3 Apr 2009 07:00
3 April 2009 GEONG International Limited ("GEONG" or "the Company") TRADING UPDATE
GEONG International Limited (AIM: GNG), the AIM listed China based provider of enterprise content management (ECM) software and solutions, is pleased to provide an update on trading and guidance to shareholders following the close of its financial year end, 31 March 2009.
GEONG's business continued its trend of solid growth in the China markets:
* Revenue is expected to be £14m against £7.6m in FY2008, up 84% * Profit before tax is expected to be £1.6m, up 45% from £1.1m in FY2008 * Positive operational cash flow, with cash position improving to £3m, from £ 2m in FY2008
The above key financials reflect a solid growth business despite such a difficult and uncertain worldwide financial environment. However, profit before tax fell short of the earlier market expectation of £2.2m which was set last year when the general opinion was that the impact of the worldwide financial crisis on China would be minimal.
While we are fortunate to operate mainly in the Chinese market which is still outperforming many of the other world markets, the Company did experience certain effects in some of its focused market sectors.
In China's SME market, which is the prime target market of our SmartBox products, we did not see the continuation of rapid growth that was witnessed earlier in the financial year. In an attempt to combat the downturn in this market we incurred additional marketing expenses of some £0.4m during the period. Margins were also further impacted by a change in the product mix, which saw us selling a greater proportion of lower margin third-party products.
Finally, large corporations, with whom we work closely, began to demonstrate recessionary measures shortly after the Chinese New Year Holiday in mid February 2009. The main impact to GEONG was a slowing down of the decision making process by certain clients in the automotive and manufacturing industries. The Company, has therefore, experienced some delay in order confirmations during February and March.
However, our customer requirements remain unchanged and we believe outstanding orders will be completed by the end of Q1 of the current fiscal year. On a more positive note, the financial services industry has been and will continue to be relatively insulated because it has a predominantly domestic focus and, furthermore our products target the Retail Banking sector. Our long standing and deep relationship with our clients in this industry has seen us winning many new contracts over the last 12 months. Our other major target industry, telecommunications, continues to prosper and was another area in which we captured significant growth in FY2008, which we expect to continue throughout the current year. The order book as of 31 March 2009 is at £5.6m.
Looking forward, in view of the changing business environment, we are implementing two new strategies which we believe will meet the market requirements as well as strengthening our business model for FY2009:
* SaaS: Software-as-a-Service for SmartBox and Solution-as-a-Service for PortalAge offerings. By offering this type of "pay as you go" model we will effect lower financial risk to customers and better cash collection for the Company. Initial feedback from customers has been favourable. * Go Deep & Broad for SmartBox: Instead of continuing to invest in substantial marketing expense for SmartBox, in order to capture SME customers, our new approach is to adopt a strategy that has already been proven to be very successful for our PortalAge product: That is, to sell SmartBox products into our existing clients' affiliates. We will also look to offer SaaS services to these affiliates as this is a more cost effective method of delivery, particularly for start-up businesses.
In summary, GEONG's management foresees solid and stable growth continuing in the current financial year. However, given current uncertainties in the global economy, the Board is adopting a prudent strategy to strengthen the business in order to deal with an environment that is creating both threats and opportunities. China continues to see a healthy growth rate across many sectors, especially those benefitting from the government's stimulation package. GEONG continues to see strong demand and healthy lead times within the telecommunications and financial services sectors. Management is actively targeting new opportunities in these growth sectors, while continuing tight control of costs and cash collection, so as to maintain the momentum of the business.
The Company expects to announce it full year audited results on 23 June 2009.
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 8000 John Depasquale ICIS Tel: +44 (0)20 7651 8688 Christian Taylor-Wilkinson Bob Huxford Caroline Evans-Jones
About GEONG International Limited
Operational since 2000, GEONG specialises in collaboration and content management software and services. Its products are specifically tailored for the Chinese market, where the Company is recognised by Government agencies and numerous blue chip clients as a leader in its field. GEONG was named The Most Successful Enterprise in ECM Software in China 2007 to 2008 by China's Centre for Information Industry Development and CCID Consulting; and one of the fastest growing companies in Asia at the Deloitte Technology Fast 50 China and Deloitte Technology Fast 500 Asia Pacific awards. The Company has recently expanded into North America setting up operations in Canada.
Registered in Jersey, the Company's operations are headquartered in Beijing. The Company's shares were admitted to AIM in June 2006 and trade under the ticker GNG.L
For more information, please visit www.geong.com
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