (brand)
2022
USD’000
2021
USD’000
2022
§USD’000
2021
USD’000
Africa
231,052
231,965
–
–
Jordan
30,647
30,647
2,780
2,780
DPO
234,083
234,083
–
–
495,782
496,695
2,780
2,780
During the year there is no movement in the goodwill except in Africa due to the effect of changes in foreign exchange rates.
8.2 Impairment testing
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 group of CGUs that are expected to benefit from the synergies of the combination.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
230
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 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 assets’ 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.
Discount rates used reflect the time value of money and are based on the Group’s weighted average cost of capital,
adjusted for specific risks relating to the country in which the CGU operates. Inputs into the discount rate calculation
include a country risk-free rate, country risk premium and market risk premium.
During the year, impairment testing of goodwill was done based on CGUs. For this purpose, management considered three
CGUs, namely, Africa, Jordan and DPO.
Africa
During the year, the impairment testing resulted in nil impairment for Africa CGU (2021: nil) as the recoverable amount
(value in use) exceeds from its carrying value of USD 414.1 million (2021: USD 384.4 million).
Following are the key assumptions used by the Group in carrying out the impairment testing, that have the most significant
effect on the recoverable amount which is compared with the carrying value of the CGU.
a) Revenue and EBITDA growth
b) Pre-tax discount rate of 22.5%
c)
Terminal growth rate of 4.5%
The key assumptions described above may change as economic and market conditions change. The Group estimates
that reasonable possible changes in these assumptions are not expected to cause the recoverable amount to decline
below the carrying amount. Therefore, the Group considers the application of these accounting estimates for Africa CGU,
as non-critical in the preparation of these consolidated financial statements.
The Directors have done the sensitivity analysis by changing the underlying assumptions used in the impairment
assessment to determine the recoverable amount of the CGU. The Directors noted that by changing the discount rate
(by +1.0% and -1.0%) and terminal growth rate by +0.5% and -0.5%), individually, would not cause the carrying amount
of the CGU to be higher than recoverable amount.
Jordan
During the year, the impairment testing resulted in nil impairment for Jordan CGU (2021: nil) as the recoverable amount
(value in use) exceeds from its carrying value of USD 53.5 million (2021: USD 50.3 million).
Following are the key assumptions used by the Group in carrying out the impairment testing, that have the most significant
effect on the recoverable amount which is compared with the carrying value of the CGU.
a) Revenue and EBITDA growth
b) Pre-tax discount rate of 21.8%
c)
Terminal growth rate of 4.5%
The key assumptions described above may change as economic and market condition change. The Group estimates
that reasonable possible changes in these assumptions are not expected to cause recoverable amount to decline below
the carrying amount. Therefore, the Group consider the application of these accounting estimates for Jordan CGU,
as non-critical in the preparation of these consolidated financial statements.
The Directors have done the sensitivity analysis by changing the underlying assumptions used in the impairment assessment
to determine the recoverable amount of the CGU. The Directors noted that changing the discount rate (by +1.0% and -1.0%) and
terminal growth rate (by +0.5% and -0.5%), individually, would not cause the carrying amount of the CGU to be higher than the
recoverable amount.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
231
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Intangible assets and goodwill (continued)
DPO
During the year, the impairment testing resulted in nil impairment for DPO CGU as the recoverable amount (value in use)
exceeds from its carrying value of USD 280.3 million.
Following are the significant assumptions used by the Group in carrying out the impairment testing, that have the most
significant effect on the recoverable amount which is compared with the carrying value of the CGU.
a) Revenue and EBITDA growth
b) Pre-tax discount rate of 18.0%
c)
Terminal growth rate of 4.5%
Using the above assumptions, the recoverable amount is higher by USD 66.1 million as compared to the carrying value
of the CGU including goodwill.
a)
Management has estimated the revenue CAGR of 35.4% and underlying EBITDA CAGR of 48.6% for five-year period
ending 31 December 2027. This is reflective of supportive underlying market trends for payment industry across
the region and Groups’ high growth strategy.
b)
Discount rates used reflect the time value of money and are based on the Group’s weighted average cost of capital,
adjusted for specific risks relating to the countries in which the CGU operates. Inputs into the discount rate calculation
include a country risk-free rate, country risk premium, market risk premium.
c)
The Group has used the terminal growth rate of 4.5% which is reflective of the existing and potential growth trend
of the payment industry.
The Directors have done the sensitivity analysis by changing the underlying assumptions used in the impairment
assessment to determine the recoverable amount of the CGU. The Directors noted that by changing the discount rate
(by +1.0% and -1.0%) and terminal growth rate (by +0.5% and -0.5%), individually, would not cause the carrying amount
of the CGU to be higher than recoverable amount.
The Directors noted that, a) reduction of 19.1% in the cash flows would reduce the headroom to USD nil, b) an increase in
the pre-tax discount rate by 2.5% would reduce the headroom to USD nil, and; c) reduction of 3.1% in the terminal growth
rate would reduce the headroom to USD nil.
9. Investment in associate (for comparative period only)
The Group’s interest in equity-accounted investee comprises its interest in associate. Interest in an associate is accounted
for using the equity method. It is 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.
On 9 November 2021, the Company sold its investment in an associate, Transguard Cash LLC, for consideration of USD 74.4 million
and, accordingly, a gain of USD 10.2 million was recorded in the financial statements of 2021.
Transguard Cash LLC
Name and nature of investment
Associate
Ownership
50%
Place of incorporation
United Arab Emirates
2021
USD’000
As at 1 January
59,808
Share of profits
1
4,694
Dividends received
–
Fair value reserve (remeasurement of defined benefit liability)
(247)
Disposal of investment
(64,255)
As at 31 December
–
Details of net profit (100%)
Total revenue
78,378
Total expenses
(68,990)
Net profit (100%)
9,388
1
Share of profit for the year only reflects 10 months of share of profit from associate (i.e. until the date of disposal). The details of the net assets are not presented since the
investment was derecognised before 31 December 2021.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
232
10. Scheme debtors, merchant creditors and restricted cash
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.
Notes
2022
USD’000
2021
USD’000
Cash
inflow/
(outflow)
USD’000
Scheme debtors
336,728
364,025
27,297
Merchant creditors
(285,791)
(329,280)
(43,489)
Restricted cash (part of cash and cash equivalents)
12
119,357
86,801
(32,556)
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 debtors and merchant creditors 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 period end falls. For example, if the
period end falls on a weekend, 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.
Restricted cash (part of cash and cash equivalents, refer to note 12)
Restricted cash represents balances specifically due to merchants.
In the UAE and Jordan
, restricted cash represents i) cash held as a form of collateral to manage the risk of merchant
chargebacks, and ii) cash balances collected from card schemes/financial institutions but not settled to merchants.
In Africa (DPO)
, restricted cash largely represents cash balances already received from banks and mobile network
operators, but not yet remitted to merchants.
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 provisions (if any). Provisions are presented net with the related receivable on the consolidated
statement of financial position.
2022
USD’000
2021
USD’000
Trade receivables
79,453
67,121
Chargeback receivables
3,955
2,430
Prepaid expenses
9,343
8,728
Advance taxes
–
6,358
Security deposits
1,573
2,288
Other receivables
7,155
5,325
101,479
92,250
Less: Provision for impairment
(6,107)
(3,876)
95,372
88,374
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
233
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Receivables and prepayments (continued)
The movements in the provision for impairment are as follows:
Notes
2022
USD’000
2021
USD’000
As at 1 January
3,876
5,994
Charge during the year
11.1
2,922
393
Acquired through business combination
–
205
Amounts written off
(326)
(2,592)
Amounts reversed
(207)
(124)
The effect of changes in foreign exchange rates
(158)
–
As at 31 December
6,107
3,876
Below is the split of changes in other working capital balance.
Notes
2022
USD’000
2021
USD’000
2022
vs 2021
Trade receivables & chargeback receivables
(Net of provisions for expected credit losses)
77,301
65,675
(11,626)
Prepayments and other receivables
18,071
22,699
4,628
Trade and other payables & income tax payable
(127,943)
(145,331)
(17,388)
(32,571)
(56,957)
(24,386)
Items excluded
1
Unpaid capital expenditure
14
14,378
20,637
6,259
Lease liabilities – current portion
14
4,262
3,282
(980)
Interest payable
14
223
101
(122)
Charge for expected credit losses
11.1
2,922
393
(2,529)
Tax liabilities
2
20,469
15,828
(4,641)
Other movements
1,122
(1,233)
(2,355)
Working capital changes
10,805
(17,949)
(28,754)
1
These items are excluded as they are either shown separately in the statement of cash flows are non-cash in nature.
2
Tax liabilities include tax and other related liabilities under Note 14 of USD 15.2 million (2021: USD 13.4 million), income tax payable in the statement of financial position
of USD 5.2 million (2021: USD 8.8 million) and net of advance taxes under Note 11 of nil (2021: USD 6.4 million).
11.1 Charge for expected credit losses
The Group follows the Simplified approach under IFRS 9 provisioning model for estimating the impairment of financial assets,
according to 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 receivable 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 2.9 million (2021: USD 0.4 million).
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, and hence, management considers the application
of the above accounting estimates as non-critical.
12. Cash and cash equivalents
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.
2022
USD’000
2021
USD’000
Cash and cash equivalents – per consolidated statement of financial position
Cash and cash equivalents (restricted)
119,357
86,801
Cash and cash equivalents (un-restricted)
234,402
270,345
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
234
Notes
2022
USD’000
2021
USD’000
(restated)
Cash and cash equivalents – per consolidated statement of cash flows
Cash and cash equivalents (restricted)
119,357
86,801
Cash and cash equivalents (un-restricted)
234,402
270,345
Bank overdraft
15
(159,287)
(77,089)
Cash and cash equivalents – per consolidated statement of cash flows
194,472
280,057
12.2 Restricted cash (part of cash and cash equivalents)
Restricted cash represents balances specifically due to merchants.
In the UAE and Jordan
, restricted cash represents i) cash held as a form of collateral to manage the risk of merchant
chargebacks, and ii) cash balances collected from card schemes/financial institutions but not settled to merchants.
In Africa (DPO)
, restricted cash largely represents cash balances already received from banks and mobile network
operators, but not yet remitted to merchants.
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 consist 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.
2022
USD’000
2021
USD’000
Executive Directors’ remuneration
Directors’ remuneration during the year
1,007
1,007
Terminal and other benefits
1,587
1,842
Share-based payments
558
2,084
Non-Executive Directors’ remuneration
Directors’ remuneration during the year
1,427
1,651
Other key management personnel remuneration
Salaries and allowances
4,001
3,610
Terminal and other benefits
4,151
4,182
Share-based payments
2,816
3,763
14. Trade and other payables
Notes
2022
USD’000
2021
USD’000
Accrued expenses
49,919
58,024
Staff benefits
Provision for bonus and sales incentives
10,623
8,987
Terminal and other benefits
2,064
2,966
Unpaid capital expenditure
14,378
20,637
Unclaimed balances
6,562
5,207
Tax and other related liabilities
15,237
13,360
Interest payable
223
101
Deferred income (refer to note below)
3,060
9,976
Lease liabilities
25.2
4,262
3,282
Other liabilities
16,383
13,965
122,711
136,505
Deferred income relates to the Group contractual liabilities for the project-related revenues (refer to note 19 and note 2(g)).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
235
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Borrowings
The Group’s total borrowings amounted to USD 500.6 million (2021: USD 491.3 million).
The long-term syndicated loan facility is utilised to increase the Group’s liquidity, fund inorganic growth opportunities and
other accelerator projects, as well as for general corporate purposes. The original facility was for USD 525 million, of which
USD 375 million was drawn in March 2020 which represents the opening balance at the start of the prior period. We have
since made a scheduled repayment of USD 37.5 million during 2022 which represents 10% of the outstanding balance
at the beginning of the year, with the repayment increasing to 20% between 2023–25, and the remaining balance of 30%
to be paid in full in 2026. The table below provides a breakdown of the borrowings:
2022
USD’000
2021
USD’000
Term loan
Principal outstanding
337,500
375,000
Unamortised debt issue cost
(3,515)
(4,690)
Net amount included in borrowings
333,985
370,310
Other term loan
7,365
8,754
Revolving credit facility
–
35,000
ATM lease liability
–
191
Bank overdraft
159,287
77,089
Total
500,637
491,344
Split into:
a) Term loan
›
Non-current portion (a)
258,985
332,810
›
Current portion (b)
75,000
37,500
Sub total
333,985
370,310
b) Other term loan – from business combination
›
Non-current portion (a)
6,306
3,929
›
Current portion (b)
1,059
4,825
Sub total
7,365
8,754
c) Revolving credit facility
›
Current portion (b)
–
35,000
Sub total
–
35,000
d) ATM lease liability
›
Non-current portion (a)
–
–
›
Current portion (b)
–
191
Sub total
–
191
e) Bank overdraft
›
Current portion (b)
159,287
77,089
Sub total
159,287
77,089
Total
500,637
491,344
As per consolidated statement of financial position
Non-current borrowings (a)
265,291
336,739
Current borrowings (b)
235,346
154,605
Total
500,637
491,344
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
236
16. Held for sale (for comparative purposes)
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 month from the date of classification
except for the extension period allowed under IFRS 5 (Non-current assets held for sale and discontinued operations).
Assets and liabilities held for sale comprises assets and liabilities if it is highly probable that these 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
accounting policies.
In December 2021, the Group entered an agreement to sell its 70% shareholding in Mercury. The sale was subsequently
completed on 14 January 2022 for consideration of USD 4.5 million. Post completion adjustment, the Group received
USD 4.3 million, resulting in a gain on disposal of USD 2.2 million. As at 31 December 2021, the Group has classified Mercury
as ‘Held for sale’ in the consolidated financial statements.
Management considers the classification of Mercury as ‘Held for sale’ as a non-critical accounting judgement based on the
significance of the Mercury results in the preparation of these consolidated financial statements. Below is the assets and
liabilities position of the Group’s discontinued operations.
Assets and liabilities held for sale
As at 31 December 2021, discontinued operation resulted in USD 4.3 million and USD 1.8 million in assets and liabilities held
for sale, respectively, in relation to Mercury.
2021
USD’000
Assets
Intangible assets
808
Scheme debtors
369
Cash and cash equivalents
2,619
Trade and other receivables
551
Total
4,347
Liabilities
Merchant creditors
1,667
Trade and other payables
102
Total
1,769
17. Other long-term liabilities
Notes
2022
USD’000
2021
USD’000
Staff benefits
17.1
10,779
12,952
Lease liabilities for right of use assets
25.2
7,390
12,863
Other long term liabilities
351
–
18,520
25,815
17.1 Staff benefits
The Group’s employee end of service benefits includes 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
(i.e. mainly UAE, Jordan and Africa).
Pension 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
considering any changes in the net defined benefit liability during the period as a result of contributions and benefit payments.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
237
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Other long-term liabilities (continued)
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 consolidated statement of other comprehensive income.
During the year, the Group has recognised USD 2.3 million (2021: USD 0.2 million) in the consolidated statement of other
comprehensive income on account of remeasurement of defined benefit liability. Accordingly, the Group’s employee benefits
obligation as at 31 December 2022, included in ‘employee end of service benefits’ above, amounted to USD 10.8 million
(2021: USD 12.9 million).
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. Management considers the application
of these accounting estimates as non-critical in the preparation of these consolidated financial statements. The following
are the principal actuarial assumptions at the reporting date:
31 December 2022
31 December 2021
Discount rate p.a.
5.00%
2.25%
Pre-retirement non-death/disability termination rate p.a.
12.5% p.a.
14.0% until end–2020 going
down by 0.5% each year to an
ultimate rate of 12.5% p.a. from
2024 onward
Salary escalation rate p.a.
3.50%
3.50%
Involuntary termination rate p.a.
Nil
Nil
Retirement age
60
60
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:
2022
(+) 0.5 percentage
(-) 0.5 percentage
Discount rate p.a.
5.50%
4.50%
+/(-) in defined benefit obligation (in USD ’000)
(297)
313
Salary increment rate p.a.
4.00%
3.00%
+/(-) in defined benefit obligation (in USD ’000)
328
(313)
Voluntary exit rate
Withdrawal rate of 7.5%
Withdrawal rate of 17.5%
+/(-) in defined benefit obligation (in USD ’000)
(229)
101
2021
(+) 0.5 percentage
(-) 0.5 percentage
Discount rate p.a.
2.75%
1.75%
+/(-) in defined benefit obligation (in USD ’000)
(409)
436
Salary increment rate p.a.
4.00%
3.00%
+/(-) in defined benefit obligation (in USD ’000)
442
(419)
Voluntary exit rate
Withdrawal rate 9.5% until
end–2021 going down by 0.5%
each year to an ultimate rate of
7.5% p.a. from 2024 onward
Withdrawal rate 19.5% until
end–2021 going down by 0.5%
each year to an ultimate rate of
17.5% p.a. from 2024 onward
+/(-) in defined benefit obligation (in USD ’000)
653
(450)
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.
2022
USD’000
2021
USD’000
Issued and fully paid up
561,101,690 shares of GBP 0.10 each (2021: 561,101,690 shares of GBP 0.10 each)
73,077
73,077
On 28 September 2021, the Company issued additional shares equivalent to 11.1 million shares as part of the purchase
consideration for the acquisition of DPO. Accordingly, the Company’s share capital increased by USD 1.5 million and the
Company recognised a share merger reserve of USD 53.0 million.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
238
Share buyback programme
On 11 August 2022, the Group announced a share buyback programme (the ‘Initial Program’). The decision to undertake the share
buyback programme is in line with the Group’s capital allocation strategy which prioritises investment in order to accelerate revenue
growth through organic investments as well as disciplined selective acquisitions and use excess cash to return to shareholders.
The Initial Program for buyback of shares is to buy shares worth a maximum aggregate market value equivalent to
USD 50 million, which ended on 27 January 2023. As announced on 26 January 2023, the Company has launched
the second tranche of the buyback for up to another USD 50 million, following the completion of the Initial Program.
Accordingly, as at 31 December 2022, the Group bought back 11,532,594 shares worth USD 40.6 million (2021: nil),
which have been recognised as treasury shares and included in the consolidated statement of changes in equity.
On 7 March 2023, the Group announced its intention to cancel all ordinary shares, purchased up to 6 March 2023 under
the buyback programme, with the exception of 5,000,000 shares which will be held in treasury to satisfy obligations under
the Group’s LTIP scheme.
Reserves comprise the following:
Treasury shares
amounted to USD (40.6) million and represent buyback of 11,532,594 shares purchased under the share
buyback programme.
Foreign exchange reserves
amounted to USD (36.5) million (2021: USD (19.7) million), including 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 and other reserves
includes a) reorganisation reserve and b) Other reserve.
a)
Reorganisation reserve
amounted to USD (1.5) billion (2021: USD (1.5) billion), and relates to the reserve created as part
of restructuring undertaken by the Group in 2019.
b)
Other reserve
amounted to USD 8.3 million (2021: USD 5.0 million). It includes the following:
i.
Statutory reserve
amounted to USD 8.5 million (2021: USD 7.5 million) and 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.
ii.
Fair value reserve
represents net defined benefit cost recognised in other comprehensive income and amounted
to USD (0.2) million (2021: USD (2.5) million).
Retained earnings
includes USD (16.9) million (2021: USD (5.6) million) representing purchase of 5,218,802 shares
(2021: 1,000,000) for LTIP scheme.
19. Revenue
Merchant Services
Under Merchant Services, the Group provides a broad range of technology-led payment solutions to its merchants through
a full omni-channel 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 Services business line is where we maintain
direct relationships with merchant customers and PSPs (Payment Service Provider businesses), enabling merchants to accept
digital payments. The business line spans the UAE, Jordan, across Africa (DPO Group) and newly launched services in Egypt.
The Group generates both transactional and non-transactional revenue (refer below for detail) under Merchant Services.
Outsourced Payment Services
Through its Outsourced Payment Services business line, the Group provides support to FIs, fintechs and other customers
in over 50 countries across two main business lines: i) Issuer processing: where we support payment credential issuing
customers in enabling their consumers to ‘make payments’ by managing and processing their consumer payment
credentials and transactions. Issuer processing represents the majority of revenue within Outsourced Payment Services.
ii) Acquirer processing: where we enable Financial Institutions (FIs), fintechs, and indirectly, their merchant customers,
to ‘take payments’ from consumers. Within acquirer processing, our clients maintain the relationship with the merchants,
whilst we provide digital payment acceptance, transaction processing and other operational services. The Group generates
both transactional and non-transactional revenue (refer below for detail) under Outsourced Payment Services.
For both Merchant Services and Outsourced Payment Services, the Group’s sources of revenue can be broadly categorised
into transaction-based revenue and non-transaction-based revenue.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
239
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. Revenue (continued)
›
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 credential 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 transaction-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-transaction-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:
–
Services provided by the Group where customer simultaneously receives and consumes the benefits as and when the
Group performs its obligation; and
–
Project-related revenue, where the Group provides a service to develop or enhance the tangible/intangible assets
which is short term in nature. Management applies 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 5.0% (2021: 4.0%) of the total
Group revenue and hence the Directors do not consider this as a critical accounting judgement that has a significant
effect in preparing these consolidated financial statements.
2022
USD’000
2021
USD’000
(restated)
Merchant Services
183,347
129,670
Outsourced Payments Services
242,510
214,082
Other revenue
12,514
8,493
438,371
352,245
During the year, Group has changed its internal reporting structure and re-aligned its business line – Merchant services
and Outsourced payment services (previously named as Merchant solutions and Issuer Solutions). This has resulted
in certain revenue line items (including acquirer processing revenues) moving from business line previously known as
Merchant Solutions into the newly classified Outsourced Payments Services business line. Accordingly, prior year figures
have been re-grouped for a comparable view.
20. Personnel expenses
The Group’s personnel expenses include salaries, allowances, bonuses and terminal and other benefits recognised during
the year, when the associated services are rendered by the employees. The details of personnel expenses are as follows:
2022
USD’000
2021
USD’000
Salaries and allowances
95,776
80,966
Bonus and sales incentives
16,523
11,557
Share-based compensation
1
5,952
7,550
Terminal and other benefits
12,600
7,884
130,851
107,957
1
Share-based compensation includes LTIP charge amounting to USD 5.9 million (2021: USD 4.6 million) and USD nil (2021: USD 3.0 million) for Management Incentive Plan
(MIP) and IPO Cash Bonus. Refer to note 27 for details.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
240
Detail of total number of employees by department is as follows:
Departments
2022
2021
Operations
639
585
Information technology
603
576
Sales
335
284
Other support functions (including Finance, HR and Risk)
376
336
1,953
1,781
Details of Directors’ remuneration can be found in the Directors’ Remuneration report on pages 164 and 172 of the
Annual Report and Accounts
21. Selling, operating and other expenses
Selling, operating and other expenses consist primarily of technology and communication-related expenses, third-party
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:
2022
USD’000
2021
USD’000
Technology and communication cost
56,709
55,266
Third-party cost
26,080
23,523
Legal and professional fees
21,473
26,933
Provision for expected credit losses
2,922
393
Other general and administrative expenses
21,733
14,076
128,917
120,191
21.1 Auditor remuneration
The details of the Group’s auditor remuneration are as follows:
2022
USD’000
2021
USD’000
Total fees to the Group’s auditor for the audit of the Group’s annual accounts
Fees payable to the Company’s auditor for the audit of the Company’s
annual accounts
628
587
Fees payable to the Company’s auditor and its associates for other services
– audit of the accounts of subsidiaries
1,083
744
Total fees to the Group’s auditor for other services:
Review of half yearly financial information
206
159
Other non-audit services
12
66
1,929
1,556
22. Net interest expense
Interest expense primarily comprises of 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 expense is as follows:
2022
USD’000
2021
USD’000
Interest on term loan facility
13,776
8,158
Interest on revolving credit facility
208
1,000
Interest on bank overdrafts
1,996
1,678
Amortisation of debt issuance cost
1,766
1,444
Other interest expense
2,135
1,812
Interest income
(1,334)
(384)
18,547
13,708
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
241
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. Basic earnings per share (EPS)
The calculation of basic EPS is based on the profit attributable to ordinary shareholders and weighted average number
of ordinary shares outstanding.
The calculation of diluted EPS is based on the profit attributable to ordinary shareholders and weighted average number
of ordinary shares outstanding after adjustments for the effects of all dilutive potential ordinary shares
The basic and diluted EPS is based on earnings of USD 80.1 million (2021: USD 57.4 million).
On 11 August 2022, the Group announced a share buyback programme (the ‘Initial Program’). The decision to undertake
a share buyback programme is in line with the Group’s capital allocation policy which prioritises investment in order to
accelerate revenue growth through organic investments as well as disciplined selective acquisitions and use excess cash to
return to shareholders. The weighted average number of share decreased during the year to reflect the buyback of 11,532,594
shares (amounting to USD 40.6 million) following the announcement of the share buyback programme. In 2021, the Company
issued 11,101,690 new ordinary shares.
On 7 March 2023, the Group announced its intention to cancel all ordinary shares, purchased up to 6 March 2023 under the
buyback programme, with the exception of 5,000,000 shares which will be held in treasury to satisfy obligations under the
Group’s LTIP scheme.
Basic earnings per share is computed on weighted average number of 552,291,780 shares (2021: 552,859,065 shares)
and diluted earnigs per share is computed on diluted average number of 559,911,755 shares (2021: 555,713,253 shares).
2022
USD’000
2021
USD’000
Basic earnings per share
14.5
10.4
Diluted earnings per share
14.3
10.4
The number of issued shares at 31 December 2022 totalled 561,101,690 (2021: 561,101,690).
24. Taxes
Taxes comprise current and deferred tax. Current tax and deferred tax are recognised in the consolidated statement
of profit or loss except to the extent that they relate to a business combination, or items recognised directly in equity
or in other comprehensive income.
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 in recognising
deferred tax assets and provisions for uncertain tax positions. Judgement and estimation involved in deferred tax mainly
relates to carried forward tax losses which is based on management 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.
On 31 January 2022, the UAE Ministry of Finance announced the introduction of a federal corporate tax in the UAE that
will be effective for financial years starting on or after 1 June 2023. Under the corporate tax rules, as published to date,
businesses will be subject to 9% corporate tax on taxable income greater than AED 375,000. A business in the Freezone
will also be subject to corporate tax but at the rate of 0% as long as it meets the eligibility requirements to become
a qualifying Free Zone Person. All Free zones entities will have to file an annual corporate tax CT return.
Accordingly, the Group’s operations in the UAE will be subject to the corporate taxation rules effective from 1 Jan 2024 and
taxable income derived therefrom is expected to be taxed under the announced taxation rules. The management continue
to assess the impact on the Group’s financial statements.
In the Directors’ view, 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.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
242
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.
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:
2022
USD’000
2021
USD’000
Deferred tax credit
(1,432)
(557)
Current tax expense
12,857
6,248
Adjustment for prior periods
1,907
1,135
Tax expenses
13,332
6,826
24.2 Reconciliation of effective tax
2022
USD’000
2021
USD’000
Profit before tax
93,436
63,384
Tax using the Company’s domestic tax rate
1
–
–
Effect of tax rates in foreign jurisdictions
13,072
3,632
Tax effect of:
Non-deductible expenses
4,164
2,211
Tax-exempt income
(89)
(18)
Other allowable deduction
(5,975)
(1,623)
Tax incentives/rebates
(55)
(162)
Carry forward losses
127
(577)
Deferred tax credit
(1,431)
(557)
Adjustment for prior periods
1,907
1,135
Other adjustments
1,612
2,785
Income tax expense
13,332
6,826
1
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.
24.3 Deferred tax liability (net of assets)
Notes
2022
USD’000
2021
USD’000
Balance as at 1 January
11,281
1,837
Deferred tax credit
(1,432)
(557)
From business combination (refer to note below)
–
10,289
Effects of change in foreign exchange
(838)
(288)
Balance as at 31 December
24.4
9,011
11,281
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
243
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
24. Taxes (continued)
24.4 Reconciliation of deferred tax
Balance at
1 Jan
From business
combination
Recognised
in P&L
Recognised
in OCI
Balance at
31 Dec
2022
Deferred tax asset
Provisions and other items
(7,633)
–
(1,971)
420
(9,184)
Deferred tax liability
Property and equipment and intangibles
16,175
–
(923)
–
15,252
Foreign exchange differences
2,739
–
1,462
(1,258)
2,943
18,914
–
539
(1,258)
18,195
Total
11,281
–
(1,432)
(838)
9,011
2021
Deferred tax asset
Provisions and other items
(1,262)
(5,239)
(1,132)
–
(7,633)
Deferred tax liability
Property and equipment and intangibles
585
15,391
199
–
16,175
Foreign exchange differences
2,514
137
376
(288)
2,739
3,099
15,528
575
(288)
18,914
Total
1,837
10,289
(557)
(288)
11,281
25. Leases
Overview
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
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, and 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 2022
244
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 of
low value contracts. 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
2022
USD’000
2021
USD’000
Balance as at 1 January
13,127
10,430
Additions during the year
3,412
4,933
From business combination
–
872
Depreciation charge for the year
(3,812)
(3,050)
Effect of change in foreign exchange
(3,216)
(58)
Balance as at 31 December
9,511
13,127
25.2 Lease liabilities
2022
USD’000
2021
USD’000
Maturity analysis – contractual undiscounted cash flows
Less than one year
4,637
5,438
One to five years
15,388
16,237
More than five years
1,484
2,119
Total undiscounted lease liabilities at 31 December
21,509
23,794
Current
4,262
3,282
Non-current
7,390
12,863
Discounted lease liabilities included in the statement of financial position at 31 December
11,652
16,145
25.3 Amounts recognised in the consolidated statement of profit or loss
2022
USD’000
2021
USD’000
Interest expense on lease liabilities
1,996
1,701
Depreciation of right of use assets
3,812
3,050
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
245
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
25. Leases (continued)
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 itself of the exemption for short-term leases and low-value assets
under IFRS 16) amounted to USD 0.2 million and (2021: 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-sale (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 2022 was USD 14.8 million (2021: USD 11.1 million).
26. Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities
Equity
Lease
liability for
right of use
asset
USD’000
ATM lease
liability
USD’000
Borrowings
1
USD’000
Retained
earnings
USD’000
Share
capital &
reserves
USD’000
Non-
controlling
interest
USD’000
Total
USD’000
2022
Opening balance
16,145
191
414,064
(28,809)
378,327
1,965
781,883
Repayment of loan
–
–
(73,368)
–
–
–
(73,368)
Payment of debt issuance cost
–
–
(591)
–
–
–
(591)
Payment of lease liabilities
(6,073)
(188)
–
–
–
(6,261)
Purchase of equity issuance cost
–
–
–
–
–
–
–
Purchase of treasury shares
(share buyback)
–
–
–
(40,631)
–
–
(40,631)
Purchase of treasury shares
(share-based payments)
–
–
–
(16,889)
–
–
(16,889)
Total
10,072
3
340,105
(86,329)
378,327
1,965
644,143
The effect of changes in foreign
exchange rates
(3,966)
–
(525)
–
–
–
(4,491)
Other changes
Recognition of lease liabilities
under IFRS 16
3,412
–
–
–
–
–
3,412
Transfer
138
–
–
–
–
–
138
Amortisation of debt issuance cost
–
–
1,766
–
–
–
1,766
Interest expense/paid
1,996
(3)
4
–
–
–
1,997
Other changes
5,546
(3)
1,770
–
–
–
7,313
Closing balance
11,652
–
341,350
(86,329)
378,327
1,965
646,965
Current portion
4,262
–
76,059
–
–
–
80,321
Non-current portion
7,390
–
265,291
–
–
–
272,681
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
246
Liabilities
Equity
Lease
liability for
right of use
asset
USD’000
ATM lease
liability
USD’000
Borrowings
1
USD’000
Retained
earnings
USD’000
Share
capital &
reserves
USD’000
Non-
controlling
interest
USD’000
Total
USD’000
2021
Opening balance
12,430
925
403,866
(23,246)
323,836
1,965
719,776
Payment of lease liabilities
(4,324)
(727)
–
–
–
–
(5,051)
Purchase of equity issuance cost
–
–
–
–
(129)
–
(129)
Purchase of treasury shares
–
–
–
(5,563)
–
–
(5,563)
Total
8,106
198
403,866
(28,809)
323,707
1,965
709,033
The effect of changes in foreign
exchange rates
237
–
–
–
–
–
237
Other changes
Recognition of lease liabilities under
IFRS 16
4,933
–
–
–
–
–
4,933
From business combination
1,168
–
8,754
–
54,620
–
64,542
Amortisation of debt issuance cost
–
–
1,444
–
–
–
1,444
Interest expense paid
1,701
(7)
–
–
–
–
1,694
Other changes
7,802
(7)
10,198
–
54,620
–
72,613
Closing balance
16,145
191
414,064
1
(28,809)
378,327
1,965
781,883
Current portion
3,282
191
77,325
–
–
–
80,798
Non-current portion
12,863
–
336,739
–
–
–
349,602
1
2021 figures also includes other term loan balance (refer note 15) to conform to current year presentation. Furthermore, borrowing figures excludes overdraft balance
(as the movement in the overdraft balance does not impact financing activities of the consolidated statement of cash flows) and ATM lease liability (as shown separately
in the table).
27. Share-based compensation
The Group currently operates the following share-based compensation plan:
›
Long Term Incentive Plan (LTIP)
The LTIP is an equity-settled share-based payment plan.
Key features and accounting policy with respect to Group incentive plans are as below:
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.
However, vesting conditions that are not market conditions are not taken into account when estimating the fair value
per share or option 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.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
247
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
27. Share-based compensation (continued)
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, while 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 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. During 2021, the outstanding cash incentive
payable to few eligible employees was converted into equity shares, and accordingly, the liability of USD 4.5 million has
been derecognised and equity has been credited.
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’) which is awarded to eligible employees and subject to the condition specified under the LTIP
rules through various grants.
Key features of the grants are as follows:
›
Under the grant, the plan is rolled out to select eligible employees of the Group;
›
The awards under this grant will normally vest on satisfaction of service and performance conditions as specified in each
of the grant;
›
The service conditions may require continued employment for a specified period from the date of the grant which could
be up to three years;
›
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;
›
Historic volatility of the Company’s share price at the grant dates is captured in the statistical, using daily TSR data over
a period commensurate with the expected life of the LTIP awards; and
›
The exercise price of all grants is Nil.
Below are the details of the various grants with service as well as performance conditions:
Grants with performance conditions:
Grant year
Number
of grants
Grant date share
price/per share
1
Weighted average
fair value
Vesting condition
Tenure
2019
1
GBP 5.3
GBP 4.9
Adjusted EPS
Revenue
Relative TSR
3 years
2020
2
GBP 4.1
and GBP 4.3
GBP 3.5
and GBP 4.0
3 years
2021
1
GBP 4.3
GBP 3.9
3 years
2022
1
GBP 2.5
GBP 2.3
3 years
Description
Details
Valuation model
Black-Scholes and Monte-Carlo model
Assumptions used:
Risk free interest rate
0.51% – 1.62% p.a.
TSR comparator group
Constituents of the FTSE 250 at the time of grant
Dividend equivalent
0% – 3% (assumed participants entitled to dividend or dividends equivalents)
Grants with service conditions only:
Grant year
Number
of grants
Grant date share
price/per share
1
Tenure
2019
1
GBP 5.3
18 months
2021
2
GBP 3.59 and GBP 4.38
12 months to 36 months
2022
9
Various ranging between GBP 1.72 to GBP 3.25
3 months to 36 months
1
Fair value of these grants is the grant date share price.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
248
The weighted average remaining contractual life of share options outstanding at 31 December 2022 is 1.5 years (2021: 0.3 years).
The movement in the share grants are as follows:
Notes
2022
USD’000
2021
USD’000
Balance as at 1 January
4,627
3,317
Less: vested during the year
(453)
(743)
Less: lapsed and cancelled
(844)
(293)
New grants during the year
6,717
2,346
Balance as at 31 December
24.4
10,047
4,627
Below is the breakdown of cumulative and current year charge for all share-based compensation plans.
Cumulative P&L
USD’000
P&L charge
USD’000
Particular
31 December 2022
31 December 2021
31 December 2022
31 December 2021
LTIP
15,945
9,993
5,952
4,518
28. 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 that 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 that 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 a 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 a 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.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
249
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
28. Financial instruments (continued)
Financial assets at fair value through other comprehensive income (FVTOCI) are carried at fair value. After initial
measurement, the Group present 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 payment 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 the 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 expire.
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 11.
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 prices (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.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
250
Accounting classifications and fair values
Carrying value
Fair value
As at 31 December 2022
USD’000
Financial
assets
Financial
liabilities
Total
carrying
value
Total
fair value
Level 1
Level 2
Level 3
Financial assets measured at fair value
Investment securities
246
–
246
246
–
246
–
Financial assets at amortised cost
Scheme debtors
336,728
–
336,728
336,728
–
336,728
–
Receivables and prepayments
95,372
–
95,372
95,372
–
95,372
–
Restricted cash
119,357
–
119,357
119,357
119,357
–
–
Cash and cash equivalents
234,402
–
234,402
234,402
234,402
–
–
Long-term receivables
333
–
333
333
–
333
–
786,192
–
786,192
786,192
353,759
432,433
–
Financial liabilities at amortised cost
Merchant creditors
–
285,791
285,791
285,791
–
285,791
–
Trade and other payables
–
122,711
122,711
122,711
–
122,711
–
Borrowings – Current
–
235,346
235,346
235,346
–
235,346
–
Other long-term liabilities
–
18,520
18,520
18,520
–
18,520
–
Borrowings – Non-current
–
265,291
265,291
265,291
–
265,291
–
–
927,659
927,659
927,659
–
927,659
–
Carrying value
Fair value
As at 31 December 2021
USD’000
Financial
assets
Financial
liabilities
Total
carrying
value
Total
fair value
Level 1
Level 2
Level 3
Financial assets measured at fair value
Investment securities
246
–
246
246
–
246
–
Financial assets at amortised cost
Scheme debtors
364,025
–
364,025
364,025
–
364,025
–
Receivables and prepayments
88,374
–
88,374
88,374
–
88,374
–
Restricted cash
86,801
–
86,801
86,801
86,801
–
–
Cash and cash equivalents
270,345
–
270,345
270,345
270,345
–
–
Long-term receivables
3,735
–
3,735
3,735
–
3,735
–
813,280
–
813,280
813,280
357,146
456,134
–
Financial liabilities at amortised cost
Merchant creditors
–
329,280
329,280
329,280
–
329,280
–
Trade and other payables
–
136,505
136,505
136,505
–
136,505
–
Borrowings – Current
–
154,605
154,605
154,605
–
154,605
–
Other long-term liabilities
–
25,815
25,815
25,815
–
25,815
–
Borrowings – Non-current
–
336,739
336,739
336,739
–
336,739
–
–
982,944
982,944
982,944
–
982,944
–
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
251
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
29. 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, in 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 ensure 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’), which provides 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 at 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:
1.
Risk Identification
2. Inherent Risk Assessment
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 Services 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 outsourced payment services.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
252
As part of Group’s Outsourced Payment Services 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’s 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 creditworthiness 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:
2022
USD’000
2021
USD’000
Middle East
612,115
676,799
Africa
164,734
117,802
776,849
794,601
The maximum exposure to credit risk (net of provisions) by type of counterparty is as follows:
2022
USD’000
2021
USD’000
Schemes
336,728
364,025
Banks
427,239
424,401
Others
12,882
6,175
776,849
794,601
2022
USD’000
2021
USD’000
Not credit impaired (0–180 days)
777,646
796,160
Credit impaired (181 days and above)
5,310
2,317
Less: Loss allowances
(6,107)
(3,876)
776,849
794,601
Financial instruments measured for expected credit losses (refer to note 11)
2022
USD’000
2021
USD’000
Not credit impaired (0–180 days)
78,098
67,234
Credit impaired (181 days and above)
5,310
2,317
Less: Loss allowances
(6,107)
(3,876)
77,301
65,675
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
253
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
29. Risk management (continued)
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
2022
USD’000
Rating
Agency
Emirates NBD PJSC
175,039
P–1
Moody’s
Standard Chartered Bank
21,345
P–1
Moody’s
Citibank N.A.
30,588
P–1
Moody’s
Name of the bank
2021
USD’000
Rating
Agency
Emirates NBD PJSC
241,840
P–2
Moody’s
Standard Chartered Bank
23,994
P–1
Moody’s
Citibank N.A.
13,886
P–1
Moody’s
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 overdraft. During the year Group has
cancelled its revolving credit facility (RCF). Following are the details for Group’s key overdraft and RCF financing facilities.
2022
2021
Overdraft financing
Limit (USD million)
163
163
Interest rate
2.4% + 1M Eibor
2.4% + 1M Eibor
Tenure/renewal date
October 2023
October 2022
Revolving credit facility (RCF)
Limit (USD million)
–
75
Interest rate
–
1.6% + 3M Libor
Tenure/renewal date
–
October 2022
(12 months extension option available)
The Group is exposed to the impact of IBOR reform in respect of debt held based upon LIBOR. In response to IBOR reform,
the Group has done a preliminary assessment on the impact of IBOR reform and alternative benchmark rates which will
be used in its debt agreements post transition. The Group will work with its lenders to ensure a smooth transition to the
alternative benchmark interest rates.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
254
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.
Contractual cash flows
31 December 2022
USD’000
Carrying
amount
Total
2 months
or less
2–12
months
1–2
years
2–5
years
More than
5 years
Merchant creditors
285,791
285,791
285,791
–
–
–
–
Trade and other payables
122,711
127,347
57,701
69,646
–
–
–
Borrowings – Current
235,346
256,118
159,325
96,793
–
–
–
Other long-term liabilities
18,520
35,679
–
–
19,069
15,126
1,484
Borrowings – Non-current
265,291
296,176
–
–
181,820
114,356
–
Total
927,659
1,001,111
502,817
166,439
200,889
129,482
1,484
Contractual cash flows
31 December 2021
USD’000
Carrying
amount
Total
2 months
or less
2–12
months
1–2
years
2–5
years
More than
5 years
Merchant creditors
329,280
329,280
329,280
–
–
–
–
Trade and other payables
136,505
138,229
3,467
134,762
–
–
–
Borrowings – Current
154,605
164,823
112,800
52,023
–
–
–
Other long-term liabilities
25,815
30,505
–
–
20,454
10,051
–
Borrowings – Non-current
336,739
371,650
–
–
177,645
194,005
–
Total
982,944
1,034,487
445,547
186,785
198,099
204,056
–
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 points 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 2022
Financial Statements
255
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
29. Risk management (continued)
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 profiles of the Group’s interest bearing financial assets and liabilities are as follows:
2022
USD’000
2021
USD’000
Fixed rate instruments
Financial assets
52
47
Financial liabilities
3,547
8,372
Variable rate instruments
Financial assets
122
129
Financial liabilities
497,106
407,971
Interest rate sensitivity analysis for variable rate instruments
A reasonably possible change of 50 basis points in term loan interest rates at the reporting date would have increased/
(decreased) the Group’s profit or loss by the amounts shown below. This analysis assumes that all other variables remain
constant.
31 December 2022
(USD’000)
-0.5%
+0.5%
Interest rate
1
1,789
(1,789)
1,789
(1,789)
31 December 2021
(USD’000)
-0.5%
+0.5%
Interest rate
2,679
(1,705)
2,669
(1,705)
1
Related to term loan only.
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 (88% of 2022
revenue and 93% of 2021 revenue) is either incurred in US dollars or currencies pegged to the US dollar, including the AED.
The Group’s foreign operations are primarily 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 under the income statement.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
256
As at 31 December 2022
USD
USD’000
AED
USD’000
EGP
USD’000
JOD
USD’000
ZAR
USD’000
Others
USD’000
Total
USD’000
Total financial assets
Scheme debtors
4,575
316,242
580
10,933
997
3,401
336,728
Receivables and prepayments
15,294
60,291
1,578
5,025
2,388
10,796
95,372
Restricted cash
36,951
–
13
6,604
30,209
45,580
119,357
Cash and cash equivalents
84,286
87,282
14,460
9,817
3,007
35,550
234,402
Long-term receivables
17
–
–
148
–
168
333
Investment securities
246
–
–
–
–
–
246
141,369
463,815
16,631
32,527
36,601
95,495
786,438
Total financial liabilities
Merchant creditors
25,598
178,002
–
17,537
30,536
34,118
285,791
Trade and other payables
5,731
89,495
7,495
5,748
4,791
9,451
122,711
Borrowings – current
59,111
171,667
–
3,547
1,021
–
235,346
Other liabilities
470
8,170
7,015
429
2,073
363
18,520
Borrowings – non current
202,500
56,448
–
–
6,343
–
265,291
293,410
503,782
14,510
27,261
44,764
43,932
927,659
Net position
(152,041)
(39,967)
2,121
5,266
(8,163)
51,563
(141,221)
As at 31 December 2021
USD
USD’000
AED
USD’000
EGP
USD’000
JOD
USD’000
ZAR
USD’000
Others
USD’000
Total
USD’000
Total financial assets
Scheme debtors
4,195
357,966
–
1,864
–
–
364,025
Receivables and prepayments
12,585
55,576
5,934
10,740
2,614
925
88,374
Restricted cash
48,003
–
293
888
23,821
13,796
86,801
Cash and cash equivalents
84,897
138,115
7,074
11,212
7,209
21,838
270,345
Long-term receivables
2
3,063
–
661
–
9
3,735
Investment securities
246
–
–
–
–
–
246
149,928
554,720
13,301
25,365
33,644
36,568
813,526
Total financial liabilities
Merchant creditors
24,499
262,911
–
2,054
24,904
14,912
329,280
Trade and other payables
9,733
97,059
7,036
11,689
5,084
5,904
136,505
Borrowings – current
63,929
76,420
1,250
8,006
15
4,985
154,605
Other liabilities
–
11,969
11,996
578
782
490
25,815
Borrowings – non current
260,357
72,453
–
–
2,002
1,927
336,739
358,518
520,812
20,282
22,327
32,787
28,218
982,944
Net position
(208,590)
33,908
(6,981)
3,038
857
8,350
(169,418)
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
EGP
1%
ZAR
1%
Others
1%
2022 – USD’000 +/(-)
21
(82)
516
2021 – USD’000 +/(-)
(70)
9
84
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
257
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
29. Risk management (continued)
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)
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 for 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).
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
258
30. Group entities
Company name
Registered address
2022
Direct subsidiaries of Network International Holdings Plc (the ultimate parent entity)
as at 31 December 2022
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
100%
Network International Holding 2 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
100%
3G Direct Pay Holdings Limited
Ulysses House, Foley Street, Dublin 1
Dublin, Ireland
100%
Indirect subsidiaries of the ultimate parent entity as at 31 December 2022
3G Direct Pay Limited
Ulysses House, Foley Street, Dublin 1
Dublin, Ireland
100%
Direct Pay Ltd
Avenue 5 Building, Rose Avenue, Hurlingham
Nairobi, Kenya
100%
Direct Payment Limited
Kigali City Tower, 14th Floor, P.O. Box 6428
Kigali, Rwanda
100%
Direct Pay Limited
European Business Centre
Lilongwe, Malawi
100%
Direct Pay (Private) Limited
27 Ridgeway South Highlands
Harare, Zimbabwe
100%
Virtual Card Services Botswana Proprietary Limited
Plot 17295, Molekangwetsi Crescent, Gaborone West
Phase 1, Gaborone, Botswana
100%
Virtual Card Services Namibia Proprietary Limited
Unit 5, Sinclair Park, Sinclair Street
Windhoek, Namibia
100%
3G Direct Pay South Africa Proprietary Limited
Great Westerford Building, 240 Main Road,
Rondebosch, Cape Town, South Africa
100%
PayGate Proprietary Limited
Great Westerford Building, 240 Main Road,
Rondebosch, Cape Town, South Africa
100%
Setcom Proprietary Limited
Great Westerford Building, 240 Main Road,
Rondebosch, Cape Town, South Africa
100%
PayFast Proprietary Limited
Brookside Office Park, 11 Imam Haron Road,
Claremont, Cape Town, South Africa
100%
PayFast Holdings Proprietary Limited
Great Westerford Building, 240 Main Road,
Rondebosch, Cape Town, South Africa
100%
Direct Pay Limited
19 Church street, Port Louis, Republic of Mauritius
100%
One Payment Limited
9th Floor, St. Nicholas House Catholic Mission Street
Lagos Island, Lagos, Nigeria
98.83%
Direct Pay Limited
No 31, Asafoanye O. Broni Crescent, Ringway Estates
Accra, Ghana
70%
Direct Pay Online Cote D’Ivoire
Cocody II Plateaux Angre 7è Tranche Immeuble
Saphir Abidjan, Cote D’Ivoire
100%
Direct Pay Online Senegal
Regus Almadies First Floor SIA Building
Route Ngor Village, Dakar, Senegal
100%
Direct Pay Online Limited
39 Hamasger Street, Nitsba Tower, 9th Floor,
Tel-Aviv Jaffo, 6721409, Office number 912, Israel
100%
Direct Pay Online Burkina Faso SARL
Ouaga 2000, Section 481, Lot 19, 01 BP3585
Ouagadougou, Burkina Faso
100%
Direct Pay Online Limited
27 Rue Khra, Lomé, Togo
100%
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
259
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Network International LLC
1
Level: 101-201 – Emirates NBD – AL Barsha (2),
P.O. Box 4487, Dubai UAE
49%
Diners Club UAE (LLC)
Level: 101-201 – Emirates NBD – AL Barsha (2),
P.O. Box 4487, Dubai UAE
100%
Network International Services (Mauritius) Limited
2
Les Cascades, Edith Cavell Street, Port-Louis,
Mauritius
100%
Network International Payments Services
Nigeria Limited
11th Floor, Heritage Place, 21 Lugard Avenue, Ikoyi,
Lagos, Nigeria
100%
Network International Payment Services
Proprietary Limited
Black River Park, North Park Block B, 2nd Floor,
Office 1 & 2, 2 Fir Street, Observatory, 7925,
South Africa
100%
Network International Services Limited Jordan
Abdul Raheem Al-Wakeed St Building No. 43
Shmeisani Amman, Jordan
100%
Network International Egypt Company (S.A.E.)
3
Building 13C01, Southern Business Park C, Cairo
Festival City, Cairo, Egypt. 92, Tahrir Street, Dokki, Giza
99.54%
Egyptian Smart Cards Company (S.A.E.)
Building 13C01, Southern Business Park C, Cairo
Festival City, Cairo, Egypt. 92, Tahrir Street,
Dokki, Giza
99.99%
Diners Club Services Egypt (S.A.E.)
55 Kods Sharif Street, Mohandessin, Giza, Egypt
97.86%
Network International Arabia Limited
Building Number: 3074, Prince Mohammed Bin
Abdulaziz Road, Level 29, Tower B, Olaya Towers,
P.O. Box: 15870, Postal Code: 11454, Riyadh,
Saudi Arabia
100%
NI Payment Services (Ghana) Ltd.
GL-144-8556, Number 7, Airport road, Airport
Liberation Rd ACCRA
La Dade-Kotopon Greater ACCRA
P.O. BX CT 6217, Cantonments-ACCRA Ghana
70%
NDiMO – Network Payments Solutions S.A.E.
Cairo Festival City, Building13C01, Southern Business
Park C, Cairo, Egypt
100%
One Payment Tanzania Limited
4
7th Floor, Amani Place, Ohio Street, Ilala District
Dar es Salaam, Tanzania
98%
One Payment Tanzania Limited
5
Kiembe Samaki, Airport Road, Unguja, West B ward,
Zanzibar, Tanzania
99%
Direct Pay (U) Limited
5th Floor Rwenzori Towers, P.O. Box 37468
Kampala, Uganda
100%
Pay Now Zambia Ltd
11th floor, Zimco house, Cairo road
Lusaka, Zambia
100%
Direct Pay Democratic Republic of Congo
26, Avenue Ebeya, Kinshasa/Gombe
100%
Indirect subsidiaries of the ultimate parent entity.
1
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 the UAE laws.
2
On 31 December 2021, the Group completed the amalgamation of its subsidiaries registered in Mauritius, namely Network International Services (Mauritius) Limited (the
surviving entity), and Network International Investment Holding Limited (the amalgamated entity). The purpose of this amalgamation is to bring efficiency in the
operation and administration of the subsidiary’s companies. The amalgamation does not have any significant impact on the financial statements of the Group.
3
On 18 June 2022, the Group completed the amalgamation of its subsidiaries registered in Egypt, namely Network International Egypt Company (S.A.E.) (the surviving
entity), and Network International Payment Services (S.A.E.) (the amalgamated entity). The purpose of this amalgamation is to bring efficiency in the operation and
administration of the subsidiary’s companies. The amalgamation does not have any significant impact on the financial statements of the Group.
4
1% shares held in the Company by each Eran Feinstein and Offer Gat which are being transferred to Network International Holding 2 Ltd.
5
1% shares held in the Company by Jaishree Razzaq as a nominee.
30. Group entities (continued)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
260
31. Contingencies and commitments
2022
USD’000
2021
USD’000
Performance and other guarantees
20,609
14,917
Commitments
6,439
12,746
27,048
27,663
Performance and other guarantees includes guarantees given by banks on the Group’s behalf to 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.
32. Subsequent events
On 26 January 2023, the Group announced its intention to commence the second tranche of the share buyback
programme, for up to an aggregate market value of USD 50 million, following the completion of the initial share buyback
programme. The second tranche commenced on 28 January 2023.
On 7 March 2023, the Group announced its intention to cancel all ordinary shares, purchased up to 6 March 2023 under
the buyback programme, with the exception of 5,000,000 shares which will be held in treasury to satisfy obligations under
the Group’s LTIP scheme.
Other than the above, there were no other subsequent events identified until the date of the issuance of these consolidated
financial statements.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
261
Notes
2022
USD’000
2021
USD’000
Assets
Non-current assets
Investment in subsidiaries
7
1,848,492
1,843,214
Total non-current assets
1,848,492
1,843,214
Current assets
Due from a related party
8
1,618
1,000
Other receivables
372
424
Cash and cash equivalents
8,014
1,656
Total current assets
10,004
3,080
Total assets
1,858,496
1,846,294
Liabilities and shareholders’ equity
Liabilities
Current liabilities
Due to a related party
9
94,728
24,134
Other payables
2,516
1,868
Total current liabilities
97,244
26,002
Total liabilities
97,244
26,002
Shareholders’ equity
Share capital
10
73,077
73,077
Share premium
252,279
252,279
Treasury shares
(40,631)
–
Share merger reserve
52,971
52,971
Retained earnings
1,423,556
1,441,965
Total shareholders’ equity
1,761,252
1,820,292
Total liabilities and shareholders’ equity
1,858,496
1,846,294
The net loss after tax for the Company was USD 7.5 million (2021: USD 17.4 million) for the year ended 31 December 2022.
Notes 1 to 11 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board of Directors on 8 March 2023 and signed
on its behalf by:
Nandan Mer
Director and Group Chief Executive Officer
Network International Holdings Plc
Statement of Financial Position
As at 31 December
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
262
Share
capital
USD’000
Share
premium
USD’000
Treasury
shares
USD’000
Share
merger
reserve
USD’000
Retained
earnings
USD’000
Total
shareholders’
equity
USD’000
As at 1 January 2022
73,077
252,279
–
52,971
1,441,965
1,820,292
Total comprehensive loss for the year
–
–
–
–
(7,472)
(7,472)
Purchase of treasury shares
–
–
(40,631)
–
(16,889)
(57,520)
Share-based payment
–
–
–
–
5,952
5,952
As at 31 December 2022
73,077
252,279
(40,631)
52,971
1,423,556
1,761,252
Share
capital
USD’000
Share
premium
USD’000
Share
merger
reserve
USD’000
Retained
earnings
USD’000
Total
shareholders’
equity
USD’000
As at 1 January 2021
71,557
252,279
–
1,455,877
1,779,713
Total comprehensive loss for the year
–
–
–
(17,366)
(17,366)
Purchase of treasury shares
–
–
–
(5,563)
(5,563)
Share-based payment
–
–
–
9,017
9,017
Issuance of new shares
1,520
–
53,100
–
54,620
Share issuance cost
–
–
(129)
–
(129)
As at 31 December 2021
73,077
252,279
52,971
1,441,965
1,820,292
Notes 1 to 11 form part of these financial statements.
Network International Holdings Plc
Statement of Changes in Equity
For the year ended 31 December
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
263
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.
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.
As permitted by FRS 102, the Company has taken advantage of the disclosure exemptions available under that standard in
relation to financial instruments and presentation of cash flow statement and key management personnel. 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.
2. Basis of preparation
a. 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.
(b) New standards and interpretations
The following amendments and interpretations apply for the first time in 2022, but do not have any significant impact
on the financial statements.
›
Amendments to IFRS 7, 9 and 16, and IAS 39: addressing issues affecting financial reporting in the period leading
up to IBOR reform;
›
Amendments to IFRS 4 – insurance contracts;
›
Amendments to IAS 37– Onerous contracts: cost of fulfilling a contract; and
›
Amendments to IAS 16 – Property, plant and equipment (proceeds before intended use)
The following amendments and interpretations apply for the first time in beginning on or after 1 January 2023.
›
Reference to the Conceptual Framework (Amendments to IFRS 3);
›
IFRS 17 Insurance contracts;
›
Amendments to IFRS 17 Insurance Contracts: Initial application of IFRS 17 and IFRS 9 – Comparative Information;
›
Accounting Policies, Changes in Accounting Estimates and Errors: definition (Amendments to IAS 8);
›
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements;
›
Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction – Amendments to IAS 12 Income Taxes.
Based on the preliminary assessment, the impact of the above amendments and interpretations is not expected
to be significant on the financial statements.
3. Going concern
Notwithstanding net current liabilities of USD 87.2 million (2021: USD 22.9 million) and a loss for the year of USD 7.5 million
(2021: USD 17.4 million) the Directors have prepared the financial statements on a going concern basis for the following reasons.
The Company acts as the ultimate holding company of Network International Group (the ‘Group’). The Group has
made a profit of USD 80.1 million (2021: USD 56.6 million) with cash inflow from operating activities of USD 119.2 million
(2021: USD 51.7 million) for the year and has a net asset position of USD 627.7 million as at 31 December 2022
(2021: USD 612.4 million). Furthermore, the Group meets its day-to-day working capital and financing requirements
through its cash generated from operations and its banking facilities.
The Directors have adopted the going concern basis after having considered the going concern assessment performed
for the Group, as further described in note 2 to the consolidated financial statements.
The Directors have, based on the assessments of 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 at least 12 months from the date of approval of these financial statements. Accordingly, the financial
statements have been prepared on a going concern basis.
Notes to the Financial Statements
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
264
4. Significant accounting policies
a. Investments in subsidiaries
Investments in subsidiaries are accounted for at cost less, where appropriate, provisions for impairment. Management
has considered whether there are any impairment indicators. Based on this assessment including sufficient liquidity and
the positive net current asset position of the Group, management concludes that there are no such impairment indicators.
Refer to the note 5 which includes the details for impairment testing carried out for one of the investments.
b. Dividends
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established
i.e., when dividends are declared, paid or payable prior to the yearend.
c. Financial instruments
Non-derivative financial instruments comprise other receivables and other payables due to a related party.
i. Recognition and initial measurement
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 or loss (FVTPL), transaction costs that are directly
attributable to its acquisition or issue.
ii. Classification and subsequent measurement
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 2022, 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 2022, the Company’s financial liabilities include other payables and amounts due to a related party.
All these financial liabilities are measured at amortised cost.
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.
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.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
265
4. Significant accounting policies (continued)
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.
d. Share-based compensation
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 plan. The Company’s accounting policy with respect to these incentive
plans is as follows.
Equity-settled share-based payment
Equity-settled share-based payment transactions are those 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, while 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.
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, other than the estimates
used in performing the impairment testing of the investment in 3G Direct Pay Holdings Limited (DPO), as detailed below,
management has not applied any accounting estimate and judgement that is critical for the preparation of the Company’s
financial statements.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
266
Using the above assumptions, the recoverable amount is higher by USD 63.3 million as compared to the carrying value
of the investment.
Following are the significant assumptions used by the Company in carrying out the impairment testing of the Investment
in 3G Direct Pay Holdings Limited, that have the most significant effect on the recoverable amount which is compared with
the carrying value of the investment.
a) Revenue and EBITDA growth
b) Pre-tax discount rate of 18.0%
c)
Terminal growth rate of 4.5%
a)
Management has estimated the revenue CAGR of 35.4% and underlying EBITDA CAGR of 48.6% for five-year period
ending 31 December 2027. This is reflective of supportive underlying market trends for payment industry across
the region and Groups’ high growth strategy.
b)
Discount rates used reflect the time value of money and are based on the Group’s weighted average cost of capital,
adjusted for specific risks relating to the countries in which CGU operates. Inputs into the discount rate calculation
include a country risk-free rate, country risk premium and market risk premium.
c)
The Group has used the terminal growth rate of 4.5% which is reflective of the existing and potential growth trend
of the payment industry.
The Directors noted that, a) reduction of 18.3% in the cash flows would reduce the headroom to USD nil, b) an increase
in the pre-tax discount rate by 2.4% would reduce the headroom to USD nil, and; b) reduction of 2.9% in the terminal
growth rate would reduce the headroom to USD nil.
6. Auditors remuneration
Amounts receivable by the Company’s auditor and its associates in respect of services to the Company and its associates,
other than the audit of the Company’s financial statements, have not been disclosed as the information is required instead
to be disclosed on a consolidated basis in the consolidated financial statements.
7. Investment in subsidiaries
Notes
2022
USD’000
2021
USD’000
Investment in Network International Holding 1 Limited (refer 7.1)
7.1
1,553,158
1,553,158
Investment in Network International Holding 2 Limited (refer 7.1)
7.1
–
–
Investment in 3G Direct Pay Holdings Limited (refer 7.2)
7.2
283,201
283,201
Other invesment (refer 7.3)
7.3
12,133
6,855
1,848,492
1,843,214
The movement in the carrying value of investment represents additional investment of USD 5.3 million relating to the LTIP
scheme awarded to the Group’s employees.
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
and it was noted that the market capitalisation as at 31 December 2022 was higher than Company’s investment in subsidiaries.
The Directors have also performed an impairment assessment exercise which resulted in nil impairment in 2022 (2021: nil).
No impairment is recorded in any of the earlier years. Refer to note 5 of the financial statements.
7.1
As at 31 December 2022, 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.
7.2
On 28 July 2020, the Group entered into an agreement to acquire (the ‘Transaction’) a 100% stake in 3G Direct Pay Holdings
Limited (DPO), the leading, high-growth online commerce platform in Africa. The sale was subsequently completed
on 28 September 2021. The total consideration price of the transaction amounted to USD 291.5 million, of which
USD 228.8 million was paid in cash and USD 62.7 million was paid through issuance of additional equity shares.
7.3
Other investment represents services provided by the employees of the subsidiaries and who are granted shares of the
Company under LTIP scheme. Please refer to note 11 for more details.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
267
8. Due from 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 consist of the Network Executive Committee.
2022
USD’000
2021
USD’000
3G Direct Pay Holdings Limited
1,618
1,000
9. 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 consist of the Network Executive Committee.
2022
USD’000
2021
USD’000
Network International LLC
94,728
24,134
The outstanding balance with the related party is unsecured and repayable on demand.
10. 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.
2022
USD’000
2021
USD’000
Issued and fully paid up
561,101,690 shares of GBP 0.10 each (2021: 561,101,690 shares of GBP 0.10 each)
73,077
73,077
On 28 September 2021, the Company issued additional shares equivalent to 11.1 million shares as part of the purchase
consideration for the acquisition of DPO. Accordingly, the Company’s share capital increased by USD 1.5 million and
the Company recognised a share merger reserve of USD 53.0 million.
Share buyback programme
On 11 August 2022, the Group announced a share buyback program (the ‘Initial Program’). The decision to undertake the share
buyback programme is in line with Group’s capital allocation strategy which prioritises investment in order to accelerate revenue
growth though organic investments as well as disciplined selective acquisitions and use excess cash to return to shareholders.
The Initial Program for the buyback of shares is to buy shares worth a maximum aggregate market value equivalent
to USD 50.0 million, which ended on 27 January 2023. As announced on 26 January 2023, the Company has launched
the second tranche of the buyback for up to another USD 50.0 million, following the completion of the Initial Program.
Accordingly, as at 31 December 2022, the Group bought back 11,532,594 shares worth USD 40.6 million (2021: nil), which have
been recognised as treasury shares and included in the statement of changes in equity.
Furthermore, the Group purchased 5.2 million number of shares (2021: 1.0 million shares) for LTIP scheme.
11. Share-based compensation
The Company currently operates the following share-based compensation plans:
›
Long Term Incentive Plan (LTIP)
The LTIP is an equity-settled share-based payment.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
268
Key features and accounting policy with respect to Company incentive plans are as below:
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, while 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.
Below are the key features of Group incentive plans:
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’) which is awarded to eligible employees and subject to the condition specified under the LTIP
rules through various grants.
Key features of the grants are as follows:
›
Under the grant, the plan is rolled out to select eligible employees of the Company;
›
The awards under this grant will normally vest on satisfaction of service and performance conditions as specified in each
of the grants;
›
The service conditions may require continued employment for a specified period from the date of the grant which could
be up to three years;
›
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;
›
Historic volatility of the Company’s share price at the grant dates is captured in the statistical, using daily TSR data over
a period commensurate with the expected life of the LTIP awards; and
›
The exercise price of all grants is Nil.
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
Financial Statements
269
11. Share-based compensation (continued)
Below are the details of the various grants with service as well as performance conditions:
Grants with performance conditions:
Grant year
Number
of grants
Grant date share
price/per share
1
Fair value
at the grant date
Vesting
condition
Tenure
2019
1
GBP 5.3
GBP 4.9
a) Adjusted EPS
b) Revenue
c) Relative TSR
3 years
2020
2
GBP 4.1
and GBP 4.3
GBP 3.5
and GBP 4.0
a) Adjusted EPS
b) Revenue
c) Relative TSR
3 years
2021
1
GBP 4.3
GBP 3.9
a) Adjusted EPS
b) Revenue
c) Relative TSR
3 years
2022
1
GBP 2.5
GBP 2.3
a) Adjusted EPS
b) Revenue
c) Relative TSR
3 years
1
Fair value of these grants is similar to grant date share price.
Description
Details
Valuation model
Black-Scholes and Monte-Carlo model
Assumptions used:
Risk free interest rate
0.51% – 0.69% p.a.
TSR comparator group
Constituents of the FTSE 250 at the time of grant
Dividend equivalent
0% – 3% (assumed participants entitled to dividends or dividend equivalents)
Grants with service conditions only:
Grant year
Number of grants
Grant date share
price/per share
1
Tenure
2019
1
GBP 5.3
18 months
2021
2
GBP 3.59 and GBP 4.38
12 months to 36 months
2022
9
Various ranging between GBP 1.72 to GBP 3.25
3 months to 36 months
1
Fair value of these grants is similar to grant date share price.
The weighted average remaining contractual life of share options outstanding at 31 December 2022 is 1.5 years
(2021: 0.3 years).
The movement in the share grants are as follows:
2022
USD’000
2021
USD’000
Balance as at 1 January
4,627
3,317
Less: vested during the year
(453)
(743)
Less: lapsed and cancelled
(844)
(293)
New grants during the year
6,717
2,346
Balance as at 31 December
10,047
4,627
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Network International Holdings Plc
ANNUAL REPORT AND ACCOUNTS 2022
270
Contact Information
Registered Office
Suite 1,
7th Floor,
50 Broadway,
London SW1H 0BL
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
Corporate brokers
Citigroup Global Markets Limited
Citigroup Centre,
33 Canada Square,
Canary Wharf,
London E14 5LB
United Kingdom
J.P. Morgan Securities plc
25 Bank St,
London E14 5JP
United Kingdom
Auditors
KPMG LLP
15 Canada Square,
London E14 5GL
United Kingdom
Registrars
Link Group
10th Floor,
Central Square,
29 Wellington Street,
Leeds LS1 4DL
United Kingdom
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