GINSMS Returns to Profitability After Two Consecutive Quarters of Losses
28 Septiembre 2011 - 11:55PM
Marketwired Canada
GINSMS Inc. ("GINSMS" or the "Company") (TSX VENTURE:GOK) has announced its
financial results for its FIRST quarter ended June 30, 2011.
Performance Highlights for the Three-Month Period Ended June 30, 2011
-- After two consecutive quarters of losses, the Company returned to
profitability with a net income of $16,509 during the quarter ended June
30, 2011, compared to net income of $39,548 during the quarter ended
June 30, 2010.
-- Inter-SMS traffic of 34.5 million during the first quarter this fiscal
year is up 25.5% from the preceding quarter. Compared to the
corresponding quarter ended June 30, 2010, traffic is up 14.6%.
-- Revenue is down despite the increase in traffic owing to lower margin in
a highly competitive environment.
-- Liquidity improved further this first quarter of fiscal 2012 with a
working capital of $999,145, compared $957,343 the previous quarter. The
working capital ratio passed from 12.3 times to 17.2 times.
-- Cash flow from operations remains attractive with EBTDA of $48,372 in
the first quarter this fiscal year, compared to $76,342 in the same
quarter the previous fiscal year.
RESULTS OF OPERATIONS
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Three-month period ended
Financial Highlights June 30,
(Unaudited)
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2011 2010
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Revenues $ 181,810 208,787
Cost of sales $ (64,689) (65,644)
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Gross profit $ 117,121 143,143
Gross margin 64.4% 68.6%
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EBITDA (1)$ 48,372 76,342
EBITDA margin N/A N/A
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Net earnings $ 16,500 39,548
Net earnings margin 9.1% 18.9%
(1) EBITDA is a non-GAAP measure related to cash earnings and is defined for
these purposes as earnings before income taxes, depreciation and
amortization. This metric should not be considered in isolation or as a
substitute for net earnings which is also reported herein but is made
relevant by the fact that there is a substantial difference in the capital
structure of the Company from one period to another, distorting the
comparability of net earnings.
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Consolidated Consolidated Consolidated
------------------------------- June 30, 2011 March 31, 2011 April 1, 2010
(Unaudited)(1) (Audited) (Unaudited)(2)
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Total assets $ 1,251,080 1,256,568 1,652,884
Total liabilities $ 81,532 108,119 356,353
Shareholders' equity $ 1,169,348 1,148,449 1,296,531
Net earnings (loss) per share $
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Basic 0.00 0.01 N/A
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Diluted 0.00 0.01 N/A
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(1) The figures reported thereto are based on the condensed consolidated
interim financial statements which have been prepared in accordance with IAS
34 Interim Financial Reporting. These are the Group's first International
financial reporting standards (IFRSs) condensed consolidated interim
financial statements for part of the period covered by the first IFRSs
annual financial statements and IFRS 1 First-time Adoption of International
Financial Reporting Standards have been applied. An explanation of how the
transition to IFRSs has affected the reported financial position, financial
performance and cash flows of the Group is provided in notes 12 of the
financial statements.
(2) The figures reported thereto are based on the Company's opening IFRS
statements of financial position at that date as required by the rules for
presentation of the interim financial statements under IFRS for the first
time. There were no adjustments to the financial position of the Company
under IFRS as compared to under Canadian GAAP except for the Accumulated
Comprehensive Loss which was charged to Retained Earnings. Under IFRS 1, the
Company is allowed an option exemption to deem the cumulative translation
differences for all foreign operations to be deemed $nil at the date of
transition to IFRS, with future gains or losses on subsequent disposal of
any foreign operations to exclude translation differences arising from
periods prior to the date of transition to IFRS The Accumulated
Comprehensive Loss as at March 31, 2010 amounted to $165,732.
Three Month Period
Revenue for the first quarter of fiscal year 2012 ending June 30, 2011 were
$181,810, representing a drop of 12.9% over revenue of $208,787 reported during
the same three-month period in fiscal year 2011. The drop in revenue occurred
despite an increase in SMS traffic of 25.5% reflecting both the substantial
growth of SMS traffic in the region and the difficulty in maximising profitably
in a unique marketplace where two players, one a large conglomerate and the
other, the Company, compete. It is more difficult for the smaller operator to
rely on the success of mobile messaging and the prospects for SMS growth to
optimize productivity absent any service enhancements. Increased volume, by
definition, does not increase revenue per message and by the nature of the
business and its economics tend to impose constraints on margins.
Management is cognizant of the fact that the provision of new enhanced services
or VAS requires considerable resources and, notwithstanding its relatively
modest but healthy financial position, believes that the best way to increase
shareholder value in the long term is to minimize costs, create substance
through the creation and preservation of a positive cash flow, and work toward
enhancing services using its unique position in a high growth market for SMS and
SMS-related services.
After operating two consecutive quarters with operating losses, the Company
returned to profitability generating net income of $16,509 in the first quarter
ending June 30, 2011, compared to a net income of $39,548 in the corresponding
period the previous year. The drop in revenue was offset marginally by a 1.5%
drop in the cost of sales. Administrative expenses were kept well under control
with an increase of 2.9% to $68,749.
With the increased volume, the SMS platform performed well, generating a
positive cash flow or EBITDA (earnings before interest, taxes, depreciation and
amortization) of $48,373 in the first quarter this year, compared with $76,342
in the corresponding quarter the previous year. The only time when the Company
experienced a negative cash flow was in the second quarter of fiscal 2011. The
parameters for that included investments in third-party marketing platforms that
did not meet expectations causing a sharp rise in the cost of sales and
therefore a decline in EBITDA. In this transition period to a more comprehensive
platform with enhanced services, the Company is vying for a sustained positive
cash flow, intent on increasing liquidity and preserving its capital base.
As can be seen from the table below, SMS traffic during the first quarter of
fiscal 2012 experienced a sharp increase of 25.4% to 39,431,484 messages. This
is owing in part to the successful renegotiation of the contracts with the
mobile operators which were due for renewal this past January. It will be
recalled as well that two major mobile operators were going through some
temporary modifications of their transmission facilities in the preceding
quarter and with their remediation contributed to improve the level of traffic
going through the platform in the first quarter of this year. The main reason,
however, is continued growth in active messaging users and the ability of SMS
messaging applications to interoperate not only within the MNOs ecosystem but
with other web-based messaging mediums as well, contributing to their sustained
popularity.
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Comparisons of Traffic (Inter-SMS) and Total Charges for Past Eight Quarters
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Q2/FY10 Q3/FY10 Q4/FY10 Q1/FY11
Traffic 31,564,627 35,476,325 34,690,178 34,401,824
1.2% 12.3% -1.0% -1.0%
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Comparisons of Traffic (Inter-SMS) and Total Charges for Past Eight Quarters
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Q2/FY11 Q3/FY11 Q4/FY11 Q1-12
Traffic 34,007,952 32,678,329 31,431,278 39,431,484
-.1.0% -.96% -.96% 25.4%
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Gross margin declined slightly from the first quarter of the previous fiscal
year from 68.6% to 64.4% during the first quarter this year. This is
attributable to slightly lower revenue, partly offset by a decline in the cost
of sales. As indicated above, the lower revenue is due to market pressures
requiring the means to adapt to a new set of realities in a high-growth,
high-volume industry. The consequence of that is lower profit margin.
Management is confident, however, that the Company's platform and its exclusive
position in the global Asian economy offer a great opportunity to expand its
horizon in this market either through mergers and or acquisitions.
Forward-Looking Information
Certain information included in this press release may constitute
forward-looking statements. Forward-looking statements generally can be
identified by the use of terms such as "may", "could", "will", "expect",
"intend", "estimate", "anticipate", "believe" or "continue" or the negative
thereof or variations thereon or similar terminology. Forward-looking
statements, by their very nature, involve significant risks, uncertainties and
assumptions. A number of factors could cause actual results to differ materially
from the results discussed in the forward-looking statements, including, without
limitation, the risks factors discussed in the section entitled "Risk Factors"
in GINSMS's long form prospectus dated November 12, 2009 which is available
under GINSMS's profile on SEDAR at www.sedar.com. Although the forward-looking
statements contained herein are based upon what management believes to be
reasonable assumptions, GINSMS cannot assure the reader that actual results will
be consistent with these forward-looking statements. These assumptions are
further described in GINSMS's management discussion & analysis for the three and
twelve-month periods ended March 31, 2011, which is also available on SEDAR at
www.sedar.com. These forward looking statements are made as of the date hereof
and GINSMS assumes no obligation to update or revise them to reflect new events
or circumstances except as may be required by law. Accordingly, readers should
not place undue reliance on the forward-looking statements.
About GINSMS
GINSMS owns 100% of Global Edge Technology, a technology company focused on
providing inter-operator short messaging services to mobile telecom operators in
Hong Kong. GINSMS's stated business objective to become a leading short
messaging service ("SMS") and data hubbing service provider to mobile network
operators in Hong Kong and China and to establish an international SMS and value
added services business.
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