Half Yearly Report

NetDimensions (Holdings) Limited

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

Interim Results for the six months ended 30 June 2013

NetDimensions (LSE AIM: NETD; OTCQX: NETDY), a global provider of enterprise-class performance, knowledge and learning management systems, announces its interim results for the six months ended 30 June 2013.

Financial Highlights

· 10% revenue growth to US$6.5M (H1 2012: US$5.9M)

· 30% revenue growth in our global hosted secure Software as a Service ("SaaS") offering to US$2.6M (H1 2012: US$2.0M)

· 25% increase in deferred revenue to US$5.5M (H1 2012: US$4.4M)

· 13% increase in gross profit to US$6.0M (H1 2012: US$5.3M)

· 31% increase in net cash to US$10.2M (H1 2012: US$7.8M)

Operations Highlights

· US$6M raised from a highly successful share placing in May 2013

· US$5M finance facility with Silicon Valley Bank

· Formation of NetDimensions Healthcare on the back of the US$3.5M acquisition of eHealthcareIT in March 2013

· Headcount increased by 34 (28%) to 155 with Sales-quota carrying heads increasing by 12 (71%) to 29

· Appointment of Key Senior Executives; Chief Financial Officer, Chief Sales Officer, Chief Human Resources Officer, Global Alliances & Key Accounts Executive and General Counsel

· 34 new clients added through direct and reseller channels including DB Schenker, Babcock, BCD Travel, Digicel Group, Emdeon, The Nature Conservancy, Musculoskeletal Transplant Foundation

· New product launched for NetDimensions Analytics, a powerful SaaS solution for learning, performance & talent data analytics

· Rated as a 'Core Leader' in Elearnity's 9-Grid™ report for Learning Management Systems

Roger Durn, Chairman of NetDimensions, commented: "The six months to 30 June 2013 marked a significant period in the Company's development. In the period the Board commenced the implementation of the 3 year Business plan to substantially grow sales revenues, launched NetDimensions Healthcare on the back of the eHealthcareIT acquisition and completed a highly successful placing raising US$6M net of fees. In addition, the Company continued to make solid progress with GAAP revenue increasing to US$6.5M (H1 2012: US$5.9M) the best ever result of any first half interim period in the Company's history.

"We are extremely pleased with the recruitment and on-boarding of high quality new hires and believe we have significantly strengthened and expanded our team. The new hires are a key component of the Business plan and will help to ensure we meet our growth objectives going forward.Trading is currently in line with market expectations and with the increased investment we expect revenues to continue to grow."

"We continue to explore new markets and opportunities for expansion and with a strong cash balance we have the funding in place to execute quickly on any expansion plan or business opportunity."

For further information:

About NetDimensions

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

NetDimensions' flagship product line, the NetDimensions Talent Suite, enables companies, government agencies and other organizations to personalize learning, share knowledge, enhance performance, foster collaboration, and manage compliance programs for employees, customers, partners and suppliers.

Recognized as one of the talent management industry's top-rated technology suppliers in overall customer satisfaction, NetDimensions has been chosen by leading organizations worldwide including ING, Cathay Pacific, Hunter Douglas, Chicago Police Department, Delphi Automotive, Progress Software, and Fresenius Medical Care..

NetDimensions is ISO 9001 certified and NetDimensions hosted services are ISO 27001 certified. For more information, visit www.NetDimensions.com

Chairman's Statement 2013 Interims

The six months to 30 June 2013 marked a significant period in the Company's development. In the period the Board commenced the implementation of a 3 year Business plan to substantially grow sales revenues, launched NetDimensions Healthcare on the back of the eHealthcareIT acquisition and completed a highly successful share placing, raising US$6M net of fees. In addition, the Company continued to make solid progress with GAAP revenue increasing to US$6.5M (H1 2012: US$5.9M), the best ever result of any first half interim period in the Company's history. Furthermore, in September the Company entered into a US$5M finance facility with Silicon Valley Bank ("SVB") which is available to the Company for acquisition funding

Financial Highlights

· 10% revenue growth to US$6.5M (H1 2012: US$5.9M)

· 30% revenue growth in our global hosted secure Software as a Service ("SaaS") offering to US$2.6M (H1 2012: US$2.0M)

· 25% increase in deferred revenue to US$5.5M (H1 2012: US$4.4M)

· 13% increase in gross profit to US$6.0M (H1 2012: US$5.3M)

· 31% increase in net cash to US$10.2M (H1 2012: US$7.8M)

Financial Summary

The financial results for the period ending 30 June 2013 saw continued progress with GAAP revenue increasing by 10% to US$6.5M (H1 2012 US$5.9M). The revenue for the period included US$0.2M from NetDimensions Healthcare, our new Healthcare division formed on the 1st March 2013 on the back of the acquisition of eHealthcareIT.

The Group continues to improve direct sales activity and in the period the proportion from direct clients was US$5M representing 83% (H1 2012 72%) of total invoiced sales.

The North America region became the best performing region for the period accounting for 44% of Group revenues. The North America region included 4 months contribution from the new Healthcare division. EMEA comprised 40% of Group revenues and Asia Pacific including China 10%. The rest of the world made up 6%.

The Group saw substantial growth in the North America market with revenues up 30% to US$2.9M (2011: US$2.2M) as we saw continued growth in our global secure SaaS service along with an immediate contribution from our new Healthcare division. The new Healthcare division is currently performing strongly and is receiving substantial investment targeted towards the sales organisation and sales quota carrying hires. The Healthcare division provides us with an exciting opportunity to substantially grow sales revenues in the fast growing U.S. healthcare market. In addition, the Group ended the period with a strong deferred revenue balance of US$5.5M (H1 2012: US$4.4M), some 35% higher than the prior period balance.

The Group continues to focus on supplying software via its global hosted secure SaaS service and we are pleased to report that revenues from this product offering increased by 30% to US$2.6M (H1 2012: US$2.0M). The Group also continued to develop its professional services business with revenues increasing by 45% in the period to US$1.6M (H1 2012: US$1.1M).

The Group's adjusted loss before tax, excluding net foreign exchange gain / (loss) (US$0.2M), intangible asset amortisation (US$0.2M) and non-cash share-based payments (US$0.1m), was US$2.7M (H1 2012: US$0.1M). NetDimensions' loss before tax was US$3.2M (H1 2012: US$0.5M). The increased loss in the period is a result of substantially increased investment in the Company as part of the 3 year Business plan.

Cash used in operating activities was US$1.5M in the period (H1 2012: US$0.9M generated) as the Group made a total Investment of US$1.1M in the Company, in line with the Business plan. Net increase in cash for the period after US$1.2M in cash consideration payments for the acquisition of eHealthcareIT and US$6M net receipts from the share placing was US$3.3M (H1 2012: US$0.9M). The Group's cash balance remained healthy at US$10.2M (2011: US$7.8M).

Operations Review

In the period the Board commenced the implementation of the 3 year Business plan to substantially increase market share, targeting the heavily compliant and highly regulated industries sector within the Talent Management Systems ("TMS") market. This multi-year plan involves substantial on-going investment in additional headcount across all functions globally with an emphasis on quota carrying sales heads, increased spend on marketing, increasing office space in Atlanta, Hong Kong and Manila, the establishment of new offices & legal entities in key strategic markets and upgraded data center facilities. In addition, the plan also involves selective acquisitions that bring complementary offerings in terms of market reach, technology, products or services.

I am pleased to report on the following progress:

· US$6M raised from highly successful share placing in May 2013

· US$5M finance facility with SVB completed in September 2013

· Formation of NetDimensions healthcare on the back of the US$3.5M acquisition of eHealthcareIT in March 2013

· Headcount increased by 34 (28%) to 155 with Sales quota carrying heads increasing by 12 (71%) to 29

· Appointment of Key senior Executives; Chief Financial Officer, Chief Sales Officer, Chief Human Resources Officer, Global Alliances & Key Accounts Executive and General Counsel

· 34 new clients added through direct and reseller channels including DB Schenker, Babcock, BCD Travel, Digicel Group, Emdeon, The Nature Conservancy, Musculoskeletal Transplant Foundation

· New enlarged offices in Hong Kong and Atlanta

· New product launched for NetDimensions Analytics, a powerful SaaS solution for learning, performance & talent data analytics.

· NetDimensions rated as a 'Core Leader' in Elearnity's 9-Grid™ report for Learning Management Systems

We are extremely pleased with the recruitment and on-boarding of high quality new hires and we have significantly strengthened and expanded our team. The new hires are a key component of the Business plan and will help to ensure we meet our growth objectives going forward.

The acquisition of eHealthcareIT was completed on the 1st March 2013 for a total consideration of US$3.5M comprising US$2.5M cash and US$1M in stock. The cash consideration comprises US$1.25M on completion followed by deferred consideration of US$0.75M to be paid in 4 equal installments commencing in June 2013 and US$0.5M on an earn out. The acquisition is in line with NetDimensions' strategy to become a premier global provider for talent management solutions for highly-regulated industries. On acquisition the eHealthcareIT business immediately became NetDimensions Healthcare, our new dedicated division providing talent, learning and compliance management solutions specifically to the healthcare market internationally.

The integration of eHealthcareIT and the formation of the new Healthcare division have been completed and I am pleased to report that the new division is performing above expectations. Investment in this division is accelerating with a focus on the sales organisation and sales quota carrying hires.

We are delighted to be partnering with SVB and look forward to working closely with them in developing our Business. The Company has commenced the multi-year Business plan to substantially increase sales revenues. In addition to investing for organic growth the Company intends to pursue additional selective acquisitions that bring complementary offerings in terms of market reach, technology, products or services. The SVB facility follows on from the highly successful share placing in May of this year which raised US$6M net of fees. The Company now has approximately US$14M in funding to pursue its Business plan and accelerate investment to drive growth. The Company intends to use the SVB facility to fund its acquisition strategy.

Outlook

The Board will continue to increase investment in the Company as part of the 3 year Business plan to substantially increase sales revenue. The Company aims to be a leading provider (by sales revenue) of TMS and related compliance solutions within the sub-sector of highly regulated industries.

Trading is currently in line with market expectations and with the increased investment we expect revenues to continue to grow. We continue to explore new markets and opportunities for expansion and with a strong cash balance and the addition of the SVB facility we have the funding in place to execute quickly on any expansion plan or business opportunity. 

NETDIMENSIONS (HOLDINGS) LIMITED

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2013

NETDIMENSIONS (HOLDINGS) LIMITED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2013

NETDIMENSIONS (HOLDINGS) LIMITED

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

NETDIMENSIONS (HOLDINGS) LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2013

Attributable to equity holders of the Company

NETDIMENSIONS (HOLDINGS) LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2013

Attributable to equity holders of the Company

NETDIMENSIONS (HOLDINGS) LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2013

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1 GENERAL INFORMATION

NetDimensions (Holdings) Limited 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 activity 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 2012 and 2013 have not been audited.

2 BASIS OF PREPARATION AND ACCOUNTING POLICIES

The Company has a financial year end date of 31 December. This condensed consolidated interim financial information for the six months ended 30 June 2013 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 2012, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Boards ("IASB").

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2012, 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.

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

 (a) Effect of adopting new standards, amendments to standards and interpretation

The following new standards, amendments to standards and interpretation are also mandatory for the Group's financial year beginning on 1 January 2013.

The application of the above new or revised IFRSs has had no material effect on the Group's results and financial position, except for certain disclosures in respect of the amendments of IAS 1.

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(b) New Standards, amendments to standards and interpretation that have been issued but are not effective

The following amendments to standards and interpretation have been issued but are not effective for the financial year beginning on 1 January 2013 and have not been early adopted by the Group:

The Group will adopt the above new or revised standards, amendments and interpretation 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 statements 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 2012, with the exception of changes in estimate that are required in determining the provision for income tax.

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

4 Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow interest rate risk and price 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 2012.

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

5 REVENUE AND SEGMENT INFORMATION

Revenue represents income from software licensing and the provision of hosting, support and maintenance, software customisation and implementation services 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, while 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, finance costs and impairment loss on available-for-sale financial assets are not allocated to individual segment. Segment assets consist primarily of property, plant and equipment, intangible assets, accounts and other receivables, prepayments and deposits. Cash and bank balances for corporate use and available-for-sale financial assets are excluded from segment assets.

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

5 REVENUE AND SEGMENT INFORMATION (CONTINUED)

Segmental information for the six months ended 30 June 2013:

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

5 REVENUE AND SEGMENT INFORMATION (CONTINUED)

Segmental information for the six months ended 30 June 2012:

To be consistent with internal reporting, Asia Pacific is presented as a new reportable segment and certain income and expenses are reallocated since second half for the year of 2012. The relevant information for the six months ended 30 June 2012 has also been presented to conform to the current year's allocation basis.

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

6 OPERATING LOSS

Operating loss is stated after charging the following:

Note: The provision of impairment of available-for-sale financial assets are recognised in operating expenses.

7 FINANCE INCOME, NET

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

8 LOSS PER SHARE

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

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares granted under from the Company's share options scheme.

The adjustment for the dilutive potential ordinary shares for share option is the number of shares that could have been acquired at fair value (determined as the average periodic market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as below is compared with the number of shares that would have been issued assuming the exercise in full of the share options.

Diluted loss per share equals basic loss per share as the exercise of the outstanding share options would be anti-dilutive for the six months ended 30 June 2013 and 2012.

9 PROPERTY, PLANT AND EQUIPMENT

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

10 INTANGIBLE ASSETS

11 Goodwill

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

12 SHARE CAPITAL

Notes:

(a) Pursuant to the terms and conditions of the letter of appointment with the non-executive directors of the Company, an aggregate of 50,000 and 26,250 ordinary shares of the Company were allotted to them as part of their remuneration package during the periods ended 30 June 2013 and 30 June 2012 respectively. The fair values of issued shares amounting to US$44,595 and US$8,775 have been recognised in the condensed consolidated income statement.

(b) During the period ended 30 June 2012, 75,000 ordinary shares of the Company were allotted to an executive director as part of his incentive rewards. The fair value of issued shares amounting to US$25,071 has been recognised in the condensed consolidated income statement.

(c) During the periods ended 30 June 2013 and 30 June 2012, an aggregate of 232,500 and 227,000 share options were exercised with proceeds of US$63,166 and US$61,484, respectively. The weighted average market value per share at the date of exercise for these share options exercised was 47.5 pence.

(d) On 1 March 2013, the Company issued 1,500,000 new ordinary shares to the shareholders of eHealthcareIT LLC as part of purchase consideration of the Healthcare business. The ordinary shares issued have the same rights as existing ordinary shares in issue. The fair value of these shares amounted to US$989,973.

NETDIMENSIONS (HOLDINGS) LIMITED

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

12 SHARE CAPITAL (CONTINUTED)

(e) On 8 May 2013, the Company and the placing agent ("Panmure Gordon") entered into a Placing Agreement pursuant to which the Company appointed Panmure Gordon, as an agent to procure independent third parties to purchase 10,750,000 new ordinary shares at the placing price of GBP38 pence per share. The transaction was completed on 15 May 2013. Accordingly, 10,750,000 ordinary shares of US$0.001 each were issued at a premium of US$0.589 each. The proceeds from issue of these new ordinary shares of US$6,331,750, net of the direct transaction cost of US$261,724 was credited to the share capital and share premium account. These new ordinary shares rank pari passu in all respects with the existing ordinary shares.

13 EQUITY SETTLED SHARE-BASED PAYMENTS

Pursuant to the share option scheme (the "Plan") approved and adopted on 18 September 2000, the Board of Directors of the Company may offer eligibleemployees, directors and sales agentsrights 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 2010, 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 6,000,000 ordinary shares. 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 1 year to 5 years from the date of grant. If the options remain unexercised 10 years after the date of grant, the options will expire. Optionsare forfeited if the relevant option holder leaves the Group before the options vest.

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