16 Jun 2008 07:00
16 June 2008 GEONG INTERNATIONAL LIMITED PRELIMINARY RESULTS
GEONG International Limited ("GEONG" or "the Company" or "the Group"), the AIMlisted, China based, provider of Enterprise Content Management ("ECM") softwareand solutions, today announces its preliminary results for the year ended 31March 2008.Financial Highlights * Turnover up 77% to ‚£7.61 million (2007: ‚£4.30 million) * Gross profit up 51% to ‚£3.58 million (2007: ‚£2.37 million) * Profit before tax up 28% to ‚£1.14 million (2007: ‚£0.89 million) * Basic earnings per share up 12% to 3.53 pence (2007: 3.14 pence) * Share placing in June 2007 raised ‚£3.41 million * Cash and cash equivalents up to ‚£2.00million (2007: ‚£0.52million) * Change in presentational currency to GBP from US$
Operational Highlights
* Doubled revenue from top 10 PortalAgeTM clients and continued to sign new
contracts to maintain leading position in the Financial Services, Automotive and Electronic Manufacturers sectors * SmartBox product currently has over 130,000 licensed end users in China * Branch office opened in Guangzhou to develop the Company's presence in Southern China * Minren Guan, Chief Technology Officer, appointed to the Board in July
* Voted "The Most Successful ECM Company in China, 2007" by CCID Consulting,
one of China's leading management consulting and market research
organisations
Commenting on the results Wang Weidong, Chief executive of GEONG InternationalLimited said: "We have delivered consistently strong growth for the last fiveyears and the Board is confident that this trend will continue into 2009 andbeyond. We have had a good start to the year and already have a strong orderbook for 2009 and aim to increase the percentage of recurring revenues. TheBoard is very positive about the future success of GEONG's products both in
China and overseas."Enquiries:Henry Tse, Chairman www.geong.com Weidong Wang, CEO
GEONG International Limited Tel: +44 (0)20 7822 0200
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 EditorsThe Group's operations are:
* GEONG is registered in Jersey and the Group's operations are headquartered
in Beijing. The Company's shares were admitted to AIM in June 2006 and
trade under the ticker GNG.L
* The Group 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.
* GEONG 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 Group 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 Group established a Guangzhou branch office in order
to commence the expansion of both PortalAgeTM and SmartBoxTM in Southern
China. CHAIRMAN'S STATEMENTOverviewI am pleased to report that the year ended 31 March 2008 was one of significantgrowth for GEONG, with the Group ending the period with 77% year-on-yearrevenue growth, well ahead of the budgeted plan of 60% year-on-year growth.This builds on the strong growth of previous years, with gross profit up 51%and profit before tax up 28%. We have made a substantial investment to developthe product range and sales function during the year to ensure that we cancontinue this level of growth into the future.The management had expected our results for the year to have reflected evengreater growth when on 10 April we issued a trading update which stated thatthe financial results would be ahead of market expectations. However,subsequently the management determined that the revenue recognition milestonesfrom two long-term projects had not been met in full and hence that the revenuefrom these contracts should be recognised in the current financial year. Themanagement issued a second trading update on 3 June as soon as we hadre-assessed the revenue and profit figures.The funds raised in a placing in June 2007 have enabled the Group to developand strengthen its sales and marketing channels, including opening a new officein Guangzhou to target Southern China, and to accelerate the roll-out of itsaward-winning PortalAgeTM and SmartBoxTM product ranges. The Chinese market isgrowing rapidly and with the leading products GEONG has developed we areideally positioned to capitalise on the opportunities that exist across thecorporate spectrum, from large multinationals to very small local businesses.We are also delighted that the Company continues to attract recognition fromthird parties. For the third year running, GEONG has been included in theDeloitte Technology Fast 500 Asia Pacific survey, which recognises GEONG asbeing one of the fastest growing technology companies. In March this year GEONGwas honoured by CCID (China Centre for Information Industry Development)Consulting as The Most Successful Enterprise in ECM Software in China, 2007 to2008. GEONG has also been acknowledged by AMT Consulting and Vsharing as one ofthe top 10 Knowledge Management and Collaboration Commerce management softwaresuppliers and one of the top 100 management software providers in China over2007. These endorsements, as well as the continued adoption of our PortalAgeTMbased solutions by some of China's largest companies, reaffirms GEONG'sposition as the leading independent ECM software and solutions provider inChina, a position we will continue to build upon and use as a solid base to
expand into overseas markets.Operational ReviewPortalAgeTMOur market-leading ECM PortalAgeTM solutions have now been implemented by over100 blue chip companies in China. We have continued to perform particularlywell in our established sectors, including Financial Services, Automotive andElectronics Manufacturing, where we have signed extensions and renewals ofcontracts with existing clients, as well as a number of contracts with newclients. Revenue from the top 10 PortalAgeTM clients doubled during the yearand we increased our number of Gold clients from four to eight, which nowinclude Lenovo, Shanghai General Motors, Huawei, China Bond, China ConstructionBank, Bank of Communications, IBM China and Shanghai Future Stock Exchange.The "go-deep-and-broad" strategy to drive new business has generated success intargeting the second tier banks and we expect to continue to make progress withthis tier of prospective clients as we replicate proven solutions from ourearly projects. We have also had some promising results with companies outsideour established sectors.During the year, we also gained recognition from, and partnered with, a numberof the world's largest IT companies. These include Oracle, with whom we holdcore supplier status; and SAP for whom we are now official enterprise resourceplanning partner. In December we were awarded Core Supplier Status by IBM Chinafor the third consecutive year. Through these relationships we are able todeliver enhanced solutions and value to our clients.
SmartBoxTM & SmartExpress
SmartBoxTM, our licensed off-the-shelf software product aimed at SMEs, hasachieved good sales growth at this early stage of its development. At the yearend SmartBoxTM had over 130,000 licensed end users in approximately 2,000 SMEs.During the year, we achieved notable contract wins with Beijing Jin Guan,Shanghai EPIC and Beijing Genesis Group.The GEONG SmartBoxTM product range currently comprises six licensed modules,namely SmartExpress/SmartGroup, SmartSales, SmartProduct, SmartProject,SmartISO and SmartService. In addition to the modules we have also developed 11industry specific solutions to ensure customers receive a product that fitswith their requirements and we are continually developing and enhancing therange to address new market opportunities.SmartExpress is the entry level product of the SmartBoxTM product family. Aspart of the development of our sales strategy, in November 2007 GEONG signed abundling agreement with IBM China to provide its SmartExpress product withIBM's PC Server. The one year agreement means that GEONG's SmartExpress productwill be included with the IBM PC Server and, after installation, can beactivated online or through an IBM PC Server reseller in China. This builds onGEONG's relationship with IBM and opens up new market opportunities for theSmartExpress product.An English version of SmartBoxTM, developed in our Canadian research anddevelopment centre in Vancouver, was launched in August 2007. The Company isworking with the four pilot accounts to refine the product to Western businessrequirements. Whilst this is underway, we are also working with institutions topromote this product to their client bases.
Financial Review
Revenue for the year ended 31 March 2008 was ‚£7.61 million (2007: ‚£4.30million) representing an increase of 77%. Gross profit was ‚£3.58 million (2007:‚£2.37 million) and profit before tax increased by 28% to ‚£1.14 million (2007: ‚£0.89 million).The lower gross profit margin of 47% (2007: 55%) is a result of a change inrevenue mix following a significant increase in the reselling of third partylicenses during the year. Although the margin on third party license sales islower than the margin we can achieve on GEONG product licenses, reselling thirdparty software licenses is good business as an integrated part of PortalAgeTMECM projects. Going forward, we expect margins to increase slightly asSmartBoxTM sales start to have a larger impact on total revenue.
Recurring revenues have risen to 44% of total revenue (2007: 40%) reflecting an increase in longer term contracts and maintenance contracts. We have also already secured a strong order book for 2009.
In June 2007, we raised ‚£3.41 million (US$6.8 million), before expenses, from aplacing of 5,245,000 ordinary shares at 65 pence per share. Our closing cashbalance for the year ended 31 March 2008 was ‚£2.00 million (2007: ‚£0.52million).
Current Trading & Outlook
We are very pleased with the Company's performance for the year to 31 March 2008, which shows 77% year-on-year growth in revenue. This is a strong performance against the previous year and is ahead of our original target of 60% year-on-year revenue growth.
GEONG's products have been gaining customer and market acceptance, as demonstrated by the contracts we have won with some of China's largest organisations and the global partners we are working with. We continue to strengthen our leading position in the Financial Services, Automotive and Electronics Manufacturing industries with our PortalAgeTM product and are starting to make good progress in new industries.
In order to expand more rapidly into new markets we will continue to pursuepotential acquisitions, including the acquisition of a Microsoft.Net based ECMsoftware and solutions provider, which will expand the customer base for ourproducts.The new branch office in Guangzhou opened in October and has already begun todeliver new opportunities in Southern China for example, offering a PortalAgeTMinternet banking solution to the Bank of Donguang. During the next year weanticipate that our presence in this region will significantly improve ourmarket position in Southern China for both our PortalAgeTM and SmartBoxTMproducts.We are keen to build on our success in the Chinese market and during the yearlaunched an English version of SmartBoxTM and have begun to exploreopportunities in overseas markets. To help support this expansion we are goingto offer SmartBox SaaS (Software as a Service) starting in the second half ofthe 2008/2009 fiscal year. This new on-line software offering enables users topay only for the usage of the software and not the license fee.We have delivered consistently strong growth for the last five years and theBoard is confident that this trend will continue into 2009 and beyond. We havehad a good start to the year and already have a strong order book for 2009 andaim to increase the percentage of recurring revenues. The Board is verypositive about the future success of GEONG's products both in China andoverseas.Henry H.Y. TseChairman16 June 2008GEONG International Limited
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Note 2008 2007 ‚£'000 ‚£'000 Revenue 7,612 4,297 Cost of sales (4,033) (1,930) Gross profit 3,579 2,367 Other income 66 79 Research and development cost (188) (96) Selling and distribution expenses (551) (335) Administrative expenses (1,730) (1,068) Finance cost (10) (18) Finance income 16 2 Other operating expenses (2) (1) Share option expense (41) (39) Profit from operations 1,139 891 Taxation 4 (62) (82) Profit for the year attributable 1,077 809to equity shareholders of the parent company Earnings per ordinary share (pence) Basic 5 3.53 3.14 Diluted 5 3.43 3.11
All operations are continuing
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2008
2008 2007 ‚£'000 ‚£'000 ASSETS Non-current assets Property, plant and 435 176equipment Intangible assets 346 296 Total non-current assets 781 472 Current assets Inventories 191 67 Trade receivables 5,353 2,409 Other receivables 761 227 Cash and cash equivalents 1,996 515 Total current assets 8,301 3,218 Total assets 9,082 3,690 LIABILITIES & EQUITY Current liabilities Trade payables 429 63 Other payables 924 688 Short term loans - 111 Taxes payables 96 85 Total current liabilities 1,449 947 Non-current liabilities Deferred tax 105 39 Total non-current 105 39liabilities Total liabilities 1,554 986 Capital and reserves Share capital 315 263 Reserves 7,213 2,441 Total shareholders' 7,528 2,704equity Total liabilities & 9,082 3,690equity
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
2008 2007 ‚£'000 ‚£'000 Operating activities Profit from operations 1,138 891 Adjustments for: Interest income (16) (2) Interest expense 10 17 Allowance for doubtful debts 35 1 Depreciation of property, plant and 68 41equipment
Loss on disposal of property, plant and - 11 equipment
Amortisation of intangible assets 103 34 Share based payment 41 39
Operating cash flows before movement in 1,379 1,032 working capital
Increase in inventories (118) (24)
Increase in trade and other receivables (3,276) (946)
Increase in trade and other payables 546 281
Cash (used in)/generated by operations (1,469) 343
Interest paid (10) (17) NET CASH (USED IN)/GENERATED FROM OPERATING ACTIVITIES (1,479) 326 Investing activities Interest received 16 2 Purchase of property, plant and (388) (72)equipment Purchase of intangible assets (128) (283)
NET CASH USED IN INVESTING ACTIVITIES (500) (353)
Financing activities Net proceeds from issue of shares 3,301 457 Repayment of borrowing (36) (243) Short term loans (147) - NET CASH GENERATED FROM FINANCING 3,118 214ACTIVITIES NET INCREASE IN CASH AND CASH 1,139 187EQUIVALENTS Effect of exchange rate changes 342 (74) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 515 402 CASH AND CASH EQUIVALENTS AT THE END OF 1,996 515YEAR
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2008
Share Share Merger Other Equity
Retained Exchange Total
Capital Premium Reserve reserve Compensation Earnings Reserve Reserve ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 1 April 2006 - - 1,169 2 - 51 341 1,563 Net profit for - - - - - 809 - 809the year Issue of shares 245 2,208 - - - - - 2,453 Issue of share 16 419 - - - - - 435capital Exercise of share 2 48 - - - - - 50option Share issue costs - (464) - - - - - (464) Share option - (28) - - 65 - - 37granted Subsidiary share - - (1,867) - - - (312) (2,179)and reserves change Balance at 31 263 2,183 (698) 2 65 860 29 2,704March 2007 Net profit for - - - - - 1,076 - 1,076the year Issue of share 52 3,357 - - - - - 3,409capital Share issue costs - (108) - - - - - (108) Share option - - - - 41 - - 41granted Transfer to - - - 1 - - - 1statutory reserve Foreign exchange - - - - - - 405 405movement Balance at 31 315 5,432 (698) 3 106
1,936 434 7,528March 2008
NOTES TO THE ACCOUNTS FROM THESE FINANCIAL STATEMENTS
1. Financial Information
The preliminary results were approved by the Board of Directors on 16 June2008. The financial information set out above does not comprise the Company'sstatutory financial statements for the year ended 31 March 2008, but is derivedfrom those financial statements. Whilst the auditors have yet to sign theirreport on the 2008 accounts, they anticipate issuing an unqualified report. Thestatutory financial statements for the year ended 31 March 2008 will befinalised on the basis of the financial information presented by the Directorsin this preliminary announcement. The financial information for the year ended31 March 2007 is derived from the financial statements for that year. Theauditors have reported on the 2007 financial statements; their report wasunqualified.
2. Functional and presentation currency
The functional currency of GEONG is the Chinese Renminbi, as it is the currencyof the primary economic environment in which it operates. The Directors haveconsidered that the Pound is the most appropriate currency in which to presentthe Group's financial statements. The following method of translation has beenapplied to the current and prior year consolidated results, balances and cashflows:
* 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.
3. Basis of Preparation These preliminary results have been prepared in accordance with the accountingpolices adopted by the Company which are consistent with those adopted in theannual report and accounts for the year ended 31 March 2007. These preliminaryresults have also been prepared in accordance with International Financial
Reporting Standards. 4. Taxation
The tax expense recognised in the consolidated profit and loss account:
Group 2008 2007 ‚£'000 ‚£'000 Current tax 53 50 Deferred tax 9 32 62 82
Reconciliation of tax change:
Group 2008 2007 ‚£'000 ‚£'000 Profit before tax 1,139 891 Tax at applicable income 171 134tax rate Tax effect of 41 7non-deductible expenses Tax effect of exempt (118) (87)income Tax effect of income not (41) (4)taxable Timing differences 9 32 Tax expense for the year 62 82 5. Earnings per Share Basic earnings per share
The calculation of basic per share at 31 March 2008 was based on the profitattributable to equity shareholders of the Company of ‚£1,077k (2007: ‚£809k) anda weighted average number of ordinary shares outstanding during the year ended31 March 2008 of 30,516,772 (2007: 25,774,969), calculated as follows:
Weighted average number of ordinary shares
2008 2007 Issued ordinary shares at beginning of the year 26,292,032 24,532,262 Effect of shares issued 4,224,740 1,242,707 Weighted average ordinary shares at end of the year 30,516,772 25,774,969 Diluted earnings per share
The calculation of diluted earnings per share at 31 March 2008 was based onprofit attributable to equity shareholders of the Company of ‚£1,077k (2007: ‚£809k) and a weighted average number of ordinary shares outstanding during theyear ended 31 March 2008, calculated as follows:
Weighted average number of ordinary shares (diluted)
2008 2007 Weighted average number of
ordinary shares at end of the year 30,516,772 25,774,969
Effect of conversion share options 835,988 273,248
Weighted average number of ordinary
shares for diluted earnings per share 31,352,768 26,048,217
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