Last checked at 23 Sep 2009 07:00
SINOSOFT TECHNOLOGY PLC (THE "COMPANY")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
Sinosoft, the China based developer and provider of e-Government software and services, announces its consolidated interim results for the Group (being the Company and its subsidiaries, also referred to as Sinosoft) for the six months ended 30 June 2009.
Financial Highlights
Turnover down 14.5% to approximately US$4.5M (2008: US$5.3M)
Gross profit down 11.8% to approximately US$3.6M (2008: US$4.1M)
Research & Development ("R&D") expenditure up 12.3% to approximately US$0.9M (2008: US$0.8M)
Operating profit decreased to approximately US$0.3M (2008: US$1.27M)
Operating Highlights
Sale of add-on services continues to contribute strongly to tax software revenue growth
Revenue from e-Government showing signs of improvement as a result of the government's stimulus package
Commenting on the results, Mao Ning, Chairman of Sinosoft said: "The current global recession led to a poorer first half performance compared with the same period last year. However, the growing diversification of our revenue streams and the investment in research and development has enabled Sinosoft to benefit from the initial signs of an economic recovery and the PRC Government's stimulus package. Contracts in the pipeline give the board confidence that as the global economy stabilizes, Sinosoft is well positioned to grow its revenues in the second half of 2009."
-ends-
For further information please contact:
| Sinosoft Technology plc | Mr. Yifa Yu | yuyifa@sinosoft-technology.com |
| Hanson Westhouse Limited | Tim Metcalfe/Richard Baty | 020 7601 6100 |
| Tavistock Communications | Simon Compton | 020 7920 3150 |
Chief Executive Officer's Statement
Due to the challenging operating environment from the slowing global economy that started last quarter of FY2008, our turnover for the six months to 30 June 2009 was lower than the same period last year. Despite the overall fall in revenue, sales achieved by our Tax Software division were up by 8.9% on the same period of last year. e-Government and System Integration witnessed marginal decrease (3.8% and 16.4% respectively) while Information Integration suffered the biggest drop in sales (46.3%), pulling down overall Group sales.
Despite tighter control on operating costs, total operating expenses increased marginally from last year as a result of the necessary continued investment in marketing and R&D. As a result, profit from operations experienced a 77.6% decrease to approximately US$0.3M (2008: US$1.27M). Net profit before tax decreased by a smaller percentage (36.2%) to approximately US$1.0M (2008: US$1.53M) as a result of higher investment gains. Basic and diluted earnings per share were US$0.0046 (2008: US$0.0086).
Tax software
There has been no change in the status of the Group's SAT rollout since the Company last reported. Despite this, our strategy of diversifying away from the SAT project through the development and sale of value added tax software has started to bear fruit and helped this division to book in an increase in revenue compared to the same period of last year. This growth was achieved despite a tough operating environment that saw a drop in turnover for our other divisions. We are currently continuing our R&D and are looking to push out more new products in this area.
e-Government
This division witnessed a marginal decrease in turnover as a result of a number of local and provincial governments suspending discretionary spending during late FY2008 and early FY2009. The e-Government division suffered constriction in sales during the latter half of 2008 and this continued into FY2009. Sales for the first quarter were significantly below those of the comparative period in FY2009. However, in Q2 and Q3 the Company has witnessed a strong pickup of activity in this division as the benefits of the PRC's RMB 4 trillion stimulus package begin to filter through. The board are pleased that Q2's performance resulted in the division achieving turnover marginally below HY2008 and the Company is currently very active in this area, demonstrating the four tender wins in Jiangsu that were recently announced.
Information Integration
Revenue of this division has always been derived mainly from large corporate clients that use the Group's products and services to restructure and streamline their IT infrastructure. As a result of the financial crisis, many such corporations have either slashed their FY2009 IT spending budget or scrapped their IT integration projects due to reduced business activity. As a result, turnover for this division has fallen significantly, compared to the same period last year.
Systems Integration
As expected with the tough economic conditions, turnover for this division is lower than that of the same period last year. The Group's systems integration services are dependent upon its customers installing new systems. As a consequence, demand has dropped away as IT expenditure has been reduced. However, some of the impact of this is mitigated - when compared with Information Integration services - as this division sells to public sector agencies where expenditure cuts have been less pronounced.
Outlook
Our strategy of diversifying from the SAT project into providing value added software products has borne fruit in the form of increased revenues for the tax software division, despite the difficult economic conditions. Likewise, we are seeing signs of pickup in e-Government projects as a result of the stimulus package. Although Information Integration is likely to see lower revenue this year, the strong pickup in growth from the tax software and e-Government division in the remaining months of FY2009 should be able to offset the poor performance by this division.
Xin Yingmei
Chief Executive Officer
22 September 2009
| CONSOLIDATED INCOME STATEMENT | |||
| 6 months | 6 months | 12 months ended | |
| ended 30 June | ended 30 June | 31 December | |
| 2009 | 2008 | 2008 | |
| US$ | US$ | US$ | |
| (reviewed) | (reviewed) | (audited) | |
| Revenue | 4,543,113 | 5,311,008 | 12,078,124 |
| Cost of sales | (916,897) | (1,201,921) | (3,494,992) |
|
|
|
| |
| Gross profit | 3,626,216 | 4,109,087 | 8,583,132 |
| Other income | 209,627 | 277,217 | 620,974 |
| Research and development cost | (933,514) | (831,362) | (1,986,680) |
| Selling and distribution expenses | (1,012,707) | (901,202) | (1,357,692) |
| Administrative expenses | (1,427,171) | (1,336,766) | (2,422,484) |
| Other operating expenses | (177,572) | (43,024) | (144,387) |
|
|
|
| |
| Profit from operations | 284,879 | 1,273,950 | 3,292,863 |
| Finance cost | (16,014) | - | (2,303) |
| Finance income | 653,051 | 258,761 | 515,632 |
| Exchange gain or loss | 55,769 | (529) | (18,488) |
| Profit before tax | 977,685 | 1,532,182 | 3,787,704 |
| Taxation | (210,747) | (100,523) | (358,014) |
|
| |||
| Profit for the period | 766,938 | 1,431,659 | 3,429,690 |
| CONSOLIDATED BALANCE SHEET | |||
| 30 June | 30 June | 31 December | |
| 2009 | 2008 | 2008 | |
| US$ | US$ | US$ | |
| (reviewed) | (reviewed) | (audited) | |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 883,632 | 940,537 | 979,087 |
| Intangible assets | 6,733,100 | 4,250,739 | 5,109,922 |
| Long term investment | 4,403,363 | - | 4,402,842 |
| Total non-current assets | 12,020,095 | 5,191,276 | 10,491,851 |
| Current assets | |||
| Inventories | 334,655 | 1,401,043 | 643,877 |
| Trade receivables | 7,202,347 | 6,035,016 | 6,283,869 |
| Other receivables | 1,360,925 | 4,166,676 | 3,707,876 |
| Investments | 86,945 | - | 1,463,143 |
| Cash deposits | - | - | 460,276 |
| Cash and cash equivalents | 12,577,728 | 16,467,271 | 12,452,387 |
| Total current assets | 21,562,600 | 28,070,006 | 25,011,428 |
| Total assets | 33,582,695 | 33,261,282 | 35,503,279 |
| LIABILITIES & EQUITY | |||
| Current liabilities | |||
| Short term loan | - | - | 1,170,515 |
| Trade payables | 566,632 | 1,073,119 | 973,835 |
| Other payables | 156,229 | 343,760 | 1,790,061 |
| Deferred income | - | 142,423 | - |
| Total current liabilities | 722,861 | 1,559,302 | 3,934,411 |
| Non-current liabilities | |||
| Deferred tax | 837,689 | 292,490 | 647,126 |
| Total non-current liabilities | 837,689 | 292,490 | 647,126 |
| Total liabilities | 1,560,550 | 1,851,792 | 4,581,537 |
| 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 | 8,118,637 | 9,739,557 | 7,785,172 |
| Retained earnings | 13,313,985 | 11,080,410 | 12,547,047 |
| Total shareholders' equity | 32,022,145 | 31,409,490 | 30,921,742 |
| Total liabilities & equity | 33,582,695 | 33,261,282 | 35,503,279 |
| CASH FLOW STATEMENT | 6 months | 6 months | 12 months ended |
| ended 30 June | ended 30 June | 31 December | |
| 2009 | 2008 | 2008 | |
| US$ | US$ | US$ | |
| (reviewed) | (reviewed) | (audited) | |
| Operating activities | |||
| Income before taxation from continuing operations | 977,685 | 1,532,182 | 3,787,704 |
| Adjustments for: | |||
| Interest income | (653,051) | (258,761) | (671,089) |
| Interest expense | 16,014 | - | 2,303 |
| Exchange difference | (55,769) | 529 | 18,488 |
| Gain on disposal of investments | - | - | (158,166) |
| Investment income | (209,627) | (137,656) | - |
| Share based payment | 143,589 | - | - |
| Impairment loss in receivables | (156,990) | 217,594 | 90,597 |
| Depreciation of property, plant and equipment | 96,518 | 53,127 | 165,870 |
| Amortisation for intangible assets | 1,293,370 | 745,379 | 1,592,818 |
| Operating cash generated before working capital changes | 1,451,739 | 2,152,394 | 4,828,525 |
| Decrease in inventories | 309,222 | 147,455 | 904,621 |
| Decrease/ (increase) in trade and other receivables | 1,713,434 | (2,912,097) | (2,702,150) |
| Decrease/(Increase) in trade and other payables | (3,750,846) | (168,788) | 1,178,229 |
| (Decrease) in deferred income | - | - | (126,369) |
| Cash generated by operations | (276,451) | (781,036) | 4,082,856 |
| Income taxes paid | (141,310) | (173,248) | (128,065) |
| Interest paid | (16,014) | - | (2,303) |
| NET CASH (USED IN) / GENERATED FROM OPERATING ACTIVITIES | (433,775) | (954,284) | 3,952,488 |
| Investing activities | |||
| Interest received | 653,051 | 258,761 | 671,089 |
| Gain on disposal of investment | 209,627 | - | - |
| Proceeds on disposal of trading investment | 1,376,198 | 323,929 | 463,730 |
| Purchase of property, plant and equipment | (1,063) | (336,530) | (418,824) |
| Purchase of intangible assets | (1,177,504) | (1,037,852) | (2,797,073) |
| Entrust loan made | - | - | (5,865,985) |
| Purchase of investments for trading | - | (186,272) | (305,564) |
| Decrease/(increase) in pledged bank deposits | 460,276 | 250,646 | (177,182) |
| NET CASH USED IN INVESTING ACTIVITIES | 1,520,585 | (727,318) | (8,429,809) |
| Financing activities | |||
| Repayment of borrowing | (1,170,515) | - | - |
| Proceeds from short-term bank loans | - | - | 1,170,515 |
| Dividend paid | - | (1,027,075) | (1,027,075) |
| NET CASH USED IN FINANCING ACTIVITIES | (1,170,515) | (1,027,075) | (1,027,075) |
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (83,705) | (2,708,677) | (4,333,881) |
| Effect of exchange rate changes | 209,046 | 1,056,796 | (1,332,884) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 12,452,387 | 18,119,152 | 18,119,152 |
| CASH AND CASH EQUIVALENTS AT THE END OF PERIOD | 12,577,728 | 16,467,271 | 12,452,387 |
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 2008 | 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 | ||
| Profit for the period | - | - | - | - | 1,998,031 | 1,998,031 | ||
| Transfer to statutory reserve | - | - | - | 531,394 | (531,394) | - | ||
| Effect of exchange rates | - | - | - | (2,485,779) | - | (2,485,779) | ||
| Balance as at 31 December 2008 | 424,023 | 11,283,551 | (1,118,051) | 7,785,172 | 12,547,047 | 30,921,742 | ||
| Profit for the period | - | - | - | - | 766,938 | 766,938 | ||
| Equity compensation reserve | - | - | - | 143,589 | - | 143,589 | ||
| Effect of exchange rates | - | - | - | 189,876 | - | 189,876 | ||
| Balance as at 30 June 2009 | 424,023 | 11,283,551 | (1,118,051) | 8,118,637 | 13,313,985 | 32,022,145 | ||
NOTES TO THE INTERIM REPORT
1. The interim results for the period ended 30 June 2009 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 2008 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 2008.
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$") is the currency used to present the financial information in order to improve understanding of the financial position of the Company by increasing comparability with the financial information of Nanjing Skytech Co. Limited and Nanjing Skytech Software Co. Limited, the operating subsidiaries whose functional currency is the Chinese Renminbi.
4. Earnings per share
The calculation of basic earnings per ordinary share and the fully diluted earnings per ordinary share is based on the profit attributable to the Group and the weighted average number of ordinary shares of each period.
| 30 June | 30 June | 31 December | |
| 2009 | 2008 | 2008 | |
| US$ | US$ | US$ | |
| (reviewed) | (reviewed) | (audited) | |
| Profit for the period | US$766,938 | US$1,431,659 | US$3,429,690 |
| Number of shares - weighted average - basic | 165,582,189 | 165,582,189 | 165,582,189 |
| Basic earnings per share | US$0.0046 | US$ 0.0086 | US$ 0.0207 |
| Number of shares - weighted average - diluted | 165,582,189 | 165,582,189 | 165,582,189 |
| Diluted earnings per share | US$0.0046 | US$0.0086 | US$0.0207 |
5. Dividend
Sinsoft Technology Plc paid a dividend amounting to £513,305 on 6 July 2009.
6. Acquisition
Nanjing Skytech Co. Ltd acquired 100% shares of Jiangsu SkyInformation Co. Ltd, a China based software company, for a cash consideration of RMB 4.17m in August 2009.
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 2009, which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes 1 to 6. 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 2009.
SEDLEY RICHARD LAURENCE VOULTERS
Chartered Accountants & Registered Auditors