TIDMRCI
RNS Number : 0219P
RapidCloud International PLC
03 June 2015
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
GBP3.18m) (2013: RM 11.34 million)
-- Gross profit increased by 14% to RM 9.67 million
(approximately GBP1.73m) (2013: RM8.46 million )
-- Gross margin at 54% (2013: 75%)
-- Operating profit growth decreased by 34% to RM 3.26 million
(approximately GBP0.58m) (2013: RM 4.95
million)
-- Profit for the financial period after tax and basic earnings
attributable to ordinary shareholders
increased by 45% to RM 3.67 million (approximately GBP0.66m)
(2013: RM 2.53 million
-- EPS: 20.59sen (GBP0.04)
-- Cash at year end RM 3.93 million (approximately GBP0.70m) (2013: RM 6.24 million).
Operational highlights (including post-period end
highlights)
-- Earnings enhancing acquisition of web development firm
Exxelnet Solutions Pte. Ltd. (now named
RapidCloud Singapore Pte. Ltd.) for c. GBP0.95m
-- 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, Philippine
Institute 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."
RapidCloud International investorqueries@rapidcloudasia.com
Plc
Raymond Chee, Managing
Director
David Cotterell, Chairman
WH Ireland, Nominated Adviser Tel: +44 (0)20 7220
and Broker 1666
Adrian Hadden
Mark Leonard
Walbrook, Financial PR Tel: 44 (0)20 7933
and IR 8792
Paul Cornelius rapidcloud@walbrookpr.com
Guy McDougall
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 GBP0.66m) (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
Notes Year ended Year ended
31 December 31 December
2014 2013
RM'000 RM'000
------------- -------------
Continuing operations
Revenue 5 17,820 11,341
Cost of sales (8,146) (2,879)
------------- -------------
Gross profit 9,674 8,462
Other operating income 1,149 446
Administrative expenses (7,559) (3,900)
Share of losses from
associate companies 15 - (54)
------------- -------------
Operating profit 3,264 4,954
Finance costs (26) (22)
Costs relating to the
Admission to AIM Market - (1,770)
------------- -------------
Profit before tax 3,238 3,162
Income tax expense 10 (50) (634)
------------- -------------
Profit for the year 7 3,188 2,528
Other comprehensive income
Exchange differences
on translation of foreign
operations. (100) -
Total comprehensive income 3,088 2,528
Profit attributable to:
Equity owners of the
parent company 3,671 2,528
Non-controlling interests (483) -
------------- -------------
3,188 2,528
Total comprehensive income
attributable to:
Equity owners of the
parent company 3,609 2,528
Non-controlling interests (521) -
------------- -------------
3,088 2,528
------------- -------------
Earnings per share
Basic (Sen) 11 20.59 14.55
Diluted (Sen) 11 19.86 14.55
------------- -------------
Consolidated Statement of Financial Position
As at 31 December 2014
Notes As at 31 As at 31
December December
2014 2013
RM'000 RM'000
---------- ----------
ASSETS
Non-current assets
Property, plant and equipment 12 5,215 3,179
Software development
assets 13 2,491 2,218
Investment in associate
companies 15 - 1,071
Intangible assets and
goodwill 16 5,839 -
13,545 6,468
---------- ----------
Current assets
Trade and other receivables 17 11,191 6,508
Amounts owed by associates - 1,583
Cash and cash equivalents 18 3,931 6,238
Taxation recoverable 68 -
---------- ----------
15,190 14,329
---------- ----------
Total assets 28,735 20,797
---------- ----------
LIABILITIES
Current liabilities
Trade and other payables 19 2,393 869
Hire purchase liabilities 20 62 79
Taxation payable - 821
---------- ----------
2,455 1,769
---------- ----------
Non-current liabilities
Hire purchase liabilities 20 457 612
Deferred tax liability 21 86 73
---------- ----------
543 685
---------- ----------
Total liabilities 2,998 2,454
---------- ----------
Net assets 25,737 18,343
---------- ----------
Consolidated Statement of Financial Position (continued)
As at 31 December 2014
Notes As at 31 As at 31
December December
2014 2013
RM'000 RM'000
---------- ----------
EQUITY
Capital and reserves
attributable to equity
holders
Share capital 22 24,609 21,643
Shares to be issued 14 2,074 -
Merger reserve (13,260) (13,260)
Currency translation (62) -
reserve
Retained earnings 13,056 9,960
---------- ----------
26,417 18,343
Non-controlling interest (680) -
---------- ----------
25,737 18,343
---------- ----------
Consolidated Statement of Cash Flow
For the year ended 31 December 2014
Year ended Year ended
31 December 31 December
2014 2013
Notes RM'000 RM'000
---------------------------- -------------
Cash flows from operating
activities
Profit before tax 3,238 3,162
Adjustments for non-cash
items:
Depreciation 12 683 271
Amortisation of software
development assets 13 931 703
Amortisation of website
assets 16 1 -
Gain on disposal of equipment (60) (78)
Equipment written off 2 -
Impairment of trade receivables 17 62 130
Foreign exchange loss/(gain) 46 (187)
Waiver of loan by subsidiary's (862) -
director
Share of loss from associate
companies 15 - 54
Finance income (52) (82)
Finance costs 26 22
---------------------------- -------------
Operating profit before
working capital changes 4,015 3,995
Increase in trade and other
receivables 17 (1,216) (2,662)
Decrease in trade and other
payables 19 (1,262) (307)
Cash generated from operations 1,537 1,026
Interest paid (26) (22)
Interest received 52 82
Tax paid (929) (143)
---------------------------- -------------
Net cash from operating
activities 634 943
---------------------------- -------------
Cash flows from investing
activities
Purchase of property, plant
and equipment 12 (2,060) (2,617)
Proceeds from sale of property,
plant and equipment 78 448
Software development expenditure 13 (1,204) (1,069)
Advances to associates - (1,256)
Acquisition of subsidiaries
(net of cash received) 14 (2,465) -
Net cash used in investing
activities (5,651) (4,494)
---------------------------- -------------
Consolidated Statement of Cash Flow
For the year ended 31 December 2014 (continued)
Year ended Year ended
31 December 31 December
2014 2013
Notes RM'000 RM'000
------------ ------------------------------
Cash flows from financing
activities
Dividends paid (575) (500)
Advances from subsidiary's
director 529 -
Repayment of hire purchase
liabilities (172) (434)
Proceeds on issue of shares
and admission to AIM - 4,761
Proceeds on issue of placing
shares (net of issue costs) 22 2,966 -
Proceeds on issue of convertible
preference shares - 3,100
------------ ------------------------------
Net cash from financing
activities 2,748 6,927
------------ ------------------------------
Net (decrease)/increase
in cash and cash equivalent (2,269) 3,376
------------ ------------------------------
Effect of exchange rate
changes on cash and cash (38) -
equivalents
------------ ------------------------------
Cash and cash equivalents
at the beginning of the
year 6,238 2,862
------------ ------------------------------
Cash and cash equivalents
at the end of the year 18 3,931 6,238
------------ ------------------------------
Consolidated Statement of Change in Equity
For the year ended 31 December 2014
Foreign
Shares currency Non-controlling
Share to be Merger translation Retained interests Total
capital issued reserve reserve earnings Total RM'000 equity
Year ended 31 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
December
2014:
---------- --------- ----------- ------------ ---------- --------- ----------------- ---------
Balance on 1
January
2014 21,643 - (13,260) - 9,960 18,343 - 18,343
Transaction
with
owners,
recorded
directly
in equity
Acquisition of
subsidiary
companies - 2,074 - - - 2,074 (159) 1,915
Issue of
placing
shares 3,235 - - - - 3,235 - 3,235
Share issue
costs (269) - - - - (269) - (269)
Dividends paid - - - - (575) (575) - (575)
---------- --------- ----------- ------------ ---------- --------- ----------------- ---------
Total
comprehensive
income
Profit for the
year - - - - 3,671 3,671 (483) 3,188
Other
comprehensive
income - - - (62) - (62) (38) (100)
Balance at
31 December
2014 24,609 2,074 (13,260) (62) 13,056 26,417 (680) 25,737
---------- --------- ----------- ------------ ---------- --------- ----------------- ---------
Consolidated Statement of Change in Equity
For the year ended 31 December 2014 (continued)
(Foreign
currency
translation
reserve)
(RM'000) (Non-controlling
interest)
(Share (Share (Merger (Retained (RM'000) (Total
capital) premium) reserve) earnings) equity)
(RM'000) (RM'000) (RM'000) (RM'000) (Total) (RM'000)
(Year ended 31 (RM'000)
December 2013:)
------------ ----------- ----------- ------------ ----------- ----------- ------------------ -----------
(Balance on 1 January
2013)
(RCAB Group) (13,860) (-) (13,260) (-) (7,432) (8,032) (-) (8,032)
(Transaction with
owners,)
(recorded directly
in equity)
(Conversion of
preference
shares) (1,173) (1,928) (-) (-) (-) (3,101) (-) (3,101)
(Shares issued and
adjustment for
business
combination) (1,928) (1,928) (-) (-) (-) (-) (-) (-)
(RCI Group)
(Following business
combination) (16,961) (-) (13,260) (-) (7,432) (11,133) (-) (11,133)
(Issue of shares
on admission to
AIM) (5,510) (-) (-) (-) (-) (5,510) (-) (5,510)
(Share issue costs) (828) (-) (-) (-) (-) (828) (-) (828)
(Total comprehensive
income)
(Profit for the
year) (-) (-) (-) (-) (2,528) (2,528) (-) (2,528)
(Other comprehensive (-) (-) (-) (-) (-) (-) (-) (-)
income)
(Balance at 31
December
2013) (21,643) (-) (13,260) (-) (9,960) (18,343) (-) (18,343)
----------- ----------- ----------- ------------ ----------- ----------- ------------------ -----------
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):
2014 2013
RM'000 RM'000
----------------------------------- -------
Staff costs (note 9) 5,594 2,293
Depreciation (note 12) 683 271
Amortisation of software development
assets (note 13) 931 703
Operating lease rentals - premises 513 142
Impairment of trade receivables
(note 17) 62 130
Bad debts written-off 130 -
Loss/(gain) on foreign exchange 38 (187)
----------------------------------- -------
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:
2014 2013
RM'000 RM'000
------- -------
Fees payable to the Group's
auditor and its member firms
for:
- statutory audit in respect
of the Company and Group 108 95
- statutory audit in respect
of the Company's subsidiaries 52 30
------- -------
160 125
------- -------
9. Staff costs
The average monthly number of persons employed (including RCI
Executive Directors) by the RCI Group, analysed by category, was as
follows:
2014 2013
Number Number
------- -------
Management 19 12
Staff 137 57
------- -------
156 69
------- -------
Their aggregate remuneration comprised:
2014 2013
RM'000 RM'000
------------------------------- -------
Salaries, wages, bonuses and
allowances 6,355 3,026
Defined contribution pension
costs 443 336
Less: capitalised in software
development assets (note 13) (1,204) (1,069)
------------------------------- -------
5,594 2,293
------------------------------- -------
Included in staff costs above is the Group's Executive
Directors' remuneration as follows:
2014 2013
RM'000 RM'000
------- -------
Salaries, wages, bonuses and
allowances 493 300
Defined contribution pension
costs 58 35
------- -------
551 335
------- -------
Directors' remuneration are included in the following:
2014 2013
RM'000 RM'000
------- -------
Staff costs 551 335
Capitalised under software development
costs (note 13) 270 170
Directors' fees (paid via service
agreements) 212 82
------- -------
1,033 587
------- -------
10. Income tax expense
2014 2013
RM'000 RM'000
------- -------
Corporation tax
Current year tax expense 15 595
Adjustments in respect of prior
years 22 (20)
------- -------
37 575
------- -------
Deferred tax expense
Current year 13 59
------- -------
50 634
------- -------
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:
2014 2013
RM'000 RM'000
Profit before tax 3,238 3,162
------- -------
Current taxation at standard
tax rate of 25% 810 791
Impact on taxation of:
Effect on different tax rate
in other jurisdictions (48) -
Income not subject to income
tax due to pioneer status (940) (557)
Income not chargeable for tax
purposes (147) -
Expenses not deductible for tax
purpose 389 709
Depreciation over capital allowances 2 (302)
Prior year adjustments 22 (20)
Other adjustments (38) 13
------- -------
Total tax expense 50 634
------- -------
Average effective tax rate 1.5% 20.1%
------- -------
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:
2014 2013
RM'000 RM'000
---------- ----------
Profit for the financial period
after tax and basic earnings
attributable
to ordinary shareholders 3,671 2,528
---------- ----------
Number Number
---------- ----------
Weighted average numbers of ordinary
shares 17,831,934 17,368,971
---------- ----------
Sen Sen
----- -----
Earnings per share:
Basic 20.59 14.55
----- -----
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
Furniture Office Computers Motor Renovation Signboard Sun Total
and equipment RM'000 Vehicles RM'000 RM'000 Microsystems RM'000
fittings RM'000 RM'000 equipment
RM'000 RM'000
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
Year ended 31
December 2014
Cost
At 1 January 2014 731 395 1,440 850 1,395 32 465 5,308
Acquisition of
subsidiaries 43 60 34 - 624 - - 761
Additions 288 319 1,045 - 408 - - 2,060
Disposals (60) (38) - (193) - - - (291)
Impaired/written
off - - (3) - - - - (3)
Exchange
difference 1 4 - - 36 - - 41
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
At 31 December
2014 1,003 740 2,516 657 2,463 32 465 7,876
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
Charge for the
year
At 1 January 2014 85 57 1,234 218 48 21 465 2,129
Acquisition of
subsidiaries 29 27 26 - 36 - - 118
Charge for the
year 80 55 206 154 184 4 - 683
Disposals (60) (37) - (176) - - - (273)
Impaired/written
off - - (1) - - - - (1)
Exchange
difference - 2 - - 4 6
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
At 31 December
2014 134 104 1,465 196 272 25 465 2,661
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
Net book value
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
At 31 December
2014 869 636 1,051 461 2,191 7 - 5,215
---------- ---------- ---------- ---------- ----------- ---------- ---------------- --------
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)
Furniture Office Computers Motor Renovation Signboard Sun Total
and fittings equipment RM'000 Vehicles RM'000 RM'000 Microsystems RM'000
RM'000 RM'000 RM'000 equipment
RM'000
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
Year ended 31
December 2013
Cost
At 1 January
2013 68 73 1,365 528 28 26 465 2,553
Additions 666 341 178 822 1,367 6 - 3,380
Disposals (3) (14) (103) (500) - - - (620)
Impaired - (5) - - - - - (5)
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
At 31 December
2013 731 395 1,440 850 1,395 32 465 5,308
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
Charge for the
year
At 1 January
2013 65 65 1,265 216 20 18 465 2,114
Charge for the
year 23 10 71 135 29 3 - 271
Disposals (3) (13) (102) (133) - - - (251)
Impaired - (5) - - - - - (5)
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
At 31 December
2013 85 57 1,234 218 49 21 465 2,129
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
Net book value
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
At 31 December
2013 646 338 206 632 1,346 11 - 3,179
-------------- ----------- ---------- ---------- ----------- ---------- ------------- --------
13. Software development assets
2014 2013
RM'000 RM'000
-------- --------
Cost
At the beginning of the
year 4,095 3,026
Additions 1,204 1,069
-------- --------
At the end of the year 5,299 4,095
-------- --------
Accumulated amortisation
At the beginning of the
year 1,877 1,174
Charge for the financial
year 931 703
-------- --------
At the end of the year 2,808 1,877
-------- --------
Carrying amount
At the end of the year 2,491 2,218
-------- --------
Included in additions to software development cost during the
financial year is as follows:
2014 2013
RM'000 RM'000
-------- --------
Directors' remunerations
(note 9) 270 170
Employee benefits expenses
(note 9) 934 899
-------- --------
1,204 1,069
-------- --------
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:
Subsidiary companies Place Equity Principal activities
of interests
incorporation 2014 2013
% %
--------------- ------ ----- ---------------------
Holding company
for Malaysia,
Thailand &
RapidCloud Asia Philippines
Sdn. Bhd. Malaysia 100 100 subsidiaries
Emerge Systems (M) Computer network
Sdn. Bhd. Malaysia 100 100 and web solutions
Emerge Software
Solutions
(M) Sdn. Bhd. Malaysia 100 100 Software development
PT RapidCloud Indonesia Indonesia 100 - Computer programming
RapidCloud Singapore Singapore 100 - Internet advertising
Pte. Ltd. services and
(formerly known to provide
as Exxelnet Pte. an Internet
Ltd.) related services
and business
such as e-commerce,
website designing
and any other
computer related
services
Emerge Systems (Thailand) Thailand 49 - Operation of
Ltd website, management
of service
server and
electronic
business solutions
Sharksurf Philippines Philippines 40 - Provision of
Incorporated various internet,
e-commerce
and m-commerce
services
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:
RM'000
--------
Property, plant and equipment 636
Intangible assets 1
Trade and other receivables 532
Cash and bank balances 72
Trade and other payables (32)
Amount due to immediate holding company (205)
Amount due to related companies (1,304)
Tax payable (2)
--------
Total identifiable assets and liabilities
- net liabilities (302)
--------
Goodwill was recognised as a result of the associates becoming
subsidiaries on 1 January 2014 as follows:
RM'000
-------
Carrying value of associate companies
at 1 January 2014 (note 15) 1,071
Non-controlling interest, based on
their proportionate interest in the
recognised amounts of assets and liabilities
of the acquiree (159)
Fair value of identifiable assets
and liabilities at 1 January 2014 302
-------
Goodwill arising on EST and SPI becoming
subsidiaries 1,214
-------
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
RM'000
--------
Property, plant and equipment 8
Trade and other receivables 1,414
Cash and bank balances (17)
Trade and other payables (1,179)
Tax payable (1)
Convertible loan (256)
--------
Total identifiable assets and liabilities
acquired - net liabilities (31)
--------
Goodwill arising from business combination
Goodwill was recognised as a result of the RCSG acquisition as
follows:
RM'000
-------
Fair value of consideration at acquisition 2,520
Fair value of deferred contingent
consideration 2,074
Fair value of identifiable assets
acquired and liabilities acquired 31
Goodwill arising on acquisition 4,625
-------
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:
2014 2013
RM'000 RM'000
--------- --------
Outside Malaysia
At cost
Unquoted shares - 987
Shares of post-acquisition
reserve - 84
--------- --------
- 1,071
-------------------------------------- --------
Details of the Group's associate companies are as follows:
Associate companies Country of Equity Principal
interests activities
incorporation 2014 2013
% %
Emerge Systems Thailand - 49 Operation
(Thailand) Ltd of website,
management
of service
server and
electronic
business
solutions
Sharksurf Philippines Philippines - 40 Provision
Incorporated of various
internet,
e-commerce
and m-commerce
services
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 Website Total
RM'000 cost RM'000
RM'000
Cost
At 1 January 2014 - - -
Arising from associates
becoming
subsidiaries 1,214 - 1,214
Acquisition of subsidiary 4,625 10 4,635
Exchange difference - 1 1
--------- -------- --------
At 31 December 2014 5,839 11 5,850
--------- -------- --------
Accumulated amortisation
At 1 January 2014 - - -
Acquisition of subsidiaries - 9 9
Amortisation during
the year - 1 1
Exchange difference - 1 1
--------- -------- --------
At 31 December 2014 - 11 11
--------- -------- --------
Carrying amount
At 31 December 2014 5,839 - 5,839
--------- -------- --------
At 31 December 2013 - - -
--------- -------- --------
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:
2014 2013
RM'000 RM'000
Thailand division 1,006 -
Philippines division 208 -
Singapore division 4,625 -
------- -------
5,839 -
------- -------
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: GBPnil) 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
2014 2013
RM'000 RM'000
-------------------------- --------
Trade receivables 10,293 6,531
Less: impairment provision (601) (424)
-------------------------- --------
Net trade receivables 9,692 6,107
Other receivables 262 216
Prepayments 1,237 185
-------------------------- --------
11,191 6,508
-------------------------- --------
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:
2014 2013
RM'000 RM'000
-------- -------------------
At 1 January 424 294
Acquisition of subsidiary 115 -
companies
Impairment losses recognised 62 130
-------- -------------------
At 31 December 601 424
-------- -------------------
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:
2014 2013
RM'000 RM'000
-------- --------
Neither past due nor impaired 2,523 3,870
Past due not impaired:
Less than 30 days past due 1,927 207
31 to 60 days past due 1,587 105
61 to 90 days past due 1,575 75
More than 90 days past due 2,080 1,850
-------- --------
Balance at end of year 9,692 6,107
-------- --------
18. Cash and cash equivalents
Cash and cash equivalents in the statement of financial position
comprise the following:
2014 2013
RM'000 RM'000
-------- --------
Cash at bank 3,931 4,705
Cash held in fixed deposit - 1,533
-------- --------
3,931 6,238
-------- --------
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
2014 2013
RM'000 RM'000
-------- --------
Trade payables 910 68
Other payables 410 210
Accruals and deferred income 1,073 591
-------- --------
2,393 869
-------- --------
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
2014 2013
RM'000 RM'000
-------- --------
Current liabilities
Hire purchase liability 62 79
-------- --------
Non-current liabilities
Hire purchase liability 457 612
-------- --------
Total hire purchase liabilities 519 691
-------- --------
The financial commitments arising from the hire purchase
agreements are disclose in note 23.
21. Deferred tax liabilities
2014 2013
RM'000 RM'000
-------- --------
Deferred tax liabilities
At 1 January 73 14
Charge in statement of comprehensive
income 13 59
-------- --------
At 31 December 86 73
-------- --------
The net deferred taxation
liability arises as a result
of:
Accelerated capital allowances 13 59
-------- --------
13 59
-------- --------
22. Share capital
Authorised at 31 December 2014
An unlimited number of ordinary shares
of no par value each
Number
At 1 January 2014 17,368,971
New shares issued 1,111,112
-----------
At 31 December 2014 18,480,083
-----------
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
GBP600,000 (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:
2014 2013
RM'000 RM'000
-------- --------
Less than one year 472 228
Between one and five years 746 307
-------- --------
Future minimum lease payments 1,218 535
-------- --------
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:
2014 2013
RM'000 RM'000
-------- --------
Less than one year 84 111
Between one and five years 337 445
More than five years 185 266
-------- --------
606 822
Less: Future finance charges (87) (131)
-------- --------
Present value of hire purchase
liabilities 519 691
-------- --------
24. Financial instruments
Loan and Financial Total
receivables liabilities RM'000
RM'000 at amortised
cost
RM'000
------------- -------------- ---------
Classification of
financial instruments
Year ended 31 December
2014
Financial Assets
Trade receivables 9,692 - 9,692
Other receivables 1,499 - 1,499
Amount owing by associate - - -
companies
Fixed deposit with - - -
a licensed bank
Cash and bank balances 3,931 - 3,931
------------- -------------- ---------
Total financial assets 15,122 - 15,122
------------- -------------- ---------
Financial Liabilities
Trade payables - 910 910
Other payables - 1,483 1,483
Share capital payables - 2,645 2,645
Hire purchase payables - 519 519
------------- -------------- ---------
Total financial liabilities - 5,557 5,557
------------- -------------- ---------
24. Financial instruments (continued)
Loan and Financial Total
receivables liabilities RM'000
RM'000 at amortised
cost
RM'000
------------- -------------- ---------
Classification of
financial instruments
Year ended 31 December
2013
Financial Assets
Trade receivables 6,107 - 6,107
Other receivables 401 - 401
Amount owing by associate
companies 1,583 - 1,583
Fixed deposit with
a licensed bank 1,533 - 1,533
Cash and bank balances 4,705 - 4,705
------------- -------------- ---------
Total financial assets 14,329 - 14,329
------------- -------------- ---------
Financial Liabilities
Trade payables - 68 68
Other payables - 801 801
Hire purchase payables - 691 691
------------- -------------- ---------
Total financial liabilities - 1,560 1,560
------------- -------------- ---------
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.
On demand 1 to 2 to 3 to 4 to After Total
or within 2 3 4 5 5 RM'000
1 year years years years years years
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
----------- -------- -------- -------- -------- -------- --------
2014
Trade payables 910 - - - - - 910
Other payables 1,483 - - - - - 1,483
Hire purchase
payables 84 84 84 84 85 185 606
----------- -------- -------- -------- -------- -------- --------
2,477 84 84 84 85 185 2,999
----------- -------- -------- -------- -------- -------- --------
On demand 1 to 2 to 3 to 4 to After Total
or within 2 3 4 5 5 RM'000
1 year years years years years years
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
----------- -------- -------- -------- -------- -------- --------
2013
Trade payables 68 - - - - - 68
Other payables 801 - - - - - 801
Hire purchase
payables 111 111 111 111 112 266 822
----------- -------- -------- -------- -------- -------- --------
980 111 111 111 112 266 1,691
----------- -------- -------- -------- -------- -------- --------
Interest Rate Risk
The carrying amounts of the Group financial instruments that are
exposed to interest rate risk are as follows:
2014 2013
RM'000 RM'000
--------- --------
Fixed deposit with licensed
banks - 1,533
--------- --------
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:
2014 2013
RM'000 RM'000
-------- --------
Trade receivables 2 2
Others Receivables 85 -
Cash and bank balances 156 85
-------- --------
243 87
-------- --------
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:
2014 2013
RM'000 RM'000
-------- --------
Short-term employee benefits 1,975 1,012
Other long-term benefits 189 118
-------- --------
2,164 1,130
-------- --------
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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