SINGAPORE (Aug 16): YuuZoo Corporation posted 2Q17 net profit of $8.4 million, compared to a net loss of $1.4 million in 2Q16 a year ago.

However, the company’s 2Q17 revenue ended at $17.7 million, 17% lower than the $21.3 million reported a year ago.

The decrease was mainly due to change in adoption of a more prudent means of revenue recognition as well as lower payment revenue.

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For the half year ended in June, net profit surged four times to $15.9 million from $3.6 million in the corresponding period in 2016. The increase was mainly driven by franchise sales in Hungary, Slovakia and Czech Republic.

The company’s 1H17 revenue was $36.8 million, 38% lower than 1H16’s $59.6 million. The decrease in revenue was mainly due to the change in revenue recognition policy of the group and lower payment revenue.

“In 2016, YuuZoo’s accounting policy on the sale of franchises was based on the advice of a 'Big Four' accounting firm, which fulfilled all accounting requirements under FRS,” says the company in its results filing released on Tuesday night.

“YuuZoo has decided, after discussions with various parties including SGX and its auditors, to discontinue the 'Big Four'-advised accounting policy of booking as revenue the value of the shares it receives as payment for the franchises it sells,” it adds.

YuuZoo says booking the full value of the shares as revenue has been replaced by booking as revenue a one-time franchise fee based not on valuation but on the cost of developing the franchise packages it sells. Compared to the previous DCF-based valuation method, the new policy completely delinks the price of the franchise from expected future earnings.

Mohandas, COO of YuuZoo, says: “YuuZoo’s significantly conservative and prudent accounting policy was decided in the best interest of YuuZoo’s shareholders. Under this new policy, YuuZoo books significantly lower revenue and profit for each franchise package sold. YuuZoo’s 2Q/1H stellar growth and performance despite lower revenue and profit recognition under the new accounting policy demonstrates the potential of YuuZoo and how we are positioned to capitalise on the opportunities in the market... Growth is expected to be continuously strong in all key areas that YuuZoo operates in; tribal social networking, e-commerce, online and mobile payments, mobile games and streaming video services.”

Shares in YuuZoo closed 0.2 cent higher at 5.5 cents.