Half Yearly Report

RapidCloud International Plc

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

Half Yearly Report

RapidCloud International plc (AIM:RCI), the computing services, web-hosting and web-solutions provider based in Southeast Asia, announces its results for the six months ended 30 June 2015.

Financial highlights

· Revenue of RM 7.8m (H1 2014: RM 6.1m)

o Recurring revenue now 43% of total revenues (H1 2014: 48.9%)

o Goods and Services Tax implementation process temporarily slowed non-vital spending in Malaysia, a core revenue centre for the Company

· Gross profit increase of 14% to RM 4.4m (H1 2014: RM 3.9m)

o Gross profit margin of 57% (H1 2014: 64%)

· Operating profit of RM 0.6m (H1 2014: RM 1.2m)

o Certain of our businesses previously accounted for as associates are now consolidated

· Net profit attributable to shareholders of RM 0.8m (H1 2014: RM 1.1m)

· Cash at 30 June 2015 of RM 13.6m (H1 2014: RM6.0m)

· Trade receivables RM 9.9m (H1 2014: 4.7m)

· Intention to pay interim dividend within Q4 2015

Operational highlights

· Strategic partnership with CS Loxinfo PCL, a leading Internet Service Provider

· Hewlett Packard joined the Strategic Partnership within the period under review

· Contract Win with Redbox, the courier service of AirAsia, to implement an online Booking and Tracking portal

· Contract wins with two major international enterprises, a global printing firm and a Southeast Asian airline

· Strong new business pipeline for H2, a typically weightier half in terms of new business conversion for the Company

· Equity subscription raised £1.74m at 54p per ordinary share

· Appointment of Cindy Choo as Finance Director

Post period-end highlights

· Strategic partnership with Oriented Media Group Berhad to develop business-to-business E-commerce platform for sportswear manufacturers, wholesalers and retailers across Asia

o Contract has significant scale potential

· Completion of Sales and Operational integration with RapidCloud Singapore (formerly known as Exxelnet Solutions Pte Ltd).

· Introduction of Digital Marketing as a new business unit

Raymond Chee, Chief Executive of RapidCloud, commented: 

"The first half of the year saw us continue to grow revenues, achieving RM7.8m. This was despite a slowdown in non-essential spending generally across Malaysia following the implementation of the Goods and Services Tax (similar to VAT) on 1 April 2015. I am pleased to say that this destabilising period has now passed. The successful execution of our integration plan with RapidCloud Singapore enables us to quickly deliver a host of new products and services whilst the formation of the Digital Marketing business unit provides a strong footing to upsell services that enables our customers to effectively promote their brands online."

"We continue to invest in our cloud infrastructure and the strategic partnerships we have made put us in a strong position as a Company. The Company has historically produced more of its revenues in the second half. The combination of this, the return to normality of trading following the impact of the Goods and Services Tax and the number of attractive projects embarked upon and in the pipeline lead the Board to be confident of achieving market expectations for the current financial year."

Enquiries

About RapidCloud

RapidCloud, provides computing services, web-hosting and proprietary web-solutions, such as web-site building and e-commerce solutions. The Company is based in Southeast Asia and is one of the few solutions providers in the region to deliver its offerings through all three available Cloud Computing segments, i.e. Software-as-a-Service, Infrastructure-as-a-Service and Platform-as-a-Service.

Formed in 1999 the Company has a well-established cloud offering with a customer base of over 42,000. These are predominantly SMEs but also include blue-chip clients such as Deloitte, BAE Systems and Canon, for which RapidCloud's extensive R&D department creates bespoke software solutions.

RapidCloud currently has operations in Malaysia, Indonesia, Singapore, Thailand and the Philippines. According to industry research commissioned by RapidCloud from Frost & Sullivan in 2013, the Cloud Computing industry in Asia Pacific is expected to grow at a CAGR of 49.6% between 2013 and 2015, giving a market size of US45.6 billion by 2015. RapidCloud International plc was admitted to AIM on 14 August 2013. For further information, please visit www.rapidcloudasia.com

Chief Executive's Review

Financial performance

We were pleased to deliver a 28% increase in revenues over the comparative period in 2014, which itself had seen a 26% rise over the same period last year. Revenues for the first half of 2015 increased to RM 7.8m (H1 2014: RM 6.1m) due to both organic growth and the contribution of the newly acquired subsidiary, RapidCloud Singapore Pte Ltd ('RCSG'). The proportion of revenues which were recurring remained broadly steady at 43% (H1 2014: 48.9%).

Gross profit for the period increased 14% to RM 4.4m (H1 2014: RM 3.9m), with our gross profit margin decreasing to 57% (H1 2014: 64%) as the result of increase in hosting charges due to additions of new subsidiaries. Operating profit was RM 0.6m (H1 2014: RM 1.2m). Profit for the financial period after tax and basic earnings attributable to ordinary shareholders RM 0.8m (H1 2014: RM 1.1m).

Pre-tax profit decreased from RM1.15m to RM595,000 due to administration costs associated with the consolidation of associates becoming subsidiaries for Thailand and the Philippines, and the administration costs of our new subsidiary in Singapore and Indonesia.

Furthermore, although overall revenue for the group was higher than the comparative period last year, we experienced slower sales in Malaysia. This was due to the newly implemented Goods & Services Tax on 1 April 2015, which is the equivalent of VAT in the UK. During the implementation process organizations across the country could be seen to be delaying on non-vital spending. This somewhat chaotic period has now passed and business life has returned to normal in the territory.

In June we announced we had raised £1.74m (before expenses) by way of a subscription for 3,231,138 new ordinary shares by the Southeast Asian asset management firm, Corston-Smith Asset Management.

During 2014, the company made significant progress, both in terms of financial performance and operational capabilities. In particular, the earnings enhancing acquisition of Exxelnet Solutions Singapore, now renamed RapidCloud Singapore, has provided the Company new products and skillsets and accelerated its growth further.

Since the beginning of 2015, the Company has continued to invest in sales and marketing functions and recently launched several new software products specifically designed for the enterprise segment, significantly expanding its addressable market.

Our cash position at 30 June 2015 was RM 13.6m (H1 2014: RM6.0m), with trade receivables of RM 9.9m (H1 2014: 4.7m).

Further to the announcement made in our final results for the year ended 31 December 2014, published on 3 June 2015, the Company intends to pay an interim dividend within 2015. The intention is to pay this within the final quarter of this year. Further announcements will be made in due course.

Operational Review

The period saw us convert several new business wins with major, and in some cases, global organisations and successfully execute on our stated strategy to move up the value chain in terms of higher margin and higher value projects. We continue to pick up a steady stream of day-to-day corporate deals which alone, we are confident, will see us achieve management expectations for the full year.

There were however a number of substantial projects for which the onset was delayed due to the Goods and Services Tax slowdown in Malaysia. I am pleased to report the majority of these have now commenced.

Furthermore, there are a number of new business opportunities which we expect to be awarded within the remainder of this year. This follows businesses emerging from the period of the Good and Services Tax implementation and putting work out to tender.

Most significantly, we are waiting for the outcome of a number of sizeable deals being handled by key RapidCloud Executives. A positive conversion rate in this regard would have significant and positive effects on full year revenues.

It is worthy of note that RapidCloud traditionally converts a larger proportion of new business in the second half the year. Management expects this trend to be repeated for this calendar year.

I am also pleased to report that the geographic expansion completed last year and the subsequent investment required to do this, has now begun to yield a significant level of new cross selling opportunities across the group.

Strategic Partnership with CS Loxinfo and HP

In February we announced a strategic partnership and distributorship with CS Loxinfo PCL., a leading systems integrator and Internet Services Provider (ISP) in Thailand, for an initial period of three years. CS Loxinfo is one of the longest standing and most recognised ISP brands in Thailand, providing Internet data centre services, leased line, broadband and satellite services for domestic and international communications in Thailand. They have a considerable and wide-reaching customer base.

The partnership allows CS Loxinfo to offer its large-scale enterprises and SME customers a selection of RapidCloud's enterprise cloud applications, beginning with RapidCRM, the Sales Automation and Management tool, on a revenue sharing basis. RapidCRM will be offered to enterprises in a choice of public-cloud or on-premise cloud environment.

Teleco companies play a central role in our growth strategy and we expect this partnership to accelerate the Company's presence within the Thailand enterprise market. We were delighted to announce in June, that Hewlett Packard has joined the partnership through the provision of their HP Helion OpenStack ("HP Helion") platform with multiple large-bandwidth redundant connections to International and domestic Internet gateways over a secure and scalable on-premise or public cloud delivery environment.

All three parties within this strategic partnership complement each other to deliver secure and scalable cloud services with a wide variety of 'Software As A Service' offerings, with RapidCloud receiving a share of the software revenue and CS Loxinfo and HP receiving either project-based installation fees or 'Infrastructure As A Service' revenue over the term of the strategic partnership.

Redbox, Air Asia

In April, we announced a contract with RedBox, the award-winning courier service of Air Asia, for an initial period of five years.

The agreement sees RapidCloud designing, building and operating a cloud-based Logistic Management System (LMS) for RedBox, with the proprietary LMS will providing a complete end-to-end solution to monitor Redbox's entire shipment network with a fully integrated online Booking & Tracking portal.

RedBox has contracts with several of the largest e-commerce enterprises in Asia Pacific, and is experiencing rapid growth. Industry forecasts state, Asia Pacific will surpass North America as the main e-commerce market in the world within 2015, at USD$681.2 Billion1.

1 http://www.emarketer.com/Article/Global-B2C-Ecommerce-Sales-Hit-15-Trillion-This-Year-Driven-by-Growth-Emerging-Markets/1010575

RapidCloud will receive royalty revenue from each transaction processed by the LMS. The Company envisages that the agreement will generate revenues for RapidCloud of at least £150,000 in the first year with material increases thereafter.

Contracts with major two international enterprises

In May we announced contract wins with one of the world's leading printing enterprises and a major Southeast Asian airline, for our newly launched PortalWEB product worth an aggregate £180,000 in the first year.

For the printing enterprise RapidCloud will build a framework and workflow system to handle internal purchase requisition, purchase orders, invoices, budgeting, contracts and assets management to automate the internal procurement approval processes.

For the airline, RapidCloud will build an internal Training Management System ("TMS") on its PortalWEB platform. The TMS application will be developed to manage job posting, job recruitment, coaching, candidate profiling and on-the-job assessments. Job seekers, recruiters, trainers and administrative users will be granted different access controls and functionality to perform individual tasks. Dashboards for Business Intelligence analysis will provide an overview of the various key performance indicators of the entire placement processes enabling company-wide decision making.

Post Period End - Agreement with OMEDIA

Post the period end, we announced a significant partnership agreement with the Oriented Media Group Bhd ("OMEDIA") to develop a comprehensive business-2-business e-commerce platform for small to medium sportswear manufacturers, wholesalers and retailers across Asia.

OMEDIA is a Malaysia-based company focussed on software and services across the logistics and digital media industries. The logistics business offers web-based management systems to manage complex logistics networks while the digital media business offers a range of services including publishing massive multiplayer online games internet advert serving and the development of 'edutainment' related products and services. OMEDIA is listed on the Malaysian stock exchange with a market capitalisation of RM53.4m as of 18 September 2015.

Under the 24 month agreement, the Company will supply all the necessary hardware and software for OMEDIA to develop an Online Sportswear Trading Platform to enable manufacturers, initially across the Fujian province of the Peoples Republic of China ("PRC") to market and trade their products with wholesalers and retailers directly online.

The PRC e-commerce market is growing rapidly with global ecommerce sales volume increasing from USD561.0 billion in 2010 to USD1.2trillion in 2014. In particular, the ecommerce market in PRC is estimated to contribute approximately 40% of the global e-commerce market, having recorded a Compound Annual Growth Rate of 62% over the last six years2.

2 Independent Market Research Report, Smith Zander International, Malaysia

Agreement Value

The agreement is worth a minimum of £760,000 for hosting and maintaining the Online Sports Trading Platform. However, the agreement could be worth up to £3.39m dependent upon the adoption of the additional modules offered by RapidCloud. The Company expects receipt of revenues on this contract in the final quarter of this year.

Outlook

The first half of the year saw us continue to grow revenues, achieving RM7.8m. This was despite a slowdown in non-essential spending generally across Malaysia following the implementation of the Goods and Services Tax (similar to VAT) on 1 April 2015. I am pleased to say that this destabilising period has now passed. The successful execution of our integration plan with RapidCloud Singapore enables us to quickly deliver a host of new products and services whilst the formation of the Digital Marketing business unit provides a strong footing to upsell services that enables our customers to effectively promote their brands online

We continue to invest in our cloud infrastructure and the strategic partnerships we have made put us in a strong position as a Company. The Company has historically produced more of its revenues in the second half. The combination of this, the return to normality of trading following the impact of the Goods and Services Tax and the number of attractive projects embarked upon and in the pipeline lead the Board to be confident of achieving market expectations for the current financial year.

Consolidated Interim Statement of Comprehensive Income

for the six months ended 30 June 2015

Consolidated Interim Statement of Financial Position

as at 30 June 2015

Consolidated Interim Statement of Cash Flow

six months ended 30 June 2015

Consolidated Interim Statement of Cash Flow (continued)

six months ended 30 June 2015

Consolidated Interim Statement of Changes in Equity

six months ended 30 June 2015

Notes to Financial Statements

six months ended 30 June 2015

1. Accounting policies

This consolidated interim financial information, which is unaudited for the half-year ended 30 June 2015, has been prepared on a consistent basis in accordance with the International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') issued by the International Accounting Standards Board ('IASB').

They do not contain all of the information required for the full financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2014. These interim financial statements do not constitute statutory accounts within the meaning of the Companies Act.

This consolidated interim financial information has been prepared in accordance with AIM Rules for Companies and IAS 34 'Interim Financial Reporting' and is presented in Malaysia Ringgit ('RM') which is the currency of the primary economic environment in which the Group operates. The functional currency for each individual entity is the local currency of that individual entity. All amounts are prepared to the nearest thousand (RM'000) except where otherwise indicated.

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 1BD.

2. 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 period under review is 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 South East Asia. All revenues therefore arise within South East Asia. No single external customer amounts to 10 per cent or more of the Group's revenues.

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

3. 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 3.97 Sen (31 December 2014: 19.86 Sen; 30 June 2014: 6.50 Sen).

4. Property, plant and equipment

4. Property, plant and equipment (continued)

4. Property, plant and equipment (continued)

5. Software development expenditure

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 development and are recognised only if all the following conditions are met:

· an asset is created that can be identified;

· it is possible 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 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.

There have been no impairments in the period under review.

6. Trade and other receivables

The Group's normal trade credit terms range from 30 to 60 days, however, the Group's Government and Multinational customers enjoy credit terms of 90 to 120 days. Other credit terms are assessed and approved on a case-by-case basis. The Group has no significant concentration of credit risk that may arise from exposure to a single receivable. 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. There was no impairment of trade receivables for the six months to 30 June 2015 (31 December 2014: RM130,000; 30 June 2014: RM Nil).

Trade receivables above include amount that are past due at the period-end but against which no allowance for doubtful receivables has been made because there has not been any significant change in credit quality and the amounts are still considered recoverable.

7. Share Capital

Authorised at 30 June 2015

An unlimited number of ordinary shares of no par value each

On 5 June 2015, the Group has raised £1,744,815 (RM10,333,664) by way of subscription for 3,231,138 new ordinary shares by the Southeast Asia asset management firm, Corston-Smith Asset Management Sdn. Bhd.

8. 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 statement.