Wednesday 2nd December
GEONG International Limited
("GEONG" or "the Company" or "the Group")
Interim Results
GEONG International Limited (AIM: GNG), the AIM listed China based provider of
enterprise content management ("ECM") software and solutions, today announces
its unaudited interim results for the six month period ended 30 September 2009.
Financial Highlights
* Revenue up 26% to £6.5m (H1 FY2009: £5.2m)
* Gross margin: 44% (H1 FY2009: 41.7%)
* Profit before tax up 179% to £1.08m (H1 FY2009: £0.39m)
* Net profit after tax up 137% to £0.84m (H1 FY2009: £0.36m) after prepayment
of withholding tax
* Fully diluted earnings per share up 137% to 2.61p (H1 FY2009 1.10p)
* Net cash position (prior to fund raising) at 30 September 2009 of £2.4m (£
0.5m as at 30 September 2008)
* Trade receivables up 35% to £11.9m (H1 FY2009: £8.8m)
* Current order book £14.0m (H1 FY2009: £12.9m)
Corporate and Operational Highlights
* Successful fundraising in October of £2.2m gross
* 10 new clients secured within the Information as a Service ("IaaS") model,
including Qilu Bank, Shangdong Rural Bank Alliance, Dongfeng NISSAN, and
China Central Television
* 7 new clients secured using the Software as a Service ("SaaS") model
including Xinhua Insurance, Guangdong Development Bank and EMC
* New `Go Deep and Broad' strategy successfully implemented for SaaS model
Commenting on the results, Chief Executive, Wang Weidong said:
"Whilst we are delighted with our exceptionally strong interim results we would
like to stress that at this stage we foresee our full year results being in
line with market forecasts. We finished the period in a strong financial
position with a substantial order book, high levels of revenue visibility and
balance sheet strength. In October 2009 we fortified this position when we
raised £2.2 million of gross new funds, which will allow us to deliver larger,
longer-term projects going forward."
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
Bob Huxford
Hilary Millar
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 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
For more information, please visit www.geong.com
Chairman's statement
Overview
We are pleased to announce a period of strong growth, with turnover increasing
26% to £6.5m (H1 FY2009: £5.2m) and profit before tax up 179% to £1.08m (H1
FY2009: £0.39m).
During this time we have had considerable success with our 'Go Deep and Broad'
strategy, leveraging our existing partners and client base to sell to resellers
or affiliate companies. This has culminated in numerous new contract wins for
both our IaaS and SaaS offerings with new clients including Shangdong Rural
Bank Alliance, Xinhua Insurance and Guangdong Development Bank. As a result of
this strategy we have also been able to significantly reduce our direct sales
staff, leading to an associated reduction in costs.
In addition, post the period end; we successfully raised £2.2 million before
expenses through a placing of new ordinary shares of £0.01 each at £0.38 per
share. The net proceeds of the Placing are currently being utilised to provide
GEONG with the capacity to deliver larger, longer-term contracts which,
although expected to incur initial up-front costs should result in superior
margins over the longer term. As part of a new three year strategic plan, GEONG
will look to secure more contracts of this kind going forward, which are
expected to provide the Group with substantial and sustainable free cash flow
generation from FY2013 onwards.
Operational Highlights
GEONG's "Go Deep and Broad" strategy has again been highly successful for the
Company's IaaS (Information as a Service) division with ten new contract wins
signed during the period. These comprised of Qilu Bank, Shangdong Rural Bank
Alliance, Bank of Dalian, Bank of Dezhou, Taiping Insurance Group, China
Foreign Currency Exchage, Beijing Hundai, Dongfeng NISSAN, Dongguan Power and
CCTV.
While the Group has continued to acquire second tier clients in its preferred
markets, such as the financial services and automotive sectors, there has also
been steady new growth in revenues and order book for GEONG's SaaS (Software as
Service) division. Since December 2008 the Go Deep and Broad strategy was
adopted for the SaaS division resulting in a reduction in sales costs and
leading to 7 new contract wins during the six months to September 30 2009.
These comprise of Xinhua Insurance, Happy Insurance, Guangdong Development
Bank, Huaneng Capital and EMC.
Financial Review
Turnover for the six months ended 30 September 2009 grew by 26% to £6.5 million
(H1 2009: £5.2 million).
Within this revenue growth IaaS sales increased by 18% to £6.1 million (from £
5.2 million H1 FY2009). PortalAge maintenance delivered significant growth of
56% to £1.3 million (from £0.8 million H1 FY2009) and PortalAge customisation
grew by 65% to £4.0 million (from £2.4 million H1 FY2009). Revenue relating to
sales of low margin, third-party software decreased to £0.5 million (£1.6
million H1 FY2009). SaaS's introduction into the market in December 2008
resulted in sales of £0.4 million.
Overall gross margins of 44% were achieved for the period compared to 42% in H1
FY2009.
Sales and distribution expenses have decreased 26% to £0.4 million from £0.5
million in H1 FY2009. The primary reasons behind the fall in sales and
distribution costs resulted from the change in marketing strategy from direct
sales to our `Go Deep and Broad' strategy. Sales personnel costs decreased by
38% as a result of SME sales staff numbers falling from 40, as at 30 September
2008, to 4 as at 30 September 2009. Marketing expenses decreased by 40% and
travel expenses fell by 86% as a result of the newly implemented SaaS method of
delivery and the Group's decision to stop selling Smartbox directly.
The effective tax rate during the first half rose to 22% (H1 FY09 8%) including
withholding tax. According to PRC tax rules withholding tax is levied for sales
receipts received into a foreign bank account. Withholding tax has been
expensed and paid in this half with revenue to be booked in the future.
In addition the Group recorded a foreign exchange deficit arising on the
translation of the net assets of the Chinese subsidiaries which is reflected in
the condensed consolidated statement of comprehensive income.
GEONG's cash balance at the half year end remained robust at £2.4 million in
spite of trade receivables increasing during the first half by £1.0 million or
10%. The major reason for the increase in trade receivables was due to a change
in payment terms on one major contract from 30 days to 60 days. In the
foreseeable future our debtor days are expected to remain stable at current
levels with the reduction in days expected to commence in 18 to 24 months time
as the SaaS model takes hold.
Debtor days at 31 March 2009 were lower in comparison to the 30 September 2009
period end due to the cash collection generally accelerating in the second half
of the year, as is the industry norm in the PRC.
Accrued income included in debtors at 30 September 2009 was approximately £7.4
million in comparison to £6.5 million at 31 March 2009.
30 September 31 March
2009 2009
£'000 £'000
Trade debtors (net of 4,421 4,272
provision)
Accrued income 7,441 6,543
-------------------
Total 11,862 10,815
Inventories were higher at 30 September 2009 than at prior period ends and
reflect short term work in progress incurred on a new project where the first
billings were recorded in October 2009.
In October 2009 we raised £2.2 million before expenses through a placing of new
ordinary shares of £0.01 each at £0.38 per share. The net proceeds of the
Placing are currently being utilised to provide GEONG with the capacity to
deliver long term contracts.
Trading Outlook
Despite reporting exceptionally strong results GEONG would like to stress that
at this stage the Group foresee's full year results being in line with market
forecasts. GEONG finished the period in a strong financial position with a
substantial order book, high levels of revenue visibility and balance sheet
strength. In October 2009 GEONG fortified this position when it raised £2.2
million of gross new funds, which will allow the Group to deliver larger,
longer-term projects going forward.
GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
6 months ended 6 months ended 12 months
30 September 30 September ended 31 March
2009 2008
2009
Notes £'000 £'000 £'000
(unaudited) (unaudited) (audited)
Revenue 6,504 5,166 14,666
Cost of sales (3,637) (3,012) (8,728)
-------------------------------------
Gross profit 2,867 2,154 5,938
Other income 90 32 30
Research & development (182) (127) (307)
costs
Selling and distribution (391) (526) (1,129)
expenses
Administration expenses (1,262) (1,120) (2,746)
Share option expense (65) (36) (99)
-------------------------------------
Profit from operations 1,057 377 1,687
Finance income 25 11 2
-------------------------------------
Profit before tax 1,082 388 1,689
Taxation (240) (32) (330)
-------------------------------------
Profit after tax for the 842 356 1,359
period
Earnings per ordinary share
(pence)
Basic 5 2.66 1.13 4.31
Diluted 5 2.61 1.10 4.16
GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Profit after tax for the 842 356 1,359
period
Other comprehensive
(deficit)/income:
Foreign exchange movement (1,002) 1,106 3,504
-------------------------------------
Total comprehensive (160) 1,462 4,863
(deficit)/income for the
period
GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2009
Notes 30 September 2009 30 September 31 March
(unaudited) 2008 2009
(unaudited)
(audited)
ASSETS £'000 £'000 £'000
Non-current assets
Property, plant and 434 475 559
equipment
Intangible assets 422 404 514
----------------------------------
Total non-current assets 856 879 1,073
Current assets
Inventories 639 128 281
Trade receivables 11,862 8,801 10,815
Other receivables 1,198 1,050 1,333
Cash and bank balances 2,375 470 3,567
------------------------------------
Total current assets 16,074 10,449 15,996
Total assets 16,930 11,328 17,069
EQUITY AND LIABILITIES
Current liabilities
Trade payables 1,251 754 1,781
Other payables 1,611 1,286 1,224
Tax payables 1,085 125 1,052
----------------------------------
Total current liabilities 3,947 2,165 4,057
Non-current liabilities
Deferred tax liabilities 537 137 521
-----------------------------------
Total non-current 537 137 521
liabilities
Total liabilities 4,484 2,302 4,578
------------------------------------
Capital and reserves
Share capital 317 315 315
Share premium 5,480 5,432 5,432
Merger reserve (698) (698) (698)
General reserve 3 3 3
Equity compensation 257 142 206
reserve
Retained earnings 4,151 2,292 3,295
Exchange reserves 2,936 1,540 3,938
-----------------------------------
Total equity 12,446 9,026 12,491
Total equity and 16,930 11,328 17,069
liabilities
GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED CASH FLOW
STATEMENT
6 months 6 months ended 12 months
ended 30 30 September ended 31
September 2008 March 2009
2009
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Profit for the period 1,082 388 1,689
Adjustments for:
Interest income (3) - (6)
Amortisation of intangible assets 108 81 201
Depreciation of property, plant & 39 59 144
equipment
Loss on disposal of property, plant 3 - -
and equipment
Share based payment expense 65 36 99
Allowance for doubtful debts 33 - 3
------------------------------------
Operating cash flows before 1,327 564 2,130
movement in working capital
(Increase)/decrease in inventories (364) 99 (8)
Increase in receivables (1,846) (2,659) (2,288)
Increase in payables 228 234 1,210
Tax paid (86) - -
------------------------------------
Net cash (used in)/generated from (741) (1,762) 1,044
operating activities ------------------------------------
Investing activities
Interest received 3 11 6
Purchase of property, plant & (5) (33) (85)
equipment
Purchase of intangible assets (71) (87) (221)
----------------------------------
Net cash used in investing (73) (109) (300)
activities
Financing activities
Net proceeds from the issue of 50 - -
share capital ---------------------------------
Net cash generated from financing 50 - -
activities
Effect of exchange rate changes (428) 345 827
------------------------------------
Net (decrease)/increase in cash and (1,192) (1,526) 1,571
cash equivalents
Cash and cash equivalents at the 3,567 1,996 1,996
beginning of the period
-----------------------------------
Cash and cash equivalents at the 2,375 470 3,567
end of the period
GEONG INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED 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 1 315 5,432 (698) 3 106 1,936 434 7,528
April 2008
Net profit for - - - - - 356 - 356
the period
Share option - - - - 36 - - 36
granted
Foreign - - - - - - 1,106 1,106
exchange
movement
Balance at 30 315 5,432 (698) 3 142 2,292 1,540 9,026
September 2008
Balance at 1 315 5,432 (698) 3 206 3,295 3,938 12,491
April 2009
Net profit for - - - - - 842 - 842
the period
Share option - - - - (14) 14 - -
exercised
Share option - - - - 65 - - 65
granted
Issue of share 2 48 - - - - - 50
capital
Foreign - - - - - - (1,002) (1,002)
exchange
movement
Balance at 30 317 5,480 (698) 3 257 4,151 2,936 12,446
September 2009
NOTES TO THE FINANCIAL INFORMATION
1. General information
Geong International Limited is a company incorporated in Jersey. The address of
its registered office is Walker House, PO 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 information
The Company's unaudited consolidated interim financial information for the six
months ended 30 September 2009 has been prepared in accordance with the
accounting principles of International Financial Reporting Standards.
The same accounting policies, presentation and methods of computation have been
followed in this condensed financial information as were applied in the
preparation of the Group's financial statements for the year ended 31
March 2009, except for the impact of the adoption of the Standards and
Interpretations described below.
IAS 1 (revised 2007) Presentation of financial statements (effective for annual
periods beginning on or after 1 January 2009)
The revised Standard has introduced a number of terminology changes (including
revised titles for the condensed financial statements) and has resulted in a
number of changes in presentation and disclosure.
However, the revised Standard has had no impact on the reported results or
financial position of the Group.
The interim report was approved by the Board of directors on 2 December 2009.
The report is unaudited and does not constitute the Company's statutory
accounts for the six months ended 30 September 2009.
3. Seasonality
The operating result is not subject to significant seasonal variations during
the financial period.
4. 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 30,2009 Sep 30,2008
Sep 30 2009 Sep 30 2008
CNY 0.08740 0.07576 0.10232 0.08238
USD 0.66274 0.52018 0.69930 0.56167
5. 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 30 September 31 March
2009 2008 2009
(unaudited) (unaudited) (audited)
GBP GBP GBP
Earnings for the purpose of 842,000 356,471 1,359,249
diluted earnings
Numbers of shares
Weighted average number of 31,598,963 31,537,032 31,537,032
ordinary shares for the
purpose of basic earnings per
share
Weighted average number of 32,236,642 32,282,581 32,642,018
ordinary shares for the
purpose of fully diluted
earnings per share
Basic earnings per share 2.66 1.13 4.31
(pence)
Diluted earnings per share 2.61 1.10 4.16
(pence)
6. Taxation
The tax charge for the six months ended 30 September 2009 and for the six
months ended 30 September 2008 is based upon the estimated effective tax rate
for the full year.
7. 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 2009 was £65,000.
8. 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.
9. 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.
10. Copies of the interim report
Copies of the interim report will be available from the Company's website:
www.geong.com.