BNN Technology PLC Strategic and Trading Update (2599R)

TIDMBNN

RNS Number : 2599R

BNN Technology PLC

08 December 2016

8 December 2016

BNN Technology plc

Strategic & Trading Update

-- Gross sales(1) of approximately RMB 1.3 billion Q4-to-date. Exceeded RMB 1 billion (cGBP120m) in November 2016 after four-fold increase in volumes versus October

   --     Acceleration of business activity, supported by investment brought forward into FY 2016 
   --     Entry to fast growing Chinese digital advertising market with significant new contract 
   --     Further contracts, including prestigious content agreements, expected before year-end 

-- Investment in data and R&D: world-class specialist team to maximise revenue generation and deliver new products

-- Xinhua News App update: All 12 targeted provinces now successfully signed by the company's partners Xinhuatong and NewNet

Trading Update

As outlined in the interim accounts, we are pleased to confirm that the Group has returned to substantial revenue generation in the second half of this year, with strong month-on-month increases in trading volumes.

After extensive platform testing in August and September, as well as further mobile top-up contracts, we saw a dramatic acceleration of B2B transactions fulfilled by our platform in October and November. We expect further growth of B2B volumes in December and into Q1 2017 as further payment services are launched and new contracts enacted.

We have been making considerable commercial progress this year and, as a result, a number of opportunities and investments which we anticipated would materialise in 2017 are now materialising this year. As such we are now investing heavily in R&D, developing our advertising strategy and pursuing content partnerships, in addition to signing all 12 provinces targeted, through our partners Xinhuatong and NewNet, to the Xinhua news mobile app. This development is welcomed by the Board as a firm indication that our plans are advancing at a faster pace than originally expected.

Below is a chart showing the Group's gross sales(1) by month in the second half of 2016 to date. In November, more than 95% of gross sales were driven by our B2B mobile top-up business.

Gross Sales(1) in second half of 2016 to date (GBP Millions)

http://www.rns-pdf.londonstockexchange.com/rns/2599R_-2016-12-7.pdf

(1) Gross sales are the total transaction value of all payments/services that the Group processes in a period. We receive a small percentage commission from the transactions we process and this is what will be recorded in our disclosed revenues at year-end. We receive a modest commission on the B2B transactions, however strategically we aim to transfer customers from B2B to B2C customers in the future which will drive higher margins, and greater data acquisition, for the company.

Investment in new contracts

Advertising

Through our partnership with NewNet, the Group is pleased to report it has been awarded key advertising and content provision rights. In return for an upfront fee and revenue share, it represents a unique and exciting opportunity for the Group to add an additional revenue stream when the advertising sales start in 2017.

To support this contract win, BNN Technology and NewNet is expected to announce, before the year end, significant content agreements with prestigious partners that we hope will drive significant customer traffic to the Xinhua News Mobile app, through our technology platform, thereby accelerating monetisation of the large user base being built and managed by the Group.

Investment in R&D Team

As reported previously, the data that can be captured through the mobile app, and exploitation of that data, offers the opportunity to create substantial shareholder value from 2017 and beyond. With the introduction of unique mobile content and expansion of payment services, we are pleased to announce the recruitment of a world-class specialist data team to focus on product development with our partners.

The team brings to BNN Technology substantial leading edge experience and capabilities of large scale, blue chip organisations, having worked with a number of Fortune 50 companies on platforms handling high volumes of data, as well as building analytics and data mining teams. The team will also focus on developing, testing and delivering a number of new products to the market over the coming months.

Further initiatives

In addition, we are in advance stages of negotiation on several significant contracts. These include contracts to support new B2C services launched on the Xinhua News Mobile App, working with prestigious national partners. Our technology will allow consumers in these sectors to make payments and update information with ease and security using their mobile phones. We are hopeful these services will go live in the first few months of 2017. Together with the contracts and initiatives announced today, these new revenue streams represent significant potential for both higher margins and valuable customer data.

Xinhua Rollout

The Group is very pleased to announce that all 12 provinces targeted for the launch of payment services (utilities, mobile top-up, traffic fines) on the Xinhua News Mobile app have been signed by our partners Xinhuatong and NewNet ahead of the year-end schedule originally indicated. Our technology platform will be launched in these provinces, through our partners, with a total population of c.800 million, representing coverage of approximately three-quarters of all existing utility payments in China.

Nasdaq Update and FTSE Reclassification

The Nasdaq process is well underway with both the SEC and the Nasdaq exchange and we look forward to providing further updates in the new year. As announced on 2 December 2016, FTSE Russell has confirmed that BNN's FTSE Industry Classification Benchmark will change from "Gambling" (ICB Subsector Code 5752) to "Internet" (ICB Subsector Code 9535). The change in industry classification appropriately reflects BNN's current business model and will be effective as of Monday 19 December 2016.

Darren Mercer, Chief Executive of BNN Technology, said:

"We are delighted with the progress we have been making in 2016. Our key partnership with Xinhuatong, through NewNet, and activities within the Xinhua News Mobile App, have returned the Group to revenue generation during the second half of 2016, with a circa four-fold increase in gross sales(1) between October and November. This growth gives the Directors considerable confidence in the scalability of our platform and prospects for growth in December 2016 and beyond.

"Our strong balance sheet has enabled us to execute quickly on investing in key contracts in the areas of advertising, content provision and new services to be offered on the Xinhua News Mobile App, utilising our technology platform through our partner Xinhuatong. All of these represent sustainable, high-growth revenue streams, supported by our own new, world-class resource in R&D. With significant cash reserves of in excess of GBP30 million at the end of this calendar year, several attractive opportunities remain open to the Group.

"Good visibility for additional revenue through existing sales channels for December and well into 2017, together with our on-going development of multi-revenue channels, gives the Board confidence that next year and beyond will see a substantial enhancement in shareholder value. I am excited by the huge opportunity ahead of us. Our robust platform is pivotal to capitalising on our strong relationships in China as we expand the business to move into significant complementary areas. With our Nasdaq process well advanced, we hope to be placed in a peer group of like-minded Chinese internet technology companies in the new year."

- ENDS -

For further information, please contact:

 
 BNN Technology plc                    [phone] 
 Darren Mercer, Chief Executive 
  Scott Kennedy, Chief Financial 
  Officer 
  Stephen Benzikie, Communications 
                                           [phone] 
 Brunswick Group (Public Relations)                   5959 
 Brian Buckley / Diana Vaughton 
 
 Strand Hanson Limited (Nominated          [phone] 
  & Financial Adviser)                                3494 
 Andrew Emmott / Ritchie Balmer 
 
  Mirabaud Securities LLP (Broker)         [phone] 
  Peter Krens                                         3362 
 
 

About the Group

BNN Technology plc (AIM:BNN) 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 with corporate and key government partners, and, developing digital content, both online and mobile. Through its partnership with Xinhuatong and NewNet, BNN facilitates mobile payments through its technology platform on the Xinhua News mobile app in 12 provinces in China. The Chinese consumer shift to 'life on mobile' is only just beginning and BNN'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.

This information is provided by RNS

The company news service from the London Stock Exchange

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December 08, 2016 02:00 ET (07:00 GMT)