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For immediate release    25 June 2009

China Eastsea Business Software Limited 

(AIM: CESG)

Preliminary Results

China Eastsea Business Software Limited ('China Eastsea' or 'the Company'), which provides information technology and business process outsourcing services, announces Preliminary Results for the year ended 28 February 2009.

Financial Highlights:

• Revenue broadly in line with last year at £10.6m (2008: £10.8m)

• EBITDA of £1.1m (2008: £3.8m) *

• Profit after tax and minority interests of £0.2m (2008: £3.4m) *

• Net assets (inc. minority interests) increased to £18.8m (2008: £11.5m) - mainly due to the favourable exchange rate

• Cash in bank sustained at £4.1m (2008: £4.1m)

• EPS 0.03p (2008: 4.08p after listing costs and share based payment charge)

• Adjusted EPS 0.29p (2008: 4.93p before listing costs and share based payment charge)

* excluding share based payment and listing costs

Other Highlights:

• Acquisition of 60% of Ningbo Education Information Technology Ltd in March 2008.

• Acquisition of 100% of Infa Hong Kong Group Ltd in June 2008.

• Appointment of Jiarong Chen as Finance Director and James Heyworth-Dunne as UK based Non-Executive Director.

• Acquisition of a Japanese company since the end of the financial year with expertise in developing the 'All in one card business' for the group.

Commenting on Outlook, Eric Zhu, Chief Executive of China Eastsea, said:

'The unprecedented global economic crisis around the world will still have different effects to each individual country but already, there are economic indicators suggesting that the Chinese economy is starting to recover. Indeed, the opportunities and business environment in our IT outsourcing sectors have been improved substantially in the last three months comparing to the first half of this year. We anticipate the business to perform better than last financial year. The management team are committed and have full confidence in the long term future prospects of the Group.'

Contacts:

China Eastsea	Seymour Pierce Limited	Walbrook PR Ltd
Angie Chen	Chris Howard	Paul McManus
Company Secretary	Huaizheng Peng
	Christopher Wren
Tel: +86 10 6298 8850	Tel: 020 7107 8000	Tel: 020 7933 8787
		Mobile: 07980 541 893
angie@eastseagroup.com	enquiries@seymourpierce.com	paul.mcmanus@walbrookpr.com
www.sinobpo.com

    About China Eastsea

China Eastsea provides information technology and business process outsourcing services (ITO/BPO), IT consulting and a broad range of project work to clients in the petrochemical, petroleum, power and telecommunications industries, as well as to ministries, state authorities, municipalities, agencies and other organisations throughout the government sector in China. China Eastsea has a leading position in petrochemical/petroleum IT outsourcing market with Sinopec Zhenhai Refining & Chemical Company, one of the largest oil refining companies in China, as its biggest client. 

The services provided by the Group include strategic planning, gap analysis, alignment, business and technology transformation, performance management and technology selection and optimisation according to best practices. The Group offers design, development, implementation, control and maintenance relating to the use, creation, installation or integration of software, hardware, networks, systems and technologies. It also provides total ERP solutions from design to development, implementation, training and maintenance.

The Group has proprietary technology on a management platform provided over internet, intranet and corporate portals, as well as on information integration. The Group has successfully leveraged its expertise in search engines and information management to build customised products to grow its government and telecommunications IT outsourcing market share. 

  CHAIRMAN'S STATEMENT 

FOR THE YEAR ENDED 28 FEBRUARY 2009

Highlights include:

• Revenue broadly in line with last year at GBP10.6 million (2008: GBP10.8 million)

• EBITDA of GBP1.1 million, down 72.8% (2008: GBP3.8million - excluding share based payment charge and AIM listing costs)

• Profit after tax and minority down by 93.7% to GBP0.2 million excluding share based payment and listing cost (2008: GBP3.4 million - excluding share based payment charge and AIM listing costs)

• Net assets (including minority interests) increased to GBP18.8 million at year end mainly attributable to the favourable exchange rate against pounds sterling which the closing rate was at 9.75 against 14.15 for the FY2008. 

• Cash at bank of GBP4.1 million (2008: GBP4.1 million)

• EPS 0.032 pence (2008: 4.08 pence after listing costs and share based payment charge) 

• Adjusted EPS 0.293 pence (2008: 4.93 pence before listing costs and share based payment charge) 

Financial and operating overview

It is disappointing to have to report such a negative outcome in terms of pretax profits for our first full financial year as an AIM listed Company. Our customers, especially those in the oil refining industry, were severely affected by developments in China, as described in our interim report, and by the global financial crisis. Although overall we were able to achieve our revenue expectations, pressure on gross trading margins and increased in administration and other costs severely affected the profitability,

In particular, the anticipated improvement in the second half of the financial year failed to materialize. The normal seasonal improvement in revenue occurred, but profitability continued to decline. For the full year, profit before tax reached GBP 247,000 after including exchange gains of GBP 742,000 therefore at the trading level shows a pretax loss of approximately GBP 500,000 before the exchange gains. The comparable pretax loss at the interim stage was GBP150,000. 

Gross operating margins which were under pressure throughout the year came under greater pressure as the year progressed. The negative impact of this pressure on gross trading margins was offset partially by curtailment of distribution and administration costs in the second half of the financial year. Overall, however, these costs remain at materially higher levels than in the year to end February 2008. The increase in administration costs reflected two things. First, a reluctance to make staff redundant in advance of anticipated improvement in trading conditions and second, a general increase in budgeted expenditure to equip the Company for anticipated longer term expansion.

During the year, the Company continued to emphasise its commitment to its oil refining industry and government e-commerce clients. Despite the postponement of many orders from clients, our base of major clients remains substantially intact.

Sales efforts were vigorously maintained to secure orders for the Company`s goods and services from its client base and to secure new clients. We expect these efforts to be rewarded in the future and as economic conditions settle and improve.

The group has successfully made two acquisitions during the twelve months from 1 March 2008 which were:

 

 

Since the end of the financial year the group had also acquired a Japanese company which the staff have the expertise in developing the 'All in one card business' for the group. As the company is providing the IT services to this unique business, long term benefits will be generated as a result of this acquisition.

Board and management changes

During the year, our London based Non Executive Director Richard Sermon resigned to pursue his own interests and his role was taken up by James Heyworth Dunne who has extensive experience in the financial services sector. Richard contributed enormously in strengthening the corporate governance function of the group and worked closely with our Finance Director.

At time of preparing this report, we regret to see the resignation of David Kar Ning Tsui, who has served as Executive Finance Director since the listing on AIM. He has contributed significantly to the overall finance function of the group since his appointment. China Eastsea wishes to thank and formally acknowledge the valuable contribution he has made to the group during his tenure as CFO and Financial Director.

The company appointed Jiarong Chen to replace David Tsui as Chief Financial Officer ('CFO') and Finance Director of the Company with effect from 1 July 2009. Mr. Jiarong Chen joined the Company in April 2002 and currently works as assistant CFO assisting the departing CFO in financial management, M&A, and implementation of internal control procedures. He has 14 years financial experience. He graduated from Capital University of Economics and Business of China and holds a Bachelor Degree of Accounting. Before joining the Company, he worked as an Accountant and Futures Clearing Member in Huayuan Investment Group, Headquarter Accountant of Beijing Institute of Clothing Import & Export Co., Ltd., and Financial Manager of Linefan Technology Holdings Ltd respectively.

Priorities

• Focus on the petrochemical sector business and to capture more petrochemical sector clients.

• Continue to work closely with existing top ten clients and to capture and regenerate the organic growth.

• Continue to seek synergies across the business units to maximise resources and skills allocation.

• Improve gross trading margins.

• Concentrate on cash generation and costs control.

Outlook

The unprecedented global economic crisis around the world will still have different effects to each individual country but already, there are economic indicators suggesting that the Chinese economy is starting to recover. Indeed, the opportunities and business environment in our IT outsourcing sectors have been improved substantially in the last three months comparing to the first half of this year. We anticipate the business to perform better than last financial year. The management team are committed and have full confidence in the long term future prospects of the Group.

Eric Zhu

Chairman

1 July 2009

  CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 2009

	Notes	2009		2008
		£'000		£'000
Revenue	6	10,624		10,813
Cost of sales		(7,651)		(5,807)
Gross profit		2,973		5,006
Other operating income	9	155		194
Distribution costs		(862)		(364)
Administrative expenses		(1,956)		(1,171)
Foreign exchange gains		742		203
Impairment of intangibles		(61)		-
Amortisation of intangibles		(329)		(132)
Depreciation of property, plant and equipment		(261)		(165)
Share based payment charge		-		(139)
Operating profit	8	401		3,432
Interest income	10	53		55
Finance costs	11	(18)		(17)
Operating profit before listing costs		436		3,470
Listing costs		(189)		(449)
Profit before tax		247		3,021
Income tax	14	(83)		26
Profit for the year		164		3,047
Attributable to:
Equity holders of the parent		24		2,811
Minority interest		140		236
		164		3,047
Equity holders of the parent		24		2,811
AIM listing costs		189		449
Net profits for the year before listing costs		213		3,260
Earnings per share	15	Pence		Pence
Basic		0.032		4.08
Diluted		0.032		3.68
Adjusted earnings per share	15
Basic		0.293		4.93
Diluted		0.293		4.45

  CONSOLIDATED BALANCE SHEET

FOR THE YEAR ENDED 28 FEBRUARY 2009

	Notes	2009		2008		2009		2008
		£'000		£'000		£'000		£'000
		Group		Group		Company		Company
Non-current assets
Goodwill	16	3,189		1,184		-		-
Deferred tax assets	26	-		61		-		-
Intangible assets	17	2,055		659		-		-
Property, plant and equipment	18	2,126		1,525		-		-
Investments in subsidiaries	19	-		-		4,325		2,453
		7,370		3,429		4,325		2,453
Current assets
Inventories	20	186		178		-		-
Trade and other receivables	21	11,388		7,286		3,179		3,427
Cash and cash equivalents	23	4,145		4,076		33		74
		15,719		11,540		3,212		3,501
Total assets	23,089			14,969		7,537		5,954
Current liabilities
Trade and other payables	24	(3,050)		(1,874)		(200)		(69)
Current tax liabilities	24	(88)		(82)		(1)		(1)
Short term borrowings	25	(1,026)		-		-		-
	(4,164)			(1.956)		(201)		(70)
Net current assets		11,555		9,584		3,011		3,431
Non-current liabilities
Deferred tax liabilities	26	(99)		(53)		-		-
Total liabilities		(4,263)		(2,009)		(201)		(70)
Net assets		18,826		12,960		7,336		5,884
Equity
Share capital	27	3,866		3,523		3,866		3,523
Shares to be issued	28	749		338		749		338
Share premium		3,124		2,567		3,131		2,574
Share option reserve	29	139		608		139		608
Other reserves	29	(1,739)	(1,739)			-		-
Translation reserves	29	4,055	319			(19)		(9)
Retained earnings		6,413		5,920		(530)		(1,150)
Equity attributable to equity holders of the parent		16,607		11,536		7,336		5,884
Minority interest		2,219		1,424		-		-
Total equity		18,826		12,960		7,336		5,884

The financial statements were approved by the Board of Directors and authorized for issue on 1 July 2009.

Zhaofa Zhu	Jiarong Chen
Chief Executive Director	Executive Finance Director

  GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2009

Group	Share capital		Share  premium		Other reserves		Retained earnings		Total		Minority interest		Total
	£'000		£'000		£'000		£'000		£'000		£'000		£'000
Balance at 1 March 2008	3,395		2,299		(618)		3,109		8,185		1,148		9,333
Currency translation adjustments	-		-		342		-		342		40		382
Income and expense recognised in equity	-		-		342		-		342		40		382
Profit of the year	-		-		-		2,811		2,811		236		3,047
Total recognised income and expense for the year	-		-		342		2,811		3,153		276		3,429
Issue of shares	128		548		-		-		676		-		676
Transaction costs	-		(280)		-		-		(280)		-		(280)
Shares to be issued	-		-		(337)		-		(337)		-		(337)
Share based payments	-		-		139		-		139		-		139
Balance at 29 February 2008	3,523		2,567		(474)		5,920		11,536		1,424		12,960
Currency translation adjustments	-		-		3,736		-		3,736		731		4,467
Income and expense recognised in equity	-		-		-		-		-
Profit of the year	-		-		-		24		24		140		164
Total recognised income and expense for the year	-		-		3,736		24		3,760		871		4,631
Issue of shares	343		557		-		-		900		-		900
Shares to be issued	-		-		411		-		411		-		411
Share based payments	-		-		(469)		469		-		-		-
Dividend paid to minority interest	-		-		-		-		-		(201)		(201)
At acquisition of subsidiaries	-		-		-		-		-		125		125
Balance at 28 February 2009	3,866		3,124		3,204		6,413		16,607		2,219		18,826

  COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2009

Company	Share capital		Share  premium		Other reserves		Retained earnings		Total
	£'000		£'000		£'000		£'000		£'000
Balance at 1 March 2008	3,395		2,306		1,150		(620)		6,231
Currency translation adjustments	-		-		(15)		6		(9)
Income and expense recognised in equity	-		-		(15)		6		(9)
Loss for the year	-		-		-		(536)		(536)
Total recognised income and expense for the year	-		-		(15)		(530)		(545)
Issue of shares	128		268		-		-		396
Shares to be issued	-		-		(337)		-		(337)
Share based payments	-		-		139		-		139
Balance at 29 February 2008	3,523		2,574		937		(1,150)		5,884
Currency translation adjustments	-		-		(10)		-		(10)
Income and expense recognised in equity	-		-		(10)		-		(10)
Profit for the year	-		-		-		151		151
Total recognised income and expense for the year	-		-		(10)		151		141
Issue of shares	343		557		-		-		900
Shares to be issued	-		-		411		-		411
Share based payments	-		-		(469)		469		-
Balance at 28 February 2009	3,866		3,131		869		(530)		7,336

  CONSOLIDATED CASH FLOW STATEMENT 

FOR THE YEAR ENDED 28 FEBRUARY 2009

	Notes	2009		2008		2009		2008
		£'000		£'000		£'000		£'000
		Group		Group		Company		Company
Net cash (used in)/ from operating activities	31	(593)		482		931		(802)
Investing activities
Interest received		53		55		-		11
Purchase of property, plant and equipment (PPE)		(220)		(339)		-		-
Proceeds from sale of PPE		2		-		-		-
Purchase of intangibles		(1,049)		(395)		-		-
Investment in subsidiaries		-		-		(1,872)		-
Acquisition of subsidiary net of cash		(1,004)		-		-		-
Net cash (used in)/from investing activities		(2,218)		(679)		(1,872)		11
Financing activities
Proceeds on issue of shares		900		330		900		330
Proceeds from borrowings		773		-		-		-
Repayment of borrowings		-		(533)		-		-
Dividends paid to minority interest		(198)		-		-		-
Net cash from/(used in) financing activities		1,475		(203)		900		330
Net decrease in cash and cash equivalents		(1,336)		(400)		(41)		(461)
Cash and cash equivalents at beginning of year		4,076		4,282		74		535
Exchange difference		1,405		194		-		-
Cash and cash equivalents at end of year	23	4,145		4,076		33		74

The full Directors' Report and Financial Statements for the year ended 28 February 2009 are available for download from the company website (www.sinobpo.com)  and can be viewed as a pdf via the link at the beginning of this announcement.

ENDS

ENDFR FIMBTMMATTBL