NEWS RELEASE DECLOUT S 1H 2014 REVENUE UP 65% TO $45.6 MILLION ON STRONG PERFORMANCE BY IT INFRASTRUCTURE SERVICES SEGMENT Revenue contribution from overseas operations grew four-fold to $21.7 million EBITDA turned positive to $0.8 million Gross profit margin above 25% mark Singapore, 13 August 2014 SGX-Catalist listed DeClout Limited ( DeClout or the Group ), a provider of next generation technology services offering a full suite of information and communications technology solutions, has announced its financial results for the half year ended 30 June 2014 ( 1H 2014 ). Group Financial Highlights 1H 2014 ($ 000) 1H 2013 ($ 000) Change Revenue 45,592 27,574 65% Gross Profit 12,024 5,344 125% Gross Profit Margin 26% 19% 7 percentage points EBITDA 846 (317) nm Loss Before Tax (1,989) (2,335) 15% Loss After Tax (2,086) (2,068) (1%) nm not meaningful The Group reported a 65% increase in revenue to $45.6 million in 1H 2014 as a result of its global expansion of its twin engines IT Asset Recovery & Independent Maintenance and Vertical Domain Clouds (VDC). Gross profit also jumped by 125% to $12.0 million and generated a gross margin of 26%, representing an increase of 7 percentage points from 1H 2013, maintaining the Group s gross profitability rate above the 25% mark. Revenue ($'000) Gross Profit ($'000) and Gross Profit Margin (%) 65% 12,024 45,592 125% 5,344 27,574 19% 7pts 26% 1
EBITDA turned positive from a negative of $0.3 million in 1H 2013 to $0.9 million in 1H 2014, despite an increase of $0.5 million in mergers and acquisitions cost. The significant increase in EBITDA was attributed to the positive impact of the Group s overseas expansion and improved performance in the Singapore market from the IT Infrastructure Services segment. While the investments in the VDC segment has yet to make material contributions, the Group s bottom-line performance has improved, with loss before tax reduced by 15% from $2.3 million in 1H 2013 to $2.0 million in 1H 2014 on strong performance by the IT Infrastructure Services segment. With the absence of tax credits, the Group recorded a loss after tax of $2.1 million which is fairly comparable to the net loss position in 1H 2013. EBITDA ($'000) Loss Before Tax ($'000) turnaround 846 (2,335) (1,989) (317) 15% Segmental Review IT Infrastructure Services Segment has shown impressive growth from our overseas operations, mainly spurred by the global expansion of Procurri Corporation Pte Ltd ( Procurri Corp ), the Group s IT Asset Recovery and Independent Maintenance Services arm. 2
As a result, revenue for this segment increased by 68% to $44.5 million, and gross profit rose by 134% to $12.0 million compared to the same period last year. EBITDA for this segment increased by 303% to $1.6 million. IT Infrastructure Services Revenue and EBITDA ($ 000) 68% 1H 2014 IT Infrastructure Services Gross Profit ($'000) and Gross Profit Margin (%) 11,975 303% 1H 2013 1H 2014 1,627 1H 2013 26,428 44,528 5,112 19% 134% 8pts 27% 404 EBITDA Revenue Vertical Domain Cloud Segment has yet to show significant contribution to the Group due to the unforeseen delay in mobile games deployment. The revenue for VDC declined by 7% to $1.06 million from $1.15 million in 1H 2013. Coupled with the depreciation charge on the technology platform investment which started to kick in this year, the gross profit margin and EBITDA were down by 15 percentage points and 8% respectively. Vertical Domain Clouds Revenue and EBITDA ($ 000) 1H 2013 1H 2014 (7%) Vertical Domain Clouds Gross Profit ($'000) and Gross Profit Margin (%) 232 1,146 1,064 (79%) EBITDA Revenue (721) (781) 20% (15pts) 49 5% (8%) 3
Geographical Review Revenue by Country in 1H 2014 ($'000) Revenue by Country in 1H 2013 ($'000) 15, 716 23,933 4,992 131 22,138 4,931 313 435 Singapore Malaysia 577 Indonesia United Kingdom Singapore Malaysia Indonesia United States United States Singapore remained the Group s largest revenue contributor of $23.9 million, comprising 52% of 1H 2014 s overall revenue, followed by the US and UK, accounting for 34% and 11% of overall revenue respectively. In line with the Group's revenue diversification strategy, overseas revenue surged four-fold from $5.4 million to $21.7 million, with growth spearheaded by US-based Procurri LLC and partial contributions from the recent acquisitions in Tinglobal Holdings Limited ( Tinglobal ) and Verity Solutions Sdn Bhd ( Verity ). Mr Vesmond Wong, Chairman and Group CEO of DeClout, said: Diversification of the Group revenue with focus on expansion outside of Singapore has been central to our strategy in the last 12 months and we are very pleased to see 1H 2014 s revenue delivering the outcome in line with our global growth strategies. Close to 50% of our revenue is now generated from markets outside of Singapore, of which the Group will continue to focus to strengthen our performance and reach. I am also pleased to see our EBITDA and profitability closely tracking the increase of our revenue as a result of our significant expansion in the last 6 months. During the 4
process, we did not sacrifice our margins and have managed to maintain our gross profitability above the 25% mark. Expansion Progress and Outlook IT Infrastructure Services Segment Well-grounded, high growth business IT Asset Recovery and Independent Maintenance Services Led by Procurri Corp, the Group s IT Asset Recovery and Independent Maintenance Services arm continues to track well with the recent acquisitions in a 51% stake in UK-based Tinglobal in May 2014 and a 100% stake in Malaysia-based Verity in June 2014. These acquisitions were undertaken to diversify our overseas revenue stream and increase our economies of scale. Procurri Corp is in the process of enhancing and extracting synergies from these subsidiaries so as to fast-track global deployments and partnerships with Original Equipment Manufacturers and other partners in different parts of the world. Looking forward, Procurri Corp has set its sights on expanding into other markets in the near future. Based on the recent revenue momentum, the Group expects its global entities to continue to contribute to its growth in 2H 2014. Newly transformed, high yield business Telco & Network Solutions As part of the transformation plan to quickly move Beaqon Pte Ltd ( Beaqon ) away from the high labour intensive and lower value deployment of fiber optics home projects, we have managed to re-model Beaqon whose vision is to become a regional leading telco and network solutions player. We have since embarked on a regionalisation plan to enter the Indochina market through the acquisitions of Asia Wiring Systems Pte Ltd and Pacific Wave Pte Ltd to offer the full suite of wired and wireless telco and network infrastructure products required by the industry. Beside the distribution arm, Beaqon has also built the capability to provide consultancy and project management services for 4G implementation and data centre infrastructure solutions. These acquisitions will enable the Group to leverage on key distributorships and customer relationships in the region to further create opportunities to cross-sell products and services to the Group s other IT infrastructure Services business units. 5
With all positive developments in the pipeline, Beaqon is poised to be another growth engine for the Group in future. We also expect this team to contribute to the Group s future business expansion. Vertical Domain Clouds Segment Leveraging on Corous360 Pte Ltd s ( Corous360 ) Unified Payment Infrastructure and content publishing business, the Group is in the process of evolving its Games Cloud into an e-commerce payment platform for B2B, B2C and C2C transactions across Southeast Asia. This strategy is driven by Netipay Pte. Ltd. ( Netipay ), an entity which the Group will fully own once the proposed acquisition of Netipay as announced in May 2014 has been completed. We expect to complete the acquisition in August 2014. The acquisition of Netipay will enable the Group to gain access to Netipay s mobile payment channels and technology as well as its active user base in Indonesia. The Netipay platform is significant for the Games Cloud as it enhances our payment Infrastructure deployment and allows us to leverage our existing installed base to build a common and integrated platform for other e-commerce verticals. Netipay will seek for strategic targets with either market access or unique technology, or both, to enhance its competitiveness in the mobile and internet commerce space. Moving forward, Corous360 will focus on the deployment of mobile games content while Netipay s role will be to bridge the gap between content providers and consumers by providing an end-to-end payment solution for both consumers and businesses as well as actionable consumer insights from the data that we collect via our payment gateway. In Summary Mr Wong added: As we have seen in the past, revenue is weighted towards the second half of the year due to seasonal factors. The first half of the year is usually a lower season for the IT Infrastructure Services segment. At the same time, the regional expansion plans of our VDC has yet to be fully implemented by the end of 1H 2014. We expect the Group will continue to expand its business through mergers and acquisitions and growing of its existing operations in the next 12 months. In view of the encouraging improvements in EBITDA and loss before tax, it has been proven that we are on the right track towards long term sustainability, and we will continue with our ongoing efforts to invest in the growth of our twin engines. 6
While the IT Infrastructure Services segment is profitable and has laid a strong foundation for us to move forward, the VDC segment remains a core strategy in putting us ahead of the pack and the technology curve. This is in line with our strategy to diversify income stream and deliver greater value for our shareholders. About DeClout Led by a dynamic team of IT veterans, DeClout (www.declout.com) aims to be the leader in next generation technology driven services in Asia, delivering innovative and cost-effective solutions that will make us the partner of choice for leading companies across the region. Listed on the Catalist Board of the Singapore Exchange in 2012, the Group operates two core business segments - IT Infrastructure Services and Vertical Domain Clouds (VDCs) - out of Singapore, Malaysia, Indonesia, Thailand, Myanmar, Cambodia, the Philippines, United States, United Kingdom and the PRC. The IT Infrastructure Services segment comprises businesses in data centre hardware and maintenance, cloud computing and systems integration as well as telco and network solutions. Drawing on the expertise and synergies gained from our array of complementary IT Infrastructure Services, the Group is capitalising on exciting opportunities through our VDCs - vibrant, self-contained and scalable ecosystems or communities - starting with the online games and e-commerce industries. Our vision is to create diverse VDCs that serve the needs and aspirations of different businesses and user communities. With comprehensive strengths across a range of IT products and solutions that are deployed across Asia Pacific, US and Europe, the company is committed to creating long-term value and growth potential for its customers. For media enquiries, please contact: Selina Lim / Fiona Wong Gabriel Tan / Allison Chen DeClout Limited Financial PR Pte Ltd Tel: +65 6818 1807 Tel: +65 6438 2990 selina.lim@declout.com / gabriel@financialpr.com.sg / fiona.wong@declout.com allison@financialpr.com.sg This press release has been prepared by the Company and its contents have been reviewed by the Company s sponsor ( Sponsor ), Canaccord Genuity Singapore Pte. Ltd., for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited ( SGX-ST ). The Sponsor has not independently verified the contents of this press release. 7
This press release has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this press release, including the correctness of any of the statements or opinions made, or reports contained in this press release. The contact person for the Sponsor is Ms Karen Soh, Managing Director, Corporate Finance, Canaccord Genuity Singapore Pte. Ltd. at 77 Robinson Road #21-02 Singapore 068896, telephone (65) 6854-6160. 8