RNS Number : 8952C
Sinosoft Technology plc
08 September 2008
Sinosoft Technology plc ("Sinosoft" or the "Company"),
Interim Results for the Six Months Ended 30 June 2008
Sinosoft the AIM quoted (AIM:SFT), China based developer and provider of software and related services, announces interim results for
the six months ended 30 June 2008.
First Half 2008 Financial Highlights
* Turnover up 46% to US$5.31M (2007: US$3.63M)
* Gross profit up 60% to US$4.11M (2007: US$2.57M)
* Research & Development expenditure up 51% to US$0.83M (2007: US$0.55M)
* Profit for the period up 7.6% to US$1.43M (2007: US$1.33M)
First Half 2008 Operational Highlights
* Significant growth in e-government and outsourcing business
* Installation and testing of export tax refund software has expanded to Chongqing and the initial results are positive
* Incorporation of Fujitsu's PalmSecure* palm vein biometric authentication system into certain Sinosoft products for increased
security
Commenting on the results, Mao Ning, Chairman of Sinosoft said: The further expansion of our e-government and outsourcing divisions has
exceeded management expectations and is expected to be a significant driver for growth over the coming years."
The long term roll-out plans for SAT continue to have significant potential and will be further enhanced once further installations and
testings have been completed."
For further information, please visit www.sinosoft-technology.com or contact:
Sinosoft Technology plc Alfred Ho +(86) 25 8481 6867
Hanson Westhouse Limited Tim Metcalfe/Richard Baty 020 7601 6100
Tavistock Communications Simon Compton 020 7920 3150
Chief Executive's Statement
I am pleased to present our interim results for the six months to 30 June 2008. Revenue increased by 46.4% to US$5.31M (2007: US$3.63M)
following strong growth in the e-government and outsourcing divisions. Operating profit excluding investment gains was up 42.5% to US$1.14M
(2007: US$0.80M). If investment gains are included there would be no significant change: (US$1.27M and US$1.29M for 2008 and 2007
respectively). Net profit for the period, excluding investment gains was up 53.6% to US$1.29M (2007: US$0.84M). If investment gains were
included the figure would be up 7.6% to US$1.43M (2007: US$1.33M)
During the period Sinosoft invested heavily in research and development ("R&D"). The Company's total R&D costs in the period were
US$0.83M, an increase of 51.5% from the same period in 2007. This reflects the recognition that Sinosoft must continue to develop cutting
edge technology in order to further expand its range of products and generate increasing value for shareholders.
In July this year we announced an agreement with Fujitsu to use their PalmSecure* palm vein biometric authentication system to increase
secure access to Sinosoft's IT systems. I am pleased to report that this has been successfully incorporated into a number of our products
and has proven to be a key value-add feature for current and new customers. We are also cooperating with Fujitsu in the development of
document scanning technology and hope to see significant progress for the second half of 2008.
E-Government
This division has become Sinosoft's major growth driver over the past half year. During this time its contribution to revenue increased
by 80% to US$0.9M (2007: US$0.5M). This success has been largely due to the four new products developed in 2007 by our R&D team. These
products, which were detailed in our last set of preliminary results, have all been successfully launched and the resulting sales came to
US$0.16M for the period under review.
In the first half of 2008, we developed a further new product which improves the online application process for various applications in
different levels of government. It also enables applicants to go online and check the progress of their application. The majority of sales
to date have been to Shenzhen, Guangdong and Henan, which amounted to US$52,000, US$44,000 and US$73,000, respectively. We are currently in
negotiations to provide the same service to the Shangdong provincial government.
The R&D department has also developed a network platform that can be offered by provincial governments to citizens who are seeking legal
aid. In past years, lack of suitable access to legal information has prevented Chinese citizens from exercising their legal rights. We have
already sold this platform to Jiangsu, Guangxi, Hunan, Jiangxi and Guizhou provincial government offices and expect to distribute to other
provinces. The Canadian Department of Justice has subsidized this program in the form of grants.
Information Integration
Information integration has experienced an increase in sales by 40% to US$1.4M (2007: US$1.0M). Three newly developed products have been
successfully launched which focus mainly on the supervision of information for airline companies' flights. They also analyze and manage
travellers' ticket booking information. Sichuan Airlines, the regional operator based in Chengdu, became a client during the period. Sales
generated from new products amounted to US$80,000.
Tax Software
The rollout of the Company's tax software to provinces outside Jiangsu has been a significant undertaking for Sinosoft in the last six
months and this continues to be a principal focus of the business going forward. The delays in the roll out have been frustrating leading
Sinosoft to focus on increasing its revenues through its other offerings of Information Integration, e-government and outsourcing.
As previously announced the rollout has been delayed through technical issues with the State Administration of Taxation, changes to the
structuring of the taxation system within the PRC and issues with the individual technical specifications at a provincial level. However,
against this backdrop relations with the SAT remain strong, we are continuing to roll out the product to the provincial tax bureaus and we
anticipate that this remains a significant driver for growth outside Jiangsu.
In July and August this year, Sinosoft undertook testing of its export tax refund software in Chongqing. This testing went well. Due to
the good results in Chongqing, the State Administration of Taxation decided to change its plan. Instead of testing the software for the
local tax authority in Beijing as originally scheduled, stress testing to test the volume of transactions that the software can handle will
be performed in the Central State Administration of Taxation office.
Two spin off products that have been developed to work in conjunction with our tax software; an information collection program and an
information scanning program. The former collects information relevant to tax refund purposes and is currently being sold on the market at
RMB4,000 (approximately US$580); the benefit of this software is that it streamlines the application process and helps reduce human error.
The information scanning software helps integrate scanned documents into the tax refund application software. It is being developed in
cooperation with Fujitsu and we anticipate it will be launched late this year, at a price of RMB5,000 (approximately US$730) . The initial
target market for these products will be Sinosoft*s existing customer base in Jiangsu of over 30,000 exporting enterprises.
Outsourcing
The Company continues to benefit from the expansion of its software outsourcing business. As announced in April, Sinosoft entered a three
year contract for US$2M with Schenker, one of the world's leading providers of integrated logistics services. Work has commenced with
Schenker and management continue to pursue additional opportunities.
Dividend
A dividend of $1,027,075 equating to 0.31 pence per ordinary share was paid to shareholders on 16 June 2008. The Company intends to
continue to pay an appropriate annual dividend and this will be announced within the full year results statement.
Outlook
We are well positioned to achieve further growth in the second half of 2008 in e-government, information integration and outsourcing and
are hopeful that Sinosoft's export tax software will be a principal growth driver in 2009 and beyond.
Xin Yingmei
Chief Executive Officer
8 September 2008
SINOSOFT TECHNOLOGY PLC
CONSOLIDATED INCOME STATEMENT
6 months 6 months 12 months ended
ended 30 June ended 30 June 31 December
2008 2007 2007
US$ US$ US$
(reviewed) (reviewed) (audited)
Revenue 5,311,008 3,627,232 10,615,673
Cost of sales (1,201,921) (1,061,827) (3,385,934)
* * *
Gross profit 4,109,087 2,565,405 7,229,739
Other income 277,217 785,861 1,744,653
Research and development cost (831,362) (548,780) (1,565,550)
Selling and distribution (901,202) (592,950) (889,937)
expenses
Administrative expenses (1,336,766) (913,959) (1,712,729)
Other operating expenses (43,024) (6,743) (23,331)
* * *
Profit from operations 1,273,950 1,288,834 4,782,845
Finance income 258,761 215,185 439,185
Exchange gain or loss (529) - (27,845)
Profit before tax 1,532,182 1,504,019 5,194,185
Taxation (100,523) (174,094) (377,195)
*
Profit for the period 1,431,659 1,329,925 4,816,990
CONSOLIDATED BALANCE SHEET
30 June 30 June 31 December
2008 2007 2007
US$ US$ US$
(reviewed) (reviewed) (audited)
ASSETS
Non-current assets
Property, plant and equipment 940,537 457,540 682,150
Intangible assets 4,250,739 3,296,377 3,680,683
Total non-current assets 5,191,276 3,753,917 4,362,833
Current assets
Inventories 1,401,043 726,701 1,548,498
Trade receivables 6,035,016 3,555,031 3,490,923
Other receivables 4,166,676 3,579,871 3,798,672
Investments - 57,903 -
Cash deposits - - 283,094
Cash and cash equivalents 16,467,271 16,858,608 18,119,152
Total current assets 28,070,006 24,778,114 27,240,339
Total assets 33,261,282 28,532,031 31,603,172
LIABILITIES & EQUITY
Current liabilities
Trade payables 1,073,119 348,630 1,248,594
Other payables 343,760 2,546,468 337,073
Deferred income 142,423 90,933 126,369
Total current liabilities 1,559,302 2,986,031 1,712,036
Deferred tax 292,490 237,099 289,287
Total non-current liabilities 292,490 237,099 289,287
Total liabilities 1,851,792 3,223,130 2,001,323
Capital and reserves
Share capital 424,023 424,023 424,023
Share premium 11,283,551 11,283,551 11,283,551
Merger reserve (1,118,051) (1,118,051) (1,118,051)
Other reserves 9,739,557 4,562,524 8,336,500
Retained earnings 11,080,410 10,156,854 10,675,826
Total shareholders' equity 31,409,490 25,308,901 29,601,849
* * *
Total liabilities & equity 33,261,282 28,532,031 31,603,172
CASH FLOW STATEMENT
6 months 6 months 12 months ended
ended 30 June ended 30 June 31 December
2008 2007 2007
US$ US$ US$
(reviewed) (reviewed) (audited)
Operating activities
Income before taxation from 1,532,182 1,504,019 5,194,185
continuing operations
Adjustments for:
Interest income (258,761) (215,185) (439,185)
Exchange difference 529 - 27,845
Gain on disposal of - (487,527) (35,509)
investments
Investment income (137,656) - (1,353,211)
Impairment loss in receivables 217,594 113,367 69,157
Depreciation of property, 53,127 33,110 75,085
plant and equipment
Amortisation for intangible 745,379 433,692 967,522
assets
Operating cash generated 2,152,394 1,381,476 4,505,889
before working capital changes
Decrease/(increase) in 147,455 (497,817) (1,319,614)
inventories
Increase in trade and other (2,912,097) (815,930) (892,711)
receivables
(Decrease)/ increase in trade (168,788) 1,812,438 476,418
and other payables
Cash generated by operations (781,036) 1,880,167 2,769,982
Income taxes paid (173,248) (8,517) (16,125)
NET CASH USED IN / GENERATED (954,284) 1,871,650 2,753,857
FROM OPERATING ACTIVITIES
Investing activities
Interest received 258,761 215,185 439,185
Proceeds on disposal of 323,929 1,229,223 3,169,208
trading investment
Purchase of property, plant (336,530) (92,886) (335,097)
and equipment
Purchase of intangible assets (1,037,852) (1,575,836) (2,440,609)
Purchase of investments for (186,272) (538,994) (1,484,429)
trading
Increase in pledged bank 250,646 171,352 (111,742)
deposits
NET CASH USED IN INVESTING (727,318) (591,956) (763,484)
ACTIVITIES
Financing activities
Dividend paid (1,027,075) - -
NET CASH USED IN FINANCING (1,027,075) - -
ACTIVITIES
NET (DECREASE) /INCREASE IN (2,708,677) 1,279,694 1,990,373
CASH AND CASH EQUIVALENTS
Effect of exchange rate 1,056,796 548,431 1,098,296
changes
CASH AND CASH EQUIVALENTS AT 18,119,152 15,030,483 15,030,483
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT 16,467,271 16,858,608 18,119,152
THE END OF PERIOD
STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Merger reserve Other reserves Retained earnings Total
US$ US$ US$ US$ US$ US$
Reviewed Reviewed Reviewed Reviewed Reviewed Reviewed
Balance as at 1 January 2007 424,023 11,283,551 (1,118,051) 3,956,096 8,826,929 23,372,548
Profit for the period - - - - 1,329,925 1,329,925
Effect of exchange rates - - - 606,428 - 606,428
* * * * * *
Balance as at 30 June 2007 424,023 11,283,551 (1,118,051) 4,562,524 10,156,854 25,308,901
Profit for the period - - - - 3,487,065 3,487,065
Transfer to statutory reserve - - - 404,109 (404,109) -
Effect of exchange rates - - - 805,883 - 805,883
Transfer to capital reserve - - - 2,563,984 (2,563,984) -
* * * * * *
Balance as at 31 December 2007 424,023 11,283,551 (1,118,051) 8,336,500 10,675,826 29,601,849
Profit for the period - - - - 1,431,659 1,431,659
Appropriation of reserve funds - - - 2,092 - 2,092
Effect of exchange rates - - - 1,400,965 - 1,400,965
Dividend paid - - - - (1,027,075) (1,027,075)
Balance as at 30 June 2008 424,023 11,283,551 (1,118,051) 9,739,557 11,080,410 31,409,490
NOTES TO THE INTERIM REPORT
1. The interim results for the period ended 30 June 2008 are unaudited and do not constitute financial statements within the meaning
of s.240 of the Companies Act 1985. The figures for the year ended 31 December 2007 have been extracted from the financial statements which
have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain a
statement under section 237(2) of the Companies Act 1985.
2. The financial information set out in this report has been prepared in accordance with accounting policies as set out in the
Group's annual report and financial statements for the year ended 31 December 2007.
3. Functional and presentation currency
Sterling is the functional currency of the Company as it is the currency of the primary economic environment in which it operates. The
US Dollar ("US$") is the currency used to present the financial information in order to improve understanding of the financial position of
the Company by increasing comparability with the financial information of Nanjing Skytech Co. Limited and Nanjing Skytech Software Co.
Limited, the operating subsidiaries whose functional currency is the Chinese Renminbi.
4. Earnings per share
The calculation of basic earnings per ordinary share and the fully diluted earnings per ordinary share is based on the profit
attributable to the Group and the weighted average number of ordinary shares of each period.
30 June 30 June 31 December
2008 2007 2007
US$ US$ US$
(reviewed) (reviewed) (audited)
* * *
Profit for the period US$1,431,659 US$1,329,925 US$4,816,990
* * *
Number of shares - weighted 165,582,189 165,582,189 165,582,189
average - basic
Basic earnings per share US$0.0086 US$ 0.0080 US$ 0.0291
* * *
Number of shares - weighted 165,582,189 169,307,788 165,582,189
average - diluted
Diluted earnings per share US$0.0086 US$0.0079 US$0.0291
INDEPENDENT REVIEW REPORT
TO SINOSOFT TECHNOLOGY PLC
Introduction
We have been instructed by the Company to review the financial information for the six months ended 30 June 2008, which comprises the
consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and
related notes 1 to 4. We have read the other information contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 issued
by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters that we are required to
state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the
Directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the AIM admission document except where changes, and the reason for
them, are disclosed.
Review work performed
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board for use in the United Kingdom. A review consists principally of making enquires of Group management and applying analytical
procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied, unless otherwise disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with the
International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modification that should be made to the consolidated financial information
as presented for the six months ended 30 June 2008.
SEDLEY RICHARD LAURENCE VOULTERS
Chartered Accountants & Registered Auditors
This information is provided by RNS
The company news service from the London Stock Exchange
END
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