28 Nov 2006 07:01
28 November 2006 GEONG INTERNATIONAL LIMITED MAIDEN INTERIM RESULTS
GEONG International Limited ("the Company"), the AIM listed, Beijing based, provider of content management software and solutions, today announces its unaudited maiden interim results for the six months ended 30 September 2006.
Financial Highlights
* Turnover up 52% to US$3.15 million (H1 2006: US$2.07 million) * Gross profit up 51% to US$1.55 million (H1 2006: US$1.03 million) * Gross profit margin 49.3% (H1 2006: 49.7%) * Operating profit of US$0.27 million (H1 2006: US$0.29 million) * Earnings per share US cents 1.0 (H1 2006: US cents 1.2) * Solid balance sheet with cash of US$0.61 million
Commenting on the results Wang Weidong, CEO, said: "The first six months of theyear have been successful and we have maintained a high rate of growth. Duringthe period, our research and development team delivered new products onschedule whilst our flagship product, PortalAge(TM), performed very strongly witha number of significant contract wins with blue-chip customers.""We continue to build our sales and marketing infrastructure to drive salesgrowth throughout our product suite with Smart BOX(TM), our new software solutionfor SMEs, making a good start. The management are encouraged by theperformance of the business in the first half of the year and are focused ondelivering returns for our shareholders in the heavily weighted second half." -ends-
For further information visit www.geong.com or contact:
GEONG International LimitedHenry H.Y. Tse - Chairman Tel: 020 7920 3150 (on 28 November only)Wang Weidong - CEOTavistock Communications Tel: 020 7920 3150Paul DulieuMatt RidsdaleRuegg & Co Limited Tel: 020 7584 3663Brett MillerRoxane Marffy
About GEONG International Limited
GEONG International Limited, is the holding company of Conceptual Approach Limited which in turn holds 100 per cent of GEONG Business Networks Limited ("GEONG"), a Wholly Owned Foreign Enterprise ("WOFE") registered and operational in China since September 2000.
GEONG has established itself as one of the market leaders in the People's Republic of China ("PRC") in providing content management solution softwareproducts and related services for large enterprises. GEONG's flagship productrange, the GEONG PortalAge(TM) series, is used by the top 5 Chinese banks and12 out of the top 20 securities firms in China. It is an enterprise serversoftware product which combines a number of optional business solutioncomponents and customisation modules that can be used to provide individualsolutions for a range of industries including those that require real-time orcritical applications such as internet banking.In August 2005, GEONG launched a comprehensive, out of the box, collaborationsoftware application product, GEONG Smart BOX(TM) targeting SMEs. Since itslaunch, Smart BOX(TM) has received a lot of market attention and was identifiedas one of the three leading trend setters in collaboration softwareapplications by Smart Partners Magazine (CNET Networks, China) in its October2005 cover story.Chairman's StatementOverviewI am delighted to report that GEONG has been able to maintain a strong level ofgrowth during the period and the Company's status as a listed entity is bearingfruit. We are enjoying increasing traction with customers and believe that ourAIM quotation is a key factor.GEONG, as announced today, has, for the second successive year, been includedin the Deloitte Technology Fast 50 China and the Deloitte Technology Fast 500Asia Pacific survey, which recognise GEONG as one of the fastest growingtechnology companies in China and in Asia Pacific. Additionally, the ChineseScience & Technology Industry Magazine published by the Ministry of Science andTechnology of the PRC, has recognized GEONG's Smart BOX(TM) as one of China's Top100 Most Influential and Innovative Products due to the innovative managementsoftware tools for SMEs that make up our Smart BOX(TM) offering.Our strategy for growth going forward remains unchanged. We continue to focuson going "deep-and-broad" by winning contracts for PortalAge(TM), in partnershipwith key industry players, with the head office of major corporates. Thisprovides us with the opportunity to demonstrate the value of our solutions andservices before tendering to the customer for the adoption of our software intheir regional and affiliate branches. This has been particularly successful inthe financial services sector where our customers include the top 5 Chinesebanks and 12 out of the top 20 securities firms in China.
Operational Review
During the period GEONG won a number of significant contracts with Air China,Huawei-3COM, Motorola China, Bank of Communications, Shanghai General Motors,Shanghai Telecom and DELL and in August, GEONG launched a new version ofPortalAge(TM) for WCM (Web Content Management) V5.0.GEONG has also been successful in gaining a renewed Core Supplier Agreementwith IBM Global Business Services as well as signing new agreements to become aCore Supplier of Oracle (Siebel) and Huawei-3COM major for PortalAge(TM). Theseagreements allow GEONG to compete and provide solutions to major corporationsand win larger, valuable mandates. Already, we have been successful indiversifying our client base and are now working with customers in thetransportation, power and automotive industries.The progress GEONG has made during the period has been achieved despite areduction in the level of funds raised at the time of the Company's admissionto AIM in June 2006, which arose because of unfavourable market conditions atthat time. These funding limitations forced a review of our strategy for themarketing of Smart BOX(TM) and we have adopted a more cost effective approach.In September we undertook a mass marketing of the product and held a number ofsuccessful management seminars. As a result, sales and referrals have commencedand, importantly, awareness of our product amongst management professionals isincreasing.In order to fully exploit the opportunity that Smart BOX(TM) represents, we haveexpanded our sales force which has, I am delighted to say, resulted inbreakthrough sales to large corporations. We have now introduced severalversions under the Smart BOX(TM) umbrella including Smart ISO for ISO9000 andSmart BOX(TM) Express which were launched in July and August respectively. Wealso, in September, introduced an English version of Smart BOX(TM) which has soldin beta form in Canada and Hong Kong.
Financial Review
In the six months ended 30 September 2006, consolidated revenue was US$3.15 million(H1 2006: US$2.07 million), gross profit was US$1.55 million (H1 2006: US$1.03million) and profit before tax was US$0.27 million (H1 2006: US$0.29 million).This performance represents an increase in turnover of 52% and in gross profitof 51% when compared with the corresponding period last year.Profit before tax showed a decrease of 7%. The major reasons for the decreaseof profit before tax were the additional costs associated with being listed onAIM of US$75,000 and an increased investment in the marketing of Smart BOX(TM)which we expect will make a material contribution to the Company in the nearfuture.Trading Outlook
The Directors believe that the trend of growing demand for content management software solutions from large corporations and easy to use collaboration application software from SMEs, will continue and offers substantial opportunity. Our business is heavily weighted to the second half of the financial year and we have started the period strongly.
GEONG with its PortalAge(TM) products has a first class reputation which it hasearned by offering high quality solutions and services to large corporations inChina over the past six years. The quality of GEONG's performance washighlighted recently when it was awarded first place in IBM Global BusinessServices' core supplier ranking program. GEONG was assessed on its technology,quality of service, communication, cost and performance and achieved the topposition in four of these five areas. We believe that the high standards we setourselves are reflected in the high level of recurring business and referralsales, which have been a strong source of revenue, as well as the strength ofour sales pipeline going forward.Sales of our Smart BOX(TM) range is now gaining momentum and has a growingreputation amongst SME customers. In addition, the Smart BOX(TM) Sales ProcessManagement module has been adopted by some larger corporations, and the Englishlanguage version is developed and ready to enter overseas markets.With growing market demand and the sound foundation we have in place, the Boardbelieves that the Company is well positioned to continue to grow both in termsof revenue and profitability and look forward to the future with cautiousoptimism.Henry H.Y. TseChairman28 November 2006
GEONG International Limited Interim Results for the 6 Months Ended 30 September 2006 Consolidated Profit and Loss Accounts
Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (Unaudited) (Unaudited - (Audited - proforma) proforma) Note US$'000 US$'000 US$'000 Revenue 3,150 2,072 5,475Cost of sales 1,596 1,043 2,504
-----------------------------------------------
Gross profit 1,554 1,029 2,971 Other operating income 61 30 73Research & development (83) (21) (95)Distribution costs (339) (155) (335)Administrative expenses (901) (562) (1,197)Finance costs (19) (27) (55) ----------------------------------------------- Operating profit 273 294 1,362 Taxation (27) (19) (81) ----------------------------------------------- Retained profit for the period 246 275
1,281
===============================================
Earnings per share 3 (US cents) Basic 1.0 1.1 5.2Diluted 1.0 - -
===============================================
GEONG International LimitedInterim Results for the 6 Months Ended 30 September 2006Consolidated Balance Sheets Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (Unaudited) (Unaudited - (Audited - proforma) proforma) US$'000 US$'000 US$'000 Assets Non-current assets Property, plant and equipment 333 215 285Intangible assets 180 0 89 ----------------------------------------------- Total non-current assets 513 215
374
-----------------------------------------------
Current assets Inventories 187 105 82Trade and other receivables 4,045 2,777 3,183Cash and cash equivalents 609 122 699 ----------------------------------------------- Total current assets 4,841 3,004
3,964
----------------------------------------------- Total assets 5,354 3,219
4,338
===============================================
Equity and liabilities Equity Share capital 486 - - Share premium 3,899 - - Merger reserve (1,360) 2,159 2,296Equity reserve 20 - -
Cumulative foreign currency translation 54 12
28
Retained earnings 640 (612)
394
----------------------------------------------- Total equity 3,739 1,559
2,718
----------------------------------------------- Non-current liabilities Deferred tax liabilities 14 0 13
-----------------------------------------------
Current liabilities Trade and other payables 921 1,073 667Short term loans 302 395 661Taxes payable 378 192 279
-----------------------------------------------
Total current liabilities 1,601 1,660
1,607
-----------------------------------------------
Total equity and liabilities 5,354 3,219
4,338
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GEONG International Limited Interim Results for the 6 Months Ended 30 September 2006 Consolidated Cash Flow Statements
Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (Unaudited) (Unaudited - (Audited - proforma) proforma) US$'000 US$'000 US$'000Profit for the period 273 294 1,362Adjustments for:
Amortisation of intangible assets 34 -
66
Depreciation of property, plant &equipment 39 42
72
Share based payment expense - -
-
Provision for doubtful debts - -
18
Provision for deferred tax - -
(5)
Cumulative foreign currencytranslation 26 8
25
Loss on disposal of property, plant & equipment 1 -
-
-----------------------------------------------
Operating cash flows beforemovement in working capital 373 344 1,538(Increase) in inventories (105) (102) (79)(Increase) in receivables (1,183) (452) (876)
Increase/(decrease) in payables 593 (44)
(137)
-----------------------------------------------
Net cash generated by operatingactivities (322) (254)
446
===============================================
Investing activities Purchase of property, plant &equipment (87) (31) (130)Increase in intangible assets (126) - (156)
-----------------------------------------------
Net cash used in investingactivities (213) (31) (286)Financing activities Short term loans (359) 17 283Increase in share capital 798 270 11Increase in share premium - - 125Other financing activities 6 - £â‚¬â‚¬ -
-----------------------------------------------
Net cash used in financingactivities 445 287
419
-----------------------------------------------
Net (decrease)/increase in cashand cash equivalents (90) 2
579
Cash and cash equivalents at the beginning of the period 699 120
120
-----------------------------------------------
Cash and cash equivalents at theend of the period 609 122
699
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GEONG International LimitedInterim Results for 6 months ended 30 September 2006
Notes
1. Introduction
The Company was incorporated on 21 December 2005 under the laws of Jersey asthe holding company holding the entire issued share capital of ConceptualApproach Limited. Conceptual Approach Limited in turn holds the entire issuedshare capital of GEONG which is a WOFE registered and operating in China sinceSeptember 2000.
GEONG provides content management solution software products and related services for large enterprises and software application products for the SME market.
2. Significant Accounting Policies and Basis of Preparation
The financial information set out in this interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the six months to 30 September 2006 and the six months to 30 September 2005 is unaudited.
The Interim Report for the six months ended 30 September 2006 was approved by the directors on 27 November 2006.
The financial information has been prepared in accordance with accounting policies adopted in the admission document issued in relation to the admission of the Company to the AIM market on 23 June 2006.
The Company entered into an agreement to acquire the entire share capital ofConceptual Approach Limited on 10 May 2006. The acquisition was effected by wayof issue of shares. The acquisition has been accounted for using mergeraccounting principles under UK standard FRS6 (Acquisitions and Mergers) as thedirectors believe that this is not a business combination in the scope of IFRS3(Business Combinations) and there is no international standard dealing withbusiness combinations outside of the scope of IFRS3. Accordingly, the financialinformation for the current and previous year has been presented as ifConceptual Approach Limited, and its subsidiaries, had been owned throughoutthe current and comparative periods.
3. Earnings Per Share
The basic earnings per share are calculated on the basis of the profits attributable to the ordinary shareholders divided by the weighted average number of shares during the period of 25,390,084. The comparative EPS has been calculated based on the total shares in issue immediately prior to the Company's Admission to AIM of 24,532,262.
Diluted earnings per share is calculated by adjusting the weighted number ofordinary shares in issue to assume conversion of potential dilutive ordinaryshares, being 333,332. For the proforma comparative periods there were nodilutive potential ordinary shares in issue.
4. Taxation
The tax charge for the six months ended 30 September 2006 and for the six months ended 30 September 2005 is based upon the estimated effective tax rate for the full year.
5. Functional and presentation currency
Sterling is the functional currency of the Company as it is the currency of theprimary economic environment in which it operates. The US Dollar ("US$") is thecurrency used to present the financial information in order to improveunderstanding of the financial position of the Company by increasingcomparability with the financial information of GEONG, the operating subsidiarywhose functional currency is the Chinese Renminbi.
6. Copies of the Interim Report
Copies of the Interim Report will be available from the Company's registeredoffice at P O Box 72, 44 Esplanade, St Helier, Jersey, JE4 9PN, the Company'swebsite www.geong.com, or Ruegg & Co. Limited, 39 Cheval Place, London, SW71EW. -END-
GEONG INTERNATIONAL LIMITED