Final Results

SINOSOFT TECHNOLOGY PLC

("Sinosoft" or the "Company" or the "Group")

PRELIMINARY RESULTS FOR THE YEAR ENDING 31 DECEMBER 2009

Sinosoft, the China based developer and provider of e-Government software and other IT services, announces its preliminary results for the year ended 31 December 2009.

Financial Highlights

l Turnover up 20% to US$14.5m (2008: US$12.1m)

l Gross profit up 12% to US$9.6m (2008: US$8.6m)

l Operating profit maintained at US$3.3m (2008: US$3.3m) 

l Profit before tax increased by 16% to US$4.4m (2008: US$3.8m)

l Dividend to be maintained at FY2008 payout of 0.31 pence per share

Operating Highlights

l Strong growth in Tax Software and System Integration division

l Continuing strong cashflow

l Acquired Jiangsu Skyinformation Co., Ltd.

l Integrated 3M's RFID technology with our software

Commenting on the results, Mark Greaves, the newly appointed Chairman of Sinosoft said: "What started out as a difficult year, improved considerably in the second half. I am pleased to announce that the Group's revenue and profit before tax have continued to grow. Our cash position remains strong and we are in a position to propose a meaningful dividend to shareholders."

-ends-

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Chairman's Statement

Results

It gives me great pleasure to present my first report as incoming Chairman of the Company and to reflect on what has been a challenging year, but a year in which Sinosoft has made significant progress. The Chinese economy has not been immune to recent financial turmoil and in the face of tightened trading conditions Sinosoft has been required to adapt.

The difficult trading environment was evidenced by our FY2009 first half results, when, for the first time in our history we recorded lower revenues than the comparable period of the previous year. Despite this initial setback the Group was able to recover lost ground during the second half of the year thanks in part to the PRC government's stimulus package. The Group's performance benefited from our strategy of adopting a broadly-based business model that is not dependent on any one income stream. This strategy enabled Sinosoft to redeploy staff and to focus the business on sectors where sales continued to exist.

I am pleased to report that for the full year, the Group was able to report growth in turnover and net profit. However, gross profit margin was lower due to the higher proportion of revenue contributed by System Integration, a traditionally lower margin division. Operating expenses were higher due to increased spending on R&D, marketing and administration.

We continued to record growth in sales of our export tax software. Whilst the economic slowdown has exacerbated the delays suffered in the roll-out of the Company's SAT product outside of Jiangsu, we have continued to generate revenues through the sale of our value-added products to existing customers. We are pleased that we are continuing to develop bolt on products that enable us to leverage from our established customer base and believe that this demonstrates the inherent value of Sinosoft's export tax products to our clients.

e-Government was the key performer during the year in terms of revenue growth. This division benefitted from the government restating previously postponed or delayed projects and increasing its discretionary spending activity in its bid to stimulate the economy. In addition, the PRC government has been taking measures to develop the country's IT infrastructure and to improve on the level of government online services that it provides to its citizens. With our proven past track record in this field, we have managed to secure an increasing number of such government contracts. We have bid for and won an e-government project in Nan An, a city in the Chongqing municipality that was previously dominated by local software companies. We are hopeful that the Group's first move into South West China should bring about greater potential for the Group's e-government business.

As expected, the Group's Information Integration division recorded a decline in revenues. This division is highly dependent on corporate IT projects and the economic slowdown has greatly reduced the IT budgets of most corporate clients and the number of new projects available for tender. To overcome the expected decline in this division, the Group actively looked for innovative ways to develop new services. As a first step, the Group has integrated 3M's Radio Frequency Identification (RFID) tracking technology with the Group's own software system and has won a project with the Nanjing Library. This contract made a significant contribution to the revenue for this division. Whilst there is still uncertainty surrounding the economic recovery, we are not anticipating a substantial improvement in this division in the near term.

For System Integration, revenue growth and overall contribution to Group turnover was significantly higher compared to the prior year. Pleasingly this is mainly due to repeat business from existing clients. The division also benefited from provincial and national government's increased spending on IT infrastructure as well as our continued effort to secure new customers. The Group continues to adopt the strategy of expanding the customer base of this division as it believes that this will continue to play a vital role in helping to bring in revenue for our other divisions.

During the year, we have also collaborated with a Singaporean IT company to outsource our engineers to help them with programming and coding work for their projects. From this collaboration, we hope to seek new opportunities to expand our outsourcing business outside of the PRC.

For the year, the Group experienced an overall net cash inflow, taking our cash position from US$12.9m to US$14.9m. We continue to be cash generative from our operations. Cash generated from operations increased by US$3.0m to US$7.0m. Our main cash outflow during the year related to our continuing investment in R&D. Trade receivables increased significantly due to increased activity in the latter months of the year.

In July 2009, we acquired SkyInformation Co. Ltd, a PRC registered software company. Although this acquisition did not contribute materially to our performance this year, we expect to use its software license in the future to further develop new products and apply for government grants that are only available to PRC registered companies. In addition, this acquisition will allow the Group to be better placed to win government mandates that were otherwise not accessible to foreign owned companies.

Dividend

At the operation level the Group has continued to be cash generative. A resolution proposing a dividend of 0.31 pence per ordinary share (2008: 0.31p per share) will be proposed at the forthcoming AGM.

Board

On 1 May 2010, Mr Mao Ning will retire from the board and will step down from his position as Chairman of the Company. Mr Mao Ning has held the position since Sinosoft's admission to AIM in March 2006 and the Board would like to thank him for his contribution and unfailing commitment to the Group. I am honoured to have been asked to take on the role of Chairman, building on my four years of service as an independent non-executive director of the Company.

What began as a difficult start to the year has ended with reasonably pleasing results. I believe our strategy of continuously expanding our four core business areas and yet not being totally dependent on any one revenue stream has helped us to overcome the recent difficult economic climate. The Group has been resilient to a difficult trading period and we are cautiously optimistic that as the economy begins to recover we are well positioned to capitalise from our investment in our staff, R&D and product development and established customer base.

On behalf of the Board, I extend my sincere appreciation and thanks for the support of all our stakeholders, including our shareholders, customers, staff and advisers. With your continuing support, we look forward to the further development and success of Sinosoft Technology plc.

Mark Greaves

Non Executive Director and incoming Chairman

19 April 2010

Chief Executive Officer's Report

Group turnover registered a 20% growth from FY2008 to achieve total sales of US$14.5m (FY2008: US$12.1m). However, gross profit grew by a smaller 12% to US$9.6m (FY2008: US$8.6m) due to the higher percentage of revenue contributed by System Integration, a traditionally low margin division. Operating expenses continued to increase as we increase the number of our staff and increase our spending to secure and service customers in new provinces.

For FY2009, the sales split across the Group's four divisions, of System Integration, e-Government, Tax Software and Information Integration, was 37%, 27%, 24% and 12%, respectively (FY2008: 31%, 22%, 26% and 21%).

Tax Software

In tandem with the global economy, China's export industry suffered substantial slowdown in 2009. The knock on effect was a marked decline in the number of newly set up export enterprises; prospective customers for our sales of export tax rebate software. The roll out of our SAT product outside of Jiangsu also suffered further delay as the central tax bureau amended the timetable in response to the wider slow down in export levels. To overcome these setbacks, we have been focusing on the development and sales of value added software to our existing export tax rebate software users. We are pleased that despite the difficult market conditions sales from this division increased by 14%. A new value added product developed in FY2009 which generated revenue during the same year is our Sinosoft Portable Reporting Software. Stored on a thumb drive, it allows users to connect to their office computer where the tax rebate software is located and allow them access to their tax rebate data. This is useful for users who need to make last minute amendments at the tax office or need remote access to their tax rebate data.

e-Government

Sales growth was very strong for this division in FY2009 with a 43% increase in turnover recorded from the previous year. Discretionary spending by the PRC government picked up pace with the release of the stimulus package during the early part of FY2009. Our Group was able to benefit greatly from this increase government spending as we have a well proven track record with both local, provisional and national government agencies. In addition, with the launch of six new products in FY2008, we were able to offer a wider suite of functionality to suit our customers' needs.

Our strategy of continuously investing in R&D and offering new products based on client requirements has proven to be successful as was demonstrated during the year with our maiden contract win in Nan An. The division beat other software companies to secure our first e-government contract in this region.

During the latest Chinese People's Political Consultative Conference (CPPCC) meeting held in March 2010, the government communicated its intention to improve the level of IT services that it provides to its citizens in the coming years. Given our history of successfully securing and completing such projects, this division should be in a good position to capture a share of any such initiative.

During the year, the division developed two new products; Sinosoft Public Resource Supervision Software and Sinosoft Integrity Software. The first software allows the government to supervise the use of public resources such as funds, manpower, materials etc in projects that they have awarded, to ensure that resources are not misappropriated. The second software allows the government to collect data from various agencies to set up a database on the level of integrity of private contractors. Any government agency is then able to conduct search on the integrity of any private contractor before a contract is awarded to them. Both of these products are expected to start generating revenue in FY2010.

Information Integration

This division is the only one to record a revenue decrease of 29%. Being highly dependent on corporate IT spending, this decline was the direct outcome of the decrease in most corporates' IT spending due to the financial crisis that began in the last quarter of 2008. With the global economic recovery still patchy, the outlook for this division will continue to be uncertain.

During the year, we developed two new products: Sinosoft RFID Integrated Software and Sinosoft Export Enterprise Management Software. The first software was used in our successful bid for Nanjing Library which integrated RFID technology developed by 3M (www.3M.com) to provide a new archiving, cataloguing and book borrowing system. The second software is a product that helps export enterprises to integrate information from various departments into a single interface. This product is expected to start generating revenue in FY2010.

Outsourcing

During the year, the Group entered into an outsourcing collaboration with a Singaporean IT company whereby our engineers helped to provide coding and programming services to the company. We hope that this collaboration will further open doors to help the Group secure new contracts in Singapore.

Systems Integration

Revenue of Systems Integration increased significantly by 41% during the year. Traditionally a lower margin division, it accounted for 37% of the Group's total revenue as compared to 31% in FY2008. This has resulted in a lower overall gross profit margin for the Group as compared to the prior year.

This growth in this business was primarily due to a higher number of our existing and previous clients turning to us for their IT upgrade during FY2009. In addition, this division also greatly benefitted from the government's increased spending as a result of the stimulus package. Even though margin is low for this division, we continued to pursue System Integration projects and secure new clients. These new customers also helped to contribute to the higher revenue during the whole year.

Management continues to maintain the view that active courting of new projects in this low margin division is a necessary strategy because such projects are highly effective in increasing the client's hardware compatibility with our other products, thus making it easier to sell our proprietary software to them in the future.

Other

Even though our operations were somewhat affected by the global downturn, the crisis nevertheless also presented us with the opportunity to acquire Jiangsu Skyinformation Co. Ltd at a competitive price. The acquisition has and will enable the Group to secure government contracts that were otherwise not available to our two foreign owned trading subsidiaries.

Towards the end of FY2010, the Company will be relocating to its new premises located in Nanjing's Pukou District. With this new premise, the Company will have the necessary space to continue its investment in R&D. During the year, the number of R&D personnel employed increased from 230 in FY2008 to 270. Our intangible assets of development cost and patents similarly increased to US$7.5m (FY2008: US$5.1m). We expect part of this to start generating revenues in FY2010 and beyond.

Xin Yingmei

Chief Executive Officer

19 April 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2009

CONSOLIDATED BALANCE SHEET

at 31 December 2009

COMPANY BALANCE SHEET

at 31 December 2009

CONSOLIDATED CASHFLOW STATEMENT

for the year ended 31 December 2009

CONSOLIDATED STATEMENT OF SHAREHOLDERS'FUNDS AND STATEMENT OF CHANGES IN SHAREHOLDERS'EQUITY

at 31 December 2009

NOTES TO THE FINANCIAL STATEMENTS

1 BASIS OF PREPARATION

This preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), the Companies Act 2006 applicable to companies reporting under IFRS and under the historical cost convention.

2. REVENUE AND SEGMENT INFORMATION

The segment reporting format is determined to be business segments, as the Group's principal activity is conducted in the People's Republic of China. 

The Group's operations are organised into two operating divisions namely software development and system integration. 

The software segment provides export tax, e-government and information integration software.

The system integration provides consultancy and the implementation of IT solutions, which includes provision of hardware and peripherals.

The Group's revenue was all derived from its principal activity. All revenue originates in the People's Republic of China. 

Major customers

During the year revenues of $3,483,733 (2008: $3,782,022) arose from three customers from within the Software Development division. Within that figure, revenue derived from Chinese government and companies within the control of the Chinese government accounted for 59% (2008: 34%).

During the year revenues of $6,806,267 (2008: $7,310,193) arose from three customers from within the System Integration division. Within that figure, revenue derived from Chinese government and companies within the control of the Chinese government accounted for 84% (2008: 53%).

The assets and liabilities of the Group cannot be allocated to the above segments. For internal reporting purposes balance sheets are not split into segments.

3. OTHER INCOME

4. EARNINGS PER SHARE

5. DIVIDEND

Subject to approval at the forthcoming AGM, the Company will declare a dividend of 0.31p per ordinary share. The dividend will be paid to shareholders on the register on 18 June 2010. The Company's shares will trade 'Ex-dividend' on 16 June 2010 and the proposed payment date is 19 July 2010.

6. PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information in the preliminary statement of results does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 2008. Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985 in respect of the accounts for 2008, nor a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2009.

The financial statements, and this preliminary statement, of the Group for the year ended 31 December 2009 were authorised for issue by the Board of Directors on 19 April 2010

7. TIMETABLE AND DISTRIBUTION OF ACCOUNTS

The report and financial statements together with the Notice of AGM and Proxy form will be despatched to shareholders in May. The annual general meeting will be held at 10 am on 25 May 2010 at the offices of the Tavistock Communications, 131 Finsbury Pavement, London, EC2A 1NT.

Additional copies of the Annual Report and Accounts, Notice of AGM and Proxy Form may be requested directly from the Company and will be available following distribution to shareholders on the Company's website www.sinosoft-technology.com.