GEONG International, an AIM-listed China-based provider of online business solutions, disappointed investors after declining earnings during a challenging year pushed profit significantly lower.
Turnover fell from £11.3m to £9.7m year-on-year (y/y), reducing the gross margin from 53% to 47% and pre-tax profits to £0.4m (2011: £2.6m), largely due to disappointing Software as a Service (SaaS) revenues and margins. Diluted earnings per share came in at 0.4p (2011: 5.5p).
The company was also greatly affected by the fact that one of its global business partners delivered far fewer contracts than had been anticipated and budgeted. In addition, the firm also incurred some £0.35m of costs in attempting the acquisition of AdBeyond, which was eventually aborted late last year.
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Weidong Wang, Chief Executive Officer of GEONG, said: "This has been an extremely disappointing year for GEONG in which our profits were substantially below our previous expectations. This has arisen principally as a result of a revenue shortfall from our SaaS business and as a consequence of the failure by one of our business partners to deliver a number of previously anticipated contracts.
"It is important to recognize that our technological strength and capability remains, that there has been no loss of clients during thisperiod and that the business is trading profitably. However, we have to recognize that our fortunes are not immune from what isgoing on around us and a recovery in revenues and profits will depend upon an improvement in trading conditions for our clients and business partners."
Cash at the year end remained stable at £5.3m, while the order book at that time declined £4m to £11m.
The share price dropped 22.64% to 5.12p by 14:48.
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