announcement of interim results for the six ......2020/08/28 · net foreign exchange loss 22 37...

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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

SINOSOFT TECHNOLOGY GROUP LIMITED中國擎天軟件科技集團有限公司

(Incorporated in the Cayman Islands with limited liability)(Stock Code: 1297)

ANNOUNCEMENT OF INTERIM RESULTSFOR THE SIX MONTHS ENDED 30 JUNE 2020

HIGHLIGHTS

• RevenueoftheGroupforthesixmonthsended30June2020wasapproximatelyRMB255.7million,representingadecreaseofapproximately19.9%ascomparedtoapproximatelyRMB319.3millionforthesixmonthsended30June2019.

• Profitandtotalcomprehensiveincomeforthesixmonthsended30June2020wasapproximatelyRMB77.7million,representingadecreaseofapproximately22.1%ascomparedtoapproximatelyRMB99.8millionforthesixmonthsended30June2019.

• Basicearningspershareforthesixmonthsended30June2020wasRMB6.48cents,representingadecreaseofapproximately21.5%ascomparedtoRMB8.26centsforthesixmonthsended30June2019.

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Theboard(the“Board”)ofdirectors(the“Director(s)”)ofSinosoftTechnologyGroupLimited(the“Company”)ispleasedtoannouncetheunauditedconsolidatedinterimresultsoftheCompanyanditssubsidiaries(collectively,the“Group”)forthesixmonthsended30June2020,togetherwiththecomparativefiguresforthecorrespondingperiodintheyear2019,asfollows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 30 JUNE 2020

Six months ended 30 June 2020 2019 NOTE RMB’000 RMB’000 (unaudited) (unaudited)

Revenue 3 255,687 319,284Value-addedtaxrefund 3,610 1,580Costofsales (96,952) (130,987)Researchanddevelopmentcosts (32,524) (25,361)Otherincomeandgains 5 8,052 2,586Distributionandsellingexpenses (22,980) (22,777)Administrativeandgeneralexpenses (20,666) (23,617)Financecosts (370) (513)Otherexpensesandlosses 6 (4,034) (3,684)

Profitbeforetaxation 7 89,823 116,511Taxation 8 (12,083) (16,668)

Profitandtotalcomprehensiveincomefortheperiod 77,740 99,843

Profitandtotalcomprehensiveincome fortheperiodattributableto:OwnersoftheCompany 79,221 100,947Non-controllinginterests (1,481) (1,104)

77,740 99,843

RMB RMB (unaudited) (unaudited)

Earnings per share—Basicanddiluted (in RMB cents) 9 6.48 8.26

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT 30 JUNE 2020

As at Asat 30 June 31December 2020 2019 NOTE RMB’000 RMB’000 (unaudited) (audited)

Non-current assetsProperty,plantandequipment 91,751 94,647Right-of-useassets 13,952 14,218Restrictedbankdeposits 28,160 28,160Intangibleassets 11 336,788 317,083Financialassetsatfairvaluethroughprofitorloss — —

470,651 454,108

Current assetsInventories 2,462 1,018Tradeandotherreceivables 13 1,395,141 1,369,653Pledgedbankdeposits 1,884 1,884Bankbalancesandcash 160,789 140,577

1,560,276 1,513,132

Current liabilitiesTradeandbillspayables 14 61,784 106,095Otherpayables 87,151 107,983Contractliabilities 9,669 8,567Leaseliabilities 143 248Borrowings 15 74,000 10,000Taxliabilities 705 19,062

233,452 251,955

Netcurrentassets 1,326,824 1,261,177

Totalassetslesscurrentliabilities 1,797,475 1,715,285

Non-current liabilitiesLeaseliabilities 19 19Deferredtaxliabilities 12 78,324 73,874

78,343 73,893

Netassets 1,719,132 1,641,392

Capital and reservesSharecapital 9,876 9,876Reserves 1,702,928 1,623,707

EquityattributabletoownersoftheCompany 1,712,804 1,633,583Non-controllinginterests 6,328 7,809

Totalequity 1,719,132 1,641,392

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2020

1. BASIS OF PREPARATION

ThecondensedconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalAccountingStandard(“IAS”)34, Interim Financial Reporting,issuedbytheInternationalAccountingStandardsBoard(“IASB”)aswellastheapplicabledisclosurerequirementsoftheRulesGoverningtheListingofSecurities(the“Listing Rules”)onTheStockExchangeofHongKongLimited(the“Stock Exchange”).

2. PRINCIPAL ACCOUNTING POLICIES

Thecondensedconsolidatedfinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforcertainfinancialinstrumentsthataremeasuredatrevaluedamountsoffairvalues.

Theaccountingpoliciesandmethodofcomputationusedinthecondensedconsolidatedfinancialstatementsforthesixmonthsended30June2020arethesameasthosefollowedinthepreparationoftheGroup’sconsolidatedfinancialstatementsfortheyearended31December2019.

Application of new and amendments to International Financial Reporting Standards (“IFRSs”) for the current period

Inthecurrentinterimperiod,theGrouphasapplied,forthefirsttime,followingnewandamendmentstoIFRSsissuedbytheIASBwhicharemandatoryeffectivefortheannualperiodbeginningonorafter1January2020forthepreparationoftheGroup’scondensedconsolidatedfinancialstatements:

AmendmentstoIAS1andIAS8 Definition of MaterialAmendmentstoIFRS3 Definition of BusinessAmendmentstoIFRS9,IAS39 Interest Rate Benchmark Reform andIFRS7AmendmentstoIFRS16 Covid-19 Related Rent Concessions

TheapplicationoftheAmendmentstoReferencestotheConceptualFrameworkinIFRSStandardsandtheamendmentstoIFRSsinthecurrentperiodhashadnomaterialimpactontheGroup’sfinancialperformanceandpositionsforthecurrentandpriorperiodsand/oronthedisclosuressetoutinthesecondensedconsolidatedfinancialstatements.

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3. REVENUE FROM CONTRACTS WITH CUSTOMERS AND SEGMENT INFORMATION

TheGroupisorganisedintodifferentbusinessunitsbyproductsorservices,basedonwhichinformationispreparedandreportedtotheGroup’schiefoperatingdecisionmaker(the“CODM”) (i.e.,theboardofdirectorsoftheCompany)forthepurposesofresourceallocationandassessmentofperformance.

Formanagementpurposes,theGroupisorganisedintofourcoreproductlines,namelyexportenterprisecloud-basedsoftwareandservices,governmentbigdatasoftwareandrelatedservices,lowcarbon&ecologysoftwareandrelatedservicesandsystemintegrationsolutions.TheseproductsformthebasisonwhichtheGroupreportsitssegmentinformation.

ThefollowingisananalysisoftheGroup’srevenueandresultsbyoperatingandreportablesegmentsfortheperiodunderreview:

Segment revenue

Six months ended 30 June 2020 (unaudited) Government Export Low carbon big data enterprise & ecology software cloud-based software System and related software and related integration services and services services solutions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Types of goods or servicesSalesofsoftwareproduct 166,250 28,716 23,107 — 218,073Salesofhardwareproduct — — — 6,133 6,133Serviceincome 1,418 30,063 — — 31,481

Total 167,668 58,779 23,107 6,133 255,687

Timing of revenueAtpointoftime 166,250 28,716 23,107 6,133 224,206Overtime 1,418 30,063 — — 31,481

Total 167,668 58,779 23,107 6,133 255,687

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Six months ended 30 June 2019 (unaudited) Government Export Low carbon big data enterprise & ecology software cloud-based software System and related software and related integration services and services services solutions Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Types of goods or servicesSalesofsoftwareproduct 179,979 35,842 47,900 — 263,721Salesofhardwareproduct — — — 24,678 24,678Serviceincome 453 30,432 — — 30,885

Total 180,432 66,274 47,900 24,678 319,284

Timing of revenueAtpointoftime 179,979 35,842 47,900 24,678 288,399Overtime 453 30,432 — — 30,885

Total 180,432 66,274 47,900 24,678 319,284

Six months ended 30 June 2020 2019 RMB’000 RMB’000 (unaudited) (unaudited)

Segment resultsGovernmentbigdatasoftwareandrelatedservices 79,660 82,670Exportenterprisecloud-basedsoftwareandservices 46,766 55,653Lowcarbon&ecologysoftwareandrelatedservices 3,258 25,644Systemintegrationsolutions 137 549

Totalsegmentresults 129,821 164,516

Otherincomeandgains 8,052 2,586Distributionandsellingexpenses (22,980) (22,777)Administrativeandgeneralexpenses (20,666) (23,617)Financecosts (370) (513)Otherexpensesandlosses (4,034) (3,684)

Profitbeforetaxation 89,823 116,511Taxation (12,083) (16,668)

Profitandtotalcomprehensiveincomefortheperiod 77,740 99,843

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Segmentrevenuereportedrepresentsrevenuegeneratedfromexternalcustomers.Therewerenointer-segmentsalesforcurrentandpriorperiod.

Segmentresultsrepresentthesumofrevenueandvalue-addedtaxrefundlesscostofsalesandservicesandresearchanddevelopmentcostsoftherelevantservices/productline.ThisisthemeasurereportedtoCODMforthepurposesofresourceallocationandperformanceassessment.

TheCODMdoesnotreviewassetsandliabilitiesbyoperatingsegmentforthepurposeofresourceallocationandperformanceassessment.

Geographical information

TheGroup’snon-currentassetsaresubstantiallylocatedinthePRC,theplaceofdomicileoftherelevantgroupentities.SubstantiallyalloftheGroup’srevenueisderivedfromthePRC.

4. RESULTS FOR THE PERIOD

Whilstthesalesofexportenterprisecloud-basedsoftwareandservicesaregenerallystablethroughouttheyear,thesalesofgovernmentbigdatasoftwareandrelatedservices,lowcarbon&ecologysoftwareandrelatedservicesandsystemintegrationsolutionsareseasonal,withsalesgenerallybeinglowerinthefirsthalfoftheyearthaninthesecondhalf.Thereareanumberoffactorsthatcausethesevariations,buttheprimaryfactoristhatthemajorcustomersoftheGroup,i.e.PRCgovernmentagencies,tendtoconcludecontractsinthesecondhalfoftheyearinaccordancewiththeirfinancialbudgetsapprovalprocedures.

5. OTHER INCOME AND GAINS


Interestincome 1,052 732Governmentgrants(Note 1) 1,075 747Compensationincome(Note 2) 4,629 630Others 1,296 477

8,052 2,586

Note 1: ThegrantsareincentivesreceivedbythePRCsubsidiariesforeminentcontributionstotechnologydevelopmentandencouragementofbusinessdevelopment.Thesegrantsareaccountedforasimmediatefinancialsupportwithnofuturerelatedcostsexpectedtobeincurred,andnotrelatedtoanyassets.

Note 2: Thecompensationincomerepresentsthecompensationreceived/receivablefromlegalaction.

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6. OTHER EXPENSES AND LOSSES


Impairmentontradereceivables 3,948 3,550Netforeignexchangeloss 22 37Others 64 97

4,034 3,684

7. PROFIT BEFORE TAXATION

Profitbeforetaxationhasbeenarrivedataftercharging:


Depreciationofproperty,plantandequipment 3,741 3,701Depreciationofright-of-useassets 118 180Amortisationofintangibleassets: amortisationofcapitalisedsoftwarecosts (includedincostofsales) 51,044 38,463 amortisationofothersoftware (includedinresearchanddevelopmentcosts) 30,691 22,732

85,594 65,076

Financecosts 370 513Netforeignexchangeloss 22 37Costofinventoriesrecognisedasanexpense 38,833 86,303

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8. TAXATION


Currenttax: PRCenterpriseincometax(“EIT”) 7,083 10,468Deferredtaxcharge: Currentperiod 5,000 6,200

12,083 16,668

Note:

TheCompanyandInfotechHoldingsPte.Ltd.,itssubsidiaryincorporatedinSingapore,hadnoassessableprofitssubjecttoincometaxinanyjurisdictionssinceitsincorporation.

TheCompany’ssubsidiariesestablishedinthePRCaresubjecttoPRCEITatratesprevailingundertherelevantlawsandregulationsinthePRCasfollows:

1. On31October2014,NanjingSkytechCo.,Limited(“Nanjing Skytech”)andJiangsuSkyinformationCo.,Limited(“Jiangsu Skyinformation”)obtained“High-techEnterprise”certificates.Accordingly,theapplicableincometaxrateforbothNanjingSkytechandJiangsuSkyinformationfromYear2014toYear2016were15%.ThelatestreviewwasconductedinOctober2017,pursuanttowhichNanjingSkytechandJiangsuSkyinformationweregrantedthewrittencertificationbytherelevanttaxauthorities,maintaineditsstatusasthe“High-techEnterprise”,andwasentitledtothepreferentialcorporateincometaxrateof15%fromYear2017toYear2019.

Inadditiontobeingrecognisedasa“High-techEnterprise”,enjoyingapreferentialcorporateincometaxrateof15%,ifanenterpriseisapprovedandcertifiedbyrelevantregulatoryauthoritiesas“KeySoftwareEnterpriseundertheNationalPlan”fortheyear,itcanfurtherenjoyapreferentialtaxrateof10%.In2016,CaiShui[2016]No.49hasbeenenactedthatanentitycanregisterforthe“KeySoftwareEnterpriseundertheNationalPlan”withthetaxbureauiftheentitycomplieswithrelevantrequirements.NanjingSkytechwasconsideredtomeetthoserequirementsbecauseinpursuanttotheCompany’sannouncementdated6September2019,NanjingSkytechwasagainrecognisedas“KeySoftwareEnterpriseundertheNationalPlan”byrelevantgovernmentauthoritiesandcontinuestoenjoythe10%preferentialenterprisecorporateincometaxrate.Therefore,NanjingSkytechusesapreferentialcorporateincometaxrateof10%(sixmonthsended30June2019:10%)forthecurrentperiod.

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2. NanjingSkytechQuanShuiTongInformationTechnologyCo.,Limited(“Quan Shui Tong”) wasformerlyeligibleforcertaintaxholidaysandconcessionsandwasexemptedfromPRCEITfortwoyearsstartingfromitsfirstprofit-makingyear,followedbya50%reductionforthefollowingthreeyears.QuanShuiTongcommenceditsfirstprofit-makingyearinthefinancialyearended31December2014.ThetaxholidaysandconcessionsforQuanShuiTongwasendedaftertheyearended31December2018.On3December2018,QuanShuiTongobtained“High-techEnterprise”certificates.Accordingly,theapplicableincometaxforQuanShuiTongfromYear2018toYear2020are15%.PursuanttotheCompany’sannouncementdated6September2019,QuanShuiTongwasalsorecognisedas“KeySoftwareEnterpriseundertheNationalPlan”byrelevantgovernmentauthoritiesforthefirsttimetoenjoythe10%preferentialenterprisecorporateincometaxrate.Therefore,QuanShuiTongusedapreferentialcorporateincometaxrateof10%(sixmonthsended30June2019:15%)forthecurrentperiod.

3. TheapplicableEITrateforZhenjiangSkyinformationCo.,Limited(“Zhenjiang Skyinformation”),JiangsuSkytechInvestmentManagementCo.,Limited,(“Jiangsu Skytech Investment”),QingdaoSkytechSoftwareCo.,Limited(“Qingdao Skytech”),NanjingAisitaRealEstateCo.,Limited(“Nanjing Aisita”),JiangsuSkytechIndustrialInternetCo.,LimitedandJiangsuSkytechZumooCo.,Limited(“Jiangsu Skytech Zumoo”) are25%forthesixmonthsended30June2020and2019.

9. EARNINGS PER SHARE

ThecalculationofbasicearningspershareattributabletoownersoftheCompanyisbasedontheunauditedprofitforthesixmonthsended30June2020ofapproximatelyRMB79,221,000(sixmonthsended30June2019:RMB100,947,000)and1,222,384,600shares(sixmonthsended30June2019:1,222,384,600shares).

DilutiveearningspershareisthesameasbasicearningspershareastheGrouphadnopotentialoutstandingordinarysharesthroughoutthesixmonthsended30June2020and30June2019.

10. DIVIDENDS

Duringthesixmonthsended30June2020,nofinaldividendfortheyearended31December2019wasproposedbytheCompany’sdirectorson30March2020.Thedirectorsdidnotrecommendpaymentofaninterimdividendforthesixmonthsended30June2020(sixmonthsended30June2019:RMBnil).

Duringthesixmonthsended30June2019,afinaldividendfortheyearended31December2018amountingtoRMB0.02(approximatelyHKD0.0227)persharewasproposedbytheCompany’sdirectorson25March2019,andsubsequentlyapprovedattheannualgeneralmeetingdated18June2019.

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11. INTANGIBLE ASSETS

Duringthesixmonthsended30June2020,theGroupincurredtheadditionsofcostatapproximatelyRMB101,440,000(sixmonthsended30June2019:RMB92,918,000)whichrepresentedthecapitalisedsoftwarecostsgeneratedinternallyamountingtoapproximatelyRMB57,183,000(sixmonthsended30June2019:RMB53,244,000)andotherpurchasedsoftwareamountingtoapproximatelyRMB44,257,000(sixmonthsended30June2019:RMB39,674,000)forthenewsoftwareproductdevelopment.

12. DEFERRED TAXATION

Thefollowingarethedeferredtaxassets/(liabilities)recognisedbytheGroupandmovementsthereonduringthesixmonthsended30June2020andtheyearended31December2019:

Expected Undistributed creditlosses profitsof Capitalised provision subsidiaries software costs Total RMB’000 RMB’000 RMB’000 RMB’000

At1January2019(audited) 595 (35,038) (16,701) (51,144)Credit/(charge)toprofitorloss 355 (4,000) (2,555) (6,200)

At30June2019(unaudited) 950 (39,038) (19,256) (57,344)Credit/(charge)toprofitorloss 220 (13,800) (2,950) (16,530)

At31December2019(audited) 1,170 (52,838) (22,206) (73,874)

At1January2020(audited) 1,170 (52,838) (22,206) (73,874)Credit/(charge)toprofitorloss 397 (5,000) (397) (5,000)Reversaluponpaymentofwithholdingtax — 550 — 550

At30June2020(unaudited) 1,567 (57,288) (22,603) (78,324)

UndertheEITLawofPRC,dividendspaidtonon-residentoverseasshareholdersdeclaredinrespectofprofitsearnedbythePRCsubsidiariesfrom1January2008onwardsaresubjecttoaPRCwithholdingtaxrateofupto10%.ForinvestorsincorporatedinSingapore,apreferentialrateof5%willbeappliedwhereappropriate.Asat30June2020and31December2019,theGrouphasfullyprovidedthedeferredtaxliabilitiesofwithholdingtaxontheundistributedearningsofthePRCsubsidiaries.

Thedeferredtaxbalancehasreflectedthetaxratesthatareexpectedtoapplyintherespectiveperiodswhentheassetisrealisedortheliabilityissettled.

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13. TRADE AND OTHER RECEIVABLES

As at Asat 30 June 31December 2020 2019 RMB’000 RMB’000 (unaudited) (audited)

Tradereceivables 1,338,234 1,283,863Less:Expectedcreditlossallowance (15,652) (11,704)

1,322,582 1,272,159Prepaymentstosuppliers 58,232 79,050Prepaymenttothetrustee 1,454 1,438Deposits 3,954 6,021Value-addedtaxrecoverable 2,996 4,783Advancestoemployees 2,394 4,970Others 3,529 1,232

Totaltradeandotherreceivables 1,395,141 1,369,653

TheGroup’stradecustomersareprincipallygovernmentagenciesandtheGroupofferedcredittermstothemwithreferencetotheexpectedtimingofsettlementfromthecustomers,whichwasaroundoneyear,althoughalongercredittermmaybeextendedtocertaincustomers,dependingonprice,thesizeofthecontract,credibilityandreputationofthecustomers.Thefollowingisanagedanalysisoftradereceivables,netofallowanceforcreditlossesandispresentedbasedonthedateofdeliveryofgoodsorrenderingofservicestocustomerswhichapproximatedtherespectivedatesonwhichrevenuewasrecognised.


0to60days 199,466 364,06161to90days 5,604 24,70191to180days 13,555 2,744181daysto365days 327,495 260,441Over1yearbutlessthan2years 457,451 393,697Over2years 319,011 226,515

1,322,582 1,272,159

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14. TRADE AND BILLS PAYABLES

Thefollowingisanagedanalysisoftradeandbillspayablepresentedbasedontheinvoicedateattheendofthereportingperiod:


0to90days 52,864 99,27991to180days 2,756 581181daysto365days 2,810 3,921Over1year 3,354 2,314

61,784 106,095

Thetradeandbillspayablescompriseamountsoutstandingfortradepurchases.Paymenttermswithsuppliersaremainlyoncreditwithin90daysfrominvoicedate.

15. BORROWINGS


Securedbankborrowingscarriedinterestatvariablerate 74,000 10,000

Theeffectiveinterestratesofbankborrowingsarerangingfrom3.50%to3.92%(31December2019:oneyearLoanPrimeRateinPRCplus4basispoints)perannumasat30June2020.

Asat30June2020,theGroupobtainedtwonewshort-termbankloanamountingtoRMB44,000,000andRMB30,000,000.ThebankloanamountofRMB44,000,000wassecuredbycorporateguaranteeofJiangsuSkytechInvestment,asubsidiaryoftheCompanyandthebankloanamountofRMB30,000,000wassecuredbypersonalguaranteeofMs.XinYingmei,ChairladyoftheCompany.

Asat31December2019,theGrouphasashort-termbankloanamountingtoRMB10,000,000.TheloanwassecuredbycorporateguaranteeofJiangsuSkytechInvestment,asubsidiaryoftheCompanyandleaseholdlandsandownedbuildingsoftheGroupwithcarryingamountsofapproximatelyRMB13,948,000andRMB86,945,000respectively.

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MANAGEMENT DISCUSSION AND ANALYSIS

OVERALL DEVELOPMENT

Inthefirsthalfof2020,thewholeworldincludingChinawasaffectedbytheoutbreakofthenovelcoronavirusdisease(the“Pandemic”)thatgreatlydisruptedthepaceofcitylifeandeconomicactivities,shrunkforeigntrade,puttremendousdownwardpressuresonbothdomesticandforeigneconomies,andbroughtnumerousdifficultiestoenterprises.Inthefaceofthisextraordinarilysevereeconomicenvironment,theGrouppersistedinactivelyseekingnewopportunitiestodevelopproductsandoperateprudentlyatthesametime,andwasabletocontinuemakingprofitintheadversity.

Exportenterprisesborethebruntofthecomplexandhighlychangeableforeigntradeenvironment.Thedeclineinforeigntradedemandhasforcedsomeexportenterprisestotransformforsurvival.Leveragingontheunderstandingandprofessionalknowledgeforexportenterprises,theGrouphasprovidedthemwithcloud-basedsoftwaresandservicesthateffectivelyhelpedsavecostsandimproveefficiency.Also,theGroup’sbigdataanalyticproducts,whichhelpeditsclientsoptimizebusinessprocessesandaccuratelyanalyzeupstreamanddownstreamindustrieshasalsosupportedtheminthemarkettrough.

OneofthemajorareasoftheGroup’sgovernmentbigdataproductsistoenhancesocialgovernanceandgovernmentservices.UnderthePandemic,governmentsatalllevelshadsignificantdemandsonemergencymanagement,communityriskpreventionandcontrolandtheprovisionofonlinegovernmentservicesetc.TheGrouphassoldavarietyofrelatedgovernmentbigdataproductstoeffectivelyassistthecommunityinreorganizingandfurtheroptimizingthegovernancelevelafterthePandemic.

Despitethedifficulteconomicenvironment,theGrouphasnotsloweditsresearchanddevelopmentinthelow-carbon&ecologybusiness.Inadditiontovariousecologicalbigdataproducts,theGroupisalsoactivelyexploringproductsthathelpenterprisesstrengthensafeproductionandestablishacirculareconomy,andalsotopromotetheseproductstomoreenterprisesthroughthegreenindustrialinternetplatform.

REVENUE

Forthesixmonthsended30June2020,theGroup’srevenuerecordedapproximatelyRMB255.7million,representinga19.9%declineascomparedtoRMB319.3millionforthecorrespondingperiodin2019,mainlyduetotheeconomicdownwardpressureandsalesdelaycausedfromthePandemic.

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Export Enterprise Cloud-Based Software and Services

Duringtheperiodunderreview,theGroup’sexportenterprisecloud-basedsoftwareandservicescontinuedtoobtainsupportandtrustfromcustomersdespitesomeenterpriseswhichterminatedtheirexportbusinessandnolongerpurchasedtheGroup’sproducts.Forthesixmonthsended30June2020,revenuegeneratedfromtheGroup’sexportenterprisecloud-basedsoftwareandserviceswasapproximatelyRMB58.8million,representingadecreaseofapproximately11.3%ascomparedtoapproximatelyRMB66.3millionforthecorrespondingperiodin2019.

Government Big Data Software and Related Services

ThereisacontinuousdemandfortheGroup’sgovernmentbigdataproductswhichareabletoeffectivelyhelpenhancethelevelofsocialgovernance.However,thePandemichasdelayedthebiddingprocessesandhasaffectedtheGroup’srevenue.Forthesixmonthsended30June2020,revenuegeneratedfromgovernmentbigdatasoftwareandrelatedservicesamountedtoapproximatelyRMB167.7million,representingadecreaseofapproximately7.1%ascomparedtoapproximatelyRMB180.4millionforthecorrespondingperiodin2019.

Low Carbon & Ecology Software and Related Services

Demandforlowcarbon&ecologysoftwareandrelatedserviceshastemporarilysloweddowninthedifficulteconomicenvironment.Forthesixmonthsended30June2020,revenuegeneratedfromlowcarbon&ecologysoftwareandrelatedservicesamountedtoapproximatelyRMB23.1million,representingadecreaseofapproximately51.8%ascomparedtoapproximatelyRMB47.9millionforthecorrespondingperiodin2019.

System Integration Solutions

SystemintegrationsolutionsisnottheGroup’skeybusinesssegment,butacomplementaryservicetotheGroup’sothersolutionspurportingtoprovideatotalsolutionsservicetotheGroup’scustomers.Duringthesixmonthsended30June2020,revenuegeneratedfromthesystemintegrationsolutionssegmentamountedtoRMB6.1million,ascomparedtoapproximatelyRMB24.7millionforthesameperiodin2019.

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COST OF SALES

TheGroup’scostofsalesislargelymadeupofamortisationofcapitalisedsoftwaredevelopmentcostsaswellasthecostsforpurchasingsystemsandcomponentsforsomeoftheGroup’sprojects.Duringtheperiodunderreview,theGroup’scostofsaleswasapproximatelyRMB97.0million,representingadecreaseofapproximately26.0%ascomparedtoapproximatelyRMB131.0millionforthesixmonthsended30June2019,mainlyduetotheslowdowninrevenueandcorrespondingdecreaseintherelatedcostsofsales.

SEGMENT RESULTS AND SEGMENT RESULTS MARGIN

TheGroup’stotalsegmentresults(representingthesumofrevenueandvalue-addedtaxrefundlesscostofsalesandresearchanddevelopmentcosts)decreasedbyapproximately21.1%fromapproximatelyRMB164.5millionforthesixmonthsended30June2019toapproximatelyRMB129.8millionforthesixmonthsended30June2020.

TheGroup’soverallsegmentresultsmargindecreasedfromapproximately51.5%inthesixmonthsended30June2019toapproximately50.8%inthesixmonthsended30June2020.

RESEARCH AND DEVELOPMENT COSTS

TheGroup’sresearchanddevelopment(“R&D”)costsincreasedbyapproximately28.2%fromapproximatelyRMB25.4millionforthesixmonthsended30June2019toapproximatelyRMB32.5millionforthesixmonthsended30June2020,mainlyattributabletotheincreasedinvestmentsindevelopingfutureproductsforlong-termgrowth.

OTHER INCOME AND GAINS

Otherincomeandgainsforthesixmonthsended30June2020wasapproximatelyRMB8.1million,whichwasanincreasefromapproximatelyRMB2.6millionforthecorrespondingperiodin2019.Thisincreasewasmainlyduetotheincreaseofcompensationfromlegalactionduringtheperiodunderreview.

DISTRIBUTION AND SELLING EXPENSES

TheGroup’sdistributionandsellingexpensesforthesixmonthsended30June2020wasapproximatelyRMB23.0millionatasimilarlevelascomparedtoapproximatelyRMB22.8millionforthecorrespondingperiodin2019.

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ADMINISTRATIVE AND GENERAL EXPENSES

TheGroup’sadministrativeandgeneralexpensesforthesixmonthsended30June2020wasapproximatelyRMB20.7million,representingadecreasefromapproximatelyRMB23.6millionforthecorrespondingperiodin2019,mainlyduetotheeffectivecostcontrol.

OTHER EXPENSES AND LOSSES

Otherexpensesandlossesforthesixmonthsended30June2020slightlyincreasedtoapproximatelyRMB4.0millionfromapproximatelyRMB3.7millionforthecorrespondingperiodin2019,mainlyduetotheincreaseinimpairmentontradereceivables.

INCOME TAX EXPENSES

Incometaxexpensesforthesixmonthsended30June2020decreasedtoapproximatelyRMB12.1millionfromapproximatelyRMB16.7millionforthecorrespondingperiodin2019,mainlyduetothedecreaseinprofitduringtheperiodunderreview.

PROFIT AND TOTAL COMPREHENSIVE INCOME

ProfitandtotalcomprehensiveincomeoftheGroupforthesixmonthsended30June2020amountedtoapproximatelyRMB77.7million,representingadecreaseofapproximately22.1%ascomparedtoRMB99.8millionforthesixmonthsended30June2019.Fortheperiodunderreview,netprofitmarginwasapproximately30.4%.

NET CURRENT ASSETS

Asat30June2020,theGrouphadnetcurrentassetsofRMB1,326.8million(31December2019:RMB1,261.2million).

FINANCIAL RESOURCES AND LIQUIDITY

Duringthesixmonthsended30June2020,theGroup’sprimarysourceoffundingcamefromcashgeneratedfromitsoperatingactivities,thenetcashinflowfromoperatingactivitiesamountedtoapproximatelyRMB59.0million(30June2019:approximatelyRMB86.4million).Asat30June2020,theGrouphadcashandcashequivalentofRMB160.8million(31December2019:RMB140.6million).

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Asat30June2020,theGrouphadborrowingsofRMB74million(31December2019:RMB10million).Thegearingratio,whichwascalculatedbasedonthetotalborrowingsdividedbytotalequity,wasapproximately4.3%(31December2019:0.6%).TheGrouphadnosignificantcontingentliabilities.

INTANGIBLE ASSETS

TheGroup’sintangibleassetsconsistsmainlyofcapitalisedsoftwarecostsandpurchasedsoftware.TheincreaseinintangibleassetswasmainlyattributabletotheadditiontocapitalisedsoftwarecostsofapproximatelyRMB57.2million(30June2019:RMB53.2million)andtheadditiontopurchasedsoftwareofRMB44.3million(30June2019:RMB39.7million)lesstheamortisationchargesfortheperiodunderreview.

HUMAN RESOURCES

Asat30June2020,theGrouphadatotalof712employees(31December2019:740).TheGroupofferedcompetitivesalarypackages,aswellasdiscretionarybonusesandcontributionstosocialinsurancetoitsemployees.InordertoensurethattheGroup’semployeesremaincompetitiveintheindustry,theGrouphasadoptedtrainingprogramsforitsemployeesmanagedbyitshumanresourcesdepartment.TheCompanyhasalsoadoptedashareoptionschemeandashareawardschemetorecogniseandmotivatecontributionsofitsemployees.FurtherdetailsregardingtheshareoptionschemeandshareawardschemewillbesetoutintheCompany’sinterimreportforthesixmonthsended30June2020.

FOREIGN EXCHANGE EXPOSURE

TheprimaryeconomicenvironmentinwhichtheGroupoperatesisinthePRCanditsfunctionalcurrencyisRMB.However,certainoftheGroup’sbankbalancesandotherpayablesaredenominatedinUnitedStatesDollar(“USD”)andHongKongDollar(“HKD”),whicharecurrenciesotherthanthefunctionalcurrencyoftherelevantgroupentitiesandexposestheGrouptoforeigncurrencyrisks.

Duringtheperiodunderreview,theGrouprecordedanexchangelossofRMB22,000(30June2019:RMB37,000).ThisexchangelossduringtheperiodunderreviewwasaresultoftheappreciationofRMBagainsttheUSDandHKDwhereduringtheperiodunderreview,theGrouphadnetassetsinUSDandHKD.

Nocurrencyhedgingarrangementsweremadeasat30June2020.TheGroupwillcontinuetocloselymonitorandmanageitsexposuretofluctuationsinforeignexchangeratesandmakeappropriatearrangementsasandwhennecessary.

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OUTLOOK

AlthoughtheimpactofthePandemicontheeconomycontinuesandfuturechallengeswillnotberesolvedinashortperiod,theGroupwillcontinuetoadheretoproductinnovationandoptimizationtohelpdifferentclientsenhanceefficiencyandsolvemanagementpainpoints.Meanwhile,byprovidingmorecompetitivenewdataproducts,theGroupwillfurtherconsolidateitsmarketpositionandstriveforrapidgrowthagain.

TheGroupcontinuestoconductin-depthresearchinoperationaldifficultiesencounteredbyexportenterprisesunderthesevereeconomicenvironmentandforeigntradesituationinthePandemic,anddevelopsapplicationsoftwareandbigdataanalyticservicesthatcaneffectivelyassistclientsinimprovingtheiroperationsandunderstandingmarketdynamics.Also,theGroupwillcontinuetotransformanddevelopproductscopingwiththeinformatizationdemandsofenterprises’domestictradebusiness,toadapttomarketchangesundertheneweconomicsituation.

Forthegovernmentbigdataproducts,theGroupwillcontinuetodevelopandpromoteproductsrelatedtosocialgovernanceandgovernmentservicesthatarecurrentlythemostindemandbygovernmentatalllevels.Ontheotherhand,theGrouphasexploredanewdevelopmentdirectionforitsjudicialproductsbyusingblockchaintechnologytoconcatenatedataundertheprotectionofprivateandsensitiveinformationinlegalservices,suchasjudicialauthenticationandnotarization,andinlawenforcementtofurtherenhancetheoverallefficiencyandfairnessofjudicialinstitutions.Thisinnovativejudicialproducthasbeengraduallyimplementedinsomeregionsandwillbepromotednationwideinthefuture.

Inlinewiththepolicydirectionof“newinfrastructure”,theGroupwillcontinuetodevelopitsgreenindustrialinternetplatformtoassistenterprisesinimprovingtheirproductionefficiency,enhancingcirculareconomyandachievingsustainabledevelopment.Thegreenindustrialinternetplatformhasgraduallygainedsupportfrommorecustomersandwillbringnewimpetusinthefuture.

TheGroupbelievesthatthroughleveragingitsexperienceandcapabilitiesinvariousmajorbusinessareasandcommittingR&Dinmoreinnovativesoftwareandbigdataproductswillbringcontinuousopportunitiesandmaintainlong-termhealthybusinessgrowth.

INTERIM DIVIDEND

TheBoarddidnotrecommendthepaymentofaninterimdividendforthesixmonthsended30June2020(Forthesixmonthsended30June2019:nil).

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EVENT AFTER THE REPORTING PERIOD

TheGrouphasnotundertakenanymaterialeventssubsequentto30June2020anduptothedateofthisannouncement.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

TheCompanyhasadoptedtheCorporateGovernanceCode(the“CG Code”)assetforthinAppendix14totheListingRulesasitscorporategovernancecodeofpractices.TheCompanyhascompliedwithalloftheapplicablecodeprovisionsassetoutintheCGCodethroughoutthesixmonthsended30June2020,saveforthedeviationofcodeprovisionA.2.1asbelow:

CodeprovisionA.2.1oftheCGCodeprovidesthat,amongstothers,therolesofchairmanandchiefexecutiveshouldbeseparateandshouldnotbeperformedbythesameindividual.Ms.XinYingmei,thechairladyandchiefexecutiveofficeroftheCompanyisresponsibleforoverseeingtheoperationsoftheGroup.

TheBoardhasconsideredthemeritsofseparatingtherolesofchairladyandchiefexecutivebutisoftheviewthatitisinthebestinterestsoftheCompanytovestthetworolesinMs.XinYingmei.TheBoardconsidersthatvestingthetworolesinMs.XinYingmeiensuresthattheCompanyisunderaconsistentleadershipandfacilitatestheimplementationandexecutionoftheGroup’sbusinessstrategiescurrentlyandintheforeseeablefuture.TheGroupwillneverthelessreviewthestructurefromtimetotimeinlightoftheprevailingcircumstances

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS

TheCompanyhasadoptedtheModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuers(the“Model Code”)assetforthinAppendix10totheListingRulesasthecodeforsecuritiestransactionsbytheDirectors.TheCompanyhasmadespecificenquirieswiththeDirectorsandalltheDirectorshaveconfirmedthattheyhavecompliedwiththeModelCodethroughoutthesixmonthsended30June2020.

TheCompanywasnotawareofanyincidenceofnon-compliancewiththeModelCodebytheDirectorsduringthesixmonthsended30June2020.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

Duringthesixmonthsended30June2020,neithertheCompanynoranyofitssubsidiarieshadpurchased,soldorredeemedanyoftheCompany’slistedsecurities.

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REVIEW OF INTERIM RESULTS

TheunauditedcondensedconsolidatedfinancialreportoftheGroupforthesixmonthsended30June2020hasbeenreviewedbytheauditoroftheCompany,BakerTillyHongKongLimited,inaccordancewithHongKongStandardonReviewEngagements2410-“ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity”issuedbytheHongKongInstituteofCertifiedPublicAccountants.TheindependentreviewreportoftheauditorwillbeincludedintheinterimreportoftheCompanytobedispatchedtoitsshareholders.TheunauditedcondensedconsolidatedfinancialreportoftheGroupforthesixmonthsended30June2020hasalsobeenreviewedbytheauditcommitteeoftheCompany(the“Audit Committee”).TheAuditCommitteehasbeenestablishedincompliancewithRule3.21andRule3.22oftheListingRulesandwithwrittentermsofreferenceincompliancewiththeCGCode.TheAuditCommitteeconsistsofthreeindependentnon-executiveDirectors:Mr.KangChoonKiat,Mr.KwaukTehMing,WalterandMr.ZongPing.Mr.KwaukTehMing,WalterservesasthechairmanoftheAuditCommittee.TheprimaryresponsibilitiesoftheAuditCommitteearetoreviewandmonitorthefinancialreportingandinternalcontrolsoftheCompanyandtoassisttheBoardtofulfillitsresponsibilitiesoveraudit.

PUBLICATION OF INTERIM RESULTS ANNOUNCEMENT AND INTERIM REPORT

ThisinterimresultsannouncementispublishedonthewebsiteoftheStockExchangeat www.hkexnews.hkandontheCompany’swebsiteatwww.sinosoft-technology.com.TheinterimreportoftheGroupforthesixmonthsended30June2020containingalltherelevantinformationrequiredbytheListingRuleswillbedispatchedtotheCompany’sshareholdersandalsobepublishedonthewebsitesoftheStockExchangeandtheCompanyinduecourse.

ByOrderoftheBoard Sinosoft Technology Group Limited Xin Yingmei Chairlady

HongKong,28August2020

As at the date of this announcement, the executive Directors of the Company are Ms. Xin Yingmei and Mr. Su Hui, the non-executive Director of the Company is Mr. Ren Geng, and the independent non-executive Directors of the Company are Mr. Kang Choon Kiat, Mr. Kwauk The Ming, Walter and Mr. Zong Ping.

announcement of interim results for the six ......2020/08/28 · net foreign exchange loss 22 37...

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