GNG.L Regulatory News (GNG)

30 July 2013 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 utilising Enterprise Content Management (ECM)technology, today announces its audited results for the year ended 31 March2013. Financial Highlights: - Turnover slightly down to £9.6 million (2012: £9.7 million) - Gross profit of £4.2 million (2012: £4.6 million) - Gross margin down to 44% (2012: 47%) due to the reduction of IaaS averagemargins but lifted by the improved margin of SaaS - Profit before tax £0.1 million (2012: £0.4 million) - Fully diluted earnings per share 0.04 pence (2012: 0.43 pence) - Cash balance at 31 March 2013 £4.6 million (2012: £5.3 million) - Trade receivables, including accrued income, £22.1 million (2012: £18.9 million) - Order book £9.5 million (2012: £11.0 million) Business Development: - Continued investment in R&D in order to capture more revenues from SaaSbusiness. - The dedicated GEONG Social Business support service, which addressesincreasing client interest in social media solutions and services, nowrepresents 29% of the total revenues and is provided to 22 clients. - The Company has developed a secure mobile transactions and applicationsplatform which has already been adopted by some of our larger clients. TheCompany is committed to invest in and develop a financial mobile applicationbased on this platform as it believes that this will enable a strong presencein the fast growing financial mobile apps market. Board Changes following the year-end: - Stuart Lane stepped down as a non-executive director with effect from 23June 2013 following four years' service. Amit Thakar has been appointed therole of Chairman to lead both the Audit Committee and the RemunerationCommittee. - Mr. David Kar Ning Tsui, the Company's Chief Financial Officer ("CFO"), wasappointed as a director on 23 June 2013. Audit Opinion: The auditor's opinion on the financial statements is unqualified; however, theaudit 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 £19 million of accrued income (2012 approximately £15 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: Since the year-end the Company has continued to pursue its stategy offocussing on SaaS business and on declining IaaS business which is either lowmargin or subject to a long cash collection period in order to increase theoverall gross margins and to reduce the level of accrued income. This strategyhas meant that turnover and profits for the first two months of the 2014financial year have been below the 2013 level and this is likely to continueinto the year. Collection of cash in the first quarter was GBP 2.2m in accordance with theGroup's forecasts. Weidong Wang, Chief Executive Officer of GEONG, commented: Following the disappointments in 2012, the Company has stabilized its trading.In the interim results, we reported a decrease in revenues compared with thesame period of 2012 but with the benefit of the new customers gained duringH1, in both IaaS and SaaS business segments, the Company has had a much moreencouraging second half of the year, enabling us to bring the overall revenueback to near the 2012 level. We are aware of the need to improve the working capital position through thequicker collection of receivables. A dedicated employee has been recruited tofocus entirely on all collection and invoicing opportunities. Though majorimprovement will not be immediately evident, the Company is ensuring that thecollection opportunities are monitored. Despite the small decline in profitability from FY2012, GEONG managementbelieves that the Group is now better placed to be more selective over theIaaS business that it takes on and to attract more SaaS business, which will,in turn, result in shorter cash collection periods and higher average grossmargins. Although this policy will temporarily limit the growth of the IaaSbusiness this will be compensated, in due course, by strengthening SaaSrevenues and margins, which will provide the backbone for growth in bothrevenues and profits in the coming years. The Annual Report will be posted to all shareholders who request a copy and isavailable on the Company's website www.geong.com. The Company's AGM will beheld at GEONG International Room 1901-1902, Tower A, Ocean InternationalLimited, No. 56, Zhonglu East 4th Ring Road, Chaoyang District, Beijing P.R.C.100025 on 26 September 2013 at 9:00 am UK time The Notice of AGM and proxycard will be posted to all shareholders. For further information, please contact: GEONG International Limited www.geong.com Tel: +86 10 8586 9655Henry Tse, ChairmanWeidong Wang, CEODavid Tsui, CFO Financial Adviser and Joint BrokerEvolution Securities China Ltd Tel: +44 (0)20 3362 8888Tim Worlledge Nomad and Joint 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 We have already outlined above the strategy of focusing on building up ourSaaS business. The Group is also being more selective in taking on newprojects or assignments and will decline the low margin and working capitalintensive business in order to concentrate on the more profitable SaaSbusiness. Although this will lead to a reduction in revenues in the near term,it will enable growth in our overall gross margin and also allow us to reducethe amount of capital tied up in accrued income, which resulted mainly fromIaaS business. I believe that this course of action will benefit the Group inthe longer term and make analytical review of the Company easier. However, we still have much to do and the Company is continuing to execute thestrategies previously explained, which are (1) to work closely with ourexisting customers, (2) to promote more business from IaaS to SaaS to achievehigher average margins and improve cash flow and (3) to explore new areas ofbusiness opportunities. In order to secure the future income and cash flow streams of the Company, thefollowing initiatives have also been executed: (1) to develop a newEnterprises' Social Business Platform to enhance the utilization of cloudcomputing technologies, (2) to continue to invest in R&D on Smart InternetPlatform and (3) to expand the geographical base of the clients in partnershipwith IBM and Oracle. The Company has renewed core suppliers (IBM GBS, GD, SWGand CDL) until December 2014 and the Gold partnership with Oracle has alsobeen renewed. The business model is set and suitable to the operational environment inChina. The Company has adequate financial and human resources to execute thestrategies and it is my belief that the action plans will improve theCompany's performance over time. The management remains positive and confident that we have the right strategyand that a SaaS-focused business model will provide the platform for growthand profitability in the future. Trading Result for the Year The almost flat revenue of £9.65 million (2012: £9.67 million) masks the factthat our SaaS revenue increased from £1.9 million to £2.8 million. Thisincrease in SaaS revenue and its higher gross profit margin compensated almostentirely for the decline in IaaS revenue from £7.7 million to £6.8 million andfor the 10% drop in IaaS gross margins from 47% to 37%, leaving us with areduction in overall gross profits of only £0.3 million. This transition to a more significant SaaS contribution has necessitated anincrease in our costs of sales of SaaS business as we have increased themanpower commitment to this area of business. Nonetheless, our SaaS grossmargin has increased from 48% to 61% and we now have the resources to achievea further quantum gain in SaaS revenues within the current overhead cost base. 2013 2013 2012 2012 £'000 % £'000 %TurnoverIaaS 6,834 71 7,745 80SaaS 2,814 29 1,924 20Total 9,648 100 9,669 100Gross ProfitIaaS 2,518 59 3,630 80SaaS 1,729 41 924 20Total 4,247 100 4,554 100 Research and development remains core to our success in developing newsolutions and winning new business. Ensuring continuing development, theresearch costs were £0.2 million higher than 2012. To drive the strategy ofcapturing SaaS business, selling expenses were £0.8 million, £0.3 millionhigher than 2012. The Company has continued to exercise tight controls overadministrative expenses resulting in savings of £0.6 million from 2012, andthese are now at a level that we intend to maintain over the next 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 million being redeemable in June2014, if not previously converted. This year we benefited from an exchange gain of £1 million arising from thetranslation of year-end assets and liabilities held in RMB and USD intosterling. Sterling depreciated by 4% against the dollar and by 4% against theRMB. Cash Flow and Financial Position Cash flow from operating activities before changes in working capital was £1.2million, compared with £1.3 million in the prior year, but an increase in theworking capital requirements of £0.8 million (2012: increase of £3.4 million)resulted in the net amount generated from operating activities being £0.4million (2012: cash usage of £2.1 million). However capitalization ofdevelopment costs and other capex amounted to £1.4 million compared with £0.9million in 2012 with the result that cash and cash equivalents were reduced to£4.6 million from £5.3 million in 2012. Trade receivables and accrued income (amounts due from customers on themilestones achieved but not yet invoiced until the completion of the project)increased from £18.9 million to £22.1 million largely for the followingreasons: 1. Between September and November, whilst changes to the national purchase VATtax system were being implemented, our clients were unable to processpurchases orders and invoices as they were not able to account for thepurchase tax. The invoices were therefore held over until after all thechanges had been updated with the consequence that the end of year balanceswere higher than they would, ordinarily, have been. 2. In the PRC, VAT invoices are required to be submitted on state-issuedinvoices, which are obtained from local PRC tax offices. However, the taxoffice imposes a quota system, limiting both the number of VAT invoices thatmay be issued and the billing value on each invoice. Once a set of VATinvoices have been issued by the Company, the Company may apply to the taxoffice for another set. In consequence, if there are a large number of verysmall invoice amounts, as is experienced by GEONG, there are an insufficientnumber of VAT invoices to fully recover the amounts accrued in a timelymanner. 2013 2012 (£'000) (£'000) Trade receivables 3,040 4,191Accrued income 19,098 14,746Total due from customers 22,138 18,937 We expect that the accrued income will reduce through the course of the next12 months. Convertible Unsecured Loan Stock In December 2012, the Company experienced unexpected delays in the granting ofapproval by the State Administration of Foreign exchange of China for thepayment of the interest due on its outstanding £2.5 million convertibleunsecured loan stock ("CULS") with the result that, by reason of the latepayment of the interest, it was deemed in default of the CULS terms. Theholder of the CULS, Hanafin Investments Limited ("Hanafin"), requiredimmediate repayment of the CULS. Following a negotiation with Hanafin, the Board reached agreement forrepayment of £1.5 million the CULS in five instalments, the last of whichinstalments was paid on 6 May 2013. It also agreed to the remaining £1.0million being replaced by a new issue of CULS, which expires on 30 June 2014,carries an interest coupon of 7.5% and is convertible into ordinary shares ata price of 5p per share, which represented a premium of 51% to the mid-marketclosing price on 22 March 2013. This new CULS is convertible at any time untilexpiry, if it has not been previously redeemed and, in the event of notice ofredemption being given, the holder has the right to elect to convert intoordinary shares in the Company. If converted in full, the resulting ordinaryshares would represent 34.6% of the enlarged issued share capital of theCompany. Although the terms attaching to the new CULS seem unduly onerous, the boardhad no option but to accept the terms as the Company, for the reason statedabove, was unable to repay the previous CULS in full. Business Strategy - GEONG protects its market position with best of breed and innovation: - Smart Internet Platform integrates GEONG products and IBM/Oracle middlewaretechnologies - Smart Internet Solution is an Industry specific solution which combines bestindustrial practices with technology innovations - New business model combines traditional IaaS solution with innovative SaaSsolution on cloud computing - Strategic partnership with IBM and Oracle in Asia Pacific enhances saleseffectiveness - Establishing a consulting subsidiary to enhance independent consultingability and capacity for client's Internet Business - Grow the GEONG Enterprise Social Business cloud computing platform - Currently three clients: China Construction Bank (Social marketing) andEverbright Bank (Weibo marketing) and China Bond (Web Analytics andOptimization) - Ongoing: China Unionpay, Guangfa Bank and Bang of China - Can significantly increase this over 12 months - Continued investment in R&D - Upgraded Smart Banking Internet Solution was released in July 2012,especially benefit to city and commercial banks - Established mobile team in Guangzhou for iPhone and Android in June - Developing GEONG own IP's Smart Internet Platform with Java Open sources - Expanding the customer and geographical base of the Company byusing our partnerships with IBM and Oracle to extend our location coverageacross Great China and Southeast Asia and we now have establishedrepresentation in Dalian, Wuhan, Shenzhen, Macau and Hong Kong in Great Chinaas well as in Vietnam, Indonesia and Malaysia. - Driving the SaaS revenues - To improve cash flow We will continue to invest in R&D to capture new SaaS business opportunitiesby ensuring that we can deliver high quality and innovative Internetsolutions. GEONG Smarter Platform development will closely follow IBM andOracle's market leadership and development of middleware technologies, and toensure that we can offer the most advanced industrial solutions for ourclients. The Internet business landscape in China is developing rapidly and we willactively participate by ensuring that our solutions are at the forefront ofthe new technology and are what our clients need. GEONG's growth is largelytied to our clients' online business growth which we believe is driven by therapid expansion of Social Networking and Mobile Internet applications inChina. 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. Current Trading and Outlook In the current year trading, the management had to overcome many challengesincluding the continued change of emphasis of the business from IaaS to SaaS.This action will slow down the growth in IaaS but will increase revenues fromthe more profitable SaaS contracts, and importantly, will, in time, reduce theamount of working capital required to finance trade receivables and accruedincome which has been a major concern to shareholders. To tackle the issue,the management has already exercised measures to improve the cash collectionprocedures by employing a full time employee to capture and monitor allpossible invoicing opportunities. In addition, the management will be highlyselective in accepting new clients and projects. Only those with a shortercash collection periods and high margins will be accepted. The management expects that this action plan will result in a revenuereduction in the current year, as well as overall net profits. However, thecapital released from the reduction in working capital needs will enable us toinvest in growth opportunities and we fully expect that the following year,2015, will see a far stronger group profit position. Mr. Henry Hak-Yan TseChairman26 July 2013 Financial Statements for the Year Ended 31 March 2013 Statement of Comprehensive Income Note Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000 Revenue 4 9,648 9,669 261 971Cost of sales (5,401) (5,115) (167) (455)Gross profit 4,247 4,554 94 516Other income 5 162 6 9 (16)Research and development costs (681) (441) - -Selling and distribution expenses (798) (478) - -Administrative expenses (2,465) (3,016) (456) (794)Share option expense (5) (41) (5) (41)Other operating expenses (4) (17) (1) (16)Profit/(loss) from operations 7 456 567 (359) (351)Finance cost 8 (387) (224) (341) (202)Finance income 30 39 - -Profit/(loss) before taxation 99 382 (700) (553)Taxation 9 (85) (220) - -Profit for the year attributable toequity shareholders of the parent company 14 162 (700) (553)Other comprehensive income - - - -Exchange differences on translating foreign operations 1,055 644 297 20Total comprehensive income for theyear attributable to equityshareholders of the parent company 1,069 806 (403) (533) Earnings per ordinary share (pence)Basic 10 0.04 0.43Diluted 10 0.04 0.43 Statement of Financial Position Note Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 11 387 259 - -Intangible assets 12 1,910 1,257 - -Investment in subsidiaries 13 - - 2,261 2,261Total non-current assets 2,297 1,516 2,261 2,261 Current assetsInventories 14 439 387 - -Trade receivables and accrued 15 22,138 18,937 2,461 3,034incomeOther receivables 16 1,270 1,200 6,761 5,671Cash and cash equivalents 17 4,592 5,290 3 650Total current assets 28,439 25,814 9,225 9,355 Total assets 30,736 27,330 11,486 11,616 LIABILITIES & EQUITYCurrent liabilitiesShort-term borrowing 20 1,140 495 - -Trade payables 1,255 757 497 301Other payables 18 3,686 1,664 1,650 231Tax payable 1,989 1,643 284 271Total current liabilities 8,070 4,559 2,431 803 Non-current liabilitiesBonds payables 21 961 2,345 961 2,345Deferred taxation 19 1,799 1,619 - -Deferred revenue 4 3 - -Total non-current liabilities 2,764 3,967 961 2,345 Total liabilities 10,834 8,526 3,392 3,148 Capital and reservesShare capital 22 378 378 378 378Reserves 24 19,524 18,426 7,716 8,090Total shareholders' equity 19,902 18,804 8,094 8,468 Total liabilities & equity 30,736 27,330 11,486 11,616 Approved and authorised for issue by the Board on 26 July 2013 and signed onits behalf by: Mr. David Kar Ning TsuiChief Financial Officer26 July 2013 Statement of Cash Flows Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000Operating activitiesProfit/(loss) before taxation 99 382 (700) (553)Adjustments for:Allowance for doubtful debts 20 176 - 4Interest income (30) (39) - -Interest expenses 388 224 341 202Depreciation of property, plant and equipment 103 120 - -Amortization of intangible assets 652 363 - -Loss on disposal of fixed assets, net 10 (2) - -Share based payment 5 41 5 41Operating cash flows before movement in 1,247 1,265 (354) (306)working capital (Increase)/decrease in inventories (30) (55) - 100(Increase)/decrease in trade and other (2,134) (2,071) (70) (1,281)receivables(Decrease)/increase in trade and other 1,332 (1,254) 155 (173)payablesCash (used in)/from operating activities 415 (2,115) (269) (1,660) Income tax paid - - - -NET CASH (USED IN)/FROM OPERATING ACTIVITIES 415 (2,115) (269) (1,660) Investing activitiesInterest received 30 39 - -Purchase of property, plant and equipment (226) (47) - -Purchase of intangible assets (1,232) (919) - -NET CASH USED IN INVESTING ACTIVITIES (1,428) (927) - - Financing activitiesPayment of other cash related to financing (213) - (213) -activitiesProceeds of convertible bonds issued (net) - 2,400 - 2,400Short term loans 618 495 - -Interest paid (241) (131) (196) (110)NET CASH GENERATED FROM FINANCING ACTIVITIES 164 2,764 (409) 2,290 NET (DECREASE)/INCREASE IN CASH AND CASH (849) (278) (678) 630EQUIVALENTS Effect of exchange rate changes 151 228 31 19 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,290 5,340 650 1 CASH AND CASH EQUIVALENTS AT THE END OF YEAR 4,592 5,290 3 650 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 2011 378 7,616 - (698) 13 334 7,187 3,023 17,853Profit or Loss for the year - - - - 15 - 147 - 162Foreign exchange movement - - - - - (1) 2 643 644Total comprehensive income for - - - - 15 (1) 149 643 806the yearShare options granted - - - - - 41 - - 41Issue of convertible loans - - 104 - - - - - 104 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 19,902 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 2011 378 7,616 - 333 (128) 657 8,856Profit or loss for the year - - - - (553) - (553)Other comprehensive income for - - - - - 20 20the yearTotal comprehensive income for - - - - (553) 20 (533)the yearRecognition of share-based - - - 41 - - 41paymentsIssue of convertible loans - - 104 - - - 104Balance 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 8,094 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 2013. 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. 2. Revenue Analysis The Group's revenue for continuing operations, is as follows: Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000 IaaS 6,834 7,745 261 971SaaS 2,814 1,924 - -Total 9,648 9,669 261 971 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 2013 2012 2013 2012 £'000 £'000 £'000 £'000 Allowance for doubtful debts, trade 20 176 - -Auditors' remuneration 35 37 35 37Amortisation charge (included within R&D cost) 652 363 - -Depreciation charge 103 120 - -Loss on disposal of property, plant and 3 9 - -equipmentListing related expenses 111 245 111 245Research and development cost 681 441 - -Foreign exchange gain 132 (24) 9 (16)Cost of sales (excluding labour cost included 2,486 2,981 167 70within cost of sales)Rent - operating lease 301 274 - - 4. Taxation The tax expense recognised in the consolidated income statement is analysed asfollows: Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000 Current year: 1 - - -Deferred tax 84 220 - -Deferred tax expenses (note 19) 85 220 - - Reconciliation of tax charge: Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000 Profit before tax 101 382 (699) (553) Tax calculated at domestic tax ratesapplicable toprofits in the respective countries at 20 147 (175) (138)25% (2011: 25%)Different tax rates in difference 98 57 - -countries Tax exempt - - 151 138Unrecognised deferred tax asset 83 72 - -Others (116) (56) - -Tax expense for the year 85 220 - - 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% (2012: 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 2013 was based on theprofit attributable to equity shareholders of the Group of £14,038 (2012:£162,116) and a weighted average number of ordinary shares outstanding duringthe year ended 31 March 2013 of 37,834,622 (2012: 37,834,622), calculated asfollows: Weighted average number of ordinary shares (Basic) Group 2013 2012 (Number) (Number) Issued ordinary shares at beginning of the 37,834,622 37,834,622year 37,834,622Effect of shares - -issuedWeighted average number of ordinary shares at end of 37,834,622 37,834,622the year Basic earnings per share (pence) 0.04 0.43 Diluted earnings per shareThe calculation of diluted earnings per share at 31 March 2013 was based on profitattributable to equity shareholders of the Group of £14,038 (2012: £162,116) and aweighted average number of ordinary shares outstanding during the year ended 31 March2013, calculated as follows: Weighted average number of ordinary shares (diluted) Group 2013 2012 (Number) (Number) Weighted average number of ordinary shares at end of 37,834,622 37,834,622the year 37,834,622Effect of conversion share - -optionsWeighted average number of ordinary shares for diluted earnings 37,834,622 37,834,622per share 37,834,622 Diluted earnings per share 0.04 0.43(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 March 2013, the Company issued a one year 7.5% £1,000,000 convertibleunsecured loan stock at 5p thereby potentially increasing the number ofordinary shares for diluted earnings per share by 20,000,000 (see note 21 inFY2013 annual report and accounts). 6. Trade Receivables and Accrued Income Group Company 2013 2012 2013 2012 £'000 £'000 £'000 £'000Trade receivables 3,380 4,511 1,292 2,858Less: allowance fordoubtful debtsBalance at 1 April 320 144 - -Allowance made during theperiod 20 176 - -Written off againstallowance - - - -Balance at 31 March 340 320 - - 3,040 4,191 1,292 2,858Accrued income 19,098 14,746 1,169 176Total 22,138 18,937 2,461 3,034 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.