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DJ DagangHalal PLC Interim Results

TIDMDGHL

RNS Number : 1466L

DagangHalal PLC

29 September 2016

29 September 2016

DagangHalal plc

("DagangHalal" or the "Company")

Interim Results for the six months ended 30 June 2016

DagangHalal Plc (the "Company") was incorporated in Jersey on 10 April 2015 as a public limited company. The registered office of the Company is 43-45 La Motte Street, St Helier, Jersey JE4 8SD. The financial information is for the Company and its subsidiaries undertakings (together, the "Group").

DagangHalal plc (ISDX: DGHL), the world's first global e-marketplace to address the need for Halal verification, today announces its unaudited interim results for the six months ended 30 June 2016.

Financial Highlights

 
                         Six months to   Six months to 
                          30 June 2016    30 June 2015 
 Revenue (MYR)           3,338,202       2,964,091 
 Gross Profit (MYR)      2,357,735       2,928,745 
 Profit / Loss Before 
  Tax (MYR)              (4,490,836)     1,175,834 
 Profit / Loss After 
  Tax (MYR)              (4,490,836)     1,335,834 
 Gross Margin            71%             99% 
 
 

Operational Highlights

-- Successfully raised c.GBP3.6 million of net proceeds and admitted to the ISDX Growth Market in April 2016

   --      Active merchant numbers increased to 4,272 (H1 2015: 3,657) 
   --      Continued geographical diversification 

-- Signed up two more Certification Bodies (CBs) to the Halal Verification Engine (HVE) database taking the total to 40, up from 38 in February 2016

-- Written confirmation received from two additional CBs to use Halal Certificate Management System (HCMS), taking total to 8

   --      Appointed Rizal Alang Zari as Chief Financial Officer 

Mohamed Hazli Mohamed Hussain ('Hazli'), Chief Executive Officer of DagangHalal commented: "I'm pleased to report the Group's maiden interim results since its successful admission to the ISDX Growth Market in April this year. We have continued to deliver on our stated strategy: we've increased active merchant numbers for our e-marketplace and diversified geographically, we've added new Certification Bodies to our HVE system and we're looking forward to holding our first carnival for a number of years in Kuala Lumpur in December this year."

For further information, please contact:

 
 DagangHalal                        via FTI Consulting 
 Mohamed Hazli Mohamed Hussain, 
  Chief Executive Officer 
 
 
                                    +44 (0) 20 7614 
 Arden Partners                      5900 
 James Felix / Patrick Caulfield 
  (Corporate Finance) 
                                    +44 (0)20 3137 
 Optiva Securities                   1902 
 Vishal Balasingham 
 
                                    +44 (0) 20 3727 
 FTI Consulting                      1000 
 Chris Lane / Rob Mindell / 
  Elena Kalinskaya 
 

Chairman's Statement

I am pleased to report DagangHalal's maiden interim results since the Group's successful admission to the ISDX Growth Market on 7 April 2016. This marked an important and exciting milestone for DagangHalal and has laid solid foundations to support the Group's future growth. With the net proceeds of approximately GBP3.6 million (c.MYR 23 million) raised on IPO, the Group intends to accelerate its growth strategy, in particular through expanding its sales and marketing initiatives, and by continuing to diversify geographically.

The IPO used up a significant amount of management capacity. However, notwithstanding this, the Group has made much progress in the first six months of 2016. Group revenue for the period was MYR 3.3 million, a 14% increase on the MYR 2.9 million in H1 2015. In line with the stated growth strategy, the Group has invested in sales and marketing activities, particularly in trade fairs, this was the main reason for the fall in gross profit from MYR 2.9 million in H1 2015 to MYR 2.4 million in H1 2016. During the first six months of 2016, the Group incurred a net loss of MYR 4.5 million which was largely due to IPO related listing expenses which amounted to MYR 3.5 million.

Strategy

The core objective of the Group is to promote Halal trade business transactions anywhere and anytime. DagangHalal's strategy is fourfold:

   --      To grow the Group's ecosystem in the existing core market; 
   --      To expand the Group's activities into new geographies; 
   --      To increase the number of Halal Certified Bodies (CB) partners; and 
   --      To further develop the Group's platform, products and proprietary strategy. 

Operational Highlights

E-marketplace, e-commerce and web solutions

During the period, the number of active merchants increased to 4,272 (H1 2015: 3,657. This is due to the Group's focus on increasing sales and marketing activities, in particular through trade events

In line with the Group's growth strategy, DagangHalal has continued to diversify and grow in new geographies. For the six months ended 30 June 2016, international revenue as a percentage of total revenue rose to 55%, up from 47% in H1 2015. This geographical diversification has been enabled through the Group's successful participation in various trade shows during the period, including Gulf-Food Dubai, FHA Singapore and Foodex Japan.

Given the Group's main focus on growing the number of active merchants during the period, the number of merchants opting for additional e-commerce features has remained stable at 50. The Group continues to have 4 master dealer agreements in place.

Halal Certificate Repository

The Group's focus remains on populating the database in advance of more actively promoting the service in 2017. During the first half of the current financial year, the Group has successfully signed up 2 more Certification Bodies (CBs) to the HVE database. With these new additions, the Group has now signed a total of 40 out of c.120 CBs globally, up from 38 in February 2016.

Since inception, over 80,000 certificates have been uploaded to the HVE, up from 60,000 as at 31 March 2016. During the period, the Group received written confirmation from two additional CBs to use HCMS, taking the total to 8 and the Group is working with these CBs towards going live on the system in due course.

Halal events, training, education and consultancy business

As stated at the time of the Group's admission to the ISDX Growth Market, DagangHalal did not host any carnivals in 2013, 2014 or 2015 due to a switch of focus towards the development of the HVE and HCMS, but with these technologies developed, it now intends to resume hosting its own carnivals going forward. The Group is making arrangements to host a carnival in Kuala Lumpur in December 2016. The carnival is planned to be held at Evolve Concept Mall, Petaling Jaya on 8(th) - 11(th) December 2016. In addition to brand building for the Group, the carnival shall provide a platform for our customers to showcase and introduce their halal products to a mass market. More than 50 merchants are expected to participate in this carnival. The exhibitors/merchants are from various industries, including food & beverages, banking & insurance, telecommunications, personal care products, pharmaceuticals and media.

Outlook

The database that we have is unique and the only one of its kind in the world and there are many other possibilities for commercialization. Our focus now is on continuing to execute on the Group's strategy as stated above and the Board remains optimistic about the future prospects of the Group.

Datuk Hj Muhadzir Mohd Isa

Chairman

Consolidated Statement of Comprehensive Income

for the period ended 30 June 2016

 
                                      Proforma       Proforma 
                                     (Unaudited)   (Unaudited) 
                                       30 June     30 June 2015 
                                         2016 
 
                             Note        MYR           MYR 
 
 Revenue                               3,338,202      2,964,091 
 Cost of sales                         (980,466)       (35,346) 
                                    ------------  ------------- 
 Gross profit                          2,357,735      2,928,745 
 Other income                             87,939         13,499 
 
 General & administrative 
  expenses                           (3,258,816)    (1,144,913) 
 Marketing expenses                    (101,540)      (165,650) 
 Other expenses                         (33,067)      (455,847) 
 Listing expenses                    (3,543,087) 
 
   Operating (loss) / 
   profit before tax                 (4,490,836)      1,175,834 
 Income tax expense                            -        160,000 
 (Loss)/profit for 
  the period                         (4,490,836)      1,335,834 
 
 Other comprehensive 
  income                                       -              - 
 
 Total comprehensive 
  (loss)/profit for 
  the period attributable 
  to the equity owners               (4,490,836)      1,335,834 
                                    ============  ============= 
 
 (Loss)/earning per 
  share : 
 Basic and diluted 
  (MYR per share)               6    (15.21 sen)       4.52 sen 
                                    ------------  ------------- 
 

Consolidated Statement of Financial Position

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DJ DagangHalal PLC Interim Results -2-

as at 30 June 2016

 
                                      Proforma      Proforma 
                                    (Unaudited)    (Unaudited) 
                                    30 June 2016   31 December 
                                                       2015 
                                        MYR            MYR 
 
   Non-Current Assets 
 
   Property, plant and equipment         667,044        81,102 
 Intangible assets 8                   3,021,589     2,720,488 
                                   -------------  ------------ 
 
   Total Non-Current Assets            3,688,633     2,801,590 
                                   -------------  ------------ 
 
   Current Assets 
 
   Trade receivables                   2,840,139     1,988,563 
 Other receivables, deposits 
  and prepayments                        124,299        78,306 
 Amount owing by related 
  parties 10                             100,271        95,133 
 Cash and cash equivalents            14,857,325        28,616 
                                   -------------  ------------ 
 
   Total Current Assets               17,922,034     2,190,618 
                                   -------------  ------------ 
 Total Assets                         21,610,667     4,992,208 
                                   -------------  ------------ 
 
   Current Liabilities 
 
   Trade payables                         81,020         6,584 
 Other payables and accruals             331,777     2,358,557 
 Amount owing to director                  3,200         6,000 
 Provision for taxation                        -           187 
                                   -------------  ------------ 
 Total Current Liabilities               415,997     2,371,328 
                                   -------------  ------------ 
 
   Non-Current Liabilities 
 
   Hire purchase                         274,000             - 
                                   -------------  ------------ 
 Total Liabilities                       689,997     2,371,328 
                                   -------------  ------------ 
 Net Assets                           20,920,670     2,620,880 
                                   -------------  ------------ 
 
   Equity 
 Share capital 5                       3,152,529             1 
 Share premium                        19,638,098             - 
 Merger reserve                        4,100,003     4,100,003 
 Retained loss                       (5,969,960)   (1,479,124) 
                                   -------------  ------------ 
 Total Equity and Reserve             20,920,670     2,620,880 
                                   -------------  ------------ 
 

Consolidated Statement of Change in Equity

for the period ended 30 June 2016

 
                                 Share         Share        Merger      Retained           Total 
                               capital       premium       reserve          loss 
                                   MYR           MYR           MYR           MYR             MYR 
 Proforma 
 Balance at 1 
  January 2015               8,000,003             -   (3,900,000)   (1,532,087)       2,567,916 
 
 Loss for the 
  period                             -             -             -        52,963          52,963 
                          ------------  ------------  ------------  ------------  -------------- 
 Total comprehensive 
  loss for the 
  period                             -             -             -        52,963          52,963 
                          ------------  ------------  ------------  ------------  -------------- 
 
   Transaction with 
   owners 
 Issue of share                      1             -             -             -               1 
 Adjustment of 
  group reorganisation     (8,000,003)             -     8,000,003             -               - 
 
 Balance at 31 
  December 2015                      1             -     4,100,003   (1,479,124)       2,620,880 
                          ------------  ------------  ------------  ------------  -------------- 
 
 Loss for the 
  period                             -             -             -   (4,490,836)     (4,490,836) 
 Total comprehensive 
  loss for the 
  period                             -             -             -   (4,490,836)     (4,490,836) 
                          ------------  ------------  ------------  ------------  -------------- 
 
   Transaction with 
   owners 
 Issue of share              3,152,528    20,951,087             -             -      24,103,615 
 Share issuance 
  costs                                  (1,312,989)             -             -     (1,312,989) 
 
 Balance at 30 
  June 2016                  3,152,529    19,638,098     4,100,103   (5,969,960)      20,920,670 
                          ------------  ------------  ------------  ------------  -------------- 
 

Consolidated Statement of Cash Flows

for the period ended 30 June 2016

 
                                       Proforma             Proforma 
                                        (Unaudited)         (Unaudited) 
                                          30 June             30 June 
                                            2016                2015 
                                           (MYR)               (MYR) 
 
   Cash flow from operating 
   activities 
 Operating loss                          (4,490,836)          1,175,834 
 Amortisation                                360,387            269,313 
 Depreciation                                 62,518             11,842 
 Impairment losses on 
  trade receivables                                             174,692 
                                      --------------       ------------ 
 Operating cash flows 
  before movements in 
  working capital                        (4,067,931)          1,631,681 
 Increase in trade and 
  other receivables                        (902,707)        (2,520,819) 
 (Decrease) / Increase 
  in trade and other 
  payables                               (1,955,331)          2,208,349 
 
 Net cash used in operating 
  activities                             (6,925,969)          1,319,211 
 
   Cash flows from investing 
   activities 
 Purchase of property, 
  plant & equipment                        (648,460)           (10,378) 
 Software development 
  expenditure                              (661,488)          (392,400) 
 Advances to related 
  parties                                          -          (313,845) 
                                      --------------       ------------ 
 
   Net cash applied to investing 
   activities                            (1,309,948)          (716,623) 
                                      --------------       ------------ 
 
   Cash flows from financing 
   activities 
 Net proceeds from issuance 
  of shares                               22,790,626                  - 
 Repayment hire purchase 
  liabilities                                274,000                  - 
                                      --------------       ------------ 
 
   Net cash used in financing 
   activities                             23,064,626                  - 
                                      --------------       ------------ 
 Repayment of a director                           -          (661,744) 
 Movement in cash and 
  cash equivalents                        14,828,709           (59,156) 
 Cash and equivalents 
  at beginning of period                      28,616             81,986 
                                      --------------       ------------ 
 Cash and equivalents 
  at end of period                        14,857,325             22,830 
                                      --------------       ------------ 
 

Notes to the Consolidated Financial Information

   1.      General Information 

DagangHalal Plc (the "Company") was incorporated in Jersey on 10 April 2015 as a public limited company. The registered office of the Company is 43-45 La Motte Street, St Helier, Jersey JE4 8SD.

The financial information is for the Company and its subsidiaries undertakings (together, the "Group"). The principal activities of the entities of the Group are as follows:-

 
                   Percentage        Country 
                    interest     of incorporation        Principal activities 
 
 DagangHalal plc       -             Jersey         Investment holding 
 DagangHalal Sdn 
  Bhd                    100%       Malaysia        Investment holding 
                                                    Development and implementation 
                                                     of software, operation 
                                                     of the online marketplace, 
                                                     operation of the 
                                                     HVE, magazine publishing, 
 DagangAsia Net                                      organising Halal 
  Sdn Bhd               100%*       Malaysia         trade shows and carnivals 
 HVE Innovations 
  Sdn Bhd               100%*       Malaysia        Dormant 
                                                    Holds a publishing 
                                                     permit for HMAG and 
 DH Events Sdn                                       runs the Dagangasia.com 
  Bhd                   100%*       Malaysia         website 
 

*indirect interest

The consolidated financial information is presented in Malaysian Ringgit (MYR) as this is the currency of the primary economic environment that the Group operates in. The Company was admitted to trading to the ISDX Growth Market on 7 April 2016, following the acquisition of DagangHalal Sdn.Bhd.

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DJ DagangHalal PLC Interim Results -3-

Although the Group reconstruction did not become unconditional until 31 March 2016, these consolidated financial statements are presented as if the Group structure has always been in place, including the activity from incorporation of the Group's principal subsidiary. Both entities had the same management as well as majority of shareholders. Accordingly, comparative amounts for the six month period ended 30 June 2015 are presented on a proforma basis.

   2.      Basis of Preparation 

The interim accounts, which have not been audited, have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use by the European Union, and effective, or issued and early adopted, as at the date of these statements. The financial statements have been prepared under the historical cost convention as modified for financial assets carried at fair value.

These interim consolidated financial statements are for the six month period ended 30 June 2016. They do not include all of the information required for full annual financial statements and should be read in conjunction with the financial information set out in the Company's ISDX Admission Document dated 31 March 2016.

These interim financial statements have been prepared in accordance with the accounting policies adopted in the preparation of the financial information set out in the Company's ISDX Admission Document referred above and as disclosed below. These interim financial statements are unaudited but have been reviewed by the Group's auditor.

   3.      Significant accounting policies 

3.1 Accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of income, expenditure, assets and liabilities. Estimates and judgements are continually evaluated, including expectations of future events to ensure these estimates to be reasonable.

The going concern basis of accounting have as been applied as Management are aware of activities since the year end which support the future of the Company (disclosed in events after the period). Management does not consider there to be any other significant judgements and assumptions which would materially affect the financial statements.

3.2 Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end of the reporting period.

Subsidiaries are entities (including structured entities, if any) controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee's return.

The acquisition of DagangHalal Sdn Bhd by the Company on 31 March 2016 has been accounted for as a business combination amongst entities under common control. Accordingly, the financial statements of the Group have been consolidated using the merger method of accounting.

Under the merger method of accounting, the results of the subsidiaries are presented as if the merger had been effected throughout the current and previous financial years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting debit or credit difference is classified as a non-distributable reserve.

The subsidiaries of DagangHalal Sdn Bhd, namely DagangAsia Net Sdn Bhd ("DagangAsia Net"), DH Events Sdn Bhd ("DH Events") and HVE Innovations Sdn. Bhd. ("HVE Innovations") are consolidated using the acquisition method of accounting prior to the internal reorganisation undertaken by the Company. Under the acquisition method of accounting, the results of 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 DagangHalal Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

Intra-group transactions, balances, income and expenses are eliminated on consolidation. Intra-group losses may indicate an impairment that requires recognition in the consolidated financial statements. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

   4.      Income tax expenses 

The Company is regarded as resident for the tax purposes in Jersey and it is subject to Jersey income tax at the general rate of zero percent.

Tax expense is recognised based on management's best estimate of the weighted average annual tax rate expected for the full financial year applied to the pre-tax income of the interim period. The Group's consolidated effective tax rate in respect of continuing operations for the six months ended 30 June 2015 was lower that the Malaysian statutory tax rate of 25% (six months ended 30 June 2014: 25%) caused mainly by the following factors:-

-- A subsidiary, DagangAsia Net Sdn Bhd was granted Multimedia Super Corridor ("MSC") status by the Malaysian Government, which qualifies the subsidiary for the Pioneer Status incentive under the Promotion of Investments Act 1986. DagangAsia Net will enjoy full exemption from income tax on its statutory income from pioneer activities for a period of 10 years, from 2 July 2009 to 1 July 2019.

   5.      Share capital and share premium 
 
                          Number       Share         Share 
                       of shares     capital       premium 
                                       (MYR)         (MYR) 
 
 On incorporation              2           1             - 
 Issue of share - 
  31 March 2016       57,288,442   3,087,848    19,398,767 
 Issue of share - 
  7 April 2016         1,200,000      64,680     1,552,320 
 Less: transaction 
  costs                        -           -   (1,312,989) 
                     -----------  ----------  ------------ 
 Total                58,488,442   3,152,529    19,638,098 
                     -----------  ----------  ------------ 
 

On 31 March 2016, the Company issued 57,288,442 ordinary shares to certain holders of the share capital of DagangHalal Sdn Bhd pursuant to the share exchange agreement, in consideration for the transfer of the entire share capital of DagangHalal Sdn Bhd to the Company.

On 7 April 2016, the Company's shares had been admitted to trading on ISDX Growth Market. The Company has further issued 1,200,000 ordinary shares of par value of GBP0.01 each at GBP0.25 per share from the public placement for a total consideration of GBP300,000 before issue costs.

As at 30 June 2016, the total issued ordinary shares of the Company was 58,488,442 ordinary share of GBP0.01 each.

   6.      (Loss)/earning per Share 

The calculation of the consolidated loss per share is based on the following loss and number of shares:

 
 
                               Period ended            Period 
                                                        ended 
                                    30 June           30 June 
                                       2016              2015 
                                      (MYR)             (MYR) 
  Proforma 
 Loss/profit for the 
  period                        (4,490,836)         1,335,834 
 
 Weighted average shares 
  in issue:                      29,519,434        29,519,434 
 
 Basic & diluted (proforma)     (15.21 sen)          4.52 sen 
 

Basic loss per share is based on the weighted average number of ordinary shares in issue during the period. Diluted loss per share would assume conversion of all potentially dilutive ordinary shares. DagangHalal has no potentially dilutive ordinary shares. The interim consolidated financial information represents the historical information prior to a group reorganisation on 31 March 2016 whereby the Company became the parent company of the enlarged group. It is of limited significance to calculate earnings per share on the historical equity of the companies forming the DagangHalal Group prior to the reorganisation. Accordingly, a pro forma loss per share has been included based on the number of shares in the Company in issue on admission to ISDX.

   7.      Property, plant and equipment 

During the period, the Group incurred MYR 648,460 additions to property, plant and equipment, mainly in acquiring office equipment (1H 2015: MYR 10,378; Dec 2015: MYR 14,178). The depreciation charge for the period on the Group's property, plant and equipment was MYR 62,518.

   8.      Intangible assets 

The intangible assets comprise of development costs and intellectual property. Development costs principally comprise internally generated expenditure cost on major portal development projects where it is reasonably anticipated that the costs will be recovered through future commercial activity.

 
                              30 June   31 Dec 2015 
                                 2016 
                                (MYR)         (MYR) 
 
 Development cost             552,769       487,385 
 Intellectual property      2,468,820     2,233,103 
 
                            3,021,589     2,720,488 
 
   9.      Merger deficit 

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DJ DagangHalal PLC Interim Results -4-

The accounting treatment for Group reorganisation is scoped out of IFRS 3. Accordingly, as required under IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, the Group has referred to current UK GAAP (FRS 102) to assist its judgement in identifying a suitable accounting policy. The introduction of the new holding company has been accounted for as a capital reorganisation using the merger accounting principles prescribed under current UK GAAP. Therefore the consolidated financial statements of DagangHalal PLC is presented as if DagangHalal PLC has always been the holding company for the Group.

The use of merger accounting principles has resulted in a balance on Group capital and reserves that have been classified as a merger reserve and included in the Group's shareholders' funds. The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date.

   10.    Related party transactions 

Other than those disclosed elsewhere in financial statements, the Group carried out the following transaction with related parties during the financial period. The summary of the amount owing by the related party is:

 
                                                         Period     Period 
                                                          ended      ended 
                                      Country of        30 June     31 Dec 
                                     Incorporation         2016       2015 
                                                          (MYR)      (MYR) 
 
           WEBSE Sdn Bhd                Malaysia        100,271     95,133 
 

WEBSE Sdn Bhd have common director. Key management personnel, which for DagangHalal plc is the company's directors, received no remuneration in the period.

   11.    Copies of the Interim Report 

Copies of the interim report will be available on the Company's website at www.daganghalalgroup.com and from the Company's registered office.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR LPMTTMBITTLF

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