TIDMGLOK
RNS Number : 2943N
Global Lock Safety (Intl) Grp CoLtd
27 September 2012
Global Lock Safety (International) Group Co., Limited
Global Lock Safety (International) Group Co., Limited
("Global Lock" or "Company")
Interim results for the six months ended 30 June 2012
Global Lock, the provider of security solutions to retailers and
other organizations in China, is pleased to announce its unaudited
interim results for the six months ended 30 June 2012.
The exchange rate on 26 September 2012 was GBP1 to RMB
10.2735
Financial Highlights
-- Revenue for the period up 31% to RMB 24.64m (H1 2011: RMB 18.78m)
-- Loss for period RMB 10.14m (H1 2011: loss RMB 3.89m)
-- Net assets (including non-controlling interest) of RMB 34.50m (H1 2011: RMB 65.22m)
-- Cash and cash equivalents RMB 4.52m (H1 2011: RMB 4.47m)
-- Loss per share RMB 0.006 (H1 2011: loss per share RMB 0.005)
Mr. Moxiang Li, Chairman and CEO, commented:
"I am pleased to report that the Group achieved significant
revenue growth in the half year on the back of increasing its
branch network. However rising costs associated with this
expansion, particularly personnel costs, did result in a
substantial loss for the period. Action is being taken to address
this performance including a strengthening of the Board.
"The Directors are confident that the Group's strategy is well
conceived and will deliver returns in the near term as well as
taking the Company towards its goal of becoming China's leading
provider of security solutions."
Further Enquiries:
Global Lock Safety (International) Group
Mr. Moxiang LI, Chairman and Chief Executive Officer Tel:+86 755
86556800 (IDD )
Mr. Robert Zhang- Director and Chief Investor Relations Officer
Tel. +86 755 86556705(IDD)
e-mail: robertzh@globallock.com
Mr. Andrew Gee, Non-executive Director Tel: 0777 565 3564
Allenby Capital Limited Tel: 0203 328 5656
Mr. Nick Naylor
Mr. Alex Price
Mr. Nick Harriss
Newgate Threadneedle Tel 0207 653 9850
Mr. Graham Herring
Mr. Terry Garrett
Mr. Alex White
Address 19(th) Floor, Cadre Headquarters Center Mansion, No. 168
Tongsha Road, Xili, Nanshan, Shenzhen, PRC
Tel No.: +(86) 755 83660755, 86556800 (IDD)
CHAIRMAN'S STATEMENT
Global Lock achieved significant revenue growth in the first
half of 2012 on the back of increasing its branch network but
rising costs associated with this expansion, particularly personnel
costs, resulted in a substantial loss for the period. As at 30 June
2012 the Company's revenues had grown to RMB 24.64 million, an
increase of 31.18% over 2011's half year revenues of RMB 18.78
million. The number of customers increased to 21,056 retail stores,
an increase of 38.2% on the 2011 half year figure of 15,240 retail
store clients. The number of branches also increased, from 67 at
the end of June 2011 to 72 branches (68 branches and 4 super
branches) by the end of June 2012, an increase of 7.46%. The
average number of customers per branch was 292 at the end of the
period, compared with 227 a year earlier.
As at June 30 2012, Global Lock had 72 branches, 21,056
customers and 1,213 employees. These compare with the first half of
2011 as shown in the following table:
June 2012 June 2011 % Increase
------------------- ----------- ----------- ------------
No. of Branches 72 67 7.46%
------------------- ----------- ----------- ------------
No. of Customers 21,056 15,240 38.2%
------------------- ----------- ----------- ------------
No. of Employees 1,213 1,178 2.97%
------------------- ----------- ----------- ------------
Revenues (RMB
million) 24.64 18.78 31.18%
------------------- ----------- ----------- ------------
The loss of RMB 10.14 million (H1 2011: RMB 3.89m) is largely
caused by the significant costs of the branch network, which had
grown to 72 branches including 4 super branches by the end of the
period. The increased costs associated with the branch network were
largely as a result of increased personnel costs. These costs,
including wages and salaries, welfare and social insurance, all
increased considerably during the period and the Directors are
therefore currently reviewing the operational model of their
branches, including measures to reduce manpower and improve
performance. Included in the increased branch network costs are
also the expense of establishing three new branches at Pingjiang,
Zixing and Liu An, all in Hunan Province. The Liu An Branch was
registered on 13 June 2012, the Zixing Branch was registered on 27
June 2012 and the Pingjiang branch was registered on 17 July 2012
(although the majority of the opening costs were incurred during
the period). Global Lock also incurred certain capital expenditures
on refurbishment and upfront costs incurred by 12 existing branches
moving into new premises, to better reflect Global Lock's
image.
In order to ensure that the Group has a better awareness of, and
control over, the costs of our branches, we have established an
internal audit team charged with visiting loss making branches,
troubleshooting the causes of the losses and implementing
improvements including, if necessary, the merger or closure of the
loss-making branches. In addition, as part of its long-term cost
reduction plan, Global Lock moved its Shenzhen headquarters to new
premises at Cadre Headquarters Center Mansion, 168 Tongsha Road,
Xili, Nanshan, 518055 Shenzhen. Although we anticipate that this
will reduce costs in the medium and long-term, the immediate impact
of this move was to increase costs in the first half of 2012.
Further, as announced on 13 March 2012, during its annual
assembly at the end of 2011 the Group has established a new
incentive system aimed at motivating all the branch managers and
business staff to improve their branches performance, by developing
the potential market, increasing customer numbers and significantly
improving branch performance. The operation of this incentive plan
will be reviewed at the year-end in order to quantify its
results.
Coupled with this incentive plan, the Company held four national
internal training events during the period covering sales and
marketing staff, installation technicians, branch management and
security guards.
During the first six months of the year research and planning
commenced for the implementation of the Global Lock Enterprise
Resource Planning (ERP) system. This ERP system will integrate the
Group's management information regarding finance, operation, market
operation, personnel and administration thereby allowing for
improved efficiency. The system will be trialed in November 2012
with a view to adopting it in the Group's branches from the start
of next year.
The Group also continued with its promotional activities and,
under its long-standing relationship with China Legal Daily, Global
Lock sponsored the 2(nd) China Social Security Comprehensive
Control Forum in May, 2012 in Yuxi, Yunnan. This event was
organized by China Legal Daily and supported by China's Politics
and Legality Committee.
As announced on 25 May 2012, changes in the regulatory
environment in the PRC during the period meant that Global Lock was
required to establish a new wholly owned subsidiary company, Hunan
Family Fortune Security Services Co., Ltd. located in Changsha,
Hunan, in order to obtain the necessary security service
qualifications, license and permits to ensure the continuation of
the Global Lock security guard patrols. These permits and license
were successfully obtained in June 2012.
Current trading and outlook
At 30 August 2012 Global Lock had a total of 22,045 customers
(an increase in 2 months of 4.70% on the number at 30 June 2012).
The number of branches has increased to 73 in all.
The Directors are confident that the Group's strategy is well
conceived and will deliver returns in the near term as well as
taking the Company towards its goal of becoming China's leading
provider of security solutions.
To further this strategy Global Lock is working on upgrading the
technical specification of the current security alarming network
system so as to reduce the costs caused by false alarms which
includes battery degradation as well as unnecessary patrol
attendance and consequential actions taken in response to false
alarms. The Company plans to upgrade its current wireless based
alarm network system on GSM into one based on web IP camera and
PSTN on-line technology which it hopes will provide more accurate
detection and also reduce battery and other costs
substantially.
In addition to improving the technical specifications of the
products offered to its customers, as well as the operational and
financial efficiency of the branch network, which provides security
services primarily to retail stores in China, the Group is also
developing two new related but distinct service offerings. The
first of these new business lines is working in conjunction with
Chinese Provincial and City Governments to construct and build
integrated security systems projects for public areas including
High-Tech Parks, Industrial and Logistics Parks, Shopping Malls and
other public areas. The Board expects to announce the signature of
the first contract in this new line of business with the Hi-Tech
Park in Xiangtan, Hunan and Peace City Demonstration in Loudi,
Hunan province shortly and further announcements will be made in
this regard.
The second of the Company's new business lines is the provision
of a total integrated security system for electricity sub-stations
in Hunan Province.
A priority for the Directors is to improve the Group's
operational performance. As part of this commitment, the
strengthening of Global Lock's Board, announced on 12 September,
will provide a greater degree of Board supervision and control and
ensure that every aspect of the Group's operations are reviewed and
properly managed. Increased awareness of, and control over, costs
and better management practices are all designed to help the group
move towards profitability.
Meantime, potential mergers and acquisitions to enhance the
Group's market position will only be considered when we have
sufficient cash flow and liquidity.
Condensed consolidated statement of comprehensive income
Note 6 months 6 months 12 months
ended 30 ended 30 ended 31
June 2012 June 2011 Dec 2011
Unaudited Unaudited Audited
RMB'000 RMB'000 RMB'000
Revenue
Fees income 6 24,635 18,780 31,857
Sales business tax (1,505) - (1,780)
----------- ----------- ----------
23,130 18,780 30,077
Cost of sales (5,189) (5,361) (8,011)
----------- ----------- ----------
Gross profit 17,941 13,419 22,066
Selling and distribution costs (22,653) (13,507) (34,178)
Administrative expenses (5,070) (3,755) (12,176)
Listing Costs - - -
----------- ----------- ----------
Loss from operations (9,782) (3,843) (24,288)
Other income 18 194 214
Finance income 3 - 7
Finance cost (212) (233) (354)
----------- ----------- ----------
Loss on ordinary activities
before taxation (9,973) (3,882) (24,421)
Taxation 8 (169) (4) -
----------- ----------- ----------
Loss for the period (10,142) (3,886) (24,421)
Other comprehensive income - - -
----------- ----------- ----------
Total comprehensive loss for
the year (10,142) (3,886) (24,421)
=========== =========== ==========
Loss attributable to:
Owners of the parent (1,407) (1,264) (4,466)
Non-controlling interests (8,735) (2,622) (19,955)
----------- ----------- ----------
(10,142) (3,886) (24,421)
=========== =========== ==========
Total comprehensive income
attributable to:
Owners of the parent (1,407) (1,264) (4,466)
Non-controlling interests (8,735) (2,622) (19,955)
----------- ----------- ----------
(10,142) (3,886) (24,421)
=========== =========== ==========
Earnings per share 9
Basic (0.006) (0.005) (0.02)
=========== =========== ==========
Diluted (0.006) (0.005) (0.02)
=========== =========== ==========
All operations are continuing.
Condensed consolidated statement of financial position
30 June 30 June 31 Dec
Note 2012 2011 2011
Unaudited Unaudited Audited
RMB'000 RMB'000 RMB'000
Non-current assets
Intangible assets 11 37,836 37,581 38,863
Property, plant and
equipment 10 23,021 19,382 22,731
Investments 7,500 9,000 7,500
Deferred tax assets - 25 -
---------- ---------- --------
Total non-current assets 68,357 65,988 69,094
---------- ---------- --------
Current assets
Inventories 1,059 1,471 1,301
Trade and other receivables 33,304 24,452 27,154
Cash and cash equivalents 4,519 4,470 3,256
---------- ---------- --------
Total current assets 38,882 30,393 31,711
---------- ---------- --------
Total assets 107,239 96,381 100,805
========== ========== ========
Equity and reserves
Share capital 13 20,324 20,324 20,324
Shares to be issued 4,000 - 4,000
Reserves 963 - 963
Retained earnings (7,562) (2,953) (6,155)
---------- ---------- --------
Total equity and reserves 17,725 17,371 19,132
---------- ---------- --------
Non-controlling interest 21,776 47,845 30,511
---------- ---------- --------
Total equity 39,501 65,216 49,643
---------- ---------- --------
Non-current liabilities
Borrowings 6,021 1,000 486
---------- ---------- --------
Total non-current liabilities 6,021 1,000 486
---------- ---------- --------
Current liabilities
Borrowings 650 614 750
Trade and other payables 60,510 29,551 49,497
Taxation 557 - 429
---------- ---------- --------
61,717 30,165 50,676
---------- ---------- --------
Total liabilities 67,738 31,165 51,162
========== ========== ========
Total equity and liabilities 107,239 96,381 100,805
========== ========== ========
Condensed consolidated statement of cash flows
6 months 6 months 12 months
ended 30 ended 30 ended 31
June 2012 June 2011 Dec 2011
Unaudited Unaudited Audited
RMB'000 RMB'000 RMB'000
Cash flows from operating activities
Loss before interest and tax (9,973) (3,649) (24,421)
Adjustments for:
Amortization of intangible assets 1,153 1,363 3,010
Depreciation of property, plant
and equipment 2,668 1,732 4,103
Loss on disposal - 13
Share based payment charge - 963
Loss of investment - 500
Financial income (3) (7)
Financial costs 212 347
----------- ----------- -----------
Operating cashflow before changes
in working capital (5,943) (554) (15,492)
(Increase) / decrease in inventories 242 (1,192) (650)
(Increase)/decrease in trade and
other receivables (6,150) (2,801) (5,466)
Increase / (decrease) in trade
and other payables 11,013 13,645 34,825
----------- ----------- -----------
Cash generated used in operations (838) 9,098 13,217
Interest paid (212) (233) (347)
Income taxes paid (41) (4) -
----------- ----------- -----------
Net cash from/(used in) operating
activities (1,091) 8,861 12,870
----------- ----------- -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (2,979) (3,935) (9,340)
Expenditure on intangibles (126) (1,323) (2,221)
Proceed from disposal of property,
plant and equipment 21 - 2
Interest received 3 - 7
Acquisition of subsidiaries - (700) (4,000)
Acquisition of assets and customer
lists - (9,000) (3,350)
Net cash used in investing activities (3,081) (14,958) (18,902)
----------- ----------- -----------
Cash flows from financing activities
Amount paid to directors - 100
Borrowings (Net) 5,435 1,614 1,235
Borrowings from directors - 1,000 -
Net cash from financing activities 5,435 2,614 1,335
----------- ----------- -----------
Net change in cash and cash equivalents 1,263 (3,483) (4,697)
Cash and cash equivalents at beginning
of the period 3,256 7,953 7,953
----------- ----------- -----------
Cash and cash equivalents at end
of the period 4,519 4,470 3,256
=========== =========== ===========
Condensed consolidated statement of changes in equity
Shares Non-controlling
Share to be Other Retained interest Total
capital issued reserve earnings Total equity
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Balance at 1 January
2012 20,324 4,000 963 (6,154) 19,132 30,511 49,643
Total comprehensive
loss for the period - - - (1,407) (1,407) (8,735) (10,142)
Balance at 30 June
2012 20,324 4,000 963 (7,561) 13,725 21,776 39,501
--------- -------- --------- ---------- --------- ---------------- ---------
Balance at 1 January
2011 20,324 - - (1,689) 18,635 50,467 69,102
Total comprehensive
income for the period - - - (1,264) (1,264) (2,622) (3,886)
--------- -------- --------- ---------- --------- ---------------- ---------
Balance at 30 June
2011 20,324 - - (2,953) 17,371 47,845 65,216
--------- -------- --------- ---------- --------- ---------------- ---------
Balance at 1 January
2011 20,324 - - (1,689) 18,635 50,467 69,102
Total comprehensive
loss for the period - - - (4,466) (4,466) (19,955) (24,421)
Deferred share consideration - 4,000 - - 4,000 - 4,000
Share based payment - - 963 - 963 - 963
--------- -------- --------- ---------- --------- ---------------- ---------
Balance at 31 December
2011 20,324 4,000 963 (6,154) 19,132 30,511 49,643
--------- -------- --------- ---------- --------- ---------------- ---------
Notes to the condensed consolidated financial statements
1. General information
Global Lock Safety (International) Group Co., Limited ("Global
Lock") is a company incorporated in British Virgin Islands ("BVI")
under the BVI Companies Act, 2004. The address of the registered
office is Akara Building, 24 De Castro Street, Wickhams Cay 1, Road
Town, Tortola, BVI. Global Lock is an investment company.
The nature of the Global Lock Group's operation and its
principal activity is the provision of security solutions to retail
stores across the People's Republic of China ("PRC"). The principal
place of business of the Global Lock Group's operation is at 19(th)
Floor, Cadre Headquarters Center Mansion, 168 Tongsha Road, Xili,
Nanshan, 518055 Shenzhen, PRC.
The group carries out its trading business through Shenzhen
Global Lock Security System Engineering Co., Ltd (Shenzhen GLOK), a
company incorporated in PRC. Global Lock Safety (Shenzhen) Limited
("GLOK Shenzhen"), a wholly owned subsidiary of Global Lock has
entered into certain long term contractual agreements with Shenzhen
GLOK that all profits generated by Shenzhen GLOK are to be paid to
GLOK Shenzhen.
These condensed financial statements present information about
the group and are set out in Renminbi ("RMB") of the PRC, which is
the functional currency of the group.
These condensed financial statements are presented in the
nearest thousands.
2. Basis of preparation
These condensed financial statements have been prepared in
accordance with International Accounting Standard 34 Interim
Financial Reporting.
The interim report is unaudited and does not constitute the
company's statutory accounts for the six months ended 30 June
2012.
The results of Shenzhen GLOK were fully consolidated in these
financial statements under IAS 27 through the contractual
agreements where full managerial, operational and financial control
of Shenzhen GLOK has been granted to GLOK Shenzhen.
3. Significant accounting policies
The condensed financial statements have been prepared under the
historical cost convention.
The same accounting policies, presentation and methods of
computation have been followed in these condensed financial
statements as were applied in the preparation of the group's
financial statements for the year ended 31 December 2011.
4. Going concern
The group has been monitored its cash flow to ensure continuity
in its operations. The directors and shareholders have expressed
their willingness to continue supporting the Company for the
foreseeable future. 5. Seasonality of interim operations
The revenue of the group has increased significantly compared to
the first six months of last year. This is mainly due to new
professional management and sales teams and collaboration with
China Legal Daily (an official newspaper distributed to all Chinese
government department and law enforcement agencies). As a result of
this, the number of branches has increased from 67 to 72 and the
number of customers has increased from 15,240 to 21,056.
6. Segment information
The group's revenue and profit before taxation were all derived
from only one segment which is its principal activity. All revenue
originates in the PRC and assets are mainly held in the PRC. As a
result of this, management considered that no segment reporting is
required.
7. Share-based payment charge
On 17 October 2010, Global Lock granted Allenby Capital, its
NOMAD "warrants to subscribe for ordinary share" which is equal to
1% of the fully diluted equity (the equity share capital of GLOK
from time to time plus all equity share capital which would arise
on exercise in full of all rights to subscribe for or convert into
equity share capital).
Judgements and estimates are required in determining the share
based payment charge as an expense in the income statement. The
directors have used Black-Scholes model which has been widely used
in valuing the share based payment charge. The directors are in the
opinion that the model used has been adjusted to their best
estimate in arriving at the charge.
8. Taxation
Global Lock is regarded as resident for the tax purposes in BVI.
There are no applicable taxes in the BVI for the company.
GLOK Shenzhen and Shenzhen GLOK are regarded as residents for
the tax purposes in PRC and subject to national income tax rate at
25%. Due to its high technology enterprise status, the company is
entitled to a reduction in tax rate at 15%.
Interim income tax is accrued based on 15% tax rate.
9. Earnings per share
Basic loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity shareholders of the company by the weighted
average number of ordinary shares in issue during the year.
30 June
2012
RMB'000
Loss attributable to equity holders of the company (1,407)
========
Weighted average number of shares in issue (thousands) 250,000
========
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The dilutive
potential ordinary shares in the company are share options. A
calculation is done to determine the number of shares that could
have been acquired at fair value (determined as the average annual
market share price of the company's shares) based on the monetary
rights attached to outstanding share options. The number of shares
calculated above is compared with the number of shares that would
have issued assuming the exercise of the share options.
Weighted average number of ordinary shares (diluted):
30 June
2012
(thousands)
At beginning of the period 250,000
Effect of conversion of share options -
------------
At end of period 250,000
============
10. Property, plant and equipment
During the period, the group made additions of approximate RMB
2.98 million to property, plant and equipment.
11. Intangible assets
During the period, the group spent approximate RMB 0.13 million
on development of new software.
12. Borrowings
In June 2012,the company obtained a loan of RMB 5.86 million
from HSBC Bank (China) Co., Ltd. Shanghai Branch. The loan period
is from 20 June 2012 to 19 March 2015, a total of 33 months with an
interest rate of 7% paid quarterly. The total interest payable is
RMB599,132.
The proceeds were used for short term working capital needs.
13. Share capital
The issued share capital of the company as at 30 June 2012 is
RMB20,323,800 fully paid. There were no movements in the issued
share capital of the company in the current interim reporting
periods.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the company. All shares rank equally with
regard to the company's residual assets.
At 30 June 2012, the company had the following outstanding share
options:
Date of grant: 17 Oct 2010
Number of option: 1% of the fully diluted equity
Option price: 16 pence (the lowest closing bid price of the
ordinary shares for the one week period following Admission on 21
October 2010)
Exercise period: 21.10.2010 - 20.10.2015
14. Related party transactions
As at balance sheet date, the amount due from Mr Xuenan Yan is
RMB 3,255,122 and the amount due to Mr Mo Xiang Li is RMB
14,051,090. The loan amounts are interest free and repayable on
demand.
Further details of the loan to Mr Mo Xiang Li are contained in
the announcement dated 24 June 2012.
Hunan Xiang long Electronics Development Co., Ltd ("Hunan
Xiang")
Hunan Xiang, the key supplier of the Group's equipment, is owned
by some of the directors. Details of transactions with Hunan Xiang
are presented below:
6 months ended
30 June 2012
RMB
Purchase of equipment 4,643,567
Balance payable 460,383
Prepayment for machinery equipment 1,818,936
14. Related party transactions - continued
Family Fortune International Co., Ltd
The Group has a non-trade balance receivable from a shareholder
of the Company, Family Fortune International Co., Ltd, of RMB
111,752.
Shenzhen Family Fortune Investment Co., Ltd
The Group has non-trade balance receivable to Shenzhen Family
Fortune Investment Co., Ltd, a company with some common directors,
of RMB 1,323,450.
Shenzhen Global Lock Security Mobile Co., Ltd
The Group has non-trade balance receivable to Shenzhen Global
Lock Security Mobile Co., Ltd, a company with some common
directors, of RMB 2,127,675.
Shenzhen Lin En Energy Investment Co., Ltd
The Group has non-trade balance receivable to Shenzhen Lin En
Energy Investment Co., Ltd, a company with some common directors,
of RMB 198,418.
Henan Xinxiang Jingan Security Electronic Co., Ltd
The Group has non-trade balance payable to Henan Xinxiang Jingan
Security Electronic Co., Ltd, a partial owned subsidiary by the
Group, of RMB NIL.
15. Event after reporting date
On 3 June 2011, the Group acquired 70% of the issued share
capital of Henan Xinxiang Jingan Security Electronic Co., Ltd
("Henan Xinxiang") for a total consideration of RMB7 million
payable in installments, RMB1 million payable on date of agreement,
RMB2 million payable within three months and balance of RMB4
million issue of new shares in Global Lock after one year (the
"Deferred Consideration"). The number of shares to be issued was to
be based on the calculation of the same value of share amount and
closing share price of Global Lock at date of business combination.
As announced on 6 June 2012, Global Lock had agreed with the
vendors of Henan Xinxiang that it will not satisfy the Deferred
Consideration element at the present time.
Subsequent to the announcement on 6 June 2012, the Group has
agreed with the vendors of Henan Xinxiang to return an equivalent
number of shares to the vendors at the original purchase price,
namely 40% of the total issued share capital of Henan Xinxiang in
return for the surrender by the vendors of their right to receive
the Deferred Consideration. As a result of this, the Group will
retain a 30% interest in of the entire share capital of Henan
Xinxiang as investment.
end
This information is provided by RNS
The company news service from the London Stock Exchange
END
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