NETD.L Regulatory News (NETD)

RNS Number : 3490K

NetDimensions (Holdings) Limited

19 April 2010

 

 

 

NetDimensions (Holdings) Limited

("NetDimensions", the "Group" or the "Company")

 

Preliminary Results for the year ended 31 December 2009

 

 

NetDimensions (AIM: NETD), a provider of performance, knowledge and learning management systems, announces its Preliminary Results for the year ended 31 December 2009 which mark a return to pre-tax profitability.

 

Financial Highlights

·; Revenues up 8% to US$6.84 million (2008: US$6.35 million)

·; Operating profit of US$0.69 million (2008: US$0.09 million)

·; Pre-tax profit of US$0.7 million (2008: loss before taxation US$0.59 million)

·; Cash balances of US$7.44 million - equates to c.18.6p per share (2008: US$5.34 million)

·; Revenue from new clients contributing 23% of the total revenue

·; Operating expenses reduced by US$0.24 million

 

Operational Highlights

·; Launch of versions 5.6 and 5.7 of the Company's flagship Enterprise Knowledge Platform (EKP)

·; Implemented infrastructure and process improvements to support future growth

·; Continued expansion in the Philippines

·; 70 new clients added

 

Roger Durn, Chairman of NetDimensions, commented:

 

"I am pleased to report strong growth in revenue over the past financial year, despite the challenging global economic environment, resulting in a return to pre-tax profitability. To position ourselves for the future, we also expanded our lower cost support and development operations in the Philippines by doubling the country headcount in 2009. In addition, we have maintained a healthy cash level and remain in a good position to grow.

 

"We believe that recent economic indicators look positive and the Company's 2010 first quarter trading results were in line with management expectations."

 

Enquiries:

 

NetDimensions	Jay Shaw Clarence Wu	+852 2122 4500 investor-relations@netdimensions.com
Arden Partners plc   (Nomad & Broker)	Fred Walsh Matthew Armitt	+44 (0) 20 7614 5917 fred.walsh@arden-partners.com matthew.armitt@arden-partners.com
Walbrook PR Limited	Paul McManus   Ben Knowles	+44 (0) 20 7933 8780 paul.mcmanus@walbrookpr.com +44 (0) 7980 541 893 ben.knowles@walbrookpr.com +44 (0) 7900 346 978

 

 

CHAIRMAN'S STATEMENT

 

 

Financial Summary

 

I am pleased to report on the financial results for NetDimensions (Holdings) Limited for the year ended 31 December 2009. Despite a challenging economic environment, total revenue increased by 8% to US$6.84 million (2008: US$6.35 million) with revenue from new clients contributing 23% of the total.

 

The Company achieved substantial revenue growth in the Europe, Middle East and Africa (EMEA) region, a geography on which we concentrated sales and marketing efforts. EMEA contributed 52% of total revenue compared to 37% in the previous financial year. Our continued focus on Software as a Service ("SaaS") hosting services also proved successful. Hosting revenue rose to US$2.69 million, up 26% from the previous year.

 

In light of the weak global economy, NetDimensions implemented tight cost controls and managed to reduce overhead expenses by US$0.24 million as compared to 2008 expenses, a reduction from 92% to 82% of total revenue. The Company ended the year with an organic operating profit of US$0.69 million.

 

During the year, the favourable Sterling and Euro exchange rates resulted in a US$0.18 million exchange gain and the operations helped generate US$0.01 million of finance income. After taking into account the US$0.18 million in losses for two strategic investments in 2009, the Group's profit before tax was US$0.7 million (2008: loss before tax of US$0.59 million).

 

The Company has continued to maintain a strong cash position, with cash balances of US$7.44 million (2008: US$5.34 million) and no debt. Net cash generated from operating activities for the year totalled US$2.02 million (2008: US$0.65 million).

 

The Board does not recommend payment of a dividend at this stage in the Company's development, however, it is the Board's intention to pay dividends in the future. Surplus funds will be reinvested to support the continued growth of the Company.

 

Operational Review

 

In 2009, NetDimensions put in place infrastructure and process improvements to support future growth while focusing on client retention and cost control.

 

In the interest of managing expenses, the Company reset expansion initiatives planned in 2008, except for initiatives relating to EMEA marketing and sales and to support service increases in the Company's two Asian offices. The Company's Philippines office doubled in size, in line with the Company plans to expand support and development operations into its lowest cost operating center.

 

The Company continued to work with major existing clients such as ING Group, HSBC, Cathay Pacific Airways and The Chicago Police Department. Our existing clients which mostly are in highly regulated industries accounted for the client retention rate of 88% in 2009.

 

The Company's reseller network accounted for 31% of 2009 revenue, helping the Company add some 55 of its 70 new clients during the year, including the Butterfield Group throughout its worldwide offices, the Metropolitan Housing Partnership in the United Kingdom, The New Zealand Department of Corrections and United Laboratories, Inc., the largest consumer prescription and health products company in the Philippines.

 

In 2009, the Company released versions 5.6 and 5.7 of its flagship product, the Enterprise Knowledge Platform (EKP). The 2009 EKP releases included dashboard reporting for senior managers, wiki integration to provide more end-user collaboration and social networking capabilities, and two new payment gateways for e-commerce use. Other product enhancements included continuing improvements to the EKP Portal Toolkit and to the Company's testing and certification engine, the Enterprise Assessment Platform.

 

During the year the Company's software engineering group adopted Agile software development methodology in order to foster faster release cycles, permit rapid delivery of incremental product improvements and incorporate more user feedback in the development process. The Agile development methodology complements the Company's ISO 9001:2008 quality management system in use in other departments.

 

The Company celebrates its 10th anniversary, a milestone that has marked the Company's progress from a two-man start-up in 1999 to an AIM listed company in 2007 with clients, operations and resellers in more than 25 countries.

 

NetDimensions ended the year with approximately 800 clients around the world.

 

Outlook

 

NetDimensions has a sound business model and, as an expanding and cash generative business, remains in a good position to grow. We have maintained a healthy cash level, with cash balances on 31 December 2009 of US$7.44 million, mostly held in Sterling and US Dollars.

 

We will continue to focus on employee and extended enterprise training and performance support applications, mostly for clients in highly regulated and compliance driven industries.

 

We believe that recent economic indicators look positive, largely due to the current low interest rate environment. However, low interest rates may not continue. Different countries may launch different monetary policies, which may in turn lead to market uncertainties in our focus geographies. Nevertheless, the Company's 2010 first quarter trading results were in line with management expectations.

 

 

 

 

Roger Philip Edward Durn

Chairman

 

19 April 2010

 

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

		2009		2008
	Notes	US$		US$
Revenue	3&6	6,839,795		6,352,524
Cost of sales		(561,001)		(421,645)
Gross profit		6,278,794		5,930,879
Administrative expenses		(5,586,308)		(5,837,302)
Operating profit		692,486		93,577
Net finance gains/(costs)	4	191,427		(507,795)
Impairment loss on goodwill		(54,604)		-
Share of loss of an associate		(78,955)		(24,041)
Share of loss of a jointly controlled entity		(49,597)		(150,403)
Profit/(loss) before taxation		700,757		(588,662)
Taxation		(21,000)		-
Profit/(loss) for the year		679,757		(588,662)
Attributable to:
Equity shareholders of the Company		679,757		(588,662)
Earnings/(loss) per share:
Basic	5	US$ 0.03		US$(0.02)
Diluted	5	US$ 0.03		US$(0.02)

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

 

	2009		2008
	US$		US$
Profit/(loss) for the year	679,757		(588,662)
Other comprehensive income:
Exchange differences on translation of
foreign operations	1,422		37,702
Share of other comprehensive income of
an associate	152		316
Other comprehensive income for the year	1,574		38,018
Total comprehensive income for the year	681,331		(550,644)
Total comprehensive income attributable to:
Equity shareholders of the Company	681,331		(550,644)

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2009

 

	2009		2008
	US$		US$
ASSETS
Non-current assets
Property, plant and equipment	137,648		144,394
Intangible assets	26,138		49,790
Interest in an associate	92,868		226,275
Interest in a jointly controlled entity	-		49,597
	256,654		470,056
Current assets
Trade and other receivables	2,480,929		3,254,905
Cash and cash equivalents	7,444,665		5,338,405
	9,925,594		8,593,310
TOTAL ASSETS	10,182,248		9,063,366
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Notes
Share capital 7	25,014		24,914
Reserves	6,432,554		5,727,407
Total equity	6,457,568		5,752,321
Non-current liabilities
Obligations under finance leases	-		1,026
Current liabilities
Trade and other payables	3,713,655		3,308,651
Income tax payable	10,000		-
Obligations under finance leases	1,025		1,368
	3,724,680		3,310,019
Total liabilities	3,724,680		3,311,045
TOTAL EQUITY AND LIABILITIES	10,182,248		9,063,366

 

The financial statements were approved by the Board of Directors on 19 April 2010 and were signed on its behalf by Clarence On Pong Wu, Director.

 

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009

 

 

	2009		2008
	US$		US$
ASSETS
Non-current assets
Investments in subsidiaries	902,737		902,737
Interest in an associate	79,870		250,000
Interest in a jointly controlled entity	-		200,000
	982,607		1,352,737
Current assets
Trade and other receivables	4,362,019		4,217,113
Cash and cash equivalents	3,323,159		3,533,224
	7,685,178		7,750,337
TOTAL ASSETS	8,667,785		9,103,074
EQUITY AND LIABILITIES
Equity attributable to equity holders of
the Company
Notes
Share capital 7	25,014		24,914
Reserves	8,585,716		9,026,478
Total equity	8,620,730		9,051,392
Current liabilities
Trade and other payables	47,055		51,682
Total liabilities	47,055		51,682
TOTAL EQUITY AND LIABILITIES	8,667,785		9,103,074

 

The financial statements were approved by the Board of Directors on 19 April 2010 and were signed on its behalf by Clarence On Pong Wu, Director.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

	Share capital	Share premium	Foreign currency translation reserve	Accumulated losses	Total
	US$	US$	US$	US$	US$
At 1 January 2008	24,864	11,116,871	(5,211)	(4,872,470)	6,264,054
Loss for the year	-	-	-	(588,662)	(588,662)
Other comprehensive income for the year	-	-	38,018	-	38,018
Total comprehensive income for the year	-	-	38,018	(588,662)	(550,644)
Equity settled share-based payments		-	-	38,861	38,861
Issue of shares	50	-	-	-	50
At 31 December 2008 and 1 January 2009	24,914	11,116,871	32,807	(5,422,271)	5,752,321
Profit for the year	-	-	-	679,757	679,757
Other comprehensive income for the year	-	-	1,574	-	1,574
Total comprehensive income for the year	-	-	1,574	679,757	681,331
Equity settled share-based payments	-	-	-	23,816	23,816
Issue of shares	100	-	-	-	100
At 31 December 2009	25,014	11,116,871	34,381	(4,718,698)	6,457,568

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

	2009		2008
	US$		US$
Cash generated from operations	2,033,680		648,844
Income tax paid	(11,000)		-
Net cash generated from operating activities	2,022,680		648,844
Cash flows from investing activities
Purchase of property, plant and equipment	(88,880)		(43,495)
Purchase of intangible assets	(19,397)		(56,828)
Interest income received	6,940		199,571
Investment in an associate	-		(250,000)
Investment in a jointly controlled entity	-		(200,000)
Net cash used in investing activities	(101,337)		(350,752)
Cash flows from financing activities
Finance lease charges	(335)		(335)
Repayments of borrowings and finance leases	(1,368)		(1,368)
Net cash used in financing activities	(1,703)		(1,703)
Net increase in cash and cash equivalents	1,919,640		296,389
Cash and cash equivalents at beginning of the year	5,338,405		5,711,745
Effect of foreign exchange rate changes, net	186,620		(669,729)
Cash and cash equivalents at end of the year	7,444,665		5,338,405

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

1. GENERAL INFORMATION

 

The Company was incorporated inthe Cayman Islands as a limited liability company under the Companies Law (2000) Revision on 10 July 2000. Its shares are listed on the London Stock Exchange AIM.  The registered office of the Company is located atP.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies. Its principal place of business is located at 17/F., Siu On Centre, 188 Lockhart Road, Wan Chai, Hong Kong.

 

The principal activities of the Company and its subsidiaries (hereinafter collectively referred to as the "Group") are licensing of computer software and the provision of related services. The principal activity of the Company is investment holding.  The principal activities of its subsidiaries are set out in note 14 to the financial statements.

 

2. FINANCIAL RISK MANAGEMENT

 

The Group's current activities result in the following financial risks and management's responses to those risks in order to minimise any resulting adverse effects on the Group's financial performance.

 

(a) Foreign exchange risk

 

The Group's reporting currency is US dollars. Its principal activities are licensing of computer software and the provision of related services in various currencies, particularly US dollars and Hong Kong dollars ("HK dollars"). Since HK dollars is currently pegged to the US dollars, no significant exposure is expected on HK dollars transactions and balances.

 

The following table indicates the approximate change in the Group's profit/(loss) after taxation (and accumulated losses) and other components of consolidated equity in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the end of the reporting period. The analysis includes balances between Group entities where the denomination of the balances is in a currency other than the functional currencies.

 

	2009		2009		2008		2008
The Group	Increase/ (decrease) in foreign exchange rates		Effect on profit after taxation and accumulated losses US$'000		Increase/ (decrease) in foreign exchange rates		Effect on loss after taxation and accumulated losses US$'000
HK dollars	1%		4		1%		30
	(1%)		(4)		(1)%		(30)
Pounds Sterling	15%		258		9%		119
	(15%)		(258)		(9)%		(119)
Euro	6%		44		7%		182
	(6%)		(44)		(7)%		(182)

 

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the end of the reporting period and had been applied to each of the Group entities' exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rates, remain constant.

 

The stated changes represent management's assessment of reasonably possible changes in foreign exchange rates over the period until the end of next annual reporting period. In this respect, it is assumed that the pegged rate between the HK dollars and US dollars would not be materially affected by any changes in movement in value of US dollars against other currencies. Results of the analysis as presented in the above table represent an aggregation of the effects on each of the Group entities' profit/(loss) after taxation and accumulated losses measured in the respective functional currencies, translated into US dollars at the exchange rate ruling at the end of the reporting period for presentation purposes. The analysis is performed on the same basis for 2008.

 

(b) Interest rate risk

 

Interest rate risk arises from debt borrowingsand cash held on deposit. The Group has no external borrowings therefore the Group currently has no interest rate risk exposure. The Group's cash balances are kept in interest bearing current accounts and on short-term deposits, so as to maximise the level of return while maintaining an adequate level of liquidity.

 

(c) Credit risk

 

The Group's credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets.

 

At the end of the reporting period, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

 

(d) Liquidity risk

 

The availability of adequate cash resources is managed by the Group through managing its funds conservatively thereby ensuring it meets its continual operational requirements. The Group's financial liabilities as at 31 December 2009, which fall due within 12 months from the end of reporting period were US$ 3,724,680 (2008: US$ 3,310,019).

 

3. REVENUE

 

Revenue represents the aggregate of income from software licensing, hosting services, support and maintenance and software customisation and implementation services during the year and is analysed as follows: -

 

	2009		2008
	US$		US$
Software licensing	2,574,937		2,986,803
Hosting	2,687,848		2,139,048
Support and maintenance	1,127,230		892,602
Software customisation and implementation	449,780		334,071
	6,839,795		6,352,524

 

4. NET FINANCE GAINS/(COSTS)

	2009		2008
	US$		US$
Bank interest income	6,940		199,571
Finance lease charges	(335)		(335)
Foreign exchange gain/(loss)	184,822		(707,031)
	191,427		(507,795)

 

 

5. EARNINGS/(LOSS) PER SHARE

 

The calculation of the basic and dilutedearnings/(loss)per share is based on the following data:

 

	2009		2008
	US$		US$
Earnings/(loss) used for the 'Earnings/(loss) per share'
Earnings/(loss) for the purpose of basic earnings/(loss) per share being net profit/(loss) attributable to equity shareholders of the parent	679,757		(588,662)
Earnings/(loss) for the purpose of diluted earnings/(loss) per share	679,757		(588,662)

 

		2009		2008
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings/(loss) per share		24,961,658		24,885,980
Effect of dilutive potential ordinary shares:
Share options		1,226,500		1,239,475
Weighted average number of ordinary shares for the purpose of dilutive earnings/(loss) per share		26,188,158		26,125,455
		2009		2008
		US$		US$
Earnings/(loss) per share:
Basic		0.03		(0.02)
Diluted		0.03		(0.02)

 

 

6. SEGMENTAL ANALYSIS

 

 

The Group operates in three geographic segments, North America, Europe, Middle East and Africa ("EMEA") and Rest of the World. These geographic segments are the basis on which the Group reports its primary segment information, as presented below:

 

Segmental information for the year ended 31 December 2009:

 

	North				Rest of the
	America		EMEA		World		Total
	US$		US$		US$		US$
Revenue from external customers	2,098,150		3,572,647		1,168,998		6,839,795
Revenue	2,098,150		3,572,647		1,168,998		6,839,795
Operating profit	212,455		361,686		118,345		692,486
Net finance gains Impairment loss on goodwill							191,427 (54,604)
Share of loss of an associate							(78,955)
Share of loss of a jointly controlled entity							(49,597)
Profit before taxation							700,757
Taxation							(21,000)
Profit for the year							679,757

 

Other segment items included in the income statement for the year ended 31 December 2009:

 

	North					Rest of the
	America			EMEA		World		Total
	US$			US$		US$		US$
Depreciation	13,213			23,093		58,460		94,766
Amortisation		1,700		1,751		39,558		43,009
Bad debts written off	-			-		35,622		35,622

 

Information regarding segment assets and liabilities as at 31 December 2009 and capital expenditure for the year then ended, based on the locations of customers:

 

	North				Rest of the
	America		EMEA		World		Total
	US$		US$		US$		US$
Total assets	137,774		29,474		10,015,000		10,182,248
Total liabilities	196,673		-		3,528,007		3,724,680
Tangible assets additions	54,488		9,500		24,892		88,880
Intangible assets additions	8,193		1,560		9,644		19,397
Total capital expenditure	62,681		11,060		34,536		108,277

 

The directors considered that there is no material difference in the information regarding segment assets and liabilities as at 31 December 2009 and capital expenditure for the year then ended, either based on the locations of customers or the locations of assets, no further disclosure is presented.

 

 

 

Segmental information for the year ended 31 December 2008:

 

	North				Rest of the
	America		EMEA		World		Total
	US$		US$		US$		US$
Revenue from external customers	2,616,339		2,350,482		1,385,703		6,352,524
Revenue	2,616,339		2,350,482		1,385,703		6,352,524
Operating profit	38,541		34,624		20,412		93,577
Net finance costs							(507,795)
Share of loss of an associate							(24,041)
Share of loss of a jointly controlled entity							(150,403)
Loss before taxation							(588,662)
Taxation							-
Loss for the year							(588,662)

 

Other segment items included in the income statement for the year ended 31 December 2008:

 

	North				Rest of the
	America		EMEA		World		Total
	US$		US$		US$		US$
Depreciation	17,471		4,311		79,951		101,733
Amortisation	11,179		273		36,351		47,803
Bad debts written off	59,650		-		22,343		81,993

 

Information regarding segment assets and liabilities as at 31 December 2008 and capital expenditure for the year then ended, based on the locations of customers:

 

	North				Rest of the
	America		EMEA		World		Total
	US$		US$		US$		US$
Total assets	159,516		7,564		8,896,286		9,063,366
Total liabilities	87,520		-		3,223,525		3,311,045
Tangible assets additions	3,803		3,398		36,294		43,495
Intangible assets additions	10,839		766		45,223		56,828
Total capital expenditure	14,642		4,164		81,517		100,323

 

The directors considered that there is no material difference in the information regarding segment assets and liabilities as at 31 December 2008 and capital expenditure for the year then ended, either based on the locations of customers or the locations of assets, no further disclosure is presented.

 

 

The Group's business segments include software licensing, hosting, support and maintenance and software customisation and implementation. These business segments are the basis on which the Group reports its secondary segment information, as presented below:

 

Segmental information for the year ended 31 December 2009:

 

	Software licensing		Hosting	Support and maintenance		Software customisation and implementation			Total
	US$		US$		US$		US$		US$
Segment revenue from external customers	2,574,937		2,687,848		1,127,230		449,780		6,839,795
Total capital expenditure	40,765		42,549		17,844		7,119		108,277
Total carrying amounts of segment assets	3,833,252		4,001,337		1,678,082		669,577		10,182,248

 

Segmental information for the year ended 31 December 2008:

 

	Software licensing		Hosting		Support and maintenance		Software customisation and implementation		Total
	US$		US$		US$		US$		US$
Segment revenue from external customers	2,986,803		2,139,048		892,602		334,071		6,352,524
Total capital expenditure	47,172		33,779		14,095		5,277		100,323
Total carrying amounts of segment assets	4,261,375		3,051,854		1,273,506		476,631		9,063,366

 

 

7. SHARE CAPITAL

 

		2009				2008
		Number of				Number of
		shares		US$		shares		US$
Authorised:
Ordinary shares at US$0.001 each		100,000,000		100,000		100,000,000		100,000
Allotted, called up and fully paid:
Ordinary shares		25,013,576		25,014		24,913,576		24,914
Movements in ordinary shares
At 1 January		24,913,576		24,914		24,863,576		24,864
Shares issued to non-executive directors		100,000		100		50,000		50
At 31 December		25,013,576		25,014		24,913,576		24,914

 

The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

 

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

 

The directors of the Company review the capital structure on a semi-annual basis. As part of this review, the directors consider the cost of capital and risks associates with each class of capital. Based on recommendations of the directors, the Group will balance its overall structure through the payment of dividends, new share issues and share repurchases as well as the issue of new debt or the redemption of existing debt.

 

 

8. EVENTS AFTER THE REPORTING PERIOD

The Group has been served a complaint for patent infringement within the United States on 25 March 2010 by the US District Court, Eastern District of Texas, Tyler Division. The plaintiff is IpLearn LLC, a California Limited Liability Company, and is against eight defendants which include the Group.

 

The directors believe that there has been no patent infringement, but take any such complaints seriously. The directors are therefore investigating the claims with a view to instructing legal advisers, together with the co-defendants, to challenge the complaint. The Company will announce any further developments in due course.

 

 

 

 

The Company's annual report will be sent to shareholders shortly and is available on the Company's website www.netdimensions.com.

This information is provided by RNS

The company news service from the London Stock Exchange