22 Nov 2007 07:00
22 November 2007 GEONG INTERNATIONAL LIMITED INTERIM RESULTS
GEONG International Limited ("GEONG" or "the Company"), the AIM listed, China based, provider of Enterprise Content Management ("ECM") software and solutions, today announces its unaudited interim results for the six months ended 30 September 2007.
Financial Highlights
* Turnover up 87% to US$5.88 million (H1 FY2007: US$3.15 million) * Gross profit up 51% to US$2.34 million (H1 FY2007: US$1.55 million) * Net profit up 107% to US$0.51 million (H1 FY2007: US$0.25 million) * Earnings per share up 70% to US cents 1.7 (H1 FY2007: US cents 1.0) * Solid balance sheet with cash of US$4.23 million * Successful share placing in June 2007 raising US$6.8 million (‚£3.45 million)
Operational Highlights
* Organic revenue growth 27% ahead of original plan of 60% year on year growth * Recognised as leading independent ECM solutions provider in China * Endorsed by, and partnering with, world's largest software vendors, including IBM, Microsoft, Oracle, SAP and BEA * Significant PortalAgeTM contract wins including Shanghai Volkswagen, Lenovo, Huawei-3Com, Bank of Shanghai and ICBC Credit Suisse Asset Management Limited * 740% year on year growth of SmartBoxTM products
* SmartExpress Loyalty Program successfully launched in two cities in June
2007 and ready for expansion in second half
Commenting on the results Wang Weidong, Chief executive of GEONG InternationalLimited said: "Having put in place and executed our detailed strategies forgrowth, we have managed to deliver interim results that are better thanoriginally planned. The additional working capital provided by way of the shareplacing in June has also allowed us to accelerate our business plan, andthrough the momentum we have gained, we now believe we can bring even greaterrewards to our shareholders." -Ends- Enquiries:Henry Tse, Chairman www.geong.com Weidong Wang, CEO GEONG International Limited Tel: +44 (0)20 7822 0200 (22 November only) Tel: +86 10 5222 0999
Paul Dulieu / Emma Kane / Mike Ward
Redleaf Communications Ltd Tel: +44 (0)20 7822 0200
John Depesquale / Parimal Kumar
Seymour Pierce Tel: +44 (0)20 7107 8000 Notes to Editors
About GEONG International Limited
* GEONG is registered in Jersey and headquartered in Beijing. Its shares were
admitted to AIM in June 2006 and trade under the ticker GNG.L
* The Company has provided content management software and solutions since
its establishment in September 2000 and has earned a reputation as a local
technology leader in the Chinese Enterprise Content Management (ECM)
market, especially in the financial services industry.
* ECM software is an internet based suite of products that enables companies
to capture, manage, store, preserve and deliver content, documents and data
across thousands of users, processes and locations.
* The Company has developed two proprietary product ranges: the PortalAgeTM
suite designed for large enterprise customers and SmartBoxTM designed to
capture the SME market's requirement for collaboration software. * PortalAgeTM clients include: Lenovo, Bank of Communications, China Construction Bank, FAW Volkswagen, Shanghai Automotive Industry Corporation, Shanghai General Motors and Air China.
* In March 2007, the Company established a Canadian representative office in
order to commence the international promotion of SmartBoxTM.
* In 2006, GEONG was recognised for the second successive year in the
Deloitte "Technology Fast 50 China 2006" and the "Technology Fast 500 Asia
Pacific 2006", which recognises the fastest growing technology companies in
China and in Asia Pacific respectively.
* GEONG was short listed for the "Best Technology" category at the 2007 AIM
Awards.
* In October 2007, the company established a Guangzhou branch office in order
to commence the expansion of both PortalAgeTM and SmartBoxTM in Southern
China. Chairman's StatementOverviewIt gives me real pleasure to report that the first half of the financial yearhas been a period of significant growth for GEONG, on all fronts, with theCompany ending the period 27% ahead of its original aggressive plan of 60% yearon year growth.The levels of growth we are experiencing are as a result of two major factors;the additional funds raised in June's placing which have enabled the Company tofurther develop it sales and marketing channels and accelerate the roll out ofits award winning PortalAgeTM and SmartBoxTM related products; and theapplication of clear strategies to develop our product offerings and penetrateour chosen markets. We believe that we are now in a position to maintain ourhigh level of growth going forward and help fulfill GEONG's market potentials.GEONG also continues to attract recognition as a Company from third parties. InSeptember we were shortlisted for the Best Technology category at the 2007 AIMAwards and today we can announce that, for the third year running, GEONG hasbeen included in the Deloitte Technology Fast 500 Asia Pacific survey, whichrecognise GEONG as being one of the fastest growing technology companies inChina and Asia Pacific. This recognition, as well as the continued adoption ofour PortalAgeTM based solutions by some of China's largest companies, reaffirmsGEONG's position as the leading independent ECM software and solutions providerin China, a position from which we intend to fully capitalise on going forward.Operational ReviewSmartBoxTM & SmartExpressSales of the full version of SmartBoxTM, which is aimed at SMEs, have continuedto grow during the period through both our conventional sales channels and bywinning further contracts to supply organizations directly. At the period endSmartBoxTM was being used by over 24,500 user seats in 350 SMEs. Consideringthe comparative newness of SmartBoxTM, which was launched in late 2005, we arevery happy with the level of penetration achieved to date.SmartExpress is the entry level product of the SmartBoxTM product family. Aspart of the development of our sales strategy, in June we launched a 3-year"Loyalty Programme" for SmartExpress. This is aimed at very small businesses(VSBs) and is structured such that VSBs pay a minimal initial fee per user inthe first year and then pay double that amount for the second and third year.The aim of this programme is to allow quick penetration into the VSB market byproviding a low cost, basic, ECM solution, which can be upgraded or added to ata later date.The Loyalty Program was initially launched in two cities (Beijing andShijiazhuang of Hebei province) as a pilot programme and has proved verysuccessful. As a result, the Company is ready to expand the pilot program tonine other major cities in Northern China in the second half of the financialyear. To date, we have provided over 24,000 user seats to 1,200 VSBs and we areexpecting sales of this product to continue to accelerate over the comingmonths as we extend the Loyalty Programme to further locations.Our strategy for the SmartBoxTM range of products is to also `cross-sell' and`up-sell' SmartBox's other management modules to our fast growing SmartExpresscustomer base. Through the continual development and enhancement of ourSmartBoxTM offering we hope to turn new customers into `life-time customers'who will add modules and additional user licenses as their business grows.Currently we offer five additional modules which can be added, namelySmartSales, SmartProject, SmartProduct, SmartService, and SmartISO. We are alsoconstantly alert to our customer requirements and are developing additionalmodules accordingly. Finally, in August we launched an English language versionof SmartBoxTM which is intended to capture higher margins overseas business inthe future.In addition to our conventional sales channels, we have also foundopportunities to provide organisations with our SmartBoxTM product directly. Inaddition to those contracts mentioned at the time of our Annual GeneralMeeting, we have won a number of larger installation accounts. These include acontract for US$67,000 with Beijing Jinguan Paper Logistic Ltd. which involvedintegrating their sales and product management systems with an enterpriseresource planning (ERP) system. With typical orders for SmartBoxTM being in theregion of US$5,000, contracts of this type are not only very lucrative, butthey demonstrate that SmartBoxTM is a highly sophisticated product which ishelping drive some of China's best SMEs.For the first half of the year, total sales revenue for SmartBoxTM andSmartExpress products was over 740% higher than the comparative period lastyear. The products are quickly gaining customer and market acceptance and wehave plans in place to further cultivate new markets in the second half of
theyear.PortalAgeTM
Our flagship product, PortalAgeTM, continues to do well and the addition offurther large contract wins with world class customers demonstrates theincreasing level of acceptance and favourability towards our services andsolutions. Our "go-deep-and-broad" strategy is also working well and we havemet our targeted number of gold, silver and bronze clients during the periodwith revenue from our top 10 PortalAgeTM clients expected to increasesignificantly going forward, with 13 new PortalAgeTM clients signed in thefirst half of the year.During the period, we continued to perform well across all of our establishedsectors, including Financial Services, Automotive and Electronic Manufacturing,where we are currently market leaders, as well as finding other selectedsectors very promising. In the financial services and automotive sectors wehave also successfully replicated proven solutions from earlier projects tosecond tier clients. This marks the beginning of our entry into a second tierof prospective clients and provides GEONG with the opportunities andefficiencies that replicating proven solutions brings.During the period, we also gained recognition from, and partnered with, anumber of the world's largest IT companies. These include Oracle and IBM, withwhom we hold core supplier status, Microsoft, for whom we are a "GoldCertificated Partner", BEA, with whom we signed a territory alliance for over110 city commercial banks, and SAP for whom we are now official enterpriseresource planning partner. Through these relationships we are able to deliverenhanced solutions and value to our clients and have access to projects whichmight otherwise be limited for a company of GEONG's size.At the period end PortalAgeTM was being used by over 100 corporate clients.
Financial Review
Revenue for the six months ended 30 September 2007 was US$5.88 million (H1 FY2007: US$3.15 million) representing an increase of 86.7%. Gross Profit was US$2.34 million (H1 FY2007: US$1.55 million) and profit after tax increased 106.9% to US$0.51 million (H1 FY2007: US$0.25 million).
The reduction in Gross Profit margin to 40% (H1 FY2007: 49%) is a result of achange in revenue mix following a rapid increase in the reselling of thirdparty licenses during the period. GEONG PortalAgeTM and third party licensesales now represent 29% of total revenue (H1 FY2007: 10%). Although the marginon third party license sales is relatively lower than selling GEONG productlicenses, reselling third party software licenses is good business as anintegrated part of PortalAgeTM ECM projects. Going forward, we expect marginsto increase slightly as an increase in GEONG SmartBoxTM sales start to have alarger impact on total revenue.Over the last four years, as our business has become more established, we haveidentified an element of seasonality to our revenue flow, which comes aboutbecause contracts with large enterprises tend to be signed in first half of ourfinancial year and delivered in second half. We expect this trend to continuegoing forward, with a heavy weighting towards the second half of the year.However, as sales of SmartBoxTM products increase over the next few years, weexpect the impact of this seasonality to be lessened slightly.As at 30 September, trade receivables were US$6.88 million (H1 FY2007: US$3.63million) and Debtor Days were at a comparable level as for the same period lastyear. The relative slowness in receiving payments is mainly due to thecontracts payment schedules adopted by the large organisations we have signedcontracts with. Whilst slightly frustrating, slow payment is a common factor ofdealing with large organisations in China, but the high level of suretysurrounding these debtors goes someway towards overcoming the slowness ofreceiving payment. Going forward, as SmartBoxTM and SmartExpress sales increaseas a percentage of overall sales, our cash flow position will improve, as thepayment times on these products is considerably shorter.In June 2007, we raised US$6.8 million (‚£3.45 million), before expenses, from aplacing of 5,245,000 ordinary shares at 65 pence per share. This contributed toour closing cash balance of US$4.23 million (30 September 2006: US$0.61million).Trading Outlook
The first half of the year showed a very strong performance by the Company and we expect the momentum in the second half of the year to remain.
In October we opened a new branch office in Guangzhou which will improve ourmarket coverage and customer support for Southern China. We have planned jointmarketing seminars with local partners for potential financial services andmanufacturing customers and, as a result, expect to significantly improve ourmarket position in Southern China for both our PortalAgeTM and SmartBoxTMproducts.Since the period end we have also announced significant contract wins forPortalAgeTM including Shanghai General Motors, SONY, Bank of Anhui, EMC Chinaand Lenovo. We expect the PortalAgeTM business to continue to remain strong,particularly in the financial services sector where we hold a market leadingposition. Multinational manufacturing and the automotive sector are alsodeveloping into strong markets for GEONG and we continue to penetrate newindustries which will provide continued opportunities for growth.With regards to our SmartBoxTM range of products, a number of marketingcampaigns and sales programmes have been put in place for the second half ofthe year. As mentioned earlier, our SmartExpress Loyalty Program will beimplemented in nine additional major cities across Northern China and adedicated sales team has been formed to `cross-sell' and `up-sell' additionalSmartBoxTM modules to SmartExpress customers.
As announced separately today, GEONG has also signed an agreement with IBM China to include SmartExpress on its IBM PC Server, with delivery to customers starting from late November.
We also continue to work with partners, including management consultants andSME institutions to promote SmartBoxTM as a management tool for Chinese smalland medium sized enterprises.Following the launch of the English version of SmartBoxTM and the developmentof an English version of PortalAgeTM, we are ready to start exploring overseasmarkets. We have signed a partnership agreement with Response Tek of Canada andGrassroots Consultants of the USA to start developing Canadian and US marketsfor both PortalAgeTM and SmartBoxTM.With regards to non-organic growth, we are currently in the process ofidentifying a few companies in local and overseas markets which we believe willcomplement GEONG in terms of market coverage, product and technologydevelopment, talents and skills. Whilst we intend to approach any possibleacquisitions with caution, we do believe that opportunities exist to leveragethe quality of our products and services and our market-leading position inChina. This process is currently at a very early stage but we hope to make oneacquisition within the current financial year.On an issue of presentation, the Company has decided to report its financialresults in Sterling rather than US Dollars in future. The Company feels that,because its shares are priced in Sterling and it is listed on a UK stockexchange, the adoption of Sterling for reporting purposes will aid shareholdersin making calculations and comparisons. Therefore, the Company's preliminaryresults for the year ending 31 March 2008 will be the first set of resultsreported in Sterling.With demand for PortalAgeTM continuing and our SmartBoxTM products growing inpopularity, the Board is very positive about the future of GEONG and expectsfull year figures to exceed current market expectation.Henry H.Y. TseChairman22 November 2007GEONG INTERNATIONAL LIMITED CONSOLIDATED INCOME STATEMENT Notes 6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2007 2006 2007 US$000 US$000 US$000 (unaudited) (unaudited) (audited) Revenue 5,882 3,150 8,123 Cost of sales (3,540) (1,596) (3,648) ------- ------- -------Gross profit 2,342 1,554 4,475Other income 239 61 154Research & development costs (140) (83)
(181)
Selling and distribution expenses (485) (339) (634)Administration expenses (1,419) (901) (2,091)Other expenses (1) - (1) ------- ------- -------Profit from operations 536 292 1,722Finance cost (20) (19) (34) ------- ------- -------Profit before tax 516 273 1,688Taxation (7) (27) (155) ------- ------- -------Net Profit 509 246 1,533 ------- ------- -------
Earnings per ordinary share (US cents)
Basic 2 1.73 0.97 5.95Diluted 2 1.72 0.97 5.89GEONG INTERNATIONAL LIMITED CONSOLIDATED BALANCE SHEET Notes 30 September 30 September 31 March 2007 2006 2007 (audited) (unaudited) (unaudited) ASSETS US$000 US$000 US$000 Non-current assets Property, plant and equipment 635 333 345Intangible assets 676 180 580 ------- ------- ------- Total non-current assets 1,311 513 925 Current assets Cash and bank balances 4,233 609 1,011Trade receivables 6,884 3,633 4,728Other receivables 1,404 412 442Inventories 341 187 132 ------- ------- -------Total current assets 12,862 4,841 6,313 ------- ------- -------Total assets 14,173 5,354 7,238 ------- ------- -------EQUITY AND LIABILITIES Current liabilities Trade payables 360 177 123Other payables 436 744 1,348Tax payables 743 378 166Short-term loans - 302 218 ------- ------- -------Total current liabilities 1,539 1,601 1,855 Non-current liabilities Deferred tax liabilities 78 14 76 ------- ------- -------Total non-current 78 14 76liabilities ------- ------- -------Total liabilities 1,617 1,615 1,931 ------- ------- ------- Capital and reserves Share capital 595 486 490Share premium 10,482 3,919 3,971Merger reserve (1,366) (1,360) (1,366)Equity compensation reserve 128 - 128Retained earnings 2,436 640 1,927Exchange Reserves 281 54 157 ------- ------- -------Total equity 12,556 3,739 5,307 ------- ------- -------Total equity and liabilities 14,173 5,354 7,238 ------- ------- -------GEONG INTERNATIONAL LIMITED
CONSOLIDATED CASH FLOW STATEMENT
6 months 6 months 12 months ended ended ended 30 September 30 September 31 March 2007 2006 2007 US$000 US$000 US$000 (unaudited) (unaudited) (audited) Profit for the period 516 273 1,688Adjustments for: Interest income (3) - (4)Interest expense 20 - 34
Amortisation of intangible assets 66 34
67
Depreciation of property, plant & 71 39
78equipment Share based payment expense - - 73
Loss on disposal property, plant & - 1
20equipment ------- ------- -------Operating cash flows before 670 347 1,956movement in working capital Increase in inventories (209) (105) (47)Increase in receivables (3,119) (1,183) (1,874)
(Decrease)/increase in payables (112) 593
551 ------- ------- ------- Cash generated by operating (2,770) (348) 586activities Interest paid (20) - (34) ------- ------- -------
Net cash generated from operation (2,790) (348)
552activities ------- ------- ------- Investing activities Interest received 3 - 4Purchase of property, plant & (361) (87) (141)equipment Purchase of intangible assets (144) (126) (555) ------- ------- -------Net cash used in investing (502) (213) (692)activities Financing activities Repayment of borrowings (218) (359) (477)Proceeds from the issue of share 6,840 1,701
1,801
capital Expenses paid for share issues (225) (903)
(903)Other financing activities - 6 - ------- ------- -------Net cash used in financing 6,397 445 421activities
Net (decrease)/increase in cash 3,105 (116)
281
and cash equivalents Cash and cash equivalents at the 1,011 699
699
beginning of the period Effect of exchange rate changes 117 26
31
------- -------
-------
Cash and cash equivalents at the 4,233 609 1,011end of the period ------- ------- -------GEONG INTERNATIONAL LIMITED
Consolidated Statement of Changes in Equity (USD$000) Equity Share Share Merger Retained compensation Equity Exchange Capital Premium Reserve Earnings Reserves Reserve Total Balance as at 31 - - 2,296 394 - 28 2,718March 2006 Net profit for - - - 246 - - 246the period Shares swap 457 4,051 - - - - 4,508 Issue of share 29 771 - - - - 800capital Share issue - (903) - - - - (903)costs Subsidiary share - - (3,656) - - 26 (3,630)and reserves change
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Balance as at 30 486 3,919 (1,360) 640 - 54 3,739September 2006 Net profit for - - - 1,287 - - 1,287the period Exercise of 4 52 - - - - 56share options Currency - - (6) - 128 103 225translation differences
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Balance as at 31 490 3,971 (1,366) 1,927 128 157 5,307March 2007 Net profit for - - - 509 - - 509the period Issue of share 105 6,735 - - - - 6,840capital Share issue - (224) - - - - (224)costs Currency - - - - - 124 124translation differences
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Balance as at 30 595 10,482 (1,366) 2,436 128 281 12,556September 2007
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NOTES TO THE INTERIM REPORT1. Basis of preparation The financial information comprises consolidated balance sheet as of 30September 2007 and related consolidated income statement, consolidatedstatement of changes in equity, consolidated cash flow statement and relatednotes for the six months then ended of Geong International Limited (hereinafterreferred to as " financial information").The interim results for the period ended 30 September 2007 are unaudited and donot constitute statutory financial statements. The figures for the year ended31 March 2007 have been extracted from the audited financial statements for theperiod. The auditors' report on those financial statements was unqualified.The financial information set out in the report has been prepared in accordancewith accounting policies as set out in the financial statements of GeongInternational Limited for the year ended 31 March 2007 and are expected to beapplied in the financial statements for the year ended 31 March 2008.Due to continuing work of the International Accounting Standards Board (IASB)further standards, amendments and interpretations could be applicable for GeongInternational Limited's financial statements for the period ending 31 March2008 as practice continues to evolve.
Geong International Limited has chosen not to adopt IAS 34,"Interim Financial Reporting" in preparing its 2007 interim statements.
2. Earnings per share
The calculation of basic earnings per ordinary share and the fully diluted earnings per ordinary share is based on the profit attributable to the Group and the weighted average number of ordinary shares of each period.
30 September 30 September 31 March 2007 2007 2006 (unaudited) (unaudited) (audited) US$ US$ US$Earnings for the purpose of 509,379 246,211 1,533,009diluted earnings Numbers of shares
Weighted average number of 29,473,425 25,402,810 25,774,970 ordinary shares for the purpose
of basic earnings per share
Weighted average number of 29,650,746 25,499,707 26,023,025 ordinary shares of the purpose of
fully diluted earnings per share
Basic earnings per share (US 1.73 0.97 5.95cents)
Diluted earnings per share (US 1.72 0.97
5.89cents) 3. Taxation
The tax charge for the six months ended 30 September 2007 and for the six months ended 30 September 2006 are based upon the estimated effective tax rate for the full year.
4. Share Issues During the six months to 30 September 2007, the company issued approximately ¯¿¡3.45 million (US$6.8 million) from the issue of 5,245,000 Ordinary shares of 1p each at 65 pence.
5. Functional and presentation currency
Sterling is the functional currency of the company as it is the currency of theprimary economic environment in which it operates. The US Dollar("US$") 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 Business Networks Limitedand Geong Information Technology Limited, the operating subsidiaries whosefunctional currencies are the Chinese Renminbi.
6. Copies of the interim report
Copies of the interim report will be available from the company's registeredoffice at Walker House, P.O.Box72, 28-34, Hill Street, St Helier, Jersey, JE48PN, United Kingdom, the company's website: www.geong.com or Seymour Pierce atwww.seymourpierce.com.
GEONG INTERNATIONAL LIMITED