Global Lock Safety (Intl) Grp CoLtd Final Results and notice of AGM (0050G)

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RNS Number : 0050G

Global Lock Safety (Intl) Grp CoLtd

31 May 2013

Global Lock Safety (International) Group Co., Limited

("Global Lock" or the "Company")

Final results and notice of AGM

Global Lock, the provider of security solutions to retailers and other organisations in China, announces its final results for the year ended 31 December 2012.

Highlights:

   --        Billing fees income for the year RMB 89.36m (an increase of 180% over 2011's RMB 31.86m) 
   --        Profit for the year RMB 1.46m (2011: loss of RMB 24.42m) 
   --        Net assets (including minority interests)  RMB 47.10m (2011: RMB 49.64m) 
   --        Cash and cash equivalents RMB 5.39m (2011: RMB 3.26m) 
   --        Loss per share RMB cents 0.45 (2011: loss of RMB cents 1.79)

Chairman's Statement

2012 saw a dramatic improvement for the Global Lock Group despite continuing tough trading conditions in China. For the first time since Global Lock listed on AIM in 2010, the Group moved into profitability with profits of RMB 1.46m, a vast improvement on the previous year's loss of RMB 24.42m. This was achieved on the back of a significantincrease inturnover, from RMB 31.86m to RMB 89.36m, an increase of more than 180%. This reflects Global Lock's focus on improving the revenues and profitability of the branch network and although the number of branches remained the same as in 2011 at 67, a number of unprofitable branches were closed and new ones opened. The number of customers at the year end increased to 24,107 (an increase of 35% on the 2011 figure of 17,850). The average number of customers per branch was 360 at the end of 2012, compared with 266 a year earlier.

As at 31 December 2012, the Group had 67 branches, 24,107 customers and 1,320 employees. These compare with 2011 as shown in the following table:

 
                   2011     2012    % increase 
---------------  -------  -------  ----------- 
 No. Branches       67       67         - 
---------------  -------  -------  ----------- 
 No. Customers    17,850   24,107      35% 
---------------  -------  -------  ----------- 
 No. Employees    1,250    1,320        6% 
---------------  -------  -------  ----------- 
 Revenues (RMB 
  m)              31.86    89.36       180% 
---------------  -------  -------  -----------

The improved performance in 2012 is attributable, inter-alia, to the following factors:

1. increased accountability of branch level management, following the changes set in place at the beginning of 2012, focussing on the number of customers obtained by each branch as the key operating metric;

2. further market expansion through developing mid-and-low level retail store customers, which has resulted in both an increased number of customers and reduced operating costs for those customers as well as reducing the per-customer costs for Global Lock;

3. successful penetration into a new market segment; namely the provision of remote monitoring services for a major security system integration and power substation project (Xiangtan Jiuhua);

4. comprehensive technical modifications of Global Lock's security equipment to improve its technical performance resulting in significantly fewer incidents of false alarms thereby reducing wasted staff time and eliminating unnecessary costs;

5. management improvements at all levels of the organisation to eliminate duplication, improve focus and reduce costs;

6. extraction of the Company from a previous loss making investment project (International Security Union building) and the recovery of the investment; and

7. clarifying the complicated relationship with Henan Xinxiang Jingan and consolidating Global Lock's 30% holding in this company as a minority interest.

For 2013, Global Lock's Board have planned a number of initiatives and developments that aim to consolidate and build upon the achievements of 2012 and to entrench Global Lock as a leading provider of security services in China. These measures include further refining the operational management system to focus each branch on its revenues and profits as the key benchmark, together with numbers of customers. Global Lock intends to expand the mid-and-low level market segment further as well as developing additional sales channels. Through these measures Global Lock aims to continue to increase its customer base, as well as building customer numbers through acquisitions and business cooperation. Following on from the success of the Xiangtan Jiuhua security project, the Group will further undertake carefully selected projects where these will add sufficiently to the bottom line.

Global Lock has ambitious plans to expand into the provision of value added services for its customer base and these include earning commissions for introducing its customers to an unconnected loan finance provider. The Board is also cognisant of the need to optimise and strengthen the Board and senior management of Global Lock in order to improve operational efficiency; necessary tasks include the improvement and streamlining of internal administrative systems, reviewing wages and salaries and employee incentives; improving the functioning of the ERP information system,strengthening the treasury and capital management platform, and enhancing branch monitoring.

In China, in recent years, incidents of theft suffered by retailers have been increasing steadily,primarily as a result of economic circumstances and a lessening of social stability. In the nine months from June 2012 to February 2013, branches of Global Lock have successfully prevented more than 8,000 potential thefts, and there were in total around 140 cases where insurance pay-outs were made. These numbers exceeded the combined total for the prior five years. Global Lock's security technology and patrol guard business, coupled with the provision of insurance has proved to be successful in face of a variety of technical and other challenges. As a Chinese saying goes "A vice rises one foot, virtue rises ten." Global Lock's Board is convinced that in order to combat the increasingly sophisticated criminals now being encountered, increased investment on research and development of security technologies with lower false detection rates and higher safety and cost-efficiency to combat theft, reduce insurance claims and lessen operating costs, will pay off many times over for Global Lock.

Technical Developments in 2012

In 2012 Global Lock's Research & Development Institute has completed research and development for the following products as well as initiating their batch production:

1. low power wireless infrared detectors aimed at significantly reducing false alarms, 8,000 units of which have been produced.;

   2.   wireless magnetic switch detector, 5,000 units have been produced; 
   3.   GPRS/PSTN single module / double module alarm host, 6,000 units have been produced;

4. C/S frame-GPRS/PSTN/GSM triple-integrated alarm and video platform, the platform has already been utilised by 15 branches;

5. central remote-control tear GPRS alarm host and alarm receiving platform (applicable to an unmanned telecommunication base station). The initial pilot was carried out at Heyuan Branch. The platform performs strongly to prevent on-site theft, helping to eliminate problems in remote areas which are not easily accessible for facilities and patrol guards; and

6. FW-2A-B phone line alarm host (wire), applicable to lower level customers. Batch production has been started.

Proposed 2013 technical enhancements include:

   1.   a wired infrared detector; 
   2.   a wired microwave and passive infrared detector; 
   3.   3G image/video transmission alarm host;

4. a network alarm monitoring integrated platform, compatible with alarm hosts manufactured by Global Lock and main alarm hosts, integrated with a network camera and digital video recorder; and

5. monitoring software operated by smartphones based on GPRS/3G/WAN data channels.This enables customers, patrol guards, as well as alarm receiving, technical and management personnel to access the alarm system to check records of real-time operation, alarm notifications, image/video browsing and recent events through their smart phones.

Recent developments and trading update

At 30 April 2013, Global Lock had a total of 25,630 clients, an increase of 6.3% from the end of 2012's 24,107. The number of branches remained unchanged from the year end at 67.

The Group held its Annual Planning Meeting in Changsha from 9 to 11 January 2013 to review the achievements of 2012 and to plan for 2013, as well as to determine the operating targets for the forthcoming year. Attendees included the Group's Chairman, members of Senior Management, and 63 Branch Managers and accountants. Outstanding branches were rewarded for achieving exceptional profit levels, in meeting their operating targets and for attaining excellent security service levels. In addition, numbers of high-achieving individuals were also rewarded. Later in the year from 21 to 22 March 2013 the Group held a further meeting for its branches in Changsha in order to set individual branch revenue and profits targets for the year.

Also in January 2013 the Hunan Family Fortune Security Services Shenzhen Branch was awarded its Security Service Provider Registration Certificate which confirms the compliance and legality of Global Lock's network security alarm service.

The Group's new ERP Information System has been in use since 1 March 2013 and is proving a very valuable management tool.

Finally, as announced on 27 February 2013 the Group transferred its holding of 15.789% shares in Shenzhen Zhong An Fang Investment Holdings, and recovered its RMB 1.0m investment. Also the Group purchased the remaining 50% shares of Yuxi Branch in order to achieve 100% ownership of the Branch, further details of which were announced on 21 March 2013.

Directorate changes

On 13 March 2012, Mr Yong Luo, Mr Xuean Yan and Mr Jun Gai ceased to act as Directors, and on 12 September 2012, four new directors, Mr Jianbing Wang, Mr Hualiang Jiang, Mr You Feng and Mr Xiaohua Zhang were appointed, and Mr Moxiang Li was appointed as Chairman and CEO. On 11 February 2013, Mr Xiaohua Zhang ceased to act as Director and on 18 March 2013, Mr Yong Luo was re-appointed as Chairman in place of Mr Moxiang Li who continued as CEO.

On behalf of the Board, I want to extend our warmest thanks to our investors, business partners, associates and customers for their support during the year and lastly, but by no means least, we wish to thank the management and staff of the Global Lock family for their tremendous efforts and dedicated hard work throughout the year.

Emphasis of matter - going concern

The financial statements include an emphasis of matter from the Group's auditors, UHY Hacker Young, in relation to the Group's ability to continue as going concern arising from its net current liabilities of RMB 11.99m as at 31 December 2012. Notwithstanding this, the Directors consider that the Group's prospects remain sound.

Posting of annual report

The annual report and accounts for the year ended 31 December 2012 will be posted to shareholders shortly together with a notice of AGM which will be held at 19/F, Shenzhen Cadre Group Centre Mansion, No. 168 Tongsha Road, Xili, Nanshan District, Shenzhen, Guangdong Province, China on 30 June 2013 at 3pm Beijing time. These documents are also in the process of being added to the Company's website, www.globallock.com, in accordance with AIM Rule 20.

Mr. Yong Luo

Chairman

Global Lock Safety (International) Group Limited

Enquiries:

Global Lock Safety (International) Group Limited

   Moxiang Li, Chief ExecutiveOfficer                                          Tel:+86 755 8366 0755 
   Andrew Gee, Non-Executive Director                                     Tel: +44 777 565 3564

Allenby Capital Limited Tel: +44 203 328 5656

Nick Naylor

Alex Price

   -     Ends -

CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED31 DECEMBER 2012

 
 
                                                       Group                        Company 
                                      --------------------------------------  ------------------- 
                                                  2012                2011       2012      2011 
                                Note             RMB'000            RMB'000     RMB'000   RMB'000 
 Revenue 
 Billing fees income                                       89,355     31,857          -         - 
 Sales business tax                                       (3,599)    (1,780)          -         - 
                                      ---------------------------  ---------  ---------  -------- 
                                                           85,756     30,077          -         - 
 Cost of sales                                           (21,863)    (8,011)          -         - 
                                      ---------------------------  ---------  ---------  -------- 
 Gross profit                                              63,893     22,066          -         - 
 
 Selling and distribution 
  costs                                                  (49,664)   (34,178)          -         - 
 Administrative expenses                                 (12,032)   (12,176)    (1,888)   (3,241) 
 Listing costs                                                  -          -          -         - 
 Other income                                                 535        214          -         - 
                                      ---------------------------  ---------  ---------  -------- 
 Profit /(loss) from 
  operations                                                2,732   (24,074)    (1,888)   (3,241) 
 Finance income                                                 -          7          -         - 
 Finance cost                                               (974)      (354)          -       (2) 
                                      ---------------------------  ---------  ---------  -------- 
 Profit /(loss) on ordinary 
  activities before taxation                                1,758   (24,421)    (1,888)   (3,243) 
 Taxation                        3                          (300)          -          -         - 
                                      ---------------------------  ---------  ---------  -------- 
 Profit /(loss) for 
  the year                                                  1,458   (24,421)    (1,888)   (3,243) 
 Other comprehensive                                            -          -          -         - 
  income 
                                      ---------------------------  ---------  ---------  -------- 
 Total comprehensive 
  Profit /(loss) for 
  the year                                                  1,458   (24,421)    (1,888)   (3,243) 
                                      ===========================  =========  =========  ======== 
 
 Profit /(loss) attributable 
  to: 
 Owners of the parent                                     (1,114)    (4,466) 
 Non-controlling interests                                  2,572   (19,955) 
                                      ---------------------------  --------- 
                                                            1,458   (24,421) 
                                      ===========================  ========= 
 Total comprehensive 
  Profit (loss) attributable 
  to: 
 Owners of the parent                                     (1,114)    (4,466) 
 Non-controlling interests                                  2,572   (19,955) 
                                      ---------------------------  --------- 
                                                            1,458   (24,421) 
                                      ===========================  ========= 
 Loss per share                  4 
 Basic (in cents)                                          (0.45)     (1.79) 
                                      ===========================  ========= 
 Diluted (in cents)                                        (0.45)     (1.79) 
                                      ===========================  =========

All amounts are derived from continuing operations.

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION