Half Year Accounts

JCurve Solutions Limited ABN 63 088 257 729 Level 8, 9 Help Street Chatswood Sydney NSW 2065 [T] +61 2 9467 9200

JCurve Solutions Limited

Half Year Report 31 December 2018

The information contained in the half year financial report should be read in conjunction with the Company's Annual Financial Report for the year ended 30 June 2018.

DIRECTORS' REPORT

Your directors present their report on the consolidated entity (referred to hereafter as "JCurve Solutions" or the "Group") consisting of JCurve Solutions Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2018.

Directors

The names of directors who held office during or since the end of the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

The Executive Management team and Board throughout the half year ended 31 December 2018, continued to focus on our three previously stated strategic objectives:

1)Investing to grow the ERP business

The investment which was undertaken over the past 12 to 18 months in our ERP team and internal capabilities has not at this stage translated into the statutory financial success at the rates we were forecasting. The shift in the sales mix of our ERP Division towards the larger more complex NetSuite solutions has continued at pace which saw a number of new sale opportunities which were forecast to close in 1HY2019 be delayed. The consequence of the shift in product mix is a higher initial average deal size and stronger future revenue potential from reduced customer churn and increased consulting opportunities, but a longer initial sales and project delivery cycle resulting in delayed recognition of revenue and profit. In line with the seasonality of the ERP business experienced in prior years, the Company expects a strong 2HY2019 ERP sales result achieved from increasing new business sales, the contract profile of the Company's recurring revenue base and an increasing number of customer implementations being completed in preparation for the start of the new financial year.

Despite the lower than expected half year result, the ERP division (exclusive of MYOB Advanced revenue) grew by 11% after recognising $3.9m of revenue, which is a significant increase from the $3.5m in 1HY2018. Sales to existing customers being renewal income and upsell income increased by 14% while sales to existing customers grew by 5% comparing the 1HY2019 sales result with the 1HY2018 sales results. The ERP division's deferred revenue balance increased by 24% between 31 December 2017 and 31 December 2018 reflecting the change in product mix. The profit before tax for the ERP division for 1HY2019 was $449,605 (1HY2018: $237,518).

The Company remains committed to growing our ERP division and continuing as NetSuite's largest solution partner globally by number of customers managed and was recently awarded NetSuite's ANZ new business partner of the year 2018.

2)Maximising value from the TEMS business

Our Telecommunications Expense Management (TEMS) product division achieved a better than expected financial result during the half year, through decreasing customer churn. For the half year period ended 31 December 2018 we were able to recognise $1.2 million of revenue from our TEMS solutions which was an 21% decrease on the revenue recognised in 1HY2018.

The profit before tax for the TEMS division was $639,440 (1HY2018: $914,130). JCurve Solutions remains committed to the ongoing maximisation of value from our TEMS proprietary owned solutions which remains a profitable part of the Group.

3)Diversification by leveraging our core strengths and capabilities

The Management Team and Board during the six months ended 31 December 2018, investigated a number of acquisition opportunities in both the Australasian and Asian markets. In December 2018 the Group was successful in completing the purchase of the business and assets of the Spectrum Partner Group, a NetSuite Two-Star Solution Provider based in Singapore. The purchase of Spectrum business and assets provides JCurve Solutions with a launch pad for further expansion into the growing ERP Asian market. In addition to a small number of customer contracts and committed license and service revenue. Arthur Fernandez who was the founder and Director of Spectrum for four years, was appointed as the General Manager of JCS' Asian operations. The Completion purchase payment of S$300,000 was settled in cash out of JCS' existing cash reserves in December while a further deferred earn-out cash payment component payable is payable in August 2019.

The integration of the Spectrum Partner Group (Spectrum), acquired in December 2018, into JCS Asia's business operations, is progressing in line with our strategic plan and a number of new customer opportunities are forecast to close throughout 2HY2019.

Following the purchase of the Riyo Platform in May 2018, the Company has focused on enhancing the solution through development, defining the go to market plan and building a team to launch and support the solution. The further development of the Riyo platform (which has been expensed in line with the Company's current accounting policy for R&D), has now broadened the Riyo solution to a much larger addressable customer base which we have recently launched to our existing customers.

Summarised financial result and position

Revenue for the half year period ended 31 December 2018 increased by 3%, from $5.0m in the corresponding comparative period to $5.2m in the half year reporting period ended 31 December 2018. The focus of the ERP business has been to expand JCurve Solutions capabilities to sell and service the NetSuite customers as well as continuing to sell and implement our industry leading small business edition of NetSuite; JCurveERP. The Group has also continued to provide services to our telecommunication expense management customers.

The Group recognised a net loss before tax of $219,635 for the half year period ended 31 December 2018 (2017: $161,864 loss).

The 'Normalised EBITDA' loss for the half year period ended 31 December 2018 was $117,980 (2017: $125,730 loss), which has been determined as follows:

Half-year

2018 $

2017 $

Normalised EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (AAS) and represents the profit under AAS adjusted for specific significant items. The table above summarises key items between the statutory loss after tax and normalised EBITDA. The directors use normalised EBITDA to assess the performance of the Group.

Normalised EBITDA has not been subject to any specific review procedures by our auditor but has been extracted from the accompanying auditor reviewed financial report.

Net cash outflows from operating activities for the 6-month period ended 31 December 2018 totalled $0.9m. The Company's income profile is seasonal and heavily weighted towards the second half of each financial year, with 60% of sales made in 2HY2018. At 31 December 2018, the Group held cash reserves of $3.3m, whilst remaining debt free, providing the opportunity for both further organic growth and growth by acquisition.

Auditor's Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, BDO East Coast Partnership, to provide the directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 6 and forms part of this directors' report for the half-year ended 31 December 2018.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001.

Bruce Hatchman

Chairman

Dated at Sydney 15 February 2019