Software Circle Regulatory News (SFT)

18 Sep 2006 11:13

Sinosoft Technology plc18 September 2006 SINOSOFT TECHNOLOGY PLC ("SINOSOFT" OR THE "COMPANY") INTERIM RESULTS FOR THE SIX MONTHS ENDING 30 JUNE 2006 AND TRADING UPDATE Interim Review I am pleased to announce the first set of interim results of Sinosoft since itsincorporation on 16 December 2005, the acquisition of Infotech Holdings Pte.Limited ("Infotech") on 20 January 2006 and its admission to AIM on 6 March2006. The results announced on 11 April 2006 were the combined results of Infotech'soperating subsidiaries Nanjing Skytech Co., Ltd and Nanjing Skytech Software Co.Ltd (the "Operating Subsidiaries") for the year to 31 December 2005. Operationally, the period has been both exciting and frustrating for theCompany. Following Sinosoft's successful admission to AIM in March 2006 theGroup (being Sinosoft and its subsidiaries) has achieved several importantmilestones, most significantly advancing the export tax contract with the StateAdministration of Taxation ("SAT"). As is often the case when working to finalise public sector mandates there canbe unforeseen delays. In our case, finalising the timetable and projectspecifications pertaining to our pan-China rollout contract with the SAT hastaken longer than we had originally anticipated. As a result, revenues andprofits in the first half are lower than expected and the board has taken a morecautious view of achievable revenues for the full year. As announced on 16 August 2006, the technical specifications of the SAT contractare signed and agreed. The Company currently has twenty staff engaged in thedevelopment of an alpha product and it is envisaged that testing will begin intwo provinces in early 2007. Whilst the delays in the progression of the SATcontract are disappointing, the Company's stated strategy and objectives andmeans of implementing these remain unchanged since admission. Testing in the twoprovinces is likely to finish in Q2 2007 with the full rollout progressingshortly thereafter. On the back of the roll out to the 36 provincial tax bureaux the directorscontinue to believe that the Company is well positioned to rapidly increase itsuser base and revenues from exporting enterprises. In particular, it isexpected that the larger and more economically developed provinces will betargeted during 2007. The first half of 2006 has seen gross profitability increase from 70.7% to81.2%. Operating costs have risen as the company has increased its level ofexpenditure on research and development, and sales. Administration costs haveincreased as the Group now has a slightly higher cost base following Sinosoft'sadmission to AIM. Discounting the accounting charge for the granting ofoptions, awarded to certain advisers at the time of the initial public offering,profit before tax has increased on 2005. Prospects for the second half remain promising and as in previous years theCompany's revenues are likely to be skewed towards the latter half of the year.Two further contracts have been secured since the period end with sales toYangzhou City, Jiangsu province, a city not previously serviced by the Company,and to Anhui Province. The sale to Anhui represents the first contract for theprovision of e-Government software outside of Jiangsu province. The Company continues to exploit other market opportunities, including theprovision of data security protection software which is distributed through athird party to the overall Chinese market. In this area, the Company has earnedRMB3.6m (US$450,000) in the first half of the year. In addition, the Company isexpanding into new sectors of the Chinese government to provide work flowsoftware to a variety of government bureaux. The Board believes that the long-term outlook for the business remains unchangedand despite the delays in commencing the rollout, the export tax project isprogressing and the Company's strategy remains to replicate its successfulbusiness model nationwide. Operationally, much has been achieved in the firsthalf of the year and the management is focussed on realising the full value ofour software in this rapidly developing market place. Mao Ning Chairman About Sinosoft Sinosoft Technology plc ("Sinosoft" or the "Company"), the China based developerand provider of e-Government software and services. The Company (EPIC: SFT), has established itself as a market leader in theprovision of specialised export tax management software and e-Governmentservices in Jiangsu through its Operating Subsidiaries. Skytech has contractswith a number of government bodies and has over 29,000 customers includingsubsidiaries of multinational companies like Hitachi and Mitsubishi. Contact Sinosoft Ms. Helen Xin, Chief Executive Officer +86 025 84815959 Hanson Westhouse Tim Metcalfe/Richard Baty 020 7601 6100 Tavistock Communications Matt Ridsdale 020 7920 3150 6 months ended 30 6 months ended 30 12 months ended 31 June 2006 June 2005 December 2005 US$ US$ US$ (reviewed) (reviewed) (reviewed) Revenue 2,725,815 2,811,345 6,155,852Cost of sales (510,581) (822,769) (1,673,880) Gross margin 2,215,234 1,988,576 4,481,972 Other income 269,035 182,700 622,185Research & development costs (353,478) (180,847) (519,462)Selling and distribution expenses (267,420) (166,843) (421,417)Administration expenses (526,356) (336,644) (610,957)Other expenses (1,525) (136) (1,173) Profit from operations 1,335,490 1,486,806 3,551,148 Share based payment cost (936,904) - -Finance cost (32,820) (101,997) (113,704)Finance income 156,979 6,145 27,349 Profit before tax 522,745 1,390,954 3,464,793 Income tax expense - (20,709) -Deferred tax - - (44,913) Net profit 522,745 1,370,245 3,419,880 Note 30 June 2006 30 June 2005 31 December 2005 US$ US$ US$ (reviewed) (reviewed) (reviewed)ASSETSCurrent assetsCash and bank balances 14,145,325 2,313,840 3,965,714Trade receivables 2,907,442 1,960,795 2,010,203Other receivables 743,721 575,332 1,260,342Inventories 901,935 297,155 557,415Total current assets 18,698,423 5,147,122 7,793,674Non-current assetsProperty, plant and equipment 380,443 359,125 381,238Intangible assets 1,298,159 816,922 1,238,636Investments 187,645 181,598 185,795Total non-current assets 1,866,247 1,357,645 1,805,669 Total assets 20,564,670 6,504,767 9,599,343 EQUITY AND LIABILITIESCurrent liabilitiesTrade payables 163,054 86,018 369,598Other payables 151,761 2,691,991 2,869,175Short-term bank loans - - 371,591Total current liabilities 314,815 2,778,009 3,610,364Non-current liabilitiesDeferred tax liabilities 46,090 20,709 148,636Deferred income 175,134 121,065 45,636Liability for share based payments 936,904 - -Total non-current liabilities 1,158,128 141,774 194,272Total liabilities 1,472,943 2,919,783 3,804,636 Capital and reservesShare capital 5 424,024 107,656 107,656Share premium 11,905,182 - -Merger reserve (1,118,051) (917,326) (917,326)Retained earnings 6,210,150 4,061,638 5,687,405General reserves 758,522 334,653 758,522Exchange reserves 911,900 (1,637) 158,450Total equity 19,091,727 3,584,984 5,794,707 Total equity and liabilities 20,564,670 6,504,767 9,599,343 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December 2006 2005 2005 US$ US$ US$ (reviewed) (reviewed) (reviewed)Operating activitiesProfit before taxation from continuing operations 1,459,649 1,390,954 3,464,793Adjustments for : Interest income (156,979) (6,145) (27,349) Interest expense 32,820 101,997 113,704 Impairment loss on investment in an associate - 32,593 - Impairment loss in receivables - - 20,381 Depreciation of plant and equipment 19,684 22,882 36,065 Amortisation for intangible assets 169,964 45,803 108,560Operating cash flows before working capital changes 1,525,138 1,588,084 3,716,154 Increase in inventories (344,520) (60,960) (310,761) (Increase)/decrease in trade and other receivables (504,851) 202,705 (514,314) (Decrease)/increase in trade and other payables (444,559) (96,449) 388,637Cash generated by operations 231,208 1,633,380 3,279,716Income taxes paid - - -Interest paid (32,820) (101,998) (113,704)NET CASH FROM OPERATING ACTIVITIES 198,388 1,531,382 3,166,012 INVESTING ACTIVITIESInterest received 156,979 6,145 27,349Purchase of plant & equipment (18,019) (16,346) (43,234)Purchase of intangible assets (106,335) (393,462) (867,045)NET CASH GENERATED FROM/(USED IN ) INVESTING ACTIVITIES 32,625 (403,663) (882,930) FINANCING ACTIVITIESNet proceeds from issue of shares 12,305,406 (47,505) -Purchase of investment - - -Repayment of borrowings (2,789,026) (363,196) (371,591)New borrowings raised - - 371,591Dividend paid (61,959) - - NET CASH GENERATED FROM/(USED IN) FINANCING ACTIVITIES 9,454,421 (410,701) - NET INCREASE IN CASH AND CASH EQUIVALENTS 9,685,434 717,018 2,283,082 Effect of exchange rate changes 494,178 - 85,810 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,965,714 1,596,822 1,596,822CASH AND CASH EQUIVALENTS AT END OF YEAR 14,145,326 2,313,840 3,965,714 Share Share Merger Retained Statutory Exchange Total Capital Premium Reserve Earnings Reserves Reserve US$ US$ US$ US$ US$ US$ US$ (reviewed) (reviewed) (reviewed) (reviewed) (reviewed) (reviewed) (reviewed) Balance as at 1 January 107,656 - (917,326) 2,691,393 334,653 (1,637) 2,214,7392005Net profit for the - - - 1,370,245 - - 1,370,245periodBalance as at 30 June 107,656 - (917,326) 4,061,638 334,653 (1,637) 3,584,9842005Net profit for the - - 2,049,636 - 2,049,636period - -Translation difference - - - - - 160,087 160,087Transfer to statutory - - - (423,869) 423,869 - -reservesBalance as at 31 107,656 - (917,326) 5,687,405 758,522 158,450 5,794,707December 2005Net profit for the - - - 522,745 - -period 522,745Issue of share capital 316,368 11,905,182 (200,725) - - - 12,020,825Translation difference - - - - - 753,450 753,450Balance as at 30 June 424,024 11,905,182 (1,118,051) 6,210,150 758,522 911,900 19,091,7272006 1. The interim results for the period ended 30 June 2006 areunaudited and do not constitute statutory accounts within the meaning of s.240of the Companies Act 1985. They have been prepared in accordance withaccounting policies adopted in the admission document issued in relation to theadmission of Sinosoft Technology plc to the AIM market on 6 March 2006. 2. The company was incorporated in England on 16 December2005 and entered into an agreement to acquire the entire share capital ofInfotech Holdings Pte. Limited on 20 January 2006. The acquisition was effectedby way of issue of shares. The acquisition has been accounted for using mergeraccounting principles under UK standard FRS6 (Acquisitions and Mergers) as thedirectors believe that this in not a business combination in the scope of IFRS3(Business Combinations) and there is no international standard dealing withbusiness combinations outside of the scope of IFRS3. Accordingly, the financialinformation for the current and previous year has been presented as if InfotechHoldings Pte. Limited, and its subsidiaries, had been owned throughout thecurrent and comparative periods. 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$") is thecurrency used to present the financial information in order to improveunderstanding of the financial position of the Company by increasingcomparability with the financial information of Nanjing Skytech Co. Limited andNanjing Skytech Software Co. Limited, the operating subsidiaries whosefunctional currency is the Chinese Renminbi. 4. Earnings per share The calculation of basic earnings per ordinary share and the fully dilutedearnings per ordinary share is based on the profit attributable to the Group andthe weighted average number of ordinary shares of each period. 30 June 30 June 31 December 2006 2005 2005 (reviewed) (reviewed) (reviewed) US$ US$ US$Earnings for the purposes of diluted earnings 522,745 1,370,244 3,419,880 Numbers of shares No. No. No.Weighted average number of ordinary shares for the purposes of basic earnings per share 110,567,575 179,000 179,000 Weighted average number of ordinary shares for the purposes of fully diluted earnings per share 112,931,973 179,000 179,000 US$ US$ US$Earnings per share 0.0047 7.65 19.10 Fully diluted earnings per share 0.0046 7.65 19.10 5. Share capital 30 June 2006 30 June 2005 31 December 2005 US$ US$ US$Authorised:248,920,144 (June 2005: nil; December 2005: 1,000)ordinary shares of £0.00148642 each (December 2005: £1each) 637,436 - 1,720 Issued and fully paid:Ordinary shares Date Shares Share capital No. US$Allotted on incorporation (£1 shares) 16 December 2005 1 1Allotted on acquisition of Infotech Holdings Pte. 20 January 2006Limited (£1 shares) 179,000 308,381 179,001 308,382Subdivision of each £1 share for 672.7571453 shares of 28 February 2006£0.00148642 each 120,424,202 308,382Allotted on placing on AIM 6 March 2006 45,158,660 115,642 165,582,862 424,024 INDEPENDENT REVIEW REPORTTO SINOSOFT TECHNOLOGY PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006, which comprises the consolidated incomestatement, consolidated balance sheet, consolidated statement of changes inequity, consolidated cash flow statement and related notes 1 to 5. 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 Rulesrequire that the accounting policies and presentation applied to the interimfigures should be consistent with those applied in preparing the AIM admissiondocument 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 2006. SEDLEY RICHARD LAURENCE VOULTERSChartered Accountants & Registered Auditors This information is provided by RNS The company news service from the London Stock Exchange