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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
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