Final Results

RapidCloud International plc

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

Final results for the year ended 31 December 2014

RapidCloud International plc (AIM:RCI), the computing services, web-hosting and web-solutions provider based in Southeast Asia, announces its final results for the year ended 31 December 2014.

Financial highlights

· Revenue increased by 57% to RM 17.82 million (approximately £3.18m) (2013: RM 11.34 million)

· Gross profit increased by 14% to RM 9.67 million (approximately £1.73m) (2013: RM8.46 million )

· Gross margin at 54% (2013: 75%)

· Operating profit growth decreased by 34% to RM 3.26 million (approximately £0.58m) (2013: RM 4.95million)

· Profit for the financial period after tax and basic earnings attributable to ordinary shareholdersincreased by 45% to RM 3.67 million (approximately £0.66m) (2013: RM 2.53 million

· EPS: 20.59sen (£0.04)

· Cash at year end RM 3.93 million (approximately £0.70m) (2013: RM 6.24 million).

Operational highlights (including post-period end highlights)

· Earnings enhancing acquisition of web development firm Exxelnet Solutions Pte. Ltd. (now namedRapidCloud Singapore Pte. Ltd.) for c. £0.95m

· Total customers grew by 11.4% to over 42,000 with continued and improved y-o-y high customer retention rate of 75%

· Increase in enterprise work, moving RapidCloud increasingly up the value chain

· Appointment of new Head of Sales, formerly of Microsoft Malaysia and Dell Asia Pacific

· Increase in staff numbers to 160 (31 Dec 2013: 58)

· Continued product development with launch of products including RapidDocs and RapidDMS

· Awarded Emerging Business Excellence Award at Sin Chew Business Excellence Awards 2014

Post Period End Highlights

· Appointment of Cindy Choo to the Board as new Finance Director

· Contract wins with Air Asia courier services division, a world's leading printing enterprises and a major Southeast Asia airline for PortalWEB web application platform and logistics management system

· Strategic marketing partnership with CS Loxinfo PCL, a leading Internet Service Provider in Thailand to market RapidCRM sales automation tool

· First public sector contract win with the Philippines Government owned institute, PhilippineInstitute of Certified Public Accountants ("PICPA")

Founder and Managing Director, Raymond Chee, commented: "2014 saw progressive expansion in customer numbers, our geographic footprint and our service offering. With the successful acquisition and integration of Exxelnet complete, we now have not only a foothold in the key territory of Singapore, but also an expert team of software engineers and digital marketing specialists which are now fully integrated into the enlarged group and whose capabilities have broadened our offering to customers. With this broadened value proposition comes the opportunity to secure higher value work and our enhanced sales team are already beginning to develop a strong new business pipeline.

"Our business continues to be profitable and cash generative and as the business executes its expansion strategy, the Board expects a continued strong performance in 2015."

Chairman's Statement

I am particularly pleased with the Company's performance in its second year trading as a publicly listed entity. Both the financial results are strong and the continued investment in the staff, technology and products provides confidence for the coming year.

Financial Review

During the year, the total number of customers increased 11% to 42,000 whilst increasing our average revenue per customer. In terms of financial performance, the results for the financial year showed continued growth with revenues increased 57% to RM 17.82 million (2013: RM 11.34 million). Gross profit was also up 14% to RM 9.67 million (2013: RM 8.46 million) with gross margins at 54% (2013: 75%). Profit for the financial period after tax and basic earnings attributable to ordinary shareholders increased by 45% to RM 3.67 million (approximately £0.66m) (2013: RM 2.53 million). The Group's cash position at the end of year was RM 3.93 million (2013: RM 6.24 million).

Successful fund raising and Acquisition

We were delighted that new and existing shareholders supported us in raising new funds of RM 3.24 million post our admission to AIM.

We completed the acquisition of Exxelnet during the period for a total consideration of RM 4.59 million of which half was paid as an initial consideration in cash and the remainder being contingent on future profits and to be settled by the issue of new ordinary shares in RapidCloud. We acquired the business with a solid customer base and remain confident that the combined Group will benefit greatly from cross-selling and up-selling opportunities.

The acquisition provided us with a profitable business in Singapore, which is the world's fourth largest financial centre and has recently become the preferred location for many multi-national companies to position their global headquarters. The acquisition also delivered a highly skilled workforce, which we knew would integrate well with the existing business and offer us increased scale and reach to deliver further growth.

Awarded Emerging Business Excellence Award

The Company was delighted to receive a Business Excellence Award at the annual Sin Chew Business Excellence Awards ("SCBEA") 2014, sponsored exclusively by CIMB Bank.

Launched in 2013, the SCBEA aims to set the benchmark for corporate excellence in Malaysia. Every year, SCBEA honours businesses for their efforts in exemplifying strategic management approaches.

The award serves as one of the highest accolades for the enterprises which have achieved utmost excellence in all key business management disciplines which form the strategic parts of organisational growth and sustainability.

This award is testament to RapidCloud's ongoing progress and development.

Investment in business

During the period, we continued to invest in personnel, product and corporate development. The acquisition delivered incremental skillsets and we continued to develop products and successfully launched a suite of new products. These products have already gained traction in their target markets and provide significant confidence for the future.

Appointment of Finance Director

Subsequent to the end of the financial year, we announced the appointment of Cindy Choo to the Board of RapidCloud as Finance Director. Cindy's appointment became effective on 5 February 2015. Cindy takes over from Darren Hopkins who, as Interim FD, assisted the Company in its listing and reporting processes from August 2013. Cindy's appointment is consistent with RapidCloud's stated intention to appoint a full time Finance Director, based in the Kuala Lumpur Headquarters, to the Board.

Dividend

The Board intends to issue an interim dividend within 2015. Further announcements will be made in due course.

Chief Executive's Statement (Managing Director)

2014 was a year of significant development for RapidCloud across all metrics including financial performance, operation progress and strategic acquisitions.

Personnel and Product Development

During the period we significantly increased our investment in the Company's sales and technical capabilities increasing total staff numbers to 160 from 58 for the corresponding period last year.

Through continued R&D investment and the acquisition of Exxelnet, RapidCloud now offers complete end-to-end solutions to enterprises including infrastructure hosting, back-end software applications, front-end design and Internet marketing product suites.

Whilst we offer a complete end-to-end solution, staying ahead of our competition is key, and as such R&D and in-house product development is core to our ongoing success.

Our investment in developing new enterprise level products is leading directly to higher value work, and we are 'moving up the value chain'.

Products Launched in 2014 and post period

Within 2014 and the first quarter of 2015, we launched the following products:

RapidDocs is a cloud-based, multi-user Document Management System to manage the workflow, creation, retrieval, archival and searching of massive amount of digital documents or images in real-time across multi-devices from anywhere, anytime.

RapidDMS is a cloud-based Dealership Management & Reward System to assist manufacturers or distributors in managing its dealers' network by providing modules and real-time business intelligence information across multi-devices.

RapidSEO is a Search Engine Optimization solution that optimizes web content and page structure to improve lead conversion rate and the overall performance of a website. RapidSEO will help channel prospective buyers by obtaining top ranking on major search engines.

RapidSEM can structure, control and determine the relevancy of online advertisement campaigns to maximize its full potential, resulting in better lead conversions. With RapidSEM reporting tools, clients can monitor the effectiveness of the marketing campaign and refine it for greater results.

We are already gaining traction with these new products, which importantly move us up the value chain and into important new market segments such as the public sector.

New Contract Wins

We announced several new contract wins throughout the year, which demonstrated the early success of both our new sales teams and enhanced product suite.

The most notable and material contract announced within the year was with the national legislature of a country in Southeast Asia. This contract is to assist in the development of a cloud-based management system which can rapidly process vast amounts of legislation data while providing members of the legislature easy access to required information such as documents, video, profiles and events through a single secure interface.  This win is a significant validation of skill sets and high customer service levels, servicing both the private and public sectors. We see it as testament to our ability to scale our cloud solutions to handle big data requirements.

Outlook

2014 saw progressive expansion in customer numbers, our geographic footprint and our service offering.

With the acquisition of Exxelnet we gained not only a foothold in the key territory of Singapore, but also an expert team of software engineers and digital marketing specialists which are now fully integrated into the enlarged group and whose capabilities broadened our offering to customers.

With a broadened offering comes the opportunity to secure higher value work, and with our enhanced sales team we are starting to see a strong pipeline develop.

This along with catering to our existing valued customer base, has led to an increase in total client numbers and an increased rate of retention at 75%.

Our business continues to be profitable and cash generative, as we continue with deepening our footprint and expansion strategy. The Board expects continued strategic expansion and a strong performance in the current year and beyond.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

Consolidated Statement of Financial Position

As at 31 December 2014

Consolidated Statement of Financial Position (continued)

As at 31 December 2014

Consolidated Statement of Cash Flow

For the year ended 31 December 2014

Consolidated Statement of Cash Flow

For the year ended 31 December 2014 (continued)

Consolidated Statement of Change in Equity

For the year ended 31 December 2014

Consolidated Statement of Change in Equity

For the year ended 31 December 2014 (continued)

The financial statements were approved by the Board of Directors on 2 June 2015 and signed on its behalf by:

David Cotterell

Director

Notes to the Consolidated of Financial Statements (continued)

For the year ended 31 December 2014

1. Accounting policies

RapidCloud International Plc ('RCI' or the 'Company') is a company registered and incorporated in Jersey on 15 March 2013. The address of the registered office is 13-14 Esplanade, St. Helier, Jersey, JE1 1 BD.

The consolidated financial statements of RapidCloud International Plc and its subsidiaries (together the 'Group') are presented in Ringgit Malaysia ('RM'), which is the presentation currency for the consolidated financial statements. The functional currency for each individual entity is the local currency of each individual entity. The primary economic environment for the Group is Malaysia. All amounts are prepared to the nearest thousand (RM'000) except where otherwise indicated.

2. Adoption of new and revised IFRS standards

There were no IFRS standards or IFRIC interpretations adopted for the first time in these financial statements that had a material impact on the Group. The following standards have been adopted for the first time in this financial year.

IFRS 10 - Consolidated Financial Statements

IFRS 11 - Joint Arrangements

IFRS 12 - Disclosure of Interests in Other Entities

Amendment to IAS 36 - Recoverable amount Disclosures for Non-Financial Assets

The Group has not applied in advance the following accounting standards and interpretations, including the consequential amendments that have been issued but are not yet effective. The transfer to these new or revised standards and interpretation is not expected to have a material impact on the financial statements.

IFRS 9 - Financial Instruments

IFRS 15 - Revenue from Contracts with Customers

Amendments to IAS 1 - Disclosure Initiative

Amendments to IAS 16 and IAS38 - Clarification of Acceptable Methods of Depreciation and Amortisation

3. Significant accounting policies

3.1 Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ('IFRS')

3.2 Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at the fair values at the end of each reporting period, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.

3. Significant accounting policies (continued)

3.3 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company, entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Purchase method

Under the purchase method, the results of the subsidiaries acquired or disposed of are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries' net assets are determined and these values are reflected in the consolidated financial statements. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire, plus any costs directly attributable to the business combination.

Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also eliminated unless costs cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

3.4 Goodwill

Goodwill represent the excess of the fair value of the purchase consideration over the Group's share of the fair values of the identifiable assets, liabilities and contingent liabilities of the subsidiaries at the date of acquisition.

Goodwill is measured at cost less accumulated impairment losses, if any. The carrying value of goodwill is reviewed for impairment annually. The impairment value of goodwill is recognised immediately in profit or loss. An impairment loss recognised for goodwill is not reversed in a subsequent period. If, after reassessment, the Group's interest in the fair values of the identifiable net assets of the subsidiaries exceeds the cost of the business combinations, the excess is recognised as income immediately in profit or loss.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject to operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group

of cash-generating units that are expected to benefit from the synergies of the combination.

3. Significant accounting policies (continued)

3.4 Goodwill (continued)

The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs of disposal. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment loss is recognised in profit or loss, unless the asset is carried at a revalued amount, in which such impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash-generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (group of cash-generating units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

3.5 Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entities operate (the functional currency). The consolidated financial information is presented in Malaysia Ringgits ('RM'), which is RCI's functional and presentational currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Foreign operations

Assets and liabilities of foreign operations are translated to RM at the rates of exchange ruling at the end of the reporting period. Revenues and expenses of foreign operations are translated at exchange rates ruling at the dates of the transactions. All exchange differences arising from translation are taken directly to other comprehensive income and accumulated in equity under the translation reserve. On the disposal of a foreign operation, the cumulative amount recognised in other comprehensive income relating to that particular foreign operation is reclassified from equity to profit or loss.

3. Significant accounting policies (continued)

3.6 Financial instruments

Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the time-frame established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value through profit or loss, which are initially measured at fair value.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective interest rate method, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of assets

For certain categories of financial assets, such as trade receivables, a provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets' carrying amount and the recoverable amount. Provisions for impairment of receivables are included in the statement of comprehensive income.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or equity in accordance with the substance of the contractual agreement.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on an effective basis.

The effective interest rate method is a method of calculating the amortised costs of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

3. Significant accounting policies (continued)

3.7 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is provided to write off the cost less the estimated residual value of each asset on a straight line basis over their expected useful lives, as follow:

Fixtures and equipment 5 years

Office equipment 5 - 10 years

Computer equipment 3 years

Motor vehicles 5 years

Renovation 10 years

Signboard 10 years

Sun Microsystems 5 years

The carrying values of property, plant and equipment are reviewed at each statement of financial position date to determine whether there are any indications of impairment. If any such indication exists, the assets are tested for impairment to estimate the assets' recoverable amounts. Any impairment losses are recognised in the statement of comprehensive income.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the statement of comprehensive income.

3.8 Software development expenditure

Software research costs are charged as an expense in the period in which they are incurred. Software development costs are charged as an expense in the period incurred unless RCI believes:

• an asset is create that can be identified (a new software product);

• it is probable that the asset created will generate future economic benefits; and

• the development cost of the asset can be reliably measured.

The capitalised software development costs of the Group are amortised on a straight line basis over the estimated useful lives of the assets which is currently assessed to be 5 years.

Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value of money and the risks specific to the asset.

Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

3. Significant accounting policies (continued)

3.9 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at cost and comprise cash in hand, cash at bank, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts that are repayable on demand are included within borrowings in current liabilities on the statement of financial position. For the purposes of the cash flow statement, cash and cash equivalents also include bank overdrafts if they form an integral part of the Group's cash management.

3.10 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

3.11 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised when the services are supplied and is measured at the fair value of consideration received or receivable net of sales tax, returns, rebates or discounts and after eliminating sales with the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific delivery criteria have been met.

Deferred revenue is recognised to the extent that services have been invoiced but have not yet been delivered and accordingly are recognised as a liability within accruals and deferred income in the statement of financial position.

3.12 Financial income and expenses

Financial income comprises interest receivable on cash balances and deposits. Interest income is recognised when the right to receive payments is established.

Financial expenses comprise interest payable on bank loans, hire purchase liabilities' charges and other financial costs and charges. Interest payable is recognised on an accrual basis.

3.13 Employee benefits

Short term employee benefits

Wages, salaries, paid annual leave, paid sick leave, bonuses and non-monetary benefits are recognised as an expense in the period in which the associated services are rendered by employees.

Post-employment benefits

The Group pays monthly contributions to defined contribution plans. The legal or constructive obligation of the Group is limited to the amount that they agree to contribute to the plan. The contributions to the plan are charged to the statement of comprehensive income in the period to which they relate.

3. Significant accounting policies (continued)

3.14 Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. 

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

4. Significant accounting judgements and estimates

The preparation of financial information in conformity with IFRSs requires management to make judgement, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates may differ from the related actual results. The estimates and assumptions that have a risk of causing material adjustment to the carrying amounts of assets and liabilities within the future financial years are as follows:

Depreciation, useful lives and residual values of property, plant and equipment

The Directors estimate the useful lives and residual values of property, plant and equipment in order to calculate the depreciation charges. Changes in these estimates could result in changes being required to the annual depreciation charges in the statement of comprehensive income and the carrying values of the property, plant and equipment in the statement of financial position.

Amortisation, useful lives and residual values of software development assets

The Directors estimate the useful lives and residual values of software development assets in order to calculate the amortisation charges. Changes in these estimates could result in changes being required to the annual amortisation charges in the statement of comprehensive income and the carrying values of the software development assets in the statements of financial position.

Deferred tax liability

The Group estimates future profitability in arriving at the fair value of the deferred tax assets and liabilities. If the final tax outcome is different to the estimated deferred tax amount, the resulting changes will be reflected in the statement of comprehensive income, unless the tax relates to an item charged to equity in which case the changes in tax estimates will also be reflected in equity.

4. Significant accounting judgements and estimates (continued)

Judgements

 In the process of applying the Group's accounting policies, management has made the following significant judgements, apart from those involving estimations, which may have a significant effect on amounts recognised in the financial statements:

• impairment of assets (including receivables, goodwill, software development expenditure and property, plant and equipment);

• timing of recognition of revenue on project contracts.

5. Revenue

Revenue represents the invoiced value of goods sold and services rendered, net of discounts and returns. Revenue is derived from the Group's principal activity of the provision of computer products and services using cloud computing technology along with the development of software to support the services.

6. Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses. IFRS 8 'Operating Segments' requires disclosure of the operating segments that are reported to the Chief Operating Decision Maker ('CODM'). The CODM at the end of the financial year under review has been identified as the Board of Directors who have responsibility for planning and controlling the activities of the Group. The Group's reportable segment has been identified as the provision of Cloud Computing services. Across the Group there is considered to be a commonality in the nature of services, the type of customer, the methods used to provide services and the regulatory environment.

All operations of the Group are carried out in Southeast Asia. All revenues therefore arise within Southeast Asia. No single external customer amounts to 10 per cent or more of the Group's revenue.

As the Group only has one reportable segment, no further segmental information is disclosed.

7. Profit for the year

Profit for the year has been arrived at after charging/(crediting):

Other income manly consists of a waiver of RM862,000 of amounts due to a director of one of the Company's subsidiary.

8. Auditors' remuneration

During the year the Group obtained the following services from its auditors:

9. Staff costs

The average monthly number of persons employed (including RCI Executive Directors) by the RCI Group, analysed by category, was as follows:

Their aggregate remuneration comprised:

Included in staff costs above is the Group's Executive Directors' remuneration as follows:

Directors' remuneration are included in the following:

10. Income tax expense

The Group's effective tax rate differs from the standard rate of corporation tax of 25% in 2014 (2013: 25%) due to the following differences:

The government of Malaysia awarded Multimedia Super Corridor ("MSC") status to Emerge Systems (M) Sdn. Bhd. On 28 June 2013. Emerge Systems (M) Sdn. Bhd. Has been granted pioneer status by the Ministry of International Trade and Industry for services under the Promotion of Investment Act 1986 in which the statutory income are exempted from tax for a period of five (5) years since 28 June 2013.

11. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:

If the basic earnings per share is diluted by the 650,000 deferred contingent shares to be issued as part of the acquisition of RapidCloud Singapore Pte. Ltd. the dilutive earnings per share would be 19.86 Sen.

12. Property, plant and equipment

Included within property, plant and equipment are motor vehicles acquired under hire purchase agreements with carrying values of RM461,000 (2013: RM632,000)

12. Property, plant and equipment (continued)

13. Software development assets

Included in additions to software development cost during the financial year is as follows:

Software development assets comprise capitalised development work on software products. These costs are internally generated wages and salaries costs arising from the Group's software developers and are recognised only if all the following conditions are met:

• an asset is created that can be identified;

• it is probable that the asset created will generate future economic benefit; and

• the development cost of the asset can be measured reliably.

Once development has been completed the software development intangible assets are amortised on a straight-line basis over their useful lives, which is assessed annually and is currently considered to be 5 years.

The Group assesses at each reporting date whether there is an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

There have been no impairments in the periods under review.

14. Subsidiaries

(a) Group entities

Details of RCI's subsidiary companies are as follows:

There are no significant restrictions on the ability of the subsidiaries to transfer fund to the Group in the form of cash dividends or repayment of loans and advances.

14. Subsidiaries (continued)

(b) Acquisition of subsidiaries

i) Emerge Systems (Thailand) Ltd and Sharksurf Philippines Incorporated

Although the Group owns less than half of the ownership interest in Emerge Systems (Thailand) Ltd ('EST') and Sharksurf Philippines Incorporated ('SPI') and less than half of their voting powers, the Directors have determined that the Group controls these two entities. On 1 January 2014, the Group obtained control of EST and SPI by virtue of written undertakings with other shareholders of EST and SPI and the Group now has full and absolute control of the management and business operations of EST and SPI. EST and SPI have therefore been included in these 2014 financial statements as subsidiaries. In the 2013 financial statements they were treated as associated companies (note 15).

Fair value of identifiable assets and liabilities at 1 January 2014 of EST and SPI:

Goodwill was recognised as a result of the associates becoming subsidiaries on 1 January 2014 as follows:

The acquired EST and SPI subsidiaries contributed RM510,000 in revenue and operating losses of RM831,000 for the year ended 31 December 2014.

ii) PT RapidCloud Indonesia

On 15 January 2014, the Group incorporated a new subsidiary, PT RapidCloud Indonesia, with share capital of RM994,156 (IDR3,657,300,000). This entity is 100% owned by the Group.

14. Subsidiaries (continued)

(b) Acquisition of subsidiaries (continued)

iii) RapidCloud Singapore Pte. Ltd.

On 23 July 2014, the Group acquired Exxelnet Solutions Pte. Ltd. On 30 October 2014, Exxelnet Solutions Pte. Ltd. was renamed to RapidCloud Singapore Pte. Ltd. ('RCSG').

Fair value of identifiable assets acquired and liabilities acquired

Goodwill arising from business combination

Goodwill was recognised as a result of the RCSG acquisition as follows:

RCSG was acquired at a cash consideration of RM2,520,000 payable to the sellers and with deferred consideration (contingent on future profitability over 36 months following the acquisition date) to be settled by up to 650,000 new shares of RCI, which are estimated at RM2,074,000.

The goodwill recognised above comprises expected synergies, revenue growth and future product and market developments. These benefits are not recognised separately from goodwill because they do not meet the criteria for separately identifiable intangible assets.

The acquired RCSG subsidiary contributed RM3,679,000 in revenue and operating profits of RM828,000 from the date of acquisition to 31 December 2014. If the acquisition of RCSG had been completed on the first day of the financial year, the RCSG revenue would have contributed RM6,057,000 to Group revenues and RCSG operating profit would have been RM171,000.

15. Associates

Investment in associates at 31 December were:

 Details of the Group's associate companies are as follows:

On 1 January 2014, the above investments in associates were classified as investments in subsidiaries, as explained in Note 14(b) above.

16. Intangible assets and goodwill

Goodwill acquired in a business combination is allocated for impairment testing to the cash-generating units (CGUs) that are expected to benefit from that business combination, as follows:

Impairment testing of goodwill

RCI tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGU's are determined from value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates and expected changes to forecast profitability. These assumptions have been revised in the year to take account of the current economic environment. Management estimates discount rates using pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to each CGU. Future cash flows are derived from the most recent financial budget approved by management for the next five years, beyond that period cash flows are extrapolated using a growth rate of 3%. The rate used to discount forecast future cash flows is 10% which represents the pre-tax weighted average cost of capital.

In 2014 no impairment charge has been made against goodwill for any CGU (2013: £nil) as the impairment tests resulted in headroom for each CGU. RCI has conducted a sensitivity analysis on the impairment test of each CGU's carrying value and sensitizing the discount rate and reducing the long term growth rate to 0% does not create an impairment charge in any CGU.

17. Trade and other receivables

The Group's normal trade credit term range from 30 to 60 days. Other credit term are assessed and approved on case-by-case basis. The Group has no significant concentration of credit risk that may arise from exposure to a single debtor. Exposure to credit and currency risks related to trade and other receivables is disclosed in note 24. The Directors consider that the carrying amount of trade and other receivables approximates to their fair values. All of the Group's trade receivables have been reviewed for indicators of impairment. 

Certain trade receivables were found to be impaired and a provision of RM601,000 (2013: RM424,000) has been included at the year end, the movement of those provisions are as follows:

Trade receivables above include amounts that are past due at the year-end but against which no allowance for doubtful receivables has been made because management have agreed payment plans with all of the aged debtors and the amounts are still considered recoverable in the long-term.

Analysis of the trade receivables ageing is as follows:

18. Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise the following:

The Group's exposure to interest rate risk for financial assets and liabilities is disclosed in note 24. 

The interest rate of deposits during the financial year is 2.90% (2013: 2.95%) per annum and the maturities of deposits are 30 days (2013: 30 days).

19. Trade and other payables

The normal trade credit terms granted to the Group range from 30 to 60 days. Exposure to liquidity and currency risks related to trade and other payables is disclosed in note 24. The Directors consider that the carrying amount of trade and other payables approximates to their fair values.

20. Hire purchase liabilities

The financial commitments arising from the hire purchase agreements are disclose in note 23.

21. Deferred tax liabilities

22. Share capital

On 23 July 2014, the Group completed the acquisition of Exxelnet Solutions Pte. Ltd. for a total consideration of RM4.59 million of which RM2.52 million was paid in cash and up to RM2.07 million is to be settled by issuing up to 650,000 new RCI ordinary shares. In order to fund the cash required to complete the acquisition, the Group carried out a placing and subscription of 1,111,112 ordinary shares of nil par value at 54p per placing share, raising £600,000 (RM3,234,504). Share issue expenses were RM268,939 resulting in net cash proceeds of RM2,965,565

23. Commitments

(a) Capital commitments

There were no capital commitments contracted for at 31 December 2014 but not yet incurred (2013: Nil).

(b) Operating lease commitments

The Group leases various assets under non-cancellable operating lease agreements. These leases have varying terms, conditions and renewal rights. The lease expenditure charge to the statement of comprehensive incomes is shown in note 7. The future aggregate minimum lease payments under these agreements are as follows:

23. Commitments (continued)

(c) Hire purchase commitments

The Group leases various assets under non-cancellable hire purchase agreements. These lease have varying terms, conditions and renewal rights. The future aggregate minimum lease payments under these agreements are as follows:

24. Financial instruments

24. Financial instruments (continued)

Financial Risk Management Objectives and Policies

The Group's financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group's business whilst managing its risks. The Group does not engage in speculative transactions or hedging transactions.

The Group's principal financial instruments consist of cash and cash equivalents. The main purpose of these financial instruments is to finance the Group's operations. The Group has other financial instruments such as receivables and payables that arise directly from its operations.

The Directors have overall responsibility for the establishment and oversight of the Group's risk management and they recognise that financial risk management is an area in which they may need to develop specific policies should the Group become exposed to further financial risks as the business develops.

The main risks arising from the Group's financial instruments are credit risk, liquidity risk, market price risk, foreign currency risk and interest rate risk. This note presents information about the Group's exposure to each of these risks. The Board reviews and agrees policies for managing each of these risks as and when they arise. Further quantitative disclosures are included throughout the financial information.

Credit Risk

Credit risk arises mainly from the inability of customers to make payments when due. The Group has adopted a policy of only dealing with counterparties that the Directors consider to be credit worthy. Receivables are monitored on an on-going basis via Group's management reporting procedures and action will be taken for long outstanding debts deemed irrecoverable.

The carrying amounts of the financial assets recorded on the statement of financial position at the end of the reporting period represents the Group's maximum exposure to credit risk in relation to financial assets. Cash at banks are placed with financial institutions that the Directors consider to be credit worthy.

24. Financial instruments (continued)

The Group's credit risk exposure relates to the Group's debts and is discussed in greater detail in note 17.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. As part of its overall prudent liquidity risk management, the Group actively manages its cash flows and ensures that sufficient funding is in place to meet the obligations as and when they fall due.

The following table analyses the remaining contractual maturity for financial liabilities. The tables been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

Interest Rate Risk

The carrying amounts of the Group financial instruments that are exposed to interest rate risk are as follows:

Currency Risk

The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than RM. The currencies giving rise to this risk are primarily Singapore Dollar. Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level.

24. Financial instruments (continued)

The carrying amounts of the Group's foreign denominated financial assets are as follows:

Currency Risk (continued)

A 10% strengthening of Ringgit Malaysia against assets held in foreign currencies at the end of the reporting period would have an insignificant impact on the profit before taxation and other comprehensive income.

Market Price Risk

Market price risk is the risk that changes in market prices will affect the Group's income. The objective of market price risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Fair values

Generally, the carrying amounts of all financial assets and liabilities of the Group as disclosed in the notes to the financial information are approximate to their faire values.

Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital with an appropriate level of leverage for the size of the business so as to maintain investor, creditor and market confidence and to sustain future development of the business. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debts. There have been no changes to the Group's approach to capital management during the year ended 31 December 2014.

The Company and Group are not subject to any externally imposed capital requirements.

25. Contingent liabilities

The Group had no contingent liabilities at 31 December 2014.

26. Subsequent events

There were no material events that occurred subsequent to the end of the reporting date to the date of approval of these financial statements.

27. Related party transactions

Key management personnel of the Group are defined as those persons having authority and responsibility for the planning, directing and controlling the activities of the Group, directly or indirectly. Key management personnel compensation comprised:

28. Ultimate controlling party

The Directors consider the controlling party to be Chee Han Wen as he holds or is beneficially interested in 36% of the total ordinary shares issued of 18,480,083.