GNG.L Regulatory News (GNG)

GEONG International Limited ("GEONG" or "the Company" or "the Group") Audited Results GEONG International Limited (AIM: GNG), the AIM listed China based provider ofonline business solutions utilizing Enterprise Content Management (ECM)technology, today announces its audited results for the year ended 31 March2014. Revenue for the period was £9.5m as opposed to £8.0m, as announced inMay. The revenue increase was due to a decision to recognize further revenueas more certain progress estimates were received on certain projects. Theestimated profit before tax has not been affected as the Board has decided tomake a provision against certain receivables. Financial Highlights: - Turnover slightly down to £9.5 million (2013: £9.6 million) - Gross profit of £4.8 million (2013: £4.2 million) - Gross margin increased to 50% (2013: 44%) which was achieved mainly from theincrease in generating SaaS clients which has better margins than IaaS clientsand significant improvement from the margin of SaaS - Profit before tax £0.1 million (2013: £0.1 million) - Fully diluted earnings per share 0.02 pence (2013: 0.04 pence) - Cash balance at 31 March 2014 £3.5 million (2013: £4.6 million) - Trade receivables, including accrued income, decreased to £20.1 million(2013: £22.1 million), principally due to exchange rate movement - Order book £10.2 million (2013: £9.5 million) Business Development and Achievements: - The Company has successfully achieved the strategic target for shiftingtowards and capturing more SaaS clients, enhancing average gross profitmargins by 6%. - GEONG has continued to capture additional business from existing or formerclients, providing practical application solutions to enterprises. - The Company developed and enhanced Secured Mobile Transaction Platform whichhas been successfully adopted by China Construction Bank. - One of the largest private banks, Min Sheng Bank has accepted the Company'sSmart Interent Platform and become the first bank that is able to do DirectRetail Banking through the platform. - Seven new clients were added in the finance sector, including Bank of ChinaInsurance, Bank of Hubei, China Jingu International Trust, National Trust,Shanghai Aijian Trust, Sichuan Rural Credit Union and China Banknote Printingand Mining. Post Year End Event: The £1.0 million of convertible unsecured loan stock repaymentdate has been extended to 31 December 2014. Audit Opinion: The auditor's opinion on the financial statements is unqualified; however,the audit report contains an Emphasis of Matter paragraph relating to thecollectability of accrued income. The following wording is contained in theaudit report: In forming our opinion on the financial statements, which is not qualified, wehave considered the adequacy of the disclosure made in note 1.5 relating toapproximately £14 million of accrued income (2013 approximately £19 million)against which no allowance has been made. Given that these amounts are not yetinvoiced for collection, and that they relate to incomplete contracts, currentmarket conditions indicate that there is nevertheless material uncertaintyregarding the recoverability of the accrued income amount. Current Trading: The Company is currently trading with more than 130 clients across thefinance, automotive and manufacturing sectors. The top 20 clients formed over90% of revenue and the Company continues to focus on these top 20 clients. Thetrading conditions remain stable and there are still many investments in Chinawhich translate into IT opportunities such as renewing Internet platforms andapplications, implementing new ideas and applications via mobile Internet andintegrating business models via the Internet. These activities havecontributed towards generating additional business opportunities to theCompany. Business overheads so far this year are stable because the Company hascontrolled costs and with the improvement of overall revenue and gross profitmargins, the improvement on net profit margins is in sight. Weidong Wang, Chief Executive Officer of GEONG, commented: "Following the disappointments in 2013, the Company has stabilized itstrading. In the interim results, we reported a decrease in revenues comparedwith the same period of 2013 but with the benefit of the new customers gainedduring H1, in both IaaS and SaaS business segments, the Company has had a muchmore encouraging second half of the year, enabling us to bring the overallrevenue back to near the 2013 level with improved overall average grossmargins. We have seen the improvement of overall client base, i.e. generating more SaaSclients numbers and through the implementation of business plans, the grossprofits margins increased to 50% (2013: 44%) and the working capitalmanagement has improved, which is particularly pleasing due to the wholeteam's dedicated efforts and professional approach to resolving matters. The overall foundation of the Company has been improved significantly and webelieve this will provide solid and stable platform for growth in years tocome." For further information, please contact: GEONG International Limited www.geong.com Tel: +86 10 8586 9655Henry Tse, ChairmanWeidong Wang, CEODavid Tsui, CFO Nomad and BrokerfinnCap Ltd Tel: +44 (0) 20 7220 0500Stuart AndrewsBen Thompson About GEONG International Limited GEONG is recognised as a leading independent Internet software solutionsprovider and operator for large enterprises in China. Registered in Jersey, the Company's operations are headquartered in Beijing,China. GEONG International Ltd. (GEONG or the Company) has been quoted on theLondon Stock Exchange (LSE AIM: GNG.L) since June 2006. The Company has sincetransformed from an ECM (Enterprise Content Management) software and servicecentric business to an internet business centric company. GEONG is an internet solutions and service software company managed by a worldclass management and professional team who collectively own 26% of thebusiness. The Company's mission is to help its clients to improve theirbusiness efficiency and customer satisfaction through smarter internetapplications. For more information, please visit www.geong.com Chairman's Statement Overview I am pleased with the progress and achievement in this financial year. Havingalready outlined our strategy of focusing on building up our SaaS business,the Company is able to be more selective in taking on new projects orassignments and we believe this will provide a solid growth pattern. TheCompany's overall strategies have been determined and the Company willcontinue in this direction. The Company will continue to invest in development of new mobile internet andBig Data products to capture clients. The Company has the capabilities to dothis which has been demonstrated by the capturing of the China ConstructionBank and Min Sheng Bank as clients. The Company has adequate financial andhuman resources to execute the strategies and it is my belief that the actionplans will improve the Company's performance over time. Trading Result for the Year 2014 2013 £'000 % £'000 %TurnoverIaaS 6,366 67 6,834 71SaaS 3,127 33 2,814 29Total 9,493 100 9,648 100Gross ProfitIaaS 2,598 55 2,518 59SaaS 2,104 45 1,729 41Total 4,702 100 4,247 100 Gross profits have increased significantly to £4.7 million despite the almostflat revenue of £9.49 million (2013: £9.65 million) due to our SaaS revenueincreasing from £2.8 million to £3.1 million. The gross margin of SaaSimproved by 6% from 61% to 67%. This increase higher gross profit margin hascompensated for the decline in IaaS revenue from £6.8 million to £6.4million, however, the margins for IaaS business have increased by 4% from 37%to 41%. The combination effect has generated an overall gross profit increaseof £0.45 million when compared to the last financial year. This transition to a more significant SaaS contribution has generated anincrease in our costs of sales of the SaaS business as we have increased theresource commitment to this area of business. Nonetheless, our SaaS grossmargin has increased from 61% to 67% and we now have the resources to achievea further increase in SaaS revenues within the current overhead cost base. Research and development remains core to our success in developing newsolutions and winning new business. Costs of R&D have been maintained at asimilar level to 2013 with a £0.1 million increase, selling expenses were£0.06 million higher than 2013 due to employing more promotional costs andresources in capturing SaaS clients These costs are such as conducting one toone discussion with larger clients and the promotional costs for O2O SaaSsolutions with Oracle. For administrative expenses were £0.3 million higherthan 2013 due to general increase of costs and administration, these relate tomaintenance costs on AIM markets, normal increments for administration staff.The ongoing expenditure is now at a level that we intend to maintain over thenext two years. The finance cost represents the interest on the 7.5% convertible bond of £2.5million issued in May of 2011, of which £1.5 million was fully repaid duringApril and May 2013 with the remaining £1.0 million being redeemable inDecember 2014, if not previously converted. Cash Flow and Financial Position Cash flow from operating activities before changes in working capital was£1.3 million, compared with £1.2 million in the prior year, in addition,there was an decrease in the working capital requirements of £1.4 million(2013: decrease of £0.8 million) resulted in deficit of £0.1 million (2013:surplus of £0.4 million) the net amount generated from operating activitiesbeing only £0.1 million (2013: £0.4 million). The capitalization ofdevelopment costs and other capex amounted to £0.66 million compared with£1.4 million in 2013 with the result that cash and cash equivalents werereduced to £3.5 million from £4.6 million in 2013. Trade receivables and accrued income (amounts due from customers on themilestones achieved but not yet invoiced until the completion of the project)decreased from £22.1 million to £20.1 million due to the new measures beenhighlighted in numerous occasion that SaaS clients will have a shorter cycleof payments which has improved the receivables situation. 2014 2013 (£'000) (£'000) Trade receivables 5,808 3,040Accrued income 14,265 19,098Total due from customers 20,073 22,138 We expect that the accrued income will continue to reduce through the courseof the next 12 months. Convertible Unsecured Loan Stock Since the replacement of the CULS in last March 2013, the new CULS £1.0million convertible unsecured loan stock has been extended from 30 June 2014to 31 December 2014. The extension of the CULS was mutually agreed between theCompany and the holder, Hanafin Investments Limited ("Hanafin"). The extensionconditions are the same as the previous CULS which carries an interest couponof 7.5% and is convertible into ordinary shares at a price of 5p per share,which represented a premium of 51% to the mid-market closing price on 22 March2014. This new CULS is convertible at any time until expiry, if it has notbeen previously redeemed and, in the event of notice of redemption beinggiven, the holder has the right to elect to convert into ordinary shares inthe Company. If converted in full, the resulting ordinary shares wouldrepresent 34.6% of the enlarged issued share capital of the Company. Business Strategy - GEONG protects its market position with best of breed and innovation: - O2O (Online to Offline) Big Data Platform integrates GEONG products andOracle middleware technologies - Secured Mobile Transaction Platform is an Industry mobile specific solutionwhich combines best industrial practices with the mobile technologyinnovations - New Content Management System V6.2 combines traditional content managementfunctions with innovative digital marketing functions - Continued investment in R&D - The New Content Management System V6.2 was launched in July 2013 and wasaccepted by five new customers - The Secured Mobile Transaction Platform was launched in October 2013 tocapture more mobile opportunities in the finance sector - The O2O (Online to Offline) Big Data Platform is to develop more SaaSBusiness - Driving the SaaS revenues - To improve cash flow and improving overall average gross margins R&D expenditure is assisting GEONG in continuing to capture new SaaS businessopportunities by ensuring that we can deliver high quality and innovativeMobile Internet and Big Data solutions. The GEONG O2O Big Data Platformdevelopment will closely follow Oracle's market leadership and development ofmiddleware technologies, and ensure that we can offer the most advanceddigital marketing solutions for our clients. The Mobile Internet business landscape in China is developing rapidly and we,based on our Secured Mobile Transaction Platform, will actively participate byensuring that our mobile internet solutions are cutting edge technology andare what our clients need. We will continue to manage the business prudently, balancing growth withaffordability and ensuring that the business continues to trade profitably. Weare well aware of the importance of cash generation and we continue to strivefor improvements in cash generation and collection. Mr. Henry Hak-Yan TseChairman Financial Statements for the Year Ended 31 March 2014Statement of Comprehensive Income Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000 Revenue 9,493 9,648 556 261Cost of sales (4,791) (5,401) (9) (167)Gross profit 4,702 4,247 547 94Other income (141) 162 51 9Research and development costs (692) (681) - -Selling and distribution expenses (861) (798) - -Administrative expenses (2,743) (2,465) (349) (456)Share option expense - (5) - (5)Other operating expenses (8) (4) (4) (1)Profit/(loss) from operations 257 456 245 (359)Finance cost (212) (387) (93) (341)Finance income 2 30 - -Profit/(loss) before taxation 47 99 152 (700)Taxation (39) (85) - -Profit for the year attributable toequity shareholders of the parent company 8 14 152 (700)Other comprehensive income - - - -Exchange differences on translating foreign operations (1,443) (353) (513) 297Total comprehensive income for theyear attributable to equityshareholders of the parent company (1,435) (339) (361) (403) Earnings per ordinary share (pence)Basic 0.02 0.04Diluted 0.02 0.04 Statement of Financial Position Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 286 387 - -Intangible assets 1,735 1,910 - -Investment in subsidiaries - - 2,261 2,261Total non-current assets 2,021 2,297 2,261 2,261 Current assetsInventories 1,078 439 - -Trade receivables and accrued 20,073 22,138 1,630 2,461incomeOther receivables 1,122 1,270 6,904 6,761Cash and cash equivalents 3,532 4,592 - 3Total current assets 25,805 28,439 8,534 9,225 Total assets 27,826 30,736 10,795 11,486 LIABILITIES & EQUITYCurrent liabilitiesShort-term borrowing 1,121 1,140 - -Trade payables 787 1,255 1,249 497Other payables 3,953 3,686 1,552 1,650Tax payable 1,783 1,989 260 284Total current liabilities 7,644 8,070 3,061 2,431 Non-current liabilitiesBonds payables - 961 - 961Deferred taxation 1,713 1,799 - -Deferred revenue 2 4 - -Total non-current liabilities 1,715 2,764 - 961 Total liabilities 9,359 10,834 3,061 3,392 Capital and reservesShare capital 378 378 378 378Reserves 18,089 19,524 7,317 7,716Total shareholders' equity 18,467 19,902 7,734 8,094 Total liabilities & equity 27,826 30,736 10,795 11,486Statement of Cash Flows Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000Operating activitiesProfit/(loss) before taxation 47 99 152 (700)Adjustments for:Allowance for doubtful debts 352 20 - -Interest income (2) (30) - -Interest expenses 212 387 93 341Depreciation of property, plant and equipment 83 103 - -Amortization of intangible assets 659 652 - -Loss on disposal of fixed assets, net (21) 10 - -Share based payment - 5 - 5Operating cash flows before movement in 1,330 1,246 339 (12)working capital (Increase)/decrease in inventories (669) (30) - -(Increase)/decrease in trade and other 222 (2,134) (105) (70)receivables(Decrease)/increase in trade and other (963) 1,332 (43) 155payablesCash (used in)/from operating activities (80) 414 97 (269) Income tax paid - - - -NET CASH (USED IN)/FROM OPERATING ACTIVITIES (80) 414 97 (269) Investing activitiesInterest received 2 30 - -Purchase of property, plant and equipment (45) (226) - -Purchase of intangible assets (616) (1,232) - -NET CASH USED IN INVESTING ACTIVITIES (659) (1,428) - - Financing activitiesPayment of other cash related to financing - (213) - (213)activitiesProceeds of convertible bonds issued (net) - - - -Short term loans 59 618 - -Interest paid (222) (241) (100) (196)NET CASH GENERATED FROM FINANCING ACTIVITIES (163) 164 (100) (409) NET (DECREASE)/INCREASE IN CASH AND CASH (904) (850) (3) (678)EQUIVALENTS Effect of exchange rate changes (158) 152 -* 31CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 4,592 5,290 3 650 CASH AND CASH EQUIVALENTS AT THE END OF YEAR 3,532 4,592 -* 3 *amount less than £1,000 Consolidated Statement of Changes in Equity Share Share Convertible Merger Other Compensation Retained Exchange Total Capital Premium Notes Reserve Reserve Reserve Earnings Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2012 378 7,616 104 (698) 28 374 7,336 3,666 18,804Profit or Loss for the year - - - - 17 - (3) - 14Foreign exchange movement - - - - - - 1 1,054 1,055Total comprehensive income for - - - - 17 - (2) 1,054 1,069the yearShare options granted - - - - - 5 - - 5Issue of convertible loans - - 24 - - - - - 24 Redeem of convertible loans - - (104) - - - 104 - - Balance at 31 March 2013 378 7,616 24 (698) 45 379 7,438 4,720 19,902Profit or Loss for the year - - - - - - 8 - 8Foreign exchange movement - - - - - - - (1,443) (1,443)Total comprehensive income for - - - - - - 8 (1,443) (1,435)the yearTransfer of statutory reserve - - - - 22 - (22) - - Balance at 31 March 2014 378 7,616 24 (698) 67 379 7,424 3,277 18,467 Company Statement of Changes in Equity Convertible Equity Retained Exchange Total Share Share Notes Compensation Earnings Reserve Capital Premium Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2012 378 7,616 104 374 (681) 677 8,468Profit or loss for the year - - - - (700) - (700)Other comprehensive income for - - - - - 297 297the yearTotal comprehensive income for - - - - (700) 297 (403)the yearRecognition of share-based - - - 5 - - 5paymentsIssue of convertible loans - - 24 - - - 24Redeem of convertible loans - - (104) - 104 - -Balance at 31 March 2013 378 7,616 24 379 (1,277) 974 8,094Profit or loss for the year - - - - 152 - 152Other comprehensive income for - - - - - (513) (513)the yearTotal comprehensive income for - - - - 152 (513) (361)the yearRecognition of share-based - - - - - - -paymentsIssue of convertible loans - - - - - - -Redeem of convertible loans - - - - - - -Balance at 31 March 2014 378 7,616 24 379 (1,124) 461 7,734 Notes to the Financial Statements 1. Basis of Preparation of the Financial Statements 1.1. General information The Company's registered office is Equity Trust House, 28-30 The Parade, StHelier, Jersey JE1 1EQ, Channel Islands. The Company is incorporated in Jerseyunder the Companies (Jersey) Law 1991. The Group financial statements consolidate the financial statements of GEONGInternational Limited and its subsidiaries for the year ended 31 March 2014. The Group has provided content management software and solutions since itsestablishment in September 2000 and has earned a reputation as a localtechnology leader in the Chinese Enterprise Content Management ("ECM") market,especially in the financial services industry. These financial statements are presented in the nearest thousands ('000). 1.2. Statement of compliance These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") and IFRIC interpretations as adopted byEuropean Union. These financial statements have been prepared under the historical costconvention except as disclosed in the accounting policies below. 1.3. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and the subsidiaries controlled by the Company up to 31 March eachyear. All intra group transactions, balances, income and expenses are eliminated onconsolidation. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those usedby the Group. 1.4. Merger accounting The Company was incorporated in Jersey on 21 December 2005 and entered into anagreement to acquire the entire share capital of Conceptual Approach Limitedon 10 May 2006. The acquisition was effected by way of issue of shares. Theacquisition has been accounted for using merger accounting principles under UKstandard FRS 6 (Acquisition and Mergers) as the Directors believe that this isnot a business combination in the scope of IFRS 3 (Business Combinations) andthere is no international accounting standard dealing with businesscombinations outside the scope of IFRS 3. 1.5. Management estimates The presentation of financial information under IFRS requires management tomake prudent estimates and assumptions that affect the reported amounts ofassets and liabilities at the date of the financial information preparationand the reported amounts of revenue and expenses during the reporting year.Estimates have been made principally in respect of the amounts capitalised as,and the useful economic life of, intangible assets, the useful economic lifeof plant and equipment and provisions for impairment of accounts receivable. Capitalisation of intangible assets All intangible assets are only capitalised when the Company believes that thefuture economic benefits are probably expected to arise and stated at costless accumulated amortisation. Impairment of intangible assets Determining whether intangible assets are impaired requiresan estimation of the value in use of the cash-generating units to whichintangible assets has been allocated. The value in use calculation requiresthe entity to estimate the future cash flows expected to arise from thecash-generating unit and a suitable discount rate in order to calculatepresent value. The carrying amount of intangible assets at the balance sheetdate was £1.7 million. There were no impairment adjustments made during theyear. Amortisation of intangible assets Intangible assets are amortised on a straight-line basis over the period oftheir estimated useful lives from the date the assets are ready for use. TheGroup assesses annually the useful life of the intangible assets and ifexpectation differs from the original estimate, such difference will impactthe amortisation in the year in which such estimate has been changed.Amortisation charge of £660,000 (2013: £652,000) is included in theStatement of Comprehensive Income within Administrative expenses. The net bookvalue of Intangible Asset as at 31 March 2014 is £1,735,000 (2013:£1,910,000). Depreciation of property, plant and equipment Plant and equipment are depreciated on a straight-line basis over theirestimated useful lives. The Group assesses annually the useful life of theplant and equipment and if the expectation differs from the original estimate,such difference will impact the depreciation in the year which such estimatehas been changed. Depreciation charge of £99,000 (2013: £103,000) isincluded in the Statement of Comprehensive Income within Administrativeexpenses. The net book value of Plant and Equipment as at 31 March 2014 is£286,000 (2013: £387,000). Impairment of investment in subsidiary Determining whether the investment in subsidiary is impaired requires anestimation of the value in use of the cash-generating unit (¡°CGU¡±). Thevalue in use calculation requires the directors to estimate the future cashflows expected to arise from the CGU and a suitable discount rate in order tocalculate present value. The recoverable amount of this CGU is determined based on VIU calculationwhich uses cash flow projections based on financial budgets approved by thedirectors covering a two-year period. Cash flow projections during the budget period are based on the current year'sgross margins and actual, considering inflation throughout the budgetedperiod. The cash flows beyond that two-year period have been extrapolatedusing a steady annual growth rate which is the projected long term averagegrowth rate for PRC market. The Directors believe that any reasonable possiblechange in the key assumptions on which recoverable amount is based would notcause the carrying amount to exceed the recoverable amount of the CGU.Therefore no impairment is provided for. Impairment of receivables Allowances for bad and doubtful debts are based on an assessment of therecoverability of trade and other receivables. Allowances are applied to tradeand other receivables where events or changes in circumstances indicate thatthe balances may not be collectible. The identification of bad and doubtfuldebts requires the use of judgement and estimates. The Group identifiesspecific balances to provide against. There is a provision of £311,000 duringthe year (2013: £20,000). Trade Receivables including accrued income is£20,073,000 (2013: £22,138,000). The accrued income represents the amount not yet invoiced but for whichspecific milestones have been met. Significant judgment is required indetermining the recoverability of the accrued income transform into cashcollection. The Directors are of the opinion the accrued income will all beinvoiced and that it is genuine expectation that these amounts will be paid infull. The accrued income is £14,265,000 (2013: £19,098,000). Share-based payment The Group has share option schemes for certain employees. Judgements andestimates are required in determining the share-based payment charge as anexpense in the income statement. The Directors have used Black-Scholes modelwhich has been widely used in valuing the share based payment charge. TheDirectors are in the opinion that the model used has been adjusted to theirbest estimate in arriving at the charge. Income tax The Group has exposure to income taxes in the PRC. Significant judgement isrequired in determining the provision for income taxes. There are also claimsfor which ultimate tax determination is uncertain during the ordinary courseof business. The Group recognises liabilities for expected tax issues based onestimates of whether additional taxes will be due. When the final tax outcomeof these matters is different from the amounts that were initially recognised,such differences will impact the income tax and deferred tax provisions in theperiod in which such determination is made. Accordingly, reversal oradditional tax provision might be made. 2. Revenue Analysis The Group's revenue for continuing operations, is as follows: Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000IaaS 6,366 6,834 556 261SaaS 3,127 2,814 - -Total 9,493 9,648 556 261 The Group's revenue and profit before taxation were all derived from itsprincipal activity. 3. Profit/(Loss) from Operations Profit/(loss) from operations is stated after charging/(crediting) thefollowing: Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000 Allowance for doubtful debts, trade 311 20 - -Auditors' remuneration 37 35 37 35Amortisation charge (included within R&D cost) 2 652 - -Depreciation charge 99 103 - -Loss on disposal of property, plant and 5 3 - -equipmentListing related expenses 84 111 84 111Research and development cost 692 681 - -Foreign exchange gain (179) 132 51 9Cost of sales (excluding labour cost included 1,969 2,486 9 167within cost of sales)Rent - operating lease 314 301 - - 4. Taxation The tax expense recognised in the consolidated income statement is analysed asfollows: Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000 Current year: - 1 - -Deferred tax 39 84 - -Deferred tax expenses (note 19) 39 85 - - Reconciliation of tax charge: Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000 Profit before tax 47 101 152 (699) Tax calculated at domestic tax ratesapplicable toprofits in the respective countries at 7 20 23 -15% (2013: 15%)Non-deductible expense 136 - - - Different tax rates in difference (5) 98 - -countries Tax exempt 18 - (23) -Utilised tax losses (93) - - -Unrecognised deferred tax asset 39 83 - -Others (63) (116) - -Tax expense for the year 39 85 - - A company is deemed to be resident in PRC if it is established in PRC or itseffective management is in PRC. Residents are taxed on their worldwide income.Non residents are taxed on PRC source income and income effectively connectedwith their establishments in PRC. The Company is regarded as resident for the tax purposes in Jersey. There areno applicable taxes in Jersey for the Company. The Company's operating subsidiaries in PRC are subject to income tax rate at25% (2013: 25%) except certain operating subsidiaires are subject to theapproval of the tax authorities if the operating subsidiaries are qualifiedfor 15% preferential rate as high technology enterprise status. 5. Earnings Per Share Basic earnings per share The calculation of basic earnings per share at 31 March 2014 was based on theprofit attributable to equity shareholders of the Group of £7,932 (2013:£14,038) and a weighted average number of ordinary shares outstanding duringthe year ended 31 March 2014 of 37,834,622 (2013: 37,834,622), calculated asfollows: Weighted average number of ordinary shares (Basic) Group 2014 2013 (Number) (Number) Issued ordinary shares at beginning of the 37,834,622 37,834,622yearEffect of shares - -issuedWeighted average number of ordinary shares at end of 37,834,622 37,834,622the year Basic earnings per share (pence) 0.02 0.04 Diluted earnings per shareThe calculation of diluted earnings per share at 31 March 2014 wasbased on profit attributable to equity shareholders of the Group of£7,932 (2013: £14,038) and a weighted average number of ordinary sharesoutstanding during the year ended 31 March 2014, calculated as follows: Weighted average number of ordinaryshares (diluted) Group 2014 2013 (Number) (Number) Weighted average number of ordinary shares at end of 37,834,622 37,834,622the yearEffect of conversion share - -optionsWeighted average number of ordinary shares for diluted earnings 37,834,622 37,834,622per share Diluted earnings per share 0.02 0.04(pence) The share options were excluded from the diluted weighted average number ofordinary share calculation as their effect would have been anti-dilutive. On 26 June 2014, the Company and the bond holder reached a mutual agreement toextend the CULS to 31 December 2014 and the terms and conditions are the sameas the previous being with 7.5% £1,000,000 convertible unsecured loan stockat 5p thereby potentially increasing the number of ordinary shares for dilutedearnings per share by 20,000,000 . 6. Trade Receivables and Accrued Income Group Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000 Trade receivables 6,459 3,380 1,117 1,292Less: allowance fordoubtful debtsBalance at 1 April 340 320 - -Allowance made during theperiod 311 20 - -Written off againstallowance - - - -Balance at 31 March 651 340 - - 5,808 3,040 1,117 1,292Accrued income 14,265 19,098 513 1,169Total 20,073 22,138 1,630 2,461 The accrued income above represents amounts not yet invoiced, but for whichspecific milestones have been met, which is in accordance with common practicein PRC. This statement of results does not constitute full accounts within the meaningof the Companies Act.