GINSMS Inc. - Performance Highlights for the Three-Month and Six-Period Ended September 30, 2011

GINSMS Inc. - Performance Highlights for the Three-Month and Six-Period Ended September 30, 2011

Calgary, Alberta CANADA, November 28, 2011 /FSC/ - GINSMS Inc. (GOK - TSX Venture), has announced its financial results for its second quarter ended September 30, 2011.

Performance Highlights for the Three-Month and Six-Period Ended September 30, 2011
* Revenue for the three month-period ended September 30, 2011 is down 9.7% to $182,844. For the six months period, revenue declined by 11.3% to $364,254.
* For the half-period ended September 30, 2011, despite lower revenue and higher expenses, EBITDA remained firmly positive at $36,099. For the three-month period to September 30, 2011, EBITDA was mildly negative at $12,273.
* Inter-SMS traffic for the three-month period is up by 1% to 34.4 million from the same period the previous year. When compared to the previous quarter ended June 30, 2011, however, traffic is down by 11.8%.
* Gross margin improved significantly during the second quarter of fiscal 2012 to 64.7% from 43.8% during the corresponding quarter the previous year. For the half-year ended September 30, 2011, gross margin also increased, namely from 56.4% from the half-year ended September 30, 2010 to 64.5%.
* Liquidity improved further this second quarter of fiscal 2012 with a working capital of $1,030,706 as at September 30, 2011, compared to $957,343 as at fiscal year-end, namely March 31, 2011. The working capital ratio is virtually unchanged with a strong 11.2 times to1.

SECTION 1.4: RESULTS OF OPERATIONS-
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Financial           Three-month period ended   Six-month period ended
Highlights                      September 30,           September 30,
                                  (Unaudited)             (Unaudited)
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                             2011        2010         2011       2010
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Revenues $                182,444     202,065      364,254    410,852
Cost of sales $          (64,461)   (113,616)    (129,150)  (179,260)
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Gross profit $            117,983      88,449      235,104    231,592
Gross margin                64.7%       43.8%        64.5%      56.4%
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EBITDA [(1)] $           (12,273)    (30,884)       36,099     45,458
EBITDA margin             (15.5)%     (34.9)%        12.8%      19.6%
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Net earnings $          (42,951)9    (66,778)     (26,442)   (27,230)
Net earnings margin       (23.5)%     (33.0)%       (7.3)%     (6.6)%
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(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
                 September 30, 2011     March 31, 2011      April 1, 2010
                      (Unaudited)(1)          (Audited)    (Unaudited)(2)
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Total assets $             1,305,623         1,256,568          1,652,884
Total liabilities $          109,101           108,119            356,353
Shareholders' equity $     1,196,522         1,148,449          1,296,531
Net earnings (loss) per share $
     Basic                      0.00              0.01                N/A
     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. 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 13 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.


Financial Review for the Three- and Six-Month Period ended September 30, 2011

Revenue for the second quarter of fiscal year 2012 ending September 30, 2011 revenue was $182,444, representing a drop of 9.7% over revenue of $202,065 reported during the same three-month period in fiscal year 2011. The drop in revenue occurred despite a small 1% increase in SMS traffic to 34,371,080 as per-message margin continued to decline. Profit margins are generated based on a formula that applies a service charge on a per-message basis and a charge based on bundled services. This formula ensures a steady somewhat predictable level of income but unless volume increases past a certain threshold rather significantly, it tends to damper margins. The formula was adopted to attract traffic and entice usage of the service in a very competitive environment.

Although traffic for the quarter period ended September 30, 2011 was slightly higher compared to the corresponding quarter ended September 30, 2010, it was lower compared to the quarter ended just prior to it, namely the quarter ended June 30, 2011, by 12.8%. The main reason for the drop is the negative impact the re-structuring by one major mobile operator of its 2G network over a two month period had on traffic. It is expected that this major operator will re-route lost traffic back through our service platform soon.

For the six-month period ended September 30, 2011, revenue dropped by 11.3% to $364,254, compared to the corresponding period the previous year. The drop manifested despite an increase in SMS traffic of 7.9% and reflects, as is the case for the tree-month period, a loss of margin per-message as explained above.

The net loss for the three-month period ended September 30, 2011 was $42,951, compared to a net loss of $66,778 during the comparable quarter the previous year. Lower losses reflect higher gross margin which settled at 64.7%, compared to 43.8%, lower salaries and amortization, partly offset by higher professional fees and administrative expenses, and a first-time non-cash charge of $6,000 on a share-based compensation program adopted during the quarter. Higher professional fees are consistent with the Company's efforts to seek out new avenues of growth externally. Higher gross margins are attributable to lower cost of sales in part due to the disposal of a third-party marketing platform which did not meet expectations.

The net loss of the six-month period ended September 30, 2011 was $26,442, compared to a net loss of $27,230 the previous year. The reasons for the slightly lower losses are similar to those for the first quarter including higher gross margins which grew to 64.5%, compared to 56.4%. Professional fees, however, were notably lower in the first quarter as compared to the second quarter, resulting in a performance for the first half-period of this year, not dissimilar to that of the first half-period the previous year.

EBITDA (earnings before interest, taxes, depreciation and amortization) is a very useful indicator in measuring the Company's ability to sustain viable operations long term while resources are used to grow the Company in a difficult environment. Despite lower revenue and higher expenses, EBITDA for the three-month period ending September 30, 2011 is only mildly negative at $12,273, compared to a negative $30,884 for the corresponding period the previous year. For the six-month period also ended on September 30, 2011, EBITDA ended on a firm positive note, generating $36,099 although slightly lower than the $45,458 generated during the comparable period the previous year.

Management remains confident 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.


Contact:

Raymond Richard
GINSMS Inc.
Corporate Secretary
450-466-2921


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http://www.usetdas.com/pr/ginsms11282011.htm



Source: GINSMS Inc. (TSX-V GOK) www.ginsms.com
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