2 Dec 2009 07:00
Wednesday 2nd December
GEONG International Limited ("GEONG" or "the Company" or "the Group") Interim Results
GEONG International Limited (AIM: GNG), the AIM listed China based provider ofenterprise content management ("ECM") software and solutions, today announcesits unaudited interim results for the six month period ended 30 September 2009.
Financial Highlights
* Revenue up 26% to 6.5m (H1 FY2009: 5.2m) * Gross margin: 44% (H1 FY2009: 41.7%) * Profit before tax up 179% to 1.08m (H1 FY2009: 0.39m)
* Net profit after tax up 137% to 0.84m (H1 FY2009: 0.36m) after prepayment
of withholding tax * Fully diluted earnings per share up 137% to 2.61p (H1 FY2009 1.10p)
* Net cash position (prior to fund raising) at 30 September 2009 of 2.4m (
0.5m as at 30 September 2008) * Trade receivables up 35% to 11.9m (H1 FY2009: 8.8m) * Current order book 14.0m (H1 FY2009: 12.9m)
Corporate and Operational Highlights
* Successful fundraising in October of 2.2m gross
* 10 new clients secured within the Information as a Service ("IaaS") model,
including Qilu Bank, Shangdong Rural Bank Alliance, Dongfeng NISSAN, and
China Central Television * 7 new clients secured using the Software as a Service ("SaaS") model including Xinhua Insurance, Guangdong Development Bank and EMC
* New `Go Deep and Broad' strategy successfully implemented for SaaS model
Commenting on the results, Chief Executive, Wang Weidong said:"Whilst we are delighted with our exceptionally strong interim results we wouldlike to stress that at this stage we foresee our full year results being inline with market forecasts. We finished the period in a strong financialposition with a substantial order book, high levels of revenue visibility andbalance sheet strength. In October 2009 we fortified this position when weraised 2.2 million of gross new funds, which will allow us to deliver larger,longer-term projects going forward."
For further information, please contact:
GEONG International Limited www.geong.com Tel: +86 10 5222 0999 Henry Tse, Chairman Weidong Wang, CEO
Seymour Pierce Tel: +44 (0)20 7107 8000John DepasqualeICIS Tel: +44 (0)20 7651 8688Bob HuxfordHilary Millar
About GEONG International Limited
Operational since 2000, GEONG specialises in collaboration and contentmanagement software and services. Its products are specifically tailored forthe Chinese market, where the Company is recognised by Government agencies andnumerous blue chip clients as a leader in its field. GEONG was named The MostSuccessful Enterprise in ECM Software in China 2007 to 2008 by China's Centrefor Information Industry Development and CCID Consulting; and one of thefastest growing companies in Asia at the Deloitte Technology Fast 50 China andDeloitte Technology Fast 500 Asia Pacific awards. The Company has recentlyexpanded into North America setting up operations in Canada.Registered in Jersey, the Group's operations are headquartered in Beijing. TheCompany's shares were admitted to AIM in June 2006 and trade under the tickerGNG.L
For more information, please visit www.geong.com
Chairman's statementOverviewWe are pleased to announce a period of strong growth, with turnover increasing26% to 6.5m (H1 FY2009: 5.2m) and profit before tax up 179% to 1.08m (H1FY2009: 0.39m).During this time we have had considerable success with our 'Go Deep and Broad'strategy, leveraging our existing partners and client base to sell to resellersor affiliate companies. This has culminated in numerous new contract wins forboth our IaaS and SaaS offerings with new clients including Shangdong RuralBank Alliance, Xinhua Insurance and Guangdong Development Bank. As a result ofthis strategy we have also been able to significantly reduce our direct salesstaff, leading to an associated reduction in costs.In addition, post the period end; we successfully raised 2.2 million beforeexpenses through a placing of new ordinary shares of 0.01 each at 0.38 pershare. The net proceeds of the Placing are currently being utilised to provideGEONG with the capacity to deliver larger, longer-term contracts which,although expected to incur initial up-front costs should result in superiormargins over the longer term. As part of a new three year strategic plan, GEONGwill look to secure more contracts of this kind going forward, which areexpected to provide the Group with substantial and sustainable free cash flowgeneration from FY2013 onwards.
Operational Highlights
GEONG's "Go Deep and Broad" strategy has again been highly successful for theCompany's IaaS (Information as a Service) division with ten new contract winssigned during the period. These comprised of Qilu Bank, Shangdong Rural BankAlliance, Bank of Dalian, Bank of Dezhou, Taiping Insurance Group, ChinaForeign Currency Exchage, Beijing Hundai, Dongfeng NISSAN, Dongguan Power andCCTV.While the Group has continued to acquire second tier clients in its preferredmarkets, such as the financial services and automotive sectors, there has alsobeen steady new growth in revenues and order book for GEONG's SaaS (Software asService) division. Since December 2008 the Go Deep and Broad strategy wasadopted for the SaaS division resulting in a reduction in sales costs andleading to 7 new contract wins during the six months to September 30 2009.These comprise of Xinhua Insurance, Happy Insurance, Guangdong DevelopmentBank, Huaneng Capital and EMC.
Financial Review
Turnover for the six months ended 30 September 2009 grew by 26% to 6.5 million (H1 2009: 5.2 million).
Within this revenue growth IaaS sales increased by 18% to 6.1 million (from 5.2 million H1 FY2009). PortalAge maintenance delivered significant growth of56% to 1.3 million (from 0.8 million H1 FY2009) and PortalAge customisationgrew by 65% to 4.0 million (from 2.4 million H1 FY2009). Revenue relating tosales of low margin, third-party software decreased to 0.5 million ( 1.6million H1 FY2009). SaaS's introduction into the market in December 2008resulted in sales of 0.4 million.
Overall gross margins of 44% were achieved for the period compared to 42% in H1 FY2009.
Sales and distribution expenses have decreased 26% to 0.4 million from 0.5million in H1 FY2009. The primary reasons behind the fall in sales anddistribution costs resulted from the change in marketing strategy from directsales to our `Go Deep and Broad' strategy. Sales personnel costs decreased by38% as a result of SME sales staff numbers falling from 40, as at 30 September2008, to 4 as at 30 September 2009. Marketing expenses decreased by 40% andtravel expenses fell by 86% as a result of the newly implemented SaaS method ofdelivery and the Group's decision to stop selling Smartbox directly.The effective tax rate during the first half rose to 22% (H1 FY09 8%) includingwithholding tax. According to PRC tax rules withholding tax is levied for salesreceipts received into a foreign bank account. Withholding tax has beenexpensed and paid in this half with revenue to be booked in the future.
In addition the Group recorded a foreign exchange deficit arising on the translation of the net assets of the Chinese subsidiaries which is reflected in the condensed consolidated statement of comprehensive income.
GEONG's cash balance at the half year end remained robust at 2.4 million inspite of trade receivables increasing during the first half by 1.0 million or10%. The major reason for the increase in trade receivables was due to a changein payment terms on one major contract from 30 days to 60 days. In theforeseeable future our debtor days are expected to remain stable at currentlevels with the reduction in days expected to commence in 18 to 24 months timeas the SaaS model takes hold.Debtor days at 31 March 2009 were lower in comparison to the 30 September 2009period end due to the cash collection generally accelerating in the second halfof the year, as is the industry norm in the PRC.
Accrued income included in debtors at 30 September 2009 was approximately 7.4 million in comparison to 6.5 million at 31 March 2009.
30 September 31 March 2009 2009 GBP'000 GBP'000 Trade debtors (net of 4,421 4,272provision) Accrued income 7,441 6,543 ------------------- Total 11,862 10,815
Inventories were higher at 30 September 2009 than at prior period ends and reflect short term work in progress incurred on a new project where the first billings were recorded in October 2009.
In October 2009 we raised 2.2 million before expenses through a placing of new ordinary shares of 0.01 each at 0.38 per share. The net proceeds of the Placing are currently being utilised to provide GEONG with the capacity to deliver long term contracts.
Trading OutlookDespite reporting exceptionally strong results GEONG would like to stress thatat this stage the Group foresee's full year results being in line with marketforecasts. GEONG finished the period in a strong financial position with asubstantial order book, high levels of revenue visibility and balance sheetstrength. In October 2009 GEONG fortified this position when it raised 2.2million of gross new funds, which will allow the Group to deliver larger,longer-term projects going forward.GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
6 months ended 6 months ended 12 months 30 September 30 September ended 31 March 2009 2008 2009 Notes GBP'000 GBP'000 GBP'000 (unaudited) (unaudited) (audited) Revenue 6,504 5,166 14,666 Cost of sales (3,637) (3,012) (8,728)
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Gross profit 2,867 2,154 5,938 Other income 90 32 30 Research & development (182) (127) (307)costs Selling and distribution (391) (526) (1,129)expenses Administration expenses (1,262) (1,120) (2,746) Share option expense (65) (36) (99)
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Profit from operations 1,057 377 1,687 Finance income 25 11 2
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Profit before tax 1,082 388 1,689 Taxation (240) (32) (330)
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Profit after tax for the 842 356 1,359period Earnings per ordinary share (pence) Basic 5 2.66 1.13 4.31 Diluted 5 2.61 1.10 4.16GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME Profit after tax for the 842 356 1,359period Other comprehensive (deficit)/income: Foreign exchange movement (1,002) 1,106 3,504
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Total comprehensive (160) 1,462 4,863(deficit)/income for the period GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2009
Notes 30 September 2009 30 September 31 March (unaudited) 2008 2009 (unaudited) (audited) ASSETS GBP'000 GBP'000 GBP'000 Non-current assets Property, plant and 434 475 559equipment Intangible assets 422 404 514 ---------------------------------- Total non-current assets 856 879 1,073 Current assets Inventories 639 128 281 Trade receivables 11,862 8,801 10,815 Other receivables 1,198 1,050 1,333 Cash and bank balances 2,375 470 3,567
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Total current assets 16,074 10,449 15,996 Total assets 16,930 11,328 17,069 EQUITY AND LIABILITIES Current liabilities Trade payables 1,251 754 1,781 Other payables 1,611 1,286 1,224 Tax payables 1,085 125 1,052
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Total current liabilities 3,947 2,165 4,057 Non-current liabilities Deferred tax liabilities 537 137 521
-----------------------------------
Total non-current 537 137 521liabilities Total liabilities 4,484 2,302 4,578
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Capital and reserves Share capital 317 315 315 Share premium 5,480 5,432 5,432 Merger reserve (698) (698) (698) General reserve 3 3 3 Equity compensation 257 142 206reserve Retained earnings 4,151 2,292 3,295 Exchange reserves 2,936 1,540 3,938
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Total equity 12,446 9,026 12,491 Total equity and 16,930 11,328 17,069liabilities GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED CASH FLOW
STATEMENT 6 months 6 months ended 12 months ended 30 30 September ended 31 September 2008 March 2009 2009 GBP'000 GBP'000 GBP'000 (unaudited) (unaudited) (audited) Profit for the period 1,082 388 1,689 Adjustments for: Interest income (3) - (6)
Amortisation of intangible assets 108 81
201
Depreciation of property, plant & 39 59
144equipment
Loss on disposal of property, plant 3 -
-and equipment
Share based payment expense 65 36
99
Allowance for doubtful debts 33 -
3
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Operating cash flows before 1,327 564 2,130movement in working capital
(Increase)/decrease in inventories (364) 99
(8) Increase in receivables (1,846) (2,659) (2,288) Increase in payables 228 234 1,210 Tax paid (86) - -
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Net cash (used in)/generated from (741) (1,762)
1,044
operating activities
------------------------------------
Investing activities Interest received 3 11 6 Purchase of property, plant & (5) (33) (85)equipment Purchase of intangible assets (71) (87) (221)
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Net cash used in investing (73) (109) (300)activities Financing activities
Net proceeds from the issue of 50 -
-
share capital
---------------------------------
Net cash generated from financing 50 -
-activities
Effect of exchange rate changes (428) 345
827
------------------------------------
Net (decrease)/increase in cash and (1,192) (1,526) 1,571cash equivalents Cash and cash equivalents at the 3,567 1,996
1,996
beginning of the period
-----------------------------------
Cash and cash equivalents at the 2,375 470 3,567end of the period GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Merger Other Equity Retained Exchange Total capital premium reserve reserve compensation earnings reserve reserve GBP'000 GBP'000GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Balance at 1 315 5,432 (698) 3 106 1,936 434 7,528April 2008 Net profit for - - - - - 356 - 356the period Share option - - - - 36 - - 36granted Foreign - - - - - - 1,106 1,106exchange movement Balance at 30 315 5,432 (698) 3 142 2,292 1,540 9,026September 2008 Balance at 1 315 5,432 (698) 3 206 3,295 3,938 12,491April 2009 Net profit for - - - - - 842 - 842the period Share option - - - - (14) 14 - -exercised Share option - - - - 65 - - 65granted Issue of share 2 48 - - - - - 50capital Foreign - - - - - - (1,002) (1,002)exchange movement Balance at 30 317 5,480 (698) 3 257 4,151 2,936 12,446September 2009
NOTES TO THE FINANCIAL INFORMATION
1. General information
Geong International Limited is a company incorporated in Jersey. The address ofits registered office is Walker House, PO Box 72, 28-34 Hill Street, St Helier,Jersey JE4 8PN, Channel Islands. The Company's ordinary shares are traded onthe AIM market of the London Stock Exchange.
2. Basis of preparation of the financial information
The Company's unaudited consolidated interim financial information for the six months ended 30 September 2009 has been prepared in accordance with the accounting principles of International Financial Reporting Standards.
The same accounting policies, presentation and methods of computation have been followed in this condensed financial information as were applied in the preparation of the Group's financial statements for the year ended 31 March 2009, except for the impact of the adoption of the Standards and Interpretations described below.
IAS 1 (revised 2007) Presentation of financial statements (effective for annual periods beginning on or after 1 January 2009)
The revised Standard has introduced a number of terminology changes (includingrevised titles for the condensed financial statements) and has resulted in anumber of changes in presentation and disclosure.
However, the revised Standard has had no impact on the reported results or financial position of the Group.
The interim report was approved by the Board of directors on 2 December 2009. The report is unaudited and does not constitute the Company's statutory accounts for the six months ended 30 September 2009.
3. Seasonality
The operating result is not subject to significant seasonal variations during the financial period.
4. Exchange rates of principal currencies
Income statements in GBP (average Balance sheets in GBP (rates as rates) of) Six months ended Six months ended Sep 30,2009 Sep 30,2008 Sep 30 2009 Sep 30 2008 CNY 0.08740 0.07576 0.10232 0.08238 USD 0.66274 0.52018 0.69930 0.561675. 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 2009 2008 2009 (unaudited) (unaudited) (audited) GBP GBP GBP Earnings for the purpose of 842,000 356,471 1,359,249diluted earnings Numbers of shares Weighted average number of 31,598,963 31,537,032 31,537,032ordinary shares for the purpose of basic earnings per share Weighted average number of 32,236,642 32,282,581 32,642,018ordinary shares for the purpose of fully diluted earnings per share Basic earnings per share 2.66 1.13 4.31(pence) Diluted earnings per share 2.61 1.10 4.16(pence) 6. Taxation
The tax charge for the six months ended 30 September 2009 and for the six months ended 30 September 2008 is based upon the estimated effective tax rate for the full year.
7. Share based payments
The Group operates a share option scheme to reward certain employees. These equity settled share-based payments are measured after value at the date of grant and are expensed over the vesting period. The charge in the six months ended 30 September 2009 was 65,000.
8. Related party transactions
Transactions within the Group have been eliminated in the preparation of the financial information set out in this report and are not disclosed in this note.
9. Functional and presentation currency
The functional currency of the Group is the Chinese Renminbi, as it is the currency of the primary economic environment in which it operates. The Directors have considered that the Pound Sterling is the most appropriate currency in which to present the Group's financial statements. The following method of translation has been applied to the current and prior year consolidated results, balances and cash flows:
* Assets and liabilities have been translated at the closing rate on the date
of the respective balance sheet;
* Income, expenses and cash flows have been translated at the average monthly
rates for the respective years; * Equity balances have been translated at historical rates; and
* All resulting currency exchange differences have been included in equity
The functional currencies of the subsidiaries are the US Dollar and the Chinese Renminbi.
10. Copies of the interim report
Copies of the interim report will be available from the Company's website: www.geong.com.
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