GNG.L Regulatory News (GNG)

23 December 2014 GEONG International Limited ("GEONG" or the "Company") Interim Results GEONG International Limited (AIM: GNG.L), a leading Internetsolution provider and operator in China for large enterprises, announces itsunaudited interim results for the six months ended 30 September 2014. Financial Highlights - Turnover £4.4 million (H1 2013/14: £4.3 million) - Gross margin 34% (H1 2013/14: 43%) - Loss before tax £0.17 million (H1 2013/14: Loss £0.44 million) - Basic and diluted loss per share 0.46 pence (H1 2013/14: basic and diluted loss per share 1.18 pence) - Trade receivables £21.6million (At 31 March 2014: £20.1 million) including accrued income of £16.8 million (At 31 March 2014: £14.3 million) - Gross cash £3.5 million (At 31 March 2014: £3.5 million) - Order book £10.0 million (At 31 March 2014: £10.2 million) including £4.0 million for delivery in H2 Key Highlights and New Clients The Company continues to execute its strategy of focusing onGEONG's top 30 clients (the top 20 existing clients in FSI and the top 10existing clients in non-FSI) to achieve better gross margins and shorterpayment terms. The Board expects that in time this will improve bothproductivity and revenue per account and rebuild a solid revenue formula. Operational highlights for the six months to 30 September 2014include: 1) Further developed the mobile finance platform for China Bond andChina Construction Bank; 2) Enhanced the direct banking platform, and signed contracts withMinsheng Bank and Guangfa Bank; 3) Minsheng Bank and Agricultural Bank of China continued the useof (GEONG UxD); and 4) Renewed the core supplier agreement with IBM GDC and GBS foranother year. The above developments generated close to £1.0 million of revenueto the Company in the six months to 30 September 2014. Commenting on the results, Wang Weidong, Chief Executive Officersaid: "The operational highlights above prove that the Company can makeprogress by focusing on its top 30 clients and build a solid foundation forthe growth. The Company will continue this path in the second half of thefinancial year. Whilst generating broadly similar revenues in the first half, thegross margin fell from 43.0% to 34.3% when compared with the first half of2013/2014. In line with the first half last year, this reflects that SaaSrevenues are expected to be weighted towards the second half of the year witha similar cost of sales to that incurred in the first half. It takes time to reposition a business but we remain confident thatthe strategy will deliver a stronger company." For further information, please contact: GEONG International Limited www.geong.com Tel: +86 10 85869655 Henry Tse, ChairmanWeidong Wang, CEODavid Tsui, CFO Nominated Adviser and BrokerfinnCap Limited Tel: +44 (0)20 7220 0500Stuart AndrewsScott Mathieson Chairman's Statement Overview In previous statements I have outlined to shareholders our strategyof focusing on our larger existing clients and their SaaS business and todevelop new solutions to create more opportunities within our existing clientbase. As previously stated, the Board believes that in the longer term, thisshould generate higher margins and tie up less capital. Whilst the managementteam has committed to execute the strategy it has taken several years torefocus the business and the management team will continue to work hard on therepositioning in the second half. Whilst slow, the results of the change instrategy are evident and we believe will translate into a satisfactory outturnfor the current financial year. New products and solutions In product R&D, the Company continues to invest into ContentManagement Suite ("CMS") and Mobile Secured Transaction Platform ("MSTP").The new CMS v6.20 is appended to the Big-Data function which allows the userto use the smarter one-to-one marketing combined with contents. The system isintegrated with the popular web-based Weixin and Weibo marketing system whichhas a significantly improved user experience and an enhanced mobile function.MSTP targets FSI to enable clients to build their mobile market, mobilepayment and mobile transaction on both Android and IOS platforms. Significant progress has been made in relation to both our DirectBanking Solution and our Big-Data Marketing Solution for both IaaS and SaaS.The Direct Banking Solution is a cutting-edge solution to capture the fastgrowth trend of financial services on the internet in China. We have the advantage of working with worldwide leading partners,such as IBM and Oracle, as well as the leading customers in the industry, suchas CCB in FSI and SH GM in automotive, which gives us a combined advantage ofadvanced technical knowhow and practical industry expertise. Financial review Revenue for the six months was £4.4 million (SaaS £1.4 million,IaaS £3.0 million), marginally higher than the same period last year whichrecorded £4.3 million (SaaS £0.9 million, IaaS £3.4 million). It isexpected that the increase in SaaS clients' revenue will be stronger in H2and that this will result in a higher gross margin in H2. Selling anddistribution expenses (£0.235 million) are down by 50% compared to the firsthalf of last year (£0.47 million) due to more focus on the top 30 existingclients as well as their SaaS businesses. The £0.1 million of other operatingexpenses related to costs incurred in obtaining short term borrowings. At 30 September 2014, trade receivables were £21.6 million, up by£1.5 million since 31 March 2014, due to an increase of £2.55 million inaccrued income and a £1.0 million reduction in trade debtors. Cash on hand at30 September 2014 was £3.5 million (net cash £1.0 million) compared to £3.5million (net cash £1.4 million) at 31 March 2014. During the period, theCompany has increased bank borrowings from £1.1 million to £1.5 million. With respect to trade receivables, as previously statedtraditionally the third quarter is the peak collection period for the Companyand this is expected to reduce the level of trade receivables in H2 andoverall. The inventory level at 30 September 2014 was £0.25 million higherthan 31 March 2014 due to work being delivered in the first half of the yearwhich will be invoiced in the second half. The carrying value of intangibleassets has decreased by £0.25 million from last year end, primarily due to anexchange difference of £0.1 million and the normal amortisation of £0.33million. The order book at 30 September 2014 was at £10.0 million whichincluded £4.0 million in SaaS business, of which approximately 40% thecurrent order book is recurring. £4.0 million is due for delivery in thesecond half of the year. Within the £4.0 million which is to be delivered inthe second half, 60% is SaaS business and 40% is IaaS business. Outlook The Company continues to gain traction with its top 30 existingclients and generate more business from them which is encouraging for thefuture. Despite the difficulties with cash collection over the last few yearsthe Company is still endorsed highly by its clients and peers, and remainscompetitive within the industry. Whilst the change of strategy is slowlycoming to fruition, the Board remains confident in the outlook for the Companyand that the strategy will deliver a more robust business. Henry H.Y. Tse Chairman Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the period ended 30 September 2014 Notes 6 months ended 6 months Year ended 30 September ended 30 31 2014 September March 2013 2014 Unaudited Unaudited Audited £'000 £'000 £'000Revenue 3 4,423 4,307 9,493Cost of sales (2,904) (2,453) (4,791)Gross profit 1,519 1,854 4,702 Selling and distributionexpenses (235) (470) (861)Administration expenses (1,020) (1,237) (2,743) Research and developmentcosts (350) (381) (692)Share option expenses - - -Other operating income 37 - (141)Other operating expenses (22) (101) (8)Profit/(loss) from operations (72) (335) 257Finance costs (103) (105) (212)Finance income 0 1 2Profit/(loss) before taxation (174) (439) 47Income tax expense 6 - (8) (39)Profit/(loss) for the period (174) (447) 8 Other comprehensive incomeExchange differences ontranslating foreignoperations 470 (825) (1,443)Total comprehensive incomefor the period 296 (1,272) (1,435) Earnings per ordinary share 7(pence)Basic (0.46) (1.18) 0.02Diluted (0.46) (1.18) 0.02 Condensed Consolidated Statement of Financial Position As at 30 September 2014 Notes 30 September 30 September 31 March 2014 2013 2014 Unaudited Unaudited Audited £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 8 253 331 286Intangible assets 8 1,489 1,556 1,735Total non-current assets 1,742 1,887 2,021 Current assetsInventories 1,315 1,112 1,078Trade receivables and accrued 9 21,639 21,021 20,073incomeOther receivables 1,311 1,184 1,122Cash and cash equivalents 3,476 3,657 3,532Total current assets 27,741 26,974 25,805 Total assets 29,483 28,861 27,826 Liabilities and equityCurrent liabilitiesShort-term borrowings 10 1,500 1,813 1,121Trade payables 1,309 860 787Other payables 3,288 2,961 2,968Bonds payable 1,000 - 985Tax liabilities 1,866 1,889 1,783Total current liabilities 8,963 8,484 7,644 Non-current liabilitiesLong-term borrowings - - -Bonds payable - 961 -Deferred tax liabilities 1,757 1,738 1,713Deferred revenue - 9 2Total non-current liabilities 1,757 1,747 1,715 Total liabilities 10,720 10,231 9,359 Capital and reservesShare capital 11 378 378 378Reserves 18,385 18,252 18,089Total shareholders' equity 18,763 18,630 18,467 Total liabilities and equity 29,483 28,861 27,826 Condensed Consolidated Statement of Cash Flows For the period ended 30 September 2014 6 months ended 6 months Year 30 September ended 30 ended 2014 September 31 2013 March 2014 Unaudited Unaudited Audited £'000 £'000 £'000Cash flows from operating activitiesProfit/(Loss) before taxation (174) (439) 47Allowance for doubtful debts 17 - 352Depreciation of property, plant andequipment 42 60 83Amortisation of intangible assets 328 281 659Loss on disposal of fixed assets, net - - (21)Interest expenses 103 104 212Interest income - - (2)Movements in working capital 316 6 1,330 (Increase)/decrease in receivables (1,772) 256 222(Increase)/decrease in inventories (237) (690) (669)Increase/(decrease) in payables 926 337 (963)Cash (used in)/from operating activities (1,083) (91) (80) Income taxes paid - - -Net cash (used in)/from operating (1,083) (91) (80)activities Cash flows from investing activitiesInterest received - - 2Purchase of property, plant and equipment (2) (117) (45)Purchase of intangible assets (37) - (616)Net cash used in investing activities (39) (117) (659) Cash flows from financing activitiesDecrease in deferred assets 42 - -Interest paid (103) (17) (222)Repayment of convertible bonds and shortterm loans - (1,586)Increase short term loans 393 1,007 59 Net cash generated from financing 332 (98) (163)activities Net (decrease)/increase in cash and cashequivalents (474) (804) (902) Cash and cash equivalents at the beginning 3,532 4,592 4,592of the periodEffects of exchange rate changes 418 (131) (158)Cash and cash equivalents at the end of 3,476 3,657 3,532the period Condensed Consolidated Statement of Changes in Equity For the period ended 30 September 2014 Equity Conver Compen Share Share -tible Other Merger -sation Retained Exchange capital premium notes reserve reserve reserve earnings reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2014 378 7,616 24 67 (698) 379 7,424 3,277 18,467Comprehensive incomeProfit for the period - - - - - - (174) - (174)Foreign exchange movement - - - - - - - 470 470Total comprehensive income for - - - - - - (174) 470 296the yearShares options expenses - - - - - - - - -Balance at 30 September 2014 378 7,616 24 67 (698) 379 7,250 3,747 18,763 Balance at 1 April 2013 378 7,616 24 45 (698) 379 7,438 4,720 19,902Comprehensive incomeProfit for the period - - - - - - (447) - (447)Foreign exchange movement - - - - - - - (825) (825)Total comprehensive income for - - - - - - (447) (825) (1,272)the yearShares options expenses - - - - - - - - -Balance at 30 September 2013 378 7,616 24 45 (698) 379 6,991 3,895 18,630 Balance at 1 April 2013 378 7,616 24 45 (698) 379 7,438 4,720 19,902Comprehensive incomeTransfer to statutory reserve - 22 - - (22) - -Profit for the period - - - - - - 8 - 8Foreign exchange movement - - - - - - - (1,443) (1,443)Total comprehensive income for - - - - - - 8 (1,443) (1,272)the yearShares options expenses - - - - - - - - -Balance at 31 March 2014 378 7,616 24 67 (698) 379 7,424 3,277 18,467 Notes to the Condensed Financial Statements for the period ended 30 September 2014 1. Corporate Information The Company's registered office is 28 - 30 The Parade, St Helier,Jersey, JE1 1EQ, Channel Islands. The Company is domiciled in Jersey. The Group has provided content management software and solutionssince its establishment in September 2000 and has earned a reputation as alocal technology leader in the Chinese Enterprise Content Management (ECM)market, especially in the financial services industry. 2. Basis of preparation The Company's unaudited condensed financial statements for thesix months ended 30 September 2014 has been prepared in accordance with theInternational Accounting Standard 34 Interim Financial Reporting. The same accounting policies, presentation and methods ofcomputation have been followed in these condensed financial statements as wereapplied in the preparation of the Group's financial statements for the yearended 31 March 2014. The results for the period ended 30 September 2014 set out in thisInterim Report do not constitute the Company's statutory accounts. 3. Segment Reporting 6 months ended 6 months ended 30 September 30 September 2014 2013 IaaS SaaS Consolidated IaaS SaaS Consolidated £'000 £'000 £'000 £'000 £'000 £'000Revenue and ExpensesRevenue 2,982 1,441 4,423 3,365 942 4,307Inter-segment - - -revenueTotal Revenue 2,982 1,441 4,423 3,365 942 4,307ResultsSegment results 987 532 1,519 1,250 604 1,854Unallocated expenses (1,605) (2,088)Results from (86) (234)operating activitiesFinance expenses (103) (104)(net)Other income 15 (101)(expenses)Share option expense -Income tax expenses (8)Profit for the (174) (447)periodAssets andliabilitiesSegment assets 16,530 7,988 24,518 18,476 5,172 23,648Unallocated assets 4,965 5,213Total assets 29,483 28,861Segment liabilities 4,785 2,312 7,097 5,159 1,444 6,603Unallocated 3,623 3,628liabilitiesTotal liabilities 10,720 10,231 4. Seasonality The operating result is marginally affected by the seasonality.The IaaS customers' split is approximately 40% in the first half of the yearand 60% in the second half. For SaaS customers, the income stream in thecurrent financial year is expected to be approximately 35% in the first halfof the year and 65% in the second half. 5. Exchange rates of principal currencies The following significant exchange rates applied during the period: Average rate Reporting date spot rate 6 months 6 months Year ended ended ended 31.3.2014 30.9.2014 30.9.2013 30.9.2014 30.9.2013 31.3.2014 £ £ £ £ £ £ USD1 0.59640 0.64820 0.62970 0.61570 0.61950 0.60090 CNY1 0.09670 0.10470 0.10230 0.10000 0.10070 0.09750 6. Taxation The Company's operating subsidiaries in PRC are subject topreferential tax rate of 15% due to their high technology enterprise status.Therefore, the tax charge for the six months ended 30 September 2014 iscalculated based on the tax rate of 15%. 7. Earnings per share 7.1 Basic earnings per share The earnings and weighted average number of ordinary shares usedin the calculation of basic earnings per share are as follows: 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2014 2013 2013Earnings used in thecalculation of total (174,005) (447,041) 14,038basic earnings per share (£)Weighted average number ofordinary shares for thepurposes of basic earnings per 37,834,622 37,834,622 37,834,622shareBasic earnings per share (penceper share) (0.46) (1.18) 0.04 7.2 Diluted earnings per share The earnings used in the calculation of diluted earnings per shareare as follows: 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2014 2013 2013Earnings used in thecalculation of totaldiluted earnings per share (£) (174,005) (447,041) 14,038 The weighted average number of ordinary shares for the purposes ofdiluted earnings per share reconciles to the weighted average number ofordinary shares used in the calculation of basic earnings per share asfollows: 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2013 2013 2013Weighted average number ofordinary shares used in thecalculation of basic loss per 37,834,622 37,834,622 37,834,622share Shares deemed to be issued forno consideration in respect ofemployee options - - - Weighted average number ofordinary shares used inthe calculation of diluted lossper share 37,834,622 37,834,622 37,834,622 Diluted loss per share (pence) (0.46) (1.18) 0.04 The 7.5% £1.0 million convertible unsecured loan issued in March2013, potentially increases the number of ordinary shares but is not dilutivefor the period because the Company made a loss and the bond is potentiallypayable in December 2014. Therefore, it is excluded from the weighted averagenumber of ordinary shares for the purposes of diluted earnings per share. 8. Property, plant and equipment During the period, the Company purchased computer server andrelated items of £0.02 million were incurred in the period. Intangibles assets There were £0.04 million research and development costscapitalised as intangibles. 9. Trade Receivables As at As at As at 30 September 30 September 31 March 2014 2013 2014 £'000 £'000 £'000 Trade receivables 5,487 2,953 6,459Accrued income 16,820 18,395 14,265 22,306 21,348 20,724Less: allowance fordoubtful debts (668) (327) (651)Total 21,639 21,021 20,073 The accrued income represents amounts not yet invoiced, but forwhich specific milestones have been met, which is in accordance with commonpractice in PRC. 10. Borrowings Bank borrowings The short term loan was the renewal of the loan from: (1) Bank of Beijing for amount of £0.677 million (RMB 7.0 million). This loanbears interest at 7.2% pa and is repayable within one year. (2) China Construction Bank for amount of £0.774 million (RMB 8.0million). This loan bears interest at 7.8% pa and is repayable within one yearand These borrowings are collateralised and secured by the tradereceivables (note 9) and certain copyrights and by personal guaranteesprovided by Mr Weidong Wang and another employee. Convertible Loan Note On 22nd December 2014, The Board and Hanafin agreed and Hanafinconfirmed in writing to the Company that the redemption date of the CULS willbe extended until 31 March 2015. All other terms of the CULS remain unchanged. The net proceeds received from the issue of the A Notes have beensplit between the liability component and an equity component, representingthe residual attributable to the option to convert the liability into equityof the Group, as follows: Group As at As at 30 September 31 March 2014 2014 Face value of convertible 1000 985Equity conversion component (15) (24) Fair value of debts 985 961Represented by:Current liabilities 985 961Non-current liabilities - -Fair value of debt 985 961 11. Share capital The total authorised number of ordinary shares is 100,000,000 with£0.01 par value per share. The issued share capital of the Company as at 30September 2014 is 37,834,622 fully paid shares. There were no movements in theissued share capital of the Company in the current interim reporting period. The holders of ordinary shares are entitled to receive dividends asdeclared from time to time and are entitled to one vote per share at meetingsof the Company. All shares rank equally with regard to the Company's residualassets. 12. Related party transactions Transactions within the Group have been eliminated in thepreparation of the financial information set out in this report and are notdisclosed in this note. There are no other related party transactions apart from theremuneration of key management. 13. Share options At 30 September 2014, the Company had the following outstanding share options: Number Exercise Date of Exercise period price (£) grant 326,241 0.30 23.06.2006 23.06.2009-22.06.2016346,814 0.65 11.06.2007 11.06.2010-10.06.2017248,424 0.56 19.06.2008 19.06.2011-18.06.2018571,201 0.33 23.06.2009 23.06.2012-22.06.2019 14. Events after the end of the reporting period There are no material events to report after the reporting period. 15. Approval of interim financial statements The interim financial statements were approved by the Board ofDirectors on 22nd December 2014.