21 Aug 2017 11:44
21 AUGUST 2017
BNN Technology plc
Interim Results for the six months ended 30 June 2017
BNN Technology (AIM: BNN), a London-listed Chinese technology, content and services company, today announces its unaudited interim results for the six months ended 30 June 2017.
Highlights
· Completed £25 million placing (gross proceeds) in May 2017 supporting working capital for the payments business and launch of student services and credit services businesses in second half of 2017
· Signed deals with Manchester City FC and Arsenal FC to run amateur footballer training camps across China and launch club microsites, driving further user traffic to our sports content platform
· Registered users on sports platform have exceeded 350,000 as at 15 August 2017 (250,000 at 30 June 2017)
· Announced in February 2017 intention to launch motorist platform with Chinese partner on the Xinhua News mobile app in second half of 2017
· Revenue for the Group was £4.6 million in the period, up from £0.5 million in the prior year, and more than double what we achieved in FY 2016 (£2.1m FY 2016)
· Total Gross Transaction Volumes (GTV) recorded of £902.1 million (£8.3 million H1 2016, £289.6 million FY 2016) predominantly driven by continued growth in mobile top up transactions
· Loss after tax of £15.5 million (H1 2016 £6.5 million loss) broadly in line with expectations, due to further investment in platform
· Addition of new independent Non-Executive Chairman to the Board, Harry Keiley, on 1 May 2017.
Darren Mercer, Chief Executive of BNN Technology, said:
"The first half of 2017 has seen us add considerable strength to the key cornerstones of our business. New initiatives, such as the sports content activities through our football partnerships, have utilised our proven marketing capabilities, whilst our robust technology platform has continued to provide a competitive advantage across a number of value-added sales channels."The Group's continued ability to accumulate a substantial, high quality database remains at the heart of our strategy to become a leading Chinese internet portal. Having generated data in recent months from some 50 million individual mobile phone customers, while preparing to provide a range of services to China's 35 million students, we believe we are strongly positioned for the forthcoming expansion of our B2C activities in mobile top ups and data, payments and credit services."With significant cash on our balance sheet and higher margin contracts expected to be coming on stream in the latter part of this year, we are well placed to drive substantial growth across all our services. Whilst there is much to achieve in the second half of this financial year and timings can often be uncertain in the markets in which we operate, the Board remains very excited about the Group's prospects and looks forward to reporting further strong progress towards achieving profitability at an operating level in the second half of 2017 and in 2018."
For further information, please contact:
BNN Technology plc Darren Mercer, Chief Executive Scott Kennedy, Chief Financial Officer Stephen Benzikie, Communications
| +44 (0) 1565 872990 |
Strand Hanson Limited (Nominated & Financial Adviser) Simon Raggett / Ritchie Balmer
| +44 (0) 20 7409 3494 |
Mirabaud Securities LLP (Broker) Peter Krens | +44 (0) 20 3167 7221 |
|
|
About the Group
BNN Technology plc is a Chinese technology, content and services company that builds long-term partnerships to deliver China's citizens with value-added services, content, and evolving opportunities.
Listed on AIM since 2014, the Group principally engages in providing technology to partners to facilitate fulfilment of payments online and on mobile apps through partnerships or affiliate agreements with corporate and key government partners, and developing digital content, both online and mobile. Through its partnership with Xinhuatong and NewNet, BNN facilitates mobile payments, through its technology platform, on the Xinhua News mobile app in 12 provinces in China. The Chinese consumer shift to 'life on mobile' is only just beginning and BNN's platform technology enables urban and rural communities across China to access exclusive content and pay for more services online.
The Group employs nearly 300 staff throughout China.
Forward looking statements
This announcement may include statements that are, or may be deemed to be, "forward-looking statements" (including words such as "believe", "expect", "estimate", "intend", "anticipate" and words of similar meaning). By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances, and actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Save as required by applicable law, the company undertakes no obligation to publicly revise any forward-looking statements in this announcement, whether following any change in its expectations or to reflect events or circumstances after the date of this announcement.
BNN Technology plc
Interim Results for the six months ended 30 June 2017
BUSINESS REVIEW
Overview
Over the first half of the year, we have made continued progress in each of our key business areas: payments, content and value added-services, as we strive towards creating a fully-fledged Chinese internet portal with, what we hope to be, millions of active users utilising the various content and services we will provide.
Payments
In the first half of the year we have seen growth in both our legacy lottery business in Shanghai (where our technology processes lottery payments) and our mobile top up business. In total, we saw period-on-period revenues grow £4.1 million to £4.6 million, with the majority of that driven by our legacy lottery business.
We continued to see growth in our B2B mobile top up business with B2B mobile gross transaction volumes exceeding £870 million in the first half of 2017. Over the past three quarters we have seen continued quarterly growth in Q4 2016 we processed £270 million of transactions, in Q1 2017 we processed £414 million and in Q2 2017 we processed £457 million, reflecting quarter on quarter growth rates of 53% in Q1 2017 and 10% in Q2 2017.
This growth in B2B business has enabled us to add significant customer data to our platform and we now have the mobile phone numbers of millions of customers. We will utilise these to support our promotional activities for B2C mobile top up, the motorist platform, sports content and value-added services over the coming months.
On 9 March 2017 we announced our intention to develop a motorist payments platform, to be launched on the Xinhua News apps, initially focussing on pre-paid petrol card top-ups, followed by motor insurance, car park payments, car maintenance and traffic fines. In the first half of the year we have been working with our local partner to develop the payments platform (both B2B and B2C) and we successfully launched the B2C petrol card top up platform at the end of July. Whilst not revenue generating in the first half of the year, this will be a driver of increased transactional volumes and revenues for the Group in the second half of the year.
Content
We continue to use our strong relationships with international football clubs to develop unique engaging digital content for our mobile partners, run amateur training camps and drive user activity onto our sports content platform. The Board is delighted with the progress being made with the delivery of the football microsites in May this year, the successful running of 13 football club competitions and training camps and the early success we have had with user registration. We firmly believe that this early success means we are on the way to building a unique mobile sport content platform in China, having successfully launched our platform with three of Europe's largest football clubs: FC Barcelona (FCB), Arsenal FC (AFC) and Manchester City FC (MCFC).
In May we launched the microsites and have been testing a number of campaign channels to promote the various competitions we have running. Channels have included Xinhua News mobile app notifications, Sina Weibo social media posts, online promotions on university campuses and WeChat discovery. To date we have run 13 competitions across the three clubs, some with relatively small prizes such as winning club merchandise, whilst we have larger competitions offering tickets to games and attendance at the amateur training camps.
Key highlights and successes since the launch of the microsites and launch of competitions include:
• Over 350,000 unique user registrations to date
• Over 1.7 million site visits to our promotional pages
• 0.5 million views of our AFC promotional video on Sina Weibo
• 160 Universities visited by promotional staff delivering a potential audience of up to 1.7m students
• 346 amateur footballers trained
• 250 coaches trained (AFC competition)
Since the launch of the sites and competitions, we have successfully gained over 350,000 unique user registrations and active users in less than three months. These continue to grow with every competition. In the past three months we have run four competitions for Manchester City FC, six competitions for Arsenal FC and three competitions for FC Barcelona. Photos from a number of our training camps are available on our corporate website. The Directors understand that the volume of active users on our platform is greater than any football club has previously achieved in China.
Value-added Services
On 13th April 2017, we announced two new and exciting services that will complement the development and growth of our payments and sports content platform. The first was our student services platform that is expected to provide a one-stop shop for students to find jobs, develop their business ideas and attract funding for them, and for financial services.
Since making the announcement, we have focussed on delivering the student recruitment part of the platform and, as previously guided, we expect to launch our part-time employment platform in October 2017 in Zheijang.
The second service was our credit rating services platform, which we hope to be able to launch with local partners. We are in discussions with a number of partners and look forward to signing our first partnership at the end of 2017/early 2018.
Fundraising & Board Changes
During the first half of the year we raised £25 million through a placing of new ordinary shares to support our growth in payments and to develop the student and credit services platform. The placing was well supported by current shareholders and we saw increased shareholdings from a number of our high quality institutional investors. As of 25 July 2017, key institutions such as Capital Research & Management (8.0% up from 4.1% in February), Henderson Global Investors (5.0% maintained from 5.0% in February), and Hadron Capital LLP (4.9% up from 3.9% in February) had all increased or maintained their shareholdings through the placing.
On 21 April 2017 we announced the appointment of a new independent Non-Executive Chairman of the Board, Harry Keiley.
Outlook
The Board is confident that the second half of 2017 and early 2018 will see the implementation of key initiatives announced in the first half of this year and subsequently, driving both customer data acquisition and earnings growth.
Motorist Platform
In late July 2017, we launched the B2C petrol fuel card platform on the Xinhua News Mobile App. In common with other platforms, the initial launch is on a test basis and we anticipate B2C revenues will grow steadily through the remainder of the year.
Following completion of contract negotiations with a number of large, high profile e-commerce partners in recent weeks, the B2B petrol fuel card platform is expected to launch in the next few weeks and to be generating significant Gross Transaction Volumes (GTV) and revenues for the Group in the second half. Whilst we expect the long-term contribution of B2C revenues from the motorist platform to be substantial, for the remainder of this year it is the Board's belief that in the short term GTV and revenues from this platform will be heavily weighted towards our larger B2B contracts.
As previously indicated, the margins we have negotiated with partners on the B2B motorist platform will be significantly higher than on the mobile top up business, enhancing revenue growth and cash generation for the Group.
Mobile Top Up
Whilst our mobile top up business has operated at relatively low margins to date, it should be noted that our activities in this area have so far generated valuable data from in excess of 50 million individual mobile phone customers. We expect our mobile top up margins to increase by a significant factor as we drive those customers towards transacting through our B2C channels.
Student Platform
We remain on track to launch the first part of the student recruitment platform, with part-time student employment expected to launch before the end of Q3 2017. We anticipate this to be revenue generating in the fourth quarter. Discussions are ongoing with a number of China's largest part-time employers to be some of the first employers on the platform, in service areas ranging from fast food chains through to high street retail and other market segments.
Other parts of the platform, including full-time recruitment and sales of mobile phones and other devices, will launch late in Q4 2017 and early in Q1 2018. Our focus during the next few months will centre on the acquisition and registration of users from China's student population of c.35 million. As in other parts of the world, the student population is a key demographic in supporting the longer term B2C strategy across the Group's product ranges.
Sports Content
The success of our sports initiatives in the first half of the year, with registrations so far exceeding the highest expectations of our football partners, has allowed us to open further discussions with the intention of generating future advertising and sponsorship revenue. Our competitions delivered in partnership with FC Barcelona, Manchester City FC and Arsenal FC have already produced a unique registered user base of 350,000. This will now be expanded with the launch of new, complementary and innovative microsites, which are tasked with multiplying the level of registrations within a few months. Data from this high volume of registrants will prove valuable in accelerating both advertising revenues and our B2C roll-out.
Our Arsenal Tmall store is scheduled for launch in advance of the major 11th November sales event (known as 11/11 singles day in China). Last year Alibaba's online marketplaces generated Gross Merchandise Value of RMB 120.7bn in 24 hours, and this is one of two main sales days in China, the other being 12th December, that are supported by extensive promotional campaigns and offers.
We believe this initiative will provide another valuable channel for the Group to drive customer data acquisition. The store will be leveraged as a cross selling opportunity to drive utilisation of our other products, notably discount incentives and other promotions when purchasing merchandise, which may then be used to make secondary purchases of our payments products such as mobile top up and motorist services.
User Data
The accumulation of high-quality data covering large parts of the Chinese population remains at the core of the Group's longer-term strategy. As with all of China's largest internet portals, a substantial database is imperative for supporting and sustaining growing revenues at higher margins across all the Group's verticals, driving our B2C rollout and positioning us well to capitalise on major opportunities for advertising income. Our strong relationships with existing partners give us considerable confidence in our capabilities for generating revenues from data. The Directors believe that our user data will, over time, deliver a quantifiable value to the Group's balance sheet and will produce revenues across all our channels in the remainder of 2017 and beyond.
Summary
There is much to achieve in the second half of this financial year and timings can often be uncertain in the markets in which we operate, with any delays impacting revenue and profitability. That said, with the launch of the motorist platform, part-time student recruitment platform, and two large sales events on our Arsenal Tmall site, all expected to take place in the second half of the year, we continue to target the generation of an operating profit for the second half, providing momentum as we move into 2018.
Darren Mercer Scott Kennedy
Chief Executive Officer Chief Financial Officer
21 August 2017
FINANCIAL REVIEW
For the period ended 30 June 2017, the company reported revenues of £4.6 million and an operating loss of £13.5 million, versus £0.5 million and £5.2 million in H1 2016. The gross transaction volumes for the Group grew from £8.3 million in H1 2016 to £902.1 million in H1 2017. The £4.1 million increase in revenue, and the increase in gross transaction volumes in the period, was primarily driven by increased teledraw digital lottery sales in our Shanghai business with a smaller contribution from the B2B mobile top up business.
Administration expenses after exceptional items in the period were £14.4 million (H1 2016: £5.1 million). The £9.3m growth in administrative expenses year on year can be predominantly explained by the following factors:
In April 2016 we announced the partnership between the BNN Group, Xinhuatong and the Xinhua News Agency to develop mobile payments. Throughout the remainder of 2016, we increased the number of provinces signed, resulting in a total of 12 Xinhua provinces. Each province is on a 3 year contract and payments are staggered through the life of the contract. 2017 is the first year where we see the full annual cost impact of the agreements in the income statement. In H1 2016 expenses were £0.6 million from this partnership, increasing to £4.0 million in H1 2017, driving a £3.4 million increase in expenses. Payments to provinces are weighted to the front end of the year so expenses associated with the Xinhua provincial payments will be less in the second half of 2017 than they were in the first half.
Headcount has continued to grow across the organisation. The Board has been strengthened via the addition of four new members since June last year, and an advisory panel to the Board has been established. The increase in headcount reflects the ongoing investment being made in our technology and data teams, and executive management, as we continue to prepare the company for the Nasdaq listing. As such, wages and salaries, of both permanent staff and contractors, have increased by £2.5 million year on year. The headcount growth and a number of the Board appointments were made in the second half of 2016, as such we do not expect the year on year growth in wages and salaries at the year-end to be double what is was at the end of the first half.
In 2016, we had existing commercial agreements with Arsenal FC and Manchester City FC that were signed in 2015; we have since extended and expanded those arrangements to include training camps and development of club microsites in China. In addition, we have partnered with FC Barcelona, which we announced in December 2016. Consequentially, expenses have increased £1.0 million period on period. This includes the costs of the licensing agreements, as well as costs associated with running the training camps.
Throughout 2016 and the first half of 2017, we have pursued a listing on Nasdaq, proceeded with the SEC application process and worked with a number of advisors in preparing the company for a US listing. As a result, these transaction costs attributed approximately £1.0 million of increased professional fees (legal, audit, advisory).
We have also seen a £0.6 million increase in financing costs period on period. Period on period interest charges have remained inline, however the foreign exchange movements have been significant. This has been driven by a weakening of the pound at the point of the Brexit announcement, followed by a consistent strengthening thereafter.
On 30th June 2017 BNN had £28.7 million of cash in bank (£28.0 million 31st December 2016). In addition a further £3.4 million of restricted cash was released on 3 July 2017. During the first half of 2017 we raised gross proceeds of £25 million following the placing announced on 13 April 2017. Fees and expenses associated with the placing were £1.7 million and a number of services were paid for with the issue of shares, totalling £4.8 million. These included a partial renegotiation of one of our Xinhua contractual payments whereby we exchanged 4 million shares (worth £3.2 million) for contractually guaranteed payments totalling RMB 60 million (approximately £7 million). This has saved the Group approximately £7 million in cash and a further £3.8 million in expenses over the next 18 months. The net cash operating outflow for the Group was £13.2 million in the first half of 2017.
Post Period End
On 26th July 2017, the Group announced a significant further expansion of its commercial relationship with Arsenal Football Club, signing a contract to create and operate an online store in China through Tmall, the business-to-consumer (B2C) marketplace owned by the country's leading e-commerce group, Alibaba.
Unaudited Condensed Consolidated Income Statement
Six months ended 30 June 2017
(all figures reported in £'000 sterling)
| Note |
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 (restated, note 5) |
| Year ended 31 December 2016 |
|
|
| (Unaudited) |
| (Unaudited) |
| (Audited) |
|
|
|
|
|
|
|
|
Revenue | 2 |
| 4,627 |
| 537 |
| 2,064 |
Cost of sales |
|
| (3,532) |
| (242) |
| (1,138) |
Gross profit |
|
| 1,095 |
| 295 |
| 926 |
Administrative expenses before exceptional items |
|
| (14,036) |
| (5,095) |
| (15,908) |
Exceptional items | 4 |
| (357) |
| - |
| (677) |
Administrative expenses after exceptional items |
|
| (14,393) |
| (5,095) |
| (16,585) |
Share of results of associates |
|
| (199) |
| (407) |
| (812) |
Operating loss |
|
| (13,497) |
| (5,207) |
| (16,471) |
Finance costs |
|
| (1,978) |
| (1,317) |
| (1,739) |
Loss before tax |
|
| (15,475) |
| (6,524) |
| (18,210) |
Tax |
|
| - |
| - |
| - |
Loss for the period |
|
| (15,475) |
| (6,524) |
| (18,210) |
Attributable to: |
|
|
|
|
|
|
|
Owners of the company | 3 |
| (15,384) |
| (6,448) |
| (18,062) |
Non-controlling interests |
|
| (91) |
| (76) |
| (148) |
|
|
| (15,475) |
| (6,524) |
| (18,210) |
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
From continuing operations: |
|
|
|
|
|
|
|
Basic loss per share | 3 |
| 7.08 |
| 4.36 |
| 10.08 |
Diluted loss per share | 3 |
| 7.08 |
| 4.36 |
| 10.08 |
Unaudited Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2017
(all figures reported in £'000 sterling)
|
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 (restated, note 5) |
| Year ended 31 December 2016 |
|
| (Unaudited) |
| (Unaudited) |
| (Audited) |
|
|
|
|
|
|
|
Loss for the period |
| (15,475) |
| (6,524) |
| (18,210) |
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
Exchange differences on translation of foreign operations |
| 796 |
| (848) |
| (1,406) |
Income tax relating to items that may be reclassified subsequently to profit or loss |
| - |
| - |
| - |
Total comprehensive loss for the period |
| (14,679) |
| (7,372) |
| (19,616) |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the company |
| (14,588) |
| (7,313) |
| (19,490) |
Non-controlling interests |
| (91) |
| (59) |
| (126) |
|
| (14,679) |
| (7,372) |
| (19,616) |
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Balance Sheet
Six months ended 30 June 2017
(all figures reported in £'000 sterling)
| Note | 30 June 2017 | 30 June 2016 (restated, note 5) | 31 December 2016 |
|
| (Unaudited) | (Unaudited) | (Audited) |
|
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
| 4,242 | 4,206 | 4,383 |
Other intangible assets |
| 1,540 | 297 | 949 |
Property, plant and equipment |
| 592 | 448 | 663 |
Investments in associates |
| 5,913 | 5,198 | 6,322 |
Other investments |
| 2,271 | 3,725 | 2,342 |
Other receivables | 7 | 7,600 | - | 7,600 |
|
| 22,158 | 13,874 | 22,259 |
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
| 3 | 20 | 5 |
Trade and other receivables | 7 | 28,041 | 7,030 | 14,767 |
Cash and cash equivalents | 6 | 28,732 | 7,074 | 28,028 |
|
| 56,776 | 14,124 | 42,800 |
Total assets |
| 78,934 | 27,998 | 65,059 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables | 8 | 8,877 | 4,584 | 5,262 |
Borrowings | 5 | 7,726 | 3,226 | 6,110 |
|
| 16,603 | 7,810 | 11,372 |
Net current assets |
| 40,173 | 6,314 | 31,428 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings | 5 | 10,942 | 10,864 | 13,564 |
Total liabilities |
| 27,545 | 18,674 | 24,936 |
Net assets |
| 51,389 | 9,324 | 40,123 |
|
|
|
|
|
Equity |
|
|
|
|
Share capital | 9 | 23,861 | 16,432 | 20,527 |
Share premium account |
| 87,764 | 31,010 | 65,394 |
EBT reserve |
| (575) | (575) | (575) |
Accumulated deficit |
| (59,700) | (37,751) | (45,353) |
Equity attributable to owner of the company |
| 51,350 | 9,116 | 39,993 |
Non-controlling interests |
| 39 | 208 | 130 |
Total equity |
| 51,389 | 9,324 | 40,123 |
Unaudited Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2017
(all figures reported in £'000 sterling)
| Share capital | Share premium account | EBT reserve | Accumulated deficit | Equity attributable to the owners of the company | Non-controlling interest | Total equity |
Balance at 31 December 2016 | 20,527 | 65,394 | (575) | (45,353) | 39,993 | 130 | 40,123 |
Loss for the period | - | - | - | (15,384) | (15,384) | (91) | (15,475) |
Exchange differences | - | - | - | 796 | 796 | - | 796 |
Total comprehensive loss for the period | - | - | - | (14,588) | (14,588) | (91) | (14,679) |
Issue of share capital | 3,125 | 20,176 | - | - | 23,301 | - | 23,301 |
Credit to equity for equity-settled share based payments | - | - | - | 241 | 241 | - | 241 |
Conversion of convertible debt | 209 | 2,194 | - | - | 2,403 | - | 2,403 |
Balance at 30 June 2017 | 23,861 | 87,764 | (575) | (59,700) | 51,350 | 39 | 51,389 |
Audited Condensed Consolidated Statement of Changes in Equity
Year ended 31 December 2016
(all figures reported in £'000 sterling)
| Share capital | Share premium account | EBT reserve | Accumulated deficit |
Equity attributable to the owners of the company | Non-controlling interest | Total equity |
Balance at 31 December 2015 (Audited) | 14,431 | 22,432 | (575) | (29,940) | 6,348 | 256 | 6,604 |
Loss for the year | - | - | - | (18,062) | (18,062) | (148) | (18,210) |
Exchange differences | - | - | - | (1,428) | (1,428) | 22 | (1,406) |
Total comprehensive loss for the year | - | - | - | (19,490) | (19,490) | (126) | (19,616) |
Issue of share capital | 6,328 | 42,962 | - | (488) | 48,802 | - | 48,802 |
Credit to equity for equity-settled share based payments | - | - | - | 129 | 129 | - | 129 |
Cancellation of shares | (232) | - | - | 232 | - | - | - |
Equity component of convertible debt | - | - | - | 4,204 | 4,204 | - | 4,204 |
Balance at 31 December 2016 (Audited) | 20,527 | 65,394 | (575) | (45,353) | 39,993 | 130 | 40,123 |
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June 2016
(all figures reported in £'000 sterling)
| Share capital | Share premium account | EBT reserve | Accumulated deficit (restated, note 5) | Equity attributable to the owners of the company | Non-controlling interest | Total equity |
Balance at 31 December 2015 | 14,431 | 22,432 | (575) | (29,940) | 6,348 | 256 | 6,604 |
Loss for the period | - | - | - | (6,448) | (6,448) | (76) | (6,524) |
Exchange differences | - | - | - | (865) | (865) | 17 | (848) |
Total comprehensive loss for the period | - | - | - | (7,313) | (7,313) | (59) | (7,372) |
Issue of share capital | 1,862 | 8,230 | - | - | 10,092 | - | 10,092 |
Issue of share capital in respect of proceeds received in prior period | 139 | 348 | - | (487) | - | - | - |
Transactions with non-controlling interests | - | - | - | (11) | (11) | 11 | - |
Balance at 30 June 2016 | 16,432 | 31,010 | (575) | (37,751) | 9,116 | 208 | 9,324 |
Unaudited Condensed Consolidated Cash Flow Statement
Six months ended 30 June 2017
(all figures reported in £'000 sterling)
| Note | Six months ended 30 June 2017 | Six months ended 30 June 2016 | Year ended 31 December 2016 |
|
| (Unaudited) | (Unaudited) | (Audited) |
Net cash used in operating activities | 6 | (13,177) | (6,336) | (16,975) |
|
|
|
|
|
Investing activities: |
|
|
|
|
Purchases of property, plant and equipment |
| (178) | (188) | (481) |
Investment in associate |
| - | - | (1,136) |
Other investments |
| - | (3,725) | (2,212) |
Purchase of other intangible assets |
| (326) | (138) | (865) |
Restricted cash deposits |
| (5,500) | - | (14,211) |
|
|
|
|
|
Net cash used in investing activities |
| (6,004) | (4,051) | (18,905) |
|
|
|
|
|
Financing activities: |
|
|
|
|
Proceeds on issue of shares |
| 18,769 | 10,092 | 48,341 |
Repayment of borrowings |
| (3,321) | - | - |
Proceeds from borrowings |
| 4,612 | 3,226 | 11,387 |
Net cash generated by financing activities |
| 20,060 | 13,318 | 59,728 |
|
|
|
|
|
Net increase in cash and cash equivalents |
| 879 | 2,931 | 23,848 |
Cash and cash equivalents at the beginning of period |
| 28,028 | 4,028 | 4,028 |
Effect of foreign exchange rate changes |
| (175) | 115 | 152 |
Cash and cash equivalents at the end of the period |
| 28,732 | 7,074 | 28,028 |
Notes to the Unaudited Condensed Financial Statements
Six months ended 30 June 2017
(all figures reported in £'000 sterling)
1. Accounting policies and basis of preparation
Basis of preparation
The unaudited interim condensed consolidated financial statements of BNN Technology PLC (the 'Group') for the six months ended 30 June 2017 have been prepared in accordance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.
The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2017 do not comprise statutory accounts for the purpose of section 434 of the Companies Act 2006 and should be read in conjunction with the Annual Report for the year ended 31 December 2016. Those accounts have been reported upon by the Group's auditor and delivered to Companies House. The report of the auditor on those accounts was unqualified and that opinion and the full Annual Report is published in the Investors section of the Group website at www.bnntechnology.com and is available from the company on request.
The unaudited interim condensed consolidated financial statements are prepared on the basis of the accounting policies stated in the Group's Annual Report 2016 which as previously stated is available on the Group's website at www.bnntechnology.com.
The interim report was approved by the board of directors, the financial information for the 6 months ended 30 June 2017 has been reviewed by the company's auditor and their report is included within this announcement.
Going concern
In determining the appropriate basis of the financial statements, the directors are required to consider whether the Group can continue in operational existence for the foreseeable future; that is for at least 12 months from the date of the signing of the interim financial statements.
At 30 June 2017, the Group was funded by cash balances of £28.7m and did not have access to any undrawn borrowing facilities.
The directors have reviewed trading and cash flow forecasts which take into consideration the uncertainties in the current operating environment. The forecasts and assumptions underpinning those forecasts have been subject to reasonable downside scenarios.
After making enquiries and considering the Group's existing cash reserves and forecasts the directors have a reasonable expectation that the company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements.
2. Revenue
IFRS 8 'Operating Segments' requires the segmental information presented in the financial statements to be that used by the chief operating decision maker to evaluate the performance of the business and decide how to allocate resources. The Group has identified the Group's Chief Executive Officer as its chief operating decision maker. The Group's Chief Executive Officer considers the results of the business as a whole when assessing the performance of the business and making decisions about the allocation of resources. Accordingly the Group has one operating segment and therefore the results of the segment are the same as the results for the Group.
The Group's revenues principally relate to commissions receivable by the Group from the sale of mobile top ups, lottery tickets and related products.
The Group's revenue is analysed between Land and Digital as this information is provided to the Group's chief operating decision maker. Land revenues relate to terminal lottery ticket machine sales and scratch cards whilst Digital revenues includes both the historic online lottery revenues in addition to the new mobile payments businesses. An analysis of the Group's revenue by channel, all of which arose from the Group's operations in China, is as follows:
|
|
|
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
|
|
|
| (Unaudited) |
| (Unaudited) |
| (Audited) |
|
|
|
|
|
|
|
|
|
Land |
|
|
| 257 |
| 51 |
| 266 |
Digital |
|
|
| 4,370 |
| 486 |
| 1,798 |
Total |
|
|
| 4,627 |
| 537 |
| 2,064 |
Gross transaction volumes (GTV) represents the total transaction value of all payments or services that our technology fulfils, net of VAT and other sales related taxes. This should not be construed as an alternative or superior to revenue as determined in accordance with IFRS, similarly our use of gross transaction volumes may not be consistent with similarly described measures used by other companies.
Gross Transaction Volumes |
|
|
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
|
|
|
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Land |
|
|
| 1,665 |
| 2,319 |
| 4,599 |
Digital |
|
|
| 900,419 |
| 5,942 |
| 285,020 |
Total |
|
|
| 902,084 |
| 8,261 |
| 289,619 |
3. Loss per share
The calculation of basic and diluted loss per share is based on the following information:
| Six months ended 30 June 2017 | Six months ended 30 June 2016 (restated, note 5) | Year ended 31 December 2016 | |
| (Unaudited) | (Unaudited) | (Audited) | |
Losses for the purposes of basic and diluted loss per share being net losses attributable to the owners of the company | (15,384) | (6,448) | (18,062) | |
|
|
|
| |
| No. | No. | No. | |
Weighted average number of ordinary shares for the purposes of basic loss per share | 217,170,470 | 147,962,352 | 179,260,542 | |
Effect of dilutive potential ordinary shares |
|
|
| |
- Share warrants | - | - | - | |
- Convertible loan notes | - | - | - | |
Weighted average ordinary shares for the purposes of diluted loss per share | 217,170,470 | 147,962,352 | 179,260,542 | |
The company made a loss in the current and prior years and therefore all potentially issuable shares are anti-dilutive. |
| |||
| Six months ended 30 June 2017 | Six months ended 30 June 2016 (restated, note 5) | Year ended 31 December 2016 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||
| Pence | Pence | Pence | |||
Basic loss per share | 7.08 | 4.36 | 10.08 | |||
Diluted loss per share | 7.08 | 4.36 | 10.08 | |||
|
|
|
|
| ||
The denominators used are the same as those detailed above for both basic and diluted loss per share. |
| |||||
4. Exceptional items
Exceptional items are those items which management consider to be of such significance they require separate disclosure in the financial statements to enable readers of the financial statements to better assess the company's performance. Exceptional items included within administration expenses in 2017 related to professional services costs associated with the planned NASDAQ listing. Costs in 2016 also related to the planned NASDAQ listing. Exceptional items incurred were:
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Listing fees | (357) |
| - |
| (677) |
Included in the balance at 30 June 2017 were accruals and other creditors of £79 thousand. There was no tax charge related to the above transactions.
5. Borrowings
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 (restated) |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Secured borrowing at amortised cost: |
|
|
|
|
|
Bank loans | 12,865 |
| 3,074 |
| 11,555 |
|
|
|
|
|
|
Unsecured borrowing at amortised cost: |
|
|
|
|
|
Convertible loan notes | 5,519 |
| 11,016 |
| 7,709 |
Loans from related parties | 284 |
| - |
| 410 |
| 18,668 |
| 14,090 |
| 19,674 |
|
|
|
|
|
|
Total borrowings |
|
|
|
|
|
Amount due for settlement within 12 months | 7,726 |
| 3,226 |
| 6,110 |
|
|
|
|
|
|
Amount due for settlement after 12 months | 10,942 |
| 10,864 |
| 13,564 |
| 18,668 |
| 14,090 |
| 19,674 |
Bank loans
On 1 June 2016, BNN Technology plc established a financing relationship with China Everbright Bank in order to efficiently provide working capital funding to its trading subsidiary Beijing NewNet Science & Technology Development Co., Ltd. Under the arrangements, the China Everbright Bank Hong Kong Branch provided Beijing NewNet Science & Technology Development Co., Ltd. with a Chinese Renminbi denominated loan which carries an interest rate in the range of 4.6 to 4.7 percent. This was secured by a sterling cash deposit of the company with the China Everbright Bank Hong Kong Branch. These cash security deposits are shown as restricted cash within other receivables on the consolidated balance sheet (see note 7).
At 30 June 2017, the company had drawn down RMB 110,000 thousand (c. £12,865 thousand) which was repayable as follows:
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
|
|
|
|
|
|
31 May 2017 | - |
| 3,074 |
| 3,358 |
25 July 2017 | 2,367 |
| - |
| 2,342 |
10 October 2018 | 5,865 |
| - |
| 5,855 |
5 January 2018 | 4,633 |
| - |
| - |
| 12,865 |
| 3,074 |
| 11,555 |
Convertible loan notes
On 26 January 2017 the company announced it had exercised its conversion rights in respect of the full outstanding balance of £2,403,288 New Interest Notes.
The Convertible Notes were capable of conversion into new ordinary shares of 10 pence each in the capital of the company at any time after 31 December 2016 and prior to 31 January 2017 at the lower of 115p and the closing mid-market price of an Ordinary Share on 31 December 2016. As such 2,089,816 new Ordinary shares were issued at a conversion price of 115p to Stadium Parkgate (Holdings) Limited.
Restatement
On the 20 April 2016, the Company agreed with the noteholder, Stadium Parkgate Limited, to cancel the previously existing Convertible Loan Notes and to issue New Notes for the same principal amount of £6,000 thousand, but carrying an interest rate of 6 per cent. The previously existing Convertible Loan Notes were cancelled on 17 May 2016 and the New Notes issued on the same date. This has been accounted for as an extinguishment of the previously existing notes, which were derecognised on cancellation and an issuance of the new convertible loan notes. At the date of extinguishment, the Convertible Loan Notes including accrued interest had a carrying value of £8,403 thousand and a loss of £2,449 thousand arose on cancellation related to the difference between the amortised cost of the previous loan notes and the estimated fair value of the new notes.
The loss of £2,449 thousand had not been previously recognised in the 2016 H1 interim accounts, however, as the transaction occurred in April 2016 the company is now restating its 2016 H1 comparatives in this 2017 interim accounts to give users of the accounts an appropriate view of the 2016 H1 period.
Please note that this loss of £2,449 thousand had been accounted for in the 31 December 2016 audited annual report and therefore the recognition of this loss in H1, 2016 has no effect on the overall position as 31 December 2016.
As a result of recognising the initial £2,449 thousand at 17 May, 2016, as opposed to recognising it at 31 December 2016 and accounting for debt issuance costs and accrued interest the net loss impact of £2,367 thousand at 30 June 2016 has the following impact on the H1, 2016 interim comparatives:
· Finance costs increase to a total of £1,317 previously disclosed as finance income of £1,050 thousand.
· Loss for the period increases to £6,524 thousand, previously disclosed as £4,157 thousand.
· Loss per share increase to 4.36p per share previously disclosed as 2.76p per share.
· Trade and other payables decreases to £4,584 thousand previously disclosed as £4,700 thousand
· Non-current liability borrowings increase to £10,864 thousand previously disclosed as £8,381 thousand.
6. Notes to the cash flow statement
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 (restated, note 5) |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Consolidated loss for the period | (15,475) |
| (6,524) |
| (18,210) |
Adjustments for: |
|
|
|
|
|
Share of results of associate | 217 |
| 407 |
| 631 |
Loss of disposal of associates | - |
| - |
| 182 |
Share settled services | 1,939 |
| - |
| - |
Finance costs | 1,978 |
| 1,317 |
| 1,739 |
Loss on disposal of property, plant and equipment | 63 |
| - |
| 1 |
Depreciation of property plant and equipment | 174 |
| 95 |
| 252 |
Amortisation and impairment of intangible assets | 186 |
| - |
| 132 |
Share based payments | 241 |
| - |
| 129 |
Operating cash flow before working capital | (10,677) |
| (4,705) |
| (15,145) |
Decrease/(increase) in inventories | 2 |
| (1) |
| 16 |
Increase in receivables | (5,418) |
| (2,093) |
| (3,029) |
Increase in payables | 3,290 |
| 505 |
| 1,678 |
Net cash used in operating activities | (12,803) |
| (6,294) |
| (16,480) |
Income taxes paid/(received) | 2 |
| (4) |
| 103 |
Interest paid | (376) |
| (38) |
| (598) |
Net cash used by operating activities | (13,177) |
| (6,336) |
| (16,975) |
Significant non-cash transactions include the extinguishment and issue of loan notes, fair value movement of the embedded derivative on the convertible loan notes, employee share based payments and interest accruals. Further consulting fees and Xinhua provincial fees were settled via share issuance as part of the April 2017 share placing.
| Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Cash and cash equivalents | 28,732 |
| 7,074 |
| 28,028 |
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair value.
On 30 June 2017, BNN had £28.7 million of cash in bank (30 June 2016: £7.1 million). In addition, £3.4 million of restricted cash deposits were released to the Group on 3 July 2017.
7. Trade and other receivables
Current | Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Trade receivables | 120 |
| 23 |
| 94 |
Unpaid share capital | - |
| 11 |
| 473 |
Amounts owed by related parties | 5,143 |
| 295 |
| 761 |
Restricted cash deposits | 12,111 |
| - |
| 6,611 |
Other receivables | 2,843 |
| 1,697 |
| 1,865 |
VAT receivable | 1,671 |
| 1,252 |
| 1,429 |
Prepayments | 6,153 |
| 3,752 |
| 3,534 |
| 28,041 |
| 7,030 |
| 14,767 |
Non-current |
|
|
|
|
|
Restricted cash deposits | 7,600 |
| - |
| 7,600 |
Included in amounts owed by related parties is a loan to D Mercer of £453k (31 December 2016: £438k). It was previously announced that this balance was to be repaid by 30 June 2017. A repayment plan is in place and the balance of the loan will be cleared by 31 December 2017. Other than this loan to Mr Mercer, there are no other director loans outstanding at the period end.
8. Trade and other payables
Current | Six months ended 30 June 2017 |
| Six months ended 30 June 2016 (restated, note 5) |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Trade creditors | 65 |
| 1,193 |
| 198 |
Amounts owed to related parties | 3,177 |
| 672 |
| 163 |
Accruals | 1,130 |
| 338 |
| 1,013 |
Income tax payable | 51 |
| 47 |
| 53 |
Other taxes and social security | 103 |
| 39 |
| 361 |
Contingent consideration | 811 |
| 908 |
| 837 |
Other payables | 3,540 |
| 1,387 |
| 2,637 |
| 8,877 |
| 4,584 |
| 5,262 |
9. Share capital
Authorised, issued and fully paid | Six months ended 30 June 2017 |
| Six months ended 30 June 2016 |
| Year ended 31 December 2016 |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
238,612,523 ordinary shares of 10p each (30 June 2016: 164,315,391, 31 December 2016: 205,272,707) | 23,861 |
| 16,432 |
| 20,527 |
10. Subsequent events
On 26 July 2017, the company announced a significant further expansion of its commercial relationship with Arsenal Football Club, signing a contract to create and operate an online store in China through Tmall, the business-to-consumer (B2C) marketplace owned by the country's leading e-commerce group, Alibaba.
The Group will be licensed by Arsenal as its Official Tmall Retail Partner. The Arsenal Tmall store, developed and operated by BNN's Chinese technology partner Harbin Tengcai Science & Technology Co. Limited ("Tengcai"), will sell a wide range of official Arsenal branded merchandise, including the 2017/18 replica kit and training wear by PUMA. BNN will have an 80% share of all revenues and earnings from the store, with the remainder distributed to our Chinese partner.
INDEPENDENT REVIEW REPORT TO BNN TECHNOLOGY PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the income statement, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report 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, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
21 August 2017