Source - RNS
RNS Number : 2707L
DJI Holdings PLC
30 September 2016
 

30 September 2016                                                                                                                         

 

DJI Holdings plc            

 

Unaudited interim results for the six months ended 30 June 2016

 

DJI Holdings plc (AIM: DJI, "the Group", "DJI"), a Chinese technology, content and services company, announces its unaudited interim results for the six months ended 30 June 2016.

 

Highlights

 

·    Signing in April of the partnership between NewNet and Xinhuatong in which NewNet will provide technology to facilitate mobile payments on the Xinhua News App across 12 provinces (10 of which have already been signed) in China

·    Loss after tax of £4.2m (H1 2015: £4.8m loss)

·    Robust cash and cash equivalent position of £7.1m (31 December 2015 £4.0m)

·    Completed fundraising of £10.5m in April. Post period end completed two further fundraisings with gross proceeds totalling £40.5m

·    Welcomed high quality institutional investors onto shareholder register, including Hadron Capital LLP, Henderson Global Investors and Capital Research & Management

·    Strengthening of Board of Directors with announcement of Group CFO, Scott Kennedy, China CEO and COO, Wei Qi, and non-executive director, Dong Jinhua

·    Expected strong fourth quarter as the payment fulfilment platform rolls out

·    Initial filing documents shortly to be submitted to SEC to formally commence Nasdaq listing process

·    General Meeting 7 October 2016 to vote on the proposed Group name change to BNN Technology plc

                                                    

The Group's transformational partnership with Xinhuatong, through NewNet, to facilitate mobile payments across China on the Xinhua News mobile app, signalled a significant step forward in applying DJI's platform technology to deliver new services for Chinese citizens. The partnership of NewNet with Xinhuatong, the main operator of the Xinhua News App, will enable the Group to capitalise on the rapid growth of mobile payments in China.

The Group is well positioned for future growth and investment following the completion of the April placing and two further placings post period end totalling cash injections of over £50m. To facilitate this next evolution of DJI and capitalise on the mobile payments opportunity, we raised funds to accelerate investment in the Group and strengthen the board.

The appointment of Scott Kennedy as Group Chief Financial Officer provides stability and focus in the Finance area, and the introduction of two Chinese nationals to the Board provides cultural balance and valuable local expertise. Specifically, the announcement of Dong Jinhua to the Board as a non-executive director demonstrates the strength and long-term nature of the relationship and partnership between NewNet, Xinhuatong and DJI.

DJI will shortly submit the initial filing document with the U.S. Securities & Exchange Commission, which initiates the Nasdaq listing process.  

 

Commenting on the first half performance, Darren Mercer, CEO of DJI, said:

 

"In the first half of 2016, we demonstrated substantial progress towards our goal of being a leading Chinese technology, content and services company and, with the partnership between NewNet and Xinhuatong propelling us into the high growth mobile payments market, established a strong position at the heart of one of China's largest mobile apps.  In the second half, we have continued that progress and recently updated that market on our successful pivot away from lottery services, with re-branding and re-positioning of our business as a dynamic technology platform provider that can facilitate mobile payments, deliver mobile content and provide data management to consumers throughout China, along with NewNet's strategic investment in Xinhuatong, further deepening our ties with a key player in this growing market."

Three sizeable placings were completed this year, two of which were post period end.   In raising just over £50m this year, we have successfully strengthened the balance sheet, which has allowed us not only to rollout the opportunity with our partners NewNet and Xinhuatong in the final quarter of this year and beyond, but also given us the necessary funding to move forward with other significant, complementary, opportunities for the Group.  We look forward to updating the market in due course on these opportunities."

The progress to date on our partnership with NewNet and Xinhuatong is exceptionally pleasing The extensive and sizeable testing process began in mid-August, initially in two provinces, and, in September, we extended the testing to seven provinces and that testing is now nearly complete.  As a result, we are confident that the large e-commerce partners, which have substantial user bases and will assist our sales drive, will come on stream in October and will deliver significant gross sales and revenues from that point onwards.  As we embark on the final quarter and into 2017, we will be broadening service offerings on the mobile app and introducing unique content that will drive customer acquisition and enhance customer retention.  With increased customer activity on the app, this will, importantly, drive sizeable data acquisition."

With the prospects for a Nasdaq submission, the roll out of our payment platform accompanied by strong revenue growth, and new opportunities for the Group, my Board and I are extremely confident about the remainder of 2016 and beyond."

- ENDS -

For further information, please contact:

 

DJI Holdings plc

+44 (0) 1565 872990

Darren Mercer, Chief Executive

Scott Kennedy, Chief Financial Officer

Stephen Benzikie, Communications

 


Brunswick Group (Public Relations)

+44 (0) 20 7404 5959

Brian Buckley / Diana Vaughton

 




Strand Hanson Limited (Nominated & Financial Adviser)

+44 (0) 20 7409 3494

Andrew Emmott / Ritchie Balmer

 

Mirabaud Securities LLP (Broker)                                                           

Peter Krens

 

 

 

 

+44 (0) 20 7878 3362

About the Group

 

DJI Holdings plc is a Chinese technology, content and services company that builds long-term partnerships to deliver China's citizens with value-added services, content and evolving opportunities.

Listed on AIM since 2014 the Group principally engages in providing technology to partners to facilitate fulfilment of payments online and on mobile apps through partnerships or affiliate agreements and, developing digital content, both online and mobile. Through its partnership with NewNet, DJI works with Xinhuatong to facilitate mobile payments and other key services on the Xinhua News mobile app in 12 provinces in China. The Chinese consumer shift to 'life on mobile' is only just beginning and DJI's platform technology enables urban and rural communities across China to access exclusive content and pay for more services online.

The Group employs over 300 professionals throughout China and is expected to grow over the next six months.

 

Business review

 

The first half of 2016 was a period of repositioning and investment for the Group with a number of new ventures being announced and fund raising and investment taking place to ensure we maximise those opportunities.  The result for period, a loss of £4.2 million (2015: loss of £4.8 million) was in line with expectations.

 

In April 2016, we announced a major partnership with NewNet and Xinhuatong allowing us to take advantage of the continuing growth in the Chinese smartphone user market and the rapidly growing mobile payments market. This is demonstrated by the increase in the China smartphone market, which is forecast to increase from 785 million users in 2015 to nearly 1 billion users in 2017[1], and the fact that Chinese mobile-payment transactions doubled last year to USD235bn[2].

 

This partnership has given the Group the opportunity to provide the technology to NewNet and Xinhuatong to facilitate mobile payments on the Xinhua Mobile app in up to 12 provinces with a total population of approximately 700 million people. The deal will allow the Group to generate commission revenues initially from the payment of utility bills, mobile top ups and traffic fines.  The partnership was not revenue generating in the first half of 2016, as we recruited the necessary staff to build and test the payment fulfilment platform.

 

In March we announced our joint venture, Qingdao Baifa, would promote an approved mobile lottery offering by using our football club resources and unique game content.  After a slow start early in the second quarter, the European Championships helped to improve daily game activity as the games are primarily focussed on football.

 

At the end of March, the Group, through its investment with the Heilongjiang Sports Bureau (HSB), Longti, secured an exclusive service agreement to promote sports lottery scratch card sales across Heilongjiang Province.  Performance was broadly in line with expectations in the first half. The online booking platform is well positioned and ready for the forthcoming winter sports season (which begins in the autumn) and the scratch card business is generating gross sales in line with expectations.

 

Whilst no longer the primary focus for the Group, the land and digital lottery businesses generated £8.3m in gross sales, resulting in revenues of £0.5m in the first half of 2016.

Outlook

The second half of 2016, and particularly the fourth quarter, is expected to see a significant increase in gross sales and revenues for the Group as we see the transaction volumes from the Xinhua News mobile app payments begin to flow through our platform.  With the continued rollout and growth in transaction volumes from our mobile payments business and expectation of new revenue streams coming online, we expect the Group to return to profitability in 2017.

 

 

Short-term

Our payment fulfilment platform, supporting the mobile payments on the Xinhua News app, was revenue generating in August, albeit only a small amount of transactions was processed, as we deliberately restricted the initial volumes in two provinces in order to ensure the robustness of the platform and allow the platform to complete certain performance levels in stages. 

 

In September, we extended the testing to a further seven provinces, which required testing on a significant number of interfaces within each province, and saw a marginal increase in gross sales versus August.  The volume of transactions and gross sales of the Group are expected to increase significantly in October as the testing phase is completed.  Gross sales are then expected to continue to grow each month over the rest of the fourth quarter as B2B volumes increase and the roll out of the platform continues.   In the fourth quarter we remain on target for mobile payments on the Xinhua News app to be live in ten of the twelve targeted provinces. 

 

The Group's full year net revenues will, in the majority, reflect the revenues from payment fulfilment through the Xinhua News Mobile app, with a small contribution from our legacy land and digital lottery business.  The earnings from the Group's associates, being Longti, Baifa and Xinhuacai, which are presented on a consolidated basis as share of associates results on the income statement, are expected to be around breakeven for the year. Accordingly, results for the full year are expected to be in line with expectations.

 

 

Medium and long-term

In addition to the growth anticipated from the revenue streams which have been launched already, management is focused on continuing to explore how we can grow and diversify revenue streams over the medium and long-term. To that end, we are working on several initiatives, some of which we hope to announce to the market over the coming quarter.

 

As announced previously, we intend to commence the Nasdaq listing process shortly following the name change, which is expected to come in to effect shortly after the general meeting on 7 October 2016.  Further announcements on the progress of the Nasdaq application will be provided as we work through the process.

 

 

 

 

Darren Mercer                                    Scott Kennedy

Chief Executive Officer                            Chief Financial Officer

 



 

Financial review

 

The Group's revenues of £0.5m (H1 2015: £5.3m) have been materially reduced when compared with last year because of the suspension of online lottery licences in China in March 2015. Some sales involving an online element have been allowed to continue which are included in Digital business in note 2. The Group continued to operate some land based lottery sales, but the Group's focus has been on efforts to move away from exclusively lottery based revenue streams into other areas. Our cost of sales, which is principally commissions paid to B2B customers, also declined in line with revenue leaving a gross profit of £0.3m (H1 2015: £1.2m).

 

Our administrative expenses increased by 15.0% to £5.1m (H1 2015: £4.4m). We have been investing in our Chinese headcount in NewNet in accordance with our business model for the cooperation agreement between NewNet and Xinhuatong. This has involved the establishment of a Research & Business Development group within our Chinese operations, into which we had recruited an additional 31 people by the end of June, as well as increased headcount of 22 across the online and administration departments. The first half also saw the establishment of the first provincial location for the Xinhua cooperation agreement where we have set up a new wholly owned subsidiary in Hangzhou province. Nevertheless, our staff costs for the period which amounted to £2.1m (H1 2015: £2.5m) are lower than the prior period reflecting the headcount reduction we undertook in 2015 following the lottery suspension. We anticipate higher staff costs going forward as the full year impact of our new hires flows through. Overall our administrative costs have increased reflecting investment into the establishment of branch offices in various Chinese provinces as NewNet prepares for the launch of the payment facilitation platform within the Xinhua News mobile app.

 

DJI's investments in Xinhuacai, Longti and Baifa are accounted for as associates and the Group income statement includes only the Group's share of their results under "Share of results of associates".  Following the transfer of NewNet's lottery assets, to Xinhuacai, all future revenues and profits from those assets will be recognised through the Group's share of the profits of Xinhuacai, which is also accounted for as an associate.

 

Our finance income of £1.1m (H1 2015: £0.5m expense) consists of two principal elements. The first is an expense being the interest payable on the convertible loan notes. The interest cost has increased from a charge of £0.5m in H1 2015 to £0.8m in H1 2016. This loan note was renegotiated in April 2016, the new loan arrangements are more favourable to the Group and carry a lower rate of interest as described in note 7. Our ongoing borrowing cost is therefore expected to fall in the second half of the year.

 

The other element of the finance income is an unrealised foreign exchange gain on our internal group loans of £1.8m which offsets an unrealised loss taken directly to reserves on the retranslation of the net assets of our Chinese subsidiaries of £0.8m. In addition, at 30 June 2016, approximately half of the Group's bank deposits were denominated in pounds sterling and half in Chinese renminbi. Since the majority of its operations, monetary assets and liabilities are conducted both in pounds sterling or Chinese renminbi, the Group manages exchange risk as an ordinary part of its financial decision-making process. The Group made the decision not to hedge sterling into renminbi in advance of the referendum concerning the possible exit of the United Kingdom from the European Union. The outcome of the referendum which took the financial markets by surprise resulted in a large movement in the exchange rate between pound sterling and Chinese renminbi. The consequence of the movement in the foreign exchange rate is that future investments into China by us will be relatively more expensive when translated into the sterling equivalent if the rate at the end of June 2016 is used.

 

The net loss for the period as a result of the above factors reduced to £4.2m (H1 2015: £4.8m). The Board has not declared an interim dividend.

 

Our balance sheet has seen an increase in cash arising from successful share placings (£10.1m net of issue costs) offset by investments in the business as we prepare for the future. Cash and cash equivalents were £7.1m (31 Dec 2015: £4.0m).

 

Total assets and net current assets of the Group were £28.0m and £6.2m respectively (31 Dec 2015: £18.2m and £2.9m respectively).



Financial statements (unaudited)

 

Condensed consolidated income statement (unaudited)

Six months ended 30 June

2016


2015


Note

£ 000


£ 000

(restated - note 2)

Continuing operations:









Revenue

2

537


5,288

Cost of sales


(242)


(4,117)






Gross profit


295


1,171

Administrative expenses

(5,095)


(4,429)

Share of results of associates

(407)


(379)






Operating loss

(5,207)


(3,637)

Finance income/(costs)


1,050


(489)






Loss before tax


(4,157)


(4,126)

Tax


-


(105)






Loss for the period from continuing operations

(4,157)


(4,231)

Discontinued operations:




Loss for the period from discontinued operations


-


(584)






Loss for the period after discontinued operations

(4,157)


(4,815)






Attributable to:





Owners of the Company

(4,081)


(4,833)

Non-controlling interests

(76)


18








(4,157)


(4,815)






Loss per share (pence)




From continuing and discontinued operations:





Basic & Diluted

3

(2.8)


(3.7)

From continuing operations:





Basic & Diluted

3

(2.8)


(3.3)

 

Condensed consolidated statement of comprehensive income (unaudited)

 

Loss for the period

(4,157)


(4,815)

Items that may be reclassified subsequently to profit or loss:





Exchange differences on translation of foreign operations


(848)


96






Total comprehensive loss for the period

(5,005)


(4,719)






Attributable to:





Owners of the Company

(4,946)


(4,688)

Non-controlling interests

(59)


(31)



(5,005)


(4,719)


Condensed consolidated balance sheet (unaudited)

 


Notes

As at
30 June


As at
31 December



2016


2015



£ 000


£ 000

Non-current assets





Goodwill


4,206


3,919

Other intangible assets


297


192

Property, plant and equipment


448


383

Investments in associates


5,198


5,218

Other investments

6

3,725


-








13,874


9,712

Current assets





Inventories


20


19

Trade and other receivables

4

7,030


4,449

Cash and cash equivalents


7,074


4,028








14,124


8,496






Total assets


27,998


18,208






Current liabilities





Trade and other payables

5

4,700


5,626

Borrowings

6

3,226


-



7,926


5,626

Non-current liabilities





Convertible loan notes

7

8,381


5,978






Net assets


11,691


6,604






Equity





Share capital

8

16,432


14,431

Share premium


31,010


22,432

EBT reserve


(575)


(575)

Accumulated deficit


(35,384)


(29,940)






Equity attributable to owners of the Company


11,483


6,348

  Non-controlling interests


208


256






Total equity


11,691


6,604

 



 

Condensed consolidated statement of changes in equity (unaudited)


Share capital

Share premium

EBT reserve

Accumulated deficit

Total

Non-controlling interests

Total equity


£ 000

£ 000

£ 000

£ 000

£ 000

£ 000

£ 000









At 1 January 2015

13,052

19,433

(575)

(17,473)

14,437

686

15,123









Loss for the period

-

-

-

(4,833)

(4,833)

18

(4,815)

Exchange differences

-

-

-

145

145

(49)

96

Total comprehensive loss for the period

-

-

-

(4,688)

(4,688)

(31)

(4,719)

Disposal of subsidiary

-

-

-

(2,382)

(2,382)

(344)

(2,726)









At 30 June 2015

13,052

19,433

(575)

(24,543)

7,367

311

7,678

Loss for the period

-

-

-

(6,535)

(6,535)

(100)

(6,635)

Exchange differences

-

-

-

15

15

45

60

Total comprehensive loss for the period

-

-

-

(6,520)

(6,520)

(55)

(6,575)

Issue of share capital

1,379

2,999

-

180

4,558

-

4,558

Equity-settled share based payments

-

-

-

455

455

-

455

Proceeds for shares not yet issued

-

-

-

488

488

-

488









At 31 December 2015

14,431

22,432

(575)

(29,940)

6,348

256

6,604

Loss for the period

-

-

-

(4,081)

(4,081)

(76)

(4,157)

Exchange differences

-

-

-

(865)

(865)

17

(848)

Total comprehensive loss for the period

-

-

-

(4,946)

(4,946)

(59)

(5,005)

Issue of share capital

1,862

8,230

-

-

10,092

-

10,092

Issue of share capital in respect of proceeds received in prior period

139

348

-

(487)

-

-

-

Transactions with non-controlling interests

-

-

-

(11)

(11)

11

-









At 30 June 2016

16,432

31,010

(575)

(35,384)

11,483

208

11,691

 



 

Condensed consolidated cash flow statement (unaudited)

As at


As at


30 June


30 June


2016


2015





Loss for the period

(4,157)


(4,815)





Adjustments for:




  Depreciation and amortisation

95


152

  Finance costs

(1,050)


489

  Share of results of associates

407


379

  Income tax expense

-


105

  Loss on disposal of discontinued operations

-


1,661





Operating cash flows before movements in working capital

(4,705)


(2,029)

(Increase)/Decrease in inventories

(1)


6

(Increase)/Decrease in receivables

(2,093)


540

Increase/(Decrease) in payables

505


(2,184)

 




Net cash used by operations

(6,294)


(3,667)

Income taxes paid

(4)


(105)

Interest paid

(38)


(483)





Net cash outflow from operating activities

(6,336)


(4,255)





Investing activities:




Purchase of property, plant and equipment

(188)


(99)

Purchase of intangibles

(138)


-

Purchase of other investments

(3,725)


-





Net cash used in investing activities

(4,051)


(99)





Financing activities




Issue of shares

10,092


-

Proceeds from borrowings

3,226


-

Payment of contingent consideration

-


(1,391)





Net cash generated by/(used in) financing activities

13,318


(1,391)





Net decrease in cash and cash equivalents

2,931


(5,745)

Exchange differences

115


8

Cash and cash equivalents at beginning of period

4,028


10,834





Cash and cash equivalents at end of period

7,074


5,097





 

Notes to the condensed consolidated financial information

 

1.       Basis of preparation

 

The unaudited interim condensed consolidated financial statements of DJI Holdings PLC (the 'Group') for the six months ended 30 June 2016 have been prepared in accordance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union.

 

The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2016 do not comprise statutory accounts for the purpose of section 434 of the Companies Act 2006 and should be read in conjunction with the Annual Report for the year ended 31 December 2015. Those accounts have been reported upon by the Group's auditor and delivered to Companies House. The report of the auditor on those accounts was unqualified, however it drew attention to the disclosures made by the directors with respect to the going concern assumption. The Annual Report is published in the Investors section of the Group website at www.djiholdings.com and is available from the Company on request.

 

The unaudited interim condensed consolidated financial statements are prepared on the basis of the accounting policies stated in the Group's Annual Report 2015 which is available on the Group's website at www.djiholdings.com.

 

The interim report was approved by the board of directors, the financial information for the 6 months ended 30 June 2016 has been reviewed by the Company's auditor and their report is included within this announcement.

 

 

Going concern

The Directors have reviewed trading and cash flow forecasts which take into consideration the uncertainties in the current operating environment.

 

At 30 June 2016, the Group was funded by cash balances of £7.1m and did not have access to any undrawn borrowing facilities. As a continuation of the Company's business strategy and in response to the need for continuing investment support, subsequent to the end of the reporting period, as noted in more detail in note 4, the Company has raised gross proceeds of £40.5m through the placement of approximately 42.6 million new ordinary shares.

 

After making enquiries and taking into account the share placing referred to above, the Directors have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements.

 

2.      Gross sales and revenue

 

IFRS 8 'Operating Segments' requires the segmental information presented in the financial statements to be the used by the chief operating decision maker to evaluate the performance of the business and decide how to allocate resources. The Group has identified the Group's Chief Executive Officer as its chief operating decision maker. The Group's Chief Executive Officer considers the results of the business as a whole when assessing the performance of the business and making decisions about the allocation of resources. Accordingly, the Group has one operating segment and therefore the results of this segment are the same as the results for the Group.

 

The Group's revenues principally relate to commissions receivable by the Group from the sale of lottery tickets and related products. In the prior interim period, commissions payable to the Group's B2B channel partners were deducted from revenue, however the directors reassessed this policy at the prior year end, and concluded IFRS requires these commissions payable to be shown as a cost of sale. Accordingly, the Directors have re-presented the results for the prior interim financial statements and as a result revenue and cost of sales have increased by £4,092,000 for the six months ended 30 June 2015 - there has been no impact on gross profits, net loss or net loss per share.

 

The Group's revenue is analysed between Land and Digital (previously described as 'Online') routes to market and this information is provided to the Group's chief operating decision maker. Gross sales are also shown below as a memorandum disclosure and represent the total transaction value of all lottery sales and services, net of VAT and other sales taxes for the six month periods as indicated. The Group reports the total transaction value since the Directors believe that it reflects more accurately the transactional volume within the Group.

 

An analysis of the Group's gross sales and revenue by channel, all of which arose from the Group's operations in China, is as follows:

 


       Gross sales

        Revenue


            2016

2015

         2016

2015

Six months ended 30 June

£ 000

£ 000

£ 000

£ 000

Continuing operations:





Land business

2,319

2,855

51

55

Digital business

5,942

57,874

486

5,233


8,261

60,729

537

5,288

Discontinued operations:





Digital business

-

25,228

-

932












8,261

85,957

537

6,220

 

3.      Loss per share

 

 

30 June

2016


     30 June
2015


£ 000


£ 000

Losses attributable to owners of the company

(4,081)


(4,833)

Adjustment to exclude loss from discontinued operations

-


584

Losses for the purposes of earnings per share from continuing operations

(4,081)


(4,249)





Weighted average number of ordinary shares in issue (thousands)

147,962


130,523





Basic and diluted loss per share from:




-     Continuing and discontinued operations

2.8p


3.7p

-     Discontinued operations

n/a


0.4p

-     Continuing operations

2.8p


3.3p

 

4.      Trade and Other Receivables

 

 

  30 June

2016


  30 June
2015


£ 000


£ 000

Trade receivables

23


23

Unpaid share capital

11


11

Amounts owed by related parties

295


61

Other receivables

1,697


1,084

VAT receivable

1,252


980

Prepayments

3,752


2,290






7,030


4,449

 

Amounts owed by related parties includes £224,000 (2015: £nil) owed by Qingdao Baifa Technology Co. Limited, an associate of the Group, and £71,000 (2015: £61,000) owed by the Directors of the Group.

5.       Trade and Other Payables

 

 

                

30 June

2016


            31 December
2015

Current

£ 000


£ 000

  Trade creditors

1,193


538

  Amounts owed to related parties

672


686

  Accruals

454


2,144

  Income tax payable

47


48

  Other taxes and social security

39


27

  Other payables

1,387


1,333

  Contingent consideration

908


850






4,700


5,626

 

Amounts owed to related parties includes £672,000 (2015: £686,000) owing to Xinhuatong Software Development (Beijing) Co. Ltd., an associate of the Group.

6.       Financing Arrangement


On 1 June 2016 DJI Holdings plc established a financing relationship with China Everbright Bank in order to efficiently provide working capital funding to its trading subsidiary Beijing NewNet Science & Technology Development Co., Ltd. Under the arrangements, the China Everbright Bank Hong Kong Branch provided Beijing NewNet Science & Technology Development Co., Ltd. with a Chinese Renminbi denominated loan of which RMB 29.7m (c. £3.2m) was drawn down at the period end and carries an interest rate of 4.6% and is repayable in May 2017. This was secured by a sterling cash deposit made with the China Everbright Bank Hong Kong Branch of £3.4m by Xinhuacai Hong Kong Trading Limited ("XHKT") (A company whose shares were held by Darren Mercer with the knowledge of the Company and, as outlined in note 9, has been purchased by the Group on 29 September 2016 for the consideration of £1). XHKT was provided with a loan of £3.7m by the Group to finance the deposit, the loan is non-interest bearing and it is intended that the loan is capitalised into share capital of XHKT. As there is no fixed repayment date, the instrument has been classified as a non-current investment. Subsequent to the period end, the Group has acquired the share capital of this company as set out in note 9.

The amounts loaned to Xinhuacai Hong Kong Trading Limited are shown as other investments within and the amounts owing to Everbright Hong Kong China Branch are presented as borrowings.

7.       Convertible Loan Notes


On 21 April 2016 the Company agreed with the noteholder, Stadium Parkgate Limited, to cancel the previously existing Convertible Loan Notes and to issue new notes for the same principal amount of £6.0 million, but carrying an interest rate of 6 per cent. This has been accounted for as an extinguishment of the previously existing notes, which were derecognised on cancellation and an issuance of the new convertible loan notes.

The new notes, together with accrued interest, are capable of conversion at the option of the noteholder to Ordinary Shares at any time after 31 December 2016 and prior to 17 July 2018, other than in circumstances of certain changes of control where the new notes will be capable of conversion to Ordinary Shares prior to 31 December 2016. The conversion price of the new notes will be the lower of 115p and the closing mid-market price of an Ordinary Share on 31 December 2016 provided that the conversion price cannot be less than 60p, other than in circumstances of certain changes of control where the conversion price of the new notes will be 115p.

In addition, further new interest notes were issued for the sum of £2,403,288, this being the accrued interest to the date of cancellation of the previous Convertible Loan Notes. The new interest notes are capable of conversion at the option of the Company to Ordinary Shares at any time after 31 December 2016 and prior to 31 January 2017 at the lower of 115p and the closing mid-market price of an Ordinary Share on 31 December 2016 provided that the conversion price cannot be less than 60p. The new interest notes carry an interest rate of 20 per cent from 17 February 2017.

Separately, at any time after 31 January 2017 or prior to 31 December 2016 in the event of certain changes of control, the new interest notes are capable of conversion at the option of the noteholder to Ordinary Shares at the lower of 115p and the closing mid-market price of an Ordinary Share on 31 December 2016 provided that the conversion price cannot be less than 60p, other than in circumstances of certain changes of control where the conversion price of the new notes will be 115p.

 

8.    Share capital

 

 

 

Allotted, called-up and fully paid

    30 June

2016

            31 December

2015


£ 000

£ 000

164,315,391 ordinary shares of 10p each (Dec 2015: 144,306,820)

 

16,432

 

14,431

 

During the period the Company allotted and issued 1,392,855 ordinary shares in respect of cash subscriptions received in the prior year of £0.5m and issued a further 18,615,716 ordinary shares of 10p each for cash consideration of £10.9m giving rise to a share premium of £8.2m, after the deduction of £0.8m share issue costs.

9.    Events after the balance sheet date

 

Share Placings

 

DJI, through its broker, Mirabaud Securities LLP, placed 42,626,000 new Ordinary Shares at a price of 95p each (the "Placing Shares"), raising gross proceeds of £40.5m through two placings. The first was announced on 1 July 2016, 30,526,000 shares were admitted to trading in two tranches, the second tranche being admitted on 29 July 2016. The second placing for the issuance of 12,100,000 shares raising gross proceeds of £11.5m was announced on 19 July 2016. These shares were admitted to trading on 1 August 2016. The net proceeds of the Placings, together with existing cash resources, will be used to meet the Group's ongoing funding commitments, and for general working capital purposes.

 

Acquisition of Xinhuacai Hong Kong Trading Limited

 

On 29 September 2016, DJI agreed to acquire 100% of the share capital of Xinhuacai Hong Kong Trading Limited for cash consideration of £1. The Company, as set out in Note 6, was established to facilitate the financing of our trading subsidiaries in China.

 

Investment in Xinhuatong

 

DJI announced on 22 September 2016 that it is making a cash investment of 20m RMB plus the Group's lottery assets to acquire a 10% shareholding in Xinhuatong Technology Co. Ltd ("Xinhuatong"). Xinhuatong already is a 49% shareholder in DJI's associate investment, Xinhua Lottery Technology Co. Ltd. Xinhuatong is the exclusive provider of mobile payments, information and other key services to the Xinhua News Mobile App owned by China's national news agency. In the announcement DJI stated that it expected to benefit from enhanced revenues and profits as a result of the stronger partnership between NewNet and Xinhuatong.

 

Change of name of DJI

 

DJI announced on 22 September 2016 that it is convening a general meeting on 7 October 2016 to seek shareholders approval to change the name of the Company to BNN Technology plc. The resolution to approve the name change will be a special resolution of the Company.

 

 



 

INDEPENDENT REVIEW REPORT TO DJI HOLDINGS PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 9. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

Manchester, United Kingdom

30 September 2016

 



[1] Source: IDC, MIIT, JP Morgan estimates August 2016

[2] Source: Red Pulse China Market Intelligence August 2016


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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