As a result of these factors, the Directors now expect to report revenue materially below that recorded last year. In addition, since a proportion of the revenue shortfall related to performance fees, which achieve a higher margin, the operating profitability will be significantly reduced from last year's level. Investors should also note that the Company will incur a non-recurring charge to profits of approximately Â£350,000 from the aborted acquisition during the financial year. Despite the significant revenue shortfall in the final quarter, the Company had cash of Â£5.3 million at 31 March 2012
Notwithstanding the reduced profitability the Board remains confident of GEONG's business model and its potential
The Company, as in previous years, had originally anticipated strong trading during the fourth quarter based on an expectation of receiving high margin performance fee revenues (where the operating costs have already been absorbed against the quarterly fixed revenues) on certain SaaS contracts. Unfortunately these performance fees have been at a lower level than anticipated as the impact of the slowing economic growth in China has caused many of the KPI's set by the Company's clients proving to be too optimistic with the result that the level of performance fees is greatly reduced.
In addition a long standing global delivery agreement with a major partner was anticipated to deliver significant revenues in the final quarter of the financial year. In the event, only a third of these anticipated IaaS contracts were delivered. The executive has reviewed the reasons for this with the partner and believe it to be a direct result of the uncertain global economic environment rather than the quality and appeal of the offering
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