20 May 2011 07:00
GEONG International Limited ("GEONG" or "the Company") Trading update; Notice of results and Issue of £2.5m convertible unsecured loan stock
GEONG International Limited (AIM: GNG), a leading Internet software solutions provider and operator for large enterprises in China is pleased to present the following post year-end trading update for the financial year to 31 March 2011.
Since the announcement of the Interim Results in December 2010, the Group's business transformation has further taken hold and the Board expects to report a net profit after tax, subject to audit, ahead of market expectations in the full year results. The Group will be announcing the preliminary results for the year ended 31 March 2011 on Tuesday 12 July 2011.
Total revenues for the year ended 31 March 2011 are expected to be around £11m (2009/10: £12.5m) including SaaS revenue of approximately £3m (2009/10: £1.7m). Gross margin has increased and is currently above 50%, compared to 46% a year ago and 40% two years ago, as the proportion of higher margin SaaS 2.0 business continues to grow strongly. SaaS now forms 27% of the revenues compared to 14% a year ago. It is likely that the Group's tax rate for the year will remain similar to last year's.
In partnership with IBM/Oracle, we won 20 new clients during the year offering our new product, Smarter Platform. Our Social Networking 2.0 solution which we partnered with Oracle, won 9 new projects from existing clients.
The order book as at 31 March 2011 had increased to £15m (of which £10.5m will be delivered in the year ending 31 March 2012) compared to £14m a year ago. Moreover, the current year has started strongly with RMB20m (£1.9m) of contracts won in April, of which approximately 50% will represent revenues in the current financial year.
We operate with a strong balance sheet with net cash, at 31 March 2011, in the region of £5.4m after £0.4m of capital expenditure and R&D spend on our Social Networking 2.0 solution offering, which is increasingly relevant given the strong growth in internet usage in China.
As we continue to deliver our long-term IaaS contracts, accrued income has increased to £10.8m, compared to £8.4m last year, although we believe that this will now decrease as IaaS becomes a reducing percentage of our business; indeed £1.1m of the accrued income has been invoiced to customers since the year end. Trade receivables remained approximately at last year's level. However, because the Group's assets are mainly denominated in RMB, which has strengthened by some 2.4% against the GBP during the year, our full year financial statements will reflect an adverse currency movement on translation.
Financial year 2012 has started well and the management team is confident of further progress being achieved. As we continue the transformation of our business towards higher margin products and services, we will seek to grow the revenue both organically and by complementary bolt-on acquisitions, which will enable us to both broaden the bandwidth of our offering to our existing clients as well as secure new clients to whom we can market our current products. Our leading market position established in China, our 2 years contract with IBM Global Delivery Group and, particularly, our strong relationships and long-term contracts with our clients and partners, leave us well placed for further growth in the years ahead.
The Company has, today, raised £2.5m, through Evolution Securities Ltd, by a placing of convertible unsecured loan stock ("CULS"). This, combined with available cash reserves of around £5m, will enable the Company to take advantage of acquisition opportunities referred to above. The CULS, which will not be listed on any exchange, has been issued at an interest rate of 7.5% per annum., payable half yearly in arrears and is convertible at any time after 31 December 2011 in the next 3 years, into new ordinary shares at a price of 50p per share, representing a 23% premium to the closing mid-market share priceon 19 May 2011 of 40.5p. If converted in full, the resulting ordinary shares would represent a maximum of 12% of the issued share capital enlarged by the conversion.
For further information, please contact:
GEONG International Limited www.geong.com Tel: +86 10 5222 0999Henry Tse, ChairmanWeidong Wang, CEOAmit Thakar, CFOEvolution Securities Limited Tel: +44 20 70714300 (Nominated Adviser and Joint Broker) Tim Worlledge Esther Lee
About GEONG International Limited
Operational since 2000, GEONG is a leading Internet software solutions provider and operator for large enterprises in China. 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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