financial results for q2 2017 · 2017-08-17 · financial results for q2 2017 highlights for q2...

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Company announcement No. 24/2017

Nets A/S

Lautrupbjerg 10

DK-2750 Ballerup

www.nets.eu

Company Registration no. 37427497

17 August 2017

Financial results for Q2 2017

Highlights for Q2 2017

Solid organic growth in net revenue of 5%, driven by strong growth in both Merchant Services and Corporate Services with

organic growth of 10% and 3%, respectively. Organic growth in Financial & Network Services was 2% negatively impacted by

high implementation revenues in Q2 last year. Organic revenue growth in H1 2017 was 6%

Transaction volumes showed strong growth across all business segments, particularly within issuer processing and e-bill pay-

ment solutions

EBITDA b.s.i. was up 6.8% compared to Q2 2016, equivalent to a margin expansion of 100 basis points to 36.0%. For H1

2017, EBITDA b.s.i. margin was 34.5%, an improvement of 110 basis points compared to the same period last year

Adjusted net profit amounted to DKK 389 million, equivalent to an increase of 84.4% compared to Q2 2016. In H1 2017, ad-

justed net profit was DKK 742 million, compared to DKK 362 million in H1 last year

Capital expenditure ratio was 10.7% in Q2 2017 and 9.3% in H1 2017

Operating free cash flow was DKK 371 million down by 11% compared to Q2 2016 due to higher investments as expected.

Operating free cash flow in H1 2017 was DKK 621 million, up 16% compared to last year

Cash conversion of 73% down by 200 basis points compared to Q2 2016 due to higher investments

The capital structure was unchanged from Q1 2017 with a net interest-bearing debt / EBITDA b.s.i. of 3.1x at the end of Q2

2017, including the effect of the acquisition of OP’s Merchant acquiring business and share-buyback programme

Guidance for 2017 is reiterated for all parameters except special items which is changed from DKK 150 million to approx. DKK 200 million. The increase primarily relates to the evaluation of options in connection with the interest in buying Nets and higher cost related to the transformation of technology. Special items, with exception of approx. DKK 30 million related to the IPO, are still expected to be finalised by the end of 2017

Bo Nilsson, CEO of Nets, said,

“I am pleased to report a solid organic growth in Q2 of 5% driven by strong growth in transactions and volumes across all business

segments. The growth was as expected lower than previous quarters due to the high implementation revenues in Financial & Net-

work Services last year. I am furthermore pleased that our transformation of Nets continues to deliver solid margin expansion”

Financial performance

Q2 Q2 Change H1 H1 Change FY

DKKm 2017 2016 2017 2016 2016

Revenue, net 1,919 1,844 4.1% 3,816 3,587 6.4% 7,385 EBITDA before special items 690 646 6.8% 1,316 1,197 9.9% 2,619 Special items (40) (105) (61.9%) (124) (245) (49.4%) (606) Adjusted EBIT 594 542 9.6% 1,134 1,002 13.2% 2,203 Net profit 333 163 104.3% 535 23 2,226.1% (584) Adjusted net profit 389 211 84.4% 742 362 105.0% 997

Organic growth 5% 7% 6% 6% 7% EBITDA before special items margin 36.0% 35.0% +1.0 pp 34.5% 33.4% +1.1 pp 35.5% EBITDA margin 33.9% 29.3% +4.6 pp 31.2% 26.5% +4.7 pp 27.3% Capital expenditure/revenue 10.7 % 8.7 % +2.0 pp 9.3 % 8.2 % +1.1 pp 9.0 % Net interest-bearing debt / LTM EBITDA bsi 3.1x 3.2x

Outlook Targets Guidance 9 May 2017

FY 2017

Guidance 17 August 2017

FY 2017

Organic revenue growth 5-6% 5-6%

EBITDA b.s.i. margin At or above 36.5% At or above 36.5%

Special items (including

IPO-related retention expenses)

DKK 150 million, which of approx. DKK 30 million is

IPO-related

DKK 200 million, which of approx. DKK 30 million is

IPO-related

Capital expenditure incurred

(% of net revenue)

Around 8% Around 8%

Net interest-bearing debt /

EBITDA b.s.i.

Around 2.5x, including effect of share buyback of

approx. DKK 150 million to cover long-term incen-

tive programme and including acquisition of OP’s

merchant acquiring business

Around 2.5x, including effect of share buyback of

approx. DKK 150 million to cover long-term incen-

tive programme and including acquisition of OP’s

merchant acquiring business

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Additional information

Conference call

In connection with the publication of the results for Q2 2017, Nets will host a conference call on Thursday, 17 August 2017, from

10:00 to 11:00 am CET. The conference call can be followed live via the company’s website, https://investor.nets.eu

Dial-in details for investors and analysts:

Participants, DK: +45 32 71 16 60

Participants, UK: +44(0)20 3427 1919

Participants, US: +1 646 254 3362

Confirmation code: 8978598

For further information, please contact:

For media enquiries:

Karsten Anker Petersen, Head of Communications, at +45 29 48 78 83 or [email protected]

For investor and analyst enquiries:

Lars Østmoe, Head of M&A and IR, at +47 91 34 71 77 or [email protected]

Financial calendar

9 November 2017: Interim Report for Q3 2017

Forward-looking statements

This report contains forward-looking statements, including, but not limited to, the statements and expectations contained in the out-

look section. Forward-looking statements are statements (other than statements of historical fact) relating to future events and Nets’

anticipated or planned financial and operational performance. The words ‘may’, ‘will’, ‘will continue’, ‘should’, ‘expect’, ‘foresee’,

‘anticipate’, ‘believe’, ‘estimate’, ‘plan’, ‘predict’, ‘intend’ or variations of these words, including negatives thereof, as well as other

statements regarding matters that are not historical fact or regarding future events or prospects, constitute forward-looking state-

ments. Nets has based these forward-looking statements on its current views with respect to future events and financial perfor-

mance. These views involve a number of risks and uncertainties, which could cause actual results to differ materially from those

predicted in the forward-looking statements and from the past performance of Nets. Although Nets believes that the estimates and

projections reflected in the forward-looking statements are reasonable, they may prove materially incorrect, and actual results may

materially differ, e.g. as the result of risks related to the industry in general or to Nets in particular, including those described in Nets

Annual Report 2016.

Factors that may affect future results include, but are not limited to, global and economic conditions, including currency exchange

rate and interest rate fluctuations, delay or failure of projects related to research and/or development, unexpected contract

breaches or terminations, unplanned loss of patents, government-mandated or market-driven price decreases for Nets’ products,

introduction of competing products, reliance on information technology, Nets’ ability to successfully market current and new prod-

ucts, exposure to product liability, litigation and investigations, regulatory developments, actual or perceived failure to adhere to

ethical marketing practices, unexpected growth in costs and expenses, failure to recruit and retain the right employees, and failure

to maintain a culture of compliance.

As a result, forward-looking statements should not be relied on as a prediction for actual results. Nets undertakes no obligation to

update or revise any forward-looking statements, neither because of new information, nor because of future events or otherwise,

except to the extent required by law.

Information on Nets

Nets is a leading provider of digital payment services and related technology solutions across the Nordic region. Nets sits at the

centre of the digital payments ecosystem and operates a deeply entrenched network, which connects merchants, corporate cus-

tomers, financial institutions and consumers enabling them to make and receive payments as well as, increasingly, utilise value-

added services to help them improve their respective activities.

https://investor.nets.eu/

mailto:[email protected]

mailto:[email protected]

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Financial highlights and key figures


DKKm 2017 2016 2017 2016 2016

Income statement

Revenue, gross 2,602 2,575 1.0% 5,096 4,942 3.1% 10,084

Revenue, net 1,919 1,844 4.1% 3,816 3,587 6.4% 7,385

EBITDA before special items 690 646 6.8% 1,316 1,197 9.9% 2,619

EBITDA 650 541 20.1% 1,192 952 25.2% 2,013

Special items (33) (91) (63.7%) (110) (181) (39.2%) (345)

Special items – IPO-related costs (7) (14) (50.0%) (14) (64) (78.1%) (261)

Adjusted EBIT 594 542 9.6% 1,134 1,002 13.2% 2,203

EBIT 394 277 42.2% 688 438 57.1% 943

Net profit 333 163 104.3% 535 23 2,226.1% (584)

Adjusted net profit 389 211 84.4% 742 362 105.0% 997

Financial position

Total assets 26,779 29,431 (9%) 26,779 29,431 (9%) 28,299

Goodwill 14,707 14,772 (0%) 14,707 14,772 (0%) 14,720

Clearing-related balances, net (1,060) (1,082) 2% (1,060) (1,082) 2% (658)

Own cash 97 1,371 (93%) 97 1,371 (93%) 703

Net interest-bearing debt 8,402 13,061 (36%) 8,402 13,061 (36%) 8,503

Equity 10,078 5,024 101% 10,078 5,024 101% 9,806

Cash flow

Net cash from operating activities excl. clear-ing-related balances 510 439 16% 807 537 50% (686)

Change in clearing-related balances 544 121 350% 401 304 32% (120)

Net cash from investing activities (384) 1,909 n.a. (625) 1,707 n.a. 67

Net cash from financing activities (66) (298) 78% (950) (447) (113%) 212

Net cash flow for the period 604 2,171 (72%) (367) 2,101 n.a. (527)

Net change in own cash (28) 89 n.a. (606) (161) (276%) (829)

Operating free cash flow 371 416 (11%) 621 534 16% 1,434

Growth in revenue, net

Reported 4.1% 6.2% 6.4% 5.7% 8.0%

Organic 5% 7% 6% 6% 7%

Capital structure

LTM EBITDA b.s.i. 2,738 2,387 2,619

Net interest-bearing debt / LTM EBITDA bsi 3.1x 5.5x 3.2x

Other ratios

EBITDA b.s.i. margin 36.0% 35.0% +1.0 pp 34.5% 33.4% +1.1 pp 35.5%

EBITDA margin 33.9% 29.3% +4.6 pp 31.2% 26.5% +4.7 pp 27.3%

Capital expenditure/revenue 10.7% 8.7% +2.0 pp 9.3% 8.2% +1.1 pp 9.0% Capitalised development costs (EBITDA bsi impact)/revenue 4.4% 3.7% +0.7 pp 4.1% 3.9% +0.2 pp 3.9%

LTM Cash conversion ratio 73% 75% -2.0 pp 78%

Equity ratio 37.6% 17.1% +20.5 pp 37.6% 17.1% +20.5 pp 34.7%

Share information

Number of shares ('000) 200,411 200,411 200,411

Earnings per share, basic, DKK 1.67 2.66 (3.00)

Earnings per share, diluted, DKK 1.68 2.68 (3.00)

Share price at the end of the period, DKK 129.5 129.5 123.6

FTE 2,487 2,464 0.9% 2,487 2,464 0.9% 2,427

This report has been prepared in accordance with IAS 34 and additional Danish regulations. The interim report has been prepared in accordance

with the accounting policies set out in the Annual Report 2016 for Nets A/S. The above numbers are presented on a comparable basis, i.e. historic

numbers are based on Nassa Topco AS’ financial statements.

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Performance for Q2 2017 Revenue

Net revenue in Q2 2017 was DKK 1,919 million, up 4.1%

from DKK 1,844 million in 2016. The development in NOK

and SEK affected the growth negatively in the quarter.

In Q2 2017, organic growth1 was 5%, driven by a strong per-

formance in Merchant Services and Corporate Services with

organic growth rates of 10% and 3%, respectively. Financial

& Network Services saw an organic growth of 2%.

The growth in Merchant Services came primarily from higher

value of transactions acquired and from e-commerce. Nets

has adjusted prices on merchant acquiring following the EU

regulation that lowered interchange fees from December

2015. In Norway, the interchange fees were lowered from

September 2016 and subsequently continued to impact the

organic growth positively in Q2 2017. In 2017, the interna-

tional schemes have increased the scheme fees which im-

pacted the growth negatively. The underlying organic growth

in Merchant Services, adjusted for the temporary positive ef-

fect from the lower interchange fees and the effect of in-

creased scheme fees, was 9%.

In Financial & Network Services, growth was driven by a

higher number of card transactions and value added services

within fraud prevention and dispute solutions. As expected,

implementation revenues related to mobile solutions were

significantly lower than in Q2 last year, which negatively im-

pacted organic growth with around 5 ppts.

Growth in Corporate Services was driven by clearing ser-

vices and by higher e-bill-payment volumes in Norway and

Denmark.

Operating expenses

The total operating expenses in Q2 2017 were DKK 1,229

million (64.0% of net revenue) compared to DKK 1,198 mil-

lion (65.0% of net revenue) in the same period in 2016.

Cost of sales

Cost of sales amounted to DKK 236 million (12.3% of net

revenue) compared to DKK 237 million (12.9% of net reve-

nue) in Q2 2016. Cost of sales is mainly related to external

vendors in Corporate Services like payments to the Danish

banks for work done in connection with Betalingsservice and

to the POS business in Merchant Services. A focus on push-

ing a higher proportion of e-bill-payment transactions to full

digital processes (digital statements instead of paper state-

ments) have improved efficiency and cost of sales ratio

which has helped offset increased cost of sales due to higher

volumes.

External expenses

External expenses in Q2 2017 amounted to DKK 467 million

up by 0.4% compared to the same period last year. External

expenses to net revenue ratio was 24.3%, which is an im-

provement of 90 basis points compared to Q2 2016. Other

1 Organic growth is calculated on a constant business scope (e.g. excluding the effect of M&A) and a constant currency basis

external expenses include consulting fees related to IT, cost

related to sourcing partners and spending on hardware/soft-

ware.

Staff cost

Staff cost in Q2 2017 amounted to DKK 526 million (27.4%

of net revenue) compared to DKK 496 million (26.9% of net

revenue) in 2016. The increase in staff cost was primarily

driven by a new labour tax in Norway and more employees in

sales-related areas compared to last year.

Nets had 2,487 FTEs (full-time equivalent) by the end of Q2

2017, which is 60 FTEs more than in Q4 2016 and 23 FTEs

more than in Q2 2016. The increase was primarily related to

sales-related activities, including outbound sales personnel,

primarily in Merchant Services. The remaining business ac-

tivities have seen staff reductions as a consequence of the

continued effort to improve operational efficiency.

Capitalised development costs (EBITDA b.s.i. impact)

Capitalised development costs were 4.4% of net revenue

compared to 3.7% for Q2 2016. The capitalised costs were

primarily related to investments within mobile solutions and

e-commerce solutions. For the first six months of 2017 capi-

talised development cost were 4.1% compared to 3.9 % in

the same period last year.

EBITDA before special items (b.s.i.)

EBITDA b.s.i. grew by 6.8% to DKK 690 million compared to

DKK 646 million in the same period in 2016. The growth

came from Corporate Services and Merchant Services.

The improvement resulted in an EBITDA b.s.i. margin expan-

sion of 100 basis points to 36.0%, whereof the most signifi-

cant improvement came from Corporate Services.

Special items

In total, special items were DKK 40 million compared to DKK

105 million in Q2 2016. The reduction is primarily due to

lower expenses related to the transformation programme but

also lower IPO-related costs.

Non-IPO-related special items were reduced by DKK 58 mil-

lion compared to the same period in 2016. Special items in

Q2 2017 were mainly related to the transformation pro-

gramme and severance costs following adjustment of the or-

ganisation primarily within the Customer Services area.

EBITDA

The improved operating performance in Q2 2017, together

with lower special items, resulted in an improvement of DKK

109 million, or an increase of 20.1% in EBITDA to DKK 650

million. Subsequently, the EBITDA margin improved by 460

basis points to 33.9%.

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Depreciation and amortisation

In Q2 2017, underlying depreciation and amortisation were

DKK 96 million down from DKK 104 million in Q2 2016. In

2016, depreciation were higher due to revised useful lifetime

and, consequently, accelerated amortisation on certain devel-

opment assets that were fully amortised at year-end 2016.

The amortisation of business combination and impairment

losses amounted to DKK 160 million, which is unchanged

compared to Q2 2016.

EBIT

EBIT in the quarter amounted to DKK 394 million up by 42.2%

compared to the same period in 2016 equivalent to an EBIT

margin expansion of 550 basis points to 20.5%.

Adjusted EBIT calculated as EBITDA b.s.i. minus underlying

depreciation and amortisation was DKK 594 million, which is

an improvement of DKK 52 million or a 9.6% increase com-

pared to the same period in 2016.

Net financials

Net financials were an expense of DKK 40 million compared

to an expense of DKK 41 million in the same period in 2016.

Financial net expenses amounted to DKK 34 million compared

to DKK 296 million in Q2 2016. Financial expenses in Q2 2017

were impacted by costs related to the refinancing in April 2017

of DKK 28 million but more than offset by foreign exchange

adjustments, which contributed positively with DKK 83 million

compared to a negative effect of DKK 28 million in the same

period last year.

Impact from Visa shares was negative by DKK 1 million in Q2

compared to a positive impact of value adjustments of DKK

255 million in the same period last year.

Adjusted net financials mainly representing the financing cost

related to the net interest-bearing debt were DKK 89 million in

Q2 2017 which is DKK 179 million lower than the same period

last year, which is a result of both lower leverage and signifi-

cantly reduced average funding costs following the refinancing

completed in connection with the IPO in September 2016.

Tax

Taxes amounted to DKK 21 million in the quarter correspond-

ing to an effective tax rate of 6%. The effective tax rate was

positively impacted by non-taxable currency adjustments on

interest-bearing debt reducing the effective tax rate by approx-

imately 17%. In Q2 2016, taxes amounted to an expense of

DKK 73 million.

Net profit

Net profit in the quarter was DKK 333 million which is DKK 170

million higher than in the same period in 2016.

Adjusted net profit

Adjusted net profit was DKK 389 million in Q2 2017 which is

an increase of DKK 178 million or 84.4% compared to the

same period in 2016.

2 See note 6.

Balance sheet and cash flow

Cash flow

Net cash flow from operating activities excluding clearing-re-

lated balances was DKK 510 million in Q2 2017 up by DKK 71

million compared to the same period in 2016. The positive de-

velopment came from higher operating profit which was partly

offset by change in narrow working capital (NWC) of minus

DKK 74 million primarily related to increased prepayments

(asset) and seasonality in trade and other payables. In Q2

2016 change in narrow working capital (NWC) was positive by

DKK 36 million among others positively impacted by IPO-

related accruals.

Cash flow from investing activities amounted to DKK 384 mil-

lion in Q2 2017 compared to net positive cash flows of DKK

1,909 million in Q2 2016. In Q2 2017, investments were im-

pacted by the acquisition of OP's merchant acquiring business

of DKK 179 million. Investments in Q2 2016 were positive im-

pacted by proceeds related to the Visa transaction of DKK

2,070 million.

Capital expenditure in Q2 2017 amounted to DKK 205 million

compared to DKK 161 million in the same period in 2016,

equivalent to a capital expenditure to revenue ratio of 10.7%

and 8.7%, respectively. Capital expenditure in Q2 2017 was

primarily related to development projects, investments in the

new data centre in Norway and seasonality in software invest-

ments.

In Q2 2017, operating free cash flow2 amounted to DKK 371

million, down by 11% compared to the same period in 2016.

Net cash flow from financing activities, excluding clearing-re-

lated balances, was negative with DKK 141 million in Q2 2017

due to purchase of treasury shares of DKK 153 million in con-

nection with the share buyback programme. Proceeds from

the bond issuance amounted to DKK 2,974 million and were

offset by repayment of existing term-loans totalling DKK 2,970

million.

Cash conversion ratio

The cash conversion ratio3 was 73% in Q2 2017 compared to

75% in Q2 2016. The slightly lower cash conversion was re-

lated to the higher capex level in Q2 2017 compared to the

same period last year.

Clearing working capital

On 30 June 2017, clearing-related assets (clearing debtors)

amounted to DKK 3,542 million and clearing-related liabilities

amounted to DKK 4,602 million leading to a clearing working

capital (CWC) of minus DKK 1,060 million (positive funding),

which represents an increase of DKK 544 million compared to

CWC at the end of Q1 2017.

Net interest-bearing debt

As of 30 June 2017, net interest-bearing debt amounted to

DKK 8,402 million or 3.1x LTM EBITDA b.s.i. which is un-

changed compared to Q1 2017.

3 Calculated as LTM EBITDA b.s.i. adjusted for the change in narrow working capital and capital expenditure divided by EBITDA b.s.i.

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The development in net interest-bearing debt in Q2 is nega-

tively impacted by the acquisition of OP’s merchant acquiring

business as well as the DKK 153 million share-buyback pro-

gramme completed in the quarter.

Net interest-bearing debt includes DKK 97 million of own cash,

but excludes the deferred consideration of DKK 308 million

related to future earn-out payments in relation to past acquisi-

tions since this amount is non-interest-bearing. If the deferred

consideration of DKK 308 million is included, net interest-bear-

ing debt to EBITDA b.s.i. ratio would have been 3.2x.

Events in the reporting period

Acquisition of OP’s Merchant acquiring business com-

pleted

On 28 June 2017 Nets closed the acquisition of OP’s mer-

chant acquiring business.

The total consideration consists of an initial cash payment of

DKK 179 million which has been paid when the acquisition

was completed and in addition hereto an expected deferred

payment on a discounted basis of around DKK 45 million, de-

pendent on how the acquired business develops over the con-

tract period.

Nets has provided merchant acquiring processing services to

OP for many years, and therefore the transfer will result in rev-

enue - previously recognised in Financial & Network Services

- being recognised in Merchant services instead. This will

have full effect in Q3 2017 and onwards. On a full-year basis

this will impact Financial & Network Services negatively with

around DKK 40 million.

Completion of share buyback programme

On 6 April 2017, Nets announced that a share buyback pro-

gramme of up to 1,200,000 shares had been initiated for the

purpose of hedging Nets' long-term incentive programmes.

On 14 June Nets completed the share buyback programme.

The total transaction value was DKK 153 million.

Events after the end of the reporting period

Media speculation about Nets

On 1 July 2017, Nets noted speculation in the media that Nets

had drawn interest from potential buyers.

Nets confirmed that it had been approached and is reviewing

its options. However, it is at an early stage and there can be

no certainty as to the potential outcome.

Further information to the market will be made when appropri-

ate.

Purchased of the remaining shares in Paytrail Oy

On 13 July Nets purchased the remaining 20% shares in Pay-

trail Oy for a cash consideration of DKK 58 million. In Decem-

ber 2014, Nets acquired 80% of the shares in Paytrail with an

option to acquire the remaining shares from the founders and

key employees in July 2017 based on the performance of the

business.

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Segment information Merchant Services Merchant Services provides in-store, online and mobile payment acceptance solutions to more than 300,000 merchants across the Nordic region, from large corporate chains to small and medium-sized enterprises (SMEs) and micro-merchants. We serve our merchants through a broad set of distribution channels, including indirect partnership relationships such as bank referrals, value-added resellers and web developers as well as through our direct sales force. Our breadth of service, payment type and geographic coverage allow us to be a one-stop shop for merchants in the countries in which we operate.


DKKm 2017 2016 2017 2016 2016

Revenue, gross 1,174 1,177 (0.3%) 2,216 2,188 1.3% 4,519

Revenue, net 631 583 8.2% 1,216 1,101 10.4% 2,317

Organic growth 10% 10% 11% 12% 13%

EBITDA b.s.i. 225 207 8.7% 399 353 13.0% 792


Value of transactions (DKK billion) 129 121 6.5% 241 225 6.8% 475

Recent development

The total value of processed transactions grew by 6.5% in

Q2 2017 compared to the same period last year, impacted

negatively by the development in both NOK and SEK. In Q2

2017, growth has been particularly strong in Finland and

Denmark.

Whereas Nets continues to grow in the SME segment in

Sweden, the large and key account segment continues to ex-

perience price pressure.

The development in e-commerce continued to be strong in

Q2. Save My Card, which has been launched in the Nordic

countries, reached two million registrations in Q2 2017 and

continues the strong growth from Q1. The experience with

Save My Card has been positive and customer conversion is

improving for the e-commerce merchants.

Through DIBS, Nets launched Easy which is an e-commerce

service simplifying payments for both consumers and web-

shops. The new payment solution includes one of the best

checkout solutions in the market, which makes it easier than

ever for consumers and helps webshops to increase conver-

sions. Easy is now available through affiliated partners in

Sweden and it has been tested with a number of pilot cus-

tomers. The service will be launched later in Norway and

Denmark.

In Q2 Nets won contracts with Ruter, NSB and Flytoget all

within the Norwegian transport sector who will all use Nets’

Netaxept-solution for e-commerce and mobile payments.

Ruter accounts for more than half of the Norwegian public

transport and NSB operates trains in both Norway and Swe-

den. Subsequently, the solution for NSB covers both these

markets. The agreement with Flytoget means that Nets will

handle all card payments for Flytoget.

Also in Norway, Nets entered into an agreement with all pub-

lic hospitals. Nets will deliver card acquiring of Visa and Mas-

terCard transactions and provide more than 1000 payment

terminals to all public hospitals and affiliated units in Norway,

which count more than 100 locations.

Revenue

Gross revenue fell by 0.3% in Q2 2017 compared to the

same period last year. Compared with the growth in value of

transactions acquired, the growth in gross revenue reflects

that Nets, has adjusted prices on merchant acquiring follow-

ing the EU regulation that lowered interchange fees from De-

cember 2015. The growth also reflects the development in

NOK and SEK.

Net revenue in Merchant Services grew by 8.2% and

amounted to DKK 631 million compared to DKK 583 million

in Q2 2016. The organic growth was 10%, coming primarily

from transactions acquired and e-commerce, and thus con-

tinued the strong momentum built over the last two years.

Interchange fees and processing fees (incl. sales commis-

sion, network fees and handling fees) have declined by 8.6%

in Q2 2017 versus Q2 2016. Scheme fees in 2017 have in-

creased compared to 2016, which impacted the organic

growth negatively. The underlying organic growth for Mer-

chant Services, adjusted for the temporary positive effect

from the lower interchange and the effect of increased

scheme fees, was 9%.

Revenue growth from point-of-sale and related solutions was

solid and was supported by the continued push towards a

higher proportion of rented terminals.

The difference in Q2 2017 between reported net revenue

growth of 8.2% and organic growth of 10% was due to

changes in NOK and SEK.

EBITDA before special items

EBITDA b.s.i. for Q2 2017 was DKK 225 million, equivalent

to a margin of 35.7% up 20 basis points compared to Q2 last

year. The growth in profitability is primarily driven by the in-

creased top line and operating leverage. Partly offsetting this

is higher cost-related to outbound sales activities and invest-

ments into mobile acceptance technology related to the

launch of the Mobile Dankort.

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Financial & Network Services

Financial & Network Services provides outsourced processing services to more than 240 issuers of payment cards, primarily banks, across the Nordic region as well as complementary services, including Consumer Management Systems (CMS), fraud and dispute solutions and mobile wallet technology. This business area also operates and processes the national debit card schemes in Denmark and Norway, branded Dankort and BankAxept, respectively.

Financial & Network Services Q2 Q2 Change H1 H1 Change FY

DKKm 2017 2016 2017 2016 2016

Revenue, gross 722 710 1.7% 1,410 1,355 4.1% 2,763

Revenue, net 583 575 1.4% 1,133 1,091 3.8% 2,273

Organic growth 2% 11% 3% 9% 10%

EBITDA b.s.i. 217 221 (1.8%) 408 398 2.5% 893

EBITDA b.s.i. margin 37.2% 38.4% -1.2 pp 36.0% 36.5% -0.5 pp 39.3%

Number of transactions (million) 1,432 1,324 8.1% 2,713 2,487 9.1% 5,214

Whereof Dankort transactions (million) 351 335 4.8% 663 631 5.1% 1,300

Whereof BankAxept transactions (million) 409 397 3.0% 779 741 5.1% 1,548

Recent development

Financial & Network Services saw a strong growth of 8.1% in

processed transactions in Q2 compared to the same period

2016. The increase was especially on international branded

cards, but growth was also seen on the two national debit

card schemes in Denmark and Norway. The Dankort had a

4.8% increase while BankAxept transactions grew by 3.0%.

On 22 June 2017, Nets launched the full version of the Mo-

bile Dankort app for iPhones and updated the wallet for the

Bokis banks, which enables lock-screen payments and the

option to validate purchases over DKK 200 using touch-ID.

Nets also introduced a pilot for a Dankort children’s pocket

money solution on mobile phones together with fintech My-

monii. In addition, Nets is working on a co-created block-

chain solutions with fintech Coinify and in-house blockchain

engineers for e.g. micropayments.

Fraud prevention and dispute solutions continues to show

strong growth rates and was positively impacted by volumes

from Finnish banks onboarded in 2017. In the first half of

2017, the fraud prevention system has significantly reduced

fraud for banks, merchants and cardholders.

Revenue

Net revenue in Financial & Network Services in Q2 2017

grew by 1.4% to DKK 583 million, equivalent to an organic

growth of 2%.

The growth in Q2 2017 was negatively impacted by extraor-

dinary high implementation revenue in Q2 last year related to

the development of mobile-based payment solutions. The ex-

traordinary implementation revenue in Q2 last year impacted

the growth negatively by around 5 percentage points in Q2

2017.

Underlying organic growth was supported by higher reve-

nues from issuer processing services and fraud prevention

and dispute services, partly offset by the concluded contract

negotiation regarding processing of Visa/Dankort transac-

tions leading to lower prices.

The difference between reported net revenue growth of 1.4%

and organic growth of 2% in Q2 2016 was due to changes in

currencies, primarily NOK.

The difference between gross and net revenues is mainly re-

lated to payments to the Danish banks for issuance of

Dankort and amounted to DKK 139 million in Q2 2017.


In Q2 2017, EBITDA b.s.i. was DKK 217 million compared to

DKK 221 million in 2016. The EBITDA b.s.i. margin was

37.2% which is 120 basis points lower compared to the same

period in 2016.

As expected, the margin in Q2 2017 was lower, primarily due

to changes to the project portfolio leading to lower capitalisa-

tions compared to the same period 2016. The capitalisation

last year was primarily related to mobile development pro-

jects.

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Corporate Services Corporate Services provides the payment platform for recurrent bill payments and credit transfer transactions for more than 240,000 corporations, primarily in Denmark and Norway. At the centre of this business is the ability to provide a seamless and integrated solution for recurring bill pay-ments to corporations and consumers (e.g. Leverandørservice, Betalingsservice and AvtaleGiro). It also includes solutions for real-time clearing providing instant payments across bank accounts as well as the national digital ID systems in Denmark and Norway.

Corporate Services Q2 Q2 Change H1 H1 Change FY

DKKm 2017 2016 2017 2016 2016

Revenue, gross 706 688 2.6% 1,470 1,399 5.1% 2,802

Revenue, net 705 686 2.8% 1,467 1,395 5.2% 2,795

Organic growth 3% 2% 4% 1% 2%

EBITDA b.s.i. 248 218 13.8% 509 446 14.1% 934


Number of e-bill transactions (million) 223 215 3.6% 462 437 5.7% 872

Recent development

Q2 2017 demonstrated strong growth in volumes in Nets’ e-

bill payment solutions. The volume growth primarily related

to Norwegian e-bill solutions AvtaleGiro and eFaktura while

Betalingsservice had solid growth.

Additionally, the Danish banks have renewed the clearing

services agreement with Nets, which represents one of the

key elements in the payments area in Denmark. The agree-

ment covers clearing of account-to-account payments com-

pleted through the Express clearing and Intraday clearing

systems in Denmark. The Express clearing system handles

instant account-to-account based payments, and the Intra-

day clearing system is primarily used for mass payments

such as payroll disbursements, where clearing is done con-

tinuously during the day. The agreement between Finance

Denmark, representing all Danish banks, and Nets runs at a

minimum until the end of 2022.

A new service in e-Boks will enable consumers to pay bills

directly from e-Boks using debit- or credit cards or recurring

cards via DIBS. It will also be easier to add new mandates to

Betalingsservice. For corporate customers this is expected to

reduce late payments significantly.

Nets and the banks in Denmark have agreed to modernise

the NemID system. Together with the Danish banks Nets is

in the process of developing a smartphone-based supple-

ment to the NemID code card. The new system will make it

easier for users to log on to their mobile and online banking

service.

Revenue

In Q2 2017, net revenue in Corporate Services grew by 2.8%

to DKK 705 million, equivalent to an organic growth of 3%.

Growth in Corporate Services was driven by clearing ser-

vices and by increasing e-bill-payment volumes in Norway

and Denmark.

Revenue growth was supported by higher implementation

revenue compared to last year related to the upgraded

NemID solution agreed with the banks in Denmark and the fi-

nal implementation revenue related to instant clearing in

Italy.


EBITDA b.s.i. for Q2 2017 was DKK 248 million, and the

margin increased by 340 basis points to 35.2%.

The increase in margin in Q2 2017 was primarily due to the

operating leverage, further digitisation of volumes and a

higher level of capitalisation primarily related to investments

in a PSD2 platform.

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Guidance for 2017

Targets Guidance for 2017

9 May 2017

Guidance for 2017

17 August 2017

Organic revenue growth 5-6 % 5-6 %

EBITDA b.s.i. margin At or above 36.5% At or above 36.5%

Special items (including IPO-related reten-

tion expenses)

DKK 150 million, which of approx. DKK 30 mil-

lion is IPO-related

DKK 200 million, which of approx. DKK 30 mil-

lion is IPO-related

Capital expenditure incurred

(% of net revenue)

Around 8%, excluding M&A activities Around 8%, excluding M&A activities

Net interest-bearing debt / EBITDA b.s.i. Around 2.5x, including effect of share buyback

of approx. DKK 150 million to cover long-term

incentive programme and including acquisition

of OP’s merchant acquiring business and as-

suming no additional M&A activities

Around 2.5x, including effect of share buyback

of approx. DKK 150 million to cover long-term

incentive programme and including acquisition

of OP’s merchant acquiring business and as-

suming no additional M&A activities

Guidance for 2017

The guidance for organic growth remains unchanged at 5-

6% for the year.

The impact from regulatory changes on interchange fees will

be lower compared to 2016 and will relate to Norway where

the new regulation was adopted in September 2016. This will

benefit growth in Merchant Services for the first eight months

of 2017. The benefit is expected to be partly passed through

to merchants through lower merchant acquiring charges.

Higher scheme fees to primarily MasterCard and Visa will

partly offset this benefit.

The guidance also reflects lower expected implementation

revenues in Financial & Network Services than in 2016.

EBITDA b.s.i. margin

The expected EBITDA b.s.i. margin at or above 36.5% is un-

changed.

Special items

Special items are now expected to be around DKK 200 mil-

lion (up from DKK 150 million), whereof approximately DKK

30 million relate to IPO retention costs.

The additional cost primarily relates to the evaluation of op-

tions in connection with the interest in buying Nets and

higher cost related to the transformation of technology. Spe-

cial items, with exception of approx. DKK 30 million related to

the IPO, are still expected to be finalized by the end of 2017.

Capital expenditure

The guidance for capital expenditure is unchanged and is ex-

pected to be impacted by the completion of investments initi-

ated in 2016, primarily related to the data centre in Norway

and network segregation. In addition, investments are ex-

pected related to PSD2, mobile and product innovation.

Net interest-bearing debt / EBITDA b.s.i.

Expected net interest-bearing debt / EBITDA b.s.i. is un-

changed at 2.5x.

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Statement of the Board of Directors and Executive Management

Today, the Board of Directors and Executive Management considered and approved the interim report for Nets A/S for the period 1

January 2017 to 30 June 2017. The interim report has not been audited or reviewed by the company’s independent auditors.

The interim report has been prepared in accordance with IAS 34 and additional Danish regulations for the presentation of quarterly

interim reports by listed companies. Furthermore, the interim report has been prepared in accordance with the accounting policies

set out in Nets’ Annual Report 2016.

In our opinion, the accounting policies used are appropriate, and the overall presentation of the interim report adequate. Further-

more, the interim report gives a true and fair view of the Group’s assets, liabilities and financial position as at 30 June 2017 and of

the results of the Group’s operations and cash flows for the period 1 January 2017 to 30 June 2017.

We further consider that the Management’s Review in the preceding pages includes a true and fair account of the development and

performance of the Group, the results for the period and the financial position, together with a description of the principal risks and

uncertainties that the Group faces in accordance with Danish disclosure requirements for listed companies.

Ballerup, 17 August 2017

Executive Management:

Bo Nilsson CEO

Klaus Pedersen CFO

----------------------------------------------------------------------------------------------------------------------------------------------------- BOARD OF DIRECTORS:

Inge K. Hansen Chairman

Jeff Gravenhorst Vice Chairman

Monica Caneman

James Brocklebank

Robin Marshall

Per-Kristian Halvorsen

Ulrik Thomsen

Frank A. Olsen

Ove Kolstad

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Condensed financial statements and notes

Financial statements

Consolidated income statement

Consolidated statement of other comprehensive income

Consolidated balance sheet

Consolidated statement of cash flows

Consolidated statement of changes in equity

Basis of preparation

Note 1 – Significant accounting policies

Income Statement

Note 2 – Segment information

Note 3 – Special items

Balance sheet

Note 4 – Borrowings

Note 5 – Visa Transaction (Other financial assets and liabilities)

Statement of cash flow

Note 6 – Operating free cash flow

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Income statement

Consolidated income statement Q2 Q2 H1 H1 FY

DKKm Note 2017 2016 2017 2016 2016

Revenue, gross 2,602 2,575 5,096 4,942 10,084

Interchange fees and processing fees (683) (731) (1,280) (1,355) (2,699)

Revenue, net of interchange fees and processing fees 2 1,919 1,844 3,816 3,587 7,385

Cost of sales (236) (237) (490) (485) (963)

External expenses (467) (465) (940) (899) (1,769)

Staff costs (526) (496) (1,070) (1,006) (2,034)

Operating profit before depreciation and amortisation (EBITDA) before special items

690 646 1,316 1,197 2,619

Special items 3 (33) (91) (110) (181) (345)

Special items – IPO-related costs (7) (14) (14) (64) (261)

Operating profit before depreciation and amortisation (EBITDA)

650 541 1,192 952 2,013

Amortisation of business combination intangibles and impair-ment losses

(160) (160) (322) (319) (654)

Underlying depreciation and amortisation (96) (104) (182) (195) (416)

Operating profit (EBIT) 394 277 688 438 943

Profit from associates after tax

(5) - (5) - 4

Fair value adjustment of Visa shares 5 13 341 110 341 413

Fair value adjustment on liability related to Visa shares 5 (13) (267) (110) (267) (448) Fair value adjustment of Visa shares related to Teller Branch Norway

5 (1) 181 5 181 185

Financial income and expenses, net (34) (296) (101) (616) (1,055)

Financial expenses - refinancing costs - - - - (738)

Net financials (40) (41) (101) (361) (1,639)

Profit/(loss) before tax 354 236 587 77 (696)

Income taxes (21) (73) (52) (54) 112

Net profit/(loss) for the period 333 163 535 23 (584)

Profit/(loss) is attributable to:

Owners of Nets A/S

334 145 533 16 (601)

Non-controlling interests (1) 18 2 7 17

333 163 535 23 (584)

Earnings per share per share for profit attributable to the ordinary equity holders of the Company (DKK)

Earnings per share, basic, DKK 1.67 - 2.66 - (3.00)

Earnings per share, diluted, DKK 1.68 - 2.68 - (3.00)

Non-GAAP performance measures Operating profit before depreciation and amortisation (EBITDA) before special items

690 646 1,316 1,197 2,619

Underlying depreciation and amortisation (96) (104) (182) (195) (416)

Adjusted EBIT 594 542 1,134 1,002 2,203

Adjusted net financials

(89) (268) (170) (532) (908)

Adjusted tax, 23% (116) (63) (222) (108) (298)

Adjusted net profit for the period 389 211 742 362 997

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Statement of comprehensive income Consolidated statement of other comprehensive income Q2 Q2 H1 H1 FY

DKKm 2017 2016 2017 2016 2016

Net profit for the period 333 163 535 23 (584)

Other comprehensive income:

Items that will not be reclassified subsequently to the consoli-dated income statement:

Actuarial gains/(losses) on defined benefit pension plans - - - - (6)

Total items not to be reclassified to the consolidated in-come statement

- - - - (6)

Items that will be reclassified subsequently to the consolidated income statement, when specific conditions are met:

Currency translation adjustments, foreign enterprises (49) 18 (105) 16 (33)

Reclassification of interest swap to the consolidated income statement

2 2 - 15

Net gains/(losses) on cash flow hedges (31) 5 (24) 5 36

Total items that may be reclassified to the consolidated income statement subsequently

(78) 23 (127) 21 18

Other comprehensive income for the period, net of tax (78) 23 (127) 21 12

Total comprehensive income for the period, net of tax 255 186 408 45 (572)

Total comprehensive income for the period is attributable to:

Owners of Nets A/S 258 188 408 47 (580)

Non-controlling interests (3) (2) - (3) 8

255 186 408 44 (572)

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Balance sheet

Consolidated balance sheet 30 Jun 30 Jun 31 Dec

DKKm Note 2017 2016 2016

Assets

Non-current assets

Goodwill 14,707 14,772 14,720

Other intangible assets 4,251 4,492 4,198

Plant and equipment 384 276 383

Investment in associates 227 226 231

Derivative financial instruments 5 - 27

Deferred tax asset 359 259 376

Total non-current assets 19,933 20,025 19,935

Current assets

Inventories 51 70 66

Trade and other receivables 819 836 801

Clearing-related assets 3,542 3,020 4,477

Prepayments 280 203 194

Other financial assets 5 362 880 957

Cash and cash equivalent 1,792 4,397 1,869

Total current assets 6,846 9,406 8,364

Total assets 26,779 29,431 28,299

Equity and liabilities

Equity

Share capital 200 50 200

Reserves 9,699 4,313 9,405

Equity, owners of Nets A/S 9,899 4,363 9,605

Non-controlling interests 179 661 201

Total equity 10,078 5,024 9,806

Non-current liabilities

Borrowings 4 8,406 14,176 9,106

Pension liabilities, net 64 62 66

Deferred consideration for business combinations and asset acquisitions 308 234 284

Derivative financial instruments - 19 -

Deferred tax 801 907 851

Total non-current liabilities 9,579 15,398 10,307

Current liabilities

Borrowings - Clearing related balances 4 75 - 223

Bank overdraft - Clearing related balances 4 91 - 91

Bank overdraft - Own cash 4 329 - -

Trade and other payables 1,505 2,066 1,614

Clearing-related liabilities 4,602 4,102 5,135

Other financial liabilities 5 412 2,180 1,064

Current tax liabilities 108 661 59

Total current liabilities 7,122 9,009 8,186

Total liabilities 16,701 24,407 18,493

Total equity and liabilities 26,779 29,431 28,299

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Statement of cash flow Consolidated statement of cash flows for the period Q2 Q2 H1 H1 FY

DKKm Note 2017 2016 2017 2016 2016

Operating profit (EBIT) 394 277 688 438 943

Depreciation, amortisation and Impairment losses 256 264 504 514 1,070

Other non-cash items - - - - 6

Change in narrow working capital (74) 36 (216) (125) 67

Interest and similar items, net (53) (138) (129) (249) (2,119)

Tax paid (13) - (40) (41) (653) Net cash flow from operating activities excluding clear-ing-related balances

510 439 807 537 (686)

Change in clearing-related balances 544 121 401 304 (120)

Net cash from operating activities 1,054 560 1,208 841 (806)

Purchase of intangible assets (163) (106) (261) (201) (391)

Purchase of plant and equipment (42) (55) (94) (92) (255)

Purchase of investments (179) - (216) (70) (70)

Proceeds from Visa shares 5 - 2,070 - 2,070 2,070

Payment of proceeds from Visa shares 5 - - (54) - (1,287)

Net cash from investing activities (384) 1,909 (625) 1,707 67

Proceeds from primary - - - - 5,500

Base fee in connection with primary - - - - (70)

Proceeds from bonds issuance 2,974 - 2,974 - -

Base fee in connection with bond issuance (50) - (50) - -

Proceeds from borrowings 60 - 550 - 9,040

Repayment of borrowings (2,970) (298) (4,121) (447) (14,466)

Settlement of interest swap (2) - (2) - (15)

Purchase of treasury shares (153) - (153) Net cash flows from financing activities excluding clear-ing-related balances

(141) (298) (802) (447) (11)

Proceeds from borrowings (clearing-related) 75 - 75 - 223

Repayment of borrowings (clearing-related) - - (223) - -

Net cash flows from financing activities (66) (298) (950) (447) 212

Net cash flow for the period 604 2,171 (367) 2,101 (527)

Cash and cash equivalents at the beginning of the period 781 2,243 1,778 2,310 2,310

Exchange gains/(losses) on cash and cash equivalents (13) (17) (39) (14) (5)

Net cash and cash equivalents at the end of the period 1,372 4,397 1,372 4,397 1,778

Bank overdraft (clearing-related balances ) 91 - 91 - 91

Bank overdraft (own cash) 329 - 329 - -

Cash and cash equivalents at the end of the period 1,792 4,397 1,792 4,397 1,869

Non-GAAP performance measures Cash and cash equivalents at the end of the period 1,372 4,397 1,372 4,397 1,778

Clearing-related assets at the end of period 3,542 3,020 3,542 3,020 4,477

Clearing-related liabilities at the end of period (4,602) (4,102) (4,602) (4,102) (5,135)

Cash related to pass through Visa proceeds (140) (1,943) (140) (1,944) (194)

Borrowings (clearing related balances) (75) - (75) - (223)

Own cash at the end of the period 97 1,371 97 1,371 703

Own cash at the beginning of the period 125 1,282 703 1,532 1,532 Net cash flow from operating activities excluding clearing re-lated balances 510 439 807 537 (686)

Net cash from investing activities in the year (384) 1,909 (625) 1,707 67 Net cash flows from financing activities in the year excluding clearing related items (141) (298) (802) (447) (11) Net cash flow from pass through Visa proceeds and related tax payments - (1,943) 54 (1,944) (194)

Exchange gains/(losses) on cash and cash equivalents (13) (18) (40) (14) (5)

Own cash at the end of the period 97 1,371 97 1,371 703

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Statement of changes in equity

Consolidated statement of changes in eq-uity

DKKm

Share capital

Treasury share

reserve

Hedge reserves

Currency translation reserves

Retained earnings

Equity, owners

Nets A/S

Non- controlling interests

Total equity

2017

Equity 1 January 200 - 12 (251) 9,644 9,605 201 9,806

Net profit for the period - - - - 533 533 2 535

Currency translation adjustments, foreign en-terprises - - - (103) - (103) (2) (105)

Net gain/(loss) on cash flow hedges - - (24) - - (24) - (24)

Settlement of interest swap - - 2 - - 2 2

Other comprehensive income for the year - - (22) (103) - (125) (2) (127)

Total comprehensive income for the year - - (22) (103) 533 408 - 408

Non-controlling interests from business combi-nation - - - - 22 22 (22) -

Share-based payments - - - - 17 17 - 17

Purchase of treasury shares - (153) - - (153) - (153)

Total changes in equity - (153) (22) (103) 572 294 (22) 272

Equity as at 30 June 200 (153) (10) (354) 10,216 9,899 179 10,078

1. The share capital of Nets A/S was established on 5 February 2016. In 2016, four capital increases were conducted in connection with the IPO to a total number of shares of 200,411,094, with each share of a nominal value of DKK 1 giving a share capital of DKK 200 million.

Consolidated statement of changes in equity

DKKm

Share capital

Hedge reserves

Currency translation reserves

Retained earnings

Equity, owners

Nets A/S

Non-con-trolling in-

terests

Total equity

2016

Equity 1 January 50 (39) (227) 4,532 4,316 664 4,980

Net profit for the period - - - 16 16 7 23

Currency translation adjustments, foreign enterprises - - 26 - 26 (10) 16

Net gain/(loss) on cash flow hedges - 5 - - 5 - 5

Settlement of interest swap - - - - - -

Other comprehensive income for the year - 5 26 - 31 (10) 21

Total comprehensive income for the year - 5 26 16 47 (3) 44

Non-controlling interests from business combination - - - - -

Total changes in equity - 5 26 16 47 (3) 44

Equity as at 31 March 50 (34) (201) 4,548 4,363 661 5,024

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Note 1 Significant accounting policies

The condensed consolidated interim financial statements of Nets A/S for the period 1 January – 30 June 2017 comprise Nets A/S and its subsidiar-ies (together referred to as "the group") and associates. Statement of compliance The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union and additional Danish disclosure requirements. The accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent with those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016. A full description of the Group's accounting policies is included in the consolidated financial statements for 2016 for Nets A/S. Key accounting estimates and judgements The preparation of the Group’s interim financial statements requires Executive Management to make assumptions that affect the reported amount of assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the financial period. Estimates and judgements used in the determination of reported results are continuously evaluated and are based on historical experience and on various other factors that are believed to be reasonable in the circumstances. Actual results may differ from these estimates under different as-sumptions or conditions. Except for the judgements and estimates commented upon in the notes of this interim report, the significant judgements made by Executive Man-agement in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the con-solidated financial statements as at and for the year ended 31 December 2016.

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Description of segments

Nets is a leading provider of digital payment services and related technology solutions across the Nordic region. Nets sits at the centre of the digital

payments ecosystem and operates a deeply entrenched network, which connects merchants, corporate customers, financial institutions and con-

sumers enabling them to make and receive payments as well as, increasingly, utilise value-added services to help them improve their respective

activities.

Segment information provided to the Executive Management

The segment information provided to the Executive Management for the reportable segments for H1 2017 is as follows:

H1 2017

DKKm

Merchant Services


Corporate Services

Group

Income statement

Revenue, gross 2,216 1,410 1,470 5,096

Revenue, net 1,216 1,133 1,467 3,816

Reported growth 10.4% 3.8% 5.2% 6.4%

Organic growth 11% 3% 4% 6%

EBITDA before special items 399 408 509 1,316

EBITDA before special items margin 32.8% 36.0% 34.7% 34.5%

Reconciliation of EBITDA before special items to profit before tax:

Special items (124)

Amortisation, depreciation and impairment losses (504)

Finance items - net (101)

Profit before tax 587

H1 2016

DKKm

Merchant Services


Corporate Services

Group

Income statement

Revenue, gross 2,188 1,355 1,399 4,942

Revenue, net 1,101 1,091 1,395 3,587

Reported growth 22.3% 0.5% -0.9% 5.7%

Organic growth 12% 9% 1% 6%

EBITDA before special items 353 398 446 1,197

EBITDA before special items margin 32.1% 36.5% 32.0% 33.4%

Reconciliation of EBITDA before special items to profit before tax:

Special items (245)

Amortisation, depreciation and impairment losses (514)

Finance items - net (361)

Profit before tax 77

The Executive Management uses revenue, organic growth and EBITDA before special items as measures to assess the performance of the seg-ments. This excludes significant items of costs and income that cannot be attributed directly to the ordinary activities in the segments.

Note 2 - Segment information

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Note 3 Special items

DKKm H1 2017 H1 2016

Special items External

expenses Staff costs

External expenses

Staff costs

Reorganisation and restructuring costs - (42) (42) - (81) (81)

Costs associated with business setups, acquisitions and disposals (16) - (16) (4) - (4)

Transformation programme (31) (21) (52) (90) (6) (96)

Other costs and income, net - - - - - -

Special items, excluding IPO-related costs (47) (63) (110) (94) (87) (181)

IPO-related costs - (14) (14) (64) - (64)

Total special items (47) (77) (124) (158) (87) (245)

Special items are costs or income that are recognised in the income statement, which cannot be attributed directly to the Group’s ordinary activities. Such costs and income include the cost of extensive restructuring or processes and fundamental structural adjustment and IPO-related costs. They are therefore separately disclosed to allow a more comparable view of underlying trading performance.

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Note 4 Borrowings

30 Jun 2017

30 Jun 2016

31 Dec 2016

Interest Rate Year of Maturity Currency

Available facility

Drawn amount

Amount hedged

Carrying Amount

Carrying Amount

Carrying Amount DKKm Nominal Effective

Term Loan 1 (NOK) NIBOR1 + 2.0% 3.1% 2019 NOK 654 654 654 648 - 1,429

Term Loan 2 (EUR) EURIBOR1 +

2.5% 2.5% 2021 EUR 135 135 - 133 - 134

Term Loan 2 (NOK) NIBOR1 + 2.5% 3.6% 2021 NOK 1,446 1,446 1,446 1,359 - 1,429

Term Loan 2 (DKK) CIBOR1 + 2.5% 2.8% 2021 DKK 2,034 2,034 2,034 2,014 - 2,011 Revolving credit fa-cility2 IBOR1 + 2.5% 2.5% 2021 Multi 2,980 1,291 - 1,291 - 1,936

Senior Notes 2.875% 3.4% 2024 EUR 2,974 2,974 2,975 2,928 - -

Term Loan 1 (EUR) EURIBOR1 +

2.0% 2.0% 2019 EUR - - 139

Term Loan 1 (DKK) CIBOR1 + 2.0% 2.1% 2019 DKK - - 2,006

Term loan EUR EURIBOR +

3.0% 3.8% 2021 EUR - 535 -

Term loan SEK STIBOR + 3.3% 4.0% 2021 SEK - 193 - Revolving Credit fa-cility

EURIBOR + 3.0% 3.0% 2021 EUR - - -


3.0% 3.8% 2021 EUR - 6,635 -


3.0% 3.8% 2021 EUR - 1,089 -

Term loan NOK NIBOR + 3.0% 4.5% 2021 NOK - 2,001 -

Payment in kind CIBOR+13,0% 14.0% 2022 DKK - 3,723 - Finance leasing lia-bility 4.0% 4.0% 2020 EUR 33 - 22

Total long term borrowings and finance leasing liabilities (non-current liabilities)

8,406 14,176 9,106 Overdraft facility (own cash)2 IBOR1 + 2.5% 2.5% 2021 Multi 558 329 - 329 - - Overdraft facility (clearing-related balances)3 Multi 1,301 91 - 91 - 91 Money market (clearing-related balances) Multi 75 75 - 75 - 223

Total short term borrowings (current liabilities) - Included in own cash calculation

495 - 314

Total loans and borrowings 8,901 14,176 9,420

1. For the term loans, Revolving Credit Facility, there is a floor of 0.0% on the EURIBOR, NIBOR and CIBOR. 2. Revolving credit facility commitment is EUR 475 million and overdraft carveout of EUR 75 million. 3. Overdraft facility for clearing working capital ("CWC") with commitment of EUR 175 million in bank lines.

Net interest bearing debt

30 Jun 2017

30 Jun 2016

31 Dec 2016

Total long-term borrowings exclusive of Finance leasing liability (Non-current liabilities) 8,373 14,176 9,084 Capitalised debt costs included in carry-ing amount 126 256 122

Own cash (97) (1,371) (703)

Net interest bear-ing debt 8,402 13,061 8,503

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Note 5 Visa transaction (Other financial assets and liabilities)

DKKm Q2 2017 Q2 2016 H1 2017 H1 2016 FY 2016

Consolidated income statement

Fair value adjustment on Visa shares (financial income) 13 341 110 341 413

Fair value adjustment on liability related to Visa shares (financial expense) (13) (267) (110) (267) (448)

Adjustment related to previous years tax on pass through proceeds - - - - 115

Tax on pass through proceeds - (74) - (74) (80)

Net profit for the year on pass through proceeds - - - - 0

Fair value adjustments of Visa shares related to Teller Branch Norway (financial income) (1) 181 5 181 185

Tax on proceeds related to Teller Branch Norway - (1) - (1) (1)

Net profit for the year (1) 180 5 180 184

DKKm 30-Jun-

17 30-Jun-

16 30-Jun-

17 30-Jun-

16 31-Dec-

16

Other financial assets Restricted shares in Visa Inc. and contingent consideration held by Teller Branch Norway 64 54 64 54 59

Restricted shares in Visa Inc. and contingent consideration held by Teller A/S 106 517 106 517 562

Restricted shares in Visa Inc. and contingent consideration held by Nets Oy 192 309 192 309 336

Other financial assets as at 30 June / 31 December 362 880 362 880 957

DKKm 30-Jun-

17 30-Jun-

16 30-Jun-

17 30-Jun-

16 31-Dec-

16

Other financial liabilities

Visa proceeds to be paid to former owners of Nets Holding A/S (212) (1,352) (212) (1,352) (721)

Visa proceeds to be paid to former owners of Nets Oy (200) (828) (200) (828) (343)

Other financial liabilities as at 30 June / 31 December (412) (2,180) (412) (2,180) (1,064)

Current tax liability

Current tax on net fair value gain (28) (590) (28) (590) (28)

Current tax liability as at 30 June / 31 December (28) (590) (28) (590) (28)

DKKm Q2 2017 Q2 2016 H1 2017 H1 2016 FY 2016

Cash flow Received cash consideration related to Visa shares held by Teller Branch Nor-way - 127 - 127 127

Received cash consideration related to Visa shares held by Teller A/S - 1,216 - 1,216 1,216

Received cash consideration related to Visa shares held by Nets Oy - 727 - 727 727

Proceeds from Visa shares - 2,070 - 2,070 2,070

Payment of Visa proceeds to former owners of Nets Holding A/S - - -54 - (662)

Payment of Visa proceeds to former owners of Nets Oy - - - - (625)

Payment of proceeds from Visa shares - - -54 - (1,287)

Tax paid on pass through proceeds Teller A/S - - - - (388)

Tax paid on pass through proceeds Nets Oy - - - - (64)

Tax paid on pass through proceeds - - - - (452)

In addition, the Group could potentially receive a share of proceeds payable by Visa Inc. to Visa Sweden, through the Group’s branch in Sweden.

These proceeds are subject to a number of uncertainties and therefore not recognised in the balance sheet as at 31 December 2016.

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Note 6 - Operating free cash flow Q2 Q2 H1 H1 FY

2017 2016 2017 2016 2016

Operating profit before depreciation and amortisation (EBITDA) 650 541 1,192 952 2,013

Change in narrow working capital (74) 36 (216) (125) 67

Purchase of intangible assets (163) (106) (261) (201) (391)

Purchase of plant and equipment (42) (55) (94) (92) (255)

Operating free cash flow 371 416 621 534 1,434

financial results for q2 2017 · 2017-08-17 · financial results for q2 2017 highlights for q2...

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