2 Dec 2008 07:00
2 December 2008 GEONG INTERNATIONAL LIMITED INTERIM RESULTSGEONG International Limited ("GEONG", "the Company" or "the Group"), the AIMlisted, China based, provider of Enterprise Content Management ("ECM")software and solutions, today announces its unaudited interim results for thesix months ended 30 September 2008.
Financial Highlights
- Turnover up 66% to ‚£5.17m (H1 FY2008: ‚£3.11m)
- Gross profit up 73% to ‚£2.15m (H1 FY2008: ‚£1.24m)
- Pre-tax profit up 42% to ‚£0.39m (H1 FY2008: ‚£0.27m)
- Net profit up 33% to ‚£0.36m (H1 FY2008: ‚£0.27m)
- Basic earnings per share up 24% to 1.13p (H1 FY2008: 0.91p)
- Solid balance sheet with net current assets of ‚£8.21m (31 March 2008: ‚£6.80m)
Operational Highlights
- Inclusion in the 2008 Deloitte Technology Fast 500 Asia Pacific list for the fourth consecutive year
- Launch of Software-as-a-Service (SaaS) for SmartBoxTM and SmartExpress in Greater China and North America
- Breakthrough in telecommunications sector with PortalAgeTM
Commenting on the results Wang Weidong, Chief executive of GEONG InternationalLimited said: "The first half of the financial year has, again, been a periodof high growth for GEONG and continues the trend the business has experiencedsince it was formed in 2000. With demand for our flagship PortalAgeTMsolutions continuing to grow in both our traditional and new sectors and thestrength of our products and services being utilised by the world's leadingbusinesses and technology companies, we are confident that GEONG will continueto grow, despite the current difficult global economic conditions." -Ends-Enquiries:Henry Tse, Chairman www.geong.com Weidong Wang, CEOGEONG International Limited Tel: +44 (0)20 7566 6700 (2 December only) Tel: +86 10 5222 0999 Paul Dulieu / Mike WardRedleaf Communications Ltd Tel: +44 (0)20 7566 6700 John DepasqualeSeymour Pierce Tel: +44 (0)20 7107 8000Notes 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 the business was established 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.
‚¡ GEONG was short listed for the "Best Technology" category at the 2007 AIM Awards.
‚¡ In October 2007, GEONG established a Guangzhou branch office in order to commence the expansion of both PortalAgeTM and SmartBoxTM in Southern China.
‚¡ In 2008, GEONG was recognised for the fourth successive year in the Deloitte "Technology Fast 500 Asia Pacific" list, which recognises the fastest growing technology companies in Asia Pacific.
Chairman's Statement
Overview
The first half of the financial year has, again, been a period of high growthfor GEONG and continues the trend the business has experienced since it wasformed in 2000. It therefore gives me great pleasure to provide an update ofthe Company's performance for the six months ended 30 September 2008.By building on the quality of our products and services, GEONG has continuedto grow quickly while the global economy is suffering. Whilst China is alsofacing tougher economic conditions, we have again proved that our"go-deep-and-broad" approach, that was adopted at the Company's inception, isworking. It is enabling GEONG to continue to grow its PortalAgeTM basedsolutions within its client base, secure recurring revenues and leverage thetechnologies it has developed to penetrate new sectors within China. Alongwith the continued adoption of our PortalAgeTM based solutions by some ofChina's largest companies and the acceptance of GEONG as a key partner by someof the world's largest software companies, this recognition continues toempower GEONG's strong growth trend.Our strategy during the current financial year is to increase market sharewhile our competitors are showing signs of slowing down. We doubled theinvestment in the development of products and solutions and in sales andmarketing resources and, as a result, achieved a very strong order book of‚£9.6m at 30 September 2008 (H1 FY2008: ‚£4.6m). The accomplishment of theseaims and a slowdown in our clients signing-off projects in the lead up to andduring the Beijing Olympics has had an impact on cash balances during theperiod. We are confident the Company has adequate resources to support ourbusiness operations as a result of improving cash collection and cashresources in the second half of the financial year and because of the projectdelivery profile and the payment behavior of our clients.
Recognition by reputable third party organisations of GEONG's continuous growth reflects our standing in our markets and, for the fourth consecutive year, GEONG has been included in the 2008 Deloitte Technology Fast 500 Asia Pacific list. This market survey recognises the fastest growing 500 technology companies in Asia Pacific.
Operational ReviewPortalAgeTMOur cornerstone product, PortalAgeTM, continues to do well. The continuedgrowth in both customers and recurring revenues highlights the strength of ourPortalAgeTM services and solutions. With a very strong confirmed order book of‚£12.9m at 30 November 2008, we are confident that the strength of PortalAgeTMin the market place will help GEONG maintain its growth rate going forward.Our "go-deep-and-broad" strategy has again worked well. Existing clientscontinue to buy our services and we are continually building on ourrelationships to expand the level and range of solutions we provide toclients. We are also pleased to report that both the number of our Gold,Silver and Bronze clients, and the average contract value for each clientcontinued to increase in the first half.During the period, GEONG significantly increased its market share in itsfocused sectors, including Financial Services, Automotive and Manufacturing,where it continues to lead the Chinese market. During the period the Companyalso made a major breakthrough in the telecommunications sector and is nowworking with China Mobile, China Telecom, China National Communications andHuawei in providing PortalAgeTM based solutions and services in a sectorgrowing rapidly as a result of 3G demand.GEONG has also continued to partner with the leading software companies in theworld and is the only ECM vendor in China with in-depth applicationpartnerships with the world's largest business software vendors includingOracle (Siebel, BEA and PeopleSoft), IBM, and SAP. In addition, through itsstrategic partnership with Momentum, a leading Users Experience Design (UxD)consulting firm from the United States, GEONG launched GEONG UxD ConsultingServices during the first quarter of the year and, at the period end, had wonfour new clients. These are China Construction Bank, Everbright Bank of China,China Unionpay and China National Communications. GEONG's approach topartnering larger businesses enables the Company to apply its solutions andservices to an ever increasing array of applications.
At the period end PortalAgeTM was being used by over 150 corporate clients (2007: 100).
SmartBoxTM
Sales of SmartBoxTM products were lower than expected during the period as aresult of the impact of the global financial crisis on SMEs. However, becauseSmartBoxTM only represents a small percentage of GEONG's revenue and grossprofit, the growth of PortalAgeTM is expected to outweigh any impact of a slowdown in SmartBoxTM sales.Despite this, the Company believes that the demand from SMEs in China for theSmartBoxTM product will be strong in the long-term and continues to invest inR&D for SmartBoxTM, SmartCOSO and our SaaS offering, as well as in thedevelopment of a free management training class for SmartSales. Additionally,in September 2008 the Company launched a Chinese and Native English version ofSmartBoxTM V2.6.The Company has also begun to transport its successful "go-deep-and-broad"strategy of PortalAgeTM to SmartBoxTM. Having developed industry solutionbased on SmartBoxTM for IT, Automotive and Pharmacy sectors, GEONG is now ableto provide solutions to its clients, customers, affiliates, partners andsuppliers by leveraging its rich management experience as well as therelationship with the vendors. This strategy has already been proved in the ITindustry by selling this solution to resellers of IBM and EMC and will becomeone of the key strategies for the growth of SmartBoxTM going forward.
The Board believes that this programme of investment in SmartBoxTM will help stimulate sales and growth in the second half of the current financial year.
Financial Review
Revenue for the six months ended 30 September 2008 was ‚£5.17 million (H1FY2008: ‚£3.11 million) representing an increase of 66%. Gross profit increased73% to ‚£2.15 million (H1 FY2008: ‚£1.24 million) and profit after tax increased33% to ‚£0.36 million (H1 FY2008: ‚£0.27 million).Gross profit margin increased slightly to 41.7% (H1 FY2008: 39.8%) as a resultof an improvement in revenue mix, resulting from a 96% increase in maintenanceand long term contracts during the period to ‚£1.53m (H1 2008: ‚£0.79m), whichrepresent 30% of total revenue (H1 2008: 26%). The increase in maintenance andlong-term contracts is a direct result of the increase in the number ofPortalAgeTM Platforms now in place with clients and our long term clientrelationships.
At the period end, the Company had a solid balance sheet with net current assets of ‚£8.28m (31 March 2008: ‚£6.85m) including cash and bank balances of ‚£0.47 million (31 March 2008: ‚£2.00 million).
Externally, a common factor of doing business in China, which the Companycannot change, is the relatively slow pace of payment practiced by largeorganizations. Internally, cash collection has improved monthly since July2008 and is expected to continue to improve going forward. Having implementedcash collection targets and improved the Company's general cash collectionmanagement system has resulted in a general improvement in cash resources. Thecash position as of 31 October is approximately ‚£0.77 million. Accordingly theBoard is confident of further improvement of cash collection and an increasein cash balances by the year end.
The Company is confident of maintaining sufficient cashflow to support its business activities and plans for growth during the 2009 financial year and expects significant collections during the remainder of the 2008 calendar year, which is the normal payment behaviour of Chinese banking customers. As a result, the Company expects cash balances to be significantly higher by the fiscal year end on 31 March 2009.
Trading Outlook
During the first half of the year GEONG showed strong levels of growth and, despite the current global financial slowdown, remains confident that the business will continue to perform well in the second half and will be in-line with market expectations for the full year.
Since 30 September 2008, the Company has won a number of contracts for its PortalAgeTM products and services in the financial services, automotive and telecommunications sectors. Of particular note are China Construction Bank, Bank of Communications, Everbright Bank of China, Bank of Shandong, Rural Bank of China, Taida Mutual Fund Co., Shangshen Mutual Fund Co., China Mobile, China National Communications and Changan Automotive, which demonstrate our ability to develop and execute strategies which are enabling the Company to gain market share in our focussed industries even in such a tough economic environment.
As at 30 November 2008, the Company had in place a confirmed order book of ‚£12.9m, which includes approximately ‚£4.9m of recurring revenues. It is expected that at least 40% of this will materialise in the second half of the year alongside further contract wins in all areas of the business.
On 28 November, the Company launched Software-as-a-Service (SaaS) offering forSmartBoxTM and SmartExpress in Greater China and North America. This newoffering is aimed at very small enterprises (VSEs). SaaS allows customers touse our SmartBoxTM SaaS website over the internet and pay monthly for actualusage instead of purchasing the software licenses. This makes SmartBoxTM moreaccessible and easily affordable by particularly customers starting small orgiving it a trial use. The Company believes that SaaS will fuel the growth ofSmartBoxTM going forward.
Sales and marketing partnerships continued to be the key to drive sales of SmartBoxTM. Cooperative partnerships have been signed up with professional institutions such as China Quality Control, Business Development Bank of Canada, Vancouver Board of Trade, and Hong Kong Management Association. Results are expected from the second half of the year.
SmartBoxTM range of products are expected to grow during the second half ofthe year, but progress is expected to be limited as a result of the generaleconomic slowdown in China. However, the Company will continue to innovate inits marketing approaches and will start to run two-day Sales Managementprofessional training classes to promote SmartBoxTM and SmartSales in Beijing,Shanghai and Guangzhou in early 2009.The strategic partnership to promote GEONG UxD Consulting Services withMomentum, USA in China continues to go well. A joint roadshow has justcompleted in Beijing, Shanghai and Guangzhou to clients in Financial Services,Automotive and Manufacturing following which a number of contracts have beenlocked-in.With demand for our flagship PortalAgeTM solutions continuing to grow in bothour traditional and new sectors and the strength of our products and servicesbeing utilised by the world's leading businesses and technology companies, weare confident that GEONG will continue to grow, despite the current difficultglobal economic conditions.Henry H.Y. TseChairman2 December 2008GEONG INTERNATIONAL LIMITEDCONSOLIDATED INCOME STATEMENT 6 months ended 6 months ended 12 months ended 30 September 30 September 31 March Notes 2008 2007 2008 ‚£'000 ‚£'000 ‚£'000 (unaudited) (unaudited) (audited) Revenue 5,166 3,111 7,612Cost of sales (3,012) (1,872) (4,033)
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Gross profit 2,154 1,239 3,579Other income 32 126 66Research & development costs (127) (74) (188)
Selling and distribution expenses (526) (257)
(551)Administration expenses (1,120) (750) (1,732)Share option expense (36) - (41)
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Profit from operations 377 284 1,133Finance income 11 - 16Finance cost - (10) (10)
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Profit before tax 388 274 1,139Taxation (32) (4) (62)
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Net profit 356 270
1,077
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Earnings per ordinary share (pence)Basic 7 1.13 0.91 3.53Diluted 7 1.10 0.90 3.43GEONG INTERNATIONAL LIMITEDCONSOLIDATED BALANCE SHEET 30 September 30 September 31 March 2008 2007 2008 Notes (unaudited) (unaudited ) (audited)ASSETS ‚£'000 ‚£'000 ‚£'000Non-current assetsProperty, plant and equipment 8 475 324 435Intangible assets 404 344 346 ----------------------------------Total non-current assets 879 668 781Current assetsCash and bank balances 470 2,157 1,996Trade receivables 8,801 3,508 5,353Other receivables 1,050 716 761Inventories 128 174 191 ----------------------------------Total current assets 10,449 6,555 8,301Total assets 11,328 7,223 9,082 ----------------------------------EQUITY AND LIABILITIESCurrent liabilitiesTrade payables 754 183 429Other payables 1,286 509 924Tax payables 125 92 96 ----------------------------------Total current liabilities 2,165 784 1,449Non-current liabilitiesDeferred tax liabilities 137 40 105 ----------------------------------Total non-current liabilities 137 40 105Total liabilities 2,302 824 1,554 ---------------------------------- Capital and reservesShare capital 315 315 315Share premium 5,432 5,432 5,432Merger reserve (698) (698) (698)General reserve 3 2 3Equity compensation reserve 142 65 106Retained earnings 2,292 1,130 1,936Exchange reserves 1,540 153 434 ----------------------------------Total equity 9,026 6,399 7,528 ----------------------------------Total equity and liabilities 11,328 7,223 9,082 ---------------------------------- GEONG INTERNATIONAL LIMITEDCONSOLIDATED CASH FLOW STATEMENT 6 months 6 months ended ended 30 12 months 30 September September ended 31 2008 2007 March 2008 ‚£'000 ‚£'000 ‚£'000 (unaudited) (unaudited) (audited) Profit for the period 388 274 1,139Adjustments for:Interest income - - (16)Interest expense - - 10
Amortisation of intangible assets 81 34
103
Depreciation of property, plant & 59 36
68equipmentShare based payment expense 36 - 41Allowance for doubtful debts - - 35
------------------------------------
Operating cash flows before movement in 564 344
1,380
working capitalDecrease/(Increase) in inventories 99 (106)
(118)
Increase in receivables (2,659) (1,344)
(3,276)
(Decrease)/increase in payables 234 (57)
546
Interest paid -
(10)
------------------------------------
Net cash generated from operation (1,762) (1,163)
(1,478)
activities
------------------------------------
Investing activitiesInterest received 11 - 16Other receivables-Youdu - (246) -
Purchase of property, plant & equipment (33) (184)
(388)
Purchase of intangible assets (87) (73)
(128)
------------------------------------
Net cash used in investing activities (109) (503)
(500)
Financing activitiesNet proceeds from the issue of share - 3,301
3,301capitalRepayment of borrowings - - (36)Short term loans - (111) (147)
------------------------------------
Net cash used in financing activities - 3,190
3,118
Effect of exchange rate changes 345 118
341
------------------------------------
Net (decrease)/increase in cash and cash (1,526) 1,642 1,481equivalentsCash and cash equivalents at the 1,996 515
515
beginning of the period
------------------------------------
Cash and cash equivalents at the end of 470 2,157
1,996
the period
------------------------------------
GEONG INTERNATIONAL LIMITEDConsolidated Statement of Changes in Equity Share Share Merger Other Equity Retained Exchange Total capital premium reserve reserve compensation earnings reserve reserve ‚£'000 ‚£'000 ‚£'000 ‚£'000
‚£'000 ‚£'000 ‚£'000 ‚£'000
Balance at 31 March 263 2,183 (698) 2 65 860 29 2,7042007Net profit for the - - - - - 270 - 270periodIssue of share capital 52 3,357 - - - - - 3,409Share issue costs - (108) - - - - - (108)Foreign exchange - - - - - - 124 124movement
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Balance at 30 315 5,432 (698) 2 65 1,130 153 6,399September 2007
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Balance at 31 March 315 5,432 (698) 3 106 1,936 434 7,528 2008
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Net profit for the - - - - - 356 - 356periodShare option granted - - - - 36 - - 36Foreign exchange - - - - - - 1,106 1,106movement
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Balance at 30 315 5,432 (698) 3 142 2,292 1,540 9,026September 2008
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NOTES TO THE FINANCIAL STATEMENTS
1. General Information
Geong International Limited is a company incorporated in Jersey. The address of its registered office is Walker House, P O Box 72, 28-34 Hill Street, St Helier, Jersey JE4 8PN, Channel Islands. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.
2. Basis of Preparation of the Financial Statements
The Company's unaudited consolidated interim financial information for the six months ended 30 September 2008 has been prepared in accordance with IAS 34 "Interim Financial Reporting".
The Interim Report was approved by the Board of directors on 2 December 2008. The report is unaudited and does not constitute the Company's statutory accounts for the six months ended 30 September 2008.
3. Summary of Significant Accounting Policies
The Interim financial information for the six months ended 30 September 2008have been prepared on the basis of the accounting policies set out in the mostrecently published financial statements for the Group for the year ended 31March 2008.
4. Segment Reporting
The Group's results of major business activities for the six months ended 30 September 2008 are summarised below:
6 months ended PortalAge SmartBox Consolidated30 September 2008Revenue and expensesRevenue 5,047 119 5,166Inter-segment revenue ----------------------------------Total revenue 5,047 119 5,166 ----------------------------------ResultsSegment results 1,149 (85) 1,064 ----------------------------------Unallocated expenses (683) ------------Results from operating 381activitiesOther income 43Share option expense (36)Income tax (32) ------------Profit for the period 356 ------------Assets and liabilitiesSegment assets 9,083 576 9,659Unallocated assets 1,669 ------------Total assets 11,328 ------------Segment liabilities 1,245 144 1,389Unallocated liabilities 913 ------------Total liabilities 2,302 ------------Other segment informationCapital expenditure 79 23 102Depreciation and 64 24 88amortisation ----------------------------------6 months ended PortalAge SmartBox Consolidated30 September 2007Revenue and expensesRevenue 2,903 208 3,111 ----------------------------------Inter-segment revenueTotal revenue 2,903 208 3,111 ----------------------------------ResultsSegment results 650 72 722 ----------------------------------Unallocated expenses (564) ------------Results from operating 159activitiesFinance expenses (net) (10)Other income 126Share option expense 0Income tax (4) ------------Profit for the period 270 ------------Assets and liabilitiesSegment assets 3,742 526 4,268Unallocated assets 2,955 ------------Total assets 7,223 ------------Segment liabilities 300 94 394Unallocated liabilities 430 ------------Total liabilities 824 ------------Other segment informationCapital expenditure 93 31 124Depreciation and 23 20 43amortisation ----------------------------------
No geographical segment analysis of the Group is presented as the Group's business operates mainly in the People's Republic of China ("PRC").
5. Seasonality
The operating result is not subject to significant seasonal variations during the financial period.
6. 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 2008 Sep 30 2007 Sep 30,2008 Sep
30,2007CNY 0.07576 0.06955 0.08238 0.06785USD 0.52018 0.52899 0.56167 0.50960
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7. 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 2008 30 September 2007 31 March 2008 (unaudited) (unaudited) (audited) GBP GBP GBPEarnings for the purpose of diluted earnings 356,471
269,457 1,077,986
Numbers of sharesWeighted average number of ordinary sharesfor the purpose of basic earnings per share 31,537,032 29,650,746 30,516,772Weighted average number of ordinary sharesof the purpose of fully diluted earnings pershare 32,282,581
30,095,595 31,459,341
Basic earnings per share (pence) 1.13 0.91 3.53Diluted earnings per share (pence) 1.10
0.90 3.43
8. Property , Plant and Equipment
During the six months ended 30 September 2008, the Group acquired property,plant and equipment with a cost of ‚£191,066 (six months ended 30 September 2007: ‚£184,109). Electronic Leasehold Total equipment improvement ‚£'000 ‚£'000 ‚£'000Cost:At 1 April 2007 512 158 670Additions 61 103 164Translation 15 8 22difference -----------------------------At 30 September2007 588 269 856 ----------------------------- At 1 April 2008 718 331 1049Additions 29 4 33Translationdifference 108 50 158 -----------------------------At 30 September2008 855 385 1240 -----------------------------AccumulatedDepreciation:At 1 April 2007 374 120 494Depreciationcharge 13 8 21Translationdifference 10 8 18 -----------------------------At 30 September2007 397 136 533 ----------------------------- At 1 April 2008 443 171 614Depreciationcharge 33 25 58Translationdifference 67 26 93 -----------------------------At 30 September2008 543 222 765 -----------------------------Net book value:At 30 September2008 191 133 324 -----------------------------At 30 September2007 312 163 475 -----------------------------9. Taxation
The tax charge for the six months ended 30 September 2008 and for the six months ended 30 September 2007 is based upon the estimated effective tax rate for the full year.
10. 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 2008 was ‚£35,976.
11. 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.
12. 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.
13. 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, Channel Islands., the Company's website: www.geong.com or Seymour Pierceat www.seymourpierce.com.
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