25th Sep 2007 07:02
Sinosoft Technology plc25 September 2007 Sinosoft Technology Plcroll-out Interim Results for the six months ending 30 June 2007 Sinosoft Technology plc ("Sinosoft" or the "Company"), the AIM quoted (AIM: SFT)China based developer and provider of e-Government software and services, ispleased to announce its interim results for the six months ended 30 June 2007. First Half 2007 Highlights o Revenue increased by 33.1% to US$3.63 million (2006: US$2.72 million) o Profit before tax increased by 31% to US$1.50 million (2006: US$1.15 million) o SAT testing in Beijing complete • Roll-out commenced in Anhui province • Zhejiang identified as the next province for roll-out o Other areas of the business performing well • E-Government solutions • Outsourcing o Six new products in the first half of 2007 o New office opened in Beijing Commenting on the results, Mao Ning, Chairman of Sinosoft said: "The Companycontinues to expand in line with its expectations and we are pleased with theprogress that has been made during the period under review. "The management remain focused on the development of the export tax project andlook forward to the commencement of roll-out in Zhejiang, the fourth province.The success of other areas of the business, in particular outsourcing services,is a useful addition to the revenue mix and will help to support our growthstrategy." -ends- Hanson Westhouse Limited 020 7601 6100Tim Metcalfe/Richard Baty Tavistock Communications 020 7920 3150Simon Compton Sinosoft Technology Plc Interim Results for the six months ending 30 June 2007 Chairman's statement Financial Review Revenue increased by 33.1% to US$3.63 million compared with the same period in2006 (1H 2006 US$2.73 million). Gross profit increased to US$2.57 million(1H 2006 US$2.22 million) resulting in gross profit margin of 70.7% (1H 200681.3%). The lower margin is mainly a result of the change of revenue mix withsystem integration work, which produces a lower margin, contributing 32% ofsales in the period (1H 2006: 20%). The profit before tax for the period is US$1.50 million (1H 2006 US$1.15million), representing an increase of 31%. The overall net profit for the periodis US$1.33 million (1H 2006: US$1.15 million), a 15.8% increase to the sameperiod in 2006. The operational costs increased as the Company expanded its R&D department todevelop new software products and increased its sales and marketing team. Theexpenditure on R&D was US$548,780, an increase of 55.25% from the same periodin 2006 (1H 2006: US$353,478). There are currently 157 people working in thisdepartment, representing around 60% of the total workforce. Since my last reportthe Group has added 36 people to its R&D team and the Board believes that theinvestment in R&D is key to the long term success of Sinosoft. Other operating income increased to US$785,861 in line with the increase insales of software products in the first half and includes a VAT refund. The restis gained from investment income. Export Tax Software It was previously disclosed in Sinosoft's trading update dated 29 June 2007, that following the completion of product testing, the intention was to commence the roll-out of the Company's export tax software products in Anhui Province in the third quarter, with revenue being generated from September, and with the roll-out to further provinces expected to commence on a staged basis from the fourth quarter. I am pleased to report that following the completion of central testing in Beijing, the tax review software has been installed in the Anhui tax bureau. The roll-out in Anhui is now progressing, albeit at a slower pace than initially anticipated as Sinosoft encountered differing interfaces between hardware and software from one city to another. This issue, which is currently being addressed, does not stop revenues being generated in the cities where the system has already been installed and sales of export tax software to exporting enterprises in Anhhui have commenced. Zhejiang, one of China's largest exporting provinces, has been identified as the next province and installation will commence immediately after the Chinese holidays on 8 October and is expected to take 30 - 40 days to complete. This will be followed by a commissioning stage to ensure the software is compatible to different network requirements. The roll-out in Zhejiang is expected to be smoother as the province is better developed in terms of IT infrastructure, and the experience gained in Anhui will be of great assistance. Sales to exporting enterprises in Zheijiang are currently anticipated from December 2007. Sinosoft currently has 45 staff dedicated to this project, who are focused upon the technical specifications, testing and the identification of distribution partners to assist in the delivery of the roll-out. E-Government Solutions We continue to grow this area of the business and the Company is looking todevelop by targeting new bureaus and district government agencies in Nanjingfollowed by other cities in Jiangsu Province. I am pleased to report that anumber of new contracts were won in the period which resulted in revenues beingahead of expectations in the first half of 2007. The Board is confident thatthis area of the business will continue to prosper in the second half of theyear. Outsourcing We intend to continue the expansion of our software outsourcing business. Thesuccess of this part of the business has led to a new income stream and we arekeen to exploit this opportunity. The Company sees this as an important move aswe look to expand both within the domestic Chinese market and to overseasmarkets. During the period, Sinosoft won a US$850,000 contract from BruxtonCorporation and met the requirements of Corporate Quality Consulting GmbH (www.corporatequality.de), a well-known German company. The Company hassubsequently begun a 6 to 12 month project with a minimum contract size of€500,000 to develop software for Corporate Quality Consulting GmbH. Mao NingChairman Operational Review Sinosoft currently has 260 members of staff, with the majority of additions inthe period being to the R&D team. The new Beijing office was opened on 20 August2007, this currently has just two employees; however the Company is looking togrow this office as it will assist the SAT project as well as assisting with thedevelopment of Sinosoft's business in Beijing and with international companies. The Company developed six new products in the first half of 2007, all of whichare related to e-Government, information integration and tax rebate. The newproducts are already revenue generating and we expect them to make significantcontribution to the Company's revenues in the coming years. The Company is actively looking for acquisition targets that will complement itsbusiness and facilitate expansion in China. Summary The Board believes that the long term outlook for the SAT contract remainsunchanged. The financial performance of the Company in the first six months of2007 was in line with the management's expectations. Sinosoft's revenues arehistorically weighted to the latter half of the financial year and managementis confident that the results for the 12 months to 31 December 2007 will be inline with its expectations. The Company will work with provincial governments and tax bureaus to push theroll-out of the tax review software to the different provinces and also theadoption of the tax application software by the relevant companies. It isexpected that the higher than expected revenues from systems integration willmore than compensate for any delayed sales resulting from the interface issuesin Anhui. SINOSOFT TECHNOLOGY PLC CONSOLIDATED INCOME STATEMENT 6 months 6 months 12 months ended 30 June ended 30 ended 31 2007 June 2006 December 2006 US$ US$ US$ (reviewed) (reviewed) (audited) Revenue 3,627,232 2,725,815 8,446,162Cost of sales (1,061,827) (510,581) (2,528,187) ------------ ---------- -----------Gross margin 2,565,405 2,215,234 5,917,975Other income 785,861 269,035 990,319Research & development (548,780) (353,478) (800,992)costsSelling and distribution (592,950) (267,420) (852,856)expensesAdministration expenses (913,959) (837,172) (1,671,387)Other expenses (6,743) (1,525) (40,625) ------------ ---------- -----------Profit from operations 1,288,834 1,024,674 3,542,434Finance cost - (32,820) (32,692)Finance income 215,185 156,979 305,537 ------------ ---------- -----------Profit before tax 1,504,019 1,148,833 3,815,279Taxation (174,094) - (91,822) ------------ ---------- -----------Net Profit 1,329,925 1,148,833 3,723,457 ============ ========== =========== SINOSOFT TECHNOLOGY PLCCONSOLIDATED BALANCE SHEET Notes 30 June 30 June 31 December 2007 2006 2006 (reviewed) (reviewed) (audited) US$ US$ US$ ASSETS Current assetsCash and bank balances 16,858,608 14,145,325 15,030,483Cash deposits - - 171,352Trade receivables 3,555,031 2,907,442 2,646,712Other receivables 3,579,871 743,721 3,750,172Inventories 726,701 901,935 228,884Investments 57,903 - 296,059 ----------- ----------- -----------Total current assets 24,778,114 18,698,423 22,123,662Non-current assetsProperty, plant and 457,540 380,443 397,764equipmentIntangible assets 3,296,377 1,298,159 2,100,933Investments - 187,645 - ----------- ----------- -----------Total non-current assets 3,753,917 1,866,247 2,498,697 ----------- ----------- -----------Total assets 28,532,031 20,564,670 24,622,359 =========== =========== =========== EQUITY AND LIABILITIESCurrent liabilitiesTrade payables 348,630 163,054 629,473Other payables 2,546,468 151,761 479,776 ----------- ----------- -----------Total current liabilities 2,895,098 314,815 1,109,249Non-current liabilitiesDeferred tax liabilities 237,099 46,090 140,562Deferred income 90,933 175,134 - ----------- ----------- -----------Total non-current liabilities 328,032 221,224 140,562 ----------- ----------- ----------- Total liabilities 3,223,130 536,039 1,249,811 ----------- ----------- ----------- Capital and reservesShare capital 424,023 424,023 424,023Share premium 11,283,551 11,283,551 11,283,551Merger reserve (1,118,051) (1,118,051) (1,118,051)General reserves 4,562,524 2,602,870 3,956,096Retained earnings 10,156,854 6,836,238 8,826,929 ----------- ----------- -----------Total equity 25,308,901 20,028,631 23,372,548 ----------- ----------- ----------- Total equity and 28,532,031 20,564,670 24,622,359liabilities =========== =========== =========== Sinosoft Technology PLCCash Flow Statement 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2007 2006 2006 US$ US$ US$ (reviewed) (reviewed) (audited) Operating activitiesProfit before taxation from continuing 1,504,019 1,148,833 3,815,279operations ----------- ----------- ---------- Adjustments for:Interest income (215,185) (156,979) (305,537)Interest expense - 32,820 32,692Gain on disposal of investment (487,527) - (228,161)Share based payment - 310,816 310,816Impairment loss in receivables 113,367 - 20,687Depreciation of property, plant and 33,110 19,684 47,695equipmentAmortisation for intangible assets 433,692 169,964 434,700 ----------- ----------- ----------Operating cash flows before working 1,381,476 1,525,138 4,128,171capital changes (Increase)/decrease in inventories (497,817) (344,520) 328,531Increase in trade and other (815,930) (504,851) (1,517,937)receivablesIncrease/(decrease) in trade and other 1,812,438 (444,559) 174,746payables ----------- ----------- ----------Cash generated by operation 1,880,167 231,208 3,113,511Income taxes paid (8,517) - -Interest paid - (32,820) (124,252) ----------- ----------- ----------NET CASH FROM OPERATING ACTIVITIES 1,871,650 198,388 2,989,259 ----------- ----------- ---------- INVESTING ACTIVITIESInterest received 215,185 156,979 305,537Proceeds on disposal of trading 1,229,223 - -investmentPurchase of property, plant and (92,886) (18,019) (1,678,181)equipmentPurchase of intangible assets (1,575,836) (106,335) (1,255,010)Purchase of investment for trading (538,994) - (599,588)Decrease/(increase) in pledged bank 171,352 - (171,352)deposits ----------- ----------- ----------NET CASH (USED IN) FROM INVESTING (591,956) 32,625 (3,398,594)ACTIVITIES ----------- ----------- ---------- FINANCING ACTIVITIESNet proceeds from issue of shares - 12,305,406 12,020,824Repayment of borrowings - (2,789,026) (2,671,591)Dividend paid - (61,959) (61,346) ----------- ----------- ----------NET CASH FROM FINANCING ACTIVITIES - 9,454,421 9,287,887 ----------- ----------- ----------NET INCREASE IN CASH AND CASH 1,279,694 9,685,434 8,878,552EQUIVALENTS Effects of exchange rate changes 548,431 494,178 1,468,732 CASH AND CASH EQUIVALENTS AT BEGINNING 15,030,483 3,965,714 3,965,714OF YEAR ----------- ----------- ----------CASH AND CASH EQUIVALENTS AT END OF 16,858,608 14,145,326 14,312,998YEAR =========== =========== ========== SINOSOFT TECHNOLOGY PLC STATEMENT OF CHANGES IN EQUITY Share Share Merger Other Retained Capital Premium Reserve Reserves Earnings Total US$ US$ US$ US$ US$ US$ (reviewed) (reviewed) (reviewed) (reviewed) (reviewed) (reviewed) Balance as at 1January 2006 107,656 - (917,326) 916,972 5,687,405 5,794,707 Net profit for theperiod - - - - 1,148,833 1,148,833 Effect of exchangerates - - - 753,451 - 753,451 Issue of sharecapital 316,367 14,666,233 (200,725) - - 14,781,875 Issue expenses - (2,761,050) - - - (2,761,050) Issue of options - (621,632) - 932,447 - 310,815 --------- ----------- ------------ ----------- ----------- ----------- Balance as at 30 June2006 424,023 11,283,551 (1,118,051) 2,602,870 6,836,238 20,028,631 --------- ----------- ------------ ----------- ----------- ----------- Net profit for theperiod - - - - 2,574,624 2,574,624 Effect of exchangerates - - - 769,293 - 769,293 Transfer to statutoryreserve - - - 583,933 (583,933) - --------- ----------- ------------ ----------- ----------- ----------- Balance as at 31December 2006 424,023 11,283,551 (1,118,051) 3,956,096 8,826,929 23,372,548 --------- ----------- ------------ ----------- ----------- ----------- Net profit for theperiod - - - - 1,329,925 1,329,925 Translation difference - - - 606,428 - 606,428 --------- ----------- ------------ ----------- ----------- ----------- Balance as at 30 June2007 424,023 11,283,551 (1,118,051) 4,562,524 10,156,854 25,308,901 --------- ----------- ------------ ----------- ----------- ----------- NOTES TO THE INTERIM REPORT 1. The interim results for the period ended 30 June 2007 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 2006 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 2006. 3. Functional and presentation currency Sterling is the functional currency of the Company as it is the currency of theprimary economic environment in which it operates. The US Dollar ("US$") is thecurrency used to present the financial information in order to improveunderstanding of the financial position of the Company by increasingcomparability with the financial information of Nanjing Skytech Co. Limited andNanjing Skytech Software Co. Limited, the operating subsidiaries whosefunctional currency is the Chinese Renminbi. 4. Earnings per share The calculation of basic earnings per ordinary share and the fully dilutedearnings per ordinary share is based on the profit attributable to the Group andthe weighted average number of ordinary shares of each period. 30 June 30 June 31 December 2007 2006 2006 (reviewed) (reviewed) (audited) US$ US$ US$ Earnings for the purposes of 1,329,925 1,148,833 3,723,457diluted earnings Numbers of shares Number of shares Weighted average number of 165,582,189 110,567,575 138,556,608ordinary shares for the purposeof basic earnings per share Weighted average number of 169,307,788 112,931,973 141,679,987ordinary shares for thepurposes of fully dilutedearnings per share US$ US$ US$Earnings per share 0.0080 0.0104 0.0269 Fully diluted earnings per 0.0079 0.0102 0.0263share INDEPENDENT REVIEW REPORT TO SINOSOFT TECHNOLOGY PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007, which comprises the consolidated incomestatement, consolidated balance sheet, consolidated statement of changes inequity, consolidated cash flow statement and related notes 1 to 4. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters that we are required to state to themin an independent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The Interim Report, including the financial information contained therein, isthe responsibility of, and has been approved by the Directors. The AIM Rules forCompanies require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing the AIMadmission document except where changes, and the reason for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquires of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied, unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with the International Standards on Auditing (UK andIreland) issued by the Auditing Practices Board and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the consolidated financial information as presented for thesix months ended 30 June 2007. SEDLEY RICHARD LAURENCE VOULTERS Chartered Accountants & Registered Auditors This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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