JQW.L Regulatory News (JQW)

JQW plc

("JQW" or the "Company")

Interim Results

JQW, the AIM quoted Chinese B2B e-commerce operator, today announces its unaudited results for the six months ended 30 June 2014.

Highlights

The illustrative exchange rate as at 8 September 2014 is 1 GBP: 9.926 RMB.

* Group, below, is defined as JQW, its subsidiaries and indirect subsidiary

Cai Yongde, Chairman of JQW, commented: "The Board is pleased with the progress that the Company has made and the positive performance during the first half of the year. We have pre-launched our international B2B e-commerce platform as well as appointed new sales agencies in line with the strategy set out in our IPO documentation. We look forward to adding more sales agencies as well as developing platforms for smartphone users to further broaden our offering and take advantage of the rapidly growing Chinese B2B e-commerce market."

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About JQW plc

JQW is a leading domestic business-to-business e-commerce provider headquartered in the Chinese province of Jiangsu. The Group's core business is its online B2B platform, www.jqw.com, which has been developed to encourage domestic trade by connecting Chinese SMEs with potential trade partners. Founded in 2004, the platform was developed to help to market Chinese SME's websites. JQW has evolved rapidly to become the second highest ranked Chinese B2B e-commerce website in terms of traffic and operates, what the directors believe to be, the first dedicated B2B search engine, www.jqw.cn.

JQW offers a low-cost entry point for Chinese SMEs to promote themselves and their B2B products to potential buyers. In order to increase transaction opportunities, JQW offers its clients a broad range of services including website design, commercial search services and advertising.

There are approximately 49 million SMEs in China manufacturing a diverse range of products, accounting for 60% of the country's GDP. The number of mobile internet-access users in China stood at 839 million at February 2014 and there is a considerable amount being invested into the country's telecommunications infrastructure. These factors have driven an increased demand for domestic trade of B2B, B2C and C2C e-commerce. With the majority of these SMEs requiring the use of third party B2B e-commerce platforms to promote their businesses and access trade partners, the Board believes that JQW offers a robust and highly reputable branded platform. With exposure in over 50 industry sectors and considerable scope for future growth, JQW is in a strong position to capitalise on the development of this market.

The Group currently has:

Chairman's statement

It is with pleasure that I present to you the results of JQW for the six months ended 30 June 2014.

Performance

Trading for the period was strong with revenue increasing by 91% to RMB 346 million (H1-2013: RMB 181 million) and net profit after tax rising by 48% to RMB 78 million (H1-2013: RMB 52 million). Revenue recognition in H1-2014 was boosted in part by a large number of new three-month contracts signed by fee paying members towards the end of 2013. As a reminder, revenues are only recognised over the contracts' lifetime. As these contracts were 3-months contracts as opposed to a 12 months length for all other packages, these short-term contracts signed at the end of 2013 boosted revenue recognition in Q1-2014. There was a 33% increase in active fee paying members totalling 221,000 as at 30 June 2014 when compared to 30 June 2013. Although the board would not expect that the strong growth recorded in H1-2014 will materialise again in H2-2014, it is confident that the Group will achieve its full year targets.

As at 31 July 2014, the Group had 227,000 fee paying members which compares to 197,000 at the end of December 2013 and 166,000 at the end of June 2013. JQW continues to be cash generative, resulting in a cash position at the half year of RMB 425 million (H1-2013: RMB 177 million) and net assets of RMB 303 million (H1-2013: RMB 99 million).

Market

The Board believes that JQW continues to be well positioned in China's B2B e-commerce market. As at 29 August 2014, JQW.com remained in second place behind Alibaba in the Chinese B2B website traffic rankings, whilst being ahead of its competitors including Youboy, b2b.cn, baimao.com, and china.cn. In terms of traffic volume, JQW.com is 47% higher than Youboy, the third most visited B2B e-commerce platform in China.

The market in which JQW operates continues to show growth. According to iResearch.cn, the leading Chinese market research firm, the monetary value of Chinese e-commerce transactions amounted to RMB 2.82 trillion in Q2-2014. Compared to Q2-2013, this represents an increase of 19.7% and 6.9% when compared to Q1-2014. Online shopping now represents 22.1% of all purchases in China.

Sales agencies

JQW's main focus has been and continues to be the appointment of new sales agencies as well as client satisfaction. As announced on 7 May 2014 and in-line with the Group's strategy, the first franchise arrangement was launched in Chongqing City, to support the planned roll-out of new sales agencies. Since the period end, the second franchise was launched in Zibo, Shandong province, at the beginning of July 2014 and the Group has invested approximately RMB 1 million into the fixed assets of this new franchise.

Under the franchise system, JQW provides financial support to sales agencies to acquire computer systems, fixed assets and to refurbish offices. In return, an approximately 10 percentage points lower percentage sales commission is earned by the franchise. The Board believes the franchise system will help the Group expand its presence into other provinces in China.

Since 31 December 2013, the Group has worked hard to expand the number of its sales agencies by 10, taking the Group total to 40, which includes two franchise agencies. JQW is now represented in 12 provinces and one direct controlled municipality in China and the Group intends to continue to expand its presence into additional provinces.

During H1-2014 JQW has seen a marked increase in average spend from its existing customer base as a number of clients have upgraded their subscriptions to higher value premium packages. In addition, there has been a rise in the number of customers selling domestic services, such as home management and cleaning services via the JQW platform. The Board is also pleased to report healthy revenue growth from Jilin and Shandong provinces, where additional sales agencies have been appointed in the first half of 2014.

To ensure that JQW's e-commerce platform operates smoothly, the Group has significantly expanded its technical team which provides full support for its customer base. The number of direct sales staff remained stable in the first half of 2014, while the Company has remained focused on increasing the number of its sales agencies.

New and future developments

Launch of international B2B e-commerce platform

During the period, JQW launched its English language B2B e-commerce platform www.jqwmall.com. The platform was established to enable certain of JQW's premier members and other new members, who are high quality local suppliers to consider expanding their sales internationally.

As announced on 2 July 2014, it is the Group's intention at this early stage of development, to open this site only to members in industries where there is an international price competitive position and where there are lower barriers for exports. The Company is satisfied with the current response to JQW Mall from the market. The management believes the contribution will grow in the future and the international platform will become an important revenue stream for the Company. JQW is now actively recruiting relevant talent to help develop the international platform business and at the appropriate time will commence a full marketing programme to support its promotion.

JQW has been strengthening its capacity to operate this platform and to attract new suppliers to it. Server mirroring has now been completed in the Shenzhen internet data centre. Some old servers have been replaced. The server capacity is adequate to accommodate the Company's development for the next few years.

Mobile applications

JQW has also been exploring the mobile applications space, which should significantly improve client experience in using JQW services. The Company continues to develop the JQW smartphone applications for both iOS and Android systems. The Android application is already in testing stage. It is anticipated that two applications will be in the market in next few months. The Company sees mobile applications as an important route for attracting new customers to the JQW platform.

Dividends

Following shareholder approval at the AGM in June 2014, a final dividend of 0.5 pence per share for the financial year ended 31 December 2013 was paid to shareholders on 14 July 2014.

Given the positive cash flow of JQW and the Board's continued optimism for future growth of the Group, the Board announces today that it proposes to declare an interim dividend of 0.2 pence per share (approximately RMB 3.9 million in total, based on 5% of the unaudited net profit for the first half of 2014).

Special dividend

In addition, taking into account its planned capital expenditure and working capital requirements, and the strong cash generation of the Group, combined with its existing healthy cash balances the Board is recommending payment of a special dividend of 5.0 pence per share (approximately RMB 97.7 million in total) to be paid to shareholders.

The interim dividend as well as the special dividend will be payable around 23 October 2014 to shareholders on the register at the close of business on Friday 26 September 2014. The shares will go ex-dividend on 24 September 2014.

Outlook and Strategy

The Board believes that JQW will continue to benefit from the rapid growth of the B2B e-commerce industry in China. The Group displays solid profitability and cash generation and the Board plans continued investment in the business to ensure its future development and sustained rate of growth. The management team remains focused on the implementation of the Group's strategy and on generating shareholder value.

Cai Yongde

Chairman

8 September 2014

Condensed Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

For the six month period ended 30 June 2014 (Unaudited)

Condensed Consolidated Statement of Financial Position

As at 30 June 2014

Condensed Consolidated Statement of Cash Flows

For the six month period ended 30 June 2014

Basis of Presentation and Summary of Significant Accounting Policies

1. General information and principal activities

The financial statements have been prepared in accordance with International Financial Report Standards ("IFRS") as adopted by the European Union. The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 December 2014 and are unchanged from those disclosed in the Financial Statements for the year ended 31 December 2013.

The interim financial information has not been reviewed nor audited by the Company's auditors. The comparatives for the period ended 31 December 2013 are not the Company's full statutory accounts but have been extracted from the audited consolidated financial information of JQW plc. A copy of the audited consolidated financial statements for the period ended 31 December 2013, which was prepared under IFRS, is available on the Company's website.

The interim consolidated financial statements for the six months ended 30 June 2014 have been prepared in accordance with IAS 34, Interim Financial Reporting.

The operations of JQW plc are not affected by seasonal variations.

The interim report for the six months ended 30 June 2014 was approved by the Directors on 8 September 2014.

2. Operating segments

Operating segments are based on internal reports about components of the Group which are regularly reviewed by the Board of Directors by the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance.

The Group reporting segments are direct sales and distribution sales. Only segmental revenues are considered by the CODM for strategic decision making purposes. The activities of the Group took place solely in the PRC and as such no geographical segment information is stated during the financial years.

The segment information provided to management for the reportable segments for the interim results is as follows:

Six months ended 30 June 2013 (Pro forma)

The segment information provided to management for the reportable segments for the six months ended 30 June 2014 is as follows:

Six months ended 30 June 2014

Segmental information is only presented to the CODM on a revenue basis and as such segmental information is only shown for revenue items.

3. Taxation

The major components of the income tax expense are as follows:

The tax rate used for the reconciliations below is the effective weighted average rate of tax applicable in the jurisdiction concerned.

The deferred tax is derived from the deferred revenue stated in the following table:

4. Property, plant and equipment

5. Trade and other receivables

The carrying amounts of trade and other receivables approximately to their fair value.

6. Earnings per share

The calculation of loss per share is based on the following loss and number of shares:

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