NETD.L Regulatory News (NETD)

NetDimensions (Holdings) Limited

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

Half Yearly Report

NetDimensions (AIM: NETD; OTCQX: NETDY), a global provider of performance, knowledge and learning management systems, is pleased to announce its half year results for the period ending 30 June 2016.

Financial Highlights

· Total revenue of US$10.5M (2015 H1: US$10.6M)

o 6% increase in revenue from our global hosted secure SaaS offering to US$5.4M (2015 H1: US$5.1M)

· Gross margin increased to 85% (2015 H1: 81%)

· 56% improvement in adjusted EBITDA loss to US$0.8M (2015 H1: loss of US$1.8M)

o 8% reduction in cost of sales, selling & operating expenses to US$11.9M (2015 H1: US$12.9M)

· Cash as of 30 June 2016 US$11.2M (2015 FY: US$12.0M)

Operations Highlights

· 4.2M active users at the end of the period (2015 H1: 3.9M)

· Recurring revenue was 70% of total revenue in the period (2015 H1: 68%)

· 12% increase in Research & Development investment to US$1.8M (2015 H1: US$1.6M)

o All of which was expensed to the Income statement during the period

· 17 new clients added in the period through direct and reseller channels with a combined contracted value of US$1.4M

Graham Higgins, Chairman of NetDimensions, commented: "The Company made good progress in the period in terms of better cost control and declaring a substantially smaller loss than the prior period. The Company did experience some delays in rolling out some larger client contracts in the first half, however the high consequence industries which we service continue to show demand for our product suite."

Enquiries:

About NetDimensions

Established in 1999, NetDimensions (AIM: NETD; OTCQX: NETDY) is a global provider of performance, knowledge and learning management solutions to high consequence industries.

NetDimensions provides companies, government agencies and other organisations with talent management solutions to personalise learning, share knowledge, enhance performance, foster collaboration and manage compliance programmes for employees, customers, partners and suppliers.

Recognised as one of the talent management industry's top-rated technology suppliers, NetDimensions' award-winning solutions have been chosen by leading organisations worldwide including ING, Cathay Pacific, Chicago Police Department, Geely Automotive, Fugro Group and Fresenius Medical Care, tesa SE and DB Schenker.

 NetDimensions is ISO 9001 certified and NetDimensions hosted services are ISO 27001 certified.

For more information, visit www.NetDimensions.com or follow @netdimensions on Twitter.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Chairman's Statement for the six months Ended 30 June 2016

The revenue in the six months to 30 June 2016 was similar to the prior period at US$10.5M (2015 H1: US$10.6M). The sales in the first half were impacted by delays in the roll-out of some larger client engagements which impacted both growth in licence revenue and associated services.

Financial Highlights

· Total revenue of US$10.5M (2015 H1: US$10.6M)

o 6% increase in revenue from our global hosted secure SaaS offering to US$5.4M (2015 H1: US$5.1M)

· Gross margin increased to 85% (2015 H1: 81%)

· 56% improvement in the adjusted EBITDA loss to US$0.8M (2015 H1: loss of US$1.8M)

o 8% reduction in cost of sales, selling & operating expenses to US$11.9M (2015 H1: US$12.9M)

· Cash as of 30 June 2016 US$11.2M (2015 FY: US$12.0M)

Financial Summary

The financial results for the period ending 30 June 2016 saw both revenue and invoiced sales coming in somewhat lower than expected. Revenue was largely unchanged when compared to the six months to June 2015, US$10.5M (2015 H1: US$10.6M) and invoiced sales were 3% lower, US$9.5M (2015 H1: US$9.8M).

Revenue from higher margin SaaS licences and multi-year on premise licences increased by 8% to US$6.8M (2015 H1: US$6.3M). The increase in licence revenue was off-set by a reduction in support and maintenance revenue which declined by 33% to US$0.6M (2015 H1: US$0.9M) and software customisation & implementation revenue which declined by 9% to US$3.1M (2015 H1: US$3.4M). The reduction in support and maintenance revenue is a result of the Company's strategy of transitioning clients away from legacy perpetual licences to either SaaS or multi-year on premise licenses. Software customisation & implementation revenue was impacted by the delays in the roll out of some larger client engagements.

Invoiced sales to clients in high consequence industries represented 91% of total invoiced sales (2015 H1: 92%), which is in line with our strategy of becoming a leading provider of Talent Management Systems and related compliance solutions to high consequence industries.

The North America region was the largest market for the Group during the period comprising 48% of Group revenues. Europe, Middle East & Africa ("EMEA") accounted for 40% of Group revenues and Asia Pacific including China 10%. The rest of the world made up 2%.

The Group continues to focus on supplying software via its global hosted secure SaaS offering and revenues from this product offering increased by 6% to US$5.4M (2015 H1: US$5.1M).

The Company continued to make improvements in expense management leading to a reduction of 8% in cost of sales, selling and operating expenses to US$11.9M (2015 H1: US$12.9M).

Gross Margins improved in the period to 85% (2015 H1: 81%) as a result of a reduction in the costs of sales related to services and a better product mix of higher-margin licence revenue which represented 64% of total revenue (2015 H1: 60%).

The improved margin and reduction in expenses resulted in the Group's adjusted EBITDA loss coming in 56% better than prior period. The Group's adjusted EBITDA loss excluding net foreign exchange gains US$0.2M, intangible asset amortisation (US$0.2M) and non-cash share-based payments (US$0.3M), was $0.8M (2015 H1: loss of US$1.8M). NetDimensions' loss before tax was US$1.2M (2015 H1: loss of US$2.5M).

Cash generated from operating activities was US$0.2M in the period (2015 H1: cash absorption of US$1.3M). The Group's cash balance at the end of the period was US$11.2M (2015 H1: US$3.5M) and the accounts receivable balance was US$4.6M (2015 H1: US$3.5M).

Operations Review

During the period we made the following progress in line with our business plan:

· 4.2M active users at the end of the period (2015 H1: 3.9M)

· Recurring revenue was 70% of total revenue in the period (2015 H1: 68%)

· 12% increase in Research & Development investment to US$1.8M (2015 H1: US$1.6M)

o All of which was expensed to the Income statement during the period

· NetDimensions Ranked as a Leader in the 2016 Aragon Research Globe™ for Corporate Learning. NetDimensions was ranked as a 'Leader' for excellence in:

o enterprise LMS functionality

o talent management

o compliance

o analytics

o language support

· NetDimensions has been positioned again as a "Core Leader" in the unique European learning and talent market insight report, Fosway 9-Grid™ for Learning Management Systems (LMS)

· 17 new clients added in the year through direct and reseller channels with a combined contracted value of US$1.4M. These new clients operate in a number of high consequence industries including healthcare, financial services, life sciences and precision manufacturing

Board

James Brooke, Non-Executive Director of the Company has decided to resign from the Company with immediate effect. We would like to thank James Brooke, for his contribution to the Board over the last three years, his financial expertise has been an asset to the Company and we are glad that he will continue to retain an interest in the Company as a valued shareholder, the Board would like to thank him and wish him well for the future.

Outlook

The Company made good progress in the period in terms of better cost control and declaring a substantially smaller loss than the prior period. The Company did experience some delays in rolling out some larger client contracts in the first half, however the high consequence industries which we service continue to show demand for our product suite.  

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2016

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2016

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

AS AT 30 JUNE 2016

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2016

Attributable to owners of the Company

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2016

Attributable to owners of the Company

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 GENERAL INFORMATION

NetDimensions (Holdings) Limited (the "Company") was incorporated in the Cayman Islands as a limited liability company under the Companies Law (2000) Revision on 10 July 2000. The address of its registered office is P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies. The address of its head office and principal place of business in Hong Kong is 17/F., Siu On Centre, 188 Lockhart Road, Wan Chai, Hong Kong.

The principal activities of the Company and its subsidiaries (together the "Group") are licensing of computer software and the provision of related services.

The Company's ordinary shares were admitted to trading on the Alternative Investment Market ("AIM") operated by the London Stock Exchange. On 7 August 2012, the Company's ordinary shares were also admitted to trading on the OTCQX platform operated by OTC Markets Group, Inc.

This condensed consolidated interim financial information is presented in United States Dollars ("US$"), unless otherwise stated.

This condensed consolidated interim financial information for the six months ended 30 June 2015 and 2016 have not been audited.

2 SUMMARY OF SIGIFICANT ACCOUNTING POLICIES

(a) Basic of preparation

The Company has a financial year end date of 31 December. This condensed consolidated interim financial information for the six months ended 30 June 2016 has been prepared in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting". The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Boards ("IASB").

(b) Significant accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2015, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

(i) Effect of adopting new and amendments to standards and interpretations

During the year, the Group has adopted all of the new standards, amendments to standards and interpretations issued by IASB that are relevant to the Group's operations and mandatory for annual periods beginning on or after 1 January 2016. The adoption of these new standards, amendments to standards and interpretations did not result in a significant impact on the results and financial position of the Group.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(ii) New standards, amendments to standards and interpretations that have been issued but are not yet effective:

The Group will adopt the above new standards, amendments to standards and interpretations to existing standards as and when they become effective. The Group has already commenced the assessment of the impact to the Group and is not yet in a position to state whether these would have a significant impact on its results of operations and financial position.

3 ESTIMATES

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were that same as those that applied to the consolidated financial statements for the year ended 31 December 2015, with the exception of changes in estimate that are required in determining the provision for income tax.

4 FINANCIAL RISK MANAGEMENT

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk.

The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2015.

There have been no changes in the risk management department since year end or in any risk management policies since year end.

5 REVENUE AND SEGMENT INFORMATION

Revenue represents income from software licensing and the provision of hosting, support and maintenance, software customisation and implementation services recognised during the period and is analysed as follows:

The chief operating decision-maker ("CODM") has been identified as the executive directors of the Company. Management has determined the operating segments based on the reports reviewed by the CODM that are used to assess performance and allocate resources. The CODM considers the business from the geographic perspective, including North America, Europe, Middle East and Africa ("EMEA"), Asia Pacific and Rest of the World, which are also the Group's reportable operating segments.

The Group's revenue is mainly derived from customers located in North America, EMEA, Asia Pacific and Rest of the World, the Group's facilities and other assets are located predominantly in North America, EMEA, Asia Pacific and Rest of the World.

Segment performance is evaluated based on segment results, which is a measure of adjusted loss before income tax. The adjusted loss before income tax is measured consistently with the Group's loss before income tax, except that amortisation of intangible assets - customer base, unallocated corporate expenses, finance income and finance costs are not allocated to individual segment.

Segment assets consist primarily of property, plant and equipment, intangible assets, accounts and other receivables, prepayments and deposits, and cash and bank balances excluding for corporate use. Cash and bank balances for corporate use are excluded from segment assets.

5 REVENUE AND SEGMENT INFORMATION (CONTINUED)

Segmental information for the six months ended 30 June 2016 is as follows:

5 REVENUE AND SEGMENT INFORMATION (CONTINUED)

Segmental information for the six months ended 30 June 2015 is as follows:

6 OPERATING LOSS

Operating loss is stated after charging the following:

7 FINANCE COSTS, NET

8 LOSS PER SHARE

Basic

Basic loss per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted loss per share is the same as basic loss per share since the exercise of the outstanding share options would have an anti-dilutive effect for the six months ended 30 June 2015 and 2016.

9 PROPERTY, PLANT AND EQUIPMENT

10 INTANGIBLE ASSETS

11 CASH AND BANK BALANCES

12 SHARE CAPITAL

Ordinary shares, issued and fully paid:

Note:

(a) During the period ended 30 June 2016, an aggregate of 45,000 share options (30 June 2015: 273,500) were exercised with proceeds of US$13,660 (30 June 2015: US$95,335). The weighted average market value per share at the date of exercise for these share options exercised was GBP 60 pence (30 June 2015: GBP 80.4 pence).

13 EQUITY SETTLED SHARE-BASED PAYMENTS

(a) Share option scheme

Pursuant to the share option scheme (the "Plan") approved and adopted on 18 September 2000, the Board of Directors of the Company may offer eligible employees, directors and sales agents rights to subscribe for shares of the Company. The Plan shall be valid and effective for a period of ten years. Pursuant to an ordinary resolution passed at the annual general meeting of the Company on 10 June 2011, the Plan expired on 17 September 2010 is renewed for a further period of ten years, and is to expire on 16 September 2020 (the "Renewed Plan"). The maximum aggregate number of ordinary shares of US$0.001 each which may be issued pursuant to the Renewed Plan is 10,000,000 ordinary shares according to an ordinary resolution passed at the annual general meeting of the Company on 9 June 2014. Options are granted at a price equal to the average market price of the Company's shares on the date of grant. The vesting period is ranged from one year to five years from the date of grant. If the options remain unexercised ten years after the date of grant, the options will expire. Options are forfeited if the relevant option holder leaves the Group before the options vest.

13 EQUITY SETTLED SHARE-BASED PAYMENTS (CONTINUED)

(a) Share option scheme (Continued)

The following table discloses the movements of the Company's share options:

Share options outstanding during the periods ended 30 June 2016 and 30 June 2015 are as follows:

13 EQUITY SETTLED SHARE-BASED PAYMENTS (CONTINUED)

(a) Share option scheme (Continued)

The fair values of share options granted during the period ended 30 June 2016 were calculated using the Binomial Option Pricing Model. The inputs into the model were as follows:

The expected volatility is based on the average of industry annualised historical stock price volatility as at the date of grant. The expected life is the expected lives of the options which have been taken into account of early exercise behaviour of the option holders.

(b) Pursuant to the terms and conditions of the letter of appointment with the non-executive directors of the Company, an aggregate of 34,639 (30 June 2015: 52,500) ordinary shares of the Company were allotted to them as part of their remuneration package during the period ended 30 June 2016. The fair values of these shares amounting to US$30,518 and US$65,648 respectively.

(c) The Company recognised total expenses of US$317,056 and US$86,772 relating to equity settled share-based payments in the periods ended 30 June 2016 and 30 June 2015 respectively.

(d) Pursuant to the terms and conditions of the letter of appointment with a non-executive director of the Company, an aggregate of 15,750 (30 June 2015: Nil) ordinary shares of the Company were allotted to him as part of his remuneration package for his service during the period ended 30 Jun 2016. The fair value of these 15,750 (30 June 2015: Nil) shares amounted to US$13,876 (30 June 2015: Nil). As at 30 Jun 2016, the shares had not been issued to the director yet.

14 NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Reconciliation of loss before income tax to net cash generated from/(used in) operations:

(b) In the condensed consolidated statement of cash flows, proceeds from disposal of property, plant and equipment comprise:

(c) In the condensed consolidated statement of cash flows, proceeds from disposal of intangible assets comprise: